Caricom’s corporate conglomeration

Jamaica Observer | Wednesday, March 26, 2008

Caricom’s corporate conglomeration


At the 19th Intercessional Meeting of Caricom Heads of Government in the Bahamas, Prime Minister Golding called on Caribbean companies to join together in joint ventures because, acting independently, individual enterprises will be unable to penetrate European markets or to achieve the levels of efficiency that each country requires to enter and dominate those markets. He said the Economic Partnership Agreement (EPA) will provide a challenge to which the region must respond.

The PM’s advice for Caribbean companies to join together is very relevant and timely with the advent of the EPA. Even before the conclusion of negotiations last December, some progressive corporations had already availed themselves of opportunities to strengthen their positions, making them more internationally competitive to penetrate the European market of 27 nations with a population of 450 million. Now that duty-free and quota-free market access has been gained, market penetration must follow, and that is where both trade and non-trade issues are encountered. Market access provides exporters with entry at the border of the target market, after which penetration is necessary to follow through to distributors and consumers.

A recent example of conglomeration is the acquisition by Neal & Massy Ltd of the Barbados Shipping and Trading Co Ltd. in which it had a previous shareholding. The Group CEO Bernard Dulal-Whiteway in a letter to shareholders had this to say: "Our Group has grown significantly over the years.
Today, the imperative for growth is even more important as globalisation continues and as the CSME becomes a reality.

Regional trading blocs are making the world smaller and it is important for our companies to see the Caribbean as the domestic market. The acquisition meets this need by creating a company with a pan-Caribbean footprint which can compete effectively in its own regional market and which has the strength to enter others."

"To see the Caribbean as the domestic market" is a fundamental necessity for a successful regional trading bloc. While we still hear reference to Trinidadians, Barbadians and Guyanese as "foreigners", there is still a degree of estrangement to be overcome. However in summary, Neal & Massy’s expansion in Barbados illustrates what Mr Golding referred to, and should ideally start being implemented during the next four years before tariff liberalisation begins in 2011.

The new Neal & Massy, BS&T Group Ltd, with revenues of over US$1 billion, with assets of US$1 billion and involved in key sectors such as automotive, tourism, insurance, food and beverage manufacturing, demonstrates the diversity of a true "conglomerate", resulting in 9,000 of the Caribbean’s best people and 10,000 shareholders from across the region and the world, coming together as a result of this development.

Angostura’s acquisition of Lascelles de Mercado and its subsidiary Wray & Nephew, to form the world’s fourth largest rum company, is another good example of strategic future planning. Wray & Nephew is now confidently poised to access and penetrate the high end of the Brazilian market, a principal competitor in the international rum and spirits trade.

In time, the new alliance may see the further consolidation of other subsidiaries creating a wider diversification of economic activities including marketing of Angostura’s other products, that is, bitters, sauces, etc. Meanwhile, the regional wine and spirits association WIRSPA, which received financial assistance from the EU to facilitate and support the establishment of West Indian branded rums in Europe, is a significant step in moving away from bulk rum that earlier formed the principal volume of the industry’s exports.

The success of this strategy which provided access to funding was due to the active, continuous and vigorous participation by the regional association, in lobbying and taking part in negotiations with the EU since the beginning of the Cariforum/EPA process. This demonstrates the strong lobbying effectiveness of regional associations similar to those for beer, spirits, poultry and paint, to name a few, that exemplify the need for more such groups to create solidarity while negotiating on behalf of their constituents in the region. On the contrary, a splintered effort dissipates strength and energy, resulting in increased expense and diminished returns.

It is not only in the Caribbean that watchful eyes are on the opportunities presented by the EPA. Third countries are also closely observing the progress of the EPA to take advantage of the duty-free and quota-free access entry to Europe for goods and services. One such proactive move was the regional takeover of RBTT Bank Ltd by the Royal Bank of Canada, which should also benefit from the existence of the present Caribcan non-reciprocal trade arrangement with Canada, and the free trade agreement soon to be negotiated. An outstanding model of third-country regional market penetration is the success of Digicel now expanding into other Caribbean territories.

"Everywhere, the business landscape is becoming more complex as some of the rules and many of the players change. The CSME requires that we think differently about the regional economy as we protect our market leadership and seek to enter new geographies. The strength of the WTO and the participation of key developing economies will also have implications for businesses in our region. Fortunately, however, even as the game changes, some things remain the same. People still matter most and the ability to manage relationships remains critical", says Bernard Dulal-Whiteway, CEO Neal & Massy, BS&T Group Limited. A prudent vision for the Caribbean, which is on the threshold of a new and historic era in its development, economic growth and political maturity.

Angostura’s acquisition of Lascelles de Mercado and Wray & Nephew to form the world’s fourth largest rum company is a good example of strategic future planning. Wray & Nephew is now confidently poised to penetrate the high end of the Brazilian market

source : Jamaica Observer

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