Dominica’s economy proves diversification is the way forward
Dominica’s economy is more diverse than ever. At a recent speech in Grand Fond, Roselyn Paul, the country’s minister for commerce, enterprise and small business development, sung the praises of the area’s many varied businesses based in the area. She mentioned the tour guide services, the local cuisine, the soft furnishing, and the herbal drying. All of these things are helping diversify Dominica’s economy, moving away from the traditional reliance on agriculture to a more sustainable model based on several industries.
Why is economic diversification important?
Many countries’ economies rely heavily on certain industries for survival. In the UK, it’s the financial services sector that keeps the nation afloat, with 7.2% of the country’s total GVA (gross value added income) coming from the industry. The economies of Saudi Arabia, and other gulf state, are heavily reliant on oil exports.
Larger countries with monolithic economies would have trouble if small changes were to happen to their key industries. In the UK, for example, Brexit is already jeopardising London’s ability to clear euro-based transactions, which brings the country £880m of trade per day. Similarly, a shift towards sustainable energy sources could prove to be detrimental to Middle Eastern economies.
Though it is a small country, Dominica’s success with diversification proves there is a way for these bigger countries to expand on areas outside their traditional domain, and create a more diverse economy.
How Dominica diversified its economy
Before the 1980s, Dominica’s economy was heavily reliant on agriculture, an industry which largely revolved around the banana trade. Bananas enjoyed region-wide popularity in Europe, and Dominica’s rich soil made it fertile planting grounds for the crop. However, three major hurricanes in the 1980s resulted in severe damage to the crops making up the country’s economic base.
Since the hurricane disasters of the 1980s, successive governments have introduced measures to diversify the economy. A shift from bananas and other traditional crops such as sugar and cocoa has been encouraged, with focus instead shifting to new crops such as citrus, melons, pineapples and mangoes.
The ecotourism market has also been targeted, with Dominica successfully marketing itself as the “nature island of the Caribbean.” The island boasts some of the best diving sites in the world, as well as unspoilt landscapes and unrivalled biodiversity. Recognising the difficulty in balancing tourism and ecosystem preservation, the Dominican Government signed an agreement with Green Globe, the environmental division of the World Travel and Tourism Council, to develop the island as a “model ecotourism destination.”
The diversification story continues to this day, as the government moves beyond tourism to encourage growth in other areas of the island’s economy. Businesses are being hugely encouraged by capital from both the government and foreign investors. For instance, the government has developed a citizenship by investment programme, which offers investors the chance to live permanently on
Dominica’s sunny shores in exchange for a contribution to help small businesses or the real estate sector.
What can other countries learn from this?
Not every country has the natural beauty to become a key tourist destination, but it doesn’t hurt to try. For a long time, the UK has taken a slightly different approach by promoting internal tourism. Britons are encouraged to go on holiday within their own country’s borders.
Then, there is the investment side. Not every nation needs to start a citizenship by investment programme, but encouraging foreign investment in niche business areas rather than simply real estate can be a huge help with economic diversification. London, for example, is one of the most popular destinations for international investors to buy property. If they were required to make a contribution to local London businesses in order to acquire these grand houses, the economy would be far more diverse than it is today.
Now a healthy mix of agriculture, tourism, and thriving local businesses, Dominica is the model many much larger countries should take if they want their economies to thrive, no matter what.