Managing Consolidation & Change - November 24, 1999
LUCIA CHAMBER OF COMMERCE INDUSTRY
November 24, 1999
does not take much debate for us to conclude that we live in challenging
times. In fact, daily challenges
come both from without and within. And,
I dare say with all respect, that the ravages of Hurricane Lennie remind us
that all to often they come from above. Whatever
the origin, rapid economic, social and political change is the one global
phenomenon most likely to characterize our existence for the foreseeable
future. Continual change demands
continual adjustment from us all. More
importantly, it demands a state of readiness and responsiveness if we are to
the same way that the cold war is over between East and West, here in the
Caribbean, as in Saint Lucia, the post independence era is clearly also over.
The centrist politics of those decades are no longer viable.
In the same way that economic power has been transferred to the
consumer, political power has been similarly disbursed to the citizenry.
Indeed, it can be argued that there has been a generational shift in
the mindset of the nation and in the psyche of this country.
with that shift, the notion of government as prime mover within the economy
has been debunked and replaced by the notion of Government as social partner,
facilitator, and regulator. These
are realities of our modern economy, which emphasise the requirement of a
close working relationship between government and the private sector.
It is a simple reality to which we must adjust our expectations and
marry our objectives.
CHALLENGE TO US ALL
say this because ultimately, we are both challenged.
Governments and businesses alike need to respond appropriately to
consumers as to constituents. We are both challenged to develop systems for
influencing change and managing our changing environments; environments in
which we must coexist and prosper.
good news however, is that we are not alone in this predicament.
As societies, markets and economies evolve, challenges as well as
opportunities present themselves in varying degrees to all nations under the
siege of uncertainty. We in the
Caribbean are no different. What
is certain however, is that the old ways of autocratic government and
unresponsive business are gone forever. We
must all compete for our place in the sun.
The question then is how we will respond and how we will compete.
This address offers some hope and some suggestions.
Government, our primary task over the last two years has been nothing less
than the redefinition of government. This
has been ongoing at several levels and there are profound implications for the
whole economy. I trust we can
agree that a similar redefinition is required of the private sector,
particularly in respect of the way in which it conducts business now and into
in the short time since assuming office, this government has had to re-invent
itself. We have had to redefine
the mandate, operations, and structure of almost every major government or
quasi government institution. A
few examples bear mentioning. The
National Development Corporation has been rescued from financial insolvency
and re-engineered to produce the kind of investment promotion and export
development service for which it was originally conceived.
The implementation of a one-stop shop for investment facilitation is
now a major policy objective expected to streamline the flow of resources into
Saint Lucia. One indicator of
successful transition is that the demand for factory shell accommodation is at
an all time high. This signals
renewed international interest in St. Lucia as a manufacturing location.
another example is The Saint Lucia Fish Marketing Corporation which has been
financially restructured into a profitable operation.
Similarly, the Urban Development Corporation is finally returning to a
solid footing and has resumed the provision of serviced sites and the
construction of starter homes. The
corporatisation of WASA is in its final stages with a new mandate and a
renewed viability. The pace and
scope of institutional change there has been pervasive and profound and
additional announcements are pending regarding the management of that utility.
the National Insurance Scheme has a redefined mandate and an unprecedented
focus on its own long-term viability. Hopefully,
the days are over when NIS resources were deployed in the name of short-term
expediency driven by an insatiable government appetite for cheap funding and
irresponsible investment. These
are just some examples of consolidation which have been achieved.
I trust their significance will be impressed upon you.
Government is using private sector models to restructure its private sector
business. We have privatised NCB
where we are now a minority shareholder; we have transformed WASA into a
private company, albeit under the corporatisation model; we have recently
re-established Radio St. Lucia as a private company in preparation for its
restructuring. Similarly, the
national Employment Resource Centre is established as a private company.
