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BY
ASHA JAVEED
Sugarcane, bananas and tourism: the traditional mainstays
of the Caribbean economy.
In the last five years, sugar cultivation has significantly
declined. It is now produced mainly for niche markets.
Loss of preferential rates to the European Union markets
has cut banana production.
And tourism?
While it remains the lifeblood of the Caribbean, it has
become increasingly challenging to market sun, sea and sand.
The onus is on Caribbean economies to diversify to compete
in a globalised world but, according to a study by the United
Nations Economic commission for Latin America and the Caribbean
(Eclac), little has been done by respective Governments
to bring them up to speed.
Where China and India have managed to transform their countries
to become IT-savvy, the study found that the Caribbean lags
behind in deploying and capitalising in information communication
technologies (ICT).
The liberalisation of the Caribbean’s mobile telecommunications
market is just one step. Broadband access is another. Yet
having options in mobile communication just means more “talk
time” while Internet usage is primarily for entertainment.
Little Internet commerce takes place except for government
commissioned Web sites which are being used to apply for
official documents, as is the case in Barbados.
Small and medium-sized enterprises (SMEs) have little Internet
penetration.
And this is where Neil Pierre, director of the subregional
headquarters for the Caribbean of Eclac, believes Caribbean
governments should focus.
“The
future of the Caribbean is not bananas and sugar. It’s
not really in tourism. The future is really in value added
products, knowledge-based products and the right policy
environment for innovation. Those are the three main courses
to determine the future of Caribbean development,”
he told the Business Guardian in an interview last Friday.
Commenting on mobile liberalisation, he noted that while
it presents a major opportunity, “the policy environments
of the Caribbean is still not right in promoting the use
of information and communication technology for development.
“We
are still not looking at fixing the policy environment to
be able to capitalise on the potential.”
To emphasise this point, Pierre noted that while there is
competition for Internet Service Providers (ISP), there
is still a monopoly with landline services.
“We
had an experience where it was a dogfight to introduce a
new carrier in cellular service so consumers are not getting
the full benefits of an open competition.”
Policy aside, there is no clear strategy of how ICT can
be used to contribute to development in the Caribbean, he
said.
“We
continue to be complacent—policymakers, consumers and
private sector—in receiving based on the traditional
modes of transaction. Consumers continue to receive so they
don’t really agitate. Very few people are coming together
to strategise about the potential benefits of this new resource
as an economic and social good. It’s beginning to happen
but I am getting frustrated by the pace at which it is happening.”
Hazel
Brown, left, Phillipa Forde, and Neil Pierre, director of
the subregional headquarters for the Caribbean of Eclac.
Photo: Sean Nero
Caribbean’s
Catch 22
No
tourism without debt
Transforming Caribbean’s economies should start with
reducing their debt level.
Pierre noted that while the Caribbean experienced growth
from 2005-2007, it also incurred a high level of debt.
“That
is going to have long-term and immediate effects.”
He noted that debt servicing as a percentage of Gross Domestic
Product (GDP) for most countries in the Organisation of
Eastern Caribbean States (OECS) is extremely high.
In St Kitts, debt is 183 per cent of GDP.
In Guyana, it is 109 per cent.
In Jamaica, it is 135 per cent.
“This
puts most Caribbean countries among the highest indebted
countries in the world. That’s a very unsustainable
situation.”
A number of factors have contributed to this:
1. The issue of the debt overhang: an accumulation of debt
over many years.
2. Rapid expenditures in expansion of public spending in
infrastructure development
3. It is also a factor of reduced terms of trade and the
loss of preferential access to European markets.
4. PetroCaribe facility: the rising oil prices has a major
impact on government balances and PetroCaribe came in as
a significant boost to a number of countries especially
the OECS and Jamaica. PetroCaribe is an immediate benefit
for those countries but it defers the payment and increases
the level of indebtedness of the beneficiary country.
Pierre’s suggestion to get out of this situation is
to tighten government spending which will involve policies
to encourage more private investment into the economy.
But can tourism-dependent economies afford to do this?
Pierre acknowledged that this was a double-edged sword.
