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The Bahamas has long sought to diversify its economy. It’s heavily dependent on tourism and financial services. Not to mention the U.S. economy.
The Sept. 11, 2001, terror attacks underscored The Bahamas’ economic vulnerability. The resulting plunge in tourism rattled its economic health.
However, not every Bahamian island is so vulnerable. In recent years, the fourth largest island in the Bahamian archipelago, Grand Bahama, has been leading the way toward an increasingly diversified and prosperous economy. It’s what some call a Caribbean version of a British-run Hong Kong.
Situated as close as 55 miles to southeastern Florida – and in the heart of international shipping lanes – Grand Bahama offers real estate bargains and lovely beaches, which are making it an increasingly popular destination for tourists and second home buyers.
The new government of Prime Minister Hubert Ingraham has pledged to give priority to revitalizing the sluggish tourism industry in Grand Bahama. But other sectors of the economy are prospering – namely, those that are tied to the global, not local, economy.
In increasing numbers, companies seeking to position themselves in the global economy are setting up operations in Freeport. A 230-square-mile free-trade zone, its biggest attraction is its deep-water container port adjoining a Sea Air Business Center in a duty-free area, and an international airport with an 11,000-foot runway.
All are privately owned by the Freeport Harbour Company, a joint venture of Hutchison Port Holdings and Grand Bahama Port Authority. The port authority operates Freeport’s free-trade zone. Hutchison is part of Hong Kong-based Hutchison Whampoa Limited, a leading port investor, developer, and operator.
By some estimates, the port and companies operating there, or in the duty-free Sea Air Business Center, support more than half of Grand Bahama’s economy.
Today, the port is one of the region’s busiest transshipment facilities, with Mediterranean Shipping Company S.A. (MSC) moving 99 percent of the containers going through Freeport. By some estimates, the port supports more than one half of Grand Bahamas’ economy.
And because this commerce is tied to a global economy, its revenues are unaffected by local economic shocks. These firms are tied to a global economy.
The billions of dollars of private investment that created the port’s infrastructure, and that attracted prime tenants there, was made possible by The Bahamas’ predisposition to use tax incentives and business-friendly policies to underwrite its critical infrastructure.
Regarding the advantages of operating in the port’s duty-free Sea Air Business Center, a port executive explained, “We have the port, airport, and container terminal connected to a global network of 45 ports, served by the second largest shipping line in the world; and it’s operated in a tax-free jurisdiction. So, we think this brings a big advantage to some people. You can do some manufacturing here if you like, value added processing, or just warehouse your goods here, even though they’re ultimately going to the United States.”
Last year, Associated Grocers of Florida was the first tenant to lease space in the Sea Air Business Center. Eventually, it plans to have an 800,000-square-foot warehouse.
“We can bring in anything we want to this sea-air business center here and then ship out to the U.S. or wherever we want to put it,” said Roy Deffler, president and CEO of Associated Grocers’ local company, International Distributors of Grand Bahama Limited.
Sixty years ago, Freeport had little population to speak of and little development. But its growth took off under a land grant signed in 1955 known as the Hawksbill Creek Agreement, which envisioned Freeport as a tax and duty-free development.
Specifically, the agreement is a contract between the government of The Bahamas and the Grand Bahama Port Authority, a private company founded by Virginia financier Wallace Groves.
Among other aspects of the agreement, personal real estate is tax free until 2015. That’s been a selling point on the island to increasing numbers of buyers of second homes which offer better value than homes in Florida, say realtors and homeowners.
Residential development aside, a number of business have set up operations in Grand Bahama, attracted to sits business-friendly polices and proximity to the U.S. and global shipping and air routes.
Among companies operating in Grand Bahama:
• PharmaChem Technologies, a privately owned pharmaceutical and chemical manufacturing facility in Freeport. Attracted to Freeport because of its business-friendly environment and access to international transportation, the firm produces critical ingredients in drugs sold at non-profit prices to treat HIV/AIDS patients worldwide.
• Grand Bahama Shipyard Ltd., a privately owned seven-year-old company. It repairs and services more cruise ships annually than any other company. It was attracted to Freeport because of its strategic location in the heart of international shipping lanes.
• Steel-HQ Bahamas Ltd., part of a Hong-Kong based company led by Daniel Gross, an American expatriate. In Freeport, he’s setting up a factory that produces pre-fabricated steel framing for housing projects across the United States, Caribbean, and South America. He was attracted to The Bahamas by its business-friendly environment and proximity to international shipping, which enable him to serve markets worldwide.
• Coral Windows Bahamas Limited, a Bahamian-owned Freeport firm producing hurricane-resistant windows for local and overseas markets.
• Quality Services Ltd., a Freeport firm founded by Italian expatriates, who had worked in Italy’s oil industry. Its engineers and contracts work on major industrial projects and have helped to change the face of Grand Bahama.
• Bradford Grand Bahama Ltd., a full-service yacht and ship repair facility in Freeport, is an extension of the company’s Ft. Lauderdale, Fla., operation. The Bahamas facility can accommodate large “mega” yachts that are too big for its Ft. Lauderdale facility. It also serves the growing needs of Floridians who are locating their vessels in Grand Bahama because of a lack of mooring space in Florida.
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