Theme: 30 years of Progress: The COMPETITIVENESS CHALLENGE TO THE CARIBBEAN COMMUNITY
Salutations
In an age of instant gratification and built-in redundancy, the celebration of a thirty-year anniversary, even in a marriage, is becoming very rare. So it is with great pleasure that I extend hearty congratulations to Caribbean-Central American Action (CCAA) on achieving this milestone with the Miami Conference on the Caribbean Basin.
It is no idle boast when your website states that the Annual Miami Conference on the Caribbean Basin is the premier gathering of its kind that brings together senior public and private sector leaders and representatives of civil society from the Hemisphere. As Secretary-General of the Caribbean Community and before that as Secretary-General of the group of African Caribbean and Pacific States, it has been my privilege to benefit from many a discourse over the years at this conference. It is truly serving its purpose as a forum for addressing many of the challenges which confront our Region and for seeking mutually beneficial solutions.
I recall the earlier days of Caribbean Latin American Action (CLAA) and the advocacy with respect to the Caribbean Basin Initiative in particular the work towards the building of partnerships among the Basin Countries. Mr Chairman, I recall in particular the initiatives taken to encourage the Twin Plant programme under the Puerto Rico 936 arrangements which sought to bring new investment to the countries in the Basin. My good friend Tito Colorado who played a major role in that initiative will always be remembered.
Tonight, I feel particularly honoured to have been chosen along side the distinguished Secretary General of the Organisation of the American States whose statement earlier this evening afforded me such insightful hemispheric perspectives, to be one of the keynote speakers at the opening dinner of this prestigious event. I am also happy that the theme of my address is – The Competitiveness Challenge – as this goes to the very heart of the most ambitious undertaking that Member States of the Caribbean Community have ever attempted – the CARICOM Single Market and Economy.
Our Caribbean Community (CARICOM) is just about the same age as CCAA – perhaps a mere three years older, we can therefore compare and jointly benefit from our common experience over the last thirty years. Indeed thirty is not just the age of maturity and also a good time for reflection and evaluation but is also always a good time to look forwards towards the future and to strategise on how best to meet the challenges with which one is confronted.
Thirty years ago none of us could have envisaged the speed at which the world has since changed. Who would have predicted the fall of the Berlin Wall and the torrent of change which that event unleashed and which continue to envelop us to this day? Who would have foreseen the events of September 11th 2001 and the profound changes which have since occurred in the global political, economic and security landscape?
Challenges to the Caribbean Economies
Ladies and gentlemen, since the inaugural Miami Conference 30 years ago, the economies of the Member States of the Caribbean Community have as a group, generally experienced a number of challenges. Firstly the rate of economic growth has decelerated from an estimated 4.3 per cent in the 1970s, through 2.1 per cent in the eighties and 1.7 per cent in the nineties. Early indications are that there has been a continued downward trend in the early years of this decade with Trinidad and Tobago being the main exception.
The picture is not much brighter as regards Human Development if one were to judge by the United Nations Development Programme’s Human Development Index. This barometer also shows that despite relatively high per capita incomes, sluggish economic growth, persistent unemployment, high indebtedness and entrenched pockets of poverty have resulted in a relative decline in the ranking of Caribbean Community countries over the thirty years. While this Index may be affected by changes in methodology of calculation, using data from the 1999 and 2006 Human Development Reports, Saint Lucia is the only Caribbean country whose ranking has improved.
In the market place, the figures are not much better. The CARICOM's share of merchandise trade in the North American market for example has declined from 0.71 per cent in 1985 to 0.27 per cent in 2000 i.e by more than 50%, mirroring an even more pronounced pattern with Europe. This reflects in large measure the effects of the erosion of preferential access to these markets in particular for bananas and sugar in the European market. The expiry of the WTO waiver for the Caribbean Basin Initiative and the difficulty faced in obtaining its renewal poses new challenges for the Region in the market of the United States. I will return to this later.
The relative share of services in Caribbean economies is increasing but our global share of tourism, the traditional service sector, declined from 0.91 per cent in 1990 to 0.69 per cent in 2002 despite positive efforts to diversify the tourism product. In addition some of our sunrise service sectors such as financial services and internet gambling have come under threat by recent action in the international community.
