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Economy To Get 'Worse Before It Gets Better'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association's (BMDA) president yesterday warned that the economy "will get worse before it gets better", with a turnaround still "a year or more away".

Fred Albury, speaking after half-year sales trends "unsettled" new auto dealers, told Tribune Business that reviving the Bahamian economy would not be as easy as "turning on a light switch".

He urged the Government to incentivise private sector expansion through Business License fee cuts and other concessions, emphasising that he and other entrepreneurs needed to "see a glimmer of light" before they would be willing to invest.

And the BMDA chief said the Bahamas "might as well dig a plot and bury" its offshore financial services industry, describing the sector as "done".

Giving a somewhat pessimistic near-term outlook following "erratic" sales data for the 2017 first half, Mr Albury said: "Until we see this economy pick up, I anticipate sales being where they are.

"A lot of the vehicles being sold are going out to the Government on lease programmes or to rental car companies who have fleet operations. It's still rough out there. I think we're in for a rough ride for another year or more before we see a turnaround out there."

The BMDA chief added: "The economy is not going to turn on like a light switch. It's going to take time to get this economy going. I think it's going to get a little worse for the economy before it starts to get better.

"The public service is overweight and needs to be cut, and the Government has to create some incentives for the private sector to expand business. I'm not going to expand if I don't see a glimmer of light out there. I've been sitting defensively for the last couple of years, trying to reduce expenditure and keep my head above water."

Mr Albury joined widespread private sector calls for a reduction in the Business License fee rate, describing this as "a very regressive tax" due to being calculated on gross turnover. It can often exceed a company's annual profits, and be the difference between reaching 'the black' or making a loss.

The BMDA chief said annual Business License fees for his Auto Mall group typically ranged from $300,000 to $500,000, and added: "If I didn't have to deal with that, I'd be able to look at expanding the business; I'd have something to put into it."

Mr Albury then told Tribune Business that this nation needed to "start thinking out of the box" to revive the 'two pillars' that have historically been most responsible for the Bahamas' economic advances - tourism and financial services.

"Banking is dead. It's done. They might as well dig a plot at Ebeneezer [Methodist Church] across the road and bury it," Mr Albury said, in remarks set to spark a lively debate.

The BMDA chief made clear he was referring to the Bahamas' international financial services sector, which has been hard hit by an ever-changing regulatory landscape since 2000 as the major industrialised countries sought to crack down on perceived tax evasion.

Former prime minister, Hubert Ingraham, whose government was responsible for implementing the controversial laws that removed the Bahamas from the Financial Action Task Force's (FATF) 'blacklist', last year said that move had merely bought this nation some time.

He told local media that the Bahamas had lost its traditional private banking business as a result, and this country had yet to 'see the worst' in terms of financial services contraction.

However, the industry is far from "dead" based on the latest data from the Central Bank, which shows the Bahamas remains home to 248 banks and trust companies. Yet it is also clear that the sector is now growing, given that the number of jobs it generates fell by 110 or 2.5 per cent in 2016, following a 5.1 per cent fall the prior year.

Brent Symonette, who now has ministerial responsibility for financial services, and industrial professionals have all agreed that the Bahamas needs to reposition its international financial centre (IFC) and develop a new business model.

In particular, Deloitte & Touche's UK arm was last year engaged to conduct a study on whether the Bahamas should shift from a 'no tax' to a 'low tax' structure, and determine if this was a more appropriate model given the international regulatory changes.

As for tourism, Mr Albury said the Bahamas needed to focus on the vacation rental by owner (VRBO) model as a way to attract a new visitor market and spread wealth across the middle class.

"The VRBO model is the way to go," he told Tribune Business, adding that he was "getting ready" to convert his own properties in Hope Town and Abaco, and place them online.

"That would give the middle class person out there extra money, and it's where the market is going," the BMDA chief said. "Big mega resorts will be a thing of the past somewhat."

Mr Albury said reduced unemployment was key to restoring business and consumer confidence, adding that the auto industry was already "pretty much at rock bottom".

"It's made a better person out of me," he said of economic conditions, "managing a business to try and keep it alive. When things are good you put stuff on the backburner, but not any more.

"You have to get lean and mean. I have a machete to chop out the expenses as much as I can. That ends up impacting other businesses."

Comments

John 1 week, 5 days ago

While it is important that the government do it's cleansing of the public sector and bring justice against those for whom there is a preponderance of evidence of wrong doing, it must not allow this process to drag on too long. The economy is already in jitters as many have taken a 'wait and see' attitude while government drains the swamp. This is not good for businesses. Yet some wonder if there is a new culture where everything will be above board and hands will be clean when dealing with government or when the government is dealing with the people's money or is this simply a case of the FNM telling the PLP.., "itch take dat."

