|The Bahamas Investor Magazine
June 22, 2010
June 22, 2010
Since Deng Xiaoping instigated economic reform in the 1990s, The People’s Republic of China has witnessed unprecedented domestic growth. In tandem with this, its foreign direct investment (FDI) has mushroomed, escalating into a multi-billion-dollar contribution to the global economy. This is expected to rise at an even greater pace over the next few years, as the emerging economy continues to open up to international exchange and embrace the global free market economy. A healthy stack of that Yuan is already making its way to Bahamian shores, as China eyes potential in the jurisdiction’s location and natural attributes.
A brief perusal of China’s national statistics offers insight into the country’s ascendency as a global economic power. The Central Intelligence Agency (CIA) estimates China’s population as being 1.3 billion (July 2009) and places the country as number one in reserves of foreign exchange and gold, totalling $2.2 trillion (2009 estimate). China’s gross domestic product (GDP) according to the World Bank is estimated at $4.3 trillion (2008), with the National Bureau of Statistics putting annual GDP growth adjusted by inflation as high as 10.7 per cent for the first half of this year.
With its coffers swollen and politics assuaged, China has found itself in a strong position to wade into the global economic arena and has proved not shy in doing so. The latest CIA figures state that the cumulative value of all investments in foreign countries made directly by Chinese residents was approximately $227.3 billion as of December 2009–making the communist country the 14th largest direct foreign investor in the world.
Since diplomatic ties with Beijing were established in 1997, Sino-Bahamian relations have been gaining momentum with high-ranking exchanges leading the way. “In the last two years in particular, bilateral relations have been developing very fast,” says Hu Diangxian, Chinese Ambassador to The Bahamas. “Many high-ranking Chinese officials have visited The Bahamas and we are expecting an official delegation from The Bahamas to attend the Shanghai Expo later this year. Such high-level visits by state leaders enhance trust, both mutual and political, as well as greatly strengthening relations.”
At the grass roots level, the Bahamas-China Friendship Association has been forging ties with its Asian counterpart in an effort to boost trade and culture exchange. “We can learn a lot from the Chinese,” says Philip Simon, the association’s president. “They are extremely skilled in business and they have tremendous self-discipline and patience. They also have incredible technical acumen, and the more integrated and familiar we are with each other, the more we can learn and grow our own independence, lessening our reliance on imports, particularly in manufacturing.”
Formed in 2005, the association is part of a network of such organizations scattered throughout the region and the world. Activities include regular trade missions, cultural events and educational programmes. “There is a lot of myth and mystery about the Chinese in The Bahamas,” says Simon. “We hope to dispel some of those misconceptions.”
In tandem with such social, cultural and diplomatic interactions, there is a series of bilateral agreements that facilitate exchanges between The Bahamas and China in a range of fields of trade and commerce. “Last year alone, eight bilateral agreements were signed and this will help set up a platform for greater cooperation,” says Ambassador Hu.
These agreements included: one abolishing the requirement for diplomats from the respective countries to obtain visitors’ visas to facilitate entry; another providing the framework for cooperation in agriculture; a third creating a framework for economic and technical cooperation, under the provisions of which some $10.5 million is being made available in funding for projects in The Bahamas.
Memorandums of understanding have also been signed for technical exchange, training and research in the development of crop farming, animal husbandry and fish farming. Add to these a tax information exchange agreement (TIEA) signed earlier this year, and raft of long-standing consul and diplomatic agreements.
Such agreements have paved the way for investment, most notably in a number of large, high-profile construction projects.
The Chinese government has given a gift to The Bahamas of a $30-million national sports stadium. The 15,000-seat, state-of-the-art facility is scheduled to be completed early next year and will be equipped with track and field, and soccer facilities, among other amenities. When the Thomas A Robinson National Stadium, as it will be named, is completed it will accrue “economic benefits” for The Bahamas and provide opportunities in sports tourism, as well as opportunities to host international events, trade shows and exhibitions, according to Desmond Bannister, then Minister of Youth, Sports and Culture.
