The Caribbean Development Bank

by Chandra Hardy

For the past 25 years, the Caribbean Development Bank (CDB), a subregional bank, has focused its efforts on the development of the Commonwealth Caribbean countries, in particular, on the seven small islands states that form the Organisation of Eastern Caribbean States (OECS). While many consider that the CDB has lived up to its early billings and expectations and has contributed in reducing poverty and improving skills, the CDB-like the other multilateral development banks (MDBs)- is being increasingly scrutinized by grassroots organizations, environmental groups, and others.

To better understand the CDB, Chandra Hardy set out to determine whether it had been an effective agent of development and whether it had the ability to take on the emerging challenges on the development agenda.

Growth And Governance

Founded in 1969, the CDB began with 18 members and US$50 million authorized capital, half of which was paid in. Nonregional members (originally only Britain and Canada, but France, Germany, and Italy joined later) are limited to 40 percent shareholding. Jamaica and Trinidad and Tobago have the largest shares, with 16.6 percent each. By 1992, the CDB had 25 members (including Mexico, Venezuela, and Colombia as donors) and resources of $1.3 billion, of which $686 million were "special fund resources." All 25 countries are on the Board of Governors, which devolves responsibilities to a 17-member Board of Directors (including all five non-regionals) that meets six times a year. Hardy suggests its numbers should be reduced. The United States does not join subregional banks, but has contributed to the CDB's special fund resources.

Headquarters staff in Barbados number fewer than 200, and the average project loan has been about $5 million. Within these size limits, says Hardy, the Bank is a significant success story, having a "distinct advantage over the larger MDBs in the lower costs of appraisal and supervision of projects, in knowledge of the region, and in flexibility."

The figures below show the distribution of loans and grants by the largest borrowing countries in 1970-92 out of a total of $1.1 billion disbursed:

Country	Amount (in US$ millions)
OECS "Seven"	393.7
Jamaica	181.8
Guyana	96.7
Belize	75.4
Bahamas	69.9
Barbados	68.2

Problems And Challenges

Applause for the CDB's past achievements is mixed with concern for the looming challenges in the region which is facing the loss of preferential export markets and a decline in capital inflows. Unemployment and poverty are increasing in the larger countries, while smaller islands are starting to suffer from deforestation and polluted beaches. Hardy argues the CDB needs to establish region-wide environmental policies, play a larger part in regional development, and help promote intraregional trade. To do so, the Bank needs to boost its information service and strengthen its staff of economic analysts.

Country Studies

The study focused particularly on three OECS countries (St. Lucia, St. Vincent and the Grenadines, and St. Kitts-Nevis) as well as on Guyana, Barbados, and Jamaica. The seven OECS countries have received 55 percent of the total resources, and 85 percent of the technical assistance grants. In the smaller islands, the loans went primarily to roads, electricity corporations, and other infrastructure, and Hardy says the CDB helped strengthen fiscal discipline and improve the quality of public administration, arriving after Britain had withdrawn budgetary support from its ex-colonies.

In Barbados, a large loan went to revitalizing the sugar industry, and the airport was successfully rehabilitated. The Guyana story is one of lending to agriculture and clearing arrears. In Jamaica, the loans went largely in support of two development finance institutions. Jamaica's connection with the CDB is more fully described in a companion booklet, Shocks and Strategies: Jamaica and the Caribbean Development Bank, by George Reid.

About The Book And Author

Published in 1995, this study is part of a larger project on the multilateral banks, launched by the North- South Institute in 1991 and supported by the Canadian International Development Agency, the Ford Foundation, the Swedish Ministry for Foreign Affairs, the Norwegian Ministry for Foreign Affairs, the Netherlands Ministry for Development Cooperation, the Inter-American Development Bank, the Caribbean Development Bank, the African Development Bank, and the Asian Development Bank.

The results are presented in four volumes, one on each of the regional development banks, plus a synthesis volume, Titans or Behemoths?, by Roy Culpeper, published in 1997.

Chandra Hardy worked for 11 years as a senior economist at the World Bank, and is an associate of the International Development Training Institute in Washington, DC.

Available at a cost of $25 from: Renouf Publishing Co.