2008 New Year’s Address To The Nation By The Honourable Stephenson King
NEW YEAR’S ADDRESS TO THE NATION
Honourable Stephenson King
Prime Minister and Minister for Finance, External Affairs,
Home Affairs and National Security
My fellow Saint Lucians, Ladies and Gentlemen, Boys and Girls.
On behalf of my Administration, and on my own behalf, I take this opportunity to extend best wishes to all of you, for a peaceful and prosperous New Year.
The advent of a new year always brings a variety of emotions.
It is a time for being thankful, especially to God for his guidance, protection and blessings over the past year;
It is a time for reflection – on our successes and deficiencies;
It is time for resolutions - for pledging to make changes and improvements in our lives;
It is a time of renewal – mobilizing and consolidating our resources and energies;
It is a time of hope – that opportunities will become available so that as individuals, as families, as communities and as a nation, we can all achieve improved standards of living and the hope of a better quality of life.
By any stretch of the imagination, the last year was an extremely challenging one for my Administration, but; throughout everything, through the pain and grief, through the difficulties, through the uncertainty, through the criticism and mud slinging and through the transition, there has been one constant source of comfort … and that is you, the people of Saint Lucia.
You have remained steadfast in your conviction, that the path to progress that your chose when you voted this Administration into office is the right one, and without your support we could not have navigated these choppy waters and emerged into the relative calm of this new Leap Year, 2008.
My Administration is truly thankful for your patience and understanding and we pledge to do everything in our power to justify your confidence in us.
Even with all of the distractions of the last year, the work of governance continued.
2007 was a year of assessment and analysis, of adjustment and re-direction as we sought to lay the foundation for the development programme that has been defined.
It was a year in which the challenges confronting the Country were identified and the policy decisions required to address them were taken. It was a year in which we came to grips with the machinery of government, making the changes necessary to ensure that this Administration can deliver on its promises to the people of St Lucia.
As we contemplate the Leap Year 2008, one thing is clear, and that is we have the opportunity to make a great leap and to take huge strides in our development, only if we are prepared to take hard decisions and to do what is in the best interest of the Country and not in the interest of political expediency.
Preliminary indicators for the first half of 2007 revealed a mixed performance in the various economic sectors. Tourism maintained its position as the lead sector, fuelled in large part by the robust growth in cruise ship arrivals. Total tourist arrivals in the first half of 2007 increased by 26.4 percent to 506,381. However, stay-over arrivals declined by 7.9 percent, owing principally to notable contractions in the United States and Caribbean markets.
Notwithstanding, there was an overall increase in economic growth, attributed principally to the ongoing expansion in the construction sector and the associated spill over effects transmitted to other sectors. Significant ongoing investments in the tourism sector and the intensification of works on other government projects dominated construction activity during the review period.
A recovery in the agriculture sector also contributed to the increase in economic activity. Banana output rebounded by 35 percent to 20,516 tonnes resulting in a 41 percent increase in export earnings. Output for non-traditional crops also expanded, by 22.4 percent, with a 58 percent growth in exports. The total value of output for the manufacturing sector also increased, by 0.9 percent, with a varied performance amongst the main manufacturing products.
The Central Government’s fiscal operations improved during the first six months of 2007, reflecting stronger revenue performance and a reduction in total expenditure. Nonetheless, high international oil prices impacted adversely on the performance of the St. Lucian economy, as the inflation rate increased by 0.9 percent as a result of increases in the cost of food, electricity and medical care.
In light of the challenges that we face, some of the decisions we will take will not be easy or popular in the short term, but are the right ones, because in the long term Saint Lucia will be placed on a path to economic and social security and prosperity.
Consequently, we have moved ahead with the preparatory activities required for the introduction of a Value Added Tax (VAT) that will ensure that we have a stable base of government revenue over the long term, that can be used to meet the cost of providing services, building economic infrastructure and improving social and community amenities.
We have also taken decisions that may not have been popular in regional circles. Acting in the national interest, we introduced measures to ensure that the needs of St. Lucia, for greater capacity in regional air travel were met through the introduction of new services by American Eagle, given the inability of LIAT to provide adequate airlift to neighbouring islands.
This Administration will not shirk from its responsibilities in providing leadership for this Country and we will do what is right, even if this means making sacrifices, enduring some pain and swallowing some bitter medicine.
It is in a similar vein that we must squarely confront the issue of oil prices.
The upward spiral of oil prices during 2007 that has fed through, into increases in the prices of most goods and services, and especially food, has been a source of grave concern to my Government.
This impact has been felt by most countries in the world and in the region in particular, where we have few means at our disposal to mitigate the effects of this trend.
