Developing Barbados’ Competitiveness in Export Services

When we think of the services sector in Barbados, the first thought usually for many is tourism. But, the fact is that services trade consists of over 120 sectors many of which are being traded here in Barbados and in the region; many of which are in varying stages of the ‘competitiveness life cycle.’ These […]

By Lisa Cummins

July 30, 2012

Developing Barbados' Competitiveness in Export Services

When we think of the services sector in Barbados, the first thought usually for many is tourism. But, the fact is that services trade consists of over 120 sectors many of which are being traded here in Barbados and in the region; many of which are in varying stages of the ‘competitiveness life cycle.’ These range from business and professional services to creative industries as well as services incidental to manufacturing and agriculture. The scope is vast and the potential tremendous. The question for many countries, Barbados included, is how to harness this potential and build competitive services which can stand alone as saleable exports as well as fuel the wider economy as backbone services.

In terms of the composition of our GDP, Barbados like most countries derives the highest percentage of GDP from the services sector. The World Trade Organisation (WTO) reported in 2011 that Barbados was exporting a significant US $ 1, 420 million annually and importing US$546 million in commercial services. The bulk of our exports were in the travel sector which is expected given the role played by tourism services. US$ 77.1 million was exported in travel services, US$2.9 million in transportation. Other commercial service exports accounted for US$20.O million.

In contrast, the country imported US$12.9 million in travel services, US$ 26.4 in transportation and a whopping US$60.7 in other commercial services.

Apart from the visible trade deficit, what is important about this data is that among sectors, imports are so unevenly distributed. Our imports of US$60.7 in commercial services suggest that Barbados is not as competitive in these sectors as it is in travel including tourism. While we may be importing inputs, there is quite possibly a need for Barbados to develop domestic capacity to service some of these commercial service sector needs and convert them into foreign exchange earning exports.

The fact that we continue to have such high export figures for travel is an indication of strong performance of the sector, but it is equally an indication that we are lagging behind in our development of other sectors.

There is much more that needs to be done, starting at a policy level in order to make the necessary transformation of our services economy.

An important and obvious starting point is our abundant supply of skilled labour.

Business and professional services are in abundant supply, but while it is an asset that we have large numbers of graduates matriculating through our education system, it is important now to go beyond that. Our human capital development must be integrated with our economic development ambitions as a country. Simply put, the composition of our human capital, and its relationship to national economic objectives in the long term, is far more significant than the production alone of large numbers of higher education graduates.

A World Bank study of 2011 estimated that in the 55-64 age group, there were thirty-nine (39) million people globally who had achieved higher education qualifications. In contrast in the 25-34 age group that number rose to approximately eighty-one (81) million people. Clearly countries are producing far more higher education graduates in the last twenty years than they were before. That trend also shows that twenty years ago, most of those graduates originated from the United States, Japan and China. In the last twenty years, countries like Brazil, Canada, France, Australia, Korea and China have taken a more significant share of the higher educated talent pool. There was a clear shift in the origin of the global talent pool and the demographic. Developing countries are shaping their education systems to meet the development goals of the country and diversifying their offerings as a result. It is having a dramatic effect on the demographic composition of the countries of origin exporting business and professional services.

It is now insufficient for developing countries to ensure universal access alone to education including technical and vocational studies. In Barbados, courses of study must be seen as essential tiers in the institutional scaffolding that builds, for example, our manufacturing sector infrastructure as essential service inputs particularly if we are to break into the high end manufacturing or off-shore industries.

A second point is the disaggregation of the entire economic value chain in order to isolate the services which have important forward and backward linkages to the wider economy. Information and communication services, telecommunications, finance, insurance and business services are examples of essential inputs and improvements in those sectors help fuel competitiveness in the wider economy. In these sectors, the competitive disadvantages need to be analysed and eliminated. I am not convinced that we have done enough of this. There are also newer, non-traditional services sectors like the creative industries with high growth potential which need an outward looking focus that is preceded by commercially based development support.

But these interventions don’t have the desired outcome if undertaken in isolation. In order for Barbados, on an integrated national economic scale, to undertake the kind of transformation that must come to give effect to competitiveness in services, the wider services economy, we need to have a macro policy framework across agencies, Ministries and the private sector that holistically creates those forward and backward linkages among and between sectors, across industries and creates the enabling firm level business support environment that is tailored to nurture aggressive entrepreneurship which is nimble, dynamic and has a global outlook.

That national framework/strategy must be fueled by constant research, analysis and development in full understanding that competitiveness is not static. We must constantly evolve and adapt to stay on par with or ahead of the curve.

 

Lisa Cummins

Executive Director, Barbados Coalition of Service Industries (BCSI)

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