Bahamas: E-Commerce

The Internet has yet to have much direct impact on the conduct of offshore business from the Bahamas, but as with all other aspects of business activity, no one can doubt that there will be an impact, that it will be soon, and that it will be substantial.

Former Minister of Financial Services and Investments Allyson Maynard Gibson set a formidable program of goals for the development of e-government in the Bahamas, and in January, 2003, was able to report significant progress, with computerisation of the Companies Registry of the Registrar General's Department accomplished on time by the end of 2002.

The newly-computerized Registry allows for a wide range of functions to be carried electronically:

In June, 2005, Mrs Maynard-Gibson announced that the deeds and documents section of the Registrar General's Department had been fully automated and is available to the public online.

Said the Minister: "Customers will be able to perform electronic searches of the index of Deeds and Documents from 1993 to the present."

The Registrar General's Department has since announced plans to fully incorporate e-commerce into its services.

"If you wish to access information from home, in the same way you would go to any website, you would use your credit card to buy access time," said Mrs Gibson. "The biggest benefit is to clearly demonstrate that The Bahamas is a leading international financial centre, serious about e-business in all of its aspects, and fully in the twenty-first century," said Mrs Gibson.

The Minister said that the Central Bank of The Bahamas is working on making real time payment methods available in conjunction with the clearing banks. However, in the meantime, payments would initially have to be made on an account at the Registry.

Mrs Maynard-Gibson expects to increase the Department's already substantial earnings through the new initiatives.

The Electronic Communications and Transactions Act 2003, and the Computer Misuse Act 2003 both came into effect in June, 2003. A Data Protection Act was also passed by Parliament in that year.

The Electronic Communications and Transactions Act is designed to facilitate online commercial activity in the jurisdiction, and according to the BFSB: 'In general terms...clarifies that wherever a law or legal requirement exists for writing, signature, originals, copies etc, the requirement is now satisfied if the writing, signature, original and copies are generated 'electronically'. Likewise, it is now acceptable to form, negotiate and conclude contracts and other legally binding arrangements between parties using electronic devices.'

The Act also requires the creation of an e-commerce advisory board to advise Financial Services and Investments Minister, Allyson Maynard-Gibson on e-commerce, IT, and telecommunications development matters.

The Computer Misuse Act creates a number of offences arising from illegal interference with computers and their security systems.

The Data Protection (Privacy of Information) Act requires that information should be obtained through lawful channels, and used in an appropriate manner consistent with the purposes for which it has been collected. It also provides for the appointment of a Data Protection Commissioner.

However, in late 2003 a leading economist at the College of the Bahamas criticised government policy towards e-commerce, arguing that recent legislative measures would not be enough to establish information technology as the ‘third pillar’ of the Bahamian economy. Dr Olivia Saunders said that the e-commerce sector had been “bandied about as a liberator from our reliance on tourism and financial services,” but she said the policy was bound to fail if the government’s only goal was to see a computer in every classroom. According to the report, only 28% of the Bahamian population had access to a personal computer and a mere 15% had access to the internet.

In June, 2004, former Minister of State for Finance Senator James Smith told an information technology conference that the government remains committed to the goal of making the country a world leader in the sphere of e-commerce.

"As the government continues preparing the country for the inevitable challenges and opportunities of globalisation, it is firmly committed to the view that, across all sectors, information and communications technologies are fundamental to the sustainable growth of the Bahamian economy and the social development of our people," Senator Smith told the seminar entitled "Trusted Information Sharing in Global Markets."

He continued: "For this reason the government has set as a long-term, broad-based objective, the transformation of the Bahamian economy to a digital one as a means of generating viable opportunities for Bahamians to participate in the global economy."

Smith outlined a four-pronged policy approach to achieve these objectives: legislation; regulation; service provision at governmental, business and individual level; and educational policies.

He stressed that legal certainty is a particularly important factor to enable e-commerce growth, and explained that significant progress has been made in the respect with the passing of key legislation in 2003.

