The implementation of Value-Added Tax (VAT) in The Bahamas ...without a reduction in current revenue measures ...is a recipe for recession

Vat Move 'A Recipe For Recession'

By AVA TURNQUEST

Tribune Staff Reporter

aturnquest@tribunemedia.net

Nassau, The Bahamas




THE implementation of Value-Added Tax without a reduction in current revenue measures is a recipe for recession, former finance minister and economist Sir William Allen said yesterday.

Sir William said that a 2014 roll out of the new tax system was “not doable”, and likely to result in disappointment and frustration for both the government and the taxpayers.

He maintained that the economy was still “too weak” for an increase of the minimum wage as a way to offset the “pain” of VAT.

Sir William said: “Economic performance is very weak, the economy has not yet recovered from the 2007/2008 period. It is still very weak and the recovery is very anaemic. An increase to minimum wage will be contrary to improvement in the economy, it would work against the improvement of the economy. You have to consider the timing.”

He added: “I agree that VAT will not be without pain, because the very nature of VAT, it’s going to impact everybody in society.

The Government is proposing to implement VAT on July 1, 2014, at a rate of 15 per cent, with the hotel industry to be subject to a lower 10 per cent rate. The Government’s White Paper on tax reform proposes to exempt those companies with an annual turnover of $50,000 or less from having to pay VAT.

Sir William called on the government to clarify whether or not it intended to reduce current taxes to make room in the economy for VAT, adding that whether or not officials could strike a balance between existing taxes and the new structure would ultimately determine the strategy’s success.

“The public is not expecting to pay the same level of custom’s duties along with everything. If that is so, there is gonna be hell to pay in this economy.”

“They’re not speaking to that clearly enough.”

Another worrisome component of the government’s VAT initiative is it’s timeline, according to Sir William, who posited that an ideal roll out would be three to five years.

He said: “My concern with the VAT is that they are seeking to put in place much too short a schedule. I don’t think that sufficient time has been given to putting it in place – to put into effect a VAT system by July 1, 2014, with the best of intentions, that is not doable in my view.”

Sir William said: “It is not doable, or if it is done it will be very inefficient and it’s going to lead to considerable disappointment on (government’s part) in terms of revenue that they collect and a lot of frustration on the part of the taxpayers.”

While Sir William noted that it was obvious the government was hard pressed to close the some three per cent gap between GDP revenue and expenditure, he maintained that it was highly improbable that the government could recoup that figure within the 2014/2015 fiscal year.

Sir William said: “You know what they do when you can tell something is wrong in an economy– if you look at the buildings or parks and they’re not maintained and if you listen to people and they’re not being paid - that’s how you know something is wrong, that’s an indication of fiscal pressure, money pressure.”

“And in light of that it’s going to be difficult to see how they are going to reduce their expenditure. There is going to be pressure for further expenditure.”

Pointing to the cost of the government’s anti-crime initiatives, which he commended, Sir William said: “I see nothing that permits them to reduce their expenditure, I don’t see any possibility on the horizon that permits for that.” 

Sir William said: “I think there’s a very valid rationale for putting [VAT] in place, the government is running a capital deficit and a current account deficit. The current account deficit is the most worrisome because that means that your revenue is not covering your ordinary expenses.

He said: “In the context of a household, if you have to borrow money to pay your rent you’re in trouble. If you have to borrow money to buy food you’re in trouble - that’s a current account expense.”

He added: “That’s a big number, if you consider a GDP of say $9 billion dollars, so that three per cent you’re talking about $270 million. You have to do something about that, it’s not a way that you can continue to operate for a long period of time and in fact we’ve been running like that for much too long.”

Nearly eight months after the release of the Government’s White Paper on Tax Reform, the former finance said he was still unimpressed with the PLP administration’s reform strategy.

Back in July, Tribune Business reported that Sir William was “doubtful” that the Government will hit the target timelines for its two key fiscal objectives – the introduction of Value-Added Tax (VAT) and eliminating the fiscal deficit by the 2015-2016 Budget year.

Sir Allen said that while he would prefer an income tax, the Bahamas has already sold itself as a “tax haven”.

“We boast,” he said, “all our marketing has been ‘no income tax’, and there is a certain fear in certain quarters that once you establish an income tax it’s only a matter of time before it impacts [offshore finance].

Sir William said: “We seek as much as we can to exclude the offshore sector from this tax on the assumption that one of the reasons why they come here is that they come to avoid income tax. One can argue whether that continues to be a valid position, but a lot has changed in the Bahamas.”

