Recess Reflections: Protectionism in Small Economies

Welcome back to Recess Reflections. If it’s your first time here, let’s recap a bit: Recess Reflections is a weekly series that I started in 2022, during the Parliament of Sint Maarten’s summer recess. Each week, on Thursday, for six weeks, I’ll share my thoughts on particular topics impacting St. Maarten, as well as the Caribbean region.

To kick us off for summer 2023, we’ll look at protectionism, and the harm it has and continues to do to several Caribbean countries, including and especially St. Maarten. Protectionism, for those who might not know, refers to government policies that restrict international trade or market diversification in order to protect domestic industries and companies.

Sounds good in theory if you’re a big country with an even bigger economy, but for small developing states, it can spell trouble. These policies aren’t necessarily written down anywhere; sometimes they’re a set of unspoken agreements that only show up when a company, especially a government-related company, faces the very natural ‘threat’ of competition. It’s not (usually) done from a place of malice; very often the goal is to ensure that locals are the first considered for certain positions, roles, etc. However, even this noble approach can lead to the detriment of a particular industry, especially if there is minimal to no professional capacity at the level required within your labor market.

What this behavior has led to in St. Maarten is the creation of monopolies or the stagnation of growth in several sectors that are critical to the country’s development. We do not need to look far; the saga of NV GEBE is a cautionary tale for the sluggishness that can occur when a company holds a monopoly in a particular sector. As successive governments, including this current one, rush to satisfy UN SDG goals for climate change and emissions reductions, we remain saddled with an energy company that has not evolved as the decades have passed.

A second example is Telem Group and, since we’re being honest, telecommunications in general. With the lack of a solid vision for the country’s ICT future, the regulator meant to oversee and execute this vision, Bureau Telecommunications & Post (BTP) cannot actually complete its task. But a hefty dose of protectionism, possibly motivated by keeping a local in place no matter what (even if he or she is not suited to the role) has led to stagnation in Telem Group as well. There is no getting around it; UTS had reached a similar point and this led to the sale to Liberty Latin American/Flow. Many don’t recall that the reason for Telem’s red rebranding stemmed from the very real rumor that a sale to Digicel was coming. A sale doesn’t always mean a name-change, so companies will adjust branding to match with the parent company when they can. That sale never materialized and if you speak to any politician who was around then, the answers are the same: how could we let go of something that’s ours? And there’s the rub.

Because the ugly word of the day is, of course, privatization, whether in its entirety or in partiality. It’s a spooky word that many Caribbean governments, like St. Maarten’s, use to build fear of professionalization into people. But there’s the emotional/pride driven belief and then there’s the reality of small economies with evolving populations. The appetite for broadband connectivity is insatiable; our approach to internet connectivity has not evolved to come remotely close to satisfying it. As a gamer who plays heavy online titles like Warzone and Overwatch, I sometimes struggle with connectivity and find myself playing early in the AM or late at night to compensate for the other folks sucking up bandwidth. Telecoms is one example. But there are many others, from GEBE to even the Princess Juliana International Airport and the Port of St. Maarten.

Much of the argument against partial privatization is steeped in subjective emotion, and not objectivity, and I understand that. It’s ours. There is a certain level of pride to be felt in ownership, but with ownership comes significant risk and not always a level of risk that we can handle. There are examples of partial privatization, as consortium, in the region and elsewhere, of course, even in airports and ports. Curacao Airport Partners is one such consortium example, and one I am researching further. The hiccup will be, of course, if politicians can set aside ego and favor giving for the enhancement, through professionalization and improved governance, of these entities that have been their playgrounds for some time. Ironically, it may not be up to them eventually; market energies might force a hand to be played that no one has done the emotional work to be ready to play.

When ideas like consortiums are brought up and detractors begin to chomp at the bit ("we giving' away everything!" is the usual battle cry), I ask them a simplified version of this question: Can small economies sustain holding the risk bag in perpetuity, or should there be measures taken to spread the risk, inject fresh blood into government-related entities and professionalize these companies, while also de-politicizing them?

That’s the question I want you to ponder, reader. I’m open to feedback. Till next time.