By MARK A. TURNQUEST
AFTER analysing the Bahamas' economic condition for the past three years, and reviewing reports by international agencies (Moody's, the World Bank, Standard & Poors), it is imperative that the public and private sectors focus on small and medium-size business (SME) development and economic diversification. It is the only sensible approach to grow our economy in a sustainable manner, increase gross domestic product (GDP) and the entrepreneurial spirit, and reduce unemployment, the national debt and crime. In order to correct these problems, there must be public-private sector partnership that conducts a strategic analysis on how to make this little country great.
What is affecting the growth of the SME sector?
(1) NATIONAL DEBT
The reality is that the national debt is almost $4.5 billion ( more than 50 per cent of GDP). We spend almost 20 per cent ($298 million) of our Budget on servicing our national debt.
Some 40,000 Bahamians are either unemployed, underemployed or discouraged workers. The unemployment rate in New Providence is 15.1 per cent, and in Grand Bahama is 21.2 per cent. For the Bahamas overall, it is 15.9 per cent. There have been 26,000 job losses over the last five years.
Our crime problem is affecting the business community tremendously through break-ins and armed robberies. We have had four years of consecutive murder rate records.
(4) DECLINE IN COMPETITIVENESS
Several international credit rating agencies downgraded the Bahamas' sovereign credit rating and competitiveness in 2011, and suggested that our government raise taxes, formulate some type of value-added tax (VAT) system, slow down government spending and, mostly importantly, diversify our economy.
Unfortunately, the Bahamas has lost its economic competitiveness and creativity in comparison to our Caribbean neighbours in recent years. Our country has regressed in the important categories of: (A) Ease of Doing Business; (B) Starting a Business; (C) Sovereign Credit Rating and (D) Human Resource Index.
(5) INDUSTRY CHALLENGES
Our tourism product is uninteresting and not exciting; our financial services offering lacks innovation and our construction sector is benefiting foreigners. These three industries: Tourism, Financial Services, and Construction and related industries, contribute over 90 per cent of GDP (some $6.5 billion) and 80 per cent of our employment levels (152,000). We are still importing more than $500 million in agricultural products, and our manufacturing sector has stagnated.
(6) ROADWORKS PROJECT and PROLONGED RECESSION
The SME sector is stagnant, and its contribution to GDP has deteriorated from 5 per cent in 2007 to 3 per cent in 2011.This is due to the great recession, failed economic policies, the road improvement project, credit crunch, lack of opportunities and a contracted economy.
(7) FAILED ECONOMIC POLICIES
The stakeholders who are responsible for SME development have failed to improve our economy beyond mediocrity by not developing a Strategic Plan for SME Development. Although over the past seven years (2005- 2011) the public and private sectors collaborated with the intent to provide some form of SME development framework - the Domestic Investment Board, SME Development Bill - both have failed to stand the test of time. The SME sector is now in a hopeless position in mid-2012.
(8) NO FAMILY ISLAND DEVELOPMENT VISION
Each Family Island should be analysed to determine its economic, social and cultural potential, so that financial and other incentives can be offered to Bahamians who want to open complementary businesses and reside permanently on a Family Island.
This initiative will increase:
The employment rate
Improve the infrastructure of the Family Islands
Encourage Bahamians to reside there permanently
And entice more domestic and foreign tourists to the various islands.
Every redevelopment plan must preserve the natural, heritage and cultural resources of each island.
(9) NO SME DEVELOPMENT ACT (SDA)
The SDA, from a domestic perspective, will provide the foundation on which to improve economic conditions in the Bahamas. From an international perspective, it will attract foreign investors who want to partner with Bahamian entrepreneurs in fields such as e-commerce, manufacturing, agriculture and information technology. These industries are tremendously underserved and underdeveloped. These types of investments would diversify the Bahamian economy, which relies heavily on tourism and financial services.
The SDA will revitalise the entrepreneurial spirit in all islands of the Bahamas, and will outline policies and initiatives that would assist in the development of such businesses - a major driving force for the economy. All current incentives, concessions and legislation that are afforded to small businesses should be modified and encompassed in the SDA.
(10) NO SME DEVELOPMENT CENTRE (SDC).
A new SME Development Centre must be developed and structured to eliminate financial and non-financial decision-making based on political influences when formulating national economic policies.
The SDC will establish and identify the roles and responsibilities of a Regulatory and Advisory Board that would oversee the enforcement of the SME Development ACT (SDA).
Public and private sector executives will be selected to this Board. Members of this Board will be mandated not to make decisions based on political, gender or cultural motives. This Board will have the authority to make recommendations to modify the SDA, based on economic conditions or the request of stakeholders.
(11) NO NATIONAL FUNDING SCHEME
A $15-20 million SME fund needs to be developed by Bahamian and foreign investors. Government needs to eliminate legislation that makes it almost impossible for SMEs to access international funding.
In addition, the Government, local and international lending institutions must partner to extend meaningful financial support to SMEs. Lenders need to focus on packaging loans extended to SMEs that have built-in accounting management, human resources and marketing support programmes at an affordable cost for at least a year.
In conclusion, the PLP government must:
Swiftly attack this economic crisis by developing a National Strategic Plan for SME Development that focuses on sustainable economic growth and economic diversification.
There must me more public-private partnership (PPT) when developing economic policies, because it would prevent unnecessary roadblocks for entrepreneurial advancement that are difficult to reverse.
I would like for SME owners to contact me so that we can collaborate to improve the economic conditions in the Bahamas. To contact me, call 326-6748/427-3640 or log on to www.markturnquestconsulting.com.