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Bahamas: Foreign Direct Investment (FDI) Declined 18 percent In 2007
Related to country: Bahamas

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UN report-Bahamian FDI fell 18%:
By INDERIA SAUNDERS, Guardian Business Desk -
Nassau, Bahamas:




As Latin America and countries in the Caribbean experienced record growth in foreign direct investment (FDI) last year, The Bahamas, for the first time in decades, found itself unable to grow its own international investment. It fell nearly 20 percent from the previous year, says a new United Nations report.

This nation — usually spoiled as far as FDI is concerned — saw it drop 18 percent in 2007 when compared to 2006, according to the UN's Economic Commission for Latin America and the Caribbean. The decline translates into an investment falloff of $126 million.

The Bahamas was not the only country in the region to see a decline, however, with Trinidad and Tobago's FDI dropping by six percent and Belize's investments down by eight percent.

Still, those pronounced falls, even when combined, are lower than that for this country. Its precipitous decline may be clear evidence that the current economic challenges in fact began last year, only now having manifest themselves in an idling construction sector and stalled development projects dotting the landscape.

The FDI drop came even as The Bahamas realized modest growth in the Gross Domestic Product (GDP) last year. The government is also pointing to some $9 billion in investment it has approved since taking office last May. Still, projections for this year have already been tempered by international ratings firm S&P with the International Monetary Fund now suggesting it too will revise its guesstimates for Bahamian GDP growth this year. IMF officials have cited a worsening U.S. economy and its effects on its closest West Indian neighbor as the compelling reason for the coming changes.

Last year's FDI decline lends support for suggestions coming from the Chamber head and others that Bahamians themselves will have to drive economic growth this year, especially true given the collapse of the $2.3-billion Baha Mar project. The development project's failure, with the pullout of minority partner Harrah's Entertainment in March, has likely retard FDI projections for 2008 as well as the next couple years.

"Bahamian business will now have to step up to the plate," Bahamas Chamber of Commerce President Dionisio D'Aguilar told Guardian Business. "This is the time to take advantage of competitive forces in the construction market if you're in a position to do so at this time."

He added, however, that local investors looking to start their projects now do so amidst continuing uncertainty in The Bahamas' number one industry — tourism.

And while this may be just the time for domestic players in the local economy to take on bigger challenges, instead of capitalizing on spinoff business created from FDI, the current economy speaks to the nation's relative dependence on the U.S., compared our regional counterparts.

A KPMG report released just last week and focused on the region's resort development suggests countries largely dependent on the U.S. economy will more acutely feel the effects of what is likely an American recession. It's something destinations drawing on a more diversified tourism base than ours are better insulated from. In fact, the Dominican Republic — identified by Caribbean financiers and developers as among the top four countries in the Caribbean likely to realize economic growth this year — showed a 16 percent increase in FDI from 2006 to 2007.

Still, the region as a whole faces real challenges to attracting international investment going forward. According to the UN report, in the aggregate much of the Caribbean suffered a 31 percent decline in FDI last year.

May 13, 2008 | 5:31 PM Comments  0 comments

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