The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

American aviation investors complained that the former Christie administration "stonewalled" their projects due to lobbying by Bahamian rivals, the US government revealed yesterday.

The State Department, in its annual 'investment climate statement' on the Bahamas, said the need for all foreign direct investment (FDI) projects to obtain government approvals meant they were subject to arbitrary, politically-related influences.

"The approval process provides opportunities for Bahamian businesses with competing interests to lobby Cabinet members to delay review or approval of FDI applications," the report said.

"The Embassy [in Nassau] is aware of several cases in which investors who have submitted applications have not received responses, or have experienced significant delays in the approvals process.

"For example, the Embassy has been contacted by American companies seeking to do business in the aviation sector whose applications have been stonewalled due to the impact of lobbying efforts on Cabinet members in the decision-making process."

Neither the US companies nor the projects in question are identified in the US report. However, it makes clear that it is referring to events that occurred under the former Christie administration, as the contents "cover the period through May 9, 2017" - the day before the general election.

The 'aviation companies' complaints could again act as a deterrent to foreign direct investment (FDI) in the Bahamas, as they suggest the investment approvals process is far from transparent and subject to unknown influences.

Yet it also offers the Minnis administration to make a 'clean break' with whatever happened in the past, and show it is committed to facilitating investment - both Bahamian and foreign - via a process that is easily understood, offers precise response times that are adhered to, and is transparent and accountable.

Oft-repeated concerns over the Government's tendering and procurement processes were also reinforced by the US State Department's report.

"Some US companies have alleged a lack of transparency and undue political influence with government bidding and procurement processes, noting that not all potential government contracts, particularly those not financed through international financing institutions, are put out for tender," it said.

"Companies also complain that it is difficult to obtain information on the status of bids. In several highly publicised requests for proposals (RFP) in recent years, the Government did not meet stated deadlines or changed the nature of the RFP, and some contract renewals have been pending for 12 months or more."

Meanwhile, the US report also warned that Bahamas Power & Light's (BPL) woes will not be solved until the Government permits increases in its base tariff rates - a prospect likely to be greeted with dread by most Bahamian households and businesses.

"Electricity in the Bahamas remains expensive, unreliable and of poor quality, which continues to hinder development of large-scale manufacturing in the country," the US State Department report said.

"The situation is unlikely to change until the Government approves increases in electricity rates to support needed improvements in power generation and distribution.

"One bright spot is in residential renewable energy. URCA published initial regulations for grid-tied, residential solar in December 2016, and BPL is now issuing licenses for small-scale solar systems. The BPL business plan calls for utility-scale solar in the Family Islands, but this is not likely to occur in the near-term."

The grim reality is that the US report is correct where BPL is concerned, since it will only be able to upgrade its aging infrastructure via increased cash flow and profitability generated by a rise in its base tariff.

"The major challenges to investment in the [Bahamas] include the high cost and uncertain reliability of electricity; high unemployment combined with a limited pool of skilled labour; high labour costs and low rates of productivity; cumbersome and sometimes opaque administrative requirements; and an escalating crime rate," the US State Department report said.

"In addition, the reservation of certain sectors of the economy for Bahamians only acts as a non-tariff trade barrier to certain foreign investments that do not fit clearly within the National Investment Policy. The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organisation (WTO).

"Companies report that the approval process for FDI and work permits can be cumbersome and time-consuming and that, in some cases, applications have lingered for years. Large FDI projects require approval by the National Economic Council, which includes members of the Cabinet of The Bahamas.......

"The Government of the Commonwealth of The Bahamas (GCOB or the Government) asserts, however, that the majority of foreign investment applications are processed quickly and without significant issues."

The US State Department also reiterated concerns over the failure to discipline wrongdoing by Bahamian attorneys, and the slow pace at which judicial disputes are resolved in the court system.

"Property disputes can be challenging, sometimes lasting several years in the Bahamian court system," the report said.

"Investors complain that these matters are difficult to resolve, and that, even after a court decision has been rendered in their favour, they face difficulty in collecting or enforcing the court judgments.

"The Embassy is aware of several complaints about local attorneys, primarily involving real estate transactions, which have resulted in significant losses to American investors. Embassy referrals to the Bahamas Bar Association for appropriate disciplinary action in these matters often go unanswered."