|The Courier N° 123 Sept - October 1990 - Dossier Higher Education - Country Reports: Barbados - (EC Courier, 1990, 104 p.)|
|Barbados: Basking in the economic sunshine|
My particular objective is to have balanced growth...
After several years of various ministerial responsibilities in the government of the Democratic Labour Party, Erskine Sandiford became Prime Minister and Minister of Finance and Economic Affairs of Barbados in June 1987, following the death of his predecessor Errol Barrow. He had been Deputy Prime Minister for almost a year. Since then he has presided over the highest rates of economic growth Barbados has known. In this interview with The Courier, he talks of his objectives.
· Prime Minister, Barbados ambition, as revealed to The Courier nearly six years ago in an interview with the then Prime Minister the late Tom Adams, is the achievement of a standard of living more or less comparable to that of western Europe within 10 to 20 years. Are you on course to achieving that objective?
- There are certain situations which relate definitely to hopes and to ambitions, but these have to grounded in terms of what are the realities of the time - and also they are influenced by certain imponderables and uncertainties over which a country has no control. And if you are a very small country with limited resources, you tend to be a taker of situations, particularly economic situations, rather than a creator or influencer of those situations. And I think that is where Barbados finds itself. We have been improving our standards of living and, given a beneficent set of conditions they will continue to improve. We will certainly hope that this will mean better prospects for our people and better prospects for the world. So we are working along the line of continued improvement in our standards of living. Realistically we have a long way to go to catch up with Western Europe.
· Tourism continues to dominate the economy. Your efforts at diversification have paid dividends. Are you satisfied, though, with the pace of diversification?
- To be satisfied may indicate a certain measure of complacency. I do not think that we are satisfied, we always believe we can do better even if we have had considerable progress in terms of tourism and in terms of the diversification of our economy. My particular objective is to have balanced growth in the economy based on some leading sectors, but one that is not skewed unduly in one direction because we believe that a balanced growth, and a balanced economy are the best objectives for a developing country to aim at. So, while we note the growth that we have made, and this has been significant, we believe that there are areas in which we can improve both tourism as well as the other sectors; for example, we believe that there is scope for a better push in terms of our agriculture and there are certain adjustments that we have to make in that particular sector; our food import bill is high, and our exports are low compared to our imports. I think there is much scope for growth and development in the areas of agriculture and fisheries. In the area of services we have had some successes and we believe that there is more scope here for development. So I just mention those as areas in which we believe that there are opportunities for Barbados to develop further.
· One area where you have also been very successful is offshore business. Notwithstanding the treaty between Barbados and the United States, how serious do you view current US concern on the laundering of drug money and the possible effects it could have on offshore banking in Barbados?
- Barbados is, I believe, well positioned and poised to be a financial centre - a business centre - whereby those who see possibilities in that area can combine their business with rest and recreation and get a mix that is generally not too readily available in the high-pressure situations of modern cities. We believe that we can use our resources and endowments in that particular regard to develop as a financial and business centre, and the results to date have been encouraging. But we are not a tax haven, and we are not aiming to attract, we certainly do not encourage, any shady types of operations. We try to keep in place quite stringent rules and regulations, and procedures to avoid as far as possible any activities and enterprises which may remotely be concerned with the laundering of ill-gotten gains. So, we are interested in legitimate business.
· Wages in Barbados have risen far beyond productivity in recent years, clearly a disincentive to foreign investment. What measures are being taken to relate wages more to productivity?
- The major resource in Barbados is our people. We are not richly endowed with a diversity or a super-abundance of the minerals or other resources which constitute the more desirable trading commodities on the world market. For us it is our people and I think it is quite natural that people should seek through their unions to get the greatest possible return for their input into the productive process; it is for all those who are in management, in government, in the unions themselves, to realise the basic fact that productivity and wage settlements must have a direct correlation and if the wages aspect of it outstrips productivity, then the competitive nature of the goods or services that we produce would be lost, and the goose that lays the golden egg would certainly disappear. So I think what we have been seeking to do on all occasions is to moderate the demands and the aspirations of our people for standards of living that may not be immediately attainable, or attainable in the short term. And, you notice, that I am somewhat more modest than others in my projections for where Barbados will be positioned by 1992 or thereabouts as far as our standards of living, compared with those of Western Europe or elsewhere, may be concerned.
