RE-313

Country Program Evaluation:

Barbados 1989-2004

Office of Evaluation and Oversight, OVE

Inter-American Development Bank

Washington, D.C.
March 2006

For Official Use Only

 TABLE OF CONTENTS

ACRONYMS

EXECUTIVE SUMMARY ............................................................................................................ I

I. COUNTRY CONTEXT AND DEVELOPMENTAL CHALLENGES ........................................... 1

II. THE IDB’S STRATEGIC ENGAGEMENT WITH BARBADOS .............................................. 7

III. PROGRAM IMPLEMENTATION ...................................................................................... 12

IV. EVALUATING EFFECTIVENESS, IMPACT AND SUSTAINABILITY OF THE PROGRAM ....... 17

A. Reform and Competitiveness ......................................................................... 17

B. Social Sectors .................................................................................................. 22
C. Environment, Natural Resources and Vulnerability........................................ 26

V. CONCLUSIONS AND RECOMMENDATIONS ................................................................... 30

REFERENCES

ANNEXES

Annex A: Implementation and Delivery of the Bank’s Program (IDB DOC # 690485)
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Annex B: Reform and Competitiveness (IDB DOC # 604708)
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Annex C: The Education Sector (IDB DOC # 604713)
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Annex D: Environment, Natural Resources and Vulnerability (IDB DOC # 604714)
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ACRONYMS

BDB Barbados Development Bank

BLP Barbados Labour Party
BNB Barbados National Bank
BOP Balance of Payments
BPA Barbados Port Authority
BSSEE Barbados Secondary School Entrance Examination
BWA Barbados Water Authority
CARICOM Caribbean Community
CDB Caribbean Development Bank
CGCED Caribbean Group for Cooperation in Economic Development
CP Country Paper
CPE Country Program Evaluation
CPP Country Programming Paper
CZM Coastal Zone Management
DLP Democratic Labour Party
ECLAC Economic Commission for Latin America and the Caribbean
EIB European Investment Bank
ERR Economic Rate of Return
FIA Financial Institutions Act (1996)
FSAP Financial System Stability Assessment (IMF)
FTAA Free Trade Agreement of the Americas
FTC Fair Trading Commission
GOB Government of Barbados
HDI Human Development Index (UNDP)
IIC Inter-American Investment Corporation
IFI International Financial Institution
IMF International Monetary Fund
MDG Millennium Development Goals
MIF Multilateral Investment Fund
NIS National Insurance Scheme
OECS Organization of Eastern Caribbean States
PAHO Pan American Health Organization
PAIS Project Alert Information System
PCR Project Completion Report
PEMG Emergency Sector Loan
PMP Program Mission Paper
PMR Program Mission Report
PPMR Project Portfolio Monitoring Report
PPR Project Performance Review
REER Real Effective Exchange Rate
SIDS Small Island Developing States
TC Technical Cooperation
VAT Value-Added Tax
WID Women in Development
 EXECUTIVE SUMMARY

Amongst the Bank’s borrowing members, Barbados has one of the highest GDP per capita, is
consistently ranked amongst the top countries in governance and social development indicators,
and amongst the countries with lowest corruption indexes. Barbados is one of only six borrowing
countries with an investment grade for its sovereign debt.

During the period evaluated, 1989 to 2004, the country has experienced two recessions. In-
between the two recessions the country’s average annual growth was 3.1%, compared to 2.6%
average for the other Eastern Caribbean countries. The first recession lasted three years. The
economy rebounded quickly from the second recession thanks to a counter-cyclical fiscal policy,
with a prospect of sustained growth in the medium-term. Throughout the period the country has
faced and attempted to tackle the challenge of competitiveness in its own way. Consistently the
country has eschewed quick fixes through a devaluation of the exchange rate with its high
associated lateral costs. Instead it has a maintained a fixed exchange rate pegged to the US
dollar. Under an effective social partnership agreement, five social protocols have been agreed
between the main actors of Barbados. The first social protocol was signed in 1993 and it adopted
an incomes policy, while limiting real wage increases to productivity growth has been a recurrent
issue. The incomes policy has been supplemented with targeted fiscal incentives and import and
export licenses. The country has also adopted an innovative institutional mechanism to ensure
consistent monetary and fiscal policy to underpin its competitiveness strategy.

During this period there have been four country strategy papers. Country strategy papers are
consensual documents that set out strategic goals agreed to by the country and the Bank. All four
strategy documents consistently emphasize the same strategic areas for the Bank’s involvement:
reform and competitiveness, social sectors and environmental management.

An evaluation of the program reveals the following. First, the Bank is a small actor in the
country. The country’s characteristics combined with its debt management policy has implied
that the Bank gross disbursements have been small relative to domestic aggregate variables;
gross disbursements, of an average of $12.6 million a year, account for an average of 0.6% of
GDP and only 1.8% of government expenditures. In the rest of the Eastern Caribbean, the
disbursement to GDP ratio is also under 1% (except for Guyana). Net cash flows to Barbados
were negative most years and averaged about $1 million per year as net outflows. Both loan
approvals and disbursements are independent of the country’s economic cycle, with $145 million
approved during the high growth period.

Second, equal importance was given to the three strategic areas. The total loan amount of
US$256 million was distributed almost equally between the three strategic areas. Approvals of
TCs, including five MIF operations, were mainly in the reform and competitiveness strategic
area. However, large TCs of over $1 million were approved in the social area, particularly in
health and sanitation.

i
Third, programming, execution, and evaluability performance indicators are at or below Bank
average, with no marked difference between the three areas. Projects take above average time
for approval, have greater than average extensions, execution performance is below Bank
average performance, and the portfolio has a larger than average number of projects on alert.

Fourth, the program and the projects that comprise it have a low level of evaluability. Country
programs, as was the norm until recently, do not have rolling target-performance analysis.
Projects rarely have information on baselines and current status of their expected outcomes; a
characteristic shared by all three areas.

Fifth, information in the two strategic areas of competitiveness and social areas is inadequate.
Barbados is not included in either in the countries of the World Economic Forum or the countries
in the International Institute for Management Development. The country has carried out only one
household survey.

Other than the fact that the Bank is a small actor in the country, the portfolio performance
features are at odds with the country’s high governance and administrative capacity
classifications and the continuity of the areas of intervention by the Bank.

The lack of outcome data limits an evaluation of the development effectiveness of the program.
Nonetheless, drawing on a variety of existing sources, a partial evaluation of the development
effectiveness of the program was made. However attribution could not be assessed.

In the reform and competitiveness effort the following loans were approved: Multi Sector Pre
Investment, Public Expenditure and Tax Administration, Investment Sector Reform, Bridgetown
Roads and Safety, and Administration of Justice. The general development objectives for the
reform and competitiveness goal dealt with reviving exports, increasing employment and
economic growth and increasing foreign-exchange earnings. An analysis of the evolution of
these indicators shows positive behavior after the recession of the early nineties and up until the
crisis that followed 9/11. After falling 6.4% from 1989 to 1993, employment grew steadily until
2000, and it has not fallen since. Real GDP also increased steadily between 1993 and 2000,
while exports soared in the mid 1990s. The goal of increasing international reserves was also
achieved.

Corresponding to the social sector’s strategic development goal, two loans were approved, the
Primary Education and the Education Enhancement. The strategic goals were to increase the
efficiency of public spending in the sector, and in education to support a major pedagogical
reform. The goal of increasing efficiency was partially achieved, as spending per pupil was
reduced 20% in the schools where the IDB supported an amalgamation process. The second goal,
as measured by test scores, was not achieved in the first education loan, while the second loan is
still executing.

In the environmental management strategic goal four loans were approved: South Coast
Sewerage, Coastal Conservation Program, Solid Waste Management and Coastal Infrastructure.
Of these only the first two have disbursed, and the development objectives have been partially

ii
met: although acceptable near-shore marine water quality levels on the south coast have not been
achieved, the quality has improved considerably. The consolidation of the relevant institutions is
still pending.

The Bank’s program can be considered relevant to the country’s needs over the period. The
four country papers and two socio-economic reports identified many of the development
difficulties facing Barbados and were consistent over time in recommending where the Bank
should address it efforts. The Bank’s program was also coherent, as the subsequent lending
program was consistent with the three strategic outcome objectives listed above, and individual
projects within each of the strategic areas of intervention were adequately articulated among
them. In contrast, the high level complexity and interdependence of many subcomponents was a
problem in some projects

The Bank has not been efficient in the preparation and implementation of the program. The
performance in these dimensions is below the Bank’s average, and this is disappointing in light
of the institutional capacity of Barbados. The program is not evaluable given the lack of
information provided for indicators, baselines and targets. At the project level indicators are
usually defined, but without baseline, milestone, targets or means of status verification. The lack
of results attributable to the Bank’s interventions does not allow to measure the efficacy of the
program.

Recommendations

The findings of the evaluation of the country program suggest four recommendations:

First, the Bank needs to address the low implementation and execution performance of its
projects. Armed with a full diagnosis of why previous actions have failed, the Bank should
design new measures and explore with the authorities of Barbados a new program that exploits
the Bank’s new lending framework’s instruments and processes, with the possibility of
reforming the existing portfolio’s instrument mix to the one allowed under the new lending
framework.

Second, the Bank should address the low evaluability of the program’s projects. The Bank
should retrofit the open projects to collect baseline and current evidence of the projects’ expected
outcomes, and ensure that projects proposed in its new program have adequate information
gathering systems, especially regarding outcomes.

Third, the Bank should fill the information gap regarding competitiveness and opportunities and
capabilities of the poor. Specifically the Bank and Barbados should generate the primary data
required both for diagnosis and for benchmarking to judge progress in the strategic areas jointly
agreed upon. With respect to competitiveness the Bank should assist Barbados to put into place a
system that gathers information to obtain indicators compatible with the World Economic
Forum, thereby allowing both ranking of the country and temporal progress in this area to be
judged. With respect to social sectors the Bank should explore with the government of Barbados
the possibility of annual household surveys, including modules to generate information of its
own project outcomes.

iii
Fourth, due to the lack of data, the institutional weaknesses, the small size and the vulnerability
of Barbados and the other English-speaking Caribbean countries, the Bank should provide more
technical assistance, through financial and non-financial instruments. Regional technical
cooperation and additional resources specifically dedicated to non-financial services to these
countries could provide an appropriate mechanism of support for addressing these challenges and
taking advantages of the commonalities and opportunities for exchange of experiences across
countries of the region..

iv
 I. COUNTRY CONTEXT AND DEVELOPMENTAL CHALLENGES

1.1 Barbados is a small island economy of about 270 thousand people, which gained
independence in 1966. Since then the country has enjoyed stable democratic government
with two major political parties - Barbados Labor Party (BLP) and Democratic Labor
Party (DLP). Each party has held office twice since independence, and all four
transitions have been successful. The BLP has been in power since 1994 and it enjoys a
comfortable majority in parliament; general elections are constitutionally due by May
2008.

