Policy reforms need for $200m IDB guarantee

As of Wednesday, July 21, 2021

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must implement several policy reforms to develop its “blue economy” in return for obtaining a $200m guarantee that will underwrite the government’s planned $700m foreign currency bond.

The terms are detailed in an Inter-American Development (IDB) document, which reveals that the multilateral lender will provide the guarantee “upon compliance with a set of policy reforms” that promote sustainable investment in The Bahamas’ marine industries and “strengthen the legal and institutional framework” for promoting an ocean-based economy.

Describing the arrangement as a “policy-based guarantee”, the IDB said that once these policy reforms are enacted it “will cover credit risk by partially guaranteeing the issuance of an international sovereign bond by The Bahamas, which is expected to be issued in reliance of private placement rules”.

It added: “The amount of the guarantee will be up to $200m from the ordinary capital resources of the bank. The beneficiary of the guarantee will be a trustee, as representative of the bondholders.

“The guarantee will be triggered in case of failure of the issuer to make a debt service payment. This guarantee structure is expected to mobilise additional resources from international investors and reduce financing costs for the government, improving its debt profile.”

The government has made no secret of its desire to obtain a $200m guarantee for its $700m sovereign foreign currency bond issue, which it is hoping to place by late September/early October this year provided market conditions - interest rate coupon, yield and tenor etc - are favourable. However, the IDB’s terms for providing the guarantee have not been disclosed until now.

The multilateral lender, meanwhile, said The Bahamas’ geography and climate creates “unique possibilities” for it to develop the so-called Blue Economy in the waters of its 260,000 square mile Exclusive Economic Zone (EEZ), which is comprised of just five percent land.

Adding that proper management and protection were key to achieving this goal, the IDB added: “The economic contribution of the Blue Economy to The Bahamas has been estimated in 21.5 percent of GDP, and up to 50 percent including the indirect impacts.

“With 95 percent of the country’s territory located in the marine habitat, and around 70 percent of the country’s population living on the coast, marine resources have the potential to become an important source of economic production.”

Suggesting that aquaculture and ocean-related biotechnology have not been properly exploited, the IDB said: “The Bahamas, as an archipelago with hundreds of Islands, has limitations in its logistic infrastructure, imposing high costs for business transactions and limiting integration of the Family Islands with the rest of the economy.

“Many of the activities related to the Blue Economy are carried out by micro, small and medium-sized enterprises (MSMEs) that are hindered by high operation costs, partially due to the cost of transport between islands, the extra time and costs required to obtain permits and the lack of digital services.

“High transportation costs within islands, irregular schedules, costly financial transactions and the cost and timing of business procedures from remote locations impose an additional burden to the business environment as maritime transportation is more expensive than land transportation,” the report continued.

“Also, Blue Economy activities such as getting an on-line fishing permit, a cruising permit or to register a private or commercial boat require lengthy and cumbersome processing time when done manually. In addition, is not profitable for commercial banks to have ATMs or physical branches on remote islands, and extreme weather events increase the cost of rebuilding that infrastructure, generating a lack of access to financial services. Many of these limitations are currently being solved by the implementation of an aggressive digitisation strategy that will allow to carry out these processes remotely.”

IslandWarrior 3 years, 5 months ago

"Aquaculture and ocean-related biotechnology have not been properly exploited" is only the tip of the "poor attitude mountain" this administration and its managers have Re: industrial aquaculture development in the Bahamas and, in fact, any development by Bahamians, as it were.

I recently had to abandon my discussion with this Administration because of its lack of vision, disrespect and the careless attitude I encountered, presenting what could become a major challenge to the industry leaders in the multi-billion dollar global export seafood industry. And what I can only conclude as a petty grudge or just a simple hatred for things Bahamian.

Globally the Blue Economy has an annual value of at least $2.5 trillion each year from the combination of fishing and aquaculture, shipping, tourism, and other activities. But the vision this Government have of Bahamians in this regard is what was said to me "Bite-Size" that you must start small and that you are too big-eyed for having the big vision of creating an industry that can easily employ 10 - 20,000 Bahamians in the Modern Aquaculture and Marine related industry.

Lately, I have learnt that millions of dollars are made available for Bahamians, as recently noted by our Ambassador Maria O’Brien The Bahamas will gain access to the $100 million Climate Services and Related Applications Programme, which supports development in agriculture and food security, health, water, disaster risk reduction and energy and is a key part of building the country’s ability to reduce the impact of the climate crisis and increasingly powerful hurricanes.

O’Brien said: “There are many programs available for Bahamians from EU-funded organizations, and with a skilled team of technical officers who can perform at a high level in Brussels, we can do even more for the country.

Ambassador Maria O’Brien and her staff are doing an excellent job of bringing forward solutions that have been available to Bahamians for years, which eases the frustration of the private sector who may not qualify for funding assistants in areas like aquaculture from traditional financial institutions.

