Growth Strategy for Belize

Growth Strategy for Belize

/in /by

by Ramzan Amiri

 

INTRODUCTION

Belize is a country in Central America bordering the Caribbean Sea. Key neighboring countries include Honduras, Guatemala, and Mexico. The geography of Belize is mainly flat with low mountains in the south. The government system is a parliamentary democracy and a Commonwealth realm; the chief of state is the queen of the United Kingdom, and the head of government is the prime minister. Belize has a mixed economic system which includes a private-enterprise system, combined with centralized economic planning and government regulation. Belize is a member of the Caribbean Community (CARICOM).

Economic reform in Belize has been uneven, institutional weaknesses and lingering policy have constrained dynamic growth in many parts of the economy. Recovery from the recent economic slowdown has been anemic due to limited entrepreneurial activities in the private sector.  Tariff and non-tariff barriers have been burdensome, and the high cost of domestic financing is significantly impacting the private-sector from investment and economic diversification.   The judicial system is influenced by the politicians and corruption has become a common practice (Heritage Foundation, 2018).

Belize has a young population with a median age of 22.7 years with an age structure of 0-14 years at 33.95%, 15-24 years at 20.55%, 25-54 years at 36.62%, and 55 and over at 8.88% (The World Factbook, 2017).  But the school system is not adequate to support the large young population which has resulted in low literacy rate as well as a dropout rate beyond 8th grade to 50% (Pathlight International, 2018).

Belize has opportunities to become a strong economic player in the region due to its small size, which gives them the agility, and its location of bordering with some of the larger Countries, i.e., e. Mexico, Honduras, and Guatemala. Potential is there for trade agreements, maquiladora model of manufacturing/assembly due to Belize’s low salary and a high unemployment rate of the population between the ages of 15-24. According to CIA factbook (The World Factbook, 2017), the unemployment rate of ages 15-24 in Belize is 18.9%, while Mexico has 7.7%, Guatemala has 4.8%, and Honduras at 14.2%. This could be a good opportunity to get some foreign direct investment in from those countries with proper tax incentives and also get young adults employed. Additionally, Belize government does not seem to have a viable long-term definitive plan or a strategy to move the country forward. A10-year economic transformation plan with the help of IMF, World Bank and some of the larger NGOs would create a purpose and meaning for the Government and the People.  Furthermore, with an effective marketing strategy, engaging Belizean and mobilizing them would be a tremendous benefit to the transformation process. This engaged approach will uplift the morale, inspire the population, as well as create a cohesive culture of ownership and pride (Sinek, 2009).

ENVIRONMENT SCAN (SPELIT)

The environmental scan using Social, Political, Economic, Legal, Intercultural, and Technological (SPELIT) framework (Schmieder, 2007) reveals several opportunities to transform Belize to a vibrant and competitive economic powerhouse in the Central American Region.

Following represents my first-hand observation using SPELIT framework as a method of analyzing the business environment. This was accomplished during my recent visit to Belize as part of Pepperdine University Business Policy analysis team and speaking with some of the local business people.

S= SOCIAL

  • Migration continues to transform Belize’s population.
  • About 16% of Belizeans live aboard, while immigrants constitute about 15%.
  • The emigration of a large share of Creoles and the influx of Central American immigrants, many Guatemalans, Salvadorans, and Hondurans, has changed Belize’s Ethnic composition.
  • Mestizos have become the largest ethnic group, and Belize now has more native Spanish speakers than English or Creole speakers, despite English being the official language.
  • All cultures appear to live in harmony

P= POLITICAL

  • Complaints of lengthy bureaucratic delays and corruption serve as disincentives to foreign investments.
  • Belize lacks political risk insurance, and as a practice rarely engages in title insurance on real estate property transactions.