1.2 Amongst the Bank’s borrowers the country has one of the highest GDP per capita, of
$15,000 (in PPP terms), and is one of only six countries with an investment grade for its
sovereign debt.1 It is also ranked highly in governance indicators2 and UN’s Human
Development Index. Like most of the English-speaking Caribbean, Barbados is an open
economy vulnerable to external economic shocks.3 Unlike the rest of the region
Barbados’ level of remittances is insignificant.

1.3 During the period under review the country has had two economic recessions: 1990-92,
and 2001-02. Underlying the economic deterioration of the early 1990s was the steady
erosion of Barbados’ competitiveness, as measured by the real effective exchange rate.
Sugar production, which accounted for most of the agriculture sector and merchandise
exports declined steadily since 1980 falling by more than one-half. Both public and
private sector investment also declined and manufacturing output growth tapered off.
Only tourism, and increasingly financial services, prospered. But weaknesses in the
tourism industry began to emerge in the late 1980s as more competitors entered the
market and competition intensified.

1.4 The economic recession of the early 1990s manifested itself in different ways.
Unemployment reached a high of 27% (more than 40% in the 15-25 age bracket), which
led to increased poverty and pressure on the social safety net. The wage cuts (agreed as
part of an incomes policy to address the crisis) also contributed to aggravate the social
situation. International reserves fell to levels of 1.33 weeks of imports, while and the
external balance on goods and services weakened to a deficit of 2.5% of GDP in 1990-1.

1
As of 2002, Bahamas was the richest country with a per capita GDP (measured in constant 2000 international $$,
reported by the World Development Indicators) of $16,793, followed by Barbados with $15,323, Argentina
($12,185), Chile ($9,197) and Mexico (9,059).
2
The available data for Barbados suggests that corruption is not a major issue, Transparency International reports
that Barbados has a very low corruption index (second to Chile in Latin America) while the governance indicators
reported by the World Bank show that Barbados has high rankings for all of them.
3
The economic and environmental vulnerability facing Barbados become increasingly evident during the 1990s as
a development challenge. This issue was raised during the Small Island Developing States (SIDS) Conference held
in 1994 and reported on in recent studies on the issue (Crowards 2000, World Bank 2000). Economic growth in
Barbados is increasingly dependent on tourism which remains susceptible to hurricanes, climatic change, oil spills,
terrorist attacks and security concerns, oil price increases, exchange rates, world economic downturn and other
factors.

1
 External debt obligations rose markedly to almost 45% of GDP. Inflation rose from 3%
to over 6% in 1991 and 1992.

1.5 The Government of Barbados decided to implement adjustment and reform measures
under an IMF Stand-by program.4 Adjustment began before the agreement when in April
1991 the authorities introduced revenue measures to reduce the fiscal deficit. By fiscal
year 1992/93 both tax increases and spending cuts were introduced, including reductions
of public sector employment and wages and large cuts in public investment. Wage
restraints in the private sector combined with tight monetary policies were aimed at
reducing domestic demand. Adjustments cum reform measures were also aimed at
improving the competitiveness but without having to devalue the Barbados currency, a
stance supported by the IMF.5 The fixed nominal exchange rate pegged to the US dollar
provided an anchor for price stability and investor confidence.

1.6 The stabilization phase was successfully implemented as the fiscal deficit was reduced to
close to zero and international reserves restored to manageable levels. By May 1993 the
IMF stand-by was allowed to lapse as it did not meet the IMF's qualitative targets for
economic performance6, and Barbados no longer needed the resources. Conventional
structural reforms aimed at increasing competitiveness proved more difficult to
implement.

Figure 1.1: Annual Growth

15 Rates Tourist Figure 1.2: Debt to GDP
expenditures
10 Tourist arrivals 80
Total debt to GDP
5 60
Percent

Real 40
0 GDP External debt to GDP
19 19 19 19 19 19 19 19 19 20 20 20 20
-5 91 92 93 94 95 96 97 98 99 00 01 02 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
-10

Source: IMF and Central Bank of Barbados

1.7 The country has followed its own path to obtain competitiveness. A fixed exchange rate
implies that the burden of obtaining competitiveness falls on fiscal policy and labor
markets. In August 1993, the GOB, labor unions and employers agreed on prices,
exchange, and income policy framework, referred to as the Social Contract. The protocol

4
These policies were incorporated into an IMF stand-by arrangement signed in February 1992
5
Barbados was under pressure to devalue by the IFIs. However, the country took a firm position not to devalue the
Barbados dollar pegged at $2 to US$1 and to address competitiveness through fiscal and adjustment measures.
6
According to the US Department of State as described in the 1993 Country Report on Economic Policy and Trade
Practices for Barbados.

2
 was adjusted and renewed in 1995, 1998, 2001 and 2005.7 The incomes policy was
complemented by a number of fiscal incentives to the private sector (both to foreign and
domestic firms). Although the country is WTO compliant it maintains surcharges on non-
CARICOM imports and has export and import licenses. Also of note is the country’s
institutional framework for obtaining consistent fiscal and monetary policy to underpin
the competitiveness with fixed exchange rate agenda. Since 1989, a Joint Economic
Group makes recommendations to Central Bank’s Board of directors regarding monetary
policy and to the Minister of Finance regarding fiscal policy, based on a common
economic forecast. It also contributes to public debate as its economic forecasts are
published in quarterly press releases.

1.8 Through the rest of the 1990s Barbados was able to maintain economic stability with a
relatively high growth rate (APR of 3.4% for real GDP between 1994 and 2000). Growth
rates of real GDP, investment, tourist arrivals and expenditures turned positive,
international reserve levels rose substantially, unemployment and inflation declined, the
fiscal deficit remained manageable and external debt was gradually reduced by 1998 to
about 57% of the 1990 level. However, economic growth started to decelerate from about
1997 onwards, and economy entered into a recession during 2001-2.

1.9 In 2001, partly due to a decline in tourism, economic growth turned negative. The GOB,
adopted an anti-cyclical policy stance by raising the fiscal deficit, mainly through capital
spending. Thanks to that policy stance, plus a revival of the tourism sector, the economy
quickly recovered and achieved a strong economic growth by 2004. However, public debt
rose to 86% of GDP (with almost 68% of this debt held domestically) by 2004, and the
external account deteriorated both the current account and the level of foreign reserves.
Thus the country faces the medium term challenge of reducing the high external
imbalances, and large public debt. The imbalances also accentuate the vulnerability of
the economy to shocks like a rise in oil prices, and in international interest rates.

1.10 Vulnerability in Barbados (as in other small states) stems from three causes: i) openness
to world market price fluctuation; ii) undiversified economy; and iii) proneness to natural
disasters and external shocks (such as 9/11). Barbados has been ranked in a number of
studies (Atkins et al, Auffret, Briguglio, Crowards, Easter, EM-DAT, Guillaumont, OAS,
SIDS, SOPAC) showing relatively high levels of both economic and environmental
vulnerability. It is ranked as of higher medium vulnerability in the Commonwealth index
of exposure and resilience to external shocks (Atkins), sixth in the Caribbean in terms of

7
It also provided “the safeguarding of the existing parity of the rate of exchange, recognizing that any deterioration
in this rate, will lead to a significant reduction in the living standards of the vast majority of Barbadians” (Protocol
for the Implementation of a Prices and Incomes Policy, 1993, P.2. The objectives of these were to safeguard the
fixed exchange rate, improve competitiveness, productivity and efficiency, increase employment, enable workers to
contribute to planning and policy-making and maintain a stable industrial relations climate. There is fairly broad
agreement that cooperation between these groups led to achievement of the goals and the economic recovery of
Barbados. Codrington (2003) concluded that, “There is general agreement that the new spirit of cooperation
between the social groups helped in the achievement of most of the goals and the economic recovery of Barbados.”
The ILO in Fashoyin (2001) in a study of the reasons for success of the social relationship noted that “the resulting
social partnership in the country made significant strides, particularly in sensitizing the stakeholders and, indeed, the
public to the critical value of productivity in restoring the country’s competitiveness.”

3
 risk of natural hazards (EM-DAT), and more recently sixth of 235 countries in terms of
environmental vulnerability (SOPAC). In this study, most of the measured vulnerability
was derived from high levels of past environmental damage found in biological factors
and human impact on nature. In seven areas Barbados reached the highest vulnerability
score possible. Barbados was also ranked at a medium high level in terms of
consumption volatility to natural disasters (Auffret) and due to its relatively largely
populated coastline it is highly prone to rising sea levels, coastal erosion and pollution
(SIDS) which could have a significant impact on economic activity and tourism in
particular

1.11 There appears to be congruence between the authorities and the IDB regarding the
development challenges faced by the country. The development challenges emphasized
by the Bank throughout the period under review can be grouped into three strategic areas:
reform and competitiveness; natural resources and the environment; and social sectors.

1.12 The need to improve competitiveness while maintaining the pegged nominal exchange
rate requires an increase in productivity over and above the appreciated real exchange
rate.8 Raising productivity and obtaining a positive supply response from the economy
remain challenges. Recently, labor productivity has fallen which combined with an
increase in real wages has implied a rise in real unit labor costs,9 and competition from
low cost neighbors intensified. Thus Barbados’s share of both tourism arrivals and
expenditures in the Caribbean has fallen, and growth in industry and agriculture remained
sluggish. In agriculture the country continues to provide heavy subsidies to the sugar
industry aimed at improving yields (but with lower acreage) and promoting
diversification of the industry into activities using raw sugar as an input. However, this
strategy can only survive with large and increasing levels of government resources, given
the forthcoming change in the European sugar regime by 2005 end, and the fact that
Barbados is one of the world’s highest cost producers of sugar. Restructuring of the
industry will imply high upfront social costs and require appropriate social safety net
measures to be simultaneously implemented. Further, the country faces reform and
competitiveness policy challenges in the context of the Caribbean Single Market
initiative and the envisaged Free Trade Area of the Americas.

1.13 Natural resources had been exploited on the island with little attention paid to
sustainability. Evidence of degradation of marine ecosystems resulting from soil erosion,
sewage effluent, liquid and solid wastes, oil spills and boat wastes was found on reefs,
near-shore fisheries, beaches and the coast. The 1988 GOB Development Plan called for
measures to control pollution resulting from the discharge of wastes but the economic
difficulties of the early 1990s resulted in a slow start. Indicators of the environmental
challenges were coral disappearance which over a 10-year span had decreased by an
estimated 34%, deteriorating water quality with high levels of bacteria contaminants,
beach variation where different locations were eroding while others were increasing in
size, solid wastes and sewerage levels both reporting significant increases, and water
8
Since 2001, the real effective exchange rate has declined due to the peg to the US dollar and the weakening of the
US dollar, which in turn has partially shielded the country’s external sector.
9
As reported by Downes (2004), between 1995 and 2003 the real wage increased by 13.9%, while labor
productivity fell by 11.6%. This report

4
 consumption which was rising considerably. There were also concerns being voiced for
the possibility of rising ocean levels due to global warming.

1.14 The social sector, traditionally considered as a model for developing countries, has also
come under pressure in the early 1990s. With a self-financing National Insurance
Scheme (NIS), free education and universal health care services, the challenge was to
maintain quality and efficiency at a time of increasing fiscal deficits and higher
unemployment. The NIS came under pressure due to the rise in unemployment
compensation and severance payments to displaced workers. Education and health
budgets were cut as the country wrestled with its deficit.

