The Tribune

By Richard Coulson

Several readers have asked me how to “get our economy moving again”. I am poorly qualified to respond, trained in lowly corporate finance, not the higher discipline of economics. However, on issues of public policy, recognised economists often differ by 180 degrees (like the Governors of the US Federal Reserve), so common sense rules seem to work as well as academic theory. For me, the dominant rule is simple: efficiency.

While our public debt and unemployment figures offer grim reading, we should not succumb to pessimism and overlook the many positive contributions already made by the combination of our Governments (past and present) and private sector. Our new airport, container transfer port, improving highway system, and the massive Atlantis and Baha Mar hotel complexes, must be the envy of other Caribbean nations. We are now stimulated by the ‘Caribbean Growth Forum’, whose Bahamas chapter was recently launched with great fanfare, created by the World Bank, the Inter-American Development Bank (IDB) and other worthy organisations from the UK and Canada, with the enthusiastic endorsement of our Prime Minister.

Its laudable mission is “to facilitate a platform for public-private dialogue around the growth challenge … identifying practicable and implementable solutions that inspire action in the 15 Caribbean nations”. Some 18-20 people in three sectors from each country will hold an “intense dialogue” and present position papers for formal adoption. Sceptical, as I usually am, that the Forum could simply degenerate into another ineffective discussion group, I interviewed minister of state for investment, Khaalis Rolle, the former businessman who is the Government’s point man for the project, as well as Astrid Wynter, the Bahamas representative for the IDB, who has already arranged finance and technical assistance for Bahamian ventures. I also spoke to Winston Rolle, the former Chamber of Commerce chief executive, who is banging heads together to create the actual working groups for tangible results.

They all assured me that “this time it’s different”. The objective for the Bahamas is a unified national development plan, which has never been attempted before but which is essential for real progress. Mr Rolle showed me the development programme adopted by Singapore, surely one of the world’s most successful economies. A quick look revealed a multi-page document listing not simply broad policy objectives, but detailed, specific measures, fully agreed between the public and private sectors – an excellent template for our own effort. He gave me a succinct analysis of the Bahamas’ major problem: While we are a leader in attracting FDI (Foreign Direct Investment), little of it flows down to reduce our unemployment levels.

I have been given the names of the appointed leaders of the three sector working groups, who will be shooting for presentations at a regional meeting of the Forum, scheduled for Nassau on June 24-25. I plan to keep in touch with their progress and see what evolves at the June session. I can only be optimistic that the methods of this Forum will produce positive and tangible measures. Here is my own list of points that I hope the working groups will convert into specific recommendations.

Efficiency: Many of the shortcomings in our economy do not derive from lack of new policies or programmes, but from simple inefficiency and slackness in carrying out existing policies, usually at Government level, but occasionally extending to the private sector.

Our political leaders, from either party, much prefer making grandiloquent promises than drilling down deep into their own ministries to discover and root out incompetent staff and failed procedures. The tedious nitty-gritty of day-to-day management gets short shrift, and the results are legion. A few examples, trivial in themselves, but combining to give us a ‘Third World’ image:

• Rare is the day when all our traffic lights are working.
• Postal times are abysmal for an island 21 miles long, without direct addressee delivery. I have a recent letter postmarked March 19, branch receipt recorded April 11.
• No white lines or cat’s eyes on many major roads, an invitation to accidents. This despite the efforts of entrepreneurial new private company, Bahamas Striping.
• Basic construction permits require in excess of six month to be processed.
• The Clifton Park Heritage Authority, despite its mission of being open to the Bahamian public, has a website years out-of date, and its e-mail address does not respond.
• Work permits and residency permits are the worst offenders. The chief executive of Doctors Hospital reports that four to eight months is required for a work permit for crucial medical personal unavailable locally, a common complaint that often discourages applicants.
  

Fred Mitchell, minister of immigration, cannot give any assurance that permits will be issued in 20, 40 or 60 days, and admits that “files are stacked to the ceiling”, because of lack of staff and digitisation of records.

Perhaps he can be persuaded to spend less time proclaiming draconian new Immigration policies (which are quickly ‘clarified’ by other shell-shocked Ministers), and plunge into the hard work of reforming the office up on Hawkins Hill which, to be sure, has been left in confusion by previous administrations.

Follow-up, a first cousin to ‘efficiency’. Brave new concepts are announced, with no follow-up to completion:

• How many times have we heard about creating a new arbitration centre, and then nothing is heard about choosing a site or permitting foreign lawyers to provide their essential expertise and contacts?
• For how many years have we heard that the captive insurance business (lost to Bermuda because of Sir Lynden Pindling’s thoughtless tax measures) will return to our shores, then hear nothing about a marketing campaign or hiring an expert in the Insurance Commission?
  
