CARICOM Single Market and Economy (CSME) Raging Debate in The Bahamas Dies A Sudden Death

CSME Shelved

By Candia Dames

candiadames@hotmail.com

Nassau, The Bahamas

14th June 2005

Seeking to bring an end to the raging national debate on the CARICOM Single Market and Economy (CSME), Minister of Foreign Affairs Fred Mitchell on Monday announced that the government will not be signing the Revised Treaty of Chaguaramas anytime soon.

In fact, Minister Mitchell said that it does not appear that the government will sign the Treaty, which establishes CSME, during this present term in office, which expires in 2007.

"There is a clear disconnect between the government and the wider community on this matter," said the Minister, who used the entire two hours allocated to him to contribute to the budget debate to address the CSME and other foreign affairs matters.

This meant that there was no room to address public service related issues or matters concerning his Fox Hill constituents.

Minister Mitchell said as it relates to the CSME, The Bahamas has reached the point where it must stop and review.

"The Bahamian people or more properly those who have created the din on the radio and in the press now have their wish," he announced.

"But they must know that it is not to me that they will have to answer for this, but to the future of this country."

Minister Mitchell said he was not panicked by the level of debate that led the government to decide to hold off on signing the Revised Treaty.

"The Bahamas has not signed the Revised Treaty of Chaguaramas and cannot now sign in these present circumstances," he said.  "What we are now engaged in is a programme of public education and discussion on the issue.

"This has become a matter on which people are attacking me personally on a policy which is the decision of the government.  I told both the Prime Minister and the Deputy Prime Minister that I believe that my truthfulness has been called into question and my integrity challenged.  No Minister has to seek to ask permission of anyone to seek redress for attacks on his or her personal integrity."

He said what is particularly regrettable is that the forces who opposed the independence of The Bahamas in 1972 now seek to impugn his character by suggesting that he would compromise the sovereignty of The Bahamas.

Minister Mitchell said, "They are false prophets and crying crocodile tears because we know that they did not want The Bahamas to be free in the first place.  There is not a possible chance that this Minister, this individual, would compromise the sovereignty of The Bahamas."

Seeking to clarify what he called misinformation associated with the CSME debate, Minister Mitchell said, "It is clear that this matter of our participation in the Revised Treaty of Chaguaramas will not be decided within this present term.

There is too much misinformation, disinformation and emotion; too much political dishonesty.  There is simply too much politics.  Accordingly, the Minister of Trade kindly agreed for me to speak to The Bahamas Commission on Trade.

"The Trade Commission's co-chair, Raymond Winder, has indicated by letter that subject to certain clarifications, they are ready and willing to work on the issues...The politics will hopefully then be out of the matter, the Commission will be free to review all the issues arising from the current debate, without a deadline, and the Ministry can now continue with other valuable projects in our Foreign Affairs.

It is only left for the government to provide a formal remit.  It is my hope that this effectively brings an end to this matter."

The Minister also said there has been "considerable misinformation and deliberate disinformation" about the matter or reservations to the Treaty.

The government has said repeatedly that if it signs the Revised Treaty, it would seek reservations on the free movement of people; the monetary union; the Caribbean Court of Justice at the appellate level; and the common external tariff.

Addressing the confusion surrounding whether the reservations would have an expiration date, the Minister said, "The reservations that are proposed are without end.

With regard to this treaty; once you sign a treaty with a reservation, the provisions of the treaty against which there are reservations do not apply to The Bahamas, neither can they be questioned in any court.  These are sovereign decisions of a sovereign government."

Minister Mitchell said that the CCJ reservation has been the cause of "considerable confusion."

"The confusion has been engendered by unintelligent ‐ at the very least disingenuous ‐ commentary by attorneys who ought to know better," he said.

Minister Mitchell announced that he will be representing Prime Minister Perry Christie at the next Heads of Government meeting set for St. Lucia early next month.

"The process of public education on this matter is nowhere near complete and so the question of signing anything in July does not arise," the Minister added.

He also spent much of his time lashing out at detractors whom he said have been spreading half-truths.

Minister Mitchell pointed to former Minister of Finance Sir William Allen, and former Minister of Economic Development Zhivargo Laing, saying, "They have been fudging, half truths and shades of deception, confused the public on this issue...This is the political season and no matter what the truth is, the response will be fudging, misinformation and mix up."

While he gave no attention to the public service in his address, Minister Mitchell, under whose portfolio the public service falls, also took a stab at John Pinder, president of The Bahamas Public Services Union.

"He is involved now in a campaign for reelection," the Minister pointed out.  "I can only imagine that anything will be said for headlines.  I have accused him before of always wanting to engage in the politics of rowing.  I did not believe for one moment that he would resort to a deliberate untruth which should be clear to him and clear, as the lawyers say, on the face of the record."

Minister Mitchell said it is "nonsense" for Mr. Pinder to say that the government signed the Revised Treaty on December 21, 2004.

