JSE Conference 2008

Cooperation not Integration

 

 

 

                                                                Most  Hon. Edward Seaga

 

 

 

We are now in a new era of CARICOM development.  Several leaders who have spent decades of their public life in trying to get CARICOM to work as an effective tool of economic development, are now no longer in positions of leadership.  New and younger replacements have taken their place.  This is an excellent time, therefore, for CARICOM to be revisited by new minds to find new approaches.  35 years have passed since CARICOM was established by the Treaty of Chaguaramas and it still has not gained sufficient traction. The launching of the Caribbean Single Market, a CARICOM centerpiece, instead of the Caribbean Single Market & Economy, the original intention, is a prime example of the problem.  The omission of an integrated economy in the CSME at this time is a consequence of a decision not to proceed with the establishment of a Caribbean Monetary Union (CMU) which is the key to the integrated economy.  The CMU which depends on the replacement of all Caribbean currencies with a single CARICOM currency, it is realized, cannot work.

 

 

 

Even in this truncated form, the CSM will have great difficulty in proving its worth.  It is, first of all, a strategy to enhance growth in the export of goods.  This it will not do on an all around basis.  Two countries, Trinidad and Barbados, with competitive productivity rates based on cheap energy resources, in the case of Trinidad, and a consistently stable macro-economy, like Barbados, will, without doubt, benefit.  Others, like Jamaica, may achieve some marginally improved share of exports.  Still others, the Organization of Eastern Caribbean States (OECS), will quite likely achieve little or no export-driven benefits.  Indeed, like Jamaica, their balance of trade will worsen at the expense of the success of the enhanced export drives of the two member countries which are in a position to increase their share of exports.

 

 

 

This conundrum arises because CARICOM was created as an integrative scheme at a time when European countries were integrating economically in a European Common Market (ECM).  In the case of Europe, there was good reason to do so because the ECM was a partnership of states which were all above a base level of economic development.  Thus, no state created an economic drag on the others.  Further, their production of diverse goods and services could be marketed to each other, enhancing their growth in exports.  These two fundamental positions do not exist in CARICOM.  Haiti, Jamaica and Suriname are much below the economic levels of the other CARICOM members.  The 15 countries of the CARICOM group all produce much the same things which cannot be marketed to each other except where price differentials are attractive.  Hence, a small number of countries in this mix will be perpetual sellers and the greater majority, perpetual buyers.

 

 

 

 

 

 

Integration vs. Cooperation

 

 

 

The CSM integration mechanism is largely a trade regime with free flow of goods and lower tariffs.  In this integration scheme the enhanced flow will be largely one way.

 

 

 

There are a few exceptions.  Some enterprises in Jamaica operate at productivity levels which produce exportable goods.  But the list is not growing.  Hence Jamaican exports to the rest of CARICOM today is at roughly the same level it was 35 years ago, as a percentage of total Jamaican exports.

 

 

 

The University of the West Indies and the Caribbean Development Bank are

prime examples of the integration process.  The establishment of an aluminium smelter in Trinidad to convert alumina outsourced from other Caribbean countries makes sense as a good example of production integration, providing the cost of Trinidadian natural gas, and other inputs, are cost effective enough to produce the aluminum metal at a globally competitive price.  Otherwise, it will not happen.

 

 

 

Carib Cement in Jamaica is not a good example of production integration.  Its product, cement, only enjoys a strength of market in Jamaica because of special tariff protection to keep out more competitive products

 

 

 

Overall, there are few strong possibilities for production integration and many weak ones.

 

 

 

Basically, integration as a strategy, in the case of CARICOM, is an attempt to force an over-sized foot into an under-sized shoe.  It is top-heavy in bureaucracy and bottom-light in benefits.  This is at the heart of the problem.

 

 

 

But if integration presents limited benefits, how can Caribbean countries make use of the fraternal goodwill which exists between them, even if it cannot bind them?  This goodwill is a resource which should be harnessed to produce a pulling-up rather than pushing–up strategy.

 

 

 

The answer is not hard to find.  This goodwill has all along created pockets of intra-regional cooperation because most people of the Caribbean see themselves as occupying the same lifeboat.  This boat has plenty of room to cooperatively man the oars. 

 

 

 

To determine the benefits, the selection process
must not begin, as it often mistakenly does, with what can be produced.  What is produceable may not be saleable because many other producers can produce the same products cheaper or with better quality elsewhere. The starting point must be what can be marketed.  This is more so true in present days when China has corralled most of the production opportunities while leaving the owners of the products to find markets.  China used the right approach by asking what does it have in abundance that other countries do not have. The answer was manpower: millions of potential workers who can produce under a disciplined regime incorporating an ingrained work ethic.  Chinese planners made manpower the centre-piece of their wage-led development strategy.  Unlike most other planners, they did not use investment capital as the focal point to determine an economic growth path. Chinese planners offered to the world cheaper production of goods with good quality.  That is what consumers want.  China made its manpower resources the fulcrum of its economic plans.  In other ways, and to a lesser extent, India is following the same prescription.

