Report No. 390a-BM

Current Economic Positionand Prospects ofthe BahamasJune 3, 1974

Latin America and the Caribbean Regional Office

Not for Public Use

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility for the accuracy or completeness of the report.

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CURRENCY EQUIVALENT

Currency Unit = Bahamian dollar

Since February 1973

B$1.00 = US$1.00

Between December 1971 - February 1973

US$1.00 B$0.97

B$1.00 US$1.03

Prior to December 1971

B$1.00 = US$1.00

This is a report of the economic mission which visitedthe Bahamas from October 15 to November 3, 1973. Themission consisted of Mr. Eduardo R. Conesa (Economist)and Miss K. M. Vij.yalakshmi (Research Assistant).While in the field, the mission cooperated with a con-current DIF mission.

TA)'A- &31 iTENTS

MAP

COUNTRY DATA

TABLES IN TEXT

SUMMARY ANrbi CONCtU,-:ION. .@S . . . . . . . . . .i

I. GENERAL BACKGROUNJD 1

A. Geographical . . . e . . . . . . .*

B. Historicai. . . . . . . . . . . . . . . . . . 2

II. ECONOMIC STRUCTURE AND DEVLi>OPa'NT CONSTRAINTS 6

A. Growth Perfornance ba the sixties . . . . . . 6B. Growth Performance in the seventies . . . . . 8C. High GNP per Capita . . . . . . . . . . . . . 12D. Economic Structure and the

Predominance of Tourism . . . . . . . .. 13E. Recent Balance of Payments

Performance. . . . . . . . . . . . . . . .15F. Recent Investment and Saving

Performance . . ... .. . .. . . .. . . . 21G. The Manpower Constraint . . . . . . . . . . . 26H. Income kistribution. . . . . . . . . . . . . . 30

III. SECTURAL PROSPECTS AND ISSUES 34

A. Agricultural Development andEff-4 ciency . . . . . . . . ......... 34

B. Industrial Development and Incentives . . . . 35C. Financial Services . ..... . . . . . . . . 36De Tourism . .. . . . . . . . . . . . . . . . . 39E. Water Supply and Sewerage . . . . . . . . . .51

F. Electricity, Telecommunicationsand Transportation . . . . . . . . . .,55

G. Educational Problems and Policies . . . . . . 56

IV. DEVELOPME STRATEGY AND PUBLIC INVESTMENT PROGRAM 60

A. Country Objectives . . . . . . . . . 60B. Development Strategy . . . . . . . . . . . . 61C. Overall Investment Requirements . . . . * . . 63D. The Public Investment Program . . . . . . . . 63

TkBLE OF CONTENTS (Contd.)

Page No.

V. FINANCING OF DEVELOPMENT 67

A. Public Sector Financing . . . . . . . . . . . . . 68B. Fiscal Prospect and Issues . . . . . . . . . . . 73C. Private Sector Flnanc: ng. . . . . . . . . . . . 77D. Monetary Nanagem3nt . . . . . . . . . . . . . . . 79

--I. BALANCE OF PAYnIENTS PROSPECTS Ai;Z EXTERNAL DEBT 83

A. Balance of Payments Prospects . . . . . . . . . . 83B. External Debt . . . . . . . . . . . . . . . . . 85

APPENDIX A - The National Accounts Estirumtes . . . . . . . . . 86

APPENDIX B - External Capital Requirements . . . . . 88

STATISTICAL APPENDIX .... . . . . . .. 94

TABLES IN TEXT

Page No.Table 1: Land and Population by Island - 1970 . . * * * * * . 2Table 2: Expenditure on Gross Domestic Product, 1969-1972 * * * * * * 10Table 3: GNP Estimates, 1970, Benchmark Year * * * * * . . . . . . . 12Table 4: Economic Structure1970 . . . ** . . . . . .* * * . . . 14Table 5: The Resource Balance as % of GDP * * * * . . * * * . . 16Table 6: Balance of Payments - Current Account. * . . . . * * * * * * 17Table 7: Merchandise Exports FOB Excluding Oil- * * * . . . . . . . * 18Table 8: Merchandise Imports CIF, Excluding Oil * * * * . . . . 19Table 9s Direction of Trade Excluding Oil under Processing

Agreement . * . * . * * . . . . 9 920

Table 10: Balance of Payments - Capital Account * * . . I * 21Table 11: The Investment Effort; GDI as percent of GDP * * * * * * 22Table 12: The Composition and Evolution of Investment * * 22Table 13: Working permits and Investments . * . * . * . * 25Table 14: The Savings Effort - Savings as percent of GDP . . . . . 25Table 15: The Financing of Investments . . . . . . . . . . . . 26Table 16: Population Increase . . . . . . . . . . . . . . . . . 26Table 17: Percentage Distribution of Employees by Area and

Nationality, 1968. . . . . . . . . . . . . . . . . . . 27Table 18: Population, Labor Force, Sex and Participation

inl 1970 *- - - - ------ 0. 0...... .. . . - 28Table 19: Actual Employment by Type of Occupation and Sex ** * * 29Table 20: Selected Wages Rates in Bahamas 1973 and Comparison -

with other Caribbean countries as percent of Bahamas 29Table 21: Per Capita Disposable Income per Island- * * .* * * . 32Table 22: Expenditure of a Small Shell Bank in Nassau . . . . . . . 37Table 23: Visitor's Points of Residence (percent). . . . . . . . * * . 40Table 24: Bahamas Air Fares in Comparison with some Caribbean

Tourist Competitor's Countrie;s . . . . . . . . . . . . . 40Table 25: Tourist Arrivals 1969-73 . . . . . . . . . . . . . . . . . 42Table 26: Tourist Expenditure Pattern 1972 . . . . . . . . . . * * . . 44Table 27: Tourist Expenditures 1969-1972 . . . . . . . . . . . . . . . 46Table 28: Tourist Accommodations in the Bahamas and other

Caribbean Countries, 1972 ..... .46Table 29: Hotel Rooms Available . . . . . . a . . . . . . . . * . . . 47Table 30: % Hotel Room Occupancy, 1972 . .*. . . . . . . . . . . . . . 49Table 31; Price Competitiveness of Bahamas in Comparison

with other Tourist Areas - 1972 . . . . . . . . . . . 49Table 32: Water Authority Revenue Statement 1973 *. .*.... . . . . 53Table 33: Government Expenditure on Education . . . . . . . . . . . . 56Table 34: Public Investments 1967-73 . . . . . . . . . . . . . . . . . oLhTable 35: Public Investment as percent of GDP, GDI, Government

Revenue and Gross Public Savings..... . 65Table 36: Public Investment Program - (B$O00). . . 0 0 0 . 66Table 37: Analysis of Public Sector Finances 1969-73 . *. . .* . . . * 67Table 38: Different Measures of the Tax Effort 1972 . . M . * * * * 69Table 39: Tax Revenue 1969-73 - * * * * * * * * 69Table 40: Commercial Bank Credit and Liabilities

to the Private S etoo r 79

Page No.

Table 41: Composition of the Money Supply 1972 . . . . . . . 80Table 42: Selected Variables Related with Inflation . . . . . . . . . 80Table 43: Suwmary of the Balance :)f Payments Excluding

Oil under Proceusing ;1greement . . . . . . . . . . . . . 83

Table 44: Selected Indicato:s of -;reditworthiness * . * * * * * * * . . 85Table 45: Exter-ial Capital iequirem3ents High Growth Path . . . . . . . 91Table 46: External Capital Requirements Low Growth Path * .* * * . . * . 93

SOURCES OF TABLES IN THE TEXT

Table 1 Department of Statistics.Tables 2 and 3 IBRD estimates.Table 4 IBRD and Department of Statistics.Tables 5,6,7,8,9, and 10 IMF, Department of Statistics, Bahamas Monetary

Atuthority and IBRD.Tables 11 and 12 IBRD estimates.Table 13 Immigration Service (Cabinet Office) and IBRD.Tables 14 and 15 IBRD estimates.Table 16 Department of Statistics, Immigration Service

(Cabinet Office) and IBRD estimates.Table 17 Clapp and Mayne Report 1969.Tables 18 and 19 Department of Statistics.Tables 20 and 21 Department of Statistics, Ministry of Tourism and

IBRD.Table 22 Bahamas Monetary Authority.Table 23 Ministry of Tourism.Tables 24 and 25 Ministry of Tourism and IBRD.Tables 26 and 27 Ministry of Tourism.Table 28 Ministry of Tourism and IBRD.Tables 29 and 30 Ministry of Tourism.Table 31 Dayton and Keenan Report, August 1973.Table 32 Ministry of Public Works.Table 33 Ministry of Finance (Treasury Accounts).Table 34 Ministry of Finance (Treasury Accounts) and IBRD;Table 35 IBRD estimates.Table 36 Ministry of Finance and IBRD.Table 37 Ministry of Finance, IMF and IBRD.Table 38 IBRD estimates.Table 39 Ministry of Finance and IMF.Tables 40 and 41 Bahamas Monetary Authority and IHF.Table 42 Bahamas Monetary Authority, Department of Statistics

and C.E.A. of USA.Tables 43 and 44 IBRD estimates.

GLOSSARY

GDP : Gross Domestic ProductGNP : Gross National ProductGDI : Gross Domestic InvestmentGDS * Gross Domestic SavingsMPS : Marginal Propensity to SaveMPM : Marginal Propensity to ImportMNSR: Marginal National Savings Ratio

IBRD 10820

104 78' 76 INSET i JANUARY 1974GRAND BAHAMA ISLAND

Walkers Cay N rth

\ , . $,,Senttbrnent~~~V, m Mq.Leons

GRAND BAHAMA I. Bgelican Pti9(Se nstI . g R 7

Norman JO ~~~~~~~~~~~~~~~~~~~~14W o015 20PFREEPORT Castle REEA-

NOUST'RIAL COMPLE OLVhHarbour REPRTERMINAL a IC 20 30 40Freeport TERMINAt IGREA REEPORT INDUSTPIAL COMPLEX

o 'sonCity U. S. A. Cit-~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~ ~USAA TANrtic

2~~~~~~6 ~~~~~Gordo Coy*26- foult THEBAHAMAS

olIe i theWaUll Aef e CoNI OCEANC' ~~~~~~BIMINI$ 4

t~? .~RHATpO r7

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iLp' J' W PROVIDENCE I Portsmouth

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B )~~~~~CAT f.

5o ANDROS I The igh

-24-_ <fs ,bBmps e Xd< ° Devis tk T@SAN SALVADOR I.-V .~~~~~~~~~~~~~~~~~~.o~~~~~Pckbvrn 24'-

Coy Sal Burnt Rum GREA Grundc Ca

aE,, %,# 1 ~~~~~~~~~~~~~ ~~Richmondf Hi< RWR CayTO

'08' ;\LONG f.

SO0 78 DZo*dmoms Coy 00

INSET 2 SA LT nTNEW PROVIDENCE ISLAND , vsPiwn

South Pt 0 COKED f.

N SAU Sa dilanduVllage ~~~~~~~~MAYAGUANA I.

-22'2-

25 Carmichael 0 40 so 120 14

KILOMETERS

Coral Har - 2G wcc aref; r 0 20 40 60 C0 1o0

0 2 4 6 t MitEs GREAT INAGAI

Kilometers SALTO 1 2 a 4 5 CUB ote0* ~~~~~~~~CUBA Matthewown

77'10' Milos 76' 74'

THE BAH/ MA ISLANDSV. Major potential agricultural lands International airports* Resort developments in the family islandsA Industrial and rnining developments ® Major airfields

Main roads * Minor airfields

Page 1 of 2 pages

COUNTRY DATA - The Bahamas

AREA 2 POPULATION DENSITYIT,942 km 0.175 million (mid-1972) 12.6 per km2

Rate of Growth: 2.0 (from 1970to 1972) 260.0 per km2 of arable land

POPULATION CHARACTERISTICS (1971) HEALTH (1972)Crude Birth Rate (per 1,000) 28.8 Population per physician 1,250Crude Death Rate (per 1,000) 6.3 Population per hospital bed 197Infant Mortality (per 1,000 live births) 37.4

INCOME DISTRIBUTION (1970) DISTRIBUTION OF LAND OWNERSHIP (year)% of pefsonal income, highest quintile 52.0 % owned by top 10% of owners

lowest quintile 2.9 % owned by smallest 10% of owners

ACCESS TO PIPED WATER (1972) ACCESS TO ELECTRICITY (year)% of population - urban 80 % of population - urban 90

- rural *-- rural

NUTRITION (1973) EDUCATION (1970)Calorie intake as % of requirements .. Adult literacy rate % 93Per capita protein intake grams .. Primary school enrollment % 100.0

GNP PER CAPITA in 1970: US $ 2,372

GROSS NATIONAL PRODUCr IN 1970 ANNUAL RATE OF GROWTH (%. constant prices)

US $ Mln. % 1960-65 1965-69 1970-1972

GNP at Market Prices 400.5 100.0 .. 12.0 -4.0Gross Domestic Investment 133.2 33.2 16.0 -35.0Gross National Saving 44.4 11.1 .. 14.3 7.3Current Account Balance -97.4 -24.3Exports of Goods, NFS 2/ 320.0 79.9 . 25.5 11.9Imports of Goods, NFS 2/ 345.8 86.3 .. 28.5 -13.0

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1970

Value Added Labor Force V. A. Per WorkerUS Mln. % Thousand % US $ 7.

Agriculture 14.1 3.6 4.8 7.7 2,943.0 42.5Industry 35.1 8.9 3.8 6.3 9,178.9 145.4Services 285.5 72.5 45.2 72.5 6,316.1 100.0Other 59.5 15.4 8.6 1... 6,918.6 109.6

Total/Average 393.7 100.0 62.4 100.0 6,312.9 100.0

GOVER'NMENT FINANCEGeneral Government Central Government

% of GDP (Mln.) % of GEP1972 1972 1969-71 1972 1972 1969-7

Current Receipts 120.8 20.7 21.0 94.8 16.3 16.8Current Expenditure 111.5 19.1 19.2 92.1 15.8 15.8Current Surplus 9- 1.6 2.7 0.5 1.0Capital Expenditures 20.0 3.4 5.1 10.4 1.8 3.4External Assistance (net) - - - - - -

1/ Excluding the expatriate community GNP per capita would be US$1700. Adjusting further for the cost ofliving, GNP per capita would be about US$1100.

2/ Excluding oil under processing agreement.

not availablenot applicable

Page 2 of 2 pages

COUNTRY DATA -

MONEY, CREDIT and PRICES 1968 1969 1970 1971 1972 1973(Million B $ outstanding end period)

Money and Quasi Money 265.2 292.1 285.7 271.7 263.5 268.2

Bank Credit to Public Sector 11.8 17.6 31.9 32.6 38.3

Bank Credit to Private Sector 124.9 153.1 127.1 134.9 132.8

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP 64.6 59.9 61.6 52.2 45.2

General Price Index (1970 = 100) 86.4 94.2 100.0 104.6 111.7 122.1

Annual percentage changes in:

General Price Index .. 8.9 6.1 4.6 6.8 9.

Bank credit to Public Sector .. 49.1 72.7 0.3 12.8

Bank credit to Private Sector .. 22.5 -17.0 6.1 -1.6

BALANCE OF PAYMENTS 1/ MERCHANDISE EXPORTS (AVERAGE 1970-72)

1970 1971 1972 US $ Mln %

(Millions US $)Cement 13.4 6.2

Exports of Goods, NFS 320.0 378.2 461.7 Hormones 16.4 7.6

Imports of Goods, NFS 345.8 284.4 303.0 Petroleum products 162.6 74.9

Resource B&l.(deficit = -) -25.8 93.8 158.7 Crude Salt 3.2 1.5

Rum 6.2 2.8

Interest Payments (net) -19.4 -36.3 -53.1 All other commodities 15.3 7.0

Workers' Remittances (net) -24.0 -24.6 -25.7 Total 217.1 T 0Other Factor Payments (net) -19.6 -44.4 -94.4Net Transfers 0.0 0.0 0.9 EXTERNAL DEBT, DECEMBER 31, 1973

Balance on Current Account -88.8 -11.5 -13.6

1/ JS $ MinDirect Foreign Investment- 123.0 113.0 89.4

Net MLT Borrowing Public Debt, incl. guaranteed 68.2

Disbursements 8.1 9.8 7.4 Non-Guaranteed Private Debt

Amortization -4.2 -5.4 -5.1 Total outstanding & Disbursed 68.2

Subtotal 3.9 4.4 2.3 2/

Capital Grants - - - DEBT SERVICE RATIO for 1973-

Other Capital (net) - -

Other items n.e.i -43.3 100._4 -74.7

Increase in Reserves (+) -5.2 +5.5 +3.4 Public Debt, incl. guaranteed ".3

Non-Guaranteed Private DebtExternal Reserves (end year) 23.7 29.2 32.6 Total outstanding & Disbursed 77T

RATE OF EXCHANGE IBRD/IDA LENDING, (Dec. 1973) (Million US $)

Through Nov.1971 IBRD IDA

US $ 1.00 = B $1B $ 1.00 = US $1 Outstanding & Disbursed

UndisbursedSince Dec. 1971-Jan.1973 Outstanding incl. Undisbursed - -

US $ 1.00 = B $ 0.97B $ 1.00 = US $ 1.03Since Feb. 1973US $ 1.00 = B $ 1

1/ This estimate excludes oil under processing agreement.

2/ Ratio of Debt Service to Exports of Goods and Non-Factor Services excluding oil under

processing agreement.

not available

not applicable

SUNTXARY .AD O12C-'TSI0N5

i. The Bahamas is an archipelago consisting of 29 major islandswith a total land area of over 5n,3&C suare xiiles. The population ofabout 175,000 is largely concentr& ed on fivc of the islands, includingNew Providence which has some 60% of the total population and only1.5% of the country's land.

ii. The islands have a very limited resource base. They lie on asubmarine shelf and tne land is for the most part covered with a verythin layer of soil. There are neither rivers nor fresh-water lakes onthe islands, and water is obtained mostly by tapping the undergroundreservoirs formed by seepage of rain water through the sedimentary lime-stone crust of the land surface. Only about 260 square miles, equivalentto 5% of the land, are suitable for commercial agriculture. Fishing istraditionally done along the coastal waters, notable for their widevariety of species rather than for their high productivity. However,neither the coastal waters nor the oceanic depths are being exploitednearly to their potential. Besides salt, which is recovered from thesea, the only other mineral found :La the Bahamas is aragonite, anextremely pure calcium carbonate san1d used in the manufacture of cement,chemical lime, steel, glass, pulp paper, and agricultural fertilizers.Several companies holding large concessions on land and offshore areashave been doing exploratory petroleum surveys, but no oil has so farbeen found.

iii. The major national assets of the Bahamas are her extremelylong coastal lines of beautiful white sand beaches, her warm clearwaters with brilliant shades of turquoise and blue, and her nearly idealsunny weather. The seasons are mild because the warm waters from thegulf stream temper the winters and the cool sea breezes provide relieffrom eventhe warmest sumer day. The great number of islands and caysmake possible a diversity lacking in other tourist resorts.

iv. Based upon these natural assets the tourism industry developedin the sixties. Tourism is now the dominant sector of the economy ac-counting directly or indirectly for 55% of GDP and 77% of GNP. The Bahamasoffer to tourists a vast range of choice to suit different tastes in termsof privacy, luxury and activities like fishing, scuba diving, snorkeling,golf, gambling, and boating. In addition, the Bahamas has an eventfulhistory that is a tourist attraction in itself. More importantly, theBahamas is the closest caribbean country to the United States, the maintourist market. Because of this proximity more than 83% of the touristshave always come from the United States. Thus, the growth of touristarrivals in the period 1964-69 is correlated with the high growth rate6f the U.S. economy and the decline of 1970 with the corresponding decline

- ii -

in the growth of the U.S. economy. The stagnation of the tourist sectorin subsequent years is to a large extent the result of increasingly in-different services combined with management difficulties and high laborcosts. In spite of these problems, tourism remains the major avenue forgrowth in the Bahamas. A large tourism potential, which can provide thebasis for renewed economic and soc:Lal development, exists especially inthe islands other than New Providence.

v. By exploiting her comparative advantage in tourism, the Bahamaswas able to achieve, by 1970, a GNP per capita of about $2,350, among thehighest in the Western Hemisphere. However, this estimate is not partic-ularly meaningful in characterizing the economy of the Bahamas. Some 15%of the population is foreign born, with a large number of expatriatesoccupying top management positions in banking, insurance, real estate andtourism businesses. Foreigners as a whole xeceive about 38% of the country'spersonal disposable income, the balance of 62% going to the Bahamian popula-tion. The per capita GNP for the latter group is estimated at US$1,700.Even this figure is somewhat misleading for inter-country welfare compari-sons, considering that the price of essential consumer goods is 5C% higherin Nassau than in Washington, D.C. A tax system heavily dependent onimport duties accounts for the major part of this price differential, andtransport costs and high markups may well account for the rest. On thisbasis, a figure of about US$1,100 would probably reflect more accuratelythe per capita GNP forthe Bahamas in comparison with other countries.

vi. All throughout the Nineteen Sixties, GDP of the Bahamas grewat an annual rate of about 12%. This growth was financed by large capitalinflows from abroad attracted by promotional activity undertaken by theGovernment jointly with private groups. This growth process stopped in1970 and was followed by quite a different pattern. After the boom yearsof the Sixties, the country stopped its growth pattern in order to takestock of its growth strategy and objectives. Since then, Bahamianizationof the economy has been occupying first priority. Economic growth, asmeasured by the standard economic indicators,has not been encouraging.GDP has grown at a rate barely above the rate of inflation and GNP hasactually declined in real terms. Thus, in the Seventies the Bahamianeconomy entered a period of transition. There are some conflicts amongobjectives and between objectives and policy tools. A major task confront-ing the planning process underway is to achieve consistency and balancebetween the different economic and political factors at play.

vii. The choice of an appropriate development strategy is not easy.Tourism remains the key to growth although capital intensive industryand agriculture have some potential. Realization of this potentialwill continue to have to rely on foreign investment, if a relativelyhigh growth rate is to be achieved. Moreover, given the scarcity of man-power, the economy would have to change its present immigration policies. Ifthis were to be permitted, and private foreign investment were to be allowedagain to enter into the Bahamas on a large scale (well in excess of

- iii -

US$100 million annually) the country might achieve a growth rate of, say, 5 o/oper year. As another alternative, the Bahamas could choose a more modestgrowth rate of say 3 o/o, one point above the natural growth rate of thepopulation, without the need of much direct foreign investment and with morerestrictive immigration policies. In either case, a greater role of govern-ment involvement in the economy seems inevitable in order to achieve economicgrowth. Such growth would call for increases in government investments,which, in turn would require direct taxation, since most conceivable sourcesof indirect taxation already seem fully exploited.

viii. The governmentts declared policy at the present time is to attractforeign investment through a tax haven policy. The White Paper of October1972 affirms that the government will maintain this. At present, there areno income taxes, corporate taxation, or inheritance taxes. The only directtaxation is a very moderate property tax based on the assessed value of im-proved property in New Providence. There is no tax on undeveloped land. Atthe same time, the government is adopting a restrictive policy on immigrationof foreign personnel so as to expand the opportunities for qualified Bahamians.This policy reduces the availability of qualified expatriates, creates un-certainty in the foreign business community, and conflicts with the tax havenpolicy of attracting foreign investment. This is perhaps a major inconsis-tency to be resolved in the planning process under way. Foreign inmrestmentmight come to the Bahamas again despite somewhat restrictive immigrationpolicies if the system of working permits were, at least, expeditious andless capricious. The simplest way to reduce bureaucratic delays, discretion-ary powers, uncertainties, and the like, and still maintain the Bahamianiza-tion objective, would be to charge a sizable fee on working permits, say,graduated between $t,0oo and $4,000. This would provide additional revenuesto the government and give an edge to the local people for employment whileassuring foreign investors of continued availability of managerial and tech-nical personnel on payment of the requisite fees. Instead of using taxationto resolve the inconsistency described in this paragraph, the government istrying a different approach. This approach consists in requiring enter-prises to present manpower projections where Bahamians will gradually re-place expatriates. When approved by the government the projections becomeequivalent to contracts that both parties, the government and the enterprises,wMll have to carry out. The approach, although an improvement over previouspractices, is still second best to taxation.

ix. Public finances were weak from 1969 up to 1972, although a modestcurrent account surplus in the consolidated public sector prevailed each year.This weakness resulted from a sluggish growth in revenues on the one handand a rapid growth of government consumption on the other. Rather than cur-tail consumption, the government both reduced investment and resorted to in-creasing borrowing for its financing. Public finances, however, registereda marked improvement in 1973, stemming from a substantial increase in revenuesand a stretching out of the short-term debt. The revenue improvement camefrom increased fees for motorcar licences, increased import duties on cars andliquor and on a number of other commodities, and an increase in the stampduty on land transfers. But the fiscal prospects for 1974 remain somewhat un-certain. The government forecasts a modest current account surplus of5 to 7 B$million to finance an equally modest public investment program. Thissurplus, however, will only materialize if increases in government expenditureswill be held down below recent rates of growth.

- iv -

Unless this m2terializes,the same financial pattern of 69-72 will reappearfrom 1974 onwards and will thwart efforts to implement the necessary publicsector investments. The authorities envisage a public investment programof some B$82 millions for the period of 1974-77. The financing of thisprogram is predicated on achieving a surplus on current account to cover roughly40O,Aith the rest coming from external borrowing. The realization of thisobjective will require measuresto raise public sector savings of about-32 million during 1974-77. The remaining B$50 million will have to be

obtained from external sources.

x. There is a case for increased taxation in the Bahamas. The taxeffort of Bahamian residents hardly reaches 10% of GDP. It is doubtful thatthe provision of a tax haven has been, for instance, the major factor forattracting industries to the country. Proximity to the United States, deep-water ports, the commercial and social talent of business promoters andpolitical stability have probably been more important factors. Sincecapital exporting countries, in most cases, tax the repatriated profitsobtained in the Bahamas, tax concessions provided by the Bahamas probablydo not benefit the private companies and are mostly gifts to the treasuriesof the capital exporting countries. It could be therefore argued that if theother favorable factors can be maintained, the Bahamas could proceed toincrease its revenues by corporate income taxation. However, given thedifferent taxation policies followed by the several capital exportingcountries with respect to their subsidiaries abroad, a case by case revieiwmight be necessary.

X . The potential for agricultural development in the Bahamas islimited. The best agricultural lands are covered by unexploited pine forests.Therefore, the development of import substitution agriculture to feed theloeal population and the tourists will require considerable land preparationwork. Since the rainfall is low, irrigation is indicated. Even the bestlands will need a lot of fertilizer and some other chemicals. Since laboris scarce and expensive, mechanization of agriculture is also indicated.On the positive side, agriculture is frost-free in the Bahamas and thereis abundant ground water supply for irrigation. The wells do not need tobe deeper than 20 feet in many areas. There is little doubt that diversi-fication of the economy is a sound policy. But if agricultural importsubstitution implies higher prices for foodstuffs, this will harm not onlythe welfare of Bahamian people but also the tourist industry whose priceshave to compete with other Caribbean countries.

xii. Industry in the Bahamas is, for the most part, capital intensive,export-oriented, highly dependent on imported inputs, with a few inter-industriallinkages, foreign-owned, and located in Grand Bahama island. Capitalintensive industries are suited for the Bahamian economy because labor isscarce and wages are relatively high. Wages in the Bahamas are 5 times higherthan in Haiti and 3 times higher than in Jama^.ca. The level of wages and thelabor scarcity will make it almost imoossible for the Bahamas to

- v -

compete with other Caribbean countries to attract labor intensive lightmanufacturing for export to the U.S. market. Also, given the small sizeof th:e internal markez, industry is bound to be export-oriented, importintensive and rather limited in forward and backward inter-industriallinkages. But capita34.ntensive enclave industries do not add much tonet national income. The only way the country could benefit substantiallyfrom big industry is through coiporate income taxation as recommended inparagraph x above.

xiii. During the past 8 years a significant amount of internationalfinancial activity has shifted location from the United States to London,Nassau and other Eurodollar money markets. By the end of 1973 more than100 branches of U.S. Banks with more than US$15 billion deposits werelocated in Nassau. To a large extent this booming financial activity inNassau was connected with the U.S. Government programs instituted in themid-sixties to reduce the rapid expansion of U.S. capital flows abroad.Although the capital control programs in the U.S. curtailed financialflows abroad, they had the side effect of shifting intermational financialactivity away from the United States. As a consequence, U.S. commercialand investment Banks flourished in Nassau where the cost of running a shellbank is low. In addition, since there are practically no interest ceilings ontime deposits in Nassau, Eurodollar banks located there are in a bettercompetitive position to attract time deposits vis-a-vis banks located in theUnited States. But the survival of Nassau as a thriving financial center isquestionable now that the United States has announced the termination ofmany of the restrictive policy measures that were causing it to decline asthe most important financial center in the world.

xiv. In the social sectors,indicators point to the prevalence of higheducational standards with an adult literacy rate of about 93%. Enrollmentsin primary education in nearly 100% of the population of the respectiveschool age. Enrollments in lower secondary education are above 75%. Con-sistent with the above quantitative indicators, the government spendsalmost one-quarter of the budget on education. But despite high quantitativeindicators the quality of education is still low. Causes of poor qualitycan be traced back to a high proportion of untrained teachers of poor quality,to the existence of all age schools in the islands other than New Providence,and to the rapid expansion of the system. Persistence of emphasis on qualitythrough teachier training should be the first priority. The second would beimproving vocational training so as to allow Bahamians to take over smoothlyand efficiently medium and top positions in private industry.

xv. Regional planning should be the focal point of the developmentstrategy in the Bahamas. Economic development has, so far, remained con-centrited mainly in two islands i.e., New Providence and Grand Bahama. NewFrovidence,for instance, with a density of 1300 inhabitants per square mile,is overpopulated. The marginal costs of basic services such as water arerising steeply and pollution problems are becoming extremely serious. On

- vi -

the other hand, islands with good development potential like Abaco andAndros remain largely undeveloped and underpopulated.

Xvi. The Bahamas had experienced a moderate rate of inflation ofabout 5.2% annually from 1969 up to 1972. However, in 1973 the sameindex showed an increase of 9.3%. This higher rate, in turn, hasgenerated wage rises of 15% in the leading hotel workers' collectiveagreement signed in 1974. To prevent inflation from accelerating thegovernment will have to enforce strong incomes policies which will holdwage increases within tolerable limits and not in *xcess of increases in thecost of living and the increase in the overall labor productivity.

xvii. In the balance of payments, the sub-balance of trade andnonfactor services presents large surpluses of the order of $150 Jillion.But these surpluses are eaten up by factor payments abroad of equivalentamount. The capital account shows a shrinking capital inflow stemmingmostly from purchases of land under long term contracts signed inprevious years. But these capital inflows are counteracted by capitalflight. Yet, despite profit remittances and capital flight,foreignreserves increased by US$11 million in 1973 to US$43 million which coveredapproximately 1 months of imports. Thus the balance of payments' positionof the Bahamas has been strong enough to allow profit remittances abroad,cover capital outflows, and still result in increased foreign exchangereserves. This increase in reserves is, however, unlikely to occur againin 1974 because of the oil crisis. On the basis of the foreign exchangereserves held by the Monetary Authority, the banking system and the privatesector, the Bahamas can weather the oil crisis with no major problem, atleast during 1974. But the increased oil import bill represents animportant leakage of resources out of the Bahamas, and to maintain thepresent level of economic activity, compensatory resources will have tocome from somewhere else, or the level of economic activity will be impairedOn the foreign exchange earnings side, the oil crisis could also have somedetrimental effects on tourist arrivals. However, the government issuccessfully counteracting them by assuring plenty of oil to charter jetsand cruise ships stopping in the Bahamas. Thuis, despite the oil crisis,tourist arrivals are thus fr holding up well in 1974.

xviii. The public and publicly guaranteed external debt increased fronabout US$23 million in 1968 to US$68 million in 1974. The debt serviceratio is estimated at 2.9% of exports and nonfactor services and it isprojected to remain in the 3-4 percent range. However, given the open-ness of the economy, other indicators may prove to be more significant inassessing the ability to repay external debt of the economy. In thiscontext, the debt service is about 20 percent of gross national savings,and 10 percent of government tax revenue. The external public debt out-standing is about 14 percent of GNP in 1974. This compares with the mean

- vii -

ratio for a sample of 36 developing countries of 20 percent in 1971-72 andwith the mean ratio for nine Caribbean and Central American countries of15 percent in 1972. Given these ratios and provided adequate action is taken .by the Government to improve public savings, to refrain from short-terA com-mercial bank borrowing to finance public investment and to maintain condi-tions conducive to continued private investment, the Bahamas should be ableto service the estimated external capital requirements for the public sectorof roughly US$50 million during 1974-77 (see paragraph ix).

I. GENERAL BACKGROUND

A. Geographical

1. The Bahamas comprise an archipelago of 29 is)ands, 661 cays, and2,387 rocks extending from Florida on the northwest to Haiti on the south-east, between Cuba and the open Atlantic, over a distance of about 750 miles.The surrounding seas are shallow for the most part, but there are three well-defined channels: the Florida channel between the northeast islands andFlorida, through which the Gu2f Stream flows; the Providence Channel betweenNew Providence, Andros and Eleuthera on the southern side and Grand Bahamaand Great Abaco islands on the northern side, and the old Bahama Channel,between the-archipelago and Cuba. The waters are clear, with brilliant shadesof turquoise and blue, and beautiful coral reefs surround Man. of theislands.

2. The weather is nearly idea. with warm waters from the Gulf Streamtempering the winter and cool sea breezes providing relief from even thew-armest summer day. The mean temperature is 74 degrees Fahrenheit in winterand 80 degrees in summer. Annual rainfall averages about 5O inches, but ismuch higher in the northwest islands than in the southeast ones. Septemberand October are the rainy months Dnd also the hurriane season.

3. The country's surface is 5,383 square miles and, in 1970, itspopulation was 168,812. Thereforegdensity is only 31 persons per squaremile, one of the lowest in the Caribbean compared with 443 in Jamaica, 521in Trinidad and Tobago, 1 ,437 in Barbados, and 803 in Puerto Rico. Moreover,as the following table shows, people are unevenly distributed in the Bahamas.For instance, New Providence Island has 60% of the country's population andonly 1 .5% of the area.

1/ The islands other than New Providence are called Fanily Islands.

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Table 1: LAND AND POPULATIONBY ISLAND 1970

Population Area'Persons 7% S Miles Density

New Providence 101,503 60.1 80 1.5 1,268.7Grand Bahama 25,859 15.3 530 9.8 48.8Andros 8,845 5.2 2,300 39.4 3.8Abaco 6,501 3.8 649 12.0 10.0Eleuthera 6,247 3.7 198 3.7 31.6Long Island 3,861 2.3 230 4.3 16.8Exuma & Cays 3,767 2.2 112 2.1 33.6Harbour Island &

Spanish Wells 3,221 1.9 2 - 1,610.5Cat Island 2,657 1.6 150 2.8 17.7Biminis, Cay Sal &Cay Lobos 1,503 0.9 11 - 136.6

Inagua 1,109 0.7 599 11.1 1.9Acklins Island 936 0.6 192 3.6 4.8San Salvador & Rum Cay 856 0.5 90 1.7 9.5Crooked Island 689 0.4 84 1.6 8.2Mayaguana 581 0.3 110 2.0 5.3Berry Island 443 0.3 12 - 36.9Ragged Island 208 0.1 14 - 14.9Long Cay 26 - 9 - 2.9Other - - 10 - -

Total 168,812 100.0 5,382 100.0 31.4

B. Historical

5. The history of the Bahamas is relevant both in interpretingpresent economic events and in attracting tourists. In fact,it is color-ful and exciting enough to be a tourist attraction in itself.

6. On October 12 of 1492, Columbus sighted the small Bahamianisland of San Salvador, thus discovering America. Spain did not have muchinterest in the Bahamas and concentrated its energy on exploiting the richesof more profitable territories such as Mexico and Peru. The Spaniards foundthat the Bahamas had no gold or silver. Even farming was considered unprofit-able because of the limestone subsurface and the lack of lush vegetation foundin other Caribbean islands.

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7. The English claimed the Bahamas Islands over a hundred years later.They wanted thLe Bahamas only as a base for operations against the Spaniards.The islands were strategically located because Spanish ships carrying goldand silver from Peru, Bolivia and Mexico stopped in Cuba and then passedthrough the Bahamas to head for the open sea towards Spain. Thus, theEnglish founded Charlestowne, later called Nassau, as a base for attackingthe Spanish ships. But the English governors were unable to establish strongleadership in Nassau, and some of them were personally involved in scandalsconnected with payoffs from wreckers and pirates. The governor of Cubaaccused the inhabitants of Nassau of being "all pirates proven", and,in 1684,two Spanish raids devastated the town. Nassau reorganized, but was destroyedtwice again by the Spaniards in 1703 and 1706, reorganizing each time. Inthe early 1700s, the famous Edward Teach, Blackbeard, one of the most notorlousof the British pirates, carried out his plundering from a base at Nassau. Inthe seventeen century, the rumors of new Spanish attacks spurred the buildingof Fort Montagu and Fort Charlotte, as well as the restoration of Fort Nassau,which had been damaged in past attacks. As a result, Nassau was left with someinteresting wc,rks of military architecture to be shown as tourist attractionstoday.

8. During the U.S. independence wars,the Bahamians were mostly Britishloyalists. When the war ended,many loyalists from the United States emigratedto the Bahamas with hopes of continuing their way of life. Refugees camemostly from the Carolinas. The Ba-hamian population increased by 300% in thefive years following the U.S. independenc- wars,reaching 4,000 in 1784 andalmost 12,000 in 1789.

9. Before this wave of immigratioRn the people had been about 50%white and 50% black. However, since A. -nt"s from the South often emigratedwith their entire households and possess A !S including slaves, people ofAfrican descenit formed about 75% of the .,' Ktl Bahamian population in 1789.Yet, despite the numbers, whites dominatced politically. White loyalistimmigrants from the United States eventually assumed many important rolesin Bahamian life. Many of the names found in Nasspu today among the Bay streetmerchants can be found on a list of 114 landowners, in a late XVIII centuryrecord of land grants given by the King of England.

10. The southern planters from the United States expected to re-establishthe plantations they had left behind and began to cultivate cotton on exten-sive tracts of land in the out islands. The first crops were encouraging; arich yield seemed to indicate a successfYj. transfer of the cotton economy fromthe southern states. But the Bahamian soil was rapidly depleted. Moreover,an attack of the chenille bug in 1788 signalled the eventual decline of thecotton crop. with this decline, many large plantations shrank into smallsubsistence farms. Thus, slaves were no longer needed to tend the fields.The failure of the cotton plantations and the independence of the Spanishcolonies in the early XIX century brought stagnation to the Bahamas.

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*1. In 1861, the American Civil War brought a new age of prosperityto Nassau. President Lincoln declared a blockade of the Southern Unitedstates ports. The confederates were dependent on guns and ammunitionpurchased from England. In turn, southern plantations supplied the Englishnmil1s with cotton. With the blockade, Nassau became the center of this trade.1 ; Street was widened, lights and curbstQnes were instilled,warehouses for shipments were built on the north side of the street, and a newdock was planned. The Royal Victoria Hotel was built at the beginning ofthe war and served as social activities center for blockade runners, confederatesoldiers, southern ladies and newspaper reporters. Real estate values increasedas much as three or four times on the Nassau waterfront. In the midst of theexcitement and activity, in 1864, a yellow fever epidemic struck. The followingyear, when the war ende6 the city was experiencing some of the confederacy'sdevastation. Warehouses,filled during the war,were empty a few months after itended. On top of that, a hurricane destroyed part of the city. A long periodof depression followed.