But, while increasing oil prices have made us all victims, each country must fashion its responses according to its own circumstances.
In August 2005, when the Government of Saint Lucia last increased the prices of gasoline and diesel fuel at the pump, the price of crude oil was approximately US$65 per barrel. Since then, as most of you are aware, crude oil prices have increased steadily on the international market.
The year 2007 witnessed new highs in oil prices which peaked on November 20 at US$98.88 per barrel. West Texas Intermediate monthly crude oil prices averaged more than $85 per barrel in October 2007 and almost $95 per barrel in November, up $27 and $36 per barrel, respectively, from a year earlier.
West Texas Intermediate Crude Oil prices averaged US$ 72.14 per barrel in 2007 as a whole, compared with US$66.04 in 2006. Furthermore, on January 2, 2008, oil prices traded at a new record high of US$100 per barrel. Industry analysts suggest that this situation is not likely to improve anytime soon and that these prices may reach US$120 per barrel by mid-year 2008.
Movements in oil prices have been due to the coming together of a number of industry trends that have resulted in the supply of oil lagging behind demand growth.
The weakening US dollar has also played a role in propelling world oil prices upwards and so has the financial turbulence related to the sub-prime mortgage crisis in the United States and speculation in the oil and finance markets.
Amidst these disturbing external developments, this Administration has been mindful of the implications of increased fuel prices for the people of St. Lucia and took the decision to keep fuel prices unchanged at the pump, for as long as possible.
However, this policy can no longer be sustained, as the increase in world oil prices has placed extreme negative pressure on Government’s revenue and fiscal balances.
During 2007, increased oil prices led to a situation in which Government had to pay refunds to the oil companies, to support their guaranteed margins on all products and to ensure that the suppliers continued to import these products unto the country.
The Government has not only foregone a substantial amount of revenue, but has incurred large expenditures in the form of subsidies to keep prices fixed, amidst rising international oil prices. Government; has in fact, been subsidizing the prices of all petroleum products for much of 2007.
For the period April to December 2007, the average subsidy on every gallon of unleaded gas was just under thirty-one (31) cents and currently stands at $1.15 per gallon. Likewise, the subsidy on diesel averaged just under fifty-four (54) cents per gallon and is currently $2.11 per gallon.
Even after the increase in price of LPG announced in the 2007/08 Budget Address, the subsidy on LPG between April and December 2007 has averaged just under forty-four (44) cents per pound on large cylinders and sixty-one (61) cents per pound for small cylinders.
This means that the Government has subsidized the price of every 100 lb cylinder sold, by $43.72 and the price of every 20 lb cylinder sold, by $12.31. At present, the subsidy on the 100 lb cylinder is $63.87 and on the 20 lb cylinder, $16.77.
Like LPG, since July 2004, kerosene has been sold to consumers at a subsidized price. This subsidy increased from $2.82 per gallon in 2005/06 to $3.73 in 2006/07. During the current fiscal year, the subsidy per gallon of kerosene has been increasing further, jumping to $5.40 as at December 28, 2007.
The total cost implications to Government for subsidizing the prices of fuel over the period April 2007 to December 2007 is EC $15.7 million. In other words, $15.7 million that could have been used to provide services and facilities for the people of St. Lucia have been applied towards subsidies on the prices of fuel.
Assuming oil prices of US $100 per barrel, and if retail prices of fuel are left unchanged, Government will spend approximately $50 million on fuel subsidies during 2008.
This situation is clearly untenable and must be addressed if Government is to adequately finance its operations and meet its capital expenditure obligations.
This having been said, the Government remains mindful of the inflationary impacts of increases in the domestic price of petroleum products on the transportation, wholesale, retail and construction sectors.
I must point out that this challenge is one that confronts the Caribbean region as a whole and it is instructive to take note of how other regional territories are responding to it.
As early as 2005, some governments in the Eastern Caribbean Currency Union changed their pricing mechanism to the semi-market pass-through method, where domestic prices more directly reflect changes in the international market. This means that whenever there’s an increase in international oil prices, such increases are passed on to consumers through adjustments to prices at the pump on a regular basis. For example, in Dominica and Grenada, the prices of fuel at the pump changes every eight weeks, in keeping with international market trends.
For other countries that; like Saint Lucia, have maintained a discretionary price control regime, the retail prices are usually increased periodically, over a much longer period. In order to have an appreciation of the situation in the region I am pleased to highlight the current prices in the region are as follows:
My Administration has carefully deliberated on this matter with a view to minimizing the impact of a price increase on the more vulnerable members of our society, on inflation and on economic growth.
