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U.S. Department of State
Bahamas Country Commercial Guide
Office of the Coordinator for Business Affairs
1995 COUNTRY COMMERCIAL GUIDE
FOR THE COMMONWEALTH OF THE BAHAMAS
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY
II. ECONOMIC TRENDS AND OUTLOOK
- MAJOR TRENDS AND OUTLOOK
- PRINCIPAL GROWTH SECTORS
- GOVERNMENT ROLE IN THE ECONOMY
- BALANCE OF PAYMENTS SITUATION
- QUALITY OF INFRASTRUCTURE SYSTEMS
III. POLITICAL ENVIRONMENT
- NATURE OF POLITICAL RELATIONS WITH THE UNITED STATES
- MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE
- BRIEF SYNOPSIS OF POLITICAL SYSTEM, SCHEDULE FOR ELECTIONS, AND
ORIENTATION OF MAJOR POLITICAL PARTIES
IV. MARKETING US PRODUCTS AND SERVICES
- DISTRIBUTION AND SALES CHANNELS
- USE OF AGENTS AND DISTRIBUTORS; FINDING A PARTNER
- FRANCHISING
- DIRECT MARKETING
- JOINT VENTURES/ LICENSING
- STEPS TO ESTABLISHING AN OFFICE
- SELLING FACTORS/ TECHNIQUES
- ADVERTISING AND TRADE PROMOTION
- PRICING PRODUCT
- SALES SERVICE/ CUSTOMER SUPPORT
- SELLING TO THE GOVERNMENT
- PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT
- NEED FOR A LOCAL ATTORNEY
V. LEADING SECTORS FOR US EXPORTS AND INVESTMENT
- BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES
PART I. TITLE
RANK OF SECTOR
NAME OF SECTOR
ITA CODE
PART II. NARRATIVE
PART III. DATABASE
- STATISTICS FOR 1994, 1995, 1996
- BEST PROSPECTS FOR AGRICULTURAL GOODS AND SERVICES
PART I. TITLE
PART II. NARRATIVE
PART III. PS/D COMMODITY HEADING
- MAJOR INVESTMENT OPPORTUNITIES
VI. TRADE REGULATIONS AND STANDARDS
- TRADE BARRIERS
- CUSTOMS VALUATION
- IMPORT LICENSES
- EXPORT CONTROLS
- IMPORT/EXPORT DOCUMENTATION
- TEMPORARY ENTRY
- LABELING/MARKING REQUIREMENTS
- PROHIBITED IMPORTS
- STANDARDS(E.G., ISO 9000 USAGE)
- FREE TRADE ZONES/WAREHOUSES
- SPECIAL IN PORT PRIVILEGES
- MEMBERSHIP IN FREE TRADE ARRANGEMENTS
VII. INVESTMENT CLIMATE
- OPENNESS TO FOREIGN INVESTMENT
- CONVERSION AND TRANSFER POLICIES
- EXPROPRIATION AND COMPENSATION
- DISPUTE SETTLEMENT
- POLITICAL VIOLENCE(AS IT MAY AFFECT INVESTMENTS)
- PERFORMANCE REQUIREMENTS/INCENTIVES
- RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
- PROTECTION OF PROPERTY RIGHTS(AS THEY PERTAIN TO INVESTMENTS)
- REGULATORY SYSTEM: LAWS AND PROCEDURES(AS THEY PERTAIN TO
INVESTMENTS)
- BILATERAL INVESTMENT AGREEMENTS
- OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
- LABOR
- FOREIGN TRADE ZONES/FREE PORTS
- CAPITAL OUTFLOW POLICY
- MAJOR FOREIGN INVESTORS
VIII. TRADE AND PROJECT FINANCING
- BRIEF DESCRIPTION OF BANKING SYSTEM
- FOREIGN EXCHANGE CONTROLS AFFECTING TRADING
- GENERAL FINANCING AVAILABILITY
- HOW TO FINANCE EXPORTS/ METHODS OF PAYMENT
- TYPES OF AVAILABLE EXPORT FINANCING AND INSURANCE
- PROJECT FINANCING AVAILABLE
IX. BUSINESS TRAVEL
- BUSINESS CUSTOMS
- TRAVEL ADVISORIES AND VISAS
- HOLIDAYS
- BUSINESS INFRASTRUCTURE
X. APPENDICES
A. COUNTRY DATA
- POPULATION
- POPULATION GROWTH(PERCENT)
- RELIGIONS
- GOVERNMENT SYSTEM
- LANGUAGES
- WORK WEEK
B. DOMESTIC ECONOMY(FOR 1994, 1995, 1996)
- GDP
- GDP GROWTH RATE 1996 ESTIMATE(PERCENT)
- GDP PER CAPITA
- GOVERNMENT SPENDING AS A PERCENT OF GDP
- INFLATION(PERCENT)
- UNEMPLOYMENT(PERCENT)
- FOREIGN EXCHANGE RESERVES
- AVERAGE EXCHANGE RATE FOR US $1.00
- DEBT SERVICE RATIO(RATIO OF PRINCIPAL AND INTEREST ON FOREIGN
DEBT TO FOREIGN INCOME)
- US ECONOMIC/MILITARY ASSISTANCE
I. EXECUTIVE SUMMARY
The Bahamas is a politically stable, middle-income developing country.
Following general elections in 1992, The Bahamas experienced a peaceful
transfer of power from the center-left Progressive Liberal Party (PLP),
which had governed the country for the preceding 25 years, to the
centrist Free National Movement (FNM).
The Bahamian government maintains the value of the Bahamian dollar on
par with the U.S. dollar. The government's primary monetary
consideration is the maintenance of sufficient foreign exchange reserves
to support the present value of its currency, pay for necessary imports,
and finance the repatriation of corporate profits. Although the Central
Bank in 1992 loosened some liquidity restraints dating back to 1987,
domestic Bahamian banks remained extremely conservative in lending and,
by early 1994, had accumulated such large Bahamian dollar reserves that
several were reluctant to accept new deposits.
Nearly two-thirds of the Bahamas' gross domestic product is derived from
tourism. Due to the country's status as a tax haven and off-shore
banking center, financial services constitute the second most important
sector of the Bahamian economy(after tourism, and excluding the public
sector), accounting for just over 10 percent of GDP. Agriculture and
industry together account for less than 10 percent of GDP. There is
little large-scale agriculture, and most agricultural products are
consumed domestically. The country also produces some chemicals and
pharmaceuticals for export, along with rum and industrial salt.
Despite its small size, The Bahamas is a major market for American
exports to the Caribbean, albeit one that has declined slowly in recent
years. With few domestic resources and little industry, The Bahamas
imports nearly all its food and manufactured goods. Approximately 55
percent of imports originate in the United States, and most Bahamian
purchases of third-country exports are acquired through American
distributors. American goods and services tend to be favored by
Bahamians because of cultural similarities and the exposure to heavy
domestic American advertising from Florida (which, at its closest point,
is only 45 miles away). In addition, the dominant tourist industry
prefers to purchase goods with which their clientele, the vast majority
of whom are Americans, is familiar.
