Small Caribbean countries can accelerate private-sector development–a critical step to fostering sustainable and inclusive growth–by addressing key sources of vulnerability and improving the investment climate, according to a new report published today by IFC and the World Bank.
The Caribbean Regional Private Sector Diagnostic (RPSD) identifies ways to reduce cross-cutting constraints to private investment, such as gaps in connectivity and skills mismatches, and break the region’s current low-growth, low-productivity trend. In addition, the study examines two key sectors–digital economy and renewable energy–in which greater private investment could contribute to export diversification and job creation, enhance productivity, and strengthen resilience to climate change and natural disasters.
“The RPSD provides a roadmap to advancing reforms that will unlock the full economic potential of the Caribbean and further enable the private sector to become an engine for inclusive growth and innovation, including strengthening the digital economy and transitioning to renewable energy,” said Susan Lund, IFC’s Vice President for Economics and Private Sector Development, during a hybrid event in Bridgetown jointly organized with the Caribbean Development Bank (CDB).
The regional diagnostic–the first of its kind–covers 12 small or micro-states (Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago) that, despite their marked differences, have a similar culture, language, and geography, and face comparable development challenges. This creates opportunities for collaboration and mutual learning.
“To realize the economic potential of the Caribbean, there is a need to bolster regional linkages and economic diversification and a move to greener and more inclusive growth”, said Lilia Burunciuc, the World Bank’s Country Director for the Caribbean countries.
“We are gearing up to play a stronger catalytic role in generating private investment. We continue to position ourselves to be at the forefront of transforming the financing landscape, attracting more resources that will help to address many of the challenges facing our populations,” he explained. “Through our new Private Sector Development Framework, which is well advanced, CDB is aiming to facilitate the development of dynamic and internationally competitive, high-growth firms, drive higher incomes and increased economic resilience at both the national and regional levels.”
As per the RPSD, leveraging digital services could be transformational in the region, repositioning itself in newer and more complex services, enhancing the productivity of traditional sectors, and the quality and inclusiveness of public services. Concurrently, transitioning to renewable energy can generate green growth, jobs, and diversified income, while mitigating the region’s dependence on imported heavy fuels and reducing energy costs for key sectors such as tourism.
The private sector in the 12 countries analyzed faces major, cross-cutting constraints–notably, gaps in trade policy, trade facilitation, and connectivity; skills mismatches; limited access to finance, especially for SMEs, and vulnerability to climate change–addressing which would foster an environment more conducive to trade, investment, and growth. Examples of policy recommendations to strengthen the role of the private sector include harmonizing investment regimes, reducing skills mismatches in partnership with the private sector, fostering credit products for SMEs, and developing new financial instruments.