Can the private sector generate regional growth?

When CARICOM Heads of Government met in Antigua earlier this month they had held a ‘frank and enthusiastic’ exchange with selected leaders of industry and commerce.

Who was present, whether this included the organisations that represent the region’s leading economic sectors, or how those present were selected, was not reported; but the objective, CARICOM suggested, was to encourage their involvement in stimulating growth and buttress the desire of Heads for greater private sector investment, public-private partnerships and an improved business environment.

Much of the discussion revolved around the vexed issue of what is known as the enabling environment – the ease of doing business free from regulatory and other constraints - with the business representatives arguing that without Governments improving this, it would be hard to unleash entrepreneurial energy, seek out new opportunity and encourage greater pan-Caribbean economic activity.

According to the communiqué, Heads, ‘remained committed’ to creating such an environment and encouraged the business leaders to invest in agriculture and energy, as well as to give serious consideration to establishing a Caribbean Private Sector Investment Fund.

How realistic or deliverable any of this is, let alone whether those present truly believe in the commercial viability of such solutions, or are in any position to deliver given the extraordinary constraints of operating in the CARICOM business environment, is far from certain.

Unfortunately, without dramatic Government reforms and an end to economic nationalism and protection, the probability is that most Caribbean Governments are unlikely to ever create the open enabling environment for Caribbean entrepreneurs that might turn countries into future equivalents of Ireland, Iceland Singapore or even Mauritius.

Most of the region is still not at the starting point for dramatic private sector led growth. The tiny 5.5m English speaking market remains at different levels of development; the private sector largely consists of micro-enterprises; without contiguous borders and poor transport links there are better opportunities for productive investment outside the region; infrastructure, extractive industries and tourism depend on external investors; poor educational standards and a lack of global competitiveness hold the region back from developing newer service oriented industries; and there continues to be a disinclination to focus on, defend and support in every way possible those sectors where the region could have a future comparative advantage such as tourism, rum and the creative industries.

For these reasons and the region’s failure to create an executive mechanism that might bring into being a genuine single market and economy, the parts of the Caribbean private sector that might be in a position to help engineer regional growth have largely moved on. They have become bottom line and shareholder centric, and as with modern business everywhere, largely deaf to the rhetoric of government.

They have also recognised that future opportunity lies wherever it may be: think Sir Kiffyn Simpson’s investment in up to 40 000 acres of Guyana’s Upper Essequibo region to produce rice, corn, soya, cow beans, guar and bamboo for export, or GraceKennedy’s US$26m recent acquisition of La Fe Foods Inc in the US, or Vicini’s investment in steel production in Trinidad through Metaldom. These companies and others have already embraced the fact that globalisation, private equity or deals that leverage tax advantage, represent the future.


Despite this, the theme of the Caribbean private sector delivering change has become of such significance that almost every single academic paper of note on the regional economy acknowledges its central future role.

In his stimulating paper on convergence published by UWI in 2013, and interestingly soon to be published in China, Winston Dookeran, Trinidad’s Foreign Minister notes that future development in the region requires not just partnership across what he describes as the whole Caribbean sea space but also between the public and private sectors. He believes that this requires inclusiveness and co-operation emphasising equality and equity. Central to this regional space, he suggests, is aligning the logic of politics (inclusiveness, co-operation) with logic of economics (production integration, competitiveness and distribution).

In a similar way in his recent book ‘Globalisation, Trade, and Economic Development’, Ambassador Richard Bernal makes clear that any new private sector led approach will take place against the background of a dramatically changed global environment. ‘The extreme globalisation of the world economy’ he writes, 'means there is really only one market and that is global ...and national economies regardless of size and level of development are subject to the dominance of capital accumulation’.

Countries, he argues, must therefore engineer a business environment that can extract the maximum benefits from the global economy while minimising effects harmful to the national economy.

And in a report for the European Commission not in the public domain an author makes clear that the lack of impact of the Cariforum EPA is because it does not seek to address government’s core domestic regulatory space affecting the cost of doing business private sector growth (financing, energy, utilities, transport and logistics) suggesting there will always be a limit to what nay FTSA can achieve.

