Sebas Bastian, CEO at Island Luck “web shop” applauds the Progressive Liberal Party (PLP) government for its pledge to address the gambling industry ...arguing that regulation will add revenue to the public treasury

Island Luck calls for end to ‘insane’ contradiction

By Scieska Adderley
Guardian Business Reporter
scieska@nasguard.com

The head of a major “web shop” is applauding the Progressive Liberal Party (PLP) for its pledge to address the gambling industry, arguing that regulation will add revenue to the public treasury.

Sebas Bastian, CEO at Island Luck, said the unregulated gambling industry already generates millions for the local economy each year.  Island Luck, he added, pays out million for salaries, rentals and to the National Insurance Board (NIB) for contributions, contributing $20 million to the local economy.

Island Luck and its more than 3,000 employees already contribute to The Bahamas, and to deem the operation illegal is “insane”, according to Bastian.

“The industry cannot continue to only be recognized as legal when we give out to the community, pay taxes, business license fees, national insurance and [when we are] taken to the labor board.  Yet, we are deemed as illegal on the other hand?  To me, that’s insane,” he said.

In last week’s Speech from the Throne, it was revealed that the PLP government would hold a referendum for the Bahamian people to decide whether a national lottery should be instituted and whether web shop type gaming should be decriminalized.

The issue is controversial in The Bahamas.  Some argue that if properly regulated, legal gaming could be a driver for the economy.  However, the Christian community stands against any move to legalize any form of gambling for Bahamians and legal residents.  Visitors can gamble legally in The Bahamas.

Winston Rolle, CEO of the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), told Guardian Business that if the national lottery and/or web shops are properly regulated, a higher level of tax should be paid to the public treasury by the sector.

“In regulating it, persons should also be looking to ensure that funds generated from it are properly allocated and channeled into specific areas where there are significant economic voids,” Rolle explained.

“My concern would be over the proper structure and regulation so that we are setting up a regime that provides adequate tax returns and that whatever funds that are raised will be utilized to the benefit of the Bahamian people.”

Rolle said that at this point, Bahamians are kidding themselves viewing gambling as being illegal.

Another leader in the web shop business was contacted by Guardian Business on the issue of legalizing the sector.  However, the source declined to comment at this time, saying he will meet with the prime minister shortly on the issue.

For Bastian’s part, he said there should be a recognition that the industry has a positive impact on Bahamians.

“For example, when the Atlantis resort decided to downsize its staff, we at Island Luck employed most of those displaced workers.  Currently, we have more than 3,000 people employed,” he said.

“We payout more than $6 million in rental property, $4 million in national insurance contributions per annum and more than $10 million is spent on utilities like the Bahamas Electricity Corporation (BEC) and Cable Bahamas, along with supplies like paper.  The funds generated are spent locally.”

May 30, 2012

thenassauguardian

Caribbean Blog International

Sidney Strachan, the former chairman of the Bahamas Gaming Reform (BGR) committee expressed disappointment in church leaders who oppose a referendum on gambling

Church 'Predicament' Over Gambling


tribune242
 

THE former chairman of the Bahamas Gaming Reform committee expressed disappointment in church leaders who oppose a referendum of gambling – a move he claims places them in a “predicament” with the pro-gambling public.

Sidney Strachan commended the Christie administration over the weekend for sticking to its campaign promise to hold the nationwide poll, as reiterated in last week’s Speech from the Throne.

He said the BGR has long expressed the need for government to review the “antiquated, hypocritical and discriminatory” gaming laws – a view shared by local stakeholders including casino owners and operators and the Bahamas Hotel Association.

Mr Strachan said: “To continue pretending that gaming does not exist and a large majority of Bahamians do not want to participate is ludicrous.

“While one group is permitted to come into our country and game in and own gambling properties, Bahamians are treated as second class citizens and denied the same rights.

“There is something fundamentally and inherently wrong when a foreigner has more rights in the Bahamas than a citizen.”

Mr Strachan said the BGR has been in contact with regulated gaming jurisdictions outside the country and has been advised that the combined economic impact of a national gaming network in the Bahamas could potentially exceed $60 million, and could create as many as 1,500 to 2,000 jobs.

“Bottom line,” Mr Strachan said, “Bahamians want to game and will not stop. However; this hypocrisy must cease. Churches that enforce on its members a tithe and other ‘voluntary taxes’ on all income, legal or illegal, now want to prevent the government from legally taxing an existing enterprise.”

He explained that some churches have said they will accept all money regardless of where it came from – simply because pastors have the authority to “bless” it.

Mr Strachan said: “Gambling is a nationally and internationally accepted legal form of entertainment.

“The Bahamas instead has decided to prohibit its citizens from participating in and owning a key portion of its own tourism product.

