The introduction of the Commercial Enterprises Bill faced heavy scrutiny from the Bahamian public, who weighed in on how beneficial the legislation would be to Bahamians as opposed to foreign investors. The Act, first unveiled in October 2017 but now passed into law, is expected to improve the country’s ease of doing business by liberalising the granting of work permits via a Commercial Enterprises Facilitation Unit and providing a reasonable minimum investment threshold for start-ups. This, in conjunction with the Central Bank of The Bahamas efforts to relax exchange controls, allows potential investors to fast-track the process of opening small, medium and large-sized businesses in areas such as international trade, captive insurance, nano technology, and computer programming.
It is important to understand how beneficial this piece of legislation could be for the entire Bahamas. However, the government should not only pay close attention to the impact on New Providence and Grand Bahama. For the Act should be crafted in a way where certain amendments are made for each of the Family Islands. Since supply and demand is different across each island, the government should consider the health of each Family Island economy and process the level of value-added from this legislation. For instance, the minimum investment requirement to be considered a commercial enterprise is $250,000 for non-Bahamians. For Bahamians and joint ventures between foreigners and Bahamians, there is no minimum investment threshold.
Thresholds
While the $250,000 benchmark may be little to no money for some investors, he or she also has to consider the extrinsic value that investment would have on a particular island. If an investor decides to invest in Grand Bahama or New Providence, it could be argued that $250,000 is a reasonable amount given that these islands have a fair amount of developed human capital, infrastructure, utilities, and other assets in place to facilitate business expansions. Of course, these advantages have to be offset against potential disadvantages, given that the cost of labour is relatively high throughout The Bahamas; the standard of living is also high; and the cost of imports can pose a concern.
However, there is also a parity concern regarding the investment thresold for each island. Would it be fair for an investor to pay $250,000 if they decide to invest in Mayaguana or Inagua? It depends on the investor. Some may not care about the minimal cost to invest, but others may be deterred from doing so after assessing the island’s conditions and the potential it has to offer. On the other hand, it is important to point out that each island has a unique potential or established industry, whether it lies in eco-tourism, boating, industrial or conservation projects. Therefore, $250,000 could be a fair amount if that industry is well established and booming on a particular Family Island.
However, costs for goods and services are higher, for the most part, on Family Islands. It would then boil down to the pros and cons for the potential investor. For example, if an investor would like to open a state-of-the-art boutique health and wellness facility for visitors in San Salvador, they would need to weigh in on variables such as airlift demand, airport conditions, room inventory, access to supplies and materials, cost of transportation and cost of labour. All of these aspects would be at a higher cost in San Salvador versus New Providence.
Growth
While this Act should deliver many benefits, it must also ultimately lead to economic growth for The Bahamas. To achieve such results, a significant amount of research should be performed to understand the challenges faced by each inhabited island of The Bahamas. For instance, the government’s ease of doing business committee should undertake research into the current economic climate facing all islands. This research should identify the different industries in the Family Islands that need to be revamped, revisited or established. In the absence of such research, potential investors are put at a risk in terms of the survival of a technology-driven company or any of the other industries listed in the Act.
Competitive Advantage or Disadvantage
One of the concerns that stood out was if Bahamians will be able to fairly compete with their foreign counterparts in the same industries. Bahamian businesses, particularly those on the Family Islands, are already faced with challenges such as high energy, labour and transportation costs. But a foreign company that has the ability to perform well despite these challenges may be able to provide a better good or service in the same area. In the Family Islands, however, this challenge could in itself become an advantage to those residents living there. For instance, if an investor would like to open a technology firm in one of the islands, it is unlikely that there is much competition in that field already. But the economic impact of this new venture would be significant and help with unemployment levels. In addition, it could also incentivise and allow local investors to find ways to enter the same field, therefore, providing room for competition to flourish in a new market. This can help with the proliferation of joint ventures and public-private partnerships to address lingering issues that business owners and residents are faced with.
Conclusion
In conclusion, the Act should help all islands of The Bahamas. However, it cannot function without comprehensive research being done on the current business climate of each. Consideration should also be given to a lower threshold for investors wanting to start companies in the Family Islands. While the $250,000 may be too low for foreign investors, it may still be too high for potential Bahamian investors when considering the costs of goods and services on Family Islands. The Act should also allow for a clause where a foreign entity is committed to develop human capital by assigning a larger percentage of required Bahamians to be employed within that company on a Family Island. It has the potential to deliver a vast amount of positive good once it is properly monitored and executed.
• Roderick A Simms II is an advocate for sustainable Family Island growth and development. He can be reached at RASII@me.com for questions and comments.
Comments
banker 5 years, 1 month ago
This is a naive and parochial view of most Bahamians, including the government. The Commercial Enterprises Bill doesn`t go far enough and will actually inhibit the goals of diversifying the economy.
The benefits to Bahamians has to be considered in terms of economic offset and not of immediate direct benefit to local Bahamians. It is a joke to suggest that the Family Islands are more amenable to tech enterprises because lack of competitor. Tech enterprises play in the global marketplace and not in the local space.
Tech enterprises need cheap energy, a highly skilled workforce and the soft parameters of a work environment. This means good grocery stores, abundant fast food places, a wide array of entertainment options for works who work hard and play hard. There must be pubs, sports facilities like squash courts and movie theaters. There must be stores and easy access to buying stuff on Amazon. There must be environment and infrastructure.
The $250,000 investment is a joke. The fastest growing companies are startups, and they invest in talent and not in buildings. They rent cheaply. They don`t have the money and the time to play the old fashioned games. They are launched in incubators cheaply. A good example is Cayman Enterprise City. You have to have $12,000 (an easily achievable sum) to rent office, shared receptionist and you get free imports for a year for every employee, and work permits issued in 48 hours at a fraction of the cost of Bahamian work permits. Their tech sector is growing so fast that they have created a second incubator called Cayman Tech. In the past year alone, these startups have contributed over $3 billion to the Cayman economy.
While we sit and navel gaze and try to figure out how much steak we can cut off racehorses, others just open the doors wide open with minimum entry barriers. One of the fastest growing tech sectors is in St. Kitt`s/Nevis and Antigua is gearing up as well. While we jaw and yack and argue, others are just doing it.
We do not have the mindset to do anything else except catch the crumbs off the table of those who are eating pie instead of carving it up for our share.
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