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BARBADOS

Presented by

Financial

atement

udgetaryProposals

The Hon. Owen S. Arthur

Prime Minister and

Minister of Finance and

Economic Affairs

Tuesday, AprU 25,1995

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Introduction

Mr. Speaker/ Sir, today I have the honour topresent to Parliament the first FinancialStatement and Budgetary Proposals of theBarbados Labour Party Administration whichassumed officeon 6th September,1994.

If great expectations have been excited at theprospects of the eurticulation of my Government'seconomic and financial policies - and apparentlythey have been - those expectations are securelyrooted in the clear tmderstanding by one and allthat .we simply cannot afford to stand where weare.

Barbados has much to be thankful for. Thedint of effort of many, exhibited over severalgenerations, our national commitment to practisesound and creative policies in all areas ofnationalendeavour,and the resolve of the peopleof Barbados to do ever3rthing in their power tosee that Barbados succeeds have contributed tothe creation of a quality of life in this nationwhich is far superior to that of most developingstates, and nearly akin to that of theindustrialisedand developedworld.

Our national accomplishments however,should not cause us to wish to rest on our laurelsnor from directly confronting the very manychallengeswith which we have yet to grapple.

And they are many.

The economic, financial and social policiesof this administration will work themselves outin an environment which is remarkably differentfrom that which has faced any recent generation.

Ever3rwhere, the march of technology isexpanding the boundaries of production andaeating new and exciting economicopportunities, but equally reordering socialrelations, the way people live, work and relate toeach other. In its wake, the globalisation ofproduction is rapidly drawing countries, greatand small, into increased reliance on the

workings of the international free market, andinto intense competition to secure their place inthat market.

For us as a nation, these developments willherald major, far-reaching and irreversiblechanges in the way iii which we conductbusiness domestically and in the way in whichwe relate to the wider international economic

community.

Indeed, Sir, for generations, a very largeproportion of our economic progress wasfoimded on our being able to have access toguaranteed and protected international marketsfor our goods at guaranteed prices. Webenefitted, too, from the access we enjoyed tofinancial resources from donor countries and

lending institutions at concessional rates. Therewas also the expectation that, equipped withsuch resources, activist Governments couldforever expand the boundaries of social andeconomic opportunities in our nation.

Mr. Speaker, all of this has changed. The ageof market preferences and concessional finance iscoming to an end for Barbados. In addition, thelimits of possible state expansion have beenreached and perhaps even exceeded.

As a small country Sir, our economicprospects now and for the foreseeable future willtherefore depend heavily upon the manner inwhich we gear ourselves to compete in the new,competitive, international economy and, moreespecially so, Mr. Speaker, to take advantage ofthe very many opportunities which are even nowbeing created as a result of the changinginternational demand and technology.

I am confident that we can ihake it. And thisbudget will therefore address itself to theconcerns of a new Barbados, functioning in anew competitive international economy.

At home, despite considerable social andeconomic progress on many fronts, there are yeta number of*problems to be addressed. The

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burden unemployment bears grievously onthe best educated and trained generation ofyoung Barbadians in our history. The growthand expansion of the national economy hasbenefitted many, particularly large establishedenterprises; but it has not been as beneficial tosmaller, newer economic entities and, indeed, therecent process of adjustment has left manyfloundering. Breadwinners and households havealso been made to carry the bnmt of the nationalstructural adjustment efforts, but theircontribution to increasing productivity is criticalif national economic progress is to be secur^.They await Sir, signals that their contribution tonational development is understood, welcomeand will be stimulated.

In addition, although recent efforts havebeen made to reform direct taxation in Barbados,thiscoimtry continues to haveoneof thehighestratios of direct tax to national output in ourregion. And the present system of indirecttaxation is so punitive that it serves largely todrive much of our business underground orabroad. Added to this, the development of ourmoney and capiteil markets hasneither keptpacewith our economic and financial requirementsnor with developments in neighbouringCaribbean countries, where potential savers andinvestors are now profiting from the availabilityof a wider and more exciting range of financialinstruments.

On thefiscal side, theappearance ofstabilityhas camouflaged the growth in arrears byCentral Government's departments and thewidespread recourse to slipshod and illegalpractices which threaten to undermine theintegrity of our syst^ of public finances. Inaddition. Sir, public sector projects have beenbadly planned and even more poorly executed.And there is still very much the threat that unlessconcerted action is taken now to curb thefinancial appetites of some state institutions or toreshucture those which have been bankrupt forsome time, they will come to constitute a majordrain on the public purse.

Above all, Mr. Speaker, despite thesuperficial evidence of recent economic growth,the economy continues to be at its weakest whereit matters most. Economic growth cannot beindefinitely sustained, nor existing jobsmaintained nor new ones created by enterpriseswhich are insolvent, under-capitalized and cashstrapped, or earning rates of returns that are toolow to maintain investor interest.

Yet, regrettably, this happens to theunhappy lot of a large proportion of ttieenterprises operating in all of the mainproductive sectors oftiiis Barbados economy.

Mr. Speaker, it is my Administration'sintention to work assiduously towards buildinga strong, modem and competitive economy inBarbados, an economy in which the principalthrust in the generation of incomes and jobscomes from the expansion of activity in thosesectors which compete in the internationalbusinessarena; an economy so stmctured and somanaged as to enable Barbados, with itswonderful endowment of human resources, tograsp the opportunities daily being created in aworld of skill-intensive, knowledge-basedindustries,an economy in which there is a broadrange of thriving, prosperousand well managedsmall businesses, filling important niches in ourdomestic and regional economy, an economy inwhidi investor confidence is securely anchoredin our pursuit of sotmd and stable policieswhichallow enterprises to realise reasonable rates ofreturns and to plan their corporate affairs withinthe context of well-defined macro-economicpolicies. Welookto build an economy whichcanpay its way in the world, maintain a soundforeign exchange reserve position and maintainthe existing value of the Barbados dollar relativeto the U.S. dollar. We will build an economy inwhich the burdens of any adjustment are fairlydistributed, in which increases in productivityare at the centre of our considerations, and inwhich productivity gains are fairly sharedbetweencapital,labourand technology.

We will build an economy in which thelongstanding Barbadian penchant for fiscalprudence will govern the administration of ouraffiiirs and saveBarbadians from thespectacle ofeconomic and financial disorder whichregrettably hasdonesomuchharmtooursocietyrecently.

Above all, Mr. Speaker, we accept that it isfeasible, in the climate of our times, to conceiveofand toexecute economic andfinancial policieswhich will over time reduce unemployment inthiscountry tonegligible proportions.

Barbados has recenfiy been subjected to astabilisation programme and a series ofstructural adjustment policies carried out incollaboration betweeii the theii DemocraticLa1x)ur Party Administration and internationallending institutions.

Mr. Speaker, there are two critical optionsfacing Barbados today, and both are predicatedon the assumption that we see ourselves ashaving a responsibility to influence futureevents.

One option is to recognize that we havereached a point in our histoty where we canconstruct a sound economic foundation forourselves in the new century that is alreadybeckoning us.

The other choice is to procrastinate, or torefuse to consult a wider cross-section ofexpertise, as we have done over the last eightyears and continuethereby to be helpless victimsof our changing times.

I firmly believe that this coimtry hassuffered needlessly from excessive reliance onthe second optionover the lasteightyears, but itis not my intention to dwellunnecessarily on thecircumstances that placed Barbados in its worsteconomicexperiencesince Independence.

Those focts are still very fresh in memory,and need no embellishmentby me. On the other

hand, where reference is made to them by thisGovernment during discussionof the Budget for1995-96, it is principally to set the context for thereasons why, and the means whereby, we mustchart a different course.

I am persuaded. Sir, that undue dependenceon external judgments has undermined nationalinitiative. It has also robbed our people of theinspiration to achieve. This country can gainnothing firom such subservience, and we mustreverse thistrend withoutfurtherdelay.

Under ttie new Barbados Labour PartyAdministration, there will therefore be renewedopportunity for our people, whether asindividuals, as families, as corporate citizenswithin the private sector, or as agencies ofGovernment, to apply their considerableaptitude, knowledge and skills in constructing ajust society.

We will not follow the example of theunwise steward and hide our talents under abushel.

The task that lies before us, indeed, the taskon which we must embark immediately is onethat puts a premium on national integrity andloyalty. It recapture the pride that onceprompted and rewarded our productive efiorts.It will renew in us the spirit of brotherhood andcommunity that, for many a decade, has madeBarbados a model widely admired within theCommonwealthand far beyond.

As is well known, Mr. Speaker, much ofwhat we do in the real world depends on whatwe afford. In seeking to rebuild the desiredsociety, we must face certain fundamental facts.Beset, as other cotmtries are, by economiccomplications that are both domestic andexternal in origin, Barbados has still not emergedfrom serious financial difficulty. Prudence

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dictates that we exercise utmost care in clawingout of this' situation/ lest we lose control andplunge to a conditionpossiblywofse than that ofour recent experience.

It is therefore/ Sir/ out of a need to becircumspect/ but equally with a responsibility tobecreative/ that the Budget for 199^96 has beendesigned.

I would wish at this point/ Sk/ to make abrief acknowledgement. In shaping and refiningthis budgetary instrument I am indebted to mycolleagues at Cabinet and in Parliament/ to theCivil Service/ to the Boards of StatutoryCorporations/ to the leaders in the Private Sector/Trades Unions and Staff Associations. The

proposals that I am presenting today owe a greatdeal to the information/ suggestions/recommendations and cooperation of persons inall of these groups.

I am pleased to let you know that I have alsohad the benefit of views expressed by persons inother areaS/ including the Church/ social andcharitable organisations and other individualswho have no known affiliation to any group/including political parties.

In canvassing or otherwise lending an ear tosuch an extensive cross section/ efiFect was beinggiven to a policy set out in dur 1994 GenerdElection Manifesto. Our emphasis on developinga participatory democracy must be seen toextend l^yond strictly political issues. TheBudget is no exception/ eventhough/ ifwe are tobe realistic/ it is perhaps least likely to reflect thefond desires of every taxpayer.

I am nevertheless gratified/ Mr. Speaker/that as a result of sifting and refining theaggregates of all the various contributions/Government has produced a formula that is bestable to purge imptuities from our financialsystem/ revitalise our productive sectors andrestore Barbados to robust economic health.

The darkness at the end of the tunnel werecently inherited must be illtuninated. ThisGovernment/ which I have the honour to lead/wiU bringa brightness that the peoplecraveanddesire. They cannot function and thrive in theencircling gloom.

In the words of the poet John Milton:"...Doth God exactday labour/light denied?" Butlike Milton/ encompassedwith the deep shadowbrought on by his blindnesS/ we are not soheavilyshrouded fiiatwe cannot think. like him;toO/ we must with fortitude assail our afflictiohto produce an inspirational and enduring work.Such I trust/ Mr. Speaker/ is the nature of thisBudget.

The Barbados EconomyIt is against this background that I wish to

present a perspective of the performance of theBarbados economy in 1994/ ttie performance sofar and the outlook for 1995 and an appraisal ofour economic prospects for the short and themedium term.

Mr.Speaker/ it is estimated that the valueofgoods and services produced in Barbados in1994/ adjusted for price increases/ was just over4% more than the value pf output in 1993. Thisgrowth in 1994 followed upon a 0.6% increase inre«d GDP in 1993 coming after declines innational productionin the order of 3%/ 3.9% and5.7% in 1990/1991 and 1992respectively.

In the circumstances/ Sk/ it would betherefore fak and appropriate to say that a turnarotmd has started to gain momentum in theBarbados economy.

For the first timein 5 yearS/ the expansionofeconomic activity wasdrivenby the expansion ofthe export sectors. The performance of thetourism sector was particularly striking/ withgrowth of approximately 10% being realised onthe strength of a surge in long stay visitors in thefirst half of the year.Sugarproduction registeredan increase for the first time since 1990/ with51 000 tonnes being produced falling marginally

short of the amount needed to meet Barbados'EEC quota. Non-sugar agriculture^ however/declined by 5.3%/ continuing a trend which hasset in since 1991.

Manufacturing output is estimated to haveincreased by 7.3%in 1994/in contrast to declinesrecorded in the previous 4 years. Economicgrowth was also recorded in the domesticallyoriented sectors such as construction/ thewholesale and retail trades and the generalBusiness and Other Services Sectors.

Overall/ Sh/ it was estimated that the valueof goods and services produced/ as measured byGDP at factor cost amounted to $2.9218 billion in1994/ up from$2,788 billionin 1993. Significantly/however/ the GDP in 1994 at factor cost waslower than the GDP at factor cost of $2.9653billion in 1990/ although prices have risen £mdthe population has grown in the interval.

