|The Bahamas Investor Magazine
January 21, 2014
January 21, 2014
Even for the most seasoned developer, investing in a new project can be a daunting prospect. Permits, licenses, approvals, financing, permissions, among others can create a heap of red tape and frustration that can extinguish a dream when it is barely more than a glint in an investor’s eye. If that project is overseas, the challenges can seem even more dispiriting. Fortunately, for local and foreign investors looking to launch a project in The Bahamas, there is the Bahamas Investment Authority (BIA), headed by director of investments Joy Jibrilu.
As the technical and administrative head of BIA, it is Jibrilu’s job to facilitate investment projects–from start to finish. It is quite a task. “We are described as a one-stop shop for investment and it is our responsibility to see the projects through to the end, and, in some cases, beyond,” she says.
A solicitor by trade and fluent in French, Jibrilu has worked overseas for most of her career, mainly in the UK, but also in Africa. From 1996-2005, she served as the principal of a British International School in Nigeria.
During her tenure, she was responsible for raising funds and overseeing the construction of a modern, purpose built school that catered to locals and expatriates seeking an international education. She also served on the board of the Association of International Schools in Africa for eight years. Her legal background, coupled with her education training and qualifications, enabled Jibrilu to work with schools throughout the region in areas of international reform, dispute resolution, arbitration and conflict prevention. “This was an incredible experience. Living and working in Africa forces you to develop new skill sets in order to operate in environments that can be challenging, and often times under resourced.”
Such skills stood Jibrilu in good stead when she finally returned to The Bahamas in 2005 and joined the then Financial Services and Investment Ministry. She chose to come home after being prevailed upon by Prime Minister Perry Christie during his first term in office to return and contribute her skills to the growing pool of professionals in the jurisdiction.
“I was very much interested in investment, but I had not viewed it through a magnifying glass in terms of The Bahamas,” recalls Jibrilu. “But it was a very natural fit for me, with the experience I had gained internationally and my technical education.”
Jibrilu had chosen to come back to her homeland during a very exciting period for investment in The Bahamas. The first decade of the 21st century had seen the Atlantis Paradise Island megaresort going vertical in a serious of phases. Proposals for the multi-billion-dollar, single-phase Baha Mar resort development on Cable Beach were shaping up also and after a series of setbacks, construction finally got underway in February 2011.
Jibrilu and her colleagues at BIA play a pivotal role in getting projects such as these off the ground. Before a proposal can be put before the National Economic Council for approval, BIA takes the investor through every stage of the application. There will be areas of the process that involve any number of external agencies, such as the Ministry of Health or the Environment Ministry or Ministry of Works. It is Jibrilu’s responsibility to reach out to them and coordinate meetings with them.
With a simple purchase and refurbishment or smaller project that does not require approval for a golf course or marina, the application can go through in a matter of a couple of months. The recent sale of the Paradise Island Harbour Resort to the Warwick Group, for example, or The Cove in Eleuthera, were relatively straightforward, notes Jibrilu. With a project on the scale of Baha Mar, however, it can take much longer, because there are so many agencies involved.
This can cause obvious frustrations for the investor. “You have to be realistic, give assurances and keep all parties informed,” Jibrilu says. “Everything is time sensitive and many people depend on the work being done. Even once I have all the information, I still have to communicate that to government and at that point, in a sense, I become the spokesperson for the investor. It is a daunting, but very important responsibility. After all, these are people’s dreams we are dealing with.”
Guiding the investor
To help the investor navigate the approval process, the BIA publishes a set of project proposal guidelines. “Many people come to us with just three or four sheets of paper for major projects,” says Jibrilu. “That gives me the opportunity to meet with them and go through the guidelines.” She also assigns the investor an investment officer who shepherds the proposal through the initial phase to approval and, depending on the project, thereafter. “Sometimes we share a template of what a project should look like and we can guide them to find local council or a counterpart that can help them with the preparation.”
For some projects, this can involve significant amends to the initial idea and the investor is forced to look very closely at the actual practicality of his or her proposal. “Sometimes you have to ask the investor the type of questions that get them to see how realistic a proposal is,” continues the BIA head. “For example, you need to ask about how will they fund it and about whether there is a market for that particular type of development.”
Common errors of judgement, suggests Jibrilu, include wanting to build sizeable resorts on Family Islands that have limited airlift or lack infrastructure and, for foreign investors, attempting to open a business in sectors that are reserved for Bahamians and not part of the National Investment Policy, such as real estate brokering, publishing and retail operations. “You can lead people to see that perhaps they need to scale back or it is in the wrong location or the wrong type of business. It is our mandate to get the investor to the point where the proposal won’t fail. As a result, the percentage of projects that get approved once presented to the National Economic Council is extremely high.”
