Tuesday, June 15, 2010

Prime Minister Hubert Ingraham and Opposition Leader Perry Christie reciprocate over the Baha Mar project

Public tit for tat erupts over Baha Mar


By STAFF WRITER ~ Guardian News Editor:

Baha Mar Project Bahamas

A public tit for tat has erupted between Prime Minister Hubert Ingraham and Opposition Leader Perry Christie over the Baha Mar project, and PLP MPs' recent decision to walk out of the House of Assembly without voting for the 2010/2011 budget.

Ingraham, who is leader of the Free National Movement, last night released a statement responding to a statement released yesterday by Christie on the issues.

Christie's statement yesterday was in response to Ingraham's statement on Sunday on these matters.

The prime minister's Sunday statement came after Christie held a news conference on Friday to respond to comments the prime minister made in the House of Assembly the night before on Baha Mar and to discuss the Opposition's walkout.

It appears that neither side is willing to allow the other side to have the last word.

"In addition to the PLP's abandonment of its role as the Official Opposition during the budget debate, the leader of the Opposition has also abandoned various responsibilities related to that role," the prime minister said.

"He is also shirking responsibility for past decisions as prime minister. This includes accepting no responsibility for not implementing any significant economic, social or infrastructural projects in five years."

The FNM has implemented many significant projects in three years which continue to drive the PLP to distraction and to an endless distortion of the facts, the prime minister said.

"Mr. Christie has resorted to making wild accusations about the current government's considerable efforts to bring to a conclusion a Baha Mar deal that he was unable to complete on his watch. This is typical. The FNM usually has to finish the work the PLP is incapable of completing."

Ingraham repeated that the government will bring to Parliament various resolutions related to Baha Mar, including immigration matters arising from a potential agreement on that project.

"Rather than rhetoric, the PLP will either have to put up or shut up on a deal they initially proposed when it comes before the House," the prime minister said.

"Mr. Christie is the poster child of failure and stunning incompetence in government. During his single disastrous term he borrowed $800 million but failed to rebuild [Lynden Pindling International Airport], failed to dredge the [Nassau Harbour], failed to build the [Bay Street] straw market, failed to move the downtown port, failed to build a single school, and failed to implement an unemployment benefit program. He even failed to bring his signature project of National Health Insurance to fruition. Compare that record to what the FNM did between 1992 and 2002, a period during which government borrowing totaled $700 million."

Ingraham said Christie and the PLP failed to negotiate a single Tax Information Exchange Agreement needed to protect the financial services industry.

And, he also failed to reign in his scandal-ridden colleagues, the prime minister said.

"In addition to attempting to wreak havoc on the Constitution and the budget process, Mr. Christie and his colleagues got the facts wrong on the matter on which they sought to offer what would have been an unconstitutional amendment," said Ingraham, referring to an attempt by Fox Hill MP Fred Mitchell to have a Social Services line item amended to increase the amount of money the government gives poor people to help bury their dead.

Ingraham said in his statement last night: "Had they (PLP MPs) done their homework, they would have realized that the budget head about which they were concerned includes assistance for several categories of individuals and families in need, not only funeral expenses.

"From July 2009 to date, the government has provided funeral assistance in the amount of $67,650. Indeed, it has honored most of the requests for assistance it has received. It will continue to do so if there is a demonstrated need."

Ingraham charged that the PLP is so desperate to return to power, and so shameless, that it is prepared to use the grief of the loss of loved ones to further its self interests.

"They have no shame over using even death to stage their political stunts," Ingraham said.

"The same people who now claim to care for the poor never increased funeral assistance from 2002 to 2007. Bahamians were losing their loved ones then, as they are now. Where was the PLP then, in what were economically good times? In 2008, it was the FNM that increased funeral assistance.

"Because the current leadership of the PLP have no record to stand on and no vision for the country they are engaging in stunts, smoke and mirrors, unconstitutional behavior, obstructionism, temper tantrums and shifting blame."

June 15, 2010

thenassauguardian

Perry Christie - Opposition Leader accused Prime Minister Hubert Ingraham of attempting to sink the Baha Mar deal

Christie accuses PM of attempting to derail Baha Mar
By STAFF WRITER ~ Guardian News Desk:



Opposition Leader Perry Christie yesterday accused Prime Minister Hubert Ingraham of attempting to sink the Baha Mar deal.

Christie's statement came a day after Ingraham said his administration would not have approved the multibillion-dollar Cable Beach project under the terms agreed to by the former administration.

"The question that must be asked is whether or not the prime minister is seeking deliberately to scuttle the Baha Mar project," Christie said in a statement.

"We are astonished that the prime minister says that he would not have supported the Baha Mar project without answering the question of what he would have done to produce the 10,000 jobs for Bahamians, which this project promises to create.

"When we approved it, there was no question then of 5,000 or any other number of Chinese laborers. Indeed at that point in time there was no Chinese involvement at all. The PLP agreed to the project to enhance our tourism industry, diversify the tourism plant so as to create a strategic counterbalance to the dominance of Kerzner and Atlantis, and to create jobs. Mr. Ingraham, in talking down this project, has no answer to any of these points."

During a news conference on Sunday, Ingraham said the approval of the extraordinary number of Chinese workers required to help construct the Cable Beach resort development would not be given without opposition support.

