Enhancing Productivity and Growth in the Caribbean
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The document provides recommendations to enhance productivity and growth in the Caribbean region. It recommends developing a regional strategic plan to improve the ease of doing business and attract foreign direct investment. It also recommends building pillars of a knowledge economy through initiatives like expanding access to broadband internet, providing training in digital technologies, and reforming education curricula. Additionally, it recommends supporting the development of industry clusters at both the national and regional levels through incentives, funding, and strengthening linkages between businesses.
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Enhancing Productivity and Growth in the Caribbean
- 1. ENHANCING PRODUCTIVITY AND GROWTH IN THE CARIBBEAN Dr. Justin Ram Director of Economics 2017 Annual Board of Governors Meeting Turks and Caicos Islands May 24th, 2017
- 2. Outline 01 Context and Justification for the Study 02 Pillars for Growth 03 Foreign Direct Investment 04 The Knowledge Economy 05 Research and Innovation 06 Clusters 07 Recommendations
- 3. Low growth, high debt trap (6) (4) (2) 0 2 4 6 8 10 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Growth(%) Real GDP growth 2006 to 2016 Emerging market and developing economies CDB BMCs Other Small States 145.3 120.3 93.6 90.0 89.2 87.7 85.0 81.1 67.2 65.9 56.6 52.0 46.4 44.3 33.6 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 BAR JAM ANT BZE GRE DOM SVG SLU SKN BAH TT SUR GUY ANG HAI Debt to GDP (%) 2016 2015 Source: WEO 2017; Country authorities; CDB 2017 Source: WEO 2017; Country authorities; CDB 2017
- 4. Key development and competitiveness issues 0.30 0.40 0.50 0.60 0.70 0.80 0.90 Human Development Index, 2015 Medium Human Development High Human Development Very High Human Development Low Human Development 0 20 40 60 80 100 120 140 160 180 Doing Business Rank 2009 vs 2017 DB Rank 2009 DB Rank 2017 Source: UNDP, 2016 Source: World Bank, 2016
- 5. Vulnerability to natural disasters BMCs Experiencing Severe Natural Disasters 2000-2015 Country Year Disaster Damage (% of GDP) BEL 2000 Storm 33 GRE 2004 Hurricane 200 GUY 2005 Flood 36 DOM 2009 Hurricane 35 HAI 2010 Earthquake 121 SLU 2011 Hurricane 34 DOM 2015 Flood 96 Parametric Insurance Payouts and Estimated Total Losses Insurance Payout ($m) Total Losses ($m) Payout (% of Losses) ANG CCRIF 2010 4.2 13 32.3 BAR CCRIF 2010 8.5 741 1.1 SLU CCRIF 2010 3.2 588 0.5 SVG CCRIF 2010 1.1 288 0.4 HAI CCRIF 2010 8 14,000 0.1 DOM CCRIF 2015 2.4 244 1.0 Source: IMF, 2016
- 6. Business cycles are highly correlated with that of trading partners Source: IMF, World Economic Outlook, CDB 2017. -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 The Caribbean and trading partners business cycle BMCs United States Canada United Kingdom
- 7. Growth volatility in BMCs Source: IMF, World Economic Outlook, CDB 2017
- 8. Periods of sustained economic growth COUNTRY PERIODS Antigua and Barbuda 1978 to 1991 Bahamas 1963 to 1971, 1978 to 1986 Barbados 1960 to 1972 Belize 1966 to 2006 Dominica 1979 to 1988 Grenada 1981 to 1991 St Kitts and Nevis 1981 to 1993 St Lucia 1988 to 1996 (1982-1990)* St Vincent and the Grenadines 1980 to 1990 Trinidad and Tobago 1973 to 1982, 1995-2009 * indicates where the growth rate was over 10% Source: Werker (2013)
- 9. Stages of development Stage 1 Factor driven - where the country relies on largely unskilled labour and its factor endowments (mainly its natural resources) Stage 2 Efficiency - where the country develops “more efficient production processes and increase product quality” Stage 3 Innovation driven - where the country competes on the “most sophisticated processes” and innovate new ones.
