UNDP, under the overall leadership of the Resident Coordinator in the COVID-19 response, launched a series of consultations which discussed some of the critical challenges facing the region in the wake of the global pandemic and identified innovative solutions to catalyze recovery and build long-term resilience. This virtual series, aptly titled “Consultations for Action” brought together five panels comprised of a cross section of thought leaders including Senior Officials from within the Host Governments of the region, International Financial Institutions, Development Partners and the UN Family.

Each session focused discussions around key thematic areas and allowed invited delegates and the general public to engage with panelists on issues most relevant to the daily lives of people across the region.

e-Conference Topics:

1. Development Finance for the COVID-19 Response in the Eastern Caribbean
2. Social Protection as Part of the COVID-19 Response in the Eastern Caribbean
3. Food Security and Economic Diversification as Part of the COVID-19 Response in the Eastern Caribbean
4. Reopening the Economy at the End of the COVID-19 Response
5. Private Sector for the COVID-19 Response

Development Finance for the COVID-19 Response in the Eastern Caribbean  

 Caribbean SIDS face several challenges associated with financing for development. Their higher levels of per capita income and progress on human development mean that they are either no longer eligible for ODA, have lower access to concessional finance and the access they do have is typically on much harder terms. Yet the vulnerabilities that they face are immense. Their small size, small populations, limited resources, remoteness from international markets, diseconomies of scale, dependence on foreign trade, social challenges and vulnerability to external economic shocks and natural hazards have led to high and for some unsustainable levels of debt, which has stigmatized the region and dampened investors’ appetite. Recurrent debt servicing costs have similarly reduced the capacities of governments to spur new development opportunities.

A 2015 UNDP study^[1] highlighted key stylized facts of the region, most notably:

• Caribbean SIDS experience a twin mobilization problem: limited capacity to mobilize domestic resources and limited capacity to mobilize external resources
• Despite maintaining reasonable savings rates there is a shortage of investable resources across many Caribbean SIDS
• High debt and consequent servicing costs severely limit governments’ fiscal space and crowd out other development expenditures
• Foreign direct investment has been an important source of development finance for Caribbean SIDS but has been decreasing for many, since 2009
• Aid flows have become concentrated on a few Caribbean SIDS and fluctuate considerably

Social Protection as Part of the COVID-19 Response in the Eastern Caribbean

Over the last two decades, countries across the Caribbean have made critical investments in social infrastructure – education, healthcare, transportation – and have recorded varying degrees of success in reducing poverty rates and levels of indigence. Nonetheless, poverty is still a critical development challenge for countries in the region, with recent joint research by UNDP, UN Women and UNICEF ^[2] suggesting that across the region, poverty levels remain stubbornly above 15% in many countries, with some experiencing more than double this rate. Rates among women and children are even higher.

Equally, the levels of vulnerability remain high. Relatively high unemployment rates, limited access to robust healthcare, significant levels of unpaid care work and economic livelihoods heavily concentrated in industries that are highly sensitive to external shocks are all compounded by increasing climate change-related risks as well as the reality of health-related risks such as COVID-19.

^[2] COVID-19 Macro Economic and Human Impact Assessment Series, forthcoming

Food Security and Economic Diversification as Part of the COVID-19 Response in the Eastern Caribbean

The panel has two foci of discussion. On the one hand, the well-documented fact that Caribbean nations are scarcely diversified economies, depending on tourism and imports for their survival. On the other hand, and connected, the need to guarantee the availability, accessibility, utilization and stability of food systems to meet the food and nutrition demands in countries that are not self-sufficient. Food and nutrition security are frequently challenged by natural disasters, food production and price volatility, trade obstacles, outdated technologies, pests and diseases, difficult enabling environments, climate change and now COVID-19. International division of the economy and the comparative advantages of the Caribbean place the region in a zone of monocrop production of touristic services.

As agriculture’s significance as a growth driver, provider of employment and income security as well as the delivery channel for food and nutrition security has diminished, superseded by tourism and related services, in the past decades, CARICOM countries now import more than 60% of the food they consume.^[3] Local agriculture is now insufficient to meet the diverse food security needs of the region. The first block of the debate will explore strategies to reduce the dependency on tourism and nurture other local industries and services to allow the economy to diversify.

The second block will try to respond to a reality where one in five people across the Caribbean are estimated to be undernourished. Advances in biotechnology and technology offer partial relief to the problems associated with food insecurity. However, the Caribbean has yet to fully harness the benefits from these tools and implement precision agriculture methods to optimize the productive capacities of their limited agrarian resources.   

Institutional settings and policies to promote food and nutritional security as well as to encourage greater economic diversification are beset by resource and capacity constraints. Information systems to convey best practice, new research and technologies are patchy and less well maintained and ill equipped for the task of encouraging food producers to switch from traditional methods, markets and products or to promote behavioral change of consumers.

Against this context, the purpose of this panel is to examine the strains that the current health crisis has exposed on the scarcely diversified economy and the food and nutritional security of the Eastern Caribbean, highlight the obstacles and potential roles and interventions for government and development partners to action that remove key barriers and strengthen food and nutritional security and promote greater economic diversification in the Eastern Caribbean.    

 ^[3] State of Food Insecurity in the CARICOM Caribbean Meeting the 2015 hunger targets: Taking stock of uneven progress: FAO: 2015

Reopening the Economy at the End of the COVID-19 Response

Governments across the globe are faced with a difficult dilemma. Many have acted quickly to suppress the spread of the COVID-19 virus to save lives but in doing so they have seen their economic networks grind to a halt. To keep economies on ice, governments have resorted to expensive stimulus measures that have cost fiscal space, and when this has not been enough, increased public debt. So, at what time is it appropriate to begin relaxing measures that contain the virus and to kick start economic activity?

