Bahamas, The

Bureau of Economic and Business Affairs
July 5, 2016

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Executive SummaryShare    

The Bahamas maintains a stable environment for investment and demonstrates a long tradition of parliamentary democracy, respect for the rule of law and a well-developed legal system, and security of life and personal property. U.S. companies find that The Bahamas' proximity to the United States, common English language, and the exposure to U.S. media and culture contribute to Bahamian consumers having general familiarity and positive attitudes towards U.S. goods and services. The Bahamas conducts approximately 85% of its international trade with the United States.

The Bahamian economy remains heavily dependent on tourism and financial services, although the government has made efforts to encourage diversification, particularly in agriculture and light manufacturing. The Bahamas relies primarily on imports from the United States to satisfy its food needs for local and tourist consumption. More than six million tourists visit the country annually.

In the financial services sector, The Bahamas is experiencing growth in investment funds and has seen significant increases in investments from Brazil in particular. According to the Bahamas Securities Commission, the increase is due to the development and approval of SMART Funds -- risk-adjusted, low-cost investment structures.

The Bahamas Investment Authority actively promotes The Bahamas' liberal tax environment and freedom from many types of taxes, including capital gains, inheritance, and corporate or personal income taxes. The Bahamas continues to attract significant foreign direct investment (FDI) from various parts of the world. These investments are primarily in the tourism sector and range from multi-billion dollar resort developments to millon dollar homes on the major islands of the archipelago.

The major challenges to investment in the country include the relatively high cost and uncertain reliability of electricity, high unemployment combined with a limited pool of skilled labor, cumbersome and sometimes opaque administrative requirements, and an escalating crime rate. In addition, certain sectors of the economy are reserved under the National Investment Policy for Bahamian only investment.

U.S. and Bahamian companies alike report that the resolution of business disputes often takes years, and collection of amounts due can be difficult even after court judgments. Companies also report that the approval process for foreign direct investments and work permits can be cumbersome and time-consuming. The government of the Commonwealth of The Bahamas (GCOB or the Government) asserts that the majority of foreign investment applications are processed quickly and without significant issues. Applications that are subject to more extensive review, or those that do not fall within the National Investment Policy, may take longer to approve given the Government’s desire to balance local versus foreign investment interests. Some U.S. and Bahamian companies also complain that the tender process for public contracts is not consistent and that it is difficult to obtain information on the status of bids. GCOB officials have told the Embassy that the Government is preparing legislation to address concerns related to its investment policy and Public Procurement Regime.

On January 1, 2015, the Government introduced a 7.5% Value Added Tax (VAT) on most goods and services, a measure designed to strengthen the fiscal balance sheet. Implementation of the tax and other fiscal measures including efforts to enhance revenue administration has yielded positive results and the Government has reduced its deficit from $539M three years ago to $141M in this fiscal year (2016). The Government continues its efforts to develop a central revenue agency and modernize its fiscal administration.

In March 2016, Moody’s Investor Service confirmed The Bahamas’ issuer and senior unsecured ratings at Baa2 with a stable outlook. (https://www.moodys.com) In its January 2016 report, Standard and Poor’s (S&P) (http://standardandpoors.com) affirmed the country as investment grade and maintained the sovereign credit rating at BBB-/A-3. (http://standardandpoors.com) In its April 15, 2016 update on The Bahamas, S&P continued its negative outlook but maintained the country’s investment grade credit rating.

With over a billion USD in new resort development committed and the potential for over 5,000 permanent jobs, the Bahamian government continues to assert that benefits from foreign investment-led activities are imminent. The Bahamas Central Bank, in its January-June 2015 Financial Stability report estimated the 2015 GDP growth rate at 1.2%.

The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organization (WTO). The government has committed to accelerating its efforts to become a member and has taken steps to remove barriers to international trade and facilitate foreign trade and investment. In 2015, the Government enacted new and amended existing laws to provide enhanced protection of intellectual property rights. The new laws are comprehensive but have not been implemented and still require the approval of supporting regulations. While these are vital to economic growth, the government likely will face internal and external challenges to successfully implementing its plans to become more fully integrated into the the global trading system.

Table 1

Measure

Year

Index or Rank

Website Address

TI Corruption Perceptions index

2014

24 of 174

transparency.org/cpi2014/results

World Bank’s Doing Business Report “Ease of Doing Business”

2016

106 of 189

doingbusiness.org/rankings

Global Innovation Index

2015

Not listed

globalinnovationindex.org/content/page/data-analysis

U.S. FDI in partner country ($M USD, stock positions)

2014

USD 32,200 million

www.bea.gov

World Bank GNI per capita

2014

USD 20,980 mount

data.worldbank.org/indicator/NY.GNP.PCAP.CD


1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Attitude toward Foreign Direct Investment

The government encourages foreign direct investment (FDI), particularly in the tourism sector, but reserves certain sectors of the economy for Bahamian investors. With the exception of those sectors reserved exclusively for Bahamian investment (which are listed at www.bahamas.gov.bs/bia), the GCOB does not give preferential treatment to investors based on nationality, and investors have equal access to incentives which include land grants, tax concessions, and direct marketing and budgetary support. The government provides guidelines for investments through its National Investment Policy (NIP), which is administered by The Bahamas Investment Authority (BIA) in the Office of the Prime Minister. Large foreign investment projects, particularly those that do fit within the NIP, require approval by the National Economic Council (NEC) or Cabinet. This process allows for environmental and socio-political input into the review and approval of applications for investment. GCOB officials have informed the Embassy that the Government is considering proposals to codify the National Investment Policy into law.

