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.............................................19 By Derek Gibbs III.........................48 By Antonio Alleyne V...................62 By Mark Durant VI......................5 By Antonio Alleyne II........ BARBADOS..... Ministry of Labour and Social Security IV.....37 By The Research Unit........................................ ECONOMIC DEVELOPMENT AND COMPETITIVENESS: A CARRIBBEAN REVIEW............................. AN EXPLORATORY STUDY ON THE RELATIONSHIP BETWEEN REAL EFFECTIVE EXCHANGE RATES AND IMPORT DEMAND IN BARBADOS-A COINTEGRATION-ECM ANALYSIS................. EXAMINING THE CONSTRAINTS TO ECONOMIC GROWTH IN BARBADOS: A GROWTH DIAGNOSTIC APPROACH....................100 By Ricardo Norville 4 ...................................................... THE MILLENIUM DEVELOPMENT GOALS(MDGS): AND THE POST-2015 DEVELOPMENT FRAMEWORK.......76 By Cyril Gill VII.............................. IS THE RESTAURANT SECTOR WITHIN THE BARBADOS TOURISM INDUSTRY TAKING ADVANTAGE OF THE BENEFITS ALLOCATED TO THEM? (1982-2006).................... TOURSIM FINANCING IN BARBADOS...........VOLUME 5 RESEARCH AND POLICY WORKING PAPERS 2012 CONTENTS I....................................... LINKING EDUCATION TO THE CHANGING NEEDS OF THE LABOUR MARKETS...............................................


(U. which leaves them essentially isolated and for the most part disconnected from these territories. Adding to their existing challenges. the move towards global economic liberalisation in the 1990’s has brought with it significant challenges for the Caribbean economies particularly with regard to the issues of primary production. However. 6 . St. Guyana. the practice of such areas of activity have tended to exhaust the country’s already limited resources and provide limited employment opportunities. Lucia. In so doing. Coupled with these physical constraints is the fact that historically. Bermuda. Jamaica. Caribbean economies recognized the need to diversify the trade regime away from the inward-looking By Antonio Alleyne INTRODUCTION The issue of being internationally competitive has long been a critical one for the states of the Caribbean1 region. “the Caribbean region is at a development crossroads and its member nations must take significant and concrete steps to improve productivity and competitiveness and face up to more global competition if they are to accelerate or even maintain past growth. local business persons focused on low-risk business activities such as wholesale and retail trade or services. ECONOMIC DEVELOPMENT AND COMPETITIVENESS: A CARIBBEAN REVIEW issues related to economies of scale (Baldacchino 1998). Dominican Republic. Vincent and the Grenadines. St. the process has also affected the use of natural resources. since the process of trade liberalization has resulted in a shifting of agricultural production to more competitive regions across the globe world (Ahmed 2001). the choice of macroeconomic. The Bahamas. More specifically. Haiti. It is argued that this positioning has had the effect of retarding their ability to develop and achieving competitiveness within the global economy. and all being regarded as among some of the most beautiful land masses in the world. there has been little homogeneity witnessed in the growth and development of Caribbean economies. According to the World Bank. International Trade Commission 2008). By taking such steps. Despite several physical and socioeconomic similarities. Kitts and Nevis. and investment policies and levels of economic diversification. Dominica. which are among the Caribbean’s most challenging issues when confronting sustainable development (ECLAC 2002). they will reposition themselves strategically as an emerging trading bloc for goods and services.S. Each has continued to show varying levels of economic development related to differences in natural resource endowments. which avoided 1 Antigua and Barbuda. which in turn perpetuate the social issue of poverty and generally renders such economies highly vulnerable to external shocks. without such action. This inevitably forced the region to explore alternative avenues in trading services. St.I. they risk growing economic marginalization and erosion of many of the social gains of the last three decades”(The World Bank 2005). Barbados. trade. The Caribbean region is largely made up of small island developing states that bear the similar physical characteristics of being located a considerable distance away from the main lands of larger territories. Belize. during this phase of development. Suriname and Trinidad and Tobago. prior and into the 21st century. Grenada. the expansion of human settlements and necessitated a change in the development policies aimed at addressing poverty and income inequality.

3 107. To compete successfully at an international level it is imperative to know where a country’s competitiveness lies. Kitts and Nevis St.2 107.2 104.3 65. one of the more important components of growth and more importantly overall economic development is a country’s ability to compete.4 107. Analysis of the data.6 63.5 97.7 101.5 121.9 129.9 100.3 103.9 87.3 127.9 110.8 59.3 108.1 116.7 78.6 67. While the concept of competitiveness continues to be the subject of much debate among academics. the dependence of Caribbean economies upon the international trade in both commodities and services has grown exponentially.3 90. and with the Caribbean this is no exception. indicates that with the exclusion of Guyana and Suriname.0 98.0 2004 51.5 132.7 115.6 118.6 109.3 72. that is.5 203.8 57.5 104.5 114.0 107.3 83.5 108.7 2005 53.6 95.1 115. Downes (2010) refers to competitiveness as “the ability of the enterprise. it is without question a key factor in achieving sustainable economic development.2 121.1 109.9 68.0 99.policies of the past towards policies of open regionalism. Table 1: Trade to GDP in the Caribbean Country Name World Antigua and Barbuda Bahamas.5 129.2 105.8 74.5 52.4 86.4 129.3 101.4 123.9 109.9 2002 47.7 117. The Barbados Belize Bermuda Dominica Dominican Republic Grenada Guyana Haiti Jamaica St. This meant extending its trade links with extra-regional trading partners and deepening and perfecting the intra-regional integration regime and its institutions (ECLAC 2002).5 109.6 2008 59.8 2006 56.4 120.6 110. and generally improves the level of susceptibility to external forces in the developing economies.7 109.5 86.1 62.2 Source: World Development Indicators Within the context of increased liberalization and open-market policies.4 66.9 109. the average trade-to-GDP ratio exceeded 100 percent in 2008. income inequality. Vincent and the Grenadines Suriname Trinidad and Tobago Caribbean Average 2001 48.8 126.0 100.5 101.4 95.0 2003 48.3 127.4 104.7 108.7 94. Over the years.3 62.5 56.7 93.4 48.8 101. Lucia St. unemployment/underemployment.5 119. this is significantly higher.0 118.8 122.5 59.0 114.6 122.6 75.7 112.2 66. country to produce and sell goods and services in domestic/foreign markets at 7 . policymakers and such like.1 106.6 107. the inability to enjoy economies of scale.5 108.1 206.2 110.3 124. High levels of competitiveness in the international economy have been linked to a higher capacity for reducing such socio–economic ills as high levels of poverty.0 2007 57.5 119.5 64.2 198.9 109.5 189.2 126.6 104.0 201.6 104.5 113.6 65. industry.5 58.2 48. Caribbean countries already suffer the handicap.4 108.3 107.2 96.8 107. Compared with the world’s average.3 87.4 132.1 130.7 134.4 140.0 128.2 106. It is instructive to reiterate the point at this juncture that.9 102. sourced from the World Development Indicators (WDI).5 74.

This paper will attempt to trace the historical stages of economic development of the Caribbean and in so doing will also attempt to highlight the linkages between development and competitiveness strengths from a Caribbean perspective. It is argued that the advances in the standard of living associated with economic growth may represent a necessary but not sufficient condition of economic development and the construction of a good society. It has been argued that competitiveness captures the awareness of both the limitations and challenges posed by global competition. Thomas on what development means in a Caribbean context. Further.prices and with the quality that ensures long run viability and sustainability”(Downes 2010). in the current global environment. macroeconomic stability.” Further deconstructed. economic development is about improving and sustaining competitiveness at national. and overall economic development. regional and international levels in relation to enhancement of businesses. innovation) factors (see World Economic Forum. the concept of competitiveness has emerged as a new paradigm of economic development. seven efficiency enhancers (higher education and training goods market efficiency. observers of economic development recognize that “the absence of coordination mechanisms that facilitate taking advantage of competitive opportunities” (Inter-American Development Bank 2003) are among the limiting factors in achieving better growth. financial market sophistication. These include.Y. Therein lies the mutual interdependence between the competitiveness and economic development for a country. Additionally. economic development is 8 . However. Bobirca and Miclaus have sought to define competitiveness as the ability of an economy to attract the demand not only for its exports but also the necessary investment to supply that demand. In recent years. highlight the hypothesis that in order for the Caribbean to maintain or surpass its current levels of development in a globalized environment. Based on the foregoing this paper would seek to. and overall improvement in human well-being. technology readiness. ECONOMIC DEVELOPMENT What is economic development? Howard (2005) defines economic development as “a process of structural change which guarantees sustainable economic growth and improvements in the quality of life of the population. A major goal of poor countries is economic development or economic growth (E. activities towards building their economic competitiveness must be undertaken. This implies that Caribbean countries are competitive at varying levels. The World Economic Forum has identified twelve (12) pillars used for measuring the competitiveness of a country which are also factors that determine productivity. The two terms are not the same. market size). infrastructure. labour market efficiency. Lewis lamented that by its very nature. and two innovation and sophistication (business sophistication. which results in an improved standard of living (Bobirca and Miclaus 2007). health and primary education). coupled with the budgetary constraints and significant barriers to compete in markets (Inter-American Development Bank 2011). W. Mandle (1996). in a critique of views provided by Guyanese economist C. the five overarching requirements (institutions. suggests that economic development is an approach which provides insight into how and why some countries have been better able to satisfy the needs of their citizens (Payne and Sutton 2001). 2009). Nafziger 2006).

it gives us greater periods of leisure.accompanied by both benefits and costs (Lewis 1955). Competing on labour cost. Industrialisation and Economic Diversification Historically. Figueroa. impersonality. the Caribbean should. Downes. through a series of policy measures. and death. recognizing that the small volume of island trade prevented these economies from exporting on a competitive basis Lewis recommended that instead of exporting. it was believed that industry would absorb the surplus labour emanating from agriculture through the provision of new jobs. dependency analysis and the attempted escape from dependency. Despite the small-scale residential manufacturing activity that took place during the early decades of the 20th century. (3) the counter offensive of neo-liberal political economy and the enforced embrace of the market as the dominant philosophy of development. Nafziger (1997) posits that economic expansion can decrease famine. 1980). (2) the dependency theory . politicians have been left without clear guidelines concerning the target towards which their policies should be designed (Mandle 1996). following the move towards the decolonization of the territories of the region (Payne and Sutton 2001). infant mortality. many politicians and social commentators strongly advocated the need for industrial development in the Caribbean in an effort to create employment opportunities and to diversify domestic production in light of the depression of the 1930s ( Bernal. Sir Arthur Lewis. which underpinned the coherent strategy for industrial development in the Caribbean otherwise known in the region as ‘industrialisation by invitation’ or simply as the ‘Lewis model’ (Lewis 1950). However. thoughts of economic development in the Caribbean only really occupied the minds of leaders after the Second World War. and emphasis on self-reliance associated with economic development may also destabilize the extended family system which in turn may have a negative impact on social structures. and (4) globalisation and promoting regionlism in response to questions of national states and societies abilities to chart their own path to development. Mandle has argued that without a solid academic consensus over the objectives of development policy. Lewis envisaged industrialization as a process requiring the simultaneous development of agriculture and industry (Lewis 1950). music and philosophy. 1992. Payne and Sutton once described Caribbean development as a series of bouts of optimistic endeavour followed by disillusion (Payne and Sutton 2001). 1985. Farrell. thereby allowing the sector to increase its productivity and standard of living. enhances art.emergency of 9 . They also stressed that there has been force in the forth phase (Payne and Sutton 2001). 1988. Nafziger emphasizes that without growth the desire of one group can only be met at the expense of others. court IN THE CARIBBEAN The study of economic development in the Caribbean has been afflicted by the lack of consensus in the region concerning the definition of its process. Noteably. and gives us the resources to be humanitarian. However it was the theoretical insights of the nobel laureate. It sought development by diversification of the national economy and the traditional Caribbean problem of dependence on agriculture. Further outlining four phases of economic development in the Caribbean: (1) the confident espousal of the modernising potential of industrialisation and economic diversification. He however expressed the view that mobility.

and diversification in the agricultural sectors (Bernal. labour market efficiency. To achieve this higher level. labor productivity must improve for the nation to be competitive (Schwab 2011). rather. as wages rise with advancing development. Theorists argued that the dependency concept represented the structure of Caribbean economies more realistically than W. since it would raise national income. Bernal. however to sustain the higher income levels. 1950). Figueroa.political. The second variant is based on the experience of Puerto Rico and places great emphasis on foreign investment and the granting of fiscal incentives to investors (Lewis. and cultural . and local manufacturers would eventually learn ‘the tricks of the trade’ and take over from foreign capitalists as the driving force in industrialisation (Girvan 2003). the dependency approach emerged as a critical reaction to the conventional approaches to economic development that emerged in 1950s. financial market sophistication. that is. Sir Arthur Lewis' solution that Caribbean islands should embrace industrialization as essential to economic transformation was. wages tend to increase. labelled as a thoughtful and progressive model to follow (Lewis 1950). economic. which would increase national savings. market size (World Economic Forum 2009). The first variant is the outcome of Lewis’ critique of the economic plan for Jamaica. as a nation develops. Figueroa and Witter 1984). The school of dependency thought in the Caribbean was founded on the tenets of structural Marxism and was promulgated by such thinkers as Beckford. This policy termed in the literature as “export-led industrialisation by invitation” (Best 1976) suggested an export-led labour intensive strategy of industrial development of which two variations exist (Downes. following Sir Arthur Lewis’ work on Caribbean industrialization. in practice the derivative "industry-by-invitation" policies failed to fully implement Lewis' broader agenda of sectoral diversification. Unfortunately. despite the similarities within the Caribbean region. they are parts of wider systems of decision-making and resource allocation. Demas and Girvan. According to the Global Competitiveness Report 2009-2010. and Witter (1984) placed dependency within the “critical tradition” of Caribbean economic thought. They argued that the typical firms in the Caribbean are not the independent competitive firms. Expressed differently. The Dependency Approach Defined as an explanation of the economic development of a state in terms of the external influences . 2006). Thus. `export-led natural resource based industrialisation. the impact of the competitiveness factors may vary across countries. in its full theoretical formulation. Economic dependence was seen to be a property of the economic system at the level of the individual firm that complemented the structural dependence of the macro economy (Girvan. However. Best. an economy must attain higher education and training market efficiency. what enhances productivity for one country is generally not the same for another country. 1985). Lewis however argued that reliance on foreign investment would be temporary. 10 . which was based on the use of local natural resources. technology readiness.foreign entrepreneurs to install and open their businesses and factories in the islands.on national development policies (Sunkel 1969). of the need for substantial investments in human capital development. Arthur Lewis’ (1954) dual economy model of development. efficiency of production and improved quality of product and service becomes the stage at which a nation can become competitive.

in which both developed countries and LDCs gain from each other. However. over reliance of foreign firms for capital intensive technology. which prioritized national economic growth above all other concerns. under utilization and exploitation of human resources. such as regressive income distribution. One major premise of the dependency theory is that poor nations provide natural resources. Payne & Sutton (2001) further stated that the collapse of the Grenadian revolution brought this radical phase of Caribbean development to an end. the dependency doctrine became the official philosophy of political opposition groups such as the workers party in Jamaica and small radical parties in other parts of the Caribbean. One need not accept dependency as a necessarily zero sum game in which the periphery loses. The theory does not highlight how the countries that follow a dependent development pattern suffer from a variety of economic ills. emphasis on luxury goods. and condemned all forms of Marxism across the entire Caribbean region. So. a chorus of voices dissented against the dependence theory. and the centre gains. which would respond to challenges. the dependency theory is an incomplete and inaccurate description of the socioeconomic conditions of lesser developed countries (LDCs). the future of Caribbean states rested solely in the hands of the United States (Payne and Sutton 2001). The neoliberal policy era began around 1980 (Harvey 2005). a destination for obsolete technology. The countries on the periphery of development are not destined to stagnation. international development agencies applied a 10-step programme with few modifications from country to country. 11 . In the mid 1980s. 3. when a chartered path to the region’s development seemed lost. They also stressed that despite the theory’s ability to correctly identify the core elements of the international capitalist agenda. Advocates admit that in the early years neoliberal development was implemented according to a top-down approach. without which the latter could not have the standard of living they enjoy (Gaavson 2002). Sachs further admits that such a universal approach was too rigid to accommodate the needs of diverse economies (Sachs 1999). it was assumed that the United State’s main development objective was to create a growing number of market-based Caribbean economies capable of competing successfully in 1. However. As neo-liberal architect Jeffrey Sachs describes it. it failed to consider the politics by which such challenges were to be sustained. and markets for developed nations. The dependency condition provides opportunities for a win-win game. By late 1970s. the world’s capitalist system fails to pay Caribbean states a fair wage for their labour and a fair price for their exported natural resources and agricultural and manufactured products. according to dependency theorists. Some of the biggest criticisms were: and the perennial problems of poverty and unemployment. the strategy proved too rigid and by very early 1980s it disintegrated into bitter conflict and would later result in a bloody ending (Payne and Sutton 2001). cheap labor.During the 1970’s. It also shaped the actions of the leading element of the People's Revolutionary Government (PRG) in Grenada after they obtained power in 1979. Guided by the views of neoliberalists. 2.

international export markets. Additionally,
the neo-liberal policy was enforced by the
International Monetary Fund and the
World Bank under the “structural
adjustment” prescription. This required
less reliance on statism, market
intervention and import substitution than
had been the norm in the development
strategies deployed in the earlier decades
(Payne and Sutton 2001).
Throughout the 80s, Caribbean
states indiscriminately followed the
structural adjustment prescription; so far
that at a regional summit in the Bahamas in
1984, CARICOM2 heads of governments
issued the Nassau Understanding3, in
which they endorsed structural adjustment
as a conscious shift to a new development
path. Why? There were little alternatives
(Payne and Sutton 2001).
By the end of the international
recession (1980-82) the region had realised
a drastic reduction in the demand for a
number of the main exports, particularly
bauxite, petroleum products and sugar, and
a fall off in the number of tourists visiting
islands. This recession created, in effect,
three crises in one, in nearly all Caribbean
constraints, fiscal imbalances, and a
national debt crisis (Karagiannis 2003).
Commonwealth Caribbean nations turned
to the IMF and other multilateral financial
institutions. As a result, their governments
were forced to follow the neo-liberal
prescription. The favoured measures were
always the same: liberalisation of foreign
exchange and import controls, devaluation
of the currency, and the deflation of
domestic demand. After following this
prescription, the economy in question was
expected to be ready to return to the
international market-place purportedly able

to achieve higher levels of exports and
economic growth (Karagiannis 2003).
Predicated on the notion that “a
rising tide lifts all boats”, the social costs of
these neoliberal policies, measured in terms
of unemployment, inflation, and sharply
declining living standards were immense.
Further, by the end of the 1980s,
fundamental structural problems associated
with the character of their production base
as well as with the distribution of their
economic assets (Karagiannis and Witter
2004). Critical analyses of the economic
and social impact of structural adjustment
did appear and had their impact, especially
in drawing attention to the peculiarly harsh
costs imposed by such programmes
prescriptions broke little new theoretical
ground and did not succeed in charting any
sort of realistic alternative course of action
for Caribbean governments in the critical
arenas of national and regional economic
management (Payne and Sutton 2001).
Upon reflection, the average annual
GDP growth for the Caribbean states has
slowed since neo-liberalism began to take
hold; dropping from 7.1 per cent in 1970,
to 5.4 per cent in 1980, to 3.0 per cent in
the 1990, to a modest rebound of 3.4 in
The 1990s were characterised by
the consolidation of the neoliberal
revolution, tempered only by the realisation
that more attention had to be paid to
human resource development if the new
technological imperatives of a globalising
economy were not to pass the region by.
Development was seen as a market-driven
private sector-led process. The role of the
state should be to meet the demands for
“good governance” imposed by the
(Karagiannis 2003). The prevailing attitude
was best expressed by the then prime
minister of Barbados Owen Arthur in


CARICOM - Caribbean Community
The Nassau Understanding, a declaration issued
by the heads of government of CARICOM
countries, Nassau, 1984.


“Generally, the strategy has to accept the
reality of the globalisation of economic forces
rather than hanker after a less complicated but
impoverished past. The strategy must also
recognise that the Caribbean countries, singly
and as a group, must make the transition
from the old age of preferences to the new age of
reciprocity in its international economic
relationships. In so doing, it must be designed
to minimise the costs and dislocations
associated with the transition, and to put in
place mechanisms that can allow the region to
exploit the market opportunities which are
being created by the international liberalisation
of trade and the formation of mega trade
blocs.” (Arthur 1996)

compete as an individual nation, but as a
bloc or region. Bishop and Payne noted
that within the Caribbean, regional
integration has been a topic of discussion
from colonial times. In the post-colonial
era, a number of distinct phases can be
identified in the evolution of regionalism
(Bishop and Payne 2010):

Table 2: Annual percentage
growth rate of GDP at market prices for
the Caribbean
Country Name
Antigua and















































Decolonisation and Federation - The
West Indies Federation lasted from
1958-1962 and was supposed to see
most of the Caribbean gain
independence as a single federated

CARIFTA — The Caribbean Free
Trade Association (1965-1973) was a
liberalised trade in manufactured

The Caribbean Community and
Common Market (CARICOM) 19731989, which replaced CARIFTA in
1973 with the signing of the Treaty of
Chaguaramas (Bishop, et al. 2011).



Bahamas, The





St. Kitts and Nevis





St. Lucia
St. Vincent and the









Trinidad and









Caribbean Average





Resulting from the policies of the
collectively sought to protect and guarantee
regional access to markets (ECLAC 2002).
However, Professor Norman Girvan
indicated that the limited economic
integration accomplished to date has not
economic development and the majority of
Caribbean member states do not perceive
significant benefits to be had from
deepening economic integration, especially
when the financial and political costs are
factored in. He further stated that from
2001 to 2007, intra-regional trade was
14.5% of CARICOM total trade, a modest
increase from the 8.3% recorded in 19731979 (see Girvan, 2011).
Payne and Sutton highlighted that
despite the evolution of different

Source: The World Bank National Accounts Data

Globalisation and Regional Integration
One of the characteristics of this
new economic era is the integration of
economies, where countries do not

theoretical perspectives, the concept of
globalisation, which has forced into being
this new era of development thought
remains far from being fully understood
(Payne and Sutton 2001). Thus the battle
for Caribbean countries to improve their
level of competitiveness and seeking
greater development remains.

Competitiveness Level

While most are based on the English
common law system there are few
exceptions, which include the Dominican
Republic, which has a system based on
French civil codes, the Haitian legal system
is based on the Roman civil law; while
Suriname’s legal system is based on Dutch
In terms of social systems and
standard of living the Caribbean is quite
diverse. Based on the gross domestic
product (GDP) per capita, Bermuda and
Bahamas are considered the most
developed countries of the group.
Bermuda has a (GDP) per capita adjusted
for Purchasing Power Parity (PPP) of
US$69,900 and The Bahamas US$28,700
(CIA World Factbook 2010). According to
the Human Development Report (2011)
most of the countries in the Caribbean are
development” and “medium human
development”; with the exception of Haiti.
On a scale of 0 to 1, the Caribbean
economies rest between 0.793 (Barbados)
and 0.454 (Haiti).
According to the United Nations
Development Programme (UNDP) Report
for 2009, all countries of the Caribbean
(except for Belize and Haiti) have high
levels of literacy compared to other
countries around the world. Currently the
average Caribbean adult literacy rate is
90.2%, compared to the world average of
indicators can prove to be positive
incentives for investors to the Caribbean
region, they are mitigated by the number of
adverse factors that hamper the potential
of their competitiveness. Currently there
exist weak linkages between the
manufacturing and infrastructural sectors.
The protectionist policy measures, which
included tax exemptions, tariffs and quotas,
have also stifled competition and weakened
productivity while the continued support
of declining industries resulted in the


For decades, Caribbean production
and exports were based on preferential
access to markets; whether it was sugar,
bananas and rum to the European Union
(EU) market under the Lomé Convention;
rum and tobacco to the United States
under the Caribbean Basin Initiative (CBI);
or a range of other commodities to Canada
under CARIBCAN. Trade liberalization,
market opening and access stipulations by
developed countries in the 1990s meant the
end of preferences for these economies.
The global market, which is founded on
competition that rewards efficiency and
productivity, is now the major “decider” of
the prospects and fortunes of countries
(ECLAC 1999). This automatically meant
that the competitiveness of the Caribbean
economies has become an increasingly
important determinant of its ability to
generate wealth from international trade.
businesses there are some factors that
should be available to an investor in
advance. These include, among others, the
government, legal and social systems,
culture, and currency strength of the
country or region (Hill 2005). Caribbean
economies offer a variety for the investor
in terms of these factors.
This variety
should be viewed as a competitive edge for
the region.
The types of government systems
that are represented in the region are:
constitutional monarchy and democracy,
democracy, republic and commonwealth.

0 95.Caribbean and Other Major Players GCI 2001/2002 Rank Score 5 34 40 2 7 Country Switzerland Barbados Trinidad and Tobago Jamaica Guyana Chad Caribbean Major Trading Partners United States United Kingdom 15 GCI 2010/2011 Rank Score 1 5.400 8.8 86.0 54. Consequently.300 9.7 GDP . it continues to show signs of weakness and inflexibility which may be damaging particularly within the context of a liberalized global economy.0 99. The Barbados Belize Bermuda Dominica Dominican Republic Grenada Guyana Haiti Jamaica St.8 88. Vincent and the Grenadines Suriname Trinidad and Tobago 99.0 97.689 0.700 10.97 95 3. the countries that are prepared to undertake necessary change are more likely to maintain and improve their rate of development in the competitive economic environment.4 98.723 0.25 .allocation of credit to uncompetitive activities (ECLAC 1999).454 0.400 69.727 0. Economic Commission for Latin America and the Caribbean (1999).200 1.735 0.200 Caribbean Average 90.724 0.800 8.8 94.62 139 2. 2011 Table 4: Global Competitiveness Index and Ranking .900 10.43 5.85 110 3.680 0. Kitts and Nevis St.63 43 4.400 28.748 0.200 8. after decades of attempting to create a vibrant manufacturing sector.73 4 12 5. According to the United Nations.2 16.0 89.1 88.700 11.900 10.793 0.300 13.1 90. Table 3: Caribbean Latest Competitiveness Indicators Antigua and Barbuda Bahamas.717 0.January 1.700 21.45 84 3.633 0. Lucia St.125 Caribbean Country 2009 Literacy rate Human Development Index 2011 0.764 0.699 0.771 0.700 21.200 7.per capita (PPP) 2011 16.7 75.8 99.760 Source: CIA World Factbook .1 96.

