Former Central Bank Governor Dr Delisle Worrell has urged authorities to take decisive steps to reverse a pronounced decline in foreign direct investment (FDI) threatening the island’s economic prospects.
Dr Worrell, writing in his August Economic Letter, revealed that foreign investment in Barbados has dwindled dramatically, dropping from a record 15 per cent of gross domestic product (GDP) in 2014 to just 3.3 per cent in 2024.
He wrote: “Foreign investment in Barbados fell from a record 15 per cent of GDP in 2014, to four per cent in 2018. Since then, the ratio has remained around that level, with the 2024 figure recorded at 3.3 per cent.”
Citing the latest United Nations Economic Commission for Latin America and the Caribbean (UN ECLAC) report, Dr Worrell noted that foreign direct investment has been on the decline across the English-speaking Caribbean over the past decade, except for Guyana. There, the recent oil export boom propelled foreign investment to more than 30 per cent of GDP since 2018, up from an average of less than five per cent.
He explained: “Guyana’s economy has ballooned as a result of the oil boom, propelling the country past Barbados, The Bahamas and Jamaica, to second place in the English-speaking Caribbean ranks in 2024, with GDP just shy of Trinidad and Tobago’s US$26 billion [BDS$52 billion].”
The economic adviser contrasted Guyana’s fortunes with a more sobering outlook for the wider region. Five countries — Trinidad and Tobago, Guyana, Jamaica, The Bahamas and Barbados — account for 85 per cent of the region’s GDP, but several have suffered sharp falls in foreign investment. According to Dr Worrell, Jamaica’s FDI has plummeted from six per cent of GDP a decade ago to just one per cent last year; The Bahamas saw its ratio halve from nine per cent in 2010 to about three per cent four years later, and dip below one per cent in each of the past two years.
He also pointed out that Trinidadians have consistently invested more abroad than foreigners have invested in their country since 2010, with much of that outbound capital flowing to Barbados and elsewhere in the region, though detailed figures remain unpublished.
The former consultant to the International Monetary Fund and World Bank warned that declining FDI signals a scarcity of growth-inducing projects and could hamper the region’s ability to fund essential imports. “As the economies grow, countries will need to import increasing amounts of fuels and other essentials for the use of consumers and for inputs into production processes. To earn the necessary foreign exchange, each country must increase its capacity to produce internationally competitive products, expand tourism facilities and provide other international services.”
Dr Worrell argued that “a widely-recognised obstacle to foreign investment is Caribbean governments’ dismal record for administrative and regulatory competence”. He suggested little progress has been made despite reforms, as evidenced by continuing foreign currency controls in several countries.
He added that the government’s credit rating remains a significant consideration for investors: “All other things being equal, investors looking to the Caribbean may be expected to prefer projects in The Bahamas and Trinidad and Tobago—which both have government debt with an ‘Investment’ grade rating from Standard and Poors—to projects in Barbados and Jamaica, where government debt is graded ‘Speculative’.”
Among his recommendations, Dr Worrell called for robust improvements in public services and infrastructure. “Other government measures which are effective in improving the incentives for foreign investment include: the provision and maintenance of high-quality health, education and public safety systems; building out and maintaining an adequate network of roads, ports, airports and other infrastructure; and putting in place a regulatory framework for high-performance telecommunications and public utilities,” he added.
He concluded that these investments not only attract much-needed investment but also enhance residents’ quality of life directly.
(EJ)
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