Transforming Belize’s Economy
Public-private sector dialogue and partnerships are setting the stage for innovation and expansion in Belize, especially for small-to-medium sized enterprises (SMEs). Belize Bank International talked to Ydahlia Metzgen, to gain insight into the challenges businesses face and how the banking sector can help address them. Dr. Metzgen is non-executive director of BCB Holdings Ltd., a professor at Galen University and a proprietor of Calico Jack’s Resort and Zip Line.
Access to finance is a significant issue for Belize businesses today. To some extent, Belize is still a cash economy. Most companies will not accept payment by check. Credit cards are a relatively new offering, and many companies and individuals still do not have them. Bank lending is the dominant source of financing, but it is difficult to obtain a loan without collateral, usually in the form of land. There is no equity market, and although some businesses issue bonds, debt financing is not the norm. Without financing, young entrepreneurs with innovative ideas and willing to take risk cannot execute their plans.
The education system is currently making a transition to accommodate economic expansion. In the last 15 years, standardized test scores have shown declines in key competencies required by businesses to compete in today’s global environment. That being said, the government is devoting resources to programs that will address this issue. According to the CIA World Factbook, on average Belize invests about 7% of GDP on education, ranking relatively high compared to education spending in other countries around the world.
“Studies and experience show a link between economic growth and education. The Government of Belize has invested heavily in education during the last several years. However, the outcomes in terms of access and quality have not been as envisaged and our country continues to face major challenges. The recent focus on assessing the effectiveness of government spending on traditional education as well as on adult training opportunities in line with business needs are positive steps,” says Metzgen. “We may have lost a generation, and many of these Belizeans need access to training in their adult years.”
Belize’s small population and internal market are problematic from an entrepreneurial perspective. It is difficult to achieve economies of scale (the ability to capture cost savings and increase profitability as production expands) and economies of scope (the ability to diversify production). Successful companies serve not just the domestic market but export markets as well.
A Joint Solution
Recently, the Government of Belize has taken steps to partner formally with private sector stakeholders to support economic expansion. The Economic Development Council (EDC), founded in 2011, serves as a forum for dialogue between the public and private sectors. At an annual Business Forum, policymakers and business leaders discuss the issues facing the economy and develop proposals for addressing them. Prime Minister Dean Barrow and relevant cabinet ministers attended the last Business Forum held in July 2014.
The Prime Minister has appointed a private-sector liaison officer to strengthen the public-private partnership and serve as the Executive Director of the Economic Development Council. In addition, the Office of Public-Private Sector Dialogue is the Secretariat for the Economic Development Council. The technical unit remains resident in the Office of the Prime Minister.
“There appears to be a commitment to a durable, lasting and systematic dialogue, and in my view this is a big plus,” says Metzgen. “Considering our resource constraints, the private sector is challenged to pool resources and together with the government, establish priorities and help set expectations in terms of what is feasible.”
Moreover, the government has partnered with the United Nations Development Program to launch the Growth and Poverty Reduction Strategy, a multi-year plan to develop the economy by 2030. The initial effort from 2014 to 2017 will focus on identifying the constraints to economic growth and budgeting to improve the management of public resources.
In Belize there appears to be a bias toward public sector employment because of the relatively attractive benefits that government provides—systematic salary increases, pensions as well as job security. Many private sector companies cannot provide such benefits. However, initiatives are underway to turn around this preference and help foster an interest in the private sector. For example, the main associations in the tourism sector— Belize Tourism Industry Association (BTIA) and the Belize Hotel Association (BHA) support scholarship and training programs to help individuals develop skills to work in tourism and encourage entrepreneurship. In addition, Belize’ Bank Ltd.’s, Belize Apprentice Program provides a platform for encouraging young entrepreneurs. Successful applicants participate in a competition where they are challenged in sales, marketing and creativity.
The positive side of operating in a small country like Belize is that good ideas can go far quickly and have a material impact on outcomes. Belize is rich in natural resources. It has beautiful beaches, the second largest barrier reef in the world as well as a rainforest that is still relatively intact. Together with the Mayan temples, Belize is an attractive tourism destination. There is an opportunity to harness these assets for business and economic development while respecting the environment.
“Currently we focus on traditional tourism, but with some creativity, there’s some room to deepen and expand that market,” says Metzgen. “For example, the rainforest could be leveraged to teach people about the value of ecology and biodiversity”
To foster entrepreneurship, the banking sector could partner with the government to build an infrastructure for lending, she points out. Information systems, property registries and credit bureaus need to be developed so that banks have sufficient information on borrowers to lend with confidence. Ultimately, providing access to financing and enhancing human capital would transform the economy.
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