Presentation by St.Kitts Chamber of Industry and Commerce President Damion C Hobson At The National Consultation Of The Economy
St Kitts and Nevis (WINN): The following is the text of the presentation made by the President of the Chamber of Industry and Commerce, Mr Damion Hobson, at the National Consultation of the Economy.
Mr. Prime Minister, Madame Financial Secretary, thank you for the kind invitation to attend and address this important National Consultation on the Economy and to once again share the perspectives of the St. Kitts and Nevis Chamber of Industry and Commerce.
Our meeting today is part of a long tradition of public and private sector dialogue.
It is a clear demonstration of our shared commitment to work together in the best interest of our people.
We accept that in this democratic society, the best way forward is with a united front, as we exchange different approaches and ideas, but all designed to fashion a future that is built on a shared vision to deliver packages of prosperity suited to all strata of society.
Our values and our cause remain the same. Though the Chamber is an advocate of the business sector, we equally understand that our mission is also to enhance the lives of every Kittitian and Nevisian.
When we examine this year’s theme of “Changing Lives-A Fresh Start Towards Sustainable Development, Growth & Prosperity”, I am reminded of Barack Obama’s famous words that “Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we’ve been waiting for. We are the change that we seek.”
The relevance of those sage words is applicable to this year’s theme.
Any fresh start must be people driven-and people oriented- and it will be all of us who must fashion the future that is relevant to our national priorities.
Simply put, it is through our collective efforts, not individualism that will deliver to us the prosperity we pursue.
When the Chamber hosted its 2015 Private Sector Banquet on July 18th, we selected the theme of “Forging a New Beginning, strengthening private/public sector partnerships” It is clear therefore that both our themes are in harmony.
At that banquet, I said, and I now repeat, “If ever there was a time for a new start, it is now. Now is the time for us all to work collectively to build on past achievements and to learn from failed economic models as we chart new courses on the road to greater national prosperity.”
“We have always said to government that they cannot do it alone and that a joint approach is best.”
Mr. Prime Minister, I assure you that in the Chamber, you will always find a willing partner.
The National Economy
The state of the national economy in recent years has been a matter of much debate and concern. Government has in the past asked for the patience of the populace to give time for its programs of austerity to work.
It is not our intention to re-hash what factors led to the challenges that required external intervention and financial support; but what is heartening to note is that better economic vistas seem to be on the horizon.
The most recent IMF Report provides some encouragement, but it also advises caution. It states that “The outlook for 2015-2016 is positive, although the pace of expansion is expected to somewhat moderate and the economy remains vulnerable to changes in CBI flow.”
Our recent experiences with the SIDF and the CBI program in general, should caution our approach to national development.
There is no doubt that the economy of St. Kitts and Nevis needs to be re-balanced. It was only 10 years ago that we exited sugar, which for hundreds of years served as the mono-culture giant that dictated the social, political and economic life of the country.
It is pellucid that it is no longer wise to embrace economic models that rely on one industry or pillar of economic progress. Instead, it may serve our cause better if diversity were to again find favour with any future models of economic development.
Mr. Prime Minister, as you seek to re-calibrate the economy, I would urge that we avoid the pitfall of relying on the Citizenship By Investment program, as the only solution to our problems.
Please don’t misunderstand me, we hold the view that the CBI is critical to any strategy moving forward, but we must not be blinded by the huge inflows of the past and be led to ignore other economic sectors which need greater attention.
In any new approach, a more innovative economy should be constructed with strong pillars of growth driven by a mixture and careful balance of tourism, agriculture, manufacturing, technology, services and the Citizenship By Investment program.
The continued development of our human capital and a robust small business sector, are added ingredients that should complement the power of large and medium sized enterprises, along the road to sustainable development, growth and prosperity.
The anxiety levels over the future of the CBI program have been high. However, we are thankful for the recent interventions of the government to restructure, re-staff and introduce new management protocols, incorporating private sector input. This augurs well for the future and we commend the government’s efforts.
These efforts could go a long way in re-establishing confidence in the program, because the one thing that was weighing on the minds of people was the impact of CBI on various sectors.
One such sector is construction and the future of the Real Estate Option.
I am advised that a few potential projects have been in a ‘holding pattern’ during the past months, awaiting greater clarity, on the way forward.
To be specific, let us look at the Statutory Rules & Orders #52 of 2011.
These allow investors with approved properties to re-sell them after five years. This measure I understand, becomes effective from 2017.
This could be detrimental to the program. It would affect existing and future real estate projects and could lead to a rotation of the same properties, from one owner to another, causing a stall in the development of new real estate projects. The effect on the construction sector and other ancillary services would be significant.
So too would the impact on jobs for our people.
We urge government to take urgent action to repeal this law.
The impact of the CBI on the economy cannot be overstated. It has become the biggest single contributor to the public purse. Its future could be bright but for it to thrive there must be a new attitude to accountability, transparency and a more judicious style of supervision.
As the following figures from the IMF would illustrate, last year (2014) was our best year, with a record $414 million in revenue, although only $283.3 million was initially projected:
In comparison, in 2010 it was $171 million…
2013 $391.3 million
The figures estimated for the following years ahead show a sharp decline.
