By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A former Chamber of Commerce chairman yesterday warned that devaluation of the Bahamian dollar “is not a question of if; it’s a question of when”, describing the country as “a rudderless ship”.
Robert Myers, now a principal with the Organisation for Responsible Governance (ORG), a newly-created civil society group, said none of the political parties had shown they have what is needed to steer the Bahamas back on track.
He argued that politicians were too focused on “shiny object issues”, such as crime and Baha Mar, and the symptoms of the Bahamas’ current economic and social malaise, rather than the causes such as poor governance, lack of accountability and an under-performing education system.
Turning to the stalled $3.5 billion development at Cable Beach, Mr Myers said that even if it and all ‘pipeline’ foreign direct investment (FDI) projects were to complete in short order, this would still “not be enough” to generate the higher economic growth rates that the Bahamas so desperately needs.
“We’re going to make some recommendations as to what needs to be done,” Mr Myers said of ORG, “but I don’t see these people [politicians] doing it, quite frankly.
Emphasising that he was referring to all political parties, not just the Government, he added: “I don’t hear enough from political candidates about the real fundamental issues.
“All they’re talking about are crime and Baha Mar. Those are not real issues; they’re shiny object issues. They’re not the real thing.
“The only thing that’s going to save us is creating a robust economy, and we’re not hearing anything from the politicians about public sector management, fiscal reform and a Fiscal Responsibility Act, which is desperately needed,” Mr Myers continued.
“We’ve got to put all these things in place, which are needed to correct. Where’s the real issues? Where’s the real leadership? Where’s the discussion about how to improve education and improve the economy?
“Baha Mar, if it gets open, it’s a fraction of what we need to correct... We need to be thinking much further out.”
While Baha Mar promises to create 5,000 direct jobs, and numerous indirect ones, if and when it can open, Mr Myers said the Bahamas needed much more to escape its high debt/low growth trap.
The International Monetary Fund (IMF) previously projected that the Bahamas needed to achieve an average 5.5 per cent GDP growth rate between 2013-2018 to both absorb all school leavers and cut existing unemployment by 50 per cent.
Yet with just 0.5 per cent GDP growth projected for 2016, and around 1.5-1.7 per cent forecast the following year, the Bahamas is well short of what is required.
“It’s not enough,” Mr Myers told Tribune Business of Baha Mar. “We could have every FDI project complete and open, and still be hard pressed to get GDP growth.”
And with indicators such as unemployment, FDI and the fiscal numbers all trending in the wrong direction, he added: “Devaluation is a question of if; it’s not a question of when” if the Bahamas fails to change course and tackle its shortcomings.
Devaluation of the Bahamian dollar would be a disaster for an economy that consumes virtually all it imports, as the living standards of Bahamian consumers and households would be drastically slashed.
With reduced purchasing power versus the US dollar, businesses and households would be unable to afford many of the necessities and products taken for granted - at least in the same quantities. And the cost of education and holidays abroad would rise dramatically.
Mr Myers, meanwhile, said reform of the public sector and its culture was vital to transforming the Bahamas’ fortunes.
“We’ve got to put in a Public Management Act and get the civil service, ministries and management of those ministries in order,” he told Tribune Business.
“It’s a completely rudderless ship. It’s upsetting to me that I’m not hearing the kind of rhetoric to show we’ve got candidates that understand what this country needs to right itself.
“If they are out there, start speaking up. Stop talking the noise in the market, and start talking the real issues - improving productivity, getting accountability, getting GDP growth, what about education, what about transparency. These are the real issues.”
Mr Myers continued: “ORG is trying to say: ‘Guys, we’ve got to have a real discussion, a real debate. The time for politics is gone’.
“Baha Mar is a shiny object. Baha Mar by itself is not going to make or break us. What are we doing about improving the ease of doing business, getting small and medium-sized enterprises to start growing, the economy to start growing?
“If we don’t improve productivity and education, we’re not going to get the improvement in GDP growth. We ought to be providing businesses with incentives for the education and career development of their staff, but instead we’re taxing them more and more. It’s completely the wrong approach.”