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DDK 1 week, 5 days ago

Hmmmm.

Why are we not allowed to comment on comments made by the Leader of the Opposition as refers to the alleged bribery by a former MP? HE seems to be permitted to comment!

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sheeprunner12 1 week, 5 days ago

The national debt will grow because of the present $722 million borrrowing ....... The infrastructural needs of the country requires capital expenditure or PPP investment ..... and the downgrade status will add to the COST of borrowing ........ So, the next decade will be hard for us.

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John 1 week, 5 days ago

In the main time CCA says there will be missed deadlines at Bah Mar because of lounge chairs! Are you (people) serious? Are you?

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TalRussell 1 week, 5 days ago

Comrade "Car Sales Man's" Freddy, I call for the nationalisation automobile business - one free new car each adult family over the age 21years holding current driver's license.

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sheeprunner12 1 week, 5 days ago

When is the government going to impose a one car per head of house/unit policy????? ................... and place a tax on private car owners that purchase cars bigger than compact size or trucks bigger than F150s???

There are too many excessively large numbers of vehicles on the roads of New Providence that put undue stress on the infrastructure ............ Pay the luxury tax if you want BIG vehicles

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TalRussell 1 week, 5 days ago

Comrade SheepRunner12, does you means more vehicles will put undue stress on the infrastructure - as in creating more width and depth inside existing potholes?

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John 1 week, 4 days ago

@sheeprunner your suggestion about limiting the number of vehicles and taxing larger vehicles are both irrelevant and premature. Firstly government already experimented with taxing vehicles based on engine size. This didn't work because there are large vehicles out there with small and efficient engines and so they ended up paying less duty than smaller vehicles. And as you can see now the availability of cheap Japanese vehicles have caused a shift from the larger more expensive American cars to these. But guess what? Rather than a family purchasing an American that costs $20-$30,000, they are now buying 3 or 4 Japanese cars that cost around $5,000 each. So the shift to smaller vehicles means more vehicles on the streets. And before government can consider restricting cars or taxing families that have more than one vehicle it must fix the public transportation system. It has to be mordenized and become safe and reliable. But wait. Experts predict that the highways will be filled with mostly driverless vehicles in five years. These vehicles will be programmed to use most efficient routes from one destination to another and also to be forewarned about traffic congestion and to avoid them. Public transportation will also become mostly driverless and because it will be more affordable, persons who don't want to take the public bus can hire a driverless taxi. And if that isn't exciting enough fore planners also expect that drones will be transporting passengers in the next 10 years. So getting from the airport to Paradise Island will be like a zip and a flash, providing the weather is good. Then maybe the next step will be teleportation. Wow!

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Porcupine 1 week, 4 days ago

Sadly, even the discussion about a well run public transportation and the many economic, social and environmental benefits is lost on today's "thinkers". Our economy will continue to head downward as the lack of imagination continues in the same direction. Continue to do more of the same, expecting different results.................................................

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OMG 1 week, 4 days ago

The law of diminishing returns. You tax the hell out of prospective new car buyers and they seek alternatives.You can buy 6 good condition s/h Japanese cars for the price of an average new American car meaning you can throw them away every 5 years. I know which I would choose.

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baldbeardedbahamian 1 week, 2 days ago

SOCIALISM WORKS WELL FOR AS LONG AS YOU CAN FIND PEOPLE TO LEND YOU MONEY, SO SAID PM THATCHER OVER 40 YEARS AGO. THE PLP AND THE FNM ARE SOCIALIST PARTIES'. WE HAVE RUN OUT OF PEOPLE TO BORROW MONEY FROM. OUR GRANDCHILDREN WILL SUFFER FOR THE STUPIDITY OF HANNA, PINDLING, INGRAHAM AND CHRISTIE IN THEIR ROLE AS MINISTERS OF FINANCE. SINCE WE ARE GOVERNED BY COLLECTIVE CABINET DESCISIONS, EVERY CABINET MINISTER WE HAVE HAD SINCE INDEPENDENCE BEARS SOME RESPONSIBILITY FOR THE FINANCIAL MESS WE ARE NOW IN. AND STILL WE HAVE NO PLAN OR PROVISION TO PAY THE LARGE AMOUNTS OF MONEY COMING DUE FOR PENSIONS OF THE FISCAL PARASITES WE CALL CIVIL SERVANTS.

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