It is estimated that between 5,000 and 7,000 Chinese workers would be required as a result of an arrangement between Baha Mar and its new Chinese partners for the $2.6 billion deal, which is still subject to both Bahamian and Chinese government approval.

"In this case we are not going to born this PLP baby by ourselves," Ingraham said.

"We will ask Parliament by resolution to approve the labor ratio between Bahamian workers and foreign workers for that project. If the PLP votes no, it'll be no. After all this is a baby conceived by them. We are seeking to deliver this baby but we don't have sufficient gynecological ability or qualifications to do so on our own."

But yesterday Christie repeated that Ingraham would have to carry the burden of whether the Baha Mar deal gets the green light all on his own.

While pointing out that Ingraham is fond of saying that he does not pay attention to anything the PLP has to say, Christie charged that with the full power in law to make an immigration decision, he (Ingraham) now wants to share the decision of whether 5,000 Chinese workers should come to build the new Cable Beach hotels.

"As the prime minister is always so anxious to show how decisive he is, he should have no hesitation in exercising his authority and deciding the matter in the same way that he decides everything else: entirely on his own, without any help from his own colleagues, much less the Opposition," Christie said.

But Christie said that irrespective of whether the Baha Mar deal is approved, thousands of students are leaving school this month, joining thousands more who are unable to find decent jobs.

"He (Ingraham) must find an answer to the 30,000 jobs that are needed in this economy," the Opposition leader said. "That is his job, not the PLP's job."

He charged that Ingraham's statement on the Opposition's performance during the recent budget debate and the Baha Mar project are a "profound embarrassment", and a "sorry attempt" to deflect attention from the real issue.

"The real issue is the abject failure of the Ingraham government," Christie claimed.

"The issue is not Perry Christie and the PLP. Instead the issue is the government of the Free National Movement that has driven our country dangerously into debt and dramatically increased the burdens on the poor, the working class, and the middle class in our country. No amount of rhetoric or grandstanding on Mr. Ingraham's part can change those unchangeable facts."


June 15, 2010

thenassauguardian

New directions in Bahamian economic policy: Some thoughts about taxation

tribune242 insight:


THE government's latest Budget brought home the harsh realities of our present economic situation. The tax hikes and funding cuts it included were defended by Prime Minister Hubert Ingraham as timely and necessary. He added, however, that the government will "one day have to be prepared to say to the public of the Bahamas that the current tax system is inequitable and unfair and do something about it." With this in mind, it is useful to revisit a speech on the future of taxation in the Bahamas delivered in 1997 by one of the world's foremost experts on the subject, Dr Alvin Rabushka of the Hoover Institute. Next week's Insight will feature more on Dr Rabushka and his views on the Bahamian economy 13 years on.


New Directions in Bahamian Economic Policy: Some Thoughts About Taxation

A Speech Delivered to the Rotary Club of Nassau

By Dr Alvin Rabushka:

It is said that "death and taxes are inevitable." The difference is that death occurs but once, while taxes are a daily affliction. Today, tomorrow, next week, and next month you will pay one or more of the following taxes: company fees and registration, motor vehicle tax, departure tax, import tax, stamp tax, export tax, property tax, payroll tax, and a raft of fees and charges. The import tax, which generates 63 per cent of tax revenue and 57 per cent of combined tax and non-tax revenue, is especially onerous. It shows up in the price of virtually everything you buy, whether directly in imported goods or indirectly in locally-produced goods that use imported materials (unless you live in Freeport). Make no mistake about it: The import tax is a massive sales tax that hits low-income Bahamians especially hard.

If "death and taxes are inevitable," then new and higher taxes are equally inevitable. The coming years will see a higher ceiling on payroll taxes for the National Insurance Board, a new tax for a contributory unemployment insurance scheme, and yet another new tax for catastrophic health insurance.

Despite what you may regard as heavy taxation in the Bahamas, by world standards your islands are both a "low tax" jurisdiction and a "tax haven." Bahamians pay about 20 per cent of their national income to the government in one form or another, compared with much higher shares of 35-60 per cent in the United States and Western Europe.

What makes the Bahamas a "tax haven" is the absence of direct taxation. There is no income tax, capital gains tax, gift tax, wealth tax, or estate tax. Bahamians can earn income without regard for personal income taxation. Instead, they pay taxes when that income is consumed.

No system of taxation is perfect, including that of The Bahamas. Indeed, there are several flaws with the current revenue system, which I want to talk about today.

First, the heavy reliance on import duties has reached the limits of its capacity. The tax is widely evaded. It results in a high cost of living. It is seriously regressive. It encourages Bahamians to fly to Miami to shop to buy stereos, clothing, furniture - you name it, they buy it there. In its recent tariff reform, the government has recognised the need to simplify the tariff and lower its rate structure. These pressures will continue.

Another problem is that reliance on import duties conflicts with the Central Bank's system of exchange control, as I explain momentarily.

Second, the payroll tax has been abused. Under the goal of establishing a public pension scheme, the payroll tax has facilitated a massive buildup in public debt, which has been spent largely on government consumption. The payroll tax amounts to Bahamians robbing themselves tomorrow to finance current consumption - eating one's cake and planning to have it, too. The National Insurance Board's promise to pay pensions depends on earnings from its portfolio of government debt. That stream of future earnings is not collateralized by "real" assets, but rather by "fictitious" assets of public debt, which, bluntly put, is an unfunded liability of taxpayers.

