ECONOMIC VIEWPOINT: Vibrant export-led strategy essential
THIS column has called repeatedly on the authorities in Barbados to pursue a more vigorous export-led policy that would add greater buoyancy to the economy.
Barbados faces some very tough times in a troubled world and with that must come measures that are able to respond to the situation.
Against this background, the call is again being made for such as the search continues for a better performing economy and to put the country on a path of sustainable growth, unlike the long talk which is getting Barbados nowhere.
A vibrant export-led strategy is being suggested in light of what is necessary to reform the Barbados economy to deal with the continuing economic slowdown and the need to do things differently if the island is to recover from the current impasse.
In spite of the previous calls, successive governments appear not to be too committed to those ideals, except to placing everything on the shoulders of the tourism industry, which is usually the first casualty when recessions and other global slowdowns come a-calling.
As things currently stand, Barbados remains in a low or better yet, a no-growth mode. Our export economic sectors are stagnant, output is very low and while foreign reserves remain robust on account of the tremendous borrowings from the multilateral institutions, the outlook is for more of the same which has occurred in recent times.
An export-led strategy involves giving our exporters/exporting sectors the appropriate tools to get more of their goods (and services) in foreign markets, including some with which the country has been doing business.
It is known that over the course of the last decade, Barbados has undertaken several market surveys, signed bilateral agreements, and mounted trade missions in and around the Caribbean and as far as Latin America. There are agreements in place with the Dominican Republic, Central America, Panama, Cuba, Guyana, the French departments, some African states, and the list goes on and on.
Somehow and somewhere the country seems unable to build on these initiatives, leaving one to conclude that all of those efforts would now amount to nothing and a waste of resources and taxpayers’ money.
Barbados has still not been engaged in the development of new products and services as other countries have done, which are vital for the export push. It was thought that recently, the economic stabilization programme would have come up with the template necessary to make the economic sectors more productive and competitive.
Like other countries, Barbados sees trade contributing to economic growth. Several studies have been done to demonstrate there is causality between exports and economic growth. The evidence is there in Asia, certain African and Latin American nations, and some here in the Caribbean.
An export-led strategy also has the potential to attract foreign direct investment, promote economic growth, earn more foreign exchange, allow for the transfer of technology, and leads to job creation.
These would make Barbados a more robust economy rather than continuing to be characterised as a one sector-led economy, and the consequences that take place from that.
Since new technologies and the value chains are driving a lot of what is being done by countries, Barbados has to follow suit with these new paradigms taking into consideration our special needs, with telling effect.
Renewable energy is very much on the radar for making the country more competitive, and would be an added input to business operations by lowering the cost of production and creating other benefits.
It is recognised that not all of the present businesses which are into exporting, will be around given what is expected going forward, unless they have undertaken the necessary reforms to make them more competitive.
At the time the first call was made for the strategy in early 2015, the Barbados economy had the previous year recorded zero growth (in 2014). The rate of unemployment that year was 12.3 per cent, with foreign reserves of $942.6 million, a fiscal deficit trending towards 7.6 per cent (by March 2015), an external current account deficit of 9.2 per cent, and a two per cent rate of inflation.
In addition, domestic exports were valued at $539.4 million in 2014, but had fallen to $510 million by the end of December 2018. In fact, the four per cent growth reported for 2014 did not carry through in 2015 and there has been a lacklustre performance since then.
The major export commodities are Rum, Food, Sugar, Chemicals, Printed Paper Labels, Construction Materials, Energy, Wooden products (including Furniture), Pharmaceuticals, Condiments and Cement, among others.
In the table depicting the performance of individual areas that account for exports, it is noticeable that electronics has fallen off the cliff.
Furthermore, re-exports, which contributed $409 million to the economy in 2014 and $479 million in 2015, declined to $385 million at the end of last year.
Barbados’ main markets for exports are the USA, Trinidad and Tobago (and the Caribbean), Canada, and the UK.
Therefore, exports, which in the words of the World Trade Organization (WTO) constitute a component of aggregate demand, stimulate growth of domestic output and hence income and employment. By expanding markets for domestic firms, the WTO went on, exports create conditions for production costs to fall, once other policy measures are in place.
The way things are is that while tourism may restore some growth, Barbados needs to move ahead with a balanced economy where other export sectors are doing better.
So it is time for policymakers to come up with another plank to diversify the economy, one that drives Barbados’ export potential. (JB)