Direct Investor Strategy Final Project- Unlocking Investment and Finance in EMDEs

1. Global Trading Corporation (GTC)
Investment Strategy for-
Entry into rum container cleaning
market in Caribbean

2. Investment Opportunity
• GTC is a multinational corporation based in the United
Kingdom, and specializes in providing shipping
containers for liquid foods and tank cleaning services
for distilled products. With over 30 years of experience
in the industry, the company has developed experience
and expertise in this industry.
• GTC is seeking to expand its global market share
through entry into new markets. According to the
Caribbean trade and investment promotion agency,
Carib-export , the potential in the global market
includes growth in rum exports
http://www.carib-export.com/rum/

3. Market Opportunity
• Rum, as an alcoholic beverage, is part of the
growing spirits industry with rum sales
exceeding US$2.6 billion in 2015.
• Rum as a product category is diverse, with the
final product dependent on the production
method and inputs utilized.
• Global exports of rum increased 37.5%
between 2006 and 2015, peaking in 2013 at
over US$1.63 billion in exports.

4. Market Research
• The business development team has been conducting
market research and has identified the Caribbean as a
market with potential.
• As part of a new strategy, GTC aims to target
developing economies which have significant
potential.
• GTC notes that, according to the World Bank-
developing countries account for a growing share of
global foreign direct investment (FDI) inflows and
outflows, and received 40% in 2016.
• In this new project, GTC will is developing a strategy to
enter this new market to provide rum container
cleaning services to ports across the Caribbean.

5. Mode of Entry – JOINT VENTURE
• The GTC strategic management team views a joint
venture as the preferred mode of entry as it aligns with
the company strategy of investing in low risk high
return projects. The joint venture would include:
 A partnership with a local exporter of rums and juices.
 Access to land space located in Jamaica’s port Special
Economic Zone (SEZ), which include access to utilities
 Access to SEZ incentives to investors such as short
term tax break and removal of duties on equipment
imported.

6. Benefits of the project
* a win-win situation for the both the
company and the country*
• Potential Benefits to GTC include expansion of revenue and market
share:
• Lower start-up cost associated with joint venture and
• Access to SEZ incentives
• Access to a growing market
• Expanding company revenues and shareholder return
• Increasing global market share and market value of the company
• Absence of high risk
• Overall alignment with the company’s strategy of investing in low-
risk high return projects.
• Alignment with Jamaica’s aim for sustainable transport
infrastructure

7. Potential benefits to host countries in the
Caribbean include contribution to economic
growth, job creation and greater ability to meet
Sustainable Development Goals:
• Access to speacialised service
• Access to expertise and technological solutions
• Higher quality, safety and environmental standards, traceability, and
sustainability and therefore greater chance of meeting international
quality standards
• Faster turn-around in containers available for shipping of rum and other
distilled products and lower operational costs
• Increase competitiveness of Caribbean economies and greater access to
global value chains (GVCs)
• Potential to increase exports and expand revenue from exports
• Creation of jobs in local market and the development of local talent
through training and exposure

8. Target Market and choice of location
Caribbean
• The Caribbean has traditionally been a major producer of
rum a by –product of sugar caneproduction. Due to small
domestic market Caribbean producers have exported rum
across the world.
• According to Carib-export, “the major suppliers of global
rum are highly concentrated in the Caribbean and Latin
America, while consumption is concentrated in North
America and Europe, led by Germany, Spain, and the
United States.”
• There is therefore a solid demand by Caribbean rum
exporters for the shipping of rum containers to global
markets.

9. Demand for Specialised service
• Rum and other liquid foods exports must be
shipped in special containers.
• These containers require regular cleaning.
However, the Caribbean exporters lack access
to a local cleaning services, and has had to
rely on costly cleaning services based outside
of the region.

10. Choice of location
• Several rum exporting countries in the
Caribbean present possibilities for setting up
the investment : The Dominican Republic,
Puerto Rico, Cuba, and Jamaica in the central
Caribbean area, Barbados (located in Atlantic
Caribbean) and Guyana ( a member of the
Caribbean Community) but (located in South
America).

