Climate, Trade and Cultural Diplomacy

The Bahamas Prime Minister, The Hon. Philip Davis’ Keynote Address at the 10th Annual Diplomatic Week on “Climate, Trade and Cultural Diplomacy”

Parliamentary Colleagues, Ambassadors, Heads of Mission, Ladies and Gentlemen...

“We wish to live in peace; we wish to satisfy the needs, both spiritual and physical, of our own people; we wish to be neither dominated nor coerced, and we wish to create a society built on the sound foundation of constitutional authority.”

These are the words of Sir Lynden Pindling, who declared to the world our Bahamian vision—a vision that has not dimmed but burns brighter, guiding our steps in an era of unprecedented challenges.

Our aspirations remain unchanged: to stand as a free nation, bound by neither fear nor force, to govern ourselves and prosper in the embrace of justice and peace.

Yet today, as climate change threatens our shores, our very sovereignty hangs in balance.  For us, climate change is no distant concern, no matter for future generations alone; it is the here and now, an ever-rising tide that threatens to wash away the home Sir Lynden spoke of so fervently.

In the struggle for climate justice, The Bahamas stands as a voice for the vulnerable, a champion of those who, like us, seek only to secure the lives and futures of our people.  We fight for a world where those responsible for this crisis answer for the loss and damages felt by those who contributed least to its cause.

Thus, we turn to the law, seeking justice from the very courts that stand as guardians of humanity’s conscience.

The International Court of Justice is now poised to deliver an advisory opinion on climate change—a ruling that we believe will echo across borders and demand accountability.

This is not about treaties and pledges; it is about moral reckoning, an acknowledgment that those who have sown the seeds of destruction must also reap the responsibility to repair.

For too long, our islands and countless others have borne the burden of “loss and damage” inflicted by climate change: land eroded, homes destroyed, livelihoods swept away in storms more violent, more frequent than any our ancestors could have foreseen.

The loss is not only material but spiritual—a threat to our culture, our heritage, and our identity as a people of the sea.

We seek not charity but justice—a clear and binding recognition that those who have profited from the destruction of our world must also contribute to its healing.

And here lies the power and purpose of diplomacy.  In every hall of power, every forum, we carry the voices of our people and the stories of our shores.  Diplomacy is our shield and our voice—a way to remind the world that we may be small, but our challenges are universal.

As ambassadors, you are called not only to advocate but to educate—to speak plainly of the impacts we face, and to rally the world toward action.

Our diplomats stand not merely as representatives of The Bahamas but as advocates of all who stand to lose everything from inaction.

To our diplomatic corps, I say this: your work is not only to bridge our borders but to defend the dignity and future of our nation.  In you, the Bahamian people see their hopes carried forth, their challenges made known, and their voices amplified.

Through diplomacy, we insist that The Bahamas and all small island nations shall not be mere bystanders but leaders in crafting a sustainable and equitable future.

Let it be known: The Bahamas will not be a silent spectator in this struggle.  We are neither large in land nor in might, but we are bound by an unyielding resolve.  We will wield the law as our shield and justice as our sword, joining hands with other nations who refuse to be casualties of indifference.

For the duty to protect this world is one we all share, but the responsibility lies heaviest on those who have brought it to the edge.

In addressing trade, we must be candid: The Bahamas has, for too long, relied on a narrow set of industries to fuel our economy.  While these sectors have served us well, the time has come to diversify and strengthen our economic foundations.  Trade is not just a matter of economic theory; it is about creating real, sustainable opportunities that can withstand the storms of global uncertainty.

Our commitment to diversifying trade is not a singular ambition; it is a necessity.  The Office of the Prime Minister has taken this challenge on with a comprehensive approach, fully aware that a resilient Bahamas must be one that taps into the potential of all its industries and regions.

This strategy demands intentional efforts to develop our trade policy, empower our entrepreneurs, and streamline systems that invite and retain investment.  Our work aims to open new pathways for Bahamian businesses, whether through export, manufacturing, or tech-driven enterprise.

In this endeavour, we owe a great debt of gratitude to the National Trade Commission, whose dedication and expertise have been instrumental in crafting a trade policy that aligns with our national vision.  They have worked tirelessly to evaluate trade agreements, recommend best practices, and advocate for trade policies that put Bahamians first.

Their leadership has brought clarity to our objectives and direction to our path forward.

Through the National Trade Policy and Vision 2040, we are paving the way for trade to be inclusive and transformative, driving both local economic growth and foreign partnerships.  We are identifying markets, building capacity, and dismantling the structural barriers that have kept our economy anchored in a narrow space.

This includes efforts to expand Freeport as a free trade zone, foster export-oriented industries, and strategically reduce tariffs to make Bahamian products more competitive abroad.

To our foreign service representatives, your role is crucial.

The relationships you build and the investments you help secure are integral to diversifying and sustaining building a bridge to a more resilient Bahamas—one where our people can thrive across industries, not just in a select few.

Your work ensures that The Bahamas is seen not only as a paradise for visitors, but as a reliable and innovative partner for businesses worldwide.

As we look toward Freeport and other emerging trade zones, we see a vision where Bahamian ports become bustling hubs of international commerce, where local businesses and foreign investors alike benefit from our strategic location.

We envision an economy that is more than resilient; it is adaptive, sustainable, and inclusive, offering prosperity and security for all Bahamians.

The future of our trade must reflect the strength and diversity of our people.  It is a future in which Bahamian goods, ideas, and services reach global markets, lifting our economy from within.

And it is through our commitment to reform and the work of our trade representatives and the National Trade Commission that we are setting this course.

In this spirit, we remain focused on creating an economic environment that does more than sustain—it elevates.  We move forward with a deep resolve to build a Bahamas that is open to the world, ready to grow, and prepared to stand shoulder-to-shoulder with the global community.

Today, we meet as partners and allies, here to advance a shared understanding of The Bahamas’ foreign policy priorities across key regions and pressing global issues.

Your presence underscores the significance of our collective mission in building alliances grounded in mutual respect, stability, and long-term cooperation.

In the Middle East, The Bahamas is establishing an office in the United Arab Emirates to lay the groundwork for strategic economic cooperation.  Through agreements on asset protection, tax frameworks, and trade facilitation, we aim to position The Bahamas as a reliable partner for mutual investment and growth with the region.

We recognize China’s ongoing support in infrastructure, education, and healthcare, which has played a central role in advancing our nation’s capacity to meet the demands of a modern, diversified economy.

Similarly, we extend our thanks to the United States, a critical partner whose investments in our security, healthcare, educational systems, and climate resilience initiatives have significantly contributed to our stability and growth.

We value the sustained commitment of the United States in these areas and look forward to deepening our collaboration on both the economic and security front.

We are pleased to announce the opening of the Consulate General in Jamaica, where we welcome Akveta Knight, and in Port of Spain, where Dr. Monica Davis joins us to further our outreach.

In the United States, we welcome Joy Newbold as Consul General in Los Angeles, enhancing our representation on the West Coast.  In Canada, we honour the legacy of the late Al Dillette, who established our office in Toronto, and we welcome Melanie Griffin as his successor.

In Africa and the Middle East, our foreign policy is focused on partnerships that drive economic, technological, and political collaboration.

The Bahamas will expand its diplomatic presence on the African continent, recognizing the value of stronger ties in trade, technology, and development.

By establishing a formal presence in Africa, we aim to build enduring partnerships that are rooted in mutual benefit and long-term cooperation.

We view these relationships as vital to achieving South-South growth, with outcomes that include expanded trade, investment, and educational opportunities.

