ࡱ> ECFq` "bjbjqPqP .4:: ,  ( $h1~  BBB   BBBB +5  B0BBB  B 8 dR DR  The View from Europe By David Jessop One of the more striking developments over the last eighteen months or so has been the rise and rise of investment interest in the Caribbean region. So much so that hardly a week has gone by when one or another bank, private equity firm, hedge fund or privately wealthy individual has not been seeking advice on the opportunities available in the region. For the most part, the interest has been focussed on hotels, condominiums, real estate development and golf courses but there has also been a thirst for information on other service sector opportunities including areas that extend from private health care through the establishment of specialist financial services activities to port development and fast sea transport. This level of interest is wholly new and reflects a radically altered view of the Caribbean. It is originating in nations in locations as diverse as the Gulf States like Dubai, the Far East, South Africa, India, Brazil and China as well as from Europe and North America. This is paralleled by a growing trend among larger regionally owned companies to seek out investment opportunities in Europe in areas as diverse as food distribution, distilling, financial services, the franchising of restaurants and in food processing. This profound change is being driven by a number of relatively new factors. At its highest this new found interest is a reflection of globalisation and global economic integration. It is being driven by a radical shift in the mobility of global wealth and a recognition that to take advantage of markets new approaches to investment are required. This trend began some years ago but has accelerated as a result of digital connectivity and the growing ease with which capital can migrate. To understand how significant this will be one only needs to look at Chinas rise. In a recent edition of the London Financial Times, one of it columnists suggested that by as soon as 2015, Chinas purchasing power will match that of the US and by 2025 it will overtake it, causing the biggest upheaval in global interrelationships for two centuries. It also reflects the agglomeration of vast financial reserves in sovereign wealth funds - investment vehicles held by states - and the privately wealthy. This new found liquidity has arisen from surging equity prices in recent years in some markets, the rapid escalation in earnings from oil and gas and the growth of huge personal fortunes in China, India and other rapidly emerging economies. In the case of the Caribbean and other US Dollar based economies investment interest has also been spurred by the relative strength of the Euro and other currencies. It is resulting in an utterly changed world in which, with some important exceptions, traditional relationships based on government-to-government ties may come to matter less than the ability of Ministers and Prime Ministers to interact well with the Chief Executive Officer or the President of the investment fund or enterprise. While no one would wish to set aside governments formal ties with nations like let us say Ireland and Spain - Europes two fastest growing economies - the reality is that it is corporations like Digicel and Sol Melia that are at the leading edge of Europes new relationship with the Caribbean. All of which will require a very different approach from Governments and a much better understanding in the public service of what drives and retains investment. In this context, a welcome development has been the willingness of some governments to embrace as ministers or as heads of statutory corporations, individuals who understand how business works and the issues that most concerns investors. Examples are particularly prevalent in the tourism sector where the present Ministerial incumbents in St Lucia, Aruba, Jamaica and elsewhere have backgrounds in business. Global interdependence and the changing balance in economic power between nations suggest that within a relatively short period, many governments of small nations that consider themselves sovereign in their right to manage their economy may find that the economic strength and direction of their nation may become less within their control. The nature of foreign investment and ownership are changing rapidly. Sovereign wealth investment funds from countries like China, Dubai, Botswana, Brunei and Kazakhstan are said to have available up to US$3 trillion for acquisitions. They are now actively buying into major US financial institutions hit hard by write downs resulting from the collapse of the US sub prime mortgage housing market. A week or so ago for example Abu Dhabi invested US$7.5 billion in Citigroup and it is suggested that since April such funds may have invested as much as $37.3 billion in distressed global financial assets. They are also playing a central role in the international currency markets in their desire to protect the value of their holdings of US Dollars. As matters stand these investments are relatively benign and may even be stabilising the US financial sector. However no one is quite sure how active or interventionist in the longer term sovereign wealth funds may become. As a consequence there are calls from the most developed nations for greater transparency. Recently there was an interesting Caribbean related example of how such funds can raise political questions. This came seemingly partly in response to the 2006 decision by the US Congress to stop Dubai ports buying a number of US port operations. The company is now planning a US$250m investment at Mariel in Cuba that will involve the construction of a modern container facility that if the US embargo were to end, would become the principal port of entry for US goods. Elsewhere in the Caribbean money from such funds, in the few cases where its origin has been visible, appear to have gone into major tourism investments. Other investments of similar origin may in future be destined for energy hubs related to the shipment and holding of oil destined for the US market. As this is being written the final negotiations for an Economic Partnership Agreement with Europe are underway. In part the EPA is a step along the road to further opening the Caribbean region to overseas investment. What little debate there has been on the implications of this, sovereign wealth funds and the capital now flowing into the region from private sources needs to be much better related to the high value most in the region continue to place on their national sovereignty. David Jessop is the Director of the Caribbean Council and can be contacted at  HYPERLINK mailto:david.jessop@caribbean-council.org david.jessop@caribbean-council.org Previous columns can be found at  HYPERLINK http://www.caribbean-council.org www.caribbean-council.org November 30th, 2007 %&jp  " , 4 F b p z  1 T _ v   Z `  , ? 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