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GOVERNANCE IN THE CARIBBEAN SMALL
STATES – EVIDENCE FROM THREE
GLOBAL INDICATORS
Lino Briguglio, Carmen Saliba and Melchior Vella
University of Malta
Presentation prepared for the
FORUM ON THE FUTURE OF THE CARIBBEAN
Trinidad and Tobago, 5-7 May, 2015
LAYOUT OF THE PRESENTATION
The paper is organised in seven sections.
1. Objectives of the Study
2. Overview of the thirteen Caribbean Small States (CSS)
3. Brief literature review focussing on matters relating to
the theme of the paper.
4. Results obtained from the political, economic and
social indicators.
5. Comparison of the governance scores among the CSS
while
6. Comparisons of the governance scores between the
CSS and the rest of the World.
7. Summary of the main tendencies implications for the
CSS.
OBJECTIVES OF THE STUDY
The presentation assesses the state of governance in
thirteen Caribbean Small States (CSS) by comparing
these states among themselves and with the rest of the
world, utilising three indicators relating to political,
economic and social governance.
When compared with the rest of the world the CSS
exhibited lower governance scores than the average of
their income comparators, particular with regard to
economic governance.
THE INDICATORS USED IN THE STUDY
The three indicators used in this study are:
(i) Political governance: the Worldwide Governance
Indicators,
(ii) Economic governance: the Macroeconomic Stability
sub-index of the Economic Resilience Index and
(iii) Social governance: the non-income component of the
Human Development Index.
The titles of the second and third indices do not directly
refer to governance, but they are strongly related to
economic and social policy, which are themselves
associated with economic and social governance. It should
be noted that the economic indicators do not include GDP
per capita or economic growth, as these are considered to
be outcomes of the policies represented by the indices.
BRIEF DESCRIPTION OF THE 13 CSS
The thirteen Caribbean Small States (CSS) covered in this
study include:
• Five high-income economies (HIE) namely
Antigua/Barbuda, Barbados, Bahamas, Saint
Kitts/Nevis and Trinidad/Tobago;
• Seven upper-middle-income economics (UMIE),
namely Belize, Grenada, Jamaica, St Lucia, St
Vincent/Grenadines and Suriname; and
• One lower-middle-income economy, namely Guyana.
MAIN DIFFERENCES AMONG THE CSS
The GDP per capita of the CSS in 2013 differed
considerably with the Bahamas and Barbados registering
the highest and Guyana, Belize, Suriname and Jamaica the
lowest per capita income.
The growth patterns also differed among the CSS. The
fastest growing countries between 2009 and 2013 were
Guyana, Suriname and Belize which have a relatively low
GDP per capita, suggesting a negative correlation between
these two variables. This matter will be discussed below.
The CSS also differ in their economic structure, with
Belize, Guyana, Suriname, and Trinidad andTobago
together produce oil/gas, minerals and agricultural goods.
The other CSS are mainly service-based economies, highly
dependent on tourism and financial services, and highly
exposed to external shocks.
MAIN SIMILARITIES AMONG THE CSS
A characteristic of the CSS is their high debt/GDP ratio.
Ten of the 13 CSS had a gross debt ratio which was about
or exceeded 60%, with Grenada, Jamaica and St
Kitts/Nevis topping the list with a debt ratio of about 100%
or over as can be seen from Figure 3.
Yet, another characteristic is their negative current
account balance. Almost all the CSS registered negative
current account balance as an average over the 4 years
between 2009 and 2013, as can be seen from Figure 4,
which expresses the current account balance as a
percentage of GDP. The only exceptions were Suriname
and Trinidad and Tobago.
MAIN SIMILARITIES AMONG THE CSS
According to Briguglio (2014), economic vulnerability is
associated with four indicators namely trade openness,
export concentration, dependence on strategic imports and
proneness to natural disasters, the four of which are
relatively high in the CSS, as shown in Figure 5, 6, 7 and 8.
These realities render the CSS as highly economically
vulnerable, which according to Briguglio (2014) rendered
Saint Lucia, Belize, Antigua and Barbuda, Grenada,
Dominica, Bahamas, Saint Kitts/Nevis, Jamaica, Barbados
and Trinidad/Tobago amongst the most economically
vulnerable countries in the world.
THE CSS: SOME RELEVANT DATA
Figure 1: Population (thousands)
Figure 3: Gross Debt /GDP (%)
Figure 2: GDP per Capita (US$)
Figure 4: Cur Acc Bal/GDP (%)
MANUFUCTURING IN SLOVENIA
Figure 5: Trade Openness (%)
(%)
Figure 7: Dependence on
Strategic Imports (%)
Strategic imports (%) Figure
Figure 6: Export Concentration
8: Natural disaster proneness (%)
LITERURE REVIEW
In this section, we consider three aspects of the literature,
closely related to this study, namely:
The state of governance in the CSS. The literature does
not generally draw a good overall picture of governance in
the CSS. The references are mostly drawn Acevedo et al.