The Minister also slammed Chairman of The Bahamas Financial Services Consultative Forum Brian Moree, who has criticized the government for its handling of the whole debate, and has urged the Christie Administration not to sign the new Treaty.

Mr. Moree has said that it makes no sense to sign such a treaty and opt out of four of its major provisions.

But Minister Mitchell indicated that he's baffled that Mr. Moree is vehemently opposed to the free movement of people under the CSME, when only a few months ago, he, as chairman of the Forum, released a controversial report strongly asking the government to liberalize its immigration laws.

"There are other critics," Minister Mitchell said.  "They have said some pretty appalling things about me personally and about the government.  One group that comes with the unfortunate acronym of BARF seems especially personally motivated...I only say this to the public: one should always look to see why a comment is being made and what interest is being served by that comment."

He said that it is clear that the detractors of his government on the CSME issue have one motto, and that is not to let the truth get in the way of a good story. 

Bankrupt Bahamasair

Bankrupt Bahamasair Due For Overhaul

 

 

 

 

 

By Candia Dames

candiadames@hotmail.com

Nassau, Bahamas

13th June 2005

 

 

 

 

 

It would make absolutely no sense for a businessman to buy into Bahamasair as it is presently constituted because the airline is bankrupt and would not have survived all these years without government subsidy, according to Bahamasair's Managing Director Paul Major.

 

Mr. Major, who was the guest on the Love 97 Sunday programme, "Jones and Co", was asked what would be the ideal circumstances that would make sense for anyone to purchase shares in a privatized Bahamasair.

 

"If it were based on a business plan that would have taken into account a restructured balance sheet where all of the non-productive debt and what you might call dormant payables were purged from the balance sheet [privatization would make sense]," he said.

 

"If you reviewed our annual report, which is a document in the public domain, there's some $50 million in payables to government entities.  Clearly, no one wants to buy into that."

 

Mr. Major added, "Bahamasair is bankrupt.  Bahamasair has negative equity of some $84 million."

 

Given that many airlines in the industry are losing money, the show's host, Wendall Jones, asked why the Government of The Bahamas should privatize Bahamasair.

 

Mr. Major noted that the government has been propping the airline up by spending anywhere from $10 million to $32 million annually.

 

"Given the size of our [national] budget and the percentage that that represents of our total GDP, the monies could probably best be spent elsewhere," said Mr. Major, who added that there are other carriers which would be able to step right in and fill the gap for any route in The Bahamas now being serviced by Bahamasair if the airline decides to stop servicing that route.

 

He said while the government should have some degree of interest in a privatized Bahamasair, it should be a minority interest only so that it would be able to preserve some degree of leverage.

 

It takes about $89 million a year to run the airline, which is only bringing in about $70 million every year, Mr. Major noted.

 

Given the annual deficit, Mr. Jones asked, "What would a privatized Bahamasair do to make money that a Bahamasair owned and operated by the Government of The Bahamas is not doing?"

 

Mr. Major responded, "There's obviously some fleet issues.  We're flying jets to destinations where they're not really designed to fly."

 

The need to right-size the fleet was pointed to recently by McKinsey and Co., the consultants the government hired at a cost of $1 million to help prepare Bahamasair for privatization.

 

McKinsey and Co. pointed out that by using smaller aircraft for certain routes, the airline would be able to save a significant amount of money annually.

 

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.

 

Mr. Major acknowledged while on the show, "The Dash 8's, in fact, are not ideal for most of the Family Island destinations we go to.  The aircraft are too large.

 

With smaller aircraft that operate more efficiently, right away, you can reduce your expenses to a great extent with marginal erosion in your revenue.  That in itself would get you to break-even or probably even turn the corner."

 

Like McKinsey and Co., Mr. Major stressed that Bahamasair has a capacity problem.  He indicated that while the airline may be able to fill its planes on one leg of a particular route, it is only able to fill a small percentage of seats on the return leg.

 

The preliminary report from the consultants noted that the break-even load factor for Bahamasair is 65 percent, but the overall load factor is only 51 percent.

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

 

While on "Jones and Company", Mr. Major also pointed to issues related to productivity, indicating that under private ownership certain things could be done more easily.

 

"The way our network is designed and the way our work rules for our crew are designed, some regulatory constraints, some union contract constraints prohibit us from being able to perform at the standard of some of the people we compete against," Mr. Major said.

 

"So, if we are able to fix those things in addition to restructuring the balance sheet to reduce the debt burden and get rid of unproductive payables this company [could] make money."

 

Mr. Major again pointed out that the onslaught of low-cost carriers continues to be a pressing challenge for Bahamasair.

 

He noted, however, "You've got to always assume that you're going to have what you might call fierce competition.  If you assume anything less, I think it's foolhardy.  You've got to always assume that somebody is going to come along with an equal or better mouse trap and you've got to be able to compete with it.

 

"I don't see any of those things as being deterrents to it being a good time to privatize."

 

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."