Steps to generate regional growth

Dennis Morrison, Contributor

While CARICOM countries, especially those under the thumb of the International Monetary Fund (IMF), will have to give priority to repairing their fiscal and external deficits, at the same time, their main focus must be on the steps to be taken to generate growth. There are several areas where Caribbean leaders - in government and business - can act to stimulate economic activity necessary to make up for the losses in production and jobs caused by the stabilisation measures.

They must also lay the groundwork for rapid growth to meet the development needs of the population. With all the studies and plans that have been made, it should not be difficult to identify some of the main areas (agriculture, manufacturing, tourism, and other services) and the actions to be taken. And, after all, the Caribbean has a population of more than 37 million, including Cuba and the Dominican Republic, a sufficiently significant market size to achieve economies of scale.

In the 1970s, CARICOM put together the Regional Food Plan and actually established the Caribbean Food Corporation (CFC) as the chief agency to implement the plan. It was then recognised that the region was becoming increasingly dependent on imported food because agricultural activity in individual countries was on the decline, even as world food prices were rising rapidly. The CFC mechanism had mixed results, and with the liberalisation of markets in the 1980s, the CARICOM food initiative lost momentum.

In recent times, world food prices rose to worrying levels, even causing riots in 2008, and after a brief decline during the recession, they are climbing again. This has spurred renewed interest in CARICOM about implementing a food plan. In the meantime, countries like Jamaica are becoming increasingly dependent on imported food (the bill will soon reach the US$1.0 billion mark), even though their foreign-exchange earning capacity has contracted.

Revitalisation

The CARICOM food initiative has languished because of the failure to reach agreement on how to fully activate the vast natural resources of countries like Guyana and Belize that could be the basis for production, to ensure regional self-sufficiency in a range of crops, as well as the revitalisation of export crops like sugar. Bound up in this failure is the issue of the framework that must be laid down by governments regarding access to land, tariffs, the range of crops, and subsidies to be provided. There is also the critical matter of how to spur regional and/or external private-sector participation.

Yet lessons should have been learned from Petrojam's aborted investment in growing sugar cane for ethanol production in Belize in the 1980s. And there is, as well, the reasonable success of rice production in Guyana by regional interests to supply regional markets. Right now, regional sugar producers must expand refining capacity if they are to meet rising domestic demand and to supply export markets. Can't the governments of Belize, Guyana, Haiti, and Jamaica agree on where the new refineries should be located, and collaborate in mobilising investors?

Caribbean people speak proudly of the region's tourist industry, and are convinced of its importance to economic activity. Just about any man in the street can tell of the linkages that can be developed with other industries - agriculture, manufacturing, entertainment, health, financial services, real estate, and so on. Yet, over the last many years, individual countries have not really made a big dent in integrating tourism with the rest of the economy - the import content of the industry remains extremely high.

Tourist industry

Nor have Caribbean countries cooperated so that a greater share of the inputs for the tourist industry that attracted nearly 19.5 million stopover visitors and 18.3 million cruise passengers in 2008 can be supplied by regional producers - in what is essentially their domestic market. So, for example, food supplies for the tourist industries of The Bahamas, Barbados, Antigua, and Barbuda, and, in some items, for Jamaica, could be produced in Guyana or Belize. Food requirements for the tourist industries of most regional countries are currently met from outside the region. Shouldn't the region be able to produce fruits, vegetables, spices, pork, beef, mutton, and seafood to satisfy the demands of the tourist industry?

The decline of manufacturing output in Jamaica after the liberalisation of imports has weakened the linkage of this sector to the tourist industry. This was evident in the recent massive investment in new hotels in Jamaica where local products accounted for only a small amount of the materials and supplies for the construction phase. The weakened capacity of Jamaican manufacturers was a major factor limiting the impact of the hotel investments' economic growth rates in the 2000s.

Joint production arrangements between Jamaican firms and manufacturers in Trinidad and Tobago could strengthen our capacity to supply such inputs. Imports now also make up a higher share of the operating supplies - food, chemicals, etc - for hotels. Opportunities exist for expansion of regional production to meet these demands, but price and quality standards have to be met. This raises the vital question of energy supply to regional countries, which requires urgent attention because of its impact on the competitiveness of manufacturing and other industries of the region.

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