October 23, 2014As prepared for Delivery
The most honorable Prime Minister Portia Simpson Miller,
Honorable Ministers and Central Bank Governors,
Members of the Diplomatic Community,
Representatives of International Organizations and Bilateral Partners of the Caribbean,
Friends and Colleagues,
Good morning. On behalf of the IMF, I would like to welcome all of you to the 2014 High-Level Caribbean Forum, Unlocking Economic Growth.
I would like to express my appreciation to the Government of Jamaica for their warm hospitality and for hosting the 2014 forum in this beautiful location. I would also like to thank our colleagues and development partners from the international community, and especially Caribbean policymakers, for sharing with us their valuable time and their ideas. The Caribbean Forum is an important platform for collaboration and for advancing solutions to the key challenges facing the region, and a young tradition I am proud to champion.
In the 2014 Forum, we continue to focus attention on the core issue of growth. The Managing Director also addressed the growth challenge at the Caribbean breakfast during the Annual meetings earlier this month, and we have heard very clearly from you that reinvigorating growth remains the top priority.
While the 2013 conference program took a comprehensive approach to the growth challenge, this year we have streamlined the agenda to cover three specific topics, to permit us to drill down in greater detail into the issues that have the biggest impact on growth, and where barriers and impediments may be inhibiting growth in the region. To help deepen our understanding of these issues, we have invited a broad range of experts from the region to share their insights and expertise. The IMF will be in “listening mode”, and we hope to learn from the region about how to tackle these challenges, and about how the IMF can be of assistance.
So what are these three topics?
First, the energy sector. It is well known that energy costs are an important factor in addressing competitiveness in the Caribbean― we are kicking off the forum with this important topic.
Caribbean countries are extremely dependent on imported oil for the generation of electricity and transportation. Many believe that there is potential for the use of other sources, including sustainable energy alternatives. Today we will benefit from the insights of private sector experts on improving energy efficiency, developing alternative energy sources and policies to encourage their development. We concur that the private sector has a critical role to play in this area and are grateful for their participation in the discussions. I will be particularly interested to hear their views on how governments can best help them achieve their objectives for better energy development.
Second, we will turn to the topic of private sector investment, the engine of economic growth and employment, and how it is taxed. We will focus on developing a more appropriate tax regime for the region, and in particular for investment. At present, the array of tax incentives offered in the Caribbean to attract investment has become wider and increasingly complex. This is an issue of great policy significance because, besides eroding the tax base in a way which is expensive for the budget, such incentives can distort investment decisions—all to the detriment of the collective good. The Fund has analytical expertise in this area—which we would like to share—and has collaborated with a number of countries in the region through our technical assistance programs. But also the Forum will benefit especially from the perspectives of successful reformers and other partner international organizations as well as investors themselves. That said, the key to a successful discussion will be to hear from Caribbean policymakers about what reforms are realistic within the Caribbean context. I also pose the question of whether there is scope for a collaborative approach to limit costly tax competition, since I believe the region would be in a better position to negotiate successfully with investors if it could speak with one voice.
Third, we will discuss, on day two, the importance of a robust financial system for sustainable economic growth.
We have seen from crises elsewhere how difficult it is for countries to grow if the banking system is under threat. Hence, maintaining strong banks and safeguarding financial stability are key prerequisites for delivering better Caribbean growth.
The presentations are centered on several important inputs to financial robustness:
For one thing, effective financial sector regulation and supervision are critical. We will benefit from a Canadian perspective on this issue and there is much we can learn from that country in this area.
Furthermore, successful resolution regimes are an integral part of a strong financial architecture. Typically such regimes facilitate decisive action to ensure the orderly exit of unviable banks, and the availability of the necessary regulatory and legal tools to restructure weak banks and rebuild capital buffers – without disruption to the system and at minimal cost to the taxpayer.
In addition, the recent global financial crisis brought to our attention the importance of financial interconnectedness, and the Caribbean experienced first-hand the downside impact of financial interconnectedness through the CLICO-BAICO crisis. We are collaborating closely with the region to gain a deeper understanding of regional interconnectedness, and we will have an interesting presentation on this issue in the last session.
Finally, we are aware that a part of your economic diversification strategy is the development of international financial centers (IFCs). Potential benefits include local employment opportunities, labor skills development and technological advances to the communications infrastructure. However, these fruits will be realized only if IFCs find an acceptable place in the global financial community. We recognize that the region is deeply concerned about global initiatives that are enforcing greater oversight and increased transparency of IFCs. Despite the costs involved in the implementation of these initiatives we know countries are making best efforts to meet the new standards. We will look closer at IFCs in the current global economic environment.
The Caribbean Forum has evolved into a genuine dialogue and partnership between the region and development institutions. With a meaningful exchange of views and experiences, we are developing a better understanding of what works and what might not work for the region, and forging a better mutual understanding of your policy priorities. We expect to continue moving in this positive direction at our 4th Forum here in beautiful Montego Bay. Let us aim for practical and concrete recommendations that will reduce or remove key constraints to unlock growth in the Caribbean.