2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
Report

Openness to Foreign Investment

The Government of the Commonwealth of The Bahamas (GCOB) generally encourages and offers incentives for foreign investment in all sectors of the economy except those the Government reserves exclusively to Bahamian citizens. Reserved businesses include: wholesale and retail operations; commission agencies engaged in the import/export trade; real estate and domestic property management agencies; domestic newspaper and magazine publication; domestic advertising and public relations firms; security services; domestic distribution and building supplies; construction companies (except for special structures for which international expertise is required); personal cosmetics/beauty establishments; shallow water scalefish; crustacean, mollusk and sponge fishing operations; auto and appliance service operations; and public transportation. On April 18, 2011, the GCOB amended the National Investment Policy to remove foreign investment restrictions on restaurants and entertainment businesses and increase the minimum investment requirement from $250,000 to $500,000.

The GCOB has targeted the following categories of businesses for foreign investors: tourist resorts; upscale condominiums; time share and second home development; international business centers; marinas; information and data processing services; assembly industries; high-tech service; ship registration, repair and other services; light manufacturing for export; agro-industries; food processing; agriculture; banking and other financial services; captive insurance companies; aircraft services; pharmaceutical manufacture; and offshore medical centers.

The benefits of investing in The Bahamas include: a stable, democratic government; relief from corporate and personal income taxes; timely repatriation of profits of approved investments; proximity to the United States; extensive air links through nearby Miami, Ft. Lauderdale, and Orlando; well-developed telecommunications links; a good pool of skilled professionals; excellent tourism and conference facilities; and tariff concessions under the Caribbean Basin Economic Recovery Act. The Bahamian dollar is fixed on par with the United States dollar and the Government is firmly committed to maintaining this exchange rate.

In practice, the vast majority of successful foreign investments in The Bahamas have been in tourism and banking. Decision-making within the GCOB is highly centralized and major investments are subject to review and approval at the cabinet level. The Government is most interested in investments that will generate local employment, particularly in white-collar or skilled jobs. Large-scale projects in agriculture may be difficult to staff since low-wage and low-skill jobs do not appeal to most Bahamians, and because the Government is reluctant to permit importation of foreign laborers to staff these jobs, even on a temporary-permit basis. When foreign ventures are perceived to compete with Bahamian businesses, or are too dependent on foreign labor, the Government typically responds to local concerns and withdraws or refuses to license the foreign business.

In 1993, the Government established The Bahamas Investment Authority (BIA) in the Office of the Prime Minister, Ministry of Finance. BIA provides a "one-stop-shop" to assist foreign investors with initial governmental approval of their investment applications and to cut through red tape for approved investments. BIA is the Government's central point of contact for foreign investment questions. Investors may contact the BIA at:


Bahamas Investment Authority

P.O. Box N-7770

Nassau, Bahamas

Tel: 1-242-356-5956, Fax: 1-242-327-5907

www.investbahamas.org

While The Bahamas has not yet enacted extensive environmental legislation , the BIA still requires a full accounting of the environmental impact of major tourism, industrial or agricultural projects.

The table below shows The Bahamas’ world ranking in the following measures:


If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Ranking

Transparency International Corruption Perceptions Index (CPI)

2011

21

Heritage Economic Freedom

2011

46

World Bank Doing Business

2012

85

The Bahamas was added to Transparency International’s (TI) CPI in 2011. The Bahamas’ 7.3 index out of 76 countries is an indication that most people consider public sector dealings to be generally transparent with few incidents of corruption. The Heritage Foundation’s Economic Freedom report ranked The Bahamas 46th out of 178 countries and 8th out of 29 countries in the South and Central America/Caribbean region. The World Bank’s Doing Business report ranked The Bahamas in 85th place globally out of 183 countries surveyed and13th in the Latin America and Caribbean region. The Bahamas is not evaluated by the Millennium Challenge Corporation (MCC).

