FINANCIAL STATEMENT & SUPPLEMENTARY BUDGET
PRIME MINISTER AND MINISTER OF FINANCE
THE HON. DR KENNY D. ANTHONY
NOVEMBER 4th 1997
On May 23rd, 1997, the people of Saint Lucia spoke decisively. In what some have
described as an avalanche, they removed from the seat of power and authority, a
Government that had become arrogant, abusive, self-serving and contemptuous.
There is no better example of the contempt which the former Government had for
the people of Saint Lucia than its decision to present a budget on April 22nd,
1997, a mere thirty-one days before General Elections. The decision was
contemptuous because the Government knew that the General Elections was a matter
of days away, yet, it denied the people of Saint Lucia the power to determine,
through the General Elections, which Government should present a budget for the
financial year, 1997/98.
The U.W.P. Government chose to ignore the well known convention that where a
General Election is imminent and a budget due, then the outgoing Government
ought to leave the electorate to determine which Government should be trusted
with power to present the next budget, provided that the Constitution is not
There was no need for the former Prime Minister to present a budget a few days
before the General Elections. Section 80 of the Saint Lucia Constitution, S.I.
1978 No. 1901, empowers the Minister of Finance to authorize the withdrawal of
monies from the Consolidated Fund for the purpose of meeting expenditure
necessary to carry on the services of the Government until the expiration of
four months from the beginning of the financial year, provided that Parliament
enacts legislation to that effect. Parliament had done so through Section 22 of
the Finance Administration Act 1997, which came into force on April 01st, 1997.
We knew that this Government would be forced to govern within the budgetary
confines established by the former administration.
But that was not the only reason why the budget was opposed by the members who
now constitute this Government. The 1997/98 budget was unrealistic in its
programmes and objectives. Indeed, a recent I.M.F. Mission to Saint Lucia noted
that while some two hundred million dollars (EC$200 million) had been budgeted
for capital expenditure, only sixty million (EC$60 million) could be
realistically spent. What is more, the economy was in recession, and like the
proverbial ostrich, the former Minister of Finance chose to bury his head in the
sand of UWP conceit and ignore the obvious structural deformities which his
predecessor left behind before bailing out.
By the former Finance Minister's own admission, A... real GDP growth declined
from 4.1% in 1995 to 1.9% in 1996. The surplus on the Current Account decreased
from EC$59.1 million in 1995/96 to EC$54.7 million in 1996/97. This surplus is
projected to decline further to EC$15.9 million in 1997/98. Moreover, between
1990 and 1996 earnings from the vital banana sector had declined by 33%. With
the exception of tourism, declines were recorded in every other main sector in
1996. Output declined by 1.2 % in the manufacturing sector. Likewise, the share
of the construction sector of GDP declined from 9.56% in 1994 to reach 8.17% in
1996 and is expected to decline even further in 1997.
Mr. Speaker, the policy implications of these indices were loud and clear. The
economy had deteriorated sufficiently to warrant structural adjustment measures
at the macro level. Rather, the country was presented with the pantomime
described as a budget on the eve of a General Election.
Against that background, the party which has entrusted me with leadership,
promised that, on being elected, it would present proposals to redirect and
reorganize the economy without compromising its the integrity. The party advised
that it would present a Amini budget or auxiliary budget or alternatively, a
supplementary budget. These terms, though different, are, in essence to the same
intent and purpose. Suffice it to say that the appropriate term to use is a
Supplementary Budget. This Budget is supplementary to that which was introduced
by the former administration. Mr. Speaker, this exercise today, fulfills the
promise of a Supplementary Budget.
Now-a-days, the authority for a Supplementary Budget resides in section 22 of
the Finance (Administration) Act, No 3 of 1997. That section empowers the
Minister of Finance to lay a Supplementary Estimate, and after its approval,
introduce a Supplementary Appropriation Bill if inter alia, Aa need has arisen
for expenditure for a purpose to which an amount has been appropriated (or) for
a purpose to which no amount has been appropriated by law. This Supplementary
Budget satisfies both criteria. Moreover, the changes in the subject portfolios
of ministries make it even more necessary that the financial resources available
to the government be re-allocated to reflect the new administrative
dispensation. Indeed, Mr. Speaker, of the sum of EC$51,666,030 allocated to
recurrent expenditure in this Supplementary Budget, $35.7 million dollars
represents re-allocated expenditure across ministries. Likewise, in respect of
the amount EC$73,317,090 allocated to capital expenditure, EC$24.7 million is
reallocated expenditure across various heads of expenditure.
Mr. Speaker, it is critical that the difference between this Supplementary
Budget and the Annual Budget be explained and understood. In obedience to our
Constitution, Parliament is required to approve the estimates and expenditure
for the financial year. A Government normally presents its major policies and
programmes on Budget Day. A Supplementary Budget merely seeks to remedy the
deficiencies of a budget already approved.
The above distinction is drawn to emphasize that the major budgetary statement
of the Government will be delivered in April 1998, as is customary. This
Supplementary Budget is meant to lay the basis to refocus our economy, to tackle
the inherited structural problems, and to inspire confidence in our ability to
overcome our problems. We have inherited a situation which requires more than
prudence. We must exercise utmost care and vigilance to climb out of this
Public Participation in the Exercise
Mr. Speaker, neither the Government nor the Minister of Finance has all the
answers to our economic problems. This government understands humility. Those
who believe that the nemesis of this Government and its leadership lies in
displays of arrogant pride must seek comfort elsewhere for their wild ambitions.
This Government believes that a budget presentation affords a unique opportunity
to tap the experience and wisdom of our social partners. The budgetary exercise
provides another opportunity to redesign the boundaries of participation and
democracy to bring our collective minds to purge our economy of its impurities.
Mr. Speaker, in the preparation of this Supplementary Budget, I have benefited
from the views and ideas of the professionals in the Public Service and
recommendations of private sector organizations as well as private individuals.
This interaction must be deepened to embrace all our Social Partners in time for
the Annual Budgetary Proposals in 1998.
Establishment of Council of Social Partners
The former government had established two consultative mechanisms, a National
Economic and Social Consultative Council and a National Economic Development
Commission. In this Government's view, the work of the two bodies could be
collapsed into one structure, and the scope and depth of responsibilities
deepened. Consistent with its proposals in the AContract of Faith, Government
will establish a Council of Social Partners comprising representatives of the
public sector, the private sector, labour, churches, non-governmental
organizations and regional institutions, to review performance, dialogue on
issues and advise on policy programmes. In matters pertaining to budgetary
policy, the Council shall meet in open and closed sessions, at least two to
three days annually, to address and make recommendations to Government on
national budgetary issues.
Philosophy, Objectives and Goals
A budget is not a mere exercise to impose taxes and grant concessions and
allowances. It is an important policy instrument used by any responsible
government to help it in achieving certain objectives for the country and the
economy. Since this is my first presentation let me use this opportunity to
outline our philosophy, objectives and goals for Saint Lucia and hence the
underpinnings that will influence this supplementary budget presentation.
Obviously, these goals are to be attained over an extended period of time and
this budget represents just the first stage, but an important one, nonetheless,
in our continuing programmes to achieve these goals. I will classify these
objectives under three broad groupings as follows: political parameters, social
imperatives and economic thrust.
Our prime objective is to unite St. Lucians to accept the need to consolidate
our political independence, cherish our hard-fought sovereignty, enhance our
identity, and to get the world to recognize that, despite our small size, we
expect to be treated as equals and accorded due respect. These fundamental
political principles are neither negotiable nor tradable. We intend to maintain
and cement relationships with other countries but these will be on the basis of
mutual respect, and will always take into account what is in St. Lucia's best
long term interests but all in the spirit of global fraternity. We would like to
make St. Lucians prouder, more loyal, and committed to St. Lucia and its
development. We would like to see St. Lucians being more aware of the workings
of government and of the economy, showing a greater interest and participating
more actively in the affairs of state, and recognizing that each and every St.
Lucian is integral to the process of development. We want to see and will
promote open, transparent, fair and accountable government. Similarly, we want
public officers and other public sector employees (and, in fact, the society as
a whole) to be more prompt, courteous, tolerant and more helpful when providing
services to the client public.
We see the maintenance of law and order as one of the prime responsibilities of
the state and an important ingredient in the development process and in
maintaining social stability. We support fully the Rule of Law. If justice is to
be effective, it must be meted out or dispensed speedily. So committed are we to
this principle, that legislation will be introduced to this Honourable House to
require public functionaries and authorities to give reasons for their
We would like to see the scourge of illiteracy wiped out in St. Lucia. This
scourge which is a main contributor to poverty, facilitates exploitation of the
individual and does not allow the afflicted persons to participate fully in
society and to enjoy the quality of life that a modern society provides. We
believe, and would work towards ensuring that no individual in our society will
be denied the benefit of a basic and sound primary education and an appropriate
secondary education. We would also encourage St. Lucians to view education and
training as continuing processes in life and hence wish to see many more St.
Lucians pursuing post-secondary or tertiary education. Towards this end, we will
continually encourage and facilitate all those desirous of pursuing such
training when it is in the national interest to do so.
We believe and would work towards ensuring that every individual in St. Lucia
has adequate shelter preferably, wherever possible, through the ownership of
their own homes. Adequate accommodation for our people, in our view, helps to
minimize many of today's social ills and health problems. In the way we see
things, we believe that home ownership gives pride and a feeling to the home
owner that he or she has a stake in the country, and provides an incentive or a
goal to work and save for.
We intend to work towards ensuring that life expectancy in St. Lucia remains at
the highest level and keeps pace with international trends and improvements.
Consequently, we would want to ensure that the country has adequate health care
facilities even though the focus of our interventions would be on preventative
health care B adequate nutrition and shelter, creating sanitary environments
through, inter alia, proper solid and liquid waste disposal facilities, access
to a quality potable water supply, and using our media to disseminate
information on ways to improve the standard and quality of life.
We need to take much greater care of the two most vulnerable groups in our
society B the young and the senior citizens. We need to take care of the young
because they represent our future, our dreams, our aspirations, our longevity,
our identity, our continuing place in history and our continuing contribution to
global development. We need to provide a challenging and wholesome environment
for the young - an environment that discourages substance abuse, that inculcates
discipline and the traditional values of thrift, hard work, honesty, courtesy,
respect, tolerance and an environment that can help them develop positively to
their full potential. In order to ensure that we can provide the best material
comfort and parental care and supervision for our children, we would need to
recognize that children are best nurtured in a safe and complete family
environment. We would also hope that society would see the nurturing of children
not only as a family responsibility but also a community responsibility, if not
directly, then certainly by precept and example. We need to reward our senior
citizens for their contribution to where we are today, to continue to use them
in whatever way is most mutually beneficial so that they can continually feel
useful and to make their twilight years as comfortable and satisfying as
possible. We do not want a society in which our elders and seniors are left
uncared and unloved.
