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Sunday, November 23, 2014

A National Development Plan: What should be expected?

We have heard very little about the National Development Plan for The Bahamas. People from all quarters of the Bahamian society have clamoured, begged and pleaded for someone to commit to creating a proper one for a new Bahamas. For years, the calls have gone unanswered. Until now!

The government of The Bahamas has launched the initial phases of The National Development Plan. The plan is being funded by the Inter-American Development Bank, and costs for its production has been slated at over $450 thousand.

A national secretariat has been created, with Director of Financial Services, Dr. Nicola Virgil Rolle, slated as the chairperson heading a team of six.

The plan itself is in the planning stages (I hate to sound "punny", but it's true...). However, the thought of such, how it will be designed, the agencies involved, the process it should take and the overall outcome for Bahamians is something that should make the citizenry excited about the possibilities.

The usefulness of a development plan for the country also has strong merit. For far too long economic planning and development in The Bahamas has been virtually nil. Subsequently, a new department has been created under the Office of The Prime Minister, with carriage of this department laying with the Minister of State responsible for Investments, Khaalis Rolle.

There were previous attempts at providing a pathway forward with regard to national planning born out of the private sector, albeit from an aspiring politician, John Bostwick and his "Bahamas Vision 20/20".

The good part about Mr. Bostwick's "Vision 20/20" document was that it was pregnant with ideas. The document put in written and clear form what most Bahamian people saw as important for national development. However, the document was void on the "how to", the "how much" and the "which ways and means" should we proceed. Also, it wasn't as much of a plan as much as it was a statement of wishes and hopes for the future.

One can say that Mr. Bostwick's 20/20 vision was created without universal consultation, insufficient funding along with an expedient approach to an initiative that just takes a great deal of doing. But one cannot argue against the sincerity of his attempt, and one would hope that some of his ideas are embraced in the context that if it makes sense, we should investigate the possibility of these things coming to be.

In addition, The College of The Bahamas, as it continually moves towards university status, have long since had in concept research facilities and advisory consultancies with regard to national development. In fact, the college has been extremely candid in their bids to be involved in the development and planning of The Bahamas. The research put out from the college has been scant due to underfunding and the very disturbing matter of the college being without leadership with a clear mandate, not just for research, but leadership overall.

videoThe college will be a part of the process even though they do not have a seat on the board of the secretariat. We hope that this is a slight omission and that someone will be there to represent the college when the process begins in earnest.

So, here we have it: The national development plan project being officially launched at The College of The Bahamas; funding, and no doubt technical support, being provided by The Inter-American Development Bank; a secretariat formed with a seasoned civil servant at the helm with a supporting team of six; a moribund governmental department being given new life under the office of the prime minister; and a slew of ideas from the public and private sector just waiting to be fleshed out in a systematic and mechanical manner that makes sense.

But before we titter with glee, we must be mindful, as is Dr. Virgil-Rolle, on the pitfalls that a process like this may encounter. And with that we should add a few more notes along with that to boot.

For starters, we hope that any document, work or theoretical rendering offered up through this process, does not end up on the shelf along with the other reams and reams of documents, as Dr. Virgil-Rolle suggests that we should not want to happen. This is why my initial reaction to this undertaking was: Will this plan and the works produced prove to be useful as a final product?

Without a doubt it must be seen as useful, and public buy-in essential. To that end, we should strive for a superior product, one that goes deep into the recesses of our culture, attitude towards social living and government and find the root causes of things and seek ways and means to correct them.

We are under the assumption that this national development plan is being designed with the sole purpose of building a better, common life for all of us. So the final product must be one that speaks to that primarily, and not one that speaks just for speaking's sake or offers up what conventional wisdom from the current structure says is good for us.

Another point for consideration is with the notion of something like this can be done by June, 2015. I'm not certain that a properly done, well reasoned, well researched and well drafted plan that has any intentions of execution on any portion can be completed in that short space of time.

For example, extensive consultations with experts, both local and foreign, need to take place. Extensive research, engineering studies, international and national risk assessments, scientific studies and other various means of studies must be produced from these consultations and a focusing of this information must then be channelled. In addition, financial analysis, economic impact assessments under different scenarios and stress indicators need to be taken into consideration along with various counter-measures and policy recommendations when something works too well, works half-way, doesn't work at all, or is deleterious to the entire framework of national development.

During the 2002-2007 political administration, there was a study done on how to enhance the human resources of the civil service. The time it took to analyse, detail, collate and present a document that made sense, even without the necessary recommendations for policy changes and legislation drafted, took more than 2 and 1/2 years. This was just with regard to the proper alignment of the human resources of the civil service, and not anything with regard to technological modernization, product and service efficiency, or facilities maintenance or how does one finance all of this.

More fundamentally, you need data. Both historic data along with actionable and working data in real time. Data, statistics, quantitative studies and qualitative logical-frameworks have historically been neglected in The Bahamas.

Just to give you an idea of what I mean, I was a guest on the talk-show "Connected" a few days back with a colleague of mine, Lester R. Cox, on Guardian Radio's, 96.9fm. Cox presented to the listening audience a study on social progress and asked the audience that, out of 150 plus countries, where they thought The Bahamas ranked in the world? The answer was that The Bahamas wasn't ranked at all, because there wasn't enough data provided from The Bahamas on any of the study's indicators.

