The government of Barbados is creating the right conditions to attract investors through regulation and a wealth of incentive schemes.
The government of Barbados is unashamedly welcoming towards foreign investors, offering generous incentives to attract capital to the island. In a world where developing countries are competing aggressively for investment with increasingly attractive enticements, the island is being forced to fight above its weight. But, unlike many developing countries, it has the necessary legislation, incentives and systems in place and well entrenched.
Shift of emphasis
Besides the international business and offshore financial services sectors, the government is putting emphasis on three broad sectors: tourism, information technology and manufacturing. Increasingly, the shift is towards service sectors, where Barbados can compete on an even footing, leveraging its well-developed infrastructure and educated workforce.
The country is building its point of differentiation on an extremely generous incentive scheme and tax system. Typically, this is built around low corporate tax rates; exemption from import duties on production related inputs; full and unrestricted repatriation of capital, profits and dividends; and training assistance programmes to reduce the cost of worker training. Just as important, Barbados is actively securing preferential trade terms through a variety of agreements with countries in the region and the EU.
The government agency that is championing this drive is the Barbados Investment and Development Corporation (BIDC), which has played a pivotal role in the island’s transformation from a mono-crop economy into a well established international business and financial centre. Created in 1956, the BIDC has been instrumental in the development of the country’s manufacturing and services sectors, administering government incentive programmes and acting as an international marketing arm of government.
According to the Caribbean Tourism Organisation (CTO), the region will require an additional 120,000 rooms between 2000 and 2010. To secure its stake of this growth in tourist arrivals, the government has instituted a comprehensive plan to boost the sector. Key to investors is the government’s commitment to tourism infrastructure development as well as marketing initiatives to ensure that the country remains a top choice for visitors.
Means of attraction
With its sound infrastructure, world-class telecommunications, supportive corporate environment and reputation as a well-regulated, high-calibre jurisdiction, Barbados has been able to attract companies providing a range of IT solutions, including software development and call centre services, as well as a growing number of financial services entities.
Manufacturing companies are eligible for a tax holiday up to a maximum of 10 years. Thereafter, a special tax rate for export industries of only 2.5 % is levied. Full exemption from import duties on components, raw materials, production machinery and other production related equipment is the norm in addition to expedited customs clearance procedures.
Labour costs in Barbados are characterised by reasonable basic wages and modern fringe benefits, while the BIDC offers facility space in industrial parks, rented or leased at low, subsidised rates.
Export advantages
Most products manufactured in Barbados are eligible for duty-free and quota-free entry to major world markets. Under the provisions of the Caribbean Basin Initiative, products made in Barbados are given duty-free entry into the US market – provided that at least 35% of the product’s appraised value originated in Barbados. This origin requirement can be reduced to 20% if at least 15% of the product value is represented by US or Puerto Rican content.
Products manufactured or assembled in Barbados can be exported to Canada free of customs duties under Canada’s Caribbean programme. In this case, at least 60% of the ex-factory price of the products must originate in Barbados or Canada. Thus Barbadian input can be low and the products still qualify for duty free entry if the Canadian raw material input is high.
Under the terms of the Lome Convention, companies manufacturing in Barbados are able to ship products to countries of the EU without paying duties. There are certain “country of origin” requirements to be met but a number of firms operating in Barbados are satisfying the requirements and achieving savings of 25% or more, depending on their product.
As a founding member of the Caribbean Community Common Market (Caricom), products that are manufactured in Barbados and satisfy certain qualifying criteria can be exported free of customs duties to the markets of the other Caricom member states.
Barbadian-made products can also be exported to Venezuela and Colombia under the Venezuela and Colombia Caricom agreements without attracting any customs duties.
