TheBroadStreetJournal1
news
TheBroadStreetJournal June 30, 2012
theweekinbusiness
www.broadstreetjournalbarbados.com
Barbados’ Independent Business Voice
Editorial: Dipping his Mottley: Hotels need toes in the Sea of half billion for Opportunity - page 8 refurbishment - page 3
Tuesday, June 30, 2012
Sinckler retains tax regime in Budget Speech - page 4
the budget
Arthur: Barbados economy at “tipping point”
Opposition leader says gov’t should stimulate domestic demand with larger tax cut By Patrick Hoyos Opposition leader Owen Arthur said Thursday night in the House of Assembly that the Barbados economy was at a “tipping point” and until the foreign exchange position improved, it should use some its own reserves to stimulate local demand. “The Barbados society is now confronted with a failing economy” which was “not providing for the future because we are saving less,” he said. Further, Barbados’ inflation rate was three times higher at 9% than the inflation it imported, which was at 3%. “What started as a problem in the macro and fiscal accounts is now embedded deeply in the two sectors that ought to be taking us out of this situation. It is like flying an aircraft that has four engines but you’ve lost two and the remaining two have started to sputter,” he said. Mr. Arthur noted that people in tourism were now talking about a “fundamental crisis” in the sector. The largest tourism enterprises were failing, he said, and more are likely to do so. “We are at a tipping point,” he told the House. He acknowledged that there were some “transformational” initiatives in the budgetary proposals presented by the minister of finance, but before the country undertook them, he said, “we have to get past this tipping point (because) we can go over the brink.” The question was whether the measures before the House were enough to bring the country back from the brink, or would they
Pictured (from left) at Wednesday’s Post-Budget Breakfast Budget Session co-hosted by the Barbados Chamber of Commerce & Industry and PriceWaterhouseCoopers were Panellists Richard Cozier, CEO of Banks Holdings Ltd.; Troy Lorde, lecturer in economics at UWI Cave Hill; Gloria Eduardo, partner, tax service, PwC East Caribbean, and Lalu Vaswani, BCCI president. See story, page 4. Photo by Vincent Tempro the budget
BIBA welcomes offshore proposals
The Barbados International Business Association (BIBA), not surprisingly, has welcomed the lowering of the minimum tax rate for international business entities in the Budget. In a press release, BIBA President Melanie Jones said it was a “meaningful response” to the island’s recent loss of its competitive advantage in the Canadian market. She added that having lower tax regime See ARTHUR, Page 2 would enable Barbados to look for new
business in other The provision for a special entry permit system for high net worth individuals and their families, was also welcomed by BIBA. However, Ms. Jones said the new measures to attract foreign investment should be part of a major effort to showcase Barbados as a hub for international business, and this meant more funds should be allocated to the agencies charged with foreign investSee BIBA, Page 2
news
TheBroadStreetJournal June 30, 2012
2
ARTHUR, from page 1
only make “an adverse situation worse.” Mr. Arthur said that after four years of recession the economy of Barbados was still expected to grow more slowly in the last three quarters of the year than it did in the first, yet the minister of finance had introduced policies which were going to have an overall negative impact on the Treasury. Citing a recent article written by Central Bank Governor Dr. Delisle Worrell and others last year that the level of Barbados’ foreign reserves were high enough to allow for an even higher deficit than the 9 percent incurred last year, Mr. Arthur said the domestic economy should be freed up and allowed to regenerate economic activity. But the administration’s only goal was to meet its targets under the Medium Term Fiscal Strategy, which he said had been imposed on it by external lenders. The minister of finance in his presentation did not outline goals for reducing poverty, unemployment or the cost of living, said Mr. Arthur, but only measured his success or failure “narrowly in terms of whether or not the MTFS could be achieved.” The MTFS “had been conceived by international institutions and foisted on this country,” charged the Opposition leader, and the question was simply whether Barbados, with higher reserves than required for safety’s sake “should be using part of our reserves not just to finance the United States government - because that is what our reserves’ accumulation means - but whether as a matter of reasonableness and prudence use some of our reserves to just keep the economy growing at a time when we are at a tipping point.” Mr. Arthur said the prevailing notion was that “any domestic stimulation, especially in the area of tax rates, would lead to a fiscal deficit, and that fiscal deficit would cause a depletion in the reserves and put our exchange anchor under threat.” However, he quoted from the article cited, titled “Fiscal Sustainability in an Open Economy with an Exchange Rate Peg,” which appeared in the March 2011 edition of the Central Bank Review, that “even though the fiscal deficit for 2009 was very high, a much larger deficit could have been accommodated without depleting foreign exchange reserves and imperiling the exchange rate.” Continued Mr. Arthur, “What the cen-
A view from Shop Hill showing the fast-growing Warrens area in the middle distance. tral bank has told the government is that at the very moment when they were going to introduce all these major taxes to cripple domestic demand, our reserves are so comfortable - and that was when the deficit was over 9% - that an even bigger deficit could be incurred without depleting the foreign exchange reserves, or putting the peg in peril.” Mr. Arthur said that some of the reserves should have been used to help keep the economy stable. Government had indeed introduced an element of tax ease in this budget so it could not say there should be none. With the reserves still more than adequate and the deficit now at 4% of GDP, “the argument that you can’t have domestic stimulation is a joke,” Mr Arthur contended. Mr. Sinckler’s modest tax reform to give back some income to people whose personal allowances were now being taxed was not enough to provide stimulation for the economy, he said. With inflation since 2008 cumulatively totalling 30%, he said, “the best thing that could happen to this economy is that the government of Barbados could have a tax change now to enable people who are earning $100,000 a year assessable income or less to pay taxes no higher than 25%.” The first $25,000 would be tax-free, the
next $30,000 would be taxed 17.5%, and up to $45,000 more would be taxed at 25%. “Barbados is a vulnerable economy,” he said, and instead of its exports being made by international companies like Intel, it was really the small and medium-sized producers for the domestic market who were exporting their surplus, and mainly to the Caricom market. Therefore, one of the best ways to increase exports “is to stimulate domestic production for domestic consumption,” in order to give them a “busy domestic base” on which to build their exports,” said the Opposition Leader.• BIBA, from page 1
