Barbados is best known for its tourism product. Investment in tourism is one of the catalysts which has given rise to substantial investment in the area of international business services.
IDENTIFYING THE GROWTH AREA IN THE ECONOMY
Research work in the area of both financial and non-financial services shows that the provision of services is expected to accelerate within the next ten years and will be information technology driven. In a 1998 report on the competitiveness of Caribbean financial services, financial services were identified as one of the fastest growing sectors in the world economy. The surge in the supply of financial services is attributed partly to the tendency of services as a whole to expand rapidly during the course of economic development, and also to the vigorous liberalisation of markets.
The current telecommunications infrastructure has the ability to meet large data transfer requirements and is at the forefront of modern technology.
OVERVIEW OF THE BARBADOS ECONOMY
Barbados has a mixed economy currently based on four pillars: export agriculture (sugar), tourism, international business and financial services and light manufacturing. In 1998, Barbados recorded its sixth consecutive year of economic growth. Real GDP expanded by 4.9% compared to 3% in 1997. Expansion in real output was led by the growth of approximately 6.1% in the non-traded sectors (mainly in construction, wholesale and retail and business services) whilst output in the traded sectors expanded by 2.1%, led by the tourism sector.
THE INVESTMENT INFRASTRUCTURE
Barbados has set out to establish and expand its treaty network through the conclusion of bilateral investment treaties and double taxation agreements. Barbados has entered into agreements with several countries including Canada, China, Cuba, Germany, Switzerland, Venezuela and the UK.
Barbados is a member of the Caribbean Community (Caricom). Most of the Member States represent the English speaking countries of the Caribbean. The community is working toward the creation of a single market and economy. There is therefore considerable scope for investing into the region as a single investment market as it moves toward facilitating the free movement of goods, services, capital and labour. The Caricom is in the process of reviewing its constitutive document, the Treaty of Chaguaramas in order to fully achieve this end.
The world is currently seeing a re-configuration of the global economy driven by globalisation and the re-thinking and re-organisation of the rules of trade which has contributed to an increased pace for mobilisation of trading blocks. Barbados is a part of this world phenomenon as it engages with Member States in the strengthening of Caricom. Internationally, Barbados is a member of the World Trade Organisation and is a party to the hemispheric negotiations to create a Free Trade Area of the Americas by the year 2005.
The Legislative Framework For Commerce And Intellectual Property
The legal system in Barbados is grounded in English Common Law but is continuously under review in order to ensure that it meets the needs of the business community. There is a modern Companies Act and an Income Tax Act and recent legislation in the area of trusts, banking, mutual funds and insurance.
Barbados has undertaken to meet its obligation under the WTO Agreement on trade related aspects of intellectual property rights. It has enacted a new Copyright Act as well as a Geographical Indications Act, an Integrated Circuits Act and a Protection Against Unfair Competition Act. The legislation with respect to patents and trademarks will soon be amended and legislation for the protection of new plant varieties is soon to be enacted. Barbados recognises that intellectual property is an increasingly complex issue. Barbados is establishing the appropriate legislative framework in order to guarantee the rights of inventors and creators.
Incentives For Export
The country's focus is not on foreign invest-ment alone. Barbados is eager to encourage the entrepreneurial talent of Barbadian investors, so that foreign investors have the option of investing solely or in partnership with local investors. Thus, Barbados incen-tives are geared toward encouraging export activity and the earning of foreign exchange by both nationals and non-nationals.
Credits, Allowances And Rebates
The corporate tax rate in Barbados is 40% with a number of credits and allowances to facilitate exports. These incentives are directed at tourism, agriculture, manufacturing and international business services.
i) 40% deduction as an export allowance.
ii) Cash rebates for expenditure on machinery and plant in non-sugar agriculture.
iii) Research and development allowance of 150% of actual expenditure incurred for persons involved in export outside the common market.
iv) 150% allowance of expenditure incurred in encouraging tourists to Barbados.
v) Tax credit up to 93% depending on the amount of foreign currency generated in business activity.
Export allowance of up to 80% for export of the following:
- data processing services;
- exports of a company that purchases wholesale from a local producer exclusively for export;
- the export of products of an industry or business, other than sugar in bulk or such other product as the Minster declares by order to be a traditionally export oriented product;
- training grants;
- subsidised commercial and industrial buildings; and
- tax relief on expenditure in the construction and refurbishment of hotels.
Low Tax Rates
There are a number of entities licensed to carry on international business which pay tax at a low rate ranging from 0% to 2.5% depending on the type of export activity in which the entity is engaged. These entities include exempt insurance companies, international business companies and offshore banks.
Human Resources
Investors have found that while Barbados cannot provide "cheap labour", labour costs are relatively low when one takes into consideration that persons in Barbados are already highly skilled or are easily trained. Barbados has for many years recognised the important link between education and business and as such strives to keep ahead of the demands by businesses. Already, a strong link has been forged between information technology-based investors and the various institutions of learning in Barbados.
SELECTED AREAS FOR INVESTMENT
One of the great advantages to investing in Barbados at this stage of its development is the fact that a sophisticated infrastructure has already been established and, as a result, initial investment costs are low. There are a number of investment opportunities available especially in the new area of information technology as well as in health and education.
Information Technology-Based Activity
In terms of information technology, Barbados had its early successes in data capture. Investors have had considerable success in providing services from Barbados such as data entry, market surveys, telemarketing, insurance claims processing, computer-aided design, database management, litigation support services and typesetting. Investors have now recognised that excellent opportunities exist in developing software in Barbados for "Fortune 500" companies. Highly sought after software engineers consider it an attractive incentive to live and work in Barbados. In addition, investors have access to university graduates from Barbados.
Health And Education
There are many medical and education professionals that have been trained both regionally and in international institutions. Telemedicine and distance learning are important features in the area of education and health.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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