Bidders Invited to participate in the ownership and operation of Bahamasair

Bahamasair Bidders Invited

 

 

 

 

 

By Candia Dames

candiadames@hotmail.com

Nassau, Bahamas

7th June 2005

 

 

 

 

 

The Ministry of Works and Utilities announced yesterday that the government is inviting expressions of interest from entities or individuals wishing to participate in the ownership and operation of Bahamasair.

 

In this regard, the Ministry says submissions should include a profile of the entity or individual wishing to invest in the national flag carrier, including financial and technical qualifications.

 

Meanwhile, the consultancy firm the government hired to advise it on how best to position Bahamasair for privatization has delivered a report that points to challenges and opportunities that have for years been outlined by various boards of the national flag carrier.

 

McKinsey and Co., which is reportedly the world's largest management consultancy firm, said in a preliminary report that Bahamasair could significantly improve its financial performance by successfully capitalizing on certain opportunities.

 

The airline is being advised to improve operational performance by fixing on-time performance to reduce costs and capture more market share; improve revenue management to achieve higher yields; and minimize crew downtime.

 

Bahamasair is also being advised to increase labour productivity and right size its present fleet by choosing appropriate aircraft better scaled to demand.

 

The consultants noted that Bahamasair's operating unit costs per hour for a DH-8 aircraft (50 seats) is $1,616, but would only be $832 per hour for B1900 aircraft (19 seats).

 

"For longer flights, the cost advantage of the B1900 is even greater," the consultants noted.

 

McKinsey and Co. said there is excess capacity in the system even during peak seasons.

 

The firm also noted that the break-even load factor for Bahamasair is 65 percent, but the overall load factor is only 51 percent.

 

Only one month in fiscal year 2004 did the airline exceed 65 percent, the consultants noted, adding that even peak flights during peak periods rarely exceed 70 percent average load factor.

 

The consultants pointed out that no airline can make money flying excess capacity all of the time.

 

"Bahamasair has to demonstrate significant progress on these issues if it hopes to survive without constant government intervention," wrote the consultants, who were hired by the government at a cost of $1 million.

 

The consultants also pointed out that without the government subsidy it is now receiving, as it stands now, Bahamasair would not be able to operate.

 

"While Bahamasair cannot grow its way out of its current difficulties, by focusing on a limited number of improvement opportunities it can achieve profitability and establish a growth platform for the future," McKinsey and Co. also pointed out.

 

The firm said Bahamasair faces a competitive challenge with its flight attendant cost structure, since cost per block hour worked are well above international and regional carrier levels.

 

McKinsey and Co. indicated that Bahamasair spends $90 per hour in costs associated with flight attendants, which is double what American Eagle spends.

 

Some Bahamasair employees who have viewed the initial recommendations of McKinsey and Co. told The Bahama Journal that it is unfortunate that the government is spending so much money to receive the kind of suggestions that are not even remotely new.

 

But the airline's present board appears pleased that the consultants are confirming what the board has been saying all along and one source said that McKinsey and Co. is expected to say much more in its final report.

 

While announcing the hiring of the consultants earlier this year, Minister of Works and Utilities Bradley Roberts stressed that the $1 million fee being paid to the firm was "competitive".

 

At the time, he announced that McKinsey and Co. will be responsible for performing the privatization requirements in conjunction with a privatization committee comprised of knowledgeable professionals from the airline and related industries.

 

Late last month, Bahamasair Chairman Basil Sands announced that consultants who have been hired to advise the government on the privatization of Bahamasair are about to begin more extensive discussions with stakeholders at the national flag carrier to try to resolve differences over productivity and wage disparities.

 

Mr. Sands said that he expects the final report on the privatization process to be presented to the government within 60 days.

 

He also assured that the airline's unions have indicated their willingness to work along with management and a privatization committee to assist in reducing the losses of the airline and ultimately make it profitable.

Florida Power & Light Company (FPL) puts On Hold a Plan to Seal a Deal for Long-term Supplies of Liquefied Natural Gas (LNG)

Florida Power & Light Company (FPL) announced that it was now focusing on other potentially more viable options to meet FPL’s increasing requirements because there appears to be limited opportunity in accessing LNG at this time

Utility Co. Pulls Out Of LNG Plan

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

6th June 2005

Florida Power & Light Company (FPL), which was involved in a partnership with two energy firms to construct a liquefied natural gas terminal in The Bahamas, has announced that it has temporarily put on hold a plan to seal a deal for long-term supplies of LNG.

