The Caribbean Development Bank tackles infrastructure, agriculture and energy as it works to encourage sustainable growth in the region
[dropcap]D[/dropcap]r W. Warren Smith, President of the Caribbean Development Bank (CDB), had good news for stakeholders across the region earlier this month. Delivering the bank’s annual report, he said: “The region is in its strongest position since the start of the 2008 global recession.”
Bolstered by US tax reforms, rising commodity prices and the strengthening of the British pound, the global economy expanded in 2017. This upturn was also felt in the Caribbean where the regional economy grew by 0.6% despite the devastating effects of hurricanes Irma and Maria in the latter half of the year. All but five of the CDB’s Borrowing Member Countries (BMCs) reported growth, and Saint Lucia was the fourth highest in the region with a 2.9% rise (attributed to strong performances in tourism and construction).
The CDB struck a note of caution, however, with the bank’s Director of Economics, Dr Justin Ram, drawing an unfavourable comparison between Caribbean countries and other small island nations. “The Caribbean’s economic performance as a whole continues to lag behind that of other groups, most notably other small developing states. This comparison suggests that small size is not an obstacle to growth but rather that other structural impediments might be the reason for the Caribbean’s tepid performance.”
STRENGTHENING INFRASTRUCTURE
The message from the CDB is that the Caribbean could, and should, do more. To build on achievements to date, and help deliver the bank’s projection of 2% growth in 2018, several key areas of focus have been identified. These include infrastructure, energy efficiency and renewable energies, youth unemployment and climate-smart agriculture.
Dr Daniel Best, CDB’s Director of Projects Department, estimates that it will take around US$30bn to close the infrastructure gap in the Caribbean and added: “The aim is to accelerate investment in social and economic infrastructure without creating unsustainable public debt.”
In the wake of September’s two devastating storms, the most pressing priority for the bank is helping affected countries rebuild. “People experienced great mental and physical trauma. This, combined with loss of life and infrastructure, is a setback for our region,” said Dr Smith. “The hurricanes claimed too many lives and caused untold damage to critical infrastructure. We are going to use the resources we have to help those countries recover, and recover quickly. Our objective at CDB is not simply to enable BMCs to rehabilitate damaged infrastructure but to also improve their resilience by building back better and stronger.”
The CDB’s mission, therefore, in the coming year is to incentivise Caribbean countries to invest in climate-resilient infrastructure. In the short-term, the bank secured US$144m from the European Investment Bank for emergency repairs post-hurricanes. The UK Caribbean Infrastructure Partnership Fund will provide an additional £28m to assist in the recovery efforts also, with a final agreement for disbursement expected by the end of Q1 2018. In total, the CDB aims to make US$700-800m available to BMCs to help them rebuild.
Over the long-term, BMCs will be able to access a new US$70m infrastructure fund created in partnership with Mexico’s development bank to upgrade and expand facilities across the region.
AGRICULTURE AND ENERGY
Building more resilient communities across the Caribbean also requires enhancing food security and developing sustainable energy resources. Climate-smart agriculture features heavily on the bank’s agenda for 2018, with ongoing projects in Grenada, Jamaica and Haiti. These initiatives encourage the adoption of new technologies and farming practices to help countries mitigate the effects of climate change.
Another weapon in the fight against climate change is energy production. The CDB wants its BMCs to shift from polluting and inefficient sources to renewable, sustainable methods that exploit the Caribbean’s natural resources while remaining environmentally and fiscally responsible. In 2017 the bank approved funding for electricity grid modernisation, street lighting projects and geothermal energy exploration.
“We made noteworthy contributions to advancing the region’s sustainable and clean energy agenda in 2017,” said Dr Smith. “These projects will contribute to reduced greenhouse gases emissions and provide cost savings to government, consumers and the business community.”
Geothermal energy is a particular area of interest for the CDB going into 2018. In November it formally accepted a grant of US$14m from the European Union for geothermal energy development in five countries: Saint Lucia, Dominica, Grenada, St Kitts and Nevis and St Vincent and the Grenadines. The project is expected to generate up to 60MW of geothermal capacity in those small island nations, potentially reducing their annual fuel bill by up to 722,000 oil barrels.
SUPPORTING YOUTH
Reducing Saint Lucia’s reliance on oil imports would help the country reduce its high energy rates – a key factor in encouraging new business to the island. And new business would help Saint Lucia address one of its most pressing problems, high unemployment.
Saint Lucia has the third highest unemployment rate in the region at 20%. The country did, however, get credit from the CDB for trending downwards – Saint Lucia’s unemployment rate has dropped a total of 5% since 2014.
The CDB wants to target youth unemployment, in particular, driving a new generation of Caribbean citizens into work in niche industries and expanding sectors. At the end of last year the bank launched its Youth Policy and Operational Strategy to assess the challenges and opportunities in youth development. It also created the Cultural and Creative Industries Innovation Fund to support creative industries – an area that typically attracts youth entrepreneurs. The bank has made an initial contribution of US$2.6m to launch the pilot project which will offer technical assistance and grants to government, business support organisations and academia within that field.
A POSITIVE OUTLOOK
The CDB expects Saint Lucia’s economy to grow by 3.1% in 2018, aided primarily by further investment in tourism. It is forecasting similarly positive results across all BMCs, with a total regional expansion of 2%, driven primarily by a return to growth in Trinidad and Tobago and Jamaica.
The biggest obstacles on the horizon are macro-economic challenges such as high public debt, low productivity and competitiveness, poor human development and environmental threats. Dr Smith is confident, however, that the region can make progress in each area with the help of its international partners and engagement from all Caribbean citizens. “Despite the setbacks caused by the natural disasters in 2017, our region must get back on track as quickly as possible.
“The Caribbean has had a long history of bouncing back from natural disasters and other external shocks. That’s the story of our lives. We see immense opportunity for BMCs to come back stronger and more resilient.”