But the sad reality for Bahamians seeking to develop industry in small island nations like The Bahamas; where assistance from funding countries and institutions become available to politically motivated administrations. The funding received is nothing more than campaign money for the sitting political party, whose view is to get maximum coverage from a few dollars while ignoring the more sustainable and more viable option of developing industry and employment - over party agenda, personal legacy and misguided ambition.

To this end, I support the IDB position that “upon compliance with a set of policy reforms” that promote sustainable investment in The Bahamas’ marine industries and “strengthen the legal and institutional framework” for promoting an ocean-based economy. Describing the arrangement as a “policy-based guarantee”,

ThisIsOurs 3 years, 5 months ago

"you must start small and that you are too big-eyed for having the big vision of creating an industry that can easily employ 10 - 20,000 Bahamians in the Modern Aquaculture and Marine related industry."

if you are going that big Id agree. Split the work into phases and prove each phase before expanding. Neither Google, Apple, Microsoft or Amazon were built in a day.

I agree with you generally, innovation is stiffled in this country by all the men sitting in the gates to the city. They control who gets funded and their petty grudges and lack of vision often see funding going to eateries for a photo op (which is great) but they should simultaneously be looking at real innovation. Dont talk about the men who do see the vision then jump to grab the spoils for themselves. "it was only an idea"

Innovation is risky and takes large upfront investment. They should either accept that or stop talking about it. Just say we're going to fund food trucks till 2100 because they guarantee a return within 3 months.

IslandWarrior 3 years, 5 months ago

The size of a project that employs 10 - 20,000 persons is the size intended to run that industry and should not be an object of anyone subjective opinion. A BahaMah, Kerzner or Sandles are not told that they should downsize because that industry needs 5,000 employees (to clean, greet, feed, entertain and manage and provide safety for its guess) or asked to split the work into phases and prove each phase before expanding.

One commercial size aquaculture site that is providing a complete culture cycle “from the egg to the plate” and its many areas of expertise (hatchery, nursery, grow-out, feeding, cleaning, testing, monitoring, harvesting, sizing, gutting, washing, checking, packing, boxing, labelling, order fulfilment, cold storage, processing, shipping logistics - administration, security and management) will consider 20,000 employees small in comparison to the market demand.

The three critical advantages the Bahamas have over the nearest competitor in the seafood industry are:

Proximity Proximity Proximity

Not to mention the Caribbean Basin Initiative (CBI), Sustainability and Food Safety. Environmental challenges in the gulf and fishing restrictions everywhere else make the Bahamas ideal for this development.

The global demand is for fresh (Fresh, Never Frozen) seafood, which the Bahamas (and the Caribbean) can fulfil, ideally.

When the IDB is telling The Bahamas (it must implement several policy reforms to develop its “blue economy”), it’s not referring to “Split the work into phases and prove each phase before expanding”.

The question to ask this administration “why not give full support to build this industry” or who are the politicians are protecting, or is it the dark face of our nemesis; the “White Guy” who must come into building the industry because Bahamians are still victims of the culture of the ugly grudge of self-hate that has marginalised us to where we are now.

ThisIsOurs 3 years, 5 months ago

Hmmm I think you misunderstood what I said.

I did not tell IslandWarrior he was "too greedy" or downsize the vision.

I told him if the project is that big do it in phases. It makes sense. There must be something about the scope of work that can be segmented. Atlantis was done in phases. Bahamar started with big do it all at once ambitions but eventually adopted a phased approach. The road works started in phases then switched to a get it all done failed approach.

Phases , iteration makes sense when size or high risk are factors

carltonr61 3 years, 5 months ago

Has the IDB considered the ravages of hurricanes? Unless they are talking about windmills. Has their proposal worked in nations with our climate. A funny carrot and stick.

IslandWarrior 3 years, 5 months ago

As a country, we need to study, seriously and act upon the "self-hate" and defeatist assumption we have for each other, or when "it's a Bahamian" is mentioned or anything to move our country forward, it becomes a thing dejected; something is very wrong with this behaviour. The top aquaculture producing countries (Vietnam, Thailand and China) have the much more devastating annual typhoons, and they pack up, batter down and have survived each year, bounce back and carry on; why not do the same for the Bahamas?

Why are we losing these opportunities? Why is the stagnation in our growth - from 1967 to now, the number of game houses and the striping company is the extent of the black Bahamian Industrial Growth.

Would you please ask yourself who long can we survive on a $21,000

The Bahamas Exports $1.316 billion (2017 est.), but Imports $9.097 billion (2017 est.) seafood products included.

Fisheries is an over 200 Billion Dollar Industry, and The Bahamas has one thing that our nearest next competitor don't have - our proximity to the world largest seafood market @ 133 Billion Dollars; In 2016, U.S. fisheries supported 1.7 million jobs and contributed $212 billion in sales.

https://www.fishwatch.gov/sustainable-s…

"I just don't get it."