October 04, 2013

Tribune 242 

Bahamas Blog International

Welcome to the new Libya

By Abdel Bari Atwan:

WELCOME to the new Libya, a country ‘liberated’ by NATO which now finds itself without the oil revenues which could make it rich, with no security, no stability and assassinations and corruption at unprecedented levels.

Libyan cities destroyed

Last Friday [September 13], the Economist magazine published a report about the implosion of Libya. My attention was caught by the pictures that illustrated the piece – particularly one of some graffiti on the wall of a seafront cafe in the capital Tripoli. ‘The only way to Heaven is the way to the airport’ it read.

The joke is indicative of the troubled state of Libya nowadays following ‘liberation’ by NATO warplanes in the sky and the revolution on the ground which toppled the dictatorial regime of Muammar al-Ghadaffi.

A newborn showing effects of
 bombing with depleted uranium.

Recently I have met many people who are visiting London from Libya and they tell stories of life there which are hard to believe.

The capital Tripoli had no water or electricity for a whole week.

The armed militia dominate and rule the streets in the absence of a workable government, a national security establishment and basic municipal services.

Onoud Zanoussi, the 18-year-old daughter of Abdullah Zanoussi, the former chief of Ghadaffi’s security establishment, was kidnapped on her release from prison following seven months behind bars accused of entering her country illegally. She was abducted in front of the prison gates and the abductor was one of the guards!

Two years ago, the British and French business community sharpened their teeth and rubbed their hands with glee in anticipation of their share of Libyan reconstruction. Now there isn’t a single foreign businessman in Tripoli, all of them ran for their lives after the assassination of the American Ambassador and attacks on several foreign Embassies and Consulates.

During the NATO bombardment, news from Libya dominated the front pages and was the first news item on every Western and Arabic television station. There was 24-hour coverage about the Libyan Liberation miracle and the great victory achieved by NATO and the revolutionaries. Nowadays it is very rare to find a Western reporter there and even more rare to read a decent report about Libya and what is really going on there.

Oil was the main objective and the real reason for the NATO intervention; but oil production has all but ceased due to a strike by security guards on the oilfields and export terminal. The ostensible reason for this strike is the demand for a pay rise but there is another, equally powerful, motive – they are protesting the demands of various separatist movements who are calling for self-rule for oil-rich Barca (Cyrenaica) with its capital in Benghazi. Most of Libya’s oil reserves are situated here.

Rather than the local or national government, a militia is in control of most of the oilfields and the export terminal; it has started to sell huge amounts of oil on the black market and is trying to expand these activities leading Ali Zidan, the Prime Minister, to threaten to bomb any unauthorized oil tanker going anywhere near these sites.

The irony is that the same thing is happening now in Eastern Syria, where the militia and local tribes are in control of the oilfields in Deir Al-Zour, refining the oil themselves by hand and selling it on illegally. The same thing is still happening in the south of Iraq.

Iraq and Libya, of course, have ‘benefited’ from Western intervention and Britain and France have been proud to repeat what the mother of the West (the U.S.) used to say about Iraq; first in Libya and now – of negotiations fail – in Syria. That is: intervention will bestow great sophistication on the affected country which will immediately become a model of prosperity and stability and lead the way for other Arab countries, which are ruled by dictators, to invite and welcome military intervention. In fact, this model has produced the worst kind of anarchy, failed security, political collapse and disintegration of the state.

Chaos rules in Libya. The assassination of politicians and journalists has become normal news in today’s Libya, to the extent that Colonel Yussef Ali al-Asseifar – who was charged with investigating a rash of assassinations and arresting the people behind it – was himself assassinated on August 29 when men from an unidentified group put a bomb under his car.

On the anniversary of 9/11 last week, a huge bomb ripped through the Foreign Ministry building in Benghazi.

Human Rights Watch has highlighted another atrocity in Tripoli on August 26, 2013, at the Main Corrections and Rehabilitation Institution, known by its former name al-Roueimy, where around 500 detainees, including five women, were being held. The prisoners were on hunger strike to protest the fact that they were detained without charge and in the absence of a fair trial. Unable to produce its own security detail, the government called in the Supreme Security Committee – composed of former anti-Gadaffi militiamen – to put down the uprising. Militia forces stormed the prison and shot the prisoners with live ammunition, wounding 19 people.

The Prime Minister of Libya – Awadh al-Barassi – resigned on 4 August and was replaced by Ali Zeidan. Then, on 18 August, the interior minister, Mohammed al-Sheikh, resigned after only three months in post. He cited lack of support from Ali Zeidan and the government’s failure to deal with widespread unrest and violence, to gain the people’s trust, or to adequately fund state agencies to provide the most basic services.