These examples confirm to us that private sector ideology is very much
a part of government business.
re-invigoration of the Saint Lucia Tourist Board has restored its focus on
securing and expanding Saint Lucia's market share.
Consequently, tourism related investment is on the increase with Saint
Lucia recording one of the most rapid expansions in new hotel capacity in the
Eastern Caribbean. For the first
half of 1999 visitor arrivals increased by some 5.9% with a commensurate
increase in visitor expenditure. This
figure rose to $492.4 million. Average
length of stay advanced slightly to 8.6 days consistent with an increase in
European traffic. Average hotel
occupancy declined by 0.8% even as stay over arrivals increased by 3.9%.
In terms of a return to Government, Hotel Accommodation Tax revenue
rose significantly by 37.4% to $5.07 million, reflecting growth in bed-nights
and the new method of calculating this tax liability.
and institutional infrastructure related to the Financial Services Sector are
both in their ultimate stages. Admittedly,
this has been long in coming, mainly due to an abundance of caution on our
part. However, this new
development platform becomes operational in early December.
I encourage the Chamber to explore its vast new possibilities.
I urge you not to sit idly by and allow this new sector to pass from
the on-shore banking sector, monetary aggregates expanded in keeping with
expansion in the real sector. There
was an easing of liquidity in the first half of 1999.
Interest rates have decreased consistent with an increase in deposit
liabilities by 14.5%. In summary
the recovery from the tight liquidity position of late 1997 and 1998 has been
steady and continuous. Loan
deposit ratios have eased by 5.4% to achieve a ratio of 93.2%.
The budget target is 92%.
telecommunications reform and modernization are both proceeding apace.
Saint Lucia is playing a lead role in the regional negotiating process
in which we are jointly engaged with the rest of the OECS.
This is yet another platform, which anticipates new commercial
opportunities opening up for a whole new generation of enterprises.
We are poised to announced major changes in the domestic rate
structure. Already, major rate
reductions have been announced for international calls.
"You asked for it and we heard you".
Manufacturing is benefiting from unprecedented levels of government
manufacturers are now routinely exempted from consumption taxes and import
duties on a wide variety of inputs and equipment.
Not only are these unprecedented, they are universal.
This means that they are generally accessible to manufacturers
irrespective of size, or scale or influence.
environment for joint venturing between domestic and foreign firms has been
significantly liberalized. The
legal definition of a Saint Lucian company has been relaxed to facilitate
this, with permissible foreign participation increased from an arbitrary 25
percent to 49 percent. This alone
has reduced the red tape and associated costs to new ventures such as the need
for trade licensing and government approval to borrow locally.
the manufacturing sector recorded an increase of 5.2 percent in the value of
production from $61.6 million in the first half of 1998, to $64.7 million in
the first half of 1999. Increases
occurred mainly in Wearing Apparel, Electrical Products, Chemicals, Plastic
Products, Copra and Copra Derivatives. These were only partially offset by
decreases the categories of Food, Beverages and Tobacco, Paper and Paper
Products, Wood and Wood Products, and Rubber Products.
continues to provide a conducive enabling environment to stimulate growth in
manufacturing. Of particular
importance is the need to restructure and re-orient the manufacturing sector
so as to make it more competitive. Government
plans therefore to establish linkages between the manufacturing sector and
other sectors, thus increasing the local market for domestically produced
items. We are also reviewing the
effectiveness of the current fiscal incentives regime so as to encourage
growth within the manufacturing sector.
output in the first half of the year fell moderately due largely to drought
conditions. This was more than
offset by a 13.5% price increase resulting in an overall increase in revenue.
Since July however, market conditions and sterling exchange rates
conspired to reduce the WIBDECO price to local companies.
The price paid to farmers was similarly reviewed downward after some
company attempts at price support. Nevertheless,
WIBDECO projects 1999 output to rise 7% over 1998 levels, exceeding 78,000
tons with annual revenue earnings of $96 million.
