OPENNESS TO FOREIGN INVESTMENT
Barbados is open for business. The Government of Barbados, through Invest Barbados, strongly encourages foreign direct investment in Barbados, particularly in industries that create jobs and earn foreign currency.
The Government offers special incentive packages for foreign investments in the hotel industry, manufacturing, and offshore business services. For example, International Business Companies (IBCs) have a maximum tax rate of 2.5 percent on income and exemption from foreign exchange controls.
The services sector holds the largest potential for growth, especially in the areas of financial services, e-commerce, medical transcription, tourism, educational, health, and cultural services. In agriculture, the slow demise of the sugar industry has opened up land for other agricultural uses, and investment opportunities exist in the areas of agro-processing, alternative and renewable energy, and hydroponics. In the financial services sector, Government has improved its regulatory oversight, and the industry is thriving under better regulatory standards, designed to prevent money laundering and tax evasion.
Telecom liberalization is bringing an end to the longstanding monopoly of LIME (formerly Cable and Wireless) and has introduced competition, lowered the cost of international telecommunications, and enhanced the telecom infrastructure. Since 2000, the Government has gradually allowed more companies to compete in the sector, and by early 2005 there was full competition in wireless and long distance service. The Government has established policy with respect to Voice over Internet Protocol (VoIP) regulations, which was approved on August 15, 2007. To prepare a workforce skilled in advanced IT services, the Government and educational institutions such as the Barbados Community College and the University of the West Indies have undertaken educational and training initiatives.
Foreign nationals receive the same legal protections as local citizens. The police and court systems are efficient and unbiased in commercial matters, and the government operates in an essentially transparent manner.
Local enterprises generally welcome joint ventures with foreign investors in order to access technology, expertise, markets, and capital. Barbados' economy is small, however, and new enterprises that might compete with entrenched local establishments, especially in the retail and restaurant sector, may face a de facto veto of their license by local interests. In the past, the government did not approve, or considerably delayed, licenses for importers of U.S. ice cream and poultry products, and some U.S. fast food franchises. Improvement has been made in this area as Government seeks to open the economy to this type of US led investment.
CONVERSION AND TRANSFER POLICIES
Companies can freely repatriate profits and capital from foreign direct investment if they registered with the Central Bank of Barbados at the time of investment. The Central Bank may limit or delay conversions depending on the level of international reserves under the bank's control.
The Ministry of Finance controls the flow of foreign exchange, and the Exchange Control Division of the Central Bank executes fiscal policy under the Exchange Control Act. Individuals may apply through a local bank to convert the equivalent of USD 3,750 per year for personal travel and up to a maximum of USD 25,000 for business travel. To convert any amount over these limits, one must apply to the Central Bank.
EXPROPRIATION AND COMPENSATION
The Barbados Constitution and Companies Act contain provisions that permit the Government to acquire compulsorily property for public use upon prompt payment of compensation at fair market value. The Embassy is not aware of any outstanding expropriation claims or nationalization of foreign enterprises in Barbados.
Barbados bases its legal system on the British common law system. The Attorney General, the Chief Justice, Puisne Judges, and Magistrates administer justice in Barbados. The Caribbean Court of Justice (CCJ) replaced London's Privy Council as the highest court of appeal for Barbados in 2005.
The United States and Barbados are both parties to the World Trade Organization (WTO). The WTO Dispute Settlement Panel and Appellate Body resolve disputes over WTO agreements, while courts of appropriate jurisdiction in both countries resolve private disputes. The Barbados Arbitration Act (1976) and the Foreign Arbitral Awards Act (1980), which recognizes the 1958 New York Convention on the Negotiation and Enforcement of Foreign Arbitral Awards, contain provisions for arbitration of investment disputes. Parliament has written The New York Convention's provisions into domestic law, but has yet to ratify the convention.
