Executive Summary

The Investment Climate Statement for The Bahamas covers the period through May 9, 2017; a new government in The Bahamas was elected on May 10, 2017.

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 Bahamian dollar is pegged to the U.S. dollar.

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 conducts more than 85 percent of its international trade with the United States and relies primarily on imports from the United States to satisfy its food needs for local consumption and for the more than six million tourists who visit the country annually.

The Bahamas Investment Authority (BIA) 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 country attracts significant foreign direct investment (FDI) from various parts of the world, primarily in the tourism sector, with investments ranging from multi-billion dollar resort developments to million dollar homes on the major islands of the archipelago. In addition, the national energy regulator published initial regulations for grid-tied, small-scale solar in December 2016, and the national utility is now issuing licenses for residential solar systems.

The major challenges to investment in the country include the high cost and uncertain reliability of electricity, high unemployment combined with a limited pool of skilled labor, high labor costs and low rates of productivity, cumbersome and sometimes opaque administrative requirements, and an escalating crime rate. In addition, the reservation of certain sectors of the economy for Bahamians only acts as a non-tariff trade barrier to certain foreign investments that do not fit clearly within the National Investment Policy. The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organization (WTO).

Companies report that the approval process for FDI and work permits can be cumbersome and time-consuming and that, in some cases, applications have lingered for years. Large FDI projects require approval by the National Economic Council, which includes members of the Cabinet of The Bahamas. This provides opportunities for Bahamian businesses with competing interests to lobby Cabinet members to delay review or approval of FDI applications. The government of the Commonwealth of The Bahamas (GCOB or the Government) asserts, however, that the majority of foreign investment applications are processed quickly and without significant issues.

The Government maintains an online list of tender notices for projects; some companies, however, have complained that not all potential government contracts, particularly those not financed through international financing institutions, are put out for tender, and it is difficult to obtain information on the status of bids.

On January 1, 2015, the Government introduced a 7.5 percent Value Added Tax (VAT) on most goods and services, a measure designed to strengthen the fiscal balance sheet. In August 2016, Moody’s Investor Service downgraded The Bahamas’ bond and issuer ratings to Baa3 from Baa2 with a stable outlook and maintained these ratings in its February 2017 quarterly credit opinionStandard and Poor’s(S&P) downgraded the country’s sovereign credit rating in its December 2016 report to BB+ (speculative grade) from BBB- (investment grade) citing slower pace of fiscal consolidation, along with lower than anticipated economic growth, high unemployment, elevated non-performing loans, and household indebtedness, but revised the outlook from negative to stable.

With over USD $2 billion in new resort development proposed and the potential for thousands of permanent jobs, the Bahamian government continues to assert that benefits from foreign investment-led activities are imminent.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 24 of 176 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2017 121 of 190 doingbusiness.org/rankings
Global Innovation Index 2016 Not listed https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD) 2015 USD $29.3 million http://www.bea.gov/international/factsheet/factsheet.cfm
World Bank GNI per capita 2015 USD $20,740 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

Policies Towards Foreign Direct Investment

The Government encourages foreign direct investment (FDI), particularly in the tourism sector. With the exception of nine (9) sectors reserved exclusively for Bahamian only investment, the Government does not give preferential treatment to investors based on nationality. Foreign investors may negotiate to receive incentives, which could include special tax concessions and direct marketing and budgetary support.

The Government provides guidelines for foreign 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 require approval by the National Economic Council (NEC), which includes members of the Cabinet of The Bahamas. The approval process provides opportunities for Bahamian businesses with competing interests to lobby Cabinet members to delay review or approval of FDI applications. The Embassy is aware of several cases in which investors who have submitted applications have not received responses or have experienced significant delays in the approvals process. For example, the Embassy has been contacted by American companies seeking to do business in the aviation sector whose applications have been stonewalled due to the impact of lobbying efforts on Cabinet members in the decision-making process. The Government reports that it is in the process of streamlining the vetting and approval process for foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The National Investment Policy (NIP) explicitly reserves certain sectors of the economy exclusively for Bahamian investors, which acts as a non-tariff trade barrier for investments which do not fit clearly within the NIP. 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.

