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>>>

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

Opinions on the grim prediction of the state of the Bahamian economy ...after the value added tax (VAT) is implemented

VAT Panic Increases

By Kendea Smith
The Bahama Journal



A prominent businessman and a well-known economist have differing opinions on the Nassau Institute’s grim prediction of the state of the economy after the value added tax is implemented next year.

According to the institute’s 48-page paper titled “The economic consequences of value added tax” David Godsell, a third year PHD student of Queen’s University School of Business, who authored the paper, says labourers can expect a decline in real wages which will in turn lead to a decline in the labour supply.

He adds that the government would stand to lose $165 million in revenue and the private sector would suffer $103 million in losses.

“Businesses and employers with VAT-based sales can expect reduced demand for goods and services, which will in turn reduce their demand for labour. Under extraordinarily conservative estimates biasing towards heightened government revenues, we forecast VAT adoption will lead to a $165 million decline in government revenues,” he said.

“Simultaneously, we estimate VAT adoption will burden the private sector with $103 million in annually recurring compliance costs and an average of $4,300 in compliance start-up costs for each VAT registrant.”

The report concludes by pointing to failed VAT adoptions in countries similar to The Bahamas and by highlighting contemporary efforts to reduce budget deficits through reductions in government spending.

Upon hearing the news, former Chamber of Commerce President Dionisio D’ Aguilar said this report fuels the concerns of the business community that already fears the tax.

“The government has not made the case where the introduction of value added tax is not going to create an inflationary situation. I can’t see where it is not going to cause prices not to go up. And everybody is talking about prices going up from anywhere between 10 and 15 per cent in order to accommodate this increase in value added tax especially those in the service industry,” he told the Bahama Journal in an interview.

“For companies that don’t import a lot you are now having to collect 15 additional per cent. You either add it on to your price or you eat a portion of it because your customer just isn’t willing to pay an additional 15 per cent for the service that you are selling. So there is no doubt in my mind that it is going to cost an inflation effect because when prices go up and wages don’t budge you are going to have a decrease in economic activity.”

Mr. D’Aguilar pointed out that most businesspeople understand that the government needs to create more revenue because it is spending more than it is taking in.

But he said economists should come together to find other ways to achieve that goal.

“Instead of borrowing the money they want to just get it from tax revenue. So basically you are taking it out of the economy to pay for what you are already spending. It is not as if the economy is going to increase because it is already spending that money. It is running huge deficits,” the businessman said.

“No one is excited about the introduction of new taxes. Anytime you increase taxes there is a huge pull back. The government has one of two choices – it can either increase what it brings in or reduce what it spends. Now, if it reduces what it spends one might argue that that too can cause an economy and cause a recession. The fact of the matter is I agree to a certain degree with what the Nassau Institute has to say. All of these businesses now have to change the way that they do business. You have to pay more taxes to the government, you have to track it more and it is very depressing for a businessperson. It doesn’t get me excited to expand my business.”

But State Minister for Finance James Smith disagrees.

He argues that the government has no choice but to introduce a new tax system because the government’s spending habits cannot be sustained.

“No services are now taxed directly and the VAT will now take into account so at the very least you will be taxing both goods and services. So the government should get more revenue. No one can predict the outcome of the introduction of a new fiscal regime – involving a new tax. But it is highly probable that the government would receive increased revenues and that is likely to reduce the overall deficit,” he said.

“There are a couple of things that are being overlooked. The government walked into a huge deficit and huge build up in debt. If that continues and nothing is done about it the country would be worst off, even the ones that are complaining will complain more if you have to devalue you currency or because of a series of downgrades from international agencies or the inability to even borrow money or that you cannot put in place the necessary things that governments do – like education, health care and law and order.

“You can have a form of chaos if we continue down the road we are going.”

Mr. D’ Aguilar is now urging the government to present the information on VAT as soon as possible to decrease the panic among businesspersons.

“They need to get ahead of this and explain and say look this is what we think is going to happen. The fact that they are just letting it out drips and drabs of information is annoying. For example, what is the rate of duty going to be once we introduce VAT? That is a critical number. Get it out there,” he said.

“We are eight months away from this thing being introduced and it is still very fuzzy on how this is going to work.”

Prime Minister Perry Christie said back in February that, “Intended with the introduction of this new system it is also proposed to affect the eventual reduction in import duties that will accommodate The Bahamas’ accession to the WTO, to reduce excise tax rates to compensate for the VAT, eliminate the business licence tax as currently structured and to replace the hotel occupancy tax.”

The prime minister said the new proposed tax system will also level the playing field for the poorest and wealthiest Bahamians.

VAT is expected to come into effect on July 1, 2014.

September 18, 2013

Jones Bahamas

Caribbean Blog International

...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

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

Policymakers and other interested parties would need to closely monitor the national debt situation to ensure that the nation’s economy remains healthy and that our living standards are not threatened by excessive public sector debt

The national debt

thenassauguardian editorial

Governments, international agencies, rating agencies and most businessmen regard the level of national debt to the size of the economy (GDP) as one of the most important economic indicators in assessing the current and future health of the economy.

The national debt consists of funds borrowed directly by the government plus any debt of the government corporations which have been guaranteed by the government.

Governments usually borrow funds when there is a need to undertake capital projects (office buildings, schools, roads, docks etc.) and the revenue from taxes is insufficient to cover the capital works.

The size of any economy determines the level of potential taxes that could be collected to meet government expenditure needs for, among other things, education, health, law enforcement, social welfare and of course, debt servicing of any loans taken out by the government.

Current and future living standards in any country are influenced by the amount of resources applied by governments, on a yearly basis, to education, health, national security, social welfare and other public sector areas.

In order to ensure that sufficient resources are available on a sustainable basis for those fundamental public sector functions, good fiscal management compels governments to restrain the growth in debt servicing to a level where it does not threaten to crowd out and push aside the needs of the other important sectors of society.

