Background Notes: The Bahamas, March 1998

Released by the Bureau of Inter-American Affairs.

Official Name: The Commonwealth of The Bahamas

PROFILE

Geography

Area: 13,939 sq. km. (5,382 sq. mi.); slightly larger than Connecticut and Rhode Island combined.
Cities: Capital--Nassau, New Providence. Second-largest city--Freeport, Grand Bahama.
Terrain: Low and flat.
Climate: Semitropical.

People

Nationality: Noun and adjective--Bahamian(s).
Population (1995 est.): 273,055.
Annual growth rate: 2%.
Ethnic groups: African 85%, European 12%, Asian and Hispanic 3%.
Religions: Baptist predominant (35%), Roman Catholic, Anglican, Evangelical Protestants, Methodist, Church of God.
Language: English; some Creole among Haitian groups.
Education: Years compulsory--through age 16. Attendance--95%. Literacy--93%.
Health (1995): Infant mortality rate--19/1,000. Life expectancy--men 69 years, women 76 years.
Work force (1996 est.): 146,600; majority employed in the tourism, government, and financial services sectors.

Government

Type: Constitutional parliamentary democracy.
Independence: July 10, 1973.
Branches: Executive--British monarch (nominal head of state), Governor General (representative of the British monarch), Prime Minister (head of government), and cabinet. Legislative--bicameral Parliament (40-member elected House of Assembly, 16-member appointed Senate). Judicial--Privy Council in U.K., Court of Appeal, Supreme Court, and magistrates' courts.
Political parties: Free National Movement (FNM), Progressive Liberal Party (PLP).
Suffrage: Universal over 18; 122,939 registered voters in 1992.

Economy

GDP (1997): $3.8 billion.
Growth rate: 3.5%.
Per capita GDP (1995): $11,115.
Natural resources: Salt, aragonite, timber.
Agriculture (1996; 4% of GDP): Products--vegetables, lobster, fish. Tourism (1996)--50% of GDP. Banking (1996)--15% of GDP. Manufacturing (1996)--3% of GDP. Products--pharmaceuticals, rum.
Trade (1996): Exports ($201.7 million*)--salt, aragonite, chemicals, lobster, fruits, vegetables. Major markets--U.S. (50%), U.K., other EU countries, Canada. Imports ($1.26 billion)--foodstuffs and manufactured goods; vehicles and automobile parts; hotel, restaurant, and medical supplies; computers and electronics. Major suppliers--U.S. (70%), U.K., other EU countries, Canada.
Exchange rate: Bahamian dollar 1=U.S. $1.

*Bahamas' export statistics do not include oil transhipments or the large transactions from the PFC Bahamas (formerly Syntex) pharmaceutical plant located in the Freeport free trade zone.

PEOPLE

Eighty-five percent of the Bahamian population is of African heritage. About two-thirds of the population reside on New Providence Island (the location of Nassau). Many ancestors arrived in the Bahama Islands when they served as a staging area for the slave trade in the early 1800s. Others accompanied thousands of British loyalists who fled the American colonies during the Revolutionary War.

School attendance is compulsory between the ages of five and 16. The government fully operates 161 of the 210 primary and secondary schools in The Bahamas. The other 49 schools are privately operated. Enrollment for state and private primary and secondary schools amounts to more than 62,000 students. The College of The Bahamas, established in Nassau in 1974, provides programs leading to bachelors and associates degrees. The college is now converting from a two-year to a four-year institution. Several non-Bahamian colleges also offer higher-education programs in The Bahamas.

HISTORY

In 1492, Christopher Columbus made his first landfall in the Western Hemisphere in The Bahamas. Spanish slave traders later captured native Lucayan Indians to work in gold mines in Hispaniola, and within 25 years, all Lucayans perished. In 1647, a group of English and Bermudan religious refugees, the Eleutheran Adventurers, founded the first permanent European settlement in The Bahamas and gave Eleuthera Island its name. Similar groups of settlers formed governments in The Bahamas until the islands became a British Crown Colony in 1717.

The first Royal Governor, a former pirate named Woodes Rogers, brought law and order to The Bahamas in 1718, when he expelled the buccaneers who had used the islands as hideouts. During the American Civil War, The Bahamas prospered as a center of Confederate blockade-running. After World War I, the islands served as a base for American rumrunners. During World War II, the Allies centered their flight training and anti-submarine operations for the Caribbean in The Bahamas. Since then, The Bahamas has developed into a major tourist and financial services center.