Beyond the areas reserved for Bahamian only 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.

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.

Other Investment Policy Reviews

The Bahamas is ranked 121 (out of 190 economies) in terms of the ease of doing business in the 2017 World Bank Doing Business Report . The report underscored historically problematic issues related to starting a business, getting electricity, getting credit, dealing with construction permits, and protecting minority investors. On the positive side, the report highlighted improvements in The Bahamas in the areas of trading across borders and registering property, although the country is still among the lower ranked economies in those areas. 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 the development of its twenty-year National Development Plan.

According to the 2017 Heritage Foundation Index of Economic Freedom , The Bahamas ranks 90th in the world in economic freedom. The report asserts that The Bahamas appears gradually to be losing competitiveness compared with other countries that are moving more rapidly to expand economic opportunity. The report states that while the overall regulatory system is conducive to entrepreneurial activity, the weak rule of law, lingering protectionism, and bureaucracy continue to hold back the emergence of a more dynamic and sustainable private sector. The report, however, says that the country’s relatively sound management of fiscal policy contributes to macroeconomic stability, and that investment management and financial services play a vital role in sustaining overall economic strength.

Business Facilitation

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. The services of the BIA are available to all investors.

Investors who invest at least USD $500,000 may apply for permanent residency. The GCOB is reportedly considering raising this ceiling to a million dollars.

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.

The Government introduced an online business license registration system in 2015 for Bahamian companies; foreign investors, however, should continue to submit applications through the BIA.

Outward Investment

The Bahamas Chamber of Commerce and Employers’ Confederation (Chamber of Commerce) encourages Bahamian companies to participate in trade missions abroad. Exchange controls maintained by the Central Bank places limitations on outward investment by Bahamians.

The United States and The Bahamas do not have a bilateral investment treaty (BIT) or Free Trade Agreement. The Bahamas is a beneficiary of the Caribbean Basin Initiative (CBI) and the Caribbean Basin Economic Recovery Act (CBERA). 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. For example, the country’s largest export to the United States is polystyrene beads used in the production of Styrofoam products. The Bahamas continues to view CBI as an incentive for investments in manufacturing in the domestic economy. The Bahamas has also applied for benefits under the Caribbean Basin Trade Partnership Act (CBTPA), but as of March 2017 had not met all of the requirements for ratification.

The Bahamas participates in the CARIFORUM – EU Economic Partnership Agreement (EPA) which was concluded between CARIFORUM states (the Caribbean subgroup of the African, Caribbean Pacific Group of States) 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. The Bahamas continues slow but consistent efforts to implement the terms of the Agreement.

In addition, The Bahamas participates in CARIBCAN, 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 to comply with new international requirements. Canada and CARICOM has agreed in principle to preserve duty-free, quota free market access until a new reciprocal agreement is reached.

The United States and The Bahamas do not have a bilateral taxation treaty. The Bahamas has established a Tax Information Exchange Agreement (TIEA) with the United States—one of twenty-seven 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 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.

Transparency of the Regulatory System

Government procurement practices are governed by the Public Procurement Act and the Financial Administration and Audit Act of 1973. The Government has implemented procurement procedures in the management of funds from international lending agencies and maintains an online list of tender notices for projects, as required as a condition of funding.

Some U.S. companies, however, have alleged a lack of transparency and undue political influence with government bidding and procurement processes, noting that not all potential government contracts, particularly those not financed through international financing institutions, are put out for tender. Companies also complain that it is difficult to obtain information on the status of bids. In several highly publicized requests for proposals (RFP) in recent years, the Government did not meet stated deadlines or changed the nature of the RFP, and some contract renewals have been pending for 12 months or more.

