Introduction
Mr. Speaker,
As I commence my contribution to the debate on the 2003-4
budget presented to the country by our Honourable Prime Minister, please
allow me to quote from the Budget Communication:
“The Bahamas has never had to seek financial assistance
from the multilateral financial organizations such as the IMF. Great credit
is due to successive Governments of The Bahamas and to the people of The
Bahamas for that track record. At the same time, the Bahamian people
have recognize that this track record involved, and continues to involve,
considerable self-discipline, awareness of economic and fiscal realities,
and great patience in pursuing growth-oriented policies so that improvements
in public services can be soundly and sustainably financed… No economy
has escaped the difficulties in the global economy in recent years… Every
other democracy is moving forward with great care and deliberation in economic
and fiscal matters because of the continuing global uncertainties and insecurities.
We must follow suit. This is a time for cautious optimism but not for alarm.
This cautious optimism is certainly reflected in the recently announced
investment projects and those currently in the pipeline.”
The Budget also presented revenue increasing measures
and cost containment measures.
Mr. Speaker,
An analysis of our economy today will show that we are in a similar position to that of the early 1990s. A careful study of The Bahamas’ economy at that time will show that the significant inflow of foreign investment (then into the hotel sector) generated the economic growth. This growth reduced unemployment, facilitated improvement of public services (including public service salaries) while not increasing the tax burden on citizens and reducing the GFS deficit.
The need to encourage foreign investment is also made patent as we recognize the significant expenditure required to upgrade docks, airports, improve medical services and educational facilities.
I commend this government for its record to date in attracting
foreign investment for these purposes and others.
Investments
In the Speech from the Throne delivered in May 2002, days before the presentation of the 2002-3 budget, Her Excellency, on behalf of the government said …“My Government will maintain a good investment climate, of prudent incentives and a sound, mutually beneficial relationship amongst investors, workers and the Government….Through skilful and imaginative planning and diplomacy and through creative adaptation, The Bahamas will not only survive the external challenges it now confronts, but will emerge as an even stronger and more viable force than ever before.”
The investments set out below clearly indicate that investors, Bahamian and non-Bahamian have great confidence in the investment climate created by our policies and approach.
International Persons Landholdings Act
On the matter of approach, the Investment Board section
of my Ministry has successfully cut red tape as is evidenced by the fact
that today the processing of completed IB applications is well within the
30 day deadline that in 2002 was set as a target.
My Government has replaced the red tape with a red carpet
to stimulate efficient and effective processing of all investment applications.
The effects have proven positive.
The Investments Board recorded for the period 1 July
2002 to 2 May 2003, a total value of IB approvals is some $842.3 Million
dollars and the accompanying revenue accruing from those approvals is some
$42 Million.
This compares with IB approvals for the prior period 1 July 2001 to 2 May 2002 of some $445.8 and the accompanying revenue accruing from those approvals of some $9.46 Million.
There is still much to do but the investment stability built in our first year will be our foundation for building opportunity and prosperity for all in the years to come. Citizens should be reminded that one of the revenue enhancing measures that will be taken in the current year is the revaluation of property so that the true value of real property tax is collected.
A quick analysis of the difference in sales value and
valuation for real property tax purposes is instructive. In 1994-95
the total market value of IB matters (certificates and permits) was some
$123 Million. The value of those properties for real property tax
purposes was some $7.9 Million. The figures for the year 2002-03
are equally instructive. In 2002-03 the total market value of IB
matters (permits and certificates was some $1.02 Billion). The value
of those properties for real property tax purposes was some $211 Million.
Clearly revaluation of properties for real property tax purpose will have
significant impact on our revenue.
National Economic Council
The National Economic Council has also established a record of which we can be proud.
As you are all aware the Ministry of Financial Services and Investments is charged with the promotion of the financial services sector and processing foreign investments in the Bahamian economy. As my Ministry processes applications for the consideration of the NEC, we look primarily for what we call “the four E’s” – employment, entrepreneurship, education and environment. As citizens review Heads of Agreement signed by this administration, these four E’s will feature prominently along with other features unique to each Heads of Agreement.
The government strongly believes that potential investors and the Bahamian public in general should understand the development objectives of The Bahamas. It is for this reason that the Ministry has developed a strategic plan for investments to clearly set out our aims and objectives for direct investment in The Bahamas.
This Plan seeks to reinforce and enhance those attributes that have traditionally attracted international investors to The Bahamas, to expand the investment opportunities available to Bahamians, and to proactively develop and sustain Bahamian entrepreneurship.
Mr. Speaker,
As has been indicated by the Prime Minister, investment
projects valued at over $1 billion have recently been approved.
Kerzner International - Phase III Paradise Island
The Heads of Agreement for Phase III of Atlantis was signed on 26 May 2003. The negotiation of this Heads of Agreement sent a very strong signal to the world of about investor confidence in The Bahamas. The manner in which it was negotiated sends a signal also about the approach of this administration to negotiation of Heads of Agreement. While many speculated in the Press about the fate of the Agreement, the parties involved focused on the negotiations. At every stage of the negotiation focus was had on mutuality of benefit.
An example of the distinction between the 2003 Heads of Agreement and the others is the clause relating to the environment. Previous Heads of Agreement simply required Kerzner to either (as in the 1993 Heads) “ undertake assessment of the environmental impact of that part of the project involving the lagoon area and provide a copy of the report to government” or (as in the 1995 Heads) “…submit an Environmental Impact Study for the expeditious consideration of government.” The 2003 Heads mandates the preparation of an EIS by a qualified consultant; that the reasonable protocols requirements of the relevant government agencies including Ministries of Agriculture and Fisheries and Health; and the BEST Commission be met relating to all aspects of the development and operation of Phase III; that Kerzner pay the reasonable costs of a qualified consultant or consultants to assist BEST in evaluating the EIS; and that Kerzner pay the reasonable costs of a qualified consultant or consultants in assisting BEST in monitoring the compliance with protocols and requirement during the development and operation of Phase III. The government is not interested in present gain at the loss of our children and grandchildren’s heritage. All proposals are therefore subject to BEST thorough consideration, given their mandate to protect our environment and guard our heritage.
