The Bahamas: Because of foreign investment and foreign banking ...we’ve had the highest GDP per capita in the region for decades ...and, because of tourism, we’ve had adequate foreign currency reserves to support our fixed dollar value ...yet our people are still poor

A country with no plan, pt. 3

I cannot, with any degree of honesty, call myself a supporter of Robert Mugabe, but there is one quote attributed to him from a recent interview with BBC World News which resonates within me. And though I find his style of leadership questionable, I cannot deny that I am in full agreement with his thinking when he declared to his people that “…never, never again shall we make the mistake of allowing our resources – natural resources – to be owned by foreigners. Never.”

I am of the opinion that foreign direct investment (FDI) should never include the giveaway or sale of natural resources, be it acres of land or miles of beaches and waterfront. A sovereign country should always be able to negotiate terms of investment from a position of strength, upholding its sovereignty, such that the very land it is presiding over remains in the ownership of the citizens, guarded on their behalf by their government.

The injection of capital in the form of FDI, in the way we have welcomed it, may serve well as a last resort to boost economic activity, but as a long-term growth model it is worrisome. We have come to think of FDI as the great deliverer, but this neglects to consider the necessity of direct domestic investment and moves the prospect of property ownership further beyond the reach of the common man. A modified approach to FDI where domestic investment is the lead part of FDI should be the norm, particularly in a small country.

This norm and modified approach to FDI should also limit the percentage of ownership of foreign investors in domestic investment partnerships to a capped amount of 49 percent with the remaining 51 percent held by the citizens of the host country as private shareholders, and not held in trust with a government where it does nothing to create new wealth and continuing prosperity for the people.

As is the case at present, a government could choose to have as much FDI as it likes with many capital injections and it will give the perception that the economy is robust, but the real story lies in the domestic sector and with domestic investment. If you want to know how well the economy is doing, ask first how large the domestic investment sector is.

How vibrant is it? How much is it growing? What is it comprised of? What percentage of small businesses in the domestic sector account for overall economic activity? What is the ratio of domestic investment opportunities to FDI opportunities? What percentage of the labor force is employed in the small business/domestic sector as opposed to being laborers in a byproduct of FDI?

And, finally, to get a better idea of long term growth potential, you should also ask how many businesses in the domestic sector really do innovate and are not merely international franchises, resellers or reproducers. You should then seek to bring partners who facilitate the development needs of the domestic sector, not the other way around.

Small business and real growth

The reason small business is the ‘lifeblood of the economy’ is because it relies on innovation, but a search through the local yellow pages and the news dailies is disheartening in this regard. A primarily copycat economy exists in our nation when there is great potential for invention. With the existing imitator blueprint, sustainable growth will be hard to come by. There cannot be sustainable growth until the people prepare themselves to have ownership of original ideas, instead of just employment in duplicates, and until they are creating and innovating as opposed to replicating.

Our country’s net exports in services yield a surplus. Our net exports in goods yield a deficit. We have more services than products to offer the world. Certainly services are an important part of an economy. But what about the other part?

We go to work every day, but what are we producing? A tourist has a great vacation. An offshore investor makes more money. But in this environment how does our daily labor make our lives better? Really, how productive are we in these industries? And how do we quench our thirst for expensive imports when we do little to innovate?

At the end of the day, we still lack infrastructure; we have very little along the lines of finished manufacturing and agriculture, and FDIs leave the same way they came. If these business ventures were more than FDIs, if they were joint ventures with all the consumers in the national economy, we might have more to show for them.

Some argue that we can’t be a producing economy in the traditional sense, that our services will always be greater than our goods, but we have many natural resources and we have them in abundance. If our people were trained throughout life to be innovative and not reliant we could have a stronger and burgeoning domestic business sector and a more resilient economy with more to trade than just ‘heads in beds’ and stock portfolios which consist of assets we can’t even purchase.

As it stands, we are too heavily reliant on people wanting to visit us and on them spending more money here, constantly trying to find ways for them to empty their pockets when our productivity could be speaking for itself in a number of other ways.

