This is in keeping with current development thinking which foresees a minimal role for the State in all but the creation of a favourable physical, social and legal environment within which market forces can develop and operate effectively. More specifically, this shift is linked to the EU's larger concern with guaranteeing efficiency and effectiveness in the use of increasingly scarce aid resources. Given its proven role as an 'engine of growth' and a more efficient user of resources, the private sector increasingly is being viewed as central to the EU's goal of improving the effectiveness of future development co-operation programmes with its ACP partners as well as guaranteeing their future competitiveness and the sustainability of development efforts.
Against this background, the Convention, as revised at the Mid-term Review, builds on the existing provisions for enterprise development within ACP countries and places special emphasis on 'promoting, in ACP States, an environment favourable to the development of the market economy and of the private sector.' (Article 6) In this regard, the consensus is that an essential part of this process involves the identification of new instruments and programmes which seek to build institutional and technical capacity within national and regional private sector entities as well as spur entrepreneurial activities. For their part ACP Governments have made an undertaking to encourage 'the participation of the agents of decentralized co-operation in (EDF) Fund projects and programmes and to [ensure] that their initiatives are taken into account in the formulation and the implementation of indicative programmes'. (Annex LXXX)
The difficulty, however, lies in translating this principle into a workable practice. Despite the existence of similar provisions within the original Convention, the European Commission, at the time of the Mid-term Review in 1994, pointed to a number of procedural problems in the area of decentralised co-operation which discouraged the involvement of non-State economic and social operators in co-operation activities in ACP States. The Commission noted that the State-centred orientation of indicative programmes meant that ACP States made no provision for funds to implement decentralised co-operation. Moreover, financing procedures which reserved a key role at each stage for the National Authorising Officer (NAO) did not facilitate the kind of direct dialogue with non-state operators which is key to decentralised co-operation (See: Commission of the European Communities, Negotiating Directives for the MidTerm Review of certain provisions of the Fourth Lomé Convention: Memorandum from Mr. Marin, Brussels, August 1993.). In practice, the general trend among the majority of ACP countries during the first five years of Lomé IV was that private sector involvement in the implementation of financial and technical cooperation activities was 'minimal, if not non-existent'(See: ACP, The Mid-Term Review of the Fourth Lomé Convention. ACP Memorandum to the European Union, (ACP/27/003/94 Rev 3. Brussels, February 1994).
In the specific case of the Caribbean ACP (hereafter Cariforum countries1), a number of programmes aimed at private sector development were implemented within individual National Indicative Programmes under the 7th EDF. Among these is the 'Small Business Credit Initiative' in Guyana which aims to increase the availability of credit and provide technical support for small and micro businesses. A similar programme is under implementation in Trinidad & Tobago where some ECU 2 million (approximately TT$15 million) has been committed over a two year period to the Small Businesses Development Programme which is geared primarily at promoting enterprise development among the 'least advantaged segments of the society'. Further assistance to the Trinidadian private sector comes through the Caribbean Business Services Limited or CDI initiative which provides shop floor technical assistance to local manufacturers. Other initiatives include the 'Target Europe' programme in Jamaica which provides assistance to local businesses in export marketing in Europe as well as the marketing of investment projects in Europe..
Funds have also been made available under the Caribbean Regional Indicative Programme (CRIP) to the Caribbean Export Development Agency (Caribbean Export2) which aims to boost regional exports through the provision of in-plant technical assistance, information on new markets and business opportunities, assistance in promoting Caribbean products overseas and in developing entrepreneurial skills throughout the region. The recently implemented 'Trade Sector Programme' in the Dominican Republic which aims to promote the competitiveness of Dominican exporters both regionally and internationally also forms part of this initiative.
Notwithstanding the existence of these initiatives, the consensus is that as a percentage of the total allocation within individual NIPs, the resources allocated to private sector development under the 7th EDF are not commensurate with the stated importance of ensuring private sector development both on a national and regional basis. In the majority of cases, the instruments and programmes have been too narrow in scope to meet the various and numerous needs of the regional private sector and only in a few cases are the programmes managed and implemented by non-State agencies. In addition, private sector organisations in individual Cariforum countries relate a common story of bureaucratic barriers and a general lack of access to Lomé resources and information about those activities (trade fairs etc.) in which their members would have an interest. Other difficulties are created by bureaucratic delays which, in most cases, have affected the start-up of income-generating programmes. Here, the specific case of the Guyana-based Caribbean Rice Association is worth highlighting.
Approximately two years after having submitted a Work Programme and Cost Estimate for the implementation of a Caribbean Rice Industry Development Network (CRIDNet3) to the CARIFORUM Secretariat, the CRA is still awaiting the release of funds. This has been further compounded by the delays attending the appointment of the Government of Trinidad and Tobago as the Deputy Regional Authorising Officer of the Caribbean Integrated Agriculture and Fisheries Development Programme under which the CRIDNet Project falls. In the meantime, CRIDNet operations have had to be financed by revenue raised by private sector interests within Guyana and other CRA members.
In the case of the regional programme managed by Caribbean Export, there is also the perception among some sections of the Caribbean private sector that, while the initiative may be laudable, the level of private sector involvement in the direction, development and implementation of projects does not reflect the private sector nature of the initiative and therefore, could undermine the objectives of the programme; namely, the development of private sector capacity within the region.
Collectively, these have raised serious questions about the level of commitment on the part of national governments as well as the European Commission to involving decentralised agents more directly in the formulation and implementation of programmes under the NIPs. Even now, the programming process for the NIPs under the 8th EDF is proceeding without any significant consultation with, and in some cases, without the knowledge of key national private sector bodies. The problem is that while the Convention places importance on the principle of decentralised co-operation and private sector-led development, in practice the Lomé mechanism continues to operate as a government-to-government agreement with social partners in the private sector having a very limited window of access. In the absence of appropriate mechanisms to facilitate decentralised dialogue and co-operation, the resistance to the current shift away from government-to-government co-operation is likely to undermine the principal objective of Lomé co-operation in the long term - the achievement of sustainable development within ACP countries. In the short term, the failure of decentralised co-operation is likely to affect the Commission's ability to create appropriate instruments for co-operation with the new partners in the private sector after the expiry of Lomé IV in 2000.
How, therefore, can the goal of private sector-led development be achieved within the ACP in general and the Caribbean specifically? Similarly, how can a more effective partnership be brought about between the Caribbean ACP and the European Union after the expiry of Lomé IV? What new instruments and mechanisms need to be identified to minimise bureaucratic delays and bring the regional private sector more directly into the programming process as well as the larger Lomé dialogue? These are the questions which the present paper attempts to address. The answers will, no doubt, form important guidelines which the region, with the support of the European Union, can use to translate 'the Caribbean's potential to be a genuine success story in the field of ACP/EU relations' into a reality.
The preliminary findings which are laid out in this paper are the results of a process of consultation by the Caribbean Association of Industry and Commerce (CAIC) in collaboration with the Caribbean Council for Europe (CCE), to develop a consensus among member and non-member private sector organisations throughout the Caribbean about the general goals of the regional private sector within a new relationship with the EU as well as the specific needs of different entities in order to overcome the current constraints to private sector-led development within the Caribbean. Importantly, this process has not been confined to a Cariforum-specific context in that it includes a number of non-Cariforum countries, including Cuba. This approach not only takes account of the dynamic set of relationships within the region which transcends the artificial boundaries of the Caribbean ACP, but also acknowledges the EU's long-term ambitions of incorporating Cuba as a beneficiary under any future co-operation agreement with the Caribbean.
The results of the consultation process are laid out over four sections, the first of which restates the need for a new strategic alliance with the Caribbean which places the private sector at the centre of that relationship. Section Two highlights the various and numerous constraints facing the private section in the region which need to be addressed as an essential first step towards ensuring the effectiveness of this new partnership. This is followed in Section Three by an exploration of possible new approaches to dialogue and co-operation with the private sector. The paper ends by putting forward a number of recommendations for action in the short, medium and long term both on the part of the European Union and its partners in Government and the private sector in the Caribbean.
