Economic Forum—Tracking Grenada's Recovery: Six Months After Hurricane Ivan
Grenada—2005 Budget Mission, February 15-22, Concluding Statement
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Tracking Grenada's Recovery: Six Months after Hurricane Ivan
Washington, DC., February 25, 2005
His Excellency Denis G. Antoine, Grenada's Ambassador to the United States
MR. TENNASSEE: Welcome. Caribbean events sometimes begin with a calypso. We don't have a calypso but I will call on Dr. Joseph Edmunds, former Ambassador from St. Lucia to the United States, to please share with us a poem he has written for this occasion. We in the Caribbean, as much as we love life, we love poetry.
AMBASSADOR EDMUNDS: Thank you very much. The poem is called "An Ode to Grenada After Ivan."
AN ODE TO GRENADA AFTER IVAN
MR. TENNASSEE: Well, even better than a calypso, the poem has set the tone for today's event. During the past 25 years, natural disasters have cost the Caribbean community more than $60 billion. Natural disasters rank very high as a major constraint to sustained development and improved living standards for citizens of the Caribbean. CARICOM's outgoing chairman, Prime Minster Dr. Keith Mitchell, has called for a regional disaster fund. We now cannot strategize and formulate development policies without making allowance for possible disasters. This is why NCOCA and CAWI have organized this event, and I glad so many people have shown up for it, and so many representing our region.
I thank the IMF for having provided us with this venue and for a lovely lunch. I particularly would like to thank Claire Lazarus and Hites Ahir from the IMF for having assisted us with organizing the event.
Now, the Caribbean has a number of external actors that play very important roles in the life of these nation states. These include the IMF and the World Bank. The perception of these institutions in the Caribbean is problematic. But we need to know the policies, and the policymakers, of these institutions. The Caribbean diaspora can play an important role by engaging these institutions in dialogue and in joint analysis, thereby contributing to better policy formulation.
As time is of the essence, I will not make lengthy introductions of our speakers, who are well known. Let me immediately call on His Excellency, Dr. Denis G. Antoine, Ambassador of Grenada to the United States of America and to the OAS, and the Dean of CARICOM Ambassadors, to make his presentation.
AMBASSADOR ANTOINE: Thank you very much, Paul. Let me say good afternoon to each and every one, particularly to representatives from the IMF, since we are in their house, and from the World Bank. I express my appreciation to NCOCA and to the other facilitating groups.
This occasion is very meaningful because without this kind of public forum the Grenadas of the world would remain marginalized based on their lack of economic might. Today I ask that you continue to assist us in keeping Grenada's name in the news and in the international community.
On the morning of September 8th, 2004, it was quite clear that, after the scope and scale of the damage inflicted by Hurricane Ivan, Grenada did not have the capacity to help itself. Not only were the primary sectors of Grenada wiped out overnight, but, also, its security, all forms of communication, and its social network, was shattered.
The statistics on economic and environmental damage caused by Hurricane Ivan are staggering, and the psycho-social impact on our people immense. The productive base of the economy was destroyed. The critical tourism and agricultural sectors were virtually obliterated. Ninety percent of the entire housing stock was damaged or destroyed. Over ninety percent of the forest area, the watershed and the mangroves were destroyed. Over ninety percent of the schools and the physical infrastructure were, also, damaged.
This is the picture we saw at the morning of September the 8th. Since that day, the resiliency of the Grenadian people and the Government of Grenada has been exhibited. But today, six months after Ivan, there is still need for international assistance, support and understanding. The international community remains very necessary and very critical to Grenada's rebounding.
The Government of Grenada has set up an Agency for Reconstruction and Development (ARD) to coordinate the nation's recovery effort. ARD, as it's called, is operational and nearly all projects and programs relating to reconstruction go through it. An outline of a reconstruction program covering three years and costing approximately $1.2 billion has been designed. ARD will provide technical assistance to government ministries and other agencies that are implementing reconstruction and development projects; it will coordinate their activities; and it will report the progress to all stakeholders that are assisting us.
The following are some highlights of what has been achieved or planned:
• In housing, community housing allocation communities have been set up, chosen by community members to work with government and donors to identify the most vulnerable persons and assist in providing housing. Special assistance is being provided to address the land tenure issue, a major constraint to solving the housing problem. Skills-training programs and schemes are underway for construction and building.
• We have, also, moved on to deal with the schools. Four school buildings are under repair, with 15 in planning stage.