There are very many local businesses that provide necessary products and services. Of course we will always need groceries and healthcare and other such necessities, but we have to think beyond the necessary. How do we make the necessary better, more effective and more efficient? That is innovation.

If you sell something already, perhaps you can learn how to make your own version of it or make it better. Keep your business idea as simple as possible and in this manner make it more achievable. Let it grow organically and tend carefully to it as it grows; don’t sit and wait for handouts from visitors. Initiate. Innovate.

A laissez-faire society hinders progress

Inviting tourists to the country and then hoping they will buy something expensive or a lot of something not too expensive is like drawing straws for a prize. It sounds great in theory – a relatively easy win. But what happens when we all get bored with that game? What is our backup when tourists and investors don’t come our way any longer, or when they don’t spend any more, or when our people no longer want to be only servants in any industry?

We are a people who hasten to fall back on “God will provide”. Perhaps for us the spirit of innovation is not instinctive, and maybe that’s why we go nowhere faster. Our motivation to assert ourselves and produce great things like we’ve never done before is pre-disabled.

It’s all well and good to dress up every day and prance around preaching prosperity to others, saying a higher power will provide, but what are we doing to help that power along?

If you were the highest level executive, would you provide to a well-dressed, able-bodied beggar who plainly does not help himself? Probably not, because that would be productive for neither one of you.

Gross Domestic Product (GDP) is a measure of what we produce, how industrious we are, but the deceitful thing about GDP is that it includes output by foreign firms who repatriate their earnings to their own or other countries. So, when we calculate GDP per capita, what are we truly measuring?

Because of foreign investment and foreign banking, we’ve had the highest GDP per capita in the region for decades and, because of tourism, we’ve had adequate foreign currency reserves to support our fixed dollar value, yet our people are still poor. That GDP per capita and those foreign currency reserves suggest that we are either over-producing, which is clear we are not, or that this kind of great wealth is spread amongst everyone, which is clear it is not, or that it is held by a small few, which is most likely. And the few holding this wealth will use it to modernize their lifestyles and possessions, because who knows when they’ll get to hold it again. Consequently, is economic growth through foreign direct investment, foreign banking and tourism really just an illusion in an otherwise non-producing society?

• Nicole Burrows is an academically trained economist and a self-trained writer. She writes primarily on the economy and society, and her interests include economic growth and development and contemporary women’s issues: nicole.burrows@outlook.com.

April 30, 2014

thenassauguardian

- A country with no plan, pt. 2

- A country with no plan, pt. 1

Young Bahamian Entrepreneurs in the tourism industry ...and the revitalisation of The Bahamas as a competitive touristic destination

 

Negotiating With The Gatekeeper: Young Entrepreneurs And Tourism

By Noelle Khalila Nicolls
Tribune242
Nassau, The Bahamas



IF the movements made by a handful of young Bahamian professionals over the past year in tourism are any indication of the entrepreneurial thinking of their counterparts, then there is some hope for the future outlook of tourism in the Bahamas.

 

Entrepreneurs such as Alanna Rogers, Jamie Lewis, Adlai Kerr and Scott Turnquest, owners of tourism startups Tru Bahamian Food Tours, Islandz Tours, and BahamaGo, are breaking barriers in tourism by going head to head with established businesses in nontraditional areas of the business. Their starups are refreshing additions to the product offering, and reflect a break from the tunnel vision way of thinking about tourism in terms of traditional service jobs, foreign direct investment and hotels.

 

The tour business in the Bahamas is not an easy one to get into. Ancient companies such as Majestic Tours, the last of the original travel agents from the days of white-only operators, have an effective monopoly over the key supply chains of visitors. And yet, Majestic Tours only places 19 amongst the 22 sightseeing tours ranked on Trip Advisor for Nassau based activities.

 

In the top spot on the Trip Advisor listing is Tru Bahamian Food Tours, with Islandz Tours following closely behind in the number four spot. As far as Trip Advisor is concerned Majestic Tours is essentially a nobody, despite their relative operational size and level of business experience. Old school business minds with an analogue outlook would not understand the significance of such a ranking. They miss how the Internet acts as a great democratic equalizer in this digital world, particularly for those with Rocky-style ambition and fight.

