Archive for September 2016

Brain Drain: A Curse of Small States?

28
SEP

Written by

By Mark Wenner

Copia de BRAIN DRAIN (2)

 

The rate of skilled emigration from small states and territories, defined either by territory size, population size, national income or some combination thereof, tends to be persistently high over time. Docuquir and Schiff (2008) found that small states had a brain drain rate five times that of all developing countries, twelve times that of high-income countries, and eight times the world average. In the Caribbean, a region dominated by small states, the percent of tertiary educated that emigrate ranks among the highest in the world.

High-levels of emigration imply both benefits and costs for the source country. On the positive side, overseas workers remit large amounts of transfers that smooth consumption and alleviate poverty for relatives in the homeland, and help maintain macroeconomic stability by increasing the inflow of hard currency. In the Caribbean, Jamaica, Haiti, and Guyana have remittance flows that account for more than 10 percent of their GDP each year. However, as was previously discussed in another blog post by Inder Jit Ruprah, the direct impact of the high stock emigrants outweighs the positive feedbacks.

Table 1. Percent of Caribbean Labor Force That Has Migrated to OECD Member Countries, 1965–2000, By Level of Schooling

Country Primary Secondary Tertiary
Antigua and Barbuda 9 64 67
Bahamas 3 10 61
Barbados 18 28 63
Belize 7 58 65
Dominica 19 67 64
Dominican Republic 6 33 32
Grenada 25 71 85
Guyana 18 43 89
Haiti 3 30 84
Jamaica 16 35 85
St. Kitts and Nevis 32 42 78
St. Lucia 12 21 71
St, Vincent and Grenadines 18 33 85
Suriname 39 74 48
Trinidad and Tobago 8 22 79
Average 15 42 70

Source: Docuquir and Marfouk, 2004.

Why does brain drain happen in small economies?

First, small economies tend to be more dependent on trade and less diversified than larger economies. This makes them require less skilled labor. The small territorial size, the small population, and the limited natural endowment of “small countries” forces them to specialize in the production and export of a few goods and services and to rely on imports for a large array of intermediate and finished  goods they cannot cost effectively produce. In this setting, the demand for a variety of skilled labor is reduced. Moreover, the undiversified economic base, dependent on a few raw commodities like sugar, copra, fisheries, cotton, coffee, tea, rice, timber, minerals or services like tourism, in absolute terms reduces the demand for skilled labor. In these economies, agricultural workers and waiters face much higher labor demand than teachers, university professors, CPAs, scientists, medical professionals, and engineers.

Second, small economies, due to the high degree of trade openness and specialization in commodities and services with low demand elasticity, tend to be more vulnerable to external price fluctuations, adverse weather shocks, and natural disasters. Therefore, they tend to experience more growth volatility and economic instability compared to countries with larger internal markets, a more diversified manufacturing base, and less trade openness. Whereas trade and external imbalances can be corrected by changes in the exchange rate in a relatively short time period, adjustment mechanisms do not readily exist to deal with imbalances and mismatches in the labor market. The decision to invest in human capital formation takes years to play out and retooling of labor  forces to match a particular local market demands is not instant or costless. When bad times hit, skilled labor in small economies often opt to emigrate. When larger economies experience downturns, mismatches in labor can be answered by internal migration and by temporary welfare assistance programs. In the US, for example, many unemployed workers from other parts of the country flocked to North Dakota between 2006-2012 to seek employment opportunities, a state that was booming due to the revolution in “fracking” technology that made the Bakken shale oil and gas formation commercially exploitable. In small developing countries, unemployment insurance and other safety net programs are not as robust nor is the possibility of moving to a more dynamic part of the country readily available.

Third, if small economies cannot compensate for the emigration of skilled labor by attracting an equivalent inflow of skilled immigration or by stronger human capital accumulation, then the capacity to grow and develop can be impaired.  The quality of institutions, the effectiveness of government, the ability of the private sector to innovate and compete, and the nature of political culture can all be diminished contributing to mismanagement, corruption, low growth, and instability. Since attracting skilled foreign labor is an unlikely outcome for most low-income developing countries, the source countries find themselves on a treadmill.  They must produce even more tertiary graduates each year just in the hope of retaining a small fraction at great public expense.

What are the possible solutions for brain drain?

  • Improve governance and create better business climates.
  • Forge agreements with OECD host countries to force scholarship students to return home for a specific period, prior to being allowed to emigrate again.
  • Create knowledge-intensive service oriented economies at home.
  • Create a cadre of well-paid civil servants that rotate through a region of small economies that share linguistic and cultural similarities. External assistance from richer, more developed countries may be needed to finance the scheme.
  • Pursue closer and more effective economic integration and even union with a group of states that include states with more diversified economic bases.