Bahamians achieved self-government through a series of constitutional and political steps, attaining internal self-government in 1964 and full independence within the Commonwealth on July 10, 1973.

GOVERNMENT AND POLITICAL CONDITIONS

The Bahamas is an independent member of the Commonwealth of Nations. It is a parliamentary democracy with regular elections. As a Commonwealth country, its political and legal traditions closely follow those of the United Kingdom. The Bahamas recognizes the British monarch as its formal head of state, while an appointed Governor General serves as the Queen's representative in The Bahamas. A bicameral legislature enacts laws under the 1973 constitution.

The House of Assembly consists of 40 members, elected from individual constituencies for five-year terms. As under the Westminster system, the government may dissolve the parliament and call elections at any time. The House of Assembly performs all major legislative functions. The leader of the majority party serves as Prime Minister and head of government. The cabinet consists of at least nine members, including the Prime Minister and ministers of executive departments. They answer politically to the House of Assembly.

The Senate consists of 16 members appointed by the Governor General, including nine on the advice of the Prime Minister, four on the advice of the Leader of the Opposition, and three on the advice of the Prime Minister after consultation with the Leader of the Opposition.

The Governor General appoints the Chief Justice of the Supreme Court on the advice of the Prime Minister and the Leader of the Opposition. The Governor General appoints the other justices with the advice of a judicial commission. The Privy Council of the United Kingdom serves as the highest appellate court.

For decades, the white-dominated United Bahamian Party (UBP) ruled The Bahamas, then a dependency of the United Kingdom, while a group of influential white merchants, known as the "Bay Street Boys," dominated the local economy. In 1953, Bahamians dissatisfied with UBP rule formed the opposition Progressive Liberal Party (PLP). Under the leadership of Lynden Pindling, the PLP won control of the government in 1967 and led The Bahamas to full independence in 1973.

A coalition of PLP dissidents and former UBP members formed the Free National Movement (FNM) in 1971. Former PLP cabinet minister and member of parliament Hubert Ingraham became leader of the FNM in 1990, upon the death of Sir Cecil Wallace-Whitfield. Under the leadership of Ingraham, the FNM won control of the government from the PLP in the August 1992 general elections. Winning again in March 1997, the ruling FNM controls 35 seats in the House of Assembly, while the PLP controls five seats and serves as the official opposition.

The principal focus of the Ingraham Aministration has been economic development and job creation. Many of his government's policies are aimed at improving the image of The Bahamas and making it an attractive place for foreigners to invest. In 1995, for example, the government passed stronger measures to prevent money laundering in the country's banking sector.

The FNM has made considerable progress in rebuilding the infrastructure, revitalizing the tourism industry, and attracting new investment to The Bahamas. A good start has been made to mitigate crime and provide for social needs.

Remaining challenges are to privatize The Bahamas' costly, inefficient national corporations, provide job retraining for hundreds of workers who will be affected by the change, and to continue creating jobs for new entries in the employment market. Currently, Bahamians do not pay income or sales taxes. Most government revenue is derived from high tariffs and import fees. A major challenge for Bahamians as the next century approaches will be to prepare for hemispheric free trade. Reduction of trade barriers will probably require some form of taxation to replace revenues when the country becomes a part of the Free Trade Area of the Americas (FTAA). The advantages may be hard for the government to sell since The Bahamas exports so little.

Principal Government Officials

Governor General--Sir Orville Alton Turnquest, G.C.M.G., Q.C.
Prime Minister--Hubert A. Ingraham, P.C., M.P.
Deputy Prime Minister, and Minister of National Security--Frank H. Watson
Minister of Foreign Affairs--Janet Bostwick
Ambassador to the United States and to the OAS--Sir Arlington Butler
Ambassador to the United Nations--Maurice Moore
Consul General, Miami--Franklyn Rolle

The Bahamas maintains an embassy in the United States at 2220 Massachusetts Ave., NW, Washington, DC 20008 (tel: 202-319-2660) and Consulates General in New York at 767 Third Ave., 9th Floor, New York, NY 10017 (tel: 212-421-6925/27), and in Miami at Suite 818, Ingraham Building, 25 SE Second Ave., Miami, FL 33131 (tel: 305-373-6295/96).