In August, 2005, the government of the Bahamas signed a memorandum of understanding with the Canadian government that it said will help with the acceleration of e-government throughout the Bahamian public service.

The Bahamas government stated its intention at the time to harmonise all current e-government initiatives, update the Government’s e-government policy and set a strategy for meeting short-term (one year), mid-term (three years) and long-term (five to ten years) goals.

In her remarks at the signing ceremony, then Financial Secretary, Mrs. Ruth Millar acknowledged Canada’s pre-eminence in e-government services and welcomed the alliance as one that would greatly assist the Bahamian Government in meeting the primary challenge of ensuring that users of its government services, wherever they are located, have equal opportunities to satisfy their needs. She highlighted the fact that both countries shared similarities based on the Westminster style of government.

The Canadian Government’s Department of Consulting and Audit Canada, under the direction of Mr. Ram Narayan, was slated to lead the project. The CAC team visited The Bahamas in May of this year for a preliminary scoping mission, which involved dialogue with various public and private sector stakeholders.

Consulting and Audit Canada has provided similar consulting services to other countries across the globe.

For information about the impact of e-commerce on a number of the main offshore activities which take place in the Bahamas, click on a link below to go to our specialist E-commerce site Offshore-e-com.com

Sales and Distribution of Physical Products
Sales and Distribution of Digital Products
Banking and Financial Services (including Investment Funds)
Corporate Support Functions

To see an analysis of the current state of legal and tax issues surrounding offshore e-commerce, click here.

Bahamas Facilities

In May 2001, Systems Resource Group (SRG), a leading information technology, e-commerce and communications solutions provider in the Bahamas, announced the opening of its network operation centre in Freeport, Grand Bahama, since the Freeport market is seen as a major opportunity for the expansion of e-commerce. Through its new operating company in Freeport, SRG's subsidiary Bahamas On-Line has started offering corporate level Internet services to the Freeport business community. A major feature of the Freeport operations is the ability to connect businesses that have Nassau and Freeport offices; businesses which previously were forced to rely on inefficient voice or fax communications can now interconnect via the Internet.

In addition to Bahamas On-Line corporate Internet access, SRG also offers its range of Internet-based eFAX services in Freeport. Users of eFAX can take advantage of enhanced features for the sending of international faxes, including store and forward, broadcast fax, and accounting codes.

In the same month, e-commerce solutions company, Emagine Ltd., opened the Bahamas' first purpose-built data centre to house e-commerce businesses, with plans for expansion to larger facilities once the demand for the centre's services has been established. The centre will accommodate servers that can be used for all types of Internet business including website hosting, ASP services and data processing/distribution. Located at the heart of the financial services region of Nassau, the centre can house up to 400 servers.

Then, in June, Secure Hosting Limited opened a new facility in Nassau providing the offshore e-business sector with services such as commercial web hosting, server co-location, offshore encrypted data storage and virtual office solutions. In a statement released by Secure Hosting, the company's President and CEO, Gary Douglas, said: 'We are excited about providing services to our customers from the business-friendly environment of the Bahamas. With the new carrier-grade data centre and fibre-optic dedicated connectivity to North America, an unlimited opportunity for e-business has been opened.'

Mr Douglas added: 'The platforms are the first of their kind here and truly revolutionary for the Offshore E-Business industry. Businesses can now have North American connectivity speeds and reliability in a tax-friendly environment.'

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Bahamas Telecommunications

A key step in the Bahamas' telecommunications privatisation process was the establishment of the Public Utilities Commission tasked with the regulation of the electricity, telecommunications and water sectors. The PUC's first task is to address the telecommunications sector. Speaking in January, PUC Executive Director George Moss recalled that in October 2002 the Government had launched the sale process for 49% of the state-owned Bahamas Telecommunications Company (BTC) with a view to completing the process in 2003.

Mr Moss listed the benefits of privatization as the raising of revenues for the Public Treasury, increased efficiency of a state-owned enterprise, expanded investment by private sector financing, attraction of foreign investment, greater commercial orientation of the company, improved responsiveness to consumers, human resources development, and knowledge transfer to nationals.

