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OP-ED: 2013: A Year of Lost Opportunities for Caribbean Countries
All the countries were beset by high unemployment; there was high debt in 10 of them; decline in inclusive economic growth in 11 of them; unsustainable fiscal deficits and widening trade deficits in goods and services in all of them; and foreign exchange losses in many of them. Additionally, bank lending and private spending tightened in 11 of them causing a contraction in the private sector to which all countries had been looking to lead economic recovery in the wake of cash-strapped governments being compelled to retreat as both investor and employer.
Underlying all this in every CARICOM country there was (and is) an insistence by governments to seek only national solutions even though there is great bewilderment about what national measures could be taken to improve the economic situation. Bewilderment led to inaction as governments failed to engage meaningfully with other crucial actors in their countries, such as the opposition political parties, the trade unions, the private sector, and the Universities, to develop an agreed national plan to help take their economies out of a prolonged stagnation. Throughout 2013 there was a pervading atmosphere of “not knowing what to do”. In this climate, those governments in IMF programmes did what the IMF said they should, and so too did the governments whose circumstances brought them to the IMF’s door. But, IMF-inspired measures focus on austerity measures such as job losses and wage freezes that heighten economic contraction.
Of course, national solutions must be sought, and they would best be sought within a framework of genuine dialogue and engagement with all the important players in the country’s economic fortunes. To do this, important hurdles have to be jumped including –- and especially for Guyana where the two opposition parties command a majority in parliament –- the sincere and constructive involvement of opposition political parties.
It is dangerous for CARICOM countries to assume that their problems will be solved by the full resolution of the economic crisis in North America and European Union (EU) countries. While there is recovery in both places the proportion of wages in national income in the US and the major EU countries has declined in real terms leading to contraction in spending. For the Caribbean, this translates into fewer tourists or tourists who spend less. It has also been difficult for investors to locate money in the North American and European capital markets for investment in the Caribbean unless projects are high-yielding, such as gold mining, or they get exceedingly generous tax holidays and other concessions that may not benefit the economies in the long-run.
In this circumstance, not only are the benefits in terms of tourism and investment likely to take longer to “trickle down” to CARICOM economies, but the global economic environment is far less favourable than before the recession started in late 2008. As an example of this, China’s economy which grew at an average 9.5% for the decade 2001 to 2011 declined in 2012 to 7.8% and looks likely to be 7.6% in 2013. China’s appetite for commodities is already decreasing, pushing down prices paid to commodity-exporting countries including those in CARICOM. What is more, since loans that CARICOM governments have contracted with China are denominated in Yuan which is rising in value against the US dollar, repayments will escalate, placing a bigger burden on already dwindling government revenues.
CARICOM countries also embraced a full Economic Partnership Agreement (EPA) with the EU in 2008. A limited review of the EU-Caribbean EPA is said to be taking place now to determine whether it has delivered on its promises. It would have been wise of governments to involve all trade unions, private sector, political parties, and academia in a transparent review that fully advises the public of findings. That has not happened. But, the region should fully review the EPA, which so far, has not delivered promised market access for Caribbean goods and services, and has not realised any significant new investment. Further, the EPA will lead in all Caribbean countries to a reduction in government revenues as a consequence of the removal of tariffs on goods imported from EU countries. To replace such lost revenue, governments will have to increase taxes on their own people at a time when taxation is already burdensome.
Caribbean governments, collectively, should be calling for at least the suspension of the terms of the EPA until the countries of the region can restructure and re-align their economies collectively with national plans that are integrated with a regional integration strategy. For it remains a stark reality that none of the CARICOM countries on its own –- including those that now benefit from commodity exports –- can deliver on a sustained basis the economic benefits, physical infrastructure and social systems their people urgently need. The EU knows this reality very well, but it is most unlikely to suspend the EPA unless there is certainty that national restructuring by CARICOM States will indeed be integrated in a regional development framework.
So, while the present difficulties of CARICOM countries require national solutions that are genuinely “national”, such national solutions will not be enough; notwithstanding the unsubstantiated belief by some parochially-minded groups that their small economies can miraculously succeed and thrive on their own.
In previous commentaries I have pointed to three critical areas that require regional attention and that could have a beneficial impact on the economies of all. They are: regional food production and distribution, maritime transportation and energy production and distribution. These are regional solutions that should be addressed on a parallel track with national plans. They are not mutually exclusive.
CARICOM governments failed to grasp this reality, and 2013 became a lost opportunity. In practical terms, this means that CARICOM must go beyond occasional cooperation. The New Year must see a concerted effort to examine how regional action can help national survival. This requires a stronger institutional base for CARICOM than it now has as well as a change of mind-set and a will to act regionally. It is not enough to wait for global economic circumstances to improve; reliance on mere trickle down is a fool’s hope.
The New Year can be a year of improved prospects if CARICOM governments end the ‘pause’ they applied to economic integration in May 2011.* * *
Sanders is a Consultant, Senior Research Fellow at London University and former Caribbean Diplomat. Responses and previous commentaries: www.sirronaldsanders.com