Private sector key to new IDB country strategy
Tariq Alli’s appointment as general manager of the Inter-American Development Bank (IDB) Caribbean Country Department and country representative for Jamaica comes when the hemispheric bank is revising the island’s country strategy.
Appointed in September, the Trinidadian has hit the ground running identifying areas of the Jamaican economy needing the IDB’s intervention.
“We just presented the country strategy, which is a document presented every five years. It is a collaborative document…guided by the discussions with the stakeholders with the Administration and civil society, and it takes many months to construct,” he told the Jamaica Observer in an interview last Thursday.
“That document was presented to the board of directors on Monday [November 28] and we received support to move it to the next level for approval, and the strategy is a very, very simple one,” he explained.
But before sharing the IDB’s country strategy for Jamaica, Alli provides context and in the same breadth commends the country for the strides it has made over the last decade.
In addition to implementing economic reforms, the country has reduced its debt to gross domestic product ratio, which has fallen from 141 per cent to 92 per cent last year. In this regard, the IDB country representative underscored that fiscal space is important for the Government of Jamaica to preserve as it also allows for a proper response to economic shocks.
Moreover, Alli argued that more fiscal space allows the Government to borrow on an as needed basis “for productive purposes”.
“All that to say the strategy is predicated heavily on now working with the private sector. We still obviously are going to work hand in hand with the public sector, but now trying to find a way to bring the two sides together,” he explained.
On this note, he pointed out that his colleague, IDB Invest CEO James Scriven, and his team are working with the private sector to align its focus with the Government’s agenda and vice versa. Alli concedes, however, that inviting private sector participation and cooperation is contingent on the return on capital investments.
“We have to make sure the private sector sees the Jamaican environment as a conducive environment to do business, and that is something where we will play a role,” the IDB Caribbean head stated.
Looking at the number of micro, small and medium-sized enterprises (MSMEs) in Jamaica, which Alli said was reported to be around 40,000, he said that this pool presents an opportunity for Jamaica’s economic growth. As such he pointed out that here the Government’s focus on digitisation could bridge the gap.
Digitisation, he said, would help small business move beyond “mom and pop” operations in cottage industries “to now embracing digital services and digital payments”.
Additionally, he said, “We could now tap in and work with players in the market who are now exporters.”
Another area in which the IDB will assist MSMEs is with access to finance, a space in which Alli believes large commercial are still operating conservatively due to the different risk profiles of MSMEs. Again, he pointed to the work of IDB Invest working with financial intermediaries to de-risk projects.
“That may take the form of us using our balance sheet to provide commercial credit guarantees, equity, and mezzanine-type structures. All in all, we have to rethink how we want to do business in Jamaica and working with the private sector,” Alli outlined, adding that doing so will require “innovative” and “out-of-the-box” approaches.
But how does the IDB close this sale to the private sector? What is new about its strategy?
The IDB country representative reiterates that Jamaica has come a far way with the Government reducing its debt stock and its use of debt instruments for budgetary support. This allows investors and financial institutions alike to access financial markets. With such a “bespoke strategy”, Alli argued, Jamaica is an attractive investment environment.
“But what it would [also] mean now is that the balance sheets of financial institutions are now shifting away from Government of Jamaica debt and will now need to be deployed to other areas of lending which will hopefully be private sector,” he told Business Observer.
Asked how the inflationary pressures and rising interest rates will impact banks’ deployment of capital, Alli — who has over 20 years of experience in corporate finance, including as head of capital markets and assistant general manager — corporate and investment banking unit at First Citizens Bank in Trinidad and Tobago — countered that managing interest rate risk is one of the characteristics of a prudent bank.
He admits, though, that banks now face interest uncertainties and “hawkish positions of major regulators worldwide, but said this will end and banks will be in a position to adjust their positions.
“But yes, high interest rates will mute credit and projects will have to be more attractive for people to want to invest,” Alli said.
Following the recommendations of Government, Alli indicated that IDB will continue to provide support in the global services sector, logistics and special economic zones.
“And we are ready to assist from that perspective in any way because of all the breadth of experience and not only through financing but also technical knowledge and technical experience,” he stated.