1.15 The NIS provides a number of social benefits including pensions, invalidity, death,
sickness, maternity and work injuries. While the participation rate in the NIS is high,10
the coverage rate of pensions for the elderly in Barbados is amongst the lowest in the
Caribbean.11 Although changes in the NIS in 2003 extended exhaustion of funds date to
2060 thus ensuring financial sustainability, the contribution rate to the NIS is the largest
in the sub-region, 14.3% of wages, a level that may have an impact on employer
compliance and thus coverage rates. A separate scheme covers unemployment insurance
and there are other social assistance programs, however, little data is available publicly
with respect to coverage and benefits.12

1.16 While Barbados met the Alma Ata primary health care goals set for 2000 and standard
health indicators have improved dramatically since independence, important challenges
remain.13 Health outcomes may be inequitably distributed; in the 2000 World Health
Report, the World Health Organization estimates that Barbados ranks 36th in terms of its
equality in the distribution of child mortality, behind developed countries, Chile and
Dominica.14 In terms of fairness of financial contributions to the sector, Barbados is
ranked 107th. Further, HIV/AIDS prevalence affects 1.5% of total population aged 15-49
and poses an important threat to the productive age population, as well as to continued
fiscal discipline. If HIV/AIDS rates were to continue to increase at current rates,
Government estimates that costs of care might amount to approximately half of current
public expenditure on health as a percentage of GDP. The GOB has prepared a
comprehensive National Strategic Plan for Health covering 2002-2012 and priority
10
In its 2002 Annual Report, the NIS reports 123,100 active contributors (i.e. individuals having paid at least one
contribution during the year), while the Barbados Labor Market Information System reports that 128,900 people
were employed in 2002.
11
ILO: World Labor Report 2000 (Geneva, 2000) and WB report on social protection in the Caribbean (World
Bank, 2005 p. 61, “Throughout the region, very few of those presently retired receive national insurance pensions–
with the elderly poor particularly at risk. Coverage rates range from lows of less than 5 percent in the Dominican
Republic and Barbados to 15 to 20 percent in Grenada and St. Vincent and the Grenadines, and approximately 30
percent in Dominica, Jamaica and St. Kitts and Nevis.”
12
From the World Bank’s report (2005) it is evident that Barbados lacks critical information on the coverage,
efficiency and efficacy of its social protection programs and institutions.
13
Barbados health system provides ample coverage to the population, and the basic health needs of the population
are satisfied. In this sense, Barbados faces challenges associated to developed countries, for all of the Millenniums
Development Goals in the health sector have been met.
14
See Annex Table 1, that reports various health system attainment and performance indicators, with data for 1997.
Note that caution should be taken in interpreting child mortality figures. In the presence of small absolute figures
(such as the number of births in Barbados every year) percentages are highly sensitive to small number changes.

5
projects to 2007, which includes ten overall goals and many indicators, that do not reflect
the relative importance and priority of each area of potential intervention. Government
has indicated that considerable financing will be required to upgrade the physical
infrastructure of the sector (hospitals and clinics), with resources to be possibly provided
by the IDB, European Union, PAHO and the CDB.

6
 II. THE IDB’S STRATEGIC ENGAGEMENT WITH BARBADOS

2.1 This chapter identifies the Bank’s programming intent in terms of strategic goals and
programming outputs and delivery on that intent in terms of programming outputs for the
period 1990 to 2004.

Table 2.1: Program Outcome Objectives and Possible Indicators

Strategy Program Priorities and Objectives Possible Indicators

Sector Approach to examining needs and Improvement in sector performance;
1989 CPP Period
priorities: a. government efficiency estimates, fiscal
1990-93
a. strengthen policy and planning frameworks; balance;
b. link natural resource management and economic b. natural resource indicators;
anticipated $200 M development; c. export levels, BOP, terms of trade;
program c. revive export earnings through higher value d. REER, wages, inflation, prices
exports;
d. assist in design and implementation of strategies
to lower costs to improve competitiveness.
a. increase employment and growth through a. REER, GDP growth, retail and relative
1993 CPP Period
restoration of external competitiveness; prices, employment;
1993-1995 no
b. improve efficiency and delivery of social b. social expenditures, NIS balance, quality
estimate provided
services; indicators
c. reversing and avoiding potential environmental c. coral reefs, water resources, solid wastes.
degradation.
Assist to restore sustained growth through: a. REER, productivity, prices;
1996 CP Period
a. improve competitiveness of foreign-exchange b. pollution, beach erosion, reefs;
1996-1998
earning sectors; c. social sector cost-effective-ness; quality
anticipated $166 M
b. conserve natural resources and reverse indicators for education and health.
program
environmental degradation;
c. improve efficiency of education and health
services.
Maintain support for a competitive export-led 50 indicators provided in CP* including:
1999 CP Period
development: a. increased skill levels, reduced
1999-2003
a. strengthen human resource development; unemployment, labor productivity, higher
anticipated $108 M
b. enhance environmental infrastructure and skilled employment, health delivery;
program
natural resource management; b. solid waste collection, water quality, supply,
c. strengthen environment for private sector management & policies, beach erosion;
development; c. port operation improvement, traffic time,
d. strengthen economic management capacity and SEC operational, traded securities, credit
administration of justice unions.
* There were no baselines or targets provided for these indicators.

2.2 The Bank’s intent (strategic development goals and programming outputs) can be
understood from the country strategy documents.15 For Barbados for the period under
study there were four country strategies. They are summarized in Table 2.1. The

15
The summary of the Bank’s intent is from a reading of the following documents: (i) four country strategy
documents since 1989 – Country Programming Papers (CPPs) in 1989 and 1993, Country Papers (CPs) in 1996 and
1999; (ii)s Socio-Economic Reports (SERs) in 1989 and 1994; and (iii) numerous Programming Mission Papers
(PMPs) and Programming Mission Reports (PMRs).

7
 summary reveals continuity over time of the Bank’s strategic development goals. Overall
Bank program development outcome goals over the period may be grouped as follows:
(i) reform and competitiveness whereby the Bank attempted to assist Barbados in its
adjustment efforts in the early 1990s, to increase employment and growth through
enhancing competitiveness and improving infrastructure, evolving to improving
competitiveness of foreign-exchange earning sectors; (ii) natural resources and the
environment whereby the Bank’s concern was linking natural resources to economic
development, then reversing and avoiding environmental degradation through improved
legal and regulatory framework and infrastructure; and (iii) social sectors whereby the
Bank sought to improve the efficiency and delivery of education and health services and
later to address low-income housing, although this intervention has yet to be approved.

2.3 The 1989 CPP was a review of sector needs based on a range of problems from
deterioration of natural resources, loss of competitiveness, weakening fiscal situation and
growing dependency of foreign borrowing. The 1993 CPP reflected the recession that
the country went through in the early 1990s and identified three similar outcome
objectives. The 1996 CP was prepared at a time when Barbados, after a period of
adjustment, was emerging from the recession and tourism was leading growth.
Maintaining competitiveness, environment and social sectors were again identified as
major objectives. The 1999 CP again focused on competitiveness through strengthening
human resource development and enhancing environment and natural resource
management but also added strengthening the environment for private sector
development and strengthening economic management capacity and administration of
justice as an outcome objective. It was only the 1999 CP that provided some 50
indicators for outcomes, but with no baselines, targets or other means to measure
progress. The possible indicators listed in Table 2.1 are illustrative to show how these
outcomes could be evaluated.

2.4 In terms of program outputs the Bank programmed the following outputs:

Table 2.2 Program Priorities, Anticipated Actions and Outputs

Principal Bank Sector Priorities and Anticipated Actions Product

Objectives Sub-Objectives Outputs
1989 CPP a. long term planning, public a. TCs to assist in improving planning
a.TCs
a. policy and sector management, pre frameworks;
b.BA0036
planning investment; b. south & west coast sewerage, coastal
BA0014
frameworks; b. sewerage disposal, coastal conservation, solid waste management,
BA0025
b. natural resource conservation, institutional c. Bridgetown traffic plan and road
c.ATN3922
management strengthening, pollution; rehabilitation, tourism sector loan,
BA0047
c. export earnings; education; manufacturing sector loan, agriculture
d. ATN3612
d. improve c. tourism, manufacturing, sector loan;
competitiveness agriculture; transportation, d. man-power planning, education and
energy; training program, health sector
d. education, health, WID rationalization

8
Continuation of Table 2.2.

1993 CPP a. comprehensive adjustment a. financial and agriculture sector a.BA0012

a. increase program, enhance adjustment, tax reform, labor adjustment, BA0035
employment and competitive-ness through implementation, tourism, export ATN4137
growth; infra-structure and TC; promotion, transport; ATN4144
b. improve b. structural weaknesses of b. improve quality, standards, efficiency BA0047
efficiency & education, increase efficiency & cost savings in education, health sector b. ATN5634
delivery of social & delivery of health care; efficiency & alternative financing; BA0009
service c. environmental regulatory c. water & sanitation regulation, west c.BA0025
c. reversing and framework, sewerage, waste coast sewerage, solid waste treatment, BA0014
avoiding potential treatment, beach erosion, coastal conservation, water management
environmental ground water. study
degradation
1996 CP a. sector adjustment, financial a. Investment sector loan-financial sector,
a.BA0012
a. improve sector, land-use reform, land reform and investment sector,
ATN6411
competitive-ness investor enabling tourism master plan and program, off-
MIF-115
of foreign- environment, tourism shore business strategy, increasing port
ATN5378
exchange sectors; development, off-shore efficiency and reducing costs, road
ATN3922
b. conserve business service, port infrastructure improvement.
b.BA0025
natural resources facilities, road transport. b. solid waste management loan, west
pipeline
and reverse b. solid waste management, coast sewerage, beach erosion and coastal
BA0019
environment sewerage, beach degradation, degradation works, potable water supply
pipeline
degradation; potable water, environment & quality, legal and regulatory
c.ATN3612
c. improve legal & regulatory framework for environment.
pipeline
efficiency of framework. c. increasing health delivery efficiency
ATN5634
education and c. health delivery efficiency and financing alternatives, education cost
BA0009
health services. & efficacy, education costs & reduction & efficiency improvement,
poverty study
efficiency, poverty poverty assessment & service delivery to
assessment. the poor
1999 CP a. education reform, a. education sector enhancement, low- a.BA0009
a. human resource improved housing, health income housing, rationalize health care pipeline
development care efficiency; system; pipeline
b. environmental b. solid waste disposal b. solid waste management, water & b.BA0025
infrastructure and systems, potable water sanitation sector strengthening, west coast pipeline
management supply, liquid waste disposal, sewerage, coastal area erosion and control pipeline
c. private sector coastal conservation; structures; BA0019
development c. sea-port capacity, auto c. port facilities and port authority c.MIF-115
d. economic traffic, capital market strengthening, Bridgetown road & safety, BA0047
management and development, micro- strengthening of securities market, micro MIF-349
justice enterprise & credit unions; enterprise development, credit union AT-6411
tourism products regulation & supervision; tourism d.BA0028
d. economic planning- development
management, pensions, penal d. multi-sector preinvestment loan,
reform pension fund restructuring, penal system
reform

9
2.5 Since 1990, the IDB has approved 11 loan operations for $256.1 million16, 35 non-
reimbursable TCs for $8.4 million and two small projects for $175 thousand. The
number of economic and sector studies total 23.17 Under the private sector there were five
MIF operations totaling nearly $1.15 million but no PRI projects.18 The IIC has not
approved any direct operations for Barbados. There was only one sector adjustment loan
in 1995. Loans and TCs approvals are given in Figure 2.1 and 2.2. No loans were
approved in the years 1990-01, 1996-97,1999-00, 2003-4. The concentration of TCs’
approvals took place in the early 1990s as Figure 2.2 shows.

