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NOTES FROM A NATIVE SON: A deafening silence


by HAL AUSTIN

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There is a worrying silence among politicians, academics, journalists and financial regulators regarding what is to be done about rescuing the national economy from the edge of the precipice. I am beginning to feel rather lonely in my constant call for instant action to kick-start and reform the macro-economy, and for radical changes in the way policy is decided. While the focus is understandably on the politicians and civil servants, very little is said about the under-performance of the stock exchange, especially since the recent well publicised delisting of a well-known company. What makes me deeply suspicious is that there are rarely, if ever, any profit warnings, account re-submissions, market-influencing information from any of the listed companies, daily reports to my mind of any real value, no significant flotations, no initial public offerings. All these and more are the necessary details on which cautious and competent investors depend before making investment decisions. More than that, the absence of sophisticated data and analytic tools means that stock market dealings are even more of a gamble than they are in more developed markets. Efficient market theory presupposes that participants have access to the same information at the same time. My suspicion is that regulators in some developing countries, few if any with real market experience, could not tell insider dealing if the details fell on their heads like pouring rain. What in reality passes for equity investments is in fact the encouraging of ordinary people to use their hard-earned money to provide cash-flow to many badly managed high-profile companies. In a properly regulated market, a listed company should provide basic data on its daily trading and balance sheet through its audited annual accounts and reports, and its non-audited quarterly reports. I am sure I am not the only person who has problems getting hold of annual reports on many listed companies – either from their own websites or through that of the stock exchange. Lack of efficient data is also a regulatory issue. Unless regulators can see the big picture they cannot properly regulate the sector. Valuation of portfolios and control processes are very important when it comes to pricing on trading floors. And, even in sophisticated markets there are lots of incidents of mispricing, far less a relatively basic trading culture and inadequate or inexperienced back office staff. Economic stabilisation and growth depend on good regulation, a growing labour force, low barrier to entry through the reduction of red tape and unnecessary bureaucracy and the availability of capital. It is this interplay between capital investments, improved education and skills training, increased productivity, vigorous regulation and supervision, and the use of modern technology, which will provide the road map for Barbados in the early years of the 21st century. However, this is more hope than expectation: apart from an unannounced and badly shaped fiscal stimulus and with consumer and business spending down, Government has stepped in to be the key driver of the economy. Note the overfunding of UWI and Four Seasons. Second, unemployment is growing, although not as quickly as was expected, although from observation it looks as if youth unemployment may be over 25 per cent. Third, not much is being done about the structure of education, which is still very much what it has been since the end of the Second World War. And, finally, the creaking red tape and over-bureaucratised system, along with the unavailability of funding for small and medium enterprises, means that we have reached gridlock. A mature, transparent and ethical capital market will not only send the right message to the financial world about doing business in Barbados, more importantly it will redistribute and grow wealth in Barbados and add value to the nation’s overall prosperity. l Hal Austin is an award-winning journalist with the Financial Times. He is Barbadian and may be reached [email protected]

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