The goal is to sensitise the EU to the specific needs of the Caribbean private sector with the hope that it: a) guarantees increased and improved access of national and regional private sector entities to Lomé resources; b) impacts favourably on the public policy implementation of national and regional indicative programmes under the current EDF and; c) impacts positively on the direction of EU policy towards the region after 2000.
Chapter One: The Caribbean Private Sector in Regional Development
In 1967, when political dialogue on the issue of Caribbean unity was at a virtual standstill, a six-man team, comprising private sector leaders from different countries throughout the region embarked on a bold initiative to encourage heads of governments to come together to discuss the creation of a free trade area and other areas of co-operation. Less than a year later in 1968, the Caribbean Free Trade Area (CARIFTA) was formed. This represented the first step in the process towards regional integration which remains central to the goal of Caribbean development and survival.
Since that time, the Caribbean business community, both in its national and regional settings, has played, and continues to play, a critical role in the ongoing efforts to attain sustainable development through regional integration. Even now, the impetus within the Caribbean towards hemispheric integration first through the Association of Caribbean States (ACS) and more recently, through the projected formation of a Free Trade Area of the Americas (FTAA) is being driven largely by private sector interests in the region which have begun to forge links through trade, joint ventures and other economic exchanges with their private sector counterparts in a number of Latin American countries.
In the context of CARICOM, it is the indigenous private sector that has produced the majority of goods and services which fuel intra-Caricom trade. Cross-regional investment by a growing group of Caribbean transnationals have also supplemented the earnings from foreign direct investment in the region, particularly in the area of manufacturing and tourism. In the same way, it is private sector activity that has fueled the growth of extra-Caricom trade with non-traditional markets in Latin America, the Far East and Europe.
Increasingly, with the globalisation of world trade and the new imperative to survive on the basis of international competitiveness rather than preferential treatment; on trade rather than aid, it is the private sector, with the help of government, that will have to steer the Caribbean towards international competitiveness through the production of quality goods and services which can compete on international markets. So, too, with the decline in bilateral and multilateral aid flows to the region, the private sector is being called on to fill the gap in terms of capital accumulation both through indigenous investments and the attraction of foreign direct investment.
If nothing else, the new emphasis on the private sector in the context of global trade liberalisation has drawn attention to the need for a new dispensation of consultation and co-operation between Caribbean governments and the social partners in the private sector and the trade union movement to devise adequate responses to the several challenges, internal and external, facing the region. Very tentative initiatives in this direction are underway on a national level in some Caribbean countries. On a regional level, the CARICOM Secretariat has also begun to engage the regional private sector, represented by the Caribbean Association of Industry and Commerce (CAIC) in a growing dialogue on issues attending the formation of the CARICOM Single Market and Economy.
For its part, the CAIC has assumed the mantle of mobilizing the regional private sector towards preparing for a new millennium without trade preferences. While acknowledging the daunting challenges posed by the potential loss of trade preferences, particularly to the region's banana producers, the approach being taken emphasises the need to survive on the basis of international competitiveness.
As an essential first step, attention has focused on building private sector consensus on key issues as well as identifying common concerns and perceived threats and opportunities as the basis for establishing common principles of co-operation for regional development. An important part of this process is the current efforts to increase the participation of private sector organisations in the non-English speaking territories, in particular Suriname and Haiti, in CAIC activities4. As a further step towards bringing the regional private sector into a closer union, the CAIC has established a Web Site linking member organisations via the INTERNET. Here, the intention is to provide information about membership according to country and economic sector.
As far as the identification of a priority agenda is concerned, attention has focused on expediting progress on the formation of a CARICOM Single Market and Economy (CSME) as well as identifying areas of co-operation within the ACS in order to re-position the Caribbean in the new global economic order. Equally important is the need to diversify the region's export base and improve the competitiveness and productivity of existing sectors. The question arises, however, about the capacity of the region's human resources as well as the capacity of national and regional public and private sector institutions to undertake the work necessary to achieve these goals. Similar questions arise relating to the capacity of the region's producers of goods and services to compete against more efficient world producers.
In addressing these questions, the CAIC has begun to work on a number of ideas, including the proposed formation of Working Groups to monitor and parallel the working groups that have been set up to deal with the technical issues attending the negotiation of the FTAA. It is envisaged that the research generated will feed the specialised information needs of key public and private sector bodies as they prepare to negotiate bilateral and multilateral trade agreements both within and outside the context of the FTAA.
Importantly, however, the CAIC continues to stress that accomplishing the numerous tasks of regional development calls for a new partnership between government and the social partners in the private sector based on a division of labour according to capability and efficiency. Given the small size of national economies and private sectors in the region, only a unified approach to investments, production, marketing and research will offer the region a chance of survival in the international market place.
A similar approach is needed in the context of EU/Caribbean co-operation in light of the new emphasis on competitiveness, effectiveness and efficiency in the second half of Lomé IV. As a more efficient user of resources, private sector involvement in the implementation of technical and financial co-operation is key to ensuring the maximum use of Lomé resources, particularly in light of the new financing arrangements governing the use of programmable resources over the next five years. Private sector involvement will also see the development of income-generating projects and programmes which, besides generating employment opportunities, will reduce the region's dependence on external financial assistance in the medium to long term.
Any new strategic alliance between the two regions must, therefore, place the private sector at the centre of that relationship. This is not to say, however, that Caribbean governments will not continue to play a critical role in that relationship. The relative inexperience of the region's private sector institutions in the area of development co-operation, particularly as it relates to the working of the Lomé Convention, will demand a new partnership between Governments and their private sector counterparts to draw on the vast experience of the public sector in this area. So too, governments continue to play a critical role in the formulation of macro-economic and fiscal policies, thus creating a favourable environment within which the private sector can operate. Indeed, given the right incentives and the appropriate supportive environment, the Caribbean private sector has the potential to take on many of the tasks currently performed by the State, thus relieving pressure on public expenditure and allowing governments to concentrate its resources on the development of key social and physical infrastructure; diversify the economic base by investing in new sectors; and team up with European partners to invest in competitive and potentially competitive sectors such as tourism, communication and information technology.
Translating that potential into a reality demands a joint effort between, on the one hand, Caribbean governments and their private sector counterparts, and these two together with the European Union. Within this framework, there are a number of essential first steps towards guaranteeing the effectiveness of that partnership (The author does not list the steps in any order of priority). These are:
These are the essential first steps towards developing a more effective partnership 2000. Fulfilling those steps calls for new and creative thinking on the part of the Caribbean and the European Union. As is the case with the EU, that process has only just begun in the Caribbean. In the meantime, however, the present paper provides some preliminary guidelines.
Chapter Two : Assessing Caribbean Private Sector Needs
The assessment of private sector needs in the Caribbean must be carried out within the context of an understanding of the different processes at work both internationally and within the hemisphere which, taken together, are driving economic change in the Caribbean at a far faster rate than in the rest of the ACP.
At the level of the global trading system, new rules attending the formation of the World Trade Organisation (WTO) mean that Caribbean countries, like most Developing Countries, have a five to ten year time horizon to dismantle tariffs and other barriers to trade. At the same time, the de-emphasising of Part IV of the GATT and the reversion to the fundamental principles of non-discrimination and reciprocity in world trade as a result of the Uruguay Round have brought into question the legal status of preferential trade arrangements on which the Caribbean has been weaned and which have underwritten the viability and stability of a number of key export sectors in most Caribbean economies. Within this framework, the present arrangements governing preferential trade between the EU and the Caribbean under the Lomé Convention face the greatest challenge, particularly from Latin American banana producers and the US Department of Trade.
In the face of such pressure, it is becoming increasingly apparent that the European Commission favours a future trade relationship with the ACP based on full-trade reciprocity in order to meet the EU's Uruguay Round commitments. Senior European officials suggest that this is best achieved through the development of region-specific free trade agreements modeled largely off the present negotiations with South Africa which envisage, over a 10 year period, that 90% of all EU/South Africa trade including agricultural produce would not be subject to restriction.
Similar forces are at work at the hemispheric level, where the present drive towards hemispheric free trade through the proposed formation of the Free Trade Area of the Americas (FTAA) foresees the liberalisation of barriers to trade in goods and services, elimination of restraints to investments, provision of free labour movement for specialised workers, and harmonisation of tax and monetary policies by 20055.
