A recent IMF report sent shockwaves throughout the Barbadian business community. Published last year, the takeaway was, for at least another two years, Barbados is projected to be the only Latin American and Caribbean country not to record any semblance of growth. We only had to observe the economic decline happening around us to agree that growth prospects in our current environment languished, all other things being equal. Although the report may have been rather optimistic about the growth in some of our CARICOM counterparts, I am very ready to concede that investments in our major drivers of economic prosperity have produced little to no return across the board. Contrary to a particular view seemingly held in the Central Bank of Barbados’ Analysis of Barbados’ Current Economic Performance published in December 2013, it is clear to most that though prices in the tourism industry have receded at a quicker pace locally than in our Caribbean competitors, our prices are still ‘perceived’ to be more expensive. We are simply not as competitive as we might like, and without massive structural investment and a renewed commitment to excellence in the industry, it will continue to become more difficult to compete even though we exist in the luxury end of the market. Moreover, the tourism industry depended too much on established Western markets, and with the most recent exception of the USA (our third largest partner), the remainder still experience either persistent economic underperformance mostly due to fiscal drags and the ever-accompanying, austerity programmes. In 2005, it was reported that the Jamaican tourism industry sought to deepen links with China. We in Barbados held the view that the market was unsustainable though economic history clearly shows that when wealth shifts so do your demographic of “thrill seekers and prestige chasers.” Jamaica’s industry has benefitted from a sustainable influx of Asian tourists.
The international business sector’s contribution to the island’s development is notably captured by it being the largest contributor to corporate tax revenues. This sector, though a bit more dynamic in its approach to marketing than tourism, can also be accused of limiting its market to predominately developed Western economies. But this approach continues to be a very competitive one and despite the fact that Barbados maintains a progressive double tax treaty network and a culture of compliance, one would argue that the implementation of professional resources is lacking when compared to say, Bermuda – which for instance keeps a strong hold on Canadian business by ensuring that large percentage of its accountants are Chartered Accountants – and other markets within the Caribbean. I am not saying that we cannot compete but though we have a superior business environment, we still lack competitiveness in some key areas.
This article focuses on why Barbados should turn its attention to emerging markets. The aforementioned, I do hope, generates some thoughts in the reader’s mind about why we should no longer continue to compete in a dwindling pie but begin to strategically build alliances in unchartered emerging markets further afield. These are the very same markets that once lacked serious investment appeal mostly due to, ironically, the type of political interference that harms many a Western nation currently. And though the rule of law leaves much to be desired across the board, many of these emerging economies realise that the way they will achieve growth is through attracting the best human capital and investment.
Outside of the BRICs (Brazil, Russia, India, China), there are many interesting opportunities for Barbados to form allegiances for our two leading industries. The African continent now has GDP of more than US $1.6 trillion, and as found by Mckinsey & Company in their report on What’s Driving Africa’s Growth published in June 2010, real GDP is on an upward trend, mostly driven by the still-prevalent commodities boom (24% of GDP); wholesale and retail (13% of GDP); agriculture (12% of GDP); transport and telecommunications (10% of GDP); and manufacturing (9%). The report states the clear correlation between the price of oil and the growth in the economy. These resources, though always there, have been employed efficiently and at scale firstly by foreign direct investment from China, followed closely by institutional capital out of Europe. Furthermore, it states that once growth across the continent matures, it should be sustained by the rise of the African urban consumer. One does not have to look further than Nairobi, Lagos and Johannesburg for confirmation. In addition, African nations have begun to boost exports in order to gain foreign investment opportunities. For example, Angola now has one of the world’s largest sovereign wealth funds that is significantly financed from its international oil receipts. There are opportunities here to exploit this new class of tourist and investor groups to develop long-term relationships with them; we must just learn from our failed experience with the Ghanian tourists in 2007-2008.
I have spoken much about Chile and Georgia in the past and would treasure the day that our international business sector forms tight linkages with said nations based on their recent propensity to attract large amounts of foreign direct investment. This is commonly due to their very strong and strategic states, both driven on factors of efficiency and well placed business concessions. With that being said, we should focus our attention on opportunities to create double taxation treaties with them. However, some Caribbean businesses have done well to notice such trends across other emerging nations. We have the example of Digicel, which very recently has signaled a very strong intent to invest in the junta-free, resource rich country of Myanmar. Due to many years of infighting, significant underdevelopment, and underemployment of its commodity resources, Myanmar is now due for the kind of explosive economic growth – specifically of its middle class – which has seen growth across Asia over the last two decades. Investment has been aggressively pouring in by the billions since the rule of law has been re-established and Digicel has provided the opportunity to be at the forefront of its telecommunications industry. I expect great things for them. Inside of CARICOM, we all need to look no further than what Sir Kyffin is doing in the very hot Guyanese economy to understand what that means for the Simpson Group.
The opportunities for new growth are still there, my friends.