• In agriculture, 2,000 acres have been cleared of fallen trees and in preparation of replanting nutmeg and cocoa. Seeds and fertilizer plants have been supplied to over 3,000 farmers and households.
• In forestry, experts are currently in the field developing strategies for refurbishing the watershed protection.
• In tourism, a brand-new cruise ship terminal is operational and tourist attraction sites are being rehabilitated.
• We are beginning now to work on providing psychological briefing and counseling to approximately 4,000 persons. Eleven medical clinics and two community centers are being repaired.
I am being very detailed and specific because we are beginning from scratch in Grenada in most instances. In addition, many other initiatives across sectors are being defined and are in design stages. These include: lines of credit and financial services to assist businesses and individuals; institutional strengthening for ministries, departments and statutory bodies; coordination of databases to facilitate project development and reporting on the basis of harmonized formats.
The challenges we face are many. The damage suffered in Grenada will cost the equivalent of 200 percent of our GDP—around 2.4 billion EC dollars. Additional financial support will be required over the coming years to enable the `Build Back Better' vision that we have for Grenada. The Agency for Reconstruction and Development looks forward to expanding its dialogue with all Grenadian development partners—partners in the diaspora, partners in the region, and partners locally.
I thank you.
MR. TENNASSEE: Thank you very much, Ambassador. Now, I would like to call on Dr. Caroline Anstey, who is the World Bank's Country Director for the Caribbean Region, to make her presentation.
MS. ANSTEY: Thank you very much, Paul. Thanks to the Ambassador, and to the IMF for inviting me. It's always a rare treat to be able to cross the road from the World Bank to the IMF.
The Ambassador has succinctly described the progress in some of the areas and, in so doing, has stolen all the statistics I had intended to cite to you. So rather than repeat those, let me concentrate on some of the lessons we take away from Grenada's experience. What can it tell us about what we have to do now, after six months? What can it tell us about how we should respond in future to these terrible natural disasters, both in Grenada and the rest of the Caribbean, which are so prevalent and we know, unfortunately, will happen again?
The great tragedy is that before Ivan hit, the economy was really turning around. Tourism, which had been so badly affected after 9/11, when people had stopped traveling, was beginning to pick up. I think Grenada had had its best tourist year. A lot of the macro numbers were looking much more robust and stronger. Then the economy really got put off-track by the hurricane. Because the country already suffered from a high debt level, it was clear it was better to finance the reconstruction by grants rather than loans or more borrowing.
So one of the prime lessons has been the need to engage the donors right from the beginning. I think it's fair to say that in the case of Grenada, there was more of a donor response, and more of a coordinated donor response, than there has been with other natural disasters in the Caribbean. That started very much with the donors conference that we held at the time of the World Bank & IMF Annual Meetings in October, and the follow-up donors conference that was held in Grenada in November.
We were able to raise over US$100 million because we did this in a coordinated way, rather than what has traditionally happened in these cases, which is that different donors come in at different times. The World Bank has provided US$20 million of the US$100 million, focused primarily on the education sector, and we will be involved in the rebuilding of about 26 schools. And we are also working with other donors in the health sector to help rebuild two hospitals and some clinics.
We were able to use the bully pulpit to try and focus attention on the catastrophe. And as we all know, with the power of the media being what it is, it is very important to have people focus attention immediately on an event before the media spotlight passes to other and competing issues in the rest of the world.
So the first lesson is that all the donors have to respond in a coordinated way. It's important for this coordination to continue, in this case under the ARD that the Ambassador has described, to make sure that donors don't trip over each other in the process of providing assistance. There is always a tendency amongst donors to want to have projects with their flags all over them - that is the way the donor community tends to work. In the case of Grenada what has happened is that once the needs were identified by sector, then the government, through the ARD, could really coordinate the donors and say, "We want this donor to provide assistance for building these schools. We want this donor to provide assistance on SMEs or whatever it may be,"—I think that's very important.
Another point under the rubric of donor coordination—what we have seen in the past is that the donors continually exact a very high price for their assistance, primarily by insisting on different reporting mechanisms, different procurement mechanisms, sending multiple missions, asking for multiple reports. When a country has been hit to the extent Grenada was, the last thing a country needs is to find itself embroiled in 10 or 15 different bureaucratic procedures. In the case of Grenada, we have been able to simplify those procedures so that we are all on the same page.
