For something that cost more that BD150 million, making a profit revenues of just over BD5 million in the 2nd year of operation, racking up a loss of BD49 million representing 65% of your paid up capital while giving away BD1.2 million in free tickets must have quite a few warning fog horns blaring. Is anyone listening though? I sure hope so….
And if they are, the first thing that should be done is fire the whole board of directors with the top management and replace them with 6th form kids as I’m sure they won’t be able to screw such an investment up so much and then claim that, hey, this is really a cultural institution and we don’t have to make money! For God’s sake, I think the hardly-visited National Museum probably makes more money that the illustrious Formula One Circuit, and that is a cultural institution!
Quite sad really, but I’ve seen it go down the pipes for more than a year now and I am not at all surprised by what the Transparency Report has found out so far, yet I’m sure that there are quite a few other bits and pieces still hidden even from their view. The report cited quite a few irregularities at the circuit (that even a cultural institution is required to avoid):
- Non compliance with bid tendering regulations and awarding bids directly or single-sourcing without proper justification,
- Holding far too much spares, some unaccounted properly,
- Giving away tickets worth BD 1.2 million,
- Improper, imprecise and irregular financial reporting procedures,
- Not collecting on sales worth BD2.8 million since 2005,
- No connection between the sales and accounting systems,
- No discount strategy, discounts are given haphazardly
And I’m sure many other aspects… here are a few that could be added or at least answered honestly if they could:
- Why is the circuit still renting large screens from a German company rather than buying these things outright?
- Why does the circuit not properly tender the rental of these screens in an open manner?
- Why does the circuit still does not have very much required experienced broadcast engineers and an experienced broadcast manager to take care of their huge broadcast investments, rather than depending on someone with just PR experience to manage the whole infrastructure?
- Why aren’t the broadcast equipment even put on maintenance contracts with their supplier in order to prolong their useful lives and protect the investment?
- Why did the circuit allegedly buy some 30 Holden cars through single sourcing the bid from a person whose company was bankrupt?
I can spill a lot more beans about the circuit and how badly it is run, but the above should suffice for now; let’s see how they try to justify their existence now.
Full disclosure: my company supplied a number of the circuit’s broadcasting capabilities in 2004.
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My advice is privatize.
But surely this is ignoring the great PR value of said track. It has ‘put Bahrain on the international map’ as one of the 18 or so countries in the world to stage a F1 Grand Prix. Not since the 1970’s when Concorde first flew it’s commercial flights to Bahrain has the country had such publicity. (tongue very firmly in cheek here).
Like the Burg Al Arab in Dubai looks unlikely to ever make a profit, BIC is a symbol of the country.
In all fairness, there is a great deal more going on at BIC than has been in past years, but I agree that it has to do much, much more if it is not going to be a phenomenal drain to the country.
As an aside, why has there never been a concert staged around the F1? Cos the management have been trying to get Mr. Whitakers’ previous employers KHP (a company owned by Ecclestone’s daughter, I’m lead to believe) to put in their own acts and keep it ‘in house’. This has led to absolutely zip being produced. This has not gone out to tender, and certainly hasn’t been offered to the one professional promoter, based in Bahrain, Mirage. Watch this space for further developments.
With regard to the freebie tickets. I believe this was an attempt to ‘paper the hall’ and make the F1 look as if it was a little bit popular in Bahrain. Ecclestone doesn’t care about ‘bums on seats’ since he makes his cut from the TV advertising. The track makes money from ticket sales, but it looks bad if the grandstands are virtually empty.
Problem, expensive tickets.
Solution, drop the bloody price so that people can afford them. Second solution, make sure the hotels don’t rip off the tourists by charging treble the normal room rate. As it stands at the moment, it’s cheaper to fly to Dubai, get a deal with a hotel and flights every day, come across and watch the race and fly back in the evening, spending no money in Bahrain, than it is to get ripped off by greedy hotels and killer taxi drivers masquerading as modern-day highwaymen.
I’ll get off my soapbox now. . .
I second Bugs’ comment!
Report BCHR realised tow years ago that made the government close the it. Those few lines copied from the same report might highlights why such projects in my opinion will not work.
