Uncharted waters

For some time now, Bahamians have realized that the Bahamian economy of old has not been working for them.

Under the weight of increased competition, falling customer service and operating standards, and international regulations, our top two industries — tourism and financial services — do not produce the kind of economic benefit they did in the past.

As I have pointed to before, the failing old economy’s reality has been evident for decades.

Once again, attention should be given to the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) report on the possible ramifications of World Trade Organization (WTO) accession.

That report explained that the Bahamian tourism sector has, “[Become] increasingly uncompetitive because [The Bahamas] is a high-cost destination and facing competition from other tourist markets that are in close proximity to the US… The problem is compounded by the trend that has emerged of a marked shift towards increases in cruise ship arrivals as opposed to stop-over tourists.”

Today, as we contend with the public health and economic crises that are the by-products of the COVID-19 global pandemic, the truth of our economy’s underdevelopment has become even more apparent.

Just last week, the Inter-American Development Bank (IDB) warned that given the rising number of cases in the United States, our primary tourism market, future travel to tourism-dependent nations in the Caribbean through 2021 could remain 40 to 75 percent below 2019 levels.

As it relates to The Bahamas specifically, “The pandemic has resulted in a major fall in tourism arrivals since March 2020. Total tourism arrivals contracted 61.9 percent on a year-to-date basis as of August, compared to a 13.2 percent increase in the same period of 2019, while total room nights sold fell by 70.5 percent in August 2020 compared to August 2019,” the IDB report stated.

Now more than ever, the government and the private sector should be looking at a wholesale, structural transformation of the Bahamian economy that centers Bahamians as business owners and skilled workers.

However, it seems as if our leaders’ only strategy is to remain hopeful that the tourism industry will return to pre-pandemic levels.

Unfortunately, this “wait and see” approach is not a strategy at all.

As deadly and destructive as the coronavirus pandemic has been, it also presents an opportunity for deep and lasting transformation.

If approached strategically, this transformation can free the talent, knowledge, and skills of Bahamians from the narrowly focused and failing economic model we currently have, opening up possibilities beyond our borders.

For example, one opportunity that I believe we should be pursuing right now, even while in the middle of our current crisis, is expanding service exports to economies worldwide.

The evidence suggests that by focusing on service exports specifically, we can diversify, stabilize, and grow the Bahamian economy while expanding ownership and job prospects for Bahamians.

When we hear about trade or Bahamian exports, we almost always only hear about the sale of physical goods. This approach to trade is outdated and does not align with our economy’s true potential or global trends in trade.

According to the IMF, services currently account for 50 percent of world income and 70 percent of global employment.

Services exports account for nearly one-fourth of total exports and have come to play a central role in the global economy, thanks to advances in technology.

Services are also the fastest-growing type of exports, expanding at an average annual rate of about 6.5 percent. And, this consistent growth is not only because of the export of traditional services.

Technology-enabled services like business services, computer and information services, financial services, and intellectual property are leading the way.

This expansion is expected to continue with the growth of e-commerce, the mushrooming middle-class in emerging markets, and ever-accelerating technological advancements.

The fact is that as a developing country, The Bahamas is already behind the curve when it comes to focusing on service exports.

Since 1990, service exports from developing countries have grown tenfold, and at twice the rate of service exports from advanced economies. Because of this growth, developing countries’ share in the service export market increased from 3 percent in 1970 to almost 20 percent in 2014.

Evidence suggests that this trend in service export growth has been good for developing countries, specifically.

Increased service exports provide opportunities for new growth sources, helping to raise productivity and job prospects, especially in emerging and developing economies.

A focus on trade in services can create opportunities for labor reallocation and increased job creation.

Furthermore, preliminary evidence suggests that countries that experience higher growth in service exports also experience faster job growth on average.

Most importantly, and especially in the current economic environment, trade in services has been more resilient to external shocks and financial crises than the trade in goods.

Moreover, service exports from developing countries have generally been more resilient than those from even advanced economies.

Given these facts, why is it that we have not prioritized service exports as part of a broader national trade strategy?

What services can Bahamians export to the rest of the world?

Are there other countries that have focused on service exports, and how have they benefited?

What might a service exports trade strategy look like for The Bahamas?

As we all consider what should be next for the Bahamian economy, over a series of articles, I will explore these questions, including suggesting a strategy for expanding service exports and equipping Bahamians to take advantage of this expansion.

• Sebas Bastian is the chief executive officer of Island Luck.

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