The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “nowhere near to tapping out” its ability to attract greater foreign direct investment (FDI) flows, it was argued yesterday, after these increased by 6 percent to near-$1.3bn in 2022.

Hubert Edwards, the Organisation for Responsible Governance’s (ORG) economic development committee head, told Tribune Business that while a United Nations (UN) agency’s report signalled The Bahamas is “holding its own” in the competition for investment capital it needs to intensify its efforts even more to generate the GDP growth its present economic and fiscal circumstances.

The United Nations Council for Trade and Development (UNCTAD), unveiling its 2023 world investment report yesterday, revealed that FDI inflows attracted by The Bahamas last year marked a six-year high. FDI increased slightly from $1.185bn in 2021 to $1.255bn, reaching the highest level since 2017.

The report also found that The Bahamas had the second-largest share of FDI inflows to 11 Caribbean small island developing states (SIDS), attracting some 22 percent - or more than one out of every five dollars - invested in the region. Only the Dominican Republic attracted more.

“Inflows to the 11 Caribbean SIDS rose by 27 per cent to $5.9bn, due to some recovery in international tourism investment,” the UNCTAD report said. “FDI flows in the Dominican Republic rose by 25 per cent to $4bn. The number of greenfield projects more than doubled to 30, and the value more than quadrupled to $3.5bn. In the Bahamas, inflows rose by 6 per cent to $1.3 billion, mainly due to intracompany loans.”

FDI remains critical to The Bahamas’ ability to grow its way out of the post-Dorian and COVID economic and fiscal crisis, and to generate the jobs necessary to further reduce unemployment. Describing the UNCTAD report’s findings as “consistent with what we have seen in the past”, Mr Edwards asserted that The Bahamas should aim to grow its share of FDI inflows to Caribbean SIDS to 30-35 percent - around a 10 percentage point increase.

“Certainly, post-pandemic, the fact The Bahamas continues to demonstrate it’s attractiveness as a destination for investment is a good thing,” Mr Edwards told this newspaper. “To garner between 20-25 percent of FDI inflows to Caribbean SIDS shows The Bahamas has huge investment potential.

“To come second to the Dominican Republic is not a bad thing, and suggests the Bahamas is holding its own. We are hoping some of the projects on the table will propel The Bahamas to grow even more. Getting to a 30-35 percent share will give us the impetus for the growth we need at this time. It’s a good performance, but we definitely need more.

“We want more FDI inflows because the more we get, the greater the growth in the economy is going to be, and that benefits all and sundry. The Government’s role is to balance this with domestic participation, but The Bahamas cannot grow without the rest of the world.”

Describing The Bahamas as a “greenfield site” for tourism and other investments, due to its multiple Family Islands and archipelagic nature, Mr Edwards added: “I don’t think in any way, shape or form at this time The Bahamas is anywhere near tapping out its investment potential.

“What’s important, and what policymakers have to keep an eye on, is the type of investment the country attracts and the value it delivers; value beyond simple employment. We have to consider how to balance FDI activity with local investors. We want to ensure our economy grows, and it’s a good place to be in, but it requires careful management and strategy.”

Mr Edwards said it was also critical that the Government follow through with long-promised reforms to convert the Bahamas Investment Authority (BIA) into a true investment promotions agency such as Jamaica’s JAMPRO. Given The Bahamas’ FDI performance to-date without this restructuring, he argued it was conceivable that capital inflows will hit further heights if reform is successfully implemented.

Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, pledged during the 2023-2024 Budget debate that the Government will finally deliver on promises to convert the Bahamas Investment Authority (BIA) into a proactive investment promotion agency known as Bahamas Invest.

“Consecutive administrations have talked a lot about Bahamas Invest, a proactive department of investments to promote, manage and attract foreign direct investment FDI). The new construct will formalise promotions unit, a compliance unit and a facilitations unit,” he said.

“Further, as I indicated before, it is often said that domestic investors, although entitled to the same and more concessions, are not treated with the same level of seriousness as foreign investors. As we committed in Our Blueprint for Change, we will refocus the Bahamas Investment Authority as a nimble promotional arm. Bahamas Invest will focus on attracting investment and industry across all sectors as we are committed to do in our Blueprint for Change.”

Mr Cooper said Bahamas Invest’s compliance arm will ensure all investors fulfill their obligations and commitments in their Heads of Agreement with the Government. “We will expand the role of Bahamas Invest to include a Domestic Investment Board to support Bahamian businesses in participating more fully in the tourism value chain,” Mr Cooper added.

“The director of investments, Phylicia Hanna-Woods, has already started work in regard to this transition, working along with McKinsey consultants to deploy global best practices. We intend to create the conditions necessary to achieve the equivalent of being ranked top 50 in the world in competitiveness.... We have pledged this in at least the last three speeches from the throne. And we intend to stand up Bahamas Invest during this fiscal year.”