Economic diversification needed in region

 

Economist Ian Durant has posited that instead of worrying about shocks following Britain’s exit of the European Union, the focus should be on building resilience through economic diversification.
 
The Deputy Director of Economics at the Caribbean Development Bank (CDB), while giving his comments at the ICAB conference panel discussion on “Brexit” at the Barbados Hilton recently, added, “There are a couple of things that we need to deal with if we are going to build resilience via diversification in the economy and allow us to weather shocks such as Brexit. We have to make these economies more competitive on the basis of critical and important infrastructure investment, but also ensuring that institutional and regulatory framework behind which businesses operate is friendlier and can allow businesses generally to compete with countries such as Singapore. 
 
“Brexit will have some impact on the Caribbean. Growth will be negatively affected, especially through trade and aid. Vulnerability to Brexit unmasks some key policy imperatives and the region needs to improve competitiveness…”
 
Durant pointed out, “The important lesson from Brexit is that it confirms the vulnerability of our growth to external shocks. This vulnerability evolves from export concentration, whether on tourism or commodities. We need to work out how we are going to make our economies more competitive so that they can exploit other potential sources of export. In small economies growth has to be export led … if you are going to enjoy sustained growth those exports have to be diverse, in turn diversification has to be underpinned by competitiveness. 
 
“The challenge we have is that for the most part our countries are not competitive so we are forced to exploit beaches or commodities, because we are not profitable in doing anything else. That is something we have to address, if we look at reports such as the World Bank’s Doing Business report the average ranking of the region out of 189 counties is 115…” 
 
The economist suggested, “Some of the policy priorities that we need to focus on to build resilience and sustain growth via diversification, one of the critical things to do, is to reduce taxes. Taxes impact significantly on profitability. We cannot talk about reducing taxes without first reducing expenditure … what should the governments be doing? That is one of the areas that should be debated at the national level in all of our countries. We [also] need to look at insolvency legislation so that entrepreneurship and creativity are not punished by the legal system. It certainly doesn’t inspire confidence when a breach of contract takes seven years to go through the court.” (NB)

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