The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas suffered a 76 per cent year-over-year decline in foreign direct investment (FDI) in 2015, as it “tumbled” to its lowest levels in 13 years.

The World Investment Report 2016, produced by United Nations (UN) agency, UNCTAD, found that FDI inflows into the Bahamas in 2015 declined by more than $1.2 billion compared to year-before levels.

“FDI flows into the Bahamas, the second largest FDI recipient [among small island developing states] in 2014, tumbled by 76 per cent from $1.6 billion in 2014 to $385 million in 2015, the lowest in 13 years,” the UNCTAD report said.

“Inter-company loans to tourism-related construction projects, which supported FDI growth in 2013 and 2014, contracted by nearly $1 billion, and equity investment fell from $325 million in 2014 to $97 million in 2015.”

The UNCTAD report, which cited the Central Bank of the Bahamas as its data source, said FDI flows to other Caribbean nations - most of whom are classified as small island developing states - also fell in 2015.

Barbados suffered a year-over-year decline of 48 per cent to $254 million, a figure lower than what the Bahamas was able to attract. FDI flows to the collective grouping of 10 Caribbean states were off 37 per cent at $3.6 billion.

The sharp decline in the Bahamas’ numbers, though, will likely generate further concerns about this nation’s economic competitiveness and ability to attract FDI.

Foreign investor capital is a vital ingredient for a healthy Bahamian economy, and this nation has relied heavily on it in past years to drive GDP growth and job creation.

While much of last year’s decline is likely related to the construction slowdown at Baha Mar, even prior to its fall into Chapter 11 bankruptcy protection, FDI’s drop to the “lowest level in 13 years” is further unwelcome news for a struggling economy.

Khaalis Rolle, the minister of state for investments, told Tribune Business yesterday that while the UNCTAD report’s findings were no cause for panic, it reflected the need for the Bahamas to become more “skillful” in attracting FDI.

With the competition between nations for FDI capital becoming increasingly intense, Mr Rolle said the Bahamas could no longer rely solely on its location to attract major investments from overseas.

The Minister agreed that FDI’s 2015 drop was largely due to Baha Mar nearing the end of its construction phase, and said it reflected an end to multi-billion dollar projects that had been in the Bahamas’ investment pipeline.

“I think that what the report is essentially reflecting is these major projects have peaked, Baha Mar and Atlantis’s Phase 2 and 3,” Mr Rolle said.

“If you go back over the timeline and look at the multi-billion dollar projects, they are all coming to a close. The major multi-billion dollar projects have peaked.

“When you look at the level of transactions, Baha Mar and Atlantis represented a significant component of FDI, and they have reached their peak. We are beginning to see FDI level off.”

Mr Rolle said the Bahamas’ FDI inflows had also experienced sharp peaks over the years from “one-off transactions”, such as the Bahamas Telecommunications Company (BTC) privatisation and the sale of private assets, such as the BORCO and South Riding Point facilities.

He said that if these, too, were removed from the calculations, the FDI figure would smooth out at more realistic levels.

Mr Rolle said the multi-billion dollar, mega resort projects were now being replaced by multiple smaller tourism-related developments, such as The Pointe adjacent to the British Colonial Hilton; Albany; Baker’s Bay; and the proposed project at Children’s Bay Cay and Williams Cay in Exuma.

“Many of the smaller projects we have signed are in the design phase and moving through the pipeline,” the Minister told Tribune Business, suggesting that 2015 may have been a ‘pause for breath’ as the Bahamas waited for the next round of developments to come on stream.

Mr Rolle also cited the proposed Carnival Cruise Lines private port in eastern Grand Bahama, and the Mediterranean Shipping Company (MSC) redevelopment at Ocean Cay as examples of projects that will soon come to fruition.

“Eventually, well begin to start seeing those levelling off [as FDI sources],” he explained. “That’s why it’s important for us to be competitive and attractive as a jurisdiction.

“There are countries that recognise our competitive position as far as FDI, and are going to work hard to attract it. We’re going to have to do the same.”

Mr Rolle continued: “We’ve been blessed over the years, and we’ve lucky because of our location. We now need to be skillful...

“If you look at Cuba as a destination, evidently they’re going to become a competitor. We’re going to start splitting FDI with jurisdictions in the region and elsewhere in the world.”