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Barbados!Services!Sector!!
Development!Strategy!
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PROGRESS!REPORT!
July!2013
PREPARED&BY& Mark&Hellyer& of& & & & & &
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Barbados(Services(Sector(Development(Strategy!
Project Recipient
Barbados Coalition of Services Industries Project Funded by Commonwealth Secretariat PX/BRB/0735 ! ! Project Implemented by ! ! ! CTA$Economic$&$Export$Analysts$Ltd$ 505#Pinner#Road# Harrow## HA2#6EH# United#Kingdom# # Tel:#(+44)#870#199#5835## Email:#[email protected]### Web:#www.ctaeconomic.com# ! Memberships
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Acknowledgements!
This!report!is!based!on!research!undertaken!between!29th!April!and!30th!June!2013.!It!involved! over!75!interviews!in!Barbados,!review!of!more!than!25!research!papers,!policy!documents!and! statistical! reports,! extensive! market! research! global! services! markets! and! close! consultation! with! the! Commonwealth! Secretariat,! Project! Steering! Group! and! the! Barbados! Coalition! of! Services! Industries! (BCSI).! The! team! is! extremely! grateful! for! the! organisation! and! guidance! provided!by!BCSI!and!the!openness!and!cooperation!of!all!participants.!However,!the!findings,! opinions!and!recommendations!expressed!in!this!report!remain!those!of!the!project!team and! do! not! necessarily! reflect! those! of! the! Commonwealth! Secretariat,! BCSI,! Government! of! Barbados!or!Project!Steering!Group.!!
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Contents!
1#
Executive!Summary!...!1#
2#
Situation!Analysis!...!3#
3#
Business!Process!Outsourcing!(BPO)!...!5#
3.1#
Global!Market!...!5#
3.2#
The!BPO!Industry!in!Barbados!...!6#
3.3#
BPO!Potential!in!Barbados!...!6#
3.4#
Challenges!to!be!addressed!...!7#
4#
International!Business!Companies!(IBC)!...!9#
4.1#
Global!Market!...!9#
4.2#
The!IBC!Industry!in!Barbados!...!9#
4.3#
IBC!Potential!in!Barbados!...!10#
4.4#
Challenges!to!be!addressed!...!10#
5#
ICT!Services!...!11#
5.1#
Global!Market!...!11#
5.2#
The!ICT!Industry!in!Barbados!...!12#
5.3#
ICT!Potential!in!Barbados!...!12#
5.4#
Challenges!to!be!addressed!...!13#
6#
Tertiary!Education!Services!...!14#
6.1#
Global!Market!...!14#
6.2#
The!Tertiary!Education!Sector!in!Barbados!...!16#
6.3#
Potential!for!Tertiary!Education!business!in!Barbados!...!17#
6.4#
Challenges!to!be!addressed!...!17#
7#
Construction!Related!Professional!Services!...!19#
7.1#
Global!Market!...!19#
7.2#
The!Construction!Related!Professional!Services!Industry!in!Barbados!...!20#
7.3#
Potential!for!Professional!Services!in!Barbados!...!20#
7.4#
Challenges!to!be!addressed!...!21#
8#
Creative!Industries!...!22#
8.1#
Global!Market!...!22#
8.2#
Creative!Industries!in!Barbados!...!22#
8.3#
Creative!Industries!Potential!in!Barbados!...!23#
8.4#
Challenges!to!be!addressed!...!23#
9#
Health!and!Wellness!Tourism!...!24#
9.1#
Global!Market!...!24#
9.2#
The!Health!and!Wellness!Tourism!in!Barbados!...!27#
9.3#
Potential!for!Health!and!Wellness!tourism!in!Barbados!...!27#
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9.4#
Challenges!to!be!addressed!...!28#
10#
Business!Support!Services!...!29#
The!Role!of!Services!in!Competitiveness!...!29#
The!Business!Support!Sector!in!Barbados!...!30#
Business!Support!Potential!in!Barbados!...!31#
Challenges!to!be!addressed!...!31#
11#
Conclusions!...!33#
11.1#
Guestimate!of!sectoral!breakdown!...!33#
11.2#
Selection!of!Priority!Services!Sectors!...!34#
!Progress!Report!
1 Executive)Summary!
The!following!section!summarises!the!key!findings!of!the!sector!analysis!and!makes!recommendations!for!the!sectors!to!focus!on!in!the!strategy!(highlighted! in!the!table!below).!Combined,!these!sectors!would!generate!around!US$!450!million!(B$!900!million)!of!new!business!for!the!services!sector,!equivalent!to!10! %!of!GDP.!The!strategy!would!not!just!focus!on!these!sectors,!but!develop!a!conducive!environment!for!all!services!sectors!so!an!addition!B$20!million!may!be! expected!from!other!individual!services!providers!across!the!sector!!! BPO! IBC! ICT! Tertiary!
Education! Construction! related! professional! services! Creative! Industries! Health!and! wellness! Business! Support! Services! Global!value!of! sector! US$!135! billion! na! US$!1,200! bllion! US$!40!billion! US$!1,700! billion! US$!800! billion! US$!100! billion! na! Value!proposition!
(medium!term)! US$!55!million! US$!63!miilion! US$!192!million! US$!150!million! US$!5!million! US$!5!million! US$!25!million! US$!49!million!
Employment!
generation! 2,000!direct!jobs! 750!direct!jobs! 800!direct!jobs!
Few! educators! with!many! indirect!jobs!! 100s! 100s! High!100s! High!100s! Quality!of!job!!
! Medium! LowGmedium! High! Mixed! High! Medium! High! Medium!
Ownership! Mixed! FDI! Local! Local! Local! Local! Mixed! Local!
Ease!of!
realisation! Easy! Hard! Medium! Easy! Medium! Medium! Mixed! Hard! Long!term!growth!
!Progress!Report! www.ctaeconomic.com! 3! Barbados!Services!Sector! Development!Strategy!
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2 Situation(Analysis!
This!section!presents!an!overview!of!the!available!information!on!the!services!sector!in!Barbados.!The! data!presented!throughout!this!report!is!drawn!from!a!variety!of!sources!including!national!accounts,! international!trade!in!services!statistics!and!estimates!from!national!services!associations!and!private! sector! operators.! These! estimates! are! NOT! accurate! and! are! not! meant! to! be! definitive.! In! the! absence!of!more!robust!data,!these!estimates!are!a!tool!to!assist!in!the!prioritisation!of!the!wider! sector! strategy! being! developed.! However,! more! accurate! and! detailed! analysis! of! each! sector! in! Barbados!is!needed.!!Services! are! the! most! important! component! of! the! Barbados! economy! amounting! to! B$! 5.5! bn! (US$2.8!bn)!and!accounting!for!65%!of!GDP.!Employment!in!the!services!sector!totals!94,700,!which! is!74%!of!all!employed!persons.!Approximately!21%!of!services!jobs!are!in!wholesale/retail,!19%!in! finance!and!business!and!18%!in!personal!services!provision!(including!education!and!health).!
Table!1!presents!the!available!data!on!the!value!of!the!different!services!sectors!and!exports!from! official! statistics.! It! shows! that! 42%! of! services! income! in! Barbados! is! in! the! finance! and! business! group,!of!which,!40%!is!derived!from!export.!Around!31%!of!services!are!in!distribution!and!leisure! (including!hotels,!restaurant!and!retail),!of!which!over!80%!is!export.! Table&1:&Principal&Services&Sectors&in&2011& & Value&of&the& Sector&1&& (B$m)& %&of&the&
services§or& Employment& Exports
2&&
(B$m)&
%&Export&
Finance!&!business! 2321.8& 42.0%& 17,800& 921.4& 39.7%&
− Other!business!services& − Insurance& − Finance& − Computer!&!information& − Royalties!and!licence!fees! ! ! ! 753.6! 100.6! 37.8! 22.8! 6.6! !
Distribution!and!leisure! 1704.9& 30.9%& 33,500& 1412.0& 82.8%&
Hotels/restaurant& Wholesale/retail& − Travel& 1043.5! 661.4! ! ! ! ! ! 1412.0! !
Transport!storage!and!communication! 609.9& 11.0%& 8,500& 95.4& 15.6%&
− Transport& − Communications!
! ! ! 44.6!
50.8!
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Construction! 374.7& 6.8%& 14,600& 5.4& 1.4%&
− Construction& ! ! ! 5.4! !
Personal!(incl.!health,!education!&!other)! 291.5& 5.3%& 17,400& 0.8& 0.3%&
− Personal!services& ! ! ! 0.8! !
Other! & & & 725& &
Total!Services! 5,524.6& 64.0%& 94,700& 3160& 57.2%&
Total!Economy! 8,626.0! ! ! ! !
