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CCJ jurist bats for regional financial services agreement

Published:Wednesday | February 10, 2010 | 12:00 AM

A judge of the court set up by CARICOM to be its ultimate arbiter in trade disputes among them and the final appellate body for member states which so choose, is supporting the need for a financial services agreement to realise the still elusive single market and economy (CSME).

While the Revised Treaty of Chaguaramas sets out the broad policy framework for the CSME and provides the Caribbean Court of Justice (CCJ) with its trade and other economic arbitration powers, the CARICOM Financial Services Agreement (CFSA) is expected to provide specific rules for the creation of a seamless, harmonised financial services market in which all economic actors within CARICOM will be expected to abide by similar rules, standards and conditions.

Aspects of the CSME, including a monetary union for all CARICOM states, are unlikely to materialise, with many member countries having balked at or simply ignored convergence criteria. Nevertheless, a draft CFSA remains on the cards.

The draft has been making the regional consultation rounds for more than a year and information out of the Guyana-based CARICOM secretariat this week was that the document "is being finalised by the secretariat for submission to the Council for Finance and Planning (COFAP)," the grouping of finance ministers, before being formally submitted to member governments.

The next COFAP meeting is set for February 27 to March 1.

Claiming there is hope for a functional regional bond and equities market, CCJ memberJustice Rolston Nelson has pointed to the cross-listing of securities on the stock exchanges of Barbados, Jamaica and Trinidad and Tobago as an initial step.

Nascent bond market

He is contending too that a nascent regional bond market already exists and that it financed US$1.7 billion of regional corporate securities and US$743 million of bonds issued by regional governments between 1997-2005.

"Between 2005 and 2009, in the same market, non-Trinidad and Tobago government and corporate securities, to the value of US$951.7 million, were sold," Nelsonsaid in Kingston at the annual capital markets conference hosted by the Jamaica Stock Exchange.

Nelson said efforts to date to create the Caribbean Exchange Network, a trading system incorporating the three regional stock exchanges,was evidence that much more can be achievedregionally in this regard.

In keeping with the revised Treaty, CARICOM has proposed to the 12 CSME participating countries, changes at themacroeconomic policy level and at the level of the legal and financial structure to create a single financial marketplace.

Of the 15 members, Haiti, Montserrat and the Bahamas are not members of the CSME.

In addition to the CFSA, the CSME plansinclude the creation of the regional capital market, a CARICOM investment code and a regime of harmonised fiscal and investment incentives.

Much to be done

Nelson pointed to a study titled, Overview of Global and CARICOM Investment Trends, which indicates that in 2007 CARICOM members attracted US$4.7 billion in foreign direct investment and that in the same year regional investors spent US$246 million overseas.

"CARICOM is, therefore, a net importer of capital. There is thus much to be done in terms of institutional framework in achieving the goals set out in the revised treaty", the CCJ judge stated.

Nelson said the critical next steps included the creation of harmonised audit and accounting standards, and the harmonisation of company laws and securities regulations in the region.

Also required, he said, are incentives for private companies to become publicly listed and traded, the updating of trading technology withtimely access to information, the removal of impediments to cross-listing and an efficient clearing and settlement system.

"Harmonisation is necessary to prevent tax competition among member states vying for higher levels of international trade and investment with multinationals and regional conglomerates," Nelson said, pointing out that in this area, the CARICOM Double Taxation Agreement has been enacted into domestic law in most member states.

On this score, he said, remaining challenges include the harmonisation of indirect taxation such as value added, and the review of double taxation treaties affording more favourable tax treatment to non-CARICOM taxpayers.