Wednesday, 21 August 2013

Study presents benefits of developing a major trade, investment bank

GRENADA and other Caribbean countries, which are members of the ACP group, can benefit from the establishment of a major trade and investment bank to serve the 79-member African Caribbean and Pacific (ACP).

This is according to a study funded by the European Union. It said that financing gaps worth more than Bds$800 billion (US$400 billion) in ACP countries can be improved by setting up the bank.

The study found that the venture is not only viable, it could also spur sustainable growth by helping local ACP firms secure financing in four key areas: infrastructure, trade, small, medium and micro-enterprises (SMMEs) and large industrial projects.

The ACP Secretariat said it is now seeking feedback from stakeholders on the findings, including two other “financing vehicle” options, namely an ACP Invest Company or capacity-building scheme for existing bodies in the regions.

“The outcome of the study is not entirely surprising. Countries in Africa, the Caribbean and the Pacific have considerable potential for growth, if not already performing in leaps and bounds,” said the Secretariat’s Cabinet Chief, former Deputy Governor of the Central Bank of Nigeria, Dr. Obadiah Mailafia, who is steering the ACP Bank project.

“They will need suitable financing to keep up the momentum. In order to fully capitalise on their potential, the ACP needs to give a boost to its citizens and private sector, and enable them to do business effectively,” he added.

“The ACP is made up of 79 nations, with a population of 932 million people. The institution we envisage would have to be a world class financing entity, with cutting edge competencies anchored on excellence.

“We invite the international development community and the surplus-rich emerging economies to invest in this project, which is capable of making a huge difference to the life chances of almost a billion people,” Mailafia said.

Funding lacking

The feasibility report found that despite generous funding by international, regional and local financing bodies, such as the World Bank or national development banks, “the variations on the key drivers of success... have not enabled them to originate, develop and finance programmes and projects that resulted decisively in meaningful industry development, firm start-up and growth, and export performance targets across the ACP region”.

In fact, for Sub-Saharan Africa alone, an estimated US$200 billion of financing needs for SMEs and US$225 billion for trade, remains unmet every year, in addition to US$20-40 billion worth for infrastructure, and USD$22 billion for large industrial projects in gas, mining, manufacturing, agri-business and services.

In the Caribbean, most gaps are for SMMEs and large projects, with hardly any bank, local or foreign, addressing the financial needs of small businesses.

While Pacific SMME needs are already covered by other facilities, the region still lacks financing to fully realise the potential of large scale projects in tourism, mining and petroleum, fishing/agriculture, and the emerging under-sea mining industry.

“The ACP Bank, or any similar institution set up, would have distinctive capacities and expertise suited for the economic and financial situations in African, Caribbean and Pacific countries. These can be quite specific, according to levels of development, the local business culture, and local needs and expectations...

“ For member states and their private sectors, services offered would include project development, co-investing and advisory services, promotion of SMME financing and the availability of competitive trade finance lines of credit, for instance,” Mailafia said.

He said the project would also support regional projects, while being a strong advocate for regional integration amongst ACP countries.

However, the study cautioned that very high level political backing – up to Heads of State level – is necessary to get the venture off the ground, especially in mobilising the initial capital sum of two billion US dollars. Highly skilled personnel will also be required to manage the bank spanning nearly 80 countries and three continents.

Moreover, the bank must be rated within the next five to seven years, with a minimum implementation period of two years. In comparison, the other two options proposed would take less money and time.

ACP officials and specialists are expected to mull over these issues in coming months, before making recommendations to the Council of Ministers, the SCP Secretariat said.

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