In economic terms, the present value of the NIB's assets is zero. At some future date, the Bahamian economy will be unable to afford the high level of taxes required to honour the unfunded liability of the NIB. This means that the real value of pension benefits will steadily decline in years to come until the public pension system is effectively bankrupt.

Let me acknowledge that I'm not the first person to explore the tax system of The Bahamas. In addition to inquiries conducted by the Inter-American Centre of Tax Administrators during the 1990s, in 1991 the Council of Economic Advisers, five distinguished Bahamians, including the current Minister of Finance and Planning, issued its "Report on Taxation in The Bahamas." It was a wide-ranging review of recent budgetary performance and options for additional taxation. It rejected the imposition of income or sales taxes and sought to sustain the heavy reliance on import duties, with slight modifications in the revenue base of the country. The report shied away from recommending any comprehensive reform of tax and non-tax sources of revenue.

The report focused on "recurrent" revenue and expenditure and paid virtually no attention to capital expenditure, which has been a major source in the rising public debt. Down playing capital expenditure presents a more optimistic view of the public finances than is justified by looking at the total picture. The underlying notion is that borrowing to finance capital expenditures can be repaid from the earnings of capital investment. Unfortunately, governments rarely set prices at levels that are sufficient to cover current operating costs, much less an allowance for the cost of capital, and The Bahamas is no exception in this regard. And much of what is labeled capital investment is, in fact, consumption.

The CEA also recognized that the government has systematically spent more than it has taken in since independence. Despite the steady growth in total revenue from about 14 per cent of GDP in 1980 to more than 20 per cent today, public spending has grown even faster. At the end of 1996, the direct national debt amounted to $1.24 billion, up sharply from $780 million in 1991, and total public debt stood at $1.54 billion. These trends are worrisome as the residents of Jamaica would be quick to advise. The government is thus under constant pressure to find new or additional sources of revenue and is forced to sell long-term government debt to finance its chronic deficits, which amounts to nationalizing domestic savings.

Debt repayment and interest payments on the outstanding debt constitute a substantial portion of annually recurrent expenditure. Total estimated outlays in the 1996/97 budget on interest and principal repayments amount to $178 million, which constitutes 23 per cent of a total of $767 million in planned recurrent expenditure. Money spent on debt service and repayment is not available for spending on roads, schools, or health care.

It is important to debunk the notion that "the debt is owed to ourselves." If that were true, it would be a license to incur unlimited debt. After all, we would just owe ourselves more money and our liabilities would be offset by our assets. The fact is that the debt must be serviced and repaid out of current taxation, and those taxes constitute a disincentive to private sector business activity. If there were no public debt in The Bahamas, there would be room for dramatic tax reform and reduction, the government could abolish exchange control virtually without risk, and money would be available for infrastructure and other critical public requirements.

Composition of revenues:

While the total tax burden is an important factor in any country's economic climate, the composition and rates of taxation are equally important. How dependent is the country on one or two revenue sources? How high are rates of taxation? The Bahamas relies too heavily on one source, import duties.

Import taxes and stamp taxes make up almost three-quarters of tax revenue. The International Monetary Fund assisted the government with a review of its tariff schedule, and an improved customs regime was implemented in 1996. Departure, property, selective services, and motor vehicle taxes contribute the remaining major shares. Fines, forfeits, and administrative fees supply the majority of non-tax revenue. Income from public corporations paid into the central treasury is negligible, suggesting that public enterprises are not being run on a commercial basis, i.e., not earning a real market rate of return.

A key problem with the revenue structure is that any decline in imports puts enormous pressure on the public finances. But there is another important reason why heavy dependence on imports is undesirable as the most important source of tax revenue. The country's revenue system is in conflict with its system of exchange control. Rising imports generate higher revenues. But rising imports also drain foreign currency reserves. The Central Bank regards a certain minimum level of foreign reserves - several months worth of imports - as necessary to insure the US$1 = B$1 exchange rate. Thus, the possibility of higher revenues from import duties conflicts with the Central Bank's exchange-rate policy. If reserves decline, then economic policy decisions must be taken to slow imports (eg, raise domestic interest rates). The Central Bank issued such a warning in autumn 1995 as foreign reserves declined to worrisome levels. Thus, maintaining parity between the Bahamian and US dollars may compel a reduction in imports, which consequently reduces the chief source of state revenue. There is no corresponding mechanism that simultaneously reduces expenditure. In fact, there may be pressure to increase expenditure (because falling import duties reflect a slowdown in economic activity).

Tax Reform:

The main options to the current tax system include direct taxation (income taxes on individuals and business firms, gross premium taxes), indirect taxation (sales taxes, value-added taxes, excises), greater reliance on payroll taxes, and much greater reliance on fees and charges.

The Bahamas is not alone as a low tax, tax haven jurisdiction. Its rivals include Bermuda, Hong Kong, the Cayman Islands, the Channel Islands, and numerous other small nations and territories. There are valuable lessons to be learned from the revenue systems found in these other jurisdictions. I have had the opportunity to visit and speak with tax authorities in each of these jurisdictions. I'd like to share with you some observations from Bermuda and the Channel Islands of Jersey and Guernsey.

Bermuda:

Let's begin with Bermuda, a fellow Caribbean nation, that lives off tourism and offshore insurance services.

