Sustainable and Inclusive Growth: The Caribbean Case
Annita Montoute
Institute of International Relations
Presentation for the 12th Regional Seminar of the EU ACP Social and
Economic Interest Groups
Santo Domingo, Dominican Republic
5 – 6 July 2012
Overview: Physical and Structural Characteristics
The Caribbean has inherent physical and structural characteristics that have implications for
development and development strategies: They are as follows:
(1) Geographically constrained, being of small geographic size and having a small population
size
(2) Under-diversified economic structure:
i. Dependence on resource-based and primary commodities
ii. Highly specialized primarily in agriculture and tourism
iii. Narrow range of resources
iv. Small domestic and regional market
v. High dependence on international trade
The high dependence on foreign trade (and finance) makes the Caribbean vulnerable to
external economic shocks such as price fluctuations, decline in access to commercial credit and
strict conditionalities on bilateral and multilateral finance. External economic shocks can affect
domestic production and employment and incomes in both formal and non-formal economic
sectors. External economic shocks weaken government revenue and negatively affect public
expenditures on social services. In the case of commodity exporters, positive price shocks can
widen income gaps. 1
1
Bourne, Compton, “Drilling down strategies for sustainable development through public and private
partnership”, First Meeting of the Caribbean Development Round Table, ECLAC, Port of Spain, 13
September 2011.
3) High trade openness - commodity exports and imports accounting for a high share of GDP.
This makes the Caribbean vulnerable to external shocks. 2
4. The Caribbean is the most vulnerable region to natural disasters globally. The economic
impact is grave. For example during the active hurricane season in 2004, damages amounted to
almost 3 billion dollars (this translates to 10 % of GDP in Jamaica and more than 200 % of GDP
in Grenada). The social impact is also severe. There is loss of human life, disruption of public
services, migration and break-up of families, increased risks of disease, lack of access to health
and education facilities, and destruction of public infrastructure. Natural disasters have the
greatest impact on the poor and those living in low lying marginal land areas. Those engaged in
agriculture are particularly affected by natural disasters.3 The devastating effects of disaster
over a period of time destroy economic and social capital and perpetuate the poverty cycle.
4
Natural disasters have had a devastating effect on development in the Caribbean Region since
resources have been redirected to recovery away from developmental efforts. 5
2
Santos-Paulino, Amelia U. “Fragility and Vulnerability in Small Island Developing States: Issues and Challenges”,
First Meeting of the Caribbean Development Round Table, ECLAC, Port of Spain, 13 September 2011.
3
Aldrie, Henry-Lee, “Social Protection among the most vulnerable in small states: the experience of the
Caribbean”, First Meeting of the Caribbean Development Round Table, ECLAC, Port of Spain, 13 September 2011.
4
Santos-Paulino, Amelia U. “Fragility and Vulnerability in Small Island Developing States: Issues and Challenges”.
5
Overview of socio economic challenges
Below, I outline select examples of socio economic challenges faced in the Caribbean. The
Caribbean has experienced declining per capita GDP growth and total productivity growth since
1960s. This has been exacerbated by the recession since 2008, with only Belize, Guyana and
Suriname recording growth rates over the 2007-2011 period.6
Unemployment continues to be a challenge. There was some growth in the pre-recession
period which brought some unemployment relief, but unemployment rose since the recession
although not significantly. The highest rate of unemployment is among the youth (especially
school leavers) and females.
While there are youth training systems there is little use of
employment subsidies. Weak systems of social assistance for the unemployed aggravate the
situation. The unemployed find very little relief because the existence of low levels of social
protection. Job security tends to be relatively high especially in the public sector which employs
approximately 25% of the workforce. Caribbean governments have sought to curb job losses by
establishing a policy of no lay-offs in the public sector and engaging in dialogue with private
sector to reduce job layoffs. 7
6
Downes, Andrew S. Labour Protection and Productivity Improvement in Small States: The Caribbean, Second
Meeting of t he Caribbean Development Round Table, ECLAC, Georgetown Guyana, 30 May 2012.
7
ibid
The Caribbean continues to suffer from high levels of poverty. In Haiti, 76 per cent of the
population live on less than US$2 a day while 56 % live on less than 1 US$ a day. The Rural
areas experience the highest level of poverty and inequality. In St Lucia in 2006, 29 percent of
the population was reported to have been living in poverty. In Jamaica, the poverty rate in
2009 was 16.5 %. While there are several poverty alleviation policies and programmes, there is
little evidence that MDG1, reducing the number of persons living in extreme poverty by half will
be achieved by 2015. Current social protection instruments to alleviate or reduce poverty are
low. 8 When people are poor they are more likely to be negatively affected by shocks. Poorer
households are therefore highly vulnerable to shocks due to lower income, savings, limited
insurance and few assets. 9Social spending is not properly targeted to those that are highly
affected by negative income shocks.
