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Barbados Prepares To 'Weather' Economic Storm

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We are living in difficult times. One of my more-.perceptive friends recently described our Island as a “motorized ghetto”, where the smell of diesel and gasoline fumes, and the ever-present vehicular pollution add a peculiar resonance to the ambience of this Rock that we call home. We have become so smug in our belief that Barbados is on a continuing upward path of so-called development, that we seem to have forgotten that we live on a very small island with a fragile ecosystem. Our current political leaders, in the belief that repetition is reputation have been trumpetting claims to such achievements, as an unprecedented eight years of uninterrupted economic growth, the lowest level of open unemployment on record, and the highest level of net foreign reserves ever accumulated, thereby encouraging us to forget that our Island faces an uncertain future.

Excerpt from Dr.George Reid’s: WHAT KIND OF DEVELOPMENT? A PRACTICAL APPROACH TO SOCIAL AND ECONOMIC TRANSFORMATION IN BARBADOS

david thompsonThe issue of the rising cost of living will no doubt remain firmly at the top of the national agenda in the coming weeks and months ahead. The pundits seem to agree that the current configuration of our economy places a skewed reliance on imports which lends itself to imported inflation. When this unfortunate reality is studied against the recent report issued by the National Productivity Council of zero growth in national productivity in the last two years, the affinity by Barbadians to behaviours which engage in high consumption expenditure, and the relatively high debt burden which Barbados has to manage, we absolutely don’t envy Prime Minister David Thompson.

Let us not forget that Prime Minister David Thompson came to government on a campaign promise to reduce the cost of living. How quickly the reality of managing a small open economy in a volatile global market can loom.

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    The blogs, talk shows, office corridors and other popular places where Barbadians meet to discuss the cost of living, we have observed that no one has summoned the courage to address the white elephant. As always Barbados Underground continue to be fearless when dealing with the controversial. As the current economic situation worsens in Barbados, merchants will suffer increase in the cost of operations and margins will get narrower. This sad state will lead to the inevitable, LAY-OFFS! We hope we are wrong but we believe that it is a logical consequence based on the current economic landscape.

    marion williamsDespite the white elephant being present we must ask the question: What can we do? Should the private sector as part of its corporate responsibility be made to sacrifice part of their ‘mark-up’ to attempt to maintain stability in the country? We are not sure how the economics of it all would apply. Perhaps there is the opportunity for the Social Partnership via the Prices and Income Protocol to play a more significant role. Maybe, just maybe Barbados can be a model country again for the world to gawk at, where the government, private sector and union can collaborate like never before to minimize the shock of rising prices affecting Barbadians. We know that all the players are intelligent enough to appreciate that if same old tired economic measures of the past are used, the people who will suffer the most will be those at the bottom.

    The other issue to debate will be how public opinion treats the administration of Prime Minister David Thompson. Most governments perish in the aftermath of a major crisis in the economy. If the Thompson administration is to survive they need to come-up with solutions out of the box, quickly. Barbadians seem not to have grasp up to now that the fat cat behaviour needs to stop!

    Barbados Underground have written a few blogs with the help of Chief Marketing Manager Stephen Worme of the Barbados Light & Power which highlighted the importance of developing alternative sources of energy. We concluded that it must be a medium to long term strategy to protect our little country from the economic and social morass which is destine to affect Barbados if we continue to buffet under the impact of the global turbulence. The current government no doubt will pursue the strategy of the former government to explore for oil. Even if we are fortunate to discover oil, we believe that it would be myopic to ignore the advantage to retrofitting our energy systems given the abundance of sun, sea and wind at our disposal. Al Gore might suggests that forward thinking countries should adopt policies which are environmentally friendly.

    We agree with social commentators and John Public who have lambasted government and other stakeholders for the lazy and recalcitrant behaviour being exercised in the effort to develop alternative sources of energy. At the risk of being labeled a prophet of doom and gloom, the clock is ticking if we are to avoid the economic disaster which we have masterly avoided up to now.

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    32 responses to “Barbados Prepares To 'Weather' Economic Storm”

    1. The People's Democratic Congress Avatar
      The People’s Democratic Congress

      On the back page of the Nation Newspaper, Thursday, April 24, 2008, and having the caption – JOBS WORRY; and with the by line BEC: Further oil hikes could cause layoffs, there is found an ominous news story that, in essence, deals with the Barbados Employers Confederation (BEC) Executive Director, Mr. Harry Husbands, being of the view that with oil prices continuing to rise (presumably in Barbados and elsewhere) Barbados can expect workers to be laid off. Hence, he is reported as saying: ” if the cost of business continues to go up, many businesses may look at cutting staff, especially any business ( where) the cost of energy is a significant factor”.

      Well, we in PDC wish to state very categorically that, based on this news story, there is a clear move by businesses that are members of the BEC TO START LAYING OFF MANY OF THEIR WORKERS SOON. And quite clearly, too, we wish to state how diametrically opposed we are to such moves by employers in this country, at a time when there is clearly NO need whatsoever to make workers of this country pay dearly for the gross ideological, political, material and financial errors and miscalculations that have been made overtime by DLP and BLP Governments. For the BEC to be thinking about laying off already poor, marginalised and very vulnerable workers is abhorrent and disgusting, esp from the point of view that such workers, when laid off will be forced to go through serious psychological, social, material and financial dislocation and distress, a situation that can help produce other serious and adverse social political and other effects on they themselves and this Barbadian society. One lady who works at KFC, told our party’s leader in Bridgetown yesterday (Thursday) how she has already been made to suffer a serious decline in her work hours and how she has had to realize a tremendous fall in her weekly income. She said she was told by management of KFC that her work situation has somewhat changed because of slower than usual business at KFC.