12. After this depression, a new period of frenetic growth developed inthe 1920s. This time the upsurge came as a result of prohibition in theUnited States. The empty warehouses in Nassau harbor, unused since the UnitedStates Civil War, were filled again, but now with liquor rather than withcotton and amunitions. Bootlegging was the latest sea activity in thetraditions of privateering, wrecking and bl*ckade running. During the era ofprohibition,land values soared again. Many of the same people who dealt withliquor speculated with land. New mansions were built all through New ProvidenceIsland.

13. During the thirties, air travel was instituted between Nassau andMiami. Hotels began to be constructed all along the New Providence coast.This trend continued in the forties and fifties, causing an economic growthof boom proportions in the sixties.

C. Political

14. The process leading to independence on July 10, 1973 was gradualand smooth. Before 1967,those of European descent, though a minority (15%),managed - to control the country. In 1967,Mr. Pindling, leader of theProgressive Liberal Party (PLP), won an election with the support of thepeople of African descent (85%) and then was appointed premier. From 1967orwards, the majority gradually took over the top positions in the country.In 1971 the PLP decided formally to seek independence. This was only onestep in the process of Bahamanizing the country. In late 1972,new electionstook place and the PLP won a solid majority of 62%. In December 1972,anIndependence Conference, held in London, was attended by representatives ofboth political parties and the British Foreign Office Authorities. In-dependence was agreed upon. A new constitution was established. Under thislatest constitution, the Governor General, who is a Bahamian, is appointed

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by the British Crown to represent it. The Constitution provides for aparliamentary system of government under which the Prime Minister and aCabinet of not less than eight other Ministers are responsible to thebicameral legislative branch. This branch of government consists of aHouse o-^ Assembly of 38 elected members and a Senate of 16 members appointedbo; the Govrernor General, 9 of them on the advice of the Prime Minister,4 of them on the advice of the Leader of the Opposition, and 3 on the adviceof the Prime Minister, after consultation with the Leader of the Opposition.The opposition party, called the Free National Movement, is predominantlywnite. The present administration, which emerged from the 1972 generalelections, has been led, since January 1967, by the Right Honorable Lynden0. Pindling. The next elections will be held not later than September of1977.

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II. ECONOMIC STRUCTRE AMD DEVELOPMENT CONSTRAINTS

A. Growth perforsance in the sixties

15. All through the sixties, the Bahamas experienced a sustainedprocess of economic growth at an annual rate estimated at about 9-12%. /This growth was led by the tourist industry. This industry had beenfinanced by large inflows of foreign capital which, in turn, had beenattracted by promotional activLty undertaken by the government in closeassociation with private groups. At the beginning of the sixties, theBahamas was a major beneficiary of an upsurge of visitors, primarily fromthe U.S. In mid-late sixties, a well designed, money oiled, advertisingcampaign consolidated the gains made in the early sixties and made theBahamas one of the worldbleading resorts reaching 1,332 thousand visitorsin 1969.

The role of foreign investment in the sixties

16. Foreign investment played an ever-whelmingly important role inthe country's growth process of the sixties. It is estimated that foreigninvestments, excluding the financial sector, were well over a billion dollars.The extent of foreign ownership in tourist accommodations is estimated at80%. The leading example of foreign investment is the case of the GrandBahama Port Authority concession.

17. In the fifties, the American financier Wallace Groves had reachedan agreement with the British colonial authorities on establishing a port andan Industrial complex in the vicinity of Hawksbill Creek, located in thewestern part of Grand Bahama, the northernmost island of all the Bahamas.To implement the agreement, Mr. Groves organized a company called GrandBahama Port Authority Limited, which undertook, among other obligations, todredge and construct a deep water harbor and a turning basin at HawksbillCreek as an aid for factories to be set up there. For its part, the govern-ment made available 138,000 acres of crown land at a price of L1 per acreand, moreover, granted three concessions, still in force _,to the Port 'Aldthrity:

(a) Freedom from taxation. Contractual clauses guaranteethat,at least up until 1990,there wiU be no personalincome taxes, no corporate profit taxes, no capitalgains taxes or levies on capital, and no personal

1/ Tourist arrivals grew at 20% annually in 1958-69 and government expendituresin money terms at about 15% per year.

2/ Except for the third.

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or real property or inventory taxes.

'(b) Freedom from custom duties or excise taxes on equipmentor materials used by licensed business. This privilegewill last up until year 2054. Only goods for personaluse are dutiable.

(c) Freedom from immigration restrictions. The agreementinsured that labor requirements would be met withoutimmigration restrictions.. Skilled and semi-skilledemployees were to be brought freely into Freeport tosatisfy the needs of industry. A moral obligationwas acknowledged, however, to employ Bahamians when-ever possible and to train them for higher skills in businessand industry.

18. Other Port Authority obligations were to provide medical facili-ties, education facilities, end utilities. Moreover, the Authority wasrequired to provide living quarters for officers and government employeesend to share in the cost of governxment services,such as the collection ofcustom duties,, the administration of justice, postal services, and im-migration control.

19. The Port Authority provided the basic infrastructure upon whichtourism, industries, and land sale activit:es were developed. Thus,737miles of roads were constructed by the end of 1969. The Freeport PowerCompany, a subsidiary of the Port Authority, provided electricity to9,00 consumers. The Grand Bahama Utility Company has the capacity toprovide 4-½ million gallons of water a day. Besides the seaport, thePort Authority built an international airport in accordance with inter-national requirements and regulations,such as those of the aviation agenciesof the U.S. axd the UK.

20. The success of the Grand Bahama Port Authority development effortsis ivdisputabl]e. In 1970, GNP per capita in Grand Bahama was about B$4,100,by far the highest of all the Bahamian islands. The total population ofGrand Bahama grew from 4,095 in 1953 to 26,043 in 1970, implying an annualcompounded growth rate of 11.5%.

21. But the phenomenal growth of Graind Bahama brought many problemstoo.* First of all, it implied giving 'u. ";,he wexnmftz.s taxation power infavor of a private company, the Port Antnhority. Although the Grand BahamaPort Authority is not entitled to collect taxes in its dominions, it doessomething equivalent: licensing in exchange for a fee. Anyone wanting toengage in any business of whatever nature in the Freeport area must obtaina license to do so from the Port Authority. To practice a profession; toestablish a school, a motel, or a factory; to operate a golf course; or to

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develop land, such a license is a prerequisite. The fees may be a flatannrual sum or at varying percentage of gross sales in each year. The licenseestake the fees as an acceptable levy for the privilege of carrying out theirundertakings in Freeport and for the protection against undue or "inordinate"competition. j

22. Economic development made Freeport predominantly non-Bahamian.Prior to September 1968,there were 1,396 licensees for carrying on business

n Freeport; 91% of them were foreigners. Of the total labor force, 75.9%-ere foreigners. Hence, to stop the country from losing its national char-acter,in early 1970, the Bahamian Government passed an immigration billthat nullifies any provisions giving immigration concessions in agreementsentered into by the government. This Act has the effect of nullifying theclause of the HawksbiLlCreek Agreement which permitted licensees to employkey trained or skilled personnel without a working permit. After this bill,the growth of the Freeport area, except for some big industrial concerns,ceased suddenly. For example, building permits declined from B$36.4 million in 1969to B$1.3 million in 1971.

23. Although the example of Grand Bahama Port Authority is the mostimportant and illustrative of the development process in the sixties, there aremany other examples such as Paradise Island, showing delegation of gQyernuent

functions to private foreign investors. Paradise Island is a small 800-acreisland across the Nassau harbor, connected with New Providence by a B$2 percar toll private bridge. The island offers six hotels, luxurious restaurants,a casino, an 18-hole golf course, gardens and Paradise beach, and is thesingle most lucrative foreign-owned resort development in the country.

B. Growth performance in the seventies

24. The growth performance in the seventies is quite different fromthat of the sixties. After the boom years of the sixties, the country stoppedits growth path in order to formulate its growth strategy and objectives.Since thenvBahamianization of the economy has been occupying first placeamiong the country's objectives. At the same time, economic growth, asmeasured by the standard economic indicators, has not been encouraging.The following overview emerges from Table 2 and Chart 1:

(a) GDP at market prices has been growing at 6.1%, barely abovethe rate of inflation.

(b) GNP has been growing only 1.2% per year. When the rate ofinflation is taken into account, GNP actually declined,inreal terms 4.6% per year. Increasing factor income paymentsabroad account for the different behavior of GDP and GNP.

1/ As a result of monopolistic structures, prices are higherin Freeport than in Nassau. See IReport of the Royal Commissionon the Hawkshill Creek Agreement, p. 86, Nassau, March of 1971.

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(c) Exports have been the most dynamic sector in the Bahamianeconomy in the last four years. As will be analyzed later,export growth stems from merchandise export by big industrialbusiness. Exports of non-factor services, mostly tourism,remain stagnant. Imports show a decline in money terms. Thisdecl-ine is above 10% per year when it is measured in constantprices

(d) Total consumption has barely been able to keep pace with in-flation, remaining roughly constant in real terms. But privateconsumption has actually been declining, while public consumptionhas been growing steadily.

(e) Gross domestic investment fell from B$488 million in 1969 toonly B$71 million in 1972, implying an annual rate of declineof 30% in money terms and 36% in real terms. The causes of thedecline are related to sluggish tourist demand and also to themanpower constraint to which the Bahamian economy is subject.The manpower problem is tied with immigration pcZctes,whichwill. be analyzed in section G of this chapter. It can be notedhere, however, that public investment was not subject to thetype of decline that affected private investment.

(f) The economy Ls quite able to generate rates of savings higherthan. 30% of GDP. However, these gross domestic savings, insteadof being reinvested in the country, are largely sent abroad.Political uncertainty and immigration policies are related withthis high degree of repatriation of profits by foreign business.

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Table 2 s ULPUDITURE 0 GROSS DCU2KSTIC PRODUCT1969-1972

(In Millions of Current B$)

Annusl Growth Rat*1969 1970 1971 1972 1970-1272

Gross Donestic Product a* KNoket Prices 487.7 463.5 520.6 582.5 6.1Not Factor Payments Abroad -87.8 -63.0 -110.7 -168.0Gross Naticnal Product at N rket Prices 399.9 400.5 409.7 414.5 1.2

1/Exports of Goods & Nonfactor Services 1 335.6 320.0 398.3 447.7 10.1Imports of Goods & Nonfactor Service r 339.4 345.8 299.5 293.8 -4.5

Available lesources 491.5 489.3 421.8 428.6

Consumption 303.6 356.1 343.7 357.4 5.5Private 250.9 291.9 277.3 284.4 .4Public 52.7 64.2 66.4 73.0 11.5

Investment 187.9 133.2 78.1 71.2 -30.0Private 168.0 100.6 55.1 51.2 -35-0Public 19.9 32.6 23.0 20.0 0.0

Gross Domestic Savings 184.1 107.4 176.9 225.1 6.9Gross National Savings 96.3 44.4 66.6 57.1 -16.0

Gross National Product at Market Prices 399.9 400.5 409.7 414.5 1.2Plus Subsidies 1.0 1.5 1.6 1.4Less Indirect Taxes 67.0 71.3 66.3 75.9

Gross Wational Product at Factor Cost 333.9 330.7 345.0 340.0 o.6Depreciation 40.0 44.7 48.0 51.0

National Income 293.9 286.0 297.0 289.0 -0.7Retail Price Index 94.2 100.0 104.6 111.7 5.8

1/ Excluding oil.

Source: Mission estimates.

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CHART 1

THE BAHAMAS MAIN MACROECONOMIC TRENDS 1965-72

(IN MILLIONS OF 1970 BAHAMIAN DOLLARS)