High crime and insecurity is another area of challenge for the Caribbean. Crime has become a
national concern and a source of vulnerability in the Caribbean because of the negative effects
on the cost of investment and other business activities, the costs of personal security and asset
protection, and the diversion of resources to security away from other social and economic
programmes.10
8
Aldrie, Henry-Lee, “Social Protection among the most vulnerable in small states: the experience of the
Caribbean”, First Meeting of the Caribbean Development Round Table, ECLAC, Port of Spain, 13 September 2011.
9
Bourne, Compton, “Drilling down strategies for sustainable development through public and private partnership.”
10
ibid
The area of health care poses a challenge to the Caribbean. For example, the cost of treating
HIV is high and the Caribbean region has identified HIV/AIDS as a national priority. The extent
of HIV/AIDS infection has a negative impact on the labour force and contributes to the already
low productivity level and current incomes. 11
Persons with disabilities are largely a socially excluded and invisible group. Those most affected
are the elderly over age 60 and elderly women. The adequacy of current social protection
instruments to this group remains very low.12
Other socio economic challenges facing Caribbean societies include: highly stratified
educational achievement; unequal distribution of income and consequently gaps in the quality
of life of different groups; ethnic, gender and racial discrimination; little trickle down of the
benefits from
Foreign Direct Investment (FDI)
to ordinary citizens; inadequate social
protection measures; low level of certification of the labour force and underemployment; brain
drain; low education quality with greater emphasis on quantity; irrelevance of the education
system to the needs of the labour market.13
What strategies/measures have been designed towards attaining
sustainable and inclusive growth?
11
Aldrie Henry-Lee, “Social Protection among the most vulnerable in small states: the experience of the
Caribbean.”
12
Henry-Lee Aldrie, “Social Protection among the most vulnerable in small states: the experience of the
Caribbean.”
13
ECLAC, “Developing Paths of CARICOM Countries”, Second Meeting of Caribbean Development Round Table, 30
May 2012, Georgetown, Guyana
The Caribbean as a region and individual countries has made attempts at devising strategies
towards achieving sustainable development. They are as follows:
1. The Caribbean Community Single Development Vision (2007) articulated a development
strategy for CARICOM under the following categories: functional cooperation activities;
self-sustaining economic growth; the elimination of poverty and the attainment of full
employment; geographically equitable growth; security, equity and social justice;
environmental protection and ecological sustainability and democratic, transparent and
participatory governance. 14
2. The OECS Development Charter and Development Strategy (2002). The objectives of this
strategy were later incorporated into the Revised Treaty of Basseterre establishing the
OECS Economic Union in 2010. The Protocol on Economic Union attached to this Treaty
speaks of achieving “balanced and sustainable economic and social progress and
cohesion, economic growth, development and competitiveness by convergence and
coordinated economic policies”.
In addition, there are a number of strategies at the national level for example:
(i) Barbados (2005) - National Strategic Plan of Barbados 2005 – 2025
(ii) Trinidad and Tobago (2005) – Vision 2020
(iii) Jamaica (2009) – Vision Jamaica 2030
14
Towards a Single development Vision and the Role of the Single Economy
www.caricom.org/jsp/single_market/single_economy_girvan.pdf p. 12
The objectives of these strategies are to attain sustainable economic transformation and
competitiveness, human development, good governance and environmental protection.
These plans however are all aimed at reaching “developed country status” by a certain date
without critiquing the type of development model they are based upon.15
Some Examples of social programmes in existence include:
The Heritage and Stabilization Fund (In Trinidad and Tobago);
The Caribbean Catastrophe Risk Insurance Facility;
PATH (Jamaica) is a conditional cash transfer scheme to assist poor households with
unemployed persons and children;
Unemployment Insurance System (Barbados).
The Way Forward
Below I outline proposals and recommendations presented at two ECLAC Round Tables on
Caribbean Development in September 2011 and May 2012.
The objectives of policies to achieve sustainable development were articulated as follows:
 Equal opportunities and access for all in education, health care, employment and social
security
 Economic policies with a long term vision aimed at transforming the economy
 A fiscal strategy aimed not only at redistribution but improving the capacity of the most
vulnerable for sustainable employment
 Encouraging innovation and building labour institutions for job security.16
15
Byron, Jessica, “The Role of Regionalism in the Sustainable Development of Small Economies” First Meeting of
the Caribbean Development Round Table, ECLAC, Port of Spain, 13 September 2011.
16
Bárcena, Alicia, “Time for Equality”, First Meeting of the Caribbean Development Round Table, ECLAC, Port of
Spain, 13 September 2011
The principles upon which action towards achieving development should be based were
outlined as follows:
(a) The subregion is at a crossroads and needs to rethink its development path to preserve
and expand the development gains that it had achieved. The new development model
should be built on a competitive and sustainable economy, social cohesion and equity
and progressive and representative governance that advanced regional integration and
environmental sustainability.
(b) Although macroeconomic stability and soundness were not sufficient conditions for
growth and development, they were necessary conditions. Therefore, emphasis should
be placed on developing a framework based on strong public finances, stable prices, a
viable and profitable financial sector and a strong external current account. That
platform would provide the foundation for stable growth and development.
(c) Transformation of economies should be based principally on structural change and
economic diversification to discover new high growth activities, such as high-end niche
tourism, cultural services and low carbon industries.
