sir k dwight venner : the eccu economic review 2005 presentation by sir k dwight venner, governor of the eastern caribbean central bank, at the eccb headquarters, st. kitts, 12 january 2006. * * * good evening fellow citizens of the eastern caribbean currency union on behalf of the monetary council, board of directors, management and staff of the eastern caribbean central bank, i bring you greetings and best wishes for the new year. i welcome this opportunity, once again, to address you on the economic performance of the currency union during the past year, and to share with you the bank's views on the prospects for this year. the year 2006 will be one of the most defining periods in the lives of the people of the oecs and the wider english speaking caribbean. the reason for this is simple. it lies in the wide variety and great intensity of the challenges we will face as very small states in a rapidly changing regional and international environment. there will be tremendous challenges for us in how our political, economic and social institutions exercise their capacity to respond to new and unexpected circumstances in a global environment, in which each national entity places its interests before those of others. in fact, recent circumstances, most notably the negotiations on access for our bananas into the european union clearly indicate that our small size does not evoke much sympathy in international economic relations. this should make it abundantly clear to us that we need to proceed into the future with an increased sense of realism, objectivity and clarity. it is, therefore, perhaps more than symbolic that in 2006 we will be celebrating the 25th anniversary of the signing of the treaty of basseterre. this treaty of cooperation between our countries has been in very large part responsible for their survival and growth over the intervening years. it is also important to note that we have been working on revisions to the treaty, and that these will reflect our considered responses to the changes which have been taking place in the domestic and external environments. the year 2006 will witness some very specific events and circumstances which will require new and strategic responses from us as individuals, families, business firms, trade unions, civic organisations, countries and as a closely connected group of countries, that is the oecs. the major challenges in the international arena will come from the new trading regimes which are now being negotiated under what is called the doha round. the major issues involved would be liberalisation in the trading of agricultural commodities and services. these will have a major

respect to interventions that involve the state, the private sector and external institutions and organisations. the first concerns the banana industry in the windward islands which brought about a virtual socioeconomic revolution in those islands. the banana industry came about after the demise of sugar and was established in large part by five critical decisions taken by the british government : 1. that the industry should involve production in all four islands to achieve critical mass ; 2. the establishment of a research center to select the most appropriate strain of bananas and to treat with the pathology of a crop which is very susceptible to plant diseases ; 3. the shipping company van geest was contracted to transport the crop ; 4. marks and spencers was contracted to market it in the uk ; 5. the british government provided a protected market. small farmers thrived in this arrangement and valuable supply chains were established between the uk and the windward islands. in the case of telecoms, an intervention by the world bank led to the liberalisation of this sector which experienced significant growth. the world bank also made a critical intervention in the cruise ship industry with respect to charges for disposal of solid waste which has had an impact on the environment within our coastal waters. direct foreign investment has been of great importance but it has not been noted for the transfer of bis central bankers ’ speeches technology and management skills. this intervention must be more programmed to have a significant developmental impact which would require the state and the domestic private sector working in tandem to ensure that there is transfer of technology and substantial spillover effects from foreign investment. two issues of interest to policy makers would be a study of the influence of the exchange rate and the wage levels on the potential for export competitiveness, and the impact on our economies of missing out on the development of secondary activities such as manufacturing. this latter has important path dependent implications. the natural sequence of development moves from primary to secondary to tertiary economic activities. we have passed from primary to tertiary and may have missed the advantages and externalities of the secondary stage. this was the stage at which the change in production methods between agriculture and industry became differentiated with major innovations based on science and technology becoming dominant. the establishment of educational institutions which catered to the new production technologies became a critical element of the new economies. measurement and precision became a part of the production process. the absence of an industrial revolution in our countries may have precluded a different trajectory in our economic growth. since we have moved to basically service economies based on tourism, the question then