Conversion and Transfer Policies

Persons and corporations resident in The Bahamas are subject to exchange controls. Certain commercial banks are authorized to deal in foreign currency and have authority delegated by the Central Bank to approve exchanges for certain current account transactions. Non-resident investors wishing to initiate operations in The Bahamas must register their operations with the Central Bank. If their projects are financed substantially by foreign currency transferred into The Bahamas, they will be given "approved status," meaning that profits and capital gains can be converted into foreign currency and repatriated with minimal formalities. Capital investment into The Bahamas remains subject to exchange controls, but as a practical matter these controls have not been known to inhibit repatriation of approved investment capital. Many Bahamians argue that exchange controls should be eliminated, however to date neither the Central Bank nor the Government have announced any plan to move forward with it, citing the need to retain sufficient foreign reserves to mount a strong defense of the currency's one-to-one parity with the U.S. dollar.

Expropriation and Compensation

Article 27 of the Bahamian Constitution prohibits deprivation of property without prompt and adequate compensation. There is no evidence that the Government has ever expropriated a business, and both major political parties have stated that nationalization will not be an instrument of Government policy.

Dispute Settlement

There is no history of significant investment dispute in The Bahamas that directly involve the GCOB, although smaller contractual and other disputes between Bahamians and foreign investors or exporters are not uncommon. The Bahamian legal system is based on English common law. The judiciary, appointed by the Governor General, is independent and there is no evidence of Governmental interference with the system. The highest court of appeal is the Privy Council in London.

Despite recent efforts to reduce backlogs of criminal and civil cases, resolution of court cases can be slow, sometimes taking years. The Embassy has received some allegations of encounters with biased judges and malfeasance by attorneys. The Embassy has also received reports of local defendants evading payment of Bahamian civil judgments or deliberately dragging out court disputes, especially in cases involving non-resident plaintiffs.

Judgments of British courts, and of selected commonwealth countries, can be registered and enforced. Other countries' judgments, including those of the United States, must be litigated in court and are subject to all jurisdictional requirements. Judgments of Bahamian courts are payable in Bahamian dollars unless otherwise specified by agreement of the parties.

Personal bankruptcy laws are antiquated and rarely used. Companies can be, and are, frequently liquidated according to law. Creditors of bankrupt debtors and liquidated companies participate in the distribution of the bankrupt debtor's or liquidated company's estate according to statute. The law relating to sales of goods and some other commercial subjects is codified in The Bahamas’ statutes.

The Bahamas has been a member of the International Center for the Settlement of Investment Disputes (ICSID) since 1995. It is also a member of the Multilateral Investment Guarantee Agency, which insures investors against currency transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries.

Performance Requirements/Incentives

There are no taxes on income, sales, estates or inheritances. The only direct tax is a real property tax. Casinos are specially taxed, and there is a $25 departure tax levied at the airports and harbors. The principal incentives for foreign investments are concessions on import duties and property tax abatement. Tariffs in general are high but do not generally discriminate by country of origin. On January 25, 2010 The Bahamas signed an Economic Partnership Agreement (EPA) with the European Union that aims at the eventual elimination of duty on EU imports over the next 25 years. The GCOB recognizes the need for legislation to address the tariff structure in order to bring it into compliance with the current trade agreement and its WTO accession efforts. The 2012 Customs Management Act will begin to address some of the performance requirements of the EPA. Incentives are offered under the following legislation:

- Industries Encouragement Act: Under this law, the Government may exempt from duties the machinery, tools, equipment, and raw materials imported to construct new factories. A list of duty-exempt items is negotiated separately with each new venture.

- Hotels Encouragement Act: Under this law, new hotels and resorts can be exempted from real property taxes for ten years from the date the new facility opens, and for significant tax reduction for up to ten additional years. An amendment to the Act currently before Parliament would allow the Government to grant tax relief for an additional ten years, raising the maximum length of tax abatement to thirty years. In addition, the Act allows the duty-free importation of materials used for the construction of new facilities or the substantial renovation of existing facilities acquired by new owners for a set period of time. The list of duty-free items for each project and the duration of some duty-free windows are negotiated separately for each venture.

- Agricultural Manufacturers Act: This law allows any materials necessary for the construction, alteration, or repair of an agricultural factory, as well as any machinery or supplies used in establishing such a factory, to be imported duty free. An agricultural factory refers to any factory established for the purpose of manufacturing or preparing agricultural or horticultural produce of The Bahamas for sale or export.