“We continue to foolishly conduct business like a banana republic while modern democracies reap the profits from modern gaming networks.”

He noted that the government could use the money raised on schools, hospitals, infrastructure and support programmes – all of which would generate new employment.

Mr Strachan said Prime Minister Perry Christie is doing “the noble and correct thing” by allowing Bahamians to choose for themselves.

“While this is not necessary to change the gaming law, it is certainly a step in the right direction to complete reform and towards creating Bahamian ownership in our country,” he said.

May 29, 2012

tribune242

Caribbean Blog International

Bishop Neil Ellis urges members of the Christian community to “stand firmly” in opposition to the Christie administration’s planned referendum on illegal gambling and a national lottery

Bishop Ellis: Christians must stand firm against legalized gambling

Royston Jones Jr.
Guardian Staff Reporter
royston@nasguard.com

Bishop Neil Ellis of Mount Tabor Full Gospel Baptist Church is urging members of the Christian community to “stand firmly” in opposition to the Christie administration’s planned referendum on illegal gambling and a national lottery, so that “there would not be blood on our hands” if it is ultimately passed.

Ellis was one of several pastors who commented on the referendum promised in the Speech from the Throne read by Governor General Sir Arthur Foulkes at the opening of Parliament on Wednesday.

In its Charter for Governance, the Progressive Liberal Party (PLP) committed to holding that referendum within its first 100 days in office.

Ellis told The Nassau Guardian that while the country might experience some financial gain as a result of regularizing gambling, Bahamian families are likely to suffer in the long run.

He said that in the past, many Bahamian families “lost everything” due to gambling.

He was referring to the Hobby Horse Hall, a horse racing venue where betting was legal decades ago.

“If we vote in favor we may benefit with the country gaining some type of revenue from it but we have people like those a while ago who lose everything and still have to come back to social services and drain the government,” said Ellis.

“You’d effectively be taking revenue in the front door and its goes out the back door. It’s going to be really important for the church community to lay its agenda clearly and concisely on the table so that if this is passed there would not be blood on our hands. But the government in its wisdom wants to bring some resolution to it and I applaud them for it.”

Bishop Reno V. Smith, pastor of Mt. Gilead Union Baptist Church in Eight Mile Rock, Grand Bahama, told The Guardian that while he was pleased the Christie administration thought it “proper and fitting” to put the issue to the Bahamian people, if the outcome was favorable, players of “games of chance” should not be permitted to be a further burden on the government.

“Should those people lose their houses, their homes, their incomes etc., I don’t think they should be allowed as gamblers to go to the Department of Social Services to be sustained by people like me and others who pay taxes,” Smith said.

“If the people decide that they wish to gamble, then that’s up to them. However, I would like to see all gamblers – players of games [of] chance – to be registered so that they would not be a further burden to the taxpayers of this country.”

The issue has been a prickly one for successive governments, as members of the Christian community have strongly objected to any hint of legalizing gambling for Bahamians.

Christian Council Treasurer Bishop Gregory Minnis of New Jerusalem Kingdom Ministries said that although he believes gambling is wrong from a biblical standpoint, he understood why so many people turned to the industry as a means of “pulling in a dollar” in light of the current state of the economy and unemployment.

“We (Christian Council) are strongly against gambling, but if the people speak and they desire for it then we as the church will have to say to our people to be mindful of how you accomplish your goals now, and how you accomplished all that you have before gambling came in,” Minnis said.

He also said that a national lottery would promote organized crime if it were not implemented properly by the government, and could further criminal activity in the country.

He added that the Christian community would be called upon to make its position “resoundingly” clear, and said he believes more people are opposed to legalizing gambling than are those who support it.

May 25, 2012

thenassauguardian

Caribbean Blog International

COMMONWEALTH OF THE BAHAMAS ... SPEECH FROM THE THRONE ... DELIVERED AT THE OPENING OF PARLIAMENT ... BY HIS EXCELLENCY SIR ARTHUR FOULKES ... GOVERNOR-GENERAL ... WEDNESDAY, 23RD MAY, 2012

Madam President and Honourable Senators,
Mr. Speaker and Members of the Honourable House of Assembly,


Today’s Opening of Parliament follows upon my Government’s election to office just sixteen days ago.

My Government has been entrusted by the Bahamian people with a clear and overwhelming mandate to effect important and far-reaching changes in our country for the benefit of all.

The challenges that confront us in The Bahamas today are as numerous as they are complex. Accordingly, my Government will present an ambitious and extensive agenda for this new Parliament. The Bahamian people expect and deserve nothing less.

Central to that agenda are two overriding imperatives -

Firstly, the need to reduce violence and crime and build a safer Bahamas.

