06272016 business

MONDAY, JUNE 27, 2016

business@tribunemedia.net

$600m Sarkis claims branded ‘hogwash’

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net AN ex-Baha Mar director has slammed as “hogwash” claims that Sarkis Izmirlian lacked the $600 million financing needed to complete the project, accusing the Government of “playing the blame game”.

Dionisio D’Aguilar told Tribune Business that the Christie administration was seeking to distract attention from its failed Baha Mar strategy by publishing copies of the advice it received on the matter from its UK and US attorneys.

He said that despite the Government’s best efforts “to bamboozle the Bahamian people”, most persons realised a “backroom deal” was done with the Chinese based on their promises to

THE Government has pushed back its original projections for eliminating the fiscal deficit by three full years, and is now pinning its hopes on a $449 million, four-year ‘swing’ into surplus.

Research by Tribune Business shows that the Christie administration forecast in 2013 that it would eliminate the GFS fiscal deficit in the current 2015-2016 Budget year, reducing it to zero.

With the Government projecting at least a $150 million deficit for this fiscal year, those projections have been well off the mark, leading the Opposition’s finance spokesman to again label its Budget forecasts as “overly-aggressive”.

See PG B7

THE Government will be “in very dodgy territory” should it seek to interfere with how Bahamian businesses price their goods and services, the DNA leader has warned.

Branville McCartney told Tribune Business that proposals to force businesses to pass on import duty reductions in the prices they charged consumers would deter entrepreneurs from going into commerce.

He was speaking after Price Control Commission chairman, E. J. Bowe, suggested the Price Control Act will be amended to force companies to reduce product prices in line with import duty reductions and exemptions.

Such a measure appears

Cutting debt to 60% of GDP needs 7% reverse

Ex-Izmirlian director accuses Gov’t of ‘playing blame game’

Constant 5-10% ‘shortfall’ from Budget forecast

D’Aguilar: Trying to distract from their own failure

Debt increases now depressing economic growth

complete the project if Mr Izmirlian was removed as developer.

With the Chinese having failed to deliver on See PG B6

Originally projected current fiscal year Now seeking $449m ‘swing’ in 4 years Opposition says ‘overly-aggressive’

K P TURNQUEST

Bran: ‘Very dodgy’ to interfere with business pricing

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

Nation now on ‘dark side’ of debt-growth link

Joe Lewis, Tavistock in one of two shortlisted Baha Mar bids

Govt pushes deficit elimination forecast back three years

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

IDB: Bahamas needs $560m ‘adjustment’

Urges caution on Price Control proposal Fears Gov’t crossing ‘fundamental line’ Warning of no growth without freedom designed to ensure businesses pass reduced/eliminated taxation on to Bahamian consumers in the form of lower prices, but many in the private sector will likely view the proposal as a further example of Government over-reach.

See PG B8

MAY THE FORCE BE WITH BAHAMAS - IDB says nation’s debt has joined Darth Vader on the ‘Dark Side’.

Ex-Hard Rock franchisee queries transfer to ex-MP

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net HARD Rock Cafe’s former Nassau franchisee has questioned why the business was so readily handed to its Bahamian landlord, when a decade earlier he had been “forced” to pay $1 million to end their partnership.

Kevin Doyle, HRCC (Bahamas) principal, in legal documents obtained by

Alleges subfranchise fall-out with Marvin Pinder ‘Forced’ to buy back rights from him for $1m Yet franchise given to him for ‘zero’ decade later

Tribune Business, asked why ex-MP, Marvin Pinder, had been allowed to take over the Nassau franchise given their previously troubled relationship.

His June 20 affidavit, filed with the middle Florida district court, alleges that HRCC’s 2002 decision to sub-license the rights for Hard Rock’s Nassau restaurant to Mr Pinder ultimately ended in acrimony.

Mr Doyle alleged that See PG B12

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas needs a $560 million “adjustment” at present growth rates just to cut its debt-to-GDP ratio to 60 per cent by 2021, amid warnings this nation now lies on the fiscal “dark side”.

The Inter-American Development Bank (IDB), in a newly-released report, warns that the Christie administration’s fiscal See PG B9

$4.15 $4.20 $4.21

$4.21

THE TRIBUNE

Monday, June 27, 2016, PAGE 3

BIA chair warns on Brexit’s potential to impact FDI, banking

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net THE Bahamas Insurance Association’s (BIA) chairman yesterday warned it was currently impossible to predict how the UK’s European Union (EU) exit will impact the Bahamas, adding: “The only certainty is uncertainty”.

Emmanuel Komolafe, who is also Colina Insurance Company’s chief risk and compliance officer, joined Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s chairman, in pointing to the potential impact on the financial services sector.

Apart from the impact that ongoing market turbulence may have on the wealth/holdings of the Bahamas’ clients, Mr Komolafe also said the UK’s exit - known more popularly as ‘Brexit’ - could also impact the international regulatory climate, and the EU’s attitude to international financial centres (IFCs).

The UK has been one of the biggest defenders of IFCs, given that Crown dependencies such as Bermuda and the Cayman Islands are among the Bahamas’ biggest competitors, and its

departure possibly could lead to the EU taking a harder line on tax matters.

Yet, on the flip side, the BIA chairman added: “With the UK’s exit from the EU, it is possible that IFCs such as the Bahamas may gain a powerful ally in the UK and its territories to address the challenges faced by IFCs that are also small island developing states.”

Mr Komolafe said “the road ahead will be tough, as the UK begins to divorce itself from the EU and accompanying rules/regulations that relate to tax compliance and financial services”.

He added: “The UK had held the chair for the EU committee responsible for banking and financial services. What will be the fate of the UK territories and Crown dependencies (BVI, Cayman, Bermuda, Channel Islands et al) without the links to, support and covering, of the EU? “Will they be isolated and subject to greater scrutiny, as well as regulations like other IFCs, and will that present us with an opportunity? Will private clients flee UK territories and Crown dependencies for other IFCs due to the unSee PG BXX

Fishermen: Govt late on storm relief

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net BAHAMIAN fishermen are hoping the Government will give further thought to their cry for fuel concessions, one representative telling this newspaper: “That would go a long way to helping the industry”.

Adrian LaRoda, the Bahamas Commercial Fishers Alliance (BCFA) chief, said that while Bahamian fishermen “certainly appreciated” the hurricane relief announced by the Government, they did not know how big an impact it will have.

“It’s certainly appreciated, but I don’t know what can actually be accomplished at this time considering that 99 per cent of the fishermen are already back up and operating,” Mr LaRoda said.

“While we appreciate the efforts, I’m not sure how far it could go in terms of achieving what they want to achieve or what needs to be achieved. In essence, what they are doing is giving someone some money to go towards fuel for one trip. Even a small day fisher could use a few hundred

Believe fuel concessions will have greater impact dollars in fuel a day.”

V Alfred Gray, minister of agriculture and marine resources, last week told Parliament that the Government has approved financial assistance for fishermen and farmers hit by Hurricane Joaquin.

Large fishermen can receive 10 per cent of their loss, medium fishermen 25 per cent of their loss, and small fishermen between 50-60 per cent of their assessed loss. Those whose loss does not amount to $1,000 will be 100 per cent assisted.

“What the Government could, and should, do is further consider our proposal to have concessions on fuel.

That would go a long way to helping the industry,” Mr LaRoda said.

“That would be a tremendous savings to fishermen.

