An overview of cariforum economies key strategies for growth

An Overview of CARIFORUM Economies: Key Strategies for Growth

By Mikael Barfod, EU Ambassador and Head of Delegation 

Dear participants and panellists. Like others, I am very happy to be back here after enjoying the last conference in Antigua.



Unlike other panellists, who have take a more global view, I will home in on the key strategies for growth, specifically in the financial services sector.



Partially based on EU's own recent experiences and initiatives on financial services, I would like to use my intervention to suggest strategies that CARIFORUM countries could pursue to achieve higher growth in this important sector.

Key Strategies for Growth In the interest of time, I shall dwell on four key areas: 1. Regional integration, 2. technology/innovation, 3. niche markets and 4. Investing in people. Some these points were already touched upon by PMs and Ministers this morning in one form or the other.

Let us look at them in turn starting with regional integration.

1. Regional Integration 

At the last conference in Antigua in 2012, I challenged CARIFORUM and its member states' vision, particularly the lack of pooling of resources to negotiate multilateral agreements in information exchange for tax purposes within the context of the Caribbean Single Market and Economy (CSME) or the OECS Economic Union. In my opinion it should require fewer precious resources to negotiate together than individually, a similar point also made by PM Christie and Minister Pinder this morning.



As my fellow EU Ambassador, Paola Amadei mentioned this morning, the EURO area will now have a single banking supervisor, the European Central Bank, and a single authority in charge of resolution, the Single Resolution Board. The strength for the Caribbean to overcome the hurdles of the protracted crisis also lies in numbers and unity. I think the Caribbean must move in this direction.



The financial crisis presented both a threat and an opportunity for the Single Market and the Euro-zone. The threats included: Member States acting on their own; ring-fencing behaviour; and significant re-nationalisation of EURO area banks' funding markets – all this reflecting a fragmentation of the 1

banking system. The greatest opportunity lies in the realisation that the Single Market is one of our Member States' principal economic assets. A weakening of the Single Market weakens all Member States. This provided political momentum for bold actions. I feel that the Caribbean should also use the opportunity to strengthen the single market and set up a common financial infrastructure that can provide better resources for entrepreneurs, SMEs and for household to grow. 

Reform is a necessity and the Caribbean's approach to financial services should be based on the premise that G20 reforms will be progressively implemented globally, and that there will be less and less tolerance for business models based on incentivising regulatory arbitrage (similarly to the push against tax-havens).



With respect to tax policies, the economic crisis the European Union and the world have gone through has put in evidence the need of coordination of tax policies at EU and global level. The European Commission is strongly committed to fighting tax evasion and promoting transparency and information exchange not only among Member States but also with third countries.

2. Technology/ Innovation 

"Innovate or perish!" was the title of a recent article in the Australian Information Industry Association publication exploring the linkages between Information and Communication Technologies (ICT) and Financial Services.

The catch phrase is extremely relevant for the way forward for Caribbean countries, which have embraced financial services as a viable option to diversifying their economies.



ICT is the driving force behind innovation and productivity among providers of financial services. It can be argued that the economies that managed to stay afloat in the aftermath of the global economic and financial crisis were those that had made significant investments in ICTs.



One of the main challenges for CARIFORUM countries is that ICT is an everevolving sector. To be a significant player in this field the countries have to be proactive to be ahead of the game. To have the transformational impact in the financial services sector, research and development in the ICT sector is critical. The benefits include not only a more effective use of resources but also a reduction in costs and an increased quality in services.

2

3. Niche Markets 

There has been a shift in the financial services industry from the traditional value chains to a new focus on niche markets. Caribbean countries should identify those sectors where there is a clear and credible advantage, and focus on being world-class in those areas. It is possible and it is already being done!



Bermuda is actively securing a niche in captive insurance Islands in hedge funds. For Barbados it is Insurance business. With so many options (Banking; Capital management; and Insurance/reinsurance), the possibility success without competition within markets.

and the Cayman and International markets; Asset remains to have

4. People 

Invest in people! Most of the Caribbean region already boasts a highly educated workforce with the number one international language – English as their first language. When you put this together with the stability of the countries and the time zone vis-à-vis that of international markets, the region remains a viable option for off-shore financial services.



The EU has been made aware of the proposal to establish an Institute of Finance and Regulation which will have a regional focus. The objective of this Institute will be to build the capacity in the sector throughout the region.

The Institute will be logistically well located and is expected to fill the present gap with respect to training enabling Caribbean countries to capitalize on new market opportunities and expand their competiveness in the financial services industry. This is something that the EU views positively and will be willing to support.

Conclusion In conclusion, financial services still remains a viable option for service-based economies in the Region in an effort to diversify their economies and generate growth. It is true that the industry continues to face serious challenges - increased competition, stricter regulations, and unpredictable markets. However, with a bit of creativity and a lot of thoughtful strategic planning and implementation, it can be a sector which reaps a lot of benefits for the region as does tourism!

Of utmost concern are the new regulatory requirements which continue to emerge – the proverbial ‘moving goal post’. There are also increased demands from potential clients 3

such as higher quality and better service. To face these challenges, countries need to review their strategies and business models to ensure growth in the industry.

4