Dr. DeLisle Worrell
Governor, Central Bank of Barbados
International Business & Financial Services Sector Conference
March 17, 2011
Lloyd Erskine Sandiford Centre
The Importance of the International Business and Financial Sector
and How We Must Address its Challenges
The international business and financial services (IBFS) sector is now second in importance to tourism in its contribution to foreign exchange earnings in Barbados, and the sector is the second strand in the country's 2-pronged diversification strategy. One part of that strategy is the reinforcement of variety within the tourism sector, to provide resilience in the face of adverse developments. That helps the country to minimize the impact of recession in one source market or segment of a market. Of course, nothing will insure you against the kind of recession we have experienced since 2008 and continue to experience, which affects all the countries to which we sell goods and services. However, the odds are that the incidence of such wide-ranging disaster will be infrequent. In order to build resilience in less taxing circumstances, diversification continues to be a fundamental aspect of Barbados’ growth strategy.
The second part of the diversification strategy hinges on the further growth
of alternative foreign exchange earners to tourism, the principal one of which is the international business and financial services (IBFS) sector. The development of this sector to date has been encouraging, from its beginnings three decades ago, to a situation today where the IBFS sector makes a substantial contribution to foreign exchange earnings, tax revenues and the provision of highly skilled job opportunities. What is more, this growth has been secured by entrepreneurship, nimbleness and innovation within our private sector, once Government had provided the enabling legislation, regulation and support. Barbados has had to cope with constantly changing national and international circumstances, laws and arrangements, in the markets where our services are sold. From time to time one or other avenue has been closed to us, but we have constantly sought new prospects, with some success. This effort continues.
From the outset Barbados has maintained its IBFS sector on the basis of a network of double taxation treaties, which continues to grow. We have built our competitiveness on a foundation of the domestic availability of internationally comparable financial, legal and support services, at prices that are very competitive internationally. Our other competitive advantages include the superior quality of life available in Barbados, the island’s social, political and economic stability, the fact that English is the native language, Barbados’ balmy tropical climate, and our time zone, which is convenient for doing business with people living and working in
London and New York.
Barbados has been especially careful to build its reputation on the basis of
international best practices of financial regulation and supervision. Keeping up with changes in this area has been a great challenge. The world economic and financial crisis of 2007/08 exposed the inadequacy of international financial oversight, and efforts to devise international institutional arrangements to preclude a repetition are still underway. In the eyes of many, including myself, these efforts have hardly begun to address the financial dysfunction which was and still is at the root of the financial crisis. The Basel Committee on Banking Supervision has issued revised guidelines for banks, which remain the subject of debate. In other financial sub-sectors the needed reforms have yet to be codified and discussed. The body which the Group of Twenty (G-20) countries has set up to coordinate these efforts, the Financial Stability Board (FSB), has so far not gone beyond checking on legislation and information systems, to address the analytical causes of financial instability.
In collaboration with our regional partners, and with other countries which offer international business and financial services, Barbados needs to participate actively in the exercise of international financial reform. This requires us to up our game, in a collaborative exercise between regulators, official agencies and market participants. We must not find ourselves any longer in the position of followers, reacting to initiatives, mostly threatening, that originate in the OECD and G-20, of which we are not members. We must find ways to move the initiative for financial reform back onto the agenda of the IMF, where we do have a voice. We must also take the lead in forming alliances, regionally and beyond, to promote changes that genuinely level the playing field, and address the vulnerabilities that matter to us.
We have already taken some steps towards a strategy along these lines, and we must build on these foundations. We have issued a statement on the importance of the IBFS sector, and the Caribbean’s commitment to maintaining the highest international standards of conduct and information, at a meeting with the Managing Director of the IMF, in October 2010. That statement is posted on the Central Bank’s website. We will follow up, at the regional level, via regional Governors' meetings, which are held twice a year. The Financial Stability Board, an organ of the G-20 group of countries, is in the process of establishing regional advisory groups, which will provide us an opportunity to have a voice at that level. We must also be pro-active in our participation in the meetings of the unfortunately titled Offshore Group of Bank Supervisors, which meets next week. On their agenda, among other things, is a proposal for a change of name, which we will support. Barbados also needs to energise the Caribbean Financial Action Task Force (CFATF), and to consider how we may gain voice in the councils of the Financial Action Task Force (FATF). The upcoming Spring meetings of the IMF and World Bank are an opportunity to engage with these institutions in furtherance of this agenda.
The Central Bank of Barbados has formed a small task force to coordinate our work in the area of international financial services, and a regional task force of regulators is being assembled, to support the Committee of Central Bank Governors in driving forward these initiatives. We need full involvement and advice from Caribbean regulators and from industry practitioners, at every step as we go forward. In carrying forward our agenda, the industry and its regulators will need to upgrade systems for collecting, analyzing and disseminating data and information on the performance of our IBFS sectors. Today's conference moves the process forward, and we intend that this event should initiate a more frequent process of involvement with you in maintaining the competitiveness of our international business and financial services sector, and in guaranteeing the high quality of the products we have on offer.