“To win without risk is to triumph without glory.” – Pierre Corneille
Last week I auditioned an array of policy options that are available to decision makers in Barbados. Those suggestions represented a short- to medium-term economic fix for an ailing economy, but they were not meant to be exhaustive.
Once the economy is stabilised and returned to a sustainable growth trajectory there will be enough revenue growth to finance more long-term initiatives. At that juncture, the Government of the day will be well advised to pursue a home-grown structural adjustment programme. At the core of such pursuits should be a sophisticated framework to boost innovation and entrepreneurship.
The quality and cost of land, labour, capital and energy, together with entrepreneurial prowess and ingenuity will determine the fate of traditional sectors like tourism, agriculture and manufacturing. They will also determine the creation of new engines of growth and the evolution of the international business sector to a lesser extent.
The future of international business hinges on many factors, chief of which are a world class workforce, competitive tax rates and fees, access to leading edge information and communication technology at competitive rates, proficient business facilitation, and an agile legal and regulatory environment.
The legal and regulatory environment must provide predictability and minimise investment risks while anticipating future opportunities and upholding or creating the highest international standards of oversight, confidentiality and efficacious exchange of information with regulators and tax authorities in partner jurisdictions. Most of the above mentioned features will also be beneficial to the wider domestic business environment.
Research and development tax credits, targeted Government procurement and far better access to risk capital and venture financing could go a long way in creating a modern, competitive and prosperous economy. Barbados needs a properly run development finance institution that is large enough to catalyse the creation of a new Barbados economy that earns its way in the world. Technology must be at the forefront of Barbados’ future. It is no longer good enough to be mere users of technology. Barbadians could do a much better job at harnessing the productive use of new technology and social media. Moreover, it is not beyond the imagination or capability of Barbadians to contribute to global technological advancement, product innovation or process innovation, but the culture must be fostered and the infrastructure built. Developing a culture of innovation (including education reform) ought to become a national aspiration.
The increasing cost of energy and land has been a cause of concern. It’s a phenomenon that has contributed in no small measure to reducing Barbados’ competitiveness and curtailing return on domestic investment. The Stuart Administration’s alternative energy policy is likely to pay some dividends. However, more can be done to reduce the domestic cost inputs of fossil fuel.
Incentivising the wider use of energy efficient light fixtures, appliances, plant and equipment, hybrid vehicles, fuel efficient vehicles and smaller cars may be quite beneficial to the country’s economy. Energy conservation will save households money and reduce corporate and government expenditure.
Though not popular, the time is approaching when vehicle ownership restrictions will become necessary in the context of traffic management and energy conservation. The creation of a reliable and efficient public transportation system will of course be central to such an undertaking.
Collectively, these types of initiatives are important to achieving productivity growth.
As it relates to land, I would recommend a policy of lease holding for foreign nationals that are desirous of investing in Barbados. Reducing the time it takes to finalise land transactions through modern land registration processes and the abatement of predatory legal and banking fees will also help to reduce the cost of land. Financial practices such as requiring a mortgagor to pay the legal fees of the mortgagee is an abomination that needs exorcising from Barbados’ financial landscape. There are too many artificial cost drivers in Barbados.
Sound monetary and fiscal policy will always be important tools for shaping the macroeconomic environment. A legitimate case could be made for targeting a lower interest rate environment by reducing the differential between the US benchmark and the local policy “target”.
As a matter of fact, the concept of a revaluation of the fixed exchange rate anchor could potentially lower Barbados’ cost of production, if we accept that inflation is largely imported (I don’t). It’s an outside the box idea that is likely to spark controversy or scorn but it’s worthy of serious discussion.
If Barbadians fail to address poor attitudes, a questionable work ethic in some spheres, abuse of sick leave, under-investment in workplace training and the souring industrial relations climate; many of the policies proposed could be severely thwarted.
“The only limit to our realisation of tomorrow will be our doubts of today. Let us move forward with strong and active faith.” – Franklin D. Roosevelt
“Our doubts are traitors, and make us lose the good we oft might win, by fearing to attempt.” – William Shakespeare, Measure for Measure
* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience. C.R.Forte@gmail.com