ment promotion. This was especially so, she said, given the almost $880 million cited by the minister as the contribution made annually by international entities to the Barbados economy through corporation tax revenues and additional spending. Ms. Jones added it was “vitally important” for the public and private sector to work together to improve business facilitation here. She said BIBA was looking forward to the House of Assembly’s “international business legislation day” and would work with other stakeholders, including government, on creating an “international business advantage” for Barbados.•
news
TheBroadStreetJournal June 30, 2012
3
THE BUDGET
Mottley calls for $500m hotel loan fund Saying that a $50 million fund for hotel refurbishment, as proposed by Minister of Finance Chris Sinckler in his budget speech on Tuesday, was too small, Opposition spokesman on finance Mia Mottley on Wednesday said at least half a billion dollars in concessionary finance was needed. “$50 million cannot meet the problem of our aging tourism sector,” she told the House of Assembly while delivering the Opposition’s Reply to the Government’s Budgetary Propsals for fiscal 2012-13. “It cannot.” In his presentation, Mr. Sinckler said that the National Insurance Scheme would be directed to set up a “Hotel Refurbishment, Energy Efficiency and Food Production Fund” as part of its investment portfolio. It would initially be capitalized with $18 million from the NIS and with one million dollars per month from the NIS as long as it had earned a surplus of more than $10 million. The minister of finance said a “further $50 million of financing will be provided from the receipts of the Government’s divestment programme.” Of the resulting $80 million in capital, $50 million would be allocated to tourism refurbishment, $20 million to the initiation of a National Food Production Initiative, and $10 million to alternative energy, manufacturing and agricultural firms. Ms. Mottley said that while the Opposition agreed with the government on the need for more financing for the industry, it had to be in the context of an overall effort to help the sector reduce its high operational costs, which were making it uncompetitive and putting
pressure on the exchange rate. There was indeed a general need for more development funding to support Barbados’ productive sectors, especially tourism, as the country had depended for too long on the commercial banks for such lending. She said, “The majority of Barbadian ho-
The scale of the problem requires “nothing short of a $500 million dollar, low-interest fund, properly established as a function of central government.” tels need redevelopment or refurbishment, and the cost of finance from the commercial banks is too high.” But the “mechanism” of asking the NIS to set up a fund “in a vacuum” would not produce the kind of concessional funding required, because “the NIS has to have a rate of return that is, essentially, longterm inflation plus 300 basis points, that is, three percent.” The scale of the problem would first require “nothing short of a $500 million dollars, lowinterest fund, properly established as a function of central government, not of the NIS,” but the latter could put in funds as long as it was guaranteed an “appropriate” rate of return. It was the function of government, not the NIS, to operate a loan fund, because the latter was in the business of managing pen-
TheBroadStreetJournal
theweekinbusiness
Advertising Rate:
Bds$20 per col. inch plus VAT
sions, not development finance. She added that hoteliers had written to the minister asking for relief on “a number of matters” affecting the cost of food and beverage, furniture and equipment, that “they need an ease on,” and were not produced locally, such as heavy cream. There was a range of items not produced in Barbados which were vital inputs to a hotel’s operating costs, but were still subject to the bound rates, “that can be looked at.” The bound rates were set up to protect local production, and to provide revenue to the Agricultural Development Fund, “which we believe remains under-provisioned.” There were also items of furniture, fittings and equipment not made in Barbados but on which the import duties applied were “too high for the hotels to bear.” Ms. Mottley said tourism revenues had declined from $2.2 billion to $1.8 billion, and the industry required new measures in order to be stabilised. She referred to recent complaints by the Barbados Hotel & Tourism Association that the prime minister would not meet with a delegation of past presidents of the organisation to discuss the sector’s financial plight prior to the budget speech, saying “The saga was already exposed to the public and I shall not add to it. But suffice it to say that if the people in charge of your primary foreign exchange earner say that our industry is in crisis and they want a meeting, I would think, Sir, I would be worried, and want to meet with them as a matter of urgency to protect thousands of jobs in this country.”•
(Sample Sizes:) Full page, 10 H x 3 cols W: 30 col. inches: $600.00 Half page, 5”H x 3 col: 15 col. inches = $300.00
Based on three-column format
Third Page: 5” x 2 cols W: 10 col. inches = $200.00
Widths: One col: 2.5”; Two cols: 5”; Three cols: 7.5”
Sixth Page, 5” x 1 col W: 5 col. inches = $100
(Note that prices do not include agency commissionPlease
call 230-5687 for more information
news
TheBroadStreetJournal June 30, 2012
4
the budget
Saying economy “not yet out of the woods,” Sinckler retains tax regime
Initiatives for offshore and renewable energy sectors, and a small tax ease for individuals
By Patrick Hoyos “While we have surmised that some level of relief is now desirable in helping people in Barbados to continue to meet their obligations and invest in our economy, we have decided that other ways to effect this reality must be found....As the figures clearly demonstrate, we are not yet out of the woods with our fiscal situation...” So said Minister of Finance Chris Sinckler in his Budget Speech Tuesday afternoon in the House of Assembly, as he retained most of the fiscal measures which he had introduced in his first Budget presentation eighteen months ago. He also announced several initiatives aimed at stimulating growth in selected areas of the economy. In response to overwhelming criticism for the removal of personal allowances in his first budget, Mr. Sinckler adjusted the personal income tax bands to help compensate for the resulting loss of income. He noted that there were “understandable concerns” over the removal of the allowances, which had “assisted with both spending and saving in the local economy.” The tax adjustment would cost government about $29m and a similar amount would be recouped by a directive to ministries to reduce spending by 2%. The minister repeated his previous announcement that VAT would stay at 7.5% for the foreseeable future as it had played the major role in bringing in revenue for the government, in fact, far more than had been expected. On the Excise Tax, which he had increased by 50% eighteen months ago, he said it would stay at that rate but would be reduced proportionately if oil prices, currently just under US$80 per barrel, went back up above US$95, so that current gas and diesel prices would remain around current levels.
