(Jamaica Observer) Opposition Senator Dr Christopher Tufton says offers being made by China for low-cost financing for infrastructure projects in the region will not be taken up at the desired rate, due to the requirements by Chinese lending institutions for government-backed sovereign guarantees.
Senator Tufton, the Opposition spokesman on foreign affairs, foreign trade and investment as well as the co-executive director of the Caribbean Policy Research Institute (CaPRI), cited the high levels of indebtedness by Caribbean territories and their self-imposed or multilateral institution- imposed restrictions on incurring further debt as one of the challenges of taking up the Chinese offer.
He was addressing an audience of researchers, policymakers and business interests attending the recent China-Latin America and the Caribbean Think-Tank Forum in the Chinese capital Beijing.
Citing Jamaica as an example, Senator Tufton said the agreement between the International Monetary Fund (IMF) severely restricts Jamaica’s capacity to borrow further as it attempts to meet a target set to bring the debt to within 95 per cent of GDP by 2020.
“This means that the Jamaican Government will have to borrow and spend less, while managing the economy to facilitate growth,” Tufton told the forum.
He argued that this was a difficult task in and of itself, but more so since key growth enablers include major Government-controlled infrastructure projects such as the ports. He said the challenge in Jamaica is similar in the region as six of the 10 most highly indebted countries in the world, on a per capita basis, are located in the Caribbean.
The CaPRI co-executive director said a possible solution to this challenge would be for the Chinese Government, through its primary lending agencies — China Exim and China Development banks — to reconfigure their lending models to support non-sovereign-backed guaranteed loans, such as public private partnerships (PPPs) and joint ventures with regional private sector entities. “This would ensure faster take up of these funds, assist the growth agenda of struggling Caribbean economies, and strengthen relationships between China and the region in both the public and private sectors,” he said.
At the same time, Tufton said more effort is needed by both Chinese investors and regional host countries to facilitate a better understanding of respective business cultures, while building strategic long-term relationships that are mutually beneficial. There are still lingering suspicions and even distrust between Chinese investors and local host country stakeholder groups, particularly the private sector in these territories, he said. “This will make PPPs and joint ventures difficult to achieve, since these investment models require closer working relationships over the long term between Chinese and local stakeholder groups,” Tufton said. “This can be overcome, not just by how contracts are configured, but through mechanisms to facilitate better cultural understanding and relationship building,” he argued. This, he said, could be aided through cultural and trade exchanges between China and the region.
The Beijing Think-Tank forum was sponsored by the China Foundation for International Studies and the Chinese People’s Institute of Foreign Affairs with the aim of facilitating better understanding of the region’s challenges and opportunities, and areas for investment and trade collaboration between China and Latin America and the Caribbean.
