The fallacious argument that suggests that unless the developed world recovers there is not much that can be done for the Barbados economy is tempting on the surface to accept.
This argument suggests that countries of Barbados’ size and structure should all then be in the same boat, but this is not the case. The factors that determine the economic outcome are structure, integration into global network, economic state at the time of crisis, and the policy responses chosen by governments. Canada and Greece have had two different outcomes because of those differences. Better can always be done.
Barbados earns most of its vital foreign exchange from tourism and financial services and the two sectors also generate 60 per cent of the country’s gross domestic product. The global crisis did not contaminate the local financial system but the resulting downturn affected tourism and financial services.
Complicating this impact was the slowdown of the economy as a result of Government’s tax impositions in 2008, more measures in 2009, and again in 2010. They all impacted the retail and wholesale sectors of the country, causing job losses and reduced tax revenue. This further dampened economic activity, worsened Government’s fiscal problems and damaged the financial circumstances of citizens and businesses.
A Budget at this time should have focused, in the short term, on increasing foreign exchange earnings, tax revenues, and reducing the cost of living. And in the long term it should reposition the economy for growth and produce structural changes to save while increasing foreign exchange generation.
In tourism, the focus should be on high-end niche marketing in traditional markets, while also expanding the CARICOM and the Staycation programme.
CARICOM trade should focus on reducing extra-regional imports through the purchase of regional agricultural produce and services.
Now is the time that we should be achieving growth through increased trade with our allies in the region.
The country should also organize a temporary programme that allows for the use of the Eastern Caribbean currency for tourism and trade purposes, if that is feasible.
A joint venture to acquire two ferries should be pursued to transport goods and people through the region at a more affordable rate.
In the short term, the administration should be boosting current Barbados Coalition of Service Industries’ initiatives into countries such as Trinidad.
We should also be fast-tracking and investing in capacity building to take advantage of the European Union-CARIFORUM Economic Partnership Agreement opportunities in culture and professional services.
The Budget should have placed emphasis on generating revenues by easing the value added tax (VAT) on the tourism sector which is burdened by costs and losing its competitiveness.
Reducing the fuel costs to Barbados Light & Power should also be a priority, even if energy cannot be subsidized for the transport sector.
The Budget should have seen a reduction of the VAT to 15 per cent in order to stimulate local spending in the economy, generate jobs and increasing Government tax earnings from economic activity. In the long-term, the alternative energy package offered in the Budget can work but a financing feature should have been included, because people are not in a position at this time to make the investment.
Another initiative should have been a 40 per cent Government procurement to small businesses to stimulate jobs, spending and tax revenues.
Now is the time to reduce Government expenditure by judiciously capping transfers with specific initiatives and not generalizations about cost savings. These can be done, because “better can be done”.
