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Since attaining independence from the UK in 1973, The Bahamas have prospered through tourism and international banking and investment management. Tourism accounts for about 60% of the total GDP and about two-thirds of the island's employment; about half of the total work force is directly or indirectly employed in the Tourism industry which amounts to about 50,000 people. Banking generates about 8% of the GDP to the economy. The agricultural and industrial sectors are comparatively smaller industries to tourism and banking.
Tourism is the number one industry in The Bahamas followed by Banking. Tourism provides 60% of the gross domestic product (GDP) and employs about two thirds of the Bahamian work force. A major contribution in the turnaround in the 90's to the growth in the overall Bahamian economy The Bahamian Government's proactive approach to courting foreign investors (in order to restore the reputation of The Bahamas), in conjunction with the opening of Sun International's Atlantis Resort and Casino, which took over the former Paradise Island Resort and has provided a much needed boost to the economy. In addition, the opening of Breezes Super Club and Sandals Resort also aided this turnaround. In 2000, over 4 million tourists visited The Bahamas, 83% of them from the United States.
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. 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.
Agriculture and fisheries industry together account for 3% of GDP. The Bahamas exports lobster and some fish but does not raise these items commercially (aside from shrimp). There is no large scale agriculture, and most agricultural products are consumed domestically. The Bahamas imports more than $300 million in foodstuffs per year, representing about 80% of its food consumption. The government aims to expand food production to reduce imports and generate foreign exchange. It actively seeks foreign investment aimed at increasing agricultural exports, particularly specialty food items. The government officially lists beef and pork production and processing, fruits and nuts, dairy production, winter vegetables, and mariculture (shrimp farming) as the areas in which it wishes to encourage foreign investment.
The Bahamian Government maintains the value of the Bahamian dollar on a par with the U.S. dollar.
The Bahamas has a few notable industrial firms: the Freeport pharmaceutical firm, PFC Bahamas (formerly Syntex), which recently purchased by the Swiss pharmaceutical firm Roche; the BORCO oil facility, also in Freeport, which transships oil in the region; the Commonwealth Brewery in Nassau, which produces Heineken, Guinness, and Kalik beers; and Bacardi Corp., which distills rum in Nassau for shipment to the U.S. and European markets. Other industries include sun-dried sea salt in Great Inagua, a wet dock facility in Freeport for repair of cruise ships, and mining of aragonite--a type of limestone with several industrial uses--from the sea floor at Ocean Cay.
The Hawksbill Creek Agreement established a duty-free zone in Freeport, The Bahamas' second-largest city, with a nearby industrial park to encourage foreign industrial investment. The Bahamian Parliament approved legislation in 1993 that extended most Freeport tax and duty exemptions through 2054. The Hong Kong-based firm, Hutchison Whampoa, has opened a container port in Freeport.
The Bahamas is largely an import, service economy. There are over 100 U.S.-affiliated businesses operating in The Bahamas, and most are associated with tourism and banking. With little industry, The Bahamas imports nearly all its food and manufactured goods from the United States. American goods and services tend to be favored by Bahamians due to cultural similarities.
Most government revenue is derived from high tariffs and import fees. A major challenge for Bahamians as the next century approaches will be to prepare for hemispheric free trade. 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). The advantages may be hard for the government to sell since The Bahamas exports so little.
The Bahamas offers attractive features to the potential investor: a stable democratic environment, relief from personal and corporate income taxes, timely repatriation of corporate profits, proximity to the U.S. with extensive air and telecommunications links, and a good pool of skilled professional workers. The Government welcomes foreign investment in tourism and banking and has declared an interest in agricultural and industrial investments to generate local employment, particularly in white-collar or skilled jobs.
Despite its interest in foreign investment to diversify the economy, the Bahamian Government responds to local concerns about foreign competition and tends to "protect" certain Bahamian business and labor interests. As a result of domestic resistance to foreign investment and high labor costs, growth stagnates in sectors which the government wishes to "protect."
The country's infrastructure is best developed in the principal cities of Nassau and Freeport, where there are relatively good paved roads and international airports. Electricity is reliable, although many businesses have their own backup generators. In Nassau, there are two daily newspapers, three weeklies, and several international newspapers available for sale. There also are six radio stations.
Both Nassau and Freeport have a television station. Cable TV and satellite also are available locally and provides most American programs with some Canadian and European channels.
Areas of Opportunity
The best U.S. export opportunities remain in the traditional areas of foodstuffs and manufactured goods: vehicles and automobile parts; hotel, restaurant, and medical supplies; and computers and electronics. Bahamian tastes in consumer products roughly parallel those in the U.S. With approximately 85% of the population of primarily African descent, there is a large and growing market in the Bahamas for "ethnic" personal care products. Merchants in southern Florida have found it profitable to advertise in Bahamian publications. Most imports in this sector are subject to high but nondiscriminatory tariffs.
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