In short, small island states have structural weakness that must be addressed through short- medium- and long-term measures. The highest priority is to slow the flow through contingent financing for education abroad and create better opportunities at home. Small states such as the Caribbean countries must aggressively improve governance, business climates, and strategically build a diversified economy based on knowledge intensity. Long-term, more economic integration and ultimately economic union is the answer. In a hyper globalized economy, smallness does seem to be an inherent weakness except for a handful states due to strategic location that can convert themselves into trading entrepots.

References:

Beine, M., F. Docquier and H. Rapoport, 2003, “Brain Drain and LDCs’ Growth: Winners and Losers,” IZA Discussion Paper No. 819.

Docuquir, F. and Schiff. M. (2008).  “Measuring Skilled Emigration Rates: The Case of Small States”.  IZA Discussion Paper No. 3388, March 2008.

Docquier, F., and A. Marfouk, 2004. , “Measuring the International Mobility of Skilled Workers.” World Bank Policy Research Working Paper No. 3381 World Bank, Washington DC.

Mishar, Prachi, (2006). ”Emigration and Brain Drain: Evidence from the Caribbean”. IMF Working Paper WP/06/25.  International Monetary Fund, Washington, DC.

5 Reasons Why Trade Agreements in Latin America and the Caribbean Matter

23
SEP

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Trade agreements cover 70% of all trade in Latin America and the Caribbean (LAC). Of the 270 free trade agreements (FTAs) currently in effect around the world, more than 70 include LAC countries.

Caribbean countries have a long history of pursuing regional economic integration and have made ambitious commitments towards a single market and economy.  However, despite progress in removing barriers to trade with one another, and substantial reductions in the tariffs of major trading partners, Caribbean countries and businesses still face important obstacles in fully taking advantage of the opportunities presented by trade. Non-traditional trade costs, including those related to information, transport and logistics, customs and border procedures, and navigating an increasingly complicated network of trade agreements, create new challenges for traders.

In order to understand the impact of these agreements on the region, the Inter-American Development Bank (IDB) will launch a Massive Open Online Course (MOOC) on how they work and what they mean for governments, businesses, and people in LAC.

The course is free of charge, starts on October 25, and lasts for six weeks. Sign up for it here.

In the meantime, let’s follow the MOOC syllabus a bit and look at five reasons why trade agreements matter to LAC.

  • Trade has enormous potential for economic development and poverty reduction.

Latin America is a recent example of this success: it took advantage of high commodity prices to boost economic performance and generate higher-paying jobs. The region experienced a period of strong growth, with significant progress in its economic and social indicators, largely driven by international trade. Trade liberalization, particularly generated by the multilateral reduction of tariffs and facilitated by the growing number of regional trade agreements, served as a catalyst for those trends.

  • It is crucial to assess the impact of trade and design optimal strategies for implementing existing agreements.

Rules of origin, for instance, set out the conditions under which an importing country considers a product to have originated in an exporting country that receives preferential treatment. These rules are often restrictive and vary not only by product, but also by agreement, complicating trade for companies and other actors involved.

  • Issues behind the border affect trade.

Some issues in business processes are essentially internal to countries — such as the liberalization of trade in services, the elimination of barriers and the establishment of mechanisms to protect foreign investors, competition policy and government procurement, and labor and environmental standards. It is essential to address these issues to create an enabling environment for companies to participate in regional or global value chains — something the IDB has described as “Synchronized Factories.” In the past two decades, international trade has undergone a fundamental change in these processes.

  • Pioneering trade agreements work as laboratories for innovation in international trade policy.

Some pioneering agreements already address intellectual property rights, electronic commerce, and state-owned enterprises (SOEs). These issues have become increasingly prominent in the latest generation of agreements. The bilateral agreements between LAC countries and the United States, for example, all include provisions that regulate e-commerce because it is changing the nature of how we shop and trade internationally, which also has implications for customs.

  • Recent economic and political developments open up new scenarios for the future of trade agreements.

To make the most of trade and trade agreements in LAC, complementary policies are needed to lower trade costs, such as upgrading transport and logistics, facilitating trade and making it more secure, and overcoming information barriers through export promotion. Such policies are particularly important for fostering SMEs so that they can thrive as the next generation of exporters in the region.

You can now learn how trade agreements work and what they mean for governments, businesses, and people in Latin America and the Caribbean. In this course – New Trend in Trade Agreement in Latin America and the Caribbean – you will also analyze in depth the provisions of regional and multilateral trade agreements, and discover why Latin American and Caribbean countries face significant obstacles using them.

