The Commonwealth of The Bahamas is a 100,000 square miles archipelago in the Atlantic Ocean just 50 miles from Florida’s east coast. The country maintains a stable environment for investment with a long tradition of parliamentary democracy, respect for the rule of law, and a well-developed legal system. U.S. companies find that The Bahamas’ proximity to the United States, common English language, and exposure to U.S. media and culture contribute to Bahamian consumers having general familiarity with and positive attitudes towards U.S. goods and services. The Bahamas is a high-income developed country with a GDP per capita of over USD 20,568 (2016) and conducts more than 85 percent of its international trade with the United States. The Free National Movement (FNM) government elected in May 2017 has benefitted from a strengthening economy with 1.3 percent growth in 2017, leading the IMF to conclude that the economy had ‘turned a corner.’ Projections are that the economy will grow by 2.5 percent by the end of 2018. The Bahamian economy is heavily dependent on tourism and financial services and these sectors have traditionally attracted the majority of foreign direct investment. Tourism contributes over 50 percent of the country’s GDP, and employs just over half of the workforce. The Bahamas relies primarily on imports from the United States to satisfy its fuel and food needs for local and tourist consumption. More than six million, mostly American, tourists visit the country annually. U.S. exports in 2017 to The Bahamas exceeded USD 2 billion, resulting in a trade surplus of USD 1.7 billion in the United States’ favor.
The Bahamas’ maintains an open investment climate and actively promotes a liberal tax environment and freedom from many types of taxes, including capital gains, inheritance, and corporate or personal income taxes. The Bahamas does not offer export subsidies, engage in trade-distorting practices, or maintain a local content requirement. The country continues to attract foreign direct investment (FDI) from various parts of the world and has recently benefitted from significant investments in the tourism sector from international companies based in China. Investments from the United States are also primarily in the tourism sector and range from services to billion-dollar resort developments to million-dollar homes on the major islands of the archipelago. One drawback to the sector is the high cost of energy, which averages four times higher than in the United States – primarily driven by antiquated generation systems and almost complete dependence on inefficient fossil-fueled power plants. Positive aspects of The Bahamas’ investment climate include political stability and parliamentary democracy since 1729, educated English-speaking labor force, well capitalized and profitable financial services infrastructure, established rule of law and respect for contracts, independent judicial system, and high per-capita GDP. Negative aspects of The Bahamas’ investment climate include: a lack of transparency in government procurement, shortages of skilled and unskilled labor, bureaucratic and inefficient investment approvals process, time consuming resolution of legal disputes, high energy costs (4 times U.S. kwh), and the high cost of labor.
A major challenge to investment in the country is the prohibition of foreign investment in 12 areas of the economy and the absence of transparent investment procedures and legislation. 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 describe the approval process for FDI and work permits as cumbersome and time-consuming. The Bahamian government does not have modern procurement legislation and companies have complained that the tender process for public contracts is not consistent, and it is difficult to obtain information on the status of bids. In response, the FNM administration launched an e-procurement and suppliers registry system in an effort to increase levels of accountability and transparency in governance. Corruption is relatively low according to the Corruption Perception Index (28 of 180) and Bahamian government officials have told the Embassy that the government tabled omnibus legislation to address concerns related to its investment policy. These draft laws pertain to the creation of the office of ombudsman, freedom of information, and the establishment of a credit bureau and an independent department of public prosecutions. The government has also used technology to improve new company formation and engaged an IDB consultant to review investment approvals procedure. Women have raised concerns regarding the ease of their doing business in The Bahamas, particularly bureaucratic hurdles to register businesses and difficulty in securing financing. The Prime Minister’s wife has committed to supporting women’s empowerment, particularly economic, as a priority of the Office of the Spouse of the Prime Minister.
