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close this bookThe Courier N 148 - Nov - Dec 1994 - Dossier: Education - Country Reports: Saint Lucia - St Vincent and The Grenadines (EC Courier, 1994, 104 p.)
close this folderCountry report
close this folderSaint Lucia: Weathering the economic storm
View the document(introduction...)
View the documentPrime Minister John Compton explains how St Lucia must bend to the winds of change
View the documentEU-St Lucia cooperation by Philippe Darmuzey*

(introduction...)

There is no doubt about it. Saint Lucia's ship of state is riding rough seas. The hitherto dominant crop, bananas, has been suffering strong 'adverse winds'. First of all, there was what is commonly known here as '404/93', the EU's much-debated new banana market regulation, which came into force - after a- long period of uncertainty among growers - on 1 July 1993. Perhaps even more strongly felt was the big drop in the value of the pound sterling, the currency in which Saint Lucia's 'green gold' is paid for. Compounded, these 'adverse winds' led to heavy turbulence, with a banana growers' strike in October 1993, riots - and two deaths. This year, as one of the worst droughts for years has hit production, a new contract with the formerly exclusive banana marketer. Geest. needs to be agreed - and this in a more tense and uncertain climate then ever known before in 40 years of banana partnership. Fortunately tourism has offset some of the banana sector's setbacks, becoming the top foreign-exchange earner. Yet here, too, there is an ongoing debate, not just about certain sectoral aspects such as taxes on cruise ships or the fast rising predominance of the so called 'ale inclusive' type of accommodation, but over the sector's real contribution to the wider economy: the banana dollar, unlike any other, trickles down throughout society. While there is no real alternative for bananas, a new course is definitely being set bound for agricultural diversification, with a view also to boosting linkages with tourism. At the same time, the new international banana scene calls for a major quality/productivity drive, weeding out inefficient growers and aiming to make Saint Lucia a cost-effective producer up to and beyond the turn of the century.

The seas off Saint Lucia's coasts are seemingly rougher too, as major economic blocs are forming all around. Small island states such as the Windwards, to which Saint Lucia belongs, increasingly share a feeling of being 'marginalised'. Since the end of the Cold War, they feel to be of little strategic or political importance, even less so in an economic sense, given the small size of their markets. Usually a strong and resilient economy, enjoying democratic political stability and good governance, Saint Lucia seems likely nevertheless to weather the storm and to set out on a new and challenging course. If its high per capita concentration of Nobel prizes - Sir Arthur Lewis in economics and L)erek Walcott in literature - is anything to go by, any failure in adjusting to new, less-protected realities will not be attributable to a lack of human capacity. In any case, there is no alternative. For, as the 'ship's captain', Prime Minister John Compton, observes, 'there can be no taking to the boats!'

'Simply beautiful'

In all its simplicity, Saint Lucia's current tourism promotion slogan may be too much of an understatement to describe this 'green paradise of the Caribbean'. The natural beauty of the 616 square kilometre island (roughly 43 km long and 22 km wide) makes it the envy of many nations less favourably blessed by nature. Part of the Lesser Antilles or Windwards, and therefore Iying in the hurricane belt, the territory is volcanic in origin. The rugged interior displays a variety of fertile valleys indented by rainforest-covered mountains rising to 1200 metres high. Most famous of all are the twin Pitons, a couple of 800m-high extinct volcano chimneys, descending steeply into the Caribbean sea, where underwater too they offer first-class scenic sights to scuba divers. The island is also endowed with some beautiful white sand beaches - a major tourist asset that not all islands in this area can boast.

Both fertile and attractive, the island has, throughout its history, been the focus of many a sea-faring nation. It was first settled by Arawac Indians originating from the Amazon basin, but by the 13th century more belligerent Carib Indians had taken control. There may still be room for discussion as to whether Columbus was really the first European to spot these islands, but it is nevertheless still claimed that the godfather of globetrotters named the island after Santa Lucia, having sighted it on her Saint's day (13 December) in 1502, during his fourth voyage of discovery. Like most of its Caribbean neighbours, the island was coveted by a range of European nations and many a battle was fought over its much disputed ownership. It changed hands most frequently between France and England, as is still very obvious today. Indeed, as one drives on the left throughout the island, the majority of place names are found to be French and, while English is the official language of the 140 000 inhabitants, they will usually communicate in Patois, a creole mixture of French, English and African languages fairly close to the one used in nearby Dominica. More than half of the population is younger than 15 years old, which poses the dual challenge of meeting the pressing needs for education and training as well as creating much needed job opportunities for several thousand school leavers every year, which if anything is even more difficult.