Saving $0.50 cents on a gallon of fuel would go a long way. I think the savings on fuel for fishing vessels could be as much as 50 per cent.”

Bahamas financial services set to feel BREXIT’s impact

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net THE UK’s decision to leave the European Union (EU) could have a significant impact on the Bahamas’ financial services industry, the Chamber of Commerce’s chairman urging this nation to be an “interested observer” of what unfolds.

“I think if we are serious about being an international financial centre, and we are not paying attention to events taking place in Europe, which is the largest base of our private wealth management clientele, then we are naive and we’re kidding ourselves,” said Gowon Bowe, who is also a PricewaterhouseCoopers (PwC) Bahamas partner.

In last week’s referendum, which saw a 71.8 per cent voter turnout, the British people voted in favoor of leaving the EU, an economic and political partnership involving 28 countries.

“If you ask all of the international bank and trust clients, they’re watching it very closely,” Mr Bowe said. “The reason being is while we may not have the UK as a major source of clients, the whole turmoil that this is going to cause could have a significant impact to

us in our private banking industry.

“We have targeted European clients, whether that was the Swiss clients, whether that was previously the Italian and French clients, and the like. What it was focused on was moving as different events took place.

“As the Italians and French cracked down from a tax perspective, there was greater movement away from those type of clientele.

When we think about what the potential is for the referendum results, the questions is what is that going to do for the currency markets?” he added.

“Is that going to have no impact on the US dollar, meaning it will be the British pound and the Euro that will effectively react to the US dollar, or will it be the US dollar reacting to those and becoming more expensive. That could make things like European exports and revenues take a tremendous turn.”

Mr Bowe continued: “One can also look at our banking relationships. The UK is a major correspondent banking environment, which would have been an alternative if we have the continued US de-risking.

“The European Union as a whole has tremendous strength with the UK in it.

GOWON BOWE While we are not of the size and scale to influence their decision, we have to be prepared and understand the fall-out or what will come.

“The stock markets are going to have a field day over the next few days because our trading volumes and potential client losses in terms of those who are in the market could have a knock-on impact, although maybe temporary, in our current wealth management environment. We are what I would call interested observers that need to ready ourselves for every

eventuality so we make sure we don’t get caught for lack of attention.”

PAGE 4, Monday, June 27, 2016

THE TRIBUNE

BFSB teams with BMA for Greek conference THE Bahamas Financial Services Board (BFSB) has again teamed with the Bahamas Maritime Authority (BMA) to attended the Posidonia conference in Athens, Greece, from June 6-10 .

Posidonia is the world’s largest gathering of international ship owners, with this year’s attendance surpassing previous conferences at 22,000, with 1,800 exhibitors from 90 countries represented.

This event provided an opportunity for BFSB and the BMA to strengthen linkages between the maritime and financial services sectors.

Prior to the start of the exhibition, at a luncheon hosted by the BMA at the Hellenic Yacht Club in Marina Zeas, which was attended by more than 200 shipowners, the BFSB’s chief executive, Tanya McCartney, encouraged guests to not only think of the

Bahamas for what it has to offer the global shipping industry.

She urged them to be aware of the full range of private wealth products and services that the Bahamas has to offer, and outlined investment opportunities available to Greek shipowners.

The BMA continues to demonstrate its commitment to improving and expanding their services to shipowners, especially the

Greek shipowner community. This was shown by the opening of an office in Piraeus, Greece. The BMA’s Greek office has been open for two years, and has been

well received by the BMA’s Greek clients, who are now able to receive a personal level of service, improving the ease of doing business.

Having an office in

Greece allows the BMA to have regular dialogue with its clients, and aids it in revamping product offerings and regulatory compliance.

PICTURED are some of the Bahamas representatives at Posidonia (from L to R): Stephen Keenan (BMA London); Carolyn Moree (BMA London); Iain Rodgers (Bahamas Tourist Office, London); Captain Dwain Hutchinson (BMA London); Janelle Sands (BFSB); Christos Papastathopoulos (BMA Greece); Kareem Kikivarakis (Kikivarakis & Co.); and Lemarque Campbell (McKinney, Bancroft & Hughes).

PRIME COMMERCIAL lot of land located on Windermere Road off East Bay Street adjacent to Red Carpet Inn and the UBS Bank building contains approximately 31,000 square feet. Portion of property presently used as a parking lot and is income producing.

Inquiries should be directed to J. Albury at 324-7856 (H) or 424-2624 (Cell)

THE TRIBUNE

SuperClubs chief an ‘industry icon’ A LEADING hotelier in the Bahamas has been recognised as an “industry icon” and “father of the allinclusive industry” by the global professional website, eHotelier.

John Issa, SuperClubs’ executive chairman, is featured this week by the website, answering questions on his career after entering the tourism and hospitality industry over 50 years ago. His major contribution - other than years of service to tourism entities, including the Jamaica Hotel and Tourist Association and the Jamaica Tourist Board - was the creation of the first all-inclusive hotel in Jamaica in 1976, Negril Beach Village, now Hedonism II. In 1978, Mr Issa took the concept further, included drinks, and created the world’s first totally all-inclusive resort for couples only.

The concept has since been imitated all over the world.

As a result, Mr Issa is recognised as the “Father of the All-Inclusive Industry”. SuperClubs has, over the years, operated its three brands, Breezes Resorts, Hedonism Resorts and Rooms On The Beach in six countries, including the Bahamas.

Mr Issa has received many awards and national honours, including the Order of Jamaica (1998), the Order of Distinction in the Rank of Commander (1983) (Jamaica), and The Order of the Southern Cross (2001) (Brazil). In 2002 he received the Legacy Award: ‘Caribbean Luminary’ from the University of the West Indies. He was also awarded the Doctor of Laws (Honoris Causa) from the Northern Caribbean University in 1999, and from the University of the West Indies in 2009.

In 2000 he was inducted into the Private Sector of Jamaica’s ‘Hall of Fame’, and was named ‘Master Entre-

preneur of the Year for 2003’

by Ernst & Young. In 2004, he was featured on a postage stamp commemorating the Centenary of Jamaican Hotel Law. Question: What inspired you to enter the industry?

Answer: The family was in the hotel business, and I was extremely attracted to the tourism industry because of its potential for Jamaica and the region. I was given responsibility for the family hotels when I was 21 years old.

Q: What was your first job in hospitality?

A: Other than growing up within the industry, I actually learned the hotel industry from the top down because I started as Managing Director of three hotels.

Q: What is the best piece of advice you were given that assisted you in your hospitality career?

A: John Pringle, who was then Jamaica’s director of tourism and the creator of Round Hill, told me: “Never believe your own propaganda”. I found it very important because you have to face the reality and always be truthful in your sales pitch, which will result in you giving your guests more than they expect.

Q: What keeps you motivated?

A: During my five-and-ahalf decades in the industry I have seen many changes, both in land-based tourism and in cruise tourism, both in terms of the number of destinations being offered to the travelling public and the variety of accommodation and packages being offered.

What motivates me most is the creative side of the industry and coming up with new ideas and features which will enhance visitors’ vacations and thus expand

the industry. It was this type of thinking which led me to create the totally all-inclusive holiday in Jamaica in the mid-70s, and introduce the first all-inclusive couple only holiday, first all-inclusive resort with private golf courses included, and the first five star all-inclusive resort with room service and all suites.

