The Tribune

EDITOR, The Tribune.

It’s now official. None other than Minister of State for Finance Kwasi Thompson (champion of the investment-begging Commercial Enterprises Act) has conceded that The Bahamas actually dwarfs all of its colleagues in the latest UN report on Foreign Direct Investment.

In fact, with inflows of $897m even during the Covid-19 pandemic, we nearly doubled our nearest competitor.

Of course, while the headline suits a convenient current narrative (a “rebound” just in time for an election) this is not really news at all.

Anyone who follows these matters outside of the attention-deficient cycles of Bahamian news and politics is already aware that, relative to its population, The Bahamas consistently has no peer on earth in the level of Foreign Direct Investment it attracts.

In other words, if Foreign Direct Investment were the Holy Grail, we would already be living in Paradise.

As such, we could heap each government which claims (falsely) to have single-handedly gotten us here with praise and re-election. But alas, the holy grail it is not.

Massive investments in our traditional tourist plant like Atlantis and Baha Mar are the bright side of the equation. There is no rational way to deny that these projects positively impact every facet of our economic well-being.

They do this principally by employing large volumes of labour and secondarily by directly consuming goods and services from Bahamian businesses and professionals.

But a large and growing proportion of what is touted as foreign investment is nothing more than foreign residency and second home ownership, including the increasingly emphasized ‘residential’ component of resort communities.

While nobody has bothered to do a cost-benefit analysis of large-scale foreign home ownership in The Bahamas (aside, of course, from reporting the opinions of realtors) the anecdotal evidence is not encouraging.

There is little doubt, for instance, that a policy of marketing finite land resources as “luxury properties” on the international market has helped price Bahamians out of land ownership and reduce our middle class in a material way.

And unlike in the case of Atlantis or Baha Mar, there is no compensatory large-scale employment generated from even large clusters of foreign owned homes, like Lyford Cay or Ocean Club Estates on Paradise Island. In fact, they have become big generators of business for the likes of Western Union, whose services their foreign domestic workers use to send money back home.

As if to add insult to injury, government then colludes with the narrow clique of professionals (realtors and lawyers) that benefit from this largely harmful industry and introduces such “incentives” as a cap on Real Property Tax for ultra-wealthy homeowners, helping to keep our tax regime among the most regressive on the planet.

In addition, the Minnis government has taken this unselective approach to FDI even further by eroding the Bahamianization rules and actually setting out (via the Commercial Enterprises Act) to lower the bar for “investment” of any and every type, telling the world that they can come here and do whatever it is they do at home, and we’ll call them “investors” – unless, of course, they’re Haitian.

What should be clear (but probably isn’t to Minnis and crew) is that the disconnect between the huge FDI that we attract and any meaningful impact on our standard of living is hidden in the distinction between beneficial and non-beneficial kinds of investment activity.

All of the evidence is that the positive impacts of Atlantis and Baha Mar are being cancelled out by an investment policy that prices Bahamians out of land with little compensating benefit (unless you’re a land lawyer like me, or a realtor) and a tax policy that targets Bahamian consumers in order to incentivize more of this non-beneficial activity.

Being blessed by such huge (frankly unheard of) levels of beneficial foreign investment as we already have in this tiny country should permit us to be more selective about the other kinds of foreign-originated activity that we permit.

But our governments have, since 1992, done the exact opposite. Like a drug addict, they have treated every downturn of growth as evidence that more investment is needed and desperately lowered the bar, rather than examining whether the lowered bar is actually the problem.

ANDREW ALLEN

Nassau,

July 18, 2021