Monday, October 7, 2019
By NEIL HARTNELL
Tribune Business Editor
Government officials managing the Hurricane Dorian recovery efforts "have the fiscal success of the country in their hands", a prominent governance reformer has warned.
Robert Myers, the Organisation for Responsible Governance's (ORG) principle, told Tribune Business that The Bahamas will face "considerable fiscal problems" if post-storm restoration results in massive cost overruns and waste rather than a "value for money" rebuild.
"What a scary time it is," he said. "No other way to put it. It's a challenging time for The Bahamas and the government, and I just hope we can come out the other side. The people managing this process have to realise they have the whole country at stake.
"The fiscal success of the country is in their hands. If they don't manage this properly we're going to have considerable fiscal problems. The management of this process, and the rebuild and relief, I just hope we have the right people with the right expertise to do this. If we get it wrong, we're in big, big trouble."
Mr Myers nevertheless praised the Government for unveiling its three-year Economic Recovery Zone package for east Grand Bahama and Abaco and the surrounding cays, effectively turning them into tax-free zones modelled on Freeport's "bonded" goods regime. The Zones were subsequently extended to the rest of Grand Bahama, albeit for one year.
The ORG chief told Tribune Business that the Government had made the correct decision to take a short-term fiscal hit, losing revenues through all the tax incentives provided as well as facing increased spending, and kickstarting the rebuilding rather than absorbing a long-term drop in economic growth.
"I think the incentives programme is excellent, and their willingness and courage to do that is very commendable," Mr Myers said. "Those two places are a massive part of our economy, and to get that done quickly and provide this encouragement for people who have lost everything is great.
"That makes sense because you're either going to take the short-term hit or have a very long-term loss of gross domestic product (GDP) and income. I think it's a very sensible and rationale position. You've got to get those economies stimulated; it's a massive part of The Bahamas' livelihood. I'm impressed; they really pulled out all the stops. I think that's going to have a big impact, sending the message out internationally."
The Government, as part of the Economic Recovery Zones, is also proposing a $10m equity and grant/loan financing facility to help small businesses and entrepreneurs devastated by Dorian to rebuild.
Mr Myers, though, suggested that the banks and private sector should take the lead in this area - especially where Abaco's vacation rental and second home market were concerned. Proposing that interest rates also be lowered to stimulate rebuilding, he argued that the Government should not be in the lending business.
Arguing that the Government's proposed $10m was "the reality we're in" and "commensurate" with its fiscal position, despite calls from Philip Davis, leader of the Opposition, for it to offer $100m. Instead, Mr Myers said the private sector and banks needed to step and do their jobs.
"There's a lot of equity left in many of those properties, even if some are semi-destroyed," he said of vacation home and rental properties. "If there's no to little debt, as big as the banks are - and as long as they don't gauge - it would be a wonderful approach to go in and make loans for renovation.
"There's a stack of money in the banks; they should be at the forefront of trying to make that happen, as the success of the economy is to their benefit. These were performing properties that have done well year in, year out, in the second home rental market.
"This is a good area. This was a thriving economy that's just had the wind taken out of its sails. The Government shouldn't be in that position. The Government can provide some additional stimulus, but the Government and the taxpayer don't have that money. Where are you going to get that $100m from? The banks are in that business," Mr Myers continued.
"The Government shouldn't be in the lending business; let the banks do it. Those were performing properties with a thriving model. We know if we rebuild it it can come back. The Government's $10m maybe not enough for some people, but the banking industry ought to kick in and not put taxpayers' money at risk.
"The Government has enough borrowing to do to rebuild our infrastructure. Let the banking industry do what they do, and lowering interest rates might be a start. The Government need not get into the lending business."