RFCD 2011: Dr. Ronald Ramkissoon: The Role of Finance in Cluster Development


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Dr. Ronald Ramkissoon - RFCD Conference @ Arthur Lok Jack GSB - November 2011

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RFCD 2011: Dr. Ronald Ramkissoon: The Role of Finance in Cluster Development

  1. 1. by Ronald Ramkissoon, Ph.D. Senior Economist, Republic Bank Ltd. Presentation to a Regional Forum on Cluster Development, Hyatt Regency, Trinidad, November 9, 2011
  2. 2. <ul><li>Situation of the Caribbean today </li></ul><ul><li>What options for the Caribbean? </li></ul><ul><li>What role for finance? </li></ul><ul><li>Conclusions </li></ul>
  3. 3. <ul><li>Commodity producers </li></ul><ul><ul><li>Showing some positive growth </li></ul></ul><ul><ul><li>Dependent on high external prices </li></ul></ul><ul><li>Others </li></ul><ul><ul><li>Negative growth </li></ul></ul><ul><ul><li>High fiscal deficits and high debt </li></ul></ul><ul><li>All </li></ul><ul><ul><li>Facing much external uncertainty </li></ul></ul><ul><ul><li>In search of sustainable strategies </li></ul></ul>
  4. 4. <ul><li>Wait until the world economy improves and with that tourism, other demands </li></ul><ul><li>Or consider different approaches to igniting growth </li></ul>
  5. 5. <ul><li>Approach speaks to selected realities of the Caribbean </li></ul><ul><li>“ ..enduring competitive advantages in a global economy lie increasingly in local things - knowledge, relationships, and motivation that distant rivals cannot match.” M.P. p.78 </li></ul><ul><li>“ clusters represent a new way for thinking about location .” M.P. p. 78 </li></ul><ul><li>“ A cluster allows each member to benefit as if it had greater scale or as if it had joined with others without sacrificing its flexibility.” M.P. p. 80 </li></ul>
  6. 6. <ul><li>At this juncture in Caribbean development, the financial sector (banks and non-banks) must join with other stakeholders in consideration of existing constraints to growth and in developing new approaches </li></ul>
  7. 7. <ul><li>The arguments for clusters are driven by the benefits that can accrue to firms- competitiveness, productivity, economies of scale etc. </li></ul><ul><li>These qualities are very much aligned with risk reduction which is paramount to the maintenance of a sound financial system </li></ul><ul><li>Successful clusters then are good credit risks and as such may already be reaping the benefits </li></ul>
  8. 8. <ul><li>The reality is that the issue of risk does not disappear in clusters but is reduced </li></ul><ul><li>The issue of the type of financial institution is important in risk mitigation </li></ul><ul><li>Need is for strong complementary sources of finance to bank funding, depending on the size and nature of the business e.g. venture capital, more developed capital market, other </li></ul><ul><li>The financial sector must help in the development of the appropriate institutions </li></ul>
  9. 9. <ul><li>Making it easier to do business is an exercise in cluster development </li></ul><ul><li>“ By revealing how business and government together create the conditions that promote growth, clusters offer a constructive way to change the nature of dialogue between the public and private sectors.” M. Porter p. 89 </li></ul>
  10. 10. <ul><li>Caribbean is at an important historical juncture </li></ul><ul><li>Cluster development is a good approach </li></ul><ul><li>Finance is important and financial institutions have a supportive role to play </li></ul><ul><li>Risk profile of businesses can improve with this approach </li></ul><ul><li>Apart from bank finance, alternative and complementary forms of finance are important </li></ul><ul><li>“ Productivity, not exports or natural resources, determines the prosperity of any state or nation.” M. Porter p. 89 </li></ul>