‘Advance the International Finance Sector’
Monday October 31 2011 | 08:59 AM

A Leading Economist advises Barbadians they must defend and develop its international financial centre (IFC) because simply there is a compelling economic case for the country to do so. 
Professor Avinash Persaud made this assertion last week at the Barbados International Business Association (BIBA) International Business Week public discussion entitled “Can Barbados Grow and Prosper Without International Business?”

“Our international financial sector is not the only avenue, but it is the main avenue for diversifying our economy into a sector that will pay our people well, will support high-value training and professionalization of our work force that will secure them the best possible opportunities and wage power in a global economy. It does this with a modest environmental footprint and complements our tourism sector” he said.

According to him, “Where overseas markets are large and local markets are small, there are few alternatives to an outwardly oriented economy with export-driven growth and falling protectionism. Autarky does not work for small states. 

Where overseas markets are distant and countries are physically small and water and energy short, there is little alternative to the export of “weightless” products. The best examples of weightless products which are the most highly paid professional services such as asset managers, family offices, lawyers, accountants etc. It is no surprise then that almost every successful small state, be it Hong Kong, Singapore, Mauritius, Luxembourg, Switzerland, Bermuda, Bahamas and Cayman, has at its core a disproportionately large financial sector.”

Professor Persaud touched on the general attack on small state IFCs. “There is no denying that there are some jurisdictions that are more co-operative than others and we must not side with all 
other small state IFCs, but the general attack on small state IFCs is without justification, especially given the poor management and regulation of finance in the large country hubs. These attacks amount to a non-tariff barrier against competition from small states. Evidence for this comes from the observation that the attacks are highly discriminatory. 

There is also a serious lapse of natural justice when conclaves of large countries, such as the Group of Twenty (G20) or the OECD, appoint themselves as both judge and jury on the activities of non-members and proceed to apply strictures to others while simultaneously resisting broad application of the same rules to themselves. 

However, he believes, “In the new financial landscape, the only sustainable strategy for small-state IFCs is a niche strategy. 

“IFCs should identify those sectors where there is a clear and credible advantage, and focus on being world-class in those areas. There are more opportunities in this space for the bold than might be imagined.

“Caribbean IFC and their regulators, will however, have to view regulation differently, it is no longer as a game of pale imitation, but a game of sharp innovation. This is a vital lesson for the newly minted Financial Services Commission (FSC) to embrace. And it will require investment, especially in people and advocacy,” he stressed.

The Economist explained the critical role of education: “If the Caribbean, if Barbados, is to be a leader in some areas of financial regulation, it will need world-class training capacity in financial risk, training people to an internationally recognised standard of excellence. Training local people will play a critical role in deepening the development of international financial sectors.”