By strengthening these bonds, we are positioning The Bahamas to address shared challenges and foster sustainable development.

We remain committed to the process of reparatory justice, recognizing the responsibility to address the enduring impact of slavery.

Recent discussions with the British Commonwealth at CHOGM have underscored the importance of this process, and we urge the international community to support these efforts as we work toward meaningful progress in achieving justice.

Furthermore, The Bahamas is seeking a non-permanent seat on the United Nations Security Council for the 2032-2033 term.  As we prepare for the vote in 2031, Our aim is to bring the perspective of small island nations to the Council, advocating for peace, security, and climate resilience.

Friends,

The Bahamas reaffirms its allegiance to CARICOM, a bond forged not in geography but in shared spirit and purpose.

In the face of a world often swayed by power and wealth, we stand together as the Caribbean, a chorus of sovereign voices calling for dignity, justice, and resilience.  United, we are greater than the sum of our islands, a force that will not be silenced nor dismissed.

And to our neighbours in Cuba, we agree the time for embargoes has passed.  The shackles that hold back free exchange must be lifted, for they serve only to hinder progress and prosperity in our shared sea.

We call upon the world to remove this barrier, to allow Cuba the dignity of engagement and the promise of opportunity.  Let our waters flow with trade, ideas, and friendship, for only through connection shall our region thrive.

To Haiti, our hearts and our hopes extend.  We do not view her struggles from afar but feel them close, like the pulse of the Caribbean tide.  We are bound by kinship and by duty, and The Bahamas stands ready to support Haiti’s path to stability and peace.

Yet, we believe that the foundation of that peace must be laid by Haitian hands, led by Haitian voices, and sustained by Haitian will.  We shall not falter in our support, for we know that the strength of one island fortifies the strength of all.

Beyond these shores, The Bahamas casts its lot with the Global South, a fellowship of nations bound not by wealth but by shared vision.

We seek a world in which each nation’s voice is a note in a global symphony, where equity guides trade, where justice leads climate action, and where the needs of the many eclipse the ambitions of the few.  The Global South, though often marginalized, will rise, its concerns resonating in halls of power where they can no longer be ignored.

Friends,

The Bahamas is focused on strengthening diplomatic relationships with the South Pacific, a region with which we share the unique challenges of small island states.

Together, we face pressing issues like climate resilience, sustainable development, and ocean preservation.

By building closer ties with South Pacific nations, The Bahamas aims to enhance cooperation in these critical areas, fostering partnerships that will support both our immediate needs and our long-term stability.

The Bahamas will be seeking the support of our international partners next year for our candidature to the International Maritime Organization (IMO).

As a small island state with a strong commitment to sustainable maritime practices, we bring an important perspective on issues like maritime security and ocean conservation.

Our goal at the IMO is to advocate for policies that serve the interests of all coastal nations, ensuring that ocean resources are managed responsibly and sustainably.  We look forward to engaging with our allies on this important initiative.

We look forward to strengthening our partnerships with each of you and to forging new pathways that enhance our shared goals and reinforce the principles that unite us.

When we speak of culture, we speak of our very essence—an inheritance of strength, vision, and defiance.

We are Tavares Strachan, boldly challenging conventions, showing the world that Bahamian creativity cannot be contained.

We are Courtney C. Spears, whose movements on the stage are declarations of resilience, embodying our stories with elegance and force.

We are Buddy Hield, Jonquel Jones, and Jazz Chisholm, athletes who do not merely compete but conquer, proving that Bahamian grit and talent deserve the world’s admiration.

We are Lenny Kravitz, whose music pulses with the spirit of these islands, grounding his artistry in the Bahamian soul.

We are Amos Ferguson, a painter who brought the colours and life of our people to canvas, defining a legacy that transcends time.

And we are Jeffrey Meris, who pushes the boundaries of contemporary art, forcing the world to reckon with the depth and complexity of our culture.

These icons do not just represent us; they carry our pride, our resilience, and our power.  Through their achievements, The Bahamas proclaims to the world that we are not merely a destination but a nation rich in talent, spirit, and ambition.

In their dance, their sport, their music, and their art, they give voice to the Bahamian story—a story of triumph over adversity, of beauty rising from the sea, of dreams that know no borders.

We export more than culture; we export conviction.  We stand before the world and say, “This is The Bahamas: a nation unafraid to rise, unafraid to lead, and unafraid to demand its place on the world stage.”

Our cultural ambassadors do https://opm.gov.bs/prime-minister-davis-diplomatic-week-2024/not just perform—they embody our resilience, our pride, and our unwavering belief in who we are.

In closing, let it be known that The Bahamas is a symbol, not only for our people but for all who seek justice, strength, and unity.

We are a small island nation, yet we stride with giants.  Our diplomats, our athletes, our artists—each of you carries this legacy forward, bearing the weight of our dreams and the fire of our convictions.

Together, we will shape a future where The Bahamas shines, not only as a place on the map but as a force of purpose and power. Let us leave here, guided by the same spirit that lives in each of our icons, determined to leave an indelible mark on the world.

Source

05 November, 2024

The Bahamas Prime Minister on a New Energy Era for The Bahamas

Transforming our country’s energy sector has been a priority for us from the start, says Bahamian Prime Minister, The Hon. Philip Brave Davis, KC., MP.,

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On the one hand, we have been compelled by the urgency of change – the need to relieve Bahamian families and businesses from the burden of high prices and unreliable electricity supply.

Relief is an important-enough goal – especially during a global inflation crisis.

But we are also motivated by our profound conviction that our economy can be more competitive, more prosperous, more dynamic, and more inclusive — with more paths to security and success for more Bahamians.

We have very big ambitions for our country and for the Bahamian people.

However – you can’t build a 21st century economy with 20thcentury infrastructure.

In every conversation I have with entrepreneurs, business owners, and investors – from the very smallest to the very largest – the high cost of electricity, and the costs and uncertainties associated with unreliable supply, inevitably come up.

For most Bahamians, the only bill bigger is their rent or mortgage payment.  Major bills are a major burden – which means less disposable income, which means less spending and investment in our local economy.

And, of course, high bills for businesses means high operating costs, affecting our competitiveness and our ability to diversify, and creating obstacles to growth and development – impacting investments, business expansions, and job creation.

Now – even with all of those problems, we’re a special-enough country that we’ve come roaring back after the dark days of, Hurricane Dorian, pandemic curfews and lockdowns, breaking big records, with substantial new investments and job growth.

Just imagine what we could accomplish if we had affordable, reliable, clean energy!

That’s where we’re finally headed.

But right before we get to the hopeful part of today’s launch – the solutions! – I want to make sure you all have an understanding of the scale of the challenge.

Important parts of our electricity infrastructure, including some transformers and substations, are more than 50 years old – they date back to before independence!

It’s hard to describe the experience of listening to engineers emphasize that critical parts of our grid are on the verge of collapse – with no chance of revival, once they go down.

And then there are the generation engines – 60% of BPL’s plant in New Providence, and 80% in the Family Islands, need replacement within the next five years.

So we have an aging, vulnerable, deteriorating, expensive system, dependent on heavy and diesel fuels, that cannot meet current needs – let alone the growing energy needs of a digital economy, or the increased demand we have to anticipate as temperatures rise in this new climate era.

If you’re wondering how much it costs to rescue and modernize our grid – I have an answer for you: about half a billion dollars.

Of course, BPL is carrying a legacy debt of the same amount —  more than $500 million, not to mention an unfunded pension liability of $100 million.

