Economic Outlook & Labour Legislation Survey
Summary of Findings & Conclusions

Prepared by the Nassau Tourism & Development Board for
The Coalition of Private Sector Organizations
July, 2002

I. Background

The economy of The Bahamas has undergone considerable change over the past eighteen months. A number of overlapping factors have contributed to this change including: the U.S. recession, the financial services blacklisting, the Bay Street fire, the terrorist attacks in the U.S.A. on September 11th 2001, hurricane Michelle and the recently enacted labour legislation.

The Coalition of Private Sector Organizations, a group comprising key organizations including the Bahamas Chamber of Commerce, the Bahamas Employers Confederation, the Bahamas Hotel Employers Association, and the Nassau Tourism & Development Board, conducted a random survey of businesses between June 4th and 25th, 2002. The objectives of the survey were as follows:

The survey was directed at a cross-section of business categories and sizes. The results reflect the views of approximately 96 businesses with a reported labour force of nearly 17,000 employees.

The findings and recommendations are being shared with Government, the business community, and the general public to provide them with a better understanding of our nation's economic standing; immediate outlook; the critical need to address productivity issues; and how the labour laws are affecting the economy and could impact it further in the future.

II. Overview of Findings

A. Business Performance

• The majority of businesses (65%) report that sales and profits are down the past six months. More than three out of every ten businesses report that sales are down significantly. These trends are expected to continue for most businesses over the next six months.

• More than three out of four businesses (78%) report that capital spending, a key indicator of economic growth, is down or stagnant. Only one in five (20%) of the businesses expect to increase capital spending over the next six months while 51% indicate it will be down.

• More than two out of every ten businesses anticipate taking a net loss this year while 64% of businesses report that profits will be lower than expected.

B. General Economic Outlook

• Most businesses (65%) believe the economy is recovering

• September 11th continues to hamper economic recovery according to 85% of businesses

• Almost all businesses report that the financial services changes have had a negative impact on the economy

C. Productivity

• Employee productivity is fundamental to success as reported by 98% of the businesses

• More than four out of five companies (81%) report that employee productivity is affecting their business

• Poor work ethics and lax attitude towards time top the list of key factors affecting productivity

D. Labour Legislation

• More than nine out of ten employers indicated that the recently enacted legislation has had a negative impact on the economy with 22% of them reporting it has had a significant negative impact

III. CONCLUSIONS

Based upon a review and analysis of the survey findings, The Coalition of Private Sector Organizations offers the following conclusions:

1. The overall economy of The Bahamas, while showing very marginal signs of rebounding, remains highly vulnerable and any marginal gains can easily be reversed.

2. Business confidence is not high with most in a restraint mode with regard to capital spending, a clear indicator of future economic activity. Based upon submitted comments, a 'wait and see' attitude appears to be prevailing for most businesses.

3. The number of businesses reporting a net loss for the year (22%), and those posting a profit lower than anticipated (64%) is especially troubling. This indicates that many businesses do not have the capacity to absorb an additional shock, having little or no equity reserves.

4. The fragility of the economy and of business confidence is underscored by the fact that sales and profit projections were already adjusted downward by most businesses a year ago and fell even lower than those downward projections. In a similar survey conducted by the Coalition of Private Sector Organizations in August, 2001, 51% of the businesses anticipated a decline in profits, 31% expected them to remain the same, and 18% projected an increase.

5. While some businesses have reduced employment levels slightly and others are planning some reductions, most businesses are holding the line on making significant reductions in their employment levels. It is assumed that this is being done in anticipation of employments needs upon recovery and at the expense of profits and capital spending.

6. The issue of productivity is pervasive throughout the economy and must be addressed seriously by Government, businesses and labour. It is a major issue, not only in the context of the present economic environment, but as it impacts our nation's long term economic and social stability and viability.

7. The recently enacted labour legislation has had a negative impact on the overall economy - adding to business operating costs, and consequentially increasing the overall cost of doing business and the cost of living for consumers.

IV. PROFILE OF SURVEY RESPONDENTS

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