Sears Calls for Courage to Create New Economic Model
Published: Wednesday June 10th, 2009
Calling the 2009/2010 fiscal budget a "Crisis of Vision", PLP MP for Fort Charlotte, Alfred Sears called out the government for its attempt at taking credit for the advances made under the Christie administration without acknowledging the role it played in creating the current economic meltdown in the country. The Ft. Charlotte MP and former Education Minister urged the government to explain the various reductions in budget allocations to critical sectors of our development. He also called on the government to embark on a number of public/private sector partnerships aimed at finding solutions to our economic problem.
In presenting the House with ten recommendations, Mr. Sears argued that the Bahamas cannot successfully move into the 21st Century while relying on a 1960s economic model fashioned by the UBP's Sir Stafford Sands. He acknowledged that while that model has served us well in the past, using year round tourism and banking as pillars of our economy, the time to diversify has arrived. You may read Mr. Sears' presentation below.
HOUSE OF ASSEMBLY
BUDGET DEBATE
ALFRED M. SEARS, M.P. 3rd June, 2009
Mr. Speaker, I thank the people of the Fort Charlotte Constituency for affording me the privilege to represent them in this Honourable House for a second consecutive term.
This year we will sponsor the 10th Annual Summer Camp at the Fort Charlotte Community Centre. As I thank all of those persons who contributed their time and/or resources to this programme in the past, I now invite volunteer teachers and contributors to come forward and help us to build our community one child at a time. I want to thank Mr. Sharron Davis for reviving our band and youth orchestra.
We lost one of our nation builders, Mrs. Sybil Blyden, and educational reformer in the field of special education. As the first Bahamian Principal of the Stapledon School and founding member of St. Michael’s Methodist Church, she was a relentless advocate for equal opportunity for all, especially special needs students. I want to extend my sympathy to her husband, Mr. Percy Blyden, her children and grandchildren and relatives.
I also extend my sympathy to Ms. Carol Fisher and Samuel Adderley, whose daughter, Shanrise Adderley, a beautiful, promising and ambitious young woman, was recently killed. I extend the support of the entire Chippingham community to her mother Carol, her father Samuel and the entire family of Shanrise at this difficult time.
Mr. Speaker, I also wish to remind the Minister of Works that it is imperative that the re-engineering work on the Canal which runs through Chippingham and Perpall Tract be completed and the dredging and cleaning of the Canal, at the Saunders Beach outlet be completed before the hurricane season causes any flooding which might potentially damage the homes and furniture of the residents of the Chippingham and Perpall Tract areas.
BUDGET: A CRISIS OF VISION
The crisis of vision reflected in this Budget is best reflected by the Bahamian poet and architect, Mr. Patrick Rahming, in his poem entitled And the Blind Will Lead: “Being without vision we are not sure we are lost only that we do not know where we are in relation to where we should be and that our faith in the caption is no longer unshakeable so we whisper among ourselves that today the sun’s heat rose in the west.”
Mr. Speaker, Fort Charlotte refuses to accept that the sun’s heat rose in the west this morning.
The Government in the Budget Communication, at page 41, claims that this Budget reflects a “Strategic Vision” which began in 1992 “created the fiscal headroom which is enabling The Bahamas to maintain its course through these deeply troubling times”. While taking credit for the positive economic growth generated by the Christie Administration, the Government cowardly absolves itself of any responsibility for the current crisis.
Incredibly, the Government, at page 20, claims that “The Bahamian economy was adversely affected in 2008 by the global economic downturn, resulting in the first decline in real activity since 2004…This significant weakness in economic activity reflected declines in tourism, foreign direct investment and related construction, business failures and or contraction, job losses and consequent falloff in consumer spending”.
Mr. Speaker, since the Government is silent on the role it played in creating our current financial crisis, we must rely on Standard & Poor’s Report of the 17th December 2008 to expose how the reckless behaviour of the Government, in stopping, reviewing and cancelling over $80 million of legal contracts for partisan political reasons undermined investors’ confidence and slowed down the Bahamian economy at the beginning of the global recession.
The Report, at page 12, states that “The review of $80 million worth of contracts and eventual cancellation of a $23 million public contract for straw market negatively affected investors’ sentiments and brought substantial disruption to the contractors’ activity. The situation has since normalized, but the important economic growth momentum has been lost.”
It is now clear, Mr. Speaker, the Government, in seeking to embarrass the previous Government, compromised the national interests and made us more vulnerable in the face of the most critical economic challenge of our post independent history.