The announcement has placed the fate of one of the LNG proposals for The Bahamas on an even more uncertain path.

FPL had hoped to carry out an arrangement with El Paso Corp. and Tractebel Electricity & Gas whereby through their partnership, natural gas would have been liquefied, shipped from the source and then re-gasified for delivery to Florida.

Last December, the utility company announced that it had agreed to combine development efforts and resources with the two energy companies "in order to bring a new supply of natural gas to South Florida."

Under that plan, the three companies had planned to carryout one project.  Prior to that, Tractebel and El Paso had been pushing separate LNG proposals before The Bahamas government.

But in a recent release, FPL announced that it was now focusing on other potentially more viable options to meet FPL’s increasing requirements because there appears to be limited opportunity in accessing LNG at this time.

The Tractebel proposal had called for the construction of an LNG terminal in the Freeport Harbour while El Paso planned to build a terminal in East Grand Bahama.  But The Bahamas Environment Science and Technology Commission rejected both sites as being viable locations for the construction of LNG plants.

Government officials later indicated that the consortium was eyeing another site in Grand Bahama for the construction of the terminal.  The plan also entails laying an LNG pipeline from the northern Bahamas to Florida.

In December, El Paso spokesman, Aaron Woods, said that both El Paso and Tractebel will continue their individual efforts on the development side of each pipeline.

But he said, "Ultimately, one pipeline and one LNG facility will be built.  The companies will be participants in the ultimate project that is selected."

Although it had indicated last year that it had formed an arrangement with El Paso and Tractebel, FPL said in its recent release that none of the proposals received as a result of a request for proposals for the long-term supplies of LNG presented "sufficiently compelling reasons for FLP to proceed with its [request for proposals] at this time."

The utility company said in a release, "The lack of benefit to FPL customers and no bidders meeting all the specifications of the [request for proposals] contributed to the decision."

Terry Morrison, vice president of FPL’s energy marketing and trading organization, said in a statement, "We remain interested in LNG, but we have to know our customers will benefit before we will enter into any long-term transaction."

The announcement by FPL appeared to have left some confusion.

Mr. Woods, in an interview with The Bahama Journal from Houston, Texas last Thursday, said as far as El Paso is concerned, its agreement with FPL Group Resources, a subsidiary of FPL Group, Inc., still stands.

"FPL Group Resources, SUEZ (Tractebel) and El Paso Corporation continue to believe that having LNG and re-gasifying it there in The Bahamas providing South Florida with an alternative source of natural gas would be in the best interest of consumers in South Florida," he said.

"Based on the announcement by FPL utility, we are assessing our options and at this time, that’s all the information I have."

There is No Compelling Economic or Political Case for The Bahamas to Join The CARICOM Single Market & Economy CSME in Its Present Form - says Notable Bahamian Attorney, John K. F. Delaney

The Bahamian Public Deserves A Clear Understanding of How The CARICOM Single Market & Economy (CSME) will Impact Their Way of Life

STRAIGHT TALK NEEDED ON CSME

By: John K. F. Delaney
Nassau, The Bahamas

31 May, 2005

THE QUESTION of whether The Bahamas joins the CSME has profound implications for the economic way of life of every Bahamian.  With the Government having decided last December to sign the Revised Treaty of Chaguaramas that would commit The Bahamas, it is troubling that there is a persistent lack of clarity or forthrightness by the Government as to the Revised Treaty’s ramifications.

The Government (by Minister of Foreign Affairs, Hon. Fred Mitchell) has stated that The Bahamas will enter reservations in four regards (“the four reservations”), which they claim would prevent the economic side of the Revised Treaty from applying to The Bahamas and keep unchanged the present position of The Bahamas in relation to Caricom.

