Business

Poverty alert - Jamaica, region facing crisis

BY JULIAN RICHARDSON Assistant business co-ordinator richardsonj@jamaicaobserver.com

Wednesday, April 13, 2011    

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JAMAICA and the wider Caribbean are faced with a serious poverty crisis that threatens the well-being of many of its citizens if effective alleviation measures are not implemented fast.

The alarm was raised at a roundtable discussion hosted by the Caribbean Development Bank (CDB) and organised by the Institutional Investor magazine at the Wyndham Nassau Resort in The Bahamas last week.

CDB vice-president Dr Warren Smith said that against the background of the global recession that has left many regional economies with serious fiscal deficits, the worrying trend on the social side is that a large number of Caricom nationals have emerged on the dire end of the poverty line.

"In virtually every Caribbean country, the level of poverty has increased dramatically, this is in spite of many sacrifices that have been made to try to widen the social safety net," noted Smith, who assumes the CDB presidency on May 1.

Indeed, recent statistics released by the two largest English-speaking island economies across the region paint a daunting picture.

The latest Jamaica Survey of Living Conditions (JSLC), conducted between July 2008 and February 2009, shows that 16.5 per cent of Jamaicans are living below the poverty line. This represented a relative increase in comparison to 2007 and 2008 when the figures were 9.9 per cent and 12.3 per cent, respectively.

In Trinidad and Tobago, an estimated 20 per cent of the population is now living beneath the poverty line, up from the findings of a 2005 survey of living conditions which estimated that 16.7 per cent (or 200,000 persons) of the population were living in poverty at the time, reported the Trinidad Express in January.

Smith said that the CDB — a regional financial institution established in 1969 with a mission to be a catalyst for development resources in the Caribbean by working in a collaborative manner with borrowing member countries of the region — will work with member countries to ensure that policies to alleviate poverty are enforced.

"(An) aspect is for us to provide financing that is consistent with those policies; we need to support them to the extent that is necessary," said Smith.

"We are a small institution, so it doesn't mean that in every instance we will be providing all the resources, but one of our roles, as a small financial institution who purports to understand better than other people what the problems of our region are, is to sell to the other multilaterals the case for working with CDB and with these countries to address those problems," he explained.

CDB approved 14 loans amounting to US$270.5 million and grants amounting to US$30 million in its 2010 financial year.

Smith said that the financial institution will next year begin negotiations for the Seventh Replenishment of its Special Development Fund.

"That's the window that we use to finance the most highly poverty focus projects in the Caribbean," said Smith, acknowledging that "those discussions are going to take place against a very difficult background because the largest providers of those concessionary resources are the very countries - European and OECD - which are having the greatest difficulty fiscally.

"So, it's a very tough sell to go to them... these donors have made it very clear to us, as far as CDB is concerned, it can't be business as usual," added the CDB vice-president.

It has been suggested that a major shortcoming of the poverty alleviation measures implemented by Caribbean countries is the fact that they generally lack production components. The upshot is that the social safety nets are being widened, but persons are rarely being lifted out of poverty.

This is a clear case in Jamaica where despite a 75 per cent and a 130 per cent increase in expenditure for the Programme of Advancement Through Health and Education (PATH) and the School Feeding Programme respectively, over the last three years, the latest JSLC shows that many more Jamaicans are living below the poverty line. Jamaican's Prime Minister Bruce Golding acknowledged that the programmes, created specifically to assist the poor, needed to be reviewed in order to improve the income-earning capability of the beneficiaries.

"I am still not satisfied that the resources are being utilised to achieve their maximum outcome," Golding said during the launch of the latest JSLC in November.

Smith told the Business Observer after last week's discussions that the CDB has noticed the inefficiency of some of the poverty measures and the organisation is in fact looking to implement a productive component in its flagship poverty reduction project — the Basic Needs Trust Fund.

"We have debated in CDB whether the approach to the Basic Needs Trust Fund - which is grant funding - should have a productive component, and we have now introduced, admittedly a very small component, which is geared towards income-generating projects in communities," noted Smith.

The primary focus of the Basic Needs Trust Fund has traditionally been on small infrastructure projects — health centres, community centres, roads, etc — which are geared towards improving the lives of those who live in poor communities.

"My own view is that, especially in rural communities, there is the possibility of using more modern approaches to agriculture for example, to have communities work on a cooperative basis to produce goods that are assailable, have a market, and have the upstream connection that will allow them to not only produce, but also to store and market their goods... The advantage of this is that it does increase income into those communities so it doesn't become an ongoing welfare type of intervention," said Smith.

However, at the end of the day, Smith that the most critical driver of poverty reduction is whether Caribbean countries create the conditions for producing relatively sound and sustainable economic growth going forward.

"Specifically to Jamaica, I think a big part of the problem has to do with the fact that for the last 30 years, it has significantly underperformed in terms of economic growth, so it has been difficult for it to be able to make the type of dramatic reductions in poverty that are required for social peace and stability," the soon-to-be CDB head explained.

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