Prime Minister Address to 2nd Caribbean Tourism Investment Conference - March 1998
Ladies and Gentlemen, it is a distinct pleasure for me to participate in this conference, and to address you more specifically on the subject of St.Lucia’s investment agenda with regard to tourism and related sectors. I do not need to emphasise the critical importance of investment to the growth of our economies. Foreign direct investment (FDI) continues to be the driving force of the globalisation process that characterises the modern world economy, and has consequently, become the focus of government policy in both developed and developing countries.
1. A NEW INVESTMENT AGENDA
While many emerging economies in other regions of the world have focused their development strategies on encouraging and facilitating foreign direct investment and foreign portfolio equity investments, the Caribbean region has been somewhat slower in making this essential policy shift. Some of our regional neighbours have, of course, moved more aggressively than others in this direction. Generally however, the small island states of the Caribbean, especially those of the OECS, have been somewhat late in facing up to this policy imperative.
Saint Lucia, like other members of the OECS sub group, has found this policy transition literally thrust upon us, by far reaching changes in the global market place. That thrust has also impacted upon our traditional exports, and the international trading environment in which those exports have to compete.
Admittedly, the refocusing of government policy towards an appropriate investment agenda, which aims to generate economic growth and development, has been somewhat difficult for Saint Lucia as our attention has been divided by more immediate aspects of economic survival. I speak of the battle in which Saint Lucia and the other Windward Islands have been engaged against with the driving forces of global competition, in an effort to maintain an almost insignificant fraction of the European market for our traditional banana exports. Our bitter struggle thus far, has been well documented and publicised throughout this hemisphere and the world.
While engaged in this global trade struggle, we have also been forced to realise that traditional mechanisms such as bilateral aid and international preferential financing have virtually become inaccessible as instruments of fiscal support. This scenario depicts the rather traumatic transformation that the St.Lucian economy experienced in recent years. Consequently, economic growth levels have been positive but uneven, and there have been social costs in terms of poverty and unemployment.
These are some of the economic challenges that faced the government of the Saint Lucia Labour Party when it was elected into office in May 1997. Over the past few months, we have taken stock of the economy we inherited and we are determined to chart a course for a more prosperous and productive future. We are determined that Saint Lucia should take and maintain its deserved place in the regional and global economy. We are committed to creating a better quality of life for our people.
2. CREATING THE INVESTMENT FRAMEWORK - Issues of Investment, Productivity and Growth
In seeking to forge ahead, the Government of Saint Lucia has opened its eyes to issues of investment, productivity and growth. During the past months, we have worked to fashion policies and implement programmes that adequately address these issues.
The core of the process of building competitive advantage is the investment environment. The challenge is to maintain a policy framework and a legislative framework within which business can operate efficiently and profitably. It is this environment which drives investment by St Lucian-based firms intending to upgrade and expand production facilities, research and development capacity, as well as in marketing and distribution capabilities. This framework also envisages investment by the state in critical physical infrastructure, in human resources and particularly in science and technology. Finally, it relates to the attraction of direct foreign investment in targeted areas that assist both the private sector and the state in fulfilling their investment responsibilities.
The fundamental premise underscoring the Government of Saint Lucia’s policy agenda for the medium term is the recognition of the pivotal role of the private sector in generating growth, output, improved productivity, and the diversification to propel the economy forward. This by no means implies that our Government’s role is a passive, or merely persuasive one. By selective interventions and strategic deployment of incentives, tax benefits and public expenditure, our government seeks to create conditions at both the macro-economic and micro-economic levels, which serve to facilitate and stimulate investment in the economy.
3. MACROECONOMIC POLICIES
At the macro-economic level, Government is pursuing the sustained implementation of sound fiscal and structural policies. These are as important for attracting private capital flows as they are for promoting healthy domestic economic development, and for reducing the risk of volatile swings in private capital flows. In the first instance, this involves the assurance of a sound political climate and a facilitative and supportive business environment.
