The DAILY OBSERVER Tuesday, May 4, 2021 Page 28
Lesson 29
with
Treisa Cornwall
TECHNOLOGY AND THE GLOBAL BUSINESS
ENVIRONMENT CONT’D
MAJOR ECONOMIC INSTITUTIONS AND SYSTEMS
Many economic systems have been instituted
to serve the Caribbean. Their focus is on trade,
development, international law, and finance.
These economics institutions are outlined below.
1. Caribbean Community (CARICOM):
the aim of this initiative is to promote
sustainable economic development,
improve the standard of living and
encourage a greater understanding
among member states. There are fifteen
member states and five associate states
of CARICOM. The member states
are Antigua and Barbuda, Bahamas,
Barbados, Belize, Dominica, Grenada,
Guyana, Haiti, Jamaica, Montserrat, St.
Lucia, St. Kitts and Nevis, St. Vincent and
the Grenadines, Suriname, and Trinidad
and Tobago. The associate states are
Anguilla, Bermuda, British Virgin Islands,
Cayman Islands and Turks and Caicos
Islands. (NB. all the associate states are
British Overseas Territories).
CARICOM impacts the Caribbean as
it seeks to promote integration and
cooperation between members fairly
and the coordination of foreign policies.
With shared resources among member
countries, the region should become more
competitive in global markets.
2. Caribbean Single Market and Economy
(CSME): this is the most important
declaration made by CARICOM countries
to establish a free trade and free tariff
single integrated market in the region. The
key elements of the CSME are:
► Free movement of goods and
services.
► Common external tariff.
► Free movement of capital.
► Free movement of labour.
► The right to establish a business
in another CSME country.
The CSME promotes regional cooperation as it
relates to free trade and the establishment of a
common external tariff for non-member states.
Operating in a single market economy allows
CARICOM businesses to operate on a larger
scale with a larger home base, thus facilitating
economic growth.
1. Caribbean Development Bank (CDB):
this organisation was formed in 1970. Its
general purpose is to assist with developing
economic growth among member
countries. Its regional members, who can
borrow funds and vote on important
decisions, are Anguilla, Antigua and
Barbuda, Barbados, Belize, British Virgin
Islands, Cayman Islands, Dominica,
JOL PRINCIPLES OF BUSINESS continues on next page
 The DAILY OBSERVER Tuesday, May 4, 2021 Page 29
JOL PRINCIPLES OF BUSINESS continued from previous page
Grenada, Guyana, Haiti, Jamaica,
Montserrat, St Kitts and Nevis, St Lucia,
St. Vincent and the Grenadines, Suriname,
The Bahamas, Trinidad and Tobago and
the Turk and Caicos Island. Other regional
members (not entitled to borrow funds)
Colombia, Mexico, and Venezuela. Non-
regional members (can vote but cannot
borrow funds) Canada, China, Germany,
Italy, and the United Kingdom. These
countries assist developing countries with
coordinating, technical assistance, and
financing for developing projects. The
Caribbean Development Bank provides
funding for Caribbean countries that need
funds to promote sustainable long-term
economic growth. Funds received are
used to improve agriculture, education, and
other key social purposes.
2. International Bank for Reconstruction
and Development (IBRD): this is one of
the institutions of the World Bank Group,
it offers financial and policy advice to
developing countries on how to reduce
poverty and extend the benefits of
sustainable growth. The IBRD provides
funding for reconstruction, rebuilding and
development projects.
3. World Bank: this is a large international
financial institution made up of one
hundred and fifty-eight (158) countries.
It is the world’s largest source of funding
for developing countries, ending poverty,
and the promotion of shared prosperity
globally is one of its main aims. The World
Bank contributes to varying projects in
developing countries, such as health care
and infrastructure.
4. International Monetary Fund (IMF):
this is an organisation made up of one
hundred and ninety-eight (198) countries
and established in 1945. Its goal is to
ensure stability within the international
monetary system. It is governed by
member countries and is accountable to
them in three main ways:
► Economic surveillance – overseeing
the economic and financial policies
of member countries as well as
assessing risks and making policy
recommendations to countries
► Lending – offers loans to member
countries who are experiencing
balance of payment problems. Balance
of payment problems arise when
the outflow of currency (facilitating
international transactions) exceeds
the inflow of currencies (receipt from
international transactions.
► Capacity development – assisting
governments with updating economic
policies and the training of people to
assist with improving the economy,
growth, and development.
The IMF helps with short-term finance
which assists countries with managing
debts, especially where countries have
accumulated large debts and is unable to
repay them. The IMF will have conditionality
or demands which the borrowing country
will have to abide by example a reduction
in government spending.
JOL PRINCIPLES OF BUSINESS continues on next page
 The DAILY OBSERVER Tuesday, May 4, 2021 Page 30

