|The Courier N° 127 May - June 1991- Dossier 'New' ACP Export Products - Country Reports Cape Verde - Namibia (EC Courier, 1991, 104 p.)|
by Philip WILLIAMS
Until the 1950s and in some cases later, exports from the CARICOM Member States in the Caribbean were largely based on agricultural produce and natural resources. In most countries sugar, molasses, rum and bananas were the main exports. In the case of Guyana and Jamaica, bauxite was also significant and in Trinidad and Tobago, oil. It is probably true to say that in many of these cases the control of the export marketing of these products was in the hands of companies operating out of the major metropolitan countries, mainly the United Kingdom, Canada and the United States.
Gradually, the example of the American Operation Bootstrap programme of industrial development for Puerto Rico and the impact of the work of Sir Arthur Lewis and other economists began to permeate regional thinking on industrial development. This resulted in the 1950s and 1960s in the establishment of Government institutions in the larger territories to encourage industrial development, mainly with a view to increasing employment opportunities and for import substitution purposes.
This model called for the introduction of incentive legislation, offering various levels of tax relief, subsidised factory space and other types of assistance for new investors. Although these incentives were never limited to foreign investors only, the emphasis of the promotion undertaken by most territories was on the overseas investor and as a result the new industrial base in most countries in the region was foreign-owned and managed. This was particularly noticeable in Barbados and Jamaica and has been the pattern followed elsewhere in the region, for example, in St Lucia and St Christopher & Nevis. An exception to this pattern was Trinidad & Tobago, which sought to retain control of its major industries and opted for State-owned enterprises or State/multinational-owned joint ventures.
It is perhaps worth noting here that the reality of early industrialisation in the Caribbean differed significantly from what most Governments probably intended: namely, it was expected that production for the regional market would have been used as a means of achieving economics of scale as well as more specialised firms and thus serve as a spring-board for launching into extra-regional markets. A recent study by Dr Anthony Gonzales, a Senior Lecturer of the University of the West Indies, suggests that this did not happen partly because of the small size of the regional market, coupled with the high levels of effective protection within CARICOM.
Gradually, Caribbean territories recognised the need to adopt new strategies for developing non-traditional exports and this led to the establishment of a number of trade promotion organisations. The Jamaica National Export Corporation was set up in the late 1960s. This was followed by the Barbados Export Promotion Corporation in 1980 and shortly after by similar agencies in Guyana, Trinidad & Tobago and Dominica. In addition, the CARICOM Export Development Project (CEDP) and the Eastern Caribbean States Export Development Authority (ECSEDA) have been established to assist the regional export effort.
The role of non-traditional exports
Precise data on the value of nontraditional exports are not readily available, but it is clear that in most Caribbean countries non-traditional exports have been a relatively small part of total domestic exports, the latter being dominated by primary products.
A 1988 study reported that: Except in the cases of Barbados, St Lucia and Dominica, primary commodity exports (foods, agricultural raw materials, fuels, and metals) comprised between 71% and 96% of total merchandise exports in recent years. Even Dominica and St Lucia had proportions of 54% to 57% compared with 12% in Barbados. There is unlikely to have been any significant change in the situation in the last couple of years.
In Jamaica, non-traditional exports registered slow but fairly steady growth during the 1980s. Non-traditional exports were valued at $224.7 million in 1988 compared with just over $100 million in 1980. Jamaicas non-traditional exports comprise mainly apparel, ornamental horticultural products and non-traditional agricultural products including processed foods.
Trinidad and Tobago used its oil revenues to invest in some very capital intensive industries: steel (1980), methanol and urea (1984). These have become significant non-traditional export industries.
Elsewhere in the region, the pattern of Barbados is probably more typical. Here the main non-traditional exports have been in the apparel and electronics sectors. Although major developments in apparel and electronics first took place in Barbados in 1968, the period of rapid extra regional export growth was during the 1970s and early 1980s. In Barbados, this growth has not been maintained in recent years: Apparel exports were BDS $28.4 million in 1989 compared with BDS $69.3 million in 1983. Similarly, the export figure for electronic components in 1989 was BDS $43.3 m compared with a high of BDS $334.1 m in 1984. On the brighter side the export of selected chemicals has shown steady growth in recent years.
Serious efforts are being made to export cut flowers and foliage, branded rum and exotic fruit and vegetables (notably paw paws) from Barbados. The success of this activity is reflected in the increase in the export of cut flowers and foliage to the European Community from BDS $ 1710 in 1985 to BDS $38 705 in the first half of 1990. Similarly, fresh fruit and vegetables exports rose from BDS $64445 in 1983 to BDS $1 627015 in 1988, although slipping back to BDS $1 229995 in 1989. Barbados rum exports also showed healthy increases during the 1980s, rising from BDS $4.9 m in 1983 to BDS $9.7 m in 1989.
