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The Week in Europe By David Jessop Ten of the world's largest stock exchanges have begun discussions aimed at establishing a basis for an alliance. Their plans, if achieved, will over time revolutionise the world's capital markets, which provide the principal means to channel funds for investment. If agreed it will open a further front on which the Caribbean must compete if it is not to be left behind by the ever-accelerating pace of globalisation. The idea is simple. If successful it may well lead to a global merger. Ten stock exchanges, based in New York, Tokyo, Amsterdam, Hong Kong, Toronto, Sao Paulo, Australia, Toronto, Paris and Mexico, will each retain their own identity but begin to trade the shares of the world's largest corporations around the clock. The announcement, which comes hard on the heels of a more fundamental decision to merge the London and Frankfurt stock exchanges, may well lead to one or another exchange grouping seeking global dominance. It will also suck up international capital and increase dramatically the ability of companies registered on both exchange groupings to raise capital for further development and acquisition. The new ten-nation exchange alliance, which according to reports has been provisionally named the Global Exchange Market, will utilise a common technology to mobilise international capital for major markets. Although far from perfect, the concept is a first step towards the creation of an integrated global capital market based in a limited number of centres linked electronically. For much of the Caribbean this is yet another signal that the pace of globalisation and integration is accelerating and threatens to leave behind utterly any region without free movement of capital and a single stock exchange. The Caribbean region has a mix of both stock and call exchanges. While the number of shares traded in recent years has dramatically increased, much of the activity has been speculative and largely of a domestic nature. It remains extremely difficult for investors in one Caribbean nation let alone external investors to trade across the region. As a result there is a trend, out of Trinidad and Jamaica in particular, for very large companies mainly in financial services but to a lesser extent manufacturing, to acquire directly companies throughout the region. The objective of some of these companies is to try to enhance their own value in order to obtain eventually quotations on international exchanges, free themselves of the constraints of local capital markets or expensive commercial borrowings and move out into the wider world. This is a startling but real development that may give rise to a few Caribbean companies becoming more powerful than the nations in which they are located. It also suggests the advent of a small number of Caribbean transnational companies operating across borders with high levels of influence over governments or policies in both their parent and host countries. It is an alternative but worrying process of integration to that envisaged but so far not delivered by governments. Without a basis for creating a more broadly based share ownership may create a range of hitherto unseen problems. But is there any longer any realistic basis to believe that the idea of a socially led government-based approach to regional integration is achievable? In early May, Barbados' Prime Minister, Owen Arthur, delivered an address which at its heart questioned the pace of Caribbean integration. He suggested that the region would soon be left trailing disastrously in the wake of the process of globalisation because of Governments' inability to recognise that the only way in which to survive the process of economic globalisation is to integrate. His remarks, suggested that what was required was "a process of harmonised liberalisation which is greater and more all encompassing than that undertaken by any sub-set of states in the whole history of mankind". Prime Minister Arthur's argument was that the Caribbean integration process was already ten years overdue. If the region could not create a single market in which fiscal, monetary, exchange rate and trade policies were harmonised, the Caribbean will, he suggested, fail to participate in the globalisation process and by extension fail to transit from an older economy to one based on the ability to compete in the new world. The speech, which was sombre and at times unusually direct about the failings of neighbours and those outside the region who seek to play a role in the Caribbean's future, seemed to mark a turning point in regional analysis. For the first time it appeared that one of the Caribbean's better regarded leaders was appearing to suggest that much of the region was more likely to fail than succeed. The sense of the Prime Minister's remarks was that the region was on the edge of an abyss if it was unable to coalesce around a rapidly delivered and practical integration process. Prime Minister Arthur's remarks reflect a number of paradoxes. Some Governments are stuck in time; oblivious to the finite nature of the economic adjustments required to survive, while others believe they have found the way forward. The same holds true of business. Some of the region's larger companies are rapidly consolidating their position and power in a practical demonstration of economic integration but with objectives that understandably have little social content. Others seem content to carry on unaware of the threat of e. commerce believing that there is a future in commodities or commission-oriented business. Outside of the region the situation is just as contradictory. The principal players in North America and Europe recognise the role of integration in resolving economic problems but politically find value in the United Nations and elsewhere in a region with numerous small sovereignties. To complicate matters the same nations seek compliance with World Trade Organisation rules while as development partners largely ignore the region's problems and concentrate instead on trying to resolve the problems of the world's poorest nations. Owen Arthur's remarks suggest that the dream of a unified single Caribbean region is a long way off. Developments in international capital markets suggest further marginalisation of the region. A genuine and effective regional stock exchange would not solve the problems facing regional economies, but it would be an important step in both the direction of regional integration and the global economy. David Jessop is the Executive Director of the Caribbean Council for Europe. June 9th, 2000 %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%