Limited shock to Jamaican companies, CaPRI finds
Published: Friday | May 8, 2009
Dr John Rapley, president of Caribbean Policy Research Institute. - File
Jamaican think tank, the Caribbean Policy Research Institute (CaPRI), has concluded that Jamaican businesses have only a small level of exposure to the global economic crisis.
According to the CAPRI report on research findings published in April, which assessed the degree of vulnerability of local businesses to the effects of the global crisis, only five per cent or 14 of the 285 businesses surveyed had any direct exposure.
These were the businesses with investments in financial institutions overseas.
CaPRI, headed by academic Dr John Rapley, also found that of the 14, only four held investments or deposits with distressed foreign institutions.
Direct impact minimal
But while the direct impact on the businesses were minimal, indirectly companies were also exposed through lines of credit with these institutions.
Eight per cent of companies surveyed had lines of credit with foreign institutions while 32 per cent had with foreign suppliers.
The survey was conducted between January and March, covering businesses in the agriculture, trade and distribution, manufacturing, financial, construction, and tourism sectors.
The size of the firms varied from micro to large enterprises.
Of the 285 companies, 19 indicated a need to close down operations as a consequence of the global crisis. This, according to CaPRI, suggests the ability of most firms to weather external shocks.
Impact on the real economy
As it relates to impact of the crisis on the real economy, the tourism sector was confirmed to be at the highest degree of vulnerability given the potential decrease in demand from the overseas market.
Close to two-thirds of the companies questioned from this sector had between 10 per cent and 19 per cent of their markets in Asia, Latin America, Canada, United Kingdom, the United States and the Caribbean.
But 85.6 per cent of other businesses had over 90 per cent of their total market located in Jamaica, with the only threat being a prolonged recession.
Based on the findings, CaPRI's key recommendation to businesses was to diversify.
A diversified portfolio, location for output market, product line and customer base were the ways forward, the researchers concluded.