· So the idea of a wage freeze, as is being suggested in many quarters, is ruled out?
- My government and I havent spoken about any wage freeze. What we have spoken about is ensuring that labour gets a fair share of any increased productivity which means that if we have a growth rate of 3 %, no one should expect to get wage increases of 30% because that bears no relation at all to increased productivity. So we believe that when a product is manufactured there are certain inputs to it and there must be certain returns for the factors that make up that product. Now we have not spoken about a wage freeze but wage policies which relate such remunerations to the level of productivity.
· You are appealing to the good sense of the trade unions. If you really want to prevent wages escalating beyond productivity, as they are now, wouldnt it be necessary to have a kind of incomes policy backed by law?
- We do have an incomes policy that is based on keeping wage settlements in line with productivity and this is done within the framework of collective bargaining, because we are committed to free trade unions and collective bargaining activities and the right of workers to get together to promote their interests. But as a government we have to look after the national interest. Our policy is to reconcile any conflicting demands through consensus government which is our philosophy as far as this particular area is concerned. But if it becomes necessary pursuing that particular objective, we will not hesitate to take the actions that are necessary if the demands are unconscionable or if they are way out of line with anything that is affordable. Where demands are such that they will have some deleterious effect on the economy generally, then we will take whatever action will be necessary to protect the general welfare.
· For Barbados, the World Bank has advocated caution on foreign borrowing, given its present debt situation. 1989 was a particularly bad year in terms of repayment and servicing. How great, though, is the pressure to borrow more abroad to finance the 1988-93 Development Plan?
- The World Bank quite wisely cautions developing countries about excessive borrowings because if your borrowings are high, that is a commitment to present and future generations to repay and you can only repay out of foreign earnings; and if the terms of trade are adverse in respect of the products that the developing countries have to sell, then that can create a further problem down the road which is at the root of the debt problem. The terms of trade are adverse in respect of the returns on the primary products and other goods that are produced. Sometimes there are difficulties in getting the semi-processed or manufactured products into the market even where there may be provision that they can be admitted; the legal framework may be different from access. So the developing countries still have a major battle to fight in terms of what they receive for their primary products and then also access for the processed products. I think developing countries should not have to wait for the World Bank to tell them that this is a problem or to be warned against it. But the situation is that most of the countries have committed themselves from past years to investment programmes that required considerable foreign investment, some of that investment coming from World Bank sources, other sources, and from multilateral agencies as well. And so what the countries find themselves doing is paying back to the multilateral agencies and to the private international banks sometimes more than they are receiving. This is a dilemma that countries have to face.
In the case of Barbados, there are requirements for public sector borrowing and our requirements relate not only to the servicing of existing debt, which has been built up from past years, but also for maintaining some kind of economic infrastructure and economic activities to help service that particular debt and to maintain standards of living. As far as Barbados is concerned, most of our debts are to the multilateral agencies and those are the ones which indicate that there is very little or no rescheduling; most of the rescheduling programme has been limited to the private institutions. But we are very responsible here. If we go to the market, its because that is the source which we have to tap in order to deal with our problems; we seek to manage our debt and our borrowings in a responsible way.
· Sugar continues to prove uneconomic to produce. Isnt there a case for phasing out its production in favour of non-sugar agriculture?
- Barbados believes in both the private and public sectors; we have a mixed economy and the sugar industry is largely a private sector operation. We believe that the individual agriculturalist takes the decision whether to remain in sugar or not. Our cost of production of sugar is high but we produce a good product. We do not process that product, we sell it as a raw commodity, and largely as sugar and its by-products of rum and molasses. In that regard it is not very much different from the situation in a number of developing countries where they produce the raw materials which are sold in the markets mostly of developed countries - industrialised countries - and then they are processed there and sold at much higher prices than are paid for the raw material on the grounds of the value added. That is the reality of international trade.
We believe that there is a demand for sugar, we believe that it is a good product, it is one of the most important products traded. We have been producing this particular product for centuries. We have built up a knowledge and an expertise in sugar. We believe that the plant, the grass that is the sugar cane, is now well adapted to our environment and it serves as part of the conservation efforts as far as our soils are concerned: it is, for us, a good product. We believe also that being a natural product, it has much better prospects for the nutritional good of people than some of the artificial things that are being produced. We believe that if used in moderation, as anything else should be used in moderation, there are good prospects for it and we will seek to maintain a niche for sugar both in terms of our local needs as well as in terms of maximising our earnings of foreign exchange from it.