Our country has a varied, interesting and colourful history which has resulted
in a very rich and unique cultural heritage. We wish to encourage and develop
this cultural heritage and expression, not only as a manifestation of our unique
identity but also as something which could be marketed as part of our
development of heritage tourism and to broaden the range of attractions which we
offer to our visitors. We do not expect, nor want, any such commercialization of
our culture to compromise its integrity and authenticity. Nor would we want to
reduce our patrimony to mere exhibition on the altar of money. The promotion and
development of our culture must start from a recognition of the value of culture
as a means of participating in the diversity of the human family and as a means
of projecting one's particular contribution to the human family. To the extent
that we share and develop our own culture, we add to this global treasury, and
to the extent that we open ourselves to the best traditions of others, we enrich
Ours is a small country with a closely knit society. In a context such as ours,
any distinction between so called `town and `country folk or between urban and
rural is something that we ought to seek to eradicate. We are either all town or
country folk. We also want to encourage the decentralization of the population
and to encourage the development of settlements outside the capital city. As
such we will work to make transportation easily accessible, reliable, efficient
and cheap. We would also seek to ensure that modern day facilities are as
equally available throughout the country as is cost-effectively possible. Thus
we would work towards making medical, educational, entertainment, cultural and
other basic social and economic infrastructural facilities such as power, water,
waste disposal and telecommunication facilities widely available and accessible.
And at as reasonable a cost as is possible.
On the economic front, our fundamental goal is to provide a reasonable standard
of living and quality of life to all citizens of St. Lucia. This standard must
be benchmarked on international indices but must be consistent with our actual
and potential resource constraints. We are committed to the provision of
economic opportunity B no resident of this beautiful country should have to live
in poverty, or suffer indigence. No productive member of society who wishes to
work should be denied access to gainful employment or the means by which to
create their own employment. To achieve this we intend to pay particular
attention to the optimum development of our human resources by encouraging and
facilitating training and investment in people. In the knowledge age, education
is as important a factor of production as the traditional factors of land,
labour and capital. For us, education is not an end in itself but a means of
achieving the economic advancement of both individual and society.
We do not believe in the handing out of welfare nor do we believe that any St.
Lucian would feel comfortable and proud of being welfare recipients. We believe
that all St. Lucians would like to develop their productive abilities to the
full and to use their own efforts to propel themselves along. But we recognize
that in aiming for this goal, St. Lucians will need help and it is our objective
to provide whatever support is reasonable and cost-effective.
It has sometimes been argued that our people are afraid of competition and that
St. Lucians would wish that economic activity in St. Lucia be restricted to St.
Lucians only. We do not believe this is so. To accept this would lead to the
adoption of policies and practices that would circumscribe our development
potential in narrow and restricted goods and service markets. The fact of two
Nobel laureates and a proud record of achievement by many distinguished sons and
daughters in foreign lands should be sufficient testimony of our intellectual
potential and our competitive capacity. That we can compete and succeed abroad
is evidence enough that we can also compete and succeed at home where we already
have an advantage. St. Lucians recognize that competition is good as it brings
out the best in us, improves our productivity and reduces our costs and prices
to everyone's satisfaction. What we believe that St. Lucians want is equal
opportunity, and, crucially, some assistance in the initial stages to help them
My administration therefore intends to welcome competition. We welcome all
investors who intend to be good corporate citizens, respecting our laws and
culture, and who can contribute capital, skills, market access and/or technology
to help us develop to our full potential. It is only through the emergence of
that competitive edge that we can attain the standard of living which we deserve
We want ours to be a just, caring and compassionate society. Consequently, we
would want to see the benefits of our economic gains as equitably distributed as
possible while at the same time not frustrating or not providing due regard for
initiative and effort. Whilst we would make every effort and provide every
incentive to facilitate savings and productive capital formation, in rewarding
for labour we would hope that our society could get consensus to achieve a
distribution of wages, that, across the board, does not exceed a 1:20 ratio. In
other words, that the highest salary should not be greater than 20 times the
lowest wage. Such a wage consensus would help to keep down overall wage and
spiraling labour costs.
We intend to regulate and monitor the use of our natural resources to ensure
that they are optimally and sustainably developed to benefit not only ourselves
but also generations yet unborn. Hence, when we measure progress we want such
assessment to take into account not only the current stream of income and output
but also to recognize whether natural assets were destroyed in the process and
to account for such destruction. Our aim is to create a framework for the
development of the physical environment which will allow for its sustainable use
for ourselves and for the future.
As a government, we intend to make essential services available to the public
where it is in the best public interest to do so and where the private sector
either does not have the capacity and/or the inclination to so provide these
services. However, where the state provides these services we would expect and
insist that such services are provided cost-effectively and that, in order to
minimize waste, there is some element of partial or complete cost recovery,
depending on the user's ability to pay. We will develop and encourage activities
which will increase the proportion of offshore revenue in our total revenue so
as to finance the wide range of services that we need while ensuring that these
services do not place too great a financial burden on our residents.
Let me again stress that what we have enumerated earlier are broad political,
social and economic objectives, goals and guidelines that will influence and
guide our activities and policies. They cannot all be achieved immediately, or
even in the medium term. But this is what we are aiming at, and will endeavour
to achieve them as soon as it is possible, depending on you, your effort and
commitment, and the resources which we have under our control. In this
presentation, I will, on behalf of the Government, spell out some of the main
goals which we have set ourselves to achieve over the next five months in the
areas of economic performance, and some of the economic policies, institutional
arrangements and capital projects which we expect to put in place to achieve
AN OPPORTUNITY FOR STRATEGIC DIRECTION
Mr. Speaker, the sluggish performance of the economy this year and in recent
years, requires the enunciation and implementation of a coherent economic
strategy aimed at re-positioning St. Lucia to seize the opportunities that
abound in the international market- place. Previous administrations have been
unable or unwilling to articulate a consistent matrix of policies to prevent
economic decline and to provide the basis for long-run growth. We are determined
to create an effective framework within which we will at last be able to address
our problems, both in the short run and in the long run. The emphasis, Mr.
Speaker, will be, not on more money, but on more efficient use of money and
resources. Immediate measures are necessary to restore buoyancy to the economy,
while a comprehensive long-term strategy is required for the achievement of
This supplementary budget gives us the opportunity to chart a new course for the
future. In so doing, we must never and will never lose sight of our solemn
promise to be frank with the nation and to involve all our people in the process
Later in my address, I will report on the current state of the Economy and on
the major problems facing us at the present time. Many of our problems are
fundamental and serious, but other aspects of the socio-economic fabric and our
performance in some areas are inherently sound.
Our economic strategy addresses itself to the weaknesses of the economy, while
building on the strengths. Both must be taken into account in devising solutions
and in mapping the way forward.
Given recent trends which I shall elaborate on later, the present state of the
economy and the realities of the ever-changing global environment, our policies
to deal with the immediate problems are guided by three objectives. These are:
(1) Stabilization of the economy in order to prevent any further deterioration
in economic performance, social and economic structures and institutional
(2) A new strategic re-orientation aimed at positioning St. Lucia to take
advantage of hitherto untapped opportunities in the international economic
sphere and redirecting the economy towards the path of sustained growth.
(3) Stimulating the economy to generate a higher rate of non-inflationary growth
and employment, and reduced poverty.
These economic objectives will guide policy formulation in the short term and
medium term. Stabilizing, re-orienting and stimulating the economy are the focal
points of this Supplementary Budget with a view to getting the economy back on
track in the shortest possible time.
Stabilizing the economy involves a number of policy measures aimed at arresting
the decline in growth and in the capacity of the country's systems, structures
and institutions to produce efficiently. An important part of this process is
the elimination of waste in the public sector. We have already set up an
investigative committee to identify areas of waste and inefficiency in
Government. Its recommendations will be carefully evaluated with a view to
implementing them in the coming months.
When we assumed office in May, nearly all the statutory bodies and other
entities outside of the Central Government were in dire financial straights and
burdened by archaic management systems. Two notable exceptions were the National
Insurance Scheme and the St Lucia Air and Sea Ports Authority. We are firmly
committed to making the parastatal bodies fully accountable, transparent,
efficient and self-financing. It has been made abundantly clear to them that
their dependence on treasury financing will be phased out within the life of the
current budget. Early next year, Government will hold a one-day consultation
with all statutory boards to articulate its policies and expectations. The
private sector will be invited to participate in the deliberations.
A critical aspect of our economic stabilization programme is the rationalization
of the Government's fiscal account. We are placing renewed emphasis on major
ongoing projects in the key sectors of Tourism, Manufacturing, Agriculture and
Construction. However, mismanagement and the sluggishness of the economy have
reduced the availability of revenue for capital projects. Consequently, it is
necessary to find additional financing for the capital investment programme -
that is, in addition to local revenue, foreign grants, and loans from
We will invite the people of St. Lucia and our neighbours in the region to
participate in a new issue of development bonds, the proceeds of which will
assist in financing public sector capital investment. Other loans have already
been sourced from the domestic banking system, while joint ventures already
arranged with the private sector are another important source of project
finance. All these monies are being obtained on reasonable terms because of the
confidence of the financial sector and our Caribbean neighbours in the new
Labour Party Administration. Since being elected to serve you the people, we
have demonstrated that we possess the will to take resolute action in the
national interest. Our track record in this regard gives comfort and reassurance
to the local, regional and international community.
We can hardly speak of stabilizing the economy without devoting resources to the
maintenance and renewal of the country's economic and social infrastructure.
Neglecting essential maintenance inevitably leads to the premature and costly
replacement of national assets. We must return to the good habit of preserving
public facilities and taking care of our natural and man-made heritage. This may
not sound like much but a nation-wide programme of beautification of towns,
villages and communities can help in the process of regeneration, not to mention
its potential for having a positive impact on tourism, employment and general
economic well-being. This too, will form part of the process of stabilization
and preventing further decline in standards.
Mr. Speaker, it is well known that we have already acted decisively in tackling
crime head on. Crime affects not just its immediate victims but also all of us
and it has a negative effect on economic activity. The criminal elements and
drug barons in our midst will find us unyielding. We have already begun a review
of the relevant legislation and a modern prison complex/correctional centre will
I will deal with the contraction of the banana industry later in my address, and
its effects on economic performance. In a few minutes I shall outline the main
elements of the strategic re-orientation of which I spoke earlier. However, the
banana sector will continue to be important to the economy for the foreseeable
future. It therefore has a significant role to play in the stabilization effort.
Whatever happens on the international stage, we still have to ensure that our
productivity is high and that the quality of our fruit is unsurpassed. The price
paid to the farmer will in the future, be closely related to fruit quality. In
addition, a more workable institutional framework for the industry as a whole
must be found quickly. We are currently exploring various options.
Accelerating the growth rate was the third objective of the new approach which I
described. The elements of our stabilization strategy that I have outlined so
far, will also stimulate economic activity. In addition, new construction
projects and ongoing investment programmes in the Agricultural, Health and
Education sectors are expected to have a positive impact on growth.
We have just begun a novel youth employment and training programme in
conjunction with the private sector. It is designed to stimulate employment
particularly among young people who are the worst affected group amongst the
unemployed. This project together with other community-based projects, will
relieve unemployment and help to stimulate the economy. In addition it will also
equip the beneficiaries with essential skills which they can then make use of as
they try to better their lives.
Let me also emphasize the importance of our policy of paying outstanding amounts
owed by the Government to both individuals and businesses, for the attainment of
Previous administrations allowed a hard core of payables to build up and remain
year after year. This was hidden from public knowledge. Indeed, the former
Government deliberately spent more than it could afford just before the May
election in an attempt to buy your vote. This resulted in a greater accumulation
of unpaid vouchers at the Treasury.
I am making every effort to meet these payments, as I believe that doing so will
improve the economy by re-injecting some liquidity into the private sector, and
by restoring confidence in Government's processes and capacity to pay. To that
end, allowance has been made in the Supplementary Budget to pay off the bulk of
these arrears. I want to punctuate this point B the Government of the St. Lucia
Labour Party will be paying off the accumulated basket of payables that was
inherited from the profligate spending of the last regime. We have made this
financial provision, because we are a responsible government committed to
restoring both public and private sector confidence in the economy.