Over the past few months, the Government of Saint Lucia has worked diligently to preserve and enhance stability in the political environment by implementing several measures aimed at making the process of governance more predictable and transparent. We have forged new partnerships with the private sector and the community of non-governmental organisations, and initiated structured mechanisms for dialogue and consultation on myriad issues of national policy.
The common objective of those measures has been the institutionalisation of a fully integrated approach to the design and implementation of national policy. In the short space of time that our Government has been in office, we have been successful in laying the basis for a stable, participatory and productive political environment.
This co-operative approach is mirrored at various sectoral levels of the economy, most notably within the tourism sector. Here, the collaboration between relevant public and private sector organisations is exemplary. Where such cooperation exists, it serves as a supportive platform for investment and growth.
4. RESTORATION OF FINANCIAL RESPONSIBILITY
On the economic front, we have embarked on an aggressive programme to restore financial responsibility and proper accountability to central government operations and the wider public sector. This encompasses statutory corporations and state enterprises whose operations and finances implicitly affect the business environment and government’s fiscal circumstances. We are also adopting systems to impose and maintain strong fiscal discipline, by streamlining our budgeting, accounting, regulatory and remittance systems.
Within the wider economy, the early establishment of robust and well-regulated financial and banking systems remains a priority in order to safeguard against financial stress in the event of a reversal of capital inflows. By creating such safeguards, our Government has sustained its commitment to advancing the process of economic and trade liberalisation.
We have continued to uphold open trade and investment policies, particularly in well integrated and rapidly growing sectors such as tourism. The relaxation of foreign exchange restrictions and the unrestricted repatriation of profits have been significant features of our economic and trade liberalisation process. In addition to attracting direct foreign investment, the Saint Lucia Government is committed to encouraging the inflow of portfolio investment where it is prudent to do so. We are also seeking to encourage private equity in domestic infrastructural projects, simultaneously creating avenues for private sector investment and providing quality infrastructure.
5. PRIVATISATION OF STATE-OWNED ENTERPRISES
The government of Saint Lucia has devised a programme to spearhead portfolio investment at the national level. This programme envisages the privatisation of several state-owned corporations including the Saint Lucia Banana Growers Association, the Water and Sewage Authority and selected financial institutions. Private sector support is also being solicited to invest in critical infrastructure programmes within the framework of the Public Sector Investment Programme (PSIP). These developments symbolise an entirely new approach to the Government/Private Sector investment relationship in Saint Lucia.
Outside the economic requirements, the Government has also sought to put in place, measures which serve to improve the investment climate and which will impact across the board on all firms and potential investors seeking to capitalise on policy interventions. These include (I) measures to improve the quality and content of the human resource base, (ii) measures to improve and enhance investment promotion and facilitation, and (iii) measures to improve the social environment.
6. HUMAN RESOURCE DEVELOPMENT
The education system in Saint Lucia has been under close scrutiny over the past few months. Interventions are now designed which will improve teaching skills and upgrade education curricula, to ensure that our work force possesses the communication and technical skills required by the rapidly expanding service sectors of the economy. Action is also being taken to expand the education delivery infrastructure to those geographic regions where such skills and services are urgently required to maintain balanced growth. This applies particularly to the south of the island, where considerable physical infrastructure already exists.
7. TOURISM EDUCATION
We are fully aware that the attractiveness of our tourism sector to further investment will also depend upon the quality of product and service. It is a priority of the Government of Saint Lucia therefore, to provide the best trained workers as required by the hospitality sector and potential investors. In this light, a new hospitality school, modeled as a small hotel, will soon be commissioned, to provide a comprehensive range of training to meet the needs of the hospitality sector. Particular emphasis will be placed on attitudinal development of students, to inculcate a highly service-oriented approach to tourism.
8. INVESTMENT PROMOTION & FACILITATION
The Government of Saint Lucia has paid considerable attention to the implementation of measures to expand and improve its ability to attract foreign investors, and in facilitating the establishment of business enterprises in Saint Lucia. The Saint Lucia National Development Corporation has been subjected to radical review and restricting over the last eight months, in order to create a one-stop center for investors.
