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U.S. DEPARTMENT OF STATE
BAHAMAS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                           THE BAHAMAS

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994 /1

Income, Production and Employment:

Real GDP                            3,059     3,065       N/A
GDP Growth Rate                       3.0       3.0       N/A
GDP Share by Sector:  (pct.)
  Tourism                              50        50        50
  Finance                              12        12        12
  Manufacturing                         4         4         4
  Agriculture/Fisheries                 4         4         4
  Government                           12        12        12
GDP Per Capita (USD)               11,588    11,610       N/A
Labor Force                       135,700   136,900       N/A
Unemployment Rate (pct.)             14.8      13.1       N/A

Money and Prices:

Money Supply (M1)                   377.7     379.5       N/A
Commercial Interest Rate (pct.)       8.0      7.25       N/A
Personal Savings Rate             3.20-5.55 2.54-5.13 3.00-4.63
Investment Rate                       N/A       N/A       N/A
Retail Price Index (1987=100)       133.0     136.2     136.6
Retail Price Index Change (pct.)      7.2       5.7       2.7
Wholesale Price Index                 N/A       N/A       N/A
Exchange Rate (USD:BD)                1:1       1:1       1:1

Balance of Payments and Trade:

Total Exports (FOB)                 310.2     256.8       N/A
  Non-Oil Exports (estimated)       585.3     348.2       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 Imports (estimated)       972.7   1,014.7     330.5
  Imports from U.S.                 712.6     704.1       N/A
Aid from U.S.                           0         0         0
Aid from Other Countries                0         0         0
External Public Debt                133.3     117.2       N/A
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                   173.9     146.0       N/A
  Merchandise Exports (FOB)         310.2     256.8       N/A
  Merchandise Imports (FOB)       1,069.2   1,080.9       N/A
  Services (net)                    711.5     738.9       N/A


N/A--Not available.

1/ Statistics cover mid-year 1994.







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 50
percent and 12 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 new jobs and diversify the
economy.

    The United States remains The Bahamas' major trading
partner.  U.S. firms exported an estimated $704.1 million worth
of goods and services to The Bahamas in 1993, down from $712.5
million the previous year but still approximately 55 percent of
all Bahamian imports.  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 government budget included
repayments estimated at $64 million on a total public debt of
$358.4 million.  The public debt service ratio reached 4.6
percent as of the first quarter of 1994.  The overall FY 94/95 
government budget of $756 million represented an increase of
$75 million over the total projected expenditures in the FY
1993-94 budget.  The budget announced new tax measures,
including a 10 percent increase in the gasoline tax (the second
such raise in two years), an import tariff on pork products
(previously untaxed), increases in business license fees and
other government fees, and the elimination of a system of
rebates for early payments of annual property taxes.  These new
measures were projected to raise an additional $38 million in
government revenue.  The government also projected an increase
in public borrowing of $60 million to make up for the budgetary
shortfall.  One problem faced by the Ingraham Administration
was that government revenue under the previous budget fell an
estimated $30 million short of original projections, apparently
due to slow growth of the overall economy and substantial tax
evasion.  Total 1993 national debt was $1.41 billion, up from
$1.28 billion in 1992.

    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
even refused new Bahamian dollar deposits.  Central Bank
authorities blamed overly cautious lending policies by Bahamian
banks for both consumer and business loans for the excess
liquidity problem.  By mid 1994, the commercial banks' prime
lending rate was 6.75 percent.  


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 which was estimated at 5.7
percent in 1993 is now 2.7 percent.

    Recognized internationally as a tax haven, The Bahamas does
not impose income, inheritance or sales taxes.  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.  For example, in 1992,
the Bahamian government lifted customs duties on a list of
items (including china, crystal, fine jewelry, leather goods,
crocheted linens and tablecloths, liquor, wines, perfume,
cologne, photographic equipment and accessories, sweaters, and
watches) which could be sold to tourists as "duty-free," but
retained variable stamp taxes on these items.  Bahamian Customs
requires entry forms and genuine invoices (original or carbon
copy) for goods coming by sea, air or post.  The Customs
Department only honors discounts of up to three percent given
by U.S. exporters.

    Certain goods may be imported conditionally on a temporary
basis against a security bond or deposit which is refundable on
their re-exportation.  These include fine jewelry, goods for
business meetings or conventions, travelling salesman samples,
automobiles or motorcycles, photographic and cinematographic
equipment, and equipment or tools for repair work.

    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.  Following protests by foreign property
owners, the Bahamian government has revised plans for the
proposed 7 percent increase on the assessed value of
undeveloped property owned by non-Bahamians.  The new tax
structure as of January, 1994 follows:

      $1 - $3,000:  the standard property tax is $30.00.

      $3,001 - $100,000:  the property tax is 1 percent of the 
      assessed value.

      Over $100,000:  the property tax is 1 1/2 percent of the 
      assessed value.

    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.

    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.  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 $1.41 billion in 1993,
with debt service of $74.0 million accounting for 8.6 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.  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 Berne 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 34,225 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

    Authorities enforce Labor laws and regulations uniformly
for all sectors and throughout the country, including within
the export processing zones.





  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             471
Total Manufacturing                                   (1)
  Food & Kindred Products                   0
  Chemicals and Allied Products             (1)
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       (2)
Wholesale Trade                                       140
Banking                                               2,707
Finance/Insurance/Real Estate                         817
Services                                              -38
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  4,194    

(1) Suppressed to avoid disclosing data of individual companies
(2) Less than $500,000

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


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