The 8th Caribbean Infrastructure Forum (CARIF) is a two-day event that brings together regional and global leaders involved in the planning, financing and construction of infrastructure and capital projects across the Caribbean. CARICOM Deputy Secretary-General, Dr Armstrong Alexis participated in a panel discussion with industry leaders and executives. Here is a summary of his remarks, in which he gives background information on CARICOM; infrastructure in relation to the Community; infrastructure gaps in CARICOM; single ICT space and opportunities for private and multilateral communities’ support.
Is Investment in Infrastructure Poised to Take off?
- Overview
The Caribbean Community Secretariat is the Administrative organ of the Caribbean Community – a grouping of 15 sovereign states and 6 associate Members. The community was established through the signing of the Treaty of Chaguaramas on July 4th 1973, and the Revised Treaty of Chaguaramas in July 2001.
The major responsibility of CARICOM is to coordinate and present a unified integrated development agenda that seeks to secure a viable, sustainable, and prosperous Community for all the citizens of Community.
With regards to infrastructure, CARICOM operates in the policy space and supports its Member States in establishing and maintain appropriate macro-economic policies that targets the improvement of infrastructure, whether these be in the air and maritime transportation space, Information and Communication Technology (ICT), irrigation, roads or tourism.
Example of ICT:
The single ICT space: “An ICT enabled borderless space that fosters economic, social and cultural integration for the betterment of Caribbean Citizens”
~ Decided by CARICOM Heads of Government in 2014 (ten years ago)
~ Heads have also adopted a Singel ICT Space Roadmap (2017).
~ The foundation is therefore already laid for effective and actionable results to be achieved.
~ The Single ICT space is a policy platform to enable sectors and citizens to exploit all facets digitalization.
~ capitalising on economies of scale vs the relative small size of the SIDS of the Caribbean.
*** Concern that telecoms operators have indicated that there is no business case for 5G the Caribbean.
Reality check:
The American Council on Foreign Relations describes the Caribbean as one of the regions of the world most vulnerable to climate change.
– large coastal populations
• more pronounced sea-level rise;
• increased frequency of extreme weather events, such as hurricanes and tropical storms;
• increased rainfall and flooding;
• dangerous high temperatures;
• coastal erosion and saltwater intrusion; and
• longer dry seasons and shorter wet seasons.
– Scientists say that without immediate action, the Caribbean could eventually become nearly uninhabitable.
A high coastline-to-land ratio, meaning that any rise in the sea level is likely to have an outsized impact on the agricultural lands, infrastructure, and populations located along a country’s coast (Intergovernmental Panel on Climate Change).
According to a 2020 study by Climate Analytics, climate damages in the Caribbean are projected to increase from 5 percent of regional gross domestic product (GDP) in 2025 to more than 20 percent by 2100 under current trends.
Others predict that losses will grow from 3 billion in 2025 to 22 billion by 2050.
- High quality and sustainable physical infrastructure is the foundation / bedrock for economic transformation and building modern, prosperous and resilient societies as envisioned by the 2030 Sustainable Development Goals (SDGs).
- climate resilient infrastructure which often requires an additional investment outlay for compliance with resilience standards.
- Given the devastating impact of climate change on the infrastructure stock, high productivity infrastructure must be climate resilient.
- Infrastructure Gaps in CARICOM
- Using the SDGs as a guide, the range of resilient infrastructure required for inclusive growth and sustainable development in CARICOM Member States broadly covers transportation (road, aviation, and maritime); electricity (renewable energy sources); telecommunications including digital platforms; and water and sanitation (pure water supply, irrigation networks, waste management and recycling). Additionally, there is need to build out the health and education infrastructure in the pursuit of disaster preparedness and resilience.
- In CARICOM, there are significant gaps in all components of the physical infrastructure stock. A 2019 IDB study in 6 CARICOM States which examined issues of efficiency, reliability, cost, and vulnerability to disasters and climate change noted the ageing infrastructure stock in several instances and identified major gaps. It was concluded that additional resources must “be channeled to productivity-boosting infrastructure projects to further stimulate near term growth, and long-term development.”[1]
- A conservative estimate is that CARICOM States lose on average 2% of the capital stock in infrastructure because of climate related events each year. This is equivalent to having the infrastructure stock destroyed and rebuilt every 50 years.
