$2.5bn trade deficit's
'major growth threat'
By NEIL HARTNELL
Tribune Business Editor
THE BAHAMAS must increase both goods and services exports to improve its balance of trade and national debt position, a paper circulating among Chamber of Commerce executives is arguing, as services exports are unable to cover a $2.5-$2.6 billion merchandise trade deficit.
The paper, entitled Export Bulletin: Bahamas, a copy of which has been seen by Tribune Business, said that among the "serious growth challenges" faced by this nation's economy was "an ever expanding international trade deficit", with revenue from export sales still dwarfed by the merchandise trade deficit generated by import spending.
"In 2008, the Bahamian economy spent US$2.6 billion more on merchandise imports (goods) than merchandise exporters earned," the Export Bulletin paper said.
"The Bahamian economy continues to face serious growth challenges, including an ever expanding international trade deficit. The problem of the ballooning trade deficit is compounded by the fact that even with revenue from the services sector, the economy still spends more on imports than it generates from export sales.
"This ultimately has significant implications on international debt, and provides a strong motive for the promotion of viable exports."
The paper noted that the Bahamas' fastest growing export markets between 2004 and 2008 accounted for just 9 per cent of total Bahamian exporter earnings.
Over this period, the fastest growing market for Bahamian exports was China, which produced 725 per cent growth, albeit from probably a low starting point.
Other markets producing strong growth for Bahamian exporters were the Netherlands, with 569 per cent growth; Turks & Caicos at 327 per cent; South Africa, which generated 295 per cent growth; Cuba at 270 per cent; Hong Kong, with 257 per cent growth; Brazil at 219 per cent; Switzerland with 191 per cent; and the Netherlands Antilles and Uruguay, which generated 146 per cent 140 per cent respectively.
The Export Bulletin paper suggested those markets could be targeted by the Bahamas for "priority market penetration activities" based on recent growth trends. However, emphasising the lack of export diversification, the Bahamas' main goods export market remained the US, which accounted for more than two-thirds, or 69.9 per cent, of 2008 merchandise export earnings.
For the same year, the next most important market was Canada, which generated 5.2 per cent of earnings for Bahamian merchandise exporters, followed by Germany with a 4.4 per cent share; France at 3.6 per cent; the Netherlands with 3 per cent and Nigeria at 2.3 per cent.
Based on data from the tradeMAP database, one positive note for the Bahamas when it came to its balance of trade and balance of payments was that between 2001-2008, the rate of growth in goods export sales exceeded the rate of increase in import spending.
For that period, Bahamian merchandise exporters saw their sales increase by 9.3 per cent, from $376 million to $702 million.
"Between 2001 and 2008, merchandise import expenditure grew by 7.7 per cent annually, but the trade deficit still expanded from $1.6 billion in 2001 to over $2.5 billion in 2008," the Export Bulletin paper noted.
"In 2007, Bahamian services exporters generated $2.6 billion in sales, whilst the Bahamian market absorbed $1.6 billion in import spending, therefore generating an intangibles (services) trade surplus of $1 billion.
"The services surplus, however, was not adequate to address the $2.5 billion merchandise trade deficit, which implies that there is still the need to promote greater exports of goods and services."
The Bahamas' greatest export earner in 2008 was Freeport-based Polymers International's polystyrene products, which grew by 11.4 per cent in the seven years from 2001 to generate $151.429 million in foreign currency earnings for this nation.
Behind that came light petroluem distillates, which earned the Bahamas $125.124 million in revenues during 2008, and Hetercycly compounds that earned $67.448 million.
While their growth rates between 2001 and 2008 were not detailed, the Bahamas' exports of rock lobster and sea crawfish actually declined by 0.7 per cent over the same period, standing at $64.957 million in 2008.
Yet these exported goods were described as "export poles" by the Export Bulletin paper, which found that this nation's top 15 exported products accounted for 82 per cent of total export earnings.
"Interestingly, the top 15 exports are mainly industrial-based products, with rock lobster the main agricultural export featuring in this category," the paper said.
"Also of interest is the intermittent export performance of light petroleum distillates and heterocyclic compounds. However, both these products have generated consistent export sales between 2006 and 2008."
Again, the Bahamas' fastest growing export earners were goods not among the top revenue generators. For instance, pebbles, gravel and stone used in aggregate grew by 92.1 per cent between 2001 and 2008 to hit $20.592 million in sales revenues during the latter year.
Bars and rods, alloy steel and stainless steel in coils grew revenues by 162.3 per cent over the same period to hot $13.66 million in 2008, while steel and iron articles experienced 72.5 per cent growth.
The Export Bulletin said: "Between 2004 and 2008, the most dynamic exports included pebbles, gravel and stone used for aggregate (885 per cent growth in sales per annum); electric generating set (586 per cent); rock lobster and other sea crawfish not frozen in shell not including boiled in shell (511 per cent); waste and scrap of tinned iron or steel (321 per cent); light petroleum distillates (319 per cent); heterocyclic compounds (275 per cent); cell phones (273 per cent); perfumes and toilet waters (211 per cent); natural sands (208 per cent); frozen fish (141 per cent) and beauty or make up preparations (131 per cent). These exports have potential for diversifying the export base."
And the paper also identified products that "should be a priority of any export development programme", based on the fact that they placed the Bahamas among the top 10 nations in the world for exports of these categories in 2008.
The Export Bulletin identified these as "expansible polysterene; natural sponges of animal origin; crude or roughly trimmed sandstone; knitted cotton curtains, drapes, interior blinds; rock lobster; apparatus for drawing semiconductor circuits; cadmium waste and scrap; copper springs; rum and tafia; twine, cordage, ropes and cables of jute or other textile bast fibres; non-halogenated waste organic solvents and monumental or building stones".
Published On:Monday, February 08, 2010