"The Choice of Technology Appropriate to Caribbean Countries. McGill University.CONCLUSION The process of Caribbean development over the years has been by no means an easy undertaking. no. Overall. "The Great Depression. Bernal. the true potential of the region’s competitiveness was predominantly over shadowed by the enjoyment of preferential arrangements." Social and Economic Studies 33. "The Impact of Globalization on the Caribbean Sugar and Banana Industries. 16 . The Society For Caribbean Studies Annual Conference Papers 2 (2001): 14712024. 1 and 2 (1988): 3364. it must be recognised that the foundations for this process have already been laid. to the dependency analysis phase. can be seen as a position to improving the regions competitiveness ultimately its development. but as a bloc or region." Working Paper. Owen. "The new realities of Caribbean international economic relations. and A Payne. Colonial Policy and Industrialisation in Jamaica." 1996: 47-48. to neo-liberal policy economy." Social and Economic Studies 37. Bishop. L. R." Asia Pacific Viewpoint 39 (1998): 267-279. of the process of full integration in the region. 1976. M Figueroa. "The Other Way Round: Manufacturing as an Extension of Services in Small Island States. With the implementation of varying development theories. no. Arthur. pioneered primarily by foreign influences. strengthening of the current linkages between sectors combined with the economic collaboration as a united region. Part of which can be attributed to an incoherent regional understanding of the concept competitiveness and its value for economic development. using the existing agreements and efficiently implementing any lingering ones. Baldacchino. the Caribbean remains severely challenged with respect to its ability to compete in the international arena. M. Best.8. "Caribbean Regional Governance and the Sovereignty/Statehood Problem. L.) Despite the diverse challenges facing the Caribbean in their ability to raise their level of development through competition on the international market. Bernal. Caribbean economies have a number of positive attributes to offer. and M Witter." Edited by Sandra Courtman. G. R. (Acknowledging a major characteristic of the current economic era is the integration of economies. where countries do not compete as an individual nation. Waterloo. Historical experiences aside. This of course does not overlook the handicap of limited resource endowments faced by the countries in the region. This is of greater importance given their endowment challenges and the slow pace. Ontario.. REFERENCES Ahmed. No 15. which have now for all intents and purposes can be deemed to have run its course. Belal. From the periods of industrialisation by invitation. 2 (1984): 596. 2010. "Caribbean Economic Thought: The Critical Tradition. Centre for Developing Area Studies. For Caribbean countries to move beyond the current levels of development they must first understand the interdependence between competitiveness and the development process." Centre for International Governance Innovation (CIGI) Caribbean Paper No.

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Karagiannis. The Competitiveness Report 2011-2012. Geneva. Report 31725LAC.Karagiannis. William Arthur. 1999. 2005. Florida: University Press of Florida. http://www. Lewis. Mandle. World Economic Forum. 2004. Updated and Expanded Edition . Sachs. 2011). "A study of the Factors of Regional frontline/shows/crash/interviews/ sachs. Illinois: Richard D. Washington. The World Bank. Nafziger. Payne." Caribbean Economic Review 2. Barbados: Sir Arthur Lewis Institute of Social and Economic Studies. P. "Competitiveness: A Dangerous Obsession’. The Theory of Economic Growth. 1996." In Economic Development. Sunkel. 1999. Persistent Underdevelopment Change and Economic Modernization in the West Indies. and Paul Sutton. Competitiveness of the manufacturing and agro-industrial sector in the Caribbean with a focus on Dominica. 18 . —. Hamiltonm. Jay R. Caribbean Region: Review of Economic Growth and Development." Foreign Affairs 73. New York: Cambridge University Press. Harvard Business School Press.L." (Kingston: Consortium Graduate School of Social Sciences) 1991. 2004. Economic Commission for Latin America and the Caribbean . Switzerland. Jeffrey D." Cambridge Econometrics. Nikolaos. "The Meaning and Measurement of Economic Development. Charting Caribbean Development . International Trade Commission. E. Wayne. Michael E. Wayne." Geneva. New York: Gordon and Breach Publishers. and Michael Witter. Anthony. 2011. R. DC: The World Bank. Nikolaos. Washington: USITC Publication 4000.html (accessed November 13. A Time to Choose: Caribbean Development in the 21st Century.pbs. Caribbean Country Management Unit. Burlington: Ashgate Publishing Limited. Martin. 2003." The Journal of Development Studies 6 (1969): 23. Polanyi-Levitt. Osvaldo. 2006. p. On Competition. The Economics of Developing Countries. United Nations. Klaus. St." Fourth Annual Sir Arthur Lewis Institute for Social and Economic Research Conference: Development strategy and policy for small states in the context of global change. Homewood. 2008. Switzerland: World Economic Forum. 2001. 2008. 1 (1950): 1-61. 2009. K. Krugman. 15-52. ECLAC Subregional Headquarters for the Caribbean. "The Origins and Consequences of Jamaica’s Debt Crisis: 1970-1990. Draft final report for the European Commission Director-General Regional Policy. The crash: Unraveling the 1998 global financial crisis. Vincent and the Grenadines and Trinidad and Tobago. 2 (1994): 28-44. Kansas: Prentice Hall. "The Industrialization of the West Indies. Porter. 3. Nafziger. U. no. Guyana. "National Development Policy and External Dependence in Latin America. 1955. The Caribbean Economies in an Era of Free Trade. Schwab.S. 1997. Caribbean Development and Cooperation Committee. "Towards a Caribbean Developmental State Framework. no. "The Global Competitiveness Report 20092010. Irwin.


1%) and negligible positive growth for 2010 and 2011. The study also draws on a similar study done on Malawi by the World Bank (2009). 2005) and apply it to the special case of Barbados. its development was similar to that of Barbados. These actions clearly marked the beginning of a more post-1960 modern and diverse economy.8% (1990 to 1999) and 0.4% (2000 to 2011). driven by higher investment and domestic savings.0% owning to I. Barbados has moved from an average annual growth position of 2. The motivation for the study comes at a time when Barbados is facing some of its greatest challenges since the start of the global recession late 2008. This line of thinking led to greater promotion of manufacturing and tourism. Barbados has lagged behind. This weak growth has had an impact on labour with the unemployment rate. However. However. Rodrik and Velasco. Associated with this has been declining domestic savings.II. Post 1970. The approach to this would be to employ the growth diagnostic methodology framework (See Hausman. However. By Derek Gibbs Introduction This draft paper seeks to incite discussion on what are the key constraints impeding stronger economic growth in Barbados. the period 20 . economic growth slowed as real GDP grew by 2. 2004). EXAMINING THE CONSTRAINTS TO ECONOMIC GROWTH IN BARBADOS: A GROWTH DIAGNOSTIC APPROACH negative economic growth and as low as 7. the paper would also want to explore ideas as to what could be the possible short and long-term solutions that could be submitted for consideration and perhaps implementation.4%. outside the region. II. Over this period. and later in the 1980s the drive towards international business. Consistent single digit unemployment rates were possible from 2004 to 2008.5% (1970-80). a small open economy with no natural resources and limited financial capacity. between 1980 and 2011. it cannot be the argument that sluggish growth is a recent occurrence. Specifically. If the example of Mauritius is taken. a period associated with fair economic growth. given the control of the sugar sector by a minority class the drive was to diversify the economy in light of Lewis (1950) argument for an alternative path of development for Caribbean countries. Particularly during the 1965-70 period Barbados would have benefitted from favourable export for its sugar (Downes.8% per annum. As captured in Table 1 below. This led to negative economic growth at the end of 2009 (4. The period 1960 to 1970 was one associated with relatively high economic growth. Similarly. This was all done by encouraging direct investment. averaging 14. Barbados Growth History and Structural Change The history of Barbados’ economic growth pre-1960s can be characterized by sugar and basic agriculture with some light manufacturing. Equally. Singapore a country with a development history similar to Barbados has also seen great economic achievement with consistently high growth rates. the data shows that for the period 1980 to 1989. with accelerated growth after this period. the rate would have reached as high as 24. Mauritius has proven to be an economic success story with some lessons to be learnt. Compared to similar small states. Real GDP grew at an average annual rate of 6. while the investment pattern has been mixed.2% (1980 to 1989) to 0.0%.

70 20.70 GDP growth (annual %) St.20 1990-1999 0.50 17.00 24. Economic recovery was experienced during the late 1970s as growth averaged 5.75 19. A reversal in fortunes was not seen until 1986 when there was a noticeable increase in real output of 9.0% the previous year. It should be noted that the 1981 and 1982 slump saw the country going into a short lived International Monetary Fund (IMF) standby programme. This recovery was mainly due to lower import prices and stronger tourism activity.20 3. growing at an average of 10.50 16.70 2000-2011 2.20 21.20 11.80 2000-2011 4. by 1990 there was a slump in economic performance as output in most major sectors fell.10 48.60 29.3%.0% over the 1975-80 period.20 GDP growth (annual %) Mauritius Gross capital formation (% of GDP) Gross domestic savings (% of GDP) GDP growth (annual %) Singapore Gross capital formation (% of GDP) Gross domestic savings (% of GDP) 1980-1989 4.50 20.70 5.44 15.38 21.10 7.30 24. The country between 1985 and 1990 had a modest recovery as the average annual growth rate rose to 2.7% in contrast to growth of 5.30 23.80 2.90 42.88 n. while manufacturing output dropped by 2. This outcome was again driven by the tourism sector which was quite buoyant during the 1986-89 period.30 33.20 1990-1999 5. 24. with the event of the 1979 increase in oil prices the global economy was back in recession which negatively impacted the country’s tourism and manufacturing sector.70 21.30 6. The results saw a reduction in domestic and foreign demand and overall a fall in domestic production.10 27.30 1990-1999 5.30 25. However.40 24. The early 21 . Table 1: Comparison of Selected Economic Indicators Period 10 Yr Averages GDP growth (annual %) Barbados Gross capital formation (% of GDP) 1980-1989 2.10 2.60 48.a.80 40.30 7.00 26.40 22.10 16.60 19.30 19.8% after growing by 10.88 Gross domestic savings (% of GDP) GDP growth (annual %) Jamaica Gross capital formation (% of GDP) Gross domestic savings (% of GDP) Source: World Bank Development Indicators Between 1981 and 1982 the country recorded negative growth. Real tourism output fell by 9. However.89 28.20 28.20 19.4% the year before.0%.40 17.70 2000-2011 0.80 1.0% per annum.90 24. Lucia Gross capital formation (% of GDP) Gross domestic savings (% of GDP) GDP growth (annual %) Small states Gross capital formation (% of GDP) Gross domestic savings (% of GDP) 1980-1989 5.20 13.1970-75 was marked by economic stagnation attributed to commodity shortages and the oil crisis of 1973-74.60 3.80 15.

real output fell by 1. Nevertheless. the country economic fortunes declined and to date has remained weak even though some gains have been made. By 2009 with the on-set of the great recession. This new growth period lasted until 2008. and 1992. The question therefore that can be asked is why. From 1990 to 1995. growth returned by 2002 driven mainly by the non-traded sector.9%.2%. averaging 2.9% per annum. due mainly to negative growth in 1990.3% per annum.0% per annum it was followed by weaker performances. 1986. We see this in 1979. when we have seen other countries like Mauritius and Singapore being able to maintain high growth rates. 1991.1990s was particularly harsh for economic growth as this period could be characterized as one which saw low growth rates and low real GDP per capita. by 2001 the country experienced a slump due mainly to the 9/11 event which caused major disruption to tourism activity which fell by 5. However. This is captured in Figure 1 and 2. With a recovery in place by 1993. Observed also is the fact that the country has never been able to maintain strong economic growth. If a summary can be given. This bleak performance forced the Government of the day into an IMF stabilization and adjustment programme. What are the constraints stopping the country from achieving this and what are the solutions to these constraints? 22 . and which could explain the struggle with high unemployment levels. the country entered into a relatively stable growth pattern lasting eight years (1993 to 2000) and averaging 2. hence the show of high volatility. 1997 and 2006 where when growth rose above an average of 5. the growth pattern that emerges from the data and experiences has been one of inconsistency and high vulnerability to external shocks. which demonstrates the high volatility in Barbados real output.

As shown in Table 2. weak enforcement of contracts. The aim is to identify the principle obstacles to an economy’s optimal rate of capital growth. it is best viewed within a simple constraint matrix that matches symptoms with constraints (See Hausmann. this sector has been on a decline since 1997 and was overtaken by construction in 1999 in its contribution to real GDP. Rodrik and Velasco (2005)4. This is compared to the business and other services sector which on average has contributed just over 17% for the same period. incomplete information. • Poor appropriability (environmental factors or conditions) – high taxation. it is reasonable to assume that each country may have specific constraints that need to be identified and set within context. other market failures. but • Low social returns – lack of important factors such as infrastructure. the sector’s contribution in 2000 stood at 16. While the HRV framework has its groundings in the standard economic theory outlined in the Ramsey model. In particular the question can be asked as to what are the binding constraints on investment and by relaxing these constraints what impact will this have on growth. While the above constraints are identified. While the average appears high.0% to real GDP (1980 to 2011). poor property rights. 4 This is normally referred to in the literature as the HRV framework. Nonetheless. and business and other services. leading to an increase in overall domestic exports. contributing on average just over 13. and unfavourable externalities. human capital.GROWTH DYNAMICS III.1%. For Barbados these important constraints could be identified as business facilitation (by Government agencies) and foreign reserves. this is seen as even more important since it is what keeps the country moving by enabling investment and for the payment of needed imports. The matrix could be more complex but for this discussion it is kept as simple as possible. Explaining the Methodology The framework used to access the growth constraints which Barbados faces is one developed by Hausmann. the reality is that the annual contribution from the sector has been declining. While on the non-traded side the key drivers have been wholesale and retail. The export of tourism services has benefitted the country well. • High cost of capital – through domestic financial markets or external ones. quite important for maintaining macroeconomic stability. Within this matrix each column identifies a constraint and each row represents a symptom of that constraint. labour conflict. What has Growth Driven Barbados’ Growth in Barbados has been dominated by exports of services mainly tourism and international business5. As such. Klinger and Wagner. Within this framework then growth can be seen as been constrained by: IV. which materializes into overall economic growth. low productivity. Similarly. the export of chemicals between 2010 and 2011 more than doubled. there have been some winners in the industrial sector as exports of rum have risen significantly. 2008). While manufacturing remains important. the role of reserves as a precautionary and transactional factor is 5 This is not captured as a specific item in the national accounts. For the latter. 23 .

6 9.2 33.8 8.9 31.2 6.4 -26.0 37.2 6234.1 5. this cannot all be taken in isolation.4 19.2 6.4 6.% Sugar 2.7 1971.5 0.0 0.8 20.0 1991.3 1.8 3.9 3.8 568.5 Retained Imports 2146.2%.8 13. could be seen as some of the constraints facing the sector.4 19.5 Tourism 16.4 3. as other factors needs to be considered when examining the growth process.3 5. as compared with tourism.1 497.0 14.1 8. the manufacturing sector’s contribution to growth has also fallen.0 21.7 13.2 6.2 3396.5 37. Alternatively. While there have been some periods were the contribution was close too or just above the average.8 17.0 6484.3 13.9 -22.9 5.8 8.1 % of GDP Domestic Exports 6.2 14.0 7837.1 522.2 13.2 6.2 458.4 -25.9 12.8 11.1 2011 this was 12.0 1.5 7.5 19.3 1.0 2866.5 9.3 19.8%.1 34.5 Electricity.1 3.8 6.9 4.2 19.0 5.0 -30.7 6183.4 5.5 3.3%).1 -24.4 -24.2 17.6 15. One such factor or concern is the country’s 24 .2 Mining & Quarrying 1.7 21. With problems ranging from economic recession.3 1.6 1.4 8.2 346.9 14.6 3.7 3.8 3.2 22.2 22.4 Source: Central Bank of Barbados Likewise.7 2220.0 0.5 5.9 3231.9 3.8 8. and low investment.4 2802.6 Imports 34. Storage & Communication Business & Other Services GDP . Table 2: GDP and sources of Growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Contribution to RGDP .0 8966.2 3.8 9.0 4.9 18.1 18.5 8.4 14.6 17.6 9.1 Trade Ratios .0 Wholesale & Retail 19.4 8793.6 522. the constraints to stronger tourism performance seems difficult to resolve.5 0.9 1. moving from double digits as seen in the 1980s (between 1980 and 1986 the contribution to real GDP stood at an annual average of 11.1 4.4 7. Gas & Water 3.9 3.8 11.0 39.8 5.8 22.0% the power of wholesale and business services to explain growth is highly important.9 0.1 5.0 1.3 8393. With R-squares of over 90. while the major foreign earning traded sectors have been facing some challenges.6 1. market liberalization.1 4.3 12.1 -30. which between 2000 and 2011 averaged 5. A scatter plot of the data as captured in Figures 4 and 5 clearly shows the high relationship between these two sectors and growth.8 11.5 3.7 333.6 5.8 Domestic Exports 379.4 6.2 9.3 2911.8 9.1 29.0 21.2 1.8 0.1 5.9 14.0 0. However. to increased operating cost.8 13.4 8.4 8625.9 6.0 15.6 -27.7 5.6 19.1 15.0 18.5 2616.9 3.6 15.5 1.9 0.2 8.5 3.7 31.1 Government Transportation.5 8.9 Non-Sugar Agriculture & fishing 3.6 3.9 422.5 12.4 14. to single digits.0 2600.3 16.8 6980. particularly given the sector’s vulnerable to external shocks. The main sectors have been the wholesale and retail sector followed by business and other services. it has not been consistent.9 2958. the non-traded foreign exchange using sectors have been driving economic output.1 Construction 7.5 15. Loss of market share due.0 17.2 6.2 2.1 1.5 Trade balance -26. among other things.4 -26.6 33.3 -29.7 8.2 37.8 0.9 3.4 3.8 16.3 3.8 4.7 6186.6 9.7 8.9 8.1 329.9 19.0 -26. lost of airlift and other external threats.3 8490.9 34.3 531.3 22.6 2.2 352.2 8687.2 Manufacturing 6.Market Prices (millions BDS$) 8.

25 .dependence on foreign exchange to purchase imports that goes into production and the fact that these non-traded sectors are consumers. of such foreign exchange. rather than earners.

the explanatory power was negligible. Salvatore and Hatcher (1991). For the purpose of this study however. except to say that productivity levels for most of the sectors appears to have weaken during the period 2008 to 2010.0% (R² = 0. sectoral productivity statistics for key industries. and real GDP growth. However. with the introduction of co-integration and error correction modelling. no elaborate econometric analysis is done. 26 .1466). Compared to the individual sectors there also appears not to be any real relationship with growth. except for the accommodation (tourism related) sector. the relationship between domestic exports (goods) and growth was shown to be weak with just an explanatory power of 15. the question that can be asked is whether growth is export driven (goods and services) or whether it is driven by endogenous factors and consumer demand. measures of labour productivity are captured in Figure 6 below.Has Growth been Export Driven? Given the above discussion. the fact that tourism productivity was shown to have more significance than the other sector would strengthen the argument of its importance. It is the expectation that decreases/increases in national productivity growth would be accompanied by similar patterns in economic growth.0% (R² = 0. Again using basic correlation analysis to test the linear relationship between national productivity changes and economic growth the relationship had an explanatory power of 42.4201). The aim is simply to use basic correlation testing to determine the strength of the linear relationship between growth and the exports of goods and services. 1994 and Ahmad and Harnhirun. Feder (1983) and then basic time series studies done by Ram (1987).8375). the emphasis shifted to testing for both short-run and long-run effects and also for causality (See Van Den Berg and Schmidt. The issue of export-led growth has been explored extensively in the literature with early cross-sectional studies done by Balassa (1978). Represented in the chart are national productivity growth measures. From the pattern this does not seem to be the case except for 2009 and 2010. In the case of accommodation the explanatory power was just 15. Given the short time series (only seven years) it is difficult to draw any strong conclusion from these results. Nonetheless.0% (R² = 0. These basic results support the fact that services has been the driving economic force and hence would have to be given the greater focus. Based on work done by the National Productivity Council.0% (R² = 0. and Sengupta (1995).1512). On the other hand the correlation between service exports (travel credit) and growth was stronger with an explanatory power of 83. For the other sectors. Productivity Measures An important gauge element for economic growth is to measure the efficiency of labour both at the macro-level and at the micro-level. 1995). Given this approach.

the focus on renewable energy and culture as emerging growth creating sectors is V. Does Barbados have a Growth Problem? This is a complex and not so straight forward question. Currently.Source: Barbados National Productivity Council Way Forward important. Hence.0% or 5. the following observations can be made: 27 .0% consistently then we need to look not only at the traditional sectors but also new ones. getting tourism growing means growth also for others. It would therefore be a strong argument that for the purpose of this study. however based on the above discussion and analysis. It may also mean examining the experience of other countries like Mauritius to determine what lessons could be learnt. It is also important that if we are going to look at how growth can be moved beyond 3. focus be given to just those foreign exchange earning sectors since in the case of tourism there are significant spin-offs to the non-traded sectors. The strategy must be to see how best resources can be used to obtained the main objective that being growth.

trade agreements. 28 HRV Constraints Matrix . While there may be lots more reasons. economic and financial weakness. which it would be impossible to discuss in just one paper.0% for the period 1980 to 2011. Maybe this could partially explain the low or insignificant growth rates during this period. 3. While manufacturing in the past has made a significant contribution to real GDP this has fallen with tourism being the only traded sector making a major contribution (currently international business is not captured as a sector in the national accounts). energy size. This raises the question as to whether the level of productivity is high enough. The early 1980s and 1990s were the major periods of negative and weak growth due to both external and internal factors. 4. private sector credit). particularly those sectors earning foreign exchange.4% (2007). etc. the aim will be to focus on the most relevant and let those be the center of discussion. 2. international foreign reserves. The low growth is reflected in the stubbornly high unemployment rate which has averaged 14. The growth diagnostic tree shown in Figure 9 captures the basic HRV model and some VI. and business services) have been the major components of real GDP. Also. and complementary factors (human capital.0% and over. crime. The following discussion centers on identifying the major constraints to growth in Barbados. Given the importance of foreign reserves to growth it is a matter of concern that the non-traded foreign exchange using sectors. in the case of small open economies like Barbados matters such as . While data was lacking the observation was that the growth in productivity seems not to have any significant impact on economic growth. The volatility could be attributed to external shocks and high dependence on just a few sectors.0%. infrastructural. The argument could be expanded upon by identifying other related issues such as business facilitation. taxation.). Possible issues to target would be – financial constraints (savings. with the highest rate being 24. the environment). taxation. and adverse external economic shocks (increases in global oil and food prices. government and market failure (business facilitation and cost. It is observed that historically real GDP growth has primarily been low with only a few accessions when it surpassed 5. 5. and financing.1. The approach will be that since growth is primarily driven by investment.3% (1993) and the lowest being 7. which may not be the case particularly between 2008 and 2010. but never able to maintain this level due to external and internal shocks. are all issues that we have to grapple with but which we have little control over. it would be best to focus on those issues that can constraint investment in traditional and even non-traditional sectors. innovation. (mainly wholesale and retail. interest rates. Economic growth has been somewhat volatile and low for most periods with only a few years when it stood 4. research and development).

of the main distortions to growth. particularly between 1991 and 2011. this would have to be amended.6 in 1991 fell to 6. In the case of Barbados. has been driven 6 This is defined as the gross capital formation in the national accounts plus the balance in the current account of the BOP (IMF approach). This is supported in Figure 10 where investment (% GDP) has been higher than the savings ratio from 1997.3007) which represents a low association between national savings and real GDP suggests that other savings are responsible for domestic investment and growth. fiscal instability Financial by this. A correlation of 30.0% (R-square = 0. 29 . taxes Growth Issues Constrained by Macro risks: financial.3 at the end of 2011. corruption. monetary. In fact. it does not appear that growth. Looking firstly at national savings6 for Barbados. Figure 9: Growth Diagnostics Decision Tree Problem: Low levels of private investment and entrepreneurship Low return to economic activity Low social returns Poor Geography High cost of finance Low appropriability Bad international finance Bad local finance Bad infrastructure Low Human Capital Government failure Market failure Low Domestic savings Poor intermediation Information externalities Coordination externalities Micro risk: Property rights. the gross national savings ratio which stood at 10. and also higher than the public savings There is a role for financial and private savings in the growth process when linked to investment in physical capital.

which is small and oligopolistic in nature. the agricultural and manufacturing sectors may be constrained by lack of resources and the high risk inherent in them. These challenges have resulted in reduced investment flows. Naturally this risk maybe reflected in the level of interest charged on loans. the focus has more been towards services. but there has been a heavy reliance on private savings. and tourism. both local and external. 30 . mainly professional and other services. and private individuals. these ratings have fallen due to growing debt levels and weaker than expected economic performance as the main economic drivers.0% of all loan and holds assets equivalent to 130. These actions clearly highlight the high exposure of the country to these shocks.9% at the end of 2011. It appears from this information that national savings has not been a significant driver of investment and growth. On the other hand private savings8 are shown to be significant with a high explanatory power of 90. Significant also is foreign direct investment (external savings) which expanded significantly after 2004 and which has helped to explain 72.0% of GDP (FSR. 7 This is defined as tax revenues less current expenditure. particularly in tourism/construction related activities. as shown by a liquidity asset ratio of 18. Outside the current challenges posed by the weak global economic environment. tourism and international business.ratio7 which in most years has been in deficit. In terms of the distribution of credit for productive or growth related activities. Commercial banks provide 70. remains highly exposed to the current global economic challenges. due mainly to good management and supervision by the Central Bank of Barbados. business firms. loans to the potential foreign earning exports sectors like manufacturing and agriculture has been declining. the recent Financial Stability Report (FSR) 2011.0% with real GDP (See Figure 12). personal credit as shown in Figure 13 has seen significant growth due to increased demand for consumer goods. In terms of the banking system and lending rates. while similarly. However. the banking system has over time been shown to be stable and less exposed to external risk. is dominated mainly by foreign own banks that are highly capitalized and liquid. This may explain the low credit to small and medium size enterprises. with larger loans attracting higher interest. a paper by Moore and Craigwell (2000) showed that in the Barbados case smaller loans attracted higher interest and vice versa. In a paper by Craigwell and Kaidou-Jefferey (2010) the point was made that access to credit can be restricted to small businesses because of the lack of adequate resources such as collateral. Disappointingly. This then raises the question of whether commercial bank lending maybe biased towards services and personal credit at the expense of the more traditional traded sectors. many of whom are operating in the agriculture and manufacturing sectors. in more recent times. In addition. posits that the banking and financial system of Barbados remains robust. 8 This is made up of savings from financial institutions. The banking community. The reliance on external savings has materialized in the form of easy access to credit owing to good credit ratings over the years. 2011). While this is assumed. which can influence lending behavior. published by the Central Bank of Barbados. The answer to this may lie in the risk perceived by the lender.0% of real GDP (Figure 11). They also noted that banks exercise caution in their lending behavior and are risk averse in an environment of uncertainty. which mirrors the small contribution these make to real GDP.

such funding.8%). possibly due to risk concerns. As shown in Table 14. and the oligopolistic nature of the banking system. current and past governments have started to create financial structures to assist small and medium sized businesses given its importance to growth. and St. 31 . While this seems to confirm the stability of the banking system. as it can discourage large. including that of credit unions only accounts for a small percentage when compared to available funds of commercial banks. the average spread (1980 to 2010) has been 5. Also. interest rate spreads for Barbados has been relatively stable.3%). Mauritius (7. However. To counteract this. may pose some constraints to higher levels of growth.4% compared to countries like Jamaica (10. the issue of low credit to traditional productive sectors. Lucia (6. medium and small scale private investments.Given that interest rates are important for growth.2%). then higher spreads could be inimical to growth.

where Barbados is ranked at 44 out of 144 countries.Source: Central Bank of Barbados Source: World Bank Development Indicators Growth Constrained by Government or Market Failure in four areas namely construction permits and registering property. while declines were seen in six areas. showed that Barbados moved from a ranking of 84 to 88. As the report showed. Lucia respectively. This report which is very much linked to the World Bank doing business The Doing Business Indicators (World Bank. the main ones being starting a business. there were improvements 32 . Another report of importance is the Global Competitiveness Report 2012-2013. a four point drop. which ranks the ease of doing business in a country from 1 to 185. This result is compared to a ranking of 90 for Jamaica and 69 and 53 for Trinidad and Tobago and St. 2013). getting credit. This ranking places it as the top Caribbean country followed by Trinidad and Tobago at 84. and enforcing contracts.

issues of limited product offerings. Interestingly. lack of market research. The results above highlight the concerns. limited air lift. high input cost.publication also identifies access to financing as a problematic factor for doing business. This would no doubt 33 . in tourism there are known challenges that have to be tackled. and an aging tourism product. high cost. and fiscal incentives. Interestingly also it highlights inefficient government bureaucracy and insufficient capacity to innovate as high up the order in terms of constraints. lack of mentorship. and mature industry. particularly at a sectoral level. the main tax on goods and services rose from 15. in the industrial sector we also have to address issues of inadequate finance. and too much focus on the domestic market. For example. limited access to supply chains. indirect taxation has increased as VAT. On the other hand. of the challenges which we have to overcome in order to improve our level of competitiveness and have higher and more sustainable growth. a high risk adverse culture. In the area of construction. have all been highlighted as issues to be addressed. These spills over into the small and medium sized enterprises were also the lack of funding. while in the International Business sector.5%. Further. and the availability of financing. are also just some of the concerns. low level of innovation.0% to 17. business environment and competition. some of the key constraints are identified as limited geography. Another important factor which identifies failure of government has to do with the management of its finances and whether such management has become a burden on consumers and producers alike. It is not totally clear the areas of taxation which is most problematic but with the lowering of both income and corporate taxes. the global competitiveness report 2012-2013 identifies tax rates as being high on the list of problematic factors for doing business. this has allowed consumers and businesses to keep more of their earnings. particularly those related to the narrow market base. high operating cost. high input cost (particularly energy).

