The Barbados Economic Recovery and Transformation Programme, also known by the acronym BERT, is a programme designed to resuscitate and transform the Barbados economy. There is little doubt that the Barbados economy has been in need of reform for some time now. Since the early 1990s, the last time that our economy was in severe crisis, the need for economic reform, if not restructuring, has become acute; some might say absolutely necessary. The question which has not been addressed thus far, is how it will affect business.
The last economic crisis resulted in an upsurge in small and micro-business investment by those who were laid off by Government during the 1990-1993 timeframe. The question is whether the same thing will happen again. Since that time, successive governments have encouraged Barbadians to get involved in the formation of new businesses. Entrepreneurship became the buzzword. Our educational institutions from primary to tertiary became involved in the delivery of programmes to assist those starting new business ventures.
Funding for these new ventures was provided by Government through a number of avenues. These were the Enterprise Growth Fund for large ventures, and for small and micro-businesses, Fund Access was the funding agency. Credit unions also provided another avenue. Banks also provided some credit facilities, and a few created units exclusively to support small business ventures. Government also reformed insolvency legislation via bankruptcy legislation which made it easier for businesses to seek protection from creditors if they encountered financial difficulties.
What has been the result of this activity? There appears not to be enough economic data to demonstrate the benefits of these efforts, which may have been significant. However, the ways of doing business have changed. Businesses are more cognizant of the cost of operations and are no longer employing persons for 20 or 30 years. Short term employment contracts are increasingly becoming the norm and the levels of skills required for permanent employment are also becoming more detailed and demanding. In short, more is expected for less.
Businesses expect their employees to be more entrepreneurial. Indeed, my short stint in the banking sector exposed me to the challenging targets these institutions expect their employees to meet. Businesses are also investing more in automation and information technology to perform the tasks of answering customer telephone queries, internet banking facilities which allow customers to pay bills and to make transfers between accounts as well as to apply for cheque books. Information technology systems allow businesses to track customer buying habits and to better target what and where consumers spend their hard-earned money. As a result, the requirement for a large staff in most businesses is much reduced.
I was introduced to the concept of jobless growth many years ago. Jobless growth refers to the return of an economy to growth without the corresponding increase in employment. This is what occurred in developed economies in the 1990s. In the United States, though employment has returned to levels of before the great recession of 2008, these new jobs are mainly in the services sector and do not compensate employees at the same level as prior to the recession.
This may hold significant implications for the economy. Employment levels may be reduced and trade union representation may be reduced which may result in these organisations which protect workers’ rights becoming obsolete, for example. Furthermore, national insurance contributions may also decline and may imperil long term sustainability of the National Insurance Fund. Government’s revenue base may be eroded for both direct and indirect taxes. With less employment, there will be reduced purchasing power which in turn affects consumers’ ability to purchase goods and services and this impacts the indirect tax system (VAT).
This is not a situation of all gloom and doom. Barbados has some advantages: a well-educated and trainable workforce, sound infrastructure, and sound educational and health systems. We have to leverage these advantages. We have to invest in developing the entrepreneurial talents of our people. This has to start within our educational system. The basics must be taught, but we must also engage the minds of our youths to the applications of the basics. If we have produced persons who have excelled beyond our shores as a result of the fundamentals developed here, why can’t we take it to the next level? We have produced world-class people despite our limited size and resources.
We must reform our legal and financial systems. We often complain that the cost of doing business in Barbados is too high, there is too much bureaucracy and we often have to wait in line for long periods of time. All of the foregoing is true; our system of law with respect to companies needs to be reformed to allow Barbadians to form newer types of corporate structures. Our corporate registry should be upgraded to allow for the electronic filing of documents related to company formation. Online filing and payment for most governmental documents such as drivers’ licenses for example, should also be considered.
The foregoing changes require investment and careful implementation. It also requires time; given the current economic circumstances, such may not be viable in the short term. However, we in Barbados are to move away from the ways of doing business which are more in step with the 19th Century. Investment in up-to-date methods, management techniques and technology must be considered and implemented as we emerge from the current economic downturn.
Edward Hunte is an Attorney-at-law with experience in business and economics.