Document of The World Bank FOR OFFICIAL USE ONLY Report Number: 85156-LAC INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL FINANCE CORPORATION AND MULTILATERAL INVESTMENT GUARANTEE AGENCY REGIONAL PARTNERSHIP STRATEGY FOR THE ORGANIZATION OF EASTERN CARIBBEAN STATES (OECS) FOR THE PERIOD FY15-19 October 17, 2014 Caribbean Country Management Unit Latin America and Caribbean Region International Finance Corporation Latin America and Caribbean Region Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit: Eastern Caribbean Dollar (EC$) US$1.0 = EC$ 2.70 FISCAL YEAR Antigua and Barbuda, Grenada, St. Kitts and Nevis, St. Vincent and the Grenadines: January 1- December 31 St. Lucia: April 1 - March 31 Dominica: July 1 - June 30 IBRD IFC MIGA Vice President Jorge Familiar Karin Finkelston Keiko Honda Country Director Sophie Sirtaine Irene Arias Ravi Vish Task Team Leader Alessandro Legrottaglie Frank Sader Petal Jean Hackett ABREVIATIONS AND ACRONYMS AAA Analytic and advisory activities IDF Institutional Development Fund APL Adjustable program loan IEG Independent Evaluation Group BAICO British American Insurance Company IFC International Finance Cooperation CARICOM Caribbean Community IMF International Monetary Fund ISR Implementation Status and Results report CARCIP Caribbean Regional Communications LAC Latin America and the Caribbean Infrastructure Program CARTAC Caribbean Regional Technical Assistance Centre LMIS Labor Market Information System CBI Citizenship-by-Investment Program M&E Monitoring and evaluation CCRIF Caribbean Catastrophe Risk Insurance Facility MDG Millennium Development Goal CCT Conditional Cash Transfer CDB Caribbean Development Bank MIGA Multilateral Investment Guarantee Agency CDF Caribbean Debt Framework MTDS Medium-term Debt Management Strategy CEDAW Convention on the Elimination of All Forms of NCD Noncommunicable disease Discrimination against Women CIDA Canadian International Development Agency NLTA Nonlending technical assistance CGF Caribbean Growth Forum NPTAs National Protected Area Trust Fund CLICO Colonial Life Insurance Company OECS Organization of Eastern Caribbean States CSME CARICOM Single Market Economy PFM Public financial management DeMPA Debt Management Performance Assessment PLR Performance and Learning Review DFID Department for International Development PPCR Pilot Program for Climate Resilience DPL Development policy loan PPP Public -private partnership DRM Disaster risk management RPS Regional Partnership Strategy EC European Commission RSVRP Regional Social Vulnerability Reduction Project ECCB Eastern Caribbean Central Bank SEMCAR Supporting Economic Management in the Caribbean ECCU Eastern Caribbean Currency Union SDR Special Drawing Rights SIDS Small Island Developing States ECERA Regional Energy Regulator Program SMEs Small and medium-sized enterprises EGRIP E-Government for Regional Integration Project SSNA Social Safety Network Assessment EPIC Entrepreneurship Program for Innovation in the TA Technical assistance Caribbean ERL Emergency Recovery Loan TAC Technical Assistance Credit ESW Economic and sector work UNDP United Nations Development Programme EU European Union UNICEF United Nations Children’s Fund FDI Foreign direct investment UN United Nations FSAP Financial Sector Assessment Program US United States GDP Gross domestic product VAT Value-added tax GEF Global Environment Facility WBG World Bank Group IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report ICT Information and communications technology IDA International Development Association ACKNOWLEDGEMENTS This OECS Regional Partnership Strategy FY15-19 (RPS) was a team effort led by Alessandro Legrottaglie (LCC3C), Frank Sader (CLASC), and Petal Jean Hackett (MIGEC) under the general guidance of Sophie Sirtaine (Country Director, LCC3C), Irene Arias (Director, CLADR) and Ravi Vish (Director, MIGES). The RPS Core Team included: Oscar Apodaca (LCC3C), Francisco Carneiro (LCC3C), Safaa El Kogali (GEDDR), Elisabeth Mekonnen (LCC3C), Galina Sotirova (LCC3C), Maria Angelica Sotomayor (GSURR), Caroline Vagneron (LCC3C), and Tom Vis (GTCDR). In addition, the whole OECS Country Team has made important contributions to the strategy. In particular, relevant inputs to the RPS have been provided by: Ivar Andersen (DFIRM), Cecilia Briceno-Garmendia (GTIDR), Carmen Carpio (GHNDR), Caroline Cerruti (GFMDR), Louise Cord (GPVDR), Frode Davanger (DFIRM), Diletta Doretti (CTCID), Lea Gimenez Duarte (GPVDR), Norbert Matthias Fiess (CROCR), Doyle Gallegos (GTIDR), Andrea Gallina (GGODR), Helen Mary Martin (GCPDR), Niels Holm-Nielsen (GSURR), David I (GGODR), Migara Jayawardena (GEEDR), Alma Kanani (LCRDE), Mark Lambrides (GEEDR), Anat Lewin (GTIDR), Jonna Lundvall (GPVDR), Alfonso Garcia Mora (GFMDR), Marialisa Motta (GTCDR), Harriet Nannyonjo (GEDDR), John Nasir (OPSPQ), Rei Odawara (GMFDR), Snjezana Plevko (GSPDR), Patricia Rogers (editor), Edith Ruguru Mwenda (LEGAM), Luis Alvaro Sanchez (LCC2C), Raha Shahidsaless (GTCDR), Monica Parra-Torrado (GSPDR), Svetlana Proskurovska (GGODR), Margo Thomas (GTCDR), Eli Weiss (GFADR), Asha Williams (GSPDR), and Jun Zhang (CLADH). The World Bank Group appreciates the collaboration and contributions of the governments of Antigua and Barbuda, the Commonwealth of Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. The WBG is also grateful for the consultation with regional institutions (particularly the OECS Commission, the ECCB and the CDB), civil society, other international development partners (including IMF, IDB, UNDP, DFID, DFTAD, EU, USAid, UNICEF, CARICOM), the private sector (including the OECS Business Council), and other stakeholders in the preparation of this RPS. OECS REGIONAL PARTNERSHIP STRATEGY (FY15-19) CONTENTS EXECUTIVE SUMMARY ........................................................................................................... i 1. COUNTRY DIAGNOSIS...................................................................................................... 4 A. Recent Economic Developments .................................................................................................. 4 B. Poverty and Shared Prosperity ...................................................................................................... 9 C. Challenges for Poverty Reduction and Shared Prosperity .......................................................... 13 2. NATIONAL AND REGIONAL VISIONS ........................................................................ 26 3. WORLD BANK GROUP PARTNERSHIP ...................................................................... 27 A. Lessons Learned from the Previous RPS.................................................................................... 27 B. Consultations .............................................................................................................................. 27 C. Country and Regional Engagement ............................................................................................ 28 D. Proposed World Bank Group FY15-19 Partnership Strategy ..................................................... 29 4. FINANCIAL PORTFOLIO AND EXPOSURE MANAGEMENT ................................ 37 5. MANAGING RISKS ........................................................................................................... 40 ANNEXES ................................................................................................................................... 42 Annex I. Results Matrix ............................................................................................................. 42 Annex II. Country Growth Outlook and Selected Economic Indicators ............................... 47 Annex III. Political Context and Progress in the Integration Process ................................... 53 Annex IV. Partnerships and Areas of Donor Supporting the OECS ..................................... 55 Annex V. Gender Note ................................................................................................................ 56 Annex VI. Monitoring and Evaluation ..................................................................................... 66 Annex VII. The Caribbean Growth Forum (CGF) ................................................................ 68 Annex VIII. Compendium of National and Regional Strategies ............................................ 70 Annex IX. Summary of the Overall Findings of the OECS Client Survey............................ 73 Annex X. List of Active Projects and Large Grants (>US$1MLN) as of June 2014 ............ 75 Annex XI. Active Trust Funds ................................................................................................... 76 Annex XII. OECS Human Development Indicators ................................................................ 77 Annex XIII. OECS Regional Partnership Strategy 2010-14: Completion Report ............... 78 Annex XIV. OECS MAP .......................................................................................................... 112 FIGURES Figure 1: Slowest-growing emerging markets and developing countries, 2003-2012 .................................. 5 Figure 2: Remittances (as percent of GDP) before and after the crisis ......................................................... 6 Figure 3: Evolution of fiscal balance (percent of GDP) ............................................................................... 7 Figure 4: FDI/GDP in selected Caribbean countries..................................................................................... 8 Figure 5: Poverty reduction in the region ................................................................................................... 10 Figure 6: Poverty and inequality in the OECS (pre-crisis) ......................................................................... 10 Figure 7: Unemployment in the OECS (total and youth) ........................................................................... 11 Figure 8: Constraints to business success ................................................................................................... 14 Figure 9: 2014 Doing Business Ranking of OECS Countries .................................................................... 15 Figure 10: High and volatile electricity prices in the OECS islands........................................................... 17 Figure 11: Percentage of LAC firms that developed or introduced a new product, 2010........................... 18 Figure 12: The total contribution of travel and tourism to GDP and employment (percent) ...................... 19 Figure 13: Impact of selected damages from disasters ............................................................................... 24 Figure 14: Trends in frequency and impact of natural disasters ................................................................. 24 Figure 15: : Average losses due to extreme weather events for IDA countries, 1993-2013 ....................... 25 Figure 16: Comprehensive Debt Framework (CDF) .................................................................................. 28 Figure 17: OECS RPS FY15-19 Framework .............................................................................................. 30 TABLES Table 1: Selected economic indicators for the OECS ................................................................................... 6 Table 2: Evolution of debt in the OECS ....................................................................................................... 8 Table 3: MDG 1.2 - Reduce hunger by half ............................................................................................... 12 Table 4: Comparative development indicators, OECS and LAC countries ................................................ 13 Table 5: OECS financial sector structure .................................................................................................... 14 Table 6: Distribution of firms in the OECS by employment size (percent)................................................ 15 Table 7: OECS market share of stay-over arrivals...................................................................................... 20 Table 8: IDA-17 (FY15-17) Indicative Country Allocation (SDR million) ............................................... 38 Table 9: OECS RPS lending program (FY15-19), and links with RPS outcomes...................................... 38 Table 10: World Bank OECS portfolio FY10-14 ....................................................................................... 39 EXECUTIVE SUMMARY i. The small, open economies of the Organization of Eastern Caribbean States (OECS) have been trapped for years in low growth, high debt, and limited fiscal space, exacerbated by a number of external shocks. The impact of the 2008 global financial crisis was severe as tourism, remittances, Foreign Direct Investment (FDI) and official development flows decreased sharply, growth rates plummeted, debt and fiscal imbalances increased to unsustainable levels, and labor market conditions deteriorated. With decreasing productivity and weak external demand in key sectors, decreasing FDI, and continued structural weaknesses, these impacts are still lingering today. The financial sector demonstrated limited capacity to support growth and job creation. In addition, natural disasters have periodically taken a large toll on the region, affecting lives, infrastructure, and economic activity. The OECS’s bleak economic performance has exacerbated social problems: unemployment has been growing at alarming rates, especially among the youth; and poverty, which was relatively high before 2008, has very likely worsened. ii. Against this background, resumption of inclusive growth, generation of employment, and increased economic and social resilience are the priorities of OECS governments. Macroeconomic sustainability is a key objective of OECS governments. They understand that strengthening the financial sector, continuing to improve the investment climate, and enhancing the competitiveness of key sectors are critical to support the resumption of private investment and development of key economic sectors that can generate growth and employment. In order to achieve this objective, reducing the cost of electricity, which is among the highest in the world, and increasing Information and Communication Technologies (ICT) connectivity are important. OECS governments recognize that a modernized public sector, including a stronger framework for public-private partnerships, would contribute to improving fiscal management and public service delivery as well as strengthening social safety nets and equipping the labor force with the skills needed to find jobs would help improve social resilience and employability. Finally, the OECS governments agree that better disaster prevention and risk management are critical. iii. The OECS Regional Partnership Strategy (RPS) for FY15-19 is consistent with the holistic approach adopted by the OECS Governments to tackle the long-standing issues of low growth and debt sustainability. The OECS countries acknowledge the multifaceted nature of their challenges and have elaborated their own vision considering that improvements in competitiveness, reduction in sovereign debt levels, fiscal adjustments to ensure macro sustainability, and enhance resilience to shocks are interrelated aspects all critical to resume and sustain inclusive growth. The Bank has supported this approach and, at the request of the Heads of Government of CARICOM countries, has elaborated the Comprehensive Debt Framework (CDF) which aims at helping governments, consistently with their own visions, in the design of country specific solutions to their high indebtedness. The CDF is the context in which the Bank undertakes its dialogue with the OECS and defines its assistance program. iv. In that context, the objective of the RPS is to contribute to laying the foundations for sustainable inclusive growth through three areas of engagement: (i) competitiveness, (ii) public sector modernization, and (iii) resilience. Drawing on a diagnostic of the main obstacles to poverty reduction and shared prosperity, under the RPS the World Bank Group (WBG) will work in close partnership with the IMF and the Caribbean Development Bank to i support governments’ efforts on the much needed fiscal adjustment, and on strengthening the financial sector, with the objective of contributing to macro-financial stability and enabling the resumption of financing activities to support growth and investments. In parallel, the WBG will focus on laying the foundations for increased private participation in the economy by creating a more effective investment climate and promoting the competitiveness of industries with high potential, including tourism and agribusiness. Over the long run, this is expected to contribute to higher investments, private sector activity, and ultimately growth and employment, as well as to poverty reduction in rural areas where many smallholders live. The RPS will also support enhanced efficiency in the supply of, and demand for, electricity and diversification of energy supply away from fossil fuels, with the objective of enhancing the competitiveness of key sectors of the economy and contributing to enhanced shared prosperity. A significant impact on the price of electricity will, however, require work extending beyond the RPS period. Finally, the RPS aims to support better disaster risk management and resilience, as well as investments in human capital, including through more effective social protection systems, better quality of education and employability of the labor force, and greater use of evidence-based policy to address non- communicable diseases. v. This WBG program will be financed through a highly selective package of regional Bank lending operations and by leveraging additional resources. Three new operations are planned: a Competitiveness project, a Renewable Energy project, and a Social Resilience and Human Development project. A fourth operation to support financial sector strengthening could also materialize in the context of adequate progress on developing a comprehensive financial sector strategy - in collaboration with the IMF, the ECCB and the CDB - and under a suitable policy and regulatory environment. To capitalize on the benefits of regional integration while enabling strong country ownership, each operation will be designed under a regional framework, as appropriate, but developed and implemented at national level. Implementation of the existing portfolio will further contribute to achieving the RPS development objectives, particularly in the areas of disaster risk management, ICT connectivity, and reforms of the public and social sectors. As IBRD and IDA resources are limited in the OECS and needs very large, leveraging additional trust fund and grant resources is integral to the success of this RPS. vi. Constrained in general by the small size of investments in the OECS, the IFC and MIGA will contribute to the RPS objectives through selective investment support, depending on opportunities. The IFC will focus on crisis response; job creation and inclusive growth; innovation, competitiveness, and integration; and climate change. MIGA faces limited opportunities for engagement because of the small market size of the OECS countries. Improvements in the financial sector and development of PPPs are likely to enable a greater role for IFC and MIGA. vii. The program proposed in this RPS might be reviewed at the time of the first Performance and Learning Review. The emphasis of the WBG engagement and allocation of resources to the various priority areas would depend on governments’ priorities and demand for Bank support at the time of the review. As the timing and form of support to the OECS financial sector remain uncertain, flexibility in the implementation of the RPS will be required. In particular, speedy progress on the financial sector reforms would require a shift of support and resources away from other areas of the RPS, while a slower pace might require an increased focus on the RPS resilience pillar, especially on building stronger safety nets to support the most ii vulnerable. Thus, the program, including key areas of engagement and results, may be significantly adjusted at the time of the first Performance and Learning Review (PLR). viii. The proposed program faces high risks stemming from a fragile macroeconomic, financial and social framework, exposure to exogenous shocks, complex political economy issues, feeble regional cooperation, and weak institutional capacity. Persistent high levels of debt and fiscal imbalances constrain countries’ ability to build fiscal buffers to manage shocks and sustain confidence and investment. A weak financial sector is a source of potential macro risks and limits the financing of private sector investment. This, in turn, might undermine the achievement of greater competitiveness in the leading sectors of the economy. Social tensions could increase if unemployment, especially among youth, continues to rise and might generate lack of consensus to move forward the development agenda that the WBG is supporting. Exposure to economic and natural shocks remains a threat to the achievement of results on structural reforms and fiscal management. Weak capacity and a complex political economy could stall needed reforms and impact the possibility to modernize the public sector as well as to take actions to improve social protection systems and the delivery of basic social services. Weak regional cooperation could jeopardize the adoption of actions needed to implement regional projects. To mitigate this risk, the OECS governments have committed to implement a program of reforms focused on fiscal sustainability and macro stability, which have been expressed in their national and regional strategies, while the WBG will maintain a systematic dialogue with the authorities and other partners to better understand the political economy context in each country. Moreover, the WBG will use flexibility, within the context of the RPS and in line with Governments’ needs, to allocate resources as events develop and will provide technical assistance and training initiatives, embedded in the operations when feasible, to contribute to increased institutional capacity. iii 1. COUNTRY DIAGNOSIS A. Recent Economic Developments 1. For years, the small states of the Organization of Eastern Caribbean States (OECS) have been trapped in a spiral of low growth, high debt, limited fiscal space, and growing social problems, exacerbated by a number of external shocks. 1 Since the 1990s, growth in the OECS countries has been subdued. Growth was further hit hard by the global financial crisis of 2008, and in most OECS countries growth has not returned to pre-crisis levels. Overall, OECS countries ranked among developing countries with the lowest growth in the world between 2003 and 2012 (Fig. 1). Low growth, combined with natural disasters and imprudent fiscal policies, has led to persistent fiscal deficits. Structural fiscal problems have resulted in turn in a sizable accumulation of debt in the region, leading to fragile macroeconomic frameworks. This lackluster performance has exacerbated social problems: unemployment has been growing at alarming rates, especially among the youth. Subdued growth 2. Over the last two decades, economic growth has been elusive in the OECS. In the 1980s growth averaged 5.9 percent per year, largely driven by an expansion of agricultural exports (mainly bananas and sugar) under preferential trade arrangements with Europe, large aid inflows that followed independence from the United Kingdom, and an initial spurt in the tourism sector. In the early 1990s, the region experienced a dramatic shift in its external trade position when many economies lost preferential access to European markets. Average annual growth dropped to 3.3 percent at the end of the decade. In the early 2000s, OECS governments’ efforts to offset exogenous shocks through increased public investment did not translate into a revival of growth; rather, they crowded out private investment. The growing fiscal imbalances associated with increased public investment were financed by expensive domestic and external commercial borrowing and resulted in an unsustainably large debt burden. In addition, the deterioration in the external environment caused a contraction in exports and in the resource balance. 3. The 2008 global economic crisis further weakened growth. After the onset of the global financial crisis, economic growth in OECS countries contracted for four consecutive years (on average, by 1.5 percent per year), leading to a cumulative drop of 6 percent in total output during 2009-2012. Per capita income declined on average by 4.5 percent from around US$9,200 in 2008 to US$8,800 in 2012 (Table 1). The largest fall in per capita income was felt in Antigua and Barbuda (17 percent compared to the pre-crisis level), which experienced a cumulative output contraction of 22 percent of GDP during 2009-2011. Dominica, St. Lucia, and St. Vincent and the Grenadines were less affected by the crisis compared to neighboring countries: St. Lucia maintained low, but positive growth from the time of the crisis through 2011. After two consecutive years of negative growth, St. Vincent and the Grenadines recorded positive growth from 2011 on. However, across the OECS, recovery has remained fragile. 2 1 The OECS, created in 1981, comprises six independent countries and three British Overseas Territories (Anguilla, Montserrat, and the British Virgin Islands). This RPS covers the six independent OECS countries: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines. Apart from St. Vincent and the Grenadines, which has not yet joined the IFC, all are members of the World Bank Group. 2 Tables on OECS countries’ selected economic indicators and projections are in the Annexes. 4 Figure 1: Slowest-growing emerging markets and developing countries, 2003-2012 6 5 Av. 4.8 for 153 emerging markets and developing countries 4 Av. 3.6 for 32 LAC Countries 3 2.5 2.5 2.5 2.6 2.3 2.1 2.2 1.9 1.9 2 1.7 1.7 1.8 1.8 1.8 1.5 1.3 1.4 1.4 1.4 1 1.1 1.2 1.2 1.2 0.9 1 0.7 0.5 0.5 0.2 0 Gabon St. Lucia Zimbabwe Barbados Kiribati Micronesia Jamaica Marshall Islands Fiji Antigua & Barbuda Palau Tuvalu Haiti Croatia Comoros El Salvador Yemen Guinea Samoa Tonga Hungary Eritrea Grenada The Bahamas Brunei Darussalam Côte d'Ivoire St. Vincent & the Grenadines St. Kitts & Nevis Swaziland Central Africa Republic -1 -2 -2 -3 Source: IMF-WEO 4. Since the crisis, growth has remained subdued due to declining competitiveness in key sectors and weak external demand. Despite a slight rebound in 2013, with regional real output growth averaging 0.7 percent, economic activity in most countries has remained sluggish. The OECS countries rely extensively on tourism, construction, agriculture, and financial services, which in 2013 represented respectively 8.7, 3 8.6, 4.3, and 9.3 percent of GDP. The OECS’s lackluster growth performance since the global financial crisis was accentuated by the weakening competitiveness of the tourism sector and the continued low demand related to the slow recovery in advanced economies: the share of tourism receipts from the US, UK, and Canada to the Eastern Caribbean Currency Union (ECCU) 4 declined by 37 percent, and the region was not able to attract visitors from other potential markets with higher growth. 5. Large remittances to the region have typically helped ease external constraints to growth. Over the past two decades the OECS has seen a significant migration of skilled labor out of the region, and has in return benefitted from large private remittances, ranging from US$20 million in Antigua and Barbuda (2 percent of GDP in 2012) to US$45 million in St. Kitts and Nevis (6 percent of GDP in 2012). In some countries, remittances exceed the value of exports (Fig. 2). Remittance flows to the region have been one of the most important sources of 3 This value indicates the direct contribution of travel and tourism to GDP, or total “internal” spending in a particular country on travel and tourism by residents and nonresidents for business and leisure purposes, as well as government “individual” spending on travel and tourism services directly linked to visitors—cultural (e.g., museums) or recreational (e.g., national parks). 4 The ECCU comprises six countries—Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines—and two British territories, Anguilla and Montserrat. 5 financing, and since the 1990s, they have exceeded foreign direct investment (FDI) and official development flows. 5 6. However, remittances fell during the Figure 2: Remittances (as percent of GDP) before and after the crisis crisis and have made only a modest recovery since. Traditionally, remittances have increased during crises, helping households and investors weather shocks. 6 This time, however, there was a substantive drop in overall remittance inflows—they fell by 15 percent between 2007 and 2010. In addition, the rate of recovery has been slow: while remittance receipts have picked up since 2011, they have barely returned to pre-crisis levels, exacerbating the impact of the crisis on growth. Source: WDI and WBG staff calculations. Data are unweighted averages. Table 1: Selected economic indicators for the OECS Prel. Projection 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (Annual percentage change, unless otherwise indicated) National Accounts Real GDP Growth 3.1 -4.1 -2.5 -0.2 -0.1 0.7 1.6 2.2 2.5 2.5 GNI per Capita (US$) 9195.0 8788.3 8590.0 8716.7 8813.3 9041.7 Prices Inflation (end of period) 4.5 -0.1 2.9 3.6 2.0 -0.3 1.8 1.9 2.3 2.4 (In percent of GDP, unless otherwise indicated) External Sector Current Account Balance -28.7 -21.3 -20.4 -18.4 -17.4 -17.9 -18.9 -17.8 -16.9 -16.3 Tourism Receipts 19.1 18.3 19.4 20.3 19.3 19.5 19.5 19.8 20.0 20.2 Foreign Direct Investment 16.8 12.4 10.3 8.1 9.7 12.0 9.2 9.2 9.3 9.3 Government Finance (Central Government) Total Revenue and Grants 27.6 27.7 28.3 27.4 26.2 27.8 27.6 27.3 27.1 27.0 Tax Revenue 22.0 21.2 20.8 20.6 20.3 20.9 17.6 18.3 18.5 18.5 Total Expenditure and Net Lending 29.8 33.1 32.2 31.0 29.5 30.4 33.5 30.8 29.8 29.7 Wages and Salaries 9.6 10.4 10.5 10.8 10.8 10.3 9.7 9.3 9.2 9.1 Capital Expenditure and Net Lending 7.7 8.4 7.8 6.6 5.3 6.6 7.3 6.0 5.7 5.7 Overall Balance -2.6 -5.4 -3.9 -3.6 -3.2 -2.6 -5.9 -2.8 -1.9 -1.8 Primary Balance 0.5 -1.6 -0.8 -0.6 0.0 0.4 -2.8 0.3 1.3 1.4 Interest Payments 3.0 3.8 3.2 3.0 3.3 3.0 2.5 2.7 2.9 2.9 Public and Publicly Guaranteed Debt 73.5 83.0 86.0 86.9 86.3 85.6 88.8 89.6 88.0 86.3 Domestic 34.2 41.9 39.0 39.5 40.8 36.7 40.6 41.0 41.6 40.7 External 39.3 41.2 46.9 47.4 45.6 48.8 48.2 48.6 46.4 45.6 Source: International Monetary Fund; Article IV 1/ OECS averages for Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. 5 See Ruprah, I., K. Melgarejo, and R. Sierra (2014), Is There a Caribbean Sclerosis? Stagnating Economic Growth in the Caribbean, Inter-American Development Bank, Country Department Caribbean, Washington, DC. 6 See Kouame, A. T., and M. I. Reyes (2014), “Before and After the 2008 Global Financial Crisis: Evaluating the Implications of Caribbean’s Business Cycle Synchronization with Global Growth Poles,” Latin America and the Caribbean Region, World Bank (mimeo). 6 Fiscal imbalances 7. Low growth, combined with frequent natural disasters and imprudent fiscal policies, has led to persistent fiscal deficits throughout the region. The sluggish economic recovery has had implications for revenue performance, while OECS countries implemented fiscal stimulus packages that led to a surge in current expenditures. Total revenue collection in the region (including grants) dropped by an average of 1.3 percentage points from the crisis to 2012, but recovered to pre-crisis level in 2013 (Fig. 3). Overall fiscal balances plunged in 2009, and, while they recovered progressively afterwards, the overall fiscal deficit remained elevated reaching 2.6 percent of GDP in 2013. In St. Kitts and Nevis and Dominica, fiscal positions have improved because of the recent introduction of a value-added tax (VAT) 7 and strong receipts from the Citizenship-by-Investment (CBI) program, 8 while in the other countries large expenditures have continued to put pressure on fiscal balances. Figure 3: Evolution of fiscal balance (percent of GDP) Primary Balance Interest Payments Overall Balance 6.0 4.0 2.0 0.0 -2.0 -2.6 -3.9 -3.6 -3.2 -2.6 -4.0 -5.4 -6.0 2008 2009 2010 2011 Prel. 2012 Proj. 2013 Note: The figures are OECS averages. Source: IMF and World Bank staff calculations. Unsustainable debt levels 8. Structural fiscal problems, combined with external shocks, have resulted in a sizable accumulation of debt in the region: aggregate public debt reached 86.7 percent of GDP at end- 2013 and all OECS countries had debt levels greater than 70 percent of GDP (Table 2). The fact that more than half of the debt is external, nonconcessional, and held by commercial banks contributes to high debt service costs (on average, 3 percent of GDP in 2013), leaving the region with little fiscal space for growth-enhancing investment. A recent Bank Debt Sustainability Analysis shows that public debt levels in most OECS countries are unsustainable. Although some countries have embarked on debt restructuring since 2009, 9 these interventions have not been large enough to reestablish debt sustainability and market access in a durable way. 7 VAT introduction: Grenada (February 2010), St. Kitts and Nevis (November 2010), and St. Lucia (October 2012). 8 The CBI is a program established by some OECS governments to attract investors to make a substantial contribution to the development of the country in return for the opportunity to apply for citizenship and passport within the strict guidelines of the law. CBI programs are currently active in Antigua and Barbuda, St. Kitts and Nevis, Grenada, and Dominica. 9 Antigua and Barbuda in 2010-11; St. Kitts and Nevis in 2012; Grenada announced it in 2013. 7 Table 2: Evolution of debt in the OECS 2008 2009 2010 2011 2012 2013 Total Domestic External Total Domestic External Total Domestic External Total Domestic External Total Domestic External Total Domestic External Anitgua and Barbuda 77.3 43.5 33.8 102.5 66.7 35.8 90.8 52.1 38.7 92.7 53.6 39.1 87.8 50.8 37 92.2 52.9 39.3 Dominica 65.2 19.4 45.8 64.2 19.2 44.9 68.8 18.3 50.4 69.7 20.1 49.6 73.3 20.6 52.7 75 21.1 53.8 Grenada 84.4 22.8 61.6 91.7 27.2 64.8 97.6 28 69.5 100.9 31.7 69.2 103.1 34.8 68.3 110 37.2 72.8 St. Kitts and Nevis 100.5 67.6 32.8 114.9 78.3 36.7 129.4 79.9 49.5 122.8 72.3 50.5 110.3 68 42.3 80.1 37.6 42.5 St. Lucia 56.3 25.1 31.2 60.2 28.2 32 62.9 31.2 31.6 66.2 33.9 32.3 71.7 37.8 33.9 79.8 36.8 43 St. Vinicent and the Grenadines 57.3 27 30.3 64.6 31.6 33 66.2 24.7 41.5 69.2 25.6 43.6 71.7 32.5 39.2 76.4 34.8 41.6 Source: IMF Article IV and World Bank Staff calculation Outlook 9. Going forward, growth is expected to pick up gradually. As the economic activity of its main trading partners (the US, Europe -in particular the UK-, and Canada) recovers, the OECS’s external demand is projected to improve. Major growth drivers in the OECS, such as tourism, construction, and agriculture, are also expected to pick up, 10 thanks in part to several investment projects in the tourism sector that are under way across the region 11. Overall, growth is expected to pick up gradually to reach a regional average of around 3 percent annually over the medium term. 10. However, declining FDI inflows and large current account deficits expose the region to increased volatility. FDI inflows to the OECS declined by 5 percentage points between 2008 and 2012 (from 12.3 percent to 7.3 percent of GDP), shifting away from the OECS to other Caribbean destinations (Fig. 4). In parallel, the OECS’s average current account deficit has declined by more than 10 percentage points (from 28.7 percent of GDP in 2008 to 17.9 percent in 2013) because of lower imports and strong service receipts, mainly driven by the CBI program. However, the current account deficit is projected to remain high at 16 percent of GDP by 2017 as tourism receipts increase (from 19.5 percent of GDP in 2014 to 20.2 percent in 2017) but inflows from the CBI program slow down over the medium term. Figure 4: FDI/GDP in selected Caribbean countries Source: UNCTAD and WB staff calculations. 10 Growth in tourism, construction, and agriculture is expected to increase from 1.7, 1.6, and 4.5 percent in 2013 to 2.1, 2.8, and 4.6 percent in 2014, respectively. 11 E.g., construction of Sandal Resort in Grenada and new international airport in St. Vincent and the Grenadines. 8 11. Financing needs in the region are high and sources volatile. Financing of the current account deficit has relied heavily on government borrowing and short-term flows into the banking sector. The region is also dependent on a number of nontraditional sources of financing, including the CBI programs, oil financing arrangements, and non-market financing sources. Volatility associated with these sources of financing could expose OECS countries to important vulnerabilities. In particular, a disruption or modification of the terms of oil financing could affect the external accounts of OECS countries and generate fiscal pressures. And while the CBI programs have been a significant source of funding for several OECS countries in recent years (providing revenues equal to 13 percent of GDP in St. Kitts in 2013 and of nearly 4 percent in Dominica), they are uncertain, especially as such programs proliferate in the region (e.g., Antigua and Barbuda and Grenada restarted in 2013 and 2014, respectively). 12. Financial sector stress creates additional downside risk. The ECCU financial sector 12 has come under considerable stress as a result of the combination of exogenous and endogenous factors: (i) the global financial crisis; (ii) low economic growth; (iii) the insolvency in 2009 of two large insurers based in Trinidad with large presence in the ECCU; 13 (iv) weak underwriting criteria and risk management policies in banks; and (v) lack of a sufficiently robust regulatory framework and supervision. As a result, the quality of assets has deteriorated significantly, profitability has declined, and credit to the private sector has contracted during the last five years. The lack of a lender of last resort, a deposit insurance scheme, and fiscal space has prevented the authorities from effectively supporting weak institutions, leaving the financial sector vulnerable and unable to meet the intermediating needs of OECS economies. In addition, OECS countries stand at varying levels of compliance with anti-money laundering/countering the financing of terrorism (AML/CFT) international standards, leaving financial institutions vulnerable to illicit financial activity. B. Poverty and Shared Prosperity 13. Against the backdrop of low growth and persisting systemic vulnerabilities, poverty remains a concern. The scant availability of data on poverty and social indicators in the OECS limits the ability to carry out a disaggregated analysis of poverty and shared prosperity trends. The most recent poverty assessments are outdated and do not capture the effects of the global financial crisis. Overall, extreme poverty was lower in the Caribbean in 1999 than in the Latin America and Caribbean (LAC) region and it fell by more than 2 percentage point over the last decade. However, poverty declined faster in LAC, and the Caribbean economies are now lagging behind the LAC average (Fig. 5). 12 OECS countries belong to the ECCU and share a common Central Bank, the Eastern Caribbean Central Bank (ECCB). The regulatory framework of the domestic banking system has two main legislative components: (i) the ECCB Agreement Act of 1983 and its amendments, which gives the ECCB the power to “regulate banking business on behalf of and in collaboration with Participating Governments”; and (ii) the Banking Acts of the various territories of the participating governments, which govern the regulation of banking business in those territories. The harmonized Banking Acts recognize the ECCB as the ECCU’s Central Bank, with primary responsibility for the supervision of domestic banks. The ultimate authority for regulating institutions covered by this Act is jointly vested in the Minister of Finance and the ECCB. The Minister of Finance is normally required to act in consultation with, and on the recommendation of, the ECCB with respect to areas in which the Minister has ultimate responsibility. 13 British American Insurance Company (BAICO) and CLICO International Life sold policies to ECCU credit unions and banks, and total liabilities amounted to about 12 percent of the ECCU GDP. 9 Figure 5: Poverty reduction in the region Source: PovcalNet and WBG staff calculations. Poverty headcount at US$1.25 (2005, purchasing power parity) in percent of the population. The Caribbean includes data from Belize, Dominica, Guyana, Jamaica, St. Lucia, Suriname, and Trinidad and Tobago. 14. Official poverty rates vary from 18 to 38 percent (using each country’s national poverty line). Latest poverty assessments (Fig. 6) show relatively small rates of extreme poverty, but rates of moderate poverty are higher than would be suggested by OECS countries’ level of income. By contrast, inequality (measured by the Gini coefficient) is low (ranging from 36.6 in 2008 in Grenada to 48 in 2006 in Antigua and Barbuda) compared to the LAC average of 52.9 in 2009. The majority of poor people are in rural areas, where a large part of the population lives, and poverty is particularly prevalent among the indigenous population and female-headed households. Figure 6: Poverty and inequality in the OECS (pre-crisis) Moderate Poverty Gini (re-scaled from 1 to 100) 48 44 39.7 42 40.2 37.7 36.6 28.8 28.8 30.2 18.3 21.8 Antigua and Barbuda Dominica (2008/9) Grenada (2007/8) St. Kitts and Nevis St. Lucia (2005/6) St. Vincent and the (2005/6) (2007/8) Grenadines (2007/8) Source: Estimates come from the CDB. Poverty estimates derived from national poverty line of each country. 