ECONOMY

The Bahamian economy is almost entirely dependent on tourism and financial services to generate foreign exchange earnings. Tourism alone provides an estimated 60% of the gross domestic product (GDP) and employs about half the Bahamian work force. In 1996, over 3.4 million tourists visited The Bahamas, 82% of them from the United States.

A major contribution to the recent growth in the overall Bahamian economy is Sun International's Atlantis Resort and Casino, which took over the former Paradise Island Resort and has provided a much needed boost to the economy. In addition, the opening of Breezes Super Club and Sandals Resort has also aided this turnaround. The Bahamian Government has also adopted a proactive approach to courting foreign investors and has conducted major investment missions to the Far East, Europe, Latin America, and Canada. The primary purpose of the trips was to restore the reputation of The Bahamas in these markets.

Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 15% of GDP, due to the country's status as a tax haven and off-shore banking center. As of December 1995, the government had licensed 418 banks and trust companies in The Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating off-shore companies in The Bahamas. Within five years, more than 44,000 IBC-type companies had been established. In February 1991, the government also legalized the establishment of Asset Protection Trusts in The Bahamas.

Agriculture and industry together account for less than 10% of GDP. The Bahamas exports lobster and some fish but does not raise these items commercially. There is no large-scale agriculture, and most agricultural products are consumed domestically. The Bahamas imports over $250 million in foodstuffs per year, representing about 80% of its food consumption. The government aims to expand food production to reduce imports and generate foreign exchange. It actively seeks foreign investment aimed at increasing agricultural exports, particularly specialty food items. The government officially lists beef and pork production and processing, fruits and nuts, dairy production, winter vegetables, and mariculture (shrimp farming) as the areas in which it wishes to encourage foreign investment.

The Bahamian Government maintains the value of the Bahamian dollar on a par with the U.S. dollar. The Bahamas is a beneficiary of the U.S.-Caribbean Basin Initiative (CBI), Canada's CARIBCAN program, and the European Union's Lome IV Agreement. Although The Bahamas participates in the political aspects of the Caribbean Community (CARICOM), it has not entered into joint economic initiatives with other Caribbean states.

The Bahamas has a few notable industrial firms: the Freeport pharmaceutical firm, PFC Bahamas (formerly Syntex), which recently streamlined its production and was purchased by the Swiss pharmaceutical firm Roche; the BORCO oil facility, also in Freeport, which tranships oil in the region; the Commonwealth Brewery in Nassau, which produces Heineken, Guiness, and Kalik beers; and Bacardi Corp., which distills rum in Nassau for shipment to the U.S. and European markets. Other industries include sun-dried sea salt in Great Inagua, a wet dock facility in Freeport for repair of cruise ships, and mining of aragonite (a type of limestone with several industrial uses) from the sea floor at Ocean Cay.

The Hawksbill Creek Agreement established a duty-free zone in Freeport, The Bahamas' second-largest city, with a nearby industrial park to encourage foreign industrial investment. The Hong Kong-based firm, Hutchison Whampoa, has opened a container port in Freeport. The Bahamian parliament approved legislation in 1993 that extended most Freeport tax and duty exemptions through 2054.

The Bahamas is largely an import, service economy. There are about 110 U.S.-affiliated businesses operating in The Bahamas, and most are associated with tourism and banking. With few domestic resources and little industry, The Bahamas imports nearly all its food and manufactured goods from the United States. American goods and services tend to be favored by Bahamians due to cultural similarities and heavy exposure to American advertising.

Business Environment

The Bahamas offers attractive features to the potential investor: a stable democratic environment, relief from personal and corporate income taxes, timely repatriation of corporate profits, proximity to the U.S. with extensive air and telecommunications links, and a good pool of skilled professional workers. The Government of The Bahamas welcomes foreign investment in tourism and banking and has declared an interest in agricultural and industrial investments to generate local employment, particularly in white-collar or skilled jobs. Despite its interest in foreign investment to diversify the economy, the Bahamian Government responds to local concerns about foreign competition and tends to protect Bahamian business and labor interests. As a result of domestic resistance to foreign investment and high labor costs, growth can stagnate in sectors which the government wishes to diversify.

