1998 Commercial Guide for The Bahamas
Report prepared by U.S. Embassy Nassau - released August 1997.

_____________________

Real Estate Law - Overview Extract:

A. 2. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT:

The Bahamian government in 1993 repealed the Immovable Property (Acquisition By Foreign Persons) Act, which required foreigners to obtain approval from the National Economic Council to purchase real property in the country, and replaced it with the International Persons Landholding Act. Under the new law, approval is granted automatically 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 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.

_____________________

I. EXECUTIVE SUMMARY

The Bahamas is a politically stable, middle-income, developing country. Following general elections in 1992, The Bahamas experienced a peaceful transfer of power from the center-left Progressive Liberal Party (PLP), which had governed the country for 25 years, to the centrist Free National Movement (FNM).

The Bahamian government maintains the value of the Bahamian dollar on par with the U.S. dollar. The government's primary monetary consideration is the maintenance of sufficient foreign exchange reserves to support the present value of its currency, pay for necessary imports, and finance the repatriation of corporate profits. Although the country's liquidity remained buoyant throughout 1995, in November the Central Bank cautioned local banks to limit lending levels because of concerns that foreign exchange reserves were getting dangerously low. The Bahamian economy rebounded by the end of the fourth quarter, however. The turnaround was sparked primarily by a jump in tourism revenues during that quarter.

Nearly two-thirds of the Bahamas ' Gross Domestic Product (GDP) is derived from tourism. Due to the country's status as a tax haven and off-shore banking center, financial services constitute the second most important sector of the Bahamian economy (after tourism, and excluding the public sector), accounting for just over 10 percent of GDP. Agriculture and industry together account for less than 10 percent of GDP. There is little large-scale agriculture, and most agricultural products are consumed domestically. The country also produces some chemicals and pharmaceuticals for export, along with rum and industrial salt.

Despite its small size, The Bahamas is a major market for American exports to the Caribbean, albeit one that has declined slowly in recent years. With few domestic resources and little industry, The Bahamas imports nearly all its food and manufactured goods. Approximately 55 percent of its imports originate in the United States, and most Bahamian purchases of third-country exports are acquired through American distributors. American goods and services tend to be favored by Bahamians because of cultural similarities and the exposure to heavy domestic American advertising from Florida (which, at its closest point, is only 45 miles away). In addition, the dominant tourist industry prefers to purchase goods with which their clientele, the vast majority of whom are Americans, is familiar.

For its part, the Bahamian government actively encourages the production of locally produced items for use by the tourist industry and promotes import substitution, although with only modest success. While the government has encouraged hotels to use domestically-produced fruits, vegetables, meat, and fish, they have had to rely on uncertainties of small local suppliers, which are restricted by government policies that discourage the growth of large-scale domestic agriculture. As a result, the tourist industry largely depends upon imported foodstuffs.

The Bahamas has much to offer the potential investor: a stable democratic environment, relief from personal and corporate income taxes, timely repatriation of corporate profits, proximity to the United States with extensive air and communication links, a good pool of skilled professionals, and designation under the Caribbean Basin Initiative (CBI), Canada's CARIBCAN program, and the European Union's Lome IV Agreement. The Bahamas officially welcomes foreign investment in tourism and banking, and has declared its interest in agricultural and industrial investment as well as any investments which will generate local employment, particularly in white-collar or skilled jobs. Nevertheless, the Bahamian government and business community have been suspicious of outside investment in non-traditional areas such as industry, and such projects have generally faced a drawn-out approval process and some local opposition. Therefore, the vast majority of successful foreign investments have remained in the areas of tourism and banking. Furthermore, the Bahamian government reserves retail and wholesale outlets, non-specialty restaurants, most construction projects, small hotels, and most small businesses exclusively for Bahamians. Some categories of businesses are designated for possible joint ventures between Bahamians and foreigners.

II. ECONOMIC TRENDS AND OUTLOOK

MAJOR TRENDS AND OUTLOOK:

The Bahamian economy will remain dependent upon tourism and financial services (primarily the former) for the foreseeable future. Per capita income--officially estimated at $11,610 in 1995--is among the highest in the region. In 1996, the Bahamian economy grew by 4 percent resulting from a 7.7 percent increase in tourist spending. The economy is also expected to grow by 4 percent in 1997 and 1998 provided tourism trends continue and the country sustains its current rate of development.

Overall growth in the Bahamian economy can be attributed to Sun International's Atlantis Resort and Casino which took over the Paradise Island Resort in 1995 and has provided a much needed boost to the economy. In addition, the government has sold off several hotels which it inherited from the former PLP government, and has attracted five other major hotel investors--The Ruffin Group (Marriott Crystal Palace on Cable Beach), Breezes Super Clubs, Sandals Resort, and RHK Capital Inc. a Canadian company which acquired the Best Western British Colonial Hotel. The Bahamian Government has also adopted a proactive approach to courting foreign investors and has already been on several major investment missions: "road trips" to the Far East and Europe, Latin America and Canada over the past two years. The primary purpose of the trips was to restore the reputation of The Bahamas in these markets. We expect the February 1997 opening of Hutchison Whampoa Freeport Container Transshipment facility to impact the Bahamian economy significantly. Hutchison Whampoa has also purchased three government-owned hotels--the Grand Bahama Beach Hotel, the Lucayan Beach Hotel and Resort, and the Clarion Atlantik Beach Hotel--in Freeport. These acquisitions and the expected major renovations are poised to transform tourism in Freeport, The Bahamas' second major city.

The government reports unemployment at 10.0 percent for 1996. However, The Bahamas appears to have a large but unreported population of under-employed workers. The Bahamian labor force has an estimated 148,000 workers. Bahamian government figures for both consumer prices and employment are rough estimates; the Statistics Department of the Ministry of Finance and Planning is attempting to improve information gathering in these areas.

Despite the Bahamian government's declared interest in economic diversification, particularly through development of the agricultural and industrial sectors, several factors will likely continue to restrict growth in these sectors. These factors include: government inertia, domestic resistance to outside investment perceived as potentially competitive with local business, high labor costs, and competition from other countries in the region.

PRINCIPAL GROWTH SECTORS:

Tourism: The Bahamas was a vacation destination for over 3.4 million visitors in 1996--an increase of 5.5 percent over 1995 levels. American visitors accounted for 82.1 percent of total stopover arrivals in Nassau and Paradise Island. Tourism and related services account for over 60 percent of GDP--supplying the Bahamian job market, directly and indirectly, with two thirds of the jobs in the Bahamas.

During 1996, the tourism sector continued on a positive growth trend due to increased cruise ship arrivals and an increasingly competitive stopover product which translated into increased earnings. Total visitor arrivals, which fell by 6.0 percent in 1995, rebounded by 5.5 percent to 3,415,858 in 1996, reflecting the buoyancy in cruise traffic and continued, yet moderated, growth in stopover visits. After three consecutive years of decline, cruise visitors recovered by a healthy 9.2 percent to 1,685,668 passengers in 1996, responding partly to the Government's Cruise Ship Incentives Bill enacted in October 1995, along with the ongoing redevelopment of the Port and downtown Nassau areas. Growth in stopover traffic, however, slackened to 2.2 percent from 5.4 percent in 1995 for a total of 1,633,105 visitors, with performance constrained by the closure of a number of hotel properties in Grand Bahama for renovation and refurbishment.

Visitor arrivals to Grand Bahama increased by 3.8 percent, benefiting from growth in sea visitors, but stayover traffic declined by 5.9 percent. Favorable cruise incentives, more effective marketing as separate destinations and increased air linkages with Europe, resulted in a 6.7 percent hike in arrivals to the Family Islands. For New Providence, 1995's 7.0 percent downturn in visitors was reversed to a 5.9 percent gain, comprising a 4.5 percent rebound in the cruise sector and an accelerated 7.4 percent increase in stayovers.

In other tourism developments, the phenomenal success of Sun International's Atlantis Resort on Paradise Island continues to fuel the Bahamian economy and represents the equivalent of 6 percent of GDP. Sun's assets include 1,870 hotel rooms and 4,000 employees, making it the country's largest single employer other than the government. Sun is currently undergoing a $450 million expansion project to construct another 1200 hotel rooms. RHK recently purchased the historic British Colonial Hotel in downtown Nassau. Rather than competing with the casinos and hotels catering to tourists, RHK will concentrate on running a first rate business center in the heart of Nassau's financial district, under a Four Seasons franchise. Overall, various developers will begin constructing 5000 hotel rooms throughout The Bahamas in 1997 - 1998.

