By Dickson Igwe, Contributor
Locally-owned small businesses are critical for getting the British Virgin Islands out of recession.
Small business is at the core of the Virgin Islands economic engine. Building strong small businesses is a bottom-up type economics.
Why? Small businesses are overwhelmingly owned by working and middle class consumers. When small businesses prosper: the working and middle class prosper.
OK. Two recent fires: one at the Malone Complex, and the other at Virgin Islands Motors, on the island of Tortola, British Virgin Islands, were national setbacks.
Both fires together with the fire at the Cox Heath dump were not helpful for getting the Virgin Islands out of an economic recession brought about by the natural disasters of September 2017.
Both businesses are critical to Virgin Islands commerce, and both are measures of how well the local economy is performing, together with a host of similar type small businesses.
Small businesses are a critical component of an economy, especially a tiny economy. Now, preceding these two fires, small businesses in the territory had suffered terribly. Hundreds of jobs and critical skills were being lost to the Virgin Islands as a result of the devastation of September 2017’s floods, and the two hurricanes that followed, that practically destroyed the territory.
Then, businesses were further damaged when a specific subset of the population appeared to have gone ‘simply mad’, and smashed and looted businesses, after Hurricane Irma departed the territory’s shores.
Small businesses will drive economic recovery
And notwithstanding which economic model and development strategy the country decides to adopt to get it back to sustainable economic growth, small businesses will be the driver of any type of economic recovery, in every way imaginable.
Why? Because small businesses in the services-oriented economy are the key engines of economic growth: small businesses employ the vast majority of the workforce; small businesses are the bell weather of how the economy is performing; and small businesses define the full scope, activity, and type, of the economy.
If the majority of small businesses, for example, are motels, hotels, bars, and car rental firms, then that is a clear indication that the economy is tourism oriented.
Government economic planning will take that metric into account when managing scarce resources for best outcomes in terms of economic growth.
On the other hand, an economy that employs a majority of financial workers and white collar types, shows the extent to which the financial sector drives economic growth. Consequently government will invest in an education model that may further prop up the financial services sector.
When critical food imports are handled by a tiny number of businesses, and the balance of payments weighted towards food importation is overwhelmingly high, as is the case with the Virgin Islands, then this is an indication that the agricultural sector requires greater investment and effort to drive local produced food markets.
Agricultural commerce in the Virgin Islands requires sustainable investment and innovation in order to drive down the massive food import bill and create hundreds of new jobs.
Post Irma, the swift bounce back and growth of the construction sector is an indicator that the construction economy is enjoying a boom, owing to the need for reconstruction.
The list goes on and on, why reviving the small business sector is the most vital component of recovery. Small businesses define the Virgin Islands economy in every parameter.
Even within sectors, for example, Virgin Islands tourism, the number, scope, and type of firm involved in the maritime industry, gives indication of the size and nature of the maritime industry, when juxtaposed with tourism assets such as hotels, motels and guest houses that are static geographically.
Most Virgin Islands businesses employ less than 50 employees: the definition of a small business.
Consequently for driving a successful recovery the majority of effort and resources must be placed within the orbit of the small business. All major government contracts must have small business as a critical component, for the simple reason that cash earned by small business drives macroeconomic growth better than any other type of entity.
Foreign investors benefit tiny minority
Foreign investors may places cash into the territory. However experience has shown that this benefits a tiny minority who do deals with these investors to ensure that the return on capital is well above what will be received had the investor stayed in their own country of origin and invested.
Or, as in the Chinese totalitarian dictatorship model: driven by the Chinese government’s ambition to expand its influence in the Caribbean, to mitigate US influence in the region.
In any event, the best place to invest for full recovery, is in the small business economy, run by the native, belonger, and resident.
To be continued
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