Politically speaking, Saint Lucia is a parliamentary democracy on the Westminster model. The last elections were held in April 1992 and confirmed the United Workers Party in power with 11 seats ( + 1) against the 6 seats (-1) of the opposition St Lucia Labour Party led by Julian Hunt. The Progressive Labour Party failed for the third consecutive time to win a seat. The UWP was led once more to victory by Prime Minister John Compton, who has been in power without interruption since 1982. In fact the PM belongs to that handful of Caribbean leaders who have been very prominent both in their country's and in their region's affairs over the past few decades. Indeed, the 68-year-old John Compton first came to power in the colonial days, initially as Chief Minister in 1964 and then as Premier. He held the top post continuously for 15 years, leading his country to independence in 1979. His UWP was ousted shortly after that but was in opposition for only three years. He led his party to victory again in 1982 and has held power ever since. Even at times of serious economic and consequently political crisis, such as during the banana strike of October 1993 - from which the Opposition obviously tried to benefit - his political skills have proved more than a match for his rivals, and he now seems more than ever set to steer his country back into calmer waters.

A juddering engine

In normal times, Saint Lucia has a strong, resilient economy, and even when things go 'bad' it is still relatively well off. It suffices to look at the figures. Between 1975 and 1992, Saint Lucia's real GDP growth rate averaged about 6%. Last year's growth of just 3.1 % may look poor in comparison but in fact, at a time of worldwide economic recession from which few nations escaped, such a performance was still more than commendable.

This year, in the view of Mrs Marcia Philbert-Jules, the Planning Ministry's Chief Economist, 'the expected banana shock is really taking its toll... and although the general mood is improving we are still feeling the pinch.' Indeed, the banana sector is still so predominant that, in the context of overall consumer patters, any decline in the sector there sends shockwaves through the island's economy.

At the risk of oversimplifying, the Saint Lucian economy could be compared to a turbo diesel engine upon which the whole country thrives. To complete this motoring image, bananas would be the basic fuel while tourism has really become the turbo. Without bananas the engine would stop; tourism provides that extra boost, particularly when bananas face hard times. But let there be no doubt about it. However powerful the turbo - and tourism has become the main foreign exchange earner - no Saint Lucian 'driver' will underestimate the role of the basic fuel, bananas. Yet at times the engine judders. Dirt in the fuel?

The image is obviously too simple, as it neglects a number of other economic sectors' contribution to growth, but it is nevertheless valid given the predominance of the banana-tourism tandem. Hence the concern to lessen dependence on it, primarily by pushing agricultural diversification.

The 'dirt' in the fuel has had a dual, interacting cause. First, there was the above-mentioned Regulation 404/93 which reorganised the EU banana market. It entered into force - at last - on 1 July 1993. One should stress the 'at last' because, for several years prior to that, so many battles were fought over it and so much uncertainty was cast over the future of the banana industry that thousands of farmers became overly concerned about their main source of income. And indeed, the new market rules did put producer prices under pressure. Second, and perhaps felt far more strongly and directly in the farmers' pockets, there was the steep depreciation of the pound sterling against the Eastern Caribbean dollar. Add to this shortages of fertilisers and other inputs, and a fairly dry season in the first half of 1993, and you end up with a cocktail of 'dirt' sufficient to make any mechanic worry over the extent of his engine's juddering, whether he can get it running properly again and, if so, how.

Banana 'split'?

Whereas bananas have always been part and parcel of St Lucians' diet, it was really only at the start of the 1950s that the banana trade started developing, thanks mainly to a 15-year contract with a UK company that was to buy all Windward bananas. Since then, bananas have rapidly become a key feature in determining not just the economic but also the social and political fate of Grenada, Dominica, Saint Vincent and the Grenadines, and Saint Lucia.