      Yes, the fact, too, is that the DLP lied to the people of Barbados in order to help them win the government on Jan 15, and for this grave political offence they must pay. We in PDC are on record as telling the people of Barbados that voters in Barbados need to stop electing DLP and BLP Governments. Certainly, if PDC were at the helm of government today in Barbados there would have been no need for talk of lay offs or any actual lay offs. Since we would long have started to put in place progressive people-centered policies that would have been avoiding the worst effects on Barbados of this present international economic and financial crisis, et al, MAKING SURE THAT IMPORTS OF GOODS AND SERVICES INTO BARBADOS ARE ZERO-“PRICED” AT ALL POINTS OF ENTRY IN THE COUNTRY.

      PDC

    2. Trained Economist Avatar
      Trained Economist

      “Oh dear what can the matter be” was the title of the BLP column this week. “What planet is the BLP on is my question?

      The matter is clearly a dramatic change in the global economic environment. The matter is a global financial crisis, an oil price above $110 and a food price crisis. This is a potential economic tsunami. Economic caution is an extremely wise option at this point.

      Forget the theoretical economics, when bajans are thinking of hoarding rice you know there is a crisis in the global economy. When major food exporters are hoarding product for domestic consumptions we have an economic crisis. When the US federal reserve bails out a major investment bank, you have an economic crisis.

      Forget the politics this is serious economic climate and the nation needs to band together and hope for the best.

    3. Avatar
      Anonymous

      Forget the politics this is serious economic climate and the nation needs to band together and hope for the best.
      ……………………………………………………………………..
      Well said buddy.

    4. Thewhiterabbit Avatar
      Thewhiterabbit

      The current state of the economy in Bim is quite complex, but we can sort out a few things. The cost of living here is NOT high. The cost of taxation is astronomical. We enjoy the world’s second-highest rate of overall taxation right after Sweden, but what do we get for it? Do we have good roads? Do we have a world-class medical system? Do we have a world-class educational system? Can you be certain that water will actually run out of your tap on any given day? Do we have political big-ups driving around in BMW’s while telling us to conserve? Do we have scores of young men hanging out on the block being supported by tax dollars rather than working? Need I go on???
      When the PM raised the price of fuels to “relieve the subsidy” he did nothing but raise the tax on fuel. On the day he raised the price of gasoline, the world price for gasoline was $1.50 per litre in local currency. There was no “subsidy”, there had only been a foregoing of potential tax revenue that he decided to reimpose.
      Our tax system taxes the MEANS of production rather than taxing the product produced. This approach is very British and very London School of Economics before Maggy Thatcher turfed out the communists. Taxing the means of production drives down production and productivity since it adds to the up-front purchase price of new equipment and new efforts that could lower costs down the road and increase productivity.
      Monopolostic business concerns may, indeed, be charging a higher mark-up than absolutely necessary, but remember that the biggest monopoly on the island is Government, the entity that imposes taxes on you, and the single one for which there is NO alternative; you MUST buy there, you MUST buy what they want to sell you, and you MUST pay their price, no questions. Want to know why it pays to fly to T&T to buy things where prices are often one-third what they are here? Look no further than our own government and its regressive, extortionate, and confiscatory tax policies!
      Finally, remember that government produces nothing, it only consumes, consumes your tax dollar. Every dollar sent to government is a dollar that cannot be used to start a new business to increase overall employment, a dollar that cannot be used to purchase new equipment that can increase productivity. And every dollar sent to government is liable to be tiefed, squandered, wasted, misappropriated or lost. While government may offer any number of “incentives” and “programs” remember that the money for these “programs” is only your tax dollar taken from you, with much of it squandered in salaries for the program officers and for grand offices for these same “civil servants”. In government you cannot be fired, so there is no incentive to be efficient, honest, or productive. Great system, isn’t it??? There is no such thing as a free lunch.

    5. Bajanboy Avatar
      Bajanboy

      thewhiterabbit:

      You said it!! Government is the biggest impediment to economic growth and development in this island, followed closely by the unions. Government needs to review each department of each ministry closely and close down or privatise many of them. This is the only way we can reduce our national debt and lower taxes. Taxes are the biggest single contributor to the cost of living in Barbados. Jobs lost would be reabsorbed by the private sector which would flourish under a lower tax regime.

    6. Krzysztof Skubiszewski Avatar
      Krzysztof Skubiszewski

      The current global economic downturn is easily explained. Far too many people earning far too much for not actually doing anything productive. I’d put currency speculation, hedging funds and shifting money from one tax haven to the next in this category.

      You know who you are.

    7. Krzysztof Skubiszewski Avatar
      Krzysztof Skubiszewski

      A “cut and paste” to remember.

      Cutoffs and Pleas for Aid Rise With Heat Costs
      By Erik Eckholm
      The New York Times

      Friday 25 April 2008

      After struggling with soaring heating costs through the winter, millions of Americans are behind on electric and gas bills, and a record number of families could face energy shut-offs over the next two months, according to state energy officials and utilities around the country.

      The escalating costs of heating oil, propane and kerosene, most commonly used in the Northeast, have posed the greatest burdens, officials say, but natural gas and electricity prices have also climbed at a time when low-end incomes are stagnant and prices have also jumped for food and gasoline.

      In New Hampshire, applicants for fuel subsidies under the federal Low Income Home Energy Assistance Program received an average of $600 in a one-time grant and up to $975 for the extremely poor who rely on heating oil or propane, the costliest fuels. But those grants, which in recent years have covered 60 percent of heating costs, covered only about 35 percent of those costs this winter, said Celeste Lovett, director of the state’s energy aid program. The state will have given aid to about 34,500 people by the end of April, Ms. Lovett said, a 5 percent increase over last year and the highest number ever.

      The most immediate challenge is to help the high number of consumers who are far behind in electric and gas payments, said Mark Wolfe, director of the National Energy Assistance Directors’ Association, which represents state aid officials in Washington.

      “Based on discussions with major utility companies around the country, we will see record numbers of families facing shut-offs,” Mr. Wolfe said.

      Rhode Island officials, for example, expect shut-offs in 2008 to surpass the record of 30,000 set in 2007.

      In Pennsylvania, applications for “crisis grants” for those whose oil tanks are empty or who face an imminent utilities cutoff totaled about 133,000 in each of the last two years but have already reached 166,000 this year, said Linda Blanchette, deputy secretary of income maintenance.