What all this suggests is that business and government in the Caribbean are now operating in different environments. The biggest players that can move economies, invest internationally, or seek opportunity in new ways or in new areas; while the smaller often micro-enterprises that cannot escape their immediate economic environment suffer stifling constraints, wait on government to change the enabling environment.

The real question is therefore whether the large Caribbean private sector is any longer interested in leading regional economic growth or whether the new generations of businessmen and women running such enterprises, who are increasingly trained in some of the world’s best business schools, have ceased to think in the same way as their regional predecessors, who felt they still had a stake in change and governance.

What seems to have happened is that as governments have failed for all sorts of reasons to deliver public sector reform, deregulation, fast response times and flexibility, so that large corporations have had to look beyond the Caribbean’s borders or at borderless modes of activity while small enterprises have atrophied within small economies.

Put another way the logic of politics and power in the Caribbean now so at odds with the logic of economics that the chances of regionally led private sector growth may have become a pipe dream.

(David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org. Previous columns can be found at www.caribbean-council.org)

China will cast a huge shadow as Japan meets CARICOM

The word will not be spoken in any formal speeches and it won’t be mentioned in final statements and declarations, but it will be talked about in the corridors and it will be at the back of everyone’s mind as Japanese Prime Minister Shinzo Abe visits five Latin American and Caribbean (LAC) nations from July 25 to August 2. The word is “China”.

Animosity between China and Japan has been steadily increasing over the last few years and relations are now tense at best and hostile at worst. From the Chinese side, according to Professor Zhou Yong-Sheng at the China Foreign Affairs University, “Japan can develop as a military superpower and boss around the region again.” He adds, “China is no longer the country it is was 120 years ago and, therefore, Japan should not commit the folly of starting a war with its western neighbour.” Those are fighting words and there have been skirmishes in both the sea and air over claims to sovereignty of five small islands known as the Senkaku in Japan and the Diaoyu in China. This had led to a military build-up in Japan that has been criticised by China on almost a daily basis. The heat generated over this was fanned into a flame by the Prime Minister’s insistence on visiting the Yasukuni shrine that venerates Japan’s war dead who China regards as invaders and from the World War 11 occupation of Chinese territory.

The Japanese leader is visiting the five LAC nations in the wake of a very successful visit by Chinese President Xi Jinping in which he signed agreements that exceed US$10 billion with Argentina, US$5 billion with Venezuela, and US$1.8 billion with Cuba. Additionally, Xi offered to extend a line of credit of up to US$10 billion to members of the Community of Latin American and Caribbean states (CELAC) and to create a US$20 billion fund to finance infrastructure projects in LAC countries. China is also LAC’s second largest trading partner after the United States of America. In 2013, trade reached US$261 billion of which China enjoys a surplus. Nonetheless, Chinese investment, particularly in infrastructure, has helped to boost economies in LAC countries, including the nine Caribbean Community (CARICOM) countries that have diplomatic relations with China.

The Japanese Prime Minister is very keen to boost trade with Latin America and the Caribbean which, while it nearly doubled over the past decade, still accounts for just 5 per cent of Japan’s foreign trade. He will also want to expand Japan’s stock of foreign investment in LAC which is now lagging behind China at US$60 billion.

The name of the game is two-fold. The first is economic and includes access to LAC resources, such as oil, gas and minerals, as well as investment in large infrastructural projects that would give Japan a sizeable return. In this regard, Chile, Colombia, Brazil and Mexico are the main targets. The second part of the game is political influence particularly in Japan’s quest for a non-permanent seat on the United Nations Security Council (UNSC) for which elections will be held in October 2016. In both cases, Japan comes up against China.

While China is one of the five permanent members of the UNSC, it has been openly campaigning against Japan’s candidacy for the single UNSC seat that will be available to Asia. Japan is contending with Bangladesh whose candidature China avidly promotes in order to block Japan.

It is because of the vote for the UNSC that Japan is particularly interested in meeting the 14 independent CARICOM nations in Trinidad and Tobago on July 28. If they all vote for Japan, Prime Minister Abe would be delighted.

