News Americas, New York, NY, Tues. Nov. 12, 2024: Caribbean businesses encounter significant operational and financial challenges, with informal payments, power outages, and limited access to capital markets among the top hurdles, according to a new report by the Inter-American Development Bank, (IDB) and Compete Caribbean titled “Are We There Yet? The Path toward Sustainable Private Sector Development in the Caribbean.”
The report, which covers 13 Caribbean nations, finds that regulatory bottlenecks often lead firms to rely on informal payments to expedite approvals, such as import licenses or construction permits. Meanwhile, two-thirds of firms face frequent power or Internet disruptions, emphasizing the need for stronger public service infrastructure to support business continuity.
A critical challenge highlighted is the lack of access to finance, which severely limits firm productivity. The study notes that Caribbean capital markets are underdeveloped and often illiquid, forcing companies to rely on limited and high-cost credit markets. Further complicating this issue is the lack of robust credit history data, which stifles lending options.
The report also identifies limitations in the region’s support for innovation and entrepreneurship. Although many Caribbean countries see significant potential in fostering entrepreneurship, systematic support for startups is scarce, and existing programs are often small in scale or temporary. This inhibits the development of scalable enterprises and limits the growth of a robust private sector.
Workforce Mismatch and Brain Drain
The Caribbean also faces a notable mismatch in labor market needs, with an oversupply of unskilled workers and a shortage of skilled professionals, particularly in technology sectors. Emigration of highly skilled workers to opportunities abroad exacerbates this imbalance, leaving critical skill gaps in key industries, the study said.
Need for Policy Reforms and Modernized Services
To address these issues, the report suggests reforms to improve business processes and public services. Key recommendations include streamlining licensing procedures, automating services through digital platforms, and implementing transparency campaigns to reduce corruption.
For workforce development, the study advises creating closer collaboration between employers and educational institutions to align training programs with in-demand skills, especially in information and communication technology (ICT). It also recommends government-supported job placement services and vocational training programs to enhance employment opportunities.
Support for Innovation and Financial Inclusion
On the financial front, the IDB study calls for policies that foster competition in credit markets and expand financial inclusion. These include establishing credit registries and bureaus for sharing credit histories, strengthening property rights and insolvency processes, and advancing financial technologies with adequate safeguards to improve credit risk assessment.
The report further encourages governments to design innovation support programs that span the business lifecycle, including public and private incubators and accelerators. Greater collaboration between industry and academic institutions is also recommended to support technology transfer and development.
A Roadmap for Growth
“The launch of this publication comes at a pivotal moment for our region. It underscores the crucial role of the private sector in driving national growth and development. By identifying key challenges and offering regional solutions and policy recommendations, it aligns with IDB Strategy+ and the pillars of our One Caribbean regional program,” said Anton Edmunds, IDB General Manager for the Caribbean Country Department. “This is not just a book; it’s a roadmap filled with regional messages and country-specific insights to promote more sustainable economic development within the Caribbean.”
The report uses data from the Innovation, Firm Performance, and Gender Issues in the Caribbean (IFPG) Firm-Level Survey, sponsored by Compete Caribbean in 2020, offering a comprehensive look into the hurdles Caribbean firms face and potential policy-driven solutions.
As the region seeks to reinvigorate economic growth post-COVID-19, the IDB report underscores the need for a stronger private sector and improved business environment. Between 1960 and 2019, the Caribbean region experienced an annual growth rate of just 1.47%, lagging behind the 1.94% rate in Latin America and well below the global average for middle-income countries.
The report’s recommendations offer a roadmap for fostering a more dynamic and resilient private sector, which is vital for accelerating the Caribbean’s long-term economic growth and development.