- Spirits and Beer Manufacturers Act: This law provides for the duty-free importation of materials used in the construction, alteration or repair of approved liquor distilleries or beer breweries and the duty-free importation of raw materials and equipment for liquor or beer production.

- Additional amendments to the Tariff Act provide duty exemptions for construction, energy efficient durable goods and development on certain outer "Family Islands."

Prospective investors should discuss the specific terms and conditions under which these benefits will be made available with The Bahamas Investment Authority. Although work permits for key foreign employees are readily granted in connection with the investment approval process, Government policy favors employment of Bahamians. Fees for work permits can run up to several thousand dollars each, and permits for less senior employees can be difficult to obtain.

Right to Private Ownership and Establishment

Subject to the reservation of certain areas of economic activity to Bahamian citizens only, and the necessary approvals and licenses, private entities may engage in nearly all forms of remunerative activity. They may freely establish, acquire, and dispose of interests in business enterprises. The GCOB privatized the Bahamas Telecommunications Company (BTC) on April 6, 2011, signaling the end of a major government monopoly on telecommunications. The Utilities Regulatory Competition Authority (URCA) has responsibility for oversight of the telecommunications industry and public utilities. Canadian-Bahamian Company Cable Bahamas merged with U.S. company System Resource Group on February 7, 2011 to add landline services to its internet and television bundle. Government corporations such as the Hotel Corporation of The Bahamas and the Broadcasting Corporation of the Bahamas (BCB) compete on a basis of rough equality with private corporations in similar businesses. To prevent the BCB from competing with private television stations, the GCOB has expressed intent to convert the company to a Public Broadcasting Services (PBS) station.

Protection of Property Rights

Subject to long legal delays, secured interest in property, both chattel and real, is recognized and enforced. Mortgages in real property and security interests in personal property can be recorded with the Registrar General.

Protection of Intellectual Property Rights: Prior to October 2009, The Bahamas maintained a compulsory licensing system for television broadcasting that allowed Bahamian cable operators to retransmit any copyrighted television programming, including for-pay programming, regardless of point of transmission origin or level of encryption. That system provided the legal basis for Cable Bahamas to extract and distribute encrypted copyrighted content from the U.S. satellite providers without having entered into agreements with the content providers. In September 2009, following consultations with U.S. officials and industry representatives, The Bahamas implemented a 2004 amendment to the Copyright Act. The Bahamas had not previously allowed the 2004 amendment to enter into force. This amendment narrowed the scope of the compulsory licensing regime for the reception and transmission of copyright works broadcast free over the air. The amendment took effect on October 1, 2009.

The Bahamas’ legal framework does provide for the protection of intellectual property rights (IPR). The government increased law enforcement on the sale of counterfeit goods and banned the sale of fabricated high-end purses in the new Straw Market, opened December 16th 2011. However, ongoing anecdotal evidence of licensed businesses engaged in the sale of pirated movies and songs suggests that the police are lax in enforcing the law against such activities. The Bahamian government has taken some steps to strengthen IPR protection as part of its WTO accession process and in response to requests from the United States. The Bahamas has also participated in several IPR protection and enforcement training programs and exercises with U.S. Department of Justice and UK officials.

The Bahamas is a member of the World Intellectual Property Organization (WIPO), but not of the World Trade Organization (WTO). There is little industrial production that might generate possible infringements of patent rights. Parliament passed a new copyright law on July 4, 2000, which is intended to provide better protection to international holders of copyrights, but has yet to be strictly enforced. The GCOB has recognized the gaps in compliance and the Attorney General has submitted a confidential report to begin a Plan of Action to combat this. Post has received reports that new legislation granting greater protections to IPR and more stringent penalties for IPR violations will be submitted to Parliament for review this year. This new legislation was designed to bring The Bahamas in line with WTO and Economic Partnership Agreement (EPA -with the European Union) requirements.