As regards this key sector of tourism, more challenges seem on the way with the recently enacted Western Hemisphere Travel Initiative. While fully recognising the right of the United States and of any other country, to take measures to secure its borders against threats to its security, we do not understand what appears to be the inequity in its application to cruise ship passengers as against those who visit the Region by air as well as the added disadvantage to Caribbean countries of the time allowed to put the passport-related measure in place.
We would have hoped that the same time frame applicable to cruise ship passengers and land based returning tourists would have been granted to those returning by air, thereby ensuring that a level playing field would apply to all destination countries. Tourism is a significant component of our regional economy. A study by the World Travel and Tourism Council estimates that the Caribbean could lose as much as US$2.6 billion and188,000 jobs because of the new rules.
To compound these difficulties the region’s share of Overseas Development Assistance and Foreign Direct Investment have been declining in the face of new priorities for the donor community including support for wars in Iraq and Afghanistan as well as on terror.
In the International arena it has now become more difficult for small and vulnerable countries such as ours to get our voices heard and to have our interests addressed. Gone are the days when thoughts and ideas of the new international economic order with elements of special and differential treatment for developing countries found a priority place on the international agenda. No more so today. The small countries of the Caribbean must face squarely, now more than ever, the fact that their future development rest on the measures which they take individually and collectively to address these many challenges.
The task before the region therefore is to take full advantage of the existing opportunities and various others being created in the context of globalisation. The single most important step to this end is to enhance our competitiveness. This is the only way in which the region can realistically expect to provide 15 million people spread over 15 countries in CARICOM with an enhance quality of life and work. This task requires the full participation of all – government and people, private sector, labour and the civil society – we need all hand on board as we embark on this journey in the twenty first century. This objective underlies our participation in these deliberations by the CCAA given its own similar raison d’etre.
Towards the Single Market and Economy
Since the end of the 1980s, the leaders of the Caribbean Community recognised then need for fundamental structural change if the Community were to achieve this goal. Subsequent international developments were to reinforce this realisation . A recent World Bank report on the Caribbean was most appropriately entitled “A Time to Choose.” Our Region has chosen. Our choice is to establish the CARICOM Single Market and Economy.
This choice was a visionary decision taken as it was seventeen years ago, when the CARICOM Heads of Government met at their Tenth regular meeting at Grand Anse, Grenada, in 1989. They determined then that a Single Market and Economy would provide our small states with the capacity to take their place in the global community. In doing so they stressed the need “to work expeditiously together to deepen the integration process and to strengthen the Caribbean Community in all of its dimensions to respond to the challenges and opportunities presented by the global economy.” This commitment led to the process of revising the Treaty of Chaguaramas which created the Caribbean Community (CARICOM) and seeks to transform the fifteen individual separate small economies into a single regional and hopefully more competitive economy.
The first historic step in implementation of the new Treaty towards the bringing into being of the Single Market and Economy took place with the creation of the Single market on 1 January 2006. This resulted in addition in the free movement of goods, which had been in place since the days of the Caribbean Free Trade Area (CARIFTA) in 1968, in the free movement among the participating Member States of labour, of services of capital and for the right of establishment. In other words not only would goods produced in the Community continue to enjoy free and unlimited access to the markets of Member States but in addition the very factors of production i.e the labour, capital etc. which produced the goods would likewise enjoy free movement among Member States. With regard to labour, the market is being liberalised in phases and is now open to university graduates, media workers, sportspersons, artistes, and musicians, and recently to nurses and teachers who are not university graduates.
Of particular relevance to our discussions here are the provisions relating to the free movement of capital, the right to provide services and the right of establishment including. The Single Market Provisions in the Revised Treaty not only entitles the entrepreneur to move his capital but also his skilled labour necessary to establish and operate his enterprise in any part of the Community he so wishes. In doing so he has the right to obtain access – not necessarily ownership – to land and buildings necessary for the effective establishment such as is necessary, for the operations of his enterprise.
Equally those categories of skilled community nationals entitled to free movement to settle and work in any Member State are also entitled to be accompanied by their and dependents. To facilitate this process CARICOM has already adopted an instrument to ensure the transferability of social security benefits. The full entitlement of this accompanying category is yet to be codified in a protocol.