 

 

 

Caribbean countries too have a unique and diverse manpower base.  I say Caribbean countries, not CARICOM, because, in this respect, Cuba with its disciplined, educated, affordable workforce leads the way in the region.

 

 

 

CARICOM countries are blessed with affordable, skilled, creative, athletic, human resources.

 

 

 

Medicine

 

 

 

Medical skills in the Caribbean have reached levels of proficiency where they can be internationally marketed to carry out a specific range of medical procedures which are in demand.  Thailand, India, Costa Rica and Cuba are prominent among the countries which are successful in reaping rich earnings in foreign exchange, enhancing export earnings, as the CSM is supposed to do.  India treated 150,000 medical tourists in 2003.  Thailand is the world leader, treating 600,000 tourists and generating US$503 million in revenues in 2002. In Singapore, 150,000 tourists seeking medical attention added 1.0% to GDP in 2000, leading to 3,000 jobs in medical service and US$3 billion in revenues.

 

 

 

What is preventing the marketing of medical services on a regional basis to enable the approach to be comprehensive in range of expertise?  Prospective patients need to be assured of more than the existence of skilled services.  They will require thoroughly sanitized facilities with the best technological equipment operating in multi-disciplinary hospital/clinics.  Generally, this does not exist; two such small but good quality facilities exist in Jamaica.  First World patients are not likely to entrust themselves to medical practitioners, even if they are First World in proficiency, if they operate in Third World type environments.  Who then will finance the establishment of the comprehensive, multi-disciplinary hospital/clinic using trained proficient Caribbean skills cooperatively, operating in a First World environment with First World equipment?

 

 

 

Music and fashion design

 

 

 

CARICOM countries can boast of creative skills in music and design, including fashion design.

 

 

 

Reggae has become a part of main stream music throughout the world.  It is no longer ethnic music.  It has become so overpowering in the marketplace that it has now incorporated Latin music to create a fast growing version, reggaeton.  Reggae was not created by persons with academic skills.  Indeed, the academic levels of reggae composers and singers are notably weak.  But their creative skills are high.  I make this point because not all the strong human resources of the region are skilled in the traditional sense.  Reggae music was neither created by government, nor by some regional scheme.  It started at the nano level and worked its way up to levels of wealth and prosperity on a worldwide basis on its own, producing stars who outshine all others in our artistic firmament.  These stars, mastered their own marketing and promotion without bureaucratic schemes.  They needed no assistance.  From a small beginning they created a world-wide brand which is unmatched in promoting Jamaica.

 

 

 

An emerging industry of great potential which is beginning to draw international attention is the field of fashion, not only in the design of clothing, but the presentation of fashion wear by Caribbean models who have already made their names on the world stage.  None can doubt that this region boasts some of the most beautiful women in the world.  They are a resource base now emerging as a regional resource.  But where is the regional school of fashion design to cooperatively build this emerging resource to still higher levels of design, branding and marketing?

 

 

 

The region produces a most valuable fabric: West Indian sea-Island cotton.  This fiber fetches the highest price in the world, twice the price of the next best cotton, the Egyptian variety.  Its long fibers create a prized silky feeling with the softness of cashmere which is in demand by discriminating buyers who wants the best and will pay the most.  The trade mark is internationally protected. The plant grows in a few areas only.  Cultivation is restricted to authorized areas in stipulated acreage.  But the cotton, which is grown in the region, is processed abroad.  Where is the cotton gin for local production of fibers?  The fibers when woven into fabric go to foreign garment manufacturers and designers, and rightfully so, at this stage.  To pay US$100 and more for a designer polo shirt made from an exclusive fabric requires Italian manufacturers and Italian designers for the start.  But where are the investors who will grab this opportunity to:

  • construct a gin for cotton processing;
  • a suitable mill for the weaving the fibers;

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  • create a regional effort cooperatively to design, promote, brand and market?

 

 

 

Indeed, where is the sophisticated Institute of design able to enhance development of products of all types – packaging, plastic, garments, wood, leather, using Caribbean design talents.

 

 

 

I still have a schematic outline for a Jamaican Institute of Design which, in the late 1987, I requested UNIDO/UNDP to carry out.  A team of 14 consultants including representatives from some of the most prestigious schools of Art and Institutes of Design in the United States and Italy created a comprehensive outline of the project.  It still remains a dream.

 

 

 

Sports

 

 

 

One further example is worthy of discussion in this group of human resource talents.  Certainly, Jamaica has excelled in track athletics and boxing internationally.  Jamaica out-ranks every other country in the world in terms of World and Olympic medals earned on a per capita basis of population.  Other countries in the region:  The Bahamas, Trinidad, Barbados and St. Kitts have also excelled at world level.  These stars are products of secondary schools who have received scholarships to universities in the United States.  To do so, they must achieve an acceptable academic level for entrance. How many more outstanding athletes are there who are potential world beaters but lack the appropriate academics for college? Where is the high tech, first rate, First World track and field academy to regionally train those athletic talents who cannot make the grade academically but may emerge in track and field, boxing, tennis, football and others as new world stars.   This is a logical cooperative venture needing no bureaucratic framework. 