Libya is simply disintegrating along tribal and geographical fault lines. Most of its people are in state of fury, including the Berbers in the south, and national reconciliation is a distant prospect.

Popular frustration is at its peak; yet when demonstrators took to the streets outside the barracks of the powerful ‘Libyan Shield Brigade’ to protest the unwarranted power of the militia, 31 people of their number were shot dead. The militia act completely outside the law.

Suleiman Kjam, a member of the parliamentarian committee for Energy, told a Bloomsberg reporter that the government is now spending its financial reserves after the production of oil dropped from 1.4 million barrels per day earlier this year to less than 160,000 bpd. He warned that if this situation continues, in the next few months, the government will not be able to pay the salaries of its employees.

The Gadaffi regime – and we say this for the millionth time – was an oppressive dictatorship but Libya nowadays, with corruption at it peak and security non-existent, is difficult to understand or accept. Especially when we remember that Libya was liberated by the most sophisticated and advanced countries on the planet, according to Western criteria.

Mr. Mohammad Abdel Azziz, the Libyan foreign minister, surprised many in the West and Arab world alike on 4 September when he objected to imminent U.S. air strikes on Syria at a special meeting of the Arab League he was chairing to discuss possible intervention.

Maybe Mr. Abdel Azziz, like many of his Libyan people, has formed his opinions as a result of the experiences of his own countrymen after Western military intervention.

We hope that the people of other Arab countries, and particularly Syria, will learn from the Libyan example.

It is true that some suggest that this is a temporary state of affairs for Libya and that following this transitory period, stability will reign. They advise us to be patient.

We hope their prophecy will prove to be correct but remain extremely skeptical with Iraq and Afghanistan also before our eyes. (Global Research) 

October 03, 2013

Granma.cu 

Bahamas Blog International

If the implementation of Value Added Tax (VAT) in The Bahamas is “done right” ...it could be the solution to the nation’s financial problems

Vat Deadline 'A Recipe For Disasters' Warns Fnm

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

Nassau, The Bahamas


THE Christie administration is “preparing a recipe for disaster” by continuing to forge ahead with an aggressive schedule for Value Added Tax implementation, FNM chairman Daron Cash warned.

 

While the government has said it will stick to its July 1, 2014 deadline for enactment of the new taxation system, the draft legislation has yet to be completed – despite the fact that State Finance Minister Michael Halkitis originally promised this would be done as early as May of this year.

 

In addition, the promised education campaign has yet to begin, resulting in widespread confusion about what VAT will mean for consumers or businesses.

 

For these reasons, the FNM suggested that VAT’s implementation date be rescheduled, saying moving too soon could do more harm than good to many Bahamians who are already struggling to make ends meet.

 

“It means increased taxation,” Mr Cash said, “there is no question that the Ministers of Finance, both the Prime Minister and Mr Halkitis, have been less than full in their explanation to the Bahamian people.

 

“At the end of the day they will be taking more money out of the average person’s pockets. But the sad reality is that they have done such an abysmal job in ensuring that the average person understands what it’s going to mean for them on a daily basis.

 

“While breadbasket items might very well be minimally impacted by VAT, the reality is we are talking about 15 per cent in a lot of areas higher than what people are paying now. So 15 per cent on top of already high cost items will lead to the average person having higher bills at the end of the month.”

 

However, if VAT is “done right”, Mr Cash believes it could be the solution to the country’s financial problems.

 

“We have always said that even an FNM government would have considered VAT. But you cannot impose new taxes in an already fragile economy. They appear to be doing too much too soon.

 

“If you listen to members of the business community, many of them don’t have the information to be able to plan sensibly, reasonably and in a sufficient time for their businesses to be able to adjust.”

 

Mr Cash urged the government to reconsider the haste at which it is moving to pile more taxes on the average Bahamian.

 

October 02, 2013

 

Tribune 242

 

The Value Added Tax (VAT) debate in The Bahamas ...and the Bahamian politicians, politics and healthy political discourse involved...

Bahamas will ‘pay savagely’ for VAT politics

Consultant fears VAT delay would lead to credit downgrading, loss of policy choices

BY ALISON LOWE
Guardian Business Editor
alison@nasguard.com
Nassau, The Bahamas

The Bahamas will “pay savagely” if plans to implement valued added tax (VAT) gets “bogged down in politics”, a consultant to the government has warned, suggesting that delays in implementing the new revenue measure could lead to serious fiscal woes.

