Current Economic Position and Prospects of the Bahamas

ReportNo. 390a-BM CurrentEconomic Position and Prospectsof

Public Disclosure Authorized the Bahamas

June3, 1974 Latin America and the CaribbeanRegional Office

Notfor PublicUse Public Disclosure Authorized Public Disclosure Authorized

Documentof the InternationalBank for Reconstructionand Development InternationalDevelopment Association Public Disclosure Authorized

Thisreport was preparedfor official use only by the BankGroup. It may not be published,quoted or cited without BankGroup authorization. The BankGroup does not accept responsibilityfor the accuracyor completenessof the report. CURRENCYEQUIVALENT

Currency Unit = Bahamian dollar

Since February 1973

B$1.00 = US$1.00

Between December 1971 - February 1973 US$1.00 B$0.97

B$1.00 US$1.03

Prior to December 1971

B$1.00 = US$1.00 This is a report of the economic mission which visited the Bahamas from October 15 to November 3, 1973. The mission consisted of Mr. Eduardo R. Conesa (Economist) and Miss K. M. Vij.yalakshmi (Research Assistant). While in the field, the mission cooperated with a con- current DIF mission.

TA)'A- &31 iTENTS

MAP

COUNTRY DATA

TABLES IN TEXT

SUMMARY ANrbiCONCtU,-:ION. .@S ...... i

I. GENERALBACKGROUNJD 1

A. Geographical . . . e . .* . . . . . B. Historicai...... 2

II. ECONOMIC STRUCTURE AND DEVLi>OPa'NT CONSTRAINTS 6

A. Growth Perfornance ba the sixties ...... 6 B. Growth Performance in the seventies . . . . . 8 C. High GNP per Capita ...... 12 D. Economic Structure and the Predominance of Tourism ...... 13 E. Recent Balance of Payments Performance...... 15 F. Recent Investment and Saving Performance ...... 21 G. The Manpower Constraint ...... 26 H. Income kistribution...... 30

III. SECTURAL PROSPECTS ANDISSUES 34

A. Agricultural Development and Eff-4 ciency ...... 34 B. Industrial Development and Incentives . . . . 35 C. Financial Services ...... 36 De Tourism ...... 39 E. Water Supply and Sewerage ...... 51 F. Electricity,Telecommunications and Transportation ...... ,55 G. Educational Problems and Policies ...... 56

IV. DEVELOPME STRATEGY AND PUBLIC INVESTMENT PROGRAM 60

A. Country Objectives ...... 60 B. Development Strategy ...... 61 C. Overall Investment Requirements . . . . * . . 63 D. The Public Investment Program ...... 63 TkBLE OF CONTENTS (Contd.)

Page No.

V. FINANCING OF DEVELOPMENT 67

A. Public Sector Financing ...... 68 B. Fiscal Prospect and Issues ...... 73 C. Private Sector Flnanc: ng...... 77 D. MonetaryNanagem3nt ...... 79

--I. BALANCEOF PAYnIENTSPROSPECTS Ai;Z EXTERNAL DEBT 83

A. Balance of Payments Prospects ...... 83 B. External Debt ...... 85

APPENDIX A - The National Accounts Estirumtes ...... 86

APPENDIX B - External Capital Requirements . . . . . 88

STATISTICAL APPENDIX ...... 94 TABLES IN TEXT

Page No. Table 1: Land and Population by Island - 1970 . . * * * . * * 2 Table 2: Expenditure on Gross Domestic Product, 1969-1972 * * * * * * 10 Table 3: GNP Estimates, 1970, Benchmark Year * * * * * ...... 12 Table 4: Economic Structure1970 . . . ** ...... * * * . . . 14 Table 5: The Resource Balance as % of GDP * * * . * . * * *. . 16 Table 6: Balance of Payments - Current Account. * . . . . * * * * * * 17 Table 7: Merchandise Exports FOB Excluding Oil- * * *...... * 18 Table 8: Merchandise Imports CIF, Excluding Oil * * * * . . . . 19 Table 9s Direction of Trade Excluding Oil under Processing Agreement . * . * . * . . . .* 9 920 Table 10: Balance of Payments - Capital Account * * . . * I 21 Table 11: The Investment Effort; GDI as percent of GDP * * * * * * 22 Table 12: The Composition and Evolution of Investment * * 22 Table 13: Working permits and Investments . *. *. . * * 25 Table 14: The Savings Effort - Savings as percent of GDP . . . . . 25 Table 15: The Financing of Investments ...... 26 Table 16: Population Increase ...... 26 Table 17: Percentage Distribution of Employees by Area and Nationality, 1968...... 27 Table 18: Population, Labor Force, Sex and Participation inl 1970 *- - - - 0.------0...... - 28 Table 19: Actual Employment by Type of Occupation and Sex ** * * 29 Table 20: Selected Wages Rates in Bahamas 1973 and Comparison - with other Caribbean countries as percent of Bahamas 29 Table 21: Per Capita Disposable Income per Island- * * * * *. . 32 Table 22: Expenditure of a Small Shell Bank in Nassau ...... 37 Table 23: Visitor's Points of Residence (percent)...... * * . 40 Table 24: Bahamas Air Fares in Comparison with some Caribbean Tourist Competitor's Countrie;s ...... 40 Table 25: Tourist Arrivals 1969-73 ...... 42 Table 26: Tourist Expenditure Pattern 1972 ...... * * . . 44 Table 27: Tourist Expenditures 1969-1972 ...... 46 Table 28: Tourist Accommodations in the Bahamas and other Caribbean Countries, 1972 ...... 46 Table 29: Hotel Rooms Available ...... a ...... * . . . 47 Table 30: % Hotel Room Occupancy, 1972 . .*...... 49 Table 31; Price Competitiveness of Bahamas in Comparison with other Tourist Areas - 1972 ...... 49 Table 32: Water Authority Revenue Statement 1973 *. .*...... 53 Table 33: Government Expenditure on Education ...... 56 Table 34: Public Investments 1967-73 ...... oLh Table 35: Public Investment as percent of GDP, GDI, Government Revenue and Gross Public Savings...... 65 Table 36: Public Investment Program - (B$O00). . . 0 0 0. 66 Table 37: Analysis of Public Sector Finances 1969-73 . *. . *. . . . * 67 Table 38: Different Measures of the Tax Effort 1972 . . M . * * * * 69 Table 39: Tax Revenue 1969-73 - * * * * * * * * 69 Table 40: Commercial Bank Credit and Liabilities to the Private S etoo r 79 Page No.

Table 41: Compositionof the Money Supply 1972 ...... 80 Table 42: Selected Variables Related with Inflation ...... 80 Table 43: Suwmary of the Balance :)fPayments Excluding Oil under Proceusing ;1greement...... 83 Table 44: Selected Indicato:s of -;reditworthiness* . * * * * * * * . . 85 Table 45: Exter-ial Capital iequirem3ents High Growth Path ...... 91 Table 46: External Capital Requirements Low Growth Path * .* * * . . * . 93 SOURCESOF TABLES IN THE TEXT

Table 1 Department of Statistics. Tables 2 and 3 IBRD estimates. Table 4 IBRD and Department of Statistics. Tables 5,6,7,8,9, and 10 IMF, Department of Statistics, Bahamas Monetary Atuthority and IBRD. Tables 11 and 12 IBRD estimates. Table 13 Immigration Service (Cabinet Office) and IBRD. Tables 14 and 15 IBRD estimates. Table 16 Department of Statistics, Immigration Service (Cabinet Office) and IBRD estimates. Table 17 Clapp and Mayne Report 1969. Tables 18 and 19 Department of Statistics. Tables 20 and 21 Department of Statistics, Ministry of Tourism and IBRD. Table 22 Bahamas Monetary Authority. Table 23 Ministry of Tourism. Tables 24 and 25 Ministry of Tourism and IBRD. Tables 26 and 27 Ministry of Tourism. Table 28 Ministry of Tourism and IBRD. Tables 29 and 30 Ministry of Tourism. Table 31 Dayton and Keenan Report, August 1973. Table 32 Ministry of Public Works. Table 33 Ministry of Finance (Treasury Accounts). Table 34 Ministry of Finance (Treasury Accounts) and IBRD; Table 35 IBRD estimates. Table 36 Ministry of Finance and IBRD. Table 37 Ministry of Finance, IMF and IBRD. Table 38 IBRD estimates. Table 39 Ministry of Finance and IMF. Tables 40 and 41 Bahamas Monetary Authority and IHF. Table 42 Bahamas Monetary Authority, Department of Statistics and C.E.A. of USA. Tables 43 and 44 IBRD estimates.

GLOSSARY

GDP : Gross Domestic Product GNP : Gross National Product GDI : Gross Domestic Investment GDS * Gross Domestic Savings MPS : Marginal Propensity to Save MPM : Marginal Propensity to Import MNSR: Marginal National Savings Ratio

IBRD 10820 104 78' 76 INSET i JANUARY1974 GRAND BAHAMA ISLAND WalkersCay N rth

\ , . $,,Senttbrnent~~~V,m Mq.Leons

GRAND BAHAMAI. BgelicanPti9 (Se nstI . g R 7 Norman o015 JO~~~~~~~~~~~~~~~~~~~~14W 20P FREEPORT Castle REEA- NOUST'RIALCOMPLE OLVhHarbour REPRTERMINAL a IC 20 30 40 FreeportTERMINAt IGREA REEPORTINDUSTPIAL COMPLEX o 'sonCityCit U.S. A. -~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~ ~USAA TANrtic 2~~~~~~6~~~~~Gordo Coy*26- f oult THEBAHAMAS olIei theWaUll Aef e CoNI OCEAN 4 C' ~~~~~~BIMINI$ t~? .~RHATpO r7 Spanah*I COY 4AQERTORICO NTHEACurre A II lVl C(ENC0 AMIC DOMI ICAN AARAGONITE Th. Iice ' anwSea,Z,L

Iiols Trpum o ELEUTfiERA (5O-EZUEA

iLp' J' W PROVIDENCEI Portsmouth

dosTown 4hursTownhr se ° e n Of NormanCmoaCq I' 'z~~~;,No o B )~~~~~CATf. 5o ANDROS I The igh

-24-_

Coy Sal Burnt Rum GREA Grundc Ca aE,, %,# 1 ~~~~~~~~~~~~~Hi< ~~Richmondf RWRCay TO '08' ;\LONG f. SO0 78 DZo*dmomsCoy 00

INSET 2 SALT nT NEW PROVIDENCEISLAND ,vsPiwn SouthPt 0 COKED f.

N SAU Sa dilanduVllage ~~~~~~~~MAYAGUANAI.

-22'2-

25 Carmichael 0 40 so 120 14 KILOMETERS Coral Harr -0 2G20 wcc40 aref;60 C0 1o0

0 2 4 6 t MitEs GREAT INAGAI Kilometers SALT O 1 0*2 a 4 5 ~~~~~~~~CUBACUB Matthewownote 77'10' Milos 76' 74' THE BAH/ MA ISLANDS

V. Major potentialagricultural lands International airports * Resort developmentsin the family islands A Industrial and rniningdevelopments ® Major airfields Main roads * Minor airfields

Page 1 of 2 pages

COUNTRYDATA - The Bahamas

AREA 2 POPULATION DENSITY IT,942 km 0.175 million (mid-1972) 12.6 per km2 Rate of Growth: 2.0 (from 1970to 1972) 260.0 per km2 of arable land

POPULATION CHARACTERISTICS (1971) HEALTH (1972) Crude Birth Rate (per 1,000) 28.8 Population per physician 1,250 Crude Death Rate (per 1,000) 6.3 Population per hospital bed 197 Infant Mortality (per 1,000 live births) 37.4

INCOME DISTRIBUTION (1970) DISTRIBUTION OF LAND OWNERSHIP (year) % of pefsonal income, highest quintile 52.0 % owned by top 10% of owners lowest quintile 2.9 % owned by smallest 10% of owners

ACCESS TO PIPED WATER (1972) ACCESS TO ELECTRICITY (year) % of population - urban 80 % of population - urban 90 - rural *-- rural

NUTRITION (1973) EDUCATION (1970) Calorie intake as % of requirements .. Adult literacy rate % 93 Per capita protein intake grams .. Primary school enrollment % 100.0

GNP PER CAPITA in 1970: US $ 2,372

GROSS NATIONAL PRODUCr IN 1970 ANNUALRATE OF GROWTH(%. constant prices)

US $ Mln. % 1960-65 1965-69 1970-1972

GNP at Market Prices 400.5 100.0 .. 12.0 -4.0 Gross Domestic Investment 133.2 33.2 16.0 -35.0 Gross National Saving 44.4 11.1 .. 14.3 7.3 Current Account Balance -97.4 -24.3 Exports of Goods, NFS 2/ 320.0 79.9 . 25.5 11.9 Imports of Goods, NFS 2/ 345.8 86.3 .. 28.5 -13.0

OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1970

Value Added Labor Force V. A. Per Worker US Mln. % Thousand % US $ 7.

Agriculture 14.1 3.6 4.8 7.7 2,943.0 42.5 Industry 35.1 8.9 3.8 6.3 9,178.9 145.4 Services 285.5 72.5 45.2 72.5 6,316.1 100.0 Other 59.5 15.4 8.6 1... 6,918.6 109.6 Total/Average 393.7 100.0 62.4 100.0 6,312.9 100.0

GOVER'NMENTFINANCE General Government Central Government % of GDP (Mln.) % of GEP 1972 1972 1969-71 1972 1972 1969-7

Current Receipts 120.8 20.7 21.0 94.8 16.3 16.8 Current Expenditure 111.5 19.1 19.2 92.1 15.8 15.8 Current Surplus 9- 1.6 2.7 0.5 1.0 Capital Expenditures 20.0 3.4 5.1 10.4 1.8 3.4 External Assistance (net) ------

1/ Excluding the expatriate community GNP per capita would be US$1700. Adjusting further for the cost of living, GNP per capita would be about US$1100.

2/ Excluding oil under processing agreement.

not available not applicable Page 2 of 2 pages

COUNTRY DATA -

MONEY, CREDIT and PRICES 1968 1969 1970 1971 1972 1973 (Million B $ outstanding end period)

Money and Quasi Money 265.2 292.1 285.7 271.7 263.5 268.2 Bank Credit to Public Sector 11.8 17.6 31.9 32.6 38.3 Bank Credit to Private Sector 124.9 153.1 127.1 134.9 132.8

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP 64.6 59.9 61.6 52.2 45.2 General Price Index (1970 = 100) 86.4 94.2 100.0 104.6 111.7 122.1 Annual percentage changes in: General Price Index .. 8.9 6.1 4.6 6.8 9. Bank credit to Public Sector .. 49.1 72.7 0.3 12.8 Bank credit to Private Sector .. 22.5 -17.0 6.1 -1.6

BALANCE OF PAYMENTS 1/ MERCHANDISE EXPORTS (AVERAGE 1970-72)

1970 1971 1972 US $ Mln % (Millions US $) Cement 13.4 6.2 Exports of Goods, NFS 320.0 378.2 461.7 Hormones 16.4 7.6 Imports of Goods, NFS 345.8 284.4 303.0 Petroleum products 162.6 74.9 Resource B&l.(deficit = -) -25.8 93.8 158.7 Crude Salt 3.2 1.5 Rum 6.2 2.8 Interest Payments (net) -19.4 -36.3 -53.1 All other commodities 15.3 7.0 Workers' Remittances (net) -24.0 -24.6 -25.7 Total 217.1T 0 Other Factor Payments (net) -19.6 -44.4 -94.4 Net Transfers 0.0 0.0 0.9 EXTERNAL DEBT, DECEMBER 31, 1973 Balance on Current Account -88.8 -11.5 -13.6 1/ JS $ Min Direct Foreign Investment- 123.0 113.0 89.4 Net MLT Borrowing Public Debt, incl. guaranteed 68.2 Disbursements 8.1 9.8 7.4 Non-Guaranteed Private Debt Amortization -4.2 -5.4 -5.1 Total outstanding & Disbursed 68.2 Subtotal 3.9 4.4 2.3 2/ Capital Grants - - - DEBT SERVICE RATIO for 1973- Other Capital (net) - - Other items n.e.i -43.3 100._4 -74.7 Increase in Reserves (+) -5.2 +5.5 +3.4 Public Debt, incl. guaranteed ".3 Non-Guaranteed Private Debt External Reserves (end year) 23.7 29.2 32.6 Total outstanding & Disbursed 77T

RATE OF EXCHANGE IBRD/IDA LENDING, (Dec. 1973) (Million US $)

Through Nov.1971 IBRD IDA US $ 1.00 = B $1 B $ 1.00 = US $1 Outstanding & Disbursed Undisbursed Since Dec. 1971-Jan.1973 Outstanding incl. Undisbursed - - US $ 1.00 = B $ 0.97 B $ 1.00 = US $ 1.03 Since Feb. 1973 US $ 1.00 = B $ 1

1/ This estimate excludes oil under processing agreement. 2/ Ratio of Debt Service to Exports of Goods and Non-Factor Services excluding oil under processing agreement.

not available

not applicable SUNTXARY.AD O12C-'TSI0N5

i. The Bahamas is an archipelago consistingof 29 major islands with a total land area of over 5n,3&C suare xiiles. The population of about 175,000 is largely concentr& ed on fivc of the islands, including New Providence which has some 60% of the total population and only 1.5% of the country's land. ii. The islands have a very limited resource base. They lie on a submarine shelf and tne land is for the most part covered with a very thin layer of soil. There are neither rivers nor fresh-water lakes on the islands, and water is obtained mostly by tapping the underground reservoirs formed by seepage of rain water through the sedimentarylimestone crust of the land surface. Only about 260 square miles, equivalent to 5% of the land, are suitable for commercial agriculture. Fishing is traditionally done along the coastal waters, notable for their wide variety of species rather than for their high productivity. However, neither the coastal waters nor the oceanic depths are being exploited nearly to their potential. Besides salt, which is recovered from the sea, the only other mineral found :Lathe Bahamas is aragonite, an extremely pure calcium carbonate san1d used in the manufacture of cement, chemical lime, steel, glass, pulp paper, and agricultural fertilizers. Several companies holding large concessions on land and offshore areas have been doing exploratory petroleum surveys, but no oil has so far been found. iii. The major national assets of the Bahamas are her extremely long coastal lines of beautiful white sand beaches, her warm clear waters with brilliant shades of turquoise and blue, and her nearly ideal sunny weather. The seasons are mild because the warm waters from the gulf stream temper the winters and the cool sea breezes provide relief from eventhe warmest sumer day. The great number of islands and cays make possible a diversity lacking in other tourist resorts. iv. Based upon these natural assets the tourism industry developed in the sixties. Tourism is now the dominant sector of the economy accounting directly or indirectly for 55% of GDP and 77% of GNP. The Bahamas offer to tourists a vast range of choice to suit different tastes in terms of privacy, luxury and activities like fishing, scuba diving, snorkeling, golf, gambling, and boating. In addition, the Bahamas has an eventful history that is a tourist attraction in itself. More importantly, the Bahamas is the closest caribbean country to the United States, the main tourist market. Because of this proximity more than 83% of the tourists have always come from the United States. Thus, the growth of tourist arrivals in the period 1964-69 is correlatedwith the high growth rate 6f the U.S. economy and the decline of 1970 with the corresponding decline - ii -

in the growth of the U.S. economy. The stagnation of the tourist sector in subsequent years is to a large extent the result of increasingly in- different services combined with management difficulties and high labor costs. In spite of these problems, tourism remains the major avenue for growth in the Bahamas. A large tourism potential, which can provide the basis for renewed economic and soc:Lal development, exists especially in the islands other than New Providence. v. By exploiting her comparative advantage in tourism, the Bahamas was able to achieve, by 1970, a GNP per capita of about $2,350, among the highest in the Western Hemisphere. However, this estimate is not particularly meaningful in characterizingthe economy of the Bahamas. Some 15% of the population is foreign born, with a large number of expatriates occupying top management positions in banking, insurance, real estate and tourism businesses. Foreigners as a whole xeceiveabout 38% of the country's personal disposable income, the balance of 62% going to the Bahamian population. The per capita GNP for the latter group is estimated at US$1,700. Even this figure is somewhat misleading for inter-country welfare compari- sons, considering that the price of essential consumer goods is 5C% higher in Nassau than in Washington, D.C. A tax system heavily dependent on import duties accounts for the major part of this price differential,and transport costs and high markups may well account for the rest. On this basis, a figure of about US$1,100 would probably reflect more accurately the per capita GNP forthe Bahamas in comparisonwith other countries. vi. All throughout the Nineteen Sixties, GDP of the Bahamas grew at an annual rate of about 12%. This growth was financed by large capital inflows from abroad attracted by promotional activity undertaken by the Government jointly with private groups. This growth process stopped in 1970 and was followed by quite a different pattern. After the boom years of the Sixties, the country stopped its growth pattern in order to take stock of its growth strategy and objectives. Since then, Bahamianization of the economy has been occupying first priority. Economic growth, as measured by the standard economic indicators,hasnot been encouraging. GDP has grown at a rate barely above the rate of inflation and GNP has actually declined in real terms. Thus, in the Seventies the Bahamian economy entered a period of transition. There are some conflicts among objectives and between objectives and policy tools. A major task confront- ing the planning process underway is to achieve consistency and balance between the different economic and political factors at play. vii. The choice of an appropriate developmentstrategy is not easy. Tourism remains the key to growth although capital intensive industry and agriculture have some potential. Realization of this potential will continue to have to rely on foreign investment, if a relatively high growth rate is to be achieved. Moreover, given the scarcity of manpower, the economy would have to change its present immigrationpolicies. If this were to be permitted, and private foreign investmentwere to be allowed again to enter into the Bahamas on a large scale (well in excess of - iii -

US$100 million annually) the country might achieve a growth rate of, say, 5 o/o per year. As another alternative, the Bahamas could choose a more modest growth rate of say 3 o/o, one point above the natural growth rate of the population, without the need of much direct foreign investment and with more restrictive immigration policies. In either case, a greater role of government involvement in the economy seems inevitable in order to achieve economic growth. Such growth would call for increases in government investments, which, in turn would require direct taxation, since most conceivable sources of indirect taxation already seem fully exploited.

viii. The governmentts declared policy at the present time is to attract foreign investment through a tax haven policy. The White Paper of October 1972 affirms that the government will maintain this. At present, there are no income taxes, corporate taxation, or inheritancetaxes. The only direct taxation is a very moderate property tax based on the assessed value of improved property in New Providence. There is no tax on undevelopedland. At the same time, the government is adopting a restrictive policy on immigration of foreign personnel so as to expand the opportunities for qualified Bahamians. This policy reduces the availability of qualified expatriates, creates uncertainty in the foreign business community, and conflicts with the tax haven policy of attracting foreign investment. This is perhaps a major inconsis- tency to be resolved in the planning process under way. Foreign inmrestment might come to the Bahamas again despite somewhat restrictiveimmigration policies if the system of working permits were, at least, expeditiousand less capricious. The simplest way to reduce bureaucratic delays, discretionary powers, uncertainties, and the like, and still maintain the Bahamianiza- tion objective, would be to charge a sizable fee on working permits, say, graduated between $t,0oo and $4,000. This would provide additional revenues to the government and give an edge to the local people for employment while assuring foreign investors of continued availability of managerial and technical personnel on payment of the requisite fees. Instead of using taxation to resolve the inconsistencydescribed in this paragraph, the government is trying a different approach. This approach consists in requiring enterprises to present manpower projections where Bahamians will gradually replace expatriates. When approved by the government the projections become equivalent to contracts that both parties, the government and the enterprises, wMll have to carry out. The approach, although an improvementover previous practices, is still second best to taxation.

ix. Public finances were weak from 1969 up to 1972, although a modest current account surplus in the consolidatedpublic sector prevailed each year. This weakness resulted from a sluggish growth in revenues on the one hand and a rapid growth of government consumption on the other. Rather than curtail consumption, the government both reduced investment and resorted to increasing borrowing for its financing. Public finances, however, registered a marked improvement in 1973, stemming from a substantial increase in revenues and a stretching out of the short-term debt. The revenue improvement came from increased fees for motorcar licences, increased import duties on cars and liquor and on a number of other commodities, and an increase in the stamp duty on land transfers. But the fiscal prospects for 1974 remain somewhat uncertain. The government forecasts a modest current account surplus of 5 to 7 B$million to finance an equally modest public investment program. This surplus, however, will only materialize if increases in government expenditures will be held down below recent rates of growth. - iv -

Unlessthis m2terializes,thesame financialpattern of 69-72 will reappear from 1974 onwardsand will thwartefforts to implementthe necessarypublic sectorinvestments. The authoritiesenvisage a publicinvestment program of some B$82 millionsfor the period of 1974-77. The financingof this programis predicatedon achievinga surpluson currentaccount to coverroughly 40O,Aith the rest comingfrom externalborrowing. The realizationof this objectivewill requiremeasuresto raise public sectorsavings of about -32 millionduring 1974-77. The remainingB$50 millionwill have to be obtained from externalsources. x. There is a case for increased taxation in the Bahamas. The tax effort of Bahamian residents hardly reaches 10% of GDP. It is doubtful that the provision of a tax haven has been, for instance, the major factor for attracting industries to the country. Proximity to the United States, deep- water ports, the commercial and social talent of business promoters and political stability have probably been more important factors. Since capitalexporting countries, in most cases,tax the repatriatedprofits obtainedin the Bahamas,tax concessionsprovided by the Bahamasprobably do not benefit the private companies and are mostly gifts to the treasuries of the capital exporting countries. It could be therefore argued that if the other favorable factors can be maintained, the Bahamas could proceed to increase its revenues by corporateincome taxation. However,given the differenttaxation policies followed by the several capital exporting countries with respect to their subsidiariesabroad, a case by case revieiw might be necessary.

X . The potential for agricultural development in the Bahamas is limited. The best agricultural lands are covered by unexploited pine forests. Therefore,the developmentof import substitutionagriculture to feed the loeal populationand the touristswill requireconsiderable land preparation work. Since the rainfall is low, irrigation is indicated. Even the best lands will need a lot of fertilizerand some other chemicals. Since labor is scarceand expensive,mechanization of agricultureis also indicated. On the positiveside, agriculture is frost-free in the Bahamas and there is abundantground water supply for irrigation. The wells do not need to be deeperthan 20 feet in many areas. There is littledoubt that diversi- ficationof the economyis a soundpolicy. But if agriculturalimport substitutionimplies higher prices for foodstuffs,this will harm not only the welfareof Bahamianpeople but also the touristindustry whose prices have to competewith other Caribbeancountries. xii. Industryin the Bahamasis, for the most part, capitalintensive, export-oriented,highly dependent on importedinputs, with a few inter-industrial linkages,foreign-owned, and located in Grand Bahamaisland. Capital intensive industries are suited for the Bahamian economy because labor is scarce and wages are relatively high. Wages in the Bahamas are 5 times higher than in Haiti and 3 times higher than in Jama^.ca. The level of wages and the labor scarcitywill make it almostimoossible for the Bahamasto - v -

compete with other Caribbean countries to attract labor intensive light manufacturing for export to the U.S. market. Also, given the small size of th:e internal markez, industry is bound to be export-oriented, import intensive and rather limited in forward and backward inter-industrial linkages. But capita34.ntensive enclave industries do not add much to net national income. The only way the country could benefit substantially from big industry is through coiporate income taxation as recommended in paragraph x above. xiii. During the past 8 years a significant amount of international financial activity has shifted location from the United States to London, Nassau and other Eurodollar money markets. By the end of 1973 more than 100 branches of U.S. Banks with more than US$15 billion deposits were located in Nassau. To a large extent this booming financial activity in Nassau was connected with the U.S. Government programs instituted in the mid-sixties to reduce the rapid expansion of U.S. capital flows abroad. Although the capital control programs in the U.S. curtailed financial flows abroad, they had the side effect of shifting intermational financial activity away from the United States. As a consequence,U.S. commercial and investment Banks flourished in Nassau where the cost of running a shell bank is low. In addition, since there are practically no interest ceilings on time deposits in Nassau, Eurodollar banks located there are in a better competitiveposition to attract time deposits vis-a-vis banks located in the United States. But the survival of Nassau as a thriving financial center is questionablenow that the United States has announced the termination of many of the restrictive policy measures that were causing it to decline as the most important financial center in the world. xiv. In the social sectors,indicatorspoint to the prevalence of high educational standards with an adult literacy rate of about 93%. Enrollments in primary education in nearly 100% of the population of the respective school age. Enrollments in lower secondary education are above 75%. Con- sistent with the above quantitative indicators, the government spends almost one-quarter of the budget on education. But despite high quantitative indicators the quality of education is still low. Causes of poor quality can be traced back to a high proportion of untrained teachers of poor quality, to the existence of all age schools in the islands other than New Providence, and to the rapid expansion of the system. Persistence of emphasis on quality through teachiertraining should be the first priority. The second would be improving vocational training so as to allow Bahamians to take over smoothly and efficiently medium and top positions in private industry. xv. Regional planning should be the focal point of the development strategy in the Bahamas. Economic development has, so far, remained con- centrited mainly in two islands i.e., New Providence and Grand Bahama. New Frovidence,for instance, with a density of 1300 inhabitants per square mile, is overpopulated. The marginal costs of basic services such as water are rising steeply and pollution problems are becoming extremely serious. On - vi - the other hand, islands with good development potential like Abaco and Andros remain largely undeveloped and underpopulated.

Xvi. The Bahamas had experienced a moderate rate of inflation of about 5.2% annually from 1969 up to 1972. However, in 1973 the same index showed an increase of 9.3%. This higher rate, in turn, has generated wage rises of 15% in the leading hotel workers' collective agreement signed in 1974. To prevent inflation from accelerating the governmentwill have to enforce strong incomes policies which will hold wage increases within tolerable limits and not in *xcess of increases in the cost of living and the increase in the overall labor productivity. xvii. In the balance of payments, the sub-balanceof trade and nonfactor services presents large surpluses of the order of $150 Jillion. But these surpluses are eaten up by factor payments abroad of equivalent amount. The capital account shows a shrinking capital inflow stemming mostlyfrom purchasesof land under long term contractssigned in previous years. But these capital inflows are counteracted by capital flight. Yet, despite profit remittances and capital flight,foreign reservesincreased by US$11 millionin 1973 to US$43 millionwhich covered approximately1 monthsof imports. Thus the balanceof payments'position of the Bahamas has been strong enough to allow profit remittances abroad, cover capital outflows, and still result in increased foreign exchange reserves. This increasein reservesis, however,unlikely to occur again in 1974 becauseof the oil crisis. On the basis of the foreignexchange reservesheld by the MonetaryAuthority, the bankingsystem and the private sector,the Bahamascan weatherthe oil crisiswith no majorproblem, at least during1974. But the increasedoil importbill representsan important leakage of resources out of the Bahamas, and to maintain the presentlevel of economicactivity, compensatory resources will have to come from somewhereelse, or the level of economicactivity will be impaired On the foreignexchange earnings side, the oil crisiscould also have some detrimentaleffects on touristarrivals. However,the governmentis successfullycounteracting them by assuringplenty of oil to charterjets and cruiseships stoppingin the Bahamas. Thuis,despite the oil crisis, tourist arrivals are thusfr holdingup well in 1974. xviii. The public and publicly guaranteed external debt increased fron about US$23 million in 1968 to US$68 million in 1974. The debt service ratio is estimated at 2.9% of exports and nonfactor services and it is projectedto remain in the 3-4 percentrange. However, given the openness of the economy,other indicators may prove to be more significant in assessing the ability to repay external debt of the economy. In this context, the debt service is about 20 percentof gross nationalsavings, and 10 percent of government tax revenue. The external public debt outstanding is about 14 percentof GNP in 1974. This compares with the mean - vii - ratio for a sample of 36 developing countries of 20 percent in 1971-72 and with the mean ratio for nine Caribbean and Central American countries of 15 percent in 1972. Given these ratios and provided adequate action is taken . by the Government to improve public savings, to refrain from short-terA commercial bank borrowing to finance public investment and to maintain conditions conduciveto continuedprivate investment, the Bahamas should be able to servicethe estimatedexternal capital requirements for the publicsector of roughlyUS$50 millionduring 1974-77 (seeparagraph ix).

I. GENERALBACKGROUND

A. Geographical

1. The Bahamas comprise an archipelago of 29 is)ands, 661 cays, and 2,387 rocks extendingfrom Floridaon the northwestto Haiti on the south- east, betweenCuba and the open Atlantic,over a distanceof about750 miles. The surrounding seas are shallow for the most part, but there are three well- defined channels: the Florida channel between the northeast islands and Florida, through which the Gu2f Stream flows; the Providence Channel between New Providence, Andros and Eleuthera on the southern side and Grand Bahama and Great Abaco islands on the northern side, and the old Bahama Channel, between the-archipelago and Cuba. The waters are clear, with brilliant shades of turquoise and blue, and beautiful coral reefs surround Man. of the islands.

2. The weatheris nearlyidea. with warm waters from the Gulf Stream tempering the winter and cool sea breezes providing relief from even the w-armest summer day. The mean temperature is 74 degrees Fahrenheit in winter and 80 degrees in summer. Annual rainfall averages about 5O inches,but is much higherin the northwestislands than in the southeastones. September and Octoberare the rainymonths Dndalso the hurriane season.

3. The country'ssurface is 5,383 squaremiles and, in 1970, its populationwas 168,812. Thereforegdensityis only 31 personsper square mile, one of the lowestin the Caribbeancompared with 443 in Jamaica,521 in Trinidad and Tobago, 1 ,437in Barbados,and 803 in PuertoRico. Moreover, as the following table shows, people are unevenly distributed in the Bahamas. For instance, New Providence Island has 60% of the country's population and only 1 .5% of the area.

1/ The islands other than New Providence are called Fanily Islands. - 2 -

Table 1: LAND AND POPULATION BY ISLAND 1970

Population Area 'Persons 7% S Miles Density

New Providence 101,503 60.1 80 1.5 1,268.7 Grand Bahama 25,859 15.3 530 9.8 48.8 Andros 8,845 5.2 2,300 39.4 3.8 Abaco 6,501 3.8 649 12.0 10.0 Eleuthera 6,247 3.7 198 3.7 31.6 Long Island 3,861 2.3 230 4.3 16.8 Exuma & Cays 3,767 2.2 112 2.1 33.6 Harbour Island & Spanish Wells 3,221 1.9 2 - 1,610.5 Cat Island 2,657 1.6 150 2.8 17.7 Biminis,Cay Sal & Cay Lobos 1,503 0.9 11 - 136.6 Inagua 1,109 0.7 599 11.1 1.9 Acklins Island 936 0.6 192 3.6 4.8 San Salvador & Rum Cay 856 0.5 90 1.7 9.5 Crooked Island 689 0.4 84 1.6 8.2 Mayaguana 581 0.3 110 2.0 5.3 Berry Island 443 0.3 12 - 36.9 Ragged Island 208 0.1 14 - 14.9 Long Cay 26 - 9 - 2.9 Other - - 10 - -

Total 168,812100.0 5,382 100.0 31.4

B. Historical

5. The history of the Bahamas is relevant both in interpreting present economicevents and in attractingtourists. In fact,itis color- ful and exciting enough to be a tourist attraction in itself.

6. On October 12 of 1492, Columbussighted the small Bahamian islandof San Salvador,thus discoveringAmerica. Spain did not have much interestin the Bahamas and concentratedits energyon exploitingthe riches of more profitableterritories such as Mexico and Peru. The Spaniardsfound that the Bahamashad no gold or silver. Even farmingwas consideredunprofit- able becauseof the limestonesubsurface and the lack of lush vegetationfound in other Caribbeanislands. - 3 -

7. The English claimed the Bahamas Islands over a hundred years later. They wanted thLe Bahamas only as a base for operations against the Spaniards. The islands were strategically located because Spanish ships carrying gold and silver from Peru, Bolivia and Mexico stopped in Cuba and then passed through the Bahamas to head for the open sea towards Spain. Thus, the English founded Charlestowne, later called Nassau, as a base for attacking the Spanish ships. But the English governors were unable to establish strong leadership in Nassau, and some of them were personally involved in scandals connected with payoffs from wreckers and pirates. The governor of Cuba accused the inhabitants of Nassau of being "all pirates proven", and,in 1684, two Spanish raids devastated the town. Nassau reorganized, but was destroyed twice again by the Spaniards in 1703 and 1706, reorganizing each time. In the early 1700s, the famous Edward Teach, Blackbeard, one of the most notorlous of the British pirates, carried out his plundering from a base at Nassau. In the seventeen century, the rumors of new Spanish attacks spurred the building of Fort Montagu and Fort Charlotte, as well as the restoration of Fort Nassau, which had been damaged in past attacks. As a result, Nassau was left with some interesting wc,rksof military architecture to be shown as tourist attractions today.

8. During the U.S. independencewars,the Bahamians were mostly British loyalists. When the war ended,manyloyalists from the United States emigrated to the Bahamas with hopes of continuingtheir way of life. Refugees came mostly from the Carolinas. The Ba-hamianpopulation increased by 300% in the five years following the U.S. independenc-wars,reaching 4,000 in 1784 and almost 12,000 in 1789.

9. Before this wave of immigratioRn the peoplehad been about 50% white and 50% black. However, since A. -nt"s from the South often emigrated with their entire households and possess A !S including slaves, people of African descenitformed about 75% of the .,' Ktl Bahamian population in 1789. Yet, despite the numbers, whites dominatcedpolitically. White loyalist immigrants from the United States eventually assumed many important roles in Bahamian life. Many of the names found in Nasspu today among the Bay street merchants can be found on a list of 114 landowners, in a late XVIII century record of land grants given by the King of England.

10. The southern planters from the United States expected to re-establish the plantations they had left behind and began to cultivate cotton on extensive tracts of land in the out islands. The first crops were encouraging; a rich yield seemed to indicate a successfYj. transfer of the cotton economy from the southern states. But the Bahamian soil was rapidly depleted. Moreover, an attack of the chenille bug in 1788 signalled the eventual decline of the cotton crop. with this decline, many large plantations shrank into small subsistence farms. Thus, slaves were no longer needed to tend the fields. The failure of the cotton plantations and the independence of the Spanish colonies in the early XIX century brought stagnation to the Bahamas. - 4 -

*1. In 1861, the American Civil War brought a new age of prosperity to Nassau. President Lincoln declared a blockade of the Southern United states ports. The confederates were dependent on guns and ammunition purchased from England. In turn, southern plantations supplied the English nmil1s with cotton. With the blockade, Nassau became the center of this trade. 1; Streetwas widened,lights and curbstQnes were instilled, warehousesfor shipmentswere builton the north side of the street, and a new dock was planned. The Royal Victoria Hotel was built at the beginningof the war and servedas socialactivities center for blockaderunners, confederate soldiers, southern ladies and newspaper reporters. Real estate values increased as much as three or four times on the Nassau waterfront. In the midst of the excitement and activity, in 1864, a yellow fever epidemic struck. The following year, when the war ende6 the city was experiencing some of the confederacy's devastation. Warehouses,filled during the war,were empty a few months after it ended. On top of that, a hurricane destroyed part of the city. A long period of depressionfollowed. 12. After this depression,a new periodof freneticgrowth developed in the 1920s. This time the upsurgecame as a resultof prohibitionin the United States. The emptywarehouses in Nassauharbor, unused since the United StatesCivil War, were filledagain, but now with liquorrather than with cottonand amunitions. Bootlegging was the latest sea activity in the traditionsof privateering, wreckingand bl*ckade running. During the era of prohibition,land values soared again. Many of the same peoplewho dealt with liquor speculated with land. New mansions were built all through New Providence Island. 13. During the thirties, air travel was instituted between Nassau and Miami. Hotelsbegan to be constructed all along the New Providence coast. This trend continuedin the fortiesand fifties,causing an economic growth of boom proportionsin the sixties.