I could go on – about the grid’s vulnerability to storm damage, the inability of our current system to integrate renewable energy, the tens of millions in rental costs annually which contribute to high prices – but I can see you’re ready to move from problems to solutions.

As were we.  We understood that as urgent as change was, the quick short-term fixes that have been the historical pattern have not served our country well.

We knew we needed comprehensive, innovative reform.

Today, we’re excited to share these policies with you, which include:

- A foundational update to transmission and distribution in New Providence, so we can have a more stronger, more resilient, more modern, more efficient power grid – critical to gaining both lower prices and increased reliability;

- For the first time, utility-scale solar power in New Providence – 70 MW of solar power, and 35 MW of Battery Energy Storage Systems will be integrated into the grid;

- Solar power throughout our Family Islands – where new hybrid microgrids will incorporate solar power and natural gas, allowing us to eliminate expensive BPL rentals, replace aging generation units, and establish battery storage systems;

- Natural gas as a partner fuel to solar, to create important savings that can be passed on to the consumer;

- Energy Efficiency Upgrades, including energy audits and efficiency upgrades for government buildings, educational outreach to consumers, LED street lighting, and rooftop solar at schools; and:

- New electricity legislation (Electricity Act 2024), which allows for stronger consumer protections, and – very importantly, as you’ll hear momentarily – allows adjustment to the tariff rates to support consumers who most urgently need relief from high prices.

I’d like to pause here to say that when I asked Minister Coleby-Davis last September to become the country’s Minister of Energy, we discussed our shared priorities for energy reform, which included:

- Immediate relief for Bahamian families

- Reforms that lead to lower prices, and fair prices, over the medium and long term

- Increased reliability

- Increased grid resilience during storms

- Cleaner energy, with a lower carbon footprint…

- An ironclad commitment to union workers, including job and pension security

- New entrepreneurial, employment, and investment opportunities for Bahamians…and:

- Strengthening the financial position of BPL, to ensure legacy debts are addressed.

To the Minister’s credit, she jumped right in and never looked back.

Which is why this morning, she has the honour of sharing more of the details of these big new policies.

And as I turn things over to her, I will close by reminding everyone – we didn’t come here to defend the status quo, we came here to change it.

We are determined to close the gap between our national potential and our national reality – and with this very big and ambitious agenda of reform and investment, we believe we are well on the way to ensuring that a new energy era will lead also to a new economic era – a new era of opportunity for all.

Source

Energy Minister JoBeth Coleby-Davis on a new energy era in The Bahamas>>>

REPORT: San Salvador Island tourism-based island economy is constantly under threat of climate change impacts such as submergence of coral reefs, flooding of coastal lowlands, loss of marine and terrestrial biodiversity, and destruction of cultural heritage sites

The Economics of Climate Change Adaptation and Ecosystem Services in The Bahamas

 

Lessons from San Salvador Island

From IDB

San Salvador island in The Bahamas is highly vulnerable to climate change impacts due to its limited land space, fragile ecosystems, population and assets exposure, limited human and technological capacity, and susceptibility to the vagaries of international trade and exogenous economic shocks.  

Higher temperatures, sea-level rise, and coastal flooding linked to extreme weather events are expected to impact crucial ecosystems such as coral reefs, and assets from the tourism sector, especially from the cultural, historical, and environmental heritage. 

This report provides a qualitative and quantitative assessment of the potential impacts of climate change on the economy and ecosystems to provide stakeholders with updated inputs for improved decision-making. 

First, the report presents an Economics of Climate Adaptation (ECA) assessment to identify and analyze the main impacts of climate change, estimate potential economic losses, and propose adaptation measures to improve the island's resilience. 

Second, it presents an Ecosystem-Based Service (EBS) assessment to identify the main ecosystems of the island, evaluate the services they provide, and determine their contribution to the economy of San Salvador.

<<<Download The Full Report>>>

The proposed Value Added Tax (VAT) could deteriorate The Bahamas’ economy

Moree Says Gov’t Should Consider Payroll Tax–Attorney says VAT could destroy economy

by Korvell Pyfrom
Jones Bahamas:



A payroll tax would be a better solution for the country at this point, suggested Attorney and former Chairman of the Public Service Commission (PSC) Brian Moree, Queen’s Counsel, who warned that the proposed Value Added Tax (VAT) could deteriorate the country’s economy.

Mr. Moree, who appeared on Jones and Company Sunday, said VAT will affect the cost of living in The Bahamas significantly.

“Depending on your view of VAT, it is not going to grow the economy,” he said. “It is going to cause significant deterioration of the economy because even the proponents of VAT and the policy makers will tell you that is going to create what they euphemistically call a one-time cost of living adjustment – they say of about nine per cent – some people say it could be as high as 12 per cent and some people say it may be as low as seven per cent. But what is common ground is that is going to have an immediate impact of an increase in the cost of living somewhere between seven per cent and 12 per cent.”

Mr. Moree acknowledged that the government needs to raise revenue, reduce its deficits, grow the economy and reform the tax structure, but he said VAT is not its only option to pursue these things.

He suggested that the government consider capital gains tax, sales, tax, income tax, but he said a payroll tax seems to be the best alternative.

“It’s just a question of deciding what will have the most negative effect on the economy at this time and what could reasonably be implemented in the economy of The Bahamas where we have no culture of paying taxes in terms of record-keeping, reporting, enforcement and compliance,” he said. “Many business people today are really concerned whether they are going to be capable of keeping the books and records that are going to be necessary in order for them to administer VAT.”

The government intends to implement VAT at rate of 15 per cent on July 1, 2014.

Many business leaders have raised concern about its implementation with Super Value food stores President Rupert Roberts warning that it could lead to a customer revolt.

Financial Services Minister Ryan Pinder recently suggested that regularising the gaming industry could delay VAT’s implementation and reduce the rate at which Bahamians will be taxed.

March 03, 2014

The Bahama Journal

Value Added Tax (VAT) and the Bahamian economy

Imf Not Forcing Vat On Bahamas

Tribune242:



The Bahamas’ decision to implement Value-Added Tax (VAT) did not result from the International Monetary Fund (IMF) holding a gun to the Government’s head, a key Ministry of Finance consultant says.

 

Ishmael Lightbourne, former senior partner at PricewaterhouseCoopers (PwC) Bahmas, told dozens gathered at Evangelistic Temple that VAT is just one of many remedies to get the Bahamian economy back on track, given that the national debt has skyrocketed over the past 20 years.

 

The former World Bank director said the Bahamas’ fiscal deficit is five times greater than what it was in 1993. What started out as borrowing to finance capital spending on infrastructure – roads, hospitals and utility plants – has evolved into borrowing for everything from operating public corporations to paying civil service salaries.

 

“If the IMF were in the position to force us to do anything, they would have done so 20 years ago,” Mr Lightbourne said. “There is a great deal of misunderstanding about that. The IMF has made no threats, and does not - and cannot - seek to impose their will on a sovereign government.”

 

He said VAT is the Government’s effort to balance out the unsustainable inequity between what the country brings in as revenue and what it spends.

 

“Governments,” Mr Lightbourne said, “have for the past two decades tried to fill the vacuum left by policies that once allowed foreign investors and developers to build without putting in their own capital investment in roads, utilities, parks and more.

 

“Succeeding governments were left to foot the bill, but expenses were greater than revenue under an increasingly outdated tax system of heavy reliance on Customs duties.”

 

“For the past 20 years, in the absence of major private sector investment, this is what we have done,” he added. “As a result, our debt has more than doubled and growth has been stagnant. So today we can no longer be inactive.”

