The United States remained The Bahamas’ major trading partner.
American firms exported $725.0 million in goods and services to The
Bahamas in 1996, up from $660.5 million the previous year. Primary
American exports to The Bahamas were manufactured goods, machinery,
food, petroleum products, automobiles, and chemicals. On the other side
of the ledger, Bahamian commodity exports to the U.S. totaled $165.4
million in 1996 an increase from $156.0 in 1995. Primary Bahamian
exports to the U.S. were pharmaceuticals, chemicals, industrial salt,
lobster, and aragonite.
A1. OPENNESS TO FOREIGN INVESTMENT:
The Bahamian government actively encourages foreign investment in
certain sectors of the economy, particularly in tourism, banking,
agriculture, and manufacturing. At the time of its election in 1992,
the Ingraham administration announced its intention to privatize
several public corporations, including the hotel corporation, the
corporation providing ground services at Bahamian airports, and parts
of the state-owned Bahamas Telecommunications Corporation (BATELCO) and
The Bahamas Electricity Corporation (BEC), as well as to invite private
investment in the national air carrier, BAHAMASAIR.
In continuing its efforts to sell off all government-owned hotels,
the FNM Government sold three hotels in Grand Bahama — The Grand
Bahama Beach Hotel (formerly the Holiday Inn), the Lucayan Beach Hotel
and Resort, and the Clarion Atlantik Beach Hotel — in April to
Hutchison Whampoa, joint owners of the Freeport container terminal.
These sales leave the Radisson Cable Beach Hotel in Nassau as the only
major publicly-owned hotel in The Bahamas. There are still two
government hotel properties for sale on Andros.
Certain businesses, however, are reserved exclusively for
Bahamians. Reserved businesses include: wholesale and retail
operations; commission agencies engaged in the import export trade;
real estate and domestic property management agencies; domestic
newspaper and magazine publication; domestic advertising and public
relations firms; nightclubs and restaurants, except specialty, gourmet
and ethnic restaurants; restaurants operating in a hotel, resort
complex or tourist attraction; security services; domestic distribution
and building supplies; construction companies, except for special
structures for which international expertise is required; personal
cosmetics beauty establishment; shallow water scale-fish, crustacean,
mollusks and sponge-fishing operations; auto and appliance service
operations; and public transportation.
The Bahamian government has targeted the following categories of
businesses for foreign investors: touristic resorts; upscale
condominium, time share and second home development; international
business centers; marinas; information and data processing services;
assembly industries; high-tech service; ship registration, repair and
other services; light manufacturing for export; agro-industries; food
processing; mariculture; banking and other financial services; captive
insurance; aircraft services; pharmaceutical manufacture; and off-shore
medical centers.
Benefits of investing in The Bahamas include a stable democratic
environment; relief from corporate and personal income taxes;
sophisticated financial services; timely repatriation of corporate
profits; proximity to the United States; extensive air links through
nearby Miami, Ft. Lauderdale and Orlando; excellent communications
links; a good pool of skilled professionals; excellent tourism and
conference facilities; and designation under the Caribbean Basin
Initiative (CBI), Canada’s CARIBCAN program and the European Union’s
Lome IV agreement. In 1993, the government announced the establishment
of The Bahamas Investment Authority (BIA) within the Office Of The
Prime Minister. BIA was designed to provide a “one-stop shop” to assist
foreign investors with approval of their investment applications and to
cut through further “red tape” for approved investments. Despite a slow
start, BIA remains the Bahamian government’s central point of contact
for foreign investment questions.
In practice, the vast majority of successful foreign investments in
The Bahamas have remained in the traditional areas of tourism and
banking. The Bahamian government is most interested in investments
which will generate local employment, particularly in white-collar or
skilled jobs. Large-scale projects in areas such as agriculture may be
difficult to fill since low-wage and low-skill jobs do not appeal to
most Bahamians, and because the government is reluctant to permit
foreign laborers in these jobs even on a temporary permit basis.
Whenever new foreign ventures are perceived as competitors to existing
Bahamian businesses or to the labor community, the government generally
responds to local concerns and withdraws the license of the foreign
business.
