The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “in a special situation” due to its high vulnerability to natural disasters and economic shocks, a trade specialist said yesterday, with imported goods ten times’ higher than exports.

Dr Dirk Bienen, an international consultant who played a key role in crafting the first-ever National Trade Policy, asserted: “There’s a high degree of vulnerability in The Bahamas to natural disasters and external economic shocks, which is quite a special situation for a country to have this vulnerability to major shocks which happen not too infrequently.”

This weakness, he added, is exacerbated by The Bahamas’ high dependency on tourism and imported goods, together with its narrow economic base and lack of export diversification. Crawfish, polystyrene beads (Polymers International), organic compounds and sea salts account for 90 percent of the country’s total goods exports.

Total goods exports made in The Bahamas “stagnated” even prior to the pandemic, Dr Bienen added, standing at $200m in 2016 and $203m in 2019. They fell-off further to $160m in 2020 at the height of the COVID-19 pandemic. And imports were so high, due to this nation’s propensity to bring in everything it consumes, that they are equivalent to ten times’ this country’s goods exports.

Michael Halkitis, minister of economic affairs, yesterday said the Government’s objective with the National Trade Policy is “to balance the trade deficit” - likely meaning that it wants to lower imports such that they are more comfortably covered by the services surplus generated by tourism earnings.

In so doing, he added that the Government is seeking to reduce the country’s vulnerability to external economic shocks. A study has also been completed detailing potential opportunities in the European Union (EU) for Bahamian professional services providers.

The National Trade Policy concedes that The Bahamas faces multiple structural weaknesses due to its reliance on imports, as well as an “extremely limited” capacity to export physical goods that are actually made in The Bahamas. “Overall exports of The Bahamas performed well until the outbreak of the COVID-19 pandemic,” the report said.

“They increased steadily from about $400m in 2016 to $537m in 2019, equivalent to an average annual increase of 10.1 percent, but then dropped by 37.7 percent in the COVID-19 year of 2020 to $335m. However, more than half of The Bahamas’ exports are re-exports of products that were previously imported.

“Also, the share of genuine ‘domestic exports’ - exports of goods produced in The Bahamas - decreased from 50 percent in 2016 to 38 percent in 2019. The recovery to 48 percent in 2020 is not necessarily an indication of increased competitiveness but, rather, of the issues faced by the logistics industry and tourism sector in the pandemic year.”

A further vulnerability was identified as The Bahamas’ reliance on a narrow range of goods exports, such as polystyrene beads (Polymers International) and fisheries, plus its dependence on just a few overseas markets - chiefly the US, followed by Canada and the European Union (EU).

“The portfolio of goods and services exported by The Bahamas is not diversified. Among goods, in 2019, the top four export products (at tariff line level) accounted for 90 percent of total domestic exports: Spiny lobster tails ($72.6m; 35.8 percent), polystyrene ($67.9m; 33.5 percent), organic chemical compounds containing a pyrimidine ring ($32.3m; 15.9 percent), and sea salt ($10m; 4.9 percent),” the draft National Trade Policy said.

“Provisional data for 2020 indicates that the pandemic has led to an even stronger export concentration than before. In addition, one of the dominant exports, polystyrene beads, has shown a long-term decline in export value from a maximum of $182m in 2013 to $69m in 2019 and $55m in 2020 – in large part in response to increasing environmental concerns in many markets over the use of plastics packaging and corresponding bans.”

A similar narrow concentration also exists when it comes to The Bahamas’ overseas exports markets. “The Bahamas’ goods trade is concentrated on very few partners,” the National Trade Policy report said. “First and foremost, the US (88 percent of total exports, 74 percent of domestic exports), followed by the EU (6 percent/16 percent). The UK, Canada and Caribbean countries play limited roles, and other countries insignificant ones.”

The National Trade Policy conceded that the “limited productive capacity” of many Bahamian industries was a key reason for the country’s restricted “trade competitiveness”. The performance of manufacturing, and agriculture, forestry, fishing and mining, was described as “weak” with their combined share of national economic output (GDP) falling from 5 percent in 2012 to less than 3 percent by 2020.

Suggesting that it will be impossible to reverse services’ economic dominance, with these activities accounting for 97 percent of GDP, the National Trade Policy nevertheless said the competitiveness of other industries can be improved by tackling the ease and cost of doing business, efficiencies and managerial capacity.

“The country has few natural resources, which are already being used for exportation, as the examples of aragonite, sea salt and sands show and, because of the small size and dispersion across numerous islands, economies of scale cannot be reaped and the potential for agriculture and industry is limited,” the National Trade Policy said.