"Translating Objectives into Operational Reality" - Prime Minister's Speech at Opening of 31st Annual Meeting of CDB Board o...

TRANSLATING OBJECTIVES INTO OPERATIONAL REALITY

Welcome and Opening Statement by

(Governor for Saint Lucia)

Colleague Prime Ministers, Fellow Governors, President of the Caribbean Development Bank, Other Members of the Head-table, Members of the Legislature, Members of the Diplomatic Corps, Members of the local and regional Media, Distinguished Ladies and Gentlemen:

It is my distinct privilege, on the occasion of this Thirty-first Annual Meeting of the Board of Governors of the Caribbean Development Bank, to welcome you into the warm embrace of the island that has become known as the "Helen of the West". I feel confident as I welcome you, on behalf of the Government and People of Saint Lucia, that we will continue to do all in our power to ensure that your stay with us is both pleasurable and productive.

Saint Lucia is extremely proud to be your host. This is the third occasion on which Saint Lucia has been the venue for the Annual Meeting of CDB Governors. Indeed, previous to this, St. Lucia hosted in 1972, and again in 1982. Hopefully, we have since then learned a thing or two about the hospitality industry, and will match our pride to our perseverance, in extending to you the very best that St. Lucia has to offer.

Such meetings also give us pause to reflect on the things we might wish discussed while distinguished guests are seated at our table; a captive audience, you might say. Well, let me begin by reflecting briefly on the visionary contributions of the founding fathers of this esteemed institution. We remember particularly, the late Sir Arthur Lewis, the First President of the Bank, Nobel Laureate in Economics and, I add modestly, a Caribbean son.

Together with like-minded Caribbean thinkers, Sir Arthur laid a solid policy foundation for the Bank, concerned as he was, with propelling these economies into self-sustaining growth. Among the visions he held dear was that of the Caribbean person, equipped with the initiative, the technology, and the economic opportunity required to escape the grip of chronic and self-perpetuating disadvantage.

Distinguished Ladies and Gentlemen, this is an opportunity to give praise for the integrity of these cornerstones and to also consider how much more acutely these imperatives affect Caribbean economies of today. With an array of external factors stacked against our traditional industries, and with technology no better than that which the rest of the world has at its disposal, the critical element in our growth acceleration strategy is still the human element. If we can, therefore, allow our efforts and our decision criteria to focus, as Sir Arthur did in his day, on the human dimensions of development financing, we will begin to unleash the tremendous potential threatening to implode our glass-house societies.

I dare say, that the traditional approach to development financing in the Region reflects a concentration on physical infrastructure. Indeed, this is the understandable philosophical orientation out of which the Bank has evolved. Despite a steady diversification in the lending portfolio, there is still a certain cherished comfort in the physical and the tangible. To be fair, this situation has been perpetuated by both lenders and borrowers.

Not surprisingly then, the progress of Caribbean economies, as measured by visible changes in the physical environment – hotels, highways, airports, and modern buildings - has been quite remarkable. By contrast, however, we continue to have irascible concentrations of human underdevelopment, which are quite unacceptable to any responsible Government. The reality therefore, is that member countries must now focus on their human infrastructure, to complement the impressive physical landscape in which we have so heavily invested.

Similarly, social policy cannot be conveniently divorced from economic policy. Governments need to access resources on suitable terms for investment in social infrastructure. As they relate to effective governance, these are critical, if only to avert the social anarchy which erodes other efforts in key industries like tourism, financial services and knowledge-based industries. The growth potential of our evolving economies is increasingly dependent on social stability in these emerging sectors.

Certainly, in the case of St. Lucia, we have recently had to access commercial lending institutions to finance an expensive correctional facility, and our justice system is still in critical disrepair. Agreed, we would rather be concentrating on preventative approaches which include processes of community development, the development of teaching and learning capacity alongside education infrastructure, and the expansion of artistic, intellectual and cultural industries. Thus, the future of our economies and the future relevance of the Region’s premier source of development finance must respond to these realities.

The need to invest in process as well as product, in the human as well as the physical, is part of a complex picture of relentless economic evolution facing this Region. Just as there is a need to adjust the preponderance on bricks and mortar, so too is there a need to court and embrace other, non-government, borrowing communities and enhance their capacity for self-determination.

For the most part, the CDB is seen as a Bank of Governments. The private sector does not come readily through our doors, seeking us out as a source of primary financing. This ought not to be so, for the Bank’s own sake as well as for the sake of the economies which the Bank services. I would therefore like to commend to the Bank, St. Lucia’s experience with a recently designed and developed Private Sector Development Strategy. This instrument seeks to place at the disposal of the private sector, special resources specifically for improving international competitiveness.