 

The Government’s series of consultations on VAT continue this month at Government High School on February 19 at 11am; AF Adderley High School on February 19 at 9:30 am; SC McPherson High School on February 20 at 10am; the Bahamas Human Resources Association on February 20 at 11:40 am; Alexiou Knowles & Co. on February 21 at 8:30 am; and BEC on February 21 at 11:30 am.

 

For more information on the VAT implementation, call the Ministry of Finance VAT hotline between 9am and 5pm, Monday-Friday, at 225-7280. Persons can also visit the official Facebook

page at www.facebook.com/vatbah242.

 

February 18, 2014

 

Tribune 242

...the numbers business is not only popular and a cultural norm ...but is one of the biggest contributors to the Bahamian economy ...says - business consultant, Paul Major

Gambling Debate Intensifies


By: Theo Sealy & Rogan Smith
The Bahama Journal



Two top clergymen, a leading hotelier, a business consultant and a college professor locked horns tighter than ever last night over the controversial gambling issue.

Retired Anglican Archbishop Drexel Gomez, Bahamas Christian Council (BCC) President Dr. Ranford Patterson, Kerzner International VP of Public Affairs & Retail Services Ed Fields, business consultant, Paul Major and educator and civil activist, Margo Blackwell all participated in a Jones Communications Network (JCN) town meeting series at the Harry C. Moore library where they each took turns highlighting the benefits or pitfalls of gambling.

The panel was split.

Opponents argued that gambling was destructive and against God’s will, while proponents touted the economic benefits that could be gained from its legalisation.

The Christie administration has announced plans to hold a referendum before the end of the year so that Bahamians can decide whether they want gambling legalised.

The BCC has repeatedly stressed that it is “diametrically opposed” to gambling and it didn’t stray from that premise last night.

“To engage in this gambling . . . one is going counter to what Jesus stands for and for what the church is here to promote. We believe that gambling is, in its final analysis, an affront to God,” Archbishop Gomez said.

“Our problem in the church is we have been compromised by our members in that so many of our members gamble and so many of our members do not really believe what the church teaches us because if they really believed, they would apply it in our lives. So, there are a lot of persons who belong to the church who participate in gambling because they aren’t putting into practice the teachings of the gospel. Gambling produces social dislocation. That is not disputed even by persons who engage in gambling.”

Mr. Major, meantime, said the church cannot legislate morality.

“It comes down to a matter of civil liberty – people deciding what they want to do with their disposable income,” he said.

“The only ones who don’t benefit from gambling are the government and the citizens who don’t gamble. At this stage in our development and enlightenment we should not be so concerned about whether Bahamians gamble.”

Dr. Patterson said with gambling, “we can only lose, not win.”

“The negative effects outweigh benefits. It can destroy a family. Every day in our ministries we are confronted with persons who are marginalised, persons who are experiencing loss, persons whose lives are falling through the cracks and that is why we feel so strongly about this because we see the devastation. That’s where our passion comes from,” Dr. Patterson said.

“Think of the devastation that we now see and the proliferation of the web shops. We believe it’s only going to get worse and our people are going to suffer as a result of it.”

But, one audience member chastised the church for its weak arguments on the controversial issue.

“I have been listening to a lot of debates on this gambling subject and it seems that the church is relying on the argument of morality. As it stands right now those arguments are not standing up very well against the arguments that these other panellists are presenting. Why isn’t the church presenting strong arguments about the economic and social impacts of the numbers business? These are the issues we need to present as opposed to what is morally incorrect,” she said.

Mr. Major, meantime, sought to dispel the notion that the ‘house’ always wins.

He told the panel and attendees that two number houses “went broke” because they couldn’t pay out winnings.

“On average 60 to 70 per cent of winnings go back out,” he said.

When challenged to substantiate his claims by providing the statistics, Mr. Major responded, “Trust me, trust me.”

He later said the numbers business has attracted 150,000 account holders.

He said 120,000 of those individuals have online accounts, while the remaining 30,000 individuals are walk-in customers to various web shops throughout the country.

Mr. Major suggested that the numbers business is not only popular and a cultural norm, but is one of the biggest contributors to the Bahamian economy.

Ms. Blackwell, careful to “stay far away from moral and social values as possible,” said she felt that Bahamians are being denied a right to gamble.

“I am a young lady who has lived her whole life being discriminated against in an independent Bahamas by a constitution that allows people who are not Bahamian to do something in my country that I am not allowed to do. I have a real problem with that,” she said.

Mr. Fields, meantime, said the gambling issue is not about its decriminalisation, but its liberalisation.

Churches have over the years demonised gambling in The Bahamas, but many have turned to major resorts for donations even though a good chunk of their revenue comes from casino dollars.

Mr. Fields said in his 16 years at the Paradise Island resort, he has received a letter from every single denomination in The Bahamas requesting donations.

He later questioned the difference between church raffles and the numbers business.

“Either you are hot or you are cold. The reality is that if I buy a raffle ticket my intent is to win over someone else…we are in a quagmire trying to justify this thing. Either we like them all or we wipe them all out. It cannot be a case of juggling. It cannot be that it is okay for the church to gamble through raffling but it is not okay for Bahamians to do the same through gambling at numbers houses,” Mr. Fields said.

“Yes numbers is illegal and perhaps there is a problem with the concept that because it is illegal on the books the donation from that illegal gambling is a problem. But there is not a problem with the church asking donations from an entity that has legal gambling. So gambling is okay if it is legal? That must be what the message is.”

Mr. Fields said if Bahamians vote to legalise the numbers business, the government could take a percentage of the money and set up counselling for addicts.

Gambling proponents say if the numbers business is legalised it could fund various government initiatives and provide millions of dollars to the public purse.

“It would do well for us here in the country if we go ahead with legalising the numbers business. It can contribute significantly to health care, sporting and education, overall helping with national development. We need to move forward with this and try to look at the positive side of how beneficial gambling can be, economically, to The Bahamas,” attorney Wallace Rolle said.

JCN CEO Wendall Jones moderated the town hall meeting.

August 10, 2012

Jones Bahamas

Caribbean Blog International

...if the Bahamian economy were to grow at a level of six to eight percent ...we would not be talking about government debt... ...The reason why we should prioritize economic growth over debt reduction is because greater economic activity generates greater revenue for government... ...Greater revenue reduces reliance on borrowing and so, debt would fall over time... ...Further, higher levels of growth usually lead to lower levels of unemployment, more opportunities for individuals to make money in order to pay their mortgages, to pay for college, or to start new businesses... ...But, in order to achieve such levels of growth, we need a plan

A call for a national economic plan

By David Frazer

In the 1960s, Germany experienced one of the world’s most impressive examples of economic growth and development that raised the standard of living for the Germans exponentially.  Its success was due to a number of factors, not least of which was its ability to organize its industries, plan for the future and engage stakeholders at all levels in the work of economic growth.  If one posed the question today where is the economy of The Bahamas headed in the next five to 25 years, it would be difficult to provide a viable answer partly because of the lack of direction in state policy.

The recently published budget and budgets of past governments confirm this notion.  The 2012-2013 budget proposes short-term bandages on an economic wound that runs deep through society, addressing symptoms of a much larger structural problem.  It is now time to focus our energies and resources on a cure to our economic illness.  It is time for a national economic plan.

Highlights of the government’s 2012-2013 budget

• Expanding the role of the Bahamas Development Bank and the Bahamas Agricultural and Industrial Corporation to go beyond lending money to provide equity, credit guarantees and marketing/accounting support is a promising move to support small business and Bahamian entrepreneurship.

