The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Real value added in the Bahamian manufacturing and agriculture sectors declined by 10 per cent and 31 per cent, respectively, between 2011-2015, with “fundamentally different business conditions” needed to reverse the fall.

Oxford Economics, in its report on sustainable growth opportunities in the Bahamas, suggested that most manufacturers and farmers lacked the scale necessary to compete with better-equipped foreign rivals in export markets.

The study, produced for the Bahamas-based Organisation for Responsible governance (ORG), suggested that any development strategy for these industries first focus on ‘import substitution’ and breaking into the domestic supply chain.

“Both the agricultural and manufacturing sectors are declining in the Bahamas,” the Oxford Economics study found, basing its conclusions on National Accounts data from the Department of Statistics.

“Specifically, real value added in manufacturing declined 10 per cent, and real value added in agriculture dropped 31% per cent between 2011 and 2015. This adds impetus to a drive to build them up, but also suggests that fundamentally different business conditions might need to be cultivated to reverse these trends.”

The report noted that Bahamian companies, such as Marsh Harbour-based Abaco Neem, with its natural healthcare products, and the Symonette Group’s agricultural products, had succeeded in breaking into export markets via specialist, niche goods.

Yet these were largely the exception to the norm, and Oxford Economics added: “More typically, it was found that producers in the Bahamas lacked a clear competitive advantage or scale to make export feasible.

“In fact, it was often the case that basic food imports - even from other Caribbean nations - have successfully penetrated the Bahamas market.”

The Bahamas’ physical goods exports totalled $224 million in 2015, with 60 per cent of this sum generated by polystyrene products produced by Freeport-based Polymers International.

Other major exports were food and live animals, mainly crawfish, crab, conch and coral from the fisheries industry, which accounted for 28 per cent of the total. Crude minerals, including salt (Morton Salt) and crushed stone, comprised an 11 per cent share.

“The Bahamas population of 377,000 people is spread among several principal islands, making it difficult for domestic producers to reach the scale necessary to profitably export to the United States,” the Oxford Economics report found.

“Once required to ship from one island to another, even within the domestic archipelago, Bahamian producers lose much of the competitive advantage that would normally accrue to a domestic producer in competition with a foreign import.”

Oxford Economics and ORG had initially examined whether the Bahamas could exploit its US proximity, and entry into numerous trading agreements, to generate export-led growth through Freeport.

“For all regions outside of Freeport, the size and nature of Bahamas manufacturing and agriculture did not seem particularly well positioned to make significant inroads into the US export market,” the report conceded.

“Rather than focusing on exports, it appeared that policies and programmes that help local manufacturing and agriculture producers successfully break into the tourism industry supply-chain in the Bahamas seem more promising.

“In fact, this appeared to be a prerequisite to any ambition to increasing exports to the US. With more than six million tourists visiting the Bahamas each year, huge demand exists for high-quality manufactured and farmed goods on the islands.

“At present, this demand is almost entirely met by imports, mainly from the US but also from other Caribbean nations. This means that a major opportunity for domestic producers exists to secure a larger share of this domestic market. If properly supported, this could help to drive economic growth.”

The Bahamas’ entry into rules-based trade agreements made it “even more urgent” that local manufacturers and farmers break into, and cement, a position within the tourism supply chain.

“Bahamian producers must first reach the scale and efficiency to compete with imports before considering increased export opportunities,” the Oxford Economics report said.

“As a first step, Bahamas’ producers should strive to break into tourism supply chains and substitute more locally manufactured and farmed content for goods that are currently imported (largely from the US). After first succeeding in the local market, Bahamas producers might then be closer to offering the quality and pricing required to successfully export to the United States.”

The report added that with Donald Trump’s administration likely to take a harder line on trade, export opportunities to the US will be challenged.

“For all of these reasons, increasing competitiveness by focusing on increasing local content in the tourist supply chain is a key challenge to address,” Oxford Economics added.