|TI Corruption Perceptions Index||2017||28 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||121 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2017||N/A||https://www.globalinnovationindex.org/
|U.S. FDI in partner country (M USD, stock positions)||2016||USD 24.7B||http://www.bea.gov/
|World Bank GNI per capita||2016||USD 22,090||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The government encourages FDI, particularly in the tourism and financial services sector. The country provides incentives for second home ownership and currently has 250 bank and trust companies operating in the jurisdiction but reserves certain sectors of the economy for Bahamian investors. The reserved areas are: wholesale and retail operations; commission agencies engaged in import/export; real estate and domestic property management; domestic newspapers and magazine publications; domestic advertising and public relations firms; nightclubs and restaurants except specialty, gourmet, and ethnic restaurants and those operating in a hotel; security services; domestic distribution of building supplies; construction companies except for special structures; personal cosmetic/beauty establishments; shallow water scale fish, crustacean, mollusk, and sponge-fishing; auto and appliance service operations; and public transportation. In 2015, the domestic gaming industry was included as an area reserved for domestic investment and supported by a moratorium on new licenses.
With the exception of these sectors, the Bahamian government 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 investment 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 not fit within the NIP, require approval by the National Economic Council (NEC) of The Bahamas. This process generally requires environmental and economic impact assessments for review by multiple government agencies prior to being considered by the NEC. Bureaucratic impediments are not limited to the approvals process and the country continues to lag behind according to the 2018 World Bank Doing Business numbers on the topics of starting a business, ranking 119 overall, and 167 in registering property, 86 in getting construction permits, and 142 in access to credit.
The Bahamas has an investment promotion strategy that includes multiple government agencies working to attract foreign direct investment. The BIA functions as the investment facilitation agency and acts as a ‘one stop shop’ to assist investors in navigating a potentially cumbersome approvals process. The Embassy is not aware of any formal retention strategies but each administration has consistently supported new investment and has generally honored agreements made by previous administrations. The FNM administration introduced plans for legislative support for Small and Medium Enterprises (SME), defined as companies with fewer than 10 employees, representing 85 percent of registered businesses.
The Embassy is aware of cases where the Bahamian government failed to respond to investment applications and several cases where there have been significant delays in the approvals process. Despite challenges, investment continues to grow in tourism, finance, and quick-serve restaurant franchises.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign investors have the right to establish private enterprises and, after approval, companies are allowed to operate unencumbered. Key considerations for the Bahamian government include economic impact/job creation and environmental protection. 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 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. Investors are required to establish a local company and be registered by the registrar of companies to operate in The Bahamas.
The Bahamian government considers FDI a critical driver for economic growth and the National Investment Policy explicitly encourages foreign investment in certain sectors of the economy. These sectors are listed on the BIA website at www.bahamas.gov.bs/bia and are as follows: touristic resorts; upscale condominium, timeshare, and second home development; information/data processing; hi-tech services; ship registration; repair; light manufacturing for export; agro-industries; food processing; agriculture; financial services; offshore medical centers; and pharmaceutical manufacture.
The government has made exceptions to this policy on a case-by-case basis but generally, there is no guarantee of market access or right of establishment in the reserved sectors of the economy. The Embassy is aware of several cases in which the Bahamian government has granted foreign investors waivers to the policy and allowed full market access.
Other Investment Policy Reviews
The Bahamas ranks 119 out of 190 countries in terms of the ease of doing business in the 2017 World Bank Doing Business Report, with a Distance to Frontier score below the Caribbean regional average (http://doingbusiness.org/rankings ).
The country is not a member of the WTO. Neither OECD nor UNCTAD have conducted investment policy reviews. The Bahamas achieved the G-20 standard on transparency and cooperation on tax matters, a standard initially advanced by the OECD, and recently re-engaged with the Accessions Division of the WTO with an aim of full membership by 2019.
According to the 2018 World Bank Doing Business Index, starting a business in The Bahamas takes 21.5 days, requires seven separate procedures, and costs the same for both men and women. In 2017, the Bahamian government streamlined this process and launched an e-business portal, which facilitated limited liability companies to register online (http://inlandrevenue.finance.gov.bs/business-licence/copy-applying-b-l/ ). In early 2018, the government removed certain documentary requirements to register or renew registration of companies and is considering allowing company fees to be applicable on the date of incorporation to expedite the annual process.
All companies with an annual turnover of USD 100,000 or more are required to register with the government to receive a tax identification number. The registration process is generally viewed as an impediment to east of starting a business. Additionally, companies are required to provide financial reports on a monthly or quarterly basis.