Continuing its efforts to sell off all government-owned hotels, the FNM Government sold three hotels in Grand Bahama to the Hong Kong-based Hutchison Whampoa, joint owners of the Freeport Container Port. Hutchison purchased the Lucayan Beach Hotel and Resort, the Grand Bahama Beach Hotel Holiday Inn and the Clarion Atlantik Beach Hotel. In 1995, the Government signed a heads-of-agreement to sell both the Grand Bahama Beach and Clarion Atlantik Beach hotels to a German company but the sale was never finalized. Hutchison plans to redevelop the hotels and adjacent beach front property into an upscale international resort. The project will cost approximately $100 million. These sales leave the Radisson Cable Beach Hotel in Nassau as the principal publicly-owned hotel in The Bahamas. (There are still two small government-owned hotels on Andros).

All the major cruise lines operating out of Florida make calls in The Bahamas either in Nassau or Freeport, the second city. Within the last year, two cruise lines, Disney and Holland America, have purchased private islands to develop their own ports of call.

In October 1995, the Government passed a controversial law to permit shopping on Sundays when a cruise ship is in port. Previously, nearly 10,000 tourists arrived each Sunday in The Bahamas only to discover that nothing was open, resulting in an estimated annual loss in revenue of $26 million to Bahamian merchants. The Government also embarked on a comprehensive beautification project for Nassau, including planting palm trees and resurfacing sidewalks along downtown Bay Street, and upgrading the docks at Prince George's Wharf.

Seeking to address the decrease in cruise ships overnighting in Nassau, the Government also passed the Cruise Ship (Overnighting Incentive) Act in November 1995, allowing cruise ships to open their stores and casinos while in port. In order to benefit from this act, however, cruise ships must be in port a minimum of 18 hours. Although the Act has not encouraged ships to change their schedules to stay in port on Sundays, they are staying longer and passengers are venturing on shore to sample Bahamian culture and participate in local activities. According to surveys conducted by the Nassau Tourism Development Board, businesses in the downtown area have reported increases in sales as a result of the new incentives.

The Casino Taxation Act was amended in October 1995 to allow for the establishment of small-scale casinos through the reduction of the basic tax and winnings tax rates for casinos of less than 10,000 square feet. The basic tax was reduced from $200,000 to $50,000 for casinos with floor space of less than 5,000 square feet. The tax rises to $100,000 for casinos of 5,000-10,000 square feet. Unlike the winnings tax rate for traditional casinos (25 percent on the first $20 million, all the way down to 5 percent on earnings over $20 million), small casinos pay a progressive winnings tax rate of 10 percent on the first $10 million to gross winnings, and 15 percent thereafter. Although the amendment was made specifically for the establishment of a casino at the Club Med Resort on the island of San Salvador, it sets the stage for licensing small casinos elsewhere.

As a further incentive to draw tourists, the government amended the Lotteries and Gaming Act in October 1995 to allow for sports betting. Gamblers must be physically present at the time of betting, and may bet on "any athletic game or sport taking place within or outside The Bahamas other than horse racing." A sports bar and betting area have already been set up inside the Crystal Palace Casino on Cable Beach to accommodate sports gamblers.

Financial Services: Financial services, the second major sector of the Bahamian economy consists primarily of banking and mutual funds activity. Financial services accounts for approximately 15 percent of GDP, with the banking share dominating. There were 425 licensed banks and trust companies in the country in 1996, along with 9 retail banks. The gross economic contribution of the sector for 1996 is expected to exceed $160 million. Since 1991, contributions from this sector have increased by an average 6.6 percent or more than $12 million per year. The financial sector employed 3,673 persons in 1996.

Offshore company incorporation continued to flourish under the International Business Companies Act (IBC), which was established in 1989 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating off-shore companies in The Bahamas. IBC's -- "shell corporations" which can be formed in a matter of hours with minimal documentation--have grown from approximately 8,000 in 1990 to currently over 53,000 although many appeared to be single-transaction firms. The Bahamian Government does not release IBC revenue figures but the minimum incorporation cost per IBC is $100. Subsequent amendments to the act include limited liability and limited duration companies.

Following the passage of the Mutual Funds Act in 1995, mutual funds recorded significant growth. From 1995 to November 1996, the number of licensed funds under management in The Bahamas increased from 412 to 488, with the value of funds under management gaining almost 40 percent to $55.0 billion.

In February 1991, The Bahamas also legalized the formation of asset protection trusts. These trusts, used to place the financial assets of wealthy individuals beyond the reach of domestic courts in countries such as the United States, formed a growing portion of Bahamian banking. The FNM has also made efforts to reduce government "red tape" and expedite approval of foreign investment proposals. The Bahamas Investment Authority (BIA) was created in 1992 with this purpose in mind. The BIA will require a full accounting of the environmental impact of new industrial or agricultural schemes and will not approve projects which would be unable to pass U. S. environmental standards.

Another important offshore service, ship registry, is poised for renewed growth under the recently established Bahamas Maritime Authority. Over the last two years, the number of ships on the Bahamian registry was relatively stable at 1,475, with the corresponding tonnage at 25 million.

Manufacturing Industry: The manufacturing industry sector in The Bahamas accounted for only 3 percent of GDP in 1996. Production among offshore manufacturing companies, primarily for the export market, recorded a modest advance in 1996. In particular, salt exports increased by 30.3 percent to $18.1 million and rum and aragonite (a coral sand used in glass manufacturing and beach reclamation) by $2.1 million each, to $5.2 million and $4.9 million, respectively. Production of chemical and pharmaceutical goods declined from $74.2 million in 1995 to $55.6 million in 1996.

The 1954 Hawksbill Creek Agreement established a duty-free zone at Freeport, Grand Bahama, with a nearby industrial park to encourage foreign industrial investment. Most Freeport tax and duty exemptions were extended by legislation in 1993 through 2054. The opening of Hutchison Whampoa's Freeport Container Transshipment facility in February 1997 is expected to impact the Bahamian economy significantly. The container facility should increase employment, create new spin-off jobs in warehousing and storage, component assembly, transportation, and distribution and security services in Freeport.

Agriculture and Fisheries: Agricultural output increased modestly in 1996 based primarily upon expanded poultry production, as crop exports declined. As the Department of Agriculture's survey of crop production was expanded to include more comprehensive data on domestic output, the estimated value of output was significantly higher at $67.6 million vis-à-vis $43.7 million in 1995; crop production accounted for 59.7 percent ($40.4 million) of the total. Agricultural exports, dominated by citrus fruits, declined by 10.5 percent to $12.0 million, as higher prices were offset by reduced quantities. Poultry production rose 12.4 percent to $26.3 million, for 38.8 percent of the sector's value. However, red meat output fell 1.4 percent to $0.9 million.

Government efforts to assist small farmers included: improving agricultural extension services, imposing import restrictions on a number of items and hosting a series of meetings between hotels and farmers, with a view to improve the distribution and marketing of Bahamian produce within the tourism sector. To assist local banana farmers, the Ministry of Agriculture imposed a restriction on banana imports in mid-October 1995 creating a monopoly for locally grown bananas. In an effort to promote the local crop, the Ministry is providing assistance to local farmers to develop a better grown Bahamian banana in terms of size, appearance, taste and shelf life. The Ministry is, however, allowing hotels to continue importing bananas until the government determines that Bahamian farmers can supply sufficient quantities for the tourist market. The fledgling banana industry received a severe blow from Hurricane Lili in September 1996, but is recovering. The agricultural restriction was also extended in December 1995 to include other varieties of produce in which the Ministry determines that demand can be met by local farmers (e.g. Christmas poinsettias, romaine lettuce, yellow squash, zucchini).

Despite the upswing in agricultural production, the sectors are still struggling to gain a substantial foothold in the import- dominated economy (The Bahamas imports over $250 million in foodstuffs per year, representing about 80 percent of its food consumption.)

The agriculture and fisheries sectors, together account for 5 percent of GDP and employ about 5 of the work force full time (and a far larger portion of the workforce on a temporary basis during the opening weeks of lobster season). Governments formed by both major political parties have, in recent years, announced efforts to expand food production in order to reduce imports and generate foreign exchange. The Government recognizes that in order to become self-sufficient in agriculture, new varieties of crops must be introduced and the caliber of crops released on the market must improve. Therefore, the Bahamian government actively seeks foreign investment aimed at increasing agricultural exports, particularly specialty food items. The government officially lists food processing, mariculture, agro-industries--fruits and nuts, dairy production, winter vegetables--as the areas in which it encourages foreign investment.

The Bahamian Government, which insists that the agricultural sector should employ more Bahamians, has been reluctant to grant work permits to foreign workers even in instances in which it is clear that they would not displace Bahamian workers. Applications for any substantial number of agricultural workers from other western hemisphere nations are almost automatically refused. These policies are unlikely to change. Ironically, agricultural work has historically carried low prestige in Bahamian society and agricultural investors have complained that Bahamian field workers are generally unreliable. In light of this, The Ministry of Agriculture and Fisheries established a Registry of Labor to encourage Bahamians to find jobs with the major growers on the Family Islands. Attitudes towards the registry have been positive thus far. In early January 1995, over 770 Bahamians applied through this registry for temporary farm jobs with an okra farm located in Andros.

