Wayzata World Factbook 1996

home *** CD-ROM | disk | FTP | other *** search

/ Wayzata World Factbook 1996 / The World Factbook - 1996 Edition - Wayzata Technology (3079) (1996).iso / pc / text / economic / barbados.txt < prev next >

Wrap

Text File | 1996-01-10 | 28.3 KB | 580 lines

U.S. DEPARTMENT OF STATE BARBADOS: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES BUREAU OF ECONOMIC AND BUSINESS AFFAIRS BARBADOS Key Economic Indicators (Millions of U.S. dollars unless otherwise noted) 1992 1993 1994 Income, Production and Employment: Real GDP (1985 prices) 422.2 396.0 401.1 Nominal GDP (current prices) 1,696.7 1,585.7 1,640.3 Real GDP Growth Rate (pct.) -4.0 -5.8 0.8 Sectoral Growth Rates: (pct.) Agriculture/Fishing -4.6 -9.2 -7.1 Tourism -9.0 -2.0 3.2 Manufacturing -5.6 -9.3 -0.3 Energy/Gas/Water 3.0 1.3 0.3 Mining/Quarrying 3.1 -9.7 4.2 Construction -7.5 -8.1 2.1 Wholesale/Retail Trade -6.3 -7.9 2.4 Business/General Services -2.4 -5.3 0.9 Transport/Storage/Communication 7.5 -3.5 1.2 Government Services -2.2 -5.0 0.0 Population (000s) 262.5 263.1 263.9 Nominal Per Cap. GDP (official/$) 5,600 5,150 5,250 Nominal Per Cap. GDP (GDP/pop/$) 6,464 6,027 6,216 Labor Force (000s) 122.5 124.8 126.3 Unemployment Rate (pct.) 17.1 23.0 24.5 Money and Prices: Growth in Money Supply (M2/pct.) -4.3 8.2 1.7 Prime Lending Rate (pct.) 1/ 14.50 10.75 8.75 Retail Price Index (pct. change) 6.3 6.1 1.1 Average Annual Exchange Rate (USD/BDs) Official 0.50 0.50 0.50 Parallel 0.50 0.50 0.50 Balance of Payments and Trade: Total Exports (FOB) 411.6 382.5 364.0 Exports to U.S. 53.4 62.3 N/A Total Imports (CIF) 1,394.0 1,048.5 1,153.9 Imports from U.S. 494.1 377.3 N/A Trade Balance -982.5 -665.9 -789.9 Current Account Balance -29.9 -137.9 58.7 Aid from U.S. 0.7 1.1 N/A Aid from Other Countries N/A N/A N/A External Central Government Debt 393.8 346.3 330.6 Domestic Central Government Debt 556.8 618.3 808.5 Total Debt Service Payments (paid) 393.8 346.4 330.6 N/A--Not available. 1/ End of period. 1. General Policy Framework Barbados is a British-style parliamentary democracy. As a result of the September 1994 general elections, the political party comprising the government is the Barbados Labour Party, headed by Prime Minister Owen Arthur. The official opposition is the Democratic Labour Party. Seated in Parliament also is a member of the National Democratic Party, as well as a few independent Members of Parliament. As a country with a relatively narrow resource base and limited production structure, Barbados imports much of what it needs to survive, including energy, food, and most types of consumer products. Previous governments have pursued policies -- including high tariffs, restrictions on entry into certain sectors of business activity (such as telecommunications and broadcasting), and laws which restrict the entry of subsidiaries or branches of foreign retail establishments -- whose purpose was to protect local businesses from external competition. Those policies have had the unintended effects of making both manufacturing and many services sectors uncompetitive in terms of price (because inputs are so expensive) and contributing to the generally high-cost wage environment in Barbados. Early indications are, however, that in its efforts to reduce the high unemployment rate, the new Barbados Labor Party government will act to lower the costs of doing business here. In October 1994, the new government announced that businesses in the manufacturing, agricultural, and fishing sectors will be able to import all inputs free of all duties and taxes. The policy change should result in higher levels of goods imports, a development U.S. exporters well may be able to take advantage of. In general, Barbados' trade policy seeks to stimulate exports of goods and services (tourism and offshore financial services), encourage domestic light manufacturing, maintain the government's revenue base through direct taxation, and actively manage foreign exchange reserves. In 1993, the United States was the leading source of imports into Barbados, followed by CARICOM, the United Kingdom, and Canada. Barbadian attitudes toward the United States and toward U.S. business are also generally favorable, as evidenced by the approximately 26 percent of the import market commanded by goods from the United States. According to U.S. Department of Commerce figures, U.S. exports to Barbados grew about 13.9 percent in 1993, to U.S. $145.5 million. Barbados ratified the Uruguay Round Agreements and became a founding member of the World Trade Organization (WTO) on January 1, 1995. 2. Exchange Rate Policy Since 1975, the Barbadian dollar has been pegged to the United States dollar at a fixed rate of Bds. $2.00 to U.S. $1.00. Despite intermittent problems in maintaining adequate levels of international reserves, both of the major political parties have formed governments committed to avoiding a devaluation of the currency. Any impact of this policy on U.S. exports is probably positive, at least in the short term, since Barbadians can buy more United States goods and services than they would be able to if the currency were devalued. Some economists hypothesize, however, that the Barbadian currency is overvalued, which contributes to making Barbadian manufactures uncompetitive in terms of price (and perhaps quality) in markets outside Barbados and restricts the long-term potential output of the economy -- which could have implications for import volumes in the long term. The Ministry of Finance makes foreign exchange control policy, which is then administered by the Central Bank of Barbados (CBB) through its Exchange Control Division. Individuals may convert the hard-currency equivalent of U.S. $2,500 per year without special permission, if they are traveling outside Barbados, by applying to a commercial bank. Amounts in excess of U.S. $2,500 may be obtained upon application to the CBB. Profits and capital from foreign direct investment usually may be repatriated if the investment was registered with the bank at the time the investment was made. The CBB may limit or delay conversions of funds depending on the level of international reserves under its control. 