The country's infrastructure is best developed in the principal cities of Nassau and Freeport, where there are relatively good paved roads and international airports. Electricity is generally reliable, although many businesses have their own backup generators. In Nassau, there are two daily newspapers, three weeklies, and several international newspapers available for sale. There are also five radio stations. Both Nassau and Freeport have a television station. Cable TV is also available locally and provides most American programs with some Canadian and European channels.

Areas of Opportunity

The best U.S. export opportunities remain in the traditional areas of foodstuffs and manufactured goods: vehicles and automobile parts; hotel, restaurant, and medical supplies; and computers and electronics. Bahamian tastes in consumer products roughly parallel those in the U.S. With approximately 85% of the population of primarily African descent, there is a large and growing market in the Bahamas for "ethnic" personal care products. Merchants in southern Florida have found it profitable to advertise in Bahamian publications. Most imports in this sector are subject to high but non-discriminatory tariffs.

FOREIGN RELATIONS

The Bahamas has strong bilateral relationships with the United States and the United Kingdom, represented by ambassadors in both countries. In addition, High Commissioners represent The Bahamas in London and Ottawa. The Bahamas also associates closely with other nations of the Caribbean Community (CARICOM). The Bahamas has diplomatic relations with Cuba, although not with resident ambassadors. A repatriation agreement was signed with Cuba in 1996, and there are commercial and cultural contacts between the two countries. The Commonwealth of The Bahamas became a member of the United Nations (UN) in 1973 and the Organization of American States (OAS) in 1982.

The Bahamas holds membership in a number of international organizations: the UN and some specialized and related agencies, including Food and Agriculture Organization (FAO), International Civil Aviation Organization (ICAO), International Labor Organization (ILO), International Monetary Fund (IMF), International Telecommunication Union (ITU), World Bank, World Meteorological Organization (WMO), and World Health Organization (WHO); OAS and related agencies, including Inter-American Development Bank (IDB), Caribbean Development Bank (CDB), and Pan-American Health Organization (PAHO); the Caribbean Community (CARICOM), excluding its Common Market; the International Criminal Police Organization (INTERPOL); Universal Postal Union (UPU); and World Intellectual Property Organization (WIPO).

U.S.-BAHAMIAN RELATIONS

The United States historically has had close economic and commercial relations with The Bahamas. Both countries share ethnic and cultural ties, especially in education, and The Bahamas is home to 7,000 American residents. In addition, there are about 110 U.S.-related businesses in The Bahamas and, in 1996, some 82% of the 3.4 million tourists visiting the country were American.

As a neighbor, The Bahamas and its political stability are especially important to the United States. The U.S. and the Bahamian Government have worked together on reducing crime and reforming the judiciary. With the closest island only 45 miles from the coast of Florida, The Bahamas often is used as a gateway for drugs and illegal aliens bound for the United States. The U.S. and The Bahamas cooperate closely to handle these threats. U.S. assistance and resources have been essential to Bahamian efforts to mitigate the persistent flow of illegal narcotics and migrants through the archipelago. The U.S. and The Bahamas also actively cooperate on law enforcement, civil aviation, marine research, meteorology, and agricultural issues. The U.S. Navy operates an underwater research facility on Andros Island.

In May 1997, Prime Minister Ingraham joined 14 other Caribbean leaders and President Clinton during the first-ever U.S.-regional summit in Bridgetown, Barbados. The summit strengthened the basis for regional cooperation on justice and counternarcotics issues, finance and development, and trade.

The Bahamas hosts U.S. preclearance facilities (U.S. Customs, Immigration, and Agriculture) for travelers to the U.S. at international airports in Nassau, Paradise Island, and Freeport.

Principal U.S. Embassy Officials

Ambassador--Sidney Williams
Deputy Chief of Mission--Pamela F. Bridgewater
Administrative Officer--Tracey Jacobson
Consul--Vincent Principe
Political-Economic Section Chief--Georgia T. Wright
Public Affairs Officer (acting)--Georgia T. Wright
U.S. Naval Liaison Officer--Lt. Cmdr. Stephen Lilly
U.S. Coast Guard Liaison Officer--Lt. Richard Pineiro
U.S. Customs Service--Frank Mullin
U.S. Drug Enforcement Administration--Toni Teresi
U.S. Immigration and Naturalization Service--Thomas J. Smiley

The U.S. embassy is located at 42 Queen Street, Nassau (tel. 242-322-1181; telex 20-138); the local postal address is P.O. Box N-8197, Nassau, The Bahamas.

