“Barbados in 2014 and Beyond: Working Together to Create a Great Future for Barbados”
Mr President; members of the Executive of the Barbados Chamber of Commerce and Industry; Ladies and Gentlemen, it is appropriate that I begin by thanking you for inviting me once again to address you, at this your first monthly luncheon for the year. The courtesies extended to me in the past have made it easy for me to not only accept this invitation, but also to look forward to joining you today.
We meet at a critical juncture in the life of our nation. The challenges we face at this moment are great. But it is my conviction that, together, we can do what is necessary to overcome whatever hurdles confront us and emerge as a stronger nation.
We can learn much from the history of your organization which ranks among the oldest and most enduring organizations in Barbados. Peter Campbell???s account, published in 1969, of the history of the Chamber from 1825 to the early twentieth century entitled ???Commercial Hall???, is a highly recommended study for individuals seeking to enhance their knowledge of the evolution of the role of the commercial sector, in the journey of Barbados from a slave society to an independent nation. Indeed, the quotation of Edmund Burke on the frontispiece of that work is instructive, I quote: ???People will not look forward to posterity who never look back to their ancestors???.
The historical record shows that this Chamber which represented the interests of narrow commercial elite was able to adjust to the changing socioeconomic landscape in Barbados through time. An organisation that was a strong ally of the ruling plantocracy during the 19th and early 20th century was able to adjust and rebrand itself in order to be relevant to the rapidly changing socioeconomic realities of post 1950 Barbados. A review of your current membership aptly tells the tale.
There is much that we can learn from the history of the Chamber. During its long life it has accumulated a vast reservoir of institutional capital that should enable its leadership to manage change with confidence. Indeed, your organization has become a most valued partner of Government in an independent nation, working with Government and the trade unions to promote the national interest.
My administration is deeply appreciative of your constructive engagement with the Government and the labour movement through your active participation in the Social Partnership. Today, happily, the Chamber is no longer viewed by the general public as a club for merchants solely interested in promoting wealth accumulation by a small privileged elite.
I noticed that your useful website sets out the Mission of the Barbados Chamber of Commerce and Industry, but interestingly absent from that website is your Vision.
My own vision for Barbados perceives the business sector and the Government working together to build both a balanced and resilient economy, and a caring society: a Barbados that is socially balanced, economically viable and environmentally sound. It is not accidental or to be wondered at, however, that from time to time we appear to be heading in divergent directions. After all, the goals of business and Government start from fundamentally different positions. Boards of directors are required to accord the highest priority to keeping their shareholders happy, happiness in this context being measured by a healthy return on their investments. Governments, on the other hand, are expected to protect the society and promote its well-being. Private decision-making employs a private calculus in sharp contrast with the public sector which uses a social calculus. The average private business person is not expected to be primarily concerned with the benefits that may accrue to society from his decisions. A Government, on the other hand, has to consider the social benefits and costs that may accrue from the decisions that it makes and from the options that it exercises.
Of course there are some basic principles that should apply to decision-making whether in the private and or the public sector. I refer to cost effectiveness, to transparency and to accountability in the use of private and public resources.
Despite the different emphases, there is much that promotes the need for bonding between business and Government. We know and accept that an economy in which the vast majority of businesses are thriving is the ambition of every Government, because such an economy can under certain conditions provide the fiscal resources that are required to build a great society. We are all aware, however, of the difficult circumstances in which the entire country, businesses included, has been functioning for most of the past four years, and of the need for Government and the private sector to pursue a course of action to turn the situation around.
The above assertion is, of course, predicated on the assumption that both the Government and the business leadership, and indeed also the trade union movement, are committed to strong ethical principles.
The administration over which I preside is committed to working with both the leadership of business and of workers to create a more resilient and balanced economy, as well as a society in which the fruits of labour and capital are more equitably distributed. History is replete with examples of powerful business elites that employed their accumulated wealth to destabilize governments in order to advance their selfish ends.
In Barbados, however, we are fortunate that this phenomenon has manifested itself neither in the pre- or the post- Independence period.
My Government is therefore committed to the continued development of a symbiotic relationship with the private sector. I am conscious that a necessary condition for the evolution of a thriving mixed economy is an understanding that both public and private sectors should focus on the pursuit of those activities that they are equipped and positioned to do best.
The private sector is expected to assume the task of wealth creation through investment in directly productive activities. The public sector is expected to facilitate the legitimate activities of the private sector through regulation, establishment of a modern legal framework with mechanisms in place for its continuing review, as well as ensuring that the lack of resources, human and material, is not an impediment to economic growth and development.