Approximately 240,000 acres of prime uncultivated agricultural land and plentiful supplies of fresh water exist throughout the islands but agricultural production still remains primarily in the realm of small-scale farming on the islands of Abaco, Andros, Eleuthera, and Grand Bahama. In the area of mariculture, The Ministry of Agriculture and Fisheries and the Department of Fisheries has declared a renewed commitment to the sustainable and profitable use of Bahamian marine resources. One of the goals of the Department of Fisheries is to develop the commercial industry by promoting the under-utilized seafood products of The Bahamas. The Ministry of Agriculture and Fisheries opened a shrimp hatchery in Nassau in 1993, and another shrimp farm is in operation on Grand Bahama Island.

The fisheries sector also recorded growth, but lower market prices dominated, for a marginal decrease in industry earnings. Although the estimated volume of fisheries exports rose 11.3 percent, average prices receded by 12.5 percent, influencing a 2.4 percent loss in value to $57.6 million. Accounting for 93.0 percent of all exports, lobster sales fell by 3.0 percent to $54.0 million; volume rose 10.6 percent to 5.5 million pounds but the average price per pound eased to $9.89 from $11.28 in 1995. Steady growth in sponging activity resulted in a 19.9 percent gain in value to $1.1 million. Foreign sales of conch meat also rose 14.4 percent to $0.9 million; however, queen helmet shells lost 42.8 percent to $0.7 million while other marine exports rose by 18.5 percent to $0.9 million.

Livestock production accounts for one of the value of agricultural production, as most meat produced in The Bahamas is for domestic consumption. Overall, 516,370 pounds of livestock were slaughtered during 1996. Gladstone Chicken Farm, the main source of fresh poultry in Nassau experienced a second devastating fire on June 7, 1997 after recovering from fire damage on May 2, 1996. The Big Bird Chicken farm opened in Abaco in March 1997. The farm is able to process 30,000 chickens a month. The farm currently employs 40 persons and has plans to expand its processing capacity to 60,000 chickens per month in the near future. In 1996, 19,437,063 pounds of broiler chickens and 4,458,060 dozen layers were slaughtered. The new farm increases the total number of chicken farms in The Bahamas to three.

In an effort to protect domestic agricultural producers, the government requires that a permit be granted to import more than 50 pounds of whole chickens or chicken parts, lamb or mutton, or pork legs, shoulders, or butts into The Bahamas. Permits are also required to import plants, fruits--particularly bananas, vegetables, and cut flowers. Permit applications have occasionally been denied when the government determined that a surplus existed in locally-grown products in the same category.

Construction: According to the 1996 Central Bank statistics, the construction industry experienced a strong recovery in 1996, heavily influenced by externally financed tourism and industrial- related projects. These, together with steady gains in residential investments, including the luxury second homes market, continued to exert a positive influence on economic expansion.

The number of building starts, which is one of the leading indicators of activity in the sector, advanced by 60 (5.8 percent) to 1,100 units and in value by $67.6 million (56.7 percent) to $186.8 million. In the dominant commercial sector, construction starts rose by 13 (14.0 percent) to 106 units; the more than threefold hike in value to $68.9 million was principally linked to a $25 million additional investment in the container terminal development in Grand Bahama and some $14.9 million in outlays on four large scale projects in New Providence. Similarly, residential starts rose by 49 (5.1 percent) to 993 units and in value by $17.5 million (17.5 percent) to $117.7 million. A single public sector project was started in 1996, at an assessed value of $0.3 million vis-à-vis 3 percent valued at $0.9 million in 1995.

During 1996, the number of building completions was higher by 60 (6.3) at 1,031, and the corresponding value by $46.7 million (42.5 percent) at $156.6 million. Although commercial completions fell in number by 29 (19.5 percent) to 116, the associated value rose threefold to $63.3 million. Residential completions increased by 87 (10.6 percent) to number 908 units, with the value strengthening by $13.9 million (17.9 percent) to $91.6 million. Public sector building completions grew by 2 to 7 units, but at a significantly lower value of $1.7 million compared to $11.4 million in 1995. Prospective activity, as signaled by permits issued, suggests continued buoyancy in the construction sector during 1997.

 

GOVERNMENT ROLE IN THE ECONOMY:

Government budget: The $968 million Bahamian budget for FY 1997-98 focuses on improving health care services, education and training programs, and reducing crime. The proposed budget calls for appropriations of $968 million--$846 million for recurring expenses and $122 million for capital expenses. Health care will receive $105.8 million, an increase of 13 from the previous budget. The Government will spend $22.3 million on education, representing an 18 increase, and $9.3 million for the police force, the court system and the Attorney General's Office, an increase of 14. The 1997-98 budget held no new taxes and no increases in existing taxes. The proposed budget supports the Free National Movement (FNM) Government's campaign promises by providing customs exemptions for construction and development in the Family Islands.

A new tax, which does not directly affect Bahamians, will be levied against foreign employees. The new revenues will be used to pay for vocational training programs. The budget, which runs from July 1, 1996 to June 30, 1997, is the Administration's fifth full year budget.

As a part of the FNM Government's overall strategy to simplify and harmonize customs import duties, the current 123 separate import duty rates were consolidated into 29 rates effective July 1, 1996. With Hemispheric Free Trade looming by the year 2005, the government needs to begin searching in earnest for ways to restructure revenue sources away from duties altogether (i.e. taxes). In the 1997-98 budget speech, the Finance Minister dispelled rumors that The Bahamas would introduce a sales tax or income tax, and stated that the budget contained no new or increased taxes. The Bahamian Government relies almost exclusively on import duties for revenue, a factor which has, so far, affected participation in the planning process for the Free Trade Area of the Americas (FTAA).

Monetary and credit policy: The Bahamas' primary monetary strategy is to maintain stability and expansion in foreign exchange reserves to purchase essential imports, maintain the parity of Bahamian and American dollars, and finance repatriation of corporate profits. In March 1997 the Central Bank instituted a "credit squeeze" to control public spending. This action was prompted because consumer loans grew dramatically. Deposit costs in the banking industry escalated by 1.5 percent over a five month period. Some local banks increased the interest rate charged on demand loans by 0.75 percent to 10.5 percent effective March 17. Bank officials say that the cost of interest on deposits payable to customers is higher than the Central Bank's prime rate of 6.75 percent. Some bankers want to see the prime rate increased to 7.5 percent and are taking measures to reduce lending levels.

Net free cash reserves at year-end 1996 were $25.6 million. Rates across the range of fixed deposits averaged between 5.3 percent - 5.4 percent, firming on the lower end by almost 75 basis points. On the lending side, the softening in average rates was especially pronounced for overdrafts and other local loans, which in both cases exceeded three percentage points, to 10.86 percent and 8.52 percent . More moderate easing was registered for average residential and commercial mortgage rates to 10.06 percent and 10.87 percent respectively, while consumer loan rates were virtually stable at 14.69 percent.

Recently, there has been talk in the financial sector about eliminating exchange controls. The government has already allowed commercial banks limited exchange control powers. Local financiers believe that eliminating exchange controls will increase investor confidence, facilitate the free flow of currency in and out of the economy, and enable the government to measure accurately the performance of the economy. If The Bahamas were to maintain exchange controls, it would eventually be forced to borrow money from abroad, a task made difficult by the country's rising debt.

Inflation and unemployment: Consumer price inflation, measured as the average variation in the retail price index, declined to 1.1 percent in 1996 from 2.2 percent in 1995.

The Government hopes to reduce unemployment by 5 percent by the year 2002. This will be achieved by: (1) establishing duty free zones on several Family Islands to boost employment in the construction industry; (2) training 3,000 persons, especially young men, at the Bahamas Technical and Vocational Institute. Sun International plans to employ 2,200 persons by the end of 1998 and create an additional 1,000 indirect jobs as a result of its Atlantis expansion program. This will make Sun the largest employer other than the government.

To further reduce unemployment, the Government has established a small business development program to assist small owners with business plans, funding and follow-up. Additionally, the Government plans to introduce a new manufacturing industry encouragement act which will make it easier for persons to establish a business.

The government also plans to divest minority interest in two public utility corporations--The Bahamas Electricity Corporation (BEC) and The Bahamas Telecommunications Corporation (BATELCO). This process may increase unemployment initially, but new spin-off businesses could offset this.

 

BALANCE OF PAYMENTS AND TRADE:

The Bahamas has an import-oriented economy and relies heavily on tourism for foreign exchange. The country's trade increased in 1996 to an estimated $1059.9 million from $939.0 million the previous year as total imports rose by $106.2 million to $1,261.6 million. Merchandise export earnings grew by an estimated $25.8 million (14.7 percent) to $201.7 million. Foreign exchange reserves at the end of 1996 were estimated at $163.0 million.