The increased energy prices have had a negative impact on businesses. Growth Constraint by Low Social Returns – Crime and Corruption A major constraint to growth can be a breakdown in social cohesion and corruption which can translate to human suffering and failure in the delivery of vital social services. other factors such as telecommunications and IT services are growing but still need to be expanded. This observation is supported by the weak negative linear relationship between real growth and inflation.0%. which only has an explanatory power of 2. Growth Constrained by a Lack of Complementary Factors Given its small size Barbados has a dense network of roads which makes accessibility to the entire island possible. Indeed. the main energy source is oil. The uncertainty or macroeconomic instability that can arise due to high prices is a concern that government cannot ignore. which are not always persistent. While crime does exist the perception of corruption is quite low as judged by Transparency International which ranks Barbados at 15 with a score of 76. the risk of continued high levels of inflation has not been part of the macroeconomic landscape. having to face higher energy bills. An important endogenous growth indicator is the building of human capital via education and health care. Primary. ranked Barbados 6th in the world. with exception of the late 1970s and early 1080s. an assessment released by the Economist Intelligence Unit (EIU) of the United Kingdom.0263). That said. the issue of crime and corruption is listed low down as one of the factors impacting negatively on doing business in Barbados. the search for alternate renewable sources has been the drive of government. another important input for private consumers and businesses is energy. Hence. The market has been liberalized and the emergence of new players will help to cut cost and improve the competitiveness of businesses.1% of GDP. now have less disposable income. it can be argued that the maintenance of a well managed sea port and airport has aided trade and the movement of goods and services.6% (R²=0. This shows that inflation does not dominate the dynamics of growth within the analysis9. In addition to communication and IT costs. particularly given food and oil shocks. and the top spot in the Western Hemisphere for road network density. 34 . Referring to the global competitiveness report 2012-2013. The same goes also for consumers who. the level of inflation for most parts has remained below 10.increase prices which could negatively impact growth.0%. However. The results would be a reduction in energy cost and increase competitiveness. Fortunately for Barbados this has not been a major issue. However. 9 Note that data from 1980 to 2011 was used. With an oil import bill at $787. Fortunately for Barbados. the results could be different if data for higher inflation years was used. which now has to face higher input costs.0 million in 2012 or 9. when we look at the history of prices it has been driven mainly by external factors. Currently. the dense road network has had its challenges in terms of road congestion and vehicular accidents. This has implications for productivity since time is wasted stuck in traffic. In 2010. which in recent times has seen price volatility due to growing demand and other shocks beyond Barbados’ control. On top of this. This is compared to a ranking of 24 in 2005 which clearly shows the level of improvement overtime in our listing in the corruption perception index. The aim is to reduce fossil fuel use by 30.

the question of the importance of such a stance to economic growth is essential.secondary and tertiary education is virtually free. Tourism. innovative remedies will be needed and cost savings found. If left unchecked. The impact has been on the most productive segment of the workforce in the form of increased absenteeism and loss of workers. The final issue that could be raised is one of the foreign reserves. a strong link between reserves and growth is expected since many of these imports go towards building productive capacity. Going forward. has placed a heavy burden on government’s finances. which is the life blood of small open economies. There is the understanding that developing countries must maintain adequate reserves in order to support financial stability. Also. which is a significant contributor to growth. This is more clearly understood when we consider that unlike developed economies which can stimulate domestic demand and drive growth. which has been the policy of successive governments. In the case of Barbados. the main services sector. is highly impacted by external shocks that can result in increased volatility. especially as it relates to spending at the tertiary level. VII. intermediate and capital goods. the upsurge can have a serious impact on our ability to produce and to be productive and grow. This however. which serves to empower the workforce and make it more competitive in a global market. Regarding health. there needs to be greater focus on providing education and training for the anticipated new growth area. countries like Barbados are limited in this regard by the lack of adequate reserves and hence is highly dependent on external factors to determine growth. the main challenge relates to non-communicable diseases which have risen due to lifestyle changes. like other small open economies we have to purchase capital and intermediate goods since our limited capacity and low technologically capabilities does not allow us to be fully creative. which depends significantly on imports of consumer goods. On top of this. Conclusion Barbados is a country highly dependent on the export of services and investments. the Barbados economy remains narrow with limited export potential and hence in need of re35 . In addition.

while the level of productivity and competitiveness has been limited. high labour and production cost. and implementation of policies and programmes for various reasons. As a result.structuring with a focus on broadening export-driven growth. 36 . Barbados’ high level of political and economic stability and high education and health services makes it an attractive destination for investment and hence all effort should be taken to build on these attributes. Notwithstanding these issues. growth has traditionally been low. Much of the constraints lie in the areas of business facilitation.


the capacity of the tertiary institutions to adequately accommodate all students that are desirous of pursuing studies at that level is also a cause for concern. • Compulsory education for all citizens up to sixteen years of age.0%10. National Strategic Plan of Barbados 2006-2025. there still remain several obstacles to the further development of the country’s education system. ranging from the advancement of National and Caribbean Vocational Qualifications. Key characteristics and highlights of Barbados’ education system include: • Free education at the primary. secondary and tertiary levels. to the formation of smart-partnerships with international institutions such as the InterAmerican Development Bank (IADB). all of its citizens have had access to this crucial service. as well as at-risk children In addition to these accomplishments. Barbados as a small open economy has been able to record many significant accomplishments in spite of having few natural resources. Moreover. With a per capita GDP of some Bds $27 800 in 2011. The development of training institutions such as the Samuel Jackman Prescod Polytechnic to facilitate the delivery of vocational subjects. LINKING EDUCATION TO THE CHANGING NEEDS OF THE LABOUR MARKETS • SKILLS NEEDS 2012: “BUILDING A STRONGER WORKFORCE THROUGH INFORMATION” By • The Research Unit Ministry of Labour and Social Security INTRODUCTION Since gaining independence in 1966. several activities are ongoing to enhance and diversify the offerings of the education system. and The provision of learning facilities to cater to the needs of children with physical and cognitive challenges. • The incorporation of information and communications technology into the learning process under initiatives such 10 as the Educational Sector Enhancement Programme (EDUTECH).III. coupled with favourable rankings on the United Nations Human Development Index and the Global Competitiveness Index. In acknowledging the various achievements that have been made. One of the key contributing factors that are often highlighted for the attainment of the country’s success has been the creative policies and programmes that Barbados has pursued to both develop its education system and ensure that to the greatest extent possible. it can be argued that Barbados has performed creditably in the management and governance of its affairs over the past couple of decades. However. aim to institutionally strengthen those agencies that have the responsibility of providing education services to the country. • The attainment of a literacy rate of 99. It is with this concern in mind that this paper has been prepared. For instance. arguably one of the most critical challenges confronting Barbados’ education system has been the chronic disconnect that continues to exist between the course offerings of Barbados’ major training institutions and the needs of employers operating in the real-world work environment. along with recommendations as to how the disconnect can be successfully addressed. 38 . Partnerships such as these. it is often reported that some sixty percent of students leave school without any formal system of certification.

provided by the country’s primary sectors. In recent years. skills needs information is vital for other categories of information users. sporadic and uncoordinated. Traditionally. In Barbados however. ranging from employment projections by occupation. information on the skills and training needs of employers in industry have emerged to become arguably the most sought-after category of labour market information required by the general public. would be ideally positioned to advise training institutions as to the skills sets they require to facilitate the growth and development of their organisation. THE IMPORTANCE OF SKILLS NEEDS INFORMATION AND ITS RELATION TO THE EDUCATION SYSTEM In addition to training institutions. the current reality is that formal collaborations between employers and training institutions are often infrequent. Australia and New Zealand. policy and decision makers would be provided with an overview as to the skills sets that employers in the country’s primary economic sectors are demanding. it must implement those policies and programmes which are necessary to make it dynamic and responsive to the needs of its people. if there is general consensus that the human resource is critical to Barbados emerging as a developed nation by 2025. to information on job losses and gains by economic sector. the primary types of labour market information required by public users pertained to statistics such as the unemployment rate. innovative means must be found to ensure that smartpartnerships between these parties are formed and that information on desired skills are communicated to Government and training institutions in reasonable timeframes. particularly businesses that generate and drive commercial activity. They would then be empowered to devise and implement proactive training policies which are based on factual and objective research. Within recent years however. Arrangements such as these are fast proving to be vital action steps that must be taken in any country’s endeavor to develop its human resource. Professionals and Skilled Craftsmen. especially if human resource needs can be organised and reviewed on a sectoral basis.THE PROBLEM OF INFORMATION ASYMMETRY In developed and developing countries alike. In an ideal environment. Employers. Such arrangements are not new and can already be found in developed countries such as Canada. based on their business experience and their analysis of environmental trends. Training institutions in turn would be assisted in the restructuring of their curricula to produce quality offerings that are (i) relevant to the business world (ii) are in sync with changes in technology and that (iii) ultimately enhance the ability of the graduate to enter seamlessly into a modern work environment. there would be constant and continuous communication between employers on the one hand and training institutions on the other. there has been a distinct demand for the provision of diverse types of information. 39 . employed persons working in Barbados’ major economic sectors and employed persons dissected into major occupational groupings such as Managers. The education system must be mindful of such developments. policy and decision makers are increasingly recognising that there is a close link that must be established between education and workforce development. for if education is to be truly placed at the forefront of socio-economic development in Barbados. Such an arrangement would inevitably redound to the benefit of both parties. With possession of this crucial type of labour market information. Consequently.

the MRSU met with key stakeholders in five selected sectors that were deemed to be critical to the future economic development of Barbados. and (iv) occupations for which skills sets were usually sourced overseas “SKILLS-NEEDS 2012” . (ii) current skills shortages impacting on the smooth functioning of the sector. (i) labour-related challenges being faced by employers in their respective sectors. analyse and disseminate information on skills needs to the public. the research section of the Ministry of Labour and Social Security. Preparatory meetings were held with representatives of chosen sectors to: • • • 40 Sensitise participants as to the importance of skills needs information. the types of qualifications that employers were demanding and which training institutions offered programmes in the areas in which they were interested. They were considered to be the “drivers” of the Barbados economy over the next 20 years and were regarded to be critical in helping the country attain international competitiveness. in collaboration with the TVET Council. embarked on exercises to collect. These stakeholders were primarily representatives of umbrella associations. It was further acknowledged that such information could have significant benefits to a variety of stakeholders in the education system. These sectors were determined to be critical to the Barbados economy in terms of their contribution to gross domestic product. and Review and finalise the list of questions that would be used in the project. These sectors were chosen from goal five of the National Strategic Plan 2006-2025. In 2007. Government. analyse and disseminate requested information and make it easily accessible to members of the public. . Identify key industry stakeholders to participate in the exercise. The sectors targeted at the time were (i) Finance and International Business (ii) Manufacturing (iii) Tourism (iv) Agriculture and (v) the Cultural Industries.AN OVERVIEW OF THE EXERCISE CONDUCTED BY THE MINISTRY OF LABOUR AND SOCIAL SECURITY In March 2012. Due to its critical importance. through the Ministry of Labour and Social Security. devised a project proposal for the conduct an expansive and comprehensive skills needs assessments exercise. the research section of the Ministry endeavoured to capture this type of information. (iii) corresponding training and certification requirements for occupations in demand. Guidance Counsellors and students in particular would be provided with sectoral information as to areas in which skills shortages exist.To be proactive and to continue to adequately respond to the needs of the public. relevant government ministries and employers. The stakeholders were arranged in focus group sessions and their responses were solicited to questions like: PAST SKILLS NEEDS EXERCISES CONDUCTED BY THE MINISTRY OF LABOUR Being mindful of the increasing need to collect. employment and foreign exchange. the occupational needs of employers in key industries. This exercise was repeated in 2009 and on a limited basis in 2010. it was determined that skills needs information should be collected on a continuous basis.

it was determined that each of these eight sectors had critical roles in the future development of the Barbados economy. various editions of the Financial Statement and Budgetary Proposals and the Barbados Economic and Social Report. the 2. primarily due to the fact that they each employed significant numbers of workers.g. Those identified stakeholders were supplied with the same questionnaire as the persons in the focus groups. etc) they required of the occupation in demand. Cultural Industries was chosen on the fact that it was widely considered to be the sector with tremendous opportunities for future development.The Ministry attempted to capture information on the skills sets and training requirements for eight sectors. 7. Masters. The ranking of every occupation identified by stakeholders as being in demand under a three-level system. Agriculture. Public Sector. 2. Ministry sought to capture specific sets of information that were not captured in previous exercises. but who weren’t invited to the focus group sessions. Upon the choosing of the eight sectors. inter alia: Tourism. Under this system. These included. 3. inclusive of: 1. out of a total employed labour force of just under 130. Sources that were determined to be of importance. Business and Financial Services. This action was pursued given the fact that some sectors such as Culture. as well as the ideal level of certification (e. Construction. 3. 11 The survey conducted by the Barbados Statistical Service to capture and report on the labour force 41 . 4. Diploma. The proposed rankings assigned to demanded occupations were: • (rank #1: modest demand) • (rank #2: significant demand) • (rank #3: critical demand) Through a review of documents such as the Medium Term Development Strategy 2011-2014. The next three sectors were considered for study. stakeholders were requested to outline the corresponding qualification.000 persons. At these focus groups. This fact was evidenced by a review of the continuous household sample survey11. would be requested to make contributions to the exercise through follow-up interviews. each session was requested to classify occupations by their level of importance. For each occupation. The first four sectors listed were considered to be vital to the earning of foreign exchange for Barbados and consequently were chosen based on this key factor. but were deemed to be critical to users of labour market information. 8. Professional certification. 6. Agriculture and Manufacturing could be dissected into numerous subsectors which were capable of being analysed as separate units by themselves. Wholesale and Retail Trade. 5. the Ministry again sought to identify a satisfactory combination of employers. Cultural Industries 1. Manufacturing. where it was discovered that each sector employed over ten thousand workers. government ministries and umbrella agencies and scheduled a series of focus groups. Bachelors.

Survey response rates in Barbados are often quite low and in making the decision to choose this method. The third and very critical point was the fact that historically.METHOD OF DATA COLLECTION: EMPLOYER SURVEYS VERSUS FOCUS GROUP SESSIONS In the initial planning stages of Skills Needs 2012. The primary advantage associated with the organisation of focus groups was that they were relatively inexpensive to conduct. the information which was required by the research section could be collected in a very short space of time. Furthermore. the factor expense was underscored when the following activities were considered: • • • • • formulating a comprehensive public relations campaign to adequately inform and sensitise employers as to the conduct of the survey. thereby facilitating the use quantitative analysis on the data which was collected from employers. the greater the amount of participants. payment of Field Investigators for their travel to and from survey participants. it was acknowledged that each approach had advantages and disadvantages. it was noted that this method would allow for a significantly greater amount of respondents to be targeted. After reviewing each method. In reviewing the use of employer surveys for each sector. transparent research method of collecting the required skills needs information. and managing and monitoring the activities of Field Investigators The other critical disadvantage was the culture associated with the provision of information for the conduct of surveys. The main disadvantage associated with this method was the significant outlay of resources that would be needed to conduct a proper analysis and draw representative samples of each of the sectors. This would result in the inclusion of a wider cross-section of employers and consequently the acquiring of more opinions from employers as to their future needs for workers. Another critical advantage would be that the use of a survey would facilitate the use of a sample that was representative of employers in a particular sector. the greater the challenge faced by the group facilitator in managing the discussions to obtain the the hiring and remuneration of field investigators required to conduct the research. the Ministry was confronted with the need to choose a systematic. The formulation of accurate sample frames for some of the sectors (particularly the Cultural Industries) was also taken into consideration. With respect to the first disadvantage. In addition. the Ministry faced the distinct possibility of spending significant amounts of funds for which the possibility of a very low response rate was highly probable. A representative sample in turn. 42 . The disadvantage of the focus group method was that virtually all of the information collected would be of a qualitative nature and would not readily facilitate the conduct of any meaningful statistical tests. the option of conducting focus groups was then scrutinised. The two methods which were considered in detail were (i) the conduct of employer surveys and (ii) the conduct of focus group sessions. would allow for the use of statistical inferences. associated survey expenses such as printing of survey instruments and printing costs. the research section has in the past experienced reasonable-tosatisfactory responses from participants in such exercises. After considering the advantages and disadvantages associated with the use of surveys.

Many participants were unable to speak with authority as to the trends and future developments which were impacting and would impact on their respective sectors. desired level of certification. The information provided in the tables have been obtained and compiled from the focus group sessions and are provided for the Tourism.required information. they were absent from the proceedings. was the fact that many stakeholders did not know what skill-sets were required to develop their sector. the sub-sectors themselves could also be further dissected. Construction and Public Sectors. some of whom could be considered to be key stakeholders in their respective sectors. However. sub-sectors. it was noted that music. participation at a few of the sessions was inadequate. and priority ranking of the skills set . when contacted prior to the meetings pledged to attend. funds would be sourced from international agencies such as the Inter-American Development Bank (IADB). In addition to having a large number of sub-sectors. in discussing possible approaches to the identification of participants for this sector. could be further divided into five distinct “sub-sub sectors. The sheer diversity and complexity of some sectors also proved to be an obstacle to the Ministry. Over the medium term however. it was noted that the Manufacturing sector could itself be dissected into at least fifteen separate and distinct sub-sectors. as a distinct sub-sector on its own. The instrument used to guide the discussions at the focus group sessions is shown as Appendix I. Some invitees. and of particular concern. the recommendation was made to tackle the issue of collecting skills needs information using a combined approach. were openly unable to provide comprehensive information as to the skills and training needs required of persons in their own sectors. Agriculture could reasonably be divided into approximately the same number of PRELIMINARY RESULTS OF SKILLS NEEDS 2012 The interim tables shown below are provided for three sectors which have been selected from the exercise. As a practical example of this dilemma. Overall. Many stakeholders did not know what qualifications were required of skilled persons seeking to enter their sector. After carefully considering both options. They display the following: • • • 43 skills sets required. The research section was of the view that focus groups could be used over the short term to capture primarily qualitative information on the skills needs of employers. to conduct a survey which would be more representative of employers in given sectors and from which richer and more detailed information on the needs of employers could be gleaned. participation by selected stakeholders could be described as fair. As a case in point. Invitees to the focus group sessions were initially contacted via telephone and/or e-mail and then written formally. The Cultural Industries sector was determined to be easily the most complex sector to study. This challenge would also be compounded by the fact that focus group sessions should ideally be conducted within a specific period of time. CHALLENGES ENCOUNTERED IN THE CONDUCT OF SKILLS NEEDS 2012 As has been the experience with some past skills needs exercises. Finally. whilst attendance at many of the focus group sessions could be deemed to be satisfactory. on the day of the sessions.” Probably one of the more worrying observations made on the exercise was the fact that many participants.

Sc 44 Priority Ranking 2 2 2 3 3 2 1 to 2 2 1 3 2 2 1 to 2 3 2 .Sc. Masons.g. Sc.Sc Certificate Certificate Diploma to Degree level Diploma to Degree level B. Technicians (Solar Pan. B.Table 1: Selected Information obtained from the Tourism Focus Group TOURISM Skill-Set Required Level of Certification Desired Quality Assurance Customer Service Food and Beverage Management Wine and Spirits Language Skills Heritage Management Project Management Website Development and Might Financial Management Tour Guides Special designation e.V.Q) Certificate.A. Carib Voc.Sc Certificate. M. Wind Energy) Fire Engineering Geographical Information Systems Scaffolders Artisans (Painters. Sc Certificate Certificate.Post Graduate Specialised courses Degree level to Professional Designation Priority Ranking 3 3 3 3 3 3 3 3 2 3 Table 2: Selected Information obtained from the Construction Focus Group Skill-Set Required Urban Design Building Conservation/Preservation Building Surveying Joinery/Ornate/Woodworking Steel Benders/Fixers/Layers Technicians (Chill Cooling Syst. Masc.V. Roofers) Specialised Welders Safety Officers Water Resource Engineers CONSTRUCTION Level of Certification Desired Bask. M. Sc/M.C. Assoc.C. Qualifications (C. Special License Certificate/Diploma/B. Tilers.P) Various short courses Certificate to Degree level Conversational courses to Associate Degree Certificate .Q) Certificate. Carib Voc. M.Sc. Qualifications (C. B. Sc B. Air Cond) Maint. Carpenters) Artisans (Plumbers. (H. Degree.

other government entities. when fully completed and analysed. the Ministry of Social Care. At present. Youth Affairs. the Ministry of Family. the Barbados Youth Development Council and other youth groups. be disseminated to various categories of labour market information users.Sc coupled with relevant short courses Records Management Certificate Legislative Drafting L.Sc. Finally. employers and policy makers. The Ministry is especially interested in ensuring that information users are provided with a clearer understanding as to what skills sets employers in particular sectors want and what qualifications must be obtained in order to gain employment in occupations that certain industries are demanding. the Government (i) (ii) (iii) (iv) (v) (vi) 45 the Social Partners.L. researchers.M. the Guidance Counselors Association of Barbados. most notably job seekers. The Ministry will also devise a “skills needs” segment on the Ministry’s website and will ensure that it is wellpositioned on the home page for easy access by website users. This information will be provided free of cost to all information users. the Ministry forwarded the instrument to additional stakeholders in most of the sectors. career planners. the Ministry would also wish to actively explore the possibility of conducting a series of presentations on the findings of the exercise. Once the information collection component of the exercise is completed. The Ministry would wish to make these presentations to: FUTURE INTENTIONS OF THE MINISTRY OF LABOUR AND SOCIAL SECURITY The Ministry is desirous that the results of this exercise. students. The Ministry is of the view that the information collected is vital to the filling of information gaps that currently exist on occupational and training needs throughout Barbados. Post Graduate Certificate Curriculum Development Specialists B. . Constituency Empowerment and Community Development. Post Graduate degree Competency Based Training Negotiating Skills Certificate Industrial Relations Certificate to Masters level Supervisory Management Certificate Priority Ranking 3 3 2 to 3 2 3 3 2 2 2 3 3 3 2 2 2 3 Information Services would be consulted to explore all available avenues to disseminate the results of the exercise to the public.Sc coupled with relevant short courses Programming B. in order to improve upon the quality of data which has been captured under the project. the Ministry of Education and Human Resource Development. Culture and Sports. tertiary institutions.Table 3: Selected Information obtained from the Public Sector Focus Group PUBLIC SECTOR Skill-Set Required Level of Certification Desired Nursing Degree level Clinical Psychiatry & Psychology Post Graduate Qualification Procurement Management Certificate to Post Graduate Qualification Project Management Diploma to Post Graduate Qualification Foreign Languages Conversational Research Skills Systems Analysts B.Sc coupled with relevant short courses Software Development B.

in that scarce financial resources. The conduct of two additional focus groups in 2013 that target the Alternative Energy and Sports sectors. One such practical example would be the case of students of tertiary institutions. Government itself also reaps adverse consequences. underemployment.(vii) (viii) tertiary institutions such as the Barbados Community College. the Ministry is of the view that there are a number of complementary actions that must be pursued if the project’s objective is to be truly realised. The conduct of detailed employer surveys in collaboration with the Inter-American Development Bank under the “Skills for the Future” project which is expected to commence in 2013-2014. bringing to ten the number of sectors that have been analysed. energy and financial resources into pursuing a training programme for which there is no demand. and Re-commencement of the Labour Market Information Advisory Committee (LMIAC) to obtain tripartite input on pertinent labour market issues that need to be researched and analysed CONCLUSION In a dynamic and extremely competitive labour market. in order that they can be contacted and requested to update information over time intervals of two to three years. These actions are now outlined below: • • • • Further collaborating with the Immigration Department to collect information on the number of work permits issued by occupation per annum. the adverse consequences that could be realised from a country’s failure to conduct structured skills needs assessments can be primarily seen though the presence of wasteful labour market imbalances and skills gaps that can arise due to the lack of timely information. Research and formulate a methodology for conducting quantitative employment projections. effort. as this could be regarded as a possible indicator of skills shortages that the Barbados labour market is challenged to meet. 46 . the Samuel Jackman Prescod Polytechnic. who invest their time. the Ministry will seek to create a comprehensive database of stakeholders. Sensitisation of the general public as to the need for labour market information. especially in a time of a Scrutiny of all courses and programmes offered by major tertiary training institutions at least every two years by a committee of employers with knowledge and experience in the subject matter. • • RECOMMENDATIONS TO STRENGTHEN AND SOLIDIFY THE INFORMATION COLLECTED UNDER SKILL NEEDS 2012 In light of the scope and direction of the project. along with its ability to facilitate enhanced decision making. This unfortunate scenario leads to unemployment. Barbados Institute of Management and Productivity. or the student being compelled to accept a job that in no way makes use of their acquired skills and competencies. the University of the West Indies and the Barbados Vocational Training Board. Re-commence the collection of information on monthly jobs created and lost (by occupation) from the National Insurance Department. and the Barbados Accreditation Council • • As the occupational and skills requirements of the eight targeted sectors are dynamic.

is the meaningful development of the country’s human resource. Medium Term Development Strategy 2010-2014. Once established and accepted by all labour market participants. hindered the ability of the labour market to achieve its maximum potential. REFERENCES The Barbados Human Resource Development Strategy 2011 – 2016. through the exchange of information.serious global downturn. government and training institution. where. Barbados Economic and Social Report (various editions). International Perspectives on Labour Market Intelligence (International Network of Sector Skills Organisations). However. Skills Needs assessments are practical responses that can be used to tackle these problems. Success will ultimately call for a collaborative approach between employer. 47 . Financial Statement and Budgetary Proposals (various editions). the nation as a whole will be in possession of a tool that will assist in the reduction of several of the imbalances that have for years. The National Strategic Plan of Barbados 2006-2025. are allocated to the offering of training programmes in which employers have no interest. no individual category of information user can successfully conduct such initiatives in a vacuum. each partner contributes to the national interest which in this case. Skills needs assessments must be structured and continuous and their results must be easily accessible to all information users.

TOURISM FINANCING IN BARBADOS Mr. Antonio Alleyne Economist Economic Affairs Division 48 .

