August 08, 2012
Bahamians are regularly bombarded with political speeches on the state of hopelessness in the country. They often quote our embarrassing unemployment rates or our unimpressive economic growth prospects. Of course, they blame the 'other' party for the country's problems and typically the debate ends there. Solutions to our problems often tinker around the edges - short-term bandages on wounds that have been spewing blood for decades.
We believe the strongest and most sustainable economies are built from the ground up, where the desires, problems and opinions of stakeholders at all levels are taken into account (See 'Collaborate, Research, Invest' July 18, 2012). We also believe that robust economic growth is often the result of proactive economic planning by government and the private sector that targets areas for investment and develop the institutional/ policy environment to aid in their success.
In order for politicians to properly address the nation's economic problems and to plan for the future, it is important to properly understand the problems from the people who are directly dealing with them. With this in mind, we adopted an Executive Opinion Survey created by the noted World Economics Forum to get an understanding of the main challenges facing industries outside of tourism in the country.
We contacted eight business leaders in five private sectors -- food distribution, waste management, financial services (40 percent of respondents), oil and healthcare and asked them to rank the top five most significant barriers to their businesses from a list of 15.
The graph illustrates the results of this survey. The five most commonly listed barriers appear on the left ranked by degree of importance to the respondents. Three of the top five barriers are directly related to government policy and underscore an important fact - government policy and/or lack thereof is standing in the way of economic progress in The Bahamas.
Serious need for education reform
'Poorly educated workforce' was chosen as the most significant single barrier to doing business in The Bahamas. If one were to take the education system headed by the Ministry of Education as a business, one could suggest that its 'products' - the students - are subpar and ill equipped. Maintaining a failing education system is not an option for an economy seeking to improve its global competitiveness. A non-political and multinational body of education and policy experts should be used to identify the major issues in the system and given the power to implement binding reforms to the Ministry of Education.
P. Sahlberg of Finland studied the various forms of education reform that have led to greater economic competitiveness internationally and his findings provide some useful insight for The Bahamas. The study concluded that collaboration across schools instead of competition between schools fosters a professional culture for teachers that allows for best practices to be diffused between them. Moreover, the best school systems emphasize risk taking and 'fear-free learning' where students are encouraged instead of punished for trying new ideas and new ways of thinking.
Corruption stifles growth
While only two respondents listed corruption in their top five, those affected had significant experiences with corruption. We live in a small country where many unapologetically proclaim that, "it's who ya know, not what ya know". Corruption may also take the form of bribes and governmental/extra-governmental fraud. The implications are very serious. Young, bright talent will be unwilling to deal with corruption and as witnessed in Russia recently, they will leave for the developed markets where their qualifications are respected and rewarded. Furthermore, horror stories of fraud and nepotism catch the eye of international investors who are weary of putting their money in a potentially corrupt economy.
These costs of corruption are too high to ignore. Aggressive legislative protection for whistle blowers is needed to root out corrupt officials with the power to victimize others. Also, full financial transparency at all levels of government; from campaign finance to the distribution of government contracts is one step toward engendering integrity in the economy.
In Sweden, in an attempt to eradicate governmental corruption, the government allowed the mass media and general public access to official government records except those kept secret for national and individual security purposes. The country holds public scrutiny of government as a pillar of transparency.
"By increasing uncertainty about the future, [political instability] may lead to less efficient resource allocation. Additionally, it may reduce research and development efforts by firms and governments, leading to slower
technological progress," the International Monetary Fund said in 2011.
Half of the respondents listed 'political instability' among their most significant barriers to doing business. Indeed, many of the respondents commented that business developments are often put on hold during the 'silly season' before an election when there is great uncertainty in the economy. This is also very problematic for investors who like to know what the long-term policy environment is in order to plan their own business activities. Apart from a national economic plan, a law regulating the handling of previous government contracts and agreements is needed to assure some level of consistency between governments.
Economic planning to alleviate barriers
Our current model of economic growth is haphazard and spontaneous; it changes substantially every time a new government is in power and is exceedingly disjointed, with different sectors completely out of sync with others. We believe that medium- to long-term multi-partisan economic planning, grounded in comprehensive research will certainly boost investor confidence, whether locally or not. This is due in part to the sense of surety economic agents feel when they know what to expect.
An economic plan can also be used to address the major barriers to doing business identified by business leaders. In terms of political inconsistency hurting business development, a long-term economic plan with widespread political and industrial support can reduce the degree of uncertainty between elections since all parties will agree at least in part, to the goals of the plan. A plan can help government and future governments to spell out their policy intentions and thus reduce information gaps for business leaders.
An economic plan can be instrumental to education reform as well. Once a plan is written and identifies industries to be pursued or strengthened, the education system could be improved and changed with these goals in mind. As a result, schools will produce students of greater quality and character, compatible with those economic prospects.
Many of our long-term economic problems require long-term solutions and thus, long-term economic planning. Let us come together as a nation, bring our knowledge and resources to the table, research specific opportunities for economic diversification and expansion and plan for/ invest in our future.
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