- - - - - - GDP- GNP

- - - - - - - EXPORTS OF GOODS AND NFS................ IMPORTS OF GOODS AND NFS

CENTRAL GOVERNMENT EXPENDITURESCENTRAL GOVERNMENT REVENUE

- . .. .. GROSS DOMESTIC INVESTMENT

MILLIONS OF

BAHAMIAN DOLLARS

600

- ~~~~~~~~~~~GDP500 -0 40- -------

J ~~~~~~~~~~~0 0 0 i 00t400 _ * s -- p -ovts

40 -5 66 ... 6 E0ports

300 ME'_ _ _ _ __ _ _ _ _ _ _ __ _ _ _ _ _ _

100 ____ _______ _ _____ _______ Imports

Gross Domestic Investment

o __________________________ ______ ______ YEAR

65 66 67 68 69 70 7 1 72 World Bank-8328

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C. High GNP per capita

25. New GNP estimates basically confirm previous high IBRD estimates./The new figures emerged from two different approaches, based on different sources,but giving approximately the same result:

Table 3: GNP ESTIMATES, 1970, BENCKARK- YEAR

(In millions of Bahamian dollars)

Expenditure Approach Income Approach

Private Consumption 291.9 Personal disposable income 287.9Government Consumption 64.2 Profit and interest remit-Private Investment 100.6 tances to Abroad 230.0Public Investment 32.6 Profit and InterestExports of Goods and received from Abroad -191.0

Non Factor Services2/ 320.0 Retained Profits 26.0Imports of Goods and Internal transfers -4.9Non Factor Services./ -345.8 Depreciation 44.7GDP at Market Prices 463.5 GDP at Factor Costs 393.7Net Factor Income -63.0 Net Indirect Taxes 69.8GNP at Market Prices 400.5 GDP at Market Prices 463.5

Net Factor Income -63.0GNP at Market Prices 400°5

26. Because of the peculiar income distribution in the Bahamas, GNPper capita needs to be interpreted with care. With a small population(168,812) and the GNP given above, the per capita figure turned out to beB$2,372. Fifteen percent of the population was foreign-born, those fromthe U.S. Canada and U.K. occupying top management positions in banking,insurance, real estate and tourism businesses. 3/ Foreigners as a wholereceived about 38% of the country's personal disposable income.4/Bahamians, on the other hand, constituted 85% of the population andreceived 62% of personal disposable income. Thus, GNP per capita for theexpatriate population would be B$5,700, while the GNP per capita for theBahamians would be only B$1,700.

1/ On the methodology followed to make the estimates, see Appendix A.2/ Excluding oil under processing agreement.3/ There is also a large group of Haitian immigrants who form the

poorest segment of the population.

2' Personal disposable income excludes pensions and transfers in this case.

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27. For purposes of inter-country econoaic welfare coraparisonV thisB$1,700 GNP per capita figure is sti'l not adequate. Prices of essentialconsumer goods are 50% higher in Nassau than in Washington, D.C. I/ TheBahamas has a system of indirect taxation9 relying on import duties anddisregarding direct taxation, thnat accounts for part of these pricedifferences. Transport cost of iL;.ported items and intermediation marginsaccount for the rest. Orie do.llar spant in the Bahamas acquires what canbe bought for 66 cents in Wash-ngtorn., DO.C.; thus,it is necessary againto adjust GNP per capita. The fInal G&L per capita for the Bahamas,comparable to other countries, is then about $1,100.

28. To return to the chronological analysis of GNP, the decline fromB$400.5 million in 1970 to B$371.1 million in 1972 has affected Bahamiansand non-Bahamians differently. A sharp decline in working permits given toexpatriates 2/ since 1970 indicates that personal disposable income ac-cruing to foreigners ma-y have been around 30% of the total disposable incomein 1972, as compared with 38% in 1970. Accordingly, personal disposableincome accruing to Bahamians went up from 62% of total disposable income to70% in 1972. In other words, although the pie of Gross National Product was smallerin 1972, the share accruing to Bahamians increased. Personal disposable incomeper capita of Bahamians,then, has probably gone up slightly,thus relievingpressure on thie government for designing an articulated development plan foreconomic growth.

D. Economic Structure and the Predominance of tourism

29. The Bahamian economy is basically a services economy. In 1970,service sectors accounted for 72% of GDP and the non-service economy sectorsonly 28%. within the latter, construction took 14% while industry, agri-culture and mining together accounted for the remaining 14%.

30. Although the hotels and restaurants account only for 19.3% ofGDP, the spillover effects of tourism are scattered all over the economy.For instance,a large percentage of the transport sector such as aerodromes,taxis and the like is geared to tourism. So are real estate-land salesactivities and wholesale-retail trade. Hotel construction absorbed more than60% of total construction business. Electricity, gas and water servicesare,to a large extent,connected to tourist resorts. Even agriculture andcottage industries depend to some extent on tourist demand. So, on thewhole, tourism determines,directly or indirectly,around 55% of BahamianGDP and 77% of GNP. ,1

1/ Comparative study of retail prices of 47 essential consumer goods itemsmade by the mission. The Bahamian prices were collected in non-touristretail stores. The 50% quoted come from a Fisher ideal index number,using both Bahamian weights and US weights.

2/ This topic is discussed in section G of this Chapter.

3/ Using the tourist maultiplier in Chapter III E, we arrive at these figures.

Table 4: ECONOMIC STRUCTURE 1970

Value added(million B$) % Employm~ent %

Agriculture, Forestry& Fishery 14.i 3.6 4,79' ,7.68

Mining & Quarrynig 2.8 1.0 78 0.12Manufacturing & Processing 35.1 8.9 3,824 6 .-Construction 56.7 14.4 8,469 1358Non-Service Sectors 108.7 27.6 17;62 27,15Electricity, Gas & Water t107 2.7 1,329 2.13wholesale Trade 13.5 3.4 799 1.28Retail Trade '14.8 3.7 5,252 8.39Hotels & Restaurants 76.1 19.3 10,106 16.21Transport Storage &Communications 45.4 11.5 5,512 8.84

Finance, Insurance, RealEstate & Business Services 50.1 12.7 5,331 8.55

Community, Social & PersonalServices 72.4 18.9 16,873 27.06

Services sectors 28-5.5 72.5 45,202 72.49GDP at Factor Cost 393.7 100.0 62,364 100.0

- Total Employment

21. The predominance of tourism is based on an undisputed comparativeadvantage. Few countries in the world can compete with the Bahamas' extensivebeaches, reliable sunshine and warm clear waters. The great number of islandsand cays makes possible a diversity lacking in competing tourist countriesthat consist of just one island. The Bahamas offer a range of choice to suit dif-ferent tastes in privacy, luxury and activities such as fishing, scuba diving,snorkeling, golf, gambling and boating. In addition, the Bahamas is the closestCaribbean country to the United States, the main tourist market. New ProvidenceIsland, which attracts over 60% of total visitors to the Bahamas, lies about180 miles east of Miami. Grand Bahama, which accounts for most of the remainder,is only 60 miles east of Palm Beach, Florida. The geographical ease of accessis reinforced by a substantial network of air transportation facilities andlow airfares. Round trip economy fare from New York to Nassau ib the lowest inthe Caribbean. In addition to cruise ships sailing towards the Bahamasfrom New York and Florida, the islands attract a substantial number of privateboats which can travel from the Florida coast in shallow protected waters.Similarly, small private aircraft can easily fly from the southern U.S. to oneof the many official airports in the Bahamas.

- 15 -

32. The comparative advantage of tourism makes the other sectors ofthe econony appear inefficient. The non-tourist economy got trapped betweentwo pincers that have kept it strangled: high wages on the one side andcompeting imports on the other. Those imports look cheap when convertedinto Bahamian dollars at the current exchange rate.

33. Because tourism is a relatively labor-intensive activity, itsdevelopment brought about a strong demand for labor. Since the countryhas few people and restrictive immigration policies, the supply of laboris inelastic. Thus high demand and inelastic supply made wages skyrocket. 1/

34. For the development of the non-tourist economy,the Bahamian dollaris overvalued. Two factors tend to keep it so. First, tourism itselfgives the Bahamas 64% of her foreign exchange supply. Second, import duties,which are the basic source of government revenue, restrict the demand forforeign exchange by making imported products more expensive. As aresult, prices in the Bahamas are higher than in the U.S. Foodand beverage prices are about 44 higher; household appliances 39% higher;transportation, 67% higher; clothing and footwear items are 49% more ex-pensive. However, overvaluation of the Bahamian dollar does not poqe thegrave dilemma existing in petroleum-oriented economies such as the Venezuelanor Trinidadian, for instance. Tourism, unlike petroleum, is abie to provideenough jobs to, make the Bahamas a full employment economy. Therefore, theneed for diversification is less pressing in the Bahamas than in many othercountries.

E. Recent Balance of Payments Performance

35. Givein the openness of the economy, the balance of payments playsa special role! in the Bahamas. Few countries in the world are more affectedby the external sector in their internal economic activity. Exports ofgoods and non-factor services are 70% of GDP. Imports of goods and non-factor services are 60% of it. 2/

j/ See paragraphs 58 and 216.

2/ Excluding oil under processing agreement.

- 16 -

Table 5: THE R3SOLRCE BALANCE AS % OF GDP

1969 1970 1971 1972

Exports of Goods and Non-factor Services (in B$ mil) 335.6 320.0 398.3 447.7

(As percent of GDP) (68.8) (69.0) (76.5) (76.8)

Imports of Goods and N.on-factor Services (in B$ mil) 3.39.6 345.0 299.5 293.8

(As percent of GDP) '69.6) (74.6 (57.5) (50.4)

Resource Balance 4inflow) -3.8 -25.8 +98.8 +153.9(Resource Gap as Percent

of GDP) (-0.8) (-5.5) (+19.0) (+26.4)

Since the important oil trans-shipment and refining business is excluded,the above figures tend to understate the importance of the foreign sector.On the other hand, the inclusion of oil would have overstated it becausethis oil business has a relatively low value added. %/ Since investmenthas been governed in the past by large autonomous capital inflows andoutflows dependent on political factors and the evolution of the U.S.economy,the capital accourit ia not.just the balancing item of the current account;rather, it influences GDP behavior.considerably, especially GDI.Moreover, almost half of the money supply is made up of demand despositsdenominated in U.S. dollars. As a result, GDP and all other nationalacco-nts indicators go up and down too easily,following drastic changesfrom year to year in some key balance of payments items. This featuremakes the economy prone to suffer from economic cycles. Thus, handlingthe helm of this economy is undoubtedly a difficult task because of thefew economic policy tools available and the many exogenous variables atplkv.

36. The current account of the Balance of Payments liad been gn defi. it'ip until 1972 -he year in which it showed a small surplus, as the followingtable indicates:

l olreover, prices of oil imports and exports look somewhat diszorted,mad4ri diifficult any analysis of the Balance of Payments in relation

t-ne national economy. For purposes of macroeconometric analysis,rna.-;o.nl uccoiints and creditworthiniess, we igrnore the oil sector.

-. 7

Table 6: BALANCE OJF ?.rMlCNTS - CURRENT ACCOUNT

(In million of US current dollars)

_______969 '1970 1971 1972Current Account Balance. 2. -7 -5i i 4+1.

I. prts 52E6 87.1 2515 35 2of irhich Oil Refined

Product - 30.1 194.1 253.5Other 52.6 57.0 57.4 98.7

II. Imports 296.4 357.5 482.6 500.0Crude Oil - 3777 237.1 27 73Other 296.4 298.8 245.5 261.7

III. Trade Balance (I-II) -243.8 -250.4 -231.1 -147.8

IV. Servrices (net) 173.6 177.0 201.2 174.2Tourism 215.7 192.0 247.7 27.3Interest Dividendsand Profits -66.5 -39.0 -80.7 -147.5

Other 24.4 24.0 34.2 47.3

V. Tranisfers (net) -19.6 -24.0 -24.6 -24.9

37. In the past, the trade balance has always been negative and theservices balance always positive. On the one hand,the trade balance hasbeen decreasing in absolute amount. This pattern is mostly due to a largeincrease in merchandise exports other than oil in 1972. Also, it is dueto some decrease in imports. On the other hand, the services balance hasbeen positive, although constant, due to the presence of the strong tourismincome. Net tourist receipts were big enough to more than offset thenegative signed interest, dividends, and profit remittances, which becamean increasingly important item in the last few years. In fact, those profitremittances have eaten up the large positive resource balance referred toearlier.

38. Exports of manufactured goods such as cement, hormones and rumhad been gaining importance in total merchandise exports up until 1972,whenthey accoumted for 73% of total merchandise exports, oil excluded.

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L'abl.e 7; 1{ERC'HUADISE EXPORTS FOB EXCLUDING OIL

(In million of US dollars)

1969 1970 1971 1972

TCITAL 52.6 5 .0 57 .4 98.7

Manufactured Goods 19.6 24.6 31.6 56.&Rum m-4 727) (2.7) (11.7'Hormones (10.5) (10.8) (15.1) (29.2)Cement (1.7) (11.1) (12.5) (15.9)

Agricultural & fishing 3.6 5.3 3.2 7.7Crawfish (0.7) () (1.3) 7i3Raw Sugar (1.3) (1.3) (1.9) -Pulpwood (1.6) (3.5) ( - ) 5.4

Mineral Products (crude salt) 1.9 2.8 .5 3.1

Miscellaneous 9.5 11.7 1.2 10.4

Re-exports 22.1 12.6 17.9 20.6

39. Merchandise imports other than oil have bena declining. Inconsumer goods, the most important item is food, which has been constantlyaround 55 million dollars a year. Raw materials and intermediate goods,which include a large amount of food and beverages "mainly for industry,"have been constant at about 90 million dollers a year. Finally, capitalgoods declined sharply from 83 million in 1969 to about 40 million in1971-72.

40. The United States is by far the main trade partner of the Bahamas,accounting for around 65% of Bahamian non-oil exports and 50% of its non-oilimports. Next in importance are the United Kingdom and Canada. Theimportance of the United States in Bahamian trade is even more enhanced whenthe export oil trade is consideredtbecause 96.8% of Bahamian oil exportsgo to the U.S. and Puerto Rico. Imports of oil come mostly from Nigeria,Lybia and Iran. Venezuela and Trinidad and Tobago do not export much oil,to t he Bahamas ,despite their proximity.

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Table 8: MERCHANDISE IMPORTS CIF, EXCLUDING OIL

(In million of U.S. dollars)

1969 1970 1971 1972

TOTAL 296.4 298.8 245.5 261.7

Consumer goods 120.9 145-3 119.3 125.0Food ( (53.8) (53.4) T60.7)Passenger Cars (..) (9-7) 7.5 (4- 8)Other (*e.) (81.6) (58.4) (59.5)

Intermediate Goods 91.4 89.3 86.7 88.9

Capital goods 82.6 62.6 37.6 44.7Machinery and Capital

Equipment; (4-) 45.9 26.7 27.6Transport ;quipment

and Accessories (.) 16.7 10.9 17.3

Unclassified and for Re-export 22.6 14.2 19.8 24.7

41. The following Table 9 also il1,u:-?,rates the unimportance of otherCaribbean counitries in Bahamian trade. 11 emay country that appears inthe Table is Jamaica,which accounts for lc-iy 1.3% of Bahamian imports.Although, from the social-cultural point zd' view, the Bahamas has strongties with her Caribbean neighbors, it is obvious that economic ties areweak or unexistent. Furthermore, since wages in the Bahamas are higherthan in the neighboring Caribbean countries, the Bahamas is at a dis-advantage when it comes to competing in a trade association like CARIFTA, forinstance.

- 20 -

Table 9: DIRECTION OF TRADE EXCLUDI!M OIL UNDERPROCESSING AGREEME;NT

(In million of U.S. dollars)

1969 1970 1971 1972

Exports FOB 2.6 57.4 8.7United StatesUnited Kingdom 11.6 4.7 4.8 8.7Canada 1.6 2.4 2.9 11.8Puerto Rico 2.5 0.5 1.8 2.0France - - 2.1 2.0Germany 1.2 - 2.1 -

Netherlands 1.1 1.8 1.1 2.0Other 2.9 6.9 3.0 7.5

Imports CIF 6 4 298.8 24 261.7United States 202.0 17l4.6 130.9 128.6United Kingdom 25.4 45.6 40.8 64.6Canada 13.2 11.8 9.9 8.0Jamaica 4.1 2.9 3.8 3.5Venezuela 3.3 7.0 13.9 15.3Italy 19.3 23.8 3.0 13.6Switzerland - - 2.3 -

Netherlands 3.0 3.5 2.7 2.5Belgium - - 1.7 1.8France 4.3 4.2 4.0 4.6Germany 5.1 3.2 3.5 3.4Japan 1.9 2.9 3.0 1.2Other 14.8 19.3 26.0 14.9

42. The capital account has played a significant role in the economyin the last fifteen years since most investments were direct private in-vestments. The data available on long-term capital flows are scanty, andpractically no information is available on short-term capital flows. However,based on these scanty data, a rough estimate can be presented.

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Table 10: BALANCE OF PAYMENTS - CAPITAL ACCOUNT

(In million of US current dollars)

1969 1970 1971 1972

Capital Account Balance +89.9 +97.4 +54.5 -1.5

I. Capital and Errors andOmissions 69.3 92.2 56.9 3.7Public Sector Capital -1.5 3.4 7.1 0.7Central Government (-0.1) (-1.8) (1.1) (-3.2)Other Public Sector (1.4) (5.2) (6.0) (3.9)

Private Direct I.nvest-ment 149.0 123.0 113.0 89.6

Property Purchase (120.6) (101.0) (88.3) (63.7)Other (28-4) (22.0) (24.7) (25-7)

Errors and Omissionsand Capital Outflows -78.2 -34.2 -63.2 -86.4

II. Exchange Profit and L.oss - - 3.1 -1.8International Reserves -(-0.5) (-2.7)

Public External Debt - - (3.6) (0.9)

III. Changes in Net Interna-tional Reserves X_nc- 20.5 5.2 -3.4

Government =.9 3.9 -2.7 -7 0Monetary Authority 13.6 1.3 -2.8 -11.4

As can be seen from the above figures, tV? lah,.mast role as capital import-ing country is changing rapidly. It -~,spital e:cporting country now, whilestill presenting many typical features c.i dveloping economy. This problemwill be taken up in the next section.

F. Recent Investment and Saving Performance

43. The investment effort used to be anusually strong. It had beenabout 30% of G])P in the boom years of the sixties up to '968. Infact, the investment effort reached an al2L-time high in 1969,when grossdomestic inves-tment was about 38% of GDP. Since then,investments havebeen steadily declining at an annual rate of 35% in real terms. As aresult, gross domestic investment reached an all-time low proportion of12% of GDP in '1972. This decline in investments is much more pronouncedin the private sector than in the public one.

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Table 11: THE INVESTMENT EFFORT; GDI AS PERCENT OF GDP

1969 1970 1971 1972

Gross Domestic Investment 28.7 15.O 12.2

Gross Domestic PrivateInvestment 34.4 21.7 10.6 8.8

Gross Domestic PublicInvestment 4.1 7.0 4.4 3.4

44. Tvo main causes are behind this drop in investment. The firstis connected with an over-investment in hotels during 1968-69,leading tonil hotel construction in 1971-72. The second is connected with a certaindegree of political uncertainty brought about by political independence,and,more importantly, with the handling of working permits for expatriates.

45. In 1968-69Ahotels were full in the Bahanas. The occupancy ratereached 80%. Consequently, to aeet future tourist demand, hotel construc-tion picked up momentum in 1969-70. Tourist demand projections proved tobe overoptimistic, however. In 1970,tourist arrivals actually declinedby 3%. Since hotel construction usod to be the bulk ofthe construction industryand, in turn. construct±pn made up half Qf the total investment, grossdomestic investment plummeted. Through its multiplier effect, the sharpdrop in hotel construction in 1971-72 dragged the economy into a lowequilibrium point. Even in 1973, hotel occupancy rates were far belowthe 80% reached in the late sixties; therefore, it is unlikely that theinvestment level will go up again in 1974 or even 1975.

Table. 12: THE COMPOSITION AND EVOLUTION OF INVESTMENT

(In million of constant B$ of 1970)

1969 1970 1971 1972

Gross Domestic Investment 199.2 133.2 74.7 L3.7

Construction 98.7 59.0 28.8 18.7

Machinery and Accessories 66.3 50.4 28.1 24.8

Transport quipment 34.4 23.8 17.8 20.2

- 23 -

CHART 2

THE BAHAMAS-COMPOSITION AND EVOLUTIONOF GROSS DOMESTIC INVESTMENT

(IN MILLIONS OF CONSTANT BAHAMIAN DOLLARS OF 1970)

MILLIONS OFBAHAMIAN DOLLARS

200

GROSS DOMESTIC INVESTMENT

175 X \ . _ _ _ _ CONSTRUCTIONTRANSPORT EQUIPMENT \. _ - MACHINERY AND ACCESSORIES

150

125 MACHINERY AND ACCESSORIES

100

75

0a _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _Y EA R1969 1970 1971 1972

World Bank-8329

- 24 -

46. The second cause underlying the decline in investment is relatedto certain inconsistencies between a policy of attracting foreign investment,on the one hand, and immigration policies, on the other. Foreign capitalis,to a large extent, tied to foreign managers and know-how. The governmenthas been seeking to attract foreign investment through fiscal exemptions;at the same time, it has been trying to keep away foreign managers andpersonnel through its immigration policy. These two policies, as they werebeing enforced up until recently, conflict with each other to the detrimentof the country.

47. The main policy tool for attracting foreign investment is to offerthe Bahamas as a tax haven. The White Paper, a document presented toParliament by the Prime Minister in October 1972 outlining social and economicpolicies for an independent Bahamas, stated clearly: -- "The Commonwealthof the Bahamas shall continue to provide what is among the best range ofincentives for the development of private enterprise anywhere in the world,and nationalization shall not be an instrument of the government's economicpolicy .... The government policy is that of maintaining the tax havenstatus of the country." At present there are no income taxes, corporate,estate or inheritance taxes. The only direct taxation is a very moderatereal property tax of 0.5% based on the assessed value of improved propertyin New Providence, with property of less than $20,000 value exempted. Thereis no tax on undeveloped land.

48. The main policy tool for Bahamianization of the economy is that of im-migration restrictions on foreign personnel. Thus, no expatriate may beoffered employment in a post for which a suitably qualified Bahamian isavailable. A permit application will not be considered if the prospectiveemployee is already in the country, having entered as a visitor. Theimmigration authorities will consider employment of a non-Bahamian, providedit is thought that the prospective employee will be an asset to the Bahamas,only after:

(a) the employer has advertised and interviewed locallyand has found no suitable, qualified Bahamian to fillthe post;

(b) the employer has obtained from the Labor Exchange aCertificate stating that no qualified Bahamian is registeredwho might fill the post.

49. Foreign private investors are unlikely to put money into acountry unless they are certain that they can select men of their confidencefor key jobs in their business. Yet,in the Bahamas,the working permitsare issued for one year 2/,and they are renewable only at Government will.This policy creates uncertainty in the foreign business community andconflicts with the proclaimed tax haven policy to attract foreign invest-ment into the Bahamas. In addition, this policy makes it difficult tofind suitable personnel wanting to move into the Bahamas with a contractlasting only one year. The following statistics,showing a parallel declinein working permits and investment,are consistent with this interpretation. 3/

j/ There are also some few three-year permits.

3/ As will be analyzed in the tourism section, managerial problemsare a partial cause of sluggish tourist arrivals.

- 25 -

Table 13: -RLT P; AU\ i) - T

Oross fmas-icNumber of Peramits Private lnves-ment

Year Issued or Renewed (in millions of i970 3$)

1969 7,421 178.31970 7,046 97.61971; 4,742 52.61972 4,305 45.7

50, One way oI' reconciling a policy of attracting foreign investment withrestrictive, Bahamianizing, immigratt.on policies is the use of tax tools assuggested in paragraph 192. Insteaad of using taxation to reconcile these twoconflicting policies, the government is trying a different approach. Thisapproach consi-sts in requiring thei enterprises to present m;anpower projectionswhere Bahamians will gradually replace expatriates. Wien approved 'oy thegovernment, these projections becone equivalent to contracts that both parties,the government, and the enterpTises, will have to carry out. The approach,although an improvement over previous practices, is still second best to taxa-tion.

51. The Bahamian saving effort is quite remarkable when measured as aratio of gross domestic savings to GDP.

Table 14: THE SAVINGS EFFORT - SAVINGS AS PERCENT OF GDP

1969 1970 1971 1972

Gross Domestic Savings 37.7 23.2 34.0 38.6Factor Income Payment Abroad 18.0 13.6 21.3 28.8Gross National Savings 19.7 9.6 12.7 9.8Gross Private Savin gs (16.2) (8.0) (12.4) (8.2)Gross Public Savings (3.5) (1.6) (0-3) (1.6)

When factor income payments abroad are substracted, high saving ratios of about30% become as 'low as 10%. Gross public savings are low, but at least positive.The country faced no problem in the sixties when high factor income paymentsabroad were matched by substantial inflows of foreign capital offsetting andsurpassing those factor incomes. But, in the year 1971, the previous steadyinflow of resources into the Bahamas was reversed while factor income paymentsincreased substantially. As a result, real resource transfers abroad reached26% of GDP in 1972.

52. The Bahamas may well be able to restore the previous steady capita-Linflow and the high degree of profits reinvestment within the country. DE tothe tax haven policies, subsidiaries of foreign companies do not pay corporateincome taxes in the Bahamas. Wen they reinvest these profits into the Baham,as,neither do they pay taxes in the original capital exporting countries. There-fore, reinvest3ment in the Bahamas should be attractive for them. However, lackof an investment climate, tourist demand and/or immigration policies may havebeen powerful enough to offset tax advantages, thus preventing profits reinvest-ments.

- 26 -

Table 15: THE FINANCING OF INVESTMENTS

(In millions of constant B$ of 1970)

1969 1970 1971i 1972

Gross Domestic Investment 199.2 133.2 74.7 63.7

Net Resource Inflow .inflow) -4.3 -25.8 94.4 137.8

Gross Domestic Savings 194.9 107.4 169.1 201.5

Factor Income Payments -93.2 -63.0 106.0 150.4

Gross National Savings 101.7 44.4 63.0 51.1

G. The Manpower Constraint

53. The economy's growth rates of above 9% in the sixties did notsquare with a natural population growth rate of about 2.4%. Thus, amanpower shortage developed that was overcome largely by immigration andhighler labor force participation rates. Therefore, of the total increasein population of 38.6 thousands from 1963 to 1970, 40% came from im-migration.

Table 16: POPuLATION INCREASE

(Thousands)

1964 1965 1966 1967 1968 1969 1

Birth 4.3 4.6 4.6 4.3 4.2 4.3 4.3 4.3 4.3Death 1.0 1.1 1.1 1.2 1.0 1.1 1.1 1.1 1.1Natural Increase 3.5 3 X 3.1 3.2 3.2 3.2 3.2 3.2

Immigration 0.4 4.5 4°0 3.1 2.3 3.9 2.5 1.5 0.9Emigration - 0.1 0.7 0.2 0.1 1.2 3.1 4.9 1.7Net Migration 0.4 4.4 3.4 2.9 2.2 2.7 -0.6 -L 4 -0.6

Total Increase 3.9 7.9 6.9 6.0 5.4 .9 2.6 -0.2 2.6

54. Filling the excess demand for workers with foreigners could havebrought about an alienation of the country with major political consequences.As a result of the government concern with this situation, the Clapp andMayne Report on manpower was commissioned in 1967. The report showed that,even in 1968, an exceedingly large proportion of the labor force was madeup of foreigners. This proportion was extremely high in the Freeport area,as can be observed in Table 17.

- 27 -

Table 17: PERCENTAGE DISTRIBUTION OF EMPLOYEESBY AREA AND NATIONALITY,1 968

Total Bahamians Non-Bahamians (Haitians) (Other foreigners)

Total 100.0 69.0 31.0 (6.8) (24.2)

New Providence 100.0 83.1 16.3 (3.1) (13.2)

Freeport 100.0 34.1 65.9 (13.0) (52-9)

Other Family 100.0 64.9 34.1 (13-3) (21.8)Islands

Moreover, the report showed that the proportion of foreigners increased substan-tially asnng prof6issional, techhical, executfive and managerial workers. Forinstance, professionals and technicians were 44% non-Bahamians; executive,managerial, 53% non-Bahamians.

55. Even more important than the actual figures on employment andnationality coming from the report were its manpower projections. Thoseprojections showed a manpower deficit of 11,500 persons for 1970 and 15,400for 1973,to be covered with more expatriates. It was clear to the authoritiesthat,if the economic policies carried out up to that moment 1969, were tocontinue, the 13ahamas were going to lose their national identity. Thereforeimmigration restrictions became stiff. Many working permits were not renewed,andfewer new working permits were issued. As a result, there was a net emigrationin 1970, 1971 and 1972. 2/

56. The Bahamian economy is basically a full employment economy. Thiswas clearly the case in the late sixties when the labor force participationincreased substantially as many persons, especially women who would notnormally have sought work, accepted gainful employment because of the manyjob opportunities with good pay. The economic slump of 1970-73 caused somereduction in the labor participation rate and also some unemployment. The1970 census reported an overall participation rate of 414.3,similar to thatof the United States, but much higher than that of countries such as Venezuelaand Puerto R.ico where the labor force is around ,3% of the total population.Tha following table illustrates the high participation rates for 1970 in

1/ See Table 16.

- 2$ -

Table 18: POPULATION, LABOR FORCE BY SEX ANDPARTICIPATION RATES IN 1970

(in thousand of persons)

Partici- Partici- Partici-Labor pation Labor pation Total Labor oation

Ages Males force Females force f iorce

0-14 37.2 0.0 0.0 36.4 0.0 0.0 73.6 0.0 0.0

15 andover 46.5 41.8 90.0 48.7 28.0 57.5 95.2 69.8 73.3

Total 83.7 41.8 50.0 831i 28.0 33.0 i68.8 69.8 41 .3

The population of ages 15 and over that were reported as members of thelabor force is 73% in the Bahamas, against 61% in the United States, 46% inPuerto Rico, and 62% in Trinidad and Tobago, for instance. The over-15male participation rate is 90% in the Bahamas, against 80% in U.S., 67% inPuerto Rico and 84% in Trinidad and Tobago. The over-15 female participationrate is 57% in the Bahamas, 42% in the U.S., 27% in Puerto Rico and 40% inTrinidad and Tobago.

57. As explained in section D, the Bahamas' economy is a serviceeconomy. As such,it generates a high demand for labor. The following break-down of population aged 15 and over by type of occupation shows again thatnearly 70% of the jobs belong to persons engaged in administrative, managerial,technical, clerical, sales, transportation and recreational activities asopposed to "productive" activities.

- 29 -

Table 1 : ACTUAL EMPLOYMENT BY TYPE OF OCCUPATION AND SEX

Total. m) (F) % of Total

Professional, Technicaland Related Workers 6,179 (3,294) (2,285) 9.9

Administrative, Executiveand Managerial Workers 3,608 (3,112) ( 496) 5.8

Clerical Workers 7,809 (2,100) (5,709) 12.5

Sales Workers 3,673 (2,021) (1,652) 5.9

Farmers, Fishermen,HuntersLoggers and Related Workers 4,333 (3,021) (1,312) 6.9

Miners, Quarrymen andRelated Workers 52 (46) (6) -

Workers in Communicationsand Transport 4,320 (3,,439) (881) 6.9

Craftsmen, ProductionProcess Worker and N.E.S3 17,047 (15,532) (1,515) 27.4

Service, &port andRecreational Workers 15,343 (60l50) (9,193) 24.6

Total 62,364 7115 23,009 100.0

58. As a result of demand pressure. .l inelasl4ic supply, wages arerelatively high in the Bahamas, especi rC 0-en compared with those prevail-ing elsewhere in the Caribbean.

Table 20: SELECTED WAGES L?n NI BAHAMAS 1973 ANDCOMPARISON WITH OTHER CARIBBEAN COU`tr.FJPES AS PERCENT OF BAHAMAS

Bahamas 4 Jamaica ' Trinidad e

Waiter 39 p/w exe. tips 29 57 61Maid 44 I 26 5$ 41Bellboy 32 ft 32 63 57Electrician 2.50 p/h 30 3,4 32Plumber 2.50 p/h 25 25 26UnskilledLabor 1.60 p/h 33 25 37

Wh"-en con.,-Pred witlh developed countries, an unskilled laborer in the Bahamas,ea.rntng ?8A1.60 per hour, is earning as much as an industrial laborer in Franceor the Unilted '(ingdom and Italy in money terms. In terris of purchasing power,saleries in these coulntries are about 50 percent higher than in the Bahamas.

59. Tn 1970, the census year, the economy fell into a s.lump; thus, un-en'loyment was as high as 10%. This figure,when put together with the high

A .tcpaton rate, loses part of its significance. In fact,the number ofpersons actively seeking jobs registered in the Employment Exchange suggests-_ uneMployment rate of around 5 % in 1973. Although the depressionas been continuous since 1970, the government has weathered the politicalpressure for more jobs by not renewing working permits to expatriates andencoaraging firms to fill jobs positions with Bahamian nationals. Table 16estimates a net emigration in yeam§1970-71-72 due to the non-renewal of workingpermits. In the near future, the government plans to weather the pressures formore jobs with a new social security system allowing for the retirement of oldpersons, thus opening new jobs for young laborers. In the long run, for thepurposes of fostering employment, investment policies will hold the key.

H. Income Distribution

60. As expected, the distribution of income turns out to be highlyuneven in the Bahamas. The poorest 20% of the population receives 2.9% ofthe personal disposable income while the richest 20% receives about 52% of it.In 40 developing countries for which data are available, the poorest 20%receives 5% of national income while the richest 20% receives 55%. Thus, theBahamian poor and rich are both proportionately poorer.

61. It seems strange that in a country without income tax such as theBahamas, the rich receive a relatively small share of personal disposableincome. The answer to this paradox lies in the krge proportion of assetsowned by non-residents, either companies or individuals. The income fromthat property does not accrue to residents in the Bahamas; it is sent abroad.Accordingly, available data suggest that the mean income of people receivingB$30,000 and over is bigger for Bahamians than for non-Bahamians, the reasonfor this being that the few high income Bahamians are mostly proprietors andadministrators, while the sizable number of high income non-Bahamians residingin the country are mere administrators. /

62. Chart 3,with Lorenz curves for the Bahamas and other countries,illustrates better than figures the unevenes of income distribution in theBahamas. ,/ For instance, income distribution in the United Kingdom is moreeqral than in the Bahamas, as we would expect. The same is true for PuertoRico and Guyana. But the Bahamas has a more equal income distribution thanJamaica.

j In 1970 there were 110 Bahamians with income above B$30,000, while there were229 non-Bahamians with income above the mentcioned 'B$30,000.

g The closer the curve is to the diagonal, the more equal the income&istribution.

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CHART 3

INCOME DISTRIBUTIONLORENZ CURVES FOR THE BAHAMAS

AND OTHER COUNTRIES

PERCENT OF INCOME1001

80

TOTAL BAHAMAS

-- UNITED KINGDOM ,-- _ _ -- JAMAICA

GUYANAPUERTO RICO

60 /

'41//~~~~~~

40

0 _E__ _ YEAR

20 40 60 80 100

PERCENT OF POPULATION

World Ban k-8330

- 32 -

63. The important issue of income distribution in accordance withnationality was discussed briefly in paragraphs 24 to 27. It was mentionedthere that,while foreigners receive 38% of personal disposable income, theyconstitute only 15% of the total population. Chart No. 4 shows clearly thatthe higher the bracket of income, the greater the proportion of nQn-Bahamians.For instance, non-Bahamians constitute 15% of the persons in the 1,000-2000B$ bracket but 75% of those in the B$20,000 - B$30,000 bracket.

64. The pockets of poverty are geographically identifiable. The poorlive Ln the Southern Family Islant and in some parts of Nassau City, inNew Providence Island, particularly the so-called South division.

Table 21: PER CAPITA DISPOSABLE INCOME PER ISLAND

(In millions of B$ of 1970)

Door lsslFnds Rich IslandsAnd.r7s 768 Freeport Grand Bahama 3859Eroma 781 Berry Islands 2790Harbour IsTand & Bemini 2120

Sparnsh Wells 769 New Providence 1721San Salvador & Fnrna Cay 6 7 Grand Bahama other thanLong Island 520 Freeport 1691Ragged Ts),nd . Abaco 1h13Crooked Island 382 Eleuthera 946Mayaguanas. 318 Inagua 889Cat Irsl- a n. . 362Acklings Including

Long Cay 313 Country's average 1711

65. The poor in the Family Islandsare mostly subsistence farmers,hunters, fishermen, loggers and other forestry workers. The poor in NassauCity are launderers, dry cleaners and pressers, postmen and messengers,housekeepers, cooks, maids, building caretakers, cleaners and, in general,uncqalified laborers.

66. At the moment, income distribution in favor of Bahamians,andagainst expatriates, seems to be the target of overriding importance inthe couantry's policy making. The tool to reach the target, as explainedin para-raDh L47, is somewhat crude. The handling of working permits as atool fc-r Bahamianization may defeat another country objective, namely,growth CInanced largely by foreign investment. New policy tools have tobe designed. Charging a sizable fee on working permits, but making themautomatic upon the payment of that fee, is suggested in paragraph 192 asa possible solution to make the different targets more compatible. Thisalone would not be enough. The viability of a moderate corporate profittax should be studied,as suggested in paragraph 196. The proceeds of thisdirect taxation could then be used to improve the quality and job relevancyof education and,thereby,to favor efficient Bahamianization. The proceedsfrom direct- taxation could also be used in financing infrastructure for thedevelopment of the Southern Family Islands, one of the loci of poverty, orin financing essential services,such as water supply and sewerage,in thepoor neighborhoods of Nassau City, thus improving the quality of life in theother loci of poverty.

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CHART 4

THE BAHAMASPERSONAL INCOME DISTRIBUTION YEAR 1970

BAHAMIANS - NON-BAHAMAIANS

NUMBER OF PERSONS

14000

13000 = __.12789

12000

11267

11000

z BAHAMIAN

1 0000 W NON BAHAMIAN

9279

9000

9671

81399012

8000

7000

6000

9000 0

4000

3594

3000

2000184 151736 10

954 1067 1063

1000 73

407 510 487339

T:387 3 4

1000 20(10 3000 4000 5000 7500 10000 12500 15000 17500 20000 30000 ANID OVER

INCOME BRACKETS IB$I World Banrk-8332

- 34 -

III. SECTORAL PROSPECTS AND ISSUES

A. AA I±ultural d.v lo nmt an-d ofici.mcT

66. The annual value of the agriculture and fisheries produceamounts to almost 16 million dollars a year, equivalent to 4% of GDP. Interms of employment, agriculture provides about 7% of the total employment.Part of the agricultural-fisheries produce is exported. The main items arepulpwood and crawfish. About 60% of the agricultural output is sold in theinternal market. Products are mainly chicken, pineapples, tomatoes, onions,bananas, cabbages and avocados. Existing agricultural production comesmostly from traditional small farms in the Family Islands. About one-thirdof the produce for the local market is sold in the government ProduceExchange Market. This institution helps to maintain agricultural pricesand performs a social function by indirectly and moderately subsidizing thesmall and declining traditional farming sector.

67. Some government officials think that agriculture could become oneof the country's "engines" of growth. At present, more than 80% (=US$60 mil-lion) of the country's food supply is imported. This directly reflects theinability of agricultural supply to keep up with growing tourists' demandin the sixties. Consequently, planners recommend import substitution inagriculture through optimum sized farms in islands like Abaco, Andros,Eleuthera, Exuma and Cat. In accordance with the emphasis that the Ministryof Development gives to agriculture and fisheries, there are two recentinternationally financed research projects. One of them is an AID 10,000,000US dollar five-year pilot project for the development of livestock in AndrosIsland. The purpose of the project is to help to uncover the developmentcanstraints that held back livestock production in the Bahamas, both on thebnatural resources side and the corresponding appropriate techniques ofproduction and on that of the human motivation and training. The otherproject is a joint research project carried out by the government, UNDP ancFAO to evaluate the fisheries resources available, so as to uncover thebest fishing techniques and to train fishermen "on the job" in those techniques.

68. The potential for agricultural development in the Bahamas islimited. The soil, composed of sedimentary limestone, is inherently infertile.Only about 260 square miles, equivalent to 5% of the land, are suitable forcommercial agriculture. Those agricultural lands are located in North Andros(180 square miles),Central Grand Bahama (30 square miles; and Central GreatAbaco (50 square miles); these lands are covered mostly by unexploitedpine forests. Therefore, the development of import substitution agricultureto feed the local population and tourism will require considerable work ofland preparation. Since the rainfall is low, irrigation is indicated. Eventhe best lands will need a lot of fertilizer and some chemicals. Since thelabor is scarce and expensive, a machinery-intensive agriculture is indicatedalso.On the positive side, agriculture is frost-free in the Bahamas, thereis abundant ground water supply for irrigation and some crops can be ob-t ained twice a year. The wells do not need to be deeper than 20feet in the named areas. There is little doubt that diversificationof the economy is a sound policy. However, if agricultural import

- 35 -

substitution implies higher than import prices for foodstuffs, this will harmnot only the welfare of the Bahamian people but also the tourist industry,

whose prices have to compete with other Caribbean countries. 1/

69. The main problem in designing agricultural policy for the Bahamasis to find the right balance between the need for diversification of theeconomy and the need to maintain a reasonable level of efficiency. Thiscould be done partly by setting . maximum tariff for agricultural products,between 10 and 20%, which then w.ll give some protection to Local producersand,at the same time,will require certain minimum standards of efficiency,preventing a wasteful allocation of scarce resources in this sector. Agri-culture will have to be relatively scphisticated, perhaps an almost scientificagriculture in the Bahamas,to reach sizable levels of production at reasonablecosts. Creating the skills, know-how and motivation to do this will requireconsiderable time and effort.

B. Industrial Developiient and Incentives

