A lesson worth learning from our Dominica
Generating a consistently high level of employment to meet the ever-expanding needs of the local population, especially the hundreds of young people who graduate annually from high school, college and university, has always presented a major challenge for Caribbean governments.
The limited availability of resources, resulting from the small size of our countries, effectively hinders the adoption of a more self-sufficient approach to economic development which is possible in larger countries with far more resources and larger populations.
The small size of our markets and a general lack of economies of scale to support highly profitable production also put Caribbean countries at a disadvantage when it comes to competing against larger countries for foreign investment to enhance our economic development prospects.
Our small countries, therefore, are generally unable to offer the kind of attractive returns on investment which every foreign investor looks for. Regional integration, in the form of the seemingly stalled CARICOM Single Market and Economy (CSME) project, was meant to address these challenges.
Given our relative unattractiveness to foreign investors, especially in the current globalized environment, ensuring the success of indigenous industries assumes significant importance. Indeed, successful indigenous businesses have always provided more stable and secure employment for our people than foreign-owned enterprises.
Anyone who has followed the development of neighbouring Dominica over the 50 years would be familiar with a company by the name of Dominica Coconut Products (DCP) Limited. Established in 1965 by the Nassief family, DCP went on to become an outstanding success story in regional export manufacturing.
Using locally grown coconuts as the basic raw material, DCP rose to prominence as a high-quality manufacturer of cooking oil, laundry and bath soap and other personal care products for the domestic and regional markets. It was one of the first regional companies to enter the Cuban market. It also landed major contracts to supply the cruise ship industry.
No doubt, it was this track record that attracted the attention of Colgate Palmolive, a leading United States-headquartered multinational involved in the production of soap and other personal care products for global markets. In 1995, at the height of its success in export manufacturing, DCP was sold to Colgate Palmolive and became a subsidiary.
Yesterday was undoubtedly a sad day for Dominica with the closure of DCP. Two weeks ago, the parent company informed shocked employees, some of whom broke down in tears, that it had taken a decision to close the plant following significant damage caused by the passage of Tropical Storm Erica a few months ago.
The closure, however, was not a total surprise. There were reports that Colgate Palmolive wanted to do so seven years ago, but the government had intervened.
At the time, the American company was reconfiguring its global business and shifting production to countries like Mexico, for example, where economies of scale and lower labour costs contribute to more profitable operations.
Almost 100 Dominicans are on the breadline as a result of the closure. In a large country, 100 job losses would be not be a big deal; but it is in a small country like Dominica where finding alternative employment after losing a job is a not an easy undertaking. Besides aggravating the island’s already high unemployment problem, the closure will adversely affect export earnings and government revenues.
There is a ray of hope, however. Recognizing the importance of DCP to the economy, the government of Prime Minister Roosevelt Skerritt has announced that it is in talks with Colgate Palmolive with a view to acquiring the plant and restarting operations.
The idea is to resume production of once popular brands like Refresh bath soap which were discarded after Colgate Palmolive took over.
“We do believe that the factory plays an important role in our national economy through the foreign exchange, the creation of employment and also manufacturing,” said Prime Minister Skerritt.
DCP’s demise serves as a powerful reminder that while foreign investment is important, it can expose small vulnerable economies to significant risks. When multinationals make decisions, they are not sensitive to domestic considerations in the way a local firm would be. It is a point which Barbados should ponder when established and successful local businesses are sold off to foreign interests.
What DCP’s experience emphasizes is that the Caribbean needs to give more serious attention to building strong and dynamic enterprises which not only support our economic development needs but, more importantly, can also venture out into the global market and take advantage of opportunities in the same way foreign entities do when they come into our space.