Challenges include costly electricity four times higher than in the U.S., deficiencies in public sector medical infrastructure, internet connectivity on smaller islands, and an undiversified pool of skilled labor in certain sectors. Given the archipelagic outlay of the country, expensive infrastructure must be duplicated on nearly each of the 29 inhabited islands and cays. However, this process has not happened uniformly, and several islands are still challenged by a lack of basic infrastructure. Recent hurricanes severely damaged the well-developed infrastructure of the country’s second and third economic centers of Grand Bahama and Abaco, although some of this infrastructure has been restored.
Cumbersome approval process for foreign investment:
Decision-making is highly centralized and the approval process for FDI is sometimes opaque, often protracted, and provides opportunity for political interference. American companies have cited delays in investment proposal approval. To improve the investment application process, the new administration announced plans to establish an independent agency, Bahamas Invest. Once fully operational, bureaucratic delays, functionality, and transparency are expected to improve.
High shipping costs:
The Bahamas is an archipelago of 700 islands and cays, with 29 inhabited and 10 considered important economically. The cost of shipping to the Family Islands, islands except New Providence and Grand Bahama, through which most trade is conducted, is generally higher due to lower volumes of trade and transportation costs. However, many of these islands benefit from incentives and legislation that waive certain government taxes on business inputs.
High crime rate:
Royal Bahamas Police Force (RBPF) statistics for 2021 highlight overall crime unchanged from 2020. In terms of violent crimes however, the number of murders increased year-on-year by 63 percent, armed robberies increased by 33 percent, and the number of reported rapes increased by seven percent, while attempted rapes, and unarmed robberies decreased compared to 2020. U.S. Embassy Nassau has issued several security messages in recent years regarding safety in Nassau and surrounding areas on New Providence Island, as well as on Grand Bahama. Most incidents involving U.S. citizens residing in The Bahamas are robberies or property crimes. Armed robbery, property crime, purse snatching, theft, fraud, and to a lesser extent sexual assault remain the most common crimes perpetrated against tourists. Murders rarely involve visitors to the country. Drug trafficking continues to be the major concern.
Relatively high customs tariffs:
The Bahamas has the highest average duty rate in the Western Hemisphere at roughly 30 percent. Tariffs on some consumer goods run as high as 65 percent and reach 100 percent on imported items that compete directly with locally produced goods. In 2015, the government introduced a Value-Added-Tax on both domestically produced and imported goods and services that generates 45 percent of government revenue. As a result, the government has lowered or eliminated some duties to spur economic activity in the construction, agriculture, fisheries, and renewable energy sectors. Despite the high customs duties, U.S. goods remain in high demand.
The government employs non-tariff barriers to trade including reserving investment in 15 sectors for Bahamians. Governmental approval is required for foreign investment in these areas, including wholesale and retail operations, real estate and property management services, small-scale construction projects, commercial fishing, and many small business activities. The government also implements seasonal prohibitions on the import of certain agricultural items which compete directly with domestically produced items. Market access for U.S. products has not been adversely impacted by the ongoing implementation of health, safety, and quality standards.