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1 Reprinted from the December 9, 2002 issue of FORTUNE Cover photo supplied by Bahamas Tourist Office The Report Designed by Darryl Leech Bahamas 2002 Time Inc. Printed in U.S.A. #02060 Brighter Future for Strong Bahamas The Commonwealth of The Bahamas, an archipelago of 700 islands and islets in the Atlantic Ocean, is rolling out a red carpet welcome for foreign and local investors in financial services, tourism and light industry. Report produced by S1

2 Strategically located only 50 miles from Florida, The Bahamas annually attracts more than 13 times its 300,000 population in tourists to enjoy its mild climate, splendid beaches, coral reefs, and game fishing. This politically stable former UK colony, which became independent in 1973, is a major provider of offshore financial services, with one of the world s largest open register shipping fleets. Situated in warm, blue-green waters at a maritime crossroads, the country s capital city of Nassau, on the island of the island of New Providence, is a bustling international commercial center; Freeport, the second city on the pristine island of Grand Bahama, is a center for ecotourism and light industry; and the string of beautiful Family Islands are enchanting pearls of old world charm. Entrepreneurship and excellence will be promoted and encouraged. No one will be held back. says Prime Minister Perry Christie The new Progressive Liberal Party (PLP) Government, led by vibrant and energetic British-trained attorney Prime Minister the Rt. Hon. Perry G. Christie, pledged since its election last May to boost economic growth and foreign investment. In a powerful and clearly persuasive election manifesto setting out his vision for a stronger Bahamas, Christie said: Entrepreneurship and excellence will be promoted and encouraged. No one will be held back. The Bahamas must inspire its young to participate in society. It must re-ignite its rich and diverse heritage and show it to the world. POLITICAL STABILITY FOR OVER 270 YEARS The Bahamas has an enviable record of political stability: in the words of Central Bank of The Bahamas Governor Julian Francis, it is a kind of Switzerland of the region. Parliamentary democracy was introduced on the Left : Perry G. Christie - Prime Minister of The Bahamas Centre : James Smith - Minister of State Finance Right : Bradley B. Roberts - Minister of Works and Utilities Westminster model to the islands in 1729 and has been uninterrupted for 273 years, making it one of the most stable countries in the world. The Bahamas judiciary is a well-established and fully independent branch of the government, using English Common Law as the basis of its system. STRATEGIC LOCATION FOR BUSINESS With external reserves of $450 million and an external foreign debt of only $200 million, The Bahamas is a country with a prudently managed economy and a reputation for fiscal conservatism. Our debt service is one of the lowest in the world, says Governor of the Central Bank of The Bahamas Julian Francis. It is probably today something like 7% of our export earnings more traditional borrowers need something like 40 or 50%. Even with the shock wave caused by the tragic events of 9/11 last year, The Bahamas has managed to maintain parity between its currency and the US dollar. Our monetary arrangements are sound so we are able to withstand a shock, says Francis. As long as our economy performs well, we should have no difficulty defending the one-to-one parity with the US dollar. The governor confirms that the fiscal prudence is the hallmark of the government and is entirely supportive of the The security of tourists, VIPs and business visitors to The Bahamas is a major priority for the government, which works closely with the private sector. Firms such as the InterTech Group Ltd, headed by criminologist Dr Elliston Rahming, are providers of professional security, research, investigations and surveillance services. With a workforce of 50, InterTech specializes in VIP protection, commercial and residential patrols and background checks. Tel / Fax: S2

3 Ministry of Financial Services and Investments and The Hotel Corporation of The Bahamas Red Carpet Welcome for Investors In The Bahamas, our resources are our people, says Hon. Allyson Maynard-Gibson, Minister of Financial Services and Investments, whose top priority is to create a pro-business atmosphere for the local and international investor community. "You would be very hard pressed to find a better place in the world to get good quality service from a very educated population. We have very friendly people. This is really a paradise to work in. The proactive economic growth and development policies of the Government of The Bahamas are guided by The Bahamas Investment Authority (BIA), established to cut red tape and lay out the red carpet for investors. the new government has invited investors to sit at the table as partners in