In many third-world countries in Africa, Asia, Latin America and the Caribbean, the public resources from tax revenues to finance public debt have exceeded the public resources allocations for education and health; a position considered by many as an undesirable path towards the lowering of living standards.

In an attempt to address poor policy choices by governments, international agencies such as the IMF (International Monetary Fund), World Bank and the IDB (Inter-American Development Bank) which provide economic advice on a global basis, urge governments to try and keep debt ratios (total national debt as a percentage of total national output or GDP) to a reasonable level.

In the case of developing countries such as The Bahamas, the level suggested is somewhere in the region of 40 percent.

Most countries, particularly those in the developing world, have fallen short of that objective.

Indeed, with the exception of Trinidad and Tobago at 26 percent, many developing countries are in the high 80s (Barbados) or, in some cases the ratio exceeds 100 percent, (Jamaica at 123 percent for example), while the European countries have set the debt to GDP ratio at 60 percent as the desired level for their community.  Our nearest neighbor and largest trading partner, the United States, has a debt to GDP ratio that stands at an unusually high level of 97 percent.

When a country’s debt to GDP is high, it implies that the country is struggling and could have difficulty servicing its debt.

Currently The Bahamas’ ratio is in the high 50s and growing.

It is not yet in troublesome territory, but given the trend over the past few years and the growing commitments to further borrowing, including the Chinese loans and the associated capital needs of the utility companies, there is surely some cause for some concern.

The policymakers and other interested parties would need to closely monitor the debt situation to ensure that the nation’s economy remains healthy and that our living standards are not threatened by excessive public sector debt.

Oct 25, 2011

thenassauguardian editorial

Caribbean Blog International

Hubert Ingraham should have invested not in roads but in the future of our youth... ... infrastructure work has not acted as a major stimulus to the economy... We are still experiencing almost zero growth

Ingranomics Part 1

By Ian G. Strachan

Last week we looked at some of the positives of the FNM’s term in office.  It’s time now to look at the flip side. What did they get wrong; where did they blow a golden opportunity and what damage have their decisions caused?

 

PLAYING IT BY THE BOOK

You’ve heard it many times but the world has been grappling with a global economic meltdown.  The USA, our biggest trading partner, has 14 million people unemployed and eight million people who can only find part time work.  In one year alone (2008-2009), U.S. unemployment increased by a mind-blowing 60 percent, from around nine to 14 million.  As the USA goes so do we.

The Ingraham administration weathered this crisis and it has been weathered largely through government borrowing and a concomitant refusal to adopt serious austerity measures. The result is a scary level of national debt which is costing us roughly $300 million a year to service (almost 40 times what we are spending this year in the Ministry of Agriculture and Marine Resources).

Now the orthodox economic approach, as I understand it, is that when your economy makes a downward turn--which all economies naturally do--governments must increase their spending to stave off unemployment and to keep money flowing.

Governments normally spend on infrastructure in times like these, so that when the economy rebounds, private business can more easily and effectively do its thing and the citizenry generally can enjoy a good quality of life (in so far as infrastructure lends itself to that).  Governments also have to figure out where to cut taxes as an incentive or to ease pressure and where to increase taxes and or tighten tax collection so they can continue to do their work despite the lean times. (NIB has been more diligent about collection, for instance, and this year we saw a reduction in the prime rate.)

Few governments in the world run on a surplus; they mostly run on a deficit and borrow to make up the difference.  A developing island nation like ours, with a little, one dimensional economy, but with citizens who have First World expectations, has had serious pressure placed on it these last four years.  Ingraham had no choice but to increase borrowing to maintain the bubble we live in and avert disaster; there was simply no other option.

The question voters must ask is, did we borrow money for projects that put us on the best possible footing going forward as a country?  Did we use this economic crisis as an opportunity to set our house in order and do some things we didn’t previously have the will to do?  Did our government also do everything in its power to increase its revenue base (a challenge in lean times) while at the same time being sure not to burden the small man with more taxes at a moment when he was least able to sustain it?

 

STIMULUS?

The FNM’s heavy emphasis on infrastructure, (and the kinds of infrastructural work chosen), has not eased the level of frustration and suffering in the country; in fact it has increased it for many.

First of all, infrastructure work has not acted as a major stimulus to the economy.  We are still experiencing almost zero growth.  These massive projects have not put a whole lot of money into the Bahamian economy.  One, the work has been done for the most part by foreign firms and two, most of the materials needed are imported, which means more money leaving than staying.  Three, they haven’t employed anywhere near the necessary number of Bahamians (even temporarily) to significantly ease the hardship in the society.  We needed to employ 7-10,000 to truly lift ourselves out of the doldrums and it just hasn’t happened.

One project that could have employed that many people in the short and long term is Baha Mar, but the deal cut with China ensures that much of the money spent will go right back where it came from and most of the temporary jobs too.  It was just a lousy deal and Parliament never should have agreed to it.  The PLP will argue that the FNM’s stopped, review and cancel policy stalled projects like Baha Mar and caused our economic slowdown.  I don’t buy it.

But whereas the FNM may argue that they invested the millions they borrowed in infrastructural improvements that will stand the test of time (they hope) and did not frit it away on nebulous programs/schemes that might have questionable long term benefits to the country, their approach was unimaginative, overly conservative and made life worse for Bahamians in the short to medium term.  The Ingraham administration demonstrated an unwillingness or inability to innovate or experiment. (The humble Self Starter Programme was the riskiest innovation they attempted in my view, but I would love to be corrected.)

The road works caused a number of homegrown businesses to die and displaced others.  It also made it difficult for businesses all over the island to deliver goods and services and made it difficult for employees to get to and from work.  And this has been going on for two and a half years.  I can’t begin to imagine how much that has cost individuals and businesses in time and money.  And the FNM government has been unable to convince anybody that they intend to make amends in some way during their term in office.