There are many more such distinctions between the negotiation of this Heads of Agreement and the previous Heads of Agreement.
Mr. Speaker, when negotiating this Heads we recognized its critical nature. Among other things it:
· Involved Kerzner’s commitment to $600 million investment, bringing its total investment in The Bahamas to $1.7 billion– largest investment ever committed to in Caribbean hotel industry.
· Comes at a time when the travel and tourism industry is in the doldrums, with tourism into the Caribbean down by over 10% but Atlantis and The Bahamas continue its strong performance.
· Will keep the destination fresh, new and exciting. Atlantis will become a 3,600-room hotel, the largest single resort hotel anywhere in the world outside of Las Vegas.
· Comes at a time when despite the industry trend, travel to the Bahamas is strong and this investment will keep the Bahamas as a leading travel destination.
· Involved a commitment greater than the cumulative commitments that Kerzner made to the country in the last two phases of development.
· Will include a minimum of 1,000 rooms and a 50% increase in its convention center.
· And, the forecasted economic impact on the Bahamas over the next 15 years is $4.4 billion.
It is proposed that construction should commence as soon as possible but no later than the end of 2003 and it is estimated that the entire project will be completed by 2006. Upon completion of Phase III, a minimum of 2,000 new permanent jobs for Bahamians will be created.
Mr. Speaker,
Great care was also taken in negotiating this agreement because of its economic impact.
Estimated Economic Benefits to Government
· Economic benefit first five years would be $1.2
billion. In the third year of operation annual benefit would be in
excess of $246 million.
· This project will contribute about 3%-4% annually
to the country’s GDP
· Over the first 15 years, total economic benefit
would be $4.4 billion in GDP.
· Additional tax revenue to government will be
approximately $20 million per year and a total of $420 million over a 15
year period.
Impact on Employment/Suppliers of Goods
· During construction 1,200 direct jobs will be
created.
· Upon opening, Phase III will employ more than
2,200 people directly and the indirect (and induced) effect will be 3,000
new jobs in the work force.
· KIB total payroll will increase from $140 million
to $200 million.
· Total new compensation dollars, direct and indirect
(and including gratuities) will reach $143 million in 3rd full year of
operation.
· Current purchases from Bahamian suppliers will
increase from approximately $74 million to $110 million.
Mr. Speaker,
Questions have been raised about the level of concessions
the government has granted to Kerzner.
This administration has no doubt that the 2003 Heads
of Agreement is a much better deal for the Government, The Bahamian economy
and people of The Bahamas than the 1993, 1995 and 1997 Heads of Agreement
in many respects.
The previous Heads of Agreement as well as the present one, all include concessions that would be granted to all qualified developers under the provisions of the Hotel Encouragement Act. When we compare the special casino concessions that have been historically used to stimulate major development and the construction of additional hotel rooms, we see that these special casino concessions under the 2003 Heads of Agreement are similar to those granted in the 1995 and the 1997 Heads of Agreement. In fact, the casino tax concessions are almost identical with the 1997 Heads of Agreement except that a cap has been placed on the 50% reduction in annual gross winnings that did not exist in the 1997 agreement.
When we look at the ratio of special casino tax concessions in relation to the investment under the 1995, 1997 and 2003 Heads of Agreement, we see that under the 2003 Heads of Agreement, the percentage of the concessions in relation to the investment is reduced by some 50% in comparison to the 1997 Heads of Agreement. Under the 1995 Heads of Agreement, Kerzner’s investment was $250 million and the special casino concessions amounted to approximately $124 million at net present value or 49.4% of the investments, or approximately $216.5 Million in absolute dollars that is 87% of the investment. In 1997, Kerzner’s investment was to be $460 million and special casino concessions at net present value amounted to approximately $151 million, that is 33% of the investment, or $264.8 Million in absolute dollars that is 58% of the investment. However, Kerzner’s $460 million investment included the cost to replace 765 rooms, which were demolished at the former Pirates Cove and Paradise Paradise Hotel sites. These rooms were never built and the only penalty Kerzner suffered was a reduction of 5% in the gross winnings on the casino in excess of $20 million.
In the 2003 agreement, Phase III, a part of which was to be done under the 1997 agreement, has increased to a phenomenal $600 million investment with special casino concessions from the Government which amounted to some $93 million at net present value is approximately 15.5% of the investment, or $117.5 Million which is approximately 20% of the investment in absolute dollars. What we are getting under the 2003 Heads of Agreement in lieu of the 765 rooms that Kerzner did not build in 1997 is enormously greater as follows:
1. A 1,200 room hotel,
2. A 120-room time-share complex,
3. 3 new luxury villas at Ocean Club,
4. 20,000 sq. ft. of additional restaurant and retail
facilities (these will be leased out in accordance with our national investment
policy and Bahamians should consider this opportunity among the many entrepreneurial
opportunities in this Heads of Agreement),
5. An extension of the water themed attractions, which
will make this feature the largest and second to none anywhere in the world,
6. 50,000 sq. ft of additional convention facilities,
7. An 18-hole golf course to be joint ventured with the
Government at Athol Island and the improvement in both the environment
and ecology at Athol Island,
8. A fire and ambulance station to be built and equipped
by Kerzner at Paradise Island,
9. A contribution of $2 million to benefit Bahamian community
programs,
10. Kerzner making available 500,000 shares for subscription
by Bahamians,
11. An increased obligation of Kerzner towards training
by its support to the School of Hospitality at The College of The Bahamas,
12. An increased obligation of Kerzner towards vocational
training at BTVI or other institute designated by government,
13. An undertaking to maximize the use of Bahamian entertainers
and Bahamian art.
Unlike the previous 1997 agreement, the 2003 agreement makes provisions for the peeling back of concessions should Kerzner fail to meet any of its development obligations under the agreement.
I therefore leave it to the Bahamian people to decide
if it was worth $117,500,500 in government concessions in order to ensure
a minimum of another 2,000 well paying jobs for Bahamians and a world class
resort that is second to none.
