The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister yesterday hailed a 42 percent year-over-year increase in foreign investors’ equity investments as confirmation that “The Bahamas’ economic turnaround has begun”.

K P Turnquest told Tribune Business this showed that investors were “willing to put skin in the game” to advance their projects, as opposed to relying on debt financing, which was further evidence that the Minnis administration’s economic policies had “restored confidence over the last two years”.

Reacting to data in the annual World Investment Report, produced by the United Nations Council on Trade and Development (UNCTAD), Mr Turnquest said the Government was “never satisfied” despite The Bahamas continuing to attract the largest foreign direct investment (FDI) inflows of all 28 small island developing states (SIDS).

The Bahamas retained top spot despite a 9 percent year-over-year decline in FDI inflows to $943m, according to the UNCTAD report. The source of such inflows, and the projects involved, were not identified but the study added that The Bahamas and Barbados continue to attract the majority of all FDI destined for SIDS.

Revealing that the Bahamas accounted for almost 50 percent of FDI received by Caribbean SIDS in 2018, the World Investment Report said: “FDI in the 10 Caribbean SIDS slipped to a five-year low of $2bn.

“FDI flows in The Bahamas, the largest FDI host economy of all SIDS, contracted for a second year (down by 9 per cent to $943m). This was despite a 42 per cent gain in the equity component of FDI, which was driven by construction projects.”

Mr Turnquest told Tribune Business: “As we’ve been saying all year, we can see the economic turnaround that has begun with 2017’s modest growth and last year’s 1.6 percent growth. The projects in negotiation and development stages, we anticipate those will show some shift in the numbers you quote.

“The fact is the international community and domestic community have got greater confidence over the last two years, and it’s showing in the numbers. As long as we focus on our fiscal plan and remain committed to transparency and progressive policy we should see some continued growth.”

Focusing on the 42 percent rise in FDI equity investments, meaning the funding is coming from investors’ own pockets and resources, Mr Turnquest added: “That is a very strong indicator that investor confidence has returned to The Bahamas; that they’re willing to put skin in the game to support growth.

“That’s a very positive development and bodes well for the future - that people are putting skin in the game.”

The Government is currently seeking to close Carnival’s $100m cruise port investment in Grand Bahama, as well as the sale of the Grand Lucayan and redevelopment of Freeport Harbour with the ITM Group/Royal Caribbean consortium.

As for Nassau, it is focused on the $250m redevelopment of Nassau’s cruise port and revitalisation of downtown Nassau, together with approved projects such as GoldWynn and Sterling Global Financial’s Hurricane Hole transformation.

However, despite the World Investment Report’s optimistic findings, FDI projects in the pipeline and “double digit” increases in hotel performance indicators and stopover tourist arrivals, concern remains over whether these economic improvements are filtering down to the so-called “average Bahamian on the street”.

Even yesterday one businessman, speaking privately to Tribune Business, voiced doubts as to whether the pick-up in economic growth and job creation was resulting in improved living standards, incomes and job opportunities for ordinary Bahamians.

Still, Mr Turnquest yesterday said “a strong investment book” should translate into a domestic economic environment that creates “sustainability” for both entrepreneurs and Bahamians seeking employment.

“FDI continues to be a very important segment for us as we recognise we have a relatively small internal market, and the need for new capital to be injected into the economy is very important,” he added.

“We are giving equal attention to the domestic market as we don’t get the full benefits by just concentrating on the international side and failing to focus on the domestic side and ensure they’re able to participate in these projects.”

Mr Turnquest added that the Government would “never be satisfied” with the FDI figures, even if they appeared healthy, so long as Bahamians were still seeking entrepreneurial and employment opportunities.

To help attract increased FDI, he said the Government had also retooled the Bahamas Investment Authority (BIA) “to improve the efficiency of the overall approval process and decentralise some aspects of what they do to remove bottlenecks”.

Confirming The Bahamas’ continued FDI dominance together with Barbados, the report added: “FDI stock in SIDS remained highly concentrated in The Bahamas and Barbados.

“MNEs (multinational enterprises) from North America have been by far the largest investors in SIDS. Five of the top 10 sources of FDI are developing Asian economies. FDI stock held by the US in SIDS represents 5 to 6 per cent of the US’ total holdings in all developing economies.

“About 30 to 40 per cent of Canadian investors’ outward FDI stock in all developing economies is held in SIDS. The geographical distribution of this North American FDI stock among the 28 SIDS has been highly skewed towards The Bahamas and Barbados,” it added.

“Similarly, the significant gains in FDI stock held by Brazil and Hong Kong (China) from 2013 to 2017 were almost all attributed to investment in either The Bahamas, Barbados or both.”

The World Investment Report revealed that 98 percent of Canadian FDI in SIDS was in 2017 split between The Bahamas and Barbados, which accounted for 33 percent and 65 percent, respectively.

During the same year, The Bahamas accounted for 36 percent of all US investment in SIDS, slightly higher than Barbados’ 31 percent, although down from a more than 50 per cent share in 2013