Economic Integration and Development in the Caribbean

CSME is necessary for meeting the economic and social objectives of the region’s economy.

Caribbean economic development has lagged behind as compared to other small economies, such as Singapore, Ireland and Cyprus, as they have depended on the exploitation of natural resources as well as preferential arrangements for products such as sugar and bananas.

In 1975 the Caribbean was at the same level, in terms of GDP per capita, with Ireland, Singapore and Cyprus. However, Ireland and Singapore’s GDP was almost twice the size of the Caribbean region by the turn of the century.

Compared to other developing economies, the Caribbean ranks high on the human development index. Both the region’s average literacy and life expectancy rates are high. On the other hand however, poverty rates are also high and income inequality is significant.

Three of the main economic challenges facing the region are the loss of preferential arrangements, importance of achieving higher productivity levels and the need to strengthen fiscal positions and reduce the public debt burden.

In terms of loss of preferential arrangements, the estimated cost of producing and exporting sugar by the lowest cost Caribbean producers is 50 to 60 percent higher than that of the higher cost free market exporters.

In terms of economic restructuring, the reality is that the Caribbean agricultural sector will find it difficult to globally compete as the high labour intensive manufacturing in the Caribbean can no longer compete internationally due to high wage structures and the rise in exportation of Chinese manufacturers.

Caribbean economies need to improve productivity since there was a decline in productivity in the 1990’s in both public and private investments. Migration is another reason for the decline in productivity as it has represented a brain drain which has weakened the skills base and capacity of regional economies.