Abaco Land Limited (Carnegie Club)
The government signed the Heads of Agreement with Abaco Land Limited on 16 May 2003 for the creation of a development at Winding Bay, Abaco valued at approximately $140 million. The development will become part of the network of four existing Carnegie Clubs and will draw on the Carnegie Club’s existing membership of over 1,000 high net worth Club Membes worldwide. The emphasis of the development will be quality and it is expected to become one of the most outstanding hideaway venues in the Caribbean.
As part of this project the developer proposes to construct a clubhouse, an 18-hole world class Linx golf course, 55 residences and 75 cottages. It will employ approximately 310 Bahamians. The first phase of the project is scheduled for completion in December 2004 and the entire project should be completed in 5 years. My Ministry understands that to date, Abaco Land has received more than 200 applications for employment. This is a clear demonstration that the people of The Bahamas fully understand the opportunities to be provided by this new development.
The developer has agreed to send Bahamians for training at one or more of the Carnegie Clubs in Scotland or the United States to broaden their qualifications and experience. The developer also agreed to cooperate with the Ministry of Education to provide capital, personnel and facilities to encourage the development of highly skilled personnel and other vocational and technical training related to the hospitality industry.
As was promised early in this administration, the government consulted the people of Cherokee about the investment at a Town Meeting attended by, among others, the developer (Mr. Peter de Savary), Minister of Tourism and myself. A successful meeting was held. Questions were openly asked and answered and the consent and support of the Community, led by distinguished Bahamian leaders such as Mr. Patrick Bethel was obtained. We were happy to note and accept the offer of a respected member of that community, Mr. John Heddon, to assist BEST in its work. As is promised in Our Plan, beach access was preserved in this development as it is in others.
The developer has already committed to an entrepreneurial opportunity for Bahamians in Abaco through financing of the development of an FBO at Marsh Harbour airport.
Gold Rock Creek Enterprises Limited
The Gold Rock Creek Enterprises has received approval to lease 3,500 acres of land on Grand Bahama to establish a world class state-of-the-art film, television and music studio and a movie theme park. This capital investment of $70 million includes a 130-room hotel. The developer has committed to maximize to the fullest extent possible, the engagement of Bahamian professional, technical and other services and it is estimated that up to 1,200 Bahamians will be employed in all aspects of the project. The Heads of Agreement for this project was signed on 2 April 2003.
A significant consideration in negotiating this Heads of Agreement was the unique potential to create a film and music industry (in all of their aspects) in The Bahamas. There is no shortage of cultural talent in The Bahamas and it is hoped that when the studios are open we shall see and explosion in these areas of our economy.
The opportunity for touristic linkages through, among other things, live taping of television shows was also a unique aspect of this development.
Again, the government, as with all of the recently signed
Heads of Agreement, encouraged the developer of this project to commit
to providing appropriate training programmes for Bahamians so as to equip
them for engagement in the management and operation of the project.
This reflects the government’s commitment to the training of Bahamians,
thereby ensuring that Bahamians are prepared to take on significant roles
in the many investments being made in the country.
Holmes Limited (Crab Cay Development)
The government concluded a Heads of Agreement with Holmes Co. Ltd. and Duplin Development Company Ltd. for the development of a major eco-sensitive resort on Crab Cay and Little Crab Cay near Georgetown, Exuma. This Heads of Agreement was signed on 2 June 2003. As in all the recently completed Heads of Agreement the project is subject to the approval of BEST (and monitoring by BEST during construction and operations) and because there are some historical remains on some of the property, the Antiquities, Monuments and Museums Corporation.
The $240 million resort consists of two phases. In phase one which is to be completed within 5 years, the developer will construct a small hotel and marina and 54 upmarket homes on waterfront lots and start the infrastructure needed for the project including a reverse osmosis desalination plant, fuel dock, fuel and oil spillage containment facility solid waste disposal and sewerage pump out system. Construction of an additional 110 hotel rooms, 30 additional villas, additional restaurants, swimming pool, tennis courts and marina village is proposed for Phase II of the project.
The developers also agreed to collaborate with the BTVI or similar institutions designated by government, and the School of Hospitality of the College of The Bahamas for the training of Bahamians. An agreement was also reached for the developer to maximize the employment of Bahamian musicians and entertainers and to acquire and display Bahamian art at the development.
A key element of this Heads of Agreement, which is also reflected in all of the Heads of Agreement is the commitment to use Bahamian materials and Services. The Heads of Agreement recognises that because of its scale and complexity the development will require the involvement of major international construction companies. It therefore includes a commitment for the developer to encourage joint venture agreements, where possible and appropriate, with qualified and suitable Bahamian companies. In including this requirement in Heads of Agreement, the government is seeking to ensure that the benefits of the development has spin off effects on the entire community.
Mr. Speaker,
It is anticipated that a 5 star operator will operate the Hotel and Marina. As mentioned by the Prime Minister, we are aware of the name of the operator with whom negotiations are being conducted but because of the confidential and delicate nature of the negotiations, we are unable to mention the name.
It is safe to say however, that this operator will compliment the Four Seasons resort and Emerald Bay that is scheduled to open in the fall of this year.
Mr. Speaker, the nature of these developments is such that extensive upgrading will be made to the infrastructure in Exuma, including BEC, Batelco and the airport. My colleagues with these responsibilities will amplify the Prime Minister’s mention of these matters.
The development in and of the Exumas also presents a plethora of entrepreneurial opportunities including home ownership and rentals.
Club Med San Salvador Village
Early in our administration discussions were held with Club Med on the reopening of the Eleuthera and San Salvador Villages. As a result of those negotiations, the San Salvador Village reopened on 7 December 2002. The government has now signed a Heads of Agreement with Club Med. Discussions are being held for the possible reopening of the Eleuthera Village. In accord with our Code of Ethics, because my former law firm represents Club Med, I was not involved in the negotiations with Club Med. The Minister of Tourism will speak in more about Club Med, its Heads of Agreement and the possible reopening of the Eleuthera Village in his address.
Mr. Speaker,
I would like to mention three other projects/destinations
in this Budget address.
First is:
Pittstown Point Landing
The developer is undertaking a $35 million expansion to their existing Pittstown Point Landing resort comprised of hotel, marina and second homes; by adding 25 residences, 18 condos and a marina. Construction of this development has begun and has resulted in full employment in Crooked Island.