Noting some of the negative response to the proposed new regime to date, Ishmael Lightbourne told Guardian Business that there is “no question” that the new tax regime would represent good fodder for political fireworks when the legislation is introduced in Parliament.

However, pointing to the situation in crisis-stricken Greece, Lightbourne said that The Bahamas’ choice is one of either implementing VAT – or some other revenue raising measure – or being forced to implement new taxes or expenditure cutbacks by “external forces”, like the southern European country.

“I think the essential issue is the country’s fiscal position which is consistently showing a deficit gap, and that is not getting better from our present tax regime, and we are putting ourselves further and further into deficits and national debt,” he said.

“In that position, my focus has always been that if we do not get off that path, we’ll be losing a chance to voluntarily make these changes in terms of expanding the revenue base or reducing the cost of government. When we can’t do that ourselves, external forces come in and impose certain conditions. If you look at Greece, Greece has been under IMF watch or care, and they are having to do things like cut some 12,500 public servants. Those are the types of issues we want to try to avoid.”

Highlighting a continuous “gap” between government’s revenues and expenditures in recent years that has led to a spiralling national debt, which stands at 60 percent of GDP and is projected to hit $4.8 billion by the end of this fiscal year, Lightbourne suggested that The Bahamas’ fiscal situation could take a turn for the worst if a further downgrade occurs as a result of international agencies perceiving that The Bahamas is not committed to fiscal reform, which would increase borrowing costs.

The situation to date is already “pretty dismal”, he highlighted in a recent presentation to the Bahamas Society of Engineers, with the government borrowing to pay administrative and operational expenses such as salaries racking up around $200 million in recurrent deficits alone per year as a result.

To date, it is unclear exactly how the official opposition, the FNM, will respond to the VAT plans. Earlier this year, former junior finance minister Zhivargo Laing suggested that had the party been re-elected during the last

general election, it would have implemented VAT within two to three years of taking office.

In a recent statement, FNM Chairman Darron Cash suggested there need to be more “public discussion” on VAT and the government was not doing a good job on the education process.

The Democratic National Alliance, headed by former FNM Minister Branville McCartney, has recently come out against the tax. In an email sent to supporters yesterday entitled “VAT will destroy us”, the party which ran a slate of candidates in the last election tells supporters that if VAT is implemented, The Bahamas “will never be the same”.

“The cost of living will be going up, the cost of your food, your cable bill and school fees!” said the party.

During an appearance on Guardian Radio’s “Coffee Break”, DNA Chairman Andrew Wilson charged that the tax will destroy the middle class and suggested the government consider a sales tax instead.

Lightbourne said: “You have to look in the real world of politics, any opportunity that presents itself for the opposition to catapult itself in the political arena, they will take. That’s the nature of politics. Now whether they will do that to the detriment of country and allow government to be the fall guy, I’m not sure, [but] that may be their strategy...”

The VAT consultant said that in a recent presentation to the Killarney Constituency Association on VAT, Opposition Leader and Killarney MP Hubert Minnis “made no comment.”

He said that a presentation on VAT to the entire parliament has “yet to come off” but he is hopeful that one can be made shortly.

“They need to be able to see the issues and challenges that we face as a country and how we go about resolving those issues. I’m still hoping that will happen so we can bring to their attention the kind of decisions that need to be made. No matter who is government these issues will present themselves and won’t go away.”

“It’s not VAT or nothing, it’s got to be VAT or something, in order to close this enormous gap we have growing by the year,” he added.

Pauline Peters, another newly-hired VAT consultant and a former head of Grenada’s inland revenue service who led the implementation of VAT in that country, told Guardian Business that while that country may remain challenged with reducing its debt burden, the introduction of VAT in 2010 in Grenada has been helpful.

“It has certainly raised additional revenue that can assist in that process (of reducing debt). One would recognize that the revenue is going to the consolidated fund and the government would prioritize with respect to how that is spent.

“There would’ve been areas that would’ve benefited from increased revenue, such as infrastructural development in the country, the social safety net would’ve been increased, and other financial issues that government would’ve been dealing with.”

October 01, 2013

thenassauguardian

Bahamas Blog International

Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC), and the Value Added Tax (VAT) debate in The Bahamas

Tax Coalition Not Out To 'Kill Vat'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Nassau, The Bahamas


The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) proposed tax reform committee is aiming to bring “more leadership to the debate”, its chairman emphasising: “This isn’t a Coalition to kill VAT.”

 

Chester Cooper told Tribune Business that the BCCEC was keeping a “very open mind” on the direction the Bahamas should take, telling Tribune Business that tax reform in this nation was inevitable.

