Based on recent statements from the Caribbean Community Secretariat, and a few finance ministers who are also heads of government, doubts persist about the way forward for the long promised Caricom Development Fund (CDF).

Rickey Singh

As the Community's leaders prepare for their 27th regular summit eight days from today, optimism continues to clash with pessimism about inauguration of the Fund, which is intended to benefit disadvantaged economies and sectors in the emerging Caricom Single Market and Economy (CSME).

Conceptualised to be established with US$120 million from the resources of participating Caricom countries, and to reach an ultimate target of US$250 million with external financing, no more than US$37 million have so far been committed.

The commitment has come from three countries, Trinidad and Tobago (US$30 million, including US$20 million from its special Petroleum Fund to which designated countries have grant access); Jamaica (US$5 million); and Barbados (US$2 million).

A major hurdle to overcome has to do with the criteria for contributions to sustain the Fund's viability. Among countries with reservations about a recommended Caricom Secretariat - "contribution formula", based on Gross Domestic Product (GDP) - are said to be Jamaica, Guyana and Suriname.

Despite a reassuring statement last Tuesday from the Caricom Secretariat that a "contribution formula has been finalised for the Development Fund,"? lingering differences among governments diminish optimism.

Contrasting views have been surfacing, even amid positive vibes generated at last week's 25th anniversary of the Organisation of Eastern Caribbean States (OECS) in St Kitts and Nevis that its six independent members will honour a commitment to access the single market component of the CSME on June 30, as six other Community partners did five months ago.

A strong and persuasive voice in this scenario is that of the respected regional economist, Dr Havelock Brewster, currently an executive director from Caricom of the Inter-American Development Bank (IDB). He has been quite candid in articulating his personal views to Caricom's Council on Finance and Planning (COFAP), which was mandated to finalise arrangements for establishment of the Fund.

Having earlier raised critical questions in a position paper, obtained by this writer, on whether the Fund makes "economic sense", or is more a mechanism rooted in "political expediency" for the functioning of the CSME, Brewster was to subsequently present at the fourth meeting of COFAP (held in Barbados on June 9) challenging alternative proposals to make the funding project a reality.

Under no illusions that Caricom Heads of Government could well ignore his "personal views", Brewster, co-author (with Clive Thomas) of the pre-Caricom work, The Dynamics of West Indian Economic Integration, and currently Senior Associate of the Caribbean Regional Negotiating Machinery (CRNM), extends his differing views to challenging some assumptions and conclusions by some OECS governments.

Rationale for the CDF is located in the revised Caricom treaty in the context of the CSME, and forms part of the special regime for "disadvantaged countries, regions, and sectors."
As outlined in the revised treaty, the disadvantaged countries would include most of the OECS signatory members and, to a lesser extent Belize, Guyana and Suriname.

After four meetings of finance ministers, some of them also prime ministers, like Barbados' Owen Arthur, who has been chairing the meetings on the CDF, a consensus reportedly emerged at their June 9 meeting to proceed with finalising arrangements for the Fund on the basis of a financing formula recommended by the Caribbean Development Bank (CDB).

But the CDB's recommended contribution formula that went before the June 9 COFAP meeting, for which four countries were absent - Belize, Grenada, St Lucia, and St Vincent and the Grenadines - varies from the GDP-based formula submitted by the Caricom Secretariat.

While making clear that in expressing his "personal reservations" his intention was not to get COFAP to amend the decision already made but "perhaps to influence the modalities of the Fund when it goes into operation", Brewster made some very striking observations:
. For instance, that a capital fund of US$120 million, used mainly as grants, but also as capital, would be depleted in about three to four years.

. Further, it is doubtful that the net donor governments (Trinidad and Tobago, Jamaica, and Barbados) would be well disposed to replenish the Fund, especially in the absence of "even a commitment in principle to any such replenishment...."

In the reckoning of Brewster, if Caricom is "serious" about regional restructuring/structural transformation, it should be aware that the projected Development Fund or even its proposed ultimate target of US$250 million would be "a drop in the bucket of what additionally would be required...."

His conclusion? The Development Fund, as currently conceived, is: (a) unlikely to be sustainable; and (b) would have "limited additional longer-term development effectiveness."
. What's the alternative? Brewster has advanced a set of proposals for an "interest subsidisation fund" that would "substantially leverage available financial resources" - as only a small fraction of the capital endowment would have to be outplayed to finance the subsidy element.

By the unofficial 'Brewster formula' on contributions for and functioning of his envisaged funding mechanism could, over a 20-year period, support, on a capital endowment of US$100 million, an additional lending programme of US$600 million. And if reduced to US$75 million, the Fund could last for 15 years with support of an additional lending programme of US$450 million.

Brewster has stressed that his recommended alternative approach "is not a theoretical proposition"; rather, one that has "successfully" been operated by the Inter-American Development Bank with an identical "subsidisation scheme" he advocates for the bank's lesser-developed member states over the past 23 years, the "Intermediate Financing Facility (IFF).

Question now is which way forward for Caricom to operationalise a funding mechanism recoginsed as integral in advancing the objectives of CSME. We should soon know - perhaps!

The fear factor

Feeding the multitude

DANGEROUS PETS