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TITLE:  BAHAMAS ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                           THE BAHAMAS

                     Key Economic Indicators
                    (Millions of U.S. dollars)

                                  1991      1992      1993
                                                      (mid-year)

Income, Production,
 and Employment

Real GDP                           2,598      n/a       n/a
GDP growth Rate                    3.0        n/a       n/a
GDP by sector (% of total):
  Tourism                         60        60        60
  Finance                         10        10        10
  Manufacturing                    3         3         3
  Agriculture/Fisheries            5         5         5
GDP Per Capita                    11,633      n/a       n/a
Labor Force                       130,100   134,700     n/a
Unemployment Rate (%)             16.0      14.8        n/a


Money and Prices

Money Supply (M1)                    361.2     377.7     392.3
Commercial Interest Rate (%)       9.0       8.0       7.25
Personal Savings Rate             4.23-6.64 3.29-5.92 2.88-6.13
Investment Rate                     n/a       n/a       n/a
Retail Price Index
   (1987=100)                        124.6     131.6     136.6
Retail Price Index
   (%) change                      7.2       3.5       3.3
Wholesale Price Index               n/a       n/a       n/a
Exchange Rate (US$:B$)              1:1       1:1       1:1


Balance of Payments and Trade

Total Exports (FOB)                  319.8     310.2     141.0
  Non-oil (est.)                    n/a       n/a       n/a
  Exports to U.S.                    488.2     607.2     227.0
Total Imports (CIF)                1,129.9   1,151.3     628.2
  Non-oil (est..)                    972.7   1,014.7     567.4
  Imports from U.S.                  721.0     712.5     471.2
Aid from U.S.                          0         0         0
Aid from Other Countries               0         0         0
External Public Debt                 129.2     131.3     128.6
Debt Repayment                        72.2      77.5      30.3
Gold Reserves                       n/a       n/a        n/a
Foreign Exchange Reserves            173.9     146.0     252.8
Balance of Payments
  Current account                   -183.6    -110.8     -57.0
  Merchandise Exports (FOB)          319.8     310.2     141.0
  Merchandise Imports (CIF)        1,129.9   1,151.3     628.2
  Services (net)                     606.2     716.5     422.0


n/a = Not available.


1.  General Policy Framework

    The Bahamas is a politically stable, middle-income
developing country.  The economy is based primarily on tourism
and financial services, which account for approximately 60
percent and ten percent of gross domestic product (GDP),
respectively.  The agricultural and industrial sectors, while
small, have recently been the focus of government efforts to
expand these sectors to produce economic growth and diversify
the economy.

    The United States remains The Bahamas' major trading
partner.  U.S. firms exported over $712 million worth of goods
and services to The Bahamas in 1991.  The Bahamian Government
actively encourages foreign investment, with free trade zones
on Grand Bahama and New Providence.  Capital and profits are
freely repatriated, and investors are offered relief from
personal and corporate income taxes.  Designation under the
Caribbean Basin Initiative (CBI) trade program allows qualified
Bahamian goods to enter the United States duty-free.

    The Bahamas continues to run a fiscal deficit due to
investment in capital projects by the government and public
corporations.  The recurrent deficit for 1992 was $67 million
while the overall budget deficit in 1992 was $149 million. 
Deficits are financed through bond issues, treasury bills,
short-term advances from the banking system, and Central Bank
financing.  In October 1991, the Government increased several
import duties and raised the gasoline tax, taxes on remittances
of foreign currency, and the departure tax on cruise ship
visitors.  Total 1992 national debt was $1.29 billion, up from
$1.17 billion in 1991.

    Domestic financing through commercial bank loans and the
issuance of government securities continued to increase in
1993.  The Government introduced new tax measures, including an
increase in the gasoline tax of 21 cents per gallon and in the
stamp tax by two percent, to generate $60 million in additional
revenue.  In addition, the FY 1993-94 budget provided for
capital revenue of $10 million from the anticipated sale of
government assets.

    The Bahamas' primary monetary consideration is foreign
exchange reserves, needed to purchase essential imports and
finance the repatriation of corporate profits.  In January
1993, the Central Bank eased the previous 35 percent
down-payment required for consumer loans in an effort to
stimulate the economy.  Individual banks are now free to
establish their own conditions for extending consumer credit
but requirements for granting such loans remain fairly
stringent.  The prime lending rate and deposit rate have each  
been reduced by 0.25 percent, to 7.75 percent and 6.75 percent,
respectively.  In addition, the Central Bank relaxed foreign
exchange controls, thereby making foreign currency transactions
easier and less time consuming.