1!Barbados!Economic!&!Social!Report!2011! 2!Calculated!from!UNCTADStat!(2013)!
!Progress!Report
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Situation(Analysis(
Within!finance!and!business!group,!other!business!services!exports!represent!one!third!(32.5%)!of! the! sector.! Given! “other! business! services”! would! likely! also! have! domestic! sales,! it! is! almost! certainly! the! largest! segment! of! the! group.! However,! little! is! known! as! to! the! relative! values! and! importance!of!each!of!these!to!either!export!of!services!or!domestic!production.!
Based!on!discussions!held!during!the!scoping!mission,!the!following!sectors!have!been!assessed!in! the!remaining!sections!of!the!report.!
Business!process!outsourcing:!! includes!call!centres,!back!office!support!and!is!part!of!business! and! finance! services! valued! at! B$! 2.3! bn! and! export! of! other! business!services!B$!750!million.!
International!business!companies:!includes! foreign! companies! registered! in! Barbados! where! their! main!activities!are!conducted!elsewhere.!This!is!part!of!business! and! finance! services! valued! at! B$! 2.3! bn! and! export! of! other! business!services!B$!750!million.!
ICT!services:! includes! IT! installation! and! software! development! part! of!
business! and! finance! services! valued! at! B$! 2.3! bn! with! exports! valued!at!B$!23!million.!
Education!services:! includes! higher! education,! technical! and! vocational! training,! professional! qualifications! and! English! language! training.! These! are!part!of!personal!services!valued!at!B$291!million!and!export! of! personal! services! of! B$! 0.8! million.! Revenue! from! foreign! students!will!also!be!a!small!part!of!hotels,!restaurants!and!retail! of!B$!1.7!bn!and!retail!and!travel!exports!(spending!in!Barbados! of!foreign!nationals)!of!B$!1.4!bn.!
Professional!services:! includes! architectural,! engineering,! surveying,! planning! and! management! consultancies! and! is! also! part! of! business! and! finance!services!valued!at!B$!2.3!bn!and!export!of!other!business! services!B$!750!million.!
Creative!Industries:! includes!performing!arts,!music!recordings,!film,!art,!photography! and! fashion! design.! These! sectors! will! cut! across! business! and! finance,! personal! and! hotels,! restaurants! and! retail! valued! at! B$4.3!bn!and!part!of!exports!of!royalties!of!B$6.6!million.!!
Health!and!Wellness! includes!medical!and!wellness!services.!These!are!part!of!personal! services!valued!at!B$291!million!and!export!of!personal!services! of! B$! 0.8! million.! Revenue! from! foreign! students! will! also! be! a! small!part!of!hotels,!restaurants!and!retail!of!B$!1.7!bn!and!retail! and!travel!exports!(spending!in!Barbados!of!foreign!nationals)!of! B$!1.4!bn.!
Business!Development!Services:! includes!services!delivered!to!value!chains!in!Barbados!is!part!of! business!and!finance!services!valued!at!B$!2.3!bn.!
!Progress!Report! www.ctaeconomic.com! 5! Barbados!Services!Sector! Development!Strategy!
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BPO(
3 Business'Process'Outsourcing'(BPO)!
The!definition!of!Business!Process!Outsourcing!is!a!broad!term!to!include!the!hiring!(outsourcing)!of! an!outside!company!to!undertake!specific!business!functions.!The!most!common!BPO!functions!are:! custom! service! and! sales;! finance,! accounting! and! payroll;! human! resource! management! and! procurement!and!logistics.!It!also!includes!Knowledge!Process!Outsourcing!(KPO),!which!is!defined!as! activities!which!require!greater!skills,!knowledge!and!education!to!handle!(essentially!higher!value! BPO!across!the!main!sectors).!BPO!does!not!generally!include!ICT!and!software!development.!3.1 Global!Market!
The!global!BPO!industry!(including!outsourcing!business!services!to!national!and!foreign!companies)! was!estimated!at!US$!135!billion!(B$!270!billion)!in!20113,!of!which!some!US$!25!billion!(19%)!is! outsourced!to!foreign!countries.!The!key!trend!in!BPO!is!that!the!market!is!fast!growing!with!average! annual!growth!rates!of!6.6%!over!recent!years!and!a!rise!in!offshore!outsourcing!(from!only!10%!in! 2008!to!19%!in!2011).!The!main!market!segment!is!customer!services!and!sales!which!accounts!for! over!50%!of!total!BPO! services.! Almost!75%!of!US!and! European!multinational! companies!now!use!BPO! services.!Overall!29%!of!US! and!European!companies! expect!to!increase!their!use! of!BPO!in!the!near!future.!! India!has!by!far!the!largest! share!of!the!world’s!BPO! with!over!50!per!cent!of! world!exports!and!more!than! 245,000!people!employed!in! exporting!BPO.!Ranked! second!is!China!with!an!estimated!14!per!cent!of!exports!followed!closely!by!the!Philippines,!which! has!a!further!12!per!cent!and!over!200,000!employees.!Malaysia!is!the!fourth!largest!supplier!of!BPO! whilst!developed!countries!such!as!Canada!and!Ireland!have!8.5!and!7.5!per!cent!of!global!exports! respectively.!Other,!relatively!new!countries!are!developing!offshore!BPO!industries!including! Eastern!Europe,!Morocco,!Egypt!and!South!Africa.! The!global!market!for!end!users!of!BPO!is!dominated!by!the!USA!which!represents!59!per!cent!of!the! market.!Europe!follows!with!27!per!cent!and!is!set!to!grow!rapidly!over!the!next!few!years!as!it! catches!up!with!the!US!and!tries!to!become!globally!more!competitive!through!reducing!costs.! ! ! 3!Market!Share!Analysis:!BPO!(2012)!Gartner! Customer) Services) 54%) Finance/ Accounts) 23%) Human) Resource) 18%) Logistics) 3%) KPO) 2%) Figure'1:'Global'BPO'Market'!Progress!Report
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BPO(((
Table(2:(Principal(BPO(Market(in(2010( Market Market Share% USA 59% Europe 27%Asia Pacific inc Japan 9%
Other 5% The!driving!factor!behind!the!development!of!offshore!outsourcing!has!been!the!need!to!cut!costs! (especially!now!during!the!global!recession)!while!the!enabling!factor!has!been!the!global!electronic! internet!network!that!allows!digital!data!to!be!accessed!and!delivered!instantly,!from!and!to!almost! anywhere!in!the!world.!
3.2 The!BPO!Industry!in!Barbados!
Business!process!outsourcing!sector!is!part!of!business!and!finance!services!valued!at!B$!2.3!billion! and!part!of!export!of!other!business!services!valued!at!B$!750!million.!Data!on!the!BPO!sector!in! Barbados!is!not!readily!available.!Discussions!with!a!variety!of!associations!and!operators!suggest! that!there!are!perhaps!around!20!companies!in!Barbados!involved!in!customer!service!call!centres,! finance!and!accounting!back!office,!insurance!claim!processing!(KPO)!and!pharmacy!prescription! processing!(KPO).!It!is!also!claimed!that!5,000!persons!are!employed!across!the!sector.!! Table(3:(Average(wages(and(revenue(per(employee(in(BPO( India Scotland USAverage per agent labour costs per month
US$400 US$ 1,500 US$ 2,000
Labour costs as percentage of total costs
33% 67% 67%
Average revenue per employee US$ 16,000 US$ 24,000 US$ 34,000
Assuming!that!costs!and!revenue!per!employee!equate!to!a!level!between!that!of!Scotland!and!India! (at!US$20,000!for!both!voice!and!nonevoice!BPO)4!then!the!sector!in!Barbados!could!be!valued!at! US$!100!million!(B$200!million).!This!indicates!that!BPO!represents!9%!of!the!business!and!finance! services!group!and!given!it!is!likely!that!the!majority!(if!not!all)!of!BPO!is!export!oriented,!then!BPO! could!be!around!27%!of!“Other!Business!Services”!exports.!
3.3 BPO!Potential!in!Barbados!
There!is!no!doubt!that!BPO!is!an!important!sector!to!the!services!industry!in!Barbados.!However,! high!staff!turnover!rates!across!the!industry!(averaging!40%!in!Indian!call!centres),!the!size!of! Barbados’s!“graduate”!workforce!will!limit!growth.!However,!much!of!Barbados’s!BPO!sector!is!“low! end”!and!therefore!any!growth!is!likely!to!derive!from!movement!up!the!BPO!value!chain!to!KPO! activities.!The!global!KPO!market!by!46!per!cent,!from!US$1.2!billion!in!2003!to!US$17!billion!in!2010! and!there!has!been!a!move!in!some!outsourcing!companies!towards!jobs!for!jobs!for!doctors,! engineers,!chartered!accountant!and!architects.5!A!move!towards!KPO!has!several!benefits!for! 4!India’s!ITeS!and!BPO!Industry!(2013)!Dunn!and!Bradstreet! 5!Knowledge!Process!Outsourcing!(KPO)!Services!(2013)!KPOExperts!!Progress!Report! www.ctaeconomic.com! 7! Barbados!Services!Sector! Development!Strategy!
