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Friday 22 March 2019
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Island arithmetic

Kiran Mathur Mohammed

kmmpub@gmail.com

Our imports are expensive. And because we import more than we export, it is hard to obtain foreign exchange. Outside of oil and gas, growing exporters are rare.

Part of the problem is that many industries face a shortage of the types of workers they need.

It is therefore difficult to compete or to achieve scale – particularly since many value-adding exporters require expensive imported inputs to make their final product.

The Caribbean single market is needed. Economists, business leaders and politicians have been calling for action on the single market for years. But momentum is finally building.

Last week in St Ann’s, the prime ministers of TT, Jamaica and Barbados and their counterparts emphatically supported free movement, and freer trade (if in a slightly more guarded tone). As a sign of their commitment, they have taken immediate steps: granting skills certificates to more service workers.

The single market is at an inflection point. As we navigate this moment, how can we sidestep the pitfalls that have claimed our greatest post-independence leaders?

The first challenge is trade. Could cheaper agricultural goods squash our nascent agricultural industry? No. Demand outstrips supply for local agricultural goods. In cocoa, demand is not the greatest constraint – it is labour.

Other islands are concerned that TT’s relatively strong manufacturers will crush their manufacturing. But this is not a zero-sum game, where one country’s gain is another’s loss. Caribbean manufactured products can substitute for more expensive international imports along the value chain. It is not the case that one country’s exports will cannibalise another’s products.

A Caribbean clearing house (set up by the CDB for example) could make it easier to do business in regional currencies – at least until regional trade increases enough that we no longer need to buy US dollars in order to obtain regional currencies like the EC dollar.

Our Caribbean partners have raised the concern that petrol and electricity subsidies give local firms an unfair advantage. It is true that as a resource-rich country, we benefit from cheap energy. Yet this is balanced by the higher exchange rates driven (and more recently propped up) by foreign-exchange inflows from energy exports. This makes other local exports more expensive than they otherwise would be.

More trade does mean that some islands will become more specialised and therefore more vulnerable to shocks from shifts in prices, external recessions or natural disasters. We can therefore add to a collective sovereign wealth fund to buffer against these. It is not just moral, it in our own interest: they are a ready market for our products.

The next challenge is the free movement of labour. World Bank research shows that far from being a drain on public welfare programmes or replacing local workers, immigrants demand goods and services. Their economic benefit is net-positive.

That said, the decisions to be made are political. The economics are an aside. These discussions have played out in boardrooms for years without traction. The West Indian Federation was inherently unstable: smaller islands anchored by two large rivals. One from ten leaves nought, etc.

What is different this time?

Guyana.

The rise of Guyana as an economic power can provide the balance of power necessary to ensure regional stability. This is assuming that Guyana can be convinced of the value of regional integration – and learn lessons from TT’s past.

More stability will benefit our country in the long run. We can work together whilst defending our national interests. To bolster Caricom, we can invite the Dominican Republic, the French and Dutch Antilles and French Guiana. This will not reduce our influence – but retain it within a stronger framework.

Winston Dookeran’s experience from the negotiating table is instructive: “The issue is really about adopting a convergence frame for Caribbean integration…the PM is right that a re-evaluation of the integration process is needed.”

The private sector has already started. Bermudez and Associated Brands have put roots down in Jamaica. NCBJ’s offer to acquire Guardian Holdings represents a major commitment to TT’s future. The Agostini group’s tie-up with Goddard in Barbados is another example. Goddard accesses the TT market whilst Agostini’s reaches the Eastern Caribbean.

Anyone who meets a fellow Caribbean national in a foreign country immediately feels a warmth and generosity that conjures home. We must support our leaders as they remove tariffs and barriers to movement in our region. Call up your Jamaican, Guyanese or Bajan friends and invite them to visit. They might be surprised to discover they are coming home.

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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