The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas “cannot rest on its laurels” despite leading all small island developing states (SIDS) in the amount of foreign direct investment attracted in 2020, a governance reformer warned yesterday.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that The Bahamas needs to adopt a more strategic, targeted approach to attracting sustainable foreign direct investment (FDI) despite receiving almost $900m in such inflows amid the COVID-19 pandemic.

The just-released World Investment Report 2021, produced by United Nations (UN) agency, UNCTAD, revealed that The Bahamas attracted more than double the amount of FDI received by another so-called SIDS states during 2020.

However, while The Bahamas enjoyed a 47 percent increase in FDI inflows to $897m, these statistics were not as impressive as they seemed. For the UNCTAD report indicated that much of the increase stemmed from reinsurance inflows related to Hurricane Dorian reconstruction as opposed to capital investments in tourism and other industries/businesses.

“In The Bahamas, inflows grew by 47 per cent to $897m despite the contraction of the domestic economy and tourism. Reconstruction works following the ravages of Hurricane Dorian in 2019 and investment in ICT (information and communications technology) services continued in 2020,” the World Investment Report 2021 stated.

Mr Aubry, who served as a member of the Government-appointed Economic Recovery Committee, said the 2020 inflows were “not necessarily something we can trust as sustainable or based on capacity” given that they appear to be linked to one-off Dorian reconstruction.

“It doesn’t sound like we can rest on our laurels,” he told Tribune Business. “We have to recognise the value of broadening the ease of doing business and smart, strategic FDI that aligns with the domestic economy and makes sure local opportunities are there. A stronger and more diverse local economy benefits from strategic FDI.

“I think there’s things we can do to shore this up through accelerating the decision-making process. We’ve recommended to develop a full Land Use Plan so we know what projects we’re looking for. Instead of what comes knocking at the door, identify where we need to push and drive. We’ve identified medical tourism as being of value, and technology as being of value.”

Mr Aubry said lessening the bureaucracy and red tape associated with Know Your Customer (KYC) processes in the financial services industry, and ensuring The Bahamas avoids so-called ‘grey’ lists and ‘black’ lists, was also key to enhancing the country’s reputation and giving it a “more competitive advantage” in attracting quality FDI.

And “the progressive way to be more competitive and attract investment here” involves boosting The Bahamas’ fight against corruption and enhancing integrity through implementation of legislation such as the Procurement Bill and passage of the Integrity Commission Bill.

“It still comes down to the experience of the investor,” Mr Aubry added. “They don’t want to encounter bureaucracy and a lack of clarity. We need to be sharp, strategic and apolitical as much as we can because the future of the country really depends on getting this blend right.”

He said The Bahamas needs to increase its annual FDI inflows beyond the numbers detailed by UNCTAD for 2020 as they “don’t come from a model that can be replicated”. Mr Aubry added: “We need strong rates of growth and it needs to come from something we can control as opposed to being built on circumstance.

“Our ability to recover is good; our ability to be resilient is something different. It’s the difference between surviving and thriving, and that’s what we need to be striving for.”

Last year’s World Investment Report revealed that FDI inflows to this nation fell by 32.8 percent year-over-year to $637m. That represented a level equal to just 20 percent of FDI’s peak in 2014 when Baha Mar’s construction was being raced to its completion (unsuccessfully at that time).

“FDI inflows to The Bahamas, the largest host economy among small island developing states (SIDS), shrank by a third to $637m, one-fifth of the peak registered in 2014,” UNCTAD said. “Investment in hotel projects slowed, and construction projects slated to start in 2019 were forced into a delay by Hurricane Dorian.”

That indicates that FDI inflows to The Bahamas increased by some $260m year-over-year in 2020. That, though, represents a 40.8 percent increase as opposed to the 46.8 percent increase cited in the latest report, indicating there may have been a slight downward revision to the 2019 figures.