Hon. L. Ryan Pinder
Member of Parliament
2010 / 2011 Mid-Year Budget Presentation
March 2, 2011
We come to this honourable House to represent our constituents in the governance of this country. Unfortunately, based on the presentations from the other side, it seems that contributions have deteriorated to an embarrassing level.
But before proceeding, I would like to make one thing clear, the PLP did NOT vote against clean water. The PLP voted FOR Bahamians. The FNM voted AGAINST Bahamians, against Bahamian opportunities, against Bahamian empowerment, against Bahamianization. Let me take you back to the Resolution at issue. The Government borrowed more than $60 million from the China Exim Bank to build a road from the airport. A condition of the loan was to have China Construction build the road from the airport.
The Minister of State of Finance in explaining the borrowing terms, said we would save $30 million over the course of the term of this loan, which is 20 years, because of the favorable lending terms. Well let us break down this figure. $30 million over 20 years is equal to $1.5 million per years. $1.5 million per year is equal to $125,000 per month. The PLP believes in investing this $125,000 per month in Bahamians, in Bahamian workers, in Bahamian contracting professionals. We would sing a market rate loan and invest in Bahamians. That is the PLP way.
Mr. Speaker, today I rise on behalf of the honourable men and women, boys and girls of the great constituency of Elizabeth. A little more than one year ago, these great Bahamians decided that they would not be misled by this Government, and affirmatively selected me to represent their interest in this honourable place. Despite the bigoted and borderline racist comments by the Member for Pinewood, constituents in Elizabeth demonstrated they did not care if I was white / black / purple or green. The good people for Elizabeth voted FOR vision, FOR youth, FOR progress, FOR the future. The good people for Elizabeth voted AGAINST the FNM Government, AGAINST failure, AGAINST regression, AGAINST your record.
To this I want to say thank you to my constituents, that you for the opportunity to serve you, thank you for the opportunity to express your interests and desires to make this country, the Bahamas, a better place to live. This is just the beginning, the last year was only a warm up lap, we have great things to do together in Elizabeth. But today we are here to debate this mid-year budget, a budget that provides no hope, and no clear direction for the country.
Mr. Speaker, last year this time the Prime Minister ended his mid-term budget communication with the statement “we are weathering the economic storm and financial storm as well if not better than might have been expected several months ago …”. Time has proven that this was not the case, that things got worse and worse over the last 12 months. The Bahamas at that time was not weathering the financial storm well, and under the misguided leadership of this FNM administration, is still failing to weather the storm.
Mr. Speaker, the Prime Minister in his Budget Communication last year concluded by providing a basis of this Government’s economic and financial strategy by saying “ours is a strategy that will promote economic growth and rising standards of living. The ultimate test of all we have done and are doing is how well it improves the quality of life of our people. I am confident that this strategy will meet that test …” Bahamians the country over can testify that their quality of life has not improved over the course of the last 6 months, we have not experienced economic growth. This FNM Government has failed their self-defined test.
In this mid-term budget communication the Prime Minister concluded by saying that “there are clear indications that the economy has turned the corner and that, despite the risks that are present, we can look forward to better days ahead.” I ask, based on the previous failures and un-met assurances, why should anyone believe the Prime Minister, especially when it comes to the economy.
I argue that caution and preparation is the best order for the day, significant risks to any economic recovery remain, and are very real. What we should have heard from the Prime Minster, starting back when the signs of economic challenges were real, years ago, was a plan on how we will sustain the challenges, how will the Government respond, how will sustainable employment be maintained, and not false expectations. I argue that once again, however, in this mid-term budget communication, there is no hope, there is no planning, there are just more and more false expectations given to Bahamians. Good governance demands better.
There are clear and well defined global and regional risks to our economic recovery that, in my opinion, this Government should be explaining and setting out a plan to deal with. First and foremost, The Prime Minister predicts a 2% growth in the economy, but fails to explain to the Bahamian public how this is going to happen. Even the IMF, whose numbers I believe are optimistic, forecast a 1.5% growth in GDP. What is more concerning, however, are the inconsistencies in the communication when dealing with external risks, such as inflation.
Inflation is generally the overall increase of the price for goods and services in an economy. Even if there is growth in the economy, the problem of the cost of items rising at an increased rate could cause more and significant challenges to Bahamians.
