Hotelier calls for clarity on tourism tax

THE STAR BUSINESSWEEK FEBRUARY 29, 2020

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HOTELIER CALLS FOR CLARITY ON TOURISM TAX

As tourism gears up for a new tax, a concerned hotelier is calling for clarity ahead of the April 1 implementation deadline. With no legislation in sight and cabinet discussions still ongoing at press time, there are fears that the uncertainty will harm not just hotels but the entire sector and the wider economy.

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CDB Remains Optimistic Despite Regional Downturn Regional economic growth took a tumble in 2019 but there are signs that the Caribbean will have a better year in 2020, according to the Caribbean Development Bank (CDB) which held its annual news conference earlier this month.

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BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT Continued on page 4

Caribbean Development Bank President Dr Wm Warren Smith

Green Energy Tensions in the Caribbean The Caribbean understands that combatting climate chage is a key challenge for the region. Indeed, by many measures it is the key challenge given the existential threat it poses.

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Minister of Tourism Dominic Fedee is pitching his new “accommodation tax” as a shot in the arm for the island’s tourism sector. But not everyone is convinced.

“Apache and Total have announced a ‘significant oil discovery’ off the South American nation of Suriname,” announced industry trade publication Energy Voice last month. “The Noble Sam Croft drillship was testing for hydrocarbons at the Maka Central-1 well and encountered ‘both oil and gas condensate” at multiple targets.”

Pictured: The Noble Sam Croft drillship.

(Photo courtesy Noble Corporation)

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CARIBBEAN ELECTIONS

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5 KEY ELECTIONS TO WATCH IN 2020

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

Guyana is a newly oil-rich nation but will its government be barrelled out of office? (Source: Pixabay)

T

he forthcoming months of 2020 will be a busy period for Caribbean elections. A number of these polls are ones where it will not be ‘business as usual’, given the profound changes in circumstances that have occurred between upcoming votes, and those cast prior. Here are five Caribbean elections to watch in 2020.

1. GUYANA: MARCH 2 IMF projections in November 2019 indicated Guyana’s economy as set to grow a colossal 86 per cent during 2020 as a result of its newfound oil wealth. In this regard, the election on March 2 would already hold a ‘once in a generation’ significance for Guyanese. But given the political turbulence in the lead-up to this date – with the Trinidad-based Caribbean Court of Justice in June 2019 ruling to uphold an earlier vote of no confidence in the government, adding a dramatic international component to the process – the majority in the nation hope to turn the page with this poll. So can it happen?

Although elections are unpredictable at the best of times, beyond Guyana’s recent political volatility there are new dynamics emerging that will make this election unlike any before. The support of Amerindian minority tribes as a voting bloc is expected to play an important role. This means that whoever wins must have an eye not only on the future, but also on the past by offering policies that meaningfully

rectify enduring issues of disadvantage in the tribal community.

2. SURINAME: MAY 31 (DATE NOT CONFIRMED) Although Suriname’s electoral process is regarded as a reasonably good one – with a 2019 assessment by Freedom House giving it full marks – the country is embattled by corruption and nepotism.

Accordingly, the real test for Suriname after the election will be how effectively it stewards the nation’s newfound oil wealth. Even if the the population expects to enjoy immense affluence as a result of the oil discovery, there could ultimately be a missed opportunity if broader governance issues go unaddressed.

3. THE DOMINICAN REPUBLIC: MAY 17 Among the Caribbean’s largest nations, with a population in excess of 10 million, the Dominican Republic has recorded strong economic growth in recent years, placing it among the fastest growing economies globally.

The lead-up to the national election on May 17 is likely to be tense. In the municipal elections held earlier this month, voting was halted due a software ‘glitch’ and outraged Dominicans took to the streets in protest, at home and abroad, with the New York protest alone drawing thousands of Dominican expats.

Reportedly, the glitch resulted in many opposition candidates being omitted from the digital ballot, while members Continued on page 6

MACRO VIEW

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CDB REMAINS OPTIMISTIC DESPITE REGIONAL DOWNTURN

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

R

egional economic growth took a tumble in 2019 but there are signs that the Caribbean will have a better year in 2020, according to the Caribbean Development Bank (CDB) which held its annual news conference earlier this month.

The Caribbean economy dipped from 1.6 per cent growth in 2018 to just 1 per cent in 2019 as it faced headwinds in construction and manufacturing.

