By INTER-AMERICAN DEVELOPMENT BANK From Nation News Barbados

Caribbean countries share a growth challenge. Economic performance among them varies but the countries share a challenging outlook. Growth in the region is projected to accelerate on average but growth rates remain low and there are considerable risks to those projections

Can the Caribbean private sector be the impetus for a turnaround in the region’s growth performance? Private sector investment is considered a main driver of sustainable economic growth.
In the Caribbean, however, the data shows that private investment, both as a percentage of gross domestic product and total investment, has been systematically lower than in comparative countries, with the commodity dependent countries showing the largest gap.
The IDB’s 2016 private sector report on the Caribbean argues that the private sector “needs more than an oil change” if it is to become the region’s engine of growth.

Private sector development is high on the policy agenda in the Caribbean. Fostering private sector investment, diversification and private sector development is a central pillar of the development agendas of Caribbean governments. However, performance remains mixed as the private sector faces important challenges, including operating in small domestic markets and countries that are vulnerable to external economic shocks and natural disasters.
The Caribbean finds itself coping with deep-rooted structural problems, some emerging challenges and a lacklustre private sector. Fiscal stimulus is not a desirable option due to low fiscal multipliers in the Caribbean and limited and declining fiscal buffers. Within this context, there is a sense of urgency for the private sector to play a greater role in transitioning Caribbean economies to a relatively higher and sustainable growth path.
Caribbean firms perform relatively poorly when compared to firms in the rest of small economies. The performance of the private sector is crucial for economic growth. However, firm-level performance metrics of Caribbean firms – sales growth and employment growth – are on average worse than those of firms in the other small economies. Total factor productivity, a measure of efficiency, is also lower in the Caribbean compared to the other small economies. Caribbean business owners and managers face many challenges.
One of the questions asked of executives in the 2014 Proteqin Survey was to rank the most serious factors affecting business operations in their country. The three main challenges are similar for firms in both groups of countries: an inadequately educated workforce, access to finance, and crime and security.
The business environment in the Caribbean is becoming less conducive to private sector growth. Government policies, regulations, laws, and public services are important elements of the business environment that can either promote or inhibit the performance of firms.
The Caribbean needs a pro-business environment. The country-specific sections of this bulletin show that much work is required to transform the Caribbean private sector into a dynamic, employment-generating and innovative driver of economic growth. Moving forward would entail, on a country-by-country basis, a review of the existing regulatory framework, and existing programmes that support private sector development.
Outdated legal regulatory frameworks that are no longer appropriate and pro-business should be revised. Many countries have incentive programmes but those that distort the economy and are a fiscal burden, or do not yield the desired outcomes, should be revised or closed.

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