While The Bahamas has not yet enacted environmental legislation as
extensive as that in the United States, the BIA will require a full
accounting of the environmental impact of new industrial or
agricultural schemes and will not approve projects which would be
unable to pass United States environmental standards.
A2. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT:
The Bahamian government in 1993 repealed the Immovable Property
(Acquisition By Foreign Persons) Act, which required foreigners to
obtain approval from the National Economic Council to purchase real
property in the country, and replaced it with the International Persons
Landholding Act. Under the new law, approval is granted automatically
for non-Bahamians to purchase residential property of less than five
acres on any single island in The Bahamas, except where the property
constitutes over fifty 50 of the land area of a cay (small island) or
involves ownership of an airport or marina. The Bahamian government
hopes this new legislation will stimulate the second home vacation home
market and revive the once-vibrant real estate sector. The new law also
provides for a two-year real property tax exemption for foreign persons
acquiring undeveloped land in The Bahamas for development purposes,
provided that substantial development occurs during those two years.
A3. PROTECTION OF PROPERTY RIGHTS:
The Bahamas is a member of the World Intellectual Property
Organization (WIPO). Local copyright laws, which date to the 1970’s,
have not yet been revised to take into account recent developments in
communications and computer technology. Generally, copyright laws to
control piracy in satellite and videos industries are not enforced.
A4. FOREIGN TRADE ZONES FREE PORTS:
A free trade zone exists at Freeport on Grand Bahama Island. The
Hawksbill Creek agreement established Freeport, the country’s
second-largest town, as a free trade zone in 1954. Firms in Freeport
are granted the right to import materials duty-free, and enjoy other
tax advantages. In 1993, the Bahamian government extended most
Hawksbill Creek tax and duty exemptions through 2054, while withdrawing
exemptions on real property tax for foreign individuals and
corporations. Prime Minister Ingraham declared, however, that property
tax exemptions might still be granted to particular individuals on a
case-by-case basis.
A5. PERFORMANCE REQUIREMENTS INCENTIVES:
The Bahamas levies no taxes on personal or corporate income,
capital gains, dividends, interest, royalties, sales, estates,
inheritances, or payrolls. Foreign-owned businesses receiving tax
benefits are expected, however, to contribute generously to various
civic projects. The only direct tax is the real property tax. The tax
rates on real property are as follows:
Owner occupied:
(a) exempt from real property tax on the first $50,000 of assessed
value; (b) 0.75 percent per annum on the next $50,000 of assessed
value; (c) 1 percent per annum on assessed value in excess of $100,000.
Commercial property:
(a) 0.50 percent per annum on the first $50,000 of assessed value;
(b) 1 percent per annum on assessed value in excess of $50,000.
A gambling tax is also levied. The airport departure tax is $18 per
person. The government originally raised the harbor departure tax from
$7 to $20 per person in 1991; following protests from cruise ship
operators, however, the harbor departure tax was lowered to $15 in
1992.
The following incentives are available to foreign investors:
Bahamas ‘Industries Encouragement ActBahamas ‘: Under this law, the
government may exempt from duties the machinery, tools, equipment, and
raw materials imported to construct new factories. A list of
duty-exempt items is negotiated separately with each new venture.
Bahamas ‘Hotels Encouragement ActBahamas ‘: Under this law, new
hotels and resorts can be exempted from real property taxes for ten
years from the date the new facility opens. In addition, the act allows
the duty-free importation of materials used for the construction of new
facilities or the substantial renovation of existing facilities
acquired by new owners for a set period of time. The list of duty-free
items for each project and the duration of some duty-free windows are
negotiated separately for each venture.
Bahamas ‘Agricultural Manufacturers Act-Bahamas ‘: This law allows
any materials necessary for the construction, alteration, or repair of
an “agricultural factory,” as well as any machinery or supplies used in
establishing such a factory, to be imported duty free. An “agricultural
factory” refers to any factory established for the purpose of
manufacturing or preparing agricultural or horticultural produce of The
Bahamas for sale or export.
Bahamas ‘Spirits and Beer Manufacturers ActBahamas ‘: This law
provides for the duty-free importation of materials used in the
construction, alteration, or repair of approved liquor distilleries or
beer breweries and the duty-free importation of raw materials and
equipment for liquor or beer production.