The Bahamian government has publicly committed to modernizing and reforming government procurement with assistance from the Inter-American Development Bank. 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 Act with the European Union may also address similar concerns.

New administrations sometimes review contracts executed by previous administrations and may request changes in terms, although government officials assert that the majority of contracts are not reviewed or altered in any way. Companies also cite concerns with the discretionary issuance or denials of approvals and licenses from various government authorities, complaining that in some instances these approval processes can be opaque with no possibility for review or appeal of a decision.

Legislation and regulations are available on line at http://laws.bahamas.gov.bs . Draft legislation, in general, is subject to a public consultation process.

According to Transparency International’s 2016 Corruption Perceptions Index  , The Bahamas ranked 24 out of 176 countries with a score of 66 out of 100.

International Regulatory Considerations

The Bahamas is an observer, but not a member, of the World Trade Organization (WTO). The Bahamas’ effort to accede to the WTO is nearing twenty years, but the Government has expressed its commitment to ongoing efforts towards membership.

The Bahamas is not a party to the agreement on Trade Related Investment Measures (TRIMS). Government officials, however, have informed the Embassy that its efforts to implement the terms of the EPA with the EU will include measures that it anticipates will exceed the WTO/TRIMS obligations.

The Government established the Bahamas Bureau of Standards and Quality in 2015 to adopt and implement standards in The Bahamas and certify products and services that conform to international standards. For example, the Bureau has successfully implemented a standard for water and is currently developing standards for poultry products, table eggs, and tobacco.

Legal System and Judicial Independence

The Bahamian legal system is based on English common law with the highest court being the Privy Council in London. Foreign nationals are afforded full rights in Bahamian legal proceedings. Contracts are legally enforceable through the courts.

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. 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. Embassy referrals to the Bahamas Bar Association for appropriate disciplinary action in these matters often go unanswered.

Additional information on the Bahamian Court System is available at https://bs.usembassy.gov/u-s-citizen-services/attorneys/.

Laws and Regulations on Foreign Direct Investment

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.

In addition, industry-specific legislation 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.

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

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 located in The Bahamas. For example, 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 USD $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 where the property and assets are located.

Competition and Anti-Trust Laws

With the exception of the Utilities Regulation and Competition Authority (URCA), which regulates the telecommunications sector and energy sector, there are no regulations governing competition or antitrust policy. In some sectors of the economy, exclusive rights to provide services for fixed periods have been granted by contract in some sectors.

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 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.

Dispute Settlement

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.

Investor-State Dispute Settlement

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 Commercial Arbitration and Foreign Courts

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.

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.

Dispute Resolution

Courts in The Bahamas face a persistent backlog of cases, and the judicial process in both civil and criminal cases remains lengthy. Corporate plaintiffs should engage a local attorney to represent their interests in court. The 2017 World Bank Report on Ease of Doing Business (www.doingbusiness.org ) ranked The Bahamas at 75 (out of 190 economies) on the ease of enforcing contracts.

Bankruptcy Regulations

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 may not be able to rely on U.S. Chapter 11 bankruptcy law provisions to protect assets located in The Bahamas. In the World Bank’s Doing Business Report for 2017, The Bahamas ranked 59 out of 190 economies for ease of resolving insolvency.

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.

Industry and region-specific incentives available under various laws are offered to any qualifying individual and may include waivers on import duties, property tax abatement, and, in some cases, land grants and extended leases for private development.

Foreign Trade Zones/Free Ports/Trade Facilitation

The 1955 Hawksbill Creek Agreement established Freeport on the island of Grand Bahama as a 230-square mile free trade and economic development zone under private ownership and control of the Grand Bahama Port Authority (GBPA).

While enabling legislation guarantees that the free trade zone continues to 2054, the Grand Bahama (Port Area) Investment Incentives Act, 2016 provides that certain tax concessions or extensions are granted only upon application to the Government’s Investment Board. In addition, 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.