Nineteen-ninety four was also characterisedby significant investment in the tourism sector/involving hotel construction/ general upgrading/golf course construction/ general refurbishmentand investment in ancillary services such aswater sportS/ duty-free outlets and restaurants. Itis estimated that these investments amounted to$86 million/ of which about 30% was met fromforeign capital inflows.

In keeping with recent trends, andinfluenced by low prices abroad, consumer pricesabated in 1994 and it is estimated that the

average rate of inflation for the year amounted to0.1% compared to 1.1% for 1993 and 6.1% for1992.

The growth of the economy also allowed formodest job creation and the rate ofunemployment which stood at 22.1% at the endof 1993/ is reported to have declined to 21.2% atthe end of 1994. At the end of the year it isestimated that some 27 000 Barbadian, who haveactively been seeking Work,were imemployed inthis country.

The financial sector exhibited a contrastingperformance in the two halves of the year. In thefirst half of 1994, the commercial banis recordedexcess liquidity ratios as high as 13%,as a resultof the growth of deposits accompanied by weakprivate sector demands for credit.

In the second half of 1994 however, dieliquidity position tightened considerably wifiithe ratio falling to 5.7%, as a result largely of amajor surge in credit to the priyate sector.

Indeed, Sir, 80% of the $142.4 million in thegrowth of commercialbank credit to the privatesector occurred in the second half of 1994.

In December 1994, the Central Banktightened credit policy in a belated response to arapid increase in bank credit to the private sectorin the preceding months that had ^en financedby a reduction in the banks' holding ofGovernment securities/ which have resulted,since August, in a larger than programmeddecline in our countr3^sinternational reserves. Itraised the minimum deposit ratio from 4% to 5%and its own discount rate from 8% to 9^/2%.Banks responded by increasing the primelending rate by a percentage point, and theTreasury Bill rate, which had declined in themiddle of the year, was pushed up to 7.4% byyear-end.

Deposits at non-bank financial institutionsfell by ^5 million during the year. Inrelation tothe capital market, the significant developmentswere the placing of a $^ million cross borderissue by the CIBC, the issue of $98 million inbonds by the Government, and a $45 millionbond placement on behalf of the sugar industry.

Mr. Speaker, during 1994, there was animprovement in the balance of payments as wasreflected in $117 million increase in the countr3^snet international reserves. The favourable currentaccount balance, a feature of the preceding twoyeeirs, was supplemented in 1994by favourablecapital account transactions. Principal among

these were increasing foreign capital inflows tofinance piivate sector projects and, in addition,Sir, the Central Bank in 1994 borrowed enoughfunds on foreign capital markets to exceed itsforeignamortisation payments.

As a result of the improved balance ofpayments perfoitaance by the end of the year,the country's Liquid foreign reserves wereestimated to be equivalent to 11 weeks ofimports, compared to 7 weeks at the end of 1993.

Outflows for foreign debt service totalled$243.7 million, some $25 million more than in1993. Total debt service payments represented17.5 per cent of the value of the exports of goodsand services, somewhat below the 22.9 per centfor the four year periodendingin 1993.

Overall, Mr. Speaker, and certainly bycomparison of the recentrecord, the performanceof the economy in 1994 can be described ashaving been encouraging. There were, however,a number of features in the functioning of theeconomy of sufficient gravity to cause us totemper optimism with caution.

To begin with, and as previously observed,the value of goods and services produced inBarbados in 1994 was l^s than the value ofoutput in 1990, despite the fact of price increasesand populationgrowth in the intervening period.The implication is that the growth over the pasttwo years, though welcome, has simply not beenlarge enough to compensate for the farsubstantial declines in the preceding years. In thecircumstances, it would be an illusion for us tobelieve that the growth realized can support areturn of the national quality of life to earlierlevels without a substantial recourse to foreignresources.

•This feattire at the macro-level wasrepresented in a similar pattern at the sectoral.For instance, tourism arrivals grew in 1994 over1993, but again the arrivals for 1994 were below1989 and 1990 levels. More to the point. Sir,the

Central Bank's Annual Report for 1994 indicatesthat the upturn in the United Kingdom marketalone contributed 79 per cent of the overallgrowth in tourism arrivals and that this was initself explained by an influx of cricket fansduring &e second quarter of the year, cheaperfares,more chartersand intensifiedmarketing.

It is, fl^erefore, clear that unless those samepredisposing factors were to exist in subsequentyears, and this has not been the case, tourismwould not be able to sustain its contribution tonational growth. Of equal concern is the fact thatin 1994, Barbados continued to lose ground in itsmain market, the U.S. Market, with arrivalswhich stood at 154.3 thousand in 1989 falling to109.1 thousand in 1994. These things point to theneed to have our tourism affairs put in such asolitary state as to have strong growth driven bymarket forces rather than arise from infrequentspecial events.

It must also be observed that althoughBarbados continues to do well in the

development of its offshore business andfinancial sector, major windows of opportunitiesthat can lead to the generation of many millionsof dollars in new areas such as trusts and mutualfunds management have been missed outbecause there was tardiness in having therelevant legislation put in place. Of equalconcern. Sir, is the fact that many of theenterprises operating in tourism, manufacturingand agricultural sectors continue to experiencefinancial distress, as reflected in low or negativerates of returns and a build-up in their arrears tolending institutions and government's revenuedepartments.

The policy implication therefore must be.Sir, that structural adjustment at the macro-leveltaken in the form of trade liberalization tax

reform, financial liberalization and the like,designed to improve the macro-economic indicessuch as the growth rate, reserves and the level ofinflation now have to be supplemented byadjustments to underpin and improve thesolvency and the viabilityof enterprises in muchof the productive economyof Barbados.

Mr. Speaker, there has been a slow down inthe rate of growth in the Barbados economy inthe first quarter of 1995 and the Central Bardc,which initially estimated growth for the year ofover 2 per cent, has now revised its preliminaryestimate to approximately 1 per cent. Sugarproduction which amounted to 51 000 tonnes in1994 is now expected to decline 30.6 per centas aresult of the drought last year and tourism hasnot reproduced its performance of last year andis expected to grow only marginally in 1995.These are the chief factors at work in explainingthe slow down in the rate of growth of thiseconomy. The non-trading sectors and the othersectors of the economy are, however, expected toexpand.

More than considerable interest continues tobe shown in Barbados' informatics and offshorebusiness and financial services sector and weexpect that these sectors will be continued.

We are also sanguine about the prospectsfor the expansion ofmanufacturing in the light ofconcessions given, and the policies andconcessions to come.

Despite the fact. Sir, that more than 2^/2times as much foreign debt had to be repaid inthe first quarter of 1995 as in 1994, the netinternational reserves of the Central Bankincreased by almost $29 million in the firstquarter and the gross holding of foreign reservesby the Central Bank and the Central Governmentamounted to approximately $450 million at thelatest count.

It is anticipated, therefore, that although wewill commence the repayment of IMF loans inMay and the Yen denominated loan repaymentthat will be made this year will requirea largerBarbados dollar equivalent to service it, wenonetheless end the fiscal year to govern. It isexpectedhowever,Mr.Speaker, that the liquidityposition of the banking system will remain tight,and that has already been reflected in theproposed structure of Government financing forthe fiscal year 1995-96.

Sir, we anticipate that ttie output of thesugar industry which will be depressed in 1995will reach over 60 000 tonnes in 1996 and that the

performance of the tourism industry will gatherrenewed momentum by the winter of 1995.

The slow down in the growth rate in theBarbados economy in 1995 is therefore likely tobea temporary and a passingphenomenon and itis therefore envisioned that over the short andthe medium term the economy will operate on asustainable growth path,"'realising an annualaverage rate of growth of between 3% and 4%.

At this juncture. Sir, I need to spell out thenature of Barbados' relationships with theInternational Financial Institutions, since theserelationships will have a bearing on the course ofeconomic events in this country.

In 1994, in presenting his budgetaryproposals to this Parliament, the then Minister ofFinance indicated the intention of theadministration, on whose behalf he spoke, toenter an Enhanced Surveillance Facilityprogramme with the International MonetaryFimd to meet the preconditions of accessing anInvestment Sector Loan from the Inter-AmericanDevelopment Bank.

I said then, and my party pledged in itsManifesto, not to entertain an EnhancedSurveillance Programme or any financialprogramme with the International MonetaryFund. The IMF is free to send teams to Barbados

as set out in its various Articles to consult with

oiu: authorities and our advisers on economic

matters, and to render such advice through suchconsultations as it sees fit. And this it has

recently done.

I must, however say for the record, Mr.Speaker, that I was powerless in'Opposition toenter any deal, secret or otherwise, with the IMFfor any purpose, least of all to bring about thedevaluation of the Barbados dollar. And thisadministration has not entered any deal, secret orotherwise, with the IMF since 6th September,1994. There is also. Sir, no longer an IMFrepresentative- stationed in the Ministry of

Finance and Economic Affairs. This Government,however, proposes to maintain a constructiverelationship with the institution without enteringany financial programme.

In relation to the World Bank, Sir, Barbadosis due to graduate from having access to itsloans. During this fiscal year outlays will bemade on three projects which have been agreedto before the expiry of the phase-out period. Oneof these is a Human Resource Project for U.S. $18million designed to strengthen the humancapital-base of Barbados by providing resourcesto train our people.

"Die Democratic Labour Partyadministration had agreed that, as a preconditionfor the receipt of those loans, the Government ofBarbados should charge students at the Samu^Tackm^ Prescod Polytechnic and the BarbadosCommunity College fees.

This arrangement was entirely unacceptableto this administration and we so advised the

World Bank.

I wish to thank the World Bank for havingagreed to revise the terms and conditions of thisloan and I am pleased to be able to announce thatthis project, which can mean so much in our fightto reduce unemployment, will now go forwardwithout the conditions earlier entered into.

The Inter-American Development Bank hasevolved and will continue to function as the

main source of project and other developmentfinance for Barbados.

For the past thr6e years, the Government ofBarbados has been discussing with the Bank anInvestment Sector Loan which is intended toprovide quick disbursing balance of paymentssupport to assist in cushioning the effects ofstructural adjustment in the economy.

Again, the condition for the loan was thestipulation that Barbados should enter an

Enhanced Surveillance Facility Programme withthe International Monetary Fund.

Since September 1994 the Government ofBarbados has been conducting extensivenegotiations with the lADB to clear obstacles inthe way of accessing this loan. An lADB teamvfeited Barbados in March, one is at present inthe island and another is expected in May to dealwith matters pertairiing to this loan facility.

It is anticipated that arising out of theseefforts, the necessary documents pertaining tothe Investment Sector Loans with the Inter-

American Development Bank should be readyfor presentation to the IDE's Board of ExecutiveDirectors for approval in September of 1995.

Barbados is also in line to have access to the

IDE's Multi-lateral Investment Fund. This is a

U.S $1.3 billion Fund, financed by 30 membercountries, including Barbados, cind administeredby the lADB through which investment fundsare provided for the follovdng purposes:

First, to help Governments modernise theirjudicial systems, particularly in mattersrelated to private investment such asbusiness and corporate law and arbitrationmechanisms;

Second, to finance schemes geared towardsthe development of human resources. Andeligible recipients of funds will be drawn inthis instance principally from the nongovernmental sector and other entities suchas training centres, private training firmsand vocational schools; and

Thirdly, to provide funds for micro-enterprises and small businesses to meetcredit needs, to fund business advice,technical know-how and market

information, equity financing to SmallEnterprise Investment Funds and thecreation of partnerships and subcontracting.

The Government wishes to urge all nongovernmental and privatesector organisations tomake ttie fullest use of the opportunitiespresented by thisMulti-lateral Facility/ and oncetheway is dear, the resources of theMinistry ofEconomic Affairs will be pressed into service towork with the non-govemmental organisationsof Barbados and the private sector to ensure thatBarbados benefits tothe fullest from this fodlity.

Incomes Protocol

I turn. Sir, to the question of an IncomesProtocol. Mr. Speaker/ in consid^ing the shortand medium term prospects of the Barbadoseconomy/ I should also wish to spell out ourposition on any Incomes Policy. TheIncomes andPrices Protocol which had at its core a freeze onbasic wageS/ together with productivity andprofit-sha^g arrangements/ expired on 31stMarch/1995.

The Government and Sodal Partners havehelda series of meetings since September 1994 todiscuss the workings and impact of theoriginalProtocol and to examine the feasibility ofdevising a successor to take with us into thefuture.

Arising out of these meetings/ a Committeedrawn from representatives of the public andprivate sector, trade tmions and other workerinstitutions/ hasbeen established to,among otherthings, develop a successor Protocol on theunderstanding, Mr. Speaker, that the collectivebargaining process will operate in the future asthe framework withinwhichwages and incomespackages are arrived at, in both the public andprivate sectors, and that productivitygainsbe thebenchmark used in arriving at settlementat theenterprise, departmental and sectoral levels.