JOL PRINCIPLES OF BUSINESS continued from previous page

5. World Trade Organisation (WTO): this is the only international organisation that deals with
trading rules. Its aim is to engage in trade negotiations on key matters relating to goods and
services, intellectual property, trade barriers and trade disputes. The WTO’s agreements are
discussed and approved by most of the global trading countries. This goal is to assist producers,
exporters, and importers to trade freely globally.
6. Organisation of American States (OAS): the aim of this institution is to strengthen peace and
security in the western hemisphere. The goals of the OAS are to facilitate political dialogue and
cooperation among members, influence domestic laws and evaluate the progress of policies
implemented by members. Democracy, human rights, security, and development are the main
pillars of the OAS.
There are many major economic problems facing Caribbean countries. These are outlined below in
figure 1.1 and table 1.
Figure 1.1

Debt
burdens

Net Economic
migration dualism

MAJOR
ECONOMIC
PROBLEMS
OF THE
CARIBBEAN
Capital Sourcing
inflow raw material

High
Un-
population
employment
density

JOL PRINCIPLES OF BUSINESS continues on next page

 The DAILY OBSERVER Tuesday, May 4, 2021 Page 31

JOL PRINCIPLES OF BUSINESS continued from previous page

ECONOMIC PROBLEMS DETAILS SOLUTION TO ECONOMIC PROBLEM

1. Access to foreign direct investment

This has been a problem plaguing
(FDI): this occurs when a person or
Net migration – Caribbean countries since the
company from a country makes an
people moving from 1950s resulting in a brain drain
investment in a company or entity in a
one country to another. situation. People who migrate are
different country. It is viewed as a long-
seeking to improve their lives.
lasting interest in a foreign country. Foreign
investments reduce the need for external
Caribbean countries often have borrowing, this in return can assist the
Capital inflow and poorly developed capital markets country with reducing their debt issues.
raw materials – and thus need to import significant 2. Development of human resource: with
these are often bought quantities of raw materials. It is the development of human capital, the
overseas. costly for Caribbean countries to
Caribbean will become more competitive
acquire raw materials.
as the skills of people will be developed.
The development of human resource will
Some traditional industries also help to alleviate unemployment as
Unemployment
have faced strong competition more people will acquire the necessary
– people who are
from overseas leading to an skills and competencies that will make
seeking a job, but
increased number of people them more marketable for jobs.
unable to find one.
looking for employment.
3. Development of manufacturing,
distribution, and export sectors: because
People tend to live in urban areas
High population the manufacturing sector uses raw material
that are relatively small, thus
density – high density from the primary and secondary sectors,
leading to overcrowding. This
occurs when lots of this creates linkages within the economy.
results in increased pressure
people live in a small To support this, an efficient distribution
on education, health, and other
area. networking system will be needed. As
amenities.
long as the manufacturing, distribution
and export facilities within a country are
Economic dualism developed and spread throughout the
Many Caribbean countries
– one side of country economic activities will improve.
experience urban/rural drift
the economy is
thereby creating a two sped 4. Development of technology to generate
technologically
economy. Most times one economic activity: technology is the
advanced and the
sector is prosperous and the driving force in the twenty-first century. It
other is technologically
other is lagging. offers enormous potential to businesses
backward.
and can be viewed as the solution to
Caribbean countries will always economic problems in the Caribbean. Even
Debt burdens – though technology drives the economy, it
have a high debt burden as they
countries being is highly dependent on solid infrastructure
constantly borrow from their
indebted to overseas such as high-speed broadband, education
foreign counterparts. Some
institutions and and training and government support.
Caribbean countries’ debt is higher
countries.
than their national income.
JOL PRINCIPLES OF BUSINESS continues on next page
 The DAILY OBSERVER Tuesday, May 4, 2021 Page 32

JOL PRINCIPLES OF BUSINESS continued from previous page

ROLE, BENEFITS, AND IMPACT OF FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) happens when capital flows from one country to another. FDI may take
the form of investments in buildings, machinery, equipment, and technologies in business in Caribbean
countries by foreigners. The table below outlines the benefits and impact of FDI.

BENEFITS OF FDI IMPACT OF FDI

It can cause competition for Caribbean

Foreign direct investment creates
businesses, thus resulting in the closure
new jobs.
of some local businesses.

Some local investment may
not be available for both the
private and public sector; hence,
foreign investment provides the
necessary capital injection.
Tax incentives are usually given in the
form of tax breaks or reduced taxes
for foreign investors. This will reduce
the amount of corporation taxes the
government will receive.

Foreign investment can lead to

Investment in production facilities
environmental damages when
and infrastructure can drive
environmentally sensitive areas are used
economic growth.
to build factories.

Funding develops local skills FDI represents an inflow of money into

with training in international best the Caribbean, but there can also be
practices hence more competent a significant outflow of money when
and knowledgeable human foreigners repatriate profits to their parent
resources. company home.

Treisa Cornwall is on the staff of St Andrew Technical High School.

 E-mail: treisacornwall@gmail.com