A critical analysis of all possible alternatives has left us with no choice but to “bite the bullet”, and to address the worrisome issue of subsidies through an increase in the prices of fuel.
In this regard, fuel prices will be adjusted as follows:
The price of Unleaded Gasoline will increase from EC$9.50 to EC$12.75 per gallon.
When the previous Administration introduced a price differential between the pump price of Unleaded Gasoline and the price of Diesel Fuel, it did so to encourage the importation of diesel vehicles, because at that time diesel fuel was cheaper and there was the perception that the burning of diesel fuel would have a less harmful impact on the environment.
However, the current reality is different, as the cost of importing diesel fuel has surpassed the cost of importing unleaded gasoline. Also, the grade of diesel imported is not the premium grade fuel that has a more benign impact on the environment. It is now necessary therefore, to reconsider the approach on diesel fuel.
In light of the considerations that I have mentioned, the price of diesel fuel will move from $8.75 a gallon to $12.75 a gallon, making it the same as the price of Unleaded Gasoline. This approach reflects only a partial adjustment to the fact of the higher cost of diesel fuel, while a more precise assessment of the cost movements of diesel is undertaken.
Cooking Gas – LPG
The oil price increases have impacted most significantly on the import price of LPG or cooking gas, as it is commonly called. Government has decided to continue to protect the more vulnerable groups in society and will continue to subsidize, albeit at a lower rate, the prices of some LPG products.
The price of a 20 lb cylinder will increase from $30.00 to $33.00.
The price of a 100 lb cylinder will increase from $170.00 to $210.00.
A new product category will be introduced for BULK LPG that is, for quantities not sold in 20 lb and 100 lb cylinders and in excess of 100 lb. The price for this category of LPG will be at the rate of $2.45 per lb, an increase from $1.70 per lb.
Kerosene now consumed in only very small quantities and by commercial users will increase in price, from $5.20 per gallon to $11.10 per gallon.
These prices will come into effect on Monday, January 14, 2008.
On the issue of margins, the importers and dealers have been clamouring for increases. Government has held off on responding to these calls for sometime, but the issue now has to be addressed.
Government has therefore decided to award interim increases in guaranteed margins to importers and dealers, pending a comprehensive review of the petroleum sector that is to be commissioned soon. The margin increases awarded are as follows:
Importers 5 cents per gallon 5 cents per gallon
Dealers 10 cents per gallon 15 cents per gallon
To cushion as much as possible the impact of these prices on the public transportation sector, Government has decided to grant a rebate of EC$1.00 per gallon up to a maximum of 500,000 gallons per year of unleaded gasoline and diesel, consumed by licensed operators of public transport vehicles. These vehicle operators will continue to purchase fuel at their regular stations at normal pump prices and the rebate will be paid periodically through the National Association and distributed to vehicle operators on the basis of a formula to be approved by Government.
I wish to emphasize that developments in the international oil market will be monitored closely, and in the event that there are significant movements in the world price of oil either upward or downward, appropriate adjustments in retail prices will be made.
The true measure of any nation, of any people, is how they respond to adversity.
In this regard, it is incumbent upon us not to passively resign ourselves to being victims of the vagaries of the international oil market, but to act decisively to mitigate the negative repercussions associated with oil price increases.
As part of this approach, Government is doing everything to facilitate and support the efforts of the Hess Corporation to establish a merchant oil refinery in Cul de Sac that, once established, will enable St. Lucians to enjoy the benefit of oil products at below open-market prices.
Also, Government is actively pursuing to the fullest extent possible, the production of alternative forms of renewable energy.
Concessions have already been granted for the establishment of production facilities that will utilize the seeds of the jatropha plant and coconuts to produce bio-diesel fuel. This activity has already been initiated in Plateau, Babonneau and, based on preliminary yields, it is anticipated that approximately 10 million litres of oil per year can be generated from the newly planted jatropha plants and the existing supply of coconuts. Subject to the availability of land, it is estimated that at least 70 million litres of oil per year can be generated.
I can also indicate that this UWP Administration is committed to ensuring that our efforts to exploit our geo-thermal resources that commenced in the early 1980’s will be resumed during this year.
Overall, it is the intention of Government to enunciate in the next budget; as part of a national energy policy, a comprehensive set of measures that will not only address issues on the supply and demand side, but also the specific circumstances of key sectors, such as transport, construction, tourism and the public sector.
Nonetheless, it would be remiss of me not to remind you of your own responsibilities as individuals.
Given these new retail prices, I implore you to actively engage in conservation practices and avoid wastage in order to ease the burden on your household budgets. Let us begin to implement some of the things that we know we should institute within our own households as a matter of course.
