INAUGURAL BARBADOS BUSINESS FORUM STRESSES

UNCLAS SECTION 01 OF 02 BRIDGETOWN 000661 SIPDIS SANTO DOMINGO FOR FCS DEPT FOR WHA/CAR, EEB/CBA, EEB/IFD E.O. 12958: N/A TAGS: ECON BEXP ETRD XL SUBJECT: INAUGURAL BARBADOS BUSINESS FORUM STRESSES REGULATION, DIVERSIFICATION -------------- Summary -------------- ¶1. (U) Tougher regulations on international financial service providers, mainly to diminish criticism of their operations as so-called "tax havens," and diversification of the Caribbean market were two main themes of the Barbados International Business Association's first-ever conference on the investment climate. Recognizing that the global economic crisis has forced many sectors to revisit their modus operandi, conference attendees agreed that building liquidity and opening new business opportunities such as renewable energy production would be essential for the sector to stay afloat. Private sector entities signaled a willingness to evolve quickly, but they expressed doubts about regional governments' ability to follow suit. End Summary. -------------- Out With the Old, In With the New -------------- ¶2. (U) The October 7 Barbados International Business Association (BIBA) conference covered a range of topics from the international banking system and asset management to maintaining competitiveness and the potential risks to offshore financial sectors. Speakers and attendees alike focused on the perception that, if businesses and governments fail to seek new investment opportunities or to ensure proper legislation and regulations are in place to fight corruption, other regions will continue to outpace the Caribbean in the international business sector. Some went so far as to insist that it may be too late, as Caribbean international financial centers have already been stigmatized by the G20, tarnishing the image of low tax Caribbean jurisdictions, and leading many investors and financial institutions to take their business elsewhere. Others were concerned that, without moving into new investment areas such as green technology, including the production of biofuels, solar, and wind energy, the region could be left behind other, more innovative, countries. Many cited Singapore as a nation that has exemplified how steady growth can be achieved through intelligent diversification and stringent regulation of its market. ¶3. (U) Macroeconomic specialists pointed to the likelihood that consumption would continue to decline in the short term, as consumers opt to build liquidity and assets rather than 
invest or expend resources. While favorable for asset management, such a trend was seen as a major disadvantage for tourism -- the Caribbean's main source of revenue. As such, experts concurred that specialized niches within the tourism industry could be created to attract certain travelers. From ecological to medical tourism, some Caribbean countries are already exploring such possibilities with measured success. A Forbes researcher told PolOff that his discussions with relevant Barbados ministries revealed that the government has, in fact, been concentrating on the development of niche enterprises, with medical tourism and mechanisms to attract non-domiciliary employers topping Barbados' agenda. -------------- Moving the Beast -------------- ¶4. (U) While there was widespread agreement regarding the need to evolve and improve the seemingly stagnated regional investment climate, many were doubtful that regional governments would be able to move beyond the status quo, execute new business plans, and rid themselves of the legacy of colonial bureaucracy that still holds sway in the Caribbean. Noting that serious losses in state revenue could be expected within the next few years, given declining consumption levels, experts unanimously agreed that the time was ripe to change practices. Participants agreed that regional governments should move aggressively to establish double taxation agreements and bilateral investment treaties, and to develop more skill- and trade-based educational institutions -- possibly together with private sector partners. Participants also agreed that governments needed to reform legislation and regulation of the offshore finance sector to get out of the OECD's "tax haven" crosshairs. ¶5. (U) In his speech to the forum, Barbados Minister of Economic Affairs and Empowerment, Innovation, Trade, Industry and Commerce David Estwick announced that the government has drafted a two-year short- and medium-term action plan designed to support further expansion of the international BRIDGETOWN 00000661 002 OF 002 business sector and preserve the island's reputation as an OECD "white-listed" low tax jurisdiction. Estwick specified that the plan would also bolster diversification and product expansion, adding that, through the international business unit, the government also plans to widen the tax and treaty network and strengthen cooperation with the OECD on taxation information exchanges. -------------- Comment -------------- ¶6. (U) This meeting of the minds was a welcome step for the Barbados business community -- and its expatriate community -- and one that could pay dividends as business leaders lobby regional governments to effect the types of changes needed to keep the Caribbean competitive. It also served as an apparently useful educational tool for those in the public and private spheres who may not have been aware of the common concerns shared by the business community. The criticism that governments here are slow to change is valid, but Barbados' government is at least making the right noises about the value of diversification and the importance of maintaining a clean business image internationally. With its substantial head start in GDP per capita and its reputation as a safe investment destination -- it was the only Caribbean country to debut on the OECD white list -- Barbados is perhaps the best placed of any CARICOM country to develop the commercial agility needed to weather the recession and build for the future. HARDT