CLUSTERING TO COM­PETE

Com­pete Caribbean looks to lever­age link be­tween col­lab­o­ra­tion and in­no­va­tion

The Star (St. Lucia) - Business Week - - NEWS - BY STAR BUSINESSWEEK CORRESPONDENT

In­no­va­tion, a key driver of growth, has long posed a chal­lenge for the Caribbean econ­omy. Vi­tal to all as­pects of the re­gion’s fi­nances, from trade to tourism, the abil­ity to in­no­vate is cru­cial in a com­pet­i­tive global mar­ket but bud­ding Caribbean en­trepreneurs are often be­set with ob­sta­cles. Lim­ited ac­cess to cap­i­tal, in­ad­e­quate re­sources and a lack of in­sti­tu­tional sup­port are just some of the is­sues the re­gion’s in­no­va­tors must over­come.

Com­pete Caribbean, jointly funded by the In­ter-Amer­i­can De­vel­op­ment Bank (IDB), the UK De­part­ment for In­ter­na­tional De­vel­op­ment and the Caribbean De­vel­op­ment Bank, is work­ing to ad­dress this through its own in­no­va­tive scheme - the clus­ter de­vel­op­ment pro­gramme which grants up to US$400,000 to pri­vate sec­tor firms col­lab­o­rat­ing to grow their mar­ket. Since its first call for pro­pos­als in 2012, the ini­tia­tive has gained ground in the re­gion, sup­port­ing eight clus­ters and im­pact­ing 525 firms. Now Com­pete Caribbean is look­ing to build on that growth, par­tic­u­larly in East­ern Caribbean coun­tries such as Saint Lu­cia where, it says, in­ter­est is low and need is great.

“The East­ern Caribbean is par­tic­u­larly suited to this type of sup­port be­cause most of the busi­nesses there are very small [but] Gre­nada has been the only coun­try from the East­ern Caribbean to get a clus­ter grant,” says Com­pete Caribbean’s Ex­ec­u­tive Di­rec­tor Dr Sylvia Dohn­ert who sug­gests that the IDB’s lim­ited pres­ence in the area may be to blame, as well as a gen­eral lack of aware­ness about the project. “This is a pro­gramme ex­e­cuted by the IDB and they are ac­tive in the East­ern Caribbean but have no coun­try of­fices there. Dur­ing the first phase there may have been less knowl­edge about what we were do­ing.”

GROW­ING THE PIE

What Com­pete Caribbean is do­ing is en­cour­ag­ing busi­nesses to work to­gether in a way that will even­tu­ally ben­e­fit the en­tire re­gion. The or­gan­i­sa­tion de­fines clus­ter de­vel­op­ment as busi­nesses in the same sec­tor, or sup­ply chain, work­ing to­gether to ex­port their prod­ucts. This has many ben­e­fits for the par­tic­i­pat­ing firms in­clud­ing shared costs, the abil­ity to build a brand to­gether, col­lab­o­rate on mar­ket­ing and jointly in­vest in qual­ity stan­dards test­ing.

“There are a number of op­por­tu­ni­ties in clus­ters,” says Brian Louisy, Ex­ec­u­tive Di­rec­tor of the Saint Lu­cia Cham­ber of Com­merce, In­dus­try and Agri­cul­ture. “They can build skill where there is none, pro­vide an op­por­tu­nity to bring firms to­gether and build in­dus­try co­op­er­a­tion. They give you the op­por­tu­nity to have a dif­fer­ent type of con­ver­sa­tion, one where ev­ery­one gets a bet­ter un­der­stand­ing of each other’s needs.”

In July 2017 Com­pete Caribbean co­hosted a fo­rum in Saint Lu­cia with the coun­try’s Na­tional Com­pet­i­tive­ness and Pro­duc­tiv­ity Coun­cil to dis­cuss ways of stim­u­lat­ing pri­vate sec­tor de­vel­op­ment. Louisy says that, al­though the is­sue is com­plex, these type of dis­cus­sions are im­por­tant and ini­tia­tives such as the clus­ter de­vel­op­ment pro­gramme are some­thing Saint Lu­cia’s pri­vate sec­tor is ex­plor­ing. “Pro­grammes like this can be of tremen­dous value. With the right re­sources and the right lead­er­ship you can use clus­ters in a wide range of sec­tors. It is not some­thing that is unique or spe­cific to any one in­dus­try. It is a way of think­ing, de­vel­op­ing and bring­ing peo­ple to­gether to find ar­eas of com­mon­al­ity so you get economies of scale and value chains be­ing built up.

“There are op­por­tu­ni­ties in clus­ters but it does not just hap­pen, you have to make it hap­pen. It re­quires you to ex­am­ine very closely what you are do­ing.”

One of Com­pete’s first, and most prof­itable projects, was that of the Belize Shrimp Grow­ers As­so­ci­a­tion who were granted fund­ing in 2012 to ob­tain Aqua­cul­ture Stew­ard­ship Coun­cil (ASC) cer­ti­fi­ca­tion and in­crease their ex­port mar­ket base. All ten of Belize’s shrimp firms came on­board and now it is the

What Com­pete Caribbean is do­ing is en­cour­ag­ing busi­nesses to work to­gether in a way that will even­tu­ally ben­e­fit the en­tire re­gion.

only coun­try in the world where all firms have the cov­eted ASC stan­dard giv­ing them the op­por­tu­nity to cre­ate a Belizean brand.