The minister also proposed a new tax, called a national greening levy, be imposed on salaries “to assist in meeting the extensive costs associated with the treatment of the garbage which we all produce on a daily basis.” The minister said the government was not in a position to do anything more on taxes because the economy was not yet out of the woods and needed to meet or exceed its Medium Term Fiscal Strategy targets. Another major initiative contained sev-
In 2010, companies operating in the international business sector, besides paying taxes of $190 million, spent $700m in the local economy. eral measures aimed at helping the offshore sector to bounce back, including a reduction in the taxes being charged to companies and other entities operating in the international business sector. Since 1995, Mr. Sinckler noted Barbados, through its Double Taxation Agreement with Canada, had been the lowest tax jurisdiction whose companies were permitted under Canadian law to generate exempt surplus (taxed income in Barbados that can be repatriated to Canadian parent companies without further tax being incurred by the parent companies). Countries which have signed TIEAs with Canada, including Bermuda, Bahamas and Cayman,which have zero taxation regimes, have become the lowest cost tax jurisdictions that can generate exempt surplus. As a result, some offshore firms have already left Barbados. The finance minister said a recent survey commissioned by Invest Barbados had shown that in 2010, companies operating
in the international business sector, besides paying taxes of close to $190 million, had spent another $700 million in the local economy. Overall, the measures relating to the offshore sector would cost the Treasury around $58 million per year but there would be new revenue of around $25 million expected from new companies entering the jurisdiction to offset the loss. The minister also announced a very limited land tax amnesty that will last for all of July. To help increase vehicle sales in the medium-sized category the minister said he proposed to Increase the chargeable value on new vehicles from $45,000 to $55,000 with a review after one year, and lower the Excise tax by 25% with a review after one year. The minister also announced a Revised Policy on Special Entry Permits for NonNationals who wish to retire in Barbados, incentives for homeowners and businesses to move to Renewable energy systems, a plan to privatise the air and sea ports and the oil company through IPOs for up to 30% of each company, now fully owned by the government. He also proposed to have the NIS establish a “Hotel Refurbishment, Energy Efficiency and Food Production Fund” as part of its investment portfolio, which would pool funds from its own surpluses with funds from government divestments for a total of $80 million. Similarly, a Tertiary Education Fund would also be established using NIS surplus funds to the tune of up to $48m a year, which will be paid into the Consolidated Fund “and will be used to assist in the funding of the University of the West Indies, The Barbados Community College, Samuel Jackman Polytechnic, Sixth Forms and Special Education Projects in Barbados,” Mr. Sinckler said. He also announced fiscal incentives to companies listing on the Junior Market of the BSE of a full income tax holiday for the first five years and half income tax holiday for the second five of a ten-year period.•
news upcoming
Calendar BIBA luncheon July 4 • The Barbados International Business Association’s July luncheon will be held at the Hilton Barbados on July 4, 2012 from noon to 2 p.m. A distinguished panel will discuss the topic: “Selected Markets in Review: Prospects for Barbados as an International Melanie Jones Business Hub.” The panel will feature new BIBA President and Partner, Lex Caribbean Melanie Jones; Russ Jones, tax partner, PwC Barbados; Ben Arrindell, director, Cidel Bank & Trust; and Jerome Dwight, managing director, RBC Wealth Management. They will discuss how Ben Arrindell clients and business professionals from mature markets, such as Canada, and emerging markets in Latin America and China perceive Barbados; the solutions preferred by investors from those jurisdictions; and opportunities for Barbados in those markets. The cost is $95 per person Russ Jones for members, and $115 per person for non-members. Register via e-mail: biba@biba.bb or call 434-2422 ext. 101 with queries. About the panellists: • Melanie Jones has 20 years’ experience serving international corporations and Jerome Dwight financial institutions; • Ben Arrindell consults on business and product development opportunities utilizing Barbados’ treaty network; • Russ Jones has over 32 years’ experience in advising clients on tax matters. • Jerome Dwight oversees captive insurance, funds management, global custody, and corporate trust across the Caribbean including related initiatives in Latin America.•
TheBroadStreetJournal June 30, 2012
5
the economy
Central Bank to issue sixmonth economic review July 9 Dr. Delisle Worrell, governor of the Central Bank of Barbados, is scheduled to present the bank’s review of the economy’s performance for the first six months of 2012 week after next. On Monday, 9th July, the bank will issue its review in press release and will follow this up with a press conference the next day. This Sunday, however, the Central Bank celebrates things cultural, with the launch of the Cropover Visual Arts Exhibition, which it is sponsoring, in the Grand Salle, at 6 p.m. Finally, on Saturday, July 21 at 4 p.m. the bank will host the “Pan in the Plaza Extravaganza.”•
We were “mining” our own business when someone sent this via BBM. Thanks to our friends at Trimart for making our day!