Bahrain is proud of being one of most liberal countries in terms of its economy and in attracting foreign investments and of its tax-free society (no tax on income and sales); however, there are 23 types of high fees imposed by the Government on people in return of its services. Half of the Bahraini citizens are suffering from poverty and poor living standards. This figure was based on official statistics and studies on number of unemployed Bahrainis, beneficiaries of social aid who are unable to work, and employees with low income.Many people are unable to work and receive financial assistance from Ministry of Labour and charitable contribution from charity funds associations exceeds 20,000 families, which are around 80,000 . While, the poverty level (Poverty Income Threshold) for a household, according to official studies and statements in the nineties was,BD309 per month. According to official figure, quarter of employed Bahrainis live below the poverty level of BD309 per month. That brings the total of Bahrainis suffering from poverty and poor living conditions to around 200,000 people (half of total Bahrainis).A large portion of the society lacks decent housing. Whereas, around 44,000 families with a low income are waiting in the waiting list for Government subsidised housing for up to 12 years or more. The official statistics shows that there are 6,000 ruined houses and that there is a project for rebuilding or maintaining 45,000 houses but in a period of 8 years.The poverty rate is increasing in Bahrain .
http://www.bahrainrights.org/node/199
I fully agree the Circuit is a symbol of Bahrain, and the Crown Prince did a great job in bringing it to Bahrain (F1 and all that fun etc) … But its run by idiots… I mean seriously anyone with any relation to the BIC would see what I mean, and like Mahmood rightfully pointed out – it needs to be tightened up.. they should have clear internal procedures, and follow tender board regulations…. there is a basic management of finance/admin etc… Problem and whoever is responsible should be fired if they haven’t left already… they need to be tightened up .. or brought under the control of the Holding Company who can then find a way to privitize it …
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Anon, is Burj Al-Arab bleeding money? No, it cost a lot to build, Dubai might never recoup the money directly, but I bet that at least it is covering its running costs.
While the BIC looks like they made it their hobby to bleed money and are falling over themselves to overspend and under-perform. All that, with complete absence of proper reporting and over-sight structures.
No, if it carries on as it is without an intrinsic change in how it is run and with a near-complete change of crew to one that is competent enough to run it, I would rather gift it to Dubai and spend the money saved on developing Bahrain Fort, Khamis Mosque, the Saar dig, the Burial mounds and other historic sites. I bet they combined would outperform the BIC without too much of an effort, and those will inculcate the sense and feelings of national pride within us Bahrainis much more than the BIC has so far.
Having said all of that, there is a chance of rescuing the BIC and making it how it was in 2004. It just needs courage and a courageous leader to gut it, retool it and get it to go back to its core activities, rather than taking over buying and maintaining cars which it does not need to do. It needs to encourage local businesses, rather than go compete with them head-to-head as it has been doing over the last couple of years.
Based on the brief report of Al Waqt newspaper, it’s very clear that there’s a lot of corruption that’s going on in this company.
Some of the major points hilighted in this report are:
* There’s no system procedures in this company, what kind of company is that?
* The Board of Directors are not properly informed about the company. Financial reports are not prepared regularly. It’s like the owner of a company is not aware about what’s going on in his/her company!
Mahmood I don’t know where did you get that piece of information about the BD 5 millions profit. According to the report, the company has incured a loss of BD 49 millions by the end of 2005. In addition, a government grant of BD 40 millions was paid to it during that year. So making a profit of BD 5 millions is very much doubted.
I fully agree with Bugs’ comment too.
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misquoted there, I should have said “revenue” of BD5m in 2005 rather than “profit”. My mistake.
This is a very serious situation for a company whose capital was fully paid by the government (i.e there’re no loans or any financial commitments!)
First – The main problem for the BIC is that only two people have any F1 experience – the rest are just there because they think its cool. You;ve got to remeber, you’re not competing with Jo down the road, you’re competing with the best in Monaco, US, Australia etc.
Second – The BIC needs to be part of an integrated strategy – not just a standalone “ooo eeerrr, haven’t we done well???”