Barbados is also a member of the International Center for the Settlement of Investment Disputes (ICSID), also known as the Washington Convention. Additionally, individual agreements between Barbados and multilateral lending agencies have provisions calling on Barbados officials to accept recourse to binding international arbitration to resolve investment disputes between foreign investors and the state.
PERFORMANCE REQUIREMENTS AND INCENTIVES
While there are no formal performance requirements, government officials will more likely approve investments they believe will create jobs and increase exports and foreign exchange earnings. There are no requirements for participation either by nationals or by the Government in foreign investment projects.
There is no requirement that enterprises must purchase a fixed percentage of goods from local sources, but the Government encourages local sourcing.
Companies must meet export performance requirements to take advantage of certain tax incentives. For example, "enclave enterprises" must produce goods exclusively for export outside the CARICOM region. Foreign investors must finance their investments from external sources or from income that the investment generates. When a foreign investment generates significant employment or other tangible benefits for the country, the authorities may allow the company to borrow locally for working capital.
There is no requirement that locals own shares of a foreign investor's enterprise, but some restrictions may apply to share transfers. The Companies Act does not permit bearer shares. Foreign investors do not need to establish facilities in any specific location, although there are zoning restrictions.
Most investment incentives in Barbados are tax incentives, although there are some special programs for manufacturers. Potential investors should contact a licensed accountant and/or lawyer in Barbados to find out which incentives fit best with their goals.
In the manufacturing sector, the Barbados Investment and Development Corporation (BIDC) has established ten well-equipped industrial parks with subsidized rent. The BIDC may also supply limited training grants and free technical assistance through two programs with a focus on developing local businesses: the Export Grant and Incentive Scheme and the Technical Assistance Program. The former helps both locally and foreign-owned companies (but only those foreign companies with management or marketing branches in Barbados) by defraying export costs such as the preparation and shipment of samples and the development of marketing materials. The latter helps companies solve a range of operational problems.
The BIDC also offers local small businesses access to its Small Business Development Center, with conference room facilities, communications services, short-term office space, and a commercial library. To further help manufacturers, the Central Bank of Barbados has established an export credit guarantee scheme, covering pre-shipment financing requirements and post-shipment credit risks for manufacturing companies.
The Fiscal Incentives (Amendment) Act (2001) provides a maximum 15-year tax holiday to any manufacturer of an approved product, provided that it meets the definition of an enclave enterprise: manufacturing exclusively for export outside of CARICOM; manufacturing approved products containing a specified percentage of local value added; or being highly capital intensive. Under the Fiscal Incentives Act, such enterprises may import duty-free equipment, spare parts, and raw materials from outside CARICOM. Dividends and other distributions to shareholders during the tax holiday are also exempt from the payment of income tax. Non-resident shareholders liable to tax in their country of residence are subject to Barbados withholding tax at a lower rate. To qualify for these incentives, the enterprise must apply to the Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce.
Enterprises not obtaining benefits under the Fiscal Incentives (Amendment Act (2007) and generating export profits (other than from exports within CARICOM) may receive an export allowance expressed as a rebate of corporation tax (between 35-93 percent) on those profits. The maximum rebate of 93 percent applies if more than 81 percent of an enterprise's profits result from extra-regional exports. The Export Development Allowance permits a company to deduct from taxable income an additional 50% of what the company spends in developing export markets outside CARICOM.
Initial Allowances or Investment Allowances of up to 40 percent on capital expenditure are available for businesses making capital expenditures on machinery and plants, or on an industrial building or structure. Annual depreciation allowances on such expenditures are also available.