The Committee will also keep imderpurview industrial relations practices in thissodety and will through its investigations andrecommendations make its best endeavours toensure that Barbados continues to benefit from aclimate of stable industrial relations.

Mr. Speaker, Barbados is not yet out of thewoods. Formidable matters pertaining to ourinternational competitiveness await nationalresolution.

Our national accounts show that in 1994 thevalue of goods and services produced in thiscountry was less than in 1990. This dramaticpiece of information requires that for the futurewe must continue to pay oursdves increases outof productivitygains.

I must therefore grasp this opportunity.Sir,to impress the need for restraint and moderationin the size of wage settlements arrived at nowand for the immediate future, and I trust that allconcerned will continue to see the nationdpurpose in this matt» witli the same darity tiiatwasevident ovd thepast fewyears.

Monetary PolicyI turn now to monetary policy.

The objectives of monetary policy in thisfiscal year will be:

1. to maintain adequate foreign exchangereserve stocks so as to guarantee astable value of the Barbados dollar;

2. to ensure continued health of thefinancial system; and

3. to support initiatives for finandalinvestment in export and the tradeableservices.

Government recognises that a small fiscaldefidt, designed to prevent increased levels ofCentral Bank financing or an excessively highinterest rate regime, is integral to its objectives ofsustainable economic growth and a strongbalance of payments. By accompan3ringrestrained fiscal operations with a sobermonetary stance, we can ensure a strong balanceof payments and a maintenance of adequateforeign exchange reserves.

Government believes that a low interest rateregime will be conducive to enhancedcompetitiveneiss and strengthening exportpotential. However, the interest rate regime mustbe consistent with the coimtry's short andmedium terni reserves objectives.

In diis regard, tiie monetary policyframework has changed significantly over thecourse of the past fhree years. The liberalisationof the £uaanci^ S3rstem by the Central Bank andparticularly the dismantling of selective creditcontrols 1^ placed additional emphasis on theuse of interest rates as the main instrument of

monetary policy.

To this end, in 1993 and more recently lastDecember, the Central Bank raised the minimumdeposit rate as a result of strong credit growthand a tightening of the domestic liquidityposition. While there has been a moderateimprovement in banking liquidity during theearly months of 1995, some deterioration isexpected later in the year. Moreover, despite theforeign reserve gains in recent years, the foreignexchange situation remains fra^e when viewedin terms of the medium term objective ofbuilding reserves equivalent to three months ofimports.

Accordingly, the current monetary standwill be maintained for the time being and noincreases in interest rates is envisioned at this

time or in the immediate future.

Mr. Speaker, Sir, to indicate its commitmentto fiscal discipline, this Government will,restorethe statutory limit on temporary borrowingsfrom the Central Bahk to 10% of Government's

estimated revenue, where it stood prior to 1990.Government will borrow through the issue ofsecurities at market rates so as to encouragefinancial savings. Towards this end. Governmentwill review its cashflow management practiceswith a view to providing timely forecasts inorder to avoid breaches of the new overdraft

limit*of 10% of Government's revenues.

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Financial regulations are under continuousreview in the light of changing conditions athome and abroad. In 1994, a regional study ofbank regulation was completed.Recommendations which are pertinent toBarbados include amendments to the FinancialIntermediaries Regulatory Act, particularly withrespect to strengSiening the legal framework.New guidelines are also proposed for loanclassification and capital adequacy criteria andfinandal statements as well as to deal withmoney laundering. Institutional strengtheningwill focus on greater training and supervision,especially enhanced offsite surveillance.

Strengthening of the foreign exchangereserve levels depend in part on the developmentof our export industries. In this regard, thefinancing of new investment by firms engaged inthe export of goods and services is crucial. TheCentr^ Bank of Barbados already providessupport for the exports of goods and servicesthrough its export credit and guaranteesschemes. Financing for the export sector is alsoprovided through ^e Industrial Credit Fund andthe Barbados Investment Fund administered bythe Caribbean Financial Services Corporation.

The Bank has increased its contribution bythe injection of a further $1millionto assist in thecapitalisation of small business projects.Whilegood progress has been made with the financialaspects of economic stabilisation, the Barbadoseconomy remains fragile and it is necessary toensure that financial resources flow in the firstinstance towards exports and trading sectors.

Government particularly welcomes anysuch initiatives that may come from the privatesector.

External Debt Management

Mr. Speaker,Sir, declining levels of externaldebt, improved foreign, exch^ge earnings andhilling debt servicing requirements haveenhanced Barbados' external debt profile. Thishas contributed to a favourable Ba2 ratingobtained in December 1994 by Mood)r's

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Investor Service on Barbados' US$50 millionglobal medium term note programme. I ampleased/ Sir, to report to this Parliament thatdespite falling bond prices due to the Mexicancrisis, the price of Barbados' bonds put in themarket has been rising, which suggests thatcontrary to suggestions raised elsewhereinvestors still have confidence in Barbados'economic prospects.

Government accepts the need to exerciseprudence in new external borrowings and willcontinue to manage its borrowing requirementsjudiciously by engaging in selective commercialborrowing designed to refinance maturing debt.In addition. Sir, Government will strive,wherever possible, to lengthen maturities oncommercial loans and thusavoid thebunching ofrepayments.

Policies Relating toCARIGOM

Mr. Speaker, Sir, I now turn to policiesrelated to our trading in CARICOM. In 1989 atGrand Anse, Grenada, the Conference ofCARICOM Heads of Government decided toestablish a Caribbean Single Market andEconomy. One of the basic elements of thisprogramme is the establishment of free tradewithin the region. This was to have beenaccomplishedby September1990.

To date,despite the repeated tirgings by theCommon Market Council, three member stateshave not yet given effect to the decision byremoving licences on CARICOM goods, whichare inconsistent with their Treaty obligations.Barbados is one of these countries. And I mustemphasise that Barbados took part in all of thedecisions relating to the creationof regional freetrade, both at the level of Cotmcil and at the levelof Heads of Government Conference.

Cturently, Mr. Speaker, there are 58 tariffheadings for CARICOM products which requirean import licence in Barbados. Twenty-one ofthese are primary agricultural products, 23 areagro-processed products and the remaining 15are manufactured goods. Of tiie 23 agro-

processed products, 9 must remain underSchedule by virtue of the Oils and Fats Protocolof Schedule DC of the Annex to the Treatyestablishing CAMCOM.

Within the 15 manufactured productscategory, 6 products are kept under licence forsafety reasons.

At the Intercessional Meeting of theConference of Heads of ^^Govemment held inBelize in February this year, I gave theundertaking that Barbados would endeavour toremove licences on CARICOM goods as soon aspossible.

In pursuit of that undertaking, I met withthe private sector to assess the implications tothem of the removal of the licences. One of theresults of our initial meeting was the decisiontoestablish a Public/Private Sector bodyto identifynon-tariff barriers which confront our exportersin CARICOM, assess the implications of th5removal of licences for domestic manufacturingand agricultural industries, and to evaluate theeffectiveness of the relevant safeguardmechanisms of the CARICOM Treaty.

The Committee has identified barriers to theFood, Beverages, Agriculture, Garments,Furniture, Plastics, Packaging, and Chemicalsectors for Barbados. Ihese barriers range fromthe implementation of discriminating standards,to the use of subsidised inputs in themanufacturing process by other Caricomcountries. In addition to the above, other factorshave been identified as impacting on themanufacturing sector. These include the highcost of energy and the high port charges inBarbados which are among the highest in theworld.

I have decided, Mr. Speaker, that generally,licences which are inconsistent with oiu: Treafyobligations will be abolished with efiect fromJune 1,1995. However, it is recognised that evenwithin the context of a free trade regime, thereare, at times, certain sectors or sub-sectors which.

11

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given their sensitivity and, indeed, theirvulnerability, cannot be exposed to free trade.This is so. Sir, in the Canada/US Free TradeArrangement, and in the North American FreeTrade Agreanent which embraces the UnitedStates of America, Canada and Mexico. And it isalso reflected, Mr. Speaker, in the Agreements ofthe recently established World TradeOrganisation.

For instance, the poultry and egg industriesof Canada are insulated from free trade underNAFTA. The agricultural sector is also protectedin all three cotmtries that participate in that freetrade arrangement as well.

Mr. Speaker, in Barbados there are certainaspects of our industrial and agricultural sectorswhiich we cannot as yet commit to free trade,without exposing them to serious adverseconsequences. I refer. Sir, to the Poultry, Egg,Ham and Bacon sub-sectors as well as certainagriculturalproducts. In addition,our softdrinksindustry could suffer untold harm if it were nowto be opened up to free trade in the region.

There is a strong case indeed. Sir, forretention of licences in respect of the soft drinksindustry in particular. The CARICOM Councilhas recognised the difficulties inherent in freetrade in soft drinks in the region. That is why ithas requested an in-depth study of the regionalindustry and before any decision is taken toremove licences from soft drinks in Barbados weprefer to await the results of the study as well asthe pronouncement of the CARICOM Council onthat matter.

Similarly, Sir, my Government will notremove licences fro£i^ agricultural products tmtiladequate protection is provided under the Treatyfor this sector. This position has already beenclearly conveyed to the CARICOM Coimcil. Inaddition. Sir, even with the safeguard provisioncontemplated by the Coimdl, Barbados will haveto retain licences, at least for the medium term,on poultry, eggs, ham and bacon production.We are prepared. Sir, to make this

12

submission to thenext meeting of theCARICOMMarket Council later in the year.

My Government, Sir, recognises that tradeliberalisation is the centrepiece of the results ofthe GATT Uruguay Round, and is the majorobjective of the World Trade Organisation. Thismeans that Barbados, like any other country thatis participating in multilateral trade, will havealso to respond to the process of tradeliberalisation. Indeed, we have already begun todo so, as evidenced by our tariff reductions, aswell as the abolition of a number of licences oncertain imports into Barbados.

However, Mr. Speaker, I wish to make itabundantly dear that Barbados is prepared toengage in free tradeto theextent thatit is capableof so doing. And we expect that trade will notonlybe free but will also be fair. We expect thisto be so in the extra-regional arena and we alsoexpect thistobe soin CARICOM as well.

Mr. Speaker, it is my Govemmenfsintention to deal firmly with any unfair tradingpractices against Barbados' exports toCARICOM, once we have removed licences onregional goods. In this context, I haveinstitution^ed a public/private sector body,under the Chairmanship of the Ministerresponsible for Industry, to monitor any unfairtrading practices perpetrated against Barbadosand to bring fiiem to the attention of tiieGovernment for necessary action.

In summary. Sir, my Govanment willpursue the following polides in respect of itstrade with our CARICOM partners:-

1. All licences inconsistent with Barbados'obligations under the CARICOMTreaty will be removed as of June 1,1995.

2. We will identify to CARICOM thosqproducts which, because of theirsensitive nature, Barbados is unable tofully expose to free trade.

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3. We will seek/ wherever it becomesnecessary/ to invoke the relevantsafeguard provisions tmder the Treatyto protect any industry or sector fromthreat or actual injury due to anincrease in imports from memberstates.

4. Licences on soft drinks will be

reviewed after submission of theCARICOM intra-regional trade inbrewery products and soft drinksstudy.

5. Licences on ham and bacon will also be

reviewed when more detailedinformation can be made available anddecisions made regarding the sourdngof raw materials.

6. Licences on primary agriculturalproducts are to remain until the newArticle 29A is ratified by all memberstates and therefore comes into force.This article will provide for restrictionsto be imposed on competingimports incases where agricultural enterprisesexperience serious difficulties as aresult of opening the market to regionalimports;

7. Investigations are being carried out todetermine if applications should besubmitted for relief under Article 29 ofthe CARICOM Treaty in respect ofbeer/ pasta products. Tee shirts,wooden furniture and other sensitive

industries which may qualify for suchtreatment.

8. Barbados will, if we consider itnecessary, invoke the relevantprovision of Article 56 which conferson us the same right as the LDCcountries of the region to imposequotas and tariffs on regional imports;

9. To deal with subsidized and dumpedgoods entering Barbados, theGovernment will invoke the relevant

provisions of the Customs Duties(Dumping and Subsidies) Act, Cap. 67.This Act will also be revised to bring itinto line wititi the recently concludedGATT-World Trade OrganizationAgreements on dumping andsubsidies.

Mr. Speaker, in leaving this aspect of trade, Iwish to emphasize the Government'scommitment to free but fair trade widun ourregion. In this context, we will continue to playour part in moving the region towards theestablishment of a single market and a singleeconomy. Butwe will not do this at any price;

Reform of FinancialInstitutions

I turn next. Sir, to the reform of our financialinstitutions. Mr. Speaker, two financialinstitutions owned by Government, the BarbadosDevelopment Bank and .the Barbados NationalBank have been performing poorly for some timenow and, if allowed to continue in their presentform, will create problems for the Treasury andundermine the integrity of our financialsystem.

