The Tribune

SCOTIABANK Bahamas recently announced that it would close or consolidate up to eight of its branches in The Bahamas. The bank reported that about 50 employees would be affected.

Predictably, the Labour Minister threatened to look into work permits and investigate strengthening laws to protect Bahamians from being fired, or made redundant.

However, the closure and consolidation by Scotiabank, requires a more measured and sober response and most of all a reality check.

The genesis of this action by Scotiabank (CIBC, RBC, IBOB) can obviously be traced back to certain events in the Bahamas of almost 15 years ago. Offshore financial jurisdictions such as The Bahamas, faced relentless and mounting pressure from the OECD to open its banking system to intrusive inquiries in pursuit of tax evaders from some of the world’s most advanced economies. Lest we forget, the OECD (Organization for Economic Co-Operation & Development) is comprised of 34 countries which include the United States, Canada and most of Europe, among others, on which banks in the Bahamas rely for thousands of daily transactions.

In a nationally televised address, delivered on August 9, 2000, Prime Minister Hubert Ingraham, said on behalf of the government and people of The Bahamas:

“…We have no desire to become or to be regarded as a pariah financial centre. Stubbornness, obstinance, national pride, claims of sovereignty and pure stupidity have no place in determining The Bahamas’ stance on the urgent need to be in full compliance with international established best standards and practices. Moreover, why shouldn’t The Bahamas join democratic states in the fight against the misuse of financial systems by criminals...?”

The address set the tone for the most comprehensive review of Bahamian banking laws in over 40 years.

The financial scandals afflicting the Catholic Church, which became increasingly public, and the chilling global impact of the terrorist attack on the World Trade Centre of September 11, 2001, marked the end of much of the pretence of bank secrecy for banking jurisdictions such as The Bahamas. The pressure on financial services systems to expose terrorist financing channels alone increased the financial and legal reach of the clearing banking centres of London and New York and further justified their work in pursuit of financial criminals and tax evaders. Many suggested that the intensity and intrusiveness of the extra territorial financial inquiries exceeded even those conducted in the famous searches for Nazi war criminals. The recent example of HSBC of Hong Kong paying billions in fines to US authorities mostly for the laundering of Mexican drug cartel money illustrates the reach of the global “banking police”. The financial world had indeed changed.

Amidst much local and global ambivalence, The Bahamas passed the banking laws, because the country wished to be in the vanguard of establishing fair, proper and internationally accepted regulations and practices governing financial transactions. The effects on the second pillar of our economy, the lasting political scars and what some saw as an assault on the sovereignty of The Bahamas, bear testimony to the period.

“My Government is satisfied that much progress has been made toward the establishment of the ‘level playing field’ which we sought in 2002,” said Prime Minister Ingraham on March 25, 2009. “It is clear that the OECD standards of transparency and exchange of information are being accepted by OECD member countries and by those non-member jurisdictions that provide financial services similar to those provided in The Bahamas. The Bahamas reaffirms its commitment recorded in a March 2002 agreement between The Bahamas and the OECD…”

Unfortunately, that was not the end, the siege continued. Offshore financial centres, such as The Bahamas, remained targets. Because of the continued intrusion and the global economic downturn, starting in late 2007, the offshore financial Centres, including The Bahamas, continued to face contraction and retrenchment led by the Banking Giants. The relentless change had become constant in the economies of countries such as The Bahamas.

Public policy did not help as the pace of change was accelerated by recent actions of the Government through the imposition of new taxes on banking institutions in two successive budgets. The efforts by banks to cut costs on their own by offering online banking, smart phone services, ATM services and all manner of measures to keep customers out of the banks were proving to be insufficient. The dark side of the global trend to paperless electronic banking has been the insidious erosion of high paying middle class jobs.

The Bahamas made a number of efforts to manage the process, by preparing people for other services that were likely to provide them with commensurate remuneration. However, one of the harshest lessons of the recent global downturn is the relative immobility of Bahamian labour. Persons in Banking, Hospitality and other sectors of the economy were ill prepared for opportunities in other sectors. Training, wage scales, age and unwillingness to change were only some of the more common hurdles facing decision makers and those affected.

Still, The Bahamas had good reason to expect positive outcomes from these efforts. For example, the regulatory environment which service the banking sector, should have lent itself readily to training in wealth management, property management, aircraft registration, yacht registration, and other features of economic service which pay commensurately and the markets for which have global reach. But our community was ill-prepared psychologically to deal with these changes that were happening everywhere.

Just a few decades ago, the big push for a number of Bahamians was to be able to get a job in a bank. So, the redundancies in the banking sector appear to be universally viewed negatively in our community, despite the fact that Teller jobs have not added value to the economy. In fact, the record will show that the Bahamas, and indeed many in our region, are the slowest to change to electronic banking from banking that required a visit to the physical bank. Indeed our very culture slowed the changes that were happening everywhere else.

The Bahamas Maritime Authority and the efforts to expand the registry to accommodate yachts, aircraft and the commencement of the LGM Maritime Academy, are only a sketch of a multi-year plan launched in an effort to reach national consensus required to reduce the effects of the assault on traditional financial services. Training to develop mobility of skill to cope with the demands of the changing global economy is an essential feature required for the long-term competitiveness of The Bahamas.

