October Economic Letter

In my letter this month I focus on our international business and financial services sector. The sector is second in importance to tourism as an earner of foreign exchange, and we therefore look to the international business and financial services (IBFS) sector, along with tourism, to lead the future growth of the economy. By now I do not need to remind you that our economic growth depends on increasing our earnings of foreign exchange, because of our need for imported materials, machinery and consumer goods.

We have every reason to expect robust future growth of the Barbados IBFS sector, despite the well-publicised challenges we face. International financial centres such as Barbados play a vital role in increasing the efficiency of international commerce in a globalised world. We offer financial, accounting, legal, trading, information, administration and other services that are up to international standards, at costs much lower than would be the case in the major financial centres of the world. Young Barbadian economist Simon Naitram recently published an important technical paper demonstrating how international financial centres provide a benefit to all parties to international transactions. (“Offshore financial centres in the global capital network,” De Gruyter Global Economy Journal, 2014). Because of this, IBFS centres are here to stay, and
Barbados has secured a small but important share of this global market.

The beneficial role of IBFS centres in global commerce and the competitive advantages of the Barbados IBFS centre were the themes of an international conference on International Financial Centres jointly sponsored by Invest Barbados and Central Bank, on September 11. A highlight of the conference was a presentation by Prof Walid Hejazi of the Rotman School of Business of Toronto University, in which he demonstrated how the use of the Barbados IBFS centre had facilitated the growth of the international business of Canadian companies.

The Global Competitiveness Report 2014-15 cites Barbados' comparative advantages in global commerce as including our Social Partnership, other institutions, infrastructure, health, education, labour market efficiency, financial market development, technological readiness, and innovation. In addition, Barbados has a network of 34 Double Taxation Agreements (DTAs) and 9 Bilateral Investment Treaties (BITs), and a regulatory framework whose international quality is attested to by the World Bank and IMF (through comprehensive financial sector assessment programmes), the Caribbean Financial Action Task Force on anti-money laundering, and the OECD's Global.

Forum on tax information exchange. Barbados has an established name in the global market as a highly reputable host to international companies and financial institutions, which welcomes active business that creates employment and value added in Barbados, and contributes to the growth of our economy.

Two weeks ago I led a team comprising Mr. Randy Graham, CEO of the
Financial Services Commission, and Central Bank staff, on our annual visit to Canada, to confer with the head offices of Canadian financial institutions, and the financial regulators. We also took the opportunity to meet with BIBA Canada, the Barbados Foreign Affairs teams, and representatives of Invest Barbados, the Barbados Tourism Marketing Inc. representative, and the Canada-Caricom Committee of the Canadian Parliament. The enduring strength of the Barbados IBFS sector was a major theme of our discussions. We explored with our partners the many initiatives that are in train to energise Canadian demand for our IBFS services. They include networking with Canadian professionals, conference participation, research, documentation and outreach, training for Barbadians, and a Canadian media strategy led by Invest Barbados.

Barbados faces challenges of misinformation about who we are and what we offer, and international regulatory guidance affecting us that is not always transparent. We are meeting these challenges head on. In addition to the measures specific to the Canadian market, IBFS practitioners, Invest Barbados, BIBA, the Ministry of International Business and Central Bank are collaborating on the development of new business products, the exploration of new markets, research and information, monitoring and commenting on international financing initiatives such as the OECD's Base Erosion and Profit Sharing (BEPS) initiative, and the continuous upgrade of regulatory standards, to ensure that Barbados'
IBFS sector remains among the world's most competitive.