The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ led all small island developing states (SIDS) by attracting $1.533 billion in foreign direct investment (FDI) inflows in 2011, a UN body’s report has revealed, although a senior private sector official said this nation “needs a bit more” to turn its economy around.

The UN Conference on Trade and Development’s (UNCTAD) World Investment Report 2012 showed the Bahamas was the only so-called SID to attract more than $1 billion in FDI inflows during 2011, the next closest being Trinidad & Tobago, which received just over $500 million.

Together, the Bahamas and Trinidad received “51 per cent” of total FDI flows to SIDS last year but, while acknowledging the news as positive, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive said this nation’s greater dependence on FDI as a growth/employment driver meant it needed to do better.

Winston Rolle said much of the Bahamas’ 2011 FDI, which increased year-over-year by 34.2 per cent from 2012’s $1.142 billion, had been generated from Baha Mar’s $2.6 billion Cable Beach redevelopment - a project that had been in the works for numerous years before construction finally got off the ground early last year.

Emphasising that he was “not trying to downplay” Baha Mar’s contribution or the Bahamas’ achievement in becoming the top SIDS performer, Mr Rolle told Tribune Business: “That’s positive stuff, but we need a bit more.

“While that [$1.533 billion] is obviously sizeable and admirable, when you compare us with other SIDS and their GDP, I think the expectation is the Bahamas will do much better than the rest of them.”

What has hurt the Bahamas has been the absence of new or ‘greenfield’ FDI projects attracted to these shores. Just $2 million of such FDI arrived in 2011, followed by none the year before. In the six years between 2006-2011, the Bahamas has only received $86 million in FDI for ‘greenfield’ investments.

Other nations included in the SIDS sample consisted of the Bahamas’ Caribbean counterparts, such as Barbados and Jamaica, plus the likes of Tonga, Fiji and the Marshall Islands.

When it came to comparing the Bahamas to the likes of Trinidad, Mr Rolle said that nation was “not as inextricably linked to FDI” as ourselves, given that it could always fall back on its oil and gas industry.

In contrast, the Bahamas had nothing when FDI inflows dried up, as in the 2008-2009 recession.

Noting that countries throughout the world had been challenged by the decline in cross-border investment flows, Mr Rolle told Tribune Business: “Our economy is so heavily linked to FDI that when we don’t have it in large quantities, it does have an impact on our growth rate.

“That’s the reason why our unemployment numbers are where they are as well.”

The UNCTAD report said the Bahamas was also the location for the first, fourth and sixth largest cross-border mergers and acquisitions (M&A) that occurred in SIDS during 2011.

Leading the way was the $1.641 billion purchase of First Reserve Corporation’s 80 per cent stake in the BORCO terminal by New York Stock Exchange-listed Buckeye Partners. The fourth spot was also taken by Buckeye Partners and the BORCO, this time the $340 million purchase of the 20 per cent minority stake held by Vopak.

And, in sixth spot, was the $206 million acquisition of a 51 per cent majority stake in the privatised Bahamas Telecommunications Company (BTC) by Cable & Wireless Communications (CWC).

The $1.533 billion in FDI inflows attracted by the Bahamas in 2011 represented an increase on the $1.512 billion earned in 2008, and a major rebound from the $873 million low-point in 2009.

Net outflows, linked to the Bahamas’ position as an international financial centre, also picked up year-over-year in 2011, more than tripling to grow to $524 million from $149 million during 2010.