The four reservations are stated as follows:

1.  Against the free movement of persons (Articles 45 & 46);

2.  Against monetary union;

3.  Against a common external tariff; and

4.  Against the Caribbean Court of Justice on its Appellate side.

Critical questions arising from the Government’s position are:

a)  Do the four reservations constitute the entirety of the so-called “economic side” of the Revised Treaty?

b)  What is the legal effect of a reservation under the Revised Treaty?

The Economic Scope

The most cursory reading of the Revised Treaty would reveal that the economic scope of the Revised Treaty extends far beyond the four reservations.  Barbados Prime Minister Owen Arthur described the comprehensive economic scope of the Revised Treaty as “the respective economies of the Caribbean should be reconstituted through the removal of existing barriers, as a Single Market space in which not only goods, but services, capital, technology, and skilled persons should freely circulate, and Caribbean citizens should enjoy new and unfettered rights of establishment of enterprise anywhere in the region.”

The four reservations relate only to part of the economic effects of the Revised Treaty.  For example, the Revised Treaty requirements for the free movement of capital and goods within the Single Market are not affected by the four reservations.  And the four reservations only partially affect the free movement of persons by relating only to the free movement of workers/employees while not touching or concerning the free movement of self-employed persons.

The Free Movement of Self-employed Persons

Whereas a reservation is proposed against the free movement of workers (Articles 45 & 46), no reservation is proposed against the free movement of self-employed persons (Articles 32, 33, 34, 37 & 44) under the so-called right of establishment.

The Government, by Minister Mitchell, has stated that the right of free movement of self-employed persons is “principally in areas that earn foreign exchange such as hotels, which are already open to foreign investors”.  But that is not what the Revised Treaty states.  The Revised Treaty does not in anyway limit the free movement of self-employed persons.  Indeed, the Government’s own Information Paper (dated October 2004 prepared by His Excellency A. Leonard Archer) contradicts the Honourable Minister in stating as follows:

“The Right of Establishment is a fundamental pillar of the CSME.  This Right permits the National of any Member State of the CSME to establish a business in any other Member State of the CSME on the same basis as would a national born in that Member State.  In other words, a Barbadian Businessman would have the right to establish a business in Jamaica in the same manner that a Jamaican Businessman would establish a business in his native Jamaica.  Similarly, the Jamaican would have the right to establish businesses in Grenada or Trinidad and Tobago in the same manner that nationals of Grenada or Trinidad and Tobago would have” (see pages 20 & 21).

Further, in answer to a question posed in the Information Paper “How will joining the CSME affect those areas of the Bahamian economy reserved for Bahamians?”  the Information Paper further states:

“On joining the CSME, unless The Bahamas obtains reservations on some aspects of Article 33 ‘Removal of Restrictions on the Right of Establishment’, The Bahamas would be expected to allow Single Market firms to enter every part of its domestic market.  Under Article 33, Member States are expected to remove any ‘restriction on the setting up of agencies, branches or subsidiaries by nationals of a Member State in the territory of another Member State’” (see page 38).

The Bahamian public is entitled to plain and direct words from the Government that, by its decision to join the CSME, the Government intends to allow Caricom nationals to operate any business in The Bahamas as self-employed persons on the same basis as any Bahamian.  And, that included are those business areas presently reserved under the National Investment Policy exclusively for Bahamians, namely:

i)  Taxi business,

ii)  Beauty salon or barber shops,

iii)  Auto repair service,

iv)  Fishing,

v)  Retail shops of any kind,

vi)  Wholesale shops of any kind,

vii)  Real estate sales & rental agencies,

viii)  Restaurants (non-specialty), and

ix)  Security service.

The Government should disclose in plain language to the public that CSME would impose an obligation upon The Bahamas to ensure that Caribbean nationals, on the same basis as Bahamians, have access to land, buildings and other property in The Bahamas for their establishment of businesses in The Bahamas (see Article 37).

The Reservations

There is much confusion about the duration of any of the four reservations to parts of the CSME:

Article 237 of the Revised Treaty allows reservations to be entered if other Caricom countries that sign the Revised Treaty would agree.  However, the Revised Treaty does not define the word “reservation” or speak to its duration or legal effect.

·  Minister Mitchell has stated that the reservations would have no time limit unless The Bahamas decides to remove them.

·  The Bahamas Information Paper states that “these reservations could last for twenty years or more” (page 47).