• Tax reform was four pronged.  The government will establish a central tax agency to improve its ability to collect taxes.  It will reform the property tax system including a cap on property taxes.  It will look to reducing leakages in the tax system and to charge international fees for aircraft passing through the country’s airspace.  This effort to raise government revenue is commendable but insufficient; the expected revenue which incorporates these ideas would still leave the country with a massive expenditure-revenue gap of nearly $300 million.

• A debt management committee will be developed to implement a debt management strategy.

• A plan to rescue Grand Bahama includes tax reduction and a Ministry of Grand Bahama.

• The jobs program of the previous government has not been continued.  Described by the current government as “lacking focus”, the jobs program attempted to alleviate the unemployment situation particularly for youth.  The problem is that the new government has not proposed an alternative to reducing youth unemployment.

• A mortgage relief effort aimed at reducing loan payments for distressed mortgage holders has received scathing international criticism.  Standard & Poor’s, a reputable rating agency, responded to the government’s promise to help mortgage holders by suggesting that the government may face lower credit ratings if it continues to spend more than it earns.

• Tax concessions laced the budget and there was an explicit promise not to raise taxes for Bahamians.  This combination of tax reduction and mortgage relief spending has cast doubt on the “government priority” to reduce national debt.

Let’s be smart about debt reduction: Focus on growth

Given the extent of the global economic recession, the government has been forced to play a greater role in economic activity.  As in the United States, government spending grew to supplant the lost economic activity after the recession.  While we must reduce the level of government debt, we must be careful not to damage the economy while doing so.  One can look to Europe for an example of how austerity soon after a recession can be detrimental to economic growth.

At the same time, government must not be frivolous in its spending.  Promises in the budget to help individuals make home repairs on top of aforementioned mortgage relief may be politically successful but do not spur further economic growth.

We hope that political leaders will go through the budget, line by line, and re-allocate/reduce unnecessary expenditure.  As much as is possible, government spending should be guided by the principle that every dollar spent directly increases the Bahamian GDP by more than a dollar and/or increases productivity.  Under this principle, unnecessary spending may be brought to light.

Hypothetically speaking, if the Bahamian economy were to grow at a level of six to eight percent, we would not be talking about government debt.  The reason why we should prioritize economic growth over debt reduction is because greater economic activity generates greater revenue for government.  Greater revenue reduces reliance on borrowing and so, debt would fall over time.  Further, higher levels of growth usually lead to lower levels of unemployment, more opportunities for individuals to make money in order to pay their mortgages, to pay for college, or to start new businesses.   But, in order to achieve such levels of growth, we need a plan.

The need for a national economic plan

Just over 26,000 Bahamians searching for work are unable to find it; thousands more have given up and left the labor force; unimpressive growth levels in the U.S. may dampen growth of tourist arrivals in the foreseeable future, and our own growth projection is stifled at less than three percent for the next few years.  These facts underscore a structural issue in the economy.  In essence, overreliance on tourism has limited the scope of economic growth.  We have failed to use the resources tourism has afforded us to develop other industries as a means to secure future growth.

We should get the largest stakeholders and experts in one room – business leaders, academics, government officials and local/international investors – to search for and implement a national economic plan with an aim to secure high levels of growth into the future.  Such a plan should be medium to long-term in focus and grounded in rigorous research on the potential for local business expansion, export of Bahamian franchises, products and services, and diversification within and across industries.

A plan of such magnitude is important because it provides an industrial framework for growth and will provide a sense of security for local business owners who would be able to plan the development of their own enterprises as a result.  A plan could create a momentum for the growth of certain projects and industries.  Finally, it would enable government to plan other areas of society such as new education and training initiatives, infrastructural projects and immigration policies that correspond with the national plan.

Our current economic realities call on us to make big decisions to secure a prosperous future.  Let us plan our way to economic vitality and growth.

 

• David Geraldo Frazer is a master’s degree candidate at Johns Hopkins University studying international economics and international relations with a bachelor’s degree in economics and business.  He is also a free lance consultant and can be contacted at: dfrazer1@johnhopkins.edu

Jun 13, 2012

thenassauguardian

Caribbean Blog International

The Bahamian electorate ought to be mindful of the following words of President Thomas Jefferson: ...“To preserve our independence, we must not let our rulers load us with perpetual debt ...We must make our election between economy and liberty ...or profusion and servitude”

Economic and fiscal prudence: Ingraham vs. Christie

By Arinthia S. Komolafe

There is ongoing debate on the leadership attributes of the prime minister and leader of the Free National Movement (FNM), Hubert A. Ingraham, and the leader of the official opposition and Progressive Liberal Party (PLP), Perry G. Christie.  Leadership was the dominant theme of the FNM’s 2007 campaign and it is not surprising that the FNM has adopted the same modus operandi for its 2012 campaign.

The general position of the 21st century Bahamian electorate is one that rejects a leadership campaign in favor of a campaign that promotes plans to create jobs, reduce crime, address the immigration debacle and place the country on the path to economic prosperity.

Against this backdrop, it is imperative to state that a leader will be judged by and for successive generations based on his/her ability to, among other things, manage the economy in a manner that balances economic prudence, socio-economic expectations and infrastructural development.  A review of the budget communications for fiscal years 2002-2012 and comparative analysis of the stewardship of our economy by the Christie and Ingraham administrations is important as we go into the 2012 general election.

Christie administration (2002–2007)

Upon assuming office in May 2002 following a landslide victory at the polls, the Christie administration was faced with multiple challenges.  In the aftermath of two consecutive Ingraham-led terms from 1992-2002, The Bahamas was in recovery mode following a blacklisting by the Financial Action Task Force and the backlash of the 9/11 terrorists attacks in the United States which had weakened our main industries of tourism and financial services.

These realities coupled with a burgeoning national debt in excess of $2.1 billion, a debt-to-GDP ratio of 37 percent and a growing deficit of 3.7 percent, would ultimately limit the Christie administration’s ability to implement many of its proposed policies and programs, least among them National Health Insurance.  The administration would proceed to execute austere measures and engineer an aggressive economic policy to improve the economy of the country and maintain deficit levels.

At the onset, the Christie administration recalled a US$125 million loan incurred by the previous Ingraham-led administration that had a four-year term and imposed heavy servicing costs.  As a result, a US$200 million bond attracting a lower interest rate and extending the life of the loan was issued.

Over its five-year period in office, the administration borrowed approximately $640 million to meet is annual budget requirements and aid in its revenue shortfall.  The administration invested in social programs, such as urban renewal, carried out what is arguably the most ambitious housing program in Bahamian history with the building of more than 1,400 homes and allocated funds to the consistent repatriation of illegal immigrants.  Further, the administration chose not to increase taxes, thereby saving Bahamians additional hardship in a depressed economy and implemented austere measures in budget allocations to ministries.

This policy decision as expected, negatively impacted government revenue and curbed expenditure.  However, the administration turned the economy around by securing multiple anchor projects for improvements in infrastructure and job opportunities resulting in an increase in foreign direct investments (FDI) of approximately $240 million in 2002 to an excess of $880 million in 2007.

This enabled The Bahamas under the Christie administration to increase external reserves to a record in excess of $690 million from $370 million in 2002.  Unemployment figures fell from 9.1 percent in 2002 to 7.9 percent in 2007, accounting for approximately 20,000 jobs created.

Ultimately, the Christie administration was able to achieve social, economic and infrastructural development in challenging times that called for austerity.

Ingraham administration (2007–2012)

The Ingraham administration was greeted with multiple FDIs, a national debt of approximately $2.4 billion, a reduced deficit and a debt-to-GDP ratio of 35 percent when it took office in 2007.  In its Manifesto 2007 promise, the administration had committed to deficit reduction and hoped to achieve this feat and reduce the debt-to-GDP ratio to a low of 30 percent by 2012.

