The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nearly one in five Bahamian companies feels they have to pay bribes to obtain crucial licences and permits, a report by development agencies finding this nation ranked worse than the Western Hemisphere average for corruption perceptions.

The recently-released Private Sector Assessment Report on the Bahamas said that “a large proportion of enterprises have experienced bribe requests” when it comes to obtaining approvals and permits from government agencies.

The report, a joint effort between the World Bank, Inter-American Development Bank and Caribbean development agencies, gave no specific examples to support this assertion, instead drawing on findings from a World Bank Enterprise survey of Bahamian businesses.

“Almost 20 per cent of the firms surveyed in the Bahamas felt that they were expected to give gifts to public officials ‘to get things done’ - a phrase that could cover a wide range of actions,” the Private Sector Assessment Report, published by Compete Caribbean, said.

“There are concerns about the lack of transparency and the prevalence of discretionary procedures for obtaining licences and permits.

“Perceptions regarding gifts given to obtain permits and licences in the Bahamas are roughly on a par with the global average. The Bahamas’ score is worse than the Latin American regional average or Trinidad and Tobago regarding the expectation of bribe payments to obtain construction permits and electricity and water connections.”

Perception often matters more than reality, and the fact the Bahamas is rated worse than many Latin American and Caribbean counterparts when it comes to corruption could turn-off foreign investment and harm this nation’s competitiveness.

The Private Sector Assessment Report, drawing on the World Bank’s survey of Bahamian businesses, found that at least 20 per cent of local companies claimed to have “experienced at least one bribe request” - the highest proportion among Caribbean nations, and slightly more than the global average.

However, conversely, the Bahamas had the smallest percentage of businesses who saw corruption “as a major threat”. The same result was also achieved when companies were asked if they viewed the Bahamian judicial system “as a major constraint”.

Breaking ‘bribery expectations’ down by permit, close to 25 per cent of Bahamian companies surveyed said they believed they would have to “gifts” to obtain a construction permit.

Near 20 per cent also expected to have to ‘pay’ for a Business Licence, with 15 per cent fearing they would have to do similar for electricity and water connections.

While the Bahamas’ rated worse than Antigua and Barbuda and Barbados, and was below the Latin American and Caribbean average for ‘corruption expectations’, it was ‘on a par’ with the World Bank’s global average.

And it fared much better than Jamaica, while Trinidad & Tobago also rated more poorly on Business and Import Licences.

Elsewhere, the Private Sector Assessment Report warned that the level of collateral demanded by lenders to Bahamian businesses was “substantial and prohibitive”.

“This may be a symptom of institutional limitations, such as a credit system that does not check the past creditworthiness of borrowers or effectively measure repayment risk,” the report said, pointing to the need for the Central Bank of the Bahamas’ proposed Credit Bureau.

“As a result, lending institutions lack specific information on the risks of financing ventures and are obliged to limit their exposure through high security requirements.

“The collateral required for business credit can reach 230 per cent of the value of the loan for small firms, while for mid-size companies it can reach 253 per cent, and for the largest it can be as high as 319 per cent.

“According to the [World Bank] Enterprise Surveys, the Bahamas has the highest collateral requirements as a percentage of loan value in the Latin American and Caribbean region.”

This, the Private Sector Assessment Report said, impacted small and medium-sized firms more than large Bahamian companies.

Just 1.9 per cent of large companies said access to finance was “a major obstacle”, but 12 per cent and 18 per cent of small and medium-sized firms, respectively, cited this as an issue.

“Financial issues impact firms differently at different points in their business cycles, and also depending on their size,” the Private Sector Assessment Report said.

“ There is a greater need for working capital for ongoing operations than for initial investments (large companies may not source the funds for initial investment locally).

“According to the World Bank’s surveys, only 30 per cent of all firms in the Bahamas use bank loans for working capital - one of the lowest ratios in any of the comparator countries.”

Apart from energy costs and reliability, and inadequate infrastructure, the Private Sector Assessment Report said workforce shortcomings were also cited as an issue by Bahamian businesses.

“Although labour market regulation and flexibility are not viewed as major constraints on the private sector..., firms cite the lack of skills, high wages and low productivity as concerns,” it added.

“According to surveyed stakeholders, the main skills that employers look for in potential employees are numeracy and literacy; personal traits such as responsibility, teamwork and good communication; and information technology (IT) skills.

“The lack of IT skills was highlighted by employers in financial services and insurance, while the tourism industry emphasised problems with numeracy and literacy. Due to the increasing importance of technology in numerous sectors, IT skills were mentioned across the board,” the Private Sector Assessment Report said.

“In the construction industry, companies pointed to the need for more trained air conditioning and refrigeration mechanics, electricians, carpenters, plumbers and pipe fitters, operators of heavy equipment, supervisors and construction managers, again commenting on the poor basic skills of potential workers.”