In his address to the nation on October 1, 2001 Prime Minister Hubert Ingraham painted a grim but realistic picture of the months ahead as the country copes with the sharp decline in tourist travel. He described in general terms the impact on employment, what Government would do and the limitations on its actions.

Past achievements.

Surprising was the absence of any call to business enterprise…either foreign or domestic. In the present crisis it is easy to overlook the economic boom of the past eight years. This is an achievement that is more often criticized than lauded in the heat of the tourism crisis and an election.

The reality is that between 1993 and 2001 the Bahamian Gross Domestic Product grew at an average rate of 3.1% per year when adjusted for inflation and approximately 1.6% when further adjusted for population growth. And in the last two years growth reached 4% per year fully adjusted. This is outstanding.

� The International Monetary Fund noted “the improvement in social indicators, which remain among the most favorable in Latin America and the Caribbean region.”

� And…this growth stands in stark contrast to the prior twelve years when economic growth adjusted for inflation barely exceeded the annual growth in the population.

� Vibrant growth followed stagnation and was the kind of growth that raised incomes in Hong Kong from below Mexico in 1960 to above the United States in 1997.

But even more importantly, while the size of the pie (the Gross Domestic Product) grew, there was an important redistribution of income in favor of the “working classes”. The lower 60% of the population got a bigger slice of the bigger pie.

In contrast, under the prior Government the lower 60% of the population got a smaller share of the pie. (See table “Distribution of Household Incomes) This income redistribution was the result of the much higher incomes experienced in tourism and construction.

The third reality is that the reason for this prosperity is readily apparent. It was the successful result of foreign investment. There is no mystery.

This prosperity was fuelled by one major investment, the $1.2 billion of Sol Kerzner in Paradise Island and the privatization and modernization of other hotel properties. These favourable developments were greatly helped by the repeal of The Immovable Property Act and by the rapid expansion of off-shore banking.

Open for business.

The Bahamas can and should use the present crisis to assert to the investment world that “The Bahamas is Open for Business.”

In 1992 the Prime Minister visited Miami, New York, Toronto and elsewhere to assert that his Government would fast track investment approvals. And it did so with Sun International and others.

The Government should now go beyond “selective fast tracking”. It should adopt a pro-investment pro-growth program.

It should --

1) Completely overhaul the investment approval process. The process should establish that the beneficial owners are not terrorists or drug dealers and that the activity is a legitimate business. The purpose should be to eliminate entirely the regulatory maze and create a climate of certainty, efficiency and encouragement to the risk takers.

2) Create a positive industrial relations environment that assures workers the freedom to associate or not to associate in determining wages and working conditions. The Administration and the judicial system should be truly even handed in dealing with labour and management; sound labour relations not income redistribution should be the guiding principle.

3) Completely overhaul the work permit system. The present system assumes that a government bureaucrat can better determine who should be hired than the businessman whose survival is dependent on good personnel decisions. Like the United States the Bahamas needs immigrants if it is to grow. The permit system should be a method of registering foreign workers, controlling the number of immigrants and providing income to the Treasury.

4) Create incentives for new industries. Each new industry has unique requirements that should be addressed. For instance, those related to e-commerce require technical personnel not available in the Bahamas. Long-term work permits at reasonable fees would be an absolute necessity. In other cases it may be reasonably priced Crown Land or relief from duties on the tools of production.

5) Administer the police and judicial functions so as to eliminate white collar crime. Stealing from business adds immeasurably to what appears to be a hostile business environment. Trumpeting the virtues of bank regulation to the financial world is hollow when an apparent bank embezzler can escape jail on a legal technicality. Bahamian stealing sets real limits on business growth because it attacks the ownership of property and adds to the cost of doing business.

6) The government should fast-track the privatization of the public utilities. The creation of new businesses in the Bahamas presupposes a reliable and competitive utility infrastructure. It is widely accepted in international circles that the Government must get out of these businesses.

The above pro-investment pro-growth program is not “politically correct” to many and perhaps most Bahamians. But…a limited program did work to the great benefit of all in a very dramatic way. These are grim times and the country needs the political will to assure its future prosperity.