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Playing to our strengths
WBF09 - Business - Playing to our strengths
Playing to our strengths
Grand Bahama’s solid industrial base
It’s industry, not tourism, that drives the economy in Grand Bahama. And industry in Grand Bahama, based on the trans-shipment and storage of goods and petroleum products, has grown steadily. Even as the global economic downturn drove tourist numbers down in 2008, Grand Bahama played to its strengths.
“I’ve said it before, and I’ll say it again: Grand Bahamians are a hardy lot,” says Gregory Moss, president of the Grand Bahama Chamber of Commerce. “Notwithstanding the challenges we have faced, we have a core group of people here in the business community who are committed to Freeport and its development.”
Superior transportation and communications infrastructure, along with ample space for growth, underpin that confidence—factors that have made this island The Bahamas’ primary location for industry.
Port Authority
Behind the major transport and administrative infrastructure of the harbour area is the Grand Bahama Port Authority. Having laid the foundations of one of the jurisdiction’s most comprehensive and user-friendly road and communications networks, Grand Bahama Port Authority was still embroiled at press time in a prolonged shareholder dispute over ownership.
“The dispute over the Port Authority needs to be resolved as quickly as possible,” says Moss. “It doesn’t send out the right signal to investors, and [it] undermines confidence. The Port Authority has done some very important, very far-sighted work and continues to function, but we need to resolve ownership issues.”
To counteract the shareholder situation, the Port Authority has been working toward shoring up its management team, appointing IBM general manager Felix Stubbs as chairman in a positive move to steady the ship. “I think appointing Felix Stubbs as chairman was a great move, and he should bring some sanity to the running of Grand Bahama Port Authority,” says Port Authority honorary chairman Sir Jack Hayward. “It is not just the shareholder dispute that has had an effect on the Grand Bahama economy. It is also the US economy and the price of oil. But we have been here through good and bad times before, and we will continue to do so.”
Marketing tourism
While the industrial sector remains robust, many believe it is time the tourism sector started marketing itself more effectively. “We have to ask ourselves why [tourism] is not maximizing its potential,” says Moss at the Chamber of Commerce. “Are we taking tourism seriously enough, and what can be done?”
Tourism to the island has been on a steady decline for the past few years. The number of visitors from Europe and Canada has decreased by 37 per cent since 2001, and the latest hotel industry figures show room occupancy in Grand Bahama to be hovering around 48 per cent.
Key to bolstering Grand Bahama’s tourism industry, Moss says, is developing a strong brand presence. Kevera Turnquest, senior director with the Chamber, agrees. “Each property has a responsibility to brand itself and market itself,” he says. “They could do better to attract customers and work with the Ministry of Tourism to enhance the tourism product.”
To this end the Grand Bahama Island Tourism Board (GBITB) held elections last summer to install a new board. The GBITB assists the government in the promotion of Grand Bahama as a tourist destination and represents the private sector in marketing its respective properties. Under its “Grand Life” promotional campaign the Board is attempting to rebrand Grand Bahama, offering free training courses for residents to increase their cultural awareness and develop a core of cultural ambassadors to help enhance the visitor experience. Programme participant Judy Duncombe of Pelican Bay Hotel highlights the benefits of the course. “I had two days of interacting and relearning my island, which will help me reinforce my responsibility as a citizen of Grand Bahama, and … enlighten everyone that I come in contact with. Our guests deserve to be given the Grand Life experience while visiting our grand island.”
Port area
Since opening in 1997, the Freeport Container Port has been a mainstay, employing more than 900 Bahamians and contributing about $25 million to $30 million annually to the local economy in wages alone. The deep-water harbour is the only one in the region big enough to accommodate enormous container ships and other gigantic cargo haulers.
In 2007 the port landed 31 per cent more containers than it did in 2006, and it forecasts a total handling of 1.6 million twenty-foot-equivalent units (TEUs) in 2008. It is the main western hemisphere trans-shipment hub for Mediterranean Shipping Co, which accounts for more than 90 per cent of container shipments going through the port. The owner and operator, Hutchison Port Holdings (HPH), handles around 10 per cent of all global container traffic annually.
This trend of growth has given confidence to further expansion plans at the port. HPH has broken ground on its Phase V expansion, to be completed in 2009, bringing its total investment in the port facility to $585 million. The $250 million in new money will add two berths with an overall length of 350m, increasing total quay length at the terminal to 1,386m. The stacking area is designed to cover an additional 35 acres.
Speaking at the groundbreaking ceremony, Chris Gray, CEO of HPH, said: “What is most important is the prospect of employment for a further 300 people, taking the total employed to 1,200 at a time when the economy of the island is not at its strongest and also when the US economy is not enjoying the best of health.”
Construction
Major construction projects such as the Ginn sur Mer resort and the Royal Oasis hotel and Bahamia condo projects managed by Harcourt Development Co were reportedly progressing at a steady, if reduced, pace amid an overall constriction within real estate and land development.
