January 29, 2015
It is always a pleasure to address The Bahamas Business Outlook forum. It gives me an opportunity to share with you my vision for the future of The Bahamas and to provide an update on the activities of my government, particularly as they relate to economic development. You have a striking theme this year: “Securing our Bahamas through Planning, Partnership and Productivity”. These three interrelated concepts have resonated throughout our country in recent years, especially in recent months as the work for my Government’s National Development Plan has gathered pace. Indeed these three concepts have been our guiding lights as we strive to promote a more dynamic economy, Bahamian entrepreneurship and ownership, and a better quality of life for Bahamians today and in the future.
Productivity: A Matter of Personal Responsibility
Indeed as I ponder the last of these three themes – PRODUCTIVITY – I realize that nation-building is all about the essential ingredients of productivity, namely, “Personal Responsibility” and “Personal Action”. We must therefore ask ourselves if we are each bearing our share of the responsibility and action needed for constructive and sustained nation-building.
Are we caring for and protecting our environment (land, sea and air) as an inheritance to pass to the next generation?
Are we truly desirous of moving towards greater energy and food security as a priority? Are we prepared to fund critical infrastructure to ensure climate change resilience, business development and a better way of life for all Bahamians?
Are we ready to put the time in to raise children who love and value themselves and their nation?
Are we ready to fund the development of “first-world” education for our children and to create an environment in which higher education and quality health care are regarded as “the new normal” rather than a privilege?
Are we prepared to take the necessary actions to secure a dignified retirement for our elders? Ladies and Gentlemen, these are critical questions for a young country such as ours! Yes, we require Planning and Partnership – actions that a government can facilitate. However, the “Productivity” aspect is 95% about personal responsibility– it’s about you and me taking the necessary action to ensure that we give more, give better, produce more, and work harder to achieve the goals we have set before us.
Let us make no mistake about it: we are individually accountable for our actions in the stewardship of this land and in the shaping of our society. Indeed, the legacy and investments made today will ultimately benefit – or condemn - successive generations in the future. Our society, after all, is merely a reflection of our individual selves and the choices we have made or have failed to make in our collective governance.
And so, at this 2015 Bahamas Business Outlook, I charge all Bahamians to recognize that personal responsibility matters as we build our country. History, and the stories which are passed on to our children and grandchildren about our stewardship of this country, are essentially the collective testimony about the personal actions of individuals. I implore you, therefore, to become a part of this nation-building narrative, so that you too can make your mark as we build our future together.
Planning: My Government’s Approach
The Bahamas has entered a new age as it relates to Planning. As I have said before, our view of planning is all about strategic thinking as we prepare for today and the future. Over the years, I have looked around at how government was carrying out its duties; and while we have been extremely successful as a nation, I am also aware that there have been instances where a better result would have been attained had there been wiser strategic planning for development and investment.
With that in mind, I met with the IDB early last year and asked them for assistance in developing a more structured approach to governmental planning for development. This initial conversation led to a technical cooperation grant to develop an Economic Development and Planning Unit within the Office of The Prime Minister to oversee the development and execution of a National Economic Development Plan. We have also had constructive discussions with the College of The Bahamas so that our future national university can be part of this new process as well. President Smith and his senior personnel have pledged their support and we are now working on the modalties that will aim to maximize faculty and student participation in the development plan.
In this plan, we hope to elucidate a shared vision for The Bahamas. We will ask the Nation, “What do we want to be in 20 years?”; “What do we want our country to look like?” We would like to have not only a clear and coherent vision that answers those questions but also a clearly articulated strategy by which we can incrementally bring that vision to reality.
This afternoon you will hear more about this work from a panel of distinguished individuals including Felix Stubbs, the chair of the Vision 2040 Steering Committee; Mr. Robert Pantzer - a representative of the IDB; Dr. Nicola Virgill-Rolle, the government’s lead on the National Development Plan and a dynamic young professional in my office, Samantha Rolle.
