Managing resource-dependence amidst

opportunities and challenges: Defining a new Sustainability Narrative for Caribbean Coastal

Economies

Planet Under Pressure Conference

Session: Response of Small Island Development States (SIDS) to the Impacts of Global Environmental Change

27 March 2012

Presenter: Leisa Perch, Policy Specialist/Team Leader - Rural and Sustainable Development

International Policy Centre for Inclusive Growth (IPC-IG)

INTRODUCTION TO IPC-IG IPC-IG is a partnership of the Government of Brazil and

UNDP based in Brasilia, Brazil. Focus of our research is international; specifically

focused on the South and on South-South Cooperation and Learning.

Themes for IPC’s applied policy research: Macro-Economic Policy, Rural and Sustainable Development, Social Protection, Development Innovations.

In Rural and Sustainable Development, the focus in on 3 key areas:• Inclusive Green Economy• Sustainable Rural Growth• Social and Political Innovations for Sustainable

Development*See more on our webpage: www.ipc-undp.org

OUR RESEARCH AND THIS PAPER Our Focus on SIDS and Sustainable Development, in the context of

the Green Economy, is to better understand and define the interdependencies between growth, sustainability and equity. Given the specific challenges SIDS face, to (i) better communicate current and future dilemmas including political economy realities, (ii) highlight the need for SIDS to attend to social as well as environmental challenges and (iii) identify strategic areas where SIDs can tackle all three pillars of SD at the same time. Our emerging niche area is in the socio-environmental policy interface.

This paper builds on research initiated last year for the CARICOM Secretariat in which a background paper was presented to A Regional on SD for Rio +20: http://pressroom.ipc-undp.org/2011/steps-for-a-new-green-growth-policy-in-caribbean-states/

* Some of the conceptual thinking is based on more recent work on Inclusive and Green Growth in the SADC region which includes 3 SIDS: http://cdkn.org/project/a-green-guide-to-align-political-and-social-contexts-for-green-and-inclusive-growth/; www.ipc-undp.org/pressroom/files/ipc671.pdf

CONTEXT AND PURPOSE OF THE RESEARCH

The paper does not attempt to speak to all of the issues affecting SIDS. Instead: it explores the context, shape and scope of

resource-dependence as a driver of volatility in Caribbean SIDS.

Seeks to define how resource dependence in SIDS is the same and different from other contexts; and

positions the SIDS reality within the international policy discourse and the specific nature of how green growth and sustainability would need to be tackled.

APPROACH

Systems theory – the interconnectedness of the pieces and potential escalation of disequilibrium from one small element being out of sync

Where SIDS fit within the framework of resource dependence

Literature Review to understand the pattern of events and crisis over the last 5-10 years and the impact on economy, society and environment and the dynamics of those impacts

What this means for the “how” of sustainability as well as the “what”

“When the development and economy of countries rich in resources becomes largely dependent on those resources, these countries often risk being affected by the so-called “resource curse” or “paradox of the plenty” (Karl, 1997)

The economy of such countries usually concentrates on the exploitation of the resources available and focuses all capital and labour investments there, often leading to a lack of diversification of the economy and high dependence on resource-extractive sectors, and resulting in financial problems and unemployment.

Other references include Gelb and associates (1988), Sachs and Warner (1995), Ross (1999) and Auty (2001). Important pieces put forward by NGOs include Global Witness (1999), Christian Aid (2003) and Gary and Karl (2003). For a full listing, see: Bagattini (2011).

DEFINING RESOURCE-DEPENDENCE

1. CHARACTERIZING RESOURCE DEPENDENCE IN CARIBBEAN SIDS – GENERAL FEATURES

15 member of CARICOM - small, open and largely mono-cultural economies heavily dependent on expansive coastal and marine resources. Rich in natural resources

Tourism – dominant sector for many of them, with a concentration of capital and labour there

Outliers - Trinidad and Tobago, Belize, Guyana more dependent on mineral extraction; Jamaica (both)

Limited diversification of the economy and options. External risk exposure significant (as compared to Mineral-dependent economies)

1. CHARACTERIZING RESOURCE DEPENDENCE – PUBLIC INVESTMENT IN RESOURCE INTENSIVE GROWTH

Natural Capital Government

investment in travel and tourism high (Top 5 in the WTTF analysis for 2011).