Additional information is available at http://www.gbpa.com .

Performance and Data Localization 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. Growing unemployment 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.

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.

Real Property

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 2015, making it easier to register property. The tax now ranges between 2.5 – 10 percent of the value of conveyances.

The Bahamas’ score for ease of “registering property” in the World Bank’s 2017 Doing Business Report is 166 out of 190 economies. This is an improvement in ranking from 184 in 2016. The World Bank report lists the cost of registering property in The Bahamas as 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 is listed as 122 days compared to 68.6 and 22.4 days, respectively.

The Embassy has received reports that some American investors have incurred significant losses in real estate transactions due to difficulties in obtaining clear title.

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 act, protection of new plant varieties, and geographical indications. As of March 2017, 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’ intellectual property registry is maintained by the Department of the Registrar General.

The Bahamas is a member of the World Intellectual Property Organization (WIPO) but has not ratified the WIPO Internet treaties. The Bahamas is also a 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

In the 2016 Special 301 Report , the Office of the U.S. Special Trade Representative’s Office stated that the United States remains seriously concerned by reports that U.S. songwriters, composers, and music publishers are reportedly not compensated or undercompensated for the public performance of their musical works on TV and radio broadcasts and via cable transmissions in several Caribbean countries, including The Bahamas.

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
(242) 397-9143
registrargeneral@bahamas.gov.bs

Capital Markets and Portfolio Investment

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.

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 .

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

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 Financial Stability Report for December 2015, the Bahamian financial sector, which represented approximately 15 percent of the country’s GDP, encompassed over 400 –banks and non-banks (such as insurance companies and credit unions) and employed in excess of 6,500 individuals. (www.centralbankbahamas.com ).

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, with some islands having no access to walk-in commercial banking services. During 2015, the number of licensed banks and trust companies declined slightly to 249; the total assets of domestic banks declined by 32 percent to USD $29.3 billion (a slowdown from the 43.9 percent reduction in 2014) while the assets of international banks contracted by 6.4 percent to USD $180.5 billion. According to the Central Bank, the decline is due to adjustments made by firms in light of global regulatory reforms and initiatives to promote tax transparency. While several banks reported changes in correspondent banking relationships over the past few years, most were able to establish new relationships.

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 facilitating 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.

The International Monetary Fund in its 2017 Financial Stability Report said The Bahamas ranked below the region’s average score of 2.23 out of 4. It showed The Bahamas as having the highest GDP per capita out of the 20 countries, at 23,903 per annum (2015), while its financial services sector was the region’s sixth largest in proportion to domestic GDP. The IMF also reported that The Bahamian financial services industry, due to the “offshore” sector has assets equivalent to 150-200 percent of GDP and has a comparatively higher ratio of bank branches to population than in many other Latin American and Caribbean countries. The IMF assessed Bahamas GDP at USD $8.7 billion in 2015. (www.imf.org/external/country/BHS/index.htm )

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 .

Foreign Exchange and Remittances

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 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.

Sovereign Wealth Funds

The Bahamas does not maintain a sovereign wealth fund.

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. Some of the SOEs include:

  • Bahamasair Holdings Ltd. (National Flag Carrier)
  • Bank of The Bahamas
  • Bahamas Electricity Corporation now Bahamas Power and Light (BPL)
  • 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 Bahamas Power and Light (BPL) are the largest public corporations in The Bahamas and, in general, maintain a monopoly over the provision of utility services. However, large resort complexes or other private real estate developments, especially those in locations in which there is limited government capacity to own and operate a utility, may be required to provide their own water and sewerage facilities. In addition, the Grand Bahamas Port Authority, which operates a Free Trade Area in Freeport on Grand Bahama Island, has its own licensing and regulatory authority for the provision of electricity, water, and sanitation services.

