Home » Posts » #BTColumn – Congrats PM, on your “Welcome Stamp” . . . May it be the first in a much bolder initiative!

#BTColumn – Congrats PM, on your “Welcome Stamp” . . . May it be the first in a much bolder initiative!

by Barbados Today
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Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today Inc.

The recent idea of PM Mottley to introduce a 12-month Welcome Stamp to allow “tourists” to work remotely for up to a year is most commendable. However, is it enough and can we perhaps also do a lot better with our International Financial Services (IFS) sector?

Current economic situation

As to be expected, under the current coronavirus situation Barbados is undergoing a most difficult time. The circumstances were already precarious before COVID-19 due to a huge government debt, no economic growth, high unemployment, an overweight civil service, increased government ministers and an abundance of grossly inefficient State-Owned Enterprises (SOEs). To add COVID-19 on top of these challenges makes the situation unbearable. However, we do have a world-class PM and because we are a tiny nation, a few projects can have a tremendous positive impact. Moreover, we do have some opportunities that can be realized at little cost—it does, however, require assertive action.

International financial services

A sector that still offers good prospects is the IFS market, provided we are creative and willing to facilitate business in a very business-like manner. We have a hubris that we are Barbados and our model is the best. It is not, and it has under-served us for well over a decade. We should have been much further ahead. For instance, Cayman, B.V.I., The Bahamas and Bermuda all have a higher percentage of GDP represented by the IFS sector and commensurately, a higher income per capita when compared to Barbados.

Under the DLP, this sector was allowed to decline drastically. Tax revenues were over $350 million in 2007 and by 2013 they had fallen to less than $100 million. Do we even know what they are today? Poor leadership and management would have been factors in the downturn. The Minister responsible for this sector was apparently unaware that the biggest revenue earner in the sector had left Barbados! The fact that the company also left without informing the government probably meant that they did not think it was worth their while to do so! Why was that? This reminds me of a meeting I attended several years ago with many of the CEOs of major multinational corporations regarding their decisions to choose a country to set up a business. The former CEO of GE said, “We go where we are welcome and we stay where we are well treated.” It is key for the government to recognize that this sector should be led by one of the brightest and most dynamic of ministers.

The IFS sector has numerous economic benefits. It generates FX, taxes, and feeds real estate sales and rentals, as well as lawyer fees, real estate commissions, construction, architectural renovations and interior decorating services, along with landscaping, restaurant and hotels business, taxi services, car rentals and retail operations. It also creates direct employment opportunities for lawyers, accountants, office staff, gardeners, maids, etc.

Challenges and opportunities

It is true that all the major powers are intent on destroying the so called “offshore centers”, especially small, vulnerable countries, even though they will not do that with places like Delaware or Las Vegas in the US and Luxembourg, Liechtenstein, etc. in Europe. Nevertheless, the sector will survive because I believe that human nature does not change and that many wealthy people and corporations will often seek the best ways to protect their assets. As the rules and regulations change, the product and the creativity of the international tax lawyers and accountants also change. To its credit, Barbados does have a good base but it must recognize the challenges and be prepared to keep abreast of all the things affecting this sector and to be nimble. The sector will not disappear but the players who cannot run with the best will disappear. We have to be seen as a leader.

I have always believed that “the brains will bring the business”. Hence, we must find out what things the brains require to relocate to Barbados so we can entice some of them. Once we have this center of excellence, the ideas and creativity will abound and the sector will flourish. Unfortunately, some of the local titans in this sector are opposed to opening these services to foreign players. They prefer to be a king in a pond rather than compete in the ocean.

New strategies required

Traditionally, Barbados has sought Double Taxation Agreements (DTAs) with many countries as a way to focus on relationships with the corporate business. This market has become difficult because the competition has gotten a lot stronger and the powerful nations have also campaigned against these services.

It is interesting to note that the experts in the IFS sector recommended the importance of Barbados having a Bilateral Investment Treaty (BIT) with the US. Over six years ago, we met with the US authorities in Washington on this matter. Françoise Hendy was our lead spokesman, and she was excellent in discussing the various aspects of a BIT with about six specialists from the US side. Basically, there were no difficulties encountered. The problem was that the US was very occupied with other countries in full negotiations and we needed to wait our turn. Unfortunately, the responsibility to follow-up was in the hands of the Ministry of International Business. It would be interesting to know what happened or why nothing happened?

Under the current conditions, our focus should be on a more attractive market. Namely, wealthy individuals (such as the owners of the structured financial products devised for the corporations) and professionals who would like to operate digitally away from their home base.

The Welcome Stamp initiative should be seen as the first step in a much broader strategy. It is an opportunity to address the country’s declining population with visitors of economic resources that can immediately help to stimulate the economy without being a burden on the government of Barbados.