I then went on to introduce the first all-inclusive St Lucia, Barbados, Cuba, Curacao, Brazil. It gives me great satisfaction to know what I started in the mid-70s in Jamaica has changed the way people vacation worldwide.

Q: What are the most exciting developments currently happening in the hospitality industry?

A: What seems to be happening in the hospitality industry - which is new but I do not consider exciting - is that bigger seems to be equated with newer and better. For example, the new cruise ships which between crew and passengers have a larger population than many of the Caribbean islands, and more retail space than many of the smaller Caribbean islands.

The exciting developments in the hospitality industry seem to be more in the method of distribution and selling, with the trend towards more direct and online bookings by people wanting to travel - and travellers being able to compare pricing very easily.

Q: What are the greatest challenges you face in your current position?

A: The greatest challenge today is in educating the consumer as to what is really all-inclusive because many vacations claiming to be allinclusive have many compulsory add-ons, whether it be resort fees or service charges for example. At Breezes we pride ourselves on having no

Monday, June 27, 2016, PAGE 5

hidden charges and tipping is not permitted.

Q: What is your management philosophy/style?

A: I tend to delegate but monitor and maybe interfere a bit too much.

Q: What qualities do you look for when you are hiring staff?

A: The first quality I look for is integrity, and the second is common sense. After that I consider skills and talent.

JOHN ISSA

PAGE 6, Monday, June 27, 2016

$600m Sarkis claims branded ‘hogwash’ From pg B1 these pledges to-date, Mr D’Aguilar called on the Christie administration to “man up” and figure out a new solution to the Baha Mar impasse.

Mr D’Aguilar’s comments came after Prime Minister Perry Christie last week said Baha Mar’s receivers, the Deloitte & Touche accounting firm, had narrowed down the potential purchasers for the $3.5 billion project to two groups.

He added that one had a “Bahamian investor connection”, an ambiguous comment that triggered much discussion over who he is referring to.

Tribune Business sources said a likely candidate was Mr Izmirlian’s fellow Lyford Cay-based billionaire, Joe Lewis, and his Tavistock Group.

Tavistock Group contacts responded with a “no comment” when contacted by Tribune Business.

Mr Lewis and the Tavis-

tock Group are the principal developers of the $1.4 billion Albany project in southwestern New Providence, which is in the middle of an extensive build out.

While mega resorts are not its core business, the Tavistock Group’s heritage does lie in the restaurant and hospitality sector.

It also has an interest in Atlanta’s St Regis hotel, meaning that a Baha Mar bid would not be a huge ‘stretch’ beyond its main competencies.

The Tavistock Group is likely to be part of a bigger group bid , given Baha Mar’s size and complexity.

It previously partnered with the New York-based asset manager, Och-Ziff, for a bid on New Providence’s South Ocean property which was unsuccessful.

Another local ‘contender’ was said to be David Kosoy, principal of the Sterling Financial Group. Mr Kosoy, who is said to be in Europe, did not return this newspaper’s message to his

direct e-mail address seeking comment.

Mr Kosoy’s background, too, lies in financing real estate deals. Sterling and its investment funds financed the acquisition and redevelopment of the former Nassau Palm property on West Bay Street, and they are also likely to be part of a larger group.

However, some sources suggested yesterday that while Mr Kosoy and Sterling had been part of a Baha Mar bid team, their offer was not among the two referenced by Mr Christie.

Raymond Winder, Deloitte & Touche (Bahamas) managing partner, declined to comment on the identity of the two shortlisted bidders when contacted by Tribune Business yesterday.

Speaking from Seoul, South Korea, Mr Winder, one of the three Baha Mar receivers, said progress had been made in talks with both the China ExportImport Bank, the project’s secured creditor, and China State Engineering Corporation, parent of its contractor.

Emphasising that he was referring both to the construction agreement and

efforts to sell Baha Mar, he told Tribune Business: “We’ve made progress, and hope to complete this process soon.”

This newspaper understands that the agreement to resume Baha Mar’s construction has been drafted.

Mr Winder, though, cautioned that even when a preferred bidder was selected, it might take several more months to negotiate and complete the $3.5 billion project’s sale.

Meanwhile, the acrimony between the Government on one side, and Mr Izmirlian and his former Baha Mar directors and executives on the other, shows no sign of abating any time soon.

It reared up again last week, after the Christie administration sought to justify its opposition to Mr Izmirlian’s Chapter 11 bankruptcy protection bid by publishing summaries of the advice it received from its foreign attorneys in summer 2015.

This provoked a sharp response not only from Mr Izmirlian, but Mr D’Aguilar, who said: “The Government is only trying to find excuses for why the project is not getting going and getting done.

“They’re playing the blame game. Why did you come out one year later to say Sarkis Izmirlian doesn’t have money? That’s hogwash; of course he’s got money. Everyone knows he’s got money.

“They’re [the Government] trying to blame someone for the catastrophic delay in the start of the project.”

Mr D’Aguilar said the Christie administration had always justified its Chapter 11 intervention on the basis that it would speed up Baha Mar’s completion, and better protect the thousands of Bahamian creditors.

Now, almost one year since Baha Mar’s Chapter 11 filing, Mr D’Aguilar quickly pointed out that there have been no visible signs of progress towards the project’s construction completion.

“They said they did it because it would speed up the project, and it turned out to be a complete and utter lie,” he added of the Government’s position.

“As everyone knows, it’s obvious there was a backroom deal that went on; that if the Bahamian government supported them [the Chinese], things would happen.

“They got blindsided by the Chinese. Are the Chinese finishing the project?

Are they selling the property?”

Mr D’Aguilar said both the China Export-Import Bank, as Baha Mar’s $2.5 billion secured lender, and China Construction America (CCA), as the project’s main contractor, had todate “failed to deliver” on their promises.

The two institutions were last week said by the Prime Minister to be meeting with the Deloitte & Touche receivers in Beijing, in a bid to reach a construction agreement that would pave the way for Baha Mar’s physical completion.

But, with no deal done yet, Mr D’Aguilar said: “The Chinese sold the Government a dream, and failed to deliver on that dream.

“The Bahamian creditors are now going to get screwed, and the Chapter 11 was to protect them. The Creditors Committee and all interests would have been protected.”

Mr Izmirlian himself had last week pointed out that Baha Mar creditors’ committee had supported the continuation of Chapter 11 and his reorganisation plan, which he added had promised to pay Bahamian creditors 100 per cent of what they were owed.

The Prime Minister also last week admitted, via a Tribune Business article, that the Chinese have no obligation to pay Baha Mar’s unsecured Bahamian creditors, which was why he was pushing so hard on this issue.

The ‘framework agreement’ between the Government and the two Chinese state-owned entities deals with this issue in extremely vague language, which stops well short of a commitment to pay the Bahamian creditors anything - much less make them whole.

Mr D’Aguilar added that China Export-Import Bank, and the receivers, were also refusing to pursue the $192 million damages

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THE TRIBUNE claim against CCA’s parent in the London courts - an action that potentially represents one of the best creditor recovery sources.

“The whole thing’s turned out to be a disaster,” he told Tribune Business.

“It’s taken much longer, and the Bahamian creditors don’t look like they’re going to get anything out of it.”

Mr D’Aguilar said the Government’s US and UK attorneys had been “paid to say what they’re going to say”, and added: “They’re not fooling anybody.

