The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The private sector believes the Central Bank’s latest exchange control liberalisation moves have “gone a long way” to encouraging Bahamians to repatriate foreign assets and related earnings.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business that the latest moves, which took effect on Friday, helped “advance the cause” towards eventual full liberalisation.

Praising new Central Bank governor, John Rolle, for “progressive thinking”, Mr Bowe said the reforms appeared specifically designed to “maximise” foreign currency inflows and earnings, which in turn will help tackle the Bahamas’ balance of payments issues.

“I think these are very much welcome,” Mr Bowe said of the latest liberalisation moves. “I’ve had conversations with John Rolle, and he’s certainly progressive in his thinking and wanting to liberalise this to the point where it encourages domestic foreign currency transactions.”

On the capital account side, the limits imposed on Bahamian investor groups and individuals for investments in overseas business ventures over a three-year period are being doubled - from $5 million to $10 million for groups, and from $1 million to $2 million for individuals.

And the Central Bank is increasing the sum granted to local broker/dealers for investments outside the Bahamas by $10 million per annum, from $25 million to $35 million per annum.

Given that the funds are distributed quarterly, the maximum three-month allocation to the Bahamian capital market will increase from $6.25 million to $8.75 million.

These are the key reforms likely to have the greatest economic impact for the Bahamas, and Mr Bowe added: “They’re [the Central Bank] not hoping for an exodus of US currency outside the Bahamas, but are hoping Bahamians take advantage of investment opportunities abroad and are able to maximise the foreign currency inflows by virtue of profits ensuing on foreign investments.

“It goes a long way to encouraging Bahamians to bring foreign assets and foreign currency investments back to the Bahamas because they’re not going to be penalised by an archaic exchange control regime.

“These monies will come back as Bahamians make profits on these types of investment.”

Other reforms have doubled the amount that temporary residents (work permit holders), who have lived in the Bahamas for at least three years, can borrow to invest in purchasing residential property. The limit has been raised from $200,000 to $400,000, and no previous permission is required from the Central Bank.

And temporary residents, borrowing jointly with their Bahamian spouses, can borrow without limit in local currency to finance “owner-occupied residential dwellings”.

Bahamian-owned companies, and individuals, can also skip the Central Bank and go directly to commercial banks to convert up to $25,000 for oil import purchases, provided they have the necessary documents and licences.

“This measure is mainly designed to facilitate business for small suppliers on the Family Islands,” the Central Bank added.

In similar fashion, Bahamian companies and individuals are able to go directly to commercial lenders to convert up to $5,000 for non-oil imports.

Foreign-owned companies can now obtain Bahamian dollar credit cards with limits up to $25,000, something they were previously prohibited from, and work permit holders can also go directly to commercial institutions to transfer salaries/savings abroad.

Continuing the theme of ‘delegating authority’ to the commercial banks, the Central Bank is now allowing them to approve gift remittances up to $5,000 per transaction.

The $25,000 per transaction limit on payments to foreign education institutions has been removed, and the limit on remittances to Bahamian students studying abroad has been doubled - from $2,500 per transaction to $5,000.

“These reforms are expected to result in enhanced efficiencies for both residents and temporary residents as they conduct their personal business transactions, and seek to invest in the Bahamas or abroad,” the Central Bank said.

Mr Bowe, saying that “every journey begins with one step”, added of the reforms: “It’s a move in the right direction, and advances the cause.

“This is just one of multiple steps to liberalisation of the foreign exchange control regime. It shows we’re on the long road to progressive advancement of the foreign exchange regime.

“It’s a good move by John Rolle and shows he’s bringing progressive thinking to growing the economy and to assist Bahamians in owning foreign currency generating businesses,” he continued.

“It’s a tremendous sentimental move, and while it will not result in an immediate influx of US dollars, it’s certainly getting the ball rolling in the right direction.”

Mr Bowe was backed by his chief executive at the Chamber, Edison Sumner, who expressed hope that the latest reforms would boost the ability of Bahamian companies to participate in international trade.

Describing the Central Bank move as a “very positive paradigm shift in the policy”, Mr Sumner said: “For a long time there have been concerns that the exchange control regime in the Bahamas was hampering Bahamian businesses from realising their full potential and prospects as it relates to trade facilitation and services.

“We will have to see what these new adjustments in exchange controls will entail, but given the fact that the Central Bank and the Government have agreed to relax the regime, [it] is certainly a step in the right direction and will be sure to boost our trade facilitation for imports and exports.”

Mr Sumner said the Central Bank action came at a time when the Chamber was waiting for the Ministry of Financial Services to complete the Memorandum of Understanding (MOU) with it for Trade Information Services.

There are many Bahamian businesses who have been desirous of attracting foreign investment capital to fund their businesses, but the rigorous rules and requirements have made that process extremely difficult to the point that businesses were turned off from pursuing international capital for their business,” he added.

“Likewise, foreign direct investors wishing to conduct business in the Bahamas would have had to deal with similar challenges in many instances.

“So, while we understand that there has to be some level of oversight to protect the country’s foreign currency reserves, it may be a good idea to consider the exchange control regime even further to allow for more free market to access to reign.”