Many studies have been undertaken toinform the restructuring of these institutions butno action has yet been taken to deal widi theproblems identified.

The hour of decision, has come.

Restructuring of the Barbados Development Bank

The Barbados Development Bank, hasaccumulated losses of approximately $65.0million over the 25 years of its operations, and isat present technically insolvent. My Governmentsees a continuing need for a financially sounddevelopment finance institution to assist in thegrowth and diversification of our productivesectors.

To be effective, the Barbados DevelopmentBank will have to be fundamentally restructured.

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The case^for restructuring the Bank is rooted inour belief that a well functioning developmentfinance institution can make a d^erence in thedevelopment of the financial and capital marketsin Barbados by mobilising domestic financialresources for investment purposes and^ withappropriate policies in place, contribute to thecreation of emplo3anent opportunities and theearning of net foreign exchange. In this context.Sir, a restructured Barbados Development Bankcan assist in promoting indigenous developmentin Barbados, thereby, making growth morebuoyant and robust.

The main elements of a restructuring planfor the Barbados Development Bank will involvethe abolition of the Barbados Development Bankin its present form and fo replace it by two (2)new companies to be established under theCompanies Act of Barbados, a new DevelopmentFinanceInstitution and a Recoveries Company.

New Development FinanceInstitution

The new Development Finance Institutionwill assume responsibility for the perfonxdngloans on the existing Barbados DevelopmentBank. It is proposed that this institution shouldbe jointly owned by. Government and non-Govemmental entities and Government's

shareholding in this institution will bC achieved,in part, by the conversion of $19.0million of theBarbados Development Bank's debt to equity inthe institution.

Thei new Development Finance Institutionwill also mobilise funds from the IndustrialCredit Fund, the C^bbean Development Bankand through issues of National DevelopmentBonds. Initially its main activity will be theprovision of loan financing. But we believe. Sir,that a new Development Finance Institutionshould also be in die business of providingfinancing in enterprises by holding equity.Therefore, Sir, the new institution will seek todiversify its functions by offering a range offinancialservicesincluding:

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(i) Equity and Venture Capital Financing;

(ii) Corporate and Management Servicesand Consulting Services.

Recoveries CompanyThe non-performing loans of the existing

Barbados Development Bank will be assigned tothe new Recoveries Company. Those projectsconsist of loans that can be rehabilitated and also

those that are deemed non-salvageable. The newentity will be 100% owned by the Governmentand will seek to rehabilitate those loans that have

good prospects for restructuring and will sellthem back to the new Development FinanceInstitution. It wiU, however, seek to liquidate asquickly as possible those projects deemedunsalvageable.

The company will seek to develop a capacityto undertake receiverships, liquidations andrestructurings. This capability be used notonly to rehabilitate and liquidate the loans on itsown portfolio but also to offer services to otherbusinesses in Barbados in competition wifiiexisting operators in the field.

This entity will specifically address theneeds of file troubled small to me^um size hotelenterprises in Barbados. While there has beensignificant refurbishment and expansion on theWest Coast, the South Coast properties havelagged significantlybehind in this regard.

My Government has fiierefore formulated apackage of assistance aimed at restoring theseproperties to viability, in addition to creating anenabling environment for sustainable growthand increase foreign exchange earnings.

The main element of this package wouldinclude:

(i) The provision of a $10 million facilityfor the upgrading and refurbishment ofhotel plants which are in debt to fiieBarbados Development Bank.

(ii) Debt relief by conversion to equity inthe region of between 20- 30%of debtliabilities of the enterprises concernedamounting to between $4 - $5 millionof the sum concerned.

(iii) Arrangements for Group Managementand the marketing of properties,involving the employment of aCanadian Management company withconsiderableexperience in this area.

The success of this programme will requiretheco-operation and collaboration of theexistingowners who must appreciate the fundamentaldifferences between the ownership andmanagement of business enterprises, and I lookforward to the co-operation of all concerned inthis endeavour.

The Barbados National BankThe new Board of Directors of the Barbados

National Bank have instituted measures tostructureand operatethe institution as a genuineCommercial Bank.

These measures have included the establishment of a centralised credit administration andcorporate lending department and the recruitmentof professional management to fill keyposts in the Bank.

Despite the foregoing initiatives there are anumber of structural problems which willcontinue to impede or adversely affect the Bank'sperformance unless remedial action is taken.

Impaired or Non-performing LoanPortfolio

As at December 31, 1994, the Bank'simpaired or non-performing loan portfolioconsisted of approximately 1 284 accountsaggregating to an estimated $60 million. Everyeffort win be made to restructure a number ofthese accounts and, where this is not possible, tominimise the loss to the Bank.

The Board believes, Mr. Speaker, thatinadequate loan loss provisions had been made

in previous years. The Bank's management andthe Au^tors have conducted a review of theBank's loan portfolio and have made a loan lossprovision of approximately $13 million for theyear ended December 31,1994.

The Bank is therefore, expected to show aloss in the vicinity of $10 million for the year1994, and a further loss of $3 million is estimatedfor 1995 as the effort is made to restructure theBank's portfolio. Thereafter, it is expected thatthe Bank will return to profitability in 1996 andshow sustained growth thereafter.

The Low Yield on Govem-meht Securities

In addition, Mr. Speaker, arising out of therestructuring of the Sugar Industry Portfolio, theBarbados National Bank was requiredto accept abundle of Government Securities with jdelds aslow as 4%, in drctunstances where the BarbadosNational Bank has to pay upwards of 725% toattract sizeabledeposits. This peld disparity willcontinue to undermine the performance of theBarbados National Bank and will in due coursebecome a fiscal problem unless timely remedialaction is taken to address the problem.

Presently, the Bank holds almost $350million in Government securities of which inexcess of $200 million relates to the settlement ofthe Sugar Industry debt. Each percentage pointbelow market prices on the latter results in a lossto the Barbados National Bank in excess of $2million a year.

The bank will, therefore, need to have thesesecurities carry a coupon rate as near to themarket rate as possible and discussions betweenthe Bank and the Ministry of Finance are in trainto have this matter resolved as soon as possible.

National Insurance SchemeMr. Speaker, Sir, I turn to matters pertaining

to the National Insurance Scheme dealing firstwith the issue of pensions. National Insurance

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pensions were last increased in1990 when infactthere were two increases —a $3.00 per weekincrease onMay 21 andbya furthet srnn of$6.00perweek inDecember. The current minimum oldage contributory pension is $76.00 perweek andthe non-coi^tributory pensionis $63 per week.

In 1984, Sir, it was established by the thenBarbados Labour Party Government ttiat a non-contributory pension would be pitched at 80% ofthe value of the minimum contributory NationalInsurance pension. It was determined also thatconsideration would be given to increasing thevalue of all pensions payable under theNationalInsurance Scheme, not annually, but every twoyears.

In our Manifesto of 1994 we recognised thatthe need for increased pensions was urgent andwe also pledged to provide and protect theentitlement of all workers to their retirementbenefits. Government is committed to increasingthe current levels of National Insurance pensions,but it is deeply aware of the fact that this has tobe accomplished without doing damage to theFund.

Thepension costs of the fund are high, witha pension roll at December 31, 1994 of some31383 persons. As recently as 1993 payments inrespect of old age contributory and non-contributory pensions, reached a total of $122million, representing some. 96% of thecontribution income of the Frmd. Thoughexpenditure in respect of these pensionsincreased to $136 million in 1994, their share ofthe contribution income was reduced toapproximately 80.4% consequent upon theincrease in contribution rates with effect fromJanuary 1994.

Barbadians must share the burden of beingresponsible for our elderly. But in so doing, wemusl reward thrift and hard work. I thereforepropose. Sir, to re-establish the 20% differentialbetween the non-contributory and thecontributory pensionpayable out of the NationalInsurance Fund but in two phases. At the

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moment. Sir, the difference is 17.1% and Ipropose to increase it to 18.8% on this occasionbyincreasing the minimum contributory pensionfrom $76 to $82.50 per week and the non-contributory pension from $63 to$67 perweek.

Mr. Speaker, those who have contributed toour National Insurance Scheme and are nowretired, willfrom the nextpension period of 15thMay 1995, receive an increase of approximately8.4% in their pensions, whereas tiie non-contributory increase isapproximately 6.3%.

Mr. Speaker, these proposals on pensionsare estimated to cost the National InsuranceScheme$10.5 million in a full year. This increase,in my opinion, will not damage the finances ofthe Scheme,but the structure of the contributionsto the several branches of the Scheme will haveto be changed.

In this respect. Sir, members of the lastadministration in their collective wisdom, saw itfit and necessary to increase contributions to theimemplo3nnent branch of the scheme by some450% in 1991 while at the same time decreasingthe rates of benefits. Consequently andnotwithstanding the belated reduction in thecontribution rate to 3% of insurable earnings inJanuary 1994 the Unemplo)mient fund hascontinued to accumulate the reserves at ascandalously high rate. When it is consideredthat a contingency reserve of one year*sexpenditure is the actuarial recommendedreserve for such a fund and tiie greatestlevelofexpenditure for any one year has been the $27million that was paid in 1992, reserves. Sir, of$94.4 million at the end of 1994 are gross to saythe least.

This has to change, Mr. Speaker! However,!have been advised that I should await theactuarial report for the triennium endedDecember 1993 which is expected by Mid-Maythisyearbefore effecting the change. Butyou canbe assured. Sir,that the changein the structureofthe contribution rate to the Unemplo)nnentBenefit Scheme will be made once we are in

receipt1995.

of the actuarial review in Mid-May

Mr. Speaker, before I turn my attention tothe other issues related to the Social SecurityScheme there are three further matters involvingpensions whichI must simplyaddress.

When we assumed responsibility for theGovernment of this country in Septemb^ 1994,we fotmd a recommendation from the NationalInsurance Board relating to persons living inBarbados who were in receipt of a pension fromanother Government or Social Security Schemeof a lesser amount than the Barbados non-contributory pension. The legislation existingthen disqualified such persons from receiving thenon-contributory pension and the Board wasfirm initsresolve that the more equitable way todeal.with thematter was totop up the pension tothelevel ofthenon-contributory pension.

But, Mr. Speaker, what was the response ofthe then DLP administration? They dilly-dalliedwith this matter for years and demitted officewithout bringing to a conclusion a simple issuewhich would have brought joy and relief to anumber of poor Barbadians in the evening ofIheir days.

This Government, however, Mr. Speaker,has taken action on the recommendation of theNational Insurance Board and I have signed thestatutory instrument to giveeffect to the toppingup of all such pensions. Never again, Mr.Speaker, should the elderly in our community,who meet the age and the residency criteria ofthe National Insurance regulations, be in receiptof a pension income of a stun less than thatestablished for non-contributory pensions tmderthe National Insmance Scheme.

I also adverted earlier in this presentation.Sir, to oiu: Manifesto commitment to protect theentitlement of all workers to their retirementbenefits. It is within this context. Sir, that I ampleased to annotmce that favourable consideration will be given to theapproval of the

CARICOM Social Security Agreement. ThisAgreement seeks to protect the migrant ortravelling worker's entitlement to pensionbenefits and to ensure him equality of treatmentin his movement firom one country to anotherwithin the region. The Agreement, therefore,provides for thepooling of thecontributions paidin the various countries, and for the pa3anent ofthepension byone ormore oftheSocial SecuritySchemesonce you have satisfied the contributioncriteria.

Mr. Speaker, the last pension relatedmatter I wish to deal with is more of acompliance matter. I have stated already in thispresentation that we all have to carry the cost ofwhat is generally recognized to be the mostcomprehensive Social Security Scheme in theEnglish speaking Caribbean. But, Mr. Speaker, aparticular category of insured persons, the selfemployed, havealways soughtto renege on theirlegal obligation to contribute to the Scheme. I,therefore, propose to instruct the HonourableAttorney General to draft the necessarylegislation to exclude from the receipt of non-contributory pension all fiiose persons whoduring their working life were meaningfully^geged in economic activities as self-employedpersons but neither paid their contributions norwere exempted from doing so by the NationalInsurance Board.

Compliance

All tax systems in democratic cotmtries relyheavily on volimtary compliance for its successin collecting revenue. Over time. Sir, andparticularly in recent years citizens have provento be quiteadept at circumventing fiie legislativeprovisions and Governments have foundthemselves having to amend and upgrade thelawson a continuing basis to keepabreastof thelegal manoeuvrings beingemployed to avoid thepa3nnent of taxes.

Notwithstanding the generous quid pro quoofthecontributions paid, the Nation^ Insuranceand Severance Pa3rments Schone have beenplagued witii* problems of non-pa3rment of

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contributions and non-compliance generally.Some ofthepractices employers have resorted to,Mr. Speaker, are in the language of the Chairmanof the Board, "highly questionable". Indeed> hehas informed me, Mr. Speaker, that:

"ordinary workers including maids, storeclerks and persons employed in factoriesarebeing deemed independent contractors bytheir employers.

