GDP Growth (%) Mauritius. St. Vincent and the Grenadines Antigua and Barbuda. Dominica. Grenada. Jamaica. St. Kitts and Nevis -10. St.

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2 25 GDP Growth (%) Mauritius St. Vincent and the Grenadines Antigua and Barbuda Dominica Grenada Jamaica St. Kitts and Nevis St. Lucia Linear (St. Lucia)

3 100% Sectoral Contribution to GDP 80% 60% 40% 20% 0% Antigua and Barbuda Dominica Grenada St. Lucia St. Vincent and the Grenadines Services (% of GDP) Manufacturing (% of GDP) Industry (% of GDP) Agriculture (% of GDP) St. Kitts and Nevis

4 Growth rate - No. of Tourists ( ) 80% 60% 40% 20% 0% -20% -40%

5 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% Growth in Tourism's Contribution to GDP (%) Haiti Vanuatu Aruba US Virgin Islands Kiribati Antigua and Barbuda Tonga Bahamas British Virgin Islands Grenada Mauritious Guadeloupe Cayman Islands Anguilla Barbados Seychelles Martinique Dominican Republic Solomon Islands Jamaica Reunion Maldives St. Lucia Dominica Fiji Comores St. Vincent and the Grenadines St. Kitts and Nevis

6 Services? Construction (10 13% of GDP)? Limited by growth in tourism (hotels, golf courses and condos) Other business services in the short term, constraints are a high rate of emigration, skills and absence of a critical mass (small population) Longer term scope but no short cut to longer term investments in skills

7 Constraints: Preferential trade agreements on banana and sugar ended Volatile ecosystems; hurricane belt Structural barriers in agriculture: small domestic markets, high production costs, old technologies High transport costs Regional competitors - similar products TOO MANY CONSTRAINTS

8 Too many constraints cannot resolve all at once doomed to choose Smart industrial policy- necessary factors: (1) comparative advantage (2) competition (NO subsidies) (3) role of government facilitator or provider of public goods Regional integration strategy targeting sectors in which 3 or more regional partners have a stake no losers, at least 3 winners Analytical framework based on the global competitiveness of countries draws on experience of all countries trade in all products

9 (1) Import substitution - to increase intraregional trade (2) Export cooperation - to access world markets Both channels need (a) economies of scale (b) greater intraregional trade (c) regional integration

10 Specialization through input pooling. Example: pool fresh fruit to produce jams and juices for large scale export Specialization through final output pooling. Example: pool fresh flower or vegetable products to achieve critical mass needed for import substitution or export to rest of the world [example -China s trading companies; Uganda s rose exports to the EU; India s table grape exports to the EU]

11 Hausmann-Klinger MIT Lab

12 Source: Hausmann-Klinger, MIT Lab

13 Hausmann-Klinger MIT Lab

14 Hausmann-Klinger MIT Lab

15 Source: World Bank Tourism Linkages Survey 2008

16 Tourism sector s food imports are only 20-25% of total agricultural imports 80% of total imports are for local consumption; large scope for IS in OECS OECS agricultural imports are greater than exports Most agricultural imports are processed and semiprocessed goods while local production is mostly unprocessed Most manufactured imports are not hi-tech large window of opportunity

17 Distance between two products measures: The similarity in inputs required to produce products including everything from natural factors, skills, institutions, infrastructural requirements, to technological capabilities Likelihood of exporting a new product competitively if you are already competitive in one (Hausmann Klinger concept) Distances between products map into a forest where each product is a tree Forest has a core and periphery - fruitier trees in the core Producers want to jump to trees in the core but most likely jump is to neighboring trees

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21 There are only 25 products (out of 800) in which at least 3 OECS countries are globally competitive Can become the starting point of a regional integration strategy of economic specialization for export diversification Regional cooperation required to achieve the scale economies necessary for import substitution and export to the rest of the world

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24 Product Complexity Index - measures the level of difficulty countries face in exporting a product in a globally integrated market (Hausmann and Hidalgo, 2012) Average product complexity is 0 (oil exports) Product complexity of many OECS imports is below 0. Example, foods and agricultural goods.

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26 Current productive structure determines the future productive structure in a country Density - a country s capability to produce a new product is related with its capabilities to produce other products. The more products it currently produces, the easier it is to become competitive in the new product. Higher density is better

27 OECS country-specific Densities for Imports imports (1000 Antig &Barbu Dominica Grenada St. Kitts & Nevis St. Lucia St.Vince nt & Code Product 114 Poultry -dead/edible Cocoa beans Medicaments Non-Alco.beverages Edible products Perfume/cosmetics Bakery Products Milk.cream preservat Org.chemicals Meals and flour Spirits,liqueurs