This course is aimed at private sector professionals, public officials, and university students interested in learning the practical aspects of how trade agreements work, and how to make the most of them. It is free of charge, starts on October 25, 2016, and lasts six weeks.

This blog post was originally published in the blog “Beyond Borders” of the IDB.

September 28, 2016

This course start date has been postponed to October 25.

Caribbean Firms: The Path to Job Creation is Innovation

21
SEP

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By Inder Jit Ruprah

Copia de CRIME PREVENTION VS INNOVATION (3)

Firms play a key role in development through investments, engaging in trade, creating jobs, increasing productivity, and providing a wide range of goods and services needed to improve living standards. However, because of crime, Caribbean firms see their annual sales reduced by 6 percent.

Undoubtedly, crime is an issue of concern for policy makers and citizens in the Caribbean. An average of 40 percent of the Caribbean population identifies crime and security-related issues as the main problem facing their country, even above poverty, the economy or inequality. Indeed, to develop a dynamic and innovative business, firms ought to invest more resources in research and development than on crime prevention. The average expenditure on research and development by Caribbean firms represents 3.17 percent of total sales, which is lower than the 4.37 percent reported for crime-related expenditure.

During 2007–2009, around 70 percent of Caribbean firms were classified as having stagnant sales or employment. By comparing private investment as a percentage of gross domestic product and private investment as a percentage of total investment between the Caribbean and the rest of small economies (ROSE), the numbers show that these indicators were systematically lower in the Caribbean.

Crime prevention remains a priority for policy makers and private firms. However, this concern has limited the resources invested in other relevant fields such as research and development. Only a dynamic, innovative, and exporting private sector can become a major driver of a country’s economic growth and contribute to job creation. To design and implement effective solutions to crime and violence in the Caribbean more information on the topic is needed.

From a report by the Caribbean Economic Team titled “An Engine of Growth? The Caribbean Private Sector Needs More Than an Oil Change,” by Inder Ruprah and Ricardo Sierra (to be yet published).

Looking for business opportunities? Join us at the Procurement Fair in Belize!

16
SEP

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By Caribbean Country Department

COMPRESSED Flyer_procurement fair-page-001

Are you a consultant, a contractor or a service provider? Join the Inter-American Development Bank, the World Bank, and the Caribbean Development Bank on October 6 to learn more about business and career opportunities at the Procurement Fair in Belize. Don’t miss this chance to connect with these organizations!

To register : http://events.iadb.org/calendar/eventDetail.aspx?lang=en&id=5176

The People’s Money: Getting Procurement Right

14
SEP

Written by

By Shirley Gayle Sinclair

 

Procurement Right from Caribbean Country Department IDB on Vimeo.

Public Procurement refers to the spending of taxpayers’ money by the government to acquire various goods and services for delivery to the public. Better road networks, hospital facilities and schools are just a few of the public goods that procurement delivers. Considering the limited resources available to governments, it is important that these goods and services are acquired at reasonable costs. If procurement is not properly managed it often results in massive wastage of public funds. Sadly, many citizens don’t show much interest in public procurement unless a scandal breaks about excessive spending or corruption in a particular contract.

There is a general misconception that the procurement function can be carried out by almost anyone. This misconception no doubt has its roots in the old view of procurement as a clerical function, a view that fails to recognize its strategic importance. Whether in the private or public sector, procurement handles substantial financial resources. Why would an organization take the risk of vesting the management of such major value in the hands of someone who lacks the skills and competencies to handle it?  Indeed, to ensure successful execution of the procurement function, contracting agencies must hire trained professionals or invest in training and developing staff to reach the required level of competency.

This discussion becomes even more relevant now because of the new Procurement Law for Trinidad and Tobago. This law introduces a framework where agencies that previously had procurement activities managed on their behalf by the Central Tenders Board, will now have the responsibility of executing these processes for themselves. This regime will have to be supported by an appropriate procurement human resource structure that matches the complexity of the functions to the level of the positions. In well -developed procurement systems, positions such as Buyer, Procurement Officer, Procurement Manager and Contract Manager, to name a few, reflect the stratification of the various job responsibilities.

Shifting The Frontiers: Caribbean Convergence

7
SEP

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By Winston Dookeran and Carlos Elias

 

Shifting the Frontiers: Caribbean Convergence from Caribbean Country Department IDB on Vimeo.

In this interview, Mr. Dookeran[1] and Dr. Carlos Elias[2] discuss the process of ‘Caribbean Convergence’. Mr. Dookeran and Dr. Carlos Elias recently edited a book called ‘Shifting The Frontiers: An Action Framework For The Future Of The Caribbean’. Below you will find a short summary of the interview.

