Productivity has the Potential to Drive Our Economic Fortunes

Remarks by Cleviston Haynes, Governor of the Central Bank of Barbados at the launch of the 2018 Week of Excellence on Monday, February 26, 2018

Good morning and welcome to the Courtney Blackman Grande Salle.

Each year since 2003, we at the Central Bank have joined the Social Partners in hosting this seminar. Our continued participation reflects the Bank’s undiminished commitment to contribute to heightening the awareness of the critical role that improved productivity and service quality in the domestic economy can play in enhancing national competitiveness and boosting economic growth. The Barbados economy operates in a globalised environment and, given our heavy reliance on the export of goods and services, high levels of productivity and service quality are required to enable our firms to penetrate external markets, generate foreign exchange earnings, create jobs and enhance overall economic activity.

Reinforcing the message of the importance of raising productivity levels is paramount as it is very easy for standards to slip. Despite our best efforts, I do not believe that our productivity and service levels are where we would want them to be, particularly in an environment in which our competitors are also trying to raise their standards. We ignore this fact at our own peril.

I wish to commend, therefore, the Social Partners for their continued focus on productivity and for promoting excellence. In the aftermath of 2017 being designated as the National Year of Productivity, there should be no doubt that raised standards of productivity concern us all. The choice of theme for this year’s Week of Excellence, of  “Productivity: The Heart of our Future” provides a very important, timely and relevant reminder of why in both public and private sectors we need to focus on enhancing productivity and strengthening the quality, speed and timeliness of service delivery.

This year, we gather at an especially difficult time in our national economic development. As you are aware, in recent years the Barbados economy has been characterised by sluggish economic activity, weak public finances, high public sector indebtedness and declining foreign exchange reserves. Our national credit rating has fallen and access to finance for Government in both domestic and foreign markets has declined. Efforts to reverse these trends have been protracted and the results mixed. While economic activity has recovered in the past two years, growth remains weak, as evidenced by the Bank’s initial estimates that suggest that activity expanded by only one percent in 2017. Our current forecasts do not indicate any acceleration in 2018. Moderate progress has been made in reducing the fiscal deficit in the current fiscal year 2017/18, but we cannot yet state that the deficit and debt are on a sustainable path.

We can and must reverse this narrative by strengthening the macroeconomic framework through further prompt decisive corrective action that facilitates a rebuilding of the country’s international reserves, engenders renewed confidence by domestic and foreign investors, bolsters private sector investment and infrastructural development and raises the overall level of economic activity. Achieving these objectives should have a favourable impact on our national credit rating. 

But reversing this narrative also requires the commitment and focus of all stakeholders, including labour and the private sector.

I wish therefore to raise three issues for us to ponder.

• The Barbados economy will require greater levels of both local and foreign investment going forward. It is therefore incumbent on all of us to assist in making Barbados a more attractive place to do business. Our ranking in the ease of doing business is currently 132 out of 190 countries but this ranking is incompatible with our goal of creating an investment friendly environment. Several factors impact this ranking but, in our effort to make the economy more competitive, it is critical that we pay greater attention to business facilitation. There is frequent criticism of what private sector players see as inefficient bureaucracy. We cannot ignore those criticisms. We need therefore to review existing policies and explore the potential for accelerating the use of technology in the quest for faster delivery of services. Moreover, we must at all times be responsive to requests, queries, applications, etc. so as to ensure timely service delivery. 
• To compete in the globalised economy where size often acts as constraint to penetrating markets and to growth, our firms need to enhance their competitiveness. This requires our firms to innovate by seeking to move away from old business models and old systems of operating, and instead move towards the development of new ideas and business models, taking on-board new technological advances as they present themselves. However, this requirement to innovate is not limited to the private sector, for the public sector’s actions serve as an important input into private sector outputs. If we are unable to enhance productivity in the public sector, we may act as a brake on the private sector.
• Productivity will be enhanced as workers are able to embrace new skills. The role of our educational system will become more critical as we go forward as we prepare citizens to be adaptable to the changes in technology that are likely to come on stream in the future. At the same time, by investing in the raising of the knowledge, skills and abilities of workers, firms can develop workers that can operate at a higher level, thereby raising the national output of our economy. Let us not forget that well managed firms have higher productivity. Raising skill levels in one firm can have positive spill-overs onto others.

As we look forward, accelerating innovation, productivity and improved service delivery have the potential to drive our economic fortunes.  Let us act.

Ladies and Gentlemen, I thank you.