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Stop 'Dictating' Fdi Direction, Banker Warns

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Michael Anderson

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must be more willing to open up to foreign direct investment (FDI) in non-traditional areas to have any hope of paying-off rising US dollar debt, a top investment banker is arguing.

Michael Anderson, RoyalFidelity Merchant Bank & Trust's president, told Tribune Business that both the Government and private sector must be less willing to "dictate" where foreign investors place their capital if the country is to smoothly emerge from them fiscal and foreign exchange earnings crisis created by COVID-19.

With tourism inflows having almost completely dried up, Mr Anderson argued that more "accommodating" laws and policies were needed to attract overseas investment as one of the few alternative foreign currency inflows available to The Bahamas in the short-term.

With COVID-19 producing increasing competition among all nations to attract FDI, the RoyalFidelity chief said The Bahamas needed to make itself stand out from the crowd if it ever hoped to attract sufficient foreign currency to service a growing US dollar debt that was increased by a net $352m as a result of the Government's recent $600m bond issue.

"The only way for the country to reduce is US dollar debt, and we do get foreign currency movements from tourism, but to make any significant repayments we need to get a bigger amount of US dollar investment into the country," Mr Anderson said.

"Typically investors go into hotels, but there's not a huge amount of interest in investing in the tourism market here at the moment. We need to open up investment into other areas. There's a tendency here to determine what type of investment is suitable for investors to make, and I don't think we're in any position to make that determination.

"We have to be open to whatever investments investors think are viable, and be willing to make accommodations and open up policies to to accommodate investment in areas other than tourism. To see if we can pass laws and policies to accommodate that as country," he added.

"Investors go where they think they can make the most money, and into the areas they think are most suitable for them. It's not for the Government and private sector here to dictate that. Historically we've tried to limit investors to areas which we think are suitable."

Broadening investment beyond the myopic focus on tourism, Mr Anderson argued, would boost the economic diversification drive as well as potentially generate increased foreign currency inflows to boost the external reserves, help repay the country's US dollar debt and support the one:one currency peg.

With the Government's direct foreign currency debt standing at $2.951bn at end-June 2020, or 36 percent of its total debt, the net $352m increase produced by the $600m offering will have taken the former figure past the $3bn mark.

The Government through its latest borrowing is effectively betting that the economy, and especially tourism-related foreign currency inflows, will recover in sufficient time to enable it to service the increased US$ debt and avoid a significant depletion and rundown of the external reserves that support the one:one currency peg.

"If we start with this idea of taking on a large amount of US dollar debt, and to repay it from tourism earnings, we never seem to catch up," Mr Anderson said, "and are always running a deficit. The only way to catch up is to get US dollar investments into the country to offset some of the debt."

Comments

realitycheck242 4 months, 1 week ago

I support this view to open up to foreign direct investment (FDI) in non-traditional areas to attract more US dollars into the economy. Tourism will come back slowly but its past time this country look at eco friendly, Green economy investments. Nothing like the investment proposal in yesterdays tribune by the Morgan's Bluff Development Ltd proposal for the limestone mining at morgans bluff Andros should not be entertained by any right thinking Government.

So if this article is stealthly advocating for that development because of a promised registrar and Share transfer agent/ share offering administration contract for the above stated company, i say to the Parties involved .Destruction of the Bahamas largest remaining source of underground fresh water is not worth no amount of US dollars.

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Economist 4 months, 1 week ago

With global warming the country should try to amass as much wealth as possible, including selling the limestone. In 100 to 150 years it will be underwater anyway.

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tribanon 4 months, 1 week ago

Is Mr. Anderson suggesting we just put a great big "For Sale" sign on The Bahamas (at a fire sale price) and mention that the country comes with a very low cost source of slave labour? The cruise line companies like Carnival would love to see that happen as would many of the other foreign vultures hovering over what they perceive to be an essentially dead carcass of The Bahamas ripe for the pickings at this time, e.g. Shell North America.

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ThisIsOurs 4 months, 1 week ago

I disagree with Mr Anderson on one point. We do have the right to tell the investor which areas we'll accept. If someone wants to come here and open up a line of brothels we have a right to say that business, which could earn millions, does not line up with our values (yeah I know, just saying). The problem is we don't have a clear vision of what we want our country to be, so anyone could tell us anything. Look at that big clunky box downtown that someone approved it's HORRID smack dab in the middle of what's supposed to be "revitalization". One big horrid brown box.

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banker 4 months, 1 week ago

Brothels wouldn't work. Too many Bahamian jungalists give it away for free.

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