Underlining the government's commitment to privatisation, Mr Moss said: 'Most countries, including The Bahamas, accept that the opening of their telecommunications market to the private sector has dramatized the need for independent, well staffed and financed regulatory agencies. This conviction is confirmed by the extraordinary growth in the number of telecommunications regulatory agencies. I understand that there are now over 100 independent regulatory agencies worldwide compared with 12 in 1990. The trend is clear.'

Mr Moss noted that the PUC had taken seriously its duty to provide access to the telecommunications market by way of licensing and the lowering of barriers to market entry, pointing out that the PUC had reduced Internet service licence fees from $10,000 to $2,600; and paging and trunking licence fees from $5,000 to $1,300. He outlined the PUC's more significant objectives as:

'In March 2000,' said Mr Moss, 'there were only three (3) Internet service providers; now we have sixteen (16). The residential Internet service package that cost $100 per month in 2000 is now available for about $20, a decrease of 80%. Similarly, business packages have been reduced from $150 to $35, a decrease of 77%.'

With respect to international leased circuits using submarine cables, in March 2000 BTC was the only operator but Caribbean Crossing was licensed in April 2001, said the Minister. Since then, he pointed out, the price of a 64 kbps leased circuit had fallen from $3,010 per month to $1,062, a decrease of 65%. Similarly, the price of a 1.544 Mbps circuit had fallen from $29,400 to $10,500, a decrease of 64%. As for cellular service, the monthly access fee had been reduced from $45 in 2000 to the present price of $10 and airtime reduced from an average of 38¢/minute to 15¢/minute.

In August, 2005, a contract was signed between BaTelCo and TYCO Telecommunications to install a $58.9 million fiber optic cable connecting 14 islands of The Bahamas.

The submarine fiber optic cable referred to as Bahamas Domestic Submarine Network International (BDSNi), has a lifespan of 25 years and is to be installed in three phases. Phase I was scheduled for completion at the end of December, 2005, and Phase II was expected to be completed by the end of June, 2006.

BTC co-owns and operates the Bahama II fibre optic cable that links New Providence and Grand Bahama with Vero Beach, Florida, thereby affording interconnection with major telecommunications carriers.

Additionally, Cable Bahamas, the exclusive cable provider in Freeport until 2054, has created a national and international submarine fibre system that is managed by its wholly-owned subsidiary Caribbean Crossings. This submarine fibre network utilises Freeport as its core distribution hub, because of Freeport’s advantageous location that bridges The Bahamas with the rest of the world.

Caribbean Crossings is also presently developing a second submarine link between Grand Bahama and Florida which will even further enhance the offering of The Bahamas in general and Freeport in particular.

Towards the end of 2002, the government launched an advertising campaign to find a strategic partner and manager for BTC, looking to sell a 49% stake in the company to the right partner, and to transfer management control.

According to the invitation to register interest in the privatisation of the Bahamian telecommunications sector, such a partner would: 'provide the technical and financial resources and management capabilities to enable the BTC to attain the highest levels of international and national competitiveness and performance in the telecommunications sector'. When bids closed in February, 2003, four bidders had entered the ring: the BahamaTel Consortium, Blue Telecommunications (Bahamas) Ltd, Cable & Wireless PLC, and Trans World TeleCom Bahamas Ltd.

Local analysts have estimated the telecommunications company's worth at between $251 million and $560 million. A strategic partner from the private sector will be able to provide capital development and technological guidance, and should allow the monopoly provider to increase its efficiency and the range of services offered, thereby boosting its earning power still further, says the government.

In early 2004, the government ended the formal privatization process, but in May that year, former Prime Minister Perry Christie made it clear that this does not mean that the government had abandoned the privatisation of BTC. “On the contrary, the privatisation of BTC remains an important item of my government’s economic agenda,” he said. “Accordingly, the privatisation will be re-launched as soon as circumstances reasonably allow and on a basis, moreover, that will take adequate account of the lessons that were learned in the earlier process.”

