|The Bahamas Investor Magazine
June 27, 2007
June 27, 2007
Sino-Bahamian economic cooperation offers a unique set of challenges and opportunities. Asia’s stunning growth has resulted in fierce competition with North America and Europe for world markets—competition that, if exploited properly, could provide an entirely new thrust in the Bahamian economy. The key to unlock this potential will be the emergence of The Bahamas as a trans-shipment centre for the Americas, turning it into the Singapore or Hong Kong of the western hemisphere.
It is no great leap to suggest that the twenty-first century belongs to Asia. The Asian economies, fuelled by the immense and powerful engine of China, already make their presence felt—and China is developing at an extraordinary pace. It now has an annual growth rate of around 10 per cent, compared to a rate of 3 to 4 per cent for most western economies. It is the new manufacturing epicentre of the world. China will make anything cheaper, better and faster than most other countries.
Exports provide nearly 40 per cent of China’s gross domestic product, a fact of enormous significance to The Bahamas because of its strategic geographical location. The islands straddle the two major shipping lanes that link the Americas and the Caribbean with European, Mediterranean, Far Eastern and Australasian ports and destinations. Anything that comes or goes through the Panama Canal passes close to The Bahamas. Hong Kong-owned Hutchison Whampoa Limited recognized this in the 1990s, hence its investment in the Freeport Harbour Company Limited, the Grand Bahama Development Company Limited and its exclusive management contract of the Freeport International Airport.
Hutchison, through Freeport Container Port Limited, owns the container terminal facilities at Freeport Harbour, which is one of the largest man-made harbours in the world with a dredged depth of 52 feet. Freeport Harbour can accommodate the largest cruise ships, cargo carriers/roll-on/roll-off vessels and oil tankers. The phase four expansion completed in December 2003 gave Freeport Harbour an estimated capacity of 1.3 million TEUs (twenty-foot equivalent units). Hutchison plans to invest another $2 million in port development over the next four years. Add to this the fact that they own the container port facilities at both ends of the Panama Canal and the long-range strategy is clear.
I believe that a partnership between Hutchison and the Bahamian government on a long-term basis could strategically promote and create the infrastructure necessary for Freeport to compete with Port Everglades as a major entrepôt in the Americas. There are a number of factors that favour Freeport, not the least of which is that it has none of the Jones Act and internal regulatory framework of the United States that restrict the movement of goods between US ports.
The benefits from the spillover of Freeport’s operation as an entrepôt are limitless. Satellite opportunities, such as warehousing and showroom facilities, assembly and light industry, packing and processing, would all attract Asian investment. Hutchison has already earmarked a 741-acre industrial park for the development of warehousing and distribution facilities. I have suggested to a number of Chinese businessmen that if they become involved in light industry—assembly or production—in Freeport they could re-export out of The Bahamas as Bahamian product, circumventing US quota regulations against Chinese imports.
Millions of customers
We need to make it as easy as possible for the Chinese to come to The Bahamas. We are now on the Chinese government’s list of approved tourist destinations. There are 175 million Chinese prequalified for tourism-related travel, many of whom are also businesspeople with money to invest here, whether in real estate, manufacturing or financial services. At the moment, visa applications from China are handled by the British Embassy, leading to a delay that can be as long as eight weeks, but I have suggested a simple way to get around this, which is currently being considered by the Ministry of Tourism and the Foreign Ministry.
The Bahamas could issue automatic visas to Chinese nationals who are at the same time holders of non-immigrant visas to the US, Canada, the United Kingdom and perhaps certain EU countries. There are no security checks that the Bahamian government could undertake that are not already employed by the US government, for example.
Education is a vital component of Sino-Bahamian cooperation. We need to learn more about each other. We must explode the old stereotypes of dour, Chinese workers dressed in Mao suits, riding bicycles and making cheap utilitarian products for a cold-war market. China today is a creative place with a cool-chic designer lifestyle, producing merchandise that rivals the major urban centres of the world. In fact, most of the leading global designer brands have their products manufactured in China. A well-educated and ambitious society, it manufactures state-of-the-art electronics, automobiles and other consumer items. All of this is happening against the backdrop of an increasingly affluent and sophisticated society where millionaires and billionaires are created every day.
At the same time we have to teach them about us. A lot of Chinese businessmen are only just beginning to come to terms with the concept of trusts, foundations and the sort of sophisticated financial products we can offer them here. They are more used to making cruder arrangements in the British Virgin Islands, the Cayman Islands and Bermuda, all of which used the reversion of Hong Kong to move very effectively into China 15 to 20 years ago. The British Virgin Islands have been so adept at self-promotion in China that Chinese businessmen seeking to incorporate abroad may typically just ask for a “BVI company” —something to handle flotations and bank accounts.
According to Hillary Deveaux, executive director of the Securities Commission, The Bahamas is already examining the sorts of reciprocal relationships that the Cayman and British Virgin Islands currently enjoy, which would allow Chinese companies to use Bahamian IBCs to float on the Hong Kong or Singapore exchanges. And as the Chinese understanding of western legal systems grows they are becoming interested in setting up more sophisticated financial products. We can benefit from this, and I believe we can speed the process by setting up tourism and commercial offices in Beijing and other urban centres, such as Shanghai, at minimal cost. In conjunction with my firm’s Beijing correspondents, the numbers have been reviewed and a commercial/tourism office could be set up in Beijing for less than $100,000 annually. It is a tiny investment to set against an incalculable gain.
Michael Scott was born in Nassau in 1951. After studying at McMaster University in Ontario, Canada, he was admitted to the Bar of England and Wales in 1976 and enrolled as counsel and attorney of the Supreme Court of The Bahamas in the same year. From 1976 to 1979 he was an associate at McKinney, Bancroft & Hughes before moving to Callenders Orr, where he was made partner in 1981. He was named senior partner when the firm became Callenders & Co in 1985. Scott was a member of the Bar Council from 1978 to 1986 and an acting magistrate from 1983 to 1986. From 2002 to 2006 he was a director of the Bahamas Financial Services Board. He travels extensively in China, and is a partner in the Sino-Bahamian financial services company, Malins Scott Li.