Perhaps the most important objective for the future direction of the economy is
that of the new strategic re-orientation. International economic relations are
characterized by a new dynamic, and our ability to adjust to global realities
will determine the speed and direction of our development.
The process of liberalizing trade and the movement of capital across national
boundaries is continuing to gather pace. This is driven in part by the
innovation and rapid expansion taking place in technology and
telecommunications. Information is becoming more accessible and complex
transactions involving persons in different parts of the world can now be
conducted much more quickly. One implication for us is the need to develop the
mechanisms to offer offshore financial services in a competitive manner. These
developments are likely to continue, indeed to intensify in the foreseeable
future. We must position ourselves to take advantage of the numerous
opportunities available to attract resources, increase our income earning
capacity, upgrade our skills and become effective players in global markets.
We are already familiar with one unsavory aspect from our point of view, of the
movement towards greater trade liberalization: that of the effect on the banana
industry in the CARICOM area. We have to address the problems in the industry in
a holistic way, and encourage friendly nations which support us to intervene on
our behalf. I will say more about what we are doing on the domestic front a bit
Another reality facing us is the position increasingly taken by developed
countries that the higher per capita incomes of St. Lucia and most Caribbean
Community countries in recent years, no longer qualifies us for obtaining
financing on the most concessionary terms. Well, try telling that to the
thousands of unemployed people who comprise 22 per cent of our work force! or
those people who earn little above a subsistence wage and whose health is at
risk because they cannot afford a nutritionally balanced diet.
There is a determination in the donor community to redistribute both financial
and non-financial resources to the countries that are perceived to be
experiencing abject poverty, particularly the economies in transition (that is,
the countries of the former Soviet bloc) and some African countries. Aid has
certainly dwindled and we must find increasingly creative ways to finance growth
In addition, the growing international competitiveness and globalization of
tourism are of particular relevance to us. Most countries, developed and
developing alike, have begun to realize the vast potential of tourism and have
consciously set out to develop it. The challenge for us is to find our market
niche and develop the delivery systems to make it work in our favour. In so
doing, we will also have to embrace the move towards mega cruise ship tourism
which offers the tourist a varied holiday experience. Again, we must make these
activities work for us by developing the right linkages between them and the
rest of the economy.
Given the current state of the economy including the effectiveness of key
sectoral and national structures, and the global trends which I have just
mentioned, we perceived the need for a strategic re-orientation of the economy.
Any new direction that we take must be forward looking. It must place us in the
midst of international economic traffic with all the tools at our disposal to
manoeuver our craft effectively. Moreover, it must give us the flexibility to
adapt to the changing flow today, tomorrow and in the years to come.
If we fail to redirect our energies to cope with modern realities, then we will
be condemned to some inconsequential backwater of history. That is why we need
to embrace change - not for the sake of change, but for our economic survival
and a more prosperous future. That is why as a nation we need to re-orient
ourselves in a new strategic direction. That is the challenge facing us.
THE NEW STRATEGIC DIRECTION: INSTITUTIONAL REFORMS AND THE NEW ECONOMIC FOCUS
Mr. Speaker, permit me now to outline the main elements of the new direction
being adopted by the Government. An important plank of the new approach is the
re-designing of the management structures of the public sector, starting with
those of Central Government. This process has already begun. It involves
rationalizing the Ministries to make them more effective. For example, we have
merged the Ministries of Finance and Planning under one Permanent Secretary.
This has already borne fruit in the preparation of this budget. The process of
medium to long-term planning is now more effectively linked to the short to
medium-term budgeting exercise. Moreover, we have just begun a budget reform
project aimed at revising and tightening up on every aspect of the budget cycle,
from conception, to preparation, to implementation and review.
Other changes to the structure of Ministries were announced shortly after the
May election when I selected my Cabinet and assigned the respective portfolios.
Another important initiative is the soon to be established Public Sector Reform
Unit which will be charged with the responsibility for managing the reform
process. In addition, more qualified professionals have been brought into the
Public Service. We believe in harnessing the talents of trained nationals to the
task of nation building and we will encourage the private sector to do the same.
We can only find our niche in the new global environment if we make the journey
together. The Government has already begun dialogue with its social partners,
which is a pre-requisite for the achievement of our goal. We recently met the
Trade Unions to discuss matters of mutual concern and agreed to meet on a
regular basis. The Advisory Council to the Prime Minister which I announced some
time ago, comprises a representative cross-section of the community. The Chamber
of Commerce accepted my invitation to be part of the Government's delegation to
the recent I.M.F. and World Bank annual meeting in Hong Kong. The President of
the Chamber had an opportunity to establish contact with various organizations,
and his discussions will undoubtedly benefit the private sector and St. Lucia in
All these elements of the new approach are designed to strengthen the
institutions, structures and arrangements that will provide the springboard for
taking us into the 21st Century. However, two other aspects of our new direction
which are related to economic activity must be mentioned.
The first aspect is our renewed emphasis on Tourism. Given the need to
revitalize that sector now and in the future, the Minister of Tourism is
undertaking a careful evaluation of the macro management structures in the
sector. A consultant's study on the organizational structures of the Ministry of
Tourism and the Tourist Board has been considered by Cabinet and is now being
studied by the Ministry. In addition, the 1982 Act governing the operations of
the Tourist Board is to be reviewed and improved to deal with the modern
realities of the industry.
I have increased the marketing budget of Tourism by EC$1 million to enable the
Ministry to strengthen St. Lucia's presence in traditional markets and break
into new ones, diversify the tourist product offered to visitors, and improve
national awareness through education and consultation. Again, this is consistent
with our Manifesto proposal to increase, substantially, but over time, the
amount allocated to the marketing of Saint Lucia as a A simply beautiful
The second economic activity I mentioned is in the area of offshore financial
services. This is perhaps the fastest growing industry in the world and we need
to examine ways of providing such services that will
suit our particular circumstances. I have entrusted this portfolio to the
Minister of Tourism, who will shortly be examining various options for the
consideration of Cabinet.
Sub-Committee on Economy
Sound economic management necessitates the provision of reliable information and
analysis on the economy. In the process of formulating macro-economic policy and
to assess the performance of, and prospects for the economy, I have just
appointed a sub-committee on the economy under my chairmanship and comprising
all the Ministers responsible for various economic sectors. The committee will
be advised by a technical group and will prepare reports and recommendations for
the consideration of the whole Cabinet of Ministers. This approach will
facilitate the formulation and evaluation of economic policy and strengthen our
decision making. The committee will provide Cabinet with:
monthly reports on implementation of the Government budget, including revenue,
expenditure, debt and the status of key development projects;
a quarterly update on economic performance, including growth, inflation,
employment/unemployment trends where possible, interest rates and the movement
of monetary variables;
recommend targets and forecasts of key economic indicators;
special sector reports/strategies for development; and
the identification and prioritization of programmes and projects.
Mr. Speaker, this presentation has repeatedly emphasized the need for
accountability whether in the public or private sector. In the society that we
seek to refashion, no individual or organization, whether it is the private
sector, non-governmental organizations, unions or Members of Parliament, should
feel immune from accountability. As one Regional Prime Minister put it recently,
those who govern (must recognize the obligation to have the decision they make
subject to the critical scrutiny of those they govern. Nowhere is that
obligation more sacred that in the Public Service. To induce greater focus,
direction, accountability and national use of scarce resources, all ministries
and departments will as of the conclusion of the 1997/98 Financial Year, be
required to prepare Annual Reports outlining goals and achievements, against
goals and work programmes, no later than three months after the end of the
These, then are some of the institutional elements of the new direction. They
are intended to equip us with the tools to meet the challenges ahead with
resolve and foresight. However, we plan to do so by encouraging people in their
communities to become fully involved in making decisions that affect their own
lives as far as possible. However, we view our efforts as part of a wider
Caribbean effort and in particular as part of an even broader effort by
developing countries to achieve economic maturity. The Ministry of Foreign
Affairs and the other Ministries will spare no effort in collaborating with,
firstly our OECS and CARICOM sister countries, and secondly with other
developing countries, on matters of mutual interest. Alone or collectively, we
must seek to forge linkages with other countries to mobilize resources for our
development and secure a high quality of life for ourselves and our children.
Public Sector Reform
Mr Speaker, this Government regards the reform of the Public Sector, as being
urgent as well as indispensable to the timely and successful implementation of
our sustainable development strategies. In our Contract of Faith we identified a
hierarchy of needs including the need to redefine the relationship between the
policy-making and administrative arms of Government; the need to introduce
greater accountability; the need for closer collaboration with the Private
Sector, the need for continuing organizational review; and the importance of the
quality of service provided by the Public Sector.
We signaled early our clear commitment to reforming the Public Sector inter alia,
by the changes made in the grouping of various portfolios in the respective
Ministries, and by the creation and activation of a post of Director of Public
Sector Reform in the Ministry of the Public Service. From the public's
standpoint, the full benefits of the regrouping of portfolios will be felt when
all sectors of each Ministry can be housed under one roof. Despite this
shortcoming however, Cabinet colleagues and public officers alike will attest to
an improved policy-making environment.
Mr Speaker, this Government is committed to taking a consultative and
participatory approach to Public Sector Reform. To that end, Government will
announce before December, 31st 1997, the appointment of a Public Sector Reform
Commission to guide reforms in the Public Service. There are however, certain
initiatives which we feel we must introduce quickly, and I take the liberty of
mentioning a few of them here, in anticipation of the fullest support of Public
Extended Role of Audit Department
The first initiative involves the creation of a comprehensive Auditing Unit
within the Audit Department. The establishment of such a unit is intended to
give to the Audit Department, a role that extends beyond the traditional
regulatory audit, which seeks to determine whether funds were spent in
accordance with legal and financial requirements. The comprehensive Audit Unit
will help to determine whether monies were used in an efficient manner and
whether programme results were achieved. While the Auditing Unit carries out
this post-audit function, the Accountant General's Department, which also has a
role in the management of the Planning, Programme Budgeting System (PPBS), will
be strengthened to enable it to fulfil its pre-audit function.
Creation of Services Commission Secretariat
The second initiative involves the centralization of the Public Service
Commission and the Teaching Service Commission respectively under one roof with
common administrative services, and with one individual serving as full time
chairman of both Commissions. In this way we will enjoy economies of
administration. This arrangement is working effectively and efficiently in
several other Caribbean and Commonwealth jurisdictions including Grenada and
Another feature of this initiative, Mr Speaker is the creation and activation of
a full-time post of Legal Counsel to the staff of the Joint Commission
Secretariat. This is intended to expedite the processing of the huge backlog of
cases, which is before both Commissions, as well as new cases. We had to do this
because we cannot countenance any delay in dispensing justice, neither can we
countenance the outrageous costs involved in keeping persons on suspension with
full or half-pay, whether or not such suspension is justified. This will also
resolve potential problems of bias when the Commission has to rely on the advice
of the Attorney General.
Mr Speaker, on the question of the inordinate costs involved, Government is
compelled to take administrative action within its constitutional competence to
deal with the wastage produced by the delay of the Public Service Commission in
taking decisions in disciplinary cases. A recent report on wastage in the Public
Service indicated that between July 1995 and September 1997, government spent
$225,723.00 on salaries of public officers on compulsory leave pending
disciplinary action. Of the twelve officers, nine are receiving full pay and
three, half pay. Additionally, to date, Government has spent $48,766.00 on
salaries to replace four of the twelve officers. The total current monthly
expenditure for the officers on leave and the four replacements is $19,781.00.