The developer has moved rapidly and has commenced the condo construction. Praises abound about the quality of workmanship being produced by the all Bahamian workforce at Crooked Island, and the work by the 100% Bahamian owned construction company – another example of the development of Bahamian entrepreneurship.
The project is awaiting conclusion of its Heads of Agreement and Hotels Encouragement Act Agreement.
Isle of Capri
The Hotel Corporation has issued a Certificate of Consent for the Isle of Capri Casinos to apply to the Gaming Board for a licence to operate a new casino at Our Lucaya Resort in Grand Bahama. The Gaming Board is currently conducting its due diligence. It is anticipated that when this new casino opens within a few months, it will add some 300 additional jobs and enhance the tourism product and revenue on Grand Bahama.
Eleuthera
The once thriving Island of Eleuthera has not been forgotten.
Negotiations are presently underway for the launch of two hotel and second
home developments. One of these will have a significant Bahamian
component. We are especially proud of this response to the Prime
Ministers invitation for Bahamians to own significant parts of the 1st
pillar of our economy.
TIME SHARE AND VACATION PLAN ACT
Mr. Speaker, as indicated previously, Time Share is a significant plank of our investment platform. We have been in discussion with large international law firms and their clients, the largest time share developers in the world, to pursue the legislative changes that in their view need to be made to our Act so that we may re-establish our pre-eminence as a Time Share destination.
Bahamians should note the opportunities that are available
to sell Time Share to Bahamians as well as Non Bahamians. Bahamians
may well be as disposed to purchase time share in The Bahamas as they are
to purchase Time Share in Orlando.
SPORTS FISHING
Mr. Speaker, studies have been conducted that reveal that this as yet untapped industry could yield gross revenue of over $500 Million per year. The flats across The Bahamas are attractive to high income visitors who want to have a unique experience and are prepared to pay top dollar and visit every year.
The US market for people interested in wildlife tourism is 82 Million people. Of this market, $34 million is spent annually on sports fishing. The Bahamas has a year round business and has untapped resources of fish that sports fishermen will travel the world to find.
We are heartened that Bahamian lodge owners and guides, led by visionary young men such as Messrs. Prescod Smith and Joel Moxey are working in Association with each other across The Bahamas to protect the industry. The Ministries of Tourism, Agriculture and Fisheries and Financial Services and Investment are working with them to develop an investment policy, a marketing strategy and legislation to properly protect the precious resource.
BAHAMIAN ENTREPRENEURSHIP
Mr. Speaker,
As was said by the Prime Minister, we are building on the 6 pillars of tourism, financial services, e-commerce, international services, manufacturing industry, and agriculture, and fisheries. These are the areas for investment on which Bahamians and non Bahamians alike should focus.
An analysis of the previously mentioned projects will show that we are fulfilling our plan to transform The Bahamas one Island at a time.
The previous PLP administration focused heavily on creating employment opportunities for Bahamians. We have many lawyers, doctors, accountants and other professionals, the children of persons involved in the struggle for Majority Rule and Independence. This administration wants to ensure that this second generation and their children and grandchildren will own our economy one small and mid sized business at a time. To do this though, we shall have to change our spending and saving habits.
Some figures for the past 20 years are instructive.
In 1982, consumer loans stood at some $211 Million or
46% of total B$ Loans. By 1992 consumer loans had increased to $657
Million or 54% of total B$ Loans. In 2002, consumer loans had increased
to $2.55 Billion or 71% of total B$ loans.
Consumer Loans B$ Total $B Loans % of Total
Loans
1982 211,470 451,603 46.83%
1983 227,274 485,296 46.83%
1984 251,234 515,493 48.74%
1985 287,508 563,396 51.03%
1986 331,473 622,554 53.24%
1987 427,132 772,143 55.32%
1988 434,983 834,904 52.10%
1989 436,769 888,457 49.16%
1990 598,986 1,113,237 53.81%
1991 620,710 1,151,605 53.90%
1992 657,262 1,215,984 54.05%
1993 821,767 1,396,829 58.83%
1994 953,114 1,524,449 62.52%
1995 1,057,036 1,687,569 62.64%
1996 1,178,430 1,854,762 63.54%
1997 1,618,622 2,308,499 70.12%
1998 1,828,672 2,564,030 71.32%
1999 1,981,855 2,833,296 69.95%
2000 2,176,240 3,231,394 67.35%
2001 2,408,359 3,477,070 69.26%
2002 2,552,444 3,562,997 71.64%
This represents a steady shift in favor of personal consumer
loans away from all other categories of Bahamian dollar loans. A substantial
part of personal consumer loans, just over half, goes to finances mortgages
and home ownership is surely desirable. Another segment is for automobiles,
consumer durables, vacations, etc. The use of these loans for personal
consumption does not increase the future earning power of Bahamians. The
time has come, therefore, to encourage the commercial banks to work with
Bahamians to develop viable business plans for local investment, either
large-scale for major Bahamian-owned projects, down to medium- and small-scale
projects that serve either or both tourists and Bahamians.
This is important because future growth and prosperity
require that The Bahamas use its financial resources to invest in activities
that generate a growing stream of foreign and domestic currency income.
We need to think more about medium- and long-term business opportunities,
and less about immediate consumption on borrowed money. Our children’s
future, a strong economy and our fiscal destiny depend on us becoming more
a nation of savers and investors, and less a nation of just workers and
consumers.
This is why we are insisting that each new major tourism project should provide opportunities for Bahamian entrepreneurship. Clearly, the extent that local entrepreneurship, large-and small-scale alike, can complement the new foreign direct investment projects that have been approved and signed, the economy would develop in a more balanced way. Bahamians would share increasingly as owners in future growth and prosperity.
Right now beds are supplied by Bahamian manufactures to hotels in The Bahamas. This example of entrepreneurship, a spin off of foreign direct investment may be duplicated in many Islands across this nation.
As well as encouraging retail banks to partner in national
development by becoming more responsive to Bahamians seeking loans for
investments, we shall effect more efficient linkages between my Ministry,
BAIC and the Development Bank to follow up on the implementation of entrepreneurial
opportunities and financing these opportunities.
