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Economic Awakening From The ‘Bottom Up’

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Mark Turnquest

By Mark Turnquest

Bahamian policymakers have long focused on ‘top down’ economic strategies to improve tourism, financial services and construction for almost 40 years. However, after all is said and done, the Bahamas, as of December 2012, is in economic distress because of the following:

  • Its sovereign rating was downgraded from ‘BBB1’ to ‘BBB’ (Standard and Poor’s) and from ‘A3’ to ‘Baa1’ (Moody’s)

  • Almost $5 Billion national debt, grown from 31.7 per cent of GDP in 2007 to 53 per cent of GDP in 2012

  • A $550 million plus deficit (expected to grow to $671 million in 2013/14)

  • A 15 per cent unemployment rate (could increase up to 20 per cent in 2013)

  • Low GDP ($8 billion) and low projected economic growth (2.5 per cent)

  • A social welfare society (an enormous increase in social safety net transfers)

  • Stagnated tourism, financial services and construction cndustries

  • An unmotivated and demoralised small business sector

The former government mismanaged the economy with a double-edged sword in 2007-2012, and made the recent recession worse. The former minister of state of finance and his colleagues formulated failed top down economic strategies, namely: The costly dredging of Nassau Harbour; unsuccessful air travel rebates; unwarranted tax increases in the vulnerable automobile industry; and terminating concessions in the manufacturing industry. In addition, the former Minister of Works spearheaded the catastrophic roadworks project. As a result, small and medium-sized enterprises (SMEs) were neglected and hundreds closed. The ultimate effect was that SMEs contribution to GDP declined from 5 per cent (2007) to 2 per cent (2012).

Top down strategies, which focus on improving the tourism, financial services and construction industries, did not increase GDP enough to cover national expenses and reduce the national debt/ deficit. To cover recurrent expenses, reduce the deficit and national debt, our annual GDP needs to be in the vicinity of $12 billion.

Along with tax (property, income, value added) reform and economic diversification, the only way our country is going to obtain an annual GDP of $12 billion is to focus on ‘bottom up’ economic strategies to improve the SME sector.

Bottom up economic strategies are the way of the future. There must be a rise of the small businessman. National policymakers over the years casually indicated that small businesses are the pillars of our economy and that there must be a focus on economic diversification.

However, as of May 2012 there was no significant evidence that they were serious about trying to improve the small business sector and diversify the economy. However, the new government seems to understand that ‘bottom up’ economic strategies to improve the SME sector are the way to go in the future. This is evident because of the following:

  • The legislation of the Small Business Act in 2013

  • The creation of the Small Business Development Agency in 2013

  • Conducting market research in order to improve the SME sector

  • Formulating a long overdue strategic plan for SME development

  • The fair roadworks compensation programme

  • The renewal of concessions for manufacturers

  • Formulating new, innovative agricultural strategies

  • A new strategic approach to develop SMEs in the Family Islands

  • The focus on reviving dormant industries and enhancing existing ones

  • Formulating clustering strategies for productive and creative markets

  • Formulating a creative national financial lending mechanism for SMEs

Only serious attention to develop the SME sector can save our nation from financial collapse. Moody’s and Standard and Poor’s will improve our sovereign rating in 2013 because the PLP government is conducting the necessary ‘bottom up’ economic strategies to correct the failed ‘top down’ economic strategies of the former FNM government.

To help develop our SME sector you can contact me at 326-6748 / 427-3640, email:markaturnquest@gmail.com, website: http://www.markturnquestconsulting.com

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