In last week’s edition of Business Basics, the first part of an extract of Christoher Sinckler’s presentation on The Role of Small Firms in the Development Agenda for Small Island Developing States (SIDS) was shared. The alternate executive director with the World Bank Group provided much food for thought at the recent Leo Leacock Lecture during Small Business Week 2023 on areas to strengthen the local small business ecosystem.
Three key points of note for which small business administrators agree should be at the forefront of the advocacy agenda for the sector in the ensuing year are climate resilience building, democratisation of finance access, and business facilitation and inclusion.
This week will continue the discussion on the area of business facilitation.
A major part of the development agenda globally and nationally is to help countries sustain Gross Domestic Product (GDP) growth, increase global trade, create employment through decent work and reduce income inequality.
In Latin America and the Caribbean, many SIDS were impacted more negatively than their developing country counterparts relative to the pandemic effects. In addition to the steeper GDP declines, unemployment and income inequality seemed to have suffered the most.
In this regard, one area that all the major post- (and in some respects pre-) COVID analyses have highlighted that SIDS need to pay urgent attention to is their respective frameworks for facilitating the conduct of business and investment. As the world continues to ramp up post-COVID business and investment threads across the entire global value chain, it will become even more competitive within and among countries globally and regionally. It means, therefore, that in countries such as ours where we know structural impediments such as smallness of markets, geographic remoteness, lack of sectoral diversification, openness to trade, foreign exchange constraints etc. limit our attractiveness to investors, foreign and domestic, removing obstacles to efficiency in business processing is critical.
It affects costs and confidence. It is no secret that in SIDS, this has been a major challenge for years. In the Caribbean especially, it presents in two critical areas: trade facilitation, and the costs and ease of doing business. Often when these discourses are happening, the focus tends to be on attracting foreign investment – which is hugely important – but equally as important is how work in these spaces affects the development, growth and success of small businesses.
The reality is that many small and medium-sized businesses die at the hands of poor facilitation, inappropriate levels of regulation, and antiquated public and private sector systems that prove to be more hindrance than help. These can be found across trade and customs, legal, tax policy, utility provision and labour market rigidities, to name a few.
While bigger businesses might be able to better manage the costs and frustrations associated with many of these, the margin for error amongst their smaller counterparts is much narrower.
From the most recent investigations across SIDS, and particularly in the Caribbean in respect of trade facilitation, there seems to be some considerable level of progress being made. To be sure, we know that the WTO, ITC, UNCTAD, World Bank and IMF have been lending financial, human and technical resources to assist domestic authorities in getting critical aspects of the WTO Agreement on Trade Facilitation implemented. Several governments have formed national working groups comprising key stakeholders from both public and private sectors to set out ambitious actions to enhance trade facilitation from ship to shop and ultimately consumers. Various SBAs have been playing a key role in this effort and it is to be hoped that such will continue because there is much at stake here for the continuing success of the small business sector, as you seek to reduce costs and create certainty of sourcing inputs for your operations.
We know the role that digitalisation plays in this regard. The fact is that there exists a real possibility that as digital systems and applications evolve at speed, the digital divide between SIDS and the rest of the world will get wider if urgent attention is not paid to reversing it. This is where the small business sector must continue to push authorities – not just in domestic jurisdictions but internationally – for agencies such as the World Bank to do more in prioritising digitalisation in SIDS and developing countries.
Digitalisation is costly and in some respects, it can be complicated. So, every effort is needed to reduce both for our countries. The World Bank Group, with strong support from regional governments, has been pushing other Directorships on the Board as well as senior Bank staff to ensure that digitalisation in developing countries is among one of the Bank’s core programmes of focus. We have been making significant progress in this effort and confidently expect that such will be the case coming out of the current World Bank Reform Process. If that happens, billions of dollars of new support, much of it in the form of grants and very low-priced loans, will be available to developing countries to improve their systems.
The full lecture can be viewed at – https://youtu.be/jTPO-cQUfE8
The Small Business Association of Barbados (www.sba.bb) is the non-profit representative body for micro, small and medium enterprises (MSMEs).