Faced with favorable economic conditions and a projected growth rate of 4.5 percent, the Ingraham administration’s first and second budgets were generous.  Allocations to most ministries were increased significantly over and above allocations in previous fiscal years.  However, The Bahamas’ tourism and financial services industries would become negatively impacted by the global economic downturn.

Over the ensuing fiscal years, the Ingraham administration witnessed a decline in revenues and consequently relied upon the headroom it met when entering office to significantly increase its borrowing and make up for revenue shortfalls.  In addition, the administration carried out perhaps the most aggressive and controversial fiscal policy in Bahamian history.  Tax increases by the administration adversely impacted lower and middle income earners and Bahamian businesses.  Private schools, charitable and College of The Bahamas subsidies were reduced in an already depressed economy.

Confronted with reduced revenue and only remnants of FDIs negotiated by the Christie administration, the administration seemed to pay the price for its “Stop, Review and Cancel” policy for FDI projects left on the table by the Christie administration, which Standard & Poor’s noted affected investor confidence in The Bahamas.  The administration would later seek to address its revenue shortfall with the controversial sale of the state-owned telecommunications company, Bahamas Telecommunications Company (BTC) to British firm Cable & Wireless and the reduction of the prime and discount rates lowered the administration’s debt servicing cost.

The challenges faced by the Ingraham administration were great and as such required prudent fiscal and economic planning.  Caught off-guard by the global recession and with no real or robust economic policy, the Bahamian economy has suffered a great deal.  Unemployment levels have risen to more than 15 percent, foreclosures are at record levels and the government had oversight of more than $100 million in cost overruns for the road improvement project.  The national debt has doubled in excess of $4 billion, deficit levels exceed eight percent and the debt-to-GDP ratio exceeds 60 percent (more than the recommended rate of less than 40 percent).

Conclusion

In the final analysis, a review of both administrations’ performance in managing the economy suggests that the Ingraham administration lacked a plan to improve economic conditions in the country as evidenced by its reactionary fiscal policy.  The Christie administration, on the other hand, despite being faced with multiple challenges throughout its term charted a course that set The Bahamas on the road to economic recovery.

It is difficult to see how another Ingraham administration would differ from the current one being faced with the same challenge and appearing to wait on a slowly recovering United States economy.  It is fair to state that a similar strategy will be deployed.  The Christie-led PLP has indicated that it will adopt similar policies (as deployed between 2002 and 2007) to restore economic prosperity to The Bahamas if elected.

The Bahamian people ought to be mindful of the following words of President Thomas Jefferson: “To preserve our independence, we must not let our rulers load us with perpetual debt.  We must make our election between economy and liberty, or profusion and servitude”.

The facts do not lie and we must choose economy and liberty over profusion and servitude.  The choice is ours to make.

• Arinthia S. Komolafe is an attorney-at-law.  Comments can be directed to: arinthia.komolafe@komolafelaw

Apr 19, 2012

thenassauguardian

Caribbean Blog International

In light of the challenges that our economy faces and the general consensus that we must revisit our economic model... it is disturbing to see that little is being said about the proposed fiscal policies of political parties as we enter the heart of the 2012 general election campaign

Confronting the debt crisis pt. 2

by Arinthia S. Komolafe

Last week we explored the effects that monetary policy at the turn of the millennium may have had upon the current mortgage and overall debt crisis.  As several individuals are calling for a further reduction of the discount and prime rates (DR and PR), it is important to note the impact such a move will have on individuals’ credit positions and financial wellbeing.

There is no doubt that the reduction of the DR and PR proved beneficial to the government in that it provided the government with an opportunity to service its debt at a lower interest rate, even though the overall benefits to consumers appears to be minimal.  On the other hand, the reduction of the DR and PR would have negatively impacted some organizations, Financial Institutions (FIs) and the National Insurance Board, as they would have lost millions of dollars in investment income.

In the final analysis, FIs usually win and are rarely dealt the bad hand of the stick in any situation within a credit-driven and consumer society like The Bahamas.  Financial Institutions in response to the aforementioned reduction imposed charges in other strategic areas, increased some of their fees and maintained their rates for consumer loans.  We have witnessed quiet increases in FIs’ fees for transactions such as ATM or passbook withdrawals – service charges on accounts and additional fees were applied to loans in the aftermath of the rate reductions.  A well-known fact is that the ultimate and main loser is usually the consumer who on the one hand receives a ‘supposed’ break on his debt servicing due to the DR and PR reduction, but pays hidden fees and charges on the other hand.

The net effect on the consumer is that he/she ends up paying the same amount and in some cases more to the FIs, which may result in non-performing loans or lost property to foreclosure.  This reinforces the point that an active Consumer Protection Commission ought to be in place to provide checks and balance on behalf of consumers relating to financial transactions among other things.

In addition to providing debt-servicing relief, it is expected that further reduction in the DR and PR should have also provided access to credit at a cheaper rate for individual and business consumers. The positive effect for business owners is that it creates the opportunity for expansion of the business and/or maintenance of inventory levels.  However, it is estimated that approximately one third of commercial banking loans extended to Bahamian companies are in arrears.  If businesses are faced with increased energy and gas costs combined with tax increases in National Insurance, business license fees and other diverse areas, it becomes less possible for businesses to be sustained during the current economic climate and more importantly create jobs that will help stem the growing unemployment rate.

The likelihood of FIs extending credit under already constrained circumstances is lower than normal and the underwriting of new loans is being done with extreme caution – a prudent course of action.  This further emphasizes and highlights the importance of and the urgent need for a functional and effective credit bureau.  It is noted that the Central Bank of The Bahamas had obtained assistance from the Caribbean Regional Technical Assistance Center (CARTAC) with the aim of establishing a credit bureau, albeit the process has been ongoing for a few years.  Considering the history of adjustments to the DR and PR, these rates are normally revised (downwards for the most part) not more frequently than in five-year intervals.  Whereas this does not suggest that monetary policy should be stalled or be predictable, the historical trends suggest that there is ample time to establish a credit bureau prior to any potential adjustments to the DR and PR.

What are the fiscal policies of the political parties?

In light of the challenges that our economy faces and the general consensus that we must revisit our economic model, it is disturbing to see that little is being said about the proposed fiscal policies of political parties as we enter the heart of the general election campaign.  It is a well-known fact that during the election campaign seasons in the past, we have heard politicians produce their grand ideas of what they intend to do for the Bahamian people.  The important part of the equation is, however, often omitted and very rarely if ever do we hear about how they propose to ‘foot the bill’ for their grand but necessary ideas.

It seems inevitable that the next government post the 2012 general election will have to continue this spate of borrowing at least during year one of governance to ensure the government is able to meet its obligations.  Fortunately, government debt servicing has been aided by one-off payments in 2011 from the sale of the Bahamas Telecommunications Company and capital inflows from Baha Mar. However, the likelihood of similar capital injections for 2012 is slim.  A part from a significant turnaround and increase in tourism numbers and the government’s ability to constrain its spending habits, it is difficult to see how we will get ourselves up out of this national disaster.

