The Tribune

• Bahamas must cut investor wait from 60 days

• Report: Take politics out of ‘antiquated’ system

• Limit NEC role to ‘sensitive’, $100m projects

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must slash the time required to approve investment projects from “more than 60 days” to seven or less if it is to remain economically competitive and transform a “bureaucratic, onerous and antiquated” process.

A report prepared for the COVID Economic Recovery Committee, which has been obtained by Tribune Business, calls on the Government to completely overhaul an investment approvals mechanism that “is manually intensive and lacks transparency” by converting the Bahamas Investment Authority (BIA) into an online agency whose processes are fully digitised.

Besides making the BIA more efficient, the Revamping the National Investment Policy of The Bahamas report also urges that politicians play a lesser role in the investment approvals process by reducing the National Economic Council’s (NEC) involvement with lower-value proposals that raise no “sensitive” concerns.

Suggesting that only projects worth $100m or more go before the NEC, which is really the Cabinet or a Cabinet committee/sub-committee, the report said the political directorate’s role was viewed by investors and their advisers as “non-value added and overly bureaucratic”.

Branding the NEC’s role as “duplicative and uninviting to foreign investors”, the report said frequent changes to its meeting schedule merely lengthen “an already haphazard and onerous process”. The resulting frustrations, it added, “discourage foreign investment” which the Davis administration has identified as critical to driving the Bahamian economy’s post-COVID recovery and job creation.

The report went so far as to describe investor criticisms that the NEC is “not fit for 21st century business”, with both existence and role seemingly “unique to The Bahamas” as no other country has such a body to review and approve foreign direct investment (FDI) proposals.

These recommendations, which were prepared by the Securities Commission’s policy, research and compliance unit for the former Minnis administration’s COVID Economic Recovery Committee, have never been publicly disclosed before.

However, they are no less relevant today because the report appears to be the template informing the Davis administration’s efforts to transform the BIA into Invest Bahamas. That name was first coined by former prime minister, Dr Hubert Minnis, and the current government appears determined to see what was started under its predecessor through to execution.

Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, said in his recent Budget presentation that the revamped Invest Bahamas will be launched this September. He indicated that it will be modelled along the lines of Jamaica’s investment promotional agency, JamPRO, and be transformed into a proactive entity that will target specific industries and investors that The Bahamas perceives to be of great economic value.

Such reforms will be critical to the Government’s strategy of growing its way out of the twin economic and fiscal crises produced by COVID-19 and Hurricane Dorian, given that it has identified attracting higher levels of FDI as the central element in this expansion strategy.

The BIA is presently the main gateway through which investment projects seeking government approval are funnelled, but this year’s World Investment Report, unveiled by the United Nations Conference on Trade and Development (UNCTAD) agency, disclosed that inbound FDI flows to The Bahamas fell from $897m in 2020 during COVID’s peak to $360m last year - a 60 percent decline.

And the Revamping the National Investment Policy of The Bahamas report warned that, in COVID’s aftermath, competition between countries to attract FDI will only become more intense with investors becoming increasingly selective over where they deploy their capital to generate the best returns. To succeed in such an environment, it said wide-ranging, deep-rooted and urgent reform is essential.

“Currently, the investment process is unnecessarily bureaucratic, onerous and antiquated. The entire process, from the submission of a completed application to a final decision by the NEC, can exceed 60 days. Moreover, investors largely bear the responsibility of navigating the various government agencies to complete the approval process, although the BIA does assist with this process,” the report warned of the current process.

“This paper recommends that the BIA be restructured, and that its functions are expanded to more efficiently facilitate and co-ordinate the investment process, ultimately providing a more modern, transparent and faster experience for investors.”

Leaving little doubt as to why such transformation is urgently required, it added: “To become more attractive to foreign investors, increase the level of foreign direct investment inflows and, as a result, increase economic growth, it is critical that The Bahamas revamps the existing National Investment Policy and framework to both apply for and access concessions to compete with both emerging and advanced countries......

“FDI inflows to The Bahamas have been on the decline, with 2019 marking the second consecutive year of FDI contraction, and are at its [their] nadir since 2010.” Streamlining the BIA and investment approval process to provide faster, more efficient answers for investors, and eliminate any uncertainty, is a key step to reversing this trend, the report added.

“Currently, the process for investment approval from the BIA can take 60 days. This is not a competitive timeline. Additionally, the process is manually intensive and lacks transparency. It is recommended that the BIA be digitised in the first instance,” the report recommended.

It added that The Bahamas’ ‘60-days and counting’ approvals timeline compared unfavourably with rivals such as the United Arab Emirates (UAE), which on average took five days. Hong Kong was said to process online applications within one day, and hard copy applications within four days, while the Cayman Islands took two to four weeks. Even Jamaica took only three to five days to acknowledge receipt of an investment application.

“Investors should be able to electronically submit applications online, receive an acknowledgement of receipt of application, track the stages of the proposal and be notified of approval, denial or any request for additional information. To this end, the BIA should have an initial response rate of one to three days for acknowledgement of receipt of proposal, and the entire process should not take more than seven working days if The Bahamas is to remain competitive,” the report said.

“If completion of approval within seven days is not feasible, efforts should be made to increase response time to acknowledge receipt of proposal and to reduce the NEC approval timeline. Foreign investors should also have the ability to register for property acquisition or apply for permits to acquire property via an online platform. Additionally, application for investment concessions should be able to be made through the BIA as opposed to investors having to apply for them separately.”

Cabinet ministers in the Davis administration have said the NEC is meeting on a more frequent and regular basis in an effort to speed up investment approvals. However, the report suggested that the NEC’s role needs to be revamped with the BIA empowered to approve more projects itself - especially those valued below $100m, and which did not involve “sensitive” matters such as Crown Land and environmental concerns.

Identifying issues that Bahamian attorneys who represent investors will doubtless recognise, the report said: “The NEC has been heavily criticised by both foreign investors and local law firms, whose staff typically processes the investment applications on behalf of foreign investors. Firstly, the NEC has been characterised as non-value adding and overly bureaucratic.

“Critics aver that the National Investment Policy already outlines the areas that are targeted for foreign investment and the requirements to qualify for the investment. As a result, a foreign investor, assuming they have met the requisite stipulations, should not have to receive a separate approval for their investment.”

It continued: “The NEC’s involvement is considered duplicative and uninviting to foreign investors. Secondly, critics assert that the often capricious meeting schedule of NEC members elongates an already haphazard and onerous process. As previously mentioned, the NEC convenes weekly meetings. However, due to the exigencies of the Government, the meetings are not always held.

“Investors note that the frustration in having to ‘wait for the NEC to meet’ discourages foreign investment. Finally, and perhaps most importantly, critics aver that the NEC is an analogue institution that is not conducive for 21st century business..... Moreover, the NEC appears unique to The Bahamas as virtually no other country employs an NEC-type organisation to both review and render decisions on foreign investment approvals.:”

Suggesting what should and should not go before Cabinet, the report added: “Sensitive applications, involving bespoke matters such as Crown Land, environmental concerns and applications to develop industries that are not on the ‘specifically targeted for investors list’, and investments greater than $100m, may be referred to the NEC.”