- 10. Competitive- ness rank and stage of development Country 2006-7 (121 countries) 2009-10 (131 countries) 2012-13 (144 countries) 2016-17 (138 countries) Current stage of development Barbados 41 44 44 72 Transition from 2 to 3 Jamaica 67 91 97 75 Efficiency Trinidad & Tobago 76 88 84 94 Innovation Guyana 113 104 109 n.a Efficiency Suriname 104 102 114 ---- Transition from 2 to 3 Source: WEF: Global Economic Forum Report
- 11. Growth and productivity -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 ANU BAH BAR BLZ DOM GDA GUY HAI JAM SKN SLU SVG SUR T&T BMCs Growth Accounting Framework (% contribution to GDP), 2010- 2015 Labor Capital TFP
- 12. Total factor productivity BarbadosJamaicaTrinidad&Tobago Lewis 1955 identified the following factors that propel growth: Savings; Capital accumulation; Growth of knowledge and the application of new ideas; International trade; The framework of private-public sector relations; and Institutions—property rights, economic freedom etc.
- 13. Pillars for enhancing growth and development Development of a “knowledge economy” Foreign Direct Investment Information and Communications Technology Research and Development Innovation Clustering
- 14. FDI inflows -55 45 145 245 345 445 545 645 745 845 945 1,045 1,145 1,245 1,345 1,445 1,545 1,645 1,745 1,845 ANT BAH BAR DOM GRE GUY HAI JAM SKN SLU SVG SUR TT ANG BEL USDmn FDI inflows (USD mn) Average 2009-2015 Average 1991 to 2008
- 15. EODB and FDI inflows 2015 -10000 0 10000 20000 30000 40000 50000 60000 70000 80000 0 20 40 60 80 100 120 140 160 180 200 FDIInflows(US$mn2015) EODB (2015) Scatter plot between the EODB index and FDI inflows, 2015
- 16. FDI promoting policies • Alternative type of tax holidays • Removal or exemption of tax duties • Removal or exemption of import and export duties • Grants Improving overall business climate Removing or reducing challenges to investors Investment Promotion Agencies Financial measures to stimulate FDI FDIPromotingPolicies • Doing business • Human resource • Corruption • Governance • Logistics • Taxation treaty • Citizen by Investment Program • Data / information availability
- 17. Ease of doing business reforms: the case of Jamaica Starting a Business • Simplified pre-registration and registration formalities; • Electronic interface between the Companies office and Tax Administration; • Changes to tax depreciation rules or deductions; • Streamlining internal procedures Getting Credit • Enhanced access to credit information (regulatory framework) • Credit Bureaus and enhanced credit reporting systems • Modern secured transactions system (Security Interests in Personal Property Act)
- 18. Broadband and productivity Source: ITU 2012. Broadband Economic Impact
- 19. ICT and broadband ICD Development Index 2016 Country IDI Rank Access Index Use Index Skill Index ANT 75 6.3 4.0 6.2 BAR 35 8.2 5.9 7.7 BEL 119 3.7 2.6 5.8 GRE 74 6.3 3.8 7.0 GUY 121 4.3 1.7 5.7 JAM 99 4.8 3.6 5.8 SKN 34 7.7 6.5 7.6 SLU 94 5.7 3.7 5.5 SVG 78 6.5 3.9 5.9 TT 67 7.0 4.5 5.7 Source: ITU, 2016
- 20. ICT and broadband Source: ICT-Pulse.com Speed/bps Price/USD Speed/bps Price/USD ANG 2 M 40.0 48 M 128.8 ANT 1 M 47.5 2 M 62.2 BAH 8 M 30.0 70 M 124.8 BAR 15 M 32.5 1 G 297.5 BEL 256 k 12.5 16 M 350.4 BVI 4 M 99.0 48 M 228.9 CAY 1 M 61.0 300 M 303.7 DOM 2 M 27.8 50 M 84.3 GRE 12 M 29.3 100 M 128.5 GUY 256 k 29.1 10 M 72.6 JAM 1 M 19.0 200 M 121.2 SKN 6 M 36.4 48 M 128.5 SLU 2 M 33.5 100 M 127.0 SVG 2 M 33.4 100 M 127.0 TT 1 M 21.9 240 M 105.0 TCI 6 M 69.0 50 M 210.0 Lowest d/l speed Highest d/l speed 2016 Broadband and Internet Prices