15. Unemployment has risen in most OECS countries in the aftermath of the global financial crisis. Lower demand for OECS exports and services resulting from the 2008 crisis exacerbated the already high pre-crisis levels of unemployment in most OECS countries (e.g., unemployment increased in St. Lucia from 14.7 percent in 2002 to 20.6 percent in 2012, and in Grenada from 10.2 percent in 2001 to 29 percent in 2010 -Fig. 7). Unemployment is in general higher among the poor, and reaches 35 percent of them in some OECS countries. Unemployment is also higher among women (e.g., in St. Vincent and the Grenadines, male unemployment is 12.2 percent and female unemployment 26.2 percent). 16. Youth unemployment is a source of particular concern. Available data suggest youth unemployment levels ranging from 34 percent in St Lucia to 42 percent in Grenada (Fig. 7). There is evidence that youth unemployment is higher among women (e.g., in St. Vincent and the 10 Grenadines, the male youth unemployment rate is 27.8 percent and the female youth unemployment rate is 41.4 percent). The growing number of young adults who are neither at school nor at work has a negative effect on labor force participation, crime, and other social issues. 14 Figure 7: Unemployment in the OECS (total and youth) * 2002 for St. Lucia. Source: Parra Torrado (2014). 17. While OECS countries have made overall progress in achieving the Millennium Development Goals (MDGs), challenges remain. Overall, human development indices are relatively high in the OECS, which rank between 63 and 88 among the 186 states in the United Nations Development Program’s Human Development Index. 15 16 Good progress has been achieved on the education MDGs: enrollment in primary education ranges between 90 and 100 percent and in secondary education between 85 and 100 percent. The OECS is also on track for achieving the MDGs related to maternal and child health by 2015. 17 However, no information is available on the poverty MDG, and progress to reduce hunger by half (MDG1c) has been mixed (see Table 3): while hunger is very low in St. Vincent and the Grenadines and Dominica, hunger in Antigua and Barbuda and Grenada remains moderately high and has worsened over time; St. Kitts and Nevis and St. Lucia have made some progress in reducing hunger but remain relatively 14 In the OECS, men’s experience of violence is generally linked to crime-, drug- and gang-related activities, while women are more likely to be exposed to sexual, domestic, and intimate partner violence. UNODC’s sex- disaggregated data on homicide rates shows that in the subregion, males’ homicide rates are higher than females’, ranging from 66.7 per 100,000 people in Antigua and Barbuda to 93.3 per 100,000 people in St. Lucia (compared to 33.3 and 6.7 per 100,000 people, respectively, for women). 15 World Bank, OECS Overview, 2013. 16 The production of timely and accurate national-level information on the MDGs has been challenging, leading to incomplete aggregation of data. The OECS Commission is taking the lead, working with other partners (WB, CDB, UNDP, UNICEF) on implementing the Sustainable Data Program for the Measurement of Living Conditions and mainstreaming a Multidimensional Approach to Poverty Measurement in the OECS. This effort would have the dual objective of regularly generating reliable data to monitor different micro-dimensions of poverty, and of developing a new approach to national policy, planning, and development initiatives for the achievement of poverty reduction goals in the subregion, while enabling the measurement of progress in achieving the post-MDGs agenda. 17 Under-five mortality (deaths of children per 100,000 live births) in the OECS has declined significantly since the early 1990s; estimates from 2011 show that in the OECS countries this indicator ranged from 7.4 to 20.9, which is considered “low mortality.” Maternal mortality rates—which range from 24 to 48 in 2010—are also low in the OECS; however, it must be noted that data are available only for Grenada, St. Lucia, and St. Vincent and the Grenadines. 11 far from attaining their goals. Progress is also lagging with regards to water access goals (MDG7). Table 3: MDG 1.2 - Reduce hunger by half 1991 2011 Distance to goal Country value value Goal Level Antigua and Barbuda 18.5 20.5 9.25 11.25 Moderately high hunger Dominica <5 <5 <2.5 Unknown Very low hunger Grenada 17.3 17.9 8.65 9.25 Moderately high hunger St. Kitts and Nevis 15.8 14 7.9 6.1 Moderately low hunger St. Lucia 11.9 14.6 5.95 8.65 Moderately low hunger St. Vincent and the 19.2 <5 9.6 Achieved Very low hunger Grenadines Source: MDG Country Progress Snapshot – UNSTATS. 18. Similarly, OECS countries have made significant progress in closing the gender gaps in the last few decades, but challenges persist 18 (Table 4). Compared to the LAC region, OECS countries do relatively well with regards to girl enrollment in primary schools (which is at parity or close to parity with boys’), girls’ participation in tertiary education, and maternal mortality. However, significant gender gaps remain, especially with regards to the labor market, reproductive health, poverty, and parliamentary participation: • Education and employment. Girls generally outperform boys in the higher levels of education, with almost twice as many young women enrolled in tertiary education as young men. However, this does not translate into labor market opportunities: women face lower labor market participation (e.g., in 2012, in St. Lucia and St Vincent and the Grenadines, the female labor force participation was 62.6 percent and 55.7 percent, respectively, 19 compared to male labor force participation of 76 percent and 78.2 percent, respectively), lower wages, and higher unemployment rates than men (see Table 4). • Reproductive health. The OECS is characterized by close to universal access to prenatal care, births attended by skilled staff, and low maternal mortality rates. However, women aged 15 to 24 are three to six times more likely to contract HIV/AIDS than young men, and teenage pregnancy is a major concern: 40.3 percent of women aged 15 to 49 in Grenada, and 42.2 percent of the same cohort in St. Kitts and Nevis, had their first child by the age of 19. 20 • Poverty. Women living in rural areas are particularly vulnerable to poverty because they engage in unpaid domestic work, and as the limited job opportunities in rural areas mean higher unemployment and lower income for them. Also, female-headed households, which account for two-thirds of households, are more likely to be poor. 21 18 In the preparation of the OECS RPS, a Gender analysis was done to inform the process. Annex V provides an abbreviated version. Among other sources of information, the assessment builds on country specific gender assessments supported by the Caribbean Development Bank.. 19 Modeled International Labor Organization estimate. 20 CDB Poverty Assessments, 2006-2009. 21 USAID, 2010; UN, 2011. 12 • Parliamentary participation. In terms of women’s parliamentary participation, OECS countries lag behind upper-middle-income country and LAC averages (22 percent and 25 percent respectively), with St. Kitts and Nevis farthest from the average at 7 percent and St. Lucia and St. Vincent and the Grenadines closest at 17 percent. Table 4: Comparative development indicators, OECS and LAC countries Indicator OECS LAC Endowments countries Ratio of female to male primary enrollment (percent) 97.0 96.9 Ratio of female to male secondary enrollment (percent) 102.0 107.1 Ratio of female to male tertiary enrollment (percent) 179.2* 126.8 Maternal mortality ratio (modeled estimate, per 100,00 live births) 35.7** 80.0 Economic opportunities Ratio of female to male labor force participation rate 0.77*** 0.92 Ratio of youth female to male unemployment rate (percent ages 15-24) 1.56*** 1.66 Agency Proportion of seats held by women in national parliaments (percent) 13.0 24.5 Adolescent fertility rate (births per 1,000 women ages 15-19) 50.0**** 69.1 Source: World Development Indicators; data presented are latest available from 2010-2012, unless noted differently. * Tertiary enrollment data are not available for Dominica and St. Vincent and the Grenadines; this is the average of the other four countries. St. Kitts and Nevis data are from 2008 and Grenada’s from 2009. ** Average for Grenada, St. Lucia, and St. Vincent and the Grenadines. *** Average for St. Lucia and St. Vincent and the Grenadines. Local Field Potential (LPF) data from 2012; youth unemployment data 2007 (St. Lucia) and 2008 (St. Vincent and the Grenadines). **** Adolescent fertility data are not available for Dominica and St. Kitts and Nevis. C. Challenges for Poverty Reduction and Shared Prosperity 19. Lack of macroeconomic sustainability and existing structural bottlenecks have limited the OECS ability to grow faster, reduce poverty, and promote shared prosperity. The low growth OECS countries have experienced over the last decades is partly due to a weak macroeconomic framework and sluggish implementation of structural reforms. In addition, OECS have experienced declining competitiveness, resulting both from structural cost disadvantages (in part due to the OECS economies’ small sizes) and poor policy choices, which have led to decreasing productivity, employment generation, and growth in key sectors. Inefficiencies in the public sector have led to inflated fiscal imbalances and public debt, and poor public services, putting a further drag on macroeconomic sustainability, growth, and poverty reduction. Finally, high vulnerability to economic shocks and natural disasters has hampered growth and affected OECS households, which are poorly equipped to manage the impact of shocks and adapt to changing circumstances. Weak Competitiveness 20. Inadequate access to finance, investment climate, connectivity, electricity costs, use of ICT, and innovation and entrepreneurship, affect the competitiveness of OECS economies, leading to lower FDI, private sector (especially SME) investment, exports, and job creation, and ultimately limiting growth, shared prosperity, and poverty reduction. The most recent (2010) Enterprise Survey reveals that private firms consider that the lack of access to 13 finance is the single most important constraint to their development, followed by the lack of affordable electricity, an inadequately trained work force, followed by specific concerns related to the investment climate (Fig. 8). Figure 8: Constraints to business success Source: Enterprise Survey, 2010, WBG 21. The financial sector, though large in terms of financial assets over GDP and number of institutions, does not provide sufficient intermediation to support economic growth. Financial system assets in the OECS represent 200 percent of regional GDP, on par with countries with well-developed financial systems. The financial sector comprises 40 commercial banks (14 domestic banks and 26 branches or subsidiaries of five foreign banks), 67 credit unions, and 61 insurance companies (on a consolidated basis) (Table 5). However, many of the institutions are small and offer a limited range of financial services. In particular, due to a number of constraints (including investment climate, credit infrastructure, and creditor rights constraints), banks provide mostly consumer loans and lines of credit to larger firms, and limited services to SMEs. In addition, bank credit to the private sector has been declining over the last five years 22 as stress on the financial sector has grown. Further, alternatives to credit are scarce as capital markets, venture capital, leasing, and factoring are underdeveloped. Table 5: OECS financial sector structure 22 From December 2008 to April 2014 (source: ECCB monetary survey). 14 22. In addition to poor access to finance, there remains, despite good progress in selected areas, constraints in the investment climate, which hurt small and medium-sized enterprises (SMEs) and FDI. While in general OECS countries rank well compared to their Latin American peers with regards to investor protection, construction permits, the availability of electricity, and regulations to start a business, severe constraints remain with regards to getting credit, registering property, enforcing contracts, resolving insolvency, and, in some jurisdictions, paying taxes (Fig. 9). Weaknesses in the investment climate penalize SMEs disproportionally, but are also an obstacle to resume growth in FDIs. Enhancing growth and job creation will require fostering faster development of the private sector, including through FDI and an enhanced contribution of SMEs, which dominate the corporate sector in the OECS, with 96.3 percent of the total number of firms and 75.8 percent of employees and have thus a crucial role to play to achieve a more inclusive growth (Table 6). Figure 9: 2014 Doing Business Ranking of OECS Countries 200 180 160 140 120 A&B 100 SVG 80 SLU 60 SKN 40 Dominica 20 Grenada 0 LCR avg Source: Doingbusiness.org Table 6: Distribution of firms in the OECS by employment size (percent) Source: World Bank Enterprise Survey. 15 23. Competitiveness is also eroded by high logistics costs and poor transport connectivity. A recent review suggests that OECS ports are relatively well developed and well equipped, given their traffic, but that the cost of import and export movements is prohibitive. On average, OECS import costs amount to US$2,000/container, four times more than in Singapore (considered best practice) and 30 percent higher than in other Caribbean countries. Similarly, export costs are twice as large as best practice in the world and 25 percent larger than in the rest of the Caribbean and similar island states (i.e., Pacific Islands) 23 . For imports, the main driver of costs is the cost of customs and document handling and for exports it is inefficient inland transportation, which accounts for about 50 percent of export costs. Air transport is also a challenge, as the inter-island system is not reliable and is not coordinated with larger outside/international carriers 24. This seriously limits the development of stay-over tourism (as opposed to cruise-based tourism), which represents a key growth opportunity for OECS economies but would require better regional coordination of air transport systems and intra- island transportation. 24. The cost of electricity in the OECS is among the highest in the world, creating an additional constraint on competitiveness and poverty reduction. While the availability of electricity is generally good, the cost of electricity if prohibitively expensive and a significant constraint to the competitiveness of OECS economies and to shared prosperity. In 2011 the average residential electricity tariffs in the OECS ranged from US$0.27 per kWh in St. Lucia to US$0.41 in Dominica, compared to US$0.19 on average in LAC (Fig. 10). The high price of electricity in the OECS largely reflects the high cost of producing electricity in systems that are small, 25 isolated, and primarily dependent on expensive fuel oil (diesel and heavy fuel oil accounted for 77-100 percent of electricity generation in 2011). This price has a sharp impact on the competitiveness of key sectors, including tourism. 26 Moreover, pollution from the heavy use of fuel oil affects the local environment (which in turn further affects tourism), and produces greenhouse gases that contribute to climate change. Electricity costs also cause hardship to private consumers, particularly poor households, who can spend as much as 7-11 percent of their income on electricity. 27 In addition, if the full cost of electricity supply is not passed on through tariffs, the subsidies used to cover the gap undermine the financial stability of utilities and create fiscal liabilities. Finally, OECS countries import all their oil, which exposes them to price and supply shocks and enhances their economic vulnerability. 23 Briceno-Garmendia et al. (2014), Connectivity for Caribbean Countries, World Bank, CGF, June 2014. 24 OECS countries do not seem to face a physical infrastructure challenge in the transport sector. They have a high density of airports (seven international and four intercontinental) with a capacity of about 4 million passengers each year. The proven demand is about 1 million tourists each year, and the aggregate population a little over 600,000. The challenge is with the systems and regional coordination. By constrast, traffic within the OECS is cumbersome; it is dominated by a monopolist air operator that controls schedules, characterized by the lack of interlining that creates baggage losses and delays (among other things), and framed in old-fashioned immigration requirements among OECS countries. Briceno-Garmendia et al. (2013), Connectivity for the OECS Countries: An Initial Step for an Assessment of the Caribbean Connectivity, Paper Presented in the Regional Workshop of the CGF in the Bahamas, June 2013. 25 The installed generation capacity in OECS islands ranged between 46 and 98MW in 2011. The total installed capacity for the entire region is only 373 MW (vs., for example, 3,000 MW in the Dominican Republic only). 26 A charge for a guest night in a 50-100 room hotel includes an estimated US$14-18 in electricity costs, as each room night consumes an average of 44 kWh of electricity, at tariffs ranging from US$0.32-0.40 per kWh; Caribbean Hotel Energy Efficiency Action Program benchmarks, 2012. 27 See World Bank (2013), Got Steam? Geothermal As an Opportunity for Growth in the Caribbean, June 2013. 16 Figure 10: High and volatile electricity prices in the OECS islands Average Residential Electricity Tariffs in Average Tariff in OECS and Oil Prices Caribbean Islands in 2011 (2002-2011) Sources: Annual Report, Caribbean Electric Utility Service Source: CARILEC Tariff Surveys 2009-2011 (St. Kitts & Nevis Corporation (CARILEC), 2011, SIEE-OLADE, 2013 (2011), excluded as insufficient data available); Crude oil spot price is DOMLEC Annual Report (for Dominica). Oklahoma WTI from US EIA. 25. However, the abundance of renewable energy sources (solar, wind, and geothermal) in the OECS provides an opportunity. Dominica and St. Vincent and the Grenadines generate, respectively, 23 percent and 12 percent of their electricity using hydropower, but other OECS countries generate only 3 percent or less from renewables. Nonetheless, OECS countries have the potential to better diversify their energy matrix through more renewables, thereby reducing their dependence on imported fossil fuels, enhancing the reliability of their energy supply, and lowering electricity costs over the long run. Achieving the appropriate balance of base-load renewables, such as geothermal energy, and intermittent sources such as solar and wind power, will be critical to meet future demand while enabling a decrease in electricity tariffs. Widespread integration of renewable energy will require changes to the power sector business model and will present challenges. Geothermal power, in particular, involves an initial high risk associated with exploration and high up-front costs. However, when judiciously combined with measures to enhance energy efficiency, greater use of multiple renewable energy alternatives can help boost the region’s competitiveness and reduce its vulnerability to high and volatile fuel prices. Increasing the provision of renewable energy is also important for maintaining a clean environment, which is critical for sustaining tourism and improving health. Access to sustainable sources of clean, reliable, and affordable energy will also enhance the provision of services, including the operations of hospitals and schools. 26. Higher reliance on ICT also has the potential to increase competitiveness in the OECS. ICT connectivity remains weak in the OECS as a result of low broadband penetration, limited competition, unfinished liberalization, and high prices for services and devices. While the region is served by several fiber-optic submarine cables (overcapacity exists in many places), there is no effective competition in the provision of international services. 28 The result is 28 In most countries, former incumbent operators still control international facilities, and cables are not subject to open access regulatory regimes. Similar challenges exist at the national transmission levels, where there are few competitors. 17 inequitable access to ICT, which constrains the region’s capacity to compete in the global economy and its options to improve competitiveness, create jobs, explore digital industries opportunities, and enhance public service delivery. However, OECS governments recognize that ICT is a critical tool for improving competitiveness and service delivery, increasing citizens’ capacity to provide feedback to the authorities, and creating job and growth opportunities in digital industries. 27. Increased innovation and entrepreneurship are also needed to enhance competitiveness. Innovation and entrepreneurship are limited in the OECS, as exemplified by the percentages of firms that develop or introduce new products. This is particularly problematic for OECS countries, whose main challenge is to foster job creation and economic growth, as innovation and entrepreneurship play a crucial role in strengthening economic competitiveness. Innovative entrepreneurs are indeed often the drivers that spur growth and competitiveness by creating jobs and delivering new products, services, and business models to underserved markets. 29 In this context, innovative growth enterprises can help address some of the most significant social, environmental, and economic challenges of the OECS. For example, ICT enterprises offer opportunities to promote youth employment and foster regional digital industry development. Similarly, climate technology enterprises can help traditional industries, such as tourism and agri-processing, to mitigate and adapt to climate change challenges and ensure energy and resource efficiency. Unleashing the potential of innovation and entrepreneurship is therefore critical to OECS’s economic integration and increased competitiveness (Fig. 11). Figure 11: Percentage of LAC firms that developed or introduced a new product, 2010 Source: World Bank report: Latin America Entrepreneurs, Many Firms but Little Innovation, 2014. Low Productivity and Growth in Leading Industries 28. Tourism is an important source of employment, economic activity, and growth in the OECS. OECS countries have limited options for economic diversification because of the 29 See Global Competitiveness Report (2013-2014). 18 small size of their markets and their limited endowments 30 and tourism has been the main pillar of their economic growth. While there are some differences across countries, the average total economic contribution 31 of tourism for the six independent OECS countries has represented roughly 60 percent of export earnings, 30 percent of GDP, and 30 percent of total employment (Fig. 12). Tourism is also an important source of foreign exchange. A competitive and robust tourism sector is thus critical to OECS economies, especially since the sector has significant linkages to such other areas of economic activity as construction, agribusiness, and financial services. Figure 12: The total contribution of travel and tourism to GDP and employment (percent) Source: Country Reports, World Travel and Tourism Council (2012). 29. While global demand for tourism has been evolving, tourism in the OECS continues to rely on markets and products with lower growth or lower local benefits. In terms of markets, the OECS countries have mostly relied on traditional tourist markets (the USA, Canada, the UK, and the Caribbean). While there has been a very marginal growth in the North American markets, the flow of tourists from the UK and the Caribbean has been shrinking since 2012. OECS countries have been less successful in attracting tourists from Europe or countries fueling growth in global tourism, including Brazil, Russia, India, and China. From a product perspective, tourism in the OECS is dominated by cruise-based travel, while the development of stay-over resort tourism represents one of the most important opportunities for OECS economies. Indeed, OECS cruise visitors are between 2.5 and 3 times more numerous than stay-over visitors; yet spending by stay-over tourists can be about ten times higher than that of cruise ship visitor. In addition, tourism in OECS countries has been heavily dependent on all-inclusive resorts, a model that has lower impacts on shared prosperity at the local level than such emerging tourism segments as nature, eco-, and cultural tourism. Overall, while tourism is the lead economic sector in the OECS countries, the share of OECS countries in international tourism is less than 0.2 percent of world tourism arrivals (Table 7). Even with respect to tourism in the wider Caribbean, the OECS represent a market share of no more than 7 percent, a share that has been on the decline over the last two decades. 30 Vandana, C., et al. (2012), “Specialization for Export Diversification: A case for greater intra-regional trade in the OECS” (draft), World Bank. 31 This is different from “direct contribution” (see footnote 3). 19 Table 7: OECS market share of stay-over arrivals Source: International Monetary Fund, Caribbean Tourism Organization, WTTC. 30. The recent OECS Common Tourism Policy provides an opportunity to expand into growing tourism niches while creating greater linkages with local economies. The 2011 OECS Common Tourism Policy envisages tourism as an industry that is viable, internationally competitive, and resilient. It identifies a large number of policy areas requiring work to improve the region’s tourism competitiveness: redefining market niches and developing new products, increasing community participation and sectoral linkages, better training the tourism workforce, enhancing regional coordination, strengthening marketing at regional level, addressing access and transportation issues, ensuring environmental and cultural sustainability, addressing crime that involves visitors, and strengthening data collection and research. An enhanced focus on tourism destinations and attracting visitors to authentic places would enable the OECS to tap into this fastest-growing tourism market, with high labor intensity and deep linkages with local communities. Doing so would provide more stable employment opportunities and promote greater shared prosperity (a high share of tourism employment (75 percent) is indeed typically for unskilled or semi-skilled labor, and tourism-related labor is highly inclusive of women, youth, and marginalized social groups) 32. 31. In addition, strengthening the tourism sector’s linkages with other sectors, such as agribusiness, would multiply the growth and job creation spillover effects. Since 2000, the decline in the production and export of sugar and bananas has meant a dramatic decline in agriculture’s contribution to GDP in the OECS 33. More recently, data gathered by the Eastern Caribbean Central Bank (ECCB) reveals a modest upward trend in the sector’s contribution to regional GDP, from 2.93 percent in 2007 to 3.2 percent in 2011, with about 3.5 percent projected for 2014, resulting from an increased contribution of nontraditional crops—from 1.77 percent of GDP in 2007 to 2.01 percent in 2011. Further efforts to support resumption in the growth of 32 In general, women are overrepresented as employees in the service sector in the LAC region, and particularly so in the Caribbean. For example, data from Antigua and Barbuda (2010) indicate that 93.8 percent of all female employees are in the service sector. 33 OECS Commission (2013), OECS Growth and Development Strategy. 20 agriculture could have a significant impact on shared prosperity, especially in rural areas, as many smallholders would stand to gain. It addition, it could yield significant economic benefits, especially by reducing hotels’ dependence on imports. According to a survey conducted in 2008 by the World Bank Group with hotels, cruise lines and marinas in the region, while most hotels procure services locally, very few purchase local agricultural goods, as local production is neither competitive nor large enough to accommodate hotels´ demand. According to this survey, only 32 percent of tourism food demand is currently sourced locally 34. Separately, based on a 2011 study, 89 percent of meat, 81 percent of dairy products, and 41 percent of fruits and vegetables consumed by the region’s tourism sector are imported. 32. To reap the benefits of stronger linkages between agribusiness and tourism, the OECS needs to improve the productivity of the agribusiness value chain. Revenue generation in agriculture has been compromised by sensitive ecosystems, vulnerability to climate shocks and climate change, historical dependence on a few key export commodities, and dependence on food imports. To address these challenges, it is necessary to link producers and processors to markets, provide incentives for the adoption of improved technologies to make crops more resilient and productive, and improve skills at the farm level (with a focus on small farmers) to enable farmers to increase productivity, comply with standards and adapt to markets, and be better prepared to deal with climate change and natural disasters. While such reforms may take time to generate their full impact, their spillover effects on poverty reduction can be large. 33. Stronger links between tourism and agriculture could benefit the poorest segments of the population, who mostly live in rural areas. Currently, all the OECS countries are net food importers, and the negative trade balance has been growing since the late 1990s. According to a survey of hotels, cruise lines, and marinas, only 32 percent of tourism food demand is currently sourced locally. Ensuring that more goods and services in the tourism supply chain come from local sources would help maximize the proportion of tourism spending that is retained in local communities, and would involve the poor in the supply process. Creating a stronger link between tourism and agribusiness could facilitate this and help reduce foreign exchange leakage for food purchases. Inefficient Public Sector 34. Public sector modernization would help the OECS countries enhance their fiscal and debt sustainability, improve the provision of public services, and leverage private investments. Greater efforts need to be done across the OECS to implement structural reforms and establish the foundations of a sound macroeconomic framework. Reducing fiscal deficits and public debt levels are a priority to create the fiscal space needed to support growth-enhancing investments, conduct countercyclical policies, and mitigate the impact of shocks. Doing this requires improving public financial management (PFM), fiscal management, and debt management. At the same time, increased institutional capacity and better management of government institutions would enable more effective delivery of public services, increased capacity for public-private partnerships (PPPs) and greater leverage of private investment in infrastructure and service provision. 35. OECS governments are committed to implement fiscal consolidation measures to reduce fiscal deficits and promote sound and prudent debt management. Recognizing that 34 World Bank, 2008. 21 the accumulation of debt pulls resources away from more productive uses, 35 OECS governments have indicated (in the OECS Growth and Development Strategy and in the ECCB Eight Point Stabilization and Growth Program) their desire to reach, by 2020, the debt-to-GDP ratio of 60 percent recommended by the ECCB, through a combination of measures to enhance fiscal discipline and growth performance. 36. Public administration systems need modernization to generate enough fiscal gains to enhance the sustainability of public finances and improve the delivery of public services. While several OECS countries have engaged into public sector modernization efforts, PFM should generally be further strengthened to increase links between planning and budgeting, improve cash management by taking advantage of information generated by integrated financial management information systems, reduce manual processes in treasury administration (using, for instance, a Treasury Single Account system), integrate systems (e.g., tax, customs, budget, debt management), and enhance the supervision of state-owned enterprises in terms of corporate governance and fiscal risks. Improving statistical capacity to collect data and monitor the impact of governments’ and development partners’ programs, particularly on poverty and shared prosperity, is also a priority36. 37. Greater use of PPPs provides an opportunity to improve the delivery of key services and fill in key infrastructure needs. Across the region, boosting economic growth, shared prosperity, and resilience will require meeting significant infrastructure and social investment needs. Driven by a combination of tight fiscal constraints and growing appreciation of the role of the private sector in delivering public services, OECS governments are increasingly considering PPPs to meet those needs. The recent “Caribbean Infrastructure PPP Roadmap” found a current pipeline of 14 potential PPPs. When selected, structured, and managed well, PPPs can help make the best use of the financial and technical resources of the public and private sectors to provide improved infrastructure assets and services. To do so however, it is critical to increase capacity in the public administration to manage such partnerships, including at regional level, as well as to prepare potential projects to best international standards. Social Vulnerabilities 38. While access to social services is strong in the OECS, structural weaknesses affect the effectiveness of these services and expose large social vulnerabilities. OECS countries provide a range of safety net programs and labor market interventions. But while safety net programs and spending levels are in line with global averages, the programs suffer from high fragmentation and duplication, spending inefficiencies, capacity deficiencies, targeting inadequacies, and limited ability to respond to exogenous shocks. These factors hamper the effectiveness of social protection spending, limit coverage, and restrict impact on human capital development. Overall, the systems have proven largely insufficient to facilitate resilience and protect vulnerable populations during the economic crisis. 39. Despite universal education coverage, education quality is weak and learning achievements are low. Large segments of the population leave the education system with limited skills. For instance, the percentage of students passing five or more Caribbean Secondary 35 Esteban Pèrez Caldentey (2007), “Debt in CARICOM: Origins and Consequences for Growth and Economic Development” in Business, Finance and Economics in Emerging Economies 2(1). 36 See Annex VI, “Monitoring and Evaluation.” 22 Education Certificate subjects, including English and mathematics, ranges from only 20 percent in Grenada and St. Vincent and the Grenadines to 35 percent in Dominica. In 2011, 67 percent of students achieved grades I-III in English, and 35 percent achieved the same grade range in mathematics. 37 In addition, the skills generated by the education system do not meet labor market expectations and the lack of adequate skills is cited as a top constraint by firms (Fig. 9).38 In the OECS fewer than half of mathematics and English teachers, and fewer than 20 percent of science teachers, are qualified to teach their subjects 39 . The lack of teaching and learning standards and weak school-level leadership contribute to the poor quality of education. Improving education quality and outcomes in the OECS would go a long way to enhance the employability of the workforce and support job creation and growth. Evidence shows indeed that a difference of one standard deviation in test scores between countries equates to roughly two percentage points in annual long-term GDP growth. Better education would also contribute to greater shared prosperity, as children from poorer households perform worse than their richer peers in school. 40. Noncommunicable diseases also place a heavy economic burden on households and the economy, slowing growth, increasing human vulnerability, weakening resilience, and affecting the productivity of the workforce. As a result, OECS households are poorly equipped to profit from opportunities, adapt to changing circumstances, and manage the impact of shocks. About 70 percent of years of life lost in the OECS are due to noncommunicable diseases (NCDs), a much higher rate than either the global average (50 percent) or the average for low- and middle-income countries in the Americas (60 percent). Moreover, the burden of NCDs falls most heavily on the poor, taking a greater toll on their already low incomes (e.g., poorer households in St. Lucia spend 48 percent of their per capita expenditure on health care, while better-off households spend less than 20 percent), lowering their productivity, and compromising their chances of moving out of poverty. There is also a gender dimension to NCDs, as risk factors affect men and women differently: 40 NCDs also represent a heavy fiscal burden (e.g., Antigua and Barbuda spends US$2.4 million a year on health care for diabetics, and St. Vincent and the Grenadines, US$1.8 million). 37 Grades I-III indicate a comprehensive to fairly good grasp of the key concepts, knowledge, skills, and abilities required by the syllabus. In most Caribbean countries, grades I-III in English and mathematics are considered in recruitment and employment processes by the public and private sectors. Caribbean Examinations Council Annual Report 2011. 38 Hanushek, E. A., L. Woessmann (2007), “The role of education quality for economic growth”, World Bank Policy Research Paper 4122, February 2007. 39 Matthews, Clark (2013), “Quality of education counts for skills and growth,” Policy Note, Caribbean Knowledge Series, Washington, DC: World Bank. 40 According to the Pan American Health Organization (2011), “Non Communicable Diseases in the Americas: Basic Indicators 2011”. Washington DC: PAHO, the prevalence of obesity is high among women in the OECS countries, whereas hypertension, alcohol consumption and tobacco use generally affect more men There is not a uniform trend in the OECS countries in terms of whether there is a higher premature mortality rate (under age of 70 per 100,000 population) due to cerebrovascular disease and diabetes among men as compared to women. However, the OECS averages show that men are more likely to die prematurely from cerebrovascular disease (19.9, as compared to 9.8 among women), while women are more likely to die prematurely from diabetes than men (28.1 and 20.2, respectively). 23 Vulnerability to Climate Change 41. OECS countries are among the countries in the world that are most exposed to natural hazards in terms of GDP and population at risk. Climate-related hazards are more common than earthquakes in the region. Major climatic hazards include strong winds and heavy rains often associated with the annual formation of tropical depressions, storms, and hurricanes, causing floods and landslides. 41.The region is also at significant risk of storm surges, drought, and volcanic eruptions. Ground-shaking, liquefaction, tsunamis, and landslides—harder to forecast—occur with little or no warning, often resulting in significant loss of life and structural damage. Most of the buildings in the region were not built to appropriate seismic-resistant standards, so a large earthquake event could also have catastrophic consequences. Between 1993 and 2012, average OECS annual losses from natural disasters reached 4.3 percent of GDP (Fig. 13). Single events can have devastating impacts on OECS economies (Fig. 13). For example, Hurricane Ivan (2004) damages amounted to over 200 percent of Grenada’s GDP, and Hurricane George (1998) caused damages amounting to 140 percent of St. Kitts and Nevis’s GDP. The frequency and impact of natural disasters have been growing in OECS countries (Fig. 14), increasing vulnerabilities significantly. Figure 13: Impact of selected damages from disasters Select Damages from Disasters as a % of GDP Hurricane: Hurricane: Ivan Hattie 200% Hurricane: Georges Hurricanes: David & Frederick Hurricanes: 100% Luis & Hurricane: Marilyn Luis Hurricane: Hurricane: Hurricane: Allen Luis Gilbert Flood Hurricane: Tomas 0% Belize - Dominica - St Lucia - Jamaica - AB - 1995 Dominica - St. Kitts & St. Kitts & Grenada - Guyana - St Lucia - 1961 1979 1980 1988 1995 Nevis - Nevis - 2004 2005 2010 1995 1998 Figure 14: Trends in frequency and impact of natural disasters Count of Disasters Damages from Disasters 75 (US$ millions) Suriname $4,000 Suriname St. Kitts & Nevis St. Vincent 50 Grenada St. Lucia Guyana Dominica AB Dominica $2,000 AB 25 St. Vincent Belize Guyana St. Lucia St. Kitts & Nevis Belize Jamaica Grenada 0 DR $0 Jamaica 1961 - 1971 - 1981 - 1991 - 2001 - 1961 - 1971 - 1981 - 1991 - 2001 - DR 1970 1980 1990 2000 2010 Souce: EM-DAT 1970 1980 1990 2000 2010 Souce: EM-DAT 41 For instance, on December 24, 2013, a brief tropical storm in St. Vincent and the Grenadines and St. Lucia produced extraordinarily intense rainfall at a time that was well outside the traditional hurricane season. Over a three-hour period, St. Vincent and the Grenadines received 278 millimeters (mm) of rain and St. Lucia 224 mm. Total damages were assessed at approximately 15 and 7 percent, respectively, of the GDP of the two countries. 