In the final analysis I can’t name one industry that the Bahamian government has helped to experience major growth through its powers to borrow, invest and to incentivize with tax breaks, so much that thousands of new, permanent jobs were created.  No, forget thousands, even hundreds.  Fishing?  Farming?  Light manufacturing?  Have we simply resigned ourselves to more decades of low productivity in these areas?  There’s nothing we can do to get things going in these sectors?

We are spending eight million out of our 1.9 billion dollar budget on Agriculture and Fisheries. That’s less than one half of one percent.  That is tragic.  Even a man as well meaning and thoughtful as Larry Cartwright can’t make miracles happen with that (especially in a nation where the men scoff at farming and fishing and all want to work a hotel job).  According to Cartwright 76 percent of government land leased to farmers is abandoned and 25,000 acres of available arable land lies dormant waiting for a small farmer to apply.  Well, I guess we’ll keep waiting.

 

DIG UP DIG UP

The FNM could have followed the recommendations of the experts they hired decades ago and created a single, Bahamian-owned bus company through public-private partnership and the economic times would have provided the perfect cover for doing so. This would have reduced traffic congestion, brought greater discipline and order to the society, increased efficiency, created new, permanent jobs, created opportunities for new satellite businesses, lowered the cost of living for many and hopefully increased tax revenue.  All for a fraction of the cost of the road works.

Instead, they chose to do road work and more roadwork.  As such, many believe Ingraham chose to reward his political allies with contracts and pass on the headache of the buses to future governments.  Instead he’s given two thirds of our nation a head ache.  His gamble is that the new roads will be appreciated by May 2012.  But he may very well lose that bet and lose power because of these roads.  I wonder, how much of these road works have been forced on us by these agreements we have made with China or Baha Mar?  The government should publish the Heads of Agreement docs in the papers and on line.

If I am going to risk losing an election over something unpopular, I’m going to at least make sure I lose over something that really will make life better for as many people as possible and will do the most lasting good.  Few think the Big Dig Up will do either.

They could have spent some of those millions in capital works on expanding The College of The Bahamas, which is a major employer and which empowers thousands and can empower even more Bahamians young and old.  Higher education is the most reliable avenue to escaping poverty, yet only 10 percent of Bahamians get a college education.  Expanding the college would create jobs within it and around it, it would allow more money to stay in The Bahamas since more students could attend, and it would ensure that we have a more competitive workforce in this information age.

COB needs more land, more classrooms, better labs, and bigger and better dormitories.  Ingraham should have invested not in roads but in the future of our youth.  He should have bought up the land surrounding the Oakes Field Campus, re-amalgamate BTVI and COB, and develop COB according to a Master Plan.  Instead Ingraham slammed brakes on the college’s growth by cutting its budget in 2009 and 2010, and he continues to ignore, abuse and mismanage BTVI (like the PLP before him).

What he will try to sell us on is that he modernized New Providence.  I suppose he tried in his way, but there are some holes in that one. Big holes. (I think I drove into one last night and almost drowned).

More next week.

Sep 26, 2011

thenassauguardian

Caribbean Blog International

...how do we regain a positive outlook for the economic future of our country and avoid the actual downgrading of The Bahamas’ rating?

Improving our economic situation

By Alfred Poitier

The fact that the outlook for the Bahamian economy has been downgraded to negative by Moody’s should come as no surprise to the opposition or the governing party of The Bahamas.  As a matter of fact, the downgrading is water under the bridge.  It is now time to avoid the water from rising over the bridge.  The pertinent question is how do we regain a positive outlook for the economic future of our country and avoid the actual downgrading of The Bahamas’ rating?

Moody’s has listed specific reasons for the negative outlook for our economic future which are listed below:

• Debt increased by 150 percent over the past decade

• Debt increased by 40 percent in the last two years

• Debt to gross domestic product is 40 percent above the average

• Economic growth has been a modest six percent over the past 10 years.

Simply put, if your revenue is not increasing proportionately to your increasing debt then at some point your revenue will not be able to pay your debt.  This is the major concern of Moody’s and thus the negative outlook rating that it gave The Bahamas.

Our slow economic growth cannot sustain the continuous high level of borrowing.  The constant budgetary deficits must be addressed and actual payments on our national debts need to begin.  Government needs to work towards a balanced budget and stop spending more than we make.

The blame game needs to be thrown out of the window.  The fact is we have borrowed beyond safety levels and now we must find ways to correct this situation.  The easiest way to correct this challenge is to simply boost our revenue.  Governments usually boost revenue by increasing taxes, which unfortunately increase the cost of living for citizens of the country.

However, creative governments find other ways of increasing revenue such as providing incentives for citizens to do more within the existing tax structure, creating more revenue by increased volume. Creative governments also look at providing incentives for new industries that will not only provide needed services to residents, but also improve the quality of life for them and create new streams of revenue for the government.

Many opportunities have been placed before our governments to diversify our economy by encouraging Bahamian ownership in new industries.  But we have missed the boat, or for whatever reason, failed to embrace them.  There is no doubt that the government needs to find other means to grow our economy.

Foreign investment is good mainly for the short-term but as the foreign investor makes his profits over time he will more than likely send his profits out of the country.  In the long-term his investment may not be as beneficial as if a Bahamian did the same investment, as chances are his profits will remain in The Bahamas and probably even be invested in another venture.

It is time for us to seriously consider the natural resources that we have been blessed with and utilize these resources to the benefit of our citizens.  Serious consideration should be given to drilling and the processing of natural gas, first and foremost, for local consumption.  This could help reduce fuel costs for necessities such as electricity, transportation and so much more.  This would also reduce the level of importation of fuel products and could provide export revenue for the country as well.

The problem is our government relies heavily on gasoline taxes and may be reluctant to promote anything that would reduce the amount of gasoline imported to the country.  However, consideration should be given to the fact that the new industry could very easily provide equal or greater revenue to the government provided proper licensing fees and reasonable taxes are applied.

I used natural gas as an example of the natural resources we do have in The Bahamas.  However, there are many other areas of industry that The Bahamas is poised for based on either location or natural resources.  Simply putting a plan in place to explore, with the intent to execute one of these options, can change our present economic outlook from negative to a minimum of stable.  Yes, I did say just putting a plan in place.

