Private sector investment needed for economic recovery

Tue, Jul 3. 2012

The economic woes being experienced by St Vincent and the Grenadines and much of the rest of the world seem not to be abating.

Last Friday, as he presented his annual report to the East Caribbean Currency Union (ECCU), Governor of the East Caribbean Central Bank Sir Dwight Venner was not particularly optimistic in his outlook. He said this year will be critical, as the Union strives to consolidate its efforts to strengthen its economies and position itself to take advantage of the opportunities from the anticipated global economic recovery.{{more}}

This recovery, however, has been proceeding at a very slow rate and the Governor said there is even a possible risk of a significant weakening of the recovery process, or even a second round recession, given the prevailing uncertainty in the international economy.

Sir Dwight said in the United States, one of the region’s main trading partners, although stimulus interventions contributed to an estimated 2.8 per cent growth in GDP in 2010, that country continues to grapple with high unemployment and the economy continues to perform below capacity. The European Union, which constitutes the largest single trading bloc in the international economy, is also facing very difficult financial issues as the peripheral states struggle to stave off default on their debts.

This type of economic outlook, understandably, sometimes has the effect of frightening investors into downsizing, holding on to what they have, and putting investment decisions on hold. When investors stop plowing their money back into the economy, the situation worsens.

When last week’s opening of the third Greaves supermarket at Pembroke is viewed in this context, we see how significant that event is for the recovery of the economy in St Vincent and the Grenadines. Both Prime Minister Dr Ralph Gonsalves and Leader of the Opposition Arnhim Eustace have welcomed with open arms the new $11 million supermarket, which will initially employ 65 workers, many of whom have never had a job before.

The spill-off effects of the new supermarket will be significant and will definitely make a difference, especially in the south Leeward area. The Greaves family should be congratulated for this bold move into a part of the country where, except for the Buccament Bay Resort, there are few other large employers.

When one considers that for St Vincent and the Grenadines, the exposure of liabilities from the demise of CLICO and BAICO amounts to more than EC$375 million or 20 per cent of this country’s Gross Domestic Product, we wonder what would have been the effect on the economy, if even 20 per cent of that money had been invested into the productive sector of our country, rather than sent out of the country.

We cannot and should not sit back and wait on government to turn the economy around. They will never succeed without the significant input of the private sector.

That being said, our government has the responsibility to ensure that they create an environment which encourages locals to invest. Foreign Direct Investment is of critical importance, but so too are the small to medium-sized investments of people here at home.

Potential investors must be confident that when they invest, they will receive fiscal incentives based on the merits of their proposals and that there will be no unfair competition from state enterprises. They must be confident that, no matter their political affiliation, the government machinery will process their applications as expeditiously as they would any other person. They must also be confident that all things being equal, their hard work will give them a fair chance of receiving a good return on their investment.