Our financial services sector is believed to be the number two industry in The Bahamas after tourism, accounting officially for 15 percent of our gross domestic product (GDP).
In recent times the sector has come under significant pressure due in part to the global financial meltdown, the high debt-to-GDP ratio in many countries and the need for resources to fund social safety nets promised many years ago as populations age.
Just recently the Department of Statistics released its newest survey of the economy. While it was a commendable effort, it fell short in analysis as it relates to the various sectors of the economy - i.e., tourism, financial, construction, etc. Having said that, and based on our internal analysis, we are of the opinion that our financial sector has contracted by as much as seven percent over the last three years.
This is of great concern to us because it has broader social implications for policymakers, regulators and the economy at large. Overall, the department's statistics confirm our internal forecast and in some instances understate what we believe to be the true unemployment rate in many quarters.
The Bahamas cannot afford to sit back and wait for the international markets to turn around and hope that we continue to be the beneficiary of global economic advancement. Even if we are the beneficiary of a global economic turn around, which we coincidently don't expect for another three years, our economy is different today and will be different in three years and as such we must chart our own course in this new global environment. We should anticipate and plan accordingly.
There have been attempts to promote the financial services sector with a number of pieces of financial legislation enacted in the last few years. In our opinion it is not enough. The rules of engagement have changed and now require participants other than the government to act. We need the private sector to lead the charge with the support and blessing of the government. If this does not happen we are afraid we will continue to see a deterioration of the financial sector in the foreseeable future.
We believe the Bahamas Financial Services Board (BFSB) in recent times appears to have a real handle on what's going on in the financial services sector with the list of new initiatives and committees enacted with new faces, which we may add bring a new sense of commitment and focus. From the outset, the BFSB was structured with term limits to ensure that new faces are brought to the forefront and given a chance to contribute. The BFSB by itself, however, cannot move the industry forward.
We opined many years ago that the financial services sector can contribute much more (in terms of its contribution to GDP) and we still maintain this position notwithstanding the recent attack on our jurisdiction and the enactment of many new pieces of financial legislation.
What is required is a road map designed and developed with the government, private sector and the regulatory regime which speaks to what 'Financial Services Sector', subsidiary of Bahamas Inc., will look like in 10 years. What resources will be required to facilitate this? What macro-economic and fiscal policies, if any, would have to be realigned to support the plan? We believe that once a non-partisan long-term flexible business plan is created for the sector and the necessary funding allocated, with buy-in by regulators and the private sector, we can re-position our financial services sector for long-term growth into the 21st century.
One of the sad commentaries on our system we believe is that we only seem to have confidence in a few individuals. You see the same people on all the advisory boards. This makes it questionable whether there is a natural flow of new ideas and vision. It is imperative that we tap in to the best talent we can find irrespective of their social, political or economic standing in our community.
There are too many examples where advisory boards consist of fine Bahamian citizens, but who unfortunately lack the ability to add value to the specific area of the board's mandate. We need a good cross section of both local and international persons on our most critical advisory boards that have the requisite skills and experience to add value. It is time for us to make the bold decisions which will enable us to position The Bahamas' financial services sector as a credible and growing part of our economy.
As we approach an election perhaps the leaders will take note and design the necessary team of skill sets from among the brightest Bahamians.

o CFAL is a sister company of The Nassau Guardian under the AF Holdings Ltd. umbrella. CFAL provides investment management, research, brokerage and pension services. For comments, please contact CFAL at: column@cfal.com.

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