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Economic Vision Must Go Beyond Restarting

By Roderick A. Simms II

An advocate for sustainable Family Island growth and development

E-mail: RASII@ME.com

Preliminary estimates by the Organisation for Economic Co-operation and Development (OECD) indicate there will be at least a 45 percent decline in international tourism this year because of COVID-19. This will have negative economic implications for countries such as The Bahamas that depend heavily on the tourism industry as their main economic and fiscal driver. The industry directly contributes 40 percent of The Bahamas’ gross domestic product (GDP) and around 50 percent of employment. Therefore, the temporary closure of most hotels and international/domestic travel should not be taken lightly. The country’s economic development hinges on all aspects of tourism. This segment will explore the challenges faced by the industry, and identify the best steps to take based on lessons from COVID-19. It is important that these lessons are considered by policymakers and incorporated into the National Development Plan (NDP).

A New Reality

The United Nations’ (UN) World Tourism Organisation (UNWTO) has pointed out that tourism is one of the most impacted sectors as a result of COVID-19. It also estimates that small and medium-sized enterprises, which make up around 80 percent of the tourism sector, are expected to be particularly impacted. For The Bahamas, this is an added downside on top of recovery efforts related to Hurricane Dorian, fiscal restrictions and an increasingly competitive tourism market within the Caribbean. Global travel is expected to slow down even after restrictions and travel bans are lifted, since many will be faced with new economic challenges and budget constraints. For those who can still enjoy travelling, they will be faced with new measures to ensure “responsible travelling”. Self-health precautions at airports will become the new norm, and health-related technology will play an important part in allowing visitors to enter countries.

While many nations are desperate to recover, it is also important to put people first. For instance, with cruise ship passengers, screening and health checks need to be in place before disembarking because these vessels carry large amounts of people. In addition, the Bahamian government should be wary of visitors from countries worst hit by COVID-19, such as the US, Italy and Spain. Unfortunately, the bulk of our tourists come from the US, Canadian and European markets. Therefore re-opening the economy will require strong collaboration regionally and internationally, along with strict safety measures at the borders. The best form of screening and testing should be also be adopted.

The tourism sector’s recovery will require more than new hotel bookings and lifted restrictions. UNCATD (Hamilton, 2020) points out that countries may be able to weather economic storms by relying on additional debt or using available foreign reserves. It said: “However, access to global capital markets is increasingly tight, more so for small countries such as small island developing states (SIDS), which are often highly indebted and not well diversified..Many of the SIDS, like Jamaica and The Bahamas, also face high external debt burdens which require complementary external debt suspension or relief programmes.” The author also points out that the World Travel and Tourism Council (WTTC) found that in previous viral epidemics the average recovery time for visitors to a destination was about 19 months. As the number infected by COVID-19 continues to increase, this recovery time could be longer. Therefore, the government needs a plan that will sustain tourism, shore up revenue losses and also look beyond dependency on tourism for economic growth.

Diversifying the economy

Diversification within economies will play a key role in how The Bahamas and other Caribbean countries survive in the future. Industries such as tourism, along with other services sectors (banking, insurance, etc.), have always provided jobs for Bahamians and, as a result, play a crucial role keeping the domestic economy functioning. However, we have seen that unprecedented disasters, even the ones we can prepare for, have always had an impact on the serviced sector, particularly tourism. Before COVID-19, natural disasters such as hurricanes have wiped out millions of dollars in revenue and, in some instances, completely halted industry operations. Much of Grand Bahama’s fragile economic state is due to the closure of major hotels on the island from the passage of major hurricanes. Notwithstanding that the tourism industry is very competitive, due to comparatively high labour costs in The Bahamas, investors are now looking for the best deals on labour, consumables and utilities. In addition, cruise ship visitors have increased in number due to cheaper vacation packages. These visitors will tend to spend less than stopover visitors.

Notwithstanding a near $1bn loss as a result of COVID-19, decades have passed and no government has successfully implemented a plan to build a resilient economy for The Bahamas. Justin Ram, director of economics at the Caribbean Development Bank (CDB), urged: “Leaders must invest in a diversified future to reduce our overall vulnerabilities.” The concept of ‘box tourism’ will no longer be sustainable. A plan should include steps towards a sustainable tourism sector with the expansion of Bahamian-owned boutique hotels, eco-tourism activities on the Family Islands and a service-led industry that allows for human resources to be exported rather than imported. This pandemic should warn leaders that the reliance on tourism is simply not sustainable, and that while improving the industry is beneficial, looking outside to more innovative sectors will provide a better platform for future economic and social development.

Conclusion

The government has provided a measured plan for reopening the economy and reopening the borders, and restarting tourism will be the final stage. It mentioned that it is currently working with industry and regional partners to ensure “a strong rebound that will meet global health standards and protocols”. These discussions should go beyond restarting and look to diversify the economy in the event of future unexpected events. This pandemic heightens the need for The Bahamas and other Caribbean countries to be leaders in renewable energy, agriculture and technology. If not, more disasters will come, and we will have to continue depending largely on tourism for economic recovery.

Read NDP @ www.vision2040bahamas.org

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