- 21. Building a Knowledge Economy MSME training to use Digital Online Technologies Build the Pillars of the KE Private Sector Training initiatives in KE Finance & encourage MSME expansion in Digital Content Production Fiscal Incentives for MSMEs and ICT sector Support & Promote Women in MSME 21st Century Curricula and Institutions ICT Infrastructure Regulatory Reform Regional Oversight Task Force/Office
- 22. R&D, technological transfer and innovation 28.1 47 33.3 36.9 14.6 Type of Research and Development in the Region (2014) New or Improved goods/services Market Development Quality Improvement Cost Reduction Network Development 13% 8% 15% 28% 5% 15% 16% Innovative Firms, 2014 (%) OECS JAM BAR GUY BEL BAH TNT
- 23. Obstacles to innovation External • Demand • Incentives (funding) • Legal / Regulatory (copyrights, standards) • Networks (collaboration) • Knowledge (market information) Internal • Finance (financial resources) • Organisational (management culture, confidence, remuneration/incentive) • Capacity (time to market, technical uncertainties, qualification of employees)
- 24. Development of RD & I in the Caribbean Collaboration between Public and Private Sector and Research Centers Financing Regional / National Innovation System (NIS) Internal Capacity
- 26. Pepper sauce cluster: Trinidad The estimated economic contribution of this cluster is US$15.6m in 2010 The backward linkages are: •Pepper farming •Commercial processing •Packaging Related clusters: •Processed food and meets •Spice industry •Packaging •Entertainment and Tourism The packaging segment is well developed Seeds are locally sourced from a gene bank Market is domestic, regional and international
- 27. Gold cluster: Guyana • Two distinct clusters: – Primary extraction – Jewelry production • Mining sector contributes 10% to GDP (7% gold) • Market is predominantly export oriented (96 % of raw gold is exported) • Only 4 % of gold available for local jewelry production • High duties on imports of gemstones further discourages value added jewelry production • Forward and backward linkages are weak • Lacks skills pooling • Value chains are not well established • 7% royalty and duties on ore contributes to the illegal trade
- 28. Building on clusters • Support private sector • Incentivize • Training / education • Standards / KPMs Public Sector • Leadership • Dialogue with Public Sector • Investment • Stronger linkages Private Sector • Training of Policy makers • Regional Cluster Fund • Regional Cluster Observatory Regional
- 29. Recommendations
- 30. Growth strategy Foreign Direct Investment Clusters MSME Development Innovation Research & Development Technological Transfer Knowledge Economy ICT Broadband
- 31. FDI A regional strategic plan be developed and implemented to improve the “ease of doing business”; Tax competition be removed so that there would be no game playing by foreign investors; A regional working group be established to examine the package of incentives needed to attract foreign investors in selected key sectors; Discussion be held with educational and training institutions to assist with both R&D and HRD to support the needs of FDI; The diaspora be targeted as an important source of skills and finance for the development of the region; Standards be set for the Citizenship for Investment programmes; Greater use be made of foreign- local partnerships; and Work be undertaken with CAIPA and Caribbean Export to develop a regional investment promotion strategy to boost innovation and technological transfer.