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BPO(
Barbados!with!lower!staff!turnover!rates,!as!low!as!4%!per!annum,!and!much!higher!revenue!per! employee!at!an!average!US$!55,000.!! So!for!example,!attracting!an!additional!2,000!KPO!jobs!to!Barbados,!could!generate!around!US$!110! million!(B$220!million)!in!revenue,!contributing!an!additional!2.5%!to!GDP.!3.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.! The!main!decision!criteria!for!selection!of!offshore!BPO!providers!by!international!clients!are:!! ! Availability!of!qualified!workforce! ! Costs!! ! Information!Communications!Technology!infrastructure! ! Time!Zones!! ! Language! ! Quality!Assurance!! ! Track!record!(Brand!reputation)! ! Confidentiality! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Availability(of(qualified(workforce.!Sufficient!high!level!graduate!and!post!graduates!will!be! required!if!Barbados!is!to!over!up!the!value!chain!to!KPO!services.!The!availability!(numbers!and! qualifications)!of!potential!workers!will!have!to!be!examined!and!any!necessary!policies!put!in! place!to!address!this.!The!universities!and!community!colleges!offer!well!reputed!IT!and!business! programs.!The!current!problem!however,!is!that!“they’re!graduating!a!lot!of!workers,!but!those! workers!don’t!have!the!requisite!experience,”!according!to!KM2!Solutions!(in!Barbados).!“In!our! own!business!we!haven’t!been!that!successful!at!finding!qualified!tech!workers,!and!the!lack!is! not!in!terms!of!education!but!in!terms!of!concrete!IT!work!experience.”!6! 2. Costs:!Costs!are!a!key!criteria!for!any!outsourcing!(it’s!the!main!motivation).!There!needs!to!be!a! significant!cost!difference!between!the!original!and!outsourced!countries!in!wages,!rentals,! communications!and!energy.!Costs!in!Barbados!are!generally!high,!but!this!becomes!less! problematic!as!business!is!sought!higher!up!the!BPO!value!chain.!Nevertheless,!costs!are!still! important!and!need!to!be!investigated!further.!! 3. ICT(infrastructure:!The!quality!of!ICT!infrastructure!available!(reliability!and!bandwidth)!can! severely!affect!competitiveness!in!KPO!provision.!In!addition,!the!availability!of!ICT!equipment! will!also!affect!competitiveness,!as!will!the!servicing!and!maintenance!of!ICT!systems.!Where! equipment!has!to!be!imported!and/or!serviced!by!foreign!providers,!ease!of!entry!to!Barbados! of!service!providers!and!products!(eg!import!duties!treatment)!could!be!a!factor.! 4. Time(Zones:!Neareshoring!(use!of!neighbouring!countries!for!outsourcing)!is!particularly! important!for!KPO!services.!Therefore,!Barbados!has!is!well!suited!for!North!American!markets.! 5. Language:!Again,!language!proficiency!is!important!and!becomes!increasingly!important!as!KPO! services!are!developed.!For!voice!BPO,!accent!is!also!a!key!determinant!(for!example,!US!Indian! accents!have!been!seen!to!be!unacceptable!whereas!Philippines!accent!are!not.!! 6!Caribbean!IT!Talent!Supply:!Can!Dominican!Republic,!Jamaica!and!Barbados!Go!Higher!Value?!(2011)!NearshoreAmericas!!Progress!Report
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BPO(((
6. Quality(Assurance.!Services!delivery!is!not!“physical”!in!the!sense!of!being!able!to!provide!clients! with!samples,!as!with!a!product.!Therefore,!“quality!assurance”!of!services!becomes!vital!to! provide!clients!with!the!confidence!that!the!services!provided!will!be!consistent!and!of!a!high! standards.!Development!of!industry!standards,!codes!of!practice!and!quality!assurance!schemes! are!areas!to!develop!(this!may!also!include!ethics!and!labour!standards).! 7. Track(record:!Allied!to!quality!is!experience!working!with!other!organisations!to!a!satisfactorily! level.!The!use!of!sector!organisation,!case!studies,!promotion!and!branding!may!be!considered.!! 8. Confidentiality:!One!of!the!most!important!issues!is!to!keep!the!customer’s!data!secure!at!the! providers’!site.!!This!relates!to!both!security!(protecting!information!from!unauthorised!access)! and!disclosure!of!information.!These!issues!can!be!addressed!through!development!of!standards! and!an!enforced!legal!framework.! ! ! ! !!Progress!Report! www.ctaeconomic.com! 9! Barbados!Services!Sector! Development!Strategy!
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IBC(
4 International*Business*Companies*(IBC)!
International! Business! Companies! (IBCs)! are! limited! liability! companies! registered! by! international! corporations! in! tax! efficient! jurisdictions! outside! their! normal! country! of! operation.! The! ownership! and!business!activities,!in!general,!lie!outside!the!country!of!registration!(outside!Barbados).!
4.1 Global!Market!
IBCs!have!grown!in!recent!years!due!in!part,!to!the!growth!of!global!value!chains!that!mean!that!a! company!based!in!one!country!can!produce!in!one!or!more!other!countries!and!supply!goods!to!a! third!country!without!ever!involving!its!own!country!of!origin.!Therefore,!for!efficient!legal!tax! planning,!offshore!companies!provide!an!important!vehicle!to!support!and!manage!these! international!global!value!chains.!Statistics!on!the!number!of!IBCs!worldwide!and!the!value!of!the! industry!to!host!countries!globally!are!not!available!as!there!has!been!a!degree!of!secrecy!and! confidentiality!surrounding!the!sector!in!general.!However,!in!recent!years,!with!the!growth!of!antie terrorism!financing!and!antiemoney!laundering!initiatives,!greater!regulation!and!transparency!is! being!introduced!to!the!sector,!especially!through!standards,!guidelines!and!best!practise!issued!by! the!Organisation!for!Economic!Coeoperation!and!Development!(OECD)!and!the!Financial!Action!Task! Force!on!Money!Laundering!(FATF).!FATF!issues!a!list!of!"NoneCooperative!Countries!or!Territories"! (NCCTs),!commonly!called!the!FATF!Blacklist.!The!effect!of!the!FATF!Blacklist!has!been!significant,! and!arguably!has!proven!more!important!in!international!efforts!against!money!laundering!than!has! the!FATF!Recommendations.!While,!under!international!law,!the!FATF!Blacklist!has!no!formal! enforcement!or!sanction,!in!reality,!a!jurisdiction!placed!on!the!FATF!Blacklist!has!often!found!it! difficult!to!attract!any!legitimate!IBCs!which!has!led!many!OECD!countries!to!place!financial!pressure! on!these!states.! The!driving!factors!for!the!sector!are:! ! exemption!from!local!corporate!taxation!and!stamp!duty,!provided!that!the!company! engages!in!no!local!business!(annual!agent's!fees!and!company!registration!taxes!are! still!payable,!which!are!normally!a!few!hundred!U.S.!dollars!per!year)! ! preservation!of!confidentiality!of!the!beneficial!owner!of!the!company! ! wide!corporate!powers!to!engage!in!different!businesses!and!activities! ! abrogation!or!restriction!of!the!requirement!to!demonstrate!corporate!benefit! ! the!ability!to!issue!shares!in!either!registered!or!bearer!form! ! an!abrogation!of!any!requirements!to!appoint!local!directors!or!officers! ! provision!for!a!local!registered!agent!4.2 The!IBC!Industry!in!Barbados!
The!IBC!sector!is!part!of!business!and!finance!services!valued!at!B$!2.3!bn!and!export!of!other! business!services!B$!750!million.!Data!on!the!IBC!sector!in!Barbados!is!not!readily!available.! Discussions!with!a!variety!of!associations!and!operators!suggest!that!there!are!approximately!4,000! IBCs!registered!in!Barbados,!employing!around!3,000!full!time!employees.!The!value!of!this!sector!to! Barbados!is!determined!by!registration!fees!(US$450!pa),!local!taxes!(sliding!profit!tax!from!2.5e 0.5%),!salaries!to!local!staff!and!agents!as!well!as!other!business!services!provided!to!these! companies!such!as!banking,!legal!and!audit!and!accounting!services.!If!it!is!assumed!average!1!full!!Progress!Report
!
