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Island Insights | Commercial Enterprises Bill in the Family Islands

In October 2017, the introduction of the Commercial Enterprises Bill came under heavy scrutiny among the Bahamian public, who weighed in on how beneficial the legislation would be to Bahamians versus foreign investors. In general, the bill is expected to improve the country’s ease of doing business by liberalizing the granting of work permits via a Commercial Enterprises Facilitation Unit and provide a reasonable minimum threshold for startup investments. This, in conjunction with efforts by the Central Bank of The Bahamas to relax exchange control arrangements, allows for potential investors to fast-track the process of opening small, medium and large businesses in some areas such as international trade, captive insurance, nanotechnology and computer programming. It is important to understand how beneficial this piece of legislation would be for the entire Bahamas. However, the government should not only pay close attention to the impact of this bill on New Providence and Grand Bahama; the bill should be crafted in a way where certain amendments are made for each of the Family Islands.

Thresholds

Since supply and demand is different across each island, the government should consider the health of each family island economy and process the level of value added from this legislation. For instance, the minimum investment requirement to be considered a commercial enterprise is $250,000 for non-Bahamians. For Bahamians and joint ventures between foreigners and Bahamians, there is no investment required.

While the quarter of a million investment may be little to no money for some investors, he or she also has to consider the extrinsic value that investment would have on a particular island. If an investor decides to invest in Grand Bahama or New Providence, it could be argued that $250,000 is a reasonable amount given that these islands have a fair amount of developed human capital, infrastructure, utilities and ad- hoc legislation in place to facilitate expansions. Of course, these pros are followed by cons given that the cost of labor is relatively high throughout The Bahamas, the standard of living is also high and the costs of imports can pose a concern. However, there is also a parity concern regarding the investment amount for each island. Would it be fair for an investor to pay $250,000 if they decide to invest in Mayaguana or Inagua? It depends on the investor. Some investors may not care about the minimal cost to invest but others may be deferred to do so after assessing the island’s conditions and the potential it has to offer. On the other hand, it is important to point out that each island has a unique potential or established industry whether it lies in eco-tourism, boating, industrial or conservation projects. Therefore, $250,000 could be a fair amount if that industry is well-established and booming on a particular family island.

However, costs for goods and services are higher, for the most part, on Family Islands. It would then boil down to the pros and cons for the potential investor. For example, if an investor would like to open a state-of-the-art boutique health and wellness facility for visitors in San Salvador, they would need to weigh in on variables such as airlift demand, airport conditions, room inventory, access to supplies and materials, cost of transportation and cost of labor. All of these aspects would be at a higher cost in San Salvador versus New Providence.

Growth

While this bill should exert many micro-economic benefits, it should also ultimately lead to economic growth for The Bahamas. In order to achieve such results, a significant amount of research should be performed to rather understand and make aware of the challenges faced among the economies of each inhabited island of The Bahamas. For instance, the startup of an Ease of Doing Business Committee (EDBC), as proposed by the government, should provide research into the current state of ease of doing business across all islands. This research should then help to fine tune the different industries in the Family Islands that need to be revamped, revisited or established. However, with this lack of research, potential investors are put at a risk in terms of the survival of a tech-driven company or any of the other industries listed in the bill.

Competitive advantage or disadvantage

One of the concerns that stood out was if Bahamians would be able to fairly compete with their foreign counter parts in the same industries. Bahamian businesses, particularly those on the Family Islands, are already faced with challenges such as high energy, labor and transportation costs. But a foreign company that has the ability to perform well despite these challenges, may be able to provide a better good or service in the same area. In the Family Islands, however, this challenge could in itself become an advantage to those residents living there. For instance, if an investor would like to open a technology firm in one of the islands, it is unlikely that there is much competition in that field already. But, the economic impact of this new venture would be significant and help with unemployment levels. In addition, it could also incentivize and allow local investors to also find ways to enter the same field; therefore, providing room for competition to flourish in a new market. This can help with the proliferation of private partnerships or public-private partnerships in order to help address lingering issues that business owners and residents are faced with.

Conclusion

In conclusion, the bill should overall help to benefit all islands of The Bahamas. However, it cannot function without comprehensive research being done on the current business climate of these Family Islands. Also, consideration should be given to a lower threshold for investors wanting to start companies in the Family Islands. While the $250,000, may be too low for foreign investors, it may still be too high for potential Bahamian investors when considering the costs of goods and services on Family Islands. The bill should also allow for a clause where a foreign entity is committed to develop human capital by assigning a larger percentage of required Bahamians to be employed within that company on a Family Island. Overall, the bill has the potential to exert a vast amount of positive externalities for The Bahamas once it is properly monitored and executed.

• Roderick A. Simms II is an advocate for sustainable Family Islands growth and development. Email: RASII@ME.com.

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