It seems that there are misleading communications in the Bahamas on inflation. In one breath the Prime Minister states that inflation is forecasted to remain subdued, yet in the next breath the Prime Minster states that the price for gas and diesel has increased exponentially over the course of the last year, and especially as compared to the prices this time last year. We are witnessing fuel prices increase at the most alarming rate in decades right now, which has a direct affect on the cost of goods, gasoline, travel, almost everything. This inflationary pressure will have an adverse effect on the economic recovery of the Bahamas.
These inflationary pressures are not only because of fuel costs. For example, in the United States almost every measurable commodity is up dramatically over the course of the last two years. Given our close ties with the United States, our pegged currency to the $US, we should expect and forecast measurable inflationary pressures. What does this mean to Bahamians, in times where income is not rising, jobs are scarce, many are unemployed, the cost of every day items could be on the rise. It is the responsibility of the Government to anticipate this and put in policies to lessen the adverse effect of anticipated rising prices. Bahamians today cannot afford increasing prices on decreasing salaries. Many struggle to put food on the table now, to keep their electricity on, to provide for their families, it will catastrophic to their livelihood and quality of life for these basic breadbasket items to increase in cost.
One indicator of the health of an economy and its real life effects on Bahamians is the quality of mortgages and other consumer type loans held by banks in the Bahamas. You don’t have to read the Central Bank reports, or be a financial analyst to know, go out on the streets, go to Elizabeth and ask the people, are you having difficulty paying your mortgage, are you at risk of losing your house? The trend over the last few years, a trend that is getting worse is that more and more Bahamians are behind on their mortgage, at risk of losing their house.
The Central Bank of the Bahamas and the Prime Minister make it clear, lending is still challenged, banks are lending less money to Bahamians, less consumer loans, less home loans, less small business loans. More alarming is the quality of the loans have worsened, with the loans that are in arrears growing, and particularly mortgages on private residences. When more and more Bahamians are becoming challenged to pay their mortgage, this is a direct indicator that the economy is not improving, Bahamians continue to struggle, quality of life continues to deteriorate. This is not a message of hope to the Bahamian people.
But I ask, where is the Mortgage Corporation and its leadership in formulating plans to alleviate the pressure on Bahamians. A PLP led Government would use the Mortgage Corporation to reach agreements with lending institutions to provide a temporary relief, or buffer to protect the homes of Bahamians. Instead, under this FNM Government, the Mortgage Corporation is showing no compassion, I am told that they are going around also putting collection notices on people’s homes. And this is the Government entity, the Mortgage Corporation, that is in being for the purpose of assisting poor Bahamians in obtaining the long desired dream of home ownership. I cry shame on this Government and those directing policy in the Mortgage Corporation. The Government has the Mortgage Corporation as a tool to facilitate arrangements to preserve home ownership. We have seen it in other jurisdictions, where governments have assisted homeowners in these difficult times by being progressive and aggressive in working with lenders. In the Bahamas, sometimes it seems the Government is more aggressive than the lenders in pursuing recourse.
Recommendation – Prime Rate
A recommendation I would make is to put in a plan dealing with the monetary policy of the country to offset, and protect Bahamians from these pressures. For example, I would make a recommendation to the Central Bank of the Bahamas to reduce the prime rate. The effect of this would be to reduce the cost of Bahamian’s mortgage payments, reducing the risk that Bahamians will lose their homes. This could be a short-term policy, but it would be a policy that would anticipate additional inflationary pressures on Bahamians, and allow some relief to homeowners.
Consequences of Poor Government Management
The poor economic and financial management of the country by this FNM Government has had drastic and adverse consequences to Bahamians. One of the most telling failures of this Government is the tax and pain budget of 2010 / 2011. We witnessed the largest tax increases thrown on the backs of Bahamians and Bahamian businesses in the recent history of the country. We were promised at that time, this is necessary to raise the Government revenues we need, and put us in a position to be better off as a country. Things will be better next time around.