Mr Speaker, this state of affairs is unsatisfactory and requires speedy
An important aspect of Public Sector Reform and of national human resource
management, is our ability to optimize the use of our skilled manpower resource.
There are many highly trained persons in the public service whose abilities are
either lost to the Nation or are underutilized when they retire. At the same
time the private sector often complains of a scarcity of trained personnel.
Ideally, they would like to be able to make use of such persons before they
Voluntary Skills Transfer Scheme
Mr Speaker, we have devised a mechanism for allowing public officers who wish to
go into the private sector, to do so on a voluntary basis. It is the Voluntary
Skills Transfer Scheme (VST), under which persons who wish to transfer over to
the private sector can apply for early retirement from the Public Service. They
would then get a gratuity and their full retirement benefits. Such persons would
be able to work in the private sector if they wished, or would be able to use
their golden handshake as they saw fit. It would be entirely up to them.
Let me emphasize that the scheme will be entirely voluntary. Such transfers will
augment the skills base in the private sector. The comprehensive forward
planning for human resource development, and the capacity of government to
undertake extensive training of staff will ensure that any loss of skills to the
government is temporary.
The VST scheme will also help in the achievement of another objective. The
government has been strongly advised that there is an urgent need to reduce its
wage bill below 50% of current expenditure, in order to devote more resources to
capital investment. The proportion of wages to current expenditure now goes up
to around 53%. This is too high. The Voluntary
Skills Transfer Scheme will help us to reduce the wage bill and to devote more
resources to economic growth, while at the same time effectively redeploying on
a voluntary basis, skilled manpower to areas of need. Let me assure the Public
Service Union that the proposals will be discussed with them before
Mr. Speaker, while these initiatives are critical in their own right, it would be
clear to all, that the overall goals of Public Sector Reform will not be
achieved, unless there is (a) a consensus among public officers themselves that
such reform is needed, and (b) a commitment to facilitate the reform process.
Over the past few months, Mr Speaker, I have been giving considerable thought to
ways and means by which we might encourage this consensus and commitment. One of
the ways that I have conceived is through the introduction of the Public Service
Innovation Awards, which is intended to recognize individuals for conceiving and
implementing practical measures, which help to improve the overall quality of
the Public Service.
CHALLENGES FACING THE ECONOMY
The challenges facing the economy arise from two basic factors. Firstly, the
fiscal and financial mismanagement of the previous Administration. This has
resulted in lower Government savings than in previous years, a backlog of
Government arrears and lower economic growth. Secondly, structural weaknesses
and the poor performance of the banana sector have contributed significantly to
the sluggish performance of the economy.
These two broad factors have different implications for Government policy.
Action must be taken now to stabilize the economy, reverse the fiscal
mismanagement and stimulate growth. On the other hand, the structural issues
have to be addressed and the economy re-directed towards the path of sustained
As I indicated previously, the outstanding payables at the Treasury on 23rd May
amounted to $20.3 million, some of which was deliberately incurred for the May
election. The payment of this money to the individuals and businesses owed by
Government could have made much-needed liquidity available for private sector
business activity. We have reduced the outstanding payables to around $15.8
million since May. Achieving this has been extremely painful. We have had to
squeeze services to the bone in order to find the necessary resources.
In addition, it is no secret that with the exception of the St Lucia Air and Sea
Ports Authority and the National Insurance Scheme, most of the statutory boards
and Government-owned agencies have been inefficiently managed for years. Nearly
all of them are bankrupt.
We estimate that the Government's current surplus will decline from around $54.7
million in fiscal year 1996/97 to only $16.0 million in the current fiscal year.
However, this is not entirely due to financial mismanagement. There will be an
estimated shortfall in current revenue of around $9.2 million, primarily because
of the sharp decline in the banana industry this year.
This year, Banana production was down to 51,979 tonnes at the end of September
compared to 79,209 for the period January to September last year. This
represents a decline of 34.4%. Income from banana exports also declined by 49.1%
cent over the same period. Given the importance of the banana industry to the
economy, such drastic reductions were bound to have an adverse effect on
economic performance and on Government's finances.
Economic growth is expected to fall from 1.9 per cent last year to around 1 per
cent this year. Last year's growth rate was the lowest since 1987, while this
year's is expected to be the lowest since 1980. These growth rates are in
contrast to the relatively high average growth of 8.3 per cent between 1986 and
1990, and 3.4 per cent between 1991 and 1996.
Manufacturing, construction and the wholesale and retail trades which recorded
negative growth last year of 1.2 per cent, 1.5 per cent and 4.3 per cent
respectively, are not expected to fare much better this year. The decline in the
banana industry has had an adverse effect on those three sectors. The prospects
for bananas are neither rosy nor hopeless in the short to medium term, though we
can expect the preferential arrangements that we enjoy to be continuously
eroded. While we fight internationally with the support of friendly nations., to
retain our preferential treatment in Europe, we must improve productivity and
increase output at home. I shall announce how we intend to address this shortly.
The sluggish economy along with an inefficient revenue collection system and a
tax system which lacks buoyancy, have all contributed to the decline in
Investment can be the driving force of growth if its level and composition are
appropriate. Most investment is undertaken by the public sector, but the overall
level of investment is generally too low to generate the target growth rate
which I shall explain shortly. Also, too much private investment is concentrated
in residential and office structures and not enough in the three main productive
sectors of Tourism, Agriculture and Manufacturing. Consequently, output, export
income and employment are low. For example, an unemployment rate of over 20 per
cent is unacceptable.
Mr. Speaker, the various problems that I have described have given rise to the
poor liquidity situation faced by both the public and private sectors. The
liquidity position of the banking sector worsened last year, with the
loan/deposit ratio moving from 89.6 per cent in 1995 to 94.7 per cent in 1996.
At the end of August, 1997 it had worsened again to 99.4 per cent. Even the
private sector has been starved of liquidity. As a result, interest rates on
bank borrowing remain high, making investment expensive and operating costs
It is imperative that I take immediate action to stabilize and stimulate the
economy. At the same time, I must begin the re-structuring process in order to
put the economy back on a long-run, self-sustaining growth path.
The specific measures that we have identified will also take into account the
strengths of the economy, strengths on which we must build the future.
The positive aspects of our recent economic performance include:
a low inflation rate of 0.9% last year and anticipated inflation of around 0.8%
for 1997. This is mainly due to external factors;
a low external debt servicing to export ratio of 4.4 percent in 1996 which is
expected to rise somewhat for 1997, given the decline in banana exports. In
addition, external debt as a percentage of GDP stood at 29.1 percent last year
and is not expected to be significantly higher this year. However, both external
debt servicing and external debt outstanding will rise next year as we contract
new loans to help stabilize and stimulate the economy. Although the debt ratio
will still fall well within internationally acceptable limits, we are conscious
that there will be a bunching of debt payments around the year 2002, because of
the specific repayment schedules of previous loans. We need to prepare for that
The tourism sector continues to expand, with the number of stay-over visitors
growing by 5.2 percent over the period January to September 1997, compared to
the same period last year. The number of cruise ship visitors has grown by about
68 percent up to August this year. The development of the Tourism sector is a
cornerstone of the Government's economic strategy, particularly with respect to
Mr. Speaker, these positive developments as well as the challenges have been
considered in formulating both the short-term and long-term objectives
enunciated in this Supplementary Budget.
ECONOMIC AND BUDGETARY GOALS AND TARGETS
We have set ourselves a number of specific short term and medium term goals and
targets for achieving stabilization, stimulating growth and redirecting the
Short Term Targets
(a) The most important objective of the Government in the short term is to
tackle the horrendous unemployment and under-employment problems which this
Government has inherited. Unemployment is a scourge; it dehumanizes people; it
undermines family life; it destroys self-worth and confidence.
The Government is conscious of the fact that the exact unemployment rate in
Saint Lucia has never been authoritatively determined. This state of affairs
cannot be allowed to continue. Some have put the unemployment rate at 22%,
others at 25% and most recently in April 1997, at 29%. A government should be in
a position to state the unemployment rate at any one time, and show what action
it has taken to reduce the incidence of unemployment. This index is too
important to leave to speculation. A government that insists on accountability
should never be afraid to subject its decisions to the critical scrutiny of
those who empowered them to govern. Consistent with this view, the Eastern
Caribbean Central Bank has been approached to support a study to determine the
unemployment rate in Saint Lucia. The availability of such data will allow the
public to assess the performance of the government on this critical index..
Mr Speaker, the Government seeks to generate employment in the short-term
through a variety of measures. Firstly, it has established the Short-Term
Employment Programme (STEP). It will step up essential and badly needed
maintenance and deploy further resources to the improvement of waste management
and landscape beautification. As stated elsewhere, the Government proposes to
initiate capital investments that will stimulate economic activity. The details
of these activities will emerge when the Public Sector Investment Programme .
(b) A second short-term objective is directed at increasing Central Government
Savings from the 1.4 % of GDP during this fiscal year and increasing it to 2.5%
next fiscal year, and to 3% the following year.
(c) A third objective is to eliminate all subventions to the parastatals which
are required to be self-financing by the end of February, 1998. Moreover,
self-financing parastatals will ultimately be required to make minimum returns
of 12 % of their equity. Dividend payments will be made to a government fund to
be established for further investment.
A fourth objective is to reduce the outstanding payables. By March, 1998, we
propose to reduce this amount to EC$5.8 million and to a maximum of 1% of
current revenue by the end of 1998/99 fiscal year. This is to reduce the adverse
effect of government arrears on private sector liquidity.
At the same time, it is proposed to increase bank liquidity by lowering the
loans/deposit ratio from 99.4% at the end of August to 95% by the end of the
fiscal year 1998/99 and to 86% the following year.
Medium Term Targets
So much for the short-term. We now turn to medium-term objectives. Essentially,
the Government proposes to establish a framework which would achieve the
(1) Assist in creating at least 3,000 new jobs per year, which would absorb new
entrants into the labour force and reduce unemployment levels by no less than
two percentage points per annum. This target is well within our grasp,
especially following the implementation of the Short-Term Employment Project
Eliminate extreme and benign poverty in St Lucia through programmes aimed at
Establish the conditions that would allow annual growth of at least 5% to be
generated. We do not have complete control over the growth rate, but we can
create some of the conditions that would facilitate economic expansion.
(4) Allow the Caribbean Development Bank to implement measures from the CARICOM
Policy and Plan of Action Towards Creative and Productive Citizens for the
Twenty-First Century. This would specifically seek to have:
(a) at least 70% enrollment of students in secondary schools with the aim of
providing universal secondary education by the year 2002;
(b) at least 10% of the population having received tertiary education with the
aim of having 15% by the year 2005.
BUDGETARY POLICIES, PROPOSALS AND MEASURES
Mr Speaker, I now turn to the specific measures and proposals of this
Supplementary Budget. This is not a heavy taxation budget. Indeed, the tax
measures generally provide relief rather than pain. The budget is, instead,
meant to breathe new life into the economy by stimulating output and redirecting
our efforts along more practical and ultimately rewarding lines.
