A private sector assessment report (PSAR) on St Lucia has identified a number of issues that impede the development and growth of the sector.
The report commissioned by the Inter American Development Bank and executed in partnership with the Caribbean Development Bank concludes that these constraints suggest the need for a long-term national strategic plan for private-sector development, increased communication channels between business-support organizations (in both the public and private sector), and wider dissemination of information.
The 2013 report, said St. Lucia demonstrates a number of strengths that are expected to contribute to the future growth of the private sector. The country performs well on international indicators in relation to government effectiveness, economic freedom and the ease of starting a business. Inflation is low, and there are no restrictions on capital flows. In addition, the island’s natural beauty and heritage are key drivers of tourism.
However, there are a number of weaknesses in St. Lucia that hinder private sector development, especially in the areas of the cost of doing business, access to finance, electricity, transportation, an inadequately educated workforce, tax rates, and the lack of a government strategy for the sector or co-ordination with private-sector stakeholders.
Furthermore, the global financial crisis had a profound effect on St. Lucia’s economy, as tourism and demand for exports contracted. The crisis also impacted jobs, with the unemployment rate rising steadily since 2007. In 2012 unemployment averaged 21.4%, one of the highest rates in the region. Youth unemployment accounts for 40% of total unemployment.
The PSAR identifies tourism, construction, manufacturing, “edu-business” and the creative industries as emerging sectors that are expected to drive future growth. In recent years the government has focused on expanding the tourism, education and alternative-energy sectors, with particular attention paid to boutique hotels and offshore medical schools.
The PSAR concluded that the private sector desired a clear commitment from the government regarding private-sector development, and that it would benefit from both a clearly defined strategy and a forum for communication and engagement between the public and private sectors. Additionally, the PSAR recommended that technological advances be utilized to improve efficiency and reduce the cost of doing business; the regulatory environment be enhanced to support and encourage alternative financing; and education and skills capacity building be implemented to strengthen the labour market and improve productivity.
It recommended a number of actions to address these issues:
1: Establishment of a tripartite committee (comprising representatives of government, employers and labour) to identify the needs of all entities and to guide and oversee private-sector development strategies. Once the tripartite committee has been formed, the committee should seek to address the following issues:
2: Rationalization and streamlining of the public sector’s business support framework to create a system that addresses both the needs of the private sector (in terms of access to finance, technical assistance and data) and the wider obligations of the government.
The report said that currently, the public sector’s support network for private-sector development was comprehensive in St. Lucia. However, there was the opportunity to achieve administrative cost savings by bringing all such support bodies together under a single agency that would act as a “one-stop shop” for all private-sector agents, both domestic and foreign. All requests for training, technical assistance and finance would thus be channelled through a single agency.
3: Development of a national strategic plan that focuses on private sector development. A national strategic plan can ensure that national policy planning is continuous and not influenced by the electoral cycle. It is considered that such an approach to development planning will also enhance the transparency of government policy formation and reduce business uncertainty. Through the lobbying efforts of the government of St. Lucia, plans for the development of the private sector should also be included in regional strategic planning at the level of the OECS, the Eastern Caribbean Currency Union and the Caribbean Community (CARICOM).
4: Reduction of the cost of finance by reducing transaction and operational costs in financial institutions through the use of technology and the monitoring of efficiency levels; reducing risk and risk-aversion through the establishment of a credit bureau and a collateral registry; introducing alternative financial products; and increasing competition in the financial sector. Such actions would reduce information asymmetries, thereby enabling credit to be provided more quickly and potentially increasing the amount of credit available to the private sector. Legislative changes are also required to provide greater protection to creditors.
5: Increase the capacity of businesses to access finance, through the provision of support (consisting of technical assistance and training) for the adoption of accepted business practices (such as record-keeping) and the skills needed to develop business plans for funding and strategic-planning purposes.
These services exist in St. Lucia, but the PSAR indicated that take-up of such services needed to be expanded.
6: Provide incentives for energy conservation and frameworks for the exploitation of renewable/alternative-energy sources. Incentives in this area could include concessions on duties on imports of materials, technical assistance, and the development of special funds for investments in alternative energy projects and enterprises. In terms of conservation, the adaptation of behaviour to reduce energy use and the adoption of energy-efficient technologies, along with retrofitting, provide avenues to reduce costs in the short to medium term.
7: Education and training curriculum reform that addresses the long-term strategic direction of the government as well as the more immediate needs (in terms of demand for skills) of the private sector. Private-sector development cannot be separated from the overall sustainable development of the country. This implies that social issues such as poverty, unemployment and environmental vulnerabilities should be considered in any plan to enhance private-sector development. Keeping such issues in mind, the government and private-sector investors should seek out initiatives in areas in which St. Lucia possesses advantages and endeavour to exploit the country’s existing assets, such as specialty tourism products (including boutique hotels and yachting)—high-end subsectors that provide high-quality employment and are environmentally friendly; geothermal energy; and the creative industries.
Such issues should be on the agenda of the tripartite committee and need to be taken into consideration in the formulation of long-term strategic plans for the development of the private sector in St. Lucia.
Although the private sector in St. Lucia faced many issues relating to taxation, dealing with government departments and so on, it is considered that creating a forum for discussion would enable many of these problems to be addressed. It is important to underline the fact that, while all of the action points relate to the establishment of a conducive environment for the development of the private sector and are external to individual enterprises, the private sector itself will need to take responsibility for seeking to adopt a more proactive approach to exploiting market opportunities. In this vein, the Caribbean region needs to exploit those resources in which it has an advantage and a brand, suggesting a concentration on alternative energy (notably geothermal and solar); specialist agricultural products and agro-processing; eco-tourism; “edu-tourism” (drawing on human resources in the region); heritage tourism; health and wellness (both product-specific and related to tourism); and financial services, among other sectors.