The danger of doing deals with governments
Perry Christie’s remarks on Friday regarding the Bahamas Telecommunications Company(BTC)deal were strong. He told supporters at a conclave at the Hilton Outten Conference Center that if elected, the next Progressive Liberal Party(PLP)government would redo the deal the Free National Movement(FNM)administration is negotiating with Cable and Wireless Communications(CWC).
“If the FNM administration proceeds against the advice of the PLP and sells to Cable and Wireless, we put Cable and Wireless on notice of our central position that the sale to Cable and Wireless is not in the national interest. And when we return to government, we will re-examine all of the provisions of the deal and we will aggressively renegotiate the terms of the agreement that we deem repugnant to the national interest,”said Christie.
This statement should scare CWC.
The last definitive barometer of public opinion in The Bahamas was the Elizabeth by-election in February 2010. The PLP won it by three votes. This would suggest that at that time–considering that Elizabeth is a swing seat–the electorate was still closely divided between the two major political parties.
The PLP feels justified threatening the CWC deal. After winning the May 2007 general election, the FNM administration cancelled contracts negotiated by the PLP when it was in government, including the straw market deal.
Governments have the responsibility to act in the best interest of the people they represent. If a new administration thinks a deal on the table is against the public interest, it should seek to change it or cancel it.
However, the government also has the legal responsibility to pay businesses what is owed due to breach of contract.
No national business can compete with the state when it comes to the power game.
The state has a department of lawyers, almost unlimited money through the Public Treasury and taxation and the capacity to make your life difficult, if not miserable.
In developing countries, these problems are magnified. Politicians in these countries often have less regard for the traditions and conventions of democracy, and more power is concentrated in their hands.
CWC is in a tough position. It is in the final stage of negotiating the acquisition of a major asset. At the same time, the opposition and alternative government has put it on notice that if it is elected, the deal it is about to sign with the current administration would not be honored.
This adds more uncertainty to the$210 million investment CWC is about to make.
If the PLP comes to office and breaks the deal, CWC could sue. Bahamian courts consistently demonstrate they are independent. The Supreme Court recently ruled against the government in the Blue Hill Road and Market Street road reversal dispute.
But such a battle would be long and expensive. It could also take the focus of CWC away from getting to know its new business and customers.
CWC is in a peculiar position. The unions representing the company’s soon-to-be workers dislike it. And now the opposition is threatening CWC with new terms.
CWC is an old organization with significant experience in the region. We wonder if its board is getting concerned about The Bahamas situation.