Why Caribbean Business Needs Reform

By Paul Hay
CJ Contributor

Doing Business 2015: Going Beyond Efficiency is the 12th in the series of long-standing co-publications of the World Bank and International Financial Corporation which ranks the global competitiveness of nations annually. In this publication, 189 economies were assessed over the period 2013 to 2014.

32 of these economies are within the Latin America and Caribbean (LAC) region. LAC and South Asia “remain the two regions with the smallest share of economies implementing regulatory reforms as captured by Doing Business”. 13 of these economies are recorded as Caribbean States.

Doing Business’ Regional Profile 2015: Caribbean States records the average rank of these states as being 99, which confirms that the Caribbean continues its downward trajectory in the rankings: as the average rank was 90 in Doing Business 2014, and 85 in Doing Business 2013.

Like “Doing Business in the Caribbean: CARIFORUM needs Reform”, this article includes 3 additional states taken from Latin America which are members of CARIFORUM: namely Belize, Guyana, and Suriname. The current and previous rankings of these 16 economies are shown in the table below.

Caribbean Economies Population (Millions) Income (US $) 2013 2014 2015
Puerto Rico (US) 3.6 19,210 41 40 47
 
CARIFORUM Economies 27.7 4,702 97 101 110
           
CARIFORUM SIDS 5.4 10,128 78 84 98
Jamaica 2.7 5,220 90 94 58
Trinidad 1.3 15,760 69 66 79
Bahamas, The 0.4 23,489 77 84 97
Barbados 0.3 15,373 88 91 106
OECS 0.7 8,714 76 84 106
Antigua & Barbuda 0.1 12,910 63 71 89
Dominica 0.1 6,760 68 77 97
St. Lucia 0.2 7,090 53 64 100
St. Vincent & the Grenadines 0.1 6,580 75 82 103
St. Kitts & Nevis 0.1 13,330 96 101 121
Grenada 0.1 7,110 100 107 126
CARIFORUM Non-SIDS 22.3 3,388 135 135 133
Dominican Republic 10.4 5,620 116 117 84
Belize 0.3 4,660 105 106 118
Guyana 0.8 3,410 114 115 123
Suriname 0.5 9,260 164 161 162
Haiti 10.3 810 174 177 180

 

Only Jamaica and the Dominican Republic improved in rank for the year under assessment. Even Puerto Rico – the only non-CARIFORUM state – fell in the rankings, but remains the highest ranked economy within the Caribbean. Trinidad and Tobago also fell in rank, but remains third highest in the region.

Puerto Rico ranked 5th in LAC, Jamaica 7th, Trinidad and Tobago 9th, and the Dominican Republic 12th. In “Jamaica takes the Leap in Doing Business Indicators: 5 lessons for the Wider Caribbean”, author Navita Anganu-Ramroop laments that:

Not all countries are bothered by the rankings, and therefore not all countries make a concerted effort to change and attempt to improve same, failing to realize that the competitiveness of nations are equally important and necessary for the competitiveness of firms operating within the country”.

The above table also records current and previous average ranks for CARIFORUM states, and the downward trajectory in ranking is again evident. This fall in rank is predominantly the result of so few “economies implementing regulatory reforms as captured by Doing Business”.

This is not the case for Trinidad and Tobago, which was one of the 10 global economies that made the most reforms. Even economies that make many reforms can fall in rank: how much more those which make only a few. The world simply will not stand still for these economies to catch up.

Besides Puerto Rico, the table records the average ranks for 10 other small island developing states (SIDS) in CARIFORUM, such as Trinidad and Tobago, and 5 non-SIDS, such as the Dominican Republic. CARIFORUM SIDS also comprise 6 Organisation of Eastern Caribbean States (OECS).

The average rank of the OECS fell below the larger SIDS for the year. Not a single OECS economy improved in rank. In Doing Business 2014, St. Lucia was the highest ranked economy in CARIFORUM and 2nd in the Caribbean, but has now been supplanted by Jamaica.

In ‘’Doing Business in the Caribbean: CARIFORUM needs Reform”, I also mentioned that the CARIFORUM non-SIDS – Dominican Republic, Haiti, and Suriname – had the three lowest ranks in the Caribbean, but the Dominican Republic’s Economy Ministry had started a “Competitiveness Project”.