national development Minister Allyson Maynard-Gibson The BIA has been designated as a one-stop shop designed to simplify investing in The Bahamas. Within 30 days of a complete submission to my ministry, we are assuring investors there will be an indication of approval of their projects. If an investment involves many ministries, the BIA makes sure that those involved are communicating with each other so that from the time they put the shovel in the ground to when they turn the key of that operation things move very smoothly. We are now a world class tourist destination with a combination of old world charm and first class resort facilities From the standpoint of investors there s an excitement, because the new government has invited investors to sit at the table as partners in national development. On the financial services side, one of my first acts internationally was to take a trip to Europe and speak with major banks and financial institutions. We are launching a five-year strategic plan to expand financial services involving the investment community, the people and the government as joint partners. You would be very hard pressed to find a better place in the world to get good quality service from a very educated population The Hotel Corporation of The Bahamas (HCTB) is working in partnership with the BIA to extend and improve hotels and resorts and has acquired extensive land holdings for t o u r i s m development. We are now a world class t o u r i s t destination with a combination of old world charm and first class resort facilities, says Dr Baltron Bethel, HCTB managing director. The government is encouraging not only the development of a national policy on investment, taking advantage of the strength of The Bahamas in a global economy, but is doing so in dialogue with the private sector. Global telecommunications is first rate, which enables the transaction of business without delay. The Hotels Encouragement Act provides exemptions from property tax and earnings tax and offers customs duty refunds on construction materials. More than ever, this government will emphasize the need for environmental protection considerations as well as economic development. The BIA has been designated as a one-stop shop designed to simplify investing in The Bahamas Among the most prestigious resort projects is the Emerald Bay Four Seasons Resort on the island of Exuma, the newest five-star resort in the Caribbean, constructed at a cost of $275 million and due to open in March This will complement existing and wellestablished facilities like the Radisson Cable Beach Resort in the capital, Nassau, that is already one of the finest destinations in the region offering luxurious accommodation, water sports and championship golf. Ministry of Financial Services and Investments P.O. Box N-7770, Nassau, The Bahamas. Tel: (242) Fax: (242) info@opm.gov.bs The Hotel Corporation of The Bahamas P.O. Box N-9520, Nassau, The Bahamas. Tel: (242) Fax: (242) thehotelcorp@bahamas.net.bs S3

4 new administration s decision to seek a $125 million loan from a consortium of international banks managed by the Royal Bank of Canada. Having waited as long as possible to assess what the financial damage had been to our tourism revenue from 9/11, the government decided to proceed with this credit, and I think rightly so, says Francis. Should our economy re-commence its normal growth over the next year or so I will have no concerns whatever. Francis considers on a wider regional level that the first priority for Caribbean countries is to develop a single market economy rather than create a unified currency, as he sees The Bahamas geographic proximity to Florida as a strategic business driver for the local economy. The islands location offers easy access to the huge consumer markets of North, Central, and South America, some 800 million strong. The Bahamas is part of the South Florida economy, he says. We do have direct foreign investment from around the world, but there is a very large relationship between our economy and the economy of Florida. I think that ultimately it would be that which would determine where we would end up. TOURISM EXPANDS IN PARADISE Lagoons dig into the jagged rocky coastline of The Bahamas and provide much of the beauty that attracts millions of visitors a year. Left : Owen Bethel - President of Montaque Securities International Centre : Julian W. Francis - Govenor of Central Bank of The Bahamas Right : Michael F. Hooper - General Manager of British Colonial Hilton In economic terms tourism is the biggest dollar earner for The Bahamas, accounting for some 65% of Gross Domestic Product, with the majority of its 4 million arrivals in 2001 coming from North America and some 2.7 million of those on cruise ships. We have to find new markets and we want to do more in Europe, says Minister of Tourism, Hon. Obie Wilchcombe. We believe that our Family Islands will benefit significantly with new European visitors. The strategy that also aims to draw in more arrivals from Latin America is based on demonstrating to the world that The Bahamas has a diverse product to offer. We want the world to dream about The Bahamas, says the minister, but he is also anxious to emphasize that the new government cares about sustainable tourism, especially when destinations attract large numbers of visitors. Hugging the most beautiful beaches in the world, The Bahamas has many attractive resorts from mega-sized S4