For some time now, informed commentators have highlighted the need to restructure the economy of Barbados. Response to these calls over the years has been tepid at best as the country has accustomed itself to getting along, periodic challenges notwithstanding. The acute and sustained tests of the last five years, however, have brought the urgency of this issue into sharp relief.
This is the challenge facing Barbados in 2014 and beyond: to restructure the economy and to reposition Barbados by placing it on a sounder footing. But, as Edmund Burke reminded us, we cannot go forward confidently, constructively and courageously, without first looking back. I invite you, therefore, to let us take a look back for a very short while.
Contrary to what seems to be an entrenched belief in some quarters, post independent Barbados is not unfamiliar with recessions. We have experienced recessions between 1974-976, 1981-1982, and 1990-1993.
The 1974-1976 recession occurred when the late Rt. Excellent Errol Walton Barrow was Prime Minister and Minister of Finance. Here is the background. In 1973 war broke out in the Middle East between the Arabs and the Israelis. The Organization of Petroleum Exporting Countries (OPEC) determined that supplies of oil would be withheld from those countries that were supporting Israel in the war. In the result, the price of oil quadrupled and the economies of our main trading partners, the United States, the United Kingdom and Canada went into recession.
The economy of Barbados has been structurally integrated into these economies from as far back as the 17th Century in the case of the United Kingdom and the 18th Century in the case of British North America in which I include the United States and Canada. Predictably, therefore, once these countries went into recession, Barbados was adversely affected and by 1975, unemployment in Barbados was 22.5% and inflation was running at 40 %. Not even the great and revered Errol Walton Barrow was able to avert that consequence.
The second recession in 1981???1982 occurred when the late Rt. Hon. John Michael Geoffrey Manningham ???Tom??? Adams was Prime Minister and Minister of Finance. A revolution took place in Iran in 1979 which resulted in the Shah of that country being overthrown and hounded into exile. An Islamic Republic was established. At the time of the revolution, Iran accounted for 10% of the oil supplied to the world market and, as a result of that revolution, oil production in Iran declined. That decline withdrew from the market 5 million barrels of oil per day.
Reduced supply, but increasing demand, resulted in further increases in the price of oil and the economies of the United Kingdom, the United States and Canada went again into recession. The Barbados economy was again necessarily affected. The country???s fiscal deficit reached 9% of GDP, the economy contracted by 7%, and the deficit on the current account of the Balance of Payments increased fivefold between 1980 and 1982. Jobs were lost in the public and private sectors and the IMF was called on for assistance with a corrective programme. The undeniably gifted Tom Adams could not avert that consequence.
The third recession occurred when Sir Lloyd Erskine Sandiford was Prime Minister and Minister of Finance. Iraq invaded Kuwait in the year 1990 and this lead to a war in the Persian Gulf. A barrel of oil that was costing $3.00 in 1973 was, as a result, costing $36.00 by 1991, and this plunged the economies of the United Kingdom, United States of America and Canada into recession.
Barbados was yet again affected and the result was another IMF program, as a larger than desirable fiscal deficit, and a reduction in foreign reserves cover to about two weeks of imports, together imperilled the country???s exchange rate. A public service salary cut of 8%, the shedding of a number of public service jobs and increased taxes were employed to restore the balance, and to save the exchange rate.
Why have I taken the trouble to so painstakingly place this information before you? I do so to remind this Chamber and Barbadians in general that none of these Ministers of Finance was capable of getting this nation???s economic graph to point upwards while the economic graphs of our principal trading partners are pointing downwards. Mr. Barrow could not do it; Mr. Adams could not do it; and Mr. Sandiford could not do it.
In that regard I consider criticisms of the present Minister of Finance to be unjustified, unreasonable and going against the grain of Barbados??? post-Independence economic history.
Today in Barbados, the foreign reserves at 15 weeks cover, are seven times as high as they were in 1991 when they were at their lowest; the fiscal deficit is lower than Tom Adams??? 9%, and unemployment is half what it was under Barrow in 1975.
As has been repeatedly acknowledged by economic commentators the world over, the current recession is deeper and more stubborn than any of the recessions referenced above. Indeed, to be a little fairer to the facts, during this recession, oil prices reached as high as $145.00 per barrel – a far cry from the $3 of 1975; the $17 of 1981; and the $36.00 of 1991. The 2008 recession has exposed and laid bare the fragility of our economy and its sensitivity to exogenous shocks. Hence the need for restructuring can no longer be postponed. We must be prepared to leave our comfort zones; to leave the security of our accustomed positions.