2015 $313.9 million
2020 $159.4 million
In other words, if this trend is allowed to continue, we would register a drop of $254.6 million between 2014 and 2020- a six year span. This is why we must act with urgency to address all attendant issues negatively affecting the program.
As a way forward, we again recommend the establishment of a “Sovereign Fund”, with amounts being applied as savings for that “rainy day”; with other portions allocated to the productive sectors for long term economic activity. We are a nation prone to external shocks, both man-made and natural disasters, as evidenced recently in our sister island of Dominica.
While much emphasis has been placed on the improved management of the CBI Unit, it is a fair expectation that soon too, we would see the appointment of councilors to manage the policy affairs of the SIDF option of the CBI.
The Chamber remains committed to offer its services at the policy table. Our direct involvement could prove helpful to your efforts to keep this program the “oldest and best”.
Mr. Prime Minister, The CBI needs a new face and a new image. It needs a new culture.
The task of meeting revenue targets and balancing that obligation with your social and political realities is never easy.
We are aware that the government is under some pressure from international agencies to extract greater revenues through higher taxation or through the expansion of the tax net. Government is also under pressure to expedite the land-for debt-swap with National Bank.
We understand the challenges of government to fill its revenue gaps and no doubt the sale of those vast parcels of lands must be tempting.
But the land for debt swap deal was, and remains a contentious issue that government is expected to handle with a balance of social sensitivity and fiscal pragmatism.
Within the business sector, generally speaking, there is a lot of uncertainty about the road ahead for the economic advancement of the country. Perhaps the path will be lit when the 2015/2016 Budget is presented in December.
Many are awaiting the disclosures of the new federal budget before certain investment decisions are made.
What is certain, is that there is no appetite for any new taxes.
Like the IMF, the Chamber believes that greater efficiency in the collection of existing taxes, could lead to higher revenue levels for government.
Another means to greater economic activity and higher revenue is the enhancement of the corporate environment to spur more domestic investments.
A few years ago, the government of the day introduced what has become known as “VAT Day”. This VAT reduction day takes place in December to help stimulate the economy. It helped also to reduce the drain on imports fueled by large overseas purchases in time for the busy Christmas/Carnival Season.
This initiative has produced remarkable results for consumers, local businesses and the government. The increased sales have led to much higher revenues in the short term of the application of the rebate.
Given past trends, a number of companies have already invested substantially in new inventory in anticipation of the VAT Days this coming December. For instance, some auto sales companies have had to place orders 4 months in advance to meet December arrival deadlines.
We, the private sector, and the many families throughout the country, are now looking to this new government, to continue the flow of greater economic activity that the country sees during the Vat Days.
However, if in the future, there is to be a change to this policy, it is recommended that at least one year’s advance notice be given.
I believe the Prime Minister agrees with the request for advance and early notice. It was only in September this year, at a dinner meeting with the Deputy Managing Director for the IMF, that the prime minister stated that he too believes that advance notice should always be given before these Vat Days.
I urge the Prime Minister and Minister of Finance to carefully consider what I have just shared and to announce this morning, the VAT days for this December.
One final matter on taxes!
At last year’s National Consultation, the Chamber called for the removal of restrictions on write offs for employees earning more than EC$100,000 annually.
I am happy to report that in response, the government granted the request, not for $100,000, but for $90,000.00. For this we are thankful. This was reflected on page 51, section 105, of the 2015 Budget Address. However, the political excitement earlier in February caused a delay in the passage of the required legislation to give effect to the new threshold.
We understand the oversight and have every confidence that this is a matter that our distinguished prime minister and his financial team would expedite, back-dating to January, 2015.
As we said last year, if we are to remain competitive in attracting the best talent, especially our own qualified citizens a more urgent consideration is needed in this regard.
One of the revenue drains that we have seen in the last 2-3 years is the PEP. It is bleeding the public purse. Urgent reform is required before it is too late.
The concept of the People Empowerment Program, is laudable, if its focus is to provide short term opportunities of on the job training and development for both the young and unemployed.
According to the latest IMF Report, there were 3,300 people on PEP, as at March this year (2015). The cost of this accounted for “…about 3 percent of GDP for 2014,” says the International Monetary Fund.
Using even the basic minimum of EC$1,300 per month, it becomes obvious that this initiative is not sustainable.
The IMF has placed the monthly salary figure at 5 Million Dollars or 60 Million annually.
Not only is there a financial problem, but there is also a social issue, because it would not be easy to suddenly release over 3,000 people into the ranks of unemployment.
We know that the program has been misused and abused. But it is also true that some have made the best of the opportunities and are truly interested in making a difference in their lives and becoming productive contributors to the human capital pool.
A joint approach, led by the Ministry of Finance and the Chamber, can begin the dialogue to find creative remedies to craft a new model for PEP.
The Labour Market
The issue of PEP leads us to a quick word on the Labour Market-specifically, the impact that illegal migrant workers is continuing to have on the local workforce.
Upon assuming office as the new Federal Minister of Labour, Honourable Vance Amory, committed his resources to take tough and decisive action on this front.