Bermuda differs from The Bahamas in one important respect. It has avoided the buildup of a large public debt. By law (the Government Loans Act 1978), the total public debt, including loan guarantees, cannot exceed 10 per cent of revenue. The current legislative cap is $185 million, but the actual amount of debt is $78.3 million, along with $35.4 million of guarantees on borrowings of the Bermuda Housing Corporation, which makes low-cost housing loans. Debt and guarantees outstanding of $128.5 million are less than 7 per cent of GDP and debt service payments constitute about 2 per cent of public expenditure.

In terms of the overall tax burden, Bermuda resembles The Bahamas in that central government revenue has ranged from a low of 16.9 per cent of GDP in 1977/78 to a high of 20.9 per cent of GDP in 1991/92 during the past 20 years.

Bermuda, like The Bahamas, regards itself as a tax haven. It imposes no income, capital gains, wealth, gift, or inheritance taxes. No transfer taxes are imposed on non-resident entities.

The difference is found mainly in the composition of revenue. The primary sources of revenue and the share each contributes in fiscal 1995/96 were as follows:

* Customs - $134.5 million (31.6 per cent)

* Payroll Tax - $107.4 million (25.2 per cent)

* Companies Fees - $31.1 million (7.3 per cent)

* Land Tax - $22.5 million (5.3 per cent)

* Passenger Tax - $20.5 million (4.8 per cent)

* Vehicle Licenses - $15.5 million (3.6 per cent)

* Stamp Duties - $17.4 million (4.1 per cent)

* Hotel Occupancy - $11.9 million (2.8 per cent)

* Immigration - $11.5 million (2.7 per cent)

* Post Office - $8.4 million (2.0 per cent)

* All Other - $45.4 million (10.6 per cent)

The trend lines in the main revenue sources are worth noting.

Customs Duty:

Customs duty as a percentage of government revenue fell from 58.7 per cent in 1970/71 to 43.4 per cent in 1980/81 to 36.8 per cent in 1990/91 to an all-time estimated low of 31.6 per cent for 1995/96. Although customs duty will rise in dollar values, its share of total revenue is likely to decline in future years as tariff reform in Bermuda follows global trends toward harmonization. Bermuda implemented a major tariff reform that took effect on February 14, 1994. The rate schedule was simplified and rates of duty were imposed at 0 per cent, 8.5 per cent, 10 per cent, 15 per cent, 22.5 per cent, and 33 per cent depending on the item in question. For some items, a specific dollar rate of duty is imposed.

The customs duty is levied on cost plus packaging, but does not include insurance and freight. The geographical configuration of Bermuda, and the relative simplicity of the tariff code, make enforcement relatively easy, although there is growing concern in Bermuda that the remaining high duties on imports are encouraging shopping in the United States. (Does this refrain sound familiar?)

Payroll Tax:

On April 1, 1995, Bermuda combined its hospital levy and employment tax into a single payroll tax. It is levied at a standard rate of 11.5 per cent on cash and benefits paid to employees, and is collected on a quarterly basis. Employers can, at their discretion, collect up to a maximum of 4 per from employees' remuneration. Self-employed persons are required to assess themselves for the purpose of the payroll tax. International companies may choose to report actual salaries or an assumed remuneration figure assessed against each employee.

The scope of the payroll tax is now nearly universal and it will soon become the leading source of central government revenues. The payroll tax is not specifically earmarked for a government-run pension or social insurance scheme, and is thus not a tax vehicle to buy government debt, as in The Bahamas. Certain items remain exempt from the tax such as employers' contributions to social insurance, the hospital insurance plan, approved retirement plans, hospital schemes, life insurance schemes, workmen's compensation schemes, and compulsory tips in hotels. Over the years, its scope and size have steadily grown, and one might expect the remaining exemptions to gradually disappear.

A general strategy of revenue collection is to impose as many direct fees and charges as can be levied on specific services (eg, a 4 per cent gross fee on income on persons providing corporate services to exempted businesses without a physical presence in Bermuda; banking license fees; professional licenses; land taxes that collect a portion of the capital gains on resales by non-Bermudians to other non-Bermudians; stamp duties on residential properties, et cetera) There are no plans to impose a direct income, capital gains, wealth, or gift tax.

The Channel Islands:

Let me conclude this geographical tour with a brief mention of the tax systems found in the Channel Islands of Jersey and Guernsey. The Channel Islands derive more than half their income from offshore financial services, with the balance principally from tourism. The relative size of their public sectors approximates that found in The Bahamas. The main difference is that Jersey and Guernsey rely heavily on a 20 per cent flat tax on income, which includes a substantial personal allowance to exempt low-income households from the tax, instead of customs duties. Neither jurisdiction imposes a sales tax, VAT, an estate tax, a wealth tax, or capital gains tax.

Compliance with the Channel Islands' income tax is near universal and it is cheap to collect. The flat rate of 20 per cent has remained intact for more than 50 years. The tax forms are simple and short. Due to the substantial personal allowances, the system is mildly progressive. The Channel Islands suggests that personal income tax can, and I stress the word "can," be compatible with a low-tax regime. Offshore firms pay an annual registration fee, rather than any tax on overseas earnings.