24 42. Vulnerability to natural disasters affects OECS growth and prosperity prospects significantly. The average annual losses incurred by OECS countries from extreme weather events range from about one percent of GDP in St Vincent and the Grenadines to a very high nine percent in Grenada (Fig. 15). Similarly, average annual life losses are very significant across the region. Such losses create a significant challenge for OECS governments as they endeavor to create sustained economic growth and prosperity. Therefore, enhanced disaster risk resilience is fundamental for the OECS to ensure sustainable and inclusive growth. Figure 15: : Average losses due to extreme weather events for IDA countries, 1993-2013 Average annual losses per GDP (percent), Deaths per 100,000 inhabitants, 1993-2012 1993-2013 10.00 5.00 0.00 0.00 1.00 2.00 (1) (7) Grenada (3) (36) Dominca (41) (4) St. Kitts & Nevis (7) Antigua & (31) Barbuda (17) (24) St. Lucia (32) St. Vincent & (64) the Grenadines • () indicate Global Rank of 183 countries or territories evaluated. • Sorted by Losses per GDP (percent) Source: Kreft, S., and D. Eckstein, “Global Climate Risk Index 2014.” Germanwatch, November 2013: http://germanwatch.org/fr/download/7170.pdf 43. Going forward, increased threats to marine and coastal resources in the OECS may have further negative effects on tourism and growth. The natural resource base, the engine that drives tourism and fosters private sector growth and jobs in the OECS, is at risk as oceans become dumping grounds for industrial and urban solid waste and sewerage, agricultural run-off, and marine-based pollution (e.g., sewage from yachts). Other factors, such as ocean temperature increases that are due to climate change and point source pollution, have also had a marked destructive impact on these resources. The result, highly visible to tourists, is a noticeable decline in marine life, degraded corals, and declining fish varieties and stock. A degraded marine base could seriously affect tourism and other sectors of the economy, and highlights the importance of promoting a sustainable ocean-based (blue) economy in the OECS. 25 2. NATIONAL AND REGIONAL VISIONS 44. The OECS governments recognize the fundamental challenge of resuming growth and competitiveness in the region. In their national development strategies, OECS countries acknowledge the importance of addressing the persistently high unemployment rate, especially among youth. They also mention the importance of addressing their vulnerability to economic and natural shocks. They recognize fiscal deficits and high debt levels as the main constraint for governments’ action. The weaknesses of both the financial sector and the current business environment are major concerns. Tourism, agriculture, ICT, and energy are recognized as the main drivers of future growth. The OECS countries emphasize the importance of modernizing the state and developing effective social protection systems, and they agree that better-quality education and appropriate skills are needed to meet job market demands. 45. The OECS regional vision is anchored on the Revised Treaty of Basseterre (June 2010), establishing the OECS Economic Union, and the OECS Growth and Development Strategy. The Treaty led to the creation of a single financial and economic space within which goods, people, and capital move freely; monetary and fiscal policies are harmonized; and countries take a common approach to trade, health, education and environment, as well as to the development of critical sectors such as agriculture, tourism, and energy. The 2012 OECS Growth and Development Strategy provides directions for the region’s development over the next ten years. Its key objectives are to achieve economic transformation, growth, employment, poverty reduction and better human development, with a focus on structural reforms geared towards boosting private investment and productivity, recognizing in particular the role that tourism, creative industries, ICT, education and health, and environment management can play. In 2013, an OECS Growth and Development Strategy Action Plan outlined short, medium, and long-term activities in the areas of tourism, agriculture and the creative industries among others. In 2014, the Director General of the OECS Commission presented a new OECS regional vision, based on three pillars: (i) consolidation of the institutional architecture of the union; (ii) facilitation of the free movement of people and capital; and (iii) security and well-being of OECS citizens, founded on an effective job creation strategy across the single economic space. 46. This Regional Partnership Strategy (RPS) is consistent with the strategic directions of the OECS Growth and Development Strategy and relevant national and regional OECS policies, strategies, and papers 42. The RPS also takes into account the vision expressed by the Governor of the ECCB and developed in two main documents (i.e., the “8 Point Stabilization and Growth Plan” of 2009 and “Challenges to ECCU Stability and Growth” of 2013), which identify the major challenges faced by the OECS in the aftermath of the global financial crisis and propose a focus on four key areas: i) financial stability, ii) debt management, iii) fiscal reforms, and iv) growth and competitiveness. 42 For example, at the regional level: the OECS Common Tourism Policy (OECS Commission, 2011); the OECS Education Strategy (OECS Commission, 2013); A Framework for Regional Growth and Development in CARICOM (CARICOM, 2013); Structural Change for Equality: An Integrated Approach to development (ECLAC, 2012). At the national level: National Economic and Social Transformation Plan (Antigua and Barbuda, 2009); Growth and Social Protection Strategy 2014-18 (Commonwealth of Dominica, 2014); Growth and Poverty Reduction Strategy 2012-16 (Grenada, 2012); Adaptation Strategy in Response to the new Sugar Regime 2006-13 (St. Kitts and Nevis, 2006); Medium term Development Strategic Plan 2012-16 (St. Lucia, 2011); and the National Economic and Social Development Plan 2013-2025 (St. Vincent and the Grenadines, 2013). See also Annex VIII, “Compendium of National and Regional Strategies.” 26 3. WORLD BANK GROUP PARTNERSHIP A. Lessons Learned from the Previous RPS 47. Lessons resulting from the Completion Report of the OECS RPS for 2010-14 have been incorporated into the design of this RPS. The RPS for 2010-2014 was implemented under difficult circumstances as the stagnation brought about by the continued sluggish global economy, the scarcity of readily available opportunities to diversify, and recurrent natural disasters placed the OECS economies under stress. The World Bank Group (WBG) responded by increasing attention to such issues as economic growth and employment, sustainability, the financial sector, and energy. Overall, delivery of the program met expectations, but because of some partial shortfalls, the Completion Report rated the RPS’s contribution to development outcomes as moderately satisfactory. The new RPS builds on the efforts of the previous strategy. The following are key lessons learned from the implementation of the RPS 2010-14 that have been taken into consideration in designing the new strategy: • Objectives set under the RPS should be aligned with the capacity of the WBG program to deliver (available instruments and capacity to influence results); • The RPS results framework must reflect as accurately as possible the outcomes and impact of the program (i.e., scope of engagement and achievements); • The RPS support for regional integration through a combination of regional work and country-level interventions worked well and should be further enhanced; • A regional perspective would enhance opportunities for the IFC to contribute to growth and inclusion, bringing to bear the IFC’s innovative practices, expertise, and finance; • Flexibility to respond to evolving circumstances through innovative products or activities is critical (e.g., Comprehensive Debt Framework, Caribbean Growth Forum); • Caribbean countries have found it difficult to undertake reforms in the past, often because of political economy factors; and • Selectivity can help improve focus and delivery of results. B. Consultations 48. This RPS draws on extensive strategic consultations with different partners and stakeholders. In-depth consultations were conducted with governments and representatives of the private sector (including through the OECS Business Council) and civil society, both in- country and in Washington, DC. 43 Bilateral and multilateral partners, as well as the OECS Commission and the ECCB, were also extensively consulted at different times in the process. A Client Survey was carried out in the OECS 44 in 2013, and its results were taken into account in designing the strategy. The RPS also capitalizes on the wide-reaching participatory process of the Caribbean Growth Forum (CGF), which informs programming in the areas of skills and productivity, investment climate, and logistics 45. 43 Specifically, representatives of the private sector and civil society organizations have been consulted on this RPS in Antigua and Barbuda, Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines. 44 See Annex IX on the results of the Client Survey conducted in Antigua and Barbuda, Dominica, Grenada, and St. Vincent and the Grenadines. 45 See Annex VII, “Caribbean Growth Forum.” 27 49. Stakeholders support the proposed RPS framework and its objectives. There was broad agreement on giving priority to activities that could help lay the foundations for growth and competitiveness and stimulate job creation in the OECS countries. Stakeholders also agreed that particular attention should be paid to the role and soundness of the financial sector, and public sector modernization is also high among their priorities. In addition, attention to social safety nets and disaster risk management were requested to enhance OECS’s resilience. C. Country and Regional Engagement 50. This RPS applies a systematic filtering process to define relevant areas of engagement. Four filters have been used: (i) client demand and commitment; (ii) “line of sight” to the twin corporate goals; (iii) potential to achieve highest impact in the OECS, in line with the diagnostic presented above, and (iv) WBG comparative advantage. 46 The RPS also takes into account the assistance provided by other development partners. 51. The OECS Regional Partnership Strategy (RPS) for FY15-19 is consistent with the holistic approach adopted by the OECS Governments to tackle the long-standing issues of low growth and debt sustainability. The OECS countries acknowledge the multifaceted nature of their challenges and have Figure 16: Comprehensive Debt Framework (CDF) elaborated their own vision considering that improvements in competitiveness, reduction in Private Sector Led Growth sovereign debt levels, fiscal adjustments to ensure macro sustainability, and enhanced resilience to shocks are interrelated aspects all critical to resume and sustain inclusive growth. The Bank has supported this approach and, at Debt Resolution CDF Fiscal Management the request of the Heads of Government of CARICOM, has elaborated the Comprehensive Debt Framework (CDF). Structured around four pillars, the Resilience to Natural Comprehensive Debt Framework Disaster (CDF) is designed to address the interdependent structural causes of high debt and low growth in small island states by (i) promoting private-sector led growth, (ii) strengthening fiscal management, (iii) building resilience to natural disasters, and (iv) improving debt management. The CDF is the context in which the Bank undertakes its dialogue with the OECS and defines its assistance program. 52. As there is merit in seeking greater regional integration but implementation of regional programs has proven difficult, the RPS will support country programs under regional frameworks. For the OECS, the greatest benefits from economic integration will come 46 Comparative advantage was defined as measuring the WBG’s global experience, its analytic understanding, and the success of its engagement in a given area. 28 from taking advantage of economies of scale, sharing risk, generating cross-country spillovers, rationalizing the provision of public services, eliminating duplication of administrative structures, and better representing the region in international fora. Achieving economies of scale will also allow IFC and MIGA to play a stronger development role and increase opportunities for investment in the OECS. However, despite recent efforts towards regional integration, progress has been uneven. This RPS proposes a systematic, yet pragmatic, approach to regional integration by offering individual countries a menu of options under a regional operation framework; this arrangement will foster regional approaches in critical areas and has potential to generate cross-country spillovers, while allowing countries to select the mix that suits their priorities best and tailor support for reforms to their needs, for greatest ownership and effectiveness. Accordingly, the Bank will prepare regional programs supporting regional approaches where suitable, and implemented through tailored country-level loans, using Investment Project Financing for “Series of Projects”. 53. The proposed engagement model aims at maximizing impact by leveraging a tailored package of WBG financial, knowledge, and convening services, including a strategic use of trust funds. To build knowledge in areas critical to the RPS objective, analytic and advisory activities (AAA) will support each area of lending engagement. In each objective area, support will be provided by the Bank, IFC, and MIGA as relevant and feasible. 47 MIGA and, to some extent, IFC currently acknowledge limited opportunities for engagement because of the small size of the OECS markets. They will, however, endeavor to seek potential opportunities for engagement, possibly at regional level. In high-income OECS countries (Antigua and Barbuda and St. Kitts and Nevis), the Bank will move toward a model that is increasingly based on reimbursable advisory services. Trust funds will be sought to complement the limited IDA/IBRD envelope and enable more effective results in each area of engagement. 54. Gender, environmental, and institutional capacity considerations are critical and will be mainstreamed in activities, where relevant. As relevant, WBG interventions will include a gender perspective to enhance the development outcomes. Concerns about environmental sustainability will be mainstreamed throughout the program, as will capacity- building efforts. Indeed, much of the program seeks not only the delivery of specific sector outcomes, but also the building of capacity and institutions to sustain achievements over the long haul. D. Proposed World Bank Group FY15-19 Partnership Strategy 55. The overall strategic goal of this RPS is to support the OECS in laying foundations for sustainable inclusive growth. To pursue this high-level objective, the RPS activities are organized around three areas of engagement; all ranked as high priorities by governments and stakeholders: competitiveness, public sector modernization, and resilience (Fig. 17). 47 St. Vincent and the Grenadines is the only OECS country that is not also a member of IFC. 29 Figure 17: OECS RPS FY15-19 Framework Supporting the OECS in laying the Foundations for Sustainable and Inclusive Growth Public Sector Competitiveness Resilience Modernization Outcome 6: Improved targeting Outcome 1: Improved Outcome 3: Improved budget and reduced fragmentation of investment climate management and social protection system transparency Outcome 2: Increased Outcome 7: Establishment of tourism benefits with Outcome 4: Strengthened quality education standards stronger linkages to statistical capacity Outcome 8: Enhanced data to agribusinesses support evidence-based policy to Outcome 5: Strengthened address NCDs capacity to manage PPP Outcome 9: Increased capacity to manage natural hazards 56. The proposed RPS program is aligned with the WBG Strategy and the twin corporate goals of reducing extreme poverty and boosting shared prosperity. Establishing a sound investment climate, including ICT and transport connectivity and lowering the cost of electricity, would help eliminating obstacles to growth and private sector development, and attracting FDI, which are all necessary to create jobs and new sources of wealth. Strengthening the financial system would help reducing fiscal risk, for governments with limited fiscal space and rising debt, and potential negative spillovers on the most vulnerable. The limited capacity of the financial system to support private sector development is an obstacle to investments and growth. A more efficient public sector would reduce unnecessary fiscal costs and support private sector development. Improved quality of public services would positively affect the well-being of the poor and vulnerable. The poor would also benefit from less fragmented, better designed social assistance systems. Moreover, social vulnerability would be reduced with stronger education systems with higher quality and able to equip the population with the necessary skills to enter the job market effectively. Finally, better capacity to manage natural disasters would lead to significant reduction in human and economic losses. Competitiveness 57. The RPS includes activities aimed at increasing private participation in the economy through a more effective business environment and increased competitiveness in leading industries. In this regard, the WBG plans to implement both “horizontal” and “vertical” interventions. Horizontal actions refer to economy wide reforms aimed at enhancing the overall enabling environment for businesses across sectors (e.g., interventions to enhance access to finance, improve the investment climate, encourage adoption of ICT, support innovation, and decrease the cost of electricity). Vertical actions aim at unleashing the competitiveness potential of leading sectors of the economy, particularly tourism and agriculture. 30 Outcome 1: Improved investment climate 58. A better investment climate will improve conditions for private investment, FDI, SMEs, and higher productivity. Removing weaknesses in the investment climate should have a positive impact on firms, including on their ability to invest and grow. SMEs, which typically suffer more from investment climate barriers, stand to gain significantly, and, as they are the main generators of employment in the OECS, their benefiting from reforms of the investment climate should have a positive impact on employment. A better investment climate is also a requisite to reverse the trend of decreasing FDI. Finally, constraints in the investment climate increase the costs of doing business, so that their removal will contribute to increasing productivity in key sectors. 59. The WBG will continue to support efforts to remove key weaknesses in the investment climate, with a specific focus on areas where the OECS countries rank low relative to countries at a similar level of per capita income or in the region, and are thus handicapped to compete regionally and globally, such as for getting credit, registering property, enforcing contracts, resolving insolvency, paying taxes, and improving logistics 48. Country-specific action plans stemming from the CGF process will provide the basis for identifying needed reforms. The WBG, working in coordination with the OECS Business Council, will support implementation of these action plans. 60. A strengthened banking system is necessary to support the development of the private sector. Given the dominance of bank credit and the lack of other instruments to finance productive activities, the curb on lending resulting from bank balance sheet weaknesses has left firms and individuals with limited financial resources to leverage internal funds for investment, in turn limiting growth of the private sector and the creation of jobs. A well-functioning and diversified financial sector is also necessary to maintain economic stability; efficiently mobilize domestic and external savings; and ensure the efficient allocation of capital to productive investments, housing, and infrastructure, thereby supporting growth of the private sector and the economy49. 61. The WBG will support the development and implementation of a comprehensive strategy to support the financial system. A comprehensive approach to strengthening the banking sector and developing the financial sector is essential, given the OECS’s commitment to a single financial space and the opportunity to generate economies of scale in a fragmented market. The Bank will support the ECCB in developing a comprehensive financial sector strategy aimed at strengthening the health of the banking sector and its ability to support the development of the private sector and economic growth, while ensuring macro sustainability. An operation to support the financial sector strengthening could materialize in the context of adequate progress on developing a comprehensive OECS financial sector strategy - in collaboration with the IMF, the ECCB and the CDB - and under a suitable policy and regulatory 48 Ongoing WBG advisory support for selected investment climate reforms include (i) facilitate business entry of firms in Dominica and St Lucia; (ii) facilitate application process for construction permits in Dominica; (iii) establish framework for the operation of a collateral registry in St Lucia; (iv) automate the clearance of imports and build capacity of border agencies in Dominica, Grenada, St Lucia, St Kitts and Nevis; (v) support the establishment of a commercial chamber/commercial court in St Lucia; (vi) provide support to simplify tax administration in Antigua and Barbuda; and (vii) improve the framework for resolving insolvency in Dominica and St Lucia. 31 environment. The IFC will seek to support development of the financial sector where private sector investment may be mobilized. 62. To enhance productivity, competitiveness, and employment, the RPS will also support greater adoption of ICT, innovation, and growth of creative industries. The RPS program will support increased access to regional broadband networks and the development of an ICT-enabled services industry in the OECS. Thus, the Bank will continue implementing the Caribbean Regional Communication Infrastructure Project (CARCIP), endeavoring to extend it to other OECS countries. 50 In collaboration with InfoDev (through the Entrepreneurship Program for Innovation in the Caribbean, or EPIC), 51 the WBG will help foster entrepreneurship through the development of a dynamic innovation and entrepreneurship ecosystem, including supportive public policies, public and privately funded incubators, training, and exchange of knowledge. Building on the successful experience of Digital Jam 3.0 “Caribbean edition” in Jamaica, where OECS countries were invited to participate, the WBG, in collaboration with various development partners, will support the development of creative industries (e.g., animation industry). This work will help increase youth employability and entrepreneurship, and create opportunities for jobs, especially for young women and men, in the virtual global economy and in creative sectors. 63. Finally, the RPS will support activities aimed at contributing to more predictable and lower energy prices to enhance competitiveness and inclusion. The Bank will support enhanced efficiency in the supply of and demand for electricity. It will also support diversifying the energy supply away from fossil fuels, realizing, however, that significant impact will require work extending beyond the RPS period. Therefore the objective during the RPS is to set the groundwork and, when ready, to commence work in this area, beginning with the preparation of geothermal development roadmaps in OECS countries, including Dominica and St. Lucia. To do this, the WBG will mobilize technical assistance resources (e.g., from the Energy Sector Management Assistance Program ESMAP, SIDS DOCK, the Global Environment Facility GEF), in coordination with other development partners. In addition, the Bank will continue implementing the Eastern Caribbean Energy Regulatory Authority Project (ECERA) to develop a strengthened energy regulatory environment, and will endeavor to extend it to other OECS countries 52. Outcome 2: Increased tourism benefits with stronger linkages to agribusiness 64. Revitalizing the tourism sector and establishing stronger linkages with agribusinesses will contribute to resumption in employment and growth in the OECS. Resumed growth in tourism, the main economic driver in the OECS, is expected to have a spillover effect on other sectors (e.g., agriculture) in terms of economic growth and job creation. This would be particularly the case with growth of tourism segments that have strong linkages to local culture, are associated with the highest labor intensity, and are highly inclusive of women, 50 CARCIP Phase 1 was approved in May 2012 with Grenada (US$10m IDA), St. Lucia (US$6m IDA) and St. Vincent and the Grenadines (US$6m IDA). At the end of 2013, Antigua and Barbuda expressed its intention to join CARCIP. However, a new Government is in place after the June 2014 elections and the interest has to be confirmed. 51 The EPIC program is a 7-year program funded by the Canadian Department of Foreign Affairs, Trade, and Development (DFATD) and implemented by the WBG, with three components: (i) support to and expansion of the Caribbean network of business enablers (including women entrepreneurs); (ii) skills upgrading and capacity development; and (iii) innovative access to finance program for entrepreneurs. 52 Grenada and St. Lucia are the only OECS countries that are currently part of ECERA, which is implemented by the OECS Commission. 32 youth, and marginalized social groups. Stronger links between tourism and agriculture will benefit small holders and those living in rural areas, who are among the poorest segments of the population. In addition, the development of agriculture will contribute to reducing food imports and improving the current account balance. 65. The WBG will support a comprehensive set of measures to enhance the competiveness of tourism and create stronger linkages with agribusinesses. The Bank will support the removal of obstacles to the sector’s development, including those related to policies, regulation, infrastructure, and logistics. It will also foster linkages between the two sectors, so that the tourism industry increasingly provides a market for small agribusinesses. This will be achieved in part by strengthening selected value chains. Emphasis will be placed on developing productive alliances in rural areas and enhancing the quality and standards infrastructure. Capacity development of female entrepreneurs and insertion of female-led enterprises in these alliances will be supported. Attention will be given to increasing the availability of productivity- enhancing technologies (e.g., seeds, weather insurance, improved farming practices, training) for agriculture. Productive alliances will not only link producer organizations to national markets (including tourism), but will also link and strengthen productive alliances with exporters and importers overseas for products where the OECS countries have comparative advantages, such as nutmeg and other spices, quality cocoa or some tropical fruits. Investments could be supported in cold chains and food safety systems. Air and maritime connectivity issues, which limit both tourism and agriculture, may also be addressed (including the feasibility of a ferry system), depending on economic feasibility, the availability of additional donor funding, and political appetite. In addition, through an ongoing operation, 53 the WBG will continue supporting better management of marine resources in the OECS, which will also help to boost tourism, although recognizing that long-term efforts will be needed in this area, given the degree of degradation of marine and coastal resources. Measures supporting the promotion of a sustainable ocean-based (blue) economy in the OECS could also lead to positive spillovers. Public Sector Modernization 66. The WBG will support more effective and transparent public administrations, more robust institutional capacity and stronger frameworks for partnership with the private sector. The RPS will concentrate efforts in three areas: (i) assisting OECS governments to build more efficient and accountable public administrations, focusing on the processes and systems that will enhance the efficiency of the public administration and enable the fiscal gains that are needed to enhance the sustainability of public finances; (ii) strengthening statistical capacity to inform policymaking, and (iii) strengthening the framework for PPPs to enable OECS governments to partner with the private sector to meet critical infrastructure investment needs. The Bank will also continue to build institutional capacity in the public sector by incorporating institutional capacity-building components in lending operations, and the Bank will explore the possibility to support the adoption of harmonized Procurement Acts and developing supporting regulations and institutional processes in the OECS. 53 The Sustainable Financing and Management of Eastern Caribbean Marine Ecosystem Project established the Caribbean Biodiversity Fund, with a current capitalized endowment of approximately US$15 million from GEF/World Bank, the German Development Bank, and the Nature Conservancy. 33 Outcome 3: Improved budget management and transparency 67. With significant fiscal imbalances impeding government’s ability to allocate resources to needed investments and programs, establishing the basis for sound fiscal management is essential in the OECS. Introducing strategic budgeting tools, such as rolling forward budget estimates and multiannual budget ceilings, is critical to lay the foundations for better fiscal management, as these tools will contribute to inform decision on additional spending request and savings options. In the long term, more efficient public administrations and increased institutional capacity will help free up resources to deliver better services and strengthen macro sustainability. 68. The WBG will support selected country efforts to enhance the processes and systems that contribute to better budget processes and greater transparency. It is expected that Antigua and Barbuda, St. Kitts and Nevis, and Grenada will, with support from the Bank, gradually introduce program budgeting and make available to the public information on planning and budget outruns 54. In these three countries, the Bank will also support the creation of an Open Budget Index through the implementation of the Open Data Initiative. These efforts will be complemented by assistance provided under the Supporting Economic Management in the Caribbean (SEMCAR) 55 program and the Caribbean Regional Technical Assistance Center (CARTAC), 56 in close coordination with the EU and the IMF. The Bank will also continue working with the Supreme Audit Institutions and Public Accounts Committees of Parliaments in the OECS areas as well as on accounting and auditing standards. Finally, the Bank will support greater accountability by leveraging the opportunity provided by the CGF process and the Global Partnership for Social Accountability (GPSA) for the five OECS countries that have joined the program 57. Outcome 4: Strengthened statistical capacity 69. Solid statistics are critical to inform policy decision making and monitor the impact of policy decisions. Priority will be given to social and poverty statistics that allow timely poverty and inclusion assessments and the assessment of the impacts of policy measures on poverty and shared prosperity. In coordination with other partners, the WBG will support, through no lending activities, the production of harmonized household surveys and capacity building in key national and regional institutions (e.g., national statistical offices, OECS Commission, Living Standards Measurement Committee) 58. A plan to strengthen OECS statistics 54 This will be achieved through the ongoing A&B Public and Social Sector Transformation Project; through an ongoing Institutional Development Fund (IDF) grant in St. Kitts and Nevis; and through the development of a policy loan series in Grenada. 55 The SEMCAR Program, initiated with funding from DFATD, is managed by the World Bank and implemented in partnership with the IMF. Its strategic objective is to improve economic management, regional integration, and competitiveness in 12 Caribbean countries by contributing to more efficient, effective, accountable and regionally integrated tax, customs, and PFM institutions, policies, processes, and ICT systems. Also, it includes a component that aims to better understand and address gender-differentiated constraints to voluntary tax compliance. 56 CARTAC’s mission is to enhance the institutional and human capacities of countries in the Caribbean region to achieve their macroeconomic, fiscal, and monetary policy objectives. It provides technical services in four core areas: public expenditure management, tax/customs policy and administration, financial sector regulation and supervision, and economic and financial statistics. 57 Antigua and Barbuda, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. 58 This work will also be crucial to respond to one of the key constraints for improved gender mainstreaming as it will provide sex-disaggregated statistical information. 34 and poverty work will be rolled out and implemented during the first two years of the RPS, and more up-to-date information on poverty and shared prosperity will be presented in the first Performance and Learning Review (PLR). Outcome 5: Strengthened capacity to manage PPPs 70. Appropriate structuring of PPPs can help project implementation, contributing to increasing resilience and competitiveness. To improve service delivery and free up much- needed public resources for other initiatives, in the long term, OECS governments need to partner with the private sector in building infrastructure, managing state assets, or carrying out innovative investment projects. Thus, the WBG will support, through non lending activities and trust funds, the development of a stronger institutional, legal, and regulatory framework, at national and regional levels, for the development and implementation of PPPs. This will be achieved by supporting OECS governments in implementing the actions identified in the Caribbean PPP Infrastructure Roadmap that has been prepared with joint support from the Bank and other development partners 59. In coordination with the IFC, the WBG will also support the preparation of selected PPP transactions. Greater development of PPPs could lead the IFC to play a greater role in the OECS. Resilience 71. The RPS aims at supporting OECS governments and households to better manage the impact of shocks and adapt to changing circumstances. Through a combined focus on strengthening social protection systems and improving the quality of education and health systems, the RPS aims to support holistic human capital development among the poor and vulnerable. In addition, the Bank will endeavor to incorporate a youth dimension in this assistance, anchored on a youth survey covering all human development areas (i.e., health, education, employment, civic engagement, and providing sex-disaggregated data). In parallel, the Bank aims to continue building the capacity of OECS governments to effectively manage natural disaster risks, focusing on shifting attention toward prevention and building resilience. Proper management of these risks would lower the human and economic costs of disasters. It would also have benefits in terms of reducing fiscal pressures and enhancing the quality of the environment, thus contributing to growth and employment. Outcome 6: Improved targeting and reduced fragmentation of social protection systems 72. Enhanced effectiveness of social protection systems will strengthen the resilience of the population, especially vulnerable groups, to shocks. Social protection systems directly address extreme poverty, but they also address intergenerational poverty by helping families invest in themselves, their children, and their assets. The priority will be on reducing high levels of fragmentation and duplication, spending inefficiencies, capacity deficiencies, targeting inadequacies, and limited abilities to respond to exogenous shocks. The reforms would improve the responsiveness of social protection systems, particularly in times of economic and environmental shocks. The ongoing Safety Net Advancement Project will continue to be implemented in Grenada. The planned Regional Social Resilience and Human Development 59 The Caribbean PPP Infrastructure Roadmap identifies a number of relevant actions, both at the country and regional level, to capitalize on the PPP potential in the OECS, such as: identify a “PPP focal point” at the national level; training for government staff at all levels; developing priority PPP projects and pipelines; exploring the creation of a regional PPP support mechanism, etc.. 35 operation will address social protection challenges in other OECS countries, depending on their demand. Complementary work on health systems will depend on country demand and is likely to focus on addressing the threat of NCDs. Outcome 7: Establishment of quality education standards 73. Improving education standards and the skills of the labor force is essential to enhance employability. Inadequate skillsets are among the biggest obstacles identified by businesses operating in the OECS. Improving the education and skill set of OECS populations is thus essential to enhance the employability of the labor force and contribute to reduced unemployment and poverty. Enhanced vocational training will also be useful as individuals who take employer-provided or vocational training earn, on average, at least 5 percent higher real earnings than those who have not taken such training. The returns are closer to 5-10 percent if, as a result of the training, the individual obtains a middle or higher vocational qualification. 60 Specific attention will be given to skills training that promote women’s labor force participation. 74. The RPS aims to focus on improving the quality of education standards. The priority in education is to implement the OECS Education Sector Strategy, which targets significant improvements in educational outcomes. With support from the Global Education Partnership (GEP), the Bank will focus its support on the establishment of quality standards and improvement in teaching. The RPS will also support better technical and vocational education and training to optimize human capital. Outcome 8: Enhanced data to support evidence-based health policy to address NCDs 75. Despite significant progress in improving their population's health in the past two decades, OECS countries face the challenges of non-communicable diseases (NCDs) which represent the major causes of death in the region. NCDs also account for a growing portion of health spending, imposing a large economic burden. The OECS capacity to address NCDs is compromised by i) the shortage of Human Resources for Health (HRH), particularly nurses, which limits the ability to meet key health service needs, ii) lack of effective information on NCDs, and iii) inadequate financing in the health sector. 76. Better information on NCDs would enable better evidence-based policies and decisions. The RPS will focus on developing a regional mechanism to systematically capture timely data on NCDs to assess results, resource gaps, and define policies and improve programs based on evidence. Outcome 9: Increased capacity to manage natural hazards 77. The RPS will help OECS countries better manage natural disasters with greater focus on ex-ante risk reduction, planning, and financing, and enhanced rapid emergency response capacity. Such an effort could significantly contribute to reducing the impacts of natural disasters, especially for the most vulnerable segments of the population, who often live in fragile houses and in remote areas prone to disaster impacts. Physical damages to housing, schools, and health centers interfere directly and indirectly with the provision of education, health, and social services, and therefore greater resilience has a strong positive social impact. The approach would also help reduce the fiscal impact of natural disasters, as risks would be 60 Blundell, Dearden, and Meghir (1996), The Determinants of Work-Related Training in Britain, London: Institute for Fiscal Studies, ISBN 1-873357-56-7.. 36 increasingly transferred to the market, and as enhanced resilience would attract more investments into OECS countries. 