Transparency of the Regulatory System

Government policy commits The Bahamas to promoting an economic environment in which the Government regulates and facilitates economic development and where transparency, fair play and equality of treatment are protected. Still, the discretionary issuance of business licenses can result in a lack of transparency in decisions to authorize or to renew the license of a business. Large foreign investors may be held to higher labor, health and safety standards than are local entrepreneurs. Obtaining required permits, especially immigration permits, can involve lengthy delays. To encourage and maintain foreign and local investment the GCOB has pledged to implement new investment policies which will simplify the process and reduce ambiguity. The Bahamas Investment Authority exists to assist foreign investors in dealing with the permitting process.

Efficient Capital Markets and Portfolio Investment

The financial sector of The Bahamas is highly developed and dynamic, providing a wide array of services by several types of financial intermediaries. The Central Bank of The Bahamas and the Financial Intelligence Unit (FIU, December 2000) are the regulatory bodies of the financial sector which is comprised of savings banks, trust companies, offshore banks, insurance companies, a development bank, a publicly controlled pension fund, a housing corporation, a public savings bank, private pension funds, cooperative societies, credit unions and commercial banks – which dominate financial intermediation. The free flow of capital to markets is encouraged by the GCOB and supported by the functions of the Bahamas Development Bank and the Bahamas Mortgage Corporation. The Small Business Loan Guarantee Program and the Bahamas Venture Capital Fund are initiatives of the government to fund 100 percent Bahamian-owned businesses through debt and equity financing, respectively. Bahamian-foreign joint venture businesses are eligible for financing through the commercial banks and the Bahamas Development Bank.

In 2000, the Bahamas International Securities Exchange, (BISX) began operations, and presently involves the listing and trading of domestic equities and also provides a mutual fund listing facility. BISX has experienced several problems during its short corporate life, with a shortage of funds and low trading volumes since its inception. The Exchange presently consists of 26 listed public companies and poor economic conditions have continued to negatively impact investor sentiment. On May 21, 2010, BISX was designated by the United Kingdom’s HM Revenue and Customs (HMRC) as a “recognized stock exchange.” Under this designation, BISX is regarded as a recognized stock exchange for Inheritance Tax purposes. On October 28, 2011, BISX was registered by The United States Securities and Exchange Commission (U.S. SEC) as a Designated Offshore Securities Market (DOSM). The U.S. SEC recognition of BISX as a DOSM allows the Exchange to assist market participants who are eligible for the safe harbor provided by Rule 904 of Regulation S in satisfying the requirements specified in that rule when reselling securities in, on or through the facilities of BISX.

Bank profitability contracted by 4.6 percent to $61.4 million in first quarter 2011, reflecting a net loss from non-core operating activities. In June, the Central Bank reduced its Discount rate by 75 basis points to 4.5 percent. The decision was made to support the ongoing economic recovery, given the favorable outlook for external reserves and the expectation of tempered credit growth. Commercial banks reduced their Prime lending rate by the same magnitude to 4.75 percent. The majority of outstanding commercial bank credit is personal loans (mortgages) for consumer purchases. Non-performing loans contracted by $5.5 million to $661.5 million in the second quarter of 2011. Over the same period, public sector foreign currency debt fell by 7.3 percent to $1,268.1 million and the Government disposed of 4.9 percent of its public corporations debt through the sale of BTC. This debt is now reclassified as liability of the private sector. The Central Bank reported a marginal contraction in currency in circulation and increased liabilities to commercial banks and public corporations. Government-related foreign currency inflows spurred an increase in external reserve from $43.1 million in 2010 to $101 million. The banking industry contributed an estimated $458 million to the economy in 2010 which accounts for more than half of the financial intermediaries sector, the third largest economic contributor.

The Bahamas is associated with the U.S. Government's Overseas Private Investment Corporation (OPIC), the U.S. Export-Import Bank, the Inter-American Development Bank and the Multilateral Investment Guarantee Agency a World Bank Unit that provide direct financing and loan guarantees for foreign investors. The Bahamas also recently agreed to become a party to the convention on the settlement of investment disputes. Major Bahamian banking institutions, which can provide financing for certain projects in The Bahamas include:

Bahamas Development Bank

P.O. Box N-3034

Nassau, Bahamas

Tel: (242) 352-5780

Bank of The Bahamas, Ltd.

