Notes From The Margin

March 16, 2008

A Further Thought on Air One…. and other investments.

A further thought on the AirOne story…. The airone project represented a significant investment project that would have brought considerable jobs to Barbados (or Jamaica for that matter). Because of the upward movement of oil prices, that project won’t be happening now.  If you talk to people in the legal and financial fields there is a feeling of caution in the investment community. There are a number of projects that are still going ahead as their investors are committed, however there are some that have been put on pause as investors wait to see what will happen with the global economy.

If Airone has been put on hold, it does make u wonder what other projects are being put on pause? With Oil at $113 a barrel, it may be sometime before they get considered again.

Marginal

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February 27, 2008

Irish Airline Headquartering in Barbados?

 Mr. Leslie Buckley one of the main backers of the airline.

To follow on from our post Jamaica Drops The Ball – Irish Competition For LIAT – Coming Soon To Grantley Adams? We thought we’d provide some more background info that we were able to find online about the airline that might be headquartered in Barbados. The source of the story is an article in the Jamaica Gleaner. The excerpt below has been edited for conciseness.

Airone Ventures, has successfully raised US$30 million  so far from private investors to begin its operations.

It plans to operate a fleet of five new Boeing 737s in the first eight months, with the intention of expanding to eight aircraft in two years.

Airone has tapped Digicel for assistance, saying that it would be relying on the savvy mobile phone company for sales support.

The airline principals envisage Airone becoming the largest regional carrier under plans to to add routes to the wider Caribbean and Central American markets.

The company says it will be positioning itself as a low-cost carrier.

“We are here to establish a headquarters and a home from which we will grow to over 25 planes spread over 7 bases within the Caribbean and the Americas,” the company said in its business plan.

BJM Nominees and Buckley have been named as the main shareholders of the company, with the remaining 22 per cent being made up of promoters and cash investors.

This new entity, which is comprised of interests with expertise in finance, telecommunications and aviation, plans to break into the Jamaican market as a Low Cost Carrier (LCC) with the ethnic Diaspora and cost conscious tourists as its main target.

Airone is promising fares priced as low as 80 per cent below current fares offered by airlines flying to Jamaica and other Caribbean destinations.

The principals in their pitch for CAA approval, argued that the establishment of Airone in Jamaica would not only provide low cost travel to residents and foreigners alike, but it would also generate some 220 new skilled jobs in the first year of operation with 90 per cent of those positions to be filled locally.

It estimates that its operations would contribute 2.0 per cent to the country’s Gross Domestic Product, and contribute a minimum of US$65 million in taxes to the Government, excluding those to be had from new employment and third party service providers.

Airone Ventures has set May 2008 to commence flights.

Irish Private Equity firm Quantum Investment Capital has also been publicly identified as an investor in the airline.

AirOne Ventures application for a license was denied by the CAA of Jamaica, the company had indicated that it would try it’s luck in Barbados (since then the company has been recruiting staff for a Barbados base of operations).

Marginal

February 26, 2008

Jamaica Drops The Ball – Irish Competition For LIAT – Coming Soon To Grantley Adams?

Back in July of 2007 we ran a post “Irish Competition For LIAT?” based on a very short column that appeared in the Irish press, since then we hadn’t thought much about it. We only connected the dots with the saga of the Low Cost Carrier AirOne quite recently. The AirOne story bumped along at the edge of our radar until this afternoon when we were investigating an unusual spike in interest in the above story.

The AirOne story begins back at the beginning of December last year in a Jamaica Gleaner story:

First low-cost Caribbean airline to be launched in Jamaica

A group of entrepreneurs has applied to the Jamaican government to create the first Caribbean low-cost airline. Group head representative Ian Burns said: “We have made a formal application to the Jamaican Civil Aviation Authority under the name of Airone Ventures Ltd, although this isn’t the name that we will be flying under. We have the potential to add one million tourist arrivals to Jamaica within five years, a huge boost to the tourism industry.” The airline will also seek to open new markets and new routes. It will service the Caribbean, the United States and Latin America.

737-300 Aircraft Similar To What is Mentioned In Article

…. Speaking with Caribbean Business Report last night, Burns said: “We will be providing non-stop airlinks to the Caribbean, the United States and Latin America and will be using Boeing 737-300 aircraft. The idea is to develop Kingston’s Norman Manley International Airport as an international hub for the Caribbean.