For its part, the Bahamian government actively encourages the production
of locally produced items for use by the tourist industry and promotes
import substitution, albeit with only very modest success. While the
government has encouraged hotels to use domestically produced fruits,
vegetables, meat, and fish, the uncertainties of relying on small local
suppliers, which are restricted by government policies that discourage
the growth of large-scale domestic agriculture, have left the tourist
industry largely dependent upon imported foodstuffs.
The Bahamas has much to offer the potential investor: a stable
democratic environment, relief from personal and corporate income taxes,
timely repatriation of corporate profits, proximity to the United States
with extensive air and communication links, a good pool of skilled
professionals, and designation under the Caribbean Basin Initiative
(CBI) as well as Canada's CARIBCAN program and the European Union's Lome
IV Agreement. The Bahamas officially welcomes foreign investment in
tourism and banking, and has declared its interest in agricultural and
industrial investment as well as any investments which will generate
local employment, particularly in white-collar or skilled jobs.
Nevertheless, the Bahamian government and business community have been
suspicious of outside investment in non-traditional areas such as
industry, and such projects have generally faced a drawn-out approval
process and some local opposition. Therefore, the vast majority of
successful foreign investments have remained in the areas of tourism and
banking. Furthermore, the Bahamian government reserves retail and
wholesale outlets, non-specialty restaurants, most construction
projects, small hotels, and most small businesses exclusively for
Bahamians. Some categories of businesses are designated for possible
joint ventures between Bahamians and foreigners.
Finally, while corruption is admirably rare, some foreign businesses,
attracted by the tax advantages of investing in the Bahamas, have
complained that frequent requests for "voluntary" donations to civic
causes have constituted an unexpectedly high expense.
Country Commercial guides are available on the National Trade Data Bank
on CD-ROM or through the INTERNET. Please contact State-USA at 1-800-
STATE-USA for more information. To locate country commercial guides via
the INTERNET, please use the following world wide web address: WWW.STAT-
USA.gov. CCGS can also be ordered in hard copy or on diskette from the
National Technical Information Service (NTIS) at 1-800-553-NTIS.
II. ECONOMIC TRENDS AND OUTLOOK
Overview: The Bahamian economy will remain dependent upon tourism and
financial services (primarily the former) for the foreseeable future.
Although per capita income -- officially estimated at $11,610 in 1993 --
is among the highest in the region, economic growth will likely remain
slow as The Bahamas tries to recover from the decline in tourism
expenditures it suffered in the late 1980's and early 1990's.
This recovery is complicated by continuing high prices in the Bahamas,
intense competition from newer tourist destinations in the region,
continuing economic uncertainties in North America, and the continuing
structural shift of Caribbean tourism towards cruise travel (which
generates considerably less income for the tourist destination than
stopover visits). The takeover by new management and substantial
renovation of a major resort on Paradise Island near Nassau may provide
a near-term boost to tourism starting in 1995, but cannot by itself
reverse long-term trends.
High rates of unemployment and underemployment will likely remain
serious problems throughout the decade, particularly as large numbers of
children from a local "baby boom" in the 1970's reach the labor market
with inflated career expectations and relatively weak job skills.
Despite the Bahamian government's declared interest in economic
diversification, particularly through development of the agricultural
and industrial sectors, government inertia, domestic resistance to
outside investment perceived as potentially competitive with local
business, high labor costs, and competition from other countries in the
region more open to foreign investment in non-traditional areas will
likely continue to restrict the growth of these sectors.
Tourism: The Bahamas was a vacation destination for over 3.4 million
visitors in 1994, more than 13 times the country's total permanent
population. American visitors accounted for 82.5 percent of these total
arrivals. Tourism and related services account for over 60 percent of
GDP supplying the Bahamian job market, directly and indirectly, with two
thirds of the jobs in the Bahamas. Tourism activity weakened during
1994 as the sector faced continually high prices for tourist goods and
services, intense competition from other Caribbean destinations,
continuing uncertainties in the North American economy, increased
competition from other regional destinations, and a reduction in air
seats. Total arrivals declined 6.4 per cent, following a more moderate
0.2 percent drop in 1993. Growth in air arrivals slowed to 0.5 per cent
from 8.1 per cent in 1993, while the contraction on sea arrivals
increased twofold to 10.2 per cent.
Stopover arrivals posed an increase of 1.8 per cent to 1,516,035, less
than half the 6.4 per cent gain achieved in 1993. Notwithstanding the
stronger economic recovery in North America, growth in stopover visits
from the United States was lower at 3.7 per cent from 7.2 per cent in
1993.
Fewer cruise ships called at The Bahamas' ports during 1994, and as a
result, cruise visitors declined by 11.8 percent relative to 4.3 per
cent in 1993. Despite this relative decline, cruise passengers
continued to represent over 55 percent of all visitors to The Bahamas in
1993. The Ministry of Tourism reported that this relative decline in
cruise ship traffic in the face of continued growth in the cruise
industry in the Caribbean occurred because some cruise lines rerouted
their ships to other destinations in the region. Crime and
deteriorating standards of public behavior were also cited as the two
reasons for last year's decline in tourist arrivals.
Average room rates averaged at $72.34 per night, the average length of
stay advanced by 1.6 per cent to 6.3 days, and hotel occupancy rates
increased 5.6 per cent to 61 per cent. Consequently, gross earnings
from tourism grew by an estimated 2 per cent to $1.333 billion.
In other tourism developments, efforts to re-establish The Bahamas as a
premier destination for more upscale visitors received a major boost.
The first phase of Sun International's $250-million redevelopment
investment of the Paradise Island 1,150 room Atlantis resort and casino,
formerly owned by Merv Griffin Enterprises, was completed in December of
1994. The mega-resort boasts a 14-acre waterscape and includes the
largest outdoor aquarium in the world.
In the public sector, the government made notable progress in divestment
of its hotel properties. Both Lucayan Bay properties on Grand Bahama
were sold to European concerns during the final quarter of 1994, and the
Winding Bay Hotel in Eleuthera was sold to the Italian Venta Club. The
Crystal Palace Resort and Casino was sold to the Ruffin Group of the
United States with Host Marriott as the new managing group. Le Meridien
(Royal Bahamian) Hotel was sold to the Sandals Resort Group of Jamaica
and the Ambassador Beach Hotel, renamed "Breezes," was sold to the
Jamaica-based Super Clubs. Both Jamaican based groups plan to introduce
the "all-inclusive" resort idea which is new to The Bahamas, prohibits
tipping, and eliminates any unexpected extras. Large scale renovations
are planned or ongoing for all recently purchased hotels.
Financial services: Financial services, the second major sector of the
Bahamian economy, accounted for approximately 11 percent of GDP. There
were 415 licensed banks and trust companies in the country in 1993,
along with 5 retail banks. The financial sector generated $122.3
million in revenue in 1993 (up from $118.2 million in 1992) and employed
3,447 persons (up from 3,386 the previous year), 95 percent of whom were
Bahamians.
The Bahamas enacted the International Business Companies Act (IBC) in
1990 to enhance the country's status as a leading financial center. The
act served to simplify and reduce the cost of incorporating off-shore
companies in The Bahamas. By mid-1994, 24,200 IBC's -- "shell
corporations" which can be formed in a matter of hours with minimal
documentation -- had been created, although many appeared to be single-
transaction firms. In February 1991, The Bahamas also legalized the
formation of asset protection trusts. These trusts, used to place the
financial assets of wealthy individuals beyond the reach of domestic
courts in countries such as the United States, formed a growing portion
of Bahamian banking. The FNM has also made efforts to reduce government
"red tape" and expedite approval of foreign investment proposals. The
new Bahamas Investment Authority (BIA) was created in 1992 with this
purpose in mind, but it has had a slow start. 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 American environmental standards.
