August 1, 2012
Today I rise on behalf of the good and loyal constituents of Elizabeth who sent me here to work for all Bahamians, to move for the second reading of A Bill for an Act to amend the Industries Encouragement Act. This Amendment, along with the Amendment to the Tariff (Amendment) (No. 2) Bill, 2012, are intended to re-instate the incentives available to Bahamian manufacturers that existed prior to the 2010 amendments enacted by the prior FNM Government. We are here to reverse a failed economic strategy and bad economic decision by the prior FNM Government, and to provide the framework for Bahamian industrial development. It is wisely accepted that it is essential that we diversify our economy and broaden our economic base if we are to significantly increase Government revenue without increasing the tax burden on Bahamians, which I say is already to heavy. Tax increases were the way of the FNM, but creating economic opportunity for Bahamians is the way for our Government.
Historically, Bahamian manufacturers were given duty exemptions on imported machinery and raw materials to use in manufacturing operations; these incentives and tax concessions lasting for as long as that manufacturer was an “Approved Manufacturer”. In 2010, in the middle of an economic downturn, when companies, and especially Bahamian manufacturing companies, were facing the reality of threats to their economic viability, the FNM Government, in its quest to seek additional Government revenues, fiscally punished these same Bahamian engines of job growth, Bahamian manufacturers.
A component of the FNM’s failed revenue measures was the removal of the tax concessions available for manufacturers under the Industries Encouragement Act and Tariff Act after 5 years of enjoying these concessions, and thereafter imposing a flat 10% duty on all imports to support their manufacturing operations. Evidence shows that like most of the tax increases of the FNM administration, this strategy not only failed to generate the anticipated revenues, but served as a brick wall in the way of economic advancement for Bahamian entrepreneurs, a penalty against business in the Bahamas.
In my industry tours, I have heard exactly this message, the actions by the FNM Government, especially in this regard with respect to incentives available to Bahamian manufacturers, restricted diversification of the economy of the Bahamas, held back economic advancement, and contributed negatively to the much needed engine for job creation, the private sector. But your PLP Government believes in Bahamians, and the promotion of Bahamians into the economic mainstream of an expanded and diversified Bahamian economy.
The Industries Encouragement (Amendment) Bill 2012 removes the five-year limitation on duty free concessions for approved manufacturers. The amendment also removes the 10% duty on materials and qualified imports after the expiration of the 5-year period. The Tariff (Amendment) (No. 2) Bill, 2012 seeks to amend the Tariff Act to accomplish similar ends. The Tariff Act provides similar incentives as the Industries Encouragement Act, but for small cottage industries. Small cottage industries are the underpinning of our cultural manufacturing and tourism manufacturing in the Bahamas. This is the future of industrial entrepreneurs in the Bahamas, the opportunity to transform the creativity of our people into industry, industry that offer natural linkages to the primary pillar of our economy, tourism. One can only marvel at our cultural richness and it is the intention of this PLP Government and my Ministry that this cultural richness finds its way to the mainstream of our economy, thereby creating a place for Bahamians and things Bahamian in our economy.
Diversification and Entrepreneurism
The mandate of this Government is to enhance employment opportunities for Bahamians through economic diversification and promotion. In The Speech from the Throne, where this Government’s mandate was laid out, it was mandated that “My Government is deeply wedded to the belief that private enterprise should remain the primary engine of job creation and entrepreneurial opportunity in our country, and that tourism and financial services, supported by industrial expansion, fisheries and agricultural production, should be the chief areas of economic activity in our country. In this regard, my Government is committed to the formulation and execution of policies that will encourage private investment in these areas while maximizing job creation and career development for Bahamians in the shortest possible time” and it is the position of my Ministry that means NOW!
This philosophy is the underpinning of the economic development program of this Government, the promotion and diversification of the private sector economy as the engine for job creation. The Amendment to the Industries Encouragement Act and The Tariff Act is an initial step of this Government to provide the framework for industry expansion, recognizing that industrial expansion is a primary engine of job creation and entrepreneurial opportunity in our country for Bahamians. Allow me to give an example of how the amendments today will promote industrial expansion and economic development and diversification.
Last week when we tabled and moved for first reading the Industries Encouragement Act Amendment and the Tariff Act Amendment the response from industry was overwhelming. In fact, a small Bahamian manufacturer, Mr. Deran Thompson of Bahamas Woodworking Studio, approached me last week. Mr. Thompson told of his plight as a woodworking manufacturer, how the removal of concessions previously available to him prevented him from growing his business, and consequently from providing additional opportunities for Bahamians, from providing additional opportunities.