The Bahamian government does not promote nor incentivize outward investment. Additionally, the government does not restrict its citizens from investing internationally.
2. Bilateral Investment Agreements and Taxation Treaties
The Bahamas has no bilateral investment agreements but has signed tax information exchange agreements with 33 countries, including the United States. The agreement designates the country as a qualified jurisdiction and allows U.S. companies to qualify for tax credits for conventions and related corporate expenses.
The country was the first in the Caribbean region to sign the Foreign Account Tax Compliance Agreement (FATCA) with the United States and since September 2015, has implemented a non-reciprocal inter-governmental agreement (Model 1B) to satisfy the obligations of the agreement. Additionally, the Bahamian government has passed enabling legislation and is engaged in public consultations to implement the Common Reporting Standard (CRS).
The country is a signatory to the Economic Partnership Agreement between the Caribbean Forum of the ACP Group of States and the European Union and remains a member of the Caribbean Community but does not participate in the free trade agreement portions of the regional agreement. The Bahamas does not have a free trade agreement with the United States but is a member of CARICOM, which has a Trade and Investment Framework Agreement (2013).
Tax information exchange agreements to date include: Argentina (2009), Australia (2010), Belgium (2009), Canada (2010), China (2009), Czech Republic (2014), Denmark (2010), Faroe Islands (2010), Finland (2010), France (2009), Georgia (2016), Germany (2010), Greenland (2010), Guernsey (2011), Iceland (2010), India (2011), Indonesia (2015), Ireland (2015), Japan (2011), Malta (2012), Mexico (2010), Monaco (2009), Netherlands (2009), Norway (2010), Poland (2013), Republic of Korea (2011), San Marino (2009), South Africa (2011), Spain (2010), Sweden (2010), United Kingdom (2009), and the United States of America (2002).
3. Legal Regime
Transparency of the Regulatory System
The Bahamas’ legal and regulatory systems are transparent and consistent with international norms and the Bahamian government is engaged in making reforms to public accounting procedures to conform to international financial reporting standards. Proposed legislation is available at the Government Publications office and public comment and engagement of stakeholders is encouraged, particularly on legislation perceived as controversial. There is no equivalent to the Federal Register, but the government regularly updates its website (www.bahamas.gov.bs ) and includes draft legislation and policy pronouncements by Ministers of Government. There is regulatory system reform legislation, but it has not been fully implemented. In some instances, there is public consultation on investment proposals but the process is not required by law. The Embassy is unaware of any informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations that restrict foreign participation in the economy.
International Regulatory Considerations
The country is not a member of a regional economic block and only recently re-engaged with the WTO secretariat to continue negotiations to join the organization. The Bahamian government anticipates a third meeting of the Working Party by the end of 2018 and announced plans to join the organization by the end of 2019.
The country is not a member of UNCTAD’s international network of transparent investment procedures but is actively reviewing investment policies with the aim of developing comprehensive, WTO-compliant investment legislation.
The Bahamas Bureau of Standards and Quality (BBSQ) was launched in 2016 and benefits from EU-funded technical assistance to the Caribbean Regional Organization for Standards and Quality (CROSQ) in the development of national standards.
The Embassy is not aware of any discriminatory technical barriers to trade.
Legal System and Judicial Independence
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 nor commercial law.
The judiciary is independent and allegations of government interference in the judicial process are rare. The Chief Justice of the Supreme Court, the Attorney General – who serves as the government’s chief legal advisor and is responsible for public prosecutions, and the President of the Court of Appeals are appointed by the Governor-General upon recommendation of the Prime Minister in consultation with the leader of Her Majesty’s Loyal Opposition. The Bahamas is a member of the Commonwealth of Nations and uses the Privy Council Judicial Committee in London as the final court of appeal. The country also contributes financially to the operations of the Caribbean Court of Justice and 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 judiciary is independent and judicial process is considered procedurally competent, fair, and reliable.
Laws and Regulations on Foreign Direct Investment
No major laws, regulations, or judicial decisions have been passed since the 2017 Investment Climate Statement.
Competition and Anti-Trust Laws
The fledging Utilities Regulation and Competition Authority (URCA) regulates the telecommunications sector and new regulations have expanded the mandate to include the regulation of the energy sector. URCA is building technical capacity with the support of the U.S. government. There is no legislation governing competition or anti-trust.