Someemployersare very prompt in makingthe statutory deductions from theiremployees' pay, but then they forget to paythe monies over to the National InsuranceScheme.

Others accumulate large liabilities to theScheme and then they shift their indebtedcompany's assets into other companies andcontinue on in the same line of business as

though nothing has happened."

Mr. Speaker, these abuses must stop! AsMinister responsible for National Insurance, 1have accepted the recommendation of theChairman and the Board on the measures neededto tighten tiie legislation to put an end to theseobjectionable practices. I can inform Members ofth^ House that the focus of the amendmentsshall be on making directors of companiespersonally liable for the non-remittance ofstatutory deductions such as National InsuranceContributions to the relevant statutoryinstitutions. At the same time active

consideration will be given to debarring all thosecompanies guilty of the practices adumbratedfrom qualifying for the award of Governmentcontracts.

Financial ReviewMr. Speaker, Sir, I now turn to the Financial

Statement emd review of the Government'sdomesticsituation during the year ending March31,1995.

Revenue

The current revenue for the fiscal year1994/95 was originally estimated at $1022.2m.

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Provisional data suggests that actual collectionup to March 31,1995 was $1 billion 72.9 million,some $63 million or 6.2% higher than for thefiscal year 1993/94. This outturn was dueprimarily to a very strong revenue performariceduring the quarter January to March, led mainlyby an extraordinary performance in theCorporation Tax. The amounts collected duringFebruary and March were higher thananticipated and the data to date suggests that theoverall yield from the Corporation Tax was$116.3 millioncompared to $86.5 in 1993.

Expenditure

On the expenditure side, currentexpenditure for tiie tiscal year 1994/95 wasoriginally set at $1 billion 99.5 million. Duringthe year, supplementary provisions of $69.6million were approved, making total currentexpenditure approved by Parliament some$1 billion 169.1 million. The approved estimatesof capital expenditure for the year amounted to$172.1 million. During the course of the year,supplementary provisions totalled $13 millionapproved by Parliament, making approvedcapital expenditure $185.1 million.

The expenditure outturn for the year isprovisionally estimated at $1301.9m of which$1177.6m is current expenditure and $124.3mcapital expenditure. As a result, the overalldeficit is estimated at $229million or 7.8 per centof the Gross Domestic Product. When this isconverted. Sir, to the basis used by theinternational institutions, the deficit is $13.6million or 0.5 per cent of the Gross DomesticProduct.

Mr. Speaker, this was achieved in spite ofthe fact that we decided to pay off a largenumber of debt and arrears which the previousadministration left outstanding, converted twoloans - one of $7 million and another $6.7 - intogrants for the Severance Fund and the CaribbeanBroadcasting Corporation respectively, and gavesignificant concessions to manuhicturing.

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library of parliamentagriculture including fishing, hotelhandicapped and other individuals.

sector.

Throughout the year, and particularly sinceSeptember, deliberate efforts were made torestrict the growth of e}q>enditure and to createaclimate which would allow businesses to flourishafter years of hardship resulting from themisguided policies pursuedbyour predecessors.

It is obvious from the fiscal outturn. Sir, thatthere has been a great measure of success withthese endeavours. In fact. Sir, the outturnclearlyshows what can be achieved if prudent financialmanagement is pursued and if there is adetamination on the part of those responsiblefor tilemanagement of the system to maintain itsintegrity.

Of the $82.6 million in supplementaryappropriations approved by Parliament duringtiie last fiscal year, tiie staggering sum of $44.3million had to be used to settle the unpaid billsand other arrears left by the former Minister ofFinance and his colleagues of the DemocraticLabour Part^'.The breakdown. Sir, of these sumsis as follows:

$4607 726 - Welfare Department topayarrears to the Transport Board for the travellingof old people on the buses of the TransportBoard

$6.4 million - To the Transport Boardto pay arrears to the Inland Revenue and theNational Insurance Department.

$23.8 million - Tothe University of theWest Indies to pay arrears to the Universityparticularly. Sir, the fees of the students fromBarbados attending the University of the WestIndies.

$3.8 million - To pay outstandingbillson the Sherboume Complex.

the past.$2million - Topay forland acquired in

$2.5 million, Mr. Speaker, to pay thearrears and the debts of the Barbados Tourism

Authority.

$158 000- To settle the impaid bills ofthe Holetown Complex and $1.1 million to settlethe debt of the other institutions on behalf of theagricultural sector.

Mr. Speaker, I must repeat that in spite ofthe fact that we settied all of these debts and didall other things, in^uding relief tomanufacturing and agriculture we were still ableto keep the deficit to 0.5per cent of GDP. It has tobe understood that the diversion of financialresources to clear arrears rather than to stimulatenew activity means that this new administrationwas constrained from making a much greaterimpact on the social and economic life of thecountry in our short tenure of office.

National Debt

The National Debt at March 31 isprovisionally estimated at $2 329.8 million, 0.5%higher than at March 31,1994. The domestic debtrose by 1.2% while the foreign debt fell by 2.7%.At March 31,1995 the domestic component of tiiedebt was estimated at $1 683.2 million or 58.4%of the Gross DomesticProduct, while the foreigncomponent was estimated at $646.6 million, orsome 22.4% of GDP.

Public Finances -1995/96

I turn. Sir, to Public Finances for 1995/96.The Estimates of Revenue and Expenditurerecently approved by Parliament provide forrevenues of $1106.7 million and expenditure of$1362.7 million leaving an overall deficit of $256million. In spite of the fact that the revenueoutturn for the fiscal year just ended was higherthan the base we used in projecting revenue forthis fiscal year, I propose to retain the proposedestimate of revenue for 1995/96 which reflectsonly a modest growth.

As I explained to Parliament a few weeksago. Sir, the Estimates for 1995/96 have beenprepared with one of the major objectives beingto keep the deficit around 1% of GDP while at thesame time to* increase spending on Capital

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Formatictn and to make provision for spending inspecial areas to help create a climate which isconducive to new investment by the privatesector.

The Government has developed a mediumterm strategy and the various measures whichare being proposed this year must be taken inconjunction with those adopted since October, asweU as thoseplanned for the comingyears.

Among the special contributions in theEstimates or the budgets of StatutoryCorporations are the following:

(i) Provision for studies relating to theCarlisle BayRedevelopment Project

(ii) Provision for studies relating toSpeightstown Redevelopment

(iii) Provision for Rural Development andUrban RenewalProgramme

(iv) WaterResoiurces Development

(v) HousingDevelopment

(vi) A new YouthProgramme

(vii) Provision for the Rehabilitation of theSugar Industry and

(viii) Assistance and Incentives toencouragepeople to plant sugar cane on landsnow lying idle.

I wish, however, Mr. Speaker, to soimd aword of warning to all those persons who areresponsible for spending public funds. Our aimis always to get value for money and to see thatAccounting Officers remain accoimtable for thefunds entrusted to their care.

Therefore, I wish to state that the sums ofmoney approved by Parliament constitute thelimits within whicheveryone must operate. Thatis so for the Central Government Agencies as

20

well as those Statutory Corporations whichreceive subventions from Government.

In other words. Sir, if Parliament hasapproved, for example, a provision of $1 millionfor a particular programme, a programme whichcosts $1 million should be developed forimplementation by the Department and not onewhich costs $3 ir^on on the assumption thatthis Parliament will come back and grant asupplementary appropriation later in the year.This practice must stop as we seek to restoresoundness to the management of our pubUcaffairs.

Fiuthermore, in no circumstances shouldanyone undertake expenditure in excess of thewarrants released by the Ministry of Finance andEconomic Affairs or in excess of the amountsapproved by Parliament or, worse yet. Sir, incurexpenditure when there is no provision for suchexpenditure in the Estimates approved by thisParliament.

The recent Report by the Auditor Generalhighlighted a number of instances where suchthings were done and I trust I will see no suchthings occurringin future reports.

A review of the Financial Rules is therefore

now being imdertaken by a Committee tmder theChairmanship of the Permanent Secretary in theMinistry of Finance and, without pre-emptingthe recommendations which that Committee willmake, I think that there is need for additionalpenalties to be provided to deal with thedisregard for proper financial managementwhichthe AuditorGeneral hais highlightedin hisReports.

During the year the staff of the ManagementAccounting Section and the Budget Section of theMinistry of Finance and Economic Affairs will bevisiting Statutory Boards and Ministries andDepartments on a regular basis-to monitor theirexpenditure and to ensure that they are operatingwithin the agreed fiscal framework.

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The Statutory Corporations will be requiredto submit regular and timely finandalinformation to the Ministry of Finance andEconomic Affairs so that we will have a goodunderstaniding on how the consolidated publicsector is performing.

During 1990, as one of the many instances offinancial recklessness practised by the lastadministration, the Financial Administration andAudit Act was amended to increase the amount

which the Government can borrow in anyfinancial year from the Central Bank by way ofoverdraft from 10% to 17.5% of estimatedrevenue for that year.

At the time, I did not agree with thedecision of the Government because I was aware

of the implication for the foreign reserves ofexcessiveborrowing from the Central Bank.

Therefore, as part of my effort to restorefinancial integrity to Public Finances and toensure that Government's expenditure does notin any way create foreign reserve problems forthe Central Bank, I have decided to reduce theWays and Means limit from 17.5% to 10%, andthat will take effect from tomorrow.

Debt Management StrategyIn relation to our Debt Management

Strategy, during this fiscal year the CentralGovernment has tp repay foreign loans totalling$80.9 million in principal and $52.9 million ininterest.

Our debt management strategy for this yearwill be to borrow on the foreign market loansequivalent to the amount of principal which wehave to repay.

We will pay maximum attention to theimplementation of foreign funded projects andthe early submission of claimsfor reimbursementso as to minimise the net outflow of foreignexchange.

In addition, Mr. Speaker, discussions havebeen initiated with a number of interested partieswith a view to working out a refinancingpackage for the major commercial loans whichareverycostly to service. Theobjective hereis toreduce the interest costs and to lengthen thematuritystructure of thoseloans.

During this year. Sir, the Central Bank hasto makefour repayments to the IMF towards theloan which was raised from the Fund in 1991.These will amount to some $54.5 million by theend of the fiscal year.

Divestment and Commercialisation ofStatutory Corporations

In relation to our divestment andcommercialisation of Statutory Boardspolicy;Sir,during this year the Government proposes todivest interest in a number of enterprises. Theseare as follows:

(1) The shares which the Government nowowns in the Barbados Light and PowerCompany will be sold to the NationalInsuranceDepartment at the prevailingmarket price. It is expected that some$2 million will be realised from thissale.

(2) The shares which the Governmentowns in the Pine Hill Dairy will also besold.

(3) Contrary to popular belief, the presentarrangement with the Hilton Hotel isnot one which the Barbados TourismInvestment Corporation has benefittedfrom significantly. In fact, theCorporation is now experiencing greatdifficulty in servicing its loans and isnow faced with the possibility of ahuge refurbishment bill. Therefore, it isclear to me that the time has come forthe Government to re-evaluate itsinvolvement in the Hilton Hotel andconsideration is being given to sellingthat entity.

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(4) Government will also reactivate plansto restructure and to privatise theCaribbean Broadcasting Corporation.Cabinet has had to take^the decision toconvert a loan of $6.5 million to thatinstitution into a grant because it is atpresent technically insolvent.

(5) The Government is also committed tofully commercialising the airport andwe will shortly be establishing anAirport Authority.

At that time, it is expected that institutionssuchas the National Insurance Department willtake the opportunity to invest some funds in there-development of the airport in an effort todiversify its investments and to improve itsreturns.

Government also, as you know, Mr.Speaker,owns a significantnumber of under- orunutilised properties and parcels of landscattered all over Barbados, most of which couldbeused effectively in theprivatesector.

It is proposed, therefore, that efforts besteppedup to dispose of theseproperties and thesums realised from such sales will be earmarkedto support the new housing thrust of theNational Housing Corporation, which isattracting $11 million this &cal year.

Outline of BudgetaryProposes

Statement of Policies

Mr. Speaker, I now turn to the outline of thebudgetary proposals. As I turn to the budgetaryproposals. Sir, I wish to outline the kinds ofpolicy concerns that have inspired thecomposition of the package of measures beforethis House, and the ends being sought byGovfemmenfs fiscal and other economic andfinancialpolicies.

