CDB gives Caribbean
economies mixed reviews
Head of the Caribbean Development Bank calls on regional Governments to set a plan for reduced unemployment within ten years.

by Peter Richards, on assignment, Nassau- Bahamas

Faced with a mixed economic report for 1995, the English- speaking Caribbean countries have been challenged to drastically reduce unemployment in order to increase their chance of economic survival. The challenge came from Caribbean Development Bank (CDB) President, Sir Neville Nicholls who also warned that if the goal of reducing unemployment is to be achieved, member countries, "will not only have to invest considerably much more than the current level, but they will have to strive to increase the productivity of their existing capital stock."

According to Sir Nicholls, chronic unemployment was a major factor affecting the region's chances of survival, particularly since it, "wastes the lives of our youth and distorts their aspirations." "I would therefore urge this region to adopt as a developmental agenda, the goal of reducing unemployment to an acceptable level over the next ten years." He said that we should not consider this task to be too difficult since in the 1960's, the Asian situation was no different from present- day Caribbean countries, yet today Asia excells beyond initial expectations.

"The general concensus is that the secret is to have well- prepared human capital, high rates of investment, mostly from high savings ratios and macro- economic policies that are appropriate, well- managed and sufficiently flexible to change course as circumstances evolve."

He said that another crucial component had been policy fundamentals, which induced savings and investment. Sir Nicholls added that the failure of the region to seize the opportunities and match the Asian countries "has had a telling impact on our labour force" to the extent that the unemployment rate has remained unacceptably high in nearly all of the bank's member states.

"Persistent unemployment in excess of 20 percent is commonplace and our youth and women are most affected by this scourge. Haplessness and bitterness are on the faces of too many of our young people. This fuels the menaces of illegal drugs, crime and violence," he said, adding that some member states allocate excessively high resources to the security of self and property. "That retards productive investment and aggravates the problem of lowered job opportunities. Indeed ... unemployment would have been far worse if there had not been scope for emigration, but now even that relief valve has been closed to a trickle."

For the English- speaking Caribbean, 1995 was a year of mixed fortunes. Preliminary indications show that only Guyana, the Cayman Islands and the British Virgin Islands recorded growth in excess of four percent. According to the Bank's annual review of the region's economy, most of the countries recorded a downturn in economic activity.

The CDB said that compared with performance in 1994, lower growth rates were recorded in Antigua and Barbuda (- 3.5%), Barbados (2.3%), Dominica (- 1.3%), Jamaica (- 1%), St Kitts- Nevis (2%), St Lucia (3.8%), Trinidad and Tobago (3.5%) and the Turks and Caicos Islands (2.7%). Guyana recorded a remarkable turnaround, leading the region with a growth rate of 5.1%, followed by the Cayman Islands with 5% and the British Virgin Islands, 4%. The CDB said that natural disasters during the year had affected the growth output in six of the 11 member countries, with strong indications that output had also contracted in Anguilla and Montserrat.

In contrast, Gross Domestic Product (GDP) in Belize rose by 3.8 % during 1995, compared with 1.5% in 1994. During 1995, Caribbean governments continued to grapple with many of the issues which held their attention in 1994, such as public finances, monetary management, excess liquidity in the banking system and the debt arrears situation.

When the year started, there were great expectations of a favourable performance in the tourism sector, given the economic recovery of the main markets for visitors. However, this did not translate into increased income from that sector, so 1995 proved to be difficult even for Caribbean countries traditionally flooded with visitors. There were also expectations of an improvement in the banana industry in the Windward Islands, given the efforts to restructure the industry. The manufacturing sector was also expected to remain competitive because of an improved business environment.

There was some progress in the establishment and expansion of export services. But the CDB noted that tourism had been "adversely affected by hurricanes," which also "did substantial damage to economic infrastructure ... particularly in the tourism, agriculture and housing sectors." One positive consequence of the hurricane damage in the northern Caribbean was the increased number of visitors to the southern Caribbean, particularly St Vincent and the Grenadines, St Lucia and Barbados.

Cruise ship arrivals in Grenada rose sharply, with destinations in the northwest Caribbean also registering increases, particularly the Cayman Islands, the Turks and Caicos Islands and the British Virgin Islands. "Growth in visitor arrivals in the two major northwest Caribbean destinations - The Bahamas and Jamaica - remained relatively weak, though less so in Jamaica than in the Bahamas, largely because of domestic factors," the CDB noted.

Regarding agriculture, infestation of the pink mealy bug affected output in the southern Caribbean, particularly Grenada. The sector was put in an even worse position when neighbouring islands banned produce which was likely to be affected by the pest. In Guyana , the accidental release of cyanide- contaminated mine residue into the Essequibo River adversely affected GDP growth.

However, the mining sector still expanded and good results in agriculture, manufacturing and construction led to the eventual figure. Flooding in Jamaica adversely affected agricultural production, particularly sugar cane. Belize too, was affected by flooding during the year, on two separate occasions. "Output performance in the member countries as a group, was therefore, heavily influenced by the effects of these natural disasters and by the performance of the tourism sector," the CDB said, noting however, that this "general pattern did not apply to every country In Trinidad and Tobago, for example, increased output in the petroleum sector and to a greater extent, manufacturing and services, led the growth."

The bank said that Caribbean countries are increasing their dependence on tourism. Therefore, growth depends substantially on economic expansion in those countries from which the visitors come. If the current trends continue, in the long run, economic performance will depend on the extent to which Caribbean tourism can remain competitive when compared with the number of countries trying to diversify into the industry.

"In this regard, the need for member states to broaden their production bases away from an excessive dependence on tourism remains urgent, as is the need to promote a capacity for flexible responses to changing demand for regional products, and the ability to create demand through product development and imaginative marketing." The bank also noted that the greater freedom of movement for productive factors between the region is likely to enhance response flexibility at the regional level.

In the area of air transport, the privatization of BWIA, the reorganization of LIAT and the start of CARIB Express (despite its eventual fate) resulted in changes in the cost and pattern of air travel in the Eastern Caribbean. The expansion of the privatized Air Jamaica has also increased the competition faced by non- regional air carriers servicing the region.

"The refusal of carriers to accept tickets issued by others was a negative development that was offset in part by some fare competition which pushed down prices," the CDB said. The bank also commented on the decision by CARICOM governments to allow free travel of university graduates, noting however, that at the beginning of 1996 "indications were that variations on such arrangements had only been implemented in Guyana, Grenada and Dominica."

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