Partnerships: For the Greater Good
Ladies and Gentlemen, I am pleased to report that the partnerships in our country – that is to say the oartnerships between “citizen and government” and “government and business” are, from the government’s perspective, growing stronger. I was deeply encouraged by the recent collaborative relationship forged between the public and private sectors in the implementation of VAT. What we saw was deep and patient discussion between business, the citizen and the government. Eventually, a consensus was forged on the way forward with VAT. Today the citizenry is assisting the government in the orderly implementation of VAT in a way that will maximize revenue collection and ensure that the revenues raised are utilized wisely and sensibly for the greatest benefit of the country.
I applaud the partnerships – government, citizen and business -- which have helped to make the introduction of VAT as smooth as could be expected.
As a result of VAT, we expect that many of our public/private partnership initiatives in energy, infrastructure and tourism development will be able to make important forward strides without over-depletion of the public purse. There are also other reforms planned which focus on the modernization of systems in public management for greater effectiveness in planning and efficiency in revenue collections.
The world is still emerging from the economic and social devastation spawned by the financial “hurricane” of 2008. We have, however, slowly gained traction in our primary economic sectors. We do not underestimate this accomplishment, for although the United States declared an end to recessionary conditions in their country, many Caribbean economies are still plagued with unprecedented levels of unemployment, burgeoning social problems like crime and deterioration in family life, high public and personal debt, fiscal and financial sector deterioration and, for many countries in the region, economic stagnation.
I am encouraged, however, that we have successfully arrested the downward spiral of our economy and that we remain on course to see accelerated growth this year. When we took office my government prioritized spending on infrastructural development, energy, and projects that focused on poverty alleviation and job creation. We introduced fiscal reforms as mechanisms for cost containment and manageable servicing of debt. We have maintained a disciplined course in this regard and are seeing the results.
By the second quarter last year fiscal debt had fallen by some $65 million to $375 million due to fiscal consolidation and increased tax revenue resulting from the implementation of initiatives which yielded increased taxes to date and greater efficiency in collections. Energy My government recognizes that energy costs in The Bahamas are among the highest in the region at US$0.40 kWh for residential customers and US$0.44 for nonresidential customers. In addition, our energy infrastructure is outdated. We also recognize that reducing the cost of energy is paramount to reducing the cost of living and doing business for both domestic and business consumers. It would spur sustained economic development by both domestic and foreign investors.
With that in mind we introduced last year a National Energy Policy and established renewable energy goals of 30% baseline generation through renewable technologies by 2030. The Electricity (Amendment) Bill 2014, and Electricity (Renewable Energy) Regulations 2014, which just recently passed in Parliament, speaks to the requirements for installation and operation of generating stations and grid interconnections by renewable energy producers in areas of low population density. Such measures will have profoundly positive implications for Family Island development moving forward.
The restructuring of the country’s electricity corporation is a major initiative effort by my government, one that is designed to reduce energy costs through privatization of management while at the same time maintaining equity ownership of an important national asset and essential service, using for this purpose a model similar to the Nassau Airport Development Company (NAD) management contract with Vantage, formerly Vancouver Airport Services. We should complete a critical part of the BEC re-structuring exercise shortly with the selection of the successful bidder.
Oil prices have dropped on international markets. The cost of a barrel of diesel dropped from $117 in October to $77 in January, and a barrel of heavy fuel oil from $99 to $50. Crude oil is purchased at a fixed-price over contractual periods and so there is expected to be a lag in rate reductions. BEC has instituted billing reductions in the range of 11% to 12% for residential consumers for the specified period October 2014 to January 2015, based upon the customer type, basic rate, units consumed and fuel charge. Fuel surcharge has dropped by about 5 cents, which is a reduction of 17%. Commercial consumers will be getting reductions on their bills and that further interventions will occur in the coming months.
As Chair of CARICOM, I have just met in Washington, D.C., with U.S. Vice President Joe Biden and colleague Heads of Government from the region. There we discussed energy security matters and the potential transformative impact on our Caribbean sub-region with our US partner. This will be one of the themes on our agenda for our upcoming CARICOM Inter-sessional Conference of Heads of State and Government on 26th and 27th February in Nassau.