“Enough of the blame game. If the Chinese and the Government have a solution, get a move on with it. If you’re so convinced you’re doing it the right way, get on with it.

“Nothing has happened.

It’s June 2016, and they’ve not even laid another brick one year later. Man up, figure out a solution and move on.”

The main justifications provided for the Chapter 11 opposition were that Mr Izmirlian had no realistic prospect for raising the $600 million necessary to complete and open Baha Mar, and that his move was merely designed to strengthen his negotiating position.

There was also the ‘sovereignty’ argument, in that Bahamian courts should not be made secondary to foreign courts in dealing with winding-up/receivership matters where the companies and assets involved are domiciled primarily in this jurisdiction.

Mr Izmirlian last week argued that the timing of the legal advice summaries, produced on June 20 this year, was an attempt to justify the Christie administration’s actions, as it came under pressure over the continuing impasse and its relationship with the two Chinese entities.

While Mr Izmirlian has never publicly provided ‘proof of financing’, his family remains of considerable means, having invested $800-$900 million to get Baha Mar off the ground.

Tribune Business last year reported that Mr Izmirlian’s reluctance to provide additional financing, or enter into any new funding agreements, was due to CCA’s continued involvement.

He wanted the contractor removed, and was also unhappy at the terms and conditions the Chinese were seeking to impose upon him.

His last offer to the China Export-Import Bank was that both sides should split the $600 million financing 50/50, with CCA cut loose.

THE TRIBUNE

Monday, June 27, 2016, PAGE 7

Govt pushes deficit elimination forecast back three years From pg B1 K P Turnquest told Tribune Business: “Every Budget cycle we have gone through, we have been saying to the Government: ‘You are being overly-aggressive’.

“We said to the IMF that based upon what we’re seeing they’re being aggressive.

We’re not taking any pleasure in it, but every year we have under-performed in relation to the projections, and under-performed monetarily.

“I don’t want to disrespect the Ministry of Finance of professionals, but it seems very much as if the numbers are made to fit the desired results, rather than be critical and conservative with the projections.”

The Christie administration is now forecasting that the Government will achieve a GFS surplus for the first time in the 20182019 fiscal year, with $68 million of ‘black ink’.

But, three years earlier, besides projecting that the GFS deficit (which strips out debt principal redemptions) would be eliminated this fiscal year, the Government also forecast that a surplus of $80 million would be achieved in 2016-2017.

It is now pushing the attainment of a surplus back two further years, indicating that its initial hopes for major, consecutive annual cuts in the deficit were too optimistic.

And, to achieve that $68 million GFS surplus, it will need a positive $449 million ‘swing’ from 2014-2015’s $381 million in ‘red ink’ over a four-year period.

A Tribune Business review of the fiscal forecasting since the current government took office in 2012 shows how it has been forced to scale back the projected pace of fiscal consolidation to a more modest, conservative ‘glide path’.

While it has made undeniable progress in reducing the GFS fiscal deficit over the past three years, the pace of reduction has been far slower than it predicted - or would have liked.

To achieve the projected $68 million surplus in 20182019, much will depend on whether the Government hits its slightly revised $150 million projection for the current fiscal year.

Many are sceptical that it will, given that the Prime Minister announced in May 2015 that the administration had beaten its $286 million projection for 2014-2015 with a $198 million GFS deficit.

Just one year later, the Government effectively admitted that the latter figure was almost $200 million out, and that the 2014-2015 deficit was actually $381 million - a figure higher than projections made several years before.

“I have little faith in that given the history,” Mr Turnquest said of the Government’s latest 2015-2016 projection.

“If you look at every one of the years where they’ve projected they’re going to run a surplus or reduce the deficit, they’ve missed the target by as much as $150 million. Inspecting the record, it’s not likely they’re going to meet those targets.”

He continued: “When you add the fact that the growth rate is 0.7 per cent, it is hard enough to keep up with the increase in the cost of living and the expenditure they’re anticipating, considering that it is an election year.”

In fairness to the Government, it did beat its 20122013 GFS deficit forecast, coming in at $539 million compared to $550 million.

However, the InterAmerican Development Bank’s (IDB) latest Caribbean Quarterly Bulletin has

NOTICE

NOTICE is hereby given that KIRK O’BRIEN WILLIAMS of #2a Adventure’s Way, Freeport, Grand Bahama, 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 twentyeight days from the 27th day of June, 2016 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

NOTICE

NOTICE is hereby given that ROSEMARY AMBROISEJOHNSON of Farrington Road, 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 twentyeight days from the 27th day of June, 2016 to the Minister responsible for nationality and Citizenship, P.O. Box N-7147, Nassau, Bahamas.

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also criticised the Government’s Budget estimates, saying there is frequently a 5-10 per cent ‘gap’ between projections and actual performance (see other article on Page 1B).

“History teaches us that they have been making very unreliable projections base upon a set of assumptions not grounded in the reality of our situation,” Mr Turnquest told Tribune Business.

“We’ve had negative growth for the last two years, and are projecting

what can best be described as anemic growth for the next few years. The Government seems not to be taking this into account.

“The Prime Minister is hanging his hat on the Baha Mar basket and it may happen, but it’s not likely to have the full impact this fiscal year,” the FNM’s deputy leader continued.

“As trade is down, and businesses have seen reductions in turnover as a result of VAT and other taxes, there’s less economic activ-

ity, which means less money for the Government, and less money available to pay down debt and things that need to be done.

“I think they’re being very optimistic about these revenue items; very optimistic, bearing in mind they’ve already made some adjustments to these trade taxes, which are coming down anyway.”

Mr Turnquest said VAT’s impact had been especially hard on the services side of the economy, which had

previously been subjected to relatively little taxation.

He added: “If you survey small businesses, they’re telling you revenues are significantly down anyway, particularly for services industries.

“While the Government pats itself on the back with respect to VAT, it is having a serious effect, particularly on the services side.

“All that translates into revenue, and the lack of it has a serious effect.”

PAGE 8, Monday, June 27, 2016

Bran: ‘Very dodgy’ to interfere with business pricing From pg B1 They are likely to perceive it as tantamount to

unwarranted interference and intrusion into the affairs of private companies,

and their freedom to determine their prices, margins, revenue and profitability.

Mr McCartney, who owns several businesses himself, said that while companies “ought to do the right thing” in passing

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on the benefit of tax cuts, the Government could not “dictate” to the private sector what to do.

“I can understand about ‘breadbasket’ items,” he told Tribune Business, “but the Government is not able, and should not dictate, how private businesses operate.

“Private businesses ought to do the right thing, and where there is a reduction in import duties, they ought to pass them on for the benefit of consumers.

“But the Government must be careful in that regard; trying to run private business is very dodgy territory. It threatens to turnoff private business, and it’s a turn-off for persons going into - and staying in - business.”

Mr McCartney said the Bahamas’ economic and social system was not one that contemplated the extent of government intervention seemingly being sought by the Price Control Commission.

“The Government should be very careful about intervening,” he warned. “We’re not that type of society where Government interferes with private business.

“Business persons are there to make a profit.

That’s good, and we want that. But they should also look to do the right thing, and not gouge and overprice, whether it’s goods or services.”

Pointing to the Bahamas’ continued slippage in the World Bank’s ‘ease of doing business’ rankings, and the ever-increasing tax burden being imposed on the private sector, the DNA leader said the Government needed to fulfill promises of post-VAT tax cuts and refunds if it ever granted Mr Bowe his wish.

