By NEIL HARTNELL <\/p>\n
Tribune Business Editor <\/p>\n
nhartnell@tribunemedia.net<\/a> <\/p>\n The Bahamas needs \"considerably\" more foreign direct investment (FDI) than the $522 million inflows it attracted in 2016, a governance reformer yesterday describing this as \"critical\" to faster economic growth. <\/p>\n Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that \"stimulating FDI is vital\" if the Bahamas is to hit the 5.5 per cent annual GDP growth rate identified as key to workforce stability. <\/p>\n He was speaking after the World Investment Report 2017, published by the United Nations Conference on Trade and Development (UNCTAD), revealed that Baha Mar's construction resumption boosted FDI flows to the Bahamas by 27.8 per cent in 2016. <\/p>\n The Bahamas attracted the second highest FDI inflow among small island developing states (SIDS), coming in behind only Jamaica, which gained $900 million in capital from overseas in 2016. <\/p>\n \"Although flows into the 10 Caribbean economies in the group slipped to $2 billion (down 13 per cent), they still absorbed almost 60 per cent of total inflows to the 29 SIDS members. The largest recipient economy in this region was Jamaica, followed by the Bahamas and Barbados,\" the World Investment Report said. <\/p>\n \"In the Bahamas, FDI flows bounced back by 28 per cent to $522 million, as FDI in construction picked up. Yet the volume remained less than one-third of its previous peaks ($1.6 billion in 2014 and $1.5 billion in 2011).\" <\/p>\n The report shows how the Bahamas 'put its eggs in one basket' with respect to Baha Mar, with the $4.2 billion Cable Beach-based resort project effectively 'the only game in town' when it came to FDI, and generating employment and economic activity, for the past five years. <\/p>\n The FDI flows measured by the World Investment Report bear this out, as the peaks coincide with Baha Mar's 2011 construction start and the 2014 'race to the finish' that ultimately failed. The project's 2015 Chapter 11 bankruptcy protection filing, and subsequent protracted legal battle, coincide with a sharp decline in capital invested in the Bahamas. <\/p>\n Between 2011 and 2014, FDI inflows to the Bahamas never dropped below $1 billion. Starting at $1.533 billion in 2011, they remained relatively constant at $1.073 billion and $1.133 billion in 2012 and 2013, respectively, before hitting $1.599 billion in 2014. <\/p>\n However, FDI inflows dropped by almost 75 per cent year-over-year in 2015 to hit $408 million, before recovering somewhat to $522 million due to Baha Mar's construction resumption and payments to creditors in late 2016. <\/p>\n \"While FDI in some leading FDI host economies (the Bahamas, Maldives and Mauritius) bounced back, the majority saw their fragile FDI diminish,\" the World Investment Report said of SIDS generally. \" <\/p>\n \"The top five FDI recipients in 2016 - Jamaica, the Bahamas, Maldives, Mauritius and Fiji, in that order - accounted for 70 per cent of total FDI received by all SIDS.\" <\/p>\n While the Bahamas' rebound may look encouraging, the report said Caribbean rivals such as Jamaica and Trinidad & Tobago were using FDI more effectively to help diversify their economies. <\/p>\n And it added: \"Prospects for attracting more FDI for sustainable development remain dim. A sharp fall in the value of announced greenfield projects from 2015 to 2016 underscores the continuing challenge for SIDS of securing FDI.\" <\/p>\n Mr Myers, responding to the report's findings, suggested that the Bahamas needed at least $1 billion-plus annually in FDI if it was to have any chance of generating 5.5 per cent annual GDP growth. <\/p>\n The International Monetary Fund (IMF) identified that percentage as the threshold for slashing the existing 11.6 per cent unemployment rate in half, and the economy being able to absorb all high school graduates into its workforce with ease. <\/p>\n \"It's not enough,\" Mr Myers told Tribune Business of the Bahamas' increased 2016 FDI inflow. \"We've got to get our GDP up to 5.5 per cent.\" <\/p>\n He explained that the Bahamian economy's current model, with its focus on services exports via tourism and financial services, and narrow domestic investor base, meant it remained heavily reliant on FDI to generate much of its growth. <\/p>\n Mr Myers also highlighted structural impediments to domestic growth, including exchange controls and a relatively high interest rate environment, coupled with a thin manufacturing and export base. <\/p>\n \"FDI is a big one for us because manufacturing is absolutely zero to none. It's very low,\" he told Tribune Business. \"All you have is fish and exports like Polymers, aragonite, sand and salt. <\/p>\n \"There's also some petroleum products that really skew our GDP. It's money, money out and it doesn't positively impact our economy that much.\" <\/p>\n Emphasising that the Bahamas will continue to be heavily reliant on foreign capital for the foreseeable future, Mr Myers added: \"FDI is a big driver of our economy and always has been. <\/p>\n \"We've got to grow the economy, and FDI is a very large part of that. It's a driver of our overall GDP, which needs to be at 5.5 per cent. GDP growth is the gorilla in the room, and FDI is one part of that GDP gorilla. <\/p>\n \"We haven't done any specific modelling to understand that number, but I think that over a sustained period of time, if FDI could be $1.2 billion to $1.5 billion a year that's a start.\" <\/p>\n <\/p>\n Original post: <\/p>\n Bahamas needs 'much' more FDI than $522m | The Tribune - Bahamas Tribune<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net<\/a> The Bahamas needs \"considerably\" more foreign direct investment (FDI) than the $522 million inflows it attracted in 2016, a governance reformer yesterday describing this as \"critical\" to faster economic growth. Continue reading