The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Confidence-building “baby steps” are required to break the Bahamian private sector out of its “entrenched status quo” following a decade of growth “flat-lining”, an international economist argued yesterday.

Dan Levine, a practice leader with the Oxford Economics consultancy, told Tribune Business he had “heard surprisingly little” commitment to growth and investment from the Bahamian business representatives he interviewed.

Mr Levine, who led Oxford Economics in producing the just-published report on sustainable Bahamian growth strategies for the Organisation for Responsible Governance (ORG), said the private sector was desperately looking for signs the economy “was moving in the right direction”.

To achieve this, he said the Government and private sector needed to start working “in tandem” to remove structural obstacles to growth, arguing that this “carries more weight than you might think”.

“One of the things that struck me is the importance of baby steps,” Mr Levine told Tribune Business, when asked how the Bahamas could break out of its persistent ‘low GDP growth’ performance.

“It’s confidence-building measures that say we’re moving in the right direction. Many of the people I spoke to were simply looking for confidence measures that the Government and business can work on; incremental steps to improve how these things may occur.”

Oxford Economics, on ORG’s behalf, assessed and analysed the potential of three industries to drive sustainable growth for the Bahamas - manufacturing and agriculture for the local market (import substitution); the shipping ‘break bulk’ and logistics sector; and tourism’s boutique hotel and vacation rental market.

It found that policy, and regulatory, reforms were essential to ease bureaucracy and remove growth impediments to all three sectors if the Bahamas was every to fulfill its true potential in each.

Mr Levine said that while none of the private sector representatives he interviewed were planning to pull out of the Bahamas, they equally had no job-creating growth or investment plans.

“Very few people were saying we’re really committed to growth here, things are going great and we’re ready to make large investments I heard surprisingly little of that,” he told Tribune Business.

“People are entrenched where they are. There are examples of companies growing, but by and large I think it goes back to what we said before. It’s stick with the status quo.

“I do think part of the answer is incremental, small steps in the right direction. Customs reforms came up repeatedly. These carry greater weight down the road than comes up at first blush.”

While acknowledging investments such as Pharmachem’s $80 million-plus expansion in Freeport, Mr Levine said Oxford Economics research showed “some of the smaller manufacturers in the space are really struggling.

“They start off saying they have this major customer and that major customer, but by and large they’re hanging on,” he added.

Mr Levine said Oxford Economics also heard multiple tales regarding investments that could have come to the Bahamas, but for a variety of reasons never did.

“We heard lots of examples of investments that might have come to the Bahamas, but did not come to the Bahamas,” he told Tribune Business.

“That’s how the discussions went. ‘One time we were considering ‘x’, and it didn’t happen’. They said other plants can do this operation.”

The Bahamas has slipped consistently in the World Bank’s ‘ease of doing business’ rankings for the past several years, and Mr Levine said Oxford Economics’ own internal forecasts, like those of the IMF and World Bank, show “relatively flat economic growth” for this nation even with Baha Mar.

“In general, when you look at the last 10 years of economic growth, it has flat-lined by any measure,” he told Tribune Business of the Bahamas.

“As the population grows and the demand for government services increases, flat-line growth is not a sustainable model. To bring sustainable growth, you’re going to need different strategies.”

Mr Levine and Matt Aubry, ORG’s executive director, explained that the ORG study had deliberately focused on industries where key supporting infrastructure elements were already in place to support their development.

Freeport’s existing port facilities, for example, can support a fledgling ‘break bulk’ sector, and Mr Levine said the Bahamas needed to quickly assess how it can best leverage existing infrastructure assets to support diversification and new industries.

“Right now, there’s large infrastructure in place for key industries,” he continued. “The challenge is that as things decline, you begin to lose capital, investment and innovation, and lose your competitive advantage.

“It seems to us that it’s a very strategic time to at core structures on the islands, and recognise that new strategies are needed to reinvigorate core areas.

“It’s time to start moving forward in a new direction, and reinvigorate key sectors while they’re still there to be reinvigorated.”

Mr Aubry added: “If we continue on this path, it becomes more and more difficult to get out of it, and the issues are compounded.”

He emphasised that while the Bahamas’ debt-to-GDP ratio, and unchecked Government spending, needed to both be brought under control, greater GDP growth was equally important if this nation was to achieve economic stability.