 

Providing more details on the BCCEC’s ‘Tax Coalition’ plans, first revealed by this newspaper last week, Mr Cooper said its purpose was effectively to ‘bridge the gap’ between the Government and private sector when it came to educating and informing the latter on VAT and other tax reforms.

 

He added that the Tax Reform Committee would also “examine the fundamentals” of the Government’s VAT proposal to see whether it was the best tax reform option for the Bahamas, of if a revised version - or entirely different tax - was the best option.

 

And Mr Cooper also acknowledged that the Committee was intended to “calm the hysteria” that had arisen over VAT and the Government’s wider tax reform plans, given that most commentators and statements on the issue were vehemently opposed to the proposals.

 

“In a nutshell, over the past several weeks, we have become a little concerned about the level of debate on the issue of VAT, and the level of criticism,” Mr Cooper told Tribune Business.

 

“We want to see this [the Committee] bring more leadership to the debate, organise and elevate it.”

 

Acknowledging that the Government had begun to ‘ramp up’ its VAT educational initiatives, via speeches and presentations, Mr Cooper said the proposed tax reform committee will be co-chaired by Robert Myers, the BCCEC’s vice-chairman, and PricewaterhouseCoopers (PwC) Bahamas accountant and partner, Gowon Bowe.

 

Its objective, he added, was to “bring together a broad private sector coalition” featuring all key industry associations in an effort to engage both the Government and private sector, analysing VAT’s likely impact on both the overall economy and individual sectors.

 

Mr Cooper promised that the Committee would “really look at the facts and fundamentals of what is being proposed, look at it scientifically, and look at the impact on some of the sectors”.

 

It will also arrange a series of meetings with sister Family Island Chambers, industry associations and their members, in collaboration with the Ministry of Finance, to educate them and explain how VAT will impact their businesses.

 

“By and large there’s been a bit of a feeding frenzy coming out and opposing VAT,” Mr Cooper told Tribune Business.

 

“We [the BCCEC] believe in national tax reform. When the rating agencies downgraded us were dismayed by that. We want to have fiscal prudence, but want the Government to have enough revenues and exercise restraint in spending.

 

“We expect, at the end of the day, to have a balanced, equitable tax structure, whether its VAT in its current form or revised form, or a new form of tax altogether.”

 

The BCCEC chairman added: “I think it’s important we find a way to calm the hysteria a little bit, and have a productive, mature discussion that provides leadership from the private sector in that regard.

 

“This is not a Coalition to kill VAT. I don’t want the public to get any form of impression, or the Government to get its back up, that this is a Coalition to kill it.

 

“If it happens, at the end of the day, that all the Associations and people we talk to are opposed to VAT in a very drastic way, because it’s detrimental and their analysis shows the impact is negative, we might take that position. At this point, the Chamber is very open-minded.”

 

The VAT debate has intensified since the Nassau Institute economic think-tank published the results of its study, which showed that the implementation of such a tax would cut Bahamian GDP by between $322-$483 million annually.

 

That sparked senior Ministry of Finance officials and consultants into lining up to slam the report’s findings. One, former PwC senior partner, Ishmael Lightbourne, last week blasted the Nassau Institute’s study as “one of the most extreme, ridiculous and exaggerated” reports he had ever seen.

 

Mr Cooper, though, pointed out that the Wall Street credit rating agencies, plus both the International Monetary Fund (IMF) and Inter-American Development Bank (IDB), had all emphasised the need for “significant tax reform in the Bahamas”.

 

“We want our economy to be fiscally sound, by generating enough revenues to service debt and build hospitals road and schools,” the BCCEC chairman added.

 

“What is important is for us to have a balanced, equitable tax structure that improves government revenues but, at the same time, not slow down the economy or disincentivise entrepreneurs from going into business or staying in business.

 

“We are also strong advocates for more efficiency and less waste in government so that we can have prudent spending of the revenues that we are now getting.

 

“There is also a need to stamp out corruption to minimise leakages, and the Government needs to demonstrate that it has the will and the teeth to implement appropriate controls so that we maximise the benefit to the country of the taxes that are now in place and the new taxes that might come.”

 

Emphasising that he did not believe in ‘Soap Box Advocacy’, Mr Cooper said: “Obviously, when I hear a few members opine that VAT will kill their business, I become concerned.

 

“Likewise any suggestion that VAT will slow down the economy, cause businesses to put investment on hold is a cause of concern for me a chairman of the BCCEC.”