P.O. Box N-7118

Nassau Bahamas

Tel: (242) 326-2560

First Caribbean International Bank (merger between Barclays Bank and the Canadian Imperial Bank of Commerce (CIBC)

Charlotte House

P.O. Box N-3221

Nassau, Bahamas

Tel: (242) 325-7384

British-American Bank

P.O. Box N-7502

Nassau, Bahamas

Tel: (242) 327-5170

Commonwealth Bank

P.O. Box SS-6263

Nassau, Bahamas

Tel.: (242) 328-1854

Royal Bank of Canada

P.O. Box N-7537

Nassau, Bahamas

Tel: (242) 322-8700

Bank of Nova Scotia

P.O. Box N-7518

Nassau, Bahamas

Tel: (242) 356-1400

Finance Corp. Of The Bahamas

P.O. Box N-3038

Nassau, Bahamas

Tel: (242) 322-4822

State-Owned Enterprises

State-Owned Enterprises (SOE) with delegated powers by the government no longer exist in The Bahamas, however one SOE remains a monopoly. SOE’s are present in mining, industry and air transport (Bahamas Air), broadcasting (the Broadcasting Corporation of The Bahamas), and utilities (the Water and Sewerage Corporation (WSC)) and the Bahamas Electricity Corporation (BEC). The Government’s 51 percent stake in the Bahamas Telecommunications Company was sold to UK-owned Cable & Wireless in April 2011. The telecommunications market will be fully liberalized over three years allowing for one private entrant, while additional entrants will be assessed five years after the sale, pending market sustainability and subject to URCA approval. BEC still operates as a monopoly under the Electricity Act, and while WSC – in theory – is a monopoly, there are several private water companies which are sanctioned by the GCOB to provide water to private communities in The Bahamas. During the first term of the Free National Movement’s administration in 1992, policies were adopted to replace the regulatory role of SOE’s in the telecommunications industry with a semi-autonomous regulatory agency, the Public Utilities Corporation, which was later converted to the Utilities Regulation Competition Authority (URCA). This move was taken to liberalize the industry, beginning with television and radio in the late 1990’s and phone in the early 2000’s.

Each SOE has its own board and operates its accounts independently of the government. As sole owners of these corporations, the government assigns a Cabinet Minister to oversee the general operations. Before its sale, BTC operated financially autonomous of the government, which allowed the GCOB to borrow funds to finance obligations. The other corporations are given annual subsidies. As mentioned earlier, much debate has taken place surrounding the need to privatize all of the SOE’s, especially those that are a financial burden to the country. The GCOB asserts that BTC is the only company that garnered interest from the private sector for sale.

Corporate Social Responsibility

There is a general awareness of Corporate Social Responsibility (CSR) by local and foreign companies and consumers. Multinationals in the Bahamas generally practice community service but they are not obligated to do so. These actions help to bolster the company’s public image but do not afford preferential or more favorable treatment by the GCOB. A recent practice by the government to request Environmental Impact Assessments ahead of granting BIA approval to new foreign investment projects has been generally accepted as a standard though it has not been formalized as a legal requirement. However, there is little enforcement and adherence to environmental policies with respect to Environmental Impact Assessments required by the GCOB for project approval.

Political Violence

The Bahamas has no history of political violence, although labor unrest has become violent on occasion and labor strikes are becoming more common. The Government publicly and strongly encourages foreign investment, although many Bahamians, including some prominent politicians, remain suspicious of expatriate investors and employees. Foreign investors are sometimes the targets of criticism in the news media and Parliament.

Corruption

Bribery of a government official is a criminal act in The Bahamas under the Prevention of Bribery Act. Penalty under this act is a fine up to $10,000 or a maximum prison term of 4 years or both. The government generally implements these laws effectively through the Ministry of National Security and the Attorney General’s office. The reigning government party, the Free National Movement, has emphasized anti-corruption measures, although reports of heavy corruption have plagued the political process for decades. The Bahamas has been a State Party to the Inter-American Convention against Corruption since signing in 1998 (ratified in 2000), and a party to the Mechanism for Follow-Up on the Implementation of the Inter-American Convention against Corruption (MESICIC) since June 2001. According to Transparency International’s 2011 Corruption Index, corruption in the public service is perceived to be relatively low. The 2011 index of Economic Freedom cites, however, illegal drug trafficking and money laundering reportedly involve police and other government employees. Violent crime has escalated sharply in the last three years and internet gambling, though illegal, is pervasive under the guise of Internet cafes. The Bahamas has neither signed nor ratified the U.N. Convention Against Corruption.

