Project assistance completion report [: infrastructure for productive investment]

Under the project, a $12 million loan was initially made available to the Eastern Caribbean Central Bank (ECCB) for on-lending to private investors through commercial financial institutions. This amount was subsequently reduced to $6 million due to lack of demand. Grant funding in support of this loan was provided under the Investment Promotion and Export Development Project to hire TA and engineering services. Overall, 29 sub-projects were considered by commercial banks in the region for funding under the project and 5 were approved by the ECCB. The other projects were cancelled or rejected by either the commercial banks or the ECCB because of non-viability or because the sponsors shelved the projects. A total of about $1.8 million of project funds were utilized for construction of about 62,000 sq. ft. of factory space in Antigua and Grenada. This space facilitated manufacturing activities, e.g., involving pre-fab housing, garments, industrial gases and furniture. Remaining project funds will be re-obligated. In sum, the project contributed to the commencement of five projects involving total investments of about $3.241 million. There was a mix of investments between local and foreign investors. Employment generation was modest, with 240 production jobs having been provided during the life of the project. This impact is marginally increased through recognition of the temporary construction jobs that resulted from the project. None of the firms occupying space had started exporting as of the PACD. The project failed to meet its objectives primarily due to flawed design assumptions: (1) that the demand for factory space exceeded supply; and (2) that foreign investors would be willing to come into a region of unproven industrial experience with unreliable demand estimates and construct factory space on speculation. The principal lesson is that projects to satisfy market deficiencies must provide for prompt reaction to the perceived deficiency or be sufficiently flexible to respond to unforseen cyclical changes in economic activity. Secondly, market surveys/feasibility studies should be subject to verification before being used as a basis for funding allocation. (Author abstract, modified)