What is now the country’s largest income earner. tourism has become one of the most significant economic generators in the Barbadian economy. development and capital components of the country’s economy. “finance plays a life sustaining role in the industry’s development. The importance of the sector is reflected in the fundamental role it plays in the employment. INTRODUCTION At a time when development financing in services and tourism-based economies such as Barbados. Regarded as perhaps the most interconnected of services sectors in any economy. and recreation and entertainment. This broad analysis raises a number of unanswered questions pertinent to decision makers. the tourism sector remained the country’s largest traded sector with a contribution of 12. Thus. with both backward and forward linkages. 49 . which are dependent on travelers. food and beverage services.IV. this amalgam of parts embraces various activities both in the services and production sectors generally requires high doses of capital investment with long gestation periods (Chand 2000). in their efforts to foster economic growth. indirectly. The tourism industry is multi-sectoral (ESCAP 2001). 2003). grasp with great detail the 12 In 1976. As such. For the appropriate policy measure to be developed a comprehensive (empirical) analysis of the prevailing situation at ‘ground zero’ is paramount. development and capital components of the country’s economic performance. despite a slight decline of approximately 0. This preliminary analysis attempts to provide an initial. accommodation. Research and Planning Unit (2012). adequate supply of financing increases the overall growth and development (Chand 2000) of an economy.2%. it is imperative that the decision makers. the Tourism Society of England defined tourism as “…the temporary short term movement of people to destinations outside the places where they normally live and work and their activities during the stay at these destinations.” It acts as a lubricant in the process of economic growth and is an essential element for everyday activity. These include transportation. It includes movement of people for all purpose as well as day visits or excursions” (Ghimire. disequilibrium between the demand and supply of these facilities remains. continues to be rattled by the lingering effects of on-going developments in Europe and the slowed recovery process in other developed markets. TOURISM FINANCING IN BARBADOS connection between the financial need and the available options of the business operators within the tourism12 industry. A snapshot review of the financing flows of the tourism industry reveals that Barbados continues to establish financing and guarantee facilities options to aid in the development of tourism. travel services (containing travel agencies and tour operators). yet broad descriptive perspective on which more comprehensive studies can be built. For the appropriate policy measure to be developed a comprehensive (empirical) analysis of the prevailing situation at ‘ground zero’ is therefore paramount. According to the Ministry of Finance and Economic Affairs.3% of real gross By Antonio Alleyne ABSTRACT The importance of the tourism industry is reflected in the fundamental role it plays in the employment. However.

securing adequate financing. an attempt is made to review previous work related to 50 . the innovativeness of the tourism industry 2. host and tourists. and in order for them to be or remain competitive. Despite this fact however. the novelty of China and the cathedrals. continues to be a difficulty. Small countries similar to Barbados and within the Caribbean have to compete with the lions of East Africa. These included: 1. segmentation and diagonal integration as opposed to mass standardized and rigidly packaged holidays. According to the United Nations World Tourism Organization (2012) statistics for 2011 while continuing to increase tourist arrivals reached 983 million and tourism receipts generated an estimated US$1. Figures published by the Caribbean Tourism Organization for 2011 indicate tourist (stay-over) arrivals in Barbados reached an estimated 567.6% and 3.9%. the development of the tourist facilities and services based upon flexibility. the potential for tourism services worldwide remains high both in volume and receipts. beaches and ski slopes of Europe. if not enhanced. However. the temples of India. across the CARICOM member states. the quality of their service must be maintained. and provide effective marketing (OECD Policy Brief 2008). provide an adequately educated and trained workforce. respectively. However.054 cruise-ship passengers and a number of other excursionists (CTO 2011). needs to be able to build and improve accommodation facilities. These figures allow Barbados to be ranked as the second most favoured tourist destination. Businesses within tourism are well aware that tourists are always seeking new experiences. any country wanting to develop its tourism industry. From the international perspective.domestic product (GDP) in 2011. It is posited that these types of investment proposals offer strong opportunities and an investor’s decision to finance a proposal represents a sound business opportunity. particularly for the Caribbean. time has proven that it can be difficult for businesses (new and existing) in the services trade to obtain financing. Poon (1989) has highlighted a number of salient facts on tourism in the Caribbean.030 billion. in this section. the overall development of the services sector of which tourism is one component 3. LITERARY SURVEY ON TOURISM FINANCING Despite the increasing importance of tourism at various levels for a range of economic reasons. The development of any sector in an economy needs continuous investment and tourism is no exception. In a study commissioned by the Commonwealth Secretariat in 1987. continuously. as compared with 2010. there remain limited studies which focus on tourism financing. These figures represent an increase of 4. there were listed several pillars to the future sustainability of Caribbean tourism. or remain globally competitive. to which there remains no close substitute. Tourism continues to grow on a global scale. behind Jamaica. which all remain pertinent to the survival of Barbadian tourism today. This was in addition to 619. It must be noted however that tourist destinations and experiences are highly substitutable and therefore suggests immense competition within the industry. As important as this sector has become. critical to the longterm survival and success of any business within the sector.724. As a result the prospects for Barbados and other developing countries to expand their tourism industry and capture the opportunities it may offer for socioeconomic development are potentially great.

on economic growth has also been examined and the result supports the conventional wisdom that there is significant positive relationship between the variables. The research also contains the terms and conditions for the financing along with time duration. These different agents need to be coordinate efficiently by the nodal agency. The study investigated the pattern of investment financing and argued for commercial considerations rather than political. while considering the macro effects and the availability of fiscal space. However. such as leasing or franchising. It also emphasised the need for proper investment legislation. the author lauded the single window policy13 as an appropriate policy for investment. Moreover. on the authority’s side there still remains a multiplicity of different departmental agents whose legitimate interests need to be reconciled. in a study undertaken by Bennett (1991) though confined to tourism financing took the analysis a step further. rate of interest. collateral requirements and or guarantees and related information. several strategies and sources may be tapped. investigates the effects of tourism industry on GDP and finds a significant positive relationship between tourism financing and GDP in Nepal. Indonesia and Nepal as case studies. Results from the study suggest that to finance the tourism sector. the report aimed to provide a picture of the capital market for the promotion of the tourism industry. While the ‘single window’ may be just that on the investor’s side of the window. Among domestic private investment. Similarly. • It was also indicated that the traditional divide between public and private funds is becoming considerably blurred. Bishnu Prasad Gautam (2008).different exploratory methods of providing tourism financing. In a recent study. other sources such as foreign direct investment and 13 The single window concept of investment promotion and facilitation is meant to provide the prospective investor with a single nodal agency through which contact is made with different government agencies that provide services to investors or regulate operational aspects of investment. Noting that there is confusion among the government agencies caused by overlapping roles and functions. the capital made available in this way rarely covers more than 50% of the cost of the work. commercial companies. Overall. government budget and foreign aid (bilateral and multilateral). In a 1971 report produced by the International Union of Official Travel Organization (IUOTO) the details of the public and private banks. which is simple and easily communicable and specifically designed to protect the investor. developing countries. the role of various sources of tourism financing. including government financing and the loan financing of banks and financial institutions. international organizations and other agencies that were already contributing to financing tourism projects or are prepared to provide financing were highlighted. Using Fiji. Public funds are often combined with private funds into one in the same project. The balance is covered by novel supplementary types of financing. Some of the major findings were: • The most common forms of financing are of the traditional kind: mortgage loans for the financing of buildings and loans secured by pledges for the financing of the equipment. the purpose was to provide a practical framework and guidelines for formulating policies and strategies for financing tourism development in 51 .

capital market. From the smallest to the largest. Invariably. could not outline opportunities for the sector. all. profitability. as it should be. it is suggested that over the years persons within the services (tourism) sector in Barbados have experienced particular difficulties in obtaining financing from existing institutions. The study further posited that the government expenditure for tourism promotion and investment on civil aviation. It is the investment that has brought the significant changes in the infrastructure and superstructures necessary for tourism to reap the benefits from such industry. which would indicate that this struggle may have been amplified by 52 . and high costs “hit at the very heart of developing strategy and policy” for the sector. Therefore. the burden seems to rest with short term considerations of cost. Auliana Poon (1989) undertook a study that sought to analyse tourism financing in the Caribbean with Barbados as the country under review. Poon’s (1989) major finding from the study was that subjects experienced high operating costs which were exacerbated by the public sector through high taxes and duties which proved to be all-pervasive problems for the sector. It clearly illustrated that tourism financing has a significant economic impact. A point was also made that the current strategy by hoteliers is more one of tax avoidance. the analysis also showed the significant impact of various sources of tourism financing such as the government. It is a reality that the financing requirements for tourism operations can range from a substantial amount of money for new equipment to relatively smaller amounts to help with marketing costs. too much focus had been placed on the immediate problem of high cost. Moreover. “finance plays a life sustaining role in the industry’s development. Statistics exists. with the exception of one. duties and taxes. should be explored. commercial banks and Nepal Industrial Development Corporation as well as foreign aid and loan disbursement. Thus. Further.” It acts as a lubricant in the process of economic growth and is an essential element for everyday activity. rather than. instead of building foreign competitive strategies and investment plans. The author further suggested urgent action in addressing this matter. The major objectives of this research were to explain how the sector is financed and what forms of finance are available to the sector. Empirical analysis relating to the effectiveness of tourism financing showed the significant impact of tourism financing on economic growth. Poon (1989) has also pointed out that the availability of and conditions for financing offered to the industry affect all of the above factors and indeed the future of tourism. one of investment. concluding that the critical issues of finance. including those established to assist the services sector. adequate supply of financing increases the overall growth and development (Chand 2000) of the industry. among others. The research also noted that when hoteliers were asked to identify the major constraints and opportunities facing the industry over a ten year period. and the views of hoteliers regarding the problems and prospects for hotel financing. TOURISM FINANCING In the words of Chand (2000). as well as the loan disbursed by the commercial banks and Nepal Industrial Development Corporation has been significant for the development of tourism industry. hotels were almost unanimous in identifying taxes and duties as a constraint to their operations. it has been a benign agent for hotels and other tourism business. However. the special needs of small establishments.

whether small or large.the financial restraints imposed by financial agencies and the reduction in fiscal space being experienced by governments as a result of the global financial crisis. 2003). It is interesting to note that business-persons within the sector have expressed similar levels of frustration when seeking financial assistance. sources of tourism financing range from direct government financing and multilateral and bilateral loans and grants to financial institutions as well as third party foreign investments. the use of these facilities has been very low. For the purposes of this review. The following two sections will therefore highlight. this can also effectively prove to be the lubricant for overall economic growth. but excludes the standard commercial bank credit terms facilities available for all business ventures. The question therefore remains. Similarly. Nevertheless. tourism financing comprising government investment in civil aviation and annual expenditure on tourism and loans supplied by financial institutions are the necessary lubricants to the sector. similar to many small developing countries. The problem of financing also exists in other countries. first. as the government generally provides incentives to induce economic activities and growth. The following section outlines a number of available financing facilities (direct and indirect). according to Kenya’s Minister for Tourism and Wildlife: interest and other repayment terms. all tourism based business enterprises need financial resources to undertake profitable investments. Despite the numerous financing facilities available to tourism related operators. Previous research has revealed that there is no shortage of funding facilities available to trade (tourism) financing. The quantity of investment goods demanded depends on the interest rate. and generate revenue. it also depends on the investment climate and local tax policies. Given the significance of tourism to Barbados. the demand for investment financing depends on the marginal product of capital and expectation of future growth as well as the rate of 53 . the supply of financing also depends on the rate of interest. the utilization of domestic capital and firms’ internal sources can also be the enduring supply (Seaton 1994). which cater to the provision of financial resources to the wide range of operators or business persons within the local services industry. DEMAND FOR & SUPPLY OF TOURISM FINANCING As indicated above. 2006) Research indicates that there are various sources of financing for the tourism sector. the determining factors of demand for financing in the sector while the second section will follow with the supply side sources of tourism financing in Barbados. Thus. In addition. A major problem limiting tourism development is the unavailability of finance on favourable terms over a long period of time. in a country like Barbados. Existing financial institutions are often unable to meet the needs of those wishing to develop new tourism facilities or wishing to refurbish existing facilities because of erroneous lending conditions…” (Kenya’s Minister for Tourism and Wildlife. In the Barbados environment. what are the underlying causes “The availability of finance to develop and promote the tourism industry is also critically important for the industry’s further growth and development. It includes all the options that were available at the time of this study. which measures the cost of funds used to finance investment (Mankiw. In actual fact. and exclusively tourism. a number of these financing facilities have been identified. For instance.

in the 2012 Financial Statement and Budgetary Proposal. This has led to the establishment of numerous finance assisting facilities being offered to the range of tourism related operators. may be granted the following tax concessions: “the domestic banking system. the Barbados focus for the development of tourism has increased. According to the Act. 2. this facility expands incentives for investment in the tourism sector beyond the traditional. This follows the statement made by Abbott (1996). the cost of financing from the commercial banks is too high. This will exclude any facility originating directly from commercial banks to the private sector or any provided by the development bank solely for government related projects. 3.0% respectively. A Snapshot of the Tourism Financing Facilities and Programme For many years. competitive worldwide. This section will briefly review a number of the currently available financing facilities. supplies and equity financing14.0% and 4. Income tax at a reduced rate of 30. in efforts of developing a sustainable sector. historic and cultural heritage and for the construction of properties in non-coastal areas.  Barbados Tourism Development Act (2002) Replacing the previous Hotel Aids Act of 1956.0%.… provide most trade-related finance which contributes to the high cost of trading… notwithstanding the proliferation of facilities. 5. Incentives are offered to restaurants. fixtures and equipment as well as building materials.0% respectively. approved developers and certain investors. Exemption from income tax on interest earned on a loan made to an approved developer to finance any development work during the development period. The main advantage to equity financing is that the business is not obligated to repay the money. 54 . there is a shortage of managerial skills and funding on appropriate terms to enable CARICOM members to operate an efficient and effective multilateral trade and payment system. 14 Equity Financing refers to money obtained from investors in exchange for an ownership share in the business. there is also exemption from import duty. programmes and policies within the sector.0% and 6. Provisions are made within the Act for investors in tourism projects to benefit from write off of capital expenditure and 150.0% of interest. Exemption from import duties and value added tax on inputs for the construction of new buildings or the refurbishment of existing buildings. value added tax (VAT) and environmental levy in respect of furniture.” 1. recreational facilities and services. other than commercial banks.. Initial and annual allowances on an industrial building at 40. Initial and annual allowances on a commercial building at 20. Further it begs the question what measures can be implemented to boost overall trade in the services sector and more particularly tourism? According to the Government of Barbados.behind the low demand for financing facilities in a nation which is heavily reliant on the survival of the tourism sector. development of attractions which emphasise the island’s natural. and the established mechanism (financing facility funds) does not provide the necessary concessional ease needed. 4.

000. the minimum loan size for SHBI members is $50. Through its utilization.5 million or 15. Tourism Loan Fund (TLF) The TLF provides loans for the refurbishing and upgrading of eligible hotels and attractions and/or for the construction of facilities to be used for the purpose of carrying on business in the areas of historical cultural and natural heritage attractions. Exemption from property transfer tax payable by vendors on the initial purchase of the property.0% per annum. The moratorium under this loan facilities ranges from one but not exceeding three years. The SHIF is restricted to the Small Hotels of Barbados Inc.0% below the weighted average prime rate of commercial banks. this form of indirect financing offers a measure of relief to the financial burden imposed by local taxes and duties. 2. 8.000. whether by national or nonnationals. Over the remaining five years the loan balance of $128. While there is no specified minimum for the SHBI.00. The maximum funding per application is $5. Loan repayment periods are 10 years or less including a 5 year moratorium on the repayment of interest and principal. (SHBI) and its members whose properties comply with the minimum standards established by the European Travel Trade.311. the EGFL’s security on loans will generally take the form of a first legal mortgage but the Fund is prepared to take second mortgages in instances where 80.  1.0% of the market realisation value of the underlying security is adequate to liquidate all prior charges and the Fund's exposure. 3. Minimum loan size is $50.85. Exemption from land tax on the improved value of the land. interest charges shall be applied to 15 Example: Assume an application is approved for a loan of $100. 4. It finances projects that clearly demonstrate the will to enhance the financial viability and operational performance of the small hotel sector. Maximum Loan size . 7.335. Exemption from charges on the repatriation of interest or capital for a period of ten years.56.421.the higher of $4. 55 . Note that during the moratorium period. Enterprise Growth Fund Limited (EGFL) Equity Financing Loan Facilities Small Hotels Investment Fund (SHIF) The SHIF assists with marketing. The rate of interest will be calculated at the rate of 5. Interest is calculated at approximately 3. 3.0% per annum resulting in sixty equal installments of $2. the principal outstanding to arrive at the instalment amount due15. Thus at year five.6.000. procurement of joint services and refurbishment.335. the principal balance outstanding will be $128. assuming no payments are made. eventually totaling of $145.86 will be amortized at an interest rate of 5.25 million. Recognising the provision of this alternative form of financing (opposite to the traditional debt financing offered by 1.0% per annum during the five-year moratorium period. 2. Additional: Under both (SHIF and TLF) funding facilities.0% of total capitalization of the Fund. management. Then interest charges will accrue at the rate of 5.

commercial banks) where the sale of a stake in the business is required. consideration may be given to the special accommodating terms of individual loan contracts.0 per cent of the cost of a subproject consisting of expansion of an on-going operation of the beneficiary.964) of 2010. However.5 million. through qualified financial intermediaries. Without the backing of empirical evidence at this point.25%.681 representing a decrease of 92. the general take-up of the SHIF can be described as moderately low. the level of funds capitalized for 2011 amounted to $3. or where part of the sub-loan is to be used to finance technical assistance related to an investment project in which cases the repayment period of sub- Central Bank of Barbados Industrial Credit Fund (ICF) Established by the Government of Barbados in 1983 with funding from the International Bank for Reconstruction and 56 . Maturity periods on sub-loans granted by the ICF shall be according to the requirements of each sub-project. is tourism and other services. which can be viewed as a notable contribution to the industry’s development. and the responsibility to secure it properly.7 million.0% of qualified sub-loans (of the funds required to finance an approved project) made by financial intermediaries in amounts not exceeding (A) 80. Included in the many areas of activity that are eligible for loans. the “across the board” terms and conditions offered may have varying impacts on the small and medium size operation. low risk lending policy. Additionally.0 million. no funds were disbursed during 2011 and no new loans were approved. funding facilities continue to provide loans to hotels and other tourism related attractions. it is recommended that an analysis on the effectiveness of this new paradigm of financing be done. At the end of 2011. 3. As highlighted in the 2011 Barbados Economic and Social Report. In addition. The ICF shall discount 90. this fund has proven to be more attractive in the past as the accumulated value of loans approved for the period 1998 to 2011 totaled $299. the financial policy of the ICF includes the following: 1. The amount of funds disbursed during the period totaled $71.0 per cent of the cost of a sub-loan consisting of the starting-up of operations or of production of a new line of products by the beneficiary and (B) 90. Regarding the TLF. provides medium and long-term credit to productive enterprises operating mainly in the private sector. Each sub-loan was limited to BDS $7. At the end of 2011. resides with the intermediary. However.9 million in approved loans. the interest rate to financial intermediaries is 3. 4. 2. After fourteen years and $38.6% when compared with the disbursement ($970. it has been argued that the relatively low utilization of these funds may be a direct result of this development funding institution’s commercial bank-like. This becomes a discouraging factor in the overall demand for loans.  Development (World Bank) and the Central Bank of Barbados. Under the SHIF. the ICF. The ICF’s uses a variable interest rate on its discounts to financial intermediaries. the full credit risk of the loan. Maximum maturity shall be 25 years including a grace period of up to 3 years except when the sub-loan is financing working capital not related to fixed assets.

and medium-sized businesses operating in Barbados. The fund can be used to finance projects that are considered commercially viable in sectors such as manufacturing. makes loan. The maturity and grace period will depend on the capacity to repay and other characteristics of the particular project.87 million of all investment related to tourism & tourism related services. Only a maximum of BDS $1. the ECGS is designed to 57 .5 million of the BIF's funds will be committed to a single company. through the BIF. Have loans through this facility offered the desired competitive edge to businesses within the industry. Are the loan rates mutually beneficial to the financial institutions and their clients within tourism? Note that the guarantee provided by the Central Bank to ensure repayment of the loan should offer a measure of reduced risk in a ‘high risk’ environment such as tourism. Capitalised at US$10. Equity investments may be comprised of common or preferred stock and/or any combination of the two. In 2011. industry. Given the medium (commercial banks and other financial intermediaries) of disbursement. The Fund aims to strengthen the Barbados Securities Market. bond or equity and quasi equity investments in Barbadian owned private sector enterprises. approximately 37. or is there a situation where more can be offered to boost demand?  Caribbean Financial Services Corporation Barbados Investment Fund (BIF) The BIF was established as an equity fund in July 1992 to provide equity financing for small. tourism and tourism related industries. it aims to make available shares of investee companies to the securities market and to divest its holdings through this medium where appropriate. These figures represent a low demand for this financing option. The ICF approved six (6) applications totalling $13. Detailed information on the fund’s financial policies was limited and as such it will be difficult to fully appreciate why the demand is at the level which is reported.0% or US$3. one may argue that even though the loan supply is available. the Government of Barbados initiated guarantee schemes to provide further assistance in boosting the development of the industry. the interest imposed on projects that a borrower may actually encounter should be called into question.3 million compared with six applications valued at $10. Therefore. One may assume that this may be as a function of limited public relations. the Central Bank of Barbados issued figures which indicated that the ICF recorded an increase in the value of loan approvals and the levels of disbursements when compared with 2010. agro-  Central Bank of Barbados Enhanced Credit Guarantee Scheme (ECGS) According to the Central Bank of Barbados (2007). or part thereof as the case may be.45 million. The tourism sector alone accounted for $5. All investments must be accompanied by a Shareholder's Agreement.4 million in 2010. In addition to the funds created. Caribbean Financial Services Corporation (CFSC).loans. shall not exceed 15 years.9 million. or any other areas of industrial activity which can make a worthwhile contribution to exchange earnings and employment. to further assist businesses in obtaining adequate security for their loans from credit institutions. the CFSC (2012) reported that under the BIF.

The 2010 figure was significantly higher owing to the provision of ten (10) guarantees to the Barbados Agency for Micro Enterprise Development Limited (Fund Access) for the first time.9 million at the end of 2010. Total lines of credit decreased from $2. whose initial objective was to aid in the development of sectors such as tourism. Globe Finance. These include commercial banks. or at least challenge. Note that new loans and debt service payments through approved financial intermediaries in respect of hotels and enterprises in the tourism sector that provide accommodation for tourists will be eligible for guarantee support – Tourism Loan Guarantees After a modest improvement in 2010. Enterprise Growth Fund. Its target client base comprises the corporations that are active in foreign commerce.0 million.offer a substantial degree of protection to credit institutions against possible losses in respect of the credit granted to the enterprises. the central bank provided no guarantees under the scheme. The bank provides short-term rediscount facilities to bank in the region. The Latin American Bank of Export (BLADEX) was established by the Central Banks of Latin American and Caribbean countries to promote trade finance in the Region.  BLADEX Facilities Trade Financing On a regional scale.8 million during the year. Its business model focuses on providing products and services along the entire trade finance value chain.4 million to $1. as at the end of the year. Caribbean Financial Services. Citicorp Merchant Bank. financial guarantees appear to be preferred to. Consolidated Finance. 58 .4 million as compared with 34 guarantees with a maximum liability of $1. both on the import side as well as on the export side.  Central Bank of Barbados Tourism Loan Guarantee Facility (TLGF) The TLGF provides credit enhancements to financial institutions for short-term facilities to the hotel sector. there were 23 guarantees outstanding with a maximum liability of $1. activity in the Credit Guarantee Scheme for small and medium-sized enterprises contracted. particularly for the small and possibly medium-size operators within the industry. The 2011 figure also reflects significant cancellations of guarantees by one financial institution. Established in January 2011 with initial capital of $15. and the domestic financial institutions that cater to these corporations with broad-based banking services. At the end of 2011. there is an option available to tourism related operations. the condition under which loan are provided by institutions. Signia Finance Group. A pertinent question here is whether there is a disconnect between what is now in demand and the terms of what these agencies are willing to supply. That is. Fund Access. The facility can be accessed through a number of banks and non-bank financial intermediaries across the island. A brief analysis of the previous years’ guarantee facilities may suggest a higher demand. Guarantees may be issued to cover facilities for debt service and new shortterm loans to hotels and enterprises providing accommodation for tourists in Barbados.

facilities (similar to the EGFL) include a negotiable component where each loan and its repayment terms are offered based on individual analysis. the following innovative measures are suggested for investigation to aid in correcting the current imbalance: • 59 Accommodating packages: The development of loan packages with moratorium and creative repayment terms. there is disequilibrium between the demand and supply of financing facilities for tourism. Appropriate financing is therefore required. But. There may be the need for greater commercial consideration to balance that of the political (Bennett 1991). Additionally. even superseding the manufacturing industry. According to the 2008 OECD Policy Brief. Barbados continues to establish financing facilities guaranteeing options with the development of tourism as a primary focus. or even appropriate business acumen. . and in particular tourism. as Poon (1989) argues? Is the private sector aware of all available financing options? Do the operators across the tourists industry lack the necessary skills or resources. This research raises a number of unanswered questions. investors are overly cautious? The answers to these questions will have to be investigated in future empirical research. CONCLUDING REMARKS With greater distancing from a primarily agrarian based economy.At this time. the services sector. the question that may be posed at this time would relate to the level of public awareness of the operators in tourism industry. which then points to a need to improve productivity? In 1989. or remain globally competitive. being among the many countries unable to provide the appropriate and necessary concessional ease for the tourism operator. For example. and provide effective marketing. However. little can be concluded on the effective use of the above form of financing facility without the appropriate statistics. has become critical to the development of Barbados. Alternatively. However. any country wanting to boost its tourism industry. What are the actual factors responsible for the lack of demand for special tourism finance across the industry? Is it because Governments have yet to provide the necessary conditions to enable these tourism operations to survive in a globally competitive industry. Poon’s study of the Barbados tourism industry revealed that the availability of and conditions for financing offered to the industry is critical to the future of tourism and its survival. is the Barbados economy fiscally capable of offering better conditions or have all sources and strategies been exhausted (Gautam 2008). needs to be able to build and improve accommodation facilities. the Barbadian government has over the years sought to assist the development of the industry through a number of policy initiatives and programmes. is it that in a high risk environment. given limited economies of scale. to warrant financial support? Or. the creation of negotiable financial packages inclusive of the possibility of longer repayment periods. the factors affecting the demand for the available tourism financing are clear cut. Yet still PRELIMINARY RECOMMENDATIONS Confronted by a situation of tight financial constraints coupled with the need to foster economic growth and development through the tourism industry performance. provide an adequately educated and trained workforce. which accommodate the capabilities of small groups (entrepreneurial based venture) in the industry and yet remaining a viable financial agency. Recognising the growing possibilities that may be obtained through a competitive tourism industry.

2012). Oliver. 16 TFCI provides financial assistance to enterprises.c fm?Link=1&query=Barbados Investment Fund (accessed August 8.• • WORKS CITED Market the benefits of investing in the tourism industry: Government should review the option of providing greater incentives to encourage financial and non-financial institutions. Caribbean Financial Services Corporation . Bishnu Prasad. April 2008: 62-73. for setting up and/ or development of tourism related activities. rope-ways cultural centers. besides. promoted by All-India Financial Institutions. convention halls. As a developmental role. TFCI organizes seminars /participates in tourism-related activities organized by Ministry of Tourism. facilities and services. amusement parks and complexes for entertainment. TFCI also co-ordinates and formulates guidelines and policies related to financing of such projects. Chand. catering specifically to the financial needs of the tourism industry. by Niels Hermes and Robert Lensink. restaurants. "Enhancement of Credit Guarantee Scheme. 2012. A study on Sources of and Conditions of Financing. Diwaker. Geneva: International Union of Official Travel Organization. holiday resorts. Government of India and by the trade bodies /associations etc. Tokyo and Sendai Japan. 2000.. Barbados Economic and Social Report 2011. Bennett. 21 (2001). Central Bank of Barbados. Varanasi: Pilgrims Publishing. safari parks. 1996. 2007. Nepal's Tourism: Uncensorded Facts. CFSC." In Financial Development and Economic Growth: Theory and Experiences from developing countries . London: Routledge . 60 . http://www. the country has been able to successfully improve the sector (Tourism Finance Corporation of India Ltd 2007).bb/Se rvices/credit_guartee_scheme_enh ance. 2012). travel and tour operating agencies." Central Bank of Barbados. "Opportunities and Challenges for Tourism Investment. George.centralbank. Gautam. Occasional Paper. IUOTO. ESCAP. sports facilities etc. inclusive of agencies such as the Barbados Lotteries Board. tourism emporia. "Economic impact of Tourism Finance in Nepal. all forms of transport industry. which inter-alia include Ministry of Finance and Economic air-taxis. 1991. Abbott. education and sports. to invest in tourism related businesses that would allow them to further aid in the development of the nation and expect return more in-line with rational abilities of the player in the sector. Investment Institutions and nationalised Banks. no. 240. Bridgetown: The Ministry of One stop tourism assistance: A tourism assistance database or agency responsible for advocating and providing all information on available funding programs and advice for tourism related operations. August 8. http://www. A model of tourism financing to be examined is that which is offered by the Indian community. Through the Tourism Finance Corporation of India Ltd (TFCI)16. "Resource mobilisation in the Caribbean Community. 1971." Economic Review.cfsc." Tourism Financing in ESCAP.pdf (accessed August 8." ESCAP Tourism Review (United Nations). "Investment and Economic Cooperation in the Tourism Sector in Developing Asian Countries. Research and Planning Unit .org.

