The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Central Bank will better understand the true level of foreign currency financing demand among Bahamian businesses when the next exchange control liberalisation phase take effect on April 24, its governor said yesterday.

John Rolle said: “Our approach is that this is a work in progress. We need to be able to establish the systems to monitor these transactions and build up experience, and to see how the economy can adjust beyond this.”

He told a press conference that the bank does not yet have any statistics on the true level of demand for foreign currency investment financing.

“We don’t have satisfactory statistics on the true level of demand,” Mr Rolle said. “When we did the survey last year there was a very dismal response rate, and that could have happened for a number of reasons, including sxepticism over whether there was any seriousness abut the process. We believe that now we will get better indication as to what the true level of demand is.”

The Government earlier this month approved measures that will enable Bahamian businesses to access up to $5 million in foreign currency financing every five years, in a bid to boost economic growth, job creation and overseas exchange earnings. It is designed to aid small and medium-sized businesses and the “upper end” of the real estate market.

The reforms are targeted at 11 sectors seen as supporting the Bahamas’ medium to long-term national development goals, and having a positive impact on the country’s foreign exchange earning capability.

These industries are: Agriculture and fisheries; manufacturing; transport (land, sea and air); tourism (hotels and restaurants); construction and real estate for residential tourism; energy and energy conservation; education; health; telecommunications; ICT; and infrastructure.

Under the rules outlined by the Government, if the funding is sourced from a local commercial bank, no conditions beyond the $5 million limit over five years will be imposed.

The same terms will apply if the financing is unsecured, even if it comes from a foreign source, but additional restrictions will be imposed if the business is in a sector reserved solely for Bahamian ownership under the National Investment Policy.

Should the financing from non-residents or foreign banks involve secured debt or equity participation, this is limited to 40 per cent of the Bahamian company’s “exposed capital” - the amount of equity that would be lost in a default, or owned by a foreign partner. If the 40 per cent equity threshold is exceeded, NEC (Cabinet) approval will be required.

Bahamas-based banks in the so-called ‘offshore’ sector will be allowed to extend financing to foreign developers in the Bahamas, but only for resort and real estate developments.

Repayments will be “restricted” to foreign currency income generated by the investment or external proceeds, the Prime Minister said.

The Central Bank yesterday published the application requirements for Bahamian businesses looking to access foreign currency for investment activities.

“This will be followed up in the coming weeks with an automated and secure online system for all foreign investment applications processed through the Central Bank,”Mr Rolle said.

“In addition, the Central Bank is releasing a detailed outline of the framework that will apply for non-residents who make investments in real estate in the Bahamas.”

Applications will require details such as the financing amount, source of funding, the projected timeline and utilisation of the financing and background information on the companies involved.

Mr Rolle said the Central Bank has targeted a turnaround time of five working days.

“Under an online system, which will undergo significant fine tuning in the coming months, the Bank will be receiving applications in a more standardised format, with a series of forms and through an electronic portal that would allow scanned submissions of other documents,” he said.

“The Bank would be able to allow more real time submissions of other documents. The Bank would be able to provide more real time feedback on the completeness of applications with the further aim to speed up the process for applications.”