LEFT OF CENTRE: Find new way of doing business
Just as companies must market their products to attract new customers, countries also spend on advertising and marketing to attract potential investors. It would be wrong to assume that only developing countries use this methodology. This activity is widespread amongst all nations irrespective of size or state of development.
All investors look for the best deal, the best tax rate, the most accommodating jurisdiction, the best place to locate and set up business. As a result countries are always in a competitive race to attract new business.
In America, states actively compete with one another to be the next best location. Delaware, for example, is the most favoured state for the incorporation of companies because of its favourable legal framework and tax regime.
Within recent times several states have also developed favourable tax legislation which rivals that of low tax jurisdiction countries such as Barbados.
In addition, as a result of the work of the World Economic Forum and other similar organisations, several indices have been developed which facilitate comparison between countries. One of these is the Global Competiveness Index which sets out 12 bases of comparison.
This index also allows countries to be ranked in a hierarchical order and also to be classified into a broader matrix into which countries may be grouped. More advanced have been grouped as “innovative” whilst less developed countries can be described as “factor driven “or “efficiency driven”.
Barbados does well by these indices and generally carries a high ranking in almost any indicator used. On this basis then we would expect that Barbados will box well above its weight class to borrow the lexicon of boxing. And in reality Barbados does very well, but this by itself is not enough.
Because of its size and small market and lack of factor resources, there are some businesses that Barbados cannot attract. Similarly, simply to rely on the strength of Barbados’ ranking by itself is not enough. If it were enough, it would not now explain the poor economic performance in response to the global finance crisis.
So something different must now be done to return Barbados to a sustainable growth path as clearly what is now taking place is insufficient to generate a higher more normative level of economic activity. Whilst it is clear that there has been a fall of in the level of tourism generated income, a decline in offshore activity is not as obvious. And there is a symbiotic relationship between the two sectors.
It is clear that world economic growth is much lower as a result of the effect of the global financial crisis and that this has hurt, in the main, the economies of the west and the north.
The Asian economies have not been affected to the same extent. But there are signs that growth is returning to the United States economy, albeit slowly and weak. This is best exemplified by the decline in the rate of unemployment notwithstanding all the weakness associated with this statistic.
It is clear that Barbados is in a challenging position and that the world has become a more difficult and competitive place. Therefore, we cannot rely solely on what we used to do and our outreach or promotional programme.
What is required is something more robust, with frequent calibrations to measure progress and estimate relative measures of success.
Whatever is done it is clear that what we have done before is insufficient to move us forward. What is required is not new institutions but new approaches and new methods of thought. The real question therefore is have we changed our thinking?
• Mariano Browne is a former Minister of Finance in Trinidad and Tobagp and executive banker in Barbados.