There is tremendous uncertainty around what to do next. The shape of global economic recovery may yet take one of several different alphabetic forms – U, V, W and L – depending on the nature and potential for reoccurrence of this outbreak. Governments cannot continue to support economies indefinitely but at the same time actions and finance are needed to sustain health systems, protect frontline staff, and ultimately save lives. The biological threat of COVID-19 will only be fully resolved when enough people are immune from this disease or at such a time when there is a vaccine available. This may still be some way off.

Added to this, wide social, economic and demographic differences between countries that have influenced governments’ responses to this health crisis so far, will similarly determine reopening policies and practice. This is particularly true for the Caribbean with its limited economic resource base, heavy reliance on international sources income, goods and services, ageing populations, high incidence of non-communicable diseases, high debt levels and pervasive informal sectors.

Trade-offs will be required. Policymakers will need to judge whether their health systems have enough capacity to detect and respond to cases as they arise, as measures put in place to contain this virus and flatten the curve, are relaxed. It is highly likely that governments will not find a one-size fits all solution and must therefore nuance their response to their readiness for restarting economic activity.

Even within economies, how reopening is sequenced across sectors will form an important part of a government’s strategy. Balances may need to be struck between the relative importance of different sectors of an economy and their potential risk of virus transmission.^[4] Based on this assessment, some sectors may need to remain closed for longer periods, while others of strategic importance to economies – health care, medicines, food, defense and security, utilities and communications – may need to remain active.

Business will need to adapt. Workplace monitoring, hygiene and protocols will need to be put in place to maintain physical distancing that prevents virus transmission within the workplace and new ways of working may need to be adopted. Some jobs may also need to be redefined in ways that make them safe to restart. For the Caribbean, which is heavily dependent on tourism, traditional business models may need to be revised to mitigate the risk of importing new cases from abroad.

Socially, the impact of COVID-19 as well as the response measures introduced to contain this virus will have taken a significant toll. Poverty and inequality are likely to increase, the virus will have taken a mental toll on individuals and households and social behaviors are likely to change in the aftermath. For the youth, disrupted education will mean catch-up periods and future learning methods may need to change taking on new technologies and daily routines, reduced class sizes and greater home learning. Adjusting to this new normal we must, but through a means by which we build back better for socio-economic growth and resilience to deliver the 2030 Agenda.      

^[4] A. Cadena, et al: How to restart national economies during the coronavirus crisis: McKinsey & Co: April 2020

Private Sector for the COVID-19 Response  

Private Sector and Development Partners in the Eastern Caribbean

As an engine of growth and innovation, source of wealth creation and tax revenue and through the jobs it creates, acts as a catalyst for social cohesion. COVID-19’s impact on the private sector has had a systemic effect on economies and social structures across the Eastern Caribbean. Measures to contain, reduce and eliminate the spread of the COVID-19 virus have led to sharp contractions in demand and supply for most markets. This has prompted many governments to act swiftly with support measures to preserve their private sectors through this health crisis.

Dominated by services, the region’s private sector is an amalgam of numerous locally owned micro, small and medium sized enterprises (MSMEs) and a smaller but highly integrated number of large, regional and multi-national conglomerates. Many of the MSMEs operate informally, with limited access to support services and infrastructure and without strong international linkages for the supply of inputs or the sale of products. Enterprises’ capacity to build scale economies and enhance competitiveness is heavily constrained and has put it on a weak footing to withstand this crisis.

The challenges facing regional businesses are myriad and complex and objective measures like the World Bank’s Ease of Doing Business have highlighted both regulatory issues and access to finance as key challenges for the business environment that constrain private sector growth and resilience.

Addressing these issues post-COVID-19 is complicated by the need to make investments in costly safeguarding measures and new ways of working to ensure future work is conducted in a safe COVID-19 aware environment. With high uncertainty over a recurrence of COVID-19, business operations remain constrained in where they can operate, with investor appetite subdued for some time to come.

For some enterprises that have been strategically important when responding to the crisis, new operating models and safety measures have had to be adopted quickly. However, for the great many others, a lengthy period of adjustment awaits them. Post-COVID-19, firms will need technical assistance and finance to help them reboot and refresh their business models and introduce high workplace standards to operate safely. Transition costs in the aftermath will bear most heavily on the MSMEs, many of which operate in the informal sector. The role and reach of governments, financial institutions, and development partners will need to endure and extend accordingly.

Fiscal space and public indebtedness in the aftermath will be important factors governing whether governments can take a more interventionist approach to recovery. Where fiscal space permits, there will be room to adopt measures that direct support the business community – through direct financial support, employment and training programmes, business associations support and programmes to help integrate local firms to regional and international markets – under more constrained fiscal conditions governments may prioritize policy measures that reduce regulatory burdens on business and foreign investors.

Development partners too are adapting their engagement with the private sector. New forms of engagement are supporting the survival of key firms, clusters and industry sectors; supporting businesses reorienting production to meet COVID-19 related needs and vaccine development; as well as facilitate the private sectors recovery to return countries back on track to deliver the SDGs.

To complement this, the private sector also has a role to play. Business can assist government responses through their financial contributions; in-kind donations of priority materials; and through their influential position to advocate on key issues (e.g. keeping trade channels open) to support the response. They can also help one another by developing new linkages through financial, digital and consulting products and services in the recovery phase.

The purpose of this panel is to unpack many of the key issues facing the private sector and its swift recovery from this crisis; reexamine the main obstacles faced and actions which need to be taken; assess what the collective role of government, development partners and IFIs are; and explore how best the private sector can support recovery as well as its own revival to return the Eastern Caribbean to the 2030 Agenda and SDGs.