 

These young entrepreneurs are attempting to solve long-standing problems that the industry has been incapable of solving. The Downtown Nassau Partnership has doled out big dollars to revitalise downtown, focusing in large part on upgrading infrastructure. Their efforts are all well and good, but the creation of new businesses that add value and enhance the downtown Nassau experience could do just as well in the revitalisation efforts.

 

That is what Tru Bahamian Food Tours and Islandz Tours have proven, with Islandz also operating in the merchandising side of the business, with authentic Bahamian souvenirs.

 

Innovation and the expansion of existing products and business services are critical for the revitalisation of the Bahamas as a destination, which is on the decline. Sometimes it seems as though leaders in the business sector are either comfortable or complacent. Either way, it is leading to a lack of improvement and modernisation in our tourism offerings.

 

As far as downtown goes, our city centre is a stale, dry place at night, notwithstanding the few bars and clubs that make an effort. Why haven’t existing businesses figured out a way to make downtown vibrant at night? Why haven’t entrepreneurs seen this need as an opportunity to create new businesses? When the Downtown Nassau Partnership ran its successful bar crawl promotion on the Heineken bus, I immediately wondered why a private group hadn’t made a successful business out of a Nassau at night bar hop.

 

Why haven’t downtown businesses figured out a way to bring more Bahamians downtown? Not all of them are convinced that central to downtown’s success is bringing the city back to life for Bahamians. In fact, there is a night spot off Bay Street that has a notorious reputation for being racist and discriminatory towards black Bahamians. During the recent Goombay Summer festival in Pompey Square, I heard a tourism official say, “It was good, except, not many tourists came out.” Meanwhile, the square was jam-packed with Bahamians, starved for outlets to enjoy downtown.

If businesses are supposed to solve problems, fill needs, serve markets, it seems we are going year to year without innovating solutions and creating products to plug the market gaps; without solving problems and keeping pace with the under-served and emerging markets.

 

The startup BahamaGo is doing just that. It is attempting to solve two critical problems that the Ministry of Tourism with its $80 million annual budget has been unable to do in its more than five decades. So far BahamaGo has had success, not because it has the financial resources to do so, but because it has financial accountability; it has the business motivation combined with passion and drive; and most importantly, it does not have an analogue mind.

 

The reality is most hotels in the Bahamas are in fact small hotels, strung amongst the Family Islands; they are using outdated hotel management tools with no access to the large online travel agencies (OTAs) such as Travelocity and Expedia. This lack of access to OTAs is a major challenge for small hotels, which cannot accept online bookings for their properties, and have no way of offering booking packages that pair airfare and accommodation.

 

Many hotels are using manual ledgers or telepathic room inventory management systems. BahamaGo is an niche OTA created by Bahamian entrepreneurs with technology and finance backgrounds who understand the specific demands and challenges of the local market and are centrally focused on meeting the local needs.

 

Unfortunately, BahamaGo is not only competing against the large OTAs, it is also competing against the Ministry of Tourism (MOT). The MOT is simultaneously pursuing a strategy to solve the same problem, investing big bucks to contract an international company. It is not that the MOT is oblivious to the problems; even though they often take a while, they do act. But it is their action that often undermines entrepreneurial opportunity. And in the long run, the bureaucracy often underserves the market.

 

Small startup businesses in the tourism sector quickly come to learn that the tourism market is not free and open; it has a gate keeper known as the MOT. Large developments, particularly that bring foreign direct investment, need not worry, because the political leadership which sets the tone in tourism always has time for that.

 

A business’ size, bank balance, credit history, experience and level of connections correlate to level of trust that is inherently granted by the gate keeper. The problem for small startups, particularly those put forward by young entrepreneurs, is obvious. They suffer the most having to navigate their own way around the bureaucratic gate keeper.

 

I don’t believe it is intentional, but the MOT is a large bureaucracy that in some instances undermines economic opportunities for small businesses and innovation in the tourism sector. Whereas business is about taking risks, the bureaucracy is about playing it safe (routine processes aimed at protecting the country’s resources and not screwing things up; utilizing public funds in low risk investments); the different modes of being naturally conflict with each other, particularly when it comes to dealing with small businesses.

