CDB president pleads for business-friendly reforms to drive growth
President of the Caribbean Development Bank (CDB), Dr William Warren Smith, says a competitive and resilient private sector-driven economy could position the region and its people to realise the vision of a Caribbean that is peaceful, just, inclusive, resilient and without abject poverty.
To make this vision a reality, he said, regional countries would need to adapt an appropriate suite of macroeconomic and business-friendly reforms, and align the education system to the needs of the productive sector.
Smith also urged action in climate-proofing critical social and economic infrastructure against natural hazards, diversifying the energy mix, modernising traditional sectors such as agriculture, and developing targeted social safety nets for the most vulnerable.
The success of other countries within our own hemisphere can be a reliable beacon, said Smith.
"We can also find hope in the efforts of small countries, like Grenada and St Kitts-Nevis, which, after being ravaged by natural disasters, and the resulting accumulation of large sovereign debts, have taken the bitter medicine; pursued the right policies; and are now experiencing better outcomes," the development banker said while addressing the 46th annual CDB Board of Governors meeting in Montego Bay at midweek
"We can also take encouragement from the green shoots now beginning to appear, right here in Jamaica. After more than 40 years of disappointing economic and social development; and after so many years of failing to capitalise on its vast endowment of natural and human capacity, there appears to be good reason to begin to exhale."
Smith reminded delegates that Jamaica had endured four years of "punishing, but impressive economic and structural reforms, requiring huge sacrifices by its people" and now it appears to be wrestling to the ground "the twin monsters of sovereign indebtedness and fiscal unsustainability that have bedeviled it for much of its years as a sovereign nation".
He said that many of the reforms outlined in Jamaica are geared at improving the business climate.
"Private investment is now beginning to increase, nowhere more evident than in the vital tourism and renewable energy sectors, but encouragingly also, in business process outsourcing and the local manufacturing sectors. "The ultimate success of the Jamaica project can only serve as a symbol of hope and encouragement for the rest of our region that the vision ... is anything but the impossible dream."
In his address, Smith said the Caribbean's economic fortunes are declining; that the region's per capita growth rate has fallen from 3.9 per cent in the 1970s to 1.9 per cent in the 1990s.
"As the global economy nosedived into recession in 2008, the slippage continued; and Caribbean economies remained weak, even after global recovery commenced," Smith said, noting that high debt, rising unemployment, especially youth unemployment, and widening budget deficits became priority concerns for Caribbean policymakers.
Some of the countries of the region continue to be ranked among the world's most highly indebted, he said, while noting that at the end of 2015, four Caribbean BMCs - borrowing member countries - had debt in excess of 100 per cent of GDP.
Smith said that a comparison of CDB's BMCs to other groupings suggests that non-Caribbean small island developing states fared much better than they did during the global recession.
He said between 2006 and 2015, Caribbean growth rates averaged 1.5 per cent, compared with 3.4 per cent for other small island states.
"Small size, then, does not appear to provide a robust explanation for the Caribbean's relatively low growth performance. Arguably, as a region, we have made progress; but we have fallen substantially short of realising our true potential," said Smith.
Pursuit of strategies
He told the meeting that the journey to greater prosperity must begin with the pursuit of strategies that promote higher, more predictable and more sustainable rates of economic growth.
It is estimated that Caribbean countries, principally the larger ones, will need to make the shift from current incremental rates of growth of 1.2 per cent to transformational rates of at least five to seven per cent per annum in order to create the basis for ending abject poverty by 2030.
Given the prevailing high levels of inequality, the more aggressive growth rates will also need to be accompanied by distributional policies that spread wealth more equitably, reinforced by an enlightened and efficient social policy which targets the most vulnerable in society, mainly women and children, said Smith.
He adds that the region must begin to appreciate that a dynamic private sector driving economic growth is a distinguishing feature of economies which have been successfully transformed.
"Perhaps less well understood is that, in this paradigm, the state does not wither away. Rather it assumes, among other things, the role of enabler by investing in growth-inducing infrastructure which is climate-proofed; retrofitting, over time, older infrastructure to make it climate-resilient; achieving fiscal and debt-sustainability in order to build private-sector confidence; and creating a streamlined governance and regulatory framework to facilitate business activity," he said.
"Once macroeconomic stability is achieved it has to be sustained. And business reforms need to be relentlessly pursued, taking cognisance of emerging new technologies and the changing needs of business."