Friday, 30 November 2018

Doing Business in the Caribbean 2019 - Political Will Lacking

Doing Business 2019: Training for Reform is the 16th in the long-standing series of co-publications by the World Bank and International Financial Corporation (IFC). This annual report on the ease in doing business series involves analysis of data for 190 nations, from June 2017 to May 2018.

For the last 5 years, I have reviewed these reports and, like previous articles, I will commence by examining the global ranking of Caribbean states in Doing Business 2019. With the exception of Puerto Rico, all the states examined are members of the Association of Caribbean States (ACS).

Data is presented in two tables below. Last year’s data is included for your convenience. Differences between the years may simply result from changes in the methodology used to prepare the current report, not necessarily a tangible change of performance. Data on scores and number of regulatory reforms implemented have been added.

Table 1: Global Ratings of Caribbean Islands

RANKING
SCORE
#REFORMS
Report Year:
2018
2019
2018
2019
2018
2019
ACS Caribbean Island States:
113
115
58.10
58.47
0.92
0.61







Caribbean SIDS:
109
111
65.61
60.04
0.82
0.55
Puerto Rico (US)
64
64
69.26
69.46
1
1




Independent Caribbean SIDS:
112
115
58.73
59.10
1.25
0.75
Jamaica
70
75
66.92
67.47
2
1
Trinidad
102
105
60.93
60.81
0
0
Bahamas, The
119
118
58.13
58.90
3
2
Barbados
132
129
56.78
56.78
0
0







OECS:
117
121
57.78
57.83
0.50
0.33
St. Lucia
91
93
62.96
63.02
0
0
Dominica
98
103
61.03
61.07
0
0
Antigua & Barbuda
107
112
59.42
59.48
1
1
St. Vincent & the Grenadines
129
130
56.34
56.35
0
0
St. Kitts & Nevis
134
140
54.35
54.36
1
0
Grenada
142
147
52.64
52.71
1
1




Large Caribbean Island States:
140
142
49.59
49.82
1.50
1
Dominican Republic
99
102
60.57
61.12
3
1
Haiti
181
182
38.48
38.52
0
1
Table 1 shows information on 13 Caribbean Islands, divided into two groups: 11 Small Island Developing States (SIDS) and 2 large island-states: namely the Dominican Republic and Haiti (ie. Santo Domingo).
The SIDS group is sub-divided into three.

Puerto Rico, being the only SIDS that is not politically independent, is a group unto itself. The 6 smallest islands are members of the Organization of Eastern Caribbean States (OECS); and, the remaining 4 islands comprise the Independent SIDS group.

Table 2 shows information on 12 ACS Latin American (LatAm) states. Like the previous grouping of ACS Caribbean Islands, these LatAm states are divided into two groups – Central American and South American States: the former comprising 8 states and the latter 4.

It should also be noted that Table 2 includes three CARIFORUM member-states: Belize, in the Central American group, as well as Guyana and Suriname in the South American group. With the exception of Puerto Rico, all ACS Caribbean islands in table 1 are members of CARIFORUM.

Doing Business 2019 Fact Sheet: Latin America and the Caribbean lists 32 LAC states: 33 inclusive of Chile, which is an OECD state. The regional average score is 58.25 which has a rank of 121. With the exception of Puerto Rico, 24 of these are ACS member states: the remaining 8 being in non-ACS South American states.

11 of the top 15 LAC economies are ACS member states: the lowest rank being 105.  This is equivalent to Doing Business 2018 but the lowest rank was then 102. This is mostly due to the superior rankings of the 5 ACS Central American economies, but also 5 ACS Caribbean Islands and Colombia, as the sole ACS South American economy. 

Table 2: Global Ratings of ACS Latin American States

RANKING
SCORE
#REFORMS
Report Year:
2018
2019
2018
2019
2018
2019
ACS Latin American States:
105
109
60.39
60.34
1.08
0.42







ACS Central American States:
86
91
64.02
64.08
1.25
0.62
Mexico
49
54
72.27
72.09
1
0
Costa Rica
61
67
69.36
68.89
2
0
El Salvador
73
85
65.20
65.41
4
2
Panama
79
79
65.71
66.12
2
1
Guatemala
97
98
61.16
62.17
0
1
Honduras
115
121
58.13
58.22
0
0
Belize
121
125
57.11
57.13
0
0
Nicaragua
131
132
55.27
55.64
1
1




ACS South American States
132
135
55.31
55.11
0.75
0
Colombia
59
65
69.04
69.24
0
0
Guyana
126
134
56.78
55.57
2
0
Suriname
165
165
48.10
48.05
1
0
Venezuela
188
188
30.85
30.61
0
0
These top 15 performers, from highest to lowest, are: Mexico [54], Chile [56], Puerto Rico [64], Colombia [65], Costa Rica [67], Peru [68], Jamaica [75], Panama [79], El Salvador [85], St. Lucia [93], Uruguay [95], Guatemala [98], Dominican Republic [102], Dominica [103], Trinidad and Tobago [105]. Only Chile, Puerto Rico, Peru, and Uruguay are not ACS members.

