Categorized | National News

New SME Bill To Make Businesses More Competitive

With so many small businesses in The Bahamas hanging on by a thread the government is hoping that newly drafted legislation will make them more competitive and remove the roadblocks that prevent them from accessing capital.

Small and medium-sized enterprises (SMEs) represent 50 per cent of this country’s economic activity, yet they continue to face a number of challenges, including lack of technical support, which is why the government appointed an eight-member private sector committee to draft the Small and Medium-Sized Enterprise Development Bill 2013.

The legislation will create the Small and Medium-Sized Enterprise Development Agency (SMEDA) as a one-stop shop to facilitate all of the industry’s needs.

The legislation will reportedly be structured to resist the political fallout from governmental changes.

State Minister for Investments Khaalis Rolle, who once served as Chamber of Commerce president, said the bill is “second generation legislation” designed to support the growth and development of SMEs in The Bahamas.

“This is the culmination of a lot of hard work by the private sector and public sector, more specifically the Bahamas Chamber of Commerce and the Ministry of Finance. If you look at the institutions that we currently have in place and you look at the performance of the small and medium-sized sector, there’s a huge disconnect,” he said.

“While I was president of the chamber I worked very closely with the former administration in recognition of this gap and I can recall doing a speech at the Bahamas Business Outlook in 2009 and I spoke specifically of the need to bring to parliament or develop an infrastructure for the small and medium-sized enterprises.

Minister Rolle said the Inter-American Development Bank (IDB), through its financial support, gave the government the opportunity to transform the way it supports the SMEs sector.

Consultation on the legislation will begin in a week, Mr. Rolle said.

“This will give us the basics for what we need to bring to parliament. The legislation has already been drafted and we want to test the validity of what has been tested thus far,” he said.

Managing Partner of Chancellor’s Chambers, Merrit Storr said the IDB invited his firm – on the recommendation of the Chamber – to help draft the bill for the new entity.

“The IDB presented its draft bill, which our firm presented to them; they presented it to government in May 2011 and at that time we had anticipated . . . that the bill would have been brought to the parliament in a timely fashion. For various reasons, which I am not familiar with, the bill was not tabled prior to the last administration’s term in office and so the general elections came and the bill was still pretty much on the shelf,” Mr. Storr said.

“I think with credit to Minister Rolle, because of his prior involvement with the bill and understanding the importance of it, I’m sure he had some influence in taking it off the shelf and bringing it back to the fore. So, beginning today [Monday] we will begin consultation with some of the entities that are impacted by the proposed legislation – the Bahamas Development Bank, BAIC, the Venture Capital Fund – these are some of the government entities that provide support for the sector currently, but in some instances it’s not necessarily coordinated support. This bill is designed to try to bring more coordination to support for SMEs from a public sector perspective.”

Mr. Storr spent most of the day explaining the bill to SMEs representatives and detailing the impact it will have on their entities.

He said the committee will also seek feedback from the stakeholders.

“They will be consulting with the various chambers of commerce, presenting the bill to them, the association of clearing banks because there’s an aspect of this that impacts them through guarantees and the general public. So, we will be making media appearances to engender support and discussion,” he said.

The committee hopes to have the process completed by the end of March or at the beginning of April.

The public and impacted stakeholders are expected to respond by that time.

Regarding the feedback Mr. Storr said, “I will prepare a report and submit it to government or the Ministry of Finance for consideration. We believe that what we have drafted is fairly strong as it stands, but obviously stakeholders may have some varying views and we’d want to consider those,” he said.

Minister Rolle explained some of the challenges SMEs have faced over the years, noting that it has been an “uphill battle.”

“Access to capital remains one of the major issues and major barriers to survival. When you’re going through a difficult economy like we’re going through now and sales have fallen off most SMEs cannot go to the bank and renegotiate their facilities simply because they don’t have the capacity to do so. So, this new bill is designed to make SMEs more competitive and lower that access to capital,” he said.

“The other barrier that SMEs face is lack of technical support. If you look at all of the institutions that are designed to offer support to SMEs in many instances one can make the case that for various reasons they are not living up to those expectations, not living up to a modern mandate of support for small and medium size enterprises. I think in the past when we developed these institutions the mandates were very narrow and didn’t allow flexibility to adjust to the changing times.”
The Bahamas led all small island developing states (SIDS) by attracting over $1.5 billion in foreign direct investment (FDI) inflows in 2011.
The UN Conference on Trade and Development’s (UNCTAD) World Investment Report 2012 noted that The Bahamas was the only SID to attract more than $1 billion in FDI inflows in 2011.
Trinidad & Tobago came in a distant second with just over $500 million.
Despite the achievement, Mr. Rolle said the benefits to SMEs was “very little”

“The downstream benefit was very little. So, you can make the argument that a major challenge that SMEs face is not being fully integrated into the overall economy in a structured way, otherwise they would have benefited from all of the foreign direct investment that we have received over the years,” he said.

“You look at all of the businesses that have given birth as a result of the Atlantis or all of the major projects that took place over the years in foreign direct investment and you point to 10 businesses that started out very small and are big now and sustainable. It’s hard to identify those businesses and say that because of the system of support that is designed an offered by the public sector that they were given the opportunity to become very big and viable businesses.”

Meantime, Minister of State for Finance, Michael Halkitis noted that successive governments have invested millions of dollars trying to support small and medium-sized enterprises.

“We have spoken of one umbrella organisation for a number of years where businesses can have better access to capital and support. We need to look at the whole process of starting a business and how easy it is eliminating the red tape we always talk about. We think that the small and medium-sized enterprises government agency will greatly assist in doing that and this is the first step in getting that agency formed,” the minister said.

Mr. Halkitis said the government is developing a country strategy, which is “an indication of areas in which the IDB can assist, both in terms of loan financing and grant funding over the term of the Christie administration.”

“That is a normal thing that the bank does. They sit down with new administrations coming in and there’s a discussion on the priorities of the government and there’s a back and forth and the IDB would bring suggestions as to how they can assist the government in implementing its platform, so that’s an ongoing discussion,” he said.

“We’ve had some preliminary discussions focusing on areas such as citizen security, small and medium-sized business development, education with an emphasis on special education, etc. The discussions are ongoing and when it’s completed, we’ll be able to introduce a programme. So, these are some of the things we’ll be looking forward to and working with the IDB to implement over the next four years.”

Rogan Smith

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