Taken together, all these processes pose a common challenge to the Caribbean: transitional adjustment and long-term competitiveness. This, however, is a gradual process with attendant transitional problems which require transitional periods of phase-in and phase-out, as well as financial and technical support to assist in the practical transformation from the old to the new. Within this framework, particular attention should focus on assisting the Caribbean private sector to underwrite economic transition in preparation for open markets and globalisation.
The European Commission has noted that, except for Haiti, Cariforum countries are at a higher level of development than most other ACP countries. Taken as a group, the same could be said for the Caribbean private sector as it relates to the relative coherence of the regional private sector and its ability to formulate common positions on which to lobby regional governments. The vibrancy of the regional private sector is also manifested in the quality of representation within the various business fora dealing with the issues attending hemispheric integration.
This is not to imply, however, that the Caribbean private sector is a homogenous grouping. In the same way that there are varying levels of development within the region, there is a vast difference in the capability and level of development of the private sector as one moves from one territory to the other. In Haiti, for example, where privatisation efforts are in the very early stages, there is virtually no private sector and no structures to support private sector development. A slightly different situation exists in Cuba where, for more than 30 years, there was no private sector in industry, services and retail stores6. With Cuba beginning to insert itself in the world economy, enterprise development is in the very early stages with the emergence of a number of autonomous enterprises engaged in a range of activities. This, however, is not similar to the privatising process taking place in the former COMECON countries and elsewhere. In the case of Cuba, the term 'private sector', if it refers to the ownership of a company, should be understood as 'business sector' or 'entrepreneurial sector'. This is because the Cuban economy is structured in such a way that there is a combination of private sector and public sector, the latter of which continues to play a key role in the country's economic and social development.
In the OECS countries, the lack of economic diversification and the small size of internal markets have led to a very narrow private sector base. Banana cultivation being the main economic activity in these islands, there is a relative lack of true business culture and entrepreneurship due in large part to the failure to develop linkages in the areas of management, transportation, marketing, and insurance. This is in stark contrast to, for example, Trinidad and Tobago which has a well developed and vibrant manufacturing sector. Elsewhere, particularly in Jamaica, high interest rates coupled with high inflation rates and the fluctuation in the value of the local currency have impacted negatively on local and foreign investments, particularly in the manufacturing sector.
This means that different territories will require different types and differing degrees of assistance. At the same time, one can identify some common weaknesses across national private sector institutions (chambers of commerce, manufacturers associations etc.). These include a lack of technical expertise to analyse trade data and carry out research on sectoral issues which are of direct interest to their members. In most cases, this is further aggravated by a lack of access to specialised trade information. As a result, the knowledge of, and ability of most private sector organisations and members to deal with new issues attending the formation of the World Trade Organisation and the FTAA, such as intellectual property rights and sanitary and phytosanitary measures, is very limited.
To different extents in different territories, the relative lack of entrepreneurial skills particularly at the levels of middle and lower management also act as significant constraints to private sector development within the region. In turn, this has affected the region's ability to develop a range of quality products that can compete effectively on the international market.
Against this background, current and future co-operation activities should not only seek to address the numerous and various constraints to private sector development within the region, they should also contain a scheme of incentives to ensure that the private sector is able to underwrite economic transition in the region. Such an approach is not incompatible with EU policy towards other developing regions with which it has signed similar advanced partnership arrangements. This is particularly true in the case of the non-EU Mediterranean States, where the proposed formation of a Euro-Mediterranean FTA by 2010 is to be accompanied by appropriate measures to assist economic transition in the Mediterranean region. Such measures include support for the private sector, the primary aim being to 'make the private sector in the countries of the Mediterranean capable of withstanding a liberalisation of trade and therefore also competition on the world market' (European Commission, 'Strengthening the Mediterranean policy of the European Union: Establishing a Euro-Mediterranean partnership', Bulletin of the European Union, 2/95). Given this approach, there is a case to be made for similar provisions to assist economic transition in the Caribbean.
At present, direct assistance to the Caribbean private sector comes through the European Investment Bank (EIB) and the Centre for Industrial Development (CDI).
The EIB is entrusted with part of the EDF resources to be used in support of the productive sector and public utilities in ACP countries in the form of concessionary loans, interest subsidies on the Bank's loans and contribution of risk capital to companies stocks. The EIB may also grant loans financed from its own resources.
The CDI's role is to assist in the establishment and strengthening of industrial enterprises in the ACP States, especially by encouraging joint initiatives by economic operators of the Community and ACP states. Over the years, the CDI has operated through a network of consultants or antennae organisations in different ACP countries for the provision of financial and technical assistance in the areas of training, feasibility and market studies, trade fair support, business rehabilitation, privatisation and expansion as well as start-up and management assistance for small and medium-sized enterprises. In the case of the Caribbean ACP, the CDI has been particularly active in the development of the wood sector, especially in the Dominican Republic, Guyana and to a lesser extent, Jamaica.
These instruments have proven inadequate, however, in meeting the financing needs of the private sector in the region. This is particularly true in the case of the CDI with a yearly budget of 13 million ECU's to finance activities in 70 ACP countries. An increase in CDI activities over a larger range of sectors and a larger range of countries in the different ACP regions will demand a future increase in the resources allocated to that institution in a successor agreement. This will probably need to be accompanied by an envelope system with set allocations for each region in order to ensure that each region and territory benefits equitably (if not equally) from CDI assistance and facilities. With this in place, consideration should also be given to advertising the services of the CDI in each territory so that more companies are made aware of how to access CDI assistance. At present, the fear of over-subscription of the CDI's limited resources is one reason for the relative lack of awareness among most businesses about the services offered by the CDI and how to access them.
In the case of the EIB, proposals from a number of private sector organisations in the region call for a more dynamic use of EIB resources aimed at (The proposals which follow are contained in the presentations made by Jose Armenteros Ruiz of the Santo Domingo Chamber of Commerce and George Arzeno Brugal, Deputy Chairman of the CCE at the time of CCE/CAIC/EC Encounter in Brussels):
The ECIP instrument was developed to allow the European Union to support developing countries through the private sector, rather than via traditional trade and aid means. The aim of the programme is to promote business activities in eligible countries through joint venture arrangements. Under the latest revision of the instrument, some ECU 250 million will be made available over the next five years to investors on varying terms to finance: measures to identify projects and investment partners; feasibility studies and/or pilot projects to help businessmen set up joint ventures or make investments; capital requirements to set up joint venture or a local company; and training, management and technical assistance.
To date, the ECIP instrument has been extended to the developing countries of Asia, Latin America, the Mediterranean and South Africa, the so-called ALAMEDSA countries which are 'deemed mature enough for a more sophisticated market-driven approach' (Reported in Europe Report, February 2, 1996). By this same token, the scheme has not been extended to ACP countries for which, according to the Commission, 'this new style aid package is not yet realistic' (Reported in Europe Report, February 2, 1996). The continued relevance of this argument is questionable in light of the present move to develop advanced co-operation agreements with the different regions within the ACP.
While the Caribbean private sector is not as mature as its counterparts in the ALAMEDSA countries, it certainly is more vibrant and at a higher stage of development than its counterparts in the other ACP regions, particularly in Sub-Saharan Africa. This, plus the fact that the region is being pushed at a faster pace than the rest of the ACP to prepare for reciprocity and eventual free trade, is sufficient ground on which to argue that the Caribbean private sector should qualify for differential treatment within any new successor agreement. Accordingly, in the same way that the EU has fashioned separate financial instruments such as the AL-INVEST and MED-INVEST programmes to boost the growth of private enterprise in the developing countries of Latin America and the non-EU Mediterranean respectively, consideration should also be given to the creation of a CAN-INVEST programme for the Caribbean private sector. In this regard, attention should focus on programmes to support the development of export-oriented small and medium-sized enterprises (SMEs) through the encouragement of investments and the establishment of joint ventures with European firms. As Development Commissioner in charge of the ACP, Professor João de Deus Pinhiero puts it, 'the nuts and bolts of sustainable development lie in the growth of small and medium sized enterprises.' This is particularly true in the case of the Caribbean where the small size of the domestic and regional markets has fostered the growth of SMEs in most sectors. A general lack of access to adequate and affordable long term financing has, however, affected the performance of these enterprises particularly in the production of quality products and services which are able to compete on international markets.