78. To this end, the RPS will aim to continue building greater resilience and enhanced disaster risk management capacity. In coordination with other donors, and capitalizing on available trust funds and grants, the WBG will continue helping OECS countries increase their resilience to natural hazards and climate change impacts, through a combination of resilience investments and resilience-building policy advice and capacity building. Specific emphasis will be put on understanding and addressing gender-differentiated vulnerabilities and impacts, based on women’s and men’s different roles and responsibilities in their households and communities 61. The Bank will also support OECS governments in assessing contingent liabilities associated with natural disasters, thus setting the basis for undertaking appropriate precautionary measures. In addition, fiscal risk assessments will inform OECS countries in the development of National Disaster Risk Financing and Insurance strategies and associated action plans, enabling them to make informed decisions about efficiently transferring more disaster risk to private capital markets. This will be achieved by continuing the implementation of a large portfolio of disaster risk management activities (i.e., four large operations that are active in Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines, and a related additional financing operation for Grenada planned for FY15). The WBG will complement these efforts with activities to strengthen governments’ capacity to address individuals’, households’, and communities’ vulnerability to disasters and strengthen their resilience, including through transfers and social services to affected individuals, households, and communities. 4. FINANCIAL PORTFOLIO AND EXPOSURE MANAGEMENT 79. Indicative IBRD envelope. The indicative IBRD lending program for the six OECS countries is expected to be around US$120 million, comprising up to a maximum of US$20 million for each OECS country for the period of the RPS (FY15-19), subject to country and program performance, IBRD’s lending capacity, and exposure management parameters. 80. IDA-17 Resources. In addition to the IBRD envelope, four OECS countries (Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines) can also count on an IDA national allocation and can leverage additional regional IDA resources, consistent with the IDA regional allocation criteria 62 . The IDA17 (FY15-17) indicative allocation for the OECS is equal to SDR61.3 million, an increase of around 22 percent over the IDA16 OECS allocation (SDR50.3 million) 63 (Table 8). 61 In the St Lucia disaster vulnerability resilience project (DRVP), specific focus is given on understanding how policies may affect women and men differently and on constructing a sex-disaggregated baseline for the project, taking into account gender differentiated needs and preferences. This work is informing the government on relevant gender aspects to programming on climate change, and will provide useful lessons learned for the rest of the region as well. 62 The level of IDA regional allocation to be leveraged would depend on project design. 63 However, IDA allocations are determined on a yearly basis. The final allocation for each FY during the IDA17 replenishment period will depend on: (i) the total IDA resources available; (ii) the country’s performance rating, per capita GNI, and population; (iii) the terms of IDA assistance (grants/credits); (iv) the allocation deductions associated with MDRI annual debt service foregone as applicable; (v) the performance, other allocation parameters, and IDA assistance terms for other IDA borrowers; and (vi) the number of IDA-eligible countries. 37 Table 8: IDA-17 (FY15-17) Indicative Country Allocation (SDR million) FY12 FY13 FY14 FY15 FY16 FY17 IDA-17/ IDA-16 Final Indicative Indicative IDA-17 IDA16 Dominica 3.9 3.7 3.7 11.3 4.7 4.7 4.6 14.1 +24.8% Grenada 3.9 4.0 3.8 11.6 4.8 4.8 4.7 14.2 +22.4% St. Lucia 5.0 5.0 4.8 14.8 6.1 6.1 5.8 18.0 +21.6% SVG 4.3 4.3 4.0 12.6 5.0 5.1 4.9 15.0 +19.0% 81. Leveraging additional resources will be essential to achieve the RPS objectives. With adequate conditions in place, support to strengthen the financial sector could require significant IBRD and/or IDA resources, thus leaving limited resources towards the other areas of engagement proposed in this RPS. Leveraging additional resources will thus be essential, including supporting the proposed engagements in human development, natural disaster risk management, and energy. 82. Three new regional operations will be implemented under the RPS. In order to provide selective support in areas likely to have the strongest impact on poverty reduction and shared prosperity, three operations are planned under this RPS: a Competitiveness project, a Renewable Energy project, and a Social Resilience and Human Development project. A fourth operation to support the financial sector strengthening could also materialize in the context of adequate progress on developing a comprehensive financial sector strategy - in collaboration with the IMF, the ECCB and the CDB - and under a suitable policy and regulatory environment. 83. In addition, implementation of the following ongoing investment operations will continue: i) two regional projects in the areas of Private Sector Development and Competitiveness (i.e., the Caribbean Regional Infrastructure Communication Project (CARCIP), and the Eastern Caribbean Energy Regulatory Authority (ECERA) project); ii) in the area of Public Sector Modernization, a Public Sector and Social Transformation project in Antigua and Barbuda; and iii) in the area of Social and Climate Resilience, a Safety Net Advancement project in Grenada; and a large portfolio of Disaster Risk Management projects (i.e., four regional operations in Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines, one emergency operation to respond to the effects of the Hurricane Tomas in St. Lucia, and a Sustainable Financing and Management of Eastern Caribbean Marine Ecosystem Project). In addition, an ongoing series of development policy operations in Grenada, anchored on the CDF, is expected to have a cross-cutting impact on the three engagement areas (Table 9). Table 9: OECS RPS lending program (FY15-19), and links with RPS outcomes FY15-16 FY17-FY19 Regional Competitiveness Project (outcomes 1,2) Regional Social Resilience and Human Development Project (outcomes 6,7,8) Operation to support Financial Sector (outcome 1)* Regional Renewable Energy Project (outcomes 1,2) DPL-II (Grenada) (outcomes 1,3,6,9) Regional Disaster Vulnerability Reduction AF (Grenada) (outcomes 3,9) CARCIP (Antigua and Barbuda) (outcomes 1, 2) DPL-III (Grenada) (outcomes 1,3,6,9) Note: Italics refers to follow-up to previous operations * The Financial Sector Operation will take place – in collaboration with the IMF and the CDB - in the context of adequate progress on developing a comprehensive financial sector strategy and under a suitable policy and regulatory environment 38 84. The existing portfolio for the OECS (as of June 2014) consists of six IDA, one IBRD, and one GEF project, totaling net commitments of US$134.1 million, of which 18 percent is undisbursed. The number of projects under implementation has gone down from 15 to 7 over the period FY10-FY14, showing increased selectivity. However, net commitments have increased over the years; and the average project size has increased from US$6.1 million in 2010 to US$19.2 million today. The disbursement ratio remains relatively low however, resulting in longer implementation periods. In addition, the Bank is implementing 28 trust funds worth $31.8 million in the region, to support the implementation of projects and provide technical assistance. The Independent Evaluation Group (IEG) has evaluated six of eight recently closed projects, with 100 percent satisfactory ratings (Table 10). In addition to close supervision, which promotes an early response to implementation problems, the Bank will continue working to strengthen government capacity for project implementation, including by providing annual fiduciary and procurement training. Table 10: World Bank OECS portfolio FY10-14 Fiscal year 2010 2011 2012 2013 2014 # Projects 15 13 11 17 7 Net Commitment Amount 92.2 87.3 96.0 102.5 134.1 # Problem Projects 2 0 4 0 2 # Potential Problem Project 0 0 1 2 0 % Potential Problem Project 0.0 0.0 9.1 18.2 0.0 # Project At Risk 2 0 5 2 2 Commitment At Risk 7.0 0.0 30.6 20.0 10.6 % Commitment at Risk 7.6 0.0 31.9 19.5 7.0 85. The lending program under this RPS may be substantially reviewed at the time of the first PLR. Strengthening the OECS financial sector is critical to ensure macro-financial stability and establish the appropriate engine to support private sector growth. The WBG, in close partnership with the IMF and CDB, will work closely with the OECS governments and the ECCB toward suitable approaches that would support strengthening key elements of the financial sector. However, the decision to proceed with financial support will depend on the progress achieved by the ECCB and the OECS governments in taking the necessary measures to create the conditions for such support to be effective, including the appropriate legislative and regulatory environment. In view of the ongoing dialogue on the nature and form of such support, it is suggested that the lending program be reviewed at the time of the first PLR of this RPS. In addition, flexibility in resource allocation, and leveraging additional funding, will be required throughout the period, because of the high vulnerability and needs of OECS countries. 86. IFC’s existing activity in the OECS focus on: i) crisis response; ii) job creation and inclusive growth; iii) innovation, competitiveness and integration; and iv) climate change. During FY09-FY14, IFC committed six projects for $165.6 million in the OECS, including Sagicor Insurance (FY11), a $100 million regional commitment in insurance that had over $1.1 billion in annual premiums in 2012 and is active in every OECS country. In Advisory Services, IFC has exposure in every member state of the OECS with a current portfolio of $14 million focusing on Investment Climate (Tourism Investment Generation, St. Lucia) and PPPs (Hewanorra International Airport, St. Lucia, and St. Joseph’s hospital, Grenada). In addition, IFC 39 has OECS exposure in a number of regional projects: Risk Management & Corporate Governance, Caribbean Regional Credit Bureau and SME Banking, Business Entry, Tax Reform, Indicator-Based Reform Advisory, Trade Logistics, and Investment Climate. Overall, IFC was more successful through its Advisory Services. Investment opportunities proved to be limited, mainly because of small market size. In addition, engagements through the financial sector were constrained because of the increasingly difficult financial situation of most commercial banks in the region. 87. Looking ahead, IFC aims to expand its investment activities in the region. Over the next strategy cycle, IFC Advisory Services and the newly established Global Practices of the WBG are expected to remain a critical component of IFC’s engagement. On the investment side, IFC expects to build on close relations with the World Bank through this strategy, which is more focused on growth industries and targeted regional initiatives, to jointly develop more sizable private sector investment opportunities in the financial sector as well as in infrastructure through strengthened PPP frameworks. This should help IFC to expand its investment support, especially in the areas of tourism, agribusiness, banking and financial inclusion, education, renewable energy/energy efficiency, and other infrastructure areas. MIGA will continue observing potential opportunities in the market. 5. MANAGING RISKS 88. The risks of not achieving the development objectives of the proposed program under this RPS are high. They include (i) a fragile macro framework and potential social tension; (ii) potential lack of government actions to address financial sector weaknesses; (iii) exposure to exogenous shocks and natural disasters; and (iv) complex political economy, weak regional cooperation and low institutional capacity. 89. The macro situation is fragile, particularly because of high debt, fiscal imbalances, and exposure to external shocks. A drop in CBI revenues, changes in sources of oil financing, or an external shock could all affect the fiscal sustainability of the OECS and create negative spillovers on growth, poverty, and shared prosperity. In addition, despite a relatively secure and stable environment in the OECS, an increasing level of youth unemployment could give rise to social tensions. A sound macroeconomic framework and governments’ commitment to implement structural and social reforms are critical and, if needed, the Bank’s support might be strengthened to support these reforms. The WBG will closely monitor the macro framework through systematic dialogue with the OECS governments around the CDF. In addition, close coordination with the IMF will be maintained including around areas for strengthening fiscal management through better management of public finances. The RPS also contemplates enhancing social safety nets to mitigate the risk of social tensions. The Bank will also support measures to improve the investment climate and labor employability, and thereby set the foundations for greater employment and growth. 90. Given the level of uncertainty on financial sector issues, flexibility in the implementation of the RPS will be essential. In particular, in case of sufficient progress on developing a comprehensive financial sector strategy and on building a suitable policy and regulatory environment to address vulnerabilities in the financial sector, an operation to support the financial sector will take place and the Bank might limit its engagement in the other results areas envisaged by this RPS, unless it is able to leverage additional resources to achieve the other 40 objectives. In case of lack of progress on these issues, the Bank would refocus the program toward building resilience; especially establishing stronger safety nets to mitigate the impact of enhance vulnerability on the poor and vulnerable. Preserving appropriate flexibility in focus areas, results, and the allocation of resources is, therefore, an integral feature of this RPS. 91. Exposure to natural shocks continues to be a major threat for OECS countries, which are still not sufficiently socially and structurally resilient to disasters. Infrastructure repair negatively affects fiscal balances, declines in tourist arrivals reduce GDP growth and widen current account deficits, and the human toll of natural disasters remains very high. The WBG plans to mitigate this risk by making sure that the large portfolio of disaster risk management operations will continue to produce results and is reoriented from a culture of “reaction” to “prevention.” The Bank will also strengthen the social dimensions of these operations. 92. Lack of actions at the political level, including within the regional context, could slow down implementation of projects and reforms, especially considering the weak institutional capacity. Despite public commitment, it is possible, particularly in periods close to political elections, that appropriate actions may not be taken in a timely manner to speed up implementation of projects and reform. Political will is particularly important for effective regional integration and economies of scale, which are critical for the realization of this program, including ensuring a greater role for IFC. In addition, lack of well-trained human resources, obsolete systems of government personnel management, insufficiently robust accountability system for results, a weak enforcement culture to implement decisions, and scarce financial resources make it difficult for governments to achieve results effectively and on time when implementing projects. To mitigate this risk, the OECS governments have committed to implement a program of reforms focused on fiscal sustainability and macro stability, which have been expressed in their national and regional strategies 64 , while the WBG will maintain a systematic dialogue with the authorities and other partners to better understand the political economy context in each country and will take care to design operations that, while regional, will give clients a strong sense of ownership by also addressing country-specific needs. Moreover, the WBG will provide technical assistance and training initiatives, embedded in the operations when feasible, to contribute to increased institutional capacity. 64 See Annex VIII on “Compendium of National and Regional Strategies”. 41 ANNEXES Annex I. Results Matrix OECS Development Goals Outcomes Indicators WBG Program Competitiveness Increase employment Outcome 1: Improved Indicator 1: Improvement in Doing Lending Ongoing opportunities and reduce investment climate Business indicators Caribbean Regional unemployment Baseline: Doing Business (2014), Infrastructure Communication Enterprise Surveys, Product Market Project (CARCIP) Enhance productivity and Regulations data and other data sources Eastern Caribbean Energy competitiveness will be used Regulatory Authority (ECERA) Target: t.b.d. during diagnostic phase Grenada DPL Strengthen the financial Lending Pipeline sector Indicator 2: A new banking regulatory Regional Renewable Energy framework is adopted Project (FY17) Baseline : outdated regulatory Regional Competitiveness Consider ICT framework and deficient supervision Project (FY15) opportunities, including in Target: Banking regulation consistent Grenada DPL2/3 (FY15-16) creative industries with international standards Non-Lending Entrepreneurship Program for Improve access to Indicator 3: : Improved market Innovation in the Caribbean sustainable sources of conditions for renewables through an (EPIC) clean, reliable, and updated energy sector regulatory Open Data Initiative affordable energy and framework Digital Jam series enhance energy efficiency Baseline: 2 countries part of the Eastern Ongoing advisory support for Caribbean Energy Regulatory Authority selected investment climate (ECERA) project (GRE, SLU) reforms Target: At least 3 countries part of the Eastern Caribbean Energy Regulatory Authority (ECERA) project Strengthen linkages Outcome 2: Increased Indicator 1: Increase in local currency Lending Ongoing between productive sectors tourism benefits, with spending per tourist arrival Sustainable Financing and stronger linkages Baseline: TBD at the time of the Management of Eastern Stimulate growth toagribusiness diagnostic for the Regional APL on Caribbean Marine Ecosystem 42 OECS Development Goals Outcomes Indicators WBG Program particularly in tourism and Tourism/Agriculture Competitiveness Project agricultural sectors Target: t.b.d. during diagnostic phase Lending Pipeline Regional Competitiveness Upgrade and modernize Indicator 2: Increased demand for food Project(FY15) infrastructure sourced locally by the tourism sector Baseline: 32% of food sourced locally IFC Improve transport and by the tourism sector (World Bank, Focus on investments as logistics 2008), to be updated at the time of the opportunities develop, especially diagnostic for the Regional project on related to PPPs in infrastructure, Tourism/Agriculture Competitiveness renewable, and logistics Target: t.b.d. during diagnostic phase Indicator 3: Number of organized agro-producers who have adopted the technology being promoted and who sell their products to tourism sector Baseline: 0 Target: 2,000 (of which at least 30 percent 1 are women) Public Sector Modernization Improve public sector Outcome 3: Improved Indicator 1: Introducing strategic Non-Lending performance and budget budget management budgeting tools Supporting Economic administration and transparency Baseline: 0 Management in the Caribbean Target: at least 2 countries with rolling (SEMCAR) Develop ICT sector to forward budget estimates and Global Partnership for Social improve productivity and multiannual budget ceilings. Accountability Trust Fund transparency (e- CGF government) Indicator 2: Development and implementation of an open budget index Baseline: 0 Target: at least 2 countries Modernize the public Outcome 4: Indicator 1: The new modules to Lending Pipeline sector and improve Strengthened measure multidimensional and monetary Grenada DPL2/3 (FY15-16) statistical capacity statistical capacity poverty (enhanced Labor Force Surveys) are piloted and implemented in at least Regional Social Resilience and 1 To be confirmed during the diagnostic phase of the Regional Competitiveness project. 43 OECS Development Goals Outcomes Indicators WBG Program two member states. Human Development Project Baseline: No country has implemented (RSRHDP) (FY17) the enhanced LFS (needed to measure Non-Lending multidimensional poverty) and the SEMCAR revised consumption module (needed to estimate monetary poverty) is yet to be developed and piloted. Target: St. Lucia pilots the new modules needed to measure multidimensional and monetary poverty by 2015, at least two member states implement the new modules needed to measure multidimensional and monetary poverty. Increase PPP capacity Outcome 5: Indicator 1: Implementation of PPP Non-Lending Strengthened capacity policy and institutional frameworks Planned PPIAF supported NLTA to manage PPP Baseline: No OECS countries with PPP IFC policy and institutional frameworks Ongoing advisory support for (2013) various PPPs Target: At least 2 countries have introduced national PPP policy and institutional framework IFC aims to support at least 3 successful PPP transactions over the RPS period Resilience Facilitate protection and Outcome 6: Improved Indicator 1: Number of countries that Lending: Ongoing inclusion of vulnerable and targeting and reduced introduce objective targeting Safety Net Advancement Project marginalized groups fragmentation of mechanisms for cash transfer programs (Grenada) social protection Baseline: 1 (Dominica) Public Sector and Social Strengthen implementation system Target: 4 (Antigua and Barbuda, Transformation Project (Antigua and targeting of social Grenada, St. Kitts and Nevis, and St. and Barbuda) safety net programs Lucia) Lending: Pipeline Regional Social Resilience and Indicator 2: Number of countries where Human Development Project the ministry in charge of social (RSRHDP) (FY17) protection is using a unique registry of 44 OECS Development Goals Outcomes Indicators WBG Program beneficiaries Baseline: 0 Target: 5 (Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, and St. Lucia) Improve the quality of Outcome 7: Indicator 1: Established quality Lending Pipeline education Establishment of standards for education in line with the RSVRP (FY17) quality education OECS Education Strategy Non-Lending Match skills to job market standards Baseline - None Youth Survey Target – Quality standards established Indicator 2: Number of youth who receive the Caribbean Vocational Qualification Baseline: 1800 (currently achieved through the OECS skills and jobs projects in Grenada and St. Lucia), of which females 1368 and males 432 Target: 2600 (including an additional 300 each for Grenada and for St. Lucia, and 200 for other OECS), of which females 1820 and males 780 Capture timely data on Outcome 8: Enhanced Indicator 1: OECS countries annually Lending Pipeline NCDs to assess results, data to support submitting agreed upon common set of Regional Social Resilience and resource gaps, and define evidence-based policy NCD indicators to CARPHA using a Human Development Project policies and improve to address NCDs standard form (RSRHDP) (FY17) programs based on Baseline: 0 countries Non-Lending evidence Target: At least three countries CARPHA Knowledge and (Data Source: CARPHA reporting) Learning HRBF Dominica and Saint Lucia HRBF Improve capacity to Outcome 9: Increased Indicator 1: Number of OECS Lending Ongoing prepare for, respond to, and capacity to manage governments that have formulated a Regional Disaster Vulnerability mitigate disasters natural hazards National Disaster Risk Financing and Reduction Projects (in Grenada, Insurance Framework and associated St. Vincent and the Grenadines, Enhance disaster risk Action Plan, taking into account gender Dominica, and St. Lucia) insurance and financial consideration, where feasible Hurricane Tomas Emergency practices Baseline: 0 Recovery Loan (St. Lucia) Target: 2 Sustainable Financing and 45 OECS Development Goals Outcomes Indicators WBG Program Management of Eastern Indicator 2: Number of OECS Caribbean Marine Ecosystem governments that have assessed natural Project hazard related contingent liabilities Lending Pipeline Baseline: 0 Regional Disaster Vulnerability Target: 3 Reduction-Additional Finance (Grenada) (FY15) Indicator 3: Number of days of interrupted traffic due to landslips, IFC flooding and other climate-related events Focus on AS and IS in PPPs as in selected areas opportunities develop, especially Baseline: 30 related to renewables and Target: 12 logistics 46 Annex II. Country Growth Outlook and Selected Economic Indicators Country Growth Outlook Antigua and Barbuda, St. Kitts and Nevis, and St. Vincent and the Grenadines show the most favorable growth prospects. In Antigua and Barbuda and St. Kitts and Nevis, growth prospects are improving as a number of construction projects are already on the pipeline, and tourism and construction activity continue to recover. The IMF projections indicate that real GDP growth is projected to reach 3 to 3.5 percent over the medium-term as a result of the positive results shown by their CBI program. In St. Vincent and the Grenadines, growth is expected to improve with the renovation of the international airport over the next 16-18 months, which could boost tourism- related activity. The recent opening of two medical universities is also expected to contribute to growth. In Dominica, growth is projected to pick up to its potential rate of close to 2 percent with a rebound of the economy’s major growth drivers – agriculture and tourism, combined with a negative impact from a demographic change (aging and population decline). Grenada is expected to recover steadily over the medium-term to about 2.5 percent with a continued recovery in the tourism and private investment. Finally, in St. Lucia, medium-term growth is expected to rise gradually to its potential rate of 2.3 percent, supported mainly by a rebound in agriculture, which will indirectly boost related manufacturing activity and stronger tourism arrivals, but stronger growth will be held back by a weak banking system Antigua and Barbuda Selected Economic Indicators, 2008-2017 Proj. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 National Income and Prices GNI per Capita (US$) 14810 13420 12620 12330 12720 12900 (Annual percentage change) GDP at Constant Prices 1.5 -10.7 -8.6 -2.1 2.8 0.5 1.6 1.9 2.2 2.2 CPI Inflation (end of period) 0.7 2.4 2.9 4.0 1.8 1.1 1.1 2.0 2.5 2.5 Money and Credit Credit to the Private Sector 7.4 -0.7 0.2 -3.7 -2.4 -2.5 1.6 Broad Money (M2) 2.1 0.5 0.3 -6.9 -0.4 2.1 3.5 (In percent of GDP, unless otherwise indicated) Central Government Total Revenue and Grants 20.9 18.7 22.5 20.5 20.0 18.4 21.5 20.6 20.6 20.4 Tax Revenue 18.8 17.7 18.8 18.2 18.5 20.0 Non-tax Revenue 0.1 0.9 2.1 1.5 1.4 1.7 Total Expenditure and Net Lending 26.2 36.9 22.7 24.1 21.2 21.8 33.4 26.0 22.8 22.7 Wages and Salaries 8.1 9.2 8.7 8.7 8.4 4.0 Goods and Services 4.6 5 3.8 3.4 3.6 4.5 Interest Payments 2.8 7.2 2.1 2.1 2.3 1.9 Transfers 2.3 3.5 3.4 5.3 3.4 2.9 Capital Expenditure and Net Lending 5.6 8.8 2.1 1.3 0.6 1.2 Primary Balance -2.9 -11.0 1.9 -1.5 1.1 -1.4 -8.5 -1.5 1.5 1.3 Overall Balance -5.7 -18.2 -0.3 -3.6 -1.2 -3.3 -11.9 -5.4 -2.2 -2.2 External Sector Current Account Balance -25.9 -14.0 -14.7 -10.4 -14.0 -13.8 -12.3 -11.4 -10.6 -10.1 Tourism Receipts 24.8 25.3 26.2 27.7 26.7 25.8 26.1 26.2 26.2 26.1 Foreign Direct Investment 11.8 6.7 8.5 5.8 10.8 11.1 Public and Publicly Guaranteed Debt 77.3 102.5 90.8 92.7 87.8 92.2 100.7 102.4 100.1 97.8 Domestic 43.5 66.7 52.1 53.6 50.8 52.9 63.5 68.6 70.2 72.0 External 33.8 35.8 38.7 39.1 37.0 39.3 37.2 33.8 29.9 25.8 Source: IMF Article IV and World Bank Staff Calculations Note. The medium term projections extraporate current fiscal policies adopted since the end of the IMF's Stand-By-Arrangement. 47 48 Grenada Selected Economic Indicators, 2008-2017 Prel. Proj. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 National Income and Prices GNI per Capita (US$) 7370 6810 7050 7180 7130 7460 (Annual percentage change) GDP at Constant Prices 0.9 -6.6 -0.5 0.8 -1.8 1.5 1.1 1.2 1.7 2.0 CPI Inflation (end of period) 5.2 -2.3 4.2 3.5 1.8 -1.2 1.7 1.6 2.0 1.9 Money and Credit Credit to the Private Sector 10.2 4.1 5.2 2.1 0.2 -5.5 1.0 Broad Money (M2) 4.1 3.3 0.4 1.0 0.9 4.0 1.4 (In percent of GDP, unless otherwise indicated) Central Government Total Revenue and Grants 24.2 22.8 24.6 23.6 20.8 21.5 24.9 24.9 24.8 24.8 Tax Revenue 18.7 17.5 18.7 18.4 17.9 17.2 18.7 19.9 20.8 20.8 Non-tax Revenue 2.1 2.0 1.9 1.8 1.7 2.9 1.6 1.6 1.6 1.6 Grants 3.3 3.3 4.0 3.4 1.1 1.4 4.6 3.3 2.3 2.3 Total Expenditure 28.3 28.0 27.8 28.3 26.1 28.3 30.9 27.4 25.5 25.3 Wages and Salaries 9.0 9.2 9.4 11.0 10.5 11.1 11.1 9.7 9.0 9.0 Goods and Services 3.8 4.1 5.2 3.6 4.0 3.5 3.3 3.2 2.9 2.9 Transfers 2.3 2.9 1.7 1.5 1.2 1.2 1.1 1.1 1.0 1.0 Interest Payments 1.7 2.2 2.2 2.5 3.4 3.4 3.5 3.9 4.3 4.0 Capital Expenditure and Net lending 9.6 7.6 7.3 7.8 5.0 7.0 9.5 7.5 6.2 6.2 Primary Balance -2.4 -3.0 -1.0 -2.2 -2.0 -3.4 -2.4 1.3 3.5 3.5 Overall Balance -4.1 -5.2 -3.1 -4.7 -5.4 -6.8 -6.0 -2.5 -0.8 -0.5 External Sector Current Account Balance -28.0 -22.2 -22.1 -21.8 -19.2 -27.2 -22.6 -21.0 -20.4 -20.0 of which: Exports of Goods and Services 27.7 27.6 28.2 30.0 30.7 31.0 32.2 32.4 32.7 32.9 of which: Imports of Goods and Services 54.7 46.8 49.2 50.8 49.4 57.1 52.8 50.9 49.9 49.4 Capital and Financial Account 32.7 30.4 24.1 27.3 19.7 29.6 12.7 17.5 16.5 17.2 Tourism Receipts 17.8 17.8 18.8 19.8 20.1 19.9 20.5 20.7 20.7 20.7 Foreign Direct Investment 16.3 13.3 7.8 5.5 3.9 13.9 5.5 7.0 8.5 9.0 Public and Publicly Guaranteed Debt 86.9 95.0 100.9 106.5 108.5 115.0 117.1 116.1 112.3 107.9 Domestic 22.8 27.2 28.0 31.7 34.8 37.1 32.4 30.0 25.5 23.2 External 64.1 67.8 72.9 74.9 73.7 77.9 84.7 86.1 86.7 84.7 Source: IMF Article IV and World Bank Staff Calculations 49 St. Kitts and Nevis Selected Economic Indicators, 2008-2017 Proj. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 National Income and Prices GNI per capita (US$) 13780 13110 12640 13020 13080 13460 (Annual percentage change) GDP at Constant Prices 3.9 -4.2 -3.8 -1.9 -0.9 1.7 2.7 3.0 3.2 3.1 CPI Inflation (end of period) 6.5 1.2 5.2 2.8 0.1 0.4 1.5 2.0 2.5 2.5 Money and Credit Credit to the Private Sector 4.3 4.1 2.6 2.6 0.1 -1.4 2.2 2.1 Broad Money (M2) 1.6 5.9 8.9 10.0 11.4 9.5 4.3 -0.8 (In percent of GDP, unless otherwise indicated) Central Government Total Revenue and Grants 30.1 32.6 31 37.1 36.1 42.2 34.2 33.6 32.8 31.9 Tax Revenue 22.6 21.3 18.8 21.1 20.3 20.1 20.9 21.4 21.4 21.4 Non-tax Revenue 6.1 7.7 9.4 12.5 12.4 17.2 8.5 8.3 7.8 7.4 Grants 1.4 3.6 2.8 3.5 3.2 4.9 4.7 3.9 3.6 3.1 Total Expenditure and Net Lending 32.5 35.6 38.8 35.4 30.9 31.7 32.6 31.6 30.4 29.9 Wages and Salaries 10.2 12.6 12.3 11.5 11.2 11.7 11.4 11.2 10.9 10.8 Goods and Services 7.6 8.1 9.3 9.3 6.6 6.5 6.3 6.2 6.2 6.2 Interest Payments 6.4 6.6 7.0 6.5 6.0 4.8 3.0 2.8 2.5 2.4 Transfers 3.0 3.2 3.1 3.7 4.0 3.9 5.5 5.4 4.8 4.6 Net Lending 0.8 0.4 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Capital Expenditure 4.5 4.7 6.8 4.5 3.2 4.7 6.3 5.9 5.9 5.9 Primary Balance 2.6 3.7 -0.8 8.3 10.9 15.5 4.6 4.9 4.9 4.3 Overall Balance -3.9 -2.9 -7.8 1.8 5.0 10.6 1.6 2.1 2.4 2.0 External Sector Current Account Balance -27.8 -28.2 -21.4 -15.4 -11.8 -8.5 -17.4 -17.0 -16.2 -15.7 of which: Exports of Goods and Non-factor Services 31.7 24.6 31.0 33.8 35.2 39.2 31.5 31.7 31.9 31.9 of which: Imports of Goods and Non-factor Services -58.9 -54.6 -54.9 -51.7 -49.0 -50.0 -50.9 -51.0 -50.5 -50.0 Tourism Receipts 14.9 12.1 13.4 12.9 13 13.1 13.5 13.9 14.2 14.4 Foreign Direct Investment 24.0 17.1 16.4 15.3 18.2 20.4 18.5 17.1 16.8 16.5 Public and Publicly Guaranteed Debt 131.0 148.5 163.9 154.0 137.0 104.9 91.2 84.6 77.3 70.7 of which: Central Government 100.5 114.9 129.4 122.8 110.3 80.1 76.1 70.1 63.7 57.8 Domestic 67.6 78.3 79.9 72.3 68 37.6 34.6 34.7 39.9 37.4 External 32.8 36.7 49.5 50.5 42.3 42.5 41.5 35.4 23.8 20.4 Source: IMF Article IV, World Bank Staff Calculations and ECCU Staff Report 2012 50 St. Lucia Selected Economic Indicators, 2008-2017 Prel. Proj. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 National Income and Prices GNI per Capita (US$) 6500 6700 6620 6950 7000 7090 (Annual percentage change) GDP at Constant Prices 4.7 -0.1 -0.7 1.4 -1.3 -2.6 0.3 2.4 2.6 2.3 CPI Inflation (end of period) 3.4 -3.1 4.2 4.8 5.0 -1.4 2.4 2.5 2.8 3.0 Money and credit Credit to the Private Sector 12.8 1.9 -1.7 -0.5 0.9 -3.5 0.3 Broad Money (M2) 13.0 1.8 1.9 6.7 2.5 -0.1 1.5 (In percent of GDP, unless otherwise indicated) Central Government Total Revenue and Grants 25.7 25.6 25.6 26.0 24.5 25.7 25.4 26.6 26.6 26.7 Tax Revenue 23.1 21.7 21.6 21.8 21.3 22.3 22.1 23.8 23.9 23.9 Non-tax Revenue 2.1 1.8 1.5 2.0 1.5 1.3 1.2 1.7 1.7 1.7 Grants 0.5 2.1 2.5 2.2 1.8 2.1 2.1 2.1 2.1 2.1 Total Expenditure 26.6 28.6 30.5 32.4 33.8 32.5 31.8 34.8 35.0 35.2 Wages and Salaries 9.6 10 10.5 10.7 11 11.1 11.3 11.3 11.3 11.3 Goods and Services 4.2 4.1 4.2 4.5 5.0 5.1 5.2 5.2 5.2 5.2 Interest Payments 2.8 2.7 3.0 2.9 3.5 3.8 4.3 4.6 4.9 5.1 Capital Transfers 2.0 2.3 2.1 2.1 2.4 2.0 1.9 1.9 1.9 1.9 Capital Expenditure 6.3 7.5 8.7 10.4 9.7 8.2 7.4 8.6 8.6 8.6 Primary Balance 1.9 -0.4 -1.9 -3.5 -5.8 -3.0 -2.1 -1.5 -0.9 -0.3 Overall Balance -0.9 -3.0 -4.9 -6.4 -9.2 -6.8 -6.4 -4.3 -4.1 -3.9 External Sector Current Account Balance -28.7 -11.6 -16.2 -18.8 -12.8 -11.8 -11.4 -16.7 -16.5 -16.1 of which: Exports of Goods and Services 45.3 46.1 48.6 44.3 44.5 45.5 45.7 46.2 46.2 46.2 of which: Imports of Goods and Services 69.3 54.9 62.9 63.2 55.2 54.9 54.4 62.1 61.6 61.2 Capital and Financial Account 28.6 15.7 16.9 18.8 13.4 10.4 11.5 17.8 17.7 17.4 Tourism Receipts 26.7 25.4 25.7 26.5 26.9 27.2 27.3 27.5 27.6 27.8 Foreign Direct Investment 13.6 12.4 9.7 6.2 5.7 5.9 6.1 7.8 7.8 7.8 Central Government Debt (incl. guaranteed) 56.3 60.2 62.9 66.2 71.7 79.8 83.7 93.7 97.8 101.8 Domestic 25.1 28.2 31.2 33.9 37.8 36.8 44.1 42.2 41.9 41.7 External 31.2 32.0 31.6 32.3 33.9 43.0 39.6 51.5 55.9 60.1 Source: IMF Article IV and World Bank Staff Calculations 51 St. Vincent and the Grenadines Selected Economic Indicators, 2008-2017 Prel. Proj. 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 National Income and Prices GNI per Capita (US$) 6220 6270 6040 6080 6360 6580 (Annual percentage change) GDP at Constant Prices -0.5 -2.0 -2.3 0.3 1.5 2.1 2.3 2.9 3.2 3.3 CPI Inflation (end of period) 9.4 -2.2 0.9 4.7 1.0 0.2 1.7 1.7 2.5 2.5 Money and Credit Credit to the Private Sector 3.0 1.8 1.8 4.1 3.6 2.8 4.1 Broad Money (M2) 1.4 1.4 2.6 -0.3 6.6 5.0 4.1 (In percent of GDP, unless otherwise indicated) Central Government Total Revenue and Grants 28.6 29.9 29.0 26.6 25.7 25.8 27.0 25.4 25.7 25.8 Tax Revenue 23.9 23.7 22.9 21.3 21.6 23.4 21.7 22.1 22.4 22.6 Non-tax Revenue 2.2 1.9 3.7 2.8 2.2 2.0 2.0 2.1 2.1 2.1 Grants 2.4 4.2 2.3 2.5 1.6 1.1 3.1 1.1 1.1 1.1 Total Expenditure and Net Lending 29.9 32.9 32.9 31.0 29.0 32.1 36.4 29.1 29.5 29.6 Wages and Salaries 11.0 11.6 12.1 12.6 13.0 12.9 13.3 12.9 12.9 12.9 Goods and Services 4.8 4.7 3.7 4.1 3.8 3.4 3.6 3.4 3.4 3.4 Interest Payments 2.5 2.8 3.0 2.5 2.4 2.4 2.6 3.3 3.5 3.6 Transfers and Subsidies 4.6 6.6 9.6 7.9 7.0 7.1 7.4 6.8 6.7 6.5 Capital Expenditure 7.0 7.1 4.5 4.0 2.9 6.4 9.5 2.7 2.5 2.3 Primary Balance 1.1 -0.2 -0.9 -2.0 -0.9 -3.9 -6.9 -0.4 0.3 0.8 Overall Balance -1.4 -3.0 -3.9 -4.5 -3.2 -6.3 -9.4 -3.7 -3.2 -2.8 External Sector Current Account Balance -33.1 -29.2 -30.6 -29.4 -27.8 -28.9 -30.7 -24.4 -23.1 -21.3 of which: Exports of Goods and Services 30.2 28.5 26.9 27.0 27.1 26.6 26.6 26.9 27.2 27.4 of which: Imports of Goods and Services 61.9 57.5 57.1 55.6 57.9 58.3 59.5 53.1 52.2 50.5 Tourism Receipts 13.8 13.0 12.6 13.5 13.6 14.2 13.0 13.3 13.6 13.7 Foreign Direct Investment 22.9 16.3 14.3 12.6 16.6 16.6 16.8 17.7 17.7 17.1 Public and Publicly Guaranteed Debt 57.3 64.6 66.2 69.2 71.7 76.4 85.0 84.9 83.5 81.7 Domestic 27.0 31.6 24.7 25.6 32.5 34.8 37.5 38.8 38.2 37.3 External 30.3 33.0 41.5 43.6 39.2 41.6 47.5 46.1 45.3 44.4 Source: IMF Article IV and World Bank Staff Calculations 52 Annex III. Political Context and Progress in the Integration Process Although there have been some changes in the political landscape, the political environment in the OECS remains stable. In Antigua and Barbuda, elections were held in June 2014, and Hon. Gaston Browne, of the Antigua & Barbuda Labor Party, won 14 of the 17 seats in the Parliament. This is a relevant political shift after 10 years of leadership by the United Progressive Party, led by Baldwin Spencer. In Dominica, the Hon. Roosevelt Skerrit has been Prime Minister since 2004; the last elections were held in 2009, and new ones are expected at the end of 2014. In Grenada, where the most recent elections were held (February 2013) and the next are expected in 2018, the Right Hon. Dr. Keith Mitchell returned as Prime Minister, winning all 15 parliamentary seats; he had previously served as Prime Minister from 1995 to 2008. In St. Kitts and Nevis, the Hon. Dr. Denzil Douglas is serving his fourth term in office as Prime Minister, following his success at the general election in January 2010; the next elections are expected in 2015. In Saint Lucia, the Hon. Dr. Kenny Anthony, who served as Prime Minister from 1997 to 2006, resumed that post in 2011; the next elections are expected in 2016. In St. Vincent and the Grenadines, the Hon. Dr. Ralph Gonsalves is in his third term of office as Prime Minister, a position he has held since March 2001; the last elections were held in 2010 and the next ones are expected in 2015. A revised Treaty of Basseterre to establish the OECS Economic Union was ratified on June 18, 2010. Before ratification, the provisions of the Economic Union Treaty were expected to include (i) free circulation of goods and trade in services within the OECS; (ii) free movement of labor; (iii) free movement of capital (through the ECCB’s program of support to the money and capital market); (iv) a regional Assembly of Parliamentarians; and (v) a common external tariff. Within the Single Financial and Economic Space, goods, people, and capital would move freely; member states are expected to harmonize monetary and fiscal policies and to take a common approach to trade, health, education and environment, as well as to the development of such critical sectors as agriculture, tourism, and energy. A joint declaration by political leaders gave assurances that the OECS Economic Union would not run counter to CARICOM integration but would be seamlessly integrated into the CARICOM Single Market Economy (CSME). 1 The OECS Heads of Government agreed that steps should be taken to ensure that the OECS Economic Union Treaty would be recognized under the Revised Treaty of Chaguaramas (establishing the CARICOM), just as the original Treaty of Chaguaramas had recognized the Treaty of Basseterre. At the Twenty-Fourth Inter- Sessional Meeting of the Conference of Heads of Government of CARICOM (held in Port-au- Prince, Haiti, in February 2013), CARICOM leaders adopted the Revised Treaty of Basseterre into CARICOM’s Revised Treaty of Chaguaramas, effectively giving CARICOM member states 1 The CSME is an integrated development strategy envisioned at the 10th Meeting of the Conference of Heads of Government of the Caribbean Community (CARICOM), which took place in July 1989 in Grand Anse, Grenada. The Grand Anse Declaration had three key features: (i) deepening economic integration by advancing beyond a common market toward a Single Market Economy; (ii) widening the membership and thereby expanding the economic mass of the Caribbean Community (e.g., Suriname and Haiti were admitted as full members in 1995 and 2002, respectively); and (iii) inserting of the region into the global trading and economic system by strengthening trading links with nontraditional partners. A precursor to CARICOM and its CSME was the Caribbean Free Trade Agreement, formed in 1965 and dissolved in 1973. 53 the opportunity of integrating initially with the OECS and taking a seemingly quicker path to integration. To achieve this, the Conference agreed that an Inter-Governmental Task Force revising the Treaty of Chaguaramas would recognize the provisions of the Treaty establishing the Economic Union of the OECS. Despite notable progress toward integration, several factors have posed significant drawbacks: weak commitment at the national level, political economy issues, and inadequate resources to drive implementation at the national and regional levels. The Economic Union Treaty created new organs for governing the OECS. 2 Among those, the OECS Assembly (consisting of members of Parliaments) was inaugurated in August 2012. In 2008, the 61st Meeting of the Monetary Council of the ECCU approved the establishment of an “OECS Distribution and Transportation Company” to address the deficiencies in inter-island trade by forging greater distributional links throughout the islands and providing fast and reliable transportation services for goods. In 2009, the OECS Commission conducted an independent review of the existing “Policy Framework and Strategic Plan for Agriculture.” In 2011, the OECS Council of Tourism Ministers approved the “OECS Common Tourism Policy.” An “OECS Education Sector Strategy” was launched in October 2013. The OECS Commission drafted an “OECS Growth and Development Strategy,” which the OECS Assembly was expected to endorse by 2013. However, despite all this progress toward integration and the sense of urgency to proceed on this path, it seems that political economy considerations—such as the alignment of internal decisions with the countries’ political cycles—and the lack of sufficient resources to drive implementation at both the national and regional levels have slowed progress and created considerable obstacles to an effective integration process. 