The FY 97-98 government budget amended the Tariff Act to provide
duty free exemptions for construction and development in the Family
Islands.
A6. TRANSPARENCY OF THE REGULATORY SYSTEM:
The FNM government is committed to fostering an economic
environment in which free enterprise can flourish. The government acts
as regulator and facilitator of economic development. Its Investment
Policy promotes transparency, fair play, and equality of treatment. It
is designed to support an investment friendly climate where there is
unity between Bahamian and foreign investments, and fosters appropriate
linkages with all sectors of the economy, in particular, the tourism
and financial services sectors.
A7. CORRUPTION:
The FNM Government was elected on a platform of accountability
designed to change the country’s image and international reputation of
being a corrupt nation. Since it was elected in 1992, reports of
corruption have virtually disappeared.
A8. LABOR:
In 1996, the Bahamian labor force consisted of approximately
148,000 workers. The official unemployment rate was estimated at 10
percent. Unemployment is highest among youth and slightly higher for
women; unemployment outside Nassau and Freeport tends to be higher than
in the two major population centers. Considerable underemployment also
exists in The Bahamas. Despite these facts, wage rates, while
considerably lower than in the United States, tend to be higher than
elsewhere in the Caribbean.
The Government hopes to reduce unemployment by 5 percent by the
year 2002. Officials hope to achieve this by: (1) establishing duty
free zones on several Family Islands; (2) encouraging and training
young men to join the work force, and (3) training 3,000 persons at The
Bahamas Technical and Vocational Institute. Sun International plans to
employ 2,200 persons by the end of 1998 and create an additional 1,000
indirect jobs as a result of its Atlantis phase II expansion program.
This will make Sun the largest private sector employer in The Bahamas.
The Government established a minimum wage of $4.12 per hour for
hourly paid government workers in September 1996. The Government is
also considering a minimum wage for private sector workers in the
following jobs: sales people in department stores, cashiers in grocery
stores, security officers and domestic workers.
The Bahamas Industrial Tribunal officially opened in April 1997
with a backlog of more than 200 cases. The President of the tribunal
described it as a labor court designed to resolve conflicts in the
workplace, order reinstatements, and levy damages. The tribunal was
established as a result of a landmark 1992 Supreme Court ruling which
held that the Attorney General could not refer trade disputes to an
arbitrator without the employer’s consent. This ruling created a
backlog of labor cases in the already overloaded Supreme Court.
The Department of Labor is responsible for enforcing labor laws and
has a team of several inspectors who make on-site visits to enforce
occupational health and safety standards and investigate employee
concerns and complaints. The Department normally announces these
inspections ahead of time. The Fair Labor Standards Act limits the
regular workweek to 48 hours and requires at least one 24-hour rest
period per week, paid annual vacations, and employer contributions to
national insurance (the local equivalent of social security). The Act
also requires overtime payment (time and a half) for hours in excess of
the standard or time worked during public holidays. A 1988 law provides
for maternity leave and the right to re-employment after childbirth.
The Bahamian constitution specifically grants labor unions the
rights of free assembly and association. These rights are exercised
extensively, particularly in the hotel industry where 80 percent of the
employees are unionized. Unions operate without restrictions or
government control. The right to strike is limited under the Industrial
Relations Act, which requires that union members must vote to strike
and that the motion must be passed by a simple majority before a strike
can commence. The Ministry Of Labor oversees strike votes. While
labor-management relations in The Bahamas are generally good, they are
on occasion, strained. Major or prolonged strikes are rare. Labor
unions involved in disputes with foreign-owned enterprises have not
been above using the fact of foreign ownership as a lever to gain
popular support for their demands.
The Immigration Act requires foreigners to obtain work permits
before they can be employed in The Bahamas. The government will permit
foreign employees to work in a technical, supervisory, or managerial
capacity to initiate and operate industries, provided no similarly
qualified Bahamians are available for the job. Foreign business owners
are expected to train as many of their Bahamian employees as possible
to eventually fill technical and managerial positions. The FY 97-98
budget proposed a new tax to be levied against foreign employees. The
revenues will be used to pay for vocational training programs. While
work permits are normally granted impartially under established
criteria, there have been isolated instances in the past in which
Bahamian government officials have prolonged the process of renewing
work permits for foreign managers whose actions drew local labor
protests.
