National Governance in Barbados: Regaining Paradise

It is clear that Barbados, and the wider region, is at a critical tipping point. This delivery is based on my personal views offered sincerely and purely in the interest of Barbados. I have no political affiliation and each of us must set aside any political bias and think BARBADOS FIRST. This is a wake-up […]

By Peter N. Boos

June 3, 2014

Barbados Remains Popular for Superyachts Despite Hot Competition

It is clear that Barbados, and the wider region, is at a critical tipping point.

This delivery is based on my personal views offered sincerely and purely in the interest of Barbados. I have no political affiliation and each of us must set aside any political bias and think BARBADOS FIRST. This is a wake-up call for civil society to take independent action to collaboratively ‘Regain Paradise’ for future generations…it is our duty.

Barbados is on the decline, rooted in actions and decisions taken many years ago from which we are now reaping the results. Our decline has little to do with the 2008 financial crisis and the subsequent recession. In fact, our decline was the bed we made and in which we must now lay.

Truth be told, we have lost our way in so many ways and worse we are failing to admit our true state. There is an over abundance of arrogant ignorance and a sad loss of attributes and values that made Barbados respected everywhere. Pretense and hubris are the order of the day. We’re no longer ‘strict guardians of our heritage’; we are crafting a fate that is not what those who came before us intended. Confidence is absent and the only thing that can save us is leadership; built on integrity, shared values and trust. Fortunately, we can be hopeful but the decisions we must now make will be so difficult that we need to do it together, holding hands, united as a nation, until the ship is righted.

I am not making harsh judgments but we must sincerely look at the critical aspects facing our country. First, it is the economy. The Central Bank of Barbados’ recent report on the economy’s performance in the first quarter of 2014 and for the year ended 31 March 2014 is worthy of careful analysis. What we can glean from the report is heartbreaking:

  1. The economy declined again in the first ¼ and recorded net negative growth in the last 5 years.
  2. Despite continuous tax increases tax revenues fell by $245 million in the last fiscal year.
  3. Over the last five years the fiscal deficit rose from 7.2% to a horrific 11.3%
  4. The debt to GDP ratio worsened by 15% in the last year to reach 70.2%.
  5. Interest on government debt absorbed 29% of all government revenues in 2013/14.
  6. The unemployment rate has increased to 11.7% and continues to increase.
  7. Foreign capital inflows have fallen dramatically.
  8. Our credit ratings are at an all time low.

It is clear that Barbados’ economy is in deep trouble and is not recovering. The evidence is there for all to. None of our major economic sectors is growing and some are on the verge of extinction. All are challenged and threatened. Perhaps the best evidence is provided by reports from the business owners themselves in each sector.

Secondly, there is corruption…on the rise. One definition of corruption by Transparency International is “the abuse of entrusted power for personal gain”. Corruption is often subtle and hidden and if not promptly arrested becomes the standard culture. In tough economic times corruption will involuntarily increase. Unfortunately, due of our weak financial position we make poor decisions that have negative, long-term impacts that compromise our economic choices that will over-burden future generations. The Sandals/Almond deal is such an example.

Government procurement procedures and awards of contracts need to be transparent. It is well known that certain businessmen are favoured in this process. Of course this is not new but it inevitably raises unanswered questions about corrupt practices. Are we fearful and intimidated to speak up or take action, or are we guilty too? There is no way that any country can build a just society and a sustainable economy in an environment of graft and greed. Leadership, at all levels of the society, must be based on integrity and high values.

Then there is the issue of how our democracy functions today.The last general election’s result came as a surprise to many with rampant accusations of widespread vote-buying on both sides. We were promised action but that never came. And, where is the integrity legislation promised in 2008? Private sponsors, in a corrupt system of patronage, fund political parties in elections. Under our current governance model, our elected leaders essentially proceed as they please with little reference to manifesto promises and virtually zero performance measurement or accountability. Parliamentary debates have become a circus that no one takes seriously. It is best viewed as an opportunity for grandstanding and finger-pointing. Total power without accountability is the reality. Once every five years we get a shot at political change but even then it appears that the system is corrupted. For that reason many don’t even vote and those who do hope for their party to win to have their turn at total power and its rewards. And yet we boast about our great democracy but we are only fooling ourselves for this is actually hypocrisy of the highest order.

This then leads us to question how the outside world views us. Rating agencies such as Standard & Poor’s and Moody’s have downgraded our sovereign debt to the lowest ever. Other bodies (e.g.: IMF, CDB, IDB) have all warned about our poor state. Respected international financial media (e.g.: the Economist, The Wall Street Journal, The Financial Times and The Financial Post) have all written about the serious conditions of many Caribbean countries including Barbados.

The government’s failure to settle its liabilities as they fall due and to continue to purchase goods and services knowing they don’t have the money to pay promptly is a serious failure of governance. In the commercial world such behaviour would result in the immediate appointment of a receiver. Trading whilst insolvent under commercial law is illegal. Citizens must pay interest on taxes due to Government but there is no reciprocation and this is unjust. These failures have serious implications for our brand reputation and for external confidence. Good reputations are hard to earn, easy to lose and difficult to recover.

