Impacts and Response to Globalization in the Caribbean
Globalization as defined by the European Commission is the process by which markets and
production in different countries are becoming increasingly interdependent due to the dynamics
of trade in goods and services and flows of capital and technology. (European Commission,
1997, pg.45) Globalization is a phenomenon, as simple as it is complex. The inherent simplicity
of the subject spawns from fundamental human needs and wants. Quite simply, no nation exists
in a vacuum-, that is, none are completely self reliant. This immutable fact, partnered with the
emergence of a culture of materialism and a seemingly insatiable appetite for “more”, makes
globalization unavoidable.
In the context of scarcity regarding land, labour, capital and other factors of production, self
sufficiency is not even remotely attainable or otherwise sustainable, needless to say, more so in
our small and dependent Caribbean community.
On the other side of the fence, the complexity of globalization exists in the intricacy of the
networks that span globally. These networks are the lynchpins that make trade and commerce
possible. These networks are undoubtedly achievable and maintainable due to technological
advancements, most visibly in the realms of transportation and communication.
At this juncture, I would like to pose a question to the brilliant minds out there in TV land. The
question is-Does Globalization have a more significant impact on technology or is technology
more influential to Globalization?
Through travelling, media, scientific and technical workshops, the internet and many other
communication channels, globalization allows the transmission of knowledge at a much faster
pace than in the past. However, this does not automatically imply that developing countries are
beneficiaries of these technological advances. On the contrary, this will strongly rely on the
nature of the technology and of the policies implemented in both advanced and developing
countries, with the latter group of course being less influential.
Ok, so far we understand that technological developments are conceived as the main facilitator
and driving force behind most of the globalization process. However it is important to note that
Multinational companies (MNC’s), through foreign direct investment and their penetration of
international borders are the vehicles that facilitate for the transmission of technology to the
Caribbean. Large MNC’s like Dell, Hewlett Packard and Apple, the same companies that make
your laptops, IPods and Blackberry’s, in their pursuit of profits, transfer these innovative
technologies to developing countries. The question then presents itself-Are Caribbean countries
participating in the creation of these technologies or are we simply just recipients and
bystanders?
Globalization is all around us. Working at the West Indies Cricket Board has opened my eyes to
exactly how instrumental technology is in the functioning of a Caribbean company. Unlike other
cricket boards like the England and Whales (ECB) and Australian (ACB) that are located in one
country, where the political, economic, social, technological, environmental and legal climate are
for the most part, consistent throughout the nations respectively, the WICB does not enjoy this
luxury.
The WICB, is head quartered in Antigua and is responsible for the governance of cricket across
the Caribbean. Each of these countries has different environmental conditions. These differences
magnify the difficulty for the WICB regarding the execution of its primary function. Due to the
geographic makeup of the Caribbean, this would prove to be quite a task. In the interest of time
and money, communication amongst member territories must be as swift, efficient and cost
effective as is practicably possible. Technologies such as email, Skype and other
teleconferencing hardware and software have revolutionized the way the WICB executes its
function.
It is also noteworthy, that the WICB also engages in trade at the international level. On a typical
day staff members, liaise with persons from India, London, Australia and Dubai. The company
also has corporate partners with headquarters all over the globe. Effective communication
technology is of utmost importance.
In sum, the impact of globalization has been heavily felt by Caribbean countries. The response to
the phenomenon is quite obvious. Caribbean companies like the WICB have embraced
communication and transportation technology, not because it was optional but instead because in
today’s fast-paced and highly technologically advanced world, companies that fail to do such
will fail in every sense of the word. Caribbean governments have also responded to globalization
by emphasizing information technology in the school system to ensure that the region’s youth are
equipped with the intellectual capabilities to compete in today’s world. The introduction the
annual ICT fest here in Antigua exemplifies one such government initiative geared towards this
aim.
So far, we have established that technology is the main driving force behind globalization which
in turn affects commerce and industries. The Banking and Oil industries are by no means
exception. Today, specific references to various banks in Antigua would be made to understand
the impact and response to globalization.