2 The organs are (i) the Authority of Heads of Government of the Member States; (ii) the Council of Ministers; (iii) the OECS Assembly; (iv) the Economic Affairs Council; and (v) the OECS Commission. 54 Annex IV. Partnerships and Areas of Donor Supporting the OECS The World Bank’s role in the OECS aid architecture is built on its capacity to convene regional and international partnerships for addressing the critical challenges the OECS faces. The regional aid architecture consists of a large number of bilateral and multilateral agencies that provide development assistance to the OECS in a wide range of sectors and thematic areas that are critical to the countries’ economic and social development. The WBG has worked closely with many of these development agencies and maintains long-standing and mutually supportive relationships with Caribbean institutions and agencies. The Bank will systematically coordinate with other development partners to monitor the implementation of development strategies and activities, and adjust the overall program as needed, on the basis of each partner’s comparative advantages. Systematic bilateral meetings have been, and will continue to be, held with such regional institutions as the OECS Commission and the ECCB. Quarterly donor meetings are organized by the UN Resident Coordinator in Barbados, with participation by such major donors as DFID, CIDA, EC, CDB, IMF, CARICOM, and other UN specialized agencies. Moreover, to improve coordination, frequent bilateral meetings will be held during international events (such as the WBG/IMF Annual and Spring Meetings) or on an ad hoc basis. CDB CARICOM - CDF CARTAC CIDA DFID EU IDB JICA OAS PAHO UN System USAID Macro/Fiscal/Debt Management X X X X X X X Private Sector Development X X X X X X Energy X X X X Logistics & Transport X X X X ICT X X X X X X Trade X X X X X Agriculture & Rural Development X X X X X X Environment & Climate Change X X X X X X Tourism X X X X Water & Sanitation X X X Public Sector Reform X X X X Judicial & Legal Reform X X X Capacity & Institutional Building X X X X X X Financial Sector X X X X X X Health X X X X X Education & Skills for Growth X X X X X X X Social Protection X X X X X Disaster Risk Management X X X X X X X X Security & Stability X X X X X 55 Annex V. Gender Note1 OECS countries face multiple development challenges—not only in the macro-dimension of the countries’ structural weaknesses, but also at the household and individual levels. The micro- level is characterized by a variety of inequalities, including inequalities based on gender, which often exacerbate the development challenges. In the subregion, gender identities rooted in shared social norms and cultural values expose men and women to specific gendered concerns that are described in this note. Understanding the gender dimension of the socioeconomic processes is crucial to adequately addressing the region’s gender-differentiated needs and concerns. A. Legal & Institutional Framework All countries have established gender divisions/departments under sectoral ministries. Some have developed gender action plans and national policies to promote gender equality—for example, Antigua’s National Plan of Action for Gender Affairs and Dominica’s National Policy and Action Plan on Gender Equality and Equity. They have also taken specific actions to mainstream gender among different government levels—for example, Dominica has established Gender Focal Points in some government departments; and in St. Vincent and the Grenadines, the Gender Affairs Division sits on several committee and task forces, such as the health, trade, and poverty alleviation committees. OECS countries are signatories to the most relevant international and regional treaties and mechanisms. They adopted the Beijing Declaration and Platform for Action and ratified the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), the Inter-American Convention on the Prevention, Punishment, and Eradication of Violence against Women, and the Convention on the Rights of the Child. OECS countries face challenges in complying with international agreements and provisions. Advances have been made in enacting laws to protect, support, and defend women’s rights, but some countries still lag in adapting the conventions into their legal system and in implementing them at the country level. 2 A number of OECS countries also have weaknesses in their enforcement mechanisms, especially with reference to domestic violence. In addition, because of human and technical constraints, not all of the OECS states are complying with treaty reporting obligations, such as those in CEDAW, and most states have not signed. 3 Public policy and allocation of funds related to gender issues and gender mainstreaming are underdeveloped, and there is a shortage of sex-disaggregated data in all of the OECS countries. B. Poverty Despite being categorized as having high human development, OECS countries experience a high poverty rate and financial debt and low economic growth. In the OECS countries poverty is higher in rural areas, where half of the population lives, and rural women are among 1 This annex is an abbreviated version of a full Gender Note on the OECS Region prepared by the LCSPP Gender Team, December 2013, as an input to the RPS process. 2 Robinson, Tracy. 2011. Gender Equality and Judging in the OECS and Wider Commonwealth Caribbean. UN Women. 3 Every four years, State parties to the CEDAW are requested to report on the implementation of the Convention at national level. According to the CEDAW’s website, none of the OECS countries has regularly complied with this requirement since their ratification of the Convention. 56 the most affected by poverty. 4 The combination of unpaid domestic work, lower income, and higher unemployment due to limited job opportunities in rural areas means that rural women are highly vulnerable to poverty. Additionally, their role as primary care-provider for their families further challenges their situation. The gender distribution of poverty in the subregion varies across countries. 5 Men and women are nearly equally represented among the poor in Dominica. In Grenada and Saint Lucia, however, more males than females are poor (52.2 percent and 57.5 percent, respectively). The situation is reversed in Antigua and Barbuda and in St. Kitts, where females make up 52.8 percent and 52.5 percent, respectively, of the poor. Poverty appears also to be intergenerational among the OECS countries. Youth are disproportionately affected by poverty, and in several OECS countries they are at the greatest risk of falling into the poverty trap. Additionally, in the subregion, as in most of the Caribbean, there is growing concern about the situation of young males: because of limited education, high drop-out rate and a shortage of job opportunities, they are more likely to engage in risky behavior. In the OECS countries, single mothers are particularly vulnerable to poverty. Although single parenthood is prevalent in the subregion, states seem to be falling behind in providing tailored support to the affected population. The OECS study on social safety nets in the Eastern Caribbean reports that states target less than 12 percent of expenditures to single parents; and in no country is single parenthood among the eligibility criteria for granting social safety nets. This situation is relevant for women, since in the subregion the majority of single parents are females, particularly in the lower income quintiles. Another concern related to single mothers is that their poverty may sometimes lead them to engage in transactional sex to earn fast cash. 6 While poverty affects both women and men’s lives, they experience it differently. Cultural stereotypes, gender-based differences in social roles, and access to the formal labor market shape the way in which men and women, girls and boys are affected by poverty. USAID’s report on Gender in the OECS notes that being a poor woman in the Caribbean often means carrying the responsibility of a large extended family and being part of a community network of people who support each other. Women cope with poverty through such different strategies as cultivating fruits and vegetables for domestic use, relying on their neighbors’ support, and trying to have more than one occupation. To meet their caring and welfare responsibility toward their family, they also engage in survival sex mechanisms. On the other hand, being a poor man in the Caribbean means living alone, sometimes having multiple relationships and less contacts with family and possible children. Because of poverty and the large number of single parents and female-headed households, fathers often fail in financially supporting their children. Typically poor men also engage in male networks that can be either positive, such as networks for job seeking, or negative, such as criminal networks. 4 Commonwealth Secretariat, 2013. Small Status Digest. Issue 2; UN Subregional Team for Barbados and the OECS. 2011. United Nations Subregional Analysis of the Development Context in Barbados and the OECS; USAID. 2010. Gender Assessment USAID/Barbados and Eastern Caribbean. USAID. 5 Data on poverty distribution by sex and age have been extrapolated from the Caribbean Development Bank’s Country Poverty Assessment Reports. No data were available for St. Vincent and the Grenadines. Antigua (2007); Dominica (2010); Grenada (2008); St. Kitts and Nevis (2008); St. Lucia (2007). 6 USAID, 2010. 57 C. Education In the OECS countries boys and girls have equal access to education, but the majority of students are girls, and the higher the educational level, the wider the gender gap. The ratio of female to male enrolment is near parity at the primary level in almost all countries, 7 and boy- girl primary completion rates vary. 8 Girls are slightly more likely than boys to be enrolled in secondary school (except in Antigua and Barbuda and St. Lucia), but in all countries with available data, girls are much more likely to enrol at the tertiary level. There is a strong gender aspect to the higher levels of education in the OECS. Not only do more young women than men enroll in tertiary education, but data shows that in 2010 girls accounted for 65 percent of the Caribbean Secondary Education Certificate examinations and Caribbean Advanced Proficiency Examinations. 9 Girls and boys tend to make different choices of studies and types of training: 10 at the tertiary level female students tend to choose subjects in humanities, whereas male students to a larger extent study science. 11 D. Health OECS countries have made significant progress in the last decade in terms of reproductive health. The subregion is characterized by high percentages of prenatal care and of births attended by skilled staff, factors that likely have contributed to the low maternal mortality rates. In both Antigua and Barbuda and Grenada, maternal mortality ratio is three times lower than the average for upper-middle-income countries (24 versus 62 per 100,000 live births in 2010) and almost four times lower than the regional LAC average (80 per 100,000 live births). 12 St. Lucia has a maternal mortality rate of 35, and in St. Vincent and the Grenadines the rate is 48. Despite these encouraging health outcomes, teenage pregnancy is a major concern in the subregion, with serious consequences for the health of both mother and child. Across the Eastern Caribbean, a large share of women aged 15 to 49 report having their first child between 15 and 19 years of age: 40.3 percent in Grenada, and 42.2 percent in St Kitts and Nevis. 13 Engaging in transactional sex with many different men and getting involved in the sex trade to 7 The outliers are Antigua and Barbuda and St Vincent and the Grenadines, which both have a female-to-male primary enrolment ratio of 0.93. 8 The countries present varying primary completion rates: they are equal for boys and girls in St. Lucia; in Dominica and St. Kitts and Nevis females have a higher completion rate than males; and the other countries males have a higher completion rate than females. 9 Caribbean Secondary Education Certificate and Caribbean Advanced Proficiency Examination are the examinations that students take at the end of secondary school. Caribbean Advanced Proficiency Examination is intended for university qualification. 10 Caribbean society has been characterized by institutional sex discrimination in education, stemming from the immediate post-slavery period. An intentional sex segregation of curricula ensured differential socialization of males and females into gender-related roles. Girls from working-class families were prepared for motherhood or domestic service in elite homes, while boys from working-class homes were groomed for manual labor in agriculture and industry. Middle-class girls were prepared to be good wives and mothers, clerical workers, nurses, or teachers, while boys from this social class were prepared for commerce and politics, among other class-appropriate occupations. This gendered aspect of education has affected girls’ and boys’ different choice of studies and types of training. 11 USAID, 2010. 12 PAHO (2012) reports that causes are related to postpartum hemorrhage complications, amniotic fluid embolism, eclampsia, “obstetric death of unspecified cause,” and “unspecified maternal hypertension.” 13 Caribbean Development Bank Poverty Assessments (2006-2009). 58 earn some money expose girls to multiple pregnancies and many other health risks—particularly the risk of contracting HIV/AIDS and/or STIs. 14 Furthermore, when girls get pregnant and drop out of school, they have fewer livelihood options than their male counterparts, which ultimately may lead to their increased dependence and higher levels of poverty. Teenage pregnancy is also related to poverty: in St. Lucia both qualitative and quantitative data indicate that poor women are more likely to have their first child much earlier during their teenage years. HIV/AIDS is another concern that seriously affects both women and men’s health in the OECS countries, and it is deeply entrenched in gender differences and inequalities. Young women aged 15-24, who are three to six times more likely to contract the infection than young men, are the most at-risk population. 15 E. Labor Market Participation Differences in the labor market based on gender pervade the subregion and affect men’s and women’s access to and quality of employment. 16 Although working, including working outside the home, 17 has always been part of the Caribbean woman’s identity, women face lower labor market participation, lower wages, and higher unemployment rates than men. Women’s labor force participation is generally low compared to men’s. 18 In St. Lucia, of the population aged 15-64, 69 percent of women and 81 percent of men participate in the labor force; and among the same population in St. Vincent and the Grenadines, 60.7 percent of women and 83.3 percent of men participate in the labor force. Unemployment rates are also higher among women than men: in Dominica, 33.8 percent of females and 20.2 percent of males are unemployed, 19 and in Grenada 31.8 percent of females and 17.9 percent of males are unemployed. (In Antigua, however, female unemployment is a low 4.1 percent). Youth are particularly vulnerable to unemployment, although gender differences depend on the local context. In Grenada, for example, 27.5 percent of male youth and 21.1 percent of female youth are unemployed. 20 Data from 2008 regarding the regional distribution of unemployment by education level suggest that both men and women with low education levels are more likely to be unemployed. Also, in the Caribbean the gap in earnings between males and females is still high at 17 percent. 21 Qualitative analysis shows that women are more involved in the informal sector than men. 22 By contrast, men seem to be more exposed to vulnerable employment than women.23 Facing the structural changes of moving from traditional rural employment toward a more urban 14 In St. Lucia, transactional sex is not only a source of the income single mothers need to feed their children, but it is also the greatest reason for STIs and HIV/AIDS as these women are unable to afford contraception and bargain for safe sex. Caribbean Development Bank Poverty Assessments (2006). 15 UN, 2011. 16 The lack of data makes it difficult to develop an accurate gender analysis of the labor situation in the subregion. 17 Ellis, P. 2003. Women, Gender, and Development in the Caribbean: Reflections and Projections. Zed Books. 18 Regional labor force data are from WB - Gender Statistics, 2010, and country data are from WDI, 2011. 19 Data on unemployment in Antigua, Grenada, and Dominica are from Caribbean Development Bank’s Poverty Assessments, 2007-2008-2010. 20 Caribbean Development Bank’s Poverty Assessments, 2007- 2010. 21 Compete Caribbean. 2011. Women in Business. Reference Note. Inter-American Development Bank. 22 USAID, 2010. 23 In St. Kitts and Nevis both men and women experience a low share of vulnerable employment: 9.9% of male employment and 6.6% of female employment. The gender gap increases in Dominica, where males’ vulnerable employment accounts for 29.3% compared to females’ 20.5%. WB, Gender Statistics for 2001. 59 profile of occupation, women in OECS countries are getting jobs in tourism and are increasing their involvement in occupations other than the agriculture sector. 24 Today, the service sector is the main source of employment for both men and women in LAC, accounting for 51.7 percent of men’s and 77.7 percent of women’s employment. 25 In Antigua and Barbuda in 2008 the service sector accounted for 93.8 percent of females’ and 69.5 percent of males’ employment, and in Dominica 81.5 percent of employed women and 43.9 percent of employed men work in services. 26 F. Entrepreneurship and Access to Finance A growing number of women are involved in entrepreneurship, developing businesses in areas such as woodwork and manufacturing. 27 Although the percentage varies, female participation in firms’ ownership is remarkably high in the OECS: from 76 percent in St. Vincent and the Grenadines to 32.1 percent in St. Lucia. 28 However, female owned enterprises are more likely to be micro or small firms than medium or large firms. Additionally, they are usually smaller, both in terms of sales and number of employees, and they tend to focus on less lucrative areas, such as commerce and personal consumption services. Female owned firms are also less stable, less productive, and less profitable. 29 Inadequate access to finance is among the main factors hindering entrepreneurship, and in the Caribbean women have less access to finance than men. In a recent survey, 67 percent of interviewed female entrepreneurs in the region report that access to finance is a critical constraint to developing and operating firms. 30 Because women tend to work in low value-added sectors, to receive lower wages, and to be promoted at lower rates than men, they save less than men. Other factors impeding women’s economic development as entrepreneurs include limited access to training, markets, and technical assistance. 31 It has been reported that there is a shortage of microfinance institutions specifically addressing females and youth. 32 Most programs are not tailored to the specific face of poverty in the subregion—that is, female, youth, undereducated, and rural. Some positive cases are reported: for example, in St. Kitts and Nevis the Government provides microcredit loans at minimal interest to enable women to finance their businesses and facilitate the starting-up of their micro enterprises. 33 24 USAID, 2010. 25 In this section, data on employment in the services, industry, and agriculture sectors are from WB - Gender Statistics, 2011. 26 Caribbean Development Bank Poverty Assessment, 2010. 27 Ellis, P. 2003. Women, Gender, and Development in the Caribbean: Reflections and Projections. Zed Books. 28 A&B 21.3%; Dominica 41%; Grenada 57.3%; SKN 57.8%. Data from 2010, WB Gender Stats. 29 Information about women’s enterprises comes from Compete Caribbean, 2011. 30 Lashley, Jonathan. 2010. Women Entrepreneurs in the Caribbean. University of the West Indies. 31 Remarks delivered by UN Women at the Launch of the PCW Online Resource Facility “Regional Resource Centre for Women Website,” UN House, November 13, 2012. http://www.unifemcar.org/photospercent5CUNWompercent20remarkspercent20topercent20PCWpercent20launchFI NAL.pdf 32 Lashley, Jonathan. 2004. Microfinance in the Eastern Caribbean: Demand and Delivery Options. University of the West Indies; ECLAC 2010. 33 Caribbean Development Bank’s Poverty Assessment in St. Kitts and Nevis, 2008. 60 G. Natural Disasters Although both men and women are badly hit by natural disasters, women are usually reported to be the most affected population. 34 In the Eastern Caribbean men and women hold different places in society, support distinctive activities, have different access to resources, and have different priorities and needs. These differences, along with their unequal access to the labor market and gendered differentiation of skills in the labor force, influence how both men and women react, address and adapt to and recover from natural disasters. Women’s livelihoods—such as employment in the tourism and the subsistence and small- scale farming sectors—and their fewer labor opportunities leave them more vulnerable and dependent in times of disaster. Following Hurricane Ivan, Grenada’s worst-hit sector was agriculture, including the nutmeg industry, and this led to serious loss of income among women. 35 Women working in these areas had few other skills with which to move to another occupation. In St. Lucia after Hurricane Tomas’s devastation, women reported that their self- sustainability was deeply hampered and they feared becoming dependent on husbands, partners, and fathers to meet their subsistence needs. 36 Women’s higher vulnerability is also linked to their specific needs, such as those related to health, security, and safety. 37 In a study on disaster risk management and climate change in Dominica and other Caribbean countries, the United Nations Development Programme (UNDP) reports that sexual violence against women is a common risk in emergency shelters. In Grenada, the lack of security and separate facilities for men and women contributed to the sexual abuse of girls. Men’s vulnerabilities, on the other hand, are usually embedded in their gendered role as protector and provider. In St. Lucia men’s major concern in the aftermath of the hurricane was related to their inability to farm because their lands were swept away or hard to access because of damaged infrastructure. Men are at greater risk for alcoholism, drugs, and gambling: in Grenada increased alcohol consumption, drugs, and looting have been reported as possible coping mechanisms among men. Gendered roles, labor segregation, and unequal access to opportunities prevent women from taking advantage of certain situations. Men’s resilience is mainly rooted in their professional and work contacts, technical abilities, limited childcare responsibilities, and access to resources. 38 For example, in Grenada, after Hurricane Ivan, men transitioned from the tourism and agricultural sectors to the construction sector and were involved in the productive sphere rebuilding homes. The same kind of change was not possible for women, who reported challenges in accessing this labor market. Women’s resilience increases with extensive knowledge of community and social networks, high level of risk awareness, and their caring abilities. 39 Following their gender roles and socially consolidated norms, in Grenada in the aftermath of the hurricane women devoted their energy to the caring aspects of the community, providing moral support, preparing common meals, and comforting children. Additionally, during the relocation phase, in line with women’s socially constructed protector role, they were 34 UNDP 2009, USAID 2010, and WB 2011. 35 ECLAC’s Gender Impact Assessment of Hurricane Ivan is the main source of information on Grenada’s context. 36 ECLAC’s St. Lucia Macro Socio-Economic and Environmental Assessment of the Damage and Losses Caused by Hurricane Tomas. 37 UNDP 2011. 38 UNDP 2012. 39 Ibid. 61 organizing personal belongings, taking care of children and men, and creating human chains to save children, elderly people, and persons with disabilities. The subregion lacks gendered components in the main instruments for assessing and implementing disaster risk management (DRM) mechanisms. 40 The Hyogo Framework of Action establishes that at both national and regional levels a gender-responsive approach is critical to minimize risks and to strengthen resilience mechanisms. However, the OECS Environmental and Sustainable Development Unit’s strategy on climate change and DRM gives limited attention to gender concerns at both design and implementation levels, and its Vulnerability Benchmarking Tool lacks elements to assess gendered vulnerabilities. H. Gender Norms In the OECS the gendered experience of violence is deeply entrenched in the society’s norms, traditional roles, and cultural values. Despite adopting international instruments and establishing institutions to protect women’s rights and eradicate violence against women, there are still elements of a culture that often justifies violence against women in the OECS countries. 41 Men’s experience of violence is more linked to crime-, drug-, and gang-related activities, 42 while women are more likely to be exposed to sexual, domestic, and intimate partner violence. 43 Young men in the sub-region are particularly at risk of being the victims and perpetrators of violent crime. UNODC’s sex-disaggregated data for the subregion show much greater male homicide than female homicide—the rate of male homicide (per 100,000 people) ranges from 66.7 in Antigua and Barbuda to 93.3 in St. Lucia. 44 Gang-related activities affect youth, especially at-risk youth who are more likely to engage in criminal activities, violence, and drug trafficking. 45 Cunningham’s study on youth at risk in LAC reports that in the region the majority of perpetrators of violent crime are young men aged 16-25; 46 in addition, these young men are exposed to a high risk of murder. Women, by contrast, are more likely to be the victims of intimate partner violence and unwanted sexual practices with their partners. Intimate partner violence is among the most widespread forms of violence that women and girls experience. According to both UNICEF and USAID, it is difficult to estimate the rate of violence against women because incidences of violence are underreported and there are institutional weakness in collecting data and investigating cases of violence. 47 Nonetheless, USAID reports anecdotal data showing that violence and abuse are increasing in the subregion, with 40-50 percent of women experiencing some form of domestic violence. The US State Department’s Human Rights report for St. Vincent and the Grenadines (2012) states that “Violence against women remained a serious and 40 USAID, 2010; UN, 2011. 41 ECLAC, 2009. 42 UN, 2011. 43 ECLAC. 2009. No more! The right of women to live a life free of violence in Latin America and the Caribbean. ECLAC. 44 UNODC, Homicide Statistics, 2013. 45 At-risk youth are those facing “environmental, social, and family conditions that hinder their personal development and their successful integration into society as productive citizens” (Barker and Fontes 1996). 46 Cunningham et al., 2008. 47 UNICEF, 2007; USAID, 2010. 62 pervasive problem” and identifies domestic and sexual violence against women and girls as among the most serious human rights problems. Most of the OECS countries have established mechanisms to deal with domestic violence, but effective implementation is hampered by lack of resources and gendered sociocultural stereotypes that lead people to accept higher levels of violence and make victims reluctant to seek professional support. CEDAW’s Shadow Report for St. Lucia notes, for example, that although St. Lucia has had a law against domestic violence since 1994, even when domestic violence occurs close to law enforcement bodies such as police stations, often no action is taken. I. Female Participation in Decision-Making Spaces In the last two decades all OECS countries have made notable progress in increasing women’s parliamentary participation. For example, in St. Lucia the percentage of women in parliamentary seats grew from 0 percent in 1990 to 17 percent in 2012. However, the OECS countries, with an average of 13 percent female participation in parliament, still lag behind upper-middle-income countries and LAC averages (22 percent and 25 percent, respectively). St. Kitts and Nevis are farthest from the average at 7 percent, and St. Lucia and St. Vincent and the Grenadines closest at 17 percent. 48 Women’s access to ministerial positions is still low in the OECS countries—15.8 percent in Dominica, 19 percent in Grenada, and 20 percent in St. Vincent and Grenadines. In the Caribbean, as in most of LAC, women are more likely to sit in “sociocultural cabinets” than in “economic-political cabinets.” 49 In 2011, 59 percent of female ministers were seated in “socio-cultural ministries” and 14 percent in “economic-political ministries”. In OECS local governments, the higher positions, such as city councilors and mayors, are extensively held by men. 50 In Antigua, in the last 15 years no woman has been elected to any city council, and in Dominica no female mayor has been elected since 2002. The data on women’s access to decision-making positions are more encouraging for the judicial branch. In the last three years women’s participation on the subregion’s Supreme Court has ranged between 52.2 and 60 percent 51—considerably higher than the LAC regional average of 23 percent. 52 A possible explanation could be that women are more likely to continue higher education and are thus qualified and eligible for such roles. J. Concluding Remarks Gender inequality is a cross-cutting concern in all sectors in the OECS countries. It is also an endogenous variable and can be addressed to a considerable extent by a change in the social and cultural mindset. The fact that the existing social norms and gendered stereotypes explain the 48 The share of women in parliamentary seats for the other countries (2012): Antigua and Barbuda 11 percent; Dominica and Grenada 13 percent. 49 ECLAC, 2013. “Socio-cultural cabinets” comprise ministry of social development, labor, planning, environmental, culture, science and technology, and gender. “Economical-political cabinets” account for ministry of finance, interior, external relations, security, and justice. 50 All data regarding government positions at local level come from ECLAC’s CEPALSTAT. http://www.cepal.org/default.asp?idioma=IN (last visit Dec. 10, 2013) 51 OECS countries’ share the same high court, the Eastern Caribbean Supreme Court, which explains the same percentage of women’s participation in all countries. Data are taken from ECLAC’s CEPALSTAT. 52 CEPAL, 2013. 63 four main critical gender issues—i.e., in education, employability, youth at risk, and violence— suggests that continuation of status quo is simply not an efficient economic and human development choice. The biggest concerns for the younger generation are teenage pregnancy, HIV/AIDS, and violence, which jeopardize social and economic progress by affecting the future labor force and youth’s own development. The gender-based violence (GBV) that plagues the subregion puts an additional strain on the overall health of the economy and of the society. It is important to work strategically at the ground level to tackle the social drivers of these concerns—addressing men’s and women’s norms and behaviors and stimulating men’s, boys’, women’s, and girls’ engagement in addressing unequal and risky attitudes. The following points identify some areas in which the World Bank could provide technical and financial assistance in the gender area, sometimes within World Bank projects. However, to identify more specific interventions and support comprehensive sex-disaggregated data sets would require country- and region-wide consultations to better understand the needs and demands of men and women, as well as government priorities. Gender mainstreaming • Assist Gender Departments in developing gender action plans and gender policies and support the incorporation of gender analysis in assessment, monitoring, and evaluation of government programs. • Strengthen technical skills to develop sex-disaggregated indicators within all ministries, especially those related to labor market and violence, and support sex-disaggregated statistical data collection and analysis. Education • Support the design and implementation of strategies, including constructive engagement approaches in curriculum, to target boys’ weak educational outcomes and their high dropout rates; develop behavioral change projects to provide boys, parents, and teachers with alternatives to existing norms around masculinity. • Support “second chance” learning programs, including life skills components, to improve the quality and quantity of vocational training and work force development; strengthen public and private collaboration, linking the education system’s second chance learning to available employment opportunities. • Support further research to better understand why boys are underperforming compared to girls and dropping out at higher rates than girls, especially at the higher levels of education. Health • Support programs linking health practices to broader social, economic, cultural, and environmental factors that affect health care provision. • To change social norms around potentially risky behaviors, encourage reproductive health education in school curricula to educate children at an early age, and educate adults. Safety nets • Support the development of social safety network programs that target vulnerable populations, such as female-headed households and youth; assist single parents; and provide tailored financial contributions to larger families. Labor market and access to finance • Assist labor institutions in designing policies and developing programs to improve 64 employment opportunities, especially for women and youth; set up business advisory services to promote women’s entry into the private sector and provide consulting and training on business expansion; work closely with the education sector to tailor “second chance” programs to market needs; and develop tailored programs, training, and workshops to improve women’s economic empowerment through business skills development and knowledge. • Support the development of micro-credit programs that facilitate women’s access to credit and support young entrepreneurs in new ventures; collaborate with local banks to diversify financial products and services to cater to the different needs of entrepreneurial women. • Support more research to better understand the links between gender-differentiated educational attainment, formal and informal labor market opportunities, and poverty, as well as men’s and women’s different financial demands, needs and constraints. Environmental and climate change resilience • Encourage and support national and regional disaster relief institutions to include women’s organizations in planning and response mechanisms, and to incorporate a gender perspective in DRM strategies. Gender-based violence • Support national and local institutions in efforts to prevent GBV and support victims of GBV, including by creating better data on victims of GBV, incorporating related topics on gender norms in school curricula, and through awareness campaigns and media, etc. Participation in decision-making spaces • Support policies and initiatives to facilitate and pave the way for women’s participation in local and regional leadership roles. • Support initiatives that promote and facilitate women’s entrepreneurship, including through access to finance and the recognition of female entrepreneurs. 65 Annex VI. Monitoring and Evaluation Progress in achieving the goals of the RPS will be assessed through two Performance and Learning Reviews—in FY16 and FY18—and a Completion Report in FY19. The team understands that the lack of reliable data in the OECS may create problems in establishing baselines for measuring progress at the start of the implementation of this RPS. Therefore, baselines will be thoroughly reviewed at the time of the first Performance and Learning Review (PLR), in FY16. Each PLR will be accompanied by a comprehensive OECS Country Portfolio Performance Review to provide information on the progress of the strategy and recommend appropriate actions to address emerging issues. Results-based monitoring is particularly challenging in the OECS, where the collection of timely and accurate data remains a problem, not least because of human resource and capacity constraints. The frequent and timely availability of high-quality data on poverty and social conditions is critical for the OECS governments to design, implement, and evaluate the policies and programs to reduce poverty and achieve the Millennium Development Goals, and for the Bank to monitor progress on the WBG program and the twin corporate goals. However, sufficient statistical information on poverty has been lacking in many OECS countries. The collection of poverty data has in general received lower priority from the OECS governments and has largely been funded by external donors. Because of limited capacity and resources, the National Statistical Offices (NSOs) have often contracted out much of the data collection and analysis. Some progress has been made in framing a sustainable regional initiative to improve data collection and elaboration. Beginning in 2001, the World Bank (WB) began actively engaging with the East Caribbean states 1 and the regional development partners, working with NSOs and the OECS Commission to develop a more country-owned and sustainable regional initiative to improve the availability of micro data, particularly household, employment, and labor data. In recent years, the WB has collaborated with the OECS Commission to create the Living Standards Measurement Committee, comprising the heads of all the NSOs in the region, to improve coordination and work collaboratively to address data gaps in the domain of social statistics. As necessary and pertinent, donors are invited to participate in the discussions as observers. Additionally, the WB has used multidonor trust funds to financially support the OECS Commission in conceptualizing a regional Labor Market Information System (LMIS) and designing a harmonized Labor Force Survey questionnaire that was piloted in Grenada in 2010. In parallel, the WB has provided extensive financing and technical assistance for designing a pilot regional Monitoring and Evaluation (M&E) System for the Economic Union, which has been endorsed by the Secretariat and its member states. Donors such as UNICEF and UNDP are in consultations to provide financial support for the implementation stage. The WBG has provided initial support to move toward a Sustainable Data Program. Building on the LMIS and M&E System activities, the WB engagement in the region has also included support for the conceptualization of the Sustainable Data Program—a five-year survey 1 Activities were supported in the six independent member states: Antigua and Barbuda, Grenada, Dominica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. 66 plan to increase the frequency and quality of data collection through a “progressive modular approach.” The survey plan will use a Labor Force Survey (the harmonized regional questionnaire developed under the LMIS) as a core module, collected every year, to which other modules will be added (socio-demographic and consumption household-level modules, plus one ad hoc module, depending on needs). The fifth and final year would correspond to a full-fledged Living Standards Measurement Survey. This approach will allow for the production of yearly data under a five-year cycle that provides both regional and national coverage of a variety of development dimensions, and it will feed nicely into the regional LMIS and regional M&E System. In this framework, poverty could be measured in years 2 and 5 (using the consumption module), and estimated for the in-between years. The progressive addition of modules also allows building capacity, moving from a relatively simple survey in year one (the Labor Force Survey) to a complex survey in year 5 (Living Standards Measurement Survey). 