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 supporters, and broader civil society. Some board memberships are paid while others provide nominal subventions; 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 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 2 percent of its shares to a trust to fund social programs, but board and management control remains with the investors. Recently Cable and Wireless was acquired by American owned Liberty Global and they assumed majority control of the local provider.

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. In September 2016, CBL launched a new cellular service called ALIV which currently offers services on several of the more populated Bahamian islands. The Government has announced plans to issue a third cellular license by the end of 2017. Other areas in the telecommunications sector, such as radio and television broadcast and ISP (internet) services have been liberalized and are regulated by 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 market distortions created by Bahamasair. The airline has operated at an annual loss for more than two decades.

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, a wholly-owned subsidiary of Bahamas Electricity Corporation.

Electricity in The Bahamas remains expensive, unreliable, and of poor quality, which continues to hinder development of large-scale manufacturing in the country. The situation is unlikely to change until the Government approves increases in electricity rates to support needed improvements in power generation and distribution. One bright spot is in residential renewable energy; URCA published initial regulations for grid-tied, residential solar in December 2016 and BPL is now issuing licenses for small-scale solar systems. The BPL business plan calls for utility-scale solar in the Family Islands, but this is not likely to occur in the near-term.

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.

There is a growing awareness of, and commitment to Responsible Business Conduct (RBC) by local and foreign companies operating in The Bahamas. Local and foreign 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. In addition, the Government requires licensed local gaming houses to commit three percent of their net profits to promote community services.

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 located on 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 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.

The government has laws to combat corruption of and by public officials but they appear to be inconsistently applied. Allegations of widespread patronage and the routine directing of contracts to party supporters and benefactors have been part of the political system for decades. Companies report that the procurement process is opaque and susceptible to corruption, and does not allow award decisions to be reviewed.

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 May 2016, a former state energy-company board member was convicted under the Prevention of Bribery Act, the first significant case brought under the Act since 1989.

The Government reports that it requires all Heads of Agreement to include anti-corruption provisions.

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.

In October 2016, the Government tabled a revised Freedom of Information bill in Parliament; that bill has not yet been enacted.

According to Transparency International’s 2016 Corruption Perceptions Index, The Bahamas ranked 24/176 with a score of 66/100. (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 2016.

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.

The Bahamas is not a signatory to either the U.N. Convention Against Corruption or the OECD Convention on Combating Bribery

Resources to Report Corruption

The contact at government agency or agencies responsible for combating corruption is:

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

The Bahamas has no history of politically motivated violence and, barring a few incidents leading up to the general elections in 2012, the political process is violence-free and transparent. Past incidents were relatively minor and included damage to political party installations, signage, billboards, and a few reported altercations between opposing party members.

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 (USD $210 per week).

Unemployment continues to be a significant problem. The Central Bank reported an unemployment rate of 11.6 percent for 2016. Proposed amendments to the labor laws in 2017 would require companies to consult with the Minister of Labor and bargaining units prior to lay-offs of 20 or more employees, and prioritize redundant employees for rehire.

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. 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.

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.

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.

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 USD $5.7 billion 2015 USD $8.85 billion http://www.worldbank.org/en/country 

http://tinyurl.com/MinFinance 

Foreign Direct Investment N/A N/A N/A
U.S. FDI in Partner Country ($M USD) N/A N/A 2015 USD $29.3 million http://www.bea.gov/international/
factsheet/factsheet.cfm
 
Host Country’s FDI in the United States ($M USD) N/A N/A 2015 USD $1.8 million http://www.bea.gov/international/
factsheet/factsheet.cfm
 
Total Inbound Stock of FDI as % host GDP N/A N/A 2015 0.3% databank.worldbank.org 

*Data are not available for the Bahamas
Table 3: Sources and Destination of FDI

Data are not available for the Bahamas
Table 4: Sources of Portfolio Investment

Data are not available for the Bahamas

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

2017 Investment Climate Statements: Bahamas, The
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