As before, Colombia is the sole ACS South American economy, in its group of 4; Mexico, Costa Rica, Panama, El Salvador, and Guatemala the 5 ACS Central American economies, in its group of 8.

The Dominican Republic is the only large ACS Caribbean-Island economy, in its group of 2. Jamaica, Trinidad and Tobago are the 2 larger ACS SIDS, in their group of 4. Puerto Rico is the remaining larger SIDS economy. St. Lucia and Dominica are the 2 ACS OECS economies, in their group of 6.

The superior ranking of the ACS LatAm economies is specifically due to performance of Mexico, Colombia and Costa Rica. Mexico is the best Central American performer and Colombia the best ACS South American economy: the former being more highly ranked than the latter.

Belize and Nicaragua are the only ACS Central American economies below the LAC average: Belize being a CARIFORUM member. Conversely, Colombia is the only ACS South-American economy above average; and beside islands mentioned in top 15 LAC economies, only Antigua and Barbuda, and Barbados are above-average.

Regrettably, ACS also comprises 9 of the 10 lowest ranked economies in LAC. In ascending order from the lowest, these are: Venezuela, Haiti, Suriname, Bolivia, Grenada, St. Kitts and Nevis, Guyana, Nicaragua, St. Vincent and the Grenadines, and Barbados: 7 are CARIFORUM members, and Bolivia is the sole non-ACS member.

Also, the ACS LatAm group has the greatest discrepancy between ranks: Colombia being highest at 65 and Venezuela the lowest at 188. The remaining 2 – Guyana and Suriname – being CARIFORUM members – are also in the bottom 10 along with Venezuela.

ACS not only has the most capable economies to effect reform, but it also has the most deserving economies. Therefore, it seems the body most suitable to facilitate this reform in the shortest order. But, indifference to reform continues to further deteriorate performance. Political will is simply lacking in this regard.

According to Doing Business 2018, “Latin America and the Caribbean and the OECD high-income group had the smallest shares of economies implementing business regulation reforms”. But as stated in my previous article, states of the Organization of Economic Co-operation and Development (OECD) are already highly ranked.

This behavior has not changed. According to Doing Business 2019: LAC has the “lowest share of reformers with 56% of economies” (58% including Chile). Only 19 of the 33 LAC economies implemented at least one regulatory reform to make it easier to do business, which amounted to 27 reforms in total.

Consequently, LAC had the “lowest average increase” in score: which amounted to +0.22 points; and is one of only “two regions absent from the top 50 ranking”. It may be recalled that Mexico, which is an ACS member, was the sole economy in the top 50 ranking in Doing Business 2018. However, it had made no reforms subsequently.

It may be argued that Mexico could have been negatively impacted by natural disasters during the period. But, Puerto Rico was impacted even worst yet managed to make a single reform. Its score increased more than the LAC average, and its ranking remained intact.

LAC has no reason to persist with such behaviour and this is no less true for ACS economies, even though they are typically ranked higher. El Salvador, which was a stand-out in Doing Business 2018 and an example of what could be achieved where the political will exists, reduced its reforms from 4 to 2 this period and fell 12 places in rank.

Beside El Salvador, Bahamas is the only other ACS economy to have implemented 2 reforms. Only 10 of the 25 ACS economies made at least one reform. In all such cases, their scores marginally increased but, excluding Puerto Rico, all ACS economies fell in rank.

In the LAC, Brazil made 4 reforms – the only LAC economy to make more than 2 changes – and its rank improved 16 places, from 125 (in Doing Business 2018) to 109. In Doing Business 2018, El Salvador, Dominican Republic and The Bahamas made at least 3 reforms and all increased in rank (see Doing Business in the Caribbean 2018).

At that time El Salvador had implemented 4 reforms and was considered among “the 10 economies showing the most notable improvement in performance…”, while ranks of practically all other ACS economies fell. It is time all ACS governments get serious about regulatory reform and consistently implement them every year.


Paul Hay is a Jamaican national, founder of PHC Projects: a managed service provider and consultancy, based in Kingston Jamaica, with a vision of providing strategic planning and implementation services to organizations for the construction/renovation of non-residential facilities in the English-speaking Caribbean.


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