WTO

DNA responds to WTO Report

  • Oxford Economics reiterates accession is not panacea

  • Broad based reforms not synonymous with WTO accession

  • Case studies confirm flawed approach

  • WTO is no substitute for comprehensive economic growth plan

  • Government must address implications for economy and fiscal plan


The recently released WTO Impact Assessment produced by Oxford Economics and commissioned by the Bahamas Chamber of Commerce and Employers’ Confederation provided some insights that reinforced widely held concerns by Bahamians. In general terms, the Report did not reveal concerns that had not been expressed by the Democratic National Alliance (DNA) in our position paper on the WTO released in January of this year nor by diverse local commentators and observers albeit it did go into more details on the potential impact of WTO accession on the Bahamian economy. High energy costs, inefficiency of government agencies, lack of enforcement of laws and a deficient governance system plagued with poor transparency and accountability have been highlighted for several years.


The DNA has asserted on numerous occasions that accession to the WTO is not a panacea for the myriad structural weaknesses and should not be the main impetus for long overdue reforms within the Bahamian economy. It is encouraging to see that Oxford Economics shares the same sentiments. The political will to engage in deliberate efforts aimed at reducing the cost of doing business and enhance the ability of local businesses to compete on a global stage should be the driver of positive change in our economy.


In its assessment of scenarios under which The Bahamas accedes to the WTO, Oxford Economics considered the potential impact on the national budget, balance of trade, Gross Domestic Product (GDP), taxation, unemployment and foreign direct investments among others. The key finding on the need for a more broad-based approach to structural reforms exposes the Achilles heel of the current administration which has adopted an ad-hoc and siloed approach to governance.


Case studies outlining the challenges faced by other jurisdictions that have acceded to the WTO is instructive to the government. The level of preparation and strategic planning employed when combined with the extent of reforms implemented prior to accession should not be ignored. From all of the cases highlighted, it is clear that little regard is given to the internal weaknesses of small and vulnerable jurisdictions during negotiations. The government should learn from these experiences.


There has been no articulation of the revenue replacement measures planned and the effect of WTO accession on the aggressive fiscal consolidation plan. Under a described scenario, the Report notes that the budget deficit could widen by 1% or approximately $120 million dollars in 2021. After imposing a massive 60% increase in Value Added Tax (VAT) on taxpayers, how does this fit into the plan to deliver a balanced budget within the stated timeframe?


According to the Report, annual GDP growth is projected to increase by 0.5% to 2% for a cumulative growth rate of approximately 5.6% over ten years if a comprehensive approach to reforms is adopted. An approach that is not holistic is expected to yield a 0.8% GDP growth rate over a decade. It is apparent that both scenarios yield growth rates that significantly lag the 5-6% required to absorb new entrants into the job market annually.


The Report acknowledges consistent international pressures on our financial services industry and appears to dispel the fallacy that accession to the WTO will bring an end to the assault on our number two industry. The authors of the Report highlighted the need to rethink the value proposition of this vital industry as the DNA has recommended to the government on numerous occasions. Simply put, there is a need to rethink, refocus, rebrand and reposition our financial services industry.


In its conclusion, the Report tempers the often-exaggerated benefits of WTO accession by projecting that WTO accession will bring modest or limited gains for the Bahamian economy.  Oxford Economics noted that there are legitimate concerns by Bahamians and residents in relation to the possible effects of international competition. This observation was followed by a recommendation to engage in proper consultation with the populace. The DNA submits that the findings as documented in the Report when considered in conjunction with the crisis within the WTO, justifies its position. We submit that sustainable economic growth cannot be achieved through a strategy that is disjointed and myopic in focus towards WTO accession.


Arinthia S. Komolafe, Leader

Democratic National Alliance



DNA Responds to IMF Article IV Statement

·      IMF confirms aspects of DNA’s position on economy

·      FNM approach inherently flawed and socially disruptive

·      Government ignores significant impact of VAT increase

·      Fiscal accomplishments disconnected from plight of masses

·      Economic and financial service growth plan still lacking

 

The International Monetary Fund (IMF) in its recently released statement following discussions on the 2019 Article IV consultation provided confirmed observations that have been made by Bahamian experts over the years.

 

The Democratic National Alliance (DNA) acknowledges the efforts made by the government to address the fiscal challenges confronting our nation but contends that the approach adopted is inherently flawed and socially disruptive. The sixty percent increase in the regressive Value Added Tax (VAT) rate and the aggressive timeline for elimination of the GFS deficit has imposed significant hardship on the Bahamian people.

 

In its statement, the IMF estimated growth in Real Gross Domestic Product (GDP) of 2.3% at 2018 and projected 2.1% for 2019. However, the economic growth rate is projected to stabilize at 1.5% in the medium term in the absence of a comprehensive economic growth plan which could deliver the 5.5% required to absorb new entrants into the labor market annually.

Our nation remains plagued by unemployment in double digits and youth unemployment at an alarming rate of 23%. The fiscal targets and accomplishments touted by the government have simply failed to translate into economic empowerment or relief for the Bahamian people. The current administration has simply continued the infamous friends, family and lovers’ mentality.

The absence of a growth strategy for the financial services industry has reduced our government to a blacklist avoidance and escape agency.

 

The government is under pressure to restore credibility to financial planning and fiscal projections communicated to the nation under the watchful eyes of international observers. Expenditure and revenue forecasts cannot simply be inserted into the national budget as placeholders but must be underpinned by realistic expectations and assumptions. The current administration must find the empathy to end its relentless assault on the middle and working class in our society. The pontification on prudence in public sector hiring has been discredited by subsequent admission that terminated employees have been retained or replaced. They must rein in expenditure while discontinuing the tax, spend and borrow philosophy which burdens residents under a regressive and oppressive system of taxation.

