By: Kimberly Ramkhalawan, contributor
kramkhalawan@caribmagplus.com
December 11, 2020
Digital tools are needed in the new world post COVID-19 a top Caribbean economist insists.
The COVID-19 pandemic that hit the world this year might seem to be nothing near good, but one economist says if anything positive were to come out just might be the push for digital economies.
Caribbean Economist, Marla Dukharan, speaking at this year’s virtual RF Investor Forum, says the pandemic has underscored the need for governments to head in this direction if it were to create sustainable economies moving forward.
As Chief Economist at Bitt Inc, and having championed the need for governments to digitize their economies in the last three to five years, Dukharan says doing this can assist in the ease of doing business, while changes like these can assist in an increase in productivity within government services.
But just how ready are regional governments willing to take on this move?
So far in the region, steps have been taken by Barbados and the Bahamas to an extent to implement these economies through programs rolled out in the wake of the pandemic, with Grenada taking the step towards cryptocurrency through a joint program with the World Bank.
The Bahamas has launched nationally the world’s first digital currency, the Sand Dollar, in October of this year and the Eastern Caribbean Central Bank launched its DXCDCaribe pilot, in March, 2019. Anguilla passed their Anguilla Utility Token Act in 2018, but has not launched an official digital currency to date.
Looking at the current state of economies in the Caribbean, Dukharan notes that economic growth had already been in a slump pre-coronavirus, and that growth cannot be expected to return until 2022-23, and if so, its figures won’t look anything near to growth experienced in 2019.
Attributing this to poor spending, and a lack of investments among regional states, she says this has redounded to a limited productive capacity, which in turn caps growth potential and job creation as government revenues are affected negatively.
Dukharan is instead painting a picture that says despite some growth in the future, Caribbean economies will not look the same anymore, as the pandemic has forced other markets to emerge, including the tech sector, forcing many governments to look at doing business differently. The upsurge in online business solutions as compared to traditional shopping methods in an effort to steer clear of contracting the virus for many, has been a deciding factor in the way they do business.
Even within the Caribbean, purchasing products and goods online has seen companies look to offer new shopping experiences for their customers.
And while any growth in the future sounds good, she says it can be a lot more if Caribbean governments look at doing things differently if its open enough to change and tackle the digital shift.
To make this move, Dukharan says digital tools are needed for creation of these new sectors and development of new revenue streams. However, it requires government investment if these areas are to flourish for the creation of new jobs while attracting FDIs through ICT enabled sectors. These areas vary from gaming, education and streaming sites, which hold the potential to bring trillions of dollars to the region.
The IMF has stated that adopting mobile money transactions has proven to be quite effective in improving sales among firms by 26 percent, with 2019 figures showing some US$2B mobile money transactions done daily.
Underscoring the need to embrace technology as a means to strengthening our digital ecosystem, Dukharan says incentives for other firms following suit only come when this adoption is tackled by administrations in the region first. As to how governments stand to benefit from digitizing of its services, she says this means fiscal savings, increased tax collections, an improved efficiency in spending and productivity.
This kind of move often indicates the direction a nation is heading, where time is no longer spent in waiting in lines to clear cheques, send wires, and utilize other time-consuming banking solutions, but be done in a much faster and cheaper manner at retail and wholesale level.
So far, the steps taken by regional governments to steer this way have been described by Dukharan as being ‘sub-optimal’ with very little to no gains recorded, and this can only change when governments fully implement these systems and trust is built among consumers with the public driven to adopt these methods of transactions as well.
At the turn of the third quarter in 2020, the Bahamas saw the introduction of the “Sand Dollar” by its Central Bank. The digital currency allows for Bahamians to pay at merchants who have an approved e-wallet verified by the Central Bank, using their mobile phones. The move is said to assist payments for many residents who live along the archipelago where banks are not readily available.
Barbados is another island in the region attempting to board the digital shift and use COVID to its advantage, having rolled out the red carpet to visitors looking to stay a little longer than a few weeks through its “Welcome Stamp” visa. Having been dubbed “digital nomads”, the travel permit attracts families and persons looking to relocate to the island and work remotely in a safe environment with lower COVID figures. The visa comes at a US$2000.nonrefundable fee for individuals and US$3000 for families.
So far it is said to have earned Barbados at least one million of its dollars within in the first two months of launch, while according to the IMF, some 405 applicants will account for almost US$21.5M in annual rentals revenues alone. This however does not account for monies that will be spent by its visitors in utilities, food, and entertainment.
It’s hoped this will keep the Bajan dollar afloat in these times, as tourism is its main economic source, but increase its forex and earnings in other sectors, including its technology reputation.
As to the level of readiness of other countries, their systems and populations for this approach in the region, Dukharan says countries that have been identified as having a “low financial inclusion level” are more likely to come onboard the digital train.
Citing nations such as Guyana, Haiti, Suriname, Jamaica and the Dominican Republic that already have digital means of transferring funds at a retail level for those who do not have financial inclusion, Dukharan says the readiness to adopt depends on the society. In recent times, the level of adoption has proven to be equivalent to the level of desperation by countries looking for solutions to the problems that exist. Countries that have affordable banking solutions for its people are less likely to come onboard. Depending on the need to move value or currency around without financial structures will always push the need to be innovative in creating a digital solution to a cash crisis.
If lessons are to be learnt in adopting a digital economy, Dukharan suggests modeling after Estonia, which has been successful in implementing E-government services, with two-thirds of its population having electronic IDs, 95 percent of its tax filing done online and completed in under three minutes, and a reduction of time spent doing business transactions, amounting to saving five days per year per person through its use of digital signatures.
Dukharan says the potential for Caribbean nations becoming sustainable is enormous and wide, if governments see the need to close the gap and make the digital shift toward the future, with focus placed on Artificial Intelligence, Cloud Technology, innovation in interoperability, platforms and data analytics if countries are to develop new sectors of revenue streams.
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