Friday, April 19, 2024

LEFT OF CENTRE: Help rum compete in world market


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In the 1970s manufacturing contributed significantly to our nominal GDP.
In 1980, 38 new foreign-owned companies were producing goods for export markets. They produced a range of products from wearing apparel and food items to pharmaceuticals and electrical components.
Petroleum production in Barbados reached its peak by 1985, processing 679 000 barrels or close to 50 per cent of the island’s domestic needs.
Between 1981 and 1985 manufactured exports reached $1.9 billion, or 19 per cent of Barbados’ annual GDP. Current manufactured exports are less than $400 million.
Many of these foreign-owned companies brought with them cutting-edge technology, high standards and management techniques to maximize efficiency in producing products for export markets.
These companies recruited Barbadians and sent them overseas for further development and training. A significant level of service support was required to keep these export companies operational. This provided opportunities to expand production to the service industries.
As major advances in Asia were made in the development and production of microchips, many of the major electronics firms closed and relocated to Asian countries. Trinidad, as a trading partner, had a one-third devaluation of its currency and this made Barbados’ goods uncompetitive.
Production of sugar peaked in 1967 to 204 000 metric tonnes. Current production is less than 30 000 metric tonnes.
Fast forward to the challenges Barbados’ manufacturers face in this decade. Producers face even higher cost of electricity than a domestic user; in fact, Barbados’ manufacturers subsidize the domestic consumer, as manufacturers pay more per kilowatt hour than a domestic user does. This is the reverse of what happens in economies dependent on manufacturing. Compare the cost of electricity in Trinidad to Barbados: manufacturers in Barbados pay six times the cost per kilowatt hour as their counterparts in Trinidad. This, compounded with higher wages, transport cost and fuel for production, will continue to challenge the local sector.  
Barbados is a high-cost producer, so it has to find products to make that are high in value and require sophisticated automated production to meet international quality standards. Alternative energy can help reduce our high import bill for fossil fuels that currently power generators for electricity. This new technology will drive an upturn in the economy if we implement the necessary legislation that will allow providers to export to the national grid at an approved cost to allow investors a reasonable rate of return on their investment.
Education in the sciences along with research and development will be another key to attracting new investment or industries to Barbados. It will be crucial for Government to provide fiscal incentives and improved business facilitation. Fiscal incentives for manufacturers to modernize inefficient manufacturing processes will maintain jobs. Import substitution of food products should be given high priority.
Another significant foreign exchange earner needing support is the rum industry. The entire region is facing challenges from rum producers provided with subsidies that reduce the cost of their rum and make ours uncompetitive. Regional governments need to collectively challenge these illegal subsidies or 300 years of investment and technology that developed the unique regional brands of will disappear.
Clearly, there is much to do. The question is, do we realize what needs to be done to be more competitive and do we know the consequences of not making changes?
• David Foster is president of the Barbados Manufacturers’ Association.


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