      And in New York, the number of households that received aid increased by 5 percent in the last year, to 895,000.

      Under the federal aid program, at least 5.8 million households will have received grants to help with heating bills in this fiscal year, ending Sept. 30, which is an increase of 3.7 percent from last year, according to figures to be issued Friday by the Energy Assistance Directors’ Association.

      This is the highest number in 16 years, Mr. Wolfe said. And the numbers would have been higher if some states had not been forced to reduce the number of aid recipients by increasing grants or tightening eligibility requirements – in effect choosing to provide more aid to fewer people.

      Christopher Powden, a jewelry repairer in Goffstown, N.H., with a family of five, managed to pay his electric bills but fell behind on heating oil. “It was a long winter and the cost of oil was exorbitant, and when you add in the cost of electricity it’s impossible to keep up,” Mr. Powden said. Refilling his oil tank this winter cost nearly $3,000, he said, but his grant from the aid program was only $365 and he owes the oil company $535, plus interest.

      Mr. Powden needs the tank refilled this spring because the same furnace provides hot water. But the company will not make another delivery until he pays off the arrears.

      The federal assistance program, known as Liheap, was started in 1980, to help families cope with sharply rising oil prices and energy deregulation, and it has become a routine part of the safety net. Unlike food stamps, which the government must automatically provide to eligible applicants, the program relies on annual Congressional appropriations that have not risen as much as the cost of energy.

      Many states are calling on Congress to quickly add a $1 billion supplement to the federal aid program, which has provided $2.6 billion to low-income families in the current fiscal year.

      Without extra aid, people who still owe large sums to oil vendors will not be able to get deliveries next fall, Ms. Lovett said, and many who did not pay electric and gas bills during New Hampshire’s winter moratorium on shut-offs may soon lose those services.

      At one of the agencies that administers energy aid, Southern New Hampshire Services in Manchester, which covers Hillsborough County, there were 247 new applications for financial aid just last week and most of these were people behind on payments and facing shut-offs, said Louise Bergeron, energy director of the nonprofit agency.

      One aid recipient, Rachel Trumphour, who lives with her two children in Nashua, N.H., heats with gas and electricity and started falling behind last year when she was injured and could not work. She now has a part-time job but cutoffs of energy loom. Last week, her electricity was briefly halted until the agency paid $150 and helped her work out a payment plan of about $190 a month.

      When Ms. Trumphour received a shut-off notice from the gas company, the agency stepped forward with a $625 grant to start paying her debt. But she must make another monthly catch-up payment, of about $190. “I don’t know how I’m going to make these payments and also pay the rent,” Ms. Trumphour said.

      Federal energy assistance, Ms. Lovett said, is “vital to the low-income population, our poorest residents including seniors on fixed incomes and the working poor.”

      Under the federal program, states are given money based on average temperatures, degree of reliance on the costliest fuels and numbers of poor people. Each state sets its own rules for distributing the money. In many states, aid is provided to applicants whose households make up to 150 percent of the official poverty line, or $30,326 for a family of four, though the highest benefits go to the poorest families.

      Nearly all states bar utilities from cutting electrical and gas services during winter months. Some families, like Ms. Trumphour’s, put off paying electric and gas bills, then enter the spring owing large sums to utilities, leaving them at risk.

      In Michigan, “we have just come to the end of the protection period,” said Donald Mussen, director of income support programs for the state. “People are getting pretty high bills this month, and I suspect there will be quite a few shut-offs in May.”

      For oil users in Pennsylvania, mainly in rural areas, the crisis grants had to be increased to $500 from $300 this year, Ms. Blanchette said, because the suppliers, facing higher gasoline prices themselves, would not make deliveries of less than $500.

      “We expect that minimum will be a lot more than $500 next year,” Ms. Blanchette said.

      Taking a different tack, Maryland this year reduced the number of aid recipients, to 91,000 from 100,000, in order to provide extra money to those reliant on heating oil, giving as much as $1,190 to the poorest. The program has a waiting list of more than 10,000 eligible families, said Ralph Marcus, the state director.

      “I think that next year, unless there is a major infusion of funds for Liheap, it’s going to be tougher,” Mr. Marcus said.

      The choice between benefit levels and number of people aided is a wrenching one, he said.

      “Next year we’re going to have to take a hard look at that,” Mr. Marcus said. “We may need to reduce benefits because we want to help as many people as possible.”

    8. Adrian Hinds Avatar
      Adrian Hinds

      am White Rabbit some where in your post you spelt “thiefed” (non-standard) as “tiefed” and i somehow was able to decipher that you meant . 😀 must be a miracle. 😀

      Anyway i was following and agreeing with you up until this point.

      “When the PM raised the price of fuels to “relieve the subsidy” he did nothing but raise the tax on fuel. On the day he raised the price of gasoline, the world price for gasoline was $1.50 per litre in local currency. There was no “subsidy”, there had only been a foregoing of potential tax revenue that he decided to reimpose.
      Our tax system taxes the MEANS of production rather than taxing the product produced. ”

      ================================
      Did the PM really raise the price of fuel???? and is there such a thing as the “world price of gasoline”? uh mean wid all the various blends to meet individual country’s environmental standards and the difference in transport and delivery cost a country will experience, is there really such a thing?

      ummmm taxing the means of production rather that taxing what is produce. Really in Barbados? how does the current VAT fit into this? does it not? Now i saw a study that suggest that the majority of Barbadians are working for wages below the Barbadian poverty line, and i can recall the last government saying that persons working for 28k or less will not pay income tax, so some people may not agree with that the tax system is regressive, extortive and wuh ever else big word you use. 😀

      ….But i am with you on the size of government, cost and wast it takes to run a centralize bureaucracy.

