Circular Island Economies for creating a more diversified, competitive, and inclusive Caribbean

Current global trends such as dropping oil prices, markets uncertainty and climate change effects are challenging the Caribbean economies to find new ways to reduce their vulnerability to external economic shocks. The high dependence on tourism as well as imported food and fossil fuels is avoiding the construction of a more resilient economy supported by economic diversification, technology and innovation and human resource capacity (Bourne 2015).

Diversification has been recognized as a suitable strategy to create a healthy economy by lowering the reliance on only one or limited number of productive sectors which can be vulnerable to changes in the world economy such as recessions, natural disasters or new technologies replacing need for man power. By building this capacity in the Caribbean islands, it is possible to develop a different economic structure that leads to sustainable production and consumption patterns, where new products and services are offered and potentially attract foreign direct investment (Dwarka 2011).

In the search of a more diversified economy, competitiveness is a key lever. As it has been stated by the World Economic Forum, to increase a country’s competitiveness it is important to have strong institutions which ensures the availability of talent, a high capacity to innovate and the ability to adapt to changing environments (Schwab 2015). However, according to the assessment of the Global Competitiveness Index 2016-2017, Caribbean countries lag behind. Some of the listed countries include Trinidad and Tobago with the 89th position out of 144, Guyana (121st/144) and Haiti (134th/144). Thus, there is a call to foster competitiveness and innovation among the different economic sectors (Luff et al. 2013).

In addition, given the importance of human and social factors in the development of a diversified and competitive nation, there are some issues that the region has to address. For instance, the Caribbean countries have high levels of youth unemployment related to low economic growth. According to The World Bank (2016), during 2014 the unemployment rate was of 24,6% among the youth working population.

In this scenario, the question that arises is how a Circular Economy (CE) can create a more competitive, diversified and inclusive economy in the Caribbean where majority depend on import and have services oriented sectors. In the study of the CE effects on the macro economy, some studies have concluded that activities such as Repair and Remanufacturing can foster jobs creation, innovation and new businesses opportunities. Stahel & Clift (2016) explain that in Repair and Remanufacturing schemes, end-of-life goods must be collected using non-destructive processes and the different components must be carefully disassembled and selected by skilled personnel with experience and knowledge so that components can be repaired, remanufactured or recycled preserving their value and minimizing contamination. In their view, these models are more labour-intensive and resource saving than a linear economy approach.

Moreover, repair and remanufacturing activities can represent a ‘hidden innovation potential’ because ‘…some companies active in repair, maintenance and remanufacturing activities acquire sufficient knowledge to move upstream into manufacturing innovative new products in their field of activity’ (Stahel & Clift 2016). To illustrate the way how a CE supports the creation of a diversified, innovation-supported and labour-intensive economy, some examples are provided:

Repair and Remanufacturing: As it has been pointed out by Gower & Schöder (2016), these circular activities have been extensively available in low and middle income countries as a way to generate jobs and to preserve white goods and vehicles in circulation. They have shown how the support to a local repair and remanufacturing cluster around a global car manufacturer in Ghana has led to the generation of 200.000 local jobs and the creation of around 12.000 new businesses. The products are mainly commercialized in local markets and exported to other West African countries. Another example, which shows the innovation potential of these activities, is the Israeli Aircraft Industries (IAI) who started as maintenance service provider in the aircraft industry and through the development of knowledge and skills are now leading the drones market (Stahel & Clift 2016).
Reverse logistics: Reverse logistics involves activities such as the collection of products at the-end-of-use. In low and middle-income countries these activities are carried out by informal groups of waste pickers. However, within a CE framework, it can represent an opportunity to create safe and rewarding job opportunities for people who are involved in these efforts. Some examples of these initiatives are found in Brazil and cited by Gower & Schöder (2016), in these examples a Circular Economy has meant an effective way to incorporate the informal sector in recycling activities while providing them better lifestyles.

As an official member of the UN Sustainable Development Network, ASDF is committed to realize the United Nation’s Sustainable Development Goals (SDGs). Therefore, the suggestions presented in this blog are directly linked to SDG 8 by accomplishing Target 8.2 “…achieve higher levels of economic productivity through diversification, technological upgrading, and innovation, including through a focus on high value-added and labour-intensive sectors”(United Nations 2017).

As a founding member of the Circular Economy Platform of the Americas (CEP-Americas), ASDF is committed to engage with like-minded individuals and organizations to explore, identify, and realize innovative solutions inspired by the Circular Economy principles to address economic and social challenges along all the nations in the Americas. For more information please visit: www.sustainableamericas.com.

References

Bourne, C., 2015. Financing for Development Challenges in Caribbean SIDS: A Case for Review of Eligibility Criteria for Access To Concessional Financing, Port of Spain.

Dwarka, R., 2011. The diversification challenge for small Caribbean economies. Academic Journal of Suriname, 2011(2), pp.182–185.

Gower, R. & Schöder, P., 2016. Virtous Circle: How the circular economy can create jobs and save lives in low and middle-income countries, Teddington. Available at: http://www.tearfund.org/~/media/files/tilz/circular_economy/2016-tearfund-virtuous-circle.pdf.

Luff, D. et al., 2013. Strategies for Sustainable Long Term Economic Development in Curacao,

Schwab, K., 2015. The Global Competitiveness Report 2015-2016, Geneva. Available at: www.weforum.org/gcr.

Stahel, W.R. & Clift, R., 2016. Stocks and Flows in the Performance Economy. In Taking Stock of Industrial Ecology. Springer International Publishing, pp. 137–158.

The World Bank, 2016. Unemployment, youth total (% of total labor force ages 15-24) (modeled ILO estimate). Available at: http://data.worldbank.org/indicator/SL.UEM.1524.ZS?end=2014&locations=S3&start=2005 [Accessed January 11, 2017].

United Nations, 2017. Sustainable Development Goals. Available at: http://www.un.org/sustainabledevelopment/ [Accessed January 15, 2016].