·  A Barbados based CSME specialist has reportedly stated that the proposed reservations would be limited to 5 years and that any extension would require the agreement of Caricom members.

However, even if one agrees with the position of Minister Mitchell on a question of duration, more fundamental is that, as a matter of international law, no state may form a reservation to a treaty if the reservation is incompatible with the object and purpose of the Revised Treaty (Vienna Convention on The Law of Treaties, Article 19).  In this regard, it appears that some if not all of the four reservations directly conflict with the object and purpose of the CSME.  As such, at some point after The Bahamas would have signed to join the CSME in reliance upon four reservations of uncertain effect, The Bahamas may find itself subject to a dispute brought by other Caricom states challenging the reservations.  Therefore, whatever position one takes on the duration of reservations, if they are incompatible with the object and purpose of the Revised Treaty, they may only last until the Caribbean Court of Justice sets them aside.  The CCJ alone shall have jurisdiction to determine the matter.  In this connection it should be clearly understood that the proposed reservation against the CCJ would not and could not prevent the CCJ from having exclusive jurisdiction over CSME disputes concerning The Bahamas.

There is no compelling economic or political case for The Bahamas to join the CSME in its present form.  The four reservations are insufficient and too uncertain to protect the legitimate interests of the people of The Bahamas.  The Bahamas should reject the Revised Treaty and, instead, pursue a bilateral treaty between The Bahamas, on the one hand, and Caricom, on the other, covering such aspects of economic and/or political cooperation as the Bahamian people would find acceptable.

Conclusion

The Bahamian public deserves a clear understanding of how the CSME will impact their way of life.  That understanding requires informed discussion, widely held - in our churches, unions, schools and families, and time for mature consideration.  It is unfortunate that the Government did not choose to invigorate its campaign for the CSME sufficiently in advance of the impending CSME deadline of 31 December 2005.  But Bahamians ought not to be rushed into a bad deal.  An issue so profound as whether to join the CSME could not with moral authority be decided by the Government without it first being put to the people in a referendum or general elections.

The Bahamas 2005-2006 Fiscal Deficit is Projected to Increase Over the Previous Period

The Bahamas 2005-2006 National Budget Projects The Government Finance Statistic (GFS) Deficit of $172 million

Budget Deficit Soars

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

26th May 2005

The 2005-2006 budget projects a GFS deficit of $172 million, which would be $30 million more than the deficit expected when this fiscal year draws to a close on June 30.

The $172 million deficit would be 2.8 percent of GDP and would be the highest deficit since fiscal year 2002-2003 when the spending shortfall came in at $184 million.

There are several factors that are expected to contribute to increased spending in the 2005-2006 fiscal year, Acting Prime Minister Cynthia Pratt announced in the House of Assembly yesterday.

The recurrent expenditure is pegged at $1.214 billion, which is an increase of $39 million or 3 percent over the 2004/2005 budget.

"The single major component of the increase is the provision in the Ministry of Finance Estimates to pay increases for public servants and related groups, arising from the present negotiations, as well as some increase in benefits for retired public servants," Mrs. Pratt announced.

"Another important increase is for the improvement in insurance arrangements for the Royal Bahamas Police Force, the Royal Bahamas Defence Force and the other law enforcement officers."

This comes to a total of $8 million, the Acting Prime Minister announced.

In addition to the GFS deficit, one of the traditional highlights in the annual budget communication is the ratio of government debt to GDP given that financial experts continue to advise that this ratio should be kept as near as possible to 30 percent of GDP to avoid the problems which would arise from a ratio significantly in excess of that level.

Exceeding the 40 percent mark could mean that the government’s ability to borrow money would be severely constrained and it would be forced to sharply increase taxes, Mrs. Pratt reiterated during her communication, which she delivered on behalf of Prime Minister and Minister of Finance Perry Christie, who is still convalescing at home three weeks after suffering a slight stroke.

"Fiscal deficits arise if we spend more than we earn in revenues and if this situation continues for long enough we build up massive borrowing problems," Mrs. Pratt pointed out.

She added that circumstances are quite different if the ratio of government debt to GDP is closer to 30 percent.