Consideration should also be given to the establishment of an enterprise fund for the provision of soft loans and grants to SMEs to purchase capital equipment, invest in appropriate technology and expand and upgrade production processes. This will need to be accompanied by large scale financial and technical assistance to develop export potential and improve the quality and competitiveness of products and services. Proposals for support in this area point to a general lack of specialised knowledge relating to market requirements, standards, packaging and labeling requirements particularly as they relate to trading with Europe. This calls for the development of special schemes and programmes to assist entrepreneurs to keep abreast of technological and demand changes in export markets as well as provide assistance in product and packaging design.
A number of EU-funded programmes such as the 'Target Europe' programme in Jamaica and the Trade Sector Programme in the Dominican Republic already offer some assistance to local businesses in these areas. The introduction of similar programmes in other territories will need to be accompanied by a significant increase in the resources committed to these programmes as well as a broadening of the scope of activities aimed at enterprise development within the Caribbean. Such activities include training seminars and workshops especially for lower and middle management, participation in trade fairs and trade missions, market research support, consumer promotions, advice on product and packaging design, partial sponsorship of marketing activities and technical assistance in the packaging of investment proposals. In this way, the EU can help to encourage the dissemination of best management and technological practices and improve the quality and standard of exports from the region.
Within the same context of enterprise development, attention also needs to focus on strengthening other private sector organisations such as chambers of commerce, small business associations, manufacturers associations, exporters associations and hotel associations, thus enabling them to provide more effective support to the business community which they serve. In the past, these organisations generally have been overlooked as direct beneficiaries of EU assistance.
On a national level, most countries have well-organised manufacturers associations, chambers of commerce and exporters associations which are generally influential with their members and with government and are increasingly interested in providing common services to help members improve their competitiveness and export potential. To different degrees and varying extents, these organisations are also working together to make joint presentations on both social and economic issues to government to improve the operating conditions for business. In some cases, however, the effectiveness of their support to the business community is affected by institutional weaknesses and a lack of technical and financial resources.
While different organisations will require different kinds and different degrees of assistance, in general most of the region's chambers of commerce share a common need for assistance in the area of institutional strengthening. Specific proposals for support in this area call for programmes aimed at capacity building among staff to improve administrative efficiency and enhance technical expertise in a number of areas, in particular programme design and implementation, market research and trade data analysis.
Related proposals from individual chambers of commerce point to a common problem of a relative lack of vital trade information and statistics for those sectors in which their members are involved. Attempts to address this problem are in the very early stages and require significant assistance from the European Union and other aid donors. In the Dominican Republic, the Cámara de Comercio y Producción de Santo Domingo has requested EU support in the implementation of a "Trade Information System' within the Chamber to provide specific information to the business sector. A similar project has been identified by the Jamaica Chamber of Commerce which proposes to develop a business centre within the Chamber with a data bank to access information both locally and internationally.
The implementation of similar projects in other organisations will need to be accompanied by an improvement in communication links across national and regional organisations to facilitate the development of a network of private sector organisations through which information can be disseminated and through which organisations can share the benefit of expertise and research in different areas. Proposals out of the Dominican Republic also point to the need to create linkages with similar organisations in Europe to facilitate exchanges of information. In this regard, there is a role for the Caribbean Council for Europe in linking national and regional organisations into the information flowing out of Europe. The CCE already keeps regional private sector organisations and governments abreast of information on those issues in which they have an interest as well as developments within Europe which impact directly or indirectly on them.
Proposals from the combined Chambers of Commerce of the French Departments in the Americas (DFAs) also point to the importance of foreign language training, taking into account the growing exchanges between the different linguistic region's in the wider Caribbean within the context of regional co-operation efforts. This is also an important part of the process of developing linkages and exchanges of information across private sector organisations within the wider Caribbean region.
Importantly, the aim is to improve the capacity of these organisations, not only to provide better support to the business community, but also to act as intermediaries in the delivery of EU-funded programmes for the private sector. While it is true that the majority of these organisations are in need of institutional strengthening, the general trend is that even in those cases where there is a demonstrated ability, these organisations have played a very marginal role in the planning and delivery of programmes for their members, in particular small and medium sized enterprises. The non-involvement of these private sector-support institutions is largely responsible for the general lack of information about the operation of the Convention and the opportunities for funding and involvement in other co-operation activities. The increased participation of non-State actors in development programmes, will call for measures aimed at capacity building to improve the ability of private sector organisations to effectively and efficiently implement programmes for their members in the private sector.
In this sense, the remaining five years of Lomé IV should be regarded as an important transition period for preparing non-State agencies to play a more active role in the delivery of EU/Caribbean co-operation activities. Preliminary recommendations in this area called for training seminars and workshops to familiarise private sector institutions and other decentralised agents with the Lomé financing and programming procedures as well as the operation of the aid and trade instruments (See M.A.Lowe, Europe and the Caribbean: Planning for a 'Partnership 2000', January 1996). Most organisations will also require training in the preparation of financing proposals as well as project appraisal and evaluation.
On a regional level, a number of private sector associations exist which have been working to attract investments, develop the competitiveness of their respective sectors and effectively lobby regional governments and in some cases, international organisations, on behalf of exporters and operators in their respective sectors. Such sectors include tourism, rum and rice - all of which are truly-private sector driven and, particularly in the case of tourism, are of great importance in the region's drive for international competitiveness and sustainable development. In all three cases, however, these associations have had difficulty getting EU assistance to develop, fund and implement programmes which aim to increase the viability of the particular sector and in the long-run, ensure the sustainability of development efforts in the region. Again, this raises the question about the level of commitment both on the part of regional governments and the EU, to engage with the private sector in the search for paths to sustainable development. If the EU is serious about supporting private sector-led development in the Caribbean, these are the organisations on which it should focus its attention. Future co-operation activities between the two regions should take account of the concerns expressed by regional private sector organisations as well as improve the record of assistance to these organisations in their efforts to develop their respective sectors.
The Caribbean Hotel Association (CHA) is the principal force working in the region to secure foreign investment in the tourism industry. Comprising some 1000 private Caribbean Hotel members and 600 allied members including airlines, travel agencies, restaurant suppliers and trade and consumer press, the CHA is truly private sector, regional in nature and properly representative of the regional tourism industry.
The Caribbean sub-region remains the world's most 'tourism dependent' region with the sector accounting for approximately 25% of all exports of goods and services. Tourism promises to be the region's median for economic growth and stability, with a projected annual growth rate of 4.6% by the year 2000. As such, priority has been placed on expanding the tourism market base within the wider European market and increasing European investments in the regional tourism industry.
In the meantime, there is the need to continue activities aimed at product development and marketing to improve the competitiveness of the industry. Hotel accommodation being the largest revenue earner in the tourism industry, the CHA has highlighted a number of areas in the hotel sector in which external assistance is needed when aiming to achieve long term success in the tourism industry. Critical among these is the need for assistance in the area of training and human resource development. CHA initiatives7 in this area have begun the process of improving hotel management standards in the region. Assistance is needed, however, to fund the various work sessions under the several training programmes which have been established. The CHA has also highlighted the need for financial assistance in the current efforts to upgrade the level of training being provided at Hotel Management/Training Schools across the region to accepted international levels of certification. A comprehensive model has been developed under the auspices of Sir Alister McIntyre, Vice Chancellor of the University of the West Indies. This model has been endorsed by the Heads of the ACS territories and the private sector. A US$5 million fund would be required to initiate the presented activities.
