The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nearly three-quarters of Bahamian firms have admitted to paying bribes to obtain permits and public services, it was revealed yesterday, with this nation ranked fourth in the Caribbean for this type of corruption.

An Inter-American Development Bank (IDB) report, entitled ‘Are we there yet? The path towards sustained growth in the Caribbean’, disclosed that 73.4 percent of Bahamian companies have made “informal” payments to government officials to either obtain or speed-up the necessary approvals or access to services.

This ranked The Bahamas behind only Grenada, the regional leader where 78.7 percent of firms admitted to paying bribes; Dominica and Trinidad & Tobago. These payments, which one governance specialist yesterday argued further ingrain a “pay to play” culture in Bahamian society, were estimated as costing equivalent to 3.1 percent of a Bahamian company’s annual sales - a figure in line with regional trends.

Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, told Tribune Business that the report’s findings merely reinforced the urgency with which The Bahamas needs to press on with fully enacting and implementing multiple anti-corruption reforms that have thus far been “stalled, delayed or not seen as a priority”.

Pointing out that Transparency International had in 2018 ranked The Bahamas as the Caribbean leader for the payment of bribes before they were even requested, he added that increasing acceptance of such a culture involving small, every day-type corruption such as paying public officials ‘lunch money’, continues to undermine integrity in governance, a fair competitive playing field and sustainable economic development.

“Again, when we get this kind of international attention, ORG typically takes it as yet another reminder of the opportunity to move forward on things that have been stalled, delayed or not seen as a priority,” Mr Aubry reiterated. “We’ve had a lot of discussion lately on the cost and ease of doing business. It’s already been noted that our bureaucracy and access to capital is challenging.

“Build in a component where there’s expectation of a ‘pay to play’ model is only going to further inhibit development of the local economy.” Mr Aubry said research by ORG post-Dorian had shown developing a strong, resilient local Bahamian economy was the best defence in adapting to climate change and preparing for hurricanes and other natural disasters, but this is directly undermined by the IDB study’s findings.

“Transparency International in 2018 said The Bahamas was the highest in the region for paying bribes before people were even asked,” the ORG chief recalled. “It was just accepted that this is what you do. It becomes part of the cost of doing business, which it shouldn’t be. 

“The main point is that money is not going to support businesses, it’s not going to support and improve government, it’s not going to be used for tax money and expenditures. It’s going into a space where it will be lost. This becomes another reason for us making this a priority, integrity in governance and the mechanisms we have in place to be fully resourced and active is absolutely key.

“The benefits that come out of it far outweigh the difficulties of making it happen.” Mr Aubry reiterated that this involves fully enacting and funding the Freedom of Information Act, plus ensuring the Public Procurement Act is fully defined and built-out, with bids issued in a timely manner and state-owned enterprises (SOEs) fully using the system.

He added that The Bahamas also needs to “push forward” with fully implementing the Ombudsman Act, which has already been passed by Parliament, and reforms to the Public Disclosure Act to ensure there is greater transparency.

“All these things are geared up,” Mr Aubry told Tribune Business. “In all honesty, The Bahamas has done a lot of this; the legislative foundation, and a lot of work is being done in government and the private sector to push forward and everything is above board.

“We’re not leveraging all of this together. This creates gaps and spaces which those looking to circumvent the system and go outside the law can exploit. By and large, as we talk to folks over the years, a lot of people want The Bahamas to be a place where you succeed based on your business plan, not your affiliation or association.”

While actual incidents of corruption, bribes and rent seeking are notoriously hard to prove, given that few victims are willing to go ‘on the record’ for fear of being victimised, Mr Aubry argued that even the “perception” of what is detailed in the IDB report could drive away blue chip, quality investment from both Bahamian and local sources by undermining confidence.

The IDB report itself referred to this, stating: “This type of rent-seeking behaviour is detrimental to the business environment. It directly increases the costs of doing business and generates policy distortions. Using early rounds of investment climate surveys, the World Bank estimated that 68.8 percent of firms in Latin America and the Caribbean reported paying bribes, with an average amount totalling 7 percent of sales.

“These types of payments are prevalent in two-thirds of Caribbean firms. The share of establishments required to make gifts or informal payments to public officials to ‘get things done’ varies by country. It can reach up to 78 percent of firms (Dominica and Grenada) but is less frequent in St Vincent and the Grenadines (42 percent) and Guyana (43 percent). Additionally, the reported amounts of informal payments average 3 percent of annual sales in the Caribbean.”

Elsewhere, the IDB report found that The Bahamas was among the most pessimistic Caribbean nations when it came to the COVID-19 pandemic with businesses in this nation having expected the restart of normal operations to take longer than all their regional counterparts.

“Firms that anticipated normal activities would resume expected that this would happen after 13 months, on average. That period varies by country, ranging from 10.6 months in Belize to 14.3 months in The Bahamas,” the study added. And this country’s expectation that the pandemic would last 28.07 months, or just over two years, was greater than the 25.09 month Caribbean average.

And, when it came to access to financing, the IDB study said The Bahamas and other Caribbean nations compare poorly to more developed nations when it comes to credit as a percentage of gross domestic product (GDP) or economic output. This nation’s ratio stood at just over 52 percent when compared to the triple digits more developed economies enjoy.

“The six Caribbean countries analysed here compare poorly with the average for both high income and middle income countries, which stood in 2022 at 162 percent and 132 percent, respectively,” the report added. The countries also fare poorly when compared to the Latin America and Caribbean average.

“Only Barbados has a deeper credit market than the regional average of 56 percent. Country size does not seem to be the determining factor, since the six countries are also all below the average for small states globally.”