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Advertisers Dupuch & Turnquest & Co.
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Focus on light manufacturing to diversify economic growth Freeport to be The Bahamas light manufacturing center
The Bahamian economy is primarily reliant on tourism and financial services. An economy that is concentrated on two sectors that are tied to the success of global markets is unwise. Understanding this dynamic, the government of the Bahamas is encouraging growth in light manufacturing and industry.
By doing this, the government not only is diversifying the economy but also providing an increase in higher paying, quality jobs for Bahamians.
Offshore manufacturing contributes $130 million to the Bahamian economy each year with domestic manufacturing accounting for another $90 million accounting, bringing the to about eight percent of gross domestic product.
The Bahamas’ stable government, proximity to the United States and other Latin American markets, good infrastructure, telecommunications and utilities, and tax-free structure make The Bahamas an attractive manufacturing destination. In addition to these pluses, the Bahamas is part of the Caribbean Basin Initiative, CARIBCAN and the Lomé IV Convention, which allows most goods manufactured or processed in The Bahamas to enter the United States, Canada and Europe duty free.
“We import 95 percent of all that we use in this country. In 1998, The Bahamas’ net imports for goods and services exceeded two billion dollars,” said Leslie Miller, president of the Light Industrial Development Council and vice president for Sunburst Paints & Coatings Ltd., a company that produces 1.5 million gallons paint and two million gallons of joint compound per annum for the local market.
“This means that there are lots of opportunities for local manufacturing to grow in the domestic market to supply both the domestic market and tourism industry,” said Miller.
He notes that here have been several challenges to increasing the consumption of locally manufactured goods, one of which is that some of the importers and distributors do not want to carry locally made products. “A manufacturer should never be a manufacturer, wholesaler and reseller. Almost every local manufacturer has to do this because the merchant class does not want to carry local products,” Miller said, disappointed.
To solve this problem and other challenges, Miller suggested local manufacturers come together with the government to discuss with importers and distributors the true policies related to domestic manufacturing and domestic consumption.
“In my opinion the government needs to sit down with the importers and distributors to encourage them to support local businesses by buying locally produced products instead of importing them. This would expand the local economy, diversify our economic base and save U.S. dollars in the Bahamas instead of creating jobs outside of the Bahamas,” he said.
Although no official discussions have occurred, some companies are increasingly using locally made products. Ed Fields, vice president of public affairs for Sun International, the company that developed the multi-million dollar hotel resort Atlantis on Paradise Island, said “we try to work with local manufactures and suppliers and in almost all cases where we can get products locally, we do. For example, we buy all of our flowers from a local retailer. Our mattresses and our jams and jellies that we place in the rooms are produced locally, as are some of the uniforms that our employees wear.”
Two local items that are widely consumed by the domestic and international markets alike are The Commonwealth Brewery Ltd.’s assortment of beers and a wide variety of Bacardi’s rum and liqueurs. Bacardi Company Ltd. has been producing spirits in the Bahamas since 1960, and the Commonwealth Brewery Ltd. has been making beer since 1992.
An increase in the consumption of other locally manufactured products will only occur as the economy grows. One way to accomplish this is to encourage more foreign investment. Currently, new investment in the manufacturing sector is being steered toward Freeport, Grand Bahama, which is especially attractive to foreign investors for several reasons.
Because of the Hawksbill Creek Agreement, which created Freeport as a duty-free, tax-free area, it is attractive to foreign business. A city planned for 250,000 people but that has a population of 40,000, it already has the needed infrastructure in place. With the expansion of the harbor, container port and airport, facilities for handling the transportation of goods are becoming more efficient all the time.
Perhaps most inviting is the advent of the Grand Bahama Sea-Air Business Center (S/ABC), a 780-acre industrial park between the Freeport International Airport and the Container Port. The S/ABC will be the perfect location for large warehousing, distribution, transshipping and value-added manufacturing.
“With CBI and the other treaties the Bahamas is party to, a shirt can be made in Taiwan and it can be brought here to have the collar added. This means that 20 percent of the shirt was manufactured in the Bahamas and makes it a Bahamian product. Because it is a Bahamian product it can be exported to Europe or the United States without quota from an absolutely tax-free area. Did you ever see a license to make money like that?” said Erik Christiansen, a multifaceted businessman whose business, New Hope Holding Co, is currently completing a development on Grand Bahama Island.
Taking advantage of the aforementioned incentives, Polymers International, a company that engineers polystyrenes, installed itself in Freeport two years ago. It began with a $50-million investment in its first plant and is now expanding. Polymers International employs 50 people and exports 150 containers of its product per month.
“We did a site selection study and decided to invest in Freeport for four reasons: financial, because of the tax-free status; logistical, because of the airport and the harbor; efficient infrastructure and utilities; and a skilled workforce,” said Brian Hess, managing director of Polymers International. Hess notes that because Freeport has had a large chemical industry, Polymers International was able to easily hire skilled people that had lost jobs because of downsizing.
The government is trying to attract more companies like Polymers International to Freeport. Opportunities exist in the manufacturing of jewelry, shoes and garments, personal care and cosmetic products, light plastic products, furniture, tool assembly, light machinery, chemical manufacturing, the assembly of VCRs, radios and toys, and information and data processing services. “The Bahamas is not a poor nation. Our cost of labor is not low, so the processes that come here have to be automated,” said Lincoln Ritchie, president of the Grand Bahama Chamber of Commerce and vice president of Innotec Ltd.
Ritchie noted that the private and public sector alike have emphasized training. The government is working on vocational and technical training in the schools and technical skills training has expanded at the Bahamas Technical and Vocational Institute.
“We have a responsibility to train local people in manufacturing. Certainly, the government is not going to continue to allow companies to bring in expatriate workers if there is no effort to train the locals,” said Larry Russell, director and general manager of Motherwell Bridge Bhicam Limited. He also emphasized that the private sector needs to work with the government to expand technical training programs.
The growth of the sector is important to the growth of the nation. “Many of our young people leave and go away to school. We need to make sure that they have jobs to come back to,” said Ritchie.
The government of the Bahamas is offering a wide array of incentives to manufacturers that locate there. Investment incentives under the following acts include, but are not limited to, exemption from import duties on building materials, equipment, designated raw materials and real property tax: The Industries Encouragement Act; The Tariff Act; The Agricultural Manufactories Act; The Export Manufacturing Industries Encouragement Act; The Spirit and Beer Manufacture Act and The Hawksbill Creek Agreement (Freeport, Grand Bahama). There are no legal impediments stemming the free flow of corporate profits, dividends, interest and royalties from The Bahamas to any international destination.
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Table of Contents The Bahamas: An established tourism and tax-free financial services center experiences a renaissance |
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