This represents a 4% increase over 1998.
the interim, the privatized Banana Sector has survived its first major
internal challenge. It has done
so largely through democratic processes enshrined in its own charter.
It is possibly for the first time in its history, that the sector has
resolved such a fundamental issue without political interference.
I know that many have been critical of Government's hands-off approach
to the restructured industry and I understand your trepidation.
As vital as the industry remains to economic life we must also consider
the cost of successive interventions, bailouts and restructurings over the
last three decades.
we remain optimistic about the new market-oriented sensibility that
increasingly characterizes decision-making within the industry.
There is now real choice in the industry.
Where a farmer is disappointed by the performance of one company he can
market his fruit with another. The
recklessness of the past is gradually giving way to the realities of market
competition. The Government of
Saint Lucia concurs with the view of the EU that there are too many external
layers in the industry. We both
agree moreover, that WIBDECO has to be restructured, and in that context, the
Government should divest its shares in that company.
We have no difficulty with this approach and will not hesitate to
divest our WIBDECO shareholding at the appropriate time.
This strategy is also consistent with our intentions to diversify
opportunities for equity participation and capital market development.
activity in the economy is significantly up, accounting for the lion's shares
of new employment. In fact,
unable to meet demand in recent months, there have been several marked
shortages of basic building materials such as clay and concrete products and
sheet-rock. More importantly,
activity in the sector has been buoyed by a healthy mix of residential,
commercial, institutional and tourism related construction.
We expect this trend to continue particularly with Government's ongoing
housing construction, school building and road expansion programs.
The actual commencement of the Bordelais Correctional Facility costing
some forty-five millions dollars, the Hyatt Regency
Hotel and Rosewood projects have helped boost sector employment by some 30%.
sector projects such as the Hyper-Mart at Bois D'Orange and the M&C Home
Depot Project will consolidate this trend.
The same is expected of several new hotel developments projects which
will be announced subsequently. Together
with the new hotel and stadium announced for Vieux Fort, and the National
Cricket Ground in Gros Islet, output in the construction sector is projected
to increase by 5.5%
The Government of St. Lucia and the Caribbean Development Bank recently
agreed an indicative country program with the will be a major catalyst to
economic activity. This program
is valued at US$67.1 million over the next 3 years.
A total of US$25 million is to be set aside for the road infrastructure
programme commencing in the first quarter of the year 2000. A total of US$6
million has been set aside for the second phase of the Basic Education Reform
Program. Student loans through the Saint Lucia Development Bank will account
for another US$3 million. US$4
million has been set allocated to flood control and US$4 million for projects
related to Solid Waste Management.
terms of the general economic climate, the outlook for St. Lucia is positive.
I am delighted that this optimism was recently confirmed by the
Chamber's most recent Business Survey and that the majority of businesses seem
to share the view that the worst is behind us.
The developments outlined above are expected to sustain an annualized
growth rate of 3%. This will be
consistent with the target set in the 1999/2000 budget.
OF PRIVATE SECTOR RELATIONS
related news, I am pleased to announce that the Office of Private Sector
Relations has initiated discussions with the Ministry of Commerce to fund an
ISO certification programme for manufacturers.
That is to say, Government is willing to finance, on a matching grant
basis, the process of certification by any manufacturer aspiring to this
internationally recognised standard of excellence.
This is consistent with the objectives of the Private Sector
Development Strategy recently reviewed and approved by St. Lucia's private
sector representative organisations.
the meantime we are mindful that the implementation of the final phase of the
Common External Tariff, involving a further reduction in the tariff rates is
likely to have implications for the competitiveness of the domestic
manufacturing sector. Government
will therefore accelerate efforts to neutralise any negative growth impacts
this may have on the sector. We
are inviting your assistance and co-operation in this.
are mindful that businessmen have little time to listen to the ramblings of
politicians in parliament. As a
result, they maybe unaware of policy initiatives intended to benefit them.