TOTAL REALLOCATED NEW
Current Expenditure 51.7 35.7 16.0
Capital Expenditure 73.3 24.8 48.5
(Government Revenue) (19.4) (11.9) (7.5)
(Grants) (13.9) (2.2) (11.7)
(Loans) (40.0) (10.7) (29.3)
Total Expenditure 125.0 60.5 64.5
You will note from what I have just said, that total current and capital
expenditure to be financed out of local government revenue in the Supplementary
Budget, is $23.5 million. Capital expenditure accounts for $7.5 million, while
the balance of $16.0 million represents a provision for various current
The main items that make up the $16.0 million of additional current expenditure
(i) a $3.2 million subvention to WASA which we will be discontinuing by the end
of the year.
(ii) $2.1 million in retirement benefits to Parliamentarians which, according to
section 10 of the Retiring Allowances (Legislative Service) Act, must be paid
within Aninety days of the due date after Parliamentarians retire whether
compulsorily or otherwise. In some cases these benefits relate to the extensive
period of time over which members of the previous Administration were in power.
I note that this item was severely under-budgeted for by the previous
government. Given the indecent haste with which the April budget was forced
through this Honourable House, so close to the May General Election, a time when
the writing was surely Aon the wall, I marvel at the shortsightedness of the
last Administration. Perhaps they could not or did not want to believe that they
would have to retire B or to put it more accurately, that they would have been
summarily retired by the people.
(iii) A provision of $3.5 million for additional debt servicing. This is
necessary because of the extra borrowing which we must undertake to stimulate
and re-direct the economy.
(iv) An amount of $2.5 million to replenish the Contingency Fund. We must have
such a fund for inescapable and unforeseen expenditure. This allocation
increases the original amount from $1.5 million to $4 million, a figure that is
wholly inadequate given the overall size of the budget. However, that is all we
can afford, given the current financial situation.
In addition to the $7.5 million for capital projects which we had initially
planned to finance from local revenue, we propose to spend a further $41.0
million on capital projects to be financed from earmarked grants and loans. I
mentioned earlier that we planned to issue development bonds and market them
locally and in the region. The total bond issue will be for $45 million for 10
years at an interest rate of 7.5%.
The bond issue will finance the $7.5 million for capital projects which should
have come from local revenue on which there is now a shortfall. In addition, the
bonds are earmarked for $21.5 million of the expenditure under the Aloans
category, as well as the $16 million of recurrent expenditure which I spoke
about earlier. In general, $29.0 million or 64.4% of the proceeds of the bond
issue will be for capital projects.
In total, the new expenditure provisions that we have made amount to $64.5
million, which is fully financed by the bond issue, other loans and grants from
international organizations and other countries as well as domestic loans. The
reallocated expenditure of $60.5 million which I referred to earlier, reflects
the re-structuring of ministries and departments that we have undertaken. We do
not have to find additional money for this. It is merely a matter of
transferring allocations from one AHead or from one ministry to another.
As I indicated earlier, the Government is committed to absorbing the St Lucia
Banana Growers Association debt. Once the Association is privatized, Government
will finalize arrangements with the Association and its creditors for its
reduction over time.
In addition, we intend to reduce the Treasury payables which now stand at $15.8
million, by a further $10.0 million by March 1998, in order to improve the
liquidity of the economy. The payables have already gone through the Treasury
system as expenditure but have not been paid out. The reduction by $10 million
will of course, have to be financed. We estimate that we will realize some $7.5
million in revenue as the economy responds to the stimulus of this budget, and a
further $2.5 million from improved collections and waste reduction measures.
It is worthy of note that most of the proceeds from the bond issue are expected
to come from external sources, as are all the grants and loans. Even the loans
from the domestic banking system (e.g. from the Caribbean Banking corporation
for the Short-Term Employment project) will be sourced from outside St. Lucia.
This in itself will improve the general liquidity situation and stimulate
Mr Speaker, in keeping with the Finance (Administration) Act No 3 of 1997, and
in keeping with conventional practice, I have presented this Honourable House
with the details of the proposed appropriation for 1997/98. However, I am
unhappy that the traditional approach to preparing supplementary budgets does
not fully reflect all the components of a normal income-expenditure statement.
For example, shortfalls in revenue, of which there have been many in the past,
have not normally formed part of the Supplementary Appropriation Bill.
As part of the Budget Reform Project which I mentioned earlier, we will review
these procedures and practices. We are committed to full and timely disclosure
of the public finances. Bearing in mind the process involved, the new systems
will be in place and functioning by the next financial year.
Increase in the Establishment of Police Officers
It has long been recognized that the Police Force is operating under severe
manpower constraints. Unless we address this problem, nobody in our society will
be safe and free. Saint Lucia will not emerge as an attractive place for people
to do business.
As a preliminary measure, Government has agreed to increase the establishment of
police officers by fifty; incurring additional expenditure of EC$332,565. Saint
Lucia has a ratio of one police officer to every two hundred and fifty-seven
citizens. Compare this situation to the other islands.
Caribbean States Police Officer Population
Antigua & Barbuda 1 123
Bahamas 1 103 plus Army
Barbados 1 180 plus Army
Dominica 1 182 plus Army
Grenada 1 125
Guyana 1 210 plus Army
Jamaica 1 242 plus Army
St Kitts/Nevis 1 93
St Vincent & the
Grenadines 1 190
Trinidad & Tobago 1 270 plus Army
Saint Lucia 1 257
Clearly, there is urgent need to increase the manpower levels in the Police
Force. By December, 1998, the Government intends to bring the ratio to at lease
one police officer to two hundred citizens. This would require a force of seven
hundred and twenty-five police officers, an overall increase on one hundred and
Mr Speaker, elsewhere in this address, I have stressed that the short-term
prospects of the economy rest heavily on the performance of the banana industry
and tourism. Already there are positive signs of confidence and recovery.
Production is slowly increasing from its lowest of 823 tons in week 33 to 1,333
tons in week 43. The Certified Farmers Programme is now well underway. The new
packing sheds are being build at a rapid rate.
Mr Speaker, this industry can survive but only if we have the courage to
modernize it. Our farmers are trying, but they need help, particularly in
respect of drainage and irrigation. Despite the difficult fiscal position, EC$1
million is allocated to the Ministry of Communications and Works to meet the
cost of undertaking urgent drainage works in the banana sector.
Mr Speaker, the Government recognizes that insufficiency of capital and
resources, the unavailability of appropriate technology in Saint Lucia, often
compel our local investors to enter into joint venture arrangements. In any
event, in these competitive times, it is becoming even more difficult to attract
direct foreign investment.
One barrier to direct foreign investment is the provision in the Aliens
(Landholding Regulation) Act, No. 10 of 1973, as amended, deeming a company to
be under alien control, if, inter alia, more than one-fourth of the nominal
amount of its issue shares or more than one-fourth in the number of its members
are unlicensed aliens. In order to boost joint venture investment, Government
proposes to increase the 25% stake to 45%. This measure will make it cheaper and
more attractive to the foreign partner to invest some more while still leaving
the company firmly in the control of the local investor.
Special Development Areas
Mr. Speaker, in any society it is dangerous to create enclaves whether defined
by class, race, or economic circumstances. There is even greater discomfort
where such development is expressed in spatial terms. Unfortunately, the specter
of spatially determined development looms large in our island.
In many ways, this little island of ours is blessed. Our natural beauty is
shared by all of our communities, whether in the north, south, east or west.
Indeed, our development options are virtually suggested by our topography.
Soufriere and its southwestern hinterland offer immense possibilities for
investment in tourism. Babonneau is an agricultural hinterland of tremendous
importance to our watershed preservation but with unique opportunities for
nature tourism and mountain biking that is tied to community provision. Vieux
Fort and its environs offer opportunities in manufacturing, tourism, and duty
It is critical that we arrest the drift from the rural communities to the urban
communities in the north. Suffice it to note, that population growth and
economic development have exerted considerable pressure on the island's social
and physical infrastructure. These trends can only be contained if we move
rapidly to develop the potential in other communities.
To that end, and consistent with our Contract of Faith, Government intends to
enact legislation to declare certain areas special development areas.
Government's role will, essentially, be that of an enabler, or if Honourable
Members prefer, a catalyser. Government will make imports intended for
investment in these areas duty free and will provide income tax relief as well
as investment allowances to persons who broaden the scope of existing business
activity or engage in designated investment, provided that such investment is
consistent with the development plan of the area. For example, Soufriere will be
designated a Aspecial tourism development area. Thus investments which enhance
Soufriere's heritage tourism, or expand services connected to its berthing
facilities or which broaden the scope of business activity in tourism related
services, will qualify under the scheme.
Allow me, Mr. Speaker, to bring a little comfort and excitement to the
Honourable Member for Anse-La-Ray/Canaries. I wish to advise him that I propose
to designate that constituency as a Special Development Area.
I am advised that the legislation will receive its first reading at this sitting
of this Honourable House. Further details will be provided as the Bill makes its
way through Parliament.
Conservation and Beautification
Mr. Speaker, one of the matters which has caused serious distress is our
unsightly and unhealthy natural environment. This is neither good for our health
nor our tourism industry. Mr. Speaker, Honourable Members, are we doing enough
to preserve and enhance St. Lucia's traditional reputation as the beautiful
Helen of the West? What does beauty mean? Must it not mean a healthy, clean,
attractive environment where people are happy, contented and blossoming to their
full potential? If it means what I have suggested, then we must do something
Mr. Speaker, this Government is anxious to enhance our environmental heritage.
It proposes to establish a National Conservation Authority whose responsibility
will be to clean and beautify our beaches, engage in landscape beautification,
assist in clearing and maintenance of our cemeteries, and the sides of our
roads. To achieve these objectives two steps will be taken. Firstly, the Parks
and Beaches Commission Act, No. 4 of 1983, will be repealed. The relevant
provisions of the repealed Act will be absorbed in the new legislation.
Secondly, the landscape artists, that is, those persons who are employed as
caretakers by the Ministry of Communications, Works, Transport and Public
Utilities, will be transferred to the National Conservation Authority.
Honourable Members will note that an allocation of $1 million has been made in
the Supplementary Estimates for this Authority.
Poverty Reduction Programme
Mr. Speaker, there are many indices by which the performance of a Government may
be judged. Some may take solace from impressive rates of economic growth, or
increases in output, or from number of housing starts, or by an expansion of our
road network. In the final analysis however, Mr. Speaker, the most important
yardstick can only be the degree of sustained improvement that is created in the
quality of life of the people.
It was out of recognition of the fact that the traditional indices did not
accurately reflect the degree of improvement in the social conditions in a
country, that the UNDP a few years ago introduced what is called a Human
Development Index or HDI. The HDI is still being refined Mr. Speaker, but its
central thesis and purpose has been accepted by many developed and developing
Mr. Speaker, we in this Government have consciously agreed to use another
yardstick by which to judge our performance. We have agreed to use the Poverty
Reduction Index, and in this respect, our benchmark will be the results of the
Poverty Assessment study which was conducted in St. Lucia in 1995.
The results of this survey make for very depressing reading. The survey
concluded that at the national level some 18.7% of the households in St. Lucia
can be considered poor on the basis of their expenditure on food and non-food
items; 5.3% can be considered indigent, in that they do not have a level of
expenditure consistent with fulfilling their food requirements.