Barbados' method of calculating export allowance is as follows:
|EXPORT PROFIT AS PERCENTAGE||REBATE OF INCOME TAX AS|
|OF TOTAL PROFIT||PERCENTAGE OF INCOME TAX|
|ON EXPORT PROFITS|
|Up to 20 percent||35 percent|
|21 percent, but under 41 percent||45 percent|
|41 percent, but under 61 percent||64 percent|
|61 percent, but under 81 percent||79 percent|
|81 percent and over||93 percent|
|GAINS AND NET PROFITS||CORPORATE TAX RATE|
|Up to USD 5 million||2.5 percent|
|USD 5-10 million||2.0 percent|
|USD 10-15 million||1.5 percent|
|Over USD 15 million||1.0 percent|
Barbados uses transparent policies and effective laws to foster competition and establish clear rules for foreign and domestic investors in the areas of tax, labor, environment, health, and safety. The regulatory system can be slow at times, and some companies have complained that the Ministry of Finance does not give adequate justification for rejecting a license.
In the past, obtaining a work permit could be a difficult and time-consuming task. However, the International Business Customer Charter launched on November 26, 2007, provides for the processing of long and short term work permits in two to four weeks (2-4) weeks provided that the application is completed in totality. Work permits are of two types, short-term (for six months or less) and long-term (usually for no more than three years). To receive a work permit for senior management, the company must show that a Barbadian national or resident does not possess the skill set to fill the position.
The principal regulatory agencies are the Ministry of Finance and the Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce. The Ministry of Finance regulates the Exchange Control Authority of the Central Bank of Barbados, including inward investment, registration of foreign capital, currency accounts, and repatriation of capital and earnings. Local on-shore companies must meet fairly stringent exchange control requirements, but the Government welcomes investment by non-residents with external sources of financing.
The Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce administers the Companies Act and other statutes dealing with company affairs. The Companies Act is modeled on the Canada Business Corporations Act, and creates flexibility and simplicity for the incorporation and operation of companies in Barbados.
Companies using or manufacturing chemicals must obtain approval of their environmental and health practices from the Barbados National Standards Institution and the Ministry of Health's Environmental Division.
The Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce on rare occasions imposes price controls, listed in the Official Gazette. The Government controls gasoline prices.
Barbados enacted legislation in 2000 to create the Fair Trading Commission (FTC) to provide consumer protection in telecommunication and utility services. There is no specific antitrust legislation in Barbados.
The Minister of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce or the Minister of Finance must approve foreign investment. The Chief Town Planner must approve new construction or changes in land use. Zoning restrictions protect agricultural land, and the Government pursues policies to ensure environmental integrity.
The Central Bank must approve real property purchases for non-residents. If a non-resident uses foreign funds and pays for the property in Barbados, the Central Bank will normally approve the transaction. When they sell the property, non-residents need to pay the 2.5 percent Property Transfer Tax in addition to brokerage and legal fees. The Commissioner of Land Tax charges an annual fee based on the assessed property value. The Government taxes hotels on 50 percent of the improved value at 0.65 percent, and residential properties are taxed as follows:
Up to USD 62,500 0 percent
USD 62,500 up to 112,500 0.1 percent
USD 112,500 up to 250,000 0.45 percent
USD 250,000 up to 425,000 0.75 percent
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
Barbados has a small stock exchange, an active banking sector, and opportunities for portfolio investment. Local policies seek to facilitate the free flow of financial resources, unless there is a shortage of funds. The Government has, in the past, intervened in the local credit market to control interest rates, limit the volumes of funds available for borrowing, and borrow on the local market. However, the Central Bank has raised interest rates in the past without any government intervention. There are a variety of credit instruments in the commercial and public sectors that local and foreign investors may access.
The Government has implemented a continuous review process for legislation in the financial sector in an effort to strengthen and improve the regulatory regime in order to attract and facilitate retention of foreign portfolio investments. A self-assessment undertaken by the Bank Supervision Department of the Central Bank found their on-shore and offshore sectors in general compliance with the Basel Core Principles of Effective Banking Supervision, utilizing the Basel Committee's Core Principles Methodology. The International Financial Services Act, which replaced the Offshore Banking Act in June 2002, incorporates the Basel standards, and provides for on-site examinations of offshore banks. This allows the Central Bank to augment its offsite surveillance system of reviewing anti-money laundering policy documents and analyzing prudential returns.