E= ECONOMIC

  • Belize’s economic freedom score ranks 23rd among the 32 countries in the Americas region, and its overall score is below the regional and world averages
  • Economic reform in Belize has been uneven, and more dynamic growth is constrained by lingering policy and institutional weaknesses in many parts of the economy.
  • Burdensome tariff and nontariff barriers and the high cost of domestic financing hinder private-sector development and economic diversification.
  • Tourism is the number one foreign exchange earner in this small economy, followed by export of sugar, bananas, citrus, marine products, and crude oil.

L= LEGAL

  • Governance is weak with high levels of corruption.
  • Unreliable land title certificates have led to numerous property disputes involving foreign investors and landowners.

I= INTERCULTURAL

  • Most Belizeans are of multiracial descent. About 52.9% are Mestizo, 25.9% Creole, 11.3% Maya, 6.1. % Garifuna, 3.9% East Indian, 3.6% Mennonites, 1.2% White, 1% Asian, 1.2% Other and 0.3% Unknown.
  • In the case of Europeans, most are descendants of Spanish and British colonial settlers, whether pure-blooded or mixed with each other.
  • Most Spanish left the nation just after it was taken by the British colonists who, in the same way, left after independence. Beginning in 1958
  • German and Russian Mennonites settled in Belize, mostly in isolated areas.

T= TECHNOLOGY

  • Wi-Fi is a challenge in most parts of Belize. The speed is very slow, and connectivity is unreliable.
  • The government decided in 2016 to install fiber optics connection throughout the country. This is a three-year project and appears to be going well. The installation has taken place in a couple of the larger cities including the Capital, Belmopan.

 

PROBLEM STATEMENT

The key challenge the Belize Government appears to face is stagnant GDP growth which is impacting government from making any infrastructure investment, consequentially, impacting Foreign Direct Invest (FDI).

Some of the key infrastructures that are lacking include educated workforce, supply chain infrastructure, and facilities to support manufacturing or technology industries. The most critical challenge appears to be there is no plan in place by the Government to educate the workforce. 50% of the Belizean children do not attend high school, 40% of the Belizean live in poverty and cannot afford to send their children to school or purchase books, and worst of all 23% of the Belizeans over the age of 15 cannot read or write (Pathlight International, 2018).  One of the schools the Pepperdine Team visited had a library but was locked, and no one knew where the key was. We were told the library had not been used for years. One high school Principal we spoke to about computer class mentioned that they have a few desktop computers, but half of the computers are not working and the few that are working are being used to teach students typing. It appears there is no clear understanding of how these assets they already have should be effectively utilized.

The issue of lack of education is further exasperated with the government policy which supports free education only up to grade 8, with 9th through 12th-grade students having to go through a government approval process for funding. The approval process lacks credibility, and generally poor children are left out.  Furthermore, K-12 schools do not have adequate qualified teachers which unfortunately impacts the entire learning and mentorship culture.

In summary, Belize is not an attractive place for any sort of commercial investments. The country lacks basic infrastructure, and the government policies add another layer of complication for local and foreign businesses.

OBJECTIVES AND ACTION STEPS

Below are four key measurable objectives with specific actions items to consider getting Belize into the global business arena. Timeline and cost will be determined once a strategic team is formed and priorities are defined. The plan would be put in place with the help of IMF and World Bank:

  • Effective Capitalization of Human Resources (measurement: enrollments in secondary school and completion, salary growth, number of skilled jobs filled vs. open)
    • Engage NGOs with specific objectives that align with Belize’s long-term transformation plan
    • Teacher training to be accelerated
    • Update education system and policies
    • Introduce trade schools with courses that align with the industry cluster plan
    • Upgrade immigration policy to attract skilled workers
  • Improve living standards of Belizean (measurement: Income per capita growth) (home ownership by Belizean)
    • Job creation in information technology and manufacturing sectors – high paying jobs generates increase tax as well as internal demand for consumer goods. This will allow Belize to move towards consumer economy leading to additional investments in manufacturing and service sectors.
  • Increase foreign direct investments (FDI) (measurement: $ investment by foreign businesses) (Real Estate development and demand)
    • Work with IMF and World Bank to develop infrastructure in the areas of broadband development to connect with the rest of the world
    • Improve trade policies to attract investment
    • Provide incentives for investment in Commercial Real Estate
  • Develop Industrial Clusters (measurement: number of businesses and employment in the targeted clusters)
    • Define two areas of Industrial clusters where Belize can be known as having skills and capability as most competitive in the region, i.e., technology, high skilled manufacturing capability

