The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ economic growth outlook is being slashed because the Government is “too focused on its social agenda and raising taxes”, a well-known businessman warned yesterday.

Dionisio D’Aguilar, the Superwash president, said the Christie administration’s failure to promote pro-growth policies, apart from its drive to increase foreign direct investment (FDI), was a major reason why the International Monetary Fund (IMF) cut this nation’s 2014 GDP growth forecast from 2.3 per cent to 1.2 per cent.

The former Chamber of Commerce president told Tribune Business that continuing uncertainty over the Value-Added Tax (VAT) details (the Bill and accompanying package are due to be released today), and proposals such as National Health Insurance (NHI), were deterring the private sector from job-creating investments.

And he argued that too many ministers in the Christie Cabinet were “not pro-private sector”, with all this creating an environment in which Bahamian firms were “not excited” to expand.

Tribune Business exclusively revealed that the IMF’s revised forecast had cut around $90 million from the Bahamian economy’s expansion prospects in 2014, which Mr D’Aguilar agreed was “not surprising”.

“The Government is, in my opinion, far too focused on their social agenda and far too focused on raising revenues, and they’ve got everyone in a state of dithering,” Mr D’Aguilar told Tribune Business. “Business people are unsure whether to forge ahead or fall back.

“The whole indecision with this tax issue; it’s up in the air when it’s coming in, how it’s going to work, what exemptions will there be, the details of it.”

The Government should hopefully take care of that today, with Michael Halkitis, minister of state for finance, promising that the VAT Bill, accompanied by the revised list of exemptions and Customs/Excise tax rates, will be tabled in the House of Assembly tomorrow.

This will take place almost two months after Prime Minister Perry Christie unveiled the revised 7.5 per cent VAT in his 2014-2015 Budget speech, meaning that the private sector, consumers and the Government itself will have just over five months to complete their preparations before the January 1 implementation target.

Still, Mr D’Aguilar said the delayed release of the VAT details had placed businesses “in a state of hold back”.

“I don’t understand their reasons for going so slow,” he added. “The country is haemorrhaging money with these massive deficits, but they can’t seem to focus on this VAT issue and bring it to a conclusion.

“I don’t know why this is not a number one priority, and they simply get it behind them. Now they’re out of time, and they may try to jook it down our throats like they already did. We will push back against that.

“We appreciate the 7.5 per cent, it was a wise move, but now we need to see the devil in the details,” Mr D’Aguilar said.

“It’s affecting the appetite in the business sector to invest, create jobs and move forward.”

The former Chamber president said the Government’s social and labour plans were also adding to private sector uncertainty.

“The Government is so focused on its social agenda,” he told Tribune Business. “All we hear from them is increase taxes, raise the minimum wage, introduce National Health Insurance.

“When you put all that together, it’s: ‘Do you really want to invest in my business when all these costs are coming down the pipeline?’

“The perception is that it’s very difficult to make money. Everyone is holding back because they don’t know what these things will cost them. That’s why you have this great reluctance to invest and create jobs.”

Mr D’Aguilar said too many Cabinet ministers harboured a “dislike and distrust for the private sector”, adding: “The people around the Christie administration are not pro-private sector inclined.

“It’s very important for the domestic private sector to be excited, and we’re not excited. No one is talking about how to encourage the private sector to grow. You get what you get. We will continue to have low growth until you get your private sector investing.”

Mr D’Aguilar said a third factor behind the Bahamian economy’s underachievement, at least when it came to its growth projections, was the reluctance of commercial banks to lend to the housing and business sectors.

This industry, too, has been hit by uncertainty in the form of the Government’s Mortgage Relief Plan and, more significantly, the proposed Homeowners Protection Bill that will make it more difficult for banks to realise security/collateral on a defaulted loan.

“The banks have been so burnt that they don’t lend any more,” Mr D’Aguilar told Tribune Business. “Unless the bank cracks that nut - how to get the banks lending again - we’ll see no growth in productive areas like homes.

“The banks are certainly not lending mortgages. And 25-30 per cent of commercial loans are in default, so they’re certainly not lending to business. Without cash, you cannot grow.”

And he added: “When you combine the uncertainty with VAT, all this talk of increasing costs to business through NHI, minimum wage, the inflationary effects of VAT, and adding that to the banks not lending for legitimate reasons, you understand why we have the growth we have.”

Mr D’Aguilar said the positive effects from FDI-driven projects such as Baha Mar were being overshadowed by such negative impacts.