To any observer, the 21st century has thus far been characterised by rapid global transformation; politically, socially and economically. Radical shifts in the geopolitical landscape, mass movement of various peoples, and unpredictably evolving economic pressures are all pressing concerns with which we’ve grown familiar. For the developing small island economies, today’s prosperity may quickly give way to economic contraction and ruin. Indeed, this fragility is something even the largest of economies are now unable to claim immunity from as we’ve seen in Europe and even neighbouring Latin America.
Charting A Course In Uncertain Waters
It’s important to note that while rapid evolution brings greater risk so too does it afford greater opportunity. This is where the concept of ‘Foreign Direct Investment’ comes into play. Whereas monumental disparities in development may exist between nations based on their size and available resources, foreign direct investment does not discriminate. This is why geographically minute landmasses such as Hong Kong, Singapore and Dubai can stand globally as economic powerhouses in league with nations boasting a hundred times their size and population.
However not every small developing state can become the next Dubai or Singapore and they shouldn’t. Rather, by emulating certain policy aspects, they may achieve admirable measures of success that, in time, comfortably improve the nation’s wealth and standard of living. If we look at our backyard the small Central American nation of Costa Rica stands as a solid testament to this. According to UNDP, of 189 rated countries, it stands in the 63rd slot with a rating of 0.794, considered to be a ‘High’ human development category.
Additionally, data from Trading Economics shows that in the first quarter of 2019 alone Costa Rica enjoyed a 383.7 million USD increase in foreign investment. The Costa Rican Investment Promotion Agency further notes that last year, the nation achieved a total of 48 of its Foreign Direct Investment projects. This included the investments and establishment of local businesses from players such as ‘COLOPLAST’ a Danish medical device company and PRIMORIS, a Belgian medical laboratory outfit. This stands as quite a feat for a comparatively small Latin American nation with a population just under 5 million.
Creating Our Own Foreign Investment Roadmap
Consider that Costa Rica’s economy is not however based solely around foreign business investment. It also boasts the achievement of being Central America’s most visited tourist destination with other local industries to boot. This should stand out to the Caribbean nation wherein tourism intermingled with foreign investment and local industry successfully has always been a top aspiration. Thus, with this in mind, let’s chart out a roadmap with which the small island developing state may also achieve similar success.
- Trim The Bureaucracy
One of the most prominent indicators in attracting investors is how well functional a nation’s bureaucracy is. Too many developing countries have a hodgepodge mess of regulation that’s too outdated, too restrictive and excessive or a painful hybridization of both. No company wants to spend months or more grappling with conflicting, dead-end and prohibitive mountains of red tape.
The sad reality for many Caribbean nations is that large segments of their civil service and by extension, the very crux of their administrations, still run according to colonial-era texts. Some modernization has taken place but this is usually reactive, slow and only done when politically expedient. Rapid modernization, including digital streamlining, regulatory updates and a massive trimming of excessive red tape in favour of a more proactive system is required post haste5.
- Aspire To Become Financially Competitive
Costa Rica for one stands at Rank 55 in the World Economic Forum Global Competitiveness Report, just behind the developed nations of North America and Europe as well as way ahead of its Latin American counterparts. By comparison, Trinidad and Tobago and Jamaica both sit at 78 and 79 respectively with declining scores each year. If anything this should spell out quite clearly why a certain Central American nation snatches up so much investment. This requires the imminent modernization of trade laws, judicial efficiency, business-friendly taxation policy and an investment-friendly banking sector. It can also take the form of establishing ‘free trade’ zones in areas of infrastructure suited for commercial investment such as has been done in China and Costa Rica itself.
- Aim High
When many people consider foreign investment they’re all too likely to conjure up images of dirty industry. Things like raw resource extraction, processing and basic manufacturing come to mind. This has often led detractors to view foreign direct investment as inviting foreign powers to turn one’s country into a ‘dumping ground’ for cheap labour and easy disposal where their host nation’s environmental laws would quickly have them shuttered.
However, going back to Costa Rica we see this is far from the case. Foreign investors can encompass a vast array of high tech industry such as drug synthesizing and medical manufacturing outfits, scientific research and ICT based development such as a processor or other chipset manufacturing plants. To achieve this degree of investment however requires effort from the host nation as, while ‘cleaner’, these companies may have more comprehensive demands. This leads us to our next point.
- Retain Your Nation’s Skill
One of the worst problems that plague developing nations is the brain drain. Make no mistake; our populations produce intellect and brilliant minds just as much, if not more than those of developed nations. However, due to a lack of opportunity, financial difficulty, dead-end career paths and myriad other problems, they all too often prioritize emigration as their primary goal.
Changing this may prove difficult as they’ll only truly begin to remain in numbers once foreign entities have already begun investing across a diverse array of sectors. However, public and private players can seek to create meritocratic incentives and increase all-round investment both into ICT based development and into increased ICT and STEM training. The presence of diverse, multifaceted local talent can then be used to generate increased investor interest from STEM-based companies.
- The Need For Will And Resolve
Naturally, achieving this form of economic development requires a considerable degree of internal change as well. This is something that usually comes slowly in the economic monoculture and political climate of the Caribbean. Thus, enacting such policies would no doubt require a considerable degree of political will and sacrifice. Therefore, we must remember that this is the nature of business and commerce; that of calculated risk and shrewd implementation of policy.