Barbados - Overview

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ABSTRACT

The aim of any country is to achieve economies of scale. According to the theory, when

economies of scale are reached then the country will have economic growth. Barbados is no

exception and in order to achieve its 2025 Millennium Development Goals, the country must

implement policies that are geared towards achieving these goals.

The report contains an overview of the history, the economy as well as the infrastructure and the

opportunities for foreign investment available in Barbados. It also examines successes, initiatives,

issues, policy direction and challenges the country is encountering in its pursuit of the full

achievement of the national development strategy. In a knowledge-sharing exercise, the document

also highlights best practices that other developing countries may utilize towards the

achievement of their objectives.

The Barbados business environment offers a diverse range of opportunities and support to both

foreign and national investors prepared to invest for the long-term and sustain national objectives.


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Barbados known as the land of the flying fish is the eastern-most Caribbean island. It is a coral

limestone outcropping of the South American continental shelf that lies in the western Atlantic

Ocean, one hundred miles (160 kilometers) east of the island of Saint Lucia and two hundred miles

(320 kilometers) north of Trinidad and the northern coast of South America. Barbados has low,

rolling hills and microclimate variations from rain forest to semi desert. The island, which is less

than one million years old, was created by the collision of the Atlantic crustal and Caribbean

plates, along with a volcanic eruption. Later coral formed, accumulating to approximately 300 feet.

It is geologically unique, being actually two land masses that merged together over the years.

T he first inhabitants of the island were tribes of Amerindians: the peaceful Arawaks and the more

fierce Caribs for whom the region is named. It is suspected that the cannibalistic Caribs drove the

Arawaks off the island but abandoned it themselves by the early 1600's. No one really knows the

reason for their departure. The Spanish may have taken them as slaves or they may have migrated

to the north and south. Some Amerindians were on the island when the Portuguese stopped around

1537 on their way to Brazil.

The sailors called the island Los Barbados, after the ficus trees whose aerial roots look like beards.

When the English Captain John Powell arrived in 1625, he found the island uninhabited and

claimed it for King James I of England. Powell returned to England along with his merchant

employer, Sir William Courteen, with enthusiastic descriptions of the island. Eighty settlers were

sent out soon thereafter and arrived here in February 1627 at the site which is now known as

Holetown. By 1650, Barbados was transformed by the plantation system and slavery into the first

major monocropping sugar producer in the emerging British Empire, and its fortunes were tied to

sugar and to England for the next three hundred and ten years. In 1651, Barbados won a measure

of independence, and established what was to become the oldest continuing parliamentarydemocracy in the world outside England. This autonomy encouraged planters to remain on the

island rather than return to Europe when they made their fortunes.

When West Indian sugar plantations disappeared elsewhere in the 1800s, Barbadian plantations

remained productive. In the early twentieth century, the creation of a merchant-planter oligopoly

BARBADOS: A HISTORY


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ended the improvement in living standards that occurred in the nineteenth century. The Great

Depression of the 1930s led to massive labor disturbances. Subsequent investigations of living

conditions established the grounds for fundamental political change. The vote, which until the late

nineteenth century had been restricted to propertied white males, was made universal in 1943. By

the 1950s, the descendants of former African slaves controlled the assembly and set in motion

actions that transformed the island in fundamental ways. The island opted for full independence in

1966 but remains a member of the British Commonwealth.

Barbadian culture emerged out of the plantation slavery economy as a distinctive synthesis of

English and West African cultural traditions. Regional, race, and class cultural variants exist, but

all residents identify with the national culture.

Taxation

Companies and individuals who are resident and domiciled in Barbados for tax purposes are

subject to income tax on their world-wide income whether or not income is remitted to Barbados.

Individuals who are resident but not domiciled in Barbados are taxed on their income derived from

Barbados and on any overseas income remitted to Barbados. Non-residents are taxed only on

income derived from Barbados. With certain exemptions (e.g. financial services and the sale of

real property), Value Added Tax (VAT) is levied on all goods and services produced in Barbados

and goods imported into Barbados.

