In our own region, the economies of the Eastern Caribbean, which are important markets for Barbadian goods and services are engulfed in grave economic and financial difficulties that can pale into insignificance any crisis they have confronted in recent times.
We had also envisioned that with the removal of Barbados from the OECD's black list of tax havens, the chains which had held back the strong growth of our second most important industry since 1998 would have been released.
We however now face a new and unanticipated challenge to the continued survival and success of our international business and financial sector.
It has taken the form of the initiative by the USA Treasury Department to deal with corporate inversion - a transaction through which the corporate structure of a US multinational group is altered so that a new foreign corporation typically located in a low or no-tax country replaces the existing parent corporation as the parent of the group.
Such transactions have in the past been inspired by the desire of corporations to minimise the incidence of US taxes, and to avoid the complexities of the US tax system.
This effort by the US Treasury to deal with such fiscal and corporate matters has resulted in legislative initiatives that have, in our view, improperly named Barbados as a tax haven, and has raised concerns about the use of the US/Barbados Tax Treaty.
Officials of Barbados and the USA are engaged in discussion and negotiations to resolve this issue.
It
however signals the need for the Government of Barbados to modify the instruments
and policies we will use in the future to secure the survival and development
of our international business and financial sectors. This will have far reaching
consequences for the structure of our Corporate Tax System. None of this helps
to make our efforts at economic development easier.
I would have alluded earlier
to the havoc that trade liberalisation played especially with the performance
of our manufacturing and agricultural sectors since 1999.
Negotiations in four trade theatres have now begun or intensified and will envelop our future economic development in an environment in which accelerated trade liberalisation, designed to further remove or reduce on a regional, hemispheric, and global basis the barriers to the movement of goods, services, capital, technology and intellectual property, will take full effect.
To be specific the directions of our economic policies now have to be set to simultaneously meet the requirements of functioning in the new Caribbean Single Market and Economy, the FTAA which comes into being in January 2005, to fit the outcome of the WTO Post Doha negotiations especially in services and agriculture which are scheduled to be concluded by 2005, and to meet the new specifications of an Economic Partnership Agreement with Europe that comes into force in 2007.
Each of these offers the opportunity of a larger market and more liberal market access for our goods and services. They offer equally to regional and extra-regional enterprises the prospect of improved access to the Barbadian market, the opening of areas to foreign competition that have historically been reserved only for national enterprise, and the prospect of our enterprises having to compete in the same space with larger, better capitalised and more technologically dynamic firms.
We also face the spectre that those who have the greatest say in making the new rules of trade and of ensuring that others follow them are also those who bend them or disregard them if they do not suit their national purposes.
Our national development will therefore take place within the context of a more intensely competitive regional, hemispheric and global arena.
We cannot opt out. Rather we have to continue to refashion our own economy, and our way of doing business in the public and private sector to give ourselves a fair chance to hold our own and succeed.
It therefore goes without saying, Mr. Speaker, that in an international environment characterised by such risk, uncertainty, complexity and competition our own odds for achieving economic stability and development cannot be improved by any actions in the international political sphere which retard or disrupt global economic recovery.
There is no doubt that the proliferation of armed conflict, for whatever cause, can so severely affect international travel and tourism and cause such a spike in energy prices as to undermine everything we are seeking to do to restore the conditions for stable, sustained growth in Barbados.
Mr. Speaker, I often these days refer to Naipaul's graphic opening to his novel "A Bend in the River".
"The world is as it is. And men who are nothing or who allow themselves to become nothing have no place in it".
We cannot avoid living in a dangerous world where persons will take decisions bearing on our interests without regard for how our best interests are affected.
But we must not allow ourselves to become nothing.
And this we can successfully accomplish by the policies that we choose to generate our own opportunities, to take the fullest advantage of those that others offer to us, and to mitigate the adverse effect on our situation of actions and developments originating outside our borders over which we have no control.
It is against such a background that I now spell out the focus, and the objectives intended to be achieved by the economic, fiscal and financial policies of the Government of Barbados over the immediate planning horizon.
First, in every presentation since 1998, I have introduced new measures, all of which have been intended to restructure the Barbados economy, to condition it to become less reliant on trade preferences, old forms of protection and concessional finances, and to gradually develop the competitive capacities to achieve sustained development, in the post 2005 global economy.
This remains our most important strategic objective and this presentation of economic policies will outline additional new policies to make for a more competitive Barbadian economy.
Secondly, after a brief but sharp recession, sustained growth is once again a realistic possibility within our grasp.
We need now to implement the measures to translate the recent signs of renewed growth of the Barbadian economy into a strong and lasting recovery.
In this respect, I judge that tax reform can serve both as an instrument for economic repositioning, particularly of the corporate sector, and as a stimulus for growth, and I propose to go as far as possible with a phased programme of personal and corporate tax reform as our fiscal circumstances will allow.
In addition, our recent policies of offering strategic, selective stimulation to those areas of economic activity that hold the promise of strong growth will be expanded.
Third, it is evident that the greatest under-utilised resource in Barbados today is the financial resources bottled up in our financial system.
I propose to introduce new policies to unleash such resources in search of stronger economic growth. I believe that the time is ripe for greater financial innovation and further managed liberalisation in Barbados, and these two will be addressed.
Fourth, Barbados now has the full features of an ageing society. A chief consequence is the threat to the future viability of our Social Security System.
I will announce today the measures to reform our pension arrangements to assure the viability of the social security regime of Barbados well into the second half of this century.
Fifth, the State has recently played an important counter cyclical role in stabilising the economy and minimising the worst effects of recession by incurring a deficit that is larger than we would regard as sustainable.
The State still has a crucial role to play in ensuring that the economy climbs out of recession. But it now has to temper its intervention so as to bring the fiscal deficit down, to restrain the accrual of new debt and to assist in generalising, through its own new entrepreneurial behaviour, a new enterprise culture for our economy.
Mr. Speaker, there is always the tendency to dismiss the seriousness of a policy focus and orientation such as I have just specified as having nothing to do with the small man or about the eradication of poverty.
But the interest of the small man and the eradication of poverty are all bound up in how we generate first of all more production and output, how we make ourselves more competitive in the global economy, and how we create more sustainable jobs to afford more people sustainable livelihoods.
And this, Mr. Speaker is what today's proposals, in the final analysis, are intended to achieve.