RECOMMENDED POLICY CHANGE

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade (Porter M. E., 2008). The current protectionist trade policy of tariff on products needs to be abolished to increase global competitiveness. Companies generally achieve competitive advantage through the acts of innovation. Protectionist policies hinder innovation and stagnates growth due to limited demand.

ALTERNATIVES

There are no alternatives other than rapid acceleration with the help of government intervention in increasing the money supply. Belize is running at a deficit for quite some time, and at some point, the government will start to miss debt payments which will further deteriorate the ranking of the country.

PARTNERING

  1. Taiwan seems to have a big presence in Belize and participates in student exchange program as well as given grants/loans to Belize government for economic development. In August of 2017, Taiwan gave a grant of US$20 million to Belize and additionally a loan of US$40 million(Ramos, 2017). It appears this relationship can be further solidified if some sort of incentivized long-term economic development agreement can be achieved.
  2. Pathlight International is a California based 501 c3 organization, and their focus has been teacher development as well as helping students with scholarships, transportation, nutritious meals, afterschool academic tutoring, etc. They established their organization in Belize in 2007, since then they have trained over 600 teachers and 50 principals. They also have ongoing training programs for teachers to further enhance the learning environment for students(Pathlight International, 2018). They are currently successfully working in Belize City and Belmopan which can be further expanded to some of the urban areas.
  3. A partnership that appears to be missing is a hands-on third-party economic advisory committee to help Belize government put together a solid path for growth. Belize has a significant number of assets that can be effectively utilized to transform the country into a major economic player in the central/Latin American regions. There are several economic models that can be looked at, i.e., The Bahamas, which has a similar size population and a relatively young country but has a GDP three times the size of Belize. Another, yet extreme example is Singapore, which has a significantly larger population but went through a lot of struggle since their independence in 1965, has a GDP US$ 504.9 Billion, 15 times larger than Belize and income per capita of UD$90,500 as compare to Belize with a GDP of US$ 3.23 billion and income per capita of $8,300. So, the opportunities are there for Belize to focus and make purpose driven strategic plan to become successful.

LESSON LEARNED

  • Strong leadership with a purpose and meaning is critical to engage people and drive growth.
  • People are the biggest asset in a country or an organization. Putting them first is a critical success factor for successful growth.
  • Education and continuous training are essential for a country or an organization to innovate and grow.
  • Protectionist measures are detrimental to competitiveness and drive to excel.
  • The government has a responsibility to adjust fiscal and monetary policies as the global competitive landscape changes. Productive society leads to GDP growth.

REFERENCES

Bohlander, G. a. (2010). Managing Human Resources. Mason: South-Western Cengage Learning.

Heritage Foundation. (2018). Retrieved from The Heritage Foundation: https://www.heritage.org/index/country/belize#

Mell, A. a. (2014). The Rough Guide to Economics. London: Rough Guides Ltd.

Pathlight International. (2018). Retrieved from Pathlight International: https://pathlight.org

Porter, M. E. (2008). On Competition. Boston: Harvard Business School Publishing Corporation.

Ramos, A. (2017, August 09). Taiwan Gives Guatemala over $600 Million in Funding. Amandala, p. 1.

Schmieder, J. a. (2007). The SPELIT Power Matrix. June Schmieder-Ramirez and Leo A. Mallette.

Sinek, S. (2009). Start with Why. New York: Penguin Group.

The World Factbook. (2017, July 01). Retrieved from The World Factbook: http:// www.cia.gov/library/publications/the-world-factbook