Atlantic Connection

1. Atlantic Connection 14th -16th July 2010

2. Presenter /Chairperson Dr. Raphael C. Stephen

3. If the recession is over why is the Caribbean still suffering

4. Current Performance of the Economies • The Caribbean comprised of a small number income developing countries ranked by the world bank and IMF various categories based on criteria's ; • The region faces a significant number of challenges heavily burdened with the substantial public debt, low tax revenues, and diminishing borrowing capacity; • Growth decline by 2.6 % in 2009 and shall further contract by 2% in 2010; • Exception of Guyana and Belize all the other jurisdiction contracted: Guyana had a modest 3.1% growth • Exogenous shock has pushed St. Lucia, SVG, DA, SKN for needed resources, • Jamaica economy projected to grow by 0.5% 2010/11, there was a 2.7% decline in 2009 & 2.3% 2009/2010. Govt finances has detorriated due to the global shock; • T&T declined by 3.4 % in 2008 proj 0.5% in 2009 with a further 2.0% in 2010; • Barbados had lower levels of tax revenue, rising fiscal deficit and increasing public debt: the crisis cost Barbados 10% over the last decade ; • Antigua and Barbuda had reduce economic activity & a sharp reduction in revenue they are currently in discussion with the IMF US59M; • The ECCU a contraction of 7.4 % in 2009 compounded by the collapse of BA & CLICO: growth will further contract by 2.4%; • The above evidence indicates that tax revenues are constrain or deteriorated in all the jurisdiction: policies must be formulated specifically to the unique structural, institutional characteristic and economic circumstances of these SIS

5. Why is the Caribbean still suffering • Need to break the conflict trap that affect development in the region: • High dependency on aids that feeds on corruption: lock in the ethnic trends: dependency on the mother country: polarization of the structure and system • The Dutch disease damage the growth process by crowding out the traditional intensive labour sector • Deeply rooted in poverty from 11.3% in 1990 to 9.5 % 2001 (PPP) the inequality trap • Lags by 1% in meeting MDG goals by 2015 • Providing opportunities • Need to improve living standards, through access to education, health, infrastructure, and financial services : this contribute to economic growth • Natural resource trap not properly structured & developed this leads to internal conflict eg oil exploration and land tenure • Policy instruments are extremely poor and needs reform • The region is classified in the bottom billions • The role of growth in development is understated • Poor regional agreement not implemented • The economies are neglected by the G20 policies

6. Root Causes/ Challenges • Mapping the global future • The US National Intelligence Council by 2020 predict the rise of Asia: the Caribbean was never mention • Small Democracies in the region are weak, unresponsive , economic reforms have failed to generate substantial public finance (pension funds) with glaring income disparities • West minister constitutional style government • Authoritarian regimes • weak democratic institutions, poor governance & rule of law • Low building state capacity, accountability. representation and sound policy options not fully effective • Process of democratic consolidation is long and requires strengthening • Incapable of implementing far reaching reforms in the fiscal sector • Political polarization & open conflict • growing international drug problem • Standard living decline in the wake of current financial and banking crisis • low levels of transparency • Inefficient and ineffective administrations • Highly competitive and globalized markets • Current social security system has failed • Structure of taxes has failed to transfer benefits to the poor • With exemptions pension funds revenue and taxation are low and distortionary with social transfer going mainly to the rich • Business cycles is not synchronized to enhanced policies, foster and to labour mobility

7. Reducing the roadblocks of bureaucratic /operational efficiencies • An effective muti faceted strategy • Sustained growth and development to reduce poverty • Integrated strategies this encompasses economic and social policies • Any strategy must prioritize and define the appropriate realistic set & sequence of policies into account fiscal, financial, administrative and political constraints • Monitoring and evaluation systems eg performances and financial indicators to be fed into the budgetary process • Result oriented culture, facilitate accountability, mechanism for transparency • Efficient use of public resources • Level the playing field to improve economic prospects • Macroeconomic stabilization • Structural adjustment policies in all the island states • Opening of protected economies to international trade • Decline in the cycle of stagflation that leads to currency & sovereign debt crisis, • Develop a framework for managing financial and banking crisis: prudential regulation & vigorous supervision • empower regulators to deal with bank liquidity & solvency problems in a cost effective manner • Keep deficits in check: increasing debt to GDP ratios thus amend monetary policy

8. Economic integration • NAFTA/CAFTA the free trade area central American Countries now integrated with CARICOM/ OECS/ Caribbean basin imitative • Justification for regional integration (SIS) is a strategy to maximize economies of scale so they can participate in a globalized economy • SIS solidify, share an enjoy a common history & language • Renewed efforts led to economic growth, macroeconomic stability and reducing poverty • Prone to economic shocks • Reform agenda is hampered by a polarized political landscape • Short election cycles • Minority government • Entrenched interest groups • numerous governance problems • Consensus among the countries for closer integration to take advantage of the untapped potential • the financial system is integrated under the central banking institutions ECCB • Policy coordination at the regional level is still at its infancy with a central monetary and exchange rate policy implemented by the central bank (ECCB) • Adoption of common banking and financial framework: reduction of risk: exchange of information: cross border financial transaction • Independent states implement unique fiscal policy monitored by the WB & IMF and other international and regional agencies • The (SIS) is looking to increase investment flows, financial & government services strengthen the institutional framework including property rights

9. Proposed solution • Translating opportunities into incomes • Productive employment • Improvement in the formal sector (reduce the shadow economy) • Regulatory Framework to pay social security contributions • Equality of opportunities • Reform in legislation and tax policy • Enhanced public service • Inclusive social protective system • No serious political pressure to improve the quality of the services • Increase spill over • Improve economic policies • Improve international access • Promote international and regional integration • Encourage remittances • Create a transparent and investor friendly environment for resource prospecting • Rural development • Attract aid as an incentive: ireform, reinforcement, marginalization use it as part of the solution • Increased private capital flows

10. WHAT NEEDS TO BE DONE • Break the conflict trap: deliver key basic service through an independent service authority model: competing companies provides services on the ground while the authorities finances and scrutinizes their performances: this needs exceptional substantial supervision to ensure success and guard against corruption • Break the natural resource: natural resources discovery makes a country prone to internal conflict EG potential for off shore oil exploration in Gda; T&T; Venz. • Sound sovereign laws and international norms and agreement • Extractive industries transparency initiative • Effective scrutiny • Break the reform impasse: reform must come from within ; change will be oppose by lies and crooks; reformers have truth on the side but not a powerful tool; • Intelligent aid requires a substantial reorganization of how technical assistance is delivered • Reform of governance and policies encourages new export initiates • International charters provides reformers with the instrument to be rate poor governance • Breaking out of limbo: needs a big push for export and a transformation with the aid agencies • introduction of technology into the reform process • An Investment charter to encourages private investment • Rapid growth requires a massive increase in private investment (FDI) • Export diversification needs investment opportunities (sound trade policy) • Prioritize long term social objectives • Intergovernmental coordination • Trade policy must foster development • Force policy coordination at all levels of government7