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OECS Country Brief

OECS


CONTEXT

The Organization of Eastern Caribbean States (OECS) was created on June 18, 1981 and comprises six independent countries (Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) and three British Overseas Territories (Anguilla, the British Virgin Islands, and Montserrat). The World Bank Regional Partnership Strategy for the OECS covers the six independent states mentioned above.

Economy

The OECS economies are small and highly open, which makes them volatile and prone to external shocks. The OECS countries’ main development challenges are rooted in their exposure to changes in their terms of trade, tourism and FDI flows, as well as natural hazards and impacts of climate change. Combined with their small size, high debt levels and limited fiscal space also pose significant constraints on governments’ ability to address development needs.

The 2009 global financial crisis hit the OECS hard. Between 2003 and 2008, real GDP in the OECS grew by 34%, implying a 5% average annual growth. However, in 2009, growth contracted by 5.7% due to a steep decline in tourism activity (9.2%) and foreign direct investment in construction (21.7%). The OECS continued to contract in 2010, (-2.2% of GDP), and recovery remained subdued in 2011 with real GDP growth reaching only 0.6%.

The global slowdown also revealed vulnerabilities in the financial sector, and put renewed emphasis on the need for diversifying economic sources of growth and increasing regional integration. The countries ratified the Revised Treaty of Basseterre establishing the OECS Economic Union on January 21, 2011. The Economic Union will transfer legislative powers from national parliaments to the OECS Authority in five areas: the common market and customs union; monetary policy; trade policy; maritime jurisdiction and boundaries; and civil aviation.

In addition, the OECS continues to make efforts to promote growth, reduce high debt levels and increase fiscal space. Since 2010, some of the OECS countries have implemented strong fiscal consolidation programs and engaged in ambitious debt restructuring agendas.

Social indicators

OECS countries achieved important social milestones as a result of strong growth during the 1980s and early 1990s. OECS countries rank between 60 and 85 of 187 countries and are categorized as having high human development according to the 2011 UNDP Human Development Index (HDI). Despite their upper middle-income country status, however, between 18% and 38% of the population live in poverty. Unemployment rates are also heterogeneous, and in some cases (Grenada, St. Lucia, and St. Vincent and the Grenadines) are considerably above the average for countries at similar income levels. Although the lack of data makes it difficult to substantiate some claims, poverty has likely increased following the recent economic and financial crisis, based on the experience of other Caribbean countries.



STRATEGY

The 2010-2014 Regional Partnership Strategy was presented to the World Bank's Board of Directors in June 2010 and projects financial assistance of up to US$193 million, in addition to technical and advisory services. The strategy leverages regional approaches and focuses on building resilience and enhancing competitiveness to stimulate sustainable growth. In order to meet these objectives, the Bank focuses on activities to promote fiscal and debt sustainability, protect and improve human capital, strengthen climate resilience, build a sound financial sector, and improve access to quality services.

Since the beginning of the global economic and financial crisis, the World Bank has stepped up its engagement in the OECS with a special emphasis on climate change resilience, social safety nets and growth-oriented policies. To this end, the Bank launched the Caribbean Growth Forum (CGF) in June 2012, a regional platform to develop long-term solutions for growth. The Bank also developed a Comprehensive Debt Framework (formerly known as the “4-3-2”) to address the structural vulnerabilities of these countries and better coordinate donor engagement.

In order to support the efforts of the Eastern Caribbean countries to reduce vulnerability to natural hazards and climate variability, the World Bank approved in June 2011 the Regional Disaster Vulnerability Reduction Project (US$47 million) for Grenada and St. Vincent and the Grenadines. The project’s financing is a combination of World Bank International Development Association (IDA) credits and Climate Investment Funds (CIF) financing. This is the largest project ever supported by the World Bank in the region.

Other existing projects support public sector modernization, telecommunications, catastrophe risk insurance and disaster risk management, education and skills enhancement, social protection, energy regulation, and environmental management (with support from the Bank-administered Global Environment Facility (GEF)). Recently approved projects include the Sustainable Financing and Management of Eastern Caribbean Marine Ecosystem Project; the Grenada Safety Net Advancement Project; and the Caribbean Regional Communications Infrastructure Program.

For more information on Bank projects in the OECS, click on the following links: OECS Regional, Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines. There are currently no active projects in Antigua and Barbuda and St. Kitts and Nevis.



RESULTS

The Grenada Hurricane Ivan Emergency Recovery Project (2004-2009) was designed to deal with the widespread destruction caused by Hurricane Ivan, a Category 3 storm, which struck the Caribbean island in September 2004. The US$10 million project in loans and credits supports the rehabilitation and reconstruction of schools and recovery activities in the health sector. By June 2009, all five of the island’s health facilities were restored to pre-hurricane conditions and 18 schools of 19 target schools were rehabilitated or reconstructed.
 

The multi-country Education Development projects implemented in Grenada (2003-2011), St. Kitts and Nevis (2002-2009), St. Lucia (2002-2009) and St. Vincent and the Grenadines (2004-2011) sought to increase equitable access to secondary education and improve the quality of teaching and learning through the construction of new schools in under-served areas, as well as through the expansion, upgrade and rehabilitation of existing facilities. The construction of two new schools and the expansion of four others have benefited more than 2,300 children; the transition rate from primary to secondary school increased from 54% in 2000 to 97% in 2007; and the net enrollment rate in secondary schools rose from 64% in 2000 to 81% in 2007.

The HIV/AIDS Prevention and Control projects implemented in Grenada (2002-2009), St. Kitts and Nevis (2003-2009), St. Lucia (2004-2010) and St. Vincent and the Grenadines (2004-2010) for a total US$23.5 million aimed at assisting the Government of these countries to control the spread of HIV/AIDS and mitigate its socio-economic impact. The projects were able to reach at-risk groups and the general population with prevention information. Significant progress was also made in expanding counseling and testing services, as well as in the provision of antiretroviral therapy. In the area of prevention of mother-to-child-transmission, St. Kitts and Nevis managed to consistently increase the number of pregnant women reached; St. Lucia achieved zero transmission of HIV from mother-to-child; and St. Vincent and the Grenadines offered these services during pregnancy to all women.

The OECS-Catastrophe Insurance Project (2007-present) has allowed countries to join the Caribbean Catastrophe Risk Insurance Facility (CCRIF). The CCRIF serves as a joint reserve mechanism where participating governments can obtain coverage (insurance) that gives them the ability to access a quick financial payout in the event of a catastrophic natural disaster. Overall, the CCRIF has been a success, providing the much needed liquidity promptly following a catastrophic weather-related event and has helped reduce the vulnerability of OECS to natural hazards and the impacts of climate change.

The Telecommunications and ICT Development Project (2005-2009), implemented in Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines for a total of US$2.7 million, sought to improve access and quality of telecommunications and ICT services at a more affordable cost. As a result, fixed-to-mobile rates were reduced by 40%. Additionally, monthly rates for domestic and international leased lines decreased over 56% and 78%, respectively; mobile retail rates fell by 67%; and Internet rates at the speed of 1 Mbps from 2009 to 2011 dropped by 28%. The project also increased the use of ICTs among rural underserved communities, persons with special needs, and contributed to improve communications, collaboration, e-learning and research for students.

 






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