 

The DNA has long advocated for a comprehensive review of the Bahamian tax system and the introduction of an equitable tax regime. The IMF noted that “Global tax trends and the prospective accession to the WTO thus present an opportunity for a comprehensive review of the Bahamian tax regime with a view to achieving a more equitable and less distortionary tax system. To strengthen transparency and inform future policies, a quantitative review of existing tax and other investment incentives is recommended”.

 

It is regrettable that the Free National Movement (FNM) is heavily influenced by special interest groups and party loyalists that do not want a progressive and equitable tax system. The endangered middle class and less privileged have been relegated to the proverbial backburner with no relief in sight as a result.

 

We have long called for initiatives aimed at addressing structural deficiencies within the Bahamian economy and deliberate efforts to improve the ease and cost of doing business. The DNA maintains that the government has failed to make the case for The Bahamas’ accession to the World Trade Organization (WTO) in an environment that places Bahamian businesses at a competitive disadvantage.

 

The current administration is notorious for not taking advice or counsel originating from locals but has gained a reputation for moving with haste to implement recommendations made by international and multilateral agencies. Perhaps they will now implement policies that benefit the masses now that the IMF has implored them to do so.

 

Arinthia S. Komolafe, Leader

 Democratic National Alliance

PM Address Falls Flat for Bahamians

Summary:


  • Speech was uninspiring and underwhelming

  • No new ideas or information for economy

  • Government fails to articulate economic or financial services growth plan

  • Address failed to demonstrate strategy to return Bahamas to investment grade

  • Silence on WTO and OBAN deafening


In the immediate aftermath of the release of labor statistics which show that unemployment is on the rise, many Bahamians looked forward to the Prime Minister’s address to the nation. The widely publicized address was supposed to focus on the government’s plan for the economy and outline plans for its revitalization.

Regrettably, the speech fell flat as it failed to inspire hope among the Bahamian people or offer innovative ideas for the resurgence of an economy with stunted growth. The PM sought to spin the unemployment narrative by touting a reported fall in joblessness in Grand Bahama and Abaco but glossed over the approximately one percent rise in New Providence. This is despite the reported record increase in tourism numbers for 2018 and announcements of multiple foreign direct investments.

It was disappointing to watch the nation’s leader make a feeble effort at justifying his recent visit to Europe with a delegation. The PM could only report that the bilateral talks were constructive, and the objective was to ensure that the European Union (EU) understands the government efforts in meeting the EU’s demands. There was no communication of a Financial Services Growth Action Plan (FSGAP); rather, the government has maintained its reactive and myopic approach to this vital sector of our economy. The government seems to have resorted to presiding over the demise of our financial services sectors through the proverbial thousand cuts.

The Democratic National Alliance (DNA) welcomes any initiative that is aimed at improving the ease of doing business in The Bahamas. In this regard, improvements in the operations at the Department of Inland Revenue (DIR) come as a relief to businesses. We submit that while the creation of a promotional arm of the Bahamas Investment Authority (BIA) could provide some gains, there are operational inefficiencies plaguing the BIA and modernization is long overdue.

Bahamians anticipated a report on the economy that included an update on the economic impact of the austerity measures imposed via the budget of hardship for 2018/19. Unfortunately, no accountability or report on stewardship of the people’s money was provided; consequently, an opportunity to distinguish the FNM Government from its predecessor was squandered.

The PM spent a considerable portion of his address on listing several intended or proposed projects and investments. The challenge here is that we’ve seen this script before with successive administrations outlining multiple projects across our archipelago of islands with a vast amount never coming to fruition for the foreseeable future. The simple response of the Bahamian people to these grandiose announcements is that the proof is in the pudding and we will not count our proverbial eggs before they hatch.

Commentaries on the Commercial Enterprise Act (CEA) have become monotonous to the populace. We call on the government to provide the Bahamian people with a report on the economic impact of the CEA including the capital injection or inflow to date, local and permanent jobs created, work permits issued, and government revenue derived from the increase in economic activity following the enactment of the legislation.

Public utterances and lamentation on the ease of doing business in The Bahamas vis-à-vis opening of bank accounts and the blue economy by the government constitute nothing more than grandstanding. We implore the PM and his government to simply get the job done rather than communicating with his ministers and stakeholders via a national broadcast.

In his national address, the PM failed to inform the Bahamian people how he and his cabinet will position The Bahamas’ credit rating from a junk bond status to investment grade.  Further, the PM was silent on the topic of The Bahamas’ accession to the World Trade Organization (WTO) and the OBAN deal which has resurfaced in recent times. This deliberate silence was deafening and telling for a government that campaigned on transparency and accountability. Has the government concluded that the WTO and OBAN are not priority areas and will not positively impact the Bahamian economy in the manner that they’ve been touting? The nation’s leader missed a rare chance to address the concerns of the Bahamian people. While many had minimal expectations for the PM’s address to the nation, we are saddened that he proved them right and delivered yet another underwhelming speech.

Arinthia S. Komolafe, Deputy Leader

Democratic National Alliance



DNA: Government has failed to make case for WTO accession

DNA: Government has failed to make case for WTO accession

It is our official position that The Bahamas should not move forward with its accession to the WTO. We propose that as an alternative, The Bahamas should explore bilateral, plurilateral and sector-specific trade agreements with its main trade partners with the sole criterion being the best interest of the Bahamian people.