Legal System

The legal system is derived from English common law and Statutes. The courts administer the

laws of Barbados which consist solely of local legislation. The judicial system is composed of a

lower Magistrates Court and the Supreme Court which includes a Court of Appeal and a High

Court. Final Appeal from Barbadian courts is to the Privy Council in England.


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Barbados is the 51st richest country in the world in terms of GDP (Gross domestic product) per

capita, has a well-developed mixed economy, and a moderately high standard of living. According

to the World Bank, Barbados is classified as being in its 66 top High income economies of the

world.

The economy is fueled by the skills of a diverse population that is one of the world's most

educated, with a literacy rate close to 100 percent. The currency is the Barbados dollar, which is

linked to the United States dollar. Excellent public and private bus and taxi services take

advantage of nearly 1,205 miles (1,650 kilometers) of roads and make it possible to move

relatively cheaply around the island.

The year 1960 brought a structural change in the economy marked by a decline in sugar

production and the growth of industrial manufacturing and tourism. Barbados served as a tourist

destination as early as the 1600s. Small numbers of tourists come from South America and other

islands in the Caribbean. A significant stream comes from northwestern Europe, primarily the

United Kingdom. Most tourists, however, come from the United States and Canada. In an island

long known in the Caribbean as "Little England," many Barbadians now claim that its increasingly

important ties to the United States have transformed the nation into Little America

Historically, the economy of Barbados had been dependent on sugarcane cultivation and related

activities, but in the late 1970s and early 1980s it was diversified into the manufacturing and

tourism sectors. Offshore finance and information services have become important foreign

exchange earners, and there is a healthy light manufacturing sector. Since the 1990s the Barbados

Government has been seen as business-friendly and economically sound. They have taken a strong

stand against government interference in the operation of the national economy. During his second

term Errol Barrow, then prime minister favored a minimal role for the government managing

economic enterprises and emphasized the supportive nature of the government promoting the

development of the economy. The government has conducted its economic policy by employing

fiscal and monetary measures and supporting the social and productive sector of the society with

public sector investment. Although fiscal policy was a dominant economic tool of the government,

BARBADOS: ECONOMIC

OVERVIEW
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monetary control played a relatively significant role when compared with operations of other

Caribbean Islands.

The economy contracted in 2001 and 2002 due to slowdowns in tourism, consumer spending and

the impact of the 11 September 2001 attacks, but rebounded in 2003 and has shown growth since

2004. Traditional trading partners include Canada, the Caribbean Community (especially Trinidad

and Tobago), the United Kingdom and the United States.

It has been reported that the year 2006 would have been one of the busiest years for building

construction ever in Barbados, as the building-boom on the island entered the final stages for

several multi-million dollar commercial projects. The European Union is presently assisting

Barbados with a 10 million program of modernization of the country's International Business and

Financial Services Sector. Barbados maintains the third largest stock exchange in the Caribbean

region. At present, officials at the stock exchange are investigating the possibility of augmenting

the local exchange with an International Securities Market (ISM) venture.

Tourism

Tourism continues to play a key role in the economy and has a positive "spin-off" impact on

virtually all other business sectors. Currently, this industry accounts for about 13% of the

employed labour force and is the country's principal foreign exchange earner. In 2007, the gross

annual earnings from tourism were approximately US$1.2 billion. The island attracts

approximately one million visitors each year, with an almost equal split between long stay visitors

and cruise ship passengers.

The real problem for Barbados is that tourist facilities are too densely concentrated on the south

coast, which is highly urbanized, while the Atlantic coast, with its rugged shoreline and large

waves, is not suitable for beach tourism. There are few large brand-name hotels (the Barbados

Hilton was closed for refurbishment in 2000) which make marketing the island in the United States

difficult. On the other hand, the absence of conglomerates and package tours results in a far greater

trickle-down of tourist spending among the general population.
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Manufacturing

The manufacturing sector in Barbados accounts for approximately 7% of the island's employed

labour force and includes food and beverages (especially sugar and rum), electronics, hardwood

furniture, garments and chemicals. The country continues to welcome investment in the

manufacturing sector, especially for the production of higher value-added, skills-intensive

products that use modern technology. Electronics, medical equipment and information processing

are areas of particular interest. In recent years, the island has been attracting a growing number of

call centers. Barbados offers an excellent location from which to manufacture high end products.

