The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday warned the Bahamas was failing “to maximise the benefits” from all the foreign direct investment (FDI) it receives, largely because local businesses and workers were not in position to exploit these opportunities.

Khaalis Rolle, minister of state for investments, told Tribune Business that despite there being sufficient investment-related activity, too many Bahamian companies and workers were not productive or competitive enough to take advantage of these projects.

“What people fail to understand is that we are generating [investment] activity, but that activity in many instances is not being translated directly into benefits for all Bahamians,” Mr Rolle told Tribune Business.

“It’s Bahamian business owners as well as the Bahamian labour market. We have to be globally competitive.”

Mr Rolle was speaking after the International Monetary Fund’s (IMF) executive board, in its summary of the 2015 Article IV consultation with the Bahamas, warned that structural problems in the labour market were a key impediment to this nation achieving higher economic growth rates.

The IMF statement focused heavily on so-called ‘supply side economics’ as a way to boost productivity and the Bahamas’ economic competitiveness.

It called on this nation to expand and enhance training initiatives, such as the National Training Agency; increase investment in ‘human capital’; and improve labour market flexibility/worker movement by removing “restrictions” and other inefficiencies.

Backing the Fund’s findings, Mr Rolle told Tribune Business: “What are they saying that I haven’t been saying for years?

“My position has been consistent. This is what I have been saying from my time in the private sector, and I am not going to change my tune because of where I am now.”

Mr Rolle agreed that the Bahamas had to focus on improving “the employment prospects” of its people, with the IMF warning that structural problems in the workforce would restrict this nation’s medium-term GDP growth average to just 1.5 per cent.

“We have some structural problems,” Mr Rolle conceded, and we are going to continue to see it until we can solve them...... structural problems that prevent the Bahamas from maximising the benefits of the foreign direct investment the Bahamas receives.”

The Minister added: “If you look at the activity that’s generated through these foreign direct investment projects, it is an opportunity for us to get more Bahamians employed.

“The difficulty has been that we still find ourselves in a difficult position where every Bahamian business is looking for labour that matches perfectly with the requirements they want.

“We have a lot of work to do, and that’s why we have to work really hard to get to the nuts and bolts of this economy.”

Mr Rolle said Bahamian companies should be able to supply most of the services and products required by major investment projects, yet the $3.5 billion Baha Mar project had served as an example where even the sub-contractors and “sub-sub-contractors” had been imported from abroad.

While this was partly due to the nature of the financing agreement struck between the developer and its Chinese state-owned financier, Mr Rolle said the foreign content of the Baha Mar project was still “too high”.

He noted that similar concerns had surfaced with the Crystal Palace property’s construction in the 1980s, yet for three decades the Bahamas had failed to develop a strategy to counteract this.

“The other issue is competitiveness,” Mr Rolle told Tribune Business. “Bahamian businesses have to be competitive.

“No one has done a good enough job of determining what makes us competitive, and ensuring that [reaches] down to our businesses and labour force. This is not a battle that started now; it started years ago.”

Mr Rolle added that during the initial work on the National Development Plan, “one of the first things we identified was that the downstream benefits to Bahamian businesses from large foreign direct investment projects has not been as robust as it could. That was something we identified immediately.

“We’re getting the opportunities. The opportunities are coming, but we have to position Bahamians in terms of their productivity and being the best contributors to business success.”

Despite the likes of Albany, Baha Mar (until recently), the Holiday Inn, the Warwick and now the Ocean Club all producing significant construction-related activity, and the Island House hotel’s opening, the national unemployment rate has remained stubbornly high at 15.7 per cent - further evidence of the structural problems cited by the IMF and Mr Rolle.

The IMF executive board, in its assessment, said: ““Potential GDP growth is estimated at about 1.5 per cent over the medium term, insufficient to generate a significant reduction in the high unemployment rate.

“Absent structural reforms, including in the labour market and the energy sector, significantly higher growth than currently projected will be required to absorb new entrants to the labour force and reduce the unemployment rate to single digits over the medium term.”

This too many Bahamians are not feeling the benefits of foreign direct investment, and are failing to catch employment and entrepreneurial opportunities as they pass them by.