Facilitate business more!
For the second year in a row, Barbados has fallen in the Doing Business survey compiled by the World Bank. The survey is a ranking of countries across the globe based on how easy it is for investors, local or international, to carry out functions like registering a business, getting credit or dealing with construction permits.
This ranking has become a global benchmark since it was launched in 2002. Indeed, it is this survey which investors rely on to evaluate whether business conditions in a country are conducive to doing business and, ultimately, whether they wish to set up shop in the particular jurisdiction.
These are important considerations and should compel developing countries like Barbados which do not have a large manufacturing base and export sector, to create the enabling environment for attracting investment to ensure their survival.
On the topic of survival, Minister of Finance Chris Sinckler presented the 2016 Financial Statement and Budgetary Proposals in Parliament last week. By the end of his speech, it was difficult to characterize the presentation and identify just how it was meant to respond to the climbing national debt or depleting foreign reserves, two major economic ills facing the country.
So perhaps the Leader of the Opposition, Mia Mottley, was correct when, in her reply a day later, she borrowed a term from Paul Keens-Douglas and called it as a “join up join up speech”. Miss Mottley’s critique is one we have heard leveled at the Government before but one that is worth repeating so, like Keens-Douglas, she decided to tell them again.
The major Budgetary proposals included a social responsibility tax to help foot the costs of public healthcare, the establishment of duty free zones, a $40 monthly increase in non-contributory pensions, a shifting of money to help a faltering Student Revolving Loan Fund and a national clean-up exercise.
It is important to note that Government’s economic plans and fiscal strategies for the country have been amended continuously since 2010. The amendments have largely been unsuccessful in contributing to keeping the public debt down and creating and sustaining economic growth.
The economic benefit of business facilitation has been well documented. That no doubt was the reason it became the basis of former Prime Minster Owen Arthur’s admonishment of the Government as he replied to the Budget. Arthur opined that it was important for Barbados to settle on an economic strategy that would ensure it does not go the way of Jamaica and Guyana. Both countries previously struggled to find growth for decades but now, based on economic metrics, are or are set to be on better standing than Barbados.
According to an OECD report in 2011, as “an overarching strategy for improving the investment environment, investment promotion and facilitation can help to increase both domestic and foreign investment and enhance their contribution to national economic development.”
The report added: “Success in promoting investment requires a careful calculation of how to employ resources most effectively and how to organize investment promotion activities within the government so that the overriding goal of economic development through improvements in the investment climate remains at the forefront of policymaking.”
It is clear, from the report, that governments have a role to play in pursuing business and investment facilitation as a path to prosperity. As with anything, one must first do the work in order to reap the benefits. As such, there is a number of considerations to be made. Some of these considerations include whether there is a centralized unit handling matters of business and investment facilitation.
The report also points to the need for a suitable strategy in this regard that is tailored to respond to developments in the contemporary business environment. A focus on information exchanges and the development of linkages between sectors for investment within the local environment have also been highlighted as useful. I cannot say whether Barbados does or does not have a strategy but the results of any coherent plan is not evident.
On this year’s World Bank survey, Barbados ranked 119th out of 189 countries. The island fell in all of its metrics except one, namely construction permits, when compared to previous years. With its poor business facilitation practices, Barbados is in a class with Iran which outranked us at 118, and Lebanon which came in at 123. By comparison in the region, Jamaica came in at 64 and St Lucia at 77.
Barbados did worst when compared to previous years on paying taxes and getting credit, dropping seven and eight places respectively. This is a baffling reality considering the Government’s move towards a central tax collecting agency, a reform that the data explicitly states has made the process more difficult. Not to mention also the official rhetoric relating to support for entrepreneurs and access to credit.
Governing requires creativity. It is obvious to even the most casual observer that the present Government is relying on traditional and, some even argue, problematic approaches to economic growth. It is well established in economic theory that taxation limits spending because of a reduction in the purchasing power of a population and the harmful effects of such on employment and standards of living. A bad situation is perhaps set to become more acute for a population already saddled with a value added tax of 17.5 per cent.
Making it easier to do business in a country that depends on international business and services should be plainly obvious to even the most disengaged government.