3. Structural Policies Although the Barbadian economy is generally free market-oriented, the government controls a relatively large public sector, including a number of "parastatal" entities. Pricing of goods is generally left to the market, although the prices of certain food staples, as well as utility and public transportation rates, are set by the government. The government subsidizes losses incurred by the entities -- such as the monopoly dairy and the public bus system -- which it partially or wholly owns, but the effect of those subsidies on U.S. exports is probably minimal. For example, milk imports face high tariffs, as they do in most countries. However, even if imports were liberalized, U.S. exporters likely would face strong competition from many other countries with milk surpluses, such as from those in the European Union. Bulk users of utilities -- such as industry -- are eligible for resource discounts, but the trade effect of the subsidy is probably negligible on international markets, because of the generally higher costs of production Barbadian industry faces. The 1992 and 1993 reform of the direct tax system broadened the tax base while lowering maximum rates -- a change which resulted in an overall lower level of government revenues in the first half of 1994 (see section four). The previous government announced in April 1994 that a value-added tax (VAT) would be initiated in April 1995, which, among other things, would replace many of the indirect taxes -- such as consumption taxes and stamp duties on imports -- which now exist. The new government has not yet announced whether the VAT will be implemented according to the previous government's plan. In October 1994, the new government announced that businesses in the manufacturing, agricultural, and fishing sectors will be able to import all inputs free of all duties and taxes. The policy change should result in higher levels of goods imports, a development U.S. exporters may be able to take advantage of. In regard to purchases of consumer household durables, the government has not yet announced its policy on the amount of down payment needed, if any, to purchases these big-ticket items, many of which are imported from the United States. At one point, the previous government sought to constrain imports by making consumers put hefty down payments on installment purchases of durables. Currently, no down payment requirement is in place. 4. Debt Management Policies The overall deficit on central government operations widened slightly during the first half of 1994, from about one percent at the end of 1993 to between one and two percent of Gross Domestic Product (GDP) at the end of June 1994. The increased deficit was due to a decline in revenues -- a result of the 1993 tax reform which reduced direct levies -- and not to increased expenditures. The decline in government revenues took place even as real GDP rose 3.8 percent on an annual basis in the first six months of the 1994 (from 0.8 percent in 1993). The Barbadian government has continued its concerted effort to repay foreign debt, the levels of which have declined steadily for over three years. As in the recent past, an increasing share of debt is being financed locally. As a result of high liquidity in the banking system, commercial banks and other local buyers were the main source of new credit to the government to finance the deficit during the first half of 1994. Previously, the deficit had been financed primarily through purchases by the National Insurance Scheme (akin to the Social Security System) of Treasury bonds. As a result of the government's repayments of its external debt, net foreign financing in the January - June 1994 period was negligible. With the September 1994 election of a new (Barbados Labour Party) government, it seems unlikely that Barbados will willingly participate in a formal International Monetary Fund (IMF) program in order to obtain funds for structural adjustment in the near- to mid-term. The new Prime Minister has repeatedly said that he will not run his country according to IMF dictates. In the autumn of 1991 (under the former Democratic Labour Party government), Barbados was compelled to ask the IMF for funds to handle a severe shortfall of international reserves. In exchange, the IMF required Barbados to institute economic austerity measures to reduce government spending in ways that were politically unpopular, including cutting spending on public sector wages. Government officials have expressed their desire to continue to work with the Inter-American Development Bank and the Caribbean Development Bank on essential infrastructure projects, and relations between the Government of Barbados and those institutions appear cordial. 