Saint Lucia is the biggest producer and exporter of the four Windwards, and it must be said that when the engine started juddering, even though the hiccoughs were as painfully felt by farmers in each island, it was here that they voiced their complaints most vociferously. Blaming their own Banana Growers Association, as well as the government and the common marketing agent Geest - the three main players on the banana scene - in August 1993, a number of unhappy farmers created the so-called Banana Salvation Committee, which called for a farmers' strike and for a halt to banana harvesting. Tempers quickly rose and things got out of hand. Riots in mid-October led to the deaths of two farmers.

All in all, the combination of developments both locally and internationally on the banana scene had major negative consequences for the entire nation. Banana production and exports both fell by about 11 %. Production slipped to 123 000 tons (down from 137 600 tons in 1992), of which 120 000 tons were exported (against 135000 tons the previous year). In terms of revenue, the catastrophe was felt even more strongly. Indeed, banana receipts, usually representing about half of total exports, fell by over 25%, down from EC$ 184 million in 1992 to a mere EC$ 137 million. There is a maxim that when 'bananas go, everything goes' but, unfortunately, the opposite is also true, as the banana dollar trickles down throughout Saint Lucian society. The wider economy felt the shockwaves to such an extent that the mere figures, however dramatic, do not reveal enough. Within the banana trade, after four rather prosperous decades, the core of the business itself was badly hit and the whole banana scene was, and still is, in uproar. The Government faced major political unrest as the opposition tried to capitalise on the banana crisis. The Banana Growers Association, like those in the other Windwards, was not up to the challenges posed by the crisis and got into dire financial straits. Finally, something had snapped in the long-standing love-hate relationship between the farmers and their hitherto exclusive marketing partner Geest.

To Geest or not to...

Agriculture Minister Ira d'Auvergne feels 'tine mood in the banana industry is gradually improving again and some of the gloom cast by years of uncertainty is being dissipated.' Securing guaranteed EU market access for 127 000 tons of bananas has certainly triggered a feeling of profound relief among the 800010 000 farmers concerned.

This is not surprising. Regulation 404/93 was the culmination of years of lobbying and fighting with Latin American banana-producing countries, their powerful backers among the US fruit multinationals,and a number of reluctant EU Member States. The battleground often shifted and included such arenas as GATT panels and even the European Court of Justice, but in the end Saint Lucia, together with other traditional ACP banana suppliers, was able to secure a quota. However, the new European banana scene, now far more open to competition and far more difficult to play, owing to a complicated system of marketing licences, poses a number of tough challenges for the Windwards. They are all high-cost producers with large numbers of small-scale farmers, growing fruit of excellent taste on hardly mechanisable lands, destined for a niche market of connoisseurs. Long-term survival as banana suppliers on competitive markets will require a major quality/ productivity boost in all the Windwards.

The year-long uncertainty has made nerves twitchy in the banana business, and not just among farmers. Most bodies and structures concerned here came under severe pressure and some have 'cracked'. Throughout the Windwards, the Banana Growers Associations have faced and still are undergoing in-depth reorganisation. At the regional level, the old banana lobby of WINBAN has been replaced, after a long period of preparation, by a proper commercial firm, the Windward Islands Banana Development Company (WIBDECO). Jointly owned by the Windwards Governments and their respective BGAs, it is now WIBDECO that negotiates a new Windwards banana marketing contract - only one instead of four (one with each separate island) as before, and perhaps not just with Geest.

The long-standing partnership of more than four decades has certainly been severely rocked. At the height of the banana crisis, many a reproach was voiced against Geest, which was presumed to be suffering less, was blamed for a certain 'arrogance' stemming from its exclusive historic marketing relationship and was accused of being a high-cost operator itself.