Other Investment Policy Reviews

The Bahamas is ranked 106th in terms of the ease of doing business in the 2016 World Bank Doing Business Report. (http://doingbusiness.org/rankings.) The report reflects a significant decline in the ease of starting a business and underscored historically problematic issues related to property registration, electricity, access to credit, and protecting minority investors. On the positive side, it highlighted improvements in the areas of tax collection and trading across borders. The Government is making efforts to improve its ranking and asserts that the recent drop is because of perceived improvements in the ease of doing business in other countries, rather than any increased difficulty in doing business in The Bahamas. To address the decline in ranking, the Government has undertaken a full review of business and investment processes in conjunction with development of its National Development Plan.

According to the 2016 Heritage Foundation Index of Economic Freedom, The Bahamas ranks 31st in the world in economic freedom. (http://www.heritage.org/index/ranking.) Its overall score increased by 2.2 points, with declines in labor freedom and monetary freedom offsetting improvements in government spending, fiscal freedom, business freedom, trade freedom, and investment freedom. The report asserts that corruption remains a problem and that, while the overall regulatory system is conducive to entrepreneurial activity, protectionism, bureaucracy, and limited access to credit continue to hold back the emergence of a more dynamic private sector.

Laws/Regulations on Foreign Direct Investment

The Bahamas’ legal system is based on English common law with the highest court being the Privy Council in London. Contracts are legally enforced through the courts; there is no written contract or commercial law. Foreign nationals are afforded full rights in Bahamian legal proceedings.

Foreign direct investment is encouraged through industry-specific legislation, which often provides exemptions for Customs duties or other incentives to investment. Examples of such incentives include the Hotels Encouragement Act, the Export Manufacturing Industries Encouragement Act, and the Industries Encouragement Act. In 2015, the Government enacted new and amended laws to provide enhanced protection of intellectual property rights; however, these laws are not yet in full force pending adoption of implementing regulations. Registration of securities is regulated by the Securities Commission of The Bahamas (www.scb.gov.bs) and the Bahamas maintains an international securities exchange (BISX) (www.bisxbahamas.com).

American investors should be aware that they may not be able to rely on the provisions of U.S. Chapter 11 bankruptcy law to protect assets in The Bahamas. In September 2015, a U.S. Bankruptcy Court judge dismissed a bankruptcy case in the United States involving the owner and developer of the stalled $3.5 billion Baha Mar resort complex in Nassau, citing a finding by a Bahamian Supreme Court judge that the project’s stakeholders would expect that insolvency proceedings would take place in The Bahamas.

Business Registration

The Bahamas Investment Authority (BIA) is the first point of contact for foreign investors and operates as the principal investment promotion agency for The Bahamas. The BIA serves as a “one-stop shop” to assist investors in navigating the approvals process through various departments and agencies of the Government to ensure that requirements are met before the investment application is submitted to the National Economic Council or Cabinet for approval. (www.bahamas.gov.bs/bia.) The services of the BIA are available to all investors that meet the minimum requirement of an investment exceeding $500,000.

The BIA's Project Proposal Guidelines list the type of information and documentation that investors should provide when submitting proposals, consistent with the National Investment Policy. The government generally views more favorably proposals that prove adequate financing, demonstrate investment experience, create local employment and support overall economic development.

The BIA, with the support of the Ministry of Tourism, engages in regional and international conferences and trade shows to promote investment in the country. It also maintains functional cooperation arrangements with the Caribbean Association of Investment Promotion Agencies (CAIPA) and benefits from grant funding from the EU Development Fund.

Industrial Promotion

The National Investment Policy encourages and, for certain industries, provides incentives for foreign direct investment in the following priority sectors: tourist resorts, amenities and attractions; condominiums; time share and second home developments; marinas; information and data processing services; assembly industries; high-tech services; shipping; ship repair and other services; light manufacturing for export; agro-industries; food processing; aquaculture; banking and other financial services; captive insurance; aircraft and yachting services; pharmaceuticals; petro-chemicals; mining; and medical tourism centers. These opportunities are widely advertised in the marketing material supported by the Government, promotional material developed by the BIA, and on a range of internet resources.

The GCOB has indicated strong interest in attracting FDI to non-traditional sectors, including renewable energy and agriculture.

Limits on Foreign Control and Right to Private Ownership and Establishment

The National Investment Policy explicitly reserves certain sectors of the economy exclusively for Bahamian investors. These sectors are listed on the BIA website at www.bahamas.gov.bs/bia. The government has made exceptions to this policy on a case-by-case basis but generally these sectors should be avoided as there is no guarantee of market access or right of establishment. The embassy is aware of several cases in which investors have been concerned about lengthy delays in the approvals process. International investors are permitted to engage in the ‘wholesale’ distribution of any product they produce locally.

Beyond the areas reserved for Bahamian participation in the National Investment Policy, rights to private ownership and establishment are maintained and respected. With the assistance of a local attorney, investors can create the following types of businesses: sole proprietorship, limited or general partnership, joint stock company, or a subsidiary of a foreign company. The most popular all-purpose vehicles for foreign investors are the International Business Company (IBC) and the Limited Duration Company (LDC). Both benefit from income, capital gains, gift, estate, inheritance, and succession tax exemptions.

There is no automatic right of establishment and all business engagements are subject to licensing and approval by the relevant authorities but, once approved, foreign and domestic private entities may engage in business activity without impediment. They may also freely establish, acquire, and dispose of interests in their business enterprises. All foreign investment is subject to review and approval by the BIA and may be subject to further review by the National Economic Council or Cabinet.

