‘HURRICANE’ CONDITIONS – Funding Fallout

By Michael L Jarvis
UK Correspondent

With eyes anxiously focused on what could potentially be the first major storm bearing down on the Caribbean for this year’s hurricane season, an issue of post-disaster funding is equally focusing minds.

In the British Virgin Islands (BVI) and the Dutch overseas territory St Maarten, new disaster reconstruction funding arrangements by the UK and the Netherlands respectively are experiencing considerable push-back.

The central point of this turbulence is 'oversight and autonomy'.

In 2017 Hurricanes Irma and Maria tore through the Caribbean leaving billions of dollars in destruction in their wake.

Many islands and islands are still struggling with the enormous task of rebuilding their economies and societies.

In the case of the BVI and St Maarten, the fallout over funding has also had its political casualties. Governments have been changed, but the debate over funding remains two hurricane seasons later.

In the wake of the BVI getting hammered back-to-back by the two most devastating hurricanes of the 2017 season, the UK approved a funding package of £300 million (KYD$ 301 million/USD$ 367 million). But instead of direct funding, it's in the form of a loan guarantee.

That’s apart from other UK hurricane relief to the territory where the double-whammy impact of Irma and Maria has been put at US$ 3.6 billion.

In St Maarten, damage from Hurricane Irma cost the Dutch territory US$ 2.3 billion. The Dutch government has also gone the route of a loan guarantee of US$ 580 million for the reconstruction of its part of the island (shared with France’s St Martin).

The point of contention is the method chosen by the respective administrative authorities, the UK and the Netherlands, to manage their allocations of quite large funding allocations.

They have chosen to delegate the authority to third parties while maintaining an arms-length approach, albeit alongside their normal territorial oversight.

For the British Virgin Islands, the money is (to be) channelled through an autonomous Recovery Development Agency(RDA); the objective being transparency and reducing political influence and risks of corruption.

The BVI’s RDA is intended to manage the US$300 million loan guarantee backed by the British government, serving as a go-between for the local and government and banks.

A similar arrangement has been put in place in Dutch St Maarten but via the World Bank and a National Recovery and Resilience Plan (NRRP).

While the two administrative powers are the loan guarantors for their respective territory, carrying the responsibility (what’s known as contingent liability), this new approach to funding disaster recovery on such a large scale has not been without tension.

Questions of loss of autonomy including - and rather quite surprisingly - being ‘palmed off’ to an entity which might not share the empathy of the putative ‘mother country’, have emerged in the swirl of debate that has accompanied the new funding scheme.

The British Virgin Islands premier and the UK’s resident territorial governor have been trading opposing interpretations with BVI Premier Andrew Fahie recently suggesting that he will take his concerns up directly with London.

At issue are the stringent conditions laid down and whether or not they encroach on the territory’s autonomy, especially regarding financial control.

Premier Fahie thinks so and wants the arrangement, agreed by the previous BVI government, renegotiated. Governor Gus Jaspert disagrees; hence the current stand-off.

Over in St Maarten, wrangles continue about its Dutch-backed hurricane recovery fund.

As in the BVI, the concerns are similar.

The ongoing situation in the BVI and St Maarten can be contrasted with that of the Cayman Islands in 2004 with the equally devastating Hurricane Ivan.

Back then the British government had refused to guarantee a loan proposal of $US 300 million for the Cayman Islands, suggesting instead that the islands raise taxes to meet its rebuilding expenses.

But with disaster recovery loan guarantees now seemingly firmly on the agenda, the saying (and the song), “if you dance to the music, you just pay the piper” comes to mind.

That musical segue underlines the challenges facing all parties involved, especially with the BVI where the terms were agreed by the previous local administration.

In St Maarten, the previous government rejected what was on the table and lost power, while in the BVI, the previous government accepted the terms but also power.

In both cases, they paid the then ruling parties paid the political price, but the issue is still unresolved.

Despite appreciable local efforts at rebuilding, the bulk of the work is yet to be done, but the funds on offer are yet to be drawn down because of the ongoing stand-off in both cases.

Across Dutch St Maarten’s border that it shares with French St Martin (there’s a popular local saying; the hurricane doesn’t stop at the border), the French state is directly involved in funding - and overseeing - the rebuilding.

The terms and conditions are eye-watering and touch on just about every aspect of local policy and administration with a central theme of ‘reform’.

Unlike the BVI, St Maarten and the Cayman Islands, St Martin is fully integrated into the French Republic.

In the meantime, while these islands grapple with these 'hurricane' conditions laid down in their disaster recovery funding schemes, another hurricane season is now peaking and the storms are starting to roll in.