"There would be much greater scope to avoid these drastic remedies because there would be the capacity to borrow until the economic situation improves and until revenues recover so as to again close the gap between revenue and expenditure.  This is what transpired in 2001 and 2002," the Acting Prime Minister said.

She said in order to bring the ratio of government debt to GDP as close as possible to 30 percent revenues must consistently attain the level of 20 percent of GDP.

"At that level, we can also provide the level of revenue resources which we need for ongoing public expenditure while containing the fiscal deficit," Mrs. Pratt said.

She also noted that successive governments have tried to attain the ratio of government revenue to GDP of about 20 percent.

At that level, Mrs. Pratt said, Bahamians could enjoy a reasonable level of public services without the introduction of taxation to pay for them.

"However, the ratio of revenue to GDP of 20 percent is becoming increasingly hard to achieve because of the narrowness of our revenue system, heavily dependent as it is on customs revenues and the non-taxation of services.  Thus, the expansion of essential public services has resulted in fiscal deficits emerging, which have been met by borrowing.

"As a result, the level of government debt to GDP has risen inexorably since the year 2000.  In recognition of this issue, in the 2005/2006 budget- the government is aiming to contain the ratio of government debt to GDP to under 38 percent."

The Acting Prime Minister also said that the government is continuing an aggressive process of addressing tax reform to improve its revenue situation.

The 2005-2006 budget projects recurrent revenue of $1.145 billion, an increase of $93 million or 9 percent over the 2004/2005 budget.

"The reason for projecting an increase of 9 percent over 2004/2005 is because of the strengthening of the economy, with growth in current terms of over five percent and the heightened emphasis being given to concrete and specific improvement in revenue administration," Mrs. Pratt said.

The Acting Prime Minister also announced that the government plans to improve all of the country’s national airports to raise them to the highest standards required.

"Accordingly, a variety of air navigational fees and related charges in the Family Islands are being increased to more realistic levels to meet part of the cost," she announced.  "In addition, it is intended to implement passenger facility fees at major airports as part of the cost recovery exercise."

Free National Movement (FNM) Leader, Senator Tommy Turnquest - Advises The Bahamas Government not to join the Caricom Single Market and Economy (CSME)

FNM Leader Advises Gov't Not To Join CSME

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

24th May 2005

Amid increased debate over the Caricom Single Market and Economy (CSME), Free National Movement Leader Senator Tommy Turnquest yesterday set the record straight on the FNM's position on the controversial agreement, saying it is not the same position held by the government.

Mr. Turnquest said it is the FNM's position that The Bahamas should not join the CSME.

He made the comment in an interview with The Bahama Journal on the heels of continued statements made by Minister of Foreign Affairs Fred Mitchell that the FNM agrees with the government on how to proceed on CSME.

Minister Mitchell indicated recently in a statement that, "the position of the Official Opposition as communicated to the Minister is that they agree, and are at one with the government's position on CSME- provided reservations are obtained for The Bahamas not to participate in the free movement of people; the Caribbean Court of Justice at the appellate level, the single currency and monetary union and the Common External Tariff."

During an address last week to the Abaco Chamber of Commerce, the Minister said, "Both political parties agree with the approach that we have decided with regard to [the CSME].  You will see a lowering of the temperature on this over the next few weeks.  The arguments from the opponents have been exhausted.  You can see this with the lengths of the desperation and invention that are taking place."

But Mr. Turnquest said the Foreign Affairs Minister "ought to desist from saying what he's saying about the Free National Movement" regarding its position on CSME.

While he said that the FNM believes that the government should not sign the agreement, he also indicated that the party supports a referendum on the issue.

In addition, he said- should The Bahamas sign on; it should secure the mentioned reservations.  But Mr. Turnquest ‐ joining a growing chorus ‐ questioned how long the reservations would last.

"We want to be assured that the reservations at some point in the future don't just fall away and we find ourselves automatically becoming a part of this Caribbean union with those tenets being in place," Mr. Turnquest said.

But while on the Love 97 programme "Jones and Company" on Sunday, Minister Mitchell indicated that the reservations would last for as long as a Government of The Bahamas wishes them to.

