Growth beyond normal – The only path for The Bahamas
“Beyond recovery into growth”. A more appropriate theme could not have been chosen for this year’s Bahamas Business Outlook (BBO). What the prime minister and the governor of The Central Bank had to say or ask then was, in my opinion, most instructive, even if at times a lot more was said or asked than the words actually uttered.
A cursory review of subsequent headlines tells an important tale.
Regarding the prime minister’s contribution, the headlines read – “PM to businesses: It’s time to embrace transformative change” and “PM urges businesses: Put Bahamas before profits”.
The message is clear. There is a need for a shift in thinking, a desire for a new, philosophical underpinning to take hold as the urgent need to pursue growth hardens into sharp relief.
In the case of the governor – “Rolle: Brace for inflation, tougher credit access in 2022” and “Pre-COVID output ‘not good enough’”.
The message is clear. The performance of the country before the pandemic is inadequate going forward; it will simply not be good enough to support the sustainable “recovery” needed and certainly would be incapable of facilitating much-desired resiliency, but there are headwinds. How, then, can we move forward? I believe an exploration of the PM’s questions will provide some clues.
This is not a critique of gloom and doom. It is rather a call to action to firstly realize that the problem we all suspect is the problem we actually have and because we have yet to explore and diagnose it fully, what we have seen so far is but a portion of the entire set of challenges.
The country desperately needs to grow. One could argue that this is a rather interesting time for such an argument as growth is near impossible today. Such an argument would only be important if we are wedded to the current state, the current performances, the current strategies, the current thinking and are satisfied with the current outcomes.
It is my view that the most important shift needed, is captured the words of the prime minister.
“A positive, compassionate, national development. One that meets the needs and aspirations of the many and not just the few… [Where we can] increase growth and improve economic justice and dignity for all [in an environment which allows] investors to [profitably] focus on projects which lift up the Bahamian people.”
There is only one way to achieve this and that is through growth together with a broad suite of economic and structural reforms, unprecedented in the country’s history.
Growth for The Bahamas in the near term must confront the obstacles delineated by the governor in his presentation. There is the haunting prospect of a significant impact from imported inflation given the proportion of goods and service the country imports.
The near-term recovery carries with it the deceptive “body back on the job” or “at work” but potential underemployment or downward shifts in income, disruption to personal economies and potentially deep economic scarring.
As the governor aptly pointed out, access to credit will see adverse pressure in 2022 both from institutions’ natural adjustments to the impact of the pandemic on credit portfolios and likely impact from the implementation of the credit bureau. Access to credit holds important influence for economic performance. Appreciating the local propensity for funding consumption via bank credit, is an important development for the country.
Studying the presentations by the PM and governor together is important. On one hand, both are calling for growth but, on the other, in different ways, pointing to the perils to achieving it.
The governor highlights the potential impact of the US Treasury policy shift on interest rates. Any increases will have a direct adverse effect on the 43 percent of the national debt in currency, or at least the portions that are at floating rates.
Loan delinquency, while nowhere near amounts feared in the midst of the pandemic, will be a factor, as will reserves. While stated to be adequate, there must be concerns for a rapid demand in US currency and therefore a draw on reserves, bearing in mind that a significant portion of reserves is borrowed.
With our now “depleted” borrowing capacity, it is certain policymakers are paying close attention to this. Lack of credit may in this regard be a blessing in disguise, from a country perspective.
So, where is the good news, you ask?
Again, it lies in the words of the PM. At the BBO, he asked a series of questions that I believe hold great clues to what is needed to unlock the potential for the future as we grapple with the vagaries of the moment.
If we assume for a moment that the PM was actually laying out a series of positions, having carefully contemplated the state of affairs of the country and decided on the path he wishes to take, we can chip out an important set of policy positions from his question.
The PM asked, “What can you do to support especially persons in the Family Islands who continue to struggle with high levels of poverty and unemployment?” Family Island development and poverty alleviation.
“Are you able to look beyond short-term narrow profit to see possibilities of broader long-term gain?” A more socially responsible business environment.
“How can you help to drive down the cost of living to support the commonwealth and common good?” Arresting the cost of living, especially for the ordinary citizen.
If we assume that the responses to each of these questions by businesses are not to the satisfaction of the PM, or any other reasonable and objective person, then the reason I indicate that they are policy positions becomes readily obvious.
To secure the desired outcomes, the government will have to drive it in, in some way or the other. If we further assume that the PM is completely committed to the idea of “increased growth and improved economic justice and dignity for all”, then clearly his administration will push to cause this to be so.
If one listens closely to the PM, it is not very difficult to conclude that he truly harbors these aspirations. The key challenge faced though is that the answers to these questions will demand facilitation by government and are unlikely to emerge through the simple prompting of the private sector.
Fundamentally, this line of thinking sets the tone for serious collaborative efforts between government and the private sector toward national development.
How will you strive for a more just and inclusive workspace?
How do you plan to ensure your business affords respect and dignity for all workers?
What measures will you take to do away with anti-competitive practices?
The first two questions are clear attempts at moral suasion toward the above-stated objective.
The third though is by any analysis very challenging to be outwardly from the government.
The fact that it is asked, evidences the existence of arrangements in the economy that are demanding reforms.
Anti-competitive rules never emanate from the actors. By their very nature, wherever they exist suggests a willingness to step outside the moral lines for personal gains.
Realizing “growth beyond the normal” that is broad-based and economically equitable will require a definitive policy position supported by a clear and specific legislative agenda.
I believe that these last two questions raised by the PM completes the argument that there is a clear path to growth in the minds of policymakers.
“How can your business contribute to and benefit from this vision,” asked the PM.
“What entrepreneurial opportunities can be explored to produce a more agile, better-educated and ultimately empowered population?”
A part of that vision is infusing culture “at the heart of our tourism offering…to celebrate and market Bahamian culture as the main tourism product”.
This makes sense given the import of the tourism sector to the economy and the influence of culture on travel and hospitality. This however has to be only one part of a broader growth strategy.
Let us go back to all the questions asked and assume that the response from the business sector is at best tepid, as they are likely to be, given that they immediately exert negative pressure on existing and potential profits.
To get the answers, the administration will be left to ask them of itself, reflecting on how they can make them happen, how to become an effective facilitating agent and therefore what policy positions it must settle on and the legislative agenda to be employed to create the shift.
With this in mind, the path ahead will not be easy, but I believe there are great opportunities to be exploited, the attainment of which requires early, deliberate and focused action.
The behaviors the PM is seemingly seeking to change are simply too entrenched and advantageous to those benefiting for there to be any reasonable expectations of voluntary shifts, voluntary changes.
Change, growth and resiliency are the goals. Reforms, investments, growth, effective debt management, “rainy day” savings (for countercyclical spending during downturns) are the formula but this is only possible with direct, deliberate and intentional efforts.
• Hubert Edwards is the principal of Next Level Solutions Limited (NLS), a management consultancy firm. He can be reached at email@example.com. Hubert specializes in governance, risk and compliance (GRC), accounting and finance. NLS provides services in the areas of enterprise risk management, internal audit and policy and procedures development, regulatory consulting, anti-money laundering, accounting and strategic planning. This and other articles are available at www.nlsolutionsbahamas.com.