Direct foreign investment plays a leading role in the overall competitiveness of the Bahamian economy, according to a newly-published report.
The study, prepared by Dr. Trevor Hamilton & Associates for the Bahamas Chamber of Commerce, compared three countries, namely, Jamaica, Costa Rica and Trinidad & Tobago, and determined that, of eleven indicators used, The Bahamas was more competitive in six categories.
However, while the Bahamas has in place sound macro-economic management polices, there are several areas in need of improvement, according to the paper.
The report notes that The Bahamas’ leading competitive indicator is the availability of Per Capita Foreign Direct Investment. This has allowed a good level of price stability in the country with an inflation rate far below the rates of its main trading partners.
Within that environment is the country’s consumer purchasing power due to per capital income, and a GDP growth rate that has been steady for the past five years.
Competitiveness is also shown in the way taxes are used as a percentage of GDP, according to the report, which was described as a good indicator of government efficiency.
Similarly, internal debt as a percentage of GDP shows the capacity of the country to generate and sustain growth and economic competitiveness.
Despite such encouraging facts, the report states, The Bahamas needs to enhance its economic competitiveness by modifying its current lending rate.
The paper suggested that the lending rate be reduced or have an increase in equity financing through capital markets as the country’s lending rate has been a major contributor to the inflation rate.
Second to that would be the country’s need to increase the percentage of individuals entering the workforce with appropriate and adequate training.
As the ‘key competitive weapon’ for service-oriented economies, properly implemented education and training systems would promote a competitive drive in the workforce, the report advocated.
The country’s present status of productivity output per wage dollar also needs to improve, according to the paper, as The Bahamas will not properly be on the road to competitiveness if the value of worker output per dollar of wages has a low measure of productivity.
The report also highlight the need for an increase in gross domestic savings. To save more increases the domestic propensity to invest, it argued.
To maintain the ability of being cost and price competitive, the country must improve its current fixed cost as a percentage of total operating costs for businesses. To do this would make local businesses more competitive, with lower fixed cost ratios, the report recommended.
By Lisa Albury, The Nassau Guardian
