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  • Evaluating Barbados’ WEF GCI Competitiveness Scorecard: Is Top of the Regional Class Good Enough?

    Alicia Nicholls

    Barbados made its grand reappearance on the World Economic Forum (WEF) Global Competitiveness Index (GCI) 2016-2017 after data shortages precluded its 2014-2015 inclusion. According to the WEF’s scorecard, the region’s star pupil topped its Latin American and Caribbean peers in the following subjects: infrastructure, labour market efficiency and technological readiness.

    Barbados is a 166 sq  miles (431 sq km) island nation with a population of about 280,000, a GDP of US4.4 billion and a GDP per capita of US$15,773, which puts us in the high income non-OECD range according to the World Bank. On the surface Barbados’ scorecard is commendable, particularly for a small island developing state (SIDS) whose recovery from the 2008/2009 global economic and financial crisis has been slow and protracted. Personally for me as a Barbadian I am proud of the achievements my country has made since our independence from the UK just shy of 50 years ago.

    But before we uncork the champagne, several things should give us pause. First, Barbados’ current rank of 72nd out of 138 economies marks a precipitous drop from its ranking in the GCI 2012-2013 where it was ranked 44th place out of 144 economies. Second, contrast this slide with the performance of another small island developing state (SIDS), Mauritius, which was ranked 54th in GCI 2012-2013 and has risen slowly but surely up the ranks to reach 45th place out of 138 economies in GCI 2016-2017. Third, only three other Caribbean economies were included on the index this year. While Barbados and Trinidad & Tobago lost ground, the other two Caribbean economies, Jamaica and the Dominican Republic, improved their rankings. Fourth, Barbados’ performance on eleven of the twelve pillars has been on a downward slope since 2012-2013.

    The Good

    Barbados’ top scores were in higher education and training, and infrastructure, where it ranked 29th and 30th respectively. For example, it ranks 6th in fixed-telephone lines /100 population and 25th in overall quality of infrastructure.  These have for a long time been among the island’s competitive advantages despite its small size. However, while the gross tertiary education enrolment rate is 36%, this is likely to decline given the removal of tuition-free tertiary education in 2014.

    Barbados also ranks 31st in technological readiness which is the only one of the twelve pillars on which the island’s performance remains on an upward trajectory. It ranks a commendable 10th in internet bandwidth kb/s/user. Unlike the other three Caribbean economies included, corruption was not seen as a major problem in Barbados.

    The Bad

    The GCI is a useful tool for policy makers to benchmark their economy’s current against its historical performance across over 100 competitiveness indicators. Factors which, according to the WEF GCI, affect doing business in Barbados are: poor work ethic in the national labour force, inefficient government bureaucracy, tax rates, restrictive labour regulations and access to financing.

    Not surprisingly, market size and the macroeconomic environment are the island’s Achilles heel and are a drag on the island’s competitiveness. The Central Bank of Barbados reports economic growth of 1.3% for the first half of 2016 but the island’s fiscal deficit and public debt remain unsustainably high. The island’s economic fragility is reflected in the low rankings on indicators such as government budget balance as % of GDP (122nd), gross national savings (127th) and government debt (127th). The island is rated 72 out of 100 for country credit rating, reflecting the successive downgrades since 2009 and could decline as the downgrades continue. Under the market size pillar, the country ranked 135th out of 136 on GDP (PPP).

    The Way Forward

    The GCI is an important scorecard showing the areas in which an economy is doing well, and those in which remedial attention is needed. Barbados remains a preferred jurisdiction in the Caribbean for doing business and the report shows that the island has clear competitive advantages in some areas that policymakers and the private sector should continue to build on and leverage in our investment promotions.

    However, I believe that while Barbados remains top of the class in the Caribbean, the island’s continued slippage in the rankings, including in areas which are our competitive advantage, is a concern. I dare say that top of the class in this case is not good enough. Discerning investors consult several indices, including the GCI, when considering potential investment locations. Barbados’ previous A-class performance on these indices was one of its selling points and this would carry less weight if the island continues to decline in its rankings.