Obviously prudence must play the major part in addressing the financial ills of our country but governments must show faith in the citizens through the provision of opportunities through legislation and/or financial aid to advance new, and to grow existing, industries in The Bahamas.

Sep 07, 2011

thenassauguardian

Caribbean Blog International

...the positive assessment by the IMF of The Bahamas' economy came as a breeze of fresh air in the fug created by recently depressing world economic events

Bravo for business

By SIMON COOPER

Res Socius


THE news of the positive assessment by the IMF of the Bahamas economy in The Tribune on August 8, came as a breeze of fresh air in the fug created by recently depressing world economic events. I for one must admit to being decidedly unimpressed by the American President's snide remarks directed towards Standard and Poor who had been warning him for months.

From where I sit, Barack Obama almost sounded like a Republican himself. He appeared disinterested in the fact that at least some Americans are questioning their country's credit worthiness, and unconcerned with the way the markets went into free-fall when it turned out that America the Free no longer has an open-ended budget.

All feedback works the same way in terms of what might be done with it. One can learn from it, reject it, or put it into one's metaphorical pocket to think about it later. Perhaps the President of the World's richest nation will think again about the "poor" assessment his country just received? Perhaps he won't? Time will tell, as it invariably does.

I personally think America woke up to a whole new world this week. It no longer has an unlimited credit card, and its Asian creditors are no doubt seeing it in a whole new light too. Given that Republicans in power are unlikely to tax the companies more that contribute to campaign funds, they will remain more inclined to cut back on expenses. Obama has blocked meaningful domestic cuts. To my way of thinking, this leaves the option of cutting back on America's paternalistic role beyond its borders, no doubt to the delight of some.

Fortunately for the Bahamas we are reasonably well-insulated from the current mess, and for this we have to thank Hubert Ingraham for his foresight (for the record I am a political atheist). Our plans to jump-start our island economy are funded by improving fiscal revenues, as opposed to American handouts with proverbial stings often in their tails.

But America may also cease receiving the free lunches that the western world has been serving it. We have perhaps been too long prepared to follow its lead wherever it would go, and to jump as high as it required. This is good news in the sense that for long-lasting world stability, no single nation should be too powerful. Think of the chaos when the USSR imploded. If the American economy is on the wane, it needs to be let down gingerly.

I wrote this controversial column not to knock America or Americans for whom I have the greatest respect. I wrote it to point out that our island nation's glass is at least half full, and I guestimate far more than that. We are on the right track as the IMF has said. As a businessman I say bravo for the business opportunities that must follow.

Res Socius was founded by Simon Cooper in 2009, and is a Business Brokerage authorised by the Bahamas Investment Authority. He has extensive private and public SME experience, and was formerly chief executive of a publicly traded investment company.

He was awarded an MBA with distinction by Liverpool University in 2005.

Contact him on 636-8831 or write to simon.cooper@ressocius.com

August 12, 2011

tribune242

Caribbean Blog International

Kirk Griffin's thoughts on the union between Cable and Wireless Communications (CWC) and Bahamas Telecommunications Company (BTC)

Kirk Griffin on CWC


IN YOUR OWN WORDS


Former Acting CEO of Bahamas Telecommunications Company (BTC) and newly-appointed advisor to the company Kirk Griffin offered his thoughts on Cable and Wireless Communications.

“I am fortunate to have been at BTC — at the executive level of the company — from the very beginning of the privatization process some 14 years ago. This has given me a unique perspective on the company, the industry and the necessity for BTC to be able to align itself with industry giants that can position BTC where it needs to be.

“I am not reluctant or shy to say that my team members and I at BTC are extremely proud of what we have been able to accomplish. We have consistently been profitable over the years as we have brought modern telecommunications throughout the length and breadth of The Bahamas. Our strengths and successess have been acknowledged by all reasonable observers, including our new colleagues at Cable and Wireless Communications. There can be no question that BTC has done well.

“However, by virtue of its small size, BTC is often disadvantaged because it cannot reach the economies of scale and command best prices from suppliers and vendors. At times, BTC even has difficulty attracting the attention of potential roaming partners as we seek to expand the connectivity of our very own customers across the globe.

“Further, as we all recognize the full liberalization of the telecommunications market is vital for the interests of Bahamian consumers and the vibrancy of the Bahamian economy, for BTC to compete in a fully liberalized market, up against the telecom giants of the world, it is critical that the company partners with a capable and competent global operator. CWC will help position BTC to effectively become and remain the provider of choice for consumers in The Bahamas, in a fully open and competitive marketplace.”

4/8/2011

thenassauguardian

Bahamas Blog International

Economic nationalism and crony capitalism in The Bahamas

Lessons for BTC from Bahamas Airways

by Simon



A recent editorial cartoon of MPs bearing a coffin labelled Bahamianization was cute as a caricature but unconvincing as commentary. The cartoon represents a polar extreme from the left. From the right is another polar extreme claiming that Bahamianization has been tried and has failed.

As usual, the truer picture is somewhere in the middle beyond the hyperbole and casual analysis. Certainly, we are not where we want to be, but to deny various advances since independence, of which both extremes are prone, betrays many examples of progress despite the distance we have to travel.

All of which begs the question: What constitutes Bahamianization? Like all strands of nationalism, notions of Bahamianization are often driven by romanticism, ideological purity tests, prejudice and fear. At its most extreme, nationalism can explode into jingoism, xenophobia and racism.

At the heart of nationalism is a sense of identity and belonging to a place and may include political, social and economic nationalism. The highly emotive debate about the future of BTC has triggered various waves of economic nationalism which concern issues of opportunity, ownership and empowerment.

INSTRUCTIVE

But if the issues are about the greater empowerment of and opportunities for Bahamians, the BTC question is not as simplistic as the ardent nationalists suggest. The aviation industry offers an instructive case study in economic nationalism.