Bilateral Investment Agreements

There is no Bilateral Investment Treaty between The Bahamas and the United States. The Bahamas was designated a beneficiary of the Caribbean Basin Initiative (CBI) in 1985. As a result, with certain restrictions, products manufactured in The Bahamas qualify for duty-free entry into the United States. High wage rates, combined with the small size of the country's manufacturing and agricultural sectors, have hindered The Bahamas’ ability to exploit these benefits. On January 25, 2002 a previous FNM Government signed a Tax Information Exchange Agreement (TIEA). A key side benefit of this agreement for The Bahamas is that it permits U.S. tax deductions for expenses of business conventions held in The Bahamas. The Bahamas has also signed twenty-four other TIEA’s to comply with EPA and WTO requirements.

OPIC and Other Investment Insurance Programs

Since 1992, the U.S. Overseas Private Investment Corporation (OPIC) has approved two investment projects in The Bahamas. It guaranteed up to $10.8 million in loans to Uniroyal Chemical Company, Ltd. to assist in the purchase and refurbishment of a plant in Freeport. The Uniroyal plant has since closed. In addition, OPIC committed itself to a loan of up to $1.6 million to Landquest, Ltd., for the development of a cruise ship facility on the island of Eleuthera. The facility is currently operational.

The Bahamas is also associated with the Multilateral Investment Guarantee Agency of the World Bank, which, like OPIC, insures investors against currency transfer restrictions, expropriation, war, civil disturbances and breach of contract by member countries.

Labor

The labor force grew 3 percent in 2011 to 190,075 and unemployment decreased from 14.2 percent to 13.7 percent over the same period. The labor force in New Providence drove the advancement as Grand Bahama continues to experience challenges with a 2 percent drop off in the overall labor force and just a slight increase in employment from 23,310 to 23,410.

Well-qualified accountants and secretaries, and others with skills appropriate to the financial services industry, command a premium wage. While the low skilled labor, mostly found in the hotel and restaurants, basic wage hovers around the minimum rate. Unemployment is slightly higher for adults between the age of 25 and 34. Freeport – the second largest city - has the highest employment rate at 17.4 percent, while Nassau is at 14 percent. Freeport has experienced escalating unemployment due to two devastating hurricanes and the closure of a major resort and casino. The Sandals Emerald Bay property in Exuma accounts for much of the employment on that island. The Bahamas Maritime Affairs Chairman, Ian Fair, has suggested that jobs remain available in maritime-related industries. He based his comments on the fact that The Bahamas has earned one of the prestigious and highly sought after seats on the 40-strong council of the International Maritime Organization (IMO). Wage rates, while lower than in the United States, tend to be higher than elsewhere in the Caribbean.

There is notable concern about the level of employee and white-collar crime in The Bahamas.

In the 2000/2001 Government Budget, the Government increased its minimum wage from $4.12 per hour to $4.45 per hour for public sector employees. The minimum wage for private sector workers is $4 per hour. The Fair Labor Standards Act requires at least one 24-hour rest period per week, paid annual vacations, and employer contributions to National Insurance (social security). The Act also requires overtime pay (time and a half) for hours in excess of 48 or on public holidays. A 1988 law provides for maternity leave and the right to re-employment after childbirth. A new Minimum Labor Standards Act including the Employment Act, Health and Safety at Work Act, Industrial Tribunal and Trade Disputes Act, and the Trade Union and Labor Relations Act was passed in 2001 and early 2002.

The Bahamian Constitution specifically grants labor unions the rights of free assembly and association. These rights are exercised extensively, particularly in the hotel industry - where 80 percent of the employees are unionized - and in the state-owned industries. Unions operate without restrictions or Government controls. The right to strike is governed under the Industrial Relations Act, which requires a simple majority of union members to vote in favor of a strike before it can commence. The Ministry of Labor oversees strike votes. Although prolonged strikes are still rare, work slow-downs and rowdy protests occur and workers often use labor actions to force management to act on issues of concern to them. Labor unions and others involved in disputes with foreign-owned enterprises have not been above using the fact of foreign ownership as a lever to gain popular support for their demands.