Mr. Thompson proclaimed his appreciation of the efforts of this administration for empowering small Bahamian manufactures by putting forth, as a primary tool of economic advancement, the amendments to the Industries Encouragement Act. Mr. Thompson described how his industrial company, Bahamas Woodworking Studio, upon passage and application of the Amendments we debate today, will be able to reinvest the tax concessions back into his business, acquire new machinery, employee additional Bahamians in his business. The more we can encourage Bahamian industry to grow, the more our economy will be diversified, the more employment opportunities will exist for Bahamians.
This is not only the story of small Bahamian manufacturers, but also the larger more established and historical manufacturers in the Bahamas. One manufacturer described to me his plan to not only manufacture for domestic consumption, but also his expansion plan to manufacture for regional export, plans which were put on hold because of the removal of concessions by the FNM in 2010. He told me how because of these amendments today, he can reinvest the resulting available resources into the manufacturing plant, ensuring capacity for the expansion plans to be a regional exporter. This will not only create additional employment opportunities for Bahamians but serve to expand our economy, just imagine what 10, 100 or 1,000 export manufacturers can do for our economy.
Likewise, another established and large manufacturer told me that due to the tax increases by the former FNM administration, planned modernization of his manufacturing plant had to be put on hold, costing the company efficiencies and growth opportunities. The actions by your PLP Government today will allow this large and established manufacturer to reinvest in its facilities, increase production, operate with better efficiencies, and ultimately create an operating model that is more profitable, with an ability to grow and as a result, create additional employment opportunities for Bahamians.
Andrew Rogers, a principle for Bahamas Aluminum Manufacturing Co., felt the real world effects of the poor decision by the prior FNM Government, and sees the opportunities by the method in which this Government promotes economic development. Mr. Rogers is quoted as saying “within 3 months of the introduction of the 10% tariff on manufacturers, Bahamas Aluminum Manufacturing Co. had no option but to relieve 3 staff members from employment to compensate for the increased operating expense. Once the tariff is removed, there is no doubt that the company will increase employment because of the savings.”
These are just some testimonials of Bahamian owned industrial and manufacturing operations within just the last few weeks, real life demonstration of a difference in economic philosophy of this Government as compared to the FNM Government. This Government believes in the Bahamas for Bahamians first.
The outline above is the real world effects of how we govern on this side, especially with respect to the advancement of Bahamian businesses. We believe that you provide an atmosphere for Bahamian companies to succeed, because when they succeed, we all succeed. The economy expands, Government revenue increases, and hopefully the tax burden on Bahamians decreases. There are more employment opportunities, more career growth opportunities, more entrepreneurial opportunities. This is an underlying philosophy of the Prime Minster of the Bahamas. He frequently speaks to us about allowing Bahamians to succeed. Reinstating these concessions in the Industries Encouragement Act and the Tariff Act provide this framework for economic growth and empowerment of Bahamians, the encouragement for economic diversification, the tools necessary for the advancement of our country economically. This model for economic growth we believe will result in the expansion and diversification of the Bahamian economy, long touted as the formula necessary to stabilize our economy.
Ministry of Financial Services
This is the first step to provide for the advancement of industry in the Bahamas. In the Ministry of Financial Services we are not only tasked with the administration of the Industries Encouragement Act, but unlike the prior administration, we are committed to the task of establishing policy and the framework for advancement of Bahamian industry. We are committed to a program of not only promoting a platform for successful industrial development, but also exploring linkages between Bahamian manufacturers and market access to encourage regional export opportunities for Bahamian manufacturers. This is a policy of industrial advancement, growth and diversification.
We in the Ministry of Financial Services have are absolutely committed to this, and I have established a project team dedicated to the policy advancement of industry in the Bahamas. We will not only be administrators in our Ministry, but my team will ensure that all opportunities are investigated, and then opportunities when proven will be presented to industry for their advancement. This is the basis of the leadership of the Prime Minister and his Government, seeking out and developing opportunities for economic success. We in the Ministry of Financial Services take this very seriously.
These amendments to the Industries Encouragement Act and the Tariff Act are the right thing to do, reverse the mistake that was made by the FNM Government, amendments that provide the necessary incentives for economic and industrial growth and expansion. You don’t have to take my word for it, listen to the hard working Bahamian entrepreneurs, the private sector industrial companies, of how progressive economic vision, how these amendments will have a positive effect on the economic development of the Bahamas.
These amendments are the predicate for the promotion of industry, a clear sign of positive initiatives to come for all industry sectors as part of the Government’s Trade and Industry Agenda. The Ministry of Financial Services is committed to creating necessary linkages between all industry sectors, and external trade, opening doors for Bahamian businesses throughout the region, and the world. This includes creating policy and legislative framework for the promotion of international trade. We are actively collaborating with other Government agencies and the international community to secure market access for products from the Bahamas to places such as Europe, the Caribbean region, USA, Canada and elsewhere.
Elizabeth supports the policies of this Government for economic enhancement and promotion. I so move for the second reading and committal of A Bill for an Act to amend the Industries Encouragement Act.