Figure 2.1: Loan Approvals by Year Figure 2.2: TC Approvals by Year

$ Millions $ Thousands
100 4000
3 10
80 3000
2
60
2 1 2000 4
40 1
1 1000 2 2 2 3 1
20 1 6 1 2 1 1
0 0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2.6 Loans were approved for the three strategic areas defined above, as shown in Table 2.3.
The total loan amount was distributed almost evenly between Reform and
Competitiveness (30%), the Social Sector (37%) and Environment and Natural Resources
(33%). Approvals of TCs were mainly in the reform and competitiveness strategic area.
However, large TCs of over $1 million were approved in the social area (particularly in
health and sanitation). The five MIF TCs were approved in the reform and
competitiveness area (particularly in transportation (2) and reform (3)).

2.7 Some projects are not considered during the original programming period, which reflects
continuity and a long-term orientation of development planning in Barbados while actual
implementation is subject to short-run macroeconomic realities, resource constraints and
bottlenecks. A number of projects were conceived in the early 1990s just as the country
entered a recession which contributed to delays in approval. This occurred with BA0014
(1989 CP, approved in 1994); BA0025 (which appeared in CP’s of 1989, 1993, 1996 and
was eventually approved in 1998); and BA0047 (1989 CP, approved in 1993). The West
Coast Sewerage project, housing, health, and water projects which were first

16
In late 1989 two loans were approved, BA0048 Coastal Conservation Project and BA0050 Student Revolving
Loan Fund III, each for $4.7 million. OVE did not analyze these projects as the cutoff was projects approved in or
after 1990. Also, these two projects were not part of the 1989 Country Paper, the starting point of this evaluation.
17
These data are presented in Annex A.
18
Barbados was graduated from borrowing from the World Bank in 1993, but still receives small amounts of
assistance from the CDB and EIB and TC assistance from the UN and EU

10
 contemplated in the 1990s are still in the pipeline. 19 This indicates an area for
improvement in the programming and prioritization of Bank-supported projects.20

2.8 The Bank’s programs can be considered relevant to the country’s needs over the period.
The four country papers and two socio-economic reports identified many of the
development difficulties facing Barbados and were consistent over time in recommending
where the Bank should address it efforts. The diagnosis of issues was broadly consistent
with local authorities, the IMF and current economic thought. The subsequent lending
program was consistent with the three outcome objectives listed above. There was a
concentration on infrastructure but outputs cover social as well as environmental
infrastructure. The Bank was able to provide a sector adjustment loan, somewhat late
after the recession, but still providing needed financial support during a recovery. The
Bank’s economic and sector studies were few but in the areas of finance, labor, education
and poverty where work was needed.

Table 2.3: Loans Approved, Disbursements and Extensions

Project Year Name Amount Amount Percent Months
Disbursed Disbursed Extended
REFORM AND COMPETITIVENESS
BA0028 1992 Multisector Pre-investment 7.0 7.0 100 69
BA0035 1993 Public Expenditure & Tax 7.9 7.9 100 22
BA0012 1995 Investment Sector Loan 35.0 35.0 100 36
BA0047 1993 Bridgetown Roads and Safety 18.5 17.2 93 95
BA0055 2001 Administration of Justice 8.7 0.5 6 0
SOCIAL SECTOR
BA0017 1992 Primary Education 9.5 9.5 100 45
BA0009 1998 Education Enhancement 85.0 28.2 31 0
ENVIRONMENT AND NATURAL RESOURCES
BA0036 1992 South Coast Sewerage 51.2 51.2 100 90
BA0014 1994 Coastal Conservation Program 3.3 3.3 100 18
BA0025 1998 Solid Waste Management 13.0 0 0 60
BA0019 2002 Coastal Infrastructure Program 17.0 0.01 0.1 0

19
There is no evident pattern for the postponing of some projects. Some additional information is provided in Annex
A.
20
This issue is independent from delays in implementation, which will be analyzed in the next two chapters. Here
we point at delays in materializing the programmatic strategies, beyond implementation delays.

11
 III. PROGRAM IMPLEMENTATION

3.1 The Bank is a small actor in Barbados. Bank disbursements over 1989-2004 have been
small relative to domestic aggregates. Gross disbursements of about $12.6 million a year
account for an average of 0.6% of GDP and only 1.8% of government expenditures.21
Net cash flows to Barbados were negative most years and averaged about $1 million per
year as net outflows.

3.2 Execution and efficiency indicators of the Bank’s projects in Barbados are below the
Bank averages. This is a puzzle, as a priori expectations are that execution efficiency
indicators would be better than the Bank average due to the country’s high governance
and administrative capacity. Instead IDB projects show:

• More preparation time. The preparation time of projects, from profile 1 to approval, takes
considerably longer than the Bank average: 34.2 months compared to Bank average of
20.9 months. However, the time elapsed from approval to signature is within the normal
ranges, and such is the case of the time for first eligibility.22

• Low disbursement efficiency. With some exceptions, projects in Barbados take above
average time for disbursement. OVE’s Efficiency of Delivery curve in Figure 3.2 below
demonstrates how a few loans have disbursed much more slowly than the Bank
average.23 A corollary is that average extension months are greater for Barbados than the
Bank average, as shown in Table 2.3.24 Also, the slow pattern of disbursements after the
start of projects results in projects being shown in alert in the PAIS system. In turn,
persistently slow disbursements suggest unrealistic design of implementation schedules,
an issue that needs to be seriously considered in IDB-funded operations in Barbados,
particularly in complex operations that involve many actors, agencies and works
activities.

3.3 An important caveat should be made when analyzing Bank recorded disbursements, as in
Barbados actual project spending may be ahead of the reimbursements solicited to the
Bank. This may be due to delays in compliance with eligibility conditions related
specifically to Bank disbursements or to delays from the government in processing
reimbursements. On this point, it is important to note that Barbados’ budgetary process is

21
The disbursements/GDP ratio was similar for the Dominican Republic, 0.65%, while for Jamaica it was 0.9% and
for Trinidad it was 0.8%. The disbursements-government expenditures ratio was 3.7% in the Dominican Republic,
and 2.5% for Bahamas.
22
Except for two operations, one that took two months more than the 12-month milestone (BA0036) and BA0025
that, as shown in chapter IV and in Appendix D, has more fundamental difficulties.
23
The efficiency of delivery curve shown in figure 3.2 is based on the disbursement-to-loan and programming-to-
actual ratios over the life of the projects, as opposed to a static curve that shows the information for a given moment
in time.
24
Note that the causes for the extensions are not homogenous: in some cases it was due to problems with large
contractors (such as the South Coast Sewerage Project), while in other case it is in part due to the complexity of
managing many of individual contracts (such as in EduTech).

12
 based on a cash system that does not recognize resources until they are received.
Barbados uses its own money to finance expenditures of bank-financed projects once
Bank procedures are followed after which it seeks reimbursements. However executing
agencies are often slow in following the procedures and submitting the forms for
reimbursement by the Bank. The process also involves a warrant system whereby all of
the tendering and approval process for a contract has to be completed and the contract
signed before it can be submitted for budgetary approval before the start of the budget
year. Even though this process may have been completed, the full amount of the contract
may not be allocated in a given budget year depending on other budgetary needs.

3.4 Some additional general issues affecting implementation are the following. First,
centralized decision-making in Barbados requires considerable time and effort to obtain
all of the information and agreement of different ministries, agencies and companies
involved before decisions are taken. There is detailed examination of many projects by
the Ministry of Finance and Economic Affairs and its Planning and Priorities Committee
chaired by the Prime Minister, and all contracts need to be approved by the Solicitor
General’s Office. The system seems to have overburdened the SG office, a problem that
is common to other countries in the region and that needs to be addressed. However,
these checks and balances undoubtedly contribute to transparency and efficiency, and
they should be realistically considered at the time of project design and scheduling of the
disbursements. Moreover, as the Bank moves towards the implementation of the New
Lending Framework, and as Barbados increases the operational efficiency of both the
executing agencies and the SG office, the efficiency of IDB projects in Barbados should
rely on the effectiveness of the country’s procedures.
Figure 3.2. Historical Delivery Effeciency Curve
Figure 3.1: Disbursements and Net Flow
1990-2003 100%

90%

$ Millions 80%
Percent disbursed to loan value

40
70%
Bank
Disbursements
Reflows toBank 60%

20 50%

0 40%
Barbados

-20 Net cash flow 30%

20%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

10%

0%
0% 50% 100% 150% 200% 250% 300%
percent of actual over programmed time

3.5 Second, executing units are for the most part staffed by ministry employees who usually
earn less than the private sector. This contributes to significant turnover of key staff and
poor morale in the unit.

13
3.6 Third, there are often difficulties in coordination among departments, agencies and
private companies. There is little sharing of information among ministries and agencies
on how to do business with the Bank and institutional memory is often lost as employees
leave.

3.7 The Bank’s semi annual monitoring system (PPMR) measures several implementation
problems, which may be grouped into three categories: commitment, institutional
capacity and bank-related problems. As shown in Table 3.1, commitment difficulties
affected 20% of the projects in Barbados over 1997-2004. This is about the average for
the Bank, and similar to other comparable countries (except for Trinidad). Institutional
capacity and bank-related problems are both well above the Bank average. In all three
dimensions there is a noticeable recent deterioration.

3.8 Implementation issues should also be examined on a case-by-case basis. Five out of
eleven projects did not present any implementation problem in the PPMR system
(BA0012, BA0014, BA0017, BA0019, BA0035), and one (BA0028) had only one
problem during implementation. Hence, implementation difficulties are not general to all
IDB projects in Barbados, but are concentrated in those with larger works and
procurement components, those that have an intrinsically complex design. The PAIS
system also shows that those projects that did not show PPMR problems were not on
alert.

3.9 A closer look to the individual problems for the five projects with more difficulties (table
3.2) shows that the Bank considered institutional capacity of the executing unit as a
problem for all of them. While the PPMR system documents the specific difficulties that
occurred, a review of how the loan documents addressed the issue shows that even
though few projects identified it as a risk, most of them considered that the executing unit
was strong enough to implement the project (in some cases due to prior experiences)
while also including financial resources and/or technical assistance to strengthen the
institutional capacity of executing agencies.25 Why the original assessments and the
strengthening components failed or were insufficient is something that needs to be further
analyzed.26 Also, given the country’s high governance indicators, it is paradoxical and a
matter of thorough consideration why some projects face these problems.