Whereas, prior to the crisis, Geest bought its fruit exclusively from the Windwards, the UK company decided a few years ago to look to additional sources for its fruit, and consequently bought a Costa Rican plantation. This move prompted a lot of suspicion among the Windwards and William Rapier, Chairman of Geest West Indies, readily admits that Geest 'did not do the proper PR on the diversification of our sourcing, which was only meant to allow us to keep growth in our market share.' Within the Windwards, the fears were understandable, as Geest now also had a foot in the dollar banana camp. The BGAs felt it was part and parcel of Geest's 'divide and rule' policy. The growers are also convinced that 'the money is really made in the shipping and marketing', and that 'Geest is an expensive operator in those fields'. Also, as Calixte George, Managing Director of the Saint Lucia Banana Growers Association, points out, 'it was generally felt among farmers that when the exchange value of the pound sterling dropped so steeply - down from EC$ 4.5 to a mere EC$ 3.87 at the time of the strike - Geest, who were trading the fruit in pounds sterling, should have made a gesture by applying a reasonable rate'. Geest's response to this is that it lost money in 1993, though some critics argue that this was not due to its banana operations.

In essence, the two sides, the Windwards and Geest, are positioning themselves for tough negotiations on a new five-year banana marketing contract - 'and not just exclusively with Geest,' BGA spokesmen will always stress. Going commercial themselves through the establishment of a WIBDECO branch in the UK - a move which has to be seen against the background of the new licensing system, where banana trading licences on the EU market have rapidly become very traceable items themselves - the Windwards feel the new competitiveness required cannot just come from their side. Cyril Matthews, Chairman of the interim board of the SLBGA, stressed that 'cost-effectiveness has to be achieved throughout all stages of the banana chain.' In fact, the Windwards have closely examined all the links of the chain and remain convinced that their shipping and merchandising can be operated more cheaply. Geest, through

While Geest accepts the fact that 'there is room for changes' to their side of the operation, they are also adamant that 'the land-based activities need some thorough overhauling too.' Its spokesmen go out of their way to insist on the need for continued improvements to the quality of the fruit - determined to a large extent by the post-harvest sorting, weighing and packing - while at the same time hammering home the message of raising productivity. As Francis Leonce, Geest's Managing Director, bluntly puts it: 'It's a damned good banana we produce here, but fewer people should produce a lot more of it !'

Both Government and the SLBGA are only too aware of the need to raise yields considerably above their disappointing average of six to eight tons per acre. BGA Managing Director George stresses that 'undoubtedly the whole industry shares the same concern to see efficient farmers produce more in a more cost-effective way, which in itself means inefficient farmers should be encouraged to move into other crops.' BGA interim Chairman Matthews remains confident that 'the productivity challenge can be met, if there is a sufficiently strong price incentive.'

The negotiating positions may look very entrenched at the moment, but as the old Dutch saying goes, 'the soup is never eaten as hot as it is served'. With the long-term survival of the banana industry at stake, the Windwards and Geest will 'more than likely arrive at a compromise that is satisfactory for both sides,' feels a confident Agriculture Minister d'Auvergne. Geest is clearly willing to cut a new deal with the Windwards, hoping, as Chairman Rapier puts it, 'that in the end common sense will prevail.' Putting its 40 years of banana trading experience into perspective, it would probably also like to ´see more of a proper business approach in the land-based activities. Many farmers, while needing to be better informed on the real issues of the shipping and merchandising aspects of an eventual new banana contract, could become more professional banana growers rather than take their crop, and its regular income, for granted. The BGA spokesmen, building on the renewed strength that a guaranteed market offers, are as confident that the farming community will meet the challenges of the future. 'After all, there is no way out but the way out,' stresses Chairman Matthews.

Linkages against leakages

The whole banana crisis has certainly made the need for agricultural diversification, already on the drawing board before, far more pressing. Restructuring the banana-growing community to make it more efficient implies weeding out inefficient farmers and cutting back on growing bananas on marginal land. This may be easier said than done as most farmers have become so heavily dependent on bananas. As Minister d'Auvergne describes it, it is part of their tradition and their culture. However profitable other crops may be, none offers the same dual advantage of regular cash flow and a 'secured' market-outlet. All other crops, whether vegetables, fruit or aquaculture products, will require increasingly developed managerial skills from farmers. With a higher degree of technological inputs needed, they will have to learn how to meet market demand at the right time, with the right quality and quantity. More generally, it poses Saint Lucia the challenge of identifying and conquering new niche markets when competition is already quite tough.

