During 2017, the Barbados economy continued to encounter major macroeconomic challenges, all part and parcel of the declining international reserves and weak public finances. Although Barbados registered modest but improved economic activity in the last two years, this growth amounted to a mere 1 per cent. The fiscal deficit fell by US$197 million during the first nine months of the fiscal year, and government continued its efforts to strengthen the public finances. This deficit, as the lowest in seven years, had been mitigated by improved revenues from the last two years of tax measures and the stabilisation of non-interest expenditure. The improvement was nevertheless smaller than anticipated. Yet, the lower deficit, together with an adjustment of monetary policy, allowed for a substantial reduction in new credit to the government. Modest growth was experienced in tourism earnings and the contraction of non-oil imports allowed the external current account deficit to stabilise, but international reserves declined further to US$410 million. With approximately 6.6 weeks for import cover, Barbados moved under the desired 12 weeks.
Efforts as Revitalisation
The government has developed its Barbados Sustainable Recovery Plan 2018 in an effort to achieve six stated objectives: (1) build a comfortable net international reserves level by 2020; (2) achieve fiscal sustainability through a balanced budget by 2020/21; (3) accelerate real GDP growth to reach 3.0 per cent by 2021; (4) establish a credible and sustainable debt management plan; (5) enhance and safeguard the provisions for social development; and (6) reduce the unemployment level to 8 per cent by 2020. The thematic areas are outlined within the schedules of the document with the associated key performance indicators, dependencies, timelines and accountabilities. As stated in the plan, the thematic areas include:
(i) Fiscal Sustainability: The fiscal recovery framework captures 20 specific objectives aimed at creating efficiencies within the public sector;
(ii) Growth: The growth recovery framework which comprises 37 objectives is geared towards stimulating investments and establishing an enabling environment for increased growth;
(iii) Foreign Exchange: The foreign exchange recovery framework contains two critical objectives, which seek to augment current strategies directed towards improving the stock of foreign reserves; and
(iv) Social Services: Eleven objectives underpin the social services framework and aim to protect the poor and vulnerable with the view of improving quality of life and livelihood through employment opportunities and social services.
The plan recognises the need for financial resources to make it work. It indicates that such resources will be derived from a number of key sources on a fiscal year basis through the estimates and budget exercises. The programmes and strategies will be aligned to the respective programme budget exercises and the estimates of expenditure and revenue. It indicates that shortfalls and support financing will be obtained through: the reallocation of government's budget resources, regional finance institutions, international development organisations; the utilisation of existing and new arrangements in the form of public-private partnership mechanisms; and the development/technical cooperation funding, philanthropic investment and special user fees.
The plan is also premised on a hope that the private sector will contribute funds towards this national effort. It also recognises that over the medium-term, support will be required from the domestic banking community as part of the process of “recovery financing”. It is also expected that over time such support will be conditioned on the adoption of corrective policy measures and performance benchmarks.
The ability to finance this recovery plan will obviously rest to a large degree on the ongoing quality of efficiency which is displayed in the implementation of the plan. In the final analysis, such a broad and bold plan will be integrally tied to the political will, which is exercised in making the plan work as closely as possible to its stated objectives. Barbados will have a general election before the beginning of June 2018 and, as in all of today's parliamentary democracies, governing and administering have become closer aligned, even though the roles and responsibilities of the two sets of actors vary. Notwithstanding the traditional levels of analysis dichotomy, the boundaries are no longer substantial in form and practice. The plan will therefore unfurl in 2018 before it can later unfold.
Some Positive Developments
The recent launch of the International Securities Market (ISM) of the Barbados Stock Exchange is now a fait accompli and represents an important step for the nation’s economy. This market is a vehicle for the listing and trading of securities of issuers who may or may not be incorporated in Barbados and who may otherwise have been listed or traded on other exchanges around the world, such as, for example, the second tier markets of Canada, the US and the UK. Launching the exchange is not a new concept insofar as offshore is concerned, since benchmark exchanges such as Bermuda, Cayman Islands and the Channel Islands are in the market undertaking this type of business with proven and growing success. The new development will give expanded legal status to the provision of a seat for exempt securities, a provision which was established on behalf of a major Canadian enterprise in 1989 as an accommodation that would allow the company’s local Barbados IBC to trade on the Hong Kong exchange without question or recourse. The ISM is capable of attracting new types of international businesses to Barbados. It also encourages the use of Barbados’ double tax treaties, and allows new types of businesses to be undertaken, as with listing sponsors. Its core products will be equities, bonds and other fixed interest securities, as well as mutual funds. The advantages are many. However, first and foremost, the ISM will magnify the range of products in the Barbados International business sector.
Barbados also continues to excel in the use of its Societies with Restricted Liability (SRL) legislation. It has given the long-standing 1982 Companies legislation a flexibility of use and application, which is particularly attractive to American parents looking to enjoy the benefits of a flow-through subsidiary which may in part be treated as a partnership. It is not replicated in other comparable jurisdictions and continues to give Barbados a strong comparative advantage, as was evidenced in November and December of 2016 with the advent of extraterritorial, anti-hybrid legislation. Since that important start, more companies with similar business plans have established themselves in Barbados. In so many instances, the recognition and suitability of the Barbados SRL, is evidenced by the many local incorporations which now exist. These incorporations also, of course, preserve the indispensable inflow of tax payments to the Barbados treasury. This good fortune could continue if the quickly drafted, but long awaited Foundation Legislation is properly introduced for use by the many waiting South American clients. While the existing suite of legislation is a good varietal mix, identified legislative changes should be implemented as soon as possible so as to attract quality international business.
Fortunately, the Arbitration and Mediation Court of the Caribbean was launched in the last quarter of 2017. It is a very positive development, and with the promulgating of its rules in February of 2018, and the publication of its dispute resolution panels, there will be yet another important regional and international institution headquartered in Barbados with a wide global range of professional service delivery. Other proposed legislation is still under active consideration. The negotiating of co-production treaties with jurisdictions such as Canada, New Zealand, Britain, the US and many more, remains a big hope for the benefit of the local film industry. It is an industry which has great ramifications for transfer of technology and skills, substantial income generation, and the furtherance of youth opportunities for career development.
The macro-economic challenges of 2017 have represented an overall challenge to the favourable levels of efficient social and political organisation which had become de rigueur as a major element within the Barbadian brand. This year’s general election will be pivotal in fashioning a major social and economic reorganisation geared towards vital revitalisation.
Sir Trevor Carmichael QC
Sir Trevor Carmichael, KA,LVO,QC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President. He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.