Full marks for the Mottley administration’s handling of the economy during its first year in office have come from the nation’s association of economists.
But the Barbados Economics Society (BES) has urged Government to address several concerns over the next 12 months if Barbados is to experience sustainable economic growth that benefits all Barbadians.
In its report card on the administration’s first year in office, the BES commended Government for acting quickly “in a situation that looked desperate”.
The BES also backs the administration’s controversial decision to outsource management of the Corporate Affairs and Intellectual Property Office (CAIPO). This, the society said, was a recognition that “we cannot accept inefficiency”, while pointing out that the plan to create new financial institutions will help fund Barbadian businesses.
BES president Simon Naitram said: “Whether you agree with the strategy or not, it was clear that immediate action was necessary.
“The Government created credibility by engaging the IMF (International Monetary Fund) with a plan in hand.
“This credibility brought the Caribbean Development Bank and the Inter-American Development Bank on board.
“Secondly, there have been encouraging steps towards meaningful structural reform. The new Town and Country Planning Act is a step towards less bureaucracy and more engaging administration.”
Naitram also highlighted Government’s communication, saying this has heightened social awareness and increased confidence.
“The Barbadian public is an important cog in the long-run growth story of the nation.
“The Social Partnership between employees, employers and Government thrives under full communication.
“We can achieve inclusive growth—growth that benefits all Barbadians—through full participatory democracy,” he said.
But Naitram said there were three main areas of concern, one being the effect of the economic measures on the poor.
“There is no doubt that Barbados’ wealthy could have borne more of the burden of austerity. An extra $2 per day in bus fare is $730 over a year. This wipes out the $700 increase in the Reverse Tax Credit for low-income Barbadians.
“Meanwhile, Barbados’ richest have received two tax cuts—one on personal income and one on business profits. By taxing income less and taxing goods/services more, the Government is imposing a heavier burden on the poor.”
Secondly, he said, the growth strategy remained too “foreign-centric”, focusing on attracting foreign investment, which he said was an unsustainable strategy.
“In the long run, Barbadians gain little from foreign exploitation of their country as the country is forced to satisfy the whims of international investors. Instead, we must prioritise Barbadian investment in Barbadian businesses,” he said.
The BES said the delay in negotiating and concluding the foreign debt restructuring, was also an area of concern.
“Defaulting on foreign debt has never been easy. Luckily, it is only a small part of our total debt. Unfortunately, the possibility of large foreign repayments in the future still hangs around our necks,” the association said.
Naitram said over the next year, there would be need for greater investment in public infrastructure and more genuine and far-reaching public sector reform.
Pointing to the recent south coast sewerage system crisis, which forced businesses to close and which resulted in a loss in economic activity for several months, Naitram said the country was only as good as its infrastructure, and therefore investing in public infrastructure creates new business opportunities.
The BES president said: “The decay in public infrastructure over the past decade is unmistakable. Economic returns are very high for investment in public infrastructure.
“Public infrastructure includes roads, schools, hospitals, water supply, coastal restoration, public spaces. To see how important infrastructure is, consider what happens when it falls apart.”
In relation to public sector reform, he insisted that it goes beyond simply adding performance reviews or allowing online payments.
“The public sector is inefficient because it is designed to be inefficient. Each department is propped up by dozens of bureaucratic regulations, requirements, and processes.
“For each bit of red tape, the costs to society almost certainly outweigh the benefits. Red tape encourages corruption, and makes Barbadians feel like hostages in their own country. We must redesign the public sector to enable Barbadians rather than to oppress Barbadians.”
The leading economist said Government must ensure it had open debate on economic matters, adding that economic policy should not be “tainted by political rhetoric from any side”.
“We must base economic decisions on objective consideration of costs and benefits. We must be clear on who pays the cost and who gets the benefits. Any recovery will be unsustainable without open, transparent and objective debate.”