In the same context of human resource development, EU assistance is also required to fund technology workshops to educate hoteliers on the marketing implications generated by the continuing development of the INTERNET and other related activities. Other proposals highlight the need for significant refurbishment of hotel properties as well as assistance to property owners in the provision of expert advice in four key areas namely, operations and financial management, marketing, architecture and engineering and food and beverage. CHA statistics indicate that of the 1,000 hotel members in 32 Caribbean nations, a significant proportion are operationally inefficient and sufficiently unprofitable to be on the verge of bankruptcy. This, according to the CHA is largely due to the fact that many hotels in the region were built and mortgages granted without benefit of professional feasibility studies. Currently, the Caribbean Hotel Advisory Council (CHAC) is the only body that is available to assist hoteliers with their building and management difficulties. In order to augment the work of the CHAC, the CHA has proposed the establishment of a resource group with expertise in the four areas highlighted above to analyse ailing properties and make recommendations for their revitalisation. EU assistance in this regard, would be in the form of financial assistance to initially establish the resource group, which the CHA foresees would become self-sustaining through the payment of fees in the future.
The CHA has also been extremely involved with sustainable tourism activities specifically those focusing on the preservation of the environment. A Hoteliers ToolKit, Environmental Signage, Environmental Awards, a video and training seminar are just some of the projects that have been self-funded. This type of vital effort could be broadened and intensified with the addition of an Environmental desk within CHA's headquarters.
The Caribbean Rice Association (CRA) embraces rice industry operators in CARICOM, the Dominican Republic, Haiti and Cuba and provides a forum for the participation of producers at Field and Milling levels and marketers/distributors and suppliers of inputs and services to the region's Rice Industry. The CRA was established in 1993 to promote the development, growth and expansion of the regional rice industry and to encourage the development of linkage industries through the provision of technical assistance, business guidance and the procurement of credit and other forms of economic assistance and services to operators in the industry and associated activities.
Until quite recently, activity in the Caribbean ACP rice industry was at a relatively low level with exports going to Europe under a quota fixed at 125,000 tonnes of husked rice and 17, 000 tonnes of broken rice at a levy of around 50 per cent of that applied to rice form non-preferred nations. However, under a provision aimed at encouraging economic development in the smallest nations of the Caribbean, the Overseas Countries and Territories (OCT -- Montserrat, Turks and Caicos, Anguilla, Cayman, British Virgin Islands and the Netherlands Antilles) a special EU derogation was agreed for Caribbean ACP rice to be processed in those nations. Under this arrangement ACP rice can be milled in the OCT and enter the EU quota-free and not subject to levy.
This has contributed to the impressive growth of the rice industries in Guyana and Suriname since 1992. In Guyana, the industry has become a key component of that nation's economic recovery, earning over US$76 million per annum and contributing some 19% of agricultural GDP and 12.5% of export earnings. Importantly, the industry is not controlled by government, has no subsidies and principally consists of small and medium sized privately owned farms and privately owned mills. In short, it is exactly the type of industry Europe wishes to see prosper in the Caribbean.
Recent challenges from a number of European rice producers to the current arrangements governing the entry of ACP rice into the EC market through the OCTs pose a number of threats to the continued viability of this industry. Spain, Italy and France, all domestic European producers of rice at relatively high cost, have been threatening to introduce safeguard measures to ban ACP rice entering through the OCT unless the European Commission arrives at a solution on how to develop new regulations to control ACP shipments through the OCT. While the EU has indicated that it has no immediate intention to stop the arrangements for shipment through the OCT route, the CRA has put forward a number of proposals aimed at better organised access for ACP rice which, in the medium to long term, will ensure that ACP rice will be able to compete on an equitable basis in the EU market.
The proposals call for the establishment of quotas for ACP rice milled in the OCT, subject to an annual upward review up to the end of Lomé IV. Such quotas should be set in a manner that takes account of the growth in the level of rice production in ACP exporting nations while making special provisions for the least developed of the OCTs. Further, such quotas should be determined in the light of any change to the existing ACP quotas for rice for direct export to the EU on the basis of a reducing tariff. Other proposals include the establishment of a price mechanism at the same level prevailing for EU producers.
The CRA has also highlighted the need for EU assistance in developing the quality of ACP rice exports in order to ensure the continued viability of this sector beyond the expiry of Lomé IV in 2000. In this regard, priority should be placed on expediting the release of funds for the implementation of activities and programmes under the Caribbean Rice Industry Development Network (CRIDNet). The CRIDNet aims to enhance the competitiveness of the regional rice industry by improving efficiency in research and training and linking regional industry operators with international rice industry institutions. CRIDNet activities have been affected, however, by the delay in the release of Lomé funds under the Caribbean Regional Indicative Programme (CRIP).
EU support is also needed in the development of programmes aimed at increasing yields within the industry. The CRA has pointed to production-based problems which range from the lack of mechanisation to pest infestation and disease. So too, problems with the handling of bulk at all stages call for assistance to upgrade transport facilities prior to shipping in order to maintain quality and facilitate loading.
A case can also be made for institutional support within the CRA Secretariat to allow it more direct input in the implementation of CRIDNet programmes as well as the Regional Rice Development Programme under the CARIFORUM Integrated Agriculture and Fisheries Development Programme. So far, capacity constraints within the CRA Secretariat have necessitated the appointment of the Caribbean Agricultural Research and Development Institute (CARDI) as the Executing Agency of CRIDNet activities. The CRA has also appointed a Technical Advisory Committee to advise the Association on the Work Programme of the Network. CRA involvement in Lomé activities will bring about a more coherent regional approach to the development of the regional rice industry.
The West Indies Rum and Spirits Producers Association (WIRSPA) brings together distillers, brewers and suppliers from the major rum exporting countries of Guyana, the Bahamas, Jamaica, Barbados, Trinidad and Tobago, St. Lucia, Antigua and the Dominican Republic. Increasingly, the organisation has become an effective lobby group on issues affecting Caribbean rum exporters on the European market.
Rum is one industrial product where Caribbean ACP producers have achieved international competitiveness and, unlike rum producers in the French DOMs of Reunion, Martinique and Guadeloupe, Caribbean producers enjoy no subsidies nor benefit from special pricing arrangements. Despite the recent abolition of tariffs on ACP light rum and the progressive increase in the quota for traditional rum until abolition in 1999, the Caribbean rum industry faces an ever-increasing number of challenges in the European market both before and after the year 2000. Its competitiveness and ability to strengthen its position in the European market for both bulk rum and branded products will continue to be subject to threats from a variety of sources. Chief among these is the competition from higher cost DOM producers who, even now, are seeking to expand their market in Europe through the maintenance of special preferential mechanisms available only to European rum producers. For Caribbean ACP producers, this is aggravated by the erosion of what little preference they have in the European market after the year 2000 as other producing nations are able to enter an increasingly liberalised market. There is also the continuing danger that the GSP might be extended to a wider range of nations able to produce rum for the European market. Add to this, the continuing uncertainties about ersatz rum produced in Central and Eastern Europe if these nations become members of the EU.
In the light of all these developments, WIRSPA has begun to stress that because quotas were created and then maintained for so long on ACP rum, the industry will require special transitional support both in the second part of Lomé IV and after the Convention's expiry in 2000. In the meantime, industry operators have recognized the need to increase marketing and promotional activities in Europe in order to establish product and brand awareness of 'Caribbean' rum as being the only genuine rum. Industry operators will require financial assistance, however, to meet the huge marketing costs involved in such large scale promotional activities. There is also the need for technical support to enable the industry to ensure the continuing competitiveness in the European market through assistance with issues such as meeting international norms, financing effluent control systems and market studies on new EU member states as potential markets for ACP rum.
The Windward Islands Farmers Association (WINFA) is a sub-regional grouping of national small farmers associations across five of the Windward Islands namely, Martinique, St. Lucia, Grenada, Dominica and St. Vincent and the Grenadines. Besides its role in the area of advocacy on behalf of its members, WINFA activities include farmer training and education through the promotion of farmer exchanges within and outside of the region, particularly in Central America, to learn production processes and facilitate some exchange of technology. WINFA also promotes the participation of women in all areas of agriculture.