Under the authority of the Money Laundering and Financing of Terrorism Prevention and Control Act, Cap 129, the Government established the Anti-Money Laundering Authority and its operating arm, the Financial Intelligence Unit, in 2000. The Bank Supervision Department of the Central Bank of Barbados, in conjunction with the Anti-Money Laundering Authority in 2001, issued in 2001 the Anti-Money Laundering Guidelines for Licensed Financial Institutions, which were revised in 2006.
The Barbados domestic financial sector consists of two indigenous and four international commercial banks, two of which operate merchant banks and one a trust company. There are also 35credit unions and one money remitter. The offshore sector includes 3,361 international business companies, 221 exempt insurance companies and 50 offshore banks (December 2006 figures). Starting in 2001, the Government required Barbados institutions and legal entities to reveal the identity of beneficiaries receiving dividends and/or interest.
Assets of commercial banks totaled USD 5.7 billion in October 2009, and remained relatively consistent throughout the year. The reserve requirement for commercial banks was 2 percent of deposit liabilities, and the minimum deposit rate was 3.0 percent at the end of October 2009. The weighted average interest rate was 4.06 percent on deposits and 10.25 percent on loans for the same period.
Domestic deposits expanded by USD 131.4 million. Accounts of private individuals, financial institutions, and statutory bodies recorded growth of USD 125 million, USD 6.95million, USD 14.2 million, and USD 21.8 million, respectively. Deposits for business firms declined by USD 60.7 million which was largely attributed to the decline in the construction and manufacturing sector while Government deposits declined by USD 11.2 million.
Credit to the non-financial private sector expanded by USD 248.7 million well above the USD 110.3 million increase recorded for 2007. Lending to the personal sector, professional and other services, construction, tourism, transportation and distribution industries, increased by USD 100.8 million, USD 60.4 million, USD 36.8 million, USD 13.9 million, USD 6.6 million and USD 6.25 million, respectively. Commercial bank lending for industrial and commercial mortgages averaged USD 64.8 million at the end of October 2009, whereas commercial bank lending to residents and non-residents averaged USD 83.3 million and USD 8.2 million respectively.
The Securities Exchange Act of 1982 established the Securities Exchange of Barbados (SEB), which was re-incorporated as the Barbados Stock Exchange (BSE) in 2001. The 1982 Act was replaced by the Securities Act, Cap 318A, which removed regulatory responsibility for the securities market activity from the BSE. This Act helped to strengthen the regulatory framework and development of the capital market. In 1997, the BSE began trading corporate stocks and fixed income securities, including Government bonds (not commercial paper). Activities on the BSE include regional cross-border trading arrangements for shares listed on the Trinidad and Jamaica stock exchanges.
The BSE operates a two-tier electronic trading system comprised of a Regular Market and a Junior Market. Companies applying for listing on the Regular Market must observe and comply with certain requirements. Specifically they must inter alia have assets of not less than USD 500,000 and adequate working capital based on the last three years of their financial performance, as well as three-year projected performance. Companies must also evidence competent management and be incorporated under the laws of Barbados or other regulated jurisdiction approved by the Securities Commission. Applications for listing on the Junior Market are less onerous, requiring minimum equity of one million shares at a stated minimum value of USD 100,000. Reporting and disclosure requirements for all listed companies include interim financial statements, and an annual report and questionnaire. Non-nationals must obtain exchange control approval from the Central Bank of Barbados to trade securities on the BSE.
The Barbados Stock Exchange (BSE) is moving to full immobilization of traditional share certificates where clearance and settlement is fully computerized through a Central Securities Depository. However, investors requiring a traditional certificate can be accommodated for a small fee and the transfer is adjudicated by the Securities Commission under the Property Transfer Tax Act. Mutual Funds are also regulated by the Securities Commission in accordance with the Mutual Funds Act, Cap 320B.
