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

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Summary
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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.

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Out With the Old, In With the New
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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.

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Moving the Beast
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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

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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.

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Comment
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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