 

Sounds like great news for the Jamaican government to us doesn’t it? We could hardly believe what we found next in the Jamaican Gleaner

 

Low-cost air carrier denied J’can licence

Irish firm told to wait as Air J divestment a priority

The Government has, for the time being, rejected Caribbean low-cost carrier Airone’s formal application to the Civil Aviation Authority for a licence to operate in Jamaica.

…However, last Thursday, the minister without portfolio in the Ministry of Finance, Don Wehby, and a team of Government officials took the decision not to grant the new airline a licence now, essentially because the Government is in the process of divesting the loss-making Air Jamaica and it was felt that a decision to grant another carrier a licence at this time would adversely effect the divestment of the national carrier.

“We met with representatives of Airone last week and we regrettably were unable to grant the carrier a licence at this point in time,” Wehby told the Sunday Observer last night. “The divestment of Air Jamaica is our foremost priority, and the Government feels that it would not put it in a good light if it were to grant a carrier a licence to compete directly with Air Jamaica. In fact, to grant a licence at this time will not add value to Air Jamaica, and we would be seen as not negotiating in good faith. Our decision does not constitute an outright rejection of Airone. It is just a question of timing.”

 

Understandably the investors are pissed. However the great thing about airplanes is that they can move, so what happens next?

 

Last night, Buckley, one of Airone’s lead principals, told the Sunday Observer from Hong Kong, “We want to offer Caribbean people a low-cost carrier that will service the tourism industry and the Diaspora.

We want to grow new routes and help tourism thrive. There must be a way in which we can all survive together – that is, Air Jamaica remains the national carrier and goes from strength to strength and we are granted a licence. If we are unsuccessful in Jamaica we will set up operations in Barbados. If Air Jamaica is not divested in 12 months’ time, then Jamaica would have missed out on having an affordable, reliable carrier that would have been a boon to the tourism industry and Jamaicans living around the world.”

 

Now note the time frames here, NFTM reported what at that point was little more than a rumour about 6 months before AirOne was applying for a license. It is obvious that these investors are not letting the grass grow under their feet on this. A little more digging on our part revealed the following page on the website www.caribbeanjobs.com. We can only assume that the license has been granted.

As the first Caribbean Low Fares airline, Airone plans to become the largest airline in the region developing bases by combining bold deal making along with the quick rollout of new exciting routes from our base in Barbados. (our emphasis)

Using efficient aircraft and dedicated staff, Airone will provide unbeatable low fares, superior reliability, innovative products and services and a better choice of non-stop routes. We strive to continuously reduce costs in order to continually drive down the price of our low fares for our customers.

Airone is currently building its workforce and will employ over 200 people over the coming months. We are looking for bright, dynamic and energetic individuals with the ability to work in a flexible and fast paced environment. We have many opportunities for a wide variety of areas in this exciting new low fares airline!

Accompanying the post are vacancies for a number of management positions with the new airline.

As it happens the AirOne application would have come at a time where there was growing dissatisfaction with the current aviation agreements in Barbados. LIAT is the Worlds Most Expensive Low Cost Carrier, and BWIA/Caribbean Airlines unceremoniously pulled up stakes last year and removed a significant portion of the island’s airlift. Our sources in the aviation sector tell us that although Barbados is further away from the North American market than Jamaica, it is actually better suited geographically as a hub as it is very centrally located between Europe, South America, North America, Africa and the Eastern Caribbean. They also tell us that Grantley Adams has recently expanded it’s parking apron to facilitate the Cruise Ship passengers and hence capacity at the airport is not a problem.

Now Jamaica can hardly accuse Barbados of “stealing” this investor who went first to the Jamaican government to be turned down cold. However in this case it would appear that Jamaica’s loss is Barbados’ gain.

We on the margin will continue to follow this story.

Marginal

February 25, 2008

Do We Need A Caribbean FBI?

Faced with rising crime rates, Caribbean governments have struggled to keep pace. However at a time of challenging economic conditions and soaring levels of indebtedness, many Caribbean police forces are overwhelmed, underpaid, and under-equipped. This is particularly the case in the smaller economies of the OECS (you will note that I did not say “smaller islands”) The Caribbean with it’s inadquately equipped security forces, and many islands with inlets and coves make the chain attractive as a route for drug traffickers to move narcotics to the metropolitan markets.

The wealthier economies in the region have attempted to strengthen their security apparatus however, they are often faced with criminals who have more sophisticated equipment than they do.  The problem is compounded by the lack of financial assistance for security ( a mindset that is slowly changing).

It is against this background that Trinidad Prime Minister Patrick Manning recently proposed the development of a Pan Caribbean law enforcement agency.

