The Tribune

By NEIL HARTNELL

Tribune Business Editor

DESPITE the Bahamas seeing a 45 per cent increase in foreign direct investment (FDI) to $840 million during the first nine months of 2011, a senior private sector official yesterday said this nation needed to divert more capital into industries long "devoid of any focus".

While acknowledging that the FDI increase, identified in a newly-released report by the United Nations' (UN) Economic Commission for Latin America and the Caribbean (ECLAC) provided a certain "comfort" level, Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC), said the Bahamas "cannot rest on our laurels".

The ECLAC report noted that the $2.6 billion Baha Mar project was almost entirely responsible for the Bahamas' FDI increase, and Mr Rolle told Tribune Business he and the BCCEC were looking to create "business partnerships in other industries" to more evenly distribute capital inflows into this nation.

These partnerships, he explained, would aim to leverage Bahamian expertise and talents by partnering with foreign investors outside the 'twin pillars' of tourism and financial services, which had traditionally attracted the bulk of FDI.

The ECLAC report on FDI inflows into Latin America and the Caribbean, published yesterday, said the Bahamas had outperformed many other Caribbean nations on this score in 2011.

It said: "FDI in the Bahamas increased considerably to $840 million in the first nine months of 2011, equivalent to 45 per cent more than in 2010.

"This was largely the result of the Baha Mar major tourism project. The other Caribbean economies for which data are available posted more moderate growth in FDI or even a reduction."

The ECLAC report noted that the Bahamas' 'twin' economic pillars, tourism and financial services, had "borne the brunt" of the 2008-2010 global recession. While prior year comparisons were difficult, given that the Bahamas' 2011 figure was for nine months as opposed to the full year, the $840 million figure was well ahead of the $383 million annual average recorded for 2000-2005.

It also matched the $843 million FDI inflows the Bahamas attracted for the 2006 full year, and beat the $753 million generated in 2009. And 2011's FDI growth rate was also set to push it above 2010's $960 million for the full year, nudging closer to the $1.032 billion inflows attracted in 2008.

Acknowledging that Baha Mar was the main driver of the Bahamas' 2011 FDI growth, Mr Rolle said: "That's been the only major, consistent FDI in recent times.

"While there may have been an increase over 2010, that's been the only significant increase in recent times. Our GDP, when it projects upwards, is very much tied to FDI."

This assertion was backed by the ECLAC report, which found that the Bahamas' 2011 FDI inflows, as a percentage of GDP, were the fourth highest in the Latin American and Caribbean region. The Bahamas' FDI inflows were equivalent to 10-11 per cent of GDP, and bettered only by St Kitts and Nevis, St Vincent and the Grenadines, and Nicaragua.

When it came to Baha Mar and FDI, Mr Rolle said that for the moment "all our eggs are in one basket". He added: "One of the challenges we have is that most of the FDI tends to be focused on the hospitality sector or financial services sector, leaving all the other sectors devoid of any focus.

"One of the goals of the Chamber and myself is to alleviate that by establishing business partnerships in other industries to spur investment activity in other areas of industry."

Mr Rolle identified Information and Communications Technology (ICT) as one such target industry, while there were also "some possibilities to do something in shipping".

"We're looking at a number of things to leverage the capabilities and expertise we have locally to generate more activity locally, as well as partnership arrangements with FDI. We have other areas where we could be focusing."

The BCCEC chief executive said the need for such strategies "became very evident" when he attended the Americas Competitiveness Forum, and saw how the likes of Panama were growing their GDP at a rate "well above the region's", with FDI attracted to industries outside tourism and financial services.

"We have similar opportunities ahead of us," Mr Rolle told Tribune Business. "We just need to figure out how to embrace and engage them."

Despite the Bahamas' heavy reliance on Baha Mar for FDI growth, the BCCEC chief executive said it was still good that the $2.6 billion project was "coming into play and will be consistent over the next 12-18 months".

However, he added that "it would be a lot more comforting if it [FDI] was in a number of different areas. We still have work to do, but it's comforting to know we still have that Baha Mar contribution while we work on other areas".

Mr Rolle said the ECLAC report's findings showed the Bahamas also "had a lot of work to do" to generate more GDP growth through local (Bahamian) investment and economic activity, "which is always a challenge sometimes".

The ECLAC report noted that the Bahamas generated some $227.1 million in FDI outflows during 2011, more than double the previous year's $88.3 million.

It broke the Bahamas' $840 million FDI inflow in 2011 into $767 million worth of capital contributions, and $73 million worth of inter-company loans.

When it came to Baha Mar, the ECLAC report described the project as "a good example of the foreign expansion model followed by Chinese companies based essentially on financing from State-owned banks".

It added: "Once the project is complete, the economy of the Bahamas will be even more dependent on the tourist industry."