C. Political

14. The processleading to independenceon July 10, 1973 was gradual and smooth. Before1967,those of Europeandescent, though a minority(15%), managed - to control the country. In 1967,Mr.Pindling, leader of the ProgressiveLiberal Party (PLP),won an electionwith the supportof the peopleof Africandescent (85%) and then was appointedpremier. From 1967 orwards,the majoritygradually took over the top positionsin the country. In 1971 the PLP decidedformally to seek independence.This was only one step in the processof Bahamanizingthe country. In late 1972,newelections took place and the PLP won a solid majorityof 62%. In December1972,an IndependenceConference, held in London,was attendedby representativesof both politicalparties and the BritishForeign Office Authorities. In- dependencewas agreedupon. A new constitutionwas established.Under this latestconstitution, the GovernorGeneral, who is a Bahamian,is appointed -5- by the British Crown to represent it. The Constitution provides for a parliamentary system of government under which the Prime Minister and a Cabinet of not less than eight other Ministers are responsible to the bicameral legislative branch. This branch of government consists of a House o-^Assembly of 38 elected members and a Senate of 16 members appointed bo;the Govrernor General, 9 of them on the advice of the Prime Minister, 4 of them on the advice of the Leader of the Opposition, and 3 on the advice of the Prime Minister, after consultationwith the Leader of the Opposition. The opposition party, called the Free National Movement,is predominantly wnite. The present administration,which emerged from the 1972 general elections, has been led, since January 1967, by the Right Honorable Lynden 0. Pindling. The next elections will be held not later than September of 1977. - 6-

II. ECONOMICSTRUCTRE AMDDEVELOPMENT CONSTRAINTS

A. Growth perforsancein the sixties

15. All through the sixties, the Bahamas experienced a sustained process of economic growth at an annual rate estimated at about 9-12%. / This growth was led by the tourist industry. This industry had been financed by large inflows of foreign capital which, in turn, had been attracted by promotional activLty undertaken by the government in close association with private groups. At the beginning of the sixties, the Bahamas was a major beneficiary of an upsurge of visitors, primarily from the U.S. In mid-late sixties, a well designed, money oiled, advertising campaign consolidated the gains made in the early sixties and made the Bahamas one of the worldbleadingresorts reaching 1,332 thousand visitors in 1969.

The role of foreign investment in the sixties

16. Foreign investment played an ever-whelmingly important role in the country's growth process of the sixties. It is estimated that foreign investments,excluding the financial sector, were well over a billion dollars. The extent of foreign ownership in tourist accommodationsis estimated at 80%. The leading example of foreign investment is the case of the Grand Bahama Port Authority concession.

17. In the fifties, the American financierWallace Groves had reached an agreement with the British colonial authoritieson establishinga port and an Industrial complex in the vicinity of Hawksbill Creek, located in the western part of Grand Bahama, the northernmostisland of all the Bahamas. To implement the agreement, Mr. Groves organized a company called Grand Bahama Port Authority Limited, which undertook, among other obligations, to dredge and construct a deep water harbor and a turning basin at Hawksbill Creek as an aid for factories to be set up there. For its part, the government made available 138,000 acres of crown land at a price of L1 per acre and, moreover, granted three concessions,still in force _,to the Port 'Aldthrity:

(a) Freedom from taxation. Contractual clauses guarantee that,at least up until 1990,therewiU be no personal income taxes, no corporateprofit taxes, no capital gains taxes or levies on capital, and no personal

1/ Tourist arrivals grew at 20% annually in 1958-69 and government expenditures in money terms at about 15% per year.

2/ Except for the third. - 7 -

or real property or inventory taxes.

'(b) Freedom from custom duties or excise taxes on equipment or materials used by licensed business. This privilege will last up until year 2054. Only goods for personal use are dutiable.

(c) Freedom from immigration restrictions. The agreement insured that labor requirementswould be met without immigration restrictions.. Skilled and semi-skilled employees were to be brought freely into Freeport to satisfy the needs of industry. A moral obligation was acknowledged,however, to employ Bahamians when- ever possible and to train them for higher skills in business and industry.

18. Other Port Authority obligationswere to provide medical facilities, education facilities, end utilities. Moreover, the Authority was required to provide living quarters for officers and government employees end to share in the cost of governxmentservices,such as the collection of custom duties,,the administrationof justice, postal services, and immigration control.

19. The Port Authority provided the basic infrastructureupon which tourism, industries, and land sale activit:es were developed. Thus,737 miles of roads were constructed by the end of 1969. The Freeport Power Company, a subsidiary of the Port Authority, provided electricity to 9,00 consumers. The Grand Bahama Utility Company has the capacity to provide 4-½ million gallons of water a day. Besides the seaport, the Port Authority built an international airport in accordance with international requirements and regulations,suchas those of the aviation agencies of the U.S. axd the UK.

20. The success of the Grand Bahama Port Authority development efforts is ivdisputabl]e.In 1970, GNP per capita in Grand Bahama was about B$4,100, by far the highest of all the Bahamian islands. The total population of Grand Bahama grew from 4,095 in 1953 to 26,043 in 1970, implying an annual compounded growth rate of 11.5%.

21. But the phenomenal growth of Graind Bahama brought many problems too.* First of all, it impliedgiving 'u. ";,he wexnmftz.s taxationpower in favor of a private company, the Port Antnhority. Although the Grand Bahama Port Authority is not entitled to collect taxes in its dominions, it does something equivalent: licensing in exchange for a fee. Anyone wanting to engage in any business of whatever nature in the Freeport area must obtain a license to do so from the Port Authority. To practice a profession; to establish a school, a motel, or a factory; to operate a golf course; or to - 8 - develop land, such a license is a prerequisite. The fees may be a flat annrual sum or at varying percentage of gross sales in each year. The licensees take the fees as an acceptable levy for the privilege of carrying out their undertakings in Freeport and for the protection against undue or "inordinate" competition.j

22. Economic development made Freeport predominantlynon-Bahamian. Prior to September 1968,there were 1,396 licensees for carrying on business n Freeport; 91% of them were foreigners. Of the total labor force, 75.9% -ere foreigners. Hence, to stop the country from losing its national char- acter,in early 1970, the Bahamian Government passed an immigration bill that nullifies any provisions giving immigration concessions in agreements entered into by the government. This Act has the effect of nullifying the clause of the HawksbiLlCreekAgreement which permitted licensees to employ key trained or skilled personnel without a working permit. After this bill, the growth of the Freeport area, except for some big industrial concerns, ceased suddenly. For example, building permits declined from B$36.4 million in 1969 to B$1.3 million in 1971.

23. Although the example of Grand Bahama Port Authority is the most important and illustrative of the development process in the sixties, there are many other examples such as Paradise Island, showing delegation of gQyernuent functions to private foreign investors. Paradise Island is a small 800-acre island across the Nassau harbor, connected with New Providence by a B$2 per car toll private bridge. The island offers six hotels, luxurious restaurants, a casino, an 18-hole golf course, gardens and Paradise beach, and is the single most lucrative foreign-ownedresort development in the country.

B. Growth performance in the seventies

24. The growth performance in the seventies is quite different from that of the sixties. After the boom years of the sixties, the country stopped its growth path in order to formulate its growth strategy and objectives. Since thenvBahamianization of the economy has been occupying first place amiong the country's objectives. At the same time, economic growth, as measured by the standard economic indicators, has not been encouraging. The following overview emerges from Table 2 and Chart 1:

(a) GDP at market prices has been growing at 6.1%, barely above the rate of inflation.

(b) GNP has been growing only 1.2% per year. When the rate of inflation is taken into account, GNP actually declined,in real terms 4.6% per year. Increasing factor income payments abroad account for the different behavior of GDP and GNP.

1/ As a result of monopolistic structures, prices are higher in Freeport than in Nassau. See IReportof the Royal Commission on the Hawkshill Creek Agreement, p. 86, Nassau, March of 1971. - 9

(c) Exports have been the most dynamic sector in the Bahamian economy in the last four years. As will be analyzed later, export growth stems from merchandise export by big industrial business. Exports of non-factor services, mostly tourism, remain stagnant. Imports show a decline in money terms. This decl-ine is above 10% per year when it is measured in constant prices

(d) Total consumption has barely been able to keep pace with inflation, remaining roughly constant in real terms. But private consumption has actually been declining, while public consumption has been growing steadily.

(e) Gross domestic investment fell from B$488 million in 1969 to only B$71 million in 1972, implying an annual rate of decline of 30% in money terms and 36% in real terms. The causes of the decline are related to sluggish tourist demand and also to the manpower constraint to which the Bahamian economy is subject. The manpower problem is tied with immigrationpcZctes,which will.be analyzed in section G of this chapter. It can be noted here, however, that public investment was not subject to the type of decline that affected private investment.

(f) The economy Ls quite able to generate rates of savings higher than.30% of GDP. However, these gross domestic savings, instead of being reinvested in the country, are largely sent abroad. Political uncertainty and immigration policies are related with this high degree of repatriationof profits by foreign business. - 10 -

Table 2 s ULPUDITURE 0 GROSSDCU2KSTIC PRODUCT 1969-1972 (In Millions of CurrentB$)

Annusl Growth Rat* 1969 1970 1971 1972 1970-1272

Gross DonesticProduct a* KNoket Prices 487.7 463.5 520.6 582.5 6.1 Not Factor Payments Abroad -87.8 -63.0 -110.7 -168.0 Gross Naticnal Product at N rket Prices 399.9 400.5 409.7 414.5 1.2 1/ Exports of Goods& Nonfactor Services 1 335.6 320.0 398.3 447.7 10.1 Imports of Goods& Nonfactor Service r 339.4 345.8 299.5 293.8 -4.5

Available lesources 491.5 489.3 421.8 428.6

Consumption 303.6 356.1 343.7 357.4 5.5 Private 250.9 291.9 277.3 284.4 .4 Public 52.7 64.2 66.4 73.0 11.5

Investment 187.9 133.2 78.1 71.2 -30.0 Private 168.0 100.6 55.1 51.2 -35-0 Public 19.9 32.6 23.0 20.0 0.0

Gross DomesticSavings 184.1 107.4 176.9 225.1 6.9 Gross National Savings 96.3 44.4 66.6 57.1 -16.0

Gross NationalProduct at Market Prices 399.9 400.5 409.7 414.5 1.2 Plus Subsidies 1.0 1.5 1.6 1.4 Less IndirectTaxes 67.0 71.3 66.3 75.9

Gross Wational Productat Factor Cost 333.9 330.7 345.0 340.0 o.6 Depreciation 40.0 44.7 48.0 51.0

National Income 293.9 286.0 297.0 289.0 -0.7 Retail Price Index 94.2 100.0 104.6 111.7 5.8

1/ Excluding oil.

Source: Mission estimates. - 11 -

CHART 1

THE BAHAMAS MAIN MACROECONOMICTRENDS 1965-72 (IN MILLIONS OF 1970 BAHAMIAN DOLLARS)

------GDP - GNP ------EXPORTS OF GOODS AND NFS ...... IMPORTS OF GOODS AND NFS CENTRAL GOVERNMENT EXPENDITURES CENTRAL GOVERNMENT REVENUE - . .. .. GROSS DOMESTIC INVESTMENT

