The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister last night admitted that the Government’s tax incentives are “no longer as effective” in attracting multi-million dollar foreign direct investment (FDI) flows, as the Bahamas faces a “dramatic” increase in global and Caribbean competition.

Perry Christie, in a letter addressed to organisers of today’s ‘We March’ protest, spelled out some of the painful realities facing today’s Bahamas as he conceded that this nation’s high cost, inefficient economy had left it struggling to cope with a ‘globalised’ world.

In particular, the Prime Minister said the Bahamian economy’s ‘twin pillars’ - tourism and financial services - were struggling to adjust to increased competition and global consolidation trends.

Acknowledging that the Bahamas had suffered “setbacks”, the Prime Minister argued that many were “beyond our control” - a nod to the global economic environment and industry trends, as well as natural disasters such as Hurricane Matthew.

“As for Bahamian workers, we need to remind ourselves that they have been dealt a series of brutal external economic blows... in recent times as our nation struggles to cope with the forces of globalisation and industry consolidation, particularly as they affect out tourism and financial services sectors,” Mr Christie wrote.

He then acknowledged that the Bahamas’ proximity to the US, a long-cherished competitive advantage, had been much eroded by “decreasing costs of air transportation”.

This had made rival Caribbean tourism destinations just as accessible as the Bahamas for US, Canadian and other tourists, and ensured it was “just as cost effective to place a hotel in other parts of the region”.

“We operate with the reality that intra-regional competition has increased dramatically,” the Prime Minister conceded.

“Incentives and concessions, although important, are no longer as effective as they once were as other governments in the region are even offering tax-free concessions as consumables.”

Mr Christie thus admitted that several of the Bahamas’ key competitive advantages are no longer relevant, or no longer apply, given that rival destinations are employing similar investment strategies and, in some cases, are doing it better.

As a result, the Prime Minister said the Bahamas would have to compete on other factors, such as labour productivity and business efficiency and ease - indicators that have never been this nation’s strong point, and which continue to slip as shown by recent World Bank reports.

“More and more we must compete on our business environment, and the efficiency and the productivity of our labour force,” Mr Christie wrote, as he urged the trade unions to “bear in mind that our construction and labour costs are higher than elsewhere in the region”.

The Prime Minister’s letter, once all the dots are connected, gives a realistic appraisal of the Bahamian economy’s current predicament, and its vulnerabilities and weaknesses.

The public release of his letter, which sought to defend his administration’s work and point to its ‘achievements’, appears to be a last-ditch effort to dissuade organisers of the ‘We March’ protest from carrying out their plans.

The Prime Minister places particular emphasis on the National Development Plan (NDP), and repeatedly refers to improving government accountability and transparency - two issues that are high on the agenda for many Bahamians.

They, though, are likely to view the Prime Minister’s letter as ‘too little, too late’, given the growing demand for the Government to take concrete action to address these concerns, rather than simply make vague promises.

Mr Christie’s letter is long on promises and short on specifics, and many Bahamians are likely to view it as another example of the Prime Minister ‘talking a good game’ without providing specific execution plans and deliverable goals.

The letter’s publication, especially so late in the day, may also create the impression that the Government has been rattled by the ‘We March’ organiser and their initiative, which seems to have garnered relatively wide public support.

Conceding that the Bahamas “spends more than we take in with taxes”, Mr Christie said “some significant success” had already been enjoyed in managing government spending.

He did not define this ‘success’, and the Government’s annual recurrent spending has continually increased year-over-year, topping out at this year’s projected $1.72 billion.

Mr Christie also pledged that “one of my priorities” is to “manage” growth of the $6.695 billion national debt, “and the implementation of measures aimed at reducing unnecessary expenditures as well as the enforcement of tax compliance”.

“The reality is that our fiscal system requires further reform to be sustainable,” the Prime Minister conceded. “We must therefore continue to manage carefully our expenditures, and ensure that we receive the best value for money in all government contracts, while also ensuring that we are all paying our fair and equitable share of taxes.”

A number of these objectives have yet to take effect, as have improvements to the ‘ease of doing business’ - a key private sector priority.

Mr Christie said the Government was “actively working” to simplify the process of getting into business, although he did not say how, while also focusing on improve access to capital for Bahamian entrepreneurs.

Suggesting he wanted to develop an “ownership economy”, Mr Christie added: “We must also empower Bahamians by engendering a culture of savings and investment from an early age so that our collective capital can be used to create an economy that is for Bahamians and owned by Bahamians.”