• Our Civil Aviation Department often speaks about modernising our airports and regulations, and taking control of our air space from the Federal Aviation Administration (FAA), but now faces the Mayaguana crash and recently declared it is just “hopeful”, not certain, that the FAA will not downgrade our rating in a forthcoming audit
• A few years ago, efforts by BEC to develop a waste-to-energy facility were abruptly halted when the Government retained a German consultant to advise on a whole range of ‘alternative energy’ measures. What were the results of the consultancy? What is the status of the many new energy proposals that are now being submitted – solar, wind, bio-mass, LNG, ocean thermal, etc.? Choices cannot be much longer delayed.

Privatisation. I am far from the first person to support this policy, and there have been ample well-documented arguments in favour of privatising BEC, Wate r& Sewerage, Bahamasair and the Broadcasting Corporation, in order to eliminate the subsidies that burden our Budget and increase our debt. But they always founder for reasons that are clearly political. Any privatisations would inevitably result in reductions in inflated staffing, and no party has been willing to face the loss of potential voters.

But a good case can be made for one-time severance payments that can be made attractive to employees while still less expensive to the Treasury than the continuing subsidies. The business of several of the Government corporations (particularly TV/radio and air service) could appeal to local entrepreneurs – more efficient operators than Government. In any event, we hope the Forum seizes this issue and does not back off in fear of grasping a political hot potato.

Fiscal Policy. Government’s sole proposal under its ‘tax reform’ programme is the creation of a 15 per cent Value Added Tax (VAT). It is an inadequate measure to help our economy. Since it will simply replace lower import duties and excise taxes, it will be ‘tax neutral’, doing nothing to increase revenues. Of course, there will be no need for increased tax revenues if expenditures can be brought under control.

Here, privatisation can play a role by eliminating subsidies, and efficiency can result in improved collection of existing taxes, such as the $400 million in outstanding property taxes. In short, I hope that the Forum will make a rigorous case for reducing government expenditures before recommending any net increase in taxation. If greater ‘equity’ is an objective of tax reform, perhaps some form of income tax, as recommended by the World Bank, will be needed, instead of transaction taxes that hit the poor harder than the rich.

Another boost to our economy would be further relaxation of exchange controls to permit more foreign investment to flow into our publicly traded companies. The Ministry of Finance should also drop its quixotic prohibition against BISX trading Government securities. This long-sought change would increase the earnings of our stock exchange and encourage share-trading activity in our still sleepy capital markets.

Renaissance of Central Nassau. This is not a matter of cosmetic painting, plastering and clean-up for superficial improvement. Much of our economy depends on an attractive downtown with tourist-vibrant businesses. Positive steps have already been taken, such as the new Straw Market and the Vendue House, but that is just a start. Our target should be St George’s Town in Bermuda, which combines the beauty of a UN World Heritage Site with hard-headed commercial success.

We have plenty of raw material. The long-awaited departure of international shipping to Arawak Cay has left the whole stretch of Bay Street east from Elizabeth Avenue as a virtual waste-land, bordered by empty lots, abandoned or barely marginal shops, even a grimly derelict hotel.

This space is too large for re-development by any single local owner, and in any event needs a consolidated plan, not a mish-mash of individual schemes. An international property investor is needed, but none will come unless invited by Government, with an opportunity to negotiate zoning policies and all the requirements for a mixed-use project to cover the bulk of the area. The Government should not stay passively waiting for a bidder, but should proactively reach out towards a carefully selected candidate, such as the Hines Group, based in Houston but with worldwide experience.

The Government must also take the lead in restoration of critical properties in highly visible, tourist-sensitive areas, such as Duke Street, Cumberland Street and West Hill Street. For owners who are unwilling or unable to upgrade their buildings, or to fill rubble-strewn vacant lots, legislation must be in place to allow public acquisition by eminent domain, paying reasonable compensation in cash and long-term bonds. The seized properties would be transferred to a public holding company for resale to new private investors, who would not be hard to find once Government can assure clear title.

All the foregoing “renaissance” measures would doubtless result in cost to the Treasury, which the economy would recoup many times by higher property tax valuation, business earnings and employment growth. If structured right, even the initial cost could be shared with wealthy pension funds, actively seeking new long-term investments.

Crime and Education. While these two factors are, of course, crucial for economic growth, I deliberately refrain from comment. First, because I have no expertise. Second, because the gentlemen in charge, Police Commissioner Ellison Greenslade and Education Minister Jerome Fitzgerald, are efficient, hard-working executives who know what is needed without advice from me or the Forum. Third, because, as they will readily admit, the issues they face go far beyond the patrolman on the beat or the teacher in her classroom, and extend to the basic problems in our society: how to disband gangs of idle, violence-prone youth, or how to reduce the number of teenage, unmarried pregnancies from multiple fathers. These are subjects to be resolved by family, church, and social welfare organisations, and might only be covered in a book, certainly not a newspaper column.