Recommendations for Tax Reform in The Bahamas:

Although I am best known for my advocacy of a flat-rate income tax in the United States, I am not eager to recommend an income tax for The Bahamas. The Bahamas derives considerable benefit from its "tax haven" status and it is not clear how Bahamians and the offshore sector would regard an income tax. Therefore, any shift to a tax regime as found, for example, in Jersey and Guernsey requires serious thought.

Here goes: First, I would consider expanding the payroll tax, as has been the experience in Bermuda, which is the most ready source of higher revenue. The collection system is in place and works reasonably well. However, and this is a big caveat, the revenues obtained from any new or higher payroll taxes must take the form of general revenue, rather than serve as a vehicle to buy more government debt as is now the case with the National Insurance Board.

How can this use of additional payroll tax receipts be assured? Parliament would have to enact a law which stipulates that any new revenue from higher payroll taxes be offset by a corresponding reduction in import or other taxes. It would also be desirable for Parliament to enact a balanced-budget law, which stipulates that the proceeds of revenue from additional payroll tax receipts, over and above the current rate, could not be used to buy new government debt.

Second, to go a little further, I would explore the imposition of a uniform value added tax, or VAT, as a comprehensive substitute for import taxes. VAT has been the revenue workhorse in many transitional, developing, and middle-income countries. The IMF has broad expertise and experience in its installation and implementation. It is a tried-and-proven system of revenue collection. If imposed on the economy's full range of goods and services, the rate can be kept low and the retail price of many goods in The Bahamas will fall, thereby expanding retail trade, with its associated employment. Money that now flies off to Miami will remain in The Bahamas. The current import tax is levied only on goods, not services, which narrows its tax base, and therefore requires high rates. High rates in turn encourage smuggling and evasion.

VAT is preferable to a retail sales tax because it is self-enforcing and more difficult to evade. Each party in the production and distribution system leaves a paper trail that makes it virtually impossible, in a fully computerized system, for any seller to avoid collection and transfer to the Treasury. Many countries with incomes and literacy standards well below that in The Bahamas have successfully installed VAT systems.

It would take time, at least three years, to install a VAT. But sooner or later the creaky customs regime will require a complete overhaul. Adherence to a hemispheric free trade agreement in the future will also require that the customs regime be dismantled and replaced with some form of domestic taxation. The sooner any well-designed reform begins, the better.

Third, the government should price all services, where possible, on a commercial basis. The public corporations should be privatised as quickly as possible, with the proceeds of privatization directed solely to reduce public debt, and the government's fee structure should be annually reviewed and updated.

Fourth, and perhaps first on any list, the government must consult widely with the public as it considers tax revision and tax reform options. The support of all sectors of the Bahamian people is necessary for the success of any serious change in the current tax system.

Finally, to do nothing and allow the current tax system to linger indefinitely is to ask for fiscal trouble in the years ahead. Sound public finances are an essential ingredient in any economic environment. The Bahamas needs to get its fiscal house in order, and addressing the problems of the current tax system is part of that effort.

* Alvin Rabushka is an expert on taxation. He is the David and Joan Traitel Senior Fellow (emeritus) at the Hoover Institution at Stanford University. His writings on flat tax, with Hoover fellow Robert Hall, have provided the foundation for numerous tax reform bills, and his book Taxation in Colonial America released by Princeton University Press, 2008, won the Fraunces Tavern Museum Special Recognition Book Award in 2009. Dr Rabushka's work also focuses on economic development, and race and ethnic relations. For more information, visit http://www.hoover.org/bios/rabushka.html

June 14, 2010

tribune242 insight

Monday, June 14, 2010

Prime Minister Hubert Ingraham: I would not have approved the Baha Mar development

PM: I would not have approved Baha Mar
By MEGAN REYNOLDS
Tribune Staff Reporter
mreynolds@tribunemedia.net:



PRIME Minister Hubert Ingraham announced he would not have approved the Baha Mar development under his administration as he hit back at allegations made by Opposition leader Perry Christie.

Speaking at a press conference called at the FNM headquarters in Mackey Street yesterday, Mr Ingraham denied holding any negotiations with developers of the $2.6 billion project agreed to under the PLP administration as he called for the PLP's full support in following it through.

"Had we been involved we would never have agreed to a deal like that for the Bahamas," Mr Ingraham said.

"We didn't cancel it, we didn't stop it, we didn't review it, we told Baha Mar when we came into office we don't like it, but if you are willing to live with what you signed with the PLP government we will accept it. They came forward with changes they wanted and we negotiated changes we wanted. Had we been involved we would never have agreed to a deal like that for the Bahamas."

Once funding from the China Export-Import Bank and employment of the China State Construction Company as general contractor has been approved by the Chinese government Mr Ingraham said major decisions on the employment of nearly 5,000 Chinese workers for the project will be taken to Parliament for a cross-party decision.

He said the work permits for 4,920 Chinese workers to develop the West Bay Street corridor and Baha Mar's commercial village would have to find agreement from the Opposition.

"The government of the Bahamas is committed to ensuring that foreign direct investment in our economy benefits Bahamians," said Mr Ingraham.

"It would be unconscionable for large numbers of foreign workers to be engaged in the Bahamas if large numbers of similarly skilled Bahamians are available to take up those jobs.

"Mr Christie, while certain to seek credit as the 'father' of the Baha Mar Project is already seeking to find shelter from becoming a part of a tough decision on the labour component for the construction of that project.

