06082017 business

business@tribunemedia.net

THURSDAY, JUNE 8, 2017

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‘No false hope’ on VAT debt pay down

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

* No % for 2018-2019 debt reduction * Awaits outcome of Gov’t spending review * Gov’t running costs up $826m in 5 years

THE Minister of Finance yesterday declined to specify how much of the Government’s 2018-2019 ValueAdded Tax (VAT) revenues will be used to pay down the $7 billion-plus national debt, saying he did not want “to give false hope”.

K P Turnquest, in a bid to demonstrate that the Minnis administration will deliver where its predecessor had failed, told the House of Assembly that the Government will “allocate a percentage of the VAT revenue” generated in the 2018-2019 fiscal year to paying down the Bahamas’ growing debt burden.

However, he did not detail the actual percentage, explaining to Tribune Business that this depended on the success of the Government’s efforts to control and review public spending during the upcoming fiscal year.

“That was on purpose,” he told this newspaper, when asked to give a specific percentage. “Until we do these financial assessments and dig through those numbers, it’s difficult to commit to a percentage.

“We need to go through and scrub the accounts to see what programmes are providing benefits to the

Bahamian people and, in keeping those programmes, scrub the accounts to see we are getting value for money.

“Until we finish that programme, it’s difficult to say what portion is available in discretionary funding to put on the debt. I don’t want to give false hope.”

Mr Turnquest’s Budget debate presentation sought to underline the Christie administration’s failure to deliver on the rationale for implementing VAT, namely that the additional tax revenues would be used to eliminate the annual fiscal deficits and, ultimately, pay down the national debt.

Describing this as “another failed promise”, Mr Turnquest said: “I would submit that Bahamians did accept the VAT, perhaps grudgingly, but with the full expectation that its proceeds would be utilised to reduce the debt load that so burdens and hamstrings the Government.”

Despite collecting $1.1 billion in gross VAT revenues during the tax’s first two calendar years, the Christie administration continued to run more than $300 million in annual fiscal deficits, prompting Royal Bank of Canada’s (RBC) chief regional economist to warn that the Bahamas was in danger of squandering the benefits of tax reform.

Ex-prime minister Perry

BAHAMAS ‘REPUTATION’ IN DANGER WITHOUT $400 MILLION BORROWING

MINISTER of Finance K P Turnquest.

Christie, in late March, said 40 per cent of the $1.1 billion had gone to reducing the fiscal deficit, suggesting that the national debt would have been some $500 million higher had VAT not been implemented.

Mr Turnquest yesterday said that instead of using

RUPERT ROBERTS

* Could be ‘difference between profit and loss’ * Minister brands tax ‘job and business killer’ * Tax policy ‘can’t force company closure’

SUPER Value’s owner yesterday said the supermarket chain would save $444,000 annually based on the Budget’s Business License fee cut, as a Cabinet Minister branded the tax a “job and business killer”.

Rupert Roberts told Tribune Business that

the 25 basis point cut to the 1.5 per cent Business License fee rate could “make the difference between a profit and a loss” for his larger chain.

“We’re saving $444,000,” he said. “That could mean a difference between a profit and a

loss.

“We also have a choice.

That goes back to the bottom line, or we share it with consumers to give them better prices. It will be a biggee, because if you’re having a bad year that could be your profit.”

Mr Roberts added that

* ‘Junk’ downgrade triggers $70m demand * Lenders in early July Gov’t cash call * Minister slams ‘sheer fiscal insanity’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

the Business License fee cut would not impact his other chain, Quality Supermarkets, as its three stores have yet to reach the $50 million annual sales level at which the 1.5 per cent Business License fee rate kicks-in.

The Minnis administration’s move to eliminate the 1.5 per cent rate, and drop it to 1.25 per cent for

THE Bahamas’ “financial reputation” will be in peril without “emergency borrowing” of $400 million, with the ‘junk’ downgrade having exposed the Government to a $70 million cash demand.

K P Turnquest, minister of finance, told Tribune Business that Standard & Poor’s (S&P) action earlier this year had left the Government on the wrong side of a “hedge” or derivative transaction relating to some of its borrowings.

The loss of ‘investment grade’ status triggered an immediate demand by the lenders for $150 million in extra collateral, with the Government having to provide “a minimum of $70 million” by the first

SEE PAGE 8B

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SEE PAGE 8B

SUPER VALUE’S $444K SAVINGS IN BUSINESS LICENSE FEE SLASH

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

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BAHAMASAIR COULD ‘BLOW $35M HOLE’ IN BUDGET

* Principal payment due on new fleet * Bahamians won’t face ‘costs can’t bear’ * Minister ‘stunned’ by fiscal reporting woe

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net BAHAMASAIR’S new fleet could “blow another hole” in the 2017-2018 Budget unless the Government can delay a $35 million principal repayment on the loan that financed their acquisition.

K P Turnquest, the minister of finance, revealed that Bahamasair’s subsidy could increase beyond the budgeted $14.9 million unless

Dionisio D’Aguilar, minister of tourism, was unable to successfully “intervene” with the ATR planes’ financier.

He warned that this could “blow a hole again” in the Budget and require the Government to find another $35 million, saying: “We’ve been delaying the principal, and only paying the interest.

“Now that principal is coming home. We’ve got to SEE PAGE 10B

BAHA MAR OCCUPANCY IS ‘25 PER CENT AND GROWING’ * Resort’s workforce ‘now closer’ to 2,000 * $9m Gov’t equity is ‘marketing contribution’ * Winter marketing to kick-in during Q4

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net Baha Mar yesterday said its workforce was now “closer to 2,000” persons, as it confirmed that current occupancy levels were 25 per cent “and growing”.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, also disclosed to Tribune Business that the Government’s $9 million ‘equity contribution’ to the project was really its marketing contribution.

“It has everything to do with the co-operative marketing,” Mr Sands added, explaining that Ministry of Finance officials had informed him the contributions had been wrongly described in the 2017-2018 Budget as an ‘equity contribution’.

