Free trade push ‘irresponsible’ with exchange controls

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A governance reform advocate yesterday argued it would be “irresponsible” for the Government to commit the Bahamas to rules-based trading regimes unless local companies enjoyed equal access to credit.

Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that the Bahamas’ “antiquated” exchange control restrictions were out of place in a liberalised global economy dominated by free trade and markets.

Praising the Central Bank for at least starting discussions about placing Bahamas-based businesses on ‘a level playing field’ when it came to accessing capital, Mr Myers said this was essential if local companies were to survive in a liberalised global economy.

He added that the current regime “seriously impedes” the ability of Bahamian companies to compete with foreign rivals, able to access capital far more easily and on better terms/costs, with this nation ranked alongside the likes of Cuba when it comes to capital markets liberalisation.

“We are encouraged that the Central Bank is considering such reform as banking liberalisation in the Bahamas has been sorely lacking, and is well behind all but a few Caribbean nations like Cuba and Barbados,” Mr Myers told Tribune Business.

“We have maintained for many years that if the Bahamas is to fully subscribe to the World Trade Organisation (WTO) and Economic Partnership Agreement (EPA), which it is pursuing and is on track to do, then it must remove its exchange control restrictions on local companies, or it seriously impedes and disadvantages all such Bahamian companies who will be forced to compete with foreign companies locally and abroad.”

The Bahamas is already a signatory to the EPA with the European Union (EU), and is continuing to negotiate for full WTO membership – thereby fully integrating its economy with the world’s liberalised markets, and potentially opening up certain sectors to foreign ownership, companies and workers.

Mr Myers added: “It is irresponsible of any government to move forward with trade liberalisation through WTO and EPA while maintaining exchange control, as doing so will significantly advantage foreign companies who – easily and freely – trade and borrow in US dollars with low interest rates, low transaction costs and unrestricted seamless access across multiple borders.

“There is no way that Bahamian companies would be able to compete in the trade of goods and services while being forced to deal with the inequitable and unreasonable economics caused by Bahamian exchange control.”

Mr Myers said ORG had made these concerns and objections “abundantly clear” to Government officials and consultants during recent EPA implementation meetings.

“ORG suggested that if implementation was a priority to the Government and the EPA consultants, then it must remove all such hurdles in front of Bahamian businesses and professionals well before further implementation,” he added.

“It was also suggested that if the Government and EPA really care about the success of Bahamian businesses in the free trade future, then they must fund and form a collaborative public-private partnership (PPP) committee that focuses on the education and implementation of Bahamian businesses and professionals into such a market.”

Tribune Business reported last week how the Central Bank is eyeing further exchange control liberalisation measures that would allow Bahamian companies to obtain capital and financing overseas, while also removing remove obstacles to their participation in, and the financing of, investments overseas.

The need for such reforms was further highlighted by Central Bank data released yesterday, which showed that Bahamas-based commercial banks appear to be pulling further and further back from business lending, and focusing only on consumer (personal) loans.

The Central Bank figures showed lending to businesses had contracted by $51.5 million for the first nine months of 2016. Residential mortgage lending also contracted by $18.3 million over the same period, while consumer lending expanded by $39.3 million.

Overall, private sector credit contracted by $30.4 million in the nine months to end-September 2016, accelerating the $21.5 million decline the year before. And the figures show that Bahamas-based commercial banks are concentrating lending away from the economy’s most productive sectors – industries that could expand and create jobs.

“The Bahamas is in desperate and dire need of GDP growth, and so it is an opportune time to seriously examine – and remove – any number of antiquated restrictions imposed on our businesses and economy,” Mr Myers told Tribune Business, praising the Central Bank’s proposals.

“The Government must encourage Bahamian businesses to seek out new opportunities abroad, and provide them every incentive and opportunity to be successful in doing so.”

Mr Myers also called on the Government to ‘make a better case’ for why the Bahamas should agree to become a full WTO member, and join other rules-based trading regimes, arguing that potential benefits had not been well defined.

“Successive Bahamian governments have been pressured by first world powers, and they continue to succumb to global tax, trade and banking treaties and agreements with no clear benefit to the Bahamas, and its citizens, being planned out and or articulated,” Mr Myers argued.

“It is more and more difficult for small island nations, like the Bahamas, to compete in a global marketplace with first world countries that have significantly more resources and greater capacity within governance and public and private sector management.

“If the Bahamas and the Caribbean wish to enjoy continued prosperity, then its leadership and governments are going to have to be far more nimble and visionary in their thinking and output. To remain static is to be left behind.”

Mr Myers even suggested that the Bahamas should consider doing away with its own currency, and consider ‘dollarising’ to the US dollar.

“The Central Bank Governor is to be commended for his leadership and vision on the matter of exchange control liberalisation,” Mr Myers said of John Rolle, “and should perhaps seek to remove it all together.

“Progressive as the idea may be, perhaps US dollarisation would provide an even greater boost to investor confidence, drive lower interest rates, stimulate the economy and ward off the threat of devaluation?”

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