In 1968 Cathay Pacific Airways agreed to a partnership with the Bahamas Government in the development of Bahamas Airways as our national airline. The Hong Kong-based carrier was given exclusive rights to a number of important routes while providing the country with deep pockets and expertise in the airline industry, as well as an extensive international travel network.

Cathay Pacific (CP) invested heavily in the aircraft, marketing and training needed to develop routes between The Bahamas and tourist markets like New York and other cities. Once profitable, CP agreed to sell a 25 percent stake to the Bahamas Government at the initial share price of Bahamas Airways, which would have resulted in a windfall profit for the country.

The Bahamas would have had a national flag carrier able to compete with the big American carriers. Today we own 100 percent of a carrier that cannot compete. Is this Bahamian pride and nationalism? With crocodile tears about nationalism, Sir Lynden unilaterally and underhandedly broke the agreement with Cathay Pacific whom he himself courted and brought to The Bahamas.

Our national airline would have been integrated into the global aviation network decades before the more recent wave of globalization, providing guaranteed airlift for our tourist market, business passengers and cargo.

Imagine the possibilities of The Bahamas as a regional hub for Bahamas Airways/Cathay Pacific with direct flights to Latin America years ago, flying directly to many cities in the U.S., expanding our access to European capitals and better linking the country to the Pacific and China.

Sir Lynden and others defended his about-face by saying that Bahamians should fully own the routes Bahamas Airways had been granted. In the event, his waving the nationalist’s banner was a cover for crony capitalism as he awarded the routes to a crony who failed to get his airline off the ground.

SCANDAL

The result was the collapse of the arrangement with Cathay Pacific, a blow to the credibility of the government with investors and a big scandal for the country. The crony airline became known as “the paper airline” and became a laughing-stock.

Sir Lynden’s decision on Bahamas Airways was one of the pivotal issues which provoked increasing dissatisfaction with his leadership, eventually resulting in the break from the PLP of the Dissident Eight and others.

The founders of the FNM and other nationalists who remained in the Pindling government had to take tough and pragmatic decisions early on in the greater national interest of making the Bahamian dream more accessible and advancing the promises of majority rule.

They overwhelmingly and correctly concluded that to expand tourism and economic access and opportunities for Bahamians, and in order to grow the Bahamian economy to fund priorities such as education, that the Cathay Pacific partnership was an exceptional deal for The Bahamas.

Sir Lynden’s decision was tragic. In significant ways it set the country back decades. While it may be difficult to calculate the lost opportunities and economic benefits to the country and the Public Treasury, we know what Bahamasair has cost taxpayers -- now approaching half a billion dollars.

For point of reference, our total national debt today is approximately $4.2 billion dollars. Over the years Bahamasair constantly flew off course with poor service and incompetent management, various scandals and rip-offs, political interference and featherbedding of supporters, as well as wasteful spending.

Four decades after the Bahamas Airways debacle, the country owns 100 percent of a national airline that has been a significant failure in many respects. Is this more preferable than a 25 per cent stake in an airline that would have been more profitable, that would not have cost the Public Treasury the mind-boggling sums expended on Bahamasair, and would have guaranteed airlift into our prime tourism markets?

Then there are the opportunity costs of millions which could have been invested in education, health care, the arts, infrastructure and other areas. In all probability our national debt would also have been lower and our public finances healthier.

RATIONAL

Such rational cost-benefits analysis does not hold the emotional appeal of thumping our chests, waving the national colours and proclaiming that we are the majority owners of our national airline. Still, Bahamian pride must be more than nostalgia, unthinking nationalism and outdated economic thinking.

Surely we cannot fully know what the future of Bahamas Airways would have been amidst the turmoil that has roiled the airline industry over the decades from oil shocks to mergers to intense competition.

What we do know is that Cathay Pacific is still a healthy and competitive airline and that many of Bahamasair’s domestic routes are now in the hands of private fully Bahamian-owned companies that are profitable. The model Bahamas Airways could have followed is a concentration on international routes leaving domestic routes to local carriers with, in some instances, government subsidies to less profitable inter-island routes.

Suppose that in the 1980s The Bahamas was again offered a partnership with an international carrier to buy a majority stake in Bahamasair, with an agreement similar to the proposed BTC and Cable & Wireless partnership?

The agreement would have entailed the Government maintaining a significant though not majority stake, veto power over key decisions and significant board seats. The new partnership would leverage the resources of the well-established airline including extensive capital investments and other resources made available to Bahamasair that it could not access on its own.

The new partnership would also help to integrate the new Bahamasair into a global travel network of expanded routes with significantly better economies of scale in a more competitive global airline industry. Eventually, shares would be also sold to the Bahamian public

If this was the deal on the table, what would those who oppose the new partnership between BTC and Cable & Wireless, have thought and argued? Clearly, one could not plausibly argue that the national interest would have been better served by insisting on a 51 percent stake.

Undoubtedly the airline and telecommunications industries are different. Yet, there are parallels between the Bahamas Airways story and the proposed new partnership for BTC.

March 18, 2011

bahamapundit

Bahamas Blog International

The Bahamas' ever-expanding national debt: "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects...

'Biggest threat' from $4.1bn national debt
By NEIL HARTNELL
Tribune Business Editor



The ever-expanding national debt, which hit $4.139 billion at end-September 2010 after growing by 12.5 per cent or $460.5 million over the previous 12 months, represents "the biggest threat" to the Bahamian economy's recovery and medium to-long-term prospects, a former finance minister warned yesterday.

James Smith, minister of state for finance in the former Christie government between 2002-2007, said that while the Bahamas' national finances were "nowhere near crisis" point yet, the "worrisome" aspect was the "aggressive" and "accelerated rate" at which the national debt and its ratio to gross domestic product (GDP) was increasing.

Arguing that the Bahamas urgently needed to regain its fiscal headroom to cope with further unexpected future shocks to its economy, Mr Smith said the main concern was the trajectory at which the national debt and debt-to-GDP ratio were rising, especially since the revenues to service them were still falling.

