The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

BAHAMIAN businesses will "have our backside handed to us" unless the Government "aggressively" undertakes key reforms prior to joining the WTO, a governance reformer warned yesterday.

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business the local private sector would be "seriously damaged" if the Minnis administration fails to implement fiscal, monetary and energy sector changes that place it "on a level playing field" with foreign rivals.

The Government has set a 2019 deadline for the Bahamas to accede to full World Trade Organisation (WTO) membership, but Mr Myers said it had left Bahamian companies carrying "too much baggage" unless it moved "very aggressively" to put its house in order. "We're not ready for that. We're not ready for that at all," he said of the WTO's rules-based, liberalised trading regime. "We haven't got the inefficiency and largesse out of the Government, which is keeping our taxes artificially high.

"We've got exchange control and banking regulations that are keeping our financing and transaction costs artificially high. The cost of money in the US is half of what it is here, and the cost of power is one-third of what it is here. The labour burden and cost of labour in the Dominican Republic and Jamaica are one-third to one-quarter of what they are here."

Mr Myers argued that the Bahamian economy's competitiveness, and that of its companies, is being held back by the costs and inefficiencies of a government that has imposed an increased taxation burden and impeded the 'ease of doing business'.

These costs have been passed on to the Bahamian private sector and consumers, while exchange controls and relatively high interest rates have left local firms unable to compete with foreign rivals when it comes to capital costs and access.

Mr Myers said the Bahamas needed to "get rid of exchange controls and banking regulations so we can borrow at globally competitive interest rates, and we don't have to go from earning US dollars to convert to Bahamian dollars and then convert them back to US dollars to buy goods and services.

"There's no half pregnant on this," he told Tribune Business. "Give Bahamians that opportunity ahead of opening up so we can compete before exposing us on our own turf, and so we have an advantage ahead of competition in our own backyard.

"Otherwise we're going in with too much of a burden, too much baggage that other countries don't have because they're more fiscally responsible and have a bigger economy. We're going in and will have our backsides handed to us."

The Minnis administration and its predecessor have both embarked on a process of exchange control liberalisation in collaboration with the Central Bank, the steps so far seeking to make it easier and less costly for Bahamians - especially businesses - to access foreign capital and invest abroad, while also diversifying the economy and attracting new industries.

The Government has also indicated that WTO membership is a key element of its bid to reposition the Bahamian economy through liberalisation and deregulation, and move it out of its decade-long low growth/high unemployment slump.

Many observers, though, believe the Bahamas and many of its businesses are woefully underprepared for WTO and its rules-based trading regime, and that the private sector will struggle to compete with foreign rivals once trade barriers are lifted.

Mr Myers, though, said much depended on "how aggressive the Government is" in dealing with the Bahamian economy's structural weaknesses as to whether the Government's 2019 WTO deadline will be achieved.

"If they can be aggressive, get their fiscal house in order, abolish exchange controls and banking regulations, then 2019 - the end of - perhaps," he told Tribune Business. "If the Government is not aggressive in acting on these things, you're going to clobber Bahamian businesses if you accede to the WTO.

"You're not going to be able to compete internationally or regionally. They've got to get us on a level playing field. If you don't, you're going to seriously damage Bahamian businesses. And there's nothing I can do about it.

"I can't affect these costs. These costs can only be affected by the Government. There's not a damn thing I can do about this country."

Mr Myers said WTO membership offered "tremendous opportunities" for Bahamian companies, especially in the services sector, to export their offerings and expand into other markets, but this would only become a reality if the Government removed all structural obstacles in their way.

"If WTO accession is to be a reality then it is actually the Government who needs to get their costs in order, modify the laws, regulations and policies, and begin to think more proactively about reducing the size and cost of government," Mr Myers argued. "It is this action that will allow the Bahamas and Bahamian businesses to be more competitive globally.

"Local businesses will not be able to compete in a global market if exchange control and banking regulations remain in place. The regulation, cost and time for the conversion of dollars, combined with the artificially inflated cost of debt due to banking regulations, is of itself an uncompetitive hurdle for Bahamian businesses.

"When one then considers the high cost of energy, taxes, labour burden, fees, Customs duties, government services, work permits, water, licensing etc, all levied by a fat and inefficient government, it abundantly clear where the WTO negotiating team needs to focus their efforts and discussions," he continued.

"We agree with the WTO team's assertion that Bahamian businesses have a tremendous opportunity to grow the service sectors of their businesses throughout the Caribbean and the world, but it is imperative that prior to any further accession to WTO the Government remove the many hurdles that it has placed in the way of Bahamian businesses and its citizens."