Caribbean Trade Law and Development

Tag: SMEs

  • CARICOM-Private Sector Engagement Requires Sustainable Development as its ‘Guide Star’

    CARICOM-Private Sector Engagement Requires Sustainable Development as its ‘Guide Star’

    Alicia Nicholls

    The novel coronavirus virus disease (COVID-19) pandemic has reiterated the need for Caribbean Community (CARICOM) Member States to not only diversify their economies and trading partners, but to deepen intra-regional integration as part of their economic recovery and sustainable development efforts. The astronomical term ‘guide star’ – the star used by a telescope to keep focus on a celestial object as the telescope moves – is a useful reference in seeking to contextualise the promise of a more structured CARICOM-private sector relationship in assisting in the region’s integration, trade and post-COVID-19 recovery.

    As recognized by the Addis Ababa Action Agenda on financing for development, the private sector is an important driver of growth, economic activity and job creation and can, therefore, be a valued development partner to governments in the formulation of policies and mobilisation of resources for achieving the 17 United Nations Sustainable Development Goals (SDGs) and their 169 targets. To achieve this, the private sector must move from being a mere passive actor which is simply informed of government policy, to a more active actor consulted on and involved in policy dialogue, but not in a way that encourages corruption or rent-seeking behaviour.  

    On December 3, 2020, CARICOM took further steps towards a structured relationship with the region’s private sector through the signing of a Memorandum of Understanding (MOU) with the recently formed CARICOM Private Sector Organisation (CPSO) for achievement of the CARICOM Single Market and Economy (CSME). This article discusses why these recent developments are both laudatory and encouraging, but that sustainable and inclusive development, and not merely CSME achievement, should be the ‘guide star’ for this relationship if it is to redound to the benefit of the region’s people on a whole.

    The new CPSO and the CARICOM-CPSO MOU

    Institutionalisation of a CARICOM- private sector relationship has been mooted on previous occasions and more recently, was one of the recommendations (recommendation 31) made in the Report of the Commission to Review Jamaica’s Relations within the CARICOM and CARIFORUM Frameworks (the Golding Report). The most recent ground work for the establishment of a regional body to facilitate more structured engagement between CARICOM and the regional private sector was laid at a meeting of regional private sector officials in June 2019. A year later on June 2, 2020, the CPSO was incorporated as a non-profit in Barbados, where it is presently headquartered.

    On October 29, 2020,  the CPSO was designated as a CARICOM associate institution, establishing a formal functional relationship with CARICOM. The MOU, whose text is thankfully available on the CARICOM website, establishes a mechanism “for substantive and effective cooperation” between CARICOM and the CPSO in pursuit of a fully implemented CSME. As such, the scope of the parties’ cooperation will be on achieving elements of the CARICOM work programme conducive to the goals of the CSME which seeks to transform CARICOM from a single market to a single economy in which there is free movement of goods, services, skills, capital and the right of establishment.

    Without doubt, the private sector’s active involvement is a necessary precondition for the successful implementation and monitoring of the CSME. Under the MOU, the CPSO will have the opportunity to participate in meetings of the Organs of the Community as an Observer and may be invited by CARICOM to participate in Committees, Working Groups and Technical Teams established by the Organs of the Caribbean Community. According to the press release announcing the MOU, the CPSO has already been engaging in several important CSME-related regional discussions.

    However, CPSO’s involvement in meetings does not entail a right to vote or to prevent consensus, which likely seeks to ensure that decision-making remains the purview of the government representatives and there is no undue special interest influence on decision-making. The MOU also provides for the appointment of a Joint Technical Team comprising representatives of the CARICOM Secretariat and the CPSO Technical Secretariat, and for working groups to be established for the furtherance of the MOU’s objectives.

    Potential benefits of a more structured CARICOM-private sector relationship

    There are several potential benefits which this push towards institutionalization of greater private sector engagement could have for enhancing the CSME more specifically, and trade and sustainable development more broadly. While it is governments which negotiate and sign trade agreements, it is firms which must convert this market access on paper into market penetration in practice. The private sector’s knowledge, expertise and experience are important for identifying priorities for CSME implementation, providing feedback on what aspects of the CSME are not working optimally and what barriers they face in regional markets. Additionally, any attempt to flesh out a regional export development strategy, trade policy or industrial policy requires active private sector involvement and engagement in their formulation, implementation and monitoring if these policies are to be effective.