Former Minister of State for Finance James Smith indicated in November 2004 that while there is no ‘formal privatisation process’ in place, the government is still open to favourable bids.

The PUC has granted telecommuncations licenses to SRG (System Resource Group) and Cable Bahamas. SRG has recently announced that it is starting its business and residential services and intends to compete head on with BTC.

SRG President Paul Hutton-Ashkenny said his company’s entrance into the telecom industry is an indication that the government sees the liberalisation of the telecommunications sector as a critical pre-condition for achieving economic development in the country.

Industry sources say that it is most urgent that the government recognize the extreme dilemma that the entire telecom industry and the financial and business community would suffer if the government does not move quickly to relinquish its control of BTC and put it into the hands of an entity that has the financial capabilities, management and technical know-how to allow the company to be able to compete in the local market against SRG, Cable Bahamas and other competitors that are soon to come.

Smith said the move toward privatisation was an ongoing exercise. “It’s just that it’s not going to be done in the way it was done originally,” he said. “If a prospective buyer came along with the right attitude and the right price, I’m sure the government would be obliged to entertain the bid. So the process may have come basically to a halt, but not the intent.”

By 2007 nothing much more seemed to have happened.

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Bahamas Legislation

The Electronic Communications and Transactions Act came into force in June, 2003. This Act, says the Ministry of Finance, is vital to creating the environment for legal certainty necessary to instill confidence in online commercial activity, particularly global commercial activity.

The Act sets out a series of functional equivalency provisions which enforce the basic principle that due legal recognition will be accorded to an electronic message, signature, writing and contract on the same basis as such features would be recognized in a paper based environment and that there would be no discrimination against a transaction solely because it was conducted via an electronic medium. It also allows parties to use electronic devices to form, negotiate and conclude contracts and other legally binding agreements.

Exemptions include disposition of property, testamentary dispositions, negotiable instruments, enduring powers of attorney and court documents.

The Act is technology neutral, recognizing that technologies will continue to evolve. And unlike other jurisdictions, the Act does not prescribe the type or method to be used to generate an electronic contract, signature or method of authenticating the communication so long as the necessary attributes are met by electronic means.

Additionally the Act sets out the duties and the extent of liability of e-commerce service providers and similar intermediaries such as webhosts and Internet Service Providers.

The Misue of Computers Act also came into effect in June 2003. It creates a series of offences arising out of the unlawful interference with computers and computer systems. There are six different offenses, including hacking in all its guises, based on standards and guidelines that have been established by the European Council and the Organization for Economic and Co-operative Development (OECD) and which have been adopted by nearly 30 countries, primarily within the developed world. These offences do not currently exist in the penal framework of the Bahamas and are vitally important as a deterrent to wanton or negligent security breaches of computer systems. Recognising the critical nature of information systems and the catastrophic consequences breaches of such may have, as in the case of hacking or the release of viruses, penalties under the Bill are relatively severe.

The Data Protection Act, also passed in June, has yet to come into effect. It implements privacy principles established by the OECD under its guidelines that protect the privacy and transferred flows of personal data.

Consistent with the OECD's principles on Privacy, the Act requires that information should be obtained by fair and lawful means and used in a manner consistent with that for which it has been collected. The Act enables individuals to require persons who collect and use data to abide by standards of confidentiality in respect of such data and to provide individuals with information kept on them upon request. Of particular importance to e-commerce is the prohibition against the transfer of data to jurisdictions with inadequate data protection laws in place except with the data subject's consent.

The Act establishes an independent Office of Data Commissioner who has responsibility for enforcement of the data protection laws, but by 2006 no Commissioner had been appointed.

A transitional period has been provided for to allow collectors and users of data to make the necessary adjustments to their systems to enable them to respond to a request from a data subject. This transitional period is one year in the case of the private sector and five years in the case of the public sector.

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Bahamas Case Studies

This section will contain case studies of e-commerce solutions applied to offshore business activities carried out from the Bahamas. The case studies will be developed in association with lowtax.net partners. Contact us to learn more.

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