ECONOMY-CARIBBEAN: Regional Investment Scheme Gets a Fresh Start

By IPS Correspondents Reprint | | Print |

Bert Wilkinson

GEORGETOWN, Sep 14 1998 (IPS) - Almost eight years have elapsed since Caribbean Community (Caricom) leaders decided to establish a regional investment fund aimed at raising capital to stimulate economic growth in the poor countries in the region.

At first, not much activity took place, but with several regional governments buying into the idea in recent months, renewed attention is being paid to having the scheme up and running.

The idea of the scheme is to raise development and investment capital, mainly from mulitlateral lending agencies, the international capital market as well as subscription fees from member states.

Long dependent on aid, mainly from Europe and North America, Caribbean countries have been forced to reduce their expectations and their public expenditure as flows are reduced.

Regional governments have found traditional donors less willing to continue bilateral assistance at levels of the past. While some donors to the region have cut back on aid, others have eliminated such support altogether.

Ths reduction has forced these countries to look at other ways to stimulate their economies.

In the last week the Guyana and Jamaican governments have ratified the agreement setting up the Caribbean Basin Investment Fund (CBIF). It is to be managed by the Jamaica-based Insurance Company of the West Indies (ICWI) group now in the process of securing highly qualified fund managers to run the scheme.

In fact, ICWI chief, Dennis Lalor has only recently secured the services of Harvard graduate David Panton as the President.

Panton was in Guyana recently looking around for possible projects which would qualify for funding under the.

“CIF will invest in … infrastructural projects that offer potential for substantial returns,” says Panton. However, he warned that no more than 20 percent of the assets will be invested in any one country.

The CIF will be officially launched next March. So far eight member states have signed on.

Lalor, one of the region’s top financiers thinks it is possible to raise up to four billion dollars under this scheme, although some persons are not as optimistic given the state of the world’s capital market at the moment.

“We hope it is not too bad a time to venture out into the market now,” says Guyanese economist, Winston Jordan. “They (the fund managers) will have to approach the big agencies for money to run the CIF… It could well be a bad time.

Some observers point to a similar effort by the Washington- based Inter American Development Bank (IDB) back in the 1980s.

Anxious to raise money to help member countries, the IDB established the Inter American Corporation to play a similar role as the CIF hopes to play. but it was not long before authorities were forced to radically restructure the new entity as it was experiencing little success.

In this instance, Lalor and others are charged with raising at least 50 million dollars in the first few years.

Responding to enquiries from other hemispheric states, Fund officials are thinking of extending the CIF to include all 24 full members of the Association of Caribbean States (ACS) which covers all countreis washed by the Caribbean sea.

An estimated 60 percent of whatever funds raised will be set aside for the 15 Community nations which include the English- speaking Caribbean, Haiti and Suriname. The remainder will be offered to ACS needy member states.

“We are very keen on seeing the re-activation of this important facility. We believe it is a very important mechanism for the promotion of investment in the region and of the develoment of the Caricom Single Market and Economy,” says Trinidad and Tobago’s Foreign Afairs Minister, Ralph Maraj.

Officials say every participating regional government would have to play their part in creating the climate to attract investors with funds.

This climate should include tax breaks for revenues arising out of the CIF and on restrictions of foreign exchange.The CIF is registered in The Bahamas. Money from the first sub fund to be created will serve as venture capital aimed at equity refinancing for small and medium sized businesses.