Address by Sen. Hon. Guy Mayers at The First Executive Luncheon of the Saint Lucia Chamber Of Commerce - February 13, 2008
ADDRESS BY SENATOR, HON. GUY MAYERS
MINISTER FOR TRADE, INDUSTRY, COMMERCE AND CONSUMER AFFAIRS
FIRST EXECUTIVE LUNCHEON OF THE
SAINT LUCIA CHAMBER OF COMMERCE
WEDNESDAY, FEBRUARY 13, 2008
“MAJOR ISSUES IN SAINT LUCIA’S TRADE AND COMMERCE SECTOR, CHALLENGES AND OPPORTUNITIES FOR PARTNERSHIP BETWEEN THE MINISTRY AND CHAMBER OF COMMERCE”
Mr. Christian Husbands, President of the Saint Lucia Chamber of Commerce, Industry and Agriculture, Mr. Brian Louisy Executive Director, Members of the Management Team Ladies and Gentlemen. It is indeed a pleasure and an honour to have been invited to speak to you at your first executive luncheon for the year. Let me take this opportunity to wish you all the very best in this year, a leap year which promises to be very challenging but also one where opportunities will present themselves to those of us who are prepared to act outside of our comfort zone and take creative decisions.
You have invited me to speak to you on the trade and commerce issues that would occupy the Ministry’s and by extension the Government’s time in 2008 and I welcome this opportunity.
THE UNFINISHED BUSINESS OF 2007
Let me first begin by examining the unfinished business of 2007.
Completion of HS2007
You would be aware that the international commodity coding system that identifies every good produced and traded is the HS system. The world has moved to review this system and a new system the HS 2007 system is what is required. The system that we have been using is the HS 1998 system which is now outdated. We have been working assiduously on this matter and I am pleased to report that all amendments including tariff rates have been completed and a draft document is available. However Harmonization of Fiscal Instruments and inclusion of the Licensing Regime are still outstanding and will be completed. This exercise has been dragging for the past three years and in light of new developments in the trading arena, particularly with the completion of the Economic Partnership Agreement with the European Union, this must be completed within the first half of the year. Is this an important issue one might ask? This is very critical since the identification of a good is what determines the duties that are applied to that good upon importation into a country. This therefore has implications for the level of tariff applied and hence the level of protection that can be afforded to domestic production and the level of Government revenue to be collected for implementation of the programmes of the Government.
The Metrication Programme to be in place by the end of 2009. We will be moving from Pounds and Ounces to Kilograms and Grams, from Feet and Inches to Meters and Centimeters, from Miles to Kilometers and from Fahrenheit to Celsius. The Private Sector has to prepare itself for this dispensation.
External Trade Act
You will no doubt be aware that the instrument that has allowed the Government to afford production and marketing space for the domestic manufacturing sector has been the External Trade Act. This Act, which deals with the granting of import licenses, is however being completely reviewed by the Ministry of Trade. This must be done in keeping with our commitments undertaken in the CSME and now in the EPA with the European Union. We will seek to abolish non automatic trade licenses on all goods of CARICOM and EU origin during the course of this year. However it is necessary for us to maintain an automatic Licensing Regime to monitor imports of Article 164 items.
If Saint Lucia is to grow and the economy become less vulnerable to external shocks, there is need to deepen the level of domestic linkages between the various productive sectors. A review of the volume and value of licenses granted for the importation of certain products geared towards the tourist sector reveal that the level of backward linkage with domestic suppliers is shallow and does not reflect the potential for the multiplier effect that this sector has on the domestic economy.
There has simply been an inordinate amount of license applications from the hotel sector for linens, furniture, foodstuff and stationary. The majority of these items can be manufactured or obtained locally. While Government is reluctant to legislate and expect good reason to prevail in this climate of unreasonably high unemployment, particularly among the youth, it may be necessary to link incentives to local purchases if we are expected to experience a greater multiplier effect from the tourism sector.
The Government of Saint Lucia has been providing substantial incentives to the sector and we expect that there would be greater effort to purchase locally. The Chamber is therefore invited to assist the Ministry Commerce in promotions geared towards the Tourism Sector encouraging the sector to purchasing locally instead of engaging in the business of importation.
