-20

-15

-10

-5

0

5

10

15

20

25

1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

GDP Growth (%) Mauritius

St. Vincent and the GrenadinesAntigua and Barbuda

Dominica

Grenada

Jamaica

St. Kitts and Nevis

St. Lucia

Linear (St. Lucia)

0%

20%

40%

60%

80%

100%

1990 2009 1990 2009 1990 2009 1990 2009 1990 2009 1990 2009

Antigua and Barbuda Dominica Grenada St. Lucia St. Vincent and the Grenadines

St. Kitts and Nevis

Sectoral Contribution to GDP

Services (% of GDP) Manufacturing (% of GDP) Industry (% of GDP) Agriculture (% of GDP)

-40%

-20%

0%

20%

40%

60%

80%

Gro

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(200

6-20

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Growth in Tourism's Contribution to GDP (%) 2006-2010

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

Constraints:Preferential trade agreements on banana and

sugar endedVolatile ecosystems; hurricane beltStructural barriers in agriculture:

• small domestic markets, high production costs, old technologies

High transport costsRegional competitors - similar products TOO MANY CONSTRAINTS

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 goodsRegional 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

(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

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]

Hausmann-Klinger MIT Lab

Source: Hausmann-Klinger, MIT Lab

Hausmann-Klinger MIT Lab

Hausmann-Klinger MIT Lab

Source: World Bank Tourism Linkages Survey 2008

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 semi-

processed goods while local production is mostly unprocessed

Most manufactured imports are not hi-tech – large window of opportunity

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

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

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 .

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

OECS country-specific Densities for Imports

Code Product

imports (1000

Antig &Barbu

Dominica GrenadaSt. Kitts & Nevis

St. LuciaSt.Vincent &

114 Poultry -dead/edible 120259 0.16 0.09 0.05 0.04 0.05 0.05721 Cocoa beans 119857 0.16 0.16 0.12 0.05 0.10 0.09

5417 Medicaments 85657 0.18 0.11 0.07 0.05 0.06 0.051110 Non-Alco.beverages 73150 0.20 0.15 0.10 0.07 0.10 0.10

980 Edible products 67936 0.19 0.15 0.09 0.06 0.09 0.095530 Perfume/cosmetics 52298 0.18 0.13 0.08 0.06 0.07 0.07

484 Bakery Products 49502 0.18 0.13 0.09 0.05 0.08 0.08224 Milk.cream preservat 47477 0.21 0.12 0.07 0.05 0.07 0.07

5542 Org.chemicals 44644 0.18 0.13 0.08 0.06 0.07 0.07460 Meals and flour 43847 0.18 0.14 0.11 0.06 0.09 0.11

1124 Spirits,liqueurs 41263 0.22 0.17 0.11 0.08 0.10 0.09