- 32. ICT – national level MSME training to use Digital Online Technologies Build the Pillars of the KE Private Sector Training initiatives in KE Finance & encourage MSME expansion in Digital Content Production Fiscal Incentives for MSMEs and ICT sector Support & Promote Women in MSME 21st Century Curricula and Institutions ICT Infrastructure Regulatory Reform Regional Oversight Task Force/Office
- 33. ICT – enterprise level Design and implement national RD&I strategic plans Implement relevant legislation and regulations Dedicated ministries, research centres & science councils Ensure adequate financial support is available Active promotion of collaboration through innovative procurement strategies Active promotion of collaboration by enterprise extension officers Development of explicit technical and training support services for RD&I Implementation of incentives for industry-academia linkages Curriculum development in secondary, post- secondary and tertiary education
- 34. Cluster development – national level Support existing private sector driven activities Develop cluster level incentives Incentivise new business formation Provide funding in early stages Support development of competitiveness strategies Strengthen weak cluster segments Fund training of technocrats and stakeholders Rationalise state institutions and establish KPIs In education, direct curriculum and R & D to meet needs
- 35. Cluster development – Regional level Support the training of regional policy makers, private sector institutions and firms Establish and fund a regional cluster fund to support national cluster development Establish a “Regional Cluster Observatory” Establish a special fund to promote “Regional Clusters”
- 36. Incorporate into national development plans and CARICOM strategic plan For example: • Economic Growth Council (Jamaica); • OECS Growth and development strategy; • Trinidad and Tobago’s Economic Advisory Board and Vision 2030; • HOG’s regional commissions: Economy, HRD, ICT; • Development partners: CGF and Future of the Caribbean Project
- 37. Thank you!
Editor's Notes
- Growth among BMCs has trailed other country groups; with growth in BMCs almost half of that of average global rates and half of that of other Small Island States Caribbean continues to be constrained by low growth, fiscal deficits, high debt and increasing cost of interest payments In addition to the macro economic challenges, countries are constrained by low FDI and low capital expenditures Business environments around the Caribbean are deteriorating, warranting a rapid reform agenda to improve doing business indicators, improve trade facilitation and cost of doing business and enhance the legislative framework in the Caribbean
- 1. High debt hinders the ability to access finance for sustainable development, limiting the region’s ability to achieve the SDGs. In view of the development financing context in the Caribbean, for the most part, Caribbean countries are ineligible for concessional finance due to their status as middle-income countries. With average national per capita income levels above the international financial eligibility benchmark, there is need to review of eligibility criteria to access concessional financing given the extreme economic and environmental vulnerabilities in Caribbean countries that – like other Small Island Developing States (SIDS) – make the region’s countries special cases for development, (UNDP, 2016) 2. "The challenges of sustainable, holistic and universal development do not end at a certain income threshold: we don’t ‘graduate' from development challenges unless we can respond accordingly to the multiple dimensions that enable people to live the lives they consider valuable, " UN Assistant Secretary-General and UNDP Regional Director for Latin America and the Caribbean Jessica Faieta. 3. It is crucial to invest in people, environment, sustainable and affordable energy, institutional efficiency, stability and security as these are key factors to boost economic growth. On the other hand, it is essential to ensure that economic growth is inclusive, empowers people, leaves no one behind, and is not achieved at the expense of the environment (UNDP, 2016) 3. Caribbean countries need a new generation of public policies to increase gains in the economic, social and environmental fronts while boosting climate and financial resilience and protecting people throughout their life cycles, (United Nations Development Programme’s (UNDP), 2016). 4. Red bar is the half way mark, to indicate that most countries fall in the bottom half of the rankings 5. The highest ranked country was Jamaica at 67, followed by St. Lucia at 86 6. Only 2 of CDB BMCs rank in the top half of countries 7. This reflects the extent of the weakness in the business environment in the Caribbean and the level of reforms needed in key areas as most countries ranking fell in 2017 1. High debt hinders the ability to access finance for sustainable development, limiting the region’s ability to achieve the SDGs. In view of the development financing context in the Caribbean, for the most part, Caribbean countries are ineligible for concessional finance due to their status as middle-income countries. With average national per capita income levels above the international financial eligibility benchmark, there is need to review of eligibility criteria to access concessional financing given the extreme economic and environmental vulnerabilities in Caribbean countries that – like other Small Island Developing States (SIDS) – make the region’s countries special cases for development, (UNDP, 2016) 2. "The challenges of sustainable, holistic and universal development do not end at a certain income threshold: we don’t ‘graduate' from development challenges unless we can respond accordingly to the multiple dimensions that enable people to live the lives they consider valuable, " UN Assistant Secretary-General and UNDP Regional Director for Latin America and the Caribbean Jessica Faieta. 