25
For further details, see paragraphs 19-24 in Annex A.
26
Some of the issues discussed above such as inter-agency coordination and high turnover could be contributory
factors in these complications.

14
Table 3.1 Performance Issues as Reported in the PPMR
(Percentage of Projects affected by Specific Issues)

COMMITMENTS INSTITUTIONAL BANK

PROBLEMS* CAPACITY** RELATED***
1997 28.6% 28.6% 14.3%
1998 12.5% 25.0% 25.0%
1999 22.2% 22.2% 22.2%
2000 5.6% 22.2% 11.1%
2001 0.0% 25.0% 12.5%
2002 7.7% 46.2% 38.5%
2003 50.0% 66.7% 33.3%
2004 50.0% 66.7% 33.3%
BARBADOS 19.6% 35.7% 23.2%
Bahama 25.0% 35.0% 26.3%
sGuyana 16.8% 21.6% 17.8%
Jamaic 17.2% 17.2% 8.8%
a
Surinam 20.7% 13.8% 22.4%
eTrinidad 47.0% 49.7% 34.9%
IDB Total 19.9% 21.4% 12.1%

Source: OVEDA

* Legislative approvals, Borrower/ EU commitment, Counterpart funding shortfall,

Community/political opposition, and National Policy change
** EU institutional capacity, Consultant performance, Inter-agency coordination, Supplier/
contractor performance, Procurement difficulties, Cost overrun, Qualified external audit,
EU Policy changes, and Lack of monitoring evaluation system
*** Project/component design, Contract condition compliance delays, Bank efficiency
(response delays), Environmental issues, and Bank Policy Change

3.10 Procurement difficulties, contract condition compliance and inter-agency coordination

are the main issues in the Solid Waste Management program, while EduTech reported
problems with counterpart funding27, and the South Coast Sewerage experienced
problems with suppliers, cost overruns and inter-agency coordination. Finally, the
Bridgetown Roads and Safety project had faults due to project component design as well
as with respect to the commitment of the executing agency. On this project, it is
important to note that delays were associated with the decision of the government not to
start the project in the midst of a recession, and also resulted from a tough stand of
authorities in order to avoid cost overruns. All of these projects share a complex design
and the involvement of numerous actors in the implementation, which seems to create
difficulties in the execution of IDB projects in Barbados.

27
These difficulties, however, seem to have had a cyclical feature, for they occurred after the recession of 2001,
when the government had to adjust capital spending in order to meet budget deficit concerns.

15
3.11 Complex, highly integrated operations, often in built-up coastal areas where disruption is
likely (sewerage, roads, coastal infrastructure) and many stakeholders are affected have
often been delayed. The Bank and/or the country paid insufficient attention in planning
some projects to the possible social disruption and reaction.

Table 3.2 Specific Performance Issues reported in PPMR for selected projects

Project Number BA009 BA0025 BA0036 BA0047 BA0055

Legislative Approvals 0 0 0 0 0
Borrower Executing Agency Commitment 0 4 1 5 4
Counterpart Funding Shortfall 5 0 3 0 0
Exec. Agency Inst. Capacity 5 6 15 4 4
Community Political Opposition 0 0 0 0 0
Consultant Performance 2 0 0 0 0
Inter-Agency Coordination 0 6 14 3 4
Project Component Design 0 0 0 5 0
Supplier Contractor Performance 2 0 14 1 0
Contract Condition Compliance 0 6 14 1 0
Bank Efficiency Response Delays 0 0 0 0 0
Procurment Difficulties 3 10 6 0 4
Environmental Issue 0 0 0 0 0
Cost Overrun 0 0 12 0 0
Qualified External Audit 0 0 0 0 0
National Policy Changes 0 0 0 0 1
Executing Agency Policy Changes 0 0 0 0 0
Bank Policy Changes 0 0 0 0 0
Lack of monitoring Evaluation System 0 0 0 0 1
Other problem 2 0 0 0 2
Commitment Problems (Group) 5 4 4 5 4
Institutional Capacity (Group) 5 10 15 6 4
Bank Related Problems (Group) 0 6 14 5 0
# PPMRS 13 13 15 15 7
Source: OVEDA

3.12 The problems reported in the PPMR and PAIS systems should be the starting point of a
thorough analysis on the implementation difficulties for the IDB program in Barbados.
Delays and cost overruns are a serious concern because they postpone the
accomplishment of the development objectives and have a direct impact on the economic
rate of return of the projects.

3.13 Armed with a full diagnosis of why previous actions have failed, the Bank should design
new measures and explore with the authorities of Barbados a new program that exploits
the Bank’s new lending framework’s instruments and processes, with the possibility of
reforming the existing portfolio’s instrument mix to the one allowed under the new
lending framework.

16
 IV. EVALUATING EFFECTIVENESS, IMPACT AND SUSTAINABILITY OF THE PROGRAM

4.1 An evaluation of the development effectiveness of the Bank’s program requires outcome
data. Outcome data can be at the aggregate program level and at the individual project
level. The former facilitates a top down evaluation while the latter facilitates a bottom-up
evaluation.

4.2 However, neither type of indicators is generally available. Further, programming

documents placed considerable emphasis on broad poorly defined issues such as
improving competitiveness to increase exports and foreign exchange earnings, efficiency
and delivery of social services, natural resources and environmental degradation. These
broad objectives were well beyond the possible reach of individual Bank interventions
and with no specific indicators or targets it is not possible to provide a quantitative
evaluation of program. Additionally, individual projects’ outcome metrics and their
baselines, targets and current status are largely absent in the Bank’s project Monitoring
and Evaluation system. Thus not even a naïve process evaluation, i.e. which does not
attempt attribution, can generally be carried out using Bank information. For project
outcomes, the evaluability index as defined by OVE’s Demonstrability Index Summary,
is low, with a value of 0.22.28

A. Reform and Competitiveness 29

4.3 Competitiveness is defined in IDB (2001) as “the quality of the environment for
investment and for increasing productivity in a climate of macroeconomic stability and
integration into the international economy.” Although emphasizing this issue in all four-
country strategies the Bank has not attempted to generate the information required to rate
the country’s competitiveness over time or compare the country’s competitiveness with
other countries. Outcome objectives (shown in Table 2.1) dealt with reviving export
earnings, lowering costs, increasing employment and growth and increasing foreign-
exchange earnings. The performance of these indicators30 is shown in figure 4.1, which
shows the evolution of employment, real GDP and exports. After the recession of the
early 1990s, employment and GDP grew until 2000. Employment has remained constant
since 2000, while GDP fell in 2001 and 2002 and it began to recover in 2003. After
falling continuously from 1989 to 1994, exports soared in 1995-1996; their growth
petered off during 1997-2001 and plunged in 2002, but exports have began a slow

28
The demonstrability index summary works as follows: Ideally, for each outcome an indicator, baseline, milestone,
target and status of the indicator should be defined. The index measures how many of those elements actually exist.
So, if an outcome only has an indicator but no baseline, milestone, target or status are reported, then the index takes
a value of 1/5=0.2. We report the index for outcomes, and find that there is little variation in the index: the range
goes from 0.2 to 0.32 at the project level, and for the strategic goals the values are 0.2 for Reform and
competitiveness, 0.26 for the Social Sector and 0.24 for Environment and Natural Resources.
29
See Annex B
30
As reported by IFS.

17
 recovery since then.31 As for international reserves, they doubled during 1989-1995 (from
US$109 million to US$219 million), and again during 1995-2000 (to US$472 million); in
2003 they reached US$737 million. In summary, all of these indicators performed
positively until the 2001 crisis, and they show signals of recovery from it since.

Figure 4.1 Outcome Objectives of the Reform and Competitiveness Strategic Goal (Index, 1989=100)

140

120

100

80

60
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Employment Real GDP Real Exports (in BD$)

4.4 Bank involvement with reform and competitiveness was evidenced by statements in all
four strategy documents. Loan activities centered around a Multisector Preinvestment
Program, a Tax Administration and Public Expenditure Management Program,
Investment Sector Reform Program (all of which were completed) and an Administration
of Justice Program (still early in disbursement). A Bridgetown Roads and Safety project,
(almost complete) also addressed road efficiency in terms of cost and time. There were
eight TCs approved for $1.5 million under tax policy, capital markets, productivity and
tourism.

4.5 In 1992 the IDB financed the Multisector Preinvestment Project (BA0028, $7 million),
which aimed at strengthening the Project Cycle Management System and that financed
pre investment studies of projects likely to be funded by the IDB. Although the Project
Cycle Management System was introduced into public service in 1996, the system is not
regularly used as the equipment was not Y2K compliant. As for the feasibility studies
(five pre-investment studies were financed – three in water and sewerage, one tourism
and one ports) the complexity of some of them was such that both the Bank and the GOB
considered that the common alternative of TCs would have probably been a better option.
As stated in the PCR, “the expectation of developing projects for which Barbados would
apply for loans from the Bank, was not fully achieved”.

31
Given that the purpose was to increase total exports, we report the figure for total exports, which includes tourism.
The boom in exports in the mid 1990s is largely due to tourism, for both agricultural and manufacturing exports
were stagnant during that period.

18
4.6 As a complement to the public expenditure management provided by BA0028, in 1993
the IDB financed the Tax Administration and Public Expenditure Management
Program (BA0035, $7.9 million), with the objective of improving the efficiency of these
two areas. The loan was completed in 1998. Despite a number of self-evaluations
outcome information is relatively scarce.32 Such scarcities did not prevent the Bank from
claiming, “Having achieved most of its major objectives it is expected to maintain its
upward trend to complete the proposed reform.”(P.22), and that the major
accomplishment was the effective implementation of the VAT which “has clearly
simplified the tax system, improved efficiency of collection and reduced the chances of
tax evasion.”(P.15). The conclusion on the expenditure side in 1998 was that the reform
was only partially achieved.

4.7 An evaluation of the revenue side of the operation would require a decomposition of tax
revenue into that due to reform (rates, bases, new taxes) and tax evasion rates (as an
indicator of successful tax administration). Such an exercise was not carried out by the
Bank in its various evaluations. As for the ultimate goal of increasing revenues, data from
the IFS show that revenues as a share of GDP increased from an average of 29.8% in
1990-1996 to 32.4% in 1997-2002.

4.8 Consultations about an Investment Sector Loan initiated in the early 1990s when GOB
agreed to the stand-by with the IMF, and in 1995 an Investment Sector Reform
Program (ISRP, BA0012, $35 million) was approved. The ISRP intended outcome was
“to increase the competitiveness and to improve the climate for private sector
investment.” It did not define metric measures that could be used to judge success. With
components addressing macroeconomic policy (tax and trade reform and incomes
policy), the financial sector, land use and the private sector enabling environment
(through reducing administrative barriers to new investment, local enterprise
development and intellectual property rights), it was to provide three tranches over three
years. Macroeconomic stability was to be addressed through tax reform (VAT), trade
reform (CARICOM tariffs) and adherence to an incomes policy and measured through
progress in the macro-environment. Macro-performance was achieved until the
downturn in 2001. Revenues from the VAT were so buoyant that income taxes were
reduced. The GOB was able to fulfill its CARICOM tariff obligations.

