19 minute read
OCT and CBI Regulations: Information Session
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On 27 November 2015, the Ministry of Economic Development and Curaçao Investment and Export Promotion Agency (CINEX) held an information session for local entrepreneurs who are interested in exporting products using the Overseas Countries and Territories (OCT) and Caribbean Basin Initiative (CBI) regulations. This information session was attended by potential entrepreneurs and business owners looking to reach out to international markets.
TEXT TAHNEE BRUIN
The European Union’s OCT regulation, and the American Government’s Caribbean Basin Initiative Regulation, were both implemented for Curaçao at the beginning of 2014. Both are unilateral agreements that give countries likes Curaçao preferential entry to the European or American markets provided that certain condi tions are met. This means that products that are made in Curaçao could essentially be free from import tax regulations in these two markets. The core of these regulations is the Rules of Origin that define the nationality (or source) of the product to be exported. The nationality or source of product then determines whether or not the product may be imported free of taxes.
The Information Session consisted of several interesting and informative presentations, including one given by students from the Social Economic Faculty of the University of Curacao (UoC) on the history of Curaçao’s export indus tries and the conditions necessary in order to make use of the OCT and CBI regulations; one by the Ministry of Economic Development highlighting the possibilities of export to the EU using OCT regulation and the specific regulations regarding origins of work; one by the Acting US Consul General in Curaçao on products exported by other CBI beneficiary countries to the US and export opportunities specific to Curacao’s situation; and finally one by the Ministry of Health, Environment and Nature on requirements for products for human consumption and other international standards that must be taken into account.
After the presentations, four local companies (Curaçao Ecocity, Tatiana’s Dream Natural Product/Integra Natural, The Golden Lady Distributor, and Antillean Soap Company) shared their respective experiences with regards to exporting their products and the existing using the regulations.
New OCT and CBI Regulations can be very profitable for businesses in Curaçao if implemented correctly. It is important that as businesses consider expanding their reach to international markets that they ensure that their products are not only attractive when exporting abroad, but that they take advantages of OCT and CBI regulations, and follow international guidelines. The OCT and CBI Regulations are both very important for Curaçao, especially considering our view to reach more target mar kets close by and farther away.
Thanks to our rich cultural heritage, Curaçao is a multicultural society with people from diverse backgrounds, speaking several languages, all with a global perspective on business. This is so deeply rooted in our culture that we tend to forget the great advantages it has on our daily work-life.
TEXT JANICE TJON SIEN KIE AND ARNE KATTOUW, PWC DUTCH CARIBBEAN
More and more, students across the world are choosing to pursue foreign degrees through international higher education programs. The need for traveling overseas to the country awarding the qualification or providing the academic oversight has decreased significantly. Through a range of collaborative arrangements with degree-awarding institutions from major education-exporting countries, international higher education programs can be delivered in innovative ways, crossing borders and reaching students demanding these programs.
Research shows that over 153 million students participate in higher education. Based on current trends, the number of students’ with global mobility is expected to be around 6.7 million by 2020. This particular form of education is referred to as Transnational Education (TNE). Curaçao’s Ministry of Economic Development has identified this sector as a key investment opportunity with great potential.
Transnational Education in a Nutshell The United Nations Education, Scientific and Cultural Organization (UNESCO) defines transnational education as: all types of higher education study programs, or sets of courses of study, or educational services (also distance education) in which the learners are located in a country different form the one where the awarding institution is based.
Institutions in Curaçao are already successfully engaged in forms of higher transnational education. Most of them are delivered by franchised providers and branch campus operations. For example, University of Curaçao (UoC), University of the Dutch Caribbean (UDC) and College of the Dutch Caribbean (CDC) are local institu tions offering higher education programs, some in partnership with foreign institutions. Additionally, Curaçao is home of three med ical schools that award Doctor of Medicine degrees (MD). These
three universities: Avalon University School of Medicine, Caribbean Medical University and St. Martinus College have around 600 students 90% of which are foreign. The staff members are also a combination of foreign and local professionals. Another local example of TNE in Curaçao is the Caribbean Marine Biology Institute (Carmabi). This institute welcomes around 200 scientists annually to conduct research and attend specific courses in marine biology.
Curaçao, as part of the Kingdom of the Netherlands, is a politically stable country. The inhab itants are multilingual and the infrastructure is well developed. Immigration laws for Dutch and American passport holders are very flexible.
Also, Curacao’s tax regime offers attractive incentives and possibilities for foreign institu tions to invest in Curaçao. Several tax incentives are available, for example with regard to corpo rate income tax. Depending on the amount of investment, a “tax holiday” could be requested.
