THE ISSUE: Need to trigger new investments
Barbados’ economy is at a critical juncture.
Not only does Government have to make a $400 million reduction in its spending but measures have to be put in place to ensure long-term economic growth and transformation.
Even before the $400 million target was announced, several private sector bodies were stressing the importance of reducing spending.
For example, in April the Institute of Chartered Accountants of Barbados (ICAB) urged Government to cut its expenditure sooner rather than later.
William Layne, chairman of ICAB’s public sector committee, said based on the Accountant General’s report, the fiscal deficit stood at 12.5 per cent of gross domestic product, or more than $1 billion.
He said this figure was “staggering” and no entity could continue generating such deficits.
“If we continue as a country spending more money than we are earning, there will be a point in time in which the domestic [lenders] . . . and the international lenders will say ‘no more’,” he said in the April 22 BARBADOS BUSINESS AUTHORITY.
Layne, a retired permanent secretary in the Ministry of Finance, said “serious” and difficult decisions had to be made about where the cuts would happen.
In the June 11 DAILY NATION, Barbados’ largest trade union called on Government to phase the proposed $400 million cut over four years, to reject any idea to privatize the air and sea ports, and reduce the tax on fuel.
The Barbados Workers’ Union (BWU) said workers were hurting as a result of the economic crisis and could bear no additional tax burden.
The union said in a statement that every effort should be made to ease the burden and one way of doing so would be to reduce the cost of energy to households.
“Government should accept a reduced tax from fuel and pass this on as a reduction in the price of the commodity to consumers . . . . In 1991 Government took a reduction in the tax for liquefied petroleum gas, thereby making it cheaper for consumers,” the union said.
The BWU also stated that any measures by Government to expand the construction sector should be done in a way that would ensure the awarding of contracts was not limited to a few companies but to a wide range of contractors so as to allow more businesses to benefit.
In terms of foreign labour, particularly Chinese, the BWU recommended that 70 per cent of the labour force be local.
“With regard to the view by some that the privatization of the airport and seaport should be a quick means for Government to earn revenue, the BWU states unequivocally that this is not an option, and asserts that our airport and seaport should be held by the Government on behalf of the people for the people.”
Outside of the spending reduction, a number of suggestions have been made on how to improve the island’s short- to medium-term economic prospects.
In the April 22 BARBADOS BUSINESS AUTHORITY, past president of the Barbados Hotel and Tourism Association, Colin Jordan, indicated that while some factors were outside of the country’s ability to control, there were some measures which could improve the economy.
“Western economies, even the smallest of them, are driven to some degree by the levels of confidence of the people and businesses that operate in the market,” he said. “As confidence increases, economic activity increases, jobs are generated and government revenue improves.
“People must be able to see, based on its allocation of resources, that Government is focused on facilitating the generation of economic activity while protecting the most vulnerable within the society.”
Jordan said this balance was achieved when producers and consumers were able to detect that policy direction. Therefore, he said it was important for Government not to send any signals that suggested it was wasting scarce resources or had wrongly placed priorities.
He called for focus on tourism, international business and agriculture.
“Along with adequate allocations in the Estimates there needs to be meaningful engagement of industry players through consultations and realistic plans of action.
“Linkages across these sectors, and with others, need to be actively facilitated rather than constant berating of a real or apparent lack of synergy,” he said.
In the June 11 DAILY NATION, chairman of the Barbados Private Sector Association (BPSA), John Williams, said a two-pronged approach of reduced Government spending and the pursuit of growth would be required to put the economy back on its feet.
“Our preference for growth . . . is that it has to be kind of private sector-led and we do not have the luxury as a country to spend money on stimulus,” he said.
Williams said it was therefore critical to make it easier to invest and do business in the island.
President of the Barbados Chamber of Commerce and Industry, Lalu Vaswani, said there was a need for both local and foreign investments in sectors like tourism and international business that bring in foreign exchange.
He said businesspeople needed to have “laser-like” focus and invest in niches that could grow their operations.
“That is what’s going to collectively help the economy grow, not just foreign exchange and foreign investment.
“That’s very critical but also local [investors] who already know the market and know where the niches are,” Vaswani said.