“Analysing the opportunities for EY

from Chinese Investments in the

Caribbean Islands”

Prepared by:
Akshay Talwar
Summer Intern, EY Knowledge
Roll no: 138/2016
Under the guidance of Mr. Syed Faizi Abidi.
Contents
 Introduction
 Company & Industry Overview
 Review of Literature
 Objectives & Methodology
 Findings
 Analysis
 Suggestions
 Other Projects
 Key Learnings
 References
Introduction
 Finance being an essential pillar of any organization, requires comprehensive research
and analysis of competitor firms, clients and various economies in which the
organization has operations.

 Since several different sectors are there under an economy, which together contribute
towards growth and development, detailed knowledge and in-depth research about
them is important to address to key issues and look for insights.

 Knowledge department in an organization, with it’s articles, blogs, presentations,

reports etc., is the functional hand of other departments and contributes by keeping
them updated about current scenarios and providing key deliverables for business
maintenance and development.
About EY
 EY is one of the “Big Four” audit firms with 728 offices in 150 countries employing over 2 Lakh
people. Along with audit, EY also provides services focused in the areas of assurance, advisory,
tax, TAS, and knowledge support to clients around the world.

 To ensure efficient and effective business, EY has organized it’s legal entities into 28 similarly
sized business units, called Regions, in terms of both people and revenues. These Regions, almost
all of which are purposely not single countries, are grouped into four geographic Areas:

 Americas

 Asia-Pacific

 Europe, Middle East, India and Africa

 Japan
About EY Knowledge
 EY Knowledge is a global team of professionals working to help the other teams understand their
client’s business environments, win work and deepen relationships with their clients. The
company use knowledge, such as news, research, analysis, benchmarks and work products, to:

 Create a deeper understanding of your operating environment, opportunities, developments

and threats, let us tell you something you don’t already know.

 Using proven approaches and methodologies allows us to respond quickly and relevantly to
your challenges, however common or unique.

 Internal networks and communities connect our teams around the world to share
experiences, trends and approaches in real time.

 Globally consistent platforms mean your team can access the same insights and tools
anytime, anywhere.
 Review Of Literature
 James X. Zhan (2017): World Investment Report
 After a strong rise in 2015, global FDI flows lost growth momentum in 2016, showing that the road to
recovery remains bumpy. FDI inflows decreased by 2 per cent to $1.75 trillion.
 Flows to developing economies were especially hard hit, with a decline of 14 per cent to $646 billion.
 FDI remains the largest and most constant external source of finance for developing economies –
compared with portfolio investments, remittances and official development assistance.

 Richard L. Bernal (2016): Potential & Prospects of Chinese FDI in Caribbean

 Caribbean Island countries have now become a place of investment for most countries. The flows of
Foreign Direct Investment (FDI) into the Caribbean sub region in 2014 totalled $6.027 billion dollars.
 The percentage of Foreign Direct Investment as a proportion of Gross Domestic Product (GDP) is
relatively high in the Caribbean compared with other regions of the world, the study indicates.
 On average, these flows represent 4% of the sub region’s GDP, and more than 10% in some of its
economies.
 Objectives & Methodology
 To analyse the Chinese FDI in the Caribbean Islands.
 To understand how EY can expand its presence in the Caribbean Islands by using China as
an indirect source of investment.
 To recommend EY about the opportunities available to expand its presence in the
Caribbean Islands.

Research methodology adopted for the project was Secondary Research, as no primary
research projects are carried out at EYK.
 Secondary Sources of Information
 Websites of Chinese government.
 Statistics and reports by UNCTAD, Inter-American Development Bank, ECLAC etc.
 Research papers, PowerPoint presentations and PDF files by HBR, Mckinsey etc.
 Official websites of various Caribbean countries.
 EY database – Factiva, OneSource, Globalsource
 Past EY database.
 Related articles and newsletters from various websites.
 Economic Overview

 Caribbean Population: 36,314,000

 Ethnic groups: Afro-Caribbean, Indo-Caribbean, Native Americans (Arawak, Caribs, Tainos),
European, Asian Demonym West Indian and Caribbean
 Major Languages: Spanish, English, French patois
 Governments: 13 sovereign states; 2 overseas departments and 14 dependent territories,
tied to the United Kingdom, France, Netherlands and the USA