Secondly, but in tandem with the fight against crime, is the need to build a stronger economy that generates jobs, deepens and broadens Bahamian ownership and produces a higher standard of living for all Bahamians.

Those twin imperatives will dominate the agenda for action of my new Government.

At the same time, however, my Government will also move as resolutely as fiscal realities allow to implement the full range of programmes, legislative proposals and policy initiatives promised in the platform entitled ‘Charter for Governance’.

In this regard, urgent priority will be given to the implementation of the action-plan outlined in the Charter for the first 100 days of my Government. The implementation of this ‘First 100 Days’ plan is, I am pleased to report, already in stride, as witness the implementation of two of the action-items within the very first week of my Government coming to office, namely, the creation of the Ministry for Grand Bahama and the restoration of the Ministry of Financial Services.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


Violence and crime corrode the very fabric of a nation. They must therefore be attacked and eradicated at the root if we are to build a secure and prosperous society. My Government is absolutely determined to pursue this objective with unbounded energy, imagination, and unwavering dedication.

My Government will immediately reinstate and expand the Urban Renewal Programme to serve as a core instrument to combat the underlying social causes of crime and violence.

My Government will establish an Urban Renewal Commission to facilitate inter-agency collaboration and coordination in the delivery of services to the community.

My Government will, as a matter of high priority, introduce a national Crime Management Agenda comprising effective prevention, detection, prosecution and rehabilitation.

My Government will move for the repeal of all provisions of the Police Act which are unconstitutional or attempt to politicize the Police Force or undermine the impartiality and security of tenure of the Commissioner and Deputy Commissioner of Police.

My Government will also create a National Intelligence Agency comprising all law enforcement departments to address all categories of major crimes on a co-ordinated basis and with a greatly improved intelligence-gathering capability.

My Government will also develop a National Firearms Control Strategy and establish a proper Firearms Department and Database.

My Government will also re-introduce the Swift Justice Initiative to ensure the timely prosecution of cases and reduce the number of persons released on bail for serious crimes.

My Government will also re-introduce, as a matter of the most urgent priority, the Witness Protection Programme so as to ensure that key witnesses and their families are protected.

My Government will also move to amend the Rehabilitation of Offenders Act to assist young and first-time offenders in embracing a life founded on the values of honesty, hard work and respect for the life and property of others.

My Government will also as a matter of high priority, reintroduce School-Based Policing to curb school violence.

My Government will also re-vitalize the Tourism-Based Policing Initiative to enhance visitor safety.

My Government re-affirms its determination to more effectively police our borders against illegal immigration, drug trafficking, human trafficking, illegal firearms, and poaching. The Royal Bahamas Defence Force will therefore be re-equipped and re-positioned to more effectively combat these menaces.

In accordance with its Charter for Governance, my Government will also hold a referendum for the Bahamian people to decide whether a national lottery should be instituted and/or whether webshop-type gaming should be decriminalized but nonetheless regulated in accordance with internationally-accepted best practices and in a way that would ensure optimal revenue-generation for the country.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


The plight of homeowners in financial distress must be addressed if a stronger economy is to be restored.

My Government will therefore work with the clearing banks and other institutional lenders to develop a financially sustainable mortgage relief programme aimed at assisting distressed homeowners in saving their homes from foreclosure. Participation in such a programme would be voluntary.

My Government will also seek to bring employee pension funds under closer regulation and supervision to ensure that pension funds are duly protected; and that trustees and managers of pension funds are held to higher standards of transparency and accountability; and that employees are afforded access to their pension savings for emergency purposes, including mortgage relief.

My Government, in an effort to stimulate the real estate market, will also make good on its commitment to lower the maximum rate of stamp duty on land sales from 12 per cent to 10 per cent; and will also re-introduce a maximum cap on real property tax.

My Government will also enact amendments to the Subdivisions Act to make the building and planning process more efficient and less costly.

My Government, in an effort to help reduce the cost of rental housing, will reform the Rent Control Act and will seek to promote the construction of new rental units at more affordable prices.

My Government will aggressively pursue the expansion of affordable housing especially for lower income Bahamians. My Government regards this as a social priority that requires focused and sustained attention.

My Government will also seek to provide additional land for home ownership through the purchase of vacant and abandoned lots as a part of the Urban Renewal Initiative.

My Government will create a reliable land register and a proper system of land registration.

My Government will also review and amend as necessary the laws relating to commonage land so as to allow for greater commercial use and beneficial enjoyment of land by commoners.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


My Government is deeply wedded to the belief that private enterprise should remain the primary engine of job creation and entrepreneurial opportunity in our country, and that tourism and financial services, supported by industrial expansion, fisheries and agricultural production, should be the chief areas of economic activity in our country. In this regard, my Government is committed to the formulation and execution of policies that will encourage private investment in these areas while maximizing job creation and career development for Bahamians in the shortest possible time.

