Investing in The Bahamas: Beyond the sandy beaches
July 6, 2023
Investing in The Bahamas may be worth a second look with current economic developments stimulating an impressive post-Covid recovery. The Bahamas has a long history of generating GDP through high-end tourism and offshore banking. Since the turn of the decade, the Bahamas has had to deal with a number of challenges, including a decline from $13.06B to $9.5B in GPD during Covid. With post-Covid return in 2022 to $12.9B.
Investing in the Bahamas: A historic overview
The island nation continues to actively position itself as a hub for cryptocurrency investors. The government is also looking to monetise some of its glorious natural assets by exploring sustainability initiatives, such as launching a blue carbon credit scheme.
The impact of COVID-19 on the investment climate in the Bahamas
We spoke to partners at our firm in The Bahamas Kreston Bahamas, Pretino Albury and Sean Rolle, about these developments. Kreston Bahamas joined the network in 2021 and have already referred considerable business to the network. Pretino comments,
“Since the COVID-19 lockdown, The Bahamas has experienced notable economic growth, particularly in the tourism sector, which has historically been the largest industry in the country. Despite the initial challenges posed by the pandemic, the gradual easing of travel restrictions and the successful implementation of health and safety protocols have played a crucial role in reviving the tourism sector. The positive momentum in the tourism sector has had a ripple effect on other industries, such as hospitality, transportation, and retail, contributing to the overall economic growth and recovery of The Bahamas. This recovery has yielded an estimated growth rate of 2% (according to the International Monetary Fund (IMF)) after a decline in 2020 due to the COVID-19 outbreak.”
It is no surprise, then, to see growth in Kreston Bahamas across tourism, leisure and hospitality, construction, and retail. Unsurprisingly Covid has left a mark on how tourism businesses want to operate. Clients want the assurance that they can rely on outsourced services to navigate through challenging times, such as business closures, by easily turning them on and off as needed. Pretino comments, “Covid has changed the business landscape. Now there is a focus on outsourcing back-office functions with a ‘white glove service’ approach. Clients want to feel that they can survive the shock of closure by easily turning suppliers off when they don’t need them.”
Sean Rolle adds,
“The Bahamas has a stable political environment, a well-developed infrastructure, and a highly skilled workforce. However, governmental approval is required for foreign investment in some areas such as wholesale and retail operations, real estate and property management services, small-scale construction projects, commercial fishing, and many small business activities.”
Digital assets and regulations: Cryptocurrency investments in the Bahamas
The government, keen to get ahead of some of the grey areas surrounding cryptocurrency, is developing the Digital Assets and Registered Exchanges Bill, 2023, which is currently out for consultation with the objective of reintroduction to the global market. While regulations surrounding cryptocurrency are evolving, investors remain committed to this market. Pretino comments,
“There has been some significant sell-off; however, from what I have seen, investors are still committed to this market. They have become more strategic in investing in crypto assets backed by underlying, measurable, and sometimes tangible assets or investments with the greatest utility. Additionally, there has been a shift towards protecting crypto investments by staking their holdings and using “cold” wallets, which provide offline storage solutions. Cold wallets seem to be the best option for keeping crypto safe from hackers or companies that go bankrupt. Despite recent episodes of failed cryptocurrency projects, the hype around cryptocurrency as a viable investment option and a disruptor in the digital finance space continues to gain momentum at its own pace.”
Pretino and Sean see significant opportunities not only for investors but also for their firm’s growth plans. Sean comments,
“Looking ahead, several investment trends are expected to shape the Bahamas’ economic landscape. Public Private Partnerships are anticipated to play a significant role, fostering collaboration between the government and private entities to drive infrastructure development and public service enhancements. Tourism-related opportunities remain attractive for investors considering the Bahamas. Additionally, investment trends like ESG (Environmental, Social, and Governance) initiatives, carbon credits, and the forthcoming Digital Assets and Registered Exchanges Bill, 2023, are expected to shape future investment opportunities. The government’s commitment to strengthening small and medium enterprises (SMEs) and local entrepreneurship is another promising trend. As the Bahamas fosters an environment conducive to SME growth, foreign investors can explore opportunities for collaboration and investment within this sector. As a firm, we are looking forward to the opportunities this activity will bring to the island and have made plans to expand both nationally and across the rest of the Caribbean.”
As foreign investors seek to capitalise on the Bahamas’ potential, staying informed about regulatory changes, understanding investment trends, and seeking expert advice remain critical components of achieving success in this vibrant market.
Pillar Two tax reforms
The Bahamas has not been untouched by Organization for Economic Cooperation and Development (OECD) policy, challenging its tax haven status. The Ministry of Finance has recently announced the release of a Green Paper on “Corporate Income Tax Strategies for The Bahamas,” aimed at gathering feedback from stakeholders. The government seeks to improve efficiency and equity in the business tax regime and align with global tax developments. The paper addresses the challenges posed by OECD requirements for Pillar Two tax reforms and the limitations of the existing business license tax (BLT). The proposed strategies include options for a 15% minimum effective tax rate, with variations based on firm revenues and thresholds. Sean comments,
“Although the consultation period is still ongoing, it will be a step-change for multinational enterprises doing business in the Bahamas. Reaching out to our experts here on the island early can help businesses better prepare for any potential effects this might have on their operations.”