However, the $9 million figure appears not to align with the marketing contributions agreed by the former Christie administration in its April 25, 2017, Heads of Agreement with Baha SEE PAGE 11B

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THE TRIBUNE

INSURANCE A COMPLEMENT, BUT NO CURE, FOR CYBER SECURITY RISK

CYBER insurance can complement a company’s active security measures by providing coverage in three broad areas: * Liability for loss or breach of data * Remediation costs to respond to a breach, such as a forensic investigation, notification to affected par-

ties, etc * Regulatory fines and penalties, as well as associated settlement costs In the wake of increased cyber risks, cyber insurance can thus help companies mitigate losses from a variety of exposures, including data breaches, loss of confidential information

and business disruption.

Considerations for Cyber insurance 1. Understand your company’s risk exposure a) Evaluate your current cyber risk exposure to understand the type and amount of cyber insurance coverage required.

b) Coverage may not be required in areas where controls are well-established and routinely tested.

2. Understand policy complexities a) There are a wide variety of insurance policies available, which often require a rigorous underwriting process. Spend time at the outset understanding the pre-conditions that need to be met in order to obtain insurance. b) It is also important to understand any policy exclusions to make sure you are able to take advantage of the coverage you will be paying for.

What Cyber insurance provides * Coverage from financial implications: Cyber insurance can provide financial assistance to cover the costs associated with investigating and resolving information security breaches. * Transfer of risk: Cyber insurance allows companies to manage their risk through risk transfer, not mitigation. * Liability protection against the evolving threat landscape: Policies can be structured to protect the areas of most concern to your company, whether it be social media, cloud computing or third-party management.

Shavonne Smith

What Cyber insurance does not provide * Protection from reputational risk: While a monetary claim can be awarded for an information security breach, the damage done to a company’s brand cannot be repaired as easily or transferred to an insurance carrier.

• Removal of risk: Insurance, whether cyber or otherwise, provides a company with the opportunity to transfer, not remove, risk.

• A replacement for an information security program: Strong security controls and a comprehensive Information Security Program are prerequisites for purchasing cyber insurance.

However, they are not pro-

vided by the policy itself.

Companies must thus understand their risk exposure and evaluate insurance policies, as well as implement security controls to improve risk posture. They should execute a cyber insurance-focused risk assessment to answer the following questions: 1. How to select the appropriate insurance policy.

2. The type of coverage to be obtained 3. The residual risks the company faces with current cyber insurance NB: Information in this article is based on the Deloitte white paper, ‘Cyber Security: Getting it Right POV’.. For more information on Deloitte Bahamas Risk Advisory Services’ Cybersecurity offering, contact Lawrence Lewis, risk advisory services partner, at 1(242)302-4898 or llewis@deloitte.com, or Shavonne Smith, senior risk advisory services consultant, at 1(242)302-4880 or shasmith@deloitte.com Ms Smith holds a Master of Science (MSc) degree from Capitol College in Baltimore, Maryland, and specialises in information assurance and network security. She also holds the CISA designation (Certified Information Systems Auditor), and several Microsoft certifications.

FLORIDA-based Director for Cruise & Maritime Development Glenda Johnson at the booth during CLIA’s Cruise360 2017.

BAHAMAS WELL REPRESENTED AT KEY CRUISE INDUSTRY SHOW

THE Bahamas was well represented at the Cruise Lines International Association’s (CLIA)

Cruise360 Conference and Trade Show, which recently took place at the Greater Fort Lauderdale Convention Centre in Florida.

The Bahamas used the show to forge links with key travel agents, cruise line executives and industry representatives through a series of networking events, educational workshops and trade show exhibitions.

Glenda Johnson, the Bahamas’ Florida-based director for cruise and maritime development, said: “It’s crucial to educate agents so that they can better sell to their clients.”

CLIA is the world’s

largest cruise industry trade association.

The cruise industry surpassed 2016 passenger projections, reaching 24.7 globally, up from a projection of 24.2 million.

Passenger numbers are again forecast to grow this year to 25.8 million.

According to the cruise industry, 72 per cent of cruise sales are generated by travel agents.

In the luxury cruise segment, 93 per cent of worldwide cruise sales are generated by travel agents.

The demand for cruising has grown 62 per cent over the past two years, and eight of 10 agents in the US expect sales to increase in 2017.

THE TRIBUNE

Thursday, June 8, 2017, PAGE 3

GOV’T ‘STILL ASSESSING’ BAHA MAR OBLIGATION THE Baha Mar resort.

By NATARIO MCKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net

THE Minnis administration was yesterday said to still be “assessing” the Government’s commitments to Baha Mar and other resorts, a Cabinet Minister saying he was “amazed” at the multimillion dollar investment incentives granted to foreign developers.

K P Turnquest, minister of finance, was responding to queries over a line item in the 2017-2018 Budget entitled ‘Equity Contribution Baha Mar’, which appears to commit the Government and taxpayers to paying $9 million per annum to the Cable Beach development over the next three Budget years.

“We are still assessing the commitment to Baha Mar as well as the commitment to some of these other properties and other tourism stakeholders,” he replied. “It’s amazing the level of dollars that we are actually paying to assist in marketing these properties.

“We need to have a strategic look at what we are investing in this industry to ensure that it is still relevant to what we are doing, and it is sustainable in the long term.”

Tribune Business recently reported that Baha Mar is targeting just a 25 per cent average occupancy rate for 2017.

Dionisio D’Aguilar, the minister of tourism, confirmed that the $4.2 billion project will undergo a gradual, phased opening to al-

low for both its construction completion and ongoing staff training to perfect the guest experience.

“Their plans are to continue to very slowly open up the property,” he told Tribune Business of the new owners.

“Their goal was 25 per cent occupancy for the year,

LOI FIRM ESTIMATES $7-$8M TO TRANSFORM ‘LANDFILL DUMPSITE’

By NATARIO MCKENZIE Tribune Business Reporter nmckenzie@tribunemedia.net

THE company at the centre of the Renward Wells’ Letter of Intent (LOI) controversy yesterday said it was “ready and willing” to forge ahead with its waste-to-energy solution, estimating it would take $7-$8 million to turn New Providence’s “dumpsite into a landfill”.