There is also now a growing market in the services sector, notably in data processing. Here employment has risen from 61 in 1980 to approximately 1500 in 1991 reflecting increased processing work being done in Barbados, mainly for American airlines and insurance companies. Like a few other countries in the region, Barbados is actively seeking to expand the export of information processing services. Purpose-built factory space is under construction and good quality telecommunications facilities are already in place and being constantly upgraded.
Non-traditional exports, like electronics and apparel have been largely dependent on multinational investment which has sought to take advantage of low wages and other incentives. In the case of Barbados, as wages have risen and/or tax holidays have expired these multinationals have departed taking a substantial part of the islands exports with them. The host country has gained some additional manufacturing capability and production management skills but only limited export marketing know-how.
There are several other reasons why non-traditional exports have only achieved limited growth. The newer, mostly indigenous exporters of cut flowers, processed foods and other nontraditional products are comparatively small scale and inexperienced in penetrating export markets. In addition, in some cases they lack the management skills and financial resources required for either large scale efficient production and/or for effective marketing in metropolitan countries. In general, manufacturers preference for exporting to regional markets has also been a major handicap, especially as regional markets have declined in recent years.
The impact of trade agreements such as LomCBI and CARIBCAN
Agreements such as Lom1975), the Caribbean Basin Initiative (1983) and CARIBCAN (1985) have sought to facilitate regional exports to the European Community, the USA and Canada, respectively by offering non-reciprocal duty-free entry to a wide range of regionally made products.
However, in 1989 Barbados domestic exports to the enlarged EC were BDS $54.1 m, $40.3 m of which were sugar exports. Domestic exports to the USA were BDS $62.2 m, the major portion of which was electronic components ($30.2 m), apparel and sugar. A similar pattern emerges with Canada where Barbados exports slipped to BDS $6.6 m in 1989.
What has gone wrong?
Apart from the limitations of regional exporters mentioned earlier, these agreements frequently do not provide free access for those products for which Caribbean countries have developed a significant capability and are competitive. For example, sugar and apparel are excluded from both CBI and CARIBCAN. In addition, attempts have been made to restrict the export of nontraditional exports from the region like steel and urea which appeared to be showing impressive growth.
Lomas included apparel in its duty free access provisions, but the region has been unable to exploit this opportunity and indeed the many other export opportunities offered by all three agreements. Further, with many other countries pressing for easier access to the markets of Europe and North America the effective preference being offered by these agreements is in danger of being eroded.
The future: what products? What markets? What assistance is needed?
Like almost all CARICOM countries, Barbados is relatively small with limited human and capital resources and no significant raw material base. Indications are that regional labour costs are not competitive with other LDC locations. A 1988 study on Caribbean Development To the Year 2000 suggests that technological progress and factor price restraint will be essential for restoring and maintaining international competitiveness. It also concludes that long-term growth will have to rely on the emergence of domestic enterprises as export oriented manufacturers.
Barbados and the other small states in the region will need to concentrate on relatively small scale production of high quality products for niche markets. They must have access to modern technology, be proficient in the use of computers and seek to develop unique products with high local added value.
In order to facilitate their access to technological advances and to gain ready market access, the proliferation of joint ventures and franchise operations will be critical in the short term. In addition, Governments will have to remove all disincentives to exporting and provide increased assistance to local businessmen to encourage them to shift from their traditional commercial activity of importation and distribution to manufacturing for extra-regional markets.
The markets to be focused on will remain the major world markets of North America and Europe because of their proximity and historical linkages. However, new markets in Eastern Europe, Africa. Latin America and the Far East will have to be explored and developed in the longer term.
Considerable assistance with export development has been provided to the region under the Lomonventions through various regional and national programmes. Unfortunately, the impact of this assistance is not reflected in the export performance of the region. However, export development is a long term process and assistance will need to be continued if the region is to realise its potential as an exporter of non-traditional goods and services to extra-regional markets.
The direction of the assistance needed was highlighted at a symposium held in Barbados last April on the Challenges of Export Development in Developing Countries. This conference which included presentations from some of the more successful exporting countries, like Hong Kong, Korea and Mauritius identified some common threads as to the critical factors required for a countrys success in export development. These are: the creation of an economic and political environment which is conducive to and deliberately encourages exports, an appropriate institutional structure for trade development, a national awareness of the importance of exporting and the continuous search for new products and services to export.
Mr Paul Hogan, a leading consultant on export development, concluded: that the role of donors in promoting policy reform and in supporting services for export development was a vital one. To be effective the assistance provided to developing countries should take the form of large integrated projects which intervene at all stages of the production and marketing chain... they must have strong manpower and institutional development components, designed to result in competently staffed and effective organisations on their completion. While not open-ended, these projects must last as long as it takes. Above all, the assistance in export promotion must be tailored to the real needs of the exporters of the developing countries concerned and reflect their objectives and aspirations in solid quantifiable terms.
Apart from continued and improved access to European and North American markets, assistance to the Caribbean region to increase non-traditional exports is likely to be most successful if focused along these lines.