Most Honorable Prime Minister of St. Lucia, Dr. Kenny Anthony
Sir Dr. Dwight K. Venner, Governor of the Eastern Caribbean Central Bank
Dr. Didacus Jules, Director General of the OECS Commission
Dr. Justin Ram, Director of Economics, Caribbean Development Bank
Mr. Wayne Mitchell, Regional Resident Representative of the International Monetary Fund
Government Officials, Development partners, Ladies and Gentlemen
· It is a great privilege to be here today on this beautiful island of St Lucia to discuss a new agenda for sustainable growth in the Caribbean.
· I want to especially thank Prime Minister Anthony for hosting the Third Regional Caribbean Growth Forum and acknowledge his leadership on promoting a pro-growth agenda. Prime Minister Anthony has been a champion of the Caribbean Growth Forum initiative.
· This initiative engages government, private sector and civil society leaders and has led to date to a substantial number of reforms throughout the region.
· Just to name a few, for instance the creation of a fund by the Grenada Development Bank which supported Small and Medium Enterprises; the establishment of the National Competitiveness and Productivity Council in St Lucia which recently conducted an assessment to increase productivity in the workplace; or in the Dominican Republic where a Single Stop Shop for entrepreneurs helped reduce the time to register a business from 45 to 7 days.
· Some of the key questions to be addressed during these two-days are:
o What are the new strategies and tools necessary to achieve growth?
o How can the region better exploit its openness to trade? And
o How can the Caribbean private sector better harness growth opportunities coming from trade?
· We all know that the Caribbean region is very diverse in its rich and varied cultures, languages, geographical settings of mainland to island nations, as well as its economic profile from service based to resource based economies.
· Yet we are here together because despite these differences, many of these small economies are facing common challenges:
o Low growth: With some notable exceptions like the Dominican Republic, most countries in the region are finding it difficult to revive growth after the global financial crisis of 2008.
o Small scale: as small and open economies, the island states tend to have production and exports concentrated in one or two sectors, which brings uncertainty driven by terms of trade volatility.
o Vulnerability to external shocks: the global financial crisis exposed the fragility of the Caribbean region. Small Island Developing States typically have relatively higher investment rates, while their saving rates are low. This combination of high spending with low savings makes it difficult for a country to build enough buffers that can be used in bad times. This decreases their capacity to face external shocks.
o Oil dependent energy matrix: Most small Caribbean countries, particularly the Eastern Caribbean States, depend almost entirely on oil to supply their electricity needs - with oil and gas expenditures taking between seven to 20 percent of some countries’ GDPs.
· All these factors combined contributed to trap many countries in a vicious cycle of low growth, high debt and limited fiscal space.
· Adding to these challenges, the region is also exposed to recurrent natural disasters: The hurricane season has started and Caribbean states are among the countries in the world most exposed to natural hazards. Five out of the ten most disaster prone countries in the world are Caribbean.
· To revive growth and sustain it, we need to address these challenges together.
· The first phase of the Caribbean Growth Forum has put the spot light on improvements in investment climate, logistics and connectivity, and skills. These are necessary foundations to harness growth. But, efforts need to be sustained to effectively respond to the changing economic environment.
· Small economies have no choice but to choose. For instance, they have to choose what kind of industries they will rely on to spur growth. And for this, they have two strategy options:
1. Let the market choose: this is the example of the medical industry in Grenada.
2. Or take more proactive public policy approaches as per the example of Costa Rica, which embarked on a comprehensive set of reforms to transform an agricultural rural based economy into a high tech export economy. Costa Rica started by identifying industries in which it would be competitive, investing in human capital and changing its education system and curriculum, and opening up to the global economy with smart policies to attract certain types of Foreign Direct Investment (the case of Intel in the late 1990s). This was done in the context of resolving an unsustainable debt problem inherited from the 1980s.
· We will have a chance to hear more about the Costa Rican experience from former Minister of Trade Alberto Trejos later this morning.
· So, in a region like the Caribbean, in spite of diversity there are many challenges we can face together:
· Tackling these issues effectively requires efforts at the regional level, since effective solutions call for either risk pooling or economies of scale:
o The Caribbean Catastrophe Risk Insurance Facility’s (CCRIF), as the first multi-country catastrophe risk pooling mechanism able to mobilize emergency funds within the first two weeks of the disaster, is a good example of how regional integration designed to take advantages of economies of scale is critical. All OECS countries are members of the CCRIF and Central American countries are now joining the facility.
o Trade matters: There is significant potential for boosting trade. Our recent analysis which will be released today suggests that while entrepreneurs are already seeing improvements in the business climate, continued efforts to improve trade facilitation and step up investments in research and innovation, as well as quality education, will help improve skills and generate well-paid jobs in the Caribbean.
o Working together to improve the investment climate through better transport and better access to electricity:
Connectivity: Movements of goods and services between islands are limited. Caribbean maritime connectivity remains low compared to other small island economies (WB’s Logistics Performance Index average score between 2007-2012 is lower than in other regions: 2.40). Coming to St Lucia, we have all experienced the challenge of limited connecting flights, even for those of you who came from a neighboring island. Improving connectivity through air and sea could unlock the potential for tourist’ island hoping and facilitate intra-regional trade.
Energy security: Last January, Caribbean leaders and leading energy partners agreed to pursue a joint regional framework for energy development at the Caribbean Energy Security Summit hosted by US Vice President Biden in Washington D.C.
In response, the World Bank is working with CARICOM and other partners to build a coordinating platform to share knowledge, technical assistance and resources in efforts to make the energy sector more efficient, sustainable, green and attractive to investors.
· Let me conclude by telling you that as a partner, the World Bank Group is fully committed to support the sustainable development agenda that many Caribbean nations are pursuing and to identify innovative solutions to the particular development challenges they face.
· I commend the Caribbean Growth Forum member Governments for their commitment and the progress made in opening a real dialogue between the public and private sectors.
· During the last Annual Meetings in Washington, some of the Caribbean region Prime Ministers including Prime Minister Anthony raised the need to identify opportunities in value chain approaches to build linkages among growth sectors; and prospects to promote innovation and entrepreneurship.
· This high-level forum is a great opportunity to learn from other experiences and look at new approaches and drivers to help build these linkages, and promote innovation and entrepreneurship in the region.
· During these two days, I look forward to see how we can leverage lessons emerging from the region and other small island developing states.
· I am confident that together we can create a virtuous cycle of faster economic growth and lower debt, generating opportunities for all.