MILLIONS OF BAHAMIAN DOLLARS

600

- ~~~~~~~~~~~GDP

500 -0 40------

J ~~~~~~~~~~~0 00i00t 400 -- -ovts _ *p s

40 -566 6 ... E0ports

300 ME'______

100 ______Imports

GrossDomestic Investment

o ______YEAR 65 66 67 68 69 70 71 72 World Bank-8328 - 12 -

C. High GNP per capita

25. New GNP estimates basically confirm previous high IBRD estimates./ The new figures emerged from two differentapproaches, based on different sources, but giving approximatelythe same result:

Table 3: GNP ESTIMATES, 1970, BENCKARK- YEAR

(In millions of Bahamian dollars)

Expenditure Approach Income Approach

Private Consumption 291.9 Personal disposable income 287.9 Government Consumption 64.2 Profit and interest remit- Private Investment 100.6 tances to Abroad 230.0 Public Investment 32.6 Profit and Interest Exports of Goods and received from Abroad -191.0 Non Factor Services2/ 320.0 Retained Profits 26.0 Imports of Goods and Internal transfers -4.9 Non Factor Services./ -345.8 Depreciation 44.7 GDP at Market Prices 463.5 GDP at Factor Costs 393.7 Net Factor Income -63.0 Net Indirect Taxes 69.8 GNP at Market Prices 400.5 GDP at Market Prices 463.5 Net Factor Income -63.0 GNP at Market Prices 400°5

26. Because of the peculiar income distributionin the Bahamas, GNP per capita needs to be interpretedwith care. With a small population (168,812) and the GNP given above, the per capita figure turned out to be B$2,372. Fifteen percent of the populationwas foreign-born,those from the U.S. Canada and U.K. occupying top management positions in banking, insurance, real estate and tourism businesses. 3/ Foreigners as a whole received about 38% of the country's personal disposable income.4/ Bahamians, on the other hand, constituted 85% of the population and received 62% of personal disposable income. Thus, GNP per capita for the expatriatepopulation would be B$5,700, while the GNP per capita for the Bahamians would be only B$1,700.

1/ On the methodology followed to make the estimates, see Appendix A. 2/ Excluding oil under processing agreement. 3/ There is also a large group of Haitian immigrants who form the poorest segment of the population.

2' Personal disposable income excludes pensions and transfers in this case. - 13 -

27. For purposes of inter-country econoaic welfare coraparisonV this B$1,700 GNP per capita figure is sti'l not adequate. Prices of essential consumer goods are 50% higher in Nassau than in Washington, D.C. I/ The Bahamas has a system of indirect taxation9 relying on import duties and disregarding direct taxation, thnataccounts for part of these price differences. Transport cost of iL;.ported items and intermediation margins account for the rest. Orie do.llar spant in the Bahamas acquires what can be bought for 66 cents in Wash-ngtorn.,DO.C.; thus,it is necessary again to adjust GNP per capita. The fInal G&L per capita for the Bahamas, comparable to other countries, is then about $1,100.

28. To return to the chronological analysis of GNP, the decline from B$400.5 million in 1970 to B$371.1 million in 1972 has affected Bahamians and non-Bahamians differently. A sharp decline in working permits given to expatriates 2/ since 1970 indicates that personal disposable income accruing to foreigners ma-y have been around 30% of the total disposable income in 1972, as compared with 38% in 1970. Accordingly,personal disposable income accruing to Bahamians went up from 62% of total disposableincome to 70% in 1972. In other words, although the pie of Gross National Product was smaller in 1972, the share accruing to Bahamians increased. Personal disposable income per capita of Bahamians,then, has probably gone up slightly,thus relieving pressure on thie government for designing an articulated development plan for economic growth.

D. Economic Structure and the Predominance of tourism

29. The Bahamian economy is basically a services economy. In 1970, service sectors accounted for 72% of GDP and the non-service economy sectors only 28%. within the latter, constructiontook 14% while industry, agriculture and mining together accounted for the remaining 14%.

30. Although the hotels and restaurants account only for 19.3% of GDP, the spillover effects of tourism are scattered all over the economy. For instance,a large percentage of the transport sector such as aerodromes, taxis and the like is geared to tourism. So are real estate-land sales activities and wholesale-retailtrade. Hotel constructionabsorbed more than 60% of total constructionbusiness. Electricity, gas and water services are,to a large extent,connectedto tourist resorts. Even agricultureand cottage industries depend to some extent on tourist demand. So, on the whole, tourism determines,directlyor indirectly,around 55%of Bahamian GDP and 77% of GNP. ,1

1/ Comparative study of retail prices of 47 essential consumer goods items made by the mission. The Bahamian prices were collected in non-tourist retail stores. The 50% quoted come from a Fisher ideal index number, using both Bahamian weights and US weights.

2/ This topic is discussed in section G of this Chapter.

3/ Using the tourist maultiplierin Chapter III E, we arrive at these figures. Table 4: ECONOMICSTRUCTURE 1970

Value added (million B$) % Employm~ent %

Agriculture, Forestry & Fishery 14.i 3.6 4,79' ,7.68 Mining & Quarrynig 2.8 1.0 78 0.12 Manufacturing& Processing 35.1 8.9 3,824 6 .- Construction 56.7 14.4 8,469 1358 Non-Service Sectors 108.7 27.6 17;62 27,15 Electricity,Gas & Water t107 2.7 1,329 2.13 wholesale Trade 13.5 3.4 799 1.28 RetailTrade '14.8 3.7 5,252 8.39 Hotels & Restaurants 76.1 19.3 10,106 16.21 Transport Storage & Communications 45.4 11.5 5,512 8.84 Finance, Insurance,Real Estate & Business Services 50.1 12.7 5,331 8.55 Community, Social & Personal Services 72.4 18.9 16,873 27.06 Services sectors 28-5.5 72.5 45,202 72.49 GDP at Factor Cost 393.7 100.0 62,364 100.0 - Total Employment

21. The predominance of tourism is based on an undisputed comparative advantage. Few countries in the world can compete with the Bahamas' extensive beaches, reliable sunshine and warm clear waters. The great number of islands and cays makes possible a diversity lacking in competing tourist countries that consist of just one island. The Bahamas offer a range of choice to suit different tastes in privacy, luxury and activities such as fishing, scuba diving, snorkeling,golf, gambling and boating. In addition, the Bahamas is the closest Caribbean country to the United States, the main tourist market. New Providence Island, which attracts over 60% of total visitors to the Bahamas, lies about 180 miles east of Miami. Grand Bahama, which accounts for most of the remainder, is only 60 miles east of Palm Beach, Florida. The geographicalease of access is reinforcedby a substantial network of air transportation facilities and low airfares. Round trip economy fare from New York to Nassau ib the lowest in the Caribbean. In addition to cruise ships sailing towards the Bahamas from New York and Florida, the islands attract a substantial number of private boats which can travel from the Florida coast in shallow protected waters. Similarly,small private aircraft can easily fly from the southern U.S. to one of the many official airports in the Bahamas. - 15 -

32. The comparative advantage of tourismmakes the other sectors of the econony appear inefficient. The non-tourist economy got trapped between two pincers that have kept it strangled: high wages on the one side and competing imports on the other. Those imports look cheap when converted into Bahamian dollars at the current exchange rate.

33. Because tourism is a relatively labor-intensiveactivity, its development brought about a strong demand for labor. Since the country has few people and restrictive immigration policies, the supply of labor is inelastic. Thus high demand and inelastic supply made wages skyrocket. 1/

34. For the development of the non-tourist economy,theBahamian dollar is overvalued. Two factors tend to keep it so. First, tourism itself gives the Bahamas 64% of her foreign exchange supply. Second, import duties, which are the basic source of government revenue, restrict the demand for foreign exchange by making imported products more expensive. As a result, prices in the Bahamas are higher than in the U.S. Food and beverage prices are about 44 higher; household appliances 39% higher; transportation, 67% higher; clothing and footwear items are 49% more expensive. However, overvaluation of the Bahamian dollar does not poqe the grave dilemma existing in petroleum-oriented economies such as the Venezuelan or Trinidadian, for instance. Tourism, unlike petroleum, is abie to provide enough jobs to,make the Bahamas a full employment economy. Therefore, the need for diversification is less pressing in the Bahamas than in many other countries.

E. Recent Balance of Payments Performance

35. Giveinthe openness of the economy, the balance of payments plays a special role!in the Bahamas. Few countries in the world are more affected by the external sector in their internal economic activity. Exports of goods and non-factor services are 70% of GDP. Imports of goods and nonfactor services are 60% of it. 2/

j/ See paragraphs 58 and 216.

2/ Excluding oil under processing agreement. - 16-

Table 5: THE R3SOLRCEBALANCE AS % OF GDP

1969 1970 1971 1972

Exports of Goods and Non- factor Services (in B$ mil) 335.6 320.0 398.3 447.7 (As percent of GDP) (68.8) (69.0) (76.5) (76.8)

Imports of Goods and N.on- factor Services (in B$ mil) 3.39.6 345.0 299.5 293.8 (As percent of GDP) '69.6) (74.6 (57.5) (50.4)

Resource Balance 4inflow) -3.8 -25.8 +98.8 +153.9 (Resource Gap as Percent of GDP) (-0.8) (-5.5) (+19.0) (+26.4)

Since the important oil trans-shipment and refining business is excluded, the above figures tend to understate the importance of the foreign sector. On the other hand, the inclusion of oil would have overstated it because this oil business has a relatively low value added. %/ Since investment has been governed in the past by large autonomous capital inflows and outflowsdependent on politicalfactors and the evolutionof the U.S.economy, the capitalaccourit ia not.justthe balancingitem of the currentaccount; rather,it influencesGDP behavior.considerably,especially GDI. Moreover,almost half of the money supplyis made up of demanddesposits denominatedin U.S. dollars. As a result,GDP and all other national acco-ntsindicators go up and down too easily,followingdrastic changes from year to year in some key balanceof paymentsitems. This feature makes the economyprone to sufferfrom economiccycles. Thus, handling the helm of this economyis undoubtedlya difficulttask becauseof the few economicpolicy tools availableand the many exogenousvariables at plkv.

36. The current account of the Balance of Payments liad been gn defi. it 'ip until 1972 -he year in which it showed a small surplus, as the following table indicates:

l olreover, pricesof oil importsand exports look somewhat diszorted, mad4ri diifficult any analysis of the Balance of Payments in relation t-ne national economy. For purposes of macroeconometric analysis, rna.-;o.nl uccoiints and creditworthiniess, we igrnore the oil sector. -. 7

Table 6: BALANCEOJF ?.rMlCNTS - CURRENTACCOUNT

(In million of US current dollars)

______969 '1970 1971 1972 Current Account Balance. -72. -5i i 4+1.

I. prts 52E6 87.1 2515 35 2 of irhich Oil Refined Product - 30.1 194.1 253.5 Other 52.6 57.0 57.4 98.7

II. Imports 296.4 357.5 482.6 500.0 Crude Oil - 3777 237.1 27 73 Other 296.4 298.8 245.5 261.7

III. Trade Balance (I-II) -243.8 -250.4 -231.1 -147.8

IV. Servrices (net) 173.6 177.0 201.2 174.2 Tourism 215.7 192.0 247.7 27.3 Interest Dividends and Profits -66.5 -39.0 -80.7 -147.5 Other 24.4 24.0 34.2 47.3

V. Tranisfers (net) -19.6 -24.0 -24.6 -24.9

37. In the past, the trade balance has always been negative and the services balance always positive. On the one hand,the trade balance has been decreasing in absolute amount. This pattern is mostly due to a large increase in merchandise exports other than oil in 1972. Also, it is due to some decrease in imports. On the other hand, the services balance has been positive, although constant, due to the presence of the strong tourism income. Net tourist receipts were big enough to more than offset the negative signed interest, dividends, and profit remittances, which became an increasingly important item in the last few years. In fact, those profit remittances have eaten up the large positive resource balance referred to earlier.

38. Exports of manufactured goods such as cement, hormones and rum had been gaining importance in total merchandise exports up until 1972,when they accoumted for 73% of total merchandise exports, oil excluded. - 18 -

L'abl.e 7; 1{ERC'HUADISEEXPORTS FOB EXCLUDINGOIL

(In million of US dollars)

1969 1970 1971 1972

TCITAL 52.6 5 .0 57 .4 98.7

ManufacturedGoods 19.6 24.6 31.6 56.& Rum m-4 727) (2.7) (11.7' Hormones (10.5) (10.8) (15.1) (29.2) Cement (1.7) (11.1) (12.5) (15.9)

Agricultural& fishing 3.6 5.3 3.2 7.7 Crawfish (0.7) () (1.3) 7i3 Raw Sugar (1.3) (1.3) (1.9) - Pulpwood (1.6) (3.5) ( - ) 5.4

Mineral Products (crude salt) 1.9 2.8 .5 3.1

Miscellaneous 9.5 11.7 1.2 10.4

Re-exports 22.1 12.6 17.9 20.6

39. Merchandise imports other than oil have bena declining. In consumer goods, the most important item is food, which has been constantly around 55 million dollars a year. Raw materials and intermediategoods, which include a large amount of food and beverages "mainly for industry," have been constant at about 90 million dollers a year. Finally, capital goods declined sharply from 83 million in 1969 to about 40 million in 1971-72.

40. The United States is by far the main trade partner of the Bahamas, accounting for around 65% of Bahamian non-oil exports and 50% of its non-oil imports. Next in importance are the United Kingdom and Canada. The importanceof the United States in Bahamian trade is even more enhanced when the export oil trade is consideredtbecause96.8% of Bahamian oil exports go to the U.S. and Puerto Rico. Imports of oil come mostly from Nigeria, Lybia and Iran. Venezuela and Trinidad and Tobago do not export much oil, to t he Bahamas ,despite their proximity. - 19 -

Table 8: MERCHANDISEIMPORTS CIF, EXCLUDINGOIL

(In million of U.S. dollars)

1969 1970 1971 1972 TOTAL 296.4 298.8 245.5 261.7 Consumer goods 120.9 145-3 119.3 125.0 Food ( (53.8) (53.4) T60.7) Passenger Cars (..) (9-7) 7.5 (4- 8) Other (*e.) (81.6) (58.4) (59.5)

Intermediate Goods 91.4 89.3 86.7 88.9

Capitalgoods 82.6 62.6 37.6 44.7 Machinery and Capital Equipment; (4-) 45.9 26.7 27.6 Transport ;quipment and Accessories (.) 16.7 10.9 17.3 Unclassified and for Re- export 22.6 14.2 19.8 24.7

41. The following Table 9 also il1,u:-?,rates the unimportance of other Caribbean counitries in Bahamian trade. 11 emay country that appears in the Table is Jamaica,which accounts for lc-iy 1.3% of Bahamian imports. Although, from the social-cultural point zd' view, the Bahamas has strong ties with her Caribbean neighbors, it is obvious that economic ties are weak or unexistent. Furthermore, since wages in the Bahamas are higher than in the neighboring Caribbean countries, the Bahamas is at a dis- advantage when it comes to competing in a trade association like CARIFTA,for instance. - 20 -

Table 9: DIRECTIONOF TRADEEXCLUDI!M OIL UNDER PROCESSINGAGREEME;NT

(In million of U.S. dollars)

1969 1970 1971 1972

Exports FOB 2.6 57.4 8.7 United States United Kingdom 11.6 4.7 4.8 8.7 Canada 1.6 2.4 2.9 11.8 Puerto Rico 2.5 0.5 1.8 2.0 France - - 2.1 2.0 Germany 1.2 - 2.1 - Netherlands 1.1 1.8 1.1 2.0 Other 2.9 6.9 3.0 7.5

Imports CIF 6 4 298.8 24 261.7 United States 202.0 17l4.6 130.9 128.6 United Kingdom 25.4 45.6 40.8 64.6 Canada 13.2 11.8 9.9 8.0 Jamaica 4.1 2.9 3.8 3.5 Venezuela 3.3 7.0 13.9 15.3 Italy 19.3 23.8 3.0 13.6 Switzerland - - 2.3 - Netherlands 3.0 3.5 2.7 2.5 Belgium - - 1.7 1.8 France 4.3 4.2 4.0 4.6 Germany 5.1 3.2 3.5 3.4 Japan 1.9 2.9 3.0 1.2 Other 14.8 19.3 26.0 14.9

42. The capital account has played a significant role in the economy in the last fifteen years since most investments were direct private investments. The data available on long-term capital flows are scanty, and practically no information is available on short-term capital flows. However, based on these scanty data, a rough estimate can be presented. - 21 -

Table 10: BALANCE OF PAYMENTS - CAPITAL ACCOUNT

(In million of US current dollars)

1969 1970 1971 1972 Capital AccountBalance +89.9 +97.4 +54.5 -1.5

I. Capital and Errors and Omissions 69.3 92.2 56.9 3.7 Public SectorCapital -1.5 3.4 7.1 0.7 Central Government (-0.1) (-1.8) (1.1) (-3.2) Other Public Sector (1.4) (5.2) (6.0) (3.9) PrivateDirect I.nvest- ment 149.0 123.0 113.0 89.6 PropertyPurchase (120.6) (101.0) (88.3) (63.7) Other (28-4) (22.0) (24.7) (25-7) Errors and Omissions and CapitalOutflows -78.2 -34.2 -63.2 -86.4

II. Exchange Profit and L.oss - - 3.1 -1.8 InternationalReserves -(-0.5) (-2.7) Public External Debt - - (3.6) (0.9) III. Changesin Net Interna- tionalReserves X_nc- 20.5 5.2 -3.4 Government =.9 3.9 -2.7 -7 0 MonetaryAuthority 13.6 1.3 -2.8 -11.4

As can be seen from the above figures,tV? lah,.mast role as capitalimport- ing countryis changingrapidly. It -~,spitale:cporting country now, while still presenting many typicalfeatures c.i dveloping economy. This problem will be taken up in the next section.

F. Recent Investment and Saving Performance 43. The investmenteffort used to be anusuallystrong. It had been about 30% of G])Pin the boom years of the sixtiesup to '968. In fact, the investmenteffort reached an al2L-timehigh in 1969,whengross domesticinves-tment was about38% of GDP. Since then,investments have been steadilydeclining at an annualrate of 35% in real terms. As a result,gross domesticinvestment reached an all-timelow proportionof 12% of GDP in '1972.This declinein investmentsis much more pronounced in the privatesector than in the publicone. - 22 -

Table 11: THE INVESTMENTEFFORT; GDI AS PERCENTOF GDP

1969 1970 1971 1972

Gross Domestic Investment 28.7 15.O 12.2

Gross Domestic Private Investment 34.4 21.7 10.6 8.8 Gross Domestic Public Investment 4.1 7.0 4.4 3.4

44. Tvo main causes are behind this drop in investment. The first is connected with an over-investment in hotels during 1968-69,leading to nil hotel construction in 1971-72. The second is connected with a certain degree of political uncertaintybrought about by political independence, and,more importantly, with the handling of working permits for expatriates.

45. In 1968-69Ahotels were full in the Bahanas. The occupancy rate reached 80%. Consequently,to aeet future tourist demand, hotel construction picked up momentum in 1969-70. Tourist demand projectionsproved to be overoptimistic,however. In 1970,touristarrivals actually declined by 3%. Since hotel constructionusod to be the bulk ofthe construction industry and, in turn. construct±pnmade up half Qf the total investment, gross domestic investmentplummeted. Through its multiplier effect, the sharp drop in hotel constructionin 1971-72 dragged the economy into a low equilibrium point. Even in 1973, hotel occupancy rates were far below the 80% reached in the late sixties; therefore, it is unlikely that the investment level will go up again in 1974 or even 1975.

Table. 12: THE COMPOSITIONAND EVOLUTIONOF INVESTMENT

(In million of constant B$ of 1970)

1969 1970 1971 1972

Gross Domestic Investment 199.2 133.2 74.7 L3.7

Construction 98.7 59.0 28.8 18.7

Machinery and Accessories 66.3 50.4 28.1 24.8

Transport quipment 34.4 23.8 17.8 20.2 - 23 -

CHART2

THE BAHAMAS-COMPOSITIONAND EVOLUTION OF GROSSDOMESTIC INVESTMENT (IN MILLIONS OF CONSTANT BAHAMIAN DOLLARS OF 1970)

MILLIONS OF BAHAMIAN DOLLARS 200

GROSS DOMESTIC INVESTMENT

175 X \ . _ _ _ _ CONSTRUCTION TRANSPORT EQUIPMENT \. _ - MACHINERY AND ACCESSORIES

150

125 MACHINERY AND ACCESSORIES

100

0a ______Y EA R 1969 1970 1971 1972

World Bank-8329 - 24 -

46. The second cause underlyingthe decline in investmentis related to certain inconsistenciesbetween a policy of attractingforeign investment, on the one hand, and immigrationpolicies, on the other. Foreign capital is,to a large extent, tied to foreign managers and know-how. The government has been seeking to attract foreign investment through fiscal exemptions; at the same time, it has been trying to keep away foreignmanagers and personnel through its immigration policy. These two policies, as they were being enforced up until recently, conflict with each other to the detriment of the country.

47. The main policy tool for attractingforeign investmentis to offer the Bahamas as a tax haven. The White Paper, a document presented to Parliament by the Prime Minister in October 1972 outlining social and economic policies for an independentBahamas, stated clearly: -- "The Commonwealth of the Bahamas shall continue to provide what is among the best range of incentives for the development of private enterprise anywhere in the world, and nationalizationshall not be an instrumentof the government'seconomic policy .... The government policy is that of maintaining the tax haven status of the country." At present there are no income taxes, corporate, estate or inheritance taxes. The only direct taxation is a very moderate real property tax of 0.5% based on the assessedvalue of improvedproperty in New Providence, with property of less than $20,000 value exempted. There is no tax on undeveloped land.

48. The main policy tool for Bahamianization of the economy is that of immigration restrictionson foreignpersonnel. Thus, no expatriatemay be offered employmentin a post for which a suitablyqualified Bahamian is available. A permit applicationwill not be considered if the prospective employeeis already in the country,having enteredas a visitor. The immigration authorities will consider employment of a non-Bahamian, provided it is thought that the prospective employeewill be an asset to the Bahamas, only after:

(a) the employerhas advertisedand interviewedlocally and has found no suitable,qualified Bahamian to fill the post;

(b) the employer has obtained from the Labor Exchange a Certificatestating that no qualifiedBahamian is registered who might fill the post.

49. Foreign privateinvestors are unlikely to put money into a countryunless they are certain that they can select men of their confidence for key jobs in their business. Yet,in the Bahamas,theworking permits are issued for one year 2/,andthey are renewableonly at Governmentwill. This policy creates uncertainty in the foreign business communityand conflicts with the proclaimed tax haven policy to attract foreign investment into the Bahamas. In addition, this policy makes it difficult to find suitable personnel wanting to move into the Bahamas with a contract lasting only one year. The following statistics,showing a parallel decline in working permits and investment,are consistent with this interpretation. 3/ j/ There are also some few three-year permits. 3/ As will be analyzed in the tourism section, managerial problems are a partial cause of sluggish tourist arrivals. - 25 -

Table 13: P; -RLT AU\i) - T

Oross fmas-ic Number of Peramits Private lnves-ment Year Issued or Renewed (in millions of i970 3$) 1969 7,421 178.3 1970 7,046 97.6 1971; 4,742 52.6 1972 4,305 45.7

50, One way oI' reconciling a policy of attracting foreign investment with restrictive, Bahamianizing, immigratt.on policies is the use of tax tools as suggested in paragraph 192. Insteaad of using taxation to reconcile these two conflicting policies, the government is trying a different approach. This approach consi-sts in requiring thei enterprises to present m;anpower projections where Bahamians will gradually replace expatriates. Wien approved 'oy the government, these projections becone equivalent to contracts that both parties, the government, and the enterpTises, will have to carry out. The approach, although an improvement over previous practices, is still second best to taxation.

51. The Bahamian saving effort is quite remarkable when measured as a ratio of gross domestic savings to GDP.

Table 14: THE SAVINGS EFFORT - SAVINGSAS PERCENT OF GDP

1969 1970 1971 1972

Gross Domestic Savings 37.7 23.2 34.0 38.6 Factor Income Payment Abroad 18.0 13.6 21.3 28.8 Gross National Savings 19.7 9.6 12.7 9.8 Gross Private Savin gs (16.2) (8.0) (12.4) (8.2) Gross Public Savings (3.5) (1.6) (0-3) (1.6)

When factor income payments abroad are substracted,high saving ratios of about 30% become as 'lowas 10%. Gross public savings are low, but at least positive. The country faced no problem in the sixties when high factor income payments abroad were matched by substantial inflows of foreign capital offsetting and surpassing those factor incomes. But, in the year 1971, the previous steady inflow of resources into the Bahamas was reversed while factor income payments increased substantially. As a result, real resource transfers abroad reached 26% of GDP in 1972.

52. The Bahamas may well be able to restore the previous steady capita-L inflow and the high degree of profits reinvestment within the country. DE to the tax haven policies, subsidiaries of foreign companies do not pay corporate income taxes in the Bahamas. Wen they reinvest these profits into the Baham,as, neither do they pay taxes in the original capital exporting countries. There- fore, reinvest3ment in the Bahamas should be attractive for them. However, lack of an investment climate, tourist demand and/or immigration policies may have been powerful enough to offset tax advantages, thus preventing profits reinvest- ments. - 26 -

Table 15: THE FINANCING OF INVESTMENTS

(In millions of constant B$ of 1970)

1969 1970 1971i 1972

Gross Domestic Investment 199.2 133.2 74.7 63.7

Net Resource Inflow .inflow) -4.3 -25.8 94.4 137.8

Gross Domestic Savings 194.9 107.4 169.1 201.5

Factor Income Payments -93.2 -63.0 106.0 150.4 Gross National Savings 101.7 44.4 63.0 51.1

G. The Manpower Constraint

53. The economy's growth rates of above 9% in the sixties did not square with a natural population growth rate of about 2.4%. Thus, a manpower shortage developed that was overcome largely by immigration and highler labor force participation rates. Therefore, of the total increase in population of 38.6 thousands from 1963 to 1970, 40% came from immigration.

Table 16: POPuLATIONINCREASE

(Thousands) 1964 1965 1966 1967 1968 1969 1 Birth 4.3 4.6 4.6 4.3 4.2 4.3 4.3 4.3 4.3 Death 1.0 1.1 1.1 1.2 1.0 1.1 1.1 1.1 1.1 Natural Increase 3.5 3 X 3.1 3.2 3.2 3.2 3.2 3.2 Immigration 0.4 4.5 4°0 3.1 2.3 3.9 2.5 1.5 0.9 Emigration - 0.1 0.7 0.2 0.1 1.2 3.1 4.9 1.7 Net Migration 0.4 4.4 3.4 2.9 2.2 2.7 -0.6 -L 4 -0.6 Total Increase 3.9 7.9 6.9 6.0 5.4 .9 2.6 -0.2 2.6

54. Filling the excess demandfor workers with foreigners could have brought about an alienation of the country with major political consequences. As a result of the government concern with this situation, the Clapp and Mayne Report on manpower was commissioned in 1967. The report showed that, even in 1968, an exceedingly large proportion of the labor force was made up of foreigners. This proportion was extremely high in the Freeport area, as can be observed in Table 17. - 27 -

Table 17: PERCENTAGEDISTRIBUTION OF EMPLOYEES BY AREA AND NATIONALITY,1968

Total Bahamians Non-Bahamians (Haitians) (Other foreigners)

Total 100.0 69.0 31.0 (6.8) (24.2)

New Providence 100.0 83.1 16.3 (3.1) (13.2)

Freeport 100.0 34.1 65.9 (13.0) (52-9) Other Family 100.0 64.9 34.1 (13-3) (21.8) Islands

Moreover, the report showed that the proportion of foreigners increasedsubstan- tially asnng prof6issional,techhical, executfiveand managerialworkers. For instance, professionals and technicianswere 44% non-Bahamians;executive, managerial, 53% non-Bahamians.

55. Even more important than the actual figures on employmentand nationality coming from the report were its manpower projections. Those projections showed a manpower deficit of 11,500 persons for 1970 and 15,400 for 1973,to be covered with more expatriates. It was clear to the authorities that,if the economic policies carried out up to that moment 1969, were to continue, the 13ahamaswere going to lose their national identity. Therefore immigration restrictions became stiff. Many working permits were not renewed,and fewer new working permits were issued. As a result, there was a net emigration in 1970, 1971 and 1972. 2/

56. The Bahamian economy is basically a full employmenteconomy. This was clearly the case in the late sixties when the labor force participation increased substantiallyas many persons, especiallywomen who would not normally have sought work, accepted gainful employmentbecause of the many job opportunitieswith good pay. The economic slump of 1970-73 caused some reduction in the labor participation rate and also some unemployment. The 1970 census reported an overall participation rate of 414.3,similarto that of the United States, but much higher than that of countries such as Venezuela and Puerto R.ico where the labor force is around ,3% of the total population. Tha following table illustrates the high participation rates for 1970 in

1/ See Table 16. - 2$ -

Table 18: POPULATION,LABOR FORCE BY SEX AND PARTICIPATIONRATES IN 1970

(in thousand of persons)

Partici- Partici- Partici- Labor pation Labor pation Total Labor oation Ages Males force Females force fiorce 0-14 37.2 0.0 0.0 36.4 0.0 0.0 73.6 0.0 0.0

15 and over 46.5 41.8 90.0 48.7 28.0 57.5 95.2 69.8 73.3

Total 83.7 41.8 50.0 831i 28.0 33.0 i68.8 69.8 41 .3

The population of ages 15 and over that were reported as members of the labor force is 73% in the Bahamas, against 61% in the United States, 46% in Puerto Rico, and 62% in Trinidad and Tobago, for instance. The over-15 male participation rate is 90% in the Bahamas, against 80% in U.S., 67% in Puerto Rico and 84% in Trinidad and Tobago. The over-15 female participation rate is 57% in the Bahamas, 42% in the U.S., 27% in Puerto Rico and 40% in Trinidad and Tobago.

57. As explained in section D, the Bahamas' economy is a service economy. As such,it generates a high demand for labor. The following breakdown of population aged 15 and over by type of occupation shows again that nearly 70% of the jobs belong to persons engaged in administrative,managerial, technical, clerical, sales, transportationand recreationalactivities as opposed to "productive"activities. - 29 -

Table 1 : ACTUALEMPLOYMENT BY TYPE OF OCCUPATIONAND SEX

Total. m) (F) % of Total

Professional, Technical and RelatedWorkers 6,179 (3,294)(2,285) 9.9 Administrative,Executive and ManagerialWorkers 3,608 (3,112) ( 496) 5.8 Clerical Workers 7,809 (2,100)(5,709) 12.5

Sales Workers 3,673 (2,021)(1,652) 5.9 Farmers, Fishermen,Hunters Loggersand RelatedWorkers 4,333 (3,021) (1,312) 6.9 Miners,Quarrymen and RelatedWorkers 52 (46) (6) - Workersin Communications and Transport 4,320 (3,,439) (881) 6.9 Craftsmen,Production ProcessWorker and N.E.S3 17,047 (15,532)(1,515) 27.4 Service,&port and RecreationalWorkers 15,343 (60l50)(9,193) 24.6

Total 62,364 7115 23,009 100.0

58. As a result of demand pressure. .l inelasl4icsupply, wages are relativelyhigh in the Bahamas,especi 0rC-en comparedwith those prevailing elsewhere in the Caribbean.

Table 20: SELECTEDWAGES L?nNI BAHAMAS 1973 AND COMPARISONWITH OTHER CARIBBEANCOU`tr.FJPES AS PERCENT OF BAHAMAS

Bahamas 4 Jamaica Trinidad' e

Waiter 39 p/w exe. tips 29 57 61 Maid 44 I 26 5$ 41 Bellboy 32 ft 32 63 57 Electrician 2.50 p/h 30 3,4 32 Plumber 2.50 p/h 25 25 26 Unskilled Labor 1.60 p/h 33 25 37 Wh"-encon.,-Pred witlh developed countries, an unskilled laborer in the Bahamas, ea.rntng ?8A1.60 per hour, is earning as much as an industrial laborer in France or the Unilted '(ingdom and Italy in money terms. In terris of purchasing power, saleries in these coulntries are about 50 percent higher than in the Bahamas.

59. Tn 1970, the census year, the economy fell into a s.lump;thus, un- en'loymentwas as high as 10%. This figure,whenput togetherwith the high A .tcpatonrate, loses part of its significance.In fact,thenumber of personsactively seeking jobs registeredin the EmploymentExchange suggests -_ uneMploymentrate of around5 % in 1973. Althoughthe depression as been continuoussince 1970, the governmenthas weatheredthe political pressurefor more jobs by not renewingworking permits to expatriatesand encoaragingfirms to fill jobs positionswith Bahamian nationals. Table 16 estimatesa net emigrationin yeam§1970-71-72due to the non-renewalof working permits. In the near future, the government plans to weather the pressures for more jobs with a new social security system allowing for the retirement of old persons,thus openingnew jobs for young laborers. In the long run, for the purposesof fosteringemployment, investment policies will hold the key. H. IncomeDistribution

60. As expected, the distribution of incometurns out to be highly unevenin the Bahamas. The poorest20% of the populationreceives 2.9% of the personaldisposable income while the richest20% receivesabout 52% of it. In 40 developingcountries for which data are available,the poorest20% receives5% of nationalincome while the richest20% receives55%. Thus, the Bahamianpoor and rich are both proportionatelypoorer.

61. It seems strange that in a country without income tax such as the Bahamas, the rich receive a relatively small share of personal disposable income. The answer to this paradox lies in the krge proportion of assets owned by non-residents, either companies or individuals. The income from that propertydoes not accrueto residentsin the Bahamas;it is sent abroad. Accordingly,available data suggestthat the mean incomeof peoplereceiving B$30,000and over is biggerfor Bahamiansthan for non-Bahamians,the reason for this being that the few high incomeBahamians are mostlyproprietors and administrators,while the sizablenumber of high incomenon-Bahamians residing in the country are mere administrators. / 62. Chart 3,with Lorenz curves for the Bahamas and other countries, illustrates better than figures the unevenes of income distribution in the Bahamas. ,/ For instance, income distribution in the United Kingdom is more eqral than in the Bahamas, as we would expect. The same is true for Puerto Rico and Guyana. But the Bahamas has a more equal income distribution than Jamaica.

j In 1970 there were 110 Bahamianswith incomeabove B$30,000,while there were 229 non-Bahamianswith incomeabove the mentcioned'B$30,000. g The closerthe curveis to the diagonal,the more equal the income &istribution. - 31 -

CHART3

INCOME DISTRIBUTION LORENZ CURVES FOR THE BAHAMAS AND OTHER COUNTRIES

PERCENT OF INCOME 1001

TOTAL BAHAMAS

-- UNITED KINGDOM , -- _ --_ JAMAICA GUYANA PUERTO RICO

60 /

'41//~~~~~~

0 _E__ _ YEAR 20 40 60 80 100 PERCENT OF POPULATION

World Ban k-8330 - 32 -

63. The important issue of income distributionin accordance with nationalitywas discussed briefly in paragraphs 24 to 27. It was mentioned there that,while foreigners receive 38% of personal disposable income, they constitute only 15% of the total population. Chart No. 4 shows clearly that the higher the bracket of income, the greater the proportion of nQn-Bahamians. For instance, non-Bahamians constitute 15% of the persons in the 1,000-2000 B$ bracket but 75% of those in the B$20,000 - B$30,000 bracket.

64. The pockets of poverty are geographically identifiable. The poor live Ln the Southern Family Islant and in some parts of Nassau City, in New Providence Island, particularlythe so-called South division.

Table 21: PER CAPITA DISPOSABLE INCOMEPER ISLAND

(In millions of B$ of 1970)

Door lsslFnds Rich Islands And.r7s 768 Freeport Grand Bahama 3859 Eroma 781 Berry Islands 2790 Harbour IsTand & Bemini 2120 Sparnsh Wells 769 New Providence 1721 San Salvador & Fnrna Cay 6 7 Grand Bahama other than Long Island 520 Freeport 1691 Ragged Ts),nd . Abaco 1h13 Crooked Island 382 Eleuthera 946 Mayaguanas. 318 Inagua 889 Cat Irsl-a n. . 362 Acklings Including Long Cay 313 Country's average 1711

65. The poor in the Family Islandsaremostly subsistencefarmers, hunters, fishermen, loggers and other forestry workers. The poor in Nassau City are launderers, dry cleaners and pressers, postmen and messengers, housekeepers,cooks, maids, building caretakers, cleaners and, in general, uncqalified laborers.

66. At the moment, income distributionin favor of Bahamians,and against expatriates,seems to be the target of overriding importance in the couantry's policy making. The tool to reach the target, as explained in para-raDh L47, is somewhat crude. The handling of working permits as a tool fc-r Bahamianization may defeat another country objective, namely, growth CInanced largely by foreign investment. New policy tools have to be designed. Charging a sizable fee on working permits, but making them automatic upon the payment of that fee, is suggested in paragraph 192 as a possible solution to make the different targets more compatible. This alone would not be enough. The viability of a moderate corporate profit tax should be studied,as suggested in paragraph 196. The proceeds of this direct taxation could then be used to improve the quality and job relevancy of education and,thereby,to favor efficient Bahamianization. The proceeds from directtaxation could also be used in financing infrastructure for the development of the Southern Family Islands, one of the loci of poverty, or in financing essential services,suchas water supply and sewerage,in the poor neighborhoodsof Nassau City, thus improving the quality of life in the other loci of poverty. - 33 - CHART4

THE BAHAMAS PERSONALINCOME DISTRIBUTIONYEAR 1970 BAHAMIANS - NON-BAHAMAIANS

NUMBER OF PERSONS

14000

13000 = __. 12789

12000

11267

11000 z BAHAMIAN

10000 W NONBAHAMIAN

9279

9000 9671

8139 9012 8000

7000

6000

9000 0

4000

3594

3000

2000184 15 1736 10

954 1067 1063 1000 73

407 510 487 339 T:387 3 4

1000 20(10 3000 4000 5000 7500 10000 12500 15000 17500 20000 30000 ANID OVER

INCOME BRACKETS IB$I World Banrk-8332 - 34 -

III. SECTORALPROSPECTS AND ISSUES

A. AA I±ultural d.v lo nmt an-d ofici.mcT 66. The annual value of the agriculture and fisheries produce amounts to almost 16 million dollars a year, equivalent to 4% of GDP. In terms of employment, agriculture provides about 7% of the total employment. Part of the agricultural-fisheries produce is exported. The main items are pulpwood and crawfish. About 60%of the agricultural output is sold in the internal market. Products are mainly chicken, pineapples, tomatoes, onions, bananas, cabbages and avocados. Existing agriculturalproduction comes mostly from traditional small farms in the Family Islands. About one-third of the produce for the local market is sold in the government Produce Exchange Market. This institution helps to maintain agricultural prices and performs a social function by indirectly and moderately subsidizing the small and declining traditional farming sector.

67. Some government officials think that agriculture could become one of the country's "engines" of growth. At present, more than 80% (=US$60 million) of the country's food supply is imported. This directly reflects the inability of agriculturalsupply to keep up with growing tourists' demand in the sixties. Consequently,planners recommend import substitutionin agriculturethrough optimum sized farms in islands like Abaco, Andros, Eleuthera,Exuma and Cat. In accordance with the emphasis that the Ministry of Development gives to agricultureand fisheries, there are two recent internationallyfinanced research projects. One of them is an AID 10,000,000 US dollar five-year pilot project for the development of livestock in Andros Island. The purpose of the project is to help to uncover the development canstraintsthat held back livestock production in the Bahamas, both on theb natural resources side and the correspondingappropriate techniques of production and on that of the human motivation and training. The other project is a joint research project carried out by the government, UNDP anc FAO to evaluate the fisheries resources available, so as to uncover the best fishing techniques and to train fishermen "on the job" in those techniques.

68. The potential for agriculturaldevelopment in the Bahamas is limited. The soil, composed of sedimentarylimestone, is inherently infertile. Only about 260 square miles, equivalentto 5% of the land, are suitable for commercialagriculture. Those agriculturallands are located in North Andros (180 square miles),CentralGrand Bahama (30 square miles; and Central Great Abaco (50 square miles); theselands are covered mostly by unexploited pine forests. Therefore, the developmentof import substitutionagriculture to feed the local population and tourism will require considerablework of land preparation. Since the rainfall is low, irrigation is indicated. Even the best lands will need a lot of fertilizer and some chemicals. Since the labor is scarceand expensive,a machinery-intensiveagriculture is indicated also.On the positive side, agricultureis frost-free in the Bahamas, there is abundant ground water supply for irrigation and some crops can be ob- t ained twice a year. The wells do not need to be deeper than 20 feet in the named areas. There is little doubt that diversification of the economy is a sound policy. However, if agricultural import - 35 -

substitutionimplies higher than import prices for foodstuffs, this will harm not only the welfare of the Bahamian people but also the tourist industry, whose prices have to compete with other Caribbean countries. 1/

69. The main problem in designing agricultural policy for the Bahamas is to find the right balance between the need for diversification of the economy and the need to maintain a reasonable level of efficiency. This

could be done partly by setting . maximum tariff for agriculturalproducts, between 10 and 20%, which then w.ll give some protection to Local producers and,at the same time,will require certain minimum standards of efficiency, preventing a wasteful allocation of scarce resources in this sector. Agri- culture will have to be relatively scphisticated, perhaps an almost scientific agriculture in the Bahamas,to reach sizable levels of production at reasonable costs. Creating the skills, know-how and motivation to do this will require considerable time and effort.

B. Industrial Developiient and Incentives

70. The contributionof manufacturingto GDP. amounted to about 70 million dollars equivalent to 14% of GDP at factor costs in 1972. The manufacturing contributionto employment,however, is not more than 6% of total employment. Manufacturing,with a growth rate of 40% per year during the past years, has been the most dynamic sector of the Bahamian economy. Among the products being manufacturedin the Bahamas are petroleum products, cement, birth control pills, rum, salt, perfumery, canned juices, paints, textiles, hand prints, and cement tiles. There are a few cottage industries,manufacturing mainly garments and straw products.