3. It is crucial to invest in people, environment, sustainable and affordable energy, institutional efficiency, stability and security as these are key factors to boost economic growth. On the other hand, it is essential to ensure that economic growth is inclusive, empowers people, leaves no one behind, and is not achieved at the expense of the environment (UNDP, 2016) 3. Caribbean countries need a new generation of public policies to increase gains in the economic, social and environmental fronts while boosting climate and financial resilience and protecting people throughout their life cycles, (United Nations Development Programme’s (UNDP), 2016). 4. Red bar is the half way mark, to indicate that most countries fall in the bottom half of the rankings 5. The highest ranked country was Jamaica at 67, followed by St. Lucia at 86 6. Only 2 of CDB BMCs rank in the top half of countries 7. This reflects the extent of the weakness in the business environment in the Caribbean and the level of reforms needed in key areas as most countries ranking fell in 2017
- Small developing states are disproportionately vulnerable to natural disasters. On average, the annual cost of disasters for small states is nearly 2 percent of GDP—more than four times that for larger countries. This reflects a higher frequency of disasters, adjusted for land area, as well as greater vulnerability to severe disasters. About 9 percent of disasters in small states involve damage of more than 30 percent of GDP, compared to less than 1 percent for larger states. Greater exposure to disasters has important macroeconomic effects on small states, resulting in lower investment, lower GDP per capita, higher poverty, and a more volatile revenue base (IMF, 2016) The economic impact on small developing states will be seen in several sectors: 1. Coastal ecosystems 2. Tourism 3. Agricultural Productivity (IMF, 2016)
- Factors affecting productivity and growth:
- The study explores ways of enhancing productivity and economic growth by focusing on: 1. Foreign Direct Investment (FDI); 2. Information and Communications Technology (ICT); 3. Research and Development (R&D); 4. Innovation and Technological Adoption and Adaptation; 5. “Industrial” Clustering These elements are important ingredients in the development of a “knowledge economy” within the Caribbean region. A “knowledge economy” is one in which the production of goods and services is based on the knowledge-intensive inputs or “intellectual capital” of the labour force. Such knowledge inputs reflect intangibles which are acquired through experience, education, training, “learning by doing” and research and development.
- The data highlight that T&T, Jamaica, and the Bahamas have been the three major recipients of FDI in the region. FDI inflows peaked in 2008 and by 2015 all Caribbean economies, with the exception of Haiti and Suriname, experienced a reduction in FDI inflows. The CARICOM region faces a number of problems in attracting FDI including: 1. domestic markets are small; 2. a few industries dominate these economies, as evidenced by oil and gas in Trinidad; bauxite, rice and gold in Suriname; gold, bauxite and rice in Guyana and tourism in the OECS countries, Jamaica and Barbados. 3. High per unit costs of energy 4. Infrastructural deficiencies 5. Inadequate policy, regulatory and institutional environment
- The EOBD Index was created by the World Bank Group. It has above all provided a guide as to the amount of business regulation in an economy. It is designed to provide insights into the impact of the regulatory environment which directly affects businesses within an economy. The scatter plot shows the relationship between an economy’s rank on the EODB index (2015) and FDI inflows in 20157. Indications are that a worsening EODB rank is associated with a lower level of FDI inflows.
- Deloitte found that expanded internet access and broadband connectivity do facilitate better access by online enterprises to new markets as well as to financial capital, with services such as mobile banking, e-commerce and agricultural product marketing for rural users. Deloitte argues that internet links can improve professional and technical qualifications that can enhance labour productivity. Online access can also lead to greater adoption of innovation by users and contribute to improved business processes and the better use of capital. Better information flows from internet access can lead to user innovation, easier financial capital access, higher incidence of entrepreneurial ventures and overall to productivity enhancement. Both the macroeconomic and microeconomic studies support the view that both broadband availability and enhanced speeds can effectively drive growth in an economy. a. A faster broadband speed boosts personal productivity and allows for more flexible work arrangements. b. Higher speed also opens up possibilities for more advanced home-based businesses as a replacement, or complement to an ordinary job. c. Higher broadband speeds enabled people to be more informed, better educated and socially and culturally enriched, ultimately leading to more rapid enterprise development or getting on to a faster career path. Studies suggest that better connectivity and enhanced broadband speeds can and do positively affect economic productivity and growth, however, there are many local mitigating circumstances, which can slow down or even prohibit the accrual of these benefits especially to the small and micro enterprises that dominate the economic landscape in the Caribbean.
