The American Chamber of Commerce of T&T recently presented a policy paper titled, “Nearshoring Framework and Rationale for the Government of T&T” to the Trade Ministry aimed at boosting this country’s economy.
Compiled by Amcham T&T’s digital transformation committee, the paper centred around how a nearshoring strategy could result in more investments into T&T.
Amcham noted that nearshoring is important especially as the Government seeks to diversify the economy and find new and sustainable ways to improve its gross domestic product (GDP).
“We get that this cannot be a ‘Government only’ initiative in order to implement and realise, and we recognise that in order to succeed, there must be a joint, shared and concerted effort with Public Private Partnership,” the paper however, emphasised.
Trade Minister Paula Gopee-Scoon commended the organisation’s efforts to collaborate with the Government on measures to boost investment.
According to the paper, businesses locally and in the Caribbean continue to challenge themselves to find ways to keep their operations functioning, to strengthen their business continuity strategies, and to create innovative opportunities to diversify and/or to grow their business.
It explained that it is against this background that T&T finds itself well-poised to deliver strong nearshoring solutions in the near term and, as a medium to longer term country strategy.
Similar to offshoring, nearshoring is a means that allows companies to move their operations to the closest country with a qualified workforce and reduce cost of living without the time difference.
According to the proposal it will require Government to therefore, recognise and agree that is nearshoring is a part of its National Development Strategy (NDS) 2016 to 2030 and beyond, adding that a national agenda will be required to have nearshoring under the Sustainable Development Goals (SDGs).
The paper also noted that while the initial focus may be on tech-enabled nearshoring, ongoing disruptions to global supply chains due to the COVID-19 pandemic and the invasion of Ukraine also present opportunities for a nearshoring strategy to include a focus on manufacturing as well.
“Indeed, it can be argued that the development of the Point Lisas Industrial Estate was inadvertently a product of a nearshoring strategy of the firms that established production there, largely to service the North American market initially.
“In addition to wanting to reduce risk and exposure to the increasingly volatile Asian region, North America and even larger firms in Latin America and the Caribbean are rethinking their supply chains to mitigate single point of failure risks.
“As such, even if these firms keep major production facilities in Asia, many are seeking back-up production facilities closer to their home market,” Amcham explained.
It also cited that the local manufacturing sector is resourced with “ready accessibility” to an abundant and dependable supply of low cost energy that supports growth of large clusters of operations in the food and beverage, chemical/non-metallic minerals and assembly-type industries.
What does government need to do?
According to Amcham, this “new wave” of nearshoring has surfaced out of disruption and chaos and like all opportunities, the window is small and will not last forever.
It advised that T&T already has several factors that are highly favourable for government’s consideration, adding that government’s priority and commitment must be there but also maintained that government cannot leverage alone.
Among the main recommendations, the paper suggested was that there must be focus on Information Technology Enabled Services (ITES) and not reinvent the wheel but rather, look to Jamaica as a benchmark from which to garner learnings and best practices from that country’s success and growing BPO/Offshoring industry.
Additionally, it said government must also develop a deliberate strategy for nearshoring to fulfil a national objective of job creation opportunities with ITES as phase one and with robotics process automation, software development, ICT platforms and services, energy engineering services, education training and manufacturing in phase two.
A national task force should also be implemented with a specialised team around a five-year strategy for developing the country’s nearshoring industry as well as formal engagement of the multilaterals to secure technical and financial support for implementation.
The paper also recommended there be combined and collaborative government efforts and initiatives to create an industry presence and to build strong support for human capital.
Further, Amcham said there should be a refocus/expansion of technological parks to include government’s commitment to sector development as well as support incubator start-ups for R&D in software, health and IT consulting.
According to the policy, the Caribbean is experiencing growing interest as a delivery destination for global offshoring and BPO services.
“Although late to market, with our proximity to North America, T&T offers a nearshore English speaking talent pool, favourable economic climate for local and foreign investment, a comparatively modern infrastructure and robust telecommunications environment, relative ease of doing business and openness to trade in a stable political climate with good language and cultural fit, nestled in a tropical safe haven. The question then becomes what will stop us and why?” it noted.
And critical to leveraging possibilities and potential from nearshoring is Government’s vision, investment, coordination, and most importantly, will, Amcham reiterated.
“US-based companies may not have yet fully grasped the tremendous value of nearshore markets in the Caribbean and this is the opportunity as a potential newcomer.
“The requirement here will be to credibly focus and develop applicable verticals leveraging our quality workforce, coordinating resources and key constituents and actively promoting this viable investment opportunity with the US market,” it added.
Amcham noted that factors which position T&T to attract and pursue nearshore manufacturing include the availability of skilled labour (employment equivalent to approximately 8.3 per cent of the total labour force),customs duty exemptions, developmental grants for research and development, home to major international ports with over 63 shipping lines and the highest container port throughout the English-speaking Caribbean.
“The current converging conditions and positive ‘country factors’ create both the opportunity and imperative for a national nearshoring strategy for T&T,” it added.
The paper also cited that there are active territories that have been leading the sector in outsourcing including India, Philippines, Costa Rica, Jamaica, Dominican Republic, Panama, noting that outsourcing market and competitive landscape started its change about five to eight years ago, driven by the need for lower cost of operations with enhanced service delivery as a means to improve competitiveness.
The policy also cited that geo-political risks in Asia and India are forcing US companies to seek out closer locations to set up non-core businesses and to lower costs.
Further, it noted that Work From Home became a necessity when COVID hit but this now presents tremendous opportunity to leverage and attract nearshore opportunities.
The policy said that within the last two years, the Jamaican business process outsourcing sector has been lobbying its Government and recently received legal support for permanent WFH.
“Our legislative framework will also need to be reviewed to ensure that legislation provides adequate support for remote work including data security and cybersecurity protections,” Amcham further advised.