We, at the World Bank, would like to see that simplification go a little bit further, and I can give you one example. Procurement for goods, whether it's for rebuilding schools or for agricultural investment, always takes time. We have proposed that in an emergency situation, such as in Grenada, the thresholds of projects that have to go through a Tender Board process be raised. In the case of Grenada, I think the threshold was about 10,000 EC dollars. We recommended it be raised to a million EC dollars so that all projects, up to a million, could be signed off on by the Permanent Secretary or the Minister, rather than having to go through the Tender Board. Once things go through the Tender Board, everything slows down.
And one of the problems that has arisen in Grenada is that, despite a great deal of will and energy to push forward with reconstruction, there are bottlenecks. There are bottlenecks around procurement. There have been bottlenecks around the provision of supplies, which often have to be brought in from outside. So it is incumbent on donors to get their act together a little bit more, simplify—within the limits of doing their due diligence—and coordinate.
The second lesson is about the importance of needs assessment. It's very important that the donors respond on the basis of a needs assessment - an assessment of what the bill is, if you like, what the damage is, and then see how they can come in. In the case of Grenada, the needs assessment was conducted very quickly by ECLAC, with support from the OECS Secretariat. That enabled a sector-by-sector assessment to take place to really look at what the damage was, both the short-term humanitarian cost and the longer-term reconstruction cost.
A hurricane like Ivan has the possibility not to just destroy infrastructure, but to destroy a way of life and sectors that have contributed to Grenada's prosperity. The Ambassador already talked about the psychological impact of going through this ordeal which caused such devastation. Let me mention a couple of other problems that stand out when we look at Grenada—a couple of the areas have been particularly hit beyond the physical infrastructure.
Women, I think, have been very affected because of the closing down of the hotels and the tourist industry, where a lot of the women have previously been employed. And although, of course, after a hurricane you have an immediate sort of pick up in growth because the construction industry takes off, that's not always the same industry where people have been employed before.
Nutmeg is a very interesting and very challenging issue for Grenada. The country has been the world's second-largest producer of nutmeg, after Indonesia. It had built up a very good market share. Nutmeg, though, as we know, takes between 7 to 10 years to grow. Now, the authorities have very sensibly made great efforts to look around the world at where there may be more different types of nutmeg tree. And I think India—the Ambassador will correct me if I'm wrong—has a type of nutmeg that will grow much faster than others, but you are still talking 5 to 7 years. So this is a big reinvestment in a sector where you don't really know what the market will be like in 5 to 7 years. So the authorities are also looking at crops, flowers or other things that may have a faster turnaround in terms of income generation.
A third lesson is the need to involve civil society and community groups, which I think has happened in Grenada. Since Hurricane Ivan, I have been to Grenada I think three times and visited some of the communities, and there is a lot of involvement. Last month, our President, President Wolfensohn, went down to Grenada and he, as well as meeting with the Prime Minister and other government officials, went and visited some of the communities that are coming together to look at what their needs are and then help design the various buildings that may take place. I think this is a very important element, that reconstruction can be coordinated top down, but it really needs to take place bottom up to energize the community.
Another lesson would be the importance of regionalism. I talked about the importance of the donors, the international donors, being united and working together so as both to leverage the amount of money that is raised and not to burden the government with excessive bureaucratic regulations. But the role of the region is also extremely important. One of the things we did see with Grenada is that the region really stepped up to the plate, whether it was Trinidad and Tobago coming with forces, whether it was the Guyanese (I think it was a Guyanese colonel who helped to coordinate some of the immediate reconstruction efforts), or whether it was St. Lucia with LUCELEC who were there working on electricity. This is an absolutely key issue. These aren't, in the end, isolated, single-country problems. They are regional problems.
And linked to that, my strongest point would be: what can we do to mitigate the risks of this in the future? We know that the Caribbean suffers from natural disasters. There are hurricanes; recently there was an earthquake in Dominica. Hurricane Ivan we know hit not just Grenada, but also Jamaica. Hurricane Jean hit Haiti badly. There must be ways to approach this in a way that will reduce the costs.
Here I would like to make a very big plug for something the Bank is now working on, and that is catastrophic risk insurance. What do I mean by this? I mean a mechanism that would cover the most natural disaster-prone countries that would, in a sense, be a pooling of risk, and that would be the countries basically enter into a pool, whereby they pay an annual premium, but if one of them is hit, the insurance is there to cover the public buildings. The insurance won't stop the hurricanes from happening, but it will allow for public infrastructure to be insured.