5 Photo supplied by Bahamas Tourist Office,. Reef Diving complete facilities to small, family-run, bed-and-breakfasts. Among the many lovely hotels in The Bahamas, one specially taps into the business travel niche - the luxurious and historic room British Colonial Hilton in Nassau, which was restored under the Hilton banner with a $68 million refit in Occupying eight acres of tropical beachfront, the British Colonial Hilton is ideally situated in the heart of Nassau s shopping and financial center. We are very proud to provide you with a special kind of product that, coupled with our friendly staff, will ensure you have an enjoyable vacation or business experience, says general Manager Michael Hooper. Responsible for extension and improvement of the hotel and resort sectors of the tourism product in The Bahamas is the Hotel Corporation of The Bahamas, which aggressively pursues and promotes development of new touristic enterprises in the Family Islands through initiation of development projects or plans directly or in conjunction with private sector developers. The Corporation undertakes initiatives to attract investment in hotel and resort projects through qualified investors with background in property development, equity investment, hotel, resort and residential developments. The Corporation owns the beautiful Radisson Cable Beach Resort on famous Cable Beach in Nassau, one of the finest resort facilities in the Caribbean, and also owns the Lighthouse Club in Fresh Creek, Andros, a bonefisherman s nirvana: both resorts have been on the market recently, in line with the government s push toward privatization of its businesses. The Corporation also owns some 11,000 acres of prime property on the islands of Andros and Eleuthera that are suited for extensive development. OFFSHORE BANKING TAKES OFF The offshore financial services industry contributes 15% of GDP and encompasses over 400 major international banks and trusts that operate in The Bahamas. It has reacted favorably to the new government s pragmatic and early S5 Gold Rock Beach, Grand Bahama Island decision to establish the Ministry of Financial Services and Investments headed by Hon. Allyson Maynard-Gibson, and welcomes the evidence of the new administration s commitment to transparency and consultation. We will constantly engage with Bahamian people and with all the people in The Bahamas who call this their home, including the investment community, Minister Gibson says. This is a new concept to The Bahamas. People have talked about it before but we are doing it now. We will constantly engage with Bahamian people and with all the people in the Bahamas who call this their home, including the investment community, says Minister of Financial Services and Investments Allyson Maynard-Gibson A good example of consultation in action was the Town Meeting Minister Maynard-Gibson and several of her ministerial colleagues recently mounted in Exuma to describe to people there the investments that were on the drawing board for that island. The Ministry of Financial Services and Investments has just completed a new five-year strategic plan for the sector but again this will not be handed down in stone by the government. It is a plan that the investment community, the people and the government will all have a say in, says Minister Maynard-Gibson. We are all coming together so that we should all agree on the way forward. Indeed, according to the Minister, the biggest challenge she faces is monitoring the enthusiasm she has encountered since May. One of her first acts internationally then was to embark on a tour of Europe to meet the major banks and financial institutions to let them know about the government s new pro-business policies and to invite them to sit at the table as partners. We wanted to understand very clearly what are their concerns so that their voices too Photo supplied by Bahamas Tourist Office, Julian Bajzert

