News Americas, New York, NY, Tuesday. November 12, 2024: Caribbean businesses face significant operational and financial challenges, with informal payments, power outages and limited access to capital markets among the main obstacles, according to a new report from the Inter-American Development Bank, (IDB) and Compete Caribbean entitled “Are We There Yet? The Road to Sustainable Private Sector Development in the Caribbean.”
The report, which covers 13 Caribbean countries, finds that regulatory hurdles often lead firms to rely on informal payments to expedite approvals, such as import licenses or building permits. Meanwhile, two-thirds of firms face frequent power or internet outages, highlighting the need for stronger public service infrastructure to support business continuity.
A critical challenge highlighted is 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 the issue is the lack of solid 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, systemic support for startups is scarce and existing programs are often small-scale or temporary. This hinders the development of scalable enterprises and limits the growth of a strong private sector.
Workforce mismatch and brain drain
The Caribbean also faces a marked mismatch in labor market needs, with a surplus of unskilled workers and a shortage of skilled professionals, particularly in technology sectors. The emigration of highly skilled workers to opportunities abroad exacerbates this imbalance, leaving critical skills gaps in key industries, the study said.
The need for political reforms and modernized services
To address these issues, the report suggests reforms to improve business processes and public services. Key recommendations include simplifying licensing procedures, automating services through digital platforms and implementing transparency campaigns to reduce corruption.
For workforce development, the study advises establishing closer cooperation between employers and educational institutions to align training programs with required skills, especially in information and communication technology (ICT). It also recommends government-supported employment services and vocational training programs to increase employment opportunities.
Support for Innovation and Financial Inclusion
On the financial front, the IDB study calls for policies that promote competition in credit markets and expand financial inclusion. These include the creation of credit registries and bureaus for sharing credit histories, strengthening property rights and bankruptcy processes, and advancing financial technologies with appropriate safeguards to improve credit risk assessment.
The report further encourages governments to design innovation support programs that span the business life cycle, including public and private incubators and accelerators. Greater collaboration between industry and academic institutions to support technology transfer and development is also recommended.
A Guide to Growth
“The launch of this publication comes at a key moment for our region. It underlines the crucial role of the private sector in driving national growth and development. By identifying key challenges and providing regional solutions and policy recommendations, it aligns with the 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; is a guide packed with regional messages and country-specific insights to promote more sustainable economic development within the Caribbean.”
The report uses data from the 2020 Caribbean Innovation, Firm Performance and Gender Firm Level Survey (IFPG), sponsored by Compete Caribbean in 2020, providing a comprehensive look at the barriers facing Caribbean firms and the solutions to them. possible policy-driven.
As the region seeks to revive economic growth after COVID-19, the IDB report underscores the need for a stronger private sector and an 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 provide a roadmap for fostering a more dynamic and resilient private sector, which is vital to accelerating the Caribbean’s long-term economic growth and development.