4.9 Financial sector focus was important because Barbados was not capable in the early
1990s of providing the range of services demanded by private investors. Furthermore,
state-owned banks were in weak financial positions and thus a drain to the GOB. The
capitalization and subsequent privatization of the Barbados National Bank (BNB) was a
major component of the ISRP.33 BNB was fully recapitalized in 1998 and its

32
A Project Performance Review (PPR) was undertaken in 1998 which ultimately fed into an Evaluation on Three
Bank-Financed Operations of Tax Administration Reforms. The program was rated as satisfactory in
implementation and probable in achieving objectives. A final report of the program by the GOB was undertaken in
1999
33
Two thirds of the portfolio of BNB fell into non-performing category during 1992 as a result of government
guarantees for state enterprises and the national sugar processing companies which failed to generate sufficient
revenue to fulfill debt obligations. As part of the ISL all delinquent loans had to be taken care of so that the Bank

19
 transformation from an insolvent financial institution to a financially healthy bank was
considered to be one of the successes of the ISRP. It has since remained profitable, and
the ultimate goal of privatizing the BNB was completed in 2003.

4.10 Another component of the ISRP was the termination of new loan operations of and a
wind-up of the other state-owned bank, the Barbados Development Bank (BDB), which
traditionally provided low-cost loans to small businesses and the service sector. In 1995
the BDB had accumulated losses of at least US$23.5 million and a negative net equity of
US$6.8 million. The non-performing assets were to be divided into two groups and
transferred to specialized loan workout entities. The BDB was dissolved through the
ISRP, but only by the disbursement of the third tranche in 2001. Two new institutions
were put in place to replace BDB. FundAccess provides loan capital for micro
enterprises (targets all sectors except tourism) while Enterprise Growth Fund is a venture
capital company taking equity positions in small and medium sized firms. The PCR
claims that these two entities have not functioned as expected. They continue to be
publicly managed (efforts were made to privatize but the private sector showed no
interest) and FundAccess continues with high delinquency rates and an interest rate
structure, above the prime rate, but still concessionary in that it does not fully cover risk
and operating costs

4.11 Additional components of the loan, which have been partially achieved, were: a) propose
recommendations to strengthen the supervision and regulatory framework governing
financial institutions; b) contribute towards the deepening of the securities market in
order to facilitate the flow of funds to most productive uses that would facilitate private
investment; and, c) study the creation of a secondary mortgages market. A recent IMF
study of Financial System Stability Assessment (FSAP) for Barbados (IMF 2003)
considered the sector to be quite sophisticated, given the size of the economy, although
dominated by banks. The study concluded, “Supervision has improved during the 1990s,
as better legislation and prudential regulation have been adopted, but additional
challenges remain.” The 1996 Financial Institutions Act for domestic institutions and the
2002 International Financial Services Act for offshore banks were both approved.

4.12 The ISRP also proposed to reform land-use policy in Barbados to allow for the shifting of
resources from agriculture -primarily sugar- into new productive sectors. However, the
goal has not been achieved: about 45% of the total surface area of the country continues
to be agricultural land (50% of it is reserved for sugar production34). The project
completion report of the loan (PCR) concurs with these findings as it states that
“diversification of land use has not materially changed”. Slight progress has been made
however in making the granting of land-use decisions more transparent thanks to
improvements in the Town and Country Planning Office.

could improve its financial position and increase its loan-loss-reserve ratio and recapitalize in accordance to Basle
capital adequacy standards
34
The sugar industry, which represents the main agricultural activity in Barbados and has accounted for 50% of the
agricultural area of the country (urban development in agricultural zones is prohibited), has been in chronic decline
due to losses associated with high operating costs and low prices. For much of the 1990s, the government instead of
looking for alternatives, continued to design restructuring plans to improve the management and technology in the
industry hoping it would be a way of raising output.

20
4.13 As part of the “Enabling the Environment for New Investors” component, the ISRP
aimed to centralize investment approval procedures by streamlining operations through
training and capacity building programs, creating international business units within the
ministry of trade and preparing legislation to correct the deficiencies of the copyright,
patent and trademark law. By the second disbursement of the ISRP, improvements in
copyrights had been achieved and new legislation enforced. The institutional framework
in the Ministry of International Trade and Business35 was put in place; however, it did not
function as expected and administrative barriers to new investments still exist. Approval
processes have not been consolidated despite technological improvements; and the PCR
reports that all in all, “there has been little success in reducing administrative barriers for
new foreign investment.”

4.14 The ultimate goal of the ISRP was to consolidate an efficient banking sector and to
increase the participation of the private sector in the economy. Domestic credit to the
private sector as a share of GDP increased from 50% in 1995 to 57% for 2000-2003.
However, high spreads between deposit and borrowing rates indicate an inefficient
financial sector intermediation that has a curtailing effect on private investment. In fact
private investment and FDI as a share of GDP remained extremely low. Private building
activity of the gross capital formation component of GDP does not show an increase in
dynamism.

4.15 The competitiveness of an economy and its attractiveness for flows of FDI depend,
among other factors, on the quality of the available infrastructure.36 With the purpose of
contributing to the strengthening the roads infrastructure of Barbados, in 1993 the IDB
financed the Bridgetown Roads and Safety Program (BA0047, $18.5 million) and four
TCs for $816 thousand dealt with roads in the country.37

4.16 Two TCs and BA0047 were for a Bridgetown by-pass project designed to reduce
operating costs through improved traffic flows on two corridors around Bridgetown. It
also had components to improve traffic management and safety in Barbados. The
economic rates of return of the project were estimated at 56% for the inner corridor and
42% for the outer. An ex-post evaluation was called for at the end of the program,
making use of before and after traffic counts, average travel time and the negative effects
on traffic resulting from relocation and works. The project experienced delays for a
number of reasons and is only now close to completion, having been extended by 95
months. Implementation was considered unsuccessful up until 2000 when it finally
began to proceed.

35
The Unit was later transferred to the Ministry of Economic Development.
36
See, for example, the paper by Nagesh Kumar (2001) that shows a positive relationship between the quality of
infrastructure and FDI inflows, controlling for other factors that also determine capital flows.
37
The Bank financed two TCs for a National Transport Plan in the early 1990s. Barbados at the time considered
road improvement a priority as rapid motorization was occurring and safety was becoming an issue. A Bank
mission in 1991 had identified issues of maintenance, planning, traffic management and safety. The Transport Plan
was eventually cancelled even though about $500 thousand had been spent. Also, a ports project was listed in CPs
and the pipeline over much of the period but eventually was never financed by the Bank. A Profile I was prepared
in the early 1990s and a number of different project proposals were prepared by the Bank in anticipation of a loan.
There have been two port TC operations approved for over $1 million to assist in improving cruise ship facilities.

21
B. Social Sectors

4.17 Since independence Barbados has invested heavily in education, health, social security
and social assistance. Barbados’s social indicators are amongst the highest of the Bank’s
borrowing members. The 2004 UNDP Human Development Report rated Barbados as
number 29 in 2002, the highest ranking of a developing country, up from 31 in 2000.
Nevertheless, the effectiveness of these investments may be affected by higher
unemployment, low program coverage rates, rising crime, falling savings rates and
deterioration of infrastructure.

4.18 Education. Barbados allocates a high share of GDP to education, 7.9% of GDP in 2001.
In terms of coverage and development goals, Barbados fits the profile of a developed
country: universal primary and secondary enrollment and an illiteracy rate of 0.3%. The
government provides free universal primary and secondary education, and it also covers
some of the direct costs, such as transportation, textbooks and meals. (see Annex C).
Such important achievements result from a continued political commitment to education,
a policy of free and compulsory education between the ages of 5 and 16 and considerable
sector investments. Special efforts have been undertaken to address issues related to the
efficiency of resource allocation as some cost efficiencies have been attained through a
number of reform measures, such as school amalgamation and partial zoning. But, a
continuing challenge recognized by the GOB is the improvement in educational quality
and a needed capacity to keep up with economic and technological change.

4.19 The Bank’s analysis in its programming documents (particularly the SERs) recognized
that although Barbados had one of the most advanced educational systems, some major
challenges had emerged regarding cost efficiency, financial sustainability, inequity in
resource allocation, attainment and adequacy to meet manpower needs. This diagnosis
coincided with the educational needs identified by the GOB White Paper (1995).

4.20 The Bank approved two loans for a total of $94.5 million and two TCs for $167 thousand
for education. Responding to GOB’s concern with cost-effectiveness and cutting public
expenditures, in 1992 the IDB approved a Primary Education loan (BA0017, $11.6
million38). The project addressed rationalization of school infrastructure, where declining
enrolments (due to declining fertility rates) and demand shifts towards urban areas
resulted in a number of uneconomical schools. To achieve this objective, 66% was to
finance the amalgamation of eight schools into four larger and properly equipped ones
with larger capacity. In addition, the project design aimed at two ambitious objectives:
improving the quality of instruction and learning in primary schools and strengthening
the capacity of the Ministry for planning, evaluation and monitoring educational services
through relatively modest components of provision of textbooks and technical assistance
activities (77 person-months of consultancies).

38
The loan had cancellations for US$2.1 million, from the incidentals and cost escalation components, and also due
to a problem on the financing of the textbooks, some of which were provided exclusively by a non-member country
of the IDB, so the GOB had to pay for them. The cancellations did not affect the quantity of outputs produced by the
program.

22
4.21 After a 45 month delay, all project expected outputs were completed satisfactorily.
Although the PCR indicates that the likelihood of achieving the three broader project
objectives remained high, in OVE’s judgment project results are mixed. (An ex-post
evaluation scheduled for December of 2003, as indicated in the PPMR of 2001, has not
been completed.)

4.22 Savings of 30% in the recurrent costs per pupil were expected from the amalgamation of
8 schools into four larger and more efficient units. The outputs and activities to meet this
objective were met, as the consolidation of school was completed.39 However, there is no
evidence that the goal of 30% savings was met. According to the PCR, the unit cost fell
from $1,142 to $937, representing a savings of 18%.40

4.23 The activities set forth to improve the quality of instruction and learning in primary
schools component (provision of 114,000 textbooks and 200 teacher manuals) were also
met. From a previous IDB loan, recommendations existed on which textbooks should be
used, and reference manuals for teachers were also determined. Arguably the activities
and resources in this loan are modest for the goal of increasing quality, but they must be
analyzed in the context of implementing recommendations from the preceding loan.
There was a clear outcome indicator here, the reduction from 40% to 30% in the share of
students having an unsatisfactory score in the Common Entrance Examination (CEE)41.
However, the loan document does not state what an “unsatisfactory score” represents.