However, CDB President Dr Wm Warren Smith was quick to point out that the region’s lacklustre performance reflected a worldwide slowdown, saying: “Our Borrowing Member Countries recorded another year of low growth. This slowdown was consistent with relatively sluggish global growth of 2.9 per cent [as] the international economic environment continued to give mixed signals.”

He pointed to US-China trade tensions, geopolitical anxieties and rising social and environmental activism as some of the factors hampering growth worldwide and added that BMCs would have to push to reach their Agenda 2030 Sustainable Development Goals within the next decade.

BRIGHT SPOTS There were pockets of growth in 2019, especially in the region’s biggest earner – tourism. This sector performed very strongly, recording expansion on every island. St Kitts and Nevis and the Cayman Islands saw double digit growth in their visitor arrivals while the Bahamas had its best year ever, despite Hurricane Dorian’s devastating passage in September.

The fastest growing economies in the Caribbean last year were Anguilla at 10.9 per cent and Dominica, whose economy expanded by 5.7 per cent.

A number of islands saw substantial and welcome reduction in their debt to GDP ratio, with beleaguered Barbados managing to pull back its runaway debt from 126.9 per cent of GDP in 2018 to 119.5 per cent in 2019. Overall debt fell in 10 BMCs, with Barbados, Grenada, Jamaica and St Kitts and Nevis seeing the steepest declines.

“These BMCs are at various stages of implementing homegrown fiscal reform programmes,” noted Dr Smith who praised Barbados’ fiscal reform programme, which is being implemented with the help of a

Caribbean Development Bank President Dr Wm Warren Smith delivers his remarks at the 2020 news conference (Photo courtesy Caribbean Development Bank)

US$ 75mn loan from the CDB. “BMCs like Barbados, Grenada, Jamaica and St. Kitts and Nevis must stay on course with their home grown socio-economic reform programmes,” he added.

“Others should join the bandwagon and commence, with alacrity, implementation of their own adjustment programmes.”

GROWTH FROM GUYANA Guyana is the island to watch this year, according to the CDB. The bank predicts that the start of oil production on the island will be a hugely impactful development, not just for Guyana but the wider Caribbean. Following a strong showing in its timber and gold industries in 2019, Guyana’s economy will boom this year when it hits its projected output of 100,000 barrels of oil a day.

“We want to be a partner in development for Guyana. The revenues they get from oil production will be an attractive asset for the development of the region,” said Dr Smith who added that the bank is forecasting 4.1 per cent regional growth in 2020 on the back of Guyana’s oil boom. “Guyana should dominate regional growth performance this year. Other growth drivers in the region should be the construction, tourism and agriculture sectors, but economic growth will remain lopsided and below the sustainable rates needed for long-term resilience.”

PROJECT HIGHLIGHTS Building economic resilience is a key part of the CDB’s mandate and the bank says the region has a long way to go. According to CDB research, major vulnerabilities among the islands include dependence on strategic imports, export concentration and natural hazards.

The CDB’s portfolio in 2019 was tailored to combat these challenges, according to Dr Smith who said: “We are very proud of our contribution to the region’s development, and the transformation of people’s lives. Our interventions were underpinned by the imperatives of adaptation, resilience building, innovation and inclusion.”

Last year, the CDB approved US$ 347mn for capital projects, policy-based operations and technical assistance. It also increased disbursements by 8 per cent to the total value of US$ 305mn.

Projects in 2019 included a US$ 8.5mn grant to Saint Lucia to build resilience in the country’s agricultural sector, EUR250,000 to the Eastern Caribbean islands to help them prepare projects for consideration by the Green Climate Fund and Adaptation Fund, and a US$ 110mn loan to St Vincent and the Grenadines to modernise its Kingstown port.

AREAS OF FUTURE FOCUS Moving into the next decade, the CDB is targetting areas where it believes it can make the most impact and deliver long-term growth. These include the blue economy which, according to the bank, has the potential to grow island GDP by 7 per cent. Following successful efforts to promote the marine and coastal economy in Jamaica, the bank believes this is an area to watch, with CDB Director of Economics Dr Justin Ram saying: “This signals to all of us that the blue economy has great potential and we should be investing more in it. We are no longer just small island developing states; we are big ocean developing states.”

Another area of focus in 2020 is climate resilient infrastructure. The CDB has approved “major” road and bridge infrastructure projects for Saint Lucia, Belize, Dominica and Guyana.

