STATEMENT BY THE TEMPORARY GOVERNOR FOR JAMAICA SENATOR THE HONOURABLE DONALD WEHBY Madam Chair, Distinguished Prime Ministers, President of the Caribbean Development Bank (CDB), Fellow Governors, Directors and Officers of the Bank, Members of the Diplomatic Corps, Observers, Distinguished Guests, Ladies and Gentlemen. It gives me great pleasure to greet you on behalf of the Honourable Bruce Golding, Prime Minister of Jamaica, and the Honourable Audley Shaw, Minister of Finance and the Public Service. Minister Shaw has asked me to convey to you his deep regret for his absence at this Thirty-Eighth Meeting of the CDB Board of Governors. He extends his continued support of the Bank and thanks them for their support of Jamaica in its development initiatives. I thank the Government and People of Canada for hosting this year’s Annual Meeting of the CDB, for the wonderful welcome and for the excellent arrangements in place for our stay here. It is particularly fitting that the Thirty-Eighth Annual Meeting of the CDB be held in Canada, one of the founding members of the Bank. It has featured in the replenishments of the Bank’s capital and fostered and promoted many initiatives to shore up the Bank’s capacity over the years. The Caribbean therefore quite rightly has come to recognise and to value Canada’s contribution, particularly in underpinning our democratic ideals and traditions. I also take this opportunity to welcome Brazil to the membership of the Bank. Brazil brings a wealth of knowledge and experience in many areas that will be of mutual benefit. BACKGROUND Madam Chair, this Jamaican Government has been at the helm for only eight months, and we have had to grapple with a macro-economic situation of a high debt burden, relatively limited fiscal space and low growth rates. Our long-term objective for Jamaica is to dramatically turn around these trends. It is my belief that to realise this objective we will have to: (a) apply a strong, disciplined approach to fiscal and debt management; (b) reform the tax system to improve efficiency and to create a business friendly environment; (c) reduce bureaucracy, corruption, and waste; (d) drive local and foreign direct investment above the levels achieved over the last five to ten years; and (e) urgently move on the issue of energy conservation and the development of alternative energy. -2- These are the goals our administration will be working towards. We thank the CDB for its support of our long-term development plan - “Vision 2030”. During our brief period in office, there have been significant shifts in the global landscape – dramatic increases in oil and commodity prices and the resulting surge in inflation globally; and many financial institutions worldwide, including development banks, have been forced to write off huge losses owing to the domino effect of the US subprime mortgage crisis. What do these shifts mean for Borrowing Member Countries (BMCs) of the CDB? How will the CDB respond? What could some relevant and proactive steps look like? As Sir Alister McIntyre stated in the Inaugural William G. Demas Memorial Lecture in Barbados in October 2000 “A Call to Arms:… to encourage an urgent rethinking of our strategies and policies in the field of development in this age of globalisation ... The period ahead requires us to summon all of our energies and commitment for the development task ahead”. I will outline five areas to which I urge the CDB to develop more creative responses. 1. Enhanced Debt Management The English-speaking Caribbean has the dubious distinction of having within its ranks, ten of the most heavily indebted middle income developing countries in the world. Our ability to grow our economies and to seriously reduce the poverty is restricted by the limited fiscal space that remains when debt payments are netted out. In the case of Jamaica 54 cents of every dollar goes to debt servicing. It is against this background that Jamaica has been asked to lead the charge for debt relief in heavily indebted middle income countries (HIMCs) in the Caribbean. I would thus like to use this opportunity to present our case to the CDB and to encourage the Board to consider this as a matter of priority, one for which creative solutions will be necessary. We recommend that the Bank leads the effort of analysing the debt situation of its BMCs that fall in the category of HIMCs, as a means of providing technical assistance to such countries. Ultimately we encourage the CDB to partner with other multilateral institutions to develop and implement suitably tailored Strategic Liability Management Programmes. At the same time we urge the Bank to be even more innovative in its approach to development lending. The new global environment is forcing multilateral institutions to become more responsive to the needs of their clients. In this regard, we have noted the growing trend to re-position multilateral lending. We wish to have the terms of access to international capital markets softened through the pursuit of CDB’s guarantee facility, and welcome opportunities to explore this further with the Bank and its staff. 