Patrick Manning said a well-trained, equipped regional force with the power to legally operate in any CARICOM country would be part of the answer to combating the crime situation – one which he insists is being driven by the illegal drug trade.

“Many of us in the Caribbean today are challenged by the unacceptable levels of criminal activity in our country, most of which are now spurred by the global traffic in illegal drugs. The trade in illegal arms and gang warfare lead to an unacceptable level of homicide in our main urban centres,” he said, while delivering the keynote address at the recent University of the West Indies (UWI) Mona Campus Commemoration Dinner in Jamaica….

…..Mr Manning said his country had sought to stem the flow of illegal drugs and arms into the country through initiatives which he believes will eventually rid the country of the drug trade, such as round the clock surveillance of the twin island republic’s largely unprotected coastline. But he also noted that the pattern in the past demonstrated that when the operations of drug lords are interrupted in one country they move to another.

“(That) pattern emphasises the need for multilateral efforts among ourselves and with the wider world. Failure to effectively deal with the issue of crime could stymie the economic and social development of the Caribbean,” he said.

Mr Manning further urged CARICOM heads to spearhead the process of greater cooperation in the sharing of intelligence among police forces to head off migratory drug smugglers.

In theory this sounds like a great idea, and we on the margin support it generally. However would such a “federal” force be allowed to operate? To often in the Caribbean there are rumours (and we  aren’t prepared to say they are only rumours) of “certain people” in certain countries being untouchable, would a CFBI be allowed to go after them?If they were it would open an interesting can of worms.

Would the criminals arrested by this federal force be prosecuted in local or regional courts? For example we have many cases of witnesses in Trinidad being murdered before they can testify, we also have rumours of corrupt judiciaries in some countries, would people arrested by the “Federales” have a likely chance of getting convicted in a local court?

When you look at the implications of a Caribbean Law Enforcement agency, it’s not as simple as it might appear at first blush. For it to be really effective it would have to be part of a Pan Caribbean judicial system.

Marginal

February 11, 2008

What will the cultural academics say about Rihanna when the history of this time is written?

Well it’s old news by now that Rihanna has won her first Grammy. We on the margin are thrilled for her and once again renew our call for some form of national recognition for the songstress. Congratulations to her once more for her achievement.

But we got to thinking about the long term for Ms. Fenty… and we asked ourselves the question:

What will the Bajan cultural academics say about Rihanna when the history of this time is written?

Those slobs like us on the Margin think its great that someone from “bout here” could attain so much in such a short space of time at such a young age. But I can hear the linguistic gymnastics going on already in some quarters….

What does it say about the Barbados “music industry” if the most successful performer to emerge from the island simply bypassed the entire industry? We’ve heard at least one comment that she never sang in the “teen talent contest” We can hear lots of lip service from all and sundry about the development of a “music industry” but really how many international artists has it produced? It’s enough to make one question the relevance of the local scene.

There are many “managers” out there who say they manage artists, but some of them have been doing it for years and haven’t had the success that Rihanna has achieved in a relatively short space of time. It does beg the question… what are they doing wrong?

Let’s face it Rihanna’s music is pop music, written for a global audience, what does it say about the people who have spent years trying to find “the next reggae” (we won’t even talk about the “bring back spouge” crowd) What are the cultural implications of that? I’m sure some academic somewhere is tearing his hair out looking for some sort of “cultural linkage” to hang a paper on.

And while we are at it, the academics are quick to talk about “a strong cultural identity” being important for success (and yes Bob Marley is trotted out to support this) But here we have an artist, who speaks with a Bajan accent, and pays homage to her homeland at every opportunity but is clearly now a citizen of the world. Next to her many of the local artists look…. well…. “local”.

We’re not decrying the local music industry, but there are loads of “armchair experts” who are quick to talk about what should be done and what Rihanna should do. “We don’t want a Sony or EMI taking our artists” we heard one say on the radio today. There are only so many labels with the power to create a superstar. Even Prince ended up re signing with Universal after trying to go it alone. Rather than trying to create an entirely new music industry, perhaps we would get further if we worked on linking local talent to the international industry.

Just a thought….

Marginal

January 29, 2008

The State Of Shipping In The Caribbean

We on the margin have for a long time been supporters of the idea of ferries in the Caribbean. In our view one of the most serious barriers to regional integration and the creation of a single market and economy, is the sheer difficulty faced by an individual attempting to move around the Caribbean. Moving people and goods from island to island is hugely difficult, and that has several knock on effects in the economies of the region.