Expropriation and Compensation
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, there was satisfactory compensation at fair market value.
The Embassy is not aware of any direct or indirect expropriation actions in The Bahamas. There is no indication that the Bahamian government will consider the implementation of expropriations as an instrument of government policy.
ICSID Convention and New York Convention
The Bahamas is a member of both the International Centre for Settlement of Investment Disputes (ICSID) Convention (adopted 1995) and the New York Convention (adopted 1958). The Arbitration Act of 2009 enacted the New York Convention and provides a legal framework. 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.
Investor-State Dispute Settlement
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 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 announced its intention to establish The Bahamas as a center for international arbitration cases but a body has yet to be formally established.
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 be subject to international arbitration.
The Embassy is only aware of a single dispute between a U.S. company and the Bahamian government over the past 10 years. The matter was resolved amicably and did not result in litigation. There is no history of extrajudicial action against foreign investors.
International Commercial Arbitration and Foreign Courts
The Bahamas is a member of the Multilateral Investment Guarantee Agency, which insures investors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries. Local courts enforce and recognize foreign arbitral awards and foreign investors are provided national treatment. Disputes between companies are generally handled in local courts but foreign investors can refer cases to ICSID and in at least one instance, recourse was sought in a U.S. court in a dispute involving a USD 4 billion resort development. The Embassy is not aware of any cases involving state owned enterprises that resulted in litigation.
Company liquidations, voluntary or involuntary, proceed according to the Companies Act. Liquidations are routinely published in newspapers 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. U.S. investors should be aware that there is no equivalent to Chapter 11 bankruptcy law provisions to protect assets located in The Bahamas. The Bahamian government circulated new draft legislation in January 2018 to establish a credit bureau and engaged in public consultation and consumer education on the legislation’s impact on access by both institutions and individuals to credit.
4. Industrial Policies
Tax relief is the most significant investment incentive in The Bahamas. The government does not impose taxes on income, estates, or inheritances in the country. Other incentives for investment include waivers on import duties, property tax abatement, and, in some cases, land grants or extended leases for private development at below-market rates. Incentives are negotiated directly with the Bahamas Investment Authority and require the approval of the NEC. In some instances, terms of the incentives are outlined in a heads of agreement and the size of the concessions will vary depending on the scale of a project.
Further information on investment incentives is available at http://www.bahamas.gov.bs .
Foreign Trade Zones/Free Ports/Trade Facilitation
The city of Freeport on the island of Grand Bahama is a 233 square miles Free Trade Zone. The Hawksbill Creek Agreement (1955) between the Bahamian government and the Grand Bahama Port Authority guarantees that the “special economic zone” can continue to exist until 2054. Businesses operating in Freeport are exempt from most central government taxes (real property, excise, import, and business taxes) and subject to licensing by the Grand Bahama Port Authority. The Bahamian government has made several efforts to regulate business activities and extract tax revenues from the free zone. Most efforts have been litigated to the Port’s benefit and the FNM administration repealed legislation that differentiated between local and foreign licensees within the Port.
Performance and Data Localization Requirements
The Bahamas maintains few formal performance requirements for investments. During the approvals process an investor is expected to provide proof of adequate and legitimate sources of funding and may be requested to produce economic and environmental impact assessments. Requirements are negotiated on a project-by-project basis, and, particularly in the case of larger developments, are written into a “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 official mandate for hiring local personnel, though many heads of agreement stipulate the proportion of workers who must be Bahamian.
There is no policy of forced localization or a legal 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 businesses, job creation, or an investment that supports the transfer of skills and technology.
Work permits are also subject to negotiation but generally are facilitated for key employees as part of the investment approvals process. For non-essential services the Bahamian government requires that investors document efforts to recruit local Bahamians as part of their applications for work permits. Investors in second homes can apply for permanent residency and can benefit from expedited approval for investments that exceed USD 1 million. Fees for work permits are not tied to administrative costs and are used as a revenue measure. Depending on the category, work permits can cost up to USD 12,000 annually.