Well, these tax increase have failed to provide the Government revenues that this FNM administration predicted. In fact, revenue collections for the first six months are less than what they were a year ago, this when the Government predicted an increase in Government revenues because of the increased taxes of almost $200 million. They are already $84 million below these forecasts. I said it before, and I will say it again – the tax burden you have thrown on the backs of Bahamians has failed and failed miserably, your financial management of the country is a failure, you as a Government have failed, all at the expense of the Bahamian people.
These failed tax policies, more importantly however, have contributed directly to a shrinking of private sector jobs, many Bahamian entrepreneurs being forced out of business, and the deterioration and near elimination of the middle class in the Bahamas.
Bahamians all over our archipelago were looking for hope, looking for something to rest their hat on that employment and career opportunities will be coming, plans are in place to address the unemployment concern. For two years now, this Government has failed to produce an unemployment report or measurement. Why, well because they know what the truth is, they know that we are probably at our highest levels in the past 30 years, approaching if not surpassing 20% unemployment. In fact, given the failure of this Government to produce an unemployment figure, a report was presented to the International Monetary Fund which concluded that we have the 2nd highest unemployment in the region, pushing 19%. In fact, over the last 4 years, exactly the period this FNM Government has been in control, The Bahamas has gone from having the third-lowest to second highest unemployment rate among a sample group of Caribbean nations. Like in many measurements and comparisons lately, we as a country are failing at a greater rate than our surrounding competitors and countries. This is inexcusable, embarrassing, and frankly, reckless governance. We need to do better.
Part and parcel of the unemployment problem is the disintegration of the middle class and small and medium private businesses.
Middle Class / Small Business
I was speaking to a colleague of mine who owns a successful small / medium sized business just the other day who told me, he was prepared to expand, purchase additional vehicles for his business, and thus hire more Bahamians. As a result of the tax increases, he is unable to pay the increased duties on the trucks and his business license has increased dramatically while profits have shrunk. He is unable to and hire additional staff, so his expansion is on hold. In fact, he has been forced to reduce his staff. This is how the policies of this FNM Government have adversely affected the middle class and businesses.
Even in this mid-term budget, there is a lack of commitment to growth of the economy, providing opportunities for small businesses to succeed. I criticized this Government during the budget communication that they did not provide enough incentive funding to encourage investment in the Bahamas, which would provide additional opportunities for Bahamian businesses. Even after those criticisms, the Government in this mid-term budget reduces funding, that was already budgeted at too low an amount, for the promotion of investment. I cannot agree with this strategy.
Recommendation – Promote Bahamianization
Instead of punishing and imposing penalties on the middle class and businesses, and reducing funding for investment promotion, the proper strategy, and the strategy of a PLP administration would be to promote the expansion of business in tough times, to encourage Bahamianization of business activities in this country, thereby building a strong economic platform as well as ensuring that in difficult economic times, that financial activity within our economy remains in the Bahamas.
One must understand that when a Government hires foreign firms to build roads and provide other services Bahamian businesses can provide, it has two adverse effects. Firstly, it takes away economic opportunities from Bahamians, something we can all agree is needed to ensure the stability and advancement of our economy. Secondly, when you hire foreign firms to do projects Bahamians can do, it results in those funds exiting the Bahamas. If we commit to a policy of Bahamianization, it encourages those funds to remain in the economy. The business owner pays salary to Bahamians. The Bahamian workers use those funds to purchase necessary supplies and goods. Those businesses do the same. It is a circular effect that sustains the Bahamian economy. So a fundamental principle of advancing Bahamian businesses is not only for the glamour of it, but it has fundamental and sustaining benefit to the stability of the economy, to the promotion of Bahamian businesses throughout the economy and to the growth of the middle class, even in difficult economic times. The Member for Pinewood is obviously confused on what Bahamianization is. It is not about low paying jobs, it is about empowerment through a policy of Bahamian owned businesses; the promotion of careers.
This is a fundamental difference between this FNM Government and a PLP administration. The PLP would have offered road contracts, not to an Argentine firm, but to Bahamian firms. A PLP administration would have paid a higher interest rate on a loan and hired Bahamian businesses to expand the road and infrastructure from the airport, not compromising Bahamianization in these difficult times because of a lower interest rate. We believe a Government must be committed to the advancement of Bahamians, especially Bahamian businesses and the middle class. The PLP created the middle class in the Bahamas, and is the only party committed to expanding the middle class and creating opportunities for all. This is a fundamental component of the economic revolution this country drastically needs. Unfortunately, the FNM Government has, through its policies, destroyed the middle class, expanded the poor, and reduced opportunities for advancement.