    A useful feature of the GCI is that it allows for benchmarking against other economies and is a good tool for identifying best practices. Singapore, a small island developing state, currently ranks second place overall on the index and there may be some areas in which Barbados can learn from the reforms they have made. Besides Singapore, we can examine another top 50-rated SIDS, Mauritius, to see what best practices we can consider. We may also be able to learn from the Dominican Republic and Jamaica which, while ranked below us, saw improvements in their rankings.We have strong rankings in our technological and infrastructure capacity. Let us build on these strengths by improving the incorporation of ICTs for improving the ease of doing business and reducing some of the inefficiencies.

    Perhaps the best utility of the GCI is that it provides empirical evidence for identifying policy priorities as countries craft and evaluate their national competitiveness policies. As any eager pupil would, Barbados should take these findings to heart. Several competitiveness reforms have been on-going aimed at tackling some of the weaknesses which the GCI 2016 has again brought to light. For example, the $50 million fund for SMEs announced in the August budget should assist SMEs’ access to finance. The island also received a loan from the Inter-American Development Bank for competitiveness improvement called the Barbados Competitiveness Programme. These are good strides. However, if Barbados wants an A-grade and to be truly at the top of the global class, the island needs to quicken and deepen the pace of its competitiveness reforms, strengthening those things it is good at, working on those which it is not, while also putting mechanisms for monitoring and evaluation of their performance.

    Nonetheless, the responsibility for ensuring long-term and sustainable competitiveness does not rest with government alone but requires strong collaboration, honest dialogue and feedback among all national stakeholders, including for instance, through the social partnership.

    Private sector involvement is key for ensuring Barbados’ obtains a score card each year. A few years ago, I was part of the survey team which administered the WEF Executive Opinion Survey in Barbados, the main instrument used for gathering the data utilised in a whole suite of WEF reports, including the Global Competitiveness Report. While in each instance our team was able to meet our quota, the biggest challenge we found was the unwillingness of some business executives either to participate in the survey, or to complete it satisfactorily and in a timely manner. If insufficient businesses complete the survey, the country will not be included in the index. To encourage greater private sector participation in the survey, I suggest there be closer collaboration between the country partner institute and the various private sector bodies in the country.

     Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • Pound Sterling slips to 3 year low: What implications for Caribbean Countries?

    Pound Sterling slips to 3 year low: What implications for Caribbean Countries?

    Alicia Nicholls

    Two main statements enunciated by UK policy makers in the past few days have sent Sterling plunging to a three-year low. The first was Prime Minister Theresa May’s revelation after weeks of speculation that Brexit negotiations will begin in early March 2017. The second is statements by UK Trade Secretary Liam Fox which many have interpreted to show a preference for a “hard brexit”, that is, leaving the EU single market altogether and trading with the EU under WTO  rules.

    Investors were not too happy with these developments. According to CNBC, the pound dropped to a low of 1 GBP to 1.2818 USD on Monday, almost as low as the 31-year low set in the days following the Brexit result of June 23rd. In the weeks following its Brexit low, the pound had regained some ground and appeared to stabilise somewhat around 1 GBP to 1.32 USD. The chart below from MoneyAM shows the 6-month performance of the GBP/USD.

    gbptousd
    Source: MoneyAM.com

    So what does this new slump in the pound mean for UK-Caribbean trade? The majority of Commonwealth Caribbean countries have fixed currencies which are pegged to the US dollar. The Barbados dollar, for instance, has been pegged BBD$2 to US$1 since 1975. The Eastern Caribbean dollar is pegged at 1 USD to EC $2.70. This means that any depreciation of sterling against the US dollar also strengthens US-pegged Caribbean currencies against sterling.

    The positives

    There are both positives and negatives to this development. Let us start with the positives. As I had indicated in an earlier article, this latest drop makes British goods and services cheaper  for Caribbean importers and consumers of UK products. Some of the major beneficiaries of this are students studying in the UK or doing online courses at UK educational institutions who would find their tuition is cheaper. For Caribbean persons who have been longing for that UK trip, now is the time to book your ticket!

    Another upside is that a lower pound increases the competitiveness of UK exports which, ceteris paribus, bodes well for the UK economy, and by extension, those Caribbean countries like Barbados for which the UK is the main source market for tourist arrivals and a  major source of foreign direct investment.

    The Negatives

    The severity of the impact will depend on the level of risk exposure Caribbean economies have to the UK economy and by extension to the fluctuation of sterling. There are several channels through which Caribbean countries can be affected economically.