5. Protection of Property Rights
The Bahamas’ score for ease of “registering property” in the World Bank’s 2018 Doing Business Report is 167 out of 190 countries. The cost of registering property in The Bahamas remains at 4.7 percent of property value, as compared with 5.8 percent for Latin America and The Caribbean, and 4.2 percent for OECD high-income countries. The time to complete the registration process remains high at 122 days, and there has been limited progress in creating digital land registries or establishing time limits for procedures. These facts resulted in the World Bank ranking quality of land administration at 3 on a scale of 0 to 30. The Bahamian government does not publish an official number citing the proportion of land without clear title. Property legally purchased, but unoccupied, cannot revert to other owners, such as squatters.
The various forms of land ownership in The Bahamas have their foundation 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 Embassy has received reports of problems obtaining clear title to property, either because the seller had no legal right to convey, or because separate claims to ownership 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, the Bahamian government has invited the U.S. government to review and comment on regulations for recently amended legislation. These new regulations cover patents, trademarks, copyrights, integrated circuits, false trade descriptions act, protection of new plant varieties, and geographical indicators.
The government anticipates the new regulations will bring The Bahamas into compliance with the terms of the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 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 has not recently been listed as a country of concern in U.S. Trade Representative’s (USTR) Special 301 Report and is not considered a notorious market.
The Bahamas’ intellectual property registry is maintained by the Department of the Registrar General and enforcement responsibility is coordinated by the Royal Bahamas Police Force with support from Bahamas Customs.
For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .
6. Financial Sector
Capital Markets and Portfolio Investment
The free flow of capital to markets is encouraged by the Bahamian government 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 ) The fledgling local stock market excludes foreign investors but is effectively regulated by the Securities Commission.
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 through both commercial banks and the Bahamas Development Bank (http://www.bahamasdevelopmentbank.com/ ).
Money and Banking System
The financial sector of The Bahamas is highly developed and dynamic and 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 majority state-owned Bank of The Bahamas. These institutions provide a wide array of services via several types of financial intermediaries. The Central Bank of The Bahamas, the Securities Commission, Insurance Commission, the Inspector of Financial and Corporate Service Providers, and the Compliance Commission regulate the financial sector.
The sector is healthy and, according to the Central Bank, liquidity and external reserves expanded during the fourth quarter of 2017 and banks’ credit quality indicators reflected sustained credit restructuring measures and loan write-offs. The latest available performance indicators showed an improvement in overall bank profitability due mainly to lower operating costs and a decline in provisioning for bad debt. Bank capital levels also remained robust and well in excess of regulatory requirements. Non-performing loans have declined to 9.2 percent of total loans at the end of 2017 from 11.4 percent at the end of 2016 due mainly to a sale of toxic loans held by the Bank of The Bahamas.
In the domestic banking sector, four of the eight commercial banks are subsidiaries of Canadian banks, three are locally owned, and one is a branch of a U.S.-based institution. Recent reorganization by the Canadian banks has severely limited banking services on some of the less populated islands but to date no local institutions are without correspondent banking relationships.
The Central Bank is exploring the use of block chain technologies to modernize payment systems. In March 2018, it announced its intention to develop a digital version of the Bahamian dollar within 24 to 30 months. The Central Bank’s strategic goals include responding to the loss of brick-and-mortar banks, particularly in the Family Islands, by implementing electronic funds transfer across the country and providing access for individuals to basic financial services through digital media. To this end, the Bank is leading efforts to develop a digital identification system with appropriate legal infrastructure. A pilot project is under development.
Foreign Exchange and Remittances
Foreign Exchange Policies
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. The controls ensure that adequate foreign exchange flows are always available to support the fixed parity of the Bahamian dollar against the U.S. dollar. The peg is considered an essential convenience in the tourism-dependent economy, removes issues of rate conversions, and allows for unified pricing of goods and services for tourists and residents. To maintain this structure individuals and corporations resident in The Bahamas are subject to capital or exchange controls.
Exchange controls are not 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. This is 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 or delay approval for legitimate foreign exchange purchases for currency transactions and, in the interest of facilitating international trade, it 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. Gradual liberalization of exchange controls have continued over the years with the most recent measure implemented in April 2016. The new measures delegated increased authority to commercial banks for exchange control and seek to regularize nationals holding accounts in the United States by allowing nationals to open U.S. dollar denominated accounts within the jurisdiction.
