FRANKLY SPEAKING ………

“ Made in Dominica”

(Outlines of a National Manufacturing Strategy. Part 1.)

Focus.

There are critical external forces impacting on the emergence of a vibrant manufacturing sector in Dominica. These include positive trends such as the ease of international migration of capital and technology to areas of highest profit margin and opportunities for expanding negotiated regional and international market access. True, also, one needs to contend with such negative factors as uneven trading arrangements, increasingly demanding health and safety standards and the upward spiraling cost of transportation, due to rising fuel prices.

Superficially, small economies like Dominica face additional constraints of limited labour supplies, a small natural resource base, a limited industrial and service sector which constrains specialization, cost efficiencies, small local markets and a relative disadvantage in skills availability.

 

The challenge, then, is one of creating a viable and sustainable manufacturing sector, recognizing how these contending forces operate on the local economy and society, and of designing an incremental process in response, which benefits from the opportunities available, or those that can be created.

Factors conducive to change are not constant. They are dynamic and represent themselves in various guises. As well, they can be manipulated in different ways. For example:

  • If the size of the labour force is small, it can be “increased” not merely numerically, but also qualitatively so that with the same quantitative labour pool, more can be produced through technological substitution leading to increased productivity.
  • If available natural resources are constricted, they can be supplemented by importation of additional supplies of raw products, combined with using whatever is available by means of factor substitution leading to value augmentation.
  • If local technical and managerial expertise are limited, such limitations can be overcome in the short term by attracting outside expertise, and in the longer term, by training local persons to fill those roles. Similarly, required technology may be “purchased” under license or leasing arrangements or by encouraging compatible partnership investment “by invitation”.

There are no imponderables. Post-war examples of a resurgent industrial Japan (on a larger scale), and of Singapore or Taiwan (on a smaller scale) amply demonstrate what is

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possible. The worlds of economic endeavour and of business are ever-evolving. Not even the sky is the limit!

This paper attempts to focus attention on some of the issues relevant to the Dominica context as a springboard to more detailed and broadly based national discussion on objectives, approaches, directions and practical possibilities for Industrialization.

Essential Building Blocks.

At the outset, one might observe that until the full dimensions of the challenge are known and the possibilities for moving forward are determined, there is the need to intelligently establish and manage some basic engines of growth, without which initial efforts can be too easily frustrated. Among many, the following appear to be most critical:

  • Implementation at the earliest opportunity of a cheap and efficient national power generation and distribution system. Dominica is fortunate possessing the ingredients for such a system, through an environmentally compatibility water, wind and geo-thermal sourcing. Operation of such a national system should be under public ownership or at least be co-ventured under an acceptable public-private partnership arrangement with majority public ownership.
  • Protection of water catchment areas and the establishment of a properly planned supply and delivery of community water system must be introduced bearing in mind the critical nature of clean and abundant water for a healthy labour force; the urgency of water availability for constant year-round intensive farming of agricultural products; the contribution of water inputs to agro-processing; and, opportunities for attracting high value consumer goods production requiring high quality and reliable water supplies.
  • Assertive programs for local secondary processing of natural raw materials, always attentive to increasing the “value added” locally, minimizing waste and insisting on full site rehabilitation and renewal.
  • Significant investment in people (education, health, skills and management training) to provide timely cadres of middle and upper managers as, when and where needed.
  • Continuation of the current aggressive program of physical infrastructure improvements with the capacity of the national economy (sourcing of funds, servicing of loans, competing priorities, rational staging and expected returns on public investment).

Policy Particulars.

Modern industrial policy should be safely nested within the overall policy planning for the economy as a whole. In this way, the various patterns of interaction with other sectors such as agriculture, tourism, settlement locations, the national road and

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transportation program, human resource development or administrative issues of national fiscal policy, environmental quality, waste management, etc are all known and accommodated at the outset. With this framework in place, the following are some of the issues likely to be addressed in the industrial programming design.

  • Required priorities in inter-sectoral integration: There continues to be the need for a framework specifying how industrial objectives and initiatives are expected to relate to the other sectors of the society and economy.
  • Industrial Policy Implementation: Provision should be made for the effective day-to-day programming and management of industrial policy by means of a

dedicated Industrial Development Corporation suitably mandated, staffed and monitored, and operating at arms length from the political directorate.