OTHER CONTACT INFORMATION

U.S. Department of Commerce
International Trade Administration
Office of Latin America and the Caribbean
14th and Constitution, NW
Washington, DC 20230
Tel: 202-482-0704; 800-USA-TRADE
Fax: 202-482-0464

Caribbean/Latin American Action
1818 N Street, NW, Suite 310
Washington, DC 20036
Tel: 202-466-7464
Fax: 202-822-0075

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program provides Travel Warnings and Consular Information Sheets. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country. Consular Information Sheets exist for all countries and include information on immigration practices, currency regulations, health conditions, areas of instability, crime and security, political disturbances, and the addresses of the U.S. posts in the country.

The Bahamas stands out among the Commonwealth Caribbean nations because of its relative wealth and prosperity, political stability, and close proximity to the United States. The Bahamas also bears the distinction of being the first of the Caribbean islands discovered by Columbus in 1492 on his first transatlantic voyage in search of a new route to India. Several islands in the Bahamas have been named as Columbus's first landing site in the Caribbean, but until very recently, Watling Island was the most widely accepted location; in 1926 it was renamed San Salvador, the name bestowed by Columbus himself. In 1986, however, after an extensive five-year investigation, a National Geographic Society team announced that Samana Cay, a small isolated island in the far eastern Bahamas, was the most probable location of Columbus's first landfall.

Upon his arrival, Columbus encountered natives known as Lucayans, related to the Arawak Indians. Within a quarter of a century, however, the Lucayans had been decimated, the result of diseases brought by the Europeans and of having been forced to work in the mines of Hispaniola (the island containing present-day Haiti and the Dominican Republic). For the next century, the Bahamas was a forgotten colony. Attention was focused instead on the mineral wealth of the other Caribbean islands.

The first permanent settlement was not established until 1649, when Puritans from the English colony of Bermuda founded Eleuthera, which in Greek means "place of freedom." The colonists, known as Eleutheran Adventurers, set out to establish a colony where they could practice their religion freely, as in the colonies settled by the Pilgrims in New England. In 1666 other English settlers established a colony on New Providence and founded Charlestown, which was renamed Nassau near the end of the seventeenth century. Throughout the seventeenth century, the islands served as a favorite base for pirates, but after the era of piracy came to a close in 1718, commerce was restored to the settlement.

British loyalists and their slaves arrived from the mainland colonies in the wake of the British defeat in the American Revolution. In the 1780s, the population of New Providence tripled, and the first substantial settlement was made on Great Abaco Island. Cotton plantations were established as the southern life of the North American mainland colonies was reproduced in the Bahamas. However, the Abolition of Slavery Act of 1833 and the termination of post-abolition apprenticeships and indentured servanthood in 1838 marked the end of slavery in the Bahamas. The Bahamian economy prospered during the United States Civil War, as Nassau served as an important base for blockade-running by the Confederate States. The war's end, however, set in motion an economic tailspin that lasted for the next half-century. Little economic development occurred other than in the areas of sponging, pineapple cultivation, and tourism.

The passage of the Volstead Act (Prohibition Act) by the United States in 1919 was a bonanza for the Bahamas. The islands served as a base for United States prohibition runners, and the port of Nassau became congested once again. The introduction of commercial aircraft in the 1930s enabled the Bahamas tourism sector to develop as a mainstay of the nation's economy. The development of tourism helped mitigate the combined impact of the United States repeal of prohibition in 1933 and a marine disease in 1938 that devastated the sponging industry. During World War II, the Bahamas prospered as Britain established two air force bases on the islands; the Royal Air Force set up a bomber base to ferry new airplanes to European combat zones and to operate a training school for flight and antisubmarine operations in the Caribbean.

After World War II, the Bahamas developed economically and politically. The nation began to exploit its tourism sector more fully; by the end of the 1940s, tourism had become the principal business. In the 1960s, the nation also developed into an international finance center because of taxation and foreign capital movement legislation in the United States and Western Europe. In 1987 tourism and banking remained the two most important economic sectors in the Bahamas.