Meanwhile, Rick Lowe, an executive with the Nassau Institute think-tank, warned that the Price Control Commission’s plans threatened “to cross a fundamental line” with the private sector.

He warned that without the necessary freedom to plan, cost and price their

THE TRIBUNE

BRANVILLE MCCARTNEY products and services, Bahamian businesses - and the wider economy - simply would not grow and create jobs.

Many in the private sector believe competition and market forces will achieve what the Price Control Commission feels can be accomplished by force of legislation.

Mr Lowe was no different, telling Tribune Business: “They [the Government] don’t own the business. The business has to have some freedom to decide what it can make and cannot make.

“If the consumer decides not to buy from the business, that’s their right. We should not use the force of government to do that with legislation, forcing somebody to do your bidding or will for some political expediency.”

Mr Lowe added that the proposed amendments, as suggested by Mr Bowe, simply threatened more bureaucracy and made it “more unbearable” for Bahamian entrepreneurs to be in business.

“It forces them to do things the wrong way and think twice about expanding,” he added. “There’s got to be some element of freedom, or your economy doesn’t grow.

“There’s certain funda-

mental lines Government should not cross, and this is one of those fundamental lines where you’re fooling with people’s freedoms.

“It’s impossible for the Government to run the economy. Venezuela just tried that. You can’t take freedom away from the business community to expand, and still pay the tax dollars you expect to run your behemoth.”

Should the Price Control Commission get permission to proceed, Mr Lowe said some businesses may simply decide to stop importing price-controlled items, even if it inconvenienced the consumer.

“It depends how far they’re going to push the envelope,” he told Tribune Business. “It’s going to make business even more difficult, the forms to fill in; it’s the typical stuff.

“There’s certain freedoms the Government needs to consider if it’s serious about getting the economy going again. These types of initiative slow the economy even further.

“If someone goes into business and imports product, how can the Government say what they must charge for that? There has to be minimal Government; you can’t keep over-burdening people with this stuff.”

THE TRIBUNE

Monday, June 27, 2016, PAGE 9

IDB: Bahamas needs $560m ‘adjustment’ From pg B1 consolidation plan will only “stabilise” - not reduce the Bahamas’ growing $6.6 billion national debt.

Implying that more farreaching action was needed, the IDB said the Bahamas now found itself on the “dark side” of the relationship between economic growth and national debt.

Its latest Caribbean Region Quarterly Bulletin, the IDB said studies had shown that above 60 per cent debtto-GDP, any further increases in that ratio would have a negative “marginal and average impact” on economic growth.

The Government’s direct debt-to-GDP ratio was almost 68 per cent at year-end 2015. And when contingent liabilities (debts guaranteed on behalf of public corporations) are factored in, the debt-to-GDP ratio matches the 76.3 per cent figure produced by the Central Bank.

Prime Minister Perry Christie last week again touted the Government’s fiscal accomplishments, pointing to the $389 million reduction in the GFS fiscal deficit (if 2015-2016 projections hold true) since the 2012-2013 fiscal year.

The Government is also forecasting that it will achieve its first $68 million GFS surplus come 20182019, but the IDB report sharply arrests this optimism by offering a much more sober analysis.

In particular, it warns that at the Bahamas’ pre-

sent 1 per cent average GDP growth rate, this nation requires a “fiscal adjustment) equivalent to 7 per cent of GDP just to reach a 60 per cent debt-to-GDP ratio.

The IDB added that even to “stabilise” the debt-toGDP ratio, the Bahamas needed an adjustment equal to 3.4 per cent of GDP. ‘Adjustment’ is defined as the size of the swing into a primary surplus, which measures the difference between recurrent revenues and spending, once interest (debt servicing) payments are subtracted.

Given that the economy’s annual output is estimated to be $8 billion, the “stabilising adjustment” is equal to $270-$280 million. The “60 per cent ratio adjustment’s” equivalent is $560 million.

“The Bahamas requires a fiscal adjustment of 3.4 per cent of GDP to stabilise the debt ratio at its current level,” the IDB said.

“Simulation results show that with a debt stock at 76 per cent of GDP including contingent liabilities, the Government would need to adjust fiscally by 3.4 percentage points of GDP to stabilise the ratio of debtto-GDP. “Debt reduction, however, is an even greater challenge given that the economy is projected to remain in a low-growth trap,” it added.

“The simulations show that with a GDP growth rate of almost 1 per cent,

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a 7 per cent fiscal adjustment would be required to reduce the debt to 60 per cent of GDP in the next five years.”

Economic growth has proven elusive for the Bahamas in recent years, with Department of Statistics data showing the economy contracted in both 2014 and 2015.

The Christie administration is now projecting just a 0.5 per cent GDP expansion in 2016, and growth of 1 per cent in 2017 - placing the Bahamas right in line with the IDB’s 7 per cent “adjustment” requirement.

Drawing on its own calculations, and the International Monetary Fund’s (IMF) World Economic Outlook, the IDB report showed how higher GDP growth rates would reduce the level of “fiscal adjustment” required by the Bahamas.

Should the Bahamian economy expand at a 3 per cent rate, the “adjustment” required would fall to 6.6 per cent of GDP - a sum still equivalent to $520 million.

And, should the ‘Holy Grail’ of a 5 per cent average growth rate be hit, the Bahamas would need an adjustment of 5.2 per cent - equal to $416 million - to reach a 60 per cent debt-toGDP ratio by 2021.

“Higher GDP growth rate assumptions of 1.5 per cent and 3 per cent reduce the required fiscal adjustment marginally to 6 and 5 per cent of GDP, respectively,” the IDB report said.

“Fiscal reforms identified in the medium-term fiscal framework may reduce the primary deficit and stabilise public debt at current levels, but they will not be sufficient for debt reduction over the medium term.”

The IDB also criticised the Ministry of Finance’s budget estimates, pointing out that they were constantly too optimistic, and overly aggressive, under both the former Ingraham administration and the current government.

The last FNM government under-estimated spending in 2011 and 2012 by sums equivalent to 6 per cent and 4 per cent, respectively, while revenues in

both years were over-estimated by 5 per cent of GDP. While the Christie government was able to cut spending below projections by a sum equivalent to 6 per cent of GDP in its first year, this was more than offset by a revenue over-estimate equivalent to 12 per cent of GDP. While it has done better since then, revenues have been over-estimated by 3-4 per cent, with spending under-estimated by 3-5 per cent.

As a result, the Government has always been dealing with a deficit of 5-10 per cent of GDP between its Budget forecasts and the actual outturn.

“The estimates indicate a systematic overestimation of fiscal revenues and an underestimation of expenditure in most fiscal years,” the IDB report said.

“Budget preparation and execution in the Bahamas could be improved.

Prudence in budget preparation and execution are important determinants of the fiscal outturn, and can provide insights about the quality of institutions involved in the budgetary process.

“The adoption of fiscal rules, perhaps based on structural fiscal budgets, accompanied by institutional strengthening of budgetary institutions, may be in order. Such would increase the credibility of fiscal policy, and perhaps reduce the cost of financing.”

The IDB said the Bahamas’ debt-to-GDP ratio had risen by 36 percentage points compared to pre-recession levels, and was now weighing down economic growth, in addition to sucking money away from infrastructure investments and essential public services.