70. The contribution of manufacturing to GDP. amounted to about 70 milliondollars equivalent to 14% of GDP at factor costs in 1972. The manufacturingcontribution to employment, however, is not more than 6% of total employ-ment. Manufacturing, with a growth rate of 40% per year during the pastyears, has been the most dynamic sector of the Bahamian economy. Among theproducts being manufactured in the Bahamas are petroleum products, cement,birth control pills, rum, salt, perfumery, canned juices, paints, textiles,hand prints, and cement tiles. There are a few cottage industries,manufac-turing mainly garments and straw products.

71. Industry in the Bahamas is,for t4e most part, capital-intensive,export-oriented, import-intensive,with a •3w inter-industrial linkages, foreign-owned, and located on Grand Bahama Island. Sincb there are relatively fewindustries,it is possible to describe some of them. The Bahamas OilRefining Company,recently established, has invested about $100 million.It has an installed capacity to handle 250,000 barrels of imported oil perday. At present, an expansion program is under way which, when completed,will increase the installed capacity to 450,000 barrels per day. The presentexpansion is supposed to be cmpleted by the end of 1973. The refinexy is arelatively simple cracking plant, products being limited to naphta, kerosene,jet fuel and diesel fuel. Refined products are exported to the United States.Another example is the Bahamas Cement Company, owned by U.S.Steel. It has a75 million dollar plant,located also in Freeport. The plant exports cementworth US$16 million and sells US$1.5 million in the Bahamian market. Anothercase is the Syntex Corporation at Freeport with an investment of US$7.5million and annual exports of US$28 million in pharmaceutical products andbirth control pills. The Baccardi US$2 million rum factory is the only bigindustry located in New Providence. It produces about US$11 million of exports.

72. Capital intensive industries are suited for the Banamian economy,because labor is scarce and wages are high. wages are 5 times higher thanin Haiti and 3 times higher than in Jamaica, br instance. The level of wagesand the labor scarcity will make it almost impossible for the Bahamas

j/ See paragraph,33, 34 and 56, tourism, after all,is able to provideenough jobs to Bahamians.

- 36 -

to compete with other Caribbean countries to attract labor intensive lightmanufacturing to export to tie U.S. market. klso, given the size of theinternal market, industry is bound to be eiport-oriented, import-inten-sive and rather scarce in forward and backward inter-indusG.t.Lal linkages.But capital-intensive enclave industries do not add much to net nationalincome.

73. The only way the country could increase its take -from big industry ist.hrou-h taxation. Although tax haven is contidered a kind of sacred policyin the Bahamas, it is doubtful whether it ha, been the real major factor forlocating big industrial business in the count,ry. Proximity to U.S., deepwater ports, commercial and social talent of business promoters and politicalstability could have been more important than tax haven. The reason forthis is that many capital exporting countries give credit only forcorporate taxes actually paid in the developing nation while taxing repatri-ated tax-free profit obtained inside it. Thus, tax concessiorns given by theBahamas are mostly gifts to the treasuries of the capital-exporting coLntriesand not the private companies.

74. Tax haven policies will be reassessed sooner or later in theBahamas. Because different capital-exporting countries follow differenttaxation systems regarding their subsidiary companies abroad, no singlepolicy prescription will be optimal in all cases. For sure, the governmentof the Bahamas will do well to study the effects of its own tax policies oncorporate profits in the light of taxation systems of the main capitalexporting countries. This topic will be taken up again in Chapter V.

C. Financial services

75. Financial services,such as banking, trust companies, insurance,real estate and business services, are important economic activities in theBahamas, accounting for about 13% of GDP and 9% of employment in 1970. More-over, unlike tourism, financial, services have been a relatively dynamic in-dustry in the seventies growing at a roughly estimated rate of 10% per yearin 1969-72. As a result, Nassau is now an international financial center.

76. rhe reasons for the development of Nassau as an internationalfinancial center can be classified in two groups: the first, external tothe country, and hence, outside its control, and the second, inherent to thecountry-institutions and natural conditions. Among the first type ofreasons are certain regulations of the Federal Reserve Board and othereconomic policies of the United States. Among the second type of Ieasons,the most important are the Bahamian taxation system, the exchange controlregulations, the geographical position of the country, its political stabil-ity, and legal secrecy.

77. In 1967, owing to difficulties in the United States' balance ofpayments, the U.S. Government issued certain regulations, provoking a rapidgrowth of Eurodollar banking services in Nassau. The U.S. Office of theForeign Direct Investment Program imposed certain restrictions2/ on capital

1/ Restrictions on export of capital were lifted in January 1974.

- 37 -

exports from the U.S. American business abroad had to resort to borrow-ing outside the United States, mostly from branches of big American banks.To favor small banks, those unable to afford a fullfledged branch abroad,the Federal Re-serve Board authorized American banks to set up branches inNassau and Caynman Islands in 1969. Because of this decision, the smallbanks were perimitted to capture dollar deposits belonging to non-residentsin the U.S. and,then to lend thope dollars outside the network of the"voluntary capital export restraint program." As of the end of August 1973,110 bank branches were carrying on eurodollar business as their principalactivity, and many other banks were transacting in eurodollars as secondaryoperations; 101 of the eurodollar branches belonged to American banks.Total eurodollar deposits amounted to about $15 billion at that time.

78. Another similar reason for the creation of "shell banks" inNassau was the credit squeeze introduced by the Federal Reserve Board in1968-69-70, and, particularly, Regulation Ql/ of the same Board, whichmade it somewhat difficult for commercial banks to borrow in the Americanmoney market for lending inside the country. Again, the big American bankswere able to overcome the problem by borrowing in the London eurodollarmarket. However, the small and medium-sized banks found the creation of abranch to be expensive in London, but cheap in Nassau.

79. The cost of running a "shell" banAk is low in Nassau. Unfortunately,the value added to the national economy is also low. For instance, the annualexpenditure of a small eurodollar bank a%s :f December 31, 1971 was as follows:

Table 22: EXPENDITURE OF A S.SAUl; SHELL BA!-K IN NASSAU

(In Ewual`kisn dollars)License ,,' !4Manager fee 1,OOAudit fee 178Legal Notice 128Sundry 46

3,356

In fact, this "shell" bank had no office in the Bah:unas and its manager, onlyin charge of bookkeeping, was also the manager of a major financial institu-tion. The operational cost is about $h40O0 for a nlediun size eurodollar bankwith its own manager and personnel.

1/ Regulation Q sets the maximum interest rates the commercial banks canpay on Certificates of Deposit. These maximum interest rates arebelow what a free market would bring about. Therefore, it is notconvenienLt for a foreign holder c4f dollars to lencl his dollarsin the U.S.

- 38 -

80. Except for the salaries of clerks and managers which broughtsome amount or prosperity to Nassau, offshore elurodollar operationsh2ardly touch the national economy. The actual lending and deposit oper-ations are arranged outside the Bahanas. Depositors are instructed tocredit the funds to the shell branch account in Nassau. Similarly, whena. loAn is made, the money is only nominally drawn from. the shell account.The shell bank merely receives a letter of confirmation from elsewhere inthe world. The interest earned is usually credited to the shell to avoidtaxes.

81. The prosperity brought to Nassau by the eurodollar business inlate sixties and early seventies could prove similar to the prosperitybrought about by the American Civil War in the 1860's or the U.S. prohibi-tion era in the 1920's. History may repeat itself. Eurodollar prosperity, heavi-ly dependent on the U.S. balance of payments situation and the correspond-ing U.S. monetary policy) may prove to be ephemeral.

82. Some of the causes favoring the emergence off Nassau as a financialcenter are under control of the Bahanas or are inherent to the country.They are:

(a) Tax haven policy. The Bahamas main attraction as a tax havenis the lack of income tax and capital gains tax. A Bahamiancompany pays a fixed annual fee of B$250. Banks and trustcompanies pay an annual fee from B$1500 to, B$45,000, dependentupon the nature of their license. Insurance companies alsopay low fees. However, in most cases, income taxes have tobe paid when profits are repatriated f4rom Nassau to thecapital-exporting country anyway. The main advantage, then,is to postpone this payment.

(b) Exchange control regulations. These regulations are straight-forward. When a n)n-resident corporation, which is managedby an authorized trust company or agent, has been granted"non-resident" status, no further reference to the exchangeccntrol authorities is necessary. Thus, the corporatior cantrade in non-resident securities as well as maintain non-resident bank accounts.

(c) Geographical position. Nassau branches are often betterlocated than European branches to provide timely eurocurrencyrates to customers in the U.S., Canada and South America,particularly the west coast. For American banks with world-wide branch networks, there is the added benefit of beingin the same time zone as New York, with which the major partof all business transactions are done. Advantageous geograph-ical position is complemented b- excellent teleohone, telex,cable, postal and air communications between the Bahamas andthe U.S.

- 39 -

(d) Secrecy and English law of trusts. The secrecy attachedto relations and transactions between financial institutionsand their customers has been another factor in attractingbusiness to Nassau. The statute law of the Bahamas, super-imposed upon the British law of trusts, has strengthenedsecurity and confidentiality, essential factors to attractbusiness from investors, eager to avoid the payment of taxesin their country of origin, or wanting a safe place for theirmoney.

(e) Presence of laxge international accountancy firms and quali-fied lawyers. rhis essential factor for the development ofany financial community is obvious. It attracts business,and, in turn,it is attracted by financial transactions.

83. As a result of the reasons stated in the previous paragraph, thetrust and insurance business flourished in Nassau City. The establishmentof trust companies was the primary attraction to overseas financial institu-tions to come to the Bahamas, and, in many cases,commercial banking, euro-dollar banking or insurance are largely adjuncta to the trust operations.

Most of the trust institutions are dealing with "offshore funds" escapingfrom high tax countries. The services that these institutions provide arethose of trustees, custodians, registrars, transfer agents, and administrators.The trust companies provide nominee arrangements for clients who preferanonymity, they hold directors' and shareholders' "meetings," prepare minutesof those "meetings," and keep accounting records. In general, they renderany kind of service dealing with financial property. As of the end ofJanuary 1973, there were 53 financial institutions doing trust business withthe general public, 43 of them also doing banking business as commercialbanks or eurodollar banks. Also connected with the trust business, therewere about 1.20 insurance companies doing business in Nassau.

D. Tourism

6h. As stated in Chapter II, tourism is the dominant sector in theBahamas, and as such, it has molded the country's economic structure. Thusthe importance of tourism in this economy will not be discussed here again.Rather, the analysis will focus on demand and supply factors with a view toanalyzing the industry's prospects.

Tourism demand

85. The growth demand of tourism, stemming mostly from the U.S., wasspectacular from 1958 up to 1969. During those eleven years, the annualgrowth rate of tourist arrivals was 20%. Apart from the diversion fromCuba to the Bahamas of about 200,000 visitors in the late fifties and earlyearly sixties, the major factor influencing demand for tourism inthe Bahamas was the growth of the U.S. economy as measured by theincrease in the GNP of that country. In the past for every 1% growth in theU.S. GNP, tourist arrivals into the Bahamas grew by

- 40 -

3.1%. This result comes from the regressioA equation in Chart 5. To putit di.Cferently, for every billion dollars of growth in U.S. real GNP,touri!;t arrivals into the Bahamas increased by about h,000.

8o. In the total number of visitors from different countries, theproportion of U.S. citizens is about 86%. This proportion increased up to1969 and then declined slightly in 1972.

Table 23: VISITOR'S POINTS OF RESIDENCE (percent)

1966 1969 1972U.S.A. ?Ganada 9.4 5.1 7.3United Kingdom 3.0 l14 1.2Western Europe - 1.5 1.7Rest of the World 5.1 4.5 3.5

87. Proximity to te Bahamas and per capita income in the state ofresidence are two important factors explaining the geographical distributionof U.S. visitors. Thus, 22% of the visitors come from Florida and 17% fromNew York. In general, eastern states predominate. Massachusetts,Connecticut, New Jersey, Pennsylvania, Maryland and Virginia account for27% of total visitors. The proportion of visitors from southern states isrelatively high, given their proximity, while visitors fram California, forinstance, despite the sizable population of that state and its high incomeper capita,are only 3.8% of the total U.S. visitors because of the state'sremoteness.

88. The importance of the cost of tbavel factor is highlighted when thisfactor is connected with air fares and the Bahamas is put in the Caribbeancontext. Thus, Puerto Rico and the Bahamas.which have the lowest air farefrom New York, have the highest proportion of U.S. visitors, while Barbadosand Trinidad and Tobago, which have the highest air fare, have the lowest

sr .T>kt4on of U.S. visitors. Jamaica is in an intermediate position.

Table 24: BAHAIAS AIR FARE IN COMPARISON WITH SOMECARIBB13N TOURIST COMPETITOR'S COUNTRIES

Air Fare from New York Proportion of visitors'before oi'l crisis) from U. S.

190 87Buerto Rico 188 89Jamaica 258 81Netherlands Antilles 334 42Barbados 3)48 314Trinidad and Tobago 370 30

- 41 -

CHART 5

RELATIONSHIP BETWEEN TOURIST ARRIVALS INTOTHE BAHAMAS AND U.S. GNP

TOURIST ARRIVALS

IN THOUSANDS

1600 __ ___ _

1400 - _ .9

120 0 _ l l l _ YA

1 000 -- - - ~ --- -----

1958 SI 16 1 6 3 4 6-6 6-8 9 17 1 7400

800 R2 =0--.92--SE--86__91

60059 160 6 6 3 4 65 6 6-8 9 190 71 7

400 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~ol ak80

- 42 -

89. The Bahamas and Puerto Rico are the main Caribbean recipientsof U.S. tourist demand. In 1972,each country attracted more than onemillion visitors fram the U.S.,equivalent to 60% of U.S. tourist travelin the area. The closest competitors are Jamaica, with 300,000 visitors,and Bermudawith a similar number.

90. The Bahamas appeals especially to Americans between 40-49 yearsof age or between 20-29, with college edueation and per capita yearlyincome over $25,000. A large proportion of visitors are businessmenwanting "to get away from it all" and young honeymooning couples. Butthe country has a potential appal for almost every kind of holiday maker.The Bahamas is attractive not only becauoe of bright sun, clear watersand white sand but also because there are some exclusive places and eventfulhistory, gambling casinos, and a ringe of choices to suit different tastesin privacy, luxury, and sport activities, such as fishing, scuba diving,snorkeling, golf and boating.

91. Tourist arrivals have a mildly seasonal pattern. The country hasbeen able to achieve a good balance of tourist arrivals among seasons. Forinstance, in 1971; 25.2%, 26.5%, 26.C% and 22.3%. In the early sixties,the Ba.hamian high season was concentrated in the first four months of theyear,coinciding with winter-spring in the U.S. However, in the middlesixties, the country developed a cheaper secondary tourism season,especiallyin July and August, coinciding with holiday time in the U.S. Hotel rates arelowered about 33% from April 15 to December 15. This secondary season has alow point in September and October, the rainy months,when tourist arrivalsdrop 30% below annual average. To counteract this drop, in 1973,the program"Pack-a-Partner" was developed. It included two for the price of one for aminimum stay of seven nights. But the winter season has always attractedthe high income tourist; the summer season, the middle income one.

92. Tourist arrivals in the seventies have been growing slowly.

Table 25: TOURIST ARRIVALS 1969-73

Year Total tourist arrivals Annual growth rate Annual growth rateBahamas Bahamas Caribbean Average

1969 1,332.000 24.0 15.151970 1,298,000 - 2.6 1.561971 1,464,000 12.7 8.281972 1,512.000 3.3 9.331973 1,520.000 0.5 n.a.

- 43 -

The decline of tourist arrivals in 1970 correlates with a decline of .3%of US; GNP in 1970. Yet, the small increase in tourist arrivals in 1973does not correlate with the big US GNP increase of 5.2% in that period.It cannot be explained either by lack of hotel facilities becauseoccupancy rates were 60% in New Providence and 40% in the FamilyIslands in 1973. Other causes have to be found for the poor show oftourist arrivals in 1972 and 1973.

93. One cause of the decline in tourist arrivals could be the dec-lining quality of services. According to the Dayton and Keenan Report,l/each year a larger percentage of visitors appears less satisfied with theirBahamian vacation. The effectiveness of the high promotional expendituresof approximately $1,160 per year per hotel room is destroyed by derogatoryreports made by actual visitors to their friends. Sluggish tourist demandshould partly be traced back to this factor. This hypothesis is compatibleboth with the Ministry of Tourism figures, showing only 20% repeat visitorsin a 3-year period and the lower than average Caribbeen growth rates intourist arrivals s?own in Table 25. Friendly attitude and competentservices are like tangible commodities and weigh heavily in the visitor,assessments of their Bahamian vacation.

94. The decline in the quality of services is related to managementproblems. The threat of not getting renewal of working permits detersforeign managers from exercising full authority over employees. Thissituation, in turn~ deters qualified foreign professional managers fromaccepting top and medium level positions in the Baharian hotel industry.As a consequence, hotel administration leaves a lot to be desired. Not onlydoes service to tourists decline in quality, but cost and waste are high, andcontrols weak.2/Bahanianization is obviously a legitimate aspiration of theGovernment and people. The problem is how to implement it without harmingeconomic efficiency.95. Another cause of sluggish tourist demand in the seventies can bepartly attributed to the diversion of a number of U.S. middle income visitorsfrcm the Caribbean to Europe. This was made possible by group travel,charter flights and, in general, the air fare reduction that took place in1970 and onwards. Tourism diversion to Europe probably has occurred in thesummer seasons, and especially in May-June. The zero growth of touristarrivals intc) the Bahamas from 1969 to 1972 in the named months is clisist-ent also with this view. It is consistent also with the high season ofU.S. tourist traveling to Europe.

g,/ Prepared for the Ministry of Tourism, August 1973, p. 50.

2/ Dayton and Keenn op. cit. According to the Report,the New ProvidenceHotel industry lost US$8 million in 1972, p. 12.

- 44 -

96. The oil crisis affects tourist arrivals into the Bahamas intwo differe.t and perhaps opposing ways. On the one hand,the oil crisismay slow dowrn considerably the rate of growth of the U.S. economy, notto speak of that of Europe. This will have detrimental effects ontov.rist arrivals into the Bahamas. On the other hand, the curtailmentsof charter flights and discountsin air fares, and suspension of cruiseti-?s, a by-product of the oLl ¢risis, is harming the Bahamas much lessfor two reasons. First, the country already has,in 1974, the lowest airfare for U.S. tourists in the Caribbean. Second, due to its large oilrefining and bunkering facilities, the country has plenty of oil toensure proper supplies for jets with charter flights and cruise ships.Therefore, these two factors may favor the selection of the Bahamas forvacation, reversing the trend pointed out in paragraph 95. Consistentwith the considerations above, tourist arrivals are, in fact, holding upwell in 1974.

Tourist expenditures and the tourist multiplier

97. Tourist expenditures are the pump that keeps the economy running.Tourist expenditures reached the level of B$286 million in 1972, equivalentto 49% of GDP, 69% of GNP and 64% of export of goods and non-factor services,oil excluded. The tourist expenditures bill had the following breakdownin 1972:

Table 26: TOURIST EXPENDITURE PATTERN 1972

eo e ce oun

1. Hotels 117,393 412. Meals and Beverages outside Hotels 43,200 153. Gratuities 13,648 54&. Transportation

a) local tax, tour cars 17,328 6b) interisland 4,383 2

5. Shoppinga) souvenirs, gifts, perfume and

glassware 25,324 9b) straw work & handicraft 5,642 2c) package liquor 5,955 2d) food & beverage from markets 6,039 2

6. Entertainmenta) casino 31,756 11b) sporting equipment 5,555 2

7. Miscellaneous 9,321

Total 285,544 100

- 45 -

98. The above table permits a rough estimate of the direct currentimport component of tourist expenditures. It is around 25%.1/ The totalimport coefficient is similar to that of the economy as a whole and equalto about 50C. Thus, assuming that the average propensity to save(=0.386, GDS/GDP, paragraph 51) and the average propensity to import(=0.504 paragraph 34) are both equal to the marginal propensities,thetourist multiplier turns out to be 1,12.2/ Therefore, the direct andindirect impact of tourist expenditure on domestic product would beabout (B$286 million x 1.12) B$320 million, equivalent to 55% of GDPand 77% of GNP, as stated in paragraph 29. The low tourist multiplier isexplained by the high leakages reflected in the high propensities to importand to save. Since we used gross domestic saving, comprising big factorpaymentsabroad, saving leakages are quite similar to import leakages.

99. The length of stay and the type of visitors (air or sea stopovervisitors vs. cruise visitors) are important factors influencing the amountof money spent by tourists. The average length of stay was 6.17 days in1972 per each air or sea stopover visitor, higher than the Puerto Ricanaverage (5.4) or Bermudan (5.4), but lower than the Jamaican (8.0) orBarbadian (6.4). This type of visitor spends on the average B$267 pervisit, an amount slightly lower than the average visitor to Puerto Rico, buthigher than the visitor to Jamaica and other countries. Cruise visitorsspend only B$45 per visit.

100. The average length of stay increases when the visitor's point ofresidence is further away. Visitors from U.K. stay 15 or 16 dayson the average, other Europeans 9 or 10 days, Canadians about 8 days and U.S.visitors, who travel the shortest distance, stay about 5.5 days. Among U.S.visitors, those from Miami stay 4.0 days on the average, and those fromCalifornia about 6.0 days.

101. Total tourist expenditures in real terms remained stagnant in 1969-72. In the case of stopover visitors, the average length of stayincreased from 5.6 days in 1969 to 6.2 in 1973. But, as a result of thedifferent factors at play- a small increase in length of stay, in the numberof visitors, in the expenditure per visit; and the 5.8% inflationary rate -total stopover-tourist expenditures remained stagnant in real terms. In thecase of cruise visitors, despite the high increase in numbers since 1969,(6.5% annually), the per visit expenditure declined so sharply that the netincrease in total expenditures has been low in money terms, an actual declinein real terms.

1/ The import component is higher than the Puerto Rican but lower than theJamaican and other Caribbean countries. The high cost of services ex-plains that low import component.

2/ Using the standard Keynesian Multiplier K 1 - 1.12MPS + MM

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Table 27: TOURIST EXPENDITURES 1969-19721969-72

1969 1970 1971 1972 Growth rateTourist xrrivals(Air Plus Stop Oversea) 970,325 891,479 960,818 1,036,210 2.2Average Length of Stay

(Days) 5.6 5.9 5.9 6.2 3.5Per Diem Expenditure

(B$) 39.96 41.17 45.14 41.82 1.5Per Visit bxpenditure

(B$) 225.37 242.08 266.33 258.03 4.6Total Expenditure

(B$ million) 218.68 215.81 255.89 267.22 5.1Cruise Visitor Ar-

rivals 337,071 351,865 435,825 407,191 6.5Per Visit Expenditure

(B$) 49.75 48.40 50.00 45.00 -3.5Total Expenditure

(B$million) 16.79 17.03 21.79 18.32 3.6Grand Total Expenditure

(B$ million) 235.45 232.83 277.69 285.44 6.6

Price index 94.2 100.0 104.6 111.7 5.8

Tourism sup~ply

102. The Bahamas' tourist facilities are the largest in the Caribbean,followed closely by Puerto Rico. A distant third is Jamaica. Then, farbehind,are U.S. Virgin Islands, Bermuda and Barbados.

Table 28: TOURIST ACCOMMODATIONS IN THE BAHAMASAND OTHER CARIBBEAN COUNTRIES, 1972

Percent ofRooms Carbban Total

Bahamas 12,515 22%Puerto Rico 12,440 22%Jamaica 8,978 16%U.So. Virgin Islands 4,513 8%Be.rauda 4,286 8%:uz'>adoJs 3,663 7%0ther 9e407 17

55,502 i

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103. Three separate resort areas may be distinguished in the Bahamas:New Providence, with 44% of hotel accommodations; Grand Bahams,with 37%;and the Family Islands,with 19% of the total.

Table 29: HOTEL ROOMS AVAILABLEUrowrn

rate1962 1966 1969 1970 1971 1972 % 1972 69-72

New Providence 2,153 2,684 4,370 3,909 5,097 5,005 44 4.6Grand Bahama 397 2,159 3,620 3,905 3,884 4,136 3'7 4.5Family Islands 805 1,164 1,513 1,773 1,866 2,086 19 11.3Total 3,355 6,007 9,503 9,587 lo,847 11,227 100 5.1

104. In New Providence,92% of the tourist accommodations are hotels.Only 6$ are apartments, villas and cottages. Moreover, 57% of the hotelrooms are concentrated in big size, over 300-room hotels. About one-thirdof the hotels have less than 50 rooms,and they include only 6% of allhotel rooms.

105. Hotels in New Providence can be separated into two distinct cate-gories: those located in New Providence 1sland proper and those inParadise Island. Hotels located in New F ovidence Island tend to be oldand European type. They have good servic?s but lack gambling casinos.They cannot attract large conferences aracd ;:onventions due to lack of facil-ities to accommodate 1,500 to 3,000 perscb' . On the other hand, theParadise Island hotels appeal more to the American taste. They have theadvantage of isolation from city traffic, planned landscaping for the entirearea, extensive convention facilities, a casino and a wide choice of gourmetrestaurants. As a result of these differences, Paradise Island hotels nor-mally have an occupancy rate of 70% against 60$ in New Providence. Moreover,Paradise Island hotels charge higher prices tltan those in New Providence.

106. In Grand Bahama,the existing tourist facilities present a some-what different structure than in New Providence. Condominium units,licensed apartments and villa accommodations represent about 15% of touristaccommodations. Hotel rooms are about 85% of room Eupply. Since 1962,there has been a massive increase in accommodations. As demonstrated by Table 29the increase in 1962-72 was tenfold. Moreover, hotels in Grand Bahamaare typically large. The average size of hotels is 252 rooms, compared with143 rooms in New Providence and 27 in the Family Islands.

107. Hotels in Grand Bahama, located 45 minutes away from the worj?d'slargest and most affluent market,were designed, built, decorated, landscaped,and programmed to provide services for upper middle and upper income groups.They are luxury accommodations that require a higSsoending visitor. Butthe atmosphere in the area has clanged. The high spending visitor appears to

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be going elsewhere,and,to compensate for the 108s of revenue, operators,with few exc-otions,have resorted to mass propaganda directed to increasethe arrivals of the middle income, budget-minded tourist. This policy hasaffected the profitability of tourist investments and has slowed down growthnn the area considerably.

'be. Unlike New Providence and Grand Bahama, in the Family Islands,hotels are of medium size. Moreover, hotels in the Family Islands account-or only 59% of tourist accommodations available; apartment-villas account for35% of the total and guest-houses for 6%. Since 1970,guest-housefacilities have doubled,and self-catering accommodation units haveincreased by 27C$.

109. The existing infrastructure confines the Family Islands to themiddle-upper income tourist. Sufficient infrastracture does not exist toreceive the mass market. For instance, roads from the airports to theresorts are frequently dusty and full of holes,making uncomfortable theusually long ride to the accommodations. The airport terminals are usuallyl-ttle more than shacks and air strips. But the accommodations themselvesare attractive, operated with care for the comfort and pleasure of the guestsbecause they depend on a high percentage of repeat business, as well as longstays. This kind of accommodation appeals to the conservative guest seekingrest, relaxation and being away from the crowds which are inevitable atlarger resorts.

Occupancy rates

110. During 1969-72,the growth rate of available rooms was 5.7%outpacing the number of stcpover tourist arrivals,which grew at 2.2% peryear. This caused the average occupancy rate to decline from about80% in 1968 to an average of 60% in 1972. The decline in the occupancy rateshas caused the hotel construction business to stop almost completely inthe last two years, with dampening effects on economic activity,as discussedin paragraph 45.

111. In 1972,occupancy rates were relatively high in New Providence andlow in the Family Islands, where the seasonal pattern of occupancy is moremarked. Grand Bahama operated at a rate of occupancy in between those ofNew Providence and the Family Islands. Preliminary data for 1973 suggeststhat occupancy remained roughly the same as in 1972 in New Providence andGrand Bahama, but increased substantially in the Family Islands.

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Table 30: % HOTEL ROOM OCCUPANCY, 1972

Nassau Freeport Family Islands

January 57.6 41.6 35.1February 77.7 69.1 55.4March 78.3 78.6 66.6April 77.7 54.7 58.7May 58.8 n.a. 35.3June 54.2 na.a. 32.6July 71.4 n.a. 41.6August 80.6 62.1 43.1September 44.7 37.5 22.8October 51.0 40.8 25.6November 65.7 57.1 39.6December 60.2 55.3 48.9Average 64.9 n.a. 43.1

Competitiveness and prospeCt-S

112. The Bahamas hotel industry has maintained competitive rates withother tourist areas. Thus, in 1972,,average real rates in the Bahamaas andother leading tourist areas were as follows:

Table 31: PRICE COMPETITIVENESS OF BAHAMAS IN COMPARISONWITH OTHER TOURIST AREAS - 1972

Nassau & SouthTotal Paradise East Puerto

Caribbean -Island Z1;d Uo Aami.

Average room rate 28.64 27.88 24.36 31.48 21.83

113. Hotel costs are bound to increase substantially in 1974. Laborcosts,stemming from a new collective ccntract, are going to increase by15%. A new social security scheme is probably going to be implementedthis year,implying an additional cost estimated at 5% of the cash payroll.Superimposed upon these cost increases are sAarp rises in the cost ofelectricity, fuels, telecommunications, water-, food and hotel supplies.

114. Higher costs could only partly be shifted to higher prices becauIseof the increasing competition in the tourist market. Jamaica, Bermuda,Puerto Rico, Barbados and some of the smaller islaaids such as Caymansand Antigua are stepping up their tourist promoti^- expenditures. haiti is

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a new competitor, and there are indications of some tourist revivalin Cuba. `enezuela and Mexico,with their far larger resources, aredeveloping new nultinillion dollar resorts on their Caribbean coastline.On top of increasing competition comes the oil crisis, constraining thegrowth of travel.

115. Under these conditions- higher costs, increasing competition,oil crisis- the question is whether the country should step up its touristpromotion efforts or should try to diversify its economic base,investingheavily in sectors other than tourism so as to diminish the risks of overspecialization. The answer to this question is that the country shoulddiversify its economic base to the extent that the non-tourist activitiescan be carried out at nearly international costs. To be more precise,thereshould be an upper limit to the relative inefficiency of the non-touristtrade activities. This limit could be set up in the form of a uniformprotective duty of no more than 20% for agricultural and industrial business.But,unless oil is discovered, tourism will continue to be the most efficienteconomic activity in the Bahamas and,thus,the easiest avenue for economicgrowth. Therefore, the thrust of the development effort should continue tobe in the tourism sector, which still has local employment potential.

116. To survive in the competitive area of tourism,two policies areobviously indicated for the Bahamass first, stronger efforts to improvethe quality of tourist services (by serving the interest of tourists,Bahamians will be serving their own interest); 8econd, improve hotelmanagement and control to reduce costs and waste. These policies can beimplemented by administrative and policy decisions and do not require sub-stantial capital outlay.

117. Although there is considerable room for improvement of touristfacilities in New Providence and Grand Bahama, the big potential for futuredevelopment lies in the Family Islands. These islands have 89% of theBahamian land and only 25% of the country's population. Thus, lack ofmanpower would be a major constraint in a labor-intensive industry such astourism. Since rental condominiums, cottages and self-catering accommoda-tions are labor saving, as compared with hotels, emphasis on this type ofinvestment appear to be indicated here. A more flexible immigrationpolicy may be necessary too, as recommended above. Moreover, the govern-ment should improve the infrastructure in these islands, especially transportinfrastructure.

118. In achieving the right balance between the tourist trade and othertrades, not only the economic cost and benefits should be measured. Also,the social and political cost and benefits inherent in welcoming more thana million visitors a year in a country with a population of 175,000 mustbe assessed. This is a difficult question,and the answer, even a tentativeone, is beyond the scope of this report.

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E. Water SUPDly and Sewerage

119. New Providence Island is facing a water supply shortage. Theisland, containing 61% of the country's population,has only 1.5% of itsterritory. Water comes mostly from well fields that are already producingat more than maximum capacity. Since ground water cannot be counted uponas a new source of supply, other sources have to be developed. Presently,supply is less than 6 million gallonsper day while demand is assessed at8 million gallonsper day.

120. There are three sources of water supply. The first is a h,000acre well field operated by the government, supplying 51.5% of the totaloutput; the second is a 2,000 acre well field developed by the New ProvidenceDevelopment Company, a priva'e supplier which,in 1968,entered into a 13-yearagreement with the government; and now provides 31.5%; and fie third is theBluehills desalination plant No.1 which supplies 17%. The well fields inNew Providence have been overpumped and will have to rest soon to give thelenses opportunity to refill and bring salinities down.

121. Total demand for water increased at 17% per year from 1966 to 1970and only at 2.5% from 1970 to 1972. Assuming a modest growth rate of about4% in demand, the Ministry of Public Works forecasts a widening supply-demand gap. The Ministry's most moderate demand projection assumes an annualincrease of 5% in domestic demand and a decrease of 5% for tourist demand.Also, the Ministry's forecasted supply-demand gap allows for a decrease inproductiv:Lty of the over-pumped well fields.

122. To fill the supply-demand gap, the government policy is to diversifysources of water supply by:

(a) Installing a second 2 million gallons per day flash distillationplant, with waste heat boilers, to be in line by December of1975. The process of multistage flash distillation requires alarge input of energy in the form of steam. In order to savefuel, which constitutesabout 50% of the production cost in thedesalination plant No. 1, the Ministry of Works is negotiatinga contract with the government-owned Bahamas ElectricityCorporation (B.E.C.) to use the heat wasted by the gas turbinesinstalled nearby by B.E.C. A third similar flash distillationplant would eventually be installed in June 1976, depending ondemand developments. The total cost of the two new plants wouldbe $10.8 million to be spent in 1974-76;

(b) introducing a barging program from Andros Island starting with2 a.g.p.d. by mid-1974. A local company has recently subxwtteda proposal to the Ministry of Public Works. The Ministry ofDevelopment organized meetings with Public Works and agricul-ture to ensure that water extraction from Andros Island willnot damage the potential agricultural land existing in Andros;and

(c) installing a -a7lt miflion gallon reverse osmosis plant atLake Killarney, to be in line during 1974. This plant isof an experimental nature and would provide useful experi-ence for possible future use of this method in the SouthernFamily Islands. TLo reduce its own risks, the governmentassigned to the supplier the obligation of providing up to0.6 m.g.p.d. together with the full responsibility foroperation and mai=enance of the plant. The grovernment Willpay a rate lcwer Ithan the top tariff it charges for wateruse.

123. At present,the Water Eupp7y and Sewerage Department is underthe direct jurisdiection of the Mimistry of Public Works. But the governmentis setting up an independent self-financed government corporation to handlethe water supply financial problems in the future. All the correspondingassets of the Ministry of Works related to water supply located in NewProvidence will be transferred to the new corporation,which will then belegally responsible for a $12 million investment program equivalent to about15% of the government investment in the next five years.

124. Issues related to the creation of the corporation are beingdiscussed now inside the government. Apparently, the tendency to minimizethe independence of that corporation,reducing it to a mere financial andlegal phantom,is prevailing. Under this idea,the corporation will not haveits own staff. It will sublet its technical operations to the water andsewerage department of the Ministry of Public Works. Thus, the corporationwill be charged with the cost of management services provided by the depart-ment. On the other hand, the corporation will be credited legally with thepro-ceeds of the water tariff. The financial surplus will be used for servicing theloans necessary to finance the investment program outlined in paragraph 122.

125. The creation of this kind of phantom corporation to handle thelegal, accounting and financial responsibilities, leaving aside the realoperation of the water supply system in the hands of the Ministry of PublicWorks,may prove a useless complication. Perhaps the main advantage of agovernment corporation over a government department is that the first isable to attract talent through better compensation of technicians,whilethe second, trapped in government type of pay scale is unable to getcompetent management. This advant,age is t4tal1y lo0t lnder the proposedlegal scheme.

1,26, Moreover,to separate the stater legal and financial operationsfr.o sewerage services does not see%A economical. There are techntIcal andmP,nagc(crial J, advantages in handling both water supply arnc sewerage together.Appropriate Lnvestments in sewerage may reduce the needs for investmentsin water supply. An integrated approach is indicated, given the interde-pendence of both services.

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127. In 1973, the would-be Water Authority experienced a loss ofB$2,029,439,stemming partly from the insufficiency of the water tariffto cover depreciation and interest:

Table 32 s WATER AUTHORITT REVENUE STATEMENT 1973(B$)

Total Revenues 3,618,534Total Operating Cost 3,488,529

Operating Profit 130,005Depreciation - 1,649,1444Interest - 510.000

Net Loss - 2,029,439

128. The water rates in New Providence have a progressive structurethat relieves the small consumer, charging more to the big one. Thus,the tariff enforced since April 1970 gives the first 1500 gallons permeter per quarter free. For every 1,000 gallons in excess of 1,500gallons but not exceeding 15,000 gallors per meter per quarter, the rateis B$2.15. And,finally,for every 1,000 ga.llons in excess of 15,000 gal-lons per meter per quarter,the rate is B$3.70. The government is consider-ing the adequacy of the current rate structure to recover costs and allowan adequate surplus for future replacement and/or expansion of plant in orderto put the new corporation on a sound financial footing. The averagewater tariff was B$2.68 per 1,000 gallons in 1973. Although this tariffis high for international standards, a high tariff gives a correcteconomic signal because marginal costs of producing water through desali-nation plants in New Providence are also quite high. As pointed out inparagraph 1 6 1,these high costs bring about the need for a regionaldevelopment strategy.

129. Sewerage is one of the most urgent development problems in theBahamas, particularly in Nassau. Since the economy depends so heavilyon its tourist attractions, any epidemic will have a disastrous effect ontourist arrivals and,therefore, all over -the economy. Three main types ofdiseases are present in some areas of New Providence: typhoid, amoebiasisand infectious hepatitis. While the incidence of typhoid is small, inconditions such as existing in certain areas, the possibility of anepidemic cannot be ruled out. Amoebiasis has increased rapidly from245 cases reported in 1963 to 502 in 1970, 338 of the latter occurring inthe South Division of Nassau, where sanitary conditions are appalling.It is thought that cases of anoebiasis are grossB.7 under-reported and that thetrue figures are much higher. It is believed,too, tbat cases of infectioushepatitis are also seriously under-reported and tiat the true figure for1970 may be near 1000.