These measures are intended inter alia: to encourage and stimulate the reorganisation of businesses including the re-engineering of business models to expand from servicing domestic markets into regional markets and eventually globally. The harmonisation of rules and procedures for the enlarging of markets are expected to increase the operating efficiencies of businesses as is the greater free access to factors of production, and the freedom of location of business. Together these arrangements also serve to create conditions of certainty and predictability for investors regional seeking to do business within the Single Market. That certainty and predictability for Regional enterprises is reinforced by the provisions of the Treaty which prohibits discrimination on grounds of nationality only and entitles them to a treatment no less favourable than that granted to third country enterprises. All these arrangements are underpinned by the legal certainty provided by the Caribbean Court of Justice.
ALL THESE MEASURES WILL REQUIRE IMPLEMENTATION AT THE NATIONAL LEVEL IN THE LETTER AND SPIRIT IF THE BENEFITS ARE TO BE REALISED.
The Single Economy
Some of the challenges which the Region need to address in improving international competitiveness relate to deficiencies in the investment climate, the predominance of small uncompetitive firms, the absence of research and innovation, the inability to produce goods of high standards and the shortage of highly trained and skilled manpower. These are some of the issues which we seek to address as we develop the Single Economy. The Single Economy seeks to provide by 2008, the framework for further restructuring of the Region’s economies to help to deal with many of these issues. In that process even more so than in the movement to the Single Market, the private sector has a decisive role.
A bird's eye view of the process of constructing the Single Economy beyond that already described in the Single Market would give you the following areas of coordinated policies:
1. Monetary policy cooperation including exchange rate policies
2. Financial policy harmonization including interest rate policy,
3. Capital market integration, including the imminent creation of a truly regional stock exchange mechanism. Six of our Member States have already achieved harmonisation in these three areas.
4. Investment and incentives policy harmonization, including a CARICOM Investment Code. The effect is to make the Caribbean a single investment location rather than one with many different jurisdictions.
5. Fiscal policy coordination and harmonization of which an Intra-CARICOM Double Taxation Agreement already exists and work is proceeding with respect to a corporate tax code and, also, an indirect tax regime.
6. Sectoral policy harmonization with respect to industry, energy, agriculture and transport. A transport policy is crucial to the development and survival of the CSME given the absence of contiguous borders among Member States, save between Guyana and Suriname, as well as the need for effective linkage with the rest of the world.
7. The creation of Pan Caribbean Firms to overcome the constraints of small size and limited scale of enterprises.
8. A Development Fund (similar to that of the European Social Cohesion Fund).
The Development Fund
The Revised Treaty of Chaguaramas (Article 158) states that:
“There is hereby established a Development Fund, for the purposes of providing technical or financial assistance to disadvantaged countries regions and sectors.”
The CARICOM Development Fund is expected to inter alia:
• Foster and support economic transformation and enhance competitiveness in the global economy for its beneficiaries.
• Compensate for the adverse effects of trade distortion and international dislocation arising from the inter CARICOM Integration Process and
• To promote cohesion and counter polarization thereby preventing as Prime Minister Arthur of Barbados, the lead Head of Government with responsibility for this aspect of the Community’s development and from whom you will hear more later this week so eloquently describes it “A permanent coalition of un-equals.”
For the financing of the Fund, CARICOM Heads of Government in July 2006, committed themselves to initially raising US$250M, of which US$120M would be provided by Member States with the remaining US$130M to be raised from the CARICOM’s development partners including the private sector. The Fund would offer loans, grants and interest subsidy. The Fund is required by Heads of Government to be operational by mid-2007. To complement the Fund a Regional Development Agency is to be established to provide technical assistance to its beneficiaries.
Standards
Critical to improved competitiveness is standards. The CARICOM Regional Organisation for Standards and Quality (CROSQ) and the Caribbean Agricultural Health and Safety Agency (CAHSA) are tasked to promote and develop production standards and to facilitate international competitiveness. In the bringing together of large, medium and small enterprises one needs to avoid the abuse of dominant positions. For this reason the community in the process of establishing a Competition Commission which will also serve to ensure consumer protection.
Private Sector
Our structures recognise the important role played by the private sector in the development of CARICOM to date and that which is anticipated for the future. In this context the private sector is already taking steps to play this role. Under the leadership of the Caribbean Association of Industry and Commerce (CAIC) it has already established a broad-based Caribbean Business Council to interact and work with the governance of the Community particularly in the establishment of the CARICOM Single Economy.
