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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.
2
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:
5
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
15
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.
21
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.
26
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).
28
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.
29