Top Down Economic Strategies Are The Past
National policies makers have focused on top down economic strategies to improve Tourism, Financial Services and Construction Industries for almost 40 years. However, after all is said and done, The Bahamas as of December 2012 is in economic distress because of the following:
Sovereign rating was down-graded from BBB1 to BBB (Standard and Poor’s) and from A3 to Baa1 (Moody’s)
- Almost 5 Billion national debt, grown from 31.7% of GDP in 2007 to 53% of GDP in 2012
- 550 million plus deficit (expected to grow to 671 million (2013/14)
- 15% Unemployment rate (could elevate up to 20% in 2013)
- Low GDP (8 Billion) and low projected economic growth (2.5%)
- A social welfare society (an enormous increase in social safety net transfers)
- A stagnated Tourism, Financial Services and Construction Industries
- An unmotivated and demoralized small business sector
The former government had mismanaged the economy with a double edged sword in 2007-2012 and made the recent recession worse. The former Minister of State of Finance and his colleagues formulated failed top down economic strategies in recent years, namely: the costly dredging of the Nassau Harbour, unsuccessful air travel rebates, unwarranted tax increase in the vulnerable automobile industry and terminating concessions in the manufacturing industry. In addition, the former Minister of Works spearheaded the catastrophic road works project. As a result, the small and medium sized enterprises (SMEs) were neglected and hundreds closed. The ultimate destruction was that SMEs contribution to GDP declined from 5 % (2007) to 2% (2012).
Top down strategies, which focus on improving the tourism, financial services and construction industries, did not significantly increase GDP (8 Billion) to cover national expenses and reduce the national debt / deficit. To cover recurrent expenses, reduce national deficit and debt our annually GDP needs to be in the vicinity of 12 Billion.
Along with tax (property, income, value added) reform and economic diversification, the only way our country is going to obtain an annual GDP of 12 Billion is to focus on bottom up economic strategies to improve the SME sector.
Bottom Up Economic Strategies Are The Future
There Must Be A Rise Of The Small Businessman! National policies makers over the years casually indicated that small businesses are the pillars of our economy and that there must be a focus on economic diversification. However, as of May, 2012 there were not significant evidences that they were serious about trying to improve the small business sector and diversify the economy. However, the new government understands that bottom up economic strategies to improve the SME sector is the way to go in the future.
This is evident because of the following:
- The legislation of the Small Business Act in 2013
- The creation of the Small Business Development Agency in 2013
- Conducting a market research in order to improve the SME sector
- Formulating a long overdue strategic plan for SME development
- The fair road works compensation program
- The renewal of concessions for manufacturers
- Formulating new innovative agriculture strategies
- A new strategic approach to develop SMEs in the Family Islands
- Focus on reviving dormant industries and enhancing existing ones
- Formulating clustering strategies for productive and creative markets
- Formulating a creative national financial lending mechanism for SMEs
Only the serous attention to develop the SME sector can save our nation from financial collapse. Moody’s and Standard and Poor’s will improve our Sovereign rating in 2013 because the PLP government is conducting the necessary bottom up economic strategies to correct the failed top down economic strategies by the former FNM government.
To help develop our SME sector you can contact Mark Turnquest at 326-6748 / 427-3640
By Mark A. Turnquest
www.markturnquestconsulting.com
