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The Caribbean Development Bank is a true product of CARICOM. Having being established at a time when individual Caribbean islands were trying to establish their financial independence, it continues today, to fund programmes geared toward promoting and ensuring the economic growth and development of the entire region.
In a recent interview with JIS News, Neville Grainger, the CDB’s Vice-President of Finance, noted that since its inception, the Bank has financed projects within the Caribbean, totalling approximately US$2.6 billion.
“Of those resources, about 25 per cent would have gone to what we call financial intermediaries, such as development banks in the region, which are used as a conduit for our resources to small and medium enterprises. In addition to that, we would have disbursed about 25 per cent to the productive sectors like the agricultural sector, for manufacturing and tourism, whilst the remaining half, about 50 per cent, would have gone to the economic infrastructure and in this regard, we speak about roads and other forms of transportation, telecommunications.” said Mr. Grainger.
The CDB, which was established in Kingston, Jamaica on October 18, 1969, as part of a regional strategy for economic development, was charged specifically “to contribute to the harmonious economic growth and development of the member countries in the Caribbean and promote economic cooperation and integration among them, having special and urgent regard to the needs of the less developed members of the region.”
Mr. Grainger, a Guyanese national, who joined the CDB in 1975, recalled that the establishment of the financial institution was a significant development in the 1960s, particularly after the collapse of the Federation, when many of the Commonwealth Caribbean countries were either moving towards, or had recently attained, political independence.
According to the Vice President, these countries faced significant challenges as their domestic savings were insufficient to finance the level of investment required for growth and so many of them relied heavily on grants-in-aid and other official development assistance flows. In the circumstances, it was a widely held view that “there was a need to establish an institution to assist in accelerating the economic development of the region.”
“Consistent with that purpose, the Bank, over the years, has been focusing on the less-developed countries (LDCs), which are members of the Bank, primarily the OECS (Organisation of Eastern Caribbean States) countries, Belize and the dependent territories of the United Kingdom,” Mr. Grainger informed JIS News.
“In discharging this mandate, we have sought to ensure that the needs of the LDCs are not ignored and so, as at the end of last year, for example, the LDCs had received 71 per cent of all concessionary funds disbursed by the Bank and 52 per cent of all financing made by the Bank to date. Bearing in mind that the LDCs represent less than 16 per cent of the population of the Bank,” he continued.
In the early days, the CDB was seen as having to play a transformational role in terms of turning around economies, said Mr. Grainger.
“In those days, most of the economies had very poor infrastructure, the per capita incomes were very low, and they were weak institutions in terms of implementing public policy and so, what we focused on in those early years, was to secure as much concessionary financing from the donor community.Canada and United Kingdom in fact, were extremely generous in those days, and so we were able to get our resources started,” he further explained.
Additionally, the CDB has, over the years, performed a “catalytic role” in stimulating foreign investment in the region, in that its presence in almost any venture in the Caribbean attracts other major financiers. In fact, to date, the Bank has had notable success in attracting financing for the region, noted Mr. Grainger. Citing an example, he pointed out that when the CDB started the Caribbean Investment Fund some years ago, it was able to bring on board other players, by virtue of the Bank’s presence in that Fund.
Starting with an initial subscribed share capital of US$50 million, the CDB has flourished over the past 37 years, through the contributions of its member countries, otherwise called borrowing member countries.
Today, the institution’s subscribed capital stands at US$705 million, with a membership base of 17 CARICOM member states, three Latin American member countries – Colombia, Mexico and Venezuela, and five international members – Canada, Italy, the United Kingdom, Germany and China.
In addition to the subscribed capital, the Bank borrows on the international capital markets and to a lesser extent, from a number of financial institutions such as the Inter-American Development Bank (IADB) and the European Investment Bank (EIB).
The CDB has mobilised a total resource flow of approximately US$1.75 billion, of which 52 per cent is for use in its ordinary operations and the remaining 48 per cent in special or concessionary operations. Some US$668 million or 72 per cent of the Bank’s resources came from its non-regional members, while US$94 million or 10 per cent of resources mobilised were from the regional non-borrowing members, Colombia, Mexico, and Venezuela, and US$162 million or 17 per cent from the Commonwealth Caribbean Members.
On the concessionary side, most of the CDB’s resources are received from donor countries. The Bank’s main concessionary fund is the Special Development Fund, and traditionally, approximately 75 per cent of the resources of that Fund is provided by donors, with the remaining 25 per cent being put in by member countries, the Finance Vice President outlined.
Continuing, Mr. Grainger noted that the last replenishment of the Fund, which was concluded in December 2005, “was perhaps the best on record in terms of size,” and should take the Bank comfortably forward for another four years and enable the institution to finance various deserving programmes particularly to benefit poor communities.
One such programme is the Basic Needs Trust Fund (BNTF) programme, the Bank’s flagship poverty reduction programme, which finances the construction of much-needed community facilities such as roads and footpaths, schools and health centres. The Jamaica Social Investment Fund (JSIF) is the executing agency for the BNTF financing in Jamaica.
“We’ve had a long relationship with JSIF, going back to 1999, when we would have given them some US$14.4 million and we anticipate that we’ll be having another programme for poor communities involving health centres, basic schools, basic water supply systems, and so on,” Mr. Grainger informed JIS News.
Today, as advancements are being made towards the establishment of a CARICOM Single Market and Economy (CSME), Mr. Grainger affirms the institution’s continued commitment to facilitating the development of the region. The CSME, when fully implemented, would be considered a fourth grouping of market importance for the CARICOM business sector with a combined gross domestic product (GDP) of approximately US$300 million.
The CDB, in supporting this initiative, provided funding for the establishment of the Caribbean Court of Justice. “We raised $100 million a couple years ago on the capital market to enable the CCJ to be self-financing…also, in the area of what we call regional public goods, that is projects with a regional dimension such as education, health, transportation and disaster mitigation, the Bank again will play a role in financing those projects,” Mr. Grainger pointed out.
He added that several other types of projects would flow out of the establishment of the CSME and, when that happens, the CDB will be there to provide financing assistance as well.
Additionally the CDB is in the process of establishing a Regional Development Fund (RDF) “to assist those countries, which might be disadvantaged by the establishment of the CSME. The Bank has been playing a lead role in the design and it is contemplated that the Bank will manage the resources of the RDF,” Mr. Grainger told JIS News.