WHAT CAN WE DO TO STIMULATE OUR ECONOMY?
If we are dependent on external stimuli to jumpstart our economy, our choices are limited. Clearly, the recovery, or otherwise, of the US economy is something we can influence.
However, attracting foreign direct investment (FDI) to The Bahamas is something we can encourage despite the weak global capital markets.
The Government says that it maintains a pro-investor attitude coupled with a minimal red tape environment and a willingness to grant concessions where necessary in an effort to attract FDI.
If that is indeed the case, any success is yet to be seen.
As most informed Bahamians will readily attest, our recent years of prosperity were driven substantially by very significant inflows of foreign capital to the tune of $2.2 billion.
It is evident that we need an Atlantis type project, or several smaller projects with the same level of capital investment and employment generating capability, every other year or so if we are to enjoy any level of sustained economic growth.
This is the enormity of the challenge we face.
Foreign investors, however, look to invest where they can maximize long-term returns.
And it appears that The Bahamas does not feature high on the list of countries where satisfactory returns can be made on risk capital, particularly in the tourism sector.
A recent study on The Bahamas tourism sector reaches the alarming conclusion that Bahamas hotel properties make a 59 per cent lower return than comparable properties elsewhere in the Caribbean.
According to the study, while Bahamian hotels manage to earn a small rate premium, significantly higher operating expenses substantially negatively impact their profitability.
Room payroll expenses alone are 40 per cent higher, with power, mechanical and utility expenses 25 per cent higher, according to this analysis.
It is evident that we need to fundamentally change this business model if we are to be successful in attracting the level of investment we need in this sector.
The Bahamas is not a low cost destination and our product must, if it is to be priced to reflect the commercial realities of doing business in this country, be of a quality where we can attract a substantial premium in rates.
The repositioning of the tourism product will require a significant investment by both the private and public sector.
It appears that the hotel operators will not step up unless they are assured that the Government and the Hotel Unions understand the problem and are equally serious about making The Bahamas a competitive destination.
NOTE:
Always seek investment advice from a duly registered investment advisor who is affiliated with a licensed broker or bank or trust company.
For additional information on how to better handle your finances, tune in to "Money Matters" a radio programme that is designed to educate and inform listeners on the issue of life in regard to finances. The programme is aired on the third Tuesday of every month at 8:00 pm on Cool 96 FM Radio.
The topic for the next MONEY MATTERS Radio Programme is, "Can The People of Freeport Take Freeport to the Next Level." So tune in on Tuesday, October 21 8:00 pm
To submit questions, contact The Fidelity Group of Companies at Tel: 1 (242) 351-3010, Fax (242) 351-7977, Or write to P. O. Box F-43922.
The Fidelity Group of Companies is located in the First Commercial Centre Building, Office Suite #11, The Mall Drive, Freeport, Grand Bahama, The Bahamas.
E-Mail: barr@fidelityoffshore.com
CAPTION
JENNY BARR
