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Unlike most of the economies in the Caribbean The Bahamas recorded positive growth in 2009. However its GDP per head is considerably lower than other fund domiciles in the region at $21,307 (but The Bahamas, which is much larger than Cayman or BVI, only has 11.3% of its economy dependent upon financial services).
The Bahamas has low external debt and has one of the lowest external vulnerability indicators of countries in its rating category based on a Moody's index measuring a nation's exposure to external financial shocks. Moody's considers The Bahamas' economic strength as moderate, compared to other rated sovereigns.
Government and politics
The Bahamas is a stable democracy that gained independence from the UK in 1973. At the 2 May 2007 general election, the Free National Movement, led by Hubert Ingraham, won 23 of the 41 House of Assembly seats and defeated the Progressive Liberal Party Government led by Perry Christie. Mr Ingraham was formerly Prime Minister of the Bahamas from 1992-2002.
The Bahamas chose not to join the Caribbean Single Market (CSM), which took effect on 1 January 2006, mainly because of concerns over its people movement provisions. It also has concerns about joining a Caribbean Single Economy, because of the potential impact on the value of the Bahamas currency (which is pegged to the US dollar).
Stability and infrastructure
The Bahamas has a larger financial services infrastructure than some may realise. According to the Central Bank of The Bahamas there are approximately 4,000 employees working in 262 banks and trust companies.
The stop Tax Haven Abuse bill in the US names The Bahamas as one of 34 secrecy jurisdictions. Many Bahamians feel the inclusion of The Bahamas in such a bill would result in significant job losses in the financial services sector.
Threats to this domicile
The biggest threat to this domicile is from the US. The Obama administration is seeking to clamp down on offshore locations that it considers may be used by US citizens or corporations that are seeking to avoid paying tax. This is a political process that The Bahamas is caught up in. Washington’s Tax Haven Abuse bill is a threat to The Bahamas.
Unfortunately its funds business is not as developed as other locations in the region and therefore it is more reliant upon offshore banking than Cayman, BVI etc. The consequence of this is that if there is a move by fund managers to move to more recognised jurisdictions in the asset management industry The Bahamas could lose out in this process.