The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE PRIME Minister yesterday hit back at critics of the Government’s efforts to expand price controls by accusing them of participating in “anti-competitive practices” that hurt Bahamian consumers.

Philip Davis KC, unveiling the mid-year Budget in the House of Assembly, did not identify by name who he was talking about when he asserted that the most vociferous price control critics are involved in “monopolies, duopolies and oligopolies” that benefit their interests rather than that of the Bahamian public.

While acknowledging that price controls are unnecessary in “a perfect market”, he argued that The Bahamas was far from achieving such status and pledged that the Government “will not flinch or shirk our responsibilities” to protect consumers.

“This government came under sustained and unwarranted criticism for our efforts to assist and protect consumers through the expansion of items under price control. We acknowledge that, in a perfect market, price controls are unnecessary,” Mr Davis told the House of Assembly.

“But The Bahamas is not a perfect market. Many of those who shout loudly about the virtues of the free market themselves participate in monopolies, duopolies, oligopolies and other non-competitive practices. In all areas, the Government has a critical role to play in protecting consumers from market abuse. We will not flinch or shirk our responsibilities.”

It was unclear who the Prime Minister was targeting with his comments, but they appeared directed in particular at the food distribution industry - retailers and wholesalers - given the concerns and push back voiced over the Davis administration’s plans to implement a major price control regime expansion last October without any prior consultation with the sector.

Given The Bahamas’ relatively small consumer market, estimated around 400,000 persons, some industries can only sustain a small number of operators. The food distribution business, especially on the retail side, does not appear to fall into the “monopolies, duopolies, oligopolies” category given that there are numerous small players which compete with larger operators such as Super Value and AML Foods. Competition also exists on the wholesale side.

And the nature of the Prime Minister’s comments also indicate that The Bahamas needs a competition regulator rather than a price control watchdog. Food merchants and their wholesale suppliers last year warned that the 38 selected categories for expanded price controls included more than 5,000 product line items, and would lead to between 40-60 percent of a retailer’s inventory becoming price controlled with mark-ups below their cost of sales.

This would result in a large portion, or the majority, of their inventory being sold at a loss. Besides threatening hundreds of industry jobs, and the very survival of many operators, the Retail Grocers Association and its members also warned that the original proposal could result in food shortages as retailers/wholesalers decline to stock loss-making items while also increasing prices on non-controlled items, thereby further fuelling the cost of living crisis.

Price controls have always been a controversial instrument among the private sector - especially those companies and businesses impacted by them. They were imposed by the Government decades ago to prevent what it viewed as an unscrupulous merchant class from exploiting lower income Bahamians by unreasonably hiking the price of food staples and other essential products, thus placing them out of reach while undermining living standards.

However, opponents argue they are an anachronism that have no place in a modern 21st century economy. The private sector views price controls as an inefficient, distortionary mechanism that creates more unintended consequences than the supposed problems they solve. They can result in product shortages, while retailers and wholesalers have to increase prices and margins on non-price controlled items to compensate for selling these goods as effective “loss leaders”.

Mr Davis, meanwhile, yesterday touted his administration’s increased investments in consumer protection. “We have added more staff, we have upgraded the office accommodation of the price inspectorate and consumer protection staff and, more importantly, we have invested in technology.

“This means that, for the first time, price inspectors will be able to do digital inspections, and merchants will be able to make digital requests for adjustment in prices. This will not only improve price transparency, but also result in lower costs for merchants by reducing the time between ‘importation’ and ‘approval-to-sell’ a price-controlled product.”

Elsewhere, the Prime Minister pledged to make it easier for Bahamian taxpayers to fulfill their obligations to the Public Treasury. “I would prefer my actions to speak for themselves,” he said. “We believe it is important to make it easier for taxpayers to comply with their obligations. Unlike a previous minister of finance, I am not going to brag about my power to take criminal action against those who cheat the exchequer.....

“We have to offer a better service to taxpayers. In this regard, we are launching initiatives for all types of taxpayers: Large, medium, small and micro. While it makes sense to allocate resources to initiatives which yield the highest return, all taxpayers deserve to be treated in an equitable way, and within defined timelines.

“Our overriding philosophy is that taxpayers respond better to positive reinforcement, rather than negative harassment. The Bahamian people fully understand that if we are to continue to build and improve our infrastructure, and provide the many services that citizens expect in the 21st century, then the running of the country needs to be funded through taxation. And while nobody enjoys paying tax, most accept the need to do so. We think that our job is to make that as simple, and as easy, and as affordable as possible.”

Mr Davis argued that the Government’s decision to better engage with lenders, bondholders and creditors, and to better explain its economic and fiscal plans, was paying dividends as The Bahamas’ sovereign bonds were rated among the best performers in the Latin American and Caribbean region in 2022.

“This accomplishment required not just a sound fiscal plan but a willingness to meet, and engage, in active dialogue with banks, investors, and ratings agencies,” he added. “The minister of economic affairs (Michael Halkitis) has met virtually, or in-person, with hundreds of investors, talking in detail about our plans, and providing an unprecedented level of access to the Government.”