Source: Worldatlas
Top Economies of Caribbean
 Trinidad and Tobago
 It is the wealthiest country of the Caribbean Islands.
 It has the highest per capita Gross Domestic Product (GDP).
 Gross National Product (GNP) per capita is more than $12,735.
 GDP as per 2014 was $28.87 billion.
 Maximum Revenue Sector: Natural Gas

 Jamaica
 Mostly known for its reggae music, crystal clear beaches, and distinct accent.
 The economy is heavily reliant upon export revenues from its agriculture and mining industries
 In 2015, Jamaica’s GDP was estimated to have increased by 1.4%.
 Maximum Revenue Sector: Transport & Communication
Continued..
 Dominican Republic
 It is the ninth largest economy in Latin America, the Dominican Republic has one of the largest
GDP among the different nations that make up the Caribbean.
 Dominican Republic reported an economic growth rate of 7.3%, an increase from 4.8% realized in
2013, as well a GDP of $64.14 billion
 The island’s list of key trading partners includes the United States, China, and Haiti.
 Maximum Revenue Sector: Tourism, Manufacturing
 FDI in Caribbean Country-Wise
Total FDI in Caribbean Countries(2013)
3000

2545.5
2500 2397.6

2000
FDI ($mn)

1500

1000

500

117.8 135.5 149.2

28.7 0 15.2 13.2 15 19.4 15.7 1.4
0
Antigua & Barbados Belize Dominica Dominican Grenada Haiti Jamaica Saint Kitts Saint Lucia Saint Suriname Trinidad &
Barbuda Republic & Nevis Vincent & Tobago
Grenadines
Axis Title

Source: Economic Commission of Latin America & Caribbean (ECLAC)

 China’s FDI in Caribbean Country-Wise
China's FDI in Caribbean Countries(2013)
120
111.9

100

79.7
80
FDI ($mn)

60

40 36.2

20 14.5
8.5
6.3 5 3.9
0.35 1.1 0 0 0
0
Antigua & Barbados Belize Dominica Dominican Grenada Haiti Jamaica Saint Kitts Saint Lucia Saint Suriname Trinidad &
Barbuda Republic & Nevis Vincent & Tobago
Country Grenadines

Source: Government of People’s Republic of China(2014)

 Sector-Wise FDI in Caribbean
15%

32%
13%

22%
18%

Tourism Transportation Natural Resources Telecommunications Others

Source: EY Database

 The Caribbean consists of several groups of economies, each with its

own economic story reflecting its strengths and weaknesses. There are
some sectoral trends that are common to the whole sub region.
 Tourism has the maximum share in terms of FDI.
 The sectors in which Chinese FDI has been strongest are agriculture,
tourism, minerals, and energy.
Average breakdown of FDI Inflows by
sector
 For many economies, the tourism
sector is the largest earner of
foreign exchange and the primary
destination for investment.
 Natural resources are particularly
important in Guyana and Trinidad
and Tobago.
 Transport and communications are
particularly important in Haiti and
Jamaica.
 Only in the Dominican Republic
does manufacturing account for a
large proportion of FDI.
 EY’s presence in Caribbean Islands

 Countries where EY has presence  EY not present but China is present

 Barbados  Guyana
 Cayman Islands
 Belize
 Virgin Islands
 Haiti
 Dominica
 Dominican Republic  Antigua & Barbuda
 Grenada
 Bahamas  Countries where neither is present
 Saint Lucia
 Saint Vincent & Grenadines  Curacao
 Jamaica  Netherlands Antilles
 Suriname
 St. Kitts & Levis
 Trinidad & Tobago
Analysis

 Multiple Chinese companies have made investment in Caribbean in the past decade.
Not all companies have gained from their investments. After thoroughly analysing a list
of companies and comparing their pre & post FDI revenues, a list of companies had
been prepared which EY could take into consideration for expanding its presence in
the Caribbean Islands.

 Countries where Chinese companies have invested, however, EY has no presence have
been identified and they have been analysed on the basis of FDI in those countries.