No one sees this diversification as a rival to the banana industry. On the contrary, most feel it should be built around and alongside it. Trying to promote a new type of high-tech farmer, able to live comfortably off his trade and with less tedious labour, is obviously part and parcel of a strategy to provide jobs for youngsters and in particular to arrest their drift to urban areas and/or tourist resorts offering more fashionable jobs.

Minister d'Auvergne, however, highlights an often overlooked factor potentially inhibiting the success of agricultural diversification. 'We face shrinking aid for agriculture in general as many donors have cut back their efforts in that field. But without aid and technology transfer in that sector, how can we develop it in a sustainable way? Our sustainable development can only be built upon our natural and human resources, so perhaps they should give more consideration to our farmers. Anyhow, are not these the number one protectors of the environment, which in turn is so vital for our other main economic pillar, tourism?'

The whole agricultural diversification exercise will not only be export-oriented but will also give considerable attention to linking up with the booming tourism sector. One might well ask why pineapples, tomatoes or fruit juices, to name just a few products, must be flown in from Miami or Puerto Rico, when local produce often tastes as good, if not better. Yet again, it poses the challenge of farmers being able to manage their fruit and vegetable production, to meet the quality, quantity and timing requirements of hotels and restaurants. Those farmers that have gone into such types of diversification, away from bananas, certainly have no regrets. One of them is George Edwards, who has successfully switched to growing a variety of vegetables and fruits such as dasheen, hot peppers, parsley, broccoli and watermelons. He agrees that his carefully maintained farm, with its own irrigation system, 'requires more work and more proper planning than bananas', but he continues, 'I sell all my produce without problems to the Marketing Board and I am certainly better off than before, when I grew bananas.'

Farmers like Mr Edwards have a pilot function in highlighting the profitability of the alternative to growing bananas. Within the tourism sector, there is active interest in encouraging farmers to aim at supplying the trade with local fresh quality produce. The 'adopt-a-farmer' programme tries to boost direct links between hotels and rural suppliers to their mutual benefit. People like Robert Whit field, General Manager of the distinctive Royal St Lucian Hotel, are only too aware of their high bill for imported fruit and vegetables. 'We have been lucky,' he says, 'to have been approached by an enterprising and clever lady farmer, Madge Barnard, who has been able to convince us, through the quality of her produce and the reliability of her supplies, that we really need not import everything. On the contrary, we are now actively pursuing local supply sources.' thanks to the hotel's contract, Ms Barnard, who already employs seven people, has been able to secure a loan to build a new greenhouse, thereby allowing her to increase production and boost quality. Hotels are increasingly negotiating deals of this sort with individual farmers or farmers' cooperatives.

At the national level too, awareness of the need to link agriculture more and more with tourism has led to this becoming a major priority. In fact, a joint agriculture-tourism mission recently went to Jamaica to study that country's very successful approach in keeping as much of the tourist dollar as possible 'et home'. The tourism authorities feel that their sector could make a major contribution to rendering non-banana agriculture far more viable - not to mention its impact on construction and manufacturing. The whole issue of 'linkages' against 'leakages' has to be seen, of course, against the background of the more fundamental debate on the actual contribution of tourism to the national economy. For, despite its steady growth over the past few years and the fact that it has helped to cushion some of the negative consequences of the banana crisis, it is still snubbed by many who allege that not enough of tourism's earnings stay in the country.

A dynamic tourism sector

The fact remains, however, that tourism has been doing well in recent years; so well, its spokesmen maintain, that it ought, perhaps, to be given some more proper consideration both within government and in society at large. Over the past three years, tourism grew on average by almost 11% per annum, and last year, as the biggest foreign-exchange earner, it brought in almost EC$ 570 million. Romanus Lansiquot, the enthusiastic Minister of Tourism (significantly this has only been a separate ministerial portfolio for a couple of years, despine Saint Lucia's well-established ranking as a top tourism destination), believes that 'there is a definite need both to enhance and to appreciate better that part of the tourist dollar that stays in the country.' He continues: 'Today it is alleged that only 40 cents in the dollar remain here, yet that has never been verified scientifically. We have appointed a research officer to compile the necessary data because we in the trade believe that tourism scores better and certainly has the potential for even greater spin-offs in areas such as agriculture, construction, manufacturing and maintenance. That is why the sector deserves a higher profile and more visibility.' A number of public awareness campaigns and other initiative within schools are aimed at making the whole community increasingly aware of tourism's contribution to the country's progress.