11. Incentives characteristic of the
Caribbean are in line with an investor
survey conducted by the World Bank.
Investors viewed political stability and the legal and
regulatory environment as the most critical factors
when considering the location of new investment
venture. (World Bank)
• Political stability
• Fair macro-economic conditions
• Rule of law and protection of investor
• Openness to trade and investment

12. Kingston’s Connection with global
markets

13. Economic Commission for Latin America and the Caribbean
(ECLAC) and the American Association of Port Authorities ranks
Jamaica’s container ports as one of the largest in the Americas

14. Jamaica shows potential as the most attractive
location based on a number of specific factors:
• Improving macro-economic conditions- the International Monetary
Fund (IMF) cites higher business confidence, economic growth and a
reduction in distortionary financial taxes. Further, GTC notes that, the
IMF advises that, “the private sector, for its part, should capitalize on
these fiscal measures to increase investment, and create new
opportunities for advancing financial inclusion.”
• Geo-strategic location in major shipping lanes connecting North and
South America, Europe and Asia.
• The Port of Kingston is a global trans-shipment hub; large harbor and
advanced port facilities
• Port of Kingston served by major shipping lines providing access to
major markets of North America and Europe
• Major trans-shipment hub in the Caribbean. Jamaica’s location is
particularly attractive as possible regional base from which to connect
with and provide service to the rest of the region.
• Proximity to major rum exporting territories is an advantage
•

15. Jamaica’s potential (contd)
• Shared culture: a.)Similar (British) legal system and b.)
Shared language compared to (Puerto Rico, the
Dominican Republic and Cuba which are Spanish-
speaking territories)
• Improvement in business environment; Jamaica ranks
the highest (75) in the Caribbean in the 2019 World
Bank’s Ease of Doing Business Report
• Attention to sustainable port infrastructure
• https://www.imf.org/en/News/Articles/2019/04/22/pr19123-jamaica-imf-
executive-board-concludes-fifth-review-under-the-stand-by-arrangement
• https://www.worldbank.org/content/dam/doingBusiness/media/Annual-
Reports/English/DB2019-report_web-version.pdf

16. Several challenges relating to the business climate, environmental
conditions were identified.
Challenges:
• Possible lengthy and bureaucratic processes in the
establishment of the project
• Lack of knowledge of local business processes
• Lack of familiarity with potential business partners
Solution:
• Consideration given to establishing a joint-venture
• Leveraging incentives promoted to foreign investors
such as: (a) guidance to foreign investors on specific
investment opportunities, details of potential private
and public sector partners and stakeholders. This can
reduce information asymmetry;

17. Challenges:
• Vulnerability to natural disasters- Caribbean located in a
hurricane zone
• Insufficient skilled labour to manage facilities
• Regulatory risk- possibility of sudden changes in regulation
Solutions:
• Use of Marine insurance and other insurance services
• Deployment of staff from headquarters, in addition
to the provision of on-going training to staff in
Jamaica
• Collaboration with MIGA to acquire an appropriate
risk mitigation product

18. Consideration for Environmental, Social and
Governance (ESG) Factors
• Rationale:
• The company acknowledges the importance of proper procedures
in the collection and disposal of waste material, and the property
treatment of potentially harmful substances.
• From a long-term perspective, the company aims to get an
understanding of how sustainability factors may impact future
returns as well as overall reputation. In this regards, each of our
investments usually involve continuous assessment. In this regard,
due diligence will be undertaken for the investment project under
consideration.
• Over the years our company has seen how our sustainability
reputation has benefited the company in terms of our clients having
knowledge of procedural transparency, and the ability of the
company to attract high quality workers.
• Strategy: Members of our investment team will perform an ESF
assessment based on adue diligence procedures specific to this
industry.

19. Sources:
• Economic Commission for Latin America and
the Caribbean (ECLAC)
• World Bank
• International Monetary Fund (IMF)
• Caribbean Export
• Jamaica Promotions Coporation (JAMPRO)
• THANK YOU !