Business in Bahamas

Aired September 2004

The Bahamas is an archipelago of more than 700 islands, ideally located at the crossroads of the Americas and with easy access to the United States. Known for its political stability, The Bahamas has maintained a parliamentary democracy for 275 years and is a member of the British Commonwealth. An independent nation since 1973, The Bahamas has attracted numerous international companies drawn to the island nation’s stability, economic diversity, and high standard of living. The Bahamas now has 310,000 English-speaking inhabitants, most of them living on the country’s two most populated islands, which are New Providence, home of the capital, Nassau, and Grand Bahama Island, home of Freeport.

The economy of The Bahamas has traditionally focused on imports and services, and relies heavily on the tourism and financial services sectors to generate foreign-exchange earnings. The United States is the country’s top trading partner. The Bahamas’ current GDP is around 5.2 billion US dollars, with tourism contributing around 60 percent of that total and generating employment for half the country’s workforce. Financial services are the second most important sector to the Bahamian economy…

In 2004, The Bahamas’ GDP is expected to expand by three percent or more, a reflection of a healthy and vibrant economy with strong investment appeal. The Bahamian dollar is pegged to the US dollar, and the two currencies can be used interchangeably throughout the islands.

In a report in 2003, the International Monetary Fund points out that the Bahamas enjoys a stable economic environment thanks to a winning combination of low inflation, moderate public debt, a sound banking system and a solid country-wide credit rating.

The Bahamas’ business-friendly government has adopted long-term policies to ensure continued prosperity and has instituted a number of incentives to attract foreign investors. Other advantages The Bahamas offers investors are favorable tax status, state-of-the-art infrastructure, an educated workforce and an ideal location.

FINANCE

The Bahamas has been providing banking and trust services to the international financial community for more than 70 years, establishing a strong track record as a jurisdiction prepared to serve the diverse financial needs of both corporate and individual clients.

Now the country’s second-largest contributor to GDP after tourism, the financial services sector is expected to continue to grow and to play an even larger role in the country’s economy in the future.

Between 1999 and 2001, The Bahamas’ financial services sector came under close scrutiny from international financial regulators like the Financial Action Task Force and the OECD, creating a number of challenges for the country. As a result, The Bahamas overhauled its financial services sector and introduced a more stringent legislative platform, for example by passing eleven new financial-services legislative measures in 2000 alone.

These changes took The Bahamas off the international financial-services blacklist in 2001 and brought the country “Qualified Jurisdiction” status from the United States.
Although some challenges still exist, the government has committed itself to creating more fluid, open, efficient policies aimed at supporting both foreign and Bahamian investors. As an example, in 2002 the government created the Ministry of Financial Services and Investments in order to revitalize and restructure the financial-services sector. This further highlights the Bahamian Governments commitment to the growth of the Bahamas as an international financial center….

In 2003, the government introduced or reviewed legislation focused on ensuring streamlined “Know Your Customer” guidelines, IBCs, e-commerce and mutual funds. For example, the country’s introduction of an Investment Funds Act and “Smart Funds” prepares The Bahamas to move to the forefront of funds administration and to expand beyond its traditional strengths in private wealth management.

Aiming to serve as a Caribbean gateway for foreign financial institutions, The Bahamas is repositioning itself among the world’s top financial-services venues as an innovative, secure platform for international investors. One of its attractions is that it offers expertise in a broad range of areas, including banking, trusts, funds administration, investment advisory and insurance services.

INFRASTRUCTURE

As in any island economy, the government of The Bahamas has long made infrastructure a top priority in its efforts to attract continued foreign investment, and The Bahamas today boasts one of the best infrastructures in the Caribbean and is furthermore continuing these developments…

Providing efficient, high-quality air and sea transport is essential for an island nation, and today The Bahamas offers extensive domestic air and sea connections throughout the islands as well as a wide choice of international connections, including to major air-travel hubs and ports in the United States.

Concerning sea transport, The Bahamian maritime jurisdiction is now the world’s third-largest ship registry, home to a number of international leaders in maritime logistics. Both the capital, Nassau, and aptly named Freeport, which offers a tax- and duty-free environment, are pioneers in the region for logistics LCL and FCL cargo-carrying. All Bahamian ports are carefully monitored by customs services that operate to the highest international standards to ensure the safe passage of goods as well as the confiscation of contraband.

Another of The Bahamas’ success stories is its power infrastructure, which provides a dependable source of electrical power throughout the islands. The Bahamas has also established a world-class telecommunications infrastructure that includes high-speed Internet access, fiber-optic cable links, cellular TDMA and GSM, satellite and land-line services, all of which combine to provide seamless connections both locally and internationally.

TOURISM

With its great natural beauty, proximity to the United States and superior infrastructure, The Bahamas has long supported a thriving tourism sector, and tourism remains the country’s top industry. The sector has been attracting even more investment recently thanks to government programs aimed at diversifying the country’s cultural offerings and providing new opportunities in the tourism sector.

Both the government and the private sector have been initiating programs to attract more upscale tourism visitors and to promote real-estate development. The process of investing in tourism and real-estate has been made more investor-friendly, and current marketing campaigns are particularly focusing on opportunities in Nassau, Paradise Island and the outer Family islands.

Thanks to several multi-billion-dollar anchor investments, The Bahamas is now ranked among the world’s five-star venues for tourism and real estate. Recent mega-projects include a new Four Seasons Resort in Exuma, a one billion US dollar addition to the Atlantis Resort and casino on Paradise Island, and big-ticket real estate projects in Emerald Bay and Crab Cay. Clearly the focus is on high-end, value-added tourism projects throughout the islands.

Another major new trend concerning tourism and real estate investments in The Bahamas is that there has been a very positive spillover effect on the local economy. Local companies have taken advantage of both supply and consultation opportunities presented by major projects in tourism and real estate, and this has fostered an increase in local earning potential, professional experience and employment.

The Bahamas’ many attractions on land include Junkanoo, a colorful local combination of dance and music, and sea-loving visitors find The Bahamas a paradise. They can enjoy deep-sea fishing, scuba diving along the world’s third-longest barrier reef, bone fishing, and snorkeling around any of The Bahamas’ 2,400 island cays.

FREEPORT, GRAND BAHAMA

The Bahamas’ second-largest city, Freeport, located on Grand Bahama Island, will soon celebrate the fiftieth anniversary of the signing of the Hawksbill Creek Agreement, which established a duty-free zone in Freeport in 1955. Although a young settlement, Grand Bahama supports a diverse economy that includes maritime services, tourism, real estate development, financial and e-business services as well as commercial and industrial activities. Grand Bahama is currently experiencing a renaissance thanks to new investment and on-going development.

Grand Bahama’s superior infrastructure, close proximity to the United States and growing role as a leading international business hub are attracting investors in a wide range of activities. Much more than an industrial base and home of a top international port, Grand Bahama also offers excellent opportunities for investors in real estate, tourism and commercial projects.

Another major presence in Grand Bahama is the Bahamas Oil Refining Company, BORCO, a company with a long tradition of successful operations in Freeport. BORCO’s oil terminal on Grand Bahama is the largest in the Caribbean.