Commenting on the most recent national debt figures, published by the Central Bank in its 2010 third quarter economic review, Mr Smith said: "The increase is getting a little aggressive. Any time you have this continuing trend, and it's an upward trend, that's the concern, because it comes at a time when there is no increase in revenue, so the debt service element is growing at full steam.

"With less revenue coming in, and the cost of financing the debt going up, a greater part of Government expenditure has to be dedicated to debt servicing." As a result, the sums available for the Government to spend on essential services, such as health, education and national security, would be less.

Concern:

"There ought to be some concern about the rate of increase in the debt, because it's very difficult once you step over that slope to come back," the former finance minister added. "I don't think we're anywhere near crisis; it's the trend that's the worrisome part."

The Bahamas' national debt grew by 12.5 per cent or $460.5 million over the 12 months to September 30, 2010, and by 4.4 per cent or $173.3 million during that third quarter, aided by a $100 million domestic government bond issue.

While many small island economies had managed to withstand the global recession with higher debt-to-GDP ratios than the Bahamas, a number had been forced to head for the International Monetary Fund (IMF) to restructure their debt. And they, like the Bahamas, did not have a hard currency to back their debt, being forced to borrow in foreign currency.

The Central Bank report also highlighted another concern, namely that public sector foreign currency debt stood at $1.324 billion as at September 30, 2010, with 59.3 per cent directly attributed to the central government. And, according to Tribune Business calculations, foreign currency accounts for 32 per cent - almost one-third - of the total national debt.

"That's also worrisome," Mr Smith responded, when informed by Tribune Business about the level of foreign currency debt. "What is happening is that we're seeing a build-up in foreign currency reserves, which is good, but that has been produced by the Government's foreign currency borrowing and the IMF subvention [special drawing rights]."

The real issue for the Bahamas could come "somewhere down the road" when the Government's foreign currency bond issue matured, requiring a multi-million dollar principal repayment, likely to be in the region of $200-$300 million, to be made to the investors.

While the Government's existing foreign currency bonds all had medium and long-term maturities, if the foreign reserves were not boosted by inflows from tourism and foreign direct investment, the principal repayments would represent a substantial drawdown on these reserves - currently standing at $875 million.

Ultimately, this could result in "more and more foreign currency being used for debt reduction, as opposed to bolstering the economy" through import spending and such like, Mr Smith said, adding: "We have to be careful about the foreign currency portion of the debt.

"Right now it looks good on the monetary side because the reserves have increased, but that's not come from tourism or foreign direct investment - it's come from the proceeds of debt.

Rates:

"Again, down the road, in maybe another two or three years' time, when you look at this in a global context where interest rates have been held down by quantitative easing, the rate on our foreign currency borrowing could rise because it's tied to LIBOR.

"This debt servicing component of the Budget could rise even further still."

Describing the national debt and its growth rate as "the biggest threat" to the Bahamas' medium and long-term economic growth and stability, Mr Smith told Tribune Business: "We are rapidly using up the headroom in the event we do have problems down the road, and for us it's external events that put us out."

Pointing to the 'short, sharp shock' to the Bahamian economy caused by the travel hiatus following the September 11 terror attacks, which plunged this nation into a temporary recession, Mr Smith added that with the likes of Europe and US also carrying major debt burdens, the Bahamas would have to compete for "the same pool" of financing, something that could see it crowded out or forced to pay higher interest rates on its debt.

"We're not out of the woods yet. We need to continue to get the headroom in the event of a short-term crisis," Mr Smith said. He urged the Government to conduct a careful, proper analysis of the fiscal picture to ensure the Bahamas enjoyed a soft landing.

And the former finance minister warned that while the Government "may have it under control internally", the growing national debt and falling revenues would be interpreted as a bad sign by the international community. Indeed, the rising level of government debt saw interest payments during the first quarter of the 2010-2011 Budget year to $44 million, a growth of $12.2 million or 5.29 per cent.

The direct debt charge on the Government grew by 5.3 per cent or $181.4 million over the 2010 third quarter, and by 10.6 per cent or $342.6 million in the 12 months to September 30, 2010. Bahamian dollar obligations accounted for 78.1 per cent of this direct charge.

December 31, 2010

tribune242

Bahamas Blog International

Sarkis Izmirlian, Man of the Year

Sarkis Izmirlian JCN Man of the Year
The Bahama Journal


As we here at JCN have done for the past ten years; so do we continue this year: we have decided to recognize certain deserving men and women for the contribution they have made [and continue to make] to the ongoing development of the Bahamas.

We do so not only because we can; but because we must –as a responsible media organization – continue to do all that we can to help build up our nation; and so by the same token, we must always give credit where and when credit is due others.

We note also that, right-thinking Bahamians throughout the length and breadth of the Bahamas are today excited at the vistas of opportunity they see as they contemplate the initiation of the Baha Mar project, slated for the Cable Beach strip.

As in the case of these highly expectant Bahamians, we too look forward to the start-up and completion of this mega-project.

In this regard, it should not take the genius that comes with rocket-science to understand and appreciate the import of a project that promises to employ thousands of Bahamians.

Such a venture would also bring with it a multiplier effect that promises to buoy other aspects of the Bahamian economy, its society and its competitiveness in that wider world where in the struggle for economic pre-eminence and consumer satisfaction, it is excellence that matters most of all.

Izmirlian is this Journal’s Man of the Year because he has been able to match word with deed in support of his stated conclusion to the effect that the Baha Mar project – in its guise as a world-class resort - will significantly benefit The Bahamas and all Bahamians.

We believe him when he says that, “… Baha Mar will make The Bahamas one of the premier tourist locations in the world…"

And so, distilled to its essence, the word we are getting is to the effect that, Baha Mar will draw millions of vacationers and business travelers every year to the resort's six hotels, with almost 3,500 rooms and condos, the largest casino in the Caribbean, the largest convention center in The Bahamas, a world-class golf course, retail village and much more.