The banking industry in the Caribbean has changed drastically over the years. Globalization has
had a significant impact on the current operations of many banks. Gone are the days when banks
were heavily regulated, limited to managing one portfolio, operating in one geographical location
and depending solely on paper as a means of recording information. Today, the banking system
has evidently evolved and moved into a global market where deregulation, diversified portfolios,
wire transfers and technological dependency are all inevitable ; thus allowing banks to have a
ripple effect spread across a larger geographical area , and ultimately connecting to economies
around the world.
The proliferation of technology plays a vital role in the process of globalization as it is a key
factor to productivity of many banks in the Caribbean. Many banks feel the pressure to be
technologically savvy to compete in a global market place and as a result, customers reap the
benefits of banking with institutions.
The use of Automated Teller Machines (ATM), has made it easier for customers to access money
at any given time of the day and avoid the long lines and waiting that are normally associated
with banks.
Electronic banking is another way globalization and the uses of technology have had a positive
impact on the banks and benefits of customers. Clients can now check their account activity and
pay for bills online, as in the case of Scotia Bank collaborating with Karib Cable. We are now
moving in a world where less cash is being used and plastic is the new form of money. Debit and
credit cards are being used more and more everyday and it is more convenient for persons.
Mobile Banking is another way globalization have impacted the banking industry. As these new
forms of banking become available in more developed countries, ABI has had to restructure its
way of banking to keep abreast and current with this new form of banking. This allows
customers to view their account activity on their mobile phones.
Globalization has also given rise to Offshore Financial Centers (OFCs) throughout the Caribbean
with more than over 1000 OFCs . The rise of globalization has made it possible for high profile
customers to conduct business transactions without having to be physically present. OFCs have
allowed a customer as far as in Africa to save money in a place such as Antigua.
In spite of the many positives associated with globalization and the banking industry, there are
many negatives associated with this movement.
Caribbean Offshore Financial Services have suffered tremendously since larger countries have
claimed that a large portion of their revenues have been outsourced instead of their revenues
remaining in their country. They claim that OFCs have been a way for Caribbean States to evade
taxes; a highly punishable offence in the USA. This has crippled the OFC climate in the
Caribbean; thereby reducing potential revenues and employment. OFCs have also been accused
of offering limited employment benefits and actually serve as a basis for exploitation. It is here
where we pause and really ask , is globalization more harmful or beneficial? Has globalization
really augmented the standard of our financial services in the Caribbean?
To further demonstrate the myth of oneness associated with globalization, the Foreign Account
Tax Compliance Act (FATCA), which serves to improve tax compliance involving foreign
financial assets and offshore accounts, requires foreign financial institutions to report directly to
the IRS, information regarding the amount of money held in foreign accounts. What this will
eventually do is to frustrate customers and deter them from wanting to save money in our
Caribbean shores. Imagine for one second that you are a US citizen conducting business in the
Caribbean and each time it is mandatory that you declare the source of your funds and you are
heavily taxed, what would you do? Wouldn’t this be a hassle? This is what larger countries
attempt to do to in an effort to evade OFCS from the Caribbean.
The Caribbean’s response to globalization has been to upgrade its forms of technology to keep
current with other banks even though it may be costly. But it has responded limitedly or not at all
to the issue surrounding OFCs within its shores. Simply because, it has no power relative to its
larger counterparts, to implement policies or legislations to prevent OFCs from crippling within
its shores.
It is crystal clear that Globalization is an extremely complex phenomenon which has been
simultaneously demonized and extolled. Like banking, Globalization affects all industries
including the Oil Industry.
The West Indies Oil Company Limited will be assessed to understand the impacts and response
to Globalization.
The West Indies Oil Company commonly known as WIOC is an independent tank terminal
operator specializing in the storage and handling of liquid and gaseous chemical and oil
products. Currently, the company stores product for the United based Shell Oil Company; which
is among the largest companies in the world. WIOC also stores product for Petro Caribe
commonly known as PDVSA. PDVSA is a Venezuelan company supplying Venezuelan Oil on
easy terms to a regional bloc of countries. WIOC also hold the monopoly of providing the
country with propane gas for household usage.
So the big question now is, how has globalization affected WIOC?
