A robust and vibrant economy is ready to build on its strengths
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Barbados stands at a crossroads. Behind lie a few rough years, extending from the financial crisis that rocked Europe and North America. Yet for all the tribulations, the island’s economy remains resilient, and is able to draw on revenues from a remarkably diverse assortment of fast-growing and increasingly profitable sectors.
Investment in education and healthcare has remained high throughout the past five years, while foreign investors, funds, skilled white-collar workers and wealthy retirees continue to flock to the island in search of low levels of corporate and income tax and a super-high quality of life. New legislation, set to become law in the near future, will allow individuals with more than $5 million in bankable assets to become permanent, property-owning Barbados residents.
Switzerland with beaches
Look around the island and you see an extraordinarily diverse and robust economy, as stable and organized and orderly as any leading first-world financial economy, like Switzerland with beaches, or Singapore without the humidity.
The roads are filled on weekday mornings and evenings with commuters, and restaurants and bars are packed in high season, when it’s hard to get a room in high-end hotels like Sandy Lane, Little Arches or the exquisite Colony Club.
All of which aids the growth and sustainability of probably the region’s most diverse, stable and robust sovereign state. Despite shrinking 4% in 2009 as the world gasped for air, Barbadian gross domestic product returned to growth the following year. DeLisle Worrell, governor of the Central Bank of Barbados, tips the economy to grow at a sustainable, long-term annual rate of around 3%. The island’s recent economic performance, he says, is "commendable" given the headwinds it has faced, particularly in the markets for tourism and traded services.
Euromoney Country Risk (ECR) data underscore how successful the island has been in adapting to recent challenges. Barbados’s overall ECR ranking has consistently outperformed the region in recent years, rising from 36.9 points in September 2010 – which marked the first edition of the global database – to 47.53 points in December 2013, a rise of 42 notches, to 73rd place, in barely three years.
Barbados ranked first region-wide in terms of its regulatory and policy environment in December 2013, and places second across a key range of issues, thanks to low levels of corruption, political risk and institutional risk, and an enduringly high level of government stability. In terms of access to capital and debt indicators, the latter denoting the island’s manageable debt burden, Barbados ranks second across the Caribbean.
Reasons to be cheerful
Wherever you look, there are reasons for economic optimism. Barbados placed 47th in the World Economic Forum’s 2013-14 Global Competitiveness Report, the highest sovereign score in the Caribbean, beating the larger economies of Trinidad and Jamaica into 92nd and 94th place, respectively. Barbados cemented its status as the region’s best-run and best-managed economy in the WEF’s report, outperforming average pan-Caribbean scores across a host of metrics, including innovation, infrastructure, healthcare, education, labour market efficiency and technological readiness.
Looking further afield, Euromoney’s ratings show economists ranking Barbados alongside Mauritius (rated Baa1 by Moody’s), another vibrant offshore economy with a similar business model. Barbados also has a higher ECR ranking than Azerbaijan, also considered investment grade by Moody’s, suggesting that economists retain a much more positive view of the country than the agencies suggest.
Nor is this a static economy, reliant on squeezing value out of a few tried-and-tested industries. In a December 2013 report, the island’s central bank noted that Barbados’s ongoing recovery stemmed firmly from rising investment and activity in the private sector. Investment capital continues to flow into the business-friendly island, which boasts an average corporate tax rate as low as 1.6% for international business and services companies.
Agribusiness remains a serious business: Barbados is home to great global names in the rum trade, like Mount Gay and Cockspur. Green energy output is growing fast: solar power will make up around 10% of the island’s electricity output by 2018, notes Worrell. Barbados is also host to a number of rising green-energy names such as Solar Dynamics and Innogen Technologies.
And while the island boasts the sort of global business advisory names you’d usually find in clusters on Wall Street or in the City of London – Ernst & Young, KPMG, Deloitte – it has also succeeded in attracting some serious names in the specialized consultancy space. A notable coup came when it convinced Damian McKinney to relocate the international division of his consultancy, McKinney Rogers, from southwest UK.
Conduit for investment
Barbados is the perfect place to find financial and investment advice. Global corporates and institutional investors have long parked their money on an island famed for its low prices and business-friendly tax regime. Barbados is a sovereign territory to invest both in and through: its double-tax agreements and bilateral investment treaties make it the ideal conduit through which to invest capital in countries with incomplete or troublesome regulatory structures.
This makes it easier to comprehend the scale and suppleness of the island’s financial economy. Billions of dollars pass through the island on a daily basis, some of which sticks. In 2012, Barbados was the third highest recipient of Canadian-originated foreign direct investment.
And tourism, one of the island’s oldest and most reliable foreign exchange earners, is also undergoing a renewed investment boom. Sandals, the Jamaica-based luxury hotel brand, opened its first Barbados hotel in 2014. It is set to open a second resort in 2015, co-financed by Chinese investors.
Two high-end maritime projects, Sugar Point Pier and Pierhead Marina, are also moving close to getting the green light, says minister of finance and economic affairs Christopher Sinckler. About 500,000 tourists visited the island in 2013, primarily from the UK and US, while cruise arrivals rebounded by over 10% in 2013.
Pierhead Marina is one of several landmark projects designed to generate more tourism revenue, and to refine and expand the sector’s repertoire, from cultural tourism and sporting events – the BBC programme Top Gear is holding the first of three annual two-day rallies at the Bushy Park Circuit in mid-May 2014.
In Washington’s footsteps
As for physical healing, Barbados was a byword for medical tourism long before the term was invented. George Washington visited the island in 1751 – the only time he left the US – to cure himself of tuberculosis. The rugged east coast has meanwhile become a sanctuary for sufferers from Parkinson’s disease; the island also boasts the region’s leading fertility clinic, says Jeremy Stephen, president of the Barbados Economic Society (BES).
"Medical tourism is set to explode here," notes Sir Trevor Carmichael, a leading lawyer and chairman of Bridgetown-based Chancery Chambers. "The sector is underexploited and I see private sector investment rolling in in the coming years." Nor should the fabulous festivals be overlooked, notably the Rio-style Crop-Over harvest festival in July and August, when the island goes gently crazy.
And that’s not all. Barbados is fast becoming a regular stop-over for cruise ships, and has plans, underpinned by tax incentives, to become a natural destination for film-makers. Notes the BES’s Stephen: "With the widening of the Panama Canal, Barbados could become the global gateway to the Americas, which would boost revenues from trans-shipments. We are also looking to develop our logistics sector and to invest more in information and communications technology. There is so much we have done, and so much more we can do. For Barbados, the sky is the limit."
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