growth to be between 0. 5 % and 1 % in 2010 and between 2 % and 2. 5 % for 2011. we therefore see some light at the end of the proverbial tunnel but one is not sure how helpful this new found optimism would be for the manufacturing sector. although the sector is estimated to have expanded by 1 % during the first quarter of 2010, the bank is forecasting a decline of nearly 4 % for the sector in 2010, following a fall of nearly 13 % in 2009. it goes without saying that the revised projection is largely predicated on the performance of tourism, as the sector ’ s performance has a spill - over effect on several industries, notably wholesale and retail, transportation and construction activity. various reasons have been suggested for the continued weaknesses in the manufacturing sector. these include : ( a ) high cost of production, particularly for energy, and hence the inability of the sector to compete with regional and international products. ( b ) low productivity, partly due to the adoption of relatively inefficient processes which in turn may be attributed to. ( c ) the continued reliance on aging and obsolete plants. a few years ago i read an article about the us auto industry. the author was trying to explain why the us industry was becoming increasingly unable to compete with its asian competitors, during the period from the mid 1980s to 1990s. the indicator used by the author was the labour - income ratio. this is the proportion of value added that goes to wages and fringe benefits. if that ratio goes above a certain threshold, apparently between 80 % and 85 %, productivity declines and capital formation falls too low to maintain present jobs, let alone create new ones. the author intimated that the us auto industry was operating with a labour – income ratio of between 85 % to 90 %. in contrast, the germans and japanese auto makers were operating on labour – income ratio of 75 % to 80 %. it was not surprising therefore that the germans and especially the japanese auto industry gained significant market shares at the expense of the us auto makers in the us market. the fact is that the labour – income ratios of 85 % to 90 % made capital formation impossible as us companies were barely able to generate or raise the investment capital needed to modernize their plants and convert them to the production of fuel efficient cars. we should recall that only recently general motors had to be supported by the us federal government, otherwise the company would have collapsed. it is my considered opinion that the manufacturing sector

an ongoing basis. all in all, our financial system provides a range of services that pretty much satisfies the needs of barbadian households and large and well established businesses. however, venture capital is in short supply, and the fixed investment needs of small and medium sized enterprise continue to be a challenge for us. our session this afternoon will explore this conundrum. impact of the crisis the global recession which is dated from the september 15 2008 lehman bankruptcy, had little effect on the barbadian financial system, with the one important exception of clico. as might have been expected, the weakness of the barbadian economy resulted in late and incomplete debt service by some firms and households, but in the typical case a workout arrangement was put in place. on the other hand, government maintained its perfect service record, both for domestic and foreign debt. bis central bankers ’ speeches changes in business finance the most noticeable changes in financial transactions in recent times have been on the foreign exchange market. the interbank market is now inactive, in contrast to the situation up to a decade ago, when daily interbank transactions of a modest size were the norm. large customers of the banks have corporate treasuries which manage their transactions and exposures in several currencies, matching exposures by currency so as to minimise net exposure in foreign exchange, and reduce the transactions costs of currency conversion. we have looked into this phenomenon at this conference in years past, and when we meet with banks we invariably discuss how the market is evolving. some businesses appear to have achieved a degree of independence of their bankers, with respect to foreign currency receipts and payments. in so far as this facilitates payment of imports out of private firms'foreign earnings, there is no problem with that arrangement. our programme today includes an update on the financial system, a presentation on cyber security, investment options for insurance companies, the view from the credit union sector, a new look at banking subsidiaries, and a panel on equity finance. it is a varied menu, and one that is certain to be instructive. we expect to have a productive day. bis central bankers ’ speeches