I'd also have to add that when doing research on The Bahamas, or reading any working paper or policy document on The Bahamas, Caribbean, regional or world comparative document, other than broad based, macro-economic and financial data compiled through virtue of our budget process that the international organizations like the IMF, IDB, World Bank and the UN use to make their broad assessments, The Bahamas is always noticeably under-represented, or figures absent due to lack of available and reliable data.
This is just for starters when we talk about crafting a meaningful development plan that one wishes not to be placed on the shelf with the other un-read and under-utilized policy recommendations for The Bahamas.

From my estimation there is a lot to be done. A lot to be done properly if we are about to do what it is that was said will be done.

We shouldn't waste our time on a product that would just sit on the shelf. We should have a totally defined document based high minded methods and see it as a working and living document. A working, living document that induces action on first best information and not reduce itself and all of us to low-ball expectations.

Along with it being a perpetual work in progress, it should also be a check-list for things we are about to do and the things we actually want done. Not what a small sub-section of the structure feels would be best, but what we as Bahamians want and need done.

We deserve no less than that.

Saturday, November 15, 2014

Repatriation: The trail of tears and fears.

No doubt the new immigration policies in The Bahamas has caused an uproar. It's not been a pretty site to see the vitriolic comments and ethnic slurs go to and fro, particularly on social media.

An example of this was when U.S. State Representative for Florida, Mrs. Daphne Campbell, attacked The Bahamas in a very unusual and mean-spirited way. Mrs. Campbell went on television in Miami on Channel 7 WSVN and asked for all tourists, all cruise ships operators and everyone that would listen, to boycott The Bahamas.

Mrs. Campbell is of Haitian heritage, and no doubt she is very proud of it as she should be. But to the extent that the fervour of her rhetoric insults the public conscience of Bahamians, based on inflated misconceptions, is where it should end.

The impetus of her vituperative and seemingly crazed assault on the Bahamian people was due to a short clip of Bahamian immigration officers performing their repatriation duties. In this short clip, officers were seen carefully leading Haitian children from homes that were abandoned by the adults in their attempt to escape capture.

Bahamian officials are trained to be responsible in this regard, and as they whisked the children away to safety from a volatile environment void of any parental supervision, they were placed into the care of The Department of Social Services until their parents could be located.

As a result of Mrs. Campbell's uninformed and vicious rant, one could only imagine that the return fire from Bahamians wasn't too friendly. It was so bad that a friend of mine living in Miami made mention of it to me, as he was concerned about not only the policies, but the relationship strains being placed on The Bahamas with Haiti and America.

This is not the first time in recent memory The Bahamas had to face criticism from dangerously uninformed "rabble-rousers" from outside of its borders, and more directly from Florida.

In 2013 The Bahamas played host to un-invited Cuban migrants on their way to Florida. As a result of their un-invited visit, they had to be detained in our detention facilities. From this, this group of very odd Cuban immigrants and their associates proceeded to then promulgate a video of their "so called" abuses at the hands of Bahamian Defence Force officers in the Detention Centre.

The video went viral, relatively speaking in Caribbean terms. Cuban-American led groups in South Florida banded together to promote the same ideas as did State Representative Campbell on The Bahamas: Boycott The Bahamas, denounce Bahamian immigration policies and basically do everything within their power to bully, harass and intimidate Bahamian officials into allowing illegal immigrants unfettered access and freeway through The Bahamas.

Fortunately, the video of the alleged abuses by the officers proved to be a fake. More fake than a $4 note. Fraudulent and baseless to boot.

In the video it was clear that the persons reported to be Bahamian Defence Force officers kicking, punching and spitting on the Cuban immigrants did not have a Bahamian accent, and it sounded as if they barely spoke English.

After it was discovered that the video of this alleged abuse was fake, the Cuban groups in South Florida, claiming to speak on behalf of the illegal Cuban immigrants in the Bahamian facilities, changed tune and then began to claim that the video was a re-enactment of events that did happen.

So, The Bahamas is not unfamiliar with uninformed attacks from persons seeking to besmirch it's name internationally. Just that this particular time with regard to the new policies from the Ministry of Foreign Affairs and Immigration has just been more direct in its approach.

In a nutshell, there is much to do about nothing with regard to the "new" policies on immigration. In fact, it is what we should have been doing before the problem festered into what we have now: A sub-human mess, with it being a drain on resources, coupled with the national and international security risk the flow of illegal immigrants pose in today's post 9-11 world.

For the first part, outside of the documented and legal migrants that come to The Bahamas to work, most of the time for large companies that want to hire foreign expertise for their own strategic purposes, most migrants and in particular illegal immigrants live here in sub-human and vulnerable conditions.

Particularly with regard to illegal Caribbean and Latin American immigrants living under the radar in The Bahamas, they are subject to make less than the average wage, and are open to random and targeted victimization due to their status.

In The Bahamas, we have a culture of so called "Shanty-Towns". Basically illegally structured dwellings in certain pockets of The Bahamas that are inhabited by illegal immigrants; mostly Haitians living in The Bahamas illegally. They also pose as sanctuaries for criminals and have their own community strategies for commerce and electricity; more often illegal businesses and ways of obtaining free public utility services.

Most of these Shanty-Towns are poor environments. They are owned by slum-landlords hustling for the almighty dollar at the expense of  national security, and most certainly these illegal immigrants pay rent to these slum-landlords.

There are reportedly a few cases around the islands where these Shanty-Towns are built on government, or "Crown-Land", owned by the state. These immigrants have also reported on many occasions that they pay rent to a landlord.

The sheer cost and net loss/benefit of immigrants is another cause for concern. No data or analysis has been brought to bear on how much does illegal immigration cost over the long term for The Bahamas, but it's something I am keen to look more closely on and in the process of doing so.