In Washington we talked about:
· Promoting opportunities for investment in energy, including renewable energy, oil and gas exploration and production, forestry, mining in areas such as gold, diamonds and bauxite, infrastructure development, tourism, airline services, financial services, agriculture and fisheries;
· Pursuing a low carbon strategy and investments in solar power and other renewable energy sources such as geo-thermal, wind and hydro;
· Supporting adaptation and mitigation measures. Energy, water, sanitation, coastal protection, and protection of critical coastal infrastructure are central to the capacity of our countries to adapt to, and mitigate, the effects of climate change. The reality is that a five-foot rise in sea level would eliminate 80 per cent of The Bahamas. Climate change is real for The Bahamas; it is a threat to our very existence; and
· Working together to eliminate GDP per capita as the determinant criterion for denying or allowing us access to concessional financing. GDP per capita does not adequately reflect developmental differences within societies.
Happily, the United States and Japan are showing greater flexibility on the issue of GDP per capita as a determinant for concessional financing for development. The United States announced on 26th January that they will no longer block concessional financing to middle income countries in the International Financial Institutions as it relates to energy and climate change financing, based on GDP per capita. It also announced that the Overseas Private Investment Corporation will be able now to finance projects related to renewables and climate change mitigation in The Bahamas. I welcome this positive development and urge Bahamian and American business people to look at projects which can qualify for this financing. Food Security
We have established the Bahamas Agricultural and Marine Science Institute (BAMSI) to bring a focusd effort to achieving food security in partnership with what will become the University of The Bahamas, and other international institutions. Along with its research and educational aspects, BAMSI has begun operations of commercial agricultural and marine farms. It will also provide technical assistance to a network of affiliated operations and independent farmers in Andros, Abaco, Eleuthera, Exuma, Grand Bahama and New Providence. In fact, by way of illustration, much of the papayas and bananas supplied to wholesalers and retailers over the Christmas were produced by BAMI’s farms. I am proud of this accomplishment.
In our primary business sector, overall tourism performance improved last year, most notably in air arrivals which had consistently declined over the preceding six year period. For the first 10 months of last year air arrivals grew 4.5% over the same period in 2013 and a small contraction in sea arrivals netted an overall growth in arrivals of 3.5% or 5 .1 million visitors to The Bahamas.
Significant gains were made most notably in Grand Bahama which, for the first 10 months of last year, experienced an overall growth rate of 38% which was marked by a 43% increase in air arrivals, and a slight decline of 8% in sea arrivals.
Gains were also made in the Family Islands which experienced an overall 3% growth in air arrivals and 9% growth in sea arrivals in the first 10 months of the year. Indeed last year most of the Family Islands experienced positive growth in arrivals with Exuma leading the way with a 15% increase in stopovers. Long Island followed at 11% and San Salvador with a 6% growth in stopovers. Sadly, recessionary conditions continue to be evident in Cat Island, Eleuthera and Andros, all of which continued to experience negative growth in visitor arrivals. However, I am pleased to report that we are progressing on touristic related development proposals which should be finalized in the coming months and which will significantly impact these islands. In New Providence growth has been sluggish, due mainly to the loss of room inventory with the closure for renovations of the Wyndham, Nassau Palm and Paradise Island Harbour Resort hotels, and the lack of new inventory available to compensate for these losses. This was demonstrated by only a 2% increase in air arrivals for the first 10 months of the year. Cruise arrivals increased by 3% over the same period, netting an overall growth of 2.3% for New Providence. Tourism becomes a fully functioning economic engine only with proper calibration of its four key drivers of airlift, cruise, product and events with stimulation of the marketplace. Some drivers such as airlift and cruise can be influenced to produce more immediate results from stimulation while others such as hotel developments require anywhere from 12-24 months lead time before any economic activity even begins.
