The 2014 guide to Barbados: Heading for the major leagues

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Ambitious plans to transform the island’s tiny stock exchange into international securities market should further strengthen its position as a financial centre

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You can’t accuse Marlon Yarde of lacking ambition. The affable chief executive officer and general manager of the Barbados Stock Exchange (BSE) is forthright as he outlines the challenges and opportunities facing both the country’s leading stock market and the industry driving the island nation’s robust economy: international business and financial services.

That the BSE remains a securities backwater is hard to dispute: it has grown little since its formation in 1986. By the end of 2013, it hosted just 27 listed entities, with a market capitalization of around $5.25 billion, down 6% on the previous year. A shade over 320 million shares changed hands in 2013, mostly passed back and forth by domestic retail investors.

Yet Yarde and other Barbadian financial luminaries have conjured up a way to attract liquidity and listings to an island that in every other sphere of business activity punches above its weight. It’s called the International Securities Market (ISM), and it’s one of the most ambitious financial plans draw up by any emerging or frontier sovereign state in many a year.

Yarde expects to have the final rules in place by mid-2014, after which the ISM can really get going. He predicts up to 700 stocks and bonds will be listed on the new bourse by global funds and firms over the next four years, notably in the form of long-term US-dollar bonds, and secondary equity listings by corporates with strong, existing business links to Barbados and primary listings in the likes of London, New York and Toronto.

To the next level
Leading financial figures expect the ISM to take Barbados to the next level, placing the regional business-services leader firmly on the world stage. "We aspire to be a competitor in the major leagues," states DeLisle Worrell, governor of the Central Bank of Barbados (CBB). "Our aim is to provide the same quality of financial and business service and advice available in Switzerland or Ireland or Liechtenstein, but with the clear benefit that we can offer everything at a considerable cost advantage thanks to competitive salary packages." The latter point is particularly relevant: Barbados teems with white-collar executives working to highly competitive salary levels: here, you can get the level of business advice you’d expect in London, New York or Hong Kong, but at a fraction of the cost.

There is both logic and necessity in launching the new bourse. Barbados has long been the region’s leading business services hub, studiedly defining itself over decades as an open and financially transparent low-tax economy that avoids the increasingly unacceptable 'tax-haven’ label. "We always recognized that though we’re a pocket-sized economy, we’re still too big to live solely on licence fees and non-tax revenues, in the style of much-smaller tax havens," says Worrell.

Adds Connie Smith, managing director at Tricor Caribbean, a global provider of integrated business, corporate and investor services ultimately owned by Hong Kong-based Bank of East Asia: "We don’t have 800,000 companies here and we don’t sell cookie-cutter solutions. We are experts across the field of international business services – we prefer to export weightless professional services."

Take the scenic road linking the capital Bridgetown with the east coast and you can hardly miss the global brands adorning the facades of air-conditioned office buildings. The big auditors-cum-tax advisory shops (Deloitte, KPMG, Ernst & Young) are all here, as are more localized financial advisors (Sagicor, Tricor) and a plethora of local and international banks and law firms, all offering world-class service at Barbadian prices.

But despite its unalloyed and lasting success in attracting corporates, banks, institutional investors, and funds to the island, Barbados has never been seen as an obvious place in which either to list or to trade stocks or bonds. With the entrance of the ISM, that should change.

Building the missing pillar
"We want to be a one-stop shop for all international business, financial and capital market services, and the ISM is front and central to that ambition," says Yarde. "We offer considerable tax benefits to our business partners, and creating a vibrant, liquid stock exchange is the logical next stage in our development. We see the ISM as the missing pillar in the development of our international business and financial services industry."

Marlon Yarde, CEO and General Manager,
Barbados Stock Exchange
The new bourse has been pondered long and hard at the highest levels – consensus-driven Barbados doesn’t do snap decisions. The formation of a domestic securities market with global reach, capable of hosting stocks and dollar-denominated bonds, has been mulled over for years. Yarde and peers from across the nation’s business world studied the experience of other leading island jurisdictions, from Bermuda to Guernsey, and sought advice from a consultancy service linked to the Hong Kong Stock Exchange.