The performance of the local economy is driven by tourism, international business and financial services, and agro-processing. Dependence on two sectors to generate the foreign exchange resources that are vital to the stability and orderly progress of our nation commits our people to risks that have to be avoided or at best, mitigated.
The main planks of my Government???s restructuring programme are built on , and contemplate, among other things:
??? The modernization of traditional export agriculture to produce high value-added products for the domestic and export markets, as well as the transformation of production for the domestic market;
??? Rapid development of alternative energy sources to reduce the nation???s dependence on fossil fuel generated energy to save foreign exchange( for the calendar year 2012 Barbados spent about $808 million on fossil fuel imports); to enhance environmental quality; to improve competitiveness of domestic production, and to create new remunerative employment opportunities;
??? Further diversification of tourism markets while we facilitate the expansion and upgrading of plant and attractions;
??? Removal of roadblocks in order to facilitate prompt decision-making by both the public and the private sectors;
??? Control of the relative size of the public sector in the economy; and
??? Increase in the number of jobs generated by the private sector.
How can the Barbados Chamber of Commerce and Industry contribute to the restructuring process and increase the prospects for growth for Barbados in 2014 and beyond?
Mr. President, your organization has an important role to play in the repositioning of the Barbadian economy. At a general level it is vital that you adopt a proactive strategy in your engagement of the restructuring exercise. A defensive posture is self-defeating. Experience regionally and internationally demonstrates that negativity feeds on itself. It destroys investor confidence, and undermines the macro foundations of an economy.
Your membership can assist the recovery and restructuring process by working with my administration to eliminate two key challenges that confront the nation. I refer to the Report of the Inter-American Development Bank on a competitiveness study of selected CARICOM Countries that cited ten debilitating challenges to the economic recovery of our economy. The two foremost challenges identified in that report are:
??? Poor work ethic
??? Access to financing
Neither the public sector nor the private sector can afford to ignore these two critical weaknesses. A good work ethic and easier access to financing are indispensable prerequisites to the sustainable development of Barbados.
I have no doubt that work ethic has much to do with the degree of worker engagement at the workplace. A high level of worker engagement will result in the productive and effective discharge by the worker of his or her responsibilities. A low level of engagement will continue to undermine efforts at attaining the high level of productivity at which we aim.
If the published results of a NISE Report on this subject is a credible guide on this issue (and I think that it is), both the public sector and the private sector suffer in this regard and have serious work to do. In both sectors upwards of 30% of the work force was reported to be disengaged.
Our approaches to management and motivation are obviously in urgent need of overhaul and the government for its part will be according this issue merited attention through a renewal and acceleration of the public sector reform process. The country can benefit from hearing what the private sector, with the support of the trade unions, is doing to improve worker engagement since it is clearly a national problem.
The Government is committed to working with the leadership of workers and business to develop programmes and strategies to deal fully with the serious challenges identified in the IADB report.
Your leadership is well placed to address the challenge pertaining to limited access to financing. There in no need to re-invent the wheel. We can draw on the experience of countries within our sub-region and internationally, to design a financing/mentoring model that removes the critical bottlenecks encountered both by small, and by potential entrepreneurs. In addition, the leadership of the Social Partnership must collaborate in devising a strategy to remove those impediments to external market access that are within our collective competence to achieve.
Successive Governments after 1950 have done much to facilitate access to external markets for the goods and services that we produce. I refer to the bilateral trade Agreements with Venezuela, Colombia, the Dominican Republic, Cuba, Costa Rica, Canada, and the Economic Partnership Agreement between the CARIFORUM states and the European Community, and several double taxation treaties, the purpose of which is to spur development of the international business and financial services sector.
The Agreement with Canada ??? CARIBCAN (now expired) was a non-reciprocal preferential trade Agreement that permitted duty free access to the Canadian market for almost all imports from the Commonwealth Caribbean. CARIBCAN failed to ignite the interest of the local business leadership who cited the ???rules of origin??? as a major stumbling block.
The inward-looking focus of large segments of the local private sector is inimical to the sustained growth and development of Barbados??? economy. Government strategies to increase the range and volume of exports through initiatives undertaken by the Barbados Industrial Development Corporation, and the trade section of Barbados??? embassies and consulates have, according to available information, achieved minimal success.
There appears to be an emerging view in some admittedly restricted quarters that Government must allocate taxpayer revenues to induce businesses to invest. The small size of the local economy and narrow base of the principal drivers of economic activity renders private sector demand for substantial fiscal support unsustainable. I should be pleased to know from you any other creative and innovative ways in which we can help you.
