Capital investments account for at least 10 percent of the country's gross domestic product (GDP), and therefore, this area of the economy needs to be stimulated, according to former finance minister and Central Bank governor James Smith.
Smith credited the multibillion-dollar Baha Mar project that's currently underway on Cable Beach as a reason why The Bahamas has been able to maintain its level of capital investment, despite experiencing a decline following the global recession.
Smith admitted that type of investment has slowed down considerably, "However, the Baha Mar project, which is the biggest project that we have ever seen, has the ability to at least keep the capital investment part of the GDP up and I would imagine there will be a build-up period over the next three to four years as a result," he noted.
He revealed to Guardian Business that the Baha Mar development should give The Bahamas time to catch up, stabilize the economy and allow for normal growth to reoccur.
"It's very timely and things seem to be progressing quite well," Smith said.
He continued, "In The Bahamas, most of the foreign capital investment usually comes from the United States and that has to do with the construction of second homes and multi-family dwellings. Since the recession came along, globally there has been a slowdown in that area and we won't see much difference within the next two to three years."
In the meantime, Smith is suggesting that the country explore areas such as tax reform to stimulate capital investment.
Winston Rolle, chairman of the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), also told Guardian Business that there has seen a decrease in foreign direct investment (FDI) due to the state of the world's economy.
"If you take a look at whenever there is significant growth in our GDP, it is usually tied to foreign direct investment (FDI)," Rolle added.
"FDI is new money that's invested into the country either in construction projects, new job opportunities, training, etc., so obviously with the world economy being the way that it has been in the last three years, that has limited foreign direct investment."
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