THE CLIMATE FOR INVESTMENT AND TRADE IN THE COMMONWEALTH OF THE BAHAMAS

The Bahamas comprises some twenty islands lying just north of Cuba and fifty miles south east of Florida in the United States.  The population of The Bahamas is approximately 300,000, with some 70% of the citizens living in Nassau, the capital. There is a number of other smaller communities, scattered over the group of islands. 

The main sector of the Bahamian economy is tourism, which generates more than 60% of the Gross Domestic Product (GDP) and employs more than half of the labour force. Annually, 4 million tourists visit The Bahamas.

Other sectors of the economy are financial services, which is said to produce 15% of the GDP, agriculture and fisheries which contributes 5% of GDP and manufacturing which also generates 5% of GDP. The remaining 15% of economic contribution is made by other activities such as the retail and distributive trades.

The Bahamas is a net importer of goods, such as machinery and transport equipment, food, manufactures, chemicals and fuels.  The average annual import volume is valued at $1.86 billion; and a little over 30% of this is from the United States.  18% of imports is derived from South Korea, 17% comes from Italy and 6% is from Japan.

The Bahamas exports some $560 million worth of goods annually, consisting largely of crawfish, rum, salt and chemicals.  The major countries to which exports are sold are the United States, which absorbs 28%, France 17%, Germany, 14% and the UK 13%.

Approximately 60% of Government Revenue is derived from tariffs on imported goods; and the average import duty rate is 33%.  Another tax is Real Property Tax; and there is a Business Licence fee, charged on annual gross sales; but there is no tax on the incomes of individuals or companies.

With that brief overview of the economy, it is clear that the major area for investment in The Bahamas is tourism and related activities.  In order to encourage the continuous construction of hotels in The Bahamas, the Government has enacted legislation, called the Hotels Encouragement Act, which allows for the duty-free importation of all building supplies and furnishings for hotels.  In addition, hotels are able to seek exemption from Real Property Tax for up to thirty years.

As the Government of The Bahamas is the major landholder in the country, prime beachfront property for the construction of hotels can be leased on a long term basis or purchased from the Government for viable hotel projects.

The nearest point between The Bahamas and the United States is 50 miles.  As a result of this proximity, The Bahamas has always had a very vibrant real estate sector, where property is purchased by Americans and Canadians for the construction of  vacation and retirement homes. 

To encourage this sector, the Government has in place the International Persons Landholding Act, which permits foreign persons to purchase property for the construction of a vacation or retirement home, for their personal use, without having to obtain any governmental approvals.

Given the fact that The Bahamas is a major tourist destination in the Caribbean, there is a great demand for souvenir clothing and other memorabilia. It is estimated that the value of handicraft sold in The Bahamas to tourists yearly is in the region of $300 million.  As most of this is imported, the Government has been encouraging the development of a light manufacturing sector, to create jobs and save foreign exchange. 

In this regard, the Government has put in place the Industries Encouragement Act, which, like the Hotels Encouragement Act, allows for the duty-free importation of all raw materials, equipment, machinery and building supplies for the construction and operation of a manufacturing plant.  In addition, exemptions from Real Property Tax are granted for up to 15 years.  There is no tax on the export of manufactured goods.

Given the large number of visitors to The Bahamas each year, there is a great demand for food items such as salad greens and other vegetable crops, which do, in fact, thrive well in the mild Bahamian climate. 

To encourage the growth and development of the agricultural sector, the Government has instituted incentives that include the grant of farm-land for viable and sustainable farming activities and the duty-free importation of farm machinery and inputs such as seeds and fertilisers.

While there are many investment opportunities associated with the tourism-oriented economy of The Bahamas, there is also, by the same token, many trade opportunities available to Chinese producers and exporters. 

At present, there is very little direct trading link between The Bahamas and China; but with the establishment of the major containerised port in Freeport, Grand Bahama, owned by Hutchison Whampoa of Hong Kong, direct links can be established. 

This allows now for Chinese manufacturers to ship goods directly to The Bahamas, thus eliminating the “middle-man” and making goods available to the end-users at lower, competitive prices. 

In conclusion then, it could be said that the investment and trade environment in The Bahamas is favourable for both domestic and foreign entrepreneurs, and, as the economy continues to enjoy healthy growth, the prospects for the future are bright.