As small and medium-size enterprises are the job- creation engines of today’s economy to an ever-increasing extent, my Government will re-focus the mandate of the Bahamas Development Bank and the Bahamas Agricultural and Industrial Corporation (BAIC) to provide equity, credit guarantees and marketing and accounting support for fledgling businesses.

The necessary enabling legislation will be introduced by my Government as a matter of priority.

My Government will also implement a number of initiatives, including the grant of special concessions, to promote the economic development of Grand Bahama, and to facilitate the extension of the same benefits that are available under the Hawksbill Creek Agreement to east and west Grand Bahama.

In order to revitalize our critical tourism industry, my Government will seek to increase the number of available and affordable rooms. Promotional efforts will explore opportunities for tourism growth in niche markets inclusive of film, entertainment, sports, health and religious tourism, as well as medical, heritage and eco-tourism.

The cultivation of new markets in Asia and Latin America will also form a key part of the national tourism promotion plan.

My Government will give focused attention to the refurbishment and re-development of downtown Nassau to make it a pedestrian and shopper friendly city while retaining and enhancing its historical appearance.

My Government will work in collaboration with local and foreign air carriers to improve airlift to and throughout the Islands of The Bahamas.

My Government will also create opportunities for Bahamians to own hotels through a National Resort Development Initiative.

Recognizing that agriculture is an integral part of any sustainable economic development plan, my Government will give focus to increasing food production as a vehicle to promote food security, create jobs and boost domestic investment.

My Government will initiate plans to construct a Bahamian Food Sciences Institute in North Andros with a view to incorporating it into the University of The Bahamas.

My Government will also aggressively pursue the development of a mariculture industry in The Bahamas and the further diversification of a fisheries industry which is reserved for Bahamians.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


My Government believes that education is the principal vehicle for promoting the economic development of individuals and the nation as a whole in the overarching framework of a rapidly evolving 21st century global economy. Education is the key to both personal and national empowerment.

Conscious of that truism, my Government will seek to reform our educational system to bring it more technologically in tune with 21st century challenges and to better position Bahamians to compete for jobs both locally and on a global level.

My Government will review and strengthen the National Literacy and Numeracy plans both of which are critical to educational achievement and economic advancement.

My Government will also introduce a standardized National High School Diploma programme to ensure that graduating students meet stipulated minimum levels of proficiency.

My Government will also develop a national regulatory framework to establish, at the secondary school level, a system of Career Path Academies.

Legislation will also be placed before you to establish the University of The Bahamas.

Regulations will also be developed to establish and oversee new standards for Preschool and Early Childhood Education.

My Government recognizes the important role played by the Bahamas Technical and Vocational Institute (BTVI) in training and re-training Bahamian workers. Accordingly, the Council for BTVI will be appointed with a view to bringing the BTVI Act fully into operation as rapidly as possible.

My Government will also seek to provide enriching experiences for our youth through innovative programmes that promote cultural and self awareness, community service, social skills training, mentorship, knowledge of civics, and exposure to principles of leadership and responsible citizenship.

“Centres of Excellence” for sports will also be established within Family Island communities to help identify and develop sports talent.

My Government will also promote cultural expression in the visual, performing and literary arts; expand cultural education programmes; and enhance stakeholder participation in the development of our cultural heritage.

My Government will move swiftly to end all forms of discrimination, especially against persons with disabilities. In keeping with this commitment, legislation will be enacted. The United Nations Convention on the Rights of Persons with Disabilities will also be signed and ratified.

My Government will bring about the full implementation of the Child Protection Act, 2007.

In an effort to reduce poverty, promote human capital development and improve the effectiveness and efficiency of social assistance programmes, my Government will move speedily to undertake Social Safety Net Reform.

In the area of health care, my Government is firmly committed to the principle of universal access to health care, decentralized health-delivery systems; and a re-engineering of systems for financing the delivery of health care so that it can be more affordable.

My Government will also take steps to advance our nation’s preparations for the introduction of National Health Insurance in a financially sustainable way. My Government’s commitment to National Health Insurance remains undiminished.

My Government will facilitate the Public Hospitals Authority’s acquisition of new cancer-screening technology to ensure that Bahamian women have access to state-of-the-art mammogram machines at both the Princess Margaret Hospital in New Providence and the Rand Memorial Hospital in Grand Bahama.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


My Government will seek to amend the Local Government Act to better define the parameters for the employment of persons providing service to Local Government Councils.

In the area of air transport which is so vital to our archipelagic nation, my Government will overhaul the existing air sector policy to create a safer and more efficient air transport system. This will include the creation of a modern civil aviation regulatory regime, the creation of a fully independent body to investigate air accidents, enhanced communications technology and upgraded radar equipment.

Additionally, steps will be taken to address the management of the Bahamas Flight Information Region (FIR), which will permit access to overflight fees on The Bahamas’ upper airspace.

In relation to maritime transport which is no less vital to our national interests, my Government will procure the implementation of maritime safety standards, protocols and inspection regimes on all national ships and personnel, and the adoption of the Caribbean Ship Safety Code and Small Vessel Code.

To encourage environmental sustainability in Freeport, Grand Bahama the Freeport Bye-Laws Act, 1965 will be amended to impose mandatory standards for environmental management.

My Government will develop a national water policy in conjunction with all stakeholders and will ensure the proper extraction of ground and potable water so that all Bahamian communities will in the shortest possible time have access to piped potable water.

My Government will initiate a plan to lower the cost of electricity throughout The Bahamas through the development of alternative energy production and improved efficiency at BEC in the areas of administration, power production and equipment maintenance.

My Government will review the Regulations established by the Utilities Regulation and Competition Authority (URCA) to ensure that they conform to the Constitution and reflect Bahamian values in the context of responsible freedom of expression in a democratic society.

My Government will finalize its longstanding Foreign Service Orders for the enhancement and strengthening of a professional Foreign Service.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


There is an emerging national consensus that the Bahamian tax system is simply inadequate to meet the needs of a modern 21st century society. My Government will therefore launch an extensive review of the Bahamian tax system with a view to proposing alternative means of taxation that address the problems of the current system while providing the Government with a stable, buoyant and adequate source of revenue to meet its governance obligations to the Bahamian people.

My Government will introduce legislation to establish a council of economic advisors. The role of the council will be to develop policy recommendations for Government on the major issues pertaining to economic growth and stability, including tax reform.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


There will also be laid before you legislation to prevent the entering into of government contracts, including contracts of employment, or the payment of public monies in connection therewith, between the date of dissolution of Parliament and the date of a General Election unless such contracts or such payments are pre-determined by an independent statutory body to be absolutely critical for the maintenance of essential services.


Madam President and Honourable Senators,

Mr. Speaker and Members of the Honourable House of Assembly,


As my Government now sets about the urgent tasks that I have just outlined it shall be forever mindful that in all things God must come first and that without Him at the centre of our efforts we labour in vain.

My Government shall also remain mindful of the need for complete integrity in the stewardship of the people’s affairs. Its commitment in this regard is absolute and will remain so.

Finally, my Government believes in Bahamians and in the capacity and determination of the Bahamian people to overcome all the many challenges that lie before us. Armed with a common purpose and united in patriotism and love for one another, we shall indeed overcome, and achieve for our nation the greatness that is its destiny.

I pray that the blessings of Almighty God may rest upon your counsels.

bahamas.gov.bs

 

Caribbean Blog International

The proposed government mortgage relief program is now a very important national issue ...and it is imperative that we devise a national solution which is reasoned and considered... ...As corporate citizens, we at Circle Vision Financial Planning (CFAL) are simply interested in good economic policies ...which will further enhance the well-being of all citizens and permanent residents of The Bahamas

Economic View CFAL’s recommendations to the government on the mortgage relief program

CFAL Economic View

We have read with interest varying responses to leading international credit agency Moody’s warning to The Bahamas government on its proposed mortgage relief program.

Readers would recall in this column on April 3, 2012, we at CFAL expressed our concern with the then Progressive Liberal Party (PLP) proposal, as we had difficulty understanding the feasibility of the plan.  While we agreed with several of the recommendations, we also strongly disagreed with others.  This is what makes a market.  It is now the government’s program.

We wrote that “the center of the 2008 global crisis was the mortgage debacle, where the U.S. government through its government funded mortgage agencies provided funding for residential mortgages that in most cases the citizenry was not able to afford.  The end results, foreclosures and a depressed housing market, now headed into its fifth year.  As we all know, in the absence of a holistic economic plan, we continue to be dependent on the success or lack thereof of the U.S. economy.  The Bahamas is now experiencing what the U.S. experienced back in 2008 in the mortgage market as a result of lenient lending practices.  To fix the core of this problem, we need policies that are realistic, achievable, and measurable.”

We went on to say that: “While the idea of providing relief for persons having a difficult time in meeting their mortgage obligations is arguably a good one and one which we support, we have serious questions on some of the specifics outlined in the proposal as reported in The Guardian”.

We also noted that: “In a democracy it is not prudent for the government to mandate any financial institution to do anything; it is the shareholders, directors and management which decides on what course of action should be taken.  Governments and financial services regulators (Central Banks) sometimes resort to ‘moral suasion’ in a credit crisis in order to try and persuade financial institutions to provide relief to mortgage payers.  Alternatively, monetary policy initiatives by the Central Bank in the form of interest rate reductions are applied to solve the issue of mortgage delinquency.  That course of action, particularly with respect to our current predicament, is likely to be ineffective at best.  To date, we do not see the expected positive results.  We can point, however, to the long-term consequences.  It is our view that a holistic plan is needed.  A plan that examines the impact on all stakeholders to avoid unintended consequences.”

The burden

Since Moody’s comments, we read and heard on talk shows where many are recommending that the government simply cut interest rates.  They further state that all should bear the burden.  Well, why should all bear the cost?  “All” did not participate while many were not being prudent.

None of the economic and financial pundits speak to the cost and consequence of the reduction in interest rates.  Perhaps they do not know or choose to be intellectually dishonest in recognizing that it represents a transfer from savers to borrowers.

The recent cut in interest rates had serious consequences for many, including pensioners, National Insurance, insurance companies, the various government and private sector defined benefit pension plan schemes, savers and the Bahamian dollar.  In the United States and Europe, such a policy of artificially low interest rates is increasingly being referred to as “financial repression”.

These pundits continue to refer to the government savings on interest payments of about $25 million per year, but ignore the long-term increase to government debt and the cost associated with it.  We estimate a long-term increase in debt obligations of over $500 million.  The cost of government funding this deficit will outweigh the immediate savings.

As we have written numerous times in this column, “What the Bahamian people need are jobs”.  It’s the only way for us to manage the current and anticipated debt levels save for a significant increase in taxes which the government has indicated it does not intend to do in the short-term.

We believe the government will have to take a hard look at our taxation system as we have indicated on many occasions.  Merely dropping interest rates or guaranteeing interest payments will not cause lenders to extend credit especially since the creditworthiness of many borrowers was and still is slipping.  In the case of new or revised loans at the lower rate, the average monthly benefit will not make much of a difference to the borrower, particularly since it is the principal balance that is often too much for the borrower to bear.

In implementing a relief plan which we support, we urge our government to be mindful of the unintended consequences which can change mortgage funding in the future.  Will financial institutions continue to offer 30-year mortgages or refinancing programs if, for whatever reason, they cannot access collaterals after 15 or 20 years?  It’s not an easy decision.  We must tread carefully.

Solutions

We recommend the new government consider establishing a Long-Term Mortgage Relief Program (LTMRP), whereby a special purpose vehicle (SPV) is created for the expressed purpose of acquiring the distressed mortgages from financial institutions and issuing long-term bonds to fund the acquisition of the same.  A similar structure was used in the United States in the early 1990s to resolve the distressed mortgage and property assets of their Savings & Loan crisis.

We would recommend the government consider the following:

• Articulate clear guidelines on who would qualify for the mortgage relief program

• Relief on residential mortgages only up to a maximum of $500,000

• Purchase loans at a discount (i.e., 20-30 percent) from financial institutions with specific caveats

• Mortgage tenure up to 40 years

• Interest rates on restructured mortgages up to 5.50 percent (as indicated in plan)

• Cap interest spread on bonds issued to purchase the mortgages

• Annual audit by an independent accounting firm.

This would accomplish several things:

• Provide transparency to all

• The government doesn’t interfere in private contracts

• The government can restructure the loans with tenure up to 40-50 years with specific caveats.

The government should then issue fixed rate long-term bonds to fund the SPV.  This will lock in funding costs.  Natural buyers of these bonds will be pensioners, NIB, insurance companies and pension plans.

The government commitment will be defined with supporting assets (the mortgages) with monthly cash-flow which should be net positive for Moody’s and other rating agencies.  An example, if the government issued $75 million in bonds to purchase mortgages at a discount of 20 percent, the proposed interest of 5.50 percent would give the government some .50 basis points to service the mortgages, while having assets worth some $93.75 million.  The net cash cost to government would be a maximum of under $500,000 and the guarantee to support the loans.

Banks and other institutions would have stronger balance sheets, which would encourage them to increase lending to companies to create more jobs and opportunities.

This will reduce any semblance of moral hazard such as dictating the number of payments after which a lending institution will be unable to exercise its foreclosure provisions against a borrower.  What we don’t want is where financial institutions refrain from refinancing activities for fear of potential loss.

The program can be administered by the Bank of The Bahamas for a negotiated maximum cost, a 51 percent government entity to ensure its efficacy.

Reasoned response needed

We would strongly discourage the government from getting in the business of paying its citizens’ mortgage interest payments for any number of reasons, inclusive of moral hazard, perception of special favors to the disadvantage of others, increased debt and the potential to devalue our dollar, all of which can seriously cripple our economy.

We reiterate our comments that given the current economic climate as well as the projected growth trajectory, it is highly unlikely that The Bahamas could afford this expenditure except if we are able to grow the economy (provide more jobs) on the order of 10 percent per annum.

The proposed government mortgage relief program is now a very important national issue and it is imperative that we devise a national solution which is reasoned and considered.  As corporate citizens, we at CFAL are simply interested in good economic policies which will further enhance the well-being of all citizens and permanent residents of The Bahamas.

What we do not wish to see is capital being inadvertently driven away because of some ill-advised economic policy.  Whatever we think of the rating agencies, including Moody’s, their comments can cause our cost of capital to increase substantially in the future.

We should not dismiss their claims, but embrace them and articulate in a coherent manner the details of the proposed solution and chart a course in the best interest of The Bahamas, realizing that The Bahamas lives in a global environment.

• CFAL is a sister company of The Nassau Guardian under the AF Holdings Ltd. umbrella.  CFAL provides investment management, research, brokerage and pension services.  For comments, please contact CFAL at: column@cfal.com

May 23, 2012

thenassauguardian

Caribbean Blog International

The Bahamas Chamber of Commerce and Employers Confederation (BCCEC) support permitting oil exploration in Bahamian waters ...once regulatory safeguards were in place... ...potential earnings could "eliminate The Bahamas' National Debt in five years"

Chamber Backs Oil Exploration

By NEIL HARTNELL

#Tribune Business Editor

THE Bahamas Chamber of Commerce and Employers Confederation (BCCEC) yesterday backed permitting oil exploration in this nation's waters once regulatory safeguards were in place, telling Tribune Business potential earnings could "eliminate the National Debt in five years".

I Chester Cooper, the BCCEC's chairman, effectively told this newspaper that the Bahamas - and its economy - could not afford the 'opportunity cost' of passing up the financial benefits if commercial quantities of oil were found within this country's territorial boundaries.

Projecting that revenues worth a conservative $1 billion per year could be generated if the Bahamas Petroleum Company (BPC) and its joint venture partners were to discover oil deposits that could be extracted, Mr Cooper said the sector had the potential to "transform the economy" - both directly and through spin-off commercial activities.

Calling for a "non-partisan" debate on oil exploration in the Bahamas, the BCCEC chairman acknowledged that a comprehensive environmental, health and safety regime was required to protect this nation's environment and tourism industry.

Urging the Government to "get on with it" when it came to developing such a regulatory regime, Mr Cooper pointed out that the energy and tourism industries already co-existed in the Caribbean, in the shape of Trinidad & Tobago and Barbados. Cuba, also a tourism-dependent destination, has begun to drill in waters near its territorial boundaries with the Bahamas.

Emphasising that the BCCEC's support depended on the necessary safeguards being in place, Mr Cooper suggested it was time to lift the debate on oil exploration, and BPC's activities, to a higher level and away from being a 'political football'.

"Now that the political season is over, it is a good time to have a comprehensive, non-partisan debate on the issue," he said.

"We support the continued exploration of oil and, if successful, the eventual development of a safe and well-regulated industry. We urge the Government to quickly put the proper regulations in place for the orderly development of this industry."

Oil exploration was first seized on by the Democratic National Alliance (DNA) as an issue that it could exploit for political mileage in the general election run-up. Then former Prime Minister Hubert Ingraham attempted to use it, and BPC, to portray the Progressive Liberal Party (PLP) as 'conflicted' and unlikely to act in the nation's best interest, given that Davis & Co (now Deputy Prime Minister Philip Davis's law firm) and former PLP attorney general, Sean McWeeney, were named as the company's legal advisers.

There were then suggestions that Prime Minister Perry Christie had acted as consultant to BPC while in Opposition. Eventually, the PLP pledged to hold a referendum on whether oil drilling and exploration should be permitted in Bahamian waters, while Mr Ingraham backtracked from an earlier position that the FNM would not permit the industry if re-elected.

Ultimately, the former Ingraham administration returned to its already-stated position that oil drilling would not be permitted, and no new licences issued, until an appropriate regulatory regime has been implemented. Government officials have already visited the likes of Norway and the UK to examine those countries' regimes, and what the Bahamas can learn from and bring here.

Nevertheless, just prior to the general election, the Government decided not to renew the five BPC licences that expired on April 26, 2012, and returned the company's $300,000 fee payments to it. This leaves the ball very much in the newly-elected Christie administration's court.

BCCEC chairman Mr Cooper, meanwhile, indicated that the tremendous economic benefits - if oil was discovered in sufficient quantities in Bahamian waters - meant this nation, with its limited natural resources, narrow economic base and troubled government finances, could not afford to spurn this opportunity.