The Bahamas also underwent a major political transformation in the postwar era. The first political parties and trade union federations were founded in the 1950s. In 1964, after more than two centuries of British colonial rule, constitutional changes were negotiated at a conference in London; a new constitution replaced the nation's old representative government with a premier (the preindependence title for prime minister) and a cabinet. In 1967 a bicameral legislature was established, and the first independent government was elected. Full internal self-government was achieved with the signing of the 1969 constitution; and the name of the colony was officially changed to the Commonwealth of the Bahamas. A final constitutional conference was held in 1972, paving the way for national independence. On July 10, 1973, the new independence Constitution was presented to Prime Minister Lynden O. Pindling by Prince Charles on behalf of Queen Elizabeth II; with that, the Bahamas became a sovereign independent nation.

In the late 1990s, the Bahamas had a democratic system based on the British Westminster parliamentary model of government. The 1973 Constitution proclaims the Bahamas a sovereign democratic state; sets requirements for citizenship; guarantees fundamental human rights; establishes the executive, legislative, and judicial branches of government; and creates three civil service commissions: the Public Service Commission, the Judicial and Legal Commission, and the Police Service Commission. Although an independent member of the Commonwealth of Nations since 1973, the Bahamas retains the British monarch as its chief of state, represented in the Bahamas by an appointed governor general.

Chapter III (Articles 15-28) of the Constitution details the protection of fundamental rights and freedoms in the Bahamas, including the right to life, liberty, security, and protection of the law; freedom of conscience, expression, assembly, and association; and protection of the privacy of the home and other property from deprivation without compensation. Moreover, the Constitution provides for protection of these rights and freedoms without discrimination based on race, national origin, political opinion, color, creed, or sex. These provisions were not just theoretical considerations but were actually carried out in practice, according to the Department of State's Country Reports on Human Rights Practices for 1986.

Constitutional amendments require a combination of an act of Parliament and popular referendum. Entrenched constitutional provisions, such as those relating to the establishment of the civil service or the qualifications for members of Parliament, require a two-thirds majority in both houses and passage by a popular referendum. Specially entrenched provisions, such as those relating to citizenship, fundamental rights, and the establishment and powers of Parliament, the cabinet, and the judiciary, require a three-fourths majority in both houses and passage by referendum.

Parliament consists of a bicameral legislature made up of the sixteen-member Senate and the forty-nine-member House of Assembly. Parliament also technically includes the British monarch represented by the governor general, but that individual serves no real function in the daily parliamentary process. Under the Constitution, Parliament may make laws for the peace and good government of the Bahamas. Laws are generally enacted by Parliament in the following manner. A bill is introduced in the House of Assembly, read three times, debated, and, if passed, becomes an act. The act is read three times in the Senate and then sent to the governor general. The governor general signs the act, which upon being published in the official journal of the government becomes a law. Bills may officially be introduced in either house of Parliament, except for money bills, which may only be introduced in the House of Assembly, and may be passed with or without amendment, subject to the agreement of both houses.

The House of Assembly elects one member from each of fortythree constituencies or single-member districts for terms not to exceed five years. The House of Assembly performs all major legislative functions. The leader of the majority party in the House is appointed prime minister by the governor general, and the leader of the major opposition party is designated as leader of the opposition. The House of Assembly elects a speaker and a deputy speaker to preside over the House.

The number of constituencies is established in Article 68 of the Constitution, but Article 70 mandates a procedural review of these constituencies at least every five years. The Constituencies Commission reviews the number and boundaries of the constituencies, taking into account the number of voters, the needs of sparsely populated areas, and the ability of elected members to maintain contact with voters from a wide geographic area. The Constituencies Commission consists of the speaker of the House of Assembly, a justice of the Supreme Court, and three members of the House of Assembly--two from the majority party and one from the opposition. The 1973 Constitution first established thirty-eight constituencies. That number was increased to forty-three in time for the 1982 elections and to forty-nine for the 1987 elections.

The Senate is appointed by the governor general. Nine members are chosen on the advice of the prime minister, four on the recommendation of the leader of the opposition, and the remaining three on the advice of the prime minister after consultation with the leader of the opposition. The Senate has limited functions in the parliamentary process. It elects a president and a vice president to preside over its proceedings.