- Deloitte found that expanded internet access and broadband connectivity do facilitate better access by online enterprises to new markets as well as to financial capital, with services such as mobile banking, e-commerce and agricultural product marketing for rural users. Deloitte argues that internet links can improve professional and technical qualifications that can enhance labour productivity. Online access can also lead to greater adoption of innovation by users and contribute to improved business processes and the better use of capital. Better information flows from internet access can lead to user innovation, easier financial capital access, higher incidence of entrepreneurial ventures and overall to productivity enhancement. Both the macroeconomic and microeconomic studies support the view that both broadband availability and enhanced speeds can effectively drive growth in an economy. a. A faster broadband speed boosts personal productivity and allows for more flexible work arrangements. b. Higher speed also opens up possibilities for more advanced home-based businesses as a replacement, or complement to an ordinary job. c. Higher broadband speeds enabled people to be more informed, better educated and socially and culturally enriched, ultimately leading to more rapid enterprise development or getting on to a faster career path. Studies suggest that better connectivity and enhanced broadband speeds can and do positively affect economic productivity and growth, however, there are many local mitigating circumstances, which can slow down or even prohibit the accrual of these benefits especially to the small and micro enterprises that dominate the economic landscape in the Caribbean.
- According to the World Bank (2013), the varying levels of sophistication of ICT development across Caribbean countries can be seen from a comparison of key ICT Development indicators. This implies the need for customized approaches to resolve intercountry and intra-regional disparities in ICT sector development. Policy actions to aid in the productivity and development of MSMEs should be focused on improving their competitive performance, which would give rise to a buzzing, innovative and dynamic business environment. T his objective may be realized through, mainly: encouraging the creation of enterprises; providing the technical assistance and training; innovation and management improvements; and promoting more exports. Many indices have been developed to rank and monitor changes in the business environment of countries globally. These indices include: 1. ITU’s ICT Development Index (IDI); 2. the Access Index; 3. the Use Index; 4. The Skill Index. A diverse combination of interventions is needed in the Caribbean to address the inadequacy of broadband access, reduce high access costs and boost the limited grasp of the imperatives of the new knowledge economy. Special measures are required to strengthen and unleash the power of small, medium and micro enterprises (MSMEs) to create employment and generate creative solutions to the needs of the Caribbean region using the productivity innovations of ICTs. Government must take the lead; Other entities that must perform a strategic role are : 1 Universities and other educational institutions; 2. The media in its broadest manifestations; 3. The banking and financial institutions and trade organizations. Ten Recommended Measures: Incentivize and Train MSMEs into Greater use of Broadband and Digital Online Technologies More Actively Support and Promote Medium, Small and Micro Enterprises (MSMEs) and Women’s roles in them Build the Pillars of the Regional Knowledge Economy to Enhance Global Competitiveness Create Twenty First Century Educational Curricula and Institutions Drive new Private Sector Training Initiatives for Productivity in the Knowledge Economy Build Better ICT infrastructure in the Region for Improved Access to Rural and Remote Areas Finance and Encourage MSE expansion in Digital Content Production Undertake Regulatory reform to Converge Existing Fragmented Regulatory Structures Re-fashion Fiscal Regime to Reduce Taxation on MSME’s and the ICT Sector Establish a Regional Oversight Task Force or Office to Co-ordinate the Knowledge Economy According to the World Bank (2013), the varying levels of sophistication of ICT development across Caribbean countries can be seen from a comparison of key ICT Development indicators. This implies the need for customized approaches to resolve intercountry and intra-regional disparities in ICT sector development. Policy actions to aid in the productivity and development of MSMEs should be focused on improving their competitive performance, which would give rise