4.24 Leaving aside the appropriateness of the indicator, there is no evidence that it was
achieved. OVE consulted data that showed no improvement in the share of pupils
scoring less than 30 points.42 It is important to account for this objective, because in the
viability section of the loan document it is stated that a large part (40%) of the
quantifiable economic benefits of the program would come from the reduction in the
waste represented by the unsatisfactory CEE scores.

4.25 The expected results for the institutional strengthening objective included improvements
in the areas of organization and management, information systems and learning
assessments. The Bank financed inputs for consulting services, training, and provision
of hardware and software that were deployed as planned between 1997 and 1998. The
evaluability of this component is null. Besides the outputs desired, no specific targets
were set on the improved performance resulting from the consultancies. In the PCR a
positive appraisal is given, but it lacks any supporting evidence. A number of institutional
weaknesses prevail, as recognized by the Ministry of Education in its Strategic Plan for
2002-2012: centralized decision making processes, over-centralization in the
appointment of personnel, ineffective performance appraisal management system for

39
Note that the amalgamation process started well beyond this loan: the policy began in the late 1970s and the
previous IDB loan also considered some amalgamation of schools.
40
Note that the PCR shows the first figure, and reports a table for the after-loan period that does not include the
recurring unit cost, which is quoted at $1,174 in nominal terms; taking an average inflation of 2.87% this last
number is deflated to $937
41
The CEE is also known as the Barbados Secondary Entrance Examination (BSSEE).
42
The loan document called for an analysis of the CEE results for the project schools, for the SETP schools and for
the system as a whole. This has not been done.

23
 teachers and administrators, inability to apply supervisory management strategies, lack of
accountability of personnel, ineffective financial management systems, inadequate
research and record management capacity, and lack of adequate assessment procedures
for students. In sum, even if the technical assistance provided through the project may
have been targeted correctly, it was not sufficient to overcome the constraints for
improving managerial practices and deploying an efficient information system to enhance
monitoring and operation of educational services.

4.26 In 1998, the IDB approved a second education loan, the Education Sector
Enhancement Program (BA-0009, $85 million, known as EduTech) co-financed with
the CDB. It was designed to help implement a comprehensive educational reform
program, outlined in the 1995 White Paper. According to the LD, the reform envisioned
“moves towards the installation of a state-of-the-art technology, as well as a
constructivist and child-centered paradigms which will enable the education system to
produce the skilled workforce that is required to drive a modern economy”. The proposed
reforms encompassed the entire educational system, the teaching profession, institutional
strengthening and a full review of the curriculum with the purpose of addressing GOB
concerns about the high rate of students that exit the education system without proper
certification (60%), or that score less than 30 points in the Eleven Plus Exam (25%). The
project included five components targeted to support the reform process for primary and
secondary education: i) school rehabilitation of all (103) primary and secondary schools,
ii) infusion of computer technology throughout the system, iii) curriculum reform
(financed by GOB) and evaluation, iv) training for teachers, administrative and support
staff and v) institutional strengthening.

4.27 This is a complex project, and its implementation was expected to be difficult. The
design called for flexibility and a “test and fix” approach in order to meet the expected
uncertainties. In spite of the preemptive measures and coping mechanisms in the project
design, the risk factors contemplated in the loan document materialized: slippage in
implementation, design uncertainty, and weak institutional capacity. The plan was to
proceed with the school rehabilitation and technological equipment gradually, starting
with fifteen schools which would serve as demonstration group. The training and
curriculum components have progressed according to expected timeline, but lacking the
necessary physical and computer infrastructure, teachers will probably have to be
retrained by the time the schools are completed with the appropriate equipment.
Implementation has rated unsatisfactory since December of 2002 and the project has been
moved from alert status to problem project. The likelihood for achieving development
objectives has been downgraded to low probability. Progress has been slow in the civil
works and information technology components (with completion rates of 30% and 25%,
according to the June 2005 PPMR).

4.28 One of the design features of EduTech was the importance given to evaluation. The
program called for the establishment of the Educational Evaluation Centre with the UWI,
as well as for a monitoring and evaluation data gathering process, midterm and ex post
evaluations. Given the complexity and uncertainty inherent to a major educational
reform, it was stressed that adjustments should be made continuously based on evidence
generated and summarized by the project. Results from an external mid-term evaluation

24
 of the project (conducted in 2005 by the Ontario Institute for Studies in Education)
suggest that the EEC was created and that it is gathering useful data on the
implementation of the ESEP, but that this information does not inform the GOB nor the
IDB or CDB. Also, some technical issues exist on the baseline data collection, which
have not been resolved. While this baseline and subsequent data was not provided to the
evaluation team and not analyzed by the mid-term evaluation, it is likely that they could
have been used to make an assessment of educational quality improvements to date.

4.29 EduTech is in the midst of a reformulation. The technology infusion component is under
scrutiny, with the option of using wireless instead of wired technologies. A careful
analysis of the information that is being generated by the EEC should be undertaken both
to inform project redesign and to validate and strengthen the evaluation and monitoring
system and thus assess the delivery of expected benefits associated with “improvements
in learning outcomes for primary and secondary students and mastery of computer skills
for school leavers”.

4.30 Both education loans were relevant to the major education issues and challenges defined
by the GOB . The major focus of the first loan coincided with GOB’s concern about
cost-effectiveness during the recession of the early 1990s. The Bank’s support of the
government initiative of amalgamation of uneconomical schools, albeit small, aimed at
optimizing resource allocation and reducing recurrent costs of eight primary schools.
Likewise, the ongoing 1998 loan provided a timely response to the government’s request
to help implement its educational reform process by contributing to improvement of the
quality of education for all primary and secondary schools.

4.31 In terms of results, at the outcome level it is not possible to consider these interventions
as successful. For BA0017 the goal of reducing recurrent costs was achieved, although
the savings were below expectations. The goal of increasing CEE scores was not
achieved, and there is no way to determine whether the technical assistance and
consultancies had an impact on the performance of the MOE. In the case of EduTech, the
current difficulties in developing a system for measuring project outcomes is a major
obstacle for demonstrating learning improvements for primary and secondary students.
Beyond the slow implementation in the rebuilding of schools and in the technology
diffusion component, the data gathered by the EEC has not been analyzed to determine
the results in terms of the development outcomes (it is important to stress that technology
diffusion is a means, not an end in itself). In terms of efficiency, the quantifiable benefits
of BA0017 are not sufficient to generate the necessary benefits to justify the
investment,43 while for BA0009 –EduTech—there is no information on the benefits, so
an efficiency analysis is not feasible.

4.32 Health. Bank efforts included a $1.75 million 1991 TC for rationalization of the health
sector and a project (BA0027) of $20 million that remained in the pipeline for more than
a decade and was subsequently removed in 2004. The TC, originally scheduled for

43
The loan document stated that savings of 30% in the recurrent costs at the eight schools and the reduction by ten
percentage points (from 40% to 30%) of the students not achieving a satisfactory score in the CEE were necessary to
generate benefits such that a cost-benefit analysis would yield positive results.

25
 completion in 1993, was to provide partial financing for feasibility studies and designs
for BA0027. It originally focused on psychiatric, geriatric and rehabilitation services but
later was broadened to cover sector-wide issues. Contracts with two American
universities begun but both were cancelled. In October 2002, the Ministry of Health
prepared a Barbados Strategic Health Plan 2002-2012. The IDB’s TC was reformulated
within that context, particularly for the rationalization and upgrading of the Queen
Elizabeth Hospital.

4.33 In conclusion, in spite of access to an exceptionally large amount of grant financing to

support health sector planning and the apparent need for more analytical work, the Bank
has been unable to negotiate priorities with Government in this area and make use of
these scarce resources. Furthermore, the large recent donations from the European Union
to Barbados that help to fund the 2002-2012 health plan suggest that this is an area where
the direct involvement of the IDB is less critical.

4.34 Poverty and inequality. There is a lack of information on poverty and income
distribution in Barbados. Beyond the information necessary to compute the Human
Development Index (GDP per capita, life expectancy and educational attainment), there
is no information to capture the prevalence and severity of poverty, the access to social
services and the distribution of income. In sector work, poverty and income distribution
were estimated by the Bank (IDB, 1998a) to affect 8.7% of households and about 13.9%
of the population over four quarters of 1996/97. The IDB study calculated the Gini
coefficient at 0.39, a moderately egalitarian distribution of income. The poverty
assessment was based on a module to the labor force survey, which has not been applied
since then. The report was clear in stressing the necessity to generate regular reliable data
to capture poverty and income distribution. Nevertheless, the IDB has not assisted the
GOB in implementing a continuous household survey to monitor the living conditions of
the Barbadian population A recent attempt has been made through a regional technical
cooperation to strengthen institutional capacity of the national statistical offices of the
Anglophone Caribbean countries to collect, analyze, and produce timely, relevant and
high-quality statistical information required to formulate social policies and poverty
strategies, and to monitor progress in the achievement of these policies and goals,
however, this operation has not yet begun execution through the CDB (ATN/SF-8419-
RS). Without a reliable source of data for a diagnosis of poverty dynamics and the social
sectors, the IDB will not be able to provide assistance to the GOB in the area were the
Bank has accumulated valuable experience and where it has a comparative advantage, the
implementation of anti-poverty policies.

C. Environment, Natural Resources and Vulnerability44

4.35 Environment and natural resource issues (degradation of reefs, fisheries, beach erosion,
water supply, solid waste and sewage) have been at the forefront of development
concerns of Barbados for some time.45 Following the United Nations Conference on
44
See Annex D.
45
Water consumption has risen to about 97% of current capacity and Barbados ranks among the ten most water
scarce countries of the world. The risk of salt-water intrusion due to over abstraction is growing. Solid waste
increased by about 14% over six years and is the most controversial environmental issue today. Contamination of

26
 Environment and Development in 1992, the GOB initiated actions towards the
implementation of the agreed action plan (Agenda 21). A National Sustainable
Development Seminar was convened in June 1994, for the purpose of educating relevant
personnel and agencies on the contents of Agenda 21 and its significance to Barbados.
During the following period the GOB was active in passing legislation, formulating plans
and conducting studies46

4.36 The Bank approved four loans – about one third of its portfolio and seven TCs for over
$2 million in support of environmental efforts over the period through. However, results
of these operations are not yet readily apparent.

4.37 The South Coast Sewerage Project (BA0036, $51.2 million), approved in 1992, was to
achieve acceptable nearshore marine water quality through sewerage disposal facilities
and to develop institutional and financial capacity of the Barbados Water Authority
(BWA) to maintain and operate water supply and sewage systems. Two TCs were also
approved to help improve water quality management. Near-shore water quality
monitoring (using six US EPA standards), indicated that none of the sites monitored in
1992 consistently met standards due predominantly to high levels of faecal coliforms and
streptococci. All ten beaches exceeded US EPA levels at some time with eight doing so
consistently, leading to the conclusion that “all beaches would have been permanently
closed.” The project performance indicator - improved near-shore water quality - aimed
to reach quality levels by the year 2001 based on data collected from the beaches. The
second objective concerned BWA increased capacity to financially manage its water and
sewer systems through components of tariff increases, metering, financial systems and
operational and maintenance equipment. Baselines or targets were not provided for
either objective.

4.38 The project consisted of highly interdependent components requiring the successful
completion of each in order to initiate the flow of anticipated benefits. This did not
happen. The marine outfall (1996) and the treatment plant (1997) were constructed
several years before the sewage collection infrastructure. Even the installation of the
water meters by 1999 was of little use without the requisite household connections and
activation of the collection system, delayed until July 2002.

4.39 The incompetence of the contracted firm and the absence of effective precautionary
measures by the GOB and the Bank contributed to considerable delays and execution
inefficiencies. The winning bid for the collection system contract, came in at over $10
million less than its nearest competitor and remarkably divergent from the cluster of bids
presented by three other bidders. The contract award was based on the Bank’s policy of

coastal waters and deterioration of the coral reefs has been linked to inadequate water disposal. During a ten-year
period on the west coast coral decreased by 34% and species by 24%.
46
See Table 1 in Annex D. The studies include coral reef monitoring studies, the Barbados Program of Action
(BPOA) - a sustainable development blueprint for Small Island Developing States (SIDS); establishment of the
National Commission on Sustainable Development, a State of the Environment Report and a Sustainable
Development Policy. As in other sectors, Barbados has taken much of the onus on efforts to address environment
and natural resource issues. Much of the efforts have been in establishing an institutional and legislative framework
and carrying out and appraisal and monitoring studies.

27
 accepting the lowest bid within an acceptable range, and insufficient action was taken to
verify the qualifications and performance record of the company at the time; neither the
GOB nor the Bank took effective action that would have been required given the
complexity of the project. The firm served notice in December, 1997 that it would desist
from its involvement with the project. Its technology was inappropriate, soil collapses
wreaked havoc with scheduling, public dissatisfaction with lack of progress mounted and
the firm’s costs increased as anticipated profits failed to materialize. The firm left the
country without its equipment, impounded by the GOB, leaving unfilled holes dug in the
streets.

4.40 The sewage works are complete. Homeowners have benefited from their connections to
the sewerage collection system, eliminating relatively frequent and costly septic tank
cleanouts. In terms of results, water quality surveys carried out before and after the
project showed a reduction of contamination during the dry season but less so during the
wet season as four beaches continued to show high bacterial counts. (see Annex D for
more detailed results). Over the longer term it appears that the project has made a
contribution to reducing near-shore contamination, however still more needs to be done
in this area.

4.41 Regarding the institutional and financial strength of the BWA, the prospects are
uncertain. The GOB declared that the Fair Trading Commission (FTC) had to decide on
any tariff changes; after 12 years with no changes in water rates, on October 2004 a 25%
raise was announced, effective on January 2005. This is an significant step, as the
prevailing ethos in Barbados holds that water is a national good. It is important for the
tariff structure to encourage conservation of the country’s scarce water resources.

4.42 Maintenance of the inoperable treatment plant and other cost overruns are estimated to
have cost $22 million in addition to the expense of commitment fees and charges to the
Bank totaling some $2 million. A careful analysis should be made of the cost-benefit
analysis implications of the delays and cost overruns, for the loan document computed
relatively low rates of returns for the project.47 .

4.43 A Coastal Conservation Program – Phase I, (BA0014) was approved in 1994 as a

reimbursable TC operation of $3.6 million ($290 thousand was cancelled) and $500
thousand from the Canadian Trust Fund. The objective was to develop an integrated
Coastal Zone Management (CZM) Program for the country, but no longer term outcomes
were specified. The output components included institutional building, CZM plans,
legislation, surveys and demonstration projects. The PCR reports all components being
achieved with considerable country ownership and local leadership. Five demonstration
projects were completed contributing to reduction of beach erosion and considerable
monitoring data was begun to be collected on currents, tides, waves movement of sand,
etc., although these were not provided in the PCR. The project was one of the first to
develop a CZM program for a developing country and led in 1992 to the approval of a

47
According to the latest PPMR (June 2005) the PCR will have the necessary information to asses the main
development objective (reducing pollution in the treated beaches), and it will be done with a professional with the
necessary training to do the required cost-benefit analysis.

28
 larger Coastal Infrastructure Program (BA0019, $17 million) which has only begun to
disburse.

4.44 A Solid Waste Management Program (BA-0025) was approved in 1998 for $13
million, but as of 2005 no funds have been disbursed. The objective is to develop a
modern waste management system to protect the environment and improve public health.
At present the GOB is still working to satisfy loan preconditions.

29
 V. CONCLUSIONS AND RECOMMENDATIONS

5.1 During the period evaluated there have been four country strategy papers. Country
strategy papers are consensual documents that set out strategic goals agreed to by the
country and the Bank. All four strategy documents consistently emphasize the same
strategic areas for the Bank’s involvement: reform and competitiveness, social sectors
and environmental management.

5.2 An evaluation of the program reveals the following. First, the Bank is a small actor in the
country. The country’s characteristics combined with its debt management policy has
implied that the Bank gross disbursements have been small relative to domestic aggregate
variables and net cash flows to Barbados were negative most years. Both loan approvals
and disbursements are independent of the country’s economic cycle, with most of the
portfolio approved during the high growth period.

5.3 Second, equal importance was given to the three strategic areas as measured by the
percentage distribution of the portfolio. Approvals of TCs were mainly in the reform and
competitiveness strategic area, but large TCs, of over $1 million, were approved in the
social area, particularly in health and sanitation.

5.4 Third, programming and execution performance indicators are at or below Bank average,
with no marked difference between the three areas. Projects take above average time for
approval, have greater than average extensions, execution performance is below Bank
average performance, and the portfolio has a larger than average number of projects on
alert.

5.5 Fourth, the program and the projects that comprise it have a low level of evaluability.
Country programs, as was the norm until recently, do not have rolling target-performance
analysis. Projects rarely have information on baselines and current status of their
expected outcomes; a characteristic shared by all three areas.

5.6 Fifth, information in the two strategic areas of competitiveness and social areas is
inadequate. Barbados is not included in either in the countries of the World Economic
Forum or the countries in the International Institute for Management Development. The
country has carried out only one household survey.

5.7 Other than the fact that the Bank is a small actor in the country, the portfolio performance
features are at variance with the country’s high governance and administrative capacity
classifications and the continuity of the areas of intervention by the Bank.

5.8 The lack of outcome data strongly limits an evaluation of the development effectiveness
of the program. Nonetheless, drawing on a variety of existing sources, a partial evaluation
of the development effectiveness of the program was made. Attribution could not be
measured.

30
5.9 In the reform and competitiveness effort the general development outcome objectives for
the reform and competitiveness goal dealt with reviving export earnings, increasing
employment and growth and increasing foreign-exchange earnings. An analysis of the
evolution of these indicators shows a positive behavior after the recession of the early
nineties and up until the crisis that followed 9/11 of these variables.

5.10 In the social sector strategic development goal were to increase the efficiency of public
spending in the sector, and in education to support a major pedagogical reform. The goal
of increasing efficiency was partially achieved, for spending per pupil was reduced 20%
in the schools where the IDB supported an amalgamation process. The second goal, as
measured by test scores, was not achieved in the first education loan, while it the second
loan is still executing.

5.11 In the environmental management strategic goal the development objectives have been
partially met: although acceptable near-shore marine water quality levels on the south
coast has not been achieved, the quality has improved considerably, while the
consolidation of the relevant institutions is still pending.

5.12 The Bank’s program can be considered relevant to the country’s needs over the period.
The four country papers and two socio-economic reports identified many of the
development difficulties facing Barbados and were consistent over time in recommending
where the Bank should address it efforts. The diagnosis of issues was broadly consistent
with local authorities, the IMF and current economic thought.

5.13 The Bank’s program was coherent, for the subsequent lending program was consistent
with the three outcome objectives listed above, and individual projects within each of the
strategic areas of intervention were adequately articulated between them. At the project
level complexity and interdependence of many subcomponents was a problem, as
evidenced by the South Coastal Sewerage and the Education Sector Enhancement
projects.

5.14 The Bank has not been efficient in the preparation and implementation of the program.
The performance in these dimensions is below the Bank’s average, and this is aggravated
by the institutional capacity of Barbados, as measured by various international indexes.

5.15 While the program can be considered relevant and coherent, it is not evaluable given the
lack of information provided for indicators, baselines and targets Only the 1999 CP
provided indicators (about 50 in total) but these were vague with no baselines or targets.
At the project level indicators are usually defined, but without baseline, milestone, targets
or means of status verification. The lack of results attributable to the Bank’s interventions
does not allow OVE to measure the efficacy of the program.

5.16 Barbados continues to face major challenges. It remains highly vulnerable both in
economic and environmental areas, due to its openness to the world market, undiversified
economy and proneness to natural disasters and external shocks. Past environmental
damage, possible hurricanes and the highly populated coastline leave Barbados prone to
difficulties and crises which may have a serious impact on tourism. The GOB counter

31
 cyclical spending policy has resulted in an increased fiscal deficit and debt load that have
implications for future lending from the Bank and other lenders. In the social sector the
challenge is to maintain quality and efficiency while under natural resources/environment
the areas of potable water supply, off-shore water quality, beach erosion, reef
degradation, solid waste and sewage and limited land resources all require attention.

Recommendations:

5.17 The Bank needs to address the slow project preparation and low execution performance
of its projects. Armed with a full diagnosis of why previous actions have failed, the Bank
should design new measures and explore with the authorities a new program that exploits
the Bank’s new lending framework’s instrument and processes, with the possibility of
reforming the existing portfolio’s instrument mix to the one allowed under the new
lending framework.

5.18 The Bank should also address the low evaluability of the program’s projects. The next
country strategy should set clear priorities for the Bank, how it intends to achieve results
in the country particularly given the past implementation difficulties. It should avoid
broad or undefined objectives and establish more realistic medium-term goals, indicators
and targets under more specific priority themes, reflecting capacities for achievement.
Benchmarks and milestones should be provided so that progress can be measured. The
Bank should retrofit the open projects to collect baseline and current status of the
projects’ expected outcomes, and ensure that projects proposed in its new program have
adequate information gathering systems.

5.19 The Bank should fill the information gap regarding competitiveness and opportunities
and capabilities of the poor. Specifically the Bank should, together with the country,
generate the primary data required both for diagnosis and for benchmarking to judge
progress in the strategic areas it agrees with the country. With respect to competitiveness
the Bank should put into place a system that gathers information to obtain indicators
compatible with the World Economic Forum, thereby allowing both ranking of the
country and temporal progress in this area to be judged. With respect to social sectors the
Bank should explore the possibility of annual household surveys, including, where
pertinent, modules to generate information of its own project outcomes.

5.20 Due to the lack of data, the institutional weaknesses, the small size and the vulnerability
of Barbados and the other English-speaking Caribbean countries, the Bank should
provide more technical assistance, through financial and non-financial instruments.
Regional technical cooperation and additional resources specifically dedicated to non-
financial services to these countries could provide an appropriate mechanism of support
for addressing these challenges and taking advantages of the commonalities and
opportunities for exchange of experiences across countries of the region..

32
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