 

INFRASTRUCTURE:

The Bahamas provides good basic infrastructure for businesses. However, utility rates are considered high compared to the U.S. The divestiture of BEC and BATELCO will eventually reduce rates. Since taking office in 1992, the government has improved some major roads both in Nassau and the Family Islands, implemented changes to alleviate traffic congestion on major roads in Nassau, provided full electricity and improved airports on most Family Islands, and is working with Sun International to construct a second bridge between Nassau and Paradise Island. Generally, there is regular air and sea transportation between the major developed islands and the United States. The telecommunication service is sometimes inadequate but operational enough for most routine correspondence. The mail service is slow both on the islands and between other countries; however, the islands are also serviced by overnight delivery services.

III. POLITICAL ENVIRONMENT

The Bahamas is a constitutional multi-party parliamentary democracy and a member of the Commonwealth of Nations. Queen Elizabeth II is the nominal head of state and is represented in The Bahamas by an appointed Governor General. The government is headed by an elected Prime Minister and Parliament. Since 1992, the government has been controlled by the centrist Free National Movement (FNM) of Prime Minister Hubert A. Ingraham and is now serving its second term in office. The opposition center-left Progressive Liberal Party (PLP) is led by Perry G. Christie, a close friend and former law partner of Ingraham. Since the March 1997 general elections, the FNM has held 34 seats in the 40-member House of Assembly, with the other 6 held by the PLP. Under the constitution, the next general elections must be held by 2002.

Both major political parties have enjoyed good relations with the business community, and no serious political movement in Bahamian history has ever advocated the nationalization of foreign property. There is no Bahamian history of political violence or instability, and politics tends to follow the British model of combining sometimes intense rhetoric with courtly manners. The political issues of most interest to the business community are bank secrecy and openness to foreign investment. Both political parties favor maintaining the Bahamian tradition of strict bank secrecy, believing this policy to be essential to the maintenance of a thriving financial services sector. The government introduced the Money Laundering (Proceeds of Crime) Act, 1996, which codified many of the due diligence procedures enshrined within the 1985 Code of Conduct of the Association of International Banks and Trust Companies in The Bahamas. Along with the Money Laundering (Proceeds of Crime) Regulations, 1996, the Act reinforced the Tracing and Forfeiture of Proceeds of Drug Trafficking Act, 1987, making it a crime to launder the proceeds of any criminal activity.

The Bahamian legal system is derived from British Common Law and colonial legislation, although American and other models have been used for some business legislation enacted since independence. The judiciary is independent, and conducts fair and public trials with the ultimate right to appeal judicial decisions to the Privy Council in London. A large legal community, most of whom have received some training in Great Britain or the Caribbean, is available to assist foreign business clients. While fair, the Bahamian judicial process tends to be much slower than the norm in the United States. Although there have been instances of Bahamian businessmen attempting to take advantage of delays in the judicial process and their physical proximity to gain advantages in commercial disputes with foreign firms, there is no evidence that the Bahamian judiciary has favored local firms over foreign ones in its final adjudication of disputes. The Bahamian government began a process of upgrading its court system, in part with American government aid, in 1993.

Bilateral U.S.-Bahamian relations are excellent. Although The Bahamas lie along the most direct air route for transport of illegal substances between South America and the southeastern United States, Bahamian government cooperation with U.S. law enforcement agencies under "Operation Bahamas-Turks & Caicos" (OPBAT) has significantly reduced the level of drug trafficking through The Bahamas. Bilateral cooperation in narcotics interdiction operations is extremely close. In 1994, the Bahamas strongly supported American efforts to end military rule in Haiti. A common language, cultural similarities, family and personal ties dating back to the days of the American Revolution (when the ancestors of many modern Bahamians first came to the islands from the southeastern United States), and the enormous number of visitors every year between the two countries have engendered a level of familiarity and ease of communication unusual even between neighboring countries.

IV. MARKETING U.S. PRODUCTS AND SERVICES

Bahamian government policy prohibits foreign investors from opening retail and wholesale outlets, commission agencies engaged in the import export trade; real estate and domestic property management agencies; domestic newspaper and magazine publication; domestic advertising and public relations firms; nightclubs and restaurants, except specialty, gourmet and ethnic restaurants; restaurants operating in a hotel, resort complex or tourist attraction; security services; domestic distribution of building supplies; construction companies, except for special structures for which international expertise is required; personal cosmetic beauty supplies; shallow water scale-fish, crustacean, mollusks and sponge-fishing operations; appliance service operations; and public transportation. However, a wide variety of distributorship, joint venture, and franchise opportunities involving Bahamian partners are available.

FRANCHISING:

There are a number of American franchises in The Bahamas. Most franchises are successful because they appeal to both the local community and the three million plus tourists who visit The Bahamas. Although Bahamian government policy prohibits American foreign retail chains from opening outlets in The Bahamas, various distributorship and franchise arrangements are possible.

DIRECT MARKETING SELLING FACTORS:

Goods intended for sale to the general public are normally purchased by local wholesalers, several of whom specialize in particular lines. The usual business practice is for the wholesalers to make purchases directly from their counterparts in Florida, which is why such a large proportion of third-country products are imported into The Bahamas through the United States. Most wholesalers and some retailers, however, are willing to make direct purchase arrangements. In some cases, Bahamian retail outlets or wholesalers will enter exclusive distributorship arrangements with foreign firms.

JOINT VENTURES LICENSING:

International investors are encouraged to establish joint ventures with Bahamian partners. The Bahamian partner must have the majority ownership. The choice of a Bahamian partner is left to the discretion of the investor. Joint ventures between international investors and Bahamians are eligible to access funding from The Bahamas Development Bank (BDB). However, the equity of the overseas investor may not be borrowed from the BDB or from the domestic capital market. Bahamians may, however, borrow a percentage of their contribution from BDB or the domestic capital market. An established joint-venture is not debarred from accessing BDB funds.

STEPS IN ESTABLISHING AN OFFICE:

Companies seeking to establish a representative office in The Bahamas must first obtain a business license. Licenses are issued following application to and approval by The Bahamas Investment Authority (BIA) in the office of the Prime Minister. The BIA can be contacted at:

Bahamas Investment Authority Office of The Prime Minister P.O. Box CB-10980 Nassau, Bahamas Tel:(242) 327-5970 Fax:(242) 327-5907

ADVERTISING AND TRADE PROMOTION:

Advertising for any legal item or service, whether sold in The Bahamas or in the United States, can be purchased freely in any local newspaper or publication. Leading local publications include:

Bahamas 'The Nassau GuardianBahamas ' (circ. 15,000, morning daily) P.O. Box N-3011 Nassau, Bahamas Tel:(242) 323-5655, (242) 3232-6492, or (242) 323-5656.

Bahamas 'The TribuneBahamas ' (circ. 15,000, afternoon daily) P.O. Box N-3207 Nassau, Bahamas Tel:(242) 322-1986 Advertising Manager Tel:(242) 322-2768 Fax:(242) 328-2398.

Bahamas 'The Freeport News-Bahamas ' (circ. 5,000, morning daily) P.O. Box F-40007 Freeport, Bahamas Tel:(242) 352-8321 Bahamas 'The PunchBahamas ' (circ. 25,000, weekly tabloid) P.O. Box N-4081 Nassau, Bahamas Tel:(242) 322-7112 Fax:(242) 323-5268

Bahamas 'The Bahama Journal Bahamas ' (circ. 5,000, weekly) P.O. Box N-8610 Nassau, Bahamas Tel: (242) 325-3082

Radio and television advertising can also be purchased on local radio and television stations. The sole television broadcaster is the state-owned ZNS (channel 13). This station, and its Nassau radio stations ZNS-1, ZNS-2, and ZNS-FM, can be contacted at:

Broadcasting Corporation of The Bahamas P.O. Box N-1347 Nassau, Bahamas Tel:(242) 322-4623 or (242) 322-4480 Advertising Sales Director:(242) 322-8962

There are three independent FM radio stations in Nassau: 100-Jamz (operated by Bahamas 'The Tribune-Bahamas '); Love-97 (operated by Bahamas 'The Bahama Journal-Bahamas '); and 94-More FM. 100-Jamz P.O. Box N-3207 Nassau, Bahamas Tel:(242) 328-4771 Fax:(242) 356-5343 Love-97 FM

P.O. Box N 3909 Nassau, Bahamas Tel: (242) 356-4960 Fax: (242) 356-7256

94-More FM P. O. Box N-7030 Nassau, Bahamas Tel: (242) 361-2447 Fax: (242) 341-2448

SELLING TO THE GOVERNMENT:

Businesses intending to market goods or services to The Bahamas government or businesses seeking to enter the Bahamian commercial market are advised to seek the advice of the American Embassy in Nassau at an early stage. The Government has a fair and open procurement process for purchasing supplies, equipment and services. The Embassy's Commercial Office offers a number of services tailored to specific businesses seeking local distributors, including the Commerce Department's "Goldkey Service," for modest fees. Visitors can also speak, by appointment, with a trade specialist in the Commercial Office, located in the Embassy in downtown Nassau on Queen Street. The office can be contacted at:

Economic-Commercial Section American Embassy Nassau American Embassy Nassau P.O. Box 9009 or P.O. Box N-8197 Miami, FL 33159 Nassau, Bahamas Nassau telephone:(242) 322-1181 or 323-7180 and fax:(242) 328-3495

NEED FOR A LOCAL ATTORNEY:

As in the U.S., most business transactions may be carried out without an attorney. Persons wishing to consult or retain local counsel, however, are advised to contact the Commercial Office for a copy of the office's "Attorneys List."

