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Re-thinking CARICOM development model after COVID-19

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By Sir Ronald Sanders

Governments around the world, including in Caribbean Community (CARICOM) countries, have emerged as the principal players in the health and economic crisis caused by the COVID-19 pandemic. The private sector, for the most part, has taken a back seat with many companies turning inwards and concentrating on safeguarding their own survival, rather than playing a broader role.

This occurrence could foreshadow a new model for economic development in the future, particularly for small states.

Governments had to embrace extraordinary roles to provide economic relief, including for private sector workers. In richer nations, governments have provided what is called ‘furloughs’. Under this scheme, governments in the United States and some countries in Europe have extended unemployment benefits to these private sector workers who, though they still technically retain their jobs, receive no pay from their employers.

In CARICOM countries, where governments lack the resources of richer countries to furlough private sector workers, governments have intervened with Central Banks to make money available to commercial banks at low interest rates so that these banks can, in turn, extend repayment periods for mortgages at reduced rates of interest. Additionally, they have provided food hampers for the needy.

Governments have also become the leaders in investing in health services, enlarging hospital and other medical facilities – a task, which will continue into the future. One of the influential factors in the active involvement by governments in the health sector is the need for ‘health sovereignty’ – the ability to cope with the health needs of citizens at home, rather than sending them abroad.

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For example, Antigua and Barbuda’s Minister of State in the Finance Ministry, Lennox Weston, pointed out recently, that whereas, as part of its medical benefits scheme, the government sent its citizens abroad for treatment not available at home, the epoch of COVID-19, which closed borders and severely restricted air transportation, underscores the importance of ‘health independence’. In the future, governments will have to establish and sustain medical facilities for conditions formerly treated abroad.

The retreat of the private sector from economic activity left many governments in small countries solely with the burden of keeping their economies from total collapse. Not only did employment in the private sector decline but so too did their payment of taxes. Indeed, some private companies looked to governments for economic relief.

If the effects of COVID-19 continue to disrupt supply chains and sales in industries such as tourism and manufacturing, more private sector companies will either fail financially or seek financial aid from governments. All of this points to a larger role for the state in the economy in the years ahead, following decades in which Western nations, that control the global economy, dismissed the value of state intervention. They preached that the private sector is the driving force behind sustainable economic growth and a key source for creating wealth and jobs – a theory that collapsed in the pandemic.

There is no question that a viable private sector has a role now, and will continue to have a role, in recovering economies as nations come to grips with living in a COVID-19 world. However, going forward, governments might have to re-evaluate the relationship of the public sector and the private sector in economic growth and development. The shortcomings and vulnerabilities of too great a reliance on the private sector, as the engine of growth, have been revealed by the effects of the pandemic. There is now, perhaps, a case to regulate companies more robustly to make them more resilient to future shocks and downturns.

It is alarming that many companies operated on small margins of retained capital with little provisions for emergencies. A review of business models that rely on lengthy tax concessions and endless duty-free waivers from governments, may also now become appropriate.

One thing is certain, if these private sector vulnerabilities and shortcomings are not addressed and reformed, they are doomed to be repeated, pushing governments to become the chief burden-bearer, even as their own revenues from taxes and duties dwindle.

This consideration applies to the governments of all CARICOM countries. As members of an integration organisation, bound by treaty, and committed to a single market, they should adopt a mutually supportive stance in constructing a new model for their relations with the private sector, particularly foreign investors. One of their weaknesses is their own competitive approach to the private sector, whereby they vie to secure investment based on who gives away the most.

In the wake of the destructive effects of COVID-19 on the economies of CARICOM states, existing and unresolved issues have flared-up. A case in point is the imbroglio over LIAT 1974 Ltd, the financially troubled airline which, despite all the struggles it has faced, has served the Caribbean safely for 64 years.

Like all other airlines throughout the world, COVID-19 pointed a dagger at LIAT’s heart. In the U.S. and elsewhere, airlines survived the effects of the pandemic, only with government help. For example, the U.S. government is reported to have pumped $25 billion into six big airlines, including Delta, American and JetBlue, along with four smaller carriers, to pay workers and keep them employed until September.