But for the American experience, and no doubt the methodologies can be used as a guideline for examining the issue, NGO's like The Federation for Americans for Immigration Reform (FAIR) and The Heritage Foundation, have made a few estimates.

FAIR, in their 2010 study, estimates that:
"The net federal outlay for illegal aliens represents an annual expense of nearly $288 ($193 net) per household headed by a U.S. citizen. The average outlay at the state level for the same family is about $1,130 ($996 net), for a total of about $1,205 ($1,075 net).”
For an economy as large as The United States of America, for the average citizen to have a net-loss as a result of illegal immigration, should speak volumes to what smaller nation-states experience with regard to the burden of illegal immigration.

More importantly, the issue of illegal immigration is a national and international security issue.
Post 9-11, the world has changed. The borders in the USA and Europe are more closely scrutinized. One cannot simply travel to and through the USA as one wishes.
When we put all of that in the context coupled with the developments taking place in Iraq and Syria, with American born citizens and also reported Caribbean citizens becoming radicalized and seeking to join in with groups like Al-Qaeda and ISIS in the Jihad, one can only imagine the cause for concern for small-nation states in The Caribbean.
A more important concern is too for America, as The Bahamas is right on their doorstep. On their doorstep and with only an inkling of who is really living in The Bahamas, the manner in which they got here, the nature of their business and what their intentions are while here.  
Without a doubt what took place with regard to the slack policies, and sub-human conditions illegal immigrants found themselves living in The Bahamas, seeking to correct those issues from a moral and practical standpoint must be taken very seriously as we move forward.

Saturday, November 8, 2014

A fine mess: The Bank of The Bahamas.

Through a newly established government corporation, Bahamas Resolve Ltd., The Government of The Bahamas has stepped in to save a failing bank: The Bank of The Bahamas.

For all intents and purposes, the bank failed. A failed bank that needed to be saved by the government. A government that was a 65% shareholder in the bank, the largest shareholding, essentially making it a government institution. No matter how you try to make it sound as palatable and as diplomatic as you can, it really boils down to failure of the most epic kind.

Under any other circumstances other than the bank being a primarily government owned bank, the bank would have gone under and we would be having a very different discussion. A very different discussion, indeed.

But, before we begin to say: "I told you so! The government shouldn't be in the business of business!!" I wish to say that we really can't exercise that luxury in saying that, because it just isn't the issue that we are presented with now. Yes, people would have the moral high-ground to say that. But, this isn't what we are presented with, as terrible as it sounds to have to state the obvious.

Over the course of the last several months, the Central Bank of The Bahamas's Governor, Wendy Craig, expressed deep concerns over the non-performing loans at Bank of The Bahamas; particularly the non-performance in commercial loans.

The bank has a massive portfolio of underperforming commercial loans on it's books. A sum total of $100 million dollars in outstanding commercial loans is being transferred to Bahamas Resolve Ltd. in an attempt for the administrators of Bahamas Resolve Ltd. to chase down the borrowers, while simultaneously clearing the bank of these loans.

Reports have it that the loans borrowed are shared between no less than 13 borrowers, averaging about $7.6 million dollars, or thereabouts, which leaves us to question how many other smaller commercial loans at the bank could be on the books that, while small in nature to the 13 borrowers that amassed the $100 million, would be enough to make things much more interesting.

Bank failure in The Bahamas is nothing new. In the mid to late 1990's, Gulf Union Bank went belly up. A lot of persons have long since forgotten what had happened to the bank; why it failed; and what happened to the depositors that lost money as a result of the failure.

To cut a long story short, Gulf Union bank had found itself in too deep with some of the loans in its portfolio. With regard to one case in particular, a borrower secured a $3 million dollar plus loan through a supposed subsidiary of a parent company and with the assets of that parent company, but legally there was nothing binding between the companies other than a personal relationship between the owners.

These kinds of activities, among others, prompted Gulf Union Bank owner Sheikh Jabor bin Mohammed Al-Thani of Qatar, to sell Gulf Union and all of its assets to another Qatari businessman, Sheikh Abdul S. Qureishi.

Sheikh Qureishi then proceeded to heap more pressure on Gulf Union Bank Bahamas by ordering more than $5 million to be transferred out of the accounts in The Bahamas to the sister company in the Caymans, and essentially triggering the real downfall and subsequent liquidation of Gulf Union Bank Bahamas.

videoGulf Union Bank and it's subsidiaries in the Caymans were ordered to be liquidated as well, and that ends that.

But, as we remember the failed Gulf Union Bank, enter in now The Bank of The Bahamas giving out very large loans, relatively speaking, at a time when the economy was bad world-wide. So bad to the extent that their balance sheet deteriorated to such a point that regulators noticed something fundamentally disturbing about their position and particularly its capitalization.

News Editor from The Nassau Guardian, Juan McCartney, on his Facebook page summed up the fine and undeniable mess that the bank had put itself in that prompted Governor Craig to raise the alarm:
"For those unclear, the Central Bank mandates provisions for capitalization at around 12 percent. Most banks in The Bahamas are provisioned around 30 percent. BOB (Bank of The Bahamas) was provisioned at less than four percent. Hopefully the BOB  (Bank of The Bahamas) bailout works..."
The Bank of The Bahamas doesn't speak on, or give information on, their lending activities. Your personal banking information is kept private, as per the law. Even though it is a government ran bank with tax payer's money, it still has covenants of a privately ran bank. So, we can only have- legitimately- a macro-look at what regulators see through their mega-data compilations.

