Posted by Joey Gaskins
While the Bahamas is scrambling for a likely multi-year economic recovery in the wake of COVID-19, it has become clear that business as usual is not going to 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 see the first signs of progress in the recommendations of the Economic Recovery Committee, as well as in the government’s recent announcement on the move forward of the InvestBahamas initiative, which will reform national investment policy and support strategy. These are comprehensive, general government reforms that cover key areas such as:
These reforms take timely account of recent global events. On July 22nd, I hosted the Department of Financial Services, Trade and Industry and Immigration Department’s Global Corporate Income Tax Webinar with panelists including the Attorney General, Minister of State for Finance and the Minister for Financial Services, Trade and Industry and Immigration.
One of the main areas of discussion during the webinar was the introduction of global corporate tax and its potential to undermine the Bahamas’ value proposition as a low tax zone. These emerging changes have of course caused some concern among local actors, who fear the implications for the country’s competitiveness and ability to attract foreign direct investment.
Faced with these concerns, Minister of State for Finance Kwasi Thompson assured attendees that “what looks like a crisis can actually be an opportunity”. He went on to outline how the Bahamas needs to realign its efforts to improve vulnerabilities, highlight our strengths in case law, and remind the world of the benefits of doing business in the Bahamas if we are to compete in a changing global tax landscape . Of course, new opportunities would arise from these activities.
Don’t make a mistake. While a global corporate tax is a major challenge for our country, we must not lose sight of the competitive advantages we currently have beyond our tax rate: bright sunshine, beautiful waters, political stability, a pool of talented business service practitioners and strategic geographical proximity to the US, among others. Local innovators and investors need to build on this foundation – and they are.
In the past few weeks we’ve seen the Bahamas launch the first local crowdfunding app, as well as the announcement of a $ 1 million investment in Eleuthera-based startups by Disney Cruise Lines through a partnership with the Access Accelerator. Small Business Development Center and the Eleuthera Chamber of Commerce.
In 2020, with the adoption of the DARE (Digital Assets and Registered Exchanges) legislation, the government laid the foundation for the much-discussed fintech hub, which received rave reviews as an association of many of the best ideas from the international scene, all of which were top jurisdictions . The Securities Commission of the Bahamas (SCB) supported this legislation by creating a fintech accelerator – SCB FitLink.
We were also the first country in the world to adopt a central bank digital currency (CBDC) and we are seeing an increase in digital payment solutions and fintech-related opportunities within our borders. The fintech world is undoubtedly realizing that not only is the Bahamas open to business, but the intention is to lead the way and create fertile ground for this emerging industry to thrive. We should work to use this growing awareness for our further economic development.
As we work to attract investors to the Bahamas, there are three giant elephants in the room that we need to address.
The first problem is our lackluster simplicity in creating company rankings. The good news is that successive governments understand that this is a problem; Measures are being taken to facilitate business dealings; and we’ve seen steady improvements in the rankings.
The second issue that we need to address is the existential threat to our coastal economy from climate change. This is another situation where a crisis could potentially be an opportunity as investments in renewable energy and coastal infrastructure create new industries and jobs. How we react or not react has a significant impact on the long-term sustainable value of our investment outlook – our nation will literally sink or float as a result of our reaction.
The third is that the nature of global investment is changing, and this means that both the way we attract investors to the Bahamas and the unique opportunities for Bahamian entrepreneurs to access investment capital are changing.
In the rapidly developing world economy, 60 percent of all investments are no longer made possible by banks or traditional financial institutions, but by venture capital firms, special vehicle funds, partnerships and family offices. In the first half of 2021, global venture capital financing surpassed records with $ 268.7 billion invested worldwide. Deal-making at this rate and volume is unparalleled.
Venture capital firms are sitting on piles of cash thanks to low interest rates and a number of successful exits. You like to invest, especially in companies with a focus on software, e-commerce, digital healthcare and fintech companies. This, along with a reinvigorated focus on the value of diversity and inclusion in investment decisions, creates an amazing environment for forward-thinking Bahamian entrepreneurs to access new capital flows. Are there things we could do to ensure that Bahamian entrepreneurs can benefit from these global investment trends?
We need to work to find ways to ensure Bahamian entrepreneurs are trained and equipped to raise funding for their business ideas from global investors littered with cash in the wake of COVID-19.
If necessity is truly inventive, we seem to have no choice but to rethink the way in which we both attract investors and have access to investment as a crucial input for our further national development. While we have made incremental improvements, we urgently need breakthrough ideas to realize our full potential and Bahamians with the skills to implement those ideas.
Government reforms to policies and processes, strategic global and national promotions, and entrepreneurship that trains and equips innovative Bahamas to capitalize on global funding trends are essential. Indeed, our economic vitality as a nation may depend on it.
Joey Gaskins Jr. is a Senior Partner at the Bahamian consulting, communications and public relations firm Open Current. He is a sociologist and human rights activist.