Mr. Speaker, the structural adjustment ofthe Barbados economy will notbecomplete, norwill we meet our employment objectives unlesswe act now to restore the viability of that broad

22

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cross section of the productive sector which isnowfacing gravefinancial stress. Thispart of thebudgetary exercise seeks to address this as ourmain priorify this year. It also, accepts the needfor us, in the interest ofemplojrment andforeignexchange generation to put in place concessionswhich can lead to an expansion in profitablebusiness activities, particularly in areas thatexpand tourism and international businessactivity. The budgetary process alsoacknowledges that we have to use fiscal andother economic policies to assist in reducing thecost of doing business in Barbados and toremove many of the encumbrances whichprevent theexpansion of existing enterprises andthe creation of new ones.

Our policies are also based on therecognition that there are some matters,particularly the development of ova waterresotirces and the protection of our environment,which aresocrucial to improving thequality oflife in this country that immediate policyinitiatives need to be taken in order to deal withlongstandingproblems.

Our policies also acknowledge the need totreat the households of Barbados as socialpartners and to give such reasonable andaffordable relief as our present financialcircumctances will allow. At the end of the day,wewish to put Barbados ona sustainable growthpath in which the growth and development ofthis society will be underwritten by theexpansion of our foreign exchange eaurningcapacity and the improvement in our way ofdoing business in every sphere. We alsowish tqensure that the cost of adjustments will be fairlydistributed and not borne most heavily by thosewho are least able to contribute.

We seek. Sir, to accomplishall this, withoutincreasing the size of the deficit beyond 1.5% ofGDP nor putting our foreign exchange reservesin any jeopardy.

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The International BusinessSector

Mr. Speaker, it is beyond doubt that one ofthe most important ways in which theperformance ofthis economy can be improved inthe short-term is by taking advantage of theopportunities existing in the internationalbusiness sector. We have already made moves inthis direction by computerising the CorporateRegistry and by arranging for a decrease ininternational telephonerates.

We need, however, to put in place newlegislation that will enhance the range ofbusiness opportunities Barbados offers, and weneed also. Sir, to vigorously promote thislegislation in themarket place.

While wehave made provision in this year'sEstimates to more than double the allocation tothe InternaUonal Business Division, I fear. Sir,that the provision of$900 000 will notbeenoughto get the job done.

Accordingly, I propose to allocate anaddition of $1 million to the InternationalBusiness Division of the Ministry of ForeignAffairs, Foreign Trade and InternationalBusiness.

I a n confident that this expenditure willgenerate increased foreign exchange earningsover the short and the medium term.

Other Productive Sectors

Sir, I turn now to the other productivesectors. During the month of October, 1994 thefirst partoftheplan torehabilitate the productivesectors of the economy saw the Governmentremoving all taxes and duties on inputs,including machinery and spare parts for themanufacturing and agricultural sectors,including thehorticulture and fishing industries.

The full impact of this decision, which isexpected to result in a revenue loss of $10million, willbefelt this fiscal year.

Indeed, Sir, the Estimates of Revenuerecently approved by Parliament were preparedon that basis. Therefore, in order to fullyappreciate the impact of the measures which willbe announced this evening, we must keepforemost in our minds that only 7 months agothe first set of measures involving $10 million inrelief aimed at reviving those sectors wereimplemented.

My view is that there is much that has to bedone for those sectors but as you will appreciate,Mr. Speaker, we cannot do it all in one year.Instead, I intend to bring relief to those sectorsover a period of time, addressing the mostcritical first.

In this regard, our objective is to reduce thecosts of carrying on business and to increase thereturns so that investors will have an incentive toget involved.

Only in such a context can one conceive ofsustainable growth and the aeation of jobs on ascale required adequately to address our massiveunemployment problem.

In my recent meetings, Mr. Speaker, withpersons in the manufacturing, agricultural andhotel sectors, certain matters kept cropping up.Among these is the problem of heavyindebtedness to the Barbados DevelopmentBank, the Inland Revenue Department, theCustoms Department, the LandTax Department,the National Insurance Office and the BarbadosWater Authority.

All of the persons involved accept that thedebts have to be repaid but they are asking fortime to do so and relief from excessive interestand penalty costs.

I am sympatheticto those requests and havedecided to deal with the problem in relation toall of the agencies involved except the BarbadosWater Authority as follows:

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(i) At April 30, 1995 the mstitutions dtedwill stop incurring interest andpenalties on all amounts outstanding tosectors dted;

(ii) Manufacturers or Agriculturalists willbe given a two-year grace period onttieir arrears and then will have 7 yearsto repay the amounts outstanding atApra30,1995;

(iii) they must keep current the paymentsfrom May 1, 1995 in order to continueto enjoy ^s facility.

I have singled out the Barbados WaterAuthority because although the Authority willmake arrangements with the entities concerned,the nature of the operation is such that it cannotget involved in such long-termarrangementsandstill maintain itself.

Therefore, the individuals will have to enterseparate arrangements with the Water Authoritywhich will be as sympatibetic as possible in viewof the declared policy of Government.

Next, Sir, there is the question of energycosts. On this occasion, I am not able to deal withthe question of electridty but wiU leave that forthe next stage. However, I will deal with the costof fuel to the manufacturers and agriculturalistson this occasion.

Effective May 1, 1995, the consumption taxon fuel oil, industrial diesel and natural gas usedby manufacturers or persons engaged inagriculture on a full time basis will be waived.

The revenue loss estimated from thisdecisionis $3.6min a full year.

There is a provision in the Estimates for1995/96 to support the establishment of aSecretariat for small businesses. The promptcreation of this Secretariat is crudal for the

advancement of the Small Business Sector since itwill be among the Non-govemmentalOrganisa-

24

tions which will be able to access funds from the

Multilateral Investment Funds of the lADB with

the assistance of the Ministry of Finance andEconomic Affairs.

In addition, Mr. Speaker, the Governmenthas decided to use $2.0m from the PublicInvestment Ftmd to establish a Venture CapitalFund for the small business sector of this society.

In addition to support for the SmallBusiness Secretariat and the establishment of a

Venture Capital Fund, the Government iscurrently working on additional incentives forsmall businesses. Sir. The regime will be onemainly in the area of income tax relief forindividual investors in such businesses andcorporation tax relief for small businessenterprises in Barbados.

Mr. Speaker, we have to do everythingpossible to boost our exports and to this end, theBoard of the Barbados Port Authority hasdecided to reduce the Port Charges on containerswith exports by 50%from June 1,1995.

The charge on a 20ft. container will now be$45 and that on a 40ft. container will be $90.Hopefully, Sir, we will be able to eliininate thesecharges in the next phase of adjustment.

In 1994, when the Surtax was imposed bythe last administration as part of its tradeliberalisation programme, it was agreed,according to the records, that it would be phasedout by April 1,1998 as follows:

It was to be reduced to 50%effectiveApril 1,1995

To be reduced to 25%by April 1,1996

Then reduced to 12^/2% by April 1,1997

And abolished entirely by April 1,1998.

The 1995/96 Estimates of Revenue wereprepared on this basis and the revenue lost this

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year was estimated at $6.2m. However, Sir,during my recent discussions with themanufacturers, I have discovered that they werenot prepared to accommodate such a reductionby April 1. Therefore, I have decided to vary thearrangements and to phase out the surtax asfollows:

The 100% Surtax will remain in force untilMarch 31,1996

Then it will be reduced to 75% from April 1,1996

It will be reduced to 35% by April 1,1997

And it will be reduced to 0 by April 1,1998.

While this means. Sir, that the Surtax willstill be reduced to 0 on April 1, 1998, themanufacturers will be in a better position to dealwith that situation when it comes, in view of thevarious initiatives which the Government is toput in place this year and will put in place insubsequent years.

Mr. Speaker, it also means that theestimated revenue of $6.2m. can now beincreased as explained earlier.

Duty Jbice Sector

In relation to the Duty Free Sector, thepresent regime for duty free shopping is beingreviewed with the intention of expanding the listof items which can be sold at such centres andmaking the present entry arrangements lessburdensome on new entrants.

Operators of duty free shops presently enjoya 50% reduction on duty and taxes on items usedin the refurbishment of existing facilities or theconstruction of new buildings.

No duties or taxes are paid on the sale ofitems to visitors. However, there is evidence thatthe present system is abused by sales to local

persons and the result is severe revenue loss forthe Government without the earning of anyforeign exchange.

As a result I think that it is time that

something be done to stop such revenue loss andI have decided that a charge of 5% will be leviedat the point of entry on articles destined for dutyfree shops to help pay the administrative costs ofmonitoring the system and make up for anyrevenue lost through sales to local persons.

This charge is expected to yield revenue. Sir,of $3.0m.in a year.

It has been drawn to my attention that thereare instances where locally produced goodswhich are sold in the duty free sector have to payconsumption tax. I have decided friat effectiveMay 1,1995 such locally produced goods sold tSthe duty free sector w^ no longer bear theconsumption tax.

Hotel Sector

In relation to the hotel sector, 1 amconcerned that while the luxury hotels are doingwell, those smaller properties on the South andWest Coast for a variety of reasons areexperiencing major difficulties in making endsmeet.

Part of the problem. Sir, especially theproblem facing the small ones, is coping withtheir outstanding debts and attracting financingfor refurbishment. As was done in the case of the

manufacturing sector, the Government hasdecided to put in place a regime to allow thosesmall hoteliers to deal with their arrears to

various Government agencies.

In addition, Mr. Speaker, funds will beearmarked from the Public Enterprise InvestmentFimd to establish a $10.0m facility to make softloans available to small hotels in this country toenable them to carry on refurbishmentprogrammes.

I h^ve also indicated the approach intendedto be applied by the new recoveries agencies ofthe Barbados Development Bank to otherwiseassist small hoteliers.

The Hotel Association has submitted a newlist of items which they think should be allowedin free of duties and taxes for use in the hotelsector.

After examining the list, I have decided thatin addition to those items which are alreadybeing provided, I will allow in free securityequipment, safes, safety deposit boxes,commercial pressers and sewage plants. Therevenue loss is expected to be $1.0m.

The Hotel Aids Act is being revised butmeanwhile, I have decided that for new hotels orsubstantial renovations or refurbishment, inaddition to those items on the above list, allduties and taxes will be waived on the itemsshown in the schedules to the Hotel Aids Act.Similar treatment will be given to all-inclusivehotels where substantial sums are being spent.

Income Tax

Taft on Interest Income

Mr. Speaker, I turn to the matter of IncomeTax. The 1992 tax reforms were predicated on thebasis that it was creating a "level playing field".Yet interest income to individuals who would,under the old system, have had such incometaxed at the appropriate tax rate, were given theprivilege of being taxed at the reduced rate of12.5%. Pensioners whose total income, includinginterest was less than the basic allowance, wereforced to pay tax on interest of 12.5%.

Mr. Speaker, I consider that someadjustment in the present system is necessary.Therefore, effective from January 1,1996, interestincome to all persons other than pensioners willbe treated in the manner prior to the change in1992 and it will be added to other income andsubject to the appropriate income tax rate at thetime of filing.

Secondly, effective from May 1, 1995,pensioners60 years and over, on presentation ofappropriate identification and through a simpledeclaration to the commercial banks, will not becharged any withholding tax on interest.However, if they earn other income in excess ofthe basic allowance of $20 000 they will besubject to income tax on that income but will notbe required to declare any interest income. Inother words, Mr. Speaker, from May 1,pensioners willno longerpay any tax on interestincome.

Dividends

In relation to dividends, as is beingdone inthe case of interest income, effective January 1,1996, income from dividends will be treated inthe same way as it was treated prior to thechanges made in 1992 and will no longer beliable to a 12.5% final tax.

Group ReliefMr. Speaker, there is some need to remove

incumberances to the manner in which thecorporate system of Barbados works with a viewto expanding business activity in this country.One such area relates tothe need for group relief.Under existing legislation, tax losses incurred bya company which is a member of a group ofcompanies cannot be relieved against the taxableincome ofother members ofthe group.

Ac a result. Sir, companies in Barbados havebeen forced to go through the lengthy process ofamalgamating companies or end up chargingadditional management fees.

Therefore, to avoid such situations, I havedecided that from income year 1996, group reliefwill be permitted.

Caricom Double Taxation

Double Taxation

I deal next with the question of CARICOMDouble Taxation Treaty. TTie previousadministration for some reason had decided notto sign the Caricom Double Taxation Treaty and

the Reciprocal National Insurance Agreement. Inrelation to the first matter. Sir, this presents asignificant barrier for any Barbadianincorporated enterprise to expand into Caricomwhere the natural flow of dividends back to the

Barbados parent is envisaged. I can therefore seeno good reason why the previous position wasadopted. Consequently, Mr. Speaker, to facilitatethe expansion of our enterprises in CARICOM,the Government has decided to sign both theCaricom Double Taxation Treaty and theReciprocal National Insurance Agreementwithout further delay.