Manufacturing/industry: The manufacturing/industry sector in The
Bahamas accounted for only three percent of GDP in 1993. Exports of
manufactured goods -- primarily pharmaceuticals, petrochemicals, and rum
-- which had declined by 13.9 percent in 1993, fell again by 26.4
percent in 1994. A $30 million drop in chemical/pharmaceutical exports
occurred in 1994. The major factor in this decline was the reduction in
operations at the Syntex Pharmaceuticals plant in Freeport when the
parent corporation's patent expired for one of the plant's major
products, the pain reliever naproxin. In mid-1994, however,
unexpectedly high initial sales in the United States of the newly-
released over-the-counter version of naproxin (marketed as "Aleve") led
to a restart of naproxin production in Freeport.
Rum exports declined by $0.6 million (5.2%). Exports of aragonite (a
coral sand used in glass manufacturing and beach reclamation) fell by
$10 million (30%) to a relative total $1.1 million (28.7%) increase in
1993. Meanwhile salt exports registered growth of $1.6 million,
compared with a $4.6 million increase in 1993.
The 1954 Hawksbill Creek Agreement established a duty-free zone at
Freeport, The Bahamas' second-largest town, with a nearby industrial
park to encourage foreign industrial investment. Most Freeport tax and
duty exemptions were extended by legislation in 1993 through 2054.
Despite these advantages, Freeport has experienced slow and fitful
growth. In 1994, the Bahamian government announced that a Hong Kong
firm had agreed to spend $40 million to develop a container port in
Freeport which could spur further development there.
Agriculture and fisheries: Despite past difficulties due to stifling
government policies and the social attitude towards farming, the
agriculture and mariculture sectors saw positive changes in the past
year. Nevertheless, the sectors are still struggling to gain a
substantial foothold in the import dominated economy (The Bahamas
imports over $250 million in foodstuffs per year, representing about 80
percent of its food consumption.) The agriculture and mariculture
sectors, which together account for five percent of GDP and employ about
five percent of the work force full time (and a far larger portion of
the workforce on a temporary basis during the opening weeks of lobster
season experienced continued weakness last year. Governments of both
major political parties have, in recent years, announced efforts to
expand food production in order to reduce imports and generate foreign
exchange. The GCOB recognizes that in order to become self-sufficient
in agricultural new varieties of crops must be introduced and the
caliber of crops released on the market must improve. Therefore, the
Bahamian government actively seeks foreign investment aimed at
increasing agricultural exports, particularly specialty food items. The
government officially lists beef and pork production and processing,
fruits and nuts, dairy production, winter vegetables, and mariculture as
the areas in which it wishes to encourage foreign investment.
The Bahamian government, which insists that the agricultural sector
should employ more Bahamians, has been extremely reluctant to grant work
permits to foreign workers even in instances in which it is clear that
they would not displace Bahamian workers. Applications for any
substantial number of agricultural workers from other western hemisphere
nations are almost automatically refused. These policies are unlikely
to change as domestic unemployment and underemployment continue to grow.
Ironically, agricultural work has historically carried low prestige in
Bahamian society and agricultural investors have complained that
Bahamian field workers are generally unreliable. In light of this, The
Ministry of Agriculture and Fisheries established a registry of labour
to encourage Bahamians to find jobs with the major growers on the Family
Islands. Attitudes towards the registry have been positive thus far.
In early January 1995, over 770 Bahamians applied through this registry
for temporary farm jobs with an okra farm located in Andros.
Approximately 240,000 acres of prime uncultivated agricultural land and
plentiful supplies of fresh water exists throughout the islands but
agricultural production still remains primarily in the realm of small-
scale farming on the islands of Abaco, Andros, Eleuthera, and Grand
Bahama. Yet during the past year a growth in the formation of new
agricultural ventures occurred. High on the Hog Farm and Roland Fruit
Farm on Andros are private ventures which began leasing land from
Bahamian farmers to produce okra, squash, and watermelons for export to
the U.S. market and in January 1995 High on the Hog Farm exported about
$400,000 worth of produce. Morgan's Farm is another joint venture
between The Bahamas government, through the Bahamas Agricultural and
Industrial Corporation, and Brookwood Farms of Vero Beach, Florida that
formed to stimulate agricultural development and establish a training
network. Nevertheless, statistics on crop exports for the first six
months of 1994 revealed a decline of 10.6 per cent to 9,896.11 short
tons, with the rise in lime exports not supported by tomato exports as
was the case in 1993. Crops that remained to be produced were
grapefruits, oranges, pineapples, and winter vegetables.
In the area of mariculture, The Ministry of Agriculture and Fisheries
and the Department of Fisheries has declared a renewed commitment to the
sustainable and profitable use of Bahamian marine resources. One of the
goals of the Department of Fisheries is to develop the commercial
industry by promoting the under-utilized seafood products of the
Bahamas. The Ministry of Agriculture and Fisheries opened a new shrimp
hatchery in Nassau in 1993 with Taiwanese investment, and an American-
backed fish farm on Long Island, which was forced to cease production in
1992 due to losses, reopened for shrimp production in 1994. Another
shrimp farm remained in operation on Grand Bahama Island.
The value of fishery products for the first 9 months of 1994, aided by
an appreciable increase in crawfish prices, grew 21.2 per cent to $43.7
million. However, the corresponding weight declined by 0.3 million
pounds to 7.5 million pounds. Crawfish accounted for 52.5 per cent of
the total catch; scale fish, 27.0 per cent and conch meat, 19.4 per
cent. Export statistics for
1994 suggest that the value of marine products at $62.5 million exceeded
the $43.3 million for 1993, reinforced by a 26.7 per cent increase in
crawfish exports to $57.7 million. The corresponding weight for total
exports rose by 0.3 percent to 5.4 million pounds.
Livestock production accounts for one percent of the value of
agricultural exports, as most meat produced in the Bahamas is for
domestic consumption. The number and weight of livestock slaughtered
during the first six months of 1994 increased by 4.71 per cent and 6.56
per cent to 1,311 and 140,251 pounds, respectively. However, production
of broiler chickens contracted by 14 per cent to 6.7 million pounds and
eggs, by 6.0 per cent to 2.1 million dozens compared to the same period
of 1993.
On the investment front, Gladstone Farms on Andros Island is trying to
make The Bahamas self-sufficient in poultry production by establishing a
"contract growing" program that offers entrepreneurs the chance to buy
directly into the industry. The farm, which has 50 to 60 percent market
share of the domestic market, will set up a chicken hatchery and grower
plant for $200,000.
In an effort to protect domestic agricultural producers, the government
requires that a permit be granted to import more than 50 pounds of whole
chickens or chicken parts, lamb or mutton, or pork legs, shoulders, or
butts into The Bahamas. Permits are also required to import plants,
fruits, vegetables, and cut flowers. Permit applications have
occasionally been denied when the government determined that a surplus
existed in locally-grown products in the same category.
