Laying Out The Roadmap For Economic Resilience


The Bahamas highlighted its response to the COVID-19 crisis with a budget styled as Resilient Bahamas: A plan for restoration. Its three stated aims are to protect the well-being, and engender confidence, of citizens and residents; maintain economic stability during the crisis; and plant seeds for accelerated recovery.

The budget communique further expanded on these three aims by saying the Government's fiscal plans are designed to protect the health and safety of Bahamians; provide adequate social support to vulnerable members of the community; stabilise the economy; sustain employment; and accelerate government reforms. The social response is generally impressive given the circumstances.

We may argue over actual monetary allocations to the programme, but this approach is consistent with underlying concepts of economic resilience in that it sought to address the social environment.

The 2020-2021 budget is relatively rich with social treatments. In this regard, The Bahamas has got a number of things right through providing compensation for loss of employment and income, along with food and rental assistance and efforts to help companies retain employees through direct loan/grant financing or tax deferrals. The $55m allocation to the Small Business Development Centre is especially positive.

The 2014 paper, Building Economic Resilience?, by the Institute for Public Policy Research North, a UK think-tank, says: "A resilient economy is one that has the following characteristics: Responsible business; positive local money and resources flow; asset base and enabling environment; responsive public and small and medium-sized enterprise sector; strong community and civic voice; interdependence; and environmental sustainability". This points to the importance of getting all segments of the economy right. Critically, the health, effectiveness and efficiency of each segment will be key in determining the level of economic resilience that can be achieved. Getting balanced, but not necessarily equal interplay, between these segments of the economy is fundamental to how that resilience will be sustained. This is why the work of the Government-appointed Economic Recovery Committee is so important. The Prime Minister said their report is due in September, and I am anticipating that this "balance" will be a key feature of this work. The issue here is that all relevant sectors of society must be given due consideration.

While resilience includes economic growth, which in the case of The Bahamas is very much needed, this is not the all-encompassing nature of the concept. It is just one important part. There can be growth without achieving resilience.

For example, a country with a weak social network will struggle. The ability to allocate economic support without effective mechanisms for reaching those negatively impacted by disruptions will have very negative implications. As seen above, while one may argue about the efficiency of getting funds to those in need, the social programmes are in place in The Bahamas. Therefore, from the perspective of the Budget, the major area needing attention is evidence of a robust growth plan. If immediate impact is anticipated, it means that the Economic Recovery Committee's work will be restricted to the four broad new policy initiatives for 2020-2021.

These are small business growth and development; national digital transformation; energy reform, including renewable energy and solarisation; and food security and sustainability. Because they are there, it is reasonable to conclude these are the funded mandates. It would be fair to argue that matters not captured in the Budget presentation, which was given with clear knowledge of the extent of the crisis, will be outside the funding realm. There is a lingering question as to whether these areas are sufficiently comprehensive to secure the stated aims. More importantly, is the strategy canvas wide enough to facilitate plans for adaption and transformation?

It is likely that the Economic Recovery Committee will present on matters broader than those suggested above. The difference between having a broad review and a narrow one is important. In a broad review, one can ensure that existing economic arrangements are fully assessed. This positions the planners to effectively identify gaps, and consider the possible next steps for filling them. This, then, positions the economy to realise its return to vibrancy based on what existed, improve performance and efficiency from what existed, but also secure new contributions from what may now be added. While a narrow remit may get you back to normality, it will require a broad-based plan to secure new growth. There are some important elements in the budget that must be built on, and leveraged, in this direction.

The reform of state-owned enterprises (SOEs) is designed to save $100m for the Government and taxpayers within five years. The effort to reduce this burden on government must have urgency. The reduction of duty on building materials to 20 percent should channel thinking on how to generate the maximum level of construction activity in the private sector. All requests for permits should be considered. Projects for which approvals have been slow should be given urgent attention.

Programmes to renovate and redevelop properties can be further incentivised by government. The Budget's $515m allocation for capital projects must be given early attention. Tariff reductions on farming equipment should not be seen as an improved ability to maintain present agriculture output, but should give impetus for thinking about larger operations. This is (or must be seen as) a signaling of "big ideas time" for the agriculture sector. The use of public-private partnerships (PPP) should be better refined and, in my view, could become a pillar for advancing development in light of shortages of public funding and the curtailment of external investments.

Consistent with this argument, in my opinion, we must get a plan from the Economic Recovery Committee that is wholesome and holistic, going beyond the suggested remit of the Budget. The plan must be rich with creativity and strategic thinking. The plan should consistently ask and answer the question: "Is this creating or destroying value?" Of course, such answers will be subject to limitations imposed by the need to provide public goods. The idea here is a shift from the status quo of low growth that is facilitated by freeing-up productive capacity and potential that already exists, and at little or no cost to the economy. While this appears to be the policy suggested by the Budget, going beyond this is critical. Matters that the Budget is silent on must also be addressed. For example, there has to be a position and a strategy for financial services against the backdrop of the European Union (EU) threat and potential external pressure that may come to bear as big countries seek to claw their way out of the pit of this financial crisis. Not addressing this, having regard for its impact on the "second pillar" of a two-legged economy ,would be a major oversight.

Together with the timely execution of the announced reforms, we must anticipate the Economic Recovery Committee's efforts pushing The Bahamas in the direction of stronger links at play between critical economic sectors cited. Its work is by no means easy. It is my view that regardless of differences in outlook, everyone should be rooting for the committee to do well and to get it right. Can they do better than the National Development Plan given the timeframe they are working with? Does the COVID-19 crisis provide the definitive context in which any plan,after due consideration, is implemented? The expectations are high and, in a real way, the fate of a country hangs in the balance. Not getting it right will by no means be fatal but will certainly be disruptive to a timely recovery.

• To be continued


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