Our politicians seem to have mastered the art of avoiding reality and failing to inform us that hard decisions will have to be made.  In essence, austerity measures are not unforeseeable and it could be argued that these measures are unavoidable.  Of course such declarations are unpopular (albeit they would be truthful) and politicians fear the potential backlash of such honesty.  The government has continued to borrow in the midst of declining revenues and increased taxes that placed a heavy burden on the Bahamian people.  It would not be surprising, therefore, if the current tax levels are maintained or increased to meet budget requirements.  Unfortunately, the persons most affected by these tax burdens form part of the working and shrinking middle classes.  In the absence of foreign direct investment or new sources of revenue, any reduction in taxes will most certainly require the government to carry out extreme measures to cut its spending, increase the efficiency of state-owned enterprises to stop wastage and implement efficient tax collection policies.

The national debt crisis constitutes an unwanted and unsolicited gift to future generations of Bahamians that threaten their opportunity for economic prosperity.  This crisis and prevailing macroeconomic indicators makes it difficult to see any significant economic growth in the near future.  Our leaders and all of us must rise above the partisan politics and make a concerted effort to place our economy back on track.

 

• Arinthia S. Komolafe is an attorney-at-law.  Comments can be directed at: arinthia.komolafe@komolafelaw.com

Confronting the Bahamian debt crisis pt. 1

Mar 15, 2012

thenassauguardian

Caribbean Blog International

...four years after the ‘Great Recession’ commenced, the Bahamian economy continues to struggle... ...the government is challenged with reduced revenues, soaring energy and food prices, high unemployment, rising crime levels and social ills... ...with unemployment at its highest in years and individuals on reduced pay... it seems fair to state that the mortgage sector and housing market in The Bahamas are in a crisis...

Confronting the Bahamian debt crisis pt. 1

By Arinthia S. Komolafe

In the aftermath of the worst recession since the Great Depression, the government is challenged with reduced revenues, soaring energy and food prices, high unemployment, rising crime levels and social ills.  In response to these challenges and in order to stay afloat, the government has resorted to borrowing.  The reality is that imprudent borrowing practices prior to and during the economic downtown have exacerbated the economic soundness of our government.

The story of the sub-prime mortgage crisis and the lessons learned are well documented.  However, four years after the ‘Great Recession’ commenced, the Bahamian economy continues to struggle.  It was reported that the Bahamian banking system was resilient to the crisis and to some extent the economic downturn because of our credit policies as administered by the Central Bank of The Bahamas (CBB).  However, was this assertion truth or fallacy?  One wonders if based upon the facts and looking back in hindsight whether the current mortgage and ultimately debt crisis was an accident waiting to happen.  Could it be that the economic downturn exposed flaws in our monetary policy and credit risk management framework?

Background

A journey down memory lane and history, will show that the CBB in August 2004 in an attempt to ensure that credit expansion was consistent with economic growth, advised banks to monitor borrowers’ creditworthiness by limiting the debt service ratio (DSR) on loans to a range of 40 percent to 45 percent of ordinary income and require a minimum of 15 percent equity contribution on all personal loans with exceptions to those secured with mortgage indemnity insurance.  A short one month later, the CBB temporarily relaxed those policies by eliminating the 15 percent equity requirement and raised the DSR threshold to 55 percent.  It is noteworthy to state that the reason given for this change was to aid in relief due to the effects of Hurricane Frances.  It is unclear, however, how many banks took advantage of this flexibility, the immediate impact on the economy and how long these policies actually remained in effect.

However, some four months later, the CBB reduced its discount rate (DR) from 5.75 percent to 5.25 percent and the prime rate (PR) was consequently reduced by 50 basis points to 5.5 percent.  It is imperative that we examine the aforementioned policy decisions made by the CBB in the context of the Bahamian economy which is primarily consumer driven.

In the absence of an established credit bureau, it is difficult to assess the creditworthiness of Bahamian consumers and almost impossible to assess whether a consumer’s DSR truly falls within the 40 percent to 45 percent range.  Taking a conservative hypothetical approach (and I must emphasize that this may be extremely conservative) and assuming that a majority of consumers had a ‘real’ maximum DSR of 55 percent as opposed to the required maximum 45 percent, it follows that an increase of the DSR to 55 percent would increase the ‘real’ DSR to 65 percent, leaving the consumer with an ultimate disposable income rate of only 35 percent.

In addition to the scenario painted above, a decrease in the DR and PR all things being equal, should further encourage borrowing and expand credit.  This brings into question whether the objective of ensuring that credit expansion was consistent with economic growth was achieved.  In 2004, with the CBB’s policy to restrict credit expansion, the amount of mortgages for new construction of single dwelling homes stood at a mere 894.  To highlight the effect the aforementioned policy change had on the mortgage market, in 2005 and 2006 government revenue on stamp tax for mortgages almost doubled in 2005 compared to 2004 and increased significantly in 2006.

Further, residential mortgages for new construction of single dwelling homes stood at 1,428 and 1,137 in 2005 and 2006 respectively.  The total processed value amounted to approximately $300 million for these years.  It is uncertain how many persons painted a true picture of their DSR and the real question is whether the majority of persons who obtained mortgages during this period should have actually qualified for those mortgages. This is bearing in mind that as at December 31, 2011 mortgage delinquencies stood at approximately $650 million.

Mortgage sector and housing market in crisis

Today with unemployment at its highest in years and individuals on reduced pay, it seems fair to state that the mortgage sector and housing market are in a crisis.  It is not surprising that many Bahamians have defaulted on their mortgage obligations with mortgage delinquencies standing at approximately $650 million in arrears for the entire Bahamas.  In order to appreciate the extent of this debacle, a look in the newspapers will reveal a fraction of the number of foreclosed properties advertised for sale.  It has been argued that the reduction of the DR and PR by 75 basis points in June 2011, although welcomed came too late and that the reduction was inadequate.

The government is being called upon to provide mortgage assistance for those who are losing their homes.  Proponents of this relief effort cite the millions of dollars expended on capital infrastructure by the government in justifying this move as the right action required.  They submit that if the government could spend such exorbitant amounts on infrastructure and the purchase of shares, it is only fair that the government would provide relief to struggling homeowners.  Opponents of any form of mortgage relief efforts by the government argue that in a capitalistic society, the government should not interfere with private enterprise.  After all, opponents submit the free market economy is designed to have minimal government intervention and market forces must be left to control the market.

In the final analysis, there is enough blame to go around; starting with the government, the lending institutions and the consumer.  In the years leading up to the financial and economic downturn, the government benefitted from the credit expansion as a result of monetary policy in the form of increased stamp tax revenue, the lending institutions turned over record profits and consumers benefitted from unprecedented access to credit facilities.

It is only fitting, therefore, that the aforementioned benefactors should come together to bring resolution to this crisis.  In order to avoid further deepening of this crisis, the government on its part, should explore establishing a fund to assist eligible homeowners in retaining their homes.  Adjustments to the DR and PR by the CBB should be stalled until a credit bureau and robust consumer protection agency as a matter of urgency have been established.  The lending institutions should take significant steps to refinance mortgages on more favorable terms for consumers and more importantly consumers should exercise increased prudence in the management of their finances.

 

•Arinthia S. Komolafe is an attorney-at-law.  Comments can be directed at: arinthia.komolafe@komolafelaw.com

Confronting the Bahamian debt crisis pt. 2

Mar 09, 2012

thenassauguardian

caribbean Blog International

The Bahamian government must be dedicated to ongoing funding of education at all levels... ...Further, a corresponding factor is the need for our leaders to actively pursue the diversification of our economy... ...The lack of diversity within our economic model and the depressed economic environment in The Bahamas does not favor young and up-and-coming professionals, entrepreneurs and investors...

