The Life Writers Association of The Bahamas
Nassau Beach Hotel
22nd April 2005

I am honoured to have been asked to speak to you today on the ‘topic de jour’ – the Caribbean Single market and Economy (CSME).  This topic is one about which many people are seeking to create a lot of excitement about the town.  The concepts are fairly elementary and the effects on the Bahamian economy will not be dramatic in the short term.  What the decision to join on to CSME will do, we anticipate, is position The Bahamas economy for the future, and usher us into a system of rules based trading, one that is not predatory, and that will enhance the value of Bahamian trade and create opportunities for Bahamian businessmen.

The danger of the present analysis by many who simply say no to the concept is that they will reinforce the present anti competitive nature of so many sectors of our economy.  What has to be overcome is a fear.  It is not a significant fear.  It is that same fear of using the Automatic Bank Machines for the first time, or the fear of not having a bank passbook.  Once you get over the fear, and use the machine or accept that the money is still there in the bank, then significant gains are made in productivity and in time saving.

The Single Market and Economy is a concept that is easily embraced by young entrepreneurs.  Those entrepreneurs today have difficulty finding capital, and at present the regimes that restrict access to foreign capital are a disincentive to the development of the country.

Think about this: the cost of capital, the cost of going into business to sell goods, and the pure denial of capital.  With more a liberalized atmosphere, where there is free movement of capital, then the young entrepreneur can see some greater chances of success.  You also know that with the contemplated changes in the tax regime from customs duty to value added tax; this will make it cheaper for the entrepreneur to get his goods on the shelf.

You should not be surprised therefore that the people who most argue against trade liberalization regimes are those who presently sit pretty in an economy that is protected with walls around it.  They have the capital, and it is the story of the rich getting richer, but the pie not growing any bigger.

One must also consider one possible effect this may have on the insurance industry.  You already know that the financial services sector in The Bahamas is managed and controlled to some extent out of Barbados.  There is nothing wrong with that, except that The Bahamas has missed out on opportunities to become the centre of business for the Caribbean by standing aside from the processes of economic and regional integration.  Barbados has long ago embraced them.

There has been a market concentration recently in the insurance industry.  The result is that other insurance providers here are arguing that in order for them to compete in this market there is a need for an infusion of outside capital.  Under the present regime in order to approve this, the Government will have to make special exceptions.  Under the CSME arrangements, there will be free movement of capital, and you will simply be able to go to Barbados or Trinidad and Tobago and get the capital you need to inject into your business.  That helps to create jobs; that helps to protect jobs.

Much of the story around the CSME has to do with the objections to the free movement of people.  We have said that this is not something with which the Government of The Bahamas will agree.  Please understand that we already have the full assurance of the Caribbean Community that this reservation will be granted and this and the other reservations will be agreed before entering into the full Caricom arrangements.

I should also say that the other reservations, which we propose to enter, are those against Monetary Union, the Caribbean Court of Justice and the Common External Tariff.

The CET or Common External Tariff is a matter we have to approach with some care.  This is because at some time in the future we are likely as a country to want to negotiate a threshold for customs duties substantially lower than the present custom duty charges.  You know that all of these regimes contemplate being as close to zero as possible in customs duty.  The question then is what tax will substitute for the revenue lost as a result of the lower duties?  Most people think that Value Added Tax (VAT) is the answer.  The question is being studied by the Ministry of Finance now and the Minister of State has said that we may be two to three years away from such changes.

However, tax policy is something that requires review and change even if we never enter CSME.  The changes in taxes therefore will be an added benefit.   Within the CSME regime, there is an even further benefit in the sense that it will smooth the way for the arrangements within the World Trade Organization (WTO) which is an organization that regulates world trade on a rules based system and which we are seeking to join as a full member.  At present we are observers of the World Trade Organization.

The wider Caribbean Market provides a wider market for goods, a wider market for services.  In the ideal world it will make it possible for Bahamian insurance companies to spread their wings without restrictions throughout the Caribbean region, and for other service providers to come into The Bahamas, joint venture with Bahamians, which can enrich the product mix in the country.

While this is not a matter that should be taken lightly, it seems clear that there are definite advantages to it.  Some people are concerned about what they claim are the hordes coming from the south to swamp our culture.  Some people are prejudiced against Caribbean people, even though in almost every Bahamian generation there is the mix of Caribbean people.  Some people denigrate the south saying that they are poor and dispossessed; except that Jamaican capital saved the very same Cable beach on which we enjoy this luncheon.

What I do here today then is what I have done on many occasions in the last few weeks.  I make an appeal to rationality and not to prejudice.  I make no personal attacks on anyone who has a rational argument to make.  This is not a life and death issue.  There is no special drama in it.  The trade arrangements for The Bahamas can be enhanced by better working arrangements with other countries.  That is what CSME is part of, trying to smooth the way for Bahamians around the world, so we can spread the message of our country, our goods and our services round the world.

I thank you for this opportunity.