 

And he told Tribune Business: “By and large, the public does not understand what is being proposed, and large elements of the business community have not zeroed in on VAT and its impact.

 

“We’re calling on the private sector to be more informed and engaged, and will do our part to make that happen.”

 

September 30, 2013

 

Tribune 242

 

Bahamas Blog International

 

Venezuelan Government Occupies Toilet Paper Factory to Fight “Economic War”

By Ewan Robertson:



Mérida, 23^rd September 2013 (Venezuelanalysis.com) – The Venezuelan government has ordered the occupation of one of the main producers of toilet paper in the country as part of the struggle to combat “shortages and sabotage” in the economy.

Vice President Jorge Arreaza said the factory occupation, announced on Friday, was in order to “verify the production, distribution and sale of toilet paper” from the Manpa S.A. company, located in the central state of Aragua. The measure was ordered by President Maduro after “violations to consumer rights” were discovered upon an inspection of the factory last week.

The occupation – which will last for 15 days – will be carried out by the government’s National Superintendency for Fair Costs and Prices (Sundecop) and responds to “the state’s obligation to guarantee the normal supply of products of basic necessity to the Venezuelan people”.

The move is part of a wider government offensive to combat shortages in certain basic products such as milk, toilet paper and corn flour, which along with rising prices have been affecting consumers this year.

During Sundecop’s occupation of the factory the consumer protection agency will examine processes of production, distribution and sale, as well as input requirements for the manufacture of the toilet paper.

Manpa S.A. will provide Sundecop with a liaison team to provide documentation on inventories, production costs, sales chains, production capacity and idle capacity, among other areas.

At the end of the occupation period Sundecop will release a report with information on any irregularities in the production and management of the factory, and corrective measures to be applied.

Economic war

Since the beginning of this year the Venezuelan economy has experienced rising prices and an increase in shortages of certain basic foods and hygiene products, while the bolivar currency has fallen sharply in value on the black market.

Officials argue that these trends are largely due to an “economic war” being waged by economic and political sectors opposed to the government, which seek to disturb economic activity through acts of sabotage, hoarding products to create scarcity, and attacking the national currency.

Meanwhile the conservative opposition blames problems in the economy on government price controls and restrictions on foreign currency flows, arguing that these interfere with the “natural” functioning of the market.

Earlier this month the government created the High Commission for the People’s Defence of the Economy in order to combat the “economic war”. It is directed personally by President Maduro and incorporates ministers and grassroots activists.

Measures adopted so far include stimulating production with subsidies, raising some price controls, increasing imports from neighbouring countries, increasing the flow of foreign currency to importers and priority sectors, inspecting producers of foodstuffs and food distribution networks, increasing monitoring of price control infractions, and establishing a telephone line for citizens to denounce acts of sabotage in the economy.

The government is also looking to modify the law combating the misuse of foreign currency allocations to businesses and individuals, in order to better prevent practices which abuse allocations of state-granted dollars and contribute to devaluing the national currency.

Authorities aim to reduce relative shortages of basic products to half their current level by the end of the year, which would bring them below the level considered “normal” by the country’s National Institute of Statistics.

Young Bahamian Entrepreneurs in the tourism industry ...and the revitalisation of The Bahamas as a competitive touristic destination

 

Negotiating With The Gatekeeper: Young Entrepreneurs And Tourism

By Noelle Khalila Nicolls
Tribune242
Nassau, The Bahamas



IF the movements made by a handful of young Bahamian professionals over the past year in tourism are any indication of the entrepreneurial thinking of their counterparts, then there is some hope for the future outlook of tourism in the Bahamas.

 

Entrepreneurs such as Alanna Rogers, Jamie Lewis, Adlai Kerr and Scott Turnquest, owners of tourism startups Tru Bahamian Food Tours, Islandz Tours, and BahamaGo, are breaking barriers in tourism by going head to head with established businesses in nontraditional areas of the business. Their starups are refreshing additions to the product offering, and reflect a break from the tunnel vision way of thinking about tourism in terms of traditional service jobs, foreign direct investment and hotels.

 

The tour business in the Bahamas is not an easy one to get into. Ancient companies such as Majestic Tours, the last of the original travel agents from the days of white-only operators, have an effective monopoly over the key supply chains of visitors. And yet, Majestic Tours only places 19 amongst the 22 sightseeing tours ranked on Trip Advisor for Nassau based activities.