67 Annex VII. The Caribbean Growth Forum (CGF) The Caribbean Growth Forum (CGF) is a multistakeholder platform designed to identify, prioritize, and implement activities to improve the growth-enabling environment in the Caribbean, while promoting participatory public policy-making. It has so far engaged more than 2,500 representatives from business associations, civil society organizations, government, private sector, media, indigenous groups, and international development agencies on themes such as logistics and connectivity, investment climate, and skills and productivity. The region is characterized by low growth; high unemployment, especially for youth and women; high debt ratios (8 of the 12 most indebted countries in the world are in the Caribbean); high incidence of crime; and growing vulnerability to external shocks. In the wake of the global financial crisis, the high debt/low growth challenge has become even more acute. A number of Caribbean countries reached out to international donors to find an innovative approach to the region’s growth challenge. A suggestion was made to launch a genuinely participatory growth initiative. Following consultations and some preparatory work, the program started in mid-2012 with a regional launch event in Jamaica. The process is supported and facilitated by the World Bank, the Inter-American Development Bank, the Caribbean Development Bank, Compete Caribbean, and the European Union. Key Outcomes Eighteen months into the initiative, positive outcomes are tangible: 12 countries formally joined the process by establishing a national CGF chapter and completing the first phase of national dialogue. This effort has led to the prioritization of concrete and actionable activities, and draft action plans are now available, with details on each activity’s implementation plan (e.g., accountabilities, milestones, timeline, and funding). The results of each country’s dialogue were presented at a regional forum in The Bahamas in June 2013. At the forum, national stakeholders from government, private sector, and civil society were able to compare notes on each other’s priorities and exchange ideas on solutions to identified challenges with technical specialists and peers. The high-level attendance (nine ministers, several Permanent Secretaries and Directors, and over 300 private sector and civil society representatives and technical-level government officials) sent a strong signal in terms of both ownership and credibility. The Bahamas Communiqué, issued by the Government of The Bahamas during the event on behalf of CGF participating countries, attested to all parties’ commitment to inclusive and participatory policy-making, accountability and transparency in policy implementation, and the CGF reform process itself. By then, each government had also committed to follow up on implementation of the reform agenda, to report back periodically on progress (every 4-5 months), and to enable independent monitoring of the reforms by private sector and civil society representatives. As of June 2014, six countries have completed their First Accountability Workshop (Dominican Republic, Jamaica, St. Lucia, St. Vincent, Saint Kitts and Nevis, and Grenada). In addition, the Government of Dominica has approved the CGF Dashboard in a Cabinet resolution and is preparing the progress report for the accountability workshop to be held in September 2014. A main challenge that the CGF is addressing is the lack of trust between the public and private sectors and the slow and poor delivery of policies. Indeed, on the one hand, although the countries are small in size, communication is very sporadic and trust quite low between public 68 and private sector; while on the other, capacity and fiscal constraints make policy delivery challenging. A Regional High Level Technical Training was held in St. Kitts and Nevis in June 2014 to engage 45 key public and private CGF stakeholders on such concepts as policy delivery, participatory governance, and accountability and related practical tools. Invitations to this event were extended to Anguilla and Montserrat with funding from CDB. An immediate result of this training was the establishment of a regional CGF private sector Observatory anchored in the OECS Business Council, focusing on monitoring a few key country strategic delivery indicators and using a very innovative web platform. A gradual shift in mindsets is taking place, moving toward the concept of delivering reforms, not just outputs, with simple and useful metrics that can help keep track of progress. Participants value highly the Bank’s role as a broker in the process (clear rules of the game, leverage, influence, and convening power), and reform champions within government increasingly perceive the initiative as an opportunity to put pressure on ministries and agencies that do not deliver. In addition, through the CGF national and regional dialogues are informed by the production of analytic work in the form of policy notes, in-depth reports, and technical presentations at public events, using OECS country-specific data. Donor coordination has also been significantly improved in common reform areas and has led to the provision of additional technical assistance funds for the OECS countries. Participation in the process has been high at both national and regional events (including national chapters’ kick-off events and subsequent working group meetings). Extensive media coverage has also confirmed the importance of the initiative. The structure and format of the CGF has fostered a culture of transparency and accountability: all information pertaining to the CGF process, all minutes, and background information (including participants’ lists and documents elaborated by working groups) are available online on the CGF website. 1 In addition, CGF events have served as important catalyst for teams from the World Bank Group, Caribbean Development Bank, Compete Caribbean, and Inter-American Development Bank to engage with each country, as evidenced by increasing levels of exchange and dialogue since June 2012. A number of new lending and nonlending operations are being put in the pipeline, tackling reform priorities identified during CGF dialogues. The CGF has been an effective mechanism for development partner coordination. The continued engagement of the UK DFID and the Canadian DFATD, as well as the increased interest of other development partners, is a strong sign of the relevance of the CGF as a vehicle for engaging in promoting sustainable growth in the region. 1 caribgrowth.competecaribbean.org 69 Annex VIII. Compendium of National and Regional Strategies Antigua and Barbuda The focus of the Government’s National Economic and Social Transformation Plan for 2010- 14 is on fiscal consolidation and financial sector stability. The new National Strategic Development Plan focuses on (i) fiscal balance; (ii) Education for All; (iii) enhancing the social development agenda; (iv) preserving the environment and stronger infrastructure; (v) economic sustainability; and (vi) the branding of Antigua and Barbuda. The 2014 Budget Statement, “Building a New Economy for Growth and Prosperity,” delivered in January 2014, highlights such key areas as (i) fiscal stability, particularly public financial management and government procurement; (ii) transforming the public sector to transform the New Economy, namely by strengthening strategic management of government policies, modernizing civil service management, and developing statistics; (iii) small business development, particularly in tourism and agriculture; (iv) social sector transformation, particularly social sector reforms and pension modernization; and (v) financial sector stability. A new Government is in place since June 2014. Dominica The Third Medium Term Review of the Growth and Social Protection Strategy 2012-14 (GSPS), represents the Government’s strategy for pursuing growth and poverty reduction. It has a threefold focus: (i) fiscal policy and administrative reform, including creating an enabling environment for promoting private enterprise and attracting investment; (ii) sectoral strategies for growth (PSD, geothermal, eco-tourism, agro-industries, niche-focused agriculture, water, improved export performance); and (iii) strategies for poverty reduction and social protection (health, education, social safety nets, housing, infrastructure). The GSPS complements the 2013-14 Medium-Term Debt Management Strategy, which outlines the Government’s debt objectives for FY2013/14 to FY2017/18. The strategy has the same focus of the 2012-14 GSPS The Budget Statement for FY2013-14, “Building on the gains we have made” was delivered in July 2013. The statement confirmed the three main pillars of the economy highlighted in the previous year’s statement: (i) a sound macroeconomic framework and financial management system; (ii) reforms to enhance competitiveness; and (iii) targeted investments. It highlights jobs, agriculture, tourism, and geothermal development as the main priorities. Grenada Grenada’s 2014 Budget Statement, “Building The New Economy through higher productivity and shared sacrifices for the benefit of all,” delivered in December 2013, focuses on (i) improving fiscal management (revenue raising measures; improving tax administration; expenditure reduction measures); (ii) agriculture, fisheries, tourism, energy, ICT, and trade; (iii) support to small business development; (iv) focus on public-private partnerships; (v) education and human resources development; (vi) health and social security; 70 (vii) constitutional reform; (viii) financial sector regulation; (ix) public sector modernization; (x) national security; and (x) disaster mitigation and management. St. Kitts and Nevis The 2014 Budget Address, delivered in December 2013, focused on (i) tourism; (ii) construction; (iii) agriculture; (iv) industrial and enterprise development; (v) information technology and telecommunication; (vi) energy; (vi) the financial sector; (vii) social development; and (viii) law and order. Saint Lucia The Medium-Term Development Strategic Plan 2012-16 identifies the following development themes as “imperative to be addressed”: (i) high dependence on one sector for earning foreign exchange and failure in diversification of the export sector; (ii) trade liberalization; (iii) a growing fiscal deficit; (iv) diseconomies of small scale; (v) poverty and unemployment; (vi) lack of skills and of depth and breadth in education of the workforce; (vii) limited productivity growth; (viii) increase in crime and the growth of the underground economy; (ix) deterioration in the structure of the family system, and in social capital; (x) absorption of negative cultural influences from abroad and youth disaffection; and (xi) exposure to pandemics and high incidence of lifestyle diseases. The 2014 Budget Statement, “Building the Pillars for Economic Success, Resilience, and Fiscal Stability,” delivered in March 2014, highlights the strategic directions for 2014 and beyond. It stresses the importance of addressing (i) low growth; (ii) high unemployment; (iii) natural events; (iv) economic shocks; (v) fiscal imbalances; and (vi) lessons from the economic crisis. Expansion in tourism and agriculture are underlined as key priorities. St. Vincent and the Grenadines The National Economic and Social Development Plan 2013-2025 outlines the country’s long- term strategies for national development. It is anchored on the achievement of the following goals: (i) reengineering economic growth; (ii) enabling increased human and social development; (iii) promoting good governance and increasing the effectiveness of public administration; (iv) improving physical infrastructure, preserving the environment, and building resilience to climate change; and (v) building national pride, identity, and culture. The 2014 Budget Statement, “Strengthening the Socio-Economic Base for Recovery and Reconstruction after a Natural Disaster in the Context of On-Going Global Economic Uncertainty and Downside Risks,” was delivered in January 2014. It focuses on the natural disaster that hit the country on Christmas Eve 2013 and identifies the following priorities: (i) energy; (ii) education; (iii) agriculture and fisheries, tourism, information technology, manufacturing, construction, financial and other services, including the cultural and entertainment industries; (iv) health sector; (v) the completion of the Argyle International Airport; (vi) infrastructure; (vii) telecommunications and water; (viii) improvement of air and marine transport; (ix) disaster mitigation measures; (x) sport and culture; (xi) sustainable safety nets; (xii) good governance; and (xiii) regional integration. 71 Regional Policies and Strategies The Common Tourism Policy (2012‐2017) addresses the challenges and opportunities that can best be addressed collaboratively at an OECS level, with a view to achieving balanced growth and development of the tourism sector in the OECS Economic Union Area. The policy identifies the following areas in which action is required to improve the region’s tourism competitiveness: (i) investment and product development; (ii) community participation, sectoral linkages, and joint procurement; (iii) human resource development; (iv) tourism awareness; (v) research and statistics; (vi) access and transportation; (vii) regional facilitation; (viii) environmental and cultural sustainability; (ix) marketing communications; and (x) addressing crime that involves visitors. The OECS Education Sector Strategy, which Member States will use to align their national strategies and plans, is built on the successes of two previous education sector initiatives, Foundations for the Future 1991-2000 and Pillars for Partnership and Progress 2000-2010. The OECS vision is that all citizens, at every stage of their learning journey, from early years to adulthood, are able to reach their full potential and be successful in life, at work, and in society. The overarching goal of education in the OECS is to contribute to socioeconomic advancement through a quality education system that enables learners of all ages to reach their true potential. Seven Strategic Imperatives to achieve the vision and the goal for education in the OECS respond to the challenges and priorities identified in the analyses, reviews, and consultations that informed the development of the Education Sector Strategy. The Strategic Imperatives are (i) improve the quality and accountability of leadership and management in schools, Ministries of Education, and other education institutions; (ii) improve teachers’ quality, management, and motivation; (iii) improve the quality of teaching and learning at all levels, using learner-centered experiences; (iv) improve curriculum and strategies for assessment to meet the needs of all learners at all levels of education; (v) increase access to quality early childhood development services for children from birth to five years; (vi) provide opportunities for all learners to develop knowledge, skills, and attitudes to enable them to progress to further education and training and to engage in productive employment; and (vii) increase access to and relevance of tertiary and continuing education and increase research and innovation in the OECS. 72 Annex IX. Summary of the Overall Findings of the OECS Client Survey The findings from the FY14 country surveys fielded in four OECS countries (Grenada-GD, Dominica-DM, St. Vincent and the Grenadines-SVG, and Antigua and Barbuda-AB) suggest a number of themes that cut across countries; however, it is useful to explore the data at a country level as there are nuanced differences that are worth taking into account when mapping out country strategies. The survey sample represents a nearly equal number of opinion leaders in each of the four Caribbean countries. Many respondents report little collaboration with the World Bank Group (WBG) but a fairly good level of familiarity with the institution. Respondents who collaborate with the Bank are significantly more positive about nearly all aspects of the WBG and how it operates than those who do not collaborate. Overall, respondents are less familiar with the Bank than they are with other organizations, such as the OECS, CDB, and IMF. Overall context Opinion leaders in the four OECS countries share the view that key development priorities include jobs (first and foremost across the countries), education, and growth (education is recognized as a critical development priority more in SVG and AB than in GD and DM). In AB, public sector governance/reform is considered by more respondents a top development priority. For the most part, Foreign Direct Investment, jobs, and agriculture are seen as key to economic growth in all the countries. The World Bank’s role in the OECS countries There is much agreement about where the WBG should focus its resources, and these areas are closely aligned with the perceived development priorities: agriculture, jobs, public sector, governance, and education. Energy appears to be an area where Bank involvement would be valued; and in SVG, health is viewed as an important sector for Bank emphasis. In fact when considering where the WBG’s comparative advantage is in OECS countries, 7 out of 10 respondents believe that the WBG should lead in supporting efforts to generate employment (far fewer believe that other donors should lead). The WBG appears to be most valued for its financial resources, but its technical assistance, capacity development (particularly in AB), and policy advice are also highly valued. Capacity development emerges throughout the survey as an important and valuable aspect of the WBG’s work; the number of respondents who report that capacity development is the most effective instrument in their country to reduce poverty is nearly equal to those who say investment lending is. Operating on the ground With most respondents reporting that they do not currently collaborate/work professionally with the WBG, it is worth looking at perceptions of how the WBG works by disaggregating those who say they collaborate with the institution (24%) and those who do not. Among those who say they collaborate, survey findings indicate far more positive perceptions—for example, about the WBG’s straightforwardness, flexibility, collaboration with other donors, and collaboration with 73 those outside of government. The findings suggest that stakeholders’ level of interaction with the Bank is an important predictor for their views of the WBG. This is of particular importance when considering how to build support in the OECS countries and where it will be most important to direct support-building efforts. When considering constituencies, more attention should be given to how to achieve results on the ground, taking into account that the WBG does not have the resources to engage with all constituencies. It is worth noting that more than 8 out of 10 respondents say that the Bank should have a greater presence in their countries, and that even those who collaborate with the WBG are more familiar with OECS than with the WBG. Looking forward A number of the findings relate to how the WBG can be of greater value and how it can potentially operate more effectively: • Greater outreach. More than half report that the WBG could be of much more value if it were to reach out more to groups outside of government (note the findings above related to the relationship between collaboration and more positive views of the WBG). • Research findings indicate concern about the level of citizen participation. More than half of the respondents report that failed reforms can be attributed to inadequate citizen participation. In terms of the WBG’s capacity building, work related to citizen engagement is viewed far less positively than capacity building in project implementation and policy design. • Capacity building is highly valued. It is worth finding opportunities for expanding capacity building in these countries. • Several findings related to knowledge and public disclosure are worth noting. A majority of respondents report that they rarely or never use the WBG’s knowledge. Nearly 4 out of 10 said the WBG’s greatest weakness is that it does not provide an adequate level of disclosure. These two findings are worthy of consideration. Is the Access to Information Policy known? Are there more effective ways to get relevant knowledge into the hands of those who can use and apply the work? In the survey a slim majority said they would prefer to get their information from the WBG through e- newsletters, followed by publications and other written material and seminars/conferences/workshops. Depending on the web may not generate interest in the WBG’s knowledge at this stage, in the OECS countries (only 56% of respondents said they use/have used the WBG website). • More innovative financial services. Nearly 4 out of 10 respondents report that they believe the WBG should offer more financial services. 74 Annex X. List of Active Projects and Large Grants (>US$1MLN) as of June 2014 Area 1: ACTIVE • DPL Comprehensive Debt Framework (GRE) – US$15 m Competitiveness • Caribbean Regional Communications Infrastructure Program (CARCIP) (GRE, SLU, SVG)– US$ 26m • Eastern Caribbean Energy Regulatory Authority (ECERA) Project (SLU, GRE)-US$ 5.6m • Sustainable Finance of Eastern Caribbean Marine Resources Project (Regional)-US$8.7m • EFO–Continued Resilience Eastern Caribbean Currency Union (ECCU) Financial System – US$1m • EFO – Asset Management Expertise for the ECCU – US$1m PIPELINE • Regional Financial Sector Project (FY15) • Regional OECS Competitiveness Project (FY15) • Regional OECS Renewable Energy (FY17) • Caribbean Communications Infrastructure Program (CARCIP) (AB) – US$10m (Estim. FY15) • DPL-II Grenada (Estim. FY15) – US$10 m • DPL-III Grenada (Estim. FY16) – US$10 m Area 2: Public ACTIVE • DPL Comprehensive Debt Framework (GRE) – US$15 m Sector • Public Sector and Social Transformation (AB) – US$10m Modernization PIPELINE • DPL-II Grenada (Estim. FY15) – US$10 m • DPL-III Grenada (Estim. FY16) – US$10 m Area 3: ACTIVE • Safety Net Advancement Project (GRE) – US$5m Resilience • Regional Disaster Vulnerability Reduction Project (GRE) – US$26.2m • Regional Disaster Vulnerability Reduction Project (SVG)- US$47m • Hurricane Tomas Emergency Recovery Loan (SLU) – US$15m • Second Phase Disaster Vulnerability Reduction Project (SLU)-US$30m • Third Phase Disaster Vulnerability Reduction Project (DOM)- US$18m • Regional Disaster Vulnerability Reduction Additional Finance (SVG) –US$16.6m PIPELINE • Regional Disaster Vulnerability Reduction Additional Finance (GRE) –US$8.8 (Estim. FY15) • Regional OECS Social Resilience and Human Development Project (Estim. FY17) 75 Annex XI. Active Trust Funds List of Trust Funds executed by the Countries Country Fund Name Project ID Grant Amount USD$ Percent Disbursed Caribbean Strengthening Country Systems for better Investment Results -Caribbean P149007 $ 402,000.00 0% Broadband Communications Infrastructure Feasibility Studies for Dominican Republic and Haiti forP114963 $ 250,000.00 95% Strengthening Labor Market Monitoring and Performance in the Caribbean P144470 $ 688,000.00 49% Caribbean Mobile Innovation Project Grant P132570 $ 1,500,000.00 0% Supporting Economic Management in the Caribbean [SEMCAR IMF LOU] P123665 $ 5,638,000.00 100% Strengthening Capacity in Post Disaster Needs Assessment in the Caribbean (GFDRR ACP-EU W3) P145327 $ 335,475.00 57% Dominica Dominica - Disaster Vulnerability Reduction Project – PPCR Loan TF P129992 $ 9,000,000.00 0% Dominica - Disaster Vulnerability Reduction Project – PPCR Grant TF P129992 $ 12,000,000.00 0% Grenada Grenada: JSDF Grant for Small Farmer Vulnerability Reduction Initiative Project P124107 $ 1,000,000.00 100% Grenada: Disaster Vulnerability Reduction Program - SCF Loan P117871 $ 8,200,000.00 21% OECS Eastern Carib. Engy Reg Authority (ECERA) Project P101414 $ 300,000.00 33% Sustainable Financing and Management of Eastern Caribbean Marine Ecosystem Project P103470 $ 8,750,000.00 87% Grenada: Regional Disaster Vulnerability Reduction Project - Pilot Program for Climate Resilience P117871 $ 8,000,000.00 21% Saint Lucia - Disaster Vulnerability Reduction Project - PPCR Loan TF P127226 $ 15,000,000.00 0% St. Kitts and Nevis St. Kitts and Nevis: Enhanced Public Sector Governance and Efficiency P129786 $ 415,125.00 34% St. Vincent and the Grenadines Saint Vincent and Grenadines: Regional Disaster Vulnerability Reduction Project - Pilot Program foP117871 $ 7,000,000.00 17% Saint Vincent and the Grenadines: Disaster Vulnerability Reduction Program - SCF Loan P117871 $ 3,000,000.00 17% Data as of Sept 15, 2014 List of Trust Funds executed by the World Bank Country Fund Name Project ID Grant Amount USD$ Percent Disbursed Ca ribbea n Trade Logistics - Caribbean - $ 1,518,686.50 100% Ca ribbea n Caribbean Regional MSME Seed Fund P128068 $ 1,143,897.00 51% Ca ribbea n EPIC Access to Finance Skills Building Project P151412 $ 965,000.00 3% Ca ribbea n New Trade Environment and Opportunities for Poor in the Caribbean P146683 $ 100,000.00 76% Ca ribbea n LCR Region: - BETF: Caribbean Risk Information Programme to support th P144982 $ 1,340,000.00 38% Ca ribbea n ACP-EU NDRR – W1: Strengthening Public Investment in Disaster Risk R P145358 $ 70,700.00 25% Ca ribbea n LCR Disaster Risk Management Integration with Development Planning ( P129813 $ 300,000.00 51% Ca ribbea n Caribbean PPCR P117330 $ 689,562.00 87% Ca ribbea n mInnovation (Mobile Innovation) in the Caribbean P132570 $ 500,000.00 66% Ca ribbea n CARPHA RBF K&L P149159 $ 150,000.00 3% Ca ribbea n Dominica and St. Lucia HRBF K&L Grants P125100 $ 280,000.00 96% Ca ribbea n Program Management - EPIC 2071047 $ 985,712.79 70% Ca ribbea n Caribbean Climate Innovation Center P131734 $ 700,000.00 23% Ca ribbea n M&E EPIC 2082001 $ 700,000.00 0% Ca ribbea n Customs Modernization Technical Assistance P128874 $ 700,000.00 84% Ca ribbea n Tax Administration Technical Assistance P128874 $ 863,000.00 24% Ca ribbea n SEMCAR Public Financial Management Technical Assistance P128874 $ 1,445,000.00 62% Ca ribbea n Regional Project Coordinaton P128874 $ 1,400,000.00 67% Ca ribbea n SEMCAR Program Management P123665 $ 1,163,000.00 95% Ca ribbea n Women Innovators Network in the Caribbean (WINC) P132890 $ 1,100,000.00 40% Ca ribbea n Skills Upgrading for Incubator Managers and Resources for Policymakers P128041 $ 1,906,495.00 23% Ca ribbea n Support and Expand Caribbean Network of Business Incubators P128038 $ 4,575,588.00 40% Ca ribbea n Caribbean Business Enablers Support Project P148607 $ 557,234.00 8% Ca ribbea n Strengthening Capacity in Post Disaster Needs Assessment in the Caribb P145327 $ 37,275.00 2% Ca ribbea n MoSSaiC Caribbean Community of Practitioners (GFDRR_ACP-EU W1) P129813 $ 550,000.00 4% Dominica Small Island Developing States (SIDS) - Geothermal Development in Dom P143708 $ 295,000.00 85% Dominica Dominica: Spatial Data Management and Identification of Vulnerable Sch P129992 $ 522,000.00 59% Dominica Dominica - Disaster Vulnerability Reduction Project - MDB Fees P129992 $ 225,000.00 60% Dominica Dominica - PPCR M&R Targeted Funding P129992 $ 74,000.00 20% Grena da Grenada - Small Farmer Vulnerability Reduction Initiative P124107 $ 90,000.00 90% OECS 6O-ECERA Eastern Carib. Engy Reg Auth. P101414 $ 1,200,000.00 18% OECS Grenada Additional Financing to RDVRP - MDB Fees P149259 $ 165,000.00 51% OECS Strengthening the financial sector in the OECS P150897 $ 2,750,000.00 0% OECS Grenada Disaster Vulnerability Reduction Project - Project Fees P117871 $ 500,000.00 66% OECS SVG DVRP - Project Fees P117871 $ 708,000.00 66% OECS Saint Lucia: Hazard and Disaster Risk Assessment Framework in St. Lucia P127226 $ 300,000.00 63% OECS Saint Lucia - Disaster Vulnerability Reduction Project - MDB Fees P127226 $ 435,000.00 40% OECS Developing a Model for Gender-Inclusive Climate Adaptation Finance P127226 $ 90,000.00 43% OECS St. Vincent and the Grenadines Floods and Landslides 2013 - (GFDRR_ACP P117871 $ 50,000.00 99% OECS Grenada - PPCR M&R Targeted Funding P117871 $ 74,000.00 17% OECS Saint Vincent and the Grenadines - PPCR M&R Targeted Funding P117871 $ 74,000.00 8% OECS Saint Lucia Damage and Loss Assessment of December 2013 Floods - GFD P127226 $ 50,000.00 72% OECS Saint Lucia - PPCR M&R Targeted Funding P127226 $ 74,000.00 0% SLU Transforming Social Protection in St. Lucia P149120 $ 300,000.00 10% Data as of Sep 15, 2014 76 Annex XII. OECS Human Development Indicators Antigua & St. Kitts St. Vincent & Indicator Name Dominica Grenada i St. Lucia Barbuda & Nevis Grenadines ii School enrollment, preprimary (% gross) 80.57 110.41 98.59 95.58 59.59 79.53 (2009) School enrollment, primary (% gross) 98.91 118.73 103.42 90.16 92.96 105.07 School enrollment, secondary (% gross) 104.92 98.10 107.86 94.42 95.47 107.49 52.81 11.31 School enrollment, tertiary (% gross) 14.47 n.a. 15.09 n.a. (2009) (2010) Primary completion rate, female (% of relevant age group) 92.43 101.40 103.32 98.32 93.16 91.67 Primary completion rate, male (% of relevant age group) 102.96 87.24 119.55 87.55 93.15 96.68 Primary completion rate, total (% of relevant age group) 97.71 94.28 111.59 92.86 93.15 94.20 Repeaters, primary, total (% of total enrollment) 4.82 6.88 3.45 2.32 2.35 4.66 Repeaters, secondary, total (% of total enrollment) 6.50 11.97 8.77 2.86 0.52 3.21 Trained teachers in primary education (% of total teachers) 64.84 57.73 65.33 63.62 86.74 84.10 Total net enrolment ratio in primary education, both sexes 86 98.4 (2009) 97.5 (2009) 87.3 88.1 98.5 (2010) Total net enrolment ratio in primary education, boys 87.2 96.4 (2008) 95.7 (2009) 86 87.9 99.5 (2005) Total net enrolment ratio in primary education, girls 84.7 97.3 (2008) 99.3 (2009) 88.7 88.3 97 (2005) Gender Parity Index in primary level enrolment 0.93 0.99 0.97 1.02 0.98 0.93 Gender Parity Index in secondary level enrolment 0.98 1.07 1.03 1.04 0.97 1.02 Gender Parity Index in tertiary level enrolment 1.97 n.a. 1.36 (2009) 2.1 (2008) 1.74 n.a. Population undernourished, percentage 20.5 5.00 17.9 (2011) 14 14.6 5 Children under five mortality rate per 1,000 live births 7.6 11.8 12.8 (2011) 7.4 15.6 20.9 Children 1 year old immunized against measles, percentage 99 99 95 (2011) 99 95 99 Maternal mortality ratio per 100,000 live births n.a. n.a. 24 n.a. 35 (2010) 48 Men 15-24 y/o with comprehensive correct knowledge of HIV/AIDS, percentage 53.1 (2010) 47.8 59.8 (2011) 50 n.a. n.a Women 15-24 y/o with comprehensive correct knowledge of HIV/AIDS, 45.7 (2010) 56.2 64.8 (2011) 52.6 n.a. n.a. percentage Proportion of pop using improved drinking water sources, total 98 94 (2007) 94 (2007) 98 94 95 Proportion of pop using improved drinking water sources, urban 98 96 94 98 98 95 Proportion of pop using improved drinking water sources, rural 98 92 94 98 93 95 Proportion of the pop using improved sanitation facilities, total 91 81 92 87 (2007) 65 76 (2007) Proportion of the pop using improved sanitation facilities, urban 91 80 92 87 70 76 Proportion of the pop using improved sanitation facilities, rural 91 84 92 87 64 76 Source: World Bank WDI and UN MDG Indicators, latest data used (2011) unless noted Grenada Data is for 2010 unless otherwise noted St. Vincent Data is for 2010 unless otherwise noted 77 Annex XIII. OECS Regional Partnership Strategy 2010-14: Completion Report I. Introduction 1. This Annex presents the draft Completion Report for the Organization of Eastern Caribbean States (OECS) - Regional Partnership Strategy (RPS) for 2010-2014, as revised by the Progress Report (2012). Preparation of the draft Completion Report has been based on such documentation as project Implementation Status and Review reports (ISRs) and Implementation Completion Reports (ICRs), project documentation, and analytic and advisory activities (AAA), as well as on discussions with country team members. The draft has been shared with the OECS governments and selected stakeholders, and their comments have been incorporated. 2. The Completion Report rates the delivery of outcomes as moderately satisfactory. The WBG has contributed toward improving the OECS economies’ resilience to natural disasters and economic shocks. The Comprehensive Debt Framework (CDF) is revamping the approach to the management of public debt and providing a broader framework for policymaking. Disaster management is now more proactive and less reactive. The stage has been set for broader regional approaches on education, skills, social assistance, and health, in line with the expectations under the RPS. Improved knowledge and dialogue are feeding into strategies to address financial sector challenges. Internet coverage is rising briskly. The contribution of the Caribbean Growth Strategy to the objective of responding differently to the challenges of growth and employment, and the work on agriculture, are notable achievements that compensate for the lack of traction in areas such as public-private partnerships (PPPs), business environment, and public financial management. The rating of moderately satisfactory is consistent with the fact that 61 percent of the objectives were either achieved or mostly achieved. 3. The Completion Report rates World Bank Group performance as good. The broad objectives of the strategy fitted the reality on the ground and governments’ priorities, but limited background information and institutional capacity led to an overambitious design that was only partially adjusted by the Progress Report. The WBG responded effectively and proactively to emerging challenges in the region, developing solutions and contributing knowledge to build regional consensus around common solutions (growth, finance, public debt management), which in turn has improved the capacity of the donor community (including the WBG itself) to coordinate their efforts. The upgraded knowledge base now available provides the countries and the WBG with essential tools for the next RPS. The Bank delivered on its lending agenda, and the rating of completed projects is in line with regional averages. Portfolio performance was affected by capacity constraints and, in some cases, issues related to the complexity of projects’ design. 78 II. Broad Developments during RPS Implementation 4. The OECS region has yet to recover from the global financial crisis. Economic growth contracted for four consecutive years following the onset of the global economic crisis in 2008 for a cumulative drop of 6 percent in total output during 2009- 2012. A slight rebound in 2013 lifted regional real output by 1.3 percent. The region’s major sources of growth (tourism, construction, agriculture, and offshore banking) have suffered from weak external demand and tame efforts to improve competitiveness. Per capita income in the region declined on average by 4.5 percent, from around US$9,200 in 2008 to US$8,800 in 2012. Across countries, per capita income fell farthest in Antigua and Barbuda (17 percent less than the pre-crisis level), while in Dominica it increased by more than 5 percent. Despite large variations in growth performance across the region, recovery remained fragile for all countries. 5. The fiscal situation in the OECS remains fragile. The sluggish economic recovery has had implications for revenue performance, even as countries implemented fiscal stimulus packages that led to a surge in current expenditures. Total revenue collection in the region (including grants) dropped by around 1.5 percent on average in 2013 compared to pre-crisis levels. After a plunge in fiscal balances in 2009, primary and overall balances improved by roughly 1.5 percent and 2 percent of GDP in 2012, respectively, but they deteriorated further in 2013 (as the average primary deficit increased to 1.6 percent of GDP and the overall deficit to 4.9 percent). The fiscal situation varies across countries: the fiscal position of St. Kitts and Nevis, Antigua and Barbuda, and St. Vincent and the Grenadines has improved because of the recent introduction of VAT 1 and strong receipts from the Citizenship by Investment Program (CBI); however, in Grenada and St. Lucia the situation deteriorated: current expenditure surged in 2009 because of expansionary fiscal policies, and it has remained high since. 6. OECS countries’ debt is increasing and has reached levels considerably above the average for Latin America and the Caribbean (LAC). The growth in debt was influenced by the impact of a series of major natural disasters, the graduation of countries from IDA and consequent lack of access to concessional resources, and the global financial crisis. The high level of debt has led rating agencies to downgrade some countries and has reduced countries’ ability to borrow from international and regional markets. Moreover, the allocation of substantial portions of recurrent revenue to debt servicing incurs a high opportunity cost in terms of expenditure that could have been used to support growth and address resilience. Average total public debt-to-GDP in the region was around 82 percent in 2013, ranging from 74 percent in Dominica and St. Vincent and the Grenadines to 116 percent in Grenada. Many countries are already making fiscal adjustments, and many have also sought additional financing from international financial institutions and donors to undertake these reforms. 7. Declining competitiveness and deteriorating productivity have been a significant drag on potential output growth. Productivity growth, as measured by total 1 VAT introduction: Grenada (February 2010), St. Kitts and Nevis (November 2010), and St. Lucia (October 2012). 79 factor productivity, has fallen significantly since the 1990s. 2 A stagnant and unfavorable business environment has likely contributed to the slowdown in productivity in the region. The countries have limited options, given the size of their markets and the high logistics costs; a sizable share of the educated population migrates for lack of opportunities. 8. Increased unemployment has amplified social disparities. Although the absence of periodic, frequent, and harmonized data makes it difficult to evaluate the recent evolution of poverty and inequality across the OECS or to precisely assess the impact of the 2008 global economic crisis on these indicators, it is likely that the lower demand for OECS service exports resulting from the 2008 crisis exacerbated the already high pre-crisis levels of unemployment. This is particularly evident for service exports such as travel and tourism, which account for about 75 percent of GDP and employment in Antigua and Barbuda and an average of about 27 percent of GDP and employment in the other OECS countries. The overall perception is that poverty has increased since the 2008 crisis. III. Delivery of Results Pillar One: Building Resilience Result Area 1: Promote Fiscal and Debt Sustainability 9. The PRS noted that improved fiscal and debt sustainability, enhanced efficiency and transparency of public spending, and more efficient delivery of public services are critical to strengthening the ability of OECS countries to respond to exogenous shocks, and to laying the foundation for medium-term growth. During the RPS period, the Bank Group proposed to contribute to achieving the following outcomes: (a) strengthening debt management; (b) achieving a fiscally sustainable wage bill and ensuring coverage of key public services; (c) creating closer linkages between public expenditure and development objectives through improved monitoring and evaluation; and (d) improving service delivery across the region through regionally integrated e-government services. Outcome 1: Debt management functions strengthened. Achieved 10. The original RPS foresaw a contribution to reducing the debt-to-GDP ratios of OECD countries. The Progress Report dropped this objective, as the Bank lacked adequate instruments to contribute to its achievement. Through Stand-by Arrangements the IMF has led this effort in some countries; with attention to comprehensive public debt restructuring that is critical to the achievement of debt sustainability. 11. In accordance with the Progress Report, the Bank focused its efforts on strengthening debt management functions, including through the development of debt management strategies. According to the information provided by the Eastern Caribbean Central Bank (ECCB), St. Lucia, Dominica, and Antigua and Barbuda have prepared medium-term debt management strategies (MTDSs). St. Vincent and the Grenadines is preparing a MTDS, and a Technical Assistance Mission visited the country in March 2 Acevedo, Sebastian, Aliona Cebotari, and Therese Turner-Jones (2013), Caribbean Small States: Challenges of High Debt and Low Growth, International Monetary Fund. 80 2014. Grenada has requested the assistance of the IMF and the Bank in developing a MTDS, which should be ready by the end of 2014 or the beginning of 2015. WBG support for these initiatives has been coordinated with the ECCB, which continues to lead capacity-building efforts on various aspects of debt management, including conducting Debt Management Performance Assessments (DeMPAs) and debt sustainability analyses and preparing MTDSs. CIDA-funded technical assistance (TA) to the OECS supported the ECCB work program. 12. Most importantly, at the request of Caribbean countries, the Bank has helped define a Comprehensive Debt Framework (CDF), which is being disseminated with the cooperation of the Caribbean Development Bank (CDB) and the IMF. The CDF initiative is providing a solid platform for designing debt strategies in the region and is informing the dialogue among all stakeholders. It will also be a key framework for the design of the next RPS. A development policy operation for Grenada that will soon go to the Board has been designed following the CDF. Outcome 2: Fiscally sustainable wage bill ensuring key public services coverage. Not Achieved 13. OECS public sector wage bills have been rising gradually since the global economic crisis, reaching around 11 percent of GDP on average in 2013. Only St. Kitts and Nevis has shown a decrease in the wage-to-GDP ratio. The Bank’s engagement was centered on improving the quality of civil service practices. In this regard, the Bank supported Grenada, St. Lucia, and Antigua and Barbuda in conducting functional reviews and human resource audits in critical ministries. During 2012-2013, the Government of Grenada implemented HR audits in three ministries and one department, with the objective of aligning public sector positions and employee skills with the functions and programs for which these organizations are responsible. The Bank provided TA to support this activity. The implementation of the recommendations of the HR audit is pending. In addition, the Bank is currently working with Antigua and Barbuda on civil service reform through the Public Sector and Social Transformation project – FY13. 