A Sinking Feeling: The Cruise Industry's Dirty Secrets

THE STAR Businessweek MARCH 30, 2019

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in this edition of

A Sinking Feeling: The Cruise Industry’s Dirty Secrets

By ED Kennedy, STAR Businessweek Correspondent

SBW THE STAR Businessweek

Barbados gov’t to implement fresh tax incentives for economic turnaround In delivering the 2019-20 budget presentation, Prime Minister Mottley told Barbadians that the island is “preparing to depart stabilisation and moving on to the paths of growth and transformation”.

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The statistics of recent years show that the popularity of cruising is growing and growing. In 2017, 25.8 million holidaymakers took to the high seas on cruise ships, with the total from 2018 projected to be 27.2 million. With US$ 35.5bn changing hands annually as a result of the cruise industry, the popularity also demands immense consumption of resources, and the need to offload waste and excess from port to port.

Continued on page 4

Over-Water Hotels: Are They Sustainable?

In the race to win the tourism dollar there is always an ambition by providers to deliver something unique; something new and distinctive that seeks to go beyond a competitor’s offerings elsewhere.

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Inter-American Development Bank

IDB scraps annual meeting after China excludes Venezuela

Development Bank is caught up in strategic rivalry between Washington and Beijing

By James Politi

Beijing had tried to exclude a board member appointed by Venezuela’s opposition leader Juan Guaidó from the Inter-American Development Bank annual meeting in Chengdu, China © Reuters

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he Inter-American Development Bank has scrapped plans to hold its annual meeting in China after Beijing excluded the newly appointed board member from Venezuela chosen by opposition leader Juan Guaidó.

Last Friday evening the IDB released a statement saying its directors had decided to change the location of its annual meetings with a recommendation to come within 30 days. The planned meeting between March 28 and March 31 in Chengdu, China, would “not be held”, it said.

The extraordinary cancellation of the annual meeting of a multilateral development bank a week before the gathering highlights the extent to which

the IDB has been caught in the middle of the economic and strategic rivalry between Washington and Beijing. It reflects similar challenges for institutions ranging from the International Monetary Fund to the World Bank and the World Trade Organization.

“China’s refusal to abide by IDB rules and its obstruction of democratic transition in Venezuela demonstrate its unreliability as a partner and indifference to Latin America. China chose to side with Maduro and his crooks,” Garrett Marquis, the US National Security Council spokesman, tweeted on Saturday, referring to Beijing’s backing for the government of Nicolás Maduro. The US and many other countries consider Mr Guaidó the legitimate ruler of Venezuela. “China chose poorly,” Mr Marquis added.

The IDB’s decision to hold its annual meeting in China reflected the growing importance of Beijing as a trade and investment partner for a wide range of Latin American nations. The US, however, had become increasingly irritated by the IDB’s choice in recent months. In November David Malpass, the US undersecretary of the Treasury for international affairs and Washington’s nominee to lead the World Bank, had urged the IDB to reconsider holding the meeting in China, as he warned Congress that Beijing’s “geopolitical” influence was rising inside the multilateral development banks.

The IDB pressed ahead with its plans despite the US opposition, but the situation became untenable after its board last week approved Ricardo Hausmann, a

Harvard economist chosen by Mr Guaidó, as Venezuela’s representative, de facto recognising him as the country’s legitimate leader.

While the US, Canada and many Latin American and European countries have recognised Mr Guaidó as the leader of Venezuela, China, Russia, Cuba and some other nations are still recognising Nicolás Maduro as the president.

Ahead of the annual meeting in Chengdu, Chinese officials had asked to “depoliticise” the gathering by not inviting any representative from Venezuela, but this was seen as a breach of diplomatic norms by the board, according to one person with knowledge of the situation.

Originally published in the Financial Times

Regional

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MARCH 30, 2019

BARBADOS GOV’T TO IMPLEMENT FRESH TAX INCENTIVES FOR ECONOMIC TURNAROUND

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n delivering the 2019-20 budget presentation, Prime Minister Mottley told Barbadians that the island is “preparing to depart stabilisation and moving on to the paths of growth and transformation”.