to a buzzing, innovative and dynamic business environment. T his objective may be realized through, mainly: encouraging the creation of enterprises; providing the technical assistance and training; innovation and management improvements; and promoting more exports. Many indices have been developed to rank and monitor changes in the business environment of countries globally. These indices include: 1. ITU’s ICT Development Index (IDI); 2. the Access Index; 3. the Use Index; 4. The Skill Index. A diverse combination of interventions is needed in the Caribbean to address the inadequacy of broadband access, reduce high access costs and boost the limited grasp of the imperatives of the new knowledge economy. Special measures are required to strengthen and unleash the power of small, medium and micro enterprises (MSMEs) to create employment and generate creative solutions to the needs of the Caribbean region using the productivity innovations of ICTs. Government must take the lead; Other entities that must perform a strategic role are : 1 Universities and other educational institutions; 2. The media in its broadest manifestations; 3. The banking and financial institutions and trade organizations. Ten Recommended Measures: Incentivize and Train MSMEs into Greater use of Broadband and Digital Online Technologies More Actively Support and Promote Medium, Small and Micro Enterprises (MSMEs) and Women’s roles in them Build the Pillars of the Regional Knowledge Economy to Enhance Global Competitiveness Create Twenty First Century Educational Curricula and Institutions Drive new Private Sector Training Initiatives for Productivity in the Knowledge Economy Build Better ICT infrastructure in the Region for Improved Access to Rural and Remote Areas Finance and Encourage MSE expansion in Digital Content Production Undertake Regulatory reform to Converge Existing Fragmented Regulatory Structures Re-fashion Fiscal Regime to Reduce Taxation on MSME’s and the ICT Sector Establish a Regional Oversight Task Force or Office to Co-ordinate the Knowledge Economy
- The level of formalised R&D in Caribbean enterprises is very low, with only 9% of establishments having a dedicated R&D department or group of persons dedicated in this area. This, however, varies by sector. Twenty-three percent of enterprises in medium-high technology/knowledge intensive (TKI) sectors had a dedicated ‘team’, while the related figure for enterprises in lower TKI sectors was below 8%. This formalisation of R&D is also significantly more prevalent in larger enterprises where the median number of employees was 38 for enterprises with formal R&D and 19 for enterprises without. The result is in keeping with previous research on developing countries (Bhattacharya and Bloch 2004) that larger enterprises are more likely than smaller firms to have formal R&D teams. With respect to the type of R&D undertaken, the most prevalent was market development (local and foreign) which was undertaken by 47% of enterprises, while the least prevalent was network development (activities to build alliances with suppliers and/or clients) at 15%. Only 28% of enterprises undertook R&D that was directly related to the introduction of a new or improved product or service On average, enterprises in the region undertook 1.6 R&D activities out of a potential five (5). There is wide variation in the R&D score across the region, ranging from 1.3 in the OECS to 3.6 in Guyana. An analysis of statistically significant differences in scores revealed some element of clustering of results where Guyana demonstrated a significantly different R&D profile to all of the other countries in the region, while the OECS, Belize and The Bahamas presented profiles different to Jamaica, and Trinidad and Tobago presented differences in relation to the OECS. Barbados appears somewhere in between the OECS and Jamaica and Trinidad and Tobago, but differences were not significant. Approximately 79% of enterprises surveyed conducted at least one form of R&D, with varying levels of achievement of goals. However, only 20% of enterprises introduced a new or significantly improved good or service in the three (3) years preceding the 2014 survey (in other words, only 20 % of firms surveyed engaged in some form of innovation). The level of innovation varies widely across the region with Guyana having the highest proportion of ‘innovative’ enterprises (40%), in keeping with its R&D profile, and Belize having the lowest (7%) The R&D score indicates the number of R&D activities, and as noted previously, not all R&D results in an innovation. However, the more R&D activities undertaken appears to improve the probability of introducing an innovation.
