The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “losing its competitive edge” on foreign direct investment (FDI) to Caribbean rivals as a result of its ‘ease of doing business’ woes, the US government has concluded.

The US International Trade Commission (USITC), in its latest report on the Caribbean Basin Economic Recovery Act, which underpins the one-way trade preferences favouring multiple Bahamian exports bound for America, noted that FDI flows to this nation have “fluctuated dramatically in recent years”.

Coinciding with Baha Mar’s ‘stalling’, such flows dropped “sharply” from $1.3 billion and $1.6 billion in 2013 and 2014, respectively, to just $408 million in 2015, according to the report.

Suggesting that the “structural bottlenecks” identified in the latest International Monetary Fund (IMF) report were also to blame, the USITC said: “Part of this drop-off in FDI can be explained by the Bahamas’ losing its competitive edge for attracting investment to other CBERA [Caribbean] countries, with issues relating to property registration, electricity, access to credit, and protections for minority investors hindering the development of new business opportunities.”

FDI inflows to the Bahamas are thought to have recovered somewhat in 2016 and 2017, and the Minnis administration is banking on further increases to help drive GDP growth, job creation and foreign exchange earnings as it bids to pull this nation out of its decade-long ‘low to no growth’.

The USITC report’s conclusion, though, illustrates the extent of the work that has to be done as the Bahamas bids to integrate more fully into the world’s rules-based trading regime via accession to full World Trade Organisation (WTO) membership by end-2019.

And the US Trade Representative’s report on CBERA, released at around the same time as the USITC’s, accused unnamed Bahamian radio stations of broadcasting music without obtaining permission or paying the necessary royalties - a violation of copyright. “WTO accession efforts, coupled with the implementation of the EPA (Economic Partnership Agreement with the European Union), have aided the Bahamas’ effort to modernise its intellectual property laws. In 2015, the Bahamas passed legislation to establish a new and more extensive intellectual property rights framework,” the US Trade Representative’s report said.

“The laws are pending, however, and enforcement of existing intellectual property rights legislation is weak. US trade industry groups have expressed concerns that commercial radio stations in the Bahamas broadcast copyrighted music without the payment of royalties.” No evidence was produced to back up this allegation, and nor were the accusers named. Brent Symonette, minister of financial services, trade and industry and Immigration, recently told Tribune Business that upgrades to the Bahamas’ intellectual property rights laws, together with the regulations that give them enforcement teeth, had been circulated for comment and feedback.

The US Trade Representative’s Office pegged the Bahamas’ net trade deficit with the US at $1.732 billion in 2016, based on this nation importing some $2.029 billion worth of goods and exporting only $296.63 million in return.

For the first eight months in 2017, the report showed Bahamian imports of US goods had increased by 44.2 per cent to $1.878 billion compared to $1.302 billion the year before, further illustrating how this nation imports virtually everything it consumes.

The USITC, meanwhile, said some $68.4 million worth of Bahamian exports entered the US via CBERA, which ensures they face no tariffs or other protectionist barriers.

“US imports under CBERA from the Bahamas are almost entirely made up of polystyrene, a plastic product used in many forms of packaging and other consumer uses,” the report said. “Other US imports from the Bahamas include cucumbers, natural sponges, prepared crabmeat, metal-finishing machine tools and cigars. Polystyrene enters duty free exclusively under CBERA.”

The polystyrene is produced by Freeport-based Polymers International, and the USITC report - drawing on information provided by the US embassy in Nassau - said the company had located in the Bahamas to access the CBERA benefits.

“US imports of polystyrene under CBERA have fallen almost by half since 2012, from $129.4 million in 2012 to $67 million in 2016 - a 48 per cent decrease,” the USITC said. “Polystyrene accounted for 98 per cent of US imports from the Bahamas under CBERA in 2016.

“Despite declining imports, CBERA still remains an important factor in the Bahamian polystyrene industry. The largest Bahamian exporter of polystyrene, Polymers International, reported that the benefits of CBERA were indispensable to the company’s continued operation, and that the existence of the programme informed the New Zealand company’s decision to locate in the Bahamas.

“Overall, total US imports from the Bahamas followed the same trend as that of polystyrene. They fell roughly 48 per cent in 2012–2016, being valued at $130.5 million in 2012 and at $68.4 million in 2016.”

One-way trade preferences regimes, though, such as the CBERA with the US and CARIBCAN with Canada, are frowned on by the WTO and other rules-based trading regimes. They will at some point likely have to be replaced, especially with the Bahamas set to join the WTO.