Jean-Paul (JP) Michielsen, Stellar Waste-To-Energy’s chief executive, said the company has been talking to government officials on a “continuous basis” over its waste-to-energy proposal.

He added that the problems which have long plagued the New Providence landfill, and the relatively high cost of electricity, could all be addressed if the Government had approved the project. Further, Mr Michielsen said the project, whose costs were pegged at $650 million four years ago, would now cost $450-$400 million given advances in technology.

“The plant cost at the

THERE have been recurring fires at the New Providence landfill.

time was around $650 million but, because of the technology evolving and being widely used, that cost has gone down significantly and is now in the region of $400-$450 million,” he emphasised.

Mr Michielsen estimated that the plant’s construction would create 2,000 construction jobs, and 400 fulltime jobs when complete.

Stellar was thrust into the spotlight three years ago by the controversy that erupted over the signing of its now-expired LOI by the former Ministry of Works parliamentary secretary, Renward Wells, now Minister of Agriculture and Marine Resources in the Minnis administration.

Mr Wells, an engineer by

profession, admitted in Parliament that he had signed the LOI with Stellar Energy in order to allow the company “to carry out studies” free of charge to present to Cabinet.

Stellar later alleged that the LOI was leaked as part of “a conspiracy” against it, with “clear intent at the Government level to sabotage the project”.

Mr Michielsen yesterday said Stellar has investors ready to underwrite its projects financing, and reiterated the company’s commitment. “We have been talking to government officials on a continuous basis from the previous administration to the current administration,” he added.

Speaking to the chal-

and then in the first quarter of next year to begin to complete the opening of the fourth property, the Rosewood.

“The marketing campaign will be rolled out as rooms come on stream.

“They believe that’s the best way to do it.”

BAHAMAS AIR SEA RESCUE ASSOCIATION ANNUAL GENERAL MEETING BASRA Headquarters, June 22nd, 2017 7:30pm All members are urged to attend.

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lenges at the landfill, Mr Michielsen said: “This is not going to be solved overnight. This is a very complex matter. I think that the medium-term needs can be addressed in six months to a year.

“To get some serious energy out of there would take two-and-a-half to three years because it would take two years to build the plant.

You would be lowering the cost of energy because everything sitting there today is is fuel.

“Our estimation to get the first phase done, which means securing and making sure that there is a transition from simply a dumpsite to a real landfill, will probably be in the region of $7$8 million.”

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THE TRIBUNE

GRAND BAHAMA RESORT IN MAJOR PUBLICITY BOOST DEEP Water Cay has received a major boost this month from three international media stories exposing it to millions of potential vacationers.

The east Grand Bahamabased resort was first featured in the April edition of Business Jet Traveler’s ‘Paradise by the Week’, which reaches a target audience of more than 35,000 subscribers in 152 countries. Deep Water Cay was given high praise for its accommodations on a list that featured other properties in Fiji, French Polynesia and Florida.

Then, in late May, an Orbitz.com article, which reaches more than 6.1 million visitors, highlighted the resort as a honeymoon destination.

“There’s a good reason you’ve probably never heard of Deep Water Cay. It’s a private island—a secret haven of sorts,” said

FEATURED in Orbitz.com’s ‘Which Bahama Island is your perfect match?’, Deep Water Cay was noted as an ideal honeymoon getaway.

(Photo: Deep Water Cay for Barefoot Marketing) Sheryl Nance-Nash in her article on the website, entitled ‘Which Bahamas island is your perfect match’.

She added: “There are only seven ocean view cottages and six oceanfront private homes on the en-

tire island, which is just off Grand Bahama. There are no phones or TVs in rooms, and Wi-Fi is limited. Meals are fresh caught, hyper-local and prepared

by Bahamian cooks using time-tested family recipes.

Snorkel the legendary blue holes and reefs, scuba and kayak.”

Then the Cay, the resort and its fishing guides were featured in a ‘Saltwater Sportsman’ article and video: ‘Grand Tour of Grand Bahama island, its fast recovery from Hurricane Matthew’.

The article, written by Glenn Law, included a three–minute video by Austin Coit, and was edited by Christ Balogh. The account discussed the October 2016 landfall of Hurricane Matthew and Grand Bahama Island’s recovery, accompanied by a showcase on Old Bahama Bay. The writer

DEEP Water Cay was recently featured in Business Jet Traveler’s ‘Paradise by the Week’ (Photo: Deep Water Cay for Barefoot Marketing)

‘BONEFISH rule the flats at Deep Water Cay, Grand Bahama Island’ was the caption of this picture taken at Deep Water Cay for a feature in May’s Saltwater Sportsman (Photo: Bill Doster) and team spent several days at Deep Water Cay. “Over the decades, the place has changed hands and recently got a multimillion-dollar upgrade. But

throughout, it has maintained a reputation as one of the premier flats-fishing destinations in the Bahamas, where bonefish are both abundant and large,

and service and facilities remain second to none,” wrote Law. “The Cay itself sits as the gateway to more flats than the average angler could explore in a lifetime.”

DOMINICAN OFFICIALS JAILED IN CASE LINKED TO BRAZIL SCANDAL SANTO DOMINGO, Dominican Republic (AP) — A Cabinet minister in the Dominican Republic will remain in custody as he faces charges in a corruption case involving Brazilian construction company Odebrecht.

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THE TRIBUNE

Thursday, June 8, 2017, PAGE 5

Bahamas ‘reputation’ ALIV in danger without Employment Opportunity Commercial Analysis Manager $400m borrowing FROM PAGE 1B week of July - the first seven days of its 2017-2018 Budget year.

Mr Turnquest did not provide in-depth details on the ‘hedge’, other than to reveal that the Bahamas’ creditworthiness downgrade by S&P resulted in the Government “immediately” facing demands for extra loan security “in excess of $150 million”.

