Barbados still depends on sugar and rum as the two most important foreign exchange earners in the manufacturing sector.
Overall, manufacturing lost some ground in 2008, as the island and its trading partners continued to be buffeted by the world economic slowdown. Barbados Central Bank figures put the sector’s 2008 decline at 0.4%, following a 2.9% contraction in 2007.
Sugar production was down 6.9% compared with 2007, due to a late start to reaping, but output of beverages, including rum, was up by 7%. Last year (2008) also reflected a 3.5% improvement in the production of electronics and a 1.6% rise in food products, but a falloff in output from furniture (4.3%) and chemicals (5.2%).
Besides rum and sugar, manufacturing in Barbados centers mainly on light industry. This includes the production of:
— Cement and its by-products
— Clay tiles
— Garments and textiles
— Paper products
— Electronic components
— Edible oils
— Food products
Manufacturing enterprises involved in the production of an “approved product” are entitled to special incentives under the Barbados government’s Fiscal Incentives Act, on approval of their application to the ministry responsible for industry.
Tax holidays are granted according to the percentage of local value added to the item being produced. Enterprises considered highly capital intensive with an investment of US$25m or higher may be eligible for up to 15 years tax holiday.
Companies involved in manufacturing exclusively for export outside of the Caribbean Community (CARICOM) can qualify for benefits as an International Business Company (IBC). These benefits include a tax rate ranging from 1% to a maximum of 2.5%. In addition to the low tax rates, the benefits include exemption from exchange controls and the duty free import of plant machinery, equipment and raw materials used in the production process.
The IBC regime has been particularly attractive to investors from Canada, with which Barbados has a comprehensive double taxation treaty. For these Canadian-owned operations, dividends paid out of the active business income of a foreign affiliate operating in Barbados are fully deductible in the determination of the taxable income of a recipient Canadian resident corporation.
The Barbados Manufacturers’ Association (BMA), established back in 1964, is the umbrella body representing local companies involved in the production of goods and services on the island. It plays a pivotal role in the development of the island’s manufacturing sector.
The association does a great deal to represent its members and their collective interests. At the same time, it aims to assist in the growth of the Barbadian economy.
Annually the BMA mounts the island’s largest international trade exhibition, which gives companies – local and Caribbean – an opportunity to showcase their goods to the public.
Author: Brett Callaghan