So, the government attempted to save it. Some call it a bail out. Others have cautioned not to use the term bail out, as a bail out indicates that money was injected into the bank to prop it up. As we understand, money wasn't directly injected into the bank.

Rather, through Bahamas Resolve Ltd., the government has created another government corporation, pumped it with bonds in order to absorb the bad loans, and thus absolving the bank from it's bad loans temporarily via issuing a letter of comfort that states essentially that the government would stand by this institution, come hell or high water through these difficult times.
This is the best scenario out of all of the other options. The first, least desirable option was to let the bank fold. This would not have been doable, and not helpful in the very least.

The second least favourable scenario would be to inject hard-core cash into the bank from the public treasury in order to bulk up its reserves. The public would have been upset, and if done, would have indicated to the public that the government was prepared to throw bad money into a terribly ran bank, with the factors that caused this problem to remain in tact. In addition, the government probably would have found it difficult to do so under the terrible fiscal constraints it has found itself in.

The good part about this best-case scenario, all things considered, is that it will put Bank of The Bahamas back into shape with a clean bill of health, without causing a bank run, or wasting public funds in a bad environment.

However, with the management and board still in place, some of the personnel that caused the bank to spiral out of control, a clean bill of health is most likely a deceptive one. It looks ok, sounds ok, has performed ok so the recent books state, but it truly isn't ok.

One can only think that the board and management are left in place to assist in the unwinding and resolution of this tangled mess. Which would be the responsible thing to do, considering how different the bank is from other privately ran banks. One can also only assume that through Bahamas Resolve Ltd., more governmental oversight and scrutiny will be as a result of all of this and one can expect more moves to come in the near to medium term as the unwinding continues.

Also to be considered is that while $100 million in bad commercial loans is being placed into the care and management of Bahamas Resolve Ltd., the government is essentially taking a 100% stake in debt that really should only be a 65% stake when we consider that the bank is only 65% government owned. This is something that the tax payer should have the full confidence on that it will be handled properly and that we are not left on the hook with something that really should be a shared burden with the other shareholders.

Lastly, and most importantly, the administration of Bahamas Resolve is a very critical issue. The administrator, to be named, and the staff, must be people of inveterate probity. They, especially the administrator, should have the gravitas, courage and strength to dig into this issue and go after these bad loans. They must be respected. Respected and feared.

As said earlier, only 13 borrowers constitute this $100 million portfolio in bad loans. So, let us be honest with ourselves, the average person not of the elites of both the merchant and political class, did not get one of these loans. Loans that average out to $7.6 million, or thereabouts.

Without a doubt this is a very sensitive situation. We can only hope for the best and provide guidance as the informed and active public, while wishing the Bank of The Bahamas the very best as it tries to position itself back as a bank of soundness, and one that can re-enter international markets with a clean bill of health and steady stewardship.


Saturday, November 1, 2014

Transforming Public Transportation: Can we do it?

I'm not sure how bad public transportation is in other Caribbean countries, but in The Bahamas it is a cause for consistent public ire. Even other public bus drivers complain about each other; how they cut each other off in traffic, how they steal each other's customers and how some buses go outside of their route to cream off passengers.

In The Bahamas we call public buses "Jitney's". The more emotional of us elongate the word Jitney and prefix it with a few other choice and colourful words. Some of us even use special hand and finger signals to waive to our favourite bus drivers. How nice!

My previous next door neighbour has a fleet of buses, and daily he complained about the mess and the abuse he took from other bus drivers, passengers, other vehicles that he shared traffic with and all else road-rage worthy while he downed more than his fair share of "adult-sodas" at the local public house.

Of course, he had to be whisked safely away after a few hours of lamentations induced by his adult soda of choice. Thank goodness that he is a owner now and not a day to day driver anymore. Because one can only assume that the consumption of too many adult-sodas would leave any man struggling with too much sugar in his blood stream, which may make him unsteady during the day, to say the very least.

Anyways, for my case, and while I write about important things (at least I like to think they are important), I also like to take the time out to whine and moan about certain matters because I could. Because I'm the one penning this and not you, I just have to express just what my feelings on the public transportation fiasco we have in New Providence that public bus drivers are at the core of.
Just last week I was "trapped" behind one of those buses travelling on the Prince Charles Highway heading East. I am being bitterly honest when I say this, the bus driver stopped at least 7 times in the space of a half of a mile before I was able to get around it.

Some of these "stops" were no more than 100 yards away from the previous stop. Some even shorter.

Why all of the continual stops and starts? Why cause me to forget my prayers that morning and turn into a bitter, angry and spiteful man before my next stop? Why are these bus drivers doing this to me!?

I wrote something on the miasmal mess of public transportation a little while back, as well as highlighted a way in which we can solve this problem. The article was widely shared around The Bahamas and other national and regional sources: Getting around in New Providence.

Back when that previous article was written, New Providence was then also dealing with a major road development project that multiplied the problems of transportation times 10,000. So, not only were the roads a mess, we had to deal with the same herky-jerky chaos that we normally deal with on a day to day basis.
video
Unfortunately, while funding was "reportedly" provided for the upgrade to the public transportation system through a very small part of that road development project, with the project officially coming to an end, we are left with the same problem of a lack of a coordinated and carefully planned public bus system.

