Having worked in these markets, we know from experience that given their shared characteristics, there is a lot that small island states can potentially learn from each other.

TWEET THIS:

As a country, Jamaica is blessed with great potential. Its location, unique attractions, sandy beaches and all-year sunny weather make for a world-class tourism destination. Jamaica also has an ideal climate for agriculture and boasts significant mineral reserves.

At the same time, Jamaica faces a unique set of challenges. With a small population, it has historically had to work hard to attract foreign direct investment, and economic growth has been slow in recent years. The country has also experienced major setbacks due to external shocks and natural disasters.

In many ways, Jamaica epitomizes the realities that many small island states face today. Many have small domestic markets and economies, with significant vulnerabilities.  They are typically not well connected to other markets, and often face higher costs due to diseconomies of scale, so it is more difficult for them to export. Due to the size of their economies, capacity is limited, especially as many of the best trained professionals tend to migrate to other larger economies in search of opportunities. So, while these countries have highly qualified people, they may be unable to retain enough of them. All of this has compounded into complex challenges, including increased debt; higher public sector fiscal deficits; slower growth on average; and increasing unemployment, particularly among youth. How to solve all these issues in a small country is highly complex.

However, having worked in these markets, we know from experience that given their shared characteristics, there is a lot that small island states can potentially learn from each other.

This was made even more apparent at a recent knowledge-sharing mission when the Caribbean Development Bank (CDB) hosted a team from the World Bank’s Independent Evaluation Group (IEG). The goal was for senior CDB leaders and other stakeholders working in the Caribbean to discuss the findings of IEG’s evaluation of the World Bank Group’s work in small states. The report looked at the World Bank Group’s work in the Organisation of Eastern Caribbean States (OECS), the Pacific Island countries, as well as the island states of the Seychelles, Cabo Verde, Djibouti and Mauritius.

Shared Experiences, Shared Lessons

IEG’s report offers a number of interesting insights that speak to how small states can learn from each other, and how development institutions can work together more effectively to serve them. We reflect on three areas of opportunity. 

First and most important, there is an opportunity for transferring knowledge and best practices, where they apply, from one country to another. For example, Caribbean states could learn from other small states on the fiscal and debt management fronts, where there is need for more saving during good times to build buffers to face the cyclical downturns that are bound to come from natural and systemic shocks. Related to this is the need for continuing fiscal reforms to ensure long-term macroeconomic sustainability, as well as looking at public sector human resources and public-sector governance, and enhancing transparency and citizen participation.

The Office of Independent Evaluation at CDB recently assessed experience with its policy-based lending program, which directly supports fiscal reform.  The findings of the forthcoming report indicate growing recognition of the importance of reforms, the tendency of capacity constraints to slow progress, and the critical role national leadership plays.    

Caribbean states can take encouragement and learn lessons from other small island states. The Seychelles, for example, not too long ago went through a deep crisis when the country’s tourism sector took a hit due to the Gulf War. Since then, the government has taken steps to diversify its economy and reduce its dependence on tourism, and has engaged in profound and innovative reforms on the fiscal and debt fronts. Today, the Seychelles is in a much better position.  In the Seychelles example, it is also interesting to recognize how changes in government can cause reversals in reforms—something that many countries in the Caribbean have experienced as well. What this shows is that true reforms are possible and that more countries in the Caribbean can take the necessary steps that would be instrumental in attracting international support and investment.

On resilience, the Caribbean countries have moved much further than other small island states. For example, the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC), created with support from the World Bank Group, CDB, and other donors, was the first multi-country risk pool in the world. Through this facility, Caribbean states have created a self-sustaining, market-based pool to help mitigate the destruction from catastrophes such as hurricanes. This has inspired a similar model in the Pacific Island countries in the form of the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI).  

A second area where we see opportunity is for development institutions such as the Caribbean Development Bank, the World Bank Group, and others to create stronger alignment across their operations and policy dialogue. It is particularly important when working in small island states that development partners work efficiently in ways that don’t stretch the limited capacity of country clients. IEG’s evaluation of the World Bank Group’s experience, for example, recommends adopting approaches that promote grouped engagement approaches and, where it makes sense, to pursue opportunities that support multi-country initiatives. This has worked in Jamaica, where CDB, Inter-American Development Bank, the International Monetary Fund and World Bank Group have established a framework to better coordinate their country engagement and to have a uniform voice and approach on the development issues that Jamaica faces.  Coherence in policy dialogue is critical to progress.

Third, sharing knowledge about evaluations across development institutions can lead to more value for clients. The IEG report and the discussion it sparked among CDB’s Management and Board of Directors is good evidence of this.  CDB and the World Bank Group have a lot to gain from sharing evaluation findings and recommendations. We often work in the same countries and on the same projects, so sharing our knowledge across institutions is beneficial.  CDB is now embarking on its own evaluation of its support to the OECS, which can build on the IEG work there. At the same time, CDB has a much larger footprint than the World Bank Group in the Caribbean region, which offers an opportunity for the World Bank Group to draw richer insights for its own projects.

The impact of that knowledge sharing can be large on the effectiveness of the programs of the two institutions.  By sharing lessons from our respective project and sector operations, we can scale up or replicate what works and course-correct what doesn’t. We can identify opportunities, and align our views on where more or faster progress is needed. Evaluation can be a very good tool to enable multilateral institutions to work in areas where less progress has been made – which in small states is even more important given resource and institutional capacity constraints.  

Read IEG’s evaluation: World Bank Group Engagement in Small States

Add new comment

Image CAPTCHA