In a presentation lasting more than five hours, Mottley said that the taxation policies of her administration would strike a balance between direct versus indirect taxation; taxing income versus taxing wealth and consumption while sharing the burden of taxation across businesses, households, locals, foreigners and tourists.

“We have to balance a set of tax tools that includes the rates, the treatment of allowances and the use of credits.

Ultimately, the aim is to protect the most vulnerable groups, using the ability to pay criterion while allowing for more disposable income to fuel growth,” she argued.

For the income year 2018, the government said it will add BDS$ 9mn to the existing allocation of BDS$ 11.3mn for Barbadians who earn BDS$ 18,000 or less annually. The reverse tax credit is expected to place just over $20mn back into the hands of low-income Barbadian workers.

According to Mottley, once an individual within this income bracket submits the income tax form for the income year 2018, he/she qualifies for Reverse Tax Credit by September.

Additionally, Mottley said that the government would continue to provide a BDS$ 25,000 personal allowance for all taxpayers and that individuals earning above BDS$ 25,000 but below BDS$ 35,000 per year, would benefit from the new Compensatory Income Credit (CIC).

It means that no one earning less than BDS$ 35,000 will pay income tax in Barbados.

The government will also reduce the

The Mia Mottley-led Barbados Government has outlined a series of new fiscal measures aimed at turning around the ailing economy.

taxable income rate and will extend the first tax band, while applying income credit in a phased manner.

“The universal personal allowance of BDS$ 25,000 that is tax-free is retained.

Effective July 1, 2019, we are getting rid of both the first tax band on which a rate of 16 per cent is applied and the second tax band on which a rate of 33.5 per cent is applied,” Mottley said, adding that the rate on the third tax band of 40 per cent will also be abolished.

Effective July 1, 2019 the first tax band will be BDS$ 50,000 and a rate of 12.5 per cent will be applied. The second tax band is on taxable income over BDS$ 50,000 which is charged at a rate of 33.5 per cent.

“In the area of services . . . the export of certain services is not quite as easy to measure. In the circumstances, we are moving the export of certain services as scheduled from zero-rated to exempt. This will broaden the base of the value added tax (VAT),” Mottley said.

“In the area of water, we are reverting to the original classification for VAT. Water will once again be an exempt supply rather than zero-

rated. This change starts from April 1, 2019.

This will save about BDS$ 10mn in refunds in a full year,” she continued.

Meanwhile, the government will seek revenue from increases in VAT from the tourism sector from 7.5 per cent to 10 per cent, effective January 1, 2020. The increase is, however, lower than the proposed rate announced last year of 15 per cent.

“After persistent representation from the tourism sector, it was recognised that the doubling of the rate would have adversely affected the competitiveness of the sector and its packages in the international market.

As a consequence . . . we conceded and backed off the suggested rate of 15 per cent,” she said.

Tax generated by this measure will be BDS$ 27mn in a full calendar year but only BDS$ 4.5mn in this fiscal year.

The government also announced increases in the room rate levy going up by 75 per cent effective April 1, 2019. Adjustments will also be made to property taxes for the government to gain revenue of BDS$ 61.9mn. Of this amount, nonresidential properties will account for an

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estimated BDS$ 39mn.

“In the face of a lowering of the corporate tax rate for domestic companies, the shift in the burden is part of the change in our tax philosophy.

In a similar vein, the high-end of the residential market is being called upon to put some of the benefits from the reduction in income tax rates to the payment of property tax.”

Effective May 1, 2019, there will be a 20 per cent withholding tax on gambling winnings and a 17.5 per cent gambling tax on the net-drop of all gaming establishments.

“Gaming establishments have until January 1, 2021 to change out slot machines to auditable new machines,” she said, adding government will collect three per cent of the monies owed for the period 2011 and 2018, over a four-year period.

The government believes that the gaming sector will be improved under a public-private arrangement and, as such, will submit requests for proposals regionally and internationally for such a partnership over the medium term.

