BARBADOS IS UNLIKELY to get the sustainable economic growth it seeks unless steps are taken to improve its tax structure, while also reducing transactional barriers and costs affecting its business environment.
At the same time, a group of economists thinks the island needs to improve environmental infrastructure, reduce energy costs, improve business infrastructure, and provide social assistance targeted to the poor and vulnerable.
The recommendations were made in Going For Growth: Pilot Benchmarking In The Caribbean, a policy brief authored by Valerie Mercer-Blackman, Karl Melgarejo, and Mariana Salazni, when they were working at the Inter-American Development Bank’s Caribbean Department.
They considered various indicators – labour productivity, labour utilisation, and the business environment – that “could determine the areas in which a country has underperformed relative to its benchmark or peers”.
They concluded that “business climate, distortions in the tax structure, and quality of infrastructure are the greatest barriers to growth in the Caribbean”.
Specifically related to Barbados’ performance indicators, the authors said the good thing was that “Barbados has one of the highest numbers of people participating in the workplace in the region, and it is also higher than its benchmark country group”, while “purchasing power parity income levels and literacy rates are among the highest in the region”.
The “not so good”, they added, was that “labour productivity has decreased 0.6 per cent over the past five years, in line with other tourism countries in the region but in contrast with an increase of 1.4 per cent achieved by its benchmark country group”.
The economists used an adapted benchmarking framework developed by the Organisation for Economic Cooperation and Development to identify constraints to growth and help policymakers prioritise actions to address them. In addition to Barbados, The Bahamas, Guyana, Jamaica, Suriname, and Trinidad and Tobago were also studied.
For Barbados, the paper suggested improving the tax structure and reducing business-related transactional barriers and costs as “priorities supported by the indicators”.
“Labour productivity and investment growth could be boosted by setting up a more progressive tax system and broadening the tax based to include some sectors traditionally excluded, especially in services, as well as continue to reduce tax exemptions,” it recommended.
“Reducing transaction costs such as the time to register a property, construction permits processes and contracts enforcement could improve the business environment and help to increase the low level of the investment to GDP ratio,” the report added. (SC)