As a result of the availability of real resources, positive and structured modalities of cooperation have been fostered with and between all our major private sector institutions. Moreover, the ongoing dialogue has been about their needs and their priorities, and has been conducted in the language of business, focusing on production, productivity and profitability.

A REGIONAL PRIVATE SECTOR SUMMIT

With a view to learning from our own modest and tentative experience in this regard, I would like to suggest that the Bank convene a regular private sector summit. This will help to create a functional and institutionalised mechanism that articulates the views and priorities of the private sector and, hopefully, augments its intrinsic understanding of the sector’s dynamics.

CHARTING THE FUTURE COURSE

As Chairman, I also have the honour of welcoming Professor Compton Bourne, our new President, to this his first Annual Meeting. I wish him success, both in maintaining the steady course already set, and in charting the direction of the Bank in the challenging years ahead. He brings with him a wealth of experience from academia, private consultancy, and public administration. He will need his accumulated experience as he faces the difficult challenges ahead.

Of those challenges, I would like to commend his attention to the employment priorities facing most of our countries. Although it has new dimensions, the problem itself is not a new one. Significantly, in addressing the Board of Governors Meeting in Saint Lucia in 1972, Sir Arthur identified unemployment as the most pressing problem facing the Region and proposed a comprehensive development strategy for the structural transformation of the Region for achieving economic growth and creating employment. Sir Arthur aptly stated that:

"…. our economic policies lack a crucial element: namely, measures to bring our money costs into line with international prices."

Thirty-one years later, we are still speaking about the lack of competitiveness of the Region in the production of goods and services. It is evident that despite a fragile prosperity, the fundamentals have not significantly altered. Mr. William Demas, in his address ten years later, argued convincingly that the Region needed to look inwards if it were to achieve true development. He stated that:

"….. while the economies of the Region need a predominantly outward orientation in many aspects of production, trade, technology and finance, they also need to be inward- looking in deeper and more fundamental aspects of self-reliance, the most important being the "internalisation" of the economy - that is to say, the creation of a regional economy".

Today, Governments are grappling with these two most serious management challenges ever to face their economies: Trade and Employment. To some extent, many of us have squandered time and the option of an early, unforced adjustment. Traditional industries like export agriculture are under siege. Manufacturing, once a reliable pillar of our own tripod, is questioning its own viability. With some notable exceptions – Trinidad included – our production costs are too high for our finished goods to be internationally competitive. Governments must react, often with tied hands, to the cries for help, to the news of imminent closures, and the prospect of massive job losses.

Somewhere in the Bank’s millennium agenda therefore, must be the priority to mobilise resources to see traditional industries through their necessary and inescapable transition to competitiveness. Somewhere in the lending portfolio must be resources for retraining and retooling. Wherever feasible, such resources, in the interest of efficiency, must go directly to target beneficiaries to help them cope with such transitions.

As valuable as it might prove to be, we cannot simply wait for the FTAA to present us with new trading opportunities. There will be little to trade if we do not embrace and enhance the significant manufacturing capacity which already exists, and cause it to be reoriented to new and impending situations. In this respect I wish to commend the current World Bank/IDB initiative, inspired by Prime Minister Owen Arthur. I encourage the Bank to actively pursue this initiative and to ensure that it yields desired results.

A RENEWED COMMITMENT

Thirty-one years ago, our founding fathers agreed that Article 1 of the Bank’s Charter should state its fundamental purpose as:

To contribute to the harmonious economic growth and development of the member countries in the Caribbean and to promote economic cooperation and integration among them, having special and urgent regard to the needs of the lesser developed countries of the region.

This fundamental objective needs to be revisited, albeit not with a view to changing it, for it seems as relevant and essential today as when it was formulated. Instead, those purposes it espouses must be indelibly etched in our consciousness. They must be our guide and operating ethos. We need to be absolutely clear as to what our objectives are, assess ourselves as to the progress we are making towards achieving those objectives, and determine what can be done to accelerate attainment.

A reminder of the "fundamental purpose" of our Bank is not an invitation to retreat into protective custody. The very survival of this Bank requires it to embrace our Caribbean family, consistent with the expansion of our community and its economic boundaries. But in doing so, the Bank cannot forget its primary obligation to its "less developed countries", a concept which, admittedly, is in need of reformulation, but is certainly not obsolete.

Regional Cooperation

While the Bank may not take the lead on the issue of deepening regional cooperation, it is well placed to help develop viable and sustainable regional institutional initiatives that can deepen the onward march of functional cooperation amongst its members. It should support therefore, the development of self-sustaining modalities with them, actively identify and promote regional support mechanisms, even if it is among selected countries, and lend support to such processes. That some of us may be somewhat insular in outlook, and suspicious of each other’s motives and gains should not detract the Bank from the active pursuit of its enshrined objectives. In fact, it should spur us on to find ways to dissipate such fears and constraints, and to encourage regional cooperation as the basis for advancing and sustaining our collective development.