71. Industry in the Bahamas is,for t4e most part, capital-intensive, export-oriented, import-intensive,with a •3w inter-industrial linkages, foreign- owned, and located on Grand Bahama Island. Sincb there are relatively few industries,it is possible to describe some of them. The Bahamas Oil Refining Company,recently established, has invested about $100 million. It has an installed capacity to handle 250,000 barrels of imported oil per day. At present, an expansion program is under way which, when completed, will increase the installed capacity to 450,000 barrels per day. The present expansion is supposed to be cmpleted by the end of 1973. The refinexy is a relatively simple cracking plant, products being limited to naphta, kerosene, jet fuel and diesel fuel. Refined products are exported to the United States. Another example is the Bahamas Cement Company, owned by U.S.Steel. It has a 75 million dollar plant,located also in Freeport. The plant exports cement worth US$16 million and sells US$1.5 million in the Bahamian market. Another case is the Syntex Corporation at Freeport with an investment of US$7.5 million and annual exports of US$28 million in pharmaceutical products and birth control pills. The Baccardi US$2 million rum factory is the only big industry located in New Providence. It produces about US$11 million of exports.

72. Capital intensive industries are suited for the Banamian economy, because labor is scarce and wages are high. wages are 5 times higher than in Haiti and 3 times higher than in Jamaica, br instance. The level of wages and the labor scarcity will make it almost impossible for the Bahamas

j/ See paragraph,33, 34 and 56, tourism,after all,is able to provide enough jobs to Bahamians. - 36 -

to compete with other Caribbean countries to attract labor intensive light manufacturing to export to tie U.S. market. klso, given the size of the internal market, industry is bound to be eiport-oriented, import-intensive and rather scarce in forward and backward inter-indusG.t.Lal linkages. But capital-intensive enclave industriesdo not add much to net national income.

73. The only way the country could increase its take -from big industry is t.hrou-h taxation. Although tax haven is contidered a kind of sacred policy in the Bahamas, it is doubtful whether it ha, been the real major factor for locating big industrial business in the count,ry. Proximity to U.S., deep water ports, commercialand social talent of business promoters and political stability could have been more important than tax haven. The reason for this is that many capital exporting countries give credit only for corporate taxes actually paid in the developing nation while taxing repatriated tax-free profit obtained inside it. Thus, tax concessiorns given by the Bahamas are mostly gifts to the treasuries of the capital-exporting coLntries and not the private companies.

74. Tax haven policies will be reassessedsooner or later in the Bahamas. Because different capital-exportingcountries follow different taxation systems regarding their subsidiarycompanies abroad, no single policy prescriptionwill be optimal in all cases. For sure, the government of the Bahamas will do well to study the effects of its own tax policies on corporateprofits in the light of taxation systems of the main capital exporting countries. This topic will be taken up again in Chapter V.

C. Financialservices

75. Financial services,suchas banking, trust companies,insurance, real estate and business services, are important economic activities in the Bahamas, accountingfor about 13% of GDP and 9% of employmentin 1970. More- over, unlike tourism, financial, services have been a relatively dynamic industry in the seventiesgrowing at a roughly estimated rate of 10% per year in 1969-72. As a result, Nassau is now an internationalfinancial center.

76. rhe reasons for the development of Nassau as an international financial center can be classified in two groups: the first, external to the country, and hence, outside its control, and the second, inherent to the country-institutionsand natural conditions. Among the first type of reasons are certain regulationsof the Federal Reserve Board and other economic policies of the United States. Among the second type of Ieasons, the most importantare the Bahamian taxation system, the exchange control regulations,the geographicalposition of the country, its political stability, and legal secrecy.

77. In 1967, owing to difficulties in the United States' balance of payments, the U.S. Governmentissued certain regulations,provoking a rapid growth of Eurodollar banking services in Nassau. The U.S. Office of the Foreign Direct InvestmentProgram imposed certain restrictions2/on capital

1/ Restrictions on export of capitalwere lifted in January 1974. - 37 -

exports from the U.S. American business abroad had to resort to borrowing outside the United States, mostly from branches of big American banks. To favor small banks, those unable to afford a fullfledged branch abroad, the Federal Re-serve Board authorized American banks to set up branches in Nassau and CaynmanIslands in 1969. Because of this decision, the small banks were perimitted to capture dollar deposits belonging to non-residents in the U.S. and,then to lend thope dollars outside the network of the "voluntary capital export restraint program." As of the end of August 1973, 110 bank branches were carrying on eurodollar business as their principal activity, and many other banks were transacting in eurodollars as secondary operations; 101 of the eurodollar branches belonged to American banks. Total eurodollar deposits amounted to about $15 billion at that time.

78. Another similar reason for the creation of "shell banks" in Nassau was the credit squeeze introduced by the Federal Reserve Board in 1968-69-70, and, particularly, Regulation Ql/ of the same Board, which made it somewhat difficult for commercial banks to borrow in the American money market for lending inside the country. Again, the big American banks were able to overcome the problem by borrowing in the London eurodollar market. However, the small and medium-sized banks found the creation of a branch to be expensive in London, but cheap in Nassau.

79. The cost of runninga "shell"banAk is low in Nassau. Unfortunately, the value added to the nationaleconomy is also low. For instance,the annual expenditureof a small eurodollarbank a%s:f December 31, 1971 was as follows:

Table 22: EXPENDITUREOF A S.SAUl;SHELL BA!-KIN NASSAU

(In Ewual`kisn dollars) License ,,'!4 Managerfee 1,OO Audit fee 178 Legal Notice 128 Sundry 46 3,356

In fact, this "shell" bank had no office in the Bah:unas and its manager, only in charge of bookkeeping, was also the manager of a major financial institution. The operational cost is about $h40O0 for a nlediun size eurodollar bank with its own manager and personnel.

1/ Regulation Q sets the maximuminterest rates the commercialbanks can pay on Certificates of Deposit. These maximuminterest rates are below what a free market would bring about. Therefore,it is not convenienLt for a foreign holder c4f dollars to lencl his dollars in the U.S. - 38 -

80. Except for the salaries of clerks and managers which brought some amount or prosperity to Nassau, offshore elurodollar operations h2ardly touch the national economy. The actual lending and deposit operations are arranged outside the Bahanas. Depositors are instructed to credit the funds to the shell branch account in Nassau. Similarly, when a.loAn is made, the money is only nominally drawn from. the shell account. The shell bank merely receives a letter of confirmation from elsewhere in the world. The interest earned is usually credited to the shell to avoid taxes.

81. The prosperity brought to Nassau by the eurodollar business in late sixties and early seventies could prove similar to the prosperity brought about by the American Civil War in the 1860's or the U.S. prohibition era in the 1920's. History may repeat itself. Eurodollarprosperity, heavily dependent on the U.S. balance of payments situation and the corresponding U.S. monetary policy)may prove to be ephemeral.

82. Some of the causes favoring the emergence offNassau as a financial center are under control of the Bahanas or are inherent to the country. They are:

(a) Tax haven policy. The Bahamas main attraction as a tax haven is the lack of income tax and capital gains tax. A Bahamian company pays a fixed annual fee of B$250. Banks and trust companies pay an annual fee from B$1500 to, B$45,000, dependent upon the nature of their license. Insurance companies also pay low fees. However, in most cases, income taxes have to be paid when profits are repatriated f4romNassau to the capital-exporting country anyway. The main advantage,then, is to postpone this payment.

(b) Exchange control regulations. These regulations are straight- forward. When a n)n-resident corporation, which is managed by an authorized trust company or agent, has been granted "non-resident" status, no further reference to the exchange ccntrol authorities is necessary. Thus, the corporatior can trade in non-resident securities as well as maintain non- resident bank accounts.

(c) Geographicalposition. Nassau branches are often better located than European branches to provide timely eurocurrency rates to customers in the U.S., Canada and South America, particularly the west coast. For American banks with world- wide branch networks, there is the added benefit of being in the same time zone as New York, with which the major part of all business transactions are done. Advantageous geographical position is complemented b- excellent teleohone,telex, cable, postal and air communications between the Bahamas and the U.S. - 39 -

(d) Secrecy and English law of trusts. The secrecy attached to relations and transactionsbetween financial institutions and their customers has been another factor in attracting business to Nassau. The statute law of the Bahamas, superimposed upon the British law of trusts, has strengthened security and confidentiality,essential factors to attract business from investors, eager to avoid the payment of taxes in their country of origin, or wanting a safe place for their money.

(e) Presence of laxge international accountancy firms and qualified lawyers. rhis essential factor for the development of any financial community is obvious. It attracts business, and, in turn,it is attracted by financial transactions.

83. As a result of the reasons stated in the previous paragraph, the trust and insurance business flourished in Nassau City. The establishment of trust companies was the primary attraction to overseas financial institutions to come to the Bahamas, and, in many cases,commercial banking, eurodollar banking or insurance are largely adjuncta to the trust operations. Most of the trust institutions are dealing with "offshore funds" escaping from high tax countries. The services that these institutions provide are those of trustees, custodians, registrars, transfer agents, and administrators. The trust companies provide nominee arrangements for clients who prefer anonymity, they hold directors' and shareholders' "meetings," prepare minutes of those "meetings," and keep accounting records. In general, they render any kind of service dealing with financial property. As of the end of January 1973, there were 53 financial institutions doing trust business with the general public, 43 of them also doing banking business as commercial banks or eurodollar banks. Also connected with the trust business, there were about 1.20 insurance companies doing business in Nassau.

D. Tourism

6h. As stated in Chapter II, tourism is the dominant sector in the Bahamas, and as such, it has molded the country's economic structure. Thus the importance of tourism in this economy will not be discussed here again. Rather, the analysis will focus on demand and supply factors with a view to analyzing the industry's prospects.

Tourism demand

85. The growth demand of tourism, stemming mostly from the U.S., was spectacular from 1958 up to 1969. During those eleven years, the annual growth rate of tourist arrivals was 20%. Apart from the diversion from Cuba to the Bahamas of about 200,000 visitors in the late fifties and early early sixties, the major factor influencing demand for tourism in the Bahamas was the growth of the U.S. economy as measured by the increase in the GNP of that country. In the past for every 1% growth in the U.S. GNP, tourist arrivals into the Bahamas grew by - 40 -

3.1%. This result comes from the regressioA equation in Chart 5. To put it di.Cferently, for every billion dollars of growth in U.S. real GNP, touri!;t arrivals into the Bahamas increased by about h,000.

8o. In the total number of visitors from different countries, the proportion of U.S. citizens is about 86%. This proportion increased up to 1969 and then declined slightly in 1972.

Table 23: VISITOR'S POINTS OF RESIDENCE (percent)

1966 1969 1972 U.S.A. ? Ganada 9.4 5.1 7.3 United Kingdom 3.0 l14 1.2 Western Europe - 1.5 1.7 Rest of the World 5.1 4.5 3.5

87. Proximity to te Bahamas and per capita income in the state of residence are two important factors explaining the geographical distribution of U.S. visitors. Thus, 22% of the visitors come from Florida and 17% from New York. In general, eastern states predominate. Massachusetts, Connecticut,New Jersey, Pennsylvania,Maryland and Virginia account for 27% of total visitors. The proportion of visitors from southern states is relatively high, given their proximity, while visitors fram California, for instance, despite the sizable population of that state and its high income per capita,are only 3.8% of the total U.S. visitors because of the state's remoteness.

88. The importance of the cost of tbavel factor is highlighted when this factor is connected with air fares and the Bahamas is put in the Caribbean context. Thus, Puerto Rico and the Bahamas.which have the lowest air fare from New York, have the highest proportion of U.S. visitors, while Barbados and Trinidad and Tobago, which have the highest air fare, have the lowest sr .T>kt4onof U.S. visitors. Jamaica is in an intermediate position.

Table 24: BAHAIASAIR FARE IN COMPARISON WITH SOME CARIBB13N TOURIST COMPETITOR'S COUNTRIES

Air Fare from New York Proportion of visitors 'beforeoi'l crisis) from U. S. 190 87 Buerto Rico 188 89 Jamaica 258 81 Netherlands Antilles 334 42 Barbados 3)48 314 Trinidad and Tobago 370 30 - 41 -

CHART5

RELATIONSHIP BETWEEN TOURIST ARRIVALS INTO THE BAHAMAS AND U.S. GNP

TOURIST ARRIVALS IN THOUSANDS

1600 ______

1400 - _ .9

1200 _ l l l _ YA

1 000 -- - - ~ ------

800 R2 =0--.92--SE--86__91

400 1958 SI 16 1 6 3 4 6-6 6-8 9 17 1 7

60059 160 6 6 3 4 65 6 6-8 9 190 71 7

400~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~ol ak80 - 42 -

89. The Bahamas and Puerto Rico are the main Caribbean recipients of U.S. tourist demand. In 1972,each country attracted more than one million visitors fram the U.S.,equivalent to 60% of U.S. tourist travel in the area. The closest competitors are Jamaica, with 300,000 visitors, and Bermudawith a similar number.

90. The Bahamas appeals especially to Americans between 40-49years of age or between 20-29, with college edueation and per capita yearly income over $25,000. A large proportion of visitors are businessmen wanting "to get away from it all" and young honeymooning couples. But the country has a potential appal for almost every kind of holiday maker. The Bahamas is attractive not only becauoe of bright sun, clear waters and white sand but also because there are some exclusive places and eventful history, gambling casinos, and a ringe of choices to suit different tastes in privacy, luxury, and sport activities, such as fishing, scuba diving, snorkeling, golf and boating. 91. Tourist arrivals have a mildly seasonal pattern. The country has been able to achieve a good balance of tourist arrivals among seasons. For instance,in 1971; 25.2%,26.5%, 26.C% and 22.3%. In the early sixties, the Ba.hamianhigh season was concentratedin the first four months of the year,coincidingwith winter-springin the U.S. However, in the middle sixties,the country developed a cheaper secondary tourism season,especially in July and August, coinciding with holiday time in the U.S. Hotel rates are lowered about 33% from April 15 to December 15. This secondary season has a low point in September and October, the rainy months,when tourist arrivals drop 30% below annual average. To counteract this drop, in 1973,the program "Pack-a-Partner" was developed. It included two for the price of one for a minimum stay of seven nights. But the winter season has always attracted the high income tourist; the summer season, the middle income one.

92. Tourist arrivals in the seventies have been growing slowly.

Table 25: TOURIST ARRIVALS 1969-73

Year Total tourist arrivals Annual growth rate Annual growth rate Bahamas Bahamas Caribbean Average

1969 1,332.000 24.0 15.15 1970 1,298,000 - 2.6 1.56 1971 1,464,000 12.7 8.28 1972 1,512.000 3.3 9.33 1973 1,520.000 0.5 n.a. - 43 -

The decline of tourist arrivals in 1970 correlates with a decline of .3% of US;GNP in 1970. Yet, the small increase in tourist arrivals in 1973 does not correlate with the big US GNPincrease of 5.2% in that period. It cannot be explained either by lack of hotel facilities because occupancy rates were 60%in New Providence and 40% in the Family Islands in 1973. Other causes have to be found for the poor show of tourist arrivals in 1972 and 1973. 93. One cause of the decline in tourist arrivals could be the declining quality of services. According to the Dayton and Keenan Report,l/ each year a larger percentage of visitors appears less satisfied with their Bahamian vacation. The effectiveness of the high promotional expenditures of approximately $1,160 per year per hotel room is destroyed by derogatory reports made by actual visitors to their friends. Sluggish tourist demand should partly be traced back to this factor. This hypothesis is compatible both with the Ministry of Tourism figures, showing only 20% repeat visitors in a 3-year period and the lower than average Caribbeen growth rates in tourist arrivals s?own in Table 25. Friendly attitude and competent services are like tangible commodities and weigh heavily in the visitor, assessments of their Bahamian vacation. 94. The decline in the quality of services is related to management problems. The threat of not getting renewal of working permits deters foreign managers from exercising full authority over employees. This situation, in turn~deters qualified foreignprofessional managers from accepting top and medium level positions in the Baharian hotel industry. As a consequence, hotel administration leaves a lot to be desired. Not only does service to tourists decline in quality,but costand waste are high, and controls weak.2/Bahanianization is obviously a legitimate aspiration of the Government andpeople. The problem is how to implement it without harming economic efficiency. 95. Another cause of sluggish tourist demand in the seventies can be partly attributed to the diversion of a number of U.S. middle income visitors frcm the Caribbean to Europe. This was made possible by group travel, charter flights and, in general, the air fare reduction that took place in 1970 and onwards. Tourism diversion to Europe probably has occurred in the summer seasons, and especially in May-June. The zero growth of tourist arrivals intc) the Bahamas from 1969 to 1972 in the named months is clisist- ent also with this view. It is consistent also with the high season of U.S. tourist traveling to Europe. g,/ Prepared for the Ministry of Tourism, August 1973, p. 50. 2/ Dayton and Keenn op. cit. According to the Report,the NewProvidence Hotel industry lost US$8 million in 1972, p. 12. - 44 -

96. The oil crisis affects tourist arrivals into the Bahamas in two differe.t and perhaps opposing ways. On the one hand,the oil crisis may slow dowrn considerably the rate of growth of the U.S. economy, not to speak of that of Europe. This will have detrimental effects on tov.rist arrivals into the Bahamas. On the other hand, the curtailments of charter flights and discountsin air fares, and suspension of cruise ti-?s, a by-product of the oLl ¢risis, is harming the Bahamas much less for two reasons. First, the country already has,in 1974, the lowest air fare for U.S. tourists in the Caribbean. Second, due to its large oil refining and bunkering facilities, the country has plenty of oil to ensure proper supplies for jets with charter flights and cruise ships. Therefore, these two factors may favor the selection of the Bahamas for vacation, reversing the trend pointed out in paragraph 95. Consistent with the considerationsabove, tourist arrivals are, in fact, holding up well in 1974.

Tourist expenditures and the tourist multiplier

97. Tourist expenditures are the pump that keeps the economy running. Tourist expenditures reached the level of B$286 million in 1972, equivalent to 49% of GDP, 69% of GNP and 64% of export of goods and non-factor services, oil excluded. The tourist expenditures bill had the following breakdown in 1972:

Table 26: TOURIST EXPENDITUREPATTERN 1972 eo e ce oun

1. Hotels 117,393 41 2. Meals and Beverages outside Hotels 43,200 15 3. Gratuities 13,648 5 4&. Transportation a) local tax, tour cars 17,328 6 b) interisland 4,383 2 5. Shopping a) souvenirs, gifts, perfume and glassware 25,324 9 b) straw work & handicraft 5,642 2 c) package liquor 5,955 2 d) food & beverage from markets 6,039 2 6. Entertainment a) casino 31,756 11 b) sporting equipment 5,555 2 7. Miscellaneous 9,321

Total 285,544 100 - 45 -

98. The above table permits a rough estimate of the direct current import component of tourist expenditures. It is around 25%.1/ The total import coefficient is similar to that of the economy as a whole and equal to about 50C. Thus, assuming that the average propensity to save (=0.386, GDS/GDP, paragraph 51) and the average propensity to import (=0.504paragraph 34) are both equal to the marginal propensities,the tourist multiplierturns out to be 1,12.2/ Therefore, the direct and indirect impact of tourist expenditure on domestic product would be about (B$286 million x 1.12) B$320 million, equivalent to 55% of GDP and 77% of GNP, as stated in paragraph 29. The low tourist multiplier is explained by the high leakages reflected in the high propensities to import and to save. Since we used gross domestic saving, comprising big factor paymentsabroad,saving leakages are quite similar to import leakages.

99. The length of stay and the type of visitors (air or sea stopover visitors vs. cruise visitors) are important factors influencing the amount of money spent by tourists. The average length of stay was 6.17 days in 1972 per each air or sea stopover visitor, higher than the Puerto Rican average (5.4) or Bermudan (5.4), but lower than the Jamaican (8.0) or Barbadian (6.4). This type of visitor spends on the average B$267 per visit, an amount slightly lower than the average visitor to Puerto Rico, but higher than the visitor to Jamaica and other countries. Cruise visitors spend only B$45 per visit.

100. The average length of stay increases when the visitor's point of residence is further away. Visitors from U.K. stay 15 or 16 days on the average, other Europeans 9 or 10 days, Canadians about 8 days and U.S. visitors, who travel the shortest distance, stay about 5.5 days. Among U.S. visitors, those from Miami stay 4.0 days on the average, and those from California about 6.0 days.

101. Total tourist expendituresin real terms remained stagnant in 1969- 72. In the case of stopover visitors, the average length of stay increased from 5.6 days in 1969 to 6.2 in 1973. But, as a result of the different factors at play- a small increase in length of stay, in the number of visitors, in the expenditureper visit; and the 5.8% inflationaryrate - total stopover-touristexpenditures remained stagnant in real terms. In the case of cruise visitors, despite the high increase in numbers since 1969, (6.5% annually),the per visit expendituredeclined so sharply that the net increase in total expenditures has been low in money terms, an actual decline in real terms.

1/ The import component is higher than the Puerto Rican but lower than the Jamaican and other Caribbean countries. The high cost of services ex- plains that low import component.

2/ Using the standard Keynesian Multiplier K 1 - 1.12 MPS + MM - 4t -

Table 27: TOURIST EXPENDITURES1969-1972 1969-72 1969 1970 1971 1972 Growth rate Tourist xrrivals (Air Plus Stop Oversea) 970,325 891,479 960,818 1,036,210 2.2 Average Length of Stay (Days) 5.6 5.9 5.9 6.2 3.5 Per Diem Expenditure (B$) 39.96 41.17 45.14 41.82 1.5 Per Visit bxpenditure (B$) 225.37 242.08 266.33 258.03 4.6 Total Expenditure (B$ million) 218.68 215.81 255.89 267.22 5.1 Cruise Visitor Ar- rivals 337,071 351,865 435,825 407,191 6.5 Per Visit Expenditure (B$) 49.75 48.40 50.00 45.00 -3.5 Total Expenditure (B$million) 16.79 17.03 21.79 18.32 3.6 Grand Total Expenditure (B$million) 235.45 232.83 277.69 285.44 6.6

Price index 94.2 100.0 104.6 111.7 5.8

Tourism sup~ply

102. The Bahamas' tourist facilities are the largest in the Caribbean, followed closely by Puerto Rico. A distant third is Jamaica. Then, far behind,are U.S. Virgin Islands, Bermuda and Barbados.

Table 28: TOURIST ACCOMMODATIONSIN THE BAHAMAS AND OTHERCARIBBEAN COUNTRIES, 1972

Percent of Rooms Carbban Total

Bahamas 12,515 22% Puerto Rico 12,440 22% Jamaica 8,978 16% U.So.Virgin Islands 4,513 8% Be.rauda 4,286 8% :uz'>adoJs 3,663 7% 0ther 9e407 17 55,502 i - 47 -

103. Three separate resort areas may be distinguished in the Bahamas: New Providence, with 44% of hotel accommodations; Grand Bahams,with 37%; and the Family Islands,with 19% of the total.

Table 29: HOTEL ROOMSAVAILABLE Urowrn rate 1962 1966 1969 1970 1971 1972 % 1972 69-72

New Providence 2,153 2,684 4,370 3,909 5,097 5,005 44 4.6 Grand Bahama 397 2,159 3,620 3,905 3,884 4,136 3'7 4.5 Family Islands 805 1,164 1,513 1,773 1,866 2,086 19 11.3 Total 3,355 6,007 9,503 9,587 lo,847 11,227 100 5.1

104. In New Providence,92%of the tourist accommodationsare hotels. Only 6$ are apartments,villas and cottages. Moreover, 57% of the hotel rooms are concentrated in big size, over 300-room hotels. About one-third of the hotels have less than 50 rooms,and they include only 6% of all hotel rooms.

105. Hotels in New Providence can be separated into two distinct categories: those located in New Providence 1sland proper and those in Paradise Island. Hotels located in New F ovidence Island tend to be old and European type. They have good servic?s but lack gambling casinos. They cannot attract large conferences aracd;:onventions due to lack of facilities to accommodate 1,500 to 3,000 perscb' . On the other hand, the Paradise Island hotels appeal more to the American taste. They have the advantage of isolation from city traffic, planned landscaping for the entire area, extensive convention facilities, a casino and a wide choice of gourmet restaurants. As a result of these differences, Paradise Island hotels normally have an occupancy rate of 70% against 60$ in New Providence. Moreover, Paradise Island hotels charge higher prices tltanthose in New Providence.

106. In Grand Bahama,the existing tourist facilities present a somewhat different structure than in New Providence. Condominium units, licensed apartments and villa accommodations represent about 15% of tourist accommodations. Hotel rooms are about 85% of room Eupply. Since 1962, there has been a massive increase in accommodations. As demonstratedby Table 29 the increase in 1962-72 was tenfold. Moreover, hotels in Grand Bahama are typically large. The average size of hotels is 252 rooms, compared with 143 rooms in New Providence and 27 in the Family Islands.

107. Hotels in Grand Bahama, located 45 minutes away from the worj?d's largest and most affluent market,were designed, built, decorated, landscaped, and programmed to provide services for upper middle and upper income groups. They are luxury accommodations that require a higSsoending visitor. But the atmosphere in the area has clanged. The high spending visitor appears to - 48 -

be going elsewhere,and,tocompensate for the 108s of revenue, operators, with few exc-otions,haveresorted to mass propaganda directed to increase the arrivals of the middle income, budget-mindedtourist. This policy has affected the profitability of tourist investmentsand has slowed downgrowth nn the area considerably.

'be. Unlike New Providence and Grand Bahama, in the Family Islands, hotels are of medium size. Moreover, hotels in the Family Islands account -or only 59% of tourist accommodations available; apartment-villas account for 35% of the total and guest-houses for 6%. Since 1970,guest-house facilities have doubled,and self-catering accommodation units have increasedby 27C$.

109. The existing infrastructureconfines the Family Islands to the middle-upper income tourist. Sufficient infrastracture does not exist to receive the mass market. For instance, roads from the airports to the resorts are frequently dusty and full of holes,making uncomfortable the usually long ride to the accommodations. The airport terminals are usually l-ttle more than shacks and air strips. But the accommodations themselves are attractive, operated with care for the comfort and pleasure of the guests because they depend on a high percentage of repeat business, as well as long stays. This kind of accommodationappeals to the conservativeguest seeking rest, relaxationand being away from the crowds which are inevitable at larger resorts.

Occupancy rates

110. During 1969-72,thegrowth rate of availablerooms was 5.7% outpacing the number of stcpover tourist arrivals,whichgrew at 2.2% per year. This caused the average occupancy rate to decline from about 80% in 1968 to an average of 60% in 1972. The decline in the occupancy rates has caused the hotel construction business to stop almost completely in the last two years, with dampening effects on economic activity,as discussed in paragraph 45.

111. In 1972,occupancy rates were relatively high in New Providence and low in the Family Islands, where the seasonal pattern of occupancy is more marked. Grand Bahama operated at a rate of occupancy in between those of New Providenceand the Family Islands. Preliminarydata for 1973 suggests that occupancy remained roughly the same as in 1972 in New Providence and Grand Bahama, but increased substantially in the Family Islands. - 49 -

Table 30: % HOTEL ROOMOCCUPANCY, 1972

Nassau Freeport Family Islands

January 57.6 41.6 35.1 February 77.7 69.1 55.4 March 78.3 78.6 66.6 April 77.7 54.7 58.7 May 58.8 n.a. 35.3 June 54.2 na.a. 32.6 July 71.4 n.a. 41.6 August 80.6 62.1 43.1 September 44.7 37.5 22.8 October 51.0 40.8 25.6 November 65.7 57.1 39.6 December 60.2 55.3 48.9 Average 64.9 n.a. 43.1

Competitivenessand prospeCt-S

112. The Bahamas hotel industry has maintained competitive rates with other tourist areas. Thus, in 1972,,average real rates in the Bahamaasand other leading tourist areas were as follows:

Table 31: PRICE COMPETITIVENESSOF BAHAMASIN COMPARISON WITH OTHER TOURIST AREAS - 1972

Nassau & South Total Paradise East Puerto Caribbean -Island Z1;d Uo Aami.

Average room rate 28.64 27.88 24.36 31.48 21.83

113. Hotel costs are bound to increase substantially in 1974. Labor costs,stemming from a new collective ccntract, are going to increase by 15%. A new social security scheme is probably going to be implemented this year,implying an additional cost estimated at 5% of the cash payroll. Superimposed upon these cost increases are sAarp rises in the cost of electricity, fuels, telecommunications, water-, food and hotel supplies.

114. Higher costs could only partly be shifted to higher prices becauIse of the increasing competition in the tourist market. Jamaica, Bermuda, Puerto Rico, Barbados and some of the smaller islaaids such as Caymans and Antigua are stepping up their tourist promoti^- expenditures. haiti is - 50 - a new competitor, and there are indications of some tourist revival in Cuba. `enezuela and Mexico,with their far larger resources, are developing new nultinillion dollar resorts on their Caribbean coastline. On top of increasing competition comes the oil crisis, constraining the growth of travel.

115. Under these conditions-higher costs, increasing competition, oil crisis- the question is whether the country should step up its tourist promotion efforts or should try to diversify its economic base,investing heavily in sectors other than tourism so as to diminish the risks of over specialization. The answer to this question is that the country should diversify its economic base to the extent that the non-touristactivities can be carried out at nearly internationalcosts. To be more precise,there shouldbe an upper limit to the relative inefficiency of the non-tourist trade activities. This limit could be set up in the form of a uniform protective duty of no more than 20% for agricultural and industrial business. But,unless oil is discovered, tourism will continue to be the most efficient economic activity in the Bahamas and,thus,the easiest avenue for economic growth. Therefore, the thrust of the developmenteffort should continue to be in the tourismsector, which still has local employment potential.

116. To survive in the competitive area of tourism,twopolicies are obviously indicated for the Bahamass first, stronger efforts to improve the quality of tourist services (by serving the interest of tourists, Bahamianswill be serving their own interest); 8econd, improve hotel management and control to reduce costs and waste. These policies can be implementedby administrativeand policy decisions and do not require substantial capital outlay.

117. Although there is considerable room for improvement of tourist facilities in New Providence and Grand Bahama, the big potential for future development lies in the Family Islands. These islands have 89% of the Bahamian land and only 25% of the country'spopulation. Thus, lack of manpower would be a major constraint in a labor-intensiveindustry such as tourism. Since rental condominiums,cottages and self-cateringaccommoda- tions are labor saving, as compared with hotels, emphasis on this type of investment appear to be indicated here. A more flexible immigration policy may be necessary too, as recommendedabove. Moreover, the government should improve the infrastructure in these islands, especiallytransport infrastructure.

118. In achieving the right balance between the tourist trade and other trades, not only the economic cost and benefits should be measured. Also, the social and political cost and benefits inherent in welcoming more than a million visitors a year in a country with a population of 175,000 must be assessed. This is a difficult question,andthe answer, even a tentative one, is beyond the scope of this report. - 51 -

E. Water SUPDly and Sewerage

119. New Providence Island is facing a water supply shortage. The island, containing 61% of the country's population,has only 1.5% of its territory. Water comes mostly from well fields that are already producing at more than maximum capacity. Since ground water cannot be counted upon as a new source of supply, other sources have to be developed. Presently, supply is less than 6 million gallonsperday while demand is assessed at 8 million gallonsper day.

120. There are three sources of water supply. The first is a h,000 acre well field operated by the government, supplying 51.5% of the total output; the second is a 2,000 acre well field developed by the New Providence Development Company, a priva'e supplier which,in 1968,enteredinto a 13-year agreement with the government; and now provides 31.5%; and fie third is the Bluehills desalinationplant No.1 which supplies 17%. The well fields in New Providence have been overpumped and will have to rest soon to give the lenses opportunity to refill and bring salinities down.

121. Total demand for water increased at 17% per year from 1966 to 1970 and only at 2.5% from 1970 to 1972. Assuming a modest growth rate of about 4% in demand, the Ministry of Public Works forecasts a widening supply- demand gap. The Ministry's most moderate demand projection assumes an annual increase of 5% in domestic demand and a decrease of 5% for tourist demand. Also, the Ministry's forecasted supply-demand gap allows for a decrease in productiv:Lty of the over-pumped well fields.

122. To fill the supply-demand gap, the government policy is to diversify sources of water supply by:

(a) Installing a second 2 million gallons per day flash distillation plant, with waste heat boilers, to be in line by December of 1975. The process of multistage flash distillation requires a large input of energy in the form of steam. In order to save fuel, which constitutesabout 50% of the production cost in the desalination plant No. 1, the Ministry of Works is negotiating a contract with the government-owned Bahamas Electricity Corporation (B.E.C.) to use the heat wasted by the gas turbines installed nearby by B.E.C. A third similar flash distillation plant would eventually be installed in June 1976, depending on demand developments. The total cost of the two new plants would be $10.8 million to be spent in 1974-76;

(b) introducing a barging program from Andros Island starting with 2 a.g.p.d. by mid-1974. A local company has recently subxwtted a proposal to the Ministry of Public Works. The Ministry of Development organized meetings with Public Works and agriculture to ensure that water extraction from Andros Island will not damage the potential agricultural land existing in Andros; and (c) installing a -a7lt miflion gallon reverse osmosis plant at Lake Killarney, to be in line during 1974. This plant is of an experimental nature and would provide useful experience for possible future use of this method in the Southern Family Islands. TLo reduce its own risks, the government assigned to the supplier the obligation of providing up to 0.6 m.g.p.d. together with the full responsibilityfor operation and mai=enance of the plant. The grovernmentWill pay a rate lcwer Ithanthe top tariff it charges for water use.

123. At present,the Water Eupp7y and Sewerage Department is under the direct jurisdiection of the Mimistry of Public Works. But the government is setting up an independent self-financed government corporation to handle the water supply financial problems in the future. All the corresponding assets of the Ministry of Works related to water supply located in New Providence will be transferred to the new corporation,which will then be legally responsible for a $12 million investment program equivalent to about 15% of the government investment in the next five years.

124. Issues related to the creation of the corporation are being discussed now inside the government. Apparently, the tendency to minimize the independence of that corporation,reducing it to a mere financial and legal phantom,is prevailing. Under this idea,the corporation will not have its own staff. It will sublet its technical operations to the water and sewerage department of the Ministry of Public Works. Thus, the corporation will be charged with the cost of management services provided by the department. On the other hand, the corporation will be credited legally with thepro- ceeds of the water tariff. The financial surplus will be used for servicing the loans necessary to finance the investment program outlined in paragraph 122.

125. The creation of this kind of phantom corporation to handle the legal, accounting and financial responsibilities, leaving aside the real operation of the water supply system in the hands of the Ministry of Public Works,may prove a useless complication. Perhaps the main advantage of a government corporation over a government department is that the first is able to attract talent through better compensation of technicians,while the second, trapped in government type of pay scale is unable to get competent management. This advant,age is t4tal1y lo0t lnder the proposed legal scheme. 1,26, Moreover,to separate the stater legal and financial operations fr.o sewerage services does not see%Aeconomical. There are techntIcal and mP,nagc(crialJ, advantages in handling both water supply arnc sewerage together. Appropriate Lnvestments in sewerage may reduce the needs for investments in water supply. An integrated approach is indicated, given the interdependence of both services. - 53 -

127. In 1973, the would-be Water Authority experienceda loss of B$2,029,439,stemmingpartly from the insufficiency of the water tariff to cover depreciationand interest:

Table 32 s WATERAUTHORITT REVENUE STATEMENT 1973 (B$)

Total Revenues 3,618,534 Total Operating Cost 3,488,529

Operating Profit 130,005 Depreciation - 1,649,1444 Interest - 510.000

Net Loss - 2,029,439

128. The water rates in New Providence have a progressive structure that relieves the small consumer, charging more to the big one. Thus, the tariff enforced since April 1970 gives the first 1500 gallons per meter per quarter free. For every 1,000 gallons in excess of 1,500 gallons but not exceeding 15,000 gallors per meter per quarter, the rate is B$2.15. And,finally,forevery 1,000 ga.llonsin excess of 15,000 gallons per meter per quarter,the rate is B$3.70. The government is considering the adequacy of the current rate structure to recover costs and allow an adequate surplus for future replacement and/or expansion of plant in order to put the new corporation on a sound financial footing. The average water tariff was B$2.68 per 1,000 gallons in 1973. Although this tariff is high for international standards, a high tariff gives a correct economic signal because marginal costs of producing water through desalination plants in New Providence are also quite high. As pointed out in paragraph 1 6 1,these high costs bring about the need for a regional development strategy.

129. Sewerage is one of the most urgent developmentproblems in the Bahamas, particularly in Nassau. Since the economy depends so heavily on its tourist attractions, any epidemic will have a disastrous effect on tourist arrivals and,therefore, all over -the economy. Three main types of diseases are present in some areas of New Providence: typhoid, amoebiasis and infectious hepatitis. While the incidence of typhoid is small, in conditions such as existing in certain areas, the possibility of an epidemic cannot be ruled out. Amoebiasis has increased rapidly from 245 cases reported in 1963 to 502 in 1970, 338 of the latter occurring in the South Division of Nassau, where sanitary conditions are appalling. It is thought that cases of anoebiasis are grossB.7 under-reported and that the true figures are much higher. It is believed,too, tbat cases of infectious hepatitis are also seriously under-reported and tiat the true figure for 1970 may be near 1000. 130. The sanitary conditions in the so-called South Division of Nassau ca'll for action. With population densities varying between 40 amd 55 per acre, it is the poorest and most densely populated district in al' the Bahamas. The residential density is 13 houses per acre, a large proportion of timber houses. Potable water is obtained from Dublic standpipes. Water consumption is low; the effort of trans- oorting and storing adequate quantities of water for sanitation is the dominant factor causing standards of hygiene that are certainly not pleasant to describe.