Norway provides a graphic illustration of how this training and shift can assist citizens faced with adversity. Norway’s fisheries had almost collapsed when oil was discovered in The North Sea. The seafaring people were able to train to work on oil rigs (still at sea) and earn higher wages from the new industry. Likewise, the Bahamas can transition to deliver services related to the underlying nature of its economy, based principally on tourism and financial services. The reality is that the new focus on automated banking provides new spheres of opportunity for those trained to service and repair ATM’s and other types of developing technology. It will also encourage Bahamians to join the modern world of electronic banking. It is essential to create more mobility in the labour forces to respond readily to global trends.

One of the challenges for our society has to be effective long-term preparation for a transition from a fully service based economy to one that is focused on complete delivery of service including production. Such planning must incorporate attitudinal shifts and school centred vocational training (an area where we are lagging) to supplement the current focus on academics alone. Instead of complaining about ScotiaBank, we should have prepared ourselves for ScotiaBank.

There is a compelling need to create meaningful financial inducements to encourage entrepreneurship among Bahamian youth. Everyone comes out of school looking for a job. The country has effectively created lifetime salary slaves. Virtually none come out with an inclination or plan to create employment.

The performance of BTC is a classic case to illustrate how The Bahamas must respond, mature and adapt. A brief historical review is in order.

When an Act of Parliament first created Batelco, it started a process of connecting the Bahamas through telephone communications. The country greatly expanded the technology and the connectivity of the archipelago. It was an important link in bringing the country together. It was necessary to have physical (wired) contact in order for the system of telephones and telegraphs to work.

When Satellites were launched and the Internet was created, the need for physical connection to stay in touch evaporated. However, the need to stay connected grew stronger. The economic and social need accelerated as communities grew. The security of communications in the event of natural disasters was particularly important during the earlier period. While communications security remained vital, it was trumped by enhanced national security, and the need for social and economic progress, which were propelled by the second period of telecommunications.

At all times, during both periods, the needs of the people of The Bahamas were paramount. Deeper national identity and social contact was aided admirably in the first period. However, as essential and as fundamental it was to lay cable in 1960, so is it to have Internet connection today. Freedom, expanded economic horizons, greater social equity, and fundamental deepening of equity, democracy and social progress are enabled by greater access to the Internet. The Internet is as important to this generation of business, students, voters, and citizens as what happened in 1960, when Bahamians simply wanted a telephone.

The Government plays a vital and pivotal role in providing an environment favourable to the strengthening of institutions and the growth of our national economy and integrating the Bahamian economy. Increasingly as the demand for democracy and integration accelerated, the fight for freedom took on a larger meaning. The Internet created opportunities to level the educational playing field, through distance learning.

The Bahamas is neither a Cooperative nor a Corporation; she is a country, Our Country.

The laws and policies The Bahamas enact weave the tapestry and fabric of our country to aid in building The Bahamas we all want.

Airports and seaports are critical to island nations’ economic growth and development. When coupled with good connections and communications the power of creative entrepreneurial talent can be unleashed. Joined by sound public policies and a government grounded in a belief in its people and systems, human potential can achieve its zenith.

Where is the wealth of nations? Is it in land? A body of laws? A system of markets? Or the protection of freedom? What have we done to secure the wealth of our Nation?

We have so trained our people to tune out any and all prescriptions that call for personal responsibility and hard work that any sustained changes will only come by coercion instead of by personal initiative.

The educational system will not be changed by persuasion. The tourism sector will not be changed by persuasion alone. Interconnecting the Bahamas by sea and air will not happen by persuasion alone. The dormant multi-million e-government systems that just sits there vastly underutilized will not be used by our people by persuasion alone. People will not go overseas for training by persuasion alone. Quality people will not join the public service by persuasion alone. The second cellular license will not be issued by persuasion alone. Hundreds of obsolete systems will not be abandoned by persuasion alone.

None of these things will happen by persuasion alone because the natural tendency of a nativist and “Bahamas for Bahamians” government policy in a deteriorating economic environment is to double down on that slogan such that it becomes “Bahamas for my supporters”. It soon becomes clear that if you want a job, approval, policy change, etc, only overt supporters need apply and private sector entities are similarly intimidated to act in the same way if they want any favours from government. How do we get ourselves out of this box? It requires bold and in some cases unpopular decisions by the government of the Bahamas to coerce its people to see the world as it really is instead of the way that they wish it to be.

In the midst of the worst recession the world has seen in 80 years, The Bahamas consciously and deliberately set about to rebuild its physical plant to modernize its highway systems and prepare its people for better days ahead. Those leaders who crave a positive legacy need to know that history is very hard on those who demonstrate that their power and popularity are far more important than progress of and for the people.

We must continue to connect the dots of The Islands of The Bahamas so that the synergy arising from Policy, Laws, Incentives, Infrastructure, and Marketing can combine to propel our people and our economy.

(Today’s column was written by a

regular reader to The Tribune).