The effort, we assumed was to ensure that the country’s laws were not being breached and that Kittitians and Nevisians and legally settled CARICOM and OECS nationals were not being unfairly affected.
It remains however a concern and the reports continue to flow about the influx of such employees, and the conditions under which some of them are forced to operate, in some quarters of the business community.
It is argued that there is a growing number of undocumented workers, not only from nearby Caribbean nations, but also from non-regional countries near and far.
If any serious review is to be undertaken to find employment spaces for current PEP workers who may be displaced in the future, we ought to give consideration to the present day illegal practices operating in the Labour Market.
There is little doubt about the importance of tourism to St. Kitts and Nevis. However, there is need for more innovative measures, new marketing strategies and alliances, to realize the true potential of this sector.
We are encouraged by the recent posture of the Minister of Tourism, Honourable Lindsay Grant, who has made known his intention to return the emphasis on land-based tourism. He has announced that the hotel stock is due to increase by 50% in 2017, and this speaks well for the sector.
This is badly needed to boost arrival figures and hotel stays, thereby increasing revenues derived from the Hotel Accommodation Tax and other related levies. It is no secret that land-based tourism has been struggling for far too long, as indicated by a fall in revenues.
For instance, in 2011 the Accommodation Tax accounted for 20.51 million dollars in revenue, but in 2014, this amount fell to $16.11 million.
These figures show that there is much room for improvement.
With the opening next year of the Park Hyatt and other properties, focus is needed on Tourism Education, to help prepare a cadre of hospitality workers to embrace the available employment opportunities.
The time has come for a more comprehensive school of hospitality management to build and nurture our human capital not only targeting St. Kitts and Nevis, but becoming the school of record for nearby islands.
One new area of tourism that has space for growth is the yachting sector. The training of our people for the opportunities here will be important.
Yachting holds great promise for St. Kitts and Nevis. However, that promise can be squandered if we do not act now, and decisively- provide the required leadership, marketing plan and funding from the public sector.
The private sector too has a role to play and entities like Christophe Harbour and the Yu Lounge have already been on the international circuit, with government, promoting yachting. A forum planned for 3rd November, will help to chart new waters.
Utilities-Water and Energy
With all these new developments and expansions, it means that we are challenged to find solutions to our current water problems. These solutions are expected to be short and long term.
On the same front, the vision for the way forward in terms of new sources of energy would be helpful to all stakeholders. We know the challenges and costs of fossil fuel, but we have also have been exposed to the possibilities of geothermal and solar energy.
It is anticipated that in the December budget, government will outline the portfolios of energy solutions and remedies for the shortfall in water supplies.
Another subject I wish to mention is manufacturing.
For so many years at this forum, we have stated our concerns about the delay in taking full advantage of the Partial Scope Agreement with Brazil. The ideal approach, as we have said, is a joint one, between the Chamber and the Government.
I would not repeat the benefits that could accrue to our country but only to say that with the full implementation of the Partial Scope Agreement, manufacturing in St. Kitts and Nevis would continue to be the dominant player within the OECS.
In addition, we are still awaiting the full implementation of the National Manufacturing Strategy. W e urge action on this front.
Crime and Violence
The final issue I wish to raise is that of crime and violence.
The police and government continue to share the view that crime nationally and generally is down. But for ordinary citizens, concerns have been influenced by the spate of homicides and shootings, including those involving the police. As we are aware, the latest shooting was on Tuesday night in Phillip’s.
Of late, the police too have been involved in shooting incidents, raising fear and distrust amongst citizens. The weekend incident in Nevis has not helped the cause of the police to mend fences with the public.
But it is the murders that are of greatest threat.
Many town hall meetings have been held. Many new resources have been applied. New laws have been enacted and more experts have been rolled out. Yet, the killings continue.
Crime, Mr. Prime Minister, is a cancer to the social existence of our people.
Crime is disastrous to tourism and a deterrent to new investments.
Crime scars the image of this usually peaceful and tranquil nation of ours.
No one seems to have the answers to resolve the issue.
However, it does not mean that we must stop trying.
The long term leadership of the police force is a matter that should not be a cause for more uncertainty and lack of confidence.
The leadership of the force, not just at the level of the Commissioner, but all other senior ranks, requires a new thinking.
In some countries Commissioners of Police are recruited, not only from within the ranks of career officers, but from the private sector, drawing on the expertise of qualified professionals.
It might be time to at least think of this approach.
People generally are beginning to lose confidence in the ability of the police to successfully detect crime and to protect our communities.
Countries like ours need democracy, stable governments, an enabling economic environment and resourceful work force to thrive. But they also need to have communities and a society that is safe and secure.
Allow me to say, as I close, that if this country is desirous of sustainable development, it is best achieved through a formula of strong public and private sector collaboration.
Let us talk and let us talk more often. Let us work together to change the lives of all our people. Let us join forces to deliver the prosperity required for our citizens.
We invite the prime minister to set quarterly meetings with the Chamber and we hope to continue our ongoing meetings with each ministry.
This way, we are able to dialogue on a continuous basis to share ideas and jointly resolve issues.
When we work together as a community there truly is no limit to what we can achieve.
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