    Caribbean merchandise and services exports will be more expensive for UK buyers and importers. Although the US and in recent years China have replaced the UK as the top trade partners for many Caribbean countries, the UK is Commonwealth Caribbean countries’ top market in Europe.  One way for Caribbean exporters to the UK to mitigate this might be to quote their UK buyers in pounds to eliminate currency risk for the buyer. The Brexit-related uncertainty could also dampen UK foreign direct investment in the region as investors adopt a “wait and see” approach.

    In Barbados, British tourists comprise nearly 40% of tourist arrivals and are a major source of visitor expenditure. As this report by Deutsche Welle suggests, it is likely that Britons may choose to spend their vacations closer to home to cut down on costs. Those who do travel to the Caribbean may cut back their length of stay and/or expenditure. Recent media reports in Barbados seem to indicate that British tourists to the island are spending less.

    Remittance data is quite limited. However, for countries like Jamaica and Barbados with sizable diasporas in the UK, it is not surprising that the UK is one of their major sources of remittances inflows. According to data published by the World Bank’s Bilateral Remittance Matrix, of the US$108 million in recorded remittances Barbados received in 2015, US$21 million (or a roughly a quarter) were from the UK, making the former Mother Country the island’s second largest source of remittances after the US. In Jamaica, which has a higher dependence on remittances than Barbados, $US 292 million out of the total of $2338 million that island received were from the UK. Unlike foreign direct investment, remittances tend to be counter-cyclical. However, it will now be more expensive for Caribbean-UK residents to repatriate remittances and the spending power of the money they send will be less.

    The bottom line

    Despite what appeared to be “buyers’ remorse” on the part of the British public in the days and weeks following the Brexit vote, Prime Minister May has indicated that “Brexit means Brexit”. Her unequivocal announcement  of a firm timeline for the UK’s Article 50 notification shows that there will be no reneging on the will of the British people who voted 52 to 48% to leave.

    Although several international agencies, including the International Monetary Fund (IMF) in its latest Economic Outlook, have downgraded their growth forecasts for the UK economy, the latest post-Brexit vote economic data released by the Office of National Statistics (ONS) has shown no major negative impact on the UK economy thus far. However, with fears of a hard Brexit spooking investors, my hunch is that we have not seen the last of sterling’s roller coaster ride which may intensify as trigger day draws near. Caribbean economies need to brace themselves for the continued volatility come what may.

     Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

     

  • Ranking Caribbean Countries’ Competitiveness: WEF Global Competitiveness Index 2016-2017

    business-561388_960_720Alicia Nicholls

    A few days ago, the World Economic Forum (WEF) released its Global Competitiveness Report 2016-2017. Two things immediately struck me as I perused the list of 138 economies which made the GCI 2016. The first was that because of data shortages only 4 Caribbean countries (Barbados, Jamaica, Dominican Republic and Trinidad & Tobago in order of rank) were included in this year’s index. The second was that all four of these economies were in the bottom 50 per cent of the survey sample, with the highest ranked (Barbados) at only 72nd place.

    The WEF in its Global Competitiveness Report defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of an economy which in turn sets the level of prosperity that the country can achieve”.The GCI’s 114 indicators are grouped into 12 pillars which are further grouped into 3 sub-indices.  Collectively they measure an economy’s performance on a variety of concepts which impact on productivity and prosperity. Some of these include basic requirements such as institutions, infrastructure and macroeconomic environment to more sophisticated indicators dealing with business sophistication and innovation.

    In the preface to this year’s report, the World Economic Forum team highlighted that “many of the competitiveness challenges we see today stem from the aftermath of the financial crisis”.  Productivity and GDP growth in advanced economies and increasingly emerging economies remain subdued. This equally applies to Caribbean countries whose small open economies enhanced their vulnerability to the effects of global financial and economic crisis of 2008, and face many competitiveness disadvantages inherent in their smallness. However, not all of the region’s competitiveness challenges are structural and many are within our power to address.

    Caribbean Countries’ WEF GCI Performance 2016-2017

    So how did the region fare on the GCI this time around?  Barbados, whose economic recovery remains fragile, topped the CARIFORUM rankings with a rank of 72. Due to data shortages, the island had not been included in the 2015-2016 index but has dropped several places since its rank of 55 out of 144 economies on the 2014-2015 index.