 

A small business might offer a service that the MOT is willing to pay for, but the MOT will always defer to the company that is perceived to present fewer risks. From a public sector management point of view it makes sense, but we must acknowledge how and when it creates an unsupportive, even anti-competitive environment for small Bahamian businesses.

 

A group of artists and photographers were having a conversation online the other day about Bahamian photographers joining together to create an online stock images website. The discussion was lively and interesting, and when I made my contribution I threw a wrench in the mix. If the MOT operates a free stock images website in partnership with an international stock images company, how could a local company compete? Wouldn’t the MOT’s free service undermine the business efforts of the private group?

 

The MOT has its fingers in many pots, and it often has a possessive like sense of ownership over anything that it is involved in. This posture inevitably becomes the elephant in the room when a private business tries to enter the market.

 

For large players the point is not so relevant, but for young entrepreneurs and small businesses it is critical. At some point, there will have to be a negotiation, whether spoken or unspoken, or some sort of mediation, with the MOT, before the gates of opportunity are fully opened. In the meantime, these businesses are forced to work in spite of the MOT.

 

The events market is a classic area. The MOT is committed to events. However, when the MOT stages an event, it often undermines the capacity of a private business to operate or manage an event in the same market place. On the flip side, if a private individual or company has an event it will not be legitimized as a marketable event to the tourist market unless it has the stamp of approval of the gate keeper.

 

The People to People programme is another example. People to People is a signature MOT programme that pairs visitors with a volunteer Bahamian host to experience Bahamian life and culture. The People to People programme is a successful MOT programme. But, it could also be a great business. The MOT innovated a great product for an important niche sector, but might it not be the time for a Bahamian to pursue it as a private business venture?

 

We must ask the question, what is the MOT really about? Justifying its own existence – its $80 million budget – or supporting a local business market? Shouldn’t we encourage and celebrate the creation of businesses to service areas previously subsided by the MOT? In a thriving tourism market, shouldn’t the MOT theoretically become more and more specialized, because the needs of the market would create viable businesses opportunities that are filled by Bahamian businesses.

 

I am not certain our thinking has reached that level of consciousness. More than likely, if a Bahamian saw an opportunity to create a People to People like business, it would attract resistance from those in tourism responsible for People to People, particularly its founders. And if the MOT was so inclined, it could undermine the business efforts of the private individual.

 

In this respect I sympathise with the civil servants who work at the MOT, because their public service often means missing out on business opportunities. However, their experience in the MOT also creates for them a wealth of knowledge and networks that would be vital assets in business. Instead of normalising career service, I think civil servants should be encouraged to take their experience into the public sector, where they can step out and take on the risks of entrepreneurship.

For all of its shortcomings, there is no question, the MOT has over the years plugged important market gaps with its own innovations, not only in marketing, but also product development. The civil servants who work for the MOT do mean well and they work hard to fulfil the mission of the organisation. In many respects the public/private sector relationship that exists in the tourism industry is something to be celebrated and modelled.

 

But we must not let our pride and good intentions make us blind to our own weaknesses or limitations. From some angles, the enviable relationship between the MOT and the private sector looks incestuous.

 

As the need for product expansion and innovation becomes more and more critical and young entrepreneurs mature, Bahamians are not going to just pass up emerging opportunities. They are going to take risks and start new businesses that defy the logic of the analogue mind. The MOT must examine its role and function in light of this approaching wave.

 

Fundamentally, the MOT has a delicate balance to strike: it must act like a business (for marketing is a core business strategy aimed at achieving business objectives), but it should not be in business. And if its service to the business community is justified in support of big business, then it should also be justified in support of small businesses.

 

I am encouraged by young Bahamian entrepreneurs and I know they will do what is necessary despite the MOT or the wider business environment. There is no question, tourism in the Bahamas is badly in need of product development and modernization and it is the innovators, the young entrepreneurs, small and niche businesses that are the hope for the future.

 

As for the MOT, it if wants to do right by the future, it needs to engage in self-examination and create a way forward that reshapes its relationship with innovators, startups and small businesses, who possess different needs to established and large businesses.