130. The sanitary conditions in the so-called South Division ofNassau ca'll for action. With population densities varying between 40amd 55 per acre, it is the poorest and most densely populated districtin al' the Bahamas. The residential density is 13 houses per acre,

a large proportion of timber houses. Potable water is obtainedfrom Dublic standpipes. Water consumption is low; the effort of trans-oorting and storing adequate quantities of water for sanitation is thedominant factor causing standards of hygiene that are certainly notpleasant to describe.

131. To cope with the most urgent problems, the government has inview a $15 million sewerage project. The project comprises a reticulationsystem draining to a main pumping station where the sewage will be liftedinto a new sewage treatment works plant at Harold Pond, south of Nassau.Disposal into the sea is not acceptable on grounds of amenity and cost.The alternative is inland disposal, by deep well injection, after treat-ment by the activated sludge process and chlorination.

132. The referred project includes, as a minor cost item, but withimportant economic benefits for the country, the installation of devicesfor discharging sewage from cruise ships anchored in the Nassau Harbour.In the past, cruise passengers used to go to sleep in the Nassau hotels.Since they now sleep on the ships, the harbour is becoming increasinglypolluted,harming the beaches and hotels in the New Providence harbour upto Cable Beach, in Western New Providence Island. Moreover, since thepresent method of refuse disposal is unsatisfactory, a refuse pulverizingplant would be constructed also at the Hiarold Pond Sewage plant,where thetreated refuse might be combined with treated sludge to form either a landfill material or a compost for agricultural use. It is thought that itwill be pDssible to produce some 12,000 tons per year at a cost of $4 to$5 per ton,which should attract a ready market in view of the lack of topsoil on the island.

133. On the issue of how to finance the project,there are two views.The prevailing government idea, at this point, would be to exclude thesewerage project from the new corporation referred to in paragraphs 123-26on the grounds that this project cannot pay for itself and will have to besubsidized with central governnment revenue. Water development, instead,could be financed with the water rate. Actuallr, however,the consultantsDobell Howard Humphreys Ltd. recommended that the sewerage project befinanced by increasing the water rates 100% on the grounds that the useof water is closely linked to the use of sewerage facilities. This wayof financing the project will not destroy the social content and incomedistribution side of it, because the tariff on water allows for 6,000gallons per year free per each metered connection. This free water allow-ance could be extended somewhat without any substantial loss in revenue.

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F. Electricity. Telecommunications and Transportation

134. Economic development has caused the demand for electric powerto spiral in recent years, and a heavy capital expenditure program hasresulted in installed generating capacity being more than doubled since1968. The Bahamas Electricity Corporation, a government enterpriseestablished in 1956 to supply electricity to New Providence Island, isnow operating in the Family Islands as well, and plans have been drawnup for the installation of generating stations in North Bimini, CatIsland, San Salvador, and Andros. Electric power in Freeport is providedby a subsidiary of the Port Authority,which doubled its generatingcapacity between 1968 and 1971. With regard to electricity rates -partlydue to lack of eccnomies of large scale production, partly due to ineffi-ciencies, partly due to overinvestments -they are high in the Bahamas,about 2-3 times higher than in the U.S.' But energy produced per capitareached more than 3000 Kwh in 1972, almost as much as in Australia.

135. Modern automatic telephone systems are available in NewProvidence, Grand Bahasm, Abaco, and Harbour Island. In late 1972, aB$8.4 million submarine cable between Nassau, Freeport, and Miami wasbrought into operation, making direct dialing between the Bahamas andNorth America possible. Its initial capacity is 380 channels,but thiscan be increased to 1,380 channels. All communications, with the except-ion of private telephone systems covering Freeport and some other areas,are operated by the government-owned Bahamas Telecommunications Corporation(BATELC0). Services have been improving through a B$31 million expansionand modernization program currently under way. In 1972, there were28 telephones installed per every hundred persons, as many as in Australiaand in the United Kingdom.

136. Due to the development of tourism, the Bahamas is extremelywell served by international airlines and by a recently created nationalairline. Most of these flights operate to and from the internationalairports at Nassau and Freeport. These airports do not have capabilitiesto receive jumbo jets, however. There are daily flights to several citiesin North America and Europe. Due to the fragmented nature of the country,air service also plays an important role in internal communication; thereare some 50 smaller airports and landing strips scattered throughout theislands.

137. Nassau, the main seaport located on New Providence,has a fineharbor. A modernization program carried out in the late 1960s,at a costof B420 million,has raised its facilities to a high standard. Theimprovenaent of the deep water harbor of Nassau has extended the dockingfacilities to such an extent that several big ocean going ships can dockat the same time. Modern port facilities are also available in Freeport,including one of the largest offshore bunkering terminals in the WesternHemisphere. Plans are in an advanced stage for the development of ArawakCay, an artificial island adjoining Nassau Harbor,and for the constructionof another harbor in Orand Bahama. There, a deep water petroleum trans-

shipment terminal will be constructed to accommodate tankers up to250,000 tms. Oil will be transhipped mainly to the east coast of theUnited States.

138. There are about 1,800 miles of motorable roads in the Bahamas,300 being on New Providence and abou t 700 in the West End/Freeport areaof Grand Bahama. The road network needs to be improved in the FamilyIslands.

G. Educational P.rcbles and Policies

139. Some quantitative indicators show high educational standards inthe Bahamas; the adult 1iteracy rate is about 93%. Arournd 83% of thepopulation aged 14 years and over have more than 6 years of schooling.Around 32% of the total population are students. Enrollments in primaryeducation are nearly 100% of the population of the respective school age.Enrollments in seccadary education are above 75% for grades 7 to 11.Moreover, education is campulsory between ages 5 and 14.

140. Consistent with the above quantitative indicators, the Governmentspends about 2b% of the budget on education. This educational effortis relatively recent, however.

Table 33: GOVERNMENT EXPENDITURE ON EDUCATION(in millions of B$)

ear Educational Groth Education- Growth Total Edu- Total Total Gov-Recurrent Rate al Capital Rate cational Govern- ernmuent Ex-Expenditures Expendcitures Government ment penditures

Expendi- Expendi- in Educat-tures tures ion as % of

Total Ex-_penditures

1966 4.9 - 1.2 - 6.1 414.7 13.619,67 7.4 51.0 3.1 258.3 10,.5 55.2 19.01968 10.4 140.5 rJ 9.6 1338 64.8 21.31,969 13. J 26.9 2.v, 141.2 15.2 81.3 18.71970 18.1 3 . . L. 7 235.0 22.8 96.9 23.51971 20.2 11.6 3,0 36 23.2 103.6 22.31972 21.6 6.9 3*. 6.7 2L4.8 104.5 23.6

Back in 1966,the Government used to spend less than in education.Since then,the rate of growth of rec,'rrent educational expenditures hasbeen quite high. Capital expenaiture also has been expanding rapidly,but at an uneven pace. In 19714 and 1975,two EII4BANK loans to build pre-fabricated schools will help tc maintain and even raise capital

educational expenditures at a lavel of $5 million. Recurrent experndi-tures are expected to grow at the same pace as in the last two years,therefore, educational expenditures will continue to be about 24% ofthe total.

141. Although some quantitative indexes of Bahamian education arehigh, the quality of education is low. Causes of poor quality can betraced back to a high proportion of untrained poor quality teachers,to the existence of 'fall age" schools in the Family Islands, and tothe rapid expansion of the system mentioned earlier.

142. Teacher training is essential for progress in the Bahamianeducational system; thus about 66% of the teachers were untrained in1969 in the Family Islands. In New Providence,the situation was better,but still with 20% of the teachers untrained. To cope with the teachertraining problem,there are two teachers' colleges: The Bahamas Teachers'College in Nassau and the San Salvador Teachers' College in the islandof San Salvador. The first one trains teachers for primary school aswell as junior secondary school. The second one is a residential estab-lishment offering a three-year course for primary teachers, almostexclusively for jobs in the Family Islands. Most trainees enter thesecolleges after three successful years of secondary school. TraininoDurses for senior secondary school teachers do not exist at the moment.

143. A major second cause of poor quality education comes from thegeographical dispersion of the country. In some of the Family Islands,the number of students is too low to divide classes into grades; there-fore, students all stay in the- same classroom despite different ages andnumber of years in school. As.a result, students living in the FamilyIslands sae seriously handicapped in their educational opportunities inrelation to those living in New Providence.

1414. By analyzing the results of exams taken at the end of thesecondary cycle, the poor quality of education becomes self-evident.Thus, in 1971,there were 1,568 candidates for the General Certificate ofEducation of the University of London, ordinary level, and 629 candidates(40%) did not pass any subject. For the University of London Certificate,advanced level, the total number of exams was 217,while the number Passedwas 67, onLly 31%. When efficiency is measured with Bahamian standards,the results are not satisfactory either. Of the 17,691 exams takento obtain the Bahamian Junior Certificate, after 3-4 years of secondaryeducation, only 7,283 (41%) were passed.

145. Within this dismal situation, however, there are a few pocketsof good quality education. They are confined mostly so expatriates, tograduates from the Government High School and to a few private schools.Of the 99,200 persons with fourteen or more years of education, 5,200were expatriates. The Government High School has admittedly good stand-ards, but only 90 vacancies per year; therefore, competition to get intothis school is acute.

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146. Since the number of good secondary school vacancies is smallin relation to the number of student candidates, selection has to bethrough an annual Common Entrance examination. Usually 3,500 pupilstake this examination with the purpose of getting one of the 200 goodvacancies. The tests in English and arithmetic are heavily weighted infavor of those that had skillful teaching of language use and numberdrills. They do not indicate anything about the child's capacity tolearn new material. Since this selective system does not meet theGovernment goal of comprehensive secondary education, the Government isplanning to drop it. But no replacement for another type of exam is insight. Therefore, the quality of good schools is going to drop withoutwarrantee thatin the other schools,quality is going to rise.

1h7. Vocational education is concentrated in the C.R. WalkerTechnical College, a school which resulted from the amalgamation of someschools in 1971. The college o&fers full-time, day release, and eveningcourses in a wide variety of subjects such as Radio and TV Servicing,Cosmetology, Photography, Painting and Decorating, Printing, LightClothing Manufacture, Mechanical Engineering, Retail Sales Merchandising,Motor Mechanics, Advertising, IEM Key Punch, Dressmaking, and HotelKeeping and Catering. In the 1972/73 academic year, the number of full-time students was 427, while the number of day release and evening studentswas more than a thousand. Vocational education in the hotel trainingschool, jointly financed by industry and the Government, has beenfound inadequate. The hotel training school program is being changedbecause of the lack of employment opportunities for its present graduates.For instance., of the 20 recepti^onists graduated last June, only three couldget jobs. This situation, stenming from a stagnant tourist sector, hasforced the Government and the hotel association to substitute the presenttype of program for another one with emphasis an training of supervisorytechnical personnel, so that trained Bahamians could eventually replaceexpatriates.

148. Over the last few years, strong emphasis has been placed uponhigher education. Since there is no college or university in the Bahams,the students go to study abroad. In 1971, the Government offered 100scholarships for this: 45 in the United States; 11 in the United Kingdom;and 39 at the University of West Indies, to which the Bahamas is affiliated.The majors sought by Bahamian students abroad are business administration,economics, education, medicine, engineering and English. It is estimatedthat the total number of Bahamian students pursuing higher education out-side the country is well over three hundred. In order to avoid part ofthis temporary brair drain, the Government is trying to put together theupper grades of some existing schools,thus establishing the beginning ofthe College of the Bahamas ir. 197h.

149. The Government's educational policies are spelled out in aWhite Paper on Education issued recently. The policy objectives are:

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(a) to reinforce teacher traiz.ing to equalize opportunitiesfor children in the Family Islands with those in NewProvidence;

(b) to divide secondary education into junior and seniorcategories;

(c) to make free the entry into all junior secondary schoolsand to equalize curriculum throughout them;

(d) to establish a national examination at the end of thejunior secondary school term to assess interests, attain-ments and potential for all students;

(e) to provide senior high school students with a number ofoptions such as academic training, vocational training,teacher training, nursing, social work, hotel studies,engineering, construction, agriculture, marketing,gardening, landscaping, and commerce. This part of theprogram would be crucial, given the country goal ofBahamianization of the economy.

(f) to give substantial support to voluntary or independentschools. These schools are mostly under the control ofthe different churches, They recruit about 27% ofBahamian students of all kinds.

(g) to establish the College of the Bahamas, which willcomprise the present Bahamas Teachers College, the SanSalvador Teachers College, the two upper-grades of theGovernment High School, the C.R. Walker Technical College,and the Hotel School. This unificatbn, hopefully, wouldlead to a better use of buildings and classes. It wouldalso provide flexibility with credits and options;

(h) to increase substantially the number of Bahamian teachersas opposed to expatriate teachers.

150. Given the high priority that the Government assigns to theBahamianization objective, education acquires special relevance. Althougheducational progress has been considerable, a lot more remains to be done.One key point would be improving the quality of education through teachertraining. Another one would be improving vocational training and rele-vancy of education towards jobs in order to allow Bahamianas to take over,smoothly and efficiently, medium and top pouitiona in private industry.

IV. D7EJZOPIENT STFATEGY AXD ?UBLIC INVESTMENT PROGRAM

151. . formal development plan does not exist yet in the Bahamas.Some ideas, however, are spelled out in the White Paper on Independence.These ideas contain, in an embrionary form, a general outline of thecountry's objectives and development strategy.

.i. Countrr Objectives

Political Style

152. The Bahamas has proclaimed her adherence to the fundamentalrights and freedoms of the individual, e.g-, the right toliberty and security of the person, enjoyment of property and protectionof the law, respect for privacy and the sanctity of family life, freedomof conscience, of expression, of movement, of peaceful assembly andassociation.

153. The country's relationship with its neighbors in the westernhemisphere will be closer by virtue of common interest and traditionalties. The country's commitment to democratic principles is said to beirrevocable. Conscious of her size, the Bahamas has also recognized thatshe can not play a major role in the political affairs of the world. Buther cultural relationships with her sister countries of the CommonwealthCaribbean will be cultivated.

Bahamianization

15h. Another relevant national goal is to achieve economic independ-ence, the so-called Bahamianization, meaning an effective level of controlof the national economic environment, the maximization of the benefitsto the Bahamas arising from both domestic and foreign investment, and anincrease in Bahamian ownership and participation in business activitywhere this is possible. To achieve this goal, all foreign businessshould be able to indicate both the sincere intent to train Bahamianpersonnel and to sell stock to Bahamians. The use of foreign personnelshould be limited as far as possible. Employers will have to presentrealistic programs for increasing the proportion of employed Bahamiansover aperiod of time.

Target Growth Rates

155. There are no indications yet of any target growth rate chosenin order to plan the economy. Therefore, to figure out what the futuremay bring to the economy of the Bahamas, we made a sensitivityanalysis. In this analysis,we assumed two different growth rates, amaximal one and a minimal one. At the same,time other parameters areassumed: incremental capital output ratios (ICORS), minimumimport elasticities and maximum navional saving ratios. All thoseparameters are fed into a bwo gap model that ensures consistencyin the projections. The model is designed mainly to estimate

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the externasi capital requirements to achieve an specified growth rate.The workirgs of the model are explained in Appendix' B, and the resultsof the projections are in the Statistical Appendix. What emergesclearly froii this exercise is that the external capital requirements ofthe Bahamian economy are extremely sensitive to the chosen target growthrate for GIDP. On the one hand,a real growth rate of GDP of 5% 1/ per yearmay bring about a foreign exchange deficit of more than 100 million ayear. On the other, a rate of growth of GDP of 3% 1/ may bring about aforeign exchange surplus of more than $40 million a year. The politicalimplications of choosing a given growth rate will have to be carefullyanalyzed by Bahamian policy makers.

B. Development Strate&L

156. The development strategy of the Bahamas hinges upon four differ-ent policies: first, tax haven to attract foreign investments; second,emphasis on tourism; third, emphasis on diversification; and fourth,emphasis on regional development. To some extent ,these policies seem toconflict with each other or with the Bahamianization objective. Thus,the muain task that the planners will face is to make objectives and policiesmutuially consistent.

157. First is the promotion of investment, especially foreign invest-ment, by means of tax haven. This may conflict with the Bahamianizingimmigration policies, as pointed out in paragraphs 47-h9 above. Perhapsthe neatest way of reconciling Bahamianization with attraction of foreigninvestment is,precisely,direct taxation, implying a drop in tax havenpolicies as discussed in paragraph 192, 198 and 202 below. For brevity,those arguments will not be repeated here.

158. Second is reliance on tourism. It is estimated in the WhitePaper that,by 1980,some two and a half million tourists will visit theBahamas each year, against one million and a half in 1973. This targetentails a growth rate of about 8% per year in tourist arrivals,startingin 1975. To contribute to meet this goal and, at the same time ,to assistthe Bahamian enterprise, the government will provide free land for smallhotels to be owned and operated by local families, especially in the FamilyIslands.

159. The tourist industry creates considerable employment. Moreover,it tends to have a significant backward linkage effect by generating demandfor construction and foodatuffs, thus providing basis for increasing localagricultural production. But at present, the multiplier effect of touristexpenditures is small (=1.12, paragraph 98) because of a high import contentof the tourist expenditures and because the profits of the industry go tooutside interests. Thus'a complementary objective in the development of atourist industry should be to enlarge its multiplier effect by reducing theleakages. This objective can be achieved by greater Bahamian participationand by reducing the extent of purchases of materials and foodstuffs abroad.For these policies to succeed, the quality of-tourist services should beincreased, and the prices of materials and foodstuff produced locally

1/ Toge-ther with the high growth rate of GDP, exports are assumed togrow a-t 8% per annum in real terms. With the low growth of GDP exportswould grow a-t 3% per annum.

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should not be higher than cif import price of products of similarquality.

160. The third main point of the development strategy is thediversification of the economy. This is a right objective to the extentthat the new activities created are export activities, or, if they areimport substitution activities, they do not need a protective tariffhigher than 20-10%.1/Any otler kind of protection,e.g., with a highertariff or with exchange controls, will, in all probability,lead toresource misalocations and reduction of GNP per capita. It must alwaysbe remembered that the present high GNP was achieved mainly because ofthe tourist trade. Should the Bahamas havespecialized in agricultureor industry instead of tourism, her income per capita at present would havebeen no more than $600, as opposite to the $2,350 that the country isenjoying today. The right economic criteria for selecting commodities tobe produced either for export or for import substitution, no matter ifthey are agricultural or industrial commodities, is to choose those thatfulfill simultaneously the following two criteria: first, be produced ata reasonable cost, not higher than the international cif import price;and second, use considerable amount of local raw materials and domesticfactors of production. Many other criteria floating around such asconsumer goods or raw materials against capital goods, o-r light industriesagainst heavy industries, essential against non-essential, in whateverform they are defined, are usually misleading and should be dropped rightaway, if the Bahamas is going to avoid past misallocation of resourcesdone in other countries with import substitution policies.

161. The fourth point of the development strategy is a possibleregional emphasis. The word possible is emphasized because,in the publicinvestment program for 1974-77, investments in the Family 'Islands areonly about 5% of the total,as can be seen in Table 36 below. However,there is wide recognition in the government that regional planning shouldbe the focal point of the development strategy. Economic development inthe Bahamas has so far remained concentrated mainly in two islands,i.e.,New Providence and Grand Bahama. The other islands, despite their greaterdevelopment potential,remain underdeveloped. It is clear that, forinstance, New Providence is overpopulated; thus the marglinu cost of basicservices such as water is going up sharply and the polluticn problems arebecoming extremely serious. Therefore,in terms of a development strategy,it is adequate to hold down at a minimum development efforts in NewProvidence and Grand Bahama and step up development plans in the FamilyIslands. These islands offer many beauty spots for tourist development,and two of them, Andros and Abaco, possess the best unexploited agriculturallands in the country. Moreover, many of them have plenty of grouxnd waterand adequate rainfall. Since in any case,it is unlikely that enoughresources could be siphoned off from New Providence and CGraud Bahama forthe development of all other islands, some growth poles will nave to beselected. Part of the Public Investment Program shouLd be addressed towardproviding better transportation links, basic utilities and li ces in thoseselected growth poles. Unfortunately, given the minfin. - cf the public

1/ Actually, the recommendation of this tariff level is based upon twodifferent arguments: (1) need for efficient diversifM -'ca'Cien (2) infantindustry, skills creation and productivity growth consi e7a>tiOns that,in the long run, may change Bahamas comparative srvant _

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investment program., it is doubtful that the regional approach can beimplemented in practice, unless there is a tax reform allowing forgreater public saving-investment efforts or else, the govermment isable to attract substantial amounts of foreign investments, like it wasin the sixties.

-6.- veral. Investment Requirements

162. Investment reqairements vary with the assumed growth rate ofthe economy and the incremental capital output ratio (ICOR). Since nodevelopment plan exists yet, we made some assumptions regarding thosetwo parameters and proceeded to estimate the overall investment require-ments under a maximal growth assumption and a minimal growth assumption.On the one hand, to maintain a high growth rate of GDP of 5% per year,an investment level of around $200 million annually would be necessary.On the other, to maintain a low growth rate of GDP of 3%, the requiredinvestment level is about $100 mt.llion. Details on the assumptions ofthis exercise are given in Appendix B,and the actual projections are given inthe Statistical Appendix.

-D. The Public Investment Program

163. T'otal public investments had been declining from about $32-34million in 1967-68 to 18 million in 1973. This decline would be morepronounced if the inflationary rate of about 6% per year were taken intoaccount.

164. Two main reasons had been responsible for the declining trendof public investment. The first had been the sluggish growth of tourism,which, in turn had provided a sluggish gr:>wth in tax revenue and,thus,lowpublic savings to finance public investments. The second reason hadbeen the priority given to growth of government consumption insteadof investments.

165. From Table 34, it follows that the high priority sectors forpublic investment in the past have been telecommunications, power, educa-tion, ports and water supply. Public works in the F amily islands haveaccounted for 11% of public investment. This percentage reflects a lowdegree of priority since those islands account for about 25% of the popula-tion. Other low priority sectors in past public investment programswere sewerage, health and agriculture. Tourism and industry investmentneeds were completely satisfied by the private sector, and thus, theywere outside the public sector.

166. In the past, public investment as percent of some key macro-economic indicators fluctuated sharply. Thus, public investmernX aspercent of gross domestic product fluctuated between 7.0% and 2.9%. Aspercent of gross domestic investment, they fluctuated between 32.3% and10.6%, although more as a result of even sharper variations in privateinvestment than in government s investaents themselves.

Table 34 : PUBLIC INVSTMENTS 1967-73(in thousands of Bahamian dollars)

Total

1967 1968 1969 1970 1971 1972 I973 67-13lot.

Roads 2358 3237 1709 759 138 442 100 8743 4.9

Ports 10403 4774 1093 1397 184 30 - 17881 10.0

Airports 1020 1685 2114 469 414 349 - 6051 3.4

Water supply 1184 6481 1372 2498 1518 1343 273 14669 8.2

Sewerage 19 34 10 57 82 88 100 390 0.2 I

Power 3821 3043 1190 8621 4565 1578 5417 28235 15.8 s

Telecommunications 5961 7115 1636 3470 6229 8075 2064 34550 19.3

Education 3136 3355 2026 4723 2998 3248 5700 25186 14.1

Health 307 398 212 472 343 541 714 2680 1.5

Housing 59 - 296 258 129 41 255 1038 0.6

Tourism - - - - - - -

Industry - - - - - - - - -

Agriculture 80 41 129 307 399 269 218 1453 0.8

Public Works 2145 2597 3901 4472 3246 1894 967.1 19222 10.8Out IslandsPublic Buildings 337 310 852 1917 1162 564 1177 6319 3.5

Other 715 823 3391 3 1646 ili5 602 11889 6.6

Total 31564 33902 19932 32561 23052 20032 17589 178614 100.0

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Table 35: PUBLIC INVESTMENT AS PERCENT OF GDP, GDI,GOVERNMENT REVENUE AND GROSS PUBLIC SAVINGS

% of Gross PublicYear % of GDP ? of GDI % of Govt. Revenue Savings

1969 4.1 10.6 20.4 117.71970 7.0 24.5 30.6 440.51971 44.4 32.3 21.7 1283.31972 3.4 28.1 16.6 215.01973 2.9 23.4 12.4 90.2

As percent of consolidated government revenue, public investment fluctuatedbetween 30.6 % and 12.4% showing a declining trend. As percent of trosspublic savings, public investment fluctuated widely from 90% to 3300%.These fluctuations are due more to wild changes in public savingsthan in public investment. The scarcity of public savings has been, andis expected to be, 1he main cause of a low level of public investment.

167. Owing to the lack of enough public savings, public investment isexpected to decline as a percent of GDP and of government revenue.Table 36 shows a maximum and a minimum public investment program,and it isindicative of the likely future behavior of public investments. The highestimate came from adding up all investment proposals submitted to theMinistry of Finance by the other ministries, as part of their contributionto the overaIl development plan, now in preparation. The minimum figures,

in parentheses, are based on the Ministry of Finance's self-imposed limits.To finance the minimum investment program, the government is consideringborrowing 60% of thetotal cost of it and meeting the remaining 40% by meansof public savings.

168. The two major shiftsin priorities reflected in the above 1973-77public investment program are, first, the new emphasis placed on sewerageand health, two minor items in 1967-73 public investments, and,second ,thedrop of ports from the list of priorities. Other sectors such as telecom-munications, power, education and water supply, are still on the prioritylist for 1973-77. Sectors such as tourism, industry and agriculture arenot going to absorb any major part of public investment at all.

Table 36 : PUBLIC iNV!SfmTrr PROGRAM - (in B$000 of 1973)Figures on the right represent the requests of the different Ministries and Agencies)Figures on the left represent the upper limits set by the Ministry of Finance based on revenue constraints)

1 9 7 3 1 9 7 4 1 9 7 5 1 9 7 6 1 9 7 7 Total 1£ Total %

Roads ( 300.0) 100.0 _ 839.0 ( 100.0) 220.0 ( 400.0) 500.0 ( 800.0) 100.0 (1600) (1-5) 1759. 1.5

Ports ( 100.0) - _ 402.5 ( 100.0) - ( 300.0) - ( 500.0) - (1000) (0-9) 402. 0.3

Airports ( 600.0) - (1100.0) 1100.0 ( 300.0) 300.0 ( 600.0) 600.0 ( 800.0) 800.0 (3400) (3.30)2800. 2.3

Water Supply ( 300.0) 273.0 (1200.0) 6773.0 (2800.0) 5232.0 (3400.0) 3363.0 (3300.0) 594.0 (11000) (10.6)16235. 13.6

Sewerage ( 100.0) 100.0 (2300.0) 2580.0 (3000.0) 4751.5 (5000.0) 3301.5 (3000.0) 301.5 (13400) (13.0)12034. 10.0

Power (5NaT.o) 5417.0 (3501.1) 3501.0 (4366-0) 4366.0 (2484.0) 2484.o (2620.0) 2620.0 (18388) (17.8)18388. 15.3

Telecommunications (2064.0) 2014.0 (2000.0) 2000.0 (2000.0) 2000.0 (2000.0) 2000.0 (2000.0) 2000.0 (10064) ( 9-7)10064. 8.4

Education (5700.0) 5700.0 (5600.0) 5600.0 (2900.0) 5400.0 ( 600.0) 3600.0 (1000.0) 3700.0 (15300) (14,5)24000. 200

Health (1600.0) 714.5 (2000.0) 6268,5 (3000.0) 2700.0 (1000.0) - (1800.0) - (9400) ( 9.1)96830 8.1

Housing ( 2000.) 255.4 ( 300.0) 881.3 ( 300.0) 589.0 - 390.0 - 473.4 (800) ( 0.9) 2589. 2.2

Tourism - - - 620.0 - - - - - - (620) ( 0.6) 620. 0.5

Industry - - - - - - - _ _

Agriculture ( 200.0) 218.1 (1000.0) 247.9 (1500.0) 166.8 (1200-0) 50.0 ( 700.0) 15.9 (4600) (4.4) 698 o.6

Public Works ( 240.o) 967.1 ( 500.0) 3169.5 ( 200.0) 1085.0 (1000.0) 1830.0 (1000.0) 1280.0 (5100) (4.9) 8271 6.9Family Islands

Public Building (1500.0) 177.3 ( 600.0) 1485.4 ( 300.0) 360.0 ( 200.0) 293.0 ( 500.0) 500.0, (4900) (4.7) 3815. 3.2

Other ( 300.0) 602.4 ( 400.0) 1118.8 ( 900.0) 1455.8 (1800.0) 2616.1 (1600.0) 2572.0 (5000) (4.8) 8365 7.0

Total (20681.0) 17588.8 (20501.0)36586.9 (20366.1) 28566.1 (21783.0) 21028.0 (19620.0) 15956.8 L02951.0)1t00)119726.6 100.0

Source: Ministry of Finance, and different Ministries and Agencies

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V. F1MCING OF DEYELOPXEDT

169. At present, the prospects for financing of development areunclear because of two reasons. First, more tax revenue is necessaryto finance public investments, but tax haven policies put a constrainton the growth of government revenues. Second, foreign investments areessential if the Bahamas is going to achieve a high growth rate of GDP,but the outlook for the required foreign investment to take place isdoubtful because of the uncertainty created in the foreign businesscommunity by the handling of work permits.

Table 37: ANALYSIS OF PUBLIC SECTOR FINANCES 1969-73(in million B$)

1M 1971 1972 1973Est.

Central GovernmentCurrent revenues 78.5 86.3 82.9 94.8 112.8Current expenditures 65.9 81.8 84.9 92.1 98.5Current account surplus ordeficit (-) 12.6 4.5 -2.0 2.7 14.3

Savings ratio 16;0 5.2 -2.4 2.8 12.7Investment2/ 17.1 20.5 12.3 10.4 10.8Savings as percent ofinvestment 73.7 21.9 16.3 26.0 132.4

State Enterprisesl/Current revenue 18.7 20.3 23.0 26.0 28.5Current expenditures 14.4 16.5 19.2 19.4 23.3Current account surplus 4.2 3.8 3.2 6.6 5.2Savings ratio 22.4 18.7 17.9 25.4 18.2Investment2/ 2.8 12.1 10.8 9.7 7.5Savings as percent ofinvestment 153.6 31.4 35.2 68.0 69.3

Public SectorTotal savings 16.9 8.3 1.8 9.3 19.5Total current revenues 97.2 106.6 105.9 120.8 141.3Savings ratio 17.4 7.8 1.7 7.6 13.8Gross fixed investment2/ 19.9 32.6 23.1 20.0 17.6Savings as percent ofinvestment 84.9 25.4 7.8 46.5 110.8

Savings as percent of GDP 3.5 1.6 0.3 1.6 3.2

Overall surplus or deficit -3.0 -24.3 -21.3 -10.7 +1.9

1/ BEC and BATELCO only

2/ Excluding financial investment

- 6e -

A. Public Sector Fiacing

170. Public finances were weak from 1969 to 1972. This situation re-sulted from a sluggish growth in revenue on the one hand, and a rapidgrowth of government consumption on the other. Rather than curtailconsumption, the government curtailed investment,but still could notavoid an overall deficit averaging B$14.8 million per year in the period.To finance this deficit,the government relied mostly on short and mediumterm borrowing in the local capital market and on foreign suppliers.

171. In 1973,public finances showed a marked improvement, stem-ming from a consolidation of short term debt and a tax increase. To dealwith the rising cost of debt services, the government contracted a refin-ancing loan of $30 million in Bahamian and U.S. dollars in July. Theloan, which came from a consortium of local banks, was immediately used torepay B$23.5 million of outstanding debt, including a B$8 million promissorynote held by the Bahamas Monetary Authority. Repayment of the refinancingloan will take place in 14 equal half-yearly installmentuover a seven-yearperiod starting in 1975. The tax increase of 1973 comes from(a) increasedrates of car licenses;(b) increased import duties on cars, spirits andbeer;(c) increased excise duties on liquors; 0i) general increases in importduties, and(s) an increase in the stamp duty on land transfers.

172. Despite the 1973 improvement, public finances in the Bahamasare structurally weak. This structural weakness stems from two causes:first, an inelastic taxation system; 1/ and second, a pattern of growinggovernment salaries by about 16% per year. This high percentage comesmore from a system of automatic salary increase by seniority thana growing number of government employees. Unless these structuralproblems are solved, the financial difficulties of the past few yearsmay prove to be recurrent.

The taxation effort

173. The tax effort of the Bahamas as measured by the ratio of taxespaid by residents to GDP was less than 1C% in 1972. This tax effort islow for a country of the per capita income enjoyed by the Bahamas. Asshown in Table 38, this 10% tax effort was calculated excluding taxes paidby the tourist, who pays on the average of about B$15.3.2/

1/ The Bahamian taxation system is dealt with in paragraph 174.

2/ Checchi and Company "A Plan for Managing the Growth of Tourism inthe Commonwealth of the Bahama Islandu," Washington, D.C. 1969, p. 90.

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Table 38s CAICULATION OFDIFFERENT MEASURES OF THE TAX EFFORT 1972

a. Total tax revenue (B$ million) 78.0b.. Total tourist (000) 1443.0c. Estimated tourist's tax payments

(B$ million; B$15.3 per capita) 22.1d. Estimated resident's tax payment (a.-c.) 55.9e. GNP (B$ million) 414.5f. GDP (B$ million) 582.5g. GNP Net tax effort d/e 13.5h. GDP Net tax effort d/f 9.6i. GNP gross tax effort a/e 18.8J. GDP gross tax effort a/e 13.4

It can, therefore, be concluded that there in scope for a greater taxeffort in order to increase the current account surplus and, thus, tohelp meet the needs for a higher level of capital expenditures. Theauthorities are cognizant of the problem and planning to review the over-all tax system. As a first step, a fee will be charged for petroleumbunkering and refining operations in (Iran Bahama. This may be regardedas an important step in direct taxation.

The taxation snytem

174. The taxation system of thea Bahamas has two main features:reliance on indirect taxation and albundancy of specific taxes as opposedto "ad valorem". As a result, taxes fall on the consumer regardless ofhis ability to pay, and revenue yields are inelastic, irresponsive tochanges in money income. Because of this inelasticity, the governmentis constantly forced to introduce new taxes or change the tax base inorder to meet the needs imposed by rising expenditures.

Table 39: TAX REVENUE 1969 - 73(in million B$) 1973

-1ybx 1910U 1971 1912 Est. % T97 (

Total Tax Revenue 67.0 72.3 68.0 78.0 106.4 100.0Taxes on Imports 52.0 52.5 47.3 49.4 62.3 63.3Taxes on Gaming andhotel quests 4.9 6.9 5.8 8.5 9.4 10.9

Departure and PassengerTicket Taxes 3.1 3.0 4.7 4.9 5.2 6.3

Stamp Taxes 3.6 3.3 2.7 4.0 h.6 5.2Business and ProfessionalLicenses 0.6 2.0 2.2 4.1 5.2 5.1

Excise Taxes 0.5 0.9 1.0 1.9 2.4 2.4Taxes on Real Estate 0.2 1.1 1.6 1.5 1.8 1.9Motor 1Vehicles 1.1 1.2 1.2 1.3 2.6 1.7Other Taxes 1.0 1.4 1.5 2.4 2.6 3.1

Import Duties

175. The reliance on import duties has administrative advantagesgiven the heavy involvement of trade in the economy. Thus, becauseof expediency reasons, taxes on imports developed easily reaching 78% oftotal tax revenue in 1969. However, because from 1969 to 1972import tax collections had beern stagnant at B$50 million, the share ofimport duties in tax revenue .'.c--eliaed to 63% irn the latter year.

176. The principal dutie- char.ged on goods at importation arecustoms duties and an emergen-: tax. The customs duties are mainly advalorem with a preferential rat.e applicable to goods of Commonwealth.origin and with a general rate 1'cr other goods. Almost all goods areliable to duty on importation. By far,the most common rates under thegeneral tariff are 20%, and under the preferential tariff 1C%. Anemergency tax at the rate of 12.5% ad valorem is chargeable on all goodsimported, with exemptions broadly following the exemptions from thecustoms duties. In addition, under the Stamps Act,a stamp duty is charge-able on every set of import entries or airfreight documents at the rateof 0.75% of the value of the goods mentioned in the documents.

177. Both customs duties and the emergency tax have bee-n imposedprimarily for revenue purposes. There are -few manufacturing industrieswithin the Bahamas,and,consequently, industrial protective duties arerarely necessary. 1n general, essential goods are either free of duty oradmitted at a low rate, while luxury or nonessential goods such as beer,wine, spirits, and tobacco are subject to higher rates. Certain durablecnnsumer goods, such as radios and record players, are also subject tohigher rates. Further import duties, described as inland taxes, arechargeable on radios, television sets, cigarettes, gasoline, and fuels.

176. Agricultural and horticultural commodities produced locally,fish caught by local fishermen, and a few manufactured products areprotected by customs duties which have minimum and maximum rates. Them1nimun is the ordinary rate,but the maximum rate may be imposed at anyt-ine for the purpose of protectior.. These duties are subject to prefer-ential margins applicable to Commonwealth countries.

'79. The exemotions are similar to those provided by other countries.7':;e accord with interrational c'onventions or have been introduced foreducatlon, health, or other social reasonsl for the improvement of&gr.iculture and livestock; or for the promotion of the tourism and lightrr,anufacturing industries. Certain staple foodstluffs, sucn as butter andmarigarine, heat and rye flour, rice, and meats, are exempted.

150. Customs control and management in the Bahamas are in need of improve-memn+. Defective customs laws, outmoded tariff failure to examinegoods, absence of a va'uation procedure, and release of goods beforedeclaration nre factors conducive to abuse. There 's an urgent need

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for improving training, for instructions bringing uniformity into Procedures,for inspection routines to see that the instructions are carried out,and for an investigation branch with adequate legal powers to followup suspected cases of fraud. The control of exemptions, the postauditof import declarations, and preaudit of refunds also require attention.The number of laws imposing duties and granting exemptions is excessive.Therefore, it would facilitate the work, both of officials and of thepublic, if these Acts,which impose tax and grant exemptions, weresimplified and combined into one main Tariff Act,based on the BrusselsTariff Nomenclature, and if the procedures for valuation of goods forcustoms purposes were more precisely defined. The present tariff isconfusing and inadequate for planning taxation policy and as an instrumentfor the compilation of statistics according to the Standard InternationalTrade Classification. Many of the present exemptions could be incorporatedinto the tariff schedule at a nil rate of duty. To modernize thesecustoms,laws and practices,the government has the technical assistance ofthe IMF.

Taxes on Gaming

