The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must alter its “comparative advantage” and target new industries to generate economic growth, a US-based scholar and fellow academics have argued, with tourism’s “compartmentalisation” limiting its benefits.

Dr Nikolaos Karagiannis, an academic with Winston-Salem University’s school of business and economics, and a long-standing student of the Bahamian economy, called for policymakers “who can think ‘outside the box’, with this nation too often sacrificing long-term vision for short-term gain.

Together with Marel Katsivela, Zagros Madjd-Sadjadi and David Stewart, in their paper ‘Exploring the production Possibilities of the Bahamas, Dr Karagiannis said the “lack of backward and forward linkages” to the domestic Bahamian economy limited tourism’s contribution to economic and social development.

“The tourism industry suffers from a severe compartmentalisation that limits the benefits to the Bahamas and exacerbates the exposure to the rest of the world,” they argued.

“Essentially, the Bahamas is, in a word, hyperlinked to the rest of the world economy because of its overreliance on imports, whereas sustainable tourism could serve as an engine for growth in other sectors.”

The authors added that changing global realities would force the Bahamas to re-engineer its economy and look for new growth areas, away from its reliance on tourism and financial services.

Impending accession to full World Trade Organisation (WTO) membership would drive tax reform in the Bahamas, since this nation’s current import duty-reliant system was seen as a barrier to trade.

While the Bahamas’ average import tariff rate was 33 per cent, the quartet pointed out that most countries acceding to the WTO had rates of between 9-20 per cent.

Other challenges, Dr Karagiannis and his colleagues said, were the pressures being placed upon the financial services industry by the G-20/OECD, and the over-reliance on tourism.

To combat this, and drive future growth, the four authors suggested the Bahamas focus on sectors such as renewable energy, the agro-industrial sector and making itself an “international maritime crossroad”.

“What we are envisioning when talking about the maritime Bahamas involves taking advantage of the potential for growth of its maritime sector in order to make the country an international maritime crossroad, not only for ship registration, import and export of goods and tourism, but also for international cargo transit, services connected to ocean carriage such as freight forwarding, logistics, technical advice, vessel repair, protection of marine environment, maritime security, arbitration of disputes, maritime conferences, and other related activities,” Dr Karagiannis and his colleagues said.

“We are talking about a vision that involves creating a national maritime policy that will provide the right incentives and the necessary funds to make the Bahamas a major international maritime hub.

“In effect, a place where foreigners will look for advice on maritime transportation issues because the country has the right infrastructure, competent business providers, technical personnel and research centres to answer any questions and meet all needs arising in these fields.”

The authors suggested the Bahamas could, in its own way, emulate the likes of Singapore and Hong Kong via a maritime focus, attracting international clients and foreign investment to generate jobs for Bahamians.

“Moreover, the location of the Bahamas is ideal for catering to international maritime transportation needs,” Dr Karagiannis and his colleagues said.

“The country is conveniently placed between North and South America, neighbours the Atlantic Ocean which connects to Europe and beyond, and has enough land and natural ports in its different islands to provide the space needed for related maritime activities. Why leave these natural gifts unexploited?”

However, Dr Karagiannis and his colleagues argued that all this required a major change in approach by Bahamian policymakers.

They said: “Whether it is having too much faith in neoliberal adjustments or a desire not to ‘rock the boat’, existing Bahamian policy rests on three legs of a stool: expansion of commercial activities, socially-ameliorative programmes to assist the growing population, and tourism as the end-all be-all Bahamian activity.

“But this ‘business as usual’ approach relies exclusively on ad hoc approaches that sacrifice long-term socio-economic development for the sweet nectar of short-run gains. Of course, ‘in the long run, we may be dead’. but living exclusively in the short-run guarantees decline as circumstances change.

“The Bahamian society needs policymakers who can think ‘outside the box’ and can restructure existing institutions to promote local agro-industrial development.”