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The Caribbean may be returning to an era of monopolies Liat is at present giving us a glimpse of a future which we once thought was part of our past.

The challenge for Caribbean business is huge. How do you create profit margins in a region with a relatively high cost of labour, a bevy of trade unions and governments who talk about efficiency but act otherwise?

The Liat example is salutary. The issue of Liat and profitability is closely linked to the politics and employment equation. In a usual efficient airline, and especially given the size of the markets it operates in, Liat could shed 40% of its staff and actually be profitable.

We understand the human equation, but at the same time it is the customers who pay prices that could take them to New York and London, for trips between place like Dominica and St Kitts.

These prices we are told are the natural cause of the cost of doing business for Liat. Those costs are high because governments are loath to make the unpopular decision as major shareholders to sacrifice their nationals who in the main are the employees of the airline. An efficient Liat, employing less staff, will be able to drive down its costs and become profitable with lower fares. If not, then what is the point of having a virtual monopoly of travel in the Eastern Caribbean?

In banking similarly, the reality is that the commercial and retail activity in the Eastern Caribbean cannot logically support the number of banks in the region. Rumours of the acquisition of RBTT by First Caribbean are not surprising. With Republic Bank form Trinidad buying up many of the National Banks in the Caribbean, and with the lower profile of banks such as Royal Bank of Canada in certain islands, it is another area where a consolidation of institutions would be natural scenario.

The challenge through all of these is that the consumer in the Caribbean has little protection. Internet price are still too high and bandwidth is shaky in a world where Voice Over IP still costs less than calling between Caribbean countries or even calling your next door neighbour on fixed lines. Caribbean companies’ marketing campaigns also often misrepresent the products and services that they offer and institutional respect for the local consumers is often secondary to the average tourist. This is a concern.

The return of monopolies may be logical, but we can create consumer bodies and watchdogs which ensure that our airlines, banks and telecoms companies amongst other do not take advantage of Caribbean people.

CMSE cannot work where travel is too expensive, banking is prohibitive to the entrepreneur and telecoms are restrictive. This is, we are sure, a word to the wise.

Source:
This article was posted in The Tip! – A free publication published every Wednesday and distributed through-out Dominica.

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5 Comments »

Comment by Counterpoint
2007-07-09 10:59:34

Monopolies only drive prices up. This is not the solution. The problem is that governments make the cost of living so high by imposing high taxes (sales, VAT, consumption, duties, income tax, corporate tax, etc.) The overall high cost of business is directly related to these taxes, which tend to stack one upon the other.

Inefficiency of the labour force is only a small piece of the puzzle. This is a problem; however, the cost of unskilled labour is actually quite low, giving the region an advantage in some industries.

Look at the cost reductions in the telecom sector that have come about as a result of competition. How can you imply that returning to monopolies would be positive? It would be disastrous for the region. What is important is the overall profitability of business (the economy). Not the amount of profit a few monopoly companies can make.

The world is filled with examples of how small business and competition drives healthy economies. Monopolies should be reserved for situation where the service provided is critical and no players would exist without a grant of monopoly power.

 
Comment by Douglas755
2007-07-10 09:46:27

I totally agree. Monopolies are not the answer. We need more competition and less taxation. Prices are simply too high for the average person in the Caribbean to flourish, and this drags down the entire economy.

 
Comment by LJ26
2007-09-06 22:01:40

The governement really needs to reduce the taxes, in that way the poulation will not be afraid to open buisnesses, they’ll take the challenge then there will be competition.
All depends on the domaine, that will creat jobs, more jobs means the population becomes more active.
The economy will rise……

 
Comment by Ruth
2007-09-07 15:17:02

Yes, I was successful in entering the contest.

 
Comment by vacation travel Subscribed to comments via email
2008-07-28 22:09:12

Travel in the Caribbean can often be somewhat expensive . Unless you are a student with a summer backpack it can be a rather expensive vacation for many. Costs are great it is true.
Very little for the most part is made locally and all imported. Still there are inherent costs of nepotism in the local taxes and government rules and operations. Now add the price of fuel and oil ( all imported) to the mix. There is often not a middle of the road vacation travel setup for accommodations and food. Its as if the travel and tourism industry is not dealing with masses but rather a select few. Its similar to the mentality of the locals at Winnipeg Beach where cottagers are seen as wealthy. If you can afford to own a house and a cottage – then you can afford to and be grateful to pay high local taxes as well as poor services. If the Caribbean tourist and vacation industry is to prosper it must get over this limitation and begin to provide full ranges of services for vacationers across the board

 
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