Security
A secure environment is vital to underpin the process of CARICOM economic restructuring – Single Market as well as the Single Economy. While time would not allow us this evening to deal with the security architecture being constructed by the Community nor with the 2007 Cricket World Cup for which it will be critically important, suffice it to say that the structures being put in place to respond to the security threats faced by the region will also serve to provide a more secure base for greater investment, higher productivity and competitiveness of the Region's economy.
The external environment
The above is a brief overview of the main elements of the CSME –its internal market and production structure. The competitiveness of the regional economy is however, not only a function of the internal restructuring but also of the external environment it encounters and to which it must relate. Critical in that external environment are the market access for its goods and services as well as for attracting investment and skills.
The mechanisms embedded in the Single Economy for attracting investments have been referred to earlier. As regard attracting skills, an important emphasis must be placed on slowing down the out-migration of skilled nationals. This can only be achieved however if adequate and attractive conditions are provided at home and special policies are adopted to encourage the return of many in the diaspora.
Indeed, former Prime Minister of Jamaica made this observation in the CARICOM 30th Anniversary lecture in 2003 at the Medgar Evans Collage in New York, I myself am of the opinion that in addition, regional governments may wish to consider seeking some contribution from the beneficiary governments . Indeed none other than the President of the United States, on the occasion of proclaiming June 2006 as Caribbean American Heritage month observed that “ for centuries Caribbean Americans have enriched our Society and added to the strength of America.”
This is without prejudice to the valued role played by our diaspora in our national and regional development, however, their US$1.6 billion in remittances to the Caribbean annually while no pittance, compensate for the loss of their skills.
As regards external markets, the role of the CSME in facilitating the region’s collective approach to trade relations with third countries is vital. CARICOM Member States already work collectively to seek new and improved market opportunities and to negotiate trade rules in the World Trade Organisation; and to collectively defend our economic interests in the global market place.
A unique feature of the CSME is that due to the existence of a number of bilateral trade arrangements, production in CARICOM could in addition to free access to the markets of all CARICOM Member States, also have similar access to the markets of Venezuela, Colombia, Costa Rica, Dominican Republic and Cuba among others, provided such products are on the free entry lists in the bilateral arrangements with all these countries. This surely must be a significant added attraction to investors both Community and foreign.
Specifically with regards the United States of America, we are currently concerned at the delay in the passage in the World Trade Organisation of the waiver for the extension of the benefits of the Caribbean Basin Initiative . This situation holds great dangers for CARICOM trade with the United States, the region’s largest trading partner. But even as we await this waiver we recognize the need to put the region’s trading relationship with the United States on a more secure footing. We are mulling over this question right now.
As part of the groundwork to that end, the CARICOM and the United States are in discussions for the holding in June 2007 of a Conference on the Caribbean in Washington. It is envisaged that this Conference will bring the region’s issues to the forefront of the minds of key decision makers in Washington. We note the recent change in the composition of the Congress and we hope to have the opportunity to discuss with key Committee Members the important issues which not only affect our United States CARICOM relations but also how these impact on the future CARICOM development especially in relation to our trade and economic security – central matters in our CSME.
We hope that the Conference on the Caribbean which has the support at the highest levels in CARICOM and the United States ,will also bring together the private sector to show case what the region has to offer as a market place for trade and investment. We also hope that this Conference will inspire our Diaspora to come together and to work towards contributing further to the development our Region through advocacy and where possible through building partnerships and networks with businesses in the region to assist in improving our competitiveness.
In summary therefore, our Caribbean Community has structured what we believe to be a dynamic, flexible arrangement which facilitates the conduct of business in such a way as to allow our domestic entrepreneurs ample opportunity to participate in the global economy. It also allows enough space for investors from outside the market area to seize and take advantage of opportunities within the market space. It provides access to the Region’s best talents as well as access to specialised training and technology transfer and capacity building skills in various sectors and increased opportunity in social and capital formation based on research and innovation. It provides for national and foreign players.
Ladies and gentlemen, the challenge to sustained Caribbean development remains as formidable as ever. However, we are not lying down in the face of those challenges. The Caribbean is putting its house in order even as it reaches out to strengthen its ties with its traditional partners and to develop stronger links with the new ones such as our Central American partners in the CCAA. With a little help from our friends, I am confident that the CSME will create the kind of competitive environment that will ensure a viable and prosperous society taking its rightful place in the hemispheric and global arenas.
I wish you all happy holidays and thank you for your attention.
