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Blue Chip - E-commerce

Senator James Smith sees a bright future for the country in cyberspace

WELCOME BAHAMAS - NASSAU, CABLE BEACH & PARADISE ISLAND - 2003 EDITION


Minister of State for Finance James Smith is upbeat about The Bahamas' potential as a centre for e-commerce once key legislation and a strong infrastructure are in place.

"The Bahamas has to see e-commerce as a very important sector for future development. Indeed, it might be regarded as the third pillar (of the economy) in terms of its potential for economic development, following behind tourism and financial services," says Smith.

"We have already in place a rudimentary plan, a skeleton for its development. It would happen on essentially two levels. One would be the legislative level, meaning creating the type of environment within which an e-commerce industry can flourish. And secondly would be on a technical level, putting in place the type of technology that would promote and develop e-commerce."

Legislation was expected to be passed into law by the second quarter of 2003, dealing with matters such as security over the Internet, protection of privacy of individuals on the Internet, cyber contracts, such as bills of sale made over the Internet, and intellectual copyrights.

Smith says The Bahamas' legislation will be consistent with international rules and regulations, such as the principles of the World Trade Organization (WTO), to permit it to interconnect with the rest of the world in carrying out e-commerce activities.

"Once the legislation is in place, then we have the wherewithal to promote The Bahamas as a place from which to carry out e-commerce," says Smith.

"I think the way to get there fast would be to import what is not available locally in terms of computer literacy and computer skills," says Smith. "We would have, as a matter of policy, to engage the Immigration Department with some special considerations for that kind of labour to complete the puzzle for launching The Bahamas in e-commerce activities."


Perfect marriage
E-commerce and offshore are often touted as the perfect marriage, in part because jurisdictions like The Bahamas provide a tax-neutral platform from which to operate a business and make sales, and because the cost of skilled labour is oftentimes lower than in onshore jurisdictions. In The Bahamas' case, it is also an attractive place to live and just a 50-minute flight from the east coast of the United States.

As a sophisticated financial centre it also has the professional base to support e-commerce operations, be it legal, banking, accounting or marketing services.

"Our attributes are very much the same that attract people here for tourism and also financial services," says Smith. "A modern metropolis, really, located just outside of the United States. And because of the high degree of offshore activity, there is less red tape and bureaucracy in terms of establishing and responding to the needs of the industry."

The beauty of e-commerce is its mobility, allowing a business to separate activities that formerly would have been kept in one location.

"For instance, one can do research and development in one area, marketing in the other area, and sales in the third area, using cyberspace," says Smith, citing the case of a major airline that moved its ticket processing to Barbados even though it carried out the bulk of its operation in the United States.

"Cyberspace and e-commerce permit you to do this high-speed data transmission where you don't have to be in the particular place to do the analysis. India, I think, has perhaps the largest amount or concentration of e-commerce because of the relatively low cost of labour and pockets of highly-skilled computer technicians. Many US and European firms have moved part of their operations for processing to India," notes Smith.

Privatization is key
To further the way for e-commerce in The Bahamas, government is privatizing BaTelCo, the quasi-public telephone corporation owned by the government but operating without subsidy from it.

"The idea is to bring a strategic partner who would add value to BaTelCo and also bring in the managerial expertise as well as investments to provide the level of technology that will provide the technical platform for e-commerce," says Smith.

Privatization will improve the efficiency of the entire economy, but especially the twin pillars of tourism and finance, since tourism utilizes the system for bookings, and offshore banking relies on good telecommunications for its transactions. Privatization is also expected to bring down the cost of overseas data transmission and telephone calls.

"If we have efficiencies in those areas, by and large the economy should be more efficient, more productive," says Smith.

Foreign firms responded enthusiastically when government invited tenders to bid for a 49 per cent share of BaTelCo in December 2002, with about 30 companies from North America, Latin America, Europe and Japan showing an interest.

Some became qualified bidders, and in early 2003 government was working out the complex rules and procedures for the bidding process and putting in place a team to evaluate the bids and make a recommendation.

"The idea is not just to sell an asset which can be taken and flipped for resale, without adding value, but to meet certain specific objectives for the development of The Bahamas' e-commerce - bring in new technology, a minimum level of capital injection, a business plan, training. That's the sort of thing we'd be looking at," says Smith.

BaTelCo has already laid a high percentage of fibre optic cable, a so-called "backbone," throughout New Providence and Grand Bahama, and plans to do the same in some of the Out Islands.

"This is very necessary internally," says Smith. Externally, The Bahamas is well-served by fibre optic cable connections to the US, parts of the Caribbean and Latin America.

New Providence and Grand Bahama are linked to Vero Beach, FL, through a fibre optic connection partly owned and operated by BaTelCo, and Cable Bahamas, through its subsidiary Caribbean Crossings, has a cable landing in Boca Raton, FL, that links Grand Bahama, New Providence, Eleuthera and Abaco. As Smith notes, "once one goes through the United States, then you go across the Atlantic into Europe, so that type of fibre backbone is already in place."

Adding to this connectivity is ARCOS-1, a "self-healing" fibre optic ring connecting The Bahamas, the United States, most of Latin America, Cura?ao, Puerto Rico, Dominican Republic and Turks and Caicos. The ARCOS-1 ring ensures The Bahamas complete telecommunications redundancy in the unlikely event of a catastrophic failure of its other connections.

Freeport has connectivity
Freeport in Grand Bahama is touted as a good candidate for e-commerce activity, based on its modern infrastructure and a container port that is the largest transshipment hub in the region.

"It's quite conceivable, with the number of containers coming into Freeport - very large containers, with disassembled goods - it may be possible to do warehousing, which is a very important part of our e-commerce, because you can make the sale in New York or Florida, warehouse it somewhere else, and simply transship and distribute using the various distribution links," says Smith.

Plans are also under way for a 780-acre Air/Sea Industrial Park, a joint development by Hutchison Whampoa Ltd and the Grand Bahama Port Authority located between Freeport Container Port and Grand Bahama International Airport, which Smith notes will "lend itself admirably to e-commerce type activity."

Government is also exploring ways to make business more streamlined for importers by computerizing the payments and settlements system of the Customs Department, says Smith.

"We're having a review of their information technology system and we've asked for some assistance to make it possible, for instance, for a certain type of importer to do his clearance over the Internet," says Smith. "This would be a business facilitation measure that would impact on both domestic as well as foreign entrepreneurs."



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