Warning issued about high energy costs
The lowering of energy costs will be a major factor for Barbados when it comes to attracting international investors.
This warning today from the International Monetary Fund’s Managing Director Christine Lagarde, who said the high energy costs should be tackled with urgency in order to make the island more competitive in the global arena.
Additionally, Lagarde warned that issues such as bureaucracy and lack of unity should be addressed for the region as a whole to experience growth, restore the confidence of investors and become generally more competitive.
She gave the advice during a special lecture at the University of the West Indies, Mona Campus this evening. The event was streamed live on the UWI website.
The finance specialist said while she was confident the region had the ability to adapt and make changes in order to rebound from the economic doldrums, “a lasting success” for the region would not happen overnight.
“The Caribbean has a legacy of good institutions with a thriving tradition of democracy and political accountability. This [augurs] well for the future, especially if the region can get to grips with the twin challenges of competitiveness and climate change. That is what I would like to talk about,” she said to a packed room.
“When investors look for a place to invest in, they compare competitiveness. They compare tax costs, they compare energy costs . . . it is a big issue. High energy costs can actually be a drag. Electricity cost is three times as much in Jamaica as in the United States. It costs even more in Barbados. So conserving and renewing energy alongside efforts to bring more competition and dynamism to the energy sector will be important,” she said.
The IMF head said “the region also needs to invest more smartly in education and training to link the skills that are needed by the economy to the skills that can be deployed by the students.
“The third area where change needs to happen [and] it is critical, [is] to improve the business climate which is less hospitable in the Caribbean than in other small dynamic economies. This includes eliminating as much as the red tape there is and making labour markets more effective in creating jobs,” she said, acknowledging that some of those issues were being addressed.
She said fiscal incentives could be made simpler “and less murky” and there should be more unity among the private and public sector players, as well as each country in the region.
“For example, a regional approach to transportation, infrastructure and the marketing of tourism might work better than each country pressing for its own advantage. Each country offering a little tax holiday here and a little special subsidy there, this is not helpful,” she said.
“Countries have to be together and they have to actually unite in the face of those foreign direct investment projects. Because otherwise, let’s make no mistake, those foreign investors will arbitrage; they will play one against the other so corporation is better,” added Largarde.
She warned too that while tackling the challenges associated with becoming more competitive, the region should not forget to address issues associated with climate change.
Lagarde urged the Caribbean to invest in the requisite infrastructure to “better withstand” natural disaster, saying that to ignore climate change in the pursuit of competitiveness would be “hollow competitiveness”.
“Ultimately if the region can get to grips with these challenges I believe that its voyage will be successful especially if it takes place on board three ships . . . ownership; stewardship and partnership. Ownership of the reform programme so that all citizens take a stake in success, stewardship of the economy – nurturing its resources and investing in its people- and partnership with each other – public sector/ private sector,” she explained.
Lagarde also spoke to the region’s talent, singling out super star Rihanna in the case of Barbados.