    9. Global Voices Online » Barbados: Economic Storm?

      […] remain firmly at the top of the national agenda in the coming weeks and months ahead,” writes Barbados Underground, as he blogs about the island's economic challenges. Posted by Janine Mendes-Franco Share […]

    10. David Avatar
      David

      ThewWhiterabit are you serious? Drice around Barbados and then do the same in any other island with the exception of Puerto Rico . You can immediately see the difference in the infrastructure. We maynot many times agree with how our tax dollars is being allocated but we can see the results we think.

    11. PiedPiper Avatar
      PiedPiper

      In a nutshell: Greed, Avarice and the rich getting richer off the backs of the poor and working class. Makes you want to take a new look at Capitalism doesn’t it?
      I have always believed that a man who works 10 hours in the cane field breaking his back through physical labour is just as deserving as the man who sits in an office all day playing the stock market. Why should a man born into poverty and no inheritance struggle while those who from the moment they are born, have an advantage. Work is work and should be rewarded appropriately. We are all cogs in the mechanism that drives the economy and individual monetary compensation.
      Capitalism has serious flaws and runs against the grain of equal distribution of the world’s assets. I am not advocating Communism but look at the nations like Sweden, Norway and Denmark that have a Socialist concept where everyone has an equal opportunity to reap the benefits of hard work and a government that will support you to that end.
      The division between the haves and the have nots is so huge now that it is only a matter of time before many nations, including the U.S. , will be driven by the Massas (the rich) who will control the working class as slaves.

    12. Carlos Avatar
      Carlos

      Yes, there is a ‘World’ food and economic crisis affecting the average man throughout the world, and naturally all and sundry are offering their views on the why’s and why not’s! But, could there be a much more sinister plot and plan behind all that’s going on? Yes, I most certainly believe there is.

      Globalization, North American Free Trade Agreement (NAFTA), the General Agreement on Tariff’s (GATT), World Trade Organization (WTO), European Union (EU), Caribbean Single Market and Economy (CSME), what to all of these catch-phrases really mean?

      I will cite a few references from Dr. Grant Jeffrey’s book, “Surveillance Society, THE RISE OF ANTICHHRIST” This book is the result of over thirty years of research involving thousands of books, articles, interviews with experts in intelligence, military surveillance, and study of Scriptures. (Acknowledgement, p.7). In his introduction, Jeffrey states:

      “The world is on the verge of the greatest crisis in history…Jesus Christ warned that humanity would experience a tremendous historical crisis just before He returned to establish His Kingdom. This crisis, He indicated, would produce an unprecedented “great tribulation” such as was not since the beginning of the world to this time, no NOR EVER SHALL BE” (Matt. 24:21). “The prophets also warned that the most evil man in history would be satanically empowered to seize political, economic, military, and religious control of the entir world’s population.’ (p.9).

      This is no joking matter, nor farfetched conspiracy theory, and whether you believe it or not, does not alter one bit the historic reality (present era) of the literal manifestation of what God’s prophets foretold would happen. Listen carefully to Grant Jeffrey as he unfolds a few of the facts from “The Report of the Commission on Global Goverance.”

      “In 1991, a meeting of elite globlists in Stockholm, Sweden, produced a manifesto entitled, Common Responsibility in the 1990’s: The Stockholm Initiative on Global Security and Governance. Many worlds leaders, including Dr. Boutros- Boutros-Gali (appointed as Secretary General of the UN in 1992), endorsed this key planning document for the coming world government. Another report entitled, ‘Our Global Neighbourhood, The Report of the Commission on Global Governance’, by an independent group of 28 global leaders, describes both the philosopy and the strategy to replace the present situation of fragmented and un-coordinated national governments with a TRUE WORLD GOVERNMENT…this document illustrates the plans of those who wish to replace our present system of national sovereignty with ‘a new world order’ under the popular catch phrase of ‘Global Governance’ (Ibid., p.23).

      Former British Prime Minister, Margaret Thatcher expressed her deep concern and clear perception on this sinister ‘New World Order’ in the context of the European Union, in these words:

      “It would be the greatest abdication of national and political sovereignty in history.”

      Because of her stance and outspokenness, she was overthrown by Sir Geoffrey Howe, the Deputy Prime Minister. Howe admitted that the plans for the formation of the EU super state were orginally created following the end of World War II.

      This is just scratching the surface of the vast amount of literature, confirming this most sinister plan, very carefully ploted for many decades. We are truly living in the end-times, all of which are clearly foretold by The Lord Jesus Christ (Matthew 24). Social unrest, HIV/AIDS, famine, hurricanes, earthquakes, tidal waves, etc, etc., all converging at an unprecedented rate, at this time and in this particular generation.

      What we in B’dos and the rest of the world are now experiencing, is just the beginning of SORROWS!! To all who have eyes to see, and ears to hear, (spiritually) REPENT towards Almighty God, and by FAITH, reasonable faith, commit and surrender your hearts and lives to the Lordship of JESUS CHRIST.

    13. The People's Democratic Congress Avatar
      The People’s Democratic Congress

      A future PDC Government of Barbados shall surely ABOLISH ALL TAXATION in Barbados. TAXATION is evil and demonic. It is the state, at given times, stealing parts of the INCOMES of the relevant people, businesses and other entities in Barbados, and then taking such ill-gotten proceeds and using such for many purposes . The Holy Bible vis-a-vis the Ten Commandments so rightly condemns stealing!!

      Meanwhile, ECONOMICS is one of the worst and most wicked POLITICAL ideologies, philosophies and psychologies ever invented by the European man in the 18 – 19 Centuries, and so damningly spread by him and others right up to this point in time. It is totally absurd for persons to suggest that anyone else should avoid being political about the so-called economic and financial affairs of Barbados at any given time, when in truth and in fact these affairs themselves are a major part of the political affairs of the country.

      Surely, Voters must stop electing DLP and BLP Governments in this country, and must start electing a PDC Government, if they wish to achieve far greater levels of intellectual, social, material and financial progress and development for themselves and others.

      PDC

    14. Donald Duck, Esq Avatar
      Donald Duck, Esq

      When one is reviewing the economy, one should note the energy policy announced by then Minister of Finance, Mr. Owen Arthur in 2006 in his presentation of the economic statement for that year.