China is also providing financing through the China Eximbank to the tune of $150 million for infrastructure works, including the construction of a modern highway connecting Lynden Pindling International Airport with The College of The Bahamas campus, near downtown Nassau. The 30-year loan is at an interest rate of two per cent and is part of China’s pledge to extend more than $5 billion in low-interest loans to countries in the Caribbean region.
By far the largest investment to date proffered by the People’s Republic is the Chinese Eximbank and China State Construction Engineering Corp’s reportedly $2.6 billion joint financing of the Cable Beach Baha Mar resort project. Although still awaiting governmental approval at press time, the planned hotel mega-complex will spread over 1,000-acres of beachfront realty, with 3,000 rooms, a casino, golf course and 35,000-sq-ft retail village.
“Financing for mega hotel and resort developments of this size, scale and scope are extremely rare, particularly in today’s economic environment,” says Sarkis Izmirlian, Baha Mar Resorts Ltd chairman and chief executive officer. “We look forward to working with our Chinese partners to realize the vision for this first-in-the-world resort concept.”
It is hoped that Baha Mar, scheduled for completion in late 2013, will create over 8,000 new jobs for Bahamian workers across all sectors of the hospitality industry and generate 2.3 million annual visitor room nights.
Although it has accelerated recently, Chinese presence and commercial interest in The Bahamas stretches back a number of years. Hutchison Port Holdings Ltd, the Hong Kong-based container port operator, realized the potential in Grand Bahama’s location and natural deep-water harbour for the transshipment of goods to the US and through the Panama Canal and established operations in Freeport in 1997. The facility has an annual capacity of more than 1.5 million standard size container units and is worth approximately $25-$30 million to the local economy.
The elephant in the room, of course, is why the Chinese government, aside from the private sector, is now taking such an interest in a tropical jurisdiction on the other side of the world, with a population of only around 350,000 people. “Often the default position in regards to China is scepticism,” says Simon, who is also executive director of the Bahamas Chamber of Commerce. “There is always some uneasiness about whether the Chinese are looking to world domination. They have a plan for greater integration with the world economy and they definitely want friendships throughout the Caribbean region, can we fault them for that?”
On the diplomatic side, Ambassador Hu is quick to stress that, as regards the stadium at least, it is normal practice to fund infrastructure projects of this nature in developing countries and similar “gifts” have been given to African, Latin American and Caribbean nations. “It is Chinese foreign policy to seek mutual benefits and common development, to try to help improve the socio-economic situations in developing nations,” he says. “China realized many years ago that the world is becoming smaller and smaller, and all our interests are closely intertwined with each other. China’s future is closely linked to that of the world, and we need to work together to expand common interests. The China-Bahamas cooperative relationship is based on equality, mutual respect and mutual benefits. It is open, transparent, not exclusive and with no political conditions attached.”
Despite the global economic downturn, last year’s bilateral trade between China and The Bahamas registered a 9.7 per cent year-on-year increase, totalling $422 million–marking a 133.9 per cent increase compared to 2008. However, the bulk of this is accounted for by Chinese imports arriving on Bahamian shores. For The Bahamas to gain greater economic benefit from Sino-Bahamian relations, the jurisdiction has to tap into as yet unexplored resources and negotiate obstacles, such as the time difference and the physical distance between the two countries.
A major source of revenue that so far has gone unexploited is tourism. Chinese tourists are traveling further and further afield and in greater numbers. Last year, the number of Chinese travelling abroad was around 50 million. “The Bahamas is a very beautiful country,” says Ambassador Hu. “The Chinese people would love it here. We are just starting to encourage international tourism in our country and this is something we can work together to develop.”
The Bahamas and China signed an agreement to promote The Bahamas as a destination for Chinese tourists in 2005, but major hindrances remain. The lack of a direct flight, the language barrier and visa issues make the jurisdiction less attractive to Chinese vacationers. Ambassador Hu, however, remains confident of the potential: “Projects such as Baha Mar will encourage more Chinese to come here, as the resort development is getting a lot of coverage in China. Ultimately, they will come here out of curiosity, if nothing else.”