Privatization Program

In recent years, the Government has shown a preference for private management of state owned enterprises over equity interest and full scale divestment or liberalization. It continues to entertain proposals for upgrading services and is in discussions on several public-private partnership agreements. Foreign companies and investors have been permitted to participate in privatization programs and to bid on management contracts. In 2016, the Bahamian government completed an RFP process and signed a management services agreement with an American company to manage the country’s electric utility company.

Screening of FDI

Decision-making in The Bahamas is highly centralized, and all investments by foreign nationals are subject to approval by the National Economic Council (NEC). Investment proposals must include economic and environmental impact assessments. NEC decisions are final although it is sometimes possible for an investor to request reconsideration of a denial, particularly in cases where a proposal has been revised and strengthened. The government asserts that the majority of investment applications are processed quickly and without delay. Some U.S. companies, however, have reported that the review and approval process is cumbersome and time-consuming, and that often pending decisions linger for long periods making it difficult to make investment decisions. There is no timeline for approval and in a few instances proposals have been pending for more than a year. The review by a political body also provides an opportunity for political influence to weigh in the analysis of a business proposal.

Competition Law

With the exception of the Utilities Regulation and Competition Authority (URCA), which regulates the telecommunications sector, there are no regulations governing competition or antitrust policy. Recent decisions by the Government will expand the mandate and powers of URCA to include the regulation of electricity. This is a positive development and suggests the medium term potential for competition in the sector and the eventual approval of independent power producers. Exclusive rights for fixed periods to provide services have been granted by contract in some sectors. These legally approved private monopolies are being discontinued.

2. Conversion and Transfer PoliciesShare    

Foreign Exchange

The Bahamas maintains a fixed exchange rate policy which pegs the Bahamian dollar one-to-one with the U.S. dollar. The legal basis for the policy is the Exchange Control Act of 1974 and Exchange Control Regulations. Individuals and corporations resident in The Bahamas are subject to capital or exchange controls which govern all foreign currency transactions between residents and non-residents.

The exchange controls are not considered an impediment to foreign investment in the country. All non-resident investors in The Bahamas are required to register with the Central Bank, and non-resident investors who finance their projects substantially from foreign currency transferred into The Bahamas are permitted to convert and repatriate profits and capital gains freely. In practice, this has been done with minimal bureaucratic formalities and without limitations on the inflows or outflows of funds.

In the administration of exchange controls, the Central Bank does not withhold approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, generally delegates this authority to major commercial banks and selected trust companies. International and local commercial banks, which are registered by the Central Bank as ‘Authorized Dealers,’ may administer and conduct foreign currency transactions with residents of The Bahamas. Similarly, private banks and trust companies which are designated as ‘Authorized Agents’ are permitted to act as depositories for foreign securities of residents and to conduct securities transactions for non-resident companies under their management.
Foreign exchange transactions that fall outside of the delegated authority are approved directly by the Central Bank and include loans, dividends, issues and transfer of shares, travel facilities, and investment currency. These are generally routine and addressed at the Exchange Control Counter at the Central Bank or facilitated by correspondence with the Governor of the Central Bank.

Investment in The Bahamas will likely remain subject to exchange controls as policy makers maintain that this is an effective tool to preserve the country’s external reserves, safeguard its capacity to meet its balance of payments, and maintain dollar parity with the United States.

Remittance Policies

There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign curency-denominated bank accounts and repatriate those funds freely. In addition, with Central Bank approval, a foreign investor may open an account denominated in Bahamian currency to be used in paying local expenses.

The Bahamas is a member of the Caribbean Financial Action Task Force (CFATF). Its most recent peer review evaluation can be found at https://www.cfatf-gafic.org/index.php/documents/cfatf-mutual-evaluation-reports/the-bahamas-1.

3. Expropriation and CompensationShare    

Property rights are protected under Article 27 of The Bahamian Constitution, which prohibits the deprivation of property without prompt and adequate compensation. There have been compulsory acquisitions of property for public use, but in all instances reported there was satisfactory compensation at fair market value. There is no evidence that the GCOB has ever expropriated a business, and it remains unlikely that this will be an instrument of government policy.

4. Dispute SettlementShare    

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

The Bahamian legal system is based on English common law and foreign nationals are afforded full rights in Bahamian legal proceedings. Contracts are legally enforced through the courts; there is no written contract or commercial law.

The judiciary is independent and allegations of government interference with the system are rare. The judiciary is appointed by the Governor-General, and the Attorney General is the government's chief legal advisor and has responsibility for public prosecutions. The Bahamas is a member of the British Commonwealth and uses the Privy Council in London as the final court of appeal. The country also contributes financially to the operations of the Caribbean Court of Justice, and has announced its intention to develop itself as a center for international arbitration.

Judgments by British Courts and selected Commonwealth countries can be registered and enforced in The Bahamas under the Reciprocal Enforcement of Judgments Act. Court judgments from other countries, including those of the United States, must be litigated in the local courts and are subject to all Bahamian legal requirements.

The Industrial Tribunal comprises three members appointed by the Governor-General acting on the advice of the Judicial and Legal Service Commission. The Tribunal has the power to hear and determine trade disputes, register industrial agreements, hear and determine matters relating to the registration of such agreements, make orders or awards, and award compensation on complaints brought and proved before the Tribunal.

Property disputes can be challenging, sometimes lasting several years in the Bahamian court system. Some purchasers have reported problems obtaining clear title to property, either because the seller had no legal right to convey, or due to claims to ownership that arose after a purchase was made. Investors complain that these matters are difficult to resolve, and that, even after a court decision has been rendered in their favor, they face difficulty in collecting or enforcing the court judgments.