 

The MOT’s challenge is to value and support small and niche businesses; facilitate modernisation in the small business sector; encourage product development, especially through diversification into non-traditional areas of the business; recognize and nourish the talents of true innovators. Fundamentally, the MOT is called to be a facilitator not a gatekeeper; be a partner not a competitor; and to truly support the business of tourism, not merely justify its own existence.

 

• (Noelle Khalila Nicolls is The Tribune’s Features Editor. Follow her on Twitter @explorebahamas. For questions or comments, email nnicolls@tribunemedia.net).

 

September 23, 2013

 

Tribune 242

 

Bahamas Blog International

 

Bahamian tourism is “starving” in The Bahamas

Tourism 'Starving': The Shop Is Bare

By NEIL: HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net
Nassau, The bahamas

Bahamian tourism is “starving” because it has both failed to develop a unique product, a well-known architect believes, and not invested in creating key “attractions”.

 

Pat Rahming, of Pat Rahming & Associates, told Tribune Business that while the Bahamas had potential tourism product “coming out of its ears”, much of it was “locked away in a warehouse with three padlocks on it”.

 

And he explained that rather than focus on developing one-of-a-kind ‘attractions’, the Bahamas had instead concentrated the bulk of its tourism investments in the infrastructure that supported them - accommodation (hotels) and transportation.

 

Pointing to the “dilapidated” state of Nassau’s few land-based attractions, such as the forts and Water Tower, Mr Rahming likened Bahamian tourism to a shop with little inventory on its shelves.

 

Arguing that ‘attractions’ were the equivalent of tourism’s “cash register”, Mr Rahming said of these shortcomings: “That’s why we’re losing our shirts, and other people are eating our lunch.”

 

His thoughts offer a new perspective on why some believe the Bahamas’ tourism competitiveness is slip-sliding away, a perception reinforced by a Tribune Business report last week.

 

This newspaper reported that stopover visitors’ share of total foreign arrivals to the Bahamas had slipped from around 31-32 per cent pre-recession to around 24-25 per cent for the past four years. In raw terms, this means that high yielding stopover visitors (spending over $1,000 per head) have declined from one out of every three visitors to one out of every four.

 

Recalling how he arrived at his conclusions, Mr Rahming said he first began attending the annual American Parks and Attractions convention some 17-18 years ago.

 

Becoming a regular attendee every November, he explained: “The key was that I learned through that organisation that the business of tourism, the members of that organisation were the people that drove the business of tourism globally.

 

“At the various seminars and workshops, I came to understand why our business was floundering, what we were doing and perhaps ought not to be doing.”

 

Although he failed to convince Ministry of Tourism officials to accompany him to that convention, Mr Rahming said he learnt that all tourists - wherever they were in the world - were seeking unique Place-specific Experiences.

 

This, he told Tribune Business, could be delivered through a variety of products - place, history, mythology and lifestyle. New York and Miami were lifestyle destinations; London was a historical destination; Athens was steeped in ancient mythology; and unique places included the likes of Niagara Falls and the Grand Canyon.

 

Downtown Nassau was once, Mr Rahming said, the place-specific destination that Spanish Wells, Hope Town and Green Turtle Cay were now. Yet the fundamental flaw was that the Bahamas still had to properly define its tourism product (Place-specific experience).

 

Noting that the Bahamas represented Christopher Columbus’s first port of call in the Western Hemisphere in 1492, Mr Rahming told Tribune Business: “Someone looking for a warm weather destination, sun, sand and sea, has half the world available to him, but the guy looking for the spot where contemporary civilisation started has only one choice.

 

“We are the genesis of all contemporary Americans, the Bahamas. Isn’t that incredible? This is why it becomes so important to the business of tourism. We have product coming out of our ears, but it’s all locked away with three padlocks on it.”

 

In contrast, Mr Rahming said the Dominican Republic had chosen in 1991 to focus on Columbus as an attraction, changing the focus of its tourism product.

 

It had also concentrated on golf, these two moves explaining why its stopover visitor numbers had increased by 109.8 per cent in the nine years up to 2000. Cuba’s growth over the same period was 318.4 per cent, yet the Bahamas’ growth remained in low double digits.