14. Overall, progress in civil service reform in the region has been slow, because countries are still operating with outdated norms and practices, some of them going back to pre-independence, and also because governments partly retain the role of employer of last resort. In these circumstances, it has proven challenging to streamline public sector employment and improve the quality of the civil service. Outcome 3: Improved government services across the region through the implementation of regionally integrated e-government services. Achieved 15. Indicators set under the RPS Progress Report have been met, with the support of the e-Government for Regional Integration (EGRIP) Project, which is focused on reforms in procurement and tax and customs across the subregion. Nine new e-systems are in place: one regional e-procurement system for pharmaceuticals; four e-tax filing systems and four multipurpose ID systems—one of each in Dominica, Grenada, St. Vincent and the Grenadines, and St. Lucia. 16. The Bank’s contribution through this operation goes beyond setting up the e- systems to transform service delivery. The e-tax filing system will deliver time 81 efficiencies in filing taxes online rather than manually/in person. Regional procurement of pharmaceuticals will reduce the time to complete a pharmaceuticals requisition order in four countries by pooling procurement across the OECS, with gains in economies of scale, and the tender and contractual information will be available online; the availability and affordability of pharmaceuticals should improve. The multipurpose ID system will replace as many as five different identifier numbers with a unique personal identifier. In addition, the project contributed to a tighter economic union: the OECS Secretariat can adapt the web-based monitoring and evaluation (M&E) system to monitor donor projects and progress toward the economic union; a suite of legislation for e-government is harmonized across the region; harmonized technical standards for e-government, interoperability frameworks, and enterprise architecture are established at the regional level; and government videoconferencing facilities have been set up to improve connectivity among participating countries. Outcome 4: Greater linkage between public expenditures and development objectives. Partially Achieved 17. The six OECS countries embarked on a broad common public accountability reform program targeting (i) harmonized internal and external audit and public procurement legislation; and (ii) support to members of the audit profession, supreme audit institutions, and the parliamentary public accounts committees. Partners supporting the initiative included the World Bank, the IMF (through the Caribbean Regional Technical Assistance Centre), the European Union, and the Canadian International Development Agency (CIDA). CIDA funded TA through the Supporting Economic Management in the Caribbean (SEMCAR) program, which provides a single platform for participating donors to support OECS-wide public financial management reform. 18. SEMCAR has produced preliminary results. Antigua and Barbuda, Dominica, and St. Kitts and Nevis have adopted harmonized Procurement Acts and are developing supporting regulations and institutional processes. Antigua and Barbuda and Grenada are modeling the revision of their Audit Acts on a harmonized act. The Caribbean Organization of Supreme Audit Institutions completed an assessment of OECS public oversight arrangements. Grenada and St. Lucia are preparing to pilot implementation of the Bank portfolio through their own systems. SEMCAR has operated on an “on demand” basis, which has led to some dispersion and difficulty in tracking outcomes and impact. A menu approach from which countries could choose would possibly help better channel the support and ensure quality assistance and delivery of results. Results Area 2: Protect and Improve Human Capital 19. The Bank Group proposed to contribute to the following outcomes: (i) rationalized social safety net systems; (ii) an increase in the proportion of qualified teachers; (iii) a better-skilled post-secondary labor force; and (iv) improved data and understanding about the region’s chronic noncommunicable diseases. Delivery of results has been satisfactory. 82 Outcome 5: Rationalized social safety net systems. Mostly Achieved 20. The impact of the global crisis fueled awareness in the OECS countries of the need to rationalize and target social assistance systems and led to an informed and coordinated exchange of ideas and experiences within the subregion. The OECS Secretariat organized the delivery of technical workshops and seminars in which government officials shared experiences and learned about best practices, with a view to building consensus on actions that could be taken at subregional and national levels to strengthen social safety net systems. Simultaneously, the Bank, in collaboration with UNICEF and UN Women, conducted social safety net assessments (SSNAs) in five OECS countries; these assessments provided the basis for policy reforms that the governments are now implementing. 21. The Social Protection (OECS) nonlending TA (NLTA)—FY10 advanced regional work and cooperation by supporting capacity building in social protection tools and increasing knowledge about the social safety net landscape in OECS countries. The NLTA’s products included SSNAs for Antigua and Barbuda, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, and technical workshops to improve capacity in targeting and management information systems. The NLTA also partially supported the creation of a Community of Practice on Social Protection. In St. Lucia, additional TA is supporting overall social safety net reform that is partially grounded in the findings of the SSNA. Furthermore, broader policy reforms have taken place as a result of the NLTA activities, particularly the recommendations of the SSNAs. Grenada has developed a Social Safety Net Framework, and St. Kitts and Nevis has developed and is now putting into operation a National Social Protection Strategy. Dominica is also finalizing an Integrated Social Protection Strategy. 22. The abundant and effective TA led to projects in Grenada (to develop a Conditional Cash Transfer (CCT) and in Antigua and Barbuda (to improve the social protection system, improve the efficiency of social protection spending, and support labor market programs). Both of these projects are under implementation. Previously, the Bank had helped design a targeted social assistance system through the Dominica Growth and Social Protection Technical Assistance Credit FY07 (TAC), already completed. The ICR considered overall achievements under objective IV (corresponding to the social assistance component) as substantial. The achievements included (i) modernizing and streamlining the systems for beneficiary selection and registration; (ii) strengthening the administrative capacity to deliver social assistance; and (iii) designing and implementing a public information campaign to inform citizens about new approaches to the delivery of safety net programs. A Cabinet-approved proxy means test and the Beneficiary Identification System for the selection of beneficiaries were launched in January 2011. As of March 2011, information of about 75 percent of current beneficiaries was entered into the new Beneficiary Identification System, and 95 percent of those were confirmed—slightly below the targets of 100 percent identification and registration of beneficiaries. Delays in implementing the new system point to design flaws that did not consider political economy roadblocks to the implementation of targeted social assistance, and design options for addressing these political economy concerns are currently being explored. 83 22. This objective is considered mostly achieved, given the effective support for improving awareness of and dialogue on social assistance among the OECS countries, the training of staff, and the scoping of the relevant challenges that is supporting the design and implementation of two operations on the ground. The Dominica system has been designed and is ready for operation, and the projects in Grenada and Antigua and Barbuda are on the way to deliver modern social assistance institutions. Outcome 6: Increase in the proportion of qualified teachers at the primary and secondary levels (i.e. teachers with teacher training qualification) in the OECS. Mostly Achieved 23. The proportion of qualified teachers at primary and secondary levels increased to 65 percent in 2013, surpassing the target set under the RPS of 62 percent for 2014. However, these efforts have not brought about better quality outcomes. The OECS Education Strategy 3 points to “deficiencies in the quality of education, such as inadequate levels of literacy and low competences in Mathematics, Science and Technology. Performance in Mathematics continues to decline with pass rates reaching 40 percent for most States in 2011. In that year a mere 23 percent graduated with the basic qualifications of five passes including English and Mathematics at the end of the secondary cycle. At the early grades approximately 50 percent of students score below the national average in Mathematics and about 40 percent are under-performing in English language.” 24. The Bank’s contribution has been partial and indirect. The Bank supported regional efforts to train teachers through the now completed Teachers Career Path (OECS) ESW—FY10. IEG rated two completed Education Development Projects (Grenada, FY09; St. Vincent and the Grenadines, FY03) both moderately satisfactory for achievement of development outcomes, noting the relevance of the objectives, but singling out the limited contribution to efficiency. The Bank also provided TA to the preparation of the OECS Education Strategy. Support for better-quality education statistics through the completed Improving Human Development Data (OECS) IDF – FY11 has been effective, with increased availability of quality data. However, the intended Education Sector SWAp—FY12 was not delivered. Outcome 7: Better skilled post-secondary workers in the labor force. Achieved 25. The Bank contributed to improving institutional capacity for training post- secondary workers, and the pilot experience can inform future efforts. The demand- driven technical and vocational training program financed by the Bank has supported the establishment of institutions and structures for training and certifying post-secondary workers. The indicators set under the RPS were achieved with the support of two OECS projects: Skills for Inclusive Growth (St. Lucia, FY07; Grenada, FY09). The cumulative number of people enrolled in training programs at level 1 or higher surpassed the targets (912 vs. 500 in Grenada and 1005 vs. 870 in St. Lucia). However, the number of graduates fell below the targets. Overall, the complementary indicators suggest that the initiative had impact covering a wide range of economic sectors and engaging the private sector above expectations. Both Grenada and St. Lucia now have a quality assurance system firmly in place; they have also met all the requirements for issuing Caribbean 3 The Bank supported the preparation of the strategy with an IDF grant, Education Sector (OECS) NLTA— FY11. 84 Vocational Qualifications and have been authorized to issue them. With these systems in place, the challenge will now be to scale up pilot efforts to achieve larger impact. 4 Outcome 8: Improved knowledge and information on the subregion’s chronic noncommunicable diseases. Achieved 26. The World Bank has produced and disseminated analytic work on health in the OECS and throughout the Caribbean at large. 5 The research indicates that OECS countries are facing a health crisis, with rising rates of heart disease, diabetes, obesity, and other noncommunicable diseases (NCDs). NCDs disproportionately affect poor families, bringing the possibility of disability and premature death and worsening poverty as people pay for medical treatment out of their own pockets. The report estimates that the annual cost for treating a diabetic ranges from US$322 to US$769 in the OECS. Acknowledging that NCDs are the major cause of death in the subregion, OECS countries have taken steps to improve their ability to prevent and manage them. A growing portion of health spending in the OECS is dedicated to managing NCDs, and policies and programs could focus more on prevention at a lower cost and for better results. Because data on the epidemiology of NCDs in the OECS are limited, the OECS Secretariat, in collaboration with the Bank, has been supporting interventions to improve the availability and use of data to inform policymaking, as well as to define a set of common regional indicators to monitor NCDs. Dominica and St. Lucia are exploring mechanisms to create incentives for achieving better results in the health sector, applying the principles of results-based financing. The UN has recognized the Caribbean countries as international leaders in driving the NCD agenda; however, because of a lack of funding, comprehensive strategies to address the NCD challenge have yet to be drafted and approved. Results Area 3: Strengthen Climate Resilience 27. The RPS noted, “Given the vulnerability of OECS’ small island ecosystems, the central role of tourism in their economies, and their susceptibility to weather-related natural disasters, the Strategy provides for support for efforts to strengthen climate resilience and enhance environmental sustainability.” The RPS program sought to contribute to improving resilience and moving from a passive to an active stance in the management of natural disasters. The RPS expected to achieve the following outcomes: (i) improved understanding of the vulnerability of critical infrastructure; (ii) a reduction in the number of people at high risk of landslides in St. Lucia; (iii) improved management of priority terrestrial and marine protected areas; and (iv) the establishment of long-term financing mechanisms for critical ecosystems. 4 IEG rated both of the supporting projects as moderately satisfactory for achievement of outcomes, downgrading the team’s satisfactory rating. At play is the fact that the projects were severely restructured toward the end of implementation to take design flaws into account. With hindsight, the teams could have been more proactive and restructured earlier. Still, the contribution of the project in terms of building institutions stands. The lesson remains that skills initiatives must be complemented by policies that activate labor demand. 5 “The Growing Burden of Non-Communicable Diseases in the Eastern Caribbean,” published and disseminated to all stakeholders in June 2011: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/0,,contentMDK:23049218~page PK:146736~piPK:146830~theSitePK:258554,00.html 85 Outcome 9: Improved understanding of vulnerability of critical infrastructure. Achieved 28. Solid progress is being made toward improving understanding of the vulnerability of critical infrastructure. An inventory of public buildings and critical infrastructure in Grenada and St. Vincent and the Grenadines has been created as a first step in establishing a database necessary for undertaking vulnerability assessments. The Public Buildings database work is being carried out in Dominica under a trust fund linked to the OECS Regional Disaster Vulnerability Reduction Project (Phase 3-Dominica- P129992) and in St. Vincent under the Hurricane Tomas project (P124939). Additional work in Grenada and St. Lucia is about to be finalized. The Bank has mainstreamed understanding of the vulnerability to natural disasters through its operations, with activities that include identifying the various risks, constructing risk maps, and data management and monitoring. Four Regional Disaster Vulnerability Reduction Projects, two of which have already been approved and are under implementation, aim at further reducing the vulnerability of infrastructure and developing a comprehensive view of the risks and the remedies. 29. The Bank’s contribution on disaster risk management went beyond understanding the vulnerability of critical infrastructure. First, the Bank continued supporting recovery after major disasters. 6 Hurricane Tomas Emergency Recovery Loans in St. Vincent and the Grenadines and St. Lucia (both 2011) responded to the governments’ request for support in post-disaster reconstruction efforts. These projects included regional activities on data management and monitoring, coupled with activities to tackle risks and vulnerabilities in all Caribbean countries. The implementation of projects in direct support of recovery efforts has taught valuable lessons on project design: rapid project preparation led to underestimating the cost of some components and limited the implementation of the original pipeline of investments. These lessons have been incorporated in the design of the Regional Disaster Vulnerability Reduction Projects series through improved cost estimates and room for flexible implementation. 30. During this RPS period the completion of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) contributed to the creation of a Regional Insurance Fund to provide timely resources to member countries in the aftermath of a natural disaster. The parametric modeling of disasters under the CCRIF also contributed to the objective of building understanding of the vulnerability of critical infrastructure. Both the team and IEG rated this project as highly satisfactory. Moreover, the World Bank is currently supporting Caribbean-led efforts to increase climate resilience and decrease vulnerability to natural disasters through the Caribbean Regional Pilot Program for Climate Resilience, which includes attention to individual countries (Dominica, Grenada, St Lucia, and St. Vincent and the Grenadines).. Outcome 10: Reduced number of communities at high risk of landslides in St Lucia. Achieved 31. Thirteen communities in St. Lucia that have benefitted from the implementation of drainage works and guttering to ensure stable slopes in case of flooding also withstood 6 A sign that the previous efforts have had an impact is that following Hurricane Tomas in St. Lucia in November 2010, the World Bank carried out an evaluation that found that investments over the past decade held up well and served their purpose. 86 Hurricane Tomas. Most if not all of these community interventions were finalized under the St. Lucia Disaster Management Project II (P086469). In addition, the Bank is supporting Caribbean governments in the use and application of Open Data for Resilience tools and technologies to improve geospatial data management and risk analysis and to harmonize national and regional data-sharing on management practices. Improved information and coordination should enhance the authorities’ capacity to respond. Outcome 11: Improved management of the priority terrestrial and marine protected areas. Achieved 32. M&E systems that include biodiversity monitoring at the site level have been established for six OECS protected areas (one in each member state). The ICR of the OECS Protected Areas and Associated Livelihoods Project (March 2012) reports that 100 percent of the M&E systems were established. This was an intermediate indicator under the project; notably, all of the development outcomes were met or surpassed. Outcome 12: Long-term financing mechanisms established for critical ecosystems by 2014. Not achieved 33. The latest ISR for the Sustainable Financing & Management of Eastern Caribbean Marine Ecosystem Project (P103470) states that the National Protected Areas Trust Fund ( NPTAFs) are not yet established. Initial steps have been taken to establish a Caribbean regional endowment fund and national trust funds for the OECS to promote conservation of priority coastal and marine ecosystems, although the effort has suffered delays because of coordination issues and a change in project implementing arrangements. Pillar Two: Enhancing Competitiveness and Stimulating Sustainable Growth Results Area 4: Strengthen the Domestic Financial Sector 34. In the RPS, the Bank Group foresaw contributing to improved regulatory and supervisory frameworks for non-banking financial institutions. As the difficulties of the banking system became evident, the focus shifted to helping improve understanding of the situation and designing policy options. This shift is reflected in the revisions introduced by the Progress Report. Outcome 13: Medium-term resolution strategy for the financial sector. Achieved 35. The Bank’s work, carried out with DFID support and in collaboration with the ECCB, the IMF, and the CDB, improved understanding of the financial sector situation, highlighted the various trade-offs in strengthening the financial sector, and led to the elaboration of strategic options to ensure financial sector stability. The tight coordination among the CDB, IMF, and the World Bank allowed difficult messages to get through. It took time to develop a working relationship with the ECCB because of the difficulty of the situation. However, the gradual dialogue served to enhance awareness and to provide evidence of the need for a solution, given the limited fiscal space in the region. IFC supported the Bank of St. Lucia with Advisory Services in investment and SME banking. The ECCB and the governments of the member countries are now evaluating the adoption of a regional framework and options to strengthen the financial sector. 87 36. The Bank also contributed to the orderly resolution of British American Insurance Company (BAICO), a regional insurance giant that collapsed in 2009 in the aftermath of the financial crisis. The BAICO resolution process is nearly complete, with a few policyholders awaiting relief, subject to a grant from the Government of Trinidad and Tobago. The orderly resolution of BAICO was an outcome under the original design of the RPS, but the Progress Report dropped the outcome because of the time required to reach it and the uncertainty of funding from the Government of Trinidad and Tobago. Nonetheless, the outcome was achieved. The effective resolution of BAICO had important demonstration effects on the capacity to address concerns in the financial sector. In addition, IFC invested over US$150 million in two regional insurance companies to prevent the BAICO collapse from resulting in loss of insurance coverage for the OECS. 37. Bank TA to the financial sector has been provided mainly with support of a DFID grant, Restoring Financial Stability in the OECS. The work sought to tackle vulnerabilities identified by the 2004 Financial Sector Assessment Program (FSAP) and to address difficulties in the insurance sector—an orderly resolution for BAICO and Clico International Life, and improved regulation and supervision in insurance. Achievements under the grant include, for instance, extensive diagnostics of all domestic banks (joint CBD/IMF/WB Report), a stress test of 14 banks, and identification of legal and regulatory reforms. This grant also accommodated a crisis response to St. Vincent and the Grenadines when the Building and Loan Association (with deposits at 12 percent of GDP) faced a deposit run in January 2013 and had to be taken over by its newly created supervisor. The availability of DFID funding allowed the Bank to quickly roll out TA, and the Building and Loan Association was stabilized and returned to its members in August 2013. Following satisfactory results on the first grant, DFID agreed to provide two additional grants for the Bank to continue its work on the financial sector. 38. A planned operation to provide technical support to the financial sector was not delivered, as it was considered that more results and outcomes would be delivered with TA. A new operation is being considered in the context of the regional framework to strengthen the financial sector that the countries are developing. Outcome 14: Improved regulatory and supervisory framework for the financial sector. Mostly achieved 39. The Bank has been working with the IMF and the CDB on supporting the regulatory and supervisory framework for the financial sector. The Bank provided TA to review the new insurance legislation in line with international standards and to advise ECCU countries on the regulatory architecture for non-bank financial institutions, building on the considerable experience it acquired in assisting with the orderly resolution of BAICO. Two reports were prepared, which led countries to establish a regional non-bank supervisor, starting with insurance and pensions. A draft insurance bill was delivered to stakeholders in February 2014. 40. In the banking sector, work is ongoing to strengthen the banking legislation and prudential guidelines. Using extensive background work carried out with the Bank’s support, in February 2014 countries agreed on a strategy for strengthening banking regulation and supervision and decided that the work would start with independent 88 diagnostics and legal reforms. The Bank is also currently providing TA on the legislation to set up an asset management company to address the high level of nonperforming loans in the banking system. Results Area 5: Improve Access to Quality Services for a more Competitive Business Environment 41. The Bank Group proposed to help achieve the following outcomes: (i) a new regional institutional framework for energy; (ii) increased access to ICT services for the general population; (iii) PPPs to assist in reducing government expenditure and improving services; and (iv) simplified procedures for starting a business and for regional trading. With hindsight, the initial design of this results area lacked a coherent supporting analytic framework, so that outcomes appear dispersed. During implementation a common framework has begun to emerge through the CDF and the Caribbean Growth Initiative. Outcome 15: Draft treaty establishing ECERA prepared for two countries by 2014. Partially Achieved 42. A draft Eastern Caribbean Energy Regulatory Authority (ECERA) treaty for the regional electricity regulator is being prepared; a final draft treaty is not expected until additional countries commit to joining ECERA. Only Grenada and St. Lucia have officially joined the initiative, while other OECS countries are participating as observers. Both St. Kitts and Nevis and Antigua and Barbuda have recently expressed their intentions to join, and they may commit within six months. A Regional Energy Committee is in place and has met eight times. A SIDSDock grant of US$1.5 million approved by the Energy Sector Management Assistance Program is supporting efforts to bring in new members. A review of the national electricity legal frameworks and other efforts are under way to align ECERA’s mandate with the challenges that the countries in the region face. In addition to the work on electricity regulation, the Bank is completing a review of the energy sector in the OECS region that will inform governments on options and trade-offs as countries work to diversify the power generation mix and introduce demand management practices. The WBG has been increasingly focused on geothermal as an option, especially in Dominica, and is undertaking background work that will help Dominica and potentially the broader OECS region reduce external vulnerability by diversifying energy sources away from fossil fuels. Outcome 16: Increased access to ICT services for the general population. Mostly Achieved 43. The use of ICT services in the region has increased rapidly. The number of subscribers to broadband services went from 2.88 percent in 2008 to 14.0 percent in 2013. Over the same period, broadband performance (in terms of downloading speed) more than doubled in Grenada, Dominica, and St. Lucia, and increased by more than 50 percent in St. Kitts and Nevis . The quality of service improved as well. The Bank contributed to these objectives through the Telecommunications and ICT Development Projects completed at the end of 2011 and rated as moderately satisfactory by IEG for achievement of outcomes. The ICR judged the contribution to access and quality as substantial, but considered as modest the spillover effects on the economy, noting that 89 achieving a broader impact will take more time and effort. Despite significant improvements in ICT infrastructure, the investment in broadband could be greater, and the connectivity among the countries of the region and with the rest of the world needs to be improved. Moreover, concerns about competition in the sector remain, and the impact on development outcomes has to be further nurtured. The Caribbean Regional Communications Infrastructure Program (CARCIP) was launched to help close these gaps: a Phase 1 project has already been approved and is under implementation. Outcome 17: PPPs in relevant sectors to relieve government expenditures and improve service. Not achieved 44. No PPP has been implemented with the assistance or support of the WBG. Efforts on two potential PPP operations—one a deal for a general hospital in Grenada— advanced to the point of design but did not materialize when the political environment changed following elections. In view of the slow pace of individual operations, the countries and WBG shifted their approach and focused on preparing the Caribbean Infrastructure PPP Roadmap, which reviews the outlook for PPP in the region and identifies concrete opportunities in providing improved infrastructure, the constraints on pursuing them, and possible solutions at the project, sector, country, or regional level. The Roadmap found a current pipeline of 14 infrastructure projects that OECS governments are actively appraising or developing as PPPs. Outcome 18: Simplified procedures for starting a business and trading across borders within the OECS by 2014. Partially achieved 45. The indicators under the RPS results framework show partial progress in reducing the number of days to import and export in Grenada, St. Lucia, St. Kitts and Nevis, and Dominica. Grenada adopted new regulations on entry. However, these four OECS countries’ Doing Business rankings continue to lag behind those of other countries in the LAC region with similar levels of income. 46. Investment climate reforms were highlighted as critical in the IFC-WBG partnership strategy for the OECS. In partnership with the Canadian Department of Foreign Affairs and Trade and Development (DFATD), IFC’s Investment Climate in the Caribbean project focused from 2010 to 2013 on reforms to improve the business entry process and trade logistics and, to a lesser extent, on business taxation, property registration, and enforcing contracts. The projects were partially unsuccessful because not all reform targets were met, but legislative and regulatory changes were supported and completed in Dominica and Grenada to streamline the process of registering a business, while St. Lucia and St. Kitts and Nevis have still to make the regulatory changes effective. IFC supported the installation of e-registry software adapted to each client’s requirements and trained staff and the private sector in Dominica, Grenada, St. Kitts and Nevis, and St. Lucia. The system provides work-flow functionality for electronic submission of registration applications and approvals, and connects the Companies Registry with the tax and social security authorities. In the three countries where the system is operational, it has reduced by about 40% the time required to register a business and generated US$400,000 by December 2013. 90 47. Trade logistics are also critical to the Caribbean’s open economies and are at the top of the reform agenda. IFC undertook trade and port logistics assessments and supported policy dialogue between OECS governments and the private sector. During the project, the governments of Grenada and Dominica reduced the number of days it took to trade across borders, and governments asked to start a new project on trade logistics in 2012, in partnership with AusAID, to help automate clearance of imports. In 2012 Grenada was among the world’s top 10 economies in improving the ease of doing business, with reforms in starting a business, trade across borders, and property registration: between 2009 and 2014 it has reduced the number of days to start a business from 19 to 15, and the number of days to export from 14 to 9. The support came through the Public Sector Management TAC (FY06). Still, Grenada’s ranking in the Doing Business report (2014) has fallen by five positions to 107. Doing Business issues are also being considered under the Caribbean Growth Forum (CGF), and country targets have been set. Other activities relevant to competiveness 48. The Bank supported small farmers in Grenada in adopting new technologies through the Grenada Small Farmer Vulnerability Reduction Initiative Project, financed from the Emergency Window of the Japan Social Development Fund. The draft Implementation Completion Memorandum for the project rated the following as satisfactory: relevance, achievement of development objectives, efficiency, and development impact of the project. The grant put in place an innovative, demand-driven, and market-oriented incentive mechanism to drive technology adoption. The project benefitted from the ability to leverage additional funds and bundle services—south-south exchange, analytic work on the logistics chain analysis of two products, regional workshop—to provide tailored development solutions to the client. In addition, thanks to this successful activity, a Regional Agriculture Competitiveness Project is planned under the OECS RPS now under preparation. 49. Growing concerns with the region’s lackluster economic growth and rising unemployment led stakeholders to seek a nontraditional approach to the greatest challenge facing the region—creating sustainable and inclusive growth. The CGF has been the response. 7 The CGF is a facilitated methodology for public-private dialogue around issues central to private sector development and growth; it seeks to enable an action-oriented dialogue around key policy reforms needed across three thematic areas: Investment Climate, Skills and Productivity, and Logistics and Connectivity. The CGF engages all critical players—the public sector, the private sector, academia, youth, civil society, and the Caribbean diaspora—in the dialogue on how to stimulate economic growth. At the end of the first year, in June 2013, at a regional conference mirroring the launch event, individual country action plans and the results of the first year’s participatory dialogue were disseminated. The CGF proposes to build a “pro-growth 7 The CGF, a joint initiative of the Compete Caribbean Program, the Inter-American Development Bank, the World Bank, and the Caribbean Development Bank, is supported by CIDA, DFID, the CARICOM Secretariat, and the University of the West Indies. 91 coalition” through a broad-based but unified forum that rewards diverse constituencies for active support. The WBG has been actively engaged in the design of the approach, providing countries with TA to develop and implement their action plans of reforms. In 2014, the WBG—with the other institutions supporting the initiative—has begun organizing CGF Accountability Workshops in each of the participating countries to monitor the implementation of the agreed action plans. 50. As of June 2014, six countries have completed their first Accountability Workshop (Dominican Republic, Jamaica, St. Lucia, St. Vincent and the Grenadines, St. Kitts and Nevis, and Grenada). The Government of Dominica has approved the CGF Dashboard in a Cabinet resolution and is preparing the progress report for the Accountability Workshop to be held in September 2014. A main challenge that the CGF is addressing is the lack of trust between the public and private sectors and the slow and poor delivery of policies. Indeed, despite the country’s small size, communication is very sporadic and trust between the public and private sectors quite low, and capacity and fiscal constraints make policy delivery challenging. In June 2014, a Regional High Level Technical Training was held in St. Kitts and Nevis for 45 key public and private CGF stakeholders to engage them on such concepts as policy delivery, participatory governance and accountability, and related practical tools. With funding from the CDB, invitations to this event were extended to Anguilla and Montserrat. An immediate result of this training was the establishment of a Regional CGF Private Sector Observatory, anchored in the OECS Business Council, focused on monitoring a few key delivery indicators through an innovative web platform. A gradual shift in mindsets is taking place, moving away from thinking about just outputs toward the concept of reforms delivery, with simple and useful metrics that can help keep track of progress. Participants greatly value the Bank’s role as a broker (clear rules of the game, leverage, influence, and convening power), and reform champions within governments increasingly perceive the initiative as an opportunity to put pressure on ministries and agencies that do not deliver. In addition, through the CGF, national and regional dialogues are informed by a range of analytic work—policy notes, in-depth reports, and technical presentations at public events, using data specific to OECS countries. Donor coordination has also been significantly improved in common areas of reform, leveraging additional TA funds for the OECS countries. Rating for Achievement of Outcomes 51. The Completion Report rates the delivery of outcomes as moderately satisfactory. Most of the outcomes (12 out of 18) were achieved or mostly achieved. • Under the first pillar, the delivery of outcomes was quite strong. Important steps have been taken to build the foundations for improved resilience in the OECS countries. The CDF revamped the approach to public debt management; it is now being used by the Bank and other development partners, and it provides the basis for the new RPS. The OECS’s approach to disaster management is being transformed from reactive to proactive. The Bank has supported such achievements as a regional facility to insure against disasters, an improved understanding of the vulnerability of critical infrastructure, and investments to reduce the vulnerability of the most exposed 92 communities. Outcomes on improving human capital include analytic work and pilots to set the basis for broader regional approaches to education, skills development, social assistance, and health. • Delivery of outcomes in the second pillar, competitiveness and growth, was mixed. The Bank contributed to both improving knowledge about and developing strategies to address the financial sector challenges, and it successfully continued its support for increasing access to ICT. Because of political economy challenges, the agenda did not gain significant traction in areas such as PPPs and the business environment. Work on supporting public financial management advanced at a slower pace than expected. Although the CDF and the work in agriculture (Grenada) were not reflected in the results matrix, they represent relevant contributions that compensate for the partial delivery on competitiveness and growth. IV. World Bank Group Performance 52. The objectives of the RPS were relevant to the situation and to the challenges faced by OECS countries, as well as to the governments’ priorities. The OECS economies had been hit severely by the 2008 global economic crisis and by hurricanes that caused sizable disasters, especially in Grenada. The reduction in demand for tourism services and lower remittances hit output and employment and put the financial sector— especially the major insurance companies—under stress. A drop in public revenues and the need to increase public expenditure to cushion the impact of the crisis led to increases in the level of public debt. Therefore, the two pillars of the RPS (building resilience and enhancing competitiveness) fitted well the challenges that the countries faced. 53. Limited knowledge in certain critical areas affected the design of the RPS. There were various gaps. First, the approach selected to manage the high level of public debt was narrowly centered on fiscal consolidation, with limited focus on growth and natural disasters. As a result, the RPS initially emphasized budget support operations to accompany fiscal consolidation, an approach that did not work. Second, there was limited background knowledge on how to spur growth and employment, and consequently the program to help rekindle economic growth was weak. Third, the approach to the management of natural resources was initially reactive, as in the past. In addition, the RPS results framework did not fully capture the scope and relevance of the WBG’s engagement in certain critical areas, even after the adjustments introduced by the Progress Report. Finally, the RPS could have been more selective—18 objectives stretched the capacity of the WBG and the countries. Greater selectivity could have been obtained by a more careful analysis of the relationship between the objectives and the program. 54. The RPS was implemented under difficult circumstances. The OECS economies had not recovered from the impact of the crisis because the global economy continued to be sluggish, the opportunities to diversify were scarce, and the high levels of public debt continued to limit the governments’ capacity to take a proactive stance. Natural disasters added to the stress on the OECS economies. It was increasingly 93 challenging for the OECS governments and the supporting developing community to adjust strategies and programs to the continued difficult circumstances. 