Construction: The construction industry benefited from a rebound in
commercial investments while residential activity awaited a more broad-
based upturn in the economy. According to the 1994 Central Bank
statistics, the number of approved projects rose by 12.2 percent to 452
units and the estimated value rose to $140.9 million.
The number and value of new residential approvals dropped by 168 (8.6%)
to 1780 units and $11.6 million (7.2%) to $149.5 million. The total
number of public sector permits was unchanged at 14, although the
attendant value fell by a third to $3.1 million. Building starts, which
contracted in number by 19, were boosted in value by $56.5 million.
This was primarily due to the first phase of Sun International's $125
million resort project.
Private housing starts fell in both value and number by 50 units and
$13.4 million respectively. Public sector starts rose by a single unit
and the value increased to $700,000. Progress continued on
electrification and harbor improvement projects, roads, and the
upgrading of the water and telecommunications systems.
U.S.-Bahamian trade: The United States remained The Bahamas' major
trading partner. American firms exported $685.4 million in goods and
services to The Bahamas in 1994, down from $704.1 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
$203.0 million in 1994, down from $348.2 million in 1993. Primary
Bahamian exports to the U.S. were pharmaceuticals, chemicals, industrial
salt, lobster, and aragonite.
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, 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 deduction tax benefit for business
conventions held in The Bahamas.
Balance of payments and trade: The Bahamas has an import-oriented
economy and relies heavily on tourism for foreign exchange. Due
primarily to declining exports, the country's trade deficit grew in 1994
to an estimated $903.2 million from $843.5 million the previous year.
Foreign exchange reserves at the end of 1994 were estimated at $173.6
million.
Government budget: The FY 1995-1996 Bahamian $819 million budget (the
Bahamian fiscal year runs from July to June) focuses on restoring
stability to public finances, maintaining the fixed exchange rate with
the U.S. dollar, and strengthening the role of the private sector in the
over-all economy. The budget provides for recurring expenditures of
$725 million, an increase of $43 million from the previous fiscal year.
An allocated $174 million will go to the repayment of interest and
principal on government debt and government borrowings will not exceed
$85 million. Capital expenditure is estimated at $94 million. The
Ministry of Education will again receive the largest share of the
recurring expenses with infrastructure improvements being allotted the
remaining amount. Recurring revenue is projected at $665 million for
1995-1996. This represents an increase of $25 million over the expected
revenue of $640 million for 1994-1995.
The budget aims to reduce taxes on a number of tourist products and on
real estate transactions to enhance the country's competitiveness in the
tourist market and attract foreign investment. Products that will
receive a reduction in stamp duty include: brandy, gin, rum, vodka, and
whiskey from #13 per proof gallon to $10 per proof gallon; cordials,
liqueurs, and other spirits were reduced by $1 per proof gallon to $10;
toilet water, cologne, and perfume is being reduced from 28 pre cent to
20 per cent; table linen, jewelry, and pearls will be reduced from 18
per cent to 10 per cent; duty on watches and clocks will experience a 3
per cent reduction; and all non-leather designer handbags will be
included under designer goods to receive a 20 per cent tax reduction.
The budget also provides for a reduction on customs duties on cigarettes
and a simultaneous step-up in efforts to control smuggling of cigarettes
and contraband.
Monetary and credit policy: The Bahamas' primary monetary strategy is
to maintain stability and expansion in foreign exchange reserves to
purchase essential imports, maintain the parity of the Bahamian and
American dollars, and finance repatriation of corporate profits.
Despite efforts by the Central Bank to ease consumer credit in January
1993 by removing the previous 35 percent down-payment requirement for
consumer loans, domestic Bahamian banks were so awash in liquidity by
mid-1994 that some banks were even refusing new Bahamian dollar
deposits. Net free cash reserves averaged $38.9 million in 1994
compared with $30 million the previous year. Central Bank authorities
blamed continuing conservatism in lending policies by Bahamian banks for
both consumer and business loans for the excess liquidity problem. The
average lending rates fell within a band of 10.17 - 11.87 per cent for
residential mortgages, to 14.49 - 17.94 per cent for consumer loans.
The Bahamian dollar remained pegged to the U.S. dollar at an exchange
rate of 1:1 and the Bahamian government reiterated its long-standing
commitment to maintain parity.
Inflation and unemployment: Consumer price inflation, measured as the
average variation in the retail price index, decelerated to 1.3 per cent
in 1994 from 2.7 per cent in 1993, with the year-on-year rise at 1.5 per
cent by end 1994.
While accurate unemployment figures were not available, unemployment
appeared to be between 20 and 25 percent, with higher rates among youth.
In addition, the Bahamas appeared to have a large but unreported
population of under-employed workers. The Bahamian labor force had an
estimated 136,900 workers. Bahamian government figures for both
consumer prices and employment were rough estimates; the statistics
department of the Ministry of Finance and planning was attempting to
improve information gathering in these areas.
III. POLITICAL ENVIRONMENT
The Bahamas is a constitutional multi-party parliamentary democracy and
a member of the Commonwealth of Nations. Queen Elizabeth II is the
nominal head of state and is represented in the Bahamas by an appointed
Governor General. The government is headed by an elected Prime Minister
and Parliament. Since 1992, the government has been controlled by the
centrist Free National Movement (FNM) of Prime Minister Hubert A.
Ingraham. The opposition center-left Progressive Liberal Party (PLP) is
led by Sir Lynden O. Pindling, who was Prime Minister from independence
in 1973 until 1992. Since the August 1992 general elections, which saw
a peaceful transfer of power between the two major political parties,
the FNM has held 32 seats in the 49-member House of Assembly, with the
other 17 held by the PLP. Under the constitution, the next general
elections must be held before August, 1997.
Both major political parties have enjoyed good relations with the
business community, and no serious political movement in Bahamian
history has ever advocated the nationalization of foreign property.
There is no Bahamian history of political violence or instability, and
politics tend to follow the British model of combining sometimes intense
rhetoric with courtly manners. The political issues of most interest to
the business community are bank secrecy and openness to foreign
investment. Both political parties favor maintaining the Bahamian
tradition of strict bank secrecy, believing this policy to be essential
to the maintenance of a thriving financial services sector. The current
government, however, pledged in 1994 to introduce new legislation, which
it believed was necessary to maintain the reputation of the Bahamian
banking system, tightening regulations against money-laundering. Both
political parties have stated that reducing unemployment is their major
priority, and both have said they welcome foreign investments which
would employ large numbers of Bahamians. Both parties, however, have
proven very responsive to local constituencies in instances where local
businesses or labor unions have charged that a particular foreign
project either failed to employ a sufficient number of Bahamians or
represented possible future competition to a Bahamian enterprise.
The Bahamian legal system is derived from British common law and
colonial legislation, although American and other models have been used
for some business legislation enacted since independence. The judiciary
is independent, appointed by the executive branch on the advice of the
judicial and legal services commission, and conducts fair and public
trials with the ultimate right to appeal judicial decisions to the
Commonwealth Privy Council. A large and competent legal community, most
of whom have received some training in Great Britain or the Caribbean is
available to assist foreign business clients. While fair, the Bahamian
judicial process tends to be slower than the norm in the United States,
primarily due to overcrowded court dockets in an under-funded system.
