Mediterranean Shipping Company (MSC), the world's second largest shipping firm, has offered to finance the construction of the proposed port at Arawak Cay, The Tribune can reveal, a development that has unsettled other Bahamas-based shippers.

MSC's offer to underwrite the construction and development costs for the Arawak Cay port, the site that appears to have been identified as the preferred relocation destination for downtown Bay Street's commercial shipping facilities, has been made to the Government.However, the Ingraham administration has not decided yet whether to accept the financing offer, it is understood. Firm details of MSC's proposal have not been disclosed.

Multiple private sector sources, who all requested anonymity, confirmed to The Tribune on Friday that MSC's offer to finance the Arawak Cay port's construction had been revived. It comes just after the Government approved MSC to ship goods directly to Nassau from Freeport. This will allow the company to eliminate the costly process where all Nassau-bound goods that were landed at the Freeport Container Port (FCP) then had to be shipped out to Port Everglades, before MSC could then ship them to Nassau.

One source familiar with MSC's offer said that it was part of a wider package first presented to Dion Foulkes, the minister responsible for maritime affairs, late last year. "They were offering to dredge the [Nassau] harbour to accommodate the larger cruise ships, because they themselves are in the cruise business," the source said of MSC's proposal.

"They were offering to develop and construct the Arawak Cay port, underwriting the financing. Arawak Cay would not be for their exclusive use; everyone would use it. They [MSC] had done a feasibility study on it. "They were also offering to set up and construct a Maritime College, and deploy Bahamian graduates in their global network."

Earl Deveaux, minister of works and transport, told The Tribune he did not know whether MSC had made a financing offer to the Government, adding that the issue would be dealt with by the Prime Minister's Office if such a proposal was on the table. David Davis, director of investments in the Prime Minister's Office, did not return several telephone messages left by The Tribune seeking comment.

Dr Deveaux though, confirmed that MSC had been in discussions with himself and the Ministry of Works to obtain information on the proposed Nassau harbour dredging. The Government is planning to complete the dredging this year, so that Nassau can accommodate the largest cruise vessels — the Freedom class — from 2009 onwards. "We spoke with representatives of MSC, and they asked us to provide particulars to them with respect for our schedule for dredging the harbour," Dr Deveaux said.

It is unclear whether MSC has offered to finance 100 per cent of the Arawak Cay costs, but any proposal involving substantial amounts of capital is likely to receive serious consideration from the Government. Private sector financing, especially an arrangement where the need for an equity contribution by the Government is minimized or eliminated, is likely to find favour with the Ingraham administration given this nation's level of national debt. It would free up public funds for other infrastructure projects.

Yet the MSC offer has caused disquiet among rival Bahamas-based shipping companies, The Tribune has been told. They fear that if it is accepted by the Government, MSC will have too much power and influence in the Bahamas, which could be used to squeeze their businesses.

MSC is Hutchison Whampoa's partner in the Freeport Container Port (FCP). While it is a minority partner, it still holds a substantial stake in the FCP, and its competitors are understood to be concerned that if its offer to finance the Arawak Cay port is accepted, it will effectively have great control and influence over the Bahamas' two key ports — Nassau and Freeport.

While none of the other shipping companies, such as-Tropical Shipping, Seaboard Marine, Pioneer Shipping and Betty K Agencies, returned The Tribune's call seeking comment, it is understood they fear that if MSC is granted a substantial ownership interest in the proposed port, it could use this position to squeeze them on lease rates, not to mention dockage and wharfage fees, enhancing its own competitive advantage.

On paper, though, it is unlikely that the Government would give MSC majority ownership of the potential Arawak Cay port facilities, although the company is likely to want some sort of equity interest if its offer is accepted. Therefore, the ownership structure for the proposed Arawak Cay shipping facilities, regardless of whether they are the long-term or "intermediate" solution, will be key to how MSC's role is perceived going forward.

The consultants' report on the southwestern New Providence port proposed by the former PLP administration, a plan that now appears to have been abandoned in favour of Arawak Cay, recommended that its ownership structure be one that allowed the various operators using it to compete freely.

Some quarters are understood to view the Arawak Cay financing offer as a 'quid pro quo', with MSC returning a favour to the Government as a 'thank you' for allowing the company to ship directly from Freeport to Nassau. Yet the only real opposition to MSC's newly-won ability to ship direct is likely to come from its shipping company competitors. Shipping direct to Nassau could enable the company to decrease shipping rates by bringing in larger cargo volumes to New Providence, while also reducing its costs.

The prospect of lower shipping rates, in turn, holds out the possibility that businesses may be able to pass these on to Bahamian consumers in the form of lower prices. This would be especially welcome at a time when inflation and the cost of living in the Bahamas are under sustained assault from a combination of high global oil and food prices.

Several Bahamian businessmen have also privately told The Tribune that they welcome MSC being able to ship direct to Nassau, as the increased competition may shake-up the tightly-knit shipping industry, driving rates down across the board. If that was to happen, both Bahamian businesses and consumers would win.

Source: The Tribune