heritage tourism
“Ole Time Bajan” bus ride Aug. 2 If you would like to experience Barbados’ heritage and scenic locations by bus, sign up for the Ole Time Bajan Excursion, scheduled for Thursday, August 2, from 9:30 a.m. to 3:00 p.m. Deputy Permanent Secretary in the Ministry of Foreign Affairs & Foreign Trade and Event Organiser of the Barbados Network Consultation (BNC) 2012, David Bulbulia said there would be two choices for sightseeing, a northern and a southern route. The cost of the excursion, including lunch, is Bds$122.00. The team will be led by noted Barbadian historians, Kevin Farmer and Maurice Greenidge and their associates. The excursion will start at the Garrison Savannah to see the changing of the guard, and then head to Bridgetown, where it will
2nd Diaspora conference • The Barbados Network Consultation (BNC) 2012, also known as the 2nd Diaspora Conference will be held Au-
gust 7 -10 at the Lloyd Erskine Sandiford Centre, Two Mile Hill, St. Michael. In addition to a packed agenda, BNC 2012 will also
divide into two separate groups, one travelling to the north and the other heading to the south. The northern group will visit Holetown, Portvale, Speightstown, St. Nicholas Abbey, Farley Hill, Morgan Lewis Mill, Cherry Tree Hill and Bathsheba, ending at River Bay with lunch. The southern group will visit Oistins, Christ Church Parish Church, Callenders, Bournes’ Land, The Crane Resort, Ragged Point Lighthouse, Gun Hill Signal Station and St. John’s Parish Church, ending at the East Coast, where lunch will be served. Reservations for the Ole Time Bajan Excursion can be made online at www. foreign.gov.bb/barbadosnetwork or by contacting the Ministry of Foreign Affairs at 431-2200.• provide other recreational and business activities such as Speed Networking sessions; Bajan Road Tennis demonstrations and games; a Creative Economy Showcase; a Career Forum, hosted by the Young Barbadian Professionals Society; screenings of Barbadian films; an Ancestry Research Workshop and a Bajan Cultural Immersion, where participants can learn to cook the Bajan Way.•
news
TheBroadStreetJournal June 30, 2012
6
Business executives attending the breakfast session at the Hilton Barbados listening to the panellists discuss issues arising from the Budget Speech given by Finance Minister Chris Sinckler the previous afternoon. Photo by Vincent Tempro the budget
Large turnout of executives for BCCI-PwC post-budget breakfast update Panellists at Wednesday monrning’s “Post-Budget Breakfast Session” held at the Hilton Barbados and co-hosted by the Barbados Chamber of Commerce & Industry and PriceWaterhouseCoopers East Caribbean shared their initial reactions to the proposals outlined by Mnister of Finance Chris Sinckler in the House of Assembly on Tuesday afternoon. After opening remarks by BCCI president Lalu Vaswani, PwC Tax Partner Gloria Eduardo discussed the implications of some of the initiatives proposed as analysed by PwC’s team in its special edition of Tax News. The report said that PwC was “hopeful for success with the privatisation initiatives identified, which should generate much needed investment dollars.” However, PwC anticipated “much discussion around the use of NIS funds” to finance some of them, as the NIS had “a heavy responsibility to achieve appropriate
investment returns and to maintain a level of independence in its investment policy.” However, it felt that the provisions to lower taxing of international business was “a step in the right direction,”and hoped it would “stem the recent losses of business to our zero-tax competitors.” Economics Lecturer Troy Lorde said he had expected to hear more about “structural transformation” of the economy from Mr. Sinckler. He also note that the proposal to increase the “chargeable value” on motor vehicles, which would make it less expensive to purchase a mid-size car, for example, conflicted with other tax incentives relating to “greening of the economy.” And while he generally supported the reducing of taxes for the offshore sector he warned that it would only work in the short-term as “we will also have to reduce the cost of doing business” in order to make the entire economy more competitive, and cited
the telecommunications sector as one that needed to reduce costs to the consumer. BHL CEO Richard Cozier, for his part, noted that while the whole budget was about “stabilising” the economy and keeping up our foreign exchange reserves, it had done little to increase people’s disposable incomes. Instead, reducing such income “takes money out of the economy ” in order to reduce the foreign exchange component of local business transactions and consumer purchases. This was slowing down our economic recovery and he therefore felt that Mr. Sinckler had not “got the correct mix yet” of policies that would create growth. He added that the finance minister had made proposals that could help businesses over the longer term, but he should have reduced the excise tax on diesel “there and then,” as this would have brought immediate relief, since in Barbados, “diesel fuels both manufacturing and distribution.” •
news
TheBroadStreetJournal June 30, 2012
the budget
