The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian companies are 17 percent less productive than the Caribbean average, with the Inter-American Development Bank (IDB) warning that innovation is also below regional benchmarks.

The IDB, in its 2018-2022 country strategy for The Bahamas, is targeting "an enabling environment for private sector competitiveness" as one of three key priorities for a project lending envelope estimated at $150 million over the five-year period.

"Firm-level productivity in the Bahamas is on average 17 per cent lower than the average Caribbean firm," the report revealed. "Private sector growth is constrained by limited propension to innovate and access to finance.

"Private-sector-led growth will require innovation from both traditional and non-traditional sectors. Approximately 22 per cent of firms are innovative in the Bahamas, 4 per cent below the regional average of innovative firms.

"However, there is in general less innovative behaviour in the services sector than in manufacturing. The Bahamas has 6 per cent more non-innovative firms than the Caribbean region, with 21 per cent of firms not attempting to carry out some innovative activity within the past three years."

The IDB drew on the findings of a 2014 enterprise survey for its conclusions, noting that "approximately 36 per cent of all innovators are in the food sector, with an additional 10 per cent in chemicals and 10 per cent in construction.

"However, even though few firms in the hotel, construction or retail sectors are innovative, many of them are potentially innovative, which means that they have attempted to innovate but have encountered insurmountable barriers," the Bahamas' country strategy said.

"In effect, 28 per cent of firms in the hotel sector, 20 per cent of firms in construction, and 18 per cent of firms in retail are potentially innovative, while in the rest of the Caribbean the percentage of firms described as potentially innovative is 59 per cent."

Delving into the structural impediments to innovation by Bahamian companies, the IDB report identified access to financing as a critical obstacle for many. "Credit constraints as well as limited economic diversification and internal competition in important markets impede innovation, productivity and international competitiveness," it said.

"Private sector credit has declined in the last 10 years, while the lending rate has spiked since 2008, according to the Central Bank of the Bahamas.... Less than one-fourth of companies undertaking investment projects in the Bahamas have been funded by private banks, and access to credit is particularly harder for small and medium-sized enterprises (SMEs), which report rejection rates as high as 85 per cent (higher than Barbados at 35 per cent, Jamaica at 55 per cent and Suriname at 27 per cent).

"Additionally, women-owned businesses and firms with a large presence of women, are often smaller, relatively younger and have limited access to financing." The IDB strategy found that women played a much greater role in business leadership in the Bahamas compared to other countries in the Caribbean.

"Female leadership in the private sector is also above regional averages, as one in three firms is managed by a woman (versus one in five in Latin America and the Caribbean), and nearly 60 per cent of firms have ownership structure that include women - three times the Latin America and the Caribbean regional average," the report said.

"Unlocking private sector potential and innovation will require urgent business climate reforms that reduce the cost of doing business. The World Bank's 2018 Doing Business Report identifies several areas of regulatory inefficiency - including lengthy procedures with financial costs, as well as cumbersome processes for regulatory compliance - that negatively affect the ease of doing business and dampen productivity in the Bahamas..... Strong government-directed policies are needed to reduce these impediments to doing business."