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Good move by IMF to go after red tape

Sunday, March 23, 2014    

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THE extent to which foreign direct investment (FDI) takes place in the Caribbean is a function of both the motivation and drivers of foreign investors and the receptivity of the Caribbean.

The easier and more attractive it is for foreign firms to make investments, the more likely it is that the Caribbean will receive such flows. Since some of the investment opportunities in the Caribbean are not unique to the region, the Caribbean countries are in competition with other destinations.

It is imperative that governments in the region minimise the bureaucratic inconveniences and bear in mind that foreign firms and their executives are new to foreign investment and therefore still learning.

This applies equally to local investors who complain ad nauseam about the hindrance caused by red tape. It's a constant theme of our own principal, Mr Gordon 'Butch' Stewart. In this regard, we are happy that the International Monetary Fund has included the issue in its current pact with the Government.

Foreign and local enterprises alike will respond to or be discouraged by the business environment in individual Caribbean countries. Capital and entrepreneurs are like water -- they flow where it is easiest to establish and operate businesses. The 2014 Doing Business report produced by the World Bank and the International Finance Corporation indicates that most Caribbean governments could do more to make it easier for businesses to operate.

The Doing Business Index tracks changes in 10 areas including: starting a business; dealing with construction permits; registering property, access to credit; paying taxes, trading across borders and enforcement of contracts.

Of the 189 countries from which data was collected, the easiest Caribbean country in which to do business is St Lucia at 64, down from 52 in 2008, and the most difficult is Haiti at 177. Of the countries that have relations with China, Trinidad and Tobago is at 66, Jamaica at 94 (down from 88), Barbados is at 91 and Guyana at 115.

We should note that there are over 100 countries where it is easier to for Chinese firms to do business.

There is room for improvement in regional countries, especially since many other developing countries that are natural competition for FDI are ranked higher up the scale. A recent study by the Inter-American Development Bank reinforced the findings about the difficulty in doing business in the Caribbean.

When it comes to the ease of doing business, compared with the rest of the world, the Caribbean could be doing much better to encourage the local and foreign investors. The comparatively less competitive business environment retards local economic activity and it makes our economies less attractive in the global economy for investment.

The Caribbean has to compete with other economies across the globe to retain its existing business and to attract investment to establish new businesses, expand existing ones and improve international competitiveness. Putting in place the institutional and policy components of a modern globally integrated business environment is not rocket science.

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