The principal government shareholders in LIAT, except the Government of Antigua and Barbuda, faced with their own daunting financial constraints, chose to liquidate the company. This action has created friction in the regional group and predictions of its demise. But, history has shown that, despite such predictions in the past, CARICOM has proved to be politically resilient with all parties recognizing that there are more benefits in retaining the organisation than abandoning it.

Solving the problem of LIAT and regional transport, like the issue of re-evaluating the role of governments in relation to the market, requires a re-shaping of CARICOM based not on national rivalry but on regional collaboration so that every nation benefits from the fruits of integration. The equation will never be equitable given the differences in populations and resources, but at least it should be fair.

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In Other News

REQUEST FOR EXPRESSIONS OF INTEREST

(CONSULTING SERVICES – INDIVIDUAL SELECTION)

 

OECS MSME Guarantee Facility Project

Loan No.: IDA-62670, IDA-62660, IDA-62640, IBRD-88830, IDA-62650

Assignment Title: Senior Operating Officer (SOO)

Reference No. KN-ECPCGC-207852-CS-INDV

 

The Governments of Antigua and Barbuda, Commonwealth of Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines have received financing in the amount of US$10 million equivalent from the World Bank towards the cost of establishing a partial credit guarantee scheme, and they intend to apply part of the proceeds to payments for goods, and consulting services to be procured under this project. 

The consultant will serve as the “Senior Operating Officer (SOO)” for the ECPCGC and should possess extensive knowledge of MSME lending with some direct experience lending to Micro, small and medium-sized businesses, knowledge of the internal control processes necessary for a lending operation and the ability to design and implement risk mitigation procedures. The ideal candidate should possess an Undergraduate Degree from a reputable college or university, preferably in Business, Accounting, Banking or related field, with a minimum of 5 years’ experience in lending, inclusive of MSME lending. The initial employment period will be for two years on a contractual basis. Renewal of the contract will be subject to a performance evaluation at the end of the contractual period. The assignment is expected to begin on September 30th, 2021.  The consultant will report directly to the Chief Executive Officer of the ECPCGC.

The detailed Terms of Reference (TOR) for the assignment can be viewed by following the attached link below. 

 

https://bit.ly/3iVannm

 

The Eastern Caribbean Partial Credit Guarantee Corporation (ECPCGC) now invites eligible “Consultants” to indicate their interest in providing the Services. Interested Consultants should provide information demonstrating that they have:

  • An Undergraduate Degree from a reputable college or university, preferably in Business, Finance, Banking or related field; and
  • Minimum of 5 years’ experience in MSME lending. Applicants should also have:
  • The ability to design and implement risk management procedures 
  • Extensive knowledge of MSME lending with some direct experience lending to small and medium-sized businesses
  • Extensive knowledge of MSME banking operations
  • Knowledge of the internal controls necessary for a lending operation and the ability to design and implement risk management procedures
  • Experience developing and presenting information in public, including responding to questions in real-time
  • Experience lending to MSMEs located in the ECCU
  • Knowledge of marketing and communicating with the MSME sector
  • Ability to draft procedures to be used in a lending operation
  • Familiarity with the mechanics of a loan guarantee program
  • Exceptional written, oral, interpersonal, and presentation skills, and
  • Proficiency in the use of Microsoft Office suite.

The attention of interested Individual Consultants is drawn to Section III, Paragraphs 3.14, 3.16, and 3.17 of the World Bank’s Procurement Regulations for IPF Borrowers July 2016, [revised November 2017] (“Procurement Regulations”), setting forth the World Bank’s policy on conflict of interest. A Consultant will be selected in accordance with the Approved Selection Method for Individual Consultants set out in the clause 7.34 of the World Bank Procurement Regulations for IPF Borrowers. 

 

Further information can be obtained at the address below during office hours 0800 to 1700 hours:

Eastern Caribbean Partial Credit Guarantee Corporation

Brid Rock, Basseterre,

St. Kitts.

Expressions of interest must be delivered in a written form by e-mail by August 11th, 2021, to [email protected]. 

 

For further information, please contact:

Carmen Gomez-Trigg                                                            Bernard Thomas

Chief Executive Officer                                                          Chief Financial Officer

Tel: 868-620-8144                                                                  Tel: 869-765-2385

Email: [email protected]                                          [email protected]