 

In the top spot on the Trip Advisor listing is Tru Bahamian Food Tours, with Islandz Tours following closely behind in the number four spot. As far as Trip Advisor is concerned Majestic Tours is essentially a nobody, despite their relative operational size and level of business experience. Old school business minds with an analogue outlook would not understand the significance of such a ranking. They miss how the Internet acts as a great democratic equalizer in this digital world, particularly for those with Rocky-style ambition and fight.

 

These young entrepreneurs are attempting to solve long-standing problems that the industry has been incapable of solving. The Downtown Nassau Partnership has doled out big dollars to revitalise downtown, focusing in large part on upgrading infrastructure. Their efforts are all well and good, but the creation of new businesses that add value and enhance the downtown Nassau experience could do just as well in the revitalisation efforts.

 

That is what Tru Bahamian Food Tours and Islandz Tours have proven, with Islandz also operating in the merchandising side of the business, with authentic Bahamian souvenirs.

 

Innovation and the expansion of existing products and business services are critical for the revitalisation of the Bahamas as a destination, which is on the decline. Sometimes it seems as though leaders in the business sector are either comfortable or complacent. Either way, it is leading to a lack of improvement and modernisation in our tourism offerings.

 

As far as downtown goes, our city centre is a stale, dry place at night, notwithstanding the few bars and clubs that make an effort. Why haven’t existing businesses figured out a way to make downtown vibrant at night? Why haven’t entrepreneurs seen this need as an opportunity to create new businesses? When the Downtown Nassau Partnership ran its successful bar crawl promotion on the Heineken bus, I immediately wondered why a private group hadn’t made a successful business out of a Nassau at night bar hop.

 

Why haven’t downtown businesses figured out a way to bring more Bahamians downtown? Not all of them are convinced that central to downtown’s success is bringing the city back to life for Bahamians. In fact, there is a night spot off Bay Street that has a notorious reputation for being racist and discriminatory towards black Bahamians. During the recent Goombay Summer festival in Pompey Square, I heard a tourism official say, “It was good, except, not many tourists came out.” Meanwhile, the square was jam-packed with Bahamians, starved for outlets to enjoy downtown.

If businesses are supposed to solve problems, fill needs, serve markets, it seems we are going year to year without innovating solutions and creating products to plug the market gaps; without solving problems and keeping pace with the under-served and emerging markets.

 

The startup BahamaGo is doing just that. It is attempting to solve two critical problems that the Ministry of Tourism with its $80 million annual budget has been unable to do in its more than five decades. So far BahamaGo has had success, not because it has the financial resources to do so, but because it has financial accountability; it has the business motivation combined with passion and drive; and most importantly, it does not have an analogue mind.

 

The reality is most hotels in the Bahamas are in fact small hotels, strung amongst the Family Islands; they are using outdated hotel management tools with no access to the large online travel agencies (OTAs) such as Travelocity and Expedia. This lack of access to OTAs is a major challenge for small hotels, which cannot accept online bookings for their properties, and have no way of offering booking packages that pair airfare and accommodation.

 

Many hotels are using manual ledgers or telepathic room inventory management systems. BahamaGo is an niche OTA created by Bahamian entrepreneurs with technology and finance backgrounds who understand the specific demands and challenges of the local market and are centrally focused on meeting the local needs.

 

Unfortunately, BahamaGo is not only competing against the large OTAs, it is also competing against the Ministry of Tourism (MOT). The MOT is simultaneously pursuing a strategy to solve the same problem, investing big bucks to contract an international company. It is not that the MOT is oblivious to the problems; even though they often take a while, they do act. But it is their action that often undermines entrepreneurial opportunity. And in the long run, the bureaucracy often underserves the market.

 

Small startup businesses in the tourism sector quickly come to learn that the tourism market is not free and open; it has a gate keeper known as the MOT. Large developments, particularly that bring foreign direct investment, need not worry, because the political leadership which sets the tone in tourism always has time for that.

 

A business’ size, bank balance, credit history, experience and level of connections correlate to level of trust that is inherently granted by the gate keeper. The problem for small startups, particularly those put forward by young entrepreneurs, is obvious. They suffer the most having to navigate their own way around the bureaucratic gate keeper.

 

I don’t believe it is intentional, but the MOT is a large bureaucracy that in some instances undermines economic opportunities for small businesses and innovation in the tourism sector. Whereas business is about taking risks, the bureaucracy is about playing it safe (routine processes aimed at protecting the country’s resources and not screwing things up; utilizing public funds in low risk investments); the different modes of being naturally conflict with each other, particularly when it comes to dealing with small businesses.

 

A small business might offer a service that the MOT is willing to pay for, but the MOT will always defer to the company that is perceived to present fewer risks. From a public sector management point of view it makes sense, but we must acknowledge how and when it creates an unsupportive, even anti-competitive environment for small Bahamian businesses.