As lead spokesman in the CARICOM Heads of Government quasi Cabinet, It would be remiss of me if I did not draw attention to the urgent need to raise the level of engagement of both the private and public sectors in the process towards the CSME. This year the Prime Minister???s Office will be heightening its public education programme on the CSME to help Barbadians to avail themselves of the opportunities presented by the still evolving economic mechanism.
Furthermore, to add to those matters already outlined, the leadership of the Chamber, workers and the Government have a key role to play in enhancing the cost effective delivery of goods and services locally and externally.
The Chamber is the umbrella body that brings together the leadership of the directly productive sectors. It is strategically positioned to design and implement a strategy that effectively ensures mutual support for its members. Mutual support between the sectors may take several forms, including:
??? Giving a fillip to the Buy Local effort by show-casing locally produced goods through the allocation of prime space by the distribution sector;
??? Systematic sharing of market feedback with local producers of goods and services to enhance quality and cost effectiveness;
??? Adopting a positive approach to the repositioning of the local economy, in contrast to a ???wait and see??? approach usually followed by strident criticism of new proposals;
??? Guaranteeing sales quotas for domestic suppliers;
??? Sharing overhead expenses by investors through the development of arrangements for common facilities (for example, equipment for wood drying by furniture manufacturers; expensive agricultural and other industrial equipment; warehousing) to mention a few examples; and
??? Developing a close relationship between sectors ( for example the agricultural and tourism sectors and the manufacturing and tourism sectors).
The leadership of the Chamber is well placed to impact positively the Government???s strategy to reposition the economy. The Chamber???s support is vital with respect to the financing of imports. To give an example, during normal times bona fide importers access a ninety days credit. The record shows, however, that several developing countries facing economic challenges, encountered deeper economic and financial crises due to the defensive strategies employed by the private sector in this regard.
The refusal to continue access to the traditional ninety days credit extended by their external suppliers, thus generated a run on the net international reserves of struggling economies. Defensive business practices of the category mentioned (and there are others) have the potential to inflict great harm on domestic economies.
The Chamber can also play a key role in assisting the nation in reinforcing and enhancing good business practices. Unethical business conduct takes several forms and diverts revenue from the public purse, in the process restricting government???s ability to service its debts and provide much needed social programmes.
I am happy to note that a small number of our businesses had been competing on the international market with some success prior to the onset of the current devastating economic downturn. The number of businesses that have progressed from dependence on the domestic market to Pan Caribbean status has grown during the past two decades.
My Government is committed to developing and supporting programmes that enhance the competitiveness of our businesses to enable them to compete in the wider Caribbean and develop international alliances for facilitating access to the international market. In all of this, I wish to underline the critical importance of a culture of discipline to the attainment of sustained progress in both the public and private sectors.
My administration is committed also to giving level headed consideration to the issue of further support for investment in training and product development.
For our part, the Government acknowledges its responsibility to provide the enabling environment for the private sector, as it produces the major part of the goods and services necessary for Barbados??? survival and success. More regular meetings, such as that which I had two weeks ago with representatives of the Chamber and members of my Ministerial team, and the active review of policies, practices and processes that affect the functioning of the business sector, through the Barbados Action Team of the Social Partnership and other agencies, are on our priority list of needed actions.
In closing I wish to reiterate the importance of thriving businesses that play by the rules to the repositioning and restructuring of the local economy.
The challenges with which Barbados is grappling at present do not admit of a sustainable solution without the private sector, the public sector and the labour movement working together. I have never believed that the tripartite arrangement as a living organism would, for all time, maintain its original shape and pursue its original approaches. What is indispensable, though, is that there be credible tripartite arrangements that can claim the loyalty and respect of all three social partners. The Government???s commitment to this arrangement continues to be non-negotiable, irrevocable and profound.
As I have said elsewhere and at other times, if the structure of our national edifice is unsound, no room in that edifice is safe. The primary focus of labour, capital and the state in Barbados must be to ensure that soundness is restored to the structure of our public finances and the functioning of our public administration. Although sometimes I get the impression that we do not always remember that Barbados is still a small, fragile economy in the Caribbean with an open economy subject to the vagaries of international events, even if from time to time it manages to mitigate them.
We have done well for ourselves over the years because of prudent management, a patriotic private sector, and a responsible labour movement. Even G8 countries continue to be overwhelmed by recent economic challenges.
Ultimately, if we do not have confidence in ourselves, the confidence we expect from others will not be forthcoming. The confidence of Barbados private sector in itself, in the Government, and in the labour movement with which it has to interact, is the surest guarantee of our forward movement and of the creation of a vertebrate future for all of our people, in 2014 and beyond.
To the challenge of the moment let us all confidently rise!
I thank you.