    Policy-making at the national and regional level must be sensitive to and account for the diversity within the region’s private sector. The bigger firms of some Member States, such as Trinidad & Tobago, Jamaica and to a lesser extent Barbados, tend to be more experienced in exporting than those of some smaller Member States. It should not just be the larger firms – those whose operations often expand beyond the region – whose views are represented by the CPSO in its dealings with CARICOM organs and bodies. The voice of smaller firms like the micro-firms must also be represented and taken into account. Regional policy making should also appreciate the unique challenges facing women-owned enterprises, such as the difficulty in accessing financing on equal terms as male-owned enterprises, as well as those businesses owned by vulnerable groups, such as the youth and indigenous peoples.

    Private sector engagement will also be necessary for informing regional business and investment climate reforms. Despite some noteworthy business climate reforms, especially by Jamaica, ease of doing business remains a problem in many Caribbean countries. Where ranked, no CARICOM Member States ranks within the top fifty countries on World Bank’s Doing Business Index or the World Economic Forum’s Global Competitiveness Index. Besides improving ease of doing business at the national level, many of the Golding Report’s recommendations, such as the need for greater harmonization of laws and procedures, would also be beneficial for regional firms seeking to expand within the region by improving the predictability, transparency and ease of the regional business and investment environment.

    Up-to-date and disaggregated CARICOM-wide trade and FDI data, as well as data on the region’s private sector remains a perennial problem. Private sector firms in the region do not always like to participate in data collection surveys, either because of distrust of what the data will be used for or they fail to see the importance of such exercises, which makes data collection difficult. It is hoped that a structured CARICOM-private sector relationship through the CPSO could lead to better data collection and availability regionally – data which could help inform business decisions and national and regional policy making.

    Although the extent of formal CARICOM-CPSO cooperation under the MOU is limited to the CSME,  there are other development areas such as public health, climate action, gender equality, finance (including the blacklisting issue) and such like, where more structured private sector involvement in regional discussions could be beneficial. It could be that the framers of the MOU see the CSME as an initial priority, but intend to amend the MOU, as provided for under its amendment clause, to expand the areas of CARICOM-CPSO cooperation at a later date.

    If the general public is to trust that this closer CARICOM-private sector relationship will redound to the interest of the public and not special interests, transparency is key. It is therefore regrettable that, despite some improvement, there is still limited detailed information provided to the public on CARICOM meetings held, decisions taken and the status of the implementation by Member States of certain initiatives.

    Conclusion

    Without doubt, a dynamic, engaged and informed private sector is a necessary condition for expanding Caribbean trade and deepening regional integration with the aim of boosting growth and development. The private sector, which itself has been impacted by COVID-19, will be an invaluable partner in charting the region’s economic recovery post-COVID-19. The CPSO’s creation, its status as an associate institution of CARICOM and the MOU’s signature are promising initiatives for strengthening the institutional mechanisms for private sector consultation in the regional policy making process. That this will lead to regional development is, however, not a fait accompli but a work in progress. It will require commitment by both sides, including trust by the private sector that these initiatives are more than ‘pomp and show’, but that CARICOM Heads of Government see the private sector as a credible partner whose views they will take into account in charting the region’s future development trajectory.

    Greater information on the CPSO’s mission, composition and work would be welcomed, including the nature of its relationship and level of cooperation with other region-wide private sector associations such as the Network of Caribbean Chambers of Commerce (CARICHAM), the Caribbean Hotel and Tourism Association (CHTA), the Caribbean Network of Service Coalitions, the Caribbean Poultry Association and the newly formed CARICOM Manufacturers’ Association. Hopefully, these disparate regional private sector organisations will not work in silos but will cooperate and collaborate with each other on areas of mutual interest. If it has not already done so, CPSO should also establish links with cross-regional private sector associations, such as the Caribbean Chamber of Commerce in Europe (CCCE), the Caribbean-ASEAN Council (CAC) and the American Caribbean Chamber of Commerce (ACCC), which can be valuable sources of market information, networks and expertise on current and potential export markets.

    It is hoped that this structured CARICOM-CPSO relationship towards CSME achievement will evolve into one of mutual trust and information-sharing between regional governments and the regional private sector in the interest not of a few, but one which places sustainable and inclusive development as its ‘Guide Star’.  

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. All views herein expressed are her personal views and should not be attributed to any institution with which she may from time to time be affiliated. You can read more of her commentaries and follow her on Twitter @LicyLaw.

  • COVID-19 and MSMEs: Impacts and Options

    COVID-19 and MSMEs: Impacts and Options

    Image by Vektor Kunst from Pixabay

    This article has been updated.

    Alicia Nicholls

    Businesses which fall under the category of micro, small and medium-sized enterprises (MSMEs) are among the most impacted by the economic and financial fall-out from the COVID-19 pandemic globally.

