Monthly Archives: March 2012

Is the World Bank finally committed to an open and merit-based selection process? Only time will tell…

Alicia Nicholls

The current president of the Washington DC-based World Bank, Robert Zoellick, a former executive with Goldman Sachs, will be stepping down from the post in June of this year.  Per a tacit agreement between the US and European countries, all eleven presidents of the World Bank since the Bank’s founding in 1944 have been American. Concomitantly, a European has always headed its sister institution the International Monetary Fund (IMF).  This present World Bank selection cycle has seen an unprecedented challenge to US monopoly of the World Bank’s leadership to date. The US’ nominee, Dr. Jim Yong Kim, faces stiff competition from two nominees from the global South, Dr. Ngozi Okonjo-Iweala from Nigeria and the Brazil-nominated Mr. Jose Antonio Ocampo from Colombia.  Coming on the heels of the IMF’s managing director selection process last year when Europe retained its perennial grip on that institution’s leadership position, the question on everyone’s mind is whether this World Bank selection cycle will see a continuation of the status quo or whether either candidate from the global South will stand a decent chance of assuming the reins of this important international financial institution (IFI).

The contemporary geopolitical and economic configuration of the world is much different from that which existed in the immediate post-World War II era in which the Bretton Woods institutions were born. The US, while still the world’s largest economy by GDP, now shares the world stage with several increasingly important poles of growth, notably emerging economies which have been the main engines of economic recovery. Yet the World Bank’s governance structure does not reflect this multipolar reality. Tired of the iniquitous status quo, the BRICS have been pushing for reform of the Bretton Woods institutions to reflect present-day economic realities and to allow developing countries a greater say in the international financial and economic system. While the BRICS have been successful in increasing their voting power in the World Bank, securing the top post has been a different story. Will this time be different?

Brazil has nominated former Colombian Minister of Finance, Jose Antonio Ocampo, a US-trained economist who is currently a Professor at the Ivy-League Columbia University in New York City. In its communiqué of March 26th, the African Union  endorsed the candidacy of renowned Nigerian economist, diplomat and former government minister, Dr. Ngozi Okonjo-Iweala. Perhaps in an attempt to diffuse the calls for change, the Obama administration shied away from the usual choices of bank executives and bureaucrats and instead nominated the Korean-born US national Dr. Jim Yong Kim.  A medical doctor, Dr. Kim is the President of the prestigious Dartmouth College and is well-known for his work in fighting tuberculosis and HIV-AIDS throughout the developing world.

It should be noted that all three candidates being considered are highly educated and tremendously qualified in their respective fields. All three were born in developing countries and educated at Ivy League universities in the US. That being said, Dr. Okonjo-Iweala’s impeccable qualifications and her vast experience should make her rise to the top of the pack.  Dr. Okonjo-Iweala is an internationally respected economist with a wealth of expertise in development issues at both the national and global levels.  She has spent more than twenty years at the World Bank until ascending to the post of Managing Director in 2007. She has also served twice as Minister of Finance and Minister of Foreign Affairs in her home country of Nigeria. It is therefore no surprise that Dr. Okonjo-Iweala was named as one of the 100 most powerful women by Forbes Magazine.

Dr. Okonjo-Iweala as the World Bank’s new president would be a powerful symbol for gender rights. It would be the first time a woman, far less a woman from the global South, would be at the helm of this powerful but traditionally male-dominated global financial institution. A wife and mother of four, Dr. Okonjo-Iweala has been outspoken on gender equality and on the macroeconomic and social benefits of providing finance to women and of encouraging women entrepreneurship. In this regard, it is hoped that she would push for more gender-sensitive bank lending programmes.

