By Reshma Ragoonath From The Trinidad Guardian Newspaper

The private sector must take the lead in bolstering overall Caribbean economic growth in 2015 and invest more in the region. This was among recommendations put forward in the Caribbean Development Bank’s 2014 Caribbean Economic Review and Outlook for 2015 report which was released on Wednesday at a press conference at Hilton Barbados Beach Resort, Needhams Point, St Micheal.

The CDB, in its 14-page report, is projecting regional economies will grow by an average of two per cent this year and there will be expansions in all of its 19 borrowing member countries (BMCs,) including T&T. “As was the case last year, most (economies) are set to grow by between one per cent and three per cent with strongest performances expected in tourism and construction, along with some improvement in commodity exports,” the report said.

However, CDB president Dr William Warren Smith and CDB director of economics Dr Justine Ram both contended, on Wednesday, that the regional private sector has to be the driver of economic growth as the Caribbean continues to recover from the ravages of the global financial crisis. “The Caribbean is moving out of the recession. We are slowing moving out. But the overall level is not sufficient to lift people out of poverty,” Smith told journalists.

He said more gains are needed to get the region to a level of prosperity and this is where the private sector needs to step in. Ram, in his presentation, said that the region’s business community can make a significant contribution to increasing the rate of growth in 2015.

Ease of doing business
Ram stressed the need for countries to make policy changes that will assist in making transacting business in their territories easier. “The region is lagging behind with the ease of doing business,” he said. Ram, pointing to the strides that Singapore has made as an economically sound country, said that the region needs to make it “less costly and easier to invest” if the region expects higher growth rates.

The report also suggested that there is a need for further fiscal consolidation and greater savings within the region and that means “much of the impetus for growth and job creation must come from the private sector, including through foreign direct investment.

“The private sector will also have to shoulder more of the financial burden of investing in the region’s infrastructure, both social and economic. To this end, BMCs are increasingly turning to public-private partnerships (PPPs) and CDB is rolling out new facilities to support them in this regard,” the report added.

Governments were also called upon, through the report, to undertake “structural and other reforms to create the kind of legal and regulatory environment and broader governance framework that can attract investment, and within which the private sector can truly become the main engine of growth.”

Renewable energy
The report also recommended that the region should seek to encourage the use of more renewable sources in the energy mix and greater energy efficiency; invest in universal education, emphasising science, technology and mathematics (STEM) and technical and vocational education and training (TVET), “with a view to closing gaps in quality and matching human capital development policies with changing private sector demand for skills.”

It also suggested the promotion of the use of technology in general, including connectivity and collaboration tools, energy-efficient and/or renewable energy-based systems and e-learning modalities, as a potential driver of efficiency gains was key to increasing economic growth. Ram, in presenting the report, also contended that “unemployment remains stubbornly high across the region.” The solution to this problem, he said, could be a regional one.

“Open borders to the movement of labour,” Ram said. While the CDB, in the report, contended it was cautiously optimistic about the outlook for the region in 2015, it anticipates a further strengthening of the regional recovery this year. This, the bank said, “would allow for a continuation of the reduction in unemployment that started to take hold in 2014. Nevertheless, lingering development challenges continue to dampen medium and long-run prospects in most BMCs.”

Falling oil prices
The CDB contended that further reductions in oil prices “could threaten the sustainability of the PetroCaribe arrangement, under which many BMCs finance petroleum imports on extremely concessional terms, representing a tail-end risk to fiscal and debt sustainability.” Smith, in responding to questions from journalists on the report, lamented that Venezuela is experiencing economic challenges and this will also have an impact on the sustainability of PetroCaribe as well.

“We need to intensify the work we have been doing promoting energy efficiency in the region and we need to accelerate the (thrust towards) renewable energy,” he said. Smith said the region should not view the present challenges in commodity prices as a threat, but see it as an opportunity to be more resilient.

The CDB report also contended that T&T will experience growth between one and three per cent range, “albeit at the lower end, as unscheduled maintenance activities that have been disrupting petroleum production over the past few years are expected come to an end.” In its assessment of T&T’s performance in 2014, the CDB said, this country’s economic growth “slowed considerably to record modest growth last year.”

This came, it explained, in the “wake of operational challenges and the significant drop in oil prices during the year which suppressed petroleum output, thereby driving a decline in the mining and quarrying sector.”

Regional transport
Both Smith and Ram said there is a dire need for improvement in regional transport, especially the inter-island air bridge. Smith did not mince words about the poor service at regional airline: LIAT. “There is no question that the type of service being offered by LIAT is unacceptable, inefficient by any measure,” Smith said.

He said if the region had a more efficient inter-island air transport system then it would have the effect of bringing down the cost of getting around the Caribbean. “This is a matter that needs urgent attention,” he added. Smith also hinted at the possible inclusion of Cuba as one of the CDB’s borrowing member countries. He said the positive strides in the restoring of relations between the US and Cuba would impact on the CDB’s consideration of including the Latin American country.

“Cuba is part of the Caribbean. Cuba will be an excellent addition to the CDB,” Smith said.

IMAGE: Dr Justine Ram
For more on this story go to: http://www.guardian.co.tt/business/2015-02-22/call-more-private-sector-investment