Cruise The Bahamas, which remains the market leader in cruise product in the region, is poised for even stronger future cruise and stopover cruise growth from the Fort Lauderdale and West Palm Beach gateways. The Bahama Grand Celebration Cruise Lines, Grand Bahama’s largest provider of longer-staying visitors will re-launch its company with the new “Grand Celebration” which has the capacity to bring some 280,000 passengers year round. The combination cruise-and-stay package has the potential to boost room nights sold to 125,000 this year, from just under 50,000 in 2014, and to provide new employment in Grand Bahama for an additional 300-600 persons.
The Balearia’s $100 million dollar, superfast ferry which can hold 1,000 passengers and 200 containers sails from Ft. Lauderdale to Freeport (daily) and is now in discussions aimed at relocating its call centre operations to Grand Bahama.
My Government is also in advanced discussions with two major cruise lines for the development of new cruise destinations with major attractions revolving around a Bahamian theme. We expect to complete these negotiations soon.
My Government and our partners in the tourism industry have spent considerable time and effort in identifying the right target markets in this new global economic paradigm, one that can produce incremental visitor traffic from air seats into The Bahamas in tandem with growth of hotel room inventory.
As a result, air seat capacity to Nassau/Paradise Island in 2014 increased by 5% compared to 2013 and the Ministry of Tourism, in close collaboration with Industry partners, has taken steps to secure the incremental nonstop air seat capacity needed to accommodate the new rooms coming on stream at BahaMar in 2015.
Grand Bahama Island experienced a significant increase in stopover arrivals due to increases in nonstop flights from several Canadian gateways by Sunwing Airlines, Bahamasair/Xtra Airways Spring/Summer flights from several U.S. cities, Delta Air Lines' increased frequencies from once a week to daily service from Atlanta and Silver Airways daily service from South Florida gateways.
In the Family Islands, Air Canada inaugurated weekly service in May, 2014 from Montreal to San Salvador. I should add that my Government, through the Ministry of Transport and Aviation, has completed a study by heading airport planners of all of our Family Island airports. We will be embarking upon a programme of upgrading which is estimated to cost over $200 million.
In Bimini, through public/private partnership, the airport runway has been completed, with equipment installed to facilitate night flights and paving of the main road so that Resorts World was able to significantly increase seaplane flights to Bimini last year with 2500 flights carrying over 7,000 passengers, now making it the busiest seaplane route in the Caribbean. Operators of the Baker’s Bay Resort in Abaco are exploring private partnerships to provide weekly direct services via seaplanes between south Florida and Baker’s Bay. DLC Jet Shuttle Services, implemented in 2014, will expand to include 60 round-trips between White Plains N.Y. and Marsh Harbour. Additional lift and private jet use is expected to yield an additional business from 15,000 Members, guest and prospects in 2015.
The opening of the new Marsh Harbour Airport Terminal last year will provide new opportunities for further expansion of hotel and second home developments throughout the Abacos and we are presently in meetings with the China Harbour Construction Company to accelerate completion of the $39 million Port project in North Abaco.
The Ministry of Tourism, working in close partnership with the Industry, is also vigorously promoting airlift growth opportunities from key European markets, Latin America, Canada and key U.S. gateways.
Of particular interest, the Ministry of Tourism is currently in talks with airlines in China as well. Indeed just two weeks ago, during our visit to China, the Minister of Transport and Aviation signed an Air Services Agreement with China to allow for direct air service to our respective territories. This will enable The Bahamas to capitalize on opportunities to attract Chinese tourists who represent one in every 10 international tourists worldwide, and whose expenditures of US$129 billion in 2013 are made in only 44 countries outside of those such as The Bahamas with visa-waiver arrangements with China. We are in discussions for both charter and scheduled, direct flights from China in conjunction with leading outbound tour companies. Moreover, it is noteworthy that Chinese visitors to the USA increased by 22% last year. The opportunity for direct service and one-stop service, combined with the growing popularity of beach resorts with Chinese honeymooners, is expected to significantly change the landscape for tourist arrivals to The Bahamas. My Government is promoting closer ties with China to identify opportunities, not only in tourism and airline services, but for investments in hotels, energy, including renewable energy, financial services, agriculture and fisheries.
