The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A well-known businessman says “no positive spin” can be placed on the Bahamas’ junk downgrade, adding that it showed this country is failing to tackle long-standing structural weaknesses in its economy.

Sir Franklyn Wilson bluntly told Tribune Business that Standard & Poor’s (S&P) decision to strip the Bahamas’ of its ‘investment grade’ status five days before Christmas was “not good news”, with reactions from the different political parties all-too predictable.

The Arawak Homes and Sunshine Holdings chairman, while criticising the Opposition parties for failing to offer solutions to the problems highlighted by S&P, also warned against placing too much reliance on Baha Mar’s promised April 2017 opening.

While acknowledging that Baha Mar’s arrival and several thousand hirings will help the stagnant economy, Sir Franklyn said those who saw the $3.5 billion project as “the full answer” were “short-sighted”.

He warned that it would require “a lot more” than Baha Mar to turn the Bahamian economy around, and position this nation for sustainable, long-term growth.

“Obviously, there’s no spin to be put on that. That’s bad news,” Sir Franklyn told Tribune Business of S&P’s ‘junk’ downgrade.

“In the context of attempting to understand why it happened, we’ve heard the predictable statements; the Government saying S&P did not do a good analysis, and the Opposition saying it is bad public policy.

“My own view is that it’s more complicated than that, and it points to the fact we’re not doing anything to address systemic problems,” he added.

“The Opposition is not saying enough about how to address these systemic problems. That’s the real issue. In my humble opinion, the systemic problems adversely affecting the economy run a lot deeper.”

Sir Franklyn said there were “several” so-called “systemic problems” when asked to identify them by Tribune Business, although he did not go into detail.

Many, though, are well-known to Bahamians, especially businessmen and entrepreneurs in the private sector, who have to grapple with the economy’s structural deficiencies on a daily basis.

These weaknesses include the Bahamas’ extremely high cost base, especially for energy and labour; the inconsistent supply and relatively low productivity associated, respectively, with each; the high levels of bureaucracy and red tape encountered by businesses in dealing with the Government, as shown by the Bahamas’ 121st ‘ease of doing business’ ranking; the ‘D-’ grade average achieved by BGCSE exam candidates; entrepreneurial access to credit; and an ever-increasing taxation burden.

Sir Franklyn, meanwhile, argued that too few Bahamians had adjusted to the ‘new norm’ following the 2008-2009 recession, with lifestyles and spending habits still reflecting ‘pre-credit crunch’ levels.

He recalled how his wife, the Senate president, had recently attended a conference of senior female Parliamentary figures, where they were treated to a presentation from a leading economist.

“This economist was offering the view that the impact of the last recession, which has really not abated since 2008-2009, has been so profound that she thinks there’s just too much denial going on all over the world,” Sir Franklyn said of the economist’s conference presentation.

“If you were 100 before this recession hit, and you managed to get back to 50, you’re probably better than average.”

He further explained: “The point I’m making is that in the case of our economy, there are still too many people acting as if they are still in the circumstances of 2007-2008, and we’ll get back to it. That’s not the case.

“Just today I met with someone about to lose his home. He used to make $5,000 a month, and now he makes $2,000, yet he never adjusted his lifestyle to the fact he’s now making $2,000.

“That served to bring home the reality with this; there are a lot of families in that situation just not making the tough decisions.”

The Christie administration’s immediate response to the S&P downgrade last week effectively gave the impression that the Bahamas’ hopes for an economic rebound are pinned exclusively on the Baha Mar project.

It was the only major development referenced by the Government in its release, which touted the project’s purchase by Chow Tai Fook Enterprises’ (CTFE), and the subsequent ramp-up that will involve the direct employment of 3,300 Bahamians by summer 2017.

The Government’s seeming obsession with Baha Mar was criticised as “dangerous” by Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, given that it reinforced perceptions that the project is ‘the only game in town’.

Sir Franklyn expressed similar misgivings, telling Tribune Business that the Cable Beach-based project was not the sole cure or ‘silver bullet’ for all the economic ills plaguing the Bahamas.

“Baha Mar will help, but to see Baha Mar as a full answer is short-sighted,” he argued.

“It’s going to take a lot more to turn this economy around in a sustainable way.”

S&P downgraded the Bahamas to so-called ‘junk’ status because economic growth, and the pace of the Government’s fiscal consolidation, had, respectively, proven weaker and slower than initially projected.

While acknowledging that Baha Mar’s opening would provide an economic boost, S&P said these benefits would take time to materialise, and will not be felt fully until 2018.

The credit rating agency also lowered its 2016 GDP growth estimate for the Bahamas to 0.3 per cent, bringing it into line with both the IMF’s and the Government, the latter of which had forecast 0.5 per cent pre-Hurricane Matthew.

S&P is projecting that the Bahamian economy will expand by 1 per cent in 2017, and by an average of 1.3 per cent over the next two years.