2.  Exchange Rate Policy

    The Bahamian dollar is pegged to the U.S. dollar at an
exchange rate of 1:1, and the Bahamian Government recently
repeated its longstanding commitment to maintain parity.


3.  Structural Policies

    Price controls exist on 13 bread basket items, gasoline,
utility rates, public transportation, automobiles, and auto
parts.  The rate of inflation was estimated at 5.7 percent in
1992, down from 7.2 percent in 1991.

    Recognized internationally as a tax haven, The Bahamas does
not impose income, inheritance or sales taxes.  In December
1992, the Bahamian Government raised the value of goods which
may be imported duty-free by each resident following private
trips abroad from $100 to $300 per trip.  The Government later
modified this provision to apply only to people above 12 years
of age.  Although customs duties generate nearly 70 percent of
government income, some customs levies were reduced or dropped
altogether to ease the financial burden on Bahamian consumers. 
The FY 1993-94 budget eliminated customs duties on cooking oil,
cocoa powder, and personal hygiene items for women.  The
Government also increased taxes on cigarettes, spirits, and
locally-produced beer.  While some of these high customs duties
exist to protect local industries, the primary purpose of most
of them is to generate revenue.  The principal imports subject
to protectionist tariffs include paper products, paints,
juices, and bottled water.  Customs duties range from one to
200 percent and are applied to nearly all imported goods. 
Certain items purchased primarily by tourists, such as liquor,
photographic equipment, watches, and jewelry, are permitted to
be sold in designated "duty-free zones" heavily trafficked by
foreign visitors.  Other revenue sources include fees on
business licenses and work permits, property taxes, and airport
and harbor departure taxes.  The property tax on undeveloped
land owned by non-Bahamians was recently increased from 1.5
percent to three percent of the assessed value of the property,
with a further increase to seven percent of assessed value per
year scheduled to take effect in 1995.  A gambling tax is also
levied.  To increase revenues, the airport departure tax was
raised from $7 to $13 per person in 1991 and from $13 to $15
per person in 1993.  The government raised the harbor departure
tax from $7 to $20 per person in 1991.  Following protests from
cruise ship operators, the harbor departure tax was later
lowered to $15, effective April 1, 1992.

    Although The Bahamas encourages foreign investment, the
Government reserves certain businesses exclusively for
Bahamians, including restaurants, most construction projects,
most retail outlets, and small hotels.  Other categories of
businesses are designated for possible joint ventures involving
Bahamians and foreigners.

    A new "One-Stop Shop" for investment established in 1992,
the Bahamas Investment Authority (BIA), consolidated the
Investment Promotion Division of The Bahamas Agricultural and
Industrial Corporation (BAIC) and the Financial Services 
Secretariat (FSS).  The Authority planned to facilitate and
coordinate local and international investment and to provide 
overall guidance to the Government on all aspects of investment
policy.  By late 1993, the BIA had not yet issued long-promised
guidelines on foreign investment.

    Other trade and investment incentives include the
International Business Companies Act, the Industries
Encouragement Act, the Hotels Encouragement Act, the
Agricultural Manufactories Act, the Spirit and Beer Manufacture
Act, and the Tariff Act.  The International Business Companies
Act simplifies procedures and reduces costs for incorporating
companies.  The Industries Encouragement Act provides duty
exemption on machinery, equipment, and raw materials used for
manufacturing purposes.  The Hotels Encouragement Act grants
refunds of duty on materials, equipment, and furniture required
in construction or furnishing of hotels.

    The Agricultural Manufactories Act provides exemption for
farmers from duties on agricultural imports and machinery
necessary for food production.  The Spirit and Beer Manufacture
Act grants duty exemptions for producers of beer or distilled
spirits on imported raw materials, machinery, tools, equipment,
and supplies used in productions.  The Tariff Act grants
one-time relief from duties on imports of selected products
deemed to be of national interest.