Additionally, a special task force was established to revise the process for the approval of investors applications for trade concessions and fiscal incentives. The objectives of this exercise are to significantly accelerate processing of such approvals and to eliminate unnecessary bureaucratic procedures. The foregoing measures are aimed at allowing the government of Saint Lucia, through its investment promotion and business facilitation arm, that is the National Development Corporation, to fulfill its goal of creating a hassle-free business environment for potential local and foreign investors.
9. SOCIAL STABILITY
Within the context of the wider society, the Government of Saint Lucia has also embarked upon a strategy to ensure a peaceful and tranquil social environment within which business can thrive. This strategy has a three-tiered approach:
(1) The implementation of programmes to ensure adequate safety nets for the poor and destitute, as well as those who are mentally and physically challenged.
(2) The implementation of programmes to ensure the maintenance of law and order and the enforcement of discipline, especially among the youth and the school population. If there is one industry that requires a crime free environment, it is tourism. Growth and investment are only possible in an environment of tranquility and stability. We aim to do just that.
The Government of Saint Lucia has stated that it will exercise a zero-tolerance approach to crime to visitors and in touristic areas. We will move swiftly to quell any threat to the safety and security of our visitors. In addition to the increased police surveillance, the Government has deployed Beach Wardens whose function is to prevent harassment of visitors on the beaches whilst serving as a source of information to any needy visitor.
(3) The implementation, in various spheres within our communities, of programmes to preserve and beautify the environment. have no doubt that this audience fully appreciates the importance of the natural environment on the business climate. The recent environmental levy imposed on the cruise ship industry, is one of the targeted measures aimed at safeguarding the natural environment for the benefit of the tourism industry, the national economy, and the population of Saint Lucia. At the local level, Government’s attempts to beautify the cities and communities are clearly visible throughout the length and breath of the island. I have no doubt that nationals, visitors alike appreciate and support these visible changes.
10. MICROECONOMIC POLICIES
At the micro-economic and sectorial levels, efforts are being made to bring to bear the full impact of the national policies and programmes on individual investors and business enterprises.
Investment promotion resources are being concentrated in targeted areas which clearly hold a comparative advantage in the global market place and where it is expected to produce the greatest economic returns. The economic programme areas to be targeted in this regard are:
11. PROMOTING INVESTMENT IN TOURISM - The Significance of the Lead Growth Sector
The tourism sector share of Gross Domestic Product increased from 12.4% in 1996 to 12.9% in 1997. In fact, tourism is now the largest contributor to GDP elsewhere in the Caribbean. Our performance over the past year has been encouraging. Total visitor arrivals increasing by 5.4%. Arrivals from the UK increased by 18.3%, arrivals from Canada increased by 36.7%; France increased by 49.5% whilst arrivals from the U.S.A. decreased by 2.9%.
Hotel occupancy levels increased by 4.8% to an average of 71.4%. This increase was generated by an increase of 10% in the occupancy of conventional hotels whilst all-inclusives remained unchanged. Even the smaller properties experienced a 7.5% increase in occupancy. We have also witnessed a marginal increase in average length of stay.
Tourism has truly achieved a competitive position. The Government of Saint Lucia, therefore, focuses considerable attention on attracting direct foreign investment in this sector. The investment agenda is consequently focussed on expanding and diversifying the tourism infrastructure. Our policies however, retain a certain flexibility to allow the Government to consider the needs of the individual investors on a case by case basis.
11. EXPANDING INVESTMENT
The country’s current stock of hotel rooms stands at approximately 3500. The intention of the investment policy is to achieve a doubling of the accommodation stock, that is to 7000 rooms, within the medium term of 3-5 years. Government’s efforts in this regard are well advanced:
We are actively encouraging the establishment of a broader range of accommodation offerings, including small hotels and guest houses. The development of the " bed and breakfast" concept is also a priority which we envisage can enhance the visitor experience of Saint Lucia and play a pivotal role in distributing sector benefits to participating communities. The Government of Saint Lucia will provide special incentives for investment in that area of tourism development It is expected that after the April 1997 budget, a special unit will be established in the Ministry of Tourism to facilitate product development as well as focusing on licensing and maintaining standards in other forms of accommodation.