BSE succeeds in campaign for tax incentives for Junior Market By Patrick R. Hoyos CEO of the Barbados Stock Exchange Marlon Yarde said last week that greater incentives were needed in order to get smaller companies to list on the local stock market. What qualifying SMEs needed, said Mr. Yarde, who was speaking at a seminar sponsored by the Small Business Association, were incentives, including tax holidays, on the scale which have been offered by the Jamaica Stock Exchange since 2009, and which have proven very successful. Mr. Yarde said the BSE had lobbied the minister of finance Marlon Yarde. Photo for such measures to be introduced in last courtesy the BSE. year’s budget without success, and had made the same budget submission for this year’s. He got his wish. Minister of Finance Chris Sinckler in his Budget Speech Tuesday adopted proposals put forward by the BSE aimed at develop-
ing the Junior Market. He said that “firms that choose to list on the Barbados Stock Exchange’s Junior Stock Market will be provided with a tax incentive for ten years structured as follows: • “An income tax holiday on 25% of the company’s operation for the first five years of the ten year incentive period; • “A full income tax holiday for the first five years of the ten year incentive period; • “A half income tax holiday for the second half of the incentive period; • “An exemption from withholding tax on dividends and other distributions from companies listed on the junior market; •“An exemption from transfer tax on transfers of shares in Junior market companies.” Mr. Sinckler went on: “To promote liquidity and encourage economic democracy, in order for a company to qualify for the above-mentioned tax incentives the following could be required: •“The company must have a minimum of 50 shareholders; •“No single shareholder should own more than 25% of the shares of the company and no other shareholder should own more than 5% of the shares. •“If at any point these are violated the company must repay the Government all taxes claimed.” The Junior Market, launched by the BSE in the late nineties, has not lived up to expectations thus far, to put it mildly.
TheBroadStreetJournal
theweekinbusiness
Advertising Rate:
Bds$20 per col. inch plus VAT
7
It was set up, Mr. Yarde noted, because the BSE board recognised “a need to embrace smaller companies in Barbados by allowing them the use of the same equity financing facility offered to larger companies,” and therefore provided a more “relaxed” set of requirements. To list on the “Regular Market” of the BSE a company must be making a profit and have at least a million Barbados dollars in assets. So it was decided that to list on the junior market a company needed to have equity capital of a million shares with a stated value of at least Bds $200,000, owned by at least 25 public shareholders who held among them at least one-fifth of the equity ($40,000). And while for the regular listing a company had to produce financial statements showing that over the past three years it had had “adequate” working capital and paid dividends, along with providing projections for the coming three, for a junior listing you only had to show a good track record for the past two years. The Jamaica Stock Exchange’s Junior Market has blossomed in just three years of existence, according to Mr. Yarde, with three companies already listed on it so far and another ten on their way. Not only that, but the IPOs issued by all 13 companies were fully subscribed. The Jamaican government was now reaping rewards as the companies were paying more including payroll and sales taxes because they had hired more people and were doing a larger turnover. He added that Trinidad & Tobago had gotten on the bandwagon last year, offering a rate for companies listing on the TTSE’s junior market that was well below the normal rate. No stats were provided on actual new entrants.•
(Sample Sizes:) Full page, 10 H x 3 cols W: 30 col. inches: $600.00 Half page, 5”H x 3 col: 15 col. inches = $300.00
Based on three-column format
Third Page: 5” x 2 cols W: 10 col. inches = $200.00
Widths: One col: 2.5”; Two cols: 5”; Three cols: 7.5”
Sixth Page, 5” x 1 col W: 5 col. inches = $100
(Note that prices do not include agency commissionPlease
call 230-5687 for more information
editorial news
TheBroadStreetJournal June 30, 2012
8
the budget
Dipping his toes in the Sea of Opportunity During the whole of the current administration’s tenure With Value Added Tax providing far more revenue than expected, in office, and moreso in the past eighteen months when Mr. government could have given back some of it to ease the burden on Sinckler has been finance minister, the government has fol- both households and businesses. The tax could have been removed lowed a policy of raising taxes to keep itself going no matter from more essential food and clothing items (especially those categories of products used by the old and the very young) and to the consequences to the rest of the economy. The result has assist businesses right away with reducing some of their costs, on been almost zero growth in the real economy, unemployment electricity, for example. The 50% increase in excise tax has run its levels rising to over 11% even as government retained its full course and should have been removed immediately as well, which workforce, inflation of close to 10% and the loss of confi- would also have helped homeowners and businesses alike. dence in the Barbados economy as a place to invest, both on To take the road not taken, the finance minister would also the part of locals and foreignhave had to beef up his rather Mr. Sinckler did not take the golden op- anemic proposals for tourism ers.
