Private Sector Development and Competitiveness in the Caribbean Diego Morris Business Climate Reform Projects Coordinator Kingston, Jamaica March 2011.

Private Sector Development and Competitiveness in the Caribbean

Diego MorrisBusiness Climate Reform Projects Coordinator

Kingston, Jamaica March 2011

Private sector development in the Caribbean has unique challenges due to the size of the countries, their openness and the associated regional integration and liberalization processes, eroding trade preferences, fragile macroeconomic environment which curtails the reach of public policy, the effects of the global financial crisis and the constant threat of natural disasters.

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Context

Source: International Monetary Fund, International Financial Statistics 3

Except for Trinidad and Tobago exports are low

High concentration of exports

What are the Main Constraints that Limit Firm Level Productivity?

Fan, Qimiao., Criscuolo, Alberto., Ilieva-Hamel, Iva. (March 2005). A Better Investment Climate for Everyone: “Whither SME Policies?”

High Cost of Doing Business

Limited Business

Upgrading:

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High Cost of Doing Business

Global Competitiveness Report Scores Caribbean, 2010-2011

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.001. Institutions

2. Infrastructure

3. Macroeconomic stability

4. Health and primary education

5. Higher education and training

6. Good market efficiency

7. Labor market efficiency

8. Financial market sophistication

9. Technological readiness

10. Market size

11. Business sophistication

12. Innovation

Barbados Trinidad and Tobago Jamaica Guyana Suriname (2009) Dominican Rep.

6

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Suriname (2009)

Trinidad

Jamaica

Guyana

Dom. Rep

Barbados

Top Five Constraints to Doing Business

Source: GCR and DB 2010-2011 7

Doing Business Ranking 2011 (183 Countries)

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Aggregate History of Business Climate Reform

9

10

Limited Business Upgrading

Firm-Level Competitiveness Ranking 2010-2011

0

20

40

60

80

100

120

140

160

Barbados Guyana Jamaica Suriname (2009)Trinidad &

Tobago

State of Cluster Development

Production Process Sophistication

Firm Level Technology Absorption

Capacity for Innovation

Source: GCR and DB 2010-2011

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Cluster Data AnalysisCaribbean Country Cluster Data Analysis - Matrix

Category 1 clusters Category 1 clusters plus other types Other types of clustersAgr

icultur

e Agr

ibusin

essAgr

oproce

ssing

Agroto

urism

Archite

cture

Aquacu

lture &

Seafo

odArt

s & Cra

ftsBan

king a

nd Fin

ance

Biotec

hnolog

yCon

structio

nCre

ative

Cultur

al & Cre

ative

Educati

onEne

rgyEng

ineerin

gFas

hion &

Appar

elFilm

and V

ideo

Fish & F

ish Pro

cessin

gFor

estry

Food &

Bever

ageHea

lth & W

ellness

ICT Light m

anufac

turing

Manuf

acturin

gMe

dcal Tr

anscrip

tionMe

rchant

marine

Mining

Music

& Ente

rtainm

entNic

he Ma

nufact

uring

Non-tr

adition

al Expo

rtsPer

sonal P

roduct

sPrin

ting & P

ackagi

ngRec

ycling

Renwe

able E

nergy

Export

Servic

esFin

ancial

Service

s Per

sonal s

ervices

Service

sSpo

rtNic

he tou

rimSus

tianabl

e Tour

ismTra

nsport

Tourism

Utilitie

s & Inf

rastru

cture

Yachtin

g

LOCATIONRegionalAntigua & BarbudaBarbadosBelizeDominicaGrenadaGuyanaHaitiJamaicaSt. Kitts & NevisSt. LuciaSt. Vincent & the GrenadinesSurinameThe BahamasThe Dominican RepublicTrinidad & Tobago

Sector

Productive Development Policies

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Low product sophistication

Low diversification

No structural transformation

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Characteristics of the PDP Approach in the Caribbean

Multiplicity of policies, agencies and instruments that produce overlapping efforts, confusion, inflexibility and inefficiencies.

Some Additional Issues

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A complete absence of quantitative evaluation programs.

Lack of accountability of programs and of governmental agencies.

