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Brick by BRIC
Bahamas courts developing economies
As globalization continues to march onward at a steady pace, emerging economies are beginning to exert greater influence on the international stage. Countries such as Brazil, Russia, India and China–collectively known as the BRIC nations–are gaining global economic clout. For The Bahamas, this presents a significant opportunity to tap new markets in trade, tourism and financial services.
Although many emerging markets have per capita incomes in the lower-middle range in a global context, they constitute about 80 per cent of the world’s population and more than 20 per cent of the world’s economy. The ranks of the truly wealthy in countries are also swelling, with China alone producing 42 new billionaires in the last six years, according to Forbes.
A recent study of global economic growth by PricewaterhouseCoopers (PwC) highlights the potential impact of these emerging markets. According to its research, within the next 15 years cities such as São Paulo, Shanghai and Mumbai will have mustered enough economic muscle to be counted among the world’s wealthiest population centres.
The PwC report, published at the end of last year, ranks cities in terms of gross domestic product (GDP) per capita and predicts that Shanghai will have risen from 25th place to ninth by 2025, Beijing will reach 17th, whilst Mumbai, currently 29th, and Sao Paulo, currently 10th, will take the 11th and sixth spots, respectively.
“Global economic activity is concentrated in the world’s largest cities, and it is important to understand how those cities compare,” says Thomas Hoehn, an economic partner at PwC. “This is especially important when many developed countries are experiencing difficulties, while countries such as China and India continue to grow.”
With an estimated growth of around 6 to 7 per cent (compared to roughly 2 per cent for New York and London), many of these rapidly growing cities are poised to outstrip the more established commercial centres and tip the balance in favour of developing nations.
In absolute terms, the projected rise in Shanghai’s GDP between 2008 and 2025 is greater than the combined GDP increase for London and Paris together, according to the report.
“If you look at the projected percentage GDP growth from 2008 to 2025 of the top emerging and the top advanced economy cities, the comparison is stark,” says PwC head of macro-economics John Hawksworth.
New Sino-Bahamian ties
Faced with such telling statistics, The Bahamas is wasting no time in courting these emerging markets.
“Should we choose to ignore the new economic giants, we do so at our peril,” says Wendy Warren, chief executive officer of the Bahamas Financial Services Board (BFSB). “The need to engage with these economic tigers goes well beyond financial services. The key for us, at this stage, is to be able to present a comprehensive picture of The Bahamas as a place for business, pleasure and residence.”
With promotion at the top of its agenda, the BFSB attended the Annual Wealth Management and Private Banking Asia conference in Shanghai in November 2009. According to Warren, the event provided “excellent learning opportunities” for the financial services board to “retool” and “refine” the jurisdiction’s offerings. “This conference in Shanghai [allowed] us to listen to presentations on various aspects of wealth management and to consider how The Bahamas might respond as a result of developments, either in policy making, regulations or the client’s needs in terms of wealth creation or transfer,” says Warren. “This information is likely to influence the regulatory, or legal framework, or the manner in which we deliver services from our country.”
But it is not only in the field of financial services that Sino-Bahamian ties have been strengthening over recent years. Hutchison Whampoa Ltd–a Chinese company–began to invest heavily in the nation’s second city, Freeport, in the mid-’90s, entering into a 50-50 partnership with Grand Bahama Development Co. The tie-up with the privately owned Bahamian company helped to develop and expand the small Freeport facility–previously catering only to cruise ships. Dredging and expansion efforts at the port mean that it is now capable of handling the largest container ships in the world.
To date, Hutchison Whampoa has injected investments totalling $1 billion into the island’s economy, inclusive of the Our Lucaya hotels (Radisson & Reef Village), Grand Bahama Airport Co and Freeport Harbour Co.
Future projects include a joint venture between Baha Mar Resorts and China State Construction Engineering Corp to construct a multi-billion-dollar mega resort on the Cable Beach strip of New Providence. The Bahamian company also signed a Memorandum of Understanding with the Export-Import Bank of China (China Ex-Im Bank) regarding project financing.
Private investments aside, the Chinese government is presently funding the construction of a $30- million national stadium complex at the Queen Elizabeth Sports Centre–a gift to the Bahamian people–as well as allowing The Bahamas to borrow $150 million at two per cent interest over 30 years for infrastructural projects.
“The economic and trade cooperation between China and The Bahamas has developed rapidly and the quality and level of cooperation improved considerably,” says Hu Dingxian, Ambassador of the People’s Republic of China to The Bahamas. “Bilateral exchanges and cooperation in the fields of culture, education, sports, human resource training and tourism have enriched and expanded.”
The bond between the two countries was further strengthened last year with the signing of four bilateral agreements: a revised draft agreement that waived visa requirements for holders of diplomatic passports; a financial and an agricultural Memorandum of Understanding; and an agreement on economic and technical cooperation.
In mid-November 2009, Chinese agricultural experts visited Abaco to assess the capability of the land for farming and were favourably impressed by the island’s soil conditions, the availability of water and the climate.
Putting BRICs in place
With the trade volume between China and The Bahamas reaching $386 million last year, the relationship represents the most “established” trade dialogue The Bahamas has with any leading emerging economy, according to the Finance Ministry. But it’s not true to say that The Bahamas has ignored the other members of BRIC.
In 2009, The Bahamas and the Republic of India pledged to strengthen their diplomatic relationship in the areas of culture, technology and economic development.
Governor General Arthur Hanna notes that “The Bahamas and India share a wide base of linkages founded on common aspects of history.”
For his part, the Indian High Commissioner to The Bahamas, Mohinder Grover, points to the parliamentary democracy of both countries, Commonwealth membership and common use of the English language as key elements that unite the two nations. “As developing countries we share similar concerns and common aspirations for accelerated economic growth, eradication of poverty, improvement in the quality of life of our people and promotion of equity,” he says.
It’s a view shared by the Governor General. “As members of the global community with many of the same development challenges, our two countries share the highest aspirations and dedication to the development and protection of our world and societies,” he says. “The multilateral forum in which we both participate brings us together in a joint commitment to ensure that our goals come to fruition.”
Networking forums
As for the Latin American countries, The Bahamas engages with them through events such as the Inter-American Development Bank’s International Economic Forum Latin America and the Caribbean.
In 2009, the forum gathered together European, Latin American and Caribbean ministers, heads of central banks, the European Commission and international organizations, as well as high-level representatives from the business and financial communities, including those from The Bahamas. The event highlighted economic and fiscal policies for development in Latin America and the Caribbean and coordinated mechanisms and programmes to strengthen inter-regional business partnerships. The Bahamas was also well represented at the Alternative Investment Summit in Brazil, held in April 2009.
According to Warren, it is essential that the Bahamian business community recognizes the importance of this type of event, and she encourages local professionals to join the BFSB delegations when they attend such conferences.
“These are excellent networking opportunities. We are able to make new contacts, to encourage them to contact service providers in The Bahamas and of course to visit the country,” says Warren. “The larger the representative group from The Bahamas, the more readily appreciated is our message that The Bahamas has the capability and capacity through a modern legal framework, an importantly diverse base of financial services providers … to meet client needs, today and tomorrow.”
Historically, The Bahamas has done “extremely well” in engaging with other nations, according to Gershan Major, chairman of the Chamber of Commerce’s Globalization and Foreign Relations Committee. “We now have to leverage those diplomatic relations into economic benefits,” says Major. “We can use our relationships in the diplomatic arena to improve business linkages and business-to-business discussions in improving trade between The Bahamas and these emerging economies.”
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WBN10 - Bus_BRIC
Brick by BRIC
Bahamas courts developing economies
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