The article “Growth to Accelerate in Latin
America and the Caribbean ...”, in the Annual World Economic Situation andProspects 2014 report of the UN Department of Economic and Social Affairs
(UNDESA), indicates that Haiti and the Dominican Republic will lead the
Caribbean in growth by 2015.
The global
competitiveness of both from 2012 to 2013 are recorded in Doing Business2014 – Regional Profile: Caribbean States, a co-publication of the World
Bank and International Financial Corporation, which also records the global competitiveness
of eleven other Caribbean islands.
Except for
Puerto Rico, all these islands are members of the Caribbean Forum (CARIFORUM);
and beside Haiti and the Dominican Republic, all are Small Island Developing
States (SIDS). In comparing SIDS to non-SIDS, part 1 of this article indicated that
non-SIDS performed worse in Doing Business 2014.
The region was
ranked 90, of the 189 nations examined. Ten indicators, across the four stages of the business
cycle (i.e. start-up, operation, expansion and insolvency), were evaluated to determine
ranks. Figure 1 maps the performance of the Caribbean, and Haiti in particular,
across these indicators.
 |
| Figure 1: Global Competitiveness Map of the Caribbean |
Points
closer to the centre indicate better performance. Hence, Haiti which has an
overall rank of 177 performed worse in eight of these indicators when compared
to the Caribbean region, which has the higher rank. But, it should be noted
that performance in each indicator varies about the overall rank.
To improve
on overall rank, it stands to reason that the worse indicators need to be
addressed as a priority. For the Caribbean, priority indicators starting from the
worst seem to be: registering property [143], enforcing contracts [123], resolving
insolvency [106], paying taxes [104], and getting credit [102].
As a point
of interest, “Getting Credit” is not a priority indicator for Puerto Rico, and
Trinidad and Tobago, which have the two highest overall ranks in the Caribbean.
Puerto Rico, with the highest overall rank, also has the highest rank in this
indicator at 13: followed by Trinidad and Tobago at 28.
When considering
only CARIFORUM member states rather than islands of the regional profile, there
are marked differences. The priority indicators for the SIDS group do not
change, but their order of priority does. For the non-SIDS group, both their priority
indicators and order of priority change significantly.
Figure 2
maps the global competitiveness of CARIFORUM SIDS versus non-SIDS. The SIDS
group does not include Puerto Rico, and the non-SIDS group includes Guyana,
Suriname and Belize - CARIFORUM member states – which were not included in the
regional profile.
 |
| Figure 2: Global Competitiveness Map of the Caribbean - SIDS vs. non-SIDS |
The overall
rank for SIDS is 84. The priority indicators starting from the worst are:
registering property [147], enforcing contracts [132], getting credit [105], resolving
insolvency [101], and paying taxes [100]. Of note, the ranks of the first three
priority indicators are worse than they were for the regional profile.
The overall
rank for non-SIDS is 135. In this case, the priority indicators are: starting
business [155], getting credit [144], registering property [136], resolving
insolvency [135], and protecting investors [132]. “Enforcing Contracts” and “Paying
Taxes” are not priority indicators for non-SIDS.
Nevertheless,
international assistance is needed to address “Registering Property”,
“Enforcing Contracts”, and “Getting Credit”. In the former, Guyana ranked
highest at 111. Only Antigua and Barbuda was higher than 81 in the next; and,
only Trinidad and Tobago was higher than 86 in the latter.
The
importance of “Enforcing Contracts” is self evident: especially when
considering foreign direct investment. Which foreign enterprise is going to
invest in an unfamiliar location where enforcing contracts is known to be a
problem?
However, the
significance of “Registering Property” should not be underestimated. According
to Peruvian social scientist Hernando DeSoto, eighty per cent of the World is
under-capitalised because property owners cannot generate capital from their assets.
Using Haiti
as an example, DeSoto stated that the total assets held by its poor amount to over
150 times all foreign investment made in that nation since its independence in
1804. This is particularly alarming when considering that Haiti’s rank in this
indicator is better than the average Caribbean state.
But, it is incomprehensible
that “Getting Credit” is a priority indicator for SIDS, when so many of these
states have developed reputations as international financial centres. Is this
due to underdeveloped capital markets, an absence of credit bureaus, or do we
not consider local businesses acceptable risks?