By way of example, initiatives which can promote and accelerate the Single Market and Economy should be top priorities on the Bank’s agenda. The Bank should not only help shape and accelerate its progress, but should also use the underlying principles and objectives of this initiative in the promotion, design, and implementation of even national projects. The Bank can identify and promote national initiatives and programmes which provide valuable lessons of experience and best practice, or which serve to create ‘Centres of Excellence’ for emulation by the rest of the Region. It can even work on national projects which could be developed at such centres for replication elsewhere. It would need to design into such projects modalities that allow for easy replication in and ready technology transfer to other member countries and the world.

Operational Dynamics

I have had the opportunity in the last four years as Prime Minister and Minister for Finance, and in the last twelve months as active Chairman of the Board of Governors, to observe the Bank very closely. This was facilitated by the significant amount of financial assistance that the institution has committed to Saint Lucia during the period.

I trust that I am not mistaken in saying that the Bank has channelled more resources into Saint Lucia in absolute terms, and certainly in per capita terms, than it has for any other country during the period, and even perhaps in its history. The Bank has indeed served us well, and we intend to prove ourselves worthy of its further attention and confidence.

Notwithstanding, as a friend of the Bank, I am compelled to point out some operational areas which the Bank must work on to improve and enhance its image, its responsiveness to its client countries and its impact on the Region’s development.

The Bank can and must improve its decision-making processes. It can do this by simplifying procedures, instituting approval limits and delegating more, and shortening the chain of command and decision-making in its organisational structure. In considering projects for appraisal and in monitoring project implementation, its own staff could show more empathy for the very limited economic and project cycle management capacities of our countries.

The Bank must re-design its systems and procedures to distinguish between form, materiality and substance in its quest for information and in its prescribed approaches for the implementation of projects. Speed, simplicity and cost-effectiveness should be our watchwords.

A COMPETITIVE ENVIRONMENT

This Bank is playing, and must continue to play, an invaluable role in the development financing of our economies. In the recent past there have been a number of new regional commercial and profit-oriented entrants performing this role. We welcome this development as it broadens the scope of financing and expands the range of resources available to us while channelling more regionally mobilised funds into development financing. This notwithstanding, the Bank needs to view this development with some concern, particularly where it significantly erodes its own base and where the competitors are not as pre-occupied with procedural issues and consultancy reports. I submit that the Bank’s response should not depend only on the competitive advantage of having concessionary funding which in any case is rapidly shrinking.

CDB must, as a priority, show more empathy and flexibility, be more consumer-friendly, and be speedy and unambiguous in its decision-making. Moreover, the Bank may wish to consider a fast-track financing window, which can cater for the short-term and immediate financing needs of member countries, albeit at a higher cost for the risks that will inevitably arise.

CDB must accomplish all of this without unduly compromising quality and financial prudence. In a sense, I am hinting that in an environment of competition, the very concept of "development banking" needs to be re-visited and re-formulated to ensure its viability.

Similarly, more faithful adherence to the Bank convention that it should achieve a broad geographic representation on its staffing would further accelerate the development of institutional empathy and more functional links with member countries. This is particularly so for the smaller and lesser developed borrowing members which are more isolated from the mainstream of Bank thinking and activity.

The decision of France to withdraw from the Bank was met with consternation and disappointment. The diplomatic consequences continue to reverberate around the Region. While this is not the occasion to question the wisdom of the decision of the French Government, it is certainly the occasion to reflect on its implications.

There are some salutary lessons. We cannot take our External Member Countries for granted. Equally, the philosophical underpinnings of the Bank must be clearly articulated, as must the factors which shape policy and procedures.

Frankly, it is not enough to confine the relationship between the Bank and its Non-Borrowing Member States to interactions at Annual General Meetings. Sir Neville’s initiative in the course of the past year to visit our Non-Borrowing Member States is a step in the right direction.

Sir Neville, who only recently retired, continued the excellent work of his predecessors. Seldom concerned with popularity at the expense of prudence, he stoutly defended the interests of the borrowing member states, and jealously guarded the independence and integrity of the Bank. We wish to thank Sir Neville for his sterling contribution to the development of the Bank and, indeed, the Caribbean.

CONCLUSION

Finally, Mr President, Ladies and Gentlemen, the challenges facing this Region require strong economies. Strong economies require a steady but dynamic CDB. While the world economy has changed substantially since the establishment of the Bank in 1970, we can find solace in the fact that the principles enshrined by the founding fathers for the development of the Caribbean remain as relevant today as they were then. Let this, however, not blind us to the evolving environment in which we operate. Let us use our resources wisely and effectively, to bring to the people of the Caribbean the economic and social benefits they justly expect.

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