By Kimberly Ramkhalawan
kramkhalawan@caribmagplus.com
March 23, 2021
Caribbean Countries have always been viewed as plagued with corruption especially when it comes to handing out contracts for big ticket projects.
Viewed as a disease and addiction among Caribbean leaders to start up brand new fancy projects rather than do the work to ensure their nations are more efficient in providing essential services to its people, one group of economists and financial advisors say this has been the downfall of the islands in the region in establishing first world status.
Owing this to motives derived from political desires, they say governments often fall short in really doing the hard work in getting the nation running the way it ought to.
Coming ahead of the Caribbean Infrastructure Forum (CARIF) conference carded for later this month, speakers from accounting giant KPMG, CIBC bank, the Inter-American Development Bank (IDB) and other economists discussed the potential Public Private Partnerships (PPPs) had in revitalizing economies in the region, with emphasis placed on attracting investors to brownfield projects rather than greenfield startups, while the webinar spared no holding back in how companies and financial institutions see its role in investing in the region.
One such speaker, Zachery Harding, executive chairman and chief executive officer at the Delta Capital partners says governments’ roles in managing national infrastructure such as roads, utility companies and other state-owned agencies has limited its capacity in building and maintaining its GDP, while tax collections remain high.
He says there needs to be a shift in how governments partner with the private sector, and calls for working together to create the change needed.
Stephen Beatty, global chairman of infrastructure and head of Global Cities Center of Excellence at KPMG International says, more needs to be done when it comes to local content, as too often most supplies for any new project has to be almost entirely imported. Citing the current situation exacerbated by the COVID-19 Pandemic where supply chains have been disrupted causing a lag and shortage in supplies while the demand has grown, governments in the region, while ambitious with its projects, must keep in mind whether its high spending expenditure is going to weigh out in the long term. He adds that often it’s the mistake of governments to start bright new shiny projects as a means of injecting investment into its economy, as it is often the belief that construction projects yield or are equivalent to stimulating employment. Beatty says this is not so, as these projects while high end, do not mean long term returns.
What he says small islands need, is a real national infrastructure plan. This he says often states why something is or is not done.
Instead, he is urging governments to tackle the so-called obvious projects such as burying power lines in the ground so that in the event of a disaster such as Hurricane Maria and Irma which left islands flattened, power supply would not be a problem. Its these kinds of brownfield projects many of the panelists say are urgently needed within the region if it is to really achieve success, and that making these tradeoffs before the hurricanes arrive rather than after, is much easier.
Beatty added that there were a lot of projects that are capable of creating gains in national competitiveness, employment and resilience, but they don’t necessarily come in glamourous packages.
He notes while it is hard to get elected pointing to something that isn’t there, these so-called small things do add up to the competitiveness of a nation and region, as it holds the potential to create more capital for the newer shinier projects politicians often set their eyes upon.
Alluding to the “Shiny projects”, Therese Turner-Jones, general manager at the Caribbean Country Department of the IDB likened this approach by regional leaders to that of the Guyanese saying “Fancy gallop does not win the race”. Her analogy says stimulus does not come from constructing brand new buildings, but to projects that would also lend to themselves, citing offerings from institutions such as the World Bank, IDB through public private partnerships. She adds that not only do they provide for themselves through grants offered, but safeguards any potential risk.
Turner-Jones says while PPPs are not the ‘panacea’, she says in the last decade or so, institutions such as the World Bank and the IDB have spent a great deal building up capacities so financial relations like this would work in the development process, doing the job of ensuring each country in the region has been outfitted with a tailored tool kit on the what nots and what to do, what to look out for, and when investment makes sense while providing risk assessment.
She added that while most governments will say they are committed to improving these services, there needs to be a clearer message in what is being really said in these capital investment plans. Echoing sentiments shared by Beatty, she says a clear framework by each country does not need to be a 1,000-page document detailing how it’s going to be redone, but simply one stating their infrastructural needs. By making it simple, this can in turn invite investors, once they are aware governments are looking for partners, expression of interest from the private sector will follow.
But getting an audience to express this interest is not always an easy one.
Something Zachery Harding says can often be a stumbling block itself.
Harding, who also sits on the JamPro board, a state trade and investment agency charged with promoting Jamaica’s export, says in his experience they too have tried to fast track communication with potential investors and government. He says making investors aware of potential projects requires a change in the way governments have conversations with the private sector, and this means being more readily accessible and open to partnerships.
Pitching ideas to the government also does not come easy, instead Harding suggests that investors utilize mutual acquaintances such as KPMG personnel or another mediating advisor to the government to facilitate introducing opportunities to both parties. This he describes as out of the box thinking, but is often unlikely, especially when government ministers procrastinate meetings with investors, leading to disinterest among them, and causing them to shift their interests to other projects elsewhere.
Harding underscored to need for investors to ensure the alignment of interests.
He says having the best project and the best financing does not necessarily mean the partnership for projects can happen. Privatizing can often be a revenue shared set up while making the sector profitable within a given timeframe, including the reduction of the cost of operations. It’s this kind of viability and returns that make up a greater share of the interests, but Harding says sometimes governments frown upon businesses looking to make profits and benefiting from the same said projects that assist in their businesses growing, despite its potential to provide greater employment opportunities to its residents. He says if a combination of interests and priorities are not aligned, investors and companies are less likely to pursue business ventures after such experiences, even when the government was designed not to have any risk in the plan, it will simply not happen.
Harding says in the end, the aim is to “not lose our investors’ money, and to make some sort of risk-adjusted-return while hopefully doing some kind of good”. He adds that where the disconnect happens often is in the mindset. He says as single players entering a room, knowing the mindset of politicians helps ascertain how the approach will be taken, while informing the framework on having some commonalities of what we are all aligned around.
His cure, that each government create a minister of innovation portfolio, which he sees critical for development, charged with channeling productive directions and use it as a tool for breaking the barriers and collaborating in new ways, in other words, to do something different.
By breaking barriers, clearing impediments to change advocacy is critical while educating them exchange of information and innovation.
As to how they intend to assist in combating this plague, Turner-Jones revealed plans to take a regional approach, in what they just launched, the Build Forward, a multi donor trust fund where investors can put resources in as a means of leveraging the balance of the IDB, and by making the fund larger, the portion each nation gets will increase.
She adds that civil society needs to get more engaged in government’s budgets. Citing that Jamaica recently presented a citizen budget where it was broken down simply with pie charts on where the money comes from and where it will be spent, garners interest among the average person. Often these pie charts can show that a big chunk of revenues earned often go back into public servants’ salaries and debt service.
Turner-Jones says investors look for the viability and the services that would support returns on their capital put out. Recurring expenditures on public servant salaries, with poor service, does not auger well for competitive attractiveness.
And while this does not mean necessarily firing people, she says retention can be achieved by upscaling their tasks through digitization, as technology makes smarter and more efficient workers, while augmenting productivity.
In the end, it’s comes back to improving efficiency that citizens and investors enjoy. If we look at what simply needs improving, and governments will find there are plenty of avenues investors with the expertise can partner with in mechanizing and growing efficient economies.
The 5th Caribbean Infrastructure Forum, CARIF, will take place virtually on March 24th to the 26th via New Energy Events.