The remaining
priority indicators can be addressed using the model of the Asia-Pacific
Economic Cooperation (APEC). As mentioned in part 1, APEC is a forum committed
to the liberalization of trade and investment, business facilitation, and
economic and technical cooperation.
According
to “APEC: Sharing Goals and Experience” in Doing Business 2013: SmarterRegulations for Small and Medium-Sized Enterprises, APEC’s 2009 action plan
has shown “encouraging early results” evident in the marked improvement of their
members over non-APEC states.
“APEC sets
measurable targets with specific time-lines” to facilitate monitoring and
evaluation of performance. One set of targets is based on the “Doing Business”
indicators. APEC’s 2009 Doing Business Action Plan sets the target of making
business 25 per cent cheaper, faster and easier by 2015.
In addition,
“… sustained engagement by top government officials from every APEC member is
needed to accelerate progress towards the goals it has set for itself”. APEC also
encourages capacity building activities amongst its members to support the attainment
of these goals.
Five Doing
Business indicators are selected, and the respective “champion economies” are chosen
to provide capacity building assistance to the other members. These “champion
economies” not only share information and experience, but also undertake
personalized diagnostic studies.
“Other
regional bodies can learn from this model of capacity building”, and CARIFORUM should
follow suit. It has at least three states ranked within the top third in global
competitiveness for each of the four remaining priority indicators. So,
choosing champion economies should not be a problem.
Belize is
the only non-SIDS which could be considered a champion economy in two
indicators: “Resolving Insolvency”, for which it ranked 30, and “Paying Taxes”,
with a rank of 48. Suriname is the only other non-SIDS champion economy and this
is also in “Paying Taxes”, for which it ranked 50.
Coincidentally,
“Paying Taxes” is the only indicator which has only two possible SIDS champion
economies: Bahamas and St. Lucia. Both ranked 45. Otherwise, champion economies
are practically all SIDS, which could affect the efficacy of capacity building assistance
to non-SIDS.
There are
two priority targets unique to non-SIDS: “Starting Business” and “Protecting
Investors”. Addressing “Starting Business” is not likely to be a problem for
SIDS champion economies. But, it is suspected that addressing “Protecting
Investors” could be.
This indicator
has six possible champion economies: all SIDS, and all Anglophone. So, the
legal systems of the predominantly non-Anglophone non-SIDS will be totally unfamiliar.
Consequently, international assistance may also be required for non-SIDS to
address this indicator.
This
highlights the problem of dealing with non-SIDS as a unit. Their present amorphous
nature especially with regard to language and institutions makes this difficult.
Probably when other states with like backgrounds join CARIFORUM, this may be
resolved.
In “DoingBusiness in the Caribbean: Lessons from Singapore”, I benchmarked “DoingBusiness 2013” ratings of Barbados, Jamaica, and Trinidad and Tobago, in one
indicator, against the top ranked Singapore, which is again ranked first in “Doing
Business 2014”.
The chosen indicator
was “Dealing with Construction Permits”. But, the above indicates that this is not
one of CARIFORUM’s priority indicators. In fact, ten possible champion
economies could be identified in this indicator: the highest number in any of
the priority indicators.
Of the
original states benchmarked, only Trinidad and Tobago could not be considered a
champion in this indictor. In the 2013 report, they were ranked 101; and in the
2014 report, they were ranked 77: both ranks being below the corresponding non-SIDS
rank for the respective years.
Nevertheless,
this is a significant improvement in rank. In the 2013 report, this indicator
was one of Trinidad and Tobago’s priority indicators. It still is. But, this
improvement contributed to Trinidad and Tobago becoming the only CARIFORUM
state that has improved its overall rank in the current report.
If
CARIFORUM follows their lead, the deterioration of its performance may be
halted, or even improved. But, a concerted effort needs to be made to improve the
region’s global competitiveness. Otherwise, the growth expected into 2015 will only
be short-lived. CARIFORUM needs reform now.
Related articles:
Doing Business in the Caribbean 2018: El Salvador Shines
Doing Business in the Caribbean 2017: Central America Leads By Example
Doing Business in the Caribbean 2016: Central America shows the way
Greater Caribbean Business in 2015Doing Business in the Caribbean 2018: El Salvador Shines
Doing Business in the Caribbean 2017: Central America Leads By Example
Doing Business in the Caribbean 2016: Central America shows the way