Mr. Turnquest said yesterday that the FNM's position has "evolved to where we support the position that Bahamians have.  We ought to have a referendum on it."

He said, "There are some theorists or constitutional experts who say that our constitution does not allow for that type of referendum to be held.  We can amend our laws so that the people of The Bahamas have more of a say in this matter.

As far as I am concerned, the people ought to decide.

"I listened to Brian Moree on Jones and Co. [Sunday] when he said if you disagree with five fundamental positions like that, why then join and I wholeheartedly agree with him.  That's exactly what I'm saying."

Mr. Turnquest was asked whether The Bahamas should no longer be a part of Caricom.

"If they are not prepared to accept us as a part of it [then so be it], but I think they would be prepared to have us in terms of the cooperation and other aspects and they would benefit as would we.  I don't see that there are any great benefits to us signing and opting out of the major provisions," he said.

Asked on the show on Sunday if The Bahamas would be axed from Caricom if it does not sign the Revised Treaty of Chaguaramas, Minister Mitchell declined to give a direct answer.

He did say, however, that, "The great beauty of the Caricom movement is it isn't one of these hard and fast, black and white issues.  The fact is we do participate in all of the organs of the community at the moment, but it is just appropriate for us to be signatories to the treaty.  Everyone else in the community is a signatory to the treaty."

When asked by the show's host, Wendall Jones, whether The Bahamas should sign the treaty, he said, "I believe it should.  In fact, the government decided on the 21st of December last year that we ought to do that subject to obtaining the reservations which we have advanced in the public domain." 

The Raging Debate over the CARICOM Single Market and Economy (CSME) continues in The Bahamas

Clash Over CSME

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

23rd May 2005

The raging debate over the CARICOM Single Market and Economy (CSME) continued on Sunday as Foreign Affairs Minister Fred Mitchell locked horns with a leading attorney over various aspects of the agreement, which has created much furor in recent weeks.

A heated exchange between Minister Mitchell and Brian Moree on the Love 97 programme "Jones and Company" led to the attorney lashing out at the Minister over certain comments he made.

Throughout the show, Minister Mitchell, who at times appeared frustrated over what he termed misinformation on CSME, insisted that there will be no fundamental changes if The Bahamas signs onto to the agreement.

"What I'm saying is, let's not frighten ourselves by saying that there is going to be some fundamental change," he said.

"There is going to be no fundamental change and as for whether the reservations will last, I cannot say.  I can only speak for the Government of the Commonwealth of The Bahamas today."

There continues to be great confusion over whether the reservations the government is seeking will last indefinitely.  Several prominent figures, including Mr. Moree, have insisted that they are merely deferrals.

The government has said that at this time, The Bahamas will not participate in the free movement of people; the Caribbean Court of Justice at the appellate level, the single currency and monetary union, and the Common External Tariff.

Mr. Moree believes it is senseless to join an agreement and opt out of its major fundamental provisions.

"If you look at the literature that comes out of the southern Caribbean on the CSME, it seems to make the point very strongly that the CSME is a pipedream if it does not involve full integration of the peoples of the Caribbean countries," said Moree, who also heads the government-appointed Financial Services.

"There has to be political integration; there has to be full economic union.  When you get there, is perhaps debatable- and whether all countries get there at the same time is perhaps debatable.  The fundamental point is that these reservations do not mean that we are not going to be required to deal with these issues at some point in the future.  Before I get into something, I want to look at the future.  I don't have the luxury of mortgaging my children's future."

But Minister Mitchell shot back, "This emotive language is simply irresponsible."

It's a statement Mr. Moree took exception with.

"Minister, we should keep the level of debate high out of respect for your office," he said. "I am not irresponsible."

"I said the language was irresponsible," Minister Mitchell corrected him.

Mr. Moree responded, "That is a view, Minister...The Government of The Bahamas should listen to its people."

"I am listening to you, Mr. Moree," the Minister said.  "I am saying that if you want to keep the debate responsible we have to deal with the facts and the facts are that there will be no fundamental change."

Mr. Moree fired back, "But that is wrong and very few people agree with you."

Minister Mitchell insisted that that statement was simply incorrect.

"You're talking economic theory," he told Mr. Moree.