    These businesses, while not large participants in international trade, are significant contributors to national economic activity and employment. For instance, SMEs account for 93 per cent of enterprises in non-high income, non-OECD countries, while MSMEs comprise over 95 per cent of all enterprises in OECD countries according to the WTO’s World Trade Report 2016. Moreover, according to this same report, in “a sample of firms from 99 emerging and developing countries (World Bank Enterprise Surveys), SMEs accounted for two-thirds of formal non-agricultural private employment”.  

    With the pandemic’s growing impact on the global economy, its concomitant impact on MSMEs cannot be ignored – whether it is a ‘mom and pop’ corner shop experiencing declining footfall, the catering company which lost out due to a cancelled event or a hotel facing increased guest cancellations.  

    This article briefly looks at the possible impacts of COVID-19 on MSMEs and what options these businesses could consider to help mitigate the impact. It also briefly discusses some policy measures governments could put in place to assist MSMEs during this difficult period.

    Possible impacts on MSMEs

    The possible direct and indirect impacts of the COVID-19 pandemic on MSMEs differ according to the individual business and sector, but it is likely that those businesses in ‘high contact’ sectors– such as the hospitality and retail sectors – will be the most adversely affected.

    There is, of course, the human impact, such as the loss of productivity due to increased sick leave and the loss to the business of know-how, expertise and skill where a valued and skilled employee dies from the virus.

    Reduced sales due to a fall in demand, whether locally or from international customers, could also affect businesses’ ability to make payroll and their bottom-line.

    Supply chain disruptions could lead to difficulty sourcing final products or inputs for final goods, with knock-on effects for fulfilling contractual obligations.

    Another possible impact has been the increase in panic buying by consumers, generating increased sales in the short-term, but possibly causing inventory shortfalls, especially where supply chains have been disrupted.  

    For many small business owners around the world, there is the real fear of having to lay off staff, closing temporarily or completely going out of business.

    How can MSMEs cope?

    Because of their size, MSMEs generally face greater challenges and resource-constraints than larger businesses, like multinational enterprises (MNEs). Limited access to capital can often constrain MSMEs’ ability to respond to, and weather crises. However, there are steps that these businesses, regardless of size, can put in place.

    Below are some of the main ones.

    • Protect health of employees

    Employees are a business’ most valuable asset. As such, protecting the health of your employees must be foremost, especially those businesses in ‘high contact’ sectors. This is particularly so for frontline workers, such as receptionists and cashiers who interface with the general public, placing them at higher risk. Unlike other workers, frontline workers do not have the luxury of working from home. Therefore, they should be equipped with adequate supplies to keep themselves safe, such as hand sanitizer and wipes, as they go on about their jobs.

    In compliance with the social distancing advice given by WHO and national health authorities, many businesses globally have started reducing the number of employees working in the same space, instituting ‘work from home’ policies and remote meetings where possible, cancelling meetings which involve bringing in persons from abroad, and restricting non-essential employee travel, especially to affected countries.

    Protecting the health of employees also includes their mental health as well. Where lay-offs are an inevitability, employers should adopt a humane approach. Ensure any lay-offs are done in accordance with the law and that the employees’ rights are not violated.

    • Follow national and international best practices as they evolve

    According to the WHO, COVID-19 is a highly contagious virus and is particularly problematic for those persons with compromised immune systems, such as the elderly and those with existing illnesses. It should be noted that here in the Caribbean, we not only have a growing senior population, but a high and increasing incidence of persons with Chronic Non-Communicable Diseases (CNDCs), such as diabetes and hypertension.

    Businesses should formulate customized organization policies aimed at preventing and reducing transmission.  Your office protocols should be informed by the guidelines developed by your country’s national public health agency and the WHO. They should be updated regularly. Check out in particular WHO’s “Getting your workplace ready for coronavirus” pamphlet.

    Some simple measures can go a long way in creating a low-transmission environment. These include providing hand sanitiser dispensers, sticking up posters on good respiratory etiquette and hygiene, requiring sick employees to remain home, encouraging employees to regularly sanitise their personal work spaces, adequately stocking the company’s medicine cabinet with infrared thermometers, masks, gloves and alcohol, and increasing the frequency of scheduled work place cleaning.  

    Businesses should also formulate humane and non-discriminatory policies and protocols on what should be done in case of suspected or confirmed incidents of COVID-19 among employees, or where employees come into contact with an infected customer. What support systems, such as counselling, will be put in place where an employee dies as a result of the virus, bearing in mind the impact the death could have on the morale and well-being of other employees?

    Other good resources are the Coronavirus Guidelines for Business published by the International Chamber of Commerce, as well as the guidelines published by your local or national small business association or chamber of commerce.

