The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ near-exclusive focus on large-scale, multi-million dollar foreign direct investment (FDI) projects has come under fire from a trade expert.

Ramesh Chaitoo, one of the co-authors of the Oxford Economics report on full World Trade Organisation’s (WTO) likely impact on The Bahamas, questioned whether this nation realises any value from such mega FDI projects due to the land and tax breaks granted to their developers.

Speaking to Tribune Business, he said this nation’s concentration on such developments was at odds with research that shows small businesses are the greatest drivers of economic growth and job creation on a global scale.

“One of the problems with this economy, looking from the outside in, is the main investment thrust is big projects,” Mr Chaitoo explained, “but most growth and jobs are driven by small businesses.

“There seems to be no thrust, no recognition here, of that fact if you look at the kind of investments and numbers they propose. I don’t understand why. They give away so many concessions you wonder what they get from it in the long run.”

Mr Chaitoo’s observation about The Bahamas’ almost total belief that big is better when it comes to its FDI strategy is likely to strike a chord with many economists and environmentalists, who have seen hundreds of acres of pristine and leading real estate tied-up in failed mega resort projects - especially in the Family Islands.

The importance of medium, small and micro enterprises (MSMEs) to the Bahamian economy was also highlighted by a recent Inter-American Development Bank (IDB) report, which found: “Across the Caribbean region, micro and small and medium sized enterprises (MSME) are estimated to account for 70 percent to 85 percent of firms, contribute to 60 percent to 70 percent of GDP and about 50 percent of employment.

“In The Bahamas there are close to 17,000 business licenses and it is estimated that MSMEs conform 98 percent of them and hire 47 percent of all employees.”

The Minnis administration has sought to diversify away from large-scale resort and real estate developments through its Grand Bahama technology hub ambitions and the related Commercial Enterprises Act, which are focused on attracting entrepreneurs, start-ups and MSMEs.

It has also created the Small Business Development Centre (SBDC) to provide Bahamian entrepreneurs with access to capital and business planning advice, while has pledged to ensure 20 percent of all public sector contracts put out to tender go to MSMEs under new procurement rules.

Mr Chaitoo, meanwhile, described the Government’s June 2020 target for completing the WTO accession process as “achievable”. He added: “It’s doable within the timelines they have identified. It’s doable. It’s just a question of decisions to be made, and different things to be done here and there.”

He added that work on so-called “technical barriers to trade” and other issues, such as Customs processes, would not stop with the WTO accession but continue for some time afterwards as “you don’t introduce these things overnight”.

“The one thing that is positive here,” Mr Chaitoo said of The Bahamas, “is that in many countries that have acceded, the government has done it in a top-down way with little consultation with the private sector.

“It’s very refreshing here to see the minister [Brent Symonette] and the negotiating team are very open and having consultation with the private sector. There’s a kind of dialogue here which you don’t see in many other countries joining the WTO.

“It’s a good thing. They need to figure out the best approach to deal with this stuff, and I was very surprised to see they released the offers and that the different sectors had the right to comment on them. That is unheard of elsewhere,” he told Tribune Business.

“That is a good thing. So far, to my mind, it’s a very good, collaborative process. At some point, though, the Government will have to take hard decisions.”

The Oxford Economics report, released last week, nudged this nation towards proceeding with the WTO accession by finding that the “net impact” will “be moderately positive”.

Should The Bahamas combine joining the WTO with comprehensive, broad-based domestic reform, Oxford Economics estimated it could lift the economy’s long-run average annual GDP growth rate to around 2 percent - higher than the 1.5 percent currently forecast by the International Monetary Fund (IMF).

It also projected that this would help slash The Bahamas’ national unemployment rate from its current 10 percent to 6.5 percent over the next decade, driving it to its lowest level this century.

“The positive effects would quickly build in subsequent years, lifting the average growth rate of the economy to 2 percent per annum across the forecast, compared with 1.5 percent per annum in the baseline. By the end of the forecast period in 2029, this leaves the economy 5.7 percent larger than baseline levels,” the Oxford Economics study said.