Role of small entrepreneurs in strengthening the CARICOM Single Market and Economy / Amb. Lolita Applewhaite

I have been requested to address you today on the role of small entrepreneurs in strengthening the CARICOM Single Market and Economy (CSME). I take this as a signal of your recognition that governments can only provide the enabling environment but that the private sector has to be the engine for growth and development. This is also an indication that you are already aware of the importance of your role because it is indeed a very big and critical role.

We must first define what a small enterprise is, and of course it is a relative term. A small enterprise in a developed country is not the same as a small enterprise in our countries of the Region, and indeed we sometimes speak of small and micro enterprises or small and medium enterprises.

I shall use the usual term SME in this presentation. An SME in our countries may employ between 7 and 25 persons. Most CARICOM businesses would fall into the category of SME even though in the CARICOM context some are perceived as less small than others.

As you are aware, the Region is moving to a Single Market and Economy to enable us to meet the challenges and opportunities of global and regional developments and achieve our national and regional objective of improved quality of life for our people. This achievement would of course require, inter alia, '‘full' employment and accelerated economic development. To achieve this we would require increased levels of international competitiveness.

SMEs are central to the survival and success of the Community. The sector is seen as having the potential for creating backward and forward economic linkages; to reduce foreign currency expenditure; to utilise local raw material inputs; and to enhance economic and social conditions generally. These enterprises are further perceived to be flexible; able to respond rapidly to the market; innovative; and are key sources of employment generation for women and youth.

Most important is the fact that, regionally, thousands of small business operators are found in all of the major sectors – agricultural, industrial, manufacturing, and services. In fact, if only because of sheer numbers, SMEs are significant contributors to our economies. They contribute about 40 percent to the Region’s GDP and account for about 50 percent of employment. Entrepreneurs of small business therefore have a significant role in the advancement of the Region.

Conscious of the fact of this very important role of SMEs, the drafters of and the signatories to the Revised Treaty of Chaguaramas establishing the Caribbean Community including the CARICOM Single Market and Economy deliberately focused on the establishment of an environment capable of supporting the development and viability of SMEs. The Preamble of the Revised Treaty therefore reflects this in this fashion: "Recognising also the potential of micro, small and medium enterprise development to contribute to the expansion and viability of national economies of the Caribbean Community and the importance of large enterprises for achieving economies of scale in the production process".

There are some major limitations and challenges that are faced by the entrepreneurs of small businesses and these generally include: Ø A not sufficiently focused policy environment:

Difficulty in accessing credit and capital markets (role of the SBDF)
Low levels of productivity and quality
Insufficient resources for research and development
Inadequate business information Ø Inadequate transport and communication and ICT infrastructure
Need to access new technologies
Lack of opportunities to build on the prevailing entrepreneurial culture

CSME

Therefore, Article 53 of the Revised Treaty, headed: "Micro and Small Economic Enterprise Development”" specifically points to the requirement and responsibility of the relevant Councils of the Community to:

encourage the competitiveness of SMEs
promote the establishment of support agencies including entrepreneurial centres
address the need to access training and education in, for example, entrepreneurial competence and business management
encourage financial institutions to provide appropriate and innovative financing instruments
promote innovation within the small enterprise sector.

The Revised Treaty is a complex of rights related to free movement and obligations (primarily of governments) to ensure that benefits do accrue to the various stakeholders in the Caribbean Community. The rights in the CSME relating to SMEs, accrue to self-employed CARICOM nationals providing services or as entrepreneurs establishing businesses, or, as defined in Article 32 paragraph 5, companies and entities that are owned and controlled by nationals of CARICOM. (Of course there is not the requirement to be self-employed if those engaging in SMEs are graduates, media workers, artistes, musicians or sportspersons and I’ll explain that later.)

Further, it should be noted that all the provisions of the Revised Treaty apply to SMEs. A separate Article referring specifically to SMEs is included only to provide additional focus. The provisions and effective working of the CSME are probably even more important for the SMEs than for the larger enterprises. And competitive and successful SMEs are necessary for a vibrant and prospering Caribbean Community.

Given their lack of production capacity and other limitations, the integration of SMEs into the national, regional and international markets in the context of globalisation and trade liberalisation (including in CARICOM) necessitates the development of networking and the formation of strategic alliances to become competitive. The possibilities for developing and expanding SMEs greatly depend on the way in which they organise and develop their resources, their methods of accessing markets and their capacity to interact with other companies.

From a practical perspective, the organisation of SMEs is therefore critical. At the regional level, the Caribbean Association of Small and Medium Enterprises (CASME) was in 2005 established with the objective of promoting and advancing the Region’s SME sector. CASME comprises the national small business associations in the Region and serves as a mechanism to reposition SMEs to become more competitive and sustainable in the developing global environment. Its principal objectives include: support for advocacy for a more enabling environment; education and development; facilitation of trade and market penetration through joint ventures; and facilitation of access to technical assistance and finance to assist capacity building. Guyana – that is, its national association and entrepreneurs - is one of the seven founding members of CASME. SMEs here could therefore exploit this opportunity to strengthen the small business sector and entrepreneurs.