2. SMEs as Engines of Growth Together with fostering better debt management and debt reduction, the CDB must also be concerned with developing creative programmes to spur the economic growth of its BMCs. To this end we suggest that the CDB continue to develop products to target BMCs’ small and medium-sized enterprise (SME) sectors. SMEs are the hub of economic growth for many Caribbean countries, and account for a significant percentage of total employment. Unfortunately, they have not been able to benefit sufficiently from the spin off of large investments in our countries, largely because of their -3- inability to source cheaper financing for re-tooling and expansion and lack of technical know how. This year in Jamaica we will launch an “SME Incubator Project” to specifically target this lack of technical know how. Not only do our SMEs need general business advice and financial assistance but they also need technical assistance to help them to prepare for the new trade environment that will come after the Economic Partnership Agreement (EPA) between the Caribbean and the European Union (EU). The EPA requires greater openness and reciprocity in trade relations between the two regions. Caribbean businesses need assistance to enter the European market on a competitive footing. The CDB has an important role to play in supporting national and regional efforts to reap the trade and investment benefits from the EPA. Prime Minister Golding has written to the CDB inviting the Bank to explore how it can complement the EU resources available for EPA adjustment and implementation, specifically through a facility devoted to improving the international competitiveness of Caribbean firms to take advantage of the market access opportunities provided by the EPA. I am pleased to hear that work is proceeding on the facility. 3. The Environment/Natural Disaster Risk Management Over the past ten years, the Caribbean has witnessed the effects of several major hurricanes severely affecting major infrastructure and sectors of our economies. The CDB responded quickly to our request for assistance by providing US$20.5 mn for hurricane rehabilitation works. At the request of the Government of Jamaica and other Caribbean governments, the Commonwealth Caribbean Regional Investment Fund is now examining the feasibility of introducing a parametric insurance product for floods and agricultural insurance to complement the current product which covers catastrophes like hurricanes and earthquakes. This work is urgent. 4. Sustainable Energy With a looming energy crisis, urgent action must be taken in support of renewable energy. In the Caribbean we boast of having sunshine all year round, yet very little has been done to capitalise on this natural source of energy. Some industry forecasts now anticipate oil priced at as high as US$150 per barrel during the course of this year. This is a very serious concern. Jamaica has set a goal of meeting 10% of our energy needs by 2010 from domestic, renewable sources of energy such as wind, solar and solid waste conversion. Another initiative being undertaken is to replace 10% of the gasoline used for motor vehicle transport with ethanol. This new measure should be introduced during the next fiscal year. Most of these measures require substantial initial outlays of capital which has been prohibitive. Jamaica will be looking to the multilateral institutions and the private sector to assist in providing the necessary resources to facilitate the transition to a new energy mix. 5. Food Security The final area of major challenge for our region is that of food security. In Jamaica, we have embarked on a programme to significantly increase food production to mitigate the effects of the growing food crisis. Clearly the task before us is to transform our agriculture through the use of appropriate technologies to improve productivity and product quality, development of the food processing industry and reduce the food import bill. We have to produce it more efficiently so that consumers can get food more cheaply while allowing the producers to make a reasonable profit. -4- We commend the Bank on its role in the recent regional meeting on the food crisis and encourage the urgent implementation of steps such as financing the modernisation of agricultural production and improved access to agricultural credit. CONCLUSION Jamaica and the CDB As a founding member and the largest shareholder (along with Trinidad and Tobago), the relationship between Jamaica and the CDB has always been special. We would like to take this opportunity to thank the CDB for its assistance over the years, and to especially note the improvement in the response of the Bank to emergencies. In conclusion, I congratulate the CDB on 38 years of sterling work which has certainly pioneered innovations across the Caribbean and built within our region a shining example of efficiency, quiet effectiveness, and stability. This has not gone unnoticed in the wider international arena and redounds to the credit of our people. I thank you.