Value of Economic Diversification and Growth Fund

This article was written and submitted by David Comissiong, Barbados’ Ambassador to CARICOM.

It is relatively easy to appreciate the rationale, purpose and value of the proposed Economic Diversification and Growth Fund if one understands that Barbados is currently taxing foreign international business companies (IBC), domiciled in our country, at the rate of nine per cent – significantly up from the mere 2.5 per cent tax rate that obtained a few years ago.

What this means is that Barbados is currently raking in much more tax revenue from these IBCs than we did in the recent past.

Indeed, it is this significant increase in IBC tax revenue that recently permitted our Government to pay out a solidarity allowance of $300 to every adult Barbadian.

Invest

It is also a portion of these increased IBC tax revenues that our Government is proposing to invest in appropriate and deserving IBCs – as well as in relevant Barbadian companies – to motivate and assist them to either establish brand new business operations or to extend their existing business operations in Barbados, thereby creating additional jobs and economic opportunities for Barbadians, and further augmenting our national stock of corporation tax and foreign exchange reserves.

This seems to me to be an eminently rational and forwardlooking economic development and diversification strategy, and I can only envisage Barbados and Barbadians benefitting from the proposed Fund.

In fact, I would like to publicly propose to our Government one very creative way in which the new Fund could be used to facilitate new, high technology, foreign investment in our country.

The proposal I am putting forward is not my original creation. Rather, it is a strategy that the government of Singapore used to encourage state-of-the art, high tech German and Japanese manufacturing companies to establish operations in Singapore, and it is outlined in some detail in Lee Kuan Yew’s autobiography titled From Third World To First: The Singapore Story.

In the earlier days of Singapore’s journey as an independent country, it made an effort to convince some of the most sophisticated, high tech, high value German and Japanese manufacturing companies to shift some of their manufacturing operations to Singapore, but the outreach of the Singapore government was met with scepticism about the quality and capacity of the Singapore workforce.

Quality

In response, Singapore came up with a strategy to reassure and convince these prized high-quality German and Japanese manufacturing companies about the quality and capacity of the Singapore workforce to carry out the required high technology operations. And the Singapore government did so by “partnering” with the said German and Japanese companies to establish company-run worker training facilities in Singapore.

Training programme

These joint (Singapore government/ foreign company) established and operated training facilities then set to work training Singaporean workers up to the very high standards required of workers in said companies. And since the management of the company was directly involved in the training programme, they were in a position to satisfy themselves as to the quality and capacity of the workers.

Lee Kuan Yew explained the strategy as follows: “I visited (the German company) of Rollei-Werk in Brunswick . . . . Together with Singapore’s Economic Development Board (EDB), Rollei set up a centre to train workers in precision mechanics, precision optics, toolmaking and electro-mechanics . . . .

“I proposed to [German Chancellor] Schmidt that he set up a German-Singapore Institute to run courses on advanced manufacturing and information technology, to help German businesses set up in the region. He agreed. The institute turned out to be of great benefit to German investors who were able to recruit technicians trained to German standards . . . .”

In other words, you use funds from the Economic Diversification and Growth Fund to partner with the targeted foreign high tech company to jointly establish a worker training centre in Barbados. In this way, you pull the foreign high tech company into a worker training exercise that both parties jointly invest in and operate together; you give them confidence about operating in your country; and you secure and tie down their decision to invest in your country.

This, of course, is not the only way in which we are going to diversify our economy. Indeed, it goes without saying that our primary economic diversification strategy must be focused on our own Barbadian innovators and entrepreneurs.

But there is also a very important place and role for high technology foreign investors, and we must pursue both strategies simultaneously.