131. To cope with the most urgent problems, the government has in view a $15 million sewerage project. The project comprises a reticulation system draining to a main pumping station where the sewage will be lifted into a new sewage treatment works plant at Harold Pond, south of Nassau. Disposal into the sea is not acceptable on grounds of amenity and cost. The alternativeis inland disposal, by deep well injection, after treatment by the activated sludge process and chlorination.

132. The referred project includes, as a minor cost item, but with important economic benefits for the country, the installation of devices for discharging sewage from cruise ships anchored in the Nassau Harbour. In the past, cruise passengers used to go to sleep in the Nassau hotels. Since they now sleep on the ships, the harbour is becoming increasingly polluted,harmingthe beaches and hotels in the New Providence harbour up to Cable Beach, in Western New Providence Island. Moreover, since the present method of refuse disposal is unsatisfactory,a refuse pulverizing plant would be constructed also at the HiaroldPond Sewage plant,where the treated refuse might be combined with treated sludge to form either a land fill material or a compost for agriculturaluse. It is thought that it will be pDssible to produce some 12,000 tons per year at a cost of $4 to $5 per ton,whichshould attract a ready marketin view of the lack of top soil on the island. 133. On the issue of how to financethe project,thereare two views. The prevailinggovernment idea, at this point,would be to excludethe sewerageproject from the new corporationreferred to in paragraphs123-26 on the groundsthat this projectcannot pay for itselfand will have to be subsidized with central governnment revenue. Water development, instead, could be financedwith the water rate. Actuallr, however,the consultants Dobell Howard Humphreys Ltd. recommended that the sewerageproject be financed by increasing the water rates 100% on the grounds that the use of water is closely linked to the use of sewerage facilities. This way of financing the project will not destroy the social content and income distributionside of it, becausethe tariffon water allowsfor 6,000 gallonsper year free per each meteredconnection. This free water allow- ance could be extended somewhat without any substantial loss in revenue. - 55 -

F. Electricity.Telecommunications and Transportation

134. Economic developmenthas caused the demand for electric power to spiral in recent years, and a heavy capital expenditure program has resulted in installed generating capacity being more than doubled since 1968. The Bahamas Electricity Corporation, a government enterprise established in 1956 to supply electricity to New Providence Island, is now operating in the Family Islands as well, and plans have been drawn up for the installation of generating stations in North Bimini, Cat Island, San Salvador, and Andros. Electric power in Freeport is provided by a subsidiary of the Port Authority,which doubled its generating capacity between 1968 and 1971. With regard to electricity rates -partly due to lack of eccnomies of large scale production, partly due to ineffi- ciencies, partly due to overinvestments -they are high in the Bahamas, about 2-3 times higher than in the U.S.' But energy produced per capita reached more than 3000 Kwh in 1972, almost as much as in Australia.

135. Modern automatic telephone systems are available in New Providence, Grand Bahasm, Abaco, and Harbour Island. In late 1972, a B$8.4 million submarine cable between Nassau, Freeport, and Miami was brought into operation, making direct dialing between the Bahamas and North America possible. Its initial capacity is 380 channels,but this can be increased to 1,380 channels. All communications, with the except- ion of private telephone systems covering Freeport and some other areas, are operated by the government-owned Bahamas Telecommunications Corporation (BATELC0). Services have been improving through a B$31 million expansion and modernization program currently under way. In 1972, there were 28 telephones installed per every hundred persons, as many as in Australia and in the United Kingdom.

136. Due to the development of tourism, the Bahamas is extremely well served by internationalairlines and by a recently created national airline. Most of these flights operate to and from the international airports at Nassau and Freeport. These airports do not have capabilities to receive jumbo jets, however. There are daily flights to several cities in North America and Europe. Due to the fragmented nature of the country, air service also plays an important role in internal communication; there are some 50 smaller airports and landing strips scattered throughout the islands.

137. Nassau, the main seaport located on New Providence,hasa fine harbor. A modernization program carried out in the late 1960s,at a cost of B420 million,has raised its facilities to a high standard. The improvenaent of the deep water harbor of Nassau has extended the docking facilities to such an extent that several big ocean going ships can dock at the same time. Modern port facilities are also available in Freeport, including one of the largest offshore bunkering terminals in the Western Hemisphere. Plans are in an advanced stage for the development of Arawak Cay, an artificial island adjoining Nassau Harbor,and for the construction of another harbor in Orand Bahama. There, a deep water petroleum trans- shipment terminal will be constructedto accommodate tankersup to 250,000 tms. Oil will be transhipped mainly to the east coast of the United States. 138. There are about 1,800 miles of motorable roads in the Bahamas, 300 being on New Providence and abou t 700 in the West End/Freeport area of Grand Bahama. The road network needs to be improved in the Family Islands.

G. Educational P.rcblesand Policies 139. Some quantitative indicators show high educational standards in the Bahamas; the adult 1iteracy rate is about 93%. Arournd 83% of the population aged 14 years and over have more than 6 years of schooling. Around 32% of the total population are students. Enrollments in primary education are nearly 100% of the population of the respective school age. Enrollments in seccadary education are above 75% for grades 7 to 11. Moreover, education is campulsory between ages 5 and 14.

140. Consistent with the above quantitative indicators, the Government spends about 2b% of the budget on education. This educational effort is relatively recent, however.

Table 33: GOVERNMENTEXPENDITURE ON EDUCATION (in millions of B$)

ear Educational Groth Education- Growth Total Edu- Total Total Gov- Recurrent Rate al Capital Rate cational Govern- ernmuent Ex- Expenditures Expendcitures Government ment penditures Expendi- Expendi- in Educat- tures tures ion as % of Total Ex- _penditures

1966 4.9 - 1.2 - 6.1 414.7 13.6 19,67 7.4 51.0 3.1 258.3 10,.5 55.2 19.0 1968 10.4 140.5 rJ 9.6 1338 64.8 21.3

1,969 13. J 26.9 2.v, 141.2 15.2 81.3 18.7 1970 18.1 3 . . L. 7 235.0 22.8 96.9 23.5 1971 20.2 11.6 3,0 36 23.2 103.6 22.3 1972 21.6 6.9 3*. 6.7 2L4.8 104.5 23.6

Back in 1966,the Government used to spend less than in education. Since then,the rate of growth of rec,'rrent educational expenditures has been quite high. Capital expenaiture also has been expanding rapidly, but at an uneven pace. In 19714 and 1975,two EII4BANKloans to build pre- fabricated schools will help tc maintain and even raise capital educational expenditures at a lavel of $5 million. Recurrent experndi- tures are expected to grow at the same pace as in the last two years, therefore, educational expenditures will continue to be about 24% of the total.

141. Although some quantitative indexes of Bahamian education are high, the qualityof educationis low. Causes of poor quality can be traced back to a high proportion of untrained poor quality teachers, to the existence of 'fallage" schools in the Family Islands, and to the rapid expansionof the systemmentioned earlier. 142. Teachertraining is essentialfor progressin the Bahamian educationalsystem; thus about66% of the teacherswere untrainedin 1969 in the FamilyIslands. In New Providence,thesituation was better, but stillwith 20% of the teachersuntrained. To cope with the teacher trainingproblem,there are two teachers'colleges: The BahamasTeachers' College in Nassau and the San SalvadorTeachers' College in the island of San Salvador. The first one trainsteachers for primaryschool as well as juniorsecondary school. The secondone is a residentialestab- lishment offering a three-year course for primary teachers,almost exclusively for jobs in the Family Islands. Most trainees enter these colleges after three successful years of secondary school. Trainin oDursesfor seniorsecondary school teachers do not exist at the moment.

143. A major secondcause of poor qualityeducation comes from the geographicaldispersion of the country. In some of the Family Islands, the number of studentsis too low to divide classesinto grades;therefore, studentsall stay in thesame classroom despite different ages and number of years in school. As.a result, students living in the Family Islands sae seriously handicapped in their educational opportunities in relation to those living in New Providence.

1414. By analyzing the results of exams taken at the end of the secondarycycle, the poor qualityof educationbecomes self-evident. Thus, in 1971,therewere 1,568 candidatesfor the GeneralCertificate of Educationof the Universityof London,ordinary level, and 629 candidates (40%) did not pass any subject.For the Universityof LondonCertificate, advanced level,the totalnumber of exams was 217,while the number Passed was 67, onLly 31%. When efficiency is measured with Bahamian standards, the results are not satisfactory either. Of the 17,691 exams taken to obtain the Bahamian Junior Certificate, after 3-4 years of secondary education,only 7,283 (41%)were passed.

145. Within this dismalsituation, however, there are a few pockets of good qualityeducation. They are confinedmostly so expatriates, to graduatesfrom the GovernmentHigh Schooland to a few privateschools. Of the 99,200persons with fourteenor more years of education,5,200 were expatriates. The Government High School has admittedly good standards, but only 90 vacancies per year; therefore, competition to get into this school is acute. - 5 a-

146. Since the number of good secondary school vacancies is small in relation to the number of student candidates,selection has to be through an annual Common Entrance examination. Usually 3,500 pupils take this examination with the purpose of getting one of the 200 good vacancies. The tests in English and arithmetic are heavily weighted in favor of those that had skillful teaching of language use and number drills. They do not indicate anything about the child's capacity to learn new material. Since this selective system does not meet the Governmentgoal of comprehensivesecondary education, the Government is planning to drop it. But no replacementfor another type of exam is in sight. Therefore,the quality of good schools is going to drop without warrantee thatin the other schools,qualityis going to rise.

1h7. Vocational education is concentratedin the C.R. Walker Technical College, a school which resulted from the amalgamation of some schools in 1971. The college o&fers full-time, day release, and evening courses in a wide variety of subjects such as Radio and TV Servicing, Cosmetology, Photography, Painting and Decorating, Printing, Light Clothing Manufacture, Mechanical Engineering, Retail Sales Merchandising, Motor Mechanics, Advertising, IEM Key Punch, Dressmaking, and Hotel Keeping and Catering. In the 1972/73 academic year, the number of full- time students was 427,while the number of day release and evening students was more than a thousand. Vocational education in the hotel training school, jointly financed by industry and the Government, has been found inadequate. The hotel training school program is being changed because of the lack of employment opportunities for its present graduates. For instance., of the 20 recepti^onists graduated last June, only three could get jobs. This situation, stenming from a stagnant tourist sector, has forced the Government and the hotel association to substitute the present type of program for another one with emphasis an training of supervisory technical personnel, so that trained Bahamians could eventually replace expatriates.

148. Over the last few years, strong emphasis has been placed upon higher education. Since there is no college or university in the Bahams, the students go to study abroad. In 1971, the Government offered 100 scholarships for this: 45 in the United States; 11 in the United Kingdom; and 39 at the University of West Indies, to which the Bahamas is affiliated. The majors sought by Bahamian students abroad are business administration, economics, education, medicine, engineering and English. It is estimated that the total number of Bahamian students pursuing higher education outside the country is well over three hundred. In order to avoid part of this temporary brair drain, the Government is trying to put together the upper grades of some existing schools,thus establishing the beginning of the College of the Bahamas ir.197h.

149. The Government'seducational policies are spelled out in a White Paper on Education issued recently. The policy objectivesare: -59 -

(a) to reinforce teacher traiz.ing to equalize opportunities for children in the Family Islands with those in New Providence;

(b) to divide secondary education into junior and senior categories;

(d) to establish a national examination at the end of the junior secondary school term to assess interests, attain- ments and potential for all students;

(e) to provide senior high school students with a number of options such as academic training, vocational training, teacher training, nursing, social work, hotel studies, engineering,construction, agriculture, marketing, gardening,landscaping, and commerce. This part of the program would be crucial, given the country goal of Bahamianizationof the economy.

(f) to give substantial support to voluntary or independent schools. These schools are mostly under the control of the different churches, They recruit about 27% of Bahamian students of all kinds.

(g) to establish the College of the Bahamas, which will comprise the present Bahamas Teachers College, the San Salvador Teachers College, the two upper-gradesof the Government High School, the C.R. Walker Technical College, and the Hotel School. This unificatbn, hopefully, would lead to a better use of buildings and classes. It would also provide flexibility with credits and options;

(h) to increase substantially the number of Bahamian teachers as opposed to expatriate teachers.

150. Given the high priority that the Government assigns to the Bahamianizationobjective, education acquires special relevance. Although educationalprogress has been considerable,a lot more remains to be done. One key point would be improving the quality of education through teacher training. Another one would be improving vocational training and relevancy of education towards jobs in order to allow Bahamianas to take over, smoothly and efficiently, medium and top pouitiona in private industry. IV. D7EJZOPIENT STFATEGYAXD ?UBLIC INVESTMENTPROGRAM 151. . formal development plan does not exist yet in the Bahamas. Some ideas, however, are spelled out in the White Paper on Independence. These ideas contain, in an embrionary form, a general outline of the country's objectives and development strategy. .i.Countrr Objectives

Political Style

152. The Bahamas has proclaimed her adherence to the fundamental rights and freedoms of the individual,e.g-, the right to liberty and security of the person, enjoyment of property and protection of the law, respect for privacy and the sanctity of family life, freedom of conscience, of expression, of movement, of peaceful assembly and association.

153. The country's relationshipwith its neighbors in the western hemisphere will be closer by virtue of common interest and traditional ties. The country's commitment to democratic principles is said to be irrevocable. Conscious of her size, the Bahamas has also recognized that she can not play a major role in the political affairs of the world. But her cultural relationshipswith her sister countries of the Commonwealth Caribbean will be cultivated.

Bahamianization

15h. Another relevant national goal is to achieve economic independence, the so-called Bahamianization,meaning an effectivelevel of control of the national economic environment,the maximization of the benefits to the Bahamas arising from both domestic and foreign investment, and an increase in Bahamian ownership and participation in business activity where this is possible. To achieve this goal, all foreign business should be able to indicate both the sincere intent to train Bahamian personnel and to sell stock to Bahamians. The use of foreign personnel should be limited as far as possible. Employers will have to present realistic programs for increasing the proportion of employed Bahamians over aperiod of time.

Target Growth Rates

155. There are no indicationsyet of any target growth rate chosen in order to plan the economy. Therefore, to figure out what the future may bring to the economy of the Bahamas, we made a sensitivity analysis. In this analysis,we assumed two different growth rates, a maximal one and a minimal one. At the same,time other parameters are assumed: incremental capital output ratios (ICORS), minimum import elasticitiesand maximum navional saving ratios. All those parameters are fed into a bwo gap model that ensures consistency in the projections. The model is designed mainly to estimate - 61 -

the externasi capital requirements to achieve an specified growth rate. The workirgs of the model are explained in Appendix' B, and the results of the projections are in the Statistical Appendix. What emerges clearly froiithis exercise is that the external capital requirements of the Bahamian economy are extremely sensitive to the chosen target growth rate for GIDP. On the one hand,a real growth rate of GDP of 5% 1/ per year may bring about a foreign exchange deficit of more than 100 million a year. On the other, a rate of growth of GDP of 3% 1/ may bring about a foreign exchange surplus of more than $40 million a year. The political implicationsof choosing a given growth rate will have to be carefully analyzed by Bahamian policy makers.

B. Development Strate&L

156. The development strategy of the Bahamas hinges upon four different policies: first, tax haven to attract foreign investments;second, emphasis on tourism; third, emphasis on diversification;and fourth, emphasis on regional development. To some extent,these policies seem to conflict with each other or with the Bahamianizationobjective. Thus, the muaintask that the planners will face is to make objectives and policies mutuiallyconsistent.

157. First is the promotion of investment, especiallyforeign investment, by means of tax haven. This may conflict with the Bahamianizing immigrationpolicies, as pointed out in paragraphs 47-h9 above. Perhaps the neatest way of reconciling Bahamianizationwith attraction of foreign investment is,precisely,direct taxation, implying a drop in tax haven policies as discussed in paragraph 192, 198 and 202 below. For brevity, those arguments will not be repeated here.

158. Second is reliance on tourism. It is estimated in the White Paper that,by 1980,some two and a half million tourists will visit the Bahamas each year, against one million and a half in 1973. This target entails a growth rate of about 8% per year in tourist arrivals,starting in 1975. To contribute to meet this goal and, at the same time ,to assist the Bahamian enterprise, the government will provide free land for small hotels to be owned and operated by local families, especially in the Family Islands.

159. The tourist industry creates considerableemployment. Moreover, it tends to have a significantbackward linkage effect by generatingdemand for construction and foodatuffs, thus providing basis for increasinglocal agricultural production. But at present, the multiplier effect of tourist expenditures is small (=1.12, paragraph 98) because of a high import content of the tourist expendituresand because the profits of the industry go to outside interests. Thus'a complementaryobjective in the development of a tourist industry should be to enlarge its multiplier effect by reducing the leakages. This objective can be achieved by greater Bahamian participation and by reducing the extent of purchases of materials and foodstuffs abroad. For these policies to succeed, the quality of-tourist services should be increased, and the prices of materials and foodstuff produced locally

1/ Toge-therwith the high growth rate of GDP, exports are assumed to grow a-t8% per annum in real terms. With the low growth of GDP exports would grow a-t3% per annum. - 62 -

should not be higher than cif import price of products of similar quality.

160. The third main point of the development strategy is the diversification of the economy. This is a right objective to the extent that the new activities created are export activities, or, if they are import substitutionactivities, they do not need a protective tariff higher than 20-10%.1/Anyotler kind of protection,e.g.,with a higher tariff or with exchange controls,will, in all probability,leadto resource misalocationsand reduction of GNP per capita. It must always be rememberedthat the present high GNP was achieved mainly because of the tourist trade. Should the Bahamas havespecializedin agriculture or industry instead of tourism, her income per capita at present would have been no more than $600, as opposite to the $2,350 that the country is enjoying today. The right economic criteria for selecting commodities to be produced either for export or for import substitution, no matter if they are agricultural or industrial commodities, is to choose those that fulfill simultaneously the following two criteria: first, be produced at a reasonable cost, not higher than the international cif import price; and second, use considerable amount of local raw materials and domestic factors of production. Many other criteria floating around such as consumer goods or raw materials against capital goods, o-rlight industries against heavy industries, essential against non-essential, in whatever form they are defined, are usually misleading and should be dropped right away, if the Bahamas is going to avoid past misallocation of resources done in other countries with import substitution policies.

161. The fourth point of the development strategy is a possible regional emphasis. The word possible is emphasized because,in the public investmentprogram for 1974-77, investments in the Family 'Islandsare only about 5% of the total,as can be seen in Table 36 below. However, there is wide recognition in the government that regional planning should be the focal point of the development strategy. Economic development in the Bahamas has so far remained concentrated mainly in two islands,i.e., New Providence and Grand Bahama. The other islands, despite their greater development potential,remain underdeveloped. It is clear that, for instance, New Providence is overpopulated; thus the marglinu cost of basic services such as water is going up sharply and the polluticn problems are becoming extremely serious. Therefore,in terms of a development strategy, it is adequate to hold down at a minimum development efforts in New Providence and Grand Bahama and step up development plans in the Family Islands. These islands offer many beauty spots for tourist development, and two of them, Andros and Abaco, possess the best unexploited agricultural lands in the country. Moreover, many of them have plenty of grouxndwater and adequate rainfall. Since in any case,it is unlikely that enough resources could be siphoned off from New Providence and CGraudBahama for the development of all other islands, some growth poles will nave to be selected. Part of the Public Investment Program shouLd be addressed toward providing better transportationlinks, basic utilities andli ces in those selected growth poles. Unfortunately, given the minfin. - cf the public

1/ Actually, the recommendation of this tariff level is based upon two different arguments: (1) need for efficient diversifM -'ca'Cien (2) infant industry, skills creation and productivity growth consi e7a>tiOns that,

in the long run, may change Bahamas comparative srvant _ - 63 -

investment program., it is doubtful that the regional approach can be implementedin practice,unless there is a tax reformallowing for greaterpublic saving-investment efforts or else, the govermmentis able to attract substantial amounts of foreign investments, like it was in the sixties.

-6.-veral. Investment Requirements 162. Investmentreqairements vary with the assumedgrowth rate of the economyand the incrementalcapital output ratio (ICOR). Since no developmentplan existsyet, we made some assumptionsregarding those two parametersand proceededto estimatethe overallinvestment requirements under a maximalgrowth assumption and a minimalgrowth assumption. On the one hand, to maintain a high growth rate of GDP of 5% per year, an investmentlevel of around $200 million annually would be necessary. On the other,to maintain a low growth rate of GDP of 3%, the required investmentlevel is about$100 mt.llion. Details on the assumptionsof this exerciseare given in AppendixB,and the actualprojections are givenin the StatisticalAppendix.

-D. The PublicInvestment Program

163. T'otal public investments had been decliningfrom about$32-34 million in 1967-68 to 18 million in 1973. This decline would be more pronounced if the inflationary rate of about 6% per year were taken into account.

164. Two main reasonshad been responsiblefor the decliningtrend of publicinvestment. The first had been the sluggishgrowth of tourism, which, in turn had provideda sluggishgr:>wth in tax revenueand,thus,low publicsavings to financepublic investments. The secondreason had been the prioritygiven to growthof governmentconsumption instead of investments.

165. From Table 34, it followsthat the high prioritysectors for publicinvestment in the past have been telecommunications,power, education, ports and water supply. Publicworks in the F amilyislands have accountedfor 11% of publicinvestment. This percentagereflects a low degreeof prioritysince those islandsaccount for about25% of the population. Other low prioritysectors in past public investmentprograms were sewerage,health and agriculture.Tourism and industryinvestment needs were completelysatisfied by the privatesector, and thus, they were outsidethe publicsector.

166. In the past, publicinvestment as percentof some key macro- economicindicators fluctuated sharply. Thus, publicinvestmernX as percentof gross domesticproduct fluctuated between 7.0% and 2.9%. As percentof gross domesticinvestment, they fluctuatedbetween 32.3% and 10.6%,although more as a resultof even sharpervariations in private investmentthan in governments investaents themselves. Table 34 : PUBLIC INVSTMENTS 1967-73 (in thousands of Bahamian dollars)

Total 1967 1968 1969 1970 1971 1972 I973 67-13 lot. Roads 2358 3237 1709 759 138 442 100 8743 4.9

Ports 10403 4774 1093 1397 184 30 - 17881 10.0

Airports 1020 1685 2114 469 414 349 - 6051 3.4

Water supply 1184 6481 1372 2498 1518 1343 273 14669 8.2

Sewerage 19 34 10 57 82 88 100 390 0.2 I

Power 3821 3043 1190 8621 4565 1578 5417 28235 15.8 s

Telecommunications 5961 7115 1636 3470 6229 8075 2064 34550 19.3

Education 3136 3355 2026 4723 2998 3248 5700 25186 14.1

Health 307 398 212 472 343 541 714 2680 1.5

Housing 59 - 296 258 129 41 255 1038 0.6

Tourism ------

Industry ------

Agriculture 80 41 129 307 399 269 218 1453 0.8

Public Works 2145 2597 3901 4472 3246 1894 967.1 19222 10.8 Out Islands Public Buildings 337 310 852 1917 1162 564 1177 6319 3.5

Other 715 823 3391 3 1646 ili5 602 11889 6.6

Total 31564 33902 19932 32561 23052 20032 17589 178614 100.0 - 6 -

Table 35: PUBLIC INVESTMENTAS PERCENT OF GDP, GDI, GOVERNMENTREVENUE AND GROSS PUBLIC SAVINGS

% of Gross Public Year % of GDP? of GDI % of Govt. Revenue Savings

1969 4.1 10.6 20.4 117.7 1970 7.0 24.5 30.6 440.5 1971 44.4 32.3 21.7 1283.3 1972 3.4 28.1 16.6 215.0 1973 2.9 23.4 12.4 90.2

As percent of consolidatedgovernment revenue, public investment fluctuated between 30.6 % and 12.4% showing a declining trend. As percent of tross public savings, public investment fluctuatedwidely from 90% to 3300%. These fluctuations are due more to wild changes in public savings than in public investment. The scarcity of public savings has been, and is expected to be, 1he main cause of a low level of public investment.

167. Owing to the lack of enough public savings, public investment is expected to decline as a percent of GDP and of government revenue. Table 36 shows a maximum and a minimum public investment program,and it is indicative of the likely future behavior of public investments. The high estimate came from adding up all investment proposals submitted to the Ministry of Finance by the other ministries, as part of their contribution to the overaIl development plan, now in preparation. The minimum figures, in parentheses, are based on the Ministry of Finance's self-imposed limits. To finance the minimum investment program, the government is considering borrowing 60% of thetotal cost of it and meeting the remaining 40% by means of public savings.

168. The two major shiftsin priorities reflected in the above 1973-77 public investmentprogram are,first, the new emphasis placed on sewerage and health, two minor items in 1967-73 public investments, and,second ,the drop of ports from the list of priorities. Other sectors such as telecommunications,power, education and water supply, are still on the priority list for 1973-77. Sectors such as tourism, industry and agriculture are not going to absorb any major part of public investment at all. Table 36 : PUBLICiNV!SfmTrr PROGRAM - (in B$000 of 1973) Figureson the right representthe requestsof the differentMinistries and Agencies) Figureson the left representthe upper limitsset by the Ministryof Financebased on revenueconstraints) 1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 Total 1£ Total % Roads ( 300.0) 100.0 _ 839.0 ( 100.0) 220.0 ( 400.0) 500.0 ( 800.0) 100.0 (1600) (1-5) 1759. 1.5

Ports ( 100.0) - _ 402.5 ( 100.0) - ( 300.0) - ( 500.0) - (1000) (0-9) 402. 0.3

Airports ( 600.0) - (1100.0)1100.0 ( 300.0) 300.0 ( 600.0) 600.0 ( 800.0) 800.0 (3400) (3.30)2800. 2.3

Water Supply ( 300.0) 273.0 (1200.0)6773.0 (2800.0) 5232.0 (3400.0) 3363.0 (3300.0) 594.0 (11000)(10.6)16235. 13.6

Sewerage ( 100.0) 100.0 (2300.0)2580.0 (3000.0) 4751.5 (5000.0) 3301.5 (3000.0) 301.5 (13400)(13.0)12034. 10.0 Power (5NaT.o) 5417.0 (3501.1)3501.0 (4366-0) 4366.0 (2484.0) 2484.o (2620.0) 2620.0 (18388)(17.8)18388. 15.3

Telecommunications (2064.0) 2014.0 (2000.0)2000.0 (2000.0) 2000.0 (2000.0) 2000.0 (2000.0) 2000.0 (10064) ( 9-7)10064. 8.4

Education (5700.0) 5700.0 (5600.0)5600.0 (2900.0) 5400.0 ( 600.0) 3600.0 (1000.0) 3700.0 (15300) (14,5)24000. 200

Health (1600.0) 714.5 (2000.0) 6268,5 (3000.0) 2700.0 (1000.0) - (1800.0) - (9400) ( 9.1)96830 8.1

Housing ( 2000.) 255.4 ( 300.0) 881.3 ( 300.0) 589.0 - 390.0 - 473.4 (800) ( 0.9) 2589. 2.2

Tourism - - - 620.0 ------(620) ( 0.6) 620. 0.5

Industry ------_ _

Agriculture ( 200.0) 218.1 (1000.0) 247.9 (1500.0) 166.8 (1200-0) 50.0 ( 700.0) 15.9 (4600) (4.4) 698 o.6

Public Works ( 240.o) 967.1 ( 500.0) 3169.5 ( 200.0) 1085.0 (1000.0) 1830.0 (1000.0) 1280.0 (5100) (4.9) 8271 6.9 Family Islands

PublicBuilding (1500.0) 177.3 ( 600.0) 1485.4 ( 300.0) 360.0 ( 200.0) 293.0 ( 500.0) 500.0, (4900) (4.7) 3815. 3.2

Other ( 300.0) 602.4 ( 400.0)1118.8 ( 900.0) 1455.8 (1800.0) 2616.1 (1600.0) 2572.0 (5000) (4.8) 8365 7.0 Total (20681.0)17588.8 (20501.0)36586.9 (20366.1) 28566.1 (21783.0) 21028.0 (19620.0) 15956.8L02951.0)1t00)119726.6 100.0

Source: Ministry of Finance, and different Ministries and Agencies - 6? -

V. F1MCING OF DEYELOPXEDT 169. At present, the prospects for financing of development are unclear because of two reasons. First,more tax revenueis necessary to finance public investments, but tax haven policies put a constraint on the growth of governmentrevenues. Second,foreign investments are essential if the Bahamas is going to achieve a high growth rate of GDP, but the outlookfor the requiredforeign investment to take place is doubtfulbecause of the uncertainty created in the foreignbusiness communityby the handlingof work permits. Table 37: ANALYSISOF PUBLICSECTOR FINANCES 1969-73 (in millionB$) 1M 1971 1972 1973 Est. Central Government Currentrevenues 78.5 86.3 82.9 94.8 112.8 Currentexpenditures 65.9 81.8 84.9 92.1 98.5 Currentaccount surplus or deficit(-) 12.6 4.5 -2.0 2.7 14.3 Savingsratio 16;0 5.2 -2.4 2.8 12.7 Investment2/ 17.1 20.5 12.3 10.4 10.8 Savingsas percentof investment 73.7 21.9 16.3 26.0 132.4 State Enterprisesl/ Currentrevenue 18.7 20.3 23.0 26.0 28.5 Currentexpenditures 14.4 16.5 19.2 19.4 23.3 Currentaccount surplus 4.2 3.8 3.2 6.6 5.2 Savingsratio 22.4 18.7 17.9 25.4 18.2 Investment2/ 2.8 12.1 10.8 9.7 7.5 Savingsas percentof investment 153.6 31.4 35.2 68.0 69.3 PublicSector Total savings 16.9 8.3 1.8 9.3 19.5 Total currentrevenues 97.2 106.6 105.9 120.8 141.3 Savingsratio 17.4 7.8 1.7 7.6 13.8 Grossfixed investment2/ 19.9 32.6 23.1 20.0 17.6 Savingsas percentof investment 84.9 25.4 7.8 46.5 110.8 Savingsas percentof GDP 3.5 1.6 0.3 1.6 3.2 Overallsurplus or deficit -3.0 -24.3 -21.3 -10.7 +1.9

1/ BECand BATELCOonly 2/ Excludingfinancial investment - 6e -

A. Public Sector Fiacing 170. Public finances were weak from 1969 to 1972. This situation resulted from a sluggish growth in revenue on the one hand, and a rapid growth of government consumption on the other. Rather than curtail consumption,the government curtailed investment,butstill could not avoid an overall deficit averaging B$14.8 million per year in the period. To finance this deficit,the governmentrelied mostly on short and medium term borrowing in the local capital market and on foreign suppliers.

171. In 1973,public finances showed a marked improvement,stemming from a consolidationof short term debt and a tax increase. To deal with the rising cost of debt services, the government contracted a refinancing loan of $30 million in Bahamian and U.S. dollars in July. The loan, which came from a consortium of local banks, was immediately used to repay B$23.5 million of outstandingdebt, including a B$8 million promissory note held by the Bahamas Monetary Authority. Repayment of the refinancing loan will take place in 14 equal half-yearly installmentuover a seven-year period starting in 1975. The tax increase of 1973 comes from(a) increased rates of car licenses;(b)increased import duties on cars, spirits and beer;(c) increased excise duties on liquors; 0i)general increases in import duties, and(s) an increase in the stamp duty on land transfers.

172. Despite the 1973 improvement,public finances in the Bahamas are structurallyweak. This structuralweakness stems from two causes: first, an inelastic taxation system; 1/ and second, a pattern of growing government salaries by about 16% per year. This high percentage comes more from a system of automatic salary increase by seniority than a growing number of government employees. Unless these structural problems are solved, the financial difficulties of the past few years may prove to be recurrent.

The taxation effort

173. The tax effort of the Bahamas as measured by the ratio of taxes paid by residents to GDP was less than 1C% in 1972. This tax effort is low for a country of the per capita income enjoyed by the Bahamas. As shown in Table 38, this 10% tax effort was calculated excluding taxes paid by the tourist, who pays on the average of about B$15.3.2/

1/ The Bahamian taxation system is dealt with in paragraph 174.

2/ Checchi and Company "A Plan for Managing the Growth of Tourism in the Commonwealth of the Bahama Islandu," Washington, D.C. 1969, p. 90. - 69 -

Table 38s CAICULATIONOF DIFFERENT MEASURESOF THE TAX EFFORT 1972

a. Total tax revenue (B$ million) 78.0 b..Total tourist (000) 1443.0 c. Estimated tourist's tax payments (B$ million; B$15.3 per capita) 22.1 d. Estimated resident's tax payment (a.-c.) 55.9 e. GNP (B$ million) 414.5 f. GDP (B$ million) 582.5 g. GNP Net tax effort d/e 13.5 h. GDP Net tax effort d/f 9.6 i. GNP gross tax effort a/e 18.8 J. GDP gross tax effort a/e 13.4

It can, therefore,be concluded that there in scope for a greater tax effort in order to increase the current account surplus and, thus, to help meet the needs for a higher level of capital expenditures. The authorities are cognizant of the problem and planning to review the overall tax system. As a first step, a fee will be charged for petroleum bunkering and refining operations in (Iran Bahama. This may be regarded as an important step in direct taxation.

The taxation snytem

174. The taxation system of thea Bahamas has two main features: reliance on indirect taxation and albundancy of specific taxes as opposed to "ad valorem". As a result, taxes fall on the consumer regardless of his ability to pay, and revenue yields are inelastic,irresponsive to changes in money income. Because of this inelasticity,the government is constantly forced to introduce new taxes or change the tax base in order to meet the needs imposed by rising expenditures.

Table 39: TAX REVENUE 1969 - 73 (in million B$) 1973 -1ybx 1910U 1971 1912 Est. % T97(

Total Tax Revenue 67.0 72.3 68.0 78.0 106.4 100.0 Taxes on Imports 52.0 52.5 47.3 49.4 62.3 63.3 Taxes on Gaming and hotel quests 4.9 6.9 5.8 8.5 9.4 10.9 Departure and Passenger Ticket Taxes 3.1 3.0 4.7 4.9 5.2 6.3 Stamp Taxes 3.6 3.3 2.7 4.0 h.6 5.2 Business and Professional Licenses 0.6 2.0 2.2 4.1 5.2 5.1 Excise Taxes 0.5 0.9 1.0 1.9 2.4 2.4 Taxes on RealEstate 0.2 1.1 1.6 1.5 1.8 1.9 Motor 1Vehicles 1.1 1.2 1.2 1.3 2.6 1.7 Other Taxes 1.0 1.4 1.5 2.4 2.6 3.1 Import Duties

175. The reliance on import duties has administrativeadvantages given the heavy involvement of trade in the economy. Thus, because of expediencyreasons, taxes on imports developed easily reaching 78% of total tax revenue in 1969. However, because from 1969 to 1972 import tax collectionshad beernstagnant at B$50 million, the share of import duties in tax revenue .'.c--eliaed to 63% irnthe latter year.

176. The principal dutie- char.ged on goods at importation are customs duties and an emergen-: tax. The customs duties are mainly ad valorem with a preferential rat.e applicable to goods of Commonwealth. origin and with a general rate 1'cr other goods. Almost all goods are liable to duty on importation. By far,the most common rates under the general tariff are 20%, and under the preferential tariff 1C%. An emergency tax at the rate of 12.5% ad valorem is chargeable on all goods imported, with exemptions broadly following the exemptions from the customs duties. In addition, under the Stamps Act,a stamp duty is chargeable on every set of import entries or airfreight documents at the rate of 0.75% of the value of the goods mentioned in the documents.

177. Both customs duties and the emergency tax have bee-nimposed primarily for revenue purposes. There are -few manufacturingindustries within the Bahamas,and,consequently,industrial protective duties are rarely necessary. 1n general, essential goods are either free of duty or admitted at a low rate, while luxury or nonessentialgoods such as beer, wine, spirits, and tobacco are subject to higher rates. Certain durable cnnsumer goods, such as radios and record players, are also subjectto higher rates. Further import duties, described as inland taxes, are chargeableon radios, television sets, cigarettes,gasoline, and fuels.

176. Agricultural and horticulturalcommodities produced locally, fish caught by local fishermen, and a few manufacturedproducts are protected by customs duties which have minimum and maximum rates. The m1nimun is the ordinary rate,but the maximum rate may be imposed at any t-ine for the purpose of protectior.. These duties are subject to preferential margins applicable to Commonwealth countries.

'79. The exemotions are similar to those provided by other countries. 7':;e accord with interrational c'onventions or have been introducedfor educatlon, health, or other social reasonsl for the improvement of &gr.iculture and livestock; or for the promotion of the tourism and light rr,anufacturing industries. Certain staple foodstluffs, sucn as butter and marigarine, heat and rye flour, rice, and meats, are exempted.

150. Customs control and management in the Bahamas are in need of improve- memn+. Defective customs laws, outmoded tariff failure to examine goods, absence of a va'uation procedure, and release of goods before declaration nre factors conducive to abuse. There 's an urgent need - 71 -

for improving training, for instructions bringing uniformity into Procedures, for inspection routines to see that the instructionsare carried out, and for an investigation branch with adequate legal powers to follow up suspected cases of fraud. The control of exemptions, the postaudit of import declarations, and preaudit of refunds also require attention. The number of laws imposing duties and granting exemptions is excessive. Therefore, it would facilitate the work, both of officials and of the public, if these Acts,which impose tax and grant exemptions, were simplified and combined into one main Tariff Act,based on the Brussels Tariff Nomenclature, and if the procedures for valuation of goods for customs purposes were more precisely defined. The present tariff is confusing and inadequate for planning taxation policy and as an instrument for the compilation of statistics according to the Standard International Trade Classification. Many of the present exemptions could be incorporated into the tariff schedule at a nil rate of duty. To modernize these customs,laws and practices,the government has the technical assistance of the IMF.

Taxes on Gaming

