|The Bahamas Investor Magazine
June 26, 2018
June 26, 2018
Roderick A Simms II
Over recent years, The Bahamas has been leading the region when it comes to foreign direct investment (FDI). Construction of the Baha Mar multibillion- dollar megaresort on Cable Beach has been a major driver for this, boosting FDI flows to a peak of $1.6 billion in 2014. Now that the resort is open for business, foreign investment has dropped, presenting opportunities for new investors to fill the gap.
The World Investment Report 2017, published by the United Nations Conference on Trade and Development (UNCTAD), showed that The Bahamas attracted $522 million in FDI in 2016, second only to Jamaica in the region. Part of the reason for this success has been the incentives, concessions and regulatory reform that has led to an increasingly investor friendly environment. These incentives and concessions exist for doing business in The Bahamas, not only in the tourism hotel sector, but equally in respect of manufacturing and agricultural developments, as well as establishing timeshare facilities.
Other incentives include the availability of access to land owned by the government; concessions on customs duties (or border taxes) on approved raw materials, equipment and building supplies; as well as exemptions from real property taxes for defined periods. The Bahamas has no restrictions on current account transactions, nor any restrictions on the repatriation of profits.
To the benefit of foreign investors, The Bahamas’ government takes a favourable approach to FDI. Feasible projects large and small often move swiftly through the Bahamas Investment Authority’s (BIA) approval process. Typically, larger scale projects get green-lit quicker, but the medium-sized and small investors also get strong support from the government.
Financial services is one area where foreign investment is particularly prominent, with many fiduciary services companies experienced in setting up International Business Companies (IBCs) in The Bahamas. While there are many large and small private banking groups that can service international clients, there is often a level of insight and familiarity that Bahamian firms will have over big, international players.
The Central Bank of The Bahamas and BIA are crucial entities to the formation of businesses in The Bahamas. Both are well structured bodies with a wealth of experience and both typically move expeditiously on projects presented by foreign direct investors.
For many foreign investors, capacity and proximity are extremely important factors in a jurisdiction, and luckily The Bahamas is not lacking in either of those arenas.
Areas of opportunity
There is no denying the potential for innovative projects on The Bahamas’ Family Islands for the savvy, creative investor. Growing sectors such as technology and renewable energy, as well as ecotourism, are all areas that are currently underutilized in The Bahamas.
Deputy Prime Minister and Minister of Finance Peter Turnquest says that the low hanging fruit in The Bahamas continues to be tourism, saying that high-end boutique resorts that take advantage of natural resources, the natural environment and local people, are a sure-fire investment opportunity.
Many developers over the years have envisioned large-scale tourism “anchor projects” as the potential foundation for economic growth on the Family Islands, but there is considerable untapped potential in the tourism industry through smaller scale developments. Ecotourism is frequently cited by international tourism organizations as the fastest growing sector of the industry as tourists are increasingly drawn to off-the-grid and environmentally friendly boutique resorts. New low-impact resort offerings could revitalize tourism on some of the islands.
Home to beautiful beaches, unique wildlife, and world-class fishing, many of the Family Islands have yet to fully reach their development potential. Although there are some investment hurdles commonly found throughout the Family Islands, they present many exciting opportunities for Bahamian and international pioneers seeking a virtual blank slate for projects across several growing industries. However, simply providing rooms and basic services will not be enough to attract visitors, as local hoteliers already operating on the islands can attest. Compelling excursions and guide companies are just a part of the holistic improvements of the Family Islands’ tourism offerings.
With this in mind, there are exciting opportunities for investors and entrepreneurs looking to set up businesses in areas such as flats-fishing and birdwatching. Charter flats fishing and deep-sea fishing continue to be lucrative for Bahamian businesses. In 2014, the Bahamian government partnered with the Inter-American Development Bank to bolster the sustainability of the country’s fly fishing sector through a multi-step programme that will ultimately streamline the legislation governing the industry while also providing training and certification guidelines for a new generation of guides.
Furthermore, birdwatching is a particularly fast-growing sector of the tourism industry, with the local market having been recently bolstered by government support. The Bahamas’ Ministry of Tourism, along with the Bahamas National Trust and the US- based National Audubon Society, launched a new birdwatching initiative in January 2017 designed to train Bahamian tour guides throughout the Family Islands. These low-impact eco- friendly initiatives provide opportunities for investors looking to capitalize on a growing trend.
Although innovative local companies are making significant headway in niche tech fields such as cloud computing and app development, in the main, technology is still in its nascent stage in The Bahamas. Realizing the potential for growth in this field, efforts have been made to develop the industry and encourage investment in new IT initiatives.
A recent tech summit held on Grand Bahama attracted speakers and delegates from such tech giants as Google and Hewlett Packard. The idea behind organizing the conference being that Freeport has the potential to become a technology hub.
Speaking ahead of the event, Minister of State for Grand Bahama in the Office of the Prime Minister Kwasi Thompson said: “The technology industry can become a third pillar of our economy [after tourism and financial services]. The Bahamas is really well positioned by our proximity to the US and we have the infrastructure through our fibre optic cable. We also have skilled Bahamians–some at home and some abroad–to make it all possible.”
However, the minister was realistic about the challenges facing The Bahamas to make this happen, saying that it would require changes in legislation, special tax incentives, business license exemptions and even concessions that will attract data centres and major technology manufacturers. “We must create an environment with local entrepreneurs and innovators, where they can flourish alongside companies from abroad,” he said. “If you are a major international tech company, we want you in Grand Bahama. If you are a Bahamian and you want to set up a tech company, we want you in Grand Bahama. This is a call to all industry stakeholders locally and internationally.”
Another area for potential investment is renewable energy. Many countries in the Caribbean region are net importers of energy and projects such as the Caribbean Renewable Energy Forum are looking to reduce this reliance and develop sustainable, eco-friendly energy production methods.
This year will see one of the region’s biggest conferences, the Caribbean Energy Conference, come to The Bahamas. The conclave will look at available resources and current and planned wind, solar, geothermal, and biomass projects.
In his speech to the House of Assembly following the governor general’s Speech from the Throne last year, Prime Minister Dr Hubert Minnis said that The Bahamas was building the foundation to put in place “the expansion of the use of solar and renewable energy.”
The cost of importing energy has been a major hinderance to developments in industry and manufacturing in The Bahamas. However, Minister Turnquest believes that this will change as The Bahamas moves steadily towards a greater introduction of renewable energy and there may be opportunities to allay the concerns regarding the cost of energy.
As The Bahamas’ government begins to create a friendlier investment environment for Bahamians and foreign investors, the tide could begin to turn on the frequency of investments in the medium-term across all industries. And while some sectors of the economy are reserved for Bahamian investment and development, there is unlimited potential for large and small investments on many of the Bahamian islands.
For many investors looking for a stable and equitable economy this levelling of the playing field by government could be an incentive to invest. At the very least, it is a testament to the continued stability of the country’s government.