IBC(((
time!staff!member!of!US$!12,000,!fees!of!US$450!and!other!agent,!legal,!financial!services!of! US$!50,000!per!business!per!annum,!then!the!value!of!the!sector!would!equate!to!US$250!million! (B$500!million)!+!profit!tax!4.3 IBC!Potential!in!Barbados!
The!size!of!Barbados’s!IBC!sector!is!relatively!small!compared!with!others!in!the!region!such!as! Cayman!and!BVI!(BVI!for!example!has!600,000!IBCs!registered).7!!Therefore,!there!is!scope!to! increase!the!number!of!registrations.!By!targeting!large!“legitimate”!corporations,!a!25%!rise!in! registrations!and!associated!salary!and!business!servicing!revenues!could!for!example,!create!an! additional!750!direct!jobs!Barbados,!could!generate!around!US$!62.5!million!(B$!125!million)!in! revenue!to!GDP.!4.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.! The!main!decision!criteria!for!selection!of!IBC!by!international!corporations!are:!! ! Competitiveness!(Tax!rates!and!BDS!costs)! ! International!reputation!! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Competitiveness((Tax(rates(and(BDS(costs).!The!“legitimate”!reason!for!establishing!an!IBC!is! founded!in!efficient!tax!planning!to!save!the!business!money!for!its!shareholders.!Therefore,!the! tax!regime!compared!to!global!competitors!(BVI,!Seychelles,!Channel!Islands!etc).!In!addition,! the!quality!and!cost!of!management!agents!and!other!business!development!services!providers! also!affects!competitiveness!of!destinations.! 2. International(reputation:!The!majority!of!business!in!the!IBC!comes!through!referrals!from! source!country!tax!and!business!advisors.!Reputation!as!a!safe,!secure!and!credible!destination! with!internationally!recognised!rigorous!regulation!and!supervision!of!the!sector.!Therefore,!the! legal,!regulatory!and!enforcement!of!international!standards!(especially!those!set!by!FATF,!OECD! and!Global!Forum!on!Transparency!and!Exchange!of!Information!for!Tax!Purposes.!! ! 7!BVI!Offshore!Advantages!(2013)!Fidelity!Corporate!Services!!Progress!Report! www.ctaeconomic.com! 11! Barbados!Services!Sector! Development!Strategy!
!
ICT(
5 ICT$Services!
The! global! ICT! industry! comprises! computer! hardware,! software,! computer! services! and! communications.!Therefore,!ICT!services!is!a!specific!subset!of!ICT!industry!as!a!whole!and!includes! computer! software! and! computer! services.! Computer! software! includes! the! value! of! purchased! or! leased! packaged! software! such! as! operating! systems,! database! systems,! programming! tools! and! applications.! It! excludes! expenditures! for! internal! software! development! and! outsourced! custom! software! development.! Computer! services:! includes! the! value! of! outsourced! services! –! domestic! or! offshore! –! such! as! IT! consulting,! computer! systems! integration,! outsourced! custom! software! development,! outsourced! web! design,! network! systems,! network! systems! integration,! office! automation,!facilities!management,!web!hosting,!and!data!processing!services.!It!would!not!include! IT!helpdesks!which!would!be!part!of!the!BPO!sector.(
5.1 Global!Market!
The!global!market!for!computer!software!and!services!(excluding!software!embedded!in!devices)! amounted!to!an!estimated!US$1.2!trillion!in!2011,!comprising!844!billion!in!computer!software!and! US$!357!billion!in!computer!services.8!Developed!countries!account!for!the!largest!share!of!the! global!market.!North!America!and!Europe!account!for!80%!of!the!total!market!in!2011!(figure!2).!The! remaining!share!is!mainly!accounted!for! by!Asia,!while!markets!in!the!developing! regions!of!Africa,!Latin!America!and!the! Middle!East!corresponded!to!only!4!per! cent,!well!below!their!share!of!world! GDP!(10!per!cent).!This!suggests! significant!scope!for!market! development!of!the!computer!software! and!IT!services!in!developing!countries.! Growth!is!much!higher!in!these! economies,!growing!by!40%!between! 2008!and!2012!compared!to!only!15%!in! North!America.9!!! Exports!of!computer!and!information! services!amounted!to!US$215!billion!in! 2010,!and!have!doubled!since!2005! reflecting!strong!growth!in!outsourcing.!! In!value!terms,!Ireland!is!the!leading!exporter!with!exports!rising!from!US$7!billion!to!US$37!billion! between!2000!and!2010.!In!Costa!Rica,!India!and!the!Philippines,!computer!and!information!services! account!for!1–2!per!cent!of!GDP.!The!main!developing!country!exporters!!of!computer!and! information!services!among!exporters!are!all!Asian!and!include!India!(15.7%),!China!(4.3%),!the! Philippines!(0.9%)!and!Singapore!(0.8%).! 8!Information!Economy!Report!(2012)! 9!European!Information!Technology!Observatory!(EITO)!Survey!(2011)! Africa) 1%) Middle) East) 1%) Latin) America) 2%) AsiaF PaciGic) 16%) Europe) 34%) North) America) 46%) Figure'2:'ICT'Services'Region'!Progress!Report
!
ICT(((
!
Table(4:(Principal(ICT(Suppliers(Market(in(2011((US$(bn)(
Market Value of ICT
Services Export Market Share% Ireland 37.2 17.3% India 33.8 15.7% Germany 16.0 7.5% US 13.8 6.4% UK 10.9 5.0% China 9.3 4.3% Total 215.2 The!European!Union,!US!and!Japan!are!the!top!three!importers!while!the!BRIC!countries!are!among! the!top!ten.! Current!demand!drivers!of!software!industry!development!include!mobile!communications!and! social!networking!growth!as!well!as!cloud!computing!and!demand!for!national!content.!The!growth! of!freelancing!and!crowdsourcing!services!is!also!a!key!future!trend.!
5.2 The!ICT!Industry!in!Barbados!
The!ICT!sector!is!part!of!business!and!finance!services!which!are!valued!at!B$!2.3!billion.!ICT!services! exports!from!Barbados10!total!B$!22.8!million!and!industry!observers!and!participants!estimate!that! exports!represent!only!25%!of!the!value!of!the!sector.!Therefore,!it!is!estimated!that!total!sales!of! ICT!services!in!Barbados!are!B$!91.2!million.11!There!are!approximately!100!firms!in!the!sector,!the! majority!of!whom!(65%)!are!small,!employing!an!average!of!5!people,!30%!medium!sized!employing! an!average!of!20!and!5%!large!firms,!employing!an!average!of!40!people.!Therefore!it!is!estimated! that!around!1,125!persons!are!employed!in!the!sector.!! The!main!constraints!reported!by!the!sector!are:! ! Lack!of!professional!standards! ! Lack!of!legislation!for!data!protection!(improper!and!careless!use!of!data)!! Lack! of! understanding! of! the! sector! amongst! financial! institutions! and! venture! capitalists!resulting!in!low!levels!of!investment!!
5.3 ICT!Potential!in!Barbados!
Global!markets!for!ICT!services!are!growing!rapidly!and!given!the!relative!success!of!exports!to!date! and!the!numbers!of!local!ICT!graduates!producing!upwards!of!400+!graduates!per!year!(BCC!100!and! UWI!300)12!there!is!scope!to!develop!upstream!ICT!services!for!the!global!market.!ICT!jobs!are!higher! paid!than,!for!example,!BPO!jobs,!reflecting!the!high!revenue!per!employee!potential.!!! ! 10!calculated!from!balance!of!payments!data!by!UNCTAD!(2013)! 11!Note!the!Barbados!Association!of!ICT!Professionals!estimated!the!total!value!of!the!sector!in!Barbados!for!B$10!million,! but!this!is!less!than!half!of!official!ICT!Services!exports.!!12! Strategic! Marketing! Plan! for! Professional! Services! Exports! –! Barbados! (2007)! Caribbean! Export/Commonwealth!
!Progress!Report! www.ctaeconomic.com! 13! Barbados!Services!Sector! Development!Strategy!
!
ICT(
Table(5:(Salaries(and(Income(in(ICT((US$)( Market AverageSalaries Revenue per employee
Ireland 54,000 650,000 India 9,000 55,000 Germany 47,500 209,000 UK 50,386 214,000 Barbados - 40,500 So!for!example,!if!Barbados!could!increase!the!number!of!large!firms!in!the!ICT!sector!by!an! additional!20!firms,!creating!an!additional!800!jobs!and!increase!earnings!per!employee!to! US$!60,000!then!Barbados!could!generate!around!US$!48!million!(B$!96!million)!in!revenue.!