      The following is an extract of some elements of that policy which were announced


      Energy Pricing Policy
      It is important that we maintain an energy pricing policy in which, as far as practicable, only the change in the price of crude is passed on to the consumer. In this regard, the tax on energy products becomes a critical issue.

      Indeed our energy pricing policy has sought in recent years to reduce the tax on all energy products. We have reduced the total tax on gasoline by over 21 cents per litre or 82 cents per gallon since 1994.
      In the case of diesel the reduction has been $1.15 per gallon. In addition, this government we have removed all the taxes on fuel oil and kerosene.
      The success of our policy is evidenced by the fact that in 1994, when the price of crude was under $15 per barrel, diesel was sold at $1.29 per litre, whereas now that the crude price is $64 a barrel, a four-fold increase, diesel is selling at $1.49 per litre. In the case of gasoline, the price at the pump rose from $1.54 to $2.30, way below the fourfold percentage price increase for crude.

      In the event that the price of crude oil continues to increase the Government will reduce the excise tax to ensure that the tax take on energy products remains the same. Obviously the tax take will fall if and when energy prices fall.

      To mitigate the effects of rising energy prices we will –

      1. Intensify the efforts to maximise the production of crude oil and natural gas;
      2. Diversify the energy mix to make natural gas and other non-liquid fuels more dominant in the domestic economy;
      3. Introduce and maintain a comprehensive set of energy conservation and efficiency measures aimed at maximizing the efficient use of energy;
      4. Ensure that renewable energy plays a progressively more significant role in the economy.

      The Government itself will be in the forefront of these activities since as the single largest employer on the island its energy consumption is huge. The Public Sector Energy Conservation Programme is spelt out in Appendix II hereto.

      Renewable Energy
      The Government’s target as originally set is for renewable energy to contribute in excess of 30% of the island’s primary energy by 2012.

      However, given the unprecedented level of oil prices, we will be seeking to achieve this target in a shorter period. At the moment, the main renewable energy sources are bagasse and solar water heaters which contribute about 15% of the island’s prima ry energy supply.

      We will now carry out a programme to develop other forms of renewable energy such as wind energy, fuel cane, and to improve the contribution of the current sources.

      Wind Energy
      The Government in recognition of the potential for wind energy in
      Barbados has been examining its feasibility for producing electricity to be fed into the grid as far back as the nineteen eighties.

      These wind power feasibility efforts were reactivated when a joint detailed assessment study of a Lambert’s east site in St. Lucy was undertaken a few years ago. This favourable assessment has led the
      BL&P with the Government’s support to develop its own in-house plan for wind energy investment for this site in the very near future.

      We will support the BL&P proposals to develop the wind farm which will generate 26,000,000 kilo watt hours (KWh) annually which at today’s prices have a retail value of $ 8.8 million with an import fuel saving of $4.6 million dollars.

      Fuel Cane
      As part of its plans to transform the sugar industry into a sugar cane industry, the Ministry of Agriculture and Rural Development through the Barbados Agricultural Management Company (BAMC) commissioned a Feasibility Study on a Fuel Cane Power Generation Project which was undertaken by Schaffer and Associates International of the United States of America. It is envisaged that through this fuel cane project, 30 mega watts of electricity will be produced.

      A 30 MW plant should generate 263 million KWh with a reduction in the fuel import bill of Barbados of US $29 million per year.
      The Cabinet has agreed that the fuel cane project is deserving of national support and hence requested that a project unit be established within BAMC to prepare a Pre-investment Plan and a Budget for its full implementation.

      It is proposed that this investment will come on stream by 2008.

      Concessions for Renewable Energy
      At present items needed to support a Renewable Energy Programme are not shown as a separate category under the Customs Act.

      I propose, therefore, Mr. Speaker to exercise the authority provided to the Minister responsible for Finance under Part II Section A of the
      Common External Tariff to grant conditional exemptions for energy conservation schemes by waiving the import duty payable on the energy systems referenced in Appendix III hereto. The items to benefit include:

      •Wind turbine systems
      •Solar systems
      •Bio-fuel systems

      Energy Conservation
      A demand side management study carried out by the BL&P suggested that an opportunity for saving 6% of total energy cost through more energy efficient activities of electricity users. There is an equally large opportunity for savings in non-electricity application such as in the transport sector. Given the fuel import bill of $350 million dollars over the last year it is estimated that energy efficiency savings can be as much as $24 million as the fuel import bill reaches the $400 million mark.
      A national Energy Conservation Programme containing the following elements will now be implemented in Barbados.

      Home Energy Efficiency
      Inefficiently designed homes contribute to the wasteful use of energy.
      Consequently, Mr. Speaker, Government proposes to support the use of materials which keep houses cooler, such as thermal barriers, roof insulation, window tint and ceramic roof coatings by treating them as “energy efficient systems/components” attracting an import duty of
      5%. rather than the present 20% which they carry at present.

      Home Energy Audits
      Home Energy Audits should be encouraged as a standard practice in managing household spending, and lead to significant savings on energy costs. Indeed, Energy savings as little as $20 dollars per month per household will lead to over $40 million dollars in savings annually.
      For each house holder there is need for separate advice on what components to buy (solar lights, fluorescent lights, thermal barriers, window tints etc).

      It is therefore proposed that the cost of a ‘household energy audit and recommended conservation systems/materials’ up to $2000 be allowed as a deduction from assessable income under the Income Tax Home Allowance Scheme. The Ministry of Energy and Public Utilities will develop criteria for approval and certification of the auditors.

      Energy Savings from Fluorescent Light Bulbs
      Fluorescent light bulbs can be five times more energy efficient than incandescent bulbs. Although fluorescent light bulbs are more energy efficient than incandescent bulbs/fittings they both carry the same import duty rate of 20%.

      To encourage greater use I therefore propose to reduce the import duty on fluorescent light bulbs and fittings to 5% effective immediately.

      Transport Sector

      The energy used by the transport sector is in excess of 30% of our national fuel import bill representing over $100 million in import value.
      The following initiatives are proposed to induce significant savings.