We are doing actuarial studies on this now at the request of CARICOM. The donors, rather than giving their support in this ad hoc way after a hurricane happens, would give their support to providing either coverage of some of the premium that would be involved or cover some of the deductible, like in any insurance scheme.
The reason for pooling is that if you pool the risk, the premiums come down, and the more countries, obviously, in the pool, the better. We know the costs of natural disasters in the Caribbean; we know there will be more. So this is one thing we have to push forward, and all of the donors I hope would get behind that. We have had strong support from nine CARICOM heads of government now who want to participate in such a pool.
The other aspect of disaster mitigation and prevention is better building codes. There was one assessment done that in Grenada, if you had had hurricane straps on most of the buildings—and hurricane straps cost about $75—you would have vastly reduced the number of buildings that were affected. We know that 90 percent of the housing stock was affected largely because the roofs came away from the rest of the building. So the issue of building codes is very, very important. And, also, other ways to better insure the private housing market in a way that is not going to be at great cost to house owners, but can be done, and that's something that our International Finance Corporation is looking at.
These are the two steps: catastrophic risk insurance so that your public buildings are insured, and better building codes so that you really mitigate the damage. We found in Grenada that the two secondary schools that were left standing were, in fact, schools that had been funded with World Bank money and had been built to high hurricane resistance codes, so that they remained in place. So that there is a strong case for these steps. And remember this was a Category 3 hurricane, and look at the damage it did. If this had been Category 4 or 5, you would have seen something even more devastating.
So to sum up, the key lessons from Hurricane Ivan and Grenada's experience are:
• First, mobilize international support quickly and in a coordinated way;
• Second, look at key sectors and key people—perhaps women in this case—who have been particularly affected;.
• Third, look at long-term mitigation through building codes and insurance;
• Fourth, bring in the region and look at these issues, particularly of insurance, regionally,
And then the last issue, I would say, is the challenge is to keep the spotlight on the country and on the country's needs when people have short memories and the spotlight moves to the tsunamis in Asia or elsewhere. That's why, because we can't always rely on the media spotlight being there, we have to design better mechanisms to try and protect the Caribbean and see what donors can do to contribute to long-term prevention.
Thank you very much.
MR. TENNASSEE: Well, thank you very much, Dr. Anstey. The lessons are very important because the Caribbean has gone from disaster to another—we had Jamaica, we had Grenada, Haiti, and now Guyana is flooded. In 2005 they say we should expect more hurricanes. So we really need to work on these lessons and to make them become fundamentally part of the new policies that would be evolving.
I would now like to call on Dr. Prakash Loungani, who is the Mission Chief to Grenada for the IMF.
MR. LOUNGANI: Thanks, Paul. Thanks to the organizers for putting this together and to Ambassador Antoine and Caroline Anstey for joining us.
Let me begin by acknowledging the help of my team members Harald Finger and Rishi Goyal in putting together my remarks. The Ambassador has talked about the relief and reconstruction effort, and Caroline about some of the lessons learned. So I'm going to focus on where things stand at the moment in terms of the economic situation of Grenada. This is based on the findings of a recent IMF mission - we just got back a couple of days ago from St. George's.
We have been just amazed by the grace and fortitude of the people of Grenada. Before blue tarps were put on as temporary roofs, many people were literally living under the sun. But some people, when asked "How are you able to cope under these circumstances?" respond: "Oh, it doesn't matter. I'm even closer to God. He can look right in."
As Caroline mentioned, this was an economy that was actually starting to turn around prior to Hurricane Ivan. The economy was devastated by the 9/11 shock, but was starting to come out of it. Tourism receipts had started to show somewhat of an up-tick in 2003, The government was starting to work on addressing some of the fiscal imbalances that were holding back growth in the country. It wasn't possible to completely turn the debt situation around, but progress was being made.
And then on September 7th everything changed. The economy, as the Ambassador mentioned, suffered a shock of 200 percent of GDP. Now, to imagine a disaster of this kind, keep in mind that, on average over the last 30 years, the damage to an economy from a natural disaster has been about 2 percent of GDP. So we are talking of a shock in Grenada's case of several orders of magnitude higher than what we have seen in the past in any country. Over Christmas time last year, all of us were horrified by the terrible loss of life in Asia and the devastation suffered there. But, again, just to put the damage to Grenada in perspective, the damage to Sri Lanka, for instance, from the tsunami was about 8 percent of GDP. In Grenada's case, the loss of life mercifully was less than what it would have been otherwise because the hurricane came during the day; so people were able to dodge the incoming missiles—parts of roofs and all other kinds of material. But while that kept the loss of life mercifully on the low side, in terms of economic damage, Ivan was a major shock.