“While this does not represent an expenditure, it does represent a use of cash which has to be funded by revenues,” he told the House of Assembly yesterday. “The Ministry of Finance was partially successful in negotiating temporary waivers, but the obligation has not gone away.

“The Government is now required to provide a minimum of $70 million by the first week of July to meet this collateral call.”

Mr Turnquest warned that the lenders’ demands for extra security would increase should the Government suffer further downgrades, and disclosed that exiting the ‘hedge’ was “not recommended” as it would require a $120 million-plus payment.

When questioned by Tribune Business about the transaction, he replied: “That relates to a hedge on a loan. If I recall correctly we have to come up with $70 million to collateralise one of these derivatives transactions.”

The lenders’ demands were revealed to help explain, and justify, why the Minnis administration is seeking Parliamentary authority to borrow $400 million to cover unfunded claims dating from the 2016-2017 fiscal year. Without it, the Bahamas will be in jeopardy of defaulting on some of its loan obligations.

Besides the $70 million ‘hedge’ fall-out, Mr Turnquest said the $400 million was required to cover the Treasury’s $161.284 million payments backlog, representing transactions that required funding.

And, completing its financial exposure, the Government also faces $130.781 million in unfunded commitments - representing promises to pay vendors once the goods or services have been delivered.

“This figure is not exhaustive, as we are aware of further unrecorded commitments,” Mr Turnquest said. “While the Government is not insolvent, it is clear that it has a liquidity challenge and, as a result, employees and vendors have had to wait an inordinate time for payment.

“Many civil servants have had to suffer challenges with deductions [for loan payments] not being paid in a timely manner to the bank and other lending agencies.... We faced an im-

mediate cash flow shortage that caused many payables and salary deductions to be delayed as we robbed Peter to pay Paul, so to speak. “ Mr Turnquest’s comments illustrate how the Government’s financial challenges are negatively impacting individual Bahamians and households, plus the wider economy, with public officials unable to meet their obligations through no fault of their own.

They also highlight, in a very real sense, how downgrades to the Bahamas’ sovereign creditworthiness have a direct impact on the Government’s fiscal position and end up diverting scarce resources away from essential public services.

“The emergency borrowing authority was the only prudent thing the Government could do to protect the financial reputation of the Bahamas,” Mr Turnquest emphasised.

He then blasted the former Christie administration for engaging in what was described as “sheer fiscal insanity” by allowing the recurrent deficit - the gap between revenues and the Government’s fixedcost spending - to balloon to as high as $498 million in the current 2016-2017 fiscal year.

Mr Turnquest likened this to a family having to borrow to pay for its weekly grocery and other bills, a situation that would eventually lead to insolvency.

He argued that the Christie administration had “spent like drunken sailors” while giving “lip service” to the need for fiscal consolidation, pointing to how far away it was from its previously forecast $80 million GFS surplus for 2017-2018.

The Minister recalled how he and the former St Anne’s MP, Hubert Chipman, upon hearing that projection questioned “what world are these people living in”, given that the then-government was continuing to increase spending while also raising taxes on Bahamians.

Acknowledging that Hurricane Matthew’s impact had contributed to the expected $500 million deficit for 2017-2018, Mr Turnquest said the figure had been inflated by the former administration “entering into many egregious commitments on the eve of the general election”.

He added that new spending commitments were emerging every day, and said: “Commitments and contracts were signed between May 8-9, millions of dollars in commitments.

“It is evident that the blatant fiscal recklessness of the other side in the run-up to the general election was a major contributing factor. When they look back at the 8-9, they will have to explain to the Bahamian people why they entered into these contracts for

services, employment and extension of contracts for people on contracts that should have ended.”

Mr Turnquest cited 41 persons in Acklins who were hired on May 9, a day before the election. While his claims were challenged

by Opposition MP, Glenys Hanna-Martin, the Minister said they were “calling, trying to find out how they will get paid and when.

“What is egregious is the previous administration gave these people the impression they would be long-term employees, when the contract for those people is three months,” he added. “They have these people on three month contracts, and when that is up this government will have to make a decision.”

Highlighting the growing gap between the Government’s spending and income, Mr Turnquest said recurrent revenues had increased as a percentage of GDP by 5.4 percentage points - from 17.6 per cent in 2011-2012 to a projected 23 per cent in 2017-2018.

Yet over the same period, recurrent spending had risen by 8.6 percentage points to a forecast 28.6 per cent in 2017-2018. This, Mr Turnquest said, had resulted in the Government’s recurrent fiscal deficit growing from 2.4 per cent of GDP in 2011-2012 to 5.6 per cent for the upcoming fiscal year.

Unless this was corrected, the Minister warned that the Government will “have to borrow ever more to cover everyday expenses”, creating “an ever-growing vicious cycle that could begin to feed on itself continually if not corrected”.

“It points out why we have to break this borrowing cycle,” Mr Turnquest said.

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PAGE 8, Thursday, June 8, 2017

THE TRIBUNE

SUPER VALUE’S $444K SAVINGS ‘No false hope’ on IN BUSINESS LICENSE FEE SLASH VAT debt pay down

FROM PAGE 1B high turnover businesses, will chiefly benefit large companies such as Super Value and its main rival, AML Foods; Cable Bahamas and the Bahamas Telecommunications Company (BTC): and the three oil majors FOCOL Holdings, Rubis and Sol Petroleum (Esso).

Companies with turnovers or less are unaffected, and some observers will suggest this lends credibility to both the Progressive Liberal Party (PLP) and Democratic National Alliance’s (DNA) charge that the Budget “favours the rich but does very little for the small man”.

However, K P Turnquest, minister of finance, yesterday acknowledged that the Business License fee generally was driving some businesses into losses and closure.

Agreeing that the Government’s taxation must not drive companies out of business, he said: “We understand the difficulties with the Business License fee. As currently structured, it’s disadvantageous to businesses and a job killer.

