By Joey Gaskins
As The Bahamas embarks on what will likely be a multi-year economic recovery effort in the wake of COVID-19, it has become markedly clear that business as usual will not get us where we need to be. The twin crises of Hurricane Dorian and the global pandemic have exposed our economy’s vulnerability to external shocks and highlighted the need to reform and diversify our existing economic development models.
We have begun to see signs of progress in the recommendations made by the Economic Recovery Committee, as well as the government’s recent announcement of the InvestBahamas initiative’s forward movement, which will reform the national investment policy and promotional strategy. These are broad, whole-of-government reforms that span vital areas such as the ease of doing business, business license procedures, cybersecurity, trade, concessions, incentives, corporate income taxes, intellectual property, labor, corporate social responsibility and other areas.
These reforms are timely considering recent global events. On July 22, I moderated the Ministry of Financial Services, Trade and Industry and Immigration’s Global Corporate Income Tax Webinar, with panelists including the attorney general, the minister of state for finance and the minister of financial services, trade and industry and immigration.
One of the major areas of discussion during the webinar was the imposition of the global corporate income tax and its potential to undermine The Bahamas’ value proposition as a low tax zone. These looming changes have naturally caused some anxiety among local stakeholders who fear the impact on the nation’s competitiveness and ability to attract foreign direct investors.
Speaking to this anxiety, Minster of State for Finance Kwasi Thompson reassured attendees that “what seems like a crisis may actually be an opportunity”. He went on to outline how The Bahamas must refocus its efforts to improve areas of weakness, highlight our jurisdictional strengths and remind the world of the advantages of doing business in The Bahamas if we are to compete in a changing global tax landscape. These activities would naturally produce new opportunities.
Make no mistake about it. While a global corporate income tax does represent a major challenge for our nation, we must not lose sight of the competitive advantages we currently possess beyond our tax rate: radiant sunshine, beautiful waters, political stability, a pool of talented business services practitioners and strategic geographic proximity to the US, among other factors. Local innovators and investors must build on this foundation — and they are.
In the past few weeks, we have seen the launch of the first local crowdfunding app for The Bahamas, as well as the announcement of a $1 million investment being made in Eleuthera-based startups by Disney Cruise Lines via a partnership with the Access Accelerator, Small Business Development Centre, and the Eleuthera Chamber of Commerce.
In 2020, the government laid the groundwork for the much-talked-about fintech hub with the passage of the Digital Assets and Registered Exchanges (DARE) legislation, which received rave reviews on the international scene as a unification of many of the best ideas from top jurisdictions all rolled into one. The Securities Commission of The Bahamas (SCB) has supported this legislation with the creation of a fintech accelerator — SCB FitLink.
We were also the first country in the world to roll out a Central Bank digital currency (CBDC), and we are seeing a rise in digital payment solutions and fintech-related opportunities within our borders. The fintech world is undoubtedly taking notice that The Bahamas is not just open for business but has intentions of leading the way and creating fertile ground for this burgeoning industry to flourish. We should be working to leverage this growing awareness for our continued economic development.
As we work to attract investors to The Bahamas, there are three huge elephants in the room that we must address.
The first issue is our lackluster ease of doing business rankings. The good news is that successive governments understand that this is an issue; measures are being taken to enhance the ease of doing business; and we have seen steady improvements in the rankings.
The second issue that we must address is the existential threat of climate change on our coast-dependent economy. This is yet another situation in which a crisis could potentially be an opportunity, as investments in renewable energy and coastal infrastructure create new industries and generate jobs. How we choose to respond, or not respond, has major implications for the long-term sustainable value of our investment prospects — our nation will literally sink or swim based on our response.
The third is that the nature of global investment is changing, and this means transforming both how we attract investors to The Bahamas and that there are unique opportunities for Bahamian entrepreneurs to access investment capital.
In the rapidly evolving global economy, 60 percent of all investment is no longer facilitated by banks or traditional financial institutions, but by venture capital firms, special vehicle investment funds, partnerships and family offices. In the first half of 2021, global venture capital funding exceeded records with $268.7 billion invested worldwide. Deal-making at this pace and volume is unprecedented.
Venture capital firms are sitting on mountains of cash thanks to low interest rates and a string of successful exits. They are eager to invest, especially in businesses focused on software, e-commerce, digital healthcare and fintech companies. This, along with a revived focus on the value of diversity and inclusion in investment decision-making, creates an amazing environment for forward-thinking Bahamian entrepreneurs to access new streams of capital. Are there things we could be doing to ensure Bahamian entrepreneurs can take advantage of these global investment trends?
We must work to find ways to ensure that Bahamian entrepreneurs are educated and equipped to attract funding for their business ideas from global investors aflush with cash in the wake of COVID-19.
If necessity really is the mother of invention, then it seems that we have no choice but to rethink the way we both attract investors and access investment as crucial inputs for our ongoing national development. While we have made incremental improvements, we are desperately in need of game-changing ideas to fully realize our potential and Bahamians with the skillsets necessary to implement these ideas.
Government reforms related to policies and processes, strategic global and domestic promotional efforts and entrepreneurial engagement that educates and equips innovative Bahamians to benefit from global financing trends are imperative. Indeed, our economic vitality as a nation may depend on it.
Joey Gaskins Jr is the senior partner at Bahamian consulting, communications and public engagement firm Open Current. He is a sociologist and human rights activist.