"I am talking what the facts are as presented by the Government of The Bahamas.  Those facts are that reservations exist- and there is no timing on those reservations and so the treaty as far as those provisions will apply, will not apply to The Bahamas.  How many times does one have to say [that]?"

Mr. Moree suggested sarcastically that the Minister "holds all wisdom" and is intolerant of anyone who opposes him on CSME.  But Minister Mitchell said this was not the case.

He said signing the Revised Treaty of Chaguaramas is "really about our continued participation in CARICOM...What we are doing or proposing is to finish the work of becoming incorporated into CARICOM since the treaty is to come into force at the end of the year and maintaining our position with regard to the status quo as far as our relations with CARICOM is concerned by entering reservations pursuant to Article 237 of the treaty, which really puts us in the same position which we are in now."

The show's host, Wendall Jones, said, "The detractors of this say it makes no sense for The Bahamas to sign on to CSME because fundamentally, the economic side is fundamentally what CSME is all about."

"CARICOM is both political and economic, and the government's case has always been that we're a part of CARICOM for geopolitical reasons- and that now that we have the [Revised] Treaty of Chaguaramas, if we are to be fully a part of CARICOM, we should sign the treaty with the reservations, which will serve our national interest."

Mr. Jones then asked, "Are you suggesting therefore that if we do not sign the treaty then we are not a part of CARICOM or should not be a part of CARICOM?"

The Minister explained that, "The great beauty of the CARICOM movement is it isn't one of these hard and fast, black and white issues.  The fact is we do participate in all of the organs of the community at the moment, but it is just appropriate for us to be signatories to the treaty.  Everyone else in the community is a signatory to the treaty."

He added, "I believe that [the government should sign the treaty].  In fact, the government decided on December 31 that we ought to do that, subject to obtaining the reservations which we have advanced in the public domain."

But Mr. Moree said, "I do not think that The Bahamas should join a single economy with 14 other countries within the region.  That is my primary concern.  I don't think there are compelling economic interests for The Bahamas to join this single economy."

He was echoing sentiments expressed in recent times by former Governor of the Central Bank and former Minister of Finance Sir William Allen, and soon to be former Governor of the Central Bank Julian Francis.

Mr. Moree said, "The reservations that the Minister has indicated I think are very important, but there are many questions as to how long these reservations will continue.  Who will decide when they end?  Do we retain control over making these decisions?  And in any event, what about the right of establishment, which is not currently one of the four reservations?  What is the impact of the freedom of movement of skilled persons... as opposed to the free movement of labour generally?"

The Minister explained, "The right of establishment will not affect the retail and wholesale trades in The Bahamas because the right of establishment has to deal with those areas of the economy which are foreign exchange earners for the particular country.  These sectors include, amongst others, the hotel sector, the manufacturing export sector and some smaller areas like specialty restaurants.

"What right of establishment does is it gives you when you invest in a country the right to bring certain skilled labour to run your establishment.  If you look at the national investment policy of The Bahamas today, all of those areas that I have listed are already areas where foreign investors are able to come and invest in the country and part of the policy is that they are permitted to have the skilled labour to run their companies.  So it balances out."

While the Minister insisted throughout the show that signing the Revised Treaty of Chauguaramas would be merely a political move, Bahamas High Commissioner to CARICOM A. Leonard Archer said recently in an interview with The Bahama Journal that there are many economic benefits that will come if the government signs on to CSME.

Mr. Archer said that by signing the CSME, The Bahamas would see "increased investments and increased trade with the rest of the Caribbean."

Minister Mitchell said in a recent speech that not signing on to the CSME would have serious negative implications for the country's social and economic infrastructure that would set The Bahamas "at a serious disadvantage as a country, rather than enhance our growth and development, in that, our access to the facilities and services provided by the Caribbean Development Bank, the University of the West Indies, the Caribbean Disaster and Emergency Response Agency and others, would be greatly diminished."

"We would be the only country in the Caribbean, apart from Cuba, that would be outside a regional trade bloc; and since trade blocs provide benefits for their members that are not provided to non-members, it could easily be reasoned that our tourism industry, our manufacturing industry, our beleaguered agriculture industry and even our financial services industry would be immediately and negatively affected, largely in terms of the relatively higher cost of doing business in The Bahamas that we would have invited by trying to stand alone," Minister Mitchell said.