The executive authority of government officially rests with the British monarch, represented by the governor general. The general direction and control of government, however, are vested in a cabinet, led by the prime minister, who serves as the chief executive of the government. The cabinet also consists of at least eight other ministers, including the attorney general, who are drawn from the membership of Parliament. In late 1987, the cabinet consisted of the Office of the Attorney General and the heads of eleven ministries: agriculture, trade, and industry; education; employment and immigration; finance; foreign affairs; health; housing and national insurance; tourism; transport and local government; works and utilities; and youth, sports, and community affairs. The minister of finance must be a member of the House of Assembly. If the attorney general is appointed from the Senate, no more than two other ministers may be drawn from the ranks of the Senate; if the attorney general is from the House of Assembly, however, three ministers may be chosen from the Senate. A number of parliamentary secretaries are also appointed from the membership of Parliament to assist the ministers. Permanent secretaries also serve in the ministries; they are appointed by the Public Service Commission to these highest civil service positions. Institutionally, the cabinet collectively is responsible to Parliament. The prime minister is responsible for keeping the governor general informed of the general conduct of the government.

The judiciary of the Bahamas is independent of executive control. It consists of the Court of Appeal at the highest level, followed by the Supreme Court, magistrate is courts, and Family Islands commissioners, who often act as magistrates. The Court of Appeal consists of a president and two other justices. If needed, a final appeal may be made to the Judicial Committee of the Privy Council in London. Bahamian law is based on English common law, but a large body of Bahamian statute law also exists.

Local government in the Family Islands falls administratively under the Department of Local Government of the cabinet's Ministry of Transport and Local Government. The Family Islands are divided into nineteen districts administered by twenty-three commissioners appointed by the government and supervised from Nassau. Several of the larger islands with relatively greater populations are split up into several districts. In addition to the commissioners, elected House of Assembly members often deal with local matters, thereby filling the void created by the absence of an elected local government.

The second most important Bahamian economic activity in the late 1980s was banking and finance. The nation's proximity to Miami and its location in the same time zone as New York City enhanced these activities. A large number of trust and finance companies and investment firms were established in the 1950s, following the imposition of restrictive finance laws in many industrialized countries. Enactment of regulations in the Bahamas in 1965, however, provided for the licensing and supervision of the banking industry, cutting back drastically the number of financial institutions. Steady growth took place after 1967, the only setback occurring in the mid-1970s following the formation of the Central Bank of the Bahamas. The new Central Bank increased its monitoring of the industry.

By the end of 1985, there were 374 banking and trust institutions registered in the Bahamas. Of these, 270 were permitted to deal with the public; 96 were restricted to dealing with or on behalf of certain people or companies; and 8 held nonactive licenses. Of these 270 public financial institutions, 134 were Eurocurrency branches of banks in Western Europe, Hong Kong, the United States, or South America; 84 were subsidiaries of finance institutions based outside the Bahamas; 33 were Bahamas-based banks or trust companies; 10 were officially designated to deal in gold and in Bahamian and foreign currencies; and only 9 were trust companies designated to act as custodians and dealers in foreign securities.

The proliferation of financial institutions encouraged the development of ancillary services such as accounting, computing, and law. It also required the installation of an advanced telecommunications system, a development that benefited other economic sectors as well.

Several factors combined to make the Bahamas a significant center of finance in the late 1980s. First, the country had taxhaven status: no taxes on income, profits, capital gains, or inheritance. Second, the Bahamas offered liberal legal provisions for the registration and licensing of financial institutions and bank secrecy laws. Third, the Bahamas benefited from its stable political climate. Finally, it offered investors the convenience of geographic proximity to the United States. In January 1985, the financial sector was strengthened by the adoption of a code of conduct that gave the Central Bank a more supervisory role over the banking system. The main purpose of the code was to prevent money laundering. Large cash transactions were prohibited, unless they were made by well-established customers. Lawyers and accountants could no longer sign over accounts of offshore customers without approval of the Central Bank.

