Facilitating Private Sector Investment for SDG Achievement in Caribbean SIDS

By: Matthew Wilson

In photo: Matthew Wilson

The following is an adapted article from talking points delivered by esteemed panelist Mr. Matthew Wilson at the August 5, 2021 Shridath Ramphal Centre event on ‘Facilitating private sector investment for SDG achievement in Caribbean SIDs‘.

 Thank you to Professor Jeffrey Sachs for his introductory remarks. Like many of us I watched his recent passionate and on point assessment at the UN Food systems summit. He is an agitator- but an agitator with morality, facts and numbers behind him. That is a powerful combination.

 In particular I thank him for recognizing the central role that the UN has to play in working with countries to get to a more equitable and sustainable state of being. I also welcome his implicit call for more funding and support of the UN and its programmes.

 On ‘Facilitating Private Sector Investment for SDG Achievement in Caribbean SIDS’: What a challenge we have set for ourselves. There is so much to unpack in this title alone. But here are some truisms:

 ·      The SDGs remain the global compass to push for sustainable and inclusive growth and we are in the final decade of delivery for the SDGs

·      BUT meeting the targets is more in doubt now than ever before- and we know the reasons why: COVID, multiple and varied crises hitting us all at once, challenges in prioritizing and incorporating SDGs into national development programming and ODA programming; and a real lack of SDG consideration in the decision making and investment choices of the private sector- we know that more than 150 countries have adopted national development strategies that reflect the SDGs, but a deeper analysis of this shows limited integration of concrete action plans or road maps for the promotion of investment in the SDGs.

·      But we also know the SDGs will NOT be achieved without the private sector and without investment based on partnership and the dual push of economic gains and social gains. But UNCTAD research tells us that 2015-2019 project finance in developing countries in SDG sectors – in power, infrastructure, telecommunication, and water and sanitation was down 32 per cent from the pre-SDG period (2010–2014).

There are 4 roles that I see the private sector playing:

 1.    as a financier or an investor– this is through both the ordinary business line of the private sector ie for profit. And also through their CRS or foundation arms. I do believe we can certainly do good and make money at the same time. The key is whether private sector investors will be in it for the medium and long haul. Transformative results do not happen overnight- especially in SIDS. So make your commitment but don’t expect immediate returns in year 1 or year 2 ( But also understand the risks: it can be seen as politically sensitive to have increased private sector participation in health care, water, telecoms and education in developing countries. This is where strong regulatory oversight would be needed plus a guarantee of provision to under served populations and areas which may not appear profitable.)

2.    As a market and a buyer. The value chains of large private companies are as long as they are deep. And sometimes that depth can lead to murkiness. We know the problems. Human rights issues, child labour, environmental disasters. BUT millions of SMEs in developing countries are surviving because they are part of the supply chain to large companies. There is so much more that can be done here. From companies developing procurement activities that mandate they buy from women owned SMEs, or from refugee communities or from youth entrepreneurs or from small producers in SIDs. And couple the buying with investing in helping these small producers and service suppliers to become resource efficient and greener, to become leaner and cleaner, to meet public and private sustainability standards, to adhere to ILO standards. This can all be part of the actions of the business community to be a market for SMEs.

3.    As a partner and an agitator. There are a lot of private companies, especially the large ones, who can do better. But there are some that are doing solid work. At ITC our work with UPS on women’s economic empowerment is one example of a multinational stepping up to the plate. We have seen the same with Maersk, with DHL, with Ebay and recently with facebook and zoom. Inspire others. Share your model and what works. Truly and respectfully partner with developing countries, with the support of UN agencies like ITC or UNwomen, or UN Global Compact, to ensure a win-win-win outcome.

4.    And 4- as an example. The business community, including the SMEs, should consider incorporating the SDGs into their business plans, their targets and their investment decisions. Use the SDGs to give yourselves credit and serve as a form of scorecard to guide your activities. From greening your buildings and processes to ensuring better gender balance in the boardroom, to investing in community education and supporting innovation within your supply chains. And report on this. Share your successes and acknowledge your shortfalls. And the UN has the tools to help business incorporate and report on SDG contributions- in 2019, UNCTAD- our sister agency- published the Guidance on Core Indicators as a framework for corporate reporting on contributions towards the attainment of the SDGs.

But what of the SMEs? what are some of the major hindrances to SME development? 