5. Significant Barriers to U.S. Exports The introduction of the CARICOM Common External Tariff several years ago will continue to disadvantage imports from countries which are not CARICOM (Caribbean Community) member states -- including exports from the United States. In February 1994, Barbados eliminated its "negative list" of goods which could not be imported or for which an import license was necessary, and replaced it with a higher duty. The benefit of a duty replacing an import license is that the trade barrier is transparent; previously, there was no way to foretell whether the responsible Minister would approve a particular import license application. There is no provision of Barbadian law that discriminates against U.S. exports in or of itself. U.S. standards are generally acceptable in Barbados; the American Embassy is not aware of any cases in which Barbadian standards have acted as a trade barrier to U.S. goods exports. Barbados is a member of the GATT/Tokyo Round Agreement on Standards (Standards Code). Barbados permits full ownership by foreigners of investments and property, although certain sectors are reserved for citizens of Barbados. There are no maximum equity position restrictions on foreign ownership of a local enterprise or participation in a joint venture. Non-residents need permission from the Central Bank to purchase real property or stock which is traded on the Securities Exchange of Barbados, but permission is usually granted. A property transfer tax is levied on real property or stock transactions conducted by foreigners. The Barbadian government must approve a license in order for foreigners to invest in utilities, broadcasting, banking, and insurance enterprises. Previous governments denied all requests by investors, both domestic and foreign, to open a television station to compete with the government-owned monopoly, but the current government has indicated that at least one new television venture will be licensed. In addition, the government has licensed only one firm to provide basic (local) telephone service and another to provide long-distance telephone service. Banking and insurance services are open to foreign direct investment provided the required level of capital is invested and prior government approval is obtained. Stock exchange membership (for traders) is closed to non-Barbadians, and only firms long-established in Barbados may be traded on the local securities exchange. This situation may change as the new government assesses ways to broaden the possibilities for attracting foreign direct investment to Barbados. Other services (such as travel) are generally open to foreign investment, although the ministries responsible for trade and for labor matters must, by law, determine if the competition of another service provider would be detrimental to the financial health of currently-established Barbadian businesses. The government requires a Barbadian citizen to apply for many of the requisite licenses that allow enterprises to operate. Thus, a foreign-owned firm might have to hire a Barbadian. Work permits for foreigners usually are granted only when no Barbadian is qualified to perform. Administrative proceedings involving Customs clearances are sometimes burdensome. While no special documents are required, occasional capricious or dilatory judgments by officials can slow the importation of essential inputs. Government procurement is not handled in a transparent manner; both sole-source and competitive contracts are tendered and the government is not obliged to accept the lowest, or any, bid for public works projects or for critical procurements. The government must "Buy Barbados" where it can, but the Embassy has received no complaints by U.S. businesses of discrimination against U.S. goods by Barbadian goods. Neither offsets nor countertrade is used in making procurements. 6. Export Subsidies Policies Barbados gives priority to investments which intend to manufacture, especially for export. Incentives for manufacturing are available under the Fiscal Incentives Act (1974), which does not discriminate between foreign and national ownership. Any manufacturer may qualify for a maximum 10-year tax holiday by satisfying a value-added criterion or as a so-called "enclave" (international business company, or IBC) under Barbadian law, which, by definition, exports 100 percent of its output. IBCs enjoy the most advantageous tax treatment, because the higher the level of gains and profits, the lower the tax rate. IBC tax rates range from a high of three percent to a low of one percent of net profits. However, under the Income Tax Act, any manufacturing company in Barbados -- whether locally- or foreign-owned -- may enjoy tax reductions which vary according to the percentage of its profits derived from export income. If a manufacturer derives more than 80 percent of its profits from exports, its effective tax rate can be reduced from a maximum of 26 percent to 2.8 percent. Commercial and development bank financing is restricted to Barbadian citizens, but because interest rates in Barbados are generally higher than those in the United States, the subsidy element likely is nil. The Barbados Investment and Development Corporation generally limits its export promotion efforts to firms owned by Barbadians, although it may make exceptions for firms which employ Barbadian citizens regardless of ownership. In addition, the government offers export guarantee schemes offering letters of credit and credit insurance for Barbadian exporters. Also (as mentioned previously), the new Barbados government has announced that businesses in the manufacturing, agricultural, and fishing sectors will be able to import all inputs free of all duties and taxes, a measure designed to stimulate the productive sectors in Barbados. 