Economic Capital 4 X more dependent

than any other region in 2001

Human Capital Highly invested in

public health and in education

1. CHARACTERISING CONTINUED – PATTERN OF VOLATILITY

The Development Ecosystem of the Caribbean Coastal Economy:

- economic growth and human development is inextricably tied to the quantity and quality of natural resources

- Dependent on food and fossil imports – with high external volatility

- sustainability of that growth and development is defined by the capacity to sustain resources, balance revenue and expenditure and smooth impact of economic and environmental shocks

- Cyclical uncertainty: climate variability and change potentially put Caribbean SIDS on a continuous cycle of “build, repair and recover” where as much as 20% of GDP may go to coping with climate change

1. CHARACTERIZING RESOURCE DEPENDENCE – INTERSECTIONS BETWEEN ECONOMY, SOCIETY AND ENVIRONMENT

1. CHARACTERIZING RESOURCE DEPENDENCE – WHERE CARIBBEAN SIDS FIT

SIMILAR: Reliance on non-

renewable or not easily regenerated

Inequality Opacity of extractive

revenues Consumption intensity

DIFFERENT Less of a trade-off

between capital intensity and labor intensity

Dependent on external markets just not financial ones

Generally more democratic and inclusive

The larger the proportion of government revenue that is dependent on the resource, the higher the volatility it can experience (one element of the resource curse)

 Overall, of the key characteristics shared by resource-dependent/mineral-dependent economies, Caribbean SIDS experience 3 acutely: economic volatility, high dependence on a single export product with limited diversification of the economy and significant environmental damage

2. MANAGEMENT CHALLENGES IN THE CONTEXT OF INTENSE VOLATILITY: RAPID TRANSMISSION OF RISK ACROSS SECTORS

Country

Impact on Productive

Sectors in US$M

Impact on Infrastructure

in US$M

Impact on

social sectors

in US$M

Impact of social sector as % of total socio-economic impact

Total Socio-economic impact

US$M

Impact of Disaster as % of GDP

Cayman

Islands1117.7 488.4 1810.3 0.53 3416.4 138.0

Grenada 539.2 262.4 1588 0.66 2389.6 212.0

Jamaica 215.7 112.7 220.7 0.40 549.1 8.0

Haiti 83.3 33.9 125.8 0.52 243.0 4.5

Table 1. Sectoral Impacts of Disasters in 2005 ( Source: Kambon, 2005)

Table 1. Patterns of working poverty across Caribbean countries in 2006

Country

Working poverty - working poor as percentage of all workers: national poverty line (in %, year 2006)

Female/male composition of working poor: national poverty line (in %, year 2006)

Bahamas 2.44 1.15/1.29

Barbados 3.74 2.02/1.72

Dominica 21.5 7.32/14.18

Grenada 20.26 n.a.

Guyana 29.42 n.a.

Jamaica 16.8 7.95/8.85 St. Kitts and Nevis 11.99 6.47/5.52 Trinidad and Tobago 15.35 3.69/11.66 Source: Statistical Report on Working Poverty in the Caribbean, ILO Subregional Office for the Caribbean(2006) - http://www.ilocarib.org.tt/cef/background%20papers/Working%20Poor.pdf

2. MANAGEMENT CHALLENGES IN THE CONTEXT OF INTENSE VOLATILITY: RAPID TRANSMISSION OF RISK ACROSS SECTORS

Country

Impact on Productive

Sectors in US$M

Impact on Infrastructure

in US$M

Impact on

social sectors

in US$M

Impact of social sector as % of total socio-economic impact

Total Socio-economic impact

US$M

Impact of Disaster as % of GDP

Cayman

Islands1117.7 488.4 1810.3 0.53 3416.4 138.0

Grenada 539.2 262.4 1588 0.66 2389.6 212.0

Jamaica 215.7 112.7 220.7 0.40 549.1 8.0

Haiti 83.3 33.9 125.8 0.52 243.0 4.5

Table 1. Sectoral Impacts of Disasters in 2005 ( Source: Kambon, 2005)

Table 1. Patterns of working poverty across Caribbean countries in 2006

Country

Working poverty - working poor as percentage of all workers: national poverty line (in %, year 2006)

Female/male composition of working poor: national poverty line (in %, year 2006)

Bahamas 2.44 1.15/1.29

Barbados 3.74 2.02/1.72

Dominica 21.5 7.32/14.18

Grenada 20.26 n.a.

Guyana 29.42 n.a.

Jamaica 16.8 7.95/8.85 St. Kitts and Nevis 11.99 6.47/5.52 Trinidad and Tobago 15.35 3.69/11.66 Source: Statistical Report on Working Poverty in the Caribbean, ILO Subregional Office for the Caribbean(2006) - http://www.ilocarib.org.tt/cef/background%20papers/Working%20Poor.pdf

Table 2. Working poverty in the Caribbean

2. MANAGEMENT CHALLENGES FOR CARIBBEAN SIDS - AMPLIFIERS

Figure 1. Selected data from Grenada CWIQ, 2005. Highlighting the immediate impacts of the hurricane on employment

Figure 2. Intersections between social and economic impacts in Caribbean SIDS during the GEC. Sourced from UNDP 2010c based on that author's calculations for Caribbean PSIA studies.