There was a tremendous international effort put together to help Grenada. Caroline Anstey at the World Bank and Ratna Sahay at the IMF were instrumental, I think, in rallying support at the donor conferences. The IMF also provided emergency assistance of US$4.4 million, which was disbursed immediately and given at concessional rates. This added to the assistance that we provided after Tropical Storm Lili. There have also been three IMF missions to Grenada since Hurricane Ivan struck—the first one last September to assess the damage and to rally donor help and the IMF's own funds, a second in November last year, and the one we've just returned from in February.
So six months later, where do things stand? The impact on unemployment was tremendous. This was a country that already had an unemployment rate of 13 percent, we estimate, before the hurricane. The National Insurance Scheme did a survey that found that 8 percent of the labor force was displaced as a result of the hurricane. So the unemployment rate probably went up to over 20 percent, but some of the people are being reabsorbed in the construction industry. As Caroline mentioned, there is an emerging problem of gender differentials—it's much easier to absorb men into the construction industries, into fishing and so on. The government and the donors are trying to address this problem—USAID has a training program that is trying to train both women and men in construction skills. UNDP is also active, and I wasn't aware that the World Bank also is working on this. So that's good news because a substantial fraction of the labor force is women, and they are often single earners in their family. Absorbing them back into the labor force is critical for the health of the economy.
What we expect this year is that there will be some growth, under 1 percent. It's coming mostly from construction. But it's being cancelled out by the still-depressed conditions that the Ambassador described in agriculture, and hotels, and restaurants. In the tourist sector, the cruise ships are helping, as the Ambassador mentioned. There was a new cruise ship terminal, which was not damaged, so that the country thankfully has been able to attract cruise ships. This is a welcome sight to an economy that was so dependent on tourism. It is helping the vendors, it is helping the restaurants in the area, it is helping some of the natural sites to which people are still able to go to. But the country needs more stay-over visitors because they contribute much more in revenue than do the people who visit on cruise ships. So, please, this is a good time to go to Grenada—good deals, great country still to visit; go there and take friends with you.
Let me focus now on the financing gap, the needs of the nation that still remain. Thanks to the donor conferences, and the donor support that Caroline and Ratna and others in the international community were able to put together, you can see that the financing gap for 2004 was closed. So this is just a tremendous effort on the part of the donor community and Grenada's own government.
But there is still a financing gap for this year and an even bigger one for next year—there's a gap of over 10 percent of GDP in 2006. These are the most recent estimates coming out of our February mission. So, as the Ambassador and Caroline said, we hope this is not a time at which donors switch off their attention from Grenada because we still need help.
Now, how is this gap going to be filled? It's going to take a combination of further donor and creditor support and the government's own efforts. It sounds cruel, asking people who have suffered such a huge shock to ask them to give more, but I honestly don't know whether purely on the basis of support from creditors and donor support Grenada is going to be able to fill this gap.
I think it will be important for there to be town hall meetings in Grenada so that the people can talk amongst themselves on what is the best way forward for them to do their share to contribute to filling the gap.
Now, there are a number of options which the Grenadian authorities have for a long time considered; but they have not actually taken these steps and obviously, under the present circumstances, are very hesitant to take them now. One thing that has been talked about by the government is trying to raise retail fuel prices, which have been frozen in Grenada for four years, despite, as you know, the nearly 50-percent increase in the world price of crude oil over this period. This essentially means that the government is subsidizing people for the consumption of fuel. And in some sense, you can say, yes, the government is providing a subsidy to people at a time when they are really hurting. But by depriving the government of revenue that could go to other perhaps more urgent needs, you are sort of simply robbing Peter to pay Paul. So the government is talking about perhaps phasing in an increase in retail prices now, and maybe down the line considering an adjustment so that there will be a flexible price mechanism in the future.
My colleague, Rishi Goyal, has been talking to people in Grenada, and to others in the ECCU region, about the tremendous losses that they have faced by giving tax concessions. So, going forward, it will be important to try to limit these concessions. It is very easy, under the present circumstances, to say `Such and such sector is hurting, let's give it a tax concession'. The problem is that every sector is hurting, and giving tax concessions to one is just not a strategy that has worked in the past to really help foreign direct investment or growth.