5.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.! The!main!criteria!for!development!of!a!competitive!ICT!sector!are:!! ! Capacity!of!ICT!Firms!! ! Securing!access!to!relevant!skills! ! Fostering!software!demand!! ! A!modern!legal!framework!! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Capacity(of(ICT(Firms:(Encouraging!quality!of!firms!through!certification,!standards!and! certification!schemes.((( 2. Securing(access(to(relevant(skills:(Skills!development!through!the!education!system!and! specialised!institutions!(linking!industry!to!education!provision!to!ensure!supply!meets!demands! of!business)!and!inehouse!training(to!develop!graduates!into!productive!employees.( 3. Fostering(software(demand:(Public!procurement!as!a!tool!to!boost!domestic!demand!and! promoting!greater!ICT!use!in!the!private!sector!will!help!develop!and!broaden!skills!in!the! domestic!market!that!can!then!be!transferred!to!international!markets!(based!on!experience! and!skills)(( 4. A(modern(legal(framework:(Intellectual!property!regulation!and!enforcement!and!electronic! transactions!are!some!of!the!legal!frameworks!that!need!to!be!develop!to!support!the!software! sector.! ! !!Progress!Report
!
Tertiary(Education(((
6 Tertiary(Education(Services!
The! World! Bank13! defines! tertiary! education! as! including:! ! universities! as! well! as! institutions! that!
teach!specific!capacities!of!higher!learning!such!as!colleges,!technical!training!institutes,!community! colleges,!nursing!schools,!research!laboratories,!centres!of!excellence,!and!distance!learning!centres.!! Within! the! context! of! Barbados,! a! further! subPsector! breakdown! to! include! higher! education!
(undergraduate,14! post! graduate! and! research),! technical! vocational! education! and! training!!
(including! Beauty,15! ICT,! business! and! management! and! hospitality,! tourism! and! catering),! English!
Language!Training!(ELT)!and!Professional!Qualifications!(such!as!Accounting,16!Nursing!training17!and!
Medical).!
6.1 Global!Market!
T
ERTIARY!E
DUCATION!SECTOR!
The!global!market18!for!education!exports!is!estimated!at!over!US$40!bn.!An!estimated!3!million! students!study!full!time!higher!education!outside!their!home!countries!(this!excludes!exchange! students)!with!an!estimated!value!of!US$30!bn.!In!addition,!over!1.3!million!students!travel!to!study! English!as!a!foreign!language!with!an!estimated!market!value!of!US$!10!billion.19!There!is!also!a! growing!market!for!travel!for!technical!and!vocational!education!and!professional!education!(such!as! nursing!and!accounting)!although!no!figures!are!readily!available!for!these!segments.!H
IGHER!EDUCATION!
Of!the!US$!30!billion!market!for!higher!education!services!export,!the!top!destination!remains!the! EU!(with!UK,!Germany!and!France!alone!32%)!accounting!for!about!one!third!and!US,!accounting!for! just!less!than!one!quarter!(22%)!of!the!market!! Table(6:(Global(Higher(Education(Destinations((Top Host Destinations Global Market Share
United States 22% United Kingdom 12% Germany 10% France 10% Australia 7% China 6% Japan 5% 13! http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/0,,contentMDK:20298183~menuPK:617592~pageP K:148956~piPK:216618~theSitePK:282386,00.html#what_why! 14!Excludes!medical!and!nursing!qualifications!that!would!be!recognized!for!practice!nationally!or!internationally!
15! Excludes,! in! the! context! of! Barbados! training! in! massage! and! alternative! therapies! such! as! Reiki.! Although! strictly!
speaking!these!would!fall!into!this!or!“other!education!services”!categories,!it!is!more!relevant!from!a!policy!perspective!to! include!it!in!any!survey!of!the!wellness!sector!as!any!policy!decision!to!promote!wellness!would!include!wellness!skills!and! training.! 16!This!would!not!include!degrees!but!would!comprise!professional!qualifications!such!as!Association!of!Chartered!Certified! Accountants!(ACCA)! 17!This!would!include!degrees!and!associate!degrees!required!for!international!or!national!registrations! 18!OECD,!Education!at!a!Glance,!2007! 19!Language!Travel!Magazine!(2011)!
!Progress!Report! www.ctaeconomic.com! 15! Barbados!Services!Sector! Development!Strategy!
!
Education(Services(
Canada 3% Other 25% Total 100% Source:(OECD,(Education(at(a(glance,(2007( The!number!of!students!studying!abroad!is!rising!at!over!15%!per!annum!and!the!places!available!in! the!traditional!global!education!destinations!(US,!UK,!Germany,!France!and!Australia)!are!declining! and!visas!are!ever!more!difficult!to!obtain,!even!for!genuine!students.!Therefore,!there!is!an! increasing!opportunity!for!new!destinations!to!emerge!and!attract!these!students.!E
NGLISH!L
ANGUAGE!T
RAINING!
The!global!market!for!ELT!is!estimated!at!US$!10!billion!per!year.!More!than!twoethirds!of!ELT! students!travelling!for!study!originate!from!Asia!(China,!Korea,!Japan!and!Taiwan).!Following!Asia,! Europe!(Russia!and!Italy)!and!Latin!America!(Brazil)!represent!significant!markets!for!ELT.!! The!UK!is!the!largest!exporter!of!ELT!representing!over!50%!of!the!global!market!followed!by!US,! Canada,!Australia!and!Ireland.! Table(7:(Global(ELT(Destinations(
Top Host Destinations Global Market Share
United Kingdom 54% United States 16% Canada 13% Australia 8% Ireland 6% New Zealand 2% Malta 1% South Africa <1% Total 100% Source:(Language(Travel(Magazine((2010)( The!British!Council!has!undertaken!research!into!global!markets!for!ELT,!including!those!taking!ELT!in! their!home!country!as!well!as!travelling!for!ELT.!Over!the!next!10!years,!it!estimates!the!increase!in! market!demand!for!ELT!at!over!45!million!students!per!year!comprising!China!22!million,!India!16! million,!Russia!4!million,!Brazil!3!million!and!Poland!2!million.!If!only!5%!of!these!elect!to!travel!for! ELT,!then!an!additional!2.25!million!ELT!students!will!be!looking!for!destinations!around!the!world! with!the!ELT!export!market!tripling!over!this!period.!!
TVET!
A!growing!number!of!firms!and!students!are!electing!to!undertake!vocational!and!technical!training! overseas!to!obtain!better!skills!and!qualifications,!especially!where!these!are!not!available!locally.! This!is!an!extremely!new!segment!and!market!research!has!not!been!undertaken!specifically!on!this! segment.!However,!anecdotally!evidence!shows!that!there!is!potential!(often!combined!with!ELT).! The!government!of!Germany,!for!example,!has!been!actively!promoting!its!technical!training!service! providers!through!events!in!its!embassies!throughout!the!world!including!in!US,!India,!UK!and!China.!!!Progress!Report
!
Tertiary(Education(((
P
ROFESSIONAL!Q
UALIFICATIONS!T
RAINING!
The!global!demand!for!professional!qualifications!is!being!fuelled!by!the!acceptance!and!recognition! of!certain!qualifications!through!mutual!recognition!agreements!and.!Professional!qualifications! training!cuts!across!both!higher!education!and!TVET.!For!example,!global!standards!and!norms!in! professions!such!as!accounting!means!that!if!an!accountant!is!qualified!in!ACCA,!it!does!not!matter! where!the!student!studies,!the!qualification!is!recognised!and!accepted!throughout!the!world.!! Shortage!of!places!and!demand!for!subsequent!entry!by!the!student!to!third!countries!to!work!also! drives!demand!for!professional!qualifications.!For!example,!studying!medical!and!nursing!training! abroad!is!now!an!established!segment!as,!for!example,!for!every!one!place!available!at!medical! schools!in!the!US,!there!are!4!American!students!with!the!required!qualifications!competition!for! each!place.!Added!to!this!shortage!of!training!places,!there!are!global!shortages!of!medical!staff! throughout!the!world!which!is!predicted!to!continue.!A!final!driver!is!third!country!students!studying! for!professional!qualifications!to!of!a!particular!country!(eg!US)!as!a!means!to!access!and!work!in!this! country.!For!example,!In!Antigua,!there!is!a!medical!school!providing!training!in!USMLE1!(entry!level! qualification!to!residency!in!US!hospitals)!with!2,000!students!of!only!Indian!origin.!