Mr. Sinckler therefore de- portunity he had to ease the pain his tax beyond freezing land tax rates and providing a loan fund that serves some praise for, on his third attempt, producing a set of regime has inflcited on the average per- might help refurbish a few small hotels, and find a way to attract budgetary proposals that will at son. The VAT could have been removed major new investment. And he least try to create conditions for would have actually had to reeconomic resurgence in a few se- from more food and clothing items. member that manufacturing exlected areas of the economy, assuming the needed legislation can be brought to Parliament and ists in Barbados and should be helped to overcome export barriers passed in a short time. The measures announced had in great part more aggressively, whether they be in Port-of-Spain or elsewhere. We were also treated to a long discourse on the nation’s garto do with increasing incentives for the international business sector by proposing sector-recommended updates to laws and drafting bage collection woes in order to justify a pittance of a tax, called a new regulations allowing wealthy people to live and run their busi- Greening Levy, rather than the more apt (in more ways than one) ness empires or manage their wealth from here in a more predict- Garbage Levy, which may cost more to collect than it is worth, and which could easily have been paid out of the embarrassment of able and transparent way. There were several other tax measures aimed getting citizens to riches that is this country’s VAT regime. A major source of potential government revenue, the proposed do things or make investments the government deems desirable, but if they don’t first spend the money they will not qualify for the selling off of 30% of the airport, seaport and oil-importing companies owned by the government, was backed into and away from just tax savings. As a result, the budget presented by the government this week as quickly amid a discourse about beefing up the turnover of the has failed on at least two significant grounds: one, meaningfully ad- Barbados Stock Exchange, and the proposed implementation of dressing the need to earn foreign exchange from tourism and man- Jamaica-like incentives to try to give a kiss of life to the moribund ufacturing exports along with the offshore sector, and two, creating Junior Market. Selling of these stakes could bring in much-needed Foreign Diopportunities for more employment by lowering both the cost of living and the cost of doing business, as well giving businesses in- rect Investment from major corporations already experienced in creased incentives to hire and invest in Barbados. In other words, to operating such businesses abroad. If Mr. Sinckler had chosen to bring a budget that would really help government grow the economy out of recession. In presenting the proposals for the international business sector, carry us forward he would have gone for a swim in the Sea of Opwhich revolve around reducing taxes to make us more competi- portunity all around us rather than just dipped his toes in it.• tive with other jurisdictions, Mr. Sinckler noted that government was taking a big gamble, but could already predict that it would be able to “claw back” about half the expected tax loss through new entrants to the market this year alone. The ‘gamble’ is that a better, lower taxed, more legislatively up-to-date jurisdiction would attract far more new companies and thus bring total corporate tax Editor: Patrick R. Hoyos revenues back to where they were a few years ago, not to mention Published weekly in PDF by Hoyos Publishing Inc. put more money into the local economy. Is that really a throw of Boarded Hall, St. George, Barbados Tel: 230-5687 the economic dice? Email: bsjbarbados@gmail.com © 2012 Hoyos Publishing Inc. Mr. Sinckler also did not take the golden opportunity he had All rights reserved. to ease the pain his tax regime has inflcited on the average person.
TheBroadStreetJournal theweekinbusiness
comment news
TheBroadStreetJournal June 30, 2012
9
not the budget
Chickens flying the coop too often at Chicken Barn By Patrick R. Hoyos
O
ne of the best places you can go to in Barbados for fast food is Chicken Barn. It tastes great and the price is competitive. Now, you don’t get a lot of alternative menu choices there - it is basically how much of the bird you want at any one time (quarter, half, whole). Unfortunately, Chicken Barn has become so popular that is now seems to run out of chicken parts more frequently than before. When this happens to me at Chefette, I am told “The wait for chicken will be eight minutes.” (For some reason it is always eight minutes, not seven or nine. I am told to go and park, if I am in the drive-thru, or have a seat and wait. And they do bring it very quickly.) Sadly, the opposite is the case at Chicken Barn. At least, this has become more and more my experience. When they run out of chicken, you have to leave and come back, sometimes the next day. I have been to the Barn at 9 p.m. to hear that they have run out and I will have to take whatever is left (usually breast) because they are not getting any more chicken for the night. Last week, when I went around 8 p.m., I was told “the chicken is coming down in an hour-and-a-half.” I am not sure from where the chicken comes down, but that is what they say. Now, at that point the other night they had already charged my credit card and were having trouble reversing the payment in order to re-bill it for the other items I was also buying. So I told them I would take those items and come
back another time for the chicken. With palpable relief they agreed and said they would “write my name down in the book.” I had never heard of this book before, so I was intrigued. I inquired if they had a sort of Chicken Doomsday Book in which they wrote with a quill pen, “We Owest Thou one medium-sized Fully-Grown and Cooked Chicken...set
was in The Book and this caused them to pause, then call for the store manager, who checked, said hold on, and the bird was produced. When I warned another guy coming in about the lack of chicken, he said, “Well, I ordered ahead.” I don’t know if that helped him.
It occurred to me that the business model that Chicken Barn seems to be following is one in which costs are so controlled that there must be no - or very, very little - left over/unsold chicken at the end of the night. So when they are running out at one location, they seem to have to call up somewhere else in hopes that additional supplies can be sent “down.” Meanwhile, customers are being turned away unless they want to wait. And wait. Here is the trade-off they should be thinking about: Although they might not be “losing” money by over-estimating the amount of chicken they will need, telling customers to come back in an hour or 90 minutes, especially at dinnertime when they have hungry families waiting on food, more likely drives those customers to visit other fast food places that night. This is a “recipe” for driving your customdown in Ye Book of Chicken this Day ers into the arms of your competitors. You the Fourteenth of June instant.” must really believe your product to be so They looked at me with some suspispecial that people will literally postpone cion. I was clearly wasting their time. their dinner just to get it. That seems to be a rather big gamble to Anyway, a few days later I called up take in this day of proliferating fast food and asked them to check the chicken choices. book for my name and queried if I As for me, I hardly go to Chicken Barn could come over for it soon. They any more unless specifically begged by looked and said okay, come in about family members, and then only under duhalf an hour. ress, because I am tired of being told I have When I got there, would you believe to wait over an hour for chicken. they told me that they were “out of The prices at Chicken Barn, in dollar chicken” again? There was a long line of terms alone, are competitive, but when people behind me and many in front, when you factor in the long waiting periods for sold-out parts to “come down,” the price all of whom had presumably received becomes way too high.• the news.
Although they might not be “losing” money by over-estimating the amount of chicken they will need, telling customers to come back in an hour or 90 minutes more likely drives those customers to visit another fast food place.
In desperation, I told them my name
theweekthatwas news
BHL’s Cozier delivers scathing indictment of T&T import policies CEO of Banks Holdings Ltd, Richard Cozier, in a press conference last week expressed concern over what his company saw as discrimination against Pine Hill Dairy products by Trinidad and Tobago. According to the Caribbean Media Corporation, by Friday, Trinidad and Tobago “was moving swiftly...to head off a trade dispute with Caribbean Community (CARICOM) trading partner Barbados, apologising for the actions of its food safety agency in blocking the entry of Barbadian milk and juices into the two-island republic and saying it was working to resolve the issue.” On Sunday, the press reported that Mr. Cozier had welcomed the response from Port-ofSpain, but noted that the problem had been going on for some time and therefore it remained to be seen whether all of the barriers would be removed and the Pine Hill Dairy’s products allowed to enter T&T without hindrance. Below is the full text of the statement released by Mr. Cozier at a press conference last Thursday in Barbados.
By Richard Cozier
R
ecently there has been much comment on the dollar value of our island’s food imports – in every case the commentators are imploring Barbadians to practice “voluntary import substitution” in structuring their purchases so that locally produced food items are selected in preference to imports.
We at BHL support this suggestion, as we believe in the quality of the local products and the security that buying local affords us. We also believe that another, less promoted, opportunity to mitigate against this high cost is for us to grow exports of our products; this is an aspect of our operations that we have invested in significantly in recent times. These investments have
TheBroadStreetJournal June 30, 2012
brought our plants to the stage where there are all now among the more technologically advanced in the region. We had to do this if we wanted to have any chance of competing in regional markets, as production costs in other territories are significantly lower, especially in Trinidad where subsidies and other measures appear to create an unlevel playing field. We are now therefore in a position to be much more efficient than we have ever been and this contributes to our ability to be competitive in these regional markets. As the smallest MDC (270,000 persons) we need access to the larger markets of Trinidad, Jamaica and Guyana, and traditionally this has not been an issue. Within the last 18 months, however, we have encountered several “challenges” in accessing the Trinidad market. These are unique to Trinidad and are not present in any other markets and it is these challenges that I want to share with you today. I spoke earlier of our investment in plant and equipment as a means of improving or lowering our production costs. At PHD that investment has resulted in us being able to significantly extend the life of our products and move them from the cold chain to ambient storage and distribution. This development opens markets which were previously impossible to service due to the limited shelf life and the need for constant refrigeration from production through final consumption. We therefore can now supply our range of fresh milks and shelf stable juices to these regional markets, or rather we should be able to do so. We have, however, run up against a roadblock in accessing the Trinidad market as their Food & Drug Agency has indicated that several of our brands have non-compliant labeling. Trinidad is the sole regional country to indicate this. Ordinarily, we would look at the noncompliance and make the investment to alter the label to be compliant; in this case, however, we believe, and you will have the opportunity to judge for yourself, that
10
CEO of Banks Holdings Richard Cozier. Photo courtesy BHL
BHL says Pine Hill’s juices do contain all natural ingredients, yet its labels were rejected while a granola product was deemed compliant. whereas they are informing us of the areas where we are non-compliant, prominent Trinidadian and international brands sold in Trinidad, are equally “noncompliant” but are not prohibited from being sold in Trinidad nor, as far as we are aware, being requested to alter their labelling. I will detail the areas where we believe we are being discriminated against.
