(Jamaica Observer) Deeper economic union is at the centre of the Eastern Caribbean’s attempts to build a platform for sustainable growth, the Governor of the Eastern Caribbean Central Bank said on Thursday.
But others may need to take a different path, warned Sir Dwight Venner. “Each country and region must establish its own trajectory on the way to accelerated growth.”
The Eastern Caribbean is conducting “an experiment of great importance to the region,” he said, according to a transcript of his speech to Sterling Asset Management’s 10th anniversary celebrations at Hope Gardens, Kingston.
The Revised Treaty of Basseterre, which came into being on January 21, 2011, provides for full economic union and creates the framework for a single financial and economic space, he said.
“The movement towards consolidation of the major institutions such as banks and insurance companies should lead to a more efficient and cost-effective financial system.”
The Eastern Caribbean also responded to the recent global crisis with an eight-point stabilisation and growth programme, he said.
The islands began their union in 1981 with the original Treaty of Basseterre, which centralised the judiciary, central banking, civil aviation and telecoms regulation as well as banking and securities regulation.
The new treaty aims to increase functional co-operation in tourism, manufacturing, agriculture and information technology, as well as health and education.
Sir Dwight pointed to the daunting task facing island nations in restructuring their financial sectors after they became independent against a background of international upheaval.
The last time there was relatively stable growth in the global economy was in the 1950s and 60s, he said, noting that oil, currency, banking and financial crises followed the demise of the Bretton Woods agreement in 1971, when the US broke the link between the dollar and gold.
“Our countries have had to chart a development path in which our financial institutions have had to play a significant role,” he said.
“The economic arrangement centred on the export of raw materials and the importation of consumer durables, capital and intermediate goods and even food.
“Foreign commercial banks dominated the financial system and their lending was oriented to facilitating this anti-developmental economic system.”
Different parts of the English-speaking Caribbean dealt with this in different ways, some by leaving the bank alone, some by nationalising them, and some by forcing local ownership participation on them or establishing state-owned competitors.
But since the first oil price shock in the early 1970s, the economic progress of the Eastern Caribbean Currency Union countries has been challenged.
Although growth hit an annual average of six per cent in the 1980s thanks to the banana boom, tourism and foreign direct investment, it has fallen to around 1.5 per cent in the last decade.
The region is now one of the most highly indebted in the world, Sir Dwight said, with debt to GDP ratios of over 100 per cent, partly because the standard of social welfare is that of a middle to high-income country, while economic development has not kept pace.
“The economies must be reoriented to create domestic efficiencies that make them more competitive, both regionally and internationally,” he said.
