The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday conceded that the government will not reap “any immediate political benefits” from much-needed reforms to eliminate structural economic bottlenecks.

KP Turnquest told Tribune Business that the intended benefits of the Minnis administration’s restructuring programme may not materialise “in two, three, five years”, but were essential if The Bahamas is to achieve greater prosperity for its citizens.

Speaking as official data showed the unemployment rate remained stubbornly in the “double digits” following a slight uptick in November, Mr Turnquest said the figures reinforced the need for The Bahamas to break out of its decade-long no-to-low growth cycle through major changes to its economic model.

While it was “understandable” that many Bahamians are unable to see the need for fundamental economic reform given that they are focused on addressing their “immediate needs”, Mr Turnquest said it was critical that the government “look down the road to see how we can build a more sustainable economy”.

He reiterated that The Bahamas needed to address the “tremendous burden” that the government’s size was imposing on the private sector and households to fund it, arguing that this was depriving businesses of capital that could be put to “more productive use”.

Mr Turnquest said previous administrations were likely “more pre-occupied” with the political impact of potential reforms, but added that the current government could ill-afford to adopt the same mindset with the economy’s “twin pillars” - tourism and financial services - coming under ever-increasing competitive and regulatory pressures.

With The Bahamas’ official jobless rate standing at 10.7 percent last November, up from 10 percent in May 2018 and 10.1 percent the year before, the Deputy Prime Minister said the Government was focusing on a “two-fold” strategy of attracting more foreign direct investment (FDI) and boosting Bahamian entrepreneurship to stimulate job creation.

“The reality is the Government has been the major employer of record for too many years,” Mr Turnquest told Tribune Business, “and the burden of that public sector puts tremendous demands on the system for capital that should be employed in the private sector for more productive use.

“It’s important for us in the long term to have a sustainable economy so that we get capital in the hands of entrepreneurs, deepen the economy so that we add to the traditional pillars of tourism and financial services, and start to produce indigenous products and services that can be consumed locally as well as exported.

“Our efforts are two-fold,” he continued. “To attract extra foreign direct investment to the country to pick up some of the slack and productive capacity that exists, and make training and capital available to entrepreneurs interested in creating the indigenous economy we desire to see us through to the sustainable and robust economy we deserve.”

Mr Turnquest indicated the Minnis administration was seeking to shed the politically-led decision-making of the past by implementing critical economic reforms that might prove unpopular at first, and where the benefits may take time to materialise rather than provide an instant election winner.

“We cannot expect to really remove structural deficiencies in the make up of the economy in two, three, five years, but we have to make a start,” he told Tribune Business.

“This is not one where we are going to receive any immediate political benefits from, but it’s absolutely necessary if we’re going to build a sustainable economy going forward.

“We all know the international pressures being put on independent sovereign nations such as ourselves, and the only way to be able to survive, sustain and thrive in this environment is to ensure local entrepreneurs and service providers have equal or better access to opportunities.”

Mr Turnquest conceded that Bahamian businesses and entrepreneurs had been neglected in the past, especially when compared to foreign counterparts who were able to access tax breaks and incentives not available locally, but pledged this would now change.

“In fairness to prior administrations they may have been more pre-occupied with achieving political majority and political equality,” he told Tribune Business. “However, consequent to that, we neglected at the same time to broaden the scope of ownership of the economy and provide the kind of incentives to local entrepreneurs that we would have given to foreign investors.

“It’s time to reverse that imbalance to ensure the local entrepreneur has an equal or better chance, and and equal access to investment concessions, as foreign investors. It’s all wrapped up in this whole thrust to encourage more participation and harness this whole idea of Bahamian wealth creation.”

Mr Turnquest did not provide details on how the Government plans to boost Bahamian entrepreneurship, although a Ministry of Finance statement yesterday said it will soon unveil “a package of direct financing instruments to get capital into the hands of Bahamian entrepreneurs and small businesses”.

This will include grant financing targeted at Bahamians from underprivileged backgrounds, and is intended to “give life” to the Government’s pledge of providing $25m in financing to Bahamian entrepreneurs over the next five years.

The Deputy Prime Minister, meanwhile, confirmed in response to Tribune Business questions that the Government’s broad economic strategy is one of sparking higher GDP growth rates through diversification that attracts new industries, coupled with deregulation, liberalisation and the removal of red tape-style barriers to commerce.

The Commercial Enterprises Act, improvements to the “ease of doing business” and accession to full World Trade Organisation (WTO) membership are just three components intended to achieve these objectives as the Minnis administration moves to re-position, restructure and re-orientate the Bahamian economy to better compete in the 21st century.

The Bahamas’ persistently high unemployment rate, which has remained in the “double digits” since the 2008-2009 recession despite Baha Mar’s arrival, is viewed as a sign that the current economic model cannot take the country much further and is in need of major reforms.

Many Bahamians, though, remain attached to the “status quo” and are fearful of change - something that was acknowledged by Mr Turnquest yesterday. With large numbers living pay cheque to pay cheque, and/or struggling daily to make ends meet, few are focused on the bigger picture and The Bahamas’ economic future.

“To some extent it’s understandable because the immediacy of their needs overshadows any long-term planning,” he told Tribune Business. “We fully understand that. We are trying to meet their immediate needs and to look down the road to see how we build a more sustainable economy.

“We all know that at some point in the future a global crisis is going to come, and we have to build an economic model that is resilient and helps us to avoid the deep recession and fall-out that occurred in 2008-2009 and subsequent hurricanes.

“We’re trying to change that position. We cannot rest on our laurels. We have to keep moving the ball forward, improving service levels and efficiency to remain competitive and fresh. That’s our challenge.”