· The Grand Anse Declaration proposes a Single Market for the Caribbean, a very laudable proposition. Is there enough political will in the region to see this come to fruition?
- I believe that if you look at our past experience, the answer would be no. We have been talking about various forms of cooperation and integration over the past three centuries, almost from the foundation of the colonies in this region. We have gone from colonial status to independence most of the countries in the Caribbean - but we still have this problem, built up over centuries, of the diversity and particularism of the different territories. In a way this is good. Each person having been nurtured in a particular territory develops strong ties and patriotism, and love of country and so on for that territory - and that is good. I believe that that should be, not a source of weakness, but a source of strength towards building the new Caribbean.
Barbados is committed, and I am certainly committed, to closer integration in the Caribbean. There are ways and means, mechanisms and devices, whereby the particular insular or territorial interest of the separate entities can be combined with the overriding economic, social, political and cultural imperative of working closely together in a world that is developing into blocs. So in terms of Barbados, and in terms of my own hopes for the Caribbean, yes I am committed towards the development of a closely linked integrated movement in the Caribbean. It is something we have to work toward. It is not going to come in 1990; it is not going to come in 1992 like Europe, but I think it will come.
· But what are precisely the briefs of the Ramphal Commission other than widespread consultations?
- It is not just widespread consultations. It is to take a very broad look at the Caribbean and where we go as a people, taking into account our past history, our resource endowments and our place in the world. In other words it is a think-tank that is drawing upon the expressions of opinion and viewpoints in all of the territories of the Caribbean, putting these together and coming up with a broad set of recommendations in terms of where the Caribbean will position itself, the kinds of challenges it will have to meet, the possibilities and the realities of the situation; it is a very important work that has to be done.
· What are Barbados views on the Single European Market?
- Barbados view is that the people of Europe have spoken and they believe that they need a Single Market. I believe the imperatives of the economic and political situation indicate that the countries of Europe, which have been in conflict with one another from time to time, should seek to develop a larger market so that economies of scale and whatever other advantages may come from them, should lead to the development and improvement of Europe as an entity. I have no quarrel with that. If the Europeans wish that for themselves and for their betterment, that is their decision. My concerns have been that, in seeking to achieve a Single Europe, the action should not be inward-looking but should be an open arrangement that would lead to the furtherance of world peace, to freer trade and to improvement in terms of economic justice. It should result in a liberal beneficent kind of situation that will give the world a lead in these areas.
· What is your assessment of cooperation between Barbados and the European Communities through the Lomonvention? What impact has it had on the development of Barbados?
- The Lomonventions, the current and the previous ones, have all been very complex documents. We believe that these are important instruments to regulate the economic and social relations between Barbados (because you asked specifically of Barbados) and Europe - and by Barbados, you can read other developing countries of Africa, the Caribbean and the Pacific. I believe that those Conventions representing, as they do, the distillation of high bargaining, many late night discussions and much give and take and compromise will never satisfy all sides. From the point of view of Barbados, we would hope that some of the problems that are being encountered, from one particular Convention to another, will be ironed out over time. But, as indicated before, we are supportive of the Conventions. We believe each one of them has provided an improvement on the previous one. They are by no means near perfection as far as Barbados is concerned but I believe that they are steps in the right direction. The Lomonvention provides a framework within which economic and social development can take place.
· Apart from the trade provisions and the Sugar Protocol, what do you think of the grant element?
- Grants do not constitute a very important element of the relations among nations, and certainly in terms of Barbados the grants are minimal. It seems to be a disappearing element in the economic relations among countries, and Barbados encounters the argument that we are one of the better-placed developing countries because of our per capita income - a middle income developing country - this presents us with some difficulties. But having said that, there are some grants which are provided and we seek to make use of those grants. If we can get through the difficulties of rules and the bureaucracy and so on, that tend from time to time on both sides to prevent quick disbursement, it will be a very welcome dimension. I must say that as far as Barbados is concerned we have had a good working relationship with the European Delegation and personnel here in Barbados.
Interview by A.O.