“Aram did business with you because of your many products; they exchanged turquoise, purple fabric, embroidered work, fine linen, coral and rubies for your merchandise” – Ezekiel 27:16
At present, there is a large economic divide between Barbados and First World countries, but this gap can be effectively reduced if we diligently pursue successful business enterprises with the potential for exponential growth in the global market.
What are the opportunities for business? These obviously depend on our holistic capital resource base, which includes Human, Intellectual, Social, Cultural, Spiritual, Physical, Natural and Financial capital. An examination of this capital base will reveal that Barbados has a competitive advantage especially in Indigenous Service Exports. Invest Barbados has recently been established by Government to promote these business opportunities and facilitate their conversion into sustainable business successes.
It has been argued that the factors that have impeded the path of progress include: (1) a paucity of good ideas; (2) entrepreneurs with a low adversity quotient; (3) an unsupportive enabling environment in terms of timely government incentives and technical assistance, timely access to appropriate financial instruments and the availability of timely management assistance and shepherding services.
My experience has been that there are many good ideas around, many entrepreneurs with a passion for their enterprise and a willingness to work for themselves rather than to seek the comfort of a secure job.
The Government of Barbados has been very visionary in providing regulatory support in terms of incentives and technical assistance for entrepreneurs. The problem has been with the timely implementation of these in the present public sector operational framework.
In the dynamic setting where the country is looking to aggressively increase the growth rate, most entrepreneurs pursuing a business opportunity have no money. I would like to explore, today, the ways in which the Government can help to accelerate the rate of entrepreneurial success.
I would first of all like to get an issue out of the way, i.e. the mendicant mentality. Some entrepreneurs seem to believe that the role of the government is to ensure their existence in business by providing grants at every step of the way. Governments do help to perpetuate this belief by making unconditional grants available.
The sugar industry in Barbados has been supported by government for many years with a subsidy of tens of millions of dollars per year, presumably because Government recognises the need to protect employment, earn foreign exchange, protect the environment and use its natural resources. The government subvention is justified on the grounds of its contribution to macro-economic development. The budget for the non-sugar agricultural sector is tens of millions of dollars per year so that we can mitigate our food import bill and engender food security.
The Barbados Tourism Authority has been the recipient of millions of dollars per year to promote the tourism industry in selected markets around the globe to enhance our major foreign exchange earner. Similarly, the Barbados Investment and Development Corporation has been the recipient of millions of dollars per year to promote business development. Now, Invest Barbados will be entrusted with a budget to promote Brand Barbados, Foreign Direct Investment and Indigenous Service Exports.
The private sector invests in businesses and they expect a financial return by means of capital appreciation, interest or dividends. Commercial and financial institutions with access to capital are very risk averse and their financial capital resources seldom get to work to help start-up enterprises with high performance potential. Governments often have to get involved. I think that is proper for government, representing the people, to invest in enterprises but they should not be looking for a financial return, but rather an economic return.
I would therefore suggest that instead of referring to government interventions as a subventions or subsidies, one should refer to them positively as a government investments, the return on which can be measured in macro-economic terms.
Government should take the risk associated with start up businesses, ensuring the effective application of businesses systems to mitigate the risk of failure. The financial instrument should be a revolving loan with no interest and with the provision that the loan will be forgiven should a business fail. If the business becomes strong enough to receive private sector investment then the government should be repaid these pre-implementation expenses and the funds used to help other entrepreneurs.
Another advantage that government has is exemplified by a practice which was employed, when I was Chairman of the Barbados Marketing Corporation (1981-1984). The BMC at that time received a subvention of $500,000 per annum. I suggested to the Minister that instead of relying on a subvention, which had a real chance of being cut in mid-stream, that we should obtain a commercial bank overdraft and provide a government guarantee to secure it. So said, so done and the bank was repaid, with interest, after three years by profits generated from BMC’s operations. This is a creative way of accessing some of the liquidity in the banking system, removing the risk of the subvention being cut in mid-stream and saving the government from having to release any money from the consolidated fund over the three year period.
Entrepreneurs can do business with Government, because it can design creative investment solutions to effect private sector trade in merchandise.