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IDB: Don’t use public funds to create pre-disaster Abaco, GB

The government is being cautioned against using public funds to reproduce pre-disaster situations on the islands of Grand Bahama and Abaco, as rebuilding efforts continue one year after Hurricane Dorian.

The recommendation was made in a just-released extensive report by the Inter-American Development Bank (IDB) on the “Assessment of the Effects and Impacts of Hurricane Dorian in The Bahamas”.

When Hurricane Dorian ravaged those islands in September 2019, it caused estimated damage of $2.5 billion, of which nine percent is public and 91 percent private, according to the IDB.

“Considering the magnitude of the government’s efforts required for reconstruction, it is vital that public funds are not used to reproduce pre-disaster situations, such as rebuilding communities on the shoreline or in flood-prone areas. Moreover, special administrative procedures to facilitate a procurement process of necessary goods and materials for emergency support should be considered,” the report states.

“Allowing temporary and exceptional flexibility in the rules and procedures for emergency assistance would facilitate, for example, the usage of contingent lines of credit that usually have a limited time for execution. In addition, funds acquired from international institutions must consider a disaster risk management component, so that these investments and public debt are properly protected.”

Abaco suffered 87 percent of the damage caused by Dorian, while Grand Bahama suffered 13 percent.

The IDB notes that losses were sustained primarily in the private sector, estimated at $717.3 million, which accounted for 84 percent of the total.

It is for that reason that the IDB recommends heightened insurance promotion for not only private residences, but also small businesses.

“The purchase of insurance for public sector infrastructure should be further considered and the culture of insurance should be promoted. Financial protection should be established, starting with new public works. For this, it is important to conduct negotiations with private insurance companies to include costs that the government would incur when buying this service. This policy is followed in other countries, such as Ecuador, where the purchase of insurance for public infrastructure is mandatory,” the IDB report states.

Following interviews with the Bahamas Insurance Association (BIA), the IDB deduced that a lack of insurance in small businesses is particularly acute in The Bahamas. From that assessment, the IDB has recommended the removal of value-added tax (VAT) on small business insurance.

“While most large business were well-insured, many small businesses and micro-enterprises were not insured or were underinsured. As insurance is a key factor in the financial protection pillar, efforts should be made to increase insurance penetration, both for property and loss of business. In 2018, the government removed the VAT requirement from homeowners’ insurance; something similar can be done for small businesses and microenterprises,” the report states.

“While discussion with the Bahamas Insurance Association revealed that this measure has not yet significantly increased insurance penetration among homeowners, witnessing the level of devastation left by Hurricane Dorian may influence both homeowners and small business owners to increase their coverage. Another suggestion that arose in discussions was the possibility of government subsidizing insurance for homeowners and small businesses. While this would increase the government’s annual expenditure, it may reduce the total relief expenditure in the event of another disaster. Besides direct subsidies, the government could also promote business associations and support their requests for group insurance and rates.”

In addition to structural protection, the IDB highly recommends the compilation of a comprehensive registry of micro, small and medium-sized enterprises in the country.

“Information about the sector, location, size and other characteristics of these companies would allow for better public interventions, especially support for retrofitting and reconstruction; and access to credit,” the report states.

“A comprehensive registry should also contribute to designing formalization strategies. Local enterprises should also be part of the recovery and reconstruction efforts, as they can provide products and services necessary to prepare and respond to the emergency. The “Green Response” initiative of the Association of Caribbean States promotes the use of green materials to respond to emergencies, which could be developed and provided by local suppliers.”

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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