The island is ideally suited for niche manufacturing products that require a world class

infrastructure including excellent air and seaport facilities, as well as a highly educated and skilled

workforce.

Agriculture

The cultivation of sugar cane, such as the cane growing in this field outside Saint Andrew, has

always been a big part of the island's economy. About 16,000 hectares (39,500 acres), or 37.2% of

the total land area, are classified as arable. At one time, nearly all arable land was devoted to

sugarcane, but the percentage devoted to ground crops for local consumption has been increasing.

In 1999, 500,000 tons of sugarcane was produced, down from the annual average of 584,000 tons

in 198991. In 2001, sugar exports amounted to US$22 million, or 8.4% of total exports. Majorfood crops ("Ground provisions") are yams, sweet potatoes, corn, eddoes, cassava, and several

varieties of beans. Inadequate rainfall and lack of irrigation has prevented the development of

other agricultural activity, although some vegetable farming takes place on a commercial scale.

Some cotton is also grown in drier parts of the island, but until cotton can be picked by machine it

is unlikely that output will rise to its former level.

Mining

Deposits of limestone and coral were quarried to meet local construction needs. Production of

limestone in 2000 amounted to 1.5 million tons. Clays and shale, sand and gravel, and

carbonaceous deposits provided limited yields. Hydraulic cement production totaled 267,659 tons

in 2000, up from 106,515 in 1996.
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Oil production is also undertaken in Barbados, with much of the on-shore activity taking place in

Woodbourne, Saint Philip.

Informatics

Informatics employed almost 1,700 workers in 1999, about the same number as the sugar industry.

The island has been involved in data processing since the 1980s and now specializes in operations

such as database management and insurance claims processing. Costs in Barbados are higher than

elsewhere in the Caribbean (although still only half of costs in the United States), but the island

offers strong advantages such as a literate English-speaking workforce and location in the same

time zone as the eastern United States. Despite these factors, employment has fallen in recent

years, reflecting increasing mobility on the part of foreign companies, which frequently relocate to

lower-cost areas.

Financial Services

Barbados has made the most of the international expansion in offshore financial sector activities

and has developed this sector accordingly it is now the second major foreign exchange earner

after tourism. Adequate telecommunications infrastructure, a well-trained and English-speaking

workforce, and a stable political environment give the country an additional advantage over other,

similar destinations. Barbados has also done well from the increased scrutiny and regulation of

financial services by international organizations such as the Organization of Economic

Cooperation and Development (OECD). One aspect that makes the sector attractive to U.S.

investors in particular, is the fixed exchange tied to the U.S. dollar. This and the islands

proximity, aided by direct air routes, as well as its development have helped to direct North

American capital into the country.
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Transportation

Barbados has an extensive road system of about 1475 km. of paved roads which have undergone

major improvement in recent years. A highway links the north and south of the island.

The Grantley Adams International Airport, located about 15 minutes from the capital city

Bridgetown, plays an important role as a vital center and link for international air traffic in the

Eastern Caribbean. The main passenger terminal handles in excess of 2.0 million passengers each

year and it has been recently upgraded and expanded .There are non-stop daily scheduled airline

services to the major international cities New York, Miami, Toronto, London as well as toother Caribbean islands. Airlines flying to Barbados include American Airlines, American Eagle,

Air Canada, Air Jamaica, British Airways, Caribbean Star, LIAT, Virgin Atlantic, US Airways and

also British West Indian Airways (BWIA), to be replaced by Caribbean Airlines in 2007.