- It has been determined that during the decade prior to COVID, CARICOM States spent about 2% of GDP on infrastructure investment which is about half that spent by emerging Asian countries. CARICOM Governments are often having to replace disaster-damaged infrastructure even before they have completed repayment of the loans used to build the road or bridge, etc. Given the existing high levels of public debt, additional borrowing to invest in infrastructure upgrading and expansion is not often a viable option.
- Infrastructure can be a key enabler of economic and social development
- CARCOM Governments already embrace the opportunities that can be provided by effective public private partnerships in the delivery of public goods and services. They acknowledge that reducing the infrastructure gap requires improvements both in the efficiency and quality of public investments as well as the mobilization of public and private investments. Additionally, they recognize that there will be need for a new institutional and collaborative architecture involving multilateral, public and private action to unlock the financing for investment in resilient infrastructure.
- This perspective has been catalysed by toolkits designed for the pursuit of public private partnerships which have been designed by the Caribbean Development Bank (CDB) and the World Bank specifically for use of CARICOM countries.
- Appropriate environmental, social and governance (ESG) practices[2] are critical in determining the risk profile of investment projects. A major financial institution (Republic Bank) in the Community has already begun the process of mainstreaming ESG practices into its lending portfolio. It is expected that other financial institutions will soon adopt such practices as well. At the same, Governments will need to ramp up work on developing their sustainable investing strategies, policy, and regulatory frameworks that can link sovereign debt with impactful ESG outcomes and provide a coherent context for private investments.
- In addition to standard public private partnerships, there is recognition of infrastructure investments in private equity markets (institutional investors such as pension funds, mutual funds and insurance companies) as a new asset class that can offer a compelling blend of risk and return characteristics to potential investors seeking to diversify and enhance their portfolios. This represents an opportunity to scale up financing for certain value-added infrastructure which require greenfield or upgrading investments (for example, telecommunication and digital networks whose value accrue from capital appreciation rather than an ongoing stream of income).
- How can the private and multilateral communities support efforts?
- Multilateral development banks such as the CDB, World Bank and IDB have been supportive to CARICOM Governments by providing workable templates and toolkits to support the forging of effective public private partnerships. Going forward, it is essential that both multilateral and regional development banks, development partners, and the private sector collaborate effectively to form much needed strategic partnerships that could be directed at unlocking the financing needed for critical infrastructure investments.
- The strategic partnerships between Governments, development partners and multilateral development banks must focus on leveraging technical (knowledge, technology and productivity enhancements) and financial resources to de-risk infrastructure projects in a manner which ensures an acceptable risk-reward balance that could promote the crowding-in of private sector investments.
- Such strategic partnerships are already happening. For example, both the World Bank and the IADB continue to work with Governments to de-risk huge infrastructure projects. The IDB’s PPPs Americas 2023 Event focused on how to expand the role of public-private partnerships (PPPs) in high-priority sectors—like water and sanitation, hospitals, schools, and renewable energy in Latin America and the Caribbean. Such projects tend to achieve greater social impact and contribute to climate action.
- G-7 Leaders have also affirmed their commitment to accelerating sustainable infrastructure investment through the Partnership for Global Infrastructure and Investment (PGI) which was launched in 2022. At the recent G-7 summit (July 2024), the United States, one of CARICOM’S major development partners, announced significant progress made on this commitment with the mobilization of over US$60 billion in PGI investments over the last two years.
- More specifically, the US International Development Finance Corporation has joined with IDB Invest to launch the Americas Partnership Platform to facilitate and increase cooperation to support high-quality infrastructure projects across Latin America and the Caribbean. In April 2024, this partnership announced an additional co-financing framework to support investments in certain key sectors by providing up to US$50 million per project to meet financing requirements.
- What are the key investments needed to deliver long-term economic growth and resilience and potential pipeline of projects
- The infrastructure investments required to deliver long-term inclusive economic growth and build resilience span a range of sectors with diverse priorities according to the specific needs of each Member State. In general, investments which result in better roads, airports and ports facilitate the movement of people, goods and services while improved water, sanitation and sustainable energy infrastructure lower the costs of production and enhance productivity and competitiveness. Value-added investments will include the upgrading of telecommunication (ICT) and digital infrastructure as well as health and education services.
[1] IADB Caribbean Quarterly Bulletin, Volume 9.
[2] ESG is a concept used to assess the viability of proposed investments and projects based on their expected environmental and social impact and governance practices. The ultimate goal of ESG is to identify investments that can enhance economic growth while improving citizen well-being and environmental protection.