The major problem why The Bahamas has a lack of movement on a unified public transportation system was that the bus drivers didn't want anything that opened the door to them losing their particular routes. Of course, this left in place the status quo of everyone poaching off of everyone else's routes. So, I guess the status quo of some of someone else's route is better than the possibility of no route at all.

The second problem was with regard to building a stakeholder model that made sure everyone could play a major part in the unification of a public bus system and sensitively transitioning those that didn't want to be a part of it out. Of course, from the onset, and with so many drivers, this would never have flown under any other manner than the one I presented earlier and will reiterate and elaborate on later in this article. That's just human nature to keep one bird in the hand. This is before we get to the politics of it all, both national and personal rivalry.

The third, and equally important problem, was the lack of leadership on the matter. A lack of leadership born out of a void of will to get it done. For all things considered, it isn't an easy task putting public bus drivers in the same room let alone have them coalesce around an idea as heavy as unifying and organizing the public transportation system so the country can benefit.

An attempt to create a model for the public bus system was done before by a private group a few years back. The group designed a new route, with a fleet of new buses, and was touted as the solution to the public transportation mess. However, what it did was create another fleet of privately owned buses to add to the already nightmarish confusion. That's just what it is. Truth!

We deserve better than this. We can do better than this!

Going to back what I had originally posed earlier, I will add value to the first opinion and build around it.

For one, creating a unified system isn't undoable. The main concern for the individual bus drivers and licensees is with regard to supplementing their salaries during the transition, particularly for the drivers and licensees that don't want to be a part of the new and unified system.

Just to say: Construction, purchasing of new fleets, corporate modelling, staffing and traffic planning is a given. This is just what needs to take place as a result of an initiative such as this. This isn't where the rub is if the over-arching idea is to create a singular, unified bus system.

The rub comes when we do not take into consideration the bus drivers and licensees that may lose income as a result of phasing out the mess we have now into a newer, organized and workable system.

What should happen is that we can provide an estimation, over time, of what it costs individual bus drivers on a yearly basis and what they stand to lose in income during the transition into a unified bus system. If the average bus driver makes $25k per year, and the project should take 2 to 3 years to complete, then that is anywhere between $50 to $75k pay out. Whatever loan, guarantee or financing option undertaken, this should be factored into the financing agreement.

Sure, it takes money to do all of this in addition to paying bus drivers out. But if the end goal is to have a singular, unified bus system, then after the bus system takes into effect then paying off the financial obligations from a public monopoly would be straight forward and stable.

The second issue is with regard to the bus drivers and licensees that do not want to be a part of a unified bus system, and do not want to stop public bus services. The solution to this is to expand the industry for public bus charters with a no bus-stop requirement, and have them work as private and public charters.

For example, allow them to have licenses where they can organize arrangements with corporate offices, schools and governmental agencies for charter services. The charter service would be designated to office to home charters, with a mixture of regular bus-stop drops and privately marked off-road stops in residential areas.

This would cut down on the public nuisance that bus drivers create through their frequent and annoying stops in the middle of the roadway, while at the same time providing for a working public bus system in addition to making the streets more organized, safe and user-friendly.

More people would have to walk a few yards to their particular stops, but walking to an identified stop is what we should be doing in any event. Let us not lose sight of what is right and proper.

All in all, I feel the end result should be on the table regardless of when and if public consultations and discussions start with regard to finding a solution for public transportation. The end result being a one bus system country. No more, no less.

Saturday, October 25, 2014

More on tax reform, please!

I guess the entire world knows by now that The Bahamas is looking forward to implementing Value Added Tax in January, 2015. Everyone except the former Chairman of the Bahamas Chamber of Commerce, Robert Myers, who also stood as the Chairman of the Coalition for Tax Reform- the once anti-VAT campaign lobby. Well, to be fair, they did morph into the "fair tax" and "sensible taxation reform" lobby. For what it's worth.

Mr. Meyers has been caught out, so to speak. As it stands, he got nabbed in an importation scandal with the Customs Department. Reportedly, he was found to have undervalued a vehicle that he wanted to bring into the country.

Bahamas Customs charge you duty on the purchase and value of all vehicles. So, if you bought a car for $1,000 and landed value works out to $1,100, you are expected to pay the duty on the $1,100.

However, Mr. Myers presented to customs a document that stated that the car he bought in the USA was less than what he actually paid for it, and thus presented false information to Customs on the actual value of the car to attract a lower duty.

In addition to this, it was also found that in the back trunk of the vehicle in question, which was a Porsche Hybrid, were groceries and other items valued at over $4,000 dollars that he also had not declared.

Yea, it is an understatement that Mr. Myers messed up. It looks like he was set up, too. Whether he did something like this before isn't something we should get into. But, it is more than curious to see the staunchest anti-government proponent for taxation reform, being taken down by a scandal that involved tax fraud at a time when the country is on the precipice of a new form of taxation. A reform that he was vehemently against from the onset.

videoMr. Myers has now resigned as the Chairman of the Coalition for Taxation Reform and as the Chairman of the Bahamas Chamber of Commerce, and has been replaced with accountant Gowan Bowe. This was the right thing to do. The second most right thing to do is to just be quiet about it. Honestly, pay your dues, back away, ask for forgiveness for your sins and move on.

With all of that taking place, without a doubt there is now a void with regard to a very strong voice and pillar on overall taxation reform. Don't get me wrong, whether we feel Mr. Myers was genuine or not in his concerns about VAT, he did hit some key notes with regard to the sincerity of this entire initiative.

In fact, as odd as it sounds, I found myself agreeing with him to a great degree with his overall concern. And I'm a proponent of taxation reform and VAT, in particular.

