The Tribune

In the final of a four-part series, Hubert Edwards says The Bahamas has much to do in developing a growth platform to pay down its debt . . .

The time for focused action is now. I recently read a meme which stated: “Don’t be afraid to start over again. This time you are not starting from scratch; you are starting from experience.” The Bahamas is certainly not starting over from scratch but, as we seek to claw ourselves back to economic resiliency and greater stability, we have deep experiences and insights from a global pandemic and financial crisis to lean on. Even if there have been missed opportunities we cannot afford to lose the lessons. In my previous article, I ended by stating that there needs to be a growth strategy coupled with dreaming and aspirational reaching, stretching ourselves beyond the points that economic realities suggest are impossible now. It is worth repeating that there is no other way out than to think and strategise for success. The recent Budget exercise has provided us with some insights into the challenges of the future, and I believe that the remedial actions now necessary must be tied to economic growth.

As part of this process, there must be a firm commitment on the part of the government to improve its facilitative capacity, thereby enabling and “incentivising” the private sector to become more innovative in driving growth. The current debt situation demands a broader discussion beyond mere reduction. As we move forward, there are questions I believe we must contemplate. In the midst of the COVID-19 shutdown, I raised some of these questions, but still believe they remain relevant and can provide guidance. What do we want the country to look like over the next decade? When we get to 2031, and the national debt is back to reasonable levels based on government projections, how well placed will The Bahamas be to build on its new economic strength? Given the uncertainty around tourism, what will it look like and how can we secure greater diversification in that sector? Beyond tourism itself, how will we add greater diversity to the economy?

One of the important questions moving forward is what the tax regime of the Bahamas should look like? This must be considered in the context of which regime provides the greatest future value for the country. Also, as we seek to secure greater economic growth, the government must actively consider sectors that are ripe for policy support and move quickly to season them for expansion. The approach should not be “home-run or nothing”, but deliberate and intentional with the ability to seamlessly switch over from one administration to the next. I believe there is value in rethinking the use of fiscal policies linked to taxation in driving growth in the Family Islands. This would not be a broadbrush policy, but one that clinically exploits different outcomes for each island.

The pandemic has shown what is at risk when there is a significant downturn. The well-being of the entire Bahamas is in peril. This makes the argument not only for diversification of tourism but paying greater attention to the wider economy. What will financial services look like over the next two to five years? Will the developments around a global minimum corporate tax hurt the industry or create sufficient disruption to demand strategic shifts and a reengineering of offerings? As the second pillar of a largely two-industry economy, these are important questions. In the quest for growth, The Bahamas must leverage every opportunity it has at its disposal. Grow tourism, grow financial services, grow agriculture, develop new industries and, where there may be “sacred cows”, determine how they will be treated and the extent to which we are willing to sacrifice benefits for the greater good.

As an example, I have noted a number of reports, news articles and analyses on the rankings and state of the offshore financial services arena. In each of these, The Bahamas does not feature highly. One may conclude that this is a good thing as they generally point to countries with the greatest impact on onshore countries’ tax revenues. However, they demonstrate an exclusion from more lucrative aspects of the financial arena. Countries such as the Cayman Islands consistently leads the way, with the British Virgin Islands (BVI) and Bermuda consistently in the frame. As we seek solutions for growing the economy, this reality suggests opportunities. It is clear there are greater options for participating in, and growing, the international financial sector.

It is clear that recent developments on corporate taxes mean there will be some disruption. Yet we are not a big player in corporate headquartering segment, and Tax Justice Network reports show The Bahamas as being well outside the top “performers” in certain lucrative segments. Why is this so? Are there opportunities to re-engineer The Bahamas’ offerings and seize back the advantage from regional competitors? Is there any potential for diversification within the sector, akin to home porting developments in tourism I believe that we must step back and take a careful strategic look at the current state of the sector. Why are all these companies headquartered in Cayman? Is it just for taxes? Given the similarities in the tax regimes of both countries, it is challenging to accept that. Therefore, are there aspects of the Cayman regime, as an example, which indicate where and how we can adjust and innovate for gain? If not, then why are they there and not here? There is clearly a competitive arena in which we do not actively participate as an international financial centre, but why would that happen if we are in the business of expanding the economy? Is this a case of The Bahamas being to focused on a particular niche? Regardless of the answers, it is clear that opportunities exist. Given the need to grow the economy, and that there are significant national competencies in financial services, should we not now look at how, with this minimum taxation disruption (potentially), we can make new forays into “non-traditional” areas of the sector? If the playing field from a tax perspective is expected to be level, and the clear regional leader, Cayman, has signed on to a global minimum corporate tax agreement, should we not be looking to see how we can leverage this? Like most persons, I like to see when The Bahamas is in the “good books” - no blacklisting, grey listing, negative narrative or threats. However, I believe that there are too many “good reports” that the country is not on. These reports appear to be indicative of opportunities not pursued. As we seek greater resilience the hard questions are whether will these be pursued, or are we incapable of pursuing them? I strongly believe that the country is capable. I strongly believe that the sector has a desire. I also believe that if we take a careful strategic approach to the corporate tax issue there is the potential for gains. After all, there is a significant market segment being disrupted in which we are an insignificant player at best.

Fixing the debt challenge requires that we move into action and solve the growth dilemma. In this recovery effort, we must be broad in our thinking and be willing to grapple with the uncomfortable questions. Which sector of the economy is causing a drag on others? How do you diversify without a broader skill set? Are there social assets such as diversity of cultures that we can take advantage of? Does immigration hold any value in diversification? What are the opportunities in CARICOM, and how can we leverage the Caribbean to improve the domestic economy? What opportunities are there for inter-regional trade that benefits The Bahamas’ maritime industry? How do we restate the idea of Bahamianisation for the 22nd century based on fairness, economic equity and empowerment? How does centralised governance adversely affect economic growth, and is there value for greater devolution to local government?

The road back to economic health for The Bahamas will not be easy. The great news is that after failures, it is not possible to start from scratch. The starting point may be without all the tangible resources desired, but there is always more when we dig deeper. Having experienced the challenges, we are better prepared for the next moves - or ought to be - because there are many lessons to be learnt. If we adequately absorbed the lessons, then moving forward should be better and easier in many ways. It is most important that we are bold, not afraid to face the realities, and believe we have the capacity for great achievements. We are now resourced with ideas, awareness of what worked and what did not work, and we should have clearer thoughts on what is needed and how to make the necessary adjustments. It is time, therefore, to step out in search of the missing pieces of the puzzle, finding and placing them in the right places. It may take us a while to get back to where we were, but the tentativeness, anxieties and uncertainties that bothered us should now be firmly placed in the past. It is time for new considerations and new thinking that is more informed. We have the ability to grow, and to grow again, but it starts by thinking that we can, and being committed to finding the “how to”.