Facts and fiction about diversification

Sat, Oct 1st 2011, 10:33 AM

This column was first published on July 20, 2010

At a recent service marking his demission from office, the head of a prominent denomination offered the heated view that the Bahamian economy desperately needs to be diversified.
He proclaimed that he had advised successive governments of this need, but that his advice went unheeded.   Unfortunately, the religious head seems as expert in economics as Donald Trump may be in theology.
His is the latest example of a public figure who should know better than repeating the wearying and inaccurate conventional wisdom regarding the actual nature and level of diversification of the Bahamian economy.
This same ignorance continues to bubble to the surface by those running around panicking like the fabled Henny Penny that the sky is falling in terms of the supposed dire threat of Cuba to the Bahamian tourism industry.
One of the accompanying arguments is that because of the apparent normalization of relations between Cuba and the United States that The Bahamas had best quickly pivot from tourism and diversify into other industries.
This view reflects a failure to grasp economics, including the economics of tourism.  It is also stunningly ignorant of Bahamian history.  Whether or not you believe Sir Stafford Sands should be on the $10 bill, he's there for a reason.
Sir Stafford understood the cycle of boom and bust that haunted The Bahamas for centuries with the rise and fall of industries - including wrecking.  Then in the 1930s the Bahamian economy collapsed with the end of Prohibition in 1933 and the devastation of the sponging industry by a marine disease in 1938.
To diversify the economy, Sir Stafford and others concluded that a year-round tourism industry would stabilize the Bahamian economy, assigning the cycle of boom and bust to the history books.  This historic achievement was also made possible by taking advantage of technologies from the jetliner to air conditioning.  Way before all of the 21st century talk of globalization and service-based economies, the Bahamas was on the cutting-edge in the mid-20th century.
Despite many downturns, including the Great Depression of the last century and the current severe global economic crisis, the Bahamian economy is generally healthy.  Tourism has made our economy quite resilient, the envy of many countries, including our Caribbean neighbors.  This resilience has been boosted by the country's diversification into financial services and other industries.

COMMODITY

The success rate of commodity production and export in The Bahamas is mixed.  Sponging collapsed, as did peanut farming in Andros, sugar in Abaco, pineapples in Eleuthera, onions in Exuma and sisal in various islands.  Had these survived, they collectively would not have generated the level of economic activity and employment of tourism.  Incidentally, after many years, Bacardi ended rum production in The Bahamas.
The distributive and sustainable power of tourism is more enduring than many other industries.  The Caribbean has learned this lesson - painfully so - from the instability of bauxite in Jamaica to sugar and bananas throughout the region.
An alphabet soup of self-interests masquerading as free traders have dealt serious blows to the economies of the Caribbean:  From the EU and the USA on bananas, NAFTA in terms of textiles, and the OECD on financial services.  Yet, tourism has generally survived hurricanes manufactured by humans and nature.
Meanwhile, the former religious head, who clearly does not understand economics, should pause and recall that most of the money offered up for collection - comes from tourism.  Those who preach of justice should consider:  Many of the demands for social and distributive justice they seek, may be been best achieved by tourism.
Undoubtedly, there is still much to be done to better spread the economic and related benefits of tourism.  Yet, on balance, tourism makes good economic and ethical sense.  And the country continues to make progress in terms of greater Bahamian ownership of the industry.  One area of great promise is the multimillion dollar heritage tourism sector.
Still, many are blind to the facts staring them in the face, with the fact of diversification seemingly of little consequence.  This includes, among other examples, The Bahamas serving as a major financial services centre and hosting a major transshipment center as well as the world's largest cruise ship repair facility.
The Bahamas boasts one of the largest ship registration centers in the world, and continues to boost its maritime services industry.  The country now hosts the annual Bahamas International Maritime Conference and Trade Show to promote the ongoing development of and diversification within this industry.
Lest we forget, Grand Bahama was also home to an oil refinery, BORCO, and Syntex, a pharmaceutical company.  The near full employment of Inagua powered by salt, and Spanish Wells by fisheries, also seems to elude the notice of those who have conveniently forgotten that aragonite was mined in Bimini and that The Bahamas has had boat-building and straw-work industries.
Still, tourism will remain our main industry for the foreseeable future, for many good reasons.  With less than 400,000 people our best bet is as a service-based economy.
We will never be a power in agriculture, fisheries or manufacturing, though we can successfully enter into niche markets in these and other areas.  Moreover, these industries can only employ so many Bahamians.

LEVERAGE

But we can leverage our small population, stability and strategic location to punch way above our weight in tourism, financial and maritime services, international arbitration, offshore educational services and other industries.
Despite tourism's exposure to external threats, we have more control over protecting tourism than any other industry. Our challenge is ongoing diversification within tourism, while promoting linkages between other industries and our main industry.
Asked his thoughts on a world energy crisis, the American architect and futurist, Buckminster Fuller pressed:  "There is no energy crisis, only a crisis of ignorance."   In many ways, the so-called long-term economic crisis some see in The Bahamas related to tourism is a crisis of ignorance and imagination.
The task for the 21st century Bahamas is to eschew an ignorance of our economic history while replacing ignorance over what is possible for the economy.  That ignorance can be overcome with the sort of imagination which prompted Sir Stafford Sands and others to recognize that in many ways tourism and The Bahamas were made for each another.
The current Minister of Tourism and Aviation, Vincent Vanderpool Wallace, understands our current historic challenge.  He has the imagination and experience to extend Sir Stafford's vision even further than the man who has been dubbed as the "Father of Tourism".
While Sir Stafford knew that tourism would create mass employment, he did not envision ownership of various elements of this industry by black Bahamians.  Mr. Vanderpool Wallace understands the power of tourism to create employment, wealth and considerable opportunities for all Bahamians.
But to leverage these opportunities the Minister understands that the country has to invest in critical infrastructure.  This infrastructure is needed for innovation within and the ongoing diversification of our main industry.
He knows that there are at least three 'Ts' that the country needs to improve:  transportation networks, technology and training inclusive of our schools and retraining programs for adults.
From better utilization of the internet, to making travel through the country more seamless for tourists from booking to actual journey, to better educating ourselves,   our challenges are clear, urgent and possible.
Moreover, the question today is not the sustainability and possibilities within the tourism industry.  The question is whether we have the imagination and will to transform the industry to take greater advantage of these possibilities in a sustainable manner.

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