And that is where the challenge and the opportunity arise for the 14 independent CARICOM states. For the five that do not have diplomatic relations with China (they are tied to Taiwan), supporting Japan poses no challenge at all, but the others do have to be mindful of the consequences of supporting Japan for the UNSC. Dealing with this issue will call for skilful diplomacy.

The opportunity for the 14 independent CARICOM nations is the face-to-face meeting with Prime Minister Abe. It presents an opportunity to bargain in the region’s interest just as the Japanese leader will be seeking benefits for Japan.

On the economic front, like China, Japan has been pledging large regional aid and investment packages to Africa and Southeast Asia, the value of which are US$43 billion and US $20 billion, respectively. It is unlikely that transactions of such sizes will be extended to all of the LAC countries. The LAC nations are a low priority for the Japan International Co-operation Agency (JICA) which provided only US$450 million to the entire region in 2012. This means that the CARICOM countries got only a fraction of that total.

It would be worth drawing that reality to Prime Minister Abe’s attention even as CARICOM leaders describe the plight of their economies and the restricted space in which they operate because of rules made by institutions in which Japan has a powerful voice. The face-to-face meeting with the Japanese Prime Minister offers a golden opportunity to remind him that his country has enjoyed a sizeable trade surplus with CARICOM countries for many years – a trade surplus that is greater than the amount of official development assistance Japan provides.

The value of the trade surplus may not be huge in Japanese terms, but it is large for CARICOM states.
Additionally, the meeting with Mr Abe also provides a chance to lever support from Japan in critical areas such as: providing help to address debt (many of the CARICOM countries now have a debt-to-GDP ratio of over 60 per cent); active support in the Organisation for Economic Co-operation and Development and the Financial Action Task Force for compensation for the high costs that result from compliance with their rules; financing for Climate Change adaptation; advocacy in the IMF and World Bank to make CARICOM states eligible for concessionary loans; and more Japanese investment in renewable energy and infrastructure.

Over all these discussions, of course, China casts a long shadow.

(Sir Ronald Sanders is a Consultant, Senior Fellow at London University and former Caribbean diplomat. Responses and previous commentaries at: www.sirronadsanders. com)

Donors urged to do the right thing

There is a popular saying, ‘A promise is a comfort to a fool’, which warns against trusting in the assurances of others. For many, mankind is too fallible and trust should therefore be placed in God alone. Still, what kind of world would we live in if a man’s word could not be trusted? In the final analysis, you are a sum of your thoughts and actions. A man is who he says and shows he is.

In light of this, it is disheartening to hear that four-and-a-half years after the devastating earthquake in Haiti, only half of the money pledged to aid in the relief, recovery and repair efforts has been handed over. This revelation was made by that country’s Prime Minister Laurent Lamothe, who implored those in the international community to honour their commitments and deliver the nearly five billion dollars outstanding.

The PM took great pains to explain that the funds collected so far have already been used constructively to rebuild entire neighbourhoods and house some of the 1.5 million people who were without housing after the earthquake. He added that Haiti, with its meager resources, even constructed 3 000 homes and rebuilt another 4 000. However, at present 125 000 people still live in tents, and have been doing so for approximately 54 months.

It is true that countries all over the world are experiencing real economic hardships as a result of a global recession. For many, the state of their economies may be altered and it may not seem possible to deliver on sums promised. It is difficult to be charitable when you or your own may be suffering and need help yourselves. Yet, it is crucial that states keep to their word or, where possible, assist in any other way relevant; for instance extended periods for disbursement of funds, or a waiver of payment for services given would also be useful.

Haiti needs the international community to step up to the plate and do the right thing. When considering economic hardships, none could be greater than those faced by that country over the years, being burdened with a debt of 150 million gold francs by France (later reduced to 90 million) for the audacity of fighting for and gaining their independence. Haiti kept to this commitment and repaid France for 122 years until their debt was cleared in 1947, so why wont other states do the same and keep their commitments? Surely their situations are not as dire as Haiti’s?

After the earthquake, there was an outpouring of goodwill. These gestures demonstrated the wonderful spirit that characterises humanity. At that time religious, political and ethnic differences were put aside and the love for humankind shone through in displays of kindness, charity and unity. In a world where economic hardship is prevalent and environmental disasters frequent, it was heartening to see that generosity existed. Let us prove that it still exists today. Though a few strides have been made in Haiti’s rebuilding, it is certainly not sufficient. It is time for those who pledged to put their money where their mouths are.