Mottley also announced an increase in bus fares in the face of the stateowned transport board receiving revenue of BDS$ 20mn while spending BDS$ 65mn. She argued that the situation demands an increase in bus fares given that a fare hike occurred once in the last 30 years of 50 cents.

The government has eliminated withholding tax on payments made to non-residents, other than dividends, including interest; management fees and royalties.

“In the case of management fees there will no longer be a deduction for payments to non-residents,” she said, adding that on the other hand, withholding tax on residents will increase on interest from 12.5 per cent to 15 per cent, on dividends from local sources from 12.5 to 15 per cent and that withholding taxes on pensioners will not be touched.

Originally published in the Jamaica Gleaner

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A Sinking Feeling: The Cruise Industry’s Dirty Secrets Continued from page 1

In 2016 Princess Cruise Lines pleaded guilty to seven felony charges in US courts and was ordered to pay a US$ 40mn fine for illegal dumping off the coast of England

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ow this is done (or rather not done) is just one of the many confronting issues facing the future of the cruise industry today.

Storm Clouds on the Horizon

The pollution caused by cruise ships is something that has come under greater pressure in recent years, but it has been an issue with a long history. When the world’s first purpose-built cruise ship, the Prinzessin Victoria Luise, set sail from the port of Hamburg, Germany in 1900, the world had not yet formed the

strong international community seen today following the global cataclysm of World War II. Despite the complex web of different legal layers, and also the difficulty of pursuing solutions through the international arena, there have been victories against cruise companies caught in the act of wrongdoing.

In 2016 Princess Cruise Lines Ltd broke a record no cruise liner would wish to hold, getting hit with a record US$ 40mn fine after it emerged that the crew aboard its Caribbean Princess had deliberately dumped waste off the coast of England in 2013. The use of a ‘magic pipe’ to discard waste was revealed by a British engineer who became a whistleblower following the discovery of

the crime of deliberate pollution.

The Inadequacy of International Law

Even if a crime is discovered, the reality is that, for many years, much pollution was not always the result of deliberate intent, but of mistakes and recklessness. A 2000 report by the United States Government Accountability Office found only 15% of discharges by cruise ships in international waters were done with intent by ship personnel. A whopping 85% occurred via accident, or an undetermined cause.

By no means does this excuse the cruise ships — many nations around the world have clear-cut criminal penalties

for negligence, the same as they do for acts of intent — but international law has long lagged well behind the ideal.

Even nations that have looked to create stronger environmental laws have often encountered trouble tackling the issue of cruise liner pollution, given the difficulty of investigating and enforcing behaviour on the high seas While the years since have seen a greater urgency applied to reform in this space, the cruise industry is informed by the same politics as the global climate change debate.

Put simply, though cruise liner pollution may be a global concern, individual nations will apply their own sense of urgency (or lack of) to improving operational practice.

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With the cruise industry growing, and our world becoming more economically borderless, no longer can a cruise liner which makes its home in one corner of the world arrogantly dismiss the damage it may do (whether by intent or negligence) in another corner of the planet

Shape Up or Ship Out

There is unquestionably self-interest in this space, not only for the cruise liners in maintaining their reputation, but also in the health of their crew and passengers.

Following the measurement of air quality aboard four major cruise liners, America’s John Hopkins University published findings in January of this year that claimed the particulate matter (PM) on cruise ships is at times comparable to the poor air quality of a major city like Beijing in China.

The PM was defined as airborne particles such as small solids or liquid droplets suspended in the air. Though the ability of cruise liners to finesse their way through and finagle local laws is well known, American law, under the Shipping Act of 1984, holds that cruise liners owe their customers a duty of care.

And what’s more, that duty of care is heightened comparative to other shipping vessels. Specifically, the Act mandates that cruise providers have a duty to ensure that all passengers arrive safely. So what would happen if it were to emerge that passengers have apparently contracted lung diseases and other respiratory illnesses as a result of a ship’s air pollution?

Were it to be proven that a cruise liner had breached a duty of care consistent with local law of the port that a cruise ship calls home, suddenly a cruise liner’s bottom line could be hit awfully hard by claim after

Royal Caribbean’s Splendour of the Seas release of untreated sewage near Turtle Beach in Brazil

claim for civil damages and restitution.

This, even more so given that not only passengers and crew can be impacted by cruise ship pollution, but even residents of any port a cruise ship sails into. The estimate in early 2018 that 10% of the air pollution in Marseille, France was a result of cruise ships that dock in the world famous port, serves as an example.

The Depth of the Problem

As well as pollution, the cruise ship industry has long been a candidate for reform when it comes to its wider operating standards and practices. This is seen most vividly whenever a death by other than natural causes is believed to have occurred on board a cruise liner at sea.

While cruise liners have an

understandable preference to keep quiet the news of any death, lest it discourage future tourists, this approach has resulted in roadblocks being placed in the path of investigations; also, evidence of industrywide issues such as sexual abuse and human trafficking occurring, and going largely unaddressed, due to the industry’s clandestine nature.

With the cruise industry growing, and our world becoming more economically borderless, no longer can a cruise liner which makes its home in one corner of the world arrogantly dismiss the damage it may do (whether by intent or negligence) in another corner of the planet.

Alongside the capacity for media outlets to cover in real time any scandals as they emerge, the ubiquity of smartphones and

user review tourism websites mean it isn’t just in the positive interest of cruise liners to change; a failure to do so means they’re only ever one scandal and smartphone away from massive reputational damage.

All Hands on Deck

Nobody, in critiquing the industry, seeks to suggest it is all bad. The cruise industry brings immense joy to millions and is a great source of economic profitability for ships and the ports they visit. While the past has seen many issues, the future can be different. But as the cruise industry expands, and its profits soar, expectations grow too that new resources will be utilised to address old problems. After all, it’s always best to sail with the wind, and not against it.

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Energy

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UAE to launch THREE solar power projects in THE Caribbean

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Representatives from the UAE Ministry of Foreign Affairs, the Abu Dhabi Future Energy Company, and Bahamas Power & Light

he UAE will inaugurate three climate-resilient solar power projects in the Bahamas, Barbados, and Saint Vincent and the Grenadines this week under the $50mn UAE-Caribbean Renewable Energy Fund (UAE-CREF).

The fund is a partnership between the UAE Ministry of Foreign Affairs and International Cooperation, the Abu Dhabi Fund for Development, and Masdar (Abu Dhabi Future Energy Company).

In total, the three projects, which broke ground in November 2018, will deliver 2.35 MW of solar and 637 kWh of battery storage capacity, while displacing more than 2.6 million tonnes of carbon dioxide annually. Combined, they will also achieve diesel savings of more than 895,000 litres per year, worth about $1.1mn.

The Bahamas, Barbados and Saint Vincent and the Grenadines face some of the highest power costs in the world, due to their reliance on diesel. All three projects are designed to withstand up to 160 mile per hour winds and extreme weather, per a new requirement instituted in the UAE-CREF in the wake of Hurricanes Irma and Maria. The projects will be inaugurated by HE Bader Almatrooshi, UAE Ambassador to Cuba, Haiti and Jamaica and Representative to the Association of Caribbean States.

“By funding renewable energy solutions globally, ADFD is enabling Small Island Developing States to tackle their development challenges, meet their outlined priorities, and optimise use of their natural resources,” said Mohammed Saif Al Suwaidi, director general of ADFD, the UAE’s leading national entity for international development aid, which fully finances the UAE-CREF. The three projects all represent significant steps forward in realising the three countries’ renewable energy ambitions.

In the Bahamas, which hopes to generate 30 per cent of its power needs from renewable sources by 2030, the Thomas A. Robinson National Stadium 925kW solar PV Carport Power Plant will displace 310,000 litres of diesel per

The Bahamas, Barbados and Saint Vincent and the Grenadines face some of the highest power costs in the world, due to their reliance on diesel

year, saving the government US$350,000 and offsetting 856 tonnes of carbon dioxide annually. The project is the largest-ever solar plant to feed into the national grid and sets a critical regulatory precedent for future private development. The project was developed in partnership with the Bahamas Ministry of Environment and Housing, with initial concept work by the Rocky Mountain Institute. In addition to power generation, it also serves as a carport with 342 parking spaces, including two spaces that are equipped with fast-charging electric vehicle charging stations.

In Barbados, the government aims to generate 100 per cent of its energy from renewable sources by 2030. As part of this target, the Bridgetown 350kW solar PV Carport Power Plant and Bow Manston 500kW solar PV Power Plant in Barbados are expected to save US$381,000 per year by displacing 265,000 litres of diesel fuel and 975 tonnes of carbon annually.

Both projects were developed in partnership with the Barbados Water Authority (BWA), providing power to its water treatment plant and the water pumping stations. The 350kW solar PV carport also provides 124 parking spaces, as well as six level 2 electric vehicle charging stations.

In Saint Vincent and the Grenadines, the project — with 600kW of solar PV and a 637 kWh lithium-ion battery — is unprecedently able to supply 100 per cent of Union Island’s daytime power requirements.

The plant alone also meets over 30 per cent of Union Island’s energy needs and will displace 320,000 litres of diesel fuel per year, saving the island US$368,000 and offsetting 825 tonnes of carbon annually.

The hybrid plant was developed in partnership with St Vincent Electricity Services Limited (VINLEC), again with initial concept support from the Rocky Mountain Institute. With its combination of solar PV and battery, the project also provides a model for high penetration of renewable energy on small outer islands, which can dramatically reduce their crippling power costs. The government has set a target to generate 60 per cent of the country’s energy from renewable sources by 2020.

“Masdar is pleased to leverage its global expertise and experience in renewables to support the Caribbean’s sustainable energy transition, as well as its climate resilience,” said Masdar CEO Mohamed Jameel Al Ramahi.

“These landmark solar projects will pave the way for further investments in clean energy across the countries. By delivering tailor-made solutions to address the specific energy needs of each country in partnership with their governments, Masdar is fulfilling its mandate to deliver on the UN Sustainable Development Goals and ensure sustainable energy for all.”

The UAE-CREF was launched in 2017 on the sidelines of the annual assembly of the International Renewable Energy Agency (Irena), under the umbrella of Abu Dhabi Sustainability Week. The fund intends to deploy renewable energy projects in 16 Caribbean countries in three cycles to reduce energy costs, increase energy access, and enhance climate resilience.

TradeArabia News Service

SUSTAINABILITY

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Over-water Hotels: Are They Sustainable?

By ED Kennedy, STAR Businessweek Correspondent

An adult only, all-inclusive resort offering both land and over-water suites, the Sandals Royal Caribbean Resort is a luxury escape that caters to those seeking a relaxing and romantic getaway

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n the race to win the tourism dollar there is always an ambition by providers to deliver something unique; something new and distinctive that seeks to go beyond a competitor’s offerings elsewhere. Because nations across the Caribbean are already replete with beachfront villas and hotels, it is almost impossible to beat the views and ambiance of a room looking out onto the shore. But for some providers, their goal of going one better has seen them take to the seas, setting up over-water hotels (OWHs) that allow tourists to sleep above the water without the motion that comes with a boat.

OWHs offer a number of advantages over their land-based competition but how financially viable are they? And how sustainable are they in an era when climate change is posing new threats to land and sea?

Taking to the Water

Today, OWHs are regularly eyed across many postcards, mobile phone backgrounds and, of course, tourism advertisements. While as permanent accommodations on water they are unquestionably visually stunning, they are also great achievements of strategic vision and engineering.

The OWH concept owes its origins to the pioneering efforts of Californian Jay Carlisle and two friends on the small island of Ra’iâtea in French Polynesia. The entrepreneurial trio, who moved to Tahiti in the late 1950s, were trying to attract tourists but the lack of sand meant that building beachfront accommodation wasn’t an option. Initially constructing three humble rooms on stilts, they wrote the first chapter of a tourism revolution.

In 1970 the Hotel Bora Bora corporatised the OWH idea, and thereafter hotel after hotel that had the means looked to take

advantage of the idyllic accommodation concept. Today there are some 170 OWHs in the world, all owing their origin to three expats with a dream, on a little island in the South Pacific.

OWHs Come to the Caribbean

A local version of the OWH concept was long in the planning. It was not until 2016 that the Caribbean got its first entry in a range of OWHs with the December 1st, 2016 opening of the Sandals Royal Caribbean in Montego Bay, Jamaica.

Those who have stayed at a beachfront villa will know the fantastic feeling of waking up and seeing the ocean. For anyone yet to make a trip to an OWH, there is not only the obvious appeal of a first class view of the waves, but many other attractions beyond.

An OWH can offer 360 degree views of the ocean. They can offer glass-bottom floors to give access to the world’s

greatest aquarium. And for snorkelers and scuba divers, there is no better accommodation than a room that lets you start the morning by jumping right into the water on your doorstep.

Just the same, the reality is that OWHs — because they are so enticing — are classified as luxury accommodation, with a price tag accordingly. With an overnight stay at the Saint Lucia Sandals Grande Resort at time of writing costing well north of US$1,500, one night could cost more than a whole week staying in 4-star accommodation on shore, with a price per night of US$159-$286 found across the nation.

However fantastic the OWH concept is, the rate is too high for someone backpacking through the region, or seeking accommodation that leverages the value found in the era of Airbnb.

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Over-water Hotels: Are They Sustainable?

Continued from page 7

For this reason, it’s no surprise that the market for OWHs targets honeymooners in particular, seeking a ‘once in a lifetime’ holiday, alongside regular luxury travellers.

Atlantis, The Palm’s underwater suites boast floorto-ceiling views directly into an aquarium from the master bedrooms and bathrooms. Sleep with the fishes! Dubai’s luxury underwater suites come with private butlers and panoramic views into an aquarium filled with 65,000 sea creatures

The Changing Tides

their origins in French Polynesia, the popularity of underwater hotels (UHs) is growing globally. Already, Dubai, the Maldives and Sweden have made notable inroads in bringing underwater hotels into the mainstream. Yet the expense of construction and ongoing maintenance is not insignificant when compared to costs for a hotel on land.

Nonetheless, for existing hotels and future constructions alike, any expansion alongside the water, instead of in the water, must come with a faith that a global consensus on climate change action will ultimately emerge soon and, in turn, that the damage already being done by climate change can be halted. Given that hotels are built not just for the years but for decades ahead, that faith could be overshadowed by doubt when decisions are required today.

By no means will all future Caribbean resorts need to include an OWH, or even UH, component. But alongside the appeal and offering of something truly dynamic is a recognition that such constructions in future could not only be sustainable against the surrounding seas, should they change further, but also against declining profitability in the sector as a result of it, especially if, as more and more water-based hotels go up, the average room SBW rates, in turn, go down.

To some extent, OWHs have some immunity from the rising sea levels that climate change could bring. For any hotelier or developer currently considering a new hotel in the region, OWHs not only offer a unique drawcard, but also some ‘future-proofing’ against the threat of climate change.

OWHs are built to provide guests with a feeling of closeness and easy access to the ocean. If they are built too high above the water, this feeling can be diminished. There is also the issue of supporting infrastructure. Many OWHs have lower level balconies, sundecks, and other amenities such as swimming pools that sit just above the sea’s surface. Many feature ladders and stairs that provide direct access to the water and are often partly submerged in them.

Rising sea levels pose a risk to this infrastructure, and can mean a costly construction bill to alter in time ahead as seas rise. This to say nothing of the natural disasters, like a hurricane, that can wreak havoc to an OWH site, the same as they can to a beachfront one.

Over and Under

Just as OWHs have enjoyed great popularity around the world since

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