 

 

 

The G.C. Foster College in Jamaica and the proposed cricket academy are good start-up exercises in providing training.  The objective must be international levels of proficiency.  Hence, there is a logical linkage between G.C. Foster College and the University of Technology to provide degrees to those who would train at a Caribbean facility instead of going abroad.  By this linkage no academic or athletic certification is lost.

 

 

 

All the examples quoted have the additional virtue of being high profile and can enhance the creation of international brand names powerfully promoting and marketing  the Caribbean as  more than a region of sea, sun and sand, drugs and crime.  To successfully fight the negative, build a bigger positive!

 

 

 

Agriculture

 

 

 

The value of sea, sun and sand are not to be discounted.  They are part of our natural resources which have become the life-line of CARICOM economies by already creating a world famous tourism industry.  But the sun has more value than providing an attractive, warmer climate for visitors.  It is the basis of energy to provide heat for growing plants.

 

 

 

Hydroponics is an established high tech method of crop production.  Its virtue is the competitive cost and consistent quality of the product. Using vegetables as the example, the cost of domestically grown hydroponic products are a fraction of imported vegetables.  Here is a case where imported items cannot compete.  The quantities produced can provide for the full requirements of Jamaican hotels, in selected varieties.  Expansion of the hydroponics industry can provide competitively priced products for the range of Caribbean hotels.  This is not a theoretical exercise.  It is already in progress in Jamaica.  What is the regional application?

 

 

 

Not every location can produce hydroponic products successfully.  Locations must be cool and dry so to allow regulation of just the right temperature and amount of water.  The warmth of the sun provides the energy for growth, without the cost of critical heating by oil which is a high cost factor in colder climates.  Jamaica has these climatic features in selected areas and could well become a prime exporter of vegetables, strawberries and other fruits to the region and North America?  Possibly, so too could other Caribbean countries.  Certainly, possibilities would exist for cooperative promotion, branding and marketing.

 

 

 

Biodiversity

 

 

 

One of the hidden treasures of the region is its bio-diversity which is rich in endogenous species of plants.  These plants, like any other ethno-botanical treasure, hold potentials for nutraceutical and pharmaceutical industries which are booming markets.  But there are no developments possible without bio-technological research.  Some work is being done at the UWI level, but this requires expansion to dig deep into the hidden mysteries in the ethno-botanical resources of the region.  Certainly, a pool of Caribbean skills could dig deeper.

 

 

 

Here, small size is not an advantage.  Creation of a bio-technology estate, able to attract university participation and private labs operating on a patent sharing basis would greatly expand the programme of work and, expectedly, the results.  Who will venture in this direction to create the required regional cooperative high tech facility?

 

 

 

Geographical location

 

 

 

There is another resource base which the Caribbean has failed to
recognize.  It is the time zone differential between the Caribbean and Europe.  By this differential, Europe is asleep while the Caribbean is awake.  The value lies in the ability to do out-sourced work of a wide variety in the internet processing of:  engineering and architecture plans; radiological readings of X-rays, CAT-scan and MRI films; transcription of notes laboriously written by doctors and lawyers, and so on.  India reaps great benefits from its time zone location compared to both Europe and North America.  Again, the pooling of skills to cooperatively create a well established highly skilled base of operation is the missing link to activating this resource.

 

 

 

It is a common feature of many resource areas in the Caribbean that individuals prefer to operate limited single entities rather than consolidated enterprises carrying credibility of scale.  Here, the element of cooperation is the missing element which can promote success.

 

 

 

Research, promotion and marketing

 

 

 

The value of the Caribbean location cannot ignore its proximity to the world’s largest market place.  It is not reasonable to expect that countries in distant places should actively market their products from great distances while next door neighbours appear helpless.  The truth is, the neighbours are not helpless, just ignorant.  Marketing, as said before, is the key to the possibilities for enhancing production.  The North American market cannot be penetrated without market intelligence.  A few years ago, Indonesia hired a New York firm to research and promote the market for Indonesian crafts.  Up to then, Bali, part of Indonesia, was known internationally only as an exotic island featured in the Broadway musical, South Pacific.  Today, crafts from Bali are among the most widely sought in the world.

 

 

 

Small operations relatively speaking, on their own, are not able to mobilize the resources in funds and skills to undertake research, promotion, and marketing on the scale necessary to penetrate global markets.  This is best carried out by cooperative action on a joint basis, as in the well known case of the hotel industry.

 

 

 

These new and different approaches to maximizing market potentials differ from the traditional methods of the past which have failed.  If the Caribbean is going to find its place in the modern world of export trade and investment, it must modernize its techniques of market research, promotion and branding.

 

 

 

The examples set out above are not an exhaustive list.  They are illustrations of grand market opportunities which have potential for investment.  They require, except in unusual cases, no movement of goods across borders and, hence, no elaborate integration bureaucracy to smooth the flow.

 

 

 

The essence a system of regional cooperation is, generally, the penetration of large external markets by using well established sophisticated facilities within the region manned by proficient regional skills, to sell services and products, attractively packaged, presented, promoted, branded and marketed. This does not require any elaborate, expensive, regional bureaucracy, particularly one linked to the limited market potential in the movement of goods.  From this perspective, CARICOM needs re-thinking.