      Diesel Vehicles
      Diesel and gasoline powered vehicles attract the same levels of excise tax.

      However, diesel vehicles get up to 40% more mileage per dollar than equally sized gasoline vehicles. A diesel driver therefore spends less money and produces less green house gas emissions when traveling on the road.

      I propose therefore, Mr. Speaker that there be a separate tariff for gasoline and diesel vehicles should be introduced. The existing tax structure will apply only to gasoline vehicles and a new tariff structure for the diesel vehicles based on equivalent fuel efficiency will be introduced.

      Consequently, with effect from April 1, 2006, the minimum rate of excise tax of 46.95% which at present is applied to a gasoline vehicle with an engine size under 1600 cc and a chargeable value under
      $45,000 will now be applied to a diesel vehicle with an engine size under 2000cc and a chargeable value under $45,000. Further details of the new excise tax structure for diesel vehicles may be seen at Appendix IV.

      On the basis of the above if all gasoline vehicles were to be replaced by diesel vehicles the $160 million paid for gasoline annually would be reduced by $40 million. While such a transition is unlikely I intend to assist the process by mandating that effective September 1, 2006 all taxi owners and operators of vehicles for approved tourism ventures desirous of accessing the duty free concessions available under Part II B of the Customs Tariff can only do so by purchasing diesel powered vehicles in the future.

      Electric, Solar, Hybrid, Natural Gas and Liquefied
      Petroleum Gas Ethanol, Vehicles

      I propose, Mr. Speaker, to encourage motorists to assist us in reducing the over $200 million spent on transport fuels annually by providing special concessions on vehicles that use energy sources that are less costly than traditional or locally available fuels.

      I therefore propose that with effect from April 1, 2006 hybrid vehicles as well as those powered by solar energy, LPG and Compressed
      Natural Gas will attract an excise tax at a fixed rate of 20% as compared to the lowest rate of 46.9% on regular cars.
      The management of the Transport Board has been mandated to undertake a technical and economic feasibility study of using alternative fuels to power the Board’s fleet.

    15. Linchh Avatar
      Linchh

      David:

      The date on my copy of the paper by Dr. Reid that you quote is October 12, 2001. I recall that it was written shortly after the 911 disaster in the USA, and seemed to convey the message that the time was ripe for a reappraisal of the (then) BLP government’s development strategy. It seems that Owen Arthur convinced the people of Barbados that the solution was to finance their way out of the crisis.

      I remember seeing our former Prime Minister roundly abusing Dr. Reid on CBC television, without making any attempt to answer any of the challenges contained in his paper.

      Six-and-one-half years later the chickens have come home to roost, but it is now Prime Minister David Thompson who has the misfortune to sit on the clutch of addled eggs that Owen Arthur should be made to suck!

      Fortunately, many of the persons who contributed to the economic recovery of the early 1990s are still available and if requested will readily apply their intellectual energies to taking this blessed Island safely through its present discontents.

    16. The People's Democratic Congress Avatar
      The People’s Democratic Congress

      On the front page of the Weekend Nation, Friday, April 25, 2008, there is a line: BHTA boss: Layoffs no answer to price hikes. On page 3, of the said newspaper President of the Barbados Hotel and Tourism Association, Mr. Alvin Jemmottt, is reported as having said at a press conference on Thursday at the BHTA’s Belleville, St. Michael office: “I think what we need is a collaborative effort between private, public sector and labour to find some productivity methodologies that we can work together to help cushion the impact (of the price increases) …. Barbados needs to become and continue to be competitive and though we have a good tourism product, a lot of that tourism product is driven by attractions. So to go to a lay off situation would be pretty much shooting yourself in the foot”.

      The above comments that have been attributed to Mr. Jemmott, do indeed evince that a least one head of one private sector body in Barbados is very confident in the very positive and rational position he is taking to this talk in Barbados about layoffs coming to the country. Very truly, Mr. Jemmott must be commended by our party for being very refreshingly thoughtful on the subject, and for showing the country that you do NOT have to go down the line of implementing old tried, tested but failed methodologies at this perilous time in Barbados, given that what Barbados must have right now are modern and workable solutions to the current serious economic and financial problems we are facing in the country, and that will, when implemented by whomsoever, bring greater levels of prosperity and redistribution of wealth and income to the masses and middle classes of people in the country.

      PDC

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    18. Trained Economist Avatar
      Trained Economist

      If I take the arguments presented so far, it would seem that the previous government was committed to forsaking the tax revenue from petroleum products.

      I guess my follow up question would be what aspect of government expenditure was being concomitantly reduced?

      Tax revenues from petroleum products must have constituted a major source of revenue. if one gives this up, then one either needs another major source, a major build up in debt or a major reduction in government expenditure.

      Passing on the oil price increases, subsiding them both have costs tot he economy. Its a matter of what you prefer or what you think has the best cost-benefit tradeoff.

      My own sense is that given that oil and food prices seem stuck at high levels for the foreseeable future, I can see the merits of passing them on and pushing the economy to adjust. That is painful and costly but I cannot see that it is an inherently flawed or clumsy policy.

      the debt levels built up by one policy affects the policy options open to the other. The national debt of barbados spiked post 2000 and is certainly around worrying levels.

    19. Diaspora-ite Avatar
      Diaspora-ite

      Some month ago, I read with amazement a statement from the Governor of the Central Bank of Barbados, the same madame pictured at the start of this string, to the effect that all it would take would be an economic recovery in the USA for oil prices to start coming down.

      Well, I’ve got news – and 2 words – for the esteemed governess: China and India! The demand for oil from those 2 countries are the reason why oil isn’t coming down again, unless of course that all world economies implode. Such naive reasoning by a high government official makes me wonder if the government of Barbados really has a grip on reality, or if they are merely ducking down and hoping for the best.