Over the course of the past few years we as a country have experienced an unsustainable trend. Our population is growing faster than our economy. A country cannot survive with this model. More Bahamians are coming out of school and entering the workforce than jobs being created. This reality is having a dramatic and deteriorating effect on our country, its social consciousness and cultural values. There was no hope in this mid-year budget communication, no detail on the country going forward. What are your plans for new industry? For family island economic empowerment? Where is our commitment to a trade agenda? What expansion opportunities are available for out current mature industries?
Mr. Speaker, these are the questions that are being asked. I speak to young people every day, and there is a common question, they ask, when will we reform our economy so that I am confident there are opportunities for me. We live in a new world, a smaller global village, we as a country are not prepared, not putting in clear, well-defined and progressive economic vision for the future of our country. We have to get to a point where we are producing more jobs and entrepreneurial opportunities year after year than graduates.
New Economic Opportunities
Trade Agenda – In December 2008 the Bahamas signed the Economic Partnership Agreement. In January 2010 the Bahamas signed the services component of the Economic Partnership Agreement. The Bahamas is on track for accession to the World Trade Organization. I ask, however, especially with respect to the EPA, when can we expect the necessary legislation so Bahamians can understand the framework and have a platform to take advantage of this potentially new and what in my opinion would be a revolutionary prong of our economy.
The Bahamas is perfectly positioned, geographically and with its infrastructure to be a dominant force in international trade. Bahamians can partner with multi national corporations to participate in a trade agenda, trading many manufactured goods to Europe. Not only would opportunities grow, there would be new training available, Bahamians becoming experts in new fields, in new areas. As an example, if a US based multi-national pharmaceutical company had a suite of products that has strong exports to Europe, it would make sense for them to establish a manufacturing operation in the Bahamas, maybe on Grand Bahama, and utilizing the trade infrastructure already in place, trade these products to Europe under preferential trading agreements such as the EPA. Not only would they be in a better position in trade, there are other advantages to these companies, such as effective tax planning opportunities in the Bahamas.
It takes more than just putting in the legislative framework, however, to further new industry. A Government has to put together all of the benefits, the platform for success, and then go out and sell itself in a meaningful way. Identify key industries, identify key companies, and go get them. It is over where you wait for new industries to develop, new companies to come, you have to go get what you want, to provide opportunities and expand our economy.
The development of a trade agenda is just an example, we have to be aggressive in identifying other areas economically where we have a comparative benefit as compared to our surrounding competing jurisdictions. We need a Ministry of Trade and Economic Development. It might be advisable to join this with the Ministry of Foreign Affairs so that new international industries and economic expansion opportunities can be isolated and marketed from a single international channel.
Support for our Current Industries
Not only must we work to promote new industries to provide new opportunities for Bahamians, we must also support and encourage expansion in our existing agencies. In man instances, new industries such as the establishment of a robust trade platform can had direct and indirect effects on our existing, dominant industries such as financial services and tourism.
Let me give you an example on how a National Development Plan to establish and promote new industries such as a trade agenda can promote the Financial Services Industry. When we attract these large global commercial enterprises to our country to manufacture and trade from the Bahamas, they will need a robust commercial banking and insurance infrastructure to support them. Our current industry is rather narrow, focusing on wealth management and investments, by introducing a robust trade agenda, a robust commercial banking industry will develop to support it.
This type of planning and aggressive implementation results in significant economic expansion, this is how you put in plans that grows our economy at a faster pace than our population is growing. My colleague, the Member for Bain and Grants Town, said earlier we have to create 8,000 – 10,000 new jobs a year just to put our people back to work and provide opportunities for new entrants to the workforce. You do this by fundamental and progressive economic reform. Something that this FNM Government has failed to articulate, failed to plan for. The status quo works no longer, we need change, progressive change, we need it now.