 

A group of artists and photographers were having a conversation online the other day about Bahamian photographers joining together to create an online stock images website. The discussion was lively and interesting, and when I made my contribution I threw a wrench in the mix. If the MOT operates a free stock images website in partnership with an international stock images company, how could a local company compete? Wouldn’t the MOT’s free service undermine the business efforts of the private group?

 

The MOT has its fingers in many pots, and it often has a possessive like sense of ownership over anything that it is involved in. This posture inevitably becomes the elephant in the room when a private business tries to enter the market.

 

For large players the point is not so relevant, but for young entrepreneurs and small businesses it is critical. At some point, there will have to be a negotiation, whether spoken or unspoken, or some sort of mediation, with the MOT, before the gates of opportunity are fully opened. In the meantime, these businesses are forced to work in spite of the MOT.

 

The events market is a classic area. The MOT is committed to events. However, when the MOT stages an event, it often undermines the capacity of a private business to operate or manage an event in the same market place. On the flip side, if a private individual or company has an event it will not be legitimized as a marketable event to the tourist market unless it has the stamp of approval of the gate keeper.

 

The People to People programme is another example. People to People is a signature MOT programme that pairs visitors with a volunteer Bahamian host to experience Bahamian life and culture. The People to People programme is a successful MOT programme. But, it could also be a great business. The MOT innovated a great product for an important niche sector, but might it not be the time for a Bahamian to pursue it as a private business venture?

 

We must ask the question, what is the MOT really about? Justifying its own existence – its $80 million budget – or supporting a local business market? Shouldn’t we encourage and celebrate the creation of businesses to service areas previously subsided by the MOT? In a thriving tourism market, shouldn’t the MOT theoretically become more and more specialized, because the needs of the market would create viable businesses opportunities that are filled by Bahamian businesses.

 

I am not certain our thinking has reached that level of consciousness. More than likely, if a Bahamian saw an opportunity to create a People to People like business, it would attract resistance from those in tourism responsible for People to People, particularly its founders. And if the MOT was so inclined, it could undermine the business efforts of the private individual.

 

In this respect I sympathise with the civil servants who work at the MOT, because their public service often means missing out on business opportunities. However, their experience in the MOT also creates for them a wealth of knowledge and networks that would be vital assets in business. Instead of normalising career service, I think civil servants should be encouraged to take their experience into the public sector, where they can step out and take on the risks of entrepreneurship.

For all of its shortcomings, there is no question, the MOT has over the years plugged important market gaps with its own innovations, not only in marketing, but also product development. The civil servants who work for the MOT do mean well and they work hard to fulfil the mission of the organisation. In many respects the public/private sector relationship that exists in the tourism industry is something to be celebrated and modelled.

 

But we must not let our pride and good intentions make us blind to our own weaknesses or limitations. From some angles, the enviable relationship between the MOT and the private sector looks incestuous.

 

As the need for product expansion and innovation becomes more and more critical and young entrepreneurs mature, Bahamians are not going to just pass up emerging opportunities. They are going to take risks and start new businesses that defy the logic of the analogue mind. The MOT must examine its role and function in light of this approaching wave.

 

Fundamentally, the MOT has a delicate balance to strike: it must act like a business (for marketing is a core business strategy aimed at achieving business objectives), but it should not be in business. And if its service to the business community is justified in support of big business, then it should also be justified in support of small businesses.

 

I am encouraged by young Bahamian entrepreneurs and I know they will do what is necessary despite the MOT or the wider business environment. There is no question, tourism in the Bahamas is badly in need of product development and modernization and it is the innovators, the young entrepreneurs, small and niche businesses that are the hope for the future.

 

As for the MOT, it if wants to do right by the future, it needs to engage in self-examination and create a way forward that reshapes its relationship with innovators, startups and small businesses, who possess different needs to established and large businesses.

 

The MOT’s challenge is to value and support small and niche businesses; facilitate modernisation in the small business sector; encourage product development, especially through diversification into non-traditional areas of the business; recognize and nourish the talents of true innovators. Fundamentally, the MOT is called to be a facilitator not a gatekeeper; be a partner not a competitor; and to truly support the business of tourism, not merely justify its own existence.

 

• (Noelle Khalila Nicolls is The Tribune’s Features Editor. Follow her on Twitter @explorebahamas. For questions or comments, email nnicolls@tribunemedia.net).

 

September 23, 2013

 

Tribune 242

 

Bahamas Blog International