Net Foreign Exchange Earnings

Mr. Speaker, Sir, I turn next to a matter thataffects the functioning of the offshore businesssector in particular. In 1986 a net foreignexchange earnings allowance was introduced asa means of inducing persons particularly in theoffshore financial sector to generate foreignexchange earnings for the benefit of the country.From all available information. Sir, members ofthe accounting and legal fraternities have made acommendable effort in obtaining business butbecause of a number of difficulties, noassessments have been allowed up to now toenable them to take advantage of tWs allowance.In the meantime, the offehore business sector isgenerating almost $100 million a year forBarbados. The time has come,Mr. Speaker, to putthis right.

I have examined the submissions from the

Commissioner of Inland Revenue as well as fromthe affected persons and have decided that thematter should be resolved as follows:

(i) I will retain the concept of thedefinition of "net foreign exchangecurrency earnings" as the base for theapplication of an open percentage rate;

(ii) I will remove the tax credit restrictionclause completely and introduce anopen rate of 30%.

While this will not exactly meet what all theaffected persons have been requesting, I am surethat even they will agree that ^eir interpretationis too liberal and would in some instances

completely wipe out their tax liability.

The proposed changes will take effect from1996 and will apply to members of the legalprofession as well as the accounting fraternity.Enterprises which will qualify for a refund forthat extended period will be encouraged to takethose refunds in the "form of tax reservecertificates. A successor proposal is now beingstudied and will be discussed with all interested

parties for implementation when the present oneexpires at the end of this income year.

Accrued Interest

In relation to accrued interest, effective fromIncome Year 1995, associated or relatedcompanies or persons will be allowed to claiminterest payable in accounts for one year only.Thereafter, the amount will be brought intocharge to tax if not paid in the following incomeyear.

Other persons will be allowed to claiminterest payable in accounts for each of twosuccessive income years only. Therefore if notpaid in the third income year, it should bebrought back into charge to tax.

Capital Allowances

Sir, I turn next to capital allowances. It isacknowledged that computer equipmentbecomes obsolete very quickly and as anincentive to business to keep up-to-date with thelatest technology and to make Barbados morecompetitive. Sir, I have decided that effectiveJanuary 1, 1996 the capital allowance for suchequipment will be increased from 12.5% to33V3% annually. The other rates and categoriesof capital allowances applicable to other itemswill be reviewed in due course.

Mr. Speaker, I spoke earlier of the need toexpand business activity in this country in thefight against unemployment.

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Special Development Areas

As you are aware, Mr. Speaker, there areprovisions in the Estimates of Expenditure forthis fiscal year to finance the costof dealing withthe development of Speightstown and CarlisleBay.

It is my view that Government'sinvolvement in these projects should be that ofan enabler providing the money to pay for thestudies and that it should arrange a package oftax incentives for the private sector to makeinvestments in new businesses in these eueas.

Therefore, I have decided to declare fourareas eis special development areas and to grantduty and tax relief as well as investmentallowances to new approved areas which areestablished.

The areas are as follows:

(i) Speightstown

(ii) Carlisle Bay

(iii) Scotland District

(iv) St.Lawrence Gap

In relation to the Carlisle Bay Developmentand the Qty area concessions will be providedfor dty hotels, conference facilities andresidential accommodation as well as therestoration of dry dock facilities.

The Florida Cruise Ship Association hasalready decided to designate Speightstown as aport of call and plans are in trainby the privatesector to make the riecessary investments to takeihefullest advantage of thatopportunity.

Also, Sir, plans are being made to optimiseSpeightstown's potential in the area of heritagetourism and this and other similar investmentswhich broaden the scope for business activitywill qualify for favourable duty and tax reliefand the appropriate investment incentives.

28

The legislation will be brought toParliament shortly and further details will bemade available at that time.

Establishment ofJetties and Marinas

In relation to jetties and marinas, a numberof private individuals have expressedan interestin establishing jetties and marinas at theirexpense for public use.

I feel that these individuals should beencouraged to make such investments andpropose to grant duty and corporation taxincentivesfor these projects.

Watersports Equipment, Yachts andVessels - Tariff Heading 89.03

Mr. Speaker,Sir, it is futile to speak in termsof having marinas without having yachts. As aresult I often refer to the tourism sector as thehospitality sector because I recognize that thehotel sector is only part of the tourism industryand that activities such as Watersports are asmuch a part of the industry as the hotel sectoritself.

The present duties and taxes which arelevied on these activities are indeed quiteonerous and I consider that some reli^ ismerited. Therefore, I have decided that witheffect fi:om May 1, 1995 the consumption tax of25% ind the surcharge of 20% will be removedfrom yachts and sportingvessels importedunderTariff Heading 89.03. Thiswould cover not onlywater sports equipment referred to as vessels butwould include sportingvessels as well as yachts.The revenue loss is estimated at only $0.6 millionbecause the rates are presently so burdensomethat they have inhibited any significant imports.However, as we seek to develop attractions forvisitors and the establishment of marinas, it isimperative that we provide some incentives inthis particular area.

Heritage Foundation

Government, Sir, has also decided toestablish a Heritage Foundation and to transfer

the $1.5 million in funds which are now held inthe Barbados National Bank for the repair of"listed properties" to that Foundation.

In addition. Sir, a package of incentivesunder the Income Tax Act is being discussedwith the National Trust and will be implementedwhen the legislation for the establishment of theHeritage Foundation is submitted to Parliamentshortly.

Water Development

I deal next. Sir, with measures topromote water development in Barbados. Withtotal water developable water resourcesamounting to 249 000 cubic metres per day,Barbados affords only 350 cubic metres ofrenewable water resources per person per yearand falls squarely in the group of "waterstressed" countries alongside such countries asJordan, Libya, Somalia, and Djibouti.

Recently, the demand for water (which wasalready high) has been growing at about 4%annually and by 1994, Sir, the groundwaterresources were almost 90% used up orcommitted. Therefore, if water is not to become aconstraint on our future development actionmust be taken now to maximise the use of

existing resources while preparing a long-termplan for economical alternatives.

In this regard, it is felt that consumersshould be encouraged to use water savingdevices and between the 1st October and the 31st

December, 1995 the Barbados Water Authoritywill distribute free of cost to domestic consumers

whose accounts are not in arrears, a kitcontaining a Barbados National StandardsInstitute approved water saving shower head orkitchen sink aerator.

The Barbados Water Authority has about61 000 domestic consumers of whom about

44 000 have accounts free of arrears. Therefore, itis estimated that the additional expenditure tothe Authority will be $1.3 million but the amount

of water saved will be about 1.7 million gallor\sdaily and justifies the expenditure.

Effective from January 1, 1996 all newcommercial buildings as well as newGovernment buildings will be required to instalwater saving taps, and where applicable showerheads.

This requirement will be enforced throughan amendment to the Town and CountryPlanning Regulations and if is already in place inseveral Caribbean countries.

Retro-fitting of existing commercialbuildings will be encouraged by allowing claimsfor corporation tax purposes for the cost of thesewater saving devices.

AH regular taps and shower heads shouldbe phased out over a 5-year period starting fromthe 1st January, 1996 and as an incentive,individuals will be allowed to make a claim forIncomeTax purposes for such devices as part ofthe new Home Allowance Package which willshortly be announced.

As a further measure to save water, fromJanuary 1, 1996 all new residences will berequired to construct water storage facilities incases where there is a roof area or living area of3 000square feet or more.

Also it will be mandatory for all newcommercial buildings with a roof plan of 1 000square feet or more to construct water storagefacilities. These water storage facilities are to beconstructed on the basis that they will store rainwater and not water from the public supply.

As an incentive, Mr. Speaker, the BarbadosWater Authority will give a rebate of $1.00 pergallon of installed tank capacity up to theequivalent of one quarter of the total roof planarea for residences as well as for commercialbuildings.

Owners of existing residences orcommercial buildings who construct suchstoragefacilities will also qualify for therebate.

At present individuals are grantedpermission to extract water. However, there is nosystem in place for monitoring their activities. Inview of the seriousness of our water problem, ithas been decided that the Water Authorityshould monitor suchactivity and effective the1stJanuary 1996 such persons will be required topayan annual fee to the Authority tohelp defraythe administrative costs involved.

Finally, Sir, Government has approved an$18 million programme of capital works for theWater Authority this year to improve itsoperation and to identify new sources of water.

Solid Waste ManagementI turn next. Sir, to the matter of solid waste

management. Mr. Speaker, it is estimated that itwill cost the Government approximately $5.0million to establish and operate a new landfill atGreenland.

You are aware of the problems which wereallowed todevelop at theMangrove Landfill. It isour determination that suchproblems should notbe allowed to exist in the future.

Therefore, our intention is to make sure thatthe new Landfill is properly managed and thatthe cost of constructing and maintaining thatfacility should be met from a stream of incomethrough a levy imposed on those items whichcreate the need for a facility in the first place aswell as recourse to tipping fees.

As a result, I now make the followingproposals to deal with the management of oursolid waste and to encourage people to getinvolvedin recycling activities:

(i) a tipping fee of $40.00 per tonnewillbecharged at the new landfill;

a levy will be imposed on all plastics,glass bottles, fridges, stoves, paperboard boxes and cartons, tyres,washing machines, motor vehicles, carbatteries, TV sets and mattresses; asfollows:

Motor vehicles

TyresFridgesStoves

Washing MachinesT.V. Sets

Mattresses

Plastic sacks and bagsPlastic bottles

Plastic Sheets

Glass bottles

Car batteries

Boxesof paper board

$150.00 per vehicle$10.00 per tyre$15.00 per fridge$15.00 per stove$15.00 per machine$10.00 per set$10.00 per mattress$1.00 per kg.10 cents per bottle$1.00 per kg.10 cents per bottle$10.00 per battery$1.00 per kg.

In addition, Sir, business engaged inrecycling activities will receive fiie sameconcessions as those presently granted tomanufacturers on machinery, spare parts andequipment.

In the case of the imports. Sir, theEnvironmental Levy will be collected by theComptroller of Customs at the point of entry. Inthe case of locally manufactured items, the levywill be paid to the Comptroller of Customswhere theconsumption taxis paid.

It is estimated. Sir, that revenue amountingto $2 million a year will be collected from thisnew source.

Concessions to Householdsand Individuals

I turn next to concessions to households andto individuals.

Mr. Speaker, by decision of the previousadministration we are committed to increasingthe Child Allowance this year to $1 000 and toproviding an allowance for a spouse withoutincome from $2 000 to $3 000 from this income

year. Therefore, I have decided that any furtherrelief to the individual shall take effect 1stJanuary, 1996. In keeping with our Manifesto torestore the allowance for mortgage interest andrepairs, I have decided from the1st January, 1996,a Home Allowance of up to $3,500 will begranted annually to cover mortgage interest,repairs, renovation, energy or water savingdevices, solar water heaters or water storagetanks. This allowance will be periodicallyreviewed in the lightof changing costconditions.

This allowance will be in addition to thebasic allowance of $1300 and can be made upentirely of one of the above or any combinationof the above. In the case of the water storagetanks, a certificate from the Barbados WaterAuthority must be presented to show that rainwater and notthepublic supply isbeing used.

The expected loss from this proposal is $6.0miUion in a revenueyear.

Motor Cars

Mr. Speaker, representation has been madeto me by the various car dealers and a number ofprivate individuals about the extremely highrates of duties and taxes which now'-apply tomotor cars. In the present circumstances, 1 amunable to grant the kind of relief that personsmay be expecting immediately but some relief.Sir,will be granted nevertheless.

With effect from tomorrow, the luxury taxof20 per cent and the stamp duty of20 per centwill be removed on cars of 1 600 cc or less on thebasis of the view. Sir, that cars above 1 600 cc areregardedas beingin the luxuryclass.

If I may illustrate. Sir, what this will mean, itwill mean that on a 1 600 cc Starlet there will be asaving of $6 184 to the consumer. On a 1 300 ccTercel, Sir, a saving of $7 300 and on a 1 600 ccCorolla, a saving should come to $11 000. Therevenue loss. Sir, is estimated at $11 million but itis estimated that most of this will be recoveredfrom the appreciation of the Yen and any

increase in sales. In addition, the present policyof granting 100 per cent waivers to a largenumber ofindividuals and organisations is beingchanged and in future. Sir, very low rates oftaxes will be applied. Based on informationwhich we now have, any short-falls from thereduction of duties and taxes on motor cars asproposed which is not compensated for throughincreased sales and the appreciation of the Yenwill bemadeup, Sir, horn these savings.

Taxes on Sporting Goods^

I turn. Sir, next to taxes on sporting goods.In keeping with our manifesto promiseand as agesture to theyouthand thesporting communityofBarbados, I have decided that effective May 1,1995 the Consumption Tax on sporting goodsunder Tariff Head-95.06 - 01 to 95.06 - 07 will beremoved. The revenue loss is estimated at $0.3mper year.