7. Protection of U.S. Intellectual Property The Government of Barbados has made efforts in recent years to improve the legal regime to protect, as well as to acquire and dispose of, all property rights, including intellectual property rights (IPR). Barbados is a signatory of the Paris Convention of Intellectual Property Rights and the Madrid accords, and is a member of the World Intellectual Property Organization (WIPO). The law of Barbados does not promote domestic industries at the expense of foreign industrial and intellectual property rights holders. However, Barbados has only limited experience with IPR matters and very few industrial designs or patents have been registered here. There have been no recent court challenges or settlements for patent, trademark, or copyright infringements although infringement is commonplace in certain sub-sectors of the economy (e.g., rentals and sales of films on videocassettes, tee-shirt production of unlicensed copyrighted images, unlicensed use of trademarks as store names, software piracy, satellite signal piracy). Enforcement has not been an active priority of government, although the Government may initiate some challenges in court in late 1994 or the first half of 1995. Private parties may also initiate court challenges in that time frame. Separate statutes govern and regulate IPR protection. The Industrial Designs Act provides for registration of industrial designs for exclusive use by the registrant for five years, which may be renewed for two additional consecutive five year periods. The Patents Act of 1981 allows for protection of patents for 14 years. The Trademarks Act of 1981 protects marks initially for ten years with renewals possible for ten year periods. The Copyright Act protects copyrights during the life of the author and for seven years thereafter. There is no specific statutory reference to trade secrets or semiconductor chip layout designs. In 1990, a WIPO consultant made recommendations for changes in Barbados' IPR statutes and administrative and enforcement procedures which are still being considered. Embassy cannot estimate lost U.S. import opportunities related to local IPR protection standards. 8. Worker Rights a. The Right of Association Barbados boasts one of the most advanced trade union environments in the hemisphere. Workers have the right to form and belong to trade unions and to strike, and they freely exercise these rights. There are two major unions and several smaller ones, representing various sectors of labor. The Civil Service Union, called the National Union of Public Workers (NUPW), is completely independent of any political party or the government. The General Secretary of the NUPW was a candidate of the National Democratic party, while the former Director of Education was a candidate for the Democratic Labor Party and a Cabinet Minister. The largest union, The Barbados Workers' Union (BWU), was historically closely associated with the governing Democratic Labor Party. However, in February 1994, Leroy Trotman, BWU General Secretary and President of the Caribbean Congress of Labor, resigned from the DLP while remaining in Parliament as an independent representative. Trotman resigned because the public and especially union members perceived a conflict between his role as union leader and his role as parliamentarian. The latter required him to support the government's economic stabilization and austerity measures which were viewed as setting back union achievements and harming workers. Nevertheless, one of Trotman's deputies in the BWU remained a government backbencher in parliament until he was voted out of office in September, 1994. Trade unionists' personal and property rights are given full protection under law. Under a long-standing law, strikes are prohibited in the water, gas and electricity sectors,. However, there have been several cases of work stoppages in the electricity sector. All other private and public sector employees are permitted to strike. There were fewer industrial actions in 1993 than 1992, despite severe cutbacks in personnel in the private sector. In the public sector, wage cuts, layoffs, and efforts to privatize state-run enterprises continued. Public, private, and union sector leaders in the summer of 1993 signed a tripartite wage policy accord that established a two- year wage freeze. Any increase in wages will be tied to productivity increases by particular workers or by particular enterprises. Critics argued that the wage policy undermined the right of unions to bargain collectively because it forestalled any new company-wide or industry-wide negotiations for wage and benefit increases. Supporters of the tripartite pact hailed it as a cooperative solution to the recession which prevailed at the time. Trade Unions are free to form federations and are in fact affiliated with a variety of regional and international labor organizations. Leroy Trotman head of the Barbados Workers' Union, is also President of the ICFTU and President of the Caribbean Congress of Labor. The