 

Unlike New Orleans with its ‘Voodo’ aura, Mr Rahming said the Bahamas had never exploited its ‘Obeah’ mythology. “This is one of the few places you can go where there isn’t a church tour,” he added.

 

And, while aspects of the Bahamian diet and lifestyle were unique, this nation paid “so little attention to it” as part of the tourism product.

 

“The position is that we have product coming out of our ears, but we are losing business because we have no product,” Mr Rahming told Tribune Business. “This is why we are losing our shirts, people are eating our lunch.”

 

This, he added, was exacerbated by the Bahamas misunderstanding where the tourism ‘Point of Sale’ or cash register was located. It was not located in hotels, transportation or hospitality, which were supporting infrastructure, but attractions.

 

Mr Rahming said there were five types of attraction - traditional tours; retail (the Straw Market); events (the Super Bowl); infrastructure; and resorts.

 

He described the latter as “the most misunderstood in our neck of the woods”. Bahamians generally believed resorts were a hotel with a few facilities, but Mr Rahming argued it was the other way around - a resort was an attraction with accommodation as the supporting facility.

 

Pointing to Atlantis as a water-based theme park attraction, Mr Rahming told Tribune Business: “Atlantis is an attraction, but it has accommodation.

 

“They understand that, and you never hear an Atlantis executive call Atlantis a hotel. But you’ll hear us call it a hotel because we don’t understand.”

 

The result of this misunderstanding, Mr Rahming said, was that “the only investment for the tourism business is on accommodation, and this isn’t helping us.

 

“If you look at New Providence, you will see all our attractions are in trouble. We have few tours, and by any definition of tourism we have very few land-based attractions. What we have are dilapidated or in bad shape,” he told Tribune Business.

 

“That’s the product we are selling. We have the Ministry of Tourism going out to bring customers in, but we have very little inventory on the shelves, and what is on the shelves is not selling. That’s why our lunch is being eaten by other people.”

 

Focusing on Freeport, Mr Rahming said the strategy of concentrating on casino and hotel operators was entirely misplaced. “In their case there is absolutely nothing on the shelf, nothing whatsoever,” he told Tribune Business.

 

“We have product coming out of our ears. This destination, the Bahamas, is the most gifted community on the planet, 350,000 people. You put us against any other community in the world, we have more champions per capita. Why are we starving?

 

“It’s about the fact the shop is open and there’s very little on the shelf. You can’t make money without stuff on the shelf.”

 

Going back to the retail analogy, Mr Rahming said the industry’s ‘first rule’ was that if there was something to sell, it had to be easy to buy. The second was that if you were selling something the competition could sell, price would inevitably drive sales.

 

This was the situation Bahamian tourism now found itself in, a price-driven competition, due to the absence of a unique product and associated attractions.

 

June 03, 2013

 

Tribune 242

 

Bahamas Blog International

 

...will The Bahamas government allow Bahamas Petroleum Company (BPC) to drill for oil willy-nilly in Bahamian waters ...and risk the destruction of the Bahamian bread and butter industry - tourism?

Young Man's View: The Oil Industry

By ADRIAN GIBSON
ajbahama@hotmail.com
Nassau, The Bahamas


...

I continue to believe that Bahamas Petroleum Company is a bit player in the oil industry and, having been told of the overly emotional online attacks on me by so-called shareholders/investors after my first column, I am now even more interested in piercing the veil and looking into any and all drilling agreements that this company—and any other company— has with our government.

 

For some reason, every time I think about the giving away of our national patrimony, I hear Beavis and Butthead sarcastically snickering in the background. The licensing agreement between BPC and the government states that the oil royalties would be disbursed on a sliding scale, i.e. if 75,000 barrels of oil are produced daily, the royalty rate would be 12.5 per cent; if it’s in excess of 75,000 and up to 150,000, it would be 15 per cent; 150,000 to 200,000 daily barrels would yield a royalty rate of 17.5 per cent; 250,000 to 350,000 would result in a 20 per cent rate and any daily production in excess of 350,000 barrels would incur a royalty rate of 25 per cent.

