Recovery and relief – spot the difference
Has anyone noticed that no one to date has come forward with an economic recovery plan? Please note, we are not saying there have not been any efforts of relief at all, or that there is no attempt to mitigate the Covid-19 effects on the economy, but there is a huge difference between recovery and relief.
To be fair, last week Brian Duperreault's consultant, Tom Lawrence, offered that the single-family office idea on Caroline Bay, if revisited, can bring a boost to the economy, and John Huff, through the Association of Bermuda Insurers and Reinsurers, offers an incentive by forming a collaboration between international business and certain businesses.
Looking at both, as for Morgan's Point, agreeably it is a natural imperative that any construction that has the wherewithal to proceed should. Looking at that specific project from a numbers perspective, the amount of work left to be done will help with this fiscal year and 2021, providing some liquidity as funds from paycheques circulate throughout the economy.
The Abir effort is like putting rubbers on the handles to ease the pain of the crutch that helps an injured person to walk. However, in context, we need thousands of bodies generating healthy incomes; in fact, we need “hyper employment”. Both Morgan's Point and international business can stem the effects of Covid-19 on the economy and soften the blow, but cannot on their own provide the yield to turn the needle upward.
Morgan's Point comes closest, but the process, while absolutely necessary as an immediate injection for the short term, is a long-term strategy whose real value compounds over the years, therefore needing to be complemented by an even larger, more immediate project to carry the country over what will be inevitably at least a two to three-year slump in tourism.
We are already calculating a $180 million loss for the first half of the year from cruise cancellations, the finance minister has forecast a 10 per cent drop in gross domestic product, which is $300 million to 400 million conservatively but probably more. That being the first year, but what about year two then year three, which may be a slow recovery towards normal.
I forwarded a proposal years ago to build a commercial port township and industrial park with hotel and cruise terminal, which actually works synergistically with Morgan's Point and repositions Bermuda as a cruise destination with far more capacity and recaptures our maritime relevance in shipping.
The price tag was about $3 billion overall. That amount of money expressed over a four-year period at its most dense construction period is a whopping $700 million a year. Combine the payroll tax and import duties, then add hundreds of millions in spending throughout the community, the Government would collect enough to sustain its existing budget and pay down its debt. Bermuda society, in fact, would experience what can be considered an economic boon during this pandemic, rather than a depression.
The key is having the kind of project with high capital requirement that causes intense spending that is sustainable because of having the ability to earn enough to justify it. For example, a hotel could cost $300 million to 400 million and provide jobs, but the huge question will be, can it generate sufficient tourism to retire its cost? And then how long will it take? Rhetorical question, that, because the answer would be that it is unsustainable.
We can also do huge infrastructure investment and the same question would arise: how long would it take to financially justify and at what toll on the taxpayer? In short, we cannot arbitrarily create a project that has the scope to represent a stimulus. Nor can we hide the inevitable collapse of our economy by borrowing. Our present case may require expediency, but it must be a wise calculation.
In our jurisdiction in an era of “responsible” government, while everyone is truly party to where the economy goes, the “buck” constitutionally stops at the desk of the Minister of Finance. The now deceased Eugene Cox proved that point with the easing of the legislation for the sale of the Bank of Bermuda to HSBC. He did so without consultation with anyone, dare it be told; Bob Richards did similar with the airport.
Like it or not, the role of the Minister of Finance is not subordinate to the Premier regarding the economy. The Minister of Finance is responsible and fulfils the one area of government that does not fall under “collective responsibility” when it comes to the economy because his job is to see beyond everyone and to save the economy.
OK, the Premier can choose and appoint the Minister of Finance, but the role has a level of independence constitutionally.
The critics will say “your project can't work in Bermuda, it's going to be a white elephant”. My only answer is leave that analysis to the experts in the various fields. You have nothing to lose, you are not at risk. If a group is thoughtful enough to invest, what argument do you have against them?
I further ask why bury oneself under apprehension or cancel a thought before exploration?
Today, particularly with this economic threat, Bermuda in trying not to foster a white elephant can become itself that proverbial elephant. The truism goes: “We inherit what we fear”.
We do not have the luxury of time or options, otherwise those options would have already surfaced. It is a self-evident path that is laid before us. We need to turn tragedy into an opportunity to become greater and all it takes is will.
We either take the opportunity to save ourselves with a few people having some reservations and, hopefully, see a greater country four to five years later, or be guaranteed to fail as we are at present and be in an infinitely worse situation for sure.