The Embassy is aware of several complaints about local attorneys, primarily involving real estate transactions, which have resulted in significant losses to American investors. Referrals to the Bahamas Bar Association and its Ethics Committee for appropriate disciplinary action in these matters often go unanswered.

Additional information on the Bahamian Court System is available at http://nassau.usembassy.gov/bahamianlegaloverview2.html

Bankruptcy

Companies are regularly liquidated (voluntarily or involuntarily) according to the Companies Act. Liquidations are routinely published in accordance with the legislation. Creditors of bankrupt debtors and liquidated companies participate in the distribution of the bankrupt debtor’s or liquidated company’s assets according to statute. As noted above, U.S. investors should be aware that they cannot rely on U.S. Chapter 11 bankruptcy law provisions to protect assets located in The Bahamas.

Investment Disputes

Investment disputes in The Bahamas that directly involve the Bahamian government are rare. The Bahamas is not a signatory to a bilateral international trade agreement with a developed dispute settlement mechanism and, therefore, disputes must be settled within the judicial system or subject to international arbitration.

International Arbitration

The Bahamas has been a member of the International Center for the Settlement of Investment Disputes since 1995 and is also a member of the Multilateral Investment Guarantee Agency. This agency insures investors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries. The Bahamas became a member state of the Permanent Court of Arbitration in The Hague, effective June 13, 2016.

Order 66 of the Rules of the Bahamian Supreme Court provides rules for arbitration proceedings. The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards entered into force for The Bahamas on March 20, 2007. This convention also provides for the enforcement of agreements for commercial disputes. Under the convention, courts of a contracting state can enforce such an agreement by referring the parties to arbitration. There are no restrictions on foreign investors negotiating arbitration provisions in private agreements.

The government has announced its intention to establish The Bahamas as a center for international arbitration cases, but a body has yet to be formally established.

ICSID Convention and New York Convention

The Bahamas is a member of both the International Centre on the Settlement of Investment Disputes (ICSID) Convention (adopted 1965) and the New York Convention (adopted 1958). The Arbitration Act of 2009 enacted the New York Convention and provides a legal framework.

Duration of Dispute Resolution – Local Courts

Courts in The Bahamas face a persistent backlog of cases. Civil cases, on average, can take five years to resolve. Foreign investors have frequently complained that local defendants are able to delay payment on Bahamian civil judgments due to the lengthy judicial process, which often involves delays during multiple levels of appeal. In addition, enforcement or collection of court judgments can be difficult. Corporate plaintiffs should engage a local attorney to represent their interests in court. The 2016 World Bank Report on Ease of Doing Business (www.doingbusiness.org) ranked The Bahamas at 60 (out of 189 economies) on the ease of enforcing contracts.

5. Performance Requirements and Investment IncentivesShare    

WTO/TRIMS

The Bahamas is an observer in the WTO and is not a party to the agreement on Trade Related Investment Measures (TRIMS). It has signed the Economic Partnership Agreement (EPA) with the countries of the Caribbean Forum of African, Caribbean, and Pacific (ACP) States (CARIFORUM) and the European Union (EU). GCOB officials have informed the Embassy that the Government is actively involved in developing measures to implement the terms of the EPA that will include measures exceeding the WTO/TRIMS obligations.

Investment Incentives

Tax relief is the most significant investment incentive in The Bahamas. Currently the government does not impose taxes on income, estates, or inheritances in the country, but instead raises revenue from real property tax, import duties, value added tax, and various permit and license fees. Other incentives for investment include waivers on import duties, property tax abatement, and, in some cases, land grants and extended leases for private development.

These taxes are even further reduced for investments in selected ‘Family Islands’ and in the Freeport special economic zone which is privately owned and managed by the Grand Bahama Port Authority. (www.gbpa.org). While the terms of the overarching agreement for Freeport guarantee that the special economic zone can continue in existence until 2054, certain provisions of the agreement relating to business licensing and property tax have more limited terms and, as of March 2016, are under review during short term extensions. In the case of economically depressed family islands and those recently impacted by Hurricane Joaquin (2015), the Government maintains duty free concessions for building materials and other inputs.

Industry and region-specific incentives are offered to any qualifying individual and available under various laws. Further information on this legislation is available at http://www.bahamas.gov.bs.

Research and Development

Foreign firms are not restricted from participating in government subsidized research and development programs.

Performance Requirements

The Bahamas maintains formal performance requirements for investments, including proof of adequate and legitimate sources of funding and economic and environmental impact assessments. Such requirements are negotiated on a project-by-project basis, and, particularly in the case of larger developments, are written into “heads of agreement,” between the government and the investor. It is noteworthy that these agreements also include government obligations to the investor.

There is no policy of forced localization or a requirement for technology transfers, but there is official encouragement to direct benefits to local producers and the transfer of skills to the local labor market. This engagement is a part of the negotiations with the Government and it is not uncommon for an investor to gain greater concessions where there is a direct benefit to local business, job creation, or an investment that supports the transfer of skills and technology.

Work permits are facilitated for key foreign employees as part of the investment approval process, but government policy generally favors the employment of Bahamian nationals. Fees for work permits are not tied to administrative costs and have been developed as a revenue measure and, depending on the category of employee, can cost up to USD 12,500 annually. Work permits for less senior employees and those without specialized skills are generally more difficult to obtain. According to Government officials, The Bahamas currently has 24,000 work permit holders, with a large majority considered as unskilled. Growing unemployment, however, makes it increasingly difficult to get a work permit and new approvals are subject to an extensive and potentially lengthy review process. Most permits are issued by the Immigration Board, but in high profile or sensitive positions Cabinet approval may be required.