Mr. Speaker, the investment objectives of my Ministry have been accomplished through close cooperation of the private sector with my team. In this regard, I would especially like to thank the Bar Association, many of whom have given comments on our IB and NEC processes.
I also want to acknowledge and thank the wonderful, enthusiastic
and competent team in my Ministry. Their dedication and approach
to their work exemplifies public sector competence at its best. Mr.
Speaker, I’d like to note that on more than one occasion my team has stayed
late into the night to “get the job done”.
Hotel Corporation of The Bahamas
In relation to casino taxation in The Bahamas, the Corporation has commenced an updated study of casino taxation in other major jurisdictions to facilitate a review by Government with a view to ensuring the profitability of Bahamian casinos and equitable tax returns to the Government. An inter-departmental committee representing the Ministry of Finance, Ministry of Tourism, Ministry of Financial Services & Investments, The Hotel Corporation and the Gaming Board, are examining the study and will be shortly making recommendations for consideration by the Government.
This is especially important in relation to revenue generating measures by the government.
Mr. Speaker it is necessary to remind Bahamians about
steps taken to decrease revenue of the HCB and possibly of the country.
Beginning 1993 the former administration gave concessions in Casino Fees and in the later years completely removal of the Fees which were the only source of revenue of the Corporation. It was their declared intention to dissolve HCB.
The former Government gave concessions to Sun International as well as the Ruffin Group that meant substantial reduction in the annual Casino fees to $8 Million from what was $20 Million at one stage.
Effective the dates given below the Casinos were exempted
from paying the
Casino Fees to the Corporation:
Sun Int'l Paradise Island Casino Jan 1998
Ruffin Group
Jan 1999
Princess Casino Freeport
Jan 2000
It should be noted that the former Government was
to introduce new legislation for the enhanced Casino Taxation and the amendment
of the Lotteries and Gaming Act so that the HCB would no longer “own” all
casinos in The Bahamas. The new Casino Taxation would have meant
additional revenues to the Treasury but would have meant removal of the
one
and only source of revenue for the Corporation.
Today we are in a situation where no legislation has been passed changing the Casino taxation regime, the former Government advised the Casino operators not to pay Casino Fees to the Corporation and the regime under which taxation is now paid must be “legalized”.
The Management Agreements with Casino Operators remain in force but the Casinos have not been paying Casino Fees from the dates mentioned above. This has resulted in loss of revenue of $58.7 Million to the Hotel Corporation from the dates mentioned above to Dec. 2002.
The new taxation proposed should have led to additional revenue to the Government and would have recovered some of the loss of revenue to the Corporation. As the legislation was not passed, this revenue did not accrue to the government and it is believed that the Treasury may have lost a possible $31 Million in revenue during period between the dates mentioned above and Dec. 2002. There was a corresponding benefit of as much as $31 Million to the Casino Operators.
It is also noted that many of the Casino Operators are behind payment of the Casino Taxes that should have accrued to the Treasury under the existing Casino Taxation.
It should be noted that Casino Fees and taxes were generally promptly collected when HCB had control over the Casinos under the various Management Agreements.
The philosophy of ownership of the casinos was one derived from the desire to ensure that the casinos are owned by capable and financially sound entities. It was thought that if the Hotel Corporation owned the casinos the Government could ensure continuity of casino operations by finding another lessee of the casino in the event an economic occurrence that threatened the operations of the casino such as bankruptcy, mortgage foreclosure, unacceptable promotional activities etc.) of or by the Casino Operator. It was felt that HCB ownership of the Casino would cause due regard for tourism and employment.
The upshot is that government will continue to honour the commitments of the prior administration, will make every effort to collect outstanding taxes, continue consideration with stakeholders of the new taxation regime and will in consultation pass necessary legislation to legally effect policies.
Financial Services
Mr. Speaker,
When this Government assumed office, the country was facing significant challenges in the Financial Services Sector and foreign direct investments were stagnant. We have over the last 12 months or so, taken vigorous measures to address many of the uncertainties in the financial services sector. Yes, we have brought some degree of stability to the sector. Perhaps most significant is the spirit of change, openness, participation, consultation and responsiveness that pervades the sector.
The work of the past year has been accomplished through the following:
· Co-operation amongst all stakeholders in the
industry. This enables the government to arrive at a fully informed conclusion
or decision on the way forward
· Partnership with the private sector where the
resources of the private sector become available to achieve the objectives
of the public sector.
· Engagement with the private sector as there
is clear recognition of mutuality of interest and respect of sector views
and assiduous effort made to ensure success of the sector and thereby the
jurisdiction.
The work accomplished and in progress has involved many
persons/groups in the public sector, regulatory and administrative agencies
and the private sector. I would like to thank all who have assisted
– those who are involved in the projects mentioned here and those who are
involved that I will not have the opportunity to mention.
The Five Year Strategic Plan
Mr. Speaker, business thrives in a transparent environment where the rule and objectives are known. More importantly, it thrives where those who are responsible for the success of business are actively involved in the process of identifying priorities and process by which the priorities will be achieved. The Strategic Plan was developed through a broad and varying input from the industry and developed principally in partnership with BFSB.
I wish to highlight the steps taken to date to achieve objectives. In so doing, it is important to recognize that while progress has been made there still are significant goals to be accomplished e.g. improving the clarification and consistency in application of policies, minimizing the bureaucracy, streamlining regulatory processes and the KYC regime remain priorities.
In the interim, we have implemented a hotline for enquiries, complaints. 327-INFO.
Department of the Registrar General
Computerization of the Companies Section
The sector deemed this as essential is measuring our ability to consistently deliver first class service in a government agency.
The recent internet module upgrade of the Companies Section of the Management Information System has certainly assisted registered agents in speeding up name reservations, payment of fees on line and searches for their companies. To date Phase I of the proposed Three-Phase Programme have been completed.
The capabilities are as follows:
Internet access
v Access via Internet Explorer
v No need for special remote software
High level of security
v Data encryption
v Passwords
v Personal identification numbers (PIN’s)
Electronic submission of incorporation documents
v Paperless procedure for incorporation (IBC’s only at
this time)
v Comprehensive name edit: Uniqueness, name endings,
embedded sensitive words, etc.
v Registry approval and filing initiates automated incorporation
process
v Payment via credit card will be available as soon as
possible or Payment on Account
v Electronic receipt issued to Agent
v Documents, electronic as well as paper, company particulars,
payment history, etc.; available for agent review via online company inquiry.
