The last eighteen months have seen unparalleled upheaval in the world markets, with traditional Bahamian trading partners, such as the US and European nations, suffering from economic instability. To help disperse the impact of such fluctuations, The Bahamas has been making efforts to court emerging markets that are proving more robust in the current economic climate.

Leading emerging economies have become increasingly influential in global economic, social and environmental affairs. They also represent the world’s largest potential markets and are the source of much of the planet’s natural and human resources. Increasingly they are home to leading global brands and innovation, particularly in areas such as information technology, showing that they are not only manufacturers and consumers but are able to generate wealth in their own right.

They are also starting to play a critical role in financial services. According to Forbes, “the days when a few leading countries could dictate global financial regulations are over,” given the relative economic health and strong banking systems of “emerging market” nations such as China, India, Russia and Brazil, and of smaller western leaders, such as Canada and Spain.

“Should we choose to ignore the new economic giants, we do so at our peril,” says Wendy Warren, chief executive officer of the Bahamas Financial Services Board (BFSB). “The need to engage with these economic tigers goes well beyond financial services. The key for us, at this stage, is to be able to present a comprehensive picture of The Bahamas as a place for business, pleasure and residence.”

Emerging markets
The term “emerging markets” was coined in the late ‘70s by Antoine van Agtmael, chairman, chief executive officer and a director of Emerging Markets Management LLC and Strategic Investment GroupSM (SIG), as a way to encourage investment in developing nations.

Emerging markets (sometimes used loosely as a replacement for emerging economies) are said to have per capita incomes in the lower-middle range in a global context, but they constitute about 80 per cent of the world’s population and more than 20 per cent of the global economy.

These markets are potentially very profitable, but just casting out blindly in an attempt to land big business would be a reckless waste of limited resources. “You have to seek out how to get the most out of your engagement,” advises Zhivargo Laing, Minister of State in the Ministry of Finance. “You can’t be too wide in spreading your net, otherwise, you may not get the benefit of what it is you’re trying to do. We tend to use existing forums where we have opportunities to have targeted meetings and talk about issues that might be of common interest for us,” Laing continues. “That [might] relate to the signing of investment protection arrangements with China, or having some mutually agreeable trade arrangements with Colombia, or discussing with Brazil matters related to mutual legal assistance treaties.”

Courting China
The government isn’t the only one using existing forums and conferences to advance a Bahamian agenda. In November, the BFSB attended the Annual Wealth Management and Private Banking Asia conference in Shanghai. According to Warren, the event provided “excellent learning opportunities” for the financial services board to “retool” and “refine” the jurisdiction’s offerings.

“This conference in Shanghai [allowed] us to make presentations on various aspects of wealth management and to consider how The Bahamas might respond as a result of developments, either in policy-making (geo-politics), regulations or the client’s needs in terms of wealth creation or transfer,” says Warren. “This information is likely to influence the regulatory, or legal framework, or the manner in which we deliver services from our country.”

The fact that the conference was held in China was also reflective of the new global forces at work. The Free National Movement government officially established a diplomatic relationship with China in 1997. However, China’s investment in The Bahamas really got underway a couple of years earlier when Hutchison Whampoa Ltd–a Chinese company–began to invest heavily in the nation’s second city, Freeport, in Grand Bahama, entering into a 50-50 partnership with Grand Bahama Development Co. The tie-up with the privately owned Bahamian company helped to develop and expand the small Freeport facility that had previously only catered to cruise ships. Dredging and expansion efforts at the port mean that it is now capable of handling the largest container ships in the world.

To date, Hutchison Whampoa has injected investments totalling $1 billion into the island’s economy, inclusive of the Our Lucaya hotels, Grand Bahama Airport Co and Freeport Harbour Co. In 2006 The Bahamas officially opened an embassy in the Chinese capital, Beijing.

In March 2009, Baha Mar Resorts signed a formal agreement with China State Construction Engineering Corporation to construct a multi-billion dollar mega-resort on the Cable Beach strip of New Providence. It also signed a Memorandum of Understanding with the Export-Import Bank of China (China Ex-Im Bank) regarding potential project financing.

Private investments aside, China is presently constructing a $30-million national stadium complex at the Queen Elizabeth Sports Centre–a gift to the Bahamian people from the Chinese government–as well as allowing The Bahamas to borrow $150 million at two per cent interest over 30 years for infrastructural projects.

The bond between the two countries was further strengthened in 2009 with the signing of four bilateral agreements: a revised draft agreement that waived visa requirements for holders of diplomatic passports; a financial and an agricultural Memorandum of Understanding and an agreement on economic and technical cooperation.

Brick by BRIC
China is one of four countries, along with Brazil, Russia and India, that are known collectively as BRIC and are tipped to be wealthier than most of the current major economic powers by 2050. The BRIC thesis suggests China and India will become the world’s dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials.

In terms of continuous trade dialogue with leading emerging economies, China represents the most “established” arrangement, according to Minister Laing. That’s not to say that The Bahamas has ignored the others.

In 2009, The Bahamas and the Republic of India pledged to strengthen their diplomatic relationship in the areas of culture, technology and economic development. That commitment was made when Governor General Arthur Hanna accepted Letters of Commission from India’s High Commissioner to The Bahamas, Mohinder Singh Grover.

The Governor ­General noted that The Bahamas and India shared a wide base of linkages founded on common aspects of history. It was a sentiment shared by the High Commissioner, who pointed to the parliamentary democracy of both countries, Commonwealth membership and common use of the English language. Moreover, India–like The Bahamas–is a member of the Group of 77, Group of 15 and the Non-Alignment Movement.

“As members of the global community with many of the same development challenges, our two countries share the highest aspirations and dedication to the development and protection of our world and societies,” the Governor General said at the time. “The multi-lateral forum in which we both participate brings us together in a joint commitment to ensure that our goals come to fruition.”

Direct contact
Historically, The Bahamas has done “extremely well” in engaging with other nations, according to Gershon Major, chairman of the Chamber of Commerce’s Globalization and Foreign Relations Committee. “We now have to leverage those diplomatic relations into economic benefits,” says Major, who is also the chief executive officer of Mailboxes Etc Caribbean and executive director of the Bahamas Hotel Association. “We can use our relationships in the diplomatic arena to improve business linkages and business-to-business discussions in improving trade between The Bahamas and these emerging economies.”

According to Warren, recognizing the importance of direct contact is why she encourages Bahamian professionals to join them when the BFSB attends conferences such as the Alternative Investment Summit in Brazil.

“These are excellent networking opportunities. We are able to make new contacts, to encourage them to contact service providers in The Bahamas and of course to visit the country,” says Warren. “The larger the representative group from The Bahamas, the more readily appreciated is our message that?The Bahamas has the capability and capacity through a modern legal framework, an importantly diverse base of financial services providers … to meet client needs, today and tomorrow.”

At the diplomatic level, The Bahamas engages with Latin America through forums like the Inter-American Development Bank’s International Economic Forum Latin America and the Caribbean.

In 2009, the event gathered European, Latin American and Caribbean ministers, heads of central banks, the European Commission and international organizations, as well as high-level representatives from the business and financial communities. The forum highlighted economic and fiscal policies for development in Latin America and the Caribbean and coordinated mechanisms and programs to strengthen inter-regional business partnerships.

Despite The Bahamas’ engagements with emerging markets, don’t expect the prominence of US-Bahamian relations to be diminished in any way.

“It’s not a choice between the US and others,” concludes Laing. “It’s really a matter of exploring economic opportunities wherever they exist.”