The Immigration Act requires foreigners to obtain work permits before they can be employed in The Bahamas. The Government will permit foreign employees to work in a technical, supervisory or managerial capacity to initiate and operate industries, provided no similarly qualified Bahamians are available for the job. Foreign business owners are expected to train as many of their Bahamian employees as possible to eventually fill technical and managerial positions. Work permit fees range from $350 to $10,000 per year.

Foreign Trade Zones/Free Ports

The 1955 Hawksbill Creek Agreement established Freeport, Grand Bahama, the country's second-largest town, as a free trade zone. Firms in Freeport are granted the right to import equipment and materials duty-free, and enjoy other tax advantages. In 1993, the Government extended the Hawksbill Creek property tax exemptions to 2015 and duty exemptions to 2054, but withdrew real property tax exemptions for foreign individuals and corporations. The current administration plans to extend these exemptions to the entire island of Grand Bahama. The Hong Kong-based conglomerate Hutchison Whampoa has invested millions of dollars in a new deep-water container port, airport, cruise ship dock, industrial park, and hotel properties in Freeport, promising a revitalization of Freeport as The Bahamas' leading industrial city. The benefits of this investment have been realized with the Bahamas’ ship registry surpassing the 50 million tonnage mark, which is the largest in the world and the Freeport Container Port is the 72nd busiest container terminal in the world and the 4th busiest hub for its partner Mediterranean Shipping Company (MSC). The ownership issues over shares in the Grand Bahama Port Authority (GBPA) have been resolved as all parties agreed to end litigation and work together on a joint sale of their equal interests in the Port companies.

Foreign Direct Investment Statistics and Major Foreign Investments

• There is also a direct link between the level of imports flowing into The Bahamas and foreign direct investments. The Central Bank records the flows of investment. At the end of the second quarter 2011, net foreign direct investment (FDI) inflows increased by 3.8 percent to an estimated $242.8 million. Real estate purchases decreased by $27.1 million to $8.7 million and net equity inflows advanced by $234 million to $36 million – inclusive of proceeds from the sale of BTC. Net portfolio outflows more than doubled to $9.4 million supported by gains in net outward investments in equity and debt securities by $1.9 million and $3.1 million respectively. While Government statistics do not list overall foreign investment by nationality, the Embassy believes that the largest investors are American, Canadian, Chinese, and South African in origin. According to the United States Bureau of Economic Analysis reports cumulative U.S. foreign direct investment to The Bahamas is $31.49 billion. The United Nations Conference on Trade and development reported Bahamas FDI flows at $977 million and stock at $9,062 billion in 2010, at 12.8 percent and 118 percent of GDP, respectively. Data on FDI outflows or stock is currently unavailable.

• Major foreign investments in The Bahamas include:

ACCOUNTING

Grant Thornton Chartered Accountants Horwath International

KPMG

Ernst & Young

PriceWaterHouseCoopers

TOURISM DEVELOPMENTS

Abaco Beach Cottages, resort development, owned by an American company.

Atlantis Resort, a hotel, resort, and casino complex on Paradise Island near Nassau formerly owned by South African Sol Kerzner. On November 30, 2011, Sol Kerzner, owner of Kerzner International, turned over ownership of the Paradise Island Atlantis and One and Only Ocean Club properties to Canadian creditors Brookfield Asset Management to satisfy part of its US$2.6 billion debt. Kerzner will enter a management agreement with Brookfield to continue oversight of operations at the off-loaded properties.

Baha Mar owned by Armenian firm consisting of the Sheraton Resort (formerly government owned), Wyndham Nassau Resort & Crystal Palace Casino, and convention center, and the Nassau Beach Hotel. With approvals in hand from the Chinese and Bahamian governments, Baha Mar awarded $15 million in contracts to begin phase 1 of the project – which is the redirection of traffic at Cable and West Bay Streets to accommodate the design of the proposed property.