In an effort to strengthen our relationship and to provide timely
information the office of Private Sector Relations will be publishing every
two months, a newsletter entitled OPSR News.
The inaugural issue is being distributed today.
the silver lining
dark spot on the economic spectrum continues to be unemployment and the
associated ravages of poverty and deprivation.
These we are not so proud of, but are attempting to address.
Quite apart from our efforts under the Poverty Reduction Program,
Government, in close conjunction with the private sector is investing in the
establishment of an Employment Resource Center to be located at Bisee.
The principal focus of this centre will be training of primarily, but
not exclusively, young persons in preparation for the world of work.
this juncture I would like to specifically acknowledge and applaud the good
conscience of many firms within the private sector which have weathered these
difficult economic times without instituting the layoffs and redundancies
typical of such periods of adjustment.
now as Minister of Finance, let me say that restoring growth has been a
difficult balancing act for this government.
We have had to simultaneously tackle economic stabilisation
and reconstruction while addressing the most fundamental flaws in the fabric
of the economy. For this we have
needed had to generate a considerable quantum of resources.
During the first half of 1999, Tax Revenue continued to increase,
albeit at a slower rate of 9.2 percent, (to $101.64 million), compared with an
18.0 percent rise last year. The
deceleration in the rate of growth was attributed to a significant decline in
revenue from taxes on goods and services and more specifically consumption tax
After increasing by 30.1 percent in the first quarter of 1998/99, taxes
on goods and services grew moderately by 3.8 percent to $39.05 million.
Moreover, consumption tax on imports, which is the single largest
revenue item, recorded an 8.2 percent decline to $25.98 million, owing mainly
to reductions in consumption taxes on petroleum products as a result of
increases in world petroleum prices. Still
we remain committed to the budget targets we have established.
We are firm in the belief that a sound macro environment is the
critical framework for all development and I do not apologise for the absence
of "spend quick - make work" schemes in the lead up to Christmas.
I have described our revenue situation, not only to impress upon you
Government's financing needs, but also to indicate the level of resources
redeployed within the economy. A
quiet revolution is on its way. When
that revolution is complete, Saint Lucia will have the most diversified
economy in the Eastern Caribbean. The
Financial Services Sector is to be launched in December.
Early next year the CDB-Funded informatics park will commence
construction. In March 2000 the
Vieux Fort Free Zone funded by the People's Republic of China will commence
business. For the first time,
Saint Lucia will enter into the Free Zone business already being pioneered by
the Cimpex Group of Companies.
FOR THE CHAMBER
implore you to continue the good work at company level and at institutional
level. Within your firms,
efficiency, and competitiveness are the watchwords.
There is no hiding from that reality.
We have taken note of certain strategic alliances with international
suppliers which promise to bring international purchasing power to domestic
companies. This is good for the
economy. But we hope that similar
alliances will also emerge with regards to exports of goods and services
regard to human resources we wish to see more pro-activity on the part of the
Chamber. Government requires the
input of the private sector to develop the human resource potential of our
small nation. Education is the
future. It is the bedrock of our
future economic development and if Government is to go it alone, we will
always be a day late and a penny short. For
this reason I invite you to contemplate a national collaboration on human
resource development as a natural complement to the work the Chamber proposes
to do on the Cost of Capital.
I am in
danger of overstaying my welcome and so I must conclude.
In closing let me say that I believe this government is investing in a
tremendous partnership with the private sector.
I wish to take this opportunity to thank the many private sector
persons who have given of their time, experience and expertise to serve on
boards, task forces and interim committees during this vital transition
am especially proud of the emerging cadre of young St. Lucian professionals
who have devoted themselves to the task of nation building at a time when the
country so desperately needed to join hands.
Admittedly, we have made some mistakes but it continues to be a
learning experience that we cherish and seek to sustain.
I would like to believe that we are beginning to speak the same
language and I look forward to a long and fruitful dialogue with the private
sector of St. Lucia.
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