Perhaps, even more critically, it would be the first time a person from a developing country and an African nation, will be at the head of this institution. The World Bank is an important lender to developing countries and has the twin goals of reducing poverty and promoting development. Despite some of its good work, the World Bank, like its twin sister the IMF, has not always had the best reputation in the developing world, including right here in the Caribbean. During the 1990s, its structural adjustment programmes under the so-called Washington Consensus foisted austere market reforms and other neo-liberal policies on cash-strapped countries as conditionalities for loans. These policies included deregulation, privatization, cuts in Government expenditure (especially in social welfare) and liberalization of capital markets, which if introduced too quickly and/or without the supporting institutional framework could lead and have led to devastating consequences in the countries concerned and have had a disproportionate impact on the livelihoods of women and the poor. For a case in point, just watch the documentary Life and Debt for a vivid look at Jamaica’s experience with IMF-World Bank sponsored structural adjustment. Under a Okonjo-Iweala presidency, it would be hoped that there will be the genesis of a new era in the Bank’s dealings with the South, marked by less focus on free market ideology and a greater sensitivity towards the impact of policies on vulnerable groups in society such as women and the poor.

However, Dr. Okonjo-Iweala’s candidacy faces two big hurdles. Chief among them is the Bank’s ‘democratic deficit’. It is the Bank’s 25-member Board of Executive directors which will ultimately decide the successful candidate.  As the largest economy among the 187 countries in the World Bank, the US has the majority of votes. By choosing a nominee, the US has shown that it will not go against its own strategic interests by supporting a non-American for such a key post.  Moreover, European countries, which hold the second largest block of votes, are unlikely to support a non-US candidate, especially given the US’ support for their IMF nominee last year. Additionally, Japan has already signalled its intention to support the US nominee.

The only alternative would be for Dr. Okonjo-Iweala to garner unanimous developing country support. Therein lies the second problem.  The BRICS have been reticent about throwing their support behind a single nominee from the South and have so far not endorsed any of the three candidates. Last year the BRICS missed their opportunity to block the ascension of yet another European to the post of IMF managing director by their inability to unanimously agree on an alternative candidate, even though there were well-qualified non-European candidates.

This crop of candidates will make unanimous developing country support behind a single candidate even more elusive. The Brazil-nominated Mr. Ocampo will probably enjoy significant support from Latin American countries. But as the US nominee, Dr. Kim is the clear front-runner for the job. Moreover, by choosing an Asian-American, a non-banker and a public health professional,  the US has picked a candidate who will undoubtedly garner support from many developing countries, including some Asian countries which have criticised the US’ monopoly of the World Bank leadership position. Despite being the best candidate, Dr. Okonjo-Iweala will have a tough, and some say, futile battle for the World Bank presidency.

As the countries which rely the most on IFIs and arguably stand the most to lose from any turmoil in the international financial system, developing countries need to have a greater say in these global financial institutions. Is the World Bank truly committed to an open and merit-based process irrespective of nationality? Only time will tell.

Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw.

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Is ALBA a threat to CARICOM integration?

Alicia Nicholls

CARICOM countries could soon make up the majority of member states in the Bolivarian Alliance for the Peoples of Our America (ALBA). At the bloc’s 11th Summit last month in Caracas, both Suriname and St. Lucia  formally expressed their intention to become members of the eight-member group. They would join four other CARICOM countries which are already ALBA member states: Antigua & Barbuda, Dominica, St. Vincent & the Grenadines and more recently, Haiti.

The wave of interest in ALBA, a regional bloc which like CARICOM envisions deep integration between its members, comes against a backdrop of stagnation and crisis in the CARICOM integration process.  While ALBA leaders at their 11th Summit agreed to move full speed ahead to deepen their integration with the creation of a single monetary union – ECOALBA, CARICOM Heads of Governments caught most people by surprise last year when they inexplicably put the CARICOM Single Market and Economy (CSME) on ‘pause’ during their retreat in Guyana. It was a decision for which Prime Minister of St. Vincent and the Grenadines, Dr. Ralph Gonsalves recently expressed regret. In a candid letter sent to the Secretary General of CARICOM which effused both lament and frustration at the current ‘standstill’ in CARICOM, Dr. Ralph Gonsalves made mention of the augmented interest by CARICOM countries in courting ALBA. He predicted that more CARICOM countries were likely to follow suit and rhetorically asked what would be the implications of this for CARICOM.