Baker’s Bay located on Guana Cay, Abaco is owned by the U.S. Discovery Land Company of San Francisco

Bimini Bay Resort, owned by Florida-based developer

Comfort Suites on Paradise Island owned by a U.S. company

Crooked Island Lodge, a 12 room lodge owned by an American developer.

Four Seasons Resort Development on Exuma, owned by a Canadian Company

Freeport/Lucaya marina village developed recently by European investors

Gorda Cay, renamed Castaway Cay, purchased and developed by Disney Corp. for its cruise ship operations

Half Moon Cay, owned by U.S-owned Holland America Cruise Lines

Island Outpost Resort at Compass Point, Nassau, Pink Sands Resort, Harbour Island, and Kamalamae Resort, Andros owned by a Jamaican company

Our Lucaya Resort, a subsidiary of Hutchison Whampoa Group and Centex Rooney

Princess Cay, a cruise ship landing facility near Eleuthera Island, owned by Landquest, a U.S. company

Professional Golfers Village, the proposed hotel broke ground on April 24, 2009, owned by Southworth Developers, a U.S. company.

Ritz Carlton Rose Island Resort, owned by Florida-based Gencom Group

RIU Resort, Paradise Island, owned by a Spanish Company

Sandals Royal Bahamian Resort, owned by a Jamaican company. Sandals now owns the Emerald Bay property in Great Exuma, formerly the Four Seasons Emerald Bay, having purchased it from the liquidator in 2009.

Superclub Breezes Resort, owned by a Jamaican company

The Bahamas Film Studio/Gold Rock Creek Enterprises Ltd., located at East Grand Bahama, owned by Canadian Paul Quigley

The British Colonial Hilton Hotel a subsidiary of Blackstone and managed by Hilton Corp., both U.S. companies

The Ginn development project located on the west end of Grand Bahama, owned by the Florida-based Ginn Development Company

The I Group Mayaguana development owned by developers from Boston

Winding Bay Resort, Abaco, owned by a British company

Over Yonder Cay, Exuma, owned by American company, Borsage Family Office is a “green” private residential community undertaken in April 2010. The island, which is powered by wind and solar technology, was reportedly commissioned on October 15, 2011.

CONSTRUCTION

Baker Construction, a subsidiary of a U.S. firm.

BANKING & FINANCE

BankBoston Trust Company Ltd., a U.S. bank subsidiary

BNP Paribas, a French bank subsidiary

Citibank, N.A., a U.S. bank subsidiary

JP Morgan Trust Co. (Bahamas) Ltd., a U.S. bank subsidiary

Templeton Global Advisors Ltd., a U.S. owned company.

OTHER

AES American Oil Company, which owns Ocean Cay, a facility to produce liquefied natural gas (upon Bahamian government approval)

Cable Bahamas, Ltd., established by a Canadian group

Commonwealth Brewery Ltd (Heineken), a Dutch-Bahamian company

Freeport Ship Care Facility, owned by the Lloyd Werft Ship Repair Company of Germany

Morton Salt (Bahamas) Ltd.

Mirant (Grand Bahama Power Company)

Polymers International, Ltd., a subsidiary of Dart Container, which produces styrofoam pellets at a plant in Freeport

The Container Port facility, airport and three beachfront hotels in Freeport were acquired in 1997 by Hong Kong-based Hutchison Whampoa

The Caribbean Marine Research Center, operated by The Perry Institute for Marine Science, an American firm

HOUSING DEVELOPMENTS

Albany Golf and Beach Resort owned by an investment group comprising Bahamian Joe Lewis, and American Tiger Woods and South African Ernie Els.

Chub Development Ltd., Treasure Cay, Abaco, the proposed construction of nine townhouses with docking facilities and other amenities.

Cotton Bay, Rock Sound, Eleuthera owned by Eleuthera Properties Ltd.

Old Fort Bay, a housing subdivision, owned by a U.S. company.

Powell Point at Cape Eleuthera, includes The Island School and marina, owned by the parent company for Amway Corporation.

Roberts Isle, a housing subdivision owned by a U.S. company

Sandyport Development Co. Ltd., a housing subdivision owned by a British company

Schooner Bay, an environmentally friendly development, owned by a U.S. company

Treasure Cove, a housing subdivision, owned by a U.S. company.

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