V. LEADING SECTORS FOR US EXPORTS AND INVESTMENT

Best Prospects For Non-Agricultural Goods and Services:

Tourism Industry

Tourism is the overwhelmingly dominant industry, with more than 80 percent of tourists to The Bahamas coming from the United States. The market for supplies familiar to American tourists is, therefore, predictably large. In certain instances, the Hotels Encouragement Act allows duty-free importation of hotel supplies for several years after the original construction or reconstruction of a hotel or resort.

Vehicles and automobile parts

Although Bahamians drive on the left side of the road, and thus right-hand drive vehicles (such as domestic Japanese and British models) should have a slight advantage, there is no legal restriction against left-hand drive (US Standard) vehicles, and the majority of vehicles on Bahamian roads are American-made. There is a large market for second-hand US vehicles, although these can only be sold through local dealers. Used limousines are particularly prized for use as taxis. Bahamian safety and pollution standards are less restrictive than those in the United States. Import tariffs, while high, are non-discriminatory.

• Total Imports for 1996 (in US$): $75,070,343
• Total Imports from the US for all types of motor vehicles for 1996(in US$): $62 Million

Medical supplies

There are three main hospitals in The Bahamas (the government-owned hospitals, Princess Margaret in Nassau and Rand Memorial in Freeport, and the privately-owned Doctors Hospital in Nassau). The level of medical care is continuously developing to keep abreast with medical technology. The medical community aims to provide a level of service to treat patients effectively and curtail the numbers of Bahamians who travel to South Florida for medical treatment.

Computers and electronics

The large, modern financial services sector is a particular target for export. The 1996-97 Government Budget reduced import duties on computers and computer parts and consumer electronic appliances. Goods which can be easily serviced either in The Bahamas or in Florida will enjoy a competitive advantage over those which cannot; service agents in The Bahamas must be Bahamian.

• Total Imports of computers and electronics for 1996(in US$): US$:97.6 million
• Total Imports of electronics for 1996 (in US$): $90,573,720
• Total Imports from the U.S. for electronics and computers (in US$):$45.7 million

BEST PROSPECTS FOR AGRICULTURAL PRODUCTS:

Foodstuffs and manufactured goods

FOD APS FRA

The best US export opportunities remain in the traditional areas of foodstuffs and manufactured goods; vehicles and automobile parts; hotel, restaurant, and medical supplies; and computers and electronics. Bahamian tastes in consumer products roughly parallel those in the United States, both because of similarities in culture and because the proximity of The Bahamas to the US exposes Bahamians to massive doses of American domestic advertising. Merchants in southern Florida have found it profitable to advertise in Bahamian publications, as the average middle-income Bahamian makes several shopping trips to Florida every year. With approximately 85 of the population being primarily of African descent, there is a large and growing market in The Bahamas for "ethnic" personal care products aimed at the African-American market. Bahamian consumer and safety regulations, where they exist, are based on US models and thus are not a barrier to exports of items suitable for the domestic American market. Most imports in this sector are subject to high but non-discriminatory tariffs.

Manufactured Goods

Total Imports for 1996 (in US$): $101,379,720

Fruits and Vegetables

The Bahamas continues to show weakness in this category. The Ministry of Agriculture imposed a ban on imports of bananas, and permits are required to import certain plants, fruits, vegetables, and cut flowers in an effort to protect the local production. The Ministry has occasionally denied applications to import fruits and vegetables when it determined that a surplus existed in locally-grown products in the same category.

Livestock (Meat)

Most meat produced in The Bahamas is for domestic consumption.

In an effort to protect domestic agricultural producers, the government requires that a permit be granted to import more than 50 pounds of whole chickens or chicken parts, lamb or mutton, or pork legs, shoulders, or butts into The Bahamas. Permit applications have been denied occasionally when the government determined that a surplus existed in locally-grown products in the same category.

VI. TRADE REGULATIONS AND STANDARDS

Bahamas'Customs: The Bahamian government raises approximately 65 of its total revenue from import tariffs, which, as a result, tend to be high. The basic ad valorem tariff for imported goods is 35 percent, but a long list of items have separate tariff rates. Among these are:

clothing: 25 percent tobacco: 160 percent cigarettes: 260 percent and 7 percent stamp tax bottled water: 70 percent pool tables: 100 percent room air conditioners: 35 percent automobiles: 45 percent to 65 percent, based on the type of vehicle; automobile parts and accessories: 50 percent personal computers: 15 percent plus 7 percent stamp tax business computers: 15 percent plus 7 percent stamp tax stereo units: 25 percent plus $5 per unit satellite receivers and accessories: 35 percent video tapes: 65 percent cheese: 10 percent pasta: 10 percent water heaters: 40 percent televisions: 25 percent plumbing supplies: 25 percent wooden doors: 35 percent concrete tiles: 25 percent cement: duty free lumber: duty free, 7 percent stamp tax

All these rates, and others, are subject to change. In the 1996 budget, for example, the Bahamian government lifted customs duties on a variety of imported goods, ranging from construction materials (nails, cement, sheetrock, plywood, etc.) to computers and computer parts, musical instruments and consumer electronic appliances. Bahamians shopping in Florida (and elsewhere abroad) are permitted to import $150 worth of goods, duty free, per trip twice a year.

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. Yet on average, The Bahamas charges an export stamp tax of 4 on most exports from the country. The FY 1995-96 budget reduced stamp taxes on various tourist items, including: brandy, vodka, gin, rum, whiskey, cordials, liqueurs, other spirits, toilet water, cologne, perfume, table linen, jewelry, pearls, watches, clocks, and non-leather designer handbags.

Certain goods may be imported conditionally on a temporary basis against a security bond or a deposit that is refundable on the re-exportation. These include fine jewelry, goods for business meetings or conventions, traveling salesmen equipment, and equipment or tools for repair work.

Entry forms are required by Bahamian Customs for goods coming by sea, air or post. A genuine invoice (original or carbon copy) is required. The Customs Department only honors discounts of up to 3 percent given by U.S. exporters.

Copies of current import regulations may be obtained from:

Government Publications Office Parliament Square P.O. Box N-7147 Nassau, Bahamas

Bahamas 'Membership in free trade arrangements: The Bahamas is a beneficiary of the U.S. Caribbean Basin Initiative (CBI), Canada's CARIBCAN program, and the European Union's Lome IV Agreement. Although the Bahamas participates in the political aspects of the Caribbean Community (CARICOM), it has not entered any joint economic initiatives with other Caribbean states.

VII. INVESTMENT CLIMATE

The United States remained The Bahamas' major trading partner. American firms exported $725.0 million in goods and services to The Bahamas in 1996, up from $660.5 million the previous year. Primary American exports to The Bahamas were manufactured goods, machinery, food, petroleum products, automobiles, and chemicals. On the other side of the ledger, Bahamian commodity exports to the U.S. totaled $165.4 million in 1996 an increase from $156.0 in 1995. Primary Bahamian exports to the U.S. were pharmaceuticals, chemicals, industrial salt, lobster, and aragonite.

A.1. OPENNESS TO FOREIGN INVESTMENT:

The Bahamian government actively encourages foreign investment in certain sectors of the economy, particularly in tourism, banking, agriculture, and manufacturing. At the time of its election in 1992, the Ingraham administration announced its intention to privatize several public corporations, including the hotel corporation, the corporation providing ground services at Bahamian airports, and parts of the state-owned Bahamas Telecommunications Corporation (BATELCO) and The Bahamas Electricity Corporation (BEC), as well as to invite private investment in the national air carrier, BAHAMASAIR.

In continuing its efforts to sell off all government-owned hotels, the FNM Government sold three hotels in Grand Bahama -- The Grand Bahama Beach Hotel (formerly the Holiday Inn), the Lucayan Beach Hotel and Resort, and the Clarion Atlantik Beach Hotel -- in April to Hutchison Whampoa, joint owners of the Freeport container terminal. These sales leave the Radisson Cable Beach Hotel in Nassau as the only major publicly-owned hotel in The Bahamas. There are still two government hotel properties for sale on Andros.

