The Caribbean region has for some time now had the reputation of producing anaemic, one-dimensional economies that are unable to generate meaningful economic growth that translates into social equality and equity. Only this week Forbes Magazine listed Jamaica as the fifth worse economy in the world.

Last month, accountant and financial analyst Dennis Chung undertook a competitive analysis of the Caribbean region at the ICAC Conference of Accountants which took place at the Jamaica Pegasus Hotel.

Chung said it is very important that it is understood that corporations are only going to innovate if profits are increasing and if there is greater market efficiency and that competition drives those pillars of growth. The way he sees it, if companies have more money, there will be increased levels of investments and the standard of living rises.

“What that does is lead to investments in infrastructure which in turn leads to greater spends on technology in an effort to get a better competitive edge. In Jamaica we have seen the example in the mobile telephone industry. I can recall when Cable& Wireless was the dominant player and you would have to almost take out a mortgage to buy a cell phone. I also remember how difficult it was to get a land line and ICAS number but competition has changed all that,” said Chung.

He further contended that competition is a noteworthy factor that leads to economic growth. The way he sees it, there is no need to place an over reliance upon government policies and economic gymnastics, rather all that is required is the creation of a facilitating environment that allows competition to meet the demand and so the private sector grows.

” A look at the Global Competitiveness Report 2010/11 shows just how far Caribbean countries lag the rest of the world. The basic findings here are that institutions are vitally important. If your justice and legislative systems do not work, then a country has a serious problem. Also, attention must be paid to infrastructure. All too often you hear, ‘well we are short of funds so we cannot fix the roads, but if you don’t fix the roads it hampers the development of the economy and hampers productivity. Two years ago the IDB did a report that concluded that traffic congestion is the main prohibitor of productivity in Latin America and the Caribbean.”

Efficiency enhancers

On the issue of market economics Chung said: ” I firmly believe that we are too fixated on sorting out interest rates, exchange rates and inflation when in fact the market will determine these factors. We have to let competition and the market work. The way to grow Caribbean economies is by introducing competition into the marketplace. If we feel that interest rates are too high the best way to counter that is by introducing more banks who have to compete with better products and services for the customer’s business.”

Low literacy rates and a lack of investment in education has plagued the Caribbean for generations and this Chung believes is the region’s Achilles heel. He points to the 80s where there was a growth spurt by Jamaican standards but however the foreign direct investment that comes into the country is restricted to low-skilled work.

“The reason for that is that there is a glaring absence of highly skilled workers in Jamaica who are capable of taking advantage of the likes of a Dell coming into Jamaica. It cannot be said enough that we have to focus more upon primary and secondary education that will serve as the bedrock for tertiary levels which then can serve as the workforce for industries that necessitate skilled personnel. For fifty years we have placed an inordinate importance on agriculture and tourism that requires low-skilled workers and that has not given us the growth we require. We can no longer be satisfied with just having any old job. It has to now be about the quality of the job and what it requires. That approach is vital if we are both going to attract foreign direct investment and grow the economies of the Caribbean.

“We have to adhere to the stages of economic development and look to efficiency enhancers. I have already spoken to the role of higher education and training. Then there is goods and labour market efficiency. If the market is not efficient, goods and labour will move to where it is so. In Singapore we have seen the relationship between labour and company owners and how they work in tandem to the betterment of the country. In the Caribbean we see it time and time where labour leaders hold the country to ransom for months due to disputes. Now when you see that can Caribbean countries really be serious about competing with other countries in the world?

Chung then turned his attention to the efficiency enhancer of financial market development. One of the things he sees here is low penetration due to prices. Other enhancers are technological readiness and market size. The relatively small markets of the region has had a negative effect on island economies and force them to look to exports where they are largely ill equipped to compete. Business sophistication and innovation-driven markets speak more to first-world economies and here the Caribbean still has some way to go.

“If one looks at the Caribbean countries ranked in the Global Competitiveness Report 2010/11 Barbados leads the way at 43 followed by Trinidad at 84 then comes Jamaica at 95. Dominican Republic follows at 101, then comes Guyana at 110. There are 139 countries making up the rankings. This indicates the level of uncompetitiveness within the region but more worrying is its inability over the years to make any notable improvements,” declared Chung.

Economic measurements

Jamaica has declared most vociferously that it wants to attain first-world status by 2030, that is 19 years from now. It is apparent to all that it still has a Herculean task ahead of it and that its ambitions do not match glaring realities. It may prove more prudent to focus on a few economic drivers that in turn will lead to transformational growth rather than utter unobtainable aphorisms that are politically expedient. As it presently stands there are countries in the Caribbean that are performing far better than Jamaica and regard the country as the ‘sick man of the Caribbean.

“There are some economic measurements that we can use to determine competitiveness. The first one is the current account balance. I think we focus too much on the income statement of the country (the fiscal accounts) to the detriment of the balance of payments. The truth of the matter is you have a fixed income statement this year but next year some unforeseen circumstance appreciates the balance sheet and puts the numbers out of whack.

“The other indicator is GDP growth rates. In this regard if you look at the rest of the world we are actually closer to the bottom. The only other countries that Jamaica does better than are some of those in the Middle East and North Africa. We have a long way to grow in regard to GDP growth.

“Both the current account and real GDP growth rate measures indicate competitiveness as it shows how countries perform relative to other countries in relation to global market share (trade numbers and growth in the global market). The global market is an absolute measurement and so higher trade and growth for one country usually means lower or negative growth for another country,” said Chung addressing a full conference hall.

FDI flows

The trained accountant noted that data reveals that as a region the Caribbean is not competitive in terms of world market and trade, and in fact, the Caribbean is the worst in the world. As far as foreign direct investment (FDI) flows are concerned, most of the Caribbean’s was in Trinidad which was mostly in gas and oil.

It was projected by ECLAC that FDI flows to the LAC region increased by 40 per cent to 50 per cent in 2010 over 2009. Still the region lags behind other parts of the world, although the share of FDI flows is expected to improve.Developed economies still account for the lion’s share of FDI flows and even within our sector of developing economies the growth is expected to take place in areas such as developing Asia and in South and Central America.

In 2007 Trinidad ranked 71 for FDI flows, Jamaica 85, and Dominican Republic 86 in the world (UNCTAD) and in 2010 Trinidad ranked 31 and the Dominican Republic (CIA World factbook). In 1970 the Caribbean region accounted for 3.70 per cent of the world FDI inflows and in 2009 accounted for 3.96 per cent. The Caribbean has not been seen as much more attractive as an investment option in relation to the rest of the world.

Chung concluded :”This all indicates that the world does not see the region as a competitive place to come and invest in. In summary, the low ranking in GCI, GDP,trade and FDI flows all show the Caribbean lags behind other parts of the world. Even though the region has seen growth relative to acceptable per capita GDP, this has to some extent been undermined by high debt burdens. I have always maintained that debt as an absolute is not necessarily bad. The question is what do we use that debt for?”

He further added that lack of higher value commodity exports in the region means lower earnings generally. The way he sees it, the region has failed to maximise potential from its areas of comparative advantage as a result of various factors suppressing competitiveness. Chung remains of the view that significant opportunities exist but will depend on solving the weaknesses associated with the region.