(2013), Brown (2010), Grenade (2012) and Shafik (2013).
Correlation between governance and GDP per capita.
The literature generally finds a positive relationship between
these good governance and GDP per capita; and
Correlation between good governance and GDP growth.
There is considerable debate on this relationship. Rodrik
(2008) argues that there are many countries that are
growing rapidly despite poor governance to render suspect
any general claim to the contrary and governance is
generally not a prerequisite for getting growth going.
POLITICAL GOVERNANCE
Political governance is measured by the Worldwide
Governance Indicators (WGI) which has six dimensions of
governance, namely (1) voice and accountability (2) political
stability and absence of violence (3) government
effectiveness (4) regulatory quality (5) rule of law and (6)
control of corruption. A detailed description of the
methodology is given in Kaufmann et al. (2010).
This study utilises the 2013 version of the WGI (World
Bank, 2014). The data was rescaled using the Max-Min
formula so that it takes a value from 0 to 1 and a simple
average of all dimensions was computed.
ECONOMIC GOVERNANCE
Economic governance is measured by the macroeconomic
stability component of the Economic Resilience Index (STBERI), which was developed in Briguglio et al. (2009) and
was recently updated in Briguglio (2014). This index
contains three sub-indicators, namely inflation (measured
by the GDP deflator) , debt and current account imbalances,
the latter two measured relative to GDP.
These indicators were chosen because they are considered
to be policy induced and thus closely related to economic
governance. A detailed description of the method used to
construct the STB-ERI is given in Briguglio (2014). The data
was sourced from the IMF World Economic Outlook
database and the three sub-indices were rescaled Max-Min
formula and averaged using equal weights.
SOCIAL GOVERNANCE
Social governance is measured by the non-income
components of the Human Development Index (HDI),
namely health (measured by life expectancy), education
(measured by the average of years of schooling and
expected years of schooling). These two components are
thought to be policy-induced and closely related to social
governance. The data is sourced from UNDP (2014).
The NY-HDI was measured by rescaling the data using the
Max-Min formula, and assigning a weight of 50% to the
health component and 25% to each of the educational
components (the same procedure used by the HDI
compilers).
CSS GOVERNANCE SCORES AND RANKINGS
Country
WGI
ERI
HDI
AVERAGE
Score
Rank
Score
Rank
Score
Rank
Score
Rank
Antigua/Barbuda
0.783
6
0.348
8
0.870
3
0.667
3
Bahamas
0.802
5
0.810
2
0.933
2
0.848
2
Barbados
1.000
1
0.701
3
1.000
1
0.900
1
Belize
0.235
11
0.565
5
0.773
5
0.525
8
Dominica
0.746
7
0.464
6
0.769
6
0.660
4
Grenada
0.524
8
0.297
9
0.790
4
0.537
7
Guyana
0.000
13
0.377
7
0.000
13
0.126
13
Jamaica
0.272
10
0.000
13
0.689
7
0.321
12
St Kitts/Nevis
0.815
3
0.037
12
0.601
9
0.484
10
St Lucia
0.839
2
0.064
11
0.660
8
0.521
9
St Vincent/Grenadines
0.802
4
0.231
10
0.584
10
0.539
6
Suriname
0.222
12
0.664
4
0.307
12
0.398
11
Trinidad/Tobago
0.320
9
1.000
1
0.571
11
0.631
5
The sources are: World Bank (2014) for the WGI; Briguglio (2014) for the STB-ERI; UNDP (2014) for the NY-HDI
OVERVIEW OF THE GOVERNANCE SCORES
The previous table shows how the Caribbean Small States
fared in terms of the three indicators mentioned above. It
can be seen that, taking a simple average of the three
indicators, the Bahamas and Barbados received relatively
high scores whereas Suriname, Guyana and Jamaica
received the lowest scores.
These tendencies also emerge in the individual indicators,
although Trinidad/Tobago received low scores in two of the
three indicators.
GDP Per Capital and Growth in the CSS
Country
GDPPC
2013
Grwt
10-13
Grwt
03-13
Antigua/Barbuda
13,838
-1.24
1.99
Bahamas
23,489
1.08
0.44
Barbados
15,373
0.18
1.06
Belize
4,602
2.47
3.35
Dominica
7,034
0.26
2.57
Grenada
7,697
-0.02
1.68
Guyana
3,729
4.96
3.30
Jamaica
5,134
-0.08
0.51
13,115
-0.69
1.32
Saint Lucia
7,801
-0.61
1.77
Saint Vincent/Grenadines
Suriname
Trinidad and Tobago
6,563
9,240
0.45
4.60
2.13
4.98
20,611
0.12
4.18
Saint Kitts/Nevis
Source: IMF (2014)
GDP Per Capita and Growth in the CSS
As can be seen from the previous table, two growth
indicators were selected one representing the post-crisis
years (2010-2013) and the other a longer-term period
(2003-2013).
In the case of the growth indicators, it appears that the
fastest growth tended to occur in the countries with
relatively low GDP per capita, namely Guyana, Suriname
and Belize. Conversely, Barbados and Bahamas, which
received relatively high governance scores registered
relatively low GDP growth rates.