181. Second in importance to import duties are taxes on casinos and gaming machines. There are three casinos in the Bahamas, one in Paradise Island and two in Grand Bahama. They are taxed in three different ways: first, with a B$0.5 million per year per casino; seccnd, with 17% on gross winnings up to $17 million and,in excess of $17 million, 10; and third, with a specific tax on gaming machines and tables.

Departures, Passenger ticket taxes and hotel guests

182. The departure tax consistsof B$3.00 dollars per every adult leaving the Bahamas either by ship or aircraft and $1.5 per child below 12 down to 3 years old. The passenger ticket tax consists of $2.00 per every ticket sold within the Bahamas. The hotel room tax is B$3.00 per year and the hotel guest tax ia 25 cents per night per guest in the high season, 17 cents in the low season. In practice, the hotels charge 4% of the hotel bill to the tourists. The surplus, after paying the government the legal taxes, is used to finance the hotel training school and related expenses.

Business and professional taxes

183. These are license fees payable annually by banks, trust companies, insurance companies, and companies in general. The fee on banks varies with the type of bank. It goes from the smallest restricted" banks,paying B$1i,500 annually,to commercial banks open to the public,paying a maximm of B$45,000. Insurance companies pay a maximum fee of B$3,000 annually. Companies of any type of activity, incorporated in the Bahamas, pay amiual fees lower than B$300. - 72 -

184. As an example of the anachronism of some existing taxes, there exists an annual fee paid by shops of only B$0.71 per year. The Govern- ment is studying a new tax on shops to replace this one. However, the publicly stated policies against an income tax,or anything that would appear to be a substitute income tax, are particularly important here since they rule out measures such as those used in Freeport by the Port Authority, namely percentages of turnover. The problem with a fee of fixed amount is unfairness, because it does not take into account the ability to pay. Thus,a given fee may be light for a big merchant but heavy for a small one. A way out could be a graduated tax of fixed amount,taking into account the nature of the business, size of property, and zoning. Thus, wholesalers, manufacturers retail shops, garages, automobile agencies, restaurants, laundries, etc. might all be classified by means of the criteria suggested and pay these taxes accordingly. In any case, the yield of this kind of tax is not expected to be substantial.

Stamp taxes

185. Stamp duties are payable on a variety of commercial and legal documents, such as deeds of conveyance of realty and personal leases, mortgages, import entries, checks, receipts for money in excess of B$5, and remittances abroad. The most important of all is the tax on deed on conveyance of realty payable on a sliding scale starting at 0.75% for values below B$6,000 and increasing to 4.5% on values exceeding B$100,000. Stamp taxes are a small, though a stable,component of tax revenues.

Excise tax

186. This tax is payable on domesticallyproduced spirits and beer.

Taxes on real estate

187. This tax is progressive,xitha maximum of 1.5% for properties valued over B$50,000 on New Providence Island. Undeveloped land and properties assessed at less than B$20,000 are exempted.

188. With no income tax, a sound system of property taxation is particularly needed to compensate for the present reliance on commodity taxation. The revenue potential of this tax was estimated at B$5-6 million in 1969. But the new system of property tax was not as productive as was hoped. There is a grave delinquency situation which threatens to bring the tax into disrepute. Action to correct this situation is difficult because of administrative failure to observe the steps provided in the law with regard to the making of assessments and the service of notices. Frivolous objections have been encouraged by failure to enforce the legal provision that tax payable should be deposited before an objection is considered. - 73 -

Taxes on motor vehicles

189. These taxes are based on the vObicle's area, a poor indicator of the vehicle's value. Moreover, comparison with taxationof vehiclesin other countries such as Jamaica and Singapore indicated that the tax could be easily doubled. The average tax per vehicle was about B$22.5 per year up until 1972. In 1973, the rateswere, in fact, almostdoubled, and revenue yields increased substantially. Taxation of motor vehicles is a relatively good tax in the Bahamas, not only because it is based on the ability to pay, but because there are 41.,o00 passenger cars in the country, _mplying a den- city. of one car per every four inhabitants, better than in Germanyand Great Britain, but poorer than in the United States and Canada. B. Fiscal Prospects and Issusa 190. Despite some official forecast of budgetary savings of up to B$7 mi3lion, the fiscal prospects for 1974 remain somewhat uncertain. GNP is stagnant, and the capacity to pay indirect taxes is used up. Nonetheless, the Ministry of Finance is projecting a growth in revenue of about 7% this year. Uhless new taxes are established, it is doubtful whether fiscal revenues will grow at all. Although the government has increased property taxation, which last year yielded only 1.8 million, and is considering increases in fees on shops, it is not likely that these increases will be sufficient. Even if the government follows the policy of raising salaries of public servants in lin with the ncrease in the cost of living, government will Be el4ous2y eroded. 2aerefore,new taxes of promptand high yield will be necessary.

191. Reinforcingthe case for more taxes :s the situation of the government-owned Bahamas Electricity Corporation and the Telephone Corporation, BATELCO. These government corporations will have a cash flow deficit well over B$5 million in 1974. This cash deficit is not the result of operating deficits, but of previous short term borrowing to finance capital equipment. Anyway,this deficit will add to the central govermnent's financial difficulties for the present year unless this short term debt is stretched out. Negotiations addressed to this end are under way. 192. In Chapter II F, we described the conflict between a policy attracting foreigninvestment and the policyof keepingaway foreignpersonnel through the handlingof work permits. One way of reconciLingthe two policiesis to make the concessionof workingpermits automatic upon the paymentof a graduated head tax or fee of, let us say, B$1,000to $44.,000yearly for each working permit. This policywill give at least certaintyto foreigninvestors allowing for a renewalof capitalinflows; it will give an edge of preferencefor employmentto Bahamians;and it will providecn incentiveto train local people. At the same time, the fee this policy establishes will providenearlj B$10 million in revenues needed by the Government for development purposes. Eventually, at a later stage, the simple fee can be replaced by sone other form of personal income tax, or by a payroll t ax. Reconsiderationof tax haven policies

193. The benefits that the country receives from the policies of tax haven will have to be assessed sooner or later. Deapite tax Siven pol`c4es, the country has not attracted much foreign business in the last five years. Exceptions to this statement are a few big, highly capital intensive, industrial concerns that add little to net national income because they provide few new jobs to Bahamians and repatriate their profits abroad.

19h. If the government were to drop its tax haven policy, it would face a political and legal problem with the Grand Bahama Port Authority and the delegation of taxation power made by the colonial government on that Authority. This poses a grave dilemma. On the one hand, if the government leaves untouched the Port Authority contract, establishing direct taxation in the rest of the Bahamas, the Freeport area will enjoy a different tax burden than the other islands,thus creating a situation of blatant inequality because the richest part of the country will be paying less taxes. On the other,, if the government decides to tax the Port Authority and/or its licensees, the Hawksbill Creek Agreement would be violated and this could bring about a legal problem. However, it is likely that, if the degree of direct taxation is moderate, the Port Authority and her licensees would come to terms with the government. Similar problems to those which would arise with the Grand Bahama Port Authority would emerge with the contracts signed under the Hotel and Industrial Encouragement Acts. However, because of the interdependence of tax systems discussed in the next paragraph, these hypothetical taxes are not likely to represent any additional real tax burden on the private foreign companies.

Corporate income taxation and the interdependence of tax systems

195. Tax haven policies are not accomplishingtheir objectives because they do not take into consideration the interdependence of tax systems. Developed countries, exporters of capital, usually follow one of the three procedures outlined below in order to tax dividends received from subsidiaries located abroad.

(a) The exemption method. Where a capital exporting country exempts incomes derived from foreign sources, an investor from that country obtains the full benefit of the income tax reduction or tax haven granted in the developing country where the investment is made. This method defin- itely favors the export of capital. Tax exemptions at home,superimposed with a tax exemption in the developing country,put the investor in a real tax haven situation. This is exactly the case of U.S. investments in Puerto Rico referred to below. However, relatively few capital exporting countries adopt unilaterally the exemption - 75 -

approachin their tax treatmentof foreignincame. More- over, those that do so generallyrestrict its application to dividendsfrom controlledforeign subsidiaries, to incomefrom foreignbranches, or to incomefrom real estateproperty located abroad. Income in the form of dividends from portfolioinvestment in stockof a foreign corporation, or in the form of interest on loans to a foreign enterprise, controlled or not, or in the form of royalties,are rard07 tax exempt.

(b) Special tax rate or full taxation with deduction. Where a capitalexporting country subjects foreign income to a specialrate belowthat applicableto domesticincome, the full effect of tax incentives grantedby a developing countrywill not be realized. Dependingon the special rate, the tax may cancelout a small or large part of the tax incentivegranted by a developingcountry. If the investor'shome countrysubjects foreign income to its full tax and allows foreign tax merely as a deduction from the tax base, the investor will benefitby a fractionof a developing country tax incentive, since the base for his home country tax will increase because of the incentive. (c) Tax creditmethod. Ca,italexporting countries taxing foreignincome and allowinga creditfor taxesimposed abroadwipe out entirelythe tax benefitsthat theirinves- tors would enjoyunder a foreign tax haven. Thus, tax incentives granted by developing nations,because of the tax credit system, are simply capital transfers from the treasuries of the developiiig countries to the treasuries of the developed ones. However, tax credit countries normally do not levy tax on profits derived abroad through foreign subsidiaries until profits are actually received by their taxpayersas dividends. Consequently,only when the profits earned abroad are reinvested in the capital importing country do tax benefits granted by a developing country accrue in full to the investor.

196. In view of the tax systems followed by capital exporting countries, the Bahamas would benefit from a detailed study of the subject. It is probablethat such a studywill lead to a reconsiderationof the tax haven policies followed up until now. Special attention should be given to the possibility of taxing corporate profits but enacting high deductions for fixed investment in the country. This would encourage profits reinvestment and, moreover, capital intensive methods of production which are adequate, given the high level of wages and labor scarcityprevailing in the Bahamas. - 76 -

197. F hnally, it is worth mentioning that all Central American and Caribbean countries have usually looked upon the Puerto Rican case as an example of a country which has successfully used tax incentives to foreign corporations to foster industrialization. They tried to imitateit,without fully realizingthat the case of Puerto Rico is not ty:±calfor two reasons. First,Puerto Rico is insidethe UnitedStates trade and tariff area. Therefore, Puerto Rican manufacturers can enter freely in the United States.Second, the UnitedStates corporations in PuertoRico are not subjectto Federalincome taxes in the United States,andyet they enjoy the benefitsof operatingwithin the United Statesbusiness community, with the UnitedStates currency,banking and postal services,and with the full protectionof constitutions,laws and courtsof both the UnitedStates and PuertoRico. Thus, fiscal exemptions given by the Puerto Rican government to U.S. corporations accrue fully to those corporations. This is not the case of the Bahamas, where fiscal exemptions given tV foreign corporations are not "spared" by the U.S. Treasuryand most other governments.

Personal Incometax

198. The problemsarising from both the low tax effortof residents, estimatedat 10% of GDP, and the inelasticityof the tax system,would be resolvedif the governmentwould establisha personalincome tax. In addition, since foreigners are in the higherincome brackets,as shown in paragraph 63 and chart 4, this kind of tax would be in agreement with the goal of Bahamianization of the economy. Incidentally, the referred chart serves to estimate the yield of a moderate income tax with a maximum rate of 30C. Thus, allowing for a minimum nontaxable income and deductions for wife and children, the yield would be above 20 miUlion.

199. Since the establishment of an efficient system of personal income taxation takes time,and the government needs revenue with some urgency, perhaps the best way to proceed would be first to establish a sizable immigrationfee,as referred in paragraph192,, and then, at a later stage,to establishthe incometax and replacethe immigrationfee with a system of minimumincome tax and/orlower deductionsfor foreigners. 200. There is littlevalidity for the widelyheld fear that the adoptionof a corporateor personalincome tax for residentswould under- mine the economicfuture of the islands. But, o.2course, in order to continue, to maintainthe prominenceof Nassau as a financialcenter, reliefshould be given to non-residentsand incomearising from abroad. - 77 -

C. Private Sector Financin

201. In the early sixties,private sector financing took, for the most part, the form of re-investment of profits from direct foreign investments., After the late sixties boom and the 1970 depression,this form declinedsharply. In fact, at present, foreign businesses reinvest little in the Bahamas,andmost of their profitsare sent abroad.

202. Since direct foreign investment already existing the Bahamas is considerable,it would be possibleto attractmore foreigncapital just by creatingthe conditions for reinvesting, in the country, part of the profits earnedfrom it. To do this, the uncertainty and adminis- trativeinefficiencies brought about by the handlingof work permits must be removed.l/ Foreign businessmen stronglydislike this handling because of delays, uncertainty and bureaucratic discretionary power. There are many cases where expatriate, candidates for key jobs were se" lected,the applicationsfor workingpermits were made, but, approvalwas so delayedthat,when it was granted,the candidateshad alreadyaccepted ,-otherjobs in differentcountries, and the employerhad to start the processof hiringall over again. It is clear that stable and simple rules, as suggested in paragraph 192, are needed to handle this situation if foreign investments are going to come again to finance the economic development of the Bahamas.

The Creationof a Development Bank 203. Consciousof the need for establishingmore bridgesbetween the foreign financial community and the local businessmen, the Government is going to create a Development Bank.

204. It is generally recognized that commercial banks are not suited for long term financing. Therefore, the new Development Bank will be vested with the authority to negotiate long term agreements with the foreign banking community and to provide loan capital to small Bahamian business on a long term basis.

205. The new Development Bank will have the new Central Bank, about to be created too, as a shareholder. Private banks and insurance companies will be invited to subscribe shares of the Development Bank. It is expected that, in this way, a link will be oreated between the foreign financial community and the Bahamian borrowers, with the Central Bank actingas a mediator.

1/ Presently some progress is being made in this respect. See Daragraph 50. - 78 -

206. The new Development Bank hopefully will also be capable of providing capital for well considered commercial and industrial projects on different bases than the traditional ones. Traditionally, medium and long term financing is available to enterprises with a good credit rating or to those who have ample collateral security. The newer concerns, and the businessmen without substantial backing, generally find difficulties in obtaining proper finance. In such circumstances, a Development Bank for lending on the basis of the business prospects rather than the amount of net worth or collateral is needed. This is precisely the type of vacuum that the new DevelopmentBank is supposed to fill.

The Development Corporation

207. In order to provide flexibilityto negotiatewith private foreign investors,the government establishedthe Bahamas DevelopmentCorporation. By using its authority, the DevelopmentCorporation can enter into equity agreementsfor use of Crown Land. Much of this land, in fact, is going to be transferredto the Corporation. Then the Corporationwill use this property as a basis to negotiate,with foreign investors,the creationof new enterprisesin tourism and industry.

CommercialBanking

208. Commercialbanks engaged in local business are in foreign hands. The most importantbanks, those that absorb 80C of the local business, are the Royal Bank of Canada (thegovernment's bankers the Barclays Bank, the Bank of Nova Scotia, the First National City Bank of New York, the Chase Manhattan Bank, the Canadian Imperial Bank of Commerce and the Bank of Montreal. These Banks have a network of 70 branches throughout the country, of which less than 40 are in Nassau.

209. However, local operations are small compared with the offshore business carried out by these seven banks. For example, in 1972,demand plus time and saving deposits in Bahamian dollars representedonly 6% of total deposits in these banks. Loans and advances in Bahamian dollars representedonly 3% of the total loan and advances. Thus, the bulk of the operationscarried out by the commercialbanks is in offshore funds and Eurodollars.

210. At present,thebanking system receives more money in deposits from the Bahamian economy than it gives back to local business in loans. This situationstems from the rather stagnant state of the economy. Thus, the marginal efficiencyof capital is low, the uncertaintiesare large, the level of investment is low and,therefore,thedemand for credit from the banking system is also low and, moreover,has declined since 1969. - 79-

Table 40: COMMERCIALBANK CREDIT AND LIABILITIES OUTSTANDINGTO THE PRIVATE SECTOR (in millions of B$ at the end of the year) 1969 1970 1971 1972 1973

Credit to the Private Sector 153.1 127.1 134.9 130.8 138.6 Liabilities to the Private Sector 274.8 268.0 256.4 241.8 245.8 Demand Deposits (166.0) (169.4) (146.7) (135.4) (130.4) Time Deposits ( 65.1) ( 55.1) ( 64.8) ( 61.9) ( 69.0) Saving Deposits ( 43.6) ( 43.4) ( 44.9) ( 44.9) ( 46.4)

D. Monetary M!nagement

211. The Bahamas Monetary Authority, created in 1968, has limited legal powers, as was usual in these kinds of bodies before World War I. The purposes of the Authority are, first, to issue currency by buying foreign exchange and reducing currency in circulation by selling foreign exchange; second, to sup-vise the banks and trust companies; and third, to administer the ecchange controls on behalf of the government.

212. The statute of the Bahamas Monetary Authority establishes that currency in circulation has to be backed at all times at least by 50% foreign exchange reserves. Following the old gold exchange standard rules, currency in circulation is expanded under balance of payment surpluses and reduced under balance of payment deficits. Although the Authority has power to rediscount and lend to banks, only on rare occasions has it made use of this power. The Authority cannot legally make advances to the Government or force banks to hold reserve requirements, or even hold Government deposits. Thus, monetary policy tends to be neutral, impersonal, automatic and governed by the balance of payments situation.

213. However, given the small size of the country, it can be argued that the impersonality and automaticity of the monetary policy are merely legal. In reality, under these arrangements,the control of the money supply is transferred from tte Monetary Authority to big commercial banks that, through autonomous movements in the capital account of the Balance of Payments,may drastically reduce or increase the currency in circulation.

214. The composition of the money supply in the Bahamas limits even further the powers of the Monetary Authority, because around 5G% of the money supply is composed of U.S. dollars. Table 41: COOMP(ST1 F THE MONEYSUPPLY 1972 -rinmill:ion of B$)

Money 156.7 Currency in Circulation 21.3 Demand Deposits Denominated in B$ 63.6 Demand Deposits Denominated in US$ 71.8

Quasi Yoney 106.8 Time Deposits B$ 61.9 Saving Deposits B$ 44.9

The above table tends z.o understate the absolute amount of U.S. doll.ars because there are many dollar oills unaccounted for by the monetary statistics, but in fact usec.in day to day transactions,not only by tourists, but also by local people.

215. No matter who the agents of monetary policy were --the Monetary Authority, the private commercial banks,the impersonal market forces arising from the balance of payment situation or a combination of the three -- money supply declined from 1969 up until June of 1973 at an annual rate of about 5% per year and credit to the private sector at about 4.5%. Probably in its effects on monetary expansion or contraction,thebalance of payments was a rather contractive factor in the last few years. Although exports of goods and non factor services did surpass imports of goods and nonfactor services by amounts well over 100 million dollars, these surpluses were not monetized due to large profit remittances abroad in those years. Capital flight has also been instrumentalin bringing down the level of the money supply.

Table 42: SELECTED VARIABLES RELATED WITH INFLATION

(In growth rates except for interest rates) X 1970 1971 1972 1973 Retail Price Jndex 1o 5.2 5. 9.3 Retail Price Index of Food 5.4 5.1 5.2 6.7 12.4 Retail Price Index in the US 6.1 5.5 3.4 3.4 8.8 Retail Price Index of Rood in US 7.2 2.2 4.3 4.7 20.1 Index of Wages in the Bahamas 18.0 -15.0 7.0 14.0 n.a. Money Supply -3.9 2.1 -13.5 -3.2 -1.6 Commercial Banking Credit to the Private SeCtor 22.5 -17.9 6.1 -3.0 6.0 Commercial Banking Credit to Central Government 49.1 81.8 2.2 17.5 n.a. Commercial Banking Credit,Total 60.1 -9.2 5.5 3.2 18.6 Treasury Bill Tende- Rate 7.6 9.1 8.1 8.3 6.6 Average TLimeD.eposit Rate 6X1 6.6 7.2 7.1 7.5 Prime Rate .0 .. 8.5 9.0 9.0 Consumer Loans Rate 8.9 9.0 9.5 9.7 12.9 Ten Year Mortgage Bates 9.0 9.4 9.6 10.1 11.4 Inflation 216. Despite sone weakness in the data basis of Table 42 above, it is possible to make some generalizations about inflation in the Bahamas. First, given the openness of the economy and its close relationship wit.h the United States, the rate of inflation in the Bahamas depends roughly on what happens to inflation in that country. This is particularly true with food items because they are imported, for the most part, from the U.S. Second, the negative rate of monetary growth,together with the low level of economic activity in 1969-73,points to a case of cost push inflation instead of demand pull during this period. Third, two factors push prices up, the increasing cost of imported items and the level of wages. The level of wages increased rapidly during the sixties due to the inelastic supply and the high demand for labor,stemming from a booming economy. But, in 1970, economic growth stopped suddenly, and, accordingly, wages dropped considerably. However, in 1971, 1972, 1973 zsd 1974,trade unions have been stronger and wages have started to rise again to meet higher wage demands from organized labor. In an econovm like that of the Bahamas, so exposed to the tourist trade, the local population is continuously tempted to adopt the conspicuous consumption patterns of tourists. Thus, the rising consumption expectations end up in demand for higher wages. At present, wage.s are at about the French or British level, / perhaps too high in relation tc labor productivity in the Bahamas. Fourth, comercial bank credit to the public sector played an expansionary role in the last four years, especially in 1969-70, but thenrin subsequent years,tended to level off at about B$30-40 million. Since 1970 was a depression year, credit to the publie sector could not possibly have had any major role in causing inflation.

3terestrates

217. Interest rates could play a powerful role in the balance of payments and monetary policy &f the Bahamas. The existence of a Eurodollar market with more than US$15 billion in Nassau makes it likely that,by raising or lowering interest rates in Bahamian dollars and by assuring, at the same time, the currency pwfty with U.S. dollar, huge amounts of money would enter the Bahamian monetary system or go out of it. Thus, the problem with interest rates as a tool for monetary policy in the Bahamas is that, perhaps,it will be too potent a tool and will- have to be used with extreme care, especially in the eXPansionary phase of the economic cycle. The New Central Banking Legislation

218. New legislation enabling the establishment of a Central Bank has been approved rece;ntly by Parliament. The legislation, when enacted, will substantially increase the government powers over the money supply and credit. Thus, the Central Banc will have the authority to fix and vary the percentage of cash or deposits liabilities in the Central Bank that commercial banks should hold in relation to deposits in Bahamian dollars. Different percentages may be fixed for different banks. Any commercial bank that fails to comply with these requirements would be liable to a fine not exceeding B$1,500 per every day of non-compliance. .iowever, the Central Bank's power will be circujnscribeX in three respects: first, the cash reserve ratio may vary only between 5 /o and 20 °/o; second, the liquid asset ratio between 10 °/o and 30 °/o; and third, no increase in ratios exceeding 5 percentage points may be requested in any period of 30 days.

I/ In nominal terms. - 8 -

There is no proviso for the set-cing of marginal reserve requirements.

219. The Central Bank will also have powers to prescribe the maximlm amount of loans and advances that commercial banks may have outstanding, the purpose and maturity of those loans and the security on which they may be granted. The coverage of these requirements might be general or apecific, with regard to the commercial banks as well as the loans and advances. However, the regulations in question may not go into effect earlier than 30 days after the date of their public announcement.

220. The new Central Bank will be allowed to make temporary advances to the government. However, the total amount of advances is not to exceed 10% of the actual or estimated average ordinary revenue of the government, whichever is lower. The Central Bank may also purchase, hold, and sell treasury bills and publicly issued government and government-guaranteed securities maturing within 20 years from the date of their acquisition. However, the total amount of these longer term securities (including those held as security for any loans and advances) is not to exceed the equivalent of 20% of the demand liabilities of the Central Bank. - 83 -

VI. BALANCEOF PAYMENTSPROSPECTS AND XT1EIALDEBT

A. The Balance of Payment Prospects

220. The balance of payments estimate for 1973 presents a similar pattern to the one for 1972. With some qualifications due to the oil crisis, another of similar pattern can be expected for 1974.

Table 43: SUMMARYOF THE BALANCEOF PAYMENTS EXCLUDINGOIL UNDERPROCESSING AGREEMt Estimate for 1973, Projection for 1974

(in current US dollars)

1973 1974 Exports of Goods and Non Factor Services 483.5 523.0 Imports of C:oodsand Non Factor Services 330.3 379.0 Resource Balance 153.2 144.6

Net Factor Service Income -173.4 -166.6 Net Current Transfer 2.0 2.0 Balance in Current Account -18.2 -20.0 Long Term Capital 93.7 61.3 Short Term Capital -64.5 -56.3 Increase in Reserves (-) -11.0 +15.0

The balance of payments situation depicted in Table 43 permitsus to make sBe general comments. The balance of trade and non factor services presents large surpluses of the order of $150 million, but these surpluses are eaten up by factor payments abroad of equivalent amount. The capital account shows a shrinking capital inflow,stemming mostly from the purchase of land under long- term contracts signed previously, but these capital inflows are counteracted by capital flight Despite capit4L flight,foreign exchange reserves increased by US$11 million in 1973. Thus, the balance of payments of the Bahamas had been strong enough in that year to send large profit remittances abroad, pay for capital flight, and still show an increase in reserves. This increase in reserves is unlikely to happen again in 1974 because of the oil crisis. 221. At the end of 1973,the foreign exchange reserves held by the Monetary Authority stood at about US$43 million, equivalent to 1.7 months of imports of goods and non factor services, excluding oil under processing agreement. In an economy like the Bahamas, however, official reserves are inadequate indicators of the ability of the econowy to pa::- external public or private debt. Even the net foreign assets position of the consolidated banking - 84 -

system, about US$70 million,equivalentto 2.8 months of imports, is not a satisfactoryindicator in an economy where about 50% of the money supply is denominatedin US dollars.

222. in 1974, the balance of payments is likely to show a smaller surplus in the sub-balance of goods and non factor services than in 1973 because of theimpact of the oil crisis. This crisis is affecting the Bahamas in two different ways. First, on the import side, it will increase the oil import bill for domestic consumptionfrom US$17 million to about US$60 million. On the basis of the foreign exchange reserves held by the Monetary Authority, the commercial banks, and the private sector, the Bahamas can afford this oil import bill with no major problems, at least for 1974. But the increased oil import bill represents an important leakage of resources out of the Bahamas,and,tomaintain the present level of economic activity, an equivalent amount of resources will have to come from somewhere else or the level of econoitLc activity will decline further. Second, on the export side, the crisis will have some detrimental effects on tourist arrivals, but the Government is successfully counteracting them by assuring plenty of oil to chartered jets and cruise ships stopping in the Bahamas. Thus, despite the oil crisis, tourist arrivals are holding up well in 1974. Then it is likely that exports of goods and non factor services will preserve the 1973 levels in real terms.

223. Part of the increased oil import bill c m be shifted back to tourists. In fact, tourists consume much more gasoline and electricityper capita than local people. In addition, part of the oil imports are used in export industries, like cement for instance, that can also be shifted out of the country. Thus, this brings about a terms of trade problem. On the basis of an increase in prices of exports of goods and non factor services of about 8%, and imports of about 14%.,the consequence of the increased oil import prices, the Bahamas is likely to experience a terms of trade loss of about US$27 million, measuring it at 1973 prices.

224. Balance of payments projections beyond 1974 are a highly tentative exercise, not only because of the uncertainties of the present international economic situation, but also because of the lack of a developmentplan in the Bahamas. The country is in a period of transition. With independence, the country started to revise many of the policies which had been followed by the colonial authorities. As a result, many of the stated policy objectives are inconsistentwith each other or with the tools designed to reach them.

225. The exercise of Appendix B indicates that the future of the balance of payments in the Bahamas varies considerablywith the chosen growth rate of GDP. On the one hand, a real growth rate of GDP of 5% per year may bring about a balance of payments deficit of more than US$100 million per year. On the other, a growth rate of GDP of 3% may bring about a surplus of more than 40 million per year. Appendix B shows illustrativelythe results of the referred exercise where, in addition to testing the effects of different growth rates on the balance of payments, some sensitivityanalysis is presented, - 85 - varying the import elasticity, the marginal savings ratios and export growth rates. Moreover, this exercise points out to an ever opening gap when the 5% growth rate of GDP is used. This means that a growth rate of 5% is not feasible (under the model assumptions)in the long run because the country would suffer, either from an intolerabledegree of foreign ownerslhipor too much public debt. Since the country generates resources in excess of its own needs to grow at 3%, an intermediategrowth rate of, say,4% may be optimal from the point of view of full domestic resource use in the Bahamas.

B. External Debt

226. The public and publicly guaranteed external debt increased from about US$23 million in 1968 to US$68 million in 1974. The Bahamas appears able to contract additional amounts of external public borrowing. Two main indicators support this view. The first is the ratio of external public debt outstanding to GNP which is about 14% in 1974. The mean ratio of external public debt to GNP for a sample of 36 representativedeveloping countries all over the world was 20% in 1971-72. For some Caribbean and Central American countries this ratio for year 1972 was as follows: Dominican Republic 18%, Jamaica 19%. Trinidad and Tobago 11%, Costa Rica 17%, El Salvador 8%, Guatemala 5%, Honduras 15%, Nicaragua 23% and Panama 19%. The second indicator is debt service over exports of good and non factor services. This ratio is extremely low in the Bahamas; it is only 2-3%. However, the usefulness of this particular indicator can be questioned in an open economy such as the Bahamas. Other additional indicators related to government revenues and savings have to be brought out. These additional indicators call for a more cautious judgment.

Table 44: SELECTED HISTORICAL INDICATORS OF THE BAHAMAS ABILITY TO REPAY ADDITIONAL EHTERNAL PUBLIC DEBT

(in percent, excluding debt with a maturity of less than a year)

1972 1973 1974 est.

External Debt Outstanding/GNP 12.0 11.7 13.7 Debt Service/Exportsof Goods and Non Factor Services 1.9 2.3 2.9 Debt Service/TaxRevenue 11.0 9.9 13.1 Debt Service/ConsolidatedCurrent Govt. Revenues 7.1 7.4 9.1 Debt Service/GrossPublic Savings 92.5 53.8 100.0 Interest Payments/GrossPublic Savings 38.7 18.9 37.4 Debt Service/GrossNational Savings 15.1 18.6 23.6

The Bahamian economy as a whole presents better indicators than the public sector, although thelatter is still within an acceptable range. However, past experience shows that the public sector contracts considerableamounts of short-term commercial banking credits that later have to be stretched out into long-term government debt. Therefore, to avoid the deteriorationof public sector indicators, the government and its enterprises should avoid further short-term commercial bank borrowing to finance investments as much as possible and rely more on taxation and tariffs. - 86 -

227. For assessing the country's ability to repay external debt the ratios for, say, 1980, are more important than the present ones. Thus, the debt service ratio is projected at the 3-L% range for the foreseeable future. But future ratios are, to a large extent, mere suppositions. It is safe to say, however, that, if the Bahamas is going to grow at a fast rate for a while, the resources will have to come mostly from direct foreign investments and not from public borrowing. The public sector cannot possibly assume a major role in financing a large scale development plan unless it substantiallyincreases its public savings. This could be done by increasing direct taxation while holding down current expendituresso is to allow for a larger current account surplus. This in turn would enable the -overnment to provide an acceptable counterpart of the investment resources needed for development. In this way the country's capacity to borrow could be substantially increased. If, on the contrary, the Bahamas is going to grow at a low rate, the Government'spresent ability to repay external debt should be adequate for financing a low profile public investment program. For its part, the private sector generates resources in excess of the needs of a low profile development plan, as emerges from the illustrativemodel in Appendix B. APPENDIXA Page 87

APPENDIX A

THE NATIONAL ACCOUNTS ESTIMATES

228. The Bahamas has a poo Xstatistical base. Thus, the making of accurate national accounts is a difficult task. However, there are enough economic indicators to make preliminary estimates. Those estimates are presented in TABLE 2 and TABLE 3 in the text. They providean idea of the main economictrends of the economyand serve to assessreasonably well the state of the economyfor IBRD purposes. But those estimatesare not intendedto be a substitutefor the government'sown estimations.In fact, we urge the governmentto allocatemore resourcesto the Department of Statistics, so as to permit it to prepare detailedup-to-date figures on national accounts, mounting the machinery for continuous data collection and processing.National accounts are essentialeconomic tools for the managementof a moderneconomy such as the Bahamas. 229. In order to preparethe estimatesof TABLES2 and 3,we started with the income approach using the government's.own censuson population and personaldisposable income of 1970. This is a main cornerstoneupon which the IBRD estimatesrest. Personaldisposable income is estimatedat B$287.9million. This figureis slightlyhigher than the B$283,9million officialestimate because we adjustedthe mean of the open end of the tables on incomedistribution by fittinga Paretocurve, so as to gain in accuracy.

230. Then,interestand profit remittances to abroad and from abroad are based on data obtainedfrom the B.M.A.and the IMF. Retainedprofits of local businessas well as depreciationwere estimatedon the basis of raw data containedin the CompanyStatistics Reports. Local ownershipwas assumed to be 20% of total net worth. The rate of profitwas assumed to be 20% of net worth locally owned,and the rate of retained profits was estimated at 25% of local profits. Depreciation was estimated, in 1970, at 4% of the country's fixed capital. Other figures such as internal transfers and indirect taxes came from the Treasury Accounts. In this way,we arrived at a GNP at M.P. of B$400.5 million for 1970, as shown in right hand side of TABLE3. 231. In the expenditure approach of TABLE3, we estimated private consumption at US$292.9 million,based on the 1970 household budgotary survey originally designed to prepare a retail price index. Public consumption was taken from the treasuryaccounts. The exportand importfigares are derivedfrom the sources'c', 'e' and 'g' mentionedbelow. Investmentswere estimatedon the basis of buildingstarts, imports of machineryand transportequipment.

232. Havingthe results for the benchmark year, 1970, confirmed by the two different independent approaches, we made the projections forward for 1971 and 1972, and backwardsfor 1969 presented in TABLE 2. Fixed capital formation,public consumption,exports and importswere estiratedexactly in the same manner as in 1970. Private consumption was projected forward and backwards

I1/ Although improving rapidly. APPENDIX A Page 88

using the growth rates of imports of non-durables as prov for the consumption of these types of goods. A consumption index of electricity was used as a proxy to project forward and backward the consuwmption of services. For proj ecting the consumption of durable goods, the growth rate of imports of these kinds of goods was used.

233. The bibliography used to prepare the estimates is the following:

(a) Report of the 1970 Census on Population, December 1972, Department of Statistics, Cabinet Office.

(b) Household Budgetary Survey Report 1970, Department of Statistics, Cabinet Office.

(c) External Trade Statistics Reports 1969, 1970 1971 and 1972. Several Volumes, Department of Statistics, Cabinet Office. (d) Annual Reports on Tourism 1969, 1970, 1971, 1972, Ministry of Tourism.

(e) The Bahamas Economic Situation, 1973, IMF.

(f) Treasury accounts 1969, 1970, 1971, 1972, Ministry of Finance.

(g) Quarterly Statistical Summaries, Several issues, Depart- ment of Statistics, Cabinet Office.

(h) Data on Building Permits and Starts, Ministry of Public works.

(i) Annual Reports, Bahamas Monetary Authcrity.

(j) Company Statistics Reports, Department of Statistics, Cabinet Office. APPENDIXB Page 89

APPENDIXB

EXTERNALCAPITAL REQUIREMENTS

234. Using a standard,simple though lengthy, two gap model,we have calculatedrequirements for achievinga specifiedgrowth rate for the economyof the Bahamas. The model does not have econometricallyestimated behavioralequations; therefore, it is not an econometricmodel. It is merely a national accounting framework useful in making consistent economic projections. Four basic parameters have to be specified "a priori" to get these projections. They are the incremental capital output ratio (ICOR),the minimum import elasticity, the maximum marginal national aanigs ratio,andthe GDP growthrate. A numberof variables,such as exports, some minimum assured levels of capital inflows, both private and public,and net foreign investment income outflows, are also predetermined. Based on these assumptions,themodel predictsthe additionalexternal capital needed in order to reach the desiredgrowth rate of GDP.