Data Storage

There is no requirement for access to source codes, or a requirement for local data storage. There are a growing number of data storage facilities in The Bahamas and new entrants are offering services to both regional and international companies.

6. Protection of Property RightsShare    

Real Property

The Bahamas’ score for ease of “registering property” in the World Bank’s 2016 Doing Business Report is 183 out of 189 countries. (http://doingbusiness.org/rankings) The World Bank report lists the cost of registering property in The Bahamas as 12.2% of property value, as compared with 6.1% for Latin America and The Caribbean and 4.2% for OECD high income countries. The time to complete the registration process is listed as 122 days compared to 63 and 21.8, respectively.

The various forms of land ownership in The Bahamas have their beginnings in English law and can include crown land, commonage land, and generational land. The legal system facilitates the investor’s secured interest in both mobile and immobile property and is recognized and enforced in law. Mortgages in real property and security interests in personal property are recorded with the Registrar General of The Bahamas. The government reduced stamp taxes in the country in 2014, making it easier to register property. The tax now ranges between 4-10 percent of the value of conveyances.

The Embassy has received reports of problems obtaining clear title to property, either because the seller had no legal right to convey, or due to claims to ownership that arose after a purchase was made.

Intellectual Property Rights

The Bahamian government is taking steps to strengthen Intellectual Property Rights (IPR) protection as part of its WTO accession process. To this end, in 2015 the Government passed IPR legislation which seeks to amend or add to the existing IPR regime. These new laws cover patents, trademarks, copyrights, integrated circuits, false trade descriptions, protection of new plant varieties, and geographical indications. As of March 2016, implementing regulations have not yet been promulgated.

The Government anticipates that the new legislation, once implemented, will bring The Bahamas into compliance with the terms of the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement as well as its obligations under the Economic Partnership Agreement.

The Bahamas is a member of the World Intellectual Property Organization (WIPO) but has not ratified the WIPO Internet treaties. The Bahamas is also signatory to the following intellectual property conventions and agreements:

  • Berne Convention for the Protection of Literary and Artistic Works
  • Paris Convention for the Protection of Industrial Property
  • Universal Copyright Convention (UCC)
  • Convention establishing the World Intellectual Property Organization (WIPO)
  • Convention on the means of prohibiting and preventing the illicit import, export and transfer of ownership of cultural property

The Bahamas is not listed as a country of concern in the U.S. Trade Representative (USTR)’s 2014 Special 301 Report.

The Bahamas’ intellectual property registry is maintained by the Department of the Registrar General.

Resources for Rights Holders

Contact at U.S. Embassy Nassau:

Economic/Commercial Section
P.O. Box N-8197
U.S Embassy Nassau
New Providence, The Bahamas
Telephone: (242) 322-1181
Email: CommercialNassau@state.gov

Contact information for the Bahamas Bar Association:

P. O. Box N 4632
Nassau, New Providence, The Bahamas
Telephone: (242) 326-3276; Fax: (242) 328-4615
Email: bba@batelnet.bs

See also: http://nassau.usembassy.gov/bahamaslawyerslist.html.

Contact for the Registrar General’s Department:

Registrar General’s Department
Shirley House, 50 Shirley Street
P.O. Box N-532, Nassau, NP, The Bahamas
Telephone (242) 397-9143
Email: registrargeneral@bahamas.gov.bs, Phone (242) 397-9143

7. Transparency of the Regulatory SystemShare    

Some U.S. companies have alleged a lack of transparency and undue political influence with government bidding and procurement processes. There is no requirement to engage in open public tenders, and award decisions are not subject to review. These processes are governed by the Public Procurement Act and the Financial Administration and Audit Act of 1973. A Government minister can approve any purchase up to $50,000; purchases of equal to or greater than $50,000, but less than $250,000 must be approved by the tenders board, chaired by the Minister of Finance; and amounts exceeding $250,000 require Cabinet approval.

The Government has implemented procurement procedures in the management of funds from international lending agencies, but has not yet implemented best international practices for the management of national finances. In several highly publicized requests for proposal, the Government has not met self imposed deadlines and contract renewals have been pending for 12 months or more.

Successive governments sometimes review contracts executed by previous administrations, although government officials assert that the majority of contracts are not reviewed or altered in any way. However, the Embassy is aware of instances where contracts have been cancelled. Other areas of concern noted by companies include the discretionary issuance of approvals and licenses from various government authorities. Companies complain that in some instances these approval processes can be opaque with no possibility for review or appeal of a decision.

The Bahamian government has publicly committed to modernizing and reforming government procurement. The review of the procurement process is being financed by the Inter-American Development Bank, and will include the transition to program-based budgeting and the creation of an integrated financial management system to collect statistics, oversee the procurement process, and perform evaluation and monitoring functions.

Public companies listed on the Bahamas International Securities Exchange (BISX) are required to prepare annual and quarterly financial statements in conformity with International Financial Reporting Standards (IRFS).

Draft legislation, in general, is subject to a public consultation process.

The Bahamas has recently established a national standards bureau and is receiving technical assistance from the Bureau of Standards of Jamaica, the Caribbean Regional Organization for Quality and Standards, and the European Union Development Fund.

Despite calls by some Bahamian government officials to permit international law firms to establish business operations in The Bahamas, particularly to serve the securities and financial services sectors, the bar association to date has resisted a further opening of the legal profession in the country, citing immigration concerns. (This is distinct from the practice of permitting international lawyers to engage in litigation in special cases or to practice in areas where expertise is lacking.)

