Although the country's small industrial base is currently limited in size and range of activities, it has plenty of scope to expand and assume a greater role in the economy.
The industrial sector's contribution to the Bahamian economy is dwarfed by that of tourism and the financial services industry, which are estimated to represent around 60% and 20% of GDP, respectively.
According to the Bahamas Investment Authority, offshore manufacturing contributes some $130m to the economy annually, with domestic manufacturing accounting for another $90m. Combined, this represents just 3% of 2008's estimated total GDP of just under $7bn, roughly the same as the contribution of agriculture and fisheries.
Manufacturing production is concentrated in a few industries, often represented by a single firm, such as the Freeport-based pharmaceutical producer, PFC Bahamas; the Commonwealth Brewery in Nassau, which brews a range of brand-name beers like Heineken, Guinness and Kalik; and the well-known Bacardi Corporation, producers of rum.
Other industries include the production of salt on the island of Great Inagua using a process of evaporation, with most of the 1.2m tonnes of dried sea salt destined for the export market; the mining of aragonite, a form of limestone used in construction; and small-scale production of goods for the tourist trade.
Though industry currently only plays a restricted role in the Bahamian economy, much of the groundwork for growth has long since been laid.
Over the years, successive governments have enacted legislation aimed at promoting industrial development and overseas investment. A central plank in this legislative process was the Industries Encouragement Act of 1970, subsequently amended, which sets out a series of incentives for businesses intending to establish manufacturing plants in the Bahamas.
These incentives include exemptions for firms approved by the state on import duties for machinery and raw products, and on materials needed to build or expand production facilities. Manufacturers can also benefit from exemptions on export duties, income and capital gains taxes and property taxes on their factory sites.
Another advantage is the location of the Bahamas, positioned astride the region's major maritime trade routes and just 80 km from the US coast. This advantage was cited in the latest US State Department report on the investment climate in the Bahamas, issued in February. Along with its proximity to major markets, the report said investors in the country could benefit from the current and potential future tariff concessions under the Caribbean Basin Economic Recovery Act, Canada's CARIBCAN Programme and the EU's Economic Partnership Agreement, all of which facilitate the entry of goods from the Bahamas into these markets.
A development that is crucial to the Bahamas' hopes of achieving its industrial potential is the Freeport Free Trade Zone, located on the island of Grand Bahama, which includes the country's largest port and cargo-handling hub.
An area of 315 ha has been set-aside within the free trade zone for industrial production, along with warehouse and assembling facilities. Businesses operating out of the free trade zone are not required to pay taxes on profits, capital gains, earnings, distributions, or duties on imported and exported goods.
While the Bahamas has enacted laws to assist the growth of industry, and the country has a well-developed transport and communications infrastructure network to support manufacturing, response from both local and foreign investors has been limited.
One reason for this was highlighted in the recent State Department report, which pointed to the government's reluctance to give work permits to overseas employees, even on a temporary-permit basis, and an apparent high degree of protectionism.
"When new foreign ventures are perceived as competitors to existing Bahamian businesses or too dependent on foreign labour, the government has responded to local concerns and withdrawn or refused the licence of the foreign business," the report said.
The Bahamas also lacks natural resources, with few minerals apart from aragonite present in commercially exploitable quantities and only limited agricultural production to form the basis of an agrifood sector, with the country having to import up to 80% of its food needs
Though there may be support to expand the industrial base, it is unlikely that the dominance of the two traditional revenue earners, tourism and financial services, will ever be challenged by manufacturing. However, an increase in domestic industrial production in the coming years could go some way towards alleviating the country's high import expenditures.