The Coalition for Tax Reform made the case that the initial date was just undoable, unrealistic and too aggressive. It showed persons trying to put VAT together from the government's aspect were either unaware or didn't care about what it takes for large, and not so large businesses to adjust to a new way of doing things.

Of course policy makers were a little embarrassed by the pooh-poohing of the initial date because they were so cock-sure that it was a slam dunk. But after this set-back they kept plugging at it in earnest. Which is what we need: diligence on a very sensitive and now critical initiative.

While this new date of January, 2015 instead a more favourable date of July, 2015, with the month of July coinciding with the yearly national budget process, sounds a little iffy. January is what they believe and it is not unlikely for the government to present a mid-term budget: a time when spending is supposed to be re-assessed to ascertain if the government is on the right path. A mid term budget may bring clarity to the process in January.

A second issue that I now find myself agreeing with the Coalition for Taxation Reform is that VAT will just work out to another tax heaped on the Bahamian public, with no true reform. While it is found that Mr. Myers may not, and will not, be the main man to continue to hammer this portion of the reform message. This is very important to ensure that everyone gets a fair deal in all of this.

Why it alarms this author so much is that the proposed Central Revenue Agency, the fundamental pillar in this entire taxation nexus, was not a part of the VAT Bill tabled and passed in the House of Assembly. This is critical, as the Central Revenue Agency was seen to be the agency with the potential to tie the hands of meddling persons from subverting the tax-collection process.

Another issue with VAT evolving into another tax to be heaped on the public, is the various professional organisations and related lobby groups are working feverishly to get the concessions and areas of their particular sectors ironed out. No doubt self-preservation is key, but at the end of the day it still makes absolutely no sense to get your concessions and the over-arching system still be in the same position as it once was, with a new tax put on the backs of Bahamians.

Without a doubt however, the omission of the agency from the VAT Bill raises concerns. Because the agency that is now supposed to monitor revenue collection and be new eyes and ears in the revenue collection process, has now been side-lined and the process is now, and we hope for a short time, in the hands of the persons within the same system that we wish to move away from.

We should take the controls of the revenue generating agencies out of the current system that has been compromised for so long. If you want to change the system, then change the system. Don't half do it. Change it!

We shouldn't act as if there aren't, or have not ever been, other abuses, like the situation we had with Customs and Mr. Myers. Many persons feel that this was a mere drop in the bucket with regard to what some may have gotten away with in the past, and what people may be getting away with doing right now. Especially when we take into consideration that less than 50% of Customs revenue makes it to the public treasury.

This doesn't absolve Mr. Myers or anyone else that has made serious errors in judgement, but the fact remains that true and systematic reform (something that was promised on the campaign trail by the current government) needs to be continually addressed.

I think the public also sees this new wave of crack downs in import fraud from the Customs Department, coupled with a renewed vigour for work in the auditor general's office, as persons within the system, wanting to look like they're working diligently, to ensure that a new layer of government in that of the Central Revenue Agency is not seen as desperately needed. Well, at least that's what I see. Blame it on me.

How all of this plays out remains to be seen, but I believe The Bahamas would much rather have full reform over half reform, with half reform leaving the Central Revenue Agency out of this initial push. If left undone, as time lingers on, it will most likely be left undone or done half-way. And then we all pay dearly for it in the end.

Saturday, October 18, 2014

What are we doing in The Caribbean? Productivity vs. Busyness.

Government workers are lousy, lazy and dreadfully incompetent. They come to work late, don't produce results of what you asked or paid them for in a timely manner, plus they take 3 hour lunch breaks and then leave work more than a half an hour before their scheduled knock off time.

Employees in the private sector want more money for doing nothing at all. I mean, where do they think this is? Don't they see that I'm the boss and I know it all? What work do you do around here?! How dare you ask for more than $200 dollars a week? For what you do? Are you kidding me? You want us to raise the minimum wage to what?!?

This is what you hear across the board when we talk about labour, work and employment for The Bahamas. You hear the same cries even in America and Canada. No doubt the calls are all the same across the Caribbean and Latin America too. But, for the Caribbean's sake, is it all true? Or, is it just misguided anger?

The most recent strike actions in early September from the Trade Union Congress (TUC) and their related sub-unions has garnered some attention from the local and international media. The courts granted an injunction to the government to put a halt to this action that the government felt was illegal, however the discontent was already in the air and certain concerns were placed before the Bahamian people with regard to these labour matters. Matters that will most likely be addressed, but at a later date.

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This strike action prompted this author to review an IMF Working Paper read a few months ago. Published on July 1, 2014, the paper analysed labour market issues in The Caribbean.

I must say from the rip that I'm not in favour of labour unions striking on a whim. I'm not appreciative of their particular matters being rejected totally out of hand either. I'm also not particularly agreeing wholeheartedly with the IMF's Paper, even though the work produced gives impetus to framing a separate debate and from that debate begging particular questions to be asked and other matters to be raised.

My position on this entire affair, leaning from the work produced by the IMF, is done strictly to bring to the attention of the public a parallax position that may be seen as distorted or an aberration of the original issue. But, a part of the issue it is, even though one may feel it too distant or unrelated.

For instance, we're all not lazy loafs, unskilled and unprofessional and choose to spend our time drinking rum, smoking marijuana and taking days off because we can. And, on the other side, we are not mean, maniacal and spiteful policy makers that want to hog up all of the money for ourselves and leave the workers to eat cake like we do! This type of language and sentiment is unhelpful.

