The Tribune

Governance reformers are arguing that FTX’s implosion further reinforces that there is “no silver bullet to solve our economic growth issues coming out of Dorian and COVID-19”.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that the crypto currency exchange’s spectacular collapse again showed the danger for The Bahamas in relying upon one major foreign investor to serve as “a game changer”.

Speaking before Sam Bankman-Fried, FTX’s embattled founder, waived his right to fight extradition to the US after a court hearing that some foreign media described as “a farce”, the ORG chief argued that this nation should have learnt that lesson when Baha Mar fell into Chapter 11 bankruptcy protection and subsequent Bahamian legal proceedings that delayed its completion and opening for some two years.

Mr Aubry also suggested to this newspaper that the laser-like focus successive administrations have placed on attracting multi-million foreign direct investment (FDI) projects has served to distract attention from building greater resilience in the domestic Bahamian economy, and enabling small businesses to scale up so they can become mid-sized and larger enterprises.

“I think it highlights a couple of things,” he explained of the FTX situation. “We’ve seen this before in The Bahamas, building out foreign direct investment as the next big thing. We’ve seen projects like Baha Mar have hiccups where entities do not manifest themselves exactly as intended, but the presentation the Government puts out; it puts more emphasis on whatever entities are coming in and bringing investment to move forward.

“The big lesson coming from this is there’s no silver bullet to solve our economic growth issues coming out of Dorian and COVID. We need to spend time building local economic development, building more resilience to external shocks, whether it’s things like this, COVID and hurricanes coming in here.

“We need to nurture scalable small businesses that move into medium-sized businesses, that move into larger businesses. It reinforces this need to have solid, diverse, inclusive economic growth. Our focus on one big project coming in and changing the game takes our focus off building slow and steady in other spaces.”

Arguing that the Government’s latest public procurement reforms, which are designed to create a fair, transparent and competitive tendering process for all public sector contracts and counter the decades-old system of political patronage, is one such area that requires sustained attention, Mr Aubry said initiatives that foster small and local business growth will better enable the economy to withstand FTX-style collapses.

“If a problem like FTX comes around, it doesn’t send such different types of shocks through the system,” he explained. “It’s not going to move our attention off building or with what’s happening with small local businesses.”

The ORG chief agreed with Prime Minister Philip Davis, in an assessment that was also backed by John Ray, FTX’s now-US chief who has chosen to frequently blast The Bahamas in public, that the crypto currency exchange’s implosion would have occurred wherever it was domiciled.

“This is something that could have happened in any jurisdiction,” Mr Aubry argued. “We are dealing with a new industry. It’s important to keep this in context. We’ve seen other large scale businesses go down through poor administration or lack of appropriate corporate governance structures. That’s not the Government’s responsibility to ensure an entity like that is going to be successful.

“It’s important to remember, first and foremost, that The Bahamas should never expect to live or die by one project or one entity like that. It does raise a number of things. From a regulatory standpoint specifically related to crypto, the industry as we look at it is this is new territory...

“If we are going to position ourselves to take advantage of it, we have to ensure that as entities come there’s a better sense of what things look like and what framework we need for the build-out of this industry. We now have a bit of real life experience in what can go wrong.”