  • Urgent assessment of potential industrial manufacturing and processing “winners”, “losers” and “in-betweeners” with an evaluation of what is required to move the most attractive of these to the fore-front of achieving sector objectives and targets.
  • Where existing operations already exist within the “winners” category, immediate consultations need to be undertaken to determine opportunities for removal of constraints to growth in order to enhance their prospects.
  • It is necessary to remember that stakeholders in industries are owner-investors, suppliers, employees and consumers, and all should be party to plans for growth and change.
  • Government incentives should be tailored to the specific requirements of       industries by type and that indeed the specific needs of particular industries may change over time. Incentives should be conditional on performance and must be predicated on direct (financial impacts, revenue generation and employment), and/or indirect (social, institutional) spin-off benefits.
  • A focused approach to Research and Development is indispensable to facilitating an appropriate industrial program. Yet, given the realities of size, these may not be feasible on an island-by-island basis. Both government and the benefiting industry should consider making an annual provision for research and development to competent in-house or third party educational agencies.
  • Further to the above, each island jurisdiction might consider the Concept of Regional Centers of Excellence where individual research specializations might be established and promoted in various territories according to interest and local activity. These may or may not be located within an academic setting but could

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  • as well be placed as well in designated and accredited institutes (or technical ministries of government).
  • Suggested Centres of Excellence might include, for example: Food Processing (Preparation and Packaging); Building Materials and Construction modules; Furniture, Fixtures and Fittings design and manufacturing; Textiles, Fabrics, Clothing and accessories design and manufacture; Energy Sourcing and Applications; Cosmetics, Pharmaceuticals, Nutraceuticals. The benefits of resulting Research and Development could then be made available to all contributing jurisdictions under negotiated protocols.
  • Little of the above can be achieved in a progressive manner without a long term skills development policy. The education system must have a purpose, the

curriculum must be designed towards a national agenda. Students graduating

from secondary and tertiary academic institutions must have a place in the

economic future of the country. Besides obvious benefits of employment,

income, improved standards of living, there must be expectations of personal

contribution to community development.

  • Successful investment programs require that the community provides nothing but the best that it can; that officials deal with all parties whether local or foreign with efficiency, professionalism and accountability; and that government policy is well-enunciated, transparently implemented and impartially applied.

Lessons along the Way.

There is no need for Caribbean countries to confine their futures to being primarily source areas for raw materials and primary goods production thus depriving themselves of the benefits accruing from proceeding to high value-added commodities. It is a gross incongruity that islands which grow sugar cane and highly flavoured fruits in such abundance continue to allow these products to be exported in raw or semi-processed form to metropolitan countries which produce neither, for manufacture and re-sale as high cost derivatives, such as liqueurs and chocolates. That is a travesty! At the same time, one needs to recognize that the days of preferential tariffs for raw agricultural products overseas or for protective tariffs at home are fast disappearing. Industrial policy and programming must operate within both realities. One must accept the strategy of producing higher value goods at home for export, and this can be done under the right policies, incentives and programs.

Dominica, like similar jurisdictions, must however reject a philosophy of localization of industrial investment, that is, that local industrialization should be

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concentrated in the hands of nationals. “Glocalization” or the astute combining of local and global investment effort potentially affords a feasible alternative for accelerating local investment effort and simultaneously breaching otherwise impregnable global technology and market preserves. The challenge is for territories like Dominica to design approaches which do not discriminate against non-national investment, which provide fair repatriation of returns to such investment, which respect and honor patent rights from abroad and which maximize the benefits of local and foreign business network linkages.

The reality is that for reasons of quality control and standards, global marketing and increasing concentration in the retailing and distribution system, there are obvious advantages for local production under arrangements with metropolitan distribution organizations. These need not necessarily operate to the absolute or relative disadvantage of local or regional producers. Indeed, as current negotiations

stand, whether we wish it or not, we need to prepare ourselves for increasingly high

levels of foreign participation in productive enterprises of all kinds in our islands

as a result of recently signed Economic Partnership Agreements (EPA’s) and other

trade agreements in the pipeline. It is no response to cry gloom and doom on that account. It is time to take advantage of the silver linings…..and there are many! One immediate recourse is to “piggy-back” on such new investment entrants by an insistence on joint venturing through local participation, as well Public Private Partnership (PPP) agreements whereby government itself shares in the production investment.

These may well be short term response strategies in recognition of existing deficiencies. Accordingly, Dominica and its sister OECS (if not CARICOM) jurisdictions should initiate in a spirit of directed and planned investigation, and as much complementary effort into Research and Development as is necessary to see the emergence of a strong local/regional innovation and invention competence. These might include “innovation centres” where private ideas might be investigated, tested experimentally and market feasibility determined. It might proceed to planned programs for designated “incubator industries” where public and private funding come together to move small feasible local industries to strong internationally competitive industries.