Entire array of features available to Agents in addition
to electronic document filing:
v Name reservations – existing paper documents and process
may still be used
v Annual fee entry: Automated posting to company payment
history
v Reports: Fees due, company listings, etc.
v Automated certificate request e.g. Good Standing
v Database file transfer capability to ensure Agent’s
records in sync with Registry’s database.
There are no outstanding technical issues with the new System and the Agents use and feedback on the system has been extremely positive.
Currently, there are 113 Registered Agents and 280 End Users signed up and actively participating in the programme.
USAGE OF SYSTEM
Name Reservation
100%
Company Inquiry/Search
100%
Annual Fees Processing
20%
Electronic Incorporation
3%
However, the System appears to be very much under utilized in terms of the number of Agents and the capabilities of the System, as shown above:
The Ministry and the Registrar General’s Office intends
to embark on a Public Relations campaign on the Agent Internet Module and
a programme targeting known Agents will shortly be put in place.
With the assistance the Ministry’s Financial Officer, and the posting of additional staff from other departments of the Registrar General’s Department to the Accounts Section, the backlog and systems put in place to increase efficiency and accountability.
v A procedure for incorporating companies over the counter and via the Internet is now in place.
v A programme for updating the records of the Companies Section has been implemented.
v A Shift System has been implemented to deal with companies that are filed late in the afternoon, so that they can be ready for signature when the office opens at 9:00a.m.
v There is a schedule for Registrars to sign Company Incorporated documents that were posted.
v A programme for updating the records of the Companies Section has been implemented
As a result of these measures there has been a noticeable improvement in the internal process with respect to this phase of the computerization programme at Registrar General’s Department.
At the request of industry, imminently we shall dedicate
an officer to processing and expediting Memoranda and Articles of Association
for Mutual Funds.
Having worked out most of the kinks in Phase I, we are poised to commence Phase 2 on June 30, 2003 to be completed September 1, 2003. This Phase will install an Agent Internet Module to upgrade the existing Global Integrated Registries Application – Phase 2:
v Configure 15 additional electronic documents, to include Local Company Incorporations, Resolutions and Certificate of Compliance. (Business names are not included, and will be covered under Phase 3 when public access in addressed.)
v Provide education to enable Registrar General Department staff to identify, prioritise, specify and approve additional electronic document requirements.
v Procedures for the introduction of electronic document will be formalized and published.
v Provide education to enable RGD staff to develop certificates requested by registered agents (e.g. Certificate of Good Standing, Certified Copy of Certificate of Incorporation)
v Integrate the WIPO Intellectual Property solution (WIPO solution needs to be installed and fully functional to ensure delivery.)
v Work with the Treasury and DPU to develop the interface to The Government’s current General Ledger System.
Phase 2 will also involve an assessment of the technical
environment to implement Phase 3 – Automation of The Civil Registry (Marriages,
Births, Deaths, Adoptions, Deeds/Documents.)
The results achieved to date in the sector are directly
attributable to the work completed by the team at the Registrar General’s
Office, AIBT, BFSB, Bar Association and the OAG office. I wish to
thank AIBT and the Bar Association, who amongst others actively participated
in the beta testing and put forward the model for the first memo and articles
to be posted on the Internet platform.
Deeds and Documents
During the last year concerted efforts have been undertaken to improve the Deeds and Documents Section’s services to the public. As I stated above, it is planned to have the civil registries completely computerized within a two-year period. The present use of the microfilm system causes undue delays in recording and returning documents to their owners.
Premises
Efforts are being made have the Ministry of Works and Utilities move ahead with the renovations to the Market Street building to house the entire Registrar General’s Department, as the Rodney Bain Building is not considered a suitable working environment. I thank the team at the DRG for their patience in this matter that had been outstanding for 10 or more years too long but advise that light is at the end of the tunnel.
The Freeport office functions have outgrown its present location. Discussions for additional space have centred on relocating to the renovated post office building. This matter will be pursued during the 2003-2004 fiscal period.
Organizational Structure
The Ministry of Public Personnel has signed off on a new
administrative structure arrived at by extensive consultations between
my administrative team, all DRG staff and me. We can now commence the reorganization
of the department and anticipate greatly enhanced productivity and revenue.
IBCs
The number of IBCs registered for 2002 totalled 3,458 compared to 5,074 for 2001. The IBCs revenues (Registration fees and Annual fees) for the period January-November, 2002 totalled $11,164,473 compared to $15,008,367 for the same period in 2001.
The Financial Services Forum is assisting the government in the preparation of Amendments to the IBC Act that is now in circulation for comments from the sector. This is one of the Bills that we anticipate laying before Parliament before the summer recess.
Mr. Speaker, the Forum is certainly an excellent example of private sector participation in governance. Each member has dedicated untold time to the task of rebuilding this jurisdiction. I thank each of them and their able leader Mr. Brian Moree who has dedicated untold numbers of hours to this national responsibility.
DRG Revenue Enhancing Measures
In the Prime Ministers’ budget communication he signalled
that there would be increased fees for a whole range of government services.
Included in these increases are the fees charged by the Registrar General’s
Office for a number of services. Our thinking was also guided by the principle
of cost recovery, which has emerged recently in a number of countries,
including the US. This entails ensuring that the revenue collected
by government from the provision of a service is sufficient to at least
cover the cost of providing the service. In addition to that
aspect, we also looked at the charges for similar services in other jurisdictions
and found that our charges were lower, in some cases significantly lower
than those in comparable jurisdictions.
It should be noted that the fees charged by the Registrar
General’s Office have not been increased for a number of years. The
Trade Marks fees were last increased in 1984, Deeds and Documents and Marriages
fees were last increased in 1990, and the Copyright fees were increased
in 2000.
The various increases have been gazetted and will come into effect on the date provided in the Gazette. However, my Ministry has prepared a listing of the current fees and the proposed increases that will be made available to the public.
I will only speak to one of the proposed increases here.
