5 Reasons Why the Caribbean Needs a Private Sector 2.0
The lack of a dynamic private sector is often cited as one of the biggest obstacles to growth and development in the Caribbean. While it is true some countries have considerable private sector activities contributing to meaningful growth, Caribbean governments are the most active players in virtually every Caribbean country, crowding out the private sector in many cases. In Trinidad & Tobago, the manufacturing sector contributes only 8% of the country’s GDP. However, Caribbean governments, responsible for providing most of the capital and supply for the jobs markets whether via make-work schemes, public assistance or direct activity through state-owned enterprises, collectively have public sector debt ratios averaging over 80% in relation to GDP.
The need for bigger and more direct roles for the private sector is obvious. Yet it can be argued that simply expanding private sector capacity as is across the board is insufficient.
Here are 5 reasons why the Caribbean needs a private sector 2.0.
- The Need for Innovation. The majority of private sector businesses in the Caribbean became successful during an era of protected markets and import substitution policies with captive markets. These businesses were able to exploit the prevalent conditions and create economies of scale and barriers to entry from mainly local rivals. Aside for Trinidad & Tobago’s energy and manufacturing sectors which primarily serve export markets, the majority of the Caribbean services have been in agriculture, tourism and tourism-related services, trading of goods and services, real estate and the fulfilment of government contracts. Innovation has usually been an afterthought until very recently but then still based on traditional business models.
- The Need for New Markets. Given its relative lack of critical mass, it is essential for Caribbean countries to find and successfully penetrate new markets outside of their region. While it can be profitable to be a big fish in a small pond, new markets with sufficient critical mass are needed for growth. Scalability through innovation must be the way forward for entrepreneurs and SMEs to successfully enter and compete in new larger markets. This includes accessing resources (technical, capital and networks) and developing new business models to join or even replace the large conglomerates and government-sponsored entities that currently comprise most of the Caribbean private sector. The new global economy calls for mastering the digital space with bandwidth replacing highways and ports as go-to delivery strategies.
- New Mindset and Definition of Services. Led by a new breed of entrepreneurs over the past 20 years, the Carnival industry in Trinidad & Tobago has evolved far beyond its traditional definitions. There are T&T-styled Carnivals throughout the Caribbean diaspora and beyond in places like Berlin, Notting Hill and even Africa. Private Carnival service providers utilize digital solutions and social media constantly seeking innovative ways to reach their consumers in disparate markets. A good example of this is mycarnivalbands.com who uses the internet as its backbone platform to expand market reach and is poised to utilize that same platform to reach and deliver other non-Carnival related services to new markets. The utilization of information technology-enabled services (ITeS) must be infused into traditional export services where delivery translates into the ability to enter and compete in near shore or far away markets. These new sets of skills, application of technologies and networks are not present en masse in the current makeup of the Caribbean private sector. The application of ITeS cuts across many industries from fashion, agribusiness, animation, to entertainment, finance and accounting, or even legal services. Caribbean entrepreneurs and businesses can use these skills and a new mindset to make their mark extra-regionally and form the core of a private sector 2.0.
- Access to Investors. It is no secret that a lack of access to capital stymies many if not most entrepreneurs and SMEs in the Caribbean. Ironically, it is only when these same entrepreneurs and SMEs are able to successfully innovate and scale to new markets profitably, would we see a long term solution for this capital gap. It is the principals of these successful businesses who have been there and done that, who will have the nous, mindset, risk appetite and capital, and be the ones more readily providing the elusive seed equity to upcoming entrepreneurs and startups. More crucially, these entrepreneurs cum investors would be able to provide networks, channels and mentorship, not unlike the Mark Zuckenberg’s and Peter Thiel’s. This private sector 2.0 will be one of the most important pillars of venture capital investing in the Caribbean.
- Knowledge Exchange not Transfer. Dr. Gillian Marcelle, Executive Director for the UVI Research and Technology Park, at a recent United Nations forum for science, technology and innovation (STI), argued for the embrace of technology acquisition and knowledge exchange saying that the … tossing into the garbage heap of history the notion and term technology transfer is an essential step to realize developing countries like the Caribbean must be acknowledged as sources of knowledge that produce value. A Caribbean private sector 2.0 will lead the sharing and receiving of knowledge with their counterparts in Latin America, Africa and Asia as well as with northern neighbors in the USA and Europe. The IDB’s www.connectamericas.com platform is one way to facilitate this knowledge exchange. It will be from private sector led ecosystem providers like the UVI RTPark, Startup Caribe and ACI Avantor Commercial Incubators www.acicaribbean.com that the Caribbean private sector 2.0 will emerge and flourish taking its place with Silicon Valley and other global innovation centers.
Innovation has no geographical boundaries.
Charles V Maynard aka Charlo is a graduate of Harvard Law School and Howard University who returned to the Caribbean to make mud mas and create wealth for the region through entrepreneurship. He has spent the past 20+ years trying to fill that gap but is no longer lost as he is the founder of ACI Avantor Commercial Incubators.