ALBA is one of the most well-known South-South trade initiatives in the Western Hemisphere, not just because it was the brain child of the outspoken and no-nonsense President of Venezuela, Mr. Hugo Chavez, but because it potentially represents a more equitable alternative to the traditional neoliberal model of regionalism. It was launched by Venezuela and Cuba in 2004 originally as the Bolivarian Alternative for the Americas, and as an alternative to the now moribund Free Trade Area of the Americas which had been pushed by the United States. Drawing inspiration from the political thought of freedom fighters Jose Marti and Simon Bolivar, ALBA’s stated aim is to be a political, economic and social alliance which seeks to protect the independence, sovereignty, self-determination and identity of its Member States, and to protect the interests of the peoples of the South from political and economic domination.

If the question of ALBA’s threat to the CARICOM integration process is considered purely on the compatibility of ALBA CARICOM countries’ obligations, the flexibility which ALBA gives its members in terms of the initiatives which they can choose to be a part of means that ALBA CARICOM countries are free to refrain from initiatives which could conflict with their CARICOM and OECS obligations.  In the declaration of accession signed by St Vincent and the Grenadines for example, the Gonsalves Government made clear that as a regional movement ALBA does not alter but complements its obligations in other regional movements such as the OECS and CARICOM.  Thus, St Vincent and the Grenadines, like the other OECS members of ALBA, has not introduced the new regional trading currency – the sucre in light of its membership in the OECS’ monetary union.

A more immediate domain for conflict between ALBA and CARICOM obligations appears to be in the area of foreign policy. Foreign policy coordination is one of the stated objectives of CARICOM per the Revised Treaty of Chaguaramas and one of the pillars of functional cooperation.  While ALBA Members are given flexibility in foreign policy, ALBA as a group has been outspoken on several current conflicts, including throwing support in a recent declaration solidly behind Argentina in the recently escalating Falkland Islands dispute between that country and the United Kingdom.  The decision was made to join several other Latin American countries, including Argentina, to prevent Falkland-flagged ships from docking at their ports.  Although the ALBA CARICOM countries have not all come out and said whether their individual stance was in consonance with that of ALBA’s, one would not be unreasonable by taking their silence as agreement with the ALBA position. This position however is diametrically opposed to that taken by the non-ALBA members of CARICOM which have supported the Falkland Islands’ right to self-determination, that is, their right to remain British. Dr. Gonsalves’ stance on the issue caused some controversy in his country. However, on a larger scale, such divergence in policy position could be evidence of the potential threat of further fragmentation in the region’s foreign policy coherence.

Politics aside, there is no doubt that the main attraction of ALBA to those CARICOM countries which have acceded so far  is the developmental support provided by its founding countries Venezuela and Cuba. Havana has long been a development partner of many countries in the region. Through bilateral cooperation agreements signed between the Cuban government and the governments of the region, the people of the wider Caribbean have benefited from free eye care in Cuban hospitals under Operation Miracle, scholarships to study medicine at Cuban universities and free health care by Cuban doctors.  Haiti has also benefited from food and literacy programmes.

Under the Chavez administration, Venezuela has also taken a more active developmental role in the region. Since the establishment of the PetroCaribe Initiative in 2005, some 17 Caribbean countries, most of which are non-ALBA members, have benefitted from this arrangement which allows them to purchase oil on preferential terms of payment. Only part of the cost is paid up front and part can also be paid through the provision of agricultural goods. The remainder is repaid over a 25 year period at a 1% interest rate. The PetroCaribe deal has not been immune to criticism, and both Barbados and Trinidad & Tobago have not joined. Though such an arrangement helps in the short term to conserve much needed foreign exchange, it means that those countries which take oil on these terms are indebted to Venezuela in the longer term. Moreover, while PetroCaribe aims to promote energy security through the provision of “cheap” oil, Venezuelan fuel exports under the Agreement have decreased over time due to less available supply. Another criticism raised is that the ‘cheap oil’ provided under PetroCaribe increases the region’s dependence on the importation of fossil fuels. This latter argument is less persuasive given the increasing interest shown by CARICOM countries in renewable energy generation, through for instance geothermal, solar and wind energy.

The financial support offered by ALBA is  highly attractive to debt-ridden CARICOM countries faced with an uncertain global economic and financial climate. Loans are given at favourable terms and without most of the usual conditionalities insisted on by traditional donors. Through its loan funds, ALBA has provided funding for projects, including infrastructure, housing and agriculture projects in Dominica for example. St Vincent and the Grenadines also received a loan from the ALBA Bank for the construction of a new international airport.