It is suc­cess sto­ries like this that help Com­pete Caribbean over­come some ret­i­cence within the pri­vate sec­tor, ac­cord­ing to Dr Dohn­ert who says, “The dif­fi­culty in a clus­ter project is that busi­nesses may feel they are com­pet­ing and not col­lab­o­rat­ing. The most suc­cess­ful projects are those that show where firms can col­lab­o­rate and make the pie big­ger, rather than be­ing of the mind­set that this per­son is go­ing to get a big­ger slice.

“The idea is to dis­cover how you make the pie big­ger for ev­ery­one.”

Com­pete’s cur­rent call for clus­ter pro­pos­als closes at the end of Oc­to­ber. To be suc­cess­ful, ap­pli­cants must demon­strate the po­ten­tial to gen­er­ate em­ploy­ment, with par­tic­u­lar con­sid­er­a­tion given to those who can stim­u­late job cre­ation among vul­ner­a­ble groups or women. A clus­ter con­sists of a min­i­mum of three firms. Once the win­ning bid is cho­sen, Com­pete will link that group with a pro­fes­sional con­sul­tant and pro­vide 80 per cent of the project’s to­tal bud­get (to a max­i­mum of US$400,000) with the pri­vate sec­tor par­tic­i­pants con­tribut­ing the re­main­ing 20 per cent.

DI­VER­SITY IN THE MIX

Clustering feeds into Com­pete’s cen­tral aim - in­no­va­tion. “Just the fact that the firms are work­ing to­gether opens the op­por­tu­nity for in­no­va­tion be­cause there is now di­ver­sity in the mix,” says Dr Dohn­ert. “They are us­ing new pro­cesses, new tech­nol­ogy, new prod­ucts.

“Pro­duc­tiv­ity in the Caribbean at the coun­try level has stag­nated over the past two to three decades. One re­ally im­pact­ful way to drive pro­duc­tiv­ity is in­no­va­tion.”

Dr Dohn­ert be­lieves that of­fer­ing clus­ters fund­ing is the best way to en­sure in­no­va­tive ideas make it to mar­ket, adding, “The main bar­rier for the pri­vate sec­tor is ac­cess to fi­nance. Com­mer­cial banks are not the ideal means to fund in­no­va­tion be­cause it is a risky process. There are a lot of firms with very in­ter­est­ing ideas but their ca­pac­ity to im­ple­ment is cut short by lack of fund­ing.”

Small and Medium-sized En­ter­prises (SMEs) are most vul­ner­a­ble to the damp­en­ing ef­fect of in­suf­fi­cient cap­i­tal, which spells trou­ble for the re­gion given that they are often the econ­omy’s in­no­va­tors. More than 75 per cent of the Saint Lu­cia Cham­ber of Com­merce mem­bers are SMEs, and all op­er­ate in a chal­leng­ing en­vi­ron­ment.

“There are a whole range of is­sues con­fronting them,” says Louisy. “There are few SME-spe­cific fi­nan­cial prod­ucts avail­able which meet their needs; they often can­not find the right skill set or re­cruit those skills to make their busi­nesses com­pet­i­tive. There are many challenges, de­pend­ing on the sec­tor, and SMEs con­tribute so much - pro­vid­ing em­ploy­ment, en­sur­ing so­cial sta­bil­ity - you name it, they do it. They are the essence of our econ­omy.”

Com­ing to­gether for clus­ter grants can af­ford SMEs some pro­tec­tion against the va­garies of the mar­ket which is good news for the Caribbean’s over­all eco­nomic health, ac­cord­ing to Dr Dohn­ert.

“SMEs gen­er­ate a large number of jobs in the Caribbean. In ev­ery de­vel­oped coun­try in the world we see a large role for SMEs in gen­er­at­ing eco­nomic de­vel­op­ment. They are more nim­ble, more in­no­va­tive and there­fore some­times have an ad­van­tage over larger firms.”

FUL­FILL­ING PO­TEN­TIAL

First con­ceived in 2009, Com­pete Caribbean is now en­ter­ing its sec­ond strate­gic phase. Its first phase, which gen­er­ated 12,000 jobs in the re­gion and helped pri­vate sec­tor firms in­crease their rev­enues by 43 per cent and ex­ports by 21 per cent, will be a tough act to fol­low but Dr Dohn­ert says her team is ready for the chal­lenge.

She is pleased and proud of the progress so far and wants to build on this solid foun­da­tion by con­tin­u­ing to de­liver on the or­gan­i­sa­tion’s core man­date. “In our sec­ond phase we want to sup­port sus­tain­abil­ity of the kind of ef­forts we have been push­ing in the re­gion. That en­tails en­cour­ag­ing in­no­va­tion and work­ing more closely with in­sti­tu­tions that sup­port the pri­vate sec­tor.

“It is im­por­tant to me that we con­tinue to have suc­cess. I’m per­son­ally com­mit­ted to this, I love the Caribbean, it is a fan­tas­tic re­gion. Projects like the clus­ter pro­gramme are im­por­tant so we can pro­vide peo­ple with much bet­ter fu­tures. The Caribbean has so much po­ten­tial.”

Pla­cen­cia, Belize - the Belize Shrimp Grow­ers As­so­ci­a­tion has in­creased pro­duc­tion by 144% since re­ceiv­ing a clus­ter grant from Com­pete Caribbean.

Belize’s shrimp clus­ter is the only one in the world where all firms have an ASC cer­ti­fi­ca­tion.

Cas­tries, Saint Lu­cia Brian Louisy, Ex­ec­u­tive Di­rec­tor of the Saint Lu­cia Cham­ber of Com­merce, In­dus­try and Agri­cul­ture.

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