No drastic changes foreseen

Minister of Economic Development the Hon. Zhivargo Laing says The Bahamas has reasonable levels of foreign reserves, and present indications are there are not likely to be any drastic changes in them as a result of the terrorists' attacks in the U,S.

"Foreign reserve levels are important to maintaining an ability to buy the imports that we rely on," Minister Laing told a forum of The School Business of the College of The Bahamas September 28, "and if we don't have sufficient reserves to be able to pay for these imports, there is a potential threat to the stability of our currency in terms of its relationship with the U.S. dollar. Today, that relationship remains safe."

Speaking on "The impact on The Bahamian economy of the recent local and international disasters," he said the impact of the terrorists' attacks on the United States has been felt by The Bahamas as well as other Caribbean territories that rely on tourism and financial services.

"We in The Bahamas have a very open economy," said Minister Laing, "and that means that we rely very heavily on doing business with the rest of the world, namely the United States of America. This is, and always has been, a double-edged sword, as on the one hand as the United States experiences booms, so do we. However, any downturns in the U.S. economy inevitably affect The Bahamas."

Looking at the gross domestic product of The Bahamas, the Minister said 40 per cent of all the business done in the country relates directly to tourism, and 15 percent to financial services namely, banking.

"This nation's economic model really is a simple one," he said. "We sell hospitality and financial services to the world, mostly American citizens, and mostly American citizens coming through New York, Philadelphia, and Florida. These persons spend in our hotels alone some $1.8 billion in our hotel sector or an average of $5 million a day."

Banks in The Bahamas manage about $200 billion in Euro-currency, said Minister Laing, and, in doing so, are able to earn more than $300 million.

"International tourists and bank clients spend in our hotels and banks," he said. "These hotels and banks hire Bahamians to service these clients. Tourism alone employs about 50 percent of the entire workforce of The Bahatnas. That's 50 percent of 160,000 people; that's 80,000 people employed in tourism. In the banking sector there are about

5,000 people employed, just about three percent. The hotels and banks also purchase goods and services locally, resulting in local companies earning money and hiring

persons to maintain their businesses. These local businesses include utility companies -BEC, Batelco and the Water and Sewerage Corporation. They include construction companies, landscaping companies, pest control companies, furniture companies, cleaning supplies companies, grocery stores, computer companies, paper companies, and the list goes on - all reliant on these hotels and banks.

"Now beyond the hotels and banks, tourist dollars are directly spent with taxi drivers, bus drivers, tour operators, travel agencies, straw vendors, artisans, restaurants, jet ski operators, ferryboat operators, and tourist attractions such as the Ardastra Gardens, the pirates' exhibit and others.

"The owners and workers in these areas, along with thousands of hotel and bank workers, spend billions of dollars on bank mortgages, rent, insurance, property purchase, utilities, groceries, fruits, vegetables, fish, travel, education, church offerings, appliances, electronic equipment, outings for their families, hair cuts, medicines, doctor visits, legal fees, to save, to invest, to start businesses, government taxes and fees, etc. As they do so, they create the ability of thousands of local businesses - some relatively large, some small - to remain viable."

As all of these companies and residents purchase goods and services from abroad, customs duties would be paid to the government, which produces 60 per cent of the revenue that the government collects and uses to pay for public services that it delivers, said the Minister.

When tourist earnings decrease and people aren't buying as many imports, then the government of The Bahamas has a decrease in its revenue, he said. Decreased revenue would affect the government's budget, he continued, and if the government's budget is affected, the service the government offers would also be affected in terms of how much of that service could be done.

"In 2000 we imported near $2 billion worth of goods into this country, 80 percent of which came from North America," he said, "Of this amount, machinery, food and live animals, manufactured goods and chemicals represented the bulk. That level of imports generated the greatest portion of government tax revenue, Government revenue last year amounted to over $900 million, of which more than $500 million came from customs duties alone. The imports that we purchase we pay for primarily using the tourist dollars that we earn."

The events of September II have and will profoundly affect the economic circumstances of The Bahamas, he said, and the extent of that effect, in terms of degree and duration, would depend largely on what the United State does in response to the terrorists' attacks.

Already, he said, tourist arrivals to The Bahamas by air are sharply down - as much as 50 percent or more below their normal levels in the early days following the


"Cruise ship arrivals, though not as severely hit by the attacks, were also significantly below normal levels," he said. "It is important to note that tourists who come to The Bahamas by air are what we call stop-over visitors. They stay a little longer than the rest, and they spend more money. When you have a decline in stop-over visitors, you have a more significant impact on tourist spending than you would have from cruise ship visitors. But I must tell you, cruise-ship visitors today are supporting us tremendously in this economic crisis. So both are important to our economic viability.

"Declines in tourists mean a decrease in tourist spending. The consequence of this is obvious. Hotels which traditionally see lower occupancy levels at this time of the year are experiencing occupancy levels that are even lower than expected; some hotels have occupancy levels as low as 18 percent in New Providence. In the Family Islands some of them just shut down the business."

Low occupancy levels, said Minister Laing, would mean layoffs and reduced work hours for many hotel workers during this time, less money for them to spend, and some difficulty paying for things such as rent, groceries, school fees, and insurance premiums. Therefore, banks, businesses and landlords would all feel the effects of decreased tourist spending and layoffs of hotel workers and others.

The Bahamas, he said, was already reeling from the devastating fire that took place on Bay Street only a few days prior to the attacks in the U.S. That fire resulted in the loss of no lives, but it disrupted the lives of more than 500 straw vendors and artisans who were housed in the straw markets, and also affected businesses housed in

surrounding buildings that were also destroyed or damaged. It also caused disruption to others who were directly linked in some way or the other to those persons.

"This event cut off an important

Created: 22 August 2017
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