This specific incentive reduces the corporate income tax rate to 2%. Another incentive that might apply for foreign education institutions is export regulation, which would provide them with a tax rate of approximately 3.2% from 2016 onwards, in cases where students are mostly foreign. In case a tax holiday applies, this also allows for an exemption towards import duty and sales tax, with regard to the cost of building and furnishing the school. For teachers, the regular income tax and social
security premiums are greatly reduced in case they qualify for the “expatriate regulation.” To apply for this, incentive specific requirements regarding income, education and experience of the teacher must be met. The students that attend the school for a short period of time, for exam ple less than a year, may not be considered a resident for tax purposes and will therefore only be taxed on locally earned income. In case stu dents become a resident for tax purposes, they will be taxed on their local and foreign income. Nevertheless, periodic financial support from
• Double degree or joint degree: in this form of TNE, education providers in different jurisdictions collaborate to offer a program through which students receive qualificati ons from all institutions involved. • Branch campus: this is the most visible example of TNE; through this form, an educational institution establishes a fully operational branch campus in the host country. Furthermore, persons from the of fering institution are based in the foreign country. • Distance or virtual education: courses and programs are offered through different chan nels (internet, video conferring, skype) and other methods within or beyond the national boundaries. An offering institution has no phy sical presence in the country of the student, but they can make use of support centers. • Study abroad: in this more traditional model, students of local institutions have the opportunity to undertake courses and de grees for a fixed period of time at an institution located abroad. • Franchising or partnership: an educational institution in an offering country enters into a partnership with an institution in a host country by offering courses and education programs. This model is also referred to as delivery through-third parties or service suppliers. • Articulation or twinning: an institution from an offering country systematically recognizes specified courses or programs (e.g. through partial credit transfer) at an institution in a host country. Transnational education can be delivered through different models. The most common delivery methods are:
family or any amount of student loans they receive is not considered taxable income. If a student does enjoy taxable income, then the initial USD 10,000 (approx..) is considered tax free.
Opportunities beyond borders for Curaçao According to Curaçao’s Central Bureau of Statistics, over the last three years, more than 2000 students have attended higher-level public high schools (HAVO/VWO). Transnational education may offer local students access to high-quality, accredited education programs, without the need to travel overseas. Developing this sec tor will create jobs, generate cross-sectorial income, and contribute to the annual GDP.
For teachers, the regular income tax and social security premiums are greatly reduced in case they qualify for the “expatriate regulation.”
Curaçao can benefit significantly from TNE opportunities. Nevertheless, the number and type of TNE operations and the aggregate enrolment of local students, expatriate students and staff enrolled in all operations must be taken into account. Flexible immigration policies to facilitate this sector are key. The potential for TNE in Curaçao lies creating a variety of pro grams and opportunities. Current programs offered in Curaçao are focused on management, financial services or medical professions, but there are great opportunities for niche studies such as hospital ity, culinary arts, fine arts and science.
About the authors: JANICE TJON SIEN KIE holds a master degree in Finance & Invest ment from the Erasmus University Rotterdam. She is a Senior Consul tant for advisory services at PwC Dutch Caribbean. Within PwC, Jani ce leads many projects focusing on strategy & business. Janice is specialized in developing strategic business plans, investment guides, codes for corporate gover nance reporting, and sustainability reporting. She also advises on business improvement.
ARNE KATTOUW is the Head of the tax technical bureau at PwC Dutch Caribbean and has extensive expe rience in Dutch Caribbean taxation. After a long career with the Dutch and (former) Netherlands Antilles Tax Department, he joined PwC in 2001. Within PwC, Arne is involved in local and internati onal structuring and tax advice, and the development of new tax legislation and policies.
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2019: Curaçao´s Finest Hour Industry Leadership: Oil & Gas
How will this historical pillar that represents both a strong social element and economic benefits be transformed to embrace a future that realises Curaçao’s economic, social and ecological sustainable development?
TEXT KATY BRANUM
The clock is ticking, and discussions are taking place accross the island and abroad about the big decision due in 2019. Specifically, what to do with the ISLA refinery and the harbor site that it is located on, when the current lease with PDVSA (Petróleos de Venezuela, S.A. – the Venezuelan state-owned oil and natural gas company) expires in 2019.
The ISLA refinery, located in Curaçao´s historic natural harbor, is a sense of pride for many families that immigrated to the island and have based their livelihoods on the success of the refinery for generations. Over the years, the refinery has provided valuable income to the island; however, fast forwarding to today, the eco nomic benefits seem to pale against the much-publicized pollution that it generates and the associated health issues the island’s citi zens experience.
