By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The “sluggish” Bahamian economy’s growth under-performed its regional rivals by five percentage points over the decade to 2023 due largely to declining productivity and lack of “technological progress”.
The Inter-American Development Bank (IDB), in its just-released latest Caribbean Quarterly Bulletin, revealed that The Bahamas’ collective economic growth rate of 9.3 percent for that period - even accounting for the devastating blows inflicted by the COVID-19 pandemic and Hurricane Dorian - paled when set against the regional average of 14.3 percent for the same period.
The report blamed The Bahamas’ under-performance on declining total factor productivity (TFP), which is described as a measurement of an economy’s technological progress, adding that this has been falling steadily ever since the 21st century began.
Warning that the number of Bahamian firms “planning to innovate” is some 15 percent behind the Caribbean average, based on the Innovation, Firm Performance, and Gender (IFPG) survey conducted by Compete Caribbean in 2020, the IDB assessment added that there was also “a more pronounced trend” in this nation for small and medium-sized enterprises (SMEs) to innovate via new products, processes and structures.
However, it concluded that all is not lost for The Bahamas, as despite long-standing workforce skills and access to finance shortcomings several initiatives supported by the Bahamian government “are starting to bear fruit” including the digitisation of public services via the MyGateway Internet portal. And there remains “a solid foundation” of firms that are either innovating, or planning to, that is higher than the Caribbean average.
But, with all projections signalling that The Bahamas is set to return to annual gross domestic product (GDP) growth rates of between 1-2 percent following the COVID reflation, the IDB report revealed: “Cumulative growth over the last decade in The Bahamas has been 9.3 percent, compared to the regional median of 14.3 percent. What explains this sluggish economic performance?
“Total factor productivity (TFP), which explains technological progress in an economy, has been a key factor explaining the lack of growth in the region. The Bahamas has been no exception.... Bahamian TFP peaked in the 1990s and, since then, has been slowly decreasing. There is a shared downward trend with Barbados and Jamaica, meaning that a significant part of the region has suffered a decrease in TFP over the last 20 years.”
The number of Bahamian firms deemed to be innovative by the Compete Caribbean survey was pegged at 54.4 percent - a ratio significantly higher than the Caribbean’s 38.9 percent average by some 15.5 percentage points. Weak points, though, were identified elsewhere.
“For firms planning to innovate or seriously constrained to achieve innovation, the term ‘potentially innovative’ firms is used. The Bahamas is 15 percent behind the regional average in that regard (59.3 percent). Finally, non-innovative firms account for only to 1.3 percent of Bahamian firms,” the IDB report said.
“When comparing a representative innovative, or potentially innovative, Bahamian firm with a representative innovative, or potentially innovative, firm in the rest of the Caribbean region, the Bahamian firm is significantly more productive. However, a representative non-innovative Bahamian firm is slightly less productive than its peer in the region.”
The report defined “potentially innovative firms” as “those planning to innovate in the next two years or that identify at least one of the 14 barriers to innovation as major or very severe”. Unsurprisingly, given the Bahamian economy’s structure as a services exporter, some 94.1 percent of ‘innovative’ firms were found to be in this sector as opposed to the Caribbean average of 84.8 percent.
“As firms become less innovative, the share of services firms declines,” the IDB report said. “Larger firms play a crucial role in innovation, with the share of small and medium-size enterprises (SMEs) decreasing as firms become more innovative - a trend more pronounced in The Bahamas.
“Female-owned firms in The Bahamas account for 23.9 percent of innovative firms and 19.1 percent of potentially innovative firms, higher than the respective regional averages. However, the share of innovative firms led by women is lower in The Bahamas than in the region.”
When it came to obstacles to innovation, more than 60 percent of both ‘innovative’ and ‘potentially innovative’ Bahamian companies cited the local market’s size as being too small to justify the cost plus the lack of required skills and qualifications among the workforce. And almost three-quarters of companies deemed ‘innovative’ or ‘potentially innovative’ said they were unable to access external credit or financing sources.
“It is clear that the two prevalent issues for Bahamian firms in terms of innovation are costs (implementation and financing) and skills,” the IDB assessment confirmed. “Firms trying to innovate report that they are constrained by lack of financial resources - 78.2 percent in The Bahamas versus 90.3 percent in the Caribbean.
“Around 72 percent of Bahamian firms, innovative and potentially innovative, are fully credit-constrained and 15 percent partially credit-constrained, coinciding with the regional average of 71 percent fully constrained and 9 percent partially constrained. Interestingly, only 19 percent of Bahamian non-innovative firms are fully credit-constrained versus 67 percent in the Caribbean.”
As for workforce development and skills, the report added: “Even though firms consider the qualification of employees a pervasive constraint, Bahamian workers are on par with the regional average for skilled workers as a proportion of the total workforce, with around a half of workers from all types of innovative firms being considered skilled.
“Expanding into what Bahamian firms believe to be the causes affecting workers’ skills, the most frequently mentioned is poor quality education and training by local institutions, which particularly affect potentially innovative firms (82 percent), followed by shortages of local professionals (roughly 66 percent) and lack of training in soft skills by local institutions (60.7 percent for potentially innovative and 68.4 percent for innovative firms).
“Ranking fourth is worker emigration at 29.8 percent and 41.1 percent of potentially innovative and innovative firms respectively. This phenomenon is of great importance considering that, since Bahamian workers are highly educated, their departure from the country could be associated with erosion in economic growth. This issue could be addressed by improving the quality of education and training, and, in the long-term, by attracting needed skills from abroad.”
However, sounding a positive note, the IDB assessment added: “There are a series of initiatives promoted and supported by the Bahamian government that are starting to bear fruit.” Besides the MyGateway platform, it also identified the support provided by the Small Business Development Centre (SBDC) to entrepreneurs and SMEs as further cause for encouragement.
“In The Bahamas, there is a solid foundation of companies that are either currently innovating, or planning to do so, at higher levels than the average Caribbean country. By implementing targeted and well-organised policies to eliminate current barriers to innovation and offering information and support services, the creativity of all Bahamian firms can be unlocked, allowing them to innovate and expand,” the IDB said.
Comments
ExposedU2C 18 hours, 41 minutes ago
The IDB is so compromised that no one really gives a flying hoot anymore about whatever it is they have to say about anything.
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