Foreign Direct Investment

First Published: 2001-01-15

Periodically an anti-capitalist mentality becomes apparent, as was the case in a recent call-in radio program. In this case, numerous callers voiced resentment against foreign investors and foreign workers. Regrettably those callers fail to make the connection between these “investors,” – whether the investment is labour or money – and the consequential growth in the economy since 1995.

In spite of the fact that Bahamians are hospitable and well meaning on the whole, a “fear of the foreigner” syndrome manifests itself in anti-capitalist rhetoric, which is not to be confused with racism.

“An -anti-something- movement displays a purely negative attitude. It has no chance whatever to succeed. Its passionate diatribes virtually advertise the program that they attack. People must fight for something that they want to achieve,… ” (Ludwig von Mises, The Anti-Capitalistic Mentality, 1956)

The OECD on Foreign Direct Investment (FDI)

While the FNM, PLP, CDR or BFA say little to contradict these caller-s views out of the fear of losing votes, a July 2000 study by the Organisation of Economic Cooperation and Development (OECD) had this to say:

“The 1990s brought considerable improvements in the investment climate, influenced in part by the recognition of the benefits of FDI (Foreign Direct Investment). The change in attitudes, in turn, led to a removal of direct obstacles to FDI and to an increase in the use of FDI incentives. Continued removal of domestic impediments through deregulation and privatisation was also widespread. Deregulation and enhanced competition policy made M & A (mergers and acquisitions) more viable in the telecommunications, electricity and other public utilities and financial services sectors, while privatisation programmes provided opportunities for international investment. The sale of state-owned companies to foreign investors represented a large share of the source of FDI, particularly among new members to the OECD and in some emerging economies.”

What do developed countries do?

There is competition among countries, and in the case of a single country, competition exists between individual provinces and states to attract billions of dollars in foreign direct investment from around the world. Various incentives are offered targeting specific industries. For example, in the Bahamas, hotels are exempted from import duties on materials for building hotels to encourage expansion of tourist accommodation, thereby helping to gain a competitive advantage over other countries reliant on tourism.

We can learn from the rest of the world.

Closing the country off from foreign investment and labour and the expertise they bring is clearly wrong. Exaggerated cultural ethnicity, epitomised in remarks like “the Bahamas for Bahamians only,” if taken to extremes risks significant social and economic costs in a society already limited by its smallness (population and land mass) and low educational standards.

Dr. Thomas Sowell, in his 1994 book “Race and Culture. A World View” gives us examples of the benefits of adopting ideas from different cultures. He notes:

“The long-run costs of exaggerated “identity” can be especially high to groups lagging behind their contemporaries in education, income, and all the social consequences that flow from these. Throughout history, one of the great sources of cultural achievement, both for groups and for nations and even civilisations, has been a borrowing of cultural features from others who happened to be more advanced in given fields at a given time. Medieval Jews in Spain copied the science and mathematics developed in the Islamic world, and only later began to make their own original contributions. Western civilisation as a whole absorbed both technologies and science from China and the Islamic world (including parts of the Indian subcontinent) as the foundation for its own ascent to world leadership in these fields.”

Create Bahamian Foreign Direct Investment.

The modern Bahamian economy was built on tourism and offshore banking. The two initiatives to build these industries were deliberate attempts to induce “foreigners” to come and invest in the Bahamas. Everyone has benefited from the resulting investments.

The reality is, if the Bahamas is to continue to prosper it will need to continue to induce people and capital to come to these shores.

With the improved ability and expanded opportunities that come from encouraging foreign investment and labour, Bahamians will be in a better position to invest in the Bahamas or other countries to run hotels, cinema-s, waste companies, offshore banks or Internet service companies and the like.

One might wonder how Bahamian investors and workers in other countries would feel if faced with the attitudes expressed on local talk shows.

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