The Seaport at Bridgetown is one of the most modern ports in the Caribbean with both a deep-

water harbour and a shallow draught facility. There are regular freight sailings to North America,

Europe and the Caribbean. The Bridgetown Port is well equipped with container-handling and

berth facilities for ocean-going freighters and passenger vessels, including major luxury liners. Ithas won the prestigious award of Caribbean Port of the Year on several occasions during the last

ten years.

Communication

Barbados is equipped with the most modern telecommunications infrastructure in the Eastern

Caribbean, with the latest in digital technology and fiber optic systems, international direct dialing

and satellite telecommunications. High speed Internet is widely available with ADSL service take-

up more than tripling in the last year. Deregulation has seen an increase in telecoms players and

services. Two major cell phone providers, Digicel and AT&T Wireless (later renamed Cingular),

entered the market against former monopoly Cable and Wireless. In August 2005, Cingular

Wireless sold their Caribbean operations to Digicel. Since then two other telecoms providers have

emerged, TeleBarbados, largely in the wireless space, and Blue Communications.

BARBADOS: INFRASTRUCTURE


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The increased competition has forced down the cost of international and mobile calls by over 50%.

Barbados offers international roaming and operates under the internationally recognized GSM

network. The International direct distance dialing code for Barbados is 1-246, followed by a seven

digit local number.

Utilities

Electricity

Barbados has a reliable supply of electricity. In fact the lone supplier of electricity, the Barbados

Light and Power Company, is considered one of the region's most efficient operations Domestic

and commercial supply voltage in major residential areas and in all new developments is 115/230

volts 50Hz. In Bridgetown and some other areas, the supply is 115/200Hz. Solar energy is used

extensively.

Water

The Barbados Water Authority, a government statutory corporation, is the sole provider of water

services. The water service in Barbados is reliable and the water supply is safe and refreshing to

drink. Most of the water supplied by the BWA is pumped from wells within natural coral aquifers

the result is a water source of a naturally high quality.


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Governments attitude towards foreign investment

Given Barbados' competitive advantages, the Government actively encourages investment and

offers an attractive incentives package, comprised of low tax rates, training grants and office

accommodation at competitive rates. It is committed to maintaining the country's attractiveness as

a centre for international business and has created Invest Barbados to enhance the country's

responsiveness in the competitive global environment. This positive attitude from the government

coupled with other factors have allowed Barbados to become one of the most stable and

prosperous states in the Caribbean, with steady economic growth and low inflation.

The Government of Barbados provides a variety of excellent support services and websites forinvestors in Barbados. The most important of these, with their respective mandates are:

Barbados Tourism Authority

To promote, assist and facilitate the efficient development of tourism.

Barbados Tourism Investment Inc.

To facilitate investment in the tourism and hospitality sectors.

Invest Barbados

To promote Barbados as a desirable investment location, and land Foreign DirectInvestment

To promote the export of services and win export business for service sectors in Barbados To monitor competitive domiciles, clients and markets for new trends and legislative

changes, and develop new products To work with other stakeholders to manage and develop the Barbados business brand

Barbados Investment & Development Corporation

To promote and facilitate the establishment and expansion of business enterprises, and to promotethe export of goods and services

Over the last 50 years Barbados has built a reputation as a prime location for foreign direct

investment. Committed to this cause the Government of Barbados focused on the development of

FOREIGN INVESTMENT

OPPORTUNITIES
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the international 'Barbados Business Product' and has progressively refined its legislation to make

possible the easy establishment of international business entities, allowing investors to maximize

their return on investment. Barbados offers a compelling mix of a strong economy, a low tax

environment, skilled and enthusiastic human resources, and an enabling world-class professional

environment inclusive of legal, banking and accounting services. In addition, the combination of

special incentives, a lower cost of doing business, readily available office and housing

accommodation and easy incorporation, all make Barbados a prime facilitating location from

which to do business. The Barbadian Government introduced a wide range of investmentincentives applying broadly to manufacturing industry offered by the Barbados Investment and

