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Caribbean Islands-Role of Government





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In the 1980s, the Dominican government attempted to strengthen public finances, develop the productive capital infrastructure, and diversify agricultural production. On two occasions, the government entered into an extended arrangement with the International Monetary Fund (IMF--see Glossary) to accomplish these goals. Although the nation's stated development policy called upon the private sector to be the engine of economic growth, the government's involvement in key sectors of the economy remained strong.

Dominica entered into an Extended Fund Facility program with the IMF for the period 1982 to 1984. Under the program, the government reorganized public finances, eliminating subsidies to unproductive state enterprises, and expanded government revenues through increased consumption taxes. Expenditure controls were also introduced; the hallmark of this effort was the decision to restrict salary increases of public employees to a level below the anticipated rate of inflation. This decision appeared to influence the rate of increase of private-sector wage settlements.

In 1987 the Dominican government signed a three-year structural adjustment program with the World Bank. The adjustment program was expected to encourage policies and programs that would increase GDP through investment by the private sector. In preparing this favorable investment environment, the government developed a package of incentives for private investment that included the removal of export taxes as well as the foreign exchange levy, the termination of price controls on 40 percent of controlled items, and a substantial reduction in corporate taxes for eligible manufacturing firms. To stimulate diversified agricultural production, the government removed price controls on imported livestock products and took steps to revitalize export market development for fruit and vegetable crops. At the public-sector level, procedures for investment promotion were streamlined and located in one agency, the Industrial Development Corporation. Each ministry received technical assistance in project design, planning, and management of public-sector projects. The Economic Development Unit, the government's central planning body, was staffed with a multidisciplinary pool of technical experts. In addition, wages in the public sector were no longer to be raised automatically each year; wage negotiation guidelines were drawn up that were expected to help keep increases in the public wage bill to 3 percent per year.

In support of these policy reforms, the International Development Association (IDA) of the World Bank made available US$3.1 million in credit as a structural adjustment loan. In addition, the CDB was to provide US$2 million in parallel financing.

The IMF program of structural adjustment was entered into largely because of the failure of the private sector to lead the way in economic development. As a result, the government was playing a greater role in direct investment and commerce than originally had been intended. In the late 1980s, the government owned and operated a citrus processing plant, lime-producing estates, and an export-import company and remained directly involved in communications, transportation, electricity supplies, and commercial banking.

Communications on Dominica were fair. A subsidiary of an international company operated a fully automatic telephone system with about 4,600 sets. New radio-relay links to Martinique and Guadeloupe provided high-quality international service. The government-owned Dominica Broadcasting Corporation operated a radio station on 595 kilohertz. Radio Caribbean, with studios on St. Lucia, had a small relay on 1210 kilohertz and the Gospel Broadcasting Corporation had facilities on 1060 kilohertz.

The transportation network on Dominica was not well developed. The island had about 370 kilometers of paved and 380 kilometers of gravel roads. Road conditions were often poor, however, and many areas of the interior and northwest could not be reached by vehicle. A new small airport outside Roseau was completed in the mid-1980s, and an older, larger airport was located near Melville Hall on the northeast coast. The island had no railroads. Several streams were navigable by canoe but none had economic significance. Roseau and Portsmouth were the only ports.

Data as of November 1987



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