St. Lucia’s New Tourism Tax: How does it stack up to other destinations?

THE STAR BUSINESSWEEK JANUARY 18, 2020

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ST. LUCIA’S NEW TOURISM TAX: How does it stack up to other destinations?

Caribbean tourism is a highly crowded marketplace and destinations walk a fine line between collecting the maximum tourist dollars and pricing themselves out of the market.

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5 Major Projects to Watch in 2020 When it comes to capital works, the Caribbean currently has a number of significant projects under progression.

When completed, these projects will not only represent a substantial upgrade to the host nations‚ but also promise to streamline new investment and tourism interest from abroad.

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BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

The deal for the new hospital tower block in Port of Spain being made official. (Source: Office of the PM)

The new accommodation tax will affect resorts like Sandals as well as smaller guesthouses and B&Bs. (Photo courtesy Sandals Grande St Lucian)

St. Lucia BPO Market The Caribbean’s largest homegrown BPO provider is opening the doors on a new facility in Saint Lucia this spring in a landmark investment that will provide hundreds of local jobs and further promote the island as a booming BPO hub.

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itelbpo Founding Chairman and CEO Yoni Epstein. (Photo courtesy itelbpo)

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In 2019 Saint Lucia received over 400,000 stayover visitors for the first time ever.

2019 Stayover Arrivals

423,736

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5 MAJOR PROJECTS TO WATCH IN 2020

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

Up by 7.3%

The Caribbean presently has a number of diverse and dynamic projects being pursued around the region promising major upgrades in transport, healthcare, energy and more. (Source: Pixabay)

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hen it comes to capital works, the Caribbean currently has a number of significant projects under progression. When completed, these projects will not only represent a substantial upgrade to the host nations‚ but also promise to streamline new investment and tourism interest from abroad. From road and energy upgrades to glittering new casinos, 2020 is set to be an exciting new chapter for construction in the Caribbean. Here now are five capital works projects that are a must-watch in the year ahead.

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JAMAICA’S SOUTHERN COASTAL HIGHWAY IMPROVEMENT PROJECT For many years the Caribbean and wider Latin America nations have struggled with a comparatively high level of road fatalities. Jamaica is no exception, having seen 435 deaths in 2019, equalling the second highest number on record in the country. The solutions to such a challenge are complex but undoubtedly the improvement of roads is an important part in bringing down this horrible toll. The Southern Coastal Highway Improvement Project involves

the rehabilitation of approximately 110 kilometres of road. The extension of the PJ Patterson Highway will also form part of the project. Set to be delivered with China Harbour Engineering, the total cost of the works is expected to be US$ 384mn.

THE DOMINICAN REPUBLIC’S SOLAR INITIATIVES As a nation with over 10 million citizens, the Dominican Republic’s electricity needs are somewhat demanding in the Caribbean. Cuba and Haiti each also have a population of over 10 million while the fourth largest in the region is Puerto Rico at just a third of that, 3.2 million people. The Dominican Republic’s goal of 25% of its electricity being green by 2025 is ambitious domestically. It is also inspiring for nations around the region that are forging their own path to greater energy independence and sustainability.

Just as a 50 MW solar project was set to finish at the end of 2019‚ the year also finished with news that the DR had concluded planning approval to build additional 100 MW and 200 MW projects, promising another step forward in the nation’s green future. The latter is set to have financing provided by US business Energy Development Partners, and Bani Solar.

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ST. LUCIA BPO MARKET

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BPO MARKET WELCOMES REGIONAL BIG-HITTER

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

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he Caribbean’s largest homegrown BPO provider is opening the doors on a new facility in Saint Lucia this spring in a landmark investment that will provide hundreds of local jobs and further promote the island as a booming BPO hub. itelbpo Smart Solutions, headquartered in Jamaica, is adding Saint Lucia to its portfolio with a 20,000 sq ft site in Vieux Fort, near Hewanorra Airport. The facility is set to open in April with 30 to 50 employees and will eventually scale up to employ around 700 Saint Lucians over the next few years.

Invest Saint Lucia, the island’s investment promotion agency which was instrumental in bringing itelbpo to the island, is hoping the major investment will help raise the country’s profile further in the Business Process Outsourcing industry, which is projected to reach US$ 343.2bn by 2025 and is growing by around 7 per cent a year.

SELLING SAINT LUCIA Founded in Jamaica in 2012, itelbpo is on a growth trajectory. In November, PanJam Investment Ltd and Portland Private Equity each acquired a 15% ownership stake in the company, allowing it to pursue an ambitious strategy that will see itelbpo expand its network of contact centre services by 5,000 new seats in the next five years.

Saint Lucia is a key part of the group’s plans going forward, according to itelbpo Founding Chairman and CEO Yoni Epstein who says: “We want to ensure we are putting capital in the right places. Our big focus for 2020 is on Saint Lucia and Jamaica.”

Already well-established in Jamaica and with centres in the Bahamas, Mexico and the US, Epstein says itelbpo began eyeing Saint Lucia in late 2018 following discussions with Invest Saint Lucia. Having already

services for a large chunk of it. I continue to see that growth.”

A rendering of itelbpo’s Saint Lucia site. (Photo courtesy itelbpo)

dipped a toe in the market running a call centre for Sandals in 2007, Epstein was familiar with the island and didn’t need much convincing. “We are familiar with the landscape and we know what the ability is from a workforce perspective.

We are very impressed with the quality of the labour. Given its location and our experience, we knew Saint Lucia would be a good opportunity for us.”

Epstein also credits Invest Saint Lucia for its “tenacity” in pushing the country as a good fit for the firm, saying: “They kept making us think about Saint Lucia for when the time was right. They have been great, and have made it very easy.”

The investment agency is currently hard at work retro-fitting the Vieux Fort site to itelbpo’s specifications and, in a particularly innovative move, is installing solar panels onto the roof of the building to help the firm reduce its energy costs.

With efforts underway to ready the site, itelbpo is procuring equipment and says everything is on track to meet the 1st April opening date.

THE CARIBBEAN CONTEXT When the centre opens this spring, it will operate with a handful of employees but itelbpo expects this number to grow quickly. Epstein says the facility will cater to a range of industries including financial services, telecommunications, tourism and utilities. When it comes to marketing the services available, the itelbpo head

wants to take a hands-on approach: “We want to bring down prospective clients to Saint Lucia. Seeing is believing in our industry. Even though we have a strong track record, people like to see the plant up and running. It is a chicken and egg scenario. There is some risk but we are willing to take that risk based on our confidence in Saint Lucia.”

In taking on the Vieux Fort facility, itelbpo also acquired first right of refusal on an adjacent property which it hopes will house the business as it grows. While room to scale up was important for the company, Epstein is quick to point out that itelbpo is pursuing a realistic growth strategy that will never sacrifice quality for quantity.

“Our focus is on quality. In a customerfacing industry, clients are willing to pay for good service. The big players want large-scale projects but we can capitalise on the benefits without the noise and competition of some of the larger markets,” he says. “The Caribbean cannot support what is happening with BPO in the Philippines or India. We have to carve out our own niche.”

And Epstein believes that the Caribbean’s long history of hospitality dovetails neatly with opportunities in the travel space for BPO providers. “Tourism has been the lifeblood of the Caribbean for the last 60 to 70 years and that is a niche we can continue to support. We can certainly stand our ground and provide

COMMUNITY SUPPORT With BPO providers such as OJO Labs, Digicel, Ark Teleservices and KM2 already well-established in Saint Lucia, the country’s BPO sector is going from strength to strength but more can be done across the entire region to fully realise the industry’s potential.

For Epstein, one of the main stumbling blocks is education. Particularly given the fast pace of technological change in the sector. He says: “There is a lot of noise as to where technology is going and how we can use it to better equip agents to provide great customer experiences for the end user. That is where the groundwork is going to be.

We have a lot of smart people across the region and we can support some of those individuals, which will help build the region’s capability. The government needs to play their part but the private sector also needs to play their part.”

This sense of responsibility is built into itelbpo’s company ethos. The firm has partnered with the University of the West Indies on several initiatives aimed at improving access to training and certification. It’s also focused on environmental education with a programme to reduce the use of singleuse plastics.

Epstein says projects like these will take place in Saint Lucia once the business is established and will be driven primarly by the team on island to ensure that the specific needs of the local community are addressed. In the meantime, he is committed to helping Saint Lucians into the workforce saying: “Our focus is on the amount of jobs we are looking to provide which has a direct impact on the local economy.

If someone makes a dollar, it is a multiplier. It contributes to the GDP, it helps the country grow. “[The Vieux Fort centre] is a very big win for the company but it’s also a very big win for Saint Lucia. It is doing well in BPO and that success is SBW making these projects possible.”

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TAXATION

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ST. LUCIA’S NEW TOURISM TAX: How Does It Stack Up To Other Destinations?

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he cash-strapped Saint Lucia Tourism Association (SLTA) is introducing a new tax on tourism this year to help boost its coffers; but while advocates claim it will help market the destination and develop Saint Lucia’s product, others fear it will have a dampening effect on the country’s biggest industry.

STAR Businessweek looks at the details of the tax and its possible repercussions.

WHAT IS THE NEW TAX? The accommodation tax, which goes into effect in April, applies to all stayover guests over 16 years old. It follows a two-tier structure tied to a hotel’s Average Daily Rate (ADR – the average price customers pay per room, per night) and includes not just hotels and resorts but also guesthouses, villas and apartments.

Those accommodations with an ADR above US$120 will carry a fee of US$6 per guest per night, while those with a smaller ADR will levy a US$3 charge. And guests booking via shared platforms such as Airbnb and VRBO will not escape the net – the government will now charge these visitors 7% on the full cost of their stay.

Under the current model, which is still under discussion, the fees will be charged to guests as they checkin and the SLTA is set to host a series of industry meetings to help hotels navigate the new regime.

The Association commented: “In the coming weeks, the Tourism Authority is to spearhead further discussions with the sector on the most effective modalities through which accommodation providers will collect and remit the fee to the Tourism Authority, to ensure high compliance levels, amongst other aspects related to implementation of the fee.”

WHO WILL IT BENEFIT? According to the SLTA the tax will be used to “supplement financial resources for the Tourism Authority for the next financial year”. The group elaborated further, saying the revenue would go towards “destination marketing and development” as it pushes Saint Lucia’s products in markets such as the US, Canada, the UK and Europe and also focuses on its flagship ‘Village Tourism’ initiative to promote and encourage local offerings.

Saint Lucia currently welcomes around 350,000 stay-over visitors a year. To hit its ambitious target of 541,000 by 2022, the SLTA is working on increasing airlift seat capacity and load factor on flights to the island – something it apparently cannot achieve with its current EC$35 million annual marketing and promotional budget.

In making a case for the new fees,

Barbados introduced a trio of taxes in 2018. (Photo courtesy homeaway.com)

Tourism Minister Dominic Fedee stressed its impact on the wider Saint Lucian economy, saying: “It’s always a challenge for small countries to allocate much-needed resources towards tourism marketing. The accommodation fee allows tourism to pay for itself, as the tax will be levied to tourists to the island. It frees up much-needed funds for healthcare, education and national security.”

PUTTING IT IN PERSPECTIVE Whether it’s a fee on airline seats or a sales tax or accommodation charges, tourism taxes are nothing new to the Caribbean which has long exploited its biggest industry to reap the maximum benefits for island economies.

Many islands, both within and beyond the OECS, charge a fee for accommodation; these include Jamaica, Antigua and Barbuda, St Kitts and Nevis, Saint Vincent and the Grenadines and Barbados. By comparison, the SLTA claims its tax is among the lowest and the least disruptive to hoteliers who will be using an automated system to collect and remit the funds.

In an era when hidden fees and charges are routinely levied by hotels and tour operators across the globe, it’s doubtful whether they are truly off-putting for travellers who have become jaded to the practice and simply factor a little extra into their budget when planning a trip.

The problem arises when those taxes become excessive, as Barbados found when it introduced not one, but three new tourist taxes in 2018 and was roundly pilloried in the international media for its greedy stance. A desperate move by a country scrambling to reduce its public debt (then 170% of its GDP), it was slammed by travel agents, tourists and accountants Ernst & Young who cautioned

that it would significantly increase the cost of the tourism product and render the destination less competitive.

Barbados’ cautionary tale serves to illustrate that Caribbean tourism is a highly crowded marketplace and destinations walk a fine line between collecting the maximum tourist dollars and pricing themselves out of the market.

The degree to which tourism should be taxed has always been a controversial issue in the Caribbean. Calls are growing for governments to refocus the tax burden – shifting it from stay-over guests (who already make a large contribution) to cruise passengers who are arguably more inclined to absorb the cost. In Saint Lucia, the cruise ship head tax is one of the lowest in the region, at just US$5.

Saint Lucia’s new accommodation tax is also at the lower end of the spectrum (the range in Barbados is from US$4.37 to US$17.50 per night) and it’s notable that the destination has so far held back

According to the SLTA the tax will be used to “supplement financial resources for the Tourism Authority for the next financial year”

on this type of charge. Given the low rates, the new tax is unlikely to seriously affect tourist appetite for the island.

From a policy perspective, however, the main concerns are that it is implemented in a transparent and consistent manner.

Tourists and locals alike must know where the money is going, how it is directly contributing to the industry’s sustainability and how it benefits the economy as a whole.

In the worldwide tourism industry, taxes are on the rise, as noted by a 2014 OECD report which highlighted a steep increase over the past decade among OECD member countries. These taxes are used for a variety of purposes: environmental protection, investment in tourism infrastructure, to fund air travel development and transportation services.

For the most trafficked destinations, taxes are often used as a punitive measure, upping the fees to prevent over-tourism at vulnerable sites.

The rationale may vary but, with any tax structure, success relies on continual monitoring, evaluation and analysis. A clear link between revenue and results ensures better engagement and buy-in from both consumers and private sector partners. By way of example, Iceland’s accommodation tax is dedicated to developing, maintaining and promoting nature-based attractions under public ownership via a specially-created body, the Tourist Site Protection Fund.

When Saint Lucia’s accommodation tax comes into force this spring, tourists, the public and industry will be watching closely. It may be some time before the benefits are actively felt in the sector but the onus is now on the SLTA to pursue a transparent strategy of clear communication about when and how those benefits will come to fruition.

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MINING CONGLOMERATE BHP’S GROWTH IN THE CARIBBEAN

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

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he past decade has seen multi-national mining giant BHP expand its presence within the Caribbean in a big way. In doing so, the company has not only brought new investment to the region and wider Latin America, but further diversified its own commercial pursuits beyond its native Australia. This expansion helped BHP win the title of the biggest mining company in the world, with its 2019 market capitalisation of US$ 120bn making it almost a full third larger than its nearest competitor, Rio Tinto (which holds a market cap of US$ 83bn).

The size and scope of BHP’s operations affirm it’s a colossal force within the commercial space. But alongside the many achievements locally and globally, in recent years it has encountered numerous speed bumps in a variety of areas. So will BHP’s performance continue to be one of seemingly unstoppable momentum, or will the Caribbean business community perhaps see its pace stagger as we head into a new year and new decade?

BHP’S LATIN AMERICAN ASPIRATION BHP has built up a sophisticated and diverse operation across Latin America, having established operations in Brazil, Chile, Colombia and Peru, yet its ventures in Trinidad and Tobago have arguably won the greatest attention in this region.

BHP began this century with assets in T&T, and in 2014 it acquired a 70% stake in two deepwater blocks. Although few expect a repeat of the blockbuster headlines delivered by Guyana surrounding its resources discoveries, BHP has announced the discovery of hydrocarbons within T&T waters. It successfully completed the addition of three wells to the waters in 2019.

Unquestionably BHP remains a mustwatch business story within the region but what could stall the company’s momentum going forward?

DIGGING UP TROUBLE The strength of BHP as a commercial force is undisputed. The challenge for BHP is that the benefits that come with being a global business can also pose threats. In its native Australia, a push for higher mining taxation could eat away at its profits if such an issue makes a return to the national agenda.

The resistance to higher taxation on major mining companies was held as a key reason for the downfall of the Rudd government in 2010. A watered down tax was subsequently passed by the next prime minister but claims have since emerged that a mining tax deal with the former Rudd government was imminent, promising an extra AU$ 200bn in revenue

Mining giant BHP has big plans in the Caribbean — could anything stop its momentum? (Source: Pixabay)

for national infrastructure.

It is unimaginable that any current or future leader would relish a fight with the powerful industry, but all leaders would salivate at the prospect of billions extra to spend on capital works that entice voters.

That 2018 saw BHP settle a longstanding dispute with the Australian tax authorities (while being labelled “one of Australia’s largest tax evaders” by former treasurer Wayne Swan), suggests the domestic climate in its native nation remains chilly and could yet turn combative again under a different government.

THE DIFFICULT CHOICE FOR TWO FUTURES All things being equal, it’s likely that BHP will navigate a change in political headwinds domestically, just as it has done successfully in recent years. Nonetheless, Australian politics has encountered the same shades of upheaval and unpredictability that have been seen in the US and UK, so any Australian business gambling that it would encounter a near future similar to the recent past, would be making a big bet indeed.

For Caribbean nations, the expansion of mining activities in the region will commonly bring mixed feelings. This is in no small part because such an occurrence will be, by default, a clash

of competing priorities. With many countries battling unemployment, and governments longing for a big, new project that would create jobs and grow the economy, a new energy initiative – even if lacking green credentials – likely wouldn’t be denied by a host nation’s leadership.

But such new ventures can undermine the quest of regional nations to go green, and push others globally to do the same, to the detriment of the Caribbean’s future viability – something that is inexorably tied to the successful combatting

BHP has built up a sophisticated and diverse operation across Latin America, having established operations in Brazil, Chile, Colombia and Peru, yet its ventures in Trinidad and Tobago have arguably won the greatest attention in this region

of climate change. But even if the Caribbean region ceased all emissions overnight, the problem of climate change would still exist if the world’s biggest emitters take no action.

BALANCING BHP’S GOALS IN THE REGION BHP will not be seen as an obvious partner by sustainability activists in the region anytime soon, but the company should not be decried by default, or altogether uncredited for all it has done. In mid-2019 BHP announced it would begin to reduce its thermal coal output, cutting it by as much as 18% in the year ahead. It is also planning a pivot towards supplying resources for the growing electric car industry.

For those who maintain the view that emissions must be stopped today then little to nothing BHP does will satisfy. But for those who anguish over the persistent problems of unemployment and poverty alongside climate change, the current presence and potential expansion of BHP in the region should not be denounced. With rising temperatures and sea levels, the decade ahead will surely help speed the decision about precisely what balance Caribbean nations wish to strike between environmental sustainability and mining profitability.

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5 MAJOR PROJECTS TO WATCH IN 2020 Continued from page 2

The groundbreaking ceremony to officially launch construction on the SCHIP. (Source: Jamaica Information Service)

ST KITTS AND NEVIS’ SOLAR AND STORAGE PLAN St Kitts and Nevis is also pursuing bold solar goals in 2020. Announced in August 2019, with a scheduled completion date of September 2020‚ the nation’s solar generation and storage project has been billed as the “largest in the Caribbean”.

The government’s partnership with Leclanché is set to provide up to 30% of the country’s present power generation requirements, and it will do so while displacing the same amount of dieselgenerated capacity.

TRINIDAD AND TOBAGO’S HEALTHCARE UPGRADE For a nation where the current life expectancy is around 68 for men and 76 for women, Trinidad and Tobago begins a new decade with strong progress in healthcare serving as an important national aspiration. Key in achieving this is the completion of the Point Fortin Hospital. Although it has been subject to delays, the revised opening of the new medical site in the nation’s south-west is scheduled for March of this year.

As well as this project, the completion

of a new hospital tower block in Port of Spain will provide a substantial boost to the nation’s healthcare sector in the years ahead. This project will also feature a heavy Chinese involvement; a public-private partnership with Shanghai Construction Group Caribbean Limited was enacted in May 2019. The government said the Group submitted the best value proposal, coming

In recent decades Costa Rica has enjoyed solid economic growth.

Indeed, the World Bank credits the nation as a development success story

The Basseterre Valley will be the site of the new solar energy plant and battery storage facility. (Source: Leclanché)

in at under US$ 600mn less than the competing bidder.

COSTA RICA’S CASINO DREAM In recent decades Costa Rica has enjoyed solid economic growth. Indeed, the World Bank credits the nation as a development success story. Even in the Great Financial Crisis that brought to a sudden stop the growth of other nations‚ Costa Rica’s real GDP ultimately contracted just 1% before quickly rebounding.

Major projects like Casino City Caribe form part of San Jose’s ambitions to turn this into spectacular economic growth. By any measure, this project will be massive, with an estimated US$ 400mn price tag.

Three casino hotels will be joined by a riverboat casino‚ a marina‚ 180 vacation homes‚ almost 250 apartments and a conference centre in a development led by Canadian architect Patti Rao. First announced in 2018, the entire project was scheduled for completion

by 2027 but with the expectation that numerous sections would open up along the way. When this grand vision is realised‚ Costa Rica’s new glittering jewel could rival Las Vegas and China’s Macau as great casino destinations of the world.

A STORY OF NATIONS This list is illustrative of some of the most notable major projects in the region but it is not exhaustive. Many other projects have not featured simply because they have already won ample headlines. One need only look across Saint Lucia to see examples of this: Castries Market, Hewanorra International Airport, a new cruise port in Vieux Fort and the Pearl of the Caribbean. Just as these projects collectively confirm that the year 2020 will be an exciting one for Saint Lucia, so too do these five major projects speak to the promise and potential of broader Caribbean construction across the next 12 months.

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