BUSINESS MONDAY: ECONOMIC VIEWPOINT – Region must look inwards for solutions to economic challenges
Mon, 11/14/2016 - 12:00am Barbados1
THE CEO of Massy Holdings Limited, Gervase Warner, was absolutely right when he suggested that no external actors will be coming to rescue the Caribbean countries facing economic challenges.
At a joint IMF – Trinidad Government sponsored function, the CEO said that the “current challenges we face are a gift.” To him the challenges are not insurmountable or that would require outside help.
The CEO could not have said it better when according to the Trinidad and Tobago press reports, he declared: “We’ve got to help ourselves. There is no big brother or big sister or external force that is coming into our region of seven million and saying they are going to forgive all our debts, grant us privileged access to their markets or pay higher prices for commodities they can get elsewhere just to support us. On the contrary, the opposite is happening. Our territories are being de-banked and de-risked.”
This is meant to suggest that the islands look inwards for solutions to their problems and act on them.
Caribbean countries do not require the IMF, the World Bank and the IDB, if they had hoped going that route, to tell them how they should go about tackling their problems.
The forum according to the press reports, featured key players from around the Caribbean in the areas of politics, business, economics, banking and finance and tourism. Among the dignitaries in attendance were Jamaica Prime Minister Andrew Holness, St Lucia Prime Minister Alan Chastanet, Grenada Prime Minister Keith Mitchell, and Gaston Browne, Prime Minister of Antigua and Barbuda. The opening remarks for the event were delivered by Dr Keith Rowley.
These are the key decision makers and one thing they ought to have taken away from that forum is the advice from the leading businessman.
When you look at it each Caribbean country, has had a different path to the challenges.
Trinidad and Tobago’s setbacks are rooted in the collapsing price for oil, and a reluctance to diversify the energy-based economy. Barbados has structural issues, a one sector dominated economy, and declining government revenues. As such it has high debt, rising taxation, and a high fiscal deficit (things Trinidad and Tobago does not have. The challenges for Jamaica with an economy that is more diversified when compared to the others in the region.
Through the University of the West Indies and similar institutions for higher learning outside the region, the Caribbean has amassed a pool of human resources who are quite familiar with their countries’ economies, very aware of how economies reached where they are and would know exactly what is required to fix the problems.
They can assess what has gone wrong and then try to find solutions without counting on those institutions as some kind of rescuer or godfather when in actual fact they have the human resources to tackle the issues.
Economic remedies must be done or attempted by crafting policies that are suitable to individual states and their special circumstances.
Furthermore, they ought not be done for any 18-month or two year period to satisfy any agency that is looking for quick fixes when in actual fact economies require some phase in periods in order for the measures to work and with out being front loaded. This is not an attempt to criticise the IMF and the other institutions mentioned. They have their role to play, whatever their relations are with member countries, including the provision of technical assistance. Rather, this is a position for countries facing challenges to take hold of their problems and deal with them.
The IMF in particular tends to use the so-called Polak model (known after Jacques Polak). It comes with the same policies of currency adjustment, expenditure trimming, liberalization of economic sectors including the financial sector, and until recently, the heavy reliance on privatisation. There is also a lot of front loading where policies are required to fix problems in a hurry.
There is no magic about these policies assuming they are what is required to fix the issues confronting individual Caribbean economies. Their response to the issues is that policies must also be paced and not undertaken in a hurry that would threaten growth, caused social dislocations and all the other impacts that are associated with IMF prescriptions.
Warner added that for the region to come out of its economic conundrum territories need to expand their purview to include Latin American neighbours, develop a more “collectively evolved” approach to leadership, strengthen and integrate governance and institutions and become more efficient.
He noted that overcoming the regional challenges was not only important for the present but for the future and those who would inevitably have to take up the mantle of leadership in the region.
So Caribbean countries, get on with it.