The Ambassador also cites renewable energy–particularly solar and wind power–and agriculture as being commercial areas in which the two countries could cooperate. “There is a lot of potential in this aspect. China is now the number one producer of solar panels, hydropower and nuclear energy technology, the third largest wind power producer in the world. Our techniques are simple, efficient, of good quality and would be useful to The Bahamas.”
Raymond Winder, managing partner at Deloitte chartered accountants, is keen to see the establishment of a Chinese financial unit in The Bahamas to deal with bilateral investment in all fields. “If we set up an office staffed by Chinese with bilingual capabilities, it could act as a catch-all for entities in China that want to do business here, as well as Bahamian companies that want to do business with China–holding investments and making investments. That could mushroom into something very significant.”
However, Simon at the Bahamas-China Friendship Association is careful to point out that The Bahamas has to be clear on what it wants and of the benefits of doing business with a much larger and a much more powerful country. “We have to put The Bahamas first. That is not selfish, it is just smart. We are a small developing economy and we still have to chart our way forward. As a very young country, whatever we do now will have long-term implications for future generations.”
World Expo Shanghai 2010
From May 1 to October 31 this year, Shanghai is the stage for the 2010 World Expo, offering all participating countries the opportunity to showcase their national and cultural attributes to an estimated 70 million visitors. The Bahamas is no exception, having a strategically located, 2,600 sq ft exhibition booth in the Caribbean Community (CARICOM) pavilion.
With more than 180 countries being represented at the exposition, The Bahamas contingency has had to come up with something eye-catching, unique, as well as informative to stand out from the crowd. “The booth is designed to maximize pedestrian flow,” says Livingston Forbes, chief architect at the Ministry of Works. “It’s an open concept, which best showcases The Bahamas’ history, culture and natural environment.”
Themed around The Bahamas’ rich sailing tradition, the exhibition booth (above) is an artistic representation of two large sloop yachts, with colourful sails and sleek hulls. The separate sections contain a culture area that has Junkanoo exhibits, as well as a large sailing boat fresco and examples of Bahamian arts and crafts. There is also a business element to the booth, showcasing Bahamian investment and tourism opportunities. As a sweetener for attendees, corporate sponsors Kerzner International Bahamas Ltd and Baha Mar Resorts Ltd are both offering a prize drawing, with lucky winners enjoying all-inclusive stays at Atlantis and the Sheraton Nassau Beach respectively.
The Ministry received $650,000 from the Chinese government toward the design and construction of the booth, the jurisdiction added $100,000, and corporate sponsors each contributed around $25,000 in funding.
Speaking the same language
Although the grammar of Mandarin is similar to English, the stumbling block is the tones. Standard Mandarin has four tones. Cantonese has six. The problem that arises is that a word can have different meanings depending on the way you say it. The word “ma,” for example, can mean “mother,” “horse,” as well as being a question maker, which could lead to rather embarrassing family gatherings, if you can’t pronounce them correctly.
“There is definitely a need for Mandarin in the local Bahamian community now,” says Dr Irene Moss, director of the International Languages and Cultures Institute (ILCI) at The College of The Bahamas, which has been offering Mandarin classes to students and businesses for the last two years. “Many Bahamians now import wares from China, and there is tremendous potential in tourism, if we can offer language services.”
Seeing the opportunity, Dr Moss has been instrumental in establishing a Confucius classroom at the college. The Confucius Institute, which is headquartered in Beijing and has approximately 500 off-shoots worldwide, funds the operation of the classroom, supplying education materials and a full-time language instructor. The non-profit organization was established to promote the teaching of Chinese as a foreign language, and for exchange in educational and cultural fields.
“There is a big gap culturally between The Bahamas and China, but if we can learn basic conversation, culture, and business etiquette, then the sky is the limit to the amount of interaction we could have,” continues Dr Moss. “More Chinese tourists are travelling internationally and, if we want to sell conch salad to them, we had better learn how to explain what is in it in Mandarin.”