Grand Bahama’s Chamber of Commerce president, Kevin Seymour, lists 10 issues that he insists must be addressed by the government in 2016 as they continue to present economic challenges to this developing nation.
Seymour, returning president for the Grand Bahama Chamber of Commerce (GBCC) shared with The Freeport News his views on the implementation of Value Added Taxes (VAT) last year and what needs to be dealt with in order to reset the country’s growth trajectory.
“Last year, 2015, started out with great promise with the government’s introduction of VAT on January 1. Whilst the jury is still out regarding the extent of the economic hardship inflicted by VAT on lower income wage earners, this tax alone is expected to raise some $550 million in tax revenues for the calendar year ending December 31, 2015, well ahead of initial estimates. What remains unclear however and requires greater clarification, is the extent to which the Central Government is remaining faithful to its previously stated commitment of fiscal consolidation and expenditure rationalization in the use of these new taxes,” Seymour stated.
The GBCC president acknowledged that notwithstanding the potential for relief provided by these VAT revenues, the Country’s economic growth trajectory was undisputedly forestalled when the developer of the mega resort and casino, Baha Mar filed for bankruptcy protection in late June 2015. “Whilst this disappointing and anticlimactic saga continues to be played out in the courts, the insidious ripple effects of this economic faux pas will no doubt continue to be a drag on the economy during 2016, as a number of over leveraged local contractors connected to Baha Mar, face the real prospect of not being able to meet their obligations as they fall due; unless they are paid the amounts currently owed by the bankrupt entity by way of liquidating dividends. This uncertainty in turn is expected to continue to drive-up unemployment, which according to the Department of Statistics’ most recent survey, stand at 14.8 percent nationally,” Seymour explained.
The Chamber president furthered that it is therefore not surprising that as a result of the aforementioned negative economic factors, in early December the IMF (International Monetary Fund) for the second time during 2015, revised its 2016 GDP growth forecast for The Bahamas downward, with economic growth for 2016 now estimated at a tepid 1.5 percent, from an initial high of 2.8 percent.
“To put this in context, in order to halve existing unemployment and absorb new workforce entrants, the IMF estimates that the average annual GDP (Gross Domestic Product) growth for The Bahamas for the next five years needs to be in the region of 7.5 percent,” Seymour noted.
The Chamber’s leader was asked by The Freeport News what actions he feels need to be taken by the Government during 2016 to arrest increasing unemployment and reset the Country’s growth trajectory with a view to remaining faithful to its commitment of fiscal consolidation and expenditure rationalization.
Seymour listed the 10 issues, which in his view, need to be urgently addressed by Government:
Escalating Crime – A new crime fighting strategy is required in light of the record increase in violent crimes during 2015. Residents, business owners and visitors are rightly concerned for their safety. Moreover, the viability of the nation’s number one industry is being threatened as a result.
Unchecked Borrowing and Spending – According to The Central Bank of The Bahamas’ June 2015 Quarterly Report, the Country’s national debt grew by more than $580 million, pushing the nation’s total indebtedness to more than $6 billion and the Country’s debt-to-GDP ratio to a whopping 75 percent, well in excess of 60 percent which is generally recognized as the prudential limit for developing countries. In early September 2015, S&P (Standard and Poor’s Financial Services Company) downgraded the Country’s foreign and local currency credit rating from BBB/A-2 to BBB/A-3; primarily due to the economic shock to the national economy caused by the failed Baha Mar project. It is important to note that credit rating downgrades make it more difficult and more expensive for the Government to borrow money. In order to avoid further weakening in the economy and to mitigate the possibility of overspending and provide greater transparency, the Government should move with haste to enact fiscal rules which set caps on spending over the intermediate to long term.
Overwhelmed Judiciary – More courts and resources needed. Currently, it takes too long for Court matters to be heard; backlog of commercial matters posing a real threat to the Nation’s competitiveness.
Illegal Immigration – These non-tax paying individuals continue to be a drag on the Country’s tax revenues and social infrastructure. More aggressive actions and deterrents required.
Lack of Economic Diversity – At present the Country is over reliant on tourism, banking and financial services; I suggest that the Government place greater emphasis on the promotion of, shipping and value-added logistics, medical tourism, light manufacturing, large scale farming and agribusiness, and the development, through collaboration with notable institutions of higher learning specialized research facilities.
The Island of Grand Bahama is well suited for such industries and can easily facilitate most, if not all of the aforementioned industries. The first step however requires a favorable decision by the Government with respect to the expiring exemptions under the Hawksbill Creek Agreement. These exemptions should be extended for at least another 20 years.
Increased Competition – With more countries seeking to attract foreign direct investors, relevant government agencies such as the Bahamas Investment Authority, National Economic Council, Immigration Department and The Central Bank of The Bahamas, need to become more agile and responsive, with quicker turnaround times for the processing of foreign direct investment applications, work permit and banking facilities approvals respectively. At the same time, safeguards must be put in place to ensure that taxes are kept at relatively low levels.
Lack of Cheap and Reliable Energy – Nationwide the cost of electricity is too high and in some cases cost prohibitive, even with the reduction of oil prices to circa U.S. $37/barrel; greater emphasis needs to be placed on the upgrade of BEC’s main generation plant and related infrastructure and the use of alternative and more cost effective green energy solutions, such as solar.
Deteriorating Infrastructure – Sea and airports, roads, clinics and primary and secondary schools in the family islands need to be upgraded and maintained through the creative use of public-private partnerships.
Bloated and Inefficient Civil Service – Steps need to be immediately taken to increase automation in areas involving high transaction volume and to rationalize salaries and emoluments through reduced head-count. Based on a recently released Inter-American Development Bank (IDB) report for the years 2009-2013, The Bahamas scored a rating of 0.9 (optimal rating 5) when measured by the IDB’s PRODEV Evaluation Tool (PET). PET measures the capacity of government institutions to manage the public sector efficiently – Drastic improvement required here!
Wastage in the Delivery of Public Health Care Services – According to recently released statistics by a Government Consultant, the estimated level of financial wastage in the Country’s public health care system stands at 40 percent. This core concern needs to be addressed and remediated prior to proceeding with the proposed implementation of the Government’s proposed National Health Insurance Program.
Seymour concluded by stating that undoubtedly the year 2016 will continue to present economic challenges for our developing nation; however in order to mitigate these challenges, the Government must aggressively and courageously address the above issues even though some may prove politically unpopular.