 Investment opportunities have been identified where neither EY nor China have any
presence.
 Chinese Companies FDI in Caribbean
China State Construction Engineering China Harbour Engineering Company
Corporation Limited

CSCEC Revenue over the years

CHEC Revenue over the years
600
512 400
339
500 350
386 300
400
250 211
$mn

$mn
300 200

200 150 103

139
100
100
50

0 0
2015 2016 2017 2015 2016 2017
Year Year

Source: EY Database
Source: EY Database
CAGR – 54.44% CAGR – 48.75%

CSCEC invested $890 mn in Bahamas in CHEC invested $600 mn in Jamaica in

2014 in the Tourism Sector. Transport & Tourism in 2014.
 China Investment Corporation Yida International Investment Group

CIC Revenue over the years Yida Revenue over the years
700 300 268
616
600 250
502
500
413 200
400 324 136
$mn

$mn
150
300
168 100
200
89
100 50

0 0
2012 2013 2014 2015 2016 2017 2016 2017
Year Year

Source: EY Database Source: EY Database

CAGR – 38.05% CAGR – 40.38%

CIC invested $890 mn in Bahamas in Yida International Investment Group

2011 in the Tourism Sector. invested $1bn in Antigua in the year
2015 in the Tourism sector.
 Countries where Chinese companies have
invested, however, EY has no presence
Total vs China's FDI
300
88.31%
255
250
225.2

200

0.29%
$mn

150
117.8

100

53.33% 21.95%
50
28.7
15
8 6.3
0.35
0
Guyana Belize Haiti Antigua & Berbuda
Country

Total FDI China's FDI

Source: ECLAC, EY Database & Government of People’s Republic of China
 FDI in Caribbean countries where neither EY
nor Chinese Companies have invested
FDI Figures
140
130

120

100

80
73
$mn

60

40

20 16

0
Netherlands Antilles Curacao St. Kettis & Levis
Country
Source: UNCTAD
Suggestions/Recommendations
 EY can tap 21 companies out of the total 72 that were identified. Due to confidentiality
of data only 4 companies have been mentioned.
 Yida International Investment Group
 China State Construction Engineering Corporation Limited
 China Investment Corporation
 China Harbour Engineering Company

 EY can expand its presence in Caribbean by investing in these companies as the

investments by these companies in the Caribbean countries have proved beneficial
over the years & the financials of the companies are also in line.
 Based on the CAGRs of each investment, it is clear that the investments made by these
companies have given positive returns over the years.
 Investment opportunities where neither
is present
 Curacao
 Investment Opportunity: Curacao Logistics Knowledge Center
 The motive of the project is to establish the only comprehensive Logistics Knowledge
center in the region to create logistic knowledge workers, conduct research and improve
cross border logistics services within the region.
 Investment Required: 1,011,601 USD (280,899 USD available locally)
Source: CAIPA

 St. Kitts & Levis

 Investment Opportunity: Whitegate Development
 Whitegate Development area, extending from Newton Ground to Belle Vue, has been
identified by the Government of St. Kitts and Nevis as a prime location for future
economic growth and development.
Source: Investstkitts
Continued..
 Netherlands Antilles
 Investment Opportunity: Open Cast Chrome Mining Opportunity
 An investment on a debt funding model for a new open cast chrome mine.
 Investment Required: SAR 50mn
Source: Factiva
Other Projects
 Business Models & Organization Structures

 Objective: To conduct a research on the business models and the organization

structures of the firms namely – Apple, Amazon, Facebook & Google and present the
findings to the client.

 Methodology: Secondary Research

 Secondary Sources of Information
 Websites of Facebook, Apple, Google & Amazon.
 Research papers, PowerPoint presentations and PDF files by HBR, Mckinsey etc.
 EY database – Factiva, OneSource.
 Related articles and newsletters from various websites.
 Business Model Canvas

Amazon

Source: Factiva

Apple Inc.
Source: Factiva
 Continued..

Google business model is Polyhedral i.e. everybody sees a different face of

the company
 Users: They see free searches, free email, free maps, free browser, etc
 Companies: They see website space where to put their ads taking
advantage of geolocation, segmentation (specially in Youtube and
Google+), etc. Google
 Developers: They see a way to monetize their knowledge by means of
Android apps.
 Offline: Google is lately it is trying to move outside the Web with
autonomous cars, working humanoid robots.

Facebook has a USER DRIVEN Business Model. The entire

business model of Facebook is free of data mining. The entire
Facebook revenue line depends on the self-serve ads being circulated
within the timelines of users scrolling through the infinite
vertical scroll.