Programs are targeted to entrepreneurs and businesses not necessarily involved in new activities.

Support to firms because of their size rather than their innovative capacity which is the true market failure.

State as “master strategist”, no real public-private dialogue

Implementation is the key failure

Traditional Approach of Donors to Issues of PSD

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Interventions have been one-shot, isolated interventions that address particular issues of private sector development, some tackling issues of business climate, some issues of clusters, some access to finance and others SME development.

These productive development programs are created in response to specific needs, at different points in time without taking into consideration a systemic approach to enhancing competitiveness

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Towards a Comprehensive Framework

Institutions

Policy andInstruments

Business Upgrading

Knowledge &Evaluation

1

2

3

4

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The program establishes a US$ 32.55 million grant facility to support private sector development and competitiveness in the Caribbean region.

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Beneficiary Countries

• Antigua and Barbuda;• The Bahamas;• Barbados;• Belize;• Dominican Republic;• Dominica;• Grenada;• Guyana;

• Haiti;• Jamaica;• St Lucia;• St Kitts and Nevis;• St Vincent and the

Grenadines;• Suriname; and• Trinidad and Tobago.

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Program ObjectivesThe ultimate goal of the program is to foster sustainable economic growth and enhance competitiveness in the Caribbean.

The specific objective is to have:(i)Increased consensus and focus on strategic interventions to

promote private sector development;

(ii)Improved enabling environment for business development, trade and integration; and

(iii)Enhanced capacity of clusters and firms to increase productivity and to sustainably compete in national, regional and global markets.

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Governance Structure

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The Compete Caribbean Program will have the following oversight structure: (i) a Program Advisory Group (PAG); (ii) a Regional Consultative Forum (RCF); (iii) an Executive Committee (EC); (iv) an Investment Panel (IP) for Component 3; and (v) the Program Coordination Unit (PCU) to be established in Barbados. This governance structure is displayed schematically in the following diagram.

Program Structure

• Private Sector Development Strategies

• Donor Matrix

• Knowledge Management Products

Comprehensive Framework for Private Sector Development

• TA to implement Business Climate

Reforms

• TA to Support Public-Private Dialogue

on Competitiveness (PPD)

• Support to Clustering Initiatives

• Direct-Firm Support – Matching Grants

Compete Caribbean Supported Projects

• Demand Driven• Country Ownership• Knowledge Generation Strategy• Monitoring and Evaluation Framework• Gender Strategy• Environmental Sustainability Strategy• Donor Harmonization Strategy

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Mervue House, Marine Gardens, Hastings,Christ Church, Barbados. BB14047

Tel: 1. 246. 227. 8536 • Fax: 1 .246. 429. 8869Email: [email protected]

Thank You

Component 1: Comprehensive Framework for Private Sector Development and Knowledge Management

The objective of this component is to:

1. Increase regional and national consensus and focus on strategic and priority interventions promoting private sector development;

2. Increase the synergies among donor-supported PSD projects; and

3. Strengthen knowledge management to ensure the transmission of PSD best practices, evaluation of interventions’ impact, and knowledge exchange with national and regional stakeholders.

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Program Structure

•The Caribbean Private Sector Development (PSD) Donor Group

•The Caribbean PSD Donor Group was established in 2008 by the IDB to increase the impact of the multiple private sector development projects funded by its members by sharing information and lessons learned; avoiding overlap and promoting synergies and moving to a more comprehensive approach to development.

•Participating Members: IDB, DFID, CIDA, CDB, European Commission, USAID, World Bank, GIZ and UNDP.

Donor Coordination

Component 2: Business Climate and Competitiveness Enhancement Facility

The objectives of this component are to:

1. Implement productive development policies and business climate reforms; and

2. Foster public-private dialogue and strengthen competitiveness councils and their Technical Units (TU).

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Component 3: “Enterprise Innovation Challenge Fund”

The objectives are to:1. Enhance the development of the productive sector, by

supporting clusters and value chains to compete in regional and global markets; and

2. Increase the generation of employment and income by strengthening Caribbean businesses with resources to finance innovative ventures, develop new products, implement new business models, and enter new markets.

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