PART 2

Another major problem the Caribbean region that has to be addressed if they want to reach the level of self sustaining growth and development is the correction of fiscal imbalances. This usually results from excessive government spending which in turn leads to a buildup in public debt. Public debt is very bad for the economy as debt affects growth as resources are redirected to debt servicing instead of productive expenditure and social programmes. However this can be solved by debt restructuring and generation of high primary surpluses.

If regional economies seek a strategy to further their development then they should implement the CSME. The benefit of the CSME allows for liberalization of trade in goods and services, the free movement of labour and capital, a regional strategic sectoral plan, the adoption of a harmonized investment code and the development of a regional capital market. Therefore growth can be achieve through what is described as open regionalism as it is based on an outward looking market oriented framework in which the private sector is to take the lead. This integration seeks to address the constraints that have led to regional economic under achievement.

If regional economies have greater integration with CARICOM this could be a critical input in improving competitiveness. Examples include regional trade liberalization which would lead to a reduction in the cost of inputs and contribute to the rationalization of production, labour mobility which has the potential to enhance skill and wage arbitrage in the region, coordinated investment promotion which would make the region more attractive for foreign investment reducing the fiscal cost attached to expensive and wasteful tax concessions and the CSME model presents opportunities for joint marketing, joint research and joint purchasing arrangements in extra regional markets. The implementation of many of the critical provisions of the CSME has lagged in terms of the impact of trade liberalization has been reduced by the large number of exemptions from the common tariff reduction scheme. Free movement of labour so far has been limited to a small group of employment categories and liberalization of trade in services has been slow in coming and there have been problems in implementing the rights of establishment which is pivotal to unlocking the potential of the regional private sector.

Funds are needed to finance new regional institutions in order to find compensator ways to finance national and regional public infrastructure as well as to finance the regional private sector’s activities which will be the ultimate engine of growth and development.
There is still concern that many organizations face an intense inadequacy of fiscal resources and will be difficult to make a commitment although many of the regional institutions are funded from contributions by existing member states.
Over the years, The Caribbean Development Bank has played a crucial role in financing infrastructural development and social programmes in the region.
If the development drive envisaged by the single economy programme is to be arrived at, an emphatic increase in the bank’s resources will be needed.
Compensatory and/or corrective mechanisms should form a necessary and influential feature of the CSME since the benefits of regional integration are often asymmetrically distributed.

Finally, in the context of the CSME, regional development will require new and expended private sector financing systems. However, despite ample liquidity, the regional financing system has only made a limited a limited contribution to regional development through a fall in the cost or a rise in the availability of business investment financing.

Regional private financial institutions need to adopt more innovative and supportive financing strategies if the private sector is to play an influential role. There is a crucial requirement for appropriate methods to finance small and medium sized firms that are likely candidates for niche manufacturing.

The next step in the financing puzzle is the establishment of an integrated regional stock exchange where all member states are electronically linked for bonds and equities trading. This would allow firms to have access to a wider market for raising risk capital and would allow the productive sectors to become more productive internationally.

Conclusively, the implementation of the single economy could put the Caribbean region on the verge of a new development drive. The region will need to reconsider its production structures and raise its level of productivity in order to remain competitive in the global economy. It would also need to increase its level of savings and improve financial intermediation if it is to fund its long term development objective. THIS IS OF GREATEST IMPORTANCE AS TIME IS NOT ON OUR SIDE.