I must also indicate that the Ministry has been bombarded by local importers with requests to reduce the list of items requiring licenses for importation. This will be addressed in the review that is ongoing but I hasten to indicate that we will never be able to abolish licensing in its entirety as licenses are also used for security, health and control purposes.
Regularization of Article 164
With respect to Article 164 of the Revised Treaty, CARICOM members agreed to applications made by CARICOM LDCs (of which Saint Lucia is a part) to activate Article 164 of the Revised Treaty at the 20th meeting of the CARICOM Council for Trade and Economic Development (COTED) in January 2006. This decision was later ratified at the 17th Inter-Sessional Meeting of the Conference of Heads of Government in February 2006.
Article 164 is a measure designed to assist CARICOM LDC members in the promotion of industrial development within their sovereign territories. This is achieved by permitting CARICOM LDCs to charge higher tariffs on non-CARICOM imports than allowed in the Common External Tariff and to permit CARICOM LDCs to charge import duty on goods of CARICOM origin from the More Developed Countries.
The goods, however must be products approved by COTED for such treatment.
The measure is temporary and is granted for a period of ten years to be reviewed after five years. Approximately twenty industries have been allowed Article 164 protection, but in order to give effect to this we need to introduce legislation to change the tariff rates. This we must do without increasing the cost of living.
First we must ensue that CARICOM LDCs can provide these products in consistent quality and quantity so as to prevent us from sourcing outside. You in turn would be expected to buy from CARICOM LDCs.
We are aware of the issues pertaining to quality and reliability of supply. However, the Ministry is working with the Office Of Private Sector Relations and the Saint Lucia Bureau of Standards to address the issues identified so that the manufacturers can grow and improve on their products and in so doing provide increased employment for Saint Lucians.
The Ministry is also actively encouraging the local manufacturers to seek partnerships and enter into joint venture arrangements so that new technology and methods of production are injected into their production processes and that external markets could be penetrated.
Implementation of the CSME
Chamber members will know that the CSME is now into its third full year of operation. One of the principal objectives of the CSME is to create a single economic space where the factors of production can move freely. To ensure that this happens Ministry Officials met with the various Government Agencies and have implemented procedures to satisfy this requirement of the treaty. The Treaty however distinguishes between persons who have the right to seek employment and those who may travel as visitors. We understand that several CARICOM nationals who have entered the state as visitors have been seeking gainful employment. We believe that this is one area in which Chamber members can be of invaluable assistance to us.
For the moment, only Skilled Community Nationals in the approved categories are allowed to seek employment. These persons must also possess a skills certificate verifying their areas of competence. All such certificates must either be issued by the Government of Saint Lucia or endorsed by the Government of Saint Lucia. CARICOM nationals who do not posses the requisite skill certificate, require a work permit to engage in wage earning activity. If you have any doubt in such matters please do not hesitate to contact the Ministry of Commerce.
Movement of Temporary Service Providers
With respect to CARICOM nationals who are desirous of establishing a business, the Revised Treaty indicates that such persons have the right to establish business in any member state. In addition Community Nationals who are established service providers have the right to visit any member state to provide those services on a temporary basis. For purposes of clarity, temporary has been defined as one year duration. We are in the process of formulating regulations to regulate the movement of such persons and provide guidance to the Immigration and Labour Departments on this issue.
Buy Local Campaign
The Ministry will continue with the Buy Local Campaign in 2008. At this time when there is upward pressure on prices in the country, it is even more important that the domestic private sector purchases more locally produced goods and services. This is important to sustain employment and provide the means through which Saint Lucians will be able to cope with the rising prices facing us. In 2008 therefore, the Ministry will seek to undertake several new initiatives, in collaboration with the Private Sector.
The Way Ahead
As we focus on the way ahead in this year some matters come into focus immediately. Of serious concern is the current state of rising prices in basic food items which is accompanied and influenced by the simultaneous rise in the price of fuel. This relatively new administration has been faced with these major challenges from its inception into office. How have we approached the problem?
