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A dark time for the Caribbean

Sir Ronald Sanders

Sunday, September 16, 2012    

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THE importance of the Caribbean Community (CARICOM) countries acting jointly to address their development needs has become acute.

With high levels of debt to GDP ratios, widening budget deficits, deteriorating terms of trade, dwindling aid flows, and shocks to their economies by a decline in tourism earnings and a grave contraction of the financial services sector, the majority of CARICOM countries are reeling. Guyana and Suriname are the notable exceptions, having recorded steady economic growth in recent years, largely due to export earnings from their mineral resources, especially gold.

In my last commentary I drew attention to the real possibility that the European Union (EU) - one of the biggest aid donors to the Caribbean region - could reduce their level of aid to all Caribbean states, except Haiti, because they are Middle Income Countries. While the European Commission has stressed that no firm decision has been made on aid reduction to African, Caribbean and Pacific (ACP) states, under the EU's Multiannual Financial Framework for the period 2014-2020, a "differentiated approach" to aid is being adopted. Already, under this approach, the EU has eliminated traditional aid to 17 countries that are Upper Middle Income countries, and two large Middle Income countries.

The EU has made it clear that its differentiated approach "represents a budget for investment and growth to ease the pressure on (EU) Member States' finances, focussing on Europe 2020 priorities, impacts and results". And while the European Development Fund (EDF), under which aid is made available to the ACP states, is being kept separate from the EU Budget, it seems inevitable that the EU - now consisting of many countries that never had colonies in ACP countries - will insist on applying the "differentiated approach" to giving aid to them. In the Caribbean, this means that in calculating allocations for the 11th EDF (2014-2020), Haiti will continue to be a beneficiary and all others could see aid reduced except "on the basis of country needs, capacities, commitments, performance and potential EU impact".

In other words, "needs" alone will not be a sufficient basis for aid to Middle Income Countries; their "commitment" and "performance" will also be key determinants.

That is why my last commentary stressed two points: first, the issue "should command the urgent attention of all Caribbean governments, the CARICOM Secretariat and the Caribbean Development Bank", and second, "if ACP Middle-Income countries are to justify why aid should not be reduced now, they must be prepared to show how it will be used effectively to transition to diversifying their economies, enhancing their productive sector, and standing on their own feet. A begging bowl is not enough".

There have been many responses to that commentary, but one of them from a Trade Specialist, David Lewis of Manchester Trade based in Washington, was particularly forthright. Lewis's life work has been Caribbean oriented. He harbours grave doubts that Caribbean governments, the CARICOM Secretariat and the Caribbean Development Bank are prepared to act in a meaningful way. He said that they "are so out of touch with reality in politics and economics in the Caribbean and more so elsewhere that they will be playing 'catch-up' to no avail on this one". He was also dubious about Caribbean organisations actually "showing how the region will transition to diversifying their economies, enhancing their productive sector, and standing on their own feet".

Lewis is not alone in his misgivings. EU Representatives in the Caribbean have bemoaned the fact that governments have not actively pursued funding for regional projects that would benefit their countries individually as well as the region collectively. They have also expressed deep concern about the private sector in almost all CARICOM countries failing to produce projects that could attract EU funding and gain access to EU markets. Other regional commentators have also lamented the reality that, in a beggar-thy-neighbour and non-productive approach, many CARICOM governments have sought solutions to their economic problems in national efforts only, shunning the real benefits that could derive from regional action as well.

National efforts for alleviating the budgetary strains on Governments and for a few infrastructural projects have focused recently on getting help from China and Venezuela. But, regardless of how generous and unquestioning these two governments may be now, their contributions, while welcome, are stopgaps; they are not addressing fundamental weaknesses that persist.

The EU's frustration with Caribbean governments and their institutions is not exceptional; other countries and agencies have also expressed their disappointment and dissatisfaction. Among these agencies is the Canadian International Development Agency which has identified the Caribbean as a priority for its aid.

It was in May that the European Commission first advised Caribbean representatives in Brussels of the decision to use a "differentiated approach" to aid. While ACP representatives have been engaged in lobbying and presenting the counter arguments in Brussels, there is urgent need for high-level representation to EU governments, particularly the newer ones that have little knowledge of the Caribbean beyond statistical information.

If CARICOM countries and the Dominican Republic, with the help of the Commonwealth Secretariat and the World Bank, could secure an International Conference on the Caribbean to address their fundamental difficulties of debt; a change in the criteria for concessional financing; differential treatment for trade based on their small size and limited capacity; deepening regional integration to allow for the creation of pan-Caribbean undertakings that are competitive; and, crucially, building machinery for transportation and storage of agricultural products within the region, many of their problems could be addressed through a co-ordinated approach by donor countries and agencies.

But first, the Caribbean would have to assemble a single dynamic team to prepare a convincing plan with measurable outcomes, performance criteria, and a viable implementation mechanism. Otherwise they won't be believed.

It is a dark time for the region; emerging into the light requires regional ingenuity, regional commitment and regional action.

Ron Sanders is a consultant and former Caribbean diplomat

Responses and previous commentaries: www.sirronaldsanders.com

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