181. Second in importance to import duties are taxes on casinos andgaming machines. There are three casinos in the Bahamas, one in ParadiseIsland and two in Grand Bahama. They are taxed in three different ways:first, with a B$0.5 million per year per casino; seccnd, with 17% ongross winnings up to $17 million and,in excess of $17 million, 10; andthird, with a specific tax on gaming machines and tables.

Departures, Passenger ticket taxes and hotel guests

182. The departure tax consistsof B$3.00 dollars per every adult leavingthe Bahamas either by ship or aircraft and $1.5 per child below 12 down to3 years old. The passenger ticket tax consists of $2.00 per every ticketsold within the Bahamas. The hotel room tax is B$3.00 per year and thehotel guest tax ia 25 cents per night per guest in the high season, 17 centsin the low season. In practice, the hotels charge 4% of the hotel billto the tourists. The surplus, after paying the government the legal taxes,is used to finance the hotel training school and related expenses.

Business and professional taxes

183. These are license fees payable annually by banks, trust companies,insurance companies, and companies in general. The fee on banks varieswith the type of bank. It goes from the smallest restricted" banks,payingB$1i,500 annually,to commercial banks open to the public,paying a maximmof B$45,000. Insurance companies pay a maximum fee of B$3,000 annually.Companies of any type of activity, incorporated in the Bahamas, pay amiualfees lower than B$300.

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184. As an example of the anachronism of some existing taxes, thereexists an annual fee paid by shops of only B$0.71 per year. The Govern-ment is studying a new tax on shops to replace this one. However, thepublicly stated policies against an income tax,or anything that wouldappear to be a substitute income tax, are particularly important here sincethey rule out measures such as those used in Freeport by the PortAuthority, namely percentages of turnover. The problem with a fee offixed amount is unfairness, because it does not take into account theability to pay. Thus,a given fee may be light for a big merchant butheavy for a small one. A way out could be a graduated tax of fixedamount,taking into account the nature of the business, size of property,and zoning. Thus, wholesalers, manufacturers retail shops, garages,automobile agencies, restaurants, laundries, etc. might all be classifiedby means of the criteria suggested and pay these taxes accordingly. Inany case, the yield of this kind of tax is not expected to be substantial.

Stamp taxes

185. Stamp duties are payable on a variety of commercial and legaldocuments, such as deeds of conveyance of realty and personal leases,mortgages, import entries, checks, receipts for money in excess ofB$5, and remittances abroad. The most important of all is the tax on deedon conveyance of realty payable on a sliding scale starting at 0.75% forvalues below B$6,000 and increasing to 4.5% on values exceeding B$100,000.Stamp taxes are a small, though a stable,component of tax revenues.

Excise tax

186. This tax is payable on domestically produced spirits and beer.

Taxes on real estate

187. This tax is progressive,xith a maximum of 1.5% for propertiesvalued over B$50,000 on New Providence Island. Undeveloped land andproperties assessed at less than B$20,000 are exempted.

188. With no income tax, a sound system of property taxation isparticularly needed to compensate for the present reliance on commoditytaxation. The revenue potential of this tax was estimated at B$5-6 millionin 1969. But the new system of property tax was not as productive as washoped. There is a grave delinquency situation which threatens to bringthe tax into disrepute. Action to correct this situation is difficultbecause of administrative failure to observe the steps provided in the lawwith regard to the making of assessments and the service of notices.Frivolous objections have been encouraged by failure to enforce thelegal provision that tax payable should be deposited before anobjection is considered.

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Taxes on motor vehicles

189. These taxes are based on the vObicle's area, a poor indicator ofthe vehicle's value. Moreover, comparison with taxation of vehicles in othercountries such as Jamaica and Singapore indicated that the tax could beeasily doubled. The average tax per vehicle was about B$22.5 per year upuntil 1972. In 1973, the rates were, in fact, almost doubled, and revenueyields increased substantially. Taxation of motor vehicles is a relativelygood tax in the Bahamas, not only because it is based on the ability to pay,but because there are 41.,o00 passenger cars in the country, _mplying a den-city. of one car per every four inhabitants, better than in Germany and GreatBritain, but poorer than in the United States and Canada.

B. Fiscal Prospects and Issusa

190. Despite some official forecast of budgetary savings of up to B$7 mi3lion,the fiscal prospects for 1974 remain somewhat uncertain. GNP is stagnant,and the capacity to pay indirect taxes is used up. Nonetheless, the Ministryof Finance is projecting a growth in revenue of about 7% this year. Uhlessnew taxes are established, it is doubtful whether fiscal revenues will growat all. Although the government has increased property taxation, which lastyear yielded only 1.8 million, and is considering increases in fees on shops,it is not likely that these increases will be sufficient. Even if the govern-ment follows the policy of raising salaries of public servants in lin with thencrease in the cost of living, government will Be el4ous2y eroded.2aerefore, new taxes of prompt and high yield will be necessary.

191. Reinforcing the case for more taxes :s the situation of the govern-ment-owned Bahamas Electricity Corporation and the Telephone Corporation,BATELCO. These government corporations will have a cash flow deficit wellover B$5 million in 1974. This cash deficit is not the result of operatingdeficits, but of previous short term borrowing to finance capital equipment.Anyway, this deficit will add to the central govermnent's financial diffi-culties for the present year unless this short term debt is stretched out.Negotiations addressed to this end are under way.

192. In Chapter II F, we described the conflict between a policy attract-ing foreign investment and the policy of keeping away foreign personnel throughthe handling of work permits. One way of reconciLing the two policies is tomake the concession of working permits automatic upon the payment of a gradu-ated head tax or fee of, let us say, B$1,000 to $44.,000 yearly for each workingpermit. This policy will give at least certainty to foreign investors allow-ing for a renewal of capital inflows; it will give an edge of preference foremployment to Bahamians; and it will provide cn incentive to train localpeople. At the same time, the fee this policy establishes will provide nearljB$10 million in revenues needed by the Government for development purposes.Eventually, at a later stage, the simple fee can be replaced by sone otherform of personal income tax, or by a payroll t ax.

Reconsideration of tax haven policies

193. The benefits that the country receives from the policies oftax haven will have to be assessed sooner or later. Deapite taxSiven pol`c4es, the country has not attracted much foreign business inthe last five years. Exceptions to this statement are a few big, highlycapital intensive, industrial concerns that add little to net nationalincome because they provide few new jobs to Bahamians and repatriatetheir profits abroad.

19h. If the government were to drop its tax haven policy, it wouldface a political and legal problem with the Grand Bahama Port Authorityand the delegation of taxation power made by the colonial government onthat Authority. This poses a grave dilemma. On the one hand, if thegovernment leaves untouched the Port Authority contract, establishingdirect taxation in the rest of the Bahamas, the Freeport area will enjoya different tax burden than the other islands,thus creating a situationof blatant inequality because the richest part of the country will bepaying less taxes. On the other,, if the government decides to tax thePort Authority and/or its licensees, the Hawksbill Creek Agreement wouldbe violated and this could bring about a legal problem. However, it islikely that, if the degree of direct taxation is moderate, the PortAuthority and her licensees would come to terms with the government.Similar problems to those which would arise with the Grand Bahama PortAuthority would emerge with the contracts signed under the Hotel andIndustrial Encouragement Acts. However, because of the interdependenceof tax systems discussed in the next paragraph, these hypothetical taxesare not likely to represent any additional real tax burden on the privateforeign companies.

Corporate income taxation and the interdependence of tax systems

195. Tax haven policies are not accomplishing their objectives becausethey do not take into consideration the interdependence of tax systems.Developed countries, exporters of capital, usually follow one of thethree procedures outlined below in order to tax dividends received fromsubsidiaries located abroad.

(a) The exemption method. Where a capital exporting countryexempts incomes derived from foreign sources, an investorfrom that country obtains the full benefit of the incometax reduction or tax haven granted in the developingcountry where the investment is made. This method defin-itely favors the export of capital. Tax exemptions athome,superimposed with a tax exemption in the developingcountry,put the investor in a real tax haven situation.This is exactly the case of U.S. investments in PuertoRico referred to below. However, relatively few capitalexporting countries adopt unilaterally the exemption

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approach in their tax treatment of foreign incame. More-over, those that do so generally restrict its applicationto dividends from controlled foreign subsidiaries, toincome from foreign branches, or to income from realestate property located abroad. Income in the form ofdividends from portfolio investment in stock of a foreigncorporation, or in the form of interest on loans to aforeign enterprise, controlled or not, or in the form ofroyalties, are rard07 tax exempt.

(b) Special tax rate or full taxation with deduction. Where acapital exporting country subjects foreign income to aspecial rate below that applicable to domestic income, thefull effect of tax incentives granted by a developingcountry will not be realized. Depending on the specialrate, the tax may cancel out a small or large part of thetax incentive granted by a developing country. If theinvestor's home country subjects foreign income to its fulltax and allows foreign tax merely as a deduction from thetax base, the investor will benefit by a fraction of adeveloping country tax incentive, since the base for hishome country tax will increase because of the incentive.

(c) Tax credit method. Ca,ital exporting countries taxingforeign income and allowing a credit for taxes imposedabroad wipe out entirely the tax benefits that their inves-tors would enjoy under a foreign tax haven. Thus, taxincentives granted by developing nations, because of thetax credit system, are simply capital transfers from thetreasuries of the developiiig countries to the treasuries ofthe developed ones. However, tax credit countries normallydo not levy tax on profits derived abroad through foreignsubsidiaries until profits are actually received by theirtaxpayers as dividends. Consequently, only when the profitsearned abroad are reinvested in the capital importingcountry do tax benefits granted by a developing country accruein full to the investor.

196. In view of the tax systems followed by capital exporting coun-tries, the Bahamas would benefit from a detailed study of the subject. Itis probable that such a study will lead to a reconsideration of the taxhaven policies followed up until now. Special attention should be givento the possibility of taxing corporate profits but enacting high deductionsfor fixed investment in the country. This would encourage profits reinvest-ment and, moreover, capital intensive methods of production which areadequate, given the high level of wages and labor scarcity prevailingin the Bahamas.

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197. F hnally, it is worth mentioning that all Central Americanand Caribbean countries have usually looked upon the Puerto Rican caseas an example of a country which has successfully used tax incentivesto foreign corporations to foster industrialization. They tried toimitate it,without fully realizing that the case of Puerto Rico is notty:±cal for two reasons. First, Puerto Rico is inside the United Statestrade and tariff area. Therefore, Puerto Rican manufacturers can enterfreely in the United States. Second, the United States corporationsin Puerto Rico are not subject to Federal income taxes in the UnitedStates,and yet they enjoy the benefits of operating within the UnitedStates business community, with the United States currency, bankingand postal services, and with the full protection of constitutions, lawsand courts of both the United States and Puerto Rico. Thus, fiscalexemptions given by the Puerto Rican government to U.S. corporationsaccrue fully to those corporations. This is not the case of the Bahamas,where fiscal exemptions given tV foreign corporations are not "spared"by the U.S. Treasury and most other governments.

Personal Income tax

198. The problems arising from both the low tax effort of residents,estimated at 10% of GDP, and the inelasticity of the tax system, wouldbe resolved if the government would establish a personal income tax. Inaddition, since foreigners are in the higher income brackets,as shown inparagraph 63 and chart 4, this kind of tax would be in agreement with thegoal of Bahamianization of the economy. Incidentally, the referred chartserves to estimate the yield of a moderate income tax with a maximum rateof 30C. Thus, allowing for a minimum nontaxable income and deductions forwife and children, the yield would be above 20 miUlion.

199. Since the establishment of an efficient system of personal incometaxation takes time,and the government needs revenue with some urgency,perhaps the best way to proceed would be first to establish a sizableimmigration fee,as referred in paragraph 192,, and then, at a later stage, toestablish the income tax and replace the immigration fee with a systemof minimum income tax and/or lower deductions for foreigners.

200. There is little validity for the widely held fear that theadoption of a corporate or personal income tax for residents would under-mine the economic future of the islands. But, o.2 course, in order tocontinue, to maintain the prominence of Nassau as a financial center,relief should be given to non-residents and income arising from abroad.

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C. Private Sector Financin

201. In the early sixties,private sector financing took, for themost part, the form of re-investment of profits from direct foreigninvestments., After the late sixties boom and the 1970 depression,thisform declined sharply. In fact, at present, foreign businesses reinvestlittle in the Bahamas,and most of their profits are sent abroad.

202. Since direct foreign investment already existing the Bahamasis considerable, it would be possible to attract more foreign capitaljust by creating the conditions for reinvesting, in the country, partof the profits earned from it. To do this, the uncertainty and adminis-trative inefficiencies brought about by the handling of work permitsmust be removed.l/ Foreign businessmen strongly dislike this handlingbecause of delays, uncertainty and bureaucratic discretionary power.There are many cases where expatriate, candidates for key jobs were se"lected, the applications for working permits were made, but, approval was sodelayed that,when it was granted, the candidates had already accepted,-other jobs in different countries, and the employer had to start theprocess of hiring all over again. It is clear that stable and simplerules, as suggested in paragraph 192, are needed to handle this situationif foreign investments are going to come again to finance the economicdevelopment of the Bahamas.

The Creation of a Development Bank

203. Conscious of the need for establishing more bridges between theforeign financial community and the local businessmen, the Government isgoing to create a Development Bank.

204. It is generally recognized that commercial banks are not suitedfor long term financing. Therefore, the new Development Bank will be vestedwith the authority to negotiate long term agreements with the foreignbanking community and to provide loan capital to small Bahamian businesson a long term basis.

205. The new Development Bank will have the new Central Bank, aboutto be created too, as a shareholder. Private banks and insurance com-panies will be invited to subscribe shares of the Development Bank. Itis expected that, in this way, a link will be oreated between the foreignfinancial community and the Bahamian borrowers, with the Central Bankacting as a mediator.

1/ Presently some progress is being made in this respect. See Daragraph 50.

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206. The new Development Bank hopefully will also be capable ofproviding capital for well considered commercial and industrial projectson different bases than the traditional ones. Traditionally, mediumand long term financing is available to enterprises with a good creditrating or to those who have ample collateral security. The newerconcerns, and the businessmen without substantial backing, generallyfind difficulties in obtaining proper finance. In such circumstances,a Development Bank for lending on the basis of the business prospectsrather than the amount of net worth or collateral is needed. This isprecisely the type of vacuum that the new Development Bank is supposedto fill.

The Development Corporation

207. In order to provide flexibility to negotiate with private foreigninvestors, the government established the Bahamas Development Corporation.By using its authority, the Development Corporation can enter into equityagreements for use of Crown Land. Much of this land, in fact, is going tobe transferred to the Corporation. Then the Corporation will use thisproperty as a basis to negotiate, with foreign investors, the creation ofnew enterprises in tourism and industry.

Commercial Banking

208. Commercial banks engaged in local business are in foreign hands.The most important banks, those that absorb 80C of the local business,are the Royal Bank of Canada (the government's bankers the Barclays Bank,the Bank of Nova Scotia, the First National City Bank of New York, theChase Manhattan Bank, the Canadian Imperial Bank of Commerce and theBank of Montreal. These Banks have a network of 70 branches throughoutthe country, of which less than 40 are in Nassau.

209. However, local operations are small compared with the offshorebusiness carried out by these seven banks. For example, in 1972,demandplus time and saving deposits in Bahamian dollars represented only 6%of total deposits in these banks. Loans and advances in Bahamian dollarsrepresented only 3% of the total loan and advances. Thus, the bulk ofthe operations carried out by the commercial banks is in offshore fundsand Eurodollars.

210. At present,the banking system receives more money in depositsfrom the Bahamian economy than it gives back to local business in loans.This situation stems from the rather stagnant state of the economy.Thus, the marginal efficiency of capital is low, the uncertainties arelarge, the level of investment is low and,therefore,the demand forcredit from the banking system is also low and, moreover, has declinedsince 1969.

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Table 40: COMMERCIAL BANK CREDIT AND LIABILITIESOUTSTANDING TO THE PRIVATE SECTOR

(in millions of B$ at the end of the year)

1969 1970 1971 1972 1973

Credit to the PrivateSector 153.1 127.1 134.9 130.8 138.6

Liabilities to thePrivate Sector 274.8 268.0 256.4 241.8 245.8

Demand Deposits (166.0) (169.4) (146.7) (135.4) (130.4)Time Deposits ( 65.1) ( 55.1) ( 64.8) ( 61.9) ( 69.0)Saving Deposits ( 43.6) ( 43.4) ( 44.9) ( 44.9) ( 46.4)

D. Monetary M!nagement

211. The Bahamas Monetary Authority, created in 1968, has limited legalpowers, as was usual in these kinds of bodies before World War I. The pur-poses of the Authority are, first, to issue currency by buying foreignexchange and reducing currency in circulation by selling foreign exchange;second, to sup-vise the banks and trust companies; and third, to administerthe ecchange controls on behalf of the government.

212. The statute of the Bahamas Monetary Authority establishes thatcurrency in circulation has to be backed at all times at least by 50%foreign exchange reserves. Following the old gold exchange standardrules, currency in circulation is expanded under balance of payment sur-pluses and reduced under balance of payment deficits. Although theAuthority has power to rediscount and lend to banks, only on rareoccasions has it made use of this power. The Authority cannot legallymake advances to the Government or force banks to hold reserve require-ments, or even hold Government deposits. Thus, monetary policy tends tobe neutral, impersonal, automatic and governed by the balance of paymentssituation.

213. However, given the small size of the country, it can be argued thatthe impersonality and automaticity of the monetary policy are merely legal.In reality, under these arrangements,the control of the money supply istransferred from tte Monetary Authority to big commercial banks that,through autonomous movements in the capital account of the Balance ofPayments,may drastically reduce or increase the currency in circulation.

214. The composition of the money supply in the Bahamas limits evenfurther the powers of the Monetary Authority, because around 5G% of themoney supply is composed of U.S. dollars.

Table 41: COOMP(S T1 F THE MONEY SUPPLY 1972-rin mill:ion of B$)

Money 156.7Currency in Circulation 21.3Demand Deposits Denominated in B$ 63.6Demand Deposits Denominated in US$ 71.8

Quasi Yoney 106.8Time Deposits B$ 61.9Saving Deposits B$ 44.9

The above table tends z.o understate the absolute amount of U.S. doll.arsbecause there are many dollar oills unaccounted for by the monetary statis-tics, but in fact usec. in day to day transactions, not only by tourists,but also by local people.

215. No matter who the agents of monetary policy were --the MonetaryAuthority, the private commercial banks,the impersonal market forces arisingfrom the balance of payment situation or a combination of the three -- moneysupply declined from 1969 up until June of 1973 at an annual rate of about5% per year and credit to the private sector at about 4.5%. Probably inits effects on monetary expansion or contraction,the balance of paymentswas a rather contractive factor in the last few years. Although exportsof goods and non factor services did surpass imports of goods and non-factor services by amounts well over 100 million dollars, these surpluseswere not monetized due to large profit remittances abroad in those years.Capital flight has also been instrumental in bringing down the level ofthe money supply.

Table 42: SELECTED VARIABLES RELATED WITH INFLATION

(In growth rates except for interest rates)X 1970 1971 1972 1973

Retail Price Jndex 1o 5.2 5. 9.3Retail Price Index of Food 5.4 5.1 5.2 6.7 12.4Retail Price Index in the US 6.1 5.5 3.4 3.4 8.8Retail Price Index of Rood inUS 7.2 2.2 4.3 4.7 20.1

Index of Wages in the Bahamas 18.0 -15.0 7.0 14.0 n.a.Money Supply -3.9 2.1 -13.5 -3.2 -1.6Commercial Banking Credit to

the Private SeCtor 22.5 -17.9 6.1 -3.0 6.0Commercial Banking Credit to

Central Government 49.1 81.8 2.2 17.5 n.a.Commercial Banking Credit,Total 60.1 -9.2 5.5 3.2 18.6Treasury Bill Tende- Rate 7.6 9.1 8.1 8.3 6.6Average TLime D.eposit Rate 6X1 6.6 7.2 7.1 7.5Prime Rate .0 .. 8.5 9.0 9.0Consumer Loans Rate 8.9 9.0 9.5 9.7 12.9Ten Year Mortgage Bates 9.0 9.4 9.6 10.1 11.4

Inflation

216. Despite sone weakness in the data basis of Table 42 above, itis possible to make some generalizations about inflation in the Bahamas.First, given the openness of the economy and its close relationship wit.hthe United States, the rate of inflation in the Bahamas depends roughlyon what happens to inflation in that country. This is particularly truewith food items because they are imported, for the most part, from the U.S.Second, the negative rate of monetary growth,together with the low levelof economic activity in 1969-73,points to a case of cost push inflationinstead of demand pull during this period. Third, two factors push pricesup, the increasing cost of imported items and the level of wages. The levelof wages increased rapidly during the sixties due to the inelastic supplyand the high demand for labor,stemming from a booming economy. But, in1970, economic growth stopped suddenly, and, accordingly, wages dropped considerably.However, in 1971, 1972, 1973 zsd 1974,trade unions have been stronger and wageshave started to rise again to meet higher wage demands from organized labor. Inan econovm like that of the Bahamas, so exposed to the tourist trade, the localpopulation is continuously tempted to adopt the conspicuous consumption patternsof tourists. Thus, the rising consumption expectations end up in demand forhigher wages. At present, wage.s are at about the French or British level, /perhaps too high in relation tc labor productivity in the Bahamas. Fourth,comercial bank credit to the public sector played an expansionary role inthe last four years, especially in 1969-70, but thenrin subsequent years,tendedto level off at about B$30-40 million. Since 1970 was a depression year,credit to the publie sector could not possibly have had any major role incausing inflation.

3terest rates

217. Interest rates could play a powerful role in the balance of paymentsand monetary policy &f the Bahamas. The existence of a Eurodollar marketwith more than US$15 billion in Nassau makes it likely that,by raising orlowering interest rates in Bahamian dollars and by assuring, at the same time,the currency pwfty with U.S. dollar, huge amounts of money would enterthe Bahamian monetary system or go out of it. Thus, the problem with interestrates as a tool for monetary policy in the Bahamas is that, perhaps,it willbe too potent a tool and will- have to be used with extreme care, especiallyin the eXPansionary phase of the economic cycle.

The New Central Banking Legislation

218. New legislation enabling the establishment of a Central Bank has beenapproved rece;ntly by Parliament. The legislation, when enacted, will sub-stantially increase the government powers over the money supply and credit.Thus, the Central Banc will have the authority to fix and vary the percentageof cash or deposits liabilities in the Central Bank that commercial banksshould hold in relation to deposits in Bahamian dollars. Different per-centages may be fixed for different banks. Any commercial bank that failsto comply with these requirements would be liable to a fine not exceedingB$1,500 per every day of non-compliance. .iowever, the Central Bank's powerwill be circujnscribeX in three respects: first, the cash reserve ratio mayvary only between 5 /o and 20 °/o; second, the liquid asset ratio between10 °/o and 30 °/o; and third, no increase in ratios exceeding 5 percentagepoints may be requested in any period of 30 days.

I/ In nominal terms.

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There is no proviso for the set-cing of marginal reserve requirements.

219. The Central Bank will also have powers to prescribe the maximlmamount of loans and advances that commercial banks may have outstanding, thepurpose and maturity of those loans and the security on which they may begranted. The coverage of these requirements might be general or apecific,with regard to the commercial banks as well as the loans and advances.However, the regulations in question may not go into effect earlier than30 days after the date of their public announcement.

220. The new Central Bank will be allowed to make temporary advancesto the government. However, the total amount of advances is not to exceed10% of the actual or estimated average ordinary revenue of the government,whichever is lower. The Central Bank may also purchase, hold, and selltreasury bills and publicly issued government and government-guaranteedsecurities maturing within 20 years from the date of their acquisition.However, the total amount of these longer term securities (including those held assecurity for any loans and advances) is not to exceed the equivalent of 20%of the demand liabilities of the Central Bank.

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VI. BALANCE OF PAYMENTS PROSPECTS AND XT1EIAL DEBT

A. The Balance of Payment Prospects

220. The balance of payments estimate for 1973 presents a similar patternto the one for 1972. With some qualifications due to the oil crisis, anotherof similar pattern can be expected for 1974.

Table 43: SUMMARY OF THE BALANCE OF PAYMENTSEXCLUDING OIL UNDER PROCESSING AGREEMt

Estimate for 1973, Projection for 1974

(in current US dollars)

1973 1974

Exports of Goods and Non Factor Services 483.5 523.0Imports of C:oods and Non Factor Services 330.3 379.0Resource Balance 153.2 144.6

Net Factor Service Income -173.4 -166.6Net Current Transfer 2.0 2.0Balance in Current Account -18.2 -20.0

Long Term Capital 93.7 61.3Short Term Capital -64.5 -56.3Increase in Reserves (-) -11.0 +15.0

The balance of payments situation depicted in Table 43 permitsus to make sBegeneral comments. The balance of trade and non factor services presents largesurpluses of the order of $150 million, but these surpluses are eaten up byfactor payments abroad of equivalent amount. The capital account shows ashrinking capital inflow,stemming mostly from the purchase of land under long-term contracts signed previously, but these capital inflows are counteracted bycapital flight Despite capit4L flight,foreign exchange reserves increased by US$11million in 1973. Thus, the balance of payments of the Bahamas had been strongenough in that year to send large profit remittances abroad, pay for capitalflight, and still show an increase in reserves. This increase in reservesis unlikely to happen again in 1974 because of the oil crisis.

221. At the end of 1973,the foreign exchange reserves held by the MonetaryAuthority stood at about US$43 million, equivalent to 1.7 months of importsof goods and non factor services, excluding oil under processing agreement.In an economy like the Bahamas, however, official reserves are inadequateindicators of the ability of the econowy to pa::- external public or privatedebt. Even the net foreign assets position of the consolidated banking

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system, about US$70 million,equivalent to 2.8 months of imports, is not asatisfactory indicator in an economy where about 50% of the money supplyis denominated in US dollars.

222. in 1974, the balance of payments is likely to show a smaller surplusin the sub-balance of goods and non factor services than in 1973 becauseof theimpact of the oil crisis. This crisis is affecting the Bahamas intwo different ways. First, on the import side, it will increase the oilimport bill for domestic consumption from US$17 million to about US$60million. On the basis of the foreign exchange reserves held by theMonetary Authority, the commercial banks, and the private sector, theBahamas can afford this oil import bill with no major problems, at leastfor 1974. But the increased oil import bill represents an importantleakage of resources out of the Bahamas,and,to maintain the present levelof economic activity, an equivalent amount of resources will have to comefrom somewhere else or the level of econoitLc activity will decline further.Second, on the export side, the crisis will have some detrimental effectson tourist arrivals, but the Government is successfully counteracting themby assuring plenty of oil to chartered jets and cruise ships stopping inthe Bahamas. Thus, despite the oil crisis, tourist arrivals are holding upwell in 1974. Then it is likely that exports of goods and non factor serviceswill preserve the 1973 levels in real terms.

223. Part of the increased oil import bill c m be shifted back to tourists.In fact, tourists consume much more gasoline and electricity per capita thanlocal people. In addition, part of the oil imports are used in export in-dustries, like cement for instance, that can also be shifted out of thecountry. Thus, this brings about a terms of trade problem. On the basis ofan increase in prices of exports of goods and non factor services of about8%, and imports of about 14%., the consequence of the increased oil importprices, the Bahamas is likely to experience a terms of trade loss of aboutUS$27 million, measuring it at 1973 prices.

224. Balance of payments projections beyond 1974 are a highly tentativeexercise, not only because of the uncertainties of the present internationaleconomic situation, but also because of the lack of a development plan inthe Bahamas. The country is in a period of transition. With independence,the country started to revise many of the policies which had been followedby the colonial authorities. As a result, many of the stated policy objectivesare inconsistent with each other or with the tools designed to reach them.

225. The exercise of Appendix B indicates that the future of the balanceof payments in the Bahamas varies considerably with the chosen growth rateof GDP. On the one hand, a real growth rate of GDP of 5% per year may bringabout a balance of payments deficit of more than US$100 million per year.On the other, a growth rate of GDP of 3% may bring about a surplus of morethan 40 million per year. Appendix B shows illustratively the resultsof the referred exercise where, in addition to testing the effects of differentgrowth rates on the balance of payments, some sensitivity analysis is presented,

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varying the import elasticity, the marginal savings ratios and export growthrates. Moreover, this exercise points out to an ever opening gap when the5% growth rate of GDP is used. This means that a growth rate of 5% is notfeasible (under the model assumptions) in the long run because the countrywould suffer, either from an intolerable degree of foreign ownerslhip or toomuch public debt. Since the country generates resources in excess of itsown needs to grow at 3%, an intermediate growth rate of, say,4% may beoptimal from the point of view of full domestic resource use in the Bahamas.

B. External Debt

226. The public and publicly guaranteed external debt increased from aboutUS$23 million in 1968 to US$68 million in 1974. The Bahamas appears able tocontract additional amounts of external public borrowing. Two main indicatorssupport this view. The first is the ratio of external public debt outstandingto GNP which is about 14% in 1974. The mean ratio of external public debt toGNP for a sample of 36 representative developing countries all over the world was

20% in 1971-72. For some Caribbean and Central American countries this ratiofor year 1972 was as follows: Dominican Republic 18%, Jamaica 19%. Trinidadand Tobago 11%, Costa Rica 17%, El Salvador 8%, Guatemala 5%, Honduras 15%,Nicaragua 23% and Panama 19%. The second indicator is debt service over exportsof good and non factor services. This ratio is extremely low in the Bahamas;it is only 2-3%. However, the usefulness of this particular indicator can bequestioned in an open economy such as the Bahamas. Other additional indicatorsrelated to government revenues and savings have to be brought out. Theseadditional indicators call for a more cautious judgment.

Table 44: SELECTED HISTORICAL INDICATORS OF THE BAHAMAS ABILITYTO REPAY ADDITIONAL EHTERNAL PUBLIC DEBT

(in percent, excluding debt with a maturity of less than a year)

1972 1973 1974 est.

External Debt Outstanding/GNP 12.0 11.7 13.7Debt Service/Exports of Goods and NonFactor Services 1.9 2.3 2.9

Debt Service/Tax Revenue 11.0 9.9 13.1Debt Service/Consolidated Current Govt.Revenues 7.1 7.4 9.1

Debt Service/Gross Public Savings 92.5 53.8 100.0Interest Payments/Gross Public Savings 38.7 18.9 37.4Debt Service/Gross National Savings 15.1 18.6 23.6

The Bahamian economy as a whole presents better indicators than the publicsector, although thelatter is still within an acceptable range. However, pastexperience shows that the public sector contracts considerable amounts ofshort-term commercial banking credits that later have to be stretched outinto long-term government debt. Therefore, to avoid the deterioration ofpublic sector indicators, the government and its enterprises should avoidfurther short-term commercial bank borrowing to finance investments as muchas possible and rely more on taxation and tariffs.

- 86 -

227. For assessing the country's ability to repay external debt the ratiosfor, say, 1980, are more important than the present ones. Thus, the debt serviceratio is projected at the 3-L% range for the foreseeable future. But future ratiosare, to a large extent, mere suppositions. It is safe to say, however, that, ifthe Bahamas is going to grow at a fast rate for a while, the resources will haveto come mostly from direct foreign investments and not from public borrowing.The public sector cannot possibly assume a major role in financing a large scaledevelopment plan unless it substantially increases its public savings. This couldbe done by increasing direct taxation while holding down current expenditures sois to allow for a larger current account surplus. This in turn would enable the-overnment to provide an acceptable counterpart of the investment resources neededfor development. In this way the country's capacity to borrow could be substantiallyincreased. If, on the contrary, the Bahamas is going to grow at a low rate, theGovernment's present ability to repay external debt should be adequate for fin-ancing a low profile public investment program. For its part, the private sectorgenerates resources in excess of the needs of a low profile development plan, asemerges from the illustrative model in Appendix B.

APPENDIX APage 87

APPENDIX A

THE NATIONAL ACCOUNTS ESTIMATES

228. The Bahamas has a poo Xstatistical base. Thus, the making ofaccurate national accounts is a difficult task. However, there are enougheconomic indicators to make preliminary estimates. Those estimates arepresented in TABLE 2 and TABLE 3 in the text. They provide an idea ofthe main economic trends of the economy and serve to assess reasonablywell the state of the economy for IBRD purposes. But those estimates arenot intended to be a substitute for the government's own estimations. Infact, we urge the government to allocate more resources to the Departmentof Statistics, so as to permit it to prepare detailed up-to-date figureson national accounts, mounting the machinery for continuous data collectionand processing. National accounts are essential economic tools for themanagement of a modern economy such as the Bahamas.

229. In order to prepare the estimates of TABLES 2 and 3,we startedwith the income approach using the government's.own census on populationand personal disposable income of 1970. This is a main cornerstone uponwhich the IBRD estimates rest. Personal disposable income is estimated atB$287.9 million. This figure is slightly higher than the B$283,9 millionofficial estimate because we adjusted the mean of the open end of the tableson income distribution by fitting a Pareto curve, so as to gain in accuracy.

230. Then,interest and profit remittances to abroad and from abroadare based on data obtained from the B.M.A. and the IMF. Retained profitsof local business as well as depreciation were estimated on the basis of rawdata contained in the Company Statistics Reports. Local ownership was assumedto be 20% of total net worth. The rate of profit was assumed to be 20% ofnet worth locally owned,and the rate of retained profits was estimated at25% of local profits. Depreciation was estimated, in 1970, at 4% of thecountry's fixed capital. Other figures such as internal transfers and in-direct taxes came from the Treasury Accounts. In this way,we arrived ata GNP at M.P. of B$400.5 million for 1970, as shown in right hand side ofTABLE 3.

231. In the expenditure approach of TABLE 3, we estimated private consumption atUS$292.9 million,based on the 1970 household budgotary survey originallydesigned to prepare a retail price index. Public consumption was taken fromthe treasury accounts. The export and import figares are derived from thesources 'c', 'e' and 'g' mentioned below. Investments were estimated on thebasis of building starts, imports of machinery and transport equipment.

232. Having the results for the benchmark year, 1970, confirmed by thetwo different independent approaches, we made the projections forward for1971 and 1972, and backwards for 1969 presented in TABLE 2. Fixed capitalformation, public consumption,exports and imports were estirated exactly in thesame manner as in 1970. Private consumption was projected forward and backwards

I1/ Although improving rapidly.

APPENDIX APage 88

using the growth rates of imports of non-durables as prov for the con-sumption of these types of goods. A consumption index of electricity wasused as a proxy to project forward and backward the consuwmption of services.For proj ecting the consumption of durable goods, the growth rate of imports ofthese kinds of goods was used.

233. The bibliography used to prepare the estimates is the following:

(a) Report of the 1970 Census on Population, December 1972,Department of Statistics, Cabinet Office.

(b) Household Budgetary Survey Report 1970, Department ofStatistics, Cabinet Office.

(c) External Trade Statistics Reports 1969, 1970 1971 and1972. Several Volumes, Department of Statistics,Cabinet Office.

(d) Annual Reports on Tourism 1969, 1970, 1971, 1972,Ministry of Tourism.

(e) The Bahamas Economic Situation, 1973, IMF.

(f) Treasury accounts 1969, 1970, 1971, 1972, Ministry ofFinance.

(g) Quarterly Statistical Summaries, Several issues, Depart-ment of Statistics, Cabinet Office.

(h) Data on Building Permits and Starts, Ministry of Publicworks.

(i) Annual Reports, Bahamas Monetary Authcrity.

(j) Company Statistics Reports, Department of Statistics,Cabinet Office.

APPENDIX BPage 89

APPENDIX B

EXTERNAL CAPITAL REQUIREMENTS

234. Using a standard, simple though lengthy, two gap model, we havecalculated requirements for achieving a specified growth rate for theeconomy of the Bahamas. The model does not have econometrically estimatedbehavioral equations; therefore, it is not an econometric model. It ismerely a national accounting framework useful in making consistent economicprojections. Four basic parameters have to be specified "a priori" toget these projections. They are the incremental capital output ratio(ICOR), the minimum import elasticity, the maximum marginal nationalaanigs ratio,and the GDP growth rate. A number of variables,such as exports,