“It’s unfair in how it’s calculated, and drives some businesses into a loss position because it’s calculated on turnover. Small margin businesses, gas stations and food stores, those businesses with thin margins, it can cause those businesses to lose money.”

Mr Turnquest emphasised that the Government should not be forcing businesses

into closure “because of it’s insatiable need for tax revenue”, and promised that the Minnis administration would review the Business License fee regime during its five-year term to see what changes could be implemented.

No details or timelines were provided, though, for a tax that still represents a key $150 million annual revenue source for the Government.

The former Christie administration, in its 2013 ‘White Paper’ on Value-Added Tax (VAT) had pledged to reduce Business License fees to a flat annual fee of $100 acrossthe-board once it could predict with certainty how much revenue the new tax would generate.

This promise, though, was never put into effect.

The private sector has long argued that Business License fees represent one of the most inequitable and regressive forms of Bahamian taxation, given that they are calculated as a percentage of gross turnover rather than profits.

Apart from forcing companies into losses and closure, they have also resulted in many companies paying more in Business Licence fees than they earn in annual profits.

High turnover, low profit margin businesses, plus those impacted by price controls, like auto dealers, pay considerably more than low volume, high profit margin companies.

GN-1899

GOVERNMENT NOTICE

FROM PAGE 1B VAT as promised, the former administration had instead used it to finance increased spending and social programmes such as National Health Insurance (NHI) - confirming what Tribune Business has been saying for years.

The Minister of Finance described these programmes as having “a lot of mistakes” and “not well thought-out because they lost money”, setting out the evidence to support his case that VAT’s revenue windfall was squandered to finance the former government’s bad habits.

Mr Turnquest said the recurrent revenues had increased by $530 million per annum during the Christie administration’s term in office, growing from $1.43 billion in 2011-2012 to $1.96 billion for the 2016-2017 fiscal year.

Yet recurrent spending, which finances the Government’s fixed costs, such as salaries and rents, had increased by $826 million over the same period - rising from $1.632 billion in 2011-2012 to $2.458 billion in 2016-2017.

While conceding that $245 million of the increase related to higher debt principal repayments, Mr Turnquest said the widening gap between recurrent revenues and expenditure showed the Christie administration had been borrowing to cover Government’s ever-rising operating costs.

“You are paying more taxes, which were intended

MINISTER of Finance K P Turnquest. to pay down the debt, but instead you increases expenses by $826 million,” he added. “How could the debt come down with that kind of uncontrolled spending?

“If you go out every year to borrow money to pay off a loan to prevent default, you don’t default, but it doesn’t lower the debt burden. If the last administration [got back] into office, this country would be in trouble given the path they were going.

“You can’t borrow to pay your loan. It’s a vicious cycle. You’re putting a burden on our children and grandchildren.”

Mr Turnquest said the Government’s annual interest (debt servicing) costs had increased by $107 million this fiscal year compared to 2011-2012, the year before the former Christie administration took office.

“Every time you refinance, interest costs go up,” he added.

The Minister of Finance

said the former administration had increased the Government’s operating costs, excluding interest and debt principal redemptions, by $474 million during its five years in office.

“As such, fully 89 per cent of the revenue increase during their term was swallowed up by increases in spending over which they had direct control, including over $20 million to one set of foreign consultants alone.”

Mr Turnquest did not identify the consultants, but added: “I leave it to the Bahamian people to determine whether we got value for money.”

The new government is seeking to eliminate the $31 million primary deficit projected for 2017-2018 by identifying significant cost savings, which the Minister said would “hopefully stop some of the bleeding we’ve had over the last five years”.

Emphasising that the Government could not continue living beyond its means while ‘kicking the can down the road’, Mr Turnquest warned that further delaying fiscal reform would only make the correction “more drastic and painful” - with greater tax increases and spending cuts.

“To be quite blunt, the Government’s fiscal position is untenable and simply not up to the task of modern governance,” he added.

“We cannot go on mortgaging the future of our children to finance the dayto-day running of government.”

PAGE 10, Thursday, June 8, 2017

THE TRIBUNE

Bahamasair could ‘blow $35m hole’ in Budget FROM PAGE 1B

pay, and will have to make a decision about that. You can only roll the ball up the hill so far before you’ve got to pay.....We’re going to do something about it; we’re going to fix it.”

Mr Turnquest’s Bahamasair revelation came as he revealed that taxpayer subsidies to 25 state-owned enterprises had increased by $79 million, or 22.6 per cent, to $429 million in the 2017-2018 fiscal year.

He said the majority of the increase related to National Health Insurance (NHI), and described the initiative as a prime example of the “path we’ve been on” - where the former government added new social programmes without knowing how they would be funded, and without any regard for the impact on the deficit and $7 billion-plus national debt.

Mr Turnquest said initiatives such as NHI “created

goodwill” and a feeling among Bahamians that the Government would always take care of them, without determining whether there was “a better way” and how - and if - the taxpayer could afford it.

The Public Hospitals Authority (PHA), as traditionally, will receive $213.8 million or almost 50 per cent of state-owned enterprise (SOE) subsidies in 2017-2018. Behind it is the NHI Authority at $48 million; the University of

the Bahamas (UoB) at $34.5 million; the Water & Sewerage Corporation at $30 million; the new Civil Aviation Authority at $17.1 million; and then Bahamasair with its initial $14.9 million.

“Taken together, these six entities account for total subventions of $358 million, or 83 per cent of aggregate subventions,” Mr Turnquest said. “There are other entities that have under-performed and not provided any benefits, or

static benefits, to the state.’

He pointed to Bank of the Bahamas, which had cost the Government “over $200 million and counting” in its ongoing bail-out and restructuring, plus the Nassau Airport Development Company (NAD) and the Bahamas Electricity Corporation (BEC) both of which have failed to provide the Treasury with a dividend for 10 and 20 years, respectively.

Warning that ‘business as usual’ could be tolerated no longer, Mr Turnquest warned that all stateowned enterprises will be assessed to sure they are operating efficiently and “in accordance with best practices”, in a bid to reduce the drain on Bahamian taxpayers.