Use of the word “Natural” on packaging
Our associated company in Belize manufactures Not From Concentrate Orange and Grapefruit Juices. “Not from Concentrate” (NFC, for short) indicates that the juice is prepared directly from the juice extracted from the fruit – not from a concentrate. They indicate on their label that the product is “100% Natural” as
theweekthatwas news
TheBroadStreetJournal June 30, 2012
Unless Nature Valley granola bars are picked from a tree or fished from the ocean, why is this regulation only applied to us and not them?, asks Mr. Cozier. be required to as it would mean that our products are being held to as different standard than the competition. This, we consider, is unfair. Do not for a moment brand produced and think that this is just a case sold in Trinidad reof sour grapes on our part. veals that the above As recently as last week is also missing from there was an article reprotheirs, yet they are duced in Trinidad from compliant, but we are the Jamaica Gleaner which not. states that Jamaica is openly accusing Trinidad of subsiFresh Milk dizing their manufacturers We are informed and putting in place nonthat our Fresh Milk tariff barriers to restrict products are nonJamaican goods into Trinicompliant as the dad. We are therefore either product common both wrong and Trinidad name is not in the right, or we are right and same font and size there are these non-tariff – in this case “Fresh barriers in place. Whole or Fresh 2% We at BHL are firmly Reduced Fat” are in supportive of Caricom and smaller case than the single market but it has Milk. With time we BHL says Pine Hill’s fresh milk labels to be fair and equitable for can adjust this, how- were also deemed non-compliant all players. Caricom marever we believe we are while a Nestlé competitor with the kets – including Trinidad – again being discrimi- same font problem was said to be should be open to all Carinated against as Nes- compliant. com goods without being tle Svelty product uses restricted through discrimidifferent fonts and sizes throughout the natory practices such as detailed above. We product name – indeed you have to really in Barbados do not restrict their brands; search the label to discover that it is milk – their milks, juices, soft drinks & beers are yet that product is deemed compliant. all freely sold here and have varying levels of There are other examples but these above support. Why should our brands not be givare the main ones we are faced with, and en similar opportunities in Trinidad? Unless as a result we have not shipped any of the this discrimination can be addressed quickabove product to that market in the past ly we will be forced to further compromise 18 months. We have brought this matter to production and this could develop into rethe attention of the authorities here and in duced working hours for Barbadian labour. Trinidad but it appears as though the only No one desires this but it is a reality where way forward would be to make the changes we have to compete locally against them but requested. This will of course take time as are prevented from doing the same in their new packaging would be needed and whilst we could do this we do not think we should market. •
Can you spot the difference? Left: T&T says the Pine Hill “common name” is not in the same size and font, but neither is Nestlé’s. Right: T&T says Pine Hill doesn’t have “UHT” on its label, but, again, neither does Nestlé. Photos courtesy BHL the ingredients are simply the juice; this we believe qualifies them to use the “Natural” designation, a position adopted by every other country with which we trade. Trinidad, however, has indicated that these products have undergone a process and once any food is processed it ceases to be natural. This definition effectively rules out every packaged food/beverage item, including water, and while we would disagree with their definition, the reality is that they can determine whatever definition they want. Our concern, however, stems from the fact that other food products in their market make the same statement on their packaging and are deemed compliant. One of those products, Nature Valley Granola Bars, clearly states “All Natural” on its packaging and this product is allowed entry into Trinidad. Unless these granola bars are picked from a tree or fished from the ocean and packaged then they must have been processed, so why is this regulation only applied to us and not them?
Flavoured Milks
We are informed that our Malted Flavoured Milk is non-compliant as the product common name is not in the same size and font. A comparison to Nestle’s Supligen, produced and sold in Trinidad, indicates that their product common name is also not in the same size and font, but they are compliant we are not.
Evaporated Milk
In this case we are informed that our packaging does not indicate the heat process utilized (UHT) in the manufacture of the product. Again, a check on the Nestle
11
news
TheBroadStreetJournal June 30, 2012
When quality and accuracy matter InBusiness EXECUTIVE OUTLOOK: How we can emerge stronger from recession
Premiere Edition • January 2012 • From The Broad Street Journal
who’swho
12
July 2012 • PILOT EDITION
in Barbados Business
Photos and contact information for over 500 top business executives at your fingertips
HABIB ELIAS Finally living out his dream KAYMAR JORDAN
+
THE MAKING OF AN EDITOR
LISTINGS AND RECOMMENDATIONS FOR MARK KING
PAul AlTMAN
NEW MAN IN POWER
lIMEGROVE’S VISIONARY CREATOR
In January thus year, Hoyos Publishing Inc. launched a new publication called INBusiness. The magazine focusses on achievers - business executives, entrepreneurs and professionals based in Barbados whose life and work experiences are informative, educational and inspiring. This positive editorial environment has made the first edition of INBusiness widely-read at all levels of the community.
Advertising Rates (add VAT): INBusiness and Who’s Who: - Full page: $2,800; - Half-page: $1,400; - Qtr Page: $700; - Eighth page: $350.
INSIDER:
2012 Edition Who’s Who in Barbados Business has become one of the most sought-after local publications. It is widely used as a research tool by middle- to upper-level executives interested in reaching upmarket consumers, senior executives, entrepreneurs and buyers. 8,000 copies are distributed annually to hundreds of company offices, as well as hotels, conference centres, banks, supermarkets, coffee shops, convenience stores and restaurants. The cost per listing (including photo), logo, 40-word profile or corporate box is $120.00 each plus VAT, and clients can take advantage of the following discounts for early payment (add VAT): - 15% OFF by June 30: $102 per listing - 10% OFF by July 31: $108 per listing - 5% OFF by Aug. 31: $114 per listing.
Per column inch: $75.00 Full page: 8” H x 3.25” W, $I,200 Half page: 4” H x 3.25” W, $600 Quarter page: 2” H x 3.25” W, $300
• Shopping • Dining & Entertainment • Health & Medical • Professional Services • Art Galleries & Museums The Barbados INSIDER • May 2012 • Page 1
Our new “what’s on” publication, Barbados INSIDER Magazine, will contain accurate, up-to-date information on attractions, restaurants, nightclubs, health and medical services, shops, boutique and stores, museums and galleries, vehicle hire and tours. It will also provide information on major events each quarter, and showcase the people and establishments in our hospitality and service sectors. 8,000 copies of the magazine will be distributed free every quarter in over 200 locations, aimed at both locals and visitors who want to enjoy the best the island has to offer in food, drink, entertainment, culture, health services and shopping. Get one free basic listing for your business. Just send us your email address and we’ll send you a URL for an online application. You can enhance your free listing with a logo, 50-word profile or photo for $I00 each plus VAT. Size of publication: 9” high x 4” wide Number of columns per page: 2
For more information, please call us at 230-5687