Even as Government has had reason to increase the prices of Petroleum products, like the rest of the region, we have been struggling to cope with escalating prices in imported food items. Following my attendance at a special CARICOM heads meeting in Guyana in December, accompanied by the Minister for Commerce, the Hon. Guy Mayers, to discuss the issue, I have received a report from the Ministry of Commerce with recommendations, intended to contain the escalating food prices.
At the domestic level, Government has agreed to increase the list of goods under Price Control. This will help create a Basket of Goods of approximately 44 products which reflect items used by the majority of the consuming public and which are determined to be vital to the maintenance of a reasonable and healthy standard of living.
Under this measure, Government will be able to control the wholesale and retail prices of these goods, by setting the percentage markup for the wholesaler and the retailer. The Consumer Affairs Department of the Ministry of Commerce will then be able to monitor the prices being exposed for sale to the public, in order to avoid price gauging.
In keeping with our Party’s Manifesto promise, we will reduce and in some cases remove entirely the consumption tax on this Basket of goods.
At the regional level, my government will apply to CARICOM through the Council for Trade and Economic Development [COTED] to remove the Import Duties on the same 44 items forming the Basket of Goods. Minister Guy Mayers who is St. Lucia’s representative on COTED will be traveling to Guyana at the end of this month to attend a special COTED meeting to deal with this matter.
Since 1970, under a UWP administration, the importation of bulk Flour, Rice and Sugar have been the responsibility of the Government. Due to this measure, there has been stability in the sale prices of these staple food items to the public. In fact, the current prices of these commodities have been in place since 1984, despite the fact that there has been a steady increase in the CIF prices of these goods.
In recent times there has been a sharp increase in the price of imported Flour, due to the increase in the world market price for grain and wheat products. The Ministry of Commerce therefore undertook a financial analysis of the Government Supply operation and the impact on Government revenue. The study revealed that Government had subsidized the cost of flour to the tune of 3.5 million dollars for last year. Despite the increased cost to Government, we have decided to maintain the current sale prices for flour, rice and sugar, and the Bakers will continue to receive flour at their concessionary price.
Government is therefore extremely concerned over reports that some Bakers have unilaterally decided to increase the price of bread and bread products. Bakers are reminded that Bread is a price controlled item and the price cannot be changed without the permission of the Ministry of Commerce. I have therefore instructed the Minister for Commerce to investigate these reports and to take appropriate action against anyone caught breaching the law.
Anyone caught will face the full brunt of the law.
I give the assurance that this Administration will examine ways in which we can assist you in making these necessary life style changes, both through public awareness and sensitization and through the provision of specific instruments of support. This initiative will be elaborated on, in a subsequent address.
However, as we confront these hard decisions and lifestyle changes, I want to re-iterate the message of hope provided by Sir John Compton, in his last Budget Address when he stated, and I quote:- “ These are challenging times, but, .… also exciting times”.
There is no truer statement of fact.
Everyone, even our most ardent critics was enthused by the displays at the recent exhibition that outlined some of the major development initiatives for the island as a whole, and initially, for the City of Castries.
Such a comprehensive and detailed vision plan, that is the hallmark of our approach to development, will be replicated for all the major settlements on the island. Over the course of the next few months and throughout the next fiscal year and beyond, you will see tangible signs of initiatives being implemented that will transform the physical, economic and social landscape of our beloved nation.
Of course, we will solicit foreign inflows of investment capital, to help propel us into a new dawn of prosperity. But we will also be nurturing a new relationship, that entails a partnership between the Government and the citizens of this country - a partnership that will guarantee that you the people of St Lucia, will be able to invest in development initiatives and benefit directly from the progress in our Fair Helen.
Those who are willing to be part of the tremendous investment opportunities that are available, must understand that we will only sanction arrangements that are sustainable and this means ensuring that Saint Lucians, from local firms to individuals, benefit substantially from the economic growth that will certainly occur.
It is for this reason that we have re-established the Development Bank; It is for this reason that we will be placing so much emphasis on the development of our people through education and training. Above all, that is why we will facilitate and encourage open and frank dialogue and consultation on matters of national importance, throughout the length and breadth of the country.
Fellow Saint Lucians, this year is one of challenges, but also one of undoubted opportunity. Let us collectively resolve to move boldly forward with pride, ambition and a sturdy determination to overcome adversity.
From the Government’s standpoint, I wish to reassure you, that we will continue to make decisions that are in the best interest of the country and provide the leadership that is required to take our beloved country forward from strength to strength.
May God continue to richly bless us all, and to bless our Island as we aspire for peace and prosperity in this New Year.
I thank you.
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