FEES OWED TO ISA

By Linda Straker

Grenada is one of six Caribbean countries that are in arrears with the International Seabed Authority (ISA), an autonomous international organisation which administers mineral resources in the seabed.

The countries are among a list of 43 members of the ISA that are in arrears of two years or more with dues, effective April 2014. They are Barbados, Dominica, the Dominican Republic, Grenada, St. Lucia, and St. Vincent and the Grenadines.

The annual report of the Secretary-General, Nii Allotey Odunton, was the focus of a two-day debate in the Assembly. The report did not give the dollar amount of that which is owed, but said that up to April 30, 2014, only 29.7 per cent of the Authority’s 166 members had paid. The money collected represents 68.7 per cent of the value of the member contributions to the 2014 budget.

The approved budget for the 2013/2014 biennium stood at just over US$14.3 million.

“Notices are sent on a regular basis to member states, reminding them of the arrears,” the document said.


“The administrative expenses of the Authority shall be met by assessed contributions of its members until the Authority has sufficient funds from other sources to meet those expenses,” it explained.

The scale of those assessments shall be based on the scale used for the regular budget of the United Nations, adjusted for differences in membership, according to the report. In accordance with article 184 of the Convention and rule 80 of the rules of procedure of the Assembly, members in arrears for two years or more shall not have voting privileges.

Meanwhile, as the inter-governmental body wound up its session last week Thursday, a day earlier than originally scheduled, its Council signalled it wanted formulation of procedures and criteria for applications for extension of exploration contracts as well as exploitation regulations to be given top priority.

The Council, by a decision adopted on July 23, requested the Authority’s expert body, the Legal and Technical Commission, to, “as a matter of urgency and as its priority”, formulate the draft texts and submit them to the Council at its 2015 session. The draft instruments would be applied in a uniform and non-discriminatory manner and made available in advance of the Council’s next session in 2015. The Commission is scheduled to meet in Kingston in February 2015.

The Authority’s Assembly, at its final meeting on Thursday, July 24, decided to convene the 21st session of the Authority from July 13 to 24, 2015 in Kingston.

During debate on the proposals in the Council, many delegations expressed support for formulation of the draft texts. A proposal by the Netherlands for the incorporation of environmental management planning in the regulatory framework for mineral exploitation in the Area was welcomed by delegations.

A communiqué issued at the conclusion of the meeting said that the exploration contracts awarded to the pioneer investors in 2001 and 2002 will come to an end in 2016 and 2017. Some of the contractors involved are likely to proceed to exploitation while others might apply for extension of their contracts. There is now a significant increase in the level of interest in deep seabed mining.

The report, submitted under article 166 paragraph 4 of the 1982 United Nations Convention on the Law of the Sea, provided information on the work of the Authority from July 2013 to June 2014.

Presenting the report to the Assembly on July 23, Mr. Odunton highlighted the challenge of managing the increasing workload of the Authority as it moved towards elaborating exploitation regulations and the need for standardised data on the living resources of the seabed Area. The report observed that the Authority had achieved significant milestones since 2000.

It is not clear who represented Grenada at the Assembly and whether or not the outstanding fees were settled by the time of writing this report. E-mails and calls to a number of relevant persons went unanswered or not acknowledged.

2 women among National Calypso finalists

Janice Augustine

LAST Sunday night, she was one of three women to perform in the semi-final round of the National Calypso competition and on Carnival Sunday night, she will be one of two who will be competing to win the prestigious title of National Calypso Monarch for Carnival 2014.

Promising that she would put out her best as her objective was to win enough points from the judges that would take her to the final level, Janice Augustine, who is a member of the Kingdom Calypso Tent, was among the few who portrayed her song during the performance.

At the end of the show, her efforts were not in vain as her ability to deliver “No Political Commentary” and “Don’t Deliver” earned her the right to boast as one of the ten calypsonians who will be hoping to dethrone the 2013 winner – Keturah George.