 

The Bahamas has no Environmental Protection Act and the trite regulatory practices (Environmental Impact Assessment reports) overseen by groups like the BEST Commission—a toothless bulldog— is laughable at best.

 

I totally agree with a recent article written by attorney Fred Smith (Queen’s Counsel) when he said: “As the Bahamas broadens its industrial investment profile; encourages large scale urban development; promotes all inclusive anchor projects by Bahamians and foreigners and continues its growth and development, it becomes more and more urgent for an independent regulatory body with teeth, to protect our often pristine, and always fragile environment.”

 

He went on to say: “The Bahamas, as a Small Island Nation, must make protecting the environment a priority. It is also important that stakeholders and interested parties who may be affected by industrial and/or other urban developments have an opportunity to be properly consulted. This has been repeatedly affirmed by our Supreme Court, Court of Appeal and Privy Council in the Guana Cay and Abaco Wilson City Power Plant litigation. The BEST Commission has been established for years but it is not a statutory body and needs to be institutionally created by legislation to make it effective and relevant.”

 

Yes, our sluggish, relatively rebounding economy could do with an injection of oil money—but it must be on the best, most nationally-sound terms and not be a hurried, tactless and superficial attempt to redesign our economy overnight. The Nigerian experience should teach us, as a nation, the shortfalls of unregulated drilling, of allowing foreign companies to buy off prominent members of government and of an oil rich country having a poverty stricken population due to corruption, greed and overtly scandalous behaviour.

 

Now, while Bahamians are discussing oil from the perspective of a countrywide get-rich-quick-scheme, many of them haven’t considered the environmental ramifications, how BPC will likely go about getting it and/or a thorough examining of the peripheral issues related to oil drilling.

 

In a published Facebook post forwarded to me by economist and lawyer Dr Gilbert Morris, he said:

 

“Let’s forget about the risk premiums to protect our waters and let’s forget about the relative costs of both drilling and pumping. If there are 3 billion barrels undersea in the Bahamas, what would you think when you learn that the US consumes 19 million barrels per day? This means, if we have 3 billion barrels, our total store of oil is 150 days of US consumption.”

 

He went on: “So therefore, here is what is likely to happen: The lead firm will confirm its find and say to the government we will pay you a royalty. Let’s suppose the royalty is 90% of profits, just to be overly optimistic. The government would never see a dime. Why? Because the firm with the rights in the Bahamas, will sell the rights to the proven reserves to a larger company. That company will determine what it costs to pump the oil from the depths. The government will only gain income, even if its on the gross, from oil that passes the Relief Valve. But nothing will. Because when the large Company buys the rights, they will Cap the Wells immediately. That is because, oil prices would need to be over $200 per barrel to make its economically feasible to pump it. So Caping is like storage until the market price makes pumping feasible.”

 

“A final point: if the oil has a high sulfur content, (Sour), then that adds refining costs too. There are lots of oil finds all over the world. The question is, is it financially feasible to pump it. If the find in the Bahamas was a “monster find” (and it could become that), the question will be the cost of pumping – including environmental protection costs – relative to the profit yield based on the market price over time,” the economist concluded.

 

An October 2012 report in The Economist stated that oil is stolen in Nigeria at a record pace, with the government inflating output figures by using a discombobulating assortment of statistics. According to that report, Nigeria announced that its oil production had increased to 2.7 million barrels per day; however, due to a corrupt culture, that figure is nearly impossible to verify.

According to a former senior World Banker—Oby Ezekwesili (a Nigerian)—some $400 billion of that country’s oil revenue has been squandered or pilfered since 1960. Nigeria, home of the world’s ninth largest gas reserves, also has an unregulated petroleum industry where a Petroleum Industry Bill has been stalled for 15 years. The Bill was drafted with the intent to heighten transparency, proffer a regulatory regime and govern every aspect of the nation’s oil industry. However, glad-handing politicians have managed to bar the formulation of any effective regulatory regime as that would curb their corrupt practices and proscribe deterring—even penal—sanctions. Could there be similar reasons why no such Bill has been considered in the Bahamas—why even Environmental Protection legislation hasn’t been brought to the Parliament?