DEBT BURDEN It is in this context, Mr. Speaker, that we must review the current Budget. The Government has borrowed US$570 million in the past two years, about 7% of our GDP, with a current National Debt of roughly $2.9 billion or a per capita debt of $8,800 for every Bahamian. During the past year alone, the Government borrowed US$120 million from the IDB for the New Providence Road Improvement Project; US$150 million from China; $200 million from a consortium of banks for stimulus and to make up revenue shortfall; and US100 million in a bond issued in New York. It is projected that over the next three (3) years to 2012, cumulative deficits of $352 million, $286 million, $250 million and $185 million would add about $1.07 billion to the public debt pushing it beyond $4 billion and producing a debt to GDP ration in the region of 55% which would put us in the danger zone.
Mr. James Smith, former Central Bank Governor and Minister of State for Finance, warned the Government in an address to the Rotary Club of West Nassau last week that it is unwise for the Government to risk the “A” rating and the parity of the Bahamian dollar with United States by undertaking this massive level of borrowing at a time when GDP growth, tourist arrivals, foreign investment, government’s revenue are all in a radical downturn and are unlikely to recover in the medium term.
Mr. Speaker, it is incumbent upon the Government to provide this Parliament with a strategic plan to show how this borrowed money will be used to stimulate our economy and create alternative and sustainable revenue sources. Further, like in the United States where citizens can access recovery.gov and find out how the Stimulus Package of US is being spent, I recommend that the Government practice Government in the Sunshine and be accountable and transparent in how this borrowed money is being spent.
In the face of this crisis, Mr. Speaker, the Government’s Budget offers no strategic vision or strategy to create new streams of income; improve the competitiveness of the Bahamian human capital, establish linkages between tourism and agriculture, fisheries and the craft souvenir industries, to invigorate Bahamian businesses and give hope to Bahamian consumers. Indeed, Mr. Speaker, there is no prescription in this Budget to get us out of this crisis and there is no national development indication where we are going, for example, where we hope to be in the year 2012 or 2020.
POOR FINANCIAL ADMINISTRATION I am reminded, Mr. Speaker, of the economic crisis The Bahamas faced during the first Gulf War in 1990 when Prime Minister Pindling was completing a disastrous tenure as Minister of Finance and something radical had to be done. Prime Minister Pindling stepped down as Minister of Finance and appointed Mr. Paul Adderley as Minister of Finance. Mr. Adderley, quoting Charles Dickens, recognized that while it was the worst of times, it was also the best of times, undertook a number of radical measures at that time. He introduced duty free shopping throughout The Bahamas, removed customs duty on all breadbasket imports and introduced rebates in real property tax.
I use this example, Mr. Speaker, not because it was the perfect medicine for the illness at the time. But rather because the attitude of the Minister of Finance was that the Government needed to be aggressive, creative and to take some risks in order to seize the opportunities the downturn offered. Perhaps, the time has come for us to accept that the administration of the Ministry of Finance has been a complete disaster under Prime Minister Ingraham. He has failed to defend the financial services sector from external threats, to protect the investment of Bahamian policy and annuity holders of Clico, to protect Crown Land from corruption in the Ministry of Finance and has failed to improve revenue collection. I suggest that Prime Minister Ingraham demonstrate the courage of his mentor and appoint a more able Minister of Finance to guide us through this current crisis.
LIMITS OF STAFFORD SAND ECONOMIC MODEL The conservative tone of the current Budget may be intended to pacify the International Monetary Fund and other multilateral agencies, but it offers no strategic vision to move us beyond the limited vision of the Stafford Sands Economic Model of year tourism and financial services.
Mr. Speaker, I acknowledge that Stafford Sands was visionary in the early 1960s when he fashioned the current economic model of year-round tourism, large foreign owned resorts (all of which were located in Nassau and Freeport) and financial services to move The Bahamas from a sleepy colony with seasonal tourism and subsistence faming.
As the Progressive Liberal Party has led us through majority rule, independence, the building of the middle class and national institutions and, under the Free National Movement, the building of local Government and private broadcasting; neither the P.L.P. nor the F.N.M. in Government has expanded the blue print of the Stafford Sands Economic Model.
While we have done well with this economic model, I suggest, Mr. Speaker, that this economic model has run its course and it is now time to reposition The Bahamas to be more competitive in this changed global economy by expanding the streams of public revenue and creating better linkages between tourism, agriculture, fisheries, craft production and other service areas.
Mr. Speaker, the current Budget claims to put emphasis on reform of customs collection and financial administration. However, while improving revenue collection efficiency may allow the Government to maintain the previous fiscal revenue; nevertheless, revenue projections for 2009-2010 are unrealistically optimistic. The adjustments to customs duty and excise tax are revenue neutral. They are part of a clean-up exercise to restore rates mistakenly increased when import duty and stamp tax were amalgamated.