There are no restrictions on investment remittances. Foreign investors who receive a Central Bank designation as a non-resident may open foreign currency-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. As mentioned, increased authority has been delegated to commercial banks and money transfer businesses.
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 .
Sovereign Wealth Funds
The Bahamian government passed omnibus legislation for the effective management of the oil and gas sector in 2017, which included the creation of a sovereign wealth fund, but has not yet promulgated supporting regulations.
7. State-Owned Enterprises
State-Owned Enterprises (SOEs) are active in the utilities and services sectors of the economy. There is a published list of the 25 SOEs available on www.bahamas.gov.bs .
Key SOEs include:
- Bahamas Air Holdings Ltd. (National Airline);
- Public Hospitals Authority;
- Civil Aviation Authority;
- Nassau Airport Development Authority;
- University of The Bahamas;
- Health Insurance Authority;
- Bank of The Bahamas (65 percent Bahamian government);
- Bahamas Electricity Corporation, now managed as Bahamas Power and Light (BPL);
- Water and Sewerage Corporation;
- Broadcasting Corporation of The Bahamas (ZNS);
- Nassau Flight Services;
- Hotel Corporation of The Bahamas.
The Bahamian government provides average annual subsidies of USD 400 million to support SOEs. Within the past decade, none have returned profits or paid dividends. The Public Hospitals Authority is the largest SOE and received USD 214 million in subventions in the 2017/2018 budget. The Water and Sewerage Corporation (WSC) and Bahamas Power and Light (BPL) are considered essential services and receive significant budgetary support. The government has permitted investment in these sectors and has approved 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 provide services. An exception is the city of Freeport on the island of Grand Bahama, which has its own licensing authority and maintains monopolies for the provision of electricity, water, and sanitation services.
The Bahamian government announced plans to find a strategic partner for Nassau Flight Services, but there does not appear to be an immediate plan for the divestment of either company. Privately owned airlines have complained of the market distortions created by Bahamas Air, claiming the national airline sells key routes below market value and benefits from not remitting licensing and other fees required by private companies. The airline has recorded annual losses for more than two decades.
In February 2018, the Bank of The Bahamas received a second bailout of USD 100 million from the government to assist with a toxic loan portfolio.
Board appointments are made by the government and usually comprised of technocrats and selected party supporters.
The Bahamian government has not taken definitive steps to implement its proposed privatization plans but has indicated a preference for public-private partnerships as the model for privatizing key sectors. The Bahamian government divested 49 percent of the Bahamas Telecommunication Company in 2011 but issued a second license for cellular services and retained 51 percent equity in the new company. In his February 2018 speech, the Deputy Prime Minister serving as Minister of Finance announced the government’s intention to divest additional equity in the Bahamian telecommunications sector.
In October 2017, the Bahamian government invited foreign investment in the re-development of its New Providence cruise terminal. In May 2017, the Minister of Finance tabled fiscal responsibility legislation and proposed the development of the Auditor General as an independent office to assist in the more effective management of SOEs.
8. Responsible Business Conduct
There is a growing awareness of and commitment to Responsible Business Conduct (RBC) by local and foreign companies operating in The Bahamas. Local 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 but has been slow to implement it. The Bahamas enacted laws protecting individuals with disabilities from discrimination in the workplace, but enforcement has been limited due primarily to the lack of financial and human resources. There have been no high profile controversial instances of corporate violations of human rights, but civil society remains active in bringing attention to social issues.
Recent steps in support of RBC also include a requirement for local gaming houses to allocate three percent of net profits to community-based social development programs. Several have established foundations that support issues ranging from the environment to education. The Bahamas has strong trade unions, and labor laws prohibit discrimination in employment based on race, creed, sex, marital status, political opinion, age, HIV status, or disability.
The Bahamas is not an adhering government to the OECD Guidelines for Multinational Enterprise.
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 USD 10,000, or a maximum prison term of four years, or both. In October 2015, the government charged and convicted a former state energy-company board member under the Prevention of Bribery Act, the first significant case brought under the Act since 1989. The FNM government was elected on a mandate to end corruption, and early in the administration, two former government Ministers and the chair of a public corporation were charged. Cases are ongoing.