Development Corporation

Advantages of establishing your business in Barbados include:

10-year tax holiday, with 2 % tax rate thereafter Exemption from import duties Full repatriation of capital, profits & dividends Low-cost, subsidized factory space available within 10 fully-serviced industrial parks Cash grants for worker training Cooperative and efficient customs service Free consulting services of the Barbados Investment and Development Corporation

(BIDC) Official welcome from a government committed to private enterprise Low operating costs (savings of 40% or more) Literate, skilled, trainable and productive workforce with low rates of turnover and

absenteeism Economic, political and social stability and integrity Duty-free access to the U.S.A., Canada and the E.U.

Barbados also offers special business sector incentives to the following areas of business:

Information Technology Services Sector

Special tax rate of 2 1/2% on net profits. Full exemption from import duties on production related equipment such as computers. Full and unrestricted repatriation of capital, profits and dividends. Subsidized office space available for rental in fully serviced industrial parks. Training grant of US $50.00 per employee per week during the first 18 months of

operation.


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Manufacturing and Production Industries

Up to ten years exemption from taxes on corporate profits. 2 1/2% tax rate for export industries thereafter. Exemption from import duties on parts, raw materials and production machinery. Expedited customs clearance procedures. Full and unrestricted repatriation of capital, profits and dividends. Subsidized factory space in well planned and fully serviced industrial parks. Training grant of US $50.00 per employee per week during the first 18 months of

operation.

Barbados continues to be recognized internationally as a choice jurisdiction for foreign investment,

as exemplified by its continued negotiation of Double Taxation Agreements (DTAs) with

countries across the globe.

Following the September 2010 DTA with Portugal, on December 1st the country signed its 23 rd

Agreement with the Kingdom of Spain. To date, 18 of these DTAs are in force, strengthening the

countrys position as a world-class international business centre. Barbados tax treaties

with Ghana, Luxembourg, Portugal and Spain are awaiting ratification.

Focus is currently being placed by Government on further expanding Barbados tax treaty

network, and as such, the countrys commitment to transparency and prudent regulation remains

paramount. Placement on the Organization for Economic Development and Cooperation(OECD)s original list of tax compliant nations highlights Barbados success in maintaining high

international standards.

Barbados is fast becoming a preferred low tax destination for international businesses and has

attracted several such businesses, particularly in the areas of Information Technology,

Manufacturing and Financial Services. These businesses have found the legal, financial and

accounting services offered by local Barbadian companies to be world-class.

Business Environment


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Barbados has an economy driven by tourism, business, financial services, agriculture, and

manufacturing. Low tax rates, double taxation agreements and exchange of information treaties

have provided Barbados with an ideal environment for its development into a major international

business and financial services centre. In addition, Government has a liberal policy towards

foreign exchange controls and is committed to moving towards the elimination of these controls.

The island is highly rated for the quality of its educational, social and healthcare services and

continues to enjoy stable political and labour relations. The availability of daily scheduled air

transport to major international cities in North America, England and Europe and ready access to

telecommunications, power, water and other utilities make Barbados a place at works.

Looking towards the future, the National Initiative for Service Excellence, NISE, was launched in

2004 jointly by the trade unions, the private sector and Government to position Barbados to

consistently deliver excellence in service in all aspects of business and social interaction. In this

way, an enabling environment will be created within which Barbados will be able to attain its

vision of being a developed country by 2025.

Risk Analysis Assessment

Political Risk: Low

British Commonwealth, Barbados is closely linked to the United Kingdom in political and legal

matters. The currency is pegged to the US dollar and the government is working to further enhance

the infrastructure supporting the international business and financial services sector. Barbados

plays a significant role in the Caribbean Community (CARICOM) as well as the relatively new

Caribbean Single Market and Economy (CSME).