CCL is the main regional labor organization; its headquarters are in Bridgetown and it conducts many of its seminars and other programs in Barbados. b. The Right to Organize and Bargain Collectively The right to organize and bargain collectively is provided by law and respected in practice. In 1993, over 25 percent of the working population was organized, but a major loss of jobs in the economy has resulted in a reduction in union membership. The BWU reported that it alone lost about 2,000 members in 1993 in the private and public sectors as a result of adverse economic conditions. Normally, wages and working conditions are negotiated through the collective bargaining process, but this was influenced by the tripartite wage accord described in Section 8(A). Employers have no legal obligation to recognize unions under the Trade Union Act of 1964. But most do so when a majority of their employees signify a desire to be represented by a registered union. The act expressly prohibits employers from discriminating against employees for engaging in trade union activities. However, there is no law that expressly sets out unfair labor practices by either employers or trade unions. The courts commonly award monetary compensation but rarely order re-employment. There are no manufacturing or special areas where collective bargaining rights are legally or administratively impaired. Barbados has no specially designated export processing zones. c. Prohibition of Forced or Compulsory Labor Force or compulsory labor is prohibited by the constitution and does not exist. d. Minimum Age for Employment of Children The legal minimum working age of 16 is generally observed. Minimum age limitations are reinforced by compulsory primary and secondary education policies, which require school attendance until age 16. Occasionally, especially among migrant worker families, children assist in agricultural production during peak season. The Labor Ministry has a small cadre of labor inspectors who conduct spot investigations of enterprises and check records to verify compliance with the law. These inspectors are authorized to take legal action against an employer who is found to have underage workers. e. Acceptable Conditions of Work Minimum wages for specified categories of workers are administratively established and enforce by law. Only two categories of workers have a formally regulated minimum wage -- household domestic workers and shop assistants (entry level commercial workers). Household domestics receive a minimum wage of about U.S.$32.50 per week, although in actual labor market conditions the prevailing wage is almost double that amount. There are two age-related minimum wage categories for shop assistants. The adult minimum hourly wage for shop assistants is U.S. $ 1.87 per hour; the juvenile minimum wage for shop assistants is U.S. $1.625 per hour. Agricultural workers (i.e., sugar plantation workers) receive a minimum wage as a matter of practice, but such compensation is not found in legislation. The minimum wage for shop assistants is marginally sufficient to meet minimum living standards; most employees earn more. In 1992 an International Labor Organization (ILO) Committee of Experts (COE) cited Barbados for not adhering to the ILO Convention On Equal Remuneration in its wage differentials in the sugar industry. The COE admonished the government to ensure the application of the principle of equal remuneration for work of equal value to male and female workers in the sugar industry or to provide further information on job descriptions which might justify such wage distinction. This case was not resolved at years' end. The standard legal work week is forty hours in five days, and the law requires overtime payment for hours worked in excess of that. Barbados accepts ILO conventions, standards, and other sectoral conventions regarding maximum hours of work. However, there is no general legislation that covers all occupations. Workers are guaranteed a minimum of three weeks annual leave., All workers are covered by unemployment benefits legislation and by national insurance (Social Security). A comprehensive government-sponsored health program offers subsidized treatment and medication. Under the Factories Act of 1993, which sets out the officially recognized occupational safety and health standards, the labor ministry enforces health and safety standards and follows up to ensure that problems cited are corrected by management. Workers have a limited right to remove themselves from dangerous or hazardous job situations without jeopardizing their continued employment. The Factories Act requires that in certain sectors firms employing more than fifty workers set up a safety committee. That committee can challenge the decisions of management concerning the occupational safety and health environment. Recently, however, trade unions called on the government to increase the number of factory inspectors in order to enforce existing and proposed safety and health legislation more effectively, and to follow up to ensure that problems cited are corrected by management. Government- operated corporations in particular were accused of doing a "poor job" in health inspections of government-run corporations and manufacturing plants as a priority. Extent of U.S. Investment in Selected Industries.--U.S. Direct Investment Position Abroad on an Historical Cost Basis--1993 (Millions of U.S. dollars) Category Amount