At the community level, Mr. Speaker, a much bleaker picture emerged. In the ten
communities surveyed, the percentage of self evaluated poor ranged from 11.1% in
the New Development Area of Soufriere to 73.4% in Belmont. The demographic
profile of these poor communities show that the majority of households are
female-headed. These range from 23.8% in Bacadere to 80% in Baron's Drive,
Permit me to quote from page 30 paragraph 2 of the Draft Report as follows:
Living conditions for households in these poor communities are, forthe most
part appalling. Proper roads, adequate portable water supply, toilet facilities,
transportation facilities, proper housing and sanitation are lacking in almost
every community, both urban and rural. Very few of the households in the rural
areas do in fact earn an income from farming. None of the household heads who
have access to agricultural land received this land through land development or
resettlement programmes. Land distribution and land ownership is seen as a
problem given the present institutional arrangements with regard to tenure and
So much for the development we have enjoyed!
Mr. Speaker, this Government, the Government of the St. Lucia Labour Party,
commits itself unswervingly to changing this depressing situation. Here's what
we will do, Mr. Speaker.
Firstly, we will establish a Social Investment Fund composed of resources
earmarked for this purpose from the Basic Needs Trust Fund, and the 1994 Stabex.
Government will be contributing an additional EC $1 million in this
Supplementary Budget to the Fund. We will be seeking technical support from the
Caribbean Development Bank in refining the institutional and financial
arrangements which I have just announced, and also with the formulation of a
Poverty Reduction Plan.
Mr. Speaker, it is critical that the thrust of the Government's proposal is
appreciated and understood. The assault on poverty is not about providing
charity to deserving cases. It is about providing encouragement, an opportunity
to enjoy what we all crave B sustainable livelihoods. It has to be about
encouraging enterprise, providing our poor with the tools to help them create
their own self-sustaining economic opportunities.
Mr. Speaker, Honourable Members, the Government proposes that the funds be
accessed directly by communities and community organizations. The Fund must be
demand driven. Community sponsorship and ownership will be the key factor for
the approval and sustainability of the projects. Government will ensure that
funding is equitably distributed, so that no one community dominates in
accessing the resources of the Fund.. The Fund will be administered by a board
comprising representatives of non-governmental organizations, the private sector
and the public sector. Legislation will shortly be introduced in Parliament to
institutionalize the Programme
Secondly, Mr. Speaker, we will be reviewing and redirecting the traditional
forms of assistance which were intended to benefit the poor, but seldom reach
them. We have already started this with the School Books Programme, and the
School Feeding Programme is shortly to come under scrutiny.
Thirdly, Mr. Speaker, we will move aggressively to improve the living conditions
in poor and depressed communities. With technical and financial assistance from
the CDB, we will be implementing a Flood Control Project in Castries, Anse-la-Raye
and Vieux Fort in the first instance. Terms of Reference for technical
assistance to determine the scope and design of this project have already been
prepared, with a view to implementing this project during the next dry season.
Fourthly, Mr. Speaker, we will move to improve living conditions at the
household level, by firstly making available land in planned settlements
islandwide, and by moving job creation programmes into poor communities. In this
regard, we recognize that there is a high correlation between ability/education
and poverty. We are committed therefore to the creation of additional employment
and work Experience Programmes. I am pleased to announce that Government has
secured technical assistance from the CDB, to facilitate design of these
Fifthly, Mr. Speaker, we must and we will address the serious housing problems
of the poor and low-income groups, details of which will emerge in my comment on
I should also mention, Mr. Speaker, how pleased we are in Government to note
that Geest Estates will be undertaking a settlements upgrading and
rationalization programme, on lands which it owns at Goodlands, Cul-de-Sac and
Roseau. On completion of the programme, these lands will be sold, much of it to
persons who have occupied them for decades. To ensure that the sale of the land
is subsidized, Government has agreed to support the project, through the waiver
of duties and taxes on materials used in the provision of infrastructure.
Finally, Mr. Speaker, to the all-important concern of financial sustainability
for the poor. We share the view of the Managing Director of the National
Commercial Bank that there is a role for commercial banks in alleviating the
plight of the poor. We would like to encourage these banks to set up
micro-finance windows, as part of their commercial operations, to channel loans
to poor households and communities that will enable them to emerge from and
remain out of the poverty trap. We need look no further than at the experience
of the National Research and Development Foundation, and to the cooperatives, to
realize that this approach can work. We shall be inviting the World Bank to hold
a National Seminar for Commercial Banks and Micro-Finance Institutions, to share
with them the interesting and encouraging results of a similar seminar which was
held in Washington earlier this year.
Youth Skills and Enterprise Development Programme
Mr. Speaker, this Government places the highest possible priority on job
creation programmes especially among our young people.
We expect that by the end of this financial year two major projects being funded
by the European Union will get off the ground. I refer to the EC $10 million
Rural Economic Diversification Incentives Project, and an EC $5 million Small
Enterprise Development Project, both of which will target our young people. I am
also pleased to announce Mr. Speaker, that the United States Government through
USAID will make available a grant of nearly EC $3 million, half of which will go
towards assisting small businesses, and the balance towards sponsorship of
technical and vocational programmes.
May I say, Mr. Speaker, that we are particularly pleased with the thrust and the
design of the Small Enterprise Development Project. This project will have a
community focus, and will provide training and business advice to young
entrepreneurs, in addition to making loans available for business start-ups
through a revolving fund which will be set up for that purpose.
Employment Tax Credit
To further enhance our thrust in reducing unemployment and modernizing our
management practices in the Private Sector, Government will provide an
Employment Tax Credit to the Private Sector for the hiring of graduates. For
each graduate employed, a deduction for salary expenses of 125% will be allowed.
This measure will not only, we expect, open up new employment avenues in the
private sector for graduates; it will also assist in infusing new skills in
local business and will complement Government's long term goal of having 15% of
the population achieve tertiary level education.
Reorganization of the Water and Sewerage Authority (WASA)
Mr Speaker, Honourable Members, I turn to the Water and Sewerage Authority (WASA).
There is no statutory body in Saint Lucia which stirs up greater passion than
the Saint Lucia Water and Sewerage Authority. Everyone has problems with WASA.
The unions and employees have difficulties with management. The consumers
receive extremely poor service. No one has confidence in WASA.
Mr. Speaker, Sir, WASA has been a complete financial disaster. The current level
of accumulated deficits is approximately EC$16 million. On assuming office, this
Government had to settle WASA's outstanding debt to LUCELEC amounting to EC$3
million. This has been done by issuing bonds. In addition, Government has been
compelled to take over the payment of WASA's electricity bill in the amount of
EC$350,000 monthly. In effect, between the commencement of the financial year
and December 31st, 1997, Government will be spending on these items,
EC$6,206,250 of the taxpayers' money on WASA. This does not include WASA's
periodic loan payments to the Caribbean Development Bank which the Government
has been meeting for some time now. This state of affairs is unacceptable.
WASA's insolvency has incapacitated its ability to attract any further
investment to upgrade its plant and to expand. The Caribbean Development Bank
has indicated its willingness to fund:
(a) The replacement of its 800,000 gallon steel reservoir at Ciceron with a 1.5
million gallon reinforced concrete tank. This has been estimated to cost EC$3.
(b) A transmission pipeline between Ciceron and Hill 20, to supply households
located at high elevations on the outskirts of Castries. This has been estimated
to cost EC$4.6 million.
(c) A submersible pump and backup generating system to replace the 8 year old
pump currently in operation inside the trunk main which supplies water to the
areas in the northwest of St Lucia. The estimated cost of this project is
The Caribbean Development Bank has indicated that it will link disbursements to
the satisfaction of certain key operational performance indicators. The loan
will not be approved until changes occur at WASA to guarantee realization of the
Likewise, the World Bank has indicated that it is willing to fund a waste-water
management project at an estimated cost of EC$32 million, for the disposal of
liquid waste in the greater Castries Area, but such assistance cannot be
provided unless the institutional and financial viability of WASA is assured.
Several reports on the organizational, structural and managerial policies,
procedures and practices of WASA have been undertaken in the past, the latest of
which is the Thames Water International Consultancy. All these reports have
emphasized the need for realistic tariff rates, the inability of WASA to finance
investment in Water and Sewerage in rural communities, severe problems in
financial administration, audit delays, and the lack of a business ethos and
So much for UWP management and administration.
What is to be done? That is the question we face.
Having reviewed the situation, Government has decided to transform WASA into a
corporate entity to enable it to become an effective self-financing business.. A
new company will be registered under the Companies Act, to take over the assets
and management of WASA by January 31st, 1998. New contract management structures
and mechanisms will be put in place, especially during the transition stage
between statutory status and corporatisation.
Mr. Speaker, irrespective of the status of WASA, the level and system of tariffs
must be adjusted. However, this Government accepts that tariff adjustments can
only be justified with improvements in the quality of service provided.
All changes breed anxieties. Government recognizes that the transformation of
WASA will require the understanding and support of the public and the unions
representing the employees. Government will immediately enter into dialogue with
the unions concerned to ensure smooth labour relations during the vitally
necessary but sensitive transitional management phase.
Commercialization and Privatization
Mr. Speaker, you will recall that in our Contract of Faith with our people we
set out clearly our intention to commercialize and privatize certain State
entities, as part of an overall strategy aimed at expanding the capital base of
these organizations, and making available to Government much needed revenue,
which it can reinvest in other areas of the economy.
While we are fully committed to this policy and strategy, Mr. Speaker, we are at
the same time seized of the need for caution in ensuring, among other things,
that the local economy can sustain share offerings when these are made and that
locals are able to participate fully..
Mr. Speaker, Government wishes to keep its privatization and commercialization
programme firmly on track, especially given its importance in the overall scheme
of restructuring and revitalizing the economy. I therefore wish to announce that
an office of Privatization and Private Sector Relations will be established in
the office of the Prime Minister. The office will be staffed by a Senior
Economist in the first instance. Technical assistance has been sought from the
ECCB and the World Bank in setting up the office. As an initial step we intend
to divest of a portion of Government's shares in the National Commercial Bank
and the St. Lucia Development Bank, respectively. The proceeds of privatization
will be used to create a National Development Fund to spawn new and viable
productive sector activity, possibly in joint ventures with competent private
Mr Speaker we would like to see all St. Lucians from every walk of life become
stakeholders in these new privatized enterprises. Therefore, we propose to offer
to prospective individual St. Lucian investors, a tax deduction for shares
purchased in these commercialized enterprises. We will offer an annual deduction
of up to $5,000 for shares purchased. Mr Speaker we are sure that this measure
will really make St. Lucians feel a sense of pride in owning part of an
organisation which their tax dollars have helped to develop over the years.
Mr. Speaker, I turn to Housing Development. Here, the Government is poised to
The Government will focus on low income housing as private developers and
financial institutions are quite equipped and prepared to develop and finance
middle and upper income housing. Three particular areas will engage our
attention. The first is to explore the need to develop tenantry schemes that
will make the lands which homeowners have been renting say for periods longer
than ten years, to be made available to them and to help put in the necessary
infrastructure, such as roads, water, electricity and sanitation services in
these developments in an organized way. The second area will be to make fully
serviced lots available in developments for low income families in all the
towns, villages and other build up areas in St. Lucia. The third programme will
be to make indigent housing available to the very poor who do not have the means
to own their own homes. Our goal is to ensure that all St. Lucians particularly,
low income families, have access to reasonable housing accommodation.
Of these three initiatives, the second will be given immediate priority.
In the next six months, preparatory and preliminary design work will be
undertaken to establish low income housing sites and services programme starting
with work on four communities in Castries, Soufriere, Vieux fort, and Dennery.
This project will involve government providing, initially through the Housing
and Urban Development Corporation, serviced lots with a small starter home with
plans and access to resources for further expansion. This programme will be
restricted to families or households with annual income under EC$15,000. Special
arrangements will be made for mortgage facilities.
