By John Hedden
See Dec 15 issue for Part II
The reality of investing in Bahamian agriculture is ‘harsh’ because of the nature of our natural and economic environments. There is little that can be done with our natural surroundings, but the economic one may certainly be modified.
The islands of the northern Bahamas are most suited to agricultural development because of the climate, the low and flat nature of land systems (pine), and easy access to water. Along with these factors comes the suitability to mechanization. Converting this land to agriculture includes initial tree removal, converting the rock into ‘soil’, and preparing for planting, all involving the use of heavy equipment.
However it must be understood that the capital investment for machine operated farms is extremely high, and equipment is used for initial land clearing, preparation, planting and grow out, and finally for harvest, storage, and transport to markets. Equipment maintenance and repair must also be factored in. This will immediately eliminate the small holding enterprise unless co-operative type groupings can be utilized.
However to date most producer cooperative initiatives have failed to become well-established and functional.
In addition, the high costs of other inputs and supplies also limit entrepreneurial interest and investment. All additives to the farm enterprise must be imported, including machinery, fuels (energy), seeds, fertilizers, pesticides, irrigation products, grading equipment, packaging materials, storage systems, and finally transport systems and methods. Importation costs (shipping) are high and then, adding taxes, duties and VAT will necessarily add considerably to input prices.
The comparative cost of labour must also be considered because farm operations require labour for machinery operation through to harvesting, grading, and packing. Labour costs here in the Bahamas are much higher than in other countries in our region, which must also have an effect on marketed product competitiveness.
In countries that value the importance of agriculture as a contributor to the economy, systems are in place to assist farming ventures in limiting costs. These include direct and indirect subsidies, outreach programmes, and crop insurance. Along with these goes guaranteed prices and payment even for a failed crop. Fuels and energy are duty (excise) free, and environmentally sound practices are rewarded. These then allow for the encouragement and survival of agriculture as part of the overall economic landscape. Finally these countries impose quotas, embargoes, and high tariffs on imported product, and so protect the home market. This is often regarded as a trade barrier.
At the present time many international treaties and conventions are being negotiated and ratified in an effort to free up trade barriers and allow easy access to markets by signature countries and regions. Two such examples are NAFTA (Mexico, Canada, and the U.S.), and the WTO (World Trade Organization) which both are designed to eliminate ‘artificial trade barriers’ between member states. It must seem ironic that countries erect these walls against free trade, and then enter into trade agreements to break them down again.
Here in The Bahamas the agricultural ‘industry’ gets very little support from the government, which adds to the harsh environment farming enterprises face.
If the government were serious about encouraging agricultural development it would re-introduce the concessions and exemptions offered previously, and also introduce new ones such as duty free fuel and processing supplies and inputs, and the simplification of the business registration process. This way a more favourable environment will be presented to the farming entrepreneur, allowing him/her to become a little more competitive in the market place.
Why is it necessary for the Bahamas to actively seek foreign investment in agriculture? I know foreign direct investment is essential, but how does a foreign capitalized venture become more sustainable and successful than the already disadvantaged local one? Is it due to economies of scale, concessions offered, taxes mitigated or exempted?
If The Bahamas is even to attempt food sufficiency, the environment surrounding agriculture must become much more economically and business healthy to even encourage genuine local investment.