Changes

Economic challenges facing The Bahamas include meeting continued employment demands, jumpstarting a lagging privatization process, and monitoring increasing levels of government debt. Another major challenge for Bahamians will be to prepare for hemispheric free trade. Currently, Bahamians do not pay income or sales taxes. Most government revenue is derived from high tariffs and import fees. Reduction of trade barriers will probably require some form of taxation to replace revenues when the country becomes a part of the Free Trade Area of the Americas (FTAA). As evident by domestic opposition to the Caribbean Single Market Economy (CSME), the advantages of free trade may be hard for the government to sell.  

Economic challenges facing The Bahamas include meeting continued employment demands, jumpstarting a lagging privatization process, and monitoring increasing levels of government debt. Another major challenge for Bahamians will be to prepare for hemispheric free trade. Currently, Bahamians do not pay income or sales taxes. Most government revenue is derived from high tariffs and import fees. Reduction of trade barriers will probably require some form of taxation to replace revenues when the country becomes a part of the Free Trade Area of the Americas (FTAA). As evident by domestic opposition to the Caribbean Single Market Economy (CSME), the advantages of free trade may be hard for the government to sell.  

Two major hotel projects promise to increase economic growth and create short- and long-term employment. The Atlantis Resort and Casino on Paradise Island is in the third phase of a billion-dollar expansion expected to create 3,000 new jobs. A second hotel resort development project costing nearly $2 billion is planned for the Cable Beach area of Nassau. The Baha Mar Company has negotiated purchase of three major hotels and a development site, including the last assets of the state-owned Hotel Corporation. As a condition of these large-scale investments, the government promises to expand Nassau International Airport and has turned over management to private operators. The Bahamian Government also has adopted a proactive approach to courting foreign investors and has conducted major investment missions to the Far East, Europe, Latin America, India and Canada. The government continues to pay particular attention to China to encourage tourism and investment. For their part, the Chinese are funding the construction of a new $30 million sports stadium in New Providence. While the new FNM government has expressed a desire to increase Bahamian ownership interests in developments, The Bahamas' dependence on foreign investment is unlikely to change.

Two major hotel projects promise to increase economic growth and create short- and long-term employment. The Atlantis Resort and Casino on Paradise Island is in the third phase of a billion-dollar expansion expected to create 3,000 new jobs. A second hotel resort development project costing nearly $2 billion is planned for the Cable Beach area of Nassau. The Baha Mar Company has negotiated purchase of three major hotels and a development site, including the last assets of the state-owned Hotel Corporation. As a condition of these large-scale investments, the government promises to expand Nassau International Airport and has turned over management to private operators. The Bahamian Government also has adopted a proactive approach to courting foreign investors and has conducted major investment missions to the Far East, Latin America, Europe, India and Canada. The government continues to pay particular attention to China to encourage tourism and investment. For their part, the Chinese are funding the construction of a new $30 million sports stadium in New Providence. While the new FNM government has expressed a desire to increase Bahamian ownership interests in developments, The Bahamas' dependence on foreign investment is unlikely to change.

Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 15% of GDP, due to the country's status as a tax haven and offshore banking center. As of 2005, the government had licensed 262 banks and trust companies in The Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating offshore companies in The Bahamas. Within 9 years, more than 84,000 IBC-type companies had been established. In February 1991, the government also legalized the establishment of Asset Protection Trusts in The Bahamas. In 2000, in response to multilateral organizations' concerns, the government passed a legislative package of stronger measures to better regulate the financial sector and prevent money laundering in the country's banking sector, including creation of a Financial Intelligence Unit and enforcement of "know-your-customer" rules. Some of these measures have been challenged in Bahamian courts, and the number of offshore banks registered in The Bahamas has declined substantially since 2002. As many as half of the IBCs have also closed shop. As a result, the government is considering additional legislation to keep the industry competitive while complying with international standards, including possible reform of the regulatory structure.  

Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 15% of GDP, due to the country's status as a tax haven and offshore banking center. As of 2005, the government had licensed 262 banks and trust companies in The Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating offshore companies in The Bahamas. Within 9 years, more than 84,000 IBC-type companies had been established. In February 1991, the government also legalized the establishment of Asset Protection Trusts in The Bahamas. In 2000, in response to multilateral organizations' concerns, the government passed a legislative package of stronger measures to better regulate the financial sector and prevent money laundering in the country's banking sector, including creation of a Financial Intelligence Unit and enforcement of "know-your-customer" rules. Some of these measures have been challenged in Bahamian courts, and the number of offshore banks registered in The Bahamas has declined substantially since 2002. As many as half of the IBCs have also closed shop. As a result, the government is considering additional legislation to keep the industry competitive while complying with international standards, including possible reform of the regulatory structure.