In pursuing these opportunities, however, my government will remain committed to its core-principles that stress the need to put “Bahamians first” in areas of the economy that do not require a heavy reliance on foreign direct investment capital.
Foreign Direct Investment
Early on in my Government’s term in office, however, we undertook an aggressive position with respect to foreign direct investment to stimulate economic activity across this archipelago so that the concentration of jobs and economic opportunities would be dispersed beyond the urban shores of New Providence and Grand Bahama, to Bimini, the Berry Islands, Abaco, Eleuthera, Exuma and San Salvador. These islands were targeted in the first instance because more achievable gains could be affected in these destinations.
The expansion and refurbishment of existing anchor-development projects in New Providence, Grand Bahama and the Family Islands; the opening of new hotel properties in New Providence, Bimini, and Abaco this year, should yield positive economic results. At the same time we are making capital investments in other islands as the economy continues to gain momentum and as previously invested capital bears fruit.
Projects such as:
A new, 300 room Resorts World hotel to be branded by Hilton.
Capital expansion of the February Point property in Exuma and construction of a community development and sports centre at Flamingo Bay in a public/private partnership initiative with the government.
A $4 million expansion and complete renovation of Club Med in Columbus Isle, San Salvador and a $20 million investment in two new properties by Club Med’s joint venture partner Sand and Ocean.
A capital investment of $348 million over the next decade by Southworth Developers the new co-owners of the Winding Bay Golf Resort in Abaco;
A $105 million expansion and refurbishment of the Baker’s Bay property in Abaco and construction of residential development, infrastructure and amenities
In Norman’s, Culmer’s, Children’s Bay and Williams’ Cays, serious investors are acquiring properties for development of ultra-high-end, eco-sensitive developments. Other investors are in negotiations with the Government with respect to major expansion in Exuma which will necessitate the upgrade of the Exuma airport and other infrastructural works.
Major expansion of the Freeport Container Terminal, to be completed over the next two years, together with other planned expansion in the industrial and manufacturing sectors in Freeport.
A new FBO terminal, housing Bahamas Customs and the Police at the Grand Bahama International Airport opened last year and one year ago this month we witnessed the forging of a partnership between the government, Blue Diamond Hotels and Resorts and Hutchison Whampoa to effect the opening of the Memories Grand Bahama Beach and Casino Resort (formerly Reef Village).This month the owners of Blue Diamond, Sunwing Travel Group which provided direct flights from Canadian cities, has added flights from six Canadian cities. During the summer season they will take over flights to Freeport from eight U.S. cities. The recent acquisition by China State Construction Engineering Corporation of the landmark British Colonial Hilton Hotel and plans for $200 million development of an eight storey facility containing 142 new units, auditorium, theatres, entertainment, restaurant facilities, marina, car park and auditorium and boardwalk – slated for start of construction in April. A $140 million expansion at Albany which is adding additional condominiums, residential resort amenities, commercial and sporting complexes to its development. It was recently announced that Tiger Woods will move his golf tournament to the Albany golf course next year. A $50 million refurbishment and expansion of the Ocean Club by its new owners, Access Industries.
A $20 million makeover by Warwick of the former Paradise Island HarbourResort which is scheduled to re-open its doors mid-2015.
The acquisition and re-development of the new Holiday Inn, formerly Nassau Palm, which is on track to re-open this Spring.
A $19 million renovation of the Melià at Baha Mar and the recent opening of four signature restaurants at that property
A $5.7 renovation by Comfort Suites
The Island House, a new, 30-room amenitized boutique hotel outside of Lyford Cay, owned by the Holowesko family scheduled for opening in the next several months. Development of a cultural museum at Graycliff and restoration of Mountbatten House as part of the soon-to-be Heritage Village.
The $2 billion refinancing and continued refurbishment of Atlantis, the nation’s largest resort, and their preferred alliance with Marriott which is yielding significant new business for the resort.
