THE Chamber of Commerce yesterday urged the Government to “tighten up the language”, and enforce the provisions, in the Commercial Enterprises Bill to prevent potential abuses.
The private sector organisation, in a review of the amended Bill, praised the Government for better clarifying the role of Bahamian investors, and the fact that the Bill’s ‘fast track’ work permit process and other incentives would be available to them in the targeted industries.
While “applauding” these changes, the Chamber nevertheless identified several concerns with the revised Bill that has now gone forward for the Governor-General’s assent, including potential “ambiguity” with its definition of ‘Bahamian’. And, while backing the removal of the $250,000 minimum investment threshold for Bahamian-owned businesses, and joint ventures or partnerships with foreigners, the Chamber said the failure to define a ‘joint venture’ could create an abusive loophole where such businesses were “contrived”.
“There is a school of thought that even the definition of ‘Bahamian’ in this Bill, even though referencing the Companies Act, may be too ambiguous for this Bill and could provide an opportunity for foreign persons to take advantage of what could be considered a level of ambiguity,” the Chamber said.
“‘Bahamian’ is defined as a natural person, which is too loosely defined. The definition of ‘Bahamian’ should be any natural person holding Bahamian citizenship.”
As for its ‘joint venture’ concerns, the Chamber added: “The $250,000 investment threshold does not apply to joint ventures or partnerships between Bahamians and non-Bahamians.
“In the absence of a definition of a ‘joint venture’, the concern is that a joint venture with a Bahamian could be contrived to avoid the $250,000 threshold. This could be easily addressed by a definition of ‘joint venture’.
“For the purpose of the legislation regarding joint venture, a Bahamian is defined as a company with at least 60 per cent Bahamian ownership. Theoretically, this means a 60 per cent Bahamian-owned company can joint venture with a foreign company for only 1 per cent interest in a joint venture. There is no minimum ownership for a joint venture.”
Edison Sumner, the Chamber’s chief executive, told Tribune Business: “We certainly think the language in the Bill can use some tightening up to avoid some of these ambiguous situations happening.
“They were able to bring a little more definition to the Bahamian component of the Bill, but we think that definition has to be further developed to avoid any ambiguity in the future.
“We believe that, as we go forward, we believe and recommend there be further amendments to the Bill at some point in the not too distant future, and we have an opportunity to take into account some of the issues raised in our paper today,” he continued.
“That [joint ventures] is one of the areas we think may be ambiguous, and could be open to some level of abuse by persons wise and prudent enough to get around certain conditions. You can have a joint venture with a Bahamian firm, but it doesn’t mean the Bahamian is the majority owner of the joint venture.”
Mr Sumner praised the Government for “taking measures to bring some relief to the economy” with the Commercial Enterprises Bill, but urged that it enforce the legislation’s provisions - especially when it came to the hiring and training of Bahamians to replace high-level expatriate workers.
In particular, he expressed concern over the Bill’s Section 7 (2), which allows for a company holding a Special Commercial Enterprises Certificate “to amend or vary” its business plan and model, subject to government approval, when it seeks to renew or extend its status.
“That does raise a bit of a red flag, as you could actually operate with a Certificate for a business you’ve not actually applied for,” Mr Sumner told Tribune Business. “It’s important reviews are conducted on an annual basis to ensure businesses are conducting the business they’re approved for.”
He added that investment incentives should be withdrawn from businesses that breach their obligations under the Bill, and said: “If the business says they’re going to hire Bahamians to work, and also train them, an audit ought to be done to ensure the jobs being offered are new jobs, sustainable jobs and they’re not going to be a collection of short-term contract workers.
“We’re looking for permanent jobs, training of the workforce and stability from these companies given Certificates to operate in the Bahamas. If they’re getting concessions from the Government, there has to be a trade-off, which has to be doing what they applied to do, and hiring and training Bahamians to take over certain positions from expatriates.”
The Chamber, in its position paper, said of section 7 (2): “This proviso might create a loophole for applicants to apply for a certificate based on an amended business model that is foreign to the originally-approved certificate.
“We recommend that the annual renewal of the enterprise certificates be tied to a review of the business plan to ensure that the business for which the certificate was granted was actually being conducted, and that Bahamians were still permanently employed and being properly trained in specialist skills.
“Further, we suggest that the purpose of any review be intended to measure the degree of investment against the concessions provided. This should not be specific or limited to Immigration. Furthermore, certain concessions should be performance-driven, tied to a specific expectation and outcomes. If the purpose for which the concession was granted does not materialise then the concession automatically falls away.”
The Chamber also suggested that the minimum $250,000 investment threshold may be too high for certain industries, and called for the Minister responsible to be given “a level of discretion” when it came to investments in ‘specified economic zones’ - especially in the Family Islands.
It suggested that the $250,000 benchmark be waived in return for “a minimum of 20 permanent and sustainable jobs... created and guaranteed for Bahamians for the life of the specified commercial enterprise certificate”, with Bahamians trained up to take on senior roles within three years.
The Chamber also questioned whether the $250,000 threshold aligned with regulatory capital requirements, especially in the financial services industry, and suggested regulatory capital “not be taken into account” for the Commercial Enterprises Bill’s purposes.
It called on the Government to increase the efficiency of its regulatory agencies beyond Immigration when it came to processing business approvals, and added: “The Chamber’s position is that there needs to be substantial overhaul and reform to the policies and procedures in Immigration, Bahamas Investment Authority, and that the investment policy of the Bahamas should be clearly and comprehensively articulated.
“We also recommend a review, enhancement and streamlining of the framework that supports small and medium enterprises (SME) in the Bahamas to ensure that they are in a position to significantly contribute to the Bahamian economy. Additionally, the ease and cost of doing business by Bahamian SMEs should be addressed as a matter of priority with due consideration for concessions, incentives and access to capital for this important sector.
“However, this issue is much more complex, as energy reform, fiscal policy and monetary policy will play major roles in addressing the dilemma facing SMEs in the country today. We encourage the Government to continue to work closely with the [Chamber] to facilitate the ease of doing business in the Bahamas.”