The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “underperforming” rival Caribbean economies on the ‘ease of business’, with productivity, employment and GDP growth indicators “up to 50 per cent below” nations of comparable size.

The grim verdict is contained in an Inter-American Development Bank (IDB) report on the ‘ease of doing business’ in the Bahamas, which notes that this nation is in the region’s “lowest quartile” in the annual World Bank rankings.

The just-published report, authored by Allan Wright, says the Bahamas is ranked 25th out of 32 nations in the Latin American and Caribbean region as a result of its “weakened performance”.

The IDB cited ‘trading across borders’ as particularly problematic, with the Bahamas ranked 31st or next-to-last, with deficiencies also noted when it comes to registering property, obtaining electricity and credit, and starting a business.

It added that Bahamian companies were complaining about “four major bottlenecks” - low workforce skills and productivity; crime and associated costs/expenses for the private sector; poor governance; and the rising cost/limited access to finance.

Some 40 per cent of Bahamian firms had been direct victims of crime, the IDB report said, which cost them sums equivalent to 5 per cent of annual sales.

And this nation’s energy costs were the highest in the Caribbean outside of Grenada and Dominica, with the 2.2 outages per month suffered by Bahamian companies only just shy of the Jamaican regional lead. The report estimated that power outages cost Bahamian firms an average of 1.5 per cent of their annual sales.

The IDB report also suggested that the Bahamas “reevaluate existing labour mobility laws” to give the workforce a “short-term boost”, which it elsewhere admitted was a call for skilled expatriate workers to augment the labour force.

“From productivity performance indicators derived from the World Bank, the Bahamas is underperforming relative to our Caribbean economies, and even other small economies within Latin America and the Caribbean,” the IDB report said.

“Measuring the contribution of the Caribbean private sector, including Bahamian firms to the rest of small economies (ROSE), indicators for factor productivity, employment and output growth appear between one-fifth and less than half of the levels observed among ROSE countries, contributing to weaker productivity, lower cost competitiveness and delays in sales and output growth within the Bahamian sphere.”

The IDB acknowledged that Bahamians’ standard of living, as measured by an annual $23,000 GDP per capita, was “among the highest in the Western Hemisphere at roughly $8,00 above the regional average”.

This, though, has helped to mask structural economic deficiencies that were exposed by the 2008-2009 recession and subsequent years, with GDP per capita also failing to reflect the vast income disparity between rich and poor in the Bahamas.

Referring to the World Bank findings, the IDB report said: “For the Bahamas, the results against major Caribbean economies show that greater efforts are needed in seeking to improve the trading across borders, ease the costs and the means of obtaining credit, reduce energy costs, register property and protect minority investors.

“This weakened performance has resulted in the Bahamas measuring closer to the lower quartile rank (25th) among the 32 countries of Latin America and the Caribbean, below Jamaica (5th), St Lucia (9th), Trinidad and Tobago (12th), Dominica (14th) and Antigua and Barbuda (19th) in the World Bank ‘ease of doing business’ report.

“Among the same group, the results within the sub-indices [show] the Bahamas is ranked second to last (31st) in trading across borders, 29th on registering property, 27th and 23rd on obtaining electricity and credit, respectively, and 17th on the ease of starting a business. The islands, however, measured 14th in the paying of taxes.”

While this may not be earth-shattering to either the private sector or the Government, the IDB report puts into stark relief just how far the Bahamas has fallen against its regional peers when it comes to facilitating business and economic growth, and creating an environment in which the private sector can thrive.

The document shows that Bahamian companies are far more concerned about an “inadequately trained workforce” and “access to finance” than their Caribbean counterparts.

Almost one-third of Bahamian companies, some 32 per cent, were concerned about workforce skills and productivity in 2014 compared to a 25 per cent regional average.

And one-fifth, or 20 per cent, of Bahamian companies were worried about access to financing compared to a 15 per cent Caribbean average.

“Bahamian firms complained about four (major bottlenecks: The current low level of skill of the workforce; limited access to and rising cost of finance; crime and related expenses to businesses; and the existing macroeconomic conditions and governance environment in the islands,” the IDB report said.

Despite the Government spending around 13 per cent of its annual Budget on education, the report added that just 50 per cent of public school students received graduation certificates.

“The Vision2040 report, which outlines the national development plan, indicated that large portions of the workforce remain unskilled, lacking basic literacy, numeracy and soft skills to contribute to national development,” the report said.

“It is small wonder that almost 32 per cent of firms complain that an inadequately trained labour force is one of the central issues they face, with roughly 37 per cent of firms offering formal training to their recruited staff.”

With lending rates above the 1998-2015 average, the report said this had combined with weak domestic demand and investment to shrink private sector credit.

“The Government of the Bahamas must take effective measures to reduce the cost and increase access to credit by the private sector, probably through wider outreach of the Bahamas Development Bank (BDB) or encouraged through other programmes such as the Bahamas Entrepreneurial Venture Fund (BEVFL), if varied scale investment projects are to be undertaken to boost growth, productivity, and competitiveness,” the IDB report said.

Whether the BDB and Entrepreneurial Venture Fund are the correct vehicles is open to debate, but the IDB report also called for the Bahamas to focus on the National Energy Plan’s “higher efficiency targets” in a bid to reduce costs and disruption.