Harcourt reopened the lovely Ruby Golf Course, which had been badly damaged and put out of operation by hurricanes a few years ago.
Meanwhile, Bobby Ginn arrived in Grand Bahama to scotch rumours that creditors were about to foreclose on a loan. He confirmed that work would continue on two golf courses, as well as on condos, homes and a hotel.
Two education and training initiatives promised to provide a significant boost to the construction sector as the result of the development of training facilities on the island.
In July 2008, Ross University, which is a division of DeVry Inc, unveiled intentions to build a $75-$100 million School of Medicine on Grand Bahama. The facility, to be located on the 600-acre Britannia site in Freeport, is scheduled to accommodate 1,420 students in the first three years of operation. This could inject $30 million a year into the local economy through employment and direct investment. Student spending could generate a further $50-$60 million.
Speaking at the official opening of the proposed site, Prime Minister Hubert Ingraham said the campus would be “the first important turn in the road to economic recovery and vitality missing (from Grand Bahama) since the terrible hurricane seasons of 2004 and 2005. I think it is fair to say that the principal economic impact and related benefits will result from the direct influx of revenue to the local economy from international students who will come to live and study in Freeport. Additional benefits will flow from the employment of Bahamians in many capacities. This is an exciting venture for Grand Bahama.”
Ross University, which has a long track record of producing highly trained medical professionals for the US market, says its vision for Grand Bahama is simple. “We plan [the campus] to be a premier location for health sciences education equal to the best anywhere in the world,” says Dr Thomas Shepherd, president of the university.
Coupled with plans by The College of The Bahamas to develop facilities for the study of vocational and technical skills, Grand Bahama’s future was brightening in 2008-2009. Not only will the initiatives provide direct and indirect investment in the local economy but also the next generation of professionals who could help secure the continued success of the island’s industrial sector.
Bahama Rock
Neither the container port nor the shipyard would be located where they are today if it wasn’t for the deep harbour. But as the ships get bigger, the channel has to get deeper. A key company behind keeping the channel operational is Bahama Rock Ltd.
“Nothing happens in the harbour unless Bahama Rock is there,” says Bahama Rock general manager Walter Reed. “We excavate the depth of the harbour in reasonable timing to keep business going. After Bahama Rock’s expansion is completed in 2014, vessels will be able to easily navigate and berth at the Freeport Harbour, providing job opportunities and growth of the economy.”
The impact of the company on the local economy is estimated at around $20 million annually. Reed can only see growth increasing. “The harbour will be one of the largest maritime seaport centres in this region. With very little competition and in just six short years, the harbour has already doubled in size,” he says.
BORCO buy-out
Another success story from the Grand Bahama industrial sector is the joint acquisition of The Bahamas Oil Refining Company International Ltd (BORCO) by energy industry investment company First Reserve Corp and Dutch-based oil storage operator Vopak in a deal reportedly worth $900 million. As soon as the purchase was inked the new owners announced plans to invest $300 million to $600 million in upgrading the facilities and turning the site into a major storage and distribution hub for petroleum products targeting the nearby US market.
“The facility will provide significant value for our strategic partners, while also providing tremendous growth opportunities for The Bahamas,” says William McCauley, First Reserve’s chairman and chief executive. “The partnership with Vopak at BORCO is an exciting opportunity to support the growth of the world’s major oil companies by providing long-term access to facilities for storage and distribution services in a strategic part of the world.”
The first phase of the redevelopment will see the demolition of the refinery, the repair of existing tankage and the planned expansion that will increase barrel storage capacity from 20 million to 25-30 million within the next couple of years.
Building for the future
The global economic slowdown does not seem to be affecting the shipbuilding industry either—certainly not in Freeport. Despite predicted downturns in cruise tourism, “the ship repair industry is incredibly buoyant at the moment because world trade is just continuing to increase, with more and more ships being built each year,” says Mick Holding, chief financial officer at Grand Bahama Shipyard. “Demand is outstripping capacity in the shipbuilding sector. You would have to wait three or four years if you wanted to build a ship now. They are still building larger cruise ships and more of them. It follows logically that growth is good in our sector, too. We estimate that due to lack of capacity we rejected $30 million worth of business in 2007.”
To deal with this, Grand Bahama Shipyard is investing $60 million in a third dock. “We are confident we can fill three docks, 24 hours a day, seven days a week, all year round,” continues Holding. “The third dock marks the next stage of our expansion plans, not only physically but also with the type of project we can handle. With the extra facilities we can take on larger, longer projects without tying up the other docks for the cargo and cruise ships that need a quick turnaround. Every minute those ships are out of the water costs the owners money. We have a reputation of doing good quality work, on time.”
Opening for business early in 2009, the third dock is expected to boost revenue well over the $100 million mark, with a bolstered operating profit of around $15 million. By 2011 the operator expects to see returns of $140 million to $150 million in revenue, with $20 million in operating profit, which all bodes well for the local economy.
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