6.2 The!Tertiary!Education!Sector!in!Barbados!
The!tertiary!education!sector!in!Barbados!(direct!income!from!fees!and!subventions)!is!part!of! personal!services!category!valued!at!B$!292!million,!of!which!B$!800,000!is!export!of!personal! services!(other!personal!services!include!private!health,!amongst!other!services).!In!addition,!for! foreign!students,!the!revenues!attributed!to!provision!of!tertiary!education!will!also!be!part!of!the! travel!(expenditure!by!foreign!parties!in!Barbados)!valued!at!B$!1.4!billion.!Data!on!the!tertiary! education!sector!in!Barbados!is!not!readily!available!and!there!is!limited!sector!organisation.! Therefore,!there!are!no!estimates!readily!available!(especially!given!the!level!of!training!in!small! private!facilities!for!TVET).!However,!discussions!with!a!variety!of!institutions,!regulators!and! Ministries!suggest!that!there!are!a!large!number!of!operators!(in!excess!of!100)!and!a!degree!of! exports!already.!In!addition,!there!appears!to!be!large!capacity!available!with!for!example!a! relatively!new!ELT!building!at!BCC!with!capacity!for!1,000!students!and!currently!only!100!students! enrolled.!There!are!also!some!private!ELT!schools!operating!in!Barbados.! !Based!on!estimates!from!the!larger!education!institutions!(BIMAP,!BCC,!UWI!and!poly)!Barbados! already!attracts!around!4,000!foreign!students!per!year!(mostly!from!other!Caribbean!islands).!Based! on!an!assumption!of!fee!of!US$!2,000!(across!long!and!short!term!courses),!then!fees!from!foreign! students!to!education!institutions!would!amount!to!US$!8!million!or!B$!16!million!(this!is!20!times! the!official!B$!0.8!million!in!the!statistics!for!export!of!all!personal!services!indicating!either!the! estimates!of!foreign!students!is!wrong!or,!more!likely,!the!BoP!statistics!are!wrong!and!some!of! these!fees!are!in!“other!business!services!exports”).!In!addition,!assuming!spend!per!annum!in!the! wider!economy!is!US$!15,000,!and!an!average!stage!of!students!of!6!months,!the!revenues!from! foreign!students!could!amount!to!US$!30!million!(B$60!million)!making!the!total!value!of!the!sector! B$!76!million.!!Progress!Report! www.ctaeconomic.com! 17! Barbados!Services!Sector! Development!Strategy!
!
Education(Services(
6.3 Potential!for!Tertiary!Education!business!in!Barbados!
Barbados’s!economy!will!generate!revenue!not!only!from!tuition!fees!but!also!(and!probably!more! importantly)!from!living!expenses.!Whereas!a!mainstream!tourist!stays!two!weeks,!an!education! tourist!stays!for!one!month!to!one!year!(or!more)!spending!every!day.!! For!higher!education!and!professional!qualifications!training,!the!annual!average!level!of!spending! and!contribution!to!the!economy!differs!by!exporting!country,!origin!of!the!foreign!student!and! length!of!course.!!In!South!Africa,!the!average!spending!per!graduate!student!is!US$7,500!pa! whereas!in!Antigua,!US!medical!students!average!spending!(including!fees)!amounts!to!US$!25,000.!! Therefore,!in!Higher!Education!and!Professional!Qualifications!Training,!attracting!mainly!none Caribbean!students!of!an!additional!2,000!per!annum,!would!generate!US$!50!million!(B$!100! million)!revenues!based!on!annual!spend!on!fees!and!living!expenses!of!US$!25,000!per!student!per! annum.!! English!Language!Training!(ELT)!and!Technical!and!Vocational!Education!and!Training!(TVE)!generally! comprise!shorter!stays!ranging!from!6e12!weeks.!Again!weekly!spend!and!fees!differ!by!country:! Table(8:(Average(spend(and(Stay(for(Foreign(ELT(Students(Top Host Destinations Spend per week (excl. fees)
US$
Average Fee per Week US$ Length of Stay Weeks United Kingdom 594 405 6 Ireland 546 373 6 United States 330 309 13 Canada 518 237 15 Australia 368 234 17 South Africa 390 149 9 Source:(Language(Travel(Magazine((2009)( If!Barbados!simply!matched!South!Africa,!then!average!ELT!students!may!generate!up!to!US$!5,000! to!the!economy!(fees!and!spend).!In!is!estimated!that!similar!revenues!(if!not!higher)!could!be! gained!from!TVET.!Therefore!attracting!20,000!TVET!and!ELT!students!per!annum!(averaging!9!weeks! stay!each,!that!is!5,000!full!time!equivalent)!could!generate!an!additional!US$!100!million!(B$!200! million)!to!the!economy.! Combined,!tertiary!education!services!in!Barbados!could!generate!an!additional!US$!150!million! (B$!300!million)!in!revenue,!adding!4%!to!GDP.!
6.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.!! The!main!decision!criteria!for!selection!of!foreign!students!travelling!for!education!are:!! ! Quality!of!education!! ! Costs! ! Ease!of!entry!!Progress!Report
!
Tertiary(Education(((
! Life!experience!! ! Safety/security! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Quality(of(education:!!For!all!tertiary!education!services,!the!key!criteria!that!students!assess!a! destination!on!is!the!quality!of!education.!Quality!is!measured!by!students!in!terms!of!portability! of!!the!qualification!(the!qualification!is!internationally!recognized!in!either!the!home!country!of! a!third!country!where!the!student!wants!to!work)!and!pass!rates.!! 2. Costs:!the!cost!of!courses!in!terms!of!fees!and!living!costs!are!important!decision!criteria.!This! determines!the!value!for!money!for!the!same!qualifications!available!elsewhere.! 3. Ease(of(entry:!!how!easy!it!is!for!the!student!to!apply,!the!availability!of!the!course!the!want!and! facilitation!support!in!obtaining!work!permits,!accommodation!and!general!information!and! confidence!on!living!in!an!unfamiliar!country.!! 4. !Life(experience:!increasing!in!a!competitive!workplace,!students!are!looking!to!differentiate! themselves!from!the!competition.!Therefore,!studying!abroad!can!provide!a!new!dimension!and! saleability!in!the!job!market!post!qualification.!There!is!scope!to!link!education!with!these!other! experiences,!adding!value!through!alternative!experiences!(work!experience,!leisure!experience! and!volunteering).!For!ELT,!often!the!lure!of!learning!combined!with!vacation!or! vocational/academic!learning!can!be!key!drivers.! 5. Safety/security:!especially!in!higher!education,!the!safety!and!security!of!both!the!campus!and! country!are!a!final!consideration!–!this!is!both!actual!and!perceived!reputation!of!the!country!in! the!country!of!origin.!Where!the!actual!country!is!not!well!known,!it!could!be!adversely! associated!with!others!(eg!Barbados!with!Jamaica!would!be!a!reputation!to!dispel)! ! !!Progress!Report! www.ctaeconomic.com! 19! Barbados!Services!Sector! Development!Strategy!
!
Professional(Services(
7 Construction*Related*Professional+Services!
Professional!services!within!the!context!of!this!report!refer!to!construction!related!services!that!are! provided! by! firms,! practises! and! consultancies! that! require! a! professional! membership! and/or! qualifications.!These!include!architecture,!engineering,!project!management,!planning!and!surveying! services.! Other! professional! services! such! as! accounting,! other! engineering,! management! consultancy! and! legal! services! will! form! part! of! “Business! Support! Services”! in! section! 10! of! this! report.!7.1 Global!Market!
The!global!market!for!construction!related!professional!services!is!estimated!at!US$!1.7!trillion! (construction!related!professional!services!are!approximately!20%!of!global!construction!market,! currently!estimated!to!be!US$!8.5!trillion)20.!Professional!services!in!the!EU!account!for!21%!of! construction!costs!so!to!approximate!any!national!market!for!construction!related!services,!it!could! be!reasonable!to!calculate!20%!of!construction!sales.! Civil!engineering!services!represent! 90%!of!the!global!market,!valued!at! US$!1,530!billion,!with!surveying! US$!102!billion,!architecture!US$!51! billion!and!planning!and!management! US$!17!billion.!However,!it!reported! that!in!engineering!services,!only! US$!31!bn!(or!2!per!cent)!is!sourced! offshore.! Asia!is!the!largest!market!for! construction!related!professional! services,!accounting!for!40%,! followed!by!Europe!accounting!for!a! further!20%.!This!represents!a! significant!change!in!construction!spending!away!from!traditional!development!markets!to! developing!and!emerging!countries).! Table(9:(Share(of(Global(Construction(Services(Industries((construction(and(professional(services)(Share of Market (2004) Share of Market (2014P)
Europe 32% 20% Asia 30% 40% North America 11% 9% Middle East 10% 16% Latin America 9% 7% Africa 8% 8%
Source: UNCTAD (2010) and Business Monitor International (2013)
20!Global!Infrastructure!&!Construction!Themes!for!2013!and!Beyond!(2013)!Business!Monitor!International! Architectural) Services) 3%) Engineering) Services) 90%) Surveying) Services) 6%) Planning) Services) 1%) Figure'3:'Global'market'for'Professional' Services'
!Progress!Report
!