some minimum assured levels of capital inflows, both private and public,andnet foreign investment income outflows, are also predetermined. Based onthese assumptions,the model predicts the additional external capital neededin order to reach the desired growth rate of GDP.

235. The two gaps are the foreign resource and the domestic resourcegap. The foreign resource gap is M-X, where:

M - imports of goods and nonfactor servicesX - exports of goods and nonfactor services;

the domestic resource gap is I-S, where:

I - Gross Domestic investmentS - Gross Domestic savings

By definition, the two gaps have to be equal ex post, so M-X - I-S. Ex ante,however, the two gaps are most likely to differ. Since the GDP growth rateis given, equality of the two gaps cannot be achieved through changes inthe GDP growth rate. Thus, equality between the two gaps is achieved simplyby filling the difference between thetwo with external resources. Therefore,the largest of the two ex ante gaps will always prev&il.

236. The next step is to (letermine which gap wouild be the largestex ante. For given X and I, the largest gap would be the external one,M-X >I-S, if and only if M > I+X-S. On the contrary, the larger gap wouldbe the domestic one, M-X <I-S, if, and only if, M<KI+X-S. Thus, the modelcalculate imports, M*, as a function of the minimum import elasticity andthe GDP growth rate, and savings, S*, as a function of the maximum marginalnational savings ratio and GDP growth:

(1) M* - f (Minimum import elasticity, GDP)

(2) S* = f (Maximum marginal National Savings, GDP)

APPENDIX BPage 90

If the calculated M* is larger than I+X-S*, the foreign resource gapdominates. Therefore, since the identity M-X - I-6 has to hold, S iscalculated as a residual: S - I+X-M*, and S* is dropped out. If,3 on thecontrary, M*<I+X-S*, the domestic resource gap dominates. In this latercase, S* from equation (2) is used,and M* is dropped out. Thus, to meetthe national account's identity requirement, M is calculated as a residual:

M - I+X-S*

237. Three observations regarding this gap model are in order. First,the higher the minimal import elasticity and the maximal marginal nationslsavings ratio, the higher is the probability that the trade gap would bebinding. Second, the higher the ICOR and the predetermined level of exports,the more likely it is that the savings gap would be binding. Third, if andonly if,the savings constraint prevails, an increase in national savingswill reduce the external capital requirements. Otherwise, an ex ante effortto increase national savings is useless. 1/

238. The lack of an officially approved development plan in the Bahamasrules out the possibility of analyzing the capital requirements of just onegrowth path. A maximal and a minimal growth target will have to be tested.

239. Two basic assumptions regarding net foreign investment income andnet direct foreign investment are valid under both a high growth assumptionand a low growth assumption. Foreign investment income is put at US$147.5million in 1973,rising to US$156 million in 1976 in money terms,and,thereafter,itis maintained constant in real terms, assuming a rate of world inflation of5.7% per year. Net direct investment is projected to decline from US$89 millionin 1973 to only US$60 million in 1974, and it-is assumed to remain constantin real terms thereafter. Non-private capital flows and debt service are takeninto account too. However, following past trends, they are projected to be smallfor the economy as a whole.

High growth path

240. GDP is projected to stay constant in 1974. This projection isrelated to the gloomy picture for GNP growth in the U.S. and Europe this year.In 1975, however, GDP is projected to grow at 4%; in 1976, at 4.5%;and from 1977 onward at 5.C%, 3 percentage points above the natural growthrate of the population of about 2.0%. Accordingly, exports of nonfactorservices, i.e. tourism, are projected to stay constant in 1974and to grow at 8% per year in real terms for 1975 onwards.

1/ The simplicity of the explanation given in the four paragraphs aboveis for presentation purposes. The real model introduces some few morecomplications,such as adjustments for the terms of trade and others thatwould not vary the essentials spelled out here.

APPENDIX BPage 91

241. Since the economy is short of manpower, methods of production willhave to be increasingly capital intensive. Substitution of capital for laborwill have to take place on two grounds. First, wages are too high for thepresent level of capital intensity. The losses experienced by the tourist industryare a clear syVptom of this problem. Second, the natural increase of the laborforce is only about 1200-1300 persons per year, too low to maintain an invest-ment level consistent with the assumed GDP growth rate and the incrementalcapital labor ratio prevailing up until now. Thus, capital labor ratio wouldhave to go up. This would be reflected in a high ICOR. Therefore, ICOR is setat 4 in 1976, at 5 in 1977 and at 6 from 1978 onwards. Incidentally, evenwith these ICORs, total investments at the end of the decade will be far belowthe levels reached in 1969, when high investments were accompanied with largeimmigration flows.

242. Two policy options can be incorporated in the projections. Theyare import substitution in agriculture, especially that geared to reducingthe import coefficient of the tourist industry, and heavier taxation, especiallydirect taxation of visible persons residing in the Bahamas.

243. In order to test the effects of an import substitution policy onthe capital requirements of the Bahamas, two import elaeticity parameterswere tried for 1976 onwards: first, 1.00 assuming that the Government willundertAke special measures to stimulate domestic production competing withimports; second, 1.20 for the case of no special measures.

244. In order to test the effects of a policy of direct taxation ofvisible persons residing in the country, two sets of marginal national savingsratios were tried. In the first set, we assumed that the Government intro-duced a personal income tax and kept current expenditures down, and then weput the MNSR at 40 percent in 1975, 1976, 1977 and 1978 and 30 percent from1979 onwards. In the second set, we assumed no action in the taxation andcurrent public expenditures field, so we put the MNSR ar 17 percent in 1974.rising smoothly up to 22 percent in 1979 and constant thereafter.

245. The additional external capital requiremants to fill whatever gapis binding are the following:

APPENDIX BPage 92

Zab e EXTERNAL CAPITAL REQUIREMENTSWLTGH GROWTH PATH

Low MNJSR Low MNSR High MNSR High MNSRLow Import High Import Low Import High Import

Year Elasticity Elasticitz Elasticitz Elasticity

(in '000 current dollars)

1974 -31760 -31760 -31904 -319041975 24342 24342 15835 158351976 86444 86444 69580 695801977 136538 136538 110273 1102731978 143166 151939 113210 1216991979 158639 173850 122583 1380491980 178008 200430 135106 158244

The capital requirements, measured in U.S. current dollars with an inflationaryrate of 5.7 percent per year, vary considerably with the assumptions. Thehighest point would be US$200 million in 1980, assuming a low marginal savingsratio and high import elasticity. The lowest point would be US$135 million,assuming high national savings and a low import elasticity.

246. The gaps referred to in the previous paragraph could be filled byraising direct foreign private investment to its earlier levels, borrowingfrom supplier's credits, commercial banks, or from public external financing.Foreign private investment could take the form of increased reinvestment ofprofits by foreign corporations already established in the country. Althoughnet investment income is running at about US$150 million per year, reinvestmentof profits by foreign corporations is at present very low. Unless thisposition is substantially changed in the near future, it would be necessaryto assume that the major part of the required resources will have to comefrom borrowing from private sources and from public external agencies.

247. Although we have dealt with different marginal national savings ratiosimeIying different taxation policies, the possibility of a corporate incometax was left out of the sensitivity analysis. We have assumed a new foreigninvestmient income of the order of US$150 million in constan.t terms. Shouldthe Government decide to tax profit remittances abroad, the external capitalrequirement would be reduced by an amount almost equal to the corporate taxescollected. In other words, there is a one-to-one correspondence between corporatetaxation and capital requirements. This statement follows neatly from theformula used to calculate capital requirements:

Capital - Imports + net foreign investment income -Requirements Extorts - net direct foreign investment -

increase in necessary foreign exchange reserves -miscellarecus,

APPENDIX BPage 93

To the extent that corporate taxation reduces net foreign investment income,capital requirements would thus be reduced. It is not likely that a moderatecorporate income tax would affect the flow of net direct foreign investmentbecause foreign corporations have to pay taxes in the capital exportingcountry anyway, and those countries generally give full tax credit for taxespaid abroad. Moreover, it could be argued that a moderate corporate profittax that exempts reinvested profits could well raise net direct foreign in-vestment made by foreign corporations already established in the country,thus reducing capital requirements on both counts: by reducing net foreigninvestment income and by increasing net direct foreign investment.

Low growth path

248. In 1974,GDP and exports of nonfactor services are expected to beat the same levels as in 1973. In 1975, however, GDP would grow at 3 percentper year and exports of nonr factor services at 4%, both in real terms.

249. This low GDP growth rate would not put pressure on a labor forcegrowing naturally at almost 2 percent per year. However, since wages arecomparatively high in the Bahamas, some increase in the degree of capitalintensity of the economy is indicated. Thus, the ICOR is set at 4.0 in1976, 4.5 in 1977 and 5.0 from 1978 onwards. Again, incidentally, theinvestment levels stemming from these ICOR's are very low in comparisonwith years 1968-69-70.

250. As in the high growth path, two policy options are tested here:import substitution,implying a lower import elasticity, and higher taxation,implying a higher marginal national saving rate. The values adopted forthese parameters are as referred in paragraphs 243 and 244.

251. Under these assumptions,the external capital requirements are,paradoxically,negative.

252. Negative capital requirements mean that the country could startto export capital. To put it differently, foreign exchange reserves wouldbe growing at annual levels similar to the negative capital requirements.Such a rapid increase in reserves would create an excess of liquidity inthe economy, thereby lowering interest rates. Low interest rates and lackof investment opportunities, stemming from the economy's assumed low growthrate, would force foreign and local investors in the Bahamas to send theirmoney abroad. The excess liquidity would thus be eliminated. Althoughthis result may look strange, something similar hsd already been happeningin years 1971 and 1972.

APPENDIX BPage 92;

Table L_6: EXTERNAL CAPITAL REQUIREMENTSLOW GROWTH PATH

Low MNSR Low MNSR High MNSR High MNSRLow Import High Import Low Import High Import

Year Elasticity Elasticit Elasticity Elasticity

(in '000 of U.S. current dollars)

1974 -31760 -31760 -31904 -319041975 -31952 -31 952 -34620 -3)46201976 -23113 -23113 -32658 -326581977 -17118 -17118 -33505 -335051978 -2.3048 -19958 -41985 -381861979 -27276 -22926 -50515 -441271980 -29751 -23516 -57753 -48070

Conclusion

253. The capital requirements of the Bahamian economy are extremelysensitive to changes in the growth rate of GDP. This conclusion stems fromthe openness of the economy as well as the high capital intensity of theproduction methods assumed. Although the economy is bound to be relativelycapital intensive, given its manpower constraint and level of wages, theGovernment has freedom to select the target growth rate. The importance ofsetting the "right" target growth rate for the future economic growth ofthe Bahamian economy is brought about sharply in the previous pages. Thepolitical implications of choosing one growth rate or the other will haveto be carefully analyzed by Bahamians themselves.

STATI'STICAL APPENDIX

Table of Contents

1. POPULATION, MANPOWER ANDINCOME DISTRIBUTION

1.1 Sex and Age Distribution of Population, 1931, 1943,1953, 1963 and 1970.

1.2 Potentially Economically Active Population Aged 14 yearsand over by Economic Activity, Sex, and Occupation.

1.3 Potentially Economically Active Population Aged 14 yearsand over by Occupation, Sex and Age Group.

1.4 Number of Pupils in Educational Institutionss 1965-70.1.5 Population by Personal Income Classification, Nationality

Status, and Sex.1.6 Income Distribution, Comparison with other Countries.

2. NATIONAL ACCOUNTS

2.1 Expenditure on Gross Domestic Product 1968-72.2.2 Projection of Expenditure on Gross Domestic Product.Case I.2.3 Projection of Expenditure on Gross Domestic Product.Case II.2.4 Projection of Expenditure on Gross Domestic Product Case III.2.5 Projection of Expenditure on Gross Domestic Product. Case IV.2.6 Projection of Expenditure on Gross Domestic Product. Case V.2.7 Projection of Expenditure on Gross Domestic Product. Case VI.2.8 Projection of Expenditure on Gross Domestic Product. Case VII.2.9 Projection of Expenditure on Gross Domestic Product. Case VIII.

3. BALANCE OF PAYMENTS

3.1 Balance of Payments,1968-723.2 Commodity Imports, by Type of Commodity.3.3 Commodity Exports, by Type of Commodity.3.4 Balance of Payments Projectiono High Growth Path. Cases I and II.3.5 Balance of Payments Projection. High Growth Path. Cases III and IV.3.6 Balance of Payments Projection. High Growth Path. Cases V and VI.3.7 Balance of Payments Projection. High Growth Path. Cases VII and VIII.

- ii. -

4. IXTE'RNi DEBT

4.1 External Public Debt Outstanding as of December 31, 1972.Debt Repayable in Foreign Currency by Creditor Country.

4.2 External Public Debt Repayable in Foreign Currency. Total4.3 External Public Debt Repayable in Foreign Currency. Suppliers.

4.4 External Public Debt Repayable in Foreign Currency. PrivateBanks.

4.5 External Public Debt Repayable in Foreign Currency. OtherPrivate Financial Institutions.

4.6 External Public Debt Repayable in Foreign Currency. UK.4.7 External Publ..c Debt Repayable in Foreign Currency. USA.4.8 External Publ-c Debt Repayable in Foreign Currency. Loans.

from Govermients.4.9 External Public Debt Repayable in Foreign Currency.

Suppliers - Canada.4.10 External Public Debt. Debt Repayable in Foreign Currency.

Suppliers - Switzerland.4.11 External Public Debt. Debt Repayable in Foreign Currency.

Suppliers - United Kingdom.4.12 External Public Debt. Debt Repayable in Foreign Currency.

Suppliers - USA.4.13 External Public Debt. Debt Repayable in Foreign Currency.

Private Banks<- Canada.4.14 External Public Debt. Debt Repayable in Foreign Currency.

Private Banks - USA.4.15 External Public Debt. Debt Repayable in Foreign Currency

Private Banks. Multiple Lenders.4.16 External Public Debt. Debt Repayable in Foreign Currency.

Other Financial Institutions. Canada.4.17 External Public Debt. Debt Repayable in Foreign Currency.

Other Private Financial Institutions. USA.

5. PUBLIC FINANCES

5.1 Central Government Expenditure. Functional Classification.5.2 Central Government Expenditure. Economic Classification.5.3 Central Government Revenue.5.4 Transactions of Non-financial Public Enterprises.

6. MONETARY STATISTICS

6.1 Summary Accounts of the Banking System.6.2 Distribution of Authorized Dealers' Credit to the Private

Sector.

- iii -

7. TOURISM STATISTICS

7.1 Monthly Arrivals, 1962-72.7.2 Tourist Arrivals in 1972. Classified by Type of Tourist

and Month.7.3 Visitors Points of Residence, 1972.7.4 First Port of Entry Arrivals, 1964-72.7.5 USA Visitors Points of Residence, 1971-72.7.6 USA Visitors Occupational Distribution, 1971-72.7.7 Visitor Expenditure Patterns 1972.7.8 Hotel Rooms, 1962-72.

8. PRICES

8.1 Nassau, Washington, D.C. Price Comparison for Food,Clothing, Transportation and Appliances.

8.2 Index of Retail Prices, 1968-73.

Table1.1: SEX AND AGE DISTRIBUTION OF POPULATION*

_ 9;3 1963 1970

(In Thousands)

Males

All A s 27.8 32.1 39-3 63.5 83.70-14 years 11. 13.1 16.7 7E:. 37.215-64 years 14.7 17.6 20.8 32.6 44.165 years and over 0.9 1.3 1.5 1.8 2.4

Not Stated 0.5 0.1 0.3 0.2 _

Females

All A yes 32.0 36.7 45-5 66.7 85.10-14 years 12.0 13.0 16.8 7-.7

15-64 years 18.4 21.9 26.3 35.1 45.265 years and over 1.3 1.7 2.2 2.8 3.5

Not Stated 0.2 0.1 0.2 0.2 -

Total

All Ages 59.8 68.8 84.8 130.2 168.8014 years 379 26.1 33-5 57-5 73.615-64 years 33.1 39.5 47.1 67.7 89.365 years and over 2.2 3.0 3.7 4.6 5.9

Not Stated 0.7 0.2 0.5 0.4 -

(In Percent Of Total Population)

Males

All eslUes 46.5 46.7 46-3 48.8 49.60-14 years 19.7 19.0 19.7 22.1 22.015-64 years 24.6 25.6 24.5 25.0 26.165 years and over 1.5 1.9 1.8 1.4 1.4

Not Stated 0.8 0.1 0.4 0.2 -

Females

All Ages 53.5 53.3 53.7 51.2 50-40-4 years 20.1 T7 9 19.8 22.0 21.615-64 years 30.8 31.8 31.0 27.0 26.865 years and over 2.2 2.5 2.6 2.2 2.1

Not Stated 0.3 0.1 0.2 0.1 -

Total

.All Agzes 100.0 100.0 100.0 100.0 100.00-1 years 39 37.9 39.5 4424-615-64 years 55.3 57.4 55.5 52.0 52.965 years and over 3.7 4.4 4.4 3.5 3.5

Not Stated 1.2 0.3 o.6 0.3 -

Source: Department of Statistics; Bahamas, Statistical Abstract, 1970

* Components may not add up to total due to rounding.

Ta.ble 12.2: POTENTIALLY ECOHNOMCALLY ACTIVE 3'OPSLATION AGED 14 YEARS AND OVER LAST S'RTHDAY 5V ECONOMIC AUTIVITY SEX AND OCCUPATTON 1970

(1)UNEMPLOYED AGRICULTURE,SUNTING, MINING & ELECTRICITY WHOLESALE & RETAIL TRANSPORT, STORASE FINANCING,INSURANCE COHMMNITY, SOCIAL A,

OCCUPATION TOTAL NOT STATED FORESTRY & FISHING QEARRYING MANUFACTUINSIG GAS & WATER CONSYRUCTION TRADE&RESTAURANTI & COMMSUNICATION REAL ESTATE & PERSONAL SERVICES& HOTELS BUSINESS SERVICES

TotalMlsFmle oa1aesFmlsTt MMalesFemalesTotal Males Female Total Males Female Total Males Foma.les Total Males Females TotalMlseae Total Males Females Total Males Females

EMPLOYEE (ORUNEMPLOYED FOR HEALTHOR OTHER REASOND) NUTOCCUPATION NOT GIVEN 7144 7343 2989 4354 - - - - - - - - - - - - - - - - - - - - - - - I I -

PROFESSIONAL,TECHNICALAND RELATED WORKECSR 6179 22 15 7 31 32 19 4 4 - 201 177 24 116 114 2 244 235 9 461 406 55 162 170 12 511 471 39 4387 1669 2718

ADMINISTRATYIVE,EXECUTIVE 4MANAGERIAL WORKERS 3608 2 1 1 47 43 2 7 7 - 170 148 22 56 55 1 371 341 10 1244 974 270 306 287 18 806 719 87 599 515 84

CLERICAL WORKERS 7809 11 4 7 47 17 30 10 1 9 265 88 177 160 64 96 211 63 148 2118 355 1563 837 237 585 24205330 1883 1730 516 1214SALES WORKERS 3673 1 - 1 18 14 4 3 2 1 169 102 67 27 25 2 23 21 2 2538 1149 1389 142 92 55 636 557 79 116 59 37PSIOSRS, FISHERMEN,HINTERS, LOGGERS &RELATED WORKERS 4333 12 4 0 4062 2775 1288 3 2 1 42 41 1 4 4 - 12 12 - 94 90 4 18 18 - 11 10 1 74 65 9

MINERS, I5UARRYHEN &RELATED WORKERES 32 2 - 2 1 1 - 11 10 1 9 5 1 8 8 - 13 13 - 4 3 1 - - - 1 1 - 3 2 1

WORKERS EN TRANSPORT &CONIMUNICA. OCCUPATIONS 4320 4 4 - 104 103 1 11 9 1 213 198 17 54 48 6 196 190 6 594 428 166 2560 2038 522 186 115 76 397 311 86

CRAFTSMEN, PRODUCTION-PROCESS WORKERS& LASOUNERS NOTELSEWHERE CLASSIFIED 17130 16 15 1 382 301 84 26 26 - 2643 1668 975 883 878 9 7316 7261 45 2037 1858 179 1181 1172 9 431 416 15 2222 2020 202

SERVICE, SPORT &RECREATION WORKERS 13343 14 4 10 75 32 43 4 1 3 110 52 28 21 15 4 93 40 53 7067 3053 4017 286 224 62 329 170 159 7344 2557 4787

TOTAL 69795 7427 3036 4391 4791 2320 1475 78 42 1b 3824 2402 1342 1329 5211 118 8449 4196 233 56157 8518 7639 3512 4258 1254 5331 2991 2341 16873 7715 9158

Saourc : Deport-et at Statistios, Cabi.ot Offios,

Table 1.3: POTENTIALLY EOGNIEMICALLY ACrTIVE POPULATION ATRD 14 YEATS ASS OVIS LAST BRTHYRAT' BY OCCEPATTON SIT AND BY ATE TROOP

OCCUPATION 1970

AGE TN TERAS ALL OCCTPATIONS PROFESSIONAL, REXECUTIVE, ADMINIS- FOO2MIRS,PTSHRMSREN, CRAF'TSMEN, PRODUC-LAST STISRTHAY UNEMPLOYED TECHNICAL & TRATIVE, & MANAG0ERIAL CLERICAL SALES SUNTERS, LOGGERS & HIKERS, QUARNTMEN TRLANSPORT & COMMUNNO- TION-PROCESS WORXERIS SERVICE, SPORT &

NOT STATES ROLATED WORKCRAS WORKERS WORKERS STRKEETS RELATED WORKCERS & RELATES MORSERS CATION WORKONS A LASOSSERS RECREATTON WORKERS

TOTAL Males Female Total Males Emasl Total Males Pa-a1e Teta1 Males Females Total Males F Jla T.tal Males Tamale Total Males Female TeseS Ma Females Tatal Mates Females Total Males Female Total Melee Pestles

14 54 7 321 22C 367 117 190 2 - 2 - - - 11 3 6 12 51 1 21 09 3 - - - 12 10 2 69 66 5 33 40 1355 - 19 7410 4067 3345 1770 661 1109 535 190 325 17 12 5 1132 320 R12 329 5fi6 153 209 142 67 4 4 - 333 217 136 1654 1583 71 1439 782 60725 2 4 10565 1919 4646 1042 428 614 993 419 574 192 153 32 2010 553 1657 564 302 242 194 15D Tb4 2 2 675 133 242 2484 2376 108 2216 1103 111325 29 11242 6792 4460 629 213 376 1331 708 623 490 407 73 1783 436 1347 560 325 043 274 214 60 4 5 1 779 583 194 2861 2666 195 2533 1185 13b830 -34 9400 5967 35330 494 214 280 1076 577 499 609 532 77 1042 272 76 7 450 255 195 376 300 76 9 9 - 641 520 121 0517 2303 294 2188 872 131635 -39 7471 4611 2860 006 169 237 717 441 316 536 465 71 629 133 496 377 204 113 314 260 94 8 8 - 556 478 78 0067 1880 184 1781 370 121140 4.4 6024 36 92 2332 370 166 202 477 300 102 436 385 13 394 106 269 315 174 141 441 308 133 5 4 1 410 365 45 4656 1428 228 1510 434 108445 49 481 1 2947 1964 369 118 211 309 190 139 421 340 62 248 75 1 73 291 114 139 440 301 159 6 6 - 322 299 23 1231 1082 149 1126 320 80655 56 4466 275 7 1709 422 172 250 293 186 107 366 309 52 151 55 96 275 159 116 557 392 167 7 6 1 268 245 23 1027 896 141 5100 349 75155 -59 3365' 2167 11 90 420 173 235 1 76 125 51 277 047 30 97 54 43 201 116 lOS 518 371 147 3 3 - 159 154 5 803 701 100 683 223 46060-64 2130 1289 941 328 133 195 101 76 40 166 143 23 66 36 20 132 71 61 363 236 1 27 2 - 2 86 g0 6 446 360 79 420 146 27465 ON MORE 0356 1363 993 709 284 431 119 92 27 105 92 10 46 32 14 135 82 23 566 331 135 2 1 1 59 53 6 315 263 52 286 126 160

TOYAL 69791 41708 28003 7344 0990 4350 6179 3294 2005 36908 3112 494 7809 2190 5709 3673 20?: 1652 4333 3021 1312 52 46 6 4320 3439 551 10130 15615 ISIS 15343 6150 9193

20S-- : Depotmet of SatSts5ti-, Cabiset OfSise.

Table 1.4: NUMBEH OF PUPIIS IN EDUCATIONAL INSTITUTIONS, 1965-1970

1965 1 9 6 6 1 9 6 7 1 9 6 8 1 9 6 9 1 9 7 0No. of No. of Increase No. of Increase No. of Increase No. of Increase No. of Increase

Students Students Over 1965 Students Over 1966 Students Over 1967 Students Over 1968 Students Over 1969

No. % No. % No. % No. a No. %

Government Schools 23,237 29,509 6,272 27.0 32,577 3,068 10.4 34,395 1,818 5.6 36,862 2,467 7.2 39,546 2,684 7.3

Private and Governmentaided Schools 11.583 13,338 1,755 15.2 13.880 542 4.1 13,871 _9 .. 14.549 678 4.9 14,585 36 0.2

Total 34,820 42,847 8,027 23.1 46,457 3,610 B.4 48,266 1,809 3.9 51,411.. 3,1i45 6.5 54,131 2,720 5.3

Source: Ministry of Education.

Note : These figures do not include stndents attending:Bahams Teachers' CollegeSan Salvador Teachers' CollegeC. R. Walker Technical College

m o14 !i i, i >I g" i .i .. a a>

00 I S 55 IS a . , N a 0000 N

r a ai aa aa nn '' i

'0 4 a a a a a '

00040 4 - |i|essK ! Ii - , a. 04 4-at 000

o ad s ' K

_ 0 gS CSx 0*_I VS D Ia|b<O0

3 o 40000080R0S 4h-h 010> 8 I a a 440000 >S

000 40n 0_.4 4___ n

0F 00 0 4 4 0 0 0 i 0 040

> _0000 000v40 D 000 00410_ 0 1 0 0 4I _ o0000 N

I-0 1 H05

H Z _ 510 HO_ 00 005. N0

0. 0.a 0.- a s 0< 0. 15'. 0. 0. 5)

|~~~~~~~~~~~0' -- 0s 0- O _ i

>- 80° 4 4- 4s c 0 05 4 ^Naf0 0 0. 4 <r 0R00 0 01 0 00 0 00 0.. 4.o-. 0

00..qc -0 00005-00000s-a0 00 0 0_ .1 O -- s

Table 1.6: INCOMI: DISTRIBUTION - COMPARISON WITHI OTIER COUNTRIES

The Bahamas United KinFdom Jamaica Puerto Rico Gu1970 1961967095

% of PoP. % of Incone P,- of Pop. 5, of Incone % of Pop. 5% of Income % of Pop. % of Income % of Pop. % of Income

20.0 2.9 20 5.5 20 2.2 20 4.5 20 4.0

40.0 12.3 40 15.8 40 8.2 40 13.7 40 14.0

60.0 26.9 60 31.7 60 19.0 60 67.9 60 30.8

80.0 47.4 80 54.8 80 38.5 80 79.4 80 54.3

95.0 77.2 95 79.0 95 69.8 95 78.0 95 81.0

100.0 100.0 100 100.0 100 100.0 100 100.0 100 100.0

Source: Bahamas Department of Statistics,Cabinet office and IBRD.

Table 2.1: EXPENDITURE ON GROSS DOMESTIC PRODUCT

(in million US$ of 1968)

1968 1969 1270 1971 1972

Gross Domestic Product 41o.4 447.4 400.7 430.3 449.6

Imports of goods and NFS 218.6 312.6 306.2 240.8 240.1

Exports of goods and NFS 240.7 309.1 283.3 320.2 365.9

Resource gap -22.1 3.5 22.8 -79.4 -125.8

Consumption 257.4 278.0 308.0 286.1 268.7

Investment 131.0 172.9 115.5 64.8 55.2

Resource use (GDP + Gap) 388.3 450.9 423.6 350.9 323.8

Domestic Savings 153.1 169.4 92.7 144.2 180.9

Net Factor Service Income -56.2 -80.9 -55.8 -89.1 -137.3

NationalSavings 96.9 88.5 36.9 55.0 44.4

Gross Natianal Product 354.2 366.4 344.8 341.0 312.2

Note 1: Components may not add up to totals because of rounding,a negligible terms of trade difference and also a veryminor current transfer.

Note 2: Exports and imports exclude o.1l under processing agreement.

Tble 2.2: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case I High Growth, Low National Marginal Savings Ratio and Low Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1i79 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.8 539.5 566.5 594.8Terms of Trade Adjustment -2.4 -20.0 -21.0 -22.0 -23.2 -24.4 -25.7 -27.2Gross Domestic Income 447.5 430.3 447.4 467.4 490.7 515.1 540.8 567.6Imports of Goods and NFS 240.2 241.7 286.5 339.2 384.1 403.3 425.1 448.5Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -403.6 -430.9 -454.8Resource Gap -111.4 - 92.3 - 64.1 - 29.4 - 3.7 - 5.2 - 5.8 - 6.3Consumption 280.8 282.9 298.9 315.6 332.8 348.0 365.0 382.9Investment 55.2 5J.2 84.3 122.3 154.2 161.9 170.0 178.5Resources Available 336.1 338.1 383.2 438.0 487.0 509.9 535.0 561.4Gross Domestic Savings 166.6 147.5 148.4 151.7 157.9 167.1 175.7 184.7Factor Service Income -126.1 -106.3 -103.7 -102.9 -104.7 -108.6 -1L2.5 -116.4Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0Gross National Savings 42.0 42.4 46.0 49.9 54.2 58.5 63.3 68.3Gross National Product 323.7 343.9 364.6 386.4 409.1 431.0 454.1 478.4Gross National Income 321.4 324.0 343.7 364.4 385.9 406.6 428.3 451.3

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports excludes oil under processing agreement

Table 2.3: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case II High Growth, Low Marginal National Savings and High Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 460.3 489.4 513.8 539.8 566.5 594.8

Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2

Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7

Imports of Goods and NFS 240.2 241.7 286.5 339.2 384.1 407.2 431.6 457.5

Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0

Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -408.6 -430.8 -454.8

Resource Gap -111.4 - 92.3 - 64.1 - 29.4 - 3.7 - 1,4 - 0.8 2.7

Consumption 280.8 282.9 298.9 315.6 332.8 351.9 371.6 391.9

Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.4

Resources Available 336.0 338.1 383.2 438.0 487.0 513.7 541.5 570.4

Gross Domestic Savings 166.6 147.5 148.4 151.7 157.8 163.2 169.2 115.8

Factor Service Income -126.1 -106.3 -103.7 -103.0 -104.7 -100.6 -112.8 -117.2

Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.4 45.9 49.9 54.2 54.7 56.4 58.5

Gross National Product 323.7 344.0 364.6 386.4 409.1 431.0 453.8 477.6

Gross National Income 321.4 324.0 343.7 364.4 385.9 406.6 428.0 450.4

Note 1 Assumptions and Methodology explained in Appendix B

Note 2 Components mav not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement

T&ble 2.4: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case III High Growth, High National Marginal Savings Ratio, Low Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.9 539.5 566.5 594.8

Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2

Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7

Imports of Goods and NFS 240.2 241.6 282.1 330.6 371.7 390.3 411.0 433.4

Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0

Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -360.6 -387.8 -408.6 -430.9 -454.8

Resource Gap -111.4 - 92.4 - 68.5 - 37.9 - 16.1 - 18.2 - 19.9 - 21.4

Consumption 280.8 282.8 294.5 307.1 320.4 335.0 350.9 367.8

Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.5

Resources Available 336.1 338.0 378.8 429.4 474.5 496.8 520.9 546.3

Gross Domestic Savings 166.6 147.6 152.8 160.3 170.3 180.1 189.8 199.9

Factor Service Incouie -126.1 -106.3 -103.7 -102.6 -103.7 -106.6 -109.4 -112.2

Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 52.5 50.4 58.8 67.7 73.6 80.4 87.7

Gross National Product 323.7 344.0 364.6 386.8 410.2 432.0 457.1 482.6

Gross National Income 321.4 324.0 343.7 364.7 387.0 408.6 431.4 455.5

Note I Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement

TAW 2.5: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case IV High Growth, High Marginal National Savings and High Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 468.3 489.4 513.8 539.6 566.5 594.9

Terms of Trade Adjustment - 2.4 - 20.0 - 21.0 - 22.0 - 23.2 - 24.4 - 25.7 - 27.2

Gross Domestic Income 447.5 430.3 447.3 467.3 490.7 515.1 540.8 567.7

Imports of Goods and NFS 240.2 241.6 282.1 330.6 371.7 693.9 417.6 442.7

Exports of Goods and NFS -354.0 -354.0 -371.6 -390.6 -411.0 -433.0 -456.6 -482.0

Exports Adj. by Terms of Trade -351.6 -334.0 -350.7 -368.6 -387.8 -408.6 430.8 454.8

Resource Gap -111.4 - 92.4 - 68.5 - 37.9 - 16.1 - 14.6 - 13.2 - 12.1

Consumption 280.9 282.8 294.5 307.1 320.4 338.7 357.6 377.0

Investment 55.2 55.2 84.3 122.3 154.2 161.9 170.0 178.5

Resources Available 336.0 338.0 378.8 429.4 474.5 500.6 527.5 555.5

Gross Domestic Savings 166.6 147.6 152.8 160.3 170.3 176.4 183.2 190.6

Factor Service Income -126.1 -106.3 -103.7 -102.6 -103.7 -106.6 -109.7 -113.0

Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.5 50.4 58.8 67.7 69.9 73.5 77.6

Gross National Product 323.7 344.0 364.6 386.7 410.2 433.0 456.8 481.8

Gross National Income 321.4 324.0 343.7 364.7 387.0 408.6 431.1 454.6

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement

Table 2.6: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case V Low Growth, Low National Marginal Savings and Low Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.1 506.8 522.0 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2

Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4

Imports of Goods and NFS 240.2 241.7 250.3 267.6 285.1 294.0 304.1 314.5

Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.6 -412.2

Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 -351.0 -359.9 -369.2 -378.9 -388.9

Resource Gap -111.4 - 92.3 - 92.0 - 83.4 - 74.9 - 75.3 - 74.8 - 74.4

Consumption 280.9 282.9 295.6 308.8 321.9 333.5 346.2 359.4

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.6

Resources Available 336.1 330.1 351.3 373.3 395.7 409.5 424.5 440.0

Gross Domestic Savings 166.6 147.5 147.7 147.9 148.7 151.3 153.1 155.1

Factor Service Income -126.1 -106.3 -103.7 -100.7 - 98.1 - 96.3 - 94.5 - 92.8

Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.4 45.2 48.3 51.6 55.0 58.6 62.3

Gross National Product 323.7 344.0 360.1 377.0 393.9 410.5 427.5 444.9

Gross National Income 321.4 323.9 339.7 356.0 372.4 388.4 404.8 421.6

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components rm-ay not add up due to rounding

Note 3 Exports and Imports exclude oil under processing agreement

Table 2.7: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

Case VI Low Growth, Low Marginal National Savings Rate and High Import Elasticity(In millions of US $ of 1968)

1973 1974 1975 1976 1977 1978 1979- 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.0 506.8 522.0 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.4 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2

Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4

Imports of Goods and NFS 240.2 241.7 250.3 267.6 285.1 295.3 306.0 317.0

Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.5 -412.2

Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 -351.0 -359.9 -369.2 -378.9 -388.9

Resource Gap -111.4 - 92.3 - 92.0 - 83.4 - 74.9 - 73.9 - 72.9 - 71.9

Consumption 280.8 282.9 295.6 308.8 321.9 334.8 348.1 361.8

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7

Resource Available 336.0 338.0 351.3 373.3 395.7 410.8 426.4 442.5

Gross Domestic Savings 166.6 147.5 147.7 147.9 148.7 149.9 151.2 152.6

Factor Service Income -126.1 -106.3 -103.7 -100.7 - 98.1 - 96.3 - 94.6 - 93.0

Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.4 45.2 48.3 51.6 53.6 56.6 59.6

Gross National Product 323.7 344.0 360.1 377.0 393.9 410.5 427.4 444.6

Gross National Income 321.4 324.0 339.7 356.0 373.4 388.4 404.7 421.4

Note 1 Assumptions and methodology are explained in Appendix B

Note 2 Components may not add up due to rounding

Note 3 Exports and imports exclude oil under processing agreement

Table 2.8: PROJLuTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT 1973-80

CASE VII: LOW GROWTH, HIGH NATIONALMARGINAL SAVINGS RATIO, LOW IMPORT ELASTICITY

(In millions of US$ of 1968)

1973 1974 1975 1976 1977 1978 1979 1t980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.1 506.8 522.2 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.1 - 22.6 - 23.2

Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 449.4 514.4

Imports of Goods and NFS 240.2 241.6 248.9 262.8 277.3 285.6 294.8 304.4

Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 -401.5 -412.2

Exports Adj. by Terms of Trade -351.6 -334.0 -342.3 351.0 -359.9 -369.2 -378.9 -388.9

Resource Gap -111.4 - 92.4 - 93.4 - 88.2 - 82.7 - 83.6 - 84.1 - 84.5

Consumption 280.8 282.8 294.3 304.1 314.1 325.1 337-. 349.3

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7

Resources Available 336.1 338.0 349.9 368.6 387.9 401.1 415.3 429.9

Gross Domestic Savings 166.6 147.6 149.1 152.7 156.5 159.7 162.4 165.1

Factor Service Income -126.1 -106.3 -103.7 -100.6 - 97.6 - 95.2 - 92.8 - 90.3

Net Current Transfers 1.5 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.5 46.6 53.2 59.9 64.5 69.6 74.9

Gross National Product 323.7 344.0 360.1 377.1 394.4 411.6 429.3 447.4

Gross National Income 321.4 324.0 339.7 356.2 372.9 389.6 406.6 424.2

Note 1: Assumptions and methodology are explained in A-pendix B.Note 2: Components may not add up due to rounding.Note 3: Exports and imports exclude oil under processing agreement.

Table 2.9: PROJECTION OF EXPENDITURE ON GROSS DOMESTIC PRODUCT

CASE VIII: LOW GROWTH, HIGH MARGINALNATIONAL SAVINGS RATIO AND HIGH IMPORT ELASTICITY(In million of US$

1973 1974 1975 1976 1977 1978 1979 1980

Gross Domestic Product 449.8 450.3 463.8 477.7 492.0 506.8 522.0 537.7

Terms of Trade Adjustment - 2.4 - 20.0 - 20.5 - 21.0 - 21.5 - 22.0 - 22.6 - 23.2

Gross Domestic Income 447.5 430.3 443.3 456.7 470.5 484.7 499.4 514.4

Imports of Goods and NFS 240.2 241.6 248.9 262.8 277.3 287.3 297.6 308.3

Exports of Goods and NFS -354.0 -354.0 -362.8 -371.9 -381.4 -391.3 401.5 -412.2

Exports Adj. by Terms of Trade 352.0 334.0 342.3 351.0 360.0 369.2 378.9 388.9

Resource Gap -111.4 - 92.4 - 93.4 - 88.2 - 82.7 - 82.0 - 81.3 - 80.6

Consumption 280.8 282.8 294.3 304.1 314.1 326.7 339.8 353.2

Investment 55.2 55.2 55.7 64.5 73.8 76.0 78.3 80.7

Resources Available 336.0 338.0 349.9 368.6 387.9 402.8 418.1 433.8

Gross Domestic Savings 166.6 147.6 149.1 152.7 156.5 158.0 159.6 161.3

Factor Service Income -126.1 -106.3 -103.7 -100.6 - 97.6 - 95.2 92.9 90.6

Net Current Transfers 1.4 1.3 1.2 1.1 1.1 0.0 0.0 0.0

Gross National Savings 42.0 42.5 46.6 53.2 59.9 62.8 66.7 70.7

Gross National Product 323.7 344.0 360.1 377.1 394.4 411.6 429.1 447.1

Gross National Incorme 321.4 324.0 339.7 356.2 372.9 389.6 406.5 423.8

Note 1: Assumptions and methodology explained in Appendix B.Note 2: Component may not add up due to rounding.

Note 3: Exports and imports exclude oil under processing agreement.

Table 3.1: BALANCE OF PAYMENTS

(In millions of US$)

1969 1970 1971 1972Credit Debit Balance Credit Debit Balance Credit Debit Balance Credit Debit Balance

Goods and Services 464.3 534.5 -70.2 541.1 614.5 -73.4 764.1 794.0 -29.9 1057.7 1035.3 26.4

Oil trade under processing agreement- -- -- -- 30.1 38.7 -8.6 194.1 237.1 -43.0 253.5 238.3 15.2Other merchandise 1/ 52.6 296.4 -243.8 57.0 298.8 -241.8 57.4 245.5 -188.1 98.7 261.7 -163.0Travel 230.4 14.7 215.7 209.0 17.0 192.0 264.8 17.1 247.7 294.9 20.6 274.3Interest, dividend and profits 135.3 201.8 -66.5 191.0 230.0 -39.0 191.8 272.5 -80.7 345.4 492.9 -147.5Local expenses of offshore companies 22.5 _ 22.5 25.0 -- 25.0 25.6 -- 25.6 31.9 31.9Miscellaneous commercial transactions 20.6 9.8 10.8 25.0 10.0 15.0 26.6 12.3 14.3 30.9 12.4 18.6Other 2/ 2.9 11.8 -8.9 4.0 20.0 -16.0 3.8 -9.5 -5.7 5.1 8.2 -3.1

Transfers -/.3 20.6 -19.6 1.0 25.0 -24.0 1,0 25.6 -24.6 1.9 268 -24.9

Private 1.0 20.6 -19.6 1.0 25.0 -24.0 1.0 -25.6 -24.6 1.1 26.8 -24.9Government -- -- 0_ -- __ __ __ __ __ 0.9 0.9

Public Sector Capital 2.4 3.9 -1.5 7.9 4.5 3.4 12.8 9.3 3.5 7.4 7.6 -0.2

Government 1.6 1.7 -0.1 0.1 1.9 -1.8 3.0 1.9 1.1 (--) 3.3 (--)Long-term (1.6) (1.7) (-0.1) (0.1) (1.9) (-1.8) (--) (1.9) (-1.9) (--) (1.9) (-1.9)Short-term (- (~) () (~) () (~) (3'0) () (3.0) () (1.3) (-1.3)Exchange rate adjustment (--) (--) (--) (--) (--) (--) (--) (1.5) (-1.5) (--) (-) (--)

Other public sector 0.8 2.2 -1.4 7.8 2.6 5.2 9.8 3.8 6.0 7.3 (3.4) (3.9)Loans (0.8) (2.2) (-1.4) (7.8) (2.6) (5.2) (9.8) (1.7) (8.1) (7.3) (2.6) (4.7)Exchnage rate adjustment (--) (--) (--) (--) (--) (--) C--) 2.1 (-2.1) (--) (0.9) (0.9)

Private Capital and Errors and Omissions 149.0 78.2 70.8 123.0 34.2 88.8 113.0 59.6 53.4 89.5 85.6 2.2

Property purchase 120.6 -- 120.6 101.0 -- 101.0 88.3 -- 88.3 63.7 -- 63.7Other direct investment 28.4 -- 28.4 22.0 -- 22.0 24.7 -- 24.7 25.7 -- 25.7Short-term capital and errorsand omissions -_ 78.2 -78.2 __ 34.2 -34.2 __ 59.6 -59.6 __ 85.6 85.6

Exchange Profits and Losses -- _ 3.1 -1.8

International reserves (net) -- -- -0.5 2.7External public debt -- -- 3.6 0.9

Changes in net international reserves(increase -) 20.5 5.2 -5.5 3.4

Government 6.9 3.9 -2.7 A;nMonetary Authority 13.6 1.3 -2.8 11.4

Source: Bahamas Monetary Authority and IMF.

1/ Exports, f.o.b., imports, c.i.f., (excluding bullion and specie).2/ Local expenses of U.S. military bases in the Bahamas (credit) and tourism advertising and

other government expenses (debit).3/ It is estimated that transfers to Bahamians working abroad and transfers by those residing

without work permit amount to about US$1 million per annum.

Table 3,b COMMODITY IMPORTS, BY TYPE OF COMMODITY

(B$'000) (in percent)

1968 1962- 1970 -1971 1972 1968 1969 1970 1971 1972

Food and Live Animals 38128 48169 47620 49618 51455 21.3 15.9 14.1 9.3 10.5

Beverages and Tobacco 10226 13557 12959 13692 14959 5.7 4.5 3.8 2.7 3.1

Crude materials inedible 3014 8897 7729 6399 5578 1.7 2.9 2.3 1.3 1.1except fuels

Mineral fuels, lubricants 7143 14673 59116 285429 256935 4.0 4.9 17.6 56.2 52.7and related materials

Animal and vegetable oils - 248 527 847 735 - 0.1 0.2 0.2 0.2and fats

Chemicals 6975 16844 20057 22739 22367 3.9 5.6 6.0 4.5 4.6

Manufactured goods 20322 57278 47542 35552 47152 11.4 18.9 14.1 7.0 9.7

Machinery and Transport 33055 66111 78295 51124 47691 18.5 21.9 23.2 10.1 9.8Equipment

Miscellaneous manufactured 59769 73539 61380 I4985 36118 33.4 24.3 18.2 8.1 7.4articles

Other 297 2962 1552 1865 4267 0.2 1.0 05 04 0.9

Total 178929 302278 336777 5o8245 487258 100.0 100AO 100.0 100.0 100.0

Source: Dc-partineit of Stat -- t.ics, Cabinet Office.

Table 3.3: COMMODITY EXPORTS, BY TYPE OF COMMODITY (including re-exports)

(B$'000) (in percent)

1968 1969 1970 1971 1972 1968 1969 1970 1971 1972

Food and Live Animals 948 2278 2868 3820 31489 1.8 4.2 3.3 1.4 1.0

Beverages and Tobacco 4851 3679 7091 4362 11700 9.4 6.8 8.1 1.6 3.4

Crude materials inedible 6596 6346 6522 3972 10791 12.7 11.7 7.5 1.5 3.2except fuels

Minerals, fuels, lubricant 1191 500 29989 204707 251998 2.3 0.9 34.4 77.4 74.9and related materials

Animal and vegetable oils - 169 - - - - - - -

and fats

Chemicals - 10698 10723 20555 32959 - 19.3 12.3 7.7 9.7

Manufactured goods 7866 8206 15135 16483 19390 15.2 15.1 17.4 6.2 5.7

Machinery and Transport 1754 15501 9699 6297 2155 3.4 28.5 11.1 2.4 0.1Equipment

Miscellaneous manufactured 28577 5639 2944 2387 1517 55.2 10.4 3.4 0.9 0.5

articles

Other 1310 2090 1590 21$0 2.4 2.4 0.1 0.1

Total 51782 54326 87061 264172 336614 100.0 100.0 100.0 100.0 100.0

Source: Department of Statistics, Cabinet Office.

Table 3.4: BALA J OF PAYMENTS PROJECTIONS HIGH GROWTH PATH

(in millions of current US dollars)

1973 1 1976 1977 19789 1980Case I Low marginal nrAionlY savings ratio-low import elastici-ty

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.5 891.2 994.5Imports of goods and NFS 330.3 379.0 474.8 645.1 711.2 789.3 879.3 988.7Resource Balance 153.2 144.7 106.3 51.5 6.8 10.2 12.0 13.7

Net factor service income -173.4 -166.7 -171.8 -180.4 -193.9 -212.5 -232.6 -254.5Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.0 -63.5 -126.9 -185.1 -202.3 -220.6 -240.7

Long-term capital 93.7 61.3 59.1 64.4 72.2 75.3 81.3 84.0Short-term capital -64.5 -58.8 24.3 86.4 136.5 143.2 158.6 178.0Increase in reserves (-) -11.0 +15.0 -19.9 -23.9 -23.6 -17.2 -19.3 -21.3

Case II Low marginal ndLon- savings ratio-hig import elastIclbv

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.6 891.2 994.5Imports of goods and NFS 330.3 379.0 474.8 594.1 711.2 796.9 892.8 1000.3Resource Balance 153.2 144.7 106.3 51.5 6.8 2.7 -1.6 -5.9

Net factor service income -173.4 -166.7 -171.8 -180.4 -193.9 -212.5 -233.3 -256.3Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -63.5 -126.9 -185.1 -209.8 -234.8 -262.2

Long-term capital 93.7 61.3 59.1 64.4 69.6 73.5 77.1 83.2Short-term capital -64.5 -58.8 24.3 86.4 136.5 151.9 173.8 200.4Increase in reserves (-) -11.0 +15.0 -19.9 -23.9 -23.6 -18.5 -20.3 -22.3

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement.

2ote 3: TV<tals may not add up due to rounding.

Table 3.5: BALANCE OF -PAYMENTS PROJECTIONS HIGH GROWTH PATh

(in million of current US doIlars)

~~ ~~~ - ~~1973--- 194_ 19735 1976 1217 1978 1279 1280 Case III igh marginal naticnal savings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 581.0 645.6 718.1 799.5 891.2 994.5Imports of goods and NFS 330.3 379.0 467.5 579.2 688.2 763.8 850.1 947.7Resource Balance 153.2 144.7 113.6 66.4 29.9 35.8 41.1 46.8

Net factor service income 173.4 -166.7 -171.8 -179.7 -192.0 -208.5 -226.3 -245.3Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -56.2 -111.3 -160.1 -172.7 -185.5 -198.5

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1Short-term capital -64.5 -31.9 15.8 69.6 110.2 113.2 122.6 135.1Increase in reserves (-) -11.0 +15.- -18.7 -22.6 -22.3 -16.8 -18.6 -20.6

Case I H3mrnal national savings ratio-high imort elastici