It is also funding a US$ 29.8mn project to rehabilitate the sewage system in Barbados, and sending US$ 6.8mn to Belize to connect Caye Caulker to the national grid.

Entrepreneurship is also a priority for the CDB this year as it looks to help bridge the gap between idea and operation for start-ups and small businesses. The bank is currently considering how it can incentivise financial institutions to lend to SMEs. “We feel that the small business sector has the potential for being the dynamic sector for driving economic growth and addressing some of the headline issues, that is, poverty and inequality in our countries,” said Dr Smith. “We have been examining very closely how CDB can find an entry point into that sector that would take us to a different level compared to the engagement we’ve had to this point. There are some exciting possibilities.”

Over the long-term, the CDB is looking inward. The bank is undergoing an internal revamp to better streamline its operations, making them more responsive to BMCs’ needs, encouraging better engagement and ensuring projects deliver faster and more efficiently.

Dr Ram said: “The Caribbean Development Bank underscores the need to build inclusive and resilient economies, to improve employment opportunities and quality of life for Caribbean citizens. Such economies are characterised by sound macro-economic management, environmental preparedness, human development, productivity and SBW competitiveness.”

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HOSPITALITY SECTOR

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HOTELIER CALLS FOR CLARITY ON TOURISM TAX Continued from page 1

firm commitments. That is difficult to do without formal legislation.

We are not sure what to tell them,” says Destang. “It is a very stressful situation.”

“We have unanswered questions, and a

lot of concerns,” says Sanovnik Destang, Executive Director of Bay Gardens Resorts. “We are not against the SLTA having its own source of revenue but the concern is the method in which it is being implemented. Right now we are at the waiting stage. If it is the government’s desire to implement this new tax by April then we need to expedite the legislation to provide more clarity to the market.”

UNDER PRESSURE The government announced in January that it would introduce an ‘accommodation fee’ for all overnight visitors, to take effect in April. Under the new head tax, 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. Government has said that the new tax will be rolled out alongside a 3 per cent reduction in VAT for accommodation providers.

Destang says that the industry had proposed a simpler structure whereby all hotels would be subject to a flat percentage tax, applicable regardless of their room rates. He suggests that the two-tiered system is overly complex and disadvantages smaller hotels and resorts, saying: “A 3 per cent tourism tax to replace the 3 per cent drop in VAT on hotels was recommended. The current proposed tiered system is not a neutral position for all hotels. Hotels at the lower end of the spectrum are going to become a lot less competitive in the marketplace.

Guests who stay at these hotels will be paying more whereas larger hotels will absorb the cost and keep their prices the same. There is such diversity in our product that this thing is not going to impact everyone the same.”

And with room rates in Saint Lucia rising, it’s likely that hotels at the lower end of the market will continue to be squeezed. “The new hotels coming onboard are higher end,” says Destang.

“Saint Lucia is one of the more expensive destinations to get to and there will be pressure on the smaller hotels to drop their rates to be competitive. Lower priced hotels may have to foot the bill to remain competitive, particularly in the very pricesensitive UK market, and there is not a lot of wiggle room in their operating costs.”

Local hotelier Sanovnik Destang, Executive Director of Bay Gardens Resorts, agrees with the rationale of the new tourism tax but calls on the government to enact legislation in a timely fashion and through meaningful stakeholder consultation

Anse La Raye, Saint Lucia: Can a single accommodation tax do it all? According to Tourism Minister and MP for Anse La Raye, Dominic Fedee: “The new tourism accommodation fee will support village tourism initiatives, local product development and destination marketing.”

With the tax looming, many issues are still on the table. There are questions over whether the VAT reduction will apply across the board, which hotel-provided services will be included, how hotels will charge and collect this new revenue, and

its long-term impact on the sector.

In the meantime, the locally owned Bay Gardens Resorts chain is feeling the pressure as it takes bookings for April and beyond. “Some of our travel partners are very persistent and asking us to make

CO-OPERATION AND COLLABORATION Destang doesn’t dispute the rationale behind the new tax, and believes that the SLTA deserves credit for its work in marketing the destination. But he remains concerned about the slow pace of legislative change, saying: “Nobody really likes tax but we understand why it is being done. We are willing to help implement it, but we need actual legislation to make it a reality. The idea behind it is sound. It is the best way to fund a tourism authority. We accept it as long as it can be implemented in a timely and sensible way.”