Agriculture being the main stay of the economies in WINFA member countries, Europe represents the main market for these countries, accounting in 1990 for 63.1 % of St. Lucia's exports, 63.0% for Grenada, 59.2% for Dominica and 50.9% for St. Vincent. Banana exports contributed to the majority of that total, accounting for 78.3% of total agricultural exports from the Windward Islands in 1990. Given the current threat to the preferential arrangements for Windward Island bananas, WINFA has begun to concentrate on activities aimed at diversification 'around bananas' rather than 'out of bananas'. This approach acknowledges the need to expand the export base in these countries, not through the abandonment of banana cultivation but through the creation of linkages between agriculture (bananas) and other industries, for example, tourism which increasingly is becoming an important source of revenue in these islands. Here, the major concern is with guaranteeing the food security in these islands while increasing the productivity and viability of agricultural production.
To this end, WINFA has pointed to the need for medium/long term financial and technical assistance to member organisations in order to increase export capacity, enhance competitiveness and ensure the successful restructuring of the banana industry in the Windward Islands. Specific proposals call for EU assistance to farmers through the provision of training in improved technologies as well as the provision of agricultural inputs and equipment. There is also the need for farmer training in order to meet market requirements as well as training in production management and the development of entrepreneurial skills. Other suggested programmes include farmer exchanges to provide hands-on training in technology adaptation.
Private sector development also depends on the ability of national governments to implement sound macro-economic and sectoral policies and provide the necessary infrastructure to support the growth of private enterprise. Capacity problems within the public sector and the continuing burden of debt in a number of countries, however, have affected the ability of national governments to create a social and financial climate conducive to attracting foreign capital and developing small businesses. There is, therefore, the need for continued support to Governments as they perform the complex tasks of structural adjustment. This includes financial assistance in the development of infrastructure and other long-term development programmes in the area of education, health, the environment and population control, as well as technical assistance to build administrative capacity and improve technical expertise within the public sector. As with the private sector, particular attention should focus on activities and programmes aimed at developing analytical and other research skills to keep abreast of economic trends and evaluate the impact of liberalisation on certain sectors and products.
With the present move towards regional integration, there is also the need for policy reform to remove current constraints to intra-regional economic activity and eventually harmonise policies in a number of areas. Preliminary proposals for support in this area call for technical assistance to regional governments to enable studies to be undertaken for recommending the best methods for reform and harmonisation of policies between countries (See: Gill, Hess and Pellerano, A new strategy to promote regional integration in the Caribbean region, Draft report prepared on behalf of the European Commission, October 1995). Specific areas highlighted in which policy, legal and regulatory reform and harmonisation are needed include trade (tariff reform, customs regulations and documentation, rules of origin and competition policy); fiscal regulations (harmonisation of fiscal regimes); standardisation (product quality requirements); investment and company regulations (investment codes, treatment of foreign investors and bankruptcy laws); environmental regulations and exchange rate policies. The proposals also highlight the need to improve the technology for capital market transactions in the region as well as assistance to strengthen existing stock exchanges in Barbados, Jamaica and Trinidad and to improve capital market instruments. To these, one should add the need for assistance to develop proper communication and transportation (air and maritime) channels within and between the countries of the region. This is vital in the development of effective regional co-operation activities, particularly as it relates to trade and the use of the cumulation provision of the Convention8.
Special consideration also needs to be given to the potential role of the French Departments in the Americas (DFAs) when developing ideas in the area of regional co-operation. Although contacts and exchanges are increasing in many fields such as the arts, sports and the fight against drugs, there is still much to be done to initiate and structure a truly fruitful regional co-operation for mutual development. As Europe in the Caribbean, the DFAs present a unique opportunity for co-operation in the area of trade, tourism and services activities. In suggesting some areas in which the most important and meaningful projects could be implemented to foster mutual and balanced development through regional co-operation, the combined Chambers of Commerce of the DFAs have highlighted regional air and maritime transport for the development of exchanges and trade; tourism, taking into consideration the growing importance of Europe as a market; and the establishment of joint ventures for the processing of some agricultural produce for export to the European market.
Importantly, the ideas contained in this paper are not meant to be exhaustive but to indicate the broad areas in which EU assistance is needed in the short to medium term in order to guarantee sustainable development in the Caribbean region. More detail on these ideas and proposals appears in the individual submissions from a number of Caribbean private sector organisations contained in an Annex to the present paper.
Chapter Three: New Modalities of EU/Caribbean Co-operation
The past twenty years of Lomé co-operation have evolved a number of institutions in which the European Union has conducted dialogue with its ACP partners on the range of issues which attend the Convention:
The Council of Ministers is the policy-making body of the Convention, consisting of, on the one hand, representatives of the 15 EU Member States and members of the European Commission and, on the other hand, ACP government members. It is also the forum for the conduct of an enlarged political dialogue, particularly on issues of human rights, good governance and the rule of law which were recently incorporated as essential elements of the Convention.
The Committee of Ambassadors is the supportive arm of the Council and is composed of, on the one hand, ACP Ambassadors to the EU and, on the other, each Member State's permanent representative to the European Union and one representative of the Commission.
The Joint Assembly is the consultative body of the Convention, consisting of representatives from the European Parliament and a mixture of ACP Parliamentarians and Diplomats. The Joint Assembly is charged with the task of reflecting upon all matters pertaining to ACP-EU co-operation and formulating proposals with a view to improving and reinforcing co-operation in all areas.
With the exception of the Joint Assembly, which facilitates dialogue with a number of European NGDOs, the composition of the institutions reinforces the government-to-government nature of co-operation that has characterised the Lomé relationship to date. The same is true for regional mechanisms such as CARIFORUM and the formal arrangements and procedures that govern the implementation of technical and financial co-operation in individual ACP States. In the absence of a formal mechanism for direct dialogue with the European Commission and its Member States, a number of key private sector associations in the Caribbean, in particular regional associations representing producers groups and tourism interests have had to rely on informal channels within Europe such as the Caribbean Council for Europe to facilitate direct dialogue with the Commission and EU Member States on those issues which impact directly on them.
While the outcome of these encounters has been positive, the development of a future coherent regional policy needs to be accompanied by the creation of new mechanisms or the revision of existing ones to facilitate a more decentralised dialogue which embraces all the actors in civil society. The present shift towards region-specific arrangements will, in all probability, lead to a decentralisation of the Lomé dialogue to regional mechanisms. In the case of the Caribbean ACP, this focuses attention on CARIFORUM as the most likely forum for the conduct of an enlarged policy and political dialogue between the EU and Cariforum countries in the future.
At present, CARIFORUM acts as a forum for ongoing exchanges among Caribbean ACP Ministers. While there is some resistance to the idea of broadening membership to include representatives from the private sector and the rest of civil society, short of creating a new mechanism at this time, this seems to be the most logical step, at least in the short to medium term. The idea is to find creative ways of using the existing structures of the Convention to facilitate dialogue with the vast range of actors in civil society, thereby ensuring that future policy decisions are the outcome of genuine consultation between governments and private sector interests. In this way, while the conduct of negotiations for a successor agreement may remain the domain of governments and their representatives, the development of negotiating stances based on minimum and maximum expectations would have been arrived at through a process of consultation with significant input from private sector organisations and their representatives. Broadening the CARIFORUM membership base would also facilitate increased participation of regional private sector organisations in the formulation and implementation of regional projects and programmes under the current EDF.
The proposal, therefore, is to upgrade the CARIFORUM mechanism in the shortest possible time into an effective regional forum with representatives from Governments, the regional private sector and other regional groupings representing trade unions, women's groups and academia. In the case of the regional private sector, preliminary proposals regarding membership include the CAIC and a representative from each of the regional private sector associations namely, the Caribbean Hotel Association, West Indies Rum and Spirits Producers Association, the Caribbean Rice Association, the Windward Island Farmers Association (WINFA) and the St. Lucia Banana Growers Association. Here, the rationale is that the CAIC, by virtue of its membership and operational structure, already represents and articulates regional private sector positions in the forum of CARICOM, the ACS and the Business Network for Hemispheric Integration (BNHI) which aims to become the private sector vehicle for the implementation of Free Trade in the Americas by the year 2005. CAIC membership in CARIFORUM would be a natural extension of this role. But, to the extent that the CAIC cannot deal adequately with sector-specific issues such as the conditions of access for Caribbean rum and rice into the EC, then there is need for representation from regional associations.
