From: OVERSEAS BUSINESS REPORTS (BAHAMAS)
University of Missouri-St. Louis
Match 16 DB Rec# - 26,461 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111104950
Title :BAHAMAS - OVERSEAS BUSINESS REPORT - OBR9208
Data type :TEXT
End year :1992
Date of record:09/17/1992
Keywords 1 :
| CARIBBEAN COUNTRIES
| CARIBBEAN GROUP
| ENTERPRISE FOR THE AMERICAS
| WESTERN HEMISPHERE
BAHAMAS - OVERSEAS BUSINESS REPORT - OBR9208
This article is derived from a report dated August 1992, prepared at the
U.S. Government - U.S. Department of Commerce, Washington, DC. The article
consists of 6 pages and discusses the economic and commercial climate in the
Bahamas, with emphasis on information useful for potential U.S. sellers and
investors. It includes the following sections:
THE BAHAMAS ECONOMY
BUSINESS VISITORS' GUIDE
GOVERNMENT AND COMMERCIAL CONTACTS
Overseas Business Report
Marketing in Bahamas
Prepared by Bryan R. Hanson
with assistance from the
Office of Latin America
and the Department of State,
U.S. Embassy, Nassau
U.S. Department of Commerce
International Trade Administration
THE BAHAMAS ECONOMY
Overview -- Industry Sector Analysis -- Business Brief -- Leading Trade
Opportunities -- Top Exports/Imports
Customs/Tariffs -- Documentation
Government Policy -- Intellectual Property Rights -- Acts/Laws -- Investment
Incentives -- Investment Promotion -- Expropriation -- Free Trade Zones
Exchange Rate Policy -- Financing -- Sources of Financing -- Major Retail
Employment -- Worker's Rights
BUSINESS VISITORS' GUIDE
Overview -- Entry Requirements -- Transportation -- Communications --
Departure tax -- Holidays -- Banking Hours -- Major Hotels
GOVERNMENT AND COMMERCIAL CONTACTS
U.S. Government Agencies -- Bahamas Government Contacts -- Bahamas Private
This publication is available through the National Trade Data Bank; for
location closest to you, call 1-800-USA-TRAD.
THE BAHAMAS ECONOMY
The Bahamas is a politically stable, middle-income developing country. The
economy is based on tourism and financial services, which account for
approximately 60 percent and 10 percent of Gross Domestic Product (GDP)
respectively. Bahamas was a vacation destination for over 3.6 million
tourists in 1991, most of them from the United States. Nearly 400 banks and
trusts were licensed and over 10,000 offshore companies registered in
Bahamas as of mid-1992. The agricultural and industrial sectors, while
small, have recently been the focus of government efforts to produce
economic growth and diversification in the economy.
The Bahamian economy grew at an average rate of 3 percent annually during
the 1980s, due largely to continued development in the tourism industry.
Per capita income, estimated at US$10,000 in 1991, was among the highest in
the Caribbean region. The U.S. recession of 1990-91 and the drop of tourism
resulting from the Persian Gulf conflict in 1991 slowed the Bahamian
economy. The unofficial inflation rate exceeded 9 percent in 1991, due
largely to increased import duties.
The United States remains Bahamas' major trading partner. U.S. firms
exported over $ 750 million worth of goods and services to Bahamas in 1991.
U.S. goods are preferred because of quality, savings in transportation
costs, and suitability for the tourist market. The 254,685 Bahamians (1990
figures) living on the 29 inhabited islands of the Bahamian Archipelago
import nearly all foodstuffs and manufactured goods.
The Bahamian government actively encourages foreign investment, with free
trade zones in Grand Bahama and New Providence. Capital and profits are
freely repatriated, and investors are free from personal and corporate
income taxes. The government of Bahamas is committed to maintaining parity
between the Bahamian and U.S. dollars. Designation under the Caribbean
Basin Initiative (CBI) trade program allows qualified Bahamian goods to
enter the United States duty free.
The Bahamas 1992 recurrent budget totalled $627.5 million, an increase of
$27.5 million (4.5 percent) over 1991. The budget reflected continuing
government priorities on education, health' police and tourism. Bahamas
continues to run a fiscal deficit due to investment in capital projects by
the government and public corporations. Deficits are financed through bond
issues, treasury bills, short-term advances from the banking system, and
Central Bank financing. The government was forced to implement emergency
tax and borrowing measures in November 1991 needed to cover a $96 million
revenue shortfall, however. Austerity measures remain in force, including
limiting capital expenditures to projects approved directly by the Ministry
of Finance. Total 1991 national debt was in excess of $1 billion.