This tendency is also applicable globally.
CORRELATIONS BETWEEN GOVERNANCE
INDICATORS, GDP PER CAPITA AND GROWTH
The table below shows that there is a tendency for positive
correlation between per capita GDP of the 13 CSS and their
governance scores.
But the correlation of governance with growth was not
positive and tended to be negative.
Variable
GDP
Per Capita
Real Growth
03-13
Real Growth
10-13
Correlation with
WGI
Correlation
with ERI
Correlation
with HDI
Correlation
with AVG
0.408 n
0.616*
0.281n
0.694*
-0.603*
0.437n
-0.463 n
-0.360 n
-0.679*
-0.339 n
-0.468 n
-0.450 n
CSS SCORES IN A GLOBAL CONTEXT
It can be seen that the high-income (HIE) CSS registered
lower scores in the three indicators when compared to the
average of their rest-of-the-world income comparators.
Category
CSS: High-income & Upper-middleincome (average) (excludes Guyana)
All countries: High-income & Uppermiddle-income (average)
CSS: High-income (average)
All countries: High-income (average)
CSS: Upper-middle-income (average)
All Countries: Upper-middle-income
(average).
WGI
STBERI
NYHDI
0.681
0.449 0.665 0.598
0.641
0.580 0.727 0.649
0.730
0.520 0.685 0.645
0.780
0.629 0.809 0.739
0.646
0.397 0.651 0.565
0.500
0.529 0.644 0.558
AVG
GLOBAL COMPARISONS
The previous table also shows that the overall score of the
upper-middle-income (UMIE) CSS was almost similar to
that of their income comparators. However they registered
higher WGI and HDI scores than their global income
comparators and a markedly lower score in the STB-ERI.
The CSS, as a group, registered the worst score, in their
economic governance. A deeper look at the STB-ERI index
shows that the most important source of instability in the
CSS is related to debt.
IMPLICATIONS
The indicators presented above, show first and foremost
that desirable governance scores, be they political,
economic or social, are correlated with GDP per capita. This
would seem to suggest that good governance is associated
with economic prosperity. This conclusion, also often found
in the literature, supports intuitive thinking, given that good
governance is likely to mean responsive administration,
better institutional set-ups and more efficient utilisation of
resources.
However the direction of causality of this connection has
been questioned, as indicated in the literature section, given
that it is possible that economic development comes first
and this enables the country to better afford governance
institutions, and not vice-versa. Another possibility is that
they are simultaneously determined.
IMPLICATIONS
Thus, with regard to political governance, policies in the
CSS that are conducive to accountability, political stability,
absence of violence, government effectiveness, regulatory
quality, rule of law and control of corruption tend to be
associated with economic well-being.
This also applies to CSS policies that lead to macroeconomic stability with regard to economic governance and
improvements in education and health, with regard to social
governance.
IMPLICATIONS
The political and social governance indicators considered in
this study do not seem to be positively correlated with
economic growth among the thirteen CSS as at the global
level – on the contrary there seems to be a negative
correlation between these two variables.
In the case of the CSS, Guyana and Suriname, which
received relatively low governance scores, are the fastest
growing economies among the CSS. Conversely Barbados
and The Bahamas, the fastest growing CSS, registered
relatively low growth rates. This would seem to contradict a
commonly held view that growth and good governance go
hand-in-hand.
IMPLICATIONS
One can argue that this is because the relationship between
governance and real GDP growth is likely to be between
changes (and not levels) in the governance variables, as
what matters are improvements in this regard.
The reason for this is that Governance improvements may
be easier to achieve from a relatively low starting point. In
other words, it may be more difficult to improve governance
once a country reaches or almost reaches a peak when
compared to a country which has considerable room for
improvement – a reality which may be termed as
“diminishing marginal good governance”.
IMPLICATIONS
However, good governance is still likely to improve the
chances of growth, other things remaining constant. For
example if one compares growth in two countries, A and B,
with country A better economically governed than country B,
everything else remaining equal, including the stage of
development, one would expect that country A would
register a higher growth rate than country B.
A related argument is that if country A is less developed
than country B, its catching-up performance can improve as
economic governance improves, in which case improved
governance gives rise to an upward shift in steady state
conditions of that country. As a matter of fact, some
developing countries have converged in their income per
capita with the high-income countries, possibly due to
improvements in their political, economic and social
governance.
IMPLICATIONS
Therefore the result of a negative correlation between GDP
growth and governance should not be interpreted as an
indication that good governance is undesirable for growth,
and that it should not, therefore, be pursued.
On the contrary, the fact that good governance and
economic prosperity are correlated, in that the best
governed countries tend to enjoy the highest standard of
living, can be seen as a sign that well-governed countries
do reap benefits in the form of high income per capita, albeit
this has occurred over a long period of time. This
conclusion, it goes without saying, applies to the CSS,
where the most prosperous small states are the best
governed economies.
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