OECS REGIONAL PARTNERSHIP STRATEGY FY15-19

DRAFT FOR DISCUSSION 1

OUTLINE

OECS Context Lessons Learned Prioritization Criteria Proposed RPS FY15-19 Program Issues for Discussion

2

OECS CONTEXT

OECS REGIONAL PARTNERSHIP STRATEGY FY15-19 3

OECS COUNTRIES FACE A NUMBER OF COMMON CHALLENGES

Weak macro framework: Insufficient growth High debt Limited fiscal space Public Sector weaknesses Weak financial resilience Low competitiveness and productivity Dependence on a few economic sectors Mismatches between skills and job market needs Vulnerability to Natural Disasters Unfavorable investment climate Infrastructure gaps High cost of energy Low connectivity Fragile social resilience 4

THE LAST DECADE WAS MARKED BY SUBDUED GROWTH AND HIGH DEBT LEVELS

5.0

4.0

Slow growth

Slowest Growing Emerging Markets and Developing Countries 2003-2012 Av. 3.6

for 32 LAC countries Av. 4.8

for 153 emerging markets and developing countries

3.0

2.0

1.0

0.2

0.5 0.5

0.7

0.9 1.0

1.1 1.2 1.2

1.2 1.3

1.4 1.4 1.4 1.5

1.7 1.7 1.8

1.8 1.8 1.9 1.9

2.1 2.2

2.3

2.5 2.5 2.5 2.6

0.0

-1.0

-2.0

-2.0

-3.0

Source: IMF –WEO

High debt 160 140 120 100 80 60

Emerging Markets and Developing Countries with General Government Gross Debt above 60 percent of GDP in 2012

147 140 126 113 103 98 89 89 83 80 80 80 79 78 78 77 77 76 73 72 72 70 68 67 64 62 61 60 60 60 40 20 0

Av. 44.1

for 139 emerging markets and developing countries



The debt-to-GDP ratio is high and above the emerging markets and developing countries average in most Caribbean countries.

Source: IMF -WEO

Debt Service to Total Revenue Ratios in 2011 for Countries in the Caribbean with Debt Ratios above 90 percent of GDP

90 80 70 60 50 40 48 30 20 10 0 St. Kitts and Nevis 77 Jamaica 22 14 26

Av. 5 countries 38

Barbados Grenada Grenada Antigua and Barbuda 5

Source: IMF, Peron, G.N. (2013)

THE INCIDENCE AND COSTS OF DISASTERS HAVE INCREASED

Select Damages from Disasters (% of GDP) Evolution of Damages from Disasters (US$ millions) $4 000 $2 000 $0 1961 1970 1971 1980 1981 1990 1991 2000 2001 2010 Suriname St. Vincent St. Lucia Dominica AB Belize Guyana St. Kitts & Nevis Grenada Jamaica DR Souce: EM-DAT 6

LOW GROWTH, DISASTERS, AND INSUFFICIENT INCLUSIVENESS HAVE IMPACTED POVERTY

7

GIVEN THIS BACKGROUND, OECS COUNTRIES FACE A NUMBER OF INTERRELATED DEVELOPMENT PRIORITIES

LAYING THE FOUNDATIONS FOR A RETURN TO SUSTAINABLE INCLUSIVE GROWTH Growth:

 Address key obstacles to growth, including in the investment climate and infrastructure  Facilitate private sector development and job creation  Accelerate public sector modernization

Inclusiveness:

 Enhance shared prosperity, accelerate poverty reduction, address gender issues, strengthen social protection, enhance employability (esp. women, youth)

Sustainability:

 Build economic, financial, fiscal, environmental, and social resilience 8

LESSONS LEARNED

OECS REGIONAL PARTNERSHIP STRATEGY FY15-19 9

OUR CURRENT PROGRAM (OECS RPS 2010-14)

Key Pillars

 Building resilience  Enhancing competitiveness and stimulating growth over the medium term

What we have achieved

     Comprehensive Debt Framework Caribbean Growth Forum Comprehensive framework for Disaster Risk Management Approach to improve skills and build up ICT competences Successful activities in Energy, Public Sector, Agriculture & Social Safety Nets 10

LESSONS FROM THE OECS RPS 2010-14

LESSONS LEARNED

      Flexibility is required to respond to evolving circumstances Alignment to national priorities ensures stronger ownership A combination of regional and national support enhances results Coordination with other development partners enhances impact and efficiency Enhanced selectivity enables sharper focus and greater impact Quality of project designs and implementation flexibility are key

PROPOSED SOLUTIONS GOING FORWARD

     CPS based on one focused overall objective and a few key pillars and interventions A steering committee will be established with key development partners and government representative Support will be provided for regional priorities, with implemetation at national level (e. g., tourism) We will use of APLs for greater flexibility We will bringing the entire World Bank Group to the OECS 11

PRIORITIZATION CRITERIA

OECS REGIONAL PARTNERSHIP STRATEGY FY15-19 12

WE PROPOSE TO FOCUS OUR SUPPORT ON SELECTIVE AREAS

 Which:  Have a transformational impact on OECS economies  Are aligned with regional and national priorities  Will help us achieve, in the OECS, the WBG twin goals to eradicate poverty and boost shared prosperity  Coincide with areas where the WBG can bring value added or has a strong ongoing engagement 13