Last year, when many of the main tourism markets such as the USA and Europe were still suffering from recession, or were only gradually emerging from it, Saint Lucia succeeded in attracting a total of 356 000 visitors, of whom 195 000 were stay over tourists, the remainder being cruise ship passengers (154000) and excursionists (6700).

Despine a rise of almost 10% in the vital category of stayover visitors, compared with 1992, hotel occupancy rates in 1993 dropped from 73% to 68%, partly due to the coming on stream of new resorts.

These rat" vary sharply according to the season, however, and the overall figures also mask a growing divergence between the so-called traditional EP hotels and the all-inclusive facilities. The latter comprise about half of the almost 3000 hotel rooms available, and they seem to be far less affected by seasonal fluctuations, recording high occupancy rates throughout the year. Their share as a proportion of the total of hotel rooms has risen rapidly in recent years as a number of major traditional hotels have been taken over, refurbished and converted by well known foreign enterprises such as 'Sandals'. Their relative preponderance, making Saint Lucia a major 'all-inclusive' destination, has, however, prompted much argument and heated debate in the island. Many critics contend that this type of sojourn takes place too much in an enclave, limiting the local spin-off to restaurants, taxis etc. Tourism Minister Lansiquot has appointed a committee to assess their real impact on the overall economy: 'Of course, as is to be expected, there are pros and cons,' he says. 'Certain problem areas were identified, such as the enclave perception with a potential split between locals and tourists, or the lack of incentives for the latter to explore the country over and beyond their pre-paid facilities. These issues, however, can and have been positively tackled. On the other hand, they offer undeniable advantages. Many of these all-inclusive operators have their own aggressive marketing which gives a considerable additional boost to our own efforts. Their level of investment, often foreign in origin, has created a lot of job opportunities; jobs which they succeed in keeping going throughout the year thanks to their year-long high occupancy rates, which also shield local suppliers from classic seasonal peaks.'

Agnes Francis, acting Director of the Saint Lucia Tourist Board, adds that 'this type of accommodation is, after all, what the market wants today.' In terms of future development of room capacity, a figure of 5000 has been set as a target for the turn of the century and within that framework Mrs Francis highlights that 'there will a conscious move to strike a balance between all-inclusives and traditional types of accommodation by giving specific investment incentives.' She also feels that while the country has a wide array of tourist assets and potential attractions, 'a lot more needs to be done to develop our tourism product more efficiently. That will require a better overall understanding of our sector as a proper industry regardless of the contention of leakages which, combined with the presence, unlike in the banana sector, of many foreigners, seems to limit the perceived impact of tourism. It is, after all, the biggest direct and indirect employer and the main foreign-exchange earner!'

Both Minister Lansiquot and Director Francis stress the need to try and get more Saint Lucians in the industry up to higher levels of skills and management and to raise the overall level of service. 'Human resource development is really the key to it,' stress" the Minister, who would like to get support for a proper hotel training school. Already he feels that 'the European Union has made a very positive contributton to overall Caribbean tourism development.' EU-funded regional tourism support programmes have indeed, over the years, contributed considerably to boosting the Caribbean's image on the European tourism market. Regional cooperation, however, does not preclude tough competition and, as the differences of opinion on a common Caribbean cruise ship tax have illustrated, it is not always 'one for all and all for one'.

Air access, particularly out of Europe, is a problem as far as scheduled flights are concerned. Charter operations often focus on a more downmarket type of tourist. Saint Lucia, however, unlike its neighbours, Dominica and St Vincent, is fortunate enough to have not just a regional airport but also one that is accessible to international wide-body carriers. Needless to say, there is much concern here over the ailing regional carrier LIAT. Suffering from a long-standing management problem and facing heavy financial losses, its eventual privatisation process became enmeshed in the local politics of the region. Yet the call to make it an efficient carrier has never been more pressing.