In addition, it is to be noted that, Baha Mar –once fully operational- will boast having a staff that is fully operational, with some 98 per cent of the staff being Bahamian.

This is excellent-good news.

It is this new information that supports and under girds the decision we have made to name this entrepreneur par excellence – Sarkis Izmirlian- as our man of the year.

He is this year’s choice not only because of his tenacity and vision; but also for being that kind of investor who clearly has a phenomenal depth of confidence in the Bahamas and in its people.

In addition, he is clearly that kind of man who is driven to get things up and going; here we would also venture that this man has a depth of confidence in himself and in his capacity to get up from under any number of disappointments and challenges.

To put the matter concerning Izmirlian in its proper perspective; this investor makes things happen; in this, he is to be distinguished from all those others who wait patiently for things to line up this or that way.

This is not to say that, he does not recognize the need for perseverance; indeed, he surely had his share of this as he plotted his way through what might have – on first glance- seemed to be seemed so very many high hurdles.

As the record shows; this man persevered; stuck to his guns; sought out and found a worthy strategic partner in the guise of the Chinese Export-Import Bank and has thereafter gone on to victory.

As we now know, “The proposed Cable Beach development would be financed by the Export-Import Bank of China and constructed by the China State Construction Engineering Corporation…”

And clearly, while we reference victory on the part of this man –Sarkis Izmirlian – we are also minded to take note of the fact that, the Bahama Mar project signals good news not only for those who govern, but also for the nation’s Loyal Opposition.

As the record would show, the initial conversations and tentative agreements concerning Baha Mar and the revitalization of the Cable Beach Strip came up for consideration in that time when, the Free National Movement was then in opposition.

In toto, then, the vast majority of our people are also winners in that saga that now involves Sarkis Izmirlian, Baha Mar and the transformation of the tourism product in the Bahamas.

This believer in the Bahamas deserves not only our recognition; but also that of all right-thinking Bahamians.

And so, we salute Sarkis Izmirlian as JCN’s Man of the Year.

December 31, 2010

The Bahama Journal

Bahamas Blog International

This Nation’s Bevy of Challenges

The Bahama Journal Editorial



With this nostrum as opening gambit, we take note of the fact that, for what now seems a fairly long season, the Bahamas seemed to conclusively demonstrate that development in a small island developing country could be successfully driven by foreign direct investment.

And for sure, Bahamians could and did exult in their good fortune by assuring themselves that, these salutary changes had come about due to their own initiatives.

Indeed, there was every indication that, the Bahamas had somehow or the other managed to escape its long history of boom and bust at the economic level.

And so it arose that, they decided to praise the late Sir Stafford L. Sands for being the financial genius behind the so-called miracle of year-round tourism to the Bahamas.

We now know that this was an illusion.

As the same record would attest and confirm: while Sir Stafford was –in truth and in fact – a major player in the development of the tourism industry, other forces – most of them external to the Bahamas- played crucially important roles in this transformative process.

Highest on the list of external forces would be the on-set of the Cuban Revolution and Cuba’s isolation from trade with the United States of America.

It was this external factor that has driven the Bahamian economy over the course of the past fifty years or so.

With this development came that transformation of the Bahamas which allowed the bulk of its people a first opportunity to turn its collective back on a development model predicated on seasonal tourism, niche banking, fishing, farming and other allied occupations.

This development brought with it ancillary political changes – some of which promised Majority Rule and some economic empowerment for those who were heretofore socially excluded and economically marginalized.

While some successes have been scored; there is every indication that some of these now run the real risk of being lost as a consequence of the hard times that now prevail.

In addition, there is every indication that things are set to be difficult for at least the next decade or so.

This situation stands in direct contrast to those days when money was in abundance and when practically everybody who was anybody could make a fairly decent living.

Things are now trending downwards; and so, as things go and grow from bad to worse – Bahamians on either side of the political divide have taken to blaming each other for this nation’s bevy of distresses.

While this ‘game’ might provide entertainment galore for those who are tuned in; we daresay that, this does the nation itself no real good.

For our part, then, we would sincerely suggest that, having grown accustomed to one version of the so-called good life [that is to say, a life driven by easy money] very many Bahamians are today panicking; this coming packaged in with the prospect that hard times might be here to stay.

While we are optimistic as regards our prospects for the long-term; we are today pessimistic for the short-term; this due to the fact that, the Bahamian people are yet to determine what they want and would have as regards real leadership.

In the interim, things threaten to disintegrate into a state akin to chaos.

And of course, this can lead to its own sad denouement in even more social distress.

Here take note that on occasion, we have bemoaned the fact that, the Bahamian people are being routinely failed by their leaders.

Evidence for this failure can be seen in practically every major institution; whether reference is to those who would lead in the field of faith and belief; education; government; the home or at the work place.

In addition, there is no gainsaying the fact that, there are very many Bahamians who are today mired in distress; with some of them teetering on the edge of despair.

And yet there is more bad news; this time around the reference we make has to do with what seems a Bahamian penchant towards dependency and lack of confidence in their own innate ability.

This neatly explains how it arises in case after case that Bahamians are loath to respect their own when they are put in positions of authority and power – thus the pre-eminence they give to foreigners and to most things foreign.

For a season, this way of things surely worked its magic.

But since nothing lasts forever, these balmy days are now receding. As they become history, a new order beckons; this being one where Bahamians will be obliged to work harder, produce more so as to become more self-reliant.

In this regard, we envisage the coming of that day when, the Bahamian people will have a national economy that walks – so to speak- on two legs; with one being foreign and the other Bahamian.

December 29, 2010

The Bahama Journal Editorial

Bahamas Blog International

...the National Congress of Trade Unions (NCTU) plans a major national strike that could possibly have devastating effects on the Bahamian economy

The new year could begin with a national strike
thenassauguardian editorial


Is it possible that while Prime Minister Hubert Ingraham was busy preparing notes for his annual Christmas Address to the nation, members of the National Congress of Trade Unions (NCTU) were busy planning a major national strike that could possibly have devastating effects on the Bahamian economy.