Although there have been instances of Bahamian businessmen attempting to
take advantage of delays in the judicial process and their physical
proximity to gain advantages in commercial disputes with foreign firms,
there is no evidence that the Bahamian judiciary has favored local firms
over foreign ones in its final adjudication of disputes. The Bahamian
government began a process of upgrading its court system, in part with
American government aid, in 1993.
Bilateral U.S.-Bahamian relations are excellent. Although The Bahamas
lie along the most direct air route for transport of illegal substances
between South America and the southeastern United States, Bahamian
government cooperation with U.S. law enforcement agencies under
"Operation Bahamas-Turks & Caicos" (OP-BAT) has significantly reduced
the level of drug trafficking through the Bahamas. Bilateral
cooperation in narcotics interdiction operations is more extensive than
that which the United States enjoys with any other country. In 1994,
the Bahamas strongly supported American efforts to end military rule in
Haiti. A common language, cultural similarities, family and personal
ties dating back to the days of the American Revolution (when the
ancestors of many modern Bahamians first came to the islands from the
southeastern United States), and the enormous number of visitors every
year between the two countries have engendered a level of familiarity
and ease of communication unusual even between neighboring countries.
IV. MARKETING U.S. PRODUCTS AND SERVICES
Bahamian government policy prohibits foreign investors from opening
retail and wholesale outlets, non-specialty restaurants, small hotels,
and most small businesses in the Bahamas. However, a wide variety of
distributorship, joint venture, and franchise opportunities involving
Bahamian partners are available.
Goods intended for sale to the general public are normally purchased by
local wholesalers, several of whom specialize in particular lines. The
usual business practice is for the wholesalers to make purchases
directly from their counterparts in Florida, which is why such a large
proportion of third-country products are imported into the Bahamas
through the United States. Most wholesalers and some retailers,
however, are willing to make direct purchase arrangements. In some
cases, Bahamian retail outlets or wholesalers will enter exclusive
distributorship arrangements with foreign firms.
Businesses intending to market goods or services to the Bahamas
government or businesses seeking to enter the Bahamian commercial market
are advised to seek the advice of the American Embassy in Nassau at an
early stage. The Embassy's Commercial Office offers a number of
services tailored to specific businesses seeking local distributors,
including the Commerce Department's "Goldkey Service," for modest fees.
Visitors can also speak, by appointment, with a trade specialist in the
Commercial Office, located in the Embassy in downtown Nassau on Queen
Street. Persons wishing to consult or retain local counsel are also
advised to contact the Commercial Office for a copy of the office's
"Attorneys List." The office can be contacted at:
Economic-Commercial Section
American Embassy Nassau
P.O. Box 9009 or P.O. Box N-8197
Miami, FL 33159 Nassau, Bahamas
Nassau telephone:(809) 323-7180 and fax:(809) 328-3495
Companies seeking to establish a representative office in the Bahamas
must first obtain a business license. Licenses are issued following
application to and approval by the Bahamas Investment Authority (BIA) in
the office of the Prime Minister. The BIA can be contacted at:
Bahamas Investment Authority
Office of The Prime Minister
P.O. Box N-7147
Nassau, Bahamas
Tel:(809) 323-7180
Fax:(809) 328-3495
Advertising: Advertising for any legal item or service, whether sold in
the Bahamas or in the United States, can be freely purchased in any
local newspaper or publication. Leading local publications include:
The Nassau Guardian (circ. 15,000, morning daily)
P.O. Box N-3011
Nassau, Bahamas
Tel:(809) 323-5655, (809) 3232-6492, or (809) 323-5656.
The Tribune (circ. 15,000, afternoon daily)
P.O. Box N-3207
Nassau, Bahamas
Tel:(809) 322-1986
Advertising Manager Tel:(809) 322-2768
Fax:(809) 328-2398.
The Freeport News (circ. 5,000, morning daily)
P.O. Box F-40007
Freeport, Bahamas
Tel:(809) 352-8321
The Punch (circ. 25,000, weekly tabloid)
P.O. Box N-4081
Nassau, Bahamas
Tel:(809) 322-7112
Fax:(809) 323-5268
The Bahama Journal (circ. 5,000, weekly)
P.O. Box N-8610
Nassau, Bahamas
Tel: (809) 325-3082
Radio and television advertising can also be purchased on local radio
and television stations. The sole television broadcaster is the state-
owned ZNS (channel 13). This station, and its Nassau radio stations
ZNS-1, ZNS-2, and ZNS-FM, can be contacted at:
Broadcasting Corporation of The Bahamas
P.O. Box N-1347
Nassau, Bahamas
Tel:(809) 322-4623 or (809) 322-4480
Advertising Sales Director:(809) 322-8962
A popular independent FM radio station, 100-Jamz, is operated by The
Tribune and can be contacted at:
100-Jamz
P.O. Box N-3207
Nassau, Bahamas
Tel:(809) 328-4771
Fax:(809) 356-5343
A second independent FM radio station, Love-97, operated by The Bahama
Journal, can be reached at:
Love-97 FM
P.O. Box N 3909
Nassau, Bahamas
Tel: (809) 356-4960
Fax: (809) 356-7256
V. LEADING SECTORS FOR US EXPORTS AND INVESTMENT
Best prospects for non-agricultural goods and services
Foodstuffs and manufactured goods
#1
FOD/APS/FRA
The best US export opportunities remain in the traditional areas of
foodstuffs and manufactured goods; vehicles and automobile parts; hotel,
restaurant, and medical supplies; and computers and electronics.
Bahamian tastes in consumer products roughly parallel those in the
United States, both because of similarities in culture and because the
proximity of The Bahamas to the US exposes Bahamians to massive doses of
American domestic advertising. With approximately 85 percent of the
population being of primarily African descent, there is a large and
growing market in The Bahamas for "ethnic" personal care products aimed
at the African-American market. Merchants in southern Florida have
found it profitable to advertise in Bahamian publications, as the
average middle-income Bahamian makes several shopping trips to Florida
every year. Bahamian consumer and safety regulations, where they exist,
are based on US models and thus are not a barrier to exports of items
suitable for the domestic American market. Most imports in this sector
are subject to high but non-discriminatory tariffs. Although Bahamian
government policy prohibits American foreign retail chains from opening
outlets in The Bahamas, various distributorship and franchise
arrangements are possible.
Total Exports for 1992(in B$): $63,078,737
Total Imports for 1992(in B$): $355,139,104
Total Imports from the US for 1992(in B$): $315,512,601
Vehicles and automobile parts
#2
APS
Although Bahamians drive on the left side of the road, and thus right-
hand drive vehicles (such as domestic Japanese and British models) have
a slight advantage, there is no legal restriction against left-hand
drive (US Standard) vehicles, and the majority of vehicles on Bahamian
roads are American-made. There is a large market for second-hand US
vehicles, although these can only be sold through local dealers. Used
limousines are particularly prized for use as taxis. Bahamian safety
and pollution standards are less restrictive than those in the United
States. Import tariffs, while high, are non-discriminatory.
Total Exports for 1992(in B$): $2,467,320
Total Imports for 1992(in B$): $58,635,858
Total Imports from the US for 1992(in B$): $51,431,711
Hotel, restaurant, and medical supplies
#3
HTL/MED
Tourism is the overwhelmingly dominant industry, with more than 80
percent of tourists to The Bahamas coming from the United States. The
market for supplies familiar to American tourists is, therefore,
predictably large. With the current slow recovery in tourism, tourist-
oriented businesses are particularly interested in goods which increase
their efficiency and lower costs. Bahamian government efforts in recent
years to sell off properties formerly owned by the state-run hotel
corporation -- which saw the privatization of most government-owned
hotels and resorts -- has produced a number of new owners interested in
buying new supplies to spruce up decaying properties. In certain
instances, the Hotels Encouragement Act allows duty-free importation of
hotel supplies for several years after the original construction or
reconstruction of a hotel or resort.
No figures are currently available for this sector.
Computers and electronics
#4
CPT/ELC
Similar to the market for US consumer goods, described above. The
large, modern financial services sector is a particular target. High
but non-discriminatory tariffs apply. Goods which can be easily
serviced either in The Bahamas or in Florida will enjoy a competitive
advantage over those which cannot; service agents in The Bahamas must be
Bahamians.
Total Exports for 1992(in B$): $8,563,739
Total Imports for 1992(in B$): $76,407,004
Total Imports from the US for 1992(in B$): $66,551,697
Best prospects for agricultural products
Fruits and Vegetables
The Bahamas continues to show weakness in this category. Price declines
for grapefruit in 1994 adversely affected export volumes and vegetable
exports fell as a result of the closure of a large farming operation.
Total Exports for 1992(in B$): $5,736,292
Total Imports for 1992(in B$): $32,861,762
Total Imports from the US for 1992(in B$): $314,524,455
Livestock
Reflecting increased demand for swine, the number and weight of
livestock slaughtered during the first sixth months of 1994 increased
marginally but not commensurately with demand.
Total Exports for 1992(in B$): $2,200
Total Imports for 1992(in B$): $836,720
Total Imports from the US for 1992(in B$): $836,729
Animal and Vegetable Oils and Fats
The demand for these products, while small, is not met by local
production.
Total Exports for 1992(in B$): $6,177
Total Imports for 1992(in B$): $2,240,787
Total Imports from the US for 1992(in B$): $2,230,985
VI. TRADE REGULATIONS AND STANDARDS
Customs: The Bahamian government raises approximately 60 percent of its
total revenue from import tariffs, which, as a result, tend to be high.
The basic ad valorem tariff for imported goods is 35 percent, but a long
list of items have separate tariff rates. Among these are:
-- clothing: 25 percent
-- tobacco: 160 percent
-- cigarettes: 150 percent plus $1.50 per 100 and 75% stamp tax
-- bottled water: 100 percent
-- pool tables: 100 percent
-- room air conditioners: 55 percent
-- automobiles: 45 to 65 percent, based on the type of vehicle
-- personal computers: 25 percent
-- business computers: 50 percent
-- stereo units: 32.5 percent plus $5 per unit
-- satellite dishes and accessories: 65 percent
-- video tapes: 65 percent
-- cheese: 10 percent
-- pasta: 10 percent
All these rates, and others, are subject to change. In 1993, for
example, the Bahamian government lifted customs duties on cooking oil,
cocoa powder, and personal hygiene items for women, while reducing other
duties. In 1994, the government raised some customs duties and imposed
new tariffs on pork products. Bahamians shopping in Florida (and
elsewhere abroad) are permitted to import $300 worth of goods, duty
free, per trip twice a year ($150 for persons under 12 years of age.)
In addition, The Bahamas charges a host of "stamp taxes" on most imports
above and beyond the import duties. These stamp taxes vary depending
upon the item in question, and apply even to many items otherwise duty
free. Yet on average, The Bahamas charges an export stamp tax of 4
percent on most exports from the country. The FY 1995-96 budget reduced
stamp taxes on various tourist items, including: brandy, vodka, gin,
rum, whiskey, cordials, liqueurs, other spirits, toilet water, cologne,
perfume, table linen, jewelry, pearls, watches, clocks, and non-leather
designer handbags.
Certain goods may be imported conditionally on a temporary basis against
a security bond or a deposit that is refundable on the re-exportation.
These include fine jewelry, goods for business meetings or conventions,
traveling salesmen equipment, and equipment or tools for repair work.
Entry forms are required by Bahamian Customs for goods coming by sea,
air or post. A genuine invoice (original or carbon copy) is required.
The Customs Department only honors discounts of up to three percent (3%)
given by U.S. exporters.
Copies of current import regulations may be obtained from:
Government Publications Office
Parliament Square
P.O. Box N-7147
Nassau, Bahamas
Membership in free trade arrangements: The Bahamas is a beneficiary of
the U.S. Caribbean Basin Initiative (CBI), Canada's CARIBCAN program,
and the European Union's Lome IV Agreement. Although the Bahamas
participates in the political aspects of the Caribbean Community
(CARICOM), it has not entered any joint economic initiatives with other
Caribbean states.
VII. INVESTMENT CLIMATE:
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), as well as to invite private investment in the
national air carrier, BAHAMASAIR. Foreign investment is welcome in
these areas, particularly in the purchase of government-owned hotel and
resort properties. Certain businesses, however, are reserved
exclusively for Bahamians. These reserved businesses include
restaurants (except gourmet and ethnic); all but very large-scale
construction; wholesale and retail distribution; commission agents
engaged in the import and export trade; real estate agencies; domestic
public transportation by land, sea, and air; newspaper and magazine
publications; advertising and public relations; interior decorating;
cinemas, theaters, and nightclubs; security services; handicrafts;
service establishments such as hairdressing, barbering, automotive and
appliance repairs; guest houses and hotels of 25 rooms or less; and
farming up to 100 acres. In addition, the Bahamian government has
reserved certain categories of businesses for joint venture operations
which include majority Bahamian ownership. Included in this category
are international air and sea transportation; debit insurance; hotels of
26 to 100 rooms; manufacturing aimed primarily at the local market; some
types of farming in excess of 100 acres; and large-scale construction to
the extent possible.
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 and Orlando, excellent communications links, a good pool of
skilled professionals, excellent tourism and conference facilities, and
designation under the Caribbean Basin Initiative (CBI) as well as
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 and business community have been suspicious of
outside investment in non-traditional areas such as agriculture and
industry, and projects in these areas have generally faced a drawn-out
approval process and some local opposition. 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 requiring low-wage and low-skill labor in
which many Bahamians are not interested have failed due to government
reluctance to allow foreign workers to be used even on a temporary
permit basis. In instances where new foreign ventures have been
perceived by a part of the Bahamian business or labor communities as
competing with existing Bahamian businesses, the government has been
generally responsive to local concerns and has closed the foreign
venture, even in instances in which business licenses were already
granted. Furthermore, 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 American environmental standards. Finally,
while corruption is admirably rare, some foreign businesses, attracted
by the tax advantages of investing in The Bahamas, have complained that
frequent requests for "voluntary" donations to various civic causes have
constituted an unexpectedly high expense.
Settlement in Investment Disputes: 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."
The Bahamas is not yet a member of the International Center For The
Settlement Of Investment Disputes. The Bahamas 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 in 1992. The
Bahamas has no history of political violence.
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) one 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) one percent per annum on assessed value in excess of $50,000.
A gambling tax is also levied. The airport departure tax was raised
from $7 to $13 per person in 1991 and again from $13 to $15 per person
in 1993. 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.
Industries Encouragement Act: 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.
Hotels Encouragement Act: 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.
Agricultural Manufactories Act: 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.
Spirits and Beer Manufacture Act: 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.
In addition to these acts, the Tariff Act grants to the government
authority to waive import duties on various goods, supplies, and
materials justified by the public good where the specific waiver is not
covered by other parliamentary acts.
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 Foreign
Investment Board before purchasing real property in the country,
replacing it with the Foreign Persons (Landholding) Act. Under the new
law, approval is automatically granted 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 percent 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. At the same time, however,
the Bahamian government doubled the tax on undeveloped real property
held by foreigners from 1.50 percent of assessed value to 3 percent,
effective January 1, 1994, and planned to more than double the tax again
in 1995 to 7 percent of assessed value. Following protests by foreign
property owners, however, Bahamian officials indicated that they may
reconsider the tax increase, which was originally passed to raise
revenue, spur the lagging construction industry, and encourage
foreigners holding undeveloped plots of land over long periods of time
to develop their land.
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.
OPIC and other investment insurance programs: OPIC programs: most
recently, OPIC approved two investment projects in The Bahamas in 1992.
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.
Intellectual 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.
Labor: In 1993, the Bahamian labor force consisted of 136,900 workers.
The unemployment rate, officially estimated at 13 percent, is more
likely in the 18-20 percent range. 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 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. The Act permits the
formation of a wages council to determine a minimum wage, but no such
council has been established. 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. In general, labor-management
relations in The Bahamas are sometimes strained, but major or prolonged
strikes are very 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.
Work Permits: 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. 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.
Foreign Trade Zones/Free Ports
Free Trade Zones: A free trade zone exists at Freeport on Grand Bahama
Island, and a much smaller one on New Providence 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.
Capital outflow policy: Profits and investment capital may be freely
repatriated. Non-resident or foreign investors wishing to initiate
operations in The Bahamas must register their operations with the
Central Bank. If the projects are substantially financed 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 freely 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.
Major Foreign Investors: Major current foreign investments in The
Bahamas include:
-- The Winding Bay Hotel in Eleuthera owned by Venta, an Italian group;
-- A large pharmaceutical plant in Freeport owned by Syntex
pharmaceuticals, which in turn is owned by the Swiss pharmaceutical firm
Roche;
-- Uniroyal Chemical plant manufacturing high performance antioxidants
in Freeport;
-- A container port facility being developed at Freeport by Hong Kong
investors;
-- Atlantis, a hotel, resort, and casino complex on Paradise Island near
Nassau recently purchased by the South African firm Sun Hotels
International;
-- A large citrus farm being developed on Abaco island by the B.G.
Harmon Fruit Company of Florida;
-- 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.;
-- Ruffin's Crystal Palace Resort, Casino, And Convention Center,
operated by Host Marriott Corporation;
-- Coral Island Underwater Observatory, Marine Park, And Hotel operated
by an Israeli firm;
-- 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;
-- Ambassador Beach Hotel recently purchased by the Jamaican company,
Superclubs, under the trade name Breezes;
-- Royal Bahamian Hotel recently purchased by Sandals company of Jamaica
from the Bahamian government;
-- Freeport/Lucaya Marina Village developed recently by European
investors;
-- Cable Bahamas, Ltd. recently begun by a Canadian group
-- Island Outpost Resort at Compass Point recently built by a Jamaican
music magnate.
VIII. TRADE AND PROJECT FINANCING:
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 new electronic
services; and political pressure to help small bankers. In spite of
these incipient changes, the banking system today remains fundamentally
as it has long been. 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 deal in all markets
except the domestic market. Furthermore, 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 greatly increased 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 thus 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:
BAHAMAS DEVELOPMENT BANK
P.O. BOX N-3034,
Nassau, Bahamas
Tel:(809)352-5780
BANK OF THE BAHAMAS, LTD.
P.O. BOX N-7118
Nassau, Bahamas
Tel:(809)326-2560
Fax:(809)325-2762
BARCLAYS' BANK
P.O. BOX N-8350
Nassau, Bahamas
Tel:(809)322-4921
BRITISH-AMERICAN BANK
P.O. BOX N-7502
Nassau, Bahamas
Tel:(809)327-5170
Fax:(809)327-5166
CANADIAN IMPERIAL BANK OF COMMERCE (CIBC)
P.O. Box N-7125
Nassau, Bahamas
Tel:(809)322-8455
Fax:(809)326-6552
CITIBANK BAHAMAS
Tel.:(809)322-4240
Fax:(809)323-3088
COMMONWEALTH BANK
P.O. BOX SS-6263
Nassau, Bahamas
Tel.:(809)328-1854
ROYAL BANK OF CANADA
P.O. BOX N-7537
Nassau, Bahamas
Tel:(809)322-8700
Fax:(809)322-6381
General Financing Availability: Bahamian banks tend to be far more
conservative than their American counterparts in making business loans,
often asking for high levels of collateral. At the end of 1993, the
prime lending rate in The Bahamas was 7.25 percent. Commercial bank
rates for consumer loans ranged from 14.23 to 18.23 percent, for
residential mortgages from 10.65 to 12.38 percent, for commercial
mortgages from 10.25 to 11.58 percent, and for "other local loans" from
9.61 to 12.12 percent.
IX. BUSINESS TRAVEL
Business customs: The national language of The Bahamas is English,
sometimes spoken with a distinctive local accent and the use of colorful
local expressions. Due to the proximity of The Bahamas to the US and
the extensive familiarity of most Bahamians with Americans and American
culture, business customs tend to be similar to those in the United
States. Business dress is more formal in The Bahamas than elsewhere in
the Caribbean or in Florida; a business suit and tie is recommended for
men and conservative business dress for women. Business attire
generally follows the standards of the northeastern United States.
Bahamians shake hands upon meeting, sometimes exchange business cards,
and address first-time business acquaintances by their last names.
Conversations generally move to a first-name basis a bit more slowly
than in the United States. Prior appointments for business meetings are
advisable. Although Bahamians are not punctual for meetings, foreign
visitors should be punctual.
Bahamian society bears some similarities to that of small-town America,
with an occasional air of provincialism. Bahamians unaccustomed to
dealing with foreigners may shy away from trusting the intentions of
foreign visitors at first, in part because of previous business dealings
gone awry.
In addition, The Bahamas is very much a consensus-driven society, in
which people often disguise personal feelings beneath a surface
cordiality. Business meetings in The Bahamas tend to be very pleasant
and Bahamians often end a meeting with an air of agreement even if real
differences remain. Thus, Bahamian partners may still retain some
reservations even after meetings that ended with firm handshakes and
pleasantries. Bahamians at the middle levels of business or government
must often gain final approval from more senior officials.
Bahamian businesses tend to operate on a tighter financial margin than
their American counterparts, often juggling financing from one
commitment to another. Therefore, for initial or large sales, a
businessman should require a deposit against future payment for goods or
services delivered, and expect that some delays may occur with
subsequent payments.
Business lunches are common in The Bahamas, and invitations to discuss
matters over lunch in a quiet restaurant are generally accepted.
Bahamians tend not to drink very much at business lunches and usually
expect the lunch to last between an hour and an hour-and-a-half.
Business dinners are relatively rare, and Bahamians do not generally
invite new acquaintances to their homes. When they do so, dinners at
the homes of well-to-do Bahamians tend to be elaborate and formal
affairs, at which business attire for men and conservative evening wear
for women is appropriate. A small gift for the hostess, such as
flowers, and a follow-up thank you note are appropriate acknowledgments.
Acceptable topics of conversation include: sports; the tourist
business; the beauty of the islands; the weather; and unique or
distinctive aspects of Bahamian culture such as the local cuisine,
junkanoo, local music, art, architecture, and history. While Bahamians
are comfortable with discussing most topics, visitors to The Bahamas
should avoid discussing drug trafficking and race relations during
initial contacts.
Since much of Bahamian social life revolves around church, an invitation
to a church service is a sign of personal respect and affection. Many
churches in The Bahamas have proud traditions of gospel choir singing,
and church services can be quite lively. Dress at church services is
usually formal with conservative business suits for men and colorful,
sometimes elaborate dresses for women.
Travel advisories and visas: American citizens do not require a
passport or visa to enter The Bahamas, but proof of citizenship such as
a birth certificate or voter registration card accompanied by a photo ID
is required, as well as a return ticket to the United States. In mid-
1994 there were no current travel advisories for The Bahamas. American
citizens traveling to an area where they may have some concern about
local conditions can contact the State Department's citizens emergency
center at tel. (202) 647-5225 to learn of any current advisories.
Business infrastructure: Both Nassau and Freeport boast a wide variety
of excellent hotels and resorts. Although Bahamian hotels are more used
to catering to the vacationer rather than the business traveler, many
large hotels have business centers. Even hotels without such centers
will be happy to arrange for fax transmissions, office and conference
facilities, and other business services. Electricity is 110 v, 60 Hz
(US standard). Taxis are plentiful near hotels and downtown, and radio
taxi services are available. Some taxi drivers are willing, for a
prearranged fee, to spend the entire day with a single customer. Car
rentals are also available, albeit far more expensive than the American
norm. Bahamians drive on the left side of the road, as in Great
Britain, even though most cars in The Bahamas are imported from or
through the United States and have left-hand drive (US standard).
Nassau has two large, modern hospitals, and there is one in Freeport;
Nassau's privately-owned doctors hospital is widely regarded as the best
medical facility in The Bahamas. No special health precautions or
vaccinations are necessary. Tap water is potable but brackish; most
Bahamians prefer one of the locally-produced brands of bottled water.
As major resorts, both Nassau and Freeport have a wide variety of
restaurants ranging from local franchises of American fast-food chains
to expensive five-star gourmet palaces. Local cuisine tends to favor
freshly-caught seafood, particularly using grouper, lobster (locally
known as "crawfish"), and conch (a Caribbean shellfish), but American
and ethnic cuisines such as Chinese and Italian are also available.
Holidays:
-- New Year's Day (January 1)
-- Good Friday (Variable)
-- Easter Monday (Variable)
-- Whit Monday (Seven Weeks After Easter)
-- Bahamian Labour Day (First Monday In June)
-- Independence Day (July 10)
-- Emancipation Day (First Monday In August)
-- Discovery Day (October 12)
-- Christmas Day (December 25)
-- Boxing Day (December 26)
Holidays which fall on Saturday or Sunday are usually observed on the
following Monday. Persons present in The Bahamas on the night of
December 25-26 or December 31-January 1 can enjoy a unique cultural
experience by purchasing tickets to the annual junkanoo parade in
downtown Nassau, a carnival similar to Mardi Gras of which Bahamians are
justly proud.
X. Appendices
A. Country data:
Population: 273,055
Population growth rate: 1.57 percent.
Religions: Baptist 35 percent, Roman Catholic 20 percent, Anglican 15
percent, Evangelical Protestants 15 percent, Methodist 5 percent, Church
Of God 5 percent, miscellaneous 5 percent.
Government system: multi-party parliamentary democracy.
Languages: English.
Workweek: Monday through Friday. Shops are generally open all-day
Saturday; Sunday closing laws are strictly observed, although groceries
are permitted to open for a few hours on Sunday morning.
B. Domestic economy: (in millions of US dollars unless otherwise
indicated. NB: B$1 equals US$1)
1992 1993 1994
GDP (current value) 3059 3065 n/a
Per Capita GDP 11633 11588 11610
GDP Growth Rate est.2% n/a n/a
Government Spending as % of GDP n/a n/a n/a
Inflation(%) 5.7 2.7 1.3
Unemployment(%) 14.8 13.1 n/a
Foreign Exchange Reserves 173.8 145.9 164.2
Average Exchange Rate for USD 1.00 1 1 1
Debt Service Ratio n/a n/a n/a
US Military/Economic Assistance n/a n/a n/a
C. Trade: (in millions of US dollars unless otherwise indicated)
1992 1993 1994
Total Country Exports 310.2 256.8 223.8
Total Country Imports 1069.3 1080.9 1081.7
US Exports 712.6 704.1 n/a
US Imports 470.4 585.3 n/a
D. Investment Statistics (refer to Section VII)
E. US and Country Contacts
US Embassy Trade Related Contacts:
US Embassy Nassau
Economic-Commercial Section
7415 NW 19th St.
Suite H
Miami, Fl. 33126
Tel:(809)323-7180
Fax:(809)328-3495
US Department of Commerce
Desk Officer for The Bahamas
Room H 3021
Washington, DC 20230
Tel:(202)377-2527
US Department of Agriculture
Office of International Cooperation and Development
Private Sector Relations
McGregor Building
Room 343
14th and Independence Ave., SW
Washington, DC 20250-4300
Tel:(202)653-7917
Overseas Private Investment Corporation
1615 M Street, NW
Washington, DC 20527
Tel:(202)457-7200
Trade and Development Program
US Department of State
2201 C Street, NW
Washington, DC 20523
Tel:(202)875-4357
Key Bahamian Government Offices:
Embassy of the Commonwealth of The Bahamas
2220 Massachusetts Avenue, NW
Washington, DC 20008
Tel:(202)319-2660
Bahamas Agricultural and Industrial Corporation
P.O. Box N 4940
Nassau, Bahamas
Tel:(809)322-3740
Ingraham Building
25 S.E. Second Ave.
Miami, FL 33131
Tel:(305)539-9350
Ministry of Agriculture, Trade and Industry
P.O. Box N 3028
Nassau, Bahamas
Tel:(809)325-7502
Government of the Commonwealth of The Bahamas
Consulate General
Ingraham Building
25 S.E. Second Avenue
Miami, FL 33131
Tel:(305)373-6295
Bahamas Chamber of Commerce
P.O. Box 665
Nassau, Bahamas
Tel:(809)322-2145
F. Market Research:
A complete list of market research is available on the National
Trade Database.
G. Trade Event Schedule:
Franchise Video/Catalog Show
September 1995
Bahamas Agricultural Industrial Trade Show
May 1996
Because trade event schedules may change, firms should consult the
export promotion calendar on the National Trade Database or contact the
post for the latest information.
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