Avia Collinder, Business Writer
Jamaican entrepreneurs are heavily reliant on their home market for business and as a corollary to that, have few clients overseas, a new report released Thursday in Canada has found.
Jamaica ranks low on what the report calls 'internationalisation', that is, the extent to which its entrepreneurs sell to customers outside its borders, according to the Global Entrepreneurship Monitor Caribbean Report 2011.
The GEM Caribbean Report reflects findings on activity among active and potential entrepreneurs in Barbados, Colombia, Jamaica and Trinidad and Tobago.
Most of the Jamaican survey respondents were found to be solely dependent on domestic patronage: their reason being it is costly to break into foreign markets.
"The majority of entrepreneurs (64 per cent) had none of their customers living outside the country, followed by 14.3 per cent who had less than 10 per cent of customers living outside the country," said the GEM report.
"These figures indicate that the internationalisation of entrepreneurial firms in Jamaica is extremely low. Internationalisation is lowest in the factor-driven economies, but increases with economic development levels."
Factor-driven economies are characterised by dependence on extraction industries, which in Jamaica's case would include bauxite.
Girjanauth Boodraj, lead researcher for GEM Jamaica who is based at the University of Technology Jamaica, says Jamaica was categorised as an efficiency-driven state in 2008, but reversed track in 2009.
The World Economic Forum's Global Competitiveness Report categorises countries under three headings - factor-driven at the low end; efficiency-driven; and innovation-driven, which is considered the top-tier group - based on GDP per capita and primary mineral exports as a share of total exports. Primary minerals exports would include bauxite, copper and other extracted natural resources.
"A GDP per capita between US$3,000 and US$9,000 is required to be placed in the category of efficiency-driven. However, if the country falls in this range - as Jamaica did over the last five years - but scored 70 per cent or above in mineral exports, an average has to be done to categorise such a country," said Boodraj.
"Obviously, Jamaica must have been scoring over 70 per cent in mineral exports since 2009 and, hence, has been falling under the factor-driven states despite its GDP per capita being between US$3,000 and US$9,000," the researcher said.
For Jamaica to reclaim the 'efficiency-driven' label, it needs to expand both its exports of primary non-mineral goods and services, while simultaneously maintaining, or expanding, its GDP per capita.
With regards to finding customers overseas, GEM Jamaica 2011 notes that just over half of the survey respondents from its expert panel, or 52 per cent, said it is not easy for new and growing firms to enter new markets.
"Most respondents (80 per cent) said that new and growing firms cannot afford the cost of market entry," the report said.
The GEM Caribbean 2011, as a means of comparison, does indicate that there are efficiency-driven countries with large populations and large land mass that show very low rates of internationalisation: Brazil, China, Argentina and Russia.
To change the Jamaican dynamic, local researchers recommend that "entrepreneurial firms should have an international mindset from their inception" and that the "strategic objectives of such firms should include plans for internationalisation."
The GEM Caribbean team was aided by Canada's International Development Research Centre, which supports research in developing countries.