Financial System Risk: Low

In 2010, in the wake of the CLFinancial crisis, the finance minister announced the creation of a

Financial Services Commission that would have responsibility for the regulation of various

financial services including insurance and pension business. Barbados has an offshore banking

sector that the government promotes with the purpose of attracting foreign investment. Thus, the

legal frameworkfor business is of high quality.Numerous local financial servicescompanies are


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majority owned by shareholders from other Caribbean countries and Canada so many of the

decisions on business activities are driven by foreign interests.

Economic Risk: Low

Barbados has a small economy that was historically reliant upon the sugar cane industry. Recently

tourism eclipsed sugar cane to become the primary industry on the island. The economys heavy

reliance on tourism, banking and other financial services leaves it highly vulnerable to external and

environmental conditions. The current global downturn resulted in a sharp contraction in gross

domestic product (GDP) in 2009. Growth, sluggish in 2010, should return to trend levels in 2011

based on expected economic recovery in the United States.

Overall Risk Assessment

Following three straight years of contraction, the Economist Intelligence Unit expects the

Barbadian economy to expand by a modest 1.4% in 2011. This is mostly due to an improved

outlook for the US economy, Barbados's main investment partner and its largest source of tourism.

Although tourism rebounded in 2010 and is expected to grow further in 2011, a more robust

expansion will be limited by the state of the construction sector, which suffered heavily from the

slump in tourism and tourism-related investment during the global crisis. Additionally, the need

for the government to bring down the deficit will lead to austerity measures which could feed

negatively on domestic demand. On the upside, the external environment will be more favourable

and a dismal sugar harvest is unlikely to be repeated. This has led to reduction the macroeconomic

risk score from 45 to 35.

Owing to this adjustment, the overall risk score for Barbados has gone down by one point

moving from 30 to 29 in 2011.

Bilateral treaties


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Barbados has several bilateral tax treaties, mostly aimed at removing double taxation on

companies that operate in the Barbados economy. Since Barbados is at times considered an

expensive place to conduct business, the treaties are mainly a measure to provide some savings to

international businesses operating in Barbados. Some of the countries which Barbados has taxation

agreements with are: Botswana, Canada, China, CARICOM, Cuba, Finland, Malta, Mauritius,

Mexico, Norway, Sweden, Switzerland, the United Kingdom, the United States and Venezuela.

The bilateral tax treaty negotiated with Canada in particular has been a political-football for the

government of that country. The treaty was made to allow the profits for IBCs and offshore

banking companies to be repatriated to Canada tax-free after paying taxes in Barbados. The aim

was mainly for companies like the Canadian Imperial Bank of Commerce (CIBC), Royal Bank of

Canada (RBC), and Scotiabank, which (along with Barclays of the United Kingdom), when-combined control a healthy majority of Barbados' local Commercial Banking sector. In essence the

treaty makes the economy of Barbados almost an unofficial part of the Canadian economy and it

was aimed at allowing Canadian companies to extract profits back to Canada more easily.

CARICOM

Barbados is a founding member of the Caribbean Community (CARICOM). Products which are

manufactured in Barbados, and satisfy certain qualifying criteria, can be exported free of customs

duties to the markets of the other CARICOM member states. In order to qualify for duty free

access to CARICOM markets, Barbadian made products must achieve a change in customs

classification or satisfy the minimum Added Value criterion or can be wholly produced.

Barbados major trading partners in Europe are the United Kingdom and Ireland. In 2004, Ireland

represented the larger part of Europes trade, for both imports and exports. The trading relationship

as it currently stands shows Barbados imports from the US almost doubling that from Europe and

while overall exports from Barbados to its trading partners are small, exports to the US have also

shown growth and those to Europe have declined.

SWOT ANALYSIS
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Strengths

In the creation and pursuit of the vision for Barbados, the strategies for development have been

founded on its strengths and a desire to exploit all available opportunities. Barbados has been able

to harness its many strengths. Its political stability is reflected in the uninterrupted practice of

representative government since 1639, upon which post-colonial Barbadians have built a

remarkable and cohesive democratic system, which compares favourably with world-class

standards. Barbados political stability has been reinforced since 1993 by the establishment of a

unique, well-developed Social Partnership comprising Government, the Private Sector and Labour.