The Bahamas Should Not Join the CARICOM Single Market and Economy (CSME) - according to Central Bank Governor, Julian Francis

Governor Francis said that CARICOM Central Bank Governors conducted a study on the impact the single currency would have on the region and advised heads of CARICOM that it would not be a feasible move to make

"Why?  Because there isn’t sufficient economic convergence between the countries of CARICOM to sustain a common currency," Mr. Francis said

Governor Against CSME

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

17 May 2005

There is no sound economic reason why The Bahamas should join the CARICOM Single Market and Economy (CSME), according to Governor of the Central Bank Julian Francis.

The show’s host, Wendall Jones, pointed out that, "There are those in the political directorate in The Bahamas as well as in other countries in the Caribbean who would say that if we do not participate in CSME we might as well not be a member of CARICOM."

Mr. Francis said this might very well be true.

"I suppose that in time if we were not to join the CSME my guess is that CARICOM would not see any particular interest in continuing its administrative and political partnership with The Bahamas," he said.

"But to the extent that these things are driven mainly by economic considerations, I would say so be it."

The CSME debate has taken on new life in recent weeks, with several prominent figures coming out in opposition to the agreement.

The growing public outcry coincides with an educational campaign launched by the government and spearheaded by the country’s Minister of Foreign Affairs, Fred Mitchell.

The government has already said that The Bahamas would request certain reservations before joining CSME.

These include opting out of the free movement of people; the Caribbean Court of Justice at the appellate level, the Common External Tariff, and the single currency and monetary union.

While on the show, Governor Francis said that three years ago, the CARICOM Central Bank governors conducted a study on the impact the single currency would have on the region and advised heads of CARICOM that it would not be a feasible move to make.

"Why?  Because there isn’t sufficient economic convergence between the countries of CARICOM to sustain a common currency," Mr. Francis said.

Asked whether the governors’ view has changed in that regard, he said, "If there has been any change I would say that Trinidad has become a bit further removed from the average of CARICOM economically.  Jamaica also has in a negative sense, and The Bahamas of course has continued its development.

"That leaves the East Caribbean and Barbados.  I don’t think that there has been anything that would have happened which would cause the governors to think differently."

Last week, a former Governor of the Central Bank of The Bahamas also came out strongly against CSME.

In a letter to the editor, Sir William Allen said there is no logical justification for The Bahamas to be a part of this single economic space, "because no one has yet identified one benefit which could only be achieved through our sign-on."

He also said that Minister Mitchell is wrong to equate CSME with the Free Trade Area of The Americas.

"This is the reason it would be helpful for the debate if it were led by a ministry or an institution which has a better understanding of the difference between a free trade area, and a single economic space- and this is not a red herring," Sir William said.

He also said, "The economic divergence between The Bahamas and the rest of the region is of such magnitude that it seems readily accepted that it should be granted temporary exemptions from key provisions of the arrangement defining this common economic space.

"No one, not the Minister nor anyone else, can know how the participation would affect The Bahamas’ economic situation, first- in terms of the impact of the provisions to which it will have to adhere, then in terms of the anticipation of the end of the exemptions it may be granted- and finally in anticipation of where the evolving harmonization within this common economic space may eventually lead."

But Bahamas High Commissioner to CARICOM A. Leonard Archer recently said in an interview with The Bahama Journal that any suggestion that the reservations would be "temporary" and The Bahamas would eventually be forced to adhere to all provisions of CSME is incorrect.

Mr. Archer said that The Bahamas may opt out of certain provisions of CSME for as long as it chooses.

He expressed disappointment that so many prominent and well-educated Bahamians are spreading "misinformation."

Mr. Archer also said The Bahamas would benefit tremendously from joining CSME.

"We are part of a global economy.  We have applied to join [the World Trade Organization].  We have been negotiating the FTAA.  Joining the CSME first provides us with certain advantages of going into WTO and FTAA," he said.

"There are also economic reasons: increased investment in The Bahamas; increased trade with the rest of the Caribbean; we could access goods and services from the Caribbean more cheaply or more economically than we are accessing them now."