(d) Regional policymakers needed to make a concerted effort to reduce inequality and
marginalization by providing better access to education and training, health and other
services which helped to reduce inequality.
(e) The State needs to be a vigorous facilitator of private, sector-led development, but also
to fill gaps where the private sector has failed to take the initiative.17
Recommendations
(i) Need for a new development framework with a more balanced approach between
economic growth, social protection, equity and environmental resilience and a social
compact to share the burdens among different groups in society.
(ii) Regional integration should be a key plank of the development model. Therefore, it
should be revisited to prioritize the implementation of the single economy in sectors
with a high growth potential and in the provision of common services where ready
benefits could be realised. Key priority areas, in that regard, included cooperation in
energy policy, intraregional trade in agricultural products, sustainable tourism and new
export services, including cultural services.
17
Report of the First Meeting of the Caribbean Development Round Table, ECLAC, Port of Spain,
September 2011.
(iii) Build a strong macroeconomy as the foundation for increased growth, starting with a
harmonized programme of fiscal consolidation supported by targeted social expenditure
to contain increasing indebtedness and to maintain acceptable levels of social spending.
The programme should aim at increasing transparency, efficiency, equity and burden
sharing among groups.
(iv) To expand fiscal space in the region, policy must facilitate faster growth in domestic
capital relative to other forms of investment as a basis for raising the import
productivity which, alongside labour productivity, was an important contributor to
growth.
(v) Renewed attention should be focused on market and product diversification of regional
economies to make them more resilient to economic shocks. Diversification should be
supported by capacity-building in the areas of technology, innovation and finance that
could facilitate the shift to high value added, knowledge-intensive activities.
(vi) Given the unsustainability of growth based on natural resources, part of the earnings
from natural resources should be invested to upgrade technology and managerial
systems to facilitate the development of new growth activities. Gains from natural
resources can also be used to close income gaps and gaps in the quality of life by
reinvesting in the marginalized groups of the region. This can be done by improving
access to education, training and secure jobs for the most vulnerable groups.
(vii)
Ethnic, gender and racial discrimination should be addressed by investing in
groups that were vulnerable to setbacks, such as young males, groups suffering from
high unemployment and school dropouts.
(viii)
Filter the gains from FDI to the average citizen in the region.
(ix) Development finance, including loans and official development assistance, should be
better targeted to address specific vulnerabilities to maximize the impact of
expenditure.
(x) Greater emphasis should be placed on developing adequate buffers to promote
macroeconomic management and economic stability, such as heritage and stabilization
funds.
(xi) Need to be more proactive in advancing foreign policy positions on issues such as
changes to the global trading and financial systems and environmental issues that affect
them.
(xii)
Social protection system should be strengthened through the provision of
unemployment relief and work-related education and training for workers, who lose
their jobs owing to structural changes. That initiative should be a key component of
policies to break the intergenerational cycles of poverty in the subregion.
(xiii)
Social protection should be better targeted to provide the greatest assistance to
the most vulnerable groups, including poor children and the elderly. In addition,
contributory social insurance programmes should be opened to informal sector workers.
(xiv)
Explore ways in which the public and private sectors could collaborate to
advance development in important areas as climate change and natural disasters,
disaster risk management and vulnerability reduction.
(xv)
Governance systems should be improved by strengthening the accountability of
the State and providing suitable avenues for the participation of citizens to jointly tackle
difficult issues, influence and inform decision-making.
(xvi)
The creation of a fully integrated regional labour market which offered more
employment opportunities to people of the region.18
(xvii)
Unemployment relief where both the public sector and the private sector can
implement schemes which provide income transfers for displaced workers in transition
to reemployment or new jobs.
(xviii)
Provision for retraining and education to equip workers and potential workers
for labour force adjustments due to structural economic changes for increasing the
chances of employment and self-employment and for shortening the duration of
joblessness and income loss.
(xix)
Relaxation or reform of credit market practices to improve access by small
enterprises and to permit re-scheduling and other revisions of loan conditions in cases
of temporary difficulty. In many Caribbean countries, the public sector has established
credit facilities for small businesses in recognition of their limited access to credit from
commercial banks and other private financial institutions. However, the continuing
experience of failure evidenced by loan delinquency and institutional collapse suggests
that there are obstacles which need to be carefully considered in the use of credit
mechanisms for social protection.
(xx)
Health vulnerability can be reduced by expanding and improving public health
services and reduction in the cost of private health insurance. In the medium to long
term, medical services might become more available and costs lowered by increases in
the number of trained practitioners through public investment in medical education and
training. Improvement will also come through the expansion of hospitals and clinics
through public investment in medical infrastructure. The private sector can play a direct
role through private investment in medical facilities, i.e. hospitals and clinics, and
indirectly through financial contributions to medical education and training.
18
ibid
(xxi)
Vulnerability to crime has to be addressed by efficient policing and criminal
justice administration 19 as well as addressing poverty, inequality and related
vulnerabilities.
.
19
Bourne, Compton, “Drilling down strategies for sustainable development through public and private
partnership.”