12. REFASHIONING THE ALL-INCLUSIVE SECTOR
Another priority of the Government of Saint Lucia is the diversification of the tourism sector to place greater emphasis on attracting E.P. Hotels. Presently 65% of all hotel beds are in the all-inclusive sector and Saint Lucia may be approaching saturation point with all-inclusive accommodation. You would therefore understand our enthusiasm for the investment by Hyatt Hotels in an E.-type. hotel in the picturesque and historical setting of Pigeon Point. The Government expects this enthusiasm to be reflected in relatively more generous incentives to investments in the E.P. hotel sector.
13. SPECIAL TOURISM INCENTIVES
New tourism incentive legislation has been wholeheartedly embraced and enacted by the Government. This legislation is broad in scope and includes provision for investors wishing to expand and modernise existing hotel plant. It also encourages the construction of new facilities and covers investment in critical areas such as training, transportation, entertainment and other amenities which enhance and diversify business activities in this sector.
The Government of Saint Lucia has also identified several areas within the country that are suitable for the development of tourism projects, and where such investments would be especially desirable. The recent enactment of legislation designating special development areas, is aimed at encouraging location-specific investment where tremendous potential for tourist activity exists, but which has not been previously realised due to ineffective development policy.
We seek to encourage investment in other parts of the island to ease the pressure created by concentrated investment in the north of the island. A compendium of sites, suitable for hotel development, is available to potential investors who are ready to explore the infinite possibilities that exist in Saint Lucia.
In addition to providing all of the basic information and guidance in the area of site selection, the Saint Lucia Government has also adopted the policy position that it will provide support for the implementation of all basic economic infrastructure (including utilities) to specific sites chosen for hotel development, in any area where such infrastructure does not already exist.
While the Government of Saint Lucia believes that investment must be private sector led and driven, it will consider direct financial involvement in strategic or exceptional cases.
14. EXPANSION OF CRUISE TOURISM
Saint Lucia witnessed a dramatic increase in cruise passenger arrivals in 1997 which reflects the growing position of the island as a favoured destination. This increased demand has put tremendous strain on existing facilities for welcoming passengers. Accordingly, over twenty five million dollars ($25 million) will be spent to upgrade berthing facilities at Port Castries, to facilitate the megaships that indicate interest in Saint Lucia. Upon completion, Saint Lucia will be positioned to be one of the major cruise ship destinations in the hemisphere with an attractive offer of modern berthing facilities, enhanced duty-free shopping and on-shore entertainment. By implication, Saint Lucia will also become a most attractive spot for investment in services to cruise ship passengers.
15. NATURE TOURISM
Another tourism priority in Saint Lucia is the development of places of interest to visitors. In this regard, the Government of Saint Lucia will be spending over US$2.0 million on the development of our Nature Heritage Tourism Product. Not only is this a statement of the importance of the environment, but it also reflects our commitment to provide the framework for product diversification. Within this framework, it is expected that eco-tourism will be well placed to attract further investment from the private sector to meet growing demand.
The Government of Saint Lucia is fully aware that the marketing of Saint Lucia should not be left entirely to the persons who have invested in the industry. Since assuming office, the Government has increased its marketing disbursements by one million dollars ($1 million). In the next financial year, it is expected that there will be a further 20% increase in resources dedicated to the marketing of our tourism product.
For Saint Lucia, tourism is clearly the dynamic industry because of its growth and diversification potential. We recognise that the potential of this industry can be harnessed only by the adoption of a focused and thought out investment agenda. As an emerging destination, we offer a pristine product laden with exciting possibilities and enticing opportunities. Tourism in Saint Lucia is at the defining moment which provides advantages and openings in the production, distribution and marketing of a multiplicity of goods and services. Using the signal words of Saint Lucia’s tourism promotion campaign, I invite you to seize the time to invest in a product that is, and will continue to be, "SIMPLY BEAUTIFUL!".
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