LlqulHed Petroleum Gas

I deal next with liquified petroleum gas.Based on the steady decline of the world marketprice of LPG between August 1994 and March1995, there is a clear case for a reduction in theprice. Therefore, with effect from tomorrow, theprice of liquified petroleum gas will be asfollows:

100 lb cylinder - $89.30 instead of $94.25

25 lb cylinder - $24.58 instead of $25.35

20 lb cylinder - $19.66 instead of $20.25.

The margin to the dealers will be increasedby2cents from 7cents to9cents per pound.

Duty free Cycles to Postmen/Postwomen

In keeping with our manifesto pledge, Ihave also decided that effective May 1, 1995,postmen and postwomen will be allowed topurchase motor cyclesfree of duties.

The next is thequestion of fees. The Gamingand Betting Committee has made a number ofrecommendations to me which I have accepted.

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It has been drawn to my attention that eventhough 396 licences to, operategaming machineshave been issued only 260 machines are beingoperated.

As a result/ the Government is losing asmuch as $0.3m annually even though there arepersons who are willing to operate thosemachines but cannot have access to them becausethe ownersof the licences keepclose control overthe industry.

Therefore/1 have decided to implement therecommendation of the Gaming and BettingCommittee to increase the number of licences tooperate gaming machines from 396 to 500 fromJuly 1/1995. At present/ Sir/ there is an anomalybetween the fees paid by persons operatinggaming rooms in hotels and those operatingarcades. Therefore/ in order to create a more levelplaying field/1 have decided that from 1st July/1995 hotels will be allowed to operate amaximum of two machines without pajdng anannual fee.

However/ if operators at hotels wish to havemore than two machines/ the facility will betermed a gaming and betting room and theywillbe permitted to do so on thefollowing basis;

Hotels with 1-25 rooms having 3 to 5machines an annual fee of $50 000 - 1/2 yearlyfee of $30 000. Those between 26 and 50 roomS/Sfr/ with machines between 6 and 10 an annualfee of $100 000 and 1/2 yearly fee of $55 000.Hotels with roo;|^ between 51 and 100 withmachines between 11 and 15 an annual fee of$150 000 or 1/2 yearly fee of $80 000. Hotels ofover 100 rooms that have 16 and 20 machines anannual fee/ Sfr/ of $200 000 or 1/2 yearly fee of$105 000.

The above games room annual fees arepayable in addition to the current machine fees.

32

Arcades will be allowed to increase thenumberof machines from15to 20by usingsomeof the licences which are not being used at themoment.

Additional revenues from this source isestimatedat $2.5 millionin a full year.

Lotteries and Sweepstakes

Continuing with taxes on gambling. Thereis every indication friat lotteriesand sweepstakesare doing well enough to be able to make agreater contribution to the exchequer. Therefore/effective from 1stMay, 1995 tiie tax per ticket onlott^es and sweepstakes will be increased from10 cents to 25 cents per ticket. Bingo games areapparently becoming popular again and tiie taxon this form of entertainment/ Sfr/ will bedoubled.

It is estimated that additional revenues of$0.6 million willbe obtained fromthesechanges.

Pool Betting

Continuing taxeS/ Sfr/ on gambling.Presently/ pool betting agencies pay an annuallicence fee of $150 and it is felt that the fee shouldbe increased. Therefore/ with effect from1stJuly/1995/ the annual licence fee will be increas^ to$300.

Continuing taxes.Stillon gambling.

Racing Services

There are 4 registered racing services whichnow pay an annual licence fee of $60 000 eachand I propose to increase that to $75 000 fromJuly 1/ 1995. This change is expected to yieldadditional revenue of $60000in a year.

Miscellaneous Fees Charged byCustoms Department

Warehouse Licensing Fees

Warehouse licensing fees have not beenincreased since the mid 80s. Meanwhile, the costof administering the system has increasedsignificantly, and it is now necessary to increasethe fees as follows:

(i) Where the duty liability coverage doesnot exceed $200 000 the fee will be$3 000 per annum instead ofthe presentfeeof $2400 per annum.

(ii) Where the duty liability coverageexceeds $200 000, the fee will be $6 000per annum instead of the present fee of$2400per annum.

It is expected. Sir, that these changes whichwill take effect from July 1, 1995 will yieldadditional revenue of $300 000.

I also wish to deal with fees for the unlawfulremoval of goods from warehouses.

Unlawful Removal of Warehoused Goods

At present there is a penalty of $25 percontainer in respect of every container removedunlawfully from a warehouse. The practice ofremoving goods unlawfully has been so seriousthat even at that small fine the CustomsDepartment collected some $300 000 in finesduring 1993/94.

In an effort to reduce this problem, I havedecided that with immediate effect, the fine insuch cases should be increased from $25 percontainer to $500.1 have not included an estimatefor any traditional revenue from this sourcebecause I expect that the practice of removinggoods,unlawfully from warehouses will cease inview of the increase in the fine. But if for someunknown reason the practice continues at thepresent level, additional revenue of $5.7 millionwill go into the Exchequer. A more realistic

estimate of thecontribution to tiie Treasury fromthis source will besome $3 million peryear.

Charges for Officers' Part-time Services

The Customs Regulations 1963, No. 117,imposes a charge per hour for the part-timeservices of officers deployed at privatewarehouses. The amount is unrealistic giventoday's salaries.

Therefore, I have decided that effective fromJuly1,1995, the fee charged will be not lessthanthe proportionate cost of the salary of the gradeofficer whose services areengaged.

Customs Brokers/Clearing Agents FeesIn keeping with the Customs Regulations

1963, No. 183, Clearing Agents or CustomsBrokers payan annual fee of $500 and I proposethat effective fromJuly1,1995that fee should beincreased to $750.

The additional revenue from this measurewill be only $13 000 which is small but it willhelp to defray the administrative costs ofpolicingthe system.

I turn finally to fees. Sir, for public servicevehicles.

Public Service Vehicles

Mr. Speaker, some of the drivers of PublicService Vehicles continue to create chaos in thebus stands and confusion on the roads. In myview, the situation has gotten out of hand andthe time has come for strong and decisive actionto restore law and order on our roads.

The existing members of the Police Forceand theInspectors of theMinistry ofTransport aswell as the present staff of the courts haveenoughproblems on theirhands already.

Therefore, 1 have decided that an additional45 special constables will be recruited andtrained to police the bus terminals and to

moniW the operations of these Public ServiceVehicles among other duties. In addition,magisterial and clerical personnel will berecruited for the Courts to deal with the trafficcases. 1 am sure, Sir, that everyone will agreewith me that the persons whose behaviour hascaused us to undertake this expenditure andtheir employers should be the ones to bear thecosts.

Therefore, effective May 1, 1995 the feespaid by Public Service Vehicles and personnelwill be as follows:

Proposed Fees for PublicService Vehicles

Description

Licence to drive a Public

Service Vehicle:

(a) Taxi

(b) Maxi-taxi

(c) Tour Bus

(d) Omnibus

(e) Mini-bus

(f) Route Taxi

Conductor Licence or duplicateDuplicate Licence

Existing ProposedFee Fee

40.00

100.00

20.00

300.00

300.00

100.00

Half the

cost of new

licence

Drivers Badge or duplicate 10.00 100.00

Conductor Badgeor duplicate 10.00 100.00

Spedal Permits/Licences 2.00 10.00

Miiu-buses- permits 10 000.00 12 000.00

Mini-buses - Annual Tax 5 000.00 7 000.00

Mini-buses - Renewal Fee 1000.00 1-500.00

Route Taxi Permit 3 000.00 8 000.00

Route Taxi Armual Tax 2 000.00 4 000.00

Route Taxi Renewal Fee 1 000.00 2 000.00

Transfer Fee 1/3 permit fee Same as

permit

fee

Weight Certificate 2.00 12.00

The additional revenue from these increasesis estimated at $2.9 million.

Summary of ProposalsThe proposals which 1 have announced this

evening are expected to jdeld additional revenueof $25.3 million as follows:

1. Retention of 100% Surtax

2. Levyon itemsfor duty freeshops3. Environmental Levy

4. Recoveryof duties and taxes onmotor cars through inaeased sales

appreciation of Yenand change inpolicy on waivers

5. Increasein Gamingand BettingFees6. Increase in Miscellaneous Customs Fees

7. Inaease in Public Service Vehides

and related fees

8. Warehouse Fines

TOTAL

The revenue losses ^d additional expenditureamount to$21.0m asft^ows:

1. Supplementary appropriatron forInternational Business Division

2. Reduction of Consumption Ta^nfuel oil, industrial diesel and

natural gas

3. Removal of Surcharge and ConsumptionTax on Yachts and Luxury Vessels

4. Removal of Stamp Duty and LuxuiyTax on motor cars 1600cc and under 11.0m

5. Removal of Consumption Tax onSporting goods 0.3m

6. Cost of employment of SpedalConstables and other Legal Officers 1.0m

7. Revenue loss from Net ForeignExchange Earnings Credit 3.0m

8. Removal of Duties and Taxes for hotels 1.0m

9. Concessions to Re-cyclingIndustries 0.5m 21.0m

Therefore/ Mr. Speaker, the net gain inrevenue will be $4.3 million which willcontribute towards meeting the cost of any salaryincrease which will be completed later this yearwith the Trade Unions.

Mr. Speaker also, the other proposals willeither be funded off-budget or as indicatedearlier will take place in subsequent financialyears since they are related to future income.Therefore, they will not result in any revenueloss this fiscal year.

Mr. Speaker, when economic historianscome to consider the economic policies set out intoday^s presentation, I should wish them to saythat they represented a resounding statement ofconfidence in the future of Barbados.

They will come to recognise that this was, asintended, the first in a series of similar suchefforts which I intend to make in the years ahead,which combine humanity, creativity andpragmatism in the search to make Barbados thejust and prosperous society we all wish it tobecome.

In the months ahead. Sir, there areadditional initiatives which I will launch to makeBarbados a better place for all of us. I thinkimmediately of the excitinginitiatives that must

be made to build our financial system and ourcapital markets. I think also of the initiatives ofwhich I will be a part soon with my colleagues inother Caribbean countries to create a foreignexchange market in the Caribbean, revolvingaround the holding of foreign exchange byCaribbean citizens and enterprises in theCaribbean and in the wider world. I think of thework which will be undertaken to reform our

indirect taxation system to make it an instrumentof enduring value to this society.

And I look to be part of that great effort tomake Barbados ready to go into the 21st Centuryas a computer literate society.

Mr. Speaker, you will note that I havebroadly identified problems and opportunitiesrelating to our country's economichealth. I haveidentified, as well, the means whereby thoseproblems may be minimized or eliminated,provided we recognise and grasp the availableopportunities.

I have also indicated. Sir, that Barbadianspossess the talent to create opportunities wherenone seem to exist; that, in keeping with our longhistory of self-sufficiency, we must re-discoverthe will to capitalise on those opportunities.

In seeking creative solutions to oureconomic welfare, I have ventured upon territorythat conventionalists may regard as taboo. Iadmit that it is a departure from some of theorthodoxy to which we have becomeaccustomed, but we must not be afraid to bepioneers. We must not be fearful. Sir, ofchallenging well-rooted customs, if such customsprove inappropriate for dealing with newrealities.

The challenge, Mr. Speaker, confronting uson the verge of the 21st Century is to lay thefoundations for a well-crafted economic modelthat will sustain generationsof Barbadians.

We cannot resign from that challenge.

We are mandated to face it.

Our proud tradition of industry and thriftsays we can do it.

Our future demands that we do it.

Our people expect us to do it.

And we WILL do it, because it is our will soto aspire and so to achieve.

Mr. Speaker, the people of this country haveendured much of late; but they nonetheless lookto the future with confidence and resolution, andwith the determination to make Barbadossucceed.

So does this Administration.

We will make it.

•For as I said. Sir, in my first address to thisnation:

"They who wait on the Lord shall renewtheir strength;

They shall mount up with wings likeeagles;

They shall run and not be weary;

They shall walk and not faint".

It is in this spirit. Sir, that I commend thefollowing Resolution to this Parliament:

WHEREAS the Government during its shorteight months in office has demonstrated that ithas the capacity, will and foresight to dealeffectively and efficiently with the several socialand economicproblems facing this country;

AND WHEREAS the fiscal and economic

measures implemented so far have had a positiveimpact on the productive sectors of the economy,and restored confidence;

AND WHEREAS the additional measures

which were introduced during the presentationof the 1995 Budgetary Proposals are designed tofurther stimulate economic activity, reduceunemployment, bring relief to households,guarantee better quality of life for all our peopleand provide a sound basis for the totaldevelopment of this country;

BE IT RESOLVED that this Honoiuable

House of Assembly:-

1. Take note of the 1995 Financial

Statement and Budgetary Proposals; and

2. Congratulate the Government for itsskilful and astute management of the economyand for the timely and outstanding leadershipprovided in laying the foundation for sustainabledevelopment in our country.

I am obliged to you. Sir.