The Barbados Stock Exchange (BSE) recorded its second consecutive decrease in 2009. This downturn was reflected in the Composite Index, which decreased by 14.5%. These declines were reflected in market capitalization values that dropped by similar percentages over the quarter, as the general slowdown in economic activity during the year and the repurchase of 87,551 shares by West Indies Rum Distillery Limited in June depressed market capitalization values. In 2009, the BSE made significant strides towards becoming the first CARICOM securities exchange to launch an international trading facility, having received Board approval earlier in the year. The BSE intends to attract international business companies to list on the international securities market in order to raise capital on the Barbados market. This move would offer greater support to the international business community and complement existing bilateral trade agreements. If approved by the regulators, the international trading facility could attract four types of listings: companies that would have their primary listing in Barbados; companies that would use Barbados as a dual or secondary listing; fixed income securities; and, mutual funds.
Barbados has not experienced political violence since riots in the 1930s.
Corruption is not a major problem in Barbados, but some U.S. companies have reported unfair treatment by Barbados' Customs and Excise Department.
BILATERAL INVESTMENT AGREEMENTS
Barbados has no bilateral investment treaty with the United States, but has a double taxation treaty and tax information exchange agreement. Barbados has bilateral investment treaties with Canada (CARIBCAN), China, Cuba, Germany, Italy, Luxembourg, Switzerland, the U.K., and Venezuela.
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
In 1999, the U.S. Government's Overseas Private Investment Corporation (OPIC) signed with Citibank to establish a USD 200 million Investment Facility for the Caribbean and Central America, as one means of encouraging investment and stimulating economic development. The Caribbean Development Bank, which is based in Barbados, administers this program. OPIC provides financing and political risk insurance to viable private sector projects, helps U.S. businesses invest overseas, and fosters economic development in new and emerging markets.
In 2009, Barbados' labor force was approximately 142,000, distributed in the following sectors: commerce, tourism, government, manufacturing, construction, agriculture, and fishing. The total average unemployment rate toward the end of 2009 was approximately 10.1 percent.
Wages in Barbados are among the highest in the Caribbean. Minimum wages for only a few categories of workers are administratively established and enforced by law. The minimum wage for shop assistants, USD 2.50 per hour, is only marginally sufficient to meet minimum living standards. The Ministry of Labor and Immigration recommended that companies use this as the de facto minimum wage, and most employees earned more than the minimum wage. The Labor Department within that ministry was charged with enforcing the minimum wage. The standard legal workweek is 40 hours in five days, and the law requires overtime payment for hours worked in excess. The law prescribes that all overtime must be voluntary. Workers are guaranteed a minimum of fourteen days of annual leave and are covered by unemployment benefits legislation and National Insurance (social security) legislation.
Trade unions, and the leaders of the trade union movement, enjoy a strong voice in the labor and economic affairs of the country through their participation in Barbados' Social Partnership, a tri-partite consultative mechanism. Approximately 25 to 30 percent of the labor force belongs to trade unions, but this small percentage belies the power and importance of unions in Barbados; all key sectors are unionized, with all private and public employees in agriculture, tourism, and at the airport and seaport belonging to a single union confederation.
The major unions recognize the advantages accruing to Barbados from foreign investment and foreign expertise, and they are generally flexible and accommodating in their dealings with employers. However, local labor leadership is sensitive when it perceives a lack of respect for Barbadian laws and customs by large, visible foreign employers. It is generally cooperative with management in unionized shops.
Barbados does not have labor legislation that mandates a legal process necessary for unions to achieve status as bargaining agents, and employers have no legal obligation to recognize unions under the Trade Act of 1954, but most employers do so when a majority of their employees desire representation. While there is no specific law that prohibits discrimination against union activity, the courts provide a method of redress for employees who allege wrongful dismissal. The courts commonly awarded monetary compensation but rarely ordered reemployment.