"The likely revenues can eliminate the National Debt in five years and contribute significantly to education, healthcare and development of infrastructure across the country and, importantly, an expansion in GDP leading to more favourable economic metrics," Mr Cooper said.

He added that the revenue generated from oil exploration could be used to reduce import tariffs on oil imports, reducing energy and gasoline costs. This, in turn, would lower the cost of living and doing business in the Bahamas, and make this nation much more competitive in attracting foreign direct investment (FDI).

"We cannot afford to be dismissive of these realities," Mr Cooper said, acknowledging that a proper regulatory regime - and its enforcement - were "a must" to preserve the environment and tourism industry.

Noting the example set by other Caribbean nations, he added: "It doesn't have to be one or the other - both can co-exist. It is being done in the region, in Barbados and Trinidad & Tobago.

"Clearly, the risks can be managed. We further understand that the Cubans are drilling right across the Bahamas' border. So we need not re-invent the wheel with respect to the regulations. We can draw on our friends in the international community with tried and tested regulations, like the US, UK, Trinidad and the Clean Caribbean Initiative."

Calling on the Government to "get on with it" when it came to developing a regulatory regime, because the opportunity cost of not doing so was too great, Mr Cooper said the Bahamas had to ensure its people were either trained abroad - or qualified Bahamians enticed back home - to participate in the oil exploration sector.

The BCCEC's energy and environment committee, he added, felt there was too much misinformation circulating on oil exploration, and called on the Government and BPC to better educate the public. The BCCEC is also planning to start discussions by hosting a luncheon on the topic shortly.

May 18, 2012

tribune242

Caribbean Blog International

The children of Bahamian independence need to stand and prove that they too possess the skills to govern The Bahamas in the 21st century and beyond... ...We know that the prime ministers past and present can do it, but where is our future? ...It lies in the hands of those born during the autonomous era in the Islands

Democracy, independence and complacency

thenassauguardian editorial

The images and news stories of the Arab Spring that have dominated the international news media for more than a year are a telling story on the importance of the basic concept of democracy, a concept that is spoken about often, but a concept often not fully appreciated. The benefits that are gained from a properly functioning democracy are too often taken for granted.

The beauty of a democracy is that we, the people, get to elect the leaders of our own choosing through a formal process of narrowing down the candidates and casting a vote.

Another key aspect of that electoral process is that there is a time frame in which those elections must come around again.  If we the people are not happy with our leaders, we have the opportunity to elect a new leader, thus holding our leaders to a certain degree of accountability.

The equation is not complicated: Please the people or get voted out of office. The common demands from the people are basic: Provide security (from outside forces and crime at home), infrastructure, jobs and a growing economy.  In other words, provide results.

A true democracy also has a time frame in which there is change.  In The Bahamas, the government must have an election every five years.  In the United States, it is every two years (for House representatives and senators) and four years for the president.  The ability to call for change on a consistent basis allows for stability.

In Egypt, there was no democracy.  Former President Hosni Mubarak was in power for 29 years.  The people fought to depose him.

We must accept that rallies and protests are part of many democracies.  The rallies against the Vietnam War in the United States or those here in The Bahamas against the Bahamas Telecommunications Company (BTC) sale are examples.  But these generally don’t call for ousting a leader, just a change in the policy position currently held by the government in power.

But one aspect of a consistent election process that we do not follow is that of term limits.

Sir Lynden Pindling was in power from 1967 to 1992 (25 years).  Hubert Ingraham was in power from 1992 to 2002 and 2007 to 2012 (15 years).  The interim period was held by Prime Minister Perry Christie (five years), who is prime minister again.

Over 44 years we have had three leaders.  The United States over a similar period has had eight leaders, almost triple that of The Bahamas.  The United Kingdom has had 12 leaders, quadruple that of The Bahamas.

The Bahamas has benefited enormously from the perseverance of these leaders for equality, prosperity and peace.  The people of The Bahamas enjoy one of the highest per capita incomes in the region and access to clean water, power and communication.  We have so much to be thankful for.

But it is inevitable that change is upon us.  In the coming years it will be time for a new generation to take governing responsibility for The Bahamas.  We must take heed of the lessons provided by our leaders and understand that independence was won with heart and vigor, not to be forgotten.

We have become complacent in our positions and surroundings, a comfort that shields us from the change happening around us.  To be constantly challenged by our peers and countrymen sets forth a standard that cannot be undermined.

The children of independence need to stand and prove that they too possess the skills to govern a country in the 21st century.  We know that the prime ministers past and present can do it, but where is our future?  It lies in the hands of those born during the  independence era.

May 19, 2012

thenassauguardian editorial

Caribbean Blog International