The National Insurance Scheme (NIS) has been accessed by successive administrations to finance government expenditures in a manner that is abusive of good financial stewardship. In reality, long-term debt is termed short-term so that lower interest rates are ‘justified’. The directors of the NIS are exposing themselves to legal action for failing to responsibly execute their fiduciary duties. The NIS Fund’s own guidelines for asset diversification are in serious breach with loans to government accounts around 70% of the investment portfolio. It is highly improbable that government will be able to repay this NIS debt on normal commercial terms. NIS debt restructuring is eventually inevitable. Audited financial statements for the NIS have not been produced for many years. Had this occurred in a financial institution in the private sector the consequences would be immediate and severe.

This NIS situation, the printing of money by the Barbados Central Bank, buying up government paper and now the plan by government to increase the debt ceiling to $4 billion, is very worrying. This is a case of irresponsible fiscal madness. Where will this end?

It can be assumed that Caribbean governments perceive debt forgiveness and reparations as a substitute for good policy, strong governance and prudent fiscal management. Unfortunately, the Caribbean isn’t an EU member therefore we have little leverage.

Good policy is what we need, not borrowing to spend beyond our ability to repay our liabilities. The Auditor General’s report is a total indictment of financial management and accountability in the public sector.

Many in civil society feel that our voices can’t be heard to have concerns addressed and resolved effectively. Take noise levels, littering, speeding motorcycles and poor service in government departments, the list is endless and the frustration levels are dangerously high. Barbadians have lost confidence in government’s systems and this lack has perfected procrastination and indecision that has led to a severe case of implementation deficit disorder (IDD). If we do nothing, the consequences will be dire.

Amidst all of the above, we have also created a society where citizens feel entitled to everything for free with little appreciation of the cost and economic burden. Examples of these entitlements are education, healthcare, transportation, etc. while provoking a laissez fair culture where low productivity is the result. To add insult to injury, trade unions have considerably contributed to low productivity by promulgating uncompetitive labour practices and political party affiliations of unions create their own problems and Barbados’ private sector management has been complicit. In all sectors real leaders are absent. Often individuals in leadership roles are compromised, conflicted or fearful of the consequences of leadership. Others are corrupt and others are unfit.

I am confident that our current challenges cannot be satisfactorily solved via a party political approach. I am also certain that national governance reform will only occur if all of us in civil society are willing to engage in making change happen and agree to share the burdens of adjustment. We have weak and failing national institutions that are critical for the Westminster Model to have a chance of working. The media, the legal justice system, the church, the private sector and the unions appear to lack the resources or willingness to provide the required leadership. The Westminster Model has facilitated our current state and the state of many of our other Caribbean countries (e.g.: Trinidad and Jamaica). The people of the Caribbean have been shackled by a system that does not work for the common good but facilitates patronage and corruption. We must find solutions that work for us all.

We all must recognize that there is a deep and urgent crisis in Barbados that must be addressed by the whole nation, NOW. Collectively, we can find the answer and work together to implement the solutions that will ‘Regain our Paradise’ for the benefit of ALL, not just a few. Any solutions we adopt for necessity must be very tough. Barbados has to recalibrate; this will mean adjusting for past mistakes to get to a brighter, more confident future. Doing so, jointly, with the IMF in a transparent process is the best solution. National Governance Reform is not a new concept but, like so much else, it seems to have gotten conveniently sidelined.

So, what can we do?

Certainly, doing nothing can’t be an option. We must all be willing to become leaders from today for complacency is deadly. We all appear too busy or too comfortable or too ignorant or too selfish to take action. The threats we face are real and must now be comprehensively addressed.

I strongly recommend that civil society (Rotary, Lions, businesses, organisations, unions, NGO’s, charities, the church, etc.) come together and invite Government and The Opposition to participate in a National Consultation on Governance Reform. Deliverables would include the establishment of a team with full stakeholder representation to research and develop recommendations for National Governance Transformation with agreed action deadlines.

Starting today we must all be willing to put BARBADOS FIRST and create a National Alliance of Stakeholders to work together to develop a plan of action for the restoration of confidence to ‘Regain Paradise’. Without confidence the economy and society will experience further decline but confidence can only come through leadership. I do not see a credible way out without engagement in a close partnership with the IMF in the process. We should not fear this but embrace it as a way to create confidence and get the changes we need. In the process the people must be fully informed and the true picture must be publicly painted.

Edited from a Presentation to The Rotary Club at the Hilton Hotel on May 29th, 2014.

Peter N. Boos

Chairman Emeritus Ernst & Young Caribbean (since 2004); Founding partner Business Barbados publication (1999) and the Barbados business web portal (2009); Co-Founder, Chairman and CEO Substance Abuse Foundation Inc. (1996 to date); Founding Sponsor (2009) and First Chairman (2009-2014) Barbados Entrepreneurship Foundation Inc.; Founder of the Peter Boos Foundation (2004), (supporting youth development, entrepreneurship, education, addiction treatment, environmental protection, arts & culture development, relief of poverty and support of various community and charitable causes); Founder, Patron and first chairman ASPIRE Foundation (Barbados) Inc. - 'helping charities help' to strengthen and expand the Barbados Third Sector (2014 to date).