The Tribune

By JOHN ISSA

Over the years, I have written about exchange controls and why they should be removed a number of times. Unfortunately, my reasoning has not convinced those in authority.

The first time I raised the matter was way back in the early 90s. What was first proposed was the removal of all exchange controls in order to free up the foreign assets hidden abroad by Bahamians so that they could be openly invested in The Bahamas.

It would also slow down - or even stop - the flow of foreign exchange which continues to leave the country, even though it is illegal. The removal would have to be combined with retroactive approval of all the actions taken by Bahamians in the past which were in breach of the exchange control regulations at the time.

Those opposed to this suggestion have waved, and continue to wave, the fear of certain devaluation in front of the authorities and the public as a consequence of lifting exchange control regulations. This fear is unfounded. The cause of the devaluation of a currency is the printing of too much of that currency, usually by governments seeking an easy short-term solution to political pressure. This can be prevented by legislation.

The other argument put forward by opponents of removal is that the government would lose the profit it makes charging a fee for supplying foreign exchange from the Central Bank. This can easily be recovered by the appropiate foreign tranaction fees.

It should be noted that the Cayman Islands have had no exchange controls for decades and their currency has been stable. When local currency is in short supply the government or private companies or individuals just have to borrow or find investors with foreign currency. In fact it is often cheaper to finance projects with foreign currency.

As an interim step in order to achieve some of the benefits, I suggested that we allow Bahamians with foreign assets to invest them in The Bahamas with the same right of repatriation of capital and income, to the country from which they were sourced, as a foreign investor would have. This is not as beneficial as a complete removal of exchange controls but it would be a good first step.

For the life of me, I can’t understand why we don’t want to free up the hundreds of millions of dollars of foreign assets held offshore by Bahamians so that The Bahamas can benefit from them. We seem to be always chasing foreigners to invest in The Bahamas. Why not start chasing Bahamians with foreign assets so to do.

• John Issa is executive chairman of SuperClubs. He is writing regularly in The Tribune.