So this is, again, another example of an issue people in the country will have to come to grips with. These are the kinds of tough decisions that, unfortunately, people in Grenada will have to be discussing to see what is the best way for them to proceed.
On the debt strategy, I am quite happy to report that the government is seized of the problem and is making good progress. It has appointed financial advisers to try to help it reach an agreement with the creditors, which, if it is successful, could go some way toward filling the financing gap that I talked about.
Let me conclude, not on a note of the state of the country's financial assets, but by returning to our impressions of its real assets—the people of Grenada. As I said at the outset, we've been tremendously impressed by the efforts of the Grenadian people to put their lives back together. But we think that the psychological impact of the hurricane has been tremendous and is just actually starting to show. People were so engaged with the immediate tasks of relief and rehabilitation that, in a sense, it was almost not on their minds. And it is now that a degree of normalcy has returned that, paradoxically, people are talking about their experiences more openly, and are realizing how much more they have to do, and how much more they may have to sacrifice in order to come out of the situation. So the point that the Ambassador mentioned, that the need for counseling, the need for helping people come to grips with this trauma is important, particularly as the next hurricane season approaches, and I'm glad the government is making that a priority. Thanks.
MR. TENNASSEE: Thank you very much, Dr. Loungani. It is very clear all over the world, whenever IMF makes these prescriptions, it becomes very problematic. Prakash has touched on two things: tax incentives and the raising of fuel prices. I know in Venezuela, even though they produce oil, when they raised fuel prices, there were riots. And I know, in case of tax incentives, if you don't have incentives in a competitive world, investors don't want to go. But we also have to engage in the hard policy choices. And this is a wonderful opportunity for us, from the Caribbean diaspora, to have an opportunity to engage with policymakers here at the IMF and the World Bank.
So I now open the floor. There's a simple rule: please don't make long speeches so that we can make best use of the time. Thank you.
Question & Answer Session
QUESTIONER: My name is Bruce McBarnett. I am with Summit Connection, a real estate investment company. A quick question that I had for Mr. Loungani. I noticed that in your slide for the debt service, that debt service almost quadruples in the year of 2012. I was curious as to why that is the case.
MR. LOUNGANI: Those two spikes that you saw in 2012 and 2014 were because of two international bonds which are coming due—the bullet payments are coming due in those years.
QUESTIONER: My name is Ransford Palmer. I'm a professor of economics at Howard. I wonder if you are able to gauge the impact of the Grenada diaspora on the reconstruction of Grenada. Were you able to identify the contributions and donations the diaspora was able to make?
MR. LOUNGANI: I don't think we have any systematic evidence on this, Dr. Palmer. The best evidence we have is that I mentioned that stay-over visitors are a critical part in helping the economy recover. Even though stay-over visitors have declined in 2004, they were still relatively high and I think part of this is because of Grenadians returning to help their relatives and friends. And so, in that sense, we do see a very strong impact from the diaspora, particularly those who came over the Christmas season to help.
MS. ANSTEY: Dr. Palmer, I think that although I don't have any hard and fast figures either, I think there has certainly been an increase in remittances, and I think most of those remittances have continued to go into consumption. There's also been, I know, on all of the flights that—I think I was there 10 days after the hurricane struck and then twice since then—the flights are full of people, usually from the U.S., going back taking things physically with them. There was, also, in the initial period, when it looked as if the schools couldn't get back up and running, there were a lot of Grenadian children, I think, who either went to school with families in the other parts of the OECS or the Caribbean or who came to the U.S. for a short while. So I don't have a number, but I think there has been a lot of that going on. Also, in the reconstruction of churches, NGO groups represented here have been going down there or sending money through churches.
I think one of the issues that we had thought about was can you better link up the diaspora with specific projects. While I think you can do that at the community level, link up by better knowledge sharing so that diaspora in this country, for example, know what the community projects are, some of our research on remittances has always come back with the answer the essential point about remittances is it is private-to-private transactions. People who send money do not necessarily want it going through government. And I'm not saying anything about the Grenadian Government here, I mean government in general. People sending remittances want that private-to-private transaction. So you can, to an extent, I think, leverage remittances by giving people information on community groups and community building projects that they could send their money to. But for the most part, I think the money is going into consumption.
