Making growth of the economy priority No. 1
After eight years of economic decline and stagnation, which have contributed to much social dislocation especially in the forms of higher unemployment and increased poverty, it is heartening that the New Year has started with signs
of cautious optimism that the economy will finally make a turnaround in 2016.
Even more pleasing is the fact that these signs are particularly noticeable within the business community. Pointing to welcome improvements in the key tourism industry last year and the positive spin-off effects on other sectors, Barbados Chamber of Commerce and Industry (BCCI) president Tracey Shuffler told Barbados TODAY at year-end that “2016 holds promise for a better year
for the Barbadian business community and all citizens”.
In our mixed economy model, the private sector is assigned the important role of engine of growth. It therefore stands to reason that if the business community is becoming more upbeat about the island’s prospects, then companies are more likely to engage in business activities, including investing in new projects, which will contribute collectively to promoting the objective of growth.
Which raises a key question: what role is expected of Government, simply put, to create the enabling environment for the much yearned for recovery to occur and gain momentum? One way it can do so is by engaging the private sector and citizens on the whole in more meaningful discussion, so that everyone is clear as to where the Government stands on key policy issues. Poor communication has been a major weakness of this administration.
Ms Shuffler also mentioned another important area: tax reform with a view to obviously easing the increased burden which businesses and individuals have had to carry during the past three years in particular. When Government keeps raising taxes, it mostly has a negative effect.
For example, it can serve as a disincentive for companies planning new investments. Individuals may also decide against going the extra mile because of a feeling they are no longer working for themselves but for Government. Productivity therefore suffers.
Government certainly ought to consider these issues. At any rate, a policy of increased taxation can also backfire because tax can actually decline.
Few dispute the need for taxes. However, like everything else, a balance must be struck. Government’s challenge is finding that balance where its financing needs are satisfactorily met without taxpayers being left out of pocket and unable to do the things that support the objective of growth.
Last week, a Barbadian economist, who formerly worked with the Central Bank of Barbados but is now employed with the Provincial Government of Ontario in Canada, put forward another suggestion to improve the economy and ease the financing pressures on Government. Carlos Forte, in an interview with Barbados TODAY, suggested Government move with haste towards implementing
a policy of privatizing state corporations, especially those which are a drain on the public purse.
He mentioned the Caribbean Broadcasting Corporation (CBC), Bridgetown Port Inc. and Grantley Adams International Airport (GAIA) Inc. as good candidates. Like devaluation, the mere mention of privatization automatically triggers considerable opposition among Barbadians. Public reaction in the case of the former Barbados National Bank stands out as a good example. Barbadians see privatization as selling off the “family silver”.
Mr Forte, however, sees the issue differently.
“I don’t see it as a problem to essentially sell a majority stake because the Government would always retain the latitude to provide a legislative framework to ensure that the interest of Barbados is preserved through legislation and regulation,” he argued.
It is a valid point. Privatized assets will continue to be in Barbados; and, once this is so, will do business under the jurisdiction of the Government of Barbados.
Mr Forte also recommended that the issue of debt rescheduling be pursued. He observed: “The problem is that the Government now finds itself in a position where it has to commit about 30 per cent of its revenue to debt servicing, which doesn’t leave much resources to meet our ongoing commitments in health care, education, other social services, public infrastructure and the like.”
Doing so along with privatization would provide the fiscal space Government needs, Forte further argued.
We believe there is a pressing need in Barbados for serious public education on economic matters so that the average citizen can develop a better understanding and appreciation of the policy options available. Often, much of the hysteria that characterize public discussion stems from ignorance, which unfortunately is exploited by one side or the other.
The start of a new year is traditionally associated with the making of resolutions. Our hope is that every interest group, from Government to the average citizen, will have as their No. 1 resolution for 2016, a commitment to doing whatever is necessary to achieve the objective of restoring and improving economic growth. Doing so is in everyone’s interest.