6 It s time I enjoyed IT S TIME FOR AN EXPERT. life more. Approved by Credit Suisse (UK) Limited. Regulated by FSA. Member of the London Stock Exchange. Investment consulting from Credit Suisse means that your personal advisor mobilizes the entire resources of the Credit Suisse Group to meet your individual goals. Put a leading international company to work for you and enjoy the outcome. Contact us at can be put into the overall development, she says. To keep dialogue open between the government and financial services, the government in its first 100 days broadcast its intention to consult with the financial services sector about its future relationship with the OECD. Minister of State for Finance James Smith, a former Governor of the Central Bank of The Bahamas, explains the move by saying that whenever governments act as a direct result of international pressure there is a risk that citizens affected would decry a loss of sovereignty. In his first address to the nation in May, Smith cautioned prudence and realism in viewing economic prospects for the next two-to-three years. A priority task was promoting and competing more effectively in the marketplace for tourism and financial services, stimulating other forms of economic activity, and as always maintaining an attractive investment climate. At the same time, the government is in talks about entry into the FTAA for which the trigger point is the year 2005, whilst also preparing to enter the WTO one of the last countries in the free world to make such an application. It is keen to protect the interests of the economy in any transitional arrangements that are made, and thus is pledged to full consultation as with the OECD. ATTRACTIVE INVESTMENT CLIMATE The Minister of Transport and Aviation Hon. Glenys Hanna-Martin stated with respect to the attractive investment climate The Bahamas seeks to maintain: Our policy really is to lay out the red carpet to facilitate investments and have a one-stop shop where all of the issues on the applications and information can be dealt with in one place. Her ministry works closely with the Bahamas Investment Authority (BIA), which operates the one-stop shop cocoordinating role for foreign and local investors with other agencies of government as part of the new government s commitment to eliminating unnecessary bureaucracy and restrictions. Under her ministry is the Bahamas Ship Registry: The Bahamas belongs S6 to the International Maritime Organization and is proud of its seafaring role with the third largest open register fleet in the world. We are a very proud people and our flag symbolizes who we are as a people, says Minister Hanna-Martin. We are very anxious that any vessel that we register is one that is reputable and maintains high safety and environmental standards. The ministry offers more than registration, also investigating accidents and is keen to encourage more ship owners to move their head offices to the islands, having already encouraged the formation of a Bahamas Ship Owners Association. Our monetary arrangements are sound so we are able to withstand a shock, says Julian Francis Govenor of the Central Bank The bread and butter financial services business is largely private banking, although as Central Bank of The Bahamas Governor Julian Francis confirms, there are now moves to develop institutional business in order to expand the domestic capital market. As an independent regulatory body, the Central Bank is zealous about safeguarding the sovereignty of The Bahamas. We make it clear that The Bahamas is independent and we seek to have the full independence to exercise fully our responsibilities, says the Governor. Julian Francis recognizes, nevertheless, that The Bahamas is not a large jurisdiction but he considers the country a world leader in quality of service. We can and we will seek to be as good as the major financial centers and represent a certain brand name that is associated with the highest level of quality. The Central Bank governor would like to see further innovation in the local banking product and more transparency in international business. The Credit Suisse is a leading global financial institution and has been operating in The Bahamas since The bank s dedicated employees enjoy long-standing expertise in their field of activity and are well-positioned to assist customers in various aspects of wealth management. From the

7 Photo supplied by Bahamas Tourist Office Queen Victoria s statue, Nassau. more traditional investment counseling to sophisticated inheritance planning, Credit Suisse provides relevant advice to its customers and it is on this quality and depth of service that the bank is building its business for the future. Credit Suisse also attributes its success to support from the government through a robust regulatory environment, its own reputation for solidity, experience and high quality investment products and the professionalism of its local multilingual staff. The bank says The Bahamas is an attractive location for many reasons. The well-developed regulatory environment is supportive of the financial industry at large. In addition, investors benefit from the various tax advantages available. The easy accessibility, strong infrastructure, as well as the spread of support services (attorneys and accountants) enhance the attractiveness of the country. Last but not least, its natural beauty and mild climate make The Bahamas the country of choice for Credit Suisse. The pragmatic attitude