AMBASSADOR ANTOINE: There has been such an outpouring of support coming from the Grenadian—I wish you would call it regional—diaspora. Thanks to the people in the region, Grenadians are beginning to smile and look up.
QUESTIONER: Hi, I'm Charmaine Robinson of the Caribbean Association of World Bank and IMF staff. I wanted to revisit the question of the diaspora because we, in the staff of these two institutions, managed to raise some money to send to Grenada after the hurricane, and these funds were matched by the managements of the Bank and the Fund. And we followed up later on to find out how they had been spent. Basically, the money went through the Red Cross chapter, the American Red Cross that worked in collaboration with the local chapter in Grenada, and they continue to do the efforts that they had already been doing on the ground. But that is why I wanted to find out exactly how, if the government has in place or is thinking about creating some structures for these kinds of efforts and for the work of the diaspora outside. For example, I know that in India and in China, I believe as well, we have Ministries of Diasporean Affairs. Is there any sort of political institution or governmental institution that Grenada is thinking of setting up to deal with these matters in the future?
QUESTIONER: I'm Paul Spencer from the Organization of American States. I know that in the rush to reconstruct or should I say in the rush to provide relief, we are often tempted to proceed with construction activity quite quickly, and I was very impressed with the figures the Ambassador provided, in terms of the number of houses and buildings that have been reconstructed. To what extent, however, have those reconstructed houses benefited from the new building code mechanisms which we all admit must be in place if this is to be avoided again or to be at least minimized in the future?
MS. ANSTEY: Very quickly on the reconstruction, and the Ambassador will have more up-to-date figures than I do, but I think, when I was in Grenada, I was on a radio program, and the person who was on before me was a UNDP rep, and they had a big team going out having workshops with all those who work in the construction industry, trying to teach them what was needed to really have good building codes, and they were using the radio and other things. And I think there has been some of that.
There was, as I say, a shortage of hurricane straps for a while, and most sort of shocking of all, there were apparently some private groups bringing in inferior hurricane straps. There is always, in these kind of situations, price gouging of some sort or people trying to make a fast buck and getting people to put substandard hurricane straps on their houses is not going to help.
But I think this issue of the building codes is very crucial. I think it's complicated a little bit, also, in Grenada, and the Ambassador can comment on that, by some of the land-titling issues, where you don't have clear land-titling about who owns what. It's a little bit more difficult to start enforcing codes and have an overall system.
AMBASSADOR ANTOINE: The issues of legislation and enforcement of codes are very critical to this reconstruction. We have to improve the productivity in housing construction. We have to educate the people involved in the process because we have a lot of self-building and we have a lot of local contractors who must be retrained.
QUESTIONER: It was mentioned a bit earlier the importance of finding or linking up with community groups and building projects. Is there any method in place for finding out information about these projects to provide funding, and what would you say is the best possible route to going about finding this set information?
MS. ANSTEY: I think there are two routes for that at the moment: I think one is through the U.N., which mobilized the U.N. flash appeal, which was for the humanitarian aid immediately after the hurricane. And they were working almost entirely with NGOs on the ground in Grenada. So UNDP website is one place to go. And I think, also, some local bodies that have international affiliates like the Red Cross are the people to contact. But I would go, as the first step, through the flash appeal process.
QUESTIONER: Bruce McBarnett again, President of Summit Connection and Real Estate Investment Company. I was curious as to what extent any private entity has been stepping forward to invest funds in real estate development in Grenada. I realize that Venezuela has built houses there and other donors are directing funds towards development of real estate, but I am particularly interested in to what extent anyone from the private sector has stepped forward in the way of making an investment in Grenada. Thank you.
MS. ANSTEY: I do know that the private sector has been active, often in terms of looking at reconstruction of its own areas, particularly in the hotel industry. But there have also been groups like Digicel, the mobile phone company, which has put money into the actual rebuilding of schools in Grenada and has taken its corporate responsibility seriously.
QUESTIONER: My name is Aston Irving; I'm a freelance writer. The IMF prescription for Grenada sounded to me like advice to the victim of a mugging, especially in terms of the debt strategy. What is the IMF framework in terms of Grenada's debt strategy?
MR. LOUNGANI: The IMF at this point does not have an engagement with Grenada beyond these visits that I described we have made at the government's invitation to assess the situation. So it's really a matter for Grenada to decide how it wants to move forward rather than for us to prescribe anything. So on the debt strategy also, the IMF actually does not have any need to sort of prescribe anything to Grenada. The debt strategy is being devised by the government, in consultation with those debt advisers that I mentioned. In the case of legal advice, it's the international law firm of Cleary, Gottlieb, Steen & Hamilton. And in the case of financial advice, it's Bear Stearns, which helped Grenada tap the international markets some years ago.
MS. ANSTEY: I think where we sit on the debt is that Grenada isn't alone in having a debt problem. The six OECS countries are amongst the 18 most highly indebted emerging economies in the world, and this is a problem that they all face. This is not a government problem. This is essentially going to be a problem for the people of the region because it is their debt. It will be passed down to their children, and their children's children, and I think that there is a need for a real dialogue on the debt issue in the Caribbean, especially in the OECS, and I think some of that is beginning to happen.
There are a number of ways you can look at the debt. You can look at debt restructuring, as Dominica is trying to do, and as we heard from the IMF, Grenada is trying to do, but you also need to look at new sources of growth. And I think it's particularly important that we look at that in the context of building a better Grenada, as the Ambassador said. It's not just a question of rebuilding what was there before, it's really looking at the sources of growth.
And we, actually, have just done two studies that are coming out very soon on sources of growth in the wide Caribbean and in the OECS, looking at both tourism and some new sectors. And Grenada is an interesting country because it already has nascent what could be a very interesting growth sector in St. George's University, the medical school that is now accredited for basically U.S. medical students to go and get their U.S. medical accreditation in St. George's. And they pay I think it is between $35,000 a year, and they contribute significantly to the economy. So Grenada has a medical school. And St. Kitts has a veterinarian school, and I think there are some others. And all the signs are that there's a huge, huge need for institutions to engage in this because the medical schools in the U.S. cannot bear the capacity, the demand that there is out there. So these are foreign investors who have invested in off-shore education, if you like, in the Caribbean. That is one potential growth area. There are, also, other growth areas, for example, ICT, which the Prime Minister is very committed to and they were already looking at. So I think, from the World Bank perspective, we look at the debt issue as something that has to be looked at, also, in the context of the sources of growth and whether investment can take place in other areas.
But this is a problem, and I think too often debt issues tend to become debates between the government and the opposition. And one government blames the previous government: `Look at all of the debt you got us in', and the other government says, ;no, it was your debt'. But, fundamentally, this is the people's debt, and the people should be I think very involved in this discussion about what can be done about this because it's going to be very pressing for all these countries.
And that's also why I said, along with the sources of growth, you need to make sure that this reconstruction money that comes in is as much as possible in grants. Because if countries in the process of reconstruction have to take out loans their debt situation is that much worse. And I think that this whole discussion around the debt will need some fleshing out very much with communities within and across the OECS.
DR. LOUNGANI: Both because we are way over time and because I agree with every word that Caroline just said, I am happy to have her have the last word, unless Paul has something to say.
MR. TENNASSEE: Well, I just would like to conclude four that key points that I take away from today's event:
First, it is very clear that the Caribbean diaspora has a very important role to play. But we do have a problem with the `knowledge gap'. And I am very happy to mention that the Chair of NCOCA, Dr. Palmer, is working presently on an initiative on this, with the diaspora.
Second, the need for coherence in providing assistance. If there was one lesson that came out, it was the fact that, as Caroline said, that the donors were able, for the first time, to work together.
Third, the question of the debt. I think Caroline has put it in the right context. It is the people's debt; governments and politicians may debate endlessly, but it is the people's debt and it has to be dealt with.
Fourth, and this came out very clearly in the Ambassador's remarks, we must always remember this as Caribbean people, that the region came together for Grenada in a magnificent role and showed solidarity, not only at the level of governments in the region, but at the level of people—the internal diaspora as the Ambassador called it.
So, once more, I would like to thank all the Caribbean organizations who are here, particularly Charmaine Robinson and the Caribbean Staff Association here at the IMF and World Bank, who have co-sponsored this event with NCOCA.
I would like to thank the staff of the IMF and the World Bank who are here. I hope, Caroline and Prakash, that this will be the first of many events that you all will work with us so that we can continuously be in touch with you all. Our program on television, Carib Nation, has already featured both of you. We hope today's event will be another step towards us working together. Thank you.
IMF EXTERNAL RELATIONS DEPARTMENT