However, the goal should really be to use the Welcome Stamp as a sort of “bait” or teaser to encourage visitors to become property owners and residents of Barbados and to persuade their friends to do likewise. Hopefully, the Welcome Stamp will help visitors become more familiar with Barbados and that will lead them to become residents. This will not only stimulate the economy but give it more sustainability that produces substantial property taxes. The objective is to bring about a genuine partnership between the government of Barbados and our people with foreigners who wish to consider Barbados their home.

Need for competitive analysis and an ongoing strategic plan

It is essential for us to analyze the IFC sector, to see how it is changing and the implications of that change so we can take the appropriate actions.

A very quick and dirty analysis indicates that our Special Entry & Reside Permit (SERP) is not competitive in attracting permanent residents. We need to prepare a spreadsheet that provides a comparison of the competition including countries such as The Bahamas, Cayman, Channel Islands, Portugal, Singapore, Cyprus, Gibraltar, St Kitts, Grenada, BVI and Panama. Once we know what we are up against, we can then devise a strategic plan bearing in mind the words of The Godfather of strategy, Michael Porter: “Strategy is choosing to run a different race.”

Feedback from several players in the IFC sector is overwhelmingly that the major problem that must be eliminated is the failure to change quickly and intelligently.

Things to consider

— How will the Welcome Stamp be facilitated online?

— It is possible to remain in Barbados for six months. However, a tourist is often given an entry for 28 days or a period of three months. This means the visitor has to seek an extension which is time consuming, bureaucratic and has a cost as well. In comparison, I can visit the US or Brazil for six months without any red tape.

Why not arrange for these individuals with the appropriate documentation to have the passport stamped up to six months? By comparison, BVI provides non-resident property owners with a card that entitles the holder to stay for six months.

— Young professionals may have children that they wish to educate and to have them schooled in a system where the education is recognized internationally. Why not review the options for these needs and seek the best solution (s)? It may be an opportunity for some individuals and companies to create a new school and expand the educational experience. If such a school was formed, it could be an opportunity to provide some scholarships for Bajans to attend the school to have further cooperation with student integration.

— Medical insurance is an issue with Coronavirus. Aruba insists that all visitors are required to buy their insurance. It may be an opportunity for Sagicor to offer a product (s) or for BIBA to assist with access to a special group insurance. An influx of residents might resurrect the private medical facility that was once planned at Welches, St. Thomas.

— Where is the visitor considered as a resident for tax purposes? One year is probably too short for someone to come here and give up their home. If there are any costs associated with the Welcome Stamp, it may be cheaper for the tourist to spend three months at a time.

Would we not be better off providing a cleaner, broader programme that gives five years, then convert into residency? It should have different classes such as a skilled person, a mobile worker, a self sustaining person (with easier financial thresholds than now found in the uncompetitive SERP programme). So long as these people are not taking a domestic job, we can welcome them. If they set up a business, we should facilitate it. And if they live here and work outside of Barbados, they should not require a work permit.

— It is important that a Welcome Stamp is not full of bureaucracy, involving fees (unless they are refunded if the visitor requests a residency status), excessive information and forms.

Other

Immigration of financially independent tourists has tremendous merits. However, in today’s world, one has to be aware of political considerations. We should be aware of whether or not any in-built xenophobia will kick in because it is almost certain that the vast majority of potential takers of the Welcome Stamp will not look like the main population of Barbados. Additionally, although Barbados is a signatory to UN and Commonwealth conventions regarding many forms of discrimination, we have not fully complied.

While Bajans are friendly, the hospitality and open friendliness is more pronounced in other WI islands. This is an opportunity for Bajans of all walks of life to show to the world that we are world leaders in friendly relationships with visitors. The private sector as well as clubs, churches, charity groups, historical groups, etc., should have a determined policy to reach out to visitors to welcome them and guide them to feeling at home. This can be a unique feature in our product that can have lasting relationships and give us a competitive advantage.

A major paradigm shift is a matter of Bajans having a good attitude. In this case, attitude is  more important than aptitude. We need to move from “it can wait” to coming across positively where “the answer to your question is surely yes, now tell me sir, what is your question?”

Another way of looking at the wider picture is that it is like baking a delicious cake. It requires many aspects, namely: the right ingredients, the correct amounts, the correct temperature, as well as the right time and to serve it with a smile! It therefore needs a band leader who can get the various parts of the government to have a passion to move to the beat!

John Beale is a former Barbados Ambassador to the US and OAS. He is a former international banker having worked at Chase, RBC/BofA, the World Bank group and served as a director on many companies in the IFS sector.

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