CARICOM stagnates

Dennis Morrison, Contributor

After nearly 40 years since the establishment of CARICOM, it is time enough for the people of the region to ask aloud: apart from political solidarity, what has been accomplished in terms of its main purpose - economic development? The public comments including from leading regional politicians during last week's summit in Montego Bay point to a general disappointment that CARICOM has not produced concrete results for the region's economy. This is in spite of the elaborate process and drawn-out negotiations that were to lead eventually to the establishment of the CARICOM Single Market & Economy.

Simply put, the integration of Caribbean economies has not taken off, notwithstanding the formidable bureaucracy of the CARICOM Secretariat and the regularity of meetings of heads of government and portfolio ministers. Numerous studies and recommendations, most important of which, Time for Action by leading Caribbean experts, have also not been acted upon for over two decades. Whatever are the other reasons, it seems clear that a major stumbling block is the ineffectiveness of the decision making of CARICOM, even allowing for the notoriously bureaucratic practices of such regional organisations.

In the meantime, trade by the countries of the region is still predominantly with outside nations, and while intra-regional flow of investment capital has increased in the last 15-20 years, it is to major metropolitan centres that our investment promotion efforts are directed. Notable areas where companies in the region have forged closer business ties include tourism with leading Jamaican brands investing in several Caribbean islands. In banking and insurance, Barbadian and Trinidadian entities have taken up major ownership stakes in the Jamaican market, although it could be said that in some way, this was by default as 'gun-shy' Jamaican investors stayed on the sidelines when failed financial institutions were being divested by Financial Sector Adjustment Company. This applies also to Carib Cement, the sole producer of a critical construction material.

Until Air Jamaica's recent 'divestment' to Caribbean Airlines, CARICOM countries have done miserably in bringing together two of the key links in the regional air travel system, an essential platform on which to build regional economic integration. It took the mounting and burdensome losses and orders from the International Monetary Fund to divest Air Jamaica according to a strict timeline and not positive, economic policy objectives to force this step. This is after many years of continuous consultations and talk about the importance of air transportation to regional integration and specifically to tourism, which is the Caribbean's major economic activity. Nothing is more indicative of the failure of regional leaders in both public and private sectors to act decisively on the elements necessary for the forging of closer economic cooperation.

Fail to capitalise on resources

The Caribbean is, no doubt, limited by the factors of small populations in scattered islands that do not provide a critical mass to reap the benefits of economies of scale and scope, especially given the capital intensity of modern production in many industries. But even where regional countries possess vital natural resources that could be converted into products for export markets, they have failed to develop the mechanisms for joint ownership and production, an obvious case of which is the aluminium industry.

From my ringside seat as a project officer, I witnessed how prime ministers of Guyana, Jamaica and Trinidad & Tobago who were declared regionalists were unable to agree on the terms of cooperation that would have secured the building of a regional aluminium industry utilising our natural resources. With alumina from Guyana and Jamaica and natural gas from Trinidad & Tobago as the energy source, these countries could have attracted the technology and private equity partners needed to build and operate an aluminium smelter capacity that would supply primary metal for export as well as fabrication of semi-finished and finished products in the region. This has been done in several Middle East countries which have natural gas but no local bauxite resources.

Part of the failure is perhaps due to the statist approach to industrial development (although it worked in the East Asian Tigers) and the reluctance of regional private-sector investors to be exposed in new, large-scale industrial activity. In the main, it has been left to the state sector and/or foreign private capital to carry Jamaica's bauxite industry and with some exception this is the case in Trinidad & Tobago's energy sector. Local entrepreneurs have also not moved aggressively to take up positions in the rapidly expanding information and communications tech-nology sector after the liberalisation of markets in 2000s.

Lack of dynamism

In fact, local private-sector players thought Mossel, the Irish company that secured the first cellular licence auctioned in Jamaica, had bid too high a price for its licence and would have failed. Not only did Digicel, its operating arm, succeed beyond all expectations in Jamaica but it has spread out across the region and Central America. Local investors in the Dominican Republic have been less risk averse and have probably overtaken us as providers of telecoms-based services for external markets.

The result of the lack of dynamism in the CARICOM integration movement, inefficiency in state bureaucracies and the weak investment appetite of our regional private sector is reflected in the relatively modest growth performance of our economies. Except for Trinidad & Tobago which after six or seven consecutive years of negative growth in the late 1980s and 1990s has had a burst of robust growth, CARICOM countries are falling behind in their pace of economic expansion.

Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.