Increases in the Price of Fuel
First the Government had to determine whether the rise in the price of fuel would stabilize and at what level. Our best estimate of this situation indicated that this would be when prices reached the USD100 per barrel mark for crude oil. We could have taken the policy decision to change prices earlier but this we believed would only serve to create uncertainty in the domestic market and weaken domestic consumer and investor confidence. We therefore opted to delay the introduction of new prices. While there are complaints in some quarters that the increases have been steep, it is also true that Saint Lucians have benefited from lower prices for fuel and its derivatives for quite some time.
The prices that have now been introduced into the market should remain stable for a while thereby giving investors the opportunity to engage in short to medium term planning at these new price levels. Of course, if prices fall significantly and remain stable at that lower price, this will be passed on to all consumers and investors.
Increases in the Price of Food Items
With respect to food, there has been a steady increase in the price of a wide range of basic food items driven by the worldwide increase in price of grain, in particular wheat and corn. These increases were occasioned by increase in demand for use of these commodities as substitute for traditional fuels. In addition there has been major failure in the harvest for these commodities as a result of drought and other natural disasters. For us in Saint Lucia, the fact that the US dollar has weakened against most major currencies has also meant that it is relatively more expensive to purchase goods in US dollars since our currency is pegged to the US dollar.
What are the options opened to Government as a means of controlling this increase in prices? Reducing the money supply is not the answer as the inflation is not domestically created but rather imported. And in any event this does not sit well with the Central Bank. This leaves us the other option of Fiscal Policy manipulation.
Government has identified a list of sensitive food and other products, eleven in all that we are seeking the lowering or removal of the Common External Tariff (CET) at the level of the COTED so that these products should be cheaper to the consumers. This matter will be further discussed at an upcoming Special COTED meeting in Nassau from March 3-5, 2008.
The other option opened to Government is the use of the Price Control mechanism. This has been considered by Government and we believe that it offers us the most practical tool at the moment to deal with the escalation in prices, at least for a short time period. Government has identified a limited list of items on which it proposes the imposition of price controls through the use of a fixed percentage mark up. We understand that this tool is not perfect and in fact are fully aware that in a perfectly competitive market, especially in the distributive trades sector, the market is the best means of determining prices. However, the market is in fact characterized by imperfect competition and hence another approach is required.
Government is prepared to sit with the private sector and discuss the level of the percentage mark up to be warded on this narrow band of items. I assure you that this Government will not implement a price control regime that will lead to the closure of micro, small, medium or large businesses. Neither will Government policy seek to discourage the attraction of new investors and investments especially in the distributive trades sector. We are however at a critical point in the development of Saint Lucia and we need all our creative thinking ability and a bit of short-term sacrifice in order to ensure this economy remains on a growth path that will lead to its eventual transformation. But the sacrifices cannot be expected or demanded from the Government alone by way of reduced revenues from the removal or reduction of Duties and Consumption Taxes.
The St. Lucia Development Plan and The Castries Redevelopment Plan
Chamber members would by now have had the opportunity to examine the intended path that this Government seeks to take with the redevelopment of Castries and the wider development for Saint Lucia. The Government is clear that if there is no vision and further if the nation does not have a shared vision, then there can be no planning by the private sector and households. The Government, within nine months of getting into office has put before the public our view for the future. It may not be perfect but there is something on the table for review and critique. Your comments will further inform our thinking and refine our plans. The Chamber of Commerce must not be passive in this matter. It must exercise leadership and articulate your views publicly so that policy can be influenced by your contribution.
The direction that is being proposed is not for the institution of Government only. It is a direction for all of Saint Lucia and the private sector will be the leading beneficiary of the proposed interventions.
Regularizing the EPA
The negotiations on the new economic partnership agreement between CARIFORUM and the European Community were completed within the timeframe that was agreed to in 2000 when the Contonou Agreement was singed. However formal signing of the treaty and enactment into law remains to be done.
The Economic Partnership Agreement (EPA) is perhaps one of the most complex trade agreements of all time, covering trade in goods, services and intellectual property. There are also related issues on competition, innovation, public procurement, transparency and environment, among others.
It is an agreement between two very unequal groups of nations. In fact even within the structure called CARIFORUM we are not all equal but non the less, we are expected to act in a homogenous manner for the good of the treaty. It seeks to create opportunities for both sides in investment and production. Rules of origin make provision for accumulation; i.e. raw materials may be obtained anywhere within CARIFORUM to manufacture goods in any member state. Finished products would be certified as CARIFORUM goods. The same goes for goods similarly manufactured in the EC.