“[…] the first thing that should be done is fire the whole board of directors with the top management and replace them with 6th form kids as I’m sure they won’t be able to screw such an investment up so much and then claim that, hey, this is really a cultural institution and we don’t have to make money!”
I agree Mahmood that the board of directors and the top management should all be fired, and replaced by capable sophisticated businessmen. Also, I agree with the previous comments being, privatize the BIC!
a company in dubai (Union Properties) just two months ago got the rights to build F1 theme parks (a big park with rides hotels etc established next to the circuit)from bernie. they are building the first one in dubai to host the race there; i think bic should team up with this company and build a similair park here with restaurants and tons of activities for families to enjoy themselves.
http://www.formula1.com/news/5243.html
The big Q: is what Bahrain pepole get out of this F1?
If the government is pouring $40 million into BIC, where is it going ?
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That’s BD40m NOT $40.
There is no denying that the BIC is a cultural landmark of Bahrain right now.
It provides other means of entertainment besides mall hopping. Increases attention to sports and motor sports and yes, places our name on the map.
BUT, there are side-advanteges too, like when RUF decided to build cars here, they’d never concider that without a state of the art track.
Similarly, a tire company may join in and so on.
How many new jobs will be created directly by the companies or by supporting companies? Managers, Marketers, drivers, secrateries, mechanics, courier men, hotel occupation increases, taxi drivers flourish, banks roll more money.. you get it.
Still, Being a current Finance & HR Manager, Having a 2.8M outstanding in recievables since freaking 2005 is STOOPID. No, not stupid, thats proper spelling. Its more stupid than that. Its STOOPID.
The absence of procedures is even more STOOPID, because that means one of two things only and no third: A) They are ideots who just fumble in the dark
or B) One man is in control & he likes to change rules as he sees fit.
Choose which scenario you prefer: incompitence or conspirecy. Bottom line, the BIC is great, but needs to be attended to asap
Moment of sanity please.
The transparency report covers a specific period (end of 2005 I believe). There have been quite a few steps taken by the BIC board and management in the last 12 months to address many of the concerns raised in the report. So before any final judgement on the issue of the board’s and management’s competence, they should be given the chance to outline the steps that they have already taken, and the ones they plan to take.
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The board, I believe were in place for most of 2005, just after the race I think. They had ample time to address those shortcomings and, as the audit report surmised, nothing was effectively done in the last 8 months since they took over, other than get a handout of BD40 million by the government to tide them over.
Fine, we’ll give them the benefit of the doubt. To the tune of BD49 million even. But you must agree that something drastic went wrong, and something even more radical must be done to correct the situation.
In any case, I don’t think that the board and management is worthy of the task given, with all due respect to them.
Maybe they should consider a partnership with Dubai, that would bail them out and get Dubai to pay the remaining unpaid capital and take a percentage to correct things. This will
Brilliant idea Mahmood 🙂
Reminds me of poor farmers in India, skin to the bone in debts and still keeping cows he cannot feed (also skin to the bone) just to maintain his image and prestige of being a farmer.
What the BIC need is a whipping in shape cord. THE EDB needs to take charge and privatise it. Just like the ministry of works, agriculture, municipalities etc….
whats all the commotion here? Who are the shareholders of this company, and who’s bearing the brunt of the losses? If the government appropriated funds to build the BIC, then just consider it as a cost to promote bahrain’s tourism whenever a race is held. If this was a private company, then its the shareholders who need questions answered regarding any irregularities.
If the BIC was run as a corporation, then it sure has failed miserably, but if the BIC is run as a government entity, then its a cost that the government will have to take. Remember, no matter what happens, funds that are spent by the government belong to the government, and the same is applied regarding revenues (regardless if the source is from oil, taxation, or selling tickets from F1).
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Well… in that case, pay every employee there BD10,000 a month, give them more perks, 1st Class travel anywhere at any time regardless of purpose, get them to even drive their cars on the track at will and give them the appropriate cars to do so throughout the year, and when the F1 circus rolls into town apologise to them profusely for not being able to continue to enjoy their “rights” for 3 days and compensate them for the privilege and discomfort by giving them a 3 month bonus and while you’re at it, forget about accounting standards and management principals.
After all, those 3 days are extremely important for Bahrain’s international PR.