By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie yesterday said foreign direct investment (FDI) would continue to be “the engine of growth” for the Bahamas and rest of the Caribbean, given that the pooling of local capital remained an “ongoing challenge”.

Delivering the keynote address at the Caribbean Investment Summit in London, Mr Christie said economic stability among all nations was required before the Caribbean could look to greater economic integration via the Caribbean Single Market & Economy (CSME).

The Prime Minister did not explicitly rule out future Bahamian participation in the CSME, saying that “we continue towards development of a single market”, even though the private sector and wider society has long been sceptical of such a move.

And while some observers would probably like to see Mr Christie talk-up, and place more emphasis on, Bahamian and domestic investment, others will argue that he merely recognised the reality of FDI’s importance as an economic driver.

“The relatively flat levels of GDP seen throughout the region can be attributed to the continued servicing by many Caribbean countries of high levels of national debt,” Mr Christie said.

“This means that, for these countries, in the medium term, the engine for growth must continue to be sourced from external, private sector sources.

“That is not to say that foreign investment alone will improve our fortunes, but I believe it will require a dedicated and ongoing process of private sector-led investment to build capacity and enterprise aimed at strengthening our domestic economies and creating a state of employment readiness across all sectors.

“It will also require substantial investment as public-private partnerships in infrastructure development and transportation to stimulate cross-border trade between countries.”

Acknowledging the constraints faced by domestic businesses and investors in the Bahamas and wider Caribbean, the Prime Minister added: “What continues to hamper efforts is the ongoing challenge of local capital formation and entrepreneurship, interrupted business growth, human capital development and skills transfer, and inherent weaknesses in regulatory performance, all of which present constraints to employment and economic mobilisation for many countries of the Caribbean.”

He then suggested that the region needed to prepare much more before it was ready for something such as the CSME.

“Some proponents of the Caribbean Single Market argue that the Caribbean must become a single market to capitalise on inflowing currents of investment,” the Prime Minister said.

“In other words, our individual markets are perceived as too small to deliver sufficient returns on capital and thus to attract significant amounts of foreign direct investment.

“While I am in agreement that more needs to be done to develop linkages in trade to achieve liberalisation, and ultimately, global economic integration, we must firstly recognise the overarching need to ensure that all nations within our sphere of influence are on a path to macroeconomic stability,” he added.

“Although most of the countries of the Caribbean are moving toward regional integration, it is difficult to manage sustained focus on a Caribbean Single Market when our economies continue to be weakened by global economic after-shocks and the punitive actions of international regulatory agencies such as the OECD, aimed specifically at what the EU has called ‘non-cooperative tax jurisdictions’ in the Caribbean in spite of our compliance with international regulatory requirements.”

The Prime Minister also complained about “high levels of revenue leakage from the absence of domestic linkages in the tourism value chain, as well as repatriation by investors of high percentages of profits”.