On a national level, there still exists some difficulty in initiating ongoing and meaningful private sector/ public sector dialogue. While, this is a matter to be worked out between national governments and their counterparts in the private sector, there is a role for EU Delegates in each territory in identifying the key private sector institutions and, together with the National Authorising Officer, begin to engage them in dialogue on the working of the Convention. This is an essential part of the process of identifying new intermediaries in the private sector capable of delivering programmes for the private sector.
According to the terms and conditions governing development finance co-operation, financial assistance may be made available to or through the ACP States concerned or, subject to their agreement, either through eligible financial institutions or directly to any other eligible beneficiary. (Art 233 (3)) Further provisions exist for the granting of financial assistance to the final recipient through an intermediary or directly to the final beneficiary in the private sector. (Art. 233 (4)(a)(b))
In the case of the Caribbean, one can identify few private sector programmes that are owned and delivered by non-State intermediaries. In Guyana, the UK-based NGO, Co-operation for Development was appointed as a consultant to implement the Small Business Credit Initiative using funds left over from the 1990-94 NIP. In Trinidad, Caribbean Business Services Limited (CBSL) was incorporated as a private company in December 1994 with local private sector shareholding to provide shop floor technical assistance to local manufacturers under the CDI initiative. In the Dominican Republic, the Cámara de Comercio y Producción de Santo Domingo is also the agency in charge of implementing the Trade Sector Programme under the Caribbean Regional Indicative Programme .
The general trend, however, is that financial assistance to the private sector has been administered largely through government or quasi-governmental agencies. In some cases, this occurs despite the existence of eligible private sector organisations. This is particularly true in the specific case of the Caribbean Hotel Association, which, despite its key role in securing foreign private investment in the regional tourism industry as well as its demonstrated record of successful project development, has played a very marginal role in the implementation of the Caribbean Integrated Tourism Development Programme under the Regional Indicative Programme.
The lack of significant private sector input in developmental projects is one reason for the slow pace of implementation. The successful planning and implementation of long-term development projects such as those in the tourism sector require some certainty about the level of available resources. Unlike the public sector which has limited sources of funding, private institutions are much more flexible in their funding and will be able to work easily with the Caribbean on financing projects. There is, therefore, a clear requirement to identify key players in the private sector which have the potential to act as intermediaries to deliver and access counterpart funds for private sector programmes. Often these organisations are better equipped to formulate projects, implement them faster, more efficiently and at a much lower cost. Moreover, the incentive to succeed is greater when private sector programmes are owned by recipients or intermediaries in the private sector rather than by governments.
Again, this calls for a greater role for members of EU delegations in each territory to identify and decide the efficiency, integrity and accountability of potential private sector intermediaries. One proposal out of Guyana has suggested adopting a sectoral approach to the identification of such intermediaries thereby linking programmes to sectoral organisations with a proven or potential capability to implement projects. This is similar to the current approach under the Caribbean Regional Indicative Programme (CRIP) wherein programmes are linked to regional organisations and agencies in that particular sector.
On a national and regional level, a number of private sector bodies exist which, provided they can be strengthened institutionally, have the potential to act as intermediaries and partners in the delivery of private sector programmes. The Trinidad and Tobago Manufacturers Association (TTMA) is one such example, having had experience in managing the disbursement of funds to the local private sector under World Bank and IMF programmes. Others include the CHA, CAIC, CRA, and WINFA.
The recently established Caribbean Enterprise Foundation (CEF9), also presents an interesting model for the delivery of private sector programmes within the Caribbean. A largely Eastern Caribbean private sector initiative to develop the private sector, the CEF aims to identify new market-driven commercial opportunities; help entrepreneurs (particularly small businesses and new entrants to the private sector) to diversify their products and services; and encourage and assist enterprises become more export-oriented.
Given its potential for helping the regional private sector to create export competitive products and services for regional and extra-regional markets and, given its potential to identify counterpart funds from other multilateral agencies, there is clearly a future role for the CEF in the development and implementation of programmes for the private sector under future co-operation activities between the EU and the Caribbean.
Under the present arrangements, ACP Governments are responsible for: defining the objectives and priorities on which the indicative programmes are based; choosing the programmes and projects to be financed; preparing and presenting programme/project dossiers; programme implementation and management; and maintaining projects/programmes. The financing arrangements for each project/programme are determined jointly by the ACP State and the EU. Thereafter, financial assistance may be made available to or through the ACP States or, subject to their agreement, either through eligible financial institutions or directly to any other eligible beneficiary. (Art. 222 (2)(a-f); 233(2-3))
In effect, the extent to which decentralised agents can have access to Lomé resources is entirely dependent on the willingness of ACP governments to grant such access. This accounted in large part for the poor results of de-centralised co-operation activities in the first half of Lomé IV. In order to eliminate the red tape, the European Commission proposed, at the time of the Mid-term review, to revise the procedures governing the drawing up of indicative programmes. Accordingly, ACP Governments would be requested to indicate: the amount set aside for decentralised co-operation activities; the principles and conditions under which funds would be deployed; and the categories of beneficiaries. Thereafter, decentralised actors would submit projects directly to the Commission which would examine each project and inform the National Authorising Officer in each country of the projects to be supported.
While acknowledging the need to ensure greater participation of decentralised agents, ACP Governments rejected the Commission's proposals on the grounds that this would challenge the authority of the ACP Government or delegated authority to determine the use of NIP resources. Moreover, with the EU exercising considerable discretionary powers over the selection of programmes for funding, there was no guarantee that decentralised co-operation activities would dovetail into the national development plan. Importantly, this is in keeping with the principles of partnership and the recognised right of ACP States to determine their development principles, strategies and models in all sovereignty. (Art. 3)
There still exists, however, a need to devise new arrangements to increase private sector access to Lomé resources, eliminate the red tape and minimise the bureaucratic delays both on the ACP side and on the Commission side. Proposals from Caribbean private sector organisations support direct access to funds through the creation of a separate private sector window in any successor agreement. ACP Governments and Commission Members have yet to come to terms with this idea. The precise arrangements would have to be worked out in such a way that they do not create a competitive situation between government and their private sector counterparts and more importantly, that they do not appear to undermine the recognised right of Caribbean governments to determine their development principles, strategies and models in all sovereignty.
Preliminary proposals suggested identifying an eligible regional financial institution capable of managing the disbursement of Lomé funds for private sector programmes within the different territories. Such an approach would not be incompatible with the existing provisions of the present Convention which stipulate that financial assistance may be made available through eligible financial institutions subject to the agreement of the ACP States. In this regard, the Caribbean Development Bank was seen as an interesting model by virtue of its membership, operational structure and its central role in development activities within the region.
A small regional financial institution relative to other multilateral development banks, the CDB links 25 countries from three continents and the Caribbean10. As the largest source of external development finance, particularly for the less developed countries of the region, the institution plays a central role in assisting members in the co-ordination of their development programmes; financing development projects and programmes; mobilizing additional financial resources from within and outside the region for development purposes; and providing technical assistance particularly by undertaking or commissioning pre-investment surveys and by assisting in the identification and preparation of project proposals. The CDB assists private sector development either by participating with co-financiers in direct loans to private entities and enterprises or indirectly by lending to financial intermediaries in the borrowing member countries to be on lent to private enterprises. Priority is placed on activities and programmes which contribute to economic development and have a potential multiplier effect in economic activity in the borrower country.
Using the CDB model, the proposal was to establish a special private sector window within the bank exclusively to administer EU funds for approved private sector programmes. Such an approach might involve the creation of a foundation able to receive funding from other bilateral and multilateral institutions and from private sector financial bodies. The new window might be controlled by a board bringing together representatives of governments, donor bodies and the private sector and might see the establishment of national desks coordinated by a regional coordinator who, collectively, would work with private sector intermediaries in the different territories to deliver programmes/projects. Each national desk would liaise directly with the EU Delegation Office in the different territories and assist in the quarterly reviews of projects/programmes.