He added that the Government would have to “figure out how to pay for them”, with persons either charged a direct fee or via specific taxation. The Minister described the present

NOTICE

NOTICE

VENTISQUERO LIMITED

LOVA HOLDINGS LIMITED

N O T I C E IS HEREBY GIVEN as follows:

N O T I C E IS HEREBY GIVEN as follows:

a) VENTISQUERO LIMITED is in voluntary dissolution under the provisions of Section 138 (4) of the International Business Companies Act 2000.

a) LOVA HOLDINGS LIMITED is in voluntary dissolution under the provisions of Section 138 (4) of the International Business Companies Act 2000.

b) The dissolution of the said company commenced on the 01st June, 2017 when the Articles of Dissolution were submitted to and registered by the Registrar General.

b) The dissolution of the said company commenced on the 01stJune, 2017 when the Articles of Dissolution were submitted to and registered by the Registrar General.

c) The Liquidator of the said company is Octagon Management Limited, The Bahamas Financial Centre, Shirley & Charlotte Streets, Nassau, Bahamas.

c) The Liquidator of the said company is Credit Suisse Trust Limited, The Bahamas Financial Centre, Shirley & Charlotte Streets, Nassau, Bahamas.

Dated this 08th day of June, A. D. 2017

Dated this 08th day of June, A. D. 2017

_________________________________ Octagon Management Limited Liquidator

_________________________________ Credit Suisse Trust Limited Liquidator

MARKET REPORT WEDNESDAY, 7 JUNE 2017

t. 242.323.2330 | f. 242.323.2320 | www.bisxbahamas.com

BISX ALL SHARE INDEX: CLOSE 1,873.35 | CHG 0.01 | %CHG 0.00 | YTD -64.86 | YTD% -3.35 BISX LISTED & TRADED SECURITIES 52WK HI 4.38 17.43 9.09 3.60 4.70 0.13 6.76 8.60 6.10 10.60 14.50 2.72 1.60 6.00 10.00 11.00 10.00 6.90 12.51 11.00

52WK LOW 3.40 17.43 8.19 3.50 1.64 0.12 3.80 8.35 5.70 10.05 10.50 2.18 1.31 5.80 7.55 8.56 7.30 6.35 11.92 10.00

1000.00 1000.00 1000.00 1000.00

900.00 1000.00 1000.00 1000.00

PREFERENCE SHARES

1.00 106.00 100.00 106.00 105.00 105.00 100.00 10.00 1.01

1.00 105.50 100.00 100.00 105.00 100.00 100.00 10.00 1.01

SECURITY AML Foods Limited APD Limited Bahamas Property Fund Bahamas Waste Bank of Bahamas Benchmark Cable Bahamas CIBC FirstCaribbean Bank Colina Holdings Commonwealth Bank Commonwealth Brewery Consolidated Water BDRs Doctor's Hospital Famguard Fidelity Bank Finco Focol ICD Utilities J. S. Johnson Premier Real Estate Cable Bahamas Series 6 Cable Bahamas Series 8 Cable Bahamas Series 9 Cable Bahamas Series 10 Colina Holdings Class A Commonwealth Bank Class E Commonwealth Bank Class J Commonwealth Bank Class K Commonwealth Bank Class L Commonwealth Bank Class M Commonwealth Bank Class N Fidelity Bank Class A Focol Class B

CORPORATE DEBT - (percentage pricing) 52WK HI 100.00 100.00 100.00

52WK LOW 100.00 100.00 100.00

SYMBOL AML APD BPF BWL BOB BBL CAB CIB CHL CBL CBB CWCB DHS FAM FBB FIN FCL ICD JSJ PRE CAB6 CAB8 CAB9 CAB10 CHLA CBLE CBLJ CBLK CBLL CBLM CBLN FBBA FCLB

SECURITY Fidelity Bank Note 17 (Series A) + Fidelity Bank Note 18 (Series E) + Fidelity Bank Note 22 (Series B) +

SYMBOL FBB17 FBB18 FBB22

Bahamas Note 6.95 (2029) BGS: 2014-12-3Y BGS: 2015-1-3Y BGS: 2014-12-5Y BGS: 2015-1-5Y BGS: 2014-12-7Y BGS: 2015-1-7Y BGS: 2014-12-30Y BGS: 2015-1-30Y BGS: 2015-6-3Y BGS: 2015-6-5Y BGS: 2015-6-7Y BGS: 2015-6-30Y BGS: 2015-10-3Y BGS: 2015-10-5Y BGS: 2015-10-7Y

BAH29 BG0103 BG0203 BG0105 BG0205 BG0107 BG0207 BG0130 BG0230 BG0303 BG0305 BG0307 BG0330 BG0403 BG0405 BG0407

BAHAMAS GOVERNMENT STOCK - (percentage pricing) 115.92 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

104.79 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

MUTUAL FUNDS 52WK HI 2.06 3.93 1.95 169.70 141.76 1.49 1.67 1.58 1.10 6.96 8.50 6.30 9.94 11.21 10.46

52WK LOW 1.67 3.04 1.68 164.74 116.70 1.43 1.64 1.54 1.04 6.41 7.62 5.66 8.65 10.54 9.57

LAST CLOSE 4.22 15.85 9.09 3.60 1.64 0.12 4.05 8.60 6.00 10.50 10.50 2.44 1.55 6.00 9.75 9.00 9.75 6.90 12.50 10.00 1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.01 LAST SALE 100.00 100.00 100.00 109.02 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

CLOSE 4.22 15.85 9.09 3.60 1.64 0.12 4.05 8.60 6.00 10.50 10.50 2.45 1.55 6.00 9.75 9.00 9.75 6.90 12.50 10.00

CHANGE 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1000.00 1000.00 1000.00 1000.00 1.00 100.00 100.00 100.40 100.00 100.00 100.00 10.00 1.01