A9. EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT:
Formerly an oligopoly dominated by the subsidiaries of foreign
banks, the Bahamian banking system is in the process of changing.
Influencing these changes are several factors: increased competition in
the marketplace; newly available technology allowing state-of-the-art
electronic services; and political pressure to help small bankers. In
spite of these incipient changes, the banking system today remains
fundamentally as it has been for a long time. That is to say, it is
legally divided between domestic banks, which service consumers and
businesses operating in The Bahamas, and offshore commercial services
which operate in all markets except the domestic market.
The non-interventionist tradition of the Central Bank of The
Bahamas has allowed the industry to set interest rates and lending
standards independently–a scheme which has been highly profitable for
the banking industry, particularly in the areas of consumer and
mortgage credit as well as in commercial lending. Nevertheless, with
the excess liquidity created by years of cautious lending and a lack of
available investments, and with the crowding of banking institutions in
the country (there are five big international banks and three midsize
local institutions for a population of 260,000), competition has
increased significantly with interest rates dropping to the benefit of
both the consumer and the foreign investor. Still, most financing for
the private sector in The Bahamas comes from the relatively small
number of commercial banks licensed to operate domestically or from The
Bahamas Development Bank, which is a government-operated institution
established to provide medium and long-term financing to projects in
priority areas of the economy. Projects in The Bahamas are also
eligible, in some instances, for financing from the US Export-Import
Bank, the Overseas Private Investment Corporation (OPIC), or from
multilateral institutions such as the Inter-American Development Bank
(IDB).
Major Bahamian banking institutions which can provide financing for certain projects in The Bahamas include:
BANK OF THE BAHAMAS, LTD. P.O. BOX N-7118 Nassau, Bahamas Tel:(242)326-2560 Fax:(242)325-2762
BARCLAYS’ BANK P.O. BOX N-8350 Nassau, Bahamas Tel:(242)322-4921
BRITISH-AMERICAN BANK P.O. BOX N-7502 Nassau, Bahamas Tel:(242)327-5170 Fax:(242)327-5166
CANADIAN IMPERIAL BANK OF COMMERCE (CIBC) P.O. Box N-7125 Nassau, Bahamas Tel:(242)322-8455 Fax:(242)326-6552
CITIBANK BAHAMAS Tel.:(242)322-4240 Fax:(242)323-3088 COMMONWEALTH BANK P.O. BOX SS-6263 Nassau, Bahamas Tel.:(242)328-1854
ROYAL BANK OF CANADA P.O. BOX N-7537 Nassau, Bahamas Tel:(242)322-8700 Fax:(242)322-6381
A10. CONVERSION AND TRANSFER POLICIES:
Profits and investment capital may be repatriated freely.
Non-resident or foreign investors wishing to initiate operations in The
Bahamas must register their operations with the Central Bank. If the
projects are financed substantially by foreign currency transferred
into The Bahamas, they will be given “approved status.” This means that
all profits and dividends, as well as the proceeds from sales of such
business, can be converted from local currency into foreign currency at
any time. While foreign investors in The Bahamas enjoy complete freedom
to repatriate their investments and profits, The Bahamas does not offer
any incentives for investment in other developing countries.
A11. EXPROPRIATION AND COMPENSATION:
The Bahamian government has never expropriated a business and both
major political parties have stated that “nationalization will not be
an instrument of government policy.”
A12. DISPUTE SETTLEMENTS:
The Bahamas has been a member of the International Center For The
Settlement Of Investment Disputes since October 18, 1995. The Bahamas
in 1992 joined the Multilateral Investment Guarantee Agency (MIGA),
which insures investors against currency transfer restrictions,
expropriation, war and civil disturbances, and breach of contract by
member countries.
A13. POLITICAL VIOLENCE:
The Bahamas has no history of political violence.