235. The two gaps are the foreignresource and the domesticresource gap. The foreignresource gap is M-X, where:

M - importsof goods and nonfactorservices X - exportsof goods and nonfactorservices; the domesticresource gap is I-S, where:

I - Gross Domesticinvestment S - Gross Domestic savings

By definition,the two gaps have to be equal ex post, so M-X - I-S. Ex ante, however,the two gaps are most likelyto differ. Since the GDP growthrate is given, equality of the two gaps cannot be achieved through changes in the GDP growth rate. Thus, equality between the two gaps is achieved simply by filling the difference between thetwo with external resources. Therefore, the largest of the two ex ante gaps will always prev&il.

236. The next step is to (letermine which gap wouild be the largest ex ante. For given X and I, the largest gap would be the external one, M-X>I-S, if and only if M > I+X-S. On the contrary, the larger gap would be the domestic one, M-X

(1) M* - f (Minimumimport elasticity, GDP)

(2) S* = f (Maximummarginal National Savings, GDP) APPENDIXB Page 90

If the calculatedM* is largerthan I+X-S*, the foreignresource gap dominates. Therefore,since the identityM-X - I-6 has to hold, S is calculatedas a residual: S - I+X-M*,and S* is droppedout. If,3on the contrary,M*

M - I+X-S*

237. Three observationsregarding this gap model are in order. First, the higherthe minimalimport elasticity and the maximalmarginal nationsl savingsratio, the higheris the probabilitythat the trade gap would be binding. Second,the higherthe ICOR and the predeterminedlevel of exports, the more likelyit is that the savingsgap would be binding. Third,if and only if,the savingsconstraint prevails, an increasein nationalsavings will reducethe externalcapital requirements. Otherwise, an ex ante effort to increasenational savings is useless.1/

238. The lack of an officiallyapproved development plan in the Bahamas rules out the possibilityof analyzingthe capitalrequirements of just one growth path. A maximal and a minimal growth target will have to be tested.

239. Two basic assumptions regarding net foreign investment income and net directforeign investment are valid under both a high growth assumption and a low growthassumption. Foreign investment income is put at US$147.5 million in 1973,rising to US$156 millionin 1976 in money terms,and,thereafter,it is maintained constant in real terms, assuming a rate of world inflation of 5.7% per year. Net direct investment is projected to decline from US$89 million in 1973 to only US$60 millionin 1974, and it-is assumedto remainconstant in real terms thereafter.Non-private capital flows and debt serviceare taken into accounttoo. However,following past trends,they are projectedto be small for the economyas a whole.

High growthpath

240. GDP is projectedto stay constantin 1974. This projection is relatedto the gloomypicture for GNP growthin the U.S. and Europethis year. In 1975, however,GDP is projectedto grow at 4%; in 1976, at 4.5%; and from 1977 onwardat 5.C%, 3 percentagepoints above the naturalgrowth rate of the populationof about 2.0%. Accordingly,exports of nonfactor services,i.e. tourism,are projectedto stay constantin 1974 and to grow at 8% per year in real terms for 1975 onwards.

1/ The simplicityof the explanationgiven in the four paragraphsabove is for presentationpurposes. The real model introducessome few more complications,suchas adjustmentsfor the terms of trade and othersthat would not vary the essentialsspelled out here. APPENDIXB Page 91

241. Sincethe economyis shortof manpower,methods of productionwill have to be increasinglycapital intensive. Substitutionof capitalfor labor will have to take place on two grounds. First, wages are too high for the presentlevel of capitalintensity. The lossesexperienced by the touristindustry are a clear syVptomof this problem. Second,the naturalincrease of the labor force is only about 1200-1300persons per year, too low to maintain an investment level consistent with the assumed GDP growth rate and the incremental capital labor ratio prevailing up until now. Thus, capital labor ratio would have to go up. This would be reflected in a high ICOR. Therefore, ICOR is set at 4 in 1976, at 5 in 1977 and at 6 from 1978 onwards. Incidentally, even with these ICORs, total investments at the end of the decadewill be far below the levels reached in 1969, when high investments were accompanied with large immigrationflows.

242. Two policy optionscan be incorporatedin the projections.They are importsubstitution in agriculture,especially that gearedto reducing the importcoefficient of the touristindustry, and heaviertaxation, especially directtaxation of visiblepersons residing in the Bahamas.

243. In order to test the effectsof an importsubstitution policy on the capital requirements of the Bahamas, two import elaeticity parameters were tried for 1976 onwards: first, 1.00 assuming that the Government will undertAke special measures to stimulate domestic production competing with imports;second, 1.20 for the case of no special measures. 244. In order to test the effectsof a policyof directtaxation of visiblepersons residing in the country,two sets of marginalnational savings ratioswere tried. In the first set, we assumedthat the Governmentintro- duced a personal income tax and kept current expenditures down, and then we put the MNSRat 40 percent in 1975, 1976, 1977 and 1978 and 30 percent from 1979 onwards. In the second set, we assumed no action in the taxation and currentpublic expendituresfield, so we put the MNSRar 17 percent in 1974. risingsmoothly up to 22 percentin 1979 and constantthereafter.

245. The additional external capital requiremants to fill whatever gap is binding are the following: APPENDIX B Page 92

Zab e EXTERNAL CAPITAL REQUIREMENTS WLTGHGROWTH PATH

Low MNJSR Low MNSR High MNSR High MNSR Low Import High Import Low Import High Import Year Elasticity Elasticitz Elasticitz Elasticity

(in '000 current dollars)

1974 -31760 -31760 -31904 -31904 1975 24342 24342 15835 15835 1976 86444 86444 69580 69580 1977 136538 136538 110273 110273 1978 143166 151939 113210 121699 1979 158639 173850 122583 138049 1980 178008 200430 135106 158244

The capital requirements, measured in U.S. current dollars with an inflationary rate of 5.7 percent per year, vary considerably with the assumptions. The highest point would be US$200 million in 1980, assuming a low marginal savings ratio and high import elasticity. The lowest point would be US$135 million, assuming high national savings and a low import elasticity.

246. The gaps referred to in the previous paragraph could be filled by raising direct foreign private investment to its earlier levels, borrowing from supplier's credits, commercial banks, or from public external financing. Foreign private investment could take the form of increased reinvestment of profits by foreign corporations already established in the country. Although net investment income is running at about US$150 million per year, reinvestment of profits by foreign corporations is at present very low. Unless this position is substantiallychanged in the near future, it would be necessary to assume that the major part of the required resources will have to come from borrowing from private sources and from public external agencies.

247. Although we have dealt with different marginal national savings ratios imeIying different taxation policies, the possibility of a corporate income tax was left out of the sensitivity analysis. We have assumed a new foreign investmient income of the order of US$150 million in constan.t terms. Should the Government decide to tax profit remittances abroad, the external capital requirement would be reduced by an amount almost equal to the corporate taxes collected. In other words, there is a one-to-one correspondencebetween corporate taxation and capital requirements. This statement follows neatly from the formula used to calculate capital requirements:

Capital - Imports + net foreign investment income - Requirements Extorts - net direct foreign investment- increase in necessary foreign exchange reserves - miscellarecus, APPENDIXB Page 93

To the extent that corporate taxation reduces net foreign investment income, capital requirements would thus be reduced. It is not likely that a moderate corporate income tax would affect the flow of net direct foreign investment because foreign corporations have to pay taxes in the capital exporting country anyway, and those countries generally give full tax credit for taxes paid abroad. Moreover, it could be argued that a moderate corporate profit tax that exempts reinvested profits could well raise net direct foreign investment made by foreign corporations already established in the country, thus reducing capital requirements on both counts: by reducing net foreign investment income and by increasing net direct foreign investment.

Low growth path

248. In 1974,GDP and exports of nonfactor services are expected to be at the same levels as in 1973. In 1975, however, GDP would grow at 3 percent per year and exports of nonr factor services at 4%, both in real terms.

249. This low GDP growth rate would not put pressure on a labor force growing naturally at almost 2 percent per year. However, since wages are comparatively high in the Bahamas, some increase in the degree of capital intensity of the economy is indicated. Thus, the ICOR is set at 4.0 in 1976, 4.5 in 1977 and 5.0 from 1978 onwards. Again, incidentally, the investment levels stemming from these ICOR's are very low in comparison with years 1968-69-70.

250. As in the high growth path, two policy options are tested here: import substitution,implying a lower import elasticity, and higher taxation, implying a higher marginal national saving rate. The values adopted for these parameters are as referred in paragraphs 243 and 244. 251. Under these assumptions,the external capital requirements are, paradoxically,negative.

252. Negative capital requirements mean that the country could start to export capital. To put it differently, foreign exchange reserves would be growing at annual levels similar to the negative capital requirements. Such a rapid increase in reserves would create an excess of liquidity in the economy, thereby lowering interest rates. Low interest rates and lack of investment opportunities, stemming from the economy's assumed low growth rate, would force foreign and local investors in the Bahamas to send their money abroad. The excess liquidity would thus be eliminated. Although this result may look strange, something similar hsd already been happening in years 1971 and 1972. APPENDIXB Page 92;

Table L_6: EXTERNALCAPITAL REQUIREMENTS LOWGROWTH PATH

Low MNSR Low MNSR High MNSR High MNSR Low Import High Import Low Import High Import Year Elasticity Elasticit Elasticity Elasticity (in '000 of U.S. current dollars)

1974 -31760 -31760 -31904 -31904 1975 -31952 -31 952 -34620 -3)4620 1976 -23113 -23113 -32658 -32658 1977 -17118 -17118 -33505 -33505 1978 -2.3048 -19958 -41985 -38186 1979 -27276 -22926 -50515 -44127 1980 -29751 -23516 -57753 -48070

Conclusion

253. The capital requirements of the Bahamianeconomy are extremely sensitive to changes in the growth rate of GDP. This conclusion stems from the openness of the economy as well as the high capital intensity of the production methods assumed. Although the economy is bound to be relatively capital intensive, given its manpower constraint and level of wages, the Government has freedom to select the target growth rate. The importance of setting the "right" target growth rate for the future economic growth of the Bahamian economy is brought about sharply in the previous pages. The political implications of choosing one growth rate or the other will have to be carefully analyzed by Bahamians themselves. STATI'STICALAPPENDIX

Table of Contents

1. POPULATION,MANPOWER AND INCOMEDISTRIBUTION

1.1 Sex and Age Distribution of Population, 1931, 1943, 1953, 1963 and 1970. 1.2 Potentially Economically Active Population Aged 14 years and over by Economic Activity, Sex, and Occupation. 1.3 Potentially Economically Active Population Aged 14 years and over by Occupation, Sex and Age Group. 1.4 Number of Pupils in Educational Institutionss 1965-70. 1.5 Population by Personal Income Classification, Nationality Status, and Sex. 1.6 Income Distribution, Comparison with other Countries.

2. NATIONALACCOUNTS 2.1 Expenditure on Gross Domestic Product 1968-72. 2.2 Projection of Expenditure on Gross Domestic Product.Case I. 2.3 Projection of Expenditure on Gross Domestic Product.Case II. 2.4 Projection of Expenditure on Gross Domestic Product Case III. 2.5 Projection of Expenditure on Gross Domestic Product. Case IV. 2.6 Projection of Expenditure on Gross Domestic Product. Case V. 2.7 Projection of Expenditure on Gross Domestic Product. Case VI. 2.8 Projection of Expenditure on Gross Domestic Product. Case VII. 2.9 Projection of Expenditure on Gross Domestic Product. Case VIII.

3. BALANCEOF PAYMENTS 3.1 Balance of Payments,1968-72 3.2 Commodity Imports, by Type of Commodity. 3.3 Commodity Exports, by Type of Commodity. 3.4 Balance of Payments Projectiono High Growth Path. Cases I and II. 3.5 Balance of Payments Projection. High Growth Path. Cases III and IV. 3.6 Balance of Payments Projection. High Growth Path. Cases V and VI. 3.7 Balance of Payments Projection. High Growth Path. Cases VII and VIII. - ii. - 4. IXTE'RNi DEBT

4.1 External Public Debt Outstanding as of December 31, 1972. Debt Repayable in Foreign Currency by Creditor Country. 4.2 External Public Debt Repayable in Foreign Currency. Total 4.3 External Public Debt Repayable in Foreign Currency. Suppliers. 4.4 External Public Debt Repayable in Foreign Currency. Private Banks. 4.5 External Public Debt Repayable in Foreign Currency. Other Private Financial Institutions. 4.6 External Public Debt Repayable in Foreign Currency. UK. 4.7 External Publ..cDebt Repayable in Foreign Currency. USA. 4.8 External Publ-c Debt Repayable in Foreign Currency. Loans. from Govermients. 4.9 External Public Debt Repayable in Foreign Currency. Suppliers - Canada. 4.10 External Public Debt. Debt Repayable in Foreign Currency. Suppliers - Switzerland. 4.11 External Public Debt. Debt Repayable in Foreign Currency. Suppliers - United Kingdom. 4.12 External Public Debt. Debt Repayable in Foreign Currency. Suppliers - USA. 4.13 External Public Debt. Debt Repayable in Foreign Currency. Private Banks<- Canada. 4.14 External Public Debt. Debt Repayable in Foreign Currency. Private Banks - USA. 4.15 External Public Debt. Debt Repayable in Foreign Currency Private Banks. Multiple Lenders. 4.16 External Public Debt. Debt Repayable in Foreign Currency. Other Financial Institutions. Canada. 4.17 External Public Debt. Debt Repayable in Foreign Currency. Other Private Financial Institutions. USA.

5. PUBLIC FINANCES

5.1 Central Government Expenditure. Functional Classification. 5.2 Central Government Expenditure. Economic Classification. 5.3 Central Government Revenue. 5.4 Transactions of Non-financial Public Enterprises.

6. MONETARYSTATISTICS

6.1 Summary Accounts of the Banking System. 6.2 Distribution of Authorized Dealers' Credit to the Private Sector. - iii -

7. TOURISM STATISTICS

7.1 MonthlyArrivals, 1962-72. 7.2 Tourist Arrivals in 1972. Classified by Type of Tourist and Month. 7.3 VisitorsPoints of Residence,1972. 7.4 First Port of EntryArrivals, 1964-72. 7.5 USA VisitorsPoints of Residence,1971-72. 7.6 USA VisitorsOccupational Distribution, 1971-72. 7.7 VisitorExpenditure Patterns 1972. 7.8 Hotel Rooms,1962-72.

8. PRICES

8.1 Nassau, Washington, D.C. Price Comparison for Food, Clothing, Transportation and Appliances. 8.2 Index of Retail Prices, 1968-73.

Table1.1: SEX ANDAGE DISTRIBUTIONOF POPULATION*

_ 9;3 1963 1970

(In Thousands)

Males

All A s 27.8 32.1 39-3 63.5 83.7 0-14 years 11. 13.1 16.7 7E:. 37.2 15-64 years 14.7 17.6 20.8 32.6 44.1 65 years and over 0.9 1.3 1.5 1.8 2.4 Not Stated 0.5 0.1 0.3 0.2 _

Females

All A yes 32.0 36.7 45-5 66.7 85.1 0-14years 12.0 13.0 16.8 7-.7 15-64 years 18.4 21.9 26.3 35.1 45.2 65 years and over 1.3 1.7 2.2 2.8 3.5 Not Stated 0.2 0.1 0.2 0.2 - Total

All Ages 59.8 68.8 84.8 130.2 168.8 014 years 379 26.1 33-5 57-5 73.6 15-64 years 33.1 39.5 47.1 67.7 89.3 65 years and over 2.2 3.0 3.7 4.6 5.9 Not Stated 0.7 0.2 0.5 0.4 - (In PercentOf Total Population)

Males

AlleslUes 46.5 46.7 46-3 48.8 49.6 0-14 years 19.7 19.0 19.7 22.1 22.0 15-64 years 24.6 25.6 24.5 25.0 26.1 65 years and over 1.5 1.9 1.8 1.4 1.4 Not Stated 0.8 0.1 0.4 0.2 -

Females

All Ages 53.5 53.3 53.7 51.2 50-4 0-4 years 20.1 9 T719.8 22.0 21.6 15-64 years 30.8 31.8 31.0 27.0 26.8 65 years and over 2.2 2.5 2.6 2.2 2.1 Not Stated 0.3 0.1 0.2 0.1 -

Total

.AllAgzes 100.0 100.0 100.0 100.0 100.0 0-1 years 39 37.9 39.5 4424-6 15-64 years 55.3 57.4 55.5 52.0 52.9 65 years and over 3.7 4.4 4.4 3.5 3.5 Not Stated 1.2 0.3 o.6 0.3 -

Source: Departmentof Statistics;Bahamas, StatisticalAbstract, 1970

* Componentsmay not add up to total due to rounding. Ta.ble 12.2: POTENTIALLY ECOHNOMCALLYACTIVE 3'OPSLATION AGED 14 YEARS AND OVER LAST S'RTHDAY 5V ECONOMICAUTIVITY SEX AND OCCUPATTON 1970

(1) UNEMPLOYED AGRICULTURE,SUNTING, MINING & ELECTRICITY WHOLESALE& RETAIL TRANSPORT,STORASE FINANCING,INSURANCE COHMMNITY,SOCIAL A, OCCUPATION TOTAL NOT STATED FORESTRY & FISHING QEARRYING MANUFACTUINSIG GAS & WATER CONSYRUCTION TRADE&RESTAURANTI & COMMSUNICATION REAL ESTATE & PERSONAL SERVICES & HOTELS BUSINESS SERVICES

TotalMlsFmleMMalesFemalesTotal oa1aesFmlsTt Males Female Total Males Female Total Males Foma.les Total Males Females TotalMlseae Total Males Females Total Males Females EMPLOYEE (OR UNEMPLOYEDFOR HEALTH OR OTHER REASOND) NUT OCCUPATIONNOT GIVEN 7144 7343 2989 4354 ------I I - PROFESSIONAL,TECHNICAL AND RELATED WORKECSR 6179 22 15 7 31 32 19 4 4 - 201 177 24 116 114 2 244 235 9 461 406 55 162 170 12 511 471 39 4387 1669 2718 ADMINISTRATYIVE, EXECUTIVE 4 MANAGERIAL WORKERS 3608 2 1 1 47 43 2 7 7 - 170 148 22 56 55 1 371 341 10 1244 974 270 306 287 18 806 719 87 599 515 84 CLERICAL WORKERS 7809 11 4 7 47 17 30 10 1 9 265 88 177 160 64 96 211 63 148 2118 355 1563 837 237 585 24205330 1883 1730 516 1214 SALES WORKERS 3673 1 - 1 18 14 4 3 2 1 169 102 67 27 25 2 23 21 2 2538 1149 1389 142 92 55 636 557 79 116 59 37 PSIOSRS, FISHERMEN, HINTERS, LOGGERS & RELATED WORKERS 4333 12 4 0 4062 2775 1288 3 2 1 42 41 1 4 4 - 12 12 - 94 90 4 18 18 - 11 10 1 74 65 9 MINERS, I5UARRYHEN & RELATED WORKERES 32 2 - 2 1 1 - 11 10 1 9 5 1 8 8 - 13 13 - 4 3 1 - - - 1 1 - 3 2 1 WORKERS EN TRANSPORT & CONIMUNICA.OCCUPATIONS 4320 4 4 - 104 103 1 11 9 1 213 198 17 54 48 6 196 190 6 594 428 166 2560 2038 522 186 115 76 397 311 86 CRAFTSMEN, PRODUCTION- PROCESS WORKERS & LASOUNERSNOT ELSEWHERE CLASSIFIED 17130 16 15 1 382 301 84 26 26 - 2643 1668 975 883 878 9 7316 7261 45 2037 1858 179 1181 1172 9 431 416 15 2222 2020 202 SERVICE, SPORT & RECREATION WORKERS 13343 14 4 10 75 32 43 4 1 3 110 52 28 21 15 4 93 40 53 7067 3053 4017 286 224 62 329 170 159 7344 2557 4787

TOTAL 69795 7427 3036 4391 4791 2320 1475 78 42 1b 3824 2402 1342 1329 5211 118 8449 4196 233 56157 8518 7639 3512 4258 1254 5331 2991 2341 16873 7715 9158

Saourc : Deport-et at Statistios, Cabi.ot Offios, Table 1.3: POTENTIALLYEOGNIEMICALLY ACrTIVE POPULATION ATRD 14 YEATSASS OVIS LAST BRTHYRAT'BY OCCEPATTONSIT AND BY ATE TROOP OCCUPATION 1970

AGE TN TERAS ALL OCCTPATIONS PROFESSIONAL, REXECUTIVE,ADMINIS- FOO2MIRS,PTSHRMSREN, CRAF'TSMEN,PRODUC- LAST STISRTHAY UNEMPLOYED TECHNICAL & TRATIVE, & MANAG0ERIAL CLERICAL SALES SUNTERS, LOGGERS& HIKERS,QUARNTMEN TRLANSPORT& COMMUNNO- TION-PROCESS WORXERIS SERVICE, SPORT & NOT STATES ROLATEDWORKCRAS WORKERS WORKERS STRKEETS RELATEDWORKCERS & RELATES MORSERS CATION WORKONS A LASOSSERS RECREATTONWORKERS TOTAL Males Female Total Males Emasl Total Males Pa-a1e Teta1 Males Females Total Males F Jla T.tal Males Tamale Total Males Female TeseS Ma Females Tatal Mates Females Total Males Female Total Melee Pestles

14 547 321 22C 367 117 190 2 - 2 - - - 11 3 6 12 51 1 21 09 3 - - - 12 10 2 69 66 5 33 40 13 55 - 19 7410 4067 3345 1770 661 1109 535 190 325 17 12 5 1132 320 R12 329 5fi6 153 209 142 67 4 4 - 333 217 136 1654 1583 71 1439 782 607 25 24 10565 1919 4646 1042 428 614 993 419 574 192 153 32 2010 553 1657 564 302 242 194 15D Tb4 2 2 675 133 242 2484 2376 108 2216 1103 1113 25 29 11242 6792 4460 629 213 376 1331 708 623 490 407 73 1783 436 1347 560 325 043 274 214 60 4 5 1 779 583 194 2861 2666 195 2533 1185 13b8 30 -34 9400 5967 35330 494 214 280 1076 577 499 609 532 77 1042 272 767 450 255 195 376 300 76 9 9 - 641 520 121 0517 2303 294 2188 872 1316 35 -39 7471 4611 2860 006 169 237 717 441 316 536 465 71 629 133 496 377 204 113 314 260 94 8 8 - 556 478 78 0067 1880 184 1781 370 1211 40 4.4 6024 3692 2332 370 166 202 477 300 102 436 385 13 394 106 269 315 174 141 441 308 133 5 4 1 410 365 45 4656 1428 228 1510 434 1084 45 49 4811 2947 1964 369 118 211 309 190 139 421 340 62 248 75 1 73 291 114 139 440 301 159 6 6 - 322 299 23 1231 1082 149 1126 320 806 55 56 4466 2757 1709 422 172 250 293 186 107 366 309 52 151 55 96 275 159 116 557 392 167 7 6 1 268 245 23 1027 896 141 5100 349 751 55 -59 3365' 2167 11 90 420 173 235 176 125 51 277 047 30 97 54 43 201 116 lOS 518 371 147 3 3 - 159 154 5 803 701 100 683 223 460 60-64 2130 1289 941 328 133 195 101 76 40 166 143 23 66 36 20 132 71 61 363 236 127 2 - 2 86 g0 6 446 360 79 420 146 274 65 ON MORE 0356 1363 993 709 284 431 119 92 27 105 92 10 46 32 14 135 82 23 566 331 135 2 1 1 59 53 6 315 263 52 286 126 160 TOYAL 69791 41708 28003 7344 0990 4350 6179 3294 2005 36908 3112 494 7809 2190 5709 3673 20?: 1652 4333 3021 1312 52 46 6 4320 3439 551 10130 15615 ISIS 15343 6150 9193

20S-- : Depotmet of SatSts5ti-,Cabiset OfSise. Table 1.4: NUMBEHOF PUPIIS IN EDUCATIONALINSTITUTIONS, 1965-1970

1965 1 9 6 6 1 9 6 7 1 9 6 8 1 9 6 9 1 9 7 0 No. of No. of Increase No. of Increase No. of Increase No. of Increase No. of Increase Students Students Over 1965 Students Over 1966 Students Over 1967 Students Over 1968 Students Over 1969

No. % No. % No. % No. a No. %

GovernmentSchools 23,237 29,509 6,272 27.0 32,577 3,068 10.4 34,395 1,818 5.6 36,862 2,467 7.2 39,546 2,684 7.3 Private and Government aidedSchools 11.583 13,338 1,755 15.2 13.880 542 4.1 13,871 _9 .. 14.549 678 4.9 14,585 36 0.2

Total 34,820 42,847 8,027 23.1 46,457 3,610 B.4 48,266 1,809 3.9 51,411.. 3,1i45 6.5 54,131 2,720 5.3

Source: Ministryof Education.

Note : These figuresdo not include stndentsattending: Bahams Teachers'College San SalvadorTeachers' College C. R. Walker TechnicalCollege a a> !imo14i,i>Ig".i..

00 I S 55 IS . a , a N 0000 N

r a ai aa '' aa i nn

4 a '0a a a a '

00040 -4 |i|essK - a. 04! Ii , 4-at 000

o ad s ' K

_ 0 gSCSx Ia|b

3 o 40000080R0S 4h-h 010> I8 a a 440000 >S

000 40n 0_.4 n 4___

0F 00 0 4 i4 0 0 0 0 040

> _0000 000v40D 000 00410_ 0 0 1 0 _4I o0000 N

1 I-0 _ H0 H Z 510 HO_ 00005. N0 5

0. 0.a a 0.- s 0< 0. 15'. 0. 0. 5)

|~~~~~~~~~~~0' -- _ 0s 0- Oi

>- 80° 4 4- c 4s 0^Naf0 05 4 0 0. 4

00..qc-0 00005-00000s-a0 00 0 O 0_ -- .1s Table 1.6: INCOMI:DISTRIBUTION - COMPARISONWITHI OTIER COUNTRIES

The Bahamas United KinFdom Jamaica Puerto Rico Gu 1970 1961967095 % of PoP. % of Incone of Pop.P,- 5, of Incone %of Pop. 5%of Income % of Pop. % of Income % of Pop. % of Income

20.0 2.9 20 5.5 20 2.2 20 4.5 20 4.0

40.0 12.3 40 15.8 40 8.2 40 13.7 40 14.0 60.0 26.9 60 31.7 60 19.0 60 67.9 60 30.8

80.0 47.4 80 54.8 80 38.5 80 79.4 80 54.3

95.0 77.2 95 79.0 95 69.8 95 78.0 95 81.0

100.0 100.0 100 100.0 100 100.0 100 100.0 100 100.0

Source: Bahamas Department of Statistics,Cabinet office and IBRD. Table 2.1: EXPENDITUREON GROSSDOMESTIC PRODUCT

(in million US$ of 1968)

1968 1969 1270 1971 1972

Gross Domestic Product 41o.4 447.4 400.7 430.3 449.6

Imports of goods and NFS 218.6 312.6 306.2 240.8 240.1

Exports of goods and NFS 240.7 309.1 283.3 320.2 365.9

Resource gap -22.1 3.5 22.8 -79.4 -125.8

Consumption 257.4 278.0 308.0 286.1 268.7

Investment 131.0 172.9 115.5 64.8 55.2

Resource use (GDP + Gap) 388.3 450.9 423.6 350.9 323.8

Domestic Savings 153.1 169.4 92.7 144.2 180.9

Net Factor Service Income -56.2 -80.9 -55.8 -89.1 -137.3

NationalSavings 96.9 88.5 36.9 55.0 44.4

Gross NatianalProduct 354.2 366.4 344.8 341.0 312.2

Note 1: Components may not add up to totals because of rounding, a negligible terms of trade difference and also a very minor current transfer.

Note 2: Exports and imports exclude o.1l under processing agreement. Tble 2.2: PROJECTIONOF EXPENDITUREON GROSS DOMESTIC PRODUCT 1973-80

Case I High Growth, Low National Marginal Savings Ratio and Low Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1i79 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.8 539.5 566.5 594.8 Terms of Trade Adjustment -2.4 -20.0 -21.0 -22.0 -23.2 -24.4 -25.7 -27.2 Gross Domestic Income 447.5 430.3 447.4 467.4 490.7 515.1 540.8 567.6 Imports of Goods and NFS 240.2 241.7 286.5 339.2 384.1 403.3 425.1 448.5 Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0 Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -403.6 -430.9 -454.8 Resource Gap -111.4 - 92.3 - 64.1 - 29.4 - 3.7 - 5.2 - 5.8 - 6.3 Consumption 280.8 282.9 298.9 315.6 332.8 348.0 365.0 382.9 Investment 55.2 5J.2 84.3 122.3 154.2 161.9 170.0 178.5 Resources Available 336.1 338.1 383.2 438.0 487.0 509.9 535.0 561.4 Gross Domestic Savings 166.6 147.5 148.4 151.7 157.9 167.1 175.7 184.7 Factor Service Income -126.1 -106.3 -103.7 -102.9 -104.7 -108.6 -1L2.5 -116.4 Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 42.4 46.0 49.9 54.2 58.5 63.3 68.3 Gross National Product 323.7 343.9 364.6 386.4 409.1 431.0 454.1 478.4 Gross National Income 321.4 324.0 343.7 364.4 385.9 406.6 428.3 451.3

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Componentsmay not add up due to rounding

Note 3 Exports and imports excludes oil under processing agreement Table 2.3: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case II High Growth, Low Marginal National Savings and High Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 460.3 489.4 513.8 539.8 566.5 594.8

Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2 Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7 Imports of Goods and NFS 240.2 241.7 286.5 339.2 384.1 407.2 431.6 457.5 Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0 Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -408.6 -430.8 -454.8 Resource Gap -111.4 - 92.3 - 64.1 - 29.4 - 3.7 - 1,4 - 0.8 2.7 Consumption 280.8 282.9 298.9 315.6 332.8 351.9 371.6 391.9 Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.4 ResourcesAvailable 336.0 338.1 383.2 438.0 487.0 513.7 541.5 570.4 Gross Domestic Savings 166.6 147.5 148.4 151.7 157.8 163.2 169.2 115.8 Factor Service Income -126.1 -106.3 -103.7 -103.0 -104.7 -100.6 -112.8 -117.2 Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 42.4 45.9 49.9 54.2 54.7 56.4 58.5 Gross National Product 323.7 344.0 364.6 386.4 409.1 431.0 453.8 477.6 Gross National Income 321.4 324.0 343.7 364.4 385.9 406.6 428.0 450.4

Note 1 Assumptions and Methodology explained in Appendix B

Note 2 Components mav not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement T&ble 2.4: PROJECTION OF EXPENDITUREON GROSS DOMESTIC PRODUCT 1973-80

Case III High Growth, High National Marginal Savings Ratio, Low Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.9 539.5 566.5 594.8 Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2 Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7 Imports of Goods and NFS 240.2 241.6 282.1 330.6 371.7 390.3 411.0 433.4 Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0 Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -360.6 -387.8 -408.6 -430.9 -454.8 Resource Gap -111.4 - 92.4 - 68.5 - 37.9 - 16.1 - 18.2 - 19.9 - 21.4 Consumption 280.8 282.8 294.5 307.1 320.4 335.0 350.9 367.8 Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.5 ResourcesAvailable 336.1 338.0 378.8 429.4 474.5 496.8 520.9 546.3 Gross Domestic Savings 166.6 147.6 152.8 160.3 170.3 180.1 189.8 199.9 Factor Service Incouie -126.1 -106.3 -103.7 -102.6 -103.7 -106.6 -109.4 -112.2 Net CurrentTransfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 52.5 50.4 58.8 67.7 73.6 80.4 87.7 Gross National Product 323.7 344.0 364.6 386.8 410.2 432.0 457.1 482.6 Gross National Income 321.4 324.0 343.7 364.7 387.0 408.6 431.4 455.5

Note I Assumptions and methodologyare explained in Appendix B

Note 2 Componentsmay not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement TAW 2.5: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case IV High Growth, High Marginal National Savings and High Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.8 539.6 566.5 594.9 Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2 Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7 Imports of Goods and NFS 240.2 241.6 282.1 330.6 371.7 693.9 417.6 442.7 Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0 Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -408.6 430.8 454.8 Resource Gap -111.4 - 92.4 - 68.5 - 37.9 - 16.1 - 14.6 - 13.2 - 12.1 Consumption 280.9 282.8 294.5 307.1 320.4 338.7 357.6 377.0 Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.5 Resources Available 336.0 338.0 378.8 429.4 474.5 500.6 527.5 555.5 Gross Domestic Savings 166.6 147.6 152.8 160.3 170.3 176.4 183.2 190.6 Factor Service Income -126.1 -106.3 -103.7 -102.6 -103.7 -106.6 -109.7 -113.0 Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 42.5 50.4 58.8 67.7 69.9 73.5 77.6 Gross National Product 323.7 344.0 364.6 386.7 410.2 433.0 456.8 481.8 Gross National Income 321.4 324.0 343.7 364.7 387.0 408.6 431.1 454.6

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement Table 2.6: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case V Low Growth, Low National Marginal Savings and Low Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.1 506.8 522.0 537.7 Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2 Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4 Imports of Goods and NFS 240.2 241.7 250.3 267.6 285.1 294.0 304.1 314.5 Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.6 -412.2 Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 -351.0 -359.9 -369.2 -378.9 -388.9 Resource Gap -111.4 - 92.3 - 92.0 - 83.4 - 74.9 - 75.3 - 74.8 - 74.4 Consumption 280.9 282.9 295.6 308.8 321.9 333.5 346.2 359.4 Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.6 Resources Available 336.1 330.1 351.3 373.3 395.7 409.5 424.5 440.0 Gross Domestic Savings 166.6 147.5 147.7 147.9 148.7 151.3 153.1 155.1 Factor Service Income -126.1 -106.3 -103.7 -100.7 - 98.1 - 96.3 - 94.5 - 92.8 Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 42.4 45.2 48.3 51.6 55.0 58.6 62.3 Gross National Product 323.7 344.0 360.1 377.0 393.9 410.5 427.5 444.9 Gross National Income 321.4 323.9 339.7 356.0 372.4 388.4 404.8 421.6

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components rm-aynot add up due to rounding

Note 3 Exports and Imports exclude oil under processing agreement Table 2.7: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case VI Low Growth, Low Marginal National Savings Rate and High Import Elasticity (In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979- 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.0 506.8 522.0 537.7 Terms of Trade Adjustment - 2.4 - 20.0 - 20.4 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2 Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4 Imports of Goods and NFS 240.2 241.7 250.3 267.6 285.1 295.3 306.0 317.0 Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.5 -412.2 Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 -351.0 -359.9 -369.2 -378.9 -388.9 Resource Gap -111.4 - 92.3 - 92.0 - 83.4 - 74.9 - 73.9 - 72.9 - 71.9 Consumption 280.8 282.9 295.6 308.8 321.9 334.8 348.1 361.8 Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7 Resource Available 336.0 338.0 351.3 373.3 395.7 410.8 426.4 442.5 Gross Domestic Savings 166.6 147.5 147.7 147.9 148.7 149.9 151.2 152.6 Factor Service Income -126.1 -106.3 -103.7 -100.7 - 98.1 - 96.3 - 94.6 - 93.0 Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0 Gross National Savings 42.0 42.4 45.2 48.3 51.6 53.6 56.6 59.6 Gross National Product 323.7 344.0 360.1 377.0 393.9 410.5 427.4 444.6 Gross National Income 321.4 324.0 339.7 356.0 373.4 388.4 404.7 421.4

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement Table 2.8: PROJLuTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

CASE VII: LOW GROWTH, HIGH NATIONALMARGINAL SAVINGS RATIO, LOW IMPORT ELASTICITY (In millions of US$ of 1968)

1973 1974 1975 1976 1977 1978 1979 1t980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.1 506.8 522.2 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2

Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 449.4 514.4

Imports of Goods and NFS 240.2 241.6 248.9 262.8 277.3 285.6 294.8 304.4

Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.5 -412.2

Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 351.0 -359.9 -369.2 -378.9 -388.9

Resource Gap -111.4 - 92.4 - 93.4 - 88.2 - 82.7 - 83.6 - 84.1 - 84.5

Consumption 280.8 282.8 294.3 304.1 314.1 325.1 337-. 349.3

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7

Resources Available 336.1 338.0 349.9 368.6 387.9 401.1 415.3 429.9

Gross Domestic Savings 166.6 147.6 149.1 152.7 156.5 159.7 162.4 165.1

Factor Service Income -126.1 -106.3 -103.7 -100.6 - 97.6 - 95.2 - 92.8 - 90.3

Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.5 46.6 53.2 59.9 64.5 69.6 74.9

Gross National Product 323.7 344.0 360.1 377.1 394.4 411.6 429.3 447.4

Gross National Income 321.4 324.0 339.7 356.2 372.9 389.6 406.6 424.2

Note 1: Assumptions and methodology are explained in A-pendix B. Note 2: Components may not add up due to rounding. Note 3: Exports and imports exclude oil under processing agreement. Table 2.9: PROJECTIONOF EXPENDITUREON GROSS DOMESTIC PRODUCT

CASE VIII: LOW GROWTH, HIGH MARGINALNATIONALSAVINGS RATIO AND HIGH IMPORT ELASTICITY (In million of US$

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.0 506.8 522.0 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.0 - 22.6 - 23.2

GrossDomestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4

Importsof Goods and NFS 240.2 241.6 248.9 262.8 277.3 287.3 297.6 308.3 Exportsof Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 401.5 -412.2

ExportsAdj. by Terms of Trade 352.0 334.0 342.3 351.0 360.0 369.2 378.9 388.9

ResourceGap -111.4 - 92.4 - 93.4 - 88.2 - 82.7 - 82.0 - 81.3 - 80.6

Consumption 280.8 282.8 294.3 304.1 314.1 326.7 339.8 353.2

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7

ResourcesAvailable 336.0 338.0 349.9 368.6 387.9 402.8 418.1 433.8

Gross DomesticSavings 166.6 147.6 149.1 152.7 156.5 158.0 159.6 161.3

FactorService Income -126.1 -106.3 -103.7 -100.6 - 97.6 - 95.2 92.9 90.6

Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0

GrossNational Savings 42.0 42.5 46.6 53.2 59.9 62.8 66.7 70.7 Gross NationalProduct 323.7 344.0 360.1 377.1 394.4 411.6 429.1 447.1

Gross NationalIncorme 321.4 324.0 339.7 356.2 372.9 389.6 406.5 423.8

Note 1: Assumptionsand methodology explained in Appendix B. Note 2: Componentmay not add up due to rounding. Note 3: Exports and imports exclude oil under processing agreement.

Table 3.1: BALANCE OF PAYMENTS

(In millions of US$)

1969 1970 1971 1972 Credit Debit Balance Credit Debit Balance Credit Debit Balance Credit Debit Balance

Goods and Services 464.3 534.5 -70.2 541.1 614.5 -73.4 764.1 794.0 -29.9 1057.7 1035.3 26.4

Oil trade under processing agreement------30.1 38.7 -8.6 194.1 237.1 -43.0 253.5 238.3 15.2 Other merchandise 1/ 52.6 296.4 -243.8 57.0 298.8 -241.8 57.4 245.5 -188.1 98.7 261.7 -163.0 Travel 230.4 14.7 215.7 209.0 17.0 192.0 264.8 17.1 247.7 294.9 20.6 274.3 Interest, dividend and profits 135.3 201.8 -66.5 191.0 230.0 -39.0 191.8 272.5 -80.7 345.4 492.9 -147.5 Local expenses of offshore companies 22.5 _ 22.5 25.0 -- 25.0 25.6 -- 25.6 31.9 31.9 Miscellaneous commercial transactions 20.6 9.8 10.8 25.0 10.0 15.0 26.6 12.3 14.3 30.9 12.4 18.6 Other 2/ 2.9 11.8 -8.9 4.0 20.0 -16.0 3.8 -9.5 -5.7 5.1 8.2 -3.1

Transfers -/.3 20.6 -19.6 1.0 25.0 -24.0 1,0 25.6 -24.6 1.9 268 -24.9

Private 1.0 20.6 -19.6 1.0 25.0 -24.0 1.0 -25.6 -24.6 1.1 26.8 -24.9 Government ------______0.90_ 0.9

Public Sector Capital 2.4 3.9 -1.5 7.9 4.5 3.4 12.8 9.3 3.5 7.4 7.6 -0.2

Government 1.6 1.7 -0.1 0.1 1.9 -1.8 3.0 1.9 1.1 (--) 3.3 (--) Long-term (1.6) (1.7) (-0.1) (0.1) (1.9) (-1.8) (--) (1.9) (-1.9) (--) (1.9) (-1.9) Short-term (- (~) () (~) () (~) (3'0) () (3.0) () (1.3) (-1.3) Exchange rate adjustment (--) (--) (--) (--) (--) (--) (--) (1.5) (-1.5) (--) (-) (--) Other public sector 0.8 2.2 -1.4 7.8 2.6 5.2 9.8 3.8 6.0 7.3 (3.4) (3.9) Loans (0.8) (2.2) (-1.4) (7.8) (2.6) (5.2) (9.8) (1.7) (8.1) (7.3) (2.6) (4.7) Exchnage rate adjustment (--) (--) (--) (--) (--) (--) C--) 2.1 (-2.1) (--) (0.9) (0.9)

Private Capital and Errors and Omissions 149.0 78.2 70.8 123.0 34.2 88.8 113.0 59.6 53.4 89.5 85.6 2.2

Property purchase 120.6 -- 120.6 101.0 -- 101.0 88.3 -- 88.3 63.7 -- 63.7 Other direct investment 28.4 -- 28.4 22.0 -- 22.0 24.7 -- 24.7 25.7 -- 25.7 Short-term capital and errors and omissions -_ 78.2 -78.2 __ 34.2 -34.2 __ 59.6 -59.6 __ 85.6 85.6

Exchange Profits and Losses -- _ 3.1 -1.8

International reserves (net) -- -- -0.5 2.7 External public debt -- -- 3.6 0.9

Changes in net international reserves (increase -) 20.5 5.2 -5.5 3.4

Government 6.9 3.9 -2.7 A;n Monetary Authority 13.6 1.3 -2.8 11.4

Source: Bahamas Monetary Authority and IMF.

1/ Exports, f.o.b., imports, c.i.f., (excluding bullion and specie). 2/ Local expenses of U.S. military bases in the Bahamas (credit) and tourism advertising and other government expenses (debit). 3/ It is estimated that transfers to Bahamians working abroad and transfers by those residing without work permit amount to about US$1 million per annum. Table 3,b COMMODITY IMPORTS, BY TYPE OF COMMODITY

(B$'000) (in percent)

1968 1962- 1970 -1971 1972 1968 1969 1970 1971 1972

Food and Live Animals 38128 48169 47620 49618 51455 21.3 15.9 14.1 9.3 10.5

Beverages and Tobacco 10226 13557 12959 13692 14959 5.7 4.5 3.8 2.7 3.1

Crude materials inedible 3014 8897 7729 6399 5578 1.7 2.9 2.3 1.3 1.1 except fuels

Mineralfuels, lubricants 7143 14673 59116 285429 256935 4.0 4.9 17.6 56.2 52.7 and related materials

Animal and vegetable oils - 248 527 847 735 - 0.1 0.2 0.2 0.2 and fats

Chemicals 6975 16844 20057 22739 22367 3.9 5.6 6.0 4.5 4.6

Manufactured goods 20322 57278 47542 35552 47152 11.4 18.9 14.1 7.0 9.7

Machinery and Transport 33055 66111 78295 51124 47691 18.5 21.9 23.2 10.1 9.8 Equipment

Miscellaneous manufactured 59769 73539 61380 I4985 36118 33.4 24.3 18.2 8.1 7.4 articles

Other 297 2962 1552 1865 4267 0.2 1.0 05 04 0.9

Total 178929 302278 336777 5o8245 487258 100.0 100AO 100.0 100.0 100.0

Source: Dc-partineit of Stat -- t.ics, Cabinet Office. Table 3.3: COMMODITYEXPORTS, BY TYPE OF COMMODITY (includingre-exports)

(B$'000) (in percent)

1968 1969 1970 1971 1972 1968 1969 1970 1971 1972

Food and Live Animals 948 2278 2868 3820 31489 1.8 4.2 3.3 1.4 1.0

Beverages and Tobacco 4851 3679 7091 4362 11700 9.4 6.8 8.1 1.6 3.4

Crude materials inedible 6596 6346 6522 3972 10791 12.7 11.7 7.5 1.5 3.2 except fuels

Minerals, fuels, lubricant 1191 500 29989 204707 251998 2.3 0.9 34.4 77.4 74.9 and related materials

Animal and vegetable oils - 169 ------and fats

Chemicals - 10698 10723 20555 32959 - 19.3 12.3 7.7 9.7

Manufacturedgoods 7866 8206 15135 16483 19390 15.2 15.1 17.4 6.2 5.7

Machinery and Transport 1754 15501 9699 6297 2155 3.4 28.5 11.1 2.4 0.1 Equipment

Miscellaneousmanufactured 28577 5639 2944 2387 1517 55.2 10.4 3.4 0.9 0.5 articles

Other 1310 2090 1590 21$0 2.4 2.4 0.1 0.1

Total 51782 54326 87061 264172 336614 100.0 100.0 100.0 100.0 100.0

Source: Department of Statistics, Cabinet Office. Table 3.4: BALA J OF PAYMENTS PROJECTIONSHIGH GROWTH PATH

(in millions of current US dollars)

1973 1 1976 1977 19789 1980 Case I Low marginalnrAionlY savings ratio-low import elastici-ty

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.5 891.2 994.5 Imports of goods and NFS 330.3 379.0 474.8 645.1 711.2 789.3 879.3 988.7 Resource Balance 153.2 144.7 106.3 51.5 6.8 10.2 12.0 13.7

Net factor service income -173.4 -166.7 -171.8 -180.4 -193.9 -212.5 -232.6 -254.5 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.0 -63.5 -126.9 -185.1 -202.3 -220.6 -240.7

Long-term capital 93.7 61.3 59.1 64.4 72.2 75.3 81.3 84.0 Short-term capital -64.5 -58.8 24.3 86.4 136.5 143.2 158.6 178.0 Increase in reserves (-) -11.0 +15.0 -19.9 -23.9 -23.6 -17.2 -19.3 -21.3

Case II Low marginal ndLon- savings ratio-hig import elastIclbv

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.6 891.2 994.5 Imports of goods and NFS 330.3 379.0 474.8 594.1 711.2 796.9 892.8 1000.3 Resource Balance 153.2 144.7 106.3 51.5 6.8 2.7 -1.6 -5.9

Net factor service income -173.4 -166.7 -171.8 -180.4 -193.9 -212.5 -233.3 -256.3 Net currenttransfer 2.0 2.0 2.0 2.0 2.0 - - - Balancein currentaccount -18.2 -20.1 -63.5 -126.9 -185.1 -209.8 -234.8 -262.2

Long-term capital 93.7 61.3 59.1 64.4 69.6 73.5 77.1 83.2 Short-termcapital -64.5 -58.8 24.3 86.4 136.5 151.9 173.8 200.4 Increase in reserves (-) -11.0 +15.0 -19.9 -23.9 -23.6 -18.5 -20.3 -22.3

Note 1: Assumptions and methodologyfor the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement.

2ote3: TV

(in million of current US doIlars)

~~- ~~~ ~~1973--- 194_ 19735 1976 1217 1978 1279 1280 Case III igh marginal naticnalsavings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 581.0 645.6 718.1 799.5 891.2 994.5 Imports of goods and NFS 330.3 379.0 467.5 579.2 688.2 763.8 850.1 947.7 Resource Balance 153.2 144.7 113.6 66.4 29.9 35.8 41.1 46.8

Net factor service income 173.4 -166.7 -171.8 -179.7 -192.0 -208.5 -226.3 -245.3 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.1 -56.2 -111.3 -160.1 -172.7 -185.5 -198.5

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1 Short-term capital -64.5 -31.9 15.8 69.6 110.2 113.2 122.6 135.1 Increase in reserves (-) -11.0 +15.- -18.7 -22.6 -22.3 -16.8 -18.6 -20.6

Case I H3mrnal nationalsavings ratio-high imort elastici

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.5 891.2 994.5 Imports of goods and NFS 330.3 379.0 467.5 579.1 688.2 171.0 863.9 967.9 Resource Balance 153.2 144.7 113.6 66.4 29.9 28.5 27.3 26.6

Net factor service Income -173.4 -166.7 -171.8 -179.8 -192.0 -208.5 -226.9 -247.1 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.1 -56.2 -111.3 -160.1 -180.0 -199.6 -220.6

Long-term capital -93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1 Short-term capital -64.5 -58.8 15.8 69.6 110.3 121.7 138.0 158.2 Increase in reserves (-) -11.0 +15.0 -18.7 -22.6 -22.3 -18.0 -19.8 -21.7