Certain businesses, however, are reserved exclusively for Bahamians. Reserved businesses include: wholesale and retail operations; commission agencies engaged in the import export trade; real estate and domestic property management agencies; domestic newspaper and magazine publication; domestic advertising and public relations firms; nightclubs and restaurants, except specialty, gourmet and ethnic restaurants; restaurants operating in a hotel, resort complex or tourist attraction; security services; domestic distribution and building supplies; construction companies, except for special structures for which international expertise is required; personal cosmetics beauty establishment; shallow water scale-fish, crustacean, mollusks and sponge-fishing operations; auto and appliance service operations; and public transportation.

The Bahamian government has targeted the following categories of businesses for foreign investors: touristic resorts; upscale condominium, time share and second home development; international business centers; marinas; information and data processing services; assembly industries; high-tech service; ship registration, repair and other services; light manufacturing for export; agro-industries; food processing; mariculture; banking and other financial services; captive insurance; aircraft services; pharmaceutical manufacture; and off-shore medical centers.

Benefits of investing in The Bahamas include a stable democratic environment; relief from corporate and personal income taxes; sophisticated financial services; timely repatriation of corporate profits; proximity to the United States; extensive air links through nearby Miami, Ft. Lauderdale and Orlando; excellent communications links; a good pool of skilled professionals; excellent tourism and conference facilities; and designation under the Caribbean Basin Initiative (CBI), Canada's CARIBCAN program and the European Union's Lome IV agreement. In 1993, the government announced the establishment of The Bahamas Investment Authority (BIA) within the Office Of The Prime Minister. BIA was designed to provide a "one-stop shop" to assist foreign investors with approval of their investment applications and to cut through further "red tape" for approved investments. Despite a slow start, BIA remains the Bahamian government's central point of contact for foreign investment questions.

In practice, the vast majority of successful foreign investments in The Bahamas have remained in the traditional areas of tourism and banking. The Bahamian government is most interested in investments which will generate local employment, particularly in white-collar or skilled jobs. Large-scale projects in areas such as agriculture may be difficult to fill since low-wage and low-skill jobs do not appeal to most Bahamians, and because the government is reluctant to permit foreign laborers in these jobs even on a temporary permit basis. Whenever new foreign ventures are perceived as competitors to existing Bahamian businesses or to the labor community, the government generally responds to local concerns and withdraws the license of the foreign business.

While The Bahamas has not yet enacted environmental legislation as extensive as that in the United States, the BIA will require a full accounting of the environmental impact of new industrial or agricultural schemes and will not approve projects which would be unable to pass United States environmental standards.

A. 2. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT:

The Bahamian government in 1993 repealed the Immovable Property (Acquisition By Foreign Persons) Act, which required foreigners to obtain approval from the National Economic Council to purchase real property in the country, and replaced it with the International Persons Landholding Act. Under the new law, approval is granted automatically 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 50 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.

A. 3. PROTECTION OF PROPERTY RIGHTS:

The Bahamas is a member of the World Intellectual Property Organization (WIPO). Local copyright laws, which date to the 1970's, have not yet been revised to take into account recent developments in communications and computer technology. Generally, copyright laws to control piracy in satellite and videos industries are not enforced.

A.4. FOREIGN TRADE ZONES FREE PORTS:

A free trade zone exists at Freeport on Grand Bahama Island. The Hawksbill Creek agreement established Freeport, the country's second-largest town, as a free trade zone in 1954. Firms in Freeport are granted the right to import materials duty-free, and enjoy other tax advantages. In 1993, the Bahamian government extended most Hawksbill Creek tax and duty exemptions through 2054, while withdrawing exemptions on real property tax for foreign individuals and corporations. Prime Minister Ingraham declared, however, that property tax exemptions might still be granted to particular individuals on a case-by-case basis.

A.5. PERFORMANCE REQUIREMENTS INCENTIVES:

The Bahamas levies no taxes on personal or corporate income, capital gains, dividends, interest, royalties, sales, estates, inheritances, or payrolls. Foreign-owned businesses receiving tax benefits are expected, however, to contribute generously to various civic projects. The only direct tax is the real property tax. The tax rates on real property are as follows:

Owner occupied:

(a) exempt from real property tax on the first $50,000 of assessed value; (b) 0.75 percent per annum on the next $50,000 of assessed value; (c) 1 percent per annum on assessed value in excess of $100,000.

Commercial property:

(a) 0.50 percent per annum on the first $50,000 of assessed value; (b) 1 percent per annum on assessed value in excess of $50,000.

A gambling tax is also levied. The airport departure tax is $18 per person. The government originally raised the harbor departure tax from $7 to $20 per person in 1991; following protests from cruise ship operators, however, the harbor departure tax was lowered to $15 in 1992.

The following incentives are available to foreign investors:

Bahamas 'Industries Encouragement ActBahamas ': Under this law, the government may exempt from duties the machinery, tools, equipment, and raw materials imported to construct new factories. A list of duty-exempt items is negotiated separately with each new venture.

Bahamas 'Hotels Encouragement ActBahamas ': Under this law, new hotels and resorts can be exempted from real property taxes for ten years from the date the new facility opens. In addition, the act allows the duty-free importation of materials used for the construction of new facilities or the substantial renovation of existing facilities acquired by new owners for a set period of time. The list of duty-free items for each project and the duration of some duty-free windows are negotiated separately for each venture.

Bahamas 'Agricultural Manufacturers Act-Bahamas ': This law allows any materials necessary for the construction, alteration, or repair of an "agricultural factory," as well as any machinery or supplies used in establishing such a factory, to be imported duty free. An "agricultural factory" refers to any factory established for the purpose of manufacturing or preparing agricultural or horticultural produce of The Bahamas for sale or export.

Bahamas 'Spirits and Beer Manufacturers ActBahamas ': This law provides for the duty-free importation of materials used in the construction, alteration, or repair of approved liquor distilleries or beer breweries and the duty-free importation of raw materials and equipment for liquor or beer production.

The FY 97-98 government budget amended the Tariff Act to provide duty free exemptions for construction and development in the Family Islands.

A.6. TRANSPARENCY OF THE REGULATORY SYSTEM:

The FNM government is committed to fostering an economic environment in which free enterprise can flourish. The government acts as regulator and facilitator of economic development. Its Investment Policy promotes transparency, fair play, and equality of treatment. It is designed to support an investment friendly climate where there is unity between Bahamian and foreign investments, and fosters appropriate linkages with all sectors of the economy, in particular, the tourism and financial services sectors.

A.7. CORRUPTION:

The FNM Government was elected on a platform of accountability designed to change the country's image and international reputation of being a corrupt nation. Since it was elected in 1992, reports of corruption have virtually disappeared.

A.8. LABOR:

In 1996, the Bahamian labor force consisted of approximately 148,000 workers. The official unemployment rate was estimated at 10 percent. Unemployment is highest among youth and slightly higher for women; unemployment outside Nassau and Freeport tends to be higher than in the two major population centers. Considerable underemployment also exists in The Bahamas. Despite these facts, wage rates, while considerably lower than in the United States, tend to be higher than elsewhere in the Caribbean.

The Government hopes to reduce unemployment by 5 percent by the year 2002. Officials hope to achieve this by: (1) establishing duty free zones on several Family Islands; (2) encouraging and training young men to join the work force, and (3) training 3,000 persons at The Bahamas Technical and Vocational Institute. Sun International plans to employ 2,200 persons by the end of 1998 and create an additional 1,000 indirect jobs as a result of its Atlantis phase II expansion program. This will make Sun the largest private sector employer in The Bahamas.

The Government established a minimum wage of $4.12 per hour for hourly paid government workers in September 1996. The Government is also considering a minimum wage for private sector workers in the following jobs: sales people in department stores, cashiers in grocery stores, security officers and domestic workers.

The Bahamas Industrial Tribunal officially opened in April 1997 with a backlog of more than 200 cases. The President of the tribunal described it as a labor court designed to resolve conflicts in the workplace, order reinstatements, and levy damages. The tribunal was established as a result of a landmark 1992 Supreme Court ruling which held that the Attorney General could not refer trade disputes to an arbitrator without the employer's consent. This ruling created a backlog of labor cases in the already overloaded Supreme Court.

The Department 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 Department normally announces these inspections ahead of time. The Fair Labor Standards Act limits the regular workweek to 48 hours and requires at least one 24-hour rest period per week, paid annual vacations, and employer contributions to national insurance (the local equivalent of social security). The Act also requires overtime payment (time and a half) for hours in excess of the standard or time worked during public holidays. A 1988 law provides for maternity leave and the right to re-employment after childbirth.

The Bahamian constitution specifically grants labor unions the rights of free assembly and association. These rights are exercised extensively, particularly in the hotel industry where 80 percent of the employees are unionized. Unions operate without restrictions or government control. The right to strike is limited under the Industrial Relations Act, which requires that union members must vote to strike and that the motion must be passed by a simple majority before a strike can commence. The Ministry Of Labor oversees strike votes. While labor-management relations in The Bahamas are generally good, they are on occasion, strained. Major or prolonged strikes are rare. Labor unions involved in disputes with foreign-owned enterprises have not been above using the fact of foreign ownership as a lever to gain popular support for their demands.