“A steep rise in public debt could place a country into a vicious, unsustainable cycle of increasing debt and rising interest payments,” the IDB report said, echoing previous IMF warnings.

“A moniker often invoked to describe the Caribbean is: ‘High debt, low growth’. It was never completely true. Today it may have become so. The tourism countries, Jamaica,

Barbados, and the Bahamas, are still in distress from the tailwinds from the world crisis of 2009.

“Barbados, the Bahamas, and Jamaica are on the ‘dark’ side of the debtgrowth relation; that is, with debt levels that put negative pressure on economic growth,” the IDB added, in a bleak assessment of the wider Caribbean region.

“Guyana and Trinidad and Tobago are expected to join them. Only Jamaica and, to a lesser extent, Barbados, are expected to reduce their debt levels in the next two years, albeit remain on the dark side of the growth-debt relation.”

The IDB added that the fiscal buffers for all Caribbean nations, including the Bahamas, were “inadequate”. With only Jamaica forecast to produce “an unambiguous improvement”, it warned that there was “a deteriorating limited policy space to respond to negative external shocks”.

Turning to the Bahamas specifically, the IDB said this country was now categorised by the IMF as ‘higher scrutiny’, given the ongoing concerns over its debt and fiscal sustainability.

Pointing to what has the Bahamas in its current fiscal mess, the IDB report said the Bahamas’ primary deficit had grown from 0.1 per cent in 2008, just before the global recession, to 4.2 per cent of GDP in 2013.

“In the five years leading up to fiscal year 2013, expenditure growth averaged 4 per cent annually, compared to a decline in revenue of 0.9 per cent on average each year,” the IDB report said.

“The annual change in debt-to-GDP over the period 2011-2015 averaged 4.4 per cent, and was determined largely by the primary balance. For the same period, the annual growth in the primary deficit averaged 2.8 per cent.”

The primary deficit, together with interest rates, were identified by the IDB report as the main drivers of the increase in the Bahamas’ national debt.

It also blamed structural rigidities in the Budget,

with more than 60 per cent of recurrent spending allocated to public service compensation, subsidies and transfers, for the fiscal predicament.

“Stabilising the debt-toGDP ratio and subsequently putting it on a sustainable path would require the central government to generate primary surpluses over an extended period of time,” the IDB report said.

“In the Bahamas, current spending is rigidly focused on subsidies and transfers, and personal emoluments - almost 60 per cent of current expenditure.

“In particular, transfers and subsidies as a share of GDP increased from 5.3 per cent in 2011 to 7.3 per cent in 2016, and this accounts for 34 per cent of current expenditures.

“Personal emoluments account for a similar share of GDP (7.5 per cent), but have been relatively steady over the same period.”

The IDB report said the Bahamas’ primary deficit had shrunk as a result of increased revenues stemming from Value-Added Tax’s (VAT) implementation.

It added: “The Bahamas still has room to increase tax revenues, as it is presently well below that of other tourism-dependent Caribbean countries, such as Barbados at 25 per cent of GDP, and Jamaica at 25 per cent.”

The IDB warned that the Bahamas’ fiscal consolidation efforts would only succeed if they were accompanied by economic growth.

“The fiscal imbalance is further amplified by what appears to be weaknesses in the fiscal institutions and/ or technicalities of budget preparation and execution,” it said.

“Moreover, fiscal adjustment measures outlined in the country’s medium-term fiscal framework should be supported with complementary growth-enhancing policies to support the country’s debt reduction efforts and growth prospects over the medium term....

“The task is not only fiscal consolidation but to increase economic growth.”

THE TRIBUNE

Monday, June 27, 2016, PAGE 11

Germany’s Merkel at centre stage as EU faces Brexit fallout BERLIN (AP) — Britain's decision to leave the European Union puts German Chancellor Angela Merkel at center stage as the bloc seeks to preserve its unity and win back skeptical voters across the continent.

Merkel stressed that "Germany has a special interest and a special responsibility in European unity succeeding" as she voiced regret Friday at Britain's departure, citing Europe's 20th century history of wars. She signaled that she was taking the initiative, inviting her counterparts from France and Italy — the two other largest remaining members — to meet her Monday in Berlin as well as EU President Donald Tusk.

But, true to a methodical approach to problems tried and tested over a decade in power, she also sought to slam the brakes on any hasty decisions, arguing that the 27 remaining members must avoid drawing "quick and simple conclusions" that would only create further divisions.

Germany traditionally has been reluctant to exert an overt leadership role in Europe, though it has been increasingly assertive in recent years in designing the response to the eurozone's debt troubles and, less conclusively, in seeking an EUwide response to the influx of refugees and other mi-

"In that couple, Germany is the stronger player, quite clearly," he said. "So in that sense it will probably increase the role of Germany in the EU." Merkel, Germany's chancellor since 2005, isn't in quite as strong a position at home as she was in recent years, though her support remains solid.

Unease over last year's influx of asylum seekers to Germany and internal

GERMAN Chancellor Angela Merkel speaks during a statement about the referendum in Britain at the chancellery in Berlin, Friday, June 24, 2016. Britain voted to leave the European Union after a bitterly divisive referendum campaign, according to tallies of official results Friday. (AP Photo) grants from the Middle East and elsewhere.

Even now, with one of the EU's heavyweights on the way out, Berlin isn't likely to seek a sole leadership role, ever conscious of the historical burden of its Nazi past.

"It will continue to lead with and through groups," said Daniela Schwarzer, an expert on EU affairs at the German Marshall Fund of the United States think tank in Berlin. "There's this really strong concern to always be part of something and not going it alone."

"Germany has a huge interest that the Brussels institutions have more support

than they currently have," she added, and there's no sign that it "actively seeks power and a hegemonic position."

Guntram Wolff, director of the Bruegel think tank in Brussels, said Britain's EU exit, or Brexit, will mean issues can no longer be addressed by shifting coalitions of France, the U.K. and Germany. Instead, it would increase the dependency between France and Germany — the traditional motor powering EU integration, but one that has sputtered somewhat over recent years amid differences on the debt crisis and other issues.

squabbling over Merkel's welcoming approach last fall have weighed on her conservative bloc's poll ratings, and other policy arguments in her "grand coalition" of right and left have sharpened as an election expected in September 2017 begins to loom on the horizon.

There is still, however, little sign of a successful leftwing challenge to her and none from within her own party. That contrasts with

the fortunes of deeply unpopular French President Francois Hollande, who faces elections next spring, and many other European leaders.

German officials left open what exactly the response to the British referendum might be. Finance Minister Wolfgang Schaeuble said earlier this month that "we couldn't simply call for more integration" if Britain leaves.

GN-1763

GOVERNMENT NOTICE Ministry of Finance Public Treasury PUBLIC ANNOUNCEMENT

GN-1761

GOVERNMENT NOTICE MINISTRY OF WORKS & URBAN DEVELOPMENT DEPARTMENT OF PHYSICAL PLANNING The public is hereby notified that Site Plan Application (SPA/2/2016) on behalf of MSC Cruises S.A. and MSC (Bahamas) Limited is presently being reviewed by the Department of Physical Planning for presentation to the Town Planning Committee.

This application is for preliminary approval to redevelop Ocean Cay as a cruise ship destination. The proposed development will reshape the 95 – acre man-made cay and will include a cruise ship berth, an arrival plaza, a Bahamian village, cabanas, a marina, and the creation of 11,400 feet of shoreline.

