The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas saw 2012 foreign direct investment (FDI) inflows drop by more than 50 per cent to $595 million, a top private sector executive describing this as “a sobering reminder” of the competition for global capital.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC), in its annual report on FDI trends in the region, also estimated that around four Bahamian jobs are created with each $1 million invested.

And, while the reported 2012 fall-off in FDI inflows to the Bahamas may look bad, this nation is likely to have been up against tough year-over-year comparatives.

With the $2.6 billion Baha Mar development in full swing, the $211 million Bahamas Telecommunications Company (BTC) privatisation and $1 billion-plus acquisition of BORCO made 2011 something of a ‘banner year’ for Bahamian-related FDI inflows, hitting $1.2-$1.3 billion.

Still, the ECLAC report said: “The Bahamas received $595 million in FDI in 2012, less than half the level of the previous year.”

Comparing this nation to Barbados, given the tourism-dependent characteristics of their economies, the ECLAC report added: “Both these economies are highly dependent on tourism, which has been badly affected by the economic crisis since 2009.

“Nevertheless, there are investment projects in both countries worth mentioning. While in the Bahamas the Baha Mar project has reached the implementation phase, in Barbados a Four Seasons resort project that had to be abandoned after the financial crisis was reinitiated with assistance from the Government of Barbados and the Inter-American Development Bank (IDB).”

While the ECLAC report did not identify any reason for the year-over-year decline in FDI inflows into the Bahamas, Chester Cooper, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, also suggested to Tribune Business that Baha Mar may have made 2011 ‘an anomaly”.

A better judge of the Bahamas’ 2012 FDI performance, he added, may be to look at the previous five years as a whole.

But Mr Cooper also warned: “In addition to the above, I believe it’s a sobering reminder that wen are in competition for FDI with our neighbours in the region.

“With this in mind we must have a robust approval process, a modernised incentives regime, an enabling environment and a reputation ( and perception) that the Bahamas is an easy place to do business.

“When I look at some of the things happening in ICT (information and communications technology) in Jamaica, the various industries in the Dominican Republic and the Caracoal industrial park in Haiti, it is also clear that focus must be given to the development of non-touristic industries where we have been focused over the last 10-15 years, lest we leave money on the table.”

The BCCEC chairman told Tribune Business that the ECLAC report “also highlights the need for the encouragement of domestic investments.

“I say as I have done before that we must find the formula to unlock domestic wealth. Bay Street is a prime example. Whilst I commend the Downtown Nassau Partnership (DNP) for the work they are doing, the property owners must now take advantage of the incentives provided under the Downtown Revitalisation Act and the various other incentive regimes in order to spur activity.

“The Bahamas Investment Authority, as it focuses on landing the large FDI, must also bring focus to encouraging domestic investments.”

The ECLAC report also illustrated the Bahamian job creation benefits from attracting high FDI capital inflows and large-scale developments.

Dividing the Caribbean nations into two groups, when it came to those focused largely on tourism-related investments, the report said: “Each $1 million of investment is projected to generate about six jobs.

“This group comprises Bahamas, Barbados, Belize, Haiti, Jamaica and Saint Lucia. Inward FDI over the past 10 years was oriented towards tourism-related activities (mainly hotels and transport services). Call centres are major job creators in Jamaica and Saint Lucia.”

The ECLAC report showed that in the case of the Bahamas specifically, four local jobs were created for every $1 million in FDI capital injected into this economy.

Edison Sumner, the BCCEC’s chief executive, said that while FDI inflows into the Bahamas may have dipped in 2012, he was “satisfied” that Khaalis Rolle, minister of state for investments, and the Bahamas Investment Authority were doing everything they can to attract new projects.

“We all appreciate that the country, any country, cannot advance without foreign direct investment coming in to support its economy,” Mr Sumner told Tribune Business.

“While at the same time we want to see many more Bahamians being given opportunities to invest, expand and grow businesses in the country, we appreciate we have to allow FDI to build the economy, and stabilise foreign currency reserve issues.

“We always want to see opportunities available to Bahamian entrepreneurs, but understand and appreciate there has to be that element of foreign direct investment, which we have been largely dependent on for so many years to develop the country.”