According to Transparency International’s 2014 Corruption Perceptions Index (http://www.transparency.org/country#BHS), The Bahamas ranked 24 out of 175 countries with a score of 71 out of 100. The country is not listed in the 2015 Index.

8. Efficient Capital Markets and Portfolio InvestmentShare    

The free flow of capital to markets is encouraged by the GCOB and supported by the functions of the Central Bank of the Bahamas. The Bahamas is an Article VIII member of the IMF and has agreed not to place restrictions on currency transactions, such as payments for imports. The Bahamas Securities Commission regulates the activities of investment funds, securities and capital markets. (www.scb.gov.bs)

There are no legal limitations on foreigners’ access to the domestic credit market, and credit is available on market terms through commercial banks. Bahamian-foreign joint venture businesses are encouraged by the government and are eligible for financing both through commercial banks and the Bahamas Development Bank (http://www.bahamasdevelopmentbank.com/). The government has also announced plans to establish a credit bureau to operate as a public-private partnership between the Central Bank and the Financial Services Board. Once operational, the credit bureau is expected to address local access to credit.

Money and Banking System, Hostile Takeovers

The financial sector of The Bahamas is highly developed and dynamic, providing a wide array of services by several types of financial intermediaries. The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, Inspector of Financial and Corporate Service Providers, and the Compliance Commission are the regulatory bodies of the financial sector which consists of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions, commercial banks, and the state-owned Bank of The Bahamas – which dominate financial intermediation. The Securities Commission also regulates The Bahamas International Securities Exchange (BISX), and a Central Bank supervision department ensures that banks comply with capitalization and reporting requirements.

According to the Central Bank report for January-June 2015, the Bahamian financial sector, which represented approximately 25% of the country’s GDP in 2015, encompasses over 400 –banks and non-banks (such as insurance companies and credit unions) and employs in excess of 6,500 individuals. (www.centralbankbahamas.com). As of June 2015, there were 252 licensed banks and trust companies, 84 of which were offshore banks. In the domestic banking sector, four of the eight onshore commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Limited banking services are available on some of the less populated islands.

Foreign exchange controls prohibit international banks from investing in domestic securities, and they generally are not permitted to hold Bahamian dollar balances except for the purpose of faciliting the payment of local expenses. Foreign investors seeking to open a non-Bahamian currency-designated account in one of the commercial banks in the country must first register and receive approval from the Central Bank. (www.centralbankbahamas.com)

9. Competition from State-Owned EnterprisesShare    

State-Owned Enterprises (SOEs) are active in the utilities and services sectors with several notable monopolies still maintained by the GCOB. There is a published list of SOEs available on www.bahamas.gov.bs under a listing for Government Corporations and Statutory Agencies. There have been discussions about the privatization of SOE’s, but movement has been slow and recent policy decisions suggest a preference for private management of the remaining SOE’s. Some of the SOEs include:

  • Bahamasair Holdings Ltd. (National Flag Carrier)
  • Bank of The Bahamas
  • Bahamas Electricity Corporation (BEC)
  • Water and Sewerage Corporation
  • Broadcasting Corporation of The Bahamas (ZNS)
  • Nassau Flight Services
  • Hotel Corporation of The Bahamas

The Water and Sewerage Corporation (WSC) and the Bahamas Electricity Corporation (BEC) are the largest public corporations in The Bahamas. The government has permitted limited exceptions to these monopolies, and has provided licenses to private suppliers of electrical and water and sewerage services. These licenses have been issued for private real estate developments or in locations in which there is limited government capacity to own and operate the utility. An additional exception was made for the city of Freeport on the island of Grand Bahama which has its own licensing authority for the provision of electricity, water, and sanitation services.

The Bahamas telecommunications sector has been partially privatized and, in April 2011, the government sold 51 percent of the Bahamas Telecommunications Company (BTC) to Cable & Wireless (DBA LIME), with the government retaining ownership of 49 percent of the company. In 2014, at the initiative of the government, Cable & Wireless agreed to transfer two percent of its shares to a trust to fund social programs, but board and management control remains with the investors. In October 2015, Cable Bahamas Limited (CBL) won the bid to become the country’s second cellular services provider, opening the way for competition in the cellular market. As of April 2016, CBL is in the process of building new infrastructure to support this new service. The government has announced plans to issue a third cellular license by the end of 2016. Other areas in the telecommunications sector have been liberalized and are regulated by the Bahamas Utilities Regulation and Competition Authority (URCA).

The Government has announced its intention to find a strategic partner for national flag carrier Bahamasair, although there appears to be no immediate plans for the divestment of the company. Privately owned airlines providing service to the various markets have consistently complained of the market distortions created by Bahamasair, claiming that the national airline uses state funds to undercut fares. The airline has operated at a loss for more than two decades.

Bahamas Electricity Corporation (BEC) recently transferred assets to Bahamas Power and Light (BPL), a newly formed wholly-owned subsidiary and, once refinanced, its debt will be removed from the Government’s contingent liabilities. In February 2016, the Government signed a 5-year management contract with PowerSecure International, Inc. (subsequently acquired in March 2016 by Southern Company) to take over management of BPL. Amendments to the Electricity Act that took effect in March 2015 opened the door to grid-tied small-scale alternative power generation systems and power credits, although the application process and certain technical requirements have not yet been defined.

The Bahamas is not a party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO), but efforts to implement the Economic Partnership Agreement with the European Union may address similar concerns.