A wake-up call for the nation

The 'all-inclusive' debase has also given rise to discussion about the overall role of local private entrepreneurs. Already in the tourism sector, generous tax concessions and further incentives have been developed to broaden the scope of involvement of nationals and many have responded by opening up smaller hotels. Yet, in a broader context, the Government cannot hide its disappointment about the fact that, in its view, the private sector has been lacking entrepreneurship. 'We have laid solid foundations in terms of infrastructure development, yet local entrepreneurs have not truly maximised the opportunities,' feels Minister Lansiquot. Minister d'Auverge, suggesting they could do a lot more in agro-processing, feels that 'many are too timid or too conservative to take the quantum leap. Most are only merchandisers in for a quick profit instead of investors with a long-term goal.'

The private sector is felt to have too much of a laid-back mentality and this could backfire on it. The Government, for instance, is inclined to allow the giant US supermarket chain K-Mart to open a branch in the Cul-de-Sac area, both to decongest the capital Castries and to stimulate competition with local suppliers. The private sector, which has operated until now in a protected economic environment, obviously does not welcome such a powerful competitor but it is increasingly conscious that it too will have to live up to the new challenges. Jacqueline Albertinie, the new and forthright Executive Director of the Saint Lucia Chamber of Commerce, Industry and Agriculture, agrees that 'it is a sorry thing the private sector has not developed to the extent it should have'. Pleading for far more intense institution building within the private sector, she feels 'more entrepreneurs can and must be created, while existing ones must become more development-oriented. Local capital is here, although with a lot of flaws in the current credit system, which does not exactly encourage innovative approaches. Yet the profit motive of the private sector can clearly be developmental in its impact. Government and the private sector should, therefore, come to terms with this and start pulling in the same direction to the benefit of all.'

With an official unemployment rate of 16.7% and some thousands of school leavers every year - though not always with the skills required to meet demand - job creation will be a sine qua non if continued progress is to be achieved. Facing up to it may be easier said than done for such a small, open and vulnerable island economy. Clearly the numerous and not always favourable changes imposed by the outside world have engendered a distinct feeling among Saint Lucians of having their 'backs to the wall'. Yet out of something bad, something good can grow, and Saint Lucia seems more than determined to adjust to the changing tides.

Roger De Backer

Prime Minister John Compton explains how St Lucia must bend to the winds of change


'We cannot take to the boats!'

John Compton, who was born in 1926, studied law and legal economics at the London School of Economics. Starting a legal career beck home in 1951, he went on to enter politics in 1954. A decade later, he was elected leader of the United Workers Party and was appointed Chief Minister (1964-67). As 'Premier' and Minister of Finance, Planning and Development (1967-791 he led his country to independence in 1979 as Prime Minister. A/though he lost power shortly afterwards, it was only for three years and, in 1982, his UWP regained its parliamentary majority. John Compton has held the political reins of St Lucia ever since with his party winning each subsequent election. In the last poll, held in April 1992, the UWP won 11 of the 17 parliamentary seats (a gain of one) with the opposition St Luda Labour Party taking the remaining six.

In power for virtually three decades, John Compton is one of a group of long-standing Caribbean leaders who have had a dominant role in shaping the region's development He is a keen advocate of regional cooperation and, at the level of the smaller islands, even favours closer political integration. He has also been a zealous defender of the vital banana industry. All too aware of the maelstrom whipped up by the falling away of old forms of protectionism and the need for greater competitiveness in the world's emerging market blocs, he seems more determined than ever to force St Lucia to face up to the new challenges. In the following Courier interview, Prime Minister Compton (who continues to hold the finance portfolio) sets out his vision for the future.

· Prime Minister, you have been in power in St Lucia for all but three of the last 30 years. Would you agree that considerable progress has been made, particularly in the field of in*astructure, and what do you think are the main achievements of St Lucia over the three decades?

- Speaking about infrastructure, the first thing we have tried to do is improve our communications, both internally and externally, by modernising our ports and airports. One of the features of St Lucia is our safe harbours and we thought we should capitalise on those by developing them, not just for local trade, but with a view to attracting regional trade as well. We have been reasonably successful in that. When we look at our other assets we end up inevitably at tourism, which also needs good communications. We have improved our seaports by building tourist facilities as well as developing our principal airports for jet traffic. Because of that we have been able to enter the tourist industry and we are now a major player in the game.