Participants from the Caribbean private sector at the time of the CCE/CAIC/EC Encounter in Brussels advised caution, however, in the choice of the CDB as an institutional model due largely to that institution's past record in the delivery of projects. In this regard, attention focused on the issue of timing which Caribbean private sector representatives underlined as crucial when seeking to work with the private sector. Whereas the CDB might take 12-18 months to process a loan, the nature of private sector projects are such that they demand a shorter processing period, failing which the proposed project would die a natural death. Instead, Caribbean private sector representatives suggested identifying eligible national financial institutions such as the Trafalgar Development Bank in Jamaica and the Institute of Private Enterprise Development (IPED) in Guyana through which to channel funds for approved private sector programmes/projects in a successor agreement.
There is still space, however, within these proposals to accommodate the model proposed above. The idea of creating a private sector window within the CDB is guided by a number of concerns, namely: identifying a credible and accountable regional institution which could act as the umbrella foundation or legitimising body for a Caribbean private sector window capable of working with a network of national financial institutions. Within this framework, the private sector window (the location of which does not have to be at the present seat of the CDB in Barbados) would operate as an autonomous entity by virtue of its exclusive role and separate organizational structure. The window would also act as a sort of holding house for private sector funds which would be released to national institutions once projects have been approved. Under the current arrangements, Lomé funds are channeled from the EU Delegation Office through government to the intermediary and finally to the beneficiary in the private sector. This is usually accompanied by delays both on the EU side and on the part of government, which affect the smooth implementation of the programme.
In order to minimise the delays, new financing arrangements would have to be established whereby once projects have been approved the money is channeled through the designated private sector window instead of through national governments. This is assuming that the Commission can streamline its procedures for monitoring and implementing co-operation activities in order to minimise delays on the EU side. In this regard, there is much value in the suggestion that the Commission delegates greater responsibilities to the Heads of Delegations in the different territories.
The other difficulty is in ensuring the participation of national and regional private sector organisations in EDF projects and programmes and that their initiatives are taken into account in the formulation and implementation of indicative programmes for the next five year period. As pointed out before, the programming process for the current financial protocol is well underway and should be completed by November of this year. The major question now is how to use the next few months to set the stage for co-operation over the next five years and beyond. The remainder of this paper addresses itself to this question.
Conclusion and Recommendations
The previous sections have highlighted a number of key issues that were the subject of frank and positive discussion between representatives from the Caribbean private sector and members of the Development Directorate of the European Commission at the time of the CCE/CAIC Encounter in Brussels in July this year. At the end of the one day Encounter with the European Commission which brought together some 30 participants from Europe and the Caribbean, both EC representatives and Caribbean private sector participants had a clearer understanding of what was and was not possible in the search for a more effective partnership. Importantly, the list of possibilities outweighed the impossibilities. As a result, further discussions are intended to see how the very practical ideas proposed by the private sector organisations present might be implemented.
There is no doubt that the private sector will be at the forefront of most new approaches to development. Of the three regions of the ACP, the Caribbean is the most prepared for such a future approach to co-operation with the European Union. The relative coherence of the private sector in the region, its vibrancy and its ability to develop and articulate coherent and unified positions on which to lobby regional governments are in contrast to the less developed and more fragmented organisations, particularly in Sub-Saharan Africa.
The effectiveness of this future approach to EU/Caribbean co-operation, however, will necessitate the development of new financial approaches aimed at assisting small and medium sized enterprises through the EIB, the CDI or other instruments such as the ECIP Scheme. Where the CDI is concerned, there is need for a future increase in the resources allocated to that institution in a successor agreement as well as the possible establishment of an envelope system with set allocations for each region in order to ensure that each region and territory benefits equitably (if not equally) from CDI assistance and facilities. New and innovative uses of EIB resources have also been proposed, including the design of policies that have strong impact on the development of financial markets, enabling financial institutions to provide longer-term financial resources to small and medium-sized enterprises. Private sector-led development also pre-supposes the existence of programmes to strengthen chambers of commerce, manufacturers associations, hotel associations and other national and regional private sector organisations so as to enable them to provide more effective support to the business community.
The Encounter underlined that there is no substitute for direct dialogue when seeking to develop a more decentralised approach to co-operation. It is a telling statement, however, that once again, the private sector has had to rely on a non-Lomé institution to facilitate effective and direct dialogue with the European Commission. This raises the question of whether one needs to look further than the CCE when searching for a mechanism to facilitate dialogue with the private sector in the future. This is not a role sought by the CCE which sees itself more as a facilitator and producer of timely information. But in the short term until proper arrangements are put in place, the CCE remains a credible body as long as channels are established for forward and backward exchanges between the different Lomé partners. In the longer term, however, unless a basis for direct dialogue is established there will remain a danger of a competitive situation developing between national governments and the regional private sector which might undermine the objectives of co-operation as well as the principle of partnership that is central to EU/ACP co-operation.
Achieving the objectives of co-operation requires a new culture of partnership between national governments and their counterparts in civil society. Despite tentative initiatives towards this kind of social partnership in a few countries in the region, the required culture of partnership is still some way off. In order to give the process a push start, it will be necessary to create situations and arrangements that force national governments and decentralised agents in the private sector to begin working together in the context of EU/Caribbean co-operation. This comes back to the proposal to create appropriate mechanisms that incorporate all the Lomé partners - national governments, the private sector and the representatives of civil society - at every stage of EU/Caribbean dialogue; negotiation, policy development and programming. At the same time, the private sector will require separate financing windows either through existing CDI antennae organisations, the EIB or through the identification of eligible national financial institutions for the timely delivery of private sector programmes.
The Mid-Term Review having brought about a number of fundamental changes in the nature of EU/ACP co-operation over the next five years, no substantial changes can be made to the Convention at this time. This, however, does not preclude putting in place arrangements on a regional level that agree with the letter of the Convention and which can carry over into a successor agreement. This calls for action in the short term to carry forward the process of dialogue that has been initiated. As a first priority, emphasis should be placed on ensuring that some of the projects identified by individual private sector organisations are incorporated in the NIPs and the RIP for financing under the current EDF. In a number of cases, these proposals need fine-tuning and elaboration. The ideas contained in these proposals, however, address the main constraints to private sector development in the region and can be built into successful private sector programmes over the next five years. In this regard, particular emphasis should be placed on, but not limited to, programmes aimed at developing entrepreneurial skills and institutional strengthening within national and regional private sector organisations. In this way, the next five years can be used to prepare the Caribbean private sector to play a more active role in the future delivery of co-operation programmes and projects and create the conditions for private sector-led development within the region.
For their part, individual private sector organisations will have to begin to work out the practical issues of their respective proposals as long as they relate to implementation, financing, etc. with a view to formally submitting them to their respective NAOs for possible incorporation in the NIP before the completion of the current programming process. It is also advisable that they begin to familiarise themselves with the working of the Convention by drawing on the experience of those private sector organisations and governmental agencies that have acted as executing agencies for past and current EDF projects.
It is also up to the CAIC to begin to use its growing dialogue with CARICOM to lobby the Caricom Secretary General (who is also the CARIFORUM Secretary General and the Regional Authorising Officer for the Caribbean Regional Indicative Programme) on the matter of extending CARIFORUM membership to regional private sector bodies as well as considering some of the projects identified by regional private sector associations for financing under the CRIP. With regard to CARIFORUM membership, the process could begin by admitting regional private sector bodies as observers at its meetings as allowed under Rule 7 (2) of the Rules of Procedure, with a view to revising the rules and gradually extending membership to decentralised partners in the Caribbean. Failing this, there will be the need to create a makeshift forum in the short term to facilitate regional dialogue. In which case, this will create an additional call on regional co-operation funds. In the medium to long term, the growing emphasis on regional co-operation as a major objective of EU/Caribbean co-operation will demand serious consideration on the part of all the parties concerned about how to use existing regional structures to promote workable partnerships and effective co-operation for mutual development.
For its part, the European Commission will shortly be publishing its Green Paper outlining the principles of future co-operation with the countries of the ACP in the next millennium. As the process of planning and creative thinking gains momentum over the next five years, it will be vital that the mechanics of translating the principle of decentralised co-operation into a workable practice are achieved. A central component will be the incorporation of the thinking of the Caribbean private sector as reflected in this paper into ideas being developed separately by the EC and ACP Ambassadors in Brussels.
In this regard, special note should be taken of areas highlighted in previous sections that indicate the a number of essential first steps. These are: