Caribbean Investment Forum Magazine

The empirical literature shows that FDI has many bene fi ts for countries, including employment generation, foreign exchange, and the transfer of skills, knowledge and technology. However, Executive Secretary of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) noted that while FDI was key for economic recovery, “there is no evidence to suggest that FDI has contributed to a change of direction in the development model in the [LAC] region because many in fl ows go the sectors where transnational enterprises have played a prominent role for decades.” While detailed data on FDI fl ows by sector is not widely available in the Caribbean, successive ECLAC reports show that most FDI to the region generally goes to tourism and the extractive sectors. To this end, UNCTAD (2014) has identi fi ed in its World Investment Report of 2014 10 SDG-related sectors as follows: power, climate change mitigation, food security, telecommunications, transport, ecosystems/biodiversity, health, water and sanitation, climate change adaptation and education (UNCTAD 2014). The sectors of focus at Caribbean Export Development Agency’s forthcoming Caribbean Investment Forum in November 2022, namely digital economy, agribusiness, the blue economy, s u s t a i n a b l e t o u r i sm , l o g i s t i c s a n d transportation innovation and renewable energy are all high growth sectors and sectors which, in many cases, are SDG related. It is increasingly recognized that countries should focus on attracting FDI in sectors which would help them achieve their development objectives.

In their IMF blog post dated October 2020 Pienknagura, Roldos & Werner (2020) noted that although the region had been relatively successful at managing the virus spread, Caribbean countries were the hardest hit economically because of their heavy dependence on tourism for economic activity and employment. The authors likened the sudden stop in tourist arrivals and local lockdowns to ‘a cardiac arrest to their economies’. The COVID-19 pandemic has further exposed and exacerbated pre existing social issues: rising crime, large informal economies, youth underemployment and unemployment, poverty and growing income inequality. including small population size, narrow economic and export bases, high import dependence, and their susceptibility to shocks. The good news is that, as the World Bank (2022) reports, many of our countries are expected to experience positive growth, with Guyana and Barbados projected to lead the Latin America and Caribbean region in growth in 2022 (World Bank 2022). However, many headwinds exist, such the Russia Ukraine crisis, global in fl ation, a weakening UK economy and news that the IMF expects some two-thirds of the global economy to contract in 2023. There is also the looming debt crisis as many developing countries, lacking enough fi scal space, were forced to take on new debt to ride out the pandemic.

2022

18

FDI and Economic Transformation

Caribbean countries generally have very liberal and open investment regimes. In large p a r t , o u r c o u n t r i e s f o l l o w e d t h e ‘Industrialisation by Invitation’ model proposed by Saint Lucian-born Nobel Prize Laureate in economics, the venerable Sir W. Arthur Lewis.