Barbados.Finance and Economic Affairs. Seaton. Tourism Finance Corporation of India Ltd. V. http://www. 131. Tourism Finance Corporation of India Ltd. 2007.International Trends & Caribbean Prespectives. 61 ." Conference on Financing Development in the Caribbean. Auliana. 2012).tfciltd. helping tourism grow. 2012. 1994. (accessed August 14. Tourism: The State of the Art. John Wiley & Sons. A. "Financing Tourism in the Caribbean . 1989.


The Economic Recession and Barbados’ Vulnerabilities There are important considerations which hamper the continued achievement 17 Andrew S. which are broken out into twenty-one quantifiable targets. has taken a leadership role to reduce gender disparity in all levels of education (goal 3). However. it must be noted that a 2003 Barbados and Eastern Caribbean MDG report showed wide variations in Barbados’ Progress to Date With just two (2) years to go before the target date. According to the UN Development Group (UNDG). 63 . Barbados has basically achieved five (5) of the eight (8) goals and has ensured that children everywhere are able to complete a full course of primary schooling (goal 2). and there has been reductions in child mortality as well as the maternal mortality ratio (goal 5). However. V. numerical benchmarks for tackling extreme poverty in its many dimensions. THE MILLENNIUM DEVELOPMENT GOALS (MDGS): AND THE POST-2015 DEVELOPMENT FRAMEWORK By Mark Durant Summary The largest ever gathering of world leaders welcomed the new millennium by adopting the United Nations Millennium Declaration in September 2000. However. there outstanding issues related to the eradication of poverty (goal 1) and to ensuring environmental sustainability (goal 7). These MDGs have been modified to fit the Caribbean context and this report identifies the goals. ‘The Millennium Development Goals in the Eastern Caribbean: A Progress Report’. Tara Inniss was entitled “Comprehensive Report to Inform the Presentation by the Government of Barbados to the Annual Ministerial Review of the United Nations Economic and Social Council on Barbados’ Progress towards Achieving the MDG’s and the Other Internationally Agreed Development Goals” and was prepared June 2007. while the eighth goal. UNDP 2003. still needs to be fully addressed. support for the implementation of the MDGs has increased steadily in Barbados since their introduction in the early 2000s. development of a global partnership for development (goal 8). In effect. are measured by sixty indicators and generally.17 The last previous report. These eight MDGs. prepared by Dr. BARBADOS. Endorsed by 189 countries. Downes and Doris Downes. Barbados’ HDI has consistently been ranked among the top 50 countries over the 2005 – 2011 period with a rank of 38 out of the 185 countries in 2012 UNDP/HDR. countryspecific status reports for the MDGs were produced by Barbados for use in global reporting. they provide a framework for the entire international community to work together toward a common end – making sure that human development reaches everyone. targets and indicators in this way (See Appendix I). These MDGs were established to facilitate monitoring of progress in achieving satisfactory levels of human development at the global and the country specific level. everywhere and providing concrete. the declaration was then translated into a roadmap setting out eight (8) Millennium Development Goals (MDGs) to be reached by 2015. This brief now updates that report. Barbados has made a positive contribution towards the global effort to achieve several of the Millennium Development Goals.existing information and progress to date.

given the recent downgrades (December 2012) by Standard and Poors through a lowering of its sovereign credit ratings on Barbados to 'BB+/B' from 'BBB-/A-3' and a recovery rating of '3' to Barbados' foreign-currency debt. means that Barbados will have severe challenges in raising much needed development capital on the capital market. These developments impact expansion activity from the internal financial core. these achievements and gains can be reversed if the current international and national macroeconomic situation the country faces does not improve in the short to medium term. leading to incomplete or partial aggregation of MDG data for the Eastern Caribbean. The mere fact that Barbados has graduated from the World Bank and is now being defined as a high middle income developing country has removed Barbados from the category of developing countries that can benefit from the level and nature of Official Development Assistance other similar developing countries have access to. It must be remembered that even though Barbados has done reasonably well in the MDGs. Results from the study indicated that the poverty situation in Barbados worsened since the previous study with one in five persons being in poverty in 2010 as opposed to one (1) in thirteen (13) in the 1997. it faces severe economic challenges relating to its overall macroeconomic and fiscal position and its social challenges with an aging population and an epidemiological profile of Chronic Non-Communicable Diseases. Moody’s Investors Service also announced in December 2012. Monitoring of the MDGs The process of MDG monitoring has encouraged Barbados to commit to poverty monitoring as a regular process. the country has undertaken a Caribbean Development Bank (CDB) funded Country Assessment of Living Conditions in 2010 in the form of a national poverty assessment which updated the previous assessment program published in 1997. while maintaining that the economic outlook was “negative”. Production of accurate and timely nationallevel information on the MDGs has been very slow. As such. which reflected their assessment of meaningful recovery (50. These are largely related to. as well as slow progress related to some goals {poverty (Goal 1). Therefore the issue of maintaining and strengthening Barbados’ economic and social resilience must therefore be at the forefront of discussion as it relates to achieving the current MDGs as well as for the Post-2015 Framework negotiations. that it had lowered the island’s foreign and local currency bond ratings to Ba1 from Baa3.and maintenance of the MDG successes in Barbados. discussions were also continuing in efforts to design a specialized multidimensional poverty measurement with the UN Development Programme (UNDP) that can be used to accurately reflect the unique development conjuncture facing Barbados and the other Eastern Caribbean island countries. Lack of data especially for poverty issues remains a major developmental challenge as it creates barriers for effective planning.0 per cent to 70. At the end of 2012. however. key data gaps. Moreover. This would have obvious implications for the programmatic areas of all ministries throughout Government. Moreover. the current global recession and maintaining the country’s current macro-social resilience. the country is in the process of implementing a five-year Medium Term Fiscal Strategy which has objectives of reducing government expenditure and the overall fiscal deficit. The challenges have been many.0 per cent) in the event of a sovereign default. environmental sustainability (Goal 7) and global development partnership (Goal 8)}. policy 64 . Moreover.

education. water resources management. also to make meaningful progress in attaining those goals not yet attained Goals (1). solid and liquid waste management. Moreover. high level officials and a number of agencies who work in the sector and has the aim of ensuring that the poor and vulnerable in Barbados do not succumb to poverty and hunger. The country has implemented the Universal Intake Form to assist in the upscaling of information in the sector and has started Summary of MDG Progress for Barbados One Two Three Four Five Six Seven Eight Poverty Education Gender Child Mortality Maternal Health HIV/AIDS Environment Partnership Partial Achieved Achieved Achieved Achieved Achieved Changes needed Insufficient information Challenges will remain that need to be overcome in the broader national context in order to maintain the gains already achieved and at the same time. and coastal zone management programmes. the containment and reduction of poverty continues to be paramount over the medium term. the delivery of health services. especially on poverty reduction. In addition. Notwithstanding. a Stabilization Enablement and Empowerment program has been established by the Bureau of Social Policy. housing. Presently. 65 . the Government initiated a local version of the Chilean Puente (Bridge) Social Protection Programme (ISEE Bridge Programme) which involves the assessment of 30 vulnerable households with a view towards their identification. initiatives to eradicate/alleviate poverty having been moving beyond the indicative stage given that the information gathering and monitoring systems have been improving with the creation and implementation of Goal 1: Eradicate Extreme Hunger and Poverty There is no clear information set which directly states that Barbados has achieved goal one of the MDG’s. the processes of compiling a National database for the sector. (7) and (8). since the start and completion of the 2010 Country Assessment of Living Conditions. This of course allows for representation on poverty and social safety net issues by the highest offices of the Government of Barbados. In addition.analysis or strategy development. In August 2012. This new approach will serve to remove clients from a generation of poverty towards full independence from the system. Barbados has been attempting a comprehensive approach to the issue of poverty and other social needs. an Inter-Ministerial Committee has been established to strengthen the social safety net and this committee comprises Ministers of Government. the Government of Barbados is proud of the fact that it has invested more in social and environmental programmes over the past decade than at any other time. The remainder of this brief focuses on issues related to these outstanding goals and concludes by proposing a possible post-2015 development agenda could be for Barbados. While this goal is considered still not achieved in the Barbadian context. the future fiscal concerns for Barbados and other Caribbean states may represent a severe challenge to the continued funding of social sector programmes. As such.

This policy. referrals were made to the various social services and resource persons. both rates for contributory and non-contributory pensions would have increased twice over the last five years in addition to increases in the reverse tax credit for the elderly and a one-off energy grant for the most vulnerable who would want to purchase energy saving technologies. The Government of Barbados is also in the process of preparing a National Social Policy framework and is about to embark on a Growth and Poverty reduction strategy. Over the last five years. articulated at Goal 4 of the NSP. land. It also has plans to contribute to the food and nutrition security of the nation through the production of nutritious food at reasonable prices and on a consistent basis.such tools as the Universal Intake Form and the National Database for Client Tracking. food stuff etc. there is a clear need for there to be a consistent and sustained programme of data collection to make informed decisions about poverty and other social needs of the society going forward. Water Resources and Drainage (MEWD). for all types of assistance sought. In cases of dire need the Constituency Councils would have directly provided assistance in the areas of grants. the database will become a very effective tool for the purposes of monitoring and evaluating the sector. financial assistance. Specifically. The Government of Barbados has been working through the thirty (30) Constituency Councils to identify and assist persons who were previously unknown to the government social services system. For pensioners in Barbados. assistance with rents. persons living with disabilities and other vulnerabilities). The Universal Intake form allows clients to be assessed by a single agency. “The Green Economy: Strengthening the Physical Infrastructure and Preserving the Environment” while speaking to a vision 66 . the Government has increased the level of national financial assistance to vulnerable persons (children. The major task of the NCSD was the production of the Barbados Sustainable Development Policy (2004) and the Medium Term Development Strategy (MTDS) 2010 – 2014. In light of these facts however. In other cases. water. empowerment and self-reliance. in relation to the treatment of poverty. by providing access to critical means of production e. GOAL 7: ENVIRONMENTAL SUSTAINABILITY ENSURING Target 9: Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources The task of spearheading progress toward sustainable development in the period immediately following the Global Conference on the Sustainable Development of Small Island Developing States was entrusted to a Cabinet appointed National Commission on Sustainable Development (NCSD).g. capital and inputs in conjunction with an expanded welfare to work programme to allow for the national development of a culture of behavioural change. This will be done through the facilitation of an enhanced level of participation in agricultural production. In addition. along with the National Strategic Plan (NSP) 2006-2025 serve as the primary references that shape the programming direction for the Ministry of the Environment. Government has increased the level and quantity of welfare grants and food vouchers provided as well. This information forms a critical part of the National Database and as more persons access service.

is also a recognition of past actions taken to embrace a “green ideal”. appointed in 1994. Community-Based Organisations (CBOs). the Government of Barbados continues to affirm its commitment to a path of peoplecentred. The overarching goal of the Policy is “to ensure the optimization of the quality of life for every person by ensuring that economic growth and development does not occur to the detriment of our ecological capital. while at the same time reducing greenhouse gas emissions. Greening the economy requires the reconfiguring of business and infrastructure to deliver better returns on natural. the Academic Community and Private Sector entities.” The major objectives of the Policy were: 1. Together with a multi-pronged legislative regime. and institutional support. human and economic capital investments. The Green Economy has been defined as an emerging global marketplace model that seeks to respond to the world’s major environmental problems by optimizing social. comprised 30 members representing Government and all major groups including Non-Governmental Organisations (NGOs). and 4. sustainable economic growth and development in the form of its Green Economic model. to sensitize and educate all persons in Barbados about key issues and conflicts between development and environment and the need to make wise consumption and production choices. to promote principles of sustainable development and encourage all persons to adopt and apply these principles in every aspect of decision-making. extracting and using less natural resources. economic and environmental value. The Government of Barbados has been pursuing various elements of a Green Economy throughout the country’s development.this is most commonly referred to as the “triple bottom line” or the three pillars of Sustainable Development. Significant inroads towards realising this goal have been accomplished through the design of our administrative and institutional structures. creating less waste and reducing social disparities. 3. THE NATIONAL COMMISSION ON SUSTAINABLE DEVELOPMENT The Cabinet-appointed NCSD was the most visible and successful structure put in place for the co-ordination of national sustainable development. Women Organisations.for the future. CONSTRAINTS TO IMPLEMENTATION The constraints experienced with implementing the Barbados Sustainable Development Policy can be summarized as follows: 67 . This original Commission. to formulate a national definition of sustainable development. 2. to provide a national framework for decision-making based on our principles of sustainable development. Trade Unions. THE BARBADOS SUSTAINABLE DEVELOPMENT POLICY (BSDP) The BSDP was approved and made one of the documents of Parliament in 2004 and is used by both decision-makers and citizens to adapt current attitudes and behaviours to reflect both the principles of sustainability and the opportunities which a green economy represents for Barbados.

the Environmental Protection Department and the Ministry of Agriculture (including the Fisheries Division). some of it needs to be updated to reflect current national goals and circumstances. play an important regulatory role but there is still room for improvement especially with respect to coordination. comprising administrative and technical personnel. the creation of which would enhance the ability of the NCSD to fully implement and institutionalize the BSDP. 4. This Sustainable Development and environment feedback is not readily available at this point in time. is greatly enhanced by the availability of key data and information regarding its performance. much like a traditional one. Additionally. lobbying and advocacy and demonstration projects. public education. Communicating sustainable development to the general population is a challenge. The resources required to adequately provide the volume of information required in the appropriate format have been ad hoc and information is usually provided in response to various 3. is needed to facilitate the work of the NCSD which is envisaged would have ‘ownership’ for monitoring implementation of the policy. the Environmental Health Inspectorate. health and conservation problems which tax the limited resources of finance and physical space needed for adequate management of associated issues. it has a high standard of living which means its primary economic and social indicators follow those exhibited by developed countries. financial and technical resources dedicated to sustained implementation and evaluation activities associated with the BSDP. further policy development. which makes it problematic for decision-makers to get information on a sustained basis and at opportune moments. a Green Economy. there is a lack of legal authority and institutional capacity needed for the implementation and enforcement associated with the BSDP. Where data is available it exists in differing formats and in different locations. a variety of messages have to be transmitted to a number of different publics in differing formats. or one whose advantages have not been fully understood or appreciated. and benefits of.1. a dedicated staff. and certainly to the detriment of a viable Green Economy. 5. including the Town and Country Development Planning Office. Barbados is working assiduously to develop a coordinated approach to statistics and data collection. The need to sensitise policy makers as to the exact nature. This brings with it waste management. During its tenure. This scenario also has an added impact on the effectiveness of regulation and enforcement practices. While a significant amount of legislation exists for the management of natural resources. 6. Current resource constraints mean that environmental enforcement is not a priority for the Barbados Police Force or other relevant legal entities. for many the concept of a green economy is a relatively new one. Particular attention is required in areas such as research. In terms of enforcement. For effective education. Although Barbados is a developing country. 2. Many still operate on the premise that economic development can only be achieved through increases in economic growth. Information for Decisionmaking: The performance of a greenbased economy. Capacity: There are inadequate human. A number of agencies 68 . the NCSD operated as a voluntary entity and without an allocated budget or independent secretariat (this may change in the future). This view results in significant funding being allocated primarily to economic development oftentimes to the detriment of the proper management of finite natural resources.

Hence. the Delegation of 69 Partnership for . better educational opportunities and the concomitant gravitation towards higher quality jobs and wages. together with the private sector has and will continue to embark on vigorous programme to provide affordable and adequate housing. to have achieved a significant improvement in the lives of at least 100 million slum dwellers Goal 8: Global Development Description of the Barbados Scenario: Over the past two decades Barbados has undergone significant demographic changes reflected in a growing population.situations. The overall economy has recorded strong growth Barbados’ commitment as a global partner for development is unchallengeable and is aptly reflected in its unequivocal support for the work of the United Nations and its Specialized Agencies as well as other regional. The Government however recognizes that high land prices and construction costs have placed these goals out of reach of those persons with moderate incomes. Good groundwater quality and a relatively effective disinfection system have ensured that Barbados has a biologically safe water supply. Target 11: By 2020. There is inadequate opportunity for timely reviews and evaluation of the planning process. The Government of Barbados. the Government through the Ministry of Housing and Lands and the National Housing Corporation (NHC). and maintaining acceptable. i. Barbados proudly hosts six UN agencies at UN House including the UNDP Subregional Office of the United Nations to the OECS and Barbados. The approach to public education and information requires streamlining and coordination and will be bolstered by the requisite information for decision-making. The provision of adequate shelter for all. Target 10: Halve. the proportion of the population without sustainable access to safe drinking water and basic sanitation A focus on a Green Economy also encouraged the national prioritization of several cross-cutting issues resources which are seen as an integral part of a sustainable Barbadian economy. With respect to water quality. being acutely aware of the population dynamics and the need to match these with the stock of housing. improved health care and quality of life. during the past ten years and the net effect of this scenario has been increased employment and a higher demand for housing. and necessary for the health and welfare for the Barbadian populace. the greater challenge lies in the supply of affordable housing. living and working conditions on a sustainable basis. by 2015. Whereas the upper income groups are better able to meet their obligations. Fresh water resources and waste management were indicated as critical among the resources necessary for this development to occur. a longer lifespan of residents. is committed to its two main housing goals namely 7. Specific water management measures are implemented to achieve specific targets or standards. and ii. Home ownership for the majority of the population by providing the opportunity for the widest majority of Barbadians to own property. hemispheric and international organizations and agencies. 96-98% of households in Barbados are connected to the public water supply system with the remaining 2-4% having easy access to the public water supply. that is: improving.

the European Commission for the Eastern
Caribbean, and the Organisation of
American States. Barbados has also
participated actively in virtually all UN
meetings and conferences on Housing,
Development (Brazil, 1992), Women
(Beijing) and Financing for Development
(Monterrey). In 1994, Barbados hosted the
UN Global Conference on the Sustainable
Development of Small Island Developing
States which produced the Barbados
Programme of Action (BPOA).
consistently been ranked among the top 50
countries over the 2005 – 2011 period, the
Government of Barbados is ever mindful
of the inherent vulnerability of the country
to external shocks and is alert to
opportunities to urge the international
community to take account of the special
needs and circumstances of small island
developing states (SIDS) and to help them
to build their economic, social and
environmental resilience to debilitating
external shocks such as rising fuel prices,
high transportation costs, peripherality,
vulnerability to natural hazards and other
related factors that lead to declining terms
of trade.

The Public Sector Investment
Programme (PSIP) has benefited from
multilateral funding agencies. Between
1999/00 and 2005/05 the cost of the PSIP
expanded to $1707.21 million with the
main sources of foreign finance coming
from the IDB and CDB. IDB contributed
52.0 percent of foreign aid with $154.42
million; the CDB contributed 41.0 percent
with $125.49 million, while the World
Bank contributed $19.59 million or 7.0
PSIP projected spending over
2005/06 to 2008/09 is for $1090.8 million
and Government has stated that it intends
to increase its efforts to have projects
financed by the Chinese government, the
European Investment Bank, as well as
increasing its requests to the CDB. The
projects under consideration are mainly
infrastructural, environmental, educational
and health-related. Unless Barbados is able
to attract the requisite ODA necessary, this
could reduce the rate at which the island
develops because it would be difficult to
raise these funds from internal sources
without tightening fiscal and monetary
policies further.
Moreover, price shocks in major
commodity markets have significantly
reduced Government revenues. The
combined effect of these developments has
been to force heavy borrowing to
implement public sector improvement
programmes (PSIP) as well as to fund
recurrent expenditure. In such situations,
the temptation to cut back on financing of
social and environmental programmes can
become almost irresistible.

developing country with middle-income
status, Barbados no longer has access to a
large range of funding mechanisms, which
once helped to build and maintain gains in
human development. In the face of a rapid
decline in aid flows between the Caribbean
and its traditional development partners,
over the past decade, this has led to
Barbados and other Caribbean countries
having to carry the brunt of the cost of
implementing international sustainable
development agreements and the MDGs.

In seeking to control the country’s
debt levels,
the Government is
endeavouring to reduce the ratio of public
debt to under 60.0 percent (the
international standard) by 2012. At the end

of 2011, Barbados’ total public debt stood
at 84.0 per cent of GDP, representing an
increase of 22.0 per cent over 1997 figures.
Current debt levels reflect in part the
efforts of the Government during the
2002/2003 fiscal year to bring the
economy out of recession at the earliest
For the period April to September
2012, the fiscal deficit was estimated at 3.2
per cent of GDP. Likewise, at the end of
September 2012, Government’s revenue is
projected to have decreased slightly below
target on account of the rebasing of tax
base and increases in the income tax
threshold recording an intake of
BDS$1,019.4 mn, down BDS$88.1 on the
previous period a year earlier. For this
period, total expenditure was estimated to
have decreased by BDS$161.9 mn to
record and outlay of BDS$1,550.2, well
within the expenditure target set in the
Medium Term Fiscal Strategy 2010-2014 of
BDS$1,712.1 mn. Current Transfers for
this period increased slightly by BDS$8.3
mn to BDS$479.4 mn, marginally higher
than the MTSF target.
All of
Government’s deficit financing was
sourced from the domestic market. Gross
government debt as a percentage of GDP
was 77.0 per cent while net government
debt was 57.0 per cent. The fiscal outlook
remains grounded in the targets as set out
by the Medium Term Fiscal Strategy 20102014.

The mere fact that levels of
required fiscal constraint will impact the
social provisioning needed in Barbados in
the near to medium term future definitely
implies that the eradication of extreme
poverty and extreme hunger must remain
high on the post-2015 development agenda
and cannot be seen in isolation from the
other goals.
For the very uncertain economic
future the global community faces
together, there are four broad avenues
through which dependence on aid can
influence sustainability of the post-2015
1. Degree of dependency on aid:
dependent on aid, governments
fluctuations in aid flows. In some
cases, certain sectors within a country
may rely heavily on aid to function


Therefore the country is proposing
the seven below items to inform part of
the discussions going forward.

Social Resilience- greater focus on
building resilience, and adaptive
Revenues and Services - Manage
revenue and build capacity for
accountable and fair service
Security - Establish and strengthen
people’s security;
Justice - Address social and
economic injustices and increase
people’s access to justice;
Legitimate Aid Infrastructure Foster
Greater SIDS Visibility

Economic Resilience - Generate
transparency and debt management
instruments for SIDS;

and thus are vulnerable (e.g., the
health sector).
2. The procyclicality of aid: Where aid
is procyclical, it can exacerbate rather
than mitigate the impacts of business
cycles and/or extreme weather-related
shocks. Where aid is countercyclical,
it can have an important smoothing
or insurance function. The empirical
evidence suggests that, on average, aid
is procyclical.
3. The volatility of aid: Where aid is
volatile or unpredictable, recipient
governments are less able to plan
expenditures effectively. This raises
the costs of financial management
and can worsen the composition of
government spending (e.g., divert
resources from capital investment
However, it should be noted that not
all volatility in aid is necessarily
negative; volatility in aid can be
associated with aid shortfalls and aid
4. The uses of aid: While the headline
ODA figure suggests substantial
increases in aid over the last decade,
this masks the extent to which
relatively little aid actually reaches
recipient countries overall. Some
sectors (e.g., the social sectors) have
seen larger increases in aid than others
(e.g., agriculture and the productive
capacities). However, the evidence
shows that much aid has had little
meaningful impact on development
outcomes and the MDGs.

by many donors, recipient countries and
international organizations alike, aim to
improve the effectiveness of aid through a
pre-defined set of actions to be undertaken
by both donors and recipients. Progress,
however, has so far been mixed. However,
the position does not seem to have
changed much in reality. While the UN
System for example has adopted a
harmonised system for cash transfers
(HACT), and has created a harmonised
multi-country development assistance
framework, this is something yet to be
done by the larger donor community.
Policy responses to secure sustainability of
the MDGs in aid-dependent countries
must therefore seek to address these
concerns. This will necessarily involve
actions by aid recipient countries and aid
Donor Harmonisation and Planning
Given Barbados’ excellent relation
with its donors and as it relates to the
MDG’s in particular, the UN System, if the
United Nations cannot assert strong and
assertive leadership, it must play the role of
curator. A curator is a specialist who cares
for the heritage. As curator of its MDG
heritage, four tasks must be undertaken:
(i) convene national reviews and debates;
(ii) promote participatory consultations;
(iii) aggregate outcomes; and (iv) serve as
gatekeeper for new targets.
However, unlike the current
MDGs, the post-2015 goals should not be
seen to have been designed by and for aid
donors and other international partners
alone. The post-2015 targets must be much
more broadly owned and also relevant to
countries affected by economic and social
fragility, as they persevere in their efforts to
attain lasting growth and a significant
reduction in poverty levels.

These problems are well known
and have inspired a number of
international efforts aimed at addressing
them, such as the Paris Declaration on Aid
Effectiveness of 2005 and the Accra
Agenda for Action of 2008, both under the
auspices of the Organisation for Economic
Co-operation and Development (OECD).
These international agreements, endorsed

In this regard. and to consider significant debt relief or restructuring for middle-income developing countries. consumers. There is a need to initiate a technical cooperation mapping exercise at the regional and national levels. children and those affected by long-term diseases such as HIV). Research cooperation can be fragmented with little or no transfer of skills and technology. In addition. poorer households are usually larger and the food and energy consumed in any given period is generally more than that of any other economic group. Food and energy account for a very high share of the total budget of the poorest households and because poor households often consume foods that are less processed the effect of rises in commodity prices is felt more strongly. to recall that the Barbados Programme of Action which summarizes the case for special consideration for Small Island Developing States by stating that “Although they are afflicted by economic difficulties and confronted by developing imperatives similar to those of developing countries generally. with an unsustainable debt burden. the ever changing global landscape continues to challenge our development agenda and assigns enormous responsibility on policy makers. Countries should first develop an aid strategy which is linked to the budget so as to increase the 73 . Barbados has signaled its intension to embrace technical cooperation and technical assistance as new pillars for developmental sustainability. health care. It is imperative therefore. the new design of any cooperation effectiveness agenda should be flexible and must embrace a mechanism that seeks to build the requisite bridges for the effective transfer of knowledge and technology which is on par with developed countries. These households find their nutrition and financial status (especially of pregnant women. lie concerns about food security and energy costs. or other basic needs compromised. Within this context. Technical cooperation ownership at the country level would be integral in developing a comprehensive and coherent international technical cooperation framework. the SIDS issue must continue to be advanced given that small island developing states like Barbados remains vulnerable to external economic shocks.Barbados should raise its concern about the effectiveness of the use of resources released and the rigidities in conditionalities needed to make assistance available. Behind concerns about volatility lie concerns about price levels and behind both. especially poor consumers. as well as the exploration of mechanisms to comprehensively address the debt problem. so that the difficulties they face in the pursuit of sustainable development are particularly severe and complex. In this regard. small island developing states also have their own peculiar vulnerabilities and characteristics. are severely adversely affected by high prices. In the case of Barbados. Barbados should stress the need to deliberate for additional measures and initiatives aimed at ensuring long term debt sustainability through increased grant based financing. when food and energy prices are high.” Caribbean countries have not developed an aid strategy which improves the effectiveness of aid. being classified as a high middle income country. as well as their capacity to purchase education. Discussions concerning an agenda for the improvement of aid effectiveness should be fashioned around human and institutional capacity strengthening. presents challenges in terms of getting concessional finance from multilateral agencies. While producers benefit (or at least those who are net producers and whose asset base and knowledge enable them to respond effectively).