While the government has been meeting with industry throughout the process, Destang says engagement could be better and there will need to be greater transparency once the tax goes through. “If the hotel sector is now expected to fund the SLTA, we would hope there would be representation from those paying that tax. It is very important. People want to feel they have some sort of say. We need very close collaboration between the public sector and the private sector.”

The SLTA has said all proceeds from the accommodation fee will go towards destination marketing and promotion.

Destang is hopeful that these efforts will be successful but wants to see a greater presence in the regional market and untapped European markets such as France, which he says contributes around 10,000 visitors a year without much spend. More digital and social media promotion is also necessary, according to the veteran hotelier. “We need a continued push on social media and digital media because that is where we see the real return on investment.”

But before the funds can be spent, they must be collected and the clock is ticking on how exactly that will happen.

Destang says: “There is still a window.

There is a very narrow window to get it right and that window is closing. If it takes much longer it will be a painful process.”

ENERGY

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GREEN ENERGY TENSIONS IN THE CARIBBEAN

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

T

he Caribbean understands that combatting climate change is a key challenge for the region. Indeed, by many measures it is the key challenge given the existential threat it poses. Even though Caribbean states as a whole account for a fractional amount of global CO2 emissions, it’s recognised that the capacity for regional governments to push for stronger global action on climate change depends upon them pursuing strong action within their own borders.

Across the region there are nations making strong inroads in this regard, just as there are those that continue to maintain their fossil fuel industries, with Guyana and Suriname even seeking to expand theirs. These two countries do so not without an awareness of climate change, but arguing that their most urgent need is to utilise such industry to combat poverty and enhance social services for their citizens. Herein lies the ‘great energy tension’ between states in this region. But can this division be conquered?

DOMINICA’S GREEN RECOVERY Dominica suffered devastation following Hurricanes Irma and Maria in September 2017.

According to the World Bank, “Total damages and losses are estimated at US$ 1.3bn or 224% of GDP.” However, nobody could have imagined just how rapid and dynamic the nation’s road to recovery would be. With commendable foresight, Roseau seized the opportunity to rebuild infrastructure that was hurricane-resistant, clean and green.

Now Dominica is a beacon of green energy adoption within the region.

GUYANA GOES THE OTHER WAY As a result of substantial and successive oil discoveries, Guyana is on track to become a major oilproducing nation. Eco-conscious residents of the Caribbean may wince at this burgeoning industry but, with a substantial number of Guyanese living in poverty (estimated as 30-40 per cent according to the Guyana National Poverty Reduction Strategy: 2011–2015), the capacity to reduce this tragically high rate is prioritised

by Guyanese leaders over eco-efforts.

Guyana is not alone in facing this fork in the road. Suriname has also

Block Island Wind Farm is the first commercial offshore wind farm in the United States, located 3.8 miles from Block Island, Rhode Island in the Atlantic Ocean. The five-turbine, 30 MW project was developed by Deepwater Wind and completed in 2016.

made significant oil discoveries and expects to become a substantial oilproducing nation, providing a rosier financial future for the population.

These countries’ plans demonstrate the complexity of the challenge in finding regional consensus on climate action.

The most strident eco-conscious members of the Caribbean family may well scoff at the intention of these two countries to convert their discoveries into massive wealth at the expense of the environment, but the reality is that no government in the Caribbean would turn down such an economic windfall, especially if dealing with huge rates of national poverty.

This dynamic also illustrates that those who aspire for a cleaner and greener Caribbean must emphasise not only the need to progress eco-friendly policies, but also offer plans that drive down poverty; and make concrete the connection between climate change and the enhanced threat it poses to those of limited means who stand to be impacted the greatest by it.

TRINIDAD AND TOBAGO STAKES ITS CLAIM With an election upcoming, the government of Trinidad and Tobago knows that positioning itself as a regional leader that continues to pursue fresh ideas at home is key to justifying re-election.

This is seen by Energy Minister

Franklin Khan’s desire for his nation to become a recognised regional leader in Caribbean ‘energy diplomacy’.

Bolstering this ambition was the midFebruary announcement that a joint proposal put forward by BP and Shell (the nation’s largest natural gas producers), alongside renewable energy developer LightSource, was the winning bid following an RFP for the provision of grid-scale renewable energy projects. The companies will now negotiate a power purchase agreement, with the aim of producing 130mw of power via renewables.

“ . . . but arguing that their most urgent need is to utilise such industry to combat poverty and enhance social services for their citizens. Herein lies the ‘great energy tension’ between states in this region. But can this division be conquered?”

