By NEIL HARTNELL
Tribune Business Editor
Bahamian companies are “performing at 50 per cent or below productivity, growth and employment levels” when compared to firms in similar small economies, an Inter-American Development Bank (IDB) report has found.
The bank’s Caribbean Quarterly Bulletin, released yesterday, warned that the Bahamian private sector was “further away” from the top in the World Bank’s ‘ease of doing business’ rankings than their small economy rivals.
And it revealed that the Bahamas “leads the Caribbean” when it comes to economic losses from crime, estimating this at $434 million in sales or 5 per cent of GDP.
In what is likely to be perceived as another ‘wake-up call’ when it comes to creating a growth-friendly environment for Bahamian businesses, the IDB report said greater economic expansion was “the greatest challenge” facing the economy.
Noting that the private sector generated 60 per cent of Bahamian employment, the IDB Bulletin said: “It is dependent on a macroeconomic environment that promotes growth and technological innovation, cost competitiveness, and structures that ease the cost of doing business.
“Bahamian private sector firms have been performing at 50 per cent or below productivity, growth and employment levels when compared to similar firms in the rest of small economies (ROSE). This results in constrained levels of labour productivity and output growth in the archipelago, and against regional neighbours.”
IDB data showed that labour productivity in the Bahamas had declined between 1991 and 2005, with per capita GDP also down.
“The [World Bank] ease of doing business index, which compares the period between 2017 and 2010, shows that the Bahamas’ private sector is constrained by structural challenges, including accessing credit and electricity, trading across borders, obtaining construction permits, resolving insolvency and paying taxes,” the IDB report said.
“Against other [small] economies, the private sector is hampered in registering property, getting electricity, obtaining credit, protecting minority investors, trading across borders, getting construction permits and starting a business.”
Identifying the major concerns of Bahamian companies, the IDB report said these included “an inadequately trained workforce; access and cost of finance; costs of crime, theft and general disorder; and the current state of macroeconomic conditions and conditions of governance”.
It continued: “The cost of crime, theft and disorder has accounted for an annual sales loss of up to 5 per cent, leading the Caribbean in economic losses.
“A recent World Bank/International Finance Corporation (IFC) survey reports that up to 40 per cent of Bahamian firms have reported being victims of crime within the last 12 months, while almost 8 per cent lamented crime being a significant obstacle to productivity growth.”
Other obstacles cited by the IDB report were lending rates that had risen to 11.2 per cent, exacerbating problems caused by low consumer demand, high unemployment and high non-performing loan levels.
The cost and unreliability of power were also fingered by Bahamian companies, with the average of 2.2 outages per month only exceeded by Jamaica.
“The archipelago, in comparison to its Caribbean neighbours, spends more on its educational system (roughly 13 per cent), and currently has over 250 schools, supported by well-trained staff,” the IDB report said.
“Despite this, recent reports from the Vision 2040 report on national development cites that significant portions of the graduating classes are entering the workplace with inadequate numeracy and literacy skills.
“Thirty-two per cent of firms lament the inadequacy of the existing workforce in the 2014 Compete Caribbean PROTEqIN survey, and up to 37 per cent of firms offer additional training to their recruited staff.”
It added: “The private sector is dependent on a growth-positive environment that improves cost competitiveness and makes it easy for enterprises to engage in business.
“Achieving a higher growth trajectory is the greatest challenge the Bahamian economy faces. Negative productivity growth and limited contributions from factor inputs (capital and labour) since 2000 have constrained the country’s potential output.
“Unlocking higher growth and enabling this change in an environment of fiscal consolidation is a major challenge for 2017 and beyond.”