A current industry with so much expansion, and so little support from this Government is the commercial fishing industry. I have spoken frequently on the dangers and risks associated with poachers from the Dominican Republic. I am advised that there are as man as 20 illegal fishing vessels who regularly illegally fish our waters. This has to stop and stop NOW. But a greater issues has come to my attention. Apparently there are Bahamian owned fishing vessels entirely staffed with fishermen from the Dominican Republic. I also understand many of these foreign fishermen on Bahamian vessels are on work permits issued not for fishing activities, but other activities. These are fraudulent work permits.
I ask the Minister of Immigration to aggressively investigate this issue and deal with it in an aggressive fashion. I also ask this Government to impose sever penalties if it is found that boat owners are complicit in this fraud. I also ask the Government a question, are there senior members of the FNM who own direct or indirect interests in such vessels who employ, almost exclusively, foreign fishermen. This industry requires the Government’s attention, immediate attention.
Apart from the distinct quietness on plans for economic expansion, there is noticeable silence with respect to the pressing need for tax reform. Don’t take my word for it, the International Monetary Fund points out in their Article IV Consultation that comprehensive tax reform was necessary for a sustained fiscal consolidation. The ability for the Government to raise enough revenues to be able to pay this rapidly escalating debt is tied directly to fundamental reforms in our taxing system.
If we are committed to economic expansion opportunities, we should do so in concert with tax reform. The current tax system is regressive, equates to a penalty for businesses. Tax reform can actually attract multinational companies to our shores, participants in a trade agenda, participants that would encourage an expansion of our financial services industry.
There is a lot of debate on what a reformed tax system should be, and frankly, bi-partisan and comprehensive dialogue needs to happen in this regard. I am not going to stand here and argue for one form of tax reform versus another, but only to say as we enter into membership in the World Trade Organization, as I hope we make a commitment to developing a trade agenda and expansion of industries such as Financial Services, that we as a country explore the true implications of tax reform.
With an expanded economy and well thought out tax reform, there won’t be a need to raise taxes, in fact, it is very likely that Bahamians will pay a lower percentage of taxes if planned accordingly. I look forward contributing my talents in this regard, if not now, certainly when we become the next government of the Bahamas.
National Economic Plan
We as those responsible for the governance of the Bahamas have lot of work to do with respect to the economic development for Bahamians. It cannot be done in isolation, and cannot be done in a piecemeal fashion. With all the reforms that are necessary, from tax reform, to economic reform, what is connected is the need for a national economic plan to exploit each to its fullest extent. As I have described, these proposed reforms are all connected in a certain degree, where one helps promote the other and the success of one could be dictated by the implementation of another. Without detailing how everything should work together in the context of moving the country forward, we have failed.
We as a country, in these tough times, in times where the Government cannot collect enough revenue to meets its obligations, in an era where government debt is close to spiraling out of control, a national economic plan is required. The PLP believes this is a matter of urgency. I am prepared to work towards this goal. We need to define our place in this world economy, in the global marketplace, and the only way to do so is by a well defined plan. As the old adage says, “Those who fail to plan, plan to fail.” There appears no plan for the future by this Government, I encourage them to put one in place.
The reality of the management of the Bahamas is that the financial and economic policies of a Government has a direct effect on the quality of life and economic well being of Bahamians. It is clear, after almost 4 years in Government, and certainly over this fiscal budget year, the policies of this FNM Government has failed. This FNM Government seems to stand for the following:
• They believe in things, not people
• They believe in foreign participation and ownership of our economy, and not Bahamianization
• They believe in a process of foreign privatization of the country’s profits and socializing our losses
• They believe in a tax and pain policy of the middle class
These policies have failed. Price of cars are up, price of transportation if up. Price of fuel is up. Price of utilities are up. Price of food is up. The only thing that doesn’t seem to be up is salaries and opportunities. I don’t understand the voodoo economics that this FNM Government uses, nothing seems to add up. I would suggest it is time for the Prime Minister to admit that he is not up to the job, and as he stated before, acknowledge he can’t take the Bahamas any further, resign from the public arena and go back to the people in elections so that the PLP, the party with the programs and the people who can implement the programs can be elected and deliver the country back to prosperity and the Bahamian people.
A PLP Government would have imposed policies that are fundamentally different. Polices that would have promoted the stability of our private sector, expansion of the middle class, which would have positive benefit to private sector job creation.
With these observations, Elizabeth thanks you for your indulgence.