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

CLOSE 100.00 100.00 100.00

CHANGE 0.00 0.00 0.00

109.05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

FUND CFAL Bond Fund CFAL Balanced Fund CFAL Money Market Fund CFAL Global Bond Fund CFAL Global Equity Fund FG Financial Preferred Income Fund FG Financial Growth Fund FG Financial Diversified Fund FG Financial Global USD Bond Fund Royal Fidelity Bahamas Opportunities Fund - Secured Balanced Fund Royal Fidelity Bahamas Opportunities Fund - Targeted Equity Fund Royal Fidelity Bahamas Opportunities Fund - Prime Income Fund Royal Fidelity Int'l Fund - Equities Sub Fund Royal Fidelity Int'l Fund - High Yield Fund Royal Fidelity Int'l Fund - Alternative Strategies Fund

VOLUME

9,000 1,800

1,000

VOLUME

NAV 2.06 3.93 1.95 168.44 141.76 1.49 1.64 1.58 1.07 6.96 8.50 6.30 9.80 11.13 9.63

EPS$ 0.029 1.002 -0.144 0.170 -0.130 0.000 -0.030 0.607 0.430 0.450 0.110 0.102 0.080 0.300 0.520 0.960 0.820 0.294 0.610 0.000

DIV$ 0.080 1.000 0.000 0.210 0.000 0.000 0.090 0.300 0.220 0.360 0.490 0.060 0.060 0.240 0.400 0.000 0.330 0.140 0.640 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

P/E 145.5 15.8 N/M 21.2 N/M N/M -135.0 14.2 14.0 23.3 95.5 24.0 19.4 20.0 18.8 9.4 11.9 23.5 20.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.00% 0.00% 0.00% 0.00% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 7.00% 6.50%

INTEREST 7.00% 6.00% Prime + 1.75%

MATURITY 19-Oct-2017 31-May-2018 19-Oct-2022

6.95% 4.00% 4.00% 4.25% 4.25% 4.50% 4.50% 6.25% 6.25% 4.00% 4.25% 4.50% 6.25% 3.50% 3.88% 4.25%

20-Nov-2029 15-Dec-2017 30-Jul-2018 16-Dec-2019 30-Jul-2020 15-Dec-2021 30-Jul-2022 15-Dec-2044 30-Jul-2045 26-Jun-2018 26-Jun-2020 26-Jun-2022 26-Jun-2045 15-Oct-2018 15-Oct-2020 15-Oct-2022

YTD% 12 MTH% 1.57% 4.52% 0.39% 2.75% 0.77% 2.51% 3.95% 3.95% 6.77% 6.77% 1.45% 4.17% -1.59% 0.17% 0.49% 2.72% 1.29% 2.00% 4.35% 4.69% 4.13% 4.28% 4.22% 4.64% 6.19% 3.43% 2.77% 2.98% -3.66% -3.90%

NAV Date 30-Apr-2017 30-Apr-2017 30-Apr-2017 31-Dec-2016 31-Dec-2016 30-Apr-2017 30-Apr-2017 30-Apr-2017 30-Apr-2017 30-Nov-2016 30-Nov-2016 30-Nov-2016 30-Nov-2016 30-Nov-2016 30-Nov-2016

MARKET TERMS BISX ALL SHARE INDEX - 19 Dec 02 = 1,000.00 52wk-Hi - Highest closing price in last 52 weeks 52wk-Low - Lowest closing price in last 52 weeks Previous Close - Previous day's weighted price for daily volume Today's Close - Current day's weighted price for daily volume Change - Change in closing price from day to day Daily Vol. - Number of total shares traded today DIV $ - Dividends per share paid in the last 12 months P/E - Closing price divided by the last 12 month earnings

YIELD 1.90% 6.31% 0.00% 5.83% 0.00% 0.00% 2.22% 3.49% 3.67% 3.43% 4.67% 2.45% 3.87% 4.00% 4.10% 0.00% 3.38% 2.03% 5.12% 0.00%

YIELD - last 12 month dividends divided by closing price Bid $ - Buying price of Colina and Fidelity Ask $ - Selling price of Colina and fidelity Last Price - Last traded over-the-counter price Weekly Vol. - Trading volume of the prior week EPS $ - A company's reported earnings per share for the last 12 mths NAV - Net Asset Value N/M - Not Meaningful

TO TRADE CALL: CFAL 242-502-7010 | ROYALFIDELITY 242-356-7764 | FG CAPITAL MARKETS 242-396-4000 | COLONIAL 242-502-7525 | LENO 242-396-3225

situation as “unacceptable and not sustainable the way we’ve been doing it”, and added: “That’s just cold reality.”

Expanding on the initiatives planned to dig the Bahamas out of its fiscal hole, Mr Turnquest said “more taxes are not the answer to the fiscal mess we inherited”.

Revenue-side efforts will focus on improved administration, collection and enforcement, with the Minister confirming that the “primary efforts will be to contain the growth of recurrent expenditure”.

He emphasised: “We will not place on the backs of the Bahamian people costs they cannot bear for political expediency.....

The Government of the Bahamas will not put more on the Bahamian people than the revenue we generate can bear.”

Mr Turnquest said that while the Government would seek to avoid layingoff civil servants, it would insist on efficiency in the public sector and improved service delivery, adding: “We cannot continue as if there is fat and plenty.”

He indicated that a key focus will be the InterAmerican Development Bank (IDB) funded plan to improve the Government’s financial management and reporting systems, describing the existing system as completely inadequate for evidence-based policymaking.

“The information is of limited quality, difficult to access and not widely used for evidence-based policy and decision-making,” Mr Turnquest told the House of Assembly. “The system does not seem to be able to tell us in any central agency or spot what the full amount of spending commitments are.

“Every day we have someone popping up saying they have a commitment for this, a contract for that. It is absolutely stunning to me as a businessman that there’s no place where all agencies must report, what the Government’s committed to and what it owes..... Tourism is an interesting one; they have all kinds of commitments out there.”

Mr Turnquest said the Government needed to move to accrual-based accounting, as the Public Treasury’s continuing reliance on a cash-based system was incompatible with modern governance and the Bahamas’ needs.

