PRESS RELEASE – For immediate release: Is this the end for Freeport?
It is hard to conceive of anyone who is content with the development of Freeport over recent years. The grand economic development project, begun in 1955 with the Hawksbill Creek Agreement (HCA), has stalled and no-one accepts responsibility for restarting the engine.
Government recognises the problem and, earlier this year, convened a committee to advise on what, if anything, should be done to modify the HCA. The findings of the committee have not been published and the entire process is now mired in a legal challenge on the basis the government declined to release an earlier report it commissioned from management consultants McKinsey.
Davies Associates (DAL), the Freeport based project management consultancy, also recognised the problem and commissioned a study into the economic development of GBI with the objective of replacing unproductive criticism of the general climate of inactivity by identifying new initiatives that would reinvigorate the island’s economy.
DAL was moving towards publishing its findings, having already released several proposals over recent months, when two additional negative developments were announced which have given cause for hesitation.
Firstly it was reported (Tribune 29 October 2015) that Kell Ryan and a UK based small investment adviser, Highgrove Securities, intended to approach government with a proposal to circumvent GBPA to produce a 10 year development plan for GBI. This appears to have been a speculative project and was dismissed by the St George family, on behalf of GBPA, as lacking substance.
Secondly it was announced (Tribune 30 October 2015) that Hannes Babak, once of the GBPA, had intervened in the affairs of the Sir Jack Hayward Discretionary Settlement 1993 to dismiss a prospective transaction with the US financial institution BlackRock.
Mr Babak asserts that the proposed deal undervalued the assets, that he was entitled to $20m of the proceeds and, it is alleged, complained that it left the St George family with executive control of GBPA.
The significant consequence of these events is that GBI has become less attractive as an investment location.
Given the number of competitive Caribbean sites seeking external investment it is now unlikely that, in a such a disputatious environment, anyone will choose GBI and become exposed to the unmanageable risk of an unknown government position and/or the disruption of shareholder disputes.
Even if or when the current disagreements subside the underlying problems will remain. HCA is no longer fit for purpose, the shareholders in GBPA are oriented towards exiting rather than investing and GBI has lost its development momentum.
Waiting for 40 years until the HCA lapses cannot be a credible option but, if government intervenes to modify the HCA in a way that deprives the shareholders of what they regard as their legitimate interests, it is likely that protracted litigation will ensue causing further delays to the detriment of the citizens of GBI.
All economic zones require momentum and, if nothing is done, Freeport will gradually regress. Is this the beginning of the end for Freeport?
Andrew Davies of DAL said; “These recent developments are worrying as the citizens of GBI will suffer while a minority elite squabbles over their share of a virtual cake. As it stands GBI is not attractive to investors and its economic development requires a radical and urgent rethink.
Our opinion is that the value of the GBPA assets does not match the shareholder’s apparent valuation which we understand approximates the replacement cost of the infrastructure already constructed. It is unlikely that a rational and informed external investor is going to fund the terms the beneficiaries of the HCA demand.
So we’ve decided to take a step back and delay publication of our report on the economic development of the island until, and unless we can find a credible counterparty who is able and willing to break the current impasse.
Unlike the quarrelling parties our only vested interest is that we are a Bahamian company in all other respects we are objective. We are happy to help in any way we can to broker a solution and will work with Government to find a way forward.
It is likely that, in one form or another, Government will have to pick up the costs so it needs to minimise the damage by building a wall around Mr. Babak, the Hayward family and the St Georges to confine their dispute in a manner which does not prejudice the economic development of the island and the welfare of residents.
We believe that we know how to do this but cannot proceed until government decides to act.”
For more information please contact: Andrew Davies on (242) 727 1466
Davies Associates Ltd. (DAL) is a Bahamian development advisory and project Management Company based in Freeport.
DAL has worked extensively throughout the region and has acquired considerable knowledge of investment strategies and structures.