Growing influence

Sun, Oct 26th 2014, 11:47 PM

China's stake in the Bahamian economy is growing, and it is indeed something to watch.
On Friday, China State Construction Engineering Corporation (CSCEC) signed a contract to purchase the British Colonial Hilton and the vacant property to its west.
As a part of the sale agreement, CSCEC will develop the vacant property to create a luxury hotel and condominium, Prime Minister Perry Christie announced.
The Chinese have also agreed to join in partnership with the government and other stakeholders along Bay Street to implement a plan for its redevelopment, extending from Arawak Cay to Potter's Cay.
On the face of it, it is wonderful news that the long-awaited and desperately needed face lift for Downtown Nassau appears near.
The new luxury hotel to be built by the Chinese will create 250 construction jobs, 500 permanent jobs for Bahamians and an additional 500 jobs in the amenities and commercial components, according to Christie.
On the face of it, this is also good news for an economy still feeling the residual effects of the 2008 global financial meltdown.
But some Bahamians, understandably so, are nervous about the Chinese spreading their influence deeper into the Bahamian economy.
However, Professor Gilbert Morris, who monitors economic developments locally and on the world stage, observed to National Review that the issue is not that the Chinese are getting too big; rather it is that we think too small.
"The Chinese, in my view, are pursuing their strategy and understand the value of our country better than we do," Morris said.
"The Hilton is an excellent property, with wonderful staff. For minimal investment, one can diversify that property and create an upper medium-tier luxury facility with a value of over $320 million.
"And so whilst I thought $70 million or thereabout was too expensive - based on the hotel's financial performance, in my view, in terms of its history, which ties the Eastern Seaboard to Nassau and captures the interwar period together with Prince Edward's abdication of the throne of England - it was the best investment available in Nassau, which I, myself attempted to acquire."
Morris added, "The Chinese are doing nothing wrong or anathema to opportunity for Bahamians. The difficulty for Bahamians is not being able to access capital under terms that are commercially viable. When I first spoke to principals of the pension fund that was the foreign owners eight years ago, I had obtained financing, but only with the most onerous terms and it was then that I discovered how unfriendly a business environment existed in our country.
"It was then that I found how incestuous it was to deal with government agencies and how local capital was both shortsighted and risk averse."

Monitoring
We suspect that our friends at the United States Embassy, which coincidentally is located across the street from the Hilton, are also watching these latest developments with much interest.
Back in 2011, we reported that the United States had serious concerns about the growing influence of China on The Bahamas, and had questioned if the Chinese engagement with the country is part of a wider strategy to control the Caribbean.
This thinking was revealed in confidential U.S. Department of State cables, which The Nassau Guardian reported on exclusively at the time.
"The Chinese appear committed to establishing a firm financial hold on projects, such as the Baha Mar [project], that will have a major impact on the Bahamian economy and leave the government of the Commonwealth of The Bahamas indebted to Chinese interests for years to come," said the cable.
The September 2009 cable was titled, "Chinese Offer Golden Opportunities to The Bahamas". The cable focused on the $2.5 billion Baha Mar project.
Chinese influence in The Bahamas has grown in recent years.
As a part of the Baha Mar deal, the Export-Import Bank (EximBank) of China lent Baha Mar $2.45 billion, the largest loan for a single resort development in Bahamian history.
China State Construction Engineering Corporation is an equity partner with Baha Mar and it is also the lead contractor for the resort.
The China EximBank also lent the government nearly $58 million to finance a new highway from Lynden Pindling International Airport (LPIA) to Thompson Boulevard; the Hong Kong-based firm Hutchison Whampoa is an owner of the Freeport Container Port, and China built a $30 million stadium for The Bahamas as a gift.
American concerns with the Chinese presence in The Bahamas predates Baha Mar, however.
"For their part, the Chinese in The Bahamas may be a strategic move preparing for a post-Castro Caribbean," said a 2003 cable titled, "Prime Minister Christie's China Trip, the Latest in a String of Visits". The cable was classified by then Charge d'Affaires Robert Witajewski.
The United States also has a keen interest in the work of Bahamian diplomats regarding China.
The Americans' monitoring of China's involvement in The Bahamas and the Caribbean will no doubt continue. This in light of the fact that America is itself indebted to the Chinese to the tune of over US$1 trillion.
In an April 7, 2012 article, The New York Times noted that China's economic might had rolled up to America's doorstep in the Caribbean with a flurry of loans from state banks, investments by companies and outright gifts from the Chinese government in the form of new stadiums, roads, official buildings, ports and resorts where the United States has long been a prime benefactor.
That same article noted that the Chinese have flexed their economic prowess in nearly every corner of the world, but planting a flag so close to the United States has generated intense vetting -- and some raised eyebrows -- among diplomats, economists and investors.
At the contract signing ceremony for the Airport Gateway Project, then Prime Minister Hubert Ingraham noted that the People's Republic of China had offered to assist The Bahamas in its modernization and the government accepted.
So did other countries in the region.
In Dominica, China also financed a national stadium and a road project.
St. Lucia has benefited from a national stadium and a psychiatric hospital.
And other countries in the region have also benefited from their relationship with China.
A few years ago, China agreed to make available US$1 billion for various loans to Caribbean countries.
Of this sum, $150 million was allocated for The Bahamas.

What does China want?
For many observers, there are lingering questions about what China wants.
We are reminded of a 2010 lecture in Beijing, where university Professor Zhu Liqun insisted that on the world stage, China's policy is to keep a low profile and it is not seeking to become 'leader of the world'.
As we listened in, we were not convinced of this. Neither were other Caribbean journalists who attended that lecture.
Zhu, assistant president at China Foreign Affairs University, was giving a lecture on China's foreign policy.
She admitted that, like many other countries, China is concerned about its image internationally, and is seeking a win-win situation with all other countries.
Zhu said China has been pushed hard to be the center of the international arena, but she said at the time it was not ready.
"As appreciative as we are, my firm belief is that there is an agenda," stated one journalist as the discussion got heated.
Another asked, "If you don't want to be the world leader, then what do you want?"
Zhu admitted that the Caribbean has benefited from the historic struggles between the People's Republic of China and Taiwan.
A key element of China's foreign policy is to create a favorable environment for its further development, she noted.
She explained that on the global stage, growing demands were being placed on China to do more and China has a responsibility.
In The Bahamas, the growing presence of the Chinese is hard to miss, particularly as Baha Mar nears completion.
China also has a new, state-of-the-art embassy here.
Last year, The Bahamas and China signed a mutual visa exemption agreement, which officials said represented a "milestone" in the diplomatic relations between the nations.

We need to expand Bahamian wealth
As China expands its footprint on the Bahamian economy, with a growing strategic position in our country's number one industry, we expect more raised eyebrows.
Perhaps it will be many years off before we truly understand and appreciate China's end game.
But Morris cautions, Bahamians ought not to demonize the Chinese or suggest a "take-over".
"We have locked ourselves in a political system that is not aimed at facilitating, advancing or sustaining Bahamian wealth, except for a narrow group," he said.
"The Hilton was owned by foreigners and now it's again owned by foreigners. If there is a tragedy it is that we lost an opportunity to take a great institution to draw out its history to make that history part of its attraction and essential to its business model.
"A right-thinking Bahamian owner would have valued that, and perhaps ensured the equity participation of staff as a new business model.
"The answer is not hostility toward foreign investors, but rather to ask questions about the mechanisms available to Bahamians for wealth creation."

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