Professional(services(((
This!trend!reflects!the!changes!in!growth!rates!in!recent!years!where!growth!in!construction!services! in!developing!countries!has!averaged!8%!per!annum!compared!with!only!2%!in!Europe.!This!trend!is! likely!to!continue.! Public!procurement!is!the!biggest!driver!for!construction!markets,!especially!in!developing!and! emerging!markets!and!on!average,!global!spending!by!governments!on!infrastructure!development! is!estimated!to!average!between!5e7%!of!GDP.21!However,!in!Africa,!for!example,!infrastructure! spending!averages!15%!of!GDP.!7.2 The!Construction!Related!Professional!Services!Industry!in!Barbados!
Construction!related!professional!services!form!part!of!business!and!finance!services!valued!at! B$!2.3!billion!and!part!of!export!of!other!business!services!valued!at!B$!750!million.!Data!on!the! professional!services!sector!in!Barbados!is!not!readily!available.!Based!on!global!norm!that! construction!related!professional!services!are!valued!at!approximately!20%!of!construction!sector,! this!would!mean!that!in!Barbados,!the!sector!was!valued!at!B$!37million.!However,!this!is!far!higher! than!industry!estimates22!of!B$!21!million!comprising!B$!6!million!in!civil!engineering,!B$!10!million! architecture!and!B$5!million.!This!may!be!a!combination!of!factors!(under!estimation!by!in!particular! engineers!and!use!of!“imported”!professionals).!Exports!of!services!are!reported!at!10%!or!B$!3.7! million!across!the!industry.! There!are!approximately!30!firms!in!the!engineering!sector,!90%!locally!owned!with!6!large!firms,!10! medium!firms!employing!an!average!of!5!persons!and!the!rest!small!firms!employing!1e2!specialists.! There!are!93!registered!architects!in!Barbados!with!a!few!large!firm!employing!25!persons! (architects!and!draftsman)!but!the!majority!of!firms!are!small!employing,!on!average,!4!people.! Information!on!other!professionals!was!not!available!at!the!time!of!this!research.!7.3 Potential!for!Professional!Services!in!Barbados!
The!vast!majority!of!construction!related!work!and!services!is!awarded!through!public!tenders.!In! Europe!and!US,!these!are!not!open!to!third!countries!unless!that!country!has!signed!the!WTO! General!Procurement!Agreement!(Barbados!is!not!a!member).!However,!under!the!EPA,!Cariforum! professionals!can!in!theory,!access!the!EU!market.!However,!in!practise,!given!the!size!of!firms,!it!is! likely!that!access!would!only!be!available!through!cooperation!with!EU!firms.! All!international!aid!contracts!are!subject!to!international!open!tendering!procedures!which!would! allow!direct!bidding!for!these!services.!Moreover,!pressure!from!the!international!community!on! governments!throughout!the!world!has!seen!the!gradual!opening!of!all!public!procurement!to! international!competition!and!the!reduction!of!local!price!preferences!(a!usual!barrier!to! participation!for!foreign!firms).!Therefore,!opportunities!in!growth!markets!such!as!Latin!America! and!Africa!could!see!opportunities!for!Barbados!professionals.! Exporting!of!such!services!depends!upon!networking,!partnerships!and!participating!in!public! procurement!for!both!donor!and!national!government!contracts!in!foreign!markets.!!Given!that!the! majority!of!firms!are!small,!the!average!contract!(or!subecontract)!for!exports!is!likely!to!be!relatively! 21!UNCTAD!(2007)! 22!Discussions!with!a!engineering,!surveyors!and!architecture!associations!!Progress!Report! www.ctaeconomic.com! 21! Barbados!Services!Sector! Development!Strategy!
!
Professional(Services(
small!at!around!US$!250,000!per!annum.!Say!20!contracts!per!year!across!the!different!construction! related!professionals!could!generate!around!US$!5!million!(B$!10!million)!in!revenue.!7.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.! The!main!decision!criteria!for!selection!of!construction!related!professional!by!international!clients! (governments,!development!banks!and!private!clients)!are:!! ! Qualifications! ! Liability!and!professional!indemnity!insurance! ! Capacity!and!experience! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Qualifications:!Recognised!qualifications!and!memberships!of!internationally!recognised! professional!bodies!are!a!prerequisite!to!participation!in!international!tenders.!Therefore,! affiliation!and!membership!by!national!bodies!of!internationally!recognised!organisations,!plus! mutual!recognition!agreements!are!key!areas!to!explore.! 2. Liability(and(professional(indemnity(insurance:!Professional!insurance!is!often!a!requirement!of! contracts!and!even!if!not,!the!willingness!of!an!insurance!company!to!insure!a!professional! provides!confidence!in!clients!as!to!the!abilities!of!the!firm.! 3. Capacity(and(experience:!firm!size!is!a!major!constraint!to!international!tenders!which!often! require!asset!base!and!turnover!requirements.!In!addition,!on!taking!on!larger!assignments,!a! larger!and!diversified!(including!all!professions)!practice!may!find!it!easier!to!compete! internationally.!Therefore!partnerships!established!across!firms!for!export!only!business!may!be! an!option!to!pool!skills!and!resources!for!export!markets.!! ! ! !!Progress!Report
!
Creative(Industries(((
8 Creative(Industries!
The! scope! of! creative! industries! covers! sound! recording! and! distribution! (calypso,! reggae,! soca,! modern! pop! etc),! film! locations,! film! production! (including! animation),! live! performance! (theatre,! dance,!music,!pan!and!carnival),!fashion!(design!of!clothing,!jewellery!and!accessories)!and!artists.!!!!
8.1 Global!Market!
The!market!for!the!creative!industries!services!(music,!film!and!live!performance)!is!estimated!at! over!US$!800!billion.!The!vast!majority!of!this!is!comprised!US$!650!billion!for!events,!meetings!and! festivals23!(with!the!UK!alone!estimated!at!US$!36!bn!and!even!emerging!markets!such!as!India! valued!at!US$!450!million!and!rising!by!24%!per!annum).!The!film!industry!is!valued!at!US$!84.2! billion24!and!comprising!distribution!sales,!production!and!editing.!Music!industry!is!valued!at! US$!62.8!billion25!comprising!US$!24.0! billion!(digital!and!retail!sales),! publishing!royalties!US$!7.7!billion,! synchronisation!licensing!fees!(music! for!films!and!compilations)!US$!1.1! billion!and!live!music!performances! US$!20.0!billion.! Increasingly,!live!events!and!festivals! are!being!organised!through!event! management!companies.!Event! management!is!“the!application!of! project!management!to!the!creation! and!development!of!festivals,!events! and!conferences.”!! Event!Management!is!a!multiebillion! dollar!industry,!growing!rapidly,!with! mega!shows!and!events!hosted!regularly.!Surprisingly,!there!is!no!little!research!conducted!to!assess! the!size!and!growth!of!this!industry.!Increasingly,!event!management!companies!are!joining! international!networks!to!work!together!(similar!to!advertising!agencies).!In!the!UK,!one!online!web! directory!lists!over!700!event!management!companies.!!!8.2 Creative!Industries!in!Barbados!
The!creative!industries!sector!cuts!across!the!services!sector!comprising!personal!services,!business! and!finance,!royalties,!leisure!and!retail.!Data!on!the!creative!industry!sector!in!Barbados!is!not! readily!available!but!there!examples!of!artists!selling!music!over!the!internet!and!performing! worldwide.!However,!the!majority!of!this!is!aimed!at!diaspora!events!(both!Barbadian!and!wider! 23!Meetings!and!Events!Market!(2012)!Travel!Management!Institute! 24!Global!Media!and!Entertainment!Outlook!2011e2015!(2010)!PWC! 25!World!Music!and!the!Global!Music!Industry:!Flows,!Corporations!and!Networks!(2012)!Dave!Laing!Institute!of!Popular! Music,!University!of!Liverpool! Events) and) Festivals) 81%) Music) 8%) 11%)Film) Figure'4:'Global'Market'for'Creative' Industries'Inception!Report! www.ctaeconomic.com! 23! Barbados!Services!Sector! Development!Strategy!
!
Creative(Industries(
Caribbean!diaspora).!In!addition,!there!are!also!over!200!galleries!in!Barbados!selling!art,!primarily!to! tourists.!!8.3 Creative!Industries!Potential!in!Barbados!