3. MANAGEMENT CONT’D – CYCLICAL VOLATILITY AT THE MACRO LEVEL

In the case of Antigua and Barbuda, success between 2004 and 2008 in reducing the public debt-to-GDP ratio from 120% to about 90%, was undermined by the global financial crisis. By the end of 2010, the national debt had again surpassed 100% and was even higher than it has been in 2004, reaching 130%. In 2010, services contributed more than 60% of the country’s GDP (CIA, 2011).

In Barbados, a sharp decline in tourism in 2009 was immediately felt fiscally with the public debt to GDP ratio, increasing sharply.

2. MANAGEMENT CHALLENGES IN THE CONTEXT OF INTENSE VOLATILITY- MULTIPLIERS

Source: Burke et. al, 2011: 24)

2. MANAGEMENT CHALLENGES FOR CARIBBEAN SIDS IN THE CONTEXT OF INTENSE VOLATILITY (CONTD.)

Structural factors of complexity – openness of ecosystem: Many governments, from Barbados to the UW

Virgin Islands, are now seeking to contain the impacts of growing numbers of Pacific Lionfish.

Investments in managing the Lionfish (native to the Pacific region) demonstrates other more subtle effects of both economic and environmental realities of managing global environmental change in a Caribbean context.

One of the key elements of the management strategy relies on a heavily fished species in the region – one of the few natural predators of the invasive Lionfish.

3. MANAGEMENT CHALLENGES CONT’D: THE POLICY ENVIRONMENT

In the context of stringency, the numbers are also notable with Barbados the highest at 50 (most stringent) and Trinidad at 102 (less so).

On the effectiveness of government efforts to be sustainable, the ratings are more favourable with Barbados ranking 6th, Jamaica 40th, Guyana 72nd and Trinidad 101st of 139 countries, though particulate matters seems to be a problems for all countries generally; and

In the area of ratification of environmental treaties, Trinidad and Tobago ranks highest with 20/24; Jamaica -18/24; Barbados -17/24, Guyana – 17/24.

Country/Economy

T&T Regulatory Framework

 

Policy Rules and Regulations

Environmental Sustainability

Prioritization of Travel and Tourism

  Overall Rank Overall Rank  

Barbados 75 30 3

Guyana 99 34 86

Jamaica 11 116 4

Trinidad and Tobago 42 137 103

Source: Blanke and Cheia (2011: 27, 28).

Table 3. Environmental Policy Framework for Travel and Tourism in Caribbean SIDS

3. MANAGEMENT CHALLENGES FOR CARIBBEAN SIDS IN THE CONTEXT OF INTENSE VOLATILITY (CONTD.) – INCLUSIVENESS OF GROWTH?

Labour Market Volatility is a Key Transmission Point of Social Risk, Social and Economic Exclusion: Knock on effects on

Crime and Insecurity (see UNODC/World Bank 2007; new Caribbean HDR, 2012)

Country HDI 2011 Inequality-Adjusted HDI

Bahamas 0.771 0.655

Guyana 0.663 0.493

Haiti 0.454 0.278

Jamaica 0.727 0.610

Trinidad and Tobago 0.760 0.655

Source: Human Development Report, 2011

Table 4: Change in HDI for selected CARICOM states when adjusted for inequality

• Furthermore, the average intensity of poverty, based on the Multidimensional Poverty Index is 39.5% in Guyana, with child mortality contributing significantly to overall poverty. Additionally, 2.1% of the population seem to be deprived in more than 60% of the indicators.

• In spite of a high HDI ranking and GDP per capita, Trinidad and Tobago has a similar intensity of deprivation- observed at 35.1%.

• In Haiti, the intensity is the highest in the region at neatly 60%.

3. MANAGEMENT CHALLENGES FOR CARIBBEAN SIDS IN THE CONTEXT OF INTENSE VOLATILITY (CONTD.)

4. SUSTAINABLE GROWTH IN A RESOURCE-DEPENDENT GREEN ECONOMY  – TACKLING SOCIAL EQUITY AND ECONOMIC GOVERNANCE

Social inequity is a source of pressure for and on resource intensive growth. Muting the effects requires:

- Changing the cycle - environmental quality has a direct impact on the employment generation capacity of resource-dependent sectors

- Enhancing pro-poor productivity - poverty has implications for the environment (coping mechanisms rely on free/accessible public goods)

- Accelerating productive inclusion – Prioritizing youth employment, access to finance and innovation; reduce underemployment and enhance women’s access to decent work

