A private sector-led, regionally-coordinated approach can help the Caribbean reap the full benefits of the international business and financial services (IBFS) sector, says President of the Caribbean Development Bank, Dr. Warren Smith. Speaking recently at Barbados’ International Business Week 2019 conference, Dr. Smith noted that the increasing attractiveness of the region as an offshore center had brought closer attention to the sector.
“According to a recent OECD (Organization for Economic Cooperation and Development) report, since 2010, developing countries have accounted for a larger intake of foreign direct investments than their more established counterparts. But, the growing attractiveness of these economies to multinational corporations has come at a price, bringing them increased visibility and greater scrutiny,” he stated.
Dr. Smith drew attention to the increase in regulation requirements with the passage of the United States’ Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standard, noting that compliance with the various rules “places a bureaucratic burden on governments and institutions.”
The CDB President stated that countries which failed to make changes to their regulatory frameworks faced the real threats of loss of the loss of correspondent banking relationships and of ‘blacklisting’, pointing out that: “Since the recent threats of ‘blacklisting’ Barbados, many Caribbean countries are even more aware of the pressures that the international community can exert on the international business and financial services sector.”
He strongly advised stakeholders to adopt a regional approach to protecting this valuable sector and establish the region as a “zone of excellence” for financial services. “We should embrace a regional approach that supports regulatory convergence and the adoption of common principles among CARICOM countries,” the CDB President said.
He added that a threat to the reputation of one Caribbean country was a threat to all, emphasizing that “in this business, what we trade on is our good name. The blacklisting of any one Caribbean country will have an immediate negative effect on the reputation of the entire region.” Amidst these acknowledged challenges, Dr. Smith sounded an optimistic note, suggesting that digitalization and other prevalent global trends promised significant benefits for the Caribbean’s IBFS sector.
“Digital transformation is the new nexus for growth and development….Barbados must adopt the technology of tomorrow – today. We are already seeing the efforts in this light with the modernization of public sector service delivery,” he said. To this end, he recommended some key areas which could be enhanced by employing digital technology, including the domestic payment systems and data collection.
The CDB head also called for the private sector to be more involved in shaping the direction of the IBFS, advising that the private sector had a role to play in policy and strategy development. “There is untapped potential in the Caribbean for sustainable and inclusive growth through greater private sector involvement. The engagement of the various private sector actors is not limited to the provision of financing. Rather, the private sector brings to the table valuable knowledge and insights that can help shape better policies and build proactive strategies based on regional and international exposure and experience.”