Barbados will need about $160 million in upgrades and repairs to aging and inefficient infrastructure and outdated regulations and tariffs, according to an Inter-American Development (IDB) report.
Roads, bridges, ports, water and sanitation, energy and telecommunications were reviewed in the IDB’s latest infrastructure report on Barbados which said “aging infrastructure, outdated regulations and tariffs, and inefficient infrastructure use represent key challenges”.
But Government’s investment in infrastructure has been declining to an average of around two per cent of gross domestic product (GDP) between 2014 and 2018, “markedly lower than the five per cent level recorded during the pre-crisis years of 2000 and 2008”, the IDB said.
The country was ranked 30th among 138 countries in the 2016/2017 Global Competitiveness Report (GCR) Quality Infrastructure Index, topping the Caribbean region. But this position was eight lower than in 2012/2013.
The report, which examined data up to 2018, said while Barbados had some of the highest road density levels in Latin America and the Caribbean, most of the road network was at least 20 years old and in need of repair, maintenance and upgrading to accommodate the large increase in motor vehicles in recent years.
The IDB said: “The cost of upgrading the public transportation system and undertaking essential road and bridge repairs is estimated to be US$30 million (0.6 per cent of GDP).”
It pointed out that the island’s lone airport struggles with aging and weakening infrastructure and inadequate capacity.
The report also pointed to other inefficiencies in transport, singling out the Bridgetown Port, where it said those inefficiencies made exporting “slower and more expensive despite high quality infrastructure, nautical access and availability of equipment”.
The IDB insisted that economic growth in Latin American and Caribbean was sharply impacted by the failure to invest in infrastructure, adding that the cost rises over time.
So far, Government has received a promised $200 million from the IDB and $150 million from the Caribbean Development Bank (CDB) in support of its Barbados Economic Recovery and Transformation (BERT) programme, which includes modernisation of processes and infrastructure upgrades.
Government is also in line for a further $80.8 million infrastructure loan from the CDB to carry out upgrades to the airport, and has also indicated that it would be seeking another loan from the IDB to accelerate modernisation plans.
The IDB report also reviewed the country’s energy sector, declaring that the regulatory framework and market design did not adequately accommodate renewable energy and possibly lower electricity prices.
“Tariff reviews, moreover, are infrequently undertaken. For instance, the most recent tariff review for the [Barbados] Light and Power Company and for the Barbados Water Authority (BWA) took place in 2009,” said the bank.
In water and sanitation, the IDB said the island had a weak centralised sanitation system, pointing to the persistent sewage leakages on the south coast in recent years.
The IDB report said: “Estimates suggest a cumulative cost of US$38.5 million (0.8 per cent of GDP) is required to address the challenges in the south coast sewage system, whereas fixing the south coast and Bridgetown sewage plants will have an immediate remedial cost of an estimated US$11 million (0.2 per cent of GDP).”
The development Bank added that in the water sector, there were institutional challenges “including the fact that the BWA lacks authority to set its own tariff structures, which are insufficient to cover the operating costs, afford capital expenditures, and service its debt”.
In telecommunications, the IDB said despite Barbados’ comparatively extensive infrastructure and information and communication technology service coverage, low levels of ICT development, adoption and use prevail in both the public and private sectors.
The IDB said: “Overall, Barbados’ infrastructure stock has good coverage and quality. The latter, however, is deteriorating. At the same time, greater operational and maintenance spending and investment will be challenging in the current fiscal environment.
“Developing alternative financing arrangements, such as public private partnerships (PPPs), can support resilient infrastructure financing.”
It suggested a promotion of more sustainable financing mechanisms for road, promotion of greater competition in key markets including telecommunications, adding that greater private sector participation could be an alternative for long-term maintenance and rehabilitation of road contracts.
The IDB reasoned that such measures would have significant implications for household and business costs and positive effects on the current account balance, the environment.
The IDB recommended a more robust public/private sector partnership framework to overcome the island’s infrastructure challenges, while acknowledging that the Public Procurement Bill showed Government’s intention to explicitly consider PPPs under the procurement law.
The bank said it was aware that Government considered infrastructure a key priority for the country’s medium- term development, pointing to plans to reduce reliance on fossil fuel, combat climate
change and upgrade and modernise infrastructure.
The Washington-based hemispheric lender released its Macroeconomic Report last week, pointing out that economic growth for Latin America and the Caribbean could fall to a disappointing 0.8 per cent, due mainly to factors such as the US and China trade dispute, a rise in US interest rates, changes in oil prices and uncertainties relating to the UK’s exit from the European Union (Brexit).