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Opportunity knocks in unlikely places
November 1, 1997
6 Min Read
.svg?width=850&auto=webp&quality=95&format=jpg&disable=upscale "Opportunity knocks in unlikely places")
Going global among U.S. manufacturers has become tantamount to a divine directive. Dutifully, if not enthusiastically, American companies have opened new plants overseas and begun to address a world market. Wouldn't the picture change if the concept of expanding your business to another country not only meant serving market demands better but improving your financial picture significantly? Emerging nations in the Caribbean are offering just such enticements, and one country in particular believes it is well suited for plastics processing.
At 166 sq miles, Barbados, a small island in the West Indies, is roughly the size of JFK International Airport. And indeed, the Concorde lands here once a week bringing European travelers seeking sand and sun. Before you write it off as a tropical vacation paradise rather than a productive manufacturing environment, however, consider some eye-opening statistics. You'll find that its small size belies some very real business possibilities for molders.
First and foremost, Barbados has an ideal location for shipping to the U.S., South America, and Europe. And thanks to several trade agreements, Barbadian-made products can enter the U.S., Europe, Canada, Venezuela, and other Caribbean nations free of duty. Secondly, export-oriented manufacturing concerns are exempt from taxes on corporate profits for 10 years. After that time, they receive a special tax rate of 2.5 percent. Also, any raw materials, machinery, and other purchased components are also exempt from import duties.
Manufacturers receive assistance through the Barbados Investment Development Corp. (BIDC), an agency of the Barbados government. For example, the agency helps manufacturers by securing government subsidized factory space that can be rented for roughly $3/sq ft/year.
IMM spoke with BIDC's Peggy Griffith, director international business, and Donville Inniss, business development officer. Griffith explains, "BIDC also offers a range of free services, and administers several programs, including a Training Grant Scheme to help companies offset training costs during start-up and expansion phases." When it comes to training, Barbados has a potential workforce of 126,000 out of 257,000 residents with an overall literacy rate of 98 percent. A British schooling system, recognized by the U.N. as one of the best in the world, is free to all residents and includes a campus of the West Indies university system, numerous secondary schools, and a variety of primary schools.
One of only two molding operations on the island of Barbados, CPM Ltd. and its five employees provide the domestic market with a variety of products - disposable utensils and plates, combs, ice trays, soap dishes, and pharmacy vials - molded in HDPE, LDPE, PP, PS, and HIPS. Director Shiu Shun Yeung, who relocated here from Hong Kong, tells IMM that his biggest challenge is maintaining molds. "We have no toolmakers locally, so I must rely on periodic mold maintenance from Hip Wo Co., an overseas partner," he explains. Yeung's immediate plans include expanding to a larger facitly. And like the current 2400-sq-ft space, it will be subsidized by the Barbadian government.
Various initiatives across the West Indies and abroad are designed to boost trade. For example, the Caricom (Caribbean Community Common Market) agreement allows products made in Barbados to be exported free of customs duties to 12 other islands within the West Indies, including Jamaica and Trinidad. The Caribbean Basin Initiative allows Barbadian-made products duty-free entry into the U.S. For Canada, a similar agreement is known as Caribcan. Legislation known as the Lome Convention allows companies manufacturing in Barbados to ship to the European Union countries without paying duties.
Concerned about infrastructure? Barbados is self-sufficient in natural gas. Its crude oil production supplies 30 percent of the country's electrical needs, while the other 70 percent is imported. A pilot wind power plant financed by the government seeks to make use of another natural resource - powerful sea breezes. Roads are relatively narrow by U.S. standards, but adequately handle the smaller-sized vehicles prevalent on the island. Phone, fax, and shipping capabilities are equivalent to most industrialized countries. You can even choose from several overnight courier services, including FedEx and UPS.
Molding Opportunities
Timing is everything when making a business decision, and conditions in Barbados today are fertile ground for investment. Here is the condensed version of current available opportunities:
Many of the products made here require molded plastic components, which are currently purchased abroad by necessity. For instance, lack of domestic molders forces a large state dairy to purchase its HDPE yogurt and ice cream containers from a Canadian processor. Electronics manufacturers buy housings from the U.S., then assemble products here. If manufactured on the island, these same components would be much less expensive, according to Andrew Applewhaite, a former director of electronics firm Bel-tronics. He believes that not only would ocean freight costs be eliminated, but the 10-year tax abatement may allow a molding operation more leeway in its pricing.
According to a 1994 United Nations seminar, environmental sustainability for a small island means successfully recycling solid waste such as PET and HDPE containers. One company, Envirotech Inc. (St. Michael, Barbados), is in the preliminary stages of building such an operation. Andrew Simpson, director of the firm, currently has 1 million lb of PET bottles shredded, baled, and stored as a result of a government "bottle bill" inducing consumers to return the containers for a 10-cent return. But rather than selling the bales on the open market, where prices have fallen considerably, Simpson hopes to utilize new technology that would allow him to mix PET and HDPE flake without separating them. The end result: a roofing and tile product suited to the conditions in the sunny Caribbean.
As chief environmental engineer, Jeffrey Headley tells IMM that Barbados wants to attract industries that generate little or no waste. "Because of our limited land space, we stress technology rather than waste-producing industry," he says. "Plastics processing fits well into this scheme, because in-plant scrap can be reground and used again or sold."
In a similar vein, any environmental endeavors are supported by government incentives: "There are several such initiatives now that illustrate the level of public and private sector cooperation."
The island contains its own bottling operations for Coca-Cola. To produce the PET bottles, this concern must buy the injection molded parisons for use in the stretch-blow process. A local supplier could consolidate both processes at considerable savings, according to potential investor Boney Mathew of Mathson Industries (Clarkston, MI).
Another potential - moldmaking shops. There are currently a few molding operations, but they must rely on outside toolmaking and maintenance because there are no moldmakers in the country.
While the Barbadian government is seeking to diversify its country's economy, the fact remains that tourism is one of the three largest industries, next to sugar and rum. As such, molded wares in demand include disposable service items, recreation goods, and souvenir items. Again, most of these products are purchased abroad at a relative premium.
Investor's Snapshot of Barbados
It's not a typical postcard, but the following facts definitely beat "wish you were here" for investors:
Electric rates | 30 cents/kwh |
Currency | Bds$ 2 to US$ 1 (only Caribbean nation that has not devalued its currency) |
Banking system | 34 offshore banks with total assets of US$ 4.8 billion |
Population | 257,000 |
Labor force | 126,000 |
Literacy rate | 98 percent |
Language | English |
Health care | government-sponsored system, free to all residents |
Education | free public schooling through university level, rated by U.N. as one of the best in the world. |
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