      And as to the statement by PiedPiper to the effect that, “I am not advocating Communism but look at the nations like Sweden, Norway and Denmark that have a Socialist concept where everyone has an equal opportunity to reap the benefits of hard work and a government that will support you to that end,” I will merely say that if you think like some, that the rate of taxation is too high in Barbados, you don’t want to follow the mode of Sweden, where the top marginal rate of taxation is around 65%, the VAT is around 20% and there is no incentive to “work hard” because whatever you earn is going to be taxed punitively. Besides, while not agreeing with unbridled capitalism, the underlying presupposition behind socialism is the use of force; or the ability of government to use state means of enforcement to ensure compliance with their policies.

      I certainly do not have all the answers but I believe that the closest I have seen to a made-in-Barbados solution was provided by Peter Laurie in his column in the Sunday Sun. He seems to be advocating not communism, or socialism, but “communalism,” or a return to community. With that I can agree.

    20. David Avatar
      David

      “How much higher (oil) will go . . . depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries,” al-Badri said at an energy conference over the weekend in Rome. “So there are many other factors other than OPEC production.”

      One factor today was an attack on a Japanese oil tanker off Yemen in the Gulf of Aden. The tanker, the Takayama, was hit by a “rocketlike weapon” at 4:40 a.m. Yemeni time, according to the Japanese coast guard. None of the 23 crew members was injured.

      “There’s clearly some geopolitical tension in the market,” Mark Pervan, a senior commodity strategist at the ANZ Bank in Melbourne, Australia, told CNNMoney.com “This will die down, but the market is pretty jittery at the moment.”

      Oil’s surge is also partly due to the weak dollar. Crude prices are denominated in dollars and generally rise when the dollar declines.

      “Today it’s a trader’s market,” Stephen Schork, editor of the Schork Report, an energy newsletter, told CNBC. Every time traders see weakness in the dollar, they buy crude oil.

      “There is plenty of oil,” Schork said. The problem is “the lack of ability to refine oil.” He said there’s no reason for oil prices to be at these levels: “Fair value is $85 to $90 a barrel.”
      a

      Diaspora-ite here is a snippet which we feel summarizes the oil situation in simple terms. You should not count the Governor of the Central Bank out. The situation can change with a strong dollar which is possible with a change in government in the USA.

    21. Straight talk Avatar
      Straight talk

      David:

      If you should evr give credence to such postings as above, you are seriously, seriously missing the point.

      The mainstream press and oil companies have been lying to you for years, and still you are grasping for any excuse but the trurh.

      When this state of denial is finally over will be the day we start adressing the real problem.

      The world’s economy is based on cheap oil and there isn’t any left.

      Refinery shutdowns, pirates in the Molacca straits, rocket attacks, Nigerian rebels…….when will you people realise that oil is doubling every year for one reason and one reason only.
      It is very precious and it is getting harder to obtain….simple.

    22. Donald Duck, Esq Avatar
      Donald Duck, Esq

      Trained economist

      You should understand that an increase in the gas and diesel price has a multiplier effect in the economy. When they are such massive increases the economy slows, there are less sales and the result is government gets less revenue. Now, would it not be better to reduce the tax take on the input side and therefore reduce the multiplier effect so that government will be able to maintain tax revenue from no so reduced output side of the equation.

      By the way I am not an economist but a realist. Economics is a bit of gobbledigook for me. Once I know how to balance my cheque book and plan a budget. I am fine.

    23. Donald Duck, Esq Avatar
      Donald Duck, Esq

      Observers in the market make everyone believe that it is the increase in consumption that has caused the price to sky rocket. I am however a bit perplexed over this since we almost have a 100% increase in the oil price over the last 15 months and yet the world economy has not grown by more than 10% during that period. Even the economies of the developing world especially india and china have not reached the growth patterns that would warrant such an increase.

      Is the increase not caused by over zealous traders and speculators? Why is it that opec is silent on increasing production.

      We as a nation need to know our weekly consumption of gas and diesel to see if we are conserving our usage or merely being price takers.

    24. Straight talk Avatar
      Straight talk

      Donald Duck, a realist not an economist, should study OPECs “real” ability to pump more of their “real” proven reserves of “really ” light sweet crude as they could in the past.

      Oil is still cheap enough to have relatively inelastic demand, and at the moment producers are fully stretched in barely meeting demand.
      When a shortage occurs price will go through the roof.

      Check out the California gas crisis when a 3% supply shortfall caused an instant doubling of price.

      Speculators may be on to a good thing, it is their money they are gambling with. I wish BL&P would have been smart enough to speculate in Oil futures but instead they just pass any market increase straight on to us as fuel surcharge.

      If speculators are wrong, and the useless media pundits are right, they will get their fingers burnt.

      I am sticking to my prediction of $170 dollar a barrel by year end.

      Any one out there want to take a bet?

    25. The People's Democratic Congress Avatar
      The People’s Democratic Congress

      The Front Page of the Sunday Sun, Sunday, April 27, 2008, does indeed have published a chronicle of the very impressive trend taking place in the food import bill of Barbados over a particular period concerned – the last 5 years. The source of their information being the Barbados Statistical Service.

      The news story speaks to our food import bill being at a staggering BDS $ 1/2 billion, over the said period, and how there are efforts to reduce this bill. The story goes on to further say, et al, how “officials in agriculture believe they can help break the gigantic bill if the incentives offered by Government are modernised to meet current market demands so that they can improve productivity”.

      While we in PDC are are in agreement with the idea that there is a serious need to reduce the food import bill of the country, we certainly are of the very strong position that we in Barbados need to import more food and too plant more food locally to meet the various different demands, tastes, preferences, incomes, costs, supplies, export demands, etc. that relate to this – albeit small – country of Barbados.

