By Mark A Turnquest
Op-Ed Contributor
National policymakers in the Bahamas have focused on top-down economic strategies to improve the tourism, financial services and construction industries for almost 40 years.
However, after all is said and done, the Bahamas, as of December 2012, is in economic distress for a number of reasons, by my estimation:
- The country’s sovereign rating was down-graded from BBB1 to BBB (Standard and Poor’s) and from A3 to Baa1 (Moody’s)
- Almost $5 Billion in national debt, having grown from 31.7 percent of GDP in 2007 to 53 percent of GDP in 2012
- A $550 million-plus deficit (expected to grow to $671 million (2013/14)
- A 15 percent unemployment rate (one could elevate up to 20 percent in 2013)
- Low GDP ($8 billion) and low projected economic growth (2.5 percent)
- A social welfare society (with an enormous increase in social safety net transfers)
- Stagnated tourism, financial services and construction industries
- An unmotivated and demoralized small business sector
The former government had mismanaged the economy with a double edged sword in 2007-2012 and made the recent recession worse, from policies like the costly dredging of the Nassau Harbour, unsuccessful air travel rebates, unwarranted tax increasse in the vulnerable automobile industry and by terminating concessions in the manufacturing industry, along with the road works project.
As a result, the small- and medium-sized enterprises (SMEs) in the Bahamas were neglected and hundreds closed. The ultimate destruction was that SMEs’ contribution to GDP declined from 5 percent (2007) to 2 percent (2012).
Top-down strategies, which focus on improving the tourism, financial services and construction industries, did not significantly increase GDP ($8 billion) to cover national expenses and reduce the national debt / deficit. To cover recurrent expenses and reduce the national deficit and debt, our annual GDP needs to be in the vicinity of $12 billion.
Along with tax (property, income, value added) reform and economic diversification, the only way our country is going to obtain an annual GDP of $12 billion is to focus on bottom-up economic strategies to improve the SME sector.
There must be a rise of the small businessman! National policymakers over the years casually indicated that small businesses were the pillars of the Bahamas’ economy and that there must be a focus on economic diversification.
However, as of the spring, there was not significant evidence that they were serious about trying to improve the small business sector and diversify the economy.
The new government seems to understand that bottom up economic strategies to improve the SME sector is the way to go in the future. This is evident because of the following:
- The legislation of the Small Business Act in 2013
- The creation of the Small Business Development Agency in 2013
- Conducting market research in order to improve the SME sector
- Formulating a long overdue strategic plan for SME development
- The fair road works compensation program
- The renewal of concessions for manufacturers
- Formulating new innovative agriculture strategies
- A new strategic approach to develop SMEs in the Family Islands
- Focus on reviving dormant industries and enhancing existing ones
- Formulating clustering strategies for productive and creative markets
- Formulating a creative national financial lending mechanism for SMEs
Only serious attention to develop the SME sector in the Bahamas can save our nation from financial collapse.
Moody’s and Standard and Poor’s will improve our Sovereign rating in 2013 because the PLP government is conducting the necessary bottom up economic strategies to correct the failed top-down economic strategies by the former FNM government.
Mark Turnquest can be reached at markaturnquest@gmail.com.
Note: the opinions expressed in Caribbean Journal Op-Eds are those of the author and do not necessarily reflect the views of the Caribbean Journal.