Mr Myers urged the Government to “improve education, ease Immigration” to get GDP growth moving.
On the latter, he emphasised that he was referring to entrepreneurs and senior foreign management executives, who could start businesses and employ Bahamians, rather than low-level maids and gardeners.
Comments
MonkeeDoo 8 years, 3 months ago
What are we doing about improving the ease of doing business, getting small and medium-sized enterprises to start growing, the economy to start growing? They are shutting down the package businesses with the Customs stupidity of penalizing the carrier. If only we could penalize the Civil Service and Executive Government when something slips by them. I mean teh people not the treasury. That would just be a new way to tief.
DEDDIE 8 years, 3 months ago
The B$ is not traded internationally so it can't be devalued unless the government decide they no longer want it peg to the US $.
asiseeit 8 years, 3 months ago
You really think our government can decide what the Bahamian dollar is worth? The ratings agency's can devalue our dollar tomorrow if they have cause. Our government has been told to cut back spending but being the fuctards they are they have increased spending. They believe the Bahamian people are made to pay taxes for the government to WASTE, MISMANAGE, and STEAL. The party is coming to an end and we the Bahamian people will be the only ones that feel the pain. The political class already has their money stashed abroad and if it gets bad enough they will go abroad and never look back!
banker 8 years, 3 months ago
Actually you are right in the fact that the B$ is not traded internationally. However to maintain the 1:1 peg, we must have a certain level of American dollar reserves. You will recall about a year ago, that the government had to borrow $200 million US dollars to prop up the reserves.
It is the international banking community in conjunction with the central bank that determines how many US dollars are required to keep the 1:1 peg. The actual number is a formula determined by money supply, the GDP, fiscal and monetary policies and various economic indicators. If the economy seriously degenerates (I should say "when" instead of "if"), then it will not generate enough activity and bring in enough American dollars to support the peg to the money supply and the bar will be raised. We will have to come up with a few hundred million more American dollars in reserves, and if we can't, the the 1:1 peg goes bye-bye, and the B$ is exchanged at whatever fraction of reserves we have over what is required. So if we can only come up with half the reserves, then the B$ will be devalued by half and worth 50 cents American.
Here is the rub. The central bank and the government play footsie with the reserves. They will borrow money domestically from say the NIB, and denominate that bond in American dollars -- ie when it become due, they have to pay it back in American dollars (if its a 10 year bond, then they have ten years to find the money). So the NIB puts this bond in the bank, and because it is denominated in US dollars, the central bank counts that amount as American dollar reserves, because technically it is a negotiable instrument in American dollars. But it is all a shell game.
Our reserves aren't really what we think they are. We don't actually have the American dollars that we say that we do to prop up the B$.
Some (internal) economists calculate that if we have a Come-To-Jesus reckoning of the reserves and the economy, the B$ is worth only 35 cents American.
DEDDIE 8 years, 3 months ago
The IMF can make a recommendation for devaluation and governments can reject it. Case in point, Jamaica accepted and Barbados rejected. By the way, Barbados situation was worst than ours when they rejected the IMF recommendation for devaluation.
banker 8 years, 3 months ago
Barbados was already pegged at 50 cents or 2 Bajan dollars for 1 US dollar and they were asked to go lower. It would have caused massive hardship for a country that imports everything.
The statutory mandate (by law) for the central bank is to ensure that external reserves are maintained at 50% of the value of total notes and coins in circulation and demand liabilities of the Bank. Once it falls below the statutory limits, either a devaluation is triggered (or they change the law, which would screw our ability to get foreign-denominated loans). It is this statutory limit that the central bank plays footsie with.
ted4bz 8 years, 3 months ago
I don't see your solution. Don't be fooled by what it's not doing, there are many underlying factors that even the best of us can not know. But you should be intelligent to know there are no free riders, nor rides.
observer2 8 years, 3 months ago
The reason you're not hearing the correct solutions from the politicians is because they truly believe they are running the country correctly.
So when Fred says there is no Bahamian brain drain. You must believe him.
If Fred says there is a good living in the Bahamas for Bahamians then you must believe him.