However harmonization must not lead to a reduction in the overall support levels and should not be used by donors to increase their leverage during the negotiation process. Tara Inniss. UNDP (2003). the use of such a mechanism will allow the region to better collectively address medium to long term needs and to improve the relevance and effectiveness of local and external sources of assistance. All countries should take stock of the aid that actually worked and what did not work. within the structure of the UNDP Office for Barbados and the OECS is a specific sub-programme entitled the Support to Poverty Reduction in the Caribbean (SPARC) which has as its mandate such a comprehensive framework. It can allow Barbados. An electronic platform should be developed which would facilitate a forum where donors and recipients could interact with each other and work together. (2004).effectiveness of aid. 1. There is no such framework existing outside of the budgetary processes and the monitoring of development strategy. However. CONCLUSION References While Barbados has done very well in the achievement of the MDG’s and their targets so far with five (5) MDG’s achieved out of the eight(8). Comprehensive Report to Inform the Presentation by the Government of Barbados to the Annual Ministerial Review of the United Nations Economic and 74 . 5. Meeting the Monitoring Requirements of the MDGs’. 3. However. UNDP Assessment of Development Results (ADR) (2009). How well this mechanism is being used may be an item of concern more so given the need to determine collectively a Post-2015 framework for Barbados and the OECS. ‘The Millennium Development Goals in the Eastern Caribbean: A Progress Report’. Donors should coordinate their activities in order to reduce duplication and should use common application and disbarment procedures in order to simplify the process. By improving the nature and frequency of reporting. Responsibility for the MDG’s are not centrally located within anyone public agency even though there are agencies responsible for the collection of data related to the MDG’s and their targets. Downes and Doris Downes. through concerted efforts with the Barbados Statistical Service and the respective agencies connected to aspects of the MDG’s to provide enough supportive mechanisms to regularize the identification. 6. UN Human Development ReportsVarious Editions. it has also recognised the need to continually assess and redesign policies. 4. Andrew S. UNECLAC. Aid resources should aid developing countries in attaining their Millennium Development Goals (MDGs) and Aid should produce concrete and measurable results on the ground. in order to ensure the effectiveness of interventions and successful returns on public investment (economic or social) a rigorous and comprehensive institutional and policy framework is fundamental. initiatives and responses to economic and social issues if necessary. collection and dissemination of data and indicators. Barbados Country Assessment of Living Conditions Final Report (2012). Barbados is currently developing a Technical Cooperation and Aid Strategy. ‘Challenges in 2.

Leisa Perch.Social Council on Barbados’ Progress towards Achieving the MDG’s and the Other Internationally Agreed Development Goals”. (2007). UNDP. 75 . (2005). A Framework for Monitoring the MDGs and Sustainable Human Development in the CARICOM Region. 7.


This further exacerbated the current account crisis which the country faced as the generation of foreign exchange earnings from export sales were on the decline. Given that Barbados depends heavily on oil imports for the production of electricity and hence the continuation of business activity. Barbados has had its encounters with a balance of payments (BOP) crisis in the early 1980s which may have been severely affected by the oil price hikes of the seventies. This is particularly so for small open economies whose day to day activities depend largely on foreign imports of goods and services. It is for this reason that Barbados is a net importer of foreign goods. Real effective exchange rates in particular prove to be a significant contributor to import demand conditions in the long-run and hence conforms to theoretical construct of exchange rates in the long run. Faini (1988) and Craigwell (1994) suggested that understanding the impact of import flows is even more crucial for the sustainability of structural adjustment programs posited by the IMF as policymakers can more appropriately determine the overall feasibility of such adjustment programmes. Jordan (1998) also noted similar observations during the early nineties where excessive demand by nationals for consumer imports coupled with an un-proportionate growth in By Cyril Gill ABSTRACT Small open developing economies such as Barbados are heavily dependent on trade . The literature also placed special emphasis on formulating the right mix of exchange rate policy as it had implications for the responsiveness of business activities.A COINTEGRATIONECM ANALYSIS preliminary evidence signals the need to monitor real effective trends in exchange rate policy as such trends have implications for the stability of Barbados’ economy. The results indicate that accounting for the real exchange rate effects in the import demand equation shows special significance to the Barbadian scenario as the tested import demand components are cointegrated and thus cannot drift too far apart. Through the use of a Cointegration Error Correction Model this study presents a variation of the Marshallian demand model to estimate the long and short run dynamics of the import demand function.VI. This paper examines the relationship of real exchange rate changes and import demand in Barbados for the period 1970-2010. INTRODUCTION Understanding how import flows react to changing economic conditions is essential to the design of any successful macroeconomic sustainability policy for all countries. social development and a host of other reasons. While import trade does not necessarily determine the exchange rate in Barbados and while there is no strong economic rationale which purports that exchange rates under a fixed regime move to equilibrate trade imbalances it is purported that movements in the real effective exchange rate may signal the stability of the dollar which by extension influences the magnitude of import trade flows.for business continuity. This 77 . most export-oriented firms and businesses would have been uncompetitive during this period. AN EXPLORATORY STUDY ON THE RELATIONSHIP BETWEEN REAL EFFECTIVE EXCHANGE RATES AND IMPORT DEMAND IN BARBADOS . relative prices and consequently trade flows which could either improve or widen the trade imbalance.primarily imports .

I consider an aspect of exchange rate policy that has so far escaped much attention in the import demand literature as it relates to Barbados. provides the theoretical motivation for this paper. If a high speed of adjustment is realized it would suggest that policy makers may consider changes in the real value of the dollar on import investment behaviour as a signal to a nation’s exchange rate regime stability. and increasing current account deficit) will lead to the expectation of a devaluation thereby resulting in. inter alia. The Marshallian approach estimated the aggregate import demand function within the framework of the imperfect substitution model. It is with this perspective that the objective of the paper seeks to uncover the relationship between real exchange rates and its corresponding speed of adjustment to import demand. describes the data used. increasing interest rates. discusses the methodology to be employed. 1989) and Johansen and Juselius (1990) multivariate method to check the rank of cointegrating relationships. Afterwards an error correction term is specified to determine the speed of adjustment of the real exchange rate component to the long run import demand equilibrium position. optimal taxes and exchange rate policies [see Craigwell (1994) and Emran and Shilpi (2010)]. increasing budget deficit financed by credit creation. Outside these commonalities however. presents the empirical results and discussion and Section VII. The main motivation for this analysis stems from the fact that the stable environment which the fixed exchange rate regime provides seems to be partly responsible for the influx of imports during times of crisis. The impact of Barbados’ real effective exchange rate regimes on the stability of its trade inflows is examined through the application of the Johansen (1988. relating the total 78 . Before devaluation occurs the dollar under a fixed exchange rate regime still enjoys a superior buying capacity compared to other currencies as a result of its appreciated value. Under such circumstances firms and individuals may indulge in excessive import purchases in an effort to exploit the short-term windfall capital gain made possible by the overvalued dollar Funke (1996). This paper proceeds as follows: Section II presents a review of selected literature. adjustment programs. provides some concluding remarks. Section 1V. These crises remind us that being able to predict import flows more accurately can help policymakers assess more confidently the overall sustainability of current macroeconomic policies. capital flight and hence the fulfilment of a prophetic devaluation of the dollar [see Funke (1996)]. determine the appropriate speed of the trade liberalization process.exports or unmatched flow of foreign investments led to a BOP crisis. In this paper. overvaluation of domestic currency. suggests that a deterioration in a nation’s identifiable economic fundamentals (declining international reserves. The literature. the fact that excessive demand for imports were observed during periods of crisis under a fixed exchange rate regime suggests that foreign exchange policy may enlighten us on the nations’ import demand conditions. Section III. SELECTIVE LITERATURE REVIEW The literature on the determinants of import demand in the case of Barbados abounds the focus of which centers on modeling the import function around the Marshallian demand function. both theoretical and empirical. From an import policy perspective it is critical therefore to monitor trends in the real value of the exchange rate as it may signal changes in imports demanded by consumers. Section VI. ceteris paribus. Section V.

in addition to intra-industry trade 79 . With the main objective of determining whether these disaggregated components along with non-traditional variables such as credit and money proves to be significant in explaining import demand. Secondly. Jordan’s model was specified with the use of a variable which exemplifies the level of restrictions faced by many developing countries. As the literature for developing countries proposes. Orcutt (1950) in particular criticized OLS as the appropriate method to estimate price and income elasticities. using Engle and Granger’s two step approach and applying Hendry’s general to specific model selection criteria. Thirdly. and in general would raise questions about the statistical inference made based on the conventional T and F tests. First Craigwell estimated the traditional import demand function (assuming zero degree homogeneity)20. for this case the importer is a producer trying to maximize utility subject to a cost constraint. While real expenditure includes imports and excludes exports. Napier (1982) utilised Ordinary Least Squares (OLS) estimation in examining the yearly trends in imports for Barbados and used disaggregated data according to sections of the Standard International Trade Classification (SITC) over the period 1954-70. Craigwell (1994) made a number of contributions in advancing the modeling of the import demand function for Barbados. this variable 18 There is some controversy as to whether real income or real expenditure should be used. Jordan (1998). These deposits constitute the sources through which banks lend to consumers. measured in the same currency. 19 The consumer tries to maximize utility subject to a budget constraint. real income includes exports and excludes imports. 20 The model was specified to that of the imperfect substitute model (Goldstein and Khan [1983]) which implies the existence of both imports and domestic production. His study concludes that such non-traditional variables are useful in modeling the import demand in Barbados. See Goldstein and Khan (1985). and to price of imports and domestic substitutes19.quantity of imports demanded by a country. Napier found that real GDP as an explanatory variable did not adequately capture import demand as consumers’ demand for import is not necessarily attributed to the value of goods and services of a country but rather it is determined by money borrowed from abroad and held in deposits with commercial banks. Hence. he disaggregated the domestic price index into traded and non-traded price indices. The fact that issues such as stationarity and cointegration relationships were not incorporated into the analysis would raise questions such as identification. attempted to model the import demand function in the context of a small open economy by employing the Johansen co-integration approach using annual data from 1973 to 1997. In order to allow for the simultaneous relationship between the quality and prices of imports. The primary argument here was that one must assume that there is no possibility of a supply relationship between prices and qualities. with this increased access to finance consumers now capable of demanding more imports. estimator efficiency. the estimate would be biased and inconsistent. the low significance of the real GDP reported by Napier may be questionable. he included credit from the banking system in his model. There were several objections to the use of Ordinary Least-Squares (OLS) to estimate import demand. If this supply relationship is less than infinitely price elastic. to the level of its real expenditure or real income18. a supply function would have to be specified. There were however. several deficiencies in this study as the modern econometric literature would suggest.

and the relative price index. THEORETICAL MOTIVATION The proposed exchange rate component to be included in the model has its bearing within the theory of Purchasing Power Parity (PPP). According to the theory. Leamer and Stern (1970) and Murray and Ginmam for further reading). Put another way the theory of PPP assumed that net exports are highly responsive to small changes in the real exchange rate. These studies are generally concerned with the aggregate impact and demand for imports. This paper therefore concentrates on an alternative dimension of the import demand equation as can be found in Halil Fidan (2006). and 80 . Yt . hence the general form of the import function (assuming zero degree homogeneity) models import volume as a function of real domestic income and relative prices (see Houthtakker and Magee (1969). the unemployment rate and a dummy variable representing the 1990-1992 period of economic recession influenced the demand for motorcars. real income. There is a vast body of empirical literature on the effects of the real exchange rate. Therefore. the relative price and gross domestic product on national imports. This study sought to determine the major contributors to car imports in Barbados. real income. which in like manner this paper will also focus.the real quantity of imports in volume terms. No theoretical or empirical paper thus far has attempted to model directly the relationship between real exchange rates and import demand. Other non-traditional variables were included in his analysis including the real personal credit variable suggested by Craigwell 1994. if goods were cheaper in one country than in the next they would be exported from the first country and imported into the second until the price difference disappears. the theory of PPP can be viewed as a special case of the import demand model considered here. applied cointegration analysis over the period 1970 to 1999 (yearly data).real income or domestic economic activity. MODEL SPECIFICATION The import demand function as explained by Craigwell (1994) is traditionally specified to that of the imperfect substitute model (Goldstein and Khan [1983]) which implies the existence of both imports and domestic production. commercial bank credit. bank repayments and relative prices were the important determinants in explaining the demand for motorcars. these studies all indicate that there is significant effect of exchange rate on foreign trade flows. international trade responds quickly to international price differences.was the net international reserves. commercial bank credit. RPt) eq1 With Mt . Jordan found that net international reserves were indeed important in explaining consumer behaviour and could be used by Governments to gauge consumer patterns for a particular year. in addition to intra-industry trade. In the short run. Caballero and Corbo (1989). For further reading please see Cushman (1988). This is: Mt = f (Yt. relative prices. bank repayments. Campbell and Sealy (2000) set out to determine the long and short run variables that influenced demand for motorcar imports. This paper therefore fills the gap. The results of the cointegration analysis revealed that in the long run. Lastrapes and Koray (1990).

such variables included personal credit and net international reserves and as such were considered for inclusion in the specification of the model specification in this paper. a number of key and relevant variables were tested. Lastrapes and Koray (1990). p. Craigwell (1994) finds this approach particularly useful given that it allows one to incorporate information given by the time series properties of the data and economic theory where necessary. In general the GETS methodology treats modeling as a process where the aim is to derive a parsimonious congruent encompassing model while at the same time acknowledging that the currently best available model can always be improved. Hendry and Richard 1990. These variables would be considered in developing the import demand function in this paper.Model selection procedures RPt . These variables included slight modifications of the series’ original form and substitutes of the original form such as nominal GDP (NGDP) and Real GDP (RGDP) and relative prices compared to its modified version real relative prices (see Data Sources section for a description of the variables). 323. particularly in areas where economic theory does not afford a direction in modeling short-run dynamics of aggregate demand functions. Caballero and Corbo (1989).] The general model as purported by Goldstein and Khan (1983) was adapted to reflect more relevantly the import demand of Barbados and to record the impact Barbados’ real exchange rate to the demand for imports. various forms of the import demand function were modeled using stationary series under the OLS estimation The literature identified above for the case of Barbados suggests that some additional variables were deemed relevant in modeling the import function for the small open economy of Barbados. the significance of which is supported by economic theory and preliminary supporting empirical evidence [see Goldstein and Khan (1983). In determining the appropriate structure of the model to be tested. As a contribution to the literature real exchange rate is added to the model. The motivation for including the variables such as personal credit and net international reserves is due to the fact that credit restrictions in particular directly influence an individual’s ability to purchase imported goods and hence is critical for inclusion in the Barbadian model [see Craigwell (1994) and Jordan (1998)]. The GETS modeling strategy generally follows two steps: 1) Formulating a general unrestricted model which is congruent.the ratio of import prices to domestic prices. 81 . and 2) simplifying the model sequentially in an attempt to derive a parsimonious model while at each step checking that the model remains congruent. tariffs or credit and hence an inclusion of a restriction variable would be key for the case of Barbados. The aim in conforming to the Hendry’s approach is to eliminate the most insignificant variables from the model in order to arrive at the parsimonious model. In econometric practice the general to specific (GETS) modeling procedure is popular. In carrying out preliminary checks. It is also a fact that developing countries usually impose some form of restriction whether it is quotas. It is also argued that the ability to purchase imports depends on the country’s ability to pay for those imports. Cushman (1988). which to a large extent depends upon the country’s Net International Reserves Craigwell (1994). This approach as advocated by Hendry et al (1995) is adapted here within this study to an extent.

All time series were transformed to their real values by deflating them by the Barbados Consumer Price Index (as provided by the IFS). In this model Net International reserves (NIR) is not considered as the preliminary model selection investigations suggest that the variable is not significant in determining import demand. – the log of real relative LRRPt prices at time t Ut – the error term at time t α0 . α1 . In summary. α2 . α1<0 and is expected to be negative. the Central Bank of Barbados Online Statistics (for the series – Real Personal Credit. α4. if the domestic currency depreciates this will weaken the purchasing power of the domestic currency and hence lead to lower import levels. Hence we relax the relevance of the NIR variable for the sake of achieving a parsimonious model.e. i. the results present some interesting but not alarming findings. This data was acquired from two main sources. According to the theory of real exchange rates. The investigation of the data leads us to the following model to be estimated. at the 5% level) in all cases except one. This was done in order to remove any effects of price over time from the data. α5. DATA SOURCES The data employed in this study consists of annual time series over the period 1970 – 2008. The real exchange rate variable consistently showed the correct sign and was statistically significant (i. α3 . Net International Reserves.framework to get a general idea of the significance of the various variables to the import demand function. Also the variables LRMt = α0 – α1LRERt + α2 LRPCt α3LRRPt + Ut Where L represents the natural log. and the International Financial Statistics (IFS) online database. Craigwell (1994) and Jordan (1998) have found that real personal credit should be positively related to import flows. α2>0. There was some concern with the relative price variations as these variables also were shown to be insignificant. The p values of the stationary nominal and Real GDP time series under OLS estimation were found to be insignificant (and hence statistically zero) in every model estimated. It is important to note at this juncture that the formal application of the Johansen procedure also helps to identify the parsimonious model as tests for the lag optimality. thus. Economic theory also suggests that as import prices increase relative to domestic prices quantity of imports demanded will reduce thus the sign of the coefficient is expected to be negative.e. represent the parameters to be estimated A full description of the variables in this model and the methods used to calculate such are presented in the following section. α3 <0. and Import Volume). the variables are defined as follows: LRMt – the log of quantity of imports demanded at time t LRERt – the log of real exchange rates at time t LRPCt – the log of real Personal Credit at time t 82 . hence. The formal application of the unit root tests provided some guidance as to the model to be estimated and was used in conjunction with the basic tests of significance under the OLS framework to determine the initial modeling of the import demand function. the identification of the rank and the determination of whether to include a trend and intercept to form the model helps give rise to the parsimonious model and extends Hendry’s general to specific approach to modeling.

21 In this study two basic steps are employed in determining whether series are stationary or not: 1. The nominal values of imports as obtained from the Central Bank of Barbados online statistics and were deflated by the IFS Barbados CPI with fixed based 2005=100 in order to generate the real import series. United States of America (USA). Export Price Indices for USA. Description and source Real Personal Credit was measured by taking nominal values for personal credit which were obtained from the Central Bank of Barbados Online Statistics and deflated by the Consumer Price Index2005 which was obtained from the IMF’s online “International Financial Statistics” the ratio of import prices to domestic prices. i. which was constructed from the export price indices of Barbados’ top three exporting countries and weighted by each country’s percentage contribution to Barbados’ imports. All indices (CPI.e. Real Imports. After weighting each series by their requisite percentage of import value (this the weighted average over the period 1970 – 2008) the series were summed to give the proxy import price index for Barbados. This procedure is appropriate for trend stationary time series.were transformed to their natural logarithmic forms in order to obtain a decent spread of the data and for ease of Variable LRPC – LRRP – Pd – Pm – LRER – LRGDP – LNGDP – LRIM – interpretation. Relative Prices . However. Real Gross Domestic Product. It is very important in time series analysis (and more so cointegration analysis) to proceed on the basis that all variables are stationary. Real Exchange Rate . Nominal GDP was obtained from the IFS online database. failure to do so may result in a spurious regression being formed. Import Price . 83 . and Canada) and each country's percentage contribution was used as a weight. The weight applied is an average of the respective countries contribution to imports over the review period 1970-2010. METHODOLOGY series are non-stationary and contains a unit root. the most common is when one reaps a result which gives a very high R2 and a very low Durbin Watson statistic.this variable is a composite index of real exchange rates of Barbados’ top three exporting countries. The first requires an examination of the data to determine the form in which it may be used for any subsequent estimation as macroeconomic data generally follows a stochastic process which is problematic in most econometric models. This is to say that many time 21 Spurious regressions may come in various forms. Barbados’ total imports were assumed to be the total imports bought from these three countries (United Kingdom.this variable is measured by the consumer price index for Barbados using 2005 as the base year which was obtained from the IMF’s online “International Financial Statistics” database. Domestic Price . This variable was obtained from IFS online database which represents GDP at constant prices. The first step refers to the graphical inspection of the pattern of data over time and the inspection of the correlogram with Unit root testing There are several preliminary important steps to using time-series data in econometric analyses. Again the index was constructed from the Central Bank of Barbados’ Online statistics on the par rate of Barbados’ top three exporting countries’ currencies (nominal currency values) and weighted by each country’s percentage contribution to Barbados’ imports. CANADA and UK) have fixed based 2005=100.this variable is being measured by a proxy import price index. Note: This series was developed by deflating the import volumes used in calculating the import prices (Pm). Pm/Pd. The traditional detrending procedure separates the trend from the cyclical component of the series. many macroeconomic time-series are difference stationary.

In this paper three formal unit root tests are employed. the actual determination of whether a variable is trend stationary or difference is based upon the results of unit root tests. High R2 and low Durbin Watson statistic). The correlogram graphs the correlation patterns of the autocorrelation coefficients against different lags. The null hypothesis that yt is I (0) is formulated as HO: = 0 which implies that is constant.e. Where Dt contains deterministic components (constant or constant plus time trend) and ut is I (0) and may be heteroskedastic. one can distinguish more clearly the 22 Box and Jenkins. These tests are expressed as follows: ADF – PP – series that appear to be stationary. While KPSS type tests are intended to complement the ADF and PP unit root tests. The KPSS gives the null hypothesis that a time series is I (0) and is derived by starting with the model. the standard regression could be inappropriate as the conventional t and F tests may give misleading spurious results. such as the ones characterised in Appendix 5 (i. by applying the alternative hypothesis. To test for cointegration and We employ the KPSS test for completeness as it tends to give better results in the presence of structural breaks. 84 . auto covariance (at various lags) of the individual series are time-invariant) then this would give way to estimating the coefficients through the use of the standard OLS technique. Typically the ACF plot that takes a while to die out signifies presence of a unit root. KPSS – y. However. 2. a feature that is characteristic in the data on this paper. The ADF and PP unit root test gives the null hypothesis that a time series yt is I (1) – integrated of order one. if the variables are non-stationary in their levels. Phillips and Perron test and the Kwiatkowski-Phillips-SchmidtShin (KPSS). the Augmented-Dickey Fuller. these are.special attention on the results of the autocorrelation function (ACF). If perhaps in the event that the unit root tests shows that all variables are stationary (meaning the variance. (1970) notes that differencing a series may result in removing out the long-run characteristics of the data thereby making the model capable of explaining only short-run effects. Once there exists stationarity due to a linear combination of the set of variables integrated of the same order then it is possible for the series to be cointegrated. This test is a one sided test so that one rejects the null if the t statistic is less than the critical value. It is useful in econometric practice to employ unit root tests which tests for alternative null as it adds to the robustness of the model selection criteria. If the variables are found to be non-stationary at levels then they may be determined to be stationary in their first differences22. After the graphical inspection.

however. The number of cointegrating relationships is identified by use of the trace test or the maximum Eigen value test. the EngleGranger method often produces a complex linear combination of all the distinct cointegrating vectors that cannot be sensibly interpreted. Testing for Cointegration . 1991) was employed due to its superior and powerful tests compared to the next major approach the Engle-Granger (1987) method. The Granger Representation Theorem. it also suggests that the autocorrelations at 23 Testing first for optimal lag length tends to give the most parsimonious model. maximum likelihood estimation to determine the maximum number of cointegrated relationship between nonstationary variables. This allows the writer to specify an Error Correction Model (ECM) including the error correction term to investigate the dynamic behavior of the model. The ACF is presented in the correlogram at appendix II (in levels) and appendix III (in first differences) and examines the presence of auto-correlation at each variable’s lagged autoregressive structure. To help the writer obtain the optimal lag length the preference as the literature suggest would be to accept conclusions of the Akaike Information Criterion (AIC) and Schwartz information criterion (SIC).VECM The Johansen maximum likelihood procedure (1988. in the case of multiple cointegrating vectors. This signifies that the autocorrelations for each variable are significant for a large number of lags.23 The application of the Johansen procedure presumes the use of the Informal unit root results The graphical analysis as illustrated in Appendix 1 show that most variables with the exception of Net International Reserves (NIR) and Real Imports (RIM) appear to be a stochastic process with a trend thus signaling the presence of unit root. The following reasons are noted to be of concern to the Engle-Granger approach: Firstly. the Hendry’s approach is also generally embodied within the context of the VECM framework as one establishes the parsimonious equation through testing for the optimal lag length and determining the optimal fit of the model by testing for whether to include a trend or intercept. as one will see in the following section there were relatively harmonious conclusions of the optimal lag structure.consequently establish the speed of adjustment of the real exchange rate series the Johansen procedure was used. EMPIRICAL RESULTS INTERPRETATION AND Unit root analysis As alluded to earlier. The NIR and RIM time series tend to show evidence of a weak mean reverting process although still exhibiting upward trend movement overtime. The ACF for all variables in levels tend to die-out after a long series of lags. the Engle-Granger procedure does not account for the possibility of multiple cointegrating relationships and all the possible dynamic interactions that could exist between two or more times series. The correspondence between cointegration and the ECM term indicates the speed of adjustment of any disequilibrium towards a long-run equilibrium state. states that once a cointegration relationship can be uncovered then there exist at least one valid Error Correction representation of the data. 85 . Secondly. inter alia.