PROPOSED RPS FY15-19 PROGRAM

OECS REGIONAL PARTNERSHIP STRATEGY FY15-19 14

PROPOSED STRUCTURE OF THE RPS FY15-19

PILLAR 1: REVITALIZING SOURCES OF GROWTH PILLAR 2: STRENGTHENING RESILIENCE

Focus Area 1

Facilitating private sector development and job creation

Focus Area 2

Enhancing the effectiveness of the public sector

Focus Area 3

Managing Disaster Risks

Focus Area 4

Increasing social resilience

Focus Area 5

Improving financial resilience Objective 1: Removing key constraints to growth

Objective 2

Fostering industries with the highest potential for inclusive sustainable growth

Objective 3

Promoting a more effective Public Financial Management

Objective 4

Improving institutional capacity

Objective 5

Increasing capacity of OECS governments to manage natural hazards or climate change impacts

Objective 6

Building the OECS human capital and strengthening the productivity of its labor force

Objective 7

Strengthening the efficiency and responsiveness of social protection programs

Objective 8

Promoting economic, fiscal and financial resilience 15

FOCUS AREA 1: FACILITATING PRIVATE SECTOR DEVELOPMENT & JOB CREATION

Objective 1: Removing key constraints to growth

 Improve the business environment and investment climate  Strengthen the capacity of financial institutions to provide funding to support growth of the economy  Foster entrepreneurship and innovation  Address critical infrastructure and connectivity gaps

Objective 2: Fostering industries with the highest potential for inclusive sustainable growth

 Tourism  Agriculture/Agribusiness  ICT/Creative industries  Logistics/Transport 16

FOCUS AREA 2: ENHANCING THE EFFECTIVENESS OF THE PUBLIC SECTOR

Objective 3: Promoting a more effective Public Financial Management

 Improve public financial and fiscal management and administration  Increase quality of public service delivery  Improve customs administration   Enhance transparency of public information Strengthen State-Owned Enterprise (SOE) management, when suitable 

Objective 4: Improving institutional capacity

 Strengthen institutional capacity of the public sector  Build PPP capacity and a pipeline of bankable transactions 17

FOCUS AREA 3: MANAGING DISASTER RISKS

Objective 5: Increasing the capacity of OECS countries to manage natural hazards or climate change impacts Assess Risk

Reduce contingent liability Reduce disaster impact through integrating risk information in public investments Reduce economic impact by creating incentives for private sector resilience

Pre-Disaster

Assess and quantify risks Define and measure contingent liabilities

Reduce Disaster Risk Assess Risks Reduce Financial Risk Secure Financing Deploy and Monitor Funding

Integrate disaster risk in fiscal risk and public debt management Improve post disaster budget response capacity Clarify post disaster financial assistance

Post-Disaster

Establish effective administrative systems for post-disaster approval, transfer and monitoring of funds 18

FOCUS AREA 4: INCREASING SOCIAL RESILIENCE

Objective 6: Building the OECS human capital and strengthening the productivity of its labor force

 Improve quality standards for education  Upgrade skills for jobs  Enhance capacity to plan, implement and monitor Non Communicable Diseases (NCDs)

Objective 7: Strengthen the efficiency and responsiveness of social protection programs

 Consolidate systems  Strengthen efficiency  Improve targeting and effectiveness 19

FOCUS AREA 5: IMPROVING FINANCIAL RESILIENCE

Objective 8: Promoting economic, fiscal and financial resilience

 Enhance risk management  Reduce vulnerability to external shocks  Strengthen banking and non banking sector  Enhance fiscal and debt sustainability 20

PROPOSED LENDING PROGRAM

FY15

Regional DPL/APL Financial Sector DPL-II Grenada

FY16

DPL-III Grenada Regional APL Geothermal Project Regional APL Tourism Sector Regional APL Agriculture Competitiveness

FY17

Regional APL CGF Reform Implementation Regional APL Social Vulnerability Reduction 21

FINANCIAL ENVELOPE (ASSUMPTIONS)

 IBRD envelope FY15-19 USD 120mln (up to USD 20mln per country)  IDA-17 envelope (FY15-17) not yet known; estimated at around SDR 50 mln (roughly USD 75 mln)  DOM: SDR 11.3 mln (USD 17mln)  GRE: SDR 11.6 mln (USD 17.4 mln)  SLU:  SVG: SDR 14.8 mln (USD 22.2 mln) SDR 12.6 mln (USD 18.9 mln) 22

ISSUES FOR DISCUSSION

OECS REGIONAL PARTNERSHIP STRATEGY FY15-19 23

ISSUES FOR DISCUSSION



Are we focusing on the right strategic priorities? Are there critical areas missing? Can this program have a transformational impact?



Which area would the OECS need additional assistance? Which areas suffers from knowledge gaps?



Are there lessons to incorporate on the way we work? Are there things we can do better?

24