    The Hawksbill Creek Agreement of 1954 granted certain tax
and duty exemptions, on business license fees, real property
taxes, and duties on building materials and supplies in the
town of Freeport on Grand Bahama Island.  These exemptions,
which expired in 1990, were initially extended to August 1993. 
In July 1993, the Government enacted legislation extending most
Hawksbill Creek tax and duty exemptions through 2054, while
withdrawing exemptions on real property tax for foreign
individuals and corporations.  The Prime Minister declared,
however, that property tax exemptions might still be granted to
particular investors on a case-by-case basis.

    The Bahamas is a beneficiary of the United States'
Caribbean Basin Initiative (CBI) trade program, permitting the
country to export most goods duty-free to the United States.


4.  Debt Management Policies

    The Bahamas' national debt reached $1.29 billion in 1992,
with debt service of $77.5 million accounting for 14.5 percent
of total government revenues.


5.  Significant Barriers To U.S. Exports

    The Bahamas is a $700 million market for U.S. companies. 
There are no barriers to the import of U.S. goods, although a
substantial duty applies to most imports.  Deviations from the
average duty rate often reflect policies aimed at import
substitution.  Tariffs on items which are also produced locally
are at a rate designed to provide protection to local
industries.  The Ministry of Agriculture occasionally issues
temporary bans on the import of certain agricultural products
when it determines that a sufficient supply of locally grown
items exists.  The government's quality standards for imported
goods are similar to those of the United States.


6.  Export Subsidies Policies

    The Bahamian Government does not provide direct subsidies
to industry.  The Export Manufacturing Industries Encouragement
Act provides exemptions to approved export manufacturers from
duty for raw materials, machinery, and equipment. 
Additionally, the approved product is not subject to any export
tax.

7.  Protection of U.S. Intellectual Property

    The Bahamas is a member of the World Intellectual Property
Organization (WIPO), and is a party to the Paris Convention for
the Protection of Industrial Property and the Bern Convention
for the Protection of Literary and Artistic Works (older
versions for some articles of the latter are used).  It is also
a member of the Universal Copyright Convention.


8.  Worker Rights

    a.   Right of Association

    The Constitution specifically grants labor unions the
rights of free assembly and association.  Unions operate
without restriction or Government control, and are guaranteed
the right to strike and to maintain affiliations with
international trade union organizations.

    b.   Right to Organize and Bargain Collectively

    Workers are free to organize and collective bargaining is
extensive for the 30,000 workers (25 percent of the work force)
who are unionized.  Collective bargaining is protected by law
and the Ministry of Labor is responsible for mediating
disputes.  The Industrial Relations Act requires employers to
recognize trade unions.

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by the
Constitution and does not exist in practice.

    d.   Minimum Age for Employment of Children

    While there are no laws prohibiting the employment of
children below a certain age, compulsory education for children
up to the age of 14 years and high unemployment rates among
adult workers effectively discourage child employment. 
Nevertheless, some children sell newspapers along major
thoroughfares and work at grocery stores and gasoline
stations.  Children are not employed to do industrial work in
The Bahamas.

    e.   Acceptable Conditions of Work

    The Fair Labor Standards Act limits the regular workweek to
48 hours and provides for at least one 24-hour rest period. 
The Act requires overtime payment (time and a half) for hours
in excess of the standard.  The Act permits the formation of a
Wages Council to determine a minimum wage; to date, no such
Council has been established.

    The Ministry 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 Ministry
normally announces these inspections ahead of time.  Employers
generally cooperate with the inspections in implementing safety
standards.  A 1988 law provides for maternity leave and the
right to reemployment after childbirth.  Worker rights
legislation applies equally to all sectors of the economy.

    f.   Rights in Sectors with U.S. Investment

    Labor laws and regulations are enforced uniformly
throughout the country, including within the export processing
zones.  They apply equally to all sectors of the economy.




         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (millions of U.S. dollars)

Category                                    Amount

Petroleum                                               407
Total Manufacturing                                       D
    Food & Kindred Products                     0
    Chemicals and Allied Products               D
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                0
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         *
Wholesale Trade                                         128
Banking                                               2,723
Finance and Insurance                                 1,260
Services                                                  6
Other Industries                                          D

TOTAL ALL INDUSTRIES                                  4,566


(D)-Suppressed to avoid disclosing data of individual companies
(*)-Less than $500,000

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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