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Monday 19 November 2018
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Cheaper travel can help

Crises bind the Caribbean

Kiran Mathur Mohammed

kmmpub@gmail.com

This Divali, the thousands of deyas lit in the aftermath of the floods were a testament to our resilience and spirit of solidarity.

Trust is the foundation of societies, and of growth. And trust is built and earned gradually by little gestures. The people of Dominica have lost everything time and again. Their prime minister’s roof was blown off. Yet, they were among the first to reach out to offer to lend a hand.

There has been an outpouring of support from across the region. We are a proud people. But we have shown that accepting support demonstrates true strength.

Small island states are by necessity open economies. On our own, we are not big enough to develop self-sustaining economies of scale. This makes us more vulnerable to global economic shocks to prices or demand. Capital outflows can be swift. Caribbean academics like Winston Dookeran, Lloyd Best and Norman Girvan have been at the forefront of this research for many years.

The world is changing more rapidly than ever. Yuval Hariri has written about this in his latest book, 21 Lessons for the 21st Century. He has argued that international co-operation is the only way to address shocks from climate change, artificial intelligence, and biotechnology, among other things.

We will be the first to be hit by climate change and should be the loudest voice for adaptation. The Netherlands is sharing the “low countries”’ flooding expertise with us. This is laudable, and the conversation should become two-way. Our region has learned lessons on disaster resilience that we can share with the rest of world.

Yet before that, a first step is to come together and share more within our region. TT could benefit from the hard-won expertise of other Caribbean islands, while they could benefit from our resources and expertise from our world-class energy sector.

Of course, forging deeper diplomatic relationships is a long process. But what could have a more immediate impact?

We can reduce airline taxes and charges; and move towards less regulated “free skies.”

A recent Caribbean Development Bank (CDB) report on Air Transport Competitiveness and Connectivity has been published by Justin Ram, Damien Reeves and Ronald James. The Caribbean has some of the highest airline taxes in the world, comprising more than 35 per cent of the average ticket price. This is taking a toll. Since travellers are price-sensitive, any increase in all-in fares has a disproportionate effect on the number of travellers. Caribbean governments therefore collect less overall revenue.

Liat has estimated that travel between Caribbean islands has fallen by 30 per cent in the last ten years, while airline taxes have increased by 50 per cent. Serendipitous encounters have become less frequent, and trade more expensive. Airlines are now less able to support direct routes, compounding the problem in a downward spiral.

Then there are the regulations. Complex rules constrain the number of airlines permitted to operate, the rules of airfares, the allowable routes, and overall capacity.

There is good news. In February 2018, the Caricom Heads of Government ratified the multilateral air service agreements. These should be implemented as quickly as possible. This will increase competition, leading to lower fares and more choices.

According to the CDB: “Air transport contributes to the generation of employment and the rise in incomes… causes positive economies of scale, helping to boost a country’s competitiveness; and finally… is an important factor in the diffusion of technical knowledge.”

Increased foreign exchange is another benefit. The World Tourism Organisation has noted that most long-haul tourists go to more than one country per trip. Historically there have been many barriers to this in the Caribbean.

Alexander Girvan has continued his father Prof Norman Girvan’s work as a leading economist on regional issues. He pointed out that many islands would be complementary to each other if travel were cheaper. A tourist might go for a beach holiday in Barbados and take a day or two in Trinidad for a jungle adventure.

Trinidad is well placed to benefit from intra-regional tourism. Right now, it is often cheaper to go to Miami than to another Caribbean island. If tickets were cheaper, we could draw tourists from other islands looking for a different experience.

Reducing airline taxes and regulations would, along with infrastructure upgrades, add approximately 288,000 jobs as well as US$4.4 billion in GDP across the Caribbean over the next 18 years. More than that, we can give people the chance to share the richness of the wider Caribbean experience, marvel at our natural wonders, and maybe even fall in love a little.

Kiran Mathur Mohammed is a social entrepreneur, economist and businessman. He is a former banker, and a graduate of the University of Edinburgh.

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