Barbados has a well-developed, judicial and legal system in which fundamental human rights, civil

liberties and respect for the rule of law are strongly upheld. A very high level of social

cohesiveness characterizes the islands population. There is in place a network of social

organizations (churches, sports clubs, community clubs, service clubs, and other interest groups)

that fosters this cohesiveness. Barbados has a high literacy rate which is a legacy of one of the

most comprehensive educational systems in the developing world. Education is compulsory to age

16 and free at the nursery (partial) primary, secondary and tertiary levels. Educational

opportunities range from pre-school to university education, and include vocational and technical

training, as well as special schools for the mentally and physically challenged. Barbadosrecognizes that, globally, tertiary output per capita is highly correlated with GDP per capita and

has put in motion a brain train with the destination of one graduate in every household as soon as

is practicable.

Barbados has an enviable record of macro-economic stability as a result of prudent fiscal,

monetary and prices & incomes policies. Barbados operates on the principle that the fixed parity

with the US dollar can be pegged at any reasonable level provided that it is supported by the

appropriate macroeconomic policies. The Barbadian dollar has maintained a fixed parity with the

US dollar since 1975.

There has also been a low and stable rate of inflation, relatively low unemployment, a reasonably

equitable distribution of income (every individual has the opportunity to pull him/herself up to the

next rung of the socio-economic ladder) and an AA-credit rating as at mid-2004 by Standard and

Poors Credit Rating Agency. Barbados has a relatively well-developed and continually improving


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infrastructure of public buildings, conference facilities, airport, seaport, road networks,

information and telecommunications systems, water, electricity, and pipelines for the delivery of

natural gas. In 2007 Barbados staged the final of the Cricket World Cup, the third largest sporting

event in the world, at its specially constructed state of- the-art sports and entertainment stadium

which has been recognized globally.

Barbados possesses a competitive regime for the attraction of foreign investment, especially in the

area of international business services and is now presenting a thrust in the innovative service

exports sector. An excellent tropical climate, clean white beaches, blue water, beautiful coral reefs

and a friendly population make Barbados particularly attractive to tourists and business persons

alike.

Weakness & Threat

The vision for Barbados also recognizes the need to strengthen the weaknesses and mitigate the

impact of domestic and global threats.

Barbados is categorized as a developing country. The Barbadian economy possesses the defining

characteristics of Small Island Developing States (SIDS), which make it especially vulnerable to

exposure to hurricanes, limited land and natural resource base, sea level rise (a consequence of

global warming) and a fragile marine ecosystem (threatened by the passage of radio-active

materials through the Caribbean Sea). Barbados is conscious of the need for a renewable energythrust to mitigate the dependence on fossil fuels, to protect the environment and engender energy

security.

There is limited economic diversification, a high degree of economic openness and a high cost of

infrastructural services relative to the population and the tax base. This presents a challenge to

Barbados fixed exchange rate regime and the degree of monetary autonomy. In addition, it

provides greater avenues for money laundering and other financial crimes. The small size of

Barbados has made it difficult to realize economies of scale and scope especially in industry and

agriculture (a net food importing country) but there are pockets of success where efficient

technology application has compensated for the classical disadvantages associated with lack of

size. Barbados has recognized that a sharp focus on productivity (labour, process and technology)

rather than on relatively high labour and operating costs can boost competitiveness, economic


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fortunes and sustainable success especially in the manufacturing and agriculture sectors, thus

reducing the dependency on imports and the attendant foreign exchange leakages.

There is a high incidence of monopolistic and oligopolistic behavior in Barbados domestic

markets. Financial markets, in particular, are narrow and shallow and, as such, limited in their

capacity to absorb domestic and external shocks. These market imperfections suppress efficiency

and competitiveness, leading to higher production costs and prices, sub-optimal quality of service

delivery and reduced consumer welfare. The advent of innovation is expected to contribute to the

diversification of the Barbadian economy stimulated by the loss of the preferential market access,

particularly for raw sugar.