OECD Guidelines on Corporate Governance of SOEs

Corporate governance of SOEs generally includes a board of directors chaired by senior politicians, and board members are drawn from the Chambers of Commerce, trade unions, governing party members, and broader civil society. Some board memberships are paid and most are not subject to public vetting. Oversight is under the purview of a member of the Cabinet. Historically, there have been criticisms that these corporations have been used to employ party supporters and, with few exceptions, SOEs have not demonstrated sustained profitability. The board of newly-created BPL includes foreign representatives and technical experts.

Sovereign Wealth Funds

The government’s oil exploration legislation, tabled in December 2014, will establish the legislative framework for a sovereign wealth fund managed by the Central Bank.

10. Responsible Business ConductShare    

There is a growing awareness of, and commitment to Responsible Business Conduct (RBC) by local and foreign companies operating in The Bahamas. International companies have led RBC-related initiatives, including educational programs directed at capacity-building for specific industries, the maintenance of public spaces, and financial and technical assistance to charitable organizations.

The government encourages and enforces responsible business conduct through legislation. For example, in 2014, The Bahamas enacted a law protecting individuals with disabilities from discrimination in the workplace. A Consumer Protection Act was enacted in 2006; citizens can lodge complaints at consumer affairs offices on the different islands. Labor laws prohibit discrimination in employment based on race, creed, sex, marital status, political opinion, age, HIV status, or disability, but not in regard to language, sexual orientation and/or gender identity, or social status. In addition, revisions to the Government’s National Development Plan will include a focus on social policy and development.

The government has released draft legislation for public review and comment that would amend or repeal sections of the Subdivisions and Planning Act, which regulates construction-type development in the country. Some non-governmental organizations claim that the amendments, if enacted, could lead to reduced opportunities for citizen consultation on projects, and unregulated development.

The Bahamas adopted the UN Guiding Principles on Business and Human Rights in 2011 (http://investmentpolicyhub.unctad.org/IIA/CountryIris/14). It is not an adherent to the OECD Guidelines for Multinational Enterprises.

11. Political ViolenceShare    

The Bahamas has no history of politically motivated violence and, barring a few incidents leading up to the last general elections, the political process is violence-free and transparent. These incidents were relatively minor and included damage to political party installations, signage, billboards, and a few reported altercations between opposing party members.

12. CorruptionShare    

The government has laws to combat corruption of and by public officials but they appear to be inconsistently applied. Reports of corruption, including allegations of widespread patronage and the routine directing of contracts to party supporters and benefactors, have plagued the political system for decades.

In The Bahamas, giving a bribe to, or accepting a bribe from, a government official is a criminal act under the Prevention of Bribery Act. The penalty under this act is a fine of up to $10,000, or a maximum prison term of four years, or both. In October 2015, the government charged a former state energy-company board member under the Prevention of Bribery Act, the first significant case brought under the Act since 1989.

The procurement process is particularly susceptible to corruption, as it is opaque, contains no requirement to engage in open public tenders, and does not allow award decisions to be reviewed.

The Public Disclosure Act requires senior public officials, including senators and members of parliament, to declare their assets, income, and liabilities on an annual basis. The government publishes a summary of the individual declarations. There is no independent verification of the submitted data and the rate of annual submission is weak, except in election years.

As of April 2016, the government is engaged in public consultation regarding implementation of Freedom of Information legislation. The government has publicly committed to enacting new Freedom of Information Act legislation by the end of 2016.

According to Transparency International’s 2014 Corruption Perceptions Index, The Bahamas ranked 24/175 with a score of 71/100. The country is not listed in the 2015 index. (www.transparency.org.)

The Government of the Bahamas does not, as a matter of government policy, encourage or facilitate illicit drug production or distribution, nor is it involved in laundering the proceeds of the sale of illicit drugs. No charges of drug-related corruption were filed against government officials in 2015.

The Bahamas has been a State Party to the Inter-American Convention against Corruption since signing in 1998 (ratified in 2000), and a party to the Mechanism for Follow-Up on the Implementation of the Inter-American Convention against Corruption (MESICIC) since June 2001.

U.S. firms operating in The Bahamas are generally aware of the 1977 U.S. Foreign Corrupt Practices Act and have not been accused of breaches of this law.

The Central Bank requires licensed financial institutions to appoint a compliance officer and a money laundering reporting officer. (www.centralbankbahamas.com)

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Bahamas has acceded to the U.N. Convention Against Corruption. It is not a member of the OECD Convention on Combating Bribery.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption is:

Office of the Attorney General
John F. Kennedy Drive
Nassau, The Bahamas
TEL: (242) 322-1141
EMAIL: attorneygeneral@bahamas.gov.bs

13. Bilateral Investment AgreementsShare    

There is no Bilateral Investment Treaty (BIT) between The Bahamas and the United States. The Bahamas was designated a beneficiary of the Caribbean Basin Initiative (CBI) and the Caribbean Basin Economic Recovery Act (CBERA) and has established a Tax Information Exchange Agreement with the United States—one of twenty-nine that The Bahamas has ratified. The agreement establishes The Bahamas as a qualified jurisdiction and allows U.S.-registered companies to qualify for tax credits for conventions and related corporate expenses in The Bahamas.

The benefits under CBI provide products manufactured in The Bahamas that meet defined rules of origin duty-free and quota-free entry into the United States, such as the country’s largest export to the United States, polystyrene beads used in the production of Styrofoam products. The Bahamas continues to use this access as an incentive for investments in manufacturing in the domestic economy. Additionally, The Bahamas has applied for benefits under the Caribbean Basin Trade Partnership Act (CBTPA), but as of March 2016 had not yet met all of the requirements for its application to be ratified.