When Christie says the PLP will fall apart if he doesn't run after 40 years in Parliament please believe him.
As Minnis/Butler runs the FNM into the ground don't be surprised when the PLP wins again.
The average Bahamian with a D average doesn't read these blogs and doesn't really know that a devaluation is on the way. As long as they have their bars, fish fry, church and a trip to Miami I assume they are happy with the way things are?
OMG 8 years, 3 months ago
Terrible to say but so much of the population is under educated that they have no concept of the looming fiscal crisis. You only have to listen to the Ministers to see that they cannot think outside of the old system. This week the education minister lied when he said all family island schools were repaired and ready to go. maybe he forgot my child who did auto mechanics in CEHS where the roof has leaked for over 16 years. He knows that. Maybe he can explain why Cuban teachers are employed who in many cases struggle to speak understandable English and have little or no connection with the communities that they teach in. Wake up fellow Bahamians, because 10% VAT is coming then externalization of currency controls and then devaluation.
concerned799 8 years, 3 months ago
Could it be that a shift to low margin cruise based tourism is causing a structural lowering of Bahamian economic performance?
Why again did we dredge the harbour to allow even bigger ships in to facilitate this?
banker 8 years, 3 months ago
It's not going to help. Only 23% of cruisers on average, get off the boat when it docks in Nassau. The cruise lines have it down to a science to keep dollars aboard the ship, and do it slyly with safety warnings, store rip-off warnings (they get Bahamian stores to pay egregious fees to get on the "recommended" list) and other scheduling tricks to keep the cruisers spending on board rather than in port.
Economist 8 years, 3 months ago
This is why Bermuda made a decision to go for the high end cruise ships only. Some of us have always advocated targeting the European air arrival tourist as they spend foreign currency in Bahamian owned resturants and shops.
The PLP always went for bottom of the barrel cruise lines like Carnival as they could up the numbers of tourists. They then told the grass roots "Look how many tourists we brought this year, aren't we great? Look what we are doing for you the taxi drivers, our precious taxi drivers." Their education is such that they do not think of how much the cruise ship tourist passengers actually spend.
banker 8 years, 3 months ago
The last figure that I saw, was that average spending for those that do shop is about $35 per person. In 2010, it was about $64 per person. Fifteen years ago, it was over $100 per person.
All of my figures come from one of my network acquaintances based out of Florida, and he is a consultant to the cruise lines. He has examined and surveyed passengers for the cruise lines as well as the stop-over tourists (remember the girls giving out survey forms in the arrivals and departure halls of the airport?).
We have difficulty attracting the European air arrival and the high end cruise lines because of the "experiential factor". Nowadays tourists are looking for "THE EXPERIENCE" rather than shopping and sun, sea, sand and tropical drinks. That is why when you go to Vegas, you can ride a Venice gondola and see a replica of the Eiffel Tower of France.
Even a unique culture is an experience, but we have been so assimilated by the American influence that we do not have a unique culture worth visiting unless you come at Junkanoo time, and even then after the first three groups, the tourists have had enough. Attention spans are short, and you have to have lots to attract them. Quite simply, we can not compete.
dtobias 7 years, 6 months ago
Tourism is the primary business only of banana republics. That kind of boom and bust business is not what the Bahamas needs as its structural spine. You need high tech. Clean high tech. You need software developers and other kinds of high tech development. A good high tech worker earns the same as 4-6 tourism industry workers. You cannot get into high tech as a nation by telling established high tech firms that they MUST hire locally. It's asinine to think otherwise. Bahamas cannot tell Apple where to get off the bus! BUT if Bahamas was friendly toward high tech then MANY high salary high tech will want to move there to take advantage of depression prices on canal front property. They can live like kings for pennies on the dollar in the Bahamas and they would spend their hefty wages improving their lifestyle there, building and buying and employing the locals. Eventually the smartest locals would prove themselves worthy to work at these same companies and local hiring for the high tech positions would take place at a measure pace. But Bahamian government thinks it can demand immediate hiring without any demonstration of local high tech skills and that is just laughable. EVERYONE has to pay their dues. Everyone has to walk before they can run. No exceptions.
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