Dominican Republic’s improvement in rank from 117 to 84 makes it the 4th highest ranked economy in the Caribbean, and 3rd in CARIFORUM. It is solely responsible for the improvement in average rank for CARIFORUM non-SIDS in Going Business 2015.

Although a regional effort at capacity building under CARIFORUM had been proposed, it was stated in “Caribbean Business in 2014“ that “international assistance may also be required for non-SIDS” to address capacity building. Obviously, this had significant benefits for the Dominican Republic.

In that article, it was further stated that there was a problem dealing with non-SIDS as a unit. “Their present amorphous nature especially with regard to language and institutions makes this difficult. Probably when other states with like backgrounds join CARIFORUM, this may be resolved”.

In hindsight, this statement is unfortunate. It would require non-SIDS to forego regional assistance until CARIFORUM membership improved. It completely ignored that states, like the Dominican Republic, could immediately benefit from involvement in a wider Caribbean regional body.

From Doing Business’ Regional Profile 2015: Latin America and the Caribbean (LAC), the average rank for LAC is 100. However, this data-set includes economies of the Caribbean States. Without them, the average rank for Latin America alone falls to approximately 101.

This is slightly below the average rank for the Caribbean in Doing Business’ Regional Profile 2015: Caribbean States. But without Puerto Rico, the average rank for CARIFORUM economies (less the 3 Latin American States) is 103: slightly below the average rank of Latin America.

Again in ‘’Doing Business in the Caribbean: CARIFORUM needs Reform”, I proposed using the Asia-Pacific Economic Cooperation (APEC) as a model for CARIFORUM to address the falling performance in “Doing Business”. But, this could also be implemented by a wider Caribbean regional body.

3 Latin American nations are members of APEC: namely, Peru, Mexico, and Chile. These economies ranked 35, 39, and 41 respectively in Doing Business 2015, which is superior to the Caribbean economies: though Mexico is located in the Greater Caribbean.

LAC has a number of regional groupings that could undertake the reform needed in “Doing Business”. However, the Association of Caribbean States (ACS) stands out, primarily because it is focused on the Caribbean Basin.

According to their website, the convention establishing the ACS “was signed on 24 July 1994 in Cartagena de Indias, Columbia, with the aim of promoting consultation, cooperation and concerted action among all the countries of the Caribbean”.

One of their concerns is “Trade and Economic External Relations. The ACS provides a framework for the dialogue and activity necessary to further advance economic integration and intra-regional trade and investment, thereby improving the economic competitiveness of the Greater Caribbean region”.

15 of its 25 member states are CARIFORUM members. Cuba is one other member, and 8 Caribbean Overseas Territories are associate members. Neither is ranked in “Doing Business”. But, ACS member states Columbia and Mexico are ranked 1st and 3rd respectively in LAC.

Considering that other member states Panama, Guatemala and Costa Rica are ranked 6th, 8th and 11th respectively in LAC, the Greater Caribbean has 9 of the top 12 highest ranked economies in LAC: 8 being ACS member states, and 3 CARIFORUM member states.

Regrettably, ACS member states also comprise 3 of the lowest ranked economies in LAC: namely Suriname, Haiti and Venezuela, which have ranks of 162, 180 and 184 respectively. So, the largest discrepancy in ranks within LAC also occurs in the Greater Caribbean.

With the widening of the Panama Canal and construction of a second canal in Nicaragua, a significant increase in trade and investment can be expected in the Caribbean Basin. So, improving competitiveness of local firms is imperative and this through the improved competiveness of Greater Caribbean states.

LAC is one of the regions “with the smallest share of economies implementing regulatory reforms as captured by Doing Business” and the Greater Caribbean not only has the most capable states to effect this reform, but also the most deserving of states for reform.

The indifference to reform should not be allowed to further deteriorate performance in “Doing Business”. CARIFORUM cannot address reform of its non-SIDS member states, and these states cannot reasonably be expected to await capacity building within CARIFORUM itself.

ACS seems to be the regional body more able to facilitate this reform in the shortest order, and time really is of the essence if the Greater Caribbean is to capitalize on expected benefits from increased investment and trade within the Basin.

Does anyone care that the Greater Caribbean needs reform? Is anyone willing to spearhead this reform? It is hoped someone will take up this mantle and run with it. It is of no comfort that greater trade is expected in the Greater Caribbean if its economies are ill prepared to benefit from it.

Paul Hay is the founder and manager of Paul Hay Capital Projects.

 

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