Before we delve further, it is important to note that globalization is the phenomenon which has
resulted in the removal of trade barriers and freedom to gain access and to tap into various
markets. It is the very same phenomenon which has allowed for Shell to conduct business with
WIOC. If there were more sturdy trade barriers, it would make it difficult or maybe impossible
for Shell to do business with WIOC. As a result of globalization opening up the doors between
these two companies, WIOC has had to upgrade its facilities to make them more safe, secure and
environmentally compliance to meet Shell’s requirements. Safety and Security have always been
a major concern for those in the Oil Industry, but globalization has created an atmosphere where
safety and security have now become priority. Shell, being in a more international market has
been directly affected by all this change brought about by globalization which has in turn
affected WIOC’s operations. Shell’s renewed contract with WIOC is testament to this fact.
Shell’s contract outlines, “In carrying out duties, managed and revised as required at WIOC’s
expense, WIOC shall: maintain, repair, renew and operate the Storage facility and carry out its
obligations and shall notify shell of any changes in law affecting the health safety, security and
environmental responsibilities.” Consequently, globalization has not only benefitted WIOC with
its upgraded facility, but has given it a grander opportunity to attract more oil companies
interested in outsourcing their handling and storage of oil.
Additionally, WIOC has undertaken intensive training and retraining to ensure that its employees
are competent and experienced in their field of activity and fit to work. A few years ago, WIOC
had no Health, Safety, Security and Environmental (HSSE) Officer. However, one had to be
hired to prepare a HSSE Management Program, Policies, Handbooks and similar materials
reasonably assured to be understood by all staff and to ensure that employees comply with these
materials. The HSSE Officer is also responsible for taking measures to ensure pollution of all
types which include land, water and air as outlined by Shell’s Contract. Most naturally, the
demand for upgraded facilities resulted in more training and this has led to a more proficient
workforce at WIOC.
If it were not for globalization with technology acting as its main driving force, companies would
have no knowledge of each other and WIOC would not have been able to attract customers to
conduct business. Outsourcing would not have been an option and companies would have to
suffer the burden of incurring higher costs to conduct operations in their home countries. Hence,
the removal of trade barriers and the shrinking of the world into a global village have created
many opportunities for companies to take advantage of economies of scale and the ability to
generate additional revenues as result of increasing business. Globalization is seen as the savior
here for WIOC resulting in a more upgrade facility with the potential to attract more business
and more competent staff to handle its operations. However, globalization can be demonized at
WIOC because it has resulted in the company having to spend large and in some cases exorbitant
sums of money; thereby affecting the bottom line monetary profit for the company.
Preventative Maintenance Programs which falls under HSSE can be extremely expensive and
can cost the company over USD$ 100,000. Training expenses may range at least USD50, 000
and these figures relative to its small operation translate to a small bottom line profit and
therefore small retained earnings to invest in other areas of WIOC.
Competition is also another problem arising from removal of trade barriers and opening of
markets. The Government has 25 % shares in WIOC which results in strict and fixed
Government control and payments based on the price paid for WIOC’s products. This is negative
for the company since it is unable to compete effectively with other Caribbean companies which
offer similar a product. The situation is exacerbated by the small size of WIOC’s facilities which
does not afford the company the opportunity to purchase a large bulk of products. The result is
WIOC has to charge the same price that it initially paid for the product and not the price of the
fuel on the market compared to another company which has the capability to charge the current
market price. Customers who need fuel for their ships (a process referred to as bunkering) may
divert their attention to places such as Saba which purchases fuel more regularly than WIOC;
and is therefore able to charge according to the current market price which is obviously lower
than that of WIOC. As WIOC’s Stock Control Analyst, I have had the experience of
international customers calling me to tell me that our price is too high for them to bunker in
Antigua. The fact is if we sell fuel at the current market price, we will not only lose profits, but it
will result in a serious issue with the Government of Antigua and Barbuda.
In my estimation, WIOC has responded very well to globalization in terms of upgrading its
facilities and training staff which serve as the company’s core competence. But it has not and
cannot respond to the issue of its price being relatively higher to that of its competitors.