      Thus, to drastically reduce the food import bill but at the same time to continue increasing the amount of food into the country, a future PDC Government will, et al, make sure that IMPORTS OF GOODS AND SERVICES INTO THE COUNTRY ARE ZERO-“PRICED” AT ALL POINTS OF ENTRY; that ALL EXCHANGE RATES WITH THE BARBADOS DOLLAR ARE ABOLISHED; AND THAT TAXATION IS ABOLISHED. Also, to make sure that greatly more, and perhaps, better food is planted in Barbados to meet increasing local and export demand a future PDC Government will make sure that TAXATION AND INTERESTS RATES ARE ABOLISHED; THAT INSTITUTIONAL LOANS FOR PRODUCTIVE PURPOSES ARE DEEMED NON-REPAYABLE; THAT AGRICULTURAL LANDS ARE PRESERVED FOR THE PURPOSE OF SOLELY AGFRICULTURAL ACTIVITY AND DEVELOPMENT AND THOSE ALONE; THAT NO FOREIGERS SHALL BE ABLE TO OWN OUR LANDS; AND THAT VERY REASONABLE CAPS SHALL BE PLACED ON THE AMOUNT OF LAND SPACE AN INDIVIDUAL BARBADIAN, MAJORITY OR FULLY OWNED BARBADIAN BUSINESS OR OTHER ENTITY CAN “OWN”, “PURCHASE”, “SELL” OR “LEASE”.

      PDC

    26. David Avatar
      David

      The BU household read the same extract with great interest as well. It provoked the question if Barbadians are being asked to modify behaviours and make different choices so too people like Sir Charles, CLICO, Sir David Seale etc. For many years these actors who control significant resources in Barbados have padded their wealth by operating by making certain choices. It seems from all those who know better than us that now and going forward it cannot be business as usual. The point therefore, and we hope that Sir Charles, Bizzy et al will be made aware, the old arguments of how much they have done for the country will not wash. We thank them for what they have done to date as far as their contribution is concerned but they have to bend because of new requirements necessitated by the global trends.

      We recommend an article written by Peter Laurie, who is not too far behind Lowdown as a columnist who uses words to make sense of the issues, wrote an this article which appeared in the Nation just passed. It is an article which is a 100% improvement on Carl Moores dribble.

    27. Green Monkey Avatar
      Green Monkey

      There is a post in the General Discussion forum at Democraticunderground.com (linked below) which explains how continuous exponential growth in world consumption of oil can add to up to very big numbers in relatively short periods of time, making it very unlikely that we can count on always finding the amount of new oil (or developing alternative energy sources) that we are going to need if we persist in attempting to: (a) give the whole world the typical “American dream” energy hogging lifestyles as is now portrayed worldwide in Hollywood movies and US TV shows, or (b) maintain that lifestyle “as is” in North America and the rest of the developed world in perpetuity.

      http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389×3201026

    28. Dr. Justin Robinson Avatar
      Dr. Justin Robinson

      It probably provides little comfort, but Barbados is not alone in its current concerns about food. The head of the UN World Food Programme (WFP) summed up the global food shortages as a “A silent tsunami which knows no borders sweeping the world”. The Economist magazine used the theme as their cover for last week, “The Silent Tsunami: The Food Crisis and How To Solve It.” Joachim von Braun, the head of the International Food Policy Research Institute says that “World agriculture has entered a new, unsustainable and politically risky period.”

      The increases in the prices of major commodities in the food supply chain have been steep and sharp. The BBC reports that from March 2007 to March 2008, the price of wheat increased 130%, soya 87%, rice 74% and corn 31%. However, the rate of price increases has really taken off this year. For example, since January 2008 rice prices have increased 141%. So what is driving all this?

      The price increases are generally attributed to a lethal combination of high fuel costs, bad weather in key food producing countries, the increase in land allocated to bio-fuels, and a surge in demand – much of it from the rising middle classes of China and India. Ethanol production in the USA has increased from 12 billion litres in 2004 to 42 billion litres in 2007 and is forecasted to be around 50 billion litres in 2008, while meat consumption in China has moved from 20 KG per person in 1980 to 50KG per person in 2007.

      A major part of the problem is that once the price of rice or wheat has risen, other factors kick in which make things worse. There is panic and people start hoarding, speculators buy up supply, and food producing countries impose export controls to try and preserve food for their own people. This then means less is available to be exported to countries which rely on food imports. So, is the era of cheap food over, can the current problems be solved?

      In theory, the rapid increases in food prices should create incentives for increased food production, which should resolve the problem. WFP head Josette Sheeran says she is confident the world could produce the food it needed, it was just a question of riding this difficult period and getting enough resources to invest. She went on to argue that “soaring food prices should be a wake-up call for the world to make long term investment in the food supply chain.” Small farmers will be unable to deliver more food without that investment. Amy Barry from Oxfam argues that agriculture has been badly neglected. “Agriculture stopped being sexy, it was all about unglamorous logistics,” she said. “The focus was more on delivering health and education services. That has to change.”

      But it is not going to be a quick fix. Fuel prices are forecasted to remain high, demand from China and India is likely to continue growing and by its very nature, farming supply always responds with a lag. Many economists believe that government subsidies and price controls on food have slowed the adjustment process by shielding consumers from the food price increases.

      Agriculture clearly needs to needs to move up the policy agenda and aggressive efforts made to expand local and regional production. It may not lead to cheap food but at least it may avert food shortages.

    29. Trained Economist Avatar
      Trained Economist

      Donald Duck esq you are ducking the question. If we accept your argument that the fuel products subsidy is just foregone government revenue, if you keep the subsidy in place what aspect of government’s budget are you cutting to cover the revenue loss?
      If you cut some government expenditure isn’t there a multiplier effect to that?
      If you don’t cut any expenditure then that means more debt. So you are saying leave the problem for later, let the current good times roll.

    30. Linchh Avatar
      Linchh

      “Agriculture clearly needs to needs to move up the policy agenda and aggressive efforts made to expand local and regional production. It may not lead to cheap food but at least it may avert food shortages.”

      Justin, I agree, but jawboning the issue is no solution. Despite all the effort of their parents to provide proper training during childhood, people still try to talk with their mouths full!!

    31. Macca Avatar
      Macca

      I believe that food shortages world wide will be a problem but water shortages could be a greater threat and having to install desalination plants which are very costly to run will only impact on the problem.

    32. Sean Reynolds Avatar
      Sean Reynolds

      Good

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