It seems possible.

In fact, on Christmas Eve, executives of the NCTU held a press conference where they not only dismissed the prime minister’s warning about their union’s actions, but they also took the time to point out that a national strike could occur soon.

It’s not the kind of action the prime minister wants, or need at this time.

With the light of hope of an economic recovery on the horizon, the prime minister is looking ahead with optimism for the Bahamian people.

Needless to say, that in spite of all the setbacks which the country and the government have experienced during 2010, for the most part Prime Minister Ingraham and his government appear to be finishing off the year strong.

Of course, the plight of a high crime rate and a record breaking murder rate for 2010 will haunt the prime minister’s 2010 performance. However, some feel that the prime minister has navigated the storms of adversity well.

As 2011 approaches, talks of a national strike by the major unions in the country is not what the prime minister had in mind when he reflected on what lies ahead for his government in the new year.

However, it is something that has to be factored in, because apparently, the NCTU and the BCPOU have no plans of backing down any time soon. As the prime minister is adamant about selling BTC to Cable and Wireless, the unions are just as persistent in their stand to fight against it.

There is a chance that the new year could begin on the rough path for the government of The Bahamas. The stand by both sides could lead a major battle in 2011.

The year 2011 is unofficially the year for campaigning, as both the Free National Movement and the Progressive Liberal Party shift into full gear and prepare for a general election in 2012.

The prime minister would prefer to spend the start and the entire year of 2011 doing the things that needs to be done to ensure his party’s re-election. Having a fight with the country’s major unions is not a part of that agenda.

With just a few days left before 2010 ends and 2011 begins, will the prime minister, the NCTU and BCPOU find some solution to the BTC dilemma and avoid a national strike at the beginning of the year?

As the clock ticks away on the closing of an old year, as far as the NCTU is concerned, it signals only the beginning of what can be expected in 2011 if an amicable solution is not reached.

As far as end of the year and New Year’s resolutions go, one can only wonder what tops the list of resolutions for Prime Minister Ingraham for 2011.

12/28/2010

thenassauguardian editorial

Bahamas Blog Inernational

All Hands on Deck

The Bahama Journal Editorial


Certain high-ranking International Monetary Fund officials are today convinced that, “Although the outlook [for the Bahamas] is fraught with uncertainties and risks, the mission is confident that the resolute adherence to fiscal consolidation and an enabling investment climate will foster a stable macroeconomic environment and support sustained economic growth.”

We concur.

But even as we express our overall agreement with the IMF’s analysis; we are constrained to note that, we should – as a matter of both principle and policy – do all we can as to further empower our people; and to see to it that, growth and development is powered from both the inside and outside.

Such an addition of an endogenous dimension of development to the current policy mix would go a long way to helping Bahamians help each other.

Such a double-barreled approach to national development would – of necessity- push leadership in the direction of seeing to it that our most precious resources- here namely our youth are put to the most productive use possible.

Here our churches, unions, businesses, other civil society agencies – and the government are called to pull together in the interest not only of their membership; but in the interest of all to put the Bahamas on a path to sustainability.

And so, whether the reference made is to tourism, banking or the industrial sector, each and every one of these clearly has a stake in a vibrant, healthy, development-oriented Bahamas.

But just as clearly, we must break with business as usual.

Were we to do so, we would wake to find that, while things are tough; and for sure, while moving forward, things might get even tougher; we are ever optimistic.

We are buoyant not only because we know that, this period of austerity is one where those who stick it out will reap their fair share of rewards; but also because it is precisely in times like these –that is to say, days of creative destruction – when you either sink or swim.

For our part, then, while these are days of tremendous struggle, we are convinced that, the worst is over; and that, in the fullness of time – better days will come.

But even as we note that these so-called better days are ahead; we know it for a fact that, we must –like others in the mix- do our level-best to help make some of these things happen.

And for sure, we are also absolutely convinced that, the time is nigh for all of this nation’s right-thinking Bahamian sons and daughters to cease from their time-tested habit of sweating the small stuff; that is to say, their socially pernicious habit of making too much of the already too-little that divides them.

Happily, while this habit does persist – and might yet continue – we are happy to report that, this country that is ours continues to get kudos for the conservative manner given by all who govern to the economic affairs of this land that is ours.

Some of these kudos routinely come from world agencies such as the International Monetary Fund. In this regard, we now note some of what the IMF has had to say about the management of things in this period when austerity is the word that apparently matters most.

The team met with senior government officials and representatives of the private sector. At the end of the visit, Mr. Gene Leon, head of the IMF mission to the Bahamas, issued the following statement: “The global crisis of 2008-09 had a profound impact on the Bahamian economy. Tourist arrivals declined by 10 percent and foreign direct investment fell by over 30 percent, leading to a sharp contraction in domestic activity and a large rise in unemployment.

“However, lower import prices helped narrow the external current account deficit to about 12.5 percent of GDP; this together with external borrowing and the one-off allocation of Special Drawing Rights helped raise gross international reserves to about 2.5 months of imports, boosting support for the exchange rate peg…”

There was even more. Here we are led to believe that, “… Gross international reserves are projected to increase despite the higher oil prices owing to strong private capital inflows, including from Foreign Direct Investment…”

While this is not to be ranked at the optimal level, we do have some modest reason to be happy that ventures like Baha Mar are on stream.

And as Gene Leon aptly notes, “…Going forward, the authorities have indicated a commitment to maintain prudent macroeconomic policies, including fiscal measures to reduce the rising debt-to-GDP ratio and a monetary policy geared to supporting price stability and the US dollar peg… They also plan to continue with reforms to improve tax administration, increase fiscal responsibility, and transparency.”

Evidently, then, even if things were to turn out as suggested by the IMF; there would still be work [at the endogenous level] that could and should be done by Bahamians.

December 23, 2010

The Bahama Journal Editorial

Bahamas Blog International