B. BILATERAL INVESTMENT AGREEMENTS:
The Bahamas is in the process of negotiating an investment
protection agreement with the United Kingdom. There is no Bilateral
Investment Treaty (BIT) between The Bahamas and the United States.
Bahamas ‘Caribbean Basin Initiative (CBI): The Bahamas was
designated a beneficiary of the Caribbean Basin Initiative (CBI) in
1985. As a result, with certain restrictions, products manufactured in
the Bahamas qualify for duty-free entry into the United States. High
wage rates, however, combined with the country’s small manufacturing
and agricultural sectors, have hindered The Bahamas’ ability to exploit
these benefits. In addition, The Bahamas’ failure to enter negotiations
with the United States for a bilateral Tax Information Exchange
Agreement (TIEA) precluded the use of 936 (QPS II) credits for projects
in The Bahamas or the use of the convention tax benefit for business
conventions held in The Bahamas.
C. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS:
In 1992, OPIC approved two investment projects in The Bahamas. It
guaranteed up to $10.8 million in loans to the UNIROYAL Chemical
Company, Ltd. to assist in the purchase and refurbishment of a plant in
Freeport formerly owned by Gist-Brocades, Ltd. UNIROYAL currently uses
the plant to produce high performance antioxidants used in the
manufacture of plastics for export to North America, Europe, and Asia.
In addition, OPIC committed itself to loan up to $1.6 million to
LANDQUEST, ltd. for the development of the Princess Cays cruise ship
facility on Eleuthera island near Bannerman Town.
D. CAPITAL OUTFLOW POLICY:
Foreign investors in The Bahamas enjoy complete freedom of
repatriation on their investments and profits. The Bahamian government
does not offer any incentives for investment in other developing
countries.
Net inflows associated with transportation services were reduced by
$14.4 million to $34.3 million and government’s net overseas expenses
for services rendered were up by $6.7 million to $23.8 million. Other
miscellaneous services net outflows grew by an estimated $12.6 million
to $214.8 million.
E. MAJOR FOREIGN INVESTORS:
Major current foreign investments in The Bahamas include:
–Atlantis, a hotel, resort, and casino complex on Paradise Island
near Nassau recently purchased by the South African firm Sun Hotels
International; –Ruffin’s Crystal Palace Resort, Casino, And Convention
Center, operated by Host Marriott Corporation; –Coral Island
Underwater Observatory, Marine Park, and Hotel formerly owned by an
Israeli firm and recently sold to the Ruffin Group owners of the
Marriott Crystal Palace Hotel and Casino which also recently bought the
Fort Nassau Beach Hotel; –A container port facility opened in Freeport
by Hong Kong investors, Hutchison Whampoa; –Ambassador Beach Hotel
recently purchased from the Bahamian government by the Jamaican
company, Superclubs, under the trade name Breezes; –Royal Bahamian
Hotel recently purchased by Sandals company of Jamaica from the
Bahamian government; –The Winding Bay Hotel in Eleuthera owned by
Venta, an Italian group; –PFC Bahamas in Freeport, formerly known as
Syntex is now owned by the Swiss pharmaceutical firm Roche; –Uniroyal
Chemical plant manufacturing high performance antioxidants in Freeport;
–Walt Disney World, Orlando recently purchased Gorda Cay, a private
island; –Bahama Star, a large citrus farm being developed on Abaco
island by the B.G. Harmon Fruit Company of Florida; –Grand Bahama
Beach and Lucayan Beach Hotels sold to German owned Sun and Sea Estates
Limited; –Cotton Bay Club, Eleuthera recently purchased by Colombian
Carlos Sarmiento; –A large shrimp farm on Long Island operated by the
American firm Maritek; –A tropical fish farm operated on Walker’s Cay
by Aqua Life, Ltd.; –Princess Cays, a cruise ship landing facility on
Eleuthera Island owned by Landquest; –Club Med resorts on Paradise
Island, Eleuthera, and San Salvador; –Comfort Suites on Paradise
Island; –Freeport Lucaya Marina Village developed recently by European
investors; — Cable Bahamas, Ltd. recently established by a Canadian
group –Island Outpost Resort at Compass Point recently built by a
Jamaican music magnate.