Industry Sector Analysis
Tourism alone provides an estimated 60 percent of GDP and employs a
127,000-strong work force. In 1991 a total of 3.6 million tourists (83
percent from the United States) visited Bahamas. Total tourist expenditures
were an estimated 1.08 billion during 1991. The main tourism centers are
New Providence, including the capital of Nassau and Paradise Island, and
Grand Bahama, whose main city is Freeport. The number of hotel rooms in
Bahamas increased to 13,165 in 1991, and the average length of stay of
stopovers reached 6.2 nights.
Cruise ship traffic to Bahamas has increased considerably in recent years.
Cruise ship calls increased by 1.4 percent in 1991 to 2,372, and nearly half
were to Nassau. In 1990, the government began extensive harbor improvement
projects for the Family Islands and Nassau Harbor; the harbor can now
accommodate up to 13 cruise ships.
However, tourism revenue dropped by an estimated 15 percent decline in 1991
in large part due to the U.S. recession and the Persian Gulf War; total
visitor nights fell by 3.5 percent. Most of the luxury hotels in New
Providence experienced financial difficulties. Over 3,000 hotel employees
lost their jobs in 1991 as hotels sought to cut operating expenses. Hotel
occupancy rates averaged approximately 50 percent for the year (a 65 percent
rate is needed by most hotels to break even). At least four of Bahamas'
major hotel--Carnival's Crystal Palace, Resorts International, the Lucaya
Beach and Princess Resort and Casino - are currently up for sale.
Delta Airlines, American Eagle, and USAir are among the U.S. airlines
offering scheduled service in to Bahamas. Bahamasair, the national flag
carrier, flies to the United States and among the Bahamian Islands. The
government is completing a $58 million refurbishing and expansion project at
Nassau International Airport. Five airlines suspended service to Bahamas in
1991: British Airways, Eastern, Midway, US Air Express and Pan Am Express.
TWA Express ceased operation in 1992.
In an effort to increase tourist arrivals, the government has concluded a
series of "package" agreements to bring in visitors from Canada and Europe,
which together accounts for approximately 13 percent of overall tourist
traffic to Bahamas.
Bahamas' status as a tax haven and its bank secrecy laws make financial
services the second leading economic sector. There are 399 banks and trust
companies licensed in Bahamas in 1992, in addition to six major retail banks
and several mortgage institutions. Nassau is also home to several
investment companies and mutual funds. The financial sector accounted for
nearly ten percent GDP in 1991 and employs 3,300 people, 95 percent of whom
Bahamas promulgated the International Business Companies (IBC) Act in
January 1990 to simplify and reduce the cost of incorporating offshore
companies in Bahamas. The Act was one of several measures to make Bahamas
more competitive in offshore finance. As of mid-1992, over 10,000 IBC-type
companies have been established. In February 1991, the House of Assembly
passed a measure to allow the establishment of an asset protection trusts.
Legislation to refine insurance regulation and enhance local capital markets
is also being drafted.
This sector accounted for three percent of GDP in 1991, and merchandise
exports totaled an estimated US$306.1 million. Under the Caribbean Basin
Initiative (CBI), approved products manufactured in Bahamas qualify for
duty-free entry into the United States. Two large chemical companies in
Freeport and several citrus growers on Abaco are among the businesses
currently exporting under CBI. With no Tax Information Exchange Agreement
(TIEA) in place, however, Bahamas doesn't qualify for 936 (QPSII) funds
under CBI. The Canadian government offers similar trade incentives under
the CARIBCAN office. Under the Lome IV Convention, a wide range of goods
manufactured in Bahamas may be imported in the European Community
These sectors account for five percent of GDP and employ five percent of the
labor force in 1991. Agricultural output totalled $18.5 million in 1991,
with an additional $51 million in fisheries exports. The fact that Bahamas
imports over $250 million in foodstuffs each year (80 percent of its food
consumption) has led the government to look to these sectors to reduce
imports and generate foreign exchange.
There are approximately 240,000 acres of prime agricultural land which
remain uncultivated. The primary agricultural islands are Abaco, Andros,
Eleuthera, and Grand Bahama. The Bahamian Department of Agriculture has
identified areas as potentially the most profitable for investors: beef
cattle and pork production and processing, tree food crops, dairy production
and processing, winter vegetables, aquaculture and mariculture. Recognizing
the potential of fisheries, the government has plans to develop
aquaculture/mariculture into a US$150 million annual business employing
15,000 people over the next decade. Training programs on the fisheries
industry are being conducted for Bahamian fishermen and the Ministry of
Education will soon introduce "Fisheries" as a topic in the school
syllabus. Fish and Shrimp farms currently in operation are located in Long
Island, Grand Bahama, and in Nassau.
