‘Caribbean needs to be more competitive’

Dr. Justin Ram, Director, Economics Department at the Caribbean Development Bank (CDB), has highlighted that the Caribbean has competitive issues which are impeding growth.

Last week at a press conference to highlight the performance of the region for 2013 and outlook for 2014, he argued, “Small size is no excuse for under-performance. Caribbean economies are still lagging behind other small island developing states. It means that certain critical structural problems need to be addressed within our economies if we are to have sustainable and lasting growth in the future. Some of these reforms address the cost of doing business in our countries, examining overall cost of energy in our economies, as well as the need of governments to further tighten our fiscal accounts.”

He said, “Economic growth has been lagging in the Caribbean and we see this through structural inefficiencies of our economy. Policymakers need to ensure that the business environment is set at a pace where the cost of doing business is reduced. For example, if you compare what is happening
in Caribbean economies and Singapore, it takes six months to acquire construction permits on average in the Caribbean as opposed to 26 days in Singapore; with respect to enforcement of contracts within the Caribbean, on average it takes 772 days as opposed to 150 days in Singapore.

“In the Caribbean, the overall cost of electricity is very high when compared to many of our comparative block of nations. Electricity costs are around 35 US cents per kilowatt hour. This is far too high. It is imperative we reduce the cost of electric. If we don’t, our economies will continue to not compete on the world stage and this could have a dampening effect on our export potential.”

President of the CDB, Dr. Warren Smith, added: “There is an increasing recognition that in Caribbean countries to grow and maintain standard of living, something needs to change. We are seeing, in terms of the accumulation of debt, this is a direct consequence of the inability of our countries to compete internationally. Thus, foreign exchange becomes the binding constraint in our economies, but we are not generating enough foreign exchange to be able to sustain standard of living. So rather than adjusting to a low level of standard of living, we borrow more in order to sustain that standard of living.

“Our countries have reached a situation where we cannot continue to sustain that standard by borrowing. We need to adjust, we have to focus on those things that will make these economies more competitive, that we can earn foreign exchange to ease the binding constraint that forces us to put ourselves in a position where we become less and less viable as economic entities.” (NB)