- The major/very severe obstacles to innovation are: 1. building of networks with other firms in the sector and laboratories/research centres; 2. a lack of external incentives; These constraints account for four of the top five constraints with a lack of protection against ‘copycats’ being the other factor in the top five external constraints. While a lack of financial resources is also noted, internal capacity appears to the largest constraint in relation to the qualifications of employees and the ability to bring R&D outputs to market in a timely manner. What is interesting is that these major/very severe obstacles are not statistically different between innovators and non-innovators. Internal obstacles: 1. Internal financial resources are one of the top three barriers in all countries, with the main overall constraints being related to internal capacity issues.
- IADB 2017: Cluster activity is very intense in the region. Caribbean clusters are very diverse on several key dimensions. Three groups were identified form the survey: rising, innovative, and sluggish clusters. Supporting policies should be differentiated to address and reinforce different strengths and weaknesses in clusters. Clusters in creative industries, in business services, in non-traditional agro products, and in aquaculture, and some clusters in tourism addressing new segments of the market are dynamic and have good potential for future growth. These dynamic clusters should play a key role in signaling to the rest of the economy that diversification, entrepreneurship, and innovation are possible in the Caribbean region when the private and the public sector work together. Importantly, new skilled jobs could be developed in these dynamic clusters, helping address brain drain, one of the most challenging problems in the Caribbean. Further, some of these clusters show that external connections, through MNCs or within GVCs, are key to exports and to accessing knowledge and acquiring capabilities needed to be competitive in international markets. Among the biggest constraints to growth in the Caribbean are the small size of the countries and the associated lack of economies of scale. Nevertheless, there is still a lot of potential to promote external economies and cooperation between clusters, industries, and countries. Therefore, there is an urgent need for an integrated and coordinated approach to clusters to strengthen the complementarities between industries such as the creative sectors, tourism, agro-products, and aquaculture. Countries in the region need to collaborate to build a regional innovation system so that institutions, such as the metrology institute or the standardization bodies, can assist companies at a regional level. Knowledge flow between companies and research bodies at the regional level should be incentivized, for instance by funding competitive tenders for research programs involving companies and research institutions from different countries in the region, (building on the concept of Innovation presented earlier)
- Incentivise and train MSMEs in greater use of Broadband and Digital Online technologies; More actively support and promote Medium, Small and Micro Enterprises (MSMEs) and women’s roles in them; Build the pillars of the regional knowledge economy to enhance global competitiveness; Create Twenty First Century Educational Curricula and Institutions; Drive new private sector training initiatives for productivity in the knowledge economy; Build better ICT infrastructure in the region for improved access in rural and remote areas; Finance and encourage MSME expansion in digital content production; Undertake regulatory reform to converge existing fragmented regulatory structures; Re-fashion fiscal regimes to reduce taxation on MSMEs and the ICT sector; and Establish a regional oversight task force or office to co-ordinate the knowledge economy.
- Be guided by the market and support existing private sector driven activities in clusters already in existence; Develop cluster level incentives for greater efficiency; Incentivise new business formation within targeted clusters to develop critical mass of firms; and the development of a financing ecosystem to support the needs of clusters; Provide funding for the early stages of a cluster initiative; Support cluster initiatives through which competitiveness strategies are developed, implemented and managed; Target incentives and support to strengthen weak cluster segments; Fund the training of technocrats and cluster stakeholders in clustering as a tool for industry growth; Rationalise state institutions and establish key performance indicators to ensure that they meet the needs of economic clusters; Where government is involved in tertiary education, direct curriculum and research and development to meet the needs and growth trajectories of economic clusters.
- Support the training of regional policy makers, private sector institutions and firms in clustering and cluster management; Establish and fund a regional cluster fund to support national cluster development along the best practices defined in this analysis. Clusters should have to apply for such funding based on annual calls for proposals; Establish a “Regional Cluster Observatory” to collect and manage cluster data and monitor and evaluate cluster performance on an ongoing basis; Establish a special fund to promote “Regional Clusters” as distinct from country clusters with regional potential.