After the Storm: A Caribbean Development Outlook
by Richard Westlund
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Reprinted from the May 2010 Institutional Investor. For more on the Institutional Investor Magazine visit www.institutionalinvestor.com
As the global economy recovers from its recent downturn, Wendy Warren believes this is an ideal time for Caribbean states to assess their individual and regional assets, identify their competitive advantages and prepare for future development opportunities. “We all need to position ourselves for business that is relevant and can be attracted to our countries,” says Warren, CEO and executive director of the Bahamas Financial Services Board (BSFB). “We also need to be painfully honest about what changes are needed to succeed.”
The Bahamas is hosting the 40th annual Caribbean Development Bank (CDB) board of governors meeting May 19-20, with panel discussions on development strategies, financial services and other topics. It comes at a time when many Caribbean states are assessing their traditional ties with the U.S. and European Union (E.U.) and looking for new partnerships with China as well as inter-regional trade and investment opportunities.
One example is the Baha Mar resort project planned for the Cable Beach site west of Nassau. The private development team has concluded agreements with two Chinese entities for $2 billion to finance construction of a large-scale resort, and will be going to the government for approval of the project, according to Warren. “This would be a tremendous stimulus to our nation and the entire Caribbean tourism sector,” she says.
In Trinidad and Tobago, plans are moving ahead for a new international financial center that will be a catalyst for developing local expertise while serving the requirements of international financial institutions. “Developments in this area slowed with the onset of the global financial crisis,” says Larry Howai, CEO, First Citizens, a regional bank based in Trinidad. “But a number of international financial institutions have expressed an interest covering a range of activities.”
Larry Howai, CEO, First Citizens
Barbados provides another example of a Caribbean development program that is aimed at diversification. In addition to building on its traditional strengths as a center for tourism and financial services, Barbados is seeking to strengthen its technology and health-care sectors. “Barbados stands ready to engage investors in new areas such as biotechnology, health and wellness services, headquarters and holding companies, and renewable energy,” says Derek Gibbs, chief economist at the Barbados Ministry of Economic Affairs, Empowerment, Innovation, Trade, Industry and Commerce. “These are areas that offer good potential for future development.”
Slow Return to Growth
A January CDB report indicates that economic output contracted in most Caribbean economies in 2009, reflecting the global recession. That was primarily due to a decline in tourism and a drop in foreign direct investment (FDI), which affected infrastructure projects. “In the face of these exogenous shocks, Belize and Guyana have shown some resilience,” says the report. “However, the majority of regional economies are highly dependent on tourism and other services and have therefore proved to be much more vulnerable.”
The CDB report predicts that some of the regional economies that contracted in 2009 will return to growth this year, but a stronger upswing will not take hold before 2011. “Recovery in the major economies is particularly critical for the tourism and construction industries, as these are the main source markets for tourist arrivals and FDI flows,” the report notes.
