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Investment Authority To Shed 'Low-Value' Image

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Investment Authority (BIA) is to be transformed into a “full-service investment management agency”, shedding its current “low value-added” and reactive approach.

This goal is outlined in an Inter-American Development Bank (IDB) paper on the proposed $450,000 project to strengthen the Prime Minister’s Office, which aims to both bolster the BIA and create an Economic Planning Unit (EPU) - twin goals that will lead to a National Economic Development Strategy.

The IDB paper describes the project as a “redesign” of the BIA, taking it away from the manual, ‘check-list’ approach to assessing investment proposals to one that is more analytical in nature.

This, the document says, will enable the BIA to both better align foreign direct investment (FDI) and Bahamian proposals with the National Economic Development Strategy, and give it a “rational” basis upon which to grant investment incentives.

Khaalis Rolle, minister of state for investments, has touted the planned BIA reforms several times, suggesting they will boost efficiency and speed up the investment approvals process.

Enhanced efficiency and transparency will doubtless be welcomed by investors and their Bahamian advisers alike, given the numerous complaints and concerns expressed already this year over the long wait - sometimes up two-three months - for Investments Board and National Economic Council (NEC) approvals.

The IDB report noted that the BIA acts as the ‘secretariat’ for both the Investments Board, which focuses on real estate (chiefly foreign second home and property purchases), and the National Economic Council (NEC). The latter focuses more on major investment projects, although both are usually either the full Cabinet or a Cabinet committee.

Noting that the BIA, part of the Prime Minister’s Office, has “the mandate to assess all foreign and local investment projects”, the IDB paper said: “Currently, the bulk of its activities are focused on the processing and management of investor applications, following a reactive approach, mostly through manual processes such as basic check lists with very limited analytical work.

“The goal would be for the BIA to become a full-service investment management agency, with a proactive approach, a new structure and responsibility for Economic Development and Planning, which would provide higher value-added products to the National Economic Council as the highest decision-making body on investment projects in the Bahamas.”

And, just to reiterate the present weaknesses, the IDB added: “The BIA currently follows a mainly administrative check list rather than undertaking a cost-benefit analysis or calculating financial or social internal rates of return, and projects are not evaluated against any kind of economic development

plan.

“The BIA’s assessment is later sent to the National Economic Council (NEC), headed by the Prime Minister, for approval. Thus, decisions are made with very limited data and on a case by case basis.”

To tackle this, the Government is seeking the IDB’s assistance - both financial and technical - to create an Economic Planning Unit (EPU) within the BIA.

Suggesting that this would “establish the foundation for a modern investment management system in the Bahamas”, the IDB stressed that the EPU’s creation will “will not add a new layer of bureaucracy to the process of investment assessment.

“On the contrary, it is expected that the EPU will enhance the capacity of the BIA to carry out its investment assessment functions. This unit [EPU] would have the mandate, organisational structure, staffing and capacity to carry out effective feasibility and impact assessments of all investment projects including FDI, and the private and public sector.

“In addition, the unit would ensure the alignment of all prioritized projects with the National Economic Development Strategy.”

The IDB paper disclosed that the project would involve a ‘skills-gap’ analysis at the BIA to both determine training and future hiring needs.

And methods to analyse all proposed investment projects; select them based on the priorities contained in the National Economic Development Strategy; and evaluate them for their “social and economic” value via a cost-benefit analysis will also be employed.

“These activities would transform an existing (relatively low value-added) function process into a rational evaluation of all investment projects and high quality recommendations for prioritisation to the National Economic Council,” the IDB paper said.

“Currently, the BIA does not have a solid methodology to evaluate, prioritise and recommend investment projects with a rationalised approach to granting incentives based on identifiable benefits to the overall economic development of the Bahamas.”

Such a comment adds further weight to the Government’s assessment of all existing investment incentives, thought to be costing it up to $285 million in revenue per annum, to see whether they are delivering value for money.

A policy paper on the BIA reform is set to be submitted for Cabinet approval, and the IDB paper said: “The increased public value of BIA’s interventions is not expected to be cost-neutral.

“However, the Prime Minister has expressed the Government’s commitment for this reform. The redesign of the BIA is expected to be approved by Cabinet and, through the Budget, by Parliament.”

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