The Immigration Act requires foreigners to obtain work permits before they can be employed in The Bahamas. The government will permit foreign employees to work in a technical, supervisory, or managerial capacity to initiate and operate industries, provided no similarly qualified Bahamians are available for the job. Foreign business owners are expected to train as many of their Bahamian employees as possible to eventually fill technical and managerial positions. The FY 97-98 budget proposed a new tax to be levied against foreign employees. The revenues will be used to pay for vocational training programs. While work permits are normally granted impartially under established criteria, there have been isolated instances in the past in which Bahamian government officials have prolonged the process of renewing work permits for foreign managers whose actions drew local labor protests.

A.9. EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT:

Formerly an oligopoly dominated by the subsidiaries of foreign banks, the Bahamian banking system is in the process of changing. Influencing these changes are several factors: increased competition in the marketplace; newly available technology allowing state-of-the-art electronic services; and political pressure to help small bankers. In spite of these incipient changes, the banking system today remains fundamentally as it has been for a long time. That is to say, it is legally divided between domestic banks, which service consumers and businesses operating in The Bahamas, and offshore commercial services which operate in all markets except the domestic market.

The non-interventionist tradition of the Central Bank of The Bahamas has allowed the industry to set interest rates and lending standards independently--a scheme which has been highly profitable for the banking industry, particularly in the areas of consumer and mortgage credit as well as in commercial lending. Nevertheless, with the excess liquidity created by years of cautious lending and a lack of available investments, and with the crowding of banking institutions in the country (there are five big international banks and three midsize local institutions for a population of 260,000), competition has increased significantly with interest rates dropping to the benefit of both the consumer and the foreign investor. Still, most financing for the private sector in The Bahamas comes from the relatively small number of commercial banks licensed to operate domestically or from The Bahamas Development Bank, which is a government-operated institution established to provide medium and long-term financing to projects in priority areas of the economy. Projects in The Bahamas are also eligible, in some instances, for financing from the US Export-Import Bank, the Overseas Private Investment Corporation (OPIC), or from multilateral institutions such as the Inter-American Development Bank (IDB).

Major Bahamian banking institutions which can provide financing for certain projects in The Bahamas include:

• BANK OF THE BAHAMAS, LTD. P.O. BOX N-7118 Nassau, Bahamas Tel:(242)326-2560 Fax:(242)325-2762
• BARCLAYS' BANK P.O. BOX N-8350 Nassau, Bahamas Tel:(242)322-4921
• BRITISH-AMERICAN BANK P.O. BOX N-7502 Nassau, Bahamas Tel:(242)327-5170 Fax:(242)327-5166
• CANADIAN IMPERIAL BANK OF COMMERCE (CIBC) P.O. Box N-7125 Nassau, Bahamas Tel:(242)322-8455 Fax:(242)326-6552
• CITIBANK BAHAMAS Tel.:(242)322-4240 Fax:(242)323-3088 COMMONWEALTH BANK P.O. BOX SS-6263 Nassau, Bahamas Tel.:(242)328-1854
• ROYAL BANK OF CANADA P.O. BOX N-7537 Nassau, Bahamas Tel:(242)322-8700 Fax:(242)322-6381

A.10. CONVERSION AND TRANSFER POLICIES:

Profits and investment capital may be repatriated freely. Non-resident or foreign investors wishing to initiate operations in The Bahamas must register their operations with the Central Bank. If the projects are financed substantially by foreign currency transferred into The Bahamas, they will be given "approved status." This means that all profits and dividends, as well as the proceeds from sales of such business, can be converted from local currency into foreign currency at any time. While foreign investors in The Bahamas enjoy complete freedom to repatriate their investments and profits, The Bahamas does not offer any incentives for investment in other developing countries.

A.11. EXPROPRIATION AND COMPENSATION:

The Bahamian government has never expropriated a business and both major political parties have stated that "nationalization will not be an instrument of government policy."

A.12. DISPUTE SETTLEMENTS:

The Bahamas has been a member of the International Center For The Settlement Of Investment Disputes since October 18, 1995. The Bahamas in 1992 joined the Multilateral Investment Guarantee Agency (MIGA), which insures investors against currency transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries.

A.13. POLITICAL VIOLENCE:

The Bahamas has no history of political violence.

B. BILATERAL INVESTMENT AGREEMENTS:

The Bahamas is in the process of negotiating an investment protection agreement with the United Kingdom. There is no Bilateral Investment Treaty (BIT) between The Bahamas and the United States.

Bahamas 'Caribbean Basin Initiative (CBI): The Bahamas was designated a beneficiary of the Caribbean Basin Initiative (CBI) in 1985. As a result, with certain restrictions, products manufactured in the Bahamas qualify for duty-free entry into the United States. High wage rates, however, combined with the country's small manufacturing and agricultural sectors, have hindered The Bahamas' ability to exploit these benefits. In addition, The Bahamas' failure to enter negotiations with the United States for a bilateral Tax Information Exchange Agreement (TIEA) precluded the use of 936 (QPS II) credits for projects in The Bahamas or the use of the convention tax benefit for business conventions held in The Bahamas.

C. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS:

In 1992, OPIC approved two investment projects in The Bahamas. It guaranteed up to $10.8 million in loans to the UNIROYAL Chemical Company, Ltd. to assist in the purchase and refurbishment of a plant in Freeport formerly owned by Gist-Brocades, Ltd. UNIROYAL currently uses the plant to produce high performance antioxidants used in the manufacture of plastics for export to North America, Europe, and Asia. In addition, OPIC committed itself to loan up to $1.6 million to LANDQUEST, ltd. for the development of the Princess Cays cruise ship facility on Eleuthera island near Bannerman Town.

D. CAPITAL OUTFLOW POLICY:

Foreign investors in The Bahamas enjoy complete freedom of repatriation on their investments and profits. The Bahamian government does not offer any incentives for investment in other developing countries.

Net inflows associated with transportation services were reduced by $14.4 million to $34.3 million and government's net overseas expenses for services rendered were up by $6.7 million to $23.8 million. Other miscellaneous services net outflows grew by an estimated $12.6 million to $214.8 million.

 

E. MAJOR FOREIGN INVESTORS:

Major current foreign investments in The Bahamas include:

--Atlantis, a hotel, resort, and casino complex on Paradise Island near Nassau recently purchased by the South African firm Sun Hotels International; --Ruffin's Crystal Palace Resort, Casino, And Convention Center, operated by Host Marriott Corporation; --Coral Island Underwater Observatory, Marine Park, and Hotel formerly owned by an Israeli firm and recently sold to the Ruffin Group owners of the Marriott Crystal Palace Hotel and Casino which also recently bought the Fort Nassau Beach Hotel; --A container port facility opened in Freeport by Hong Kong investors, Hutchison Whampoa; --Ambassador Beach Hotel recently purchased from the Bahamian government by the Jamaican company, Superclubs, under the trade name Breezes; --Royal Bahamian Hotel recently purchased by Sandals company of Jamaica from the Bahamian government; --The Winding Bay Hotel in Eleuthera owned by Venta, an Italian group; --PFC Bahamas in Freeport, formerly known as Syntex is now owned by the Swiss pharmaceutical firm Roche; --Uniroyal Chemical plant manufacturing high performance antioxidants in Freeport; --Walt Disney World, Orlando recently purchased Gorda Cay, a private island; --Bahama Star, a large citrus farm being developed on Abaco island by the B.G. Harmon Fruit Company of Florida; --Grand Bahama Beach and Lucayan Beach Hotels sold to German owned Sun and Sea Estates Limited; --Cotton Bay Club, Eleuthera recently purchased by Colombian Carlos Sarmiento; --A large shrimp farm on Long Island operated by the American firm Maritek; --A tropical fish farm operated on Walker's Cay by Aqua Life, Ltd.; --Princess Cays, a cruise ship landing facility on Eleuthera Island owned by Landquest; --Club Med resorts on Paradise Island, Eleuthera, and San Salvador; --Comfort Suites on Paradise Island; --Freeport Lucaya Marina Village developed recently by European investors; -- Cable Bahamas, Ltd. recently established by a Canadian group --Island Outpost Resort at Compass Point recently built by a Jamaican music magnate.

VIII. TRADE AND PROJECT FINANCING

Bahamian banks tend to be far more conservative than their American counterparts in making business loans, often asking for high levels of collateral. At the end of 1996, the prime lending rate in The Bahamas was unchanged at 6.75 percent. Commercial bank rates for residential and commercial mortgages ranged from 10.06 percent - 10.87 percent, respectively. Consumer loan rates were 14.69 percent.

The Bahamas Development Bank (BD) was created to assist Bahamians in establishing new businesses or expanding existing concerns through the provision of concessionary funding and technical assistance, for projects which generate jobs and which contribute to the economic growth and development of The Bahamas. Joint ventures between international investors and Bahamians are eligible to access funding from BDB or from the domestic capital market. Bahamians may, however, borrow a percentage of their contributions from BDB or the domestic capital market. An established joint-venture is not debarred from accessing BDB funds.