REPOSITIONING OF THE BAHAMAS
Like Mr. Paul Adderley said in 1990 while this is the worst of time, it can also be the best of times if we demonstrate the courage to move this country beyond the limited Stafford Sands Economic Model. Mr. Speaker, I urge the Government and this Honourable House to exercise the courage to commit to a national development strategy which creates new streams of revenue, diversify the economy, create a world competitive population, a more competitive Bahamian business sector, forge effective private/public partnership and create more dynamic cultural institutions in the Bahamian society.
These strategies of restructuring, based on a bipartisan public/private partnership, should include the following measures:
- DIVERSIFICATION OF ECONOMY I recommend that the Government diversify the Bahamian economy beyond tourism and financial services by creating better linkages with agriculture and fisheries (commercial hydroponics and aquaculture) and indigenous craft and souvenir production, with the appropriate incentives and policies to ensure that Bahamian entrepreneurs succeed in these areas. Targets should be set to ensure that these areas to achieve a greater share of GDP by 2020. Such a strategy will also ensure The Bahamas achieve the geo-strategic objective of food security in an increasingly protectionist global environment.
The current Budget, Mr. Speaker, fails to take us in this direction. For example, the Budget, at Head 57, reduces the allocation of the Department of Agriculture by $359, 811. The allocation of the Department of Marine Resources, at Head 58, is reduced by $306,076. In the absence of such strategic repositioning, we cannot properly define the propose National Training Initiative, as we might be training young people for an old and obsolete Stafford Sands Economic Model which we need to expand and modernize.
- EDUCATION TRANSFORMATION AND CREATION OF THE UNIVERSITY OF THE BAHAMAS. I recommend that the Government, invest some of the money being borrowed in the Bahamian human capital rather than just infrastructural projects and reconsider its proposed cuts in the allocations to the Department and Ministry of Education, the College of The Bahamas and BTVI. An early date should be set for the establishment of the University of The Bahamas. In the United States, President Barack Obama committed over US$100 billion of the US$750 billion Stimulus Package to education, especially Early Childhood Education, reform of grades K through 12, with emphasis on critical thinking, problem solving and innovative use of knowledge and competitive higher education or job training after high school, to improve the competitiveness of the United States in a knowledge-based global economy.
The Christie Administration, in creating the Ministry of Education, Science & Technology, understood that to create a more competitive population the education needed to be transformed. Emphasis was placed on preschool and special education, commitment to the University of The Bahamas and the expansion and restructuring of BTVI, Distance Education, Education Leadership Institute was created in partnership with the COB, consultation with stakeholders through National Education Conferences, production of Indigenous curricular books and tools and creation of a National Training Agency. The infrastructural assets of Freeport, Grand Bahama, should be used to develop a hub for offshore universities and research centres.
Incredibly, Mr. Speaker, the Government in this Budget retreats from most of these initiatives. Although the Government proposes a National Training Initiative which is limited to 1,000 recently laid off workers for 13 weeks. With over 16,000 Bahamian unemployed and 5,000 leaving school this month, why would the proposed National Training Initiative be limited to 1,000 recently unemployed Bahamians and to 13 weeks? A careful review of the proposed budget cuts shows that the Government is not committed to education and training. The current Budget cuts the allocation to the College of The Bahamas, under Head 34, by $2,645,937 and the allocation of BTVI, at Head 36, is reduced by $500,058. Similarly, the allocation of Ministry of Education, under Head 38, is cut by $3,624,980 and the Department of Education, under Head 35, is cut by $13,011,405. It is instructive to note that Family Island Operations is cut by $3,226,081, Family Island Secondary Scholarships is cut by $160,000 and the National Educational Conference is cut by $200,000 and there is no increase in the subvention for private schools since the increase by the Christie Administration in 2006.
FINANCIAL SERVICES Mr. Speaker, I recommend the re-establishment of a Ministry of Financial Services and Trade, working in partnership with the financial services and industry sectors, to better defend the financial services sector against the protectionist threats from the Stop Tax Haven Abuse Bill in the United States Senate and the Grey Listing of The Bahamas by the Group of 20/OECD. As a part of this defence, the Government should promote the convening of a global forum on money launder, combating terrorist financing and tax harmonization under the auspices of the United Nations, leading to the formation of a global treaty. The purpose of the global forum will be to ensure that offshore jurisdictions, like The Bahamas, have a voice and place around the table in the making of the treaty and application of the rules in a level and nondiscriminatory manner. The Government should, in partnership with the private sector, establish a policy research institute at the College of The Bahamas to conduct economic intelligence monitoring and analysis of the global economy and trends to assess their impact on the financial services industry in The Bahamas and propose policy options for The Bahamas.