 

Indeed, a joint report by Transparency International and the Revenue Watch Institute revealed that Nigeria’s government-run National Petroleum Corporation is “accountable to no one” and is a “slush fund for the government,” which makes it the worst of 44 national and foreign companies included in their study. When one thinks of how locally government-run corporations have been mismanaged over the years—e.g. Bahamasair, the Bahamas Electricity Corporation and even the Bahamas Telecommunications Company (before the sale)—there’s much to desire and the thought of our governments running an oil slush fund is a no-no!

 

What’s more, Nigeria’s oil producing delta region has suffered environmental devastation that would eternally damage our pristine environment (beaches, mangroves, etc) and, as it relates to the environs and our tourism industry, set us back into the Ice Ages. Whilst the United Nations have chided the Nigerian government for their unchecked environmental degradation, there has been little to no attempt by that government to take legislative initiatives to curb indiscriminate drilling—just as there has been no attempt by the government of the Bahamas thus far! After a rig explosion (Chevron) in January, 2012, local Nigerian environmental groups have placed a $3 billion price tag on losses accrued over 46 days due to fires, a gas leak and environmental degradation. Even more, in December 2011, an oil spill at one of Royal Dutch Shell’s offshore oil operations was estimated to have cost a record $5 billion in damages. Apparently, the farmlands of Nigeria—particularly in the Niger delta—are progressively being destroyed. It remains to be seen what penalties or compensation will be rendered by both companies to the Nigerian people, considering the predilection of corrupt government officials and the likelihood that it would merely be swept under the rug. The Nigerian response, in these instances, could hardly be compared to the United States response to British Petroleum’s oil spill in the Gulf of Mexico!

 

According to a Green Peace International article titled ‘Shell Shocked’: “We witnessed the slow poisoning of the waters of this country and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operations. But since the inception of the oil industry in Nigeria, more than twenty-five years ago, there has been no concerned and effective effort on the part of the government, let alone the oil operators, to control environmental problems associated with the industry.”

 

A 2010 Newsweek article entitled ‘Oil’s Shame in Africa’ further stated that: “Oil spills in Nigeria are a common occurrence; it has been estimated that between 9 million to 13 million barrels have been spilled since oil drilling started in 1958.”

 

Due to a lack of regulation and political patronage, more than 1000 people lose their lives to oil-related deaths in Nigeria every year, 70 per cent of that nation’s population live below the poverty line (less than $1 dollar per day), clean potable water is hardly accessible and—even whilst it is a major oil exporter having racked up more than $340 billion over the last few decades—Nigeria still imports most of its gasoline. Is it possible that we could be an oil producing nation that exports our crude but then—as is the case with salt—must buy back and import our own oil (in its now refined state)?

 

Considering the corruption, dodgy practices and dysfunction of some of our elected representatives and public officers, should we too be worried about gas price-fixing scams (which cost Nigeria $29 billion in the last 10 years), oil theft (which cost the Nigerian treasury $6 billion per year), fuel subsidy scams (which cost the Nigerians $6.8 billion) and an overall proclivity by some officials to “tief” and misuse public funds like it was going out of style (which has cost the Nigerian’s nearly $400 billion since their Independence in 1960)?

So, will the government allow BPC to drill willy-nilly and risk the destruction of our bread and butter industry (tourism)? Will they risk the contamination of our groundwater and our soil, of the destruction of our coastal environment, of our local fishing industry being ruined by oil spills and of oil sheen spreading to fishing habitats with the government still being handicapped in its capacity to even conduct clean-ups at Clifton Pier (from BEC’s spills)? And, what about gas flaring—which is the release of unusable or unwanted raw natural gas and associated gases—into the atmosphere? Look, if we’re going to drill, let’s do it the right way, let’s put any and all related legislation and regulations in place beforehand. The government must remember that we the people—and those who make up the government—all live in the Bahamas and, unlike some of the principals of BPC, have nowhere else to go and call “home” (in the truest sense of the word).

 

I urge the government to get on with the people’s business, to stop talking foolishness in our Parliament or resign and get the hell out!

 

...

 

May 06, 2013

 

Tribune 242

 

Bahamas Blog International