Mr. Speaker, in keeping with our commitment to ensure that every St. Lucian is
afforded with the opportunity to own their own home, we propose to introduce the
following tax measures to stimulate construction activity by private developers.
(1) The income accruing to any person from the construction and sale by him, or
on his behalf, of residential accommodation in Saint Lucia. shall be exempt from
tax. To qualify for tax exemption the following conditions must be satisfied:
(a) the construction is in an approved sub-division as certified by the Ministry
of Finance and Planning;
(b) the cost of construction of such residential accommodation must not exceed
two hundred thousand dollars per unit of housing or any other sum prescribed
from time to time; and
(c) the number of houses constructed and sold in any income year should not be
less than five.
(2) Additionally, if an individual wishes to construct housing for the purposes
of providing residential rental accommodation in an approved sub-division, we
propose to exempt from income tax, of any rental income accruing to that person
from the leasing of such residential accommodation during a period of ten years
after completion or construction, provided that the amount of rental does not
exceed $500 per month or if higher, the proportion that $500 bears to the total
Mr. Speaker, we are aware that for some of our small scale construction firms,
there are some pressures on their cash flows during the implementation of a
project. One of the complaints is that the 10% withholding tax is too onerous on
the small man. Presently the withholding tax is levied on both materials and
labour. We propose to amend the Income Tax Act to allow for withholding tax on
labour only. This is to ensure protection for the employees.
Encouraging Home Owner Investment Savings
Mr Speaker, Honourable Members, this Government realizes that prospective home
owners may have some difficulty in saving up to purchase their own homes. Many
young persons when they achieve a measure of economic independence are thinking
of moving out and starting their own households. For some, the prospect of
saving up to make a down payment on a home is often a monumental task.
We therefore propose to introduce a Registered Home Ownership Plan where for
every dollar saved monthly, up to an amount of EC$6,000 per year, an equivalent
amount by way of a tax credit will be granted. Membership in the plan would be
for a minimum period of five years and will be open only to persons who have not
previously owned a home. Any amount drawn down before the minimum period has
elapsed will be taxed as income in the year of withdrawal. The amount saved will
also attract interest at the prevailing savings rate which is also income that
is tax free.
The plan will be managed by the commercial banking system and members of the
plan will make their monthly payments to the bank or credit union of their
The purpose of the system will therefore be to encourage savings and also to
promote a culture of putting aside funds for investment in a piece of St. Lucia.
Incentives for the Manufacturing Sector
The Government of St. Lucia is committed to ensuring that our manufacturing
sector emerges from the doldrums. To achieve this, we believe that linkages
should be established with major consumers of products so that markets can be
established for our manufacturers locally. This will eventually give them the
necessary confidence to seek external markets as economies of scale are
developed along with improving marketing and quality standards. Ultimately, it
is our desire to see our manufacturing sector becoming net foreign exchange
earners providing a truly unique St. Lucian product to the world.
To achieve this objective we propose to undertake the following policy
- Establish linkages between the manufacturing sector and other sectors, paying
particular emphasis to agro-processing, manufacturing and custom-tailoring.
- Establish a private sector investment fund.
- Strengthen the role of the Small Enterprise Development Unit;
- Encouraging dialogue between the manufacturing sector and the major local
- Protect, where necessary, local manufacturers by utilizing the mechanisms
which are available under existing treaty obligations.
In order for our manufacturers to be productive, they need to feel that there is
a demand for their product. Already, we are seeing some evidence of this in the
private sector where major retailers of consumer items have established linkages
with furniture manufacturers who produce items to their specifications.
Similarly, we would like to encourage our local tourism sectors to establish
similar links with our manufacturers in much the same way that they have
established links with the farmers.
To stimulate this initiative, we propose to offer the tourism sector incentives
to encourage their purchase of locally produced items. We will put in place an
arrangement to extend income tax holidays based on the amount of locally
manufactured items purchased. Thus, for every unit of a specified volume that is
purchased, an extension of the tax holiday period will be granted. Our
manufacturers too, will be given tax incentives, such as free duty free
concessions on inputs for every contract negotiated to supply the tourism sector
with their products.
To encourage the capitalization of manufacturing businesses and to provide them
with working capital, we propose to establish a private sector investment fund,
initially with an amount of EC$7 million. This window will offer financing at
concessionary rates. The fund will be managed by the St. Lucia Development Bank.
and will be accessible to the private sector at qualified commercial banks. This
initiative fulfills another Manifesto pledge.
We are aware that many manufacturers lack organizational skills and are also
unable to develop adequate marketing skills. Therefore, to provide help we will
be enhancing and strengthening the Small Enterprise Development Unit. The unit
will be strengthened to:
- establish linkages with financial agencies;
- provide management training, technical support, and consultancy services;
- provide opportunities for developing and adopting appropriate technological
- provide market intelligence; and
- provide guidance on quality standards.
The Unit will be staffed with competent persons who will be directed to offer as
much help as possible to our manufacturers.
To encourage this linkage we will, over the next few months, bring together the
manufacturing and tourist sectors so that opportunities can be established and
new marketing arrangements can be explored.
Mr Speaker, the Government is aware that some of our local manufacturers,
particularly those in the condiment industry, are under intense pressure on the
domestic market because of regional competition. The Government has to walk a
tight rope. On the one hand, it must honour its commitments to regional trade
and competition. On the other hand, it recognizes that some support must be
extended to our manufacturers to enhance their capacity to adjust and survive in
the new competitive environment. We cannot run away from competition. Suffice it
to say here, that this Government will, whenever it becomes necessary, invoke
the relevant safeguard provisions under the Caricom Treaty to protect any
industry or sector from threat or actual injury due to dramatic or sustained
increases of imports into Saint Lucia from Caricom States. In this regard, the
Minister of Commerce, Industry and Consumer Affairs, will shortly be meeting
with two of our manufacturers, to discuss various approaches to resolving
difficulties currently being experienced.
New Business Start-Ups
Mr. Speaker, we recognize that at this time it is necessary for government to
encourage the development of small businesses. We are aware that there are many
young persons who have ideas and would like to nurture these ideas in starting
their own business. Sometimes
too, these young persons would like to join up with their peers and start a
business of their own.
In cognizance of this fact, we would like to encourage the young enterprise
spirit through the provision of certain tax incentives.
Presently, The Income Tax Act provides for charging new small businesses at a
graduated rate of income tax on their taxable income over a three year period at
25% for the first income year; 30% for the second income year; and 33 1/3% for
the third and subsequent income years.
The criteria for qualification for this incentive is as follows:
(a) The new small business must be incorporated during the income year.
(b) The business is wholly owned by citizens of St. Lucia.
(c) It employs not more than twenty persons.
(d) It has a gross income which does not exceed a quarter of a million dollars.
(e) It engages in the direct production of a tangible good; and
(f) It provides such services as may be prescribed and approved by the Cabinet
There have not been any measurable benefits to this incentive as they were not
widely known and encouraged.
We propose to make certain enhancements to this tax incentive. These
enhancements are designed to encourage the development of small businesses with
the view that with continued support, the businesses may develop eventually to
make significant contributions to the St. Lucia economy. Certain relationships
will be developed to ensure the sustenance of the small business. There will be
closer collaboration with the Ministry of Commerce through the provisions of the
proposed Small Scale Business Enterprise Act and the Small Enterprise
Development Unit (SEDU). The Act has as its objective, the provision of
legislative support for the development of small scale business enterprises and
to provide for developmental support, financial relief and other forms of
technical support and advice in recognition of the importance of such
enterprises to the economy.
The objective of the small business start up incentive programme is to offer to
potential entrepreneurs more latitude in their selection of the areas of
business activity. In other words, we want our entrepreneurs to be creative and
we will give support to that creativity. To accomplish this, the SEDU will
continuously monitor the market place to gather intelligence as to the preferred
areas of business activity and advise the Minister of Commerce accordingly. The
government will then approve that activity as part of the incentive programme.
To start the incentive programme, we will offer a pre-approved list of
activities. This list is based on research activity of the SEDU and on input
from the private sector. This list of activities is as follows:
Medical Centre - specializing in water sport injuries
Small engine sales and repairs
Recycling - e.g. plastics, paper
Laundry services (especially with tourism linkages)
Training and educational institutions - as approved by the Ministry of Education
Alternative energy supply - e.g. wind, solar, bio-mass
Agro-processing - e.g. dried fruit processing, bottling, canning etc.
Agricultural diversification projects (inclusive of horticulture and fishing)
The following tax incentives will be offered in the small business start up
(1) The business must be newly incorporated and wholly owned by citizens of St.
Lucia who have not been owners of previously incorporated businesses in St.
Lucia. The business should employ not more than forty (40) persons and have a
gross income which does not exceed one million dollars. Additionally the
business must engage
in an activity prescribed on the list of preferred business activity as approved
by the Minister of Commerce in accordance with the provisions of the proposed
Small Scale Business Enterprise Act. The business must satisfy the provisions of
(2) As part of our desire to encourage St. Lucian nationals living abroad to
come back home, we will offer an investment credit of 10% on the capital
expenditure incurred on the provision of plant and machinery acquired and
brought into use by that person for the purpose of producing assessable income.
The investment in the plant and machinery must be made from external sources.
This investment credit will be in addition to the normal capital allowances
granted by the Income Tax Act.
(3) All the legal and other incorporation costs related to the setting up of the
business, up to a pre-determined limit, will be allowed as a tax deduction in
the year of incorporation.
(4) Additionally, the new business start up will be subject to the following
five year graduated Income Tax rates:
(a) for the first income year 15%
(b) for the second income year 20%
(c) for the third income year 25%
(d) for the fourth income year 30%
(e) for the fifth and subsequent income years 33.3%
Tax Arrears and Tax Review
Mr. Speaker, any government must be concerned about the collection of its tax
accounts receivable. If we do not collect our arrears then the government must
supplement its revenue through borrowing, which sometimes must be at market
rates. We are particularly concerned about the arrears situation for Hotel
Accommodation Tax and Travel Tax. These are taxes which are not levied on the
operators of these enterprises but on their customers. Therefore, the taxes are
collected on behalf of the government and are held in trust for onward
remittance to the government at prescribed dates.
We intend therefore to strengthen the penalty clauses in the legislation enacted
to manage the collection of these taxes. Thus, for example, we propose to
introduce a penalty of 10 % of the tax which should have been collected in
respect of failure to collect or to account for tax collected and interest will
be charged at the rate of 15% per annum on amounts not remitted.
We believe in parity of treatment in the imposition of penalties for the late
payment of tax monies that are due. The Government will pay for the first time,
interest on outstanding income tax refunds to customers, if the amount of the
refund has been determined by the Inland Revenue Department and is more than six
months late. This is just and equitable and will be introduced during the next
Review of Direct and Indirect Taxation
Mr Speaker, the Government is about to undertake a complete review of the
taxation system, with a view to achieving the right blend of direct and indirect
taxes. An inappropriate mix can have the effect of stifling initiative,
impairing efficiency and reducing productivity.
The tax regime must be fair and just, and ought not to impose a disproportionate
burden on some sectors relative to others. The consultants mandated to undertake
the review will among other things, take into account incentive and disincentive
effects, ability to pay, equity, tax effort and tax burden considerations, and
regional and international competitiveness issues. The private sector, the trade
unions and the parastatals will be consulted during the course of the review.