In this spirit moving forward, the IMF paper went into great detail to collect, collate and analyse data on labour market trends in the region. Some data was more readily available, and others sparse or simply unavailable. In either extreme case, the data was enough to extract a rich amount of inferences from the data set and the subsequent correlations it brought to the fore.

One theme that's prominent throughout the paper is: Employment output-elasticity. Or, in other terms, the extent to which employed persons' (hired workers or labourers) output (the amount, rate and level they are productive based on how and what they produce) is elastic/inelastic (negatively or positively responsive to external and or internal determinants and/or shocks) to the extent to which it impacts, or is impacted by, GDP and/or GDP growth determinants in the macro-economic sense, or in the micro-economic sense, basic company performance indicators: The bottom line and the inputs or variables that affect the bottom line.

One thing that jumps out is the correlation of employment elasticity of The Bahamas, being the lowest correlated point observed in the data set with Jamaica being the highest. Directly speaking, with any change in real growth through cyclical periods, Bahamian employment is least likely to be impacted in any significant way.

This is a very interesting outcome from this study and says a great deal about the Bahamian economy. For starters, it lends to the idea that we are over-saturated with entrenched workers in many areas of our economy, particularly the services and governmental sectors. A lack of employment-skills dynamism and services diversification is and was always a factor in Bahamian labour and employment dynamics.

This also gives the perception that it doesn't matter that if 1 person is employed on a particular task, or 10: The same level of output will be evidenced in our GDP estimates and other output and growth indicators. Essentially, we are doing the very little we are expected to do with an over-saturation of workers in those areas.

In Jamaica's case, it's the exact opposite. Which leads to another interesting piece of information brought out by the Working Paper: The distribution of elasticity of employment over time.

Without being too technical, the second method used is a regression model over time to pin-point the rate at which growth and employment were evidenced over time.

The policies that spurred these dynamics could not be explained in the paper, but highlighting the lowest correlated over time in Jamaica and the highest correlated over time in Trinidad and Tobago, the authors did make mention of the Trinidadian government implementing employment growth initiatives that were independent of regular cyclical periods.

Further to all of this, Caribbean countries that utilized their natural resources, like Trinidad and Tobago, were seen as countries that were able to control the dynamics of employment and employment output outside of the regular business cycles and other related cyclical periods.

To further solidify this observation was that over the last decade, real growth has been historically low, generating low employment growth. During 2002–2012, average real growth ranges from 0.62 percent in the Bahamas to 4.7 percent in Trinidad and Tobago.

The Bahamas has not utilized a great deal of its natural resources in a nationalistic sense, while Trinidad and Tobago has. Neither has Barbados (due to a lack of natural resources to exploit) to any large extent but Jamaica to a larger degree, both countries being on the sub-side of opposite ends of the spectrum.

While it has been reported that over the medium term real GDP growth is projected over the entire country set, one must ask the question based on this analysis is: Where will this growth be seen? Which sectors will be at the lead of this growth? Also, based on the sectors identified for growth, will this truly impact the labour market in a substantial way?

Knowing what we know now, removing constraints to innovation and investment is also a policy recommendation for the region. This is key to being able to open the doors of opportunity for development led employment growth, but also keeping our citizenry employed with worthwhile endeavours and in a sense, not going on labour strikes and other forms of disruptive behaviour.

Whatever happens as a result of these factors, natural resources are critical to impacting employment growth and managing employment elasticity. In fact, this was the key inference suggested from the paper.

Labour unions in services dominated countries must be cognizant, particularly in non-resource rich and natural resource producing countries, that labour input at the widest margins does not significantly impact real GDP growth. And from this author's estimation, an over-saturation of employees may harm growth if this study is launched into another study that pinpoints the effects of labour and employment saturation.

I must also caution that, over time, if counter-cyclical measures aren't put in place to satisfy labour and employment demands, regardless of the benefits negotiated through the various labour unions in conjunction with the government, strikes and other work-related disruptions will become more severe and protracted as the years progress.

Saturday, October 11, 2014

Land prices in The Bahamas: Thinking about the issues and possibilities.

As Jimmy McMillan would say as a slogan when running for Governor of New York back in 2010 with the political party of the same name: "The Rent is too damn high!" We feel you Jimmy. We can also say here in The Bahamas that the price of property is too damn high. Just too damn high!

The price of land has sky-rocketed in The Bahamas over the last 25 years. Many parcels of land today, in middle to lower-middle income areas without a dwelling on top, can fetch any where from between $70 thousand to $95 thousand dollars. In fact, a piece of property 40 by 80 in a middle-income area in 1985 went for anywhere between $2,500 to $3,000 dollars. Yup, the generation post 1995 was given a raw deal with this. A raw and dirty deal.

For upper scale areas, parcels of land can start from $200 thousand dollars and upwards to $1 to $2 million dollars. This is also without dwelling on it.

Based on The Bahamas's GDP per capita at a very liberal $22 thousand dollars (a grossly inflated estimation of GDP per capita as it doesn't take into consideration the over-saturation of incomes from the top 20% high-wage earners compared to the bottom 70%), leveraging for land becomes more than a task. It's almost impossible for average families to purchase land and a home of their dreams without being in debt to banks or land developers for years on years.

This, coupled with the perpetual and seemingly ubiquitous soft-services economy, an economy yet to fully rebound from the ravages of the 2008 economic collapse and financial crisis, we have a dire and particularly important issue of land-reform that's desperately needed in The Bahamas.