And leading the way……the opening two months from now in New Providence of the $3.5 billion Baha Mar Resort, along with its casino and 18-hole golf course- the Caribbean’s first TPC Network golf course, and the nation’s largest convention facilities. They bring to The Bahamas new, exciting hotel brands: the 700-room Grand Hyatt, 300-room SLS Lux and 200-room Rosewood, the 1000 room Baha Mar Hotel and the 700 room Melià Hotel Baha Mar is expected to hire 5,000 new employees when fully operational.
Today, visitors have a plethora of options for warm weather vacations and the prevailing economic conditions in the region have made our competitors work harder and smarter at attracting visitors. As a result, every destination in the region has engaged its Sport and Creative Sectors in the generation of economic spin-offs from tourism. Festivals have become extremely popular throughout the region, primarily because of its measurable impact on government taxes. We expect that our Creative Sector through our festivals will deliver added value to the visitor experience and revenues to government, leading to significant economic benefits to be gained, both in taxes and employment from the development and sale of quality Bahamian music, entertainment, art and crafts; from Bahamian fashion and literature, and from our cuisine and cultural activities.
I am introducing the Bahamas Junkanoo Carnival this year. This festival which integrates various aspects of Bahamian culture is expected to be an employment generator, an entrepreneurship creator while establishing a major festival in The Bahamas at the beginning of the summer season. The festival adds more cultural components to our tourism product and introduces more professionally-executed events, beginning with Junkanoo Carnival over a five week period on April 6 and ending May 9. These events will serve vehicles to improve the experiences of our visitors, generate employment, and stimulate economic activity and outputs in creative and cottage industries. In Grand Bahama, where the Festival will launch, various business interests in the Creative Sector have come together in partnership and formed a company to create business opportunities around the Festival. Already the company, which has invested some $1.7 million for services and products produced by 173 small and medium enterprises, has had significant economic impact on the economy in Grand Bahama.
Our greatest threat continues to be crime. As you would have learned recently, the most serious crimes increased by 3% on average last year, although overall crime rates are reported to have decreased by 18%. But this is still unacceptable!
Last year, the Royal Bahamas Police Force introduced new preventative strategies, such as saturation patrols in crime hot spots, and augmented community policing as a part of Urban Renewal. This year, we will see an expanded approach with the broader use of closed circuit television cameras, and increased support to better equip law enforcement, social services and the judiciary.
Although we will continue to demonstrate our commitment to making this country a place in which our people can live and work in a safe and secure environment and without fear, you and I know that it will require a sustained effort in collective social responsibility over time by stakeholders such as government, NGOs, the Church, educational institutions, parents and families.
Creating opportunities for the nation’s youth through employment, sports and culture, addressing their frustrations and social disorder, are of paramount importance to our future. In this regard, I have placed this matter on the agenda for consideration during the CARICOM Heads Meeting here in Nassau next month, a meeting that I will chair.
/br> We will also continue to work with the National Training Agency to introduce remediation programmes and with Urban Renewal where we will introduce a Government building programme to create opportunities for the employment of persons who would be considered unemployable in the traditional economic sectors.
Today’s customers are opting to have greater control over the management of their assets and in our financial services sector we have been able to penetrate new markets through the introduction of the Investment Condominium Act and Regulations 2014 to create a new product -- the ICON (Investment Condominium) which serves as a new wealth management tool which is tailored to meet the needs of the Latin American market.
In addition, we remain committed to continuing the culture of robust compliance, more targeted marketing of products and more aggressive promotion of the jurisdiction’s stability, and our strengths as a reputable, sovereign location for service and as a safe and secure place for the domiciling of wealth.
We are well on the road to economic resurgence. I am extremely optimistic about our prospects going forward into 2015 and beyond. We are mindful of our responsibility to future generations to ensure that the right foundation is laid, that our economy is sustainable; and that it provides a platform upon which the dreams and aspirations of our people, especially our young people, can be brought to glorious and sustained reality Thank you and I hope that your deliberations will be fruitful over the course of this day.