"I make abundantly clear that my government will not approve any extraordinary foreign labour component for the Baha Mar Project without the support of the Official Opposition.

"We are not going to born this PLP baby by ourselves.

"After all this is a baby conceived by them."

The high number of Chinese workers could translate to as many as two foreign workers for every Bahamian, which Mr Ingraham compared to Kerzner International's Atlantis worksite on Paradise Island where seven out of every ten labourers were Bahamian.

Mr Ingraham also took the opportunity to refute claims Baha Mar's negotiations were stalled under the FNM as he said it was the PLP that delayed progress by not following through with their obligations under the 2005 Heads of Agreement as government-owned lands in West Bay Street were not transferred to Baha Mar under the PLP as they should have been, and the Supplementary Heads of Agreement sought by the PLP government in May 2007 were not concluded before the FNM came to power.

And he said his government "cannot wait forever" for negotiations to conclude as protracted negotiations have stalled plans to divert Gladstone Road as Baha Mar interferes with the New Providence Road Improvement Project.

"Mr Christie has suggested that my government is seeking to keep secret, its negotiations with Baha Mar," Mr Ingraham said.

"No negotiations are taking place between the Bahamas Government and Baha Mar.

"Obviously we cannot be in a state of uncertainty forever so at some stage some decisions have to be made."

Baha Mar spokesman Robert Sands issued a statement following Mr Ingraham's press conference yesterday.

He said: "The size and scope of the Baha Mar project is unprecedented in the Bahamas.

"We are pleased with the consensus in the Bahamas on the desirability of the enormous economic, employment and social benefits it represents.

"We are making excellent progress, and we expect final approval from the Government of the People's Republic of China very shortly.

"Additionally we have already begun the process of bidding out the contraction work with the commercial village and the re-routing of West Bay Street which in itself will create hundreds of jobs for Bahamians.

"It is the first step in the project's creation of approximately 10,000 jobs for Bahamians over the next five years.

"We will continue to work closely with the Bahamian government and look forward to receiving the necessary approvals so we can begin work as quickly as possible."

Mr Ingraham agreed the Bahamas needs a major project and clarified the country currently only has the manpower and infrastructure to carry out one major project at a time, be it Baha Mar or Atlantis phase four.

"At the same time we can't have both; not simultaneously," he said.

June 14, 2010

tribune242

So, we could have another round of Ingraham versus Christie in the 2012 General Election

Politics in perilous times
By BRENT DEAN ~ Guardian Senior Reporter ~ brentldean@nasguard.com:



Sitting in the House of Assembly during the budget communication, I drifted off in thought as the prime minister informed the country about how bad things are.

Likely thinking about bills or some other mundane annoyance, I was staring with a not too pleased look on my face out of one of the western windows when a Free National Movement MP tapped me.

The MP said: "Why do you look sad? It is us who should be sad."

And many members of the governing side did look less jubilant than the norm during budget debates.

Finance ministers usually get rounds and rounds of applause from colleagues as they announce the various 'gifts' to be provided in the upcoming fiscal year.

This time was different, however.

The only notable applause Ingraham received, if I recall correctly, was when he ended the communication. And that was muted.

The times we live in:

The beginning of the second decade of the 21st century has been tough.

The collapse of the housing market and consequent global financial crisis has changed the Bahamian political landscape.

Ingraham directed his 2007 campaign personally at his friend and former law partner Perry Christie. Christie was savaged and called weak and indecisive.

In one of the last sittings of the Parliament before the 2007 general election, Ingraham shouted across the floor of the House, while on his feet, that Christie was "impotent" as a leader.

The attacks worked. Christie was sent in shame to opposition.

In opposition his fate was not good for quite a while. He lost MP Kenyatta Gibson to the FNM.

Former PLP Senator Pleasant Bridgewater was arrested and charged in an attempted extortion case. MP Obie Wilchcombe and PLP Senate leader Allyson Maynard-Gibson starred as witnesses in an embarrassing soap opera.

Christie was also unsuccessfully challenged for the party's leadership by Dr. Bernard Nottage.

And let's not forget the Malcolm Adderley affair.

Christie's time in opposition was mirroring his time as prime minister, with political misfortune standing behind every door.

Tough times for the FNM too:

As the PLP tripped and stumbled through opposition, two problems kept mounting for the Ingraham government: A high level of violent crime and a poor economy.

The Bahamas is on pace to set its third homicide record in four years.

The 2009 Her Majesty's Prison report recently revealed that in 2008 and 2009, a period when there were more than 150 homicides, only one person was convicted and sentenced to prison for murder.

This is stunning failure.

The collapse in the prosecutorial arm of the state was evident across the board as similarly abysmal results were reported in all categories of violent crime.

People are being robbed, raped and killed and no one is being punished.

On the economic front, despite the best efforts by the FNM, the country would have been in recession for three years by the end of 2010.

With the unemployment rate likely around 15 percent, and few prospects of that number dropping significantly within the next 23 months, a Progressive Liberal Party once lost in misstep after misstep appears again to have a chance to be government.

This more so because the economy is bad and crime still appears to be getting worse rather than anything the PLP did or is doing.

Things may not get better:

So if an election were called today, who would you vote for?

This question is almost impossible to answer at this time because there is a missing part of the equation.