ADMINISTRATION OF JUSTICE. I recommend that the Government invest in the Administration of Justice, as part of economic stimulus, through the establishment of Commercial Court, Arbitration Facility and Judicial Complex, while also securing the safety of the local community. The current Budget proposes radical cuts in the allocation of the Judiciary, under Head 8, by $1,681,185; the Court of Appeal, under Head 9, has a reduction of its allocation of $885,578. The allocation of the Attorney General and Ministry of Legal Affairs is cut by $2,408,289. The allocation of the Royal Bahamas Police Force is cut by $3,005,812, including $2,277,454 in Family Island Operations and $200,000 in the compensation for loss, injury and life.
PUBLIC SERVICE REFORM. Set a date for the reform of General Orders, as a part of Public Service Reform.
LAND POLICY. To facilitate wealth redistribution in our society, there needs to be a clear policy on Crown Land, by the Government which has announced that it will make land available to applicants within the next 24 months. There needs to be a clear and expeditious legal and administrative roadmap for Bahamians to pursue to get title to generation property and a proper land registration system should be established.
EMPLOYMENT RENTENTION. I recommend that the Government design, in partnership with private sector, incentives under the National Insurance Fund, Business Licence and other tax write-off mechanisms, as Barbados is doing under its social security plan, to encourage private employers to hire and/or retain employees during the current recession.
VENTURE CAPITAL FOR BAHAMIAN ENTREPRENEURS. I recommend that the Government formulate, in partnership with the private sector, new lending guidelines, with an infusion of some of the stimulus money being borrowed, to stimulate industries such as canning, marine farm, marine export, cattle rearing, with emphasis on trade/transshipment, import substitution and other areas of value added production.
HOUSING. I recommend that the Government announce that all permanent and pensionable Public Servants for home mortgages will be accommodated under the Housing Scheme in order to buffer the Housing Scheme against the decline in employment in the private sector and to ensure that the programme serves as a stimulus to the construction industry and build the expectation and confidence amongst the business community and consumers.
TOURISM REPOSITIONING. Design a tax and marketing strategy, in partnership with all stakeholders, to address the structural shift in cruise ship tourism so as to increase our share of the expenditure by cruise ship passengers and explore linkages between cruise ship tourism and domestic land and water tour operators and other areas of the service industry. The current Budget, under Head 67, proposes that the allocation to the Ministry of Tourism & Aviation be cut by $12,088,686, without providing any indication of how this will reverse the downward slide in tourist arrivals and reposition The Bahamas to be more competitive in markets which have been resistant to the global recession such as Russia, China and India.
TAX REFORM. I recommend that the Government convenes a bipartisan private/public partnership body to review the current regressive tax system and explore a value added tax, corporate tax, liberalizing of the gaming legislation and systems of double taxation to secure alternative and sustainable sources of public revenue.
ENERGY POLICY. I recommend that the Government engage in a bipartisan private/public commission to explore alternative commercial sources of energy, including solar, wind, wave, etc. to replace fossil fuel, reduce pollution and reduce the demand on our foreign exchange, with specific targets.
CONCLUSION Mr. Speaker, it is clear from the foregoing analysis and proposals that the current Budget will not stabilize the Bahamian economy or achieve the objectives of maintaining fiscal flexibility if the situation gets worse, or alleviate the effects of the present crisis or achieve a return to fiscal prudence over the medium term.
Therefore, it is critical that the Government, with an existing national debt of $2.9 billion and a projected debt over the next three years of $4 billion, that we should, for example, reconsider whether we should put $120 million in the New Providence Road Project built by a foreign contractor instead of investing those funds in an creating efficient public transport system, improving student performance, our education system and technical training, national health insurance or the development of a modern agricultural and aquaculture sectors. Bahamians are calling upon both the Government and the Official Opposition to use our collective wisdom and exercise the maturity to collaborate in expanding the Stafford Sands Economic Model to create alternative and sustainable streams of public revenue to secure the future of The Bahamas.
I therefore urge, Mr. Speaker, that the Government not mortgage the future of The Bahamas, without a clear national development plan to develop alternative and sustainable sources of public revenue, improve the competitiveness of the Bahamian human capital and ensure the proper accounting for this borrowed money. I submit that if the Government persists in this reckless path, this entire process will amount to no more than an expensive frolic which The Bahamas can not afford at this time.
Fort Charlotte reminds the Prime Minister and members of the majority party that the heat of the sun does not rise in the west, as this ill conceived Budget would make us believe.