Linda Hutchinson-Jafar, Business Writer

Dr Omar Davies, opposition spokesman on fiannce, spoke at the Caribeean Business Investor Conference 2008 in Port of Spain, Trinidad and Tobago. - File

Jamaica's opposition spokesman on Finance Dr Omar Davies said the Caribbean's financial system is not ready to stand as equal with the best in the world, but suggests that focused and coordinated action can take it there in the medium term.

An important factor, which will influence the march toward, what he called "prime time", is the willingness of leadership in the region, in both the public and private sectors, to abandon some of the 'cast in stone' prerequisites for deepening regional integration, he said at the Caribbean Investor Conference 2008 in Port of Spain last week.

"Too much of the discussion on economic integration is dominated by bureaucratic wrangling about objectives with diminishing relevance in a rapidly changing world economy," said Davies, a featured speaker on day two of the conference.

"Conversely, too little is focused on devising pragmatic solutions to new challenges."

Torturous road to prime time

His basic conclusion, however, is that the road to prime time for the regional financial sector was made more torturous by the focus on targets which, he said, have very little chance of being achieved in the medium term.

Instead, the Caribbean should seek to identify a 'do-able' pragmatic set of actions, which could then lead to an expansion of output of goods and services within the region, facilitating its move toward economic prime time.

Davies, Jamaica's former minister of finance, said the region needs a specific timetable for establishing uniform regulatory criteria for financial institutions and to share critical information on firms licensed in each jurisdiction.

There is also need for uniformity in the classification of institutions, as well as criteria for their management, board personnel and operating procedures, allowing each licensed institution to participate in all areas of activity.

"This step would represent a pragmatic recognition of the impossibility of separating into unique categories the increasing number of forms of financial intermediation, particularly if clients have the desire to carry out a range of transactions at 'one shop'," Davies commented.

In the case of free movement of capital, Davies said there needs to be a pragmatic assessment of the status quo, with a precise identification of instances ini which flows are delayed or interrupted.

He also proposed increased cooperation between central banks and commercial banks to address the obstacles.

On the issue of pension funds, Davies foresees policymakers coming under pressure to privatise the management of state schemes. He also predicted that the private pension funds market will become increasingly competitive in a fight for share, given the region's ageing population and growing per capita income.

Useful first step

Within the context of the development of a regional financial market, a useful first step, Davies said, would be to allow a certain percentage of pension fund assets to be invested within the region.

These investments, he adds, should be accompanied by regular reassessments that are based on improvements to the rate and level of domestic savings or the adequacy of 'bankable' projects domestically which provide an adequate rate of return.

He also advised that there should be no differentiation in terms of the regulatory regime between indigenous and external institutions.

Rather, clear guidelines should be laid down to which all institutions should adhere.

If within these guidelines, indigenous institutions can identify special niches, this should be encouraged and supported.

But at no time should this differentiation be reflected in a weakening of regulatory surveillance, he cautioned.

He said when regulators seek, or are pressured to relax rules on the grounds that indigenous institutions are actively 'promoting domestic economic growth', there is always the danger of inefficiencies and inappropriate practices creeping in.

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