2599 0. heteroscedasticity and normality tests were conducted on the relevant variables. This inference is confirmed by the PACF plots which for all variables are significant at lag 1 thus suggesting that all higher order autocorrelations are effectively explained by the lag-1 autocorrelation. 24 The variable LRER was found to be second difference stationary. The KPSS test does not agree with the PP test as it relates to the non-stationarity of the real exchange rate. it concludes that the variable is stationary at first difference and therefore supports the conclusion of the ADF test. 86 .96215 8 0. The formal unit root tests. and KwiatkowskiPhillips-Schmidt-Shin (KPSS) unit root test were employed. the results of which are captured in Appendix 3 shows mixed results particularly the KPSS test.695135 3. This is required given the prior evidence from graphical inspection carried out in levels which suggests the presence of a trend and intercept in each variable. we weigh heavily on the output of the KPSS in arriving as it inspires confidence in enabling one to present a parsimonious model. Diagnostic tests Under the Johansen cointegration framework errors must be normal hence to ensure estimation procedure confirms with the Johansen framework errors were tested for normality within the pure VAR model. It is important to note that the reverse null hypothesis of the KPSS (test for stationarity) is employed against the ADF and PP test (a t-test that relies on rejecting the hypothesis that the series is a random walk in favour for stationarity) is established in partial fulfilment of a parsimonious model. all of the components in the model are significant at the 5% level of significance and hence confirms the fact that the errors are multivariate normal. It rejects the null hypothesis that all variables are stationary in levels except that of real GDP (RGDP).1404 0. please refer to appendix 1. To further test the robustness of the model tests for autocorrelation.541796 3.799144 2 2 2 2 0. For all the variables the intercept and trend is applied in testing for unit root. i.lag 2 and above are merely due to propagation of the autocorrelation at lag 1. errors are distributed normally.e. All other variables which were not first difference stationary under the KPSS test were therefore eliminated. the Augmented Dickey-Fuller (ADF).e.4626 0.1529 As indicated in table 1 above. integrated of order I (2). Phillips and Perron (PP).926074 1. which is concluded to be I (0). This follows from the regular assumption of unbiased and efficient estimators. Component Jarque-Bera df Table 1 Prob. While the Augmented Dickey Fuller (ADF) failed to reject the presence of the unit root and concluded that all variables were integrated of order one. I(1). 1 2 3 4 2.1496 Joint 11. the Phillips and Perron unit root shows that all variables with the exception of the natural log of real exchange rates (LRER) are first difference stationary. i.24 The KPSS stationarity test presents mixed results for a number of the variables under analysis. In this paper.

one can get estimates of cointegrating vectors for a number of variables.964981 -10. In this regard the residuals are considered to be white noise.2133* 21.85e-10 -3.079517 -11.90239 15.39814 * indicates lag order selected by the criterion LR: sequential modified LR test statistic (each test at 5% level) FPE: Final prediction error AIC: Akaike information criterion SC: Schwarz information criterion HQ: Hannan-Quinn information criterion Preference is usually given to optimal lag length criterion such as the Akaike information criterion (AIC) and the Schwarz information criterion (SIC) within the literature however. The LM test presented in table 2 above confirms that one should fail to reject the null of serial correlation in the residuals.20993* -10.82745 5. The results indicate that one should fail to reject the null of homoscedastic error terms.857168 -8. 87 .63725* -9.9324 253.53669 227. the first step in testing for cointegration was to find the appropriate lag length.1823 0. This was determined through the use of several tests for lag optimality which is given in the table 3 below: Probs from chi-square with 16 df.88800 -10. there is no conflict with the lag optimality proposed by the various test shown.51698* -11.08e-07 1.Table 2 VAR Residual Serial Correlation LM Tests Null Hypothesis: no serial correlation at lag order h Date: 04/20/11 Time: 11:29 Sample: 1970 2008 Included observations: 38 Lags LM-Stat Prob 1 2 20.94000 14. However.44069 -11.5365 NA 287. Lag optimality Using maximum likelihood method.32e-10 1.93036 0.19647 -2. This result is confirmed with the application of the Wald lag exclusion test presented in table 4 below. The test for Heteroscedasticity is reported in Appendix 6. Table 3 VAR Lag Order Selection Criteria Endogenous variables: LRM LRER LRPC LRRP Exogenous variables: C Date: 04/13/11 Time: 20:31 Sample: 1970 2008 Included observations: 36 Lag LogL LR FPE AIC SC HQ 0 1 2 3 60.140927 -11.909165 -3.4578 Cointegration Analysis The first step in route to estimating the long and short run dynamics captured with the cointegration-VECM framework is that of lag optimality.3057 241.18e-10* 1.

404386] 3.011987 [ 0.05300 [ 7. The model assumes the data follows a linear trend with intercept.77e-08] 187.33038 [ 0.65334 [ 2. Further investigation of this suggested version of the model showed that there is indeed one 88 . then if the probability is greater than the critical value at the level of 5. Alternatively we may examine the Max-Eigen Statistic.035215] 4.454049] 26.0311 [ 0. the max-eigen tests indicate presence of one cointegrating relation. cointegrated relationship among the variables of interest.0% significance then it is assumed that there is a single vector of cointegration.27e-07] 52. The maximum statistical Eigen-value where the null hypothesis is r.56201 [ 1. The test indicates that the first lag is significant and should be retained within the model. One may therefore proceed with estimating the number of cointegrated vectors via the Johansen cointegration test. in accordance with the AIC.87205 [ 1.000000] Lag 2 3. Indentifying the structure of the VAR The summary results of this test suggest that.046652] df 4 4 4 4 16 The Wald test is employed by theoretically testing for a maximum of up to 3 lags. relations of cointegration against the alternative of r+1 relations of cointegration exists. The results for the Johansen cointegration test are presented in Table 5 below.05e-10] 60.552918] 10.029399 [ 0.0% level the Max-Eigen Statistic is greater than its critical value then we reject the hypothesized null of cointegrated equations. if at the 5.VAR Lag Exclusion Wald Tests Date: 04/19/11 Time: 10:39 Sample: 1970 2008 Included observations: 37 Table 4 Chi-squared test statistics for lag exclusion: Numbers in [ ] are p-values LRM LRER LRPC LRRP Joint Lag 1 34.11e-12] 41.659466 [ 0.55909 [ 0.

Table 5 Cointegration Test
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)
No. of CE(s)



Critical Value


None *
At most 1
At most 2
At most 3





Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level
* denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values

The results of the ECM model
reported suggests that there is indeed a
valid error correction term which resides
in the real personal credit equation. This
valid representation reports a t-statistic of 2.09969 with a coefficient estimate of 0.150311 suggesting that the elasticity of
RPC to import demand is in the in elastic
range (i.e. below one), it also indicates that
the system corrects its previous period of
disequilibrium 15.0% of each year. The
speed of adjustment is therefore
considered to be relatively slow.

As illustrated above the test shows
that one rejects the null of no
cointegrating vectors and fail to reject the
null of at most one cointegrating vector.
Hence given the evidence of a
cointegrating vector and in accordance
Theorem; there should at least be one
valid error correction model (ECM).



The summary results of the
estimated ECM model are presented
below. The full details can be found at
appendix 4.

The co-integrating equation is given below

LRIM = - 7.175632 LRER(-1) + 0.382348 LRPC(-1) - 16.17070 LRRP(-1)

The estimated long-run elasticities
are all statistically significant and all carry
the correct signs with real exchange rates
and real relative prices negatively
correlated to import flows. The results
indicate that the real relative prices explain
more significantly the dynamics of import
flows in the long run hence a one percent
increase in real relative prices would lead
to a 16.0% increase import demands.
As it relates to real exchange rates
a one percent increase in real exchange

rate lead to a 7.1% decrease to import
flows over the long-term, likewise a one
percent increase in real relative prices lends
to a 16.0% decrease in import flows over
the long term. The test statistics indicates
that it is significant and therefore relative
value of the exchange rate policy is useful
for signalling possible adjustments to
import flows. It is prudent however, to
examine this relationship further as these
elasticities imply that imports to Barbados
are volatile, this does not necessarily

confer to reality. It may also, suggest that
depreciation in the real value of the dollar
and an adjustment of the terms of trade
downwards may lend to higher import
aforementioned the difficulty in assessing
the relationship on trade balances is
pervasive throughout the literature as little
can be done to control the effect of
exogenous changes in the real exchange
rate. In other words as Barbados have a
fixed exchange rate with the US and other
Caribbean countries it is difficult to
control, inter alia, the terms of trade
effects which other currencies will have on
the US dollar which will also affect the real
value of the Barbados dollar. This in itself
represents the shortcomings of studies
such as this.
In general however, the study
signals that import demand is relatively
elastic to real relative prices and real
exchange rate and relatively inelastic to
changes in personal credit. Unlike the
models in the previous studies, the model
incorporates the effects of real exchange
rates into the model which adds some
dynamism to the demand function which
most other models lack.
The estimated model also indicates
that the Barbadian import demand is not
homogeneous; furthermore, the dynamic
lag structure reveals to some degree that
there exists a relationship between the
three explanatory variables and their
resulting impact on quantities imported
over different time frames.

current account due to a rise in demand
for aggregate imports and thus there will
be a need to discipline fiscal expansionary
policy particularly under a fixed exchange
rate regime.
The findings also suggest that with
fixed domestic and foreign levels of
average prices a rise in the real exchange
rate makes foreign goods and services
more expensive relative to domestic
goods. This confirms the theory of
exchange rates in the long-run and its
impact on aggregate demand.
This study investigates the speed
of adjustment to import demand function
for the economy of Barbados during the
period 1970 – 2008. Cointegration and
error correction techniques have been
employed to assess the relationship
between real exchange rate and import
demand. The results obtained from the
Johansen procedure indicates that the
series are co-integrated and therefore
yields a valid error correction term. The
speed of adjustment to the long run
equilibrium is corrected by the real
personal credit by 15.0% each year. In
the long run, real exchange rates prove
significant in explaining the demand for
imports. This has implications for the
exchange rate policy particularly under a
fixed exchange rate regime as it suggests
that movements in real exchange rate can
signal the possibility of an unstable

Implication of Exchange rate policy
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Given the evidence in the
preceding section, it therefore suggests
that in the long run the supply of import
flows depends significantly in part on the
real exchange rate of the Barbadian
currency relative to other currencies.
Hence as real exchange rates
increase this may have implications on the

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Appendices Graphical Representation of the Various Series Appendix 1 92 .

Appendix 2-1 Correlograms of the Various Series in Levels 93 .

Appendix 2-2 Correlograms of the Various Series in Levels 94 .

2551 Critical value = -3.0164 0.7536 0.828597) 0.2445 LRNIRt 0.1460 0.2970 LRERt 0.127103 LRPCt 0.8894 0.1412 LRMt 0.1854 LRPt 0.0028 0.536601 at 5% level of significance First difference Intercept.0016 0.0096 Critical value = at 5% level of significance Conclusion I(1) I(1) I(1) I(1) I(2) I(1) I(1) I(1) Appendix 3-3 VARIABLES KPSS Unit Root test (LM test) Levels First difference Intercept trend Intercept. trend Conclusion (-4. trend Conclusion LNGDP 0.199115 0.067885 I(0) LRMt 0.8076 0.8061 0.156240 0.075334 0.8303 0.4185 0.056072 0.189716 LRRP 0.1133 LRNIRt 0.192683 Critical Value at 5% = 0.0021 0.1883 LRPCt 7.0056 0.7730 LRGDPt 0.122994 0.0077 LRPt 0.017573) 0.Appendix 3-1 Augmented Dickey-Fuller test for Unit root VARIABLES Levels Intercept trend LNGDP (-3.2591 0. trend LNGDP 0.136532 I(1) I(2) I(1) I(1) 95 .0000 0.076103 I(0) LRPt 0.0388 0.0066 I(1) I(1) I(1) I(1) I(1) 1(1) I(1) Appendix 3-2 Phillips-Perron Unit Root Tests VARIABLES Levels First difference Intercept trend Intercept.0314 LRRP 0.0000 LRPCt 0.0004 LRGDPt 0.187031 LRNIRt 0.093295 0.1657 0.064 LRRP 0.204838 0.0038 LRMt 0.0055 LRERt 0.107378 I(1) LRGDPt 0.158921 I(2) LRERt 0.

51074] [-5.04951) [-0.280022 0.50044) [ 0.035936 (0.180145 0.094700 (0.158718 (0.367313 0.20636) [-2.613437 37.018916 (0.79589] -0.93148] -0.658377 -3.085266 (0.451400 (0.099569 3.095042 2.036087 2.09969] 0.84969 -1.24782] -0.382348 -16.573423 (0.027751 0.02391) [ 1.02785] 0. R-squared Sum sq.061904 (0.628542 -1.06833) [-1.56403] 0.01625) [-1.277833 0.305946 (0.17372) [ 2.E.07479) [-1.15301) (0.068862 2.023256 0.62595] 0.117167 0.460375 0.269620 (0.27204 D(LRM) (0.19698) [-0. dependent 0.02350) [ 1.040370 0.77869] -0.77155 -2.64047] 0.089906 (0.14272) [-0.150311 (0.02595) [ 1.769991 36.721605 -1.323310 0.397147 -0.147001 0.) Determinant resid covariance Log likelihood Akaike information criterion Schwarz criterion 5.56745] C 0.59842] 0.34610) [ 1.98144) (0.582043 73.027370 (0.02243) [ 0.17E-11 2.366030 -2.42486] [-7.015900 (0.145244 (1.52085] D(LRRP(-1)) 1.19782] D(LRER) D(LRPC) D(LRRP) CointEq1 -0.156532 -15.21158 96 .296529 0.113592 (0.294014 0.355743 (0.214166 0.18138) [-0. equation F-statistic Log likelihood Akaike AIC Schwarz SC Mean dependent S.55E-11 241.039855 Determinant resid covariance (dof adj.104800 -0.033324 (0.11850] 0.095703 (0.00852) [-2.70884] -0.15768) (2.05489] D(LRM(-1)) -0.38877) [ 1. resids S.72584] -0.22096] R-squared Adj.962241 49.47769) [-0.025419 (0.199073 (0.02201] 0.Appendix 4 Date: 04/13/11 Time: 21:21 Sample (adjusted): 1972 2008 Included observations: 37 after adjustments Standard errors in ( ) & t-statistics in [ ] Cointegrating Eq: CointEq1 LRM(-1) LRER(-1) LRPC(-1) LRRP(-1) @TREND(70) C Error Correction: 1.65693] 0.D.183066 0.378134 0.07159) [-2.009898 0.12370] -0.07268) [-0.12900] -0.077681 0.023607 (1.41808] -0.67998 -3.175632 -0.183485 (0.051277 0.17070 -0.12015) [ 1.31133] [-2.74187) [ 0.105153 0.12804 -1.26615] D(LRER(-1)) -0.49569] D(LRPC(-1)) 0.000000 7.2726 -11.307332 0.609385 (0.03011) [ 7.47419 -10.16582) [ 1.06296) [ 2.

668329 0.564925 .203390 0.0002 0.372416 -0.360486 35.209027 0. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.114265 0.947184 1. Durbin-Watson stat 10.124240 2.446468 0. Durbin-Watson stat 97 10.8357 R-squared Adjusted R-squared S.31427 0.027617 1.104517 0.0003 0.414125 2.268132 0.021875 3. C DLNGDP DLRP DLRER DLRPC DLRNIR 5.642683 Appendix 5-2 Dependent Variable: LRM Method: Least Squares Date: 04/20/11 Time: 03:24 Sample: 1970 2008 Included observations: 39 Variable Coefficient Std.99674 20.248841 0.0000 0.0087 0.711970 0.759016 0.198408 -1.359958 -1.654527 0.000000 Mean dependent var S.78775 0.624628 -2.D.085691 0.249651 2.689872 -1.538294 -1.282362 -1.0010 0.009874 0.104026 -1.430863 32.000000 Mean dependent var S.788604 5.0111 0.847439 0.043130 2.640323 0.0236 0. C DLRGDP DLRRP DLRER DLRPC DLRNIR 2.967527 1.075781 0.304980 0.722504 0.E.317783 0.1667 0.229663 0. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter.064162 0.0438 0.51918 16.0000 0. Error t-Statistic Prob.5264 R-squared Adjusted R-squared S.404341 0.E.01535 0.195271 4.739066 0.Appendix 5-1 Dependent Variable: LRM Method: Least Squares Date: 04/17/11 Time: 01:24 Sample: 1970 2008 Included observations: 39 Variable Coefficient Std.573506 0.648029 0.D.047239 7.198408 -1.743115 -0.01535 0. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.095855 4. Error t-Statistic Prob.024499 0.373524 0. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter.405555 0.

783897 0.149884 -1.046244 7.96867 0. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter.349639 2.003217 0.0123 0.032262 0.358120 36. C DLRGDP DLRP DLRER DLRPC DLRNIR 2.819256 2.0048 0.000000 Mean dependent var S.009014 4.742632 0.227187 0.0780 0.586819 Appendix 5-4 Dependent Variable: LRM Method: Least Squares Date: 04/20/11 Time: 03:40 Sample: 1970 2008 Included observations: 39 Variable Coefficient Std.073577 0.760598 0.12513 20. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.544879 -1.000000 Mean dependent var S.405816 -1.E.01535 0.198408 -1.313990 0.198408 -1.647365 0.067067 -0.666431 -2. Durbin-Watson stat 98 10.605035 0.E.0003 0.411550 33.724325 0.9450 R-squared Adjusted R-squared S.Appendix 5-3 Dependent Variable: LRM Method: Least Squares Date: 04/20/11 Time: 03:39 Sample: 1970 2008 Included observations: 39 Variable Coefficient Std.D.111675 0.069565 0.753986 0.621109 0.724880 0.230486 5.0528 0.085816 0.242111 3. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.430889 0.5109 R-squared Adjusted R-squared S.0009 0.0002 0.0326 0.664623 0.938256 2.38954 0.375302 0. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter.01535 0.683195 0.042813 2.684343 0.288946 -1.453052 0.547525 4. Durbin-Watson stat 10. C DLNGDP DLRRP DLRER DLRPC DLRNIR 5.392211 1.D.277252 -0. Error t-Statistic Prob.104174 0.0000 0.212235 3.258937 0.221177 0.0000 0. Error t-Statistic Prob.020512 -1.072506 0.296683 0.41342 17.028455 1.636296 .

4494 0.275262 0.8665 0.9031 0.376808 0.2478 0.8824 0.3395 Individual components: Dependent R-squared F(8.218103 0.097601 0.847074 3.267919 0.2614 0.264530 0. 84.4059 0.Appendix 6 Heteroskedaticity tests VAR Residual Heteroscedasticity Tests: No Cross Terms (only levels and squares) Date: 04/20/11 Time: 12:26 Sample: 1970 2008 Included observations: 38 Joint test: Chi-sq df Prob.251080 0.215300 0. Chi-sq(8) Prob.1648 0.2979 0.392072 0.133314 1.29) Prob.2805 0.3250 0.741363 9.557599 0.613935 1.7505 99 .072141 0.102495 0. res1*res1 res2*res2 res3*res3 res4*res4 res2*res1 res3*res1 res3*res2 res4*res1 res4*res2 res4*res3 0.065931 0.2342 0.8032 10.1641 0.9667 0.2987 0.413977 1.281844 1.541022 5.708855 2.2759 0.308066 0.9495 0.65703 80 0.45996 3.70649 9.011159 1.9159 0.259134 0.05213 8.303820 1.287902 11.894825 10.

Ricardo Norville Assistant Chief Research and Planning Ministry of Labour & Social Security 100 .IS THE RESTAURANT SECTOR WITHIN THE BARBADOS TOURISM INDUSTRY TAKING ADVANTAGE OF THE BENEFITS ALLOCATED TO THEM? (1982-2006) Mr.

This should then presumably result in an improvement in the investment decisions of firms. equipment. These benefits would have been. within the Barbados Tourism Industry. such as tour operators. took advantage of the benefits that were afforded to them. within the Barbados Tourism Industry. when it comes to a myriad of cuisines and the level of dining. accounting for over onethird of the value of total world-wide trade in services. These benefits would have been. and therefore has prospered as global wealth has increased. transportation. the infrastructure and the concessions that the Government of Barbados would have created over the last twenty-four years. Tourism. for the tourism industry. The Government of Barbados should continue on this path of development but they should be careful of freeloaders within the system and to look at more trade related factors.VII. with the possibility of a cycle emerging for the industry. What would be the significance of such patterns of turning points to the restaurant industry? It would lead to the elimination or reduction of the industry cycle risk. This research is beneficial in terms of its contribution to both the restaurant industry and the academic By Ricardo Norville ABSTRACT The objectives and intentions within this study are to show if the restaurant sector. that this sector was able to ‘hold its own’ and still grow. which will lead to the restaurant industry being more competitive in relation to other destinations in the Caribbean. that even though there were cases where there was no or little growth within the economy. This research as will also show. Highly labour-intensive. culture and other technical services and material products (machinery. 101 . This study provides a restaurant industry growth model. broadly defined. both domestic and international. these are required to support travel activities and tourism attractions. development and diversification of the restaurant sector. This would have affected the growth. Tourism demand. it is a major source of employment generation. took advantage of the benefits that were afforded to them. is directly related to income levels. thereby improving their effective allocation of resources. This paper indicates that there has been a very nurturing environment created within the country. is regarded as the world's largest industry and one of the fastest growing. the infrastructure and the concessions that the Government of Barbados would have created over the last twenty-four years. The purpose and objectives of this study are to show if the restaurant sector. in addition to banks. from the 80’s to the present. This would have implications for growth. insurance companies. travel agencies and lodging. which has enabled the Barbados restaurant sector to evolve into one of the best destinations in the Caribbean. instruments). especially in remote and rural areas. development and diversification of the restaurant sector. which requires a wide range of simple and complex goods and services to support it. IS THE RESTAURANT SECTOR WITHIN THE BARBADOS TOURISM INDUSTRY TAKING ADVANTAGE OF THE BENEFITS ALLOCATED TO THEM? (1982-2006) INTRODUCTION Tourism is a broad service sector. The industry utilizes focused tourism components. from the 80’s to the present. food.

including the number of foreign and locally owned restaurants within the country. if there are any declines within any of the statistics indicating inefficiencies or needs for strengthening the tourism product. Also. The following comparisons were made: base years against the year the restaurants opened (growth of the restaurants over the years). RELATING TO THE STUDIES RESTAURANT INDUSTRY There is limited research as it relates to studies in this area especially within Barbados. watching the development of the industry pertaining to the cuisine and if it was affected by any changes within the major tourist markets. thereby allowing us to see the reaction of the industry at various points within the period specified. these unseen factors play a part and will have a hand in the industry. Benefits to the restaurant industry will be gained from a better understanding of the characteristics of the cyclical fluctuations of the industry activity. specifically disciplines of study focusing on hospitality and tourism. There were difficulties obtaining the revenues (sales) and employment information from the individual establishments. it was also analysed where restaurants set up within the country over a period of time and reasons for this (Barbados has mainly three restaurant tourist areas West. This systematic industry growth model can obviously provide a guidepost for the restaurant business managers and investors. Section 3 describes the Barbados tourism product and the significance of the tourism industry. The final section contains some concluding remarks. Within my analysis. It also provides a backdrop of the Restaurant sector in Barbados. The rest of this paper is structured as follows: section 2 provides a brief review of the empirical literature on the restaurant industry. The effects of all packages under the hotel also have to be taken into account since they would be operating as one entity. The few studies that have been conducted in the United States 102 . This information would have allowed for an in-depth knowledge of the Barbados Restaurant Business Cycle. It must be understood that many restaurants in Barbados are separate entities but there are numerous restaurants within hotels. Section 5 presents the results and analysis. Section 4 provides the analytical framework of the study as well as the indicators used. This also affects the results of this study. In this research paper. Moreover. South and East coast areas). There is just the gathering of basic statistics from the restaurant sector which is amalgamated with the hotel sector. total employment is taken from a total industry point of view (tourism industry) and the revenue associated or contribution to GDP is taken for hotels and restaurants in total. it is expected that people in this industry can gain insight into the nature of the industry cycle and thus eliminate or reduce the risk in terms of decision making over the industry swings. With these results. The restaurant industry will also be shown how it reacts to the fluctuations of the economy giving it its unique character. The academic community. the fluctuations of the growth of the restaurant industry will be measured by a series of economic indicators. the government’s intervention will be shown within a table. can benefit from research that attempts to quantify time relationships over the restaurant business that has never been addressed in the with further understanding of the underlying effects of the restaurant sector within the greater tourism industry and the economy. the growth of the economy against the growth of the restaurants over the years indicating when major concessions were made.

tend to have low explanatory ability and a short usable time horizon. a framework was designed to assist the owner-manager in coordinating labor and materials management activities in response to the anticipated demand. The planning procedures include: 1) forecasting. consumer attitudes relating to health and the quality of life are causing shifts in demand. more than $14 billion (US market) can be realized if the concepts of the industry's Efficient Foodservice Response (EFR) initiative are implemented and to effectively capture this market . Forst (1992) used several regressions and Box-Jenkins models to forecast weekly sales at a small campus restaurant for two years. Questions dealing with quantity. A modified regression model was ultimately selected. According to Troyer (1996). 1993). These three models were then used to forecast sales for the first 44 weeks of the third year. the major market players are fighting for a larger share of static or diminishing markets. Today. Recent trends have combined to reshape the style. It has been indicated that simple regression models . Forecasted sales were compared with actual sales to select the three most promising forecasting models. in the food service supply chain. was presented showing practical solutions to the demand forecasting.and do so profitably . There is evidence of a slowdown in the pace of operations. The procedures demonstrated allow managers to plan for different and specific aggregate sales for a lucid cost picture for the longerrange restaurant needs. 3) recipe information. and procedures for labor and material management were addressed by integrating demand forecasts with labor and material requirements. 2) menu analysis. 4) material requirements planning. Also. and labor and material management problems faced by a fastfood operator. and they were then compared against actual sales. quality. After finalizing the forecasting model.the foodservice industry must streamline its supply chain and build a solid platform that enables food service companies to capitalize on this growth. simple industry gravity models exhibit the same poor explanatory ability as regression models. The available studies in the hospitality and tourism literature deal with different methods or techniques. The results indicated that a multiple regression model with two predictors (a dummy variable and sales lagged one week) was the best forecasting model considered. Ordinary least square regression was used to estimate the aggregate daily forecast.while easy to interpret and inexpensive to run . A wellknown New Orleans restaurant was used to illustrate the planning method.have been: Wacker (1985) examined the traditional planning problems of the restaurant industry and explained the restaurant planning procedures implemented to solve these problems. and focus on different subjects. and 6) using these components to derive an effective cost plan. Time series may yield seriously misleading forecasts if unforeseen occurrences happen. The 2-stage model incorporated the variables of month. A case study conducted by Yavas (1996) in the US. day and sales. 5) capacity requirements planning. delivery and definition of fast food systems (Silverstone. The restaurant owner reported that through enhanced planning there has been a much closer control of materials through lower inventory spoilage and shrinkage. COMPETITIVENESS The process of globalisation and trade liberalisation has rendered 103 . Both month and day were specified as dummy variables. In addition.

the strategies we develop must include the updating of plant and animal health legislation. they fear that any continued decline in the tariff applied to these products will serve to further erode the competitiveness of local businesses at best. the infrastructure.competitiveness a precondition to any company’s survival. the activities in which he/she participates. or alternatively. Another critical component of increasing competitiveness is the ability of firms to build production capacity. the services used. Whereas trade liberalisation has afforded businesses the opportunity to gain access to new and hitherto restricted markets.. however. building national capacity to undertake risk analysis. are therefore unable to compete with these imported products based on price. the requisite forms of technical and financial support must be made more readily available to them. While local handicraft manufacturers may be unable to compete with imports at the level of pricing. While Barbados has been subject to less onerous tariff reductions than developed countries. this has been accompanied by increased competition abroad as well as in the domestic market. improving the infrastructure. In order to discharge our obligations and act in conformity with the guidelines. With respect to the domestic market. Indeed. they nonetheless enter the local market having a competitive advantage with respect to production capacity and cost. Barbadian businesses. …’ BARBADOS TOURISM PRODUCT The total vacation experience. lead to their imminent demise. given high local production costs. Furthermore.. In addition. Even in the event of the imposition of high tariffs on these products. have raised concerns about the difficulties in accessing such support. to focus on the production of high quality niche products. we recognise that Barbados is now operating in a highly rules based environment. they have and must continue. Barbados must ensure that imported products conform to high standards. this has not served to maintain the competitive position of local companies in the domestic market. If we are to ensure that existing firms build production capacity with a view to enhancing their competitiveness. quote ‘. 2003 presented by the Minister of Finance. trade liberalisation has had serious implications on the ability of domestic manufacturers to remain competitive against the growing influx of cheaper imported goods. The Government of Barbados in an extract from its Financial Statement Economic and Financial Policies of Government October 25. This is a situation which must be addressed with a degree of urgency. Many of our local firms require technical assistance and financial support. Barbadian companies. Local manufacturers however. the level of 104 . while still expanding our agriculture sector. which restricts the degree of flexibility that can be exercised at the domestic level. the domestic protection that was once afforded to local enterprises in the form of high tariffs on imported goods has progressively declined in recent times. for example those involved in handicraft. both from private lending institutions and some of those government agencies charged with the task of business and export development. Consequently. are experiencing grave difficulties in the face of competing imported craft items from such low cost sources as China and Indonesia. starts from the time the consumer steps out of their residents before they travel to Barbados and includes the accommodation and transport facilities used. which will minimise the possibility of the local market becoming flooded with cheap goods of low quality.