Source: Factiva
 Organization Structure
Function
Amazon Based

Global Function-
Based
Organization
structure

Spoke &
Product
Wheel
Based
Organization Hierarchy
Structure
Apple Inc.
Global Geographic
Hierarchy Divisions

Source: Panmore
 Organization Structure
Corporate Function-
Based Teams
Google

Function Based

Organization
Structure

Geographic Product-
Divisions Based
Organization Divisions
Structure

Facebook
Product
Flatness
Based

Source: Panmore
 SWOT ANALYSIS
Strengths Weaknesses
Strong brand image Limited distribution network
High profit margins Sales limited mainly to high-end
Effective innovation process market
APPLE Inc.
SWOT
ANALYSIS
Threats
Opportunities
Aggressive competition
Distribution network expansion
Imitation
Rising demand for tablets and
smartphones Rising labor cost in countries where
Apple plants are located
Creation of new product lines

Strengths Weaknesses
Strong background Shrinking margins
Customer centric Tax Avoidance issue
Efficient delivery network High Debt
GLOCAL strategy
SWOT
Product flops Amazon
ANALYSIS
Oppurtunities
Threats
Backward Integration
Low entry barriers of the industry
Global Expansion
Government regulations
Acquisitions
Local competition
Opening physical stores outside U.S
 Continued..
Strengths
Weaknesses
•Market Leader in Search Engines
Excessive Reliance on Secrecy
•Ability to Generate User Traffic
Falling Ad Rates
•Revenue from Advertising and Display
Overdependence on Advertising
•Introduction of Android and Mobile
Technologies
SWOT
ANALYSIS Google
Opportunities Threats
Android Operating System Competition from Facebook
Diversification into non-Ad Business Mobile Computing
Models

Weaknesses
Strengths
Easily imitable products and services
Strong brand image
Negative impacts of online advertising
Large consumer base with externalities
on user experience
High revenues
Low diversification of business

SWOT
Facebook
ANALYSIS
Opportunities Threats
Business diversification Imitation
Product innovation Cybercrime
Market penetration and development Market saturation
Other Projects
 Phase 1 & Phase 2 Acquisitions Profiles
 Prepared client ready company profile decks of companies offering High Net Worth services in
Atlanta, Philadelphia, New York & Connecticut.
 Objective: EY wanted to expand its presence in the field of HNW offerings in the above mentioned
geographical areas. Accordingly, companies had to be identified and their profiles had to be delivered.
 Machine Learning & Natural Language Processing
 Objective: EY’s client wanted to enter the business of Machine Learning & Natural Language
Processing.
 A thorough research in the field of Machine Learning and Natural Language Processing had to be
done to prepare a deck for the current scenario in the field and the current market share and future
of the field.
 Dependent Eligibility Verification Services
 Objective: EY wanted to enter the DEVS. A list of companies along with the company profiles had to
be prepared which EY could tap for entering this field.
 Effect of aging population on taxation globally
 Objective: A write up based on thorough secondary research had to be prepared on the impact of
ageing population on taxation worldwide.
 Global Tax Guides
 Objective: To prepare a deck on EY’s Business Tax practice and Legal practice with respect
to its competitors.
Key Learnings

 To deliver key ideas and analysis in forms of presentations and reports to generate substantial
impact on the clients and provide fresh insights.
 To create an effective research methodology and have a 360-degree outlook towards a project or
topic.
 The projects that I worked on ranged on a wide spectrum and thus I gained knowledge about
fields that were priory unknown.
 Creating quality deliverables and aligning them as per the client needs.
 Managing complex assignments under strict deadlines with a team of analysts.
 Quality over Quantity. It is important to meet deadlines but it is even more essential for the work
to reflect the quality it is supposed to have.
References
 Richard L. Bernal (2016) : Potential & Prospects of Chinese FDI in Caribbean.
https://publications.iadb.org/bitstream/handle/11319/7977/Chinese-Foreign-Direct-Investment-in-
the-Caribbean-Potential-and-Prospects.pdf?sequence=1
 Economic Commission for Latin America and the Caribbean (ECLAC), Foreign Direct Investment in
Latin America and the Caribbean, 2015
http://repositorio.cepal.org/bitstream/handle/11362/38215/S1500534_en.pdf?sequence=4&isAllow
ed=y
 Ronnie Griffith, Kimberly Waithe and Roland Craigwell(2008): The Significance of Foreign Direct
Investment to Caribbean Development
http://www.ccmfuwi.org/files/publications/misc/roland_craigwell/foreigninvestmentwithronnie.pdf
 World Investment Report 2017 – UNCTAD
http://unctad.org/en/PublicationsLibrary/wir2017_en.pdf
 2014 Caribbean Economic Review & Outlook for 2015 – Caribbean Development Bank
http://www.caribank.org/uploads/2015/02/CDB-2014-Caribbean-Economic-Review-and-Outlook-for-
2015.pdf
THANK YOU!