This is a notable achievement, but there is a caveat.

FINDING THE ENERGY TO ADVANCE The Trinidad and Tobago government deserves credit for stepping up here, but there is a big difference between words and action, especially as no one is expecting Guyana and Suriname to simply down tools in the development of their emerging oil industries. The disconnect here is also evidenced in nations like Barbados. In recent years it has staked a claim as a green energy leader but, if oil exploration efforts result in a find of huge reserves, the country could not maintain the same line while simultaneously pumping out gallons of petroleum.

By no means do these statements seek to judge these nations, nor fail to recognise the challenge in pursuing green energy while combatting poverty and social ills. Indeed, even the fiercest advocate of green energy must acknowledge that a nation that ‘flips the switch’ overnight from fossil to renewables would risk energy security and destroy many jobs and livelihoods. Ultimately it’s the duty of the voting public of these nations to render judgements on the policy SBW of politicians.

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CARIBBEAN ELECTIONS

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5 KEY ELECTIONS TO WATCH IN 2020 Continued from page 2

of the ruling Dominican Liberation Party (PLD) still featured. Thus, this upcoming national election will test not only the candidates, but also those working to secure a strong and fair process.

4. ST. KITTS AND NEVIS: TO BE CALLED Over its past term the government of St Kitts and Nevis has won some commendable headlines, notably for its partnership with Leclanché in building the largest solar project in the Caribbean.

Prime Minister Timothy Harris will want to convince the nation that a vote for his party promises sunshine and clear skies across the board, despite the shadows of the 2019 CIP scandal still fresh in the mind of many voters. Should opposition leader Dr. Denzil Douglas win, the world’s oldest CIP could be placed under new scrutiny owing to Douglas’ prior critique of the incumbent government’s management of the investment migration scheme.

However, Douglas has himself been criticised by Harris for his management of the CIP when the former was previously PM, so both sides will give no quarter once the campaign officially commences.

5. TRINIDAD AND TOBAGO: TO BE CALLED Prime Minister Keith Rowley will be citing endeavours in the renewable energy sector, both at home and in his desire for the nation to be a regional eco-leader, as a key element of his government’s story.

While this could convince voters that he’s an innovator and forward-thinking leader, water shortages and the unemployment rate (4.7 per cent as of October 2019, according to the IMF) mean the United National Congress led by Kamla Persad-Bissessar will be making the case that it can do a better job on these bread and butter issues.

WINNING POPULAR SUPPORT These upcoming Caribbean elections will provide an insight not only into these voting nations, but the ebbs and flows across the region as a whole. Given that many political issues are shared across

Guyanese President David Granger and members of his APNU+AFC Coalition at a political rally last month (Source: APNU+AFC photo)

borders throughout the region, even residents of nations who are not set to go the polls this year will find in these elections potential takeaways when it comes to voter moods and perspectives.

In turn, the outcome of elections in Guyana and Suriname could be particularly consequential for the precise path that each nation seeks to pursue in its oil-rich future; one that we discuss in depth within our accompanying STAR Businessweek piece on Green Energy Tensions in the Caribbean (see page 5).

Over its past term the government of St Kitts and Nevis has won some commendable headlines, notably for its partnership with Leclanché in building the largest solar project in the Caribbean

The Saint Lucia Registry of Companies & Intellectual Property Company Incorporations Name: T and E Trucking Ltd. Description: To provide trucking/waste disposal Directors: Alton William, Franciane Pomponne Date Incorporated: 17/2/20 Chamber: Thomas Euguene Name: Itelbpo SLU Limited Description: Business processing outsourcing Directors: Lisa Lake, Johann Epstein Date Incorporated: 17/2/20 Chamber: Nicholas John & Co. Name: The Regis Organisation Description: Real estate investment Directors: John Regis Date Incorporated: 17/2/20 Chamber: Nicholas John & Co.

Name: M & Nz Ltd. Description: Investment Directors: Neil Williams Date Incorporated: 17/2/20 Chamber: Messrs. Monplaisir & Company Name: EZ Mart Ltd. Description: Convenient retail store Directors: Eugenie Dalson, Peter Dalson Date Incorporated: 17/2/20 Chamber: Vern Gill Chambers Name: Tripple A Woodworking & Flooring Supplies Ltd. Description: Supply and installation of flooring material, woodworking — mouldings, trimmings etc.

Directors: Alton William Date Incorporated: 17/2/20 Chamber: Thomas Euguene

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