Caribbean convergence is a term coined by Mr. Dookeran in the book ‘Shifting The Frontiers: An Action Framework For The Future Of The Caribbean’. This term describes the complex process of economic, social and political integration between the Caribbean countries. According to Dr. Elias, social convergence in the Caribbean is a very advanced process but more needs to be done to accelerate the economic and political convergence in the region. Mr. Dookeran explained that a greater catalyst is needed to support the movement of capital, technology, goods, services, and people across the Caribbean.

Both economists agree that Caribbean convergence can be accelerated if special attention is given to the following:

1. Logistical Convergence Challenge. Why a person pays more to fly from Port of Spain to Paramaribo than from Miami to Port of Spain? Air and sea transport must enable movement of people and goods throughout the region.

2. Energy Convergence Challenge. Why prices per kWh vary so much across the Caribbean? By reducing high costs, regional energy networks that rely on the production of energy from renewable resources can be developed.

3. Financial Convergence Challenge. Why entrepreneurs pay different prices for loans in the region? It is necessary to facilitate a market-making mechanism that connects excess reserves with excess demand for credit.

4. Food Security and Climate Change Convergence Challenge. Why food is expensive and scarce in Bridgetown but plentiful and cheap in Georgetown? Enhancing trade within countries will ensure good quality supply, stable prices and long-term viability of agriculture.

These convergence challenges were first addressed during the Forum on the Future of the Caribbean on May 5–7, 2015. This Forum was organized by The University of the West Indies, the Ministry of Foreign Affairs of Trinidad and Tobago, and the United Nations System in Trinidad and Tobago. Indeed, ‘Shifting The Frontiers: An Action Framework For The Future Of The Caribbean’ summarizes the results of the Forum.

Mr. Dookeran and Dr. Elias remain optimistic about the future of the Caribbean.

For students, researchers or other individuals interested in the findings of ‘Shifting The Frontiers: An Action Framework For The Future Of The Caribbean’, visit the University of West Indies library for information on obtaining a copy. Book is also available through Amazon. 

 

[1] Mr. Dookeran served as Minister of Finance, Planning, and Foreign Affairs at Trinidad and Tobago. He also served as Governor of the Central Bank and was a visiting scholar at Harvard University.

[2] Dr. Carlos Elias is a private consultant. He previously worked at the World Bank and at the Inter-American Development Bank.

How To Improve Your Skills: Management Of Development Projects

2
SEP

Written by

By Gentile Senat

“FMSC Staff Trip - Northwest Haiti Christian Mission” by FMSC is licensed under CC BY 2.0

Following the 2010 earthquake and the subsequent cholera outbreak in Haiti, development related work by international organizations like the Inter-American Development Bank increased significantly as they sought to finance more emergency and infrastructure rehabilitation projects across the country.

Nearly six years later, other sectors such as Education, Water and Sanitation, Transport, Energy and Agriculture were added to the sphere of executing projects. Given the subsequent increase in the number of professionals working on project teams, it became clear there was a need to better train these professionals in the standards and best practices in development work and project management. In this context, the Inter-American Development Bank has decided to provide professionals working both in the public and private sectors, NGOs and international organizations with access to an open online course on “Management of Development Projects“. This course is available in French through the edX platform. The course, first offered in Spanish, was a resounding success with more than 80,000 people taking part.

1. For whom is this course designed?

This course is open to people of all backgrounds and ages. In particular, it is our hope that employees in the public and private sectors, NGOs and university students will register in large numbers.

2. How is the course offered – What do I need to do to participate?

This course is offered entirely online! You will need access to a computer or tablet with an internet connection. This five-week course in “Management of Development Projects” includes case studies that will assist participants master the many tools and key concepts the course offers to help students better manage their projects. Concepts and basic techniques of project management, communication tools and techniques, international standards of project management and success factors of development projects will be explored.

3. When does the course begin?

The course begins on September 6.  To register, please click here

4. Who are the facilitators/instructors for the course?

The course is led by professionals with extensive experience in the field of project management in Haiti, in the Caribbean and Latin America.

5. Will I get a certificate at the end of the course?

Yes, of course! The certificate is proof that you have successfully completed the course. We will need to verify your identity through a photo and a personal identification in order to issue the certificate. The certificate will cost $ 25 USD, and can be a valuable asset as you pursue certain academic programs and job promotions.

6. Other questions?

Write to idbx@iadb.org

As one of the facilitators of the course, I encourage you to participate as there are many benefits to be had from connecting with others about this important topic.

See you soon!

Image: “FMSC Staff Trip – Northwest Haiti Christian Mission” by FMSC is licensed under CC BY 2.0
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Disclaimer

The views expressed in this blog are those of the author and do not necessarily reflect the views of the Inter-American Development Bank, its Management, its Board of Executive Directors or its member Governments.

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