David Jessop, Contributor

IT IS companies not countries that trade and invest. This truism lies at the heart of understanding what it will take to make the Caribbean single economy happen. It is a lesson that Europe learnt many years ago.

It means that no matter how much Government and institutions might do to put in place the frameworks necessary to establish a single market and economy it will be the response of the private sector, in any region, that will determine whether a viable, competitive economy will emerge.

In the case of the Caribbean, the necessity for the region's business community to deliver future economic growth has not been widely understood.

The region's private sector, which by global standards consists only of small and medium-size enterprises, has, with some important exceptions, not previously been known for its willingness to move rapidly, to take advantage of opportunity or to relish competition.

In an important paper delivered earlier this year in a private capacity, Ambassador Richard Bernal, director general of the Caribbean Regional Negotiating Machinery, noted that the creation of the CARICOM Single Market and Economy (CSME) ought to galvanise entrepreneurship, investment and innovation.

He argued that by increasing the size of the Caribbean market, removing many of the constraints on the private sector and by enlarging the size of the market available, logic suggests that competitiveness and growth will be encouraged.

Yet, he noted that this might not happen as the size of almost all Caribbean companies is very small indeed.

ENLARGEMENT

"CARICOM firms, even those that have become multinational corporations will find (attaining international competitiveness) difficult unless they enlarge and thereby reduce or eliminate the disadvantages of being minute," he argued.

The CSME provisions, he went on to say, have not given sufficient attention to this issue.

'The enlargement and cons-olidation of CARICOM firms ... is extremelyurgent' if they are to achieve the global competitiveness necessary for them to survive the international competition that will arise in Caribbean market as a result of the external trade negotiations that are now under way.

Ambassador Bernal's sugges-tions may not make comfortable reading for either the business sector or for governments.

Caribbean business tends to be nationalistic, insular, relatively risk averse and not welcoming of consolidation.

This is because companies are or were until quite recently family owned, are not publicly quoted, or if they are, have shares that cannot be easily traded across the region.

Large companies also present problems for governments in small countries where their requirements can skew policy or at worst even seek to control the direction of government itself.

CARIBBEAN TRANSNATIONALS

But the reality is that many of the region's most successful companies have come about through mergers and acquisitions and a relative openness to consolidation.

They are all run to global standards although surprisingly they are a little written about and are seen somehow as a phenomena and are seemingly not aspirational.

Yet Caribbean transnationals are invested in and now operating far beyond the region.

Companies such as GraceKennedy, Jamaica Producers, Sandals, SuperClubs, Clico, Sagicorp, Goddard Enterprises, Demerara Distillers and others have all retained their Caribbean identity and base, while being actively engaged in operations in Europe, Latin America, the U.S. and India.

While there will always be exceptions, larger firms have better prospects for international compe-titiveness.

As a consequence, their deve-lopment and the encourage-ment of consolidation would seem to be one of the few ways in which the region can become globally competitive as inexorably, it enters into arrangements for freer international trade.

Ambassador Bernal argues that there are policies that should be adopted to facilitate the consolidation of CARICOM companies.

He believesthat governments need to create a business environ-ment more conducive to corporate consolidation; provide support services that foster best operating practices and use of the latest technology.

He also believes that there must be a seamless regional economic space with harmonised regulations, free movement of capital and labour and a reduction in transactional costs.

BEST PRACTICES

Dr. Bernal suggests that the encouragement of best practice, equitable regulation and the fair supervision of business are essential elements in encouraging consolidation.

He notes, too, that an important element of this process of incubating larger companies should be mediating the pace at which the region's companies are exposed to the effect of international competition. This can be achieved by influencing the pace of trade liberalisation.

But crucial to all of this is whether the Caribbean private sector is able to rise to the challenge, has the institutions to debate such issues with govern-ment, and the capacity and will to educate their members about the need for change.

In a characteristically forthright speech in Barbados a little over a week ago, Prime Minister of Barbados, Owen Arthur, told representatives of private sector associations that, "the regional private sector has to get its act together if the single economy is to come alive."

Speaking to an audience attending the Caribbean Association of Industry and Commerce's first annual joint meeting with ministers of trade and finance, he said that he was prepared to argue for private sector bodies to be recognised in the Treaty of Chaguaramas, "in an organic and structured way" as associate bodies under Article 22 of the treaty.

In this way, he noted, the private sector would be "able to participate in fundamental policy decision making and the overseeing of implementation."

TRANSFORMATION NECESSARY

He suggested that without this, the Caribbean single economy would stall and that fundamental questions could not be addressed.

These included the future of 'sunset industries' such as sugar, reducing the region's food import bill by transforming the 'empty spaces' in countries like Guyana, Belize and Suriname, harmonising tax, establishing rules on competition, creating a single investment code and liberalising services.

But he also noted that it was vital that the private sector and the labour movement came together in a structured way so that they were taken seriously as partners.

"In making serious policy decisions about building a new regional economy, the regional private sector must transform itself into something it has not been in the past."

It must also develop a stronger capacity to deal with issues. This required, he said, "many of the regions bigger and more imposing companies to support private sector institutions."

The need for the full involvement of the region's business community in the single economy is clear, but it remains dangerously uncertain whether the majority of the Caribbean private sector is able or prepared to rise to the challenge.

David Jessop is director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org. Previous columns can be found at www.caribbean-council.org.