    Barbados commendably tops the Latin America and Caribbean region in infrastructure, labour market efficiency and technology. However, the island’s most problematic factors for doing business are as follows: poor work ethic in national labour force, inefficient government bureaucracy, tax rates, restrictive labour regulations and access to financing. Unlike the other three Caribbean economies included, corruption was not seen as a major problem in Barbados.

    Trinidad & Tobago, which is currently in recession, has also lost ground, ranking 94 out of 138 economies in 2016-2017, compared to 89 out 140 in 2015-2016. The top 5 problem areas for Trinidad & Tobago for doing business were poor work ethic in national labour force, corruption, inefficient government bureaucracy, crime and theft and foreign currency regulations. But there is a silver lining. The WEF GCI identifies three stages of development: Stage 1 (Factor-driven), Stage 2 (Efficiency-driven) and Stage 3 (Innovation-driven). Trinidad was the only Caribbean country listed as a stage 3 economy (innovation-driven). Barbados was ranked as transitioning between stages 2 and 3. Jamaica and the Dominican Republic were classified as stage 2.

    Some more good news is that Jamaica saw forward movement on the index, moving to 75 out of 138 in 2016-2017 from 86 out of 140 in 2015-2016, as well as the Dominican Republic which ranked 92 out of 138 countries in 2016-2017 compared to 98 out of 140 countries in 2015-2016. The Dominican Republic’s reforms were mentioned in the report.

    Importance of Country Competitiveness Indices

    The WEF GCI is the most comprehensive benchmark of national competitiveness of economies worldwide. This year’s index comprised 98% of the global economy. It is, therefore, quite disappointing that not only does no Caribbean country currently rank among the top 50, but that so few Caribbean countries are included in the 2016-2017 index compared to previous indices as a result of data shortages.

    These rankings are important for several reasons.The GCI is a useful tool for policy makers not only  for benchmarking the economy’s current performance  across over 100 competitiveness indicators against its historical performance, but also against other economies in the same bracket. As such, it provides good empirical evidence for setting policy priorities and interventions as national competitiveness strategies are crafted and refined.

    Secondly, and importantly for small economies which depend significantly on foreign direct investment inflows, the WEF GCI is one of several indices, along with the World Bank’s Doing Business Index, which discerning investors consult when considering potential investment locations. For this reason, it is not uncommon for investment promotion agencies to reference their country’s favourable performance on these indices when marketing to prospective investors.

    The Way Forward

    It is axiomatic for any economy that  competitiveness should not only be long-term but sustainable. What the current WEF GCI makes clear is that economies in the Caribbean region have a lot of room for improvement, particularly in these problem areas: inefficient government bureaucracy, work ethic in the national labor force and corruption. Improving our competitiveness, however, is not a government responsibility alone. It requires continued strategic and enhanced  public-private sector collaboration and partnership.

    Governments, the private sector and other stakeholders including trade unions and other civil society actors, therefore, need to closely examine the causes and solutions for these problematic areas. For example, what are the factors which contribute to the perception of “poor work ethic”? What country-level and firm-level productivity enhancing reforms are working and which need revising or implementing? What can we do improve the vexing issue of “inefficient government bureaucracy”? This year’s Global Competitiveness Report focused heavily on the Fourth Industrial Revolution. What role can ICTs play in improving our weak areas?

    We can also take lessons from those economies which consistently rank as the most competitive economies and those which saw tremendous improvement. The top five economies in this year’s GCI were in order of ranking: Switzerland, Singapore, United States, Netherlands and Germany. What best practices can we learn from these countries? How about those countries like India, which made the biggest leap of any country in this year’s index by climbing 16 places? Or Mauritius, a SIDS, ranks 45th , having climbed two places? Even our own Jamaica and the Dominican Republic which saw improved rankings may hold valuable lessons.

    Businesses also need to play their part. It is unacceptable that the region is so poorly represented on the GCI year after year. A few years ago, I was part of the survey team which administered the WEF  Executive Opinion Survey in Barbados, the main instrument used for gathering the data utilised in a whole suite of WEF reports, including the Global Competitiveness Report. While in each instance our team was able to meet our quota, one of the challenges we found was the unwillingness of some business executives either to participate in the survey, or to complete it properly and in a timely manner. This is after repeated attempts to impress upon them the importance of the data collected in the survey for judging Barbados’ competitiveness and to ensuring Barbados was ranked on this important index. If insufficient businesses answer the survey, the country will not be included in the index. To encourage greater private sector participation in the survey in each country, I suggest there be closer collaboration between the country partner institutes and the various private sector bodies in the countries.

