Governor of the Eastern Caribbean Central Bank Sir K. Dwight Venner (Internet photo).

BASSETERRE, St. Kitts – The Eastern Caribbean Currency Union (ECCU) has been warned that after three years of recession the only option is to use the opportunities provided by the Revised Treaty of Basseterre to create new political and economic arrangements to secure the future of citizens of the sub-region.

The Revised Treaty of Basseterre on June 18, 2010 saw the official coming into being of the Eastern Caribbean Economic Union, the eight economies of the Organisation of Eastern Caribbean States (OECS).

“The adjustment and transformation process is not going to be easy. But, as Louis D. Brandeis reminds us, most of the things worth doing in the world have been declared impossible before they had been done,” Sir K. Dwight Venner, governor of the Eastern Caribbean Central Bank, said Thursday night.

“So, let us continue to work together as citizens, businessmen and women and policymakers to prevail and achieve economic prosperity for our region,” he said in concluding the 2011 ECCU Economic Report during a simultaneous multi-media broadcast across the OECS.

Sir Dwight said that the report came at a time when the Currency Union was confronted by unique challenges and opportunities to transform its economies into self-sustaining entities.

He said that while the ECCU has been impacted by the global financial crisis, the region has not been identified as a potential growth area because of small size and lack of valuable commodities.

“The performance of our economies over the last three years clearly illustrated this fact. The region as a whole — that is, CARICOM — did not perform well,” he said, noting that the International Monetary Fund (IMF) recently said that the region was growing less before the crisis, was impacted more during the crisis, and has recovered less after the crisis.

Sir Dwight also noted the IMF’s findings that ECCU countries have been disaster-prone with almost half of their output fluctuation attributed to external and climatic shocks.

“Although the performance of the ECCU economies over the last year has seen an ease in economic contraction, the fact remains that these economies have remained in recession over the last three years,” he said, as he announced that the sub-regional economy contracted by 0.6 per cent in 2011, following contractions of 5.7 per cent and 2.2 per cent in 2009 and 2010, respectively.

The current situation calls for a fundamental restructuring of the ECCU economies at the individual and collective levels, according to Sir Dwight.

“We are small, open, vulnerable and disaster-prone economies, which are lagging in the Latin American and Caribbean region in growth, competitiveness, macro variables such as fiscal and debt, the doing business index and other critical elements in the global competitiveness index.”

He said the ECCU requires a new point of departure, an opportunity that the current crisis presents. “This situation requires a bold step, similar to that which occurred when the People’s Republic of China decided to move from a Marxist economic system to a capitalist one, which has proven to be a case of successful experimentation based on pragmatism.”

He, however, said that in the case of the ECCU, “the move will be from single country economies to multi-country economies as provided for in the Revised Treaty of Basseterre”.

The major issue, according to Sir Dwight, is a strategy for the major restructuring of economies to address the long-run growth and development issues. “A mature and intense discussion on these issues must take place given the fact that we are well-entrenched, liberal democratic systems which are proven to be significant assets for us.”

He, however, said that the Currency Union is “limited by the restrictions of short-term electoral cycle, which militate against serious long-term planning”.

“Economic development is a dynamic and long-term process, which is always in transition. We would therefore have to find the means to achieve social and political consensus on our long-term goals as an economic union. The first order of business is to have consensus on what kind of economy we would like to aim at and have progress toward by 2020.”

The 2020 vision, Sir Dwight said, envisages a substantial achievement of the sub-region’s development objectives. “This objective will have to be carefully spelt out in terms of growth, employment and the benchmark of the Human Development Indices. We will therefore have to develop the appropriate policies bearing in mind that in developing countries such as ours, policy making is a cross between an art and a science and involves making judgements and correcting mistakes.”

Achieving the 2020 goal will also call for some experimenting with the process of integration, which the ECCU has identified as “a basic strategy for treating with our fundamental structural problems”.

“Our economies must be integrated at the national level and across countries. The ECCU must then be effectively integrated into the wide regional and international systems so that we can align ourselves to the growth polls which present themselves as we shift to more flexible economics structures.”

Sir Dwight noted that the Revised Treaty of Basseterre allows for the incorporation of the opposition and public in the processes, which can provide a forum for consensus building. “This must also provide for a policy framework and architecture to manage the unique creative single space.”

He identified four issues that are “critical” to the success of the ECCU:

  1. A political framework that address the dual system of government and governance that must be put in place;
  2. A modernisation of the regional and national public services to effectively and efficiently execute the policies which are set;
  3. The development of the private sector to operate across the length and breath of the economic union and to transform itself into a sector that can be regionally and internationally competitive so that it can be a major foreign exchange earner; and,
  4. The development of a vibrant and innovative money and capital market system that can mobilise saving from both national and external sources and can efficiently allocate funds to the most productive enterprises.

Sir Dwight said that within the single financial space, there would have to be the rationalisation of the financial institutions to facilitate financial stability and to promote growth and development.

“The nature and scope of this initiative is daunting but critical to our survival and success in the changing world in which we now exist. It is urgent that we start a major public discussion on these issues at all levels in our countries. For, without a clear understanding of what is at state and the role, which the critical sectors, namely the government, the private sector, and civil society will have to play, we will not succeed.

Regarding growth and economic development of the ECCU, member governments have identified the period of adjustment from January 2012 to December 2014 and that of transformation of the economies and the creation of a fully functioning economic space from January 2015 to December 2020.

Member governments will therefore continue to intensify the implementation of measures under the eight-point stabilisation and growth programme, collaborate on addressing the debt issues in the ECCU and accelerate the process for the passage of the relevant legislation to facilitate the creation of the single financial space and OECS economic union, Sir Dwight said.

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