Exports of goods and NFS 483.5 523.6 581.1 645.6 718.1 799.5 891.2 994.5Imports of goods and NFS 330.3 379.0 467.5 579.1 688.2 171.0 863.9 967.9Resource Balance 153.2 144.7 113.6 66.4 29.9 28.5 27.3 26.6

Net factor service Income -173.4 -166.7 -171.8 -179.8 -192.0 -208.5 -226.9 -247.1Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -56.2 -111.3 -160.1 -180.0 -199.6 -220.6

Long-term capital -93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1Short-term capital -64.5 -58.8 15.8 69.6 110.3 121.7 138.0 158.2Increase in reserves (-) -11.0 +15.0 -18.7 -22.6 -22.3 -18.0 -19.8 -21.7

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement.

Note 3: 'Totals may not add up due to rounding.

Table 3.6: X LANCE OF PAYMENTS PROJECTIONS LOW GROWTH PATH

(in millions of current US dollars)

1973 1974 1975 1976 1977 1978 -1979 _,-1980

Case V Low marginal naticrAl savings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850e4Imports of goods and NFS 330.3 379.0 414.7 468.6 527.8 575.3 629.0 687.6Resource Balance 153.2 147.7 152.5 146.1 138.6 147.3 154.8 162.7

Not factor service income -173.4 -166.7 -171.8 -176.4 -181.7 -188.5 -195.5 -202.9Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -17.3 -28.3 -41.1 -41.2 *.-40.8 -40.1

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 83.9Short-term capital -64.5 -58.8 -31.9 -23.1 -17.1 -23.0 -27.3 -29.7Increase in reserves (-) -11.0 +15.0 -9.9 -13.0 -14.0 -12.1 -13.2 -14J.1

Case VI Low marginal natronal savings ratio-high import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 350.4Imports of goods and NFS 330.3 379.0 414.7 468.6 527.8 578.0 632.9 693.1Resource Balance 153.2 144.7 152.5 146.1 138.6 144.6 150.9 157.2

Net factor service income -173.4 -166.7 171.8 176.4 181.7 188.5 195.8 203.1tNet current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -17.3 -28.3 -41 .1 -43.8 -44.9 -46.1

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 83.9Short-term capital -64.5 -58.8 -31.9 -23.1 -17.1 -20.0 -22.9 -23.5Increase in reserves (-) -11.0 +15.0 -9.9 -13.0 -14.o -12.5 -13.4 -14.41

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under processing agreement.

Note 3: Totals may not add up due to rounding.

Table 3.7: BALANCE OF PAYMENTS PROJECTIONS LOW GROWTH PATH

(in millions of current US dollars)

1973 1974 1975 1976 1977 1978 1979 1280Case VII High marginal national savings ratio-low import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850.4Imports of goods and NFS 330.3 379.0 412.5 460.3 513.4 558.9 609.9 665.6Resource Balance 153.2 147.7 154.8 154.4 153.0 163.7 173.9 184.7

Net factor service income -173.4 -166.7 -171.8 -176.2 -180.8 -186.3 -191.9 -197.3Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -15.0 -19.7 -25.7 -22.6 -18.0 -12.6

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.1Short-term capital -64.5 -58.8 -34.6 -32.7 -33.5 -42.0 -50.5 -57.8Increase in reserves (-) -11.0 +15.0 -9.5 -11.9 -12.9 -11.8 -12.8 -13.6

Case VIII High marginal ntionaL savings ratio-high import elasticity

Exports of goods and NFS 483.5 523.6 567.3 614.8 666.4 722.6 783.8 850.4Imports of goods and NFS 330.3 379.0 412.4 460.3 513.4 562.2 615.6 674.1Resource Balance 153.2 144.7 154.8 154.4 153.0 160.4 168.2 176.3

Net factor service income -173.4 -166.7 -171.8 -176.2 -180.8 -186.3 -192.1 -198.1Net current transfer 2.0 2.0 2.0 2.0 2.0 - - -Balance in current account -18.2 -20.1 -15.0 -19.7 -25.7 -25.8 -23.9 -21.8

Long-term capital 93.7 61.3 59.1 64.4 72.1 76.3 81.3 84.6Short-term capital -64.5 -58.8 -34.6 -32.7 -33.5 -38.2 -44.1 -48.1Increase in reserves (-) -11.0 +15.0 -9.5 -12.0 -12.9 -12.3 -13.2 -14.7

Note 1: Assumptions and methodology for the projections are explained in Appendix B.

Note 2: Exports and imports exclude oil under prDcessing agreement.

Note 3: Totals may not add up due to rounding.

Table 4.1: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31#1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

DEBT OUTSTANDING DECEPBER 31019T2TYPE OF nFFICIAL LENDING

CRFOITnR CniJNTRY UNDISOTYPE OF CREDITOR DISBURSED BURSED TOTAL

CANADA 3,743 36 3,779

SWITZIRLAN(i 953 - 953

UNITEn KINnDOM 6#131 29 6#160

USA 2P907 1,377 47284SUPPLIERS 13,734 1,442 15,176

CANADA 9,024 201 9w225

tUSA 678 * 678PRIVATE BANKS 9#702 201 9,903

CA'%AOA 2i469 252 7 72I

LiSA 9.50O - 9,50((nTHER PRIVATF FINANCIAL INST. 1l1969 252 12#221

UNITE) KINWI04 4,586 5 4,586

USA EXiXBA:23AA 13,530 - 13r53DLnANS FRnM OnVERNMENTS 18116 - 18,116

TOTAL EXTERNAL PURLIC DEBT 53#521 1J895 55,416

NnTES DEBT wITH A MATURITY OF OVER ONE YEAR

ECONOMIC AND SOCIAL DATA DIVISIONECONO1aC ANALYSIS & PROJECTIONS DEPARIYENT

JANIJARY 1C, 197L

77a lo 4.2s BAHAMAS 12W30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS PAGE1

ToTAL

DEBT OUTSTANDING TRANSACTIONS DURING PERIOD

BEGINNING OF PERIOD CANCEL&LATIONS.

DISBURSED INCLUDING COMMITO DISBURSE SERVICE PAYMENTS ADJUSTOYEAR ONLY UNOISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS

(l) C2) (3) (4) CS) (6) C?) (a)

1967 - ' 21#915 3,606 - 41 41 19.850

1968 23. 456 41.,765 1.349 16.402 1.125 1.896 3.021 4.1511969 42.884 46.*140 O 2,789 3,680 2.763 6.4431970 41.994 42N460 11.232 8.017 4.099 2.91? t,016 1511971 46.123 49.r744 11.462 9.863 5.42? 3.171 8.593 574197v 51.135 56,358 4,047 7#375 4,990 3.581 8*571 1

1973 53.521 55,416 24.195 21,711 6,816 3.668 10.485 19?1974 68.218 72P597 - 3,377 9,222 5.507 14.729

197S 62.373 63.375 1,002 11,732 4.870 16.6021976 51.643 51,643 - - 109171 4.090 14.261 -

1977 41,473 41,473 - - 8,340 3.290 11.630 -

197A 33,133 33,133 - 8,340 2.613 10.9531979 244793 24,793 7,099 1.937 9.036 -

1980 17.694 17.694 - ' 7#099 1.346 8.445 -

1981 10.596 10.596 6,305 756 70061 -1987 4,290 4,290 - 2.743 247 2.9901983 1.548 1,s48 - - 898 90 988 -

1984 650 650 - 325 43 3681985 325 325 - 325 22 347

\TC'TI: DEPT WITh A MATURITY (le OVC `bIW YORE

I*Tal 4.3: BAHAMAS 12#430/7

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U#Se DOLLARSPAGE 2

SUPPLIERS

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL&

LATIONS,DISBURSED INCLUDING COMNIT- DISBURSEO SERVICE PAYMENTS ADJUSTO

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS(1) (2) t3) (4) (5) (6) (T) CO)

1969 643 643 ' ' 190 36 226 11970 454 454 8,712 5341 447 198 645 11971 5,*49 8*420 3#962 4.914 740 460 1.200 3431972 9.865 12P285 4.047 5*025 1.157 675 1.832 1

1973 13,734 15,116 415 1#699 2.102 993 3.095 0791974 13,253 13#410 ' 157 2,137 961 3.0981975 11.273 11#273 2.158 816 2.97419r6 9,115 9,115 ' 2158 661 2.8181977 6,957 6.957 - 2,158 505 2.6631978 4,800 4#800 2.158 350 2.5081979 2.642 2,642 916 195 1.1111980 1,725 1.725 - 916 125 1.04219l1 809 809 ' a 418 55 474 a

1987 391 391 - ' 391 23 414 a

Totble ).. BAHAMAS 1230/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101972

DEBT REPAYABLE tN FOREIGN CURRENCY

IN THOUSANDS OF Us. DOLLARSPAGE 3

PRIVATE BANKS

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL'

LATIONS.DISBURSED INCLUDING COMMITO DISBURSE* SERVICE PAYMENTS ADJUST

YEAR ONLY UNOISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL 1NEtSCL) C2) C3) C4) (S) C6) CT) CS)

1969 5.850 5.850 ' 325 348 673 3.5071969 9P032 9,j32 ' 1.184 467 1.6711970 ,848 7P848 - - 795 ST9 1#3741971 7r053 7,053 5.000 2P449 1#825 436 2P2611977 7.677 10.#228 2.35o 325 646 971

1973 9.702 9.903 2O0672 18.5.99 1#003 650 1.6531974 27P298 P9.S72 ' 10742 2.284 2.741 5.025197% 26.756 27.288 532 4.748 2*614 7.3621976 22.540 22.540 - 4.748 2J206 6J9531977 17.792 17.792 ' 3.081 1,765 4.0461976 14,711 14.711 ' 3.081 1.441 4.522197Q 11.630 11j630 ' ' 3.081 1.11? 4.198 U

1980 8P548 8.548 ' U 3.O81 792 3#8741981 5,467 5J467 ' ' 2J935 466 3#403198d 2.532 2J532 ' 1.557 5T? 1.714 1983 975 975 U U 325 65 390 U

1984 650 650 ' U 325 43 368 -1985 325 325 ' - 325 22 347 U

Igl ji5: BAHAMAS 12.10S71

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31*1972

DEBT REPAYABLE IN FORLIGN CURtRENCY

IN THOUSANDS OF U.S. DOLLARSPAGE 4

OTHER PRIVATE FINANCIAL INST.

DEBT OUTSTANDING TRANSACTIONS OURtNG PERIODBEGINNING OF PERIOD CANCEL&

LATIONSoDISBURSED INCLUDING COMMITO DISBURSE- SERVICE PAY4ENTS ADJUST&

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(l) C2) (3) (4) C5) (6) (7) (8)

1967 - - 3,515 641 14'0001966 14,641 17.515 2P226 500 1.084 1.584 11969 16,36B 17.016 ' 267 1,141 1.119 2.260 at197t) 15,494 15#874 ' 156 1.301 1.050 2.351 2361971 14,559 14.o09 * 1,301 967 2.26b 151972 13,271 13J523 - - 1,302 879 2.161 a

1973 11,969 12.221 253 1344 801 2.145 161&74 t-10893 10.893 1,344 718 2.0611975 9. 550 9.550 '- 1344 626 1r9701976 8.206 68o206 1.344 535 1.81 -1977 6,862 6.862 ' - 1.344 443 .r78 -1976 5.519 5.519 - 1.344 352 1.695 -197Q 4.175 4.175 - 1 5.344 260 1.6041980 2.831 2.631 a a 1,344 169 1513 a1981 1.486 1,488 ' a 1.344 77 1.4211982 144 144 144 4 148

Table j.6: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARSPAGE 5

LOANS PROM GOVERNMENTSUNITED KINGDOM

DEBT OUTSTANDING TRANSACTIONS OURING PERIODBEGINNING OF PERIOD CANCEL;

LATIONS.DISBURSED INCLUDING COMMITO DISBURSEO SERVICE PAYMENTS ADJUST

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS(1) (2) (3) (4) (5) Ct) (T) (a)

1970 - ' 2P520 2*520 14 141971 2'520 2'520 2.500 2P500 329 329 216i972 5#236 5i236 650 494 1*144 a

1973 4,586 4P586 ' 900 424 1.324 '1351974 3,551 39551 ' 1.990 3.05 2.295 -197$ 1,'561 1I561 ' 1.561 37 1.s98

Table 4.7: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

LOANS FROm GOVERNMENTSUSA -EtORT IpoT 1ANK PAGE 6

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL&

LAT70OtdSDISBURSED iNCLUDING COMMIT' DISBURSEW SERVICE PAYMNTS ADJUST

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTSCl) (2) (3) (4) (5) (6) (T) C)

1967 - 18.400 2,965 - 41 41 -

1968 2.965 18O400 1.349 14,176 300 464 7641969 i6p841 19J449 2.522 1J165 1.121 2286-1970 18198 18j,284 * 1.556 1,076 2,632 '61971 16P642 16,642 - - 1556 979 265352

197? 15.O86 15.0b6 - -1556 987 24435

1973 13.530 13.530 3.108 1.160 1.467 80l 2*2681974 13J223 15.171 1#478 1.467 782 2.250197'i 13P233 13.703 * 470 1.921 7T6 2*698197 T 11P782 11.782 - 1.921 689 2.6101977 9P861 9.861 - 1.757 576 2.3331978 8P03 Bo103 - . 1.757 471 2.228

1979 6P346 6.346 1.757 365 2.1231980 4.589 4.589 1.757 260 2.017

1981 2#832 2.832 - 1606 155 1,t63 -

1987 1.224 1.224 * 651 62 7131983 573 573 * 573 26 598

Table 4.8s BAHAMAS 12/30W73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U6S. DOLLARSPAGE 7

LOANS FROM GOVERNMENTS

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCELO

LATIONS.DISBURSED INCLUDING COMMITO DISOURSEO SERVICE PAYMENTS ADJUST&

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) (2) (3) C4) (5) (6) CT) C)

1967 ' l18400 2*965 * 41 411968 2J965 18.400 1.349 14P1T6 300 464 7641969 16.B41 19.449 ' 2.522 1,165 1.121 2&2861970 18,198 18J284 2*520 2*520 1*556 1*090 2.646 '861971 19,162 19*162 2*500 2P500 1*556 1.308 2.864 2161972 20J322 20.322 2.206 1.381 3#587

1973 18b116 168I16 3.108 1i160 2*367 10224 3.S92 '1351974 16,774 18*722 ' 1.478 3*457 1.087 4.5451975 14,795 15#265 47o 3.483 813 4P296197A 11*782 11*782 1*921 669 2.6101977 9J861 9pb61 - 1.757 576 2.333 3197'R bo103 6.1C3 1 .. 757 471 2.2251979 6*346 6*346 ' 1.757 365 2*123198c, 4,589 4*589 ' 1,757 260 2*01?1981 2#832 2.832 ' a 1,608 155 1.7631982 1,224 1I224 - a 651 62 713 a

1983 573 573 - a 573 26 596 -

ECONOMIC AND SOCIAL DATA DIVISIONECONOMIC ANALYSIS & PROJECTIONS DEPARn=T

JANUARY 10, 1974

SUPPLEMENT

Table 4.9: BAHAMAS 12/30UT3

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.Ss DOLLARSPAGE 1

SUPPLIERSCANADA

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL

LATIONS,DISBURSED INCLUDING COMMIT- DISBURSE' SERVICE PAYMENTS ADJUST&

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) C2) (3) (4) (5) (6) (7) (a)

19?1 a - 39962 3P466 119 119 151972 3P460 3,977 - 461 199 311 510

1973 3P743 3,779 36 380 295 675 221974 3'421 3,421 * 380 266 6461975 3'041 3ou41 - - 380 236 616197A 2P661 2i661 * 380 205 5SS197? 27?b1 2w281 * 3B0 175 555197A 1,901 1,901 5 380 144 525197Q 1J521 1*521 - 5 380 114 494 -

1980 1140 r1,40 - 360 84 4641981 760 760 - - 380 53 4331980 380 380 - 380 23 403

SUPPLEMEN T

Table 4.10: BAHAMAS 12/30/T3

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31v1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARSPAGE 2

SUPPLIERSSWITZERLAND

DEBT OUTSTANDING TRANS5ACOlNS DURING FER7t-OBEGINNING OF PERIOD CANCEL;

LATIONSDISBURSED INCLUDING COMMITO DISOURSEN SERVICE PAYNENTS ADJUST&

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTSCO) (2) C3) (4) (5) (6) (7) (a)

197c a ' i,257 1,257 79 66 145 l1971 1-179 1,179 ' a 165 84 249 1121979 1,126 11?6 - 173 76 249 *

1973 953 953 e 192 81 273 2021974 962 962 ' 0 192 67 260197S 770 770 0 - 192 54 246197A 577 577 0 ' 192 40 2331977 385 365 - 0 192 27 219197! 192 192 0 192 13 206 0

SUPPLEMENT

Table 4.11ii BAHAMAS 12i30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31D1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

SUPPLIERSUNITED KINGDOM PAGE 3

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL'

LATIONSsDISBURSED INCLUDING COMMIT* DISBURSE SERVICE PAYMENTS ADJUSY

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) C2) C33 (4) CS) (6) (7) (8)

196Q 643 643 0 190 36 226 1197t) 454 454 2,830 2'830 368 103 4711971 2'916 2,916 - a 540 150 690 2161972 2J592 2J592 4,047 4,018 479 133 612 a

1973 6,131 6,o160 - 28 816 399 1#215 03031974 5j,41 5,041 - - 816 345 19160 0

197$ 4,225 4J225 - 816 290 1.106197A 3,409 3,C4,9 - - 816 236 1.0511977 2,594 2P594 -816 181 997197A 1,778 1,778 - - 816 127 9421979 962 962 * - 481 72 5531980 481 4ei - 481 36 51?

SUPPLEMENT

Table 4.12: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.91912

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARSPAGE 4

SUPPL IERSUSA

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL

LATIONSmDISBURSED INCLUDING COMMIT- DISBURSE- SERVICE PAYMENTS ADJUST

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL NENTS(1) (2) (3) (4) C5) (6) CT) La)

197i) - - 4625 1,254 29 291971 1,?54 4,625 1i448 35 107 142 -1972 2,667 4'590 546 306 155 461 -

1973 2,907 4,264 415 1s635 714 218 932 -1974 3,828 3,985 157 748 283 1#031 -19TS 3,?37 3,237 769 236 1.0061976 2,467 2,467 - - 769 179 949 -1977 1,696 1i698 ' ' 769 122 892197fl 929 929 - 7 769 66 835 -1979 159 159 S s 55 9 64 -1960 104 104 - ' 55 5 61 -1981 49 49 '38 2 40 -

1987 10 10 'lo 1 11 U

SUPPLEIqT

Table 4.13: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31#1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.s. DOLLARS

PRIVATE BANKSCANADA PAGE 5

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL

LATIONS,DISBURSED INCLUDING COMMITO DISBURSE& SERVICE PAYMENTS ADJUSTO

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL WENTS(1) (2) (3) (4) (5) (6) (C? Ca)

1968 5,850 5.,850 * 325 348 673 -1969 5J525 5i525. 325 279 6041970 5*200 5,200 * 325 403 7261971 4P875 4.pt75 sOOO 2*449 325 33r 6621972 6,999 9,550 - 2#350 325 614 939 -

1973 9,024 9,225 - 134 325 616 9411974 8,833 8,900 67 1,992 608 2.600 -1975 6P908 6,908 - - 1.992 470 2.4621976 4 ,917 4,917 1,992 332 2#3241977 2,925 2,925 - - 325 194 5191978a 2J600 2,60 325 172 4971979 2?275 2,275 - - 325 151 4761950 1,950 1,9'50 - - 325 129 454 -1981 1,625 1,625 - - 325 108 433 -1982 1,300 1,300 - - 325 86 411 -1983 975 975 - * 325 65 390 -1984 650 650 - - 325 43 368 -1985 325 325 - - 325 22 347

SUPPLNENT

Table 4.14 : BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31D1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.s. DOLLARSPAGE 6

PRIVATE BANKSUSA

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL&

LATIONSsDISBURSED INCLUDING COMMIT' DISBURSE* SERVICE PAYMENTS ADJUST'

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL 14ENTScl) (2) (3) C4) CS) (6) Cl) CT)

1969 3'507 3F507 - 859 208 1.067197o 2,648 2,648. - a 470 176 646 -1971 2, 178 2,178 - - 1.500 99 1.599197? 678 678 a 32 32 a

1973 673 678 3J522 1.315 678 34 7121974 1,315 3,522 a 1,675 292 75 3671975 2P698 3,230 - 532 470 155 6241976 2P760 2,760 - - 470 159 6281977 2*291 2,291 - a 470 130 600 a197A 1,821 1*821 - a 470 102 572 -1979 1,351 1,351 a - 470 74 544 -19b0 882 882 - a 470 46 5151981 412 412 a 323 18 341 -1989 69 89 a ' 89 3 91 -

SUPPLEMENT

Table 4.15: BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31.1972

DEST REPAYABLE ZN FOREZGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

PRIVATE BANKSMULTIPLE LENDERS PAGE 7

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING (lF PERIOD CANCEL'

LATIONI.DISBURSED INCLUDING COMMITO DISBURSEm SERVICE PAYMENTS ADJUST-

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL WENTSCl) (2) (3) C4) CS) (6) C?) CS)

1973 - 17,150 17.150 a ' a1974 17,150 17,150 ' 2.058 2JO58197r 17,150 17.150 - 2.28? 1*989 4.276 -1976 14.863 14,863 2,287 1*715 4.0021977 12,577 12J577 - 2P287 1.441 3J7271978 10,290 10.290 2,287 1J166 3,4531979 8PO03 8.003 ' 2.287 892 3.1781980 5P717 5.717 - 2#287 617 2.9041981 3,430 3.P430 2.287 343 2.630 -

198P 1143 1.143 ' 1.143 69 1.212

SUPPLMENT

Tabl e _41 6s BAHAMAS 12/30/73

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31'1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U*S. DOLLARSPAGE 8

OTHER PRIVATE FINANCIAL INST.CANADA

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL&

LATIONS#DISBURSED INCLUDING COHMIT DISBURSE SERVICE PAYMENTS ADJUST&

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) C2) (3) (4) (5) (6) C?) (O)

1967 - - 3'515 641 - ' 0 -

196A 641 3,515 - 2#226 - 94 94 11969 2J868 3,516 - 267 141 191 332 *I197n 2,994 3P374 156 301 192 493 2361971 3,059 3,309 - 301 179 480 151972 2,l711 3,023 - 302 161 463

1973 2,469 2P721 * 253 288 155 443 161974 2,449 2,449 288 145 433197S 2,l6l 2,161 - - 288 127 416 -1976 1,873 1,673 - - 288 110 3981977 1'585 1,585 - - 268 92 380 -

197A 1,297 1,297 - 2B8 75 363 -

197 I,008 1,008 - 288 57 3451980 720 720 - 288 40 328 -1981 432 432 - 28bt 22 310 -

1982 144 144 - 144 4 148

SUPPLEMEN TTable 4.17: BAHAMAS 12/30/7)

EXTERNAL PUBLIC DEST AS OF DECEMBER 31.1972

DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U*S. DOLLARSPAG.E o

OTHER PRIVATE FINANCIAL INST.USA

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL'

LAT IOWS,DISBURSED INCLUDING COMMITO DISBURSE- SERVICE PAYMENTS ADJUST'

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTSCl) (2) (3) C4) (5) (6) cr) (S)

1968 14O000 14,000 So- 5o 990 1.490 a

1969 13i500 13,510 - -1OOO 928 1#9281970 12S50O 12,500 - 1poo( 858 1.8581971 11500 11,500 I , 1.DOO roe 1.7s8 81977 luo10J500 I,5o0 - IOOO 718 1.718 a

1973 9,500 9,500 - - 1,056 647 1#702 a

19?a 8,444 8,444 ' 1.056 573 1#62819j7 7,389 7P3a9 - - 1'056 499 1.554 a

197h 6.333 6J333 I .0 56 425 1&480 a

1977 5.278 5,278 a - 1.056 351 1.407191XA 4.222 4,222 - 1.056 277 1J3331970 3 167 3,167 - 1 056 203 1#259 a

19et) 2111 2,I111 I 1056 129 1185 I1981 l1.056 1,056 - - 1.056 55 1.111 a

ECONOEC AND SOCIAL DATA DIVISIONV,CONOMIC ANALYSIS & PROJECTIONS DEPARTMENT

JANUARY 10, 1974

Table 5.1 Central Government Expenditure : Functional Classification

(In millions of Bahamian dollars)

Budget1969 1970 1971 1972 1973

Total current expenditure 6. 76 76. 6 86.6 93.0General public services 15.1 Ji.7 19.2 2i.s .

General administration (8.7) (11.5) (11.0) (13.1) (13.8)PLublic order and safety (6.4) (8.2) (8.2) (8.7) (10.4)

Education 13.5 18.1 20.2 21.6 24.2Health 9.1 10.5 11.7 12.7 14.2Social benefits and services 2.9 3.3 3.5 3.9 3.7General administration and regulation (0.2) (0.2) (0.2) (0.3) (0.3)Old age, disability, and survivors (2.1) (2.1) (2.3) (2.3) (2.1)Other public assistance to persons (0.6) (0.9) (1.0) (1.2) (1.2)Collective social services (--) (0.1) (--) (0-1) (0.1)

Housing 0.1 0.1 0.1 0.1 0.2Other community and. social services 0.2 0.3 0.2 0.3 --Economic services 17.1 19.3 18.7 20.1 20.5Agriculture and forestry (0.5) (1.0) (0.8) (0.9) (0.8)Land surveys and meteorological (0.3) (0.3) (0.4) (0.4) (0.7)Transportation (1.8) (2.2) (2.1) (2.1) (1.9)Central ministry /1.1/ /1.4/ /1-3/ /1-3/ /1.4/Roads and road transport /0-3/ /0-4/ /0.4/ /0.4/ /0.5/Water transport /0.4/ /o.4/ /o.4/ /o.4/ /--/

Labor employment services (0.3) (0.4) (0.4) (0.4) (0.4)Tourism (6.7) (6.9) (6.9) (7.8) (7.8).Public works and water supply (7.4) (8.3) (8-0) (8-3) (8-9)Other (0.1) (0.2) (0.2) (0.2) (--)

Unallocated 3.8 5.4 5.8 6.1 6.oPublic debt (interest)!/ (3.8) (5.4) (5.8) (6.1) (5.0)Other (~) (~ ~) (--) (1.G)

Total capital expenditure 16. 2 20.1 12.1 11.3 4General public services 0.9 0.7 o.4 1.3 0.Education 2.2 5.3 3.0 3.0 5.5Health 0.2 0.5 0.3 0.5 1.6Housing -- 0.2 0.1 0.1 0.3Economic services 12.1 12.8 8.1 5.2 5.0

Agriculture, forestry, and fishing (0o1) (0.3) (0.4) (0.3) (0.2)Land surveys (0.4) (0-3) (0.2) (0.4) (0.1)Transportation (4.3) (2.3) (0.9) (0.9) (0.7)Roads and road t;ansport /1.8/ /0.6/ /0.2/ /0.5/ /0.2/Water transport2 /1.2/ /1.7/ /0.7/ /0.4/ /0.5/Air transport2I /1.3/ /__/ /__/ I--I I--

Public works,and water supply (6.o) (8.1) (6.1) (3.6) (4.0)Post Office i (1-3) (1.8) (0.5) (__) (--)

Acquisition of assets 0.8 o.6 0.2 1.2 0.4

Source: Ministry of Finance and IMF.

1/ Includes some payments in respect of the guaranteed debt. _ These are reimbursedto the Government by the corporations.

2/ Includes overall deficits of Port Department, Aviation Department, and PostOffrice, respectively.

Table 5.2: Central Government Expenditure : Economic Classification

Budget1962 1970 1971 1972 1973

(In millions of Bahamian dollars)

Total expenditure v8.o 96.8 97.9 106.4

Current expenditure 6i.8 767 6 86.6 93-0Consumption expenditure 52.7' 6.I 73.0 B0.8Purchases of goods and services (23.5) (26.5) (24.7) (27.4) (30.6)Compensation of government employees (29.2) (37.8) (41.7) (45.6) (50.2)

Interest payments 2.7 3.6 4.1 4.0 4.8Domestic (0.7) (1.7) (2.4) (2.6) (1.5)Foreign (2.0) (1.9) (1.7) (1.4) (3.3)

Subsidies and other transfers 6.4 8.7 9.1 9.7 7.4Subsidies (0.9) (1.1) (1.2) (1.1) (1.1)Reimbursable transfers to publicenterprises (1.2) (1.8) (1.8) (2.1) (0.3).Transfers to households (2.8) (3.3) (3.5) (3.6) (3.6)Transfers to nonprofit institutions (1.3) (2.2) (2.3) (2.4) (2.0)Transfers abroad (0.2) (0.3) (0.3) (0.5) (0.4)

Capital expenditure 16.2 20.1 12.1 11.3 13.4Capital formation 11.6 16.o 10.6 9.7 12.5Acquisition of existing assets 0.8 o.6 0.3 1.2 0.4Land (0.5) (0.4) (0.1) (1.0) (0.2)Equities (0.3) (0.2) (0.2) (0.2) (0.2)

Capital transfers to public enterprises2i 3.8 3.5 1.2 o.4 0.5

(As per cent of total)

Current 79.2 79.2 86.8 88.5 87.4Capital 20.8 20.8 13.2 11.5 12.6

(As per cent of current expenditure)

Consumption 85.3 83-9 83.4 84.2 86.9Interest payments 4.4 4.7 5.2 4.6 5.2Subsidies and other transfers 10.3 11.4 11.4 11.2 7.9

(As per cent of capital expenditure)

Capital formation 71.6 79.6 87.6 85.8 93-3Acquisition of existing assets 4.9 3.0 2.5 io.6 3.0

(Percentage annual change)

Total expenditure ... 24.1 -5.3 6.8 8.7Current expenditure ... 24.1 3.8 8.8 7.4Of which:-- consumption ( ) (22.0) (3.3) (9.9) (10-7)

Capital expenditure ... 24.1 -39.8 -6.6 18.6Of which: capital formation ( ) (37.9) (-33.7) (-8.5) (28.9)

Source: Ministry of Finance and IMF.2 Overall deficits of Post Office, Port Department, and Aviation-Department.

Thble 5 .3: Central Government Revenue and Grants

ActualBudget Jan.-July

1969 1970 1971 1972 1973 1973

(In millions of Bahamian dollars)

Total revenue 74.0 80.8 77.2 2 107.6 61.6

Current revenue 2 80.2 76.6 88.4 106.4 61.1

Tax revenue 67.0 72.3 68.o 78.0 9641 .6Taxes on property (real estate) 0.2 1.1 1.5 1 0.9Taxes on goods nd services 10.2 14.0 14.9 20.7 24.8 16.7Excise taxesiy (0.5) (0 9) (1.0) (1-9) (2.4) (1-7)Selective taxes on services (4.9) (6.9) (5.8) (8.5) (9.4) (6.5)Selective taxes on use or permissionto perform activities (1-7) (3.2) (3.4) (5 4) (7-8) (5.8)Business and professional licenses /0.6/ /2.0/ /2.2/ /4.1/ /5.2/ /3.6/Motor vehicle and other taxes /1.1/ /1.2/ /1.2/ /1.3/ /2.6/ /2.2/

Departure and p ssenger ticket taxes (3.1) (3.0) (4.7) (4.9) (5.2) (2.7)Taxes on imports•/ 52.0 52.5 47.3 49.4 62.3 32.9Other taxes 4.6 4.7 4.2 6.4 7.2 4.1

Stamp taxes (3.6) (3.3) (2.7) (4.o) (4.6) (3.0)Other (1.0) (1 4) (1.5) (2.4) (2.6) (1.1)

Other current revenue 5.8 7 8.6 10.4 10.3 6.5income from property ii.Z 10 0.7 Oi. aFines, forfeits, and administrativefees and charges 1.2 1.6 2.1 3.8 4.8 3.4Other3 c 3.0 5.3 5.8 5.8 4.7 2.7

Capital revenue 1.2 0.6 o.6 7 1.2 o.5Grants from abroad -- -- -- __Sales of covernnent -DroDertv 1.2 0.. 0.2 -- 0.1 --Grand Bahama Port Authority divL4ends -- -- -- 8.2 -- 0.5Nonfinancial public enterprisesY -- 0.2 o.4 0.7 1.1 --

(As per cent of total)

Current revenue 98.4 99.3 99.2 90.1 98.9 99.2Capital revenue 1.6 0.7 0.8 9.9 1.1 0.8

(As per cent of current revenue)

Tax revenue 92.0 90.1 88.8 88.2 90.3 SqTaxes on property (0-3) (1.4) (2.1) (1.7) (1.7) (o S)Taxes on goods and services (14.0) (17.4) (19.5) (23.4) (23-3) (21. 3)Taxes on imports (71.4) (65.5) (61-7) (55-9) (58.6) ( 5 3.q)Other taxes (6.3) (5.8) (5.5) (7.2) (6.7) (( 7)

Other current revenue 8.0 9.9 11.2 11.8 9.7 1°-6Tpercemtage annual change)

k :a'urevenue * 9.2 -4.5 27.1 9.7Current revenue ,, 10.2 -4.5 15.4 20.1

Tax revenue . .) (7.9) (-5.9) (14.7) (24.3) t- *.)Taxes on goods and services ( -(13.7) (6.4) (38.9) (24.0) t*Taxes on imports { (1.0) (-9.9) (4.4) (26.1)Other taxes 'w (2.2) (-10.6) (52.4) (12-5) ...

Source: Ministry of Finapce.

I Net of refunds made on exports of spirits.Net of refunds made on account of the various incentive schemes.Includes reimbursements of transfers made by the Government to the public enterprises.Net overall surpluses of Post Office, Port Department, and Aviation Department.

Table .4 Transactions of Nonfinancial Public Enterprises

(In millions of Bahamian dollars)

1969 1970 1971 1972

1. Bahamas Broadcasting and Television Commissio Y

Operating revenue o.6 0.7 o.8 1.0Operating expenditure 0.5 o.6 0.7 0.8

Operating surplus 0.1 0.1 0.1 0.2

II. Bahamas Electricity Corporetion?/

Operating revenue 7.8 8.8 11.6 13.1Operating expenditure 5.8 6.9 7.3 8.1

Operating surplus 2.0 1.9 4.3 5

Other current revenue 0.1 0.1 -- 0.6Other current expenditure 0.7 1.1 2.4 1.4

Current account surplus 1.4 0.9 1.9 4.2

Capital receipts o4 0o.4 0.4 0.3Capital expenditure 1.8 6.7 4.4 1.8

Overall surplus or deficit (-) -- -5.4 -2.1 2.7

External financing -0.9 3.0 5.9 -2.3Crown Agents (G-) (-) (5-1) (-0.8)Long-term U.S. bonds (-0.6) (-0.6) (-0.6) (-0.8)Other net borrowing (i°O3) (3.6) (1.4) (-0.7)

Domestic Xillat1cing 9.9 2.4 -3.d -0.4Financial institutions--bank overdraft (-0.1) (0.1) (-0.6) (0.6)Other (1.0) (2.3) (-3.2) (-1.0)

III. Bahamas Telecommunications Corporation

Operating revenue 10.8 11.0 10.9 12.3Operating expenditure 6.9 7.6 8.3 8.0

Operating surplus 3.9 3.4 2.6 4.3

Other current revenue __ o.4 0.5 _Other current expenditure 1.0 0.9 1.2 1.9

Current account surplus 22.9 1.9 2.4

Capital expenditure 1.6 3.5 6.2 8.1

Overall surplus or deficit (-) 1.3 -o.6 -4.3 -5.7

External financing -o.6 -0.5 4.8 4.6Domestic financing -0.7 1.1 -0.5 1.1

Bank overdraft (--) (0.1) (0.2) (0.4)Cash holdings (-1.5) (0.9) (0.9) (--)Other (0.8) (0.1) (-1.6) (0.7)

IV. Port Department, Aviation Department, and Post Office

Current revenue 5.1 5.4 5.5 5.4Current expenditure 3;6 4.5 4.6 4.7

Current account surplus 15 .9 0.9 0.7

Capital expenditure 5.2 4.1 1.6 0.4

Overall deficit (-) _3.7 -3.2 -0.7 0.3

Soumes: Respective public enterprises; and Ministry of Finance.

. Broadcasting Corporation of the Bahaeas from January 1973./ Fiscal years ending September 30 of each year.

Table 6.1: SUMMARY ACCOUNTS OF THE BANKING SYSTEMW(tomilin of Bsh-oi.n dollsro)

Onober 31 J.ne 30 D-cmbe- 31 J-o 30I 9684' 1969 1970 1971 1972 272 i97I

Enchnge lat.: 9$ per po...d ste-ling 2.45 2.45 2.45 2.40 2.40 2.53 2.53 2.37 2.37 2.28 7.28 2.58Ill per Ul.S. dollar 1.02 1.02 1.02 1.00 1.00 1.03 1.03 1.03 1.03 1.03 1.03 1.00

8 eCadiso dollar 1.05 1.05 1.05 1.01 1.01 1.03 1.03 1.02 1.02 1.03 1.03 1.00

r. Bahasao Mo..cary Authority

International re..erves 30.8 18.3 17.3 17.0 19.9 20.9 35.4 33.8 372 0 31.9 34.2 37.8

Not domestic credit 7.7 7.9 7.1 7.4 7.0 6.1 2.8 4.4 46 5.5 4.2 1.4Central Government 8.0 9.5 10.0 10.7 8.5 9.0 8.6

Treasury bill. (--5 (1.35 (2.0) (2.75 (0.55 (1.0) (0.6)

Promisery motes (8.0) (80 80 80) (0.0) (8.0 80nlasaifed (ne t) -0.3 -1.6 -2.9 .2.6 -3.6 -4.6 -5.7 -4.0 -4.4 -3.05 4.44 .7.2

Liabilities to .sthori.ed dealers (net) 25.2 98. 6.5 11.7 19.7 16.0 17.8Currency 1-2.0 107.4 8T.1 9.0. 6.811.B 7.T3Deposits 13.3 0.5 .- 1. 9 12.9 4.2 20.5Batas... e.itb authorised desisr. .0.1 -2.1 -1.-5 .0.1 -

Currency 10 circulation 13.3 17.4 17.8 15.3 18.5 21.3 20.6

22. Anth-rlzed Or-lero

Net foreiem ... et.~ 118.5 92.7 98.4 104.1 77.4 26.9 109.4 -108.0 _54.8 54.6 23.7 21.0Asse.ts . .. 2,251.1 3,084.7 3,0 33.1 4,33-9.3 4,454.3 5, 27-9.4 5,-269.9 6,064.3 ~-6,0647 ',316.9 7,334.8Liabilities ... -2,158.3 .2,986.3 -2,929.0 -4,261,9 .4,375.5 -5,170,1 .5, 161.8 .6,089.3 -6,036.1 .7,493.2 .7,300.8

Neot domestic credit 108.1 173.3 165.3 157.3 164.4 185.9 145.3 145.8 171.2 171.2 205.0 - .1Central Go-vr-oet (net) 118 17.6 -32.0 371.9 32.4 3T2.6 .. .. 3:8.3 3-8.3 TIeoWry bill, (5.2) (1.0)) (4.3) (4.2) (6.15 (6.15 ... ... (8.41 MO6 . ..Loan aed sdvae..e. (7.0) (17.5) (24.0) (23.9) (22.5) (22.7) (.5 (..5 (22.83 (72.121..8)..Ovrdats (2.5) (2.7) (6.7) (6.7) (5.55 (5.)) (..) .3 (.. 5.) 58.4 ( . . .

Deposits (.2.0) (-3.5) (.3.0) (-3.0) (.1.7) (-21.7) (.. . -. ) (-1.75 .)..PsbliO n .rportine.. (..t)'1 -0.4 0.8 1.9 22 .. 3.2..Overdrafts (--3 (2.85 (2.1) (2.6) ..)(3.6)(..Deposits (-0.4) (-2.0) (-1.25 (-0.45 . (-0.45 .

priat sec,itor 124.9 153.1 1237.1 ,. 134.9 ... 130.8ijolssfid (net) .28.2 1.7 4.3 -35 .. 3.8 ... .. . -2.0 -1.1 .. .

Cd.Oms .. BHA (not> Z5.2 8.8 6.5 11.7 19.7 16.0 17.8Cer ..n y 12.0 10.4 8.1 9.9 6.8 11.8 7.3Deposits 13.3 0.5 .- 1.9 12.9 4.2 50.5B;A bal.,,ces -0.1 -2.1 -1.5 .0.1 -. --

Liabdllties to1 rivat. -ector 231.9 274.0 270.2 260.0 253.4 256.4 274.3 273.5 242.1 241.8 241.5 245 9Deaddeoi. 1 77.5 166.0 1.7 69.4 14. 467 11.3 007 156 154.

Time deposits 36.3 65.1 55.1 64.8 63.6 61.9 0.Savings deposits 38.0 43.6 43.4 44.9 49.2 44.9

III. Cons olidated Anco...t, of the B.nkino Ovyten

Inte-nationalI r.esve 30.8 18.3 17.3 17.0 19.9 20.9 35.4 33.8 32.8 __1.9 34.2 2.-.

Other net fo-eisn .9sets 118.5 92.7 98.4 104.1 77.4 78.9 109.4 100.0 54.8 54.6 2,.7 -z0Assets 2,251.1 3,06-4.7 3, 03-3. 1 4,3i39. 3 i4,454. 3 5,-279.4 5,26-9.9 6,064.0 6,0-660. 7 7,51l 6. 9 7. 334 7~Lisbi liti.... -2.158.3 -2, 986.3 -2,929.0 -4,261.9 -4, 375.5 -5,170.1 -5, 161.8 .6,009.3 -6,006.1 .7,493.2 -7, 337 0

Net dom*estic creodit 115.8 181.2 172.4 164.7 171.4 172.0 148. 150.3 175. 176.7 209.2 1204.C.etr-l Govermet (net) 19.8 27.1 42.0 41.9 43.1 43.3 ... .. . 47.3 47.3 ... ..Treasu.ry bills (5.2) (2.5) (6.3) (6.25 (8.85 (8.0 (.) (...) (9.6) (9.6) (.. . .)..Promissory notes (8.0) (8.0) (8.0) (0.0) (8.05 (8.0) (8.05Loass and advances (7.0) (17.5) (24.0) (23.9) (22.5) (22.7) (. 3 (..5 (22.8) (22.8) (.) (.

Overdrafts (2.5) (2.7) (6.7) (6.7) (5.5) (5.55 (.. -(.) (0.6) (8.6) ( . .Deposits (-2.8) (-3.5) (-3.0) (-3.0) (-1.7) (-1.73 (.. .. .3 (-1.7) (-1.75 ..)..

Public c-rporatioss (net) -0.4 0.8 1.9 2.2 ... 3.2Overdrafts (--) (2.8) (3.1) (2.6) (...) (3.6) ( .Deposits (-0.6) (-2.0) (-1.2) (-0.4) G...) (-0.4)

Private aector 124.9 153.1 127.1 134.9 . .. 130o8Un.clsasified (net) -28.2 -. 1.4 -6.2 -0.6 -8.4 ... ... -5.4 -4.6 ... .

Liabilities to prieste sector 265.2 292.1 288.0 285.7 260. 271.7 292.8 292.0 263.7 263.) 267.0 266.4Han0ey 190.8 183.4 189.5 187.2 159.0 162.0 100.1 179.3 156.9 156.7 151.6 150.9Currency in circulation (13.3) (17.4) (17.8) (15.3) (18.5) (21.3) (20.6)Demand d"epoits (177.3) (I66. 0) (171.7) (169.4) (043.7) (146.7) (161.3) (000.7) (133.6) (135.43 (031.0) (290.45

Quasi-money 74.4 108.7 98.5 109.7 112.8 106.8 115.5Time deposits (36.3) (65.1) (55.1) (64.8) (63.6) (61.9) (69.05Smvings deposits (38.0) (43.6) (43.4) (44.9) (49.2) (44.9) (46.45

Source: Bahamas Monetary Authority and IMF.1/ Defined as consisting only of tbe Bahoas monetary Anthority and the 15 suthori.ed deale..2/All actount.exmcept tbose of tbe l2overnumet and public corporations correspond to January 31. 1969.3/Consisting of claima on aod liabilities to banks abroad, and all other accoaunts denominated in foreign currency except demand deponito and ..c..untn of the

C-ntral Gover meat.4/ The balance sheets of one public corporation corresponds 10 September of each year, not to Dec-ber.3/ Includes all demand deposits denoemisated in foreign currency except gover,ament deposits.

Table 6.2: DISTRIBUTION OF AUTHORIZED DEALERS'CREDIT TO THE PRIVATE SECTOR.

December 311971 1972 1971 1972

(In millions of (As per cent ofBahamian dollars) total)

Total 134.9 132.8 100.0 100.0Manufacturing 1.2 1.5 0.9 1.1Agriculture, fishing, and mining 2.7 3.1 2.0 2.4Construction 9.1 12.8 6.7 9.6Land development 7.1 10.2 5.3 7.7Restaurants and hotels 11.9 9.0 8.8 6.8Professional 1.7 1.4 1.2 1.0Personal 26.3 19.6 19.5 14.7Mortgages 19.3 22.5 14.3 17.0Distributive 11.1 9.3 8.2 7.0Other financial institutions 1.4 2.3 1.0 1.7Unclassified. 43.1 41.1 32.0 30.9

Source: Bahamas Monetary Authority and IMF.

Table 7.1: MONTHLY ARRIVALS 1962-72

1962 I19 1968 1966 1 96 1978 1972

January 38,737 40,430 53,530 -1766 13,149 71,5 49 87,086 93,511 104,840 109,590 114,083

February 47,499 52,012 67,574 67,574 81,029 88,242 101,575 113,013 112,944 126,291 139,714

March 48,397 64,989 70,639 77,947 95,239 107,646 107,766 137,450 139,418 133,391 163,896

April 40,159 48,616 50,101 60,856 86,507 79,017 94,318 124,248 108,175 147,274 149,139

May 34,oo6 35,956 42,746 57,937 60,500 73,746 87,897 118,302 113,677 121,003 118,857

June 34,318 42,003 44,998 56,622 58,626 79,804 80,622 115,458 109,236 119,463 115,598

July 39,333 58,394 54,527 66,486 73,327 83,384 98,831 136,743 128,052 152,004 150,786

August 40,876 59,013 50,207 65,944 77,414 88,783 112.217 140,400 130,243 151,961 148,375

September 25,026 33,374 35,111 38,662 43,133 46,675 55,613 69,047 77,782 76,164 80,472

October 27,429 27,484 37,751 46,276 40,950 52,459 67,467 75,751 76,760 99,377 93,393

November 31,168 36,728 42,654 59,060 58,518 68,866 85,704 100,850 94,433 112,616 110,996

December 37,922 47,405 55,058 59,290 73,925 75,102 93,117 107,623 102,783 114.457 126,549

Total 444,870 546,404 605,171 720,420 822,317 915,273 1,072,213 1,332,396 1,298,344 1,463,591 1,511,858

% To PreviousYear +20.8% +22.8% +10.8% +19.0% +14.1% +11.3% +17.1% +24.3% -2.6% +12.7% +3.3%

Source: Ministry of Tourism

Table 7.2: TOURIST ARRIVALS IN 1972 CLASSIFIED BY TYPE OF TOURIST AND MONTH

Air Stopover Total Cruise Total TotalMonth Tourists Sea Tourists Tourixts Visitors Visitors Transits Arrivals

January 75,299 1,905 77,204 33,068 110,272 3,811 114,083

February 99,476 3,228 102,704 34,123 136,827 2,887 139,714

March 118,728 3,508 122,236 37,889 160,125 3,771 163,896

April 103,648 3,815 107,463 37,092 144,555 4,584 149,139

May 75,643 6,278 81,921 30,713 112,634 6,223 118,857

June 67,566 8,466 76,032 31,864 107,896 7,702 115,598

July 86,733 11,740 98,473 43,440 141,913 8,873 150,786

August 88,988 7,154 96,142 44,127 140,269 8,106 148,375

September 46,354 3,570 49,924 22,513 72,437 8,035 80,472

October 57,159 2,722 59,881 27,567 87,448 5,945 93,393

November 76,315 3,669 79,984 27,346 107,330 3,666 110,996

December 80,607 3,639 84,246 37,449 121,695 4,854 126,549

Total 976,516 59,694 1,036,210 407,191 1,443,401 68,457 1,511,858

Source: Ministry of Tourism.

Table 7.3: VISITORS POINTS OF RESIDENCE 1972

Number of Average % ofCountry or Area Visitors Length of Stay Total

U.S.A. 1,245,4i95 5.58 days 86.29%

Canada 105,758 8.28 days 7.33%

Europe 23,8.,6 9.09 days 1.65%

U.K. 18,069 15.08 days 1.25,

Rest of the World 50,223 10.03 days 3.48%

TOTAL 1,44h3,401 6.17 days 100.00%

Source: Ministry of Tourism

Table 7.4: FIRST PORT OF ENTRY ARRIVALS, 1964-1972

Nassau Freeport Family Islands

1964 66.08% 18.06% 15.86%

1965 68.65% 20.41% 10.94%

1966 64h59% 23.26% 12.15%

1967 63.02% 25.28% 11.70%

1968 62.00% 28.79% 9.21%

1969 544.6% 37.35% 8.19%

1970 56.27% 35.33% 8.40%

1971 57.27% 34.34% 8.39%

1972 62.28% 27.99% 9.73%

Source: Ministry of Tourism.

Table 7.5: USA VISITORS POINTS OF RESIDENCE 1972 vs. 1971

Share of 1972 1971 d

USA Total Visitors Visitors Chg.

Alabama 0.75 9,350 10,521 -11.13Arizona 0.15 1,882 1,514 +24.31Arkansas 0.24 2,943 2,440 +20.61.California 3.76 46,842 32,638 +43.52Colorado 0.35 4,347 3,925 +10.75Connecticut 2.42 30,175 30,215 -0.13Delaware 0.27 3,377 3,479 -2.93District of Columbia 0.76 9,494 8,328 +14.00Florida 21.77 271,088 307,553 -11.86Georgia 2.27 28,288 29,178 -3.05Idahio 0.03 323 382 -15.45Illinois 4.93 61,456 59,503 +3.28Indiana 1.76 21,982 22,107 -0.57Iowa 0.41 5,148 5,071 +1.52Kansas 0.45 5,577 4,384 +27.21Kentucky 0.66 8,250 7,457 +10.63Louisiana 0.70 8,699 9,239 -5.84Maine 0.18 2,209 2,055 +7.49Maryland 2.53 31,459 28,439 +10.62Massachusetts 3.13 39,023 38,429 +1.55Michigan 4.84 60,342 56,327 +7.13Minnesota 1.01 12,529 10,384 +20.66Mississippi 0.23 2,853 3,419 -16.55Missouri 1.18 14,706 14,091 +4.36Montana 0.03 444 460 -3.48Nebraska 0.23 2,830 2,194 +28.99Nevada 0.08 1,042 886 +17.61New Hampshire 0.27 3,378 2,512 +34.47New Jersey 7.26 90,442 87,384 +3.48New Mexico 0.06 725 1,166 -37.82lNew York 17.09 212,862 216,831 -1.83North Carolina 1.37 17,048 15,707 +8.54North Dakota 0.05 613 503 +21.87Ohio 4.23 52,733 49,011 +7.59Oklahoma 0.36 4,430 3,840 +15.36Oregon 0.13 1,686 1,679 +o.42Pennsylvania 6.16 76,757 64,551 +18.91Rhode Island 0.47 5,793 5,646 +2.60South Carolina 0.75 9,302 8,388 +10.90South Dakota 0.19 2.335 436 +435.55Tennessee 0.98 12,171 12,097 +0.61Texas 1.82 22,632 22,163 +2.12Utah 0.06 745 857 -13.07Vermont 0.11 1,394 1,078 +29.31Virginia 1.63 20,181 18,213 +10.81Washington 0.32 4,045 3,438 +17.66Wiest Virginia 0.26 3,228 2,932 +10.10Wisconsin 1.23 15,340 12,284 +24.88Wyoming 0.03 436 260 +67.69Alaslca 0.02 240 255 -5.88Hawaii 0.03 341 390 -12.56

TOTAL 100.0 1,245,495 1,226,239 +1.57

Source: Ministry of Tourism.

Table 7.6: USA VISITORS OCCUPATION DISTRIBUTION 1971-1972

1971 % of Total 1972 % of Total

Business/Industry 532,901 43.46 543,373 43.63

Government 21,162 1.72 19,885 1.60

Academic 47,992 3.91 481,46 3.86

Student 119,271 9.73 130,248 10.46

Housewife 2433,o15 19.82 241,109 19.36

Professional 112,293 9.16 113,s591 9.12

Retired 56,561 4.61 59,235 4.75

Unclassified 93,044 7.59 89,908 7.22

Total 1,226,239 100.00 1,245,495 100.00

Source: Ministry of Tourism.

Table 7.7: 1972 VISITOR EXPENDITURE PATTERNS

Non-Schedule &Schedale Air Charter Foreign Average Air Average AirUSA Tourist Air Tourist Tourist Tourist Sea Visitors TotalExpenditure Expenditure Expenditure Expenditure Exponditure Expenditure

Expenditure Areas Per Diem Per Diem Per Diem Per Visit Per Visit All Visitors

1. HOTEL B$23.10 B$11.28 B$18.37 B$113.34 B$ - B$117,393,300

2. MEAIS AND EEVERAGESOutside Hotel 6.88 6.01 6.53 40.29 3.61 43,200,000

3. GRATUITIES 2.42 1.47 2.04 12.59 1.50 13,648,000

4. TRANSPORTATIONa. Local (taxi, tours, cars) 1.88 2.84 2.27 14.01 6.93 17,328,000b. Interisland 0.47 0.99 0.68 4.20 0.09 4,383,000

5. SHOPPINGa. Souvenirs, gifts, perfume

and glassware 3.56 3.30 3.46 21.35 7.89 25,324,000b. Straw work and handicrafts 0.69 0.48 0.60 3.70 4.44 5,642,oooc. Package liquor 0.67 0.67 o.67 4.13 4.11 5,955.,oood. Food and beverage 0.61 1.42 0.94 5.8o o.o8 6,039,000

6. ENTERTAINMENTa. Casino 4.40 3.56 4.o6 25.05 14.27 31,756,000b. Sporting equipment 0.88 0.78 0.84 5.18 0.46 5,555,ooo

7. MISCELLANEOUS 1.11 1.73 1.36 8.39 1.62 9,321,000

Total Expenditure B$46.67 B$34.53 B$41.82 B$258.03 B$45.00 B$285,i544,O00per day per day per day per visit per visit

Source: Ministry of Tourism.

Table 7.8: HOTEL ROOMS 1962-1972

1962 1963 1964 1965 1966 1967 1968 1969 1970* 1971** 1972**

Abaco 187 180 146 159 180 243 243 247 287 322 336Andros 99 111 130 168 155 188 187 211 178 235 263Berry Islands 16 16 16 8 26 56 50 40 76 84 151Bimini 146 146 181 227 205 189 189 197 283 251 240

Cat Cay 36 36 36 - - - - - - - -

Cat Island - - - _ _ _ 48 49 34 36 36Crooked Island - - - - - - - - - 27 25

Eleuthera 163 135 137 179 311 345 442 403 485 434 543Harbour Island 99 94 80 107 105 151 146 132 122 145 147Spanish Wells 10 26 38 46 38 54 54 49 62 62 74

Exuma 28 48 50 94 83 148 148 132 184 180 196Grand Bahama(Including Freeport and

West End) 397 536 1,444 2,180 2,159 2,849 2,849 3,620 3,905 3,884 4,136Inagua 4 4 4 4 4 4 16 16Long Island - 7 17 31 31 40 40 30 34 50 35New Providence(Including Nassau and

Paradise Island) 2,153 2,099 2,159 2,142 2,684 3,867 3,867 4,370 3,909 5,097 5,005San Salvador 19 19 19 13 24 24 19 19 24 24 24Rum Cay 2 2 2 2 2 - - _ - -

Total Rooms Available 3,355 3,455 4,455 5,360 6,007 8,158 8,286 9,503 9,587 10,847 11,227

* 1970 Revised Figures.** Only Licensed Hotels.

Source: Ministry of Tourism

Table 8.1: NASSAU-WASHINGTON DC PRICE COMPARTSON FORFOOD, CLOIi AD APLuANCES

PriceItem Quantity u.S. Bahaas Ratio

Oanges 10 0.89 0.99 1.122Tomatoes 1 lb. 0.39 0.69 1.769Bananas 2 lb. 0.29 0.58 2.000Eggs (medium) 1 doz. 0.80 0.89 1.112

n (large) 1 doz. o.86 0.95 1.105Millc 3 gal. 0.74 0.89 1.203Milk 1 gal. 1.37 1.87 1.365Ground beef lb. 0.98 1.29 1.316Frozen chicken lb. 0.59 0.99 1.678Lipton tea bags (100) 1.21 1.59 1.314Pbrk and beans (Van

Canp) lb. 0.22 0.33 1.500Pork and beans (local) lb. 0.18 0.26 1.11Canned tomatoes lb. 0.26 0.49 1.885Vegetable lb. 0.23 0.39 1.696Oil (Wesson) 1J qt. 1.59 2.25 1.415Shortening (Crisco) 3 lb. 1.32 1.59 1.204otening (loal) 3 lb, 1.19 1.64 1.378

sum r lb. 0.78 O.Y9 1469Alf-purpose flour 5 lb. 0.92 0.95 1.033salt 0.13 0.23 1.769Rice 5 lb. 1.65 1.79 1.085Onions 3 lb. 0.58 0.89 1.534Potatos 5 lb. 0.75 1.19 1.587Bread (Wonder) 0.33 0.39 1.182Bread (local) 0.31 0.33 1.065Coke 128 oz. 1.72 3.18 1.849Coke (local) 64 oz. 0.50 1.03 2.060Detergent (Drive) 3 lb.1 oz. 0.90 1.19 1.322Detergent (Rinso) 3 lb.1 oz. 0.74 1.19 1.6O8Ivory Soap unit 0.58 0.60 1.034Toaster n 15.23 24.60 1.615Iron 11.50 29.90 2.600H&nd Nxer 12.97 16.45 1.268Vacuum cleaner 83.95 93.95 1.119Television 167.95 29o.00 1.483Refrigerator 293.95 46o.oo 1.565Fan r 26.25 38.25 1457Electric oven range 240.45 320.00 1.331Volkswagen 2450.00 41.00.00 1.673

Table ,.1: (Contd) - 2 -

Item Quantity U.S. Babamas Ratio

Ladies pants suits unit 12.60 17.00 1.349Ladies slacks it 8.40 10.95 1.3o4Ladies blouses it 5.25 8.95 1.705Ladies skirts it 7.35 31.55 1.571Men's sports shirts 4.20 7.50 1.786Men's dress shirts ii 6.30 8.95 1.421Temnis shoes 4.20 5.00 1.190Boys Jeans 4 h.20 6.95 1.655

Source: IBRD Staff Estimates, November 1973.

Table 8.2: INDEX OF RETAIL PRICES

(November-December 1971 = 100)

Weight 1968 1969 1970 1971 1972 1973

I. Average During Period

All Items 100.0 80.6 87.8 93.2 104.1 n.a.Food 34 3 59.0 93.2 97.7 104.9 n.a.Housing 25.0 74.8 84.3 90.8 95.8 103.6 n.a.Clothing and Footwear 10.1 90.5 93.7 94.1 97.5 107.3 n.a.Transport 9.1 93.0 95.6 96.9 98.3 102.9 n.a.Health and Personal Care 7.0) ) ) 3 ) )Recreation and Reading 4.4) 78.2) 86.0) 94.1) 98.5) 102.5) n.a.Other Goods and Services 10.1) ) ) ) ) )

II. End of Period

All Items 100.0 82.1 90.8 95.0 100.0 105.8 115.6-Food 4 9.03 100.0 106.7 119.9Housing 25.0 82.8 86.6 93.7 100.0 104.4 110.3Clothing and Footwear 10.1 90.9 93.0 95.9 100.0 111.4 118.9Transport 9.1 93.7 98.7 97.2 100.0 102.3 110.7Health and Personal Care 7.0) ) ) ) 106.2 114.2Recreation and Reading 44.4) 78.8) 92.7) 95.5) 100.0 101.8 115.0other Goods and Services 10.1) ) ) ) 105.6 116.2

Source: Department of Statistics, Cabinet Office.