By Richard Kildare
Op-Ed Contributor
The challenges in developing any economy are many. It is prove, however, that through the infrastructural development of small businesses and entrepreneurship, this sector can account for employing more than 60 to 80 percent of a nation’s labour force and greatly improve contribution to a state’s Gross Domestic Product.
The empowerment of micro, small and medium size businesses (MSME) can be a poverty alleviation method that will help to create opportunities and impact well-needed development.
As we await the Ministry of Industry, Investment and Commerce’s “MSME and Entrepreneurial Policy,” I read with interest an excerpt from a Sectoral Debate of the Junior Minister in the Ministry of Foreign Affairs and Foreign Trade (MOFAFT) Arnaldo Brown, published in the Sunday Gleaner in July.
Of particular interest was the paragraph that said, and I quote “In elaborating a strategy for addressing the trade deficit, we must give priority to increasing our exports to all markets. The Jamaican private sector, including our micro, small and medium size enterprises (MSME’s), must be encouraged to further seek out the possibilities in these markets in which they could have a competitive advantage.”
This, I thought, was an excellent point to be made by a senior representative in the MOFAFT, as this Ministry will be critical to the development and expansion of the small business sector on a global basis. On reading further however, I must confess I became a little uncomfortable with the following statement: “We note that the Ministry of Industry, Investment and Commerce is working on a MSME Policy.”
The reason for my discomfort came from the assumption that MOFAFT appears not to be collaborating with the Ministry of Industry, Investment and Commerce (MIIC) in creating the MSME and Entrepreneurial Policy.
I can be wrong. In fact, I sincerely hope that this is not so, as MOFAFT is a crucial player in developing and administering trade policies that will, without a doubt, affect small business trade in products and services, collaboration with other CARICOM countries in developing the Caribbean Association of Small and Medium Size Enterprises (CASME), research and development and many other initiatives that can be the basis of the survival and global expansion of the sector.
MOFAFT and Jamaica’s Ministry of Finance must be integral players from start to finish of any MSME Policy. Challenges and nuances of policies ought to be worked out from inception by all parties so that hindrances to execution are minimized and sound mitigation strategies and tactics are included.
Nevertheless, the path to preparing the local MSME segment to become global players is a sound one. This process is most commonly called Internationalization or, to make global in scope and character.
A commissioned work done by the European Commission in 2010 explains the concept as follow: “Internationalization refers not only to exports but to all activities that put SMEs into a meaningful business relationship with a foreign partner: exports, imports, foreign direct investment, international subcontracting and international technical co-operation.”
This study was done in order to clearly define the effectiveness of policies that were adapted earlier to enhance the abilities of European small and medium size enterprise to do business globally.
This concept was never lost on Jamaica, as Dr Rosalea Hamilton, in her research work of 2001 called “Building Competitive Caribbean Export,” articulated the need for a concerted effort in preparing small business for the export market.
A similar position was also mooted in Dr David Tenant’s document submitted in 2009, “Policy Report for the Jamaican MSME Sector Phase 2.” He indicated that a weak export drive inhibits innovation and development of a country’s business infrastructure.
According to Tennant’s research, 278 firms indicated that 85.6 percent of businesses have over 90 percent of their market located in Jamaica. The sale of goods in foreign markets represented less than 10 per cent of total revenue for 88 percent of the businesses surveyed, and between 10 percent and 19 percent of total revenue for an additional 5 percent of the businesses. The provision of services in foreign markets represents less than 10 per cent of total revenue for 91.2 percent of the businesses.
The European Union study stated 25 percent of SMEs within the EU27 export, of which about 50 percent also go beyond the Internal Market (13 percent), 29 percents of SMEs within the EU27 import, again 50 percent import from countries outside, the Internal Market (14 pecent). In addition, 7 percent of SMEs within the EU27 are involved in technological cooperation with a foreign partner, 7 percent are a subcontractor to a foreign partner, 7 percent have foreign subcontractors and 2 percent of SMEs are active in foreign direct investment.
As Jamaica seeks to become globally competitive and to accelerate our national growth, policies ought to be implemented that will drive the internationalization of our SME sector.
Richard Kildare is an entrepreneur, business strategist, marketer and former banker. He is the first vice president of the Small Business Association of Jamaica. He can be reached at driven2media@gmail.com.
Note: the opinions expressed in Caribbean Journal Op-Eds are those of the author and do not necessarily reflect the views of the Caribbean Journal.