The law provides for the right to strike, and workers exercised this right in practice. All private and public sector employees are permitted to strike, but essential workers may strike only under certain circumstances and after following prescribed procedures. In July 2009, the island’s largest telecommunications firm announced the closure of its Call Centre and the subsequent lay-off of 115 workers. The Union intervened and the termination notice was rescinded after an intervention by the Government. There were long-running negotiations between the Union and the telecommunications company regarding the reinstatement of the workers. To date, this issue seems to be resolved as the workers have been reincorporated in other departments. Early contact and rapport with Labor Ministry officials and union leaders by foreign investors may be helpful in terms of fostering labor harmony.
The law provides for a minimum working age of 16, and this provision generally was observed in practice. Compulsory primary and secondary education policies reinforced minimum age requirements. The Labor Department had a small cadre of labor inspectors who conducted spot investigations of enterprises and checked records to verify compliance with the law. These inspectors may take legal action against an employer who is found to have underage workers. Additionally, legislation to address termination of employment and benefits and to prohibit sexual harassment is pending.
Parliament passed core regulations to implement the 2005 Occupational Safety and Health at Work Act, but the government had not implemented them by year's end. The Labor Department enforced other health and safety standards and followed up to ensure that management corrected problems cited. The law requires that in certain sectors firms employing more than 50 workers create a safety committee that could challenge the decisions of management concerning the occupational safety and health environment. Trade union monitors identified safety problems for government factory inspectors to ensure the enforcement of safety and health regulations and effective correction by management. The Labor Department's Inspections Unit conducted several routine annual inspections of government-operated corporations and manufacturing plants. Workers had the right to remove themselves from dangerous or hazardous job situations without jeopardizing their continued employment.
FOREIGN TRADE ZONES/FREE PORTS
There are no foreign trade zones or free ports in Barbados.
FOREIGN DIRECT INVESTMENT STATISTICS
The Government of Barbados compiles statistics on Foreign Direct Investment (FDI) in the areas of branches, subsidiaries, undistributed earnings, and other investments. The Barbados Investment and Development Corporation (BIDC) reported that since 1995, FDI has increase on average by USD 1.6 million, but in 2003 alone shot significantly upward by more than USD 80 million from the previous year. FDI in 2006 totaled approximately USD 91.5 million, up from USD 62 million in 2005.
MAJOR U.S. INVESTORS
American Airlines; Barbados Mills (Archer Daniels Midland);;;; Chevron Texaco;;; Citicorp Merchant Bank; JetBlue Airways; C F Caribbean Flavors; Delta Airlines; Ecolab Barbados Ltd. (joint venture); Ernst & Young; Exxon Mobil; Federal Express; Lenstec Ltd.; Pricesmart Inc.; SC Johnson; TGI Fridays; Hilton Worldwide Resorts; PriceWaterhouseCoopers; United Parcel Service (UPS); U.S. Airways; and IBM World Trade Corp.
An American Chamber of Commerce (AmCham), Barbados, has made attempts at formation, but has not met regularly.
For further information, please contact the Economic/Commercial Section at the U.S. Embassy.
US Embassy, Bridgetown, Barbados
Jonelle M. Watson
US Embassy Bridgetown, Barbados
CONTACTS FOR INVESTMENT RELATED INQUIRIES
The following are contacts for investment related inquiries:
Trident Insurance Financial Centre
Hastings, Christ Church
Invest Barbados - New York Office
800 Second Avenue, 2nd Floor
New York, New York 10017-4709
Additional web resources include:
Invest Barbados website: http://www.investbarbados.org; and The
Industry and International Business Unit of the Ministry of Economic
Affairs and Development Website: http://www.barbadosbusiness.gov.bb
Foreign Commercial Service, U.S. Department of Commerce:
Foreign Agricultural Service, U.S. Department of Agriculture: