Reprinted from Caribbean Net News
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And so it came to pass that that the OECD and FATF black-listed much of the Caribbean region’s offshore financial services sector as ‘a bad egg’, traditionally robust banana and sugar exports were “dead”, tourism was growing but in some markets reaching saturation or stifled by poor infrastructural facilities, telecoms deregulation has failed to deliver call centre jobs (or much else), “foreign aid” to the region is flat or down, whilst the ‘brain drain’ of locals to the ‘developed’ world is alive and well.
To top it all off, we are now going into only the middle of a 10 year cycle of increased hurricane and storm seasons and so vulnerable to impact.
Which community can sustain such shocks?
How will the OECS sustain and manage such shocks since most of the economy runs on these key industries, and can be brought to its knees by a devastating storm?
To my mind, there are four major industries that we now or will soon be depending on to offer jobs to the thousands of kids annually coming onto the job market, for the foreseeable future.
There are also two sub-sectors: agriculture (excluding bananas and sugar which I do not consider “dead”) and manufacturing, both light and medium/heavy, which I think will never produce much more than that required for local consumption, if anything at all, with a few exceptions.
Local (by “local” I mean regional) consumption of local agriculture and manufactured goods by rising standards of living and populations, influxes of “ex-pats” and foreign investors and by the growing tourism sectors will keep efficient suppliers and producers happily in business.
Since we can now buy Turkish soaps and powders, South African, Eastern European and Latin American milks and juices and Chinese and other Asian manufactured, plastic and other goods and other such things from half way around the world at a fraction of the price that we can make it for here, do not expect these things to survive or grow, as even a local supplier far less be an export earner or job creator.
This salient fact has serious implications for our FTAA and even CSME futures and capabilities, although the CSME is not only critical to our future success as a region, its overdue. Ironically, the implementation of VAT in the OECS, whist a very necessary and inevitable thing, will increase the price of locally produced goods and services, naturally, whilst lowering the price of imported goods; a tough world ahead that we are going to have to depend on a strong private sector for to pull us through.
Meanwhile, a lot of folks still do not look at the critical linkage of the offshore sector and the tourism sector.
It’s simple: The tourism sector needs serious investment, local, regional and international, and the offshore sector has lot of money.
Foreign Direct Investment is critical to growth and stability throughout the OECS and Barbados, and Prime Minister Owen Arthur preaches this again and again to Barbadians who ever had any thoughts to the contrary, or who had not given it any thought at all.
Like Cayman, Bermuda, Bahamas and Barbados, St. Lucia is now heading down a sensible private/public sector led investment road that brings this investment growth in to the island via the Offshore sector, among others; the rest of the OECS I think can only ignore doing the same at its own peril.
The OECS needs, I think, to take the bona fide offshore industry seriously for a change and formally make the industry attractive and workable; it is being done elsewhere and can be done here.
Telecoms / ICT (information & communications technology)
Despite some flicker of hope in the cellular/mobile telecoms sector (due mainly to Digicel’s regional refusal to take ‘no’ for an answer, plus their deep pockets to invest and bulldoze a lazy process into action; so to speak), the Caribbean ICT revolution that was promised along with telecom reform and deregulation back in 1998 has yet to happen, and is not likely to happen anytime soon due to a series of fundamental blunders being happily repeated to this day.
Its official; the region has missed the ICT boat, and until the good folks at ECTEL and the five NTRC’s are merged into one efficient body with teeth, and enabled to do what they are supposed to do, a la the EC Central Bank, we will never catch up. The present structure of the regulatory process in Barbados and the OECS is classic divide and conquer, and has failed the taxpayers of the region and of the donor countries who support(ed) the effort.
Quality ‘inbound’ call center jobs which could create 2000+ jobs per island per year, never materialized and will never materialize until true competition and true sustainable pricing arrives to the region which will not happen until new players are allowed to land undersea fiber optic cables on each island, a process frustratingly delayed for reasons yet to be articulated in any meaningful way; ask just about anyone in the business of attracting investment to the region or ask the potential large-scale employers; they will tell you the same thing.
Tourists are people too
“Discover the Caribbean…”
“Re-discover the Caribbean…”
There is no question that the Caribbean is a unique tapestry of peoples and places, a beautiful string of islands, cultures and natural wonders and diversity.
But, others boast of the same, similar or different attractions too.
US cities, counties, states, Canada, all of Europe, Latin America, powerhouse tourist destinations Britain, Italy and Spain, along with Greece, Turkey, Africa, Asia, Australia and New Zealand lure the traveler and their dollar, with endlessly larger promotional budgets, each.
September 11’s terrible terrorist attacks and other similar attacks, war and disturbances have proven how fragile we are not only as a global community but the travel industry was shocked to such an extent that it is only just now recovering. Fortunately Barbados and the OECS suffered the least from these impacts and are growing their markets nicely right now, but who knows what evil lurks just around the corner.
A major problem plaguing the region though, is the average low standard of services often offered throughout our societies and with our having a higher-than-usual percentage of customer service personnel who do not know how to look a customer in the eye and how to welcome them, but instead often present surly behavior, an indifferent attitude and a “push-up” face, which “tourists” and many locals will go elsewhere to avoid. The recent CTO/British Commonwealth report warns that today’s tourist is more discerning, environmentally conscious and less likely to accept third world standards and mentalities.
Some mature travel markets will saturate over the coming decade, and unless Dominica and St Vincent each “gets” an “international airport/jet port” soon, they will never experience the jump in their levels of travel growth that is required to put more of our people to work; never.
In Dominica, I see a 5-star 18-hole championship golf course with marina resort offering waterfront, golf-course-side and hillside villas and townhouses as a key next step to moving Dominica up market. Such a project, whilst helped by an international/jet airport, can also be started and grown now, since a reasonably high number of customers coming into and out of the island to enjoy such a facility will do so via their own private planes which can land in Dominica today and/or via yachts.
Bananas and Sugar
For over 20 years now, we have been warned that the quality of our fruit products arriving in the UK for example, was poor and had to be improved.
For more than 15 years now we have been told outright that preferential pricing for our fruit and sugar was going to end as we know it to be and had grown comfortable with.
Yet some folks are shocked to see what’s happening today with the end of subsidies and preferential treatments. Now that they have pulled their collective heads out of the sand, they wonder how ‘poor little us’ could be treated so badly.
We were told to improve quality, output and efficiency and diversify anyway. Some did exactly this and will survive nicely thank you, but as a national industry, the good old days are over.
International Financial Services
The fourth leg of the major regional industries.
Its easy for some to brush off the “offshore” industry with visions of tax evasion, money laundering, tax havens and other such nefarious activities stuck in their heads, but like everything else, it is not that simple or true.
In our small Caribbean islands, these bad things happen sometimes, though relatively rarely, but the global clean-up of legislation and compliance has put the modern regional offshore industry on a sound footing. Please note by the way, that most of the "naughty" activity that went on and indeed sometimes goes on, in fact does not go on in some small Caribbean island, but in New York, Miami, Paris, Toronto, Hong Kong, Singapore, London and other major cities.
Death and taxes are the two things "you cannot escape" they say; and it’s true. However, whilst there is not much we can do about death (outside of diet and exercise, so to speak), there are a few things we can do about taxes.
For example we can become elected officials and pass legislation to reduce the size and cost of Global Government and all of its attendant waste and inefficiencies; yeah, right!
Or we can lobby the global elected officials as many do, notably the US flat-tax guru Steve Forbes, and whilst a noble long-term cause, how long will that take? Death might work its magic before we can.
Or one can go offshore.
Not physically anymore. It does not matter where you live, work or play; "offshore" is like the proverbial grass pasture being greener on the other side, but like every patch of grass, its really only green where you water it.
The OECD and FATF, however, are scared witless that the advent of the Internet and its easy, full-service, brilliant offshore online services offers just about anyone, anywhere the ability to "play" with what was always considered "their domain".
WTO and other similar recent rulings, however, has clearly established that individual countries and jurisdictions may set and maintain whatever local tax rates they please, and that major money-guzzling high-tax jurisdictions cannot and must not impose sanctions or any other pressure to impose their own inefficiencies on others around the world.
The idea of a ‘synchronised global tax rate’ is a non-starter. If globalization and free trade is good for economies and business, so too is tax competition.
Governments will have to compete for and not demand tax revenues.
Insurance, reinsurance and captive insurance business is one of the backbones of the Caribbean’s financial services sector, along with bona fide offshore banking, personal trusts and foundations, real estate and charter boat investments and international trading through Offshore Companies; all bona fide and high finance businesses.
In fact, trillions of dollars invested in the USA, Canada, Europe, Latin America and increasingly now, Asia, come from the English-speaking Caribbean alone.
This statistic may surprise some who think of the Caribbean only as a ‘chuk your waist and wine’ rum-drinking, beach-party paradise (it is this too), but serious business in the Caribbean is big business, whether run by locals or non-locals from the Caribbean.
Since the 1100's and earlier, Europeans have used trusts to manage and protect their assets; why not today?
Even the modern IBC (International Business Company) can help one manage one's assets and other legitimate businesses. Just as one can log onto a myriad of domestic online trading sites, more and more people from around the world are keen to see what the Caribbean has to offer in this regard.
Whilst most modern compliance improvements are a welcome step, as usual, overzealous activity to implement unnecessary and irrelevant rules and regulations and other such negative pressure must be resisted so that the baby is not thrown out with the bathwater.
OECS Governments and the private sector must collectively decide if International Financial Services is what we want to grow around here, or whether we should ignore it and add to the brain drain and move the industry elsewhere.
The ball is in our court; lets play!
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