Dominica and its sister islands need to be on guard against being deluded with false promises of a future as “industrial goods assembly depots”. Equally, these islands can expect increasing interest from certain low wage industrializing countries with poor environmental records wishing to use these jurisdictions as beachheads for “topping off” cheaper manufactured goods in order to access otherwise inaccessible markets.

Efficient, high quality manufacturing (low per unit production cost) and aggressive marketing of nationally produced goods locally and regionally with prospects of

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penetrating internationally negotiated markets are going to be the key to success. There are no safe industries any more, no matter how large or unique. Neither is there any safety in the old ways of doing things. The product must be continually renewed; the process continually up-graded; and, employers and employees continually trained in the most current techniques

The thrust towards creating or renewing our industrial sector does not necessarily require us to always search out totally new products. It may also lead us to creating new products out of a combination of existing products or to find new products with commercial potential on the production “edges” of old products. Adapting old productive processes to new uses or finding products on the edges or by creating specialized market demand for renewable products (niche products) are viable options for small economies.

The successful industries are those which are best able to incorporate cost-effective measures towards a more efficient and desirable product with the greatest consideration for environmental sustainability and social stability. Small societies need to continually revisit the THREE R’s (Reduce raw material consumption, Re-use elements of the original the production process, and Re-cycle waste material towards new production).

The Development Agenda.

It is not enough for government officials to simply improve the infra-structure of the country, important as that may be, and then hope and pray that the production forces come together to make productive use of these infrastructures. For development to occur, there must be cohesive programming as to the resources to be used, the factors of production required to use them, the quantities required, the quality desired, the locations for production, including facilities and services, and the staging of the production effort for best results. There must be adequate financing at affordable carrying charges; there must be competent management and technical skills, motivated and well-compensated; labour must understand and commit to their role in the productive process; markets must be identified; and, transportation opportunities at reasonable costs must be available. These are only part of the considerations in opening the industrial doors in Dominica for business. There is no longer any imperial power and their self-serving bureaucrats around to do this. A potential interested investor is not likely to come in and undertake this broad agenda for the country as part of his private business package. This is the role of government directly or through its special purpose agencies. This is a program that requires the engagement of the many business, financial, labour, social entities who are necessary partners in the outcomes as stakeholders.

Industrialization necessarily is a process of transformation: of raw materials to finished manufactured goods; of transitioning of labor from agriculture and nature-

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dependent factors to machine-controlled working environments; of societies changing from rural, closely-knit informal relationships, to urban, impersonal, institutionalized patterns of interaction. The major question to be resolved after a consensus on an industrial agenda is how far is the society willing to change? Some may say, “Change, Yes; but destroyed, Never!’ So, what aspect of the environment, economy and society may be altered, and to what extent? What aspects of “Dominica” can and must be left intact?

Even at this stage, one can speculate on some of the critical dimensions of the conservation/development and growth decision. One is that of a population policy.

How does one perceive a changing population and the place of diversity in a new, vibrant Dominica? To what extent can Dominica sustain high levels of a non-investor segment of the population? How does the nation address the combined issues of skills retention and attraction when required? How should the society balance competing demands of social and economic programs with a limited revenue stream?

A second critical area is the urgent need for a national land resource use and settlement strategy. Dominica is fast losing (if it has not already lost) effective control over its privately owned land resource base and there might be little opportunity for rebuilding a comprehensive land use strategy. Very limited prime lands remain for intensive agriculture. Not only will continuing land clearing at the outer margins be less environmentally sustainable because of soil quality, slope, erosion etc, but they will be prohibitively expensive to service with access roads. Larger, formerly viable estates have been allowed to be fragmented into increasingly uneconomic size holdings, totally unsuitable for modern farming practices typified by crop intensification, irrigation, mechanization and financing for risk management. In addition, the intrusion of high value competitive land uses has been allowed in agricultural districts establishing new land values totally adverse to continuing stable agriculture. The persistence of an agricultural policy of primary production for exp[ort has failed to recognize that a program of national food security is capable of yielding greater net returns through food import displacement and replacement combined with aggressive regional exports. Similarly, the complementary links between agriculture and the burgeoning tourism industry locally and regionally has been largely ignored. Lastly, the relationship between agriculture and industrialization building on traditional and non-traditional food processing through to the emergence of new high value niche products such as beverages, spices, pharmaceuticals, cosmetics and nutritional supplements is an area for long overdue attention. Serious and progressive industrialization will not occur unless the agricultural sector has been stabilized! helter-skelter.