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. Recent audits of several state-owned enterprises resulted in several persons being charged before the courts in 2017. The government is aggressively seeking to improve the management and oversight of SOEs and has several initiatives to improve transparency and accountability.
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.
According to Transparency International’s 2017 Corruption Perceptions Index, The Bahamas ranked 28 out of 180 countries with a score of 65 out of 100. There are no protections for NGOs involved in investigating corruption. U.S firms have identified corruption as an obstacle to FDI and have reported perceived corruption in government procurement and in the FDI approvals process.
The Government of the Commonwealth 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 2017.
The Bahamas ratified major international corruption instruments, including the Inter-American Convention against Corruption since signing in 1998 (ratified in 2000), and has been a party to the Mechanism for Follow-Up on the Implementation of the Inter-American Convention against Corruption (MESICIC) since June 2001. The Bahamas is not party to the OCED Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.
Resources to Report Corruption
Contact at government agency or agencies are responsible for combating corruption:
Assistant Commissioner of Police
Royal Bahamas Police Force
P.O. Box N-458
Contact at “watchdog” organization:
Citizens for a Better Bahamas
Transparency International (Bahamas Chapter)
10. Political and Security Environment
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 minor and included damage to political party installations, signage, billboards, and a few reported altercations between opposing party members.
11. Labor Policies and Practices
The Bahamian labor force is considered well-educated by international literacy and numeracy standards. The 2016 labor force was 215,880 and the unemployment rate is 10.1 percent (IMF). Youth unemployment rates remain high at 25 percent. Wage rates are slightly lower than in the United States but higher than most countries in the region. The minimum wage for private sector employees is USD 5.25 per hour (USD 210 per week). There are significant numbers of foreign workers. The Bahamian government has 40,000 registered work permit holders and the majority are designated as unskilled or semi-skilled. The majority of this group is comprised of Haitian nationals working in a range of services.
The Bahamian government has granted special permission to two large-scale tourist developments to bring in foreign laborers to support construction activities. These numbers have ranged from a few hundred (The Pointe Development) to several thousand temporary workers during the construction of the Baha Mar resort. The concession for large groups of foreign workers was negotiated as part of the Heads of Agreement for the specific investment but generally, employment requires applications for individual work permits. The terms and conditions of work for foreign workers is subject to Bahamian law.
The Fair Labor Standards Act (FLSA) 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. The Minimum 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. Foreign workers also have claim to social security benefits after five consecutive years of contributions.
The Bahamian law also specifically grants labor unions the right to free assembly and association and to bargain collectively. These rights are exercised extensively, particularly in state-owned industries, but have recently lost influence and membership in some segments of the tourism sector. It is noteworthy that the Baha Mar resort, opened in 2017, is on track to become the largest private employer in the country, but it does not have a trade union or collective bargaining agent representing its employees. In 2016, the government amended legislation to require employers to inform the Minister of Labor in instances where more than 10 persons were being laid off. The action came in response to a hotel chain using union-busting tactics to lay off the majority of its employees and hire non-union workers as contractors. In sectors where unions are still active, 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 and manages overall industrial relations.
The Bahamas ratified most International Labor Organization (ILO) Conventions and international labor rights are recognized in domestic law. The Bahamian government is challenged by fiscal and human resources to adequately investigate occupational safety and health issues but is believed to be improving its capacity. The country is committed to eliminating the worst forms of child labor, and the Ministry of Labor has periodically inspected food stores and other establishments to ensure the enforcement of laws governing child labor.
12. OPIC and Other Investment Insurance Programs
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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
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
|Host Country Gross Domestic Product (GDP) (M USD)||2015||USD 11,200||2015||USD 11,200||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country (M USD, stock positions)||2016||N/A||2016||USD 24,700||BEA data available at
|Host country’s FDI in the United States (M USD, stock positions)||2016||N/A||2015||USD 484||BEA data available at
|Total inbound stock of FDI as % host GDP||2016||N/A||2016||2%||N/A|
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
P.O. Box N-8197
U.S. Embassy Nassau
New Providence, The Bahamas
Telephone: (242) 322-1181