The availability of credit under ALBA’s several funds can be contrasted with the limited capitalization of the CARICOM Development Fund. The CDF is provided for under Article 158 of the Revised Treaty of Chaguaramas as a fund to provide financial and technical assistance to disadvantaged countries, regions and sections within the grouping. The limited capitalization of the CDF, plus problems with the Petroleum Facility and the perceived lack of sensibility to the OECS countries’ unique vulnerabilities, were some of the many shortfalls of CARICOM about which Dr. Gonsalves complained in his previously mentioned letter. Frustrations like these over ill-functioning regional aid mechanisms plus the more readily available economic aid under ALBA, could lead to more CARICOM countries turning their attention to ALBA.

One area in which CARICOM arguably maintains an upper-hand over ALBA is in trade. With a population of 70 million people, ALBA represents a larger market for regional goods than does CARICOM. That being said though, the export capabilities of the ALBA CARICOM remain too weak to effectively take advantage of this.  It is true that over the period 1999-2008, it is reported that average yearly trade between Venezuela and Antigua & Barbuda was USD 6.5 million, between Venezuela and Dominica, USD 179 million and between Venezuela and St. Vincent and the Grenadines, 4.5 million dollars. However, given that petroleum trade accounts for most bilateral trade between Venezuela and ALBA CARICOM countries, the balance of trade is skewed in Venezuela’s favour.  While trade asymmetries do exist within CARICOM as well, the regime created by the Revised Treaty of Chaguaramas envisions the freedom of movement of goods, services, people (skilled) and capital within the Community, the right of Community nationals to establish businesses in other territories, as well as a competition commission which is charged with ensuring the rules of the market are respected.  ALBA has not as yet reached this level of integration. That being said, however, the large gulf between what the Revised Treaty provides for and what operates in practice in CARICOM has led to frustration that the expected benefits are not being seen.  Moreover, ALBA does intend to become an economic union, something which continues to elude CARICOM.

Although there is an undisputed role for ALBA as a development aid and trade partner for our countries, their main integration focus should be on deepening CARICOM integration. CARICOM is more than a trade group. It was founded on the vision of our regional founding fathers who believed that strength comes not through parochialism but through the political, economic and social unification of a people already united through a common history and a shared culture and values. Regardless of its many shortcomings, CARICOM, its organs and associated bodies, have played a tremendous role in the region for the past nearly forty years and can play an even greater role once a serious attempt is made at reform by our Heads of Government.

Moreover, although Venezuela is a useful ally for countries in the region by virtue of its stronger bargaining power in the international community, CARICOM’s interests as small states and those of Latin American countries, including Venezuela’s are not always complementary as seen in the Banana Wars in the WTO. It should also not be forgotten that Venezuela continues to have border disputes with two CARICOM States (Guyana and Dominica) which have still not been resolved and for which Venezuela has not changed its position.  A further caveat to bear in mind is that given the strong ideological divide in Venezuelan politics, there is no guarantee that whichever president eventually succeeds President Chavez would be leftist in political orientation or that he or she would be as sympathetic as his or her predecessor to the region’s concerns, or be committed to continuing ALBA and its component programs. Therefore, there is some concern about ALBA’s survivability in a post-Chavez era.

The real threat to CARICOM is not ALBA though, but CARICOM itself.  Impatience with the slow process of integration and its associated benefits at the CARICOM level has had as its natural corollary a desire to explore more seemingly attractive alternatives. It is not surprising therefore that the poorer countries in the region, and some of the larger countries like Suriname as well, have set their compass to ALBA for the superior economic security it provides and its seemingly better alignment with their interests.  Unless our Heads of Government act seriously on their commitment made at the last inter-sessional meeting to formulate a plan of action designed to reform CARICOM to make it more effective, there could be a day when all of our countries eventually turn their backs completely on CARICOM in favour of other blocs which they believe have both the ability and will to better cater to their peoples’ interests and needs. That would be a sad day.

Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw.