Foreign direct investment (FDI) in The Bahamas topped $1.3 billion in 2011, bolstered by the Baha Mar project, purchase of the BORCO oil refining facility by Buckeye Partners LP (NYSE:BPL) and the privatization of the national telecommunications company BTC. Although that figure was rather more moderate in 2012, hitting $595 million according to the United Nations Economic Commission for Latin America and the Caribbean, within the region, The Bahamas is still commanding a lion’s share. Over the years, The Bahamas government has put in place various pieces of legislation that are designed to maintain this level of investment. Jibrilu cites the Hotels Encouragement Act, which offers certain duty free concessions for an investor wanting to set up a business in the hotel sector, and also the Industries Encouragement Act.
“I genuinely believe that The Bahamas has a very generous incentive regime,” she says. “It makes us very competitive in terms of our incentive legislation.”
With all financial services investments being processed by The Central Bank of The Bahamas, by far the largest number of FDI projects that the BIA deals with are in the tourism sector. According to Jibrilu, there has been a definite spike in the number of smaller, boutique-type projects over the last few years. “Previously, there was a swing towards anchor projects, but the downturn showed us that perhaps that wasn’t a viable model and we have seen a change towards more boutique oriented developments and ecotourism.”
Smaller projects are often more sustainable and, according to Jibrilu, there is a shift in the funding model being adopted by many investors.
“A lot of the more sustainable developments are equity financed, rather than debt financed, and the developers are growing the projects slowly, step by step.” Jibrilu says she is also seeing some growth in other sectors such as agriculture, light industry and manufacturing. In the energy sector alone there were more than 60 applications last year in such areas as solar power, renewable energy and waste recycling.
“[The recession of] 2009 taught us all a lesson,” says Jibrilu. “But we are definitely seeing an uptick in applications, and I remain cautiously optimistic.”
In an attempt to build on this nascent recovery, BIA is increasing promotional efforts overseas. “One of our key roles is promotion,” says Jibrilu. “We had budgetary constraints after the downturn, but we are now actively going out to do promotional tours once again.”
The authority is planning trips to Canada, Europe and Asia next year in an attempt to build brand awareness, particularly in markets that are not as familiar with the jurisdiction’s offerings. The delegations will include government and private sector representatives. “The benefit of going with policymakers is that it lets people know how serious the government is about foreign investment. We also invite the private sector to partner with us, so that you can show all the services that are available, whether it is in, for example, the real estate, accounting, legal or construction sectors.”
The promotional events involve a combination of forums and invitation-only events for stakeholders and potential investors, as well as one-to-one meetings with targeted individuals. “Basically, whatever it takes to get the word out.”
The need for promotion, Jibrilu argues, is acquiring even more urgency as the global investment climate and tourism model evolves. “A few years ago, we were way ahead, but the world is becoming more competitive. People are willing to go further. So, Americans will now consider going to Asia or other places to invest or for travel. In The Bahamas, I think there is now
a realization of how important FDI is to national development and that we have to be more proactive.”
For Jibrilu, the key to the jurisdiction’s continued success, is a greater emphasis on encouraging strategic investment, rather than simply accepting all comers. In tandem with the National Economic Development Plan, currently under debate by policymakers and stakeholders, Jibrilu envisions a more purposeful approach to investment planning; one where there is more consideration to deciding where FDI should take place and what type of development would bring most benefit to the nation.
“We have been blessed with outstanding natural beauty and, because of our location, we have been able to attract investment without having to go and actively seek it out. Consequently, we have evolved at the developer’s whim, rather than the other way around. Moving forward, we need a more strategic approach to investment. One that is more equitably shared across The Bahamas and is more diverse in nature.”
Return on investment
To some extent this is happening already. Across the archipelago, 2013 saw some significant FDI projects either coming to fruition or receiving renewed interest. In San Salvador, European investors have put forward proposals for the redevelopment of the Club Med resort. In Bimini, the resort conglomerate Genting Group, which owns casinos in Singapore and New York City, opened a casino through a joint venture with a local developer in March. On Cat Island there has been renewed interest from the Professional Golfers’ Association to develop a resort and golf course.
“We have seen a greater level of interest in the last twelve months and we have been very busy with proposals,” says Jibrilu.
The pay-off for all the hard work, she says, is in the sense of achievement she gets when, after all the negotiations, challenges and setbacks, a project finally goes vertical. “It is someone’s dream, but at the point they come to us, it is all just words on paper. When you see it slowly emerge from the ground and reach completion and you see people employed and you see the contribution it is making to the community, then there is a quiet moment of satisfaction and the thought that ‘Yes, this is what it is all about.”