There is a low level of entrepreneurship, with Barbadians generally disinclined to take business

risks and to turn innovative ideas into enterprises. The enabling environment structure is weak and

the growth of new enterprises is stymied. This results in a high new enterprise failure rate and the

corresponding negative impact on economic growth. There is a general lack of intensity and

continuity in research and development in the areas of ideas, products and enterprises. It must be

said, though, that the major impediment to entrepreneurial progress is not so much lack of

creativity but the lack of timely access to appropriate financial instruments for start-up enterprises.

Managerial practice and technology also lag behind international standards in the private and

public sectors.

Barbados has an ageing population with almost zero growth. This means that the work force willbe required to support an increasing number of retired persons. The ageing population therefore

makes for a large dependency ratio. The National Insurance Scheme has increased the pensionable

age to increase contributions and delay payments so that the pension demand may more easily be

met.

The emergence of an international political order based on unilateralism and the use of war creates

a climate of uncertainty that is particularly threatening to small countries. One example is the

harmful tax competition issue in which the OECD initiatives continue to pose a severe threat to

our international business and financial services, notwithstanding the many double taxation treaties

that are in place.

Opportunities

The opportunities for economic development available to Barbados abound. Trade liberalization

and in particular the European Union Economic Partnership Agreement (EPA), signed later in


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2008, provided Barbados with new market opportunities, in a wide range of services and products

for which we have a competitive advantage, in CARICOM, the Americas and globally.

Globalization of trade and finance provides new and increased access to both portfolio and foreign

direct investment. Domestic sectors can strengthen their productive capacities through inter-

sectoral linkages. Opportunities lie in the production of high-value-added products, such as West

Indian Sea Island Cotton finished goods, specialty sugars and other high-value products based on

sugarcane, organic and gourmet foods, use of bio-technology and the tapping of ethnic markets

abroad. Regional market unification offers opportunities for economies of scale and scope, thereby

facilitating greater efficiency, growth and profitability to Barbadian businesses, lower prices to its

consumers and increased consumer welfare. The unification of regional capital markets provides

the opportunity for increased market capitalization, thereby allowing the Barbados Stock

Exchange to realize significant expansion. This would enhance capital market efficiency by

channeling investment to the areas of greatest return. Globalization, which has led to the

enhancement of information technology and e-commerce, increases opportunities for Barbadian

businesses and consumers through reductions in transaction costs and prices.

The increasing diversity of market requirements presents new opportunities for business

innovation and an expansion in production capacity. Globalization, trade liberalization and the

formation of the CARICOM Single Market and Economy will create greater opportunities for

Barbadian nationals to access employment overseas.A greater opportunity exists to use diplomatic and economic relations to develop Barbados human

resources. There is also the opportunity to develop the human resources through the enhanced

capacity to use highly developed telecommunication networks and information technology to

access and encourage distance or home-based learning / training.

Recommendation & Conclusion

Barbados possesses a competitive regime for the attraction of foreign investment, especially in the

area of international business services and is now presenting a thrust in the innovative service


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exports sector. An excellent tropical climate, clean white beaches, blue water, beautiful coral reefs

and a friendly population make Barbados particularly attractive to tourists and business persons

alike.

Barbados is an ideal location for reducing manufacturing & information processing costs, while

taking advantage of duty-free exports to international markets and increasing profits. Coupled with

this Barbados' business environment is a diverse but stable one. Barbados is one of the most stable

locations in the world for business. The island benefits from a long tradition of political and social

stability, a highly-skilled and productive workforce, sophisticated international

telecommunication. Their infrastructure surpasses those of some of its Caribbean counterparts

which make this island a preferred choice for doing business. Though the government plays an

active role in provision of international business, its needs to encourage the local to embark onmore local business formation so that foreign exchange earned maybe kept in the island rather than

being repatriated.

Documents

Barbados - Overview