Links to Commentary on CARICOM Crisis

The internet has been abuzz with commentary and analyses by well-known regional commentators on the current crisis in CARICOM. Besides my own article, below are links to some of the other articles floating around the web. If there any other good ones I’ve missed, do let me know!

Articles/Commentary

Caricom’s Promise of ‘change reality’ – Rickey Singh

Caricom doing the dragon dance? – Sir Ronald Sanders

A New Future for CARICOM – David Jessop

Turning around CARICOM – Stabroek Staff Editorial

CARICOM: Ambition + Inaction = Failure – Sir Ronald Sanders

Cari-Crisis -Again – Professor Norman Girvan

Imagine a Leader Leading – Sir Ronald Sanders

Necessity of Changes in CARICOM Confirmed – Rolando de la Ribera

Documents 

Re-Energising CARICOM – Report Commissioned by CARICOM Chairman PM Tillman Thomas

Letter by PM Dr. Ralph Gonsalves of St Vincent and the Grenadines to CARICOM SG

Communiqué issued at the conclusion of the 23rd Inter-sessional Meeting of the Conference of CARICOM Heads of Government, Paramaribo, Suriname, 8-9 March 2012 

Report: Turning Around CARICOM, Proposals to Restructure the Secretariat 

What CARICOM needs: A little less conversation, a little more action please!

Alicia Nicholls

This catchy line from Elvis Presley’s song from the late 60s “A little less conversation” immediately came to mind as I read the flurry of news reports, commentary and analyses swirling around in the regional media for the past two weeks about the current state of crisis of CARICOM. The opinions expressed therein ranged from concern over CARICOM’s ailing health to fears that it had flat-lined. All acknowledge that our main regional body is in deep trouble.

The backdrop to this latest death scare was yet another report highlighting the weaknesses of CARICOM and the urgent need for reform. This independent consultants’ report, commissioned by the CARICOM Secretariat back in July 2010 and thankfully made available online recently, predicted that, ceteris paribus, CARICOM could be in the mortuary by 2017. It comes on the heels of a frank letter sent by Prime Minister Dr. Ralph Gonsalves of St Vincent and the Grenadines to CARICOM Secretary General, Irwin LaRocque, and copied to the other Heads of Government, expressing grave concern about the current state of CARICOM.

This hurricane of bad news has quickly elicited a tsunami of denials and pledges of commitment to CARICOM from our leaders across the region. For example, our Prime Minister here in Barbados while acknowledging the challenges facing the region and the regional integration process, vehemently denied that any funeral for CARICOM needed to be planned any time soon. The response from regional leaders, though predictable, is encouraging, given that for the past few years many keen onlookers have been left to wonder about whether our leaders’ commitment to the regional process goes beyond mere lip service.

Truth be told, it has long been common knowledge that CARICOM has stagnated and faces serious challenges to its survival. The problems identified by the CARICOM Secretariat report and by Prime Minister Gonsalves in his letter are not new. Yet, despite a plethora of studies and recommendations on the same, successive CARICOM heads of government have been unable or unwilling to rectify them. One of the main problems has always been CARICOM’s weak governance structure which per the Revised Treaty of Chaguaramas concentrates policy-making authority in the hands of the Conference of Heads of Government made up of the heads of government of the fifteen member countries. On the contrary, the Secretariat, set up as the body’s principal administrative organ and headed by the Secretary-General, has become overburdened with too many tasks, while having virtually no executive power. Moreover, the lack of a supranational structure means that there is a long interlude between when decisions are taken by the Heads of Government and their implementation, if they are ever implemented, at the national level. For this reason, many of the decisions taken by the Heads of Government remain for far too long at the paper and ink stage. It is this ‘implementation deficit’ which has been continually blamed for the slow process of integration and had been called the ‘Achilles heel of CARICOM’ by the West Indian Commission “Time for Action” Report published some two decades ago.