4. SUSTAINABLE GROWTH IN A RESOURCE-DEPENDENT GREEN ECONOMY  – TACKLING SOCIAL EQUITY AND ECONOMIC GOVERNANCE? (CONTD.)

Inclusive and green finance: - Targeting decent green pro-poor employment - Incentivizing private sector investment in

sustainability (e.g. Reserve Bank of Fiji’s Agriculture and Renewable Energy Loans Ratio for commercial bank operations – 2% of deposits and liabilities must go to loans to renewable sector)

- Anticipating Sustainability Opportunities: bolster innovation and reduce the inconsistency of innovation (stagnation of solar?)……Fiji and Samoa started in the 70s and 80s and now have a share of renewables at 54 and 43% respectively     

4. SUSTAINABLE GROWTH IN A RESOURCE-DEPENDENT GREEN ECONOMY  – FINANCE AND POLICY

Finance Opportunities: New GEF-funded project

coming on board focused on sustainable marine ecosystem management for the Eastern Caribbean to the tune of USD 8.7 million

Barbados having a USD 30 million dollar loan with the IBD on coastal conservation part of a larger package exceeding USD 170 million and another USD 7.1 million in technical grants.

Policy Reform Opportunities (Seychelles): A recent report noted its fast

growing economy and a world-class environmental record (Spencer, 2012:1), highlighting that policy can deliver across economy and environment in SIDS

The three pillar approach employed by the government, defined in a “Strategy 2017, comprises tourism, fisheries and financial services, taking in mind the risks, volatilities and vulnerabilities of all three sectors.

4. SUSTAINABLE GROWTH IN A RESOURCE-DEPENDENT GREEN ECONOMY  – ROLES FOR SOCIAL EQUITY AND ECONOMIC GOVERNANCE? (CONTD.)

o ‘Smart’ Tourism i.e. inclusive and green – specific strategies:

o Green and ethical tourism with less macro debt and more growth – (Seychelles Model)

o Maximizing sizeable WTP opportunities in the Caribbean (according to WRI, 2011) – fishing, whaling, coral reefs, heritage etc.

o More local ownership: engaging private citizens in tourism investment – equity stakes (Duncan, 2011)

4. SUSTAINABLE GROWTH IN A RESOURCE-DEPENDENT GREEN ECONOMY  – ROLES FOR SOCIAL EQUITY AND ECONOMIC GOVERNANCE? (CONTD.)

‘Smart’ Development : - Strengthened and effective regulatory frameworks –

prioritize environmental sustainability concerns in regulatory frameworks (Maldives’s Low Carbon Strategy and Commitment)

- Cooperative approach to coastal management – with clear responsibilities and accountabilities (building on Barbados’s CZM approach)

- a sustainable infrastructure model – the earthquake in Haiti is a clear example of the nexus between poverty, environment and the macro-economy ( Example: Government of Tonga’s DRR+CC Strategy)

5. NEW SUSTAINABILITY NARRATIVE

Beyond Vulnerability: coping with resource-dependence and volatility

Understanding, anticipating, mitigating dynamics of nature, power and poverty

3 strand response:- increasing natural resilience – given increasing

climate variability and threats- greening of sectors rather than the “de-browning”

of environmental externalities- tying “green transformation” to areas which can

also deliver more stability, more labour market opportunities and increasing wage stability – social resilience

5. NEW NARRATIVE CONT’D - ANTICIPATORY GOVERNANCE FOR SUSTAINING CHANGE Commoner (1971) noted that “the amount of stress

which an ecosystem can absorb before it is driven to collapse is also a result of its various interconnections and their relative speeds of response. The more complex the ecosystem, the more successfully it can resist a stress …Most ecosystems are so complex that the cycles are not simple circular paths, but are crisscrossed with branches to form a network….”.

For Caribbean SIDS - it is complicated but not necessarily very complex – speed to impact is fast and the speed of response often slow; crisis often hits at the heart of the system

New economic governance framework must be anticipatory – well informed, able to cope with uncertainty, prepared, flexible and adaptable

5. NEW SUSTAINABILITY NARRATIVE - WHERE AND HOW COULD THE PIECES FIT

Development Drivers: Resource Wealth, Resource Quality, Open Economies, Climate Vulnerability and Change, Economic Volatility, Social Inequity

Inputs: Ecological Diversity, Strategic Public Policy, Partnerships, Finance and InvestmentEnablers: Adaptive Policymaking, Anticipatory Governance, Co-benefits Strategies, Innovation, Technology

Conditions for Sustainability: Decent Work, Systems Resilience, Adaptive Capacity, Economic & Environmental Governance

THANK YOU FOR YOUR ATTENTION!

LEISA PERCH