    • Fight ‘fake news’ by keeping employees and customers informed

    Businesses must also battle against rumors and misinformation about the virus being spread on social media. Combating ‘fake news’ requires keeping your clients/customers informed of the current state of your operations and the measures you have put in place to prevent or deal with any transmission. Rely on information from trusted sources, such as the national public health authority, the Caribbean Public Health Agency (CARPHA), Pan-American Health Organisation (PAHO) and the WHO.

    • Manage your risks

    Now is the time for your business to either prepare or review/update your contingency and business continuity plans.

    An essential part of preparation is reviewing your current contracts with suppliers/purchasers and examining whether a COVID-19 outbreak would impact your ability to perform your contractual obligations.

    Managing risks also might require diversifying your sourcing in the event your usual supplier goes out of business or is otherwise unable to fulfill your order request.

    Many businesses have some form of business interruption insurance. Speak to your insurance agent about what is covered and not covered in your policy. For businesses in the exporting business, they should also review their insurance coverage.

    • Consider Capital Access Options

    Businesses should consider beforehand their capital access options in cases where drops in demand could negatively affect their cashflow and ability to meet obligations. These options may range from a loan from a family member or friend, to commercial bank loans to special loan schemes provided by Government. Those in the exporting business should review their trade finance options.

    • Refrain from price gouging

    Businesses should refrain from engaging in price gouging, which can reduce public ‘goodwill’ towards your business and drive customers to your competitor.

    How can governments assist?

    Policymakers around the world are increasingly cognizant of the important economic role played by MSMEs and have sought to find ways to assist businesses during this challenging period. In the US, affected small businesses in some states impacted by COVID-19 can access low-interest federal disaster loans, while the European Commission hasset out a coordinated response to counter the economic impact of the Coronavirus, particularly on SMEs.

    In some Caribbean countries, direct support, through the provision of concessional loans and grants to SMEs, may or may not be an option depending on the Government’s fiscal constraints. However, there could be indirect support such as delaying payment of taxes, debt forgiveness, and other measures to assist SMEs facing cashflow difficulties. Other policy interventions Governments could consider include providing support for employees affected, including those laid-off or placed on ‘short time’. Governments can also temporarily suspend tariffs on the importation of needed medical supplies to make it easier for businesses and the public at large to more cheaply access these goods.

    In this period of much uncertainty, it is doubly important that Governments and the private sector keep open channels of communication and continue to work hand in hand on current preparation and mitigation efforts to reduce both the economic and human impact of the outbreak.

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant. You can also read more of her commentaries at www.caribbeantradelaw.com  and follow her on Twitter @LicyLaw.

    DISCLAIMER: All views expressed herein are her personal views and do not necessarily reflect the views of any institution or entity with which she may be affiliated from time to time.

  • WTO Public Forum 2016 focuses on “Inclusive Trade”

    Alicia Nicholls

    How can we make trade and trade rules more inclusive for small and medium sized enterprises (SMEs) and women in business? This was the central theme with which government representatives, NGOs, civil society organizations, business leaders, academics, students and ordinary citizens from around the world grappled at the World Trade Organisation’s (WTO) Public Forum held September 27-29, 2016. The flagship outreach event in the WTO’s calendar, the 2016 Public Forum attracted a record 2,000 registrants according to WTO Director General, Roberto Azevedo in his opening remarks on the first day of the event.

    This year’s main theme “Inclusive Trade” is timely given the current global trade and economic climate marked by slowing global trade and economic growth, rising anti-trade sentiment in advanced economies and a strong populist backlash against the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP).

    On the first day of the event, the WTO Secretariat launched its flagship trade policy publication, the World Trade Report 2016. Themed “Levelling the Trading Field for SMEs“, the Report explores SMEs’ participation in global trade, obstacles to their participation and cooperative approaches to promoting SME participation in global trade. Among the Report’s findings are that “trade participation of SMEs in developing countries is low, with exports accounting for 7.6 per cent of manufacturing sales, compared to 14.1 per cent for larger firms”.

    In his opening remarks Director-General Azevedo noted that the backlash against trade and globalisation is not unique during periods of low growth, but cautioned that “history also shows the dramatic consequences that this kind of sentiment can have”. He explained that while trade was an important anti-poverty tool there needs to be acknowledgement that the benefits of trade “don’t reach as many people as they should and we should act … not by attacking trade, but by making it work better.”

    Throughout the three-day event, a number of sessions and workshops were held exploring various themes, including e-commerce and bridging the global digital divide, SME access to trade finance, the sustainable development goals (SDGs), regional trade agreements (RTAs), sustainable investment, inter alia.

    Audio recordings of the various sessions are available on the WTO’s website here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.