CAPITAL INVESTMENT PROGRAMME
Public Sector Investment Projects
Mr. Speaker, you will recall that very early in the life of this Parliament, I
announced that this Government will be aggressively pursuing the design and
implementation of a number of public sector investment projects, in an attempt
at boosting the economy through the creation of jobs in the construction sector.
This sector has traditionally played a critical role in the economy,
contributing between 8% to 10% of total output. At the same time activity within
construction sector has traditionally been driven by public sector projects. The
decline which has been evident in the sector over the past three years or so is
directly linked to the reduction in the number of large public sector projects.
In embarking on a new programme of public sector investment projects, this
Government is taking a fresh and innovative approach. Firstly, we are trying to
reduce the pressure on the Consolidated Fund by mobilizing direct foreign
investment from non-traditional sources. Secondly, we are trying wherever
possible to link foreign investment inflows to the transfer of technology and
know-how. Thirdly, we are trying to reduce the demand which traditional
approaches have placed on our technical personnel within the Public Service, in
the process freeing them up to undertake planning and design work.
It is with this new vision, this new thinking that the Government began its
phase of the relationship with the National Insurance Property Development
Company of Trinidad and Tobago, more popularly known as NIPDEC. In this Company,
we found an entity with a wealth of knowledge and experience in designing,
financing, building and operating various facilities in many islands of the
Caribbean. NIPDEC is a rare breed. It is one of the few companies willing to
invest in public sector projects.
With the enthusiastic approval of the Cabinet of Ministers we have confirmed an
agreement with NIPDEC to play a lead role in the implementation of the following
Multi-Storey Car Park
The first project involves the construction of a Multi-storey Car Park on Jean
Baptiste Street, on that vacant parcel of land between Government Building and
the Darling Road Housing Facility. The Car Park Facility will cost approximately
EC $21.6 million, and will accommodate about 300 cars, in addition to providing
commercial space for offices, banking, a food court, and a Day Care Centre, the
need for which was confirmed through a survey of the office buildings on the
waterfront. The inclusion of this facility is entirely consistent with this
Government's commitment to be a caring Government. The parents surveyed
expressed concern about the security of the centre. We gave them the assurance
that security of the entire facility will be given the highest priority.
The construction of the Car Park will not have an immediate impact on the
Consolidated Fund, except for the cost of relocating a few small buildings that
lie in the path of a rear access road to the proposed facility. The primary
source of financing for the facility will come through a Joint Venture
arrangement between the National Insurance Scheme, NIPDEC and the local private
sector. A Company is being formed for this purpose, and we encourage the local
private sector to participate fully in this important endeavour. The employment
generation capacity of the project is estimated at 250 persons during the
Mr. Speaker, Government is painfully aware that the construction of this Car
Park Facility will not resolve the serious parking problems that plague this
city. Studies indicate that at least two car parks, and two bus terminals are
required. The Ministry of Communications, Works and Transport is examining the
various options for siting these facilities, and I expect to be in a position to
announce concrete plans in this regard, in my April 1998 budget.
The second project for which we have engaged the services of NIPDEC, is the
construction of a Headquarters Building for the Ministry of Communications,
Works and Transport.
New Building for Ministry of Communications
Mr. Speaker, you will recall that earlier this year the deplorable working
conditions at the Ministry of Communications sparked a protest from workers.
Many valuable days were lost, as the workers withdrew their labour, and as the
last administration frantically searched for solutions to the problem. But this
Government, Mr. Speaker, holds firmly to the view that an issue deferred is not
a problem solved, rather it often engenders a crisis. We also found no merit in
challenging long established industrial relations principles, which emphasize
the relationship between a clean and healthy working environment, and high,
sustained productivity levels.
Against this background, Mr. Speaker, we have dealt with the problem head-on in
the following way. We decided to condemn the existing building and to establish
a new three-storey building on property owned by Government at Union. The
building will make available 32,350 sq. ft. of air conditioned office space in
an architecturally attractive and environmentally pleasing setting. The building
will comfortably accommodate all the existing Departments and units of the
Ministry, except for the heavy equipment operations which will remain at Dennery.
Public Officers will be pleased to learn that the design of the outdoor
facilities includes a well-lit multi-purpose hard court, a playing field and a
small clubhouse type building with changing rooms.
The entire facility will cost EC $14.7 million, and will be undertaken through a
Build, Own, Lease and Transfer arrangement (otherwise called ABOLT) with NIPDEC.
NIPDEC as developer, would be responsible for the design, finance and
construction of the facility. On completion of the construction phase, NIPDEC
would lease the building to the Government of Saint Lucia over a fifteen year
period at the end of which ownership would be transferred to Government at a
nominal sum.. Designs have been completed and all legal requirements have been
fulfilled. Work on the headquarters facility is expected to start in the final
quarter of this financial year. It is expected that a total of 200 nationals
would e employed during the construction phase of the project.
Until such time as the project is completed, the Ministry of Communications will
operate from various locations with main bases being the Fitz Williams Building
on Bridge Street and the former Beach Haven Hotel at Vide Bouteille. Permit me
to assure tourism interests Mr. Speaker, that this hotel building will revert to
its intended use as a Hotel Training School, as soon as possible after work on
the headquarters building has been completed.
My final note on this project is to announce that Government will be putting up
for sale the property which formerly housed the Ministry of Communications and
Works. We are advised that certain companies with shipping interests have long
expressed an interest in acquiring this property, and so we expect that some
badly needed revenue will soon flow into the Consolidated Fund from the sale of
National Prison Facility
The third project for which we have engaged the services of NIPDEC, is the
construction of a National Prison Facility at Bordelais in Dennery.
Mr. Speaker there are those who have questioned the wisdom of spending $48
million on the construction of a new Prison. Some have argued that this money
would be better spent on schools, roads, a new hospital, etc. Frankly, as
Minister of Finance, I would much rather not having to spend money on a new
prison. But as I said earlier, an issue deferred is not a problem solved.
Government cannot pretend that the need for a new Prison does not exist. The
simple fact of the matter is that we have a full-scale crisis on our hands, and
the longer we take to address it, the greater the peril that we will face. We
cannot compromise our security.
There is a great deal more that I could say on this subject, Mr. Speaker, but I
will leave this to the Hon. Minister for Home Affairs. Suffice it to say, this
Government is moving steadfastly towards the design and establishment of a Penal
System that is firm and secure, but which is also rehabilitative in its vision
and purpose. We are moving to create a system that offers a second chance to
those who demonstrate a commitment to re-entering society and to working and
living within its norms. At the same time, we are seeking to create a prison
system that keeps away from society those who have repeatedly offended society,
and who have demonstrated that they are unable or unwilling to renounce crime.
It is against the background of this new philosophy Mr. Speaker that we are
embarking on the construction of a Prison Facility, which is only a part of the
refocused Penal System that we are seeking to establish.
The Prison Facility will be built using the Design-Finance-Construct mechanism
with NIPDEC in the lead developer role. The facility will include maximum
security and remand facilities for about 500 male and female prisoners. In
addition, the facility will include an administration and processing building,
cell blocks, health care facility, dinning, kitchen and laundry facilities,
education centre, chapel, agricultural area, and a recreational and workshop
building and other support facilities for the rehabilitation of prisoners. The
arrangements that we have concluded with NIPDEC also provide for in-depth
training of Prison Officers over a five month period.
The project is scheduled to commence on 1st January, 1998, and the duration is
estimated to be two (2) years. The projected employment generation capacity of
the project is 400 nationals during the construction phase.
Mr. Speaker, every effort will be made to ensure that the recurrent costs of
operating this facility are reduced as much as possible, by having the inmates
produce much of what they eat, and undertake the supervised maintenance of the
Mr Speaker, before I leave the subject of the financing and construction of the
three projects, I wish to emphasize that while NIPDEC will be managing the
construction of these projects, only Saint Lucian contractors will be engaged in
the construction activities.
Refurbishment of Police Stations
Mr Speaker, Sir, the state of the Police Stations has been the subject of
considerable commentary. A recent survey and assessment indicated that the
physical conditions of five police stations are such that the extent of the
repairs would be uneconomical. Their physical conditions restrict the level of
expansion necessary to house the future operations of the police. In addition,
four stations require major upgrading, and two require minor upgrading. It is
estimated that a refurbishment and construction programme would cost EC$ 16
million. I propose to present Parliament with a comprehensive refurbishment and
construction programme in April, 1998. Meanwhile, Government will make a modest
start by tackling the refurbishing work in the two stations requiring minor
upgrading, Gros Islet Sub-Station and Soufriere. To this end, a sum of
EC$500,000.00 has been allocated in the Supplementary Estimates to undertake
internal changes to their layout. These changes will also facilitate an overhaul
of their services.
Investment in Informatics Sector
Mr Speaker, Government will intensify the efforts towards encouraging investment
in the Informatics Sector. We intend to continue work with the Private Sector in
providing the infrastructure necessary to facilitate the development of this
sector. The future viability of this sector requires that:
Government provides accommodation dedicated to the informatics sub-sector.
The National Development Corporation intensify its promotion efforts.
Sir Arthur Lewis Community College gives more emphasis to Informatics training.
Incentives be provided to the Private Sector for further training.
Government secures a significant reduction in telecommunication rates for that
Mr Speaker, Honourable Members, arrangements are being finalized between the
Caribbean Development Bank and the National Development Corporation to construct
an Informatics Park on the Industrial Estate in Vieux Fort, and to renovate one
20,000 sq. ft building at its Union Industrial Estate. Funds to the amount of
US$3.3 million has been approved for the construction of the buildings at the
Informatics Park. The building to be renovated will be funded from other
Mr Speaker, when Ministers of Finance present budgetary statements,they speak
not only for the present but the future. This Supplementary Budget will, I am
sure, fall for scrutiny by economic historians. When they do so, I would hope
that they interpret this budget as a statement of fiscal stability, hope and
confidence in the future. They will, I am sure, reflect on the departures in
style, substance and focus.
The policies enunciated earlier will help to create a more conducive environment
for private sector development and investment. The policies express the
Government's wish to see more Saint Lucians engaging in entrepreneurial business
activity and in particular, investing a fair proportion of their savings in the
share capital of productive sector enterprises.
Mr Speaker, this Government is opening doors for our private sector. A new,
sincere partnership is in the making. It is for the Private Sector to grasp the
hand that has been extended.
Mr Speaker, the sounds of the Yuletide are upon us. Those who have found
employment with the Short-Term Employment Programme will bring some cheer to
their families. Others will not be so fortunate.
For many, their Christmas cheer will be the barrels which they receive from
relatives abroad. The Government has decided to extend a helping hand by waiving
duties and taxes on all barrels which arrive between today, 4th November, 1997
and January 31st, 1998. Recipients of the barrels will, however, be required to
meet the modest service charge.
Mr Speaker, in these proposals, I have attempted to lay the foundations to
stabilize our economy and redefine our priorities.
I recall that many who supported the United Workers Party Administration
advanced the view that this was a good election to lose. Mr Speaker, Honourable
Members, I say that this was a good election to win. The problems which we have
inherited offer a unique opportunity to strike out in a new direction. The
historical mission of this Government is to rescue our economy from the deep
abyss left behind by the United Workers Party.
Undoubtedly, it will be rough in the short-term. Equally, it will be
challenging. Saint Lucians are known for their resilience, intellectual stamina,
fortitude and creative talents. It is these qualities that this Government has
tapped to fashion this budget. Better days will be here if we do the right
Mr Speaker, it is with humility that I commend these strategic proposals to this
Honourable House and to urge their adoption with the following resolution.