December 22, 2014
As private and public sector both react to the thaw in relations between the US and Cuba, it is becoming increasingly clear that there are significant chinks in the armour with which The Bahamas has prepared itself for serious competition, both as a tourist destination and with regard to foreign direct investment.
Investment Minister Khaalis Rolle told Guardian Business The Bahamas may not be ready for that competition.
"The immigration department still operates on a manual system," he said.
"That's just one of the realities that we face. We're still a very manual society. (Consider) when we launched e-government: e-government for us is being able to download forms from the Internet. You can't pay online."
With respect to Cuba, he said, "We have to look at where we are competitors, but also where we are friends.
"From an investment standpoint I think we have the current advantage, because we do have a stable track record of investment," Rolle said.
"Cuba just recently enacted legislation to attract foreign direct investment, and it's not as robust as ours -- there are still some areas for them to improve on it -- but we still have to be concerned that in the short term there will be interest, and medium to long term, that interest will begin to have an impact on us, and we have to determine how we mitigate that impact, how we minimize it," he said.
The National Assembly in Cuba passed a new foreign investment law in March 2014 aimed at attracting capital through steep tax cuts and promising a climate of investment security. The law went into effect in July.
The law cuts profits tax from 30 to 15 percent and exempts investors from paying it for eight years, while withholding -- apparently -- many of the tax benefits from companies that are 100 percent foreign-owned. Those incentives are reserved for joint ventures with the Cuban state and investments linking foreign and Cuban companies.
Minister for foreign trade and investment Rodrigo Malmierca said on Cuban state television that Cuba needs to attract $2 billion to $2.5 billion in foreign direct investment per year to reach its economic growth target of 7 percent.
Guardian Business understands that the investment law moves forward structural economic reforms under way in Cuba since President Raul Castro took over from his ailing brother Fidel in 2008. One observer pointed out that such a law has been anticipated since 2011, when Cuba enacted a 300-point overhaul of its domestic economy to encourage more private enterprise.
Lamenting the government's ability to plan an economic resurgence, Superwash owner Dionisio D'Aguilar suggested that there was a problem with the government's focus.
"If I were Freeport, I'd (worry), because that's our industrial capital. That's where we're trying to attract a lot more businesses, because of the proximity (to the US), the deep port, the free trade zone, but you got some knuckleheads in (the Department of) Immigration that make it unattractive," he said.
D'Aguilar complained that -- in his view -- the country's resources are going to "rounding up Haitians and sending them back home," when the focus should be on putting resources into expediting applications for businesses.
"Our economy has been faltering, has been stagnant since 2008. We're in the sixth year of this... this bumbling along... we continue to slip on the ease of doing business, and we're directing resources into locking up Haitians? I mean, really?"
D'Aguilar said he was concerned about the impression given by the new immigration policy, which he said gave the impression that The Bahamas is an unfriendly place for business.
"So we gotta watch it," he said.
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