Film!and!music!sales!are!unlikely!to!generate!huge!sales!worldwide!and!profits!and!would!cost!much! in!promotion.!However,!there!would!be!potential!in!exploiting!digital!distribution!more!effectively! and!then!promoting!links!to!downloads.!!Film!and!music!production,!processing!and!editing!is! unlikely!to!become!an!industry!in!itself,!although!individual!studios!may!be!able!to!develop!niche! markets!but!this!will!be!based!on!individuals,!rather!than!a!serious!sector.! However,!there!is!greater!potential!for!creative!performers!to!export!their!services!to!festivals,!and! events!worldwide!beyond!the!diaspora.!The!UNESCO!project!in!Barbados!has!shown!that!there!is,!for! example,!interest!in!North!America!for!Bajan!performers!who!are!performing!on!the!college!circuit.! However,!this!is!not!commercially!viable!without!UNESCO!grant!finance!so!a!more!professional! approach!to!higher!value!market!segments!is!required.!The!Caribbean!Creative!Cluster!(which!has! 50%!Bajan!performers)!has!been!a!success!in!regional!and!diaspora!events!with!3!full!time!marketing! and!promotional!staff!and!over!100!artists!on!their!books!–!they!act!as!a!export!agent.!Similar! models!could!be!developed!aimed!at!supplying!event!management!companies!worldwide.!If!100! performers!from!Barbados!were!able!to!get!contracts!worth!US$!50,000!per!year,!then!exports! would!rise!by!US$!5!m!(B$!10!million).!8.4 Challenges!to!be!addressed!
If!selected!as!a!priority!sector,!the!challenges!for!sector!development!will!be!analysed!in!more!detail! within!the!specific!context!of!Barbados.! The!main!decision!criteria!for!selection!of!event!management!and!agents!are:!! ! Quality!of!performer! ! Access!to!performers! The!types!of!constraint!to!be!addressed!are!discussed!below:! 1. Quality(of(performers.!This!does!not!only!include!the!professionalism!of!performance,!but!also! professionalism!in!business!aspects!(dealing!with!clients,!touting!for!business,!contract! negotiations,!and!reliability/timing).! 2. Access(to(performers:!A!major!issue!for!potential!clients!such!as!agents!and!event!managers!is! knowing!about!the!performers!in!the!first!place.!Therefore,!exposure!to!networks!of!event! management!organisations!is!key!so!when!a!certain!type!of!performer!is!required,!they!can! directly!access!them.! !!Progress!Report
!
Health(and(Wellness(((
9 Health'and'Wellness!Tourism!
The Health and Wellness sector covers mainstream medical tourism (people travelling overseas for medical treatments, including elective surgery, cosmetic surgery, dentistry etc), Spa and wellness (including pamper spa and wellness retreats), Rehabilitation (including Orthopaedic, additive conditions and brain rehabilitation), Palliative care (for on-going conditions) and assisted living (mainly geriatric).
9.1 Global!Market!
The!global!health!and!wellness!tourism!sector!is!valued!over!US$!100!billion!comprising!medical! tourism!valued!at!US$!40!billion,!wellness!and!spa!at!US$!44.8!billion,!medical!rehabilitation!ay!US$!4! billion,!palliative!care!less!than!US$!1!billion!and!assisted!living!US$!1!billion.!M
EDICAL!S
ECTOR!
According!to!estimates!of!Tourism! Research!and!Marketing!(TRAM),!the! global!value!of!medical!tourism!in! 2010!was!over!US$!40!billion.!! The!most!dominant!market!segments! are:!complex!specialized!surgeries! such!as!joint!replacement!(knee/hip);! cardiac!surgery;!dental!surgery!and;! cosmetic!surgeries.!! Many!developing!countries!are! already!benefiting!from!this!new!type! of!tourism,!especially!in!Asia!where! Singapore!and!Thailand!are!estimated! to!receive!around!US$!900!million!per! annum!from!medical!tourism!with! India!and!Malaysia!growing!quickly! with!earnings!of!US$!333!million!and! US$!400!million!respectively.!! Table(10:(Main(Sources(of(Medical(Tourists(Country Number of Medical Tourists Principle Destinations
Germany 500,000 (2007) Thailand, India, Turkey, Poland.
US 400,000 (2006) Costa Rica, Mexico, Thailand, Philippines and India Middle East 350,000 (2007) India, Singapore, Thailand, United Kingdom, Turkey Canada 230,000 (2007) Cuba, Costa Rica, Hungary, India, Israel, Jordan, Lithuania,
Malaysia, Thailand, Belgium, Poland and Singapore
UK 100,000 (2007) India, Hungary, Turkey, Germany, Malaysia, Poland and Spain
With!current!costs!of!healthcare!in!home!countries!of!most!medical!tourists!growing,!it!is!expected! that!the!number!of!medical!tourists!from!Europe,!North!America!and!the!Middle!East!will!grow! Medical) Tourism) 39%) Spa) 39%) Wellness) 6%) Rehabilitat ion) 10%) Assited) living) 5%) palliative) care) 1%) Figure'5:Health'and'Wellness'Tourism'
Progress!Report! www.ctaeconomic.com! 25! Barbados!Services!Sector! Development!Strategy!
!
Health(and(Wellness(
significantly!over!coming!years.!Similarly,!the!number!of!“overseas”!purpose!built!facilities!is!also! expected!to!grow!with!this!demand.!! In!the!US,!emerging!policies!and!trends!are!fuelling!the!demand!for!medical!tourism:! ! US!Healthcare!reform!act!has!added!millions!of!Americans!to!the!Medicaid!program,! which!does!not!cover!the!true!cost!of!care! ! Increased!demand!for!outpatient!surgery!(75%!of!all!medical!tourism!treatments)! ! Increased!access!to!low!cost!travel! ! Shortage!of!physicians!and!primary!care!workers!in!the!US! ! Millions!of!baby!boomers!will!be!turning!65!in!the!near!future,!qualifying!for!Medicare!! ! Increase!in!numbers!of!Americans!with!chronic!diseases! ! Governments!of!host!countries!setting!up!initiatives!such!as!fast!track!visa!and!tax! breaks! ! Medical!inflation!at!3.6%!outstrips!retail!inflation!of!2.1%!in!the!USA!! The!key!to!attracting!foreign,!and!especially!US,!medical!tourists!is!JCI!accreditation.!There!are! currently!more!than!255!Joint!Commissioneaccredited!hospitals!outside!the!USA,!this!is!the!same! accreditation!that!more!than!4,800!hospitals!in!the!US!receive!and!the!same!accreditation!that! Medicare!recognises.!According!to!JCI!surveys,!patient!experience!and!satisfaction!at!JCI!hospitals! abroad!is!generally!more!favourable!than!the!USA;!surgical!complication!rates!!compare!favourably! and;!cost!savings!on!most!surgical!procedures!can!exceed!50e80%!of!the!US!cost.! With!these!factors!in!mind,!US!corporations!and!medical!insurers!are!increasingly!funding!medical! tourism.!Some!medical!insurance!companies!have!explicitly!added!international!travel!options!as! “extras”!for!any!nonecovered!services!and!preeexisting!conditions.!!S
PAS!AND!W
ELLNESS!
In!2007,!the!global!market!for!spas!was!valued!at!US!$46.8!billion26!from!an!estimated!71,762!spas! operating!around!the!world.!The!global!wellness!tourism!market,!comprises!1,485!destination! resorts!and!is!estimated!to!be!valued!at!US$!6.2!billion!and!employs!around!112,000!persons.!These! destination!spas!account!for!13!per!cent!of!revenues!from!2!per!cent!of!facilities!indicating!this!is,! with!medical!spas,!a!high!value!segment.! Latin!AmericaeCaribbean!is!the!fourth!largest!spa!region!in!the!world,!but!its!industry!is!significantly! smaller!than!those!of!the!top!three!regions!(Europe,!North!America,!and!AsiaePacific).!It!had!an! estimated!5,435!spas,!with!revenues!of!$2.5!billion!and!employment!of!82,694!persons!in!2007.! Health!and!wellness!tourism!is!now!an!international!trend!set!by!the!health!conscious!consumers! seeking!to!enhance!their!well!being!through!their!travel!experiences!(Still!Pampering?!Opportunities! and!Challenges!Facing!the!Global!Spa!and!Beauty!Industry!Euromonitor!International!Ltd!Date:!Apr,! 2010).!Wellness!tourism!means!travelling!across!borders!for!spa!and!wellness!treatments.!The!focus! of!wellness!tourism!is!on!prevention!and!helping!people!facilitate!lifestyle!changes.!The! 26!Global!Spa!Summit!2010!(SRI!International)!!Progress!Report