Activity in this sector, which recently accounted for approximately ten
percent of GDP, declined in 1991. The value of construction projects
undertaken in Nassau fell from $399.3 million in 1990 to $251.6 million in
1991. Value of actual construction starts fell from $335 million in 1990 to
$130.6 million in 1991. The $58 million expansion of terminal and ancillary
facilities at Nassau International Airport is expected to be completed in
late 1992. Work will begin in the fall of 1992 on a new airport on the
island of San Salvador. While work continues on Family Islands'
electrification and road projects, government funds are tight and only $100
million was allocated in the 1992 budget for capital development.
Exporters to Bahamas should be aware of the unusual business climate of the
country. The majority of exports to the region will not be marketed toward
the Bahamians, but the tourists vacationing there. Therefore, any market
strategy should include servicing these tourists. Products demanded to
facilitate their short stay abroad are the primary marketable good. These
products may range from hotel restaurant equipment to sunglasses. Exports
in goods and services for U.S. citizens, who comprise the majority of the
tourists will be highly receptive in the Bahamian market.
Exporters should realize that a country population of approximately 1/4
million people does not represent a substantial export market. While the
Bahamian government encourages new industries such as agriculture/fisheries
and manufactures, tourism will remain the dominant sector for years to come.
Leading Trade Opportunities
Because of its proximity to Bahamas, The United States is the principal
source for imports to the country which include such items as foodstuffs,
clothing, dry goods, motor vehicles, building supplies, hardware and general
merchandise of every description, both for local consumption and in support
of the tourist, commercial and industrial sectors. The best prospects for
U.S. exports remain food, manufactured goods, machinery, petroleum products
and chemicals. The United States likewise consumes over half of Bahamian
exports. Bahamas exports to the United States include spiny lobster,
pharmaceutical products, rum, salt and aragonite.
Although there are customs duties on virtually all imported products,
competition for U.S. exporters is low. Except for restrictions against the
importation of chicken and higher tariffs on imported items which are also
produced locally, there are no trade barriers to U.S. exports. U.S.
products are preferred due to quality, lower transportation costs and
suitability for tourists.
The following sectors are ranked according to market strength:
Foodstuffs and manufactured goods (1)
The Bahamas will continue to represent an excellent opportunity for U.S.
food exporters. According to current estimates, the Bahamas' annual food
consumption at $250 million, 80 percent of which is imported. U.S. foods
exports account for about $170 million of this total.
Most promising subsectors: Meats, fruits, and vegetables, food
preparations, juices, rice and breads.
Automobiles and Parts (2)
High customs duty (45-60) is the only trade barrier to the importation of
automobiles. There are approximately 39 auto repair shops and dealers on
New Providence alone. U.S. car parts are easier to obtain than non-U.S.
made cars and parts.
Most promising subsectors: Tires, paints and air brushing equipment body
repair materials, pre-fab auto shop, rust proofing equipment and Japanese
Hotel and Restaurant Equipment (3)
The dominant tourist sector furnishes a steady demand for these
manufactures. There are over thirteen thousand hotel rooms in Bahamas.
Most promising subsectors: Kitchen appliances, linen, bulk wholesale food
Computers and Electronics (4)
The government's emphasis on expanding the manufacturing sector includes the
need for new technology from developed countries. The nearly 400 hundred
banks and trust companies in Bahamas are continually upgrading equipment, as
are the public corporations. Many Bahamian technicians and managers are
trained in the United States and are familiar with U.S. products and
Possible privatization of national air carrier, BahamasAir, Bahamas Electric
Corporation and Bahamas Telecommunication Corporation may signal increased
opportunities for U.S. exporters.
Most promising subsectors: Data processing equipment, automatic teller
machines, computerized cash registers.
Discount Items (5)
Discount items may be the market of the future in Bahamas. Because of high
import duties, many Bahamians shop in Southern Florida for common items.
Bahamians spend an estimated $60 million in Southern Florida each year.
Locally-available discount items may attract those who are unable to travel
to the United States to shop.
Most promising subsectors: Baby products, including diapers, generic
toiletries, and cleaning products.
This file extracted from Dept. of Commerce National Trade Data Bank (NTDB)
CD-ROM SuDoc No. C 1.88:993/12. Processed 12/01/1994 by software developed
by RCM (UM-St. Louis Libraries) / OBR_0015