By NEIL HARTNELL
Tribune Business Editor
Investment projects have been “vulnerable to political pressures” because the Bahamas lacks a national economic development plan, the Inter-American Development Bank (IDB) has warned.
An IDB paper on a proposed $450,000 project, which aims to strengthen “institutional capacity” within the Prime Minister’s Office, said the absence of such a plan had made it difficult for the Bahamas to align major foreign direct investment (FDI) projects with national economic priorities and industries targeted for growth.
The project, which aims to facilitate the creation of just such a plan, describes the resulting National Economic Development Strategy as “a road map for key decisions on investments and policy making”.
Analysing the consequences of 40 years without such a plan/strategy, the IDB said it had left economic policymaking and investment decisions subject to the whim of individual ministers and ministries.
Economic and investment policies altered with each change in government, it added, and the Government was unable to give “objective” reasons as to why it rejected investment proposals deemed to be ‘non-priority’.
The ultimate impact, the IDB said, was that poor planning held back Bahamian economic growth and job creation.
“The Bahamas has lacked a comprehensive and publicly discussed long-term strategy for the country’s economic development since its independence in 1973,” the IDB paper said.
“Without such a strategy, the prioritisation of policies, programmes and investment projects has most times been made on an ad-hoc basis, and has tended to be vulnerable to short-term political pressures and individual agendas by line ministries.
“The lack of economic planning prevents investments from being strategically directed to those sectors offering greater development opportunities, thus affecting the overall performance of the economy,” the IDB added.
“An improved institutional capacity for planning and investment assessment would ensure a better economic performance, and ultimately contribute to the sustainability of public finances.”
As to the implications of the current flaws, the IDB report said: “This has led to institutional fragmentation, as well as to inefficiencies and inconsistencies in investment decisions with each change of administration, as authorities lack objective justifications to reject non-priority projects.
“This weak planning performance in practice mirrors the country’s institutional and legal framework for this key function. At present, there is no legal framework that provides for - and regulates - the strategic planning of government activity.
“While efforts in a few sectors have been made for medium-term strategies, such as Education and Health, they have been isolated and have not been articulated within a national development strategy, nor translated into annual operational plans or integrated with the budget process.”
Noting the Christie administration’s 2012 general election manifesto commitment to long-term planning, the IDB report said the Prime Minister had charged Khaalis Rolle, minister of state for investments, with leading the preparation of a National Economic Development Strategy (NEDS).
“This strategy would be prepared with participation from, and validation by, the Bahamian citizens, the private sector and the Opposition to ensure the level of ownership needed to transcend the current administration, and serve as a road map for informing public and private investment decisions and policy-making going forward,” the IDB said.
The Bahamas’ lack of experience in formulating such a long-term development strategy, and “limited capacity” within the Prime Minister’s Office to do so, meant the Government had hired the IDB’s assistance.
Among the first steps, the Bank said, will be to “draft a policy document for institutionalising the planning function in the Bahamas”. This is due to the absence of any legal framework to regulate a national economic development plan.
To kick-start the process, the project will host a Bahamas-based workshop on the experiences of other small states in constructing a national economic development plan.
The idea behind this is to provide the management and technical staff within the Prime Minister’s Office and Bahamas Investment Authority (BIA) with experiences and information to help them craft their own NEDS.
The IDB paper held up Singapore as a model the Bahamas could emulate. The island state’s Economic Strategies Committee develops strategies and proposals for economic growth, while the Singaporean Economic Development Board - a unit within the government’s Ministry of Trade and Industry - takes the lead on planning and executing strategies to enhance its ‘global business centre’ position.
“Several countries that share socioeconomic characteristics with the Bahamas have engaged in the formulation of National Economic Development Strategies, and the subsequent establishment of specific bodies to promote and monitor its implementation,” the IDB report said.
“Singapore is usually mentioned as a successful example. Other countries have followed a similar path for economic development, such as Brunei with the Brunei Economic Development Board, and Bahrain with its own Economic Development Board.
“A different, more integrated approach is followed by Maldives, whose Department of National Planning (currently integrated in the Ministry of Finance but previously with ministerial rank) is in charge of formulating, as well as promoting and monitoring, the implementation of the national economic strategies.”
Focusing on Caribbean examples, the IDB report added: “Geographically closer examples can also provide interesting insights. In Jamaica, the Plan Development Unit Secretariat, housed within the Planning Institute of Jamaica, formulated the Vision 2030 Jamaica National Development Plan, while the Jamaica Promotions Corporation (JAMPRO) facilitates and promote investment and trade in the country.
“Similarly, in Trinidad and Tobago, the Ministry of Planning and Development is in charge of planning, while the Economic Development Board (EDB) and the Council for Competitiveness and Innovation (CCI) are in charge of developing and implementing strategies to accelerate sustainable economic growth.”
The IDB emphasised that the the project’s focus on public sector management and planning tied in nicely with the Bahamas’ 2013-2017 country strategy, which it was now preparing.
This strategy includes a project entitled ‘Fiscal Administration and Modernisation Programme’, which will result in “improvements in the effectiveness and efficiency of public expenditure as well as governance through reforms in public sector management, in particular, strengthening the country’s planning and delivery capacity.
“This will include creating institutional capacity to prioritise public investments, monitor performance and control expenditure.”