Of interest to us is the special protocol on bananas with its Duty Free Quota Free (DF QF) principle. Already we can see the need to enhance competitiveness and for us to introduce measures from the farm gate to market that will assist in implementing adjustments required as a consequence of increased competition. It may be necessary to re-brand in order to refocus on the demographics of our markets.
The private sector must work closely with the Public Sector if we are to reap benefits from the EPA arrangement. From our perspective there are significant opportunities to be gained from the agreement but this calls for close collaboration and the changing of the manner in which we approach and undertake business in Saint Lucia. We will need to pursue more joint venture arrangements with firms from outside of Saint Lucia into arrangements with domestic business if we are to make full use of the possibilities of the agreement. The Government, through the Ministry of Trade, Industry and Commerce and private sector entities must come together and devise a set of objectives that ought to be pursues within the context of the EPA. These objectives must be followed up by strategies and these strategies must be implemented and monitored.
As part of the initial work of my Ministry, the officials are preparing to launch a full scale education drive and will take to the road as was done with the CSME. The object of this dialogue is to ensure that as many Saint Lucians as possible, become aware of the potential advantages of the EPA.
We are fully aware that the services sector holds the greatest potential for us in this arrangement. However regulations governing services are few and sporadic, mainly in the areas of financial services and tourism. In light of this, the Ministry is embarking on a new initiative with assistance from the Organization of American States (OAS), to introduce a body of legislation and appropriate regulations to ensure that the rules of engagement in the services sector are clear and known to all.
Implementing the National Export Strategy
As we face the prospect of the new trading environment with the EPA and the CSME, we have some things going for us in Saint Lucia. There is in place a National Export Strategy that if implemented as originally envisaged can give Saint Lucia a competitive edge in the market. Every effort will be made in the course of the new financial year to implement the National Export Strategy.
We will focus on the priority sectors in general but will perhaps commence with those that have already achieved world class status so these will be taken to the next level and become flagships of Saint Lucian enterprise. Since the agro processing and beverage sectors comprise the largest sectors within the manufacturing sector and are primary sectors with proven export potential, these will receive renewed attention. In addition, the agro processing sector has strong linkages with the agricultural sector and so its success means success for the vital agricultural sector.
The area of finance which was identified as one of the critical cross-cutting sectors and a major hurdle impeding the growth of the private sector is now being addressed with the re-introduction of the National Development Bank. The other major obstacle remaining at this state is the availability of the appropriate human resource. With the CSME in place however this ought not to be a long term problem.
Finally I wish to turn my attention to the legislative environment that has to be addressed as we move ahead in 2008. Firstly, with the support of the Attorney General’s Chambers we hope to pass new legislation relating to Competition Policy, Information and Communication Technology to facilitate e-commerce, and Incentives exclusive for the Services Sector. We will also pay attention to Shopping Hours Ordinance and Tax Reform. Of course there are other pieces of legislation that will come into sharper focus such as the Labour Code. While all these areas of legislative work do not fall directly under my Ministry, we have interest in them and will be monitoring these closely. You will know that the Consumer Credit Act was passed into law in 2006 and will become fully operational by the end of March when we expect to publish the accompanying regulations. The Consumer Protection Bill, out of an abundance of caution has been placed on hold pending completion of the Uniform CARICOM Consumer Act.
As usual the Ministry will engage you in dialogue on all of these instruments and will give due attention to your contributions.
In closing I wish to state that the Ministry in response to a request from the Junior Achievement of Saint Lucia to fund the position of Co-coordinator has agreed in principle to absorb that officer within the Ministry through SEDU. This will be an addition to that division and the officer will be responsible for the co-ordination of Junior Achievement Programme.
As we move forward throughout this year I wish to state that my Ministry is open to dialogue on matters affecting or impacting on the Chamber. We will meet regularly as planned but feel free to reach me at any time whenever the situation demands it.
Let me wish you all the best in this year and let’s make it a success for all of us.
I thank you.
© 2013 Government of Saint Lucia. All rights reserved.