Preliminary Plans for the proposed development are available for viewing at the Department of Physical Planning, located in the Aventura Plaza on John F. Kennedy Drive, during working hours.

Interested persons and organisations are invited to review the information on file and provide written comments to the Acting Director of Physical Planning within twenty-one (21) days of the date of this notice. Submissions should be made via P. O. Box N -1611, Nassau, The Bahamas or fax (242) 328 – 3206. Further inquiries should be made to the Acting Director via Tel: (242)322-7550/2 or (242)3283202 or CHARLESZONICLE@BAHAMAS.GOV.BS Signed Charles B. Zonicle Acting Director of Physical Planning

GN-1765

GOVERNMENT NOTICE Commonwealth of The Bahamas COMMONWEALTH OF THE BAHAMAS

MINISTRY OF NATIONAL SECURITY Parliamentary Registration Department PUBLIC NOTICE VOTER REGISTRATION DRIVE TO CREATE THE 2017 REGISTER OF VOTERS Registration of Voters for the upcoming 2017 General Election continues in New Providence at the Parliamentary Registration Department on Farrington Road, from 9:30 am to 4:30pm, and in the evening, from 5:00pm to 8:00pm, Monday to Friday, except on public holidays, at the following outstations: Day and Date Place and Location (Daily Voter Registration) 27 June 2016 -Until The Mall at Marathon, Marathon and Robinson Roads

Time 10:00am to 4:30pm

27 June 2016 -Until Town Centre Mall, Baillou Hill Road

10:00am to 4:30pm

27 June 2016 -Until Post Office, Carmichael Road, New Providence

10:00am to 4:30pm

27 June 2016 -Until Post Office, Elizabeth Estates Subdivision, Prince Charles Drive

10:00am to 4:30pm

27 June 2016 -Until National Insurance Headquarters, Baillou Hill Road, New Providence 10:00am to 4:30pm 27 June 2016 -Until Cable Beach Post Office, West Bay Street, New Providence

10:00am to 4:30pm

Day and Date Place and Location (Evening Voter Registration) 27 June 2016 -Until PRD Main Headquarters, Farrington Road, Oakes Field

Time 5:00pm to 8:00pm

27 June 2016 -Until The Mall at Marathon, Marathon and Robinson Roads

5:00pm to 8:00pm

27 June 2016 -Until Town Centre Mall, Baillou Hill Road

5:00pm to 8:00pm

27 June 2016 -Until Post Office, Carmichael Road, New Providence

5:00pm to 8:00pm

27 June 2016 -Until Post Office, Elizabeth Estates Subdivision, Prince Charles Drive

5:00pm to 8:00pm

27 June 2016 -Until South Beach Post Office, East Street (South), New Providence

5:00pm to 8:00pm

27 June 2016 -Until Cable Beach Post Office, West Bay Street, New Providence

5:00pm to 8:00pm

In Grand Bahama, Bahamians can register at the Parliamentary Registration Department Sub-Office in the NIB Building during normal working hours, and in the evening from 5:00pm to 8:00pm, Monday to Friday.

In the Family Islands, Bahamians can register at the District Administrator’s Office on each island during normal working hours, and in the evening from 5:00pm to 7:00pm, Monday to Friday.

Bahamian Citizens who have reached the age of eighteen (18) years are urged to register at this time so as to be eligible to vote during the upcoming General Election. All persons registering are asked to bring along a valid Bahamian Passport or Birth Certificate and their National Insurance Card, along with an official identification (ID). The holder of an old voter’s card must also present his/her Birth Certificate as proof of Bahamian citizenship. Any Birth Certificate issued after 10 July 1973, must be accompanied by the applicant’s Mother’s Bahamian Passport or Birth Certificate. Any applicant, who only possesses an Affidavit of birth, ought to apply for his/her Bahamian Passport as evidence (proof) of Bahamian citizenship.

Sherlyn W. Hall Parliamentary Commissioner

PAGE 12, Monday, June 27, 2016

Ex-Hard Rock franchisee queries transfer to ex-MP From pg B1 their relationship fractured over “a number of issues”, including the restaurant’s design.

He claimed that Hard Rock International, as franchisor, first advised him on how to deal with the dispute, before ultimately “requiring” him to buy the sub-franchise back from Mr Pinder in a $1 million deal in April 2004.

Given those events, Mr Doyle is querying why Hard Rock International so readily accede to Mr Pinder’s offer to take over the Nassau franchise 10 years later, after HRCC (Bahamas) decided to close its doors.

His affidavit, and accompanying legal documents, also raise questions as to whether the initial sub-franchise deal with Mr Pinder was structured to circumvent the National Investment Policy, which purports to reserve sectors such as retail and restaurants for 100 per cent Bahamian ownership only.

Mr Doyle alleged that the sub-franchise agreement was conceived after he received legal advice about

the Bahamas’ “licensure requirements”.

However, this does not accord with the corporate ownership structure for the Hard Rock Cafe’s retail store, which Mr Doyle alleged opened in December 2000 as a standalone entity under HRCC’s (foreign) ownership.

He added that under its Nassau franchise agreement, HRCC did not have to develop a restaurant component until June 2003 at earliest - and possibly as late as 2010.

Mr Doyle alleged that he was enticed into an early restaurant opening by Mike Kneidinger, Hard Rock’s then-director of worldwide franchise operations, who projected that he could make between $6.5-$7 million in annual sales from the restaurant.

Having decided to move forward by 2002, he added: “Because HRCC is a British Virgin Islands company owned by non-residents of the Bahamas, there were certain strict business licensure requirements that posed as obstacles to HRCC beginning operations in Nassau.”

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The “business licensure requirements” appears to be a reference to the National Investment Policy.

Although supposed to reserve certain industries exclusively for Bahamian ownership, it has frequently been waived on a case-bycase basis.

“HRCC was advised by its counsel that Bahamian law prohibits foreigners from owning an interest in a company operating in Nassau,” Mr Doyle added.

“In light of the licensure requirements in Nassau, HRCC’s counsel recommended that HRCC grant a sub-franchise to a Bahamian company.”

Thus the sub-franchise deal with Mr Pinder, the landlord for Hard Rock’s retail store, was born.

Mr Doyle alleged that the former MP began to develop the restaurant concept at the same property, at all times with HRCC’s oversight and support.

The restaurant was eventually opened in 2003, but the HRCC principal claimed: “During the build out process on the Nassau restaurant, HRCC began to have a number of issues with its franchisee Finder.

“These issues included, but were not limited to, failure to adequately and safely construct the restaurant.

On behalf of HRCC, I notified Hard Rock of several of these issues.

“Hard Rock executives, including Mr Kneidinger, gave me advice on how to manage and handle the developing situation, which was only growing worse.

“At one point, Mr. Kneidinger assisted by suggesting manners in which we could deal with Finder.”

Documents attached to Mr Doyle’s affidavit showed this ‘assistance’ included advice on setting up a new Board of Directors, which was to include Mr Pinder’s son, and current Elizabeth MP, Ryan Pinder.

It is unclear whether this structure, proposed in late July 2003, ever came about.

However, Mr Kneidinger’s proposal refers to “apparent discord in the Nassau Hard Rock Cafe business”, and how the “harmful effects” were impairing the

work of management.

“Current situation is lose/lose/lose,” he wrote to all parties. “All must adopt a new paradigm... At this time, there is no room for blame in the game plan.”

