Sunday, April 5, 2009
A national export strategy for Dominica
By Michael Norris
The welfare of the Dominican people is and must be inextricably and integrally linked with trade with the rest of the world. It is to our detriment if we ignore this reality.
We are too small in population and market size, too constrained in our resource base, and inherently vulnerable to hinge our development on an inward-looking strategy.
Although the influence of trade on development and economic welfare is the subject of much debate and controversy, there is no doubt that there is a positive correlation between trends in export earnings and growth, which are the essential concerns of the National Export Strategy.
It matters that we not only grow what we eat but we also grow to export. Exports matter because they generate income and foreign exchange which allow us to buy those goods and services we cannot produce here.
Exports matter because they create forward and backward linkages in production which, in turn, generate increased value added. This means more wealth. The more integrated the production chain, the greater the dynamism of economic activity. Exports matter because they can lead to a more efficient use of scarce resources and to increases in productivity across the wider economy.
The development of the National Export Strategy forces us to focus in a systematic fashion on those critical issues that did not and do not allow us to take full advantage of preferential trade arrangements.
These include, among others, low productivity, lack of competitiveness, absence of economies of scale, lack of technological absorption in the production process, and the dearth of risk capital.
Their resolution is an indispensable condition for surviving in a new dispensation characterized by reciprocal EPAs, single markets and economies and trade blocs and for maximizing the benefits to be derived from the market access and investment opportunities that the new trade regimes present.
Overcoming these supply-side constraints would expand productive capacity and thus close the persistent and widening trade deficit, which is becoming unsustainable.
To my mind, the greatest challenge for those who are designing the strategy is how do we get the productive sector, or more generally, private economic agents to respond appropriately to policy measures.
At the top, there is the macro policy. At the other end, we have microeconomic agents, the producers. Policy actions are taken to influence the behaviour of producers. And often times in our experience the policymaker is not successful in eliciting the appropriate response. (Think, for example, of the history of diversification attempts).
Why is this the case? Is the poor response due to a lack of a system of appropriate incentives? Are supporting institutions such as those that hedge risks missing? Is it cultural? These are some of the questions and issues that occupy the middle between policy and production and which the NES will have to address and do so in a proactive and systematic manner.
To the extent that it succeeds, this singular effort could be regarded as a significant turning point in the history of Dominica’s economic development.
Of course, the desirable response in the case of the export strategy is to increase production of goods and services that can compete in the export market. The EU is helping to elicit this response by funding current initiatives to improve the functioning of the land market; to establish business incubators for promising ideas; and to strengthen the productivity and competitiveness of Micro, Small and Medium Sized Enterprises and exporters by providing managerial and technical support and enhancing the capacity of business support organizations to deliver such services.
I urge all members of the NES design team to fully commit themselves to getting the job done. The NES is about our bread and butter. It’s about our economic independence.
It is, too, about reducing our risk exposure to adverse external developments. We cannot build a sustainable economy and society on aid alone. Life is too unpredictable for that. We have to move beyond aid dependency.
The expectation of the Office of the NAO and the European Commission is that the NES will provide for more dynamic linkages with the world economy but not on the basis of relying on trade preferences and aid but instead on the basis of a resilient, competitive and diversified economy with a skilled workforce and strong and adaptable institutions.
We also look forward to a NES that is practical and concrete in its recommendations.
The welfare of the Dominican people is and must be inextricably and integrally linked with trade with the rest of the world. It is to our detriment if we ignore this reality.
We are too small in population and market size, too constrained in our resource base, and inherently vulnerable to hinge our development on an inward-looking strategy.
Although the influence of trade on development and economic welfare is the subject of much debate and controversy, there is no doubt that there is a positive correlation between trends in export earnings and growth, which are the essential concerns of the National Export Strategy.
It matters that we not only grow what we eat but we also grow to export. Exports matter because they generate income and foreign exchange which allow us to buy those goods and services we cannot produce here.
Exports matter because they create forward and backward linkages in production which, in turn, generate increased value added. This means more wealth. The more integrated the production chain, the greater the dynamism of economic activity. Exports matter because they can lead to a more efficient use of scarce resources and to increases in productivity across the wider economy.
The development of the National Export Strategy forces us to focus in a systematic fashion on those critical issues that did not and do not allow us to take full advantage of preferential trade arrangements.
These include, among others, low productivity, lack of competitiveness, absence of economies of scale, lack of technological absorption in the production process, and the dearth of risk capital.
Their resolution is an indispensable condition for surviving in a new dispensation characterized by reciprocal EPAs, single markets and economies and trade blocs and for maximizing the benefits to be derived from the market access and investment opportunities that the new trade regimes present.
Overcoming these supply-side constraints would expand productive capacity and thus close the persistent and widening trade deficit, which is becoming unsustainable.
To my mind, the greatest challenge for those who are designing the strategy is how do we get the productive sector, or more generally, private economic agents to respond appropriately to policy measures.
At the top, there is the macro policy. At the other end, we have microeconomic agents, the producers. Policy actions are taken to influence the behaviour of producers. And often times in our experience the policymaker is not successful in eliciting the appropriate response. (Think, for example, of the history of diversification attempts).
Why is this the case? Is the poor response due to a lack of a system of appropriate incentives? Are supporting institutions such as those that hedge risks missing? Is it cultural? These are some of the questions and issues that occupy the middle between policy and production and which the NES will have to address and do so in a proactive and systematic manner.
To the extent that it succeeds, this singular effort could be regarded as a significant turning point in the history of Dominica’s economic development.
Of course, the desirable response in the case of the export strategy is to increase production of goods and services that can compete in the export market. The EU is helping to elicit this response by funding current initiatives to improve the functioning of the land market; to establish business incubators for promising ideas; and to strengthen the productivity and competitiveness of Micro, Small and Medium Sized Enterprises and exporters by providing managerial and technical support and enhancing the capacity of business support organizations to deliver such services.
I urge all members of the NES design team to fully commit themselves to getting the job done. The NES is about our bread and butter. It’s about our economic independence.
It is, too, about reducing our risk exposure to adverse external developments. We cannot build a sustainable economy and society on aid alone. Life is too unpredictable for that. We have to move beyond aid dependency.
The expectation of the Office of the NAO and the European Commission is that the NES will provide for more dynamic linkages with the world economy but not on the basis of relying on trade preferences and aid but instead on the basis of a resilient, competitive and diversified economy with a skilled workforce and strong and adaptable institutions.
We also look forward to a NES that is practical and concrete in its recommendations.
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// posted by TheDominican.net @ 7:31 PM
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