In Europe it is possible to drive on to a ferry in Scotland and be in Ireland a couple of hours later driving YOUR car on Irish roads, all for the price of a ferry fare. It is possible to ship container loads of merchandise/products/food/whatever on the same ferry without even taking them off of the truck! When you contrast this ease of movement with the situation in the Caribbean it’s pathetic.

Move a car? Sorry you only have one seat on LIAT (world’s most expensive low cost carrier) and 50lbs of baggage, and when we get to our destination we are greeted by Immigration officers and Customs Officer who seem to have difficulty with the concept of people wanting to travel to another island. There was a brief moment of hope during the Cricket World Cup when we had the single space, but that seems to have separated back into the default position of fragmentation.

President of the CDB Prof. Compton Bourne, touched on these issues recently in a speech where he highlighted the difficulty in moving goods from areas with excess productive capacity to areas with demand for those goods.

“There are countries in the region that have considerable food production capacity, but their arrangements for trade in the region are far
from adequate.”

This made it very difficult to supply the markets that are experiencing shortages or to provide a cheaper source of commodities to those markets with the existing arrangements, he argued.

“First of all, shipping is very poor within the region,” he charged. “Our shipping arrangements are largely geared towards bringing commodities from outside the region to the region, rather than moving commodities between the various islands and countries in the Caribbean.

“Secondly, our port facilities in the main for CARICOM trade are atrocious, often under-staffed, often not provided with the requisite phyto-sanitary inspection facilities and sometimes characterised
by a bit of hostility towards the trade. . . .”

For the single market and economy to become a reality, there needs to be ease of trade, and ease of travel, at the moment it is easier to get items out of a furniture store in Miami than it is to get it from a furniture manufacturer in Guyana. To speak of a single economic space is a farce unless this situation is rectified.

Marginal

December 11, 2007

BNOC GM Points Out The Obvious – Petro Caribe Is A Debt Trap!

We are applauding a statement by the current General Manager of the Barbados National Petroleum Company on the “gift with strings” that is Petro Caribe.

 Ron Hewitt, Barbados National Oil Company General Manager said on Monday, that Chavez’s Petrocaribe is not helping Caribbean countries, but making their finances worst. ” Petrocaribe is not helping at all to coup with the high oil prices, Caribbean countries are just running a large debt with Venezuela. “

 

Petrocaribe is just a scheme to create an oil dependency from Venezuela, added Hewitt at the two-day Caribbean Energy conference at the Hilton Trinidad in Port Spain.

 

“It doesn’t’t represent what we are looking for in Barbados. You have to pay part of the cost now and get a credit. That credit then goes onto your national debt. It’s not an asset….” Hewitt said.

 It is scary that the other Caribbean countries could not see this from the outset.  What is remarkable is that Barbados has been pilloried in all sorts of regional fora for not signing on. The truth of the matter is that Petro Caribe does NOT help the Caribbean, it is NOT in the Caribbean’s best interest. It simply gives Venezuela power over a key sector of our economies and increases our debt. Further the condition of accessing the “concessions” mean that Venezuela will have power over the supply chain so that it will be difficult for those in the Net to escape it.

Marginal

October 9, 2007

More Sage Advice From The IMF – “Cut Your Tax Incentives!”

We had a bit of a laugh in hearing the most recent advice from the IMF, in their latest Public Information Notice the IMF covers a seminar that was held t0 address selected cross border issues affecting the Caribbean and the three issues selected are financial integration, tax incentives and investment, and trade preference erosion.

On two of the three issues the IMF’s position isn’t that bad.

On Financial Integration:

 

... Directors considered that closer integration of the Caribbean’s still largely segmented financial markets can be expected to help generate higher economic growth by improving access to credit and lowering interest rate spreads. However, more integrated financial markets will also allow shocks to spread across borders more rapidly and pose greater regulatory challenges, especially with large financial conglomerates operating across different industry segments and in several countries.

 

On Trade Preference Erosion:

 

Directors recognized that the erosion of preferential access to European markets for bananas and sugar entails significant losses for several Caribbean countries….

… the strategy to address this difficult challenge will need to involve carefully targeted social safety nets to alleviate the impact on affected vulnerable groups; efforts to raise the efficiency of existing banana and sugar industries, where viable; and transition away to new economic activities, in countries where production is unlikely to be competitive even after significant efforts and investments.

Now we come to the fly in this ointment…..