It should be noted that the fee for a marriage license has been increased
from $40 to $100. Before deciding to increase this fee, the government
reviewed the fees in 25 other countries including our sister countries
in the Caribbean. Out of the 25 countries polled 11 have license
fees over $100. The Department proposes to provide an interviewing
service to the major hotel’s guests for marriage licenses. The Ministry
of Tourism and the marriage consultants that we consulted share our concern
about the long lines at the Rodney Bain Building and especially in the
present state of disrepair of that building. The new procedures shall be
announced shortly. Marriage officers should note however that a list
of Marriage Officers will be distributed so that marriage consultants may
choose from a wide array of available persons.
Mr. Speaker, I’d like to highlight a few areas of success
in accomplishment of the objectives set out in the Strategic Plan.
Remove unnecessary bureaucracy and Streamline KYC
The Sector regards these as two key issues. Much work remains to accomplish these goals. But, consistent progress is being made through regular meetings of group of regulators signatories to the Memorandum of Understanding. We eagerly await the report of the FSCF sub-committee to report on the way forward. In the meantime we note that the Central Bank is working actively with clearing banks, AIBT and BACO to formulate agreed standards for KYC. Also, many practical steps being taken – BFSB, BFA (Bahamas Funds Association) Clearing Banks, Central Bank & Securities Commission working to achieve clearly defined best practice standards for establishing accounts with for our second largest sector of the FS industry – investment funds
Create a public/private sector dialogue
This has been institutionalized through the establishment
of the Forum. We look forward to continued partnership with all associations
– BFSB, AIBT, BFA, BIFS, STEP, BICA, BBA, BACO, BALHI, BGIA, BIBA (Brokers
Association), BIIA (Bah Int. Ins Assoc), BREA, IIB (Insurance Institute
of The Bahamas), BSFA (Bahamas Society of Financial Analysts). Many individuals
have consistently provided solid input on the state of the industry, what
is needed and provided solutions.
Identify and Create Opportunities for Growth
Investment Funds are an area identified as a key area for growth. The Investment Funds Act was a priority for the sector. The Bill and draft regulations are the result of the hard work of sector stakeholders over the past 18 months. Securities Commission, BFA, BFSB and more recently the Forum have worked to ensure that the needs for regulatory strength can be achieved in a manner that facilitates the long term growth of a sector. The Regulations are in final form and are expected to be approved by the Board of the Securities Commission this week. The SMART Fund Templates are almost complete.
E-Commerce is another area identified for growth. The compendium of Acts was passed after the tireless efforts of the Ministry of Finance and industry, particularly the BFSB E-Business working group.
In circulation now amongst industry is the IBC Amendment Act and proposed protected cell legislation. Expected shortly are purpose trust legislation and a draft proposal on an amendment to the perpetuities bill.
Industry is encouraged to review and put forward suggestions for improvements. The sector continues to regard Foundations as a key product to be provided in The Bahamas. This Bill is being carefully reviewed by the Forum to ensure that we are able to provide in the common law a product that clients from civil law jurisdictions will find attractive. Equally though we want to ensure that we effectively deal with Patriot Act, money laundering and anti terrorist financing issues.
Private Trust Companies have also been identified as an opportunity for growth – emphasis placed during BFSB SPIN Program. Arising from this, AIBT is spearheading a project to identify fully the nature and services required by this business area and to make proposals to the relevant bodies, in particular the central bank. Initial discussions including members of AIBT, STEP, BFSB and Central Bank have been productive.
Industry feels that these Bills together with the Financial Transactions Reporting (Amendment) Act will provide the platform form which we shall relaunch the jurisdiction through intensive promotional efforts.
Mr. Speaker, I want again to acknowledge and thank you and your staff for allowing presentations to be made to all members of Parliament in respect of the very important and technical financial services Bills all of which received the unanimous consent of Parliament. I also want to thank again the presenters who took a day off from work to make the presentations. With your permission, it is hoped that this methodology can continue so that from The Bahamas we may be seen to be speaking with one clear voice about the financial services sector.
Mr. Speaker, with your permission I shall again quote
from the Prime Minister’s budget address, “This is my Government’s approach
and I am very proud that this is the approach that we are following. This
consultative and participatory approach is the essence of democracy. It
means that we will not rush to judgement or to decision based on the crucial
issues facing the Bahamian nation. Instead we will move forward carefully
and deliberately and take decisions based on the best possible information
and following the widest consultations.”
This consultative approach takes time but when it is
pursued, the end product is most likely to be one that meets the needs
of the stakeholders and is one that is most likely to ensure that all interested
parties understand the decisions and why they were made.
Develop Expertise
The world is changing – private banking is changing. Institutions have to revisit what is important to their clients, grapple with initiatives of the transparency front. As a result the services offered from the Bahamas must be keep up with worldwide changes. Securities, telecommunications and tax expertise should be brought within our industry. When a client conducts due diligence on an organization it looks for resident expertise. The Bahamas when compared with other centers must ensure that its resident expertise is superior to that of our competitors.
Standards are being raised by increased regulation and supervision. Corporate governance issues also weigh in heavily when choosing a jurisdiction and do productivity and price. Clients have choices and they know what they want. We must become more and more competitive. Xenophobia has no place in a 21st century Bahamas and we must all assess other jurisdictions and ensure that in the short, medium and long term we have all of the requisite skills here in The Bahamas while we court and nurture the sources of our international business.
The Forum’s Immigration Committee is studying his issue
and we look forward to their report and their recommendations particularly
those about acquiring expertise and about work permits.
Promote the Bahamas
My Ministry shall continue to working closely with BFSB on all aspects of marketing the Bahamas. We shall make equal effort to take our message of a “Blue Chip, Well Regulated and Cooperative” centre abroad and bring international clients and gatekeepers to the Bahamas.
I want to thank the Bahamas Real Estate Association, BFSB including through its SPIN meetings and individual firms who have facilitated my Ministry to promote in The Bahamas by bringing opinion makers to the Bahamas.
I also want to thank those who facilitate meetings with
representatives of their firms. These meetings provide invaluable opportunities
to listen to the needs of the market place and to promote Bahamas.