Mr Doyle, though, alleged that efforts to mediate a resolution between the parties failed to produce the desired results.

“When HRCC’s efforts to work collectively with Finder proved fruitless, Hard Rock required HRCC to re-acquire the sub-license rights from Finder to operate the Nassau restaurant,” he claimed.

“HRCC did so at great expense. Fursuant to Mr Kneidinger’s suggestion, HRCC spent $1 million to regain control of the restaurant from Finder.

“On or about April 30, 2004, HRCC and Finder’s company, Habacoe Ltd, entered into an assignment whereby HRCC reacquired the rights to operate the restaurant.”

To “comply with local law”, Mr Doyle said HRCC set up its Bahamian subsidiary, HRCC (Bahamas) to operate the Nassau franchise.

Given the troubled subfranchise relationship with Mr Pinder, Mr Doyle expressed surprise that Hard Rock International accepted the ex-MP’s offer to take over the Nassau franchise following his company’s exit.

Hard Rock served HRCC (Bahamas) with a termination notice in early January 2014, on the grounds that it had failed to pay $105,307 in royalties that were due to it.

Mr Doyle alleged that the two sides failed to agree a settlement, leading him to appoint Paul ‘Andy’ Gomez, the Grant Thornton (Bahamas) accountant and partner, as HRCC (Bahamas) liquidator on March 31, 2014.

He claimed, though, that Hard Rock inventory already ordered - and which belonged to either HRCC (Bahamas) and/or Mr Gomez as its liquidator - was “diverted and delivered” to Mr Pinder’s business, Thirty 3 Ltd, which was the new franchisee.

“On May 28, 2014, Mr Gomez resigned as liquidator and the assets of the business legally reverted to HRCC,” Mr Doyle alleged.

“The rights to operate a Hard Rock retail store and restaurant in Nassau were given with a zero franchise fee to Finder and operated by a company owned by Paul Zar and his partner, Anders Vestergaard.

“Finder was appointed

by Hard Rock as franchisee of HRC Nassau despite the fact that Hard Rock had previously forced HRCC to remove Finder as a sublicensee.”

This was reiterated in HRCC’s oppositon to a motion for summary judgment against it, which has been filed by Hard Rock Cafe International and three of its current and former executives.

“Despite demanding that HRCC re-acquire the rights to operate the Nassau restaurant from Pinder’s company because he did not adequately concern himself with the safety of customers, Hard Rock transferred the rights to operate the Nassau restaurant to another of Pinder’s entities after terminating HRCC’s right to operate same in 2014,” the HRCC motion claimed.

Mr Doyle is alleging that HRCC (Bahamas) loss of its franchise was deliberately engineered or manufactured so that Messrs Zar and Vestergaard, the former a friend of Thomas Perez, Hard Rock’s area vicepresident for the Americas, could step in and take over.

He is claiming that Hard Rock International, Mr Perez and two other executives put this plan into effect by repeatedly refusing HRCC (Bahamas) requests to reduce its losses, and cut costs, by closing earlier and reducing portion sizes.

This has been vehemently denied by all the defendants, who have also drawn on an affidavit submitted by Mr Pinder, confirming he sought out Messrs Zar and Vestergaard as operators for the business on his own volition.

Still, alleging double standards, Mr Doyle claimed: “When Finder began to operate the Nas-

THE TRIBUNE sau location, Hard Rock permitted the Nassau restaurant facility to change its hours of operation such that the location was permitted to close early.”

Detailing his losses, he added that the “significant losses” suffered on the restaurant side had to be subsidised by profits from Hard Rock’s Nassau retail and merchandising business.

“It became apparent that because of the losses suffered on the restaurant that Nassau’s combined restaurant and retail operations did not generate enough annual income to recuperate the millions of dollars invested in the opening and operation of the restaurant,” Mr Doyle alleged.

“HRCC’s merchandise shop located in Nassau made total profits on merchandise of $10 million in the period of 2001 through 2014. From the time that the restaurant in Nassau opened through the date it closed in 2014, the restaurant lost a total of $7.127 million.

“The total net profit from the combined business operations was $2.871 million.

Over the course of operating the restaurant, I became increasingly concerned that the food element of the business was grossly unprofitable, and that the retail sales of merchandise alone could not sustain the reasonable profitability of the franchise or offset the high costs of operating a restaurant in Nassau.”

This was what drove Mr Doyle’s request for reduced opening hours, believing such a move would increase its annual profits by between $300,000-$400,000.

He alleged that being open late caused “damages” of between $600,000 to $800,000 from December 2011 until when HRCC (Bahamas) closed.

“HRCC has invested nearly $4 million into the Hard Rock, and has paid approximately $5 million in total royalties to Hard Rock,” Mr Doyle added.

BIA chair warns on Brexit’s potential to impact FDI, banking From pg B3 certainty and turbulence, or will this shift position them to attract more clients? This is still unknown but worth considering and monitoring. It is clear, however, that as an IFC we must be prepared for the risk and opportunity.”

Mr Komolafe warned that the UK’s separation from the EU was likely to be a protracted divorce, possibly lasting two years, which made it all the harder to predict potential impacts for the Bahamas.

“There are too much unknowns and uncertainties at this time to accurately predict how Brexit will impact the Bahamas,” the

BIA chairman added.

“As the popular saying goes, the only thing predictable about the future is that it is unpredictable, and uncertainty is the only certainty about the future.”

With uncertainty likely to cause investors and businesses to postpone capital projects and expansions, Mr Komolafe questioned whether any long-term volatility spawned by Brexit could impact foreign direct investment (FDI) inflows to the Bahamas.

Tribune Business revealed on Friday how the United Nations (UN) agency, UNCTAD, had reported that FDI flows to the Bahamas fell by 76 per cent

NOTICE IN THE ESTATE of LEROY EDWIN KNOWLES late of the Eastern District of the Island of New Providence, one of the Islands of The Commonwealth of The Bahamas, deceased.

Notice is hereby given that all persons having any claim or demands against the above named Estate are required to send their names, addresses and particulars of the same duly certified in writing to the undersigned on or before the 27th day of June A.D., 2016, and if required, prove such debts or claims, or in default be excluded from any distribution; after the above date the assets will be distributed having regard only to the proved debts or claims of which the Executor shall then have had Notice.

And Notice is hereby given that all persons indebted to the said Estate are requested to make full settlement on or before the aforementioned date.

MICHAEL A. DEAN & CO., Attorneys for the Executor Alvernia Court, 49A Dowdeswell Street P.O. Box N-3114 Nassau, The Bahamas

EMMANUEL KOMOLAFE or more than $1.2 billion in 2015, dropping from $1.6 billion to $385 million.

While this was largely related to the slowdown in Baha Mar construction, Mr Komolafe said: “As a nation that depends significantly on FDI, any pessimism or anxiety created by Brexit may impact our ability to attract FDI, negatively or positively.

“Additionally, the potential impact on - and attitude of - global banks that provide funding to investors will factor into the equation, as well as the position taken by venture capitalists due to market scepticism.”

The parent companies of Bahamas-based firms were especially exposed to this volatility, and loss of investment value, outside this nation.

Conversely, Mr Komolafe said any prolonged decline in sterling’s value on the foreign exchange markets could benefit companies doing business with the UK, and Bahamians sending their children to school there, as it would become relatively less expensive.

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