Directors noted that, while the Caribbean countries’ heavy reliance on tax incentives may help attract investors, they are costly in terms of foregone revenues…..

… In light of this, and recognizing the intense competition for global investment funds which the region faces, Directors encouraged Caribbean policy-makers to weigh carefully the costs and benefits of tax exemptions and consider reducing them if possible; to step up efforts to improve other determinants of investment; and to make remaining tax incentives more cost-effective.

So if I’ve got this right, the incentive to get the revenue is costing you too much revenue, so you should cut the incentive to reduce your losses. But….. if you cut the incentive you may not get the revenue so you will end up foregoing even more revenue.

Hmmm so after some thinking we in the margin came up with this economic theory.

“While tax incentives may be expensive and may have costs associated with foregone revenue, not having the incentives is even more expensive” In short it’s better to have 75% of something rather than 100% of nothing. (And we aren’t even trained economists!)

This advice comes from the same people who managed the Jamaica’s and Guyana’s structural adjustment programs!

Marginal

 

September 11, 2007

Super Ferry!

Saw this interesting article on STV this week on National Geographic with regard to the construction of the “Hawaii Super Ferry”, it turns out that the new ferry is the first high speed ferry service to operate in the Hawaiian Islands.

Hawaii Superferry plans to use Austal fast ferry technology to establish Hawaii’s first high-speed vehicle-passenger service. Each catamaran can carry 866 passengers and up to 282 cars (or a combination of 28 twelve metre trucks and 65 cars) and provide services connecting Honolulu to Maui and Kauai in three hours and from Honolulu to the Big Island in approximately four hours. The second ferry will begin service in early 2009. With the entry into service of the second ferry, two round trips per day between Maui and Oahu and one round trip per day between Kauai and Oahu and the Island of Hawaii and Oahu will be offered.

With a draft of 3.6 metres (11’8”) and a beam of 24 metres (78’), the ferry will commute between the Hawaiian Islands at speeds up to 40 knots. The vessel is four decks high, including two decks for the car and truck loading, one deck for passengers and the bridge deck reserved for the pilot and his crew. The 2nd deck or mezzanine deck is 2/3 hoistable in order to facilitate parking for lighter cars and leave maximum parking space for the larger trucks.

The Upper Deck or passenger deck includes many premiere amenities for 866 passengers of all ages besides comfortable seating. This deck includes a bar and lounge on each end, food counter, gift shop, video game room, children’s play area, restrooms, crew mess, purser’s office, and first aid room.

At 40 knots the ferry would be able to make the 100 mile Barbados to St. Vincent Run in just under two and a half hours. When you consider the total time of travel with LIAT (not counting delays) the ferry begins to look attractive. Also the shipping of cargo between the islands would also be revolutionised. Currently several of the islands fly produce to Barbados for onward shipment to the UK in the belly cargo of the transatlantic wide bodies. A major constraint on those industries is the carrying capacity of a Dash 8, which is currently the only effective way of moving between the islands. A high speed ferry could open new opportunities for these segments of the OECS economies.

 

The only question we are left to ask is how much longer will we have to wait for this service?

 

Marginal

September 4, 2007

The True Test of Democracy – The Loser Accepts Defeat

Filed under: blogging,Caribbean,Caricom,Jamaica,law,politicians — notesfromthemargin @ 4:06 pm

The results of the election in Jamaica are in, and the result is close.  31 to 29 in favour of the JLP (former opposition) Portia Simpson Miller has refused to concede defeat so plunging the island into a highly uncertain situation.

 Jamaica was on Monday night plunged into a state of political uncertainty after the Jamaica Labour Party scraped to victory by the narrowest of margins.
The People’s National Party has refused to concede defeat after it slumped to a two seat loss.

It is reported that at least one noted legal luminary is saying there is no constitutional crisis as there is a majority for the Governor General to work with to form a new Government.

While legally there may be no constitutional crisis, in a country that is famous for electoral violence, Mrs. Simpson Miller’s refusal to concede could have the potential to lead to civil instability in Jamaica. The challenges for Bruce Golding to implement his programme in the face of an intransigent loser would be enormous (particularly with a 2 seat majority, which must also supply the house speaker).  We hope that for the good of all that cool heads will prevail.

 As we have seen time and time again (most times positively in the Caribbean) the true test of democracy is not when the people vote, but when all sides (especially the loser) accepts the outcome of the election as being representative of the will of the people. We hope that for the sake of Jamaica Mrs. Simpson Millar will act acordingly.

 Marginal

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