Jan 2006 Financial News

FOREIGN INVESTORS in Barbados

Jan 04, 2006

Foreign Ownership of Barbadian companies has been on the rise and Barbadians have tended to view this activity in a negative light and with a high degree of trepidation. In the last few years a number of locally owned and controlled companies have been sold or partnered with a foreign owned corporation. Such companies include Barbados National Bank, which Government sold its 57 per cent interests to Republic Bank and Caribbean Commercial Bank now RBTT, both of which are owned by the parent company in Trinidad and Tobago. Meanwhile, Mutual Bank now is owned by Butterfield Bank which is based in Bermuda and Rayside Construction who is now partnered with Clico a Trinidadian based firm.

Traditionally Barbados has been perceived as an attractive environment providing a stable economic and political climate with a developed services sector. Government has also been a strong advocate of Barbados providing a favourable business environment, while highlighting the gains for Barbados this activity can have with increases in foreign earnings and all other positive spin-offs. Government ministers have expressed these sentiments in various forums.

The formation or rather the renewal of these formerly owned Barbadian businesses can bring a number of benefits to this very small economy. The first of these benefits, which can easily be identified, is the significant financial gains from the direct transaction of the ownership. An example of this is seen when the government of Barbados sold its controlling interest in BNB to Republic Bank of Trinidad, this transaction allowed the former to put $US 189 million in the country's foreign reserves. This transaction allowed the government to assist in the completion of other development projects. Other spin-off benefits may include more creativity, higher level of efficiency, knowledge and technology transfer, new managerial expertise, greater productivity and more effective customer service, all of which will be of great value to both the economy and the people.

Unlike some of its CARICOM neighbours, historically Barbados has remained a very closed economy since its independence. It has been an economy where business partnerships and mergers have remained an untapped business opportunity. Considering that the majority of businesses have remained locally owned or controlled, very few businesses whether regional or extra-regional seeking entry into the Barbados market either through mergers or some other form of business partnership have been successful. However, recently acquisitions and mergers seem to be providing the most lucrative opportunities for businesses seeking entry into Barbados. Yet Barbadian-owned businesses have remained very conservative in their ventures wi th very few seeking regional opportunities. From 2000 there has been a distinct change in the environment with a number of mergers, acquisitions and partnerships taking place. Some proponents of the CSME argue that this regional effort has removed a number of concerns which businesses in certain territories have been guarded against.

Such mergers, acquisitions and partnerships can also bring more opportunities for Barbadians as consumers. Access to better terms for mortgagees have been identified as one of the most meaningful opportunities. As a subsidiary of Republic Bank, BNB introduced a 6.75 per cent rate for mortgages, which could compete, with those rates offered by other financial firms. Prior to new ownership Mutual Bank now Bank of Butt erfield, it did not offer mortgage financing, this is now one of its important services to customers and it carries one of the most competitive rates.

The business environment in Barbados is one, which is traditionally closed, but the trend towards more modern elements such as mergers and acquisitions has opened the economy. Increased competition is an expectation of the CSME being in full operation and Barbadians need to contemplate the benefits rather than dwell on the challenges. The changing global environment shows that Barbadians should adopt a more open-minded approach to foreign investors and consider the possibilities that such ventures bring. These partnerships can improve the capacity and competitiveness of companies operating in Barbados and also bring increase sales, better quality products or services and even better employee relations.

Stacia Browne
The Barbados Advocate
Tuesday, 3rd January, 2006
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