Will Hubert Ingraham run again as leader of the FNM?

Ingraham has pledged to answer that question before the year is out.

His political legacy is great.

Ingraham stands without question as the most significant politician in the post-Lynden Pindling era having, thus far, won three governments.

What stands in front of him now, however, is a bleak set of circumstances that are not going to get better before the next general election is called.

The extraordinary spending states took up in the wake of the global economic crisis has given way to sovereign debt crises across the globe.

Countries with high debt levels – developed and developing – are now reckoning with years of profligate spending.

The post-World War II welfare states are unraveling.

British Prime Minister David Cameron warned his people about a decade of austerity; people have died in Greece in clashes over spending cuts; Spain has slashed public service pay by five percent, among other measures.

The list of states choking on tough austere medicine goes on and on.

The United States too, with its two wars and large entitlements, will have to move more aggressively to reign in spending.

Further tax increases to plug its budget deficit of more than a trillion dollars are likely.

The great danger for The Bahamas is that as developed states fall prey to a double dip recession, our prolonged recession will continue without relief.

Two more crises loom.

The oil will gush in the Gulf of Mexico until at least August when a relief well is completed. This is a best-case scenario.

If the first well does not work, others will have to be attempted. Oil could flow for the rest of the year into 2011.

The Bahamas would be impacted.

Few tourists would come to a tropical paradise with oily beaches. Stopover arrivals dropped by 10 percent in 2009. A further decline would lead to a halt of tourism related investments, and layoffs.

Needless to say, a major hurricane in a populated part of the country would be calamitous.

The politics of it all:

The PLP has the luxury of sitting back and watching the Ingraham government struggle with one crisis after the other.

All it has to do is attack, saying that things are bad and they (the FNM) are the government.

This simple cynical strategy is effective.

In 2008, George Bush and his party were swept out of power in the U.S.; Gordon Brown and labor recently lost in the U.K.; and Patrick Manning in Trinidad and Tobago was too ousted from power a few weeks ago.

Anti-incumbency is in the air.

The problem the FNM faces is that it is hard to say "we did a lot for you" when things remain so bad.

Yes the FNM created the unemployment benefit; yes they boosted social service assistance; and yes they kept the economy afloat.

But, thousands of people remain out of work. Thousands are also the victims of crime.

Rational and employed people like me see that the governing party has tried.

Those who have been unemployed for two years, and who have been robbed several times in-between, do not care as much about these efforts.

They are hurting.

The weakness for the PLP is it has offered no new ideas thus far.

The PLP has run away from two of the recent national debates – one has concluded and the other is just beginning.

The party has refused to take a position on the legalization of gambling for Bahamians and it has not taken a position on the Chinese labor issue at Baha Mar.

Running away from the issues does not inspire confidence.

Christie is the master of letting opponents – both internal and external – hang themselves when the heat comes, while he steps to the side avoiding the arrows.

At a time when people are hurting, the PLP needs to look like the alternative government.

Not stepping up on the tough issues makes the PLP look like the small protest parties rather than the polished machine ready to govern.

The opposition may be finally heading in the right direction on this issue.

Christie told reporters at a news conference on Friday that his party would have a draft of its policy positions prepared by July.

How will it all end?

At this stage it would be hard to see Ingraham walking away sometime in December. A late departure from the FNM would lead to civil war in the governing party.

The young Turks like Branville McCartney who think they are ready to lead would be up against the fifty-somethings in the generation of Tommy Turnquest who think they are experienced enough to lead. (Who knows if Turnquest even has those dreams anymore).

So, we could have another round of Ingraham versus Christie.

The two leaders and parties have different things to work on in order to win.

Ingraham needs a success.

Crisis management is admirable, but some major investment creating lots of jobs must happen for him to distance self and party from the PLP.

The crime numbers too need to stabilize. In the first quarter of 2010, housebreaking was up 29 percent. This type of crime is most damaging politically because it affects so many people so personally.

Christie needs solutions. People won't buy into the help and hope he was selling in 2002.

He also needs to offload the PLPs who got into scandal since they won government the last time.

These cancerous presences will turn off middle-class voters – a group the PLP struggles with.

With no polling data in front of me, I can only speculate as to the mood of the country. The Elizabeth by-election gives some guidance.

When both parties went all out to win a swing seat in February it was a virtual draw.

Either can win the next general election. Strategy and discipline are key, however.

The losing leader will bear an eternal scar. He would be the one that was sent into retirement as a loser.

This represents a hellish punishment for great politicians.

Both Christie and Ingraham are proud men who care about their legacies; and both have much work to do in order to win.

June 14, 2010

thenassauguardian

Sunday, June 13, 2010

Bahamas' gaming industry for Bahamians and other residents cannot be stopped by no administration

The fate of the numbers men
thenassauguardian editorial:



The decision by the numbers bosses to speak with The Nassau Guardian this week was a significant development in the debate to legalize gambling for Bahamians.

A businessman claiming to speak on behalf of a number of numbers houses said that they opened up their books to representatives of the government in order to assist with what they thought was a process to fully legalize gambling.

But, what they thought was to happen, did not.

Instead, Prime Minister Hubert Ingraham has pledged a referendum if his party wins the government at the next general election.

The gambling issue seems too overwhelming for the Progressive Liberal Party. Its leader has not even attempted to take a position.