towards the financial services sector shown by the new PLP government has favorably impressed Credit Suisse. This is best exemplified by the establishment of the Ministry of Financial Services and Investments, which after only six months in existence has worked hard towards understanding the issues that have been affecting the financial industry of the country, says Mr Eugen Schaefli, Managing Director of Credit Suisse (Bahamas). The relationship between Credit Suisse and the Ministry of Financial Services and Investments has been excellent and very productive. The messages coming from the new government have appealed to president and managing director Owen Bethel, of Montaque Securities International, an investment and financial services advisory entity in The Bahamas. The Ministry of Financial Services and Investments is symbolic of the government s commitment to the further development of the financial services sector, and more so as a vehicle for the future economic development of the country, he says. It is critical that the ministry takes a proactive role in engaging the private sector in designing a future strategy for growth of the industry as it must be the private sector that takes action on the plan. Foreign direct investment into The Bahamas has to date been primarily in tourism and financial services but Bethel believes those same competitive advantages - location and a trained workforce - that encouraged the two major industries of tourism and offshore banking should be harnessed to effect diversification of the economy into information technology, manufacturing, agriculture, aquaculture, and research and development. Potential exists for exploring and exploiting linkages between our financial services sector and direct investment initiatives, as well as any opportunities that may be derived from joining the FTAA, says Bethel. He believes the financial services sector will continue to experience consolidation and rationalization as the regulatory environment continues to unfold and external pressures persist. Bethel considers this is a positive step towards change, because the image of a cleaner and more transparent jurisdiction, coupled with new products and services will result in a new energy, and possibly even new opportunities in the securities sector. PRIVATIZATION OF KEY SECTORS TOWARDS GREATER EFFICIENCIES In keeping pace with world competition and expectations, one of the top priorities for the new government has been deregulation and privatization of key sectors S7

8 Photo supplied by Bahamas Tourist Office Atlantis, Paradise Island including aviation and public utilities. Minister of Works and Utilities, Hon. Bradley B. Roberts says the government wants to privatize its telephone company, Bahamas Telecommunications Corporation (BaTelCo), then move to privatize the national flag carrier Bahamasair and the Bahamas Electricity Corporation (BEC). BaTelCo is now in a position to sell 49% of its equity to a strategic investor, which is likely to involve a major international telecommunications operator from the US, Europe or Asia. It is already working on a $28 million major project to upgrade its cell phone services to be completed by the end of the year, according to general manager Michael Symonette. In preparation for privatization, BaTelCo downsized by almost 50% without compromising services some 20,000-30,000 people are connected to the Internet in the islands with half a dozen ISPs. There has also been a substantial investment in fiber optic cables to provide the infrastructure for business and residential customers to access the Web. The government has shown great interest in e-commerce, so the infrastructure to facilitate e-commerce is very important, says Symonette. The Bahamas Electricity Corporation (BEC) has met the challenge of providing electricity in New Providence, as well as 28 supply areas throughout the archipelago of 700 islands. A recent boom in business, especially in tourismrelated projects, has increased demand which BEC, a candidate for privatization after BaTelCo, is working hard to meet by investing in additional generating capacity. BEC has coupled its commitment to improving services to its customers by keeping the cost of electricity as low as possible and has not increased its charges to consumers since BEC completed a preliminary privatization study some six years ago that outlined the various options for sell-off to the private sector including finding a strategic partner. To lower its costs, BEC outsourced some non-essential functions and streamlined staff, while at the same time expanding services to more islands. In privatization of key sectors towards greater efficiencies, the Government of The Bahamas is creating a new, stronger Bahamas to compete more effectively in today s 24/7 world. Reprints and translations of this section are available. For more details, contact Randi Bergman at randi_bergman@timeinc.com or call S8