The third critical area for a future industrial (Made in Dominica) policy development is that of available and economical energy supplies. In many respects

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this can be the determining factor in attracting new industries into the country or in making home-grown industries more competitive. One need not itemize the extensive list of candidate industries which could be activated by cheap, reliable power supplies. (It is symptomatic of the dearth of ideas in the country when local policy planners perceive this opportunity only in terms of potential export of electricity). Dominica has the most promising future within the Caribbean of supplying its growth related energy needs in a sustainable, economical and environmentally responsible manner, especially using geo-thermal sources or secondarily, through central or dispersed hydro-electric plants.

Fourthly, water has been described as the “oil resource of the 21st century”. Dominica is blessed with an adequate and even, perhaps, an excess of reliable, high quality water supply sources, highly accessible, which are indispensable for some major manufacturing processes. But once again, our local blinkered planners have perceived this endowment primarily in terms of the exportation of bulk or bottled water! Without thought or foresight and an aggressive progressive spirit guiding development policy, the country is likely to lose this competitive advantage from this endowment and find other countries using this resource to greater advantage than the country of origin.

The Turn-around.

 So why has the country been so slow to identify and to grasp these opportunities and to take advantage of them? Why so slow in bringing relief to our society through jobs and thereby saving so many of the young industrious segment of the population the indignity of having to go into less hospitable countries? The answer may lie in some of the following observations::

  • A pervading fear of committing to a policy or policy direction for fear that if not achieved it may be considered a damning indictment of failure, with adverse political fallout.
  • The release valve of out-migration has also relieved local policy makers, bureaucrats and politicians alike, from the social unrest which comes from a dissatisfied society and the concomitant urgency for action.
  • Decisions of the nature discussed will upset certain (influential) interest groups and the doing nothing or a perception of doing something such as widespread public infrastructure (without an integrated framework) would seem to be the easier route.
  • Basic change has unfortunately always been the result of a “demonstration effect”. Simply, “monkey see, monkey do”. If a foreigner comes in and does something new successfully, then others copy or fall in line. We seem hesitant to be architects of our own fortune.
  • Candidly, the country may lack the capacity and experience to put this thinking (assuming it is acceptable) into action and there is a hesitancy to require

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performance whether by “sticks or carrots”. Other countries have successfully “borrowed” administrative and technical capacity from other countries when they perceive that they have deficits in generating their own turn-around.

  • Interestingly, the Caribbean has a potential and available resource of skills and experience on which to build a world of its own making in the future but most jurisdictions in the region, with a stubborn resistance, refuse to call on their “Nationals Resident Abroad” to assist in providing this assistance.
  • (Anecdotally, one could relate a litany of instances of trained Caribbean-born diaspora personnel being sent as advisers to the Middle East, Africa and South-east Asia and Latin America to advise on a variety of development issues, projects and problems. ranging from telecommunications, electronics, electronic data processing, agriculture, agro-processing, urban-rural and resource planning. Yet, such resources are unwelcome at home.
  • A reliance on “industrialization by invitation” is no longer tenable. The

Caribbean is no longer a low wage region; the economies of scale required for

successful industrial production do not exist (in the Eastern Caribbean) and

foreign investment processes typically require a level of training not yet

prevalent in the islands. Yet opportunities for home-grown manufactured

goods of a regionally specialized nature exist, and it only remains for

interested and motivated local persons or persons with roots in the area to find

them.

  • There is some increasing perception that these islands might serve as beach-heads for the assembly of cheap Asian designed and manufactured goods destined for protected or negotiated markets in North and South America. This program is unlikely to provide much employment benefits to Caribbean people who are higher wage earners than their new citizen Asian compatriots and one cannot envisage a dual wage economy within such small islands. Secondly, North American jurisdictions have already challenged the jurisdictions where these new Caribbean citizens emanate. “Made in Dominica” under such conditions would be an unacceptable façade!

So, there is no quick fix, no easy routes to the transformation of our society to meet the challenges of the future. The two essentials are deep and intelligent thinking and concerted action. To believe that we are incapable of either or both is to abandon the legacy of the past sacrifices made to bring us to this place and time. To refuse to act when we are capable of so doing is to display the most despicable betrayal of trust to future generations. Yes, we can do better!

{In Part 2, the author will analyze Dominica’s performance within the Regional Area and identify certain potential opportunities for detailed examination by those interested, together with prescriptive elements of a National Strategy.}

General comments, discussionsl, critiques even are all encouraged

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