Charles William Eliot (1834-1926) in his inaugural address as President of Harvard University (1861) made a prescient and memorable observation about progress: “In the modern world the intelligence of public opinion is the one indispensable condition of social progress”. The global pandemic configurations of the year 2020 have underscored the traditional resilience and sobriety of the Barbadian psyche which has been at the core of its society and economy at Independence in 1966 and continuously thereafter with interruptions.
The Pandemic Effects
In addition to overall business contraction, unemployment in the Barbados’ private sector reached almost one third of the workforce by the end of May 2020 with projected increases. The local Unemployment Fund was therefore heavily burdened, having to pay out significant additional benefits with a severe reduction in levels of contribution to the Fund. The Barbados government duly acknowledged its fiduciary responsibility despite the accompanying decline in Government Revenue and the inevitable deterioration. As a result, Government established the Barbados Optional Savings Scheme (BOSS) as a stabilising mechanism. The scheme provides public servants with a savings and investment opportunity and gives to Government the chance to shift a portion of its wage bill to capital expenditure – albeit for a short while.
For the worker, an attractive rate of interest on the saved funds may be earned every six months and after four years of savings, the funds may be claimed. The underlying philosophy of this programme is the redirecting of funds presently earmarked for public expenditure on salaries and wages. By directing such funds to capital expenditure, it is hoped that increased economic activity will flow within the country. Furthermore, the expanded capital works programme is expected to add to job creation and bring to completion many of the island’s unfinished construction projects. Consistent with increased job creation is the expectation of a reduced Government burden of financing the unemployment benefits claims.
The programme is expected to create approximately US$50 million for capital spending and provide the benefit for individual workers of a higher return from savings. In addition to protecting public sector employment, it in turn keeps spending power buoyant, and uses investment as a tool to facilitate the bringing forward of more jobs. Public servants are the primary savers and investors as it is an opportunity to save by paying the employee a part of a monthly salary in Bonds. However, the rest of the population also participates by being able to purchase any Bonds which public servants may wish to sell, thereby supporting the development of a secondary market. Operationally the bond is of four- year term at five per cent interest rate per annum, with interest paid semi-annually and with principal in four years from the date of the bond. It is fully tradable with no withholding tax on the interest earned; and it is legally protected from any restructuring. Furthermore, the bonds are expected to have an early redemption feature through the Central Bank of Barbados after a 24-month period from the date of issue.
It is a government-led effort of imaginative practicality.
A Private Sector Effort
The pandemic has moved global economies into recession and Barbados’ countervailing efforts are not only at Government level but are also private sector driven. In addition to the individual and collective efforts by a vibrant Barbadian private sector, one effort stands out which will have far reaching effects in overall economic mobilisation and financial health.
The project is referred to as The Barbados Trailway which will start in June 2020 and take 21 months to complete – six months for design and 15 months for construction. It represents the turning of Barbados’ Historic Train Line into a multi-purpose biking, jogging, and walking trail. At a cost of approximately US$4.8 million, the project will be undertaken in two phases. The project is multifunctional in that it will provide opportunities for healthy recreation and commuting as well as enhanced food security since persons will be encouraged to plant and grow along the route. It will create educational advancement as persons will be educated in the area of the environment and sustainable living and development. The project is in keeping with the goals espoused in the island’s recently revised Physical Development Plan and Tourism Master Plan and it will likely have a link to the new National Botanical Gardens at Waterford. In keeping with its ethos, the project is being constructed with 25 per cent recycled asphalt to be used in the paving process.
As a project which will have significant visitor appeal and use, it will be unique as such use will be matched and surpassed by local usage. In that regard, it will be truly sustainable bearing in mind that it will naturally accommodate social distancing protocols whether or not required by the existing health climate. The project has the capacity to significantly add to the agricultural health, economic, financial and tourism sectors…..and others as well.
Additionally, there are hotel projects which are being renewed as the pandemic superficially recedes. Developments on the island’s south east coast and coastal city outskirts are taking on a renewed vigour as the national urge to survive, prosper and overcome crisis continues to rise to the fore.
Barbados In A Nutshell
Irrespective of the pandemic, Barbados shines because of its historic place as a tax treaty jurisdiction with effective protocols for doing business in a transparent manner. The jurisdiction has long ago been given international endorsement by agencies such as United Nations Development Program, which ranked it as 4th worldwide out of 177 countries in terms of literacy. Furthermore, the Human Development Report has consistently ranked Barbados as 1st in Latin America and the Caribbean and 37th worldwide out of 179 countries in its human development index. Transparency International in its corruption perceptions index has ranked Barbados as 2nd in Latin America/Caribbean and 22nd worldwide out of 180 countries. These solid institution building and retaining features have endured to the benefit of Barbados in the pandemic environment and have allowed its planners to continue to explore and carve out new niche areas along with strengthening its existing foundations.
The tax treaty network continues to be a source for transparent and reputable tax planning. The double taxation treaties are currently being used with full force and effect, some with great results and exposure, while others with more discreet utilisation and enjoyment. Double tax treaty partners include Austria, Botswana, Canada, CARICOM, China, Cuba, Finland, Ghana, Luxembourg, Malta, Mauritius, Mexico, the Netherlands, Norway, Seychelles, Sweden, Switzerland, the UK, the USA, and Venezuela. The treaty with Mexico is exhibiting continued public use and its novel charitable dimension focus has provided a mechanism to blend philanthropy and business in unique structures with bold intentions and positive benefits. Furthermore, the bilateral investment treaties continue to provide the investment protection and comfort to investors who seek to use a Barbadian corporate structure to invest worldwide. For those companies and individuals seeking to invest within Barbados, the bilateral investment treaty with its positive protection mechanisms, including the benefits of international arbitration, provide positive incentive to invest within Barbados, in furtherance of the special niches which the jurisdiction seeks to provide.
Barbados continues to be recognised as an important jurisdiction for the manufacture of specialty products which require an excellent infrastructure with first world air and seaport facilities, together with skilled and well-educated labour and a stable industrial relations climate. Such manufacture includes the specialty areas of: agro-processing, electronic components and sub-assemblies, high fashion apparel, jewellery, leather items, medical supplies, optical devices, pharmaceuticals, printing, and publishing. Recently, there has been an increased interest in the setting up of such facilities which has positive implications for increased employment within the jurisdiction. Furthermore, Barbados has sharpened its efforts to become the premier location for information and communication technologies (ICT investments). The facilitating environment has been improved with training centres for medical transcriptionists, and training grants which subsidise training of workers. The novel uses of ICT technology which is increasingly used in the jurisdiction include: call centre computer aid design (CAD); customer and technical support; credit card applications; data entry and fulfilment; database management; health insurance claims processing and health information management; optical character recognition (OCR) applications; software development; transaction processing; and web application.
In a pandemic environment, the opportunity to start new businesses has been recognised by the Barbadian planners. Efforts are being made to expand the scope of retraining and marketing. The results are encouraging.
Barbados proceeds with conviction and caution guided by an enlightened leadership and informed intelligent public opinion which give full credence to Charles Eliot’s memorable words in that well referenced inaugural address - indispensable conditions of social progress.
Sir Trevor Carmichael KC
Sir Trevor Carmichael, KA,LVO,KC. 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.