Recently, there has been talk in the financial sector about eliminating exchange controls. The government has already allowed commercial banks limited exchange control powers. Local financiers believe that eliminating exchange controls will increase investor confidence, facilitate the free flow of currency in and out of the economy, and enable the government to measure the performance of the economy accurately.

The Bahamas is a beneficiary of the Caribbean Basin Initiative (CBI) and the Overseas Private Investment Corporation (OPIC), and EXIMBANK financing is available.

U.S. commercial banks operating in The Bahamas include:

• BRITISH-AMERICAN BANK P. O. Box N-7502 Nassau, Bahamas Tel: (242) 327-5170 Fax: (242) 327-5166
• CITIBANK BAHAMAS P. O. Box N-8158 Nassau, Bahamas Tel: (242) 322-4240 Fax: (242) 323-3088

IX. BUSINESS TRAVEL

Bahamas 'Business customs: The national language of The Bahamas is English, sometimes spoken with a distinctive local accent and the use of colorful local expressions. Due to the proximity of The Bahamas to the US and the extensive familiarity of most Bahamians with Americans and American culture, business customs tend to be similar to those in the United States. Business dress is more formal in The Bahamas than elsewhere in the Caribbean or in Florida; a business suit and tie is recommended for men and conservative business dress for women. Business attire generally follows the standards of the northeastern United States. Bahamians shake hands upon meeting, sometimes exchange business cards, and address first-time business acquaintances by their last names. Conversations generally move to a first-name basis a bit more slowly than in the United States. Firm appointments for business meetings are advisable. Although Bahamians are not punctual for meetings, foreign visitors should be punctual.

In addition, The Bahamas is very much a consensus-driven society, in which people often disguise personal feelings beneath a surface cordiality. Business meetings in The Bahamas tend to be very pleasant and Bahamians often end a meeting with an air of agreement even if real differences remain. Thus, Bahamian partners may still retain some reservations even after meetings that ended with firm handshakes and pleasantries. Bahamians at the middle levels of business or government must often gain final approval from more senior officials.

Bahamian businesses tend to operate on a tighter financial margin than their American counterparts, often juggling financing from one commitment to another. Therefore, for initial or large sales, a businessman should require a deposit against future payment for goods or services delivered, and expect that some delays may occur with subsequent payments.

Business lunches are common in The Bahamas, and invitations to discuss matters over lunch in a quiet restaurant are common practice. Bahamians tend not to drink very much at business lunches and usually expect the lunch to last between an hour and an hour-and-a-half. Business dinners are relatively rare, and Bahamians do not generally invite new acquaintances to their homes. When they do so, dinners at the homes of well-to-do Bahamians tend to be elaborate and formal affairs, at which business attire for men and conservative evening wear for women is appropriate. A small gift for the hostess, such as flowers, and a follow-up thank you note are appropriate acknowledgments.

Acceptable topics of conversation include: sports; the tourist business; the beauty of the islands; the weather; and unique or distinctive aspects of Bahamian culture such as the local cuisine, junkanoo, local music, art, architecture, and history. While Bahamians are comfortable with discussing most topics, visitors to The Bahamas should avoid discussing drug trafficking and race relations during initial contacts.

Since much of Bahamian social life revolves around church, an invitation to a church service is a sign of personal respect and affection. Many churches in The Bahamas have proud traditions of gospel choir singing, and church services can be quite lively. Dress at church services is usually formal with conservative business suits for men and colorful, sometimes elaborate dresses for women.

Travel information and visas:

American citizens do not require a passport or visa to enter The Bahamas, but proof of citizenship such as a birth certificate or voter registration card accompanied by a photo ID is required, as well as a return ticket to the United States. In mid-1996 there were no current travel restrictions for The Bahamas. American citizens traveling to an area where they may have some concern about local conditions can contact the State Department's citizens emergency center at tel. (202) 647-5225 for the most up-to-date information.

Business infrastructure:

Both Nassau and Freeport boast a wide variety of excellent hotels and resorts. Although Bahamian hotels are more used to catering to the vacationer rather than the business traveler, many large hotels have business centers. Even hotels without such centers will be happy to arrange for fax transmissions, office and conference facilities, and other business services. Electricity is 110 v, 60 Hz (US standard). Taxis are plentiful near hotels and downtown, and radio taxi services are available. Some taxi drivers are willing, for a prearranged fee, to spend the entire day with a single customer. Rental cars are also available, albeit they are far more expensive than the American norm. Bahamians drive on the left side of the road, as in Great Britain, even though most cars in The Bahamas are imported from or through the United States and have left-hand drive (US standard). Nassau has two large, hospitals, and there is one in Freeport; Nassau's privately-owned Doctors Hospital is widely regarded as the best medical facility in The Bahamas. No special health precautions or vaccinations are necessary. Tap water is potable but brackish; most Bahamians drink one of the locally-produced brands of bottled water. As major resorts, both Nassau and Freeport have a wide variety of restaurants ranging from local franchises of American fast-food chains to expensive five-star gourmet places. Local cuisine tends to favor freshly-caught seafood, particularly using grouper, lobster (locally known as "crawfish"), and conch (a Caribbean shellfish), but American and ethnic cuisine such as Chinese and Italian are also available.

Bahamian Holidays:

New Year's Day (January 1) Good Friday (Variable) Easter Monday (Variable) Whit Monday (Seven Weeks After Easter) Bahamian Labor Day (First Monday In June) Independence Day (July 10) Emancipation Day (First Monday In August) Discovery Day (October 12) Christmas Day (December 25) Boxing Day (December 26)

Holidays which fall on Saturday or Sunday are usually observed on the following Monday. Persons present in The Bahamas on the night of December 25-26 or December 31-January 1 can enjoy a unique cultural experience by purchasing tickets to the annual junkanoo parade in downtown Nassau, a carnival similar to Mardi Gras of which Bahamians are justly proud.

 

Country Data:

• Population: 284,000.
• Population growth rate: 1.7 percent.
• Religions: Baptist 35 percent, Roman Catholic 20 percent, Anglican 15 percent, Evangelical Protestants 15 percent, Methodist 5 percent, Church Of God 5 percent, others 5 percent.
• Government system: multi-party parliamentary democracy.
• Languages: English.
• Workweek: Monday through Friday.
• Shops are generally open all day Saturday; Sunday closing laws are strictly observed, although grocers are permitted to open for a few hours on Sunday. Shops on Bay Street are now also opened on Sundays when there are cruise ships in port.

 

US and Country Contacts:

• Bahamas 'US Embassy Trade Related ContactsBahamas ':
• US Embassy Nassau Economic-Commercial Section P.O. Box 9009 Miami, FL 33159 Tel:(242)323-7180 Fax:(242)328-3495
• US Department of Commerce Desk Officer for The Bahamas Room H 3021 Washington, DC 20230 Tel:(202)377-2527
• US Department of Agriculture Office of International Cooperation and Development Private Sector Relations McGregor Building Room 343 14th and Independence Ave., SW Washington, DC 20250-4300 Tel:(202)653-7917
• Overseas Private Investment Corporation 1615 M Street, NW Washington, DC 20527 Tel:(202)457-7200
• Trade and Development Program US Department of State 2201 C Street, NW Washington, DC 20523 Tel:(202)875-4357
• Bahamas 'Key Bahamian Government OfficesBahamas '
• The Bahamas Investment Authority Office of the Prime Minister P. O. Box CB-10980 Nassau, Bahamas
• Embassy of the Commonwealth of The Bahamas 2220 Massachusetts Avenue, NW Washington, DC 20008 Tel:(202)319-2660
• Bahamas Agricultural and Industrial Corporation P.O. Box N 4940 Nassau, Bahamas Tel:(242)322-3740
• Bahamian Consulate Ingraham Building 25 S.E. Second Ave. Miami, FL 33131 Tel:(305)539-9350
• Ministry of Agriculture and Fisheries P.O. Box N 3028 Nassau, Bahamas Tel:(242)325-7502
• Government of the Commonwealth of The Bahamas Consulate General Ingraham Building 25 S.E. Second Avenue Miami, FL 33131 Tel:(305)373-6295
• Bahamas Chamber of Commerce P.O. Box 665 Nassau, Bahamas Tel:(242)322-2145
• Bahamas 'Market Research:Bahamas ' A complete list of market research is available on the National Trade Database

With noted exceptions, all content, copywriting and photography in the Go-Abacos.com domain has been created and produced by Bluewater Marketing Services, Inc., and are copyright © 1997-98 Go-Abacos and Bluewater Marketing Services, Inc., 1574 N.E. 36 Street, Ft. Lauderdale, Florida 33334 - All Rights Reserved. All images used on this site are copyright protected with embedded copyright protection identification.