Registrar of Insurance Companies
The Domestic Insurance Bill the product of years of work within the sector and most recently of a Working Group comprised of stakeholders in the sector will be laid before Parliament before the summer recess. I’d like to thank BGIA, BALHI, Brokers, Agents and others for their co-operation through Registrar of Insurance.
Registrar of Insurance has developed with the assistance of the BIIA and others the second draft for the revision of the External Insurance bill. We expect to also be able to lay this Bill before Parliament before the summer recess.
The ROI also in this fiscal year also will ccontinue to work toward the promotion of a coordinated (and an eventual integrated) national approach to financial regulatory issues.
· Continuation of work, along with the Central
Bank, the Securities Commission, the Compliance Commission and the Registrar
General toward the creation of a single supervisory body for financial
services.
· Along with other financial regulators develop
a common database for recording details of applicants and licensees.
· Full implementation and readjustments where
necessary of the Memoranda of Understanding with other local financial
regulators
ROI Revenue Enhancing Measures
As was indicated as I commenced this address, revenue enhancing measures are key in this Budget, as we await our IMF country rating. Fees in the Registrar of Insurance’s office have not been increased for since 1985. As indicated by the Prime Minister, the government has decided to increase the premium tax paid by the insurance companies in lieu of business license fees. This decision was not made lightly but after consultation with the sector. The government is aware of and has listened carefully to the Insurance Industry concerns on the need to improve efficiency of the office of the ROI and the regulatory process for that Industry. We share these concerns. Increased fees would provide for this improvement and the government is committed to ensuring that a significant part of the increase will be allocated to the regulatory regime. The ability to make this commitment is ground breaking and it is hoped that the sector will continue to lend its support to the effort to make The Bahamas a jurisdiction of choice for insurance.
I again acknowledge the support of the sector as a partner in national development. Enormous private sector effort was put into the draft Domestic Insurance Bill. Both need to work together if their particular concerns and The Bahamas are to flourish. No one should minimise the concern the Industry has on the impact of the increase the increase on businesses. Notable however is that all of the key players in the industry agree that reinvesting most of the revenue accrued form the increase in the reorganization, training and increasing efficiencies of that Department, would have a very significant positive effect on their businesses and would increase the competitiveness and lustre of The Bahamas. We therefore welcome the Industry’s expressions of support. We have been meeting with the Industry to review the best way of implementing the increases given the differences in private sector and government fiscal years and other very important factors for consideration in implementation. Significant progress has been made in discussions as to the implementation of the increases and these talks shall continue and hopefully finish this week.
The government is also aware that questions have been raised about the decision to increase the fees for insurance companies while no such decision has been made about banks and other financial institutions. Some consider such comparisons inapt. They say that in addition to the business fee, banks are statutorily required to 5% of their deposits with the Central Bank. Insurance Companies do not have to meet such a requirement and therefore always have access to all of their funds. Furthermore, banking transactions provide for additional revenue income for government such as, the stamp charges on checks and foreign currency exchanges. Again, there is no similar provision with regard to Insurance Companies. I publicly repeat my private commitment to the sector to continue to engage in discussions over the next year, not only about the best way to increase efficiencies and to restructure the office of the ROI but also to consider openly the taxation of stakeholders in the financial services sector.
I wish to stress that The Bahamas enjoys a free market economy. For years we have been ranked highly in the Heritage Foundation and the Wall Street Journal’s Index of Economic Freedom as a country enjoying one of the freest economies in the world. Therefore while the government hopes that the Insurance Industry would not pass on the increase to the public, at least in this fiscal year, the government is aware that in a number of other jurisdictions this fee is charged directly to the public.
As members may be aware, the government in consultation with the Insurance Industry is currently reviewing the Domestic and External Insurance Acts. As part of this review the government will revisit the registration fees charged to insurance agents that have been in place since 1965 as well as other fees related to the Insurance Industry.
Mr Speaker, I’d like to thank the leaders in the sector
who continue to freely offer their time and talent and now their treasure
to the development of the sector. With this spirit of cooperation,
this time next year we shall have made significant strides to strengthen
and increase profitability and productivity of the sector.
PINEWOOD
Mr. Speaker,
I shall end where I began, with my Constituency.
I again thank the good people of Pinewood for the privilege
of serving them in this place.
My formal biweekly visits shall continue this year and
the Constituency office shall continue to have daily office hours.
This year we enjoyed our Second Annual Family Fun Day, an opportunity for families to get together on the park and for vendors to earn a few dollars. This summer we shall again sponsor students at the Jeff Rodgers Summer Basketball Camp and at the McKinney Karate Camp.
I am presently negotiating with the Ministry of Youth and Sports for the placement of a volleyball court on the park, a track around the park and the repaving of the basketball court.
The Ministry of Works is working out a schedule to maintain the 99 wells that the Branch paid $24,000 to have blown out as well as working on a long term solution to the drainage problem. It has also paved Sapodilla Blvd and most of Pinewood Drive. We look forward to receiving a paving program for the long suffering constituents in the Nassau Village area of Pinewood.
In addition to having our Third Annual Christmas Basketball Camp, we shall start significant sports, music and entrepreneurship project with the church and the Royal Bahamas Police Force; the details of which are presently being discussed and agreed.
Although I enjoy my Ministerial responsibilities, I get most enjoyment from meeting my constituents, many of whom are friends in their homes, in the Park, in the grocery store, in church, in our many wonderful eating places, such as Floyd’s, and at family functions.
Finally Mr. Speaker, I quote from Psalm 32, “..blessed
is them man in whose spirit there is no deceit.” Mr. Speaker, our leader,
the Prime Minister is such a man. I want to thank him for the opportunity
to serve in his Cabinet over the past year and I want to say to Bahamians
and people everywhere, the Hon. Perry Gladstone Christie is a hard working
patriot. He is likely to call any Cabinet Minister at any hour of
the day or night including early mornings at 1am to pursue a matter for
the good of The Bahamas. His passion for his people is boundless
and he is determined that Bahamians everywhere should have the opportunity
to participate in governance. This openness will be just one of the
many milestones the evidence of his success as a Prime Minister.
I pray for his continued health and success.
Mr. Speaker, without reservation, I support this budget and congratulate the Prime Minister on its presentation and objectives at this challenging time in our national development.