Following the example of the banking and finance sector, other offshore activities also gained importance in the mid-1980s. Although liberal legislation for ship registration was passed in 1976, the Bahamas did not attract a major shipping industry until the 1980s. By December 1985, a total of 370 ships were registered, representing 5 million gross tons; in 1987 the Bahamas was the third largest flag-of-convenience nation behind Liberia and Panama. An even younger Bahamian industry was offshore insurance and reinsurance. Legislation was passed in 1983 to remove all taxes on premiums and restrictions on investments for this activity.

As already indicated, tourism has been the motor of the Bahamian economy for the past several decades; the nation's geography, including its climate, natural beauty, and proximity to the United States, have made it a prime tourist spot. Tourism is the major determinant of the well-being of the Bahamian economy and has maintained steady growth since World War II. The government has successfully implemented policies to increase private confidence and investment in the sector. It has transformed tourism into a year-round industry, overcoming the seasonal fluctuation of demand by aggressively promoting specialized summer tourist attractions. In 1986 the World Bank estimated that the Bahamas accounted for 20 percent of stopover visitors in the Caribbean region as well as having a large share of cruise ship passenger arrivals.

The Bahamas achieved record high levels of foreign visitors in 1985 and 1986 with 2.6 and 3 million visitors, respectively. The statistical breakdown of foreign arrivals in 1985 included 52 percent stopover visitors, 43 percent cruise ship arrivals, and 5 percent day visitors. Total tourist expenditures in 1985 amounted to US$870 million. Most of the expenditures were attributed to stopover visitors, who accounted for 92 percent of the total in 1984; by contrast, cruise ship passengers accounted for just 6.6 percent of total visitor expenditures in that year.

The major tourist centers were New Providence (Nassau, Cable Beach, and Paradise Island) and Grand Bahama (Freeport). Fiftyeight percent of stopover visitors in 1984 went to New Providence, 25 percent to Grand Bahama, and 17 percent to the Family Islands. Most of the tourist growth in the mid-1980s occurred in New Providence. Grand Bahama experienced a steady decline in tourist arrivals, reaching a five-year low in 1984, whereas the Family Islands had a steady flow of tourists. The average length of stay for stopover visitors had declined substantially from 7.14 days in 1980 to 6.46 days in 1984, reflecting the trend toward short package vacations of three to four days.

The government was actively involved in the tourist sector in the mid-1980s. The government-owned Hotel Corporation of the Bahamas, established in 1974, had seven major hotels (four in Nassau and three in Freeport). All were managed by international hotel management companies. The Hotel Corporation also owned a golf course, a marina, and four casinos (two in New Providence and two in Grand Bahama). In 1983 the corporation completed work on a new 700-room hotel at Cable Beach with a convention center and a casino.

The Ministry of Tourism marketed and monitored tourist services; a World Bank study labeled it one of the most effective tourist ministries in the world. In addition to its headquarters in the Bahamas, the ministry also operated offices in nine cities in the United States, three in Canada, and three in Western Europe. Bahamasair, the national airline, provided the only scheduled interisland air service. Competing with several airlines in the North American market, Bahamasair managed to control over 25 percent of North American routes to the Bahamas.

Since its development after World War II, the tourist industry has been dependent on the North American market. In the early 1980s, this dependency increased further. Between 1980 and 1984, Canada's and Western Europe's percentage share of the market decreased. The major factor in the increased United States share of tourist trade was the strong value of the United States dollar, to which the Bahamian dollar was pegged. Bahamian vacations for Canadians and West Europeans became all the more expensive. This dependency on the United States for tourist receipts made the Bahamian economy quite vulnerable to downturns in the United States economy. A 1986 World Bank study indicated the strong relationship between the performance of the tourism sector and the performance of the United States economy. A decline in the strength of the United States dollar has boosted the Canadian and West European share of the market, but continued benefits along these lines depend on the capability of the Ministry of Tourism to tap those markets effectively. To this end, the ministry maintained offices in Canada and Western Europe.

In late 1986, the government's plans for improvements in the tourist sector included programs to improve marketing and infrastructure and to work toward balanced growth of tourism to the Family Islands. A multimillion-dollar marketing campaign was planned, followed by the launching of a national magazine campaign across North America. Major tourist infrastructure programs included improvements to Nassau International Airport and Nassau Harbour and upgrading of docks and airports in key Family Islands. The government also planned to bring more cruise ships to the Family Islands to tap the potential of these underutilized tourist spots.