The Commonwealth of The Bahamas is a 100,000 square mile 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 Gross Domestic Product (GDP) per capita of $32,218 (2018) that conducts more than 85 percent of its international trade with the United States. The Free National Movement (FNM) government, elected in May 2017, has sought to manage an economy dealing with the dual, unprecedented economic crises wrought by the passage of Hurricane Dorian in September 2019 and the effects of the global COVID-19 pandemic, projected to inflict combined losses of $7.5 billion or 60 percent of GDP. According to Standard & Poors April 2020 forecasts, The Bahamas’ GDP growth is expected to fall by an unprecedented 16 percent in 2020 due to COVID-19. Full economic recovery is not anticipated until 2022, subject primarily to the buoyancy of the tourism sector and post-pandemic global economic recovery. Both the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) predict The Bahamas could suffer the most severe economic contraction of all Caribbean countries.
Tourism is the country’s largest sector, and economic growth is mainly driven by the industry and related services. With few natural resources and a limited industrial sector, the Bahamian economy is heavily dependent on tourism and, to a lesser degree, financial services. These sectors have traditionally attracted the majority of foreign direct investment (FDI). 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 seven million tourists, mostly American, visit the country annually. U. S. exports in 2019 to The Bahamas valued $3.06 billion, resulting in a trade surplus of $2.6 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 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 general services to billion-dollar resort developments to million-dollar homes on the major islands of the archipelago.
Positive aspects of The Bahamas’ investment climate include: political stability since independence in 1973, a parliamentary democracy since 1729, an English-speaking labor force, a well-capitalized and profitable financial services infrastructure, established rule of law and general respect for contracts, an 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 in certain sectors, a bureaucratic and inefficient investment approvals process, time consuming resolution of legal disputes, the high cost of labor, and 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. To remedy this deficiency, however, the current government has prioritized infrastructure projects focused on non-oil energy, including an LNG plant on New Providence and various solar projects on the Family Islands.
A major challenge to investment in the country is the prohibition of foreign investment in 15 areas of the economy. The current government initially set a goal of accession to the WTO by the end of 2019, which would require opening at least some of these protected sectors to foreign investment. However, the government later described the 2019 target as purely aspirational, confirming it was unlikely accession would take place before 2025.
The absence of transparent investment procedures and legislation is also problematic. U.S. and Bahamian companies alike report 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 the tender process for public contracts is not consistent, and that it is difficult to obtain information on the status of bids. In response, the FNM administration drafted a Public Procurement Bill, 2020 and launched an e-procurement and suppliers registry system to increase levels of accountability and transparency in governance. The government confirmed public consultation on the draft legislation is complete and it is being finalized for tabling in the House of Parliament by May 2020.
The Bahamas scored 64 out of 100 in Transparency International’s Corruption Perception Index in 2019 (where zero is perceived as highly corrupt and 100 is very transparent). This represents a slight improvement of the year on year score following a stabilization in 2018 and a marked increase in perceptions of corruption between 2014 and 2016. The Bahamas still lacks necessary legislation to establish an office of the ombudsman to strengthen access to information, nor has it fully enacted its Freedom of Information Bill or appointed an independent Information Commissioner. Although the current government is pursuing legislative reforms to strengthen further its investment policies, progress on these efforts has been mixed.
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 on their own. 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. The Small Business Development Centre (SBDC) has also made economic empowerment of women entrepreneurs and lessoning the income gap priorities.
|TI Corruption Perceptions Index||2019||64 of 100||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2020||119 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2019||N/A||https://www.globalinnovationindex.org/
|U.S. FDI in partner country (M USD, stock positions)||2018||18.5B||http://apps.bea.gov/
|World Bank GNI per capita||2018||30,520||http://data.worldbank.org/