    The full WEF GCI 2016-2017 Report may be accessed here.

     Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • Caribbean Weekly Trade & Development Digest – September 25-October 1, 2016

    Caribbean Weekly Trade & Development Digest – September 25-October 1, 2016

    These are some of the major trade and development headlines and analysis across the Caribbean region and the world for the week of September 25-October 1, 2016. 

    For past issues, please visit here.

    Regional

    Dominican officials meeting heralds stronger trade ties 

    Dominican Today: The foreign ministers of the Dominican Republic, Miguel Vargas and of Haiti, Pierrot Delienne, on Thursday announced a meeting of the Joint Bilateral Commission set for October 19, when topics pending since the last meeting in Port au Prince will be addressed. Read more

    Dominican Agro Sector: Time to renegotiate DR-CAFTA Trade Deal

    Dominican Today: Dominican Republic’s agro producers (Confenagro) on Thursday said the DR-CAFTA free trade deal must be reviewed and evaluated, as stipulated in executive order 260-16 issued Sept. 17. Read more

    Can Upscale Chocolate turn the tide on Haiti’s devastating deforestation

    Scroll.in: When a tiny Quebec chocolate maker won a gold prize at this year’s premier International Chocolate Awards for a bar made with Haitian cocoa beans, it rocked the specialty chocolate world. The cocoa beans had been on the market for less than a year, and a Haitian chocolate bar had never before received the award. Read more

    European Union to consider approval of accord with Cuba

    CaribbeanNewsNow: The European Union on Thursday proposed that its member states to consider approval of a political and cooperation accord with Cuba aimed at normalizing relations with the Caribbean nation.Read more

    The Sharing Economy and Caribbean Tourism – Op Ed by CTO Head Mr. Hugh Riley

    Caribjournal: The marketplace is evolving. Ten years ago no one imagined homeowners opening their doors and welcoming strangers to bunk at their tropical beach bungalows or private cozy homes for affordable rates. Forget about standing out in the street waving frantically to flag down a taxicab or worrying about having enough change to hop on a bus. Those days are over. Read more

    International

    WTO Panel to Discuss India’s Paper on TFA in Services on Oct 5

    The Indian Express: The first meeting of a WTO panel to discuss the new concept paper floated by India on a proposed trade facilitation agreement in services will be held on October 6 in Geneva. India is pitching for this agreement with a view to reduce transaction costs by doing away with unnecessary regulatory and administrative burden on trade in services.Read more

    WTO cuts 2016 world trade growth forecast to 1.7% 

    Reuters: The World Trade Organization cut its forecast for global trade growth this year by more than a third on Tuesday, reflecting a slowdown in China and falling levels of imports into the United States.Read more

    CITES to vote on legalising Rhino horn trade

    IOL: Parties wait with baited breath to find out if two-thirds of the 182 parties at CITESCOP17 will vote in favour of legalising rhino horn.The 17th meeting of the parties for Cites breaks tomorrow for two days, and early next week for some important votes to take place. Read more

    US-Africa Trade Relationship in Focus at AGOA Forum

    ICTSD: On 22-26 September, African and US ministers, trade officials, civil society, and business sector representatives gathered in Washington D.C. to discuss the implementation of the African Growth and Opportunity Act (AGOA) at the 15th AGOA Forum. Held once a year, the event gives all stakeholders the opportunity to exchange on potential avenues for enhancing US-Africa economic ties. Read more

    EU and US Trade Negotiators seek to get TTIP talks back on track

    TheGuardian: Trade negotiators will meet in New York next week to search for common ground on the controversial EU-US trade deal, which has been buffeted by strong opposition on both sides of the Atlantic. Read more

    Lack of Transparency in PACER-Plus paints bleak future for Pacific peoples

    RadioNewZealand: A Pacific academic says the lack of transparency around negotiations on the proposed regional trade deal PACER-Plus does not bode well for indigenous peoples. Read more
    BREXIT: PM to trigger Article 50 by end of March
    BBC:  Theresa May will formally begin the Brexit process by the end of March 2017, she has told the BBC.The PM’s announcement on triggering Article 50 of the Lisbon Treaty – which begins the formal negotiation process – means the UK looks set to leave the EU by the summer of 2019. Read more

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    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.