“The
investment is not going into the infrastructural part which
is telecommunications, harbours and that sort of thing.
What may have to happen is the government has to make a
way for private sector involvement which is not something
uncommon to the Caribbean.”
Another way is to improve the efficiency of revenue collection
which should put government balances in a healthy position,
he said.
“There
is a lot more that needs to be done. On the other hand there
has been a fall-out. Trade is a major component of economic
activity or external trade for most Caribbean countries.
What that means is finding alternative sources of revenue
for public sector expenditure.”
Diversification?
“For
it to happen, much more will have to be done in terms of
innovation. The discussion has to go beyond a set of intellectual
debates into hard investment in scientific investment and
research.”
Caribbean’s Catch 22
The Caribbean is in a Catch 22 situation: to attract tourists
it has to invest in infrastructure and service yet, to do
so, it incurs debt.
“We’ve
put ourselves in this situation presently. The high levels
of indebtedness and debt service requirement means we don’t
have the room to manoeuvre in research and development.
But we have to take action. We incur a lot of debt to invest
in tourism expansion and infrastructure.”
In most cases, he argued, the Caribbean does not have a
forward-looking development strategy.
“We
are not seeing down the horizon with what is coming up with
global competitiveness, what are the new niche markets and
relating that up to our comparative advantages. To my mind,
the comparative advantage is not sun, sand and sea. It’s
our human resource asset.”
Governments should be looking to capitalise on its literacy
level by investing resources to develop universal capacity
to fuel the types of research and innovation necessary to
be able to compete in the world.
“And
that is where I believe the strategy is short-sighted in
the sense that we are really not forward looking enough.
We continue to think that our primary commodity is an asset
which will take us into the future. But those primary assets,
especially tourism, are on the decline because of climate
change and global warming. They are threatened by increasing
numbers of hurricanes and flooding which are natural occurrences.
Yet we continue to feel that that is where we should be
putting most of our investment.”
Pierre acknowledged that tourism is important for employment
and income generation but, at the same time, a strategy
should be developed for capitalising on the human assets
that are available.
Climate change
Caribbean economies are most vulnerable to the vagaries
of the weather and their dependence on tourism has made
them fragile. Storms are frequent and severe.
While 2007 saw fewer hurricanes, there was evidence that
wind speeds were stronger and the level of destruction greater.
“If
we go back to Grenada and Ivan and the level of destruction
that the hurricane caused. That is also a natural factor
in the evolution of economies: the more you develop, the
higher the risk, the value of loss to hurricanes. The fundamental
issue is that the storms are getting fiercer. Destruction
levels are higher and more intense and in many cases more
frequent. We are going to face major consequences because
of climate change just in the form of natural disasters.”
How does it affect tourism?
Higher temperatures have resulted in about 80 per cent of
corals being bleached in Tobago.
“Corals
are important in the ecology and in regenerating beaches
through the production of sand, etc. When you lose that,
you not only lose an important ecological asset, you lose
an important economic asset in tourism.
“While
evidence is not yet available to show any direct relationship
between climate change and human well being, in many other
countries there is evidence to show increase in cancer and
other types of cancer directly related to ultraviolet rays.”
Another impact of climate change is the issue of food security
and agriculture.
“We
have moved out of agriculture for a whole number of reasons.
One of the things that impedes our efforts for food security
is the unavailability of adequate land in most countries.
“In
small islands, the scarcity of land is a factor to produce
agriculture on a large scale. With the exception of the
larger islands like Guyana, Belize, T&T, to a certain
extent, scale is a factor. We don’t have the advantage
of scale in most Caribbean countries.”
There has been little investment in the types of agricultural
systems—such as the use of greenhouses—which would
help to compensate for scale and limited land size.
“Very
little of that has been tried in the Caribbean so we continue
to focus on the traditional forms of agriculture. In a global
context in which agriculture has moved on beyond that and
is benefiting from scientific and technological innovation,
we are way behind.”
Investment
is not going into the
infrastructural part which is
telecommunications, harbours
and that sort of thing…
government has to make a way
for private sector involvement
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