Land reform, or the intention of land reform, has not been missed by all and sundry. In fact, recent developments based on rulings of two major and long-standing cases (one of these matters dating back to the early 1980's) for a major land development company in The Bahamas, Arawak Homes and their associated company, Eleuthera Properties Ltd., drove the critical issue of land reform home to many Bahamians.

Without going into the details of the particular court cases, the major issue involved a process called "Quieting Titles". A process by which a person can transfer title of a said property through the Supreme Court though particular means. Whether through just occupying the land for a considerable amount of time, or just through being interested in the land and the original property owners are uninterested in doing any thing with it, for some reason or the other.

Thus was the case for Eleuthera Properties Ltd. in North Eleuthera and their claim and subsequent acquisition, through a Supreme Court ruling, of nearly 2500 acres of land.

A second case, involving the parent company, Arawak Homes, is a more acute case of Quieting Titles and involved the purchase and re-sale of property that was disputed from the onset. This court case involved a particularly controversial area in The Bahamas- Pinewood Gardens. An area where someone put a petition to Quiet the land that was already, reportedly, purchased and owned by Arawak Homes.

This issue also underscored the need for a proper land registry in The Bahamas and a revamping of the Registrar General's office and the department charged with insuring the integrity and validity of property titles.

So, here we have it, one company being both a victim and claimant in two separate court cases surrounding the Quieting of Titles conundrum, where the same company came out the victor in both of the court proceedings.

This prompted the president of Arawak Homes, Mr. Franklyn Wilson, to cry about the abuses of Quieting Titles in The Bahamas. And we cry with him too! Really!

All of this, in addition to other matters surrounding the murky process of obtaining Crown Land from the central government; the lack of commitment by policy makers and the judiciary in finding a workable, best-case-solution to Generation Property (with Generation Property being land handed down from former plantation owners to their slaves primarily); and another issue of contention, The International Persons Landholding Act. of 1993 (making land purchases and ownership less cumbersome for foreigners), which repealed the former Immovable Properties Act., and is a key reason behind the explosion of land prices in The Bahamas.

In fact, with current prices taken into consideration with the Landholding Act of 1993, a Realtor from one of the most prominent real estate companies, H.G. Christie, lamented on the now 90/10 split in property sales with the 90% of sales being high-end North American, Canadian and European clients.

What the Realtor didn't explain during his lamentations was whether or not this 90/10 split was based on the numbers of individuals or entities buying property; or, in other words, 90 high-end buyers to 10 local buyers. Or was it a case of sheer value and profit; For example, 90% of his profit is realized from high-end buyers as opposed to 10% of his profit from local buyers.

Explaining what that Realtor means can help a great deal towards understanding how severe the issue is. It also must be noted that H.G. Christie specializes in the high-end market in any event.

Be that as it may, without question, all of this has certainly opened the market to fraudulent activity with particularly lengthy and confusing court cases as the fight for property for Bahamians becomes more heated and contentious as the years progress.

I'm not going to pretend that I have the solutions to all of these issues. I won't even give the impression that I can give you a workable solution to any of them. But I would like for my reading audience to consider this formula for helping with reducing the overall cost for average Bahamian families. This formula may prove fruitful for the rest of The Caribbean and Latin America at large, where developing country stagnation issues and bottlenecks are severe in many instances.

One way in which we can look to reducing the cost of land, without amending the International Persons Landholding Act., is by policy makers creating a "race to the bottom" scenario. A scenario whereby real estate companies, banks, lawyers, relevant stakeholders along with the government create an atmosphere through capping fees and interest rates for land valued and zoned in particular areas.

For example, hypothetically speaking, pieces of land in "Eastern Estates", deemed as a historically Bahamian area for residences and businesses, the rates at which the stakeholders can extract service charges and other processing fees should be capped at a certain value.

A Realtor typically asks for anywhere from 7% to 10% for sales, and the lawyer asks for 2-3% on top of that.

Lets say that a piece of property worth $100 thousand typically attracts 10% total fees from the Realtor, Lawyer, etc. But, if mandated that sales of $100 thousand should not exceed 5%, or $5 thousand; and sales for property valued at $50 thousand shall be equal to, but no less than, 11% of the total value of the property. That's $5 thousand five hundred. Parties involved would actually make more money per value off of the property at a lower price than they would make selling at the higher price.

Following the rationale of something of this nature needs to have several other factors put into consideration. One in particular is at which rates would it be profitable for a Realtor to sell land at structured price ranges? Without a doubt discussion and analysis into the socioeconomic dynamics of property sales should be broached with the Bahamas Real Estate Association.

A second issue for consideration is with regard to what price range would this ascending fees scale stop? This can also be easily appreciated by both policy maker and the Real Estate Association.

Last, but not least and what should be atop the pile for consideration with both the former, is managing the expectations and the articulation of what regulations vs. free-market policies can mean for the Real Estate industry. This is important. Important particularly with regard to persons that bought land at a higher price, but have yet done nothing with regard to it because they do not have the financial headroom.

One can see persons lashing back at what would be rightfully presumed to be government interference with price mechanisms in the industry. But as it stands now, with all of the prevailing factors surrounding the Bahamian economy, from flagging employment to inflation to socio-political behavior that has become injurious to investment and entrepreneurs, standing around doing nothing while property prices remain at virtually un-buyable prices hurts all involved.

As it stands now however, property sales under a different policy regime and arrangement is a better way forward than keeping the new status-quo of high prices and lack of flexibility for Bahamians looking for decent and affordable homes and property of their choice in their own country.