The other woman calypsonian who made it to the big stage is Jermaine “Superstar” Simon, while the others are Ajamu and Scholar, who have both won the National Monarch title seven times; Sour Serpent; Wizard; Mr X; Sheldon Douglas; Randy Issac; Jason “Big J” Joseph; while Rootsman Kelly is the standby.

Scholar

A win for either Scholar or Ajamu will bring an end to the equal number of times either one of them has won the National Calypso Monarch title and thus, many Carnival observers believe that it will be an “all-out calypso battle” between the two, who are experienced and veteran performers.

Following Sunday night’s result, there were some who openly expressed their concern about the finalists, while some debated the naming of Rootsman Kelly as a standby instead of among the final competitors. Cultural Ambassador, Francis Urias Peters, called for the scrutinising of the score sheet. He said that though the judges’ decision is final, he felt that there is a need to expose and explain the entire process of judging a calypso performance and how the scores were awarded for each performance.

Limited use of props for competitions

By Linda Straker

There is the real possibility that the best props will not be on display for the different musical shows that will be held at the National Stadium for Carnival 2014 as the terms and conditions for using the facility do not provide for vehicles to be on the field.

The Groovy and Soca Monarch competitions are set to take place on August 8 while August 10 is the date for the National Calypso Finals. Though main activities over the years have taken place at the National Cricket Stadium, this year the Spicemas Corporation (SMC) is challenged for an appropriate venue because of cricket games scheduled for the same venue eight days after.

Venues for cricket games are generally under the control of the WICB months or weeks before a game and thus that venue is restricted for hosting certain events. The National Cricket Stadium is scheduled to host two One-Day International games on August 20 and 22 as well as a practice match on August 17 at the Progress Park in Grenville on August 17.

Alistair Bain, Chairman of the Spicemas Corporation, said that one of the conditions for getting limited use of the field is not having vehicles driven unto the field. He said that the Corporation is fully aware that such a decision will put some limitation on the performance of some artistes in the various competitions, but he is hopeful that with them knowing about the terms and conditions early, the necessary adjustments will be made to the props for the various nights.

At the media launch of the Spicemas 2014, it was announced that Carnival will be held at the Roy St. John Playing Field in Tanteen, but eventually a decision was made to host it at the National Stadium with a certain amount of limitation. The cost of preparing the Tanteen playing field was seen as too costly.

Bain said that Kiddies Carnival, which is scheduled for August 2, will not be held at the Stadium and instead will be held at the Tanteen Netball Court. The Panorama competition, which will be held on August 9, will also be held at Tanteen. The National Stadium will be the venue for the National Queen Show on August 7; National Groovy and Soca Monarch competitions on Friday, August 8; and the DiMarche Gras, which will be held on Sunday, August 10.

The SMC will be collaborating with promoters of “Preeday” and that show will be held on Wednesday, August 6 at the National Stadium.

Budget retreat for senior Government staff and ministers

Government last week Wednesday began the process of preparing the 2015 Budget with a retreat for senior ministry officials who will scrutinise the 2014 Budget as they engage in grading and achievement exercise.

“This is where all Ministries meet with Finance to discuss the Budget for the upcoming year. It is a closed session, but we are opening up the opening session, where the Finance Minister usually sets the tone of the discussions,” said one Finance Minister official.

Senior ministry representatives include ministers of Government and the Cabinet; permanent secretaries; and planning and administrative staff.

“We did that about two or so years ago when it was held at the Stadium. Essentially, only the Minister of Finance speaks in the opening session and the rest of the time is spent updating on the performance of the current Budget,” it was further explained.

The venue for the retreat is the Grenada Trade Centre. The 2015 Budget is expected to be presented
during the month of December 2014. Following the retreat with the top ministry officials, it is expected that there will be more monitoring and evaluation sessions as well as a National Consultation with all the stakeholders.

Before a budget is presented in the Lower House of Parliament, it must get the approval of the Finance Committee – a committee which includes both the opposition Members of Parliament led by the Leader of the Opposition and Member of Parliament for the ruling administration.

Though Grenada doesn’t have a formal Opposition, all elected MPs continue to meet as a Finance Committee because three of the elected MPs are not Government Ministers.