The CSME

If I may examine more closely the provisions of the Revised Treaty that would most directly impact on and support the SME entrepreneur to run a competitive business and therefore strengthen the economies in the Region, these would include those relating to:

production integration (Article 52) and cross-border initiatives to enhance the possibilities of achieving advantages of economies of scale and scope and use of the resources and markets available – goods, services, skills, capital and related factors of production - in the enlarged single economic space. This would include any type of business arrangement in or with businesses in another Member State whatever the structure of the business – family -owned or corporate. This has been happening more and more as in the case of, for example, furniture and food processing in Trinidad and Tobago, Suriname and Barbados.
the investment environment (Part Three of Chapter Four) to attract financing and investment and offer incentives in the needed fields e.g. technology and Information and Communication Technology (ICT).
the Community Institutions

Ladies and Gentlemen, we share a world that is caught up in dramatic changes, much of which has to do with substantial changes in long standing social and economic systems and the erosion and re-definition of time-honoured relations.

Ladies and Gentlemen, the creation of the CARICOM Single Market and Economy (CSME) is the Region’s most important strategy, intended to be one of the pillars which will facilitate the economic survival of our Region. It brings opportunities, but we have to our mindset to enable us to exploit these opportunities. This will involve shifting from a parochial or national perspective to the perspective of a single economic space of the Region. Shifting from small, perhaps family-owned business to less small, differently structured or owned businesses in order b to give better possibilities for competitiveness, survival and prosperity.

The CSME seeks to convert the Member States of the Community into a single, enlarged economic space, as near to a single market and single economy as is possible without political integration. It is intended to create, in the first instance, an open market without cross-border restrictions and therefore seeks to facilitate the free movement, not only of goods, but the factors of production. At this stage of implementation twelve Member States are participating in the Single Market. To date six Member States are Single Market ready, namely Barbados, Belize, Guyana, Jamaica, Trinidad and Tobago and Suriname. The other six Member states, namely Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, Saint. Lucia and St. Vincent and the Grenadines, would be fully compliant by 30 June 2006. The Bahamas has not yet signed the Treaty to participate, Haiti has to complete its accession, and Montserrat is awaiting entrustment from the Government of the United Kingdom.

The primary elements of the CSME that are of particular relevance to small enterprises are those relating to:

Ladies and Gentlemen, as you are aware, there already exists a free trade area for goods within CARICOM. There are no import duties on goods of CARICOM origin. Furthermore, tariffs and quantitative restrictions in all Member States have been removed. In summary, the treatment of intra-regional imports is different from the treatment of those coming from the rest of the world.

Within the Single Market, the following persons have the right to free movement:

A Task Force under the Chairmanship of Honorable Roosevelt Skerrit, Prime Minister of Dominica, who is the Lead Head holding this portfolio, is currently working on the expansion of the categories of skilled persons. Next week, the Conference of Heads of Government will give consideration to expanding the categories of persons benefiting from free movement to include workers in the hospitality industry, artisans, domestics, teachers and nurses.

A Protocol for Government Procurement: CARICOM Member States are currently giving consideration to technical recommendations for opening the market for Government Procurement which could provide opportunities for supplying goods and services to meet the significant requirements of the Governments of other Member States, an area which has traditionally been reserved for nationals in the individual Member States. It is anticipated that agreement could be reached by mid-2007.

A Protocol for E-Commerce: Some technical work has started towards such an agreement. Guyana more than any other country in the Region and elsewhere is aware of the benefits of e-commerce with the sale of hammocks from the interior being sold via the InterNet. This is therefore a development that should be built on.

Ladies and Gentlemen, there is no doubt but that SMEs have a critical role to play in the CSME. I have tried to show the enabling environment that has been put in place to allow you to take your rightful place in strengthening the CSME. I hope that this bird’s eye view will assist you in as you go about developing a business strategy to survive, to grow and expand within the CSME, and to make use of the many opportunities that the CSME presents. We have to bear in mind that real and additional competition will come from countries outside of the Region with globalisation and liberalisation and our multilateral and Bilateral agreements

It would not be unreasonable for you to ask the question: Is the CSME creating more opportunities (and particularly opportunities which would not otherwise be possible) for producers, manufacturers, service providers and consumers of the Region? Specifically, is the CSME facilitating more production and more competitive production at that? And is the CSME increasing our chances for survival and safeguarding our profits and incomes? We would answer unhesitatingly, YES!

For the Private Sector of Guyana, including the SMEs, a successful business strategy, would make use of the many opportunities that the CSME offers including:

Moreover, a successful business strategy within the CSME demands that you implement a plan of action to:

In closing, I need to stress that the creation of the CSME is not an event. Rather it is a process that has started and has achieved some milestones. The pace of the process is affected by international developments, domestic politics, the capacity of the legislative machinery and the public service, the availability of resources and, generally, by the acceptance of the people-at-large. Among all these actors, you, the private sector perhaps must play the most decisive role. I congratulate the SBDF for the important role they have been playing in in filling the financing gap for SMEs and wish them continued success. Given the place and importance of small entrepreneurs in our economies, I encourage you to be a dynamic partner in the CSME.