Politics and the Economic Impact of the Baha Mar Project

by Craig Butler

Much has been made of the recent decision by Harrah’s Entertainment not to participate in the Baha Mar project on New Providence.

They have cited the long delays in winning government approval for the land transfers as the main reason for their withdrawal. Further justification has been provided by the fact that they are some $21billion in debt and would prefer to concentrate on reducing this figure - which seems to fly in the face of logic when one considers that they are still moving ahead with a massive project in Spain.

This leads us to the question of whether the comments of Prime Minister Hubert Ingraham in Parliament had a role in derailing the project. That will be debated for a long time, but what is clear is that such a statement by the leader of the government was unnecessary, unwarranted and wrong.

After all, the prime minister has already sought to place the blame for the delays in the project at the feet of the PLP, and by this account Mr Ingraham has averted a disaster that he would contend was coming. If that is the case then why should he attempt to weaken the deal even further?

We expect much of our chief executive - the least of which is discretion. Unfortunately, in the present circumstances very little discretion was shown. And one of the side effects that has been predicted is a downturn in economic growth.

Recently, former state finance minister James Smith warned that our current growth rate of four per cent had to be trimmed because of the recent Baha Mar announcements.

The present state finance minister, Zhivago Laing, disagreed with the quantification of a 1.5 per cent reduction given by James Smith. Mr Laing said there was no economic forecast model to quantify the extent of any project’s contribution to GDP in the course of the year. Yet he did acknowledge that there would be a reduction.

However, there was an announcement from the Central Bank that I find most troubling. I say this because the Central bank has never in the past sought to justify policy or decisions of the government. Their role is to give a dispassionate and factual view of the economy. What I saw was much more - it appears to be a justification of the present administration’s loss of the Baha Mar project.

If you were not paying attention I admit you would have missed it, especially if you were concentrating on the statement that during the first six months of the government’s Budget cycle to December 31st 2007 it spent almost 100 million more than it earned. The statement went much further than that.

Acknowledging that economic growth during the first half of 2008 was likely to be ‘mild’, the Central Bank said it expected momentum to pick up in the second half despite the uncertainty over the Baha Mar project.

The regulator said that foreign direct investment associated with other major resort-based projects, such as Albany, the Rose Island Ritz-Carlton, Kerzner International’s transformation of Hurricane Hole, and the upgrades to the Lynden Pindling International Airport and the New Providence Road Improvement Project, should stimulate construction, employment and capital inflows in the second half of the year. This should offset the weakness in the global economy and higher oil prices.

If I’m not wrong, all of these projects were on the drawing board before this administration took office and the Albany and road improvements were slowed because of the need to review. Accordingly, the major difference is that the Baha Mar project may not come to fruition with the underlying factor being a downturn in the economy.

‘Mona Vie’
Minister of State for Finance Zhivago Laing has landed himself in some hot water. He has gone where he ought not to go and now - as he faces the heat of frank Smith and the PLP - he seeks to persuade us that his actions were justified.

I don’t claim to be an expert on Customs duties or how they are configured but what I do know is that simple research has shown that juices, and by that I mean 100% juice, are the only liquid product for consumption that is bought in at 10% duty. Drinks, sodas and nutritional supplements are taxed at 45%.

Therefore what the minister did was interference. He sought tom and in fact did, reverse a decision taken by the Customs department to correct something that was clearly wrong.

I’m not disputing that the juice in question - ‘Mona Vie’ - may have been let in at 10% on previous occasions; we are all human and subject to mistakes. But on discovering the same it appears as though the department sought to correct its mistake, which affected one of the minister's relatives.

The political directorate is not to be used to promote self gain. At least that is what I expected from this FNM government which campaigned on a trust agenda to bring transparency back to government.

I was at Government House last May when the oath of office was being taken by some of the new ministers in support of my sister, who was named to the cabinet for the first time. I heard the prime minister give his charge to the ministers and speak of their responsibility to the nation and what was expected of them by the people.

Since this matter has broken, however, the PM has been silent and no statement has been issued by the FNM. Minister Laing’s indiscretion is not the first one for this administration but rather only the latest, and each time the prime minister has failed to admonish any of those involved publicly, much less fire them.

Which leads me to ask: where is that transparency in government? What about the trust agenda? Was it all just talk to get elected that falls by the wayside on the attainment of office?

The nation is owed an explanation.