There is an upsurge in cross-border investment within the Caribbean Community (CARICOM), with potential conglomerate forms of business organisations emerging in the Region. The enterprising intra-CARICOM investors are mainly from the light manufacturing, distribution and financial services sectors.
This was reported by the Economic Intelligence and Planning Unit of the Caribbean Community(CARICOM) Secretariat in its recently released Caribbean Trade and Investment Report, 2000, a new CARICOM initiative which offers a detailed analysis of the Region’s trade performance intra-regionally, hemispherically and globally.
The Report points to the increasingly liberalised business environment within the Community as being the main influence, and has observed too that Caribbean firms are breaking free from “the small local market size with its limited scope for business opportunities”, and moving out into more challenging circumstances of cross-border investment activity where the results are better from the spreading of risks.
The emerging Single Market and Economy in the Caribbean Region, aided by the increasing relaxation of cross-border restrictions, has been cited as the major factor “inspiring a greater number of firms” to evolve into conglomerates. “Some distribution firms have graduated into manufacturing (and vice versa) and certain firms with real sector core activities have entered the financial services sector as a result of the more permissive business environment,” the Report observed.
Some caution was also offered by the Report, that “while such diversification can confer important advantages for the firm concerned, it can also stretch to the limit, inherent corporate, managerial and accounting capabilities”.
The CARICOM Secretariat recently undertook a survey of 39 companies that were known to have some degree of cross-border activity. They reported that Goddards Enterprise of Barbados is the most prolific firm, with 18 cross-border operations, most of which are in the CARICOM Region, Just as prolific are Neal and Massey, Colombian Emerald and Royal Bank of Trinidad and Tobago with 14, 13 and 10 cross-border operations, respectively.
It was reported that the emerging trend suggests the development of an increasing entrepreneurial capability by investors from the Region. The extent of the operations of some firms would indicate that they can be truly considered Caribbean “transnational corporations” the Report concluded.
It was further noted that Trinidad and Tobago and Barbados are the dominant sources of regional investor capital. Of the 39 companies with cross-border operations studied, 33 had their head office in the MDCs. The firms from Trinidad and Tobago (which number 23 of the sample of 39) appear to have the most aggressive cross-border location strategy (mainly in manufacturing, and banking and other financial services). Six of the top ten firms are headquartered in Trinidad and Tobago, while the other four are based in Barbados.
According to the Report “a significant proportion of foreign investment in the Organisation of Eastern Caribbean States (OECS) is from CARICOM Member States. In 1995, intra regional investment in the OECS was EC$114.6Mn and, by 1998, it had reached EC$187.1 Mn, which is substantial when compared with FDI from all sources, since the shares in 1995, 1997 and 1998 were 23 per cent, 37 per cent and 30 per cent, respectively.”
