Grenada is a services-based economy, with services accounting for more than 90 per cent of GDP. Most policy-makers are very familiar with tourism as a major export service sector, yet when the opportunities under the EPA are considered, it is evident that many services sectors that might now also enjoy preferred market access into the European Union are not yet being leveraged.
It seems that such access is not being converted to commercial presence primarily because the professional services sector in Grenada, for example, is still weak in many ways and not yet fully organised. This strategy, therefore, aims to provide some insight into opportunities for the growth of the sector, with a focus on ICT and management consulting, both of which currently reflect trade deficits, but which, based on domestic demand and global market trends, demonstrate the potential for export development. They have been prioritised in the NES 2017–21 as a consequence.
While a lack of detailed services data on these sectors has made it difficult to analyse value chains to the same extent as have been the value chains of other sectors, some key strategic considerations have been identified and these are supported by well-detailed action plans.
Based on data compiled by the Eastern Caribbean Central Bank (ECCB), the long-term trend for the balance of payments (BOP) within Grenada’s services sector has been towards a slight decline in overall performance between 1995 and 2014. In 1995, it stood at approximately EC$161 million; in 1997, it had declined to approximately EC$131 million, before recovering to approximately EC$172 million in 2000. By 2002, the services BOP had fallen to approximately EC$109 million, before recovering to a peak performance level of approximately EC$183 million in 2004. This improvement this was not sustained, however, and the balance collapsed in 2005, reaching approximately EC$53 million – that is, dropping from its peak to its pit within the period under review.
The services sector BOP has since recovered, and averaged approximately EC$155 million between 2007 and 2014.
The years during which the overall services BOP was strong (1995, 2000 and 2004) can be associated with significantly strong export performance, with exports nearly twice imports in all cases. By contrast, the years for which the overall services BOP was weak (1997, 2002 and 2005) were associated with significantly weak export performance and a comparatively stronger performance of imports (see Table 1).
The ECCB maintains a BOP database that also captures five sub-categories of services data for Grenada, covering:
- Insurance services
- Other business services
- Government services
The BOP in relation to the transportation sub-sector is persistently negative. This is also generally the case for the insurance services sub-sector and government services, but there are exceptions: the insurance sub-sector recorded services surpluses for 2004 (around EC$96 million) and 2005 (around EC$3million); and the government sub-sector also recorded surpluses for 2000 (around EC$7 million) and 2001 (around EC$50,000). This suggests that these sectors have the potential to be net export sectors for Grenada.
Table 1 Services exports, imports and balance for select years, 1995–2005 (EC$m)
The consistently strong services surplus sectors, however, are travel, which has maintained a BOP well in excess of EC$200 million every year since 1998, and other business services, which has generally maintained a services surplus between 1995 and 2014 other than in 2002–04, 2006 and 2008, when relatively small deficits were recorded (see Figure 2)
Within the latter sub-sector lie the two that the GoG has prioritized for export development – management consulting services, and ICT services – which are now discussed in detail.
Figure 1 Long-term trend in other services balance, 1995–2014 (EC$m)
Figure 2 Long-term trend in management consulting services balance
Figure 3 Long-term trend in computer and information services balance
Figure 2 shows that Grenada was a net importer of management consulting services between 1995 and 2014, maintaining persistent deficits throughout the period. Moreover, based on the ECCB data, it appears either that there are no exports of these services or that exports are of negligible value. Likewise, as it relates to ICT services, the ECCB data suggests that, prior to 2006, there was either no or only negligible trade (see Figure 3).
Most disconcertingly, for the whole period between 2006 and 2014, Grenada recorded a trade deficit with regard to ICT services. In 2006, it was at its worst – a deficit of around EC$282,780 – and while it reduced somewhat thereafter, it continued to average a deficit of EC$130,664 between 2011 and 2014.
The vision for the professional services sector in Grenada is:
To create a services sector that drives the economic growth and development of Grenada through production and exports that are of high quality, innovative and entrepreneurial.
Increasing the production and export of professional services from Grenada will require strategic considerations such as the following:
- The issue of lack of access to, and cost of, working capital must be addressed. The GoG can address this issue in partnership with the affected professional services suppliers by introducing a policy measure in which the Grenada Development Bank (GDB) will be required to treat the knowledge of service suppliers as having an asset value based upon prevailing rates for similar experts in other countries.
- It is evident that the financial institutions in Grenada do not understand the services sectors. Interventions are therefore needed to provide information to banks, and to create awareness about the nature and type of operations of services sectors, including their potential to make a significant contribution to the national output of Grenada.
- A comprehensive services sector policy and expansion plan should be developed, which will set out the targets for growth of Grenada’s professional services and the specific interventions that will be undertaken over a period of five years in the first instance. This will require detailed consultations with stakeholders, but should include, at a minimum:
- the establishment of standards for the provision of services;
- the introduction of relevant regulations to govern sub-sectors;
- the prioritisation of professional services for soft financing; and
- the specification of what types of market access to offer and to seek when negotiating services trade agreements.
- A database of services sector skilled personnel that is readily available and accessible to other services suppliers in Grenada, as well as external suppliers, who may wish to partner with Grenadian firms in providing services in the future, should be built. In that regard, an online portal that provides all of this information in a central location would be useful. Provision should also be made for Grenadian service suppliers to be included in bids for state-funded services contracts.
- A comprehensive intervention to create detailed statistics on services trade in Grenada should be implemented. This can be done in collaboration with Statistics Grenada, which already has the mandate for this work, but which will require amendment to the Statistics Act 1960 if it is to have greater access to more detailed data than that currently compiled. Considering the small number of firms in the various sub-sectors, these data should be aggregated at sub-sector level whenever fewer than five firms constitute the entire sub-sector.
- Sector members should aggressively pursue consortium relationships with firms from major partners with which Grenada has concluded agreements regarding trade in services, including the OECS, and CARICOM and the European Union under the EPA. This would partially require the establishment of an active association of professional services suppliers, backed up by the GCSI.
- A viable GCSI Secretariat should be established that can fulfil the mandate of getting fledgling local service producers export-ready, or both technical and financial capacity should be built within the GCSI if that is the organisation that will represent the services sector. In this regard, management consultants need to be certified, so that they can bid and qualify for the jobs that are available both regionally and internationally.