To use the matrix through which we judge SME competitiveness at ITC, I would see there are hindrances when SMEs fall short in their ability to compete, change and connect.

 Let us take the pandemic as an example- we know the SME sector was decimated. Especially the services sector when we look at tourism and retail. Shops have closed all over the world. Some will never reopen again. Those that were able to weather the storm were those able to adapt – those able to move online and use digital, those able to quickly change their production process to meet demands of new products and services, those that had access to finance or access to savings.

 For those of us who are policy makers and not small business owners it may seem logical to us that a company has a web site or can take orders online. Or that these small businesses have savings and ‘funds for a rainy day’. But this is not the reality. The reality of being a small business is you are often living month to month or if you are lucky year to year.

This should not be the case. This clearly means there are some endemic issues within the business ecosystem in ALL of our countries that needs to be addressed.

 It is well known that the banking and finance sector- including in the Caribbean- are reticent to lend to small businesses and entrepreneurs. And we can appreciate why- risky, no collateral, business plans incomplete. But the financing sector in the region, along with the governments, the CDB and others such as the BSOs and TISIs around the region need to actively develop solutions to address these matters. And I see it happening- CDB is offering assistance to help SMEs access funding for example, but we need banks to consider opening funding arms for women owned businesses for example, or to really double down on the government offering matching finance solutions, or large private sector companies in the region like Fed Ex, Sandals, Goddards, Massy, Digicel and more further developing entrepreneurial and SDG investment arms to their business in the region that aim to build greener and more climate smart business processes, offer lean business training, and ensure digital access and connectivity.

ITC has almost 60 years of experience doing this. We facilitate and offer solutions but the buy in of the governments and partnerships with the business community is the only way to make changes sustainable and transformational. We are helping SMEs to go digital, to have access to trade and market intelligence to allow them to make smart business decisions, to empower women owned enterprises, to help them to understand the profit motive of going green, and to support them to move into new lines of production. On specific programme we have in the region is alliances for action where we are supporting the coconut industryfor example. Helping to revitalise an industry where there is supply and growing demand and the possibility to market a ‘made in the region’ coconut product while also building in climate smart technology. 

Attention must be paid to the green economy. ITC’s recently released SME Competitiveness Outlook 2021 contains our recommendations for a Green Recovery Plan for SMEs. It maps out a set of recommendations for how stakeholders- including governments and private investors- can help SMEs embark on a green transition that can lead to greater competitiveness, and resilience. Our recently launched Green2compete hub with Caribbean export is also there to offer advice and support to SMEs in the region on making this green transition and meeting the climate related SDGs. 

It is useful to also focus on the growing number of Sustainability funds that target SDG-related sectors, such as clean energy, clean technology or sustainable agriculture and food security. UN research shows they have grown rapidly to include green bonds, and social bonds. Granted the overwhelming majority are in developed countries for developed countries but we must drill down on how we can further support Green bonds in the region that promote investment in SDG 13 or SDG 7 such as what was done in Barbados recently with the climate bonds initiative. How can we better exploit the blue economy in the region? Seychelles just issued the world’s first sovereign blue bonds with the support of the World Bank and others such as Kenya are looking into this as well. This is something for the region to consider.

 Bringing in SMEs as active contributors to reducing the region’s massive food import bill will also be critical. Efforts must be made to have more local produce in our hotels and restaurants supplied by SMEs. This means working with SMEs to produce quality goods and services- consistently and at competitive prices- and an agreement with foreign investors to source from local producers. We need to realign public policies to support smallholder and sustainable food economies. I understand that CARICOM is finalizing the Advancing CARICOM Agri-Food Systems Agenda which aims to reduce the $5billion import bill, strengthen food security, develop agrifood sector, and invest in climate smart technologies. I hope that the SME communities, local producers, and country BSOs are part of the conversation.

 As we will also have new leadership in CARICOM Secretariat some thought to incorporating a ‘last decade’ SDG investment pillar of work- galvanising regional and global private sector actors, plus policy makers and trade and investment institutions and business support organisations in the region could help to bridge the demand-supply gap and allow us to regionally monitor what progress is required. Maybe that can be part of the new CARICOM Secretariat blueprint.

Matthew Wilson is Chief, Special Projects of the International Trade Centre (ITC) and a member of the SRC’s Advisory Board.