Meanwhile, the police have now increased their scrutiny of the openly illegal local gaming industry. One of the numbers bosses said that police cars are parked outside their businesses with increased frequency.

Some 10 to 20 percent of the staff at the numbers houses have, or will have to be, let go as a result of the police pressure, the number boss claimed.

Turning up the 'heat' on the number houses will not shut them down. The will of the people cannot be stopped by the state when the people no longer consent to an old law.

What is likely to happen as a result of increased police pressure on numbers houses is more corruption.

The numbers bosses will likely have to up their 'fees' to the agents of the state charged with investigating and arresting them.

There will be another sad consequence to not fully legalizing gambling. The police have scarce resources and a serious violent crime problem to deal with. Wasting time attempting to shut down the numbers houses will take resources away from a force struggling to catch and prosecute murderers, robbers and rapists.

With two homicide records in three years, and a current homicide count on pace to set a third such record, it seems illogical to assign officers to bother the numbers bosses rather than investigate violent crime.

The church leaders who oppose the full legalization of gambling are 'hit-n-run' commentators.

They always come out for the status quo, but do not realize that the continued prohibition only fuels corruption.

A more reasonable stand would be for preachers to call for moderation and restraint.

The numbers men are going nowhere. The local gaming industry cannot be stopped by a PLP or a Free National Movement (FNM) administration.

This is because the people want to do it in large numbers.

The more pressure a misguided state puts on the numbers men, the more they will use their money to buy the favor of those our leaders send after them.

This unwise fight is unhealthy for a Bahamas that has too many necessary battles to fight.

One day soon the numbers men will be respected businessmen just like the shipwreckers and bootleggers became. Their children now sit, decades later, in significant positions of power.

If this generation of political leaders do not see the wisdom of legitimizing them now, fear not, the next will.

June 10, 2010

thenassauguardian editorial

Saturday, June 12, 2010

James Smith - former minister of state for finance says Government's projections for budget year 2010-2011 'may be too optimistic'

Govt projections for budget year 'may be too optimistic'
By ALISON LOWE
Tribune Staff Reporter
alowe@tribunemedia.net:


THE GOVERNMENT'S debt-cutting and revenue-raising projections for the budget year may be too optimistic and do not take into account the possibility of a double-dip recession or an event like a major hurricane, said a former minister of state for finance.

James Smith, a senator during the former PLP administration, yesterday suggested an effective step to boost the economy which has not yet been proposed could be achieved by having the Central Bank of the Bahamas lower the prime interest rate - simultaneously lessening debt burdens for regular Bahamians and for the country's "biggest debtor", the Government.

"The prime rate in The Bahamas has not changed since February 2005 despite the fact the prime rate has been dropping across world. In the same way you go to a stimulus package to increase aggregate demand in a recession you also want to provide grease for the private sector by lowering interest rates," said Mr Smith, Chairman of CFAL.

"I think Ministry of Finance should speak to the Central Bank on monetary policy and ways it could assist us in this crisis. They tend to err on side of caution so unless you nudge them they'll not move," he added.

Speaking during the wrap-up of the Budget debate for 2010/2011, Prime Minister Hubert Ingraham said the measures it contains -- including an expenditure reduction of 2.6 per cent or four per cent in real terms, enhanced revenue collection measures and some increased taxes - are "designed and intended to correct an imbalance which left alone would create an enduring economic crisis of enormous proportions."

Having "borrowed to sustain living standards to the extent we could" the Bahamas has a "high level of debt" which is unsustainable, he has said. In his Budget presentation he said the government plans to reduce, through its budgetary measures, the country's GFS deficit from 5.7 to 3 per cent by July of 2011. Speaking on Thursday, he described the steps being taken to achieve this as "not a painless medicine" but said "the alternative is demonstrably worse", pointing to recent economic crises in Greece, Spain and other European countries.

For 2010-2011, the Government is projecting that it will cut its recurrent deficit (fixed revenues minus fixed costs) to just $62 million, compared to $259 million for 2010, a reduction of more than 76 per cent. With capital spending set to exceed capital revenues by $240 million, the Government is projecting a total deficit of $302 million in 2010-2011, compared to $514 million in 2009-2010.

Stripping out the cost of debt principal redemption for both years shows that the Government's targeted GFS fiscal deficit for 2010-2011 is $227 million, a 46.4 per cent reduction on this year's $425 million deficit. As a percentage of GDP, the target GFS deficit for 2010-2011 is 3 per cent.

Mr Smith said he believes the government is "sending the right message" to international credit rating agencies - who determine at what rate the Bahamas can borrow money on the international market - when it shows "recognition that debt and the deficit are rising too rapidly."

However, he said, he would have preferred to see "a more realistic timeline" for reduction in these figures than that proposed by the Prime Minister of "two to three years." He said that he feels it is unlikely the deficit can be reduced by $200 million in the next year unless "some external event" like the privatisation of BTC comes into play.

"By increasing a number of taxes you might really slow down the economic growth rate in the country which depends primarily on imports for its revenue base, having an unintended negative effect," he said.

Meanwhile, he said such optimistic revenue projections do not take into account the possibility that the Bahamas may see a ripple effect from the economic woes plaguing the Euro zone at present - exemplified by the Greek crisis - or the likelihood that a hurricane could hit, taking up precious resources.

June 12, 2010

tribune242