55. The WBG showed flexibility in adjusting to the emerging situations. The Bank’s response came in various ways. • The Bank adjusted its lending to help repair critical infrastructure after Hurricane Tomas in St. Lucia and St. Vincent and the Grenadines. Recognizing the serious impact of disasters on the population and on the fiscal situation, the Progress Report further directed lending toward disaster risk management, and the new lending for disaster risk management emphasized prevention rather than reaction only. • As traditional approaches to debt reduction ran their course, the Bank gradually adjusted its approach to work on debt, growth, and finance. The CDF, which was built on the regional dialogue and good supporting analytics, emerged as a holistic approach to debt and macroeconomic sustainability during the implementation of the RPS. The CDF defined for the Bank a role compatible with its mandate and comparative advantage, thus reducing overlap with the IMF. • In response to the mounting concerns about economic growth, the CGF emerged as an innovative approach to identifying priorities and targets: OECS countries commit to pro-growth reforms, and the commitments are tracked over time, while donors provide TA and/or resources in line with these commitments. • The work on financial sector has followed and responded to the emerging challenges. Frank dialogue with the authorities has brought agreement on an in-depth analysis of the situation by the Bank (now under way), and on the need to adopt a regional approach with strong political backing to increase the odds of dealing successfully with the emerging challenges. 56. Lending delivery was in line with program, while it was also responsive to emerging challenges. Since FY10, the Bank has delivered 14 operations, of which 10 were planned under the RPS or the Progress Report. Including the operations now under preparation, IDA commitments will amount to US$198.9 million and IBRD’s to US$18.5 million. The full IDA16 (FY12-14) envelope will have been used. Of the four operations not planned, two came about as response to Hurricane Tomas. A development policy loan (DPL) for Grenada, now under preparation, supports the implementation of the CDF and complements IMF efforts in support of macroeconomic stabilization. The operation is in line with the RPS’s initial intention to provide budget support, with the difference that the supporting policy framework is stronger than before. The proposed OECS Financial Sector Strengthening and Regulation Project and the OECS Education SWAp were not delivered. For the financial sector, extensive and effective technical support was provided with the support of a DFID grant. The new RPS includes a financial sector operation. With an OECS Education Strategy now available, financing of education will be taken up in the new RPS. 94 57. Various factors affected portfolio performance adversely. The disbursement ratio fluctuated during RPS implementation; at an average of 23 percent, it is lower than the LAC average (28.1 percent for 2008-2014.) Given the size of the portfolio, the disbursement ratio is sensitive to the presence of budget support operations. Poor capacity at the country level and at the level of the OECS Secretariat slowed down project implementation. Moreover, compliance with procurement regulations has proven cumbersome for the small economies. No disbursements are at risk today. 58. Project design issues affected implementation and delivery of results. For instance, cost estimates proved unrealistically low and affected the implementation of the Hurricane Tomas Recovery projects. The team is now developing better cost estimates for potential investments (e.g., bridges, roads, centers) to be ready to help manage emergencies in a timely and effective way. Another issue that emerged is how best to design regional engagements. Working directly with the OECS Secretariat in the implementation of several projects, while posing interesting challenges of institution building, proved cumbersome because of the extra layer of coordination. A superior approach is to design regional platforms that provide menus from which the countries select those components that best suit their challenges and their policies. 59. The Bank sought to improve project implementation by granting the OECS additional flexibility in the use of the Procurement Guidelines. In 2013, to improve project performance and delivery of results and to respond to the demand of the OECS countries’ authorities, and after consulting with the business community and representatives of civil society, the Bank eased its procurement rules for small contracts. The new procurement practices favor the development of local business in the OECS by taking account of the limited number of suppliers, the prevalent forms of business organization, and the history and size of businesses. 60. Political economy issues affected delivery of results. Politics affected the delivery of outcomes in various ways. First, the political cycles of the various OECS countries are not coordinated and therefore it is not possible to align the strategy with political cycles. Second, shifts in government affected implementation through changes in policy or in administrative personnel. As an example, the recent change of government is Grenada brought to a halt one PPP operation that was under preparation, and management changes delayed implementation of the social protection projects. Third, political economy issues have also affected the traction and development of certain issues, such as the role of the private sector in the development process. 61. The quality of delivery compares favorably with regional averages. For 2008- 2014, ICRs are available for 25 OECS projects. Of these, the country teams rated 21 (85 percent) as moderately satisfactory or better, which is above LAC averages. However, IEG rated only 18 as moderately satisfactory or above. The ratings of 10 projects were downgraded and two were upgraded, of which one became highly satisfactory. The high level of disconnect between the ratings of the teams and those of IEG is of concern; it signals the need for a more careful monitoring of impact through ICRs and other instruments. 62. The Bank supported regional integration efforts. The RPS committed to support regional integration and did so in various ways. First, the Bank experimented 95 through project design—some projects were implemented through the OECS Secretariat and others were implemented directly by the borrower countries under a common policy platform. The emerging consensus is that the second alternative is preferable because it facilitates implementation and provides a better fit to local needs and preferences. Second, the WBG used its convening power to develop and encourage policy dialogue at the regional level, using sound analytics around common challenges as the basis for regional solutions. This approach, as exemplified by the CDF and CGF, is transformational: it helps break barriers to change and helps anchor national initiatives on regional consensus for greater likelihood of success. 63. The RPS AAA work increased knowledge of key strategic issues (growth, debt, natural risks, health, education, etc.) and helped develop innovative solutions, enhancing the Bank’s contribution to the development of the OECS countries. Attachment III provides a list of the AAA delivered and the current pipeline, including AAA benefiting the entire Caribbean region. The Bank budget resources allocated to AAA have been increasing steadily, giving evidence of the importance the team has assigned to both analytic work and TA. Highlights of the AAA agenda include support for the OECS Education Strategy, PPP development, ICT capacity development, energy strategy and geothermal development, logistics, and the business environment, as well as for building a regional dialogue and capacity on social assistance, taking stock of NCDs, and restoring financial sector stability. In addition, the design of the CDF and the CGF— initiatives that have involved regional institutions and other development partners— represent innovative ways to address challenges in the OECS countries and more broadly in the Caribbean. In hindsight, although the provision of TA has been tailored to fit needs and delivery has been timely, a greater effort was needed to go beyond targeted assistance to build local capacity. Also, despite all these efforts, major knowledge gaps remain, including in the areas of poverty and inclusion. 64. Collaboration between the IFC and the Bank was strong on the advisory side, but results were more limited in private sector investments. IFC worked in close coordination with the WB in a range of TA areas such as business registration, trade logistics, and credit bureaus. However, IFC investment opportunities are limited because of the small size of the OECS, especially in the absence of stronger regional integration. The effectiveness of the joint work between the IFC and the Bank could be further improved. The work on PPPs is a good example of cooperation that did not meet the expected results, primarily because of the problems with the political economy of the region. The effort to put together a roadmap for PPPs seems a step in the right direction, but it needs to be developed further in the next strategy. 65. The Bank has maintained a broad and fruitful cooperation with other development partners active in the OECS in all areas of engagement: with the IMF on fiscal and financial sector challenges; with DFID on the financial sector; and with a broad range of partners in supporting public expenditure reform. Support for disaster risk management has mobilized substantial resources from global funds to complement Bank resources in pursuit of the RPS objectives. Attachment IV lists the trust funds that provided complementary financing in several strategic and priority areas of engagement. In general, the World Bank’s participation in the quarterly meetings among bilateral and multilateral partners organized by the United Nations Regional Coordinator in Barbados 96 has proven to be a valuable way to increase coordination and share relevant information among partners. Rating for World Bank Performance 66. The Completion Report rates WBG performance as good. The broad objectives of the strategy were aligned with the reality on the ground and the priorities of the governments. The detailed design was affected by the inherited limited background, which, combined with the limited capacity in the countries, led to an overextended design that included 18 objectives. The results framework could have better reflected the scope of the program and spelled out with greater clarity the chain or results between activities and development impact. However, the WBG responded effectively and proactively to the region’s challenges by developing solutions and building the supporting knowledge to assist in creating regional consensus, encourage shared solutions, and improve its own capacity and that of the development community to help. The WBG also responded in a timely manner to the countries’ need for support after natural disasters. The WBG was able to mobilize resources from other donors, working with them around such critical agendas as disaster risk management, public financial management, financial sector, debt management, and social sectors. The upgraded knowledge base now available provides the countries and the WBG the basis to deliver outcomes under the next strategy. The Bank delivered on the lending agenda, and the ratings of completed projects are in line with regional averages. Portfolio performance has been affected by capacity constraints and, at times, complex designs. Efforts to improve delivery include working on design and being more flexible in the enforcement of the procurement guidelines to better adapt them to the reality of small countries. V. Lessons and Recommendations 67. The OECS RPS 2010-14 was implemented under difficult circumstances. The stagnation brought about by the continued sluggish global economy, the scarcity of readily available opportunities to diversify, and recurrent natural disasters placed the OECS economies under stress. The WBG responded by expanding attention to such issues as economic growth and employment, sustainability, the financial sector, and energy. Overall delivery of the program was on target with expectations, but because of some partial shortfalls, the Completion Report rated the contribution to development outcomes as moderately satisfactory. This section highlights the key lessons learned from the implementation of the RPS 2010-14, which have been fully taken into consideration in designing the new strategy. 68. The objectives set under the RPS should be aligned with the capacity of the WBG program to deliver. In the OECS context, with the multiplicity of countries and the relatively small scale, it is not advisable to target overly ambitious development objectives under a strategy. For instance, the objectives under the original RPS with regard to alleviating the burden of public debt proved to be too ambitious for the instruments available to the Bank, and they had to be adjusted in the Progress Report. In addition, a greater understanding of the link between the objectives and the programs could have helped the exercise of selectivity. 97 69. The RPS results framework must reflect as accurately as possible the outcomes and impact of the program. Some of the indicators selected under the RPS did not reflect accurately the scope of engagement and achievements of the Bank’s program—for example, those for disaster risk management and public sector management. In reality, the impact and contribution of the disaster risk management program exceeded the indicators selected. Poor selection of objectives and indicators can end up shortchanging the evaluation of program delivery. 70. The RPS support for regional integration through a combination of regional AAA work, country-level interventions, and the building of shared understanding, vision, and solutions across countries worked well and should be further enhanced. It is advisable to use targeted analytic work to develop shared diagnostics that ground a dialogue involving all shareholders around the development of regional visions upon which countries can articulate policies and programs. This approach can have the added benefit of helping governments break local political constraints, coordinate with development partners, and lower the costs of developing and implementing initiatives. It also allows countries to take the lead on different fronts, creating momentum and encouraging peer pressure, which can be powerful drivers of change. Similarly, open support menus lead to dispersion; it would be better for project designs to provide countries a menu from which they can select the mix that suits them best. The approach to supporting regional platforms needs to be monitored continuously and adjusted. 71. A regional perspective will help enhance the opportunities for the IFC to contribute to growth and inclusion. The small national OECS markets limit the opportunities for the IFC to contribute. As governments and development partners address bottlenecks to growth from a regional perspective, the opportunities for the IFC to engage will increase. A strengthened financial sector would allow the IFC to invest and finance, using innovative practices in making resources available to the dominant small enterprise sector. As the efforts to sharpen a PPP agenda materialize, IFC can lead in implementation, bringing in expertise and finance and building partnerships. A regional approach to removing constraints to growth could identify opportunities of relevance and scale propitious to the skills and comparative advantage of the IFC, which, on its side, could continue to explore new practices and approaches suited for small- island environments. 72. In such complex environments, the Bank must maintain a flexible and open approach to be able to respond to evolving circumstances. Several products or activities were developed and introduced during the implementation of the RPS in response to evolving circumstances and client demand—for instance, the CDF and the CGF. The CDF was a response to the need to address debt issues in a broader context than simply fiscal and disaster risk management. The CGF arose to meet the mounting concern with economic stagnation. The Bank’s contribution to improving the assessment of the financial sector’s situation has in turn transformed the program of support, with deep implications for the design of the new RPS. 73. In the past, Caribbean countries have found it difficult to undertake reforms, often because of political economy factors. Political economy factors need to be taken into account in both the design and the implementation of the program. The OECS 98 countries are small, highly personalized societies in which the political sympathies and loyalties of individuals tend to be widely known and career public servants traditionally block reforms led by politicians of the other party; and they are characterized by a domestic and foreign private sector that has developed competitive advantages based on concessions and exemptions; a weak civil society and media sector that lack the necessary autonomy for advocacy; and, finally, the presence of a widespread mistrust between public and private sector, which contributes to lower mutual expectations and scope for engagement. Despite these challenges, the political stability and good governance indicators that result from strong democratic institutions could help avoid slippages and reversal once reforms are implemented. 74. Selectivity can help improve focus and delivery. The need to respond to evolving circumstances and demands pressured the WBG program away from selectivity, especially during implementation. Indeed, during this RPS, the range of engagement of the program expanded, leading in some cases to dispersion—for example, in Grenada. Given the importance of selectivity for the quality of the program and the delivery of results, a greater effort is needed to prioritize engagements and the rules to follow during implementation to maintain the necessary degree of focus. 99 ATTACHMENT I: REPORTING ON THE RESULTS MATRIX Objectives/outcomes Indicators Objectives/outcomes results Supporting program Lessons Pillar One: Building Resilience Result Area 1: Promote Fiscal and Debt Sustainability Debt management functions Debt management strategy in Achieved Lending: The Progress Report correctly strengthened at least 3 countries by 2014 • Economic and Social dropped the original objective St. Lucia, Dominica, Antigua, DPLs (GD, SLU) – FY10 to lower the public debt-to- and Barbuda have prepared GDP ratios, as the Bank did debt strategies; a fourth, St. Nonlending: not have adequate Vincent and the Grenadines, • Fiscal and Debt instruments to help deliver on will prepare one shortly. In Sustainability NLTA that objective, especially addition, the Bank supported (including supporting when the expected DPL the preparation of the DeMPAs for remaining operations did not Caribbean Comprehensive countries) – FY12 materialize. The IMF has Debt Framework (CDF), a • OECS Growth and taken the lead in support of platform linking growth, debt, Development Strategy NLTA this objective. A lesson that fiscal management, and – FY12 emerges is the need for resilience issues. The CDF • ECCB Debt and Growth credible roadmaps linking represents the prism through TA – FY12 interventions to objectives to which the governments and • Caribbean Growth Forum anchor the design of the the international community AAA – FY12 results framework. The shift approach debt sustainability • OECS MTDS TA support of focus to help develop an today and represents a major to ECCB – FY12 analytical structure on debt, growth, and frailty represents improvement over previous • Crisis Resilience RSR TF narrower practices. a more credible avenue of – FY12 impact. • Framework Solution for Caribbean Debt Restructuring AAA – FY11 • DeMPA (AB, GD, SKN) – FY10 Fiscally sustainable wage bill Public service wage bill Not Achieved Public and Social Sector The Bank supported civil ensuring key public services reduced in the OECS (3 Transformation (AB) – FY13 service studies in preparation coverage countries) Public sector wage bills have for civil service reform, but Baseline (2008/9):AB 9.8; been rising gradually since there was no credible DM 12.2; GD 13.0; SKN the crisis. The regional roadmap on how the Bank’s 100 14.96; SLU 10.6; SVG average stood at around 11 interventions would link to a 12.9 percent of GDP in 2013. Only reduction of the wage bills- Target: < Baseline St. Kitts saw a reduction in to-GDP ratios. The Bank AB 7.9; DM 10.6; GD the ratio of the wage bill to program did not have the 9.0; SKN 12.3; SLU 12.6; GDP from 2008 to 2013. appropriate instrument to SVG 11.9 (2010) contribute to the achievement of the objective, and the Progress Report should have realigned it. Improved government Number of major new e- Achieved • OECS EGRIP (SVG) – The supporting project was services across the region government services offered FY10 implemented through the through the implementation Baseline: 0 (2009) The target indicator was • OECS EGRIP – FY08 OECS Secretariat, which of regionally integrated e- Target: 4 (2014) exceeded with the support of implied a high level of government services 9 are in place in 2014 the OECS EGRIP project coordination and made for covering Dominica, Grenada, difficult implementation, St. Lucia, and St. Vincent and although at the end the the Grenadines. The e- revised results were government services delivered. A preferred introduced are expected to approach to regional projects have an impact beyond the is to use common platforms outcomes of EGRIP. that are then tailored to the needs of the countries. Greater linkage between Establish a regular reporting Partially achieved • Public and Social Sector The objective and indicators public expenditures and mechanism that contains Transformation (AB) – FY13 did not fully reflect the development objectives performance information on Information on the proposed • Strengthening PFM, Tax supporting Bank program, selected government indicators is not available. and Customs (Caribbean- which was to a great extent programs in at least 3 wide) – SEMCAR TF – FY11 coordinated with other countries by 2014 Progress has been made in • Efficiency in public development partners and advancing a broad and shared spending (AB, GD, SLU) designed to respond to public accountability reform IDF – FY10 demand from the OECS program targeting • Institutionalizing M&E in countries, which makes it harmonized internal and the OECS (CARICAD) IDF – difficult to articulate precise external audit, public FY10 indicators. procurement legislation, use • GD TAC (FY08) and of country systems, and Public Sector Management support for the audit TAC (FY06) profession, the supreme audit • DM Growth and Social 101 institutions, and Protection TAC – FY07 parliamentary account • Efficiency in public committees. spending (SKN) IDF– FY12 • Public and Social Sector Transformation (AB) – FY13 Results Area 2: Protect and Improve Human Capital Rationalized social safety net Countries using objective, Mostly Achieved Public and Social Sector The design of targeted social systems transparent, and documented Transformation (AB) – FY13 assistance programs (CCT) targeting instruments in cash A CCT system was • Strengthening Social must take political transfer programs developed for Dominica. Safety Nets SWAp (GD)– sensitivities into account. Baseline: 0 (2010) Work is under way in FY12 Creating a regional dialogue Target: 3 (2014) Grenada and Antigua. The • Economic and Social and generating mutual Bank contributed to DPLs (GD, SLU) – FY10 technical support across the generating an active and • DM Growth and Social islands, as well as generating ongoing regional dialogue on Protection TAC – FY07 leadership by example, could social assistance and the • Build Capacity Through facilitate implementation of sharing of experience. Knowledge Exchange on such programs. CCTs SSF (DM, GD, SLU) – FY12 • Social Protection (OECS) NLTA– FY10 Increase in the proportion of Baseline: Average 59% Achieved • Education Sector (GD, The analysis presented in the qualified teachers at the (2009) SLU, SKN, SVG) SWAp – regional education strategy primary and secondary levels Target: Average 62% The indicator was achieved. FY12 reports limited progress (i.e., teachers with teacher (2014) The contribution of the Bank • Economic and Social regarding quality of education training qualification) in the was indirect, working through DPLs (GD, SLU) – FY10 despite the gains made in the OECS (6 countries) 65 percent (2013) TA that included support in • IFC investments in private qualification of teachers. preparation of a regional health and education strategy on education. • Education Development Project (GD – FY09, SVG – FY03) • Education Sector (OECS) NLTA – FY11 • Teachers Career Path (OECS) ESW – FY10 • Improving Human 102 Development Data (OECS) IDF – FY11 • Statistical Capacity Building (OECS) NLTA – FY10 Better-skilled post-secondary Cumulative number of youth Achieved • Skills for Inclusive Channeling the supporting workers in the labor force enrolled in training programs Growth (SLU –FY07, GD – project though the OECS at level 1 or higher Skills for Inclusive Growth FY09) Secretariat proved Baseline: 0 (GD, 2009); (SLU –FY07, GD – FY09) • Making Youth at Risk cumbersome for 0 (SLU, 2007) Interventions Gender implementation, although the Target: 500 (GD, 2013); Sensitive (Caribbean-wide) revised results have been 870 (SLU, 2013) BNPP – FY10 achieved. A preferred approach to regional projects 912 (GD, 2013); is to use common platforms 1005 (SLU, 2013) that are then tailored to the needs of the countries. Improved knowledge and Policy note on OECS Health Achieved Health Policy ESW AAA intervention in the information on the disseminated in at least 3 “The Growing Burden of Non (Caribbean-wide) – FY11; region has helped to analyze subregion’s chronic countries by 2014 Communicable Diseases in • Results Based Financing the situation and develop noncommunicable diseases the Eastern Caribbean” was in Health (DM, SLU) RBF – health priorities in the region. published in June 2011 and FY12 disseminated to all OECS • Health Policy ESW countries. (Caribbean-wide) – FY11 • IFC advisory services in PPPs Results Area 3: Strengthen Climate Resilience Improved understanding of Database of public buildings Achieved The objectives/outcomes did the vulnerability of critical established • DVRP (Phase 1: GD, not fully reflect the scope of infrastructure Baseline: 0 (2010) The indicator was met: 2 SVG) – FY11 WBG involvement and its Target: 2 (2014) databases are in place. • PPCR (Phase 1: GD, achievements in the area of The improved understanding SVG) – FY11 disaster risk management, of the vulnerability of critical • Hurricane Tomas ERL which exceeded the outcomes infrastructure is evidenced by (SLU, SVG) – FY11 under the indicators. active national programs • SLU Disaster Additional achievements geared toward greater Management- FY09 included the creation of a resilience, with the support of • Disaster Vulnerability Regional Insurance Fund with the Disaster Vulnerability the support of the Bank 103 Reductions Projects; two Reduction Project – DVRP project Caribbean have been approved (Grenada (Phase 2: DM, SLU) Catastrophe Risk Insurance and St. Vincent) and two – FY13 Facility, which IEG rated as more are coming. • Pilot Program for Climate highly satisfactory. An Reduced number of Communities benefiting from Achieved Resilience – PPCR (Phase 2: important lesson—results communities at high risk of landslide prevention DM, SLU) – FY13 frameworks must properly landslides in St. Lucia interventions in St. Lucia The Hurricane Tomas ERL capture the scope and impact Baseline: 0 (2009) supported St. Lucia in • PPCR (Phase 1: GD, of Bank engagement, or high Target: 12 (2012) extending landslide SVG) – FY11 achievements may be prevention to 13 • Small Farmers underestimated. communities. Vulnerability Reduction Initiative (GD) JSDF – FY11 • Agriculture Risk Management (GD) NLTA – FY10 IFC – Private sector benchmarks in environmental standards Improved management of the M&E system established to Achieved • OECS Protected Areas priority terrestrial and marine monitor species and related and Associated Livelihoods – protected areas ecosystems under the 6 FY04 OPAAL sites by 2012 as per • Implementation of the ICR for OECS Protected Adaptation Measures – FY07 Areas and Associated • SSF Regional Disaster Livelihoods – FY04 Vulnerability and Climate Risk Reduction Program (Caribbean-wide) – FY12 Long-term financing National legislation for the Not Achieved • Sustainable Financing of mechanisms established for establishment of country- Marine Areas (OECS) – critical ecosystems by 2014 level protected areas trust FY12 funds adopted in 4 countries by 2014 Pillar Two: Enhancing Competitiveness and Stimulating Sustainable Growth Results Area 4: Strengthen the Domestic Financial Sector Medium-term resolution Draft comprehensive strategy Achieved • Economic and Social The Bank’s focus, flexibility, strategy for the financial for restoring the stability of DPLs (GD, SLU) – FY10 and delivery in its work on sector the financial sector by 2012 The Bank, in collaboration the financial sector were with the ECCB, the IMF, exemplary. The initial focus 104 DIFD, and the member • Restoring Financial on addressing the difficulties countries, has contributed to Stability in the OECS – DFID of the large insurance an improved understanding of EFO NLTA – FY12 companies morphed into a the financial situation and has • Caribbean Insurance larger attention to produced strategic options to Crisis NLTA understanding the status of address the current concerns (BAICO/CLICO and FIRST) the banking sector and and, over time, to bring about – FY11 designing options to address financial stability. Dialogue • Strengthening supervision the challenges in the sector. on the various options is of the non-banking financial In addition to contributing to under way, led by the ECCB. sector IDF – FY10 a deeper knowledge of the In addition, the Bank • Strengthening the Institute sector, the Bank has worked contributed to reaching a of Chartered Accountants of to increase awareness and solution for BAICO, which the Eastern Caribbean IDF – develop shared solutions in was the original target of the FY10 the region. CPS. Improved regulatory and Mostly achieved supervisory framework for Indicator 1: Draft of a new An insurance and non- the financial sector uniform insurance bill banking regulator is in place. A draft uniform bill has been Indicator 2: Action plan to prepared. strengthen banking regulation Based on extensive and supervision by 2012 background work supported by the Bank, in February 2014 countries agreed on a strategy for strengthening banking regulation and supervision and decided that the work would start with independent diagnostics and legal reforms. Results Area 5: Improve Access to Quality Services for a more Competitive Business Environment Draft treaty establishing Partially Achieved • OECS Energy Regulator The initial design has come ECERA prepared for 2 The draft treaty is not ready, Project (GD and SLU) – under stress as the countries by 2014. partly because of a one-year FY11 participation of two initial delay in reaching countries has yet to lead effectiveness. CPS support is • Renewable Energy and others to join, as they coming through the OECS Island Interconnection maintain a wait-and-see 105 Energy Regulator Project (Caribbean-wide) AAA – attitude. Greater emphasis is (GD and SLU) – FY11. The FY13 now placed on engaging Regional Energy Committee • Regional Energy Strategy others and better is in operation, and other (Caribbean-wide) ESW – understanding the regulatory OECS countries participate as FY11 reality in each country. observers. For the initiative to be effective, the challenge remains to expand the membership beyond two countries and to adapt the approach to the realities on the ground in each country. In addition, the Bank has just completed an energy strategy for the region and has commenced a dialogue on geothermal options, especially with Grenada. Increased access to ICT % population with access to Mostly Achieved ICT is an area of long-term services for the general broadband Internet services • Caribbean Regional Bank engagement, with population Baseline: 9% (2009) As of 2013 progress toward Communications notable results in developing Target: 15% (2014) the indicator was on track— Infrastructure Program (GD, regional institutions and 14 percent. SLU, and SVG) – FY12 broadening access. The 14% (2013) The ICR for Caribbean lesson is that sustaining a Regional Communications long-term engagement around Infrastructure Program (GD, a clearly defined objective SLU, and SVG) – FY12 reaps substantial positive documents the increased results over the long term. access to the Internet in the region. PPPs in relevant sectors to Number of PPP projects Not achieved • IFC PPP Advisory PPP is politically sensitive; relieve government undertaken in the region Services opportunities for any future PPP agenda must expenditures and improve Baseline: 0 (2009) Two operations that were private sector investment defuse the political risks. The service Target: 2 (2014) under implementation could strategy of using national not be completed because of roadmaps to develop a political roadblocks. common regional position anchored on building capacity 106 A PPP roadmap has been is a promising first step that prepared for each country needs nurturing. with the support of the WBG. Simplified procedures for Indicator 1: Business entry Partially Achieved • Investment Climate – The lack of traction of the starting a business and regulations adopted in 4 Doing Business (OECS) simplification agenda has trading across borders within countries by 2013 The indicators show progress NLTA – FY11 come from the limited the OECS by 2014 (IFC) in reducing the number of • GD TAC (FY08) and priority governments assign Indicator 2: Reduction in the days needed for exporting Public Sector Management to this agenda. The CGF number of days to trade and importing. In Grenada, TAC (FY06) alternative promotes Average number of days to new entry regulations were • Support and Expand the ownership by helping sharpen comply with business issued. However, the four Caribbean Network of government priorities and regulation (Imports) countries continue to lag Business Incubators – EPIC committing to action plans to Baseline: DM:15; GD: 19; behind countries in LAC with (Caribbean-wide) – FY12 be jointly monitored. SKN: 13; SLU: 18 (2009) similar levels of income. Target: < Baseline (2014) IFC Advisory Services in partnership with CIDA Status 2014—DM:12; GD: centered on entry and 15; SKN 18.5; SLU: 15 logistics in Dominica, Grenada, St. Lucia, and St. Average number of days to Kitts and Nevis (Stage 1 comply with business (2009-2011.) Stage 2 regulation (Exports) foresaw a deeper engagement Baseline: DM:13; GD: 14; in St. Lucia and Grenada on SKN: 12; SLU: 14 (2009) starting a business and Target: < Baseline (2014) trading across borders. The Bank assisted Grenada on Status (2014) DM: 13; GD:9; improving business SKN:11; SLU:14. registration. Doing Business issues are being considered under the CGF, and country targets have been set. 107 ATTACHMENT II: ACTUAL OECS LENDING FOR RPS FY10-FY14 Dro Fiscal Project Project IBRD IDA Project Name Planned ppe New in Year ID # Amt Amt in RPS d RPS Grenada Economic and Social √ P117000 DPL 1 4.5 3.5 Saint Lucia Economic and Social √ P117016 DPL 1 4.0 8.0 2010 OECS E-Government for Regional Integration Project (EGRIP) (Saint √ P117087 Vincent and the Grenadines) 1 0.0 2.3 Total for FY10 3 8.5 13.8 P10141 OECS Eastern Caribbean Energy √ 4 Regulatory Authority (ECERA) 1 0.0 5.6 OECS Regional Disaster Vulnerability Reduction Project √ P11787 (Phase 1 - Grenada, Saint Vincent 1 and the Grenadines) 1 0.0 20.9 Saint Vincent and the Grenadines P12493 Hurricane Tomas Emergency √ 2011 9 Recovery Loan 1 0.0 5.0 P12520 Saint Lucia Hurricane Tomas √ 5 Emergency Recovery Loan 1 0.0 15.0 OECS Financial Sector Droppe Strengthening and Regulation √ d Project Droppe Debt Sustainability Programmatic √ d DPLs Total for FY11 4 0.0 46.5 Caribbean Regional P11496 Communications Infrastructure √ 3 Program 1 0.0 25.0 P12312 Grenada Safety Net Advancement 2012 √ 8 Project 1 0.0 5.0 Droppe √ d OECS Education SWAp Total for FY12 2 0.0 30.0 P12679 Antigua and Barbuda Public & √ 2013 1 Social Sector Transformation 1 10.0 0.0 Total for FY13 1 10.0 0.0 OECS Regional Disaster P12722 Vulnerability Reduction Project √ 6 (Phase 2 - Saint Lucia) 1 0.0 41.0 OECS Regional Disaster 2014 P12999 Vulnerability Reduction Project √ 2 (Phase 3 - Dominica) 1 0.0 17.0 P14715 Grenada Comprehensive Debt √ 2 Framework DPL 1 0.0 15.0 Total for FY14 3 0.0 73.0 108 ATTACHMENT III – AAA DELIVERED AND PIPELINE Prod Delivery Project Plan in Line Country Cost Date Name RSP FY10 P111855 6R Strength. Education Sctr Res.HIV/AIDS TA Caribbean 34 Y P112144 Caribbean HIV/AIDS Civil Society, IEC & M&E TA Caribbean 113 P111783 OECS Career Teacher Management TA OECS Countries 184 Y 331 FY11 P121535 OECS Tax Transparency TA OECS Countries 0 P112173 Caribbean Regional Energy Strategy EW Caribbean 524 Y P109685 CARICOM Managing Nurse Migration II EW Caribbean 125 P111797 Non-Communicable Diseases in Jamaica: Moving from Prescripti TA Caribbean 267 P123161 6O-Regional Statistical Work in OECS TA OECS Countries 42 959 FY12 P124858 Caribbean Tech Assistance for Early Recovery and Damage Asse TA Caribbean 114 P121221 OECS Education NLTA TA OECS Countries 233 Y P117501 6O-OECS (C) Safety Net NLTA TA OECS Countries 262 Y P121613 Caribean Insurance Crisis Resolution TA OECS Countries 97 Y P123107 DR-HT Quisqueya grow th & poverty EW Caribbean 233 P124693 Caribbean School Health TA Caribbean 138 1,077 FY13 P117601 Market-Based Agriculture Risk Management in the Caribbean TA Caribbean 449 Y P121903 Making Youth At Risk Interventions Gender Sensitive in the C TA Caribbean 471 P127336 OECSSEC STRATEGY TA OECS Countries 612 1,532 FY14 P126179 Restoring Financial Stability in the OECS TA OECS Countries 1,303 Y P126861 DR-PR TF Pre-feasibility Study for the Interconnection of El TA Caribbean 20 P128524 Regional Statistical Work in OECS TA OECS Countries 362 Y P130526 ICT Sector Policy Notes for Jamaica and Suriname TA Caribbean 42 P133639 Caribbean Human Development Support TA Caribbean 46 P144780 6R Logistics & Connectivity TA Caribbean 184 Y P144922 Caribbean - Skills and Productivity TA Caribbean 102 Y P145772 GD Cocoa/Nutmeg Logistics Chain Analysis EW Grenada 19 2,077 109 Prod Delivery Project Plan in Line Country Cost Date Name RSP FY15 P128874 Programmatic TA for the Support for Economic Management in t TA Caribbean 3,378 P129813 6R Programmatic Engagement in DRM & CCA TA Caribbean 0 P130208 Caribbean Grow th Forum TA Caribbean 0 P143708 Geothermal Development in Dominica TA Dominica 295 P144131 RAS Curacao Payments System TA Caribbean 88 P133750 Caribbean Public-Private Dialogues (CIDA EFO) TA Caribbean 950 P146683 Caribbean New Trade Environment EW Caribbean 200 P149915 LC RAS St Lucia PPP Policy TA St. Lucia 45 P150087 Caribbean Report on Observance of Standards and Codes - Acco EW Caribbean 120 P150107 Investment Policy - Caribbean Region TA Caribbean 60 P151093 Caribbean Poverty NLTA TA Caribbean 0 P151133 OECS Statistics and Poverty NLTA TA OECS Countries 0 5,136 FY16 P145745 Continued Resilience of the ECCU Financial System TA OECS Countries 950 P146727 6O - ASSET MANAGEMENT EXPERTISE FOR THE EASTERN CARIBBEA TA OECS Countries 940 P148056 Caribbean Open Data TA Caribbean 0 P149120 Rapid Social Response Trust Fund: Transforming Social Protec TA St. Lucia 300 P150825 FINANCIAL ANALYSIS AND DYNAMIC MODELLING EXPERTISE TA OECS Countries 0 P150897 Strengthening Financial Stability in the Eastern Caribbean C TA OECS Countries 0 2,190 110 ATTACHMENT IV: ACTUAL & INDICATIVE TRUST FUNDS/GRANTS FOR THE RPS FY10-FY14 Bank Program FY10 FY11 FY12 FY13 FY14 Multi-Donor Trust Fund for strengthening PFM, √ Tax and Customs (CIDA’s SEMCAR initiative, implemented by the Bank and IMF, Caribbean- wide) – P123665 IDF Grant to promote efficiency in public spending √ (A&B) – P120474 IDF Grant to promote efficiency in public spending √ (SKN) P129786 IDF Institutionalizing M&E in the OECS √ (CARICAD) – P117829 IDF Grant to promote capacity building for √ evidence-based policymaking in education and Pipeline health sectors (In RPS as Improving Human Development Data) – P122518 GEF/Adaptation Fund Climate Resilient Energy √ Provision GEF Sustainable Financing of Marine Areas – √ P103470 Pilot Program for Climate Resilience (Phase 1- √ GRE and SVG) - P117330 Pilot Program for Climate Resilience (Phase 2 - √ DOM and SLU) - P117330 BNPP Making Youth at Risk Interventions Gender √ Sensitive (Caribbean-wide) – P121903 SSF Build Capacity Through Knowledge √ Exchange on CCTs (DOM, GRE, and SLU) – P126753 SSF Regional Disaster Vulnerability and Climate √ Risk Reduction Program – P117871 EPIC Caribbean – Support and Expand Caribbean √ Network of Business Incubators – P128038 Pipeline Results Based Financing in Health (DOM, SLU) √ P125100 JSDF Small Farmers Vulnerability Reduction √ Initiative (GRE) – P124107 RSR Trust Fund for Crisis Resilience (supporting √ the preparation of the OECS Development Strategy and the M&E system for the OECS) – P128524 IDF Strengthening Accountability of the non- √ Banking Financial Sector – P119913 FIRST Strengthening Insurance Regulation and √ Supervision – P121613 IDF Strengthening the Institute of Chartered √ Accountants of the Eastern Caribbean – P119818 111 Annex XIV. OECS MAP i 112