The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government appears be ignoring its own decade-old advice not to proceed with National Health Insurance (NHI) until there is “real growth” in jobs and its own finances, the private sector yesterday agreeing these conditions had not been met.

The 2005 report by the then-NHI steering committee, created under the first Christie administration, explicitly warns that “sustained economic progress” is an essential “precondition” that must be fulfilled before such a scheme is implemented.

This is top of the list of ‘preconditions and supportive measures required for implementation’, and remains as relevant today as it was then, given the Bahamas’ continued struggle to recover from the 2008-2009 recession.

“A fully functional and progressive NHI depends on the quality of its internal administrative and technical preparation, as well as on certain external facilitating factors and supportive measures,” the then-NHI steering committee wrote in September 2005.

“These external factors include sustained economic progress marked by real growth rates in the key sectors, employment, wage levels and fiscal operations, as well as control of inflation.”

The Bahamas is arguably in a weaker economic position now than it was then, as the 2005 report was written at the peak of a relative ‘boom’ period.

While the economy could revive relatively quickly if Baha Mar, and the other investment projects recently touted by the Prime Minister come through, these have yet to translate into real, tangible improvement.

Comparing the present reality against the 2005 “preconditions”, and it is clear that most - if not all - the economic-related ones are not being met.

Not all “key sectors” are demonstrating growth; the official national unemployment rate recently increased to 15.7 per cent; real wages have remained relatively stagnant; and the Bahamas is now saddled with a $6 billion national debt.

This is all potentially exacerbated by Value-Added Tax (VAT), which has reduced disposable incomes for consumers, and profits for businesses.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, agreed with Tribune Business that “we haven’t” met the preconditions essential to the smooth implementation of a sustainable NHI scheme.

“In reality, we have a number of different factors in play today that are causing some headwinds that are difficult to control,” Mr Bowe said. “We are handling them well, but have not gotten through yet.”

Acknowledging that the projects referred to by Mr Christie in his mid-year Budget closing would help move the economy forwards, the BCCEC chairman added that the GDP growth rate remained around just 2 per cent.

“Our unemployment rate is still increasing, which indicates we are facing a situation where the number of persons joining the workforce exceeds the number of job opportunities being created at this time,” Mr Bowe said.

He suggested that this “phenomenon” would persist for some time, and any improvement would not reduce the Bahamas’ unemployment substantially.

“We have to take into consideration where we are with growth levels, unemployment prospects, and understand some of the new things introduced,” Mr Bowe told Tribune Business, referring to VAT.

He urged the Government to be “mindful that we don’t retard progress by heaping a lot of things on the business community all at once.

“The worst thing we can do is retard our own progress by trying to do too much, too quickly, before we’re on the right footing, and leap too rapidly into new ventures”.

The Government’s consultants, Sanigest Internacional, have proposed that a payroll tax be employed as the main NHI financing mechanism, with the rate varying between 1 per cent and 5 per cent depending on whether the scheme was phased in or implemented ‘in one shot’.

Either way, it appears likely that Bahamian businesses and workers will have to contend with the implementation of another tax within a year of VAT, raising concerns that NHI will represent an unsustainable burden the economy cannot bear.

Mr Bowe told Tribune Business that while the Bahamas might enjoy GDP growth “spikes”, it was never going to achieve the 10-12 per cent economic growth rates produced by the Asian “tiger nations” in the immediate future.

Suggesting that 5-7 per cent GDP growth rates should be the Bahamas’ target, the BCCEC chair said he wanted this nation to hit 2-3 per cent as a first step.

“But if it’s 2 per cent, and inflation is growing at the same rate, we’re not adding new businesses and ventures,” Mr Bowe told Tribune Business.

“All we’re seeing the expansion from natural cost of living increases.”

The BCCEC chairman also questioned whether the Bahamas would adequately address the infrastructure, service, efficiency and quality care challenges plaguing the existing public healthcare system, before it took on the additional burden of NHI.

“Throwing money at inefficient services doesn’t make them efficient,” Mr Bowe warned. “The lure of throwing more money at these issues doesn’t fix the problem.”

He likened this to “putting a band aid on a cancer”.