The Bahamas also signed an Inter-Governmental Agreement under the Foreign Account Tax Compliance Act (FATCA) in November 2014 which entered into force in September 2015.

The CARIFORUM – EU Economic Partnership Agreement was concluded between CARIFORUM states (CARICOM and the Dominican Republic) and the European Union and its member states in 2008. The agreement promotes trade-related developments in areas such as competition, intellectual property, public procurement, the environment, and protection of personal data.

CARIBCAN is an economic and trade development assistance program for Commonwealth Caribbean countries in which Canada provides duty free and quota free access to its national market for the majority of products which originate in Commonwealth Caribbean Countries. The agreement is currently being renegotiated. Canada and The Bahamas agreed in principle to preserve duty-free market access until a new agreement was reached.

Bilateral Taxation Treaties

There is no bilateral taxation treaty between The Bahamas and the United States. For other agreements affecting taxation, please see above.

14. OPIC and Other Investment Insurance ProgramsShare    

As part of the Caribbean Energy Security Initiative, OPIC is working with countries in the region to assist efforts to improve energy security. The Bahamas is also associated with the Multilateral Investment Guarantee Agency of the World Bank, which insures investors against currency transfer restrictions, expropriation, war, civil disturbances and breach of contract by member countries.

15. LaborShare    

The Bahamian labor force is generally considered to be well-educated by international standards, although foreign nationals may be sought after for specialized skills. Wage rates, while lower than in the United States, are higher than elsewhere in the region. Well-qualified accountants and secretaries, and others with skills appropriate to the financial services industry, command a premium wage while wages for low-skilled labor, mostly found in hotels and restaurants, hover around the minimum rate. The minimum wage for private sector employees is USD 5.25 per hour ($210 per week).

Unemployment continues to be a signficant problem. The Central Bank reported an unemployment rate of 15.0% for March 2016.

The Fair Labor Standards Act requires at least one 24-hour rest period per week, paid annual vacations, and employer contributions to National Insurance (Social Security). The Act also requires overtime pay (time and a half) for hours in excess of 40 or on public holidays. A 1988 law provides for maternity leave and the right to re-employment after childbirth. TheMinimum Labor Standards Act, including the Employment Act, Health and Safety at Work Act, Industrial Tribunal and Trade Disputes Act, and the Trade Union and Labor Relations Act were passed in 2001 and in early 2002.

The Bahamian Constitution specifically grants labor unions the right to free assembly and association. These rights are exercised extensively, particularly in state-owned industries and in the hotel industry (where 80 percent of the employees are unionized). The right to strike is governed under the Industrial Relations Act, which requires a simple majority of union members to vote in favor of a strike before it can commence. The Ministry of Labor oversees strike votes. Although prolonged strikes are still rare, work slow-downs and protests occur, and workers often use labor actions to force management to act on issues of concern to them. Labor unions and others involved in disputes with foreign-owned enterprises sometimes use the fact of foreign ownership as a lever to gain popular support for their demands.

The Immigration Act requires foreigners to obtain work permits before they can legitimately be employed in The Bahamas. The GCOB permits foreign employees to work in a technical, supervisory or managerial capacity, provided no similarly qualified Bahamians are available for the job. Foreign business owners are expected to train as many of their Bahamian employees as possible to eventually fill technical and managerial positions. Work permit fees range from USD 500 to USD 12,500 per year.

16. Foreign Trade Zones/Free Ports/Trade FacilitationShare    

The 1955 Hawksbill Creek Agreement established Freeport on the island of Grand Bahama. Freeport is the country's second-largest city and has developed as a free trade and economic development zone under private ownership and control of the Grand Bahama Port Authority (GBPA).

Firms licensed by the GBPA to operate within the 230-square mile free trade zone are granted the right to import equipment and materials duty-free and benefit from the exemption from real property taxes and business license fees ordinarily payable to the central government. However, there are fees imposed by the GBPA for businesses operating in Freeport that are not subject to national regulation and, in some instances, licensees report that the process lacks transparency.

The Government extended the Hawksbill Creek property tax exemptions to 2016 and duty exemptions to 2054, but withdrew real property tax exemptions for foreign individuals and corporations. Renegotiation of this aspect of the agreement between the government and the Port Authority began in early 2015 and, as of March 2016, is continuing, with statements by senior officials indicating that the Government may seek concessions to offset its public expenses within the free trade zone.

Additional information is available at www.gbpa.com.

17. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical source

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2016

$5.7 billion

2014

$8,760 million

www.unctadstat.unctad.org

http://tinyurl.com/MinFinance

Foreign Direct Investment (inflows)

N/A

N/A

2014

$266.4 million

http://databank.worldbank.org/data/reports.aspx?
source=2&country=BHS&series=&period
=

U.S. FDI in partner country ($M USD, stock positions)

N/A

N/A

2014

$32,200 million

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

http://www.bea.gov/international/
factsheet/factsheet.cfm?Area=250

Host country’s FDI in the United States ($M USD, stock positions)

N/A

N/A

2015

$597.0 million

http://www.bea.gov/scb/pdf/2015/07%20
July/0715_direct_investment_positions.pdf

Total inbound stock of FDI as % host GDP

N/A

N/A

2014

3%

N/A

 

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

18. Contact for More InformationShare    

Economic/Commercial Section
P.O. Box N-8197
U.S Embassy Nassau
New Providence, The Bahamas
Telephone: (242) 322-1181
Email: CommercialNassau@state.gov