The debate surrounding the future of the ISLA refinery is com plex, and many things must be considered. Today, the refinery produces crude products that are outside many countries’ acceptable sulphur emission benchmarks, thus the market is limited. Needless to say, the refinery remains one of the island’s largest sources of revenue, and as the contract with PDVSA approaches its expiry, a taskforce has been established to review options and make strate gic recommendations, taking into consideration the island’s other financial obligations. Their remit also includes the implementation of those recommendations, which are currently underway.
As part of the activities; various reports have been generated, however only one has been made available to the public. This is a report that was produced for Curaçao´s Ministry of Economic Development some time ago, outlining three possible strategic paths:
Upgrading the refinery at it current location Provided there is strong demand for the product produced, this decision adds to the economic diversity of the island and will provide temporary employment associated with upgrading. The modernization of the refinery would also shift the refining process from sulphur-based to liquefied natural gas, reducing
pollution. Nevertheless, a very large investment is required, and an investor needs to be found.
Building a new refinery at a new location The main economic effect is that a modern refinery would be efficient, and allow for optimal processing. The suggested location, would position the refinery near storage areas, and tanker access points. It would also move pollution away from residential areas. This solution would allow for oil refining to remain a pillar of the economy, providing economic diversity and employment. The impact is the new zoning required and the building of the new refinery infrastructure would require a significant outlay of funds.
Redeveloping the ISLA area If the contract with PDVSA is not renewed, and the refinery is no longer used, a sustainable plan will be needed to redevelop the land where the refinery is located. In the short-term, the refinery’s storage areas could be rented out, generating some degree of income. There would also be employment generated in the short-term, as parts of the current refinery could be dismantled and some of the cleaning up processes actioned.
The level of contamination is significant, so this would take a long time, possibily up to 30 or 40 years depending on investment and methods used. There are other areas of the ISLA site that are clean and could be zoned or redeveloped. The short-term impact is a loss of economic revenue as refining activities cease and unemployment from those companies are dependent on the refinery.
All three options suggested in the report have pros and cons, and are difficult decisions that require leaders consider a sustainable long-term vision for Curaçao. To appreciate the complexity of their challenge, it is helpful to explore a little of Curaçao’s history with regards to the refinery.
Geo-political Foundation In 1985, the Royal Dutch Shell Oil Company left the Curaçao refinery, after operating here for over fifty years. They sold the refinery to the local government for a symbolic amount. This was a complete shock to the island as no one anticipated that Shell might one day leave.
The sitting Prime Minister of Curaçao visited the President of Venezuela, which resulted in PDVSA stepping in and leasing the refinery to refine Venezuelan crude oil at the ISLA refin ery allowing Curaçao to receive much needed revenues and foreign exchange.
ing a significant issue, there has been an increased focus on the pollution resulting from refinery processes. Modern refineries have processes in place to minimize pollution with older refineries often being closed and refining activities moving to places with less strict pollution controls.
In February 2015, Hess Corp, an Americanbased refining company, and PDVSA, closed down the large Hovensa oil refinery in St. Croix based on a three-year trend in the US of closing refineries due to pollution con trols, the global economic slowdown, and the preference to use the modern refineries being built in emerging markets like India, China and countries in the Middle East.
This example indicates that old refineries require large investments to modernize so that they comply with evolving environmen tal standards while producing products that meet emission levels of large international markets, such as the US and Europe. As men tioned, this level of investment would also be required to modernize the ISLA refinery. In order to fund such an endeavour, an investor will need to be identified, and guarantee will need to be provided for the development of a market for the product produced. According to publicly available documents, there is a memorandum of understanding between the PDVSA and ISLA, which might indicate that PDVSA could possibly be interested in continuing to use the refinery after 2019. However, with the increasingly challenging economic situation in Venezuela and Venezuela’s recent remarks that the crude price needs to increase, and remain consistent around $70 per barrel; the future of PDVSA in Curaçao remains largely unknown.
Looking ahead The taskforce working on the “Beyond 2019” solution is confident that they will produce a solid plan for the future of Curaçao, despite the various uncertainties. Difficult decisions will need to be taken to determine how Curaçao will move forward, and what the role of the refinery will be in all of this. Only time will tell. Curaçao´s finest hour is soon upon us.
Download a full copy of the “ The Sustainable future for Curaçao” Strategic options for ISLA and the ISLA site. Go to: Curaçaobusinessmagazine.com http://curacaochronicle.com/columns/nicolas-ma duros-caribbean-engagement-a-flamboyant-optic-in-autocracy/