This contributed US $1. Today tourism is one of the driving forces behind the promotion of cultural events and the emergence of many indigenous cultural groups. golf courses and a range of other activities. and provides a means of demonstrating to the visitor the special characteristics which distinguish Barbados from other destinations. transportation and laundry services. These range from accountants and aquatic specialists to museum guides and marketing officers. Barbados was 105 . handicraft. particularly its people and cultural and natural heritage elements are of critical importance. there are other business opportunities available within the industry: operating small hotels and guesthouses. It comprises several segments. While Barbados. each of these sub-sectors has many job opportunities and career paths. music. It has certainly helped to promote local art. from travel writers and event planners to hostesses and engineers. taxi-drivers. This information can also be seen in Appendix I and II. 3.1 Significance of the Tourism Industry The importance of the tourism industry to Barbados is reflected in the contribution it makes as an important generator of employment. the other components. In 2011. At present. where those who possess varying skills and creative abilities have the opportunity to earn an income from selling or providing services to tourists. like most tropical island destinations. dance. accommodation. establishing catering facilities where local cuisine is prepared. In the past. Many skills are required during the construction phase of a tourism project and immediately upon completion additional skills are required for the operations phase. nature attractions including underground caves and marine parks. The new legal and regulatory framework and policies being developed for tourism are designed to help facilitate planners and operators in the industry to incrementally improve all of their properties. is known because of the primary natural attributes of its climate and coastal environment. food and beverage and activities. facilities and systems to sell Barbados as a high quality destination. Barbados’ tourism product is based on the human. festivals.77 billion in revenue. scores of restaurants and other food and beverage facilities. Tourism stimulates an informal economic belt. dress and culinary arts. Barbados has emerged as one of the premier Caribbean destinations with tourism leading all other sectors of the economy. natural. craft and fruit vendors. Thus.existing safety and security and the quality of the human.200 persons. Given the diversification of the industry.315 rooms in 2007. not only to visit but also in which to invest. The tourism industry is labour intensive since it is a service industry.2% of the country's labour force. It must be noted that employment in the tourism sector has been changed to the employment in the accommodation and food services sector from 2010. tourism in Barbados directly employed approximately 13. historic sites. song. cultural and natural environment. hair braiders and beach vendors are a major feature of Barbadian tourism. cultural and social resource base of the island. the tourism product is enhanced by an added cultural dimension. the principal ones being transportation. social. representing about 10. providing entertainment. Apart from the opportunities provided in the informal sector. are just a few examples. Barbados’ product is diverse in quality and quantity and includes an accommodation complement of approximately 6.

3. since trade liberalization has caused imports to be cheaper than the locally grown produce.” Provision is made under this Bill for investors in tourism projects to benefit from exemption of import duty.2 Restaurant Sector The thriving hotel and restaurant sector in Barbados is fuelled by the country’s growing tourism industry. 2002 which states that its objective is to: 4. This factor affects the competitiveness of the agricultural industry and in turn the restaurants. ANALYTICAL FRAMEWORK (Model Development) Most of the studies within this industry are discussions and thus hard to apply to dynamic and complex economic trends and therefore industry's overall trends. sea and sand destination. but those represented by the BTA. With all these important factors the industries have to find ways to reduce cost. The tourism product in Barbados is diverse with an abundance of casual and elegant dining restaurants offering local cuisine. The cost of agricultural products is also an issue due to the high cost of inputs. The Government of Barbados has offered special incentives to the tourism and hospitality sector under the revised Tourism Development Bill. including the construction and equipping of new restaurants or the alteration/ renovation of an existing restaurant. equipment. However. there were in excess of 100 casual and fine dining restaurants registered with the Barbados Tourism Authority (BTA). for both long stay and cruise tourism. with more attention being paid to product development. this economy has developed an image as a safe. a 1% Environmental Levy and 20% duty for refrigeration appliances and 5% duty for cooking appliances. many establishments make international dishes with our own indigenous products. Barbados is a mature Caribbean tourism destination and is one of the leading destinations in the southern Caribbean. This would cater to special cuisines. fixtures. since international standards have to be observed and consistency is necessary. This image can only be maintained with aggressive and focused marketing. There are also very low import restrictions for restaurant equipment in Barbados. The need for quality and quantity is still a problem in Barbados.marketed as a sun. seafood and continental cuisine. VAT and the environmental levy. which focuses primarily on its natural and cultural heritage. this allows our own agricultural industry to play its part within the restaurant industry. building materials and supplies. in respect of furniture. offering a diverse tourism product. A concession for the importation of food is allowed. This figure is by no means all of the restaurants operating in Barbados. provided that there is no local supply. which we may not have a substitute commodity to replace it with. hospitable destination. Restaurant equipment imported into Barbados will be charged a 15% VAT. There is no systematic forecasting study for the restaurant industry as a whole and no restaurant industry business cycle “… encourage the sustainable development of the tourism industry by providing duty free 106 . Industry sources indicate that there are approximately 152 restaurants and 66 bars (Zagat 2007 survey says 169 bars and restaurants). taking into consideration the dynamic changes in the global arena. In 2003. so that it keeps them attractive to the consumers. concessions and income tax concessions for approved tourism projects and certain tourism entities and for other related matters.

it should be at least fifteen months long with any significant upward or downward movement in economic activity being at least five months in duration (Karsten 1990). 4. where they are available. monthly or quarterly data for certain time periods are required to improve the accuracy of the analysis. As Burns and Mitchell (1946) point out at great length. Ideally. for a period of economic fluctuations to be classified as a business cycle. Since the total sales of the restaurant industry in a given period represent the market value of all final goods and services which are produced in the restaurant industry in that period. Department of Commerce. 1991). The aggregate business activity of the restaurant industry is represented by the total sales of the industry in this study. it is safely said that the aggregate business activity of the restaurant industry can be represented by the data of total sales of the industry. coincident. or even monthly tend to have too much static. This is especially the case within Barbados. the sales information for these restaurants was unattainable. or lagging indicator may vary from one cycle to another. annual data leave out many cyclical turning points and are not sufficiently detailed (cited in Sherman. in a different metaphor. Therefore. Jeong-Gil Choi (1999) indicates within his study. that caution needs to be exercised in assessing the suitability for economic indicator analysis of series available for only a relatively short period. Proposition 2: It is believed that cyclical fluctuations of the growth of the restaurant industry can be projected by measuring and analyzing series of economic indicators. dating peaks and troughs of the restaurant industry cycle in this study may be less accurate than dating cycles by using monthly data. This study utilized annual data given the unavailability of monthly data for some of the periods under review. Unfortunately. and date and measure the cycle. while manifesting a unique cyclical character (degree and timing of its fluctuation). Therefore this study followed this 107 . The principle objective of this study is providing for these needs. The restaurant industry cycle is a type of fluctuation found in the aggregate business activity of the whole restaurant industry.S. On the other hand. the objective of this study is to develop a restaurant industry growth model that would represent the change and magnitude of growth in the industry. There is therefore merit to developing a systematic industry cycle model as a forecasting tool and providing a guidepost for the restaurant business managers and investors.1 The Dating of the Industry Cycle A business cycle is usually measured from peak to weekly. This study converted the nominal data series to real data series (constant dollars) to track the real changes in the industry cycle. Jeong-Gil Choi (1999) in his paper on Developing Restaurant Industry Business Cycle Model and Analyzing Industry Turning Point indicated the following: Proposition 1: It is believed that the restaurant industry reacts in different ways to the business cycle fluctuation of the US economy. Thus. According to the U. (highs and lows) of the industry cycles. data on a monthly basis for key economic variables (to permit a comprehensive study of the economic fluctuations in the restaurant industry) are very limited as far as the restaurant industry is concerned. do not begin until quite recently. This is because their performance as a leading. data given daily. Unfortunately. especially data on the restaurant industry are either not available or. they lose the forest and show only the trees.

A specific cycle is a set of turning points observable in a particular series. Note here that some restaurants have changed hands or the same restaurant opening under a different name. including type of cuisine and the year they opened their doors. this study using annual data series restricts the cycle inclusion to the cycles formed within no less than two years. Further.535 * SD is standard Deviation. To improve the accuracy of the analysis. According to the selection rule of a turn presented above. and some of this former information was unattainable. as measured from either peak to peak or trough to trough. these turns may or may not correspond to the overall business cycle turning point dates. tourist stay over arrivals by country. Unfortunately.5 0. Table 1: Peaks and Troughs 1985-2007 Peaks Period Troughs Period Years 1985 1987 1988 3 1989 2 1991 3 1992 3 1993 2 1994 2 1996 3 1997 3 1998 2 1999 2 2000 2 2001 2 2003 3 2004 3 2006 3 2007 3 Average SD 2. Niemira and Klein (1994) say the selection of a turn must meet the following criteria: * The cycle duration must be at least 15 months.2 Indicators Used in this Study The list of indicators that are used within my analysis are percentage contributions of hotels and restaurants vs GDP.625 0. * Striking activity or other special factors generally are ignored. the cycle duration must be at least twenty-four months to be considered a cycle in this study. real GDP growth within the country from 1982 until 2004. then the latest value is selected as the turn. tourist accommodation (rooms). The dates of peaks and troughs of the restaurant growth cycle are used as benchmark dates against which the specific cycles of the various candidates for inclusion in the model as restaurant indicator series are matched. The criteria for cycle dating described in Burns and Mitchell's Measuring Business Cycles remains the cornerstone of the traditional NBER method of determining cyclical turning points in a time series. * If the peak or trough zone is flat. Since a cycle duration should be at least 15 months.rule for analyzing restaurant industry cycles. employment was also used within the tourism sector and location of restaurant in the various parishes of Barbados. In other words. if their effect is brief and fully reversible. the growth change for a year should be more than the mean absolute deviation of the restaurant growth cycle. as measured from either peak to peak or trough to trough. the number of rooms that were available and registered at this time. labour numbers within the restaurant and their yearly gross revenue would have been helpful. In addition. the duration of contraction or expansion has to be at least 1 year (6 months in the NBER rule). that is how much money they contribute to the gross national product. the number of tourist arrivals from major markets.518 2. The practical and fundamental limitation of this study is data availability. type of restaurant. the cycle duration must be at least 15 months. 4. key economic variables (to permit a comprehensive study of the economic fluctuations in the restaurant industry) are very limited as far as the restaurant 108 .

S market.S. In 1993.A Tourists 200.0 million was allocated for Tourism Board for European and other markets. The number of restaurants included in this study is only 101 establishments. It can be seen that most markets in the beginning increased but as time passed later in the 80’s especially around 1988 nearly all the markets started to decline. the results of this study must be used together with other data and with full awareness of the background of business and consumer behavior and expectations. Another limitation of the indicator system is that the indicators are selected mainly in accordance with their historical performance (noting here again that some restaurants have changed hands or the same restaurant opened under a different name). This was also followed with the increase in the Caribbean market while the US market stayed almost constant with a slow gradual increase. and international events.000 OTHER 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Y e a rs Figure 1 shows the tourist arrivals in major markets over the years.000 U. in managerial decision procedures.industry is concerned. 5. in consumers’ preferences.K 100. Care must be taken in applying the results to other segments of the restaurant industry.000 EUROPE C'BEAN 50. 20 more were established before my point of reference of 1982. $9. Due to these limitations. No detailed data on output was available for the restaurant industry on less than an annual basis. Their timing patterns will change with changes in the structure of the economy.000 CANADA 150. the only market that did not was the Caribbean market and Europe market which still increased to about 1991 there were major changes where the U. Short-term data on the restaurant industry was not available until quite recently. EVIDENCE AND ANALYSIS Figure 1 Tourist Arrivals Major Markets 250.K market increased dramatically over the formally U. and in the reactions of business and government to changing business conditions. The insufficient data also limits the study of financial practices over the industry growth cycle (if there are highs and lows).000 U. 109 . These limitations led this study to eliminate possible variables relating to the industry from a list of indicators which could form an economic system. although over 160 within this restaurant and bar segment were enquired for information. governmental policies.

Figure 3 Visitor Expenditure vs.0 2.Figure 2 900 800 700 600 500 400 300 200 100 0 6.0 0. There is a dependency on tourist foreign expenditure for the growth of the economy.0 4. Tourism Expenditure Years Figure 2 shares a comparison between the growth of the economy (real growth) and tourist expenditure from the markets above and it is interesting to see that the dips or declines in the economy’s growth are similar to the reductions in tourist expenditure over the same period.0 -8. For example between 1988 and 1989 where expenditure was over the US $400.0% towards the GDP.0 -4. It is interesting to see a similar same pattern with the rise and fall in expenditure but there has been a gradual reduction in the contributions made to the GDP by these entities even though visitor expenditure has continued to rise. the visitor’s expenditure was plotted against the contribution by Restaurants and Hotels towards the GDP of the country (Barbados).0 -2. but between 1999 and 2002 the expenditure still has increased to nearly US$700. Hotel & Restaurant GDP Dollars 1000 15 800 10 600 400 5 200 0 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Years Estimates Visitor Expenditure (US$ millions) % Conrtribution of Hotels and Restaurants to GDP Within Figure 3.0 Estimates Visitor Expenditure (US$ millions) GDP Growth % Real Growth -6.000 mark and there was a contribution of nearly 12.000 110 .0 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 Dollars Growth vs.

Can this be attributed to Barbados starting to have a more diversified product and tourists are now spreading their income on other value added tourism products? This is a question to be asked. This also coincides with the change in the market share when the U. In 1986.000 to 15. It is only between 2002 and 2003 when there was a slight increase in the tourist arrivals in the US market that the contributions start to increase again.K market started to overtake the US market and continued a gradual increase over this market. It will be seen that there has been constant decline in the contributions of the restaurants and hotels to GDP starting between 1994 and 1995. but with indications of tourist revenue constantly increasing. Also. Can it be assumed that the restaurant and hotel sector are more tied to positive effects when the US market increases relative to the UK market? It should be noted here that in 1993. refurbished and reopened in other locations. included in 1999 is an accelerated write-off of 150. the cost of food has increased. which relates also to the increase in tourist expenditure and there has been an increase in the number of new restaurants over the years. Restaurants can also import food with concessions if that food is not locally grown but served on their menu. this could also mean that there may be considerable leakage within the system for example. 111 . Hotel and Restaurants sales tax was reduced from 8. It is very interesting to see that the employment figures within this sector are not really increasing (these figures are direct labour input). but the tourist numbers are increasing. Tourist expenditure had only declined back to 1997 levels where the contribution of GDP from the Restaurant and Hotel sector was nearly at its highest level recorded.0 million was allocated to the Tourism Board for European and other markets as you can see the UK market increased dramatically after this incentive. which meet specific criteria was established by the Barbados Tourism Authority with a granting of Tax Credits to restaurants.0% and in 1999 a provision of duty free concessions to restaurants. either they have had their revenue reduced due to the reduction in the market or they are greatly benefiting from the concessions given. even though some of these have changed hands and moved. why is the contribution to the tax base by these entities falling? We can look at this in two ways. BDS $9. The employment sector (19912004) in tourism showed fluctuations between 10. for training of staff by hotels and restaurants. So with these concessions.000 workers. with the government absorbing the fees payable for courses at the Hospitality institute. also the cost of menus.and the contributions to GDP are at 11. which refurbish and upgrade their property to meet specific standards. There are also many indirect jobs related to the tourism industry from agricultural to massage therapists.0% of expenditure incurred by hoteliers. There has also been a dramatic increase in the Caribbean market where it has almost doubled in 2005 from the low point between 1994 and 1995. and they are becoming more efficient.0% indicating no real move in the contributions.0% to 5.

the next location is the west coast.Figure 4 Establishments Opened 12 Number 10 8 6 4 2 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Years Figure 4 shows the preliminary results of the 101 establishments that were opened over this time period and compiled. It can also be noted there seems to be a cycle between a period of five (5) and six (6) years of a high or low point within the industry. Christ Church (CH CH) area followed by St. 112 . The preferred parish is the south coast. the south coast is also a major shopping and tourist hub within Barbados. It can be seen that there are increases and declines in the number of establishments opened with the majority of them opening after the 1994 period. Caution should be taken of this sample since there were 30 restaurants already opened before this 1982 period but some of the operators were unsure of their opening year. Michael which is central and where the capital is located between the south and west coast. To make predictions from this analysis without further testing would be unwise especially with so many factors that affect the industry. Figure 5 Restaurant Concentrated by Parish Number 7 6 St Peter 5 St James 4 3 St Michael 2 CH CH 1 Other 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Years Figure 5 shows the concentration of Restaurants which were opened within certain parishes (plotted from Appendix III). Therefore this location preference can also be a strategic move. St. James. The south coast property values and rents are less than the west coast.

The levelling out and increased activity in the 2000’s. there is a very similar pattern.Figure 6 GDP Growth vs. With this pattern continuing it looks like there may be a slowdown in activity within the sector again at the end of 2007 towards the end of 2008 (speculated every 10 year decline in the economy or global recession). also reflected is the number of restaurants opened which slows down during these periods. It levels out a little more in the year 2000 and beyond with slight reductions but not to no activity like 1990 (period of restructuring the economy). can be attributed to catering to the increase of the U. There is also a spike or activity seen every 5 years which could be an independent cycle relevant to the Barbados environment. 113 .K market and the Caribbean market. for as the economy fluctuates so does the growth of the restaurant sector. 2001) in the tourist expenditure. the two low points in growth coincide with the slight dips (1990-1992. As the number of restaurants open and starts to decline so does the economy. Shown in Figure 2. compare growth within the economy to the number of opening restaurants. Restaurants Opened 15 5 06 20 04 20 02 20 00 20 98 19 96 19 94 19 92 19 90 19 88 19 86 19 19 82 -5 84 0 19 % G rowth 10 -10 Years NUMBER OPENED Barbados GDP Growth % Real Growth The results in Figure 6 from this sample.

nearly all of them now opened cater to the local. there were approximately 600. Within Figure 7 from past experiences.000 persons travelling within the Caribbean countries.Figure 7 Number of Resturants Service Catered To 25 20 Dinner 15 Lunch 10 Breakfast 5 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Years Before the amalgamation of the Caribbean’s major airline carriers. It also must be indicated here that in 2003 there was the granting of concessions under the Tourism Development Act to retirement village projects and to community groups with dedicated cultural heritage tourism products. has evolved since nature tours and other activities happen in the earlier hours of the day. most of the restaurants that opened within the 80’s catered mainly to lunch and dinner (plotted from Appendix III) but now they have evolved and expanded to capture that breakfast market which can be local and tourists alike. the tourism product within Barbados. Figure 8 Other Oriental 16 14 12 10 8 6 4 2 0 French Italian Seafood Caribbean International Local 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 Number of Resturants TYPE OF CUISINE YEARS Figure 8 shows the results of the cuisine from the various restaurants (plotted from Appendix IV). When there are periods of low activity or growth the local market is what helps keep the sectors afloat because tourism is a seasonal affair in the Caribbean so any tourist facility would have to include the tastes of the local population. 114 .

It must be noted that this is a very volatile industry and that many factors will affect it. contrasted to the peaks of the growth cycles. the change in the market has caused a change in the cuisine and frequency of meals offered. The results show that the restaurant industry experienced high growth (boom) every two to three years on the average. As highlighted.Caribbean and international cuisine market so during low periods locals can also enjoy the familiar products and services offered. It has giving results of the best restaurants. attractions and golf courses. Caribbean and local cuisine seem to be the biggest cuisines preferred. Greek. show that there are many inefficiencies within this system which need to be addressed so that the sector and the country as a whole can benefit. this can be seen from the increased arrivals. it would be interesting to see the results of the new restaurants that would be opened in Barbados and the cuisines they offer. The analysis of the growth cycle provides clues to help us forecast future direction and improve our ability to manage. as well as if there are any other market changes that may have an effect. the writing off of certain taxes. It is clear that they have taken advantage of the buoyant economy. the International. my first objective was to form the restaurant industry growth model. There are also a few Oriental food restaurants available showing the diversification of our market. but an increasing industry and expanding sector (restaurants) with increasing benefits (concessions). We have seen that the growth of the restaurant sector is similar to the growth and decline of the economy. the restaurant industry demonstrated nine cycles (peak to peak or trough to trough). Growth cycles show great uniformity. The marketing and sourcing of the clientele is done through various organisations (BTA). The identified and dated peaks and troughs of the restaurant industry cycle are also shown in Table 1. and few others. The number of restaurants is increasing and as highlighted the expenditure of the tourists is increasing. The troughs of the growth cycles. the importation of tax deductible food if it is not obtained within Barbados. bars.5 years for both expansion (L-H) and contraction (H-L). “Other” on the key within the graph represents Mexican. if you are catering to a certain sub-segment pertaining to heritage tourism. the service industries as it can be a major constraint when government is looking to develop policies to stimulate growth. The lack of information needs to be addressed within 115 . This growth is portrayed in Figure 4. This is a time series representing the growth activity of the restaurant industry. while labour within this sector and the contribution towards the GDP is declining. on that occasion in 1989-1990 a low growth phase in the economy interrupted industry business expansion but did not terminate it. It can be applied to other types of CONCLUSION AND RECOMMENDATIONS As indicated from Table 1. this could be a sign of the restaurants becoming more efficient and realizing greater profits. The infrastructure that has been set up is available and accessible to all restaurants. The growth of the Restaurant sector signifies that this is a promising and upcoming industry to be associated with and that there are many concessions to be obtained. During this period 1982-2006. Mediterranean. as the economy prepares for a decline there is a slight decline in this value added sector. Restaurant industry growth cycles tend to be relatively symmetrical: the average duration was about 2. Barbados is now presently listed within the 2007 Zagat Survey. On the other hand. At the next large growth period in the country’s economy.

37(5). 1-3. Forst. Feb. World Tourism Organization as found in OECD. World Tourism Organization. a company that quickly recognizes a change in the phase of the industry cycle could use either a recession or a recovery strategy to optimize profit. (1985). J. 1995. 8(2). Prime Ministers Budget Speech years 1986 to 2005 (19 years). Tourism Policy and International Tourism in OECD Countries. Forecasting restaurant sales using multiple regression and Box-Jenkins Analysis. 37) Tourism Development Bill. Whither fast food? International Journal of 116 . Foodservice logistics: Ripe for change. Ministry of Finance. Journal of International Marketing & Marketing Research. 1896. R. World Tourism Organization. p. The Boston Cooking School Cook Book. 1998. 2002 THE LAWS OF BARBADOS. Fannie Merritt Farmer. (1992). Effective planning and cost control for restaurants: Making resource requirements planning work. 26(1).wttc. p.36. Paris. Transportation & Distribution. BIBLIOGRAPHY Central Bank of Barbados. 15-19. 55-70. World Trade SECOND SCHEDULE (Sections 15. when to sell businesses.87. Silverstone. 1997. (1993). functions. p. The results of the Uruguay round of multilateral trade negotiations. 1997. Annual Statistics Digest 2006. (1996). May. World Tourism Organization. G. Troyer. 2005. Yavas. Moreover. Wacker. (1996). Air Transport and Freer World Trade. World Travel and Tourism Council. 311. Internet version (http://www. G. Contemporary Hospitality Management. Demand forecasting in a service setting. 21(1). 5(1). F. U. First Quarter. C. Journal of Applied Business Research.226. (OCDE/GD (97)173. 106. Production & Inventory Management. Information statistics BTA tourist arrivals and various markets Appendix I and Appendix II. The legal texts. and even when to enter certain types of new businesses. Tourism Economic Report. Monitoring and forecasting restaurant industry cycles clearly gives the manager insight into industry turning points. International Tourism: A Global Perspective. An understanding of long-wave industry business cycle would also provide specific information as to when to be aggressive in expanding business operations. Seminar on GATS Implications for Tourism.

334 83.789 12.231 34.045 70.988 87.025 213.418 56.662 17.085 21.300 59.127 22.071 61.666 1997 108.333 202.680 1993 112.235 1995 111.986 64.858 2002 123.387 2001 106.573 38.983 53.095 58.277 2003 129.505 20.082 61.515 1990 143.922 16.588 62.988 16.093 70.606 25.455 68.487 21.073 117 .424 24.066 13.731 54.349 79.999 88.999 13.250 60.831 17.366 1984 140.690 65.772 41.373 126.068 1983 113.759 65.925 1992 110.295 57.092 52.153 59.145 21.172 1998 106.381 217.945 30.635 21.871 52.588 81.773 65.564 29.830 94.518 52.621 70.069 46.564 118.949 62.358 24.881 1991 119.328 89.890 57.652 1994 109.A CANADA U.701 14.410 16.840 16.122 43.152 23.285 47.590 19.928 139.077 51.619 51.221 86.033 1996 111.862 1987 175.641 202.208 2000 112.666 71.685 49.659 80.190 100.K EUROPE C'BEAN OTHER 1982 75.824 155.326 49.198 47.APPENDIX I BARBADOS TOURISM AUTHORITY VISITOR ARRIVALS MAJOR MARKETS 1982-2004 YEAR U.050 1985 148.989 53.307 46.286 88.S.462 58.058 1999 104.754 23.915 1986 166.864 14.953 57.873 62.622 101.462 19.598 64.946 186.752 21.298 15.311 1988 170.030 104.356 15.404 63.511 59.733 49.045 1989 154.820 83.093 64.629 52.274 16.788 57.269 65.957 226.787 33.675 50.809 23.754 192.632 63.286 123.526 96.202 67.429 46.581 21.166 65.345 2004 129.466 28.

200.4 4.500.8 2.5 0 1989 527.1 0 1987 378.2 5.0 14.0 3.000 11.700.000 11.200.000 12.6 13.2 -2.400 1994 597.800 1993 528.8 3.000 10.100.200 2003 746.800.000.9 9.700.300 1998 703.9 -3.500 2000 711.000 11.600.6 0 1990 493.0 4.000 11.6 11.900 1996 632.0 11.1 0 1986 326.000 11.500.200.000 12.200 118 .000 14.800.900.800.000.4 2.000 10.0 0.9 14.200.2 9.APPENDIX II YEAR Estimates Visitor Expenditure (US$ millions) % Contribution of Hotels and Restaurants to GDP Barbados GDP Growth % Real Growth Employed Labour Force Tourism Sector (Thousands) 1982 251.0 3.600 2001 686.000 13.3 14.100 1995 611.6 0 1988 460.000 11.900.000 10.3 2.8 0.900 2002 647.8 9.600.000.000 10.000 12.000 9.000 2004 763.000 10.6 0 1985 309.000 1999 666.3 3.5 0 1984 284.400 1997 657.800.7 14.000 11.2 -4.000 11.000 10.000 11.3 0 1991 459.9 0.000.7 12.9 0 1983 251.000 13.500 1992 462.7 14.300.000 12.900.4 4.7 1.8 -7.4 -3.9 12.8 2.4 12.9 3.9 0.

Ch Other 1 1 1 2 1 2 1 1 1 Breakfast Lunch Dinner 1 1 1 1 1 3 2 3 3 1 2 1 1 2 1 3 2 1 3 1 1 2 1 3 1 1 3 6 4 7 1 1 5 5 6 8 1 2 3 1 3 2 1 1 2 2 1 2 1 2 2 3 2 2 3 4 1 1 1 2 4 1 2 8 10 1 3 1 3 1 2 3 1 2 5 7 6 5 6 2 6 10 1 3 1 1 1 2 1 2 4 4 1 5 1 67 92 2 4 1 45 7 1 7 19 23 119 15 .APPENDIX III LOCATION St Peter St James Year Opened 1982 1 1983 1984 1985 2 3 4 1986 2 1987 1 1 1988 1989 3 0 1 1990 1991 0 3 1992 1993 1994 1 3 2 1995 1996 4 8 1997 1998 6 8 1999 2 1 2000 11 3 2001 2002 6 8 2003 10 2004 2005 2 4 2006 2007 6 1 TOTAL 101 St Michael SERVICE Ch.

APPENDIX IV CUISINE Local International Caribbean 1 1 Seafood Italian French Oriental 1 Other 1 1 3 3 1 1 1 2 2 1 1 1 1 1 2 3 1 1 1 1 2 1 1 1 2 2 3 1 5 4 1 4 4 1 4 3 3 2 1 2 5 1 2 3 3 3 2 2 2 1 4 4 2 1 1 2 3 2 3 1 2 1 1 1 1 2 3 1 2 1 3 1 1 3 2 1 1 2 9 19 1 40 47 26 9 120 6 0 .