The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Increased infrastructure spending “must not be driven by politics” if The Bahamas is to maximise investment returns from scarce resources, a governance reformer warned yesterday.

Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that taxpayer monies had too often been “wasted” by politically-led decision making determining which capital projects were initiated and where.

Speaking after the Inter-American Development Bank (IDB) urged The Bahamas to increase annual infrastructure spending to between four to five percent of gross domestic product (GDP) so that it can achieve greater economic expansion, he urged: “Make sure there’s a return on investment on it otherwise it could be an irresponsible use of the public’s money.

“Don’t build forts unless we need forts. Don’t put infrastructure in unless there’s a return or it’s to support economic growth and development. All too often capital expenditure and infrastructure improvements have been politically motivated by the favoured politicians of the day as opposed to a return on investment basis or some form of master plan.

“If commercial activity improves by $200m because you’ve spent $100m, absolutely spend it,” Mr Myers continued, “but if you’ve spent $100m to bring in a $10m return with no economic improvement and no benefit to the people, don’t start.

“That’s where there’s got to be some thought process and planning applied. Only spend on what you need. We need focused spending, focused planning. Return on investment comes in different ways for the public sector than the private sector, but it has to be thoughtful and the public must buy-in.

“It must not be driven by political favourites; not a political constituency or political candidate trying to buy or get votes. That’s too often happened in the past, and public money has been wasted. That has to stop. We don’t have any capacity to deal with that any more.”

The IDB has urged the Government to “be bold” with reforms to kickstart post-COVID economic recovery that include more than doubling projected annual infrastructure spending to between $600m-$700m.

In a report obtained by Tribune Business, it revealed that yearly infrastructure spending equivalent to four to five percent of Bahamian gross domestic product (GDP) is critical if The Bahamas is to break out of the low growth cycle that has afflicted it since the 2008-2009 recession.

The multilateral lender added that achieving such a level of infrastructure investment would “sustain” an annual three to four percent expansion in Bahamian economic output, which the likes of the International Monetary Fund (IMF) said was critical to sustaining existing employment levels and absorbing the 5,000 per year school leavers into the workforce pre-pandemic.

Acknowledging that it was impossible for the government to be “fiscally responsible” and finance the closing of The Bahamas’ estimated $2bn infrastructure gap itself, the IDB paper said the only way to achieve these objectives is to pool and mobilise private capital via mechanisms such as the proposed National Infrastructure Fund and sovereign wealth fund.

Setting out the rationale for initiatives that were recently highlighted by the prime minister, the report said: “To sustain an annual GDP growth rate equivalent to three percent to four percent, it is estimated that The Bahamas needs to invest four percent to five percent of GDP annually in infrastructure.

“These levels of investment are outside the possibilities of a fiscal responsible macroeconomic policy with budget resources. Consequently, The Bahamas needs to make a greater effort to tap into the mobilisation of private capital resources from both domestic and global sources.”

The recent mid-year budget figures show the government’s own capital expenditure is deeply inadequate when it comes to achieving the infrastructure threshold advocated by the IDB. And even the elevated spending on so-called COVID stimulus projects for the 2020-2021 and 2021-2011 fiscal years is far short of the mark.

Of the revised $429.5m capital spending budget for this fiscal year, just over $151m has been earmarked for Ministry of Works-related infrastructure projects. The former figure, pegged at 3.8 percent of GDP (in constant prices), is some way short of the $570.95m that would be required under the IDB’s suggested 5 percent benchmark.

And, while some $416.2m in capital expenditure is currently projected for the upcoming 2021-2022 fiscal year, this only amounts to 3.4 percent of forecast economic output - a sum that is even further away from the $611.25m spend required by the IDB’s top range.