2005: Ringing in the Caribbean Single Market?
CARICOM countries have to be open to investment, mergers and acquisitions from firms in other CARICOM countries.
By Sir Ronald Sanders
Guyana Chronicle
January 3, 2005
(The writer is a former Caribbean diplomat who publishes widely on the small states in the international community)
CARIBBEAN Community (CARICOM) countries should all bring the Caribbean Single Market into being by the end of 2005 in the interest of their nations and the region as whole.
The slippage from a start date in January 2005 has already delayed economic progress.
It should be recalled that, except for the Bahamas, all the governments of CARICOM countries had committed themselves in 2002, to a start date of 1st January 2005 for the ‘Caribbean Single Market and Economy’ (CSME).
The shorthand description is misleading in two aspects.
It is only a Single Market whose establishment is being pursued this year; a single economy, which would include a common currency amongst other things, is a long way off.
Also, it is not all the 15 countries of CARICOM that are pursuing a Single Market; the Bahamas, as mentioned earlier, had indicated its lack of interest from the outset, and, given the present poor level of relations between Haiti and CARICOM, Haiti will obviously not be involved in these economic arrangements.
The third misleading element of the publicity that accompanies the Single Market is that it will include the free movement of labour. This is not so. Governments have only agreed to the free movement of special categories of labour.
The absence of the free movement of labour is perhaps the biggest flaw in the Caribbean Single Market. But, it is driven by nationalistic fears that ‘native’ communities will be overrun by ‘immigrants’ from other CARICOM states.
Similar fears dogged many European countries when the European Union (EU) was being created. Yet, today while there is free movement of labour throughout the EU, no native community has found itself displaced.
When the idea of creating the Single Market was first accepted in the Grand Anse Declaration in Grenada in 1989, CARICOM Governments said that they were “determined” to work towards the establishment of the CSME “in the shortest possible time”.
That resolve began to weaken in the 1990’s, and the project lost its momentum. Picked up again in the late 1990’s, movement slackened because of the uncertainty and political debates that surrounded the formation of the Caribbean Court of Justice (CCJ) which is the body that will arbitrate disputes between countries in relation to the Single Market.
But there were other reasons: many governments in the region were tardy in educating their communities about the implications and opportunities of the Single Market, and the passage of the necessary legislation through their parliaments was delayed.
Some of the business community in many CARICOM countries remain very fearful of the Single Market. Accustomed to trade protections from their governments for sales within their national markets, they worry that open competition with companies from other countries of CARICOM will put them out of business.
Since these business people are a significant lobby as well as being contributors to political parties, it is not surprising that some governments have dragged their feet in implementing the legislative and other changes that are necessary.
There is clearly need for an attitudinal change; a change to which the West Indian Commission in its 1992 report drew particular attention. The Commission said: “We have - Governments most of all - to overcome ‘littleness’… We will not reach that goal, however, if we do not shift gear mentally and attitudinally as we climb towards the broad regional plateau… We cannot talk ‘community’ and treat community partners as ‘foreigners’.”
In essence, CARICOM countries have to be open to investment, mergers and acquisitions from firms in other CARICOM countries. If not, their economies will remain constrained by limited local capital and dominated by a few large businesses to their detriment.
It has to be said that the Government of Barbados has been an exception. Barbados was way ahead of every other country in preparing for the Single Market. It passed almost all the necessary legislation well ahead of time and had imaginative education programmes for its private sector and the general public. Barbados can truly be said to be ‘single market ready’.
Missing the 1st January 2005 date was clearly embarrassing to some governments. The Single Market had been so much trumpeted by leading regional figures that egg would be on the faces of many if nothing happened in January 2005.
It was a matter of relief that the governments of Barbados, Jamaica and Trinidad and Tobago announced late last year (2004) that they would start-off the Single Market in the first week of January 2005. They expected the remaining countries to join by the end of the year.
But, in what may be a dress rehearsal for many CARICOM countries, a debate in the Parliament of Trinidad and Tobago in December, in which opposition party representatives questioned the entire project, seemed to signal a delay.
Then on December 29, the CARICOM Secretariat announced that the ceremony “marking compliance” by these three Caribbean states has been deferred to 19th February 2005 in Guyana when the new headquarters of the CARICOM Secretariat will be inaugurated.
Once this start is made, CARICOM governments should determine that the Single Market train will move full steam ahead.
A Single Market is vitally important to all producers and manufacturers in CARICOM countries. It will create a market that is much larger than the national markets in which businesses now operate.
Firms will also be able to lower their costs and increase productivity through economies of scale. Efficient companies will create more employment and bring greater wealth to their national economies.
Competition between companies within the region which will have the right to operate and sell in every CARICOM country will bring down prices of many good and services and promote cross-border investment.
The people of the region as a whole should benefit enormously from the increased and more efficient economic activity that will result.
Of course, there will be casualties. Those who are inefficient producers or who have depended excessively on government protection will suffer. They should use the next 12 months to re-asses their businesses, re-tool them and re-train their employees for the wider regional market.
The Single Market is not a magic wand that automatically creates economic prosperity, but it will create opportunities for businesses throughout the region. And, where those opportunities are grasped by efficient firms with sound management, more and better jobs will be created.
It would be foolish not to be keenly aware of the difficulties that may be posed to some businesses and, therefore, to some national economies if a mechanism for aiding with adjustment is not in place. This is why the Regional Development Fund that was envisaged is very important.
The Fund, once established, should assist ‘disadvantaged countries, regions and sectors’. This is, of course, a very broad brush and it will require careful study to make it operational in an effective manner. But, the main point is the recognition that there will be disadvantaged areas, and these will need assistance in adjusting.
Where the money will come from is another matter. But, over the next few months, CARICOM governments have the chance to make a real case to the international community for contributions.
They also have the opportunity to explore the international bond market to offer securities backed by all CARICOM governments that could yield them substantial funds, particularly if the mechanism for administering such funds is placed in the hands of a respected institution such as the Caribbean Development Bank.
On a related financial matter, to be competitive and successful, businesses throughout the region will require access to capital. In turn, they will have to present sound business plans and good management to convince financial institutions to back them.
A few financial institutions, such as Royal Merchant Bank Limited (RBTT) of Trinidad and Tobago have shown the way by their willingness to support national and regional businesses through loans, bonds and equity transactions. Other banks should be encouraged to do the same and government should facilitate this though the passage of common regulatory and other legislation.
CARICOM, as whole, ought to be using the next 11 months of 2005 to explore establishment of a Single Stock Exchange on which shares in companies could be traded, and financing raised.
There is no reason, incidentally, why financial institutions in the Bahamas should not look at the Caribbean Single Market as an investment opportunity. Many of these institutions are even now investing in other emerging markets. Why not in their own yard space? It may provide a way in to the Single Market that the Bahamas would find of some benefit.
The Single Market will also strengthen the interest of each country in the other’s economic health. This should make for better and more cohesive bargaining in the international community. Undoubtedly, it will make the international community take CARICOM more seriously, and, therefore, more willing both to help and to listen to their arguments.
The success of the Single Market, especially if it is to develop into a Single Economy, and not split apart as have other regional initiatives, will depend very largely on the system of managing it that is put in place.
I will explore that subject next week. In the meantime, let us hope that 2005 is indeed the year of the Caribbean Single Market.