Where do we go from here? Pt. 2

By Arinthia S. Komolafe:

A major obstacle that youth and our emerging leaders face is the lack of adequate education and/or opportunities to pursue higher education.  During 2009-2010, a major topic of discussion was subsidies provided to learning institutions.  The government announced that it was decreasing its subsidy to independent schools by 20 percent.  Many were outraged by this move; not least the parents themselves who were already faced with rising education costs and would consequently rethink their desire to privately educate their children.  In some cases many were forced to enroll their children in the public school system.

Proponents of the subsidy argue that parents who choose to send their children to private school are paying double, as their taxpaying dollars are already used to fund public schools.  At the same time, they take additional funds out of their pockets to educate their children privately.  It is worth noting, however, that those opposed to such subsidies believe this reduces the amount of funds available to public schools who ultimately suffer among other things the plight of underpaid educators, understaffed schools, inadequate infrastructure or reduced supplies.

The government’s reasoning for subsidy reduction was that certain independent schools received higher subsidies in comparison to public schools.  However, this argument was perceived by some as skewed, as the government itself operates approximately 160 institutions and is responsible for operating expenses, wages and other costs.

Nevertheless, the most alarming revelation was the statement that all but three of the independent schools were in contravention of the education (grants in aid) regulations by not submitting the requisite returns of income and expenditure.  It is necessary to ascertain upon which basis the government decides the level of subsidy it disburses – bearing in mind that independent schools also receive grants from private donors and/or the denominations that they are affiliated with.

Although there is a strong case for maintaining these subsidies, increased accountability should be demanded from recipients of tax-payers’ funds.  It was recently stated that many of the independent schools have become compliant.  However, the public has not been advised of how many of the independent schools remain non-compliant.  Ironically, it’s difficult to imagine that the government would aggressively ensure compliance with these regulations, when the government itself appears to be acting ultra vires of the same by exceeding the limits apportioned to various classes of schools. It is therefore incumbent upon the government to make the necessary amendments to adjust for the increases and/or new recipients of grants.

Nevertheless, subsidies provided to independent schools, (which generally produce better national results compared to the public system) can provide a good foundation in primary and secondary education to afford more Bahamians an opportunity to pursue tertiary level education.  Statistics reveal that only 20 percent of The Bahamian labor force attain a university degree.  It should also be noted that these statistics include expatriates, therefore decreasing the ultimate rate for Bahamians. The statistics are not unconnected to the lack of opportunities to obtain higher education in a broad range of fields locally.  The inability to receive diverse higher education outside of a few concentrated areas in The Bahamas has led several Bahamian students to pursue education abroad.  In 2010, the government questioned the wisdom of maintaining current subsidies of approximately $4 million for 197 Bahamian students attending University of the West Indies (UWI).  The real question should have been the potential downside of removing the aforesaid subsidies.  Removal of subsidies of this nature at this time will decrease the opportunities for Bahamians to become qualified in fields such as medicine at a reduced cost until such time as they can do so locally.  It is sad to say that in 21st century Bahamas, Bahamians are still not able to qualify as doctors and engineers locally. Until such time as The College of The Bahamas has been converted to a university and provides science and technological services, the discussion should remain a moot point.

Debt and education

Flowing from this inability of Bahamians to be educated locally is the burden of debt acquired in pursuance of tertiary education abroad and hence the student debt loan crisis.  The government Guaranteed Loan Fund Program (GGLFP) was suspended by the current administration in 2009 at a time when many parents cannot afford tertiary education for their children in the absence of awarded scholarships.  As a result, persons unable to take advantage of the GGLFP are often left with no option but to obtain consumer loans from banks and other financial institutions where rates tend to be unfavorable.  Some aspiring students who cannot obtain loans are forced to depend on their parents who in turn resort to remortgaging their homes in order to give their offspring a chance to achieve the Bahamian Dream.

This week, Bloomberg reported a significant increase in student loan debts over the past three to four years.  The report was compiled from a survey of about 860 bankruptcy lawyers under the umbrella of the National Association of Consumer Bankruptcy Attorneys in the United States.  It was reported that student loan debt (both federal and private) in the United States is approaching $1 trillion and surpassed credit card debt for the first time in 2010.

In The Bahamas, it is estimated that some 5,000 applicants have benefited from the GGLFP since its inception in 2001.  At its debut, the program had nearly exhausted its $100 million statutory budget in less than two years, placing the sustainability of the fund at risk.  It is estimated that approximately $70 million of funds were in default before suspension of the program.  It was further stated at that time that the continuance of the program depended upon the defaulters repaying their outstanding debts.

The importance of planning for our children’s future via investments in educational funds and college funds cannot be overemphasized.  The program was plagued by multiple challenges that seemed to disadvantage the recipient of these loans.  The rate of interest, which had originally been subsidized at 50 percent by the government, was exorbitant and on the same level as that of mortgage loans.

It is worth noting that the subsidy has been reinstated in certain circumstances.  The payment terms were unfavorable and required recipients to pay large monthly payments in a short period of time, at times not taking into consideration other payment obligations of the recipient like additional student loans or car loans.  The lending institutions driven by profits, failed to take into consideration the proposed monthly payments in comparison to the earning capacity of the recipient.  As a result, the high monthly payments provided more of a burden for the recipient and/or guarantor who was accustomed to paying low interest payments that were presumably based upon their credit risk at the time the loan was approved.

The overall management of these student loans including the payment schedules, terms of payment, notification of past due payments and structuring of payments by financial institutions leaves much to be desired.  It could be argued that the poor management and minimal attention paid to this program by these institutions is because payment from the government is guaranteed in the event of defaults.  How much attention is given to the management of this program and other student loan programs to ensure that the interests of the students/borrowers are protected?

Huge monthly payments have in many cases exhausted a recipient’s debt-service ratio and have prevented many young professionals from qualifying for mortgage loans or funding for their entrepreneurial pursuits.  Consequently, many individuals are delayed from moving toward ownership in the Bahamian economy.  The extent of the challenges faced by young and up-and-coming professionals will more than likely be further exposed once the proposed credit bureau is fully implemented and operational.

Govt decision questionable

The Obama administration is proposing an overhaul of the student loan program in America by removing the current subsidies to private lending institutions.  The proposed term to forgive loans will be reduced from 25 to 20 years and the proposed monthly payments will be capped at 10 percent of the recipient’s discretionary income, representing a reduction from 15 percent.  Further, students with multiple loans will be given the option to consolidate and take advantage of lower interest rates.

A similar approach ought to be considered for existing defaulters and future reinstatement of the program in The Bahamas.  The government’s decision to suspend the program indefinitely and not address the student loan debt crisis is a flawed one.  This decision does not send a good message on government’s commitment to higher education of the youth in The Bahamas.  Further, the lending institutions must be engaged to re-evaluate their requirements and terms for student loans.  A universal amnesty period should be looked at for all outstanding recipients to pay a one-off minimal amount and restructure their loans, extend payment terms and effectively reduce monthly payments.

The government must be dedicated to ongoing funding of education at all levels.  Further, a corresponding factor is the need for our leaders to actively pursue the diversification of our economy.  The lack of diversity within our economic model and the depressed economic environment in The Bahamas does not favor young and up-and-coming professionals, entrepreneurs and investors.  These realities make the Bahamian Dream seem so unreachable, unattainable and at best a mirage.  A brain drain is certain to be a surety in our future, unless we place more emphasis upon education.  The question as to where we go from here is one that only the government and our leaders can answer through their policies, decisions and actions.

•Arinthia S. Komolafe is an attorney-at-law.  Comments can be directed at: arinthia.komolafe@Komolafelaw.com

Feb 09, 2012

thenassauguardian

Where do we go from here? pt. 1

Caribbean Blog International