The IDB project is designed to improve efficiency in the Government’s

financial management and use of resources, while also providing benchmarks to measure its performance.

Mr Turnquest, meanwhile, also outlined “a comprehensive and allencompassing” review of every government spending initiative, in a bid to determine whether all were necessary, were delivering ‘value for money’, and if they could be performed better by the private or voluntary sectors.

“Many of the programmes and services that are delivered by the Government have been in existence for a very long time indeed and, as might be expected, seen as simply something the Government does, year after year,” he said.

The Government also plans to create a Public Procurement Board to oversee the bidding and awarding of all government contracts. The Board will feature a non-public service chair; the financial secretary; a permanent secretary; and two other persons from the private sector, with a mandate to advise the Government on regulation and policy for this activity.

A Procurement Review Tribunal will also be created to hear complaints, and determine disputes, relating to government contracts.

Shedding more light on planned Fiscal Responsibility legislation, Mr Turnquest said it would focus on achieving an annual GFS balance (deficit elimination) and maintenance of a “sustainable” debt-toGDP ratio as its core objectives.

The Minister of Finance would be required to detail the assumptions underpinning Budget forecasts; detail long-term fiscal goals; explain why annual outturns had differed from targets; and explain how and when any deficits would be eliminated.

Mr Turnquest also held out the promise of greater consultation with the public and private sectors in the formulation of the Government’s annual Budget.

On the revenue side, Mr Turnquest said the Government planned to eliminate the “inconsistency” in enforcement and collection measures between different taxes.

He added that this would help to create “a level playing field for tax compliant businesses”, as well as provide the private sector with greater certainty when it came to collecting taxes.

NOTICE

NOTICE is hereby given that Claudine nikia Bethel of 596 N.W. 67th Street, Miami, Fl. 33150 is applying to

the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/ naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 8th day of June, 2017 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE

NOTICE is hereby given that PHILIPPE SIFFRARD of East Street, New Providence, Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/ naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 1stday of June, 2017 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE

NOTICE is hereby given that JOANEL THEOPHILE of Life Bouy St., New Providence, Bahamas is applying to the Minister responsible for Nationality and Citizenship, for registration/naturalization as a citizen of The Bahamas, and that any person who knows any reason why registration/ naturalization should not be granted, should send a written and signed statement of the facts within twenty-eight days from the 1stday of June, 2017 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

THE TRIBUNE

Thursday, June 8, 2017, PAGE 11

Baha Mar occupancy is ‘25% and growing’ FROM PAGE 1B

Mar’s new owner, Chow Tai Fook Enterprises (CTFE).

This calls for the Government to contribute $4 million per annum over an eight-year period for a total of $32 million, whereas the Government’s Budget details $9 million contributions per annum for the next three fiscal years.

K P Turnquest, minister of finance, told Tribune Business of the $9 million ‘equity contribution’: “We’re still analysing that Heads of Agreement to see what is the commitment of the Bahamian people.

“That line takes into account what we know.

To the extent that is all, or more is required, that will be determined in the coming weeks.”

Mr Sands, meanwhile, said demand and bookings for Baha Mar were “growing positively” as its new owner moves forward with phased opening of the property.

He emphasised that occupancy levels were not CTFE’s primary concern, as it focused more on recruiting staff and training them to meet its and hotel brand standards - the ultimate goal being to exceed guest expectations and deliver the necessary product experience.

“As we continue to open the property in a phased and thoughtful manner to ensure the guest experience is exceptional, the current occupancy is at 25 per cent and growing,” Baha Mar said in a statement.

“We are confident and encouraged by the demand for groups and conventions, corporate

transient and leisure guests, with daily increases in our room bookings.

Baha Mar supports this thoughtful approach to the phased opening with all customer expectations being exceeded with very positive feedback.

“We look forward to the continued support and collaboration of the Ministry of Tourism and Nassau/Paradise Island Promotions Board in promoting the destination.”

Graeme Davis, Baha Mar’s president, added: “The phase one opening of Baha Mar launched with tremendous excitement.

“Live reservations have exceeded our expectations, and the overall demand is extremely strong for summer travel. We are thrilled to welcome guests and international visitors to the Bahamas to experience Baha Mar and all of the guest offerings and amenities.”

Mr Sands yesterday confirmed that Baha Mar’s 300-room SLS Lux resort was on target for an October opening, with Rosewood to follow in spring 2018.

“We are satisfied that our training of staff, service delivery and exceeding guest needs are all going in the right direction,” he told Tribune Business.

“That’s the most important thing for us at this time as we plan for our first winter season in 2018.”

Mr Sands said staff numbers were “closer to 2,000 now”, having been at 1,500-1,600 for the April 25 opening, and added: “You come to the property and you’ll see an orientation taking place every day.

“There’ll be another

exercise, specifically to meet the October timeframe for SLS. “We’re beginning to look at particular associates at this point in time, getting them to go through the vetting process.

“You can begin to look for that happening four to six weeks prior to the opening.”

Mr Sands, though, said that the main thrust of Baha Mar’s winter season 2018 marketing campaign would only kick-in during the 2018 fourth quarter.

“We’re doing certain things by social media at the moment,” he told Tribune Business. “Our real marketing for the winter season will start in October, November, December, the fourth quarter of the year.”

The timing suggests that CTFE and Baha Mar are aiming to meet the peak winter season that will coincide with the Rosewood’s opening in March/April 2018, and also that the first phase opening was designed solely to boost the former Christie administration’s re-election chances.

Mr Sands, though, said Baha Mar’s “whole product offering is growing on a weekly basis”.

Apart from the Grand Hyatt’s 1,800 rooms, the convention centre, golf course and casino, Mr Sands said Baha Mar’s tennis club, pool and beach areas, and some restaurant and retail outlets are all open.

Among the eatery and bar options already open are Three Tides; the Churchill cigar bar; Sticks, the noodle bar; and “seven to eight places outside”.

INSIDE the Baha Mar resort.