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement.

Note 3: 'Totals may not add up due to rounding. Table 3.6: X LANCEOF PAYMENTSPROJECTIONS LOW GROWTHPATH

(in millions of current US dollars)

1973 1974 1975 1976 1977 1978 -1979 _,-1980

Case V Low marginal naticrAl savings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850e4 Imports of goods and NFS 330.3 379.0 414.7 468.6 527.8 575.3 629.0 687.6 ResourceBalance 153.2 147.7 152.5 146.1 138.6 147.3 154.8 162.7

Not factorservice income -173.4 -166.7 -171.8 -176.4 -181.7 -188.5 -195.5 -202.9 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.1 -17.3 -28.3 -41.1 -41.2 *.-40.8 -40.1

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 83.9 Short-term capital -64.5 -58.8 -31.9 -23.1 -17.1 -23.0 -27.3 -29.7 Increase in reserves (-) -11.0 +15.0 -9.9 -13.0 -14.0 -12.1 -13.2 -14J.1

Case VI Low marginal natronal savings ratio-high import elasticity Exportsof goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 350.4 Importsof goods and NFS 330.3 379.0 414.7 468.6 527.8 578.0 632.9 693.1 ResourceBalance 153.2 144.7 152.5 146.1 138.6 144.6 150.9 157.2

Net factorservice income -173.4 -166.7 171.8 176.4 181.7 188.5 195.8 203.1t Net currenttransfer 2.0 2.0 2.0 2.0 2.0 - - - Balancein currentaccount -18.2 -20.1 -17.3 -28.3 -41 .1 -43.8 -44.9 -46.1

Long-termcapital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 83.9 Short-termcapital -64.5 -58.8 -31.9 -23.1 -17.1 -20.0 -22.9 -23.5 Increasein reserves(-) -11.0 +15.0 -9.9 -13.0 -14.o -12.5 -13.4 -14.41

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement. Note 3: Totalsmay not add up due to rounding. Table 3.7: BALANCE OF PAYMENTS PROJECTIONSLOW GROWTH PATH

(in millions of currentUS dollars)

1973 1974 1975 1976 1977 1978 1979 1280 Case VII High marginal national savings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850.4 Imports of goods and NFS 330.3 379.0 412.5 460.3 513.4 558.9 609.9 665.6 Resource Balance 153.2 147.7 154.8 154.4 153.0 163.7 173.9 184.7

Net factor service income -173.4 -166.7 -171.8 -176.2 -180.8 -186.3 -191.9 -197.3 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.1 -15.0 -19.7 -25.7 -22.6 -18.0 -12.6

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1 Short-term capital -64.5 -58.8 -34.6 -32.7 -33.5 -42.0 -50.5 -57.8 Increase in reserves (-) -11.0 +15.0 -9.5 -11.9 -12.9 -11.8 -12.8 -13.6

Case VIII High marginalntionaL savings ratio-highimport elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850.4 Imports of goods and NFS 330.3 379.0 412.4 460.3 513.4 562.2 615.6 674.1 Resource Balance 153.2 144.7 154.8 154.4 153.0 160.4 168.2 176.3

Net factor service income -173.4 -166.7 -171.8 -176.2 -180.8 -186.3 -192.1 -198.1 Net current transfer 2.0 2.0 2.0 2.0 2.0 - - - Balance in current account -18.2 -20.1 -15.0 -19.7 -25.7 -25.8 -23.9 -21.8

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.6 Short-term capital -64.5 -58.8 -34.6 -32.7 -33.5 -38.2 -44.1 -48.1 Increase in reserves (-) -11.0 +15.0 -9.5 -12.0 -12.9 -12.3 -13.2 -14.7

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under prDcessing agreement.

Note 3: Totals may not add up due to rounding.

Table 4.1: BAHAMAS 12/30/73 EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31#1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDSOF U.S. DOLLARS

DEBT OUTSTANDING DECEPBER 31019T2 TYPE OF nFFICIAL LENDING CRFOITnR CniJNTRY UNDISO TYPE OF CREDITOR DISBURSED BURSED TOTAL

CANADA 3,743 36 3,779

SWITZIRLAN(i 953 - 953

UNITEn KINnDOM 6#131 29 6#160 USA 2P907 1,377 47284 SUPPLIERS 13,734 1,442 15,176

CANADA 9,024 201 9w225 tUSA 678 * 678 PRIVATE BANKS 9#702 201 9,903

CA'%AOA 2i469 252 772I

LiSA 9.50O - 9,50(( nTHER PRIVATF FINANCIAL INST. 1l1969 252 12#221

UNITE) KINWI04 4,586 4,5865

USA EXiXBA:23AA 13,530 - 13r53D LnANS FRnM OnVERNMENTS 18116 - 18,116

TOTAL EXTERNAL PURLIC DEBT 53#521 1J895 55,416

NnTES DEBT wITH A MATURITY OF OVER ONE YEAR

ECONOMICAND SOCIAL DATA DIVISION ECONO1aCANALYSIS & PROJECTIONS DEPARIYENT JANIJARY1C, 197L 77a lo 4.2s BAHAMAS 12W30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS PAGE1

ToTAL

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL& LATIONS. DISBURSED INCLUDING COMMITO DISBURSE SERVICE PAYMENTS ADJUSTO YEAR ONLY UNOISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (l) C2) (3) (4) CS) (6) C?) (a)

1967 - ' 21#915 3,606 - 41 41 19.850 1968 23. 456 41.,765 1.349 16.402 1.125 1.896 3.021 4.151 1969 42.884 46.*140 O 2,789 3,680 2.763 6.443 1970 41.994 42N460 11.232 8.017 4.099 2.91? t,016 151 1971 46.123 49.r744 11.462 9.863 5.42? 3.171 8.593 574 197v 51.135 56,358 4,047 7#375 4,990 3.581 8*571 1

1973 53.521 55,416 24.195 21,711 6,816 3.668 10.485 19? 1974 68.218 72P597 - 3,377 9,222 5.507 14.729 197S 62.373 63.375 1,002 11,732 4.870 16.602 1976 51.643 51,643 - - 109171 4.090 14.261 - 1977 41,473 41,473 - - 8,340 3.290 11.630 - 197A 33,133 33,133 - 8,340 2.613 10.953 1979 244793 24,793 7,099 1.937 9.036 - 1980 17.694 17.694 - ' 7#099 1.346 8.445 - 1981 10.596 10.596 6,305 756 70061 - 1987 4,290 4,290 - 2.743 247 2.990 1983 1.548 1,s48 - - 898 90 988 - 1984 650 650 - 325 43 368 1985 325 325 - 325 22 347

\TC'TI: DEPT WITh A MATURITY (le OVC`bIW YORE I*Tal 4.3: BAHAMAS 12#430/7 EXTERNALPUBLIC DEBT AS OF DECEMBER31.1972 DEBT REPAYABLEIN FOREIGN CURRENCY IN THOUSANDSOF U#Se DOLLARS PAGE 2 SUPPLIERS

DEBT OUTSTANDING TRANSACTIONSDURING PERIOD BEGINNING OF PERIOD CANCEL& LATIONS, DISBURSED INCLUDING COMNIT- DISBURSEO SERVICE PAYMENTS ADJUSTO YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS (1) (2) t3) (4) (5) (6) (T) CO)

1969 643 643 ' ' 190 36 226 1 1970 454 454 8,712 5341 447 198 645 1 1971 5,*49 8*420 3#962 4.914 740 460 1.200 343 1972 9.865 12P285 4.047 5*025 1.157 675 1.832 1

1973 13,734 15,116 415 1#699 2.102 993 3.095 079 1974 13,253 13#410 ' 157 2,137 961 3.098 1975 11.273 11#273 2.158 816 2.974 19r6 9,115 9,115 ' 2158 661 2.818 1977 6,957 6.957 - 2,158 505 2.663 1978 4,800 4#800 2.158 350 2.508 1979 2.642 2,642 916 195 1.111 1980 1,725 1.725 - 916 125 1.042 19l1 809 809 ' a 418 55 474 a 1987 391 391 - ' 391 23 414 a Totble).. BAHAMAS 1230/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101972

DEBT REPAYABLE tN FOREIGN CURRENCY

IN THOUSANDS OF Us. DOLLARS PAGE 3 PRIVATE BANKS

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL' LATIONS. DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUST YEAR ONLY UNOISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL 1NEtS CL) C2) C3) C4) (S) C6) CT) CS)

1969 5.850 5.850 ' 325 348 673 3.507 1969 9P032 9,j32 ' 1.184 467 1.671 1970 ,848 7P848 - - 795 ST9 1#374 1971 7r053 7,053 5.000 2P449 1#825 436 2P261 1977 7.677 10.#228 2.35o 325 646 971

1973 9.702 9.903 2O0672 18.5.99 1#003 650 1.653 1974 27P298 P9.S72 ' 10742 2.284 2.741 5.025 197% 26.756 27.288 532 4.748 2*614 7.362 1976 22.540 22.540 - 4.748 2J206 6J953 1977 17.792 17.792 ' 3.081 1,765 4.046 1976 14,711 14.711 ' 3.081 1.441 4.522 197Q 11.630 11j630 ' ' 3.081 1.11? 4.198 U

1980 8P548 8.548 ' U 3.O81 792 3#874 1981 5,467 5J467 ' ' 2J935 466 3#403 198d 2.532 2J532 ' 1.557 5T? 1.714

1983 975 975 U U 325 65 390 U 1984 650 650 ' U 325 43 368 -

1985 325 325 ' - 325 22 347 U Igl ji5: BAHAMAS 12.10S71 EXTERNALPUBLIC DEBT AS OF DECEMBER31*1972 DEBT REPAYABLE IN FORLIGN CURtRENCY

IN THOUSANDSOF U.S. DOLLARS PAGE 4 OTHER PRIVATE FINANCIAL INST.

DEBT OUTSTANDING TRANSACTIONSOURtNG PERIOD BEGINNING OF PERIOD CANCEL& LATIONSo DISBURSED INCLUDING COMMITO DISBURSE- SERVICE PAY4ENTS ADJUST& YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (l) C2) (3) (4) C5) (6) (7) (8)

1967 - - 3,515 641 14'000 1966 14,641 17.515 2P226 500 1.084 1.584 1 1969 16,36B 17.016 ' 267 1,141 1.119 2.260 at 197t) 15,494 15#874 ' 156 1.301 1.050 2.351 236 1971 14,559 14.o09 * 1,301 967 2.26b 15 1972 13,271 13J523 - - 1,302 879 2.161 a

1973 11,969 12.221 253 1344 801 2.145 16 1&74 t-10893 10.893 1,344 718 2.061 1975 9. 550 9.550 '- 1344 626 1r970 1976 8.206 68o206 1.344 535 1.81 - 1977 6,862 6.862 ' - 1.344 443 .r78 - 1976 5.519 5.519 - 1.344 352 1.695 - 197Q 4.175 4.175 - 5.3441 260 1.604 1980 2.831 2.631 a a 1,344 169 1513 a 1981 1.486 1,488 ' a 1.344 77 1.421 1982 144 144 144 4 148 Table j.6: BAHAMAS 12/30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS PAGE 5 LOANS PROM GOVERNMENTS UNITED KINGDOM

DEBT OUTSTANDING TRANSACTIONS OURING PERIOD BEGINNING OF PERIOD CANCEL; LATIONS. DISBURSED INCLUDING COMMITO DISBURSEO SERVICE PAYMENTS ADJUST YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS (1) (2) (3) (4) (5) Ct) (T) (a)

1970 - ' 2P520 2*520 14 14 1971 2'520 2'520 2.500 2P500 329 329 216 i972 5#236 5i236 650 494 1*144 a

1973 4,586 4P586 ' 900 424 1.324 '135 1974 3,551 39551 ' 1.990 3.05 2.295 - 197$ 1,'561 1I561 ' 1.561 37 1.s98 Table 4.7: BAHAMAS 12/30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

LOANS FROm GOVERNMENTS USA -EtORT IpoT 1ANK PAGE6

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL& LAT70OtdS DISBURSED iNCLUDING COMMIT' DISBURSEW SERVICE PAYMNTS ADJUST YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS Cl) (2) (3) (4) (5) (6) (T) C)

1967 - 18.400 2,965 - 41 41 - 1968 2.965 18O400 1.349 14,176 300 464 764 1969 i6p841 19J449 2.522 1J165 1.121 2286- 1970 18198 18j,284 * 1.556 1,076 2,632 '6 1971 16P642 16,642 - - 1556 979 265352 197? 15.O86 15.0b6 - -1556 987 24435

1973 13.530 13.530 3.108 1.160 1.467 80l 2*268 1974 13J223 15.171 1#478 1.467 782 2.250 197'i 13P233 13.703 * 470 1.921 7T6 2*698 197T 11P782 11.782 - 1.921 689 2.610 1977 9P861 9.861 - 1.757 576 2.333 1978 8P03 Bo103 - . 1.757 471 2.228 1979 6P346 6.346 1.757 365 2.123 1980 4.589 4.589 1.757 260 2.017 1981 2#832 2.832 - 1606 155 1,t63 - 1987 1.224 1.224 * 651 62 713 1983 573 573 * 573 26 598 Table 4.8s BAHAMAS 12/30W73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U6S. DOLLARS PAGE 7 LOANS FROM GOVERNMENTS

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCELO LATIONS. DISBURSED INCLUDING COMMITO DISOURSEO SERVICE PAYMENTS ADJUST& YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) C4) (5) (6) CT) C)

1967 ' l18400 2*965 * 41 41 1968 2J965 18.400 1.349 14P1T6 300 464 764 1969 16.B41 19.449 ' 2.522 1,165 1.121 2&286 1970 18,198 18J284 2*520 2*520 1*556 1*090 2.646 '86 1971 19,162 19*162 2*500 2P500 1*556 1.308 2.864 216 1972 20J322 20.322 2.206 1.381 3#587

1973 18b116 168I16 3.108 1i160 2*367 10224 3.S92 '135 1974 16,774 18*722 ' 1.478 3*457 1.087 4.545 1975 14,795 15#265 47o 3.483 813 4P296 197A 11*782 11*782 1*921 669 2.610 1977 9J861 9pb61 - 1.757 576 2.333 3 197'R bo103 6.1C3 .. 1 757 471 2.225 1979 6*346 6*346 ' 1.757 365 2*123 198c, 4,589 4*589 ' 1,757 260 2*01? 1981 2#832 2.832 ' a 1,608 155 1.763 1982 1,224 1I224 - a 651 62 713 a 1983 573 573 - a 573 26 596 -

ECONOMICAND SOCIAL DATADIVISION ECONOMICANALYSIS & PROJECTIONSDEPARn=T JANUARY10, 1974 SUPPLEMENT Table 4.9: BAHAMAS 12/30UT3 EXTERNALPUBLIC DEBT AS OF DECEMBER31#1972 DEBT REPAYABLEIN FOREIGN CURRENCY IN THOUSANDSOF U.Ss DOLLARS PAGE 1 SUPPLIERS CANADA

DEBT OUTSTANDING TRANSACTIONSDURING PERIOD BEGINNING OF PERIOD CANCEL LATIONS, DISBURSED INCLUDING COMMIT- DISBURSE' SERVICE PAYMENTS ADJUST& YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) C2) (3) (4) (5) (6) (7) (a)

19?1 a - 39962 3P466 119 119 15 1972 3P460 3,977 - 461 199 311 510

1973 3P743 3,779 36 380 295 675 22 1974 3'421 3,421 * 380 266 646 1975 3'041 3ou41 - - 380 236 616 197A 2P661 2i661 * 380 205 5SS 197? 27?b1 2w281 * 3B0 175 555 197A 1,901 1,901 5 380 144 525 197Q 1J521 1*521 - 5 380 114 494 - 1980 1140 r1,40 - 360 84 464 1981 760 760 - - 380 53 433 1980 380 380 - 380 23 403 SUPPLEMENT Table 4.10: BAHAMAS 12/30/T3

EXTERNAL PUBLIC DEBT AS OF DECEMBER31v1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDSOF U.S. DOLLARS PAGE 2 SUPPLIERS SWITZERLAND

DEBT OUTSTANDING TRANS5ACOlNS DURING FER7t-O BEGINNING OF PERIOD CANCEL; LATIONS DISBURSED INCLUDING COMMITO DISOURSEN SERVICE PAYNENTS ADJUST& YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS CO) (2) C3) (4) (5) (6) (7) (a)

197c a ' i,257 1,257 79 66 145 l 1971 1-179 1,179 'a 165 84 249 112 1979 1,126 11?6 - 173 76 249 *

1973 953 953 e 192 81 273 202 1974 962 962 ' 0 192 67 260 197S 770 770 0 - 192 54 246 197A 577 577 0 ' 192 40 233 1977 385 365 - 0 192 27 219 197! 192 192 0 192 13 206 0 SUPPLEMENT Table 4.11ii BAHAMAS 12i30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31D1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

SUPPLIERS UNITED KINGDOM PAGE 3

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL' LATIONSs DISBURSED INCLUDING COMMIT* DISBURSE SERVICE PAYMENTS ADJUSY YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) C2) C33 (4) CS) (6) (7) (8)

196Q 643 643 0 190 36 226 1 197t) 454 454 2,830 2'830 368 103 471 1971 2'916 2,916 - a 540 150 690 216 1972 2J592 2J592 4,047 4,018 479 133 612 a

1973 6,131 6,o160 - 28 816 399 1#215 0303 1974 5j,41 5,041 - - 816 345 19160 0 197$ 4,225 4J225 - 816 290 1.106 197A 3,409 3,C4,9 - - 816 236 1.051 1977 2,594 2P594 -816 181 997 197A 1,778 1,778 - - 816 127 942 1979 962 962 * - 481 72 553 1980 481 4ei - 481 36 51? SUPPLEMENT

Table 4.12: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.91912

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS PAGE4 SUPPL IERS USA

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONSm DISBURSED INCLUDING COMMIT- DISBURSE- SERVICE PAYMENTS ADJUST YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS (1) (2) (3) (4) C5) (6) CT) La)

197i) - - 4625 1,254 29 29 1971 1,?54 4,625 1i448 35 107 142 - 1972 2,667 4'590 546 306 155 461 -

1973 2,907 4,264 415 1s635 714 218 932 - 1974 3,828 3,985 157 748 283 1#031 - 19TS 3,?37 3,237 769 236 1.006 1976 2,467 2,467 - - 769 179 949 - 1977 1,696 1i698 ' ' 769 122 892 197fl 929 929 - 7697 66 835 - 1979 159 159 55S s 9 64 - 1960 104 104 - ' 55 5 61 - 1981 49 49 '38 2 40 -

1987 10 10 'lo 1 11 U SUPPLEIqT

Table 4.13: BAHAMAS 12/30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.s. DOLLARS

PRIVATE BANKS CANADA PAGE 5

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL LATIONS, DISBURSED INCLUDING COMMITO DISBURSE& SERVICE PAYMENTS ADJUSTO YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL WENTS (1) (2) (3) (4) (5) (6) (C? Ca) 1968 5,850 5.,850 * 325 348 673 - 1969 5J525 5i525. 325 279 604 1970 5*200 5,200 * 325 403 726 1971 4P875 4.pt75 sOOO 2*449 325 33r 662 1972 6,999 9,550 - 2#350 325 614 939 -

1973 9,024 9,225 - 134 325 616 941 1974 8,833 8,900 67 1,992 608 2.600 - 1975 6P908 6,908 - - 1.992 470 2.462 1976 4 ,917 4,917 1,992 332 2#324 1977 2,925 2,925 - - 325 194 519 1978a 2J600 2,60 325 172 497 1979 2?275 2,275 - - 325 151 476 1950 1,950 1,9'50 - - 325 129 454 - 1981 1,625 1,625 - - 325 108 433 - 1982 1,300 1,300 - - 325 86 411 - 1983 975 975 - * 325 65 390 - 1984 650 650 - - 325 43 368 - 1985 325 325 - - 325 22 347 SUPPLNENT

Table 4.14 : BAHAMAS 12/30/73 EXTERNAL PUBLIC DEBT AS OF DECEMBER 31D1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.s. DOLLARS PAGE 6 PRIVATE BANKS USA

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL& LATIONSs DISBURSED INCLUDING COMMIT' DISBURSE* SERVICE PAYMENTS ADJUST' YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL 14ENTS cl) (2) (3) C4) CS) (6) CT)Cl) 1969 3'507 3F507 - 859 208 1.067 197o 2,648 2,648. - a 470 176 646 - 1971 2, 178 2,178 - - 1.500 99 1.599 197? 678 678 a 32 32 a

1973 673 678 3J522 1.315 678 34 712 1974 1,315 3,522 a 1,675 292 75 367 1975 2P698 3,230 - 532 470 155 624 1976 2P760 2,760 - - 470 159 628 1977 2*291 2,291 - a 470 130 600 a 197A 1,821 1*821 - a 470 102 572 - 1979 1,351 1,351 a - 470 74 544 - 19b0 882 882 - a 470 46 515 1981 412 412 a 323 18 341 - 1989 69 89 a ' 89 3 91 - SUPPLEMENT Table 4.15: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEST REPAYABLE ZN FOREZGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

PRIVATE BANKS MULTIPLE LENDERS PAGE 7

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING (lF PERIOD CANCEL' LATIONI. DISBURSED INCLUDING COMMITO DISBURSEm SERVICE PAYMENTS ADJUST- YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL WENTS Cl) (2) (3) C4) CS) (6) C?) CS)

1973 - 17,150 17.150 ' a a 1974 17,150 17,150 ' 2.058 2JO58 197r 17,150 17.150 - 2.28? 1*989 4.276 - 1976 14.863 14,863 2,287 1*715 4.002 1977 12,577 12J577 - 2P287 1.441 3J727 1978 10,290 10.290 2,287 1J166 3,453 1979 8PO03 8.003 ' 2.287 892 3.178 1980 5P717 5.717 - 2#287 617 2.904 1981 3,430 3.P430 2.287 343 2.630 - 198P 1143 1.143 ' 1.143 69 1.212 SUPPLMENT Table _416s BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31'1972 DEBT REPAYABLE IN FOREIGN CURRENCY IN THOUSANDS OF U*S. DOLLARS PAGE 8 OTHER PRIVATE FINANCIAL INST. CANADA DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL& LATIONS# DISBURSED INCLUDING COHMIT DISBURSE SERVICE PAYMENTS ADJUST& YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) C2) (3) (4) (5) (6) C?) (O)

1967 - - 3'515 641 - ' 0 - 196A 641 3,515 - 2#226 - 94 94 1 1969 2J868 3,516 - 267 141 191 332 *I 197n 2,994 3P374 156 301 192 493 236 1971 3,059 3,309 - 301 179 480 15 1972 2,l711 3,023 - 302 161 463

1973 2,469 2P721 * 253 288 155 443 16 1974 2,449 2,449 288 145 433 197S 2,l6l 2,161 - - 288 127 416 - 1976 1,873 1,673 - - 288 110 398 1977 1'585 1,585 - - 268 92 380 - 197A 1,297 1,297 - 2B8 75 363 - 197 I,008 1,008 - 288 57 345 1980 720 720 - 288 40 328 - 1981 432 432 - 28bt 22 310 - 1982 144 144 - 144 4 148 SUPPLEMENT Table 4.17: BAHAMAS 12/30/7)

EXTERNAL PUBLIC DEST AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U*S. DOLLARS PAG.Eo OTHER PRIVATE FINANCIAL INST. USA

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL' LAT IOWS, DISBURSED INCLUDING COMMITO DISBURSE- SERVICE PAYMENTS ADJUST' YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS Cl) (2) (3) C4) (5) (6) cr) (S)

1968 14O000 14,000 So-5o 990 1.490 a 1969 13i500 13,510 - -1OOO 928 1#928 1970 12S50O 12,500 - 1poo( 858 1.858 1971 11500 11,500 1.DOOI , roe 1.7s88 1977 luo10J500 I,5o0 - IOOO 718 1.718 a

1973 9,500 9,500 - - 1,056 647 1#702 a 19?a 8,444 8,444 ' 1.056 573 1#628 19j7 7,389 7P3a9 - - 1'056 499 1.554 a 197h 6.333 6J333 I .0 56 425 1&480 a 1977 5.278 5,278 a - 1.056 351 1.407 191XA 4.222 4,222 - 1.056 277 1J333 1970 3 167 3,167 - 1 056 203 1#259 a 19et) 2111 2,I111 I1056 129 1185I 1981 l1.056 1,056 - - 1.056 55 1.111 a

ECONOEC AND SOCIAL DATADIVISION V,CONOMICANALYSIS & PROJECTIONSDEPARTMENT JANUARY10, 1974

Table 5.1 Central Government Expenditure : Functional Classification

(In millions of Bahamian dollars)

Budget 1969 1970 1971 1972 1973 Total current expenditure 6. 76.76 6 86.6 93.0 General public services 15.1 Ji.7 19.2 2i.s . General administration (8.7) (11.5) (11.0) (13.1) (13.8) PLublic order and safety (6.4) (8.2) (8.2) (8.7) (10.4) Education 13.5 18.1 20.2 21.6 24.2 Health 9.1 10.5 11.7 12.7 14.2 Social benefits and services 2.9 3.3 3.5 3.9 3.7 General administrationand regulation (0.2) (0.2) (0.2) (0.3) (0.3) Old age, disability,and survivors (2.1) (2.1) (2.3) (2.3) (2.1) Other public assistanceto persons (0.6) (0.9) (1.0) (1.2) (1.2) Collectivesocial services (--) (0.1) (--) (0-1) (0.1) Housing 0.1 0.1 0.1 0.1 0.2 Other communityand. social services 0.2 0.3 0.2 0.3 -- Economic services 17.1 19.3 18.7 20.1 20.5 Agricultureand forestry (0.5) (1.0) (0.8) (0.9) (0.8) Land surveys and meteorological (0.3) (0.3) (0.4) (0.4) (0.7) Transportation (1.8) (2.2) (2.1) (2.1) (1.9) Central ministry /1.1/ /1.4/ /1-3/ /1-3/ /1.4/ Roads and road transport /0-3/ /0-4/ /0.4/ /0.4/ /0.5/ Water transport /0.4/ /o.4/ /o.4/ /o.4/ /--/ Labor employmentservices (0.3) (0.4) (0.4) (0.4) (0.4) Tourism (6.7) (6.9) (6.9) (7.8) (7.8) .Publicworks and water supply (7.4) (8.3) (8-0) (8-3) (8-9) Other (0.1) (0.2) (0.2) (0.2) (--) Unallocated 3.8 5.4 5.8 6.1 6.o Public debt (interest)!/ (3.8) (5.4) (5.8) (6.1) (5.0) Other (~) (~ ~) (--) (1.G)

Total capital expenditure 16.2 20.1 12.1 11.3 4 General public services 0.9 0.7 o.4 1.3 0. Education 2.2 5.3 3.0 3.0 5.5 Health 0.2 0.5 0.3 0.5 1.6 Housing -- 0.2 0.1 0.1 0.3 Economic services 12.1 12.8 8.1 5.2 5.0 Agriculture, forestry, and fishing (0o1) (0.3) (0.4) (0.3) (0.2) Land surveys (0.4) (0-3) (0.2) (0.4) (0.1) Transportation (4.3) (2.3) (0.9) (0.9) (0.7) Roads and road t;ansport /1.8/ /0.6/ /0.2/ /0.5/ /0.2/ Water transport2 /1.2/ /1.7/ /0.7/ /0.4/ /0.5/ Air transport2I /1.3/ /__/ /__/ I--I I-- Public works,andwater supply (6.o) (8.1) (6.1) (3.6) (4.0) Post Office i (1-3) (1.8) (0.5) (__) (--) Acquisitionof assets 0.8 o.6 0.2 1.2 0.4

Source: Ministry of Finance and IMF.

1/ Includessome payments in respect of the guaranteeddebt. _ These are reimbursed to the Governmentby the corporations. 2/ Includes overall deficits of Port Department,Aviation Department,and Post Offrice,respectively. Table 5.2: Central Government Expenditure : Economic Classification

Budget 1962 1970 1971 1972 1973

(In millions of Bahamian dollars)

Total expenditure v8.o 96.8 97.9 106.4

Current expenditure 6i.8 767 6 86.6 93-0 Consumption expenditure 52.7' 6.I B0.873.0 Purchasesof goods and services (23.5) (26.5) (24.7) (27.4) (30.6) Compensationof governmentemployees (29.2) (37.8) (41.7) (45.6) (50.2) Interestpayments 2.7 3.6 4.1 4.0 4.8 Domestic (0.7) (1.7) (2.4) (2.6) (1.5) Foreign (2.0) (1.9) (1.7) (1.4) (3.3) Subsidiesand other transfers 6.4 8.7 9.1 9.7 7.4 Subsidies (0.9) (1.1) (1.2) (1.1) (1.1) Reimbursabletransfers to public enterprises (1.2) (1.8) (1.8) (2.1) (0.3). Transfersto households (2.8) (3.3) (3.5) (3.6) (3.6) Transfersto nonprofitinstitutions (1.3) (2.2) (2.3) (2.4) (2.0) Transfers abroad (0.2) (0.3) (0.3) (0.5) (0.4)

Capital expenditure 16.2 20.1 12.1 11.3 13.4 Capital formation 11.6 16.o 10.6 9.7 12.5 Acquisitionof existing assets 0.8 o.6 0.3 1.2 0.4 Land (0.5) (0.4) (0.1) (1.0) (0.2) Equities (0.3) (0.2) (0.2) (0.2) (0.2) Capital transfersto public enterprises2i 3.8 3.5 1.2 o.4 0.5

(As per cent of total)

Current 79.2 79.2 86.8 88.5 87.4 Capital 20.8 20.8 13.2 11.5 12.6

(As per cent of currentexpenditure)

Consumption 85.3 83-9 83.4 84.2 86.9 Interestpayments 4.4 4.7 5.2 4.6 5.2 Subsidiesand other transfers 10.3 11.4 11.4 11.2 7.9

(As per cent of capital expenditure)

Capital formation 71.6 79.6 87.6 85.8 93-3 Acquisitionof existingassets 4.9 3.0 2.5 io.6 3.0

(Percentageannual change)

Total expenditure ... 24.1 -5.3 6.8 8.7 Current expenditure ... 24.1 3.8 8.8 7.4 Of which:--consumption ( ) (22.0) (3.3) (9.9) (10-7) Capital expenditure ... 24.1 -39.8 -6.6 18.6 Of which: capital formation ( ) (37.9) (-33.7) (-8.5) (28.9) Source: Ministry of Finance and IMF. 2 Overall deficits of Post Office, Port Department,and Aviation-Department. Thble5 .3: Central Government Revenue and Grants

Actual Budget Jan.-July 1969 1970 1971 1972 1973 1973

(In millions of Bahamian dollars)

Total revenue 74.0 80.8 77.2 2 107.6 61.6 Current revenue 2 80.2 76.6 88.4 106.4 61.1 Tax revenue 67.0 72.3 68.o 78.0 9641 .6 Taxes on property (real estate) 0.2 1.1 1.5 1 0.9 Taxes on goods nd services 10.2 14.0 14.9 20.7 24.8 16.7 Excisetaxesiy (0.5) (0 9) (1.0) (1-9) (2.4) (1-7) Selectivetaxes on services (4.9) (6.9) (5.8) (8.5) (9.4) (6.5) Selectivetaxes on use or permission to performactivities (1-7) (3.2) (3.4) (5 4) (7-8) (5.8) Businessand professionallicenses /0.6/ /2.0/ /2.2/ /4.1/ /5.2/ /3.6/ Motor vehicleand other taxes /1.1/ /1.2/ /1.2/ /1.3/ /2.6/ /2.2/ Departureand p ssengerticket taxes (3.1) (3.0) (4.7) (4.9) (5.2) (2.7) Taxes on imports•/ 52.0 52.5 47.3 49.4 62.3 32.9 Other taxes 4.6 4.7 4.2 6.4 7.2 4.1 Stamp taxes (3.6) (3.3) (2.7) (4.o) (4.6) (3.0) Other (1.0) (1 4) (1.5) (2.4) (2.6) (1.1) Other currentrevenue 5.8 7 8.6 10.4 10.3 6.5 income from property 10ii.Z 0.7 Oi.a Fines,forfeits, and administrative fees and charges 1.2 1.6 2.1 3.8 4.8 3.4 Other3 c 3.0 5.3 5.8 5.8 4.7 2.7 Capitalrevenue 1.2 0.6 o.6 7 1.2 o.5 Grantsfrom abroad ------__ Sales of covernnent -DroDertv 1.2 0.. 0.2 -- 0.1 -- Grand Bahama Port Authority divL4ends ------8.2 -- 0.5 Nonfinancial public enterprisesY -- 0.2 o.4 0.7 1.1 -- (As per cent of total)

Current revenue 98.4 99.3 99.2 90.1 98.9 99.2 Capital revenue 1.6 0.7 0.8 9.9 1.1 0.8 (As per cent of current revenue)

Tax revenue 92.0 90.1 88.8 88.2 90.3 Sq Taxes on property (0-3) (1.4) (2.1) (1.7) (1.7) (o S) Taxeson goods and services (14.0) (17.4) (19.5) (23.4) (23-3) (21. 3) Taxes on imports (71.4) (65.5) (61-7) (55-9) (58.6) ( 5 3.q) Other taxes (6.3) (5.8) (5.5) (7.2) (6.7) (( 7) Othercurrent revenue 8.0 9.9 11.2 11.8 9.7 1°-6 Tpercemtage annual change) k :a'urevenue * 9.2 -4.5 27.1 9.7 Current revenue ,, 10.2 -4.5 15.4 20.1 Tax revenue . .) (7.9) (-5.9) (14.7) (24.3) t- *.) Taxes on goods and services ( (13.7)- (6.4) (38.9) (24.0) t* Taxes on imports { (1.0) (-9.9) (4.4) (26.1) Other taxes 'w (2.2) (-10.6) (52.4) (12-5) ...

Source: Ministry of Finapce. I Net of refunds made on exports of spirits. Net of refundsmade on account of the variousincentive schemes. Includesreimbursements of transfersmade by the Governmentto the public enterprises. Net overall surpluses of Post Office, Port Department, and Aviation Department. Table .4 Transactions of Nonfinancial Public Enterprises

(In millions of Bahamian dollars)

1969 1970 1971 1972

1. Bahamas Broadcasting and Television Commissio Y

Operating revenue o.6 0.7 o.8 1.0 Operating expenditure 0.5 o.6 0.7 0.8

Operating surplus 0.1 0.1 0.1 0.2

II. Bahamas Electricity Corporetion?/

Operating revenue 7.8 8.8 11.6 13.1 Operating expenditure 5.8 6.9 7.3 8.1

Operating surplus 2.0 1.9 4.3 5

Other current revenue 0.1 0.1 -- 0.6 Other current expenditure 0.7 1.1 2.4 1.4

Current account surplus 1.4 0.9 1.9 4.2

Capital receipts o4 0o.4 0.4 0.3 Capital expenditure 1.8 6.7 4.4 1.8

Overall surplus or deficit (-) -- -5.4 -2.1 2.7

External financing -0.9 3.0 5.9 -2.3 Crown Agents (G-) (-) (5-1) (-0.8) Long-term U.S. bonds (-0.6) (-0.6) (-0.6) (-0.8) Other net borrowing (i°O3) (3.6) (1.4) (-0.7) Domestic Xillat1cing 9.9 2.4 -3.d -0.4 Financial institutions--bank overdraft (-0.1) (0.1) (-0.6) (0.6) Other (1.0) (2.3) (-3.2) (-1.0)

III. Bahamas TelecommunicationsCorporation

Operating revenue 10.8 11.0 10.9 12.3 Operating expenditure 6.9 7.6 8.3 8.0

Operating surplus 3.9 3.4 2.6 4.3

Other current revenue __ o.4 0.5 _ Other current expenditure 1.0 0.9 1.2 1.9

Current account surplus 22.9 1.9 2.4

Capital expenditure 1.6 3.5 6.2 8.1

Overall surplus or deficit (-) 1.3 -o.6 -4.3 -5.7

External financing -o.6 -0.5 4.8 4.6 Domestic financing -0.7 1.1 -0.5 1.1 Bank overdraft (--) (0.1) (0.2) (0.4) Cash holdings (-1.5) (0.9) (0.9) (--) Other (0.8) (0.1) (-1.6) (0.7)

IV. Port Department, Aviation Department, and Post Office

Current revenue 5.1 5.4 5.5 5.4 Current expenditure 3;6 4.5 4.6 4.7

Current account surplus 15 .9 0.9 0.7

Capital expenditure 5.2 4.1 1.6 0.4

Overall deficit (-) _3.7 -3.2 -0.7 0.3

Soumes: Respective public enterprises; and Ministry of Finance.

. Broadcasting Corporation of the Bahaeas from January 1973. / Fiscal years ending September 30 of each year. Table 6.1: SUMMARY ACCOUNTS OF THE BANKING SYSTEMW (tomilin of Bsh-oi.n dollsro)

Onober 31 J.ne30 D-cmbe- 31 J-o 30 I 9684' 1969 1970 1971 1972 272 i97I

Enchnge lat.: 9$ per po...d ste-ling 2.45 2.45 2.45 2.40 2.40 2.53 2.53 2.37 2.37 2.28 7.28 2.58 Ill per Ul.S. dollar 1.02 1.02 1.02 1.00 1.00 1.03 1.03 1.03 1.03 1.03 1.03 1.00 8 eCadisodollar 1.05 1.05 1.05 1.01 1.01 1.03 1.03 1.02 1.02 1.03 1.03 1.00

r. Bahasao Mo..cary Authority

International re..erves 30.8 18.3 17.3 17.0 19.9 20.9 35.4 33.8 3720 31.9 34.2 37.8

Not domestic credit 7.7 7.9 7.1 7.4 7.0 6.1 2.8 4.4 46 5.5 4.2 1.4 Central Government 8.0 9.5 10.0 10.7 8.5 9.0 8.6 Treasury bill. (--5 (1.35 (2.0) (2.75 (0.55 (1.0) (0.6) Promisery motes (8.0) (80 80 80) (0.0) (8.0 80 nlasaifed (net) -0.3 -1.6 -2.9 .2.6 -3.6 -4.6 -5.7 -4.0 -4.4 -3.05 4.44 .7.2

Liabilitiesto .sthori.eddealers (net) 25.2 98. 6.5 11.7 19.7 16.0 17.8 Currency 1-2.0 107.4 8T.1 9.0. 6.811.B 7.T3 Deposits 13.3 0.5 .- 1.9 12.9 4.2 20.5 Batas... e.itb authorised desisr. .0.1 -2.1 -1.-5 .0.1 -

Currency 10 circulation 13.3 17.4 17.8 15.3 18.5 21.3 20.6

22. Anth-rlzed Or-lero

Net foreiem ... et.~ 118.5 92.7 98.4 104.1 77.4 26.9 109.4 -108.0 _54.8 54.6 23.7 21.0 Asse.ts . .. 2,251.1 3,084.7 3,0 33.1 4,33-9.3 4,454.3 5, 27-9.4 5,-269.9 6,064.3 ~-6,0647',316.9 7,334.8 Liabilities ... -2,158.3 .2,986.3 -2,929.0 -4,261,9 .4,375.5 -5,170,1 .5, 161.8 .6,089.3 -6,036.1 .7,493.2 .7,300.8

Neot domestic credit 108.1 173.3 165.3 157.3 164.4 185.9 145.3 145.8 171.2 171.2 205.0 - .1 CentralGo-vr-oet (net) 118 17.6 -32.0 371.9 32.4 3T2.6 .. .. 3:8.3 3-8.3 TIeoWry bill, (5.2) (1.0)) (4.3) (4.2) (6.15 (6.15 ...... (8.41 MO6 . .. Loan aed sdvae..e. (7.0) (17.5) (24.0) (23.9) (22.5) (22.7) (.5 (..5 (22.83 (72.121..8).. Ovrdats (2.5) (2.7) (6.7) (6.7) (5.55 (5.)) (..) .3 (.. 5.) 58.4 ( . . . Deposits (.2.0) (-3.5) (.3.0) (-3.0) (.1.7) (-21.7) (.. . -. ) (-1.75 .).. PsbliOn .rportine..(..t)'1 -0.4 0.8 1.9 22 .. 3.2.. Overdrafts (--3 (2.85 (2.1) (2.6) .. )(3.6)(.. Deposits (-0.4) (-2.0) (-1.25 (-0.45 . (-0.45 . priat sec,itor 124.9 153.1 1237.1 ,. 134.9 ... 130.8 ijolssfid (net) .28.2 1.7 4.3 -35 .. 3.8 ...... -2.0 -1.1 .. .

Cd.Oms .. BHA (not> Z5.2 8.8 6.5 11.7 19.7 16.0 17.8 Cer ..n y 12.0 10.4 8.1 9.9 6.8 11.8 7.3 Deposits 13.3 0.5 .- 1.9 12.9 4.2 50.5 B;A bal.,,ces -0.1 -2.1 -1.5 .0.1 -. --

Liabdlltiesto1 rivat. -ector 231.9 274.0 270.2 260.0 253.4 256.4 274.3 273.5 242.1 241.8 241.5 245 9 Deaddeoi. 177.5 166.0 1.7 69.4 14. 467 11.3 007 156 154. Time deposits 36.3 65.1 55.1 64.8 63.6 61.9 0. Savingsdeposits 38.0 43.6 43.4 44.9 49.2 44.9

III. Consolidated Anco...t, of the B.nkino Ovyten

Inte-nationalIr.esve 30.8 18.3 17.3 17.0 19.9 20.9 35.4 33.8 32.8 __1.9 34.2 2.-.

Other net fo-eisn.9sets 118.5 92.7 98.4 104.1 77.4 78.9 109.4 100.0 54.8 54.6 2,.7 -z0 Assets 2,251.1 3,06-4.7 3, 03-3.1 4,3i39. 3 i4,454. 3 5,-279.4 5,26-9.9 6,064.0 6,0-660. 7 7,51l 6. 9 7. 334 7~ Lisbi liti.... -2.158.3 -2,986.3 -2,929.0 -4,261.9 -4, 375.5 -5,170.1 -5, 161.8 .6,009.3 -6,006.1 .7,493.2 -7, 337 0

Net dom*esticcreodit 115.8 181.2 172.4 164.7 171.4 172.0 148. 150.3 175. 176.7 209.2 1204. C.etr-l Govermet (net) 19.8 27.1 42.0 41.9 43.1 43.3 ...... 47.3 47.3 ... .. Treasu.rybills (5.2) (2.5) (6.3) (6.25 (8.85 (8.0 (.) (...) (9.6) (9.6) . (.. .).. Promissorynotes (8.0) (8.0) (8.0) (0.0) (8.05 (8.0) (8.05 Loass and advances (7.0) (17.5) (24.0) (23.9) (22.5) (22.7) (. 3 (..5 (22.8) (22.8) (.) (. Overdrafts (2.5) (2.7) (6.7) (6.7) (5.5) (5.55 (.. -(.) (0.6) (8.6) ( . . Deposits (-2.8) (-3.5) (-3.0) (-3.0) (-1.7) (-1.73 (.. .. .3 (-1.7) (-1.75 ).. .. Publicc-rporatioss (net) -0.4 0.8 1.9 2.2 ... 3.2 Overdrafts (--) (2.8) (3.1) (2.6) (...) (3.6) ( . Deposits (-0.6) (-2.0) (-1.2) (-0.4) G...) (-0.4) Privateaector 124.9 153.1 127.1 134.9 . .. 130o8 Un.clsasified(net) -28.2 -. 1.4 -6.2 -0.6 -8.4 ...... -5.4 -4.6 ... . Liabilitiesto priestesector 265.2 292.1 288.0 285.7 260. 271.7 292.8 292.0 263.7 263.) 267.0 266.4 Han0ey 190.8 183.4 189.5 187.2 159.0 162.0 100.1 179.3 156.9 156.7 151.6 150.9 Currencyin circulation (13.3) (17.4) (17.8) (15.3) (18.5) (21.3) (20.6) Demandd"epoits (177.3) (I66. 0) (171.7) (169.4) (043.7) (146.7) (161.3) (000.7) (133.6) (135.43 (031.0) (290.45 Quasi-money 74.4 108.7 98.5 109.7 112.8 106.8 115.5 Time deposits (36.3) (65.1) (55.1) (64.8) (63.6) (61.9) (69.05 Smvings deposits (38.0) (43.6) (43.4) (44.9) (49.2) (44.9) (46.45

Source: Bahamas Monetary Authority and IMF. 1/ Definedas consistingonly of tbe Bahoas monetaryAnthority and the 15 suthori.eddeale.. 2/All actount.exmcepttbose of tbe l2overnumetand publiccorporations correspond to January31. 1969. 3/Consisting of claimaon aod liabilities to banks abroad, and all other accoauntsdenominated in foreigncurrency except demand deponito and ..c..untnof the C-ntral Gover meat. 4/ The balance sheets of one public corporation corresponds 10 September of each year, not to Dec-ber. 3/ Includes all demanddeposits denoemisatedin foreigncurrency except gover,ament deposits. Table 6.2: DISTRIBUTIONOF AUTHORIZEDDEALERS' CREDIT TO THE PRIVATE SECTOR.

December 31 1971 1972 1971 1972

(In millions of (As per cent of Bahamian dollars) total)

Total 134.9 132.8 100.0 100.0 Manufacturing 1.2 1.5 0.9 1.1 Agriculture, fishing, and mining 2.7 3.1 2.0 2.4 Construction 9.1 12.8 6.7 9.6 Land development 7.1 10.2 5.3 7.7 Restaurantsand hotels 11.9 9.0 8.8 6.8 Professional 1.7 1.4 1.2 1.0 Personal 26.3 19.6 19.5 14.7 Mortgages 19.3 22.5 14.3 17.0 Distributive 11.1 9.3 8.2 7.0 Other financial institutions 1.4 2.3 1.0 1.7 Unclassified. 43.1 41.1 32.0 30.9

Source: Bahamas Monetary Authority and IMF. Table 7.1: MONTHLY ARRIVALS 1962-72

1962 I19 1968 1966 1 197896 1972

January 38,737 40,430 53,530 -1766 13,149 71,5 49 87,086 93,511 104,840 109,590 114,083

February 47,499 52,012 67,574 67,574 81,029 88,242 101,575 113,013 112,944 126,291 139,714

March 48,397 64,989 70,639 77,947 95,239 107,646 107,766 137,450 139,418 133,391 163,896 April 40,159 48,616 50,101 60,856 86,507 79,017 94,318 124,248 108,175 147,274 149,139

May 34,oo6 35,956 42,746 57,937 60,500 73,746 87,897 118,302 113,677 121,003 118,857

June 34,318 42,003 44,998 56,622 58,626 79,804 80,622 115,458 109,236 119,463 115,598

July 39,333 58,394 54,527 66,486 73,327 83,384 98,831 136,743 128,052 152,004 150,786

August 40,876 59,013 50,207 65,944 77,414 88,783 112.217 140,400 130,243 151,961 148,375 September 25,026 33,374 35,111 38,662 43,133 46,675 55,613 69,047 77,782 76,164 80,472

October 27,429 27,484 37,751 46,276 40,950 52,459 67,467 75,751 76,760 99,377 93,393

November 31,168 36,728 42,654 59,060 58,518 68,866 85,704 100,850 94,433 112,616 110,996

December 37,922 47,405 55,058 59,290 73,925 75,102 93,117 107,623 102,783 114.457 126,549

Total 444,870 546,404 605,171 720,420 822,317 915,273 1,072,213 1,332,396 1,298,344 1,463,591 1,511,858

% To Previous Year +20.8% +22.8% +10.8% +19.0% +14.1% +11.3% +17.1% +24.3% -2.6% +12.7% +3.3%

Source: Ministry of Tourism Table 7.2: TOURIST ARRIVALS IN 1972 CLASSIFIED BY TYPE OF TOURIST AND MONTH

Air Stopover Total Cruise Total Total Month Tourists Sea Tourists Tourixts Visitors Visitors Transits Arrivals

January 75,299 1,905 77,204 33,068 110,272 3,811 114,083 February 99,476 3,228 102,704 34,123 136,827 2,887 139,714

March 118,728 3,508 122,236 37,889 160,125 3,771 163,896

April 103,648 3,815 107,463 37,092 144,555 4,584 149,139 May 75,643 6,278 81,921 30,713 112,634 6,223 118,857

June 67,566 8,466 76,032 31,864 107,896 7,702 115,598

July 86,733 11,740 98,473 43,440 141,913 8,873 150,786

August 88,988 7,154 96,142 44,127 140,269 8,106 148,375

September 46,354 3,570 49,924 22,513 72,437 8,035 80,472

October 57,159 2,722 59,881 27,567 87,448 5,945 93,393

November 76,315 3,669 79,984 27,346 107,330 3,666 110,996

December 80,607 3,639 84,246 37,449 121,695 4,854 126,549

Total 976,516 59,694 1,036,210 407,191 1,443,401 68,457 1,511,858

Source: Ministry of Tourism. Table 7.3: VISITORS POINTS OF RESIDENCE1972

Number of Average % of Country or Area Visitors Length of Stay Total U.S.A. 1,245,4i95 5.58 days 86.29%

Canada 105,758 8.28 days 7.33% Europe 23,8.,6 9.09 days 1.65%

U.K. 18,069 15.08 days 1.25, Rest of the World 50,223 10.03 days 3.48%

TOTAL 1,44h3,401 6.17 days 100.00%

Source: Ministry of Tourism Table 7.4: FIRST PORT OF ENTRYARRIVALS, 1964-1972

Nassau Freeport Family Islands

1964 66.08% 18.06% 15.86%

1965 68.65% 20.41% 10.94%

1966 64h59% 23.26% 12.15% 1967 63.02% 25.28% 11.70%

1968 62.00% 28.79% 9.21%

1969 544.6% 37.35% 8.19%

1970 56.27% 35.33% 8.40% 1971 57.27% 34.34% 8.39% 1972 62.28% 27.99% 9.73%

Source: Ministry of Tourism. Table 7.5: USA VISITORS POINTS OF RESIDENCE 1972 vs. 1971

Share of 1972 1971 d USA Total Visitors Visitors Chg.

Alabama 0.75 9,350 10,521 -11.13 Arizona 0.15 1,882 1,514 +24.31 Arkansas 0.24 2,943 2,440 +20.61. California 3.76 46,842 32,638 +43.52 Colorado 0.35 4,347 3,925 +10.75 Connecticut 2.42 30,175 30,215 -0.13 Delaware 0.27 3,377 3,479 -2.93 District of Columbia 0.76 9,494 8,328 +14.00 Florida 21.77 271,088 307,553 -11.86 Georgia 2.27 28,288 29,178 -3.05 Idahio 0.03 323 382 -15.45 Illinois 4.93 61,456 59,503 +3.28 Indiana 1.76 21,982 22,107 -0.57 Iowa 0.41 5,148 5,071 +1.52 Kansas 0.45 5,577 4,384 +27.21 Kentucky 0.66 8,250 7,457 +10.63 Louisiana 0.70 8,699 9,239 -5.84 Maine 0.18 2,209 2,055 +7.49 Maryland 2.53 31,459 28,439 +10.62 Massachusetts 3.13 39,023 38,429 +1.55 Michigan 4.84 60,342 56,327 +7.13 Minnesota 1.01 12,529 10,384 +20.66 Mississippi 0.23 2,853 3,419 -16.55 Missouri 1.18 14,706 14,091 +4.36 Montana 0.03 444 460 -3.48 Nebraska 0.23 2,830 2,194 +28.99 Nevada 0.08 1,042 886 +17.61 New Hampshire 0.27 3,378 2,512 +34.47 New Jersey 7.26 90,442 87,384 +3.48 New Mexico 0.06 725 1,166 -37.82 lNewYork 17.09 212,862 216,831 -1.83 North Carolina 1.37 17,048 15,707 +8.54 North Dakota 0.05 613 503 +21.87 Ohio 4.23 52,733 49,011 +7.59 Oklahoma 0.36 4,430 3,840 +15.36 Oregon 0.13 1,686 1,679 +o.42 Pennsylvania 6.16 76,757 64,551 +18.91 Rhode Island 0.47 5,793 5,646 +2.60 South Carolina 0.75 9,302 8,388 +10.90 South Dakota 0.19 2.335 436 +435.55 Tennessee 0.98 12,171 12,097 +0.61 Texas 1.82 22,632 22,163 +2.12 Utah 0.06 745 857 -13.07 Vermont 0.11 1,394 1,078 +29.31 Virginia 1.63 20,181 18,213 +10.81 Washington 0.32 4,045 3,438 +17.66 WiestVirginia 0.26 3,228 2,932 +10.10 Wisconsin 1.23 15,340 12,284 +24.88 Wyoming 0.03 436 260 +67.69 Alaslca 0.02 240 255 -5.88 Hawaii 0.03 341 390 -12.56

TOTAL 100.0 1,245,495 1,226,239 +1.57 Source: Ministry of Tourism. Table 7.6: USA VISITORS OCCUPATION DISTRIBUTION 1971-1972

1971 % of Total 1972 % of Total

Business/Industry 532,901 43.46 543,373 43.63

Government 21,162 1.72 19,885 1.60

Academic 47,992 3.91 481,46 3.86

Student 119,271 9.73 130,248 10.46

Housewife 2433,o15 19.82 241,109 19.36

Professional 112,293 9.16 113,s591 9.12

Retired 56,561 4.61 59,235 4.75

Unclassified 93,044 7.59 89,908 7.22

Total 1,226,239 100.00 1,245,495 100.00

Source: Ministry of Tourism. Table 7.7: 1972 VISITOR EXPENDITUREPATTERNS

Non-Schedule & Schedale Air Charter Foreign Average Air Average Air USA Tourist Air Tourist Tourist Tourist Sea Visitors Total Expenditure Expenditure Expenditure Expenditure Exponditure Expenditure Expenditure Areas Per Diem Per Diem Per Diem Per Visit Per Visit All Visitors

1. HOTEL B$23.10 B$11.28 B$18.37 B$113.34 B$ - B$117,393,300 2. MEAIS AND EEVERAGES Outside Hotel 6.88 6.01 6.53 40.29 3.61 43,200,000

3. GRATUITIES 2.42 1.47 2.04 12.59 1.50 13,648,000

4. TRANSPORTATION a. Local (taxi, tours, cars) 1.88 2.84 2.27 14.01 6.93 17,328,000 b. Interisland 0.47 0.99 0.68 4.20 0.09 4,383,000

5. SHOPPING a. Souvenirs,gifts, perfume and glassware 3.56 3.30 3.46 21.35 7.89 25,324,000 b. Straw work and handicrafts 0.69 0.48 0.60 3.70 4.44 5,642,ooo c. Package liquor 0.67 0.67 o.67 4.13 4.11 5,955.,ooo d. Food and beverage 0.61 1.42 0.94 5.8o o.o8 6,039,000

6. ENTERTAINMENT a. Casino 4.40 3.56 4.o6 25.05 14.27 31,756,000 b. Sporting equipment 0.88 0.78 0.84 5.18 0.46 5,555,ooo

7. MISCELLANEOUS 1.11 1.73 1.36 8.39 1.62 9,321,000

Total Expenditure B$46.67 B$34.53 B$41.82 B$258.03 B$45.00 B$285,i544,O00 per day per day per day per visit per visit

Source: Ministry of Tourism. Table 7.8: HOTEL ROOMS 1962-1972

1962 1963 1964 1965 1966 1967 1968 1969 1970* 1971** 1972**

Abaco 187 180 146 159 180 243 243 247 287 322 336 Andros 99 111 130 168 155 188 187 211 178 235 263 Berry Islands 16 16 16 8 26 56 50 40 76 84 151 Bimini 146 146 181 227 205 189 189 197 283 251 240 Cat Cay 36 36 36 ------Cat Island - - - _ _ _ 48 49 34 36 36 Crooked Island ------27 25 Eleuthera 163 135 137 179 311 345 442 403 485 434 543 Harbour Island 99 94 80 107 105 151 146 132 122 145 147 Spanish Wells 10 26 38 46 38 54 54 49 62 62 74 Exuma 28 48 50 94 83 148 148 132 184 180 196 Grand Bahama (IncludingFreeport and West End) 397 536 1,444 2,180 2,159 2,849 2,849 3,620 3,905 3,884 4,136 Inagua 4 4 4 4 4 4 16 16 Long Island - 7 17 31 31 40 40 30 34 50 35 New Providence (Including Nassau and Paradise Island) 2,153 2,099 2,159 2,142 2,684 3,867 3,867 4,370 3,909 5,097 5,005 San Salvador 19 19 19 13 24 24 19 19 24 24 24 Rum Cay 2 2 2 2 2 - - _ - -

Total Rooms Available 3,355 3,455 4,455 5,360 6,007 8,158 8,286 9,503 9,587 10,847 11,227

* 1970 Revised Figures. ** Only Licensed Hotels.

Source: Ministry of Tourism Table 8.1: NASSAU-WASHINGTONDC PRICE COMPARTSONFOR FOOD, CLOIi AD APLuANCES

Price Item Quantity u.S. Bahaas Ratio

Oanges 10 0.89 0.99 1.122 Tomatoes 1 lb. 0.39 0.69 1.769 Bananas 2 lb. 0.29 0.58 2.000 Eggs (medium) 1 doz. 0.80 0.89 1.112 n (large) 1 doz. o.86 0.95 1.105 Millc 3 gal. 0.74 0.89 1.203 Milk 1 gal. 1.37 1.87 1.365 Ground beef lb. 0.98 1.29 1.316 Frozen chicken lb. 0.59 0.99 1.678 Lipton tea bags (100) 1.21 1.59 1.314 Pbrk and beans (Van Canp) lb. 0.22 0.33 1.500 Pork and beans (local) lb. 0.18 0.26 1.11 Canned tomatoes lb. 0.26 0.49 1.885 Vegetable lb. 0.23 0.39 1.696 Oil (Wesson) 1J qt. 1.59 2.25 1.415 Shortening (Crisco) 3 lb. 1.32 1.59 1.204 otening (loal) 3 lb, 1.19 1.64 1.378 sum r lb. 0.78 O.Y9 1469 Alf-purpose flour 5 lb. 0.92 0.95 1.033 salt 0.13 0.23 1.769 Rice 5 lb. 1.65 1.79 1.085 Onions 3 lb. 0.58 0.89 1.534 Potatos 5 lb. 0.75 1.19 1.587 Bread (Wonder) 0.33 0.39 1.182 Bread (local) 0.31 0.33 1.065 Coke 128 oz. 1.72 3.18 1.849 Coke (local) 64 oz. 0.50 1.03 2.060 Detergent (Drive) 3 lb.1 oz. 0.90 1.19 1.322 Detergent (Rinso) 3 lb.1 oz. 0.74 1.19 1.6O8 Ivory Soap unit 0.58 0.60 1.034 Toaster n 15.23 24.60 1.615 Iron 11.50 29.90 2.600 H&nd Nxer 12.97 16.45 1.268 Vacuum cleaner 83.95 93.95 1.119 Television 167.95 29o.00 1.483 Refrigerator 293.95 46o.oo 1.565 Fanr 26.25 38.25 1457 Electric oven range 240.45 320.00 1.331 Volkswagen 2450.00 41.00.00 1.673 Table ,.1: (Contd) - 2 -

Item Quantity U.S. Babamas Ratio

Ladies pants suits unit 12.60 17.00 1.349 Ladies slacks it 8.40 10.95 1.3o4 Ladies blouses it 5.25 8.95 1.705 Ladies skirts it 7.35 31.55 1.571 Men's sports shirts 4.20 7.50 1.786 Men's dress shirts ii 6.30 8.95 1.421 Temnis shoes 4.20 5.00 1.190 Boys Jeans 4h.20 6.95 1.655

Source: IBRD Staff Estimates,November 1973. Table 8.2: INDEX OF RETAIL PRICES

(November-December1971 = 100)

Weight 1968 1969 1970 1971 1972 1973

I. Average During Period

All Items 100.0 80.6 87.8 93.2 104.1 n.a. Food 34 3 59.0 93.2 97.7 104.9 n.a. Housing 25.0 74.8 84.3 90.8 95.8 103.6 n.a. Clothing and Footwear 10.1 90.5 93.7 94.1 97.5 107.3 n.a. Transport 9.1 93.0 95.6 96.9 98.3 102.9 n.a. Health and Personal Care 7.0) ) ) 3 ) ) Recreation and Reading 4.4) 78.2) 86.0) 94.1) 98.5) 102.5) n.a. Other Goods and Services 10.1) ) ) ) ) )

II. End of Period

All Items 100.0 82.1 90.8 95.0 100.0 105.8 115.6 -Food 4 9.03 100.0 106.7 119.9 Housing 25.0 82.8 86.6 93.7 100.0 104.4 110.3 Clothing and Footwear 10.1 90.9 93.0 95.9 100.0 111.4 118.9 Transport 9.1 93.7 98.7 97.2 100.0 102.3 110.7 Health and Personal Care 7.0) ) ) ) 106.2 114.2 Recreation and Reading 44.4) 78.8) 92.7) 95.5) 100.0 101.8 115.0 other Goods and Services 10.1) ) ) ) 105.6 116.2

Source: Department of Statistics, Cabinet Office.