Tuesday, February 13, 2018
By NEIL HARTNELL
Tribune Business Editor
A CABINET Minister yesterday admitted that Bahamasair's 'shop in Florida' discounts may have been "a little misguided" by ignoring the impact on Bahamian retail merchants.
Dionisio D'Aguilar, minister of tourism and who has responsibility for the national flag carrier, agreed it should have been "more sensitive" to the consequences of incentivising Bahamians to shop abroad - especially since it is so heavily subsidised by Bahamian taxpayer.
He also acknowledged to Tribune Business that Bahamasair's promotions ran counter to the Government's push for economic growth by getting more Bahamians to spend money at home, thereby increasing GDP activity and employment.
Mr D'Aguilar said the concerns, articulated by the Bahamas Federation of Retailers (BFR) on behalf of struggling apparel and fashion retailers, resulted from Bahamasair operating "in a silo" where its sole focus was to reduce dependence on the taxpayer.
Suggesting that the national flag carrier was "damned if you do, damned if you don't" on its Florida promotions, the Minister expressed confidence they could be adjusted to account for the impact on Bahamian businesses and the Government's economic objectives.
"I completely agree," Mr D'Aguilar told Tribune Business in relation to the Federation's concerns. "Obviously it behooves the Government to get as many Bahamians to shop at home and to support our local businesses for the obvious reason it creates employment, drives GDP growth and creates wealth and opportunities for Bahamians. Shopping in Florida doesn't do that."
He was speaking out after the Federation accused Bahamasair's 'shop in Florida' discounts of further undermining the competitiveness of local apparel, shoe and fashion retailers, which were already being placed at a disadvantage by this nation's high duty rates - a 20 per cent tariff being levied on clothing imports, for instance.
"The Bahamas faces a unique predicament in retail based on its proximity to the US," the Federation said in a statement. "Unlike other Caribbean islands and destinations with more challenging logistics, the US is a mere 30-minute flight away, and shipping from online or a Florida based store is relatively cheap for the individual end consumer.
"Additionally, smuggling is rampant whether via a cargo vessel, private yacht, commercial or private airplane, or corrupt freight forwarders, as has been the case in recent times. Bahamasair, our national airline that uses millions of our tax dollars yearly, advertises 'shop in Florida' specials with discounted rates on the number of bags Bahamians can bring back.
"When those purchases in those bags are apparel, fashion accessories, shoes or other small and easily portable gift items, much of what is brought in from these 'shop in Florida' trips are claimed as 'personal effects' at the border and, understandably, it is almost impossible for Customs to police. In addition to the airline, Bahamian-based banks regularly advertise loans and credit cards for 'shopping abroad'. That is how entrenched this mentality is in our culture."
Mr D'Aguilar, while agreeing that "this is a case of Bahamasair operating in a silo", defended the airline's management and Board by pointing out that they had been "charged" by the Minnis administration with reducing the annual $15-$20 million taxpayer subsidy.
With loss minimisation the primary goal, the Minister said they could not be blamed for "looking for every mechanism and way to minimise the subvention from the Public Treasury".
This inevitably involved seeking out new business, such as increasing Florida-bound load factors, and Mr D'Aguilar added: "When you operate in that silo it seems fairly reasonable.
"I'm sure that's what's happening. They're not taking into consideration the bigger picture. It's almost damned if you do, and damned if you don't. If you don't find ways to minimise the losses, the taxpayer will have to pay more to fund the subsidies.
"But that pales into comparison with the drain on the economy if everyone is going to Florida to shop. Maybe the marketing campaign was a little misguided and should have been more sensitive to the factors identified by the statement and should support local businesses," he continued.
"These things happen when you put in place mechanisms to minimise the losses. I don't fault them for trying to find ways to minimise the losses, but in this case it doesn't play well with the business community; it seems as if Bahamasair is encouraging Bahamians to go overseas to shop."
Mr D'Aguilar added that he was interested to see "the incremental effects" of Bahamasair's Florida promotion, explaining that he was alive to the impact it could also have on rival Bahamian-owned carriers if the national flag carrier was able to exploit its government subsidy to sell tickets 'below cost'.
And, while agreeing that Florida shopping does not help struggling Bahamian retailers, the Minister argued that online competition posed a greater threat to local firms and was worthy of "more focus" than a "one-off campaign by Bahamasair".
Mr D'Aguilar said it was not a case for ministerial intervention, expressing confidence that Bahamasair's Board and management were "not oblivious to the noise in the marketplace", and would adjust future marketing campaigns accordingly to account for local private sector sensitivities.