The real underlying problem of course is the lack of political will on the part of our leaders to “cede” any national autonomy to a regional body. This is despite the recommendation made in countless CARICOM-commissioned studies that what CARICOM needs is a stronger regional governance framework which would facilitate and expedite the policy implementation process. The jealous guarding of national autonomy on the part of our governments is also evidenced by some countries’ lukewarm support for key regional institutions. As yet only three countries (Barbados, Guyana and Belize) have signed on to the Caribbean Court of Justice’s appellate jurisdiction, although the recently elected Prime Minister of Jamaica, the Hon Portia Simpson-Miller has indicated her country’s willingness to join. However, the other countries in the region remain hesitant about switching to a Caribbean-based court, while they paradoxically cling fiercely to a vestige of colonialism, the Judicial Committee of the Privy Council. The current economic and financial crisis has also increasingly caused our leaders to direct their attention inward towards national concerns, leaving many of the region’s key institutions of functional cooperation to become little more than ‘talk shops’ due to less and less funding from regional governments.

The truth is that we as a region need CARICOM now more than ever.  Besides our increasing geopolitical irrelevance and our economic marginalisation owing to our small size and loss of trade preferences, the international community is no longer as sympathetic to the economic and political vulnerabilities of non-LDC small states. CARICOM is our shield to an increasingly hostile international climate for small states.  Divided, our individual voices are little more than squeaks on the international stage. But together, our combined voice is less weak. Among other things, CARICOM gives us increased bargaining power in both multilateral and bilateral fora and negotiations and a wider market for regional goods, services and capital. Moreover, through functional cooperation, pooling our limited resources and our collective genius, we can and have achieved objectives which we would have been ill-equipped or completely unable to achieve as individual countries.

Is this latest report the wake-up call we need as a region? After all, the cynical among us would note that there have been endless studies, reports and other publications before sounding the alarm over the standstill in regional integration and bemoaning the lack of commitment of our governments. Despite this history of ‘a lot of conversation and little action’, I, perhaps naively, choose to be optimistic that this time we, the citzens of our region, will not be treated to more of the same old promises by our leaders.

The CARICOM Secretariat report was circulated to the Heads of Government before the 23rd Inter-Sessional Meeting on March 8-9, of the Heads of Government in Suriname. According to the communiqué released at the end of the meeting, the Heads of Government considered in-depth the report’s recommendations. Under the area of CARICOM-reform,  they agreed that the Secretary General would begin the process of restructuring the currently overburdened Secretariat with the help of a change facilitator. They also agreed that the Bureau of the Conference would work with an internal group from the Secretariat to facilitate improving regional governance and implementation. Although many of us expected to see more urgent action, it should be recognised that the current financial and economic situation of many of our countries does limit how much resources can be earmarked by our cash-strapped countries to comprehensive CARICOM-reform at this time. However, these two proposed reforms represent a step hopefully in the right direction and it is hoped that at their next meeting our leaders would, following consultations with civil society, have a more concrete plan of action for reform.

What we need is a little less conversation and more action by our leaders. From a structural point of view, the Revised Treaty of Chaguaramas needs amending to provide a governance structure which would permit CARICOM to function effectively and efficiently and do the tasks for which it was established. It should also provide for and mandate greater participation by the wider society in the regional governance process. Further, it is my hope that among the areas for action would be increased regional funding and political support for regional institutions of functional cooperation. In this vein, all CARICOM countries should accept the CCJ as their final court of appeal and not just because it is a regional court. The CCJ has produced very enlightened jurisprudence so far in both its original and appellate jurisdictions and demonstrates that we as a people should have faith in the wisdom, capability and impartiality of our  judges. With regard to the CARICOM Single Market & Economy (CSME) which Caribbean leaders inexplicably placed on ‘pause’ at their retreat in Guyana last year, a greater commitment is needed by regional governments to remove unduly restrictive barriers to trade between our countries and foster a more vibrant regional market where people, goods, services and capital flow more easily. Part of this would require more concrete steps to deal with the prohibitively high cost of regional transportation.  However, all the hard work cannot be left to our leaders. If there is one thing that I have come to appreciate as a student in the beautifully diverse Faculty of Law at the Cave Hill campus of the University of the West Indies, is that we as a people in the region have to put our false nationalism and stereotypes of each other aside, and recognize that as diverse as we are, we are still one Caribbean people.

Alicia Nicholls is a trade policy specialist and law student at the University of the West Indies – Cave Hill. You can contact her here or follow her on Twitter at @LicyLaw