Before tourism, we were, and of course still are, an agricultural country. An important area in developing agriculture is road communications, to open up the land and the countryside. We have done that reasonably successfully. We used a fair amount of our EDF funds for that purpose during the 1970s and early 1980s. The effect of our field road development programme can be seen by the fact that in the space of just four or five years, our banana production increased from 40 000 tonnes to some 120 000 tonnes. That shows the importance of infrastructure development.

Having done that we then were able to increase our social services. We expanded the education system, for instance. In 1979, we had only two secondary schools with a total complement of less than a thousand pupils. Now we have nine secondary schools with almost 12 000 pupils. We have also entered into tertiary education, albeit to a limited extent. Then we started looking at improving the quality of life, particularly in the rural areas. We expanded our water supplies, for example. 50% of all homes are connected to the system and 85% of the population are now within reach of potable water from public sources. We have also extended our health facilities, ensuring that no major community is more than one mile away from a health centre.

Going back to the subject of agriculture, the banana industry is really the one that has brought us to where we are today. Previously, our main export product was sugar, but we were producing, I believe, less than 30 000 tonnes a year and that was uneconomic, so we moved into bananas. The basis for that was the protected market that we had in the UK. Another thing that the banana industry has given us is what amounts, virtually, to a social revolution. In the days of sugar, we had large estates and the population was segmented - either large farmers or labourers. There was no small farming in between, because you needed large estates to keep the factories supplied. Now, with the banana industry, there is no factory that needs to be kept fed and the farmers are working for themselves. Of course, the small farmers have had to absorb the technology of banana production but they can plan the business for themselves and have more control over decisions that affect their own lives.

· The basic economic issue involves bananas, does it not? They played a major role in the past development of St Lucia but there are a lot of doubts about the future. Can they continue to be the engine for future growth?

- They are just one of the engines here in St Lucia. Our economy has been fairly diversified and although bananas are important we are not totally dependent on them. They are particularly significant, though, because of the multiplying factor. There are so many people involved - small farmers, traders and so on. But we know we have to face the future and we know we have to compete. It is not a question of diversifying agriculture but of diversifying the sector around bananas. We still need them, not just because they give us a guaranteed regular income but because of the shipping aspect. Bananas are a weekly, non-seasonal crop and, if we are going to export anything else, then we need the regular shipping service that comes with the banana sector. Our other products, such as pineapples and oranges, are seasonal, and it is the banana industry that provides the foundation which will allow us to diversify. We do expect some people to stop growing bananas, however.

· Those that are less competitive and produce less?

- Yes. The less efficient ones will move into other forms of agricultural production.

· But problems in the banana sector have been looming for some time and yet isn't it the case that people did very little about it?

- They didn't believe it.

· Do you think they believe it now, after the events of October 1993? We are talking here about changing mentalities which can often be a slow process.

- It will be a slow process but, as I said, some people will leave the industry while the more efficient ones remain. The important thing for those who have to find something else is knowing that they can sell the crops they plan to grow, whether in the domestic market or overseas. The market organisation we have is now geared up to that.

· Is it true that the government subsidises banana growers?

- We have to sustain them yes, for the time being. In the longer term, we have to find ways of increasing the productivity of the land. Our big problem is that production per acre is too low. If we can just increase our productivity from seven tonnes to 10 tonnes per acre we would produce our quota of bananas on less land with fewer farmers. The people involved would then be able to make a decent income. But they have got to take it seriously. There are a lot of part-time farmers who just grow bananas because it is a crop they can sell. The people who are seriously in bananas should be assisted. The basic thing is to get a good contract for them. We have a market even if it is only until the year 2002.

· But that is only another eight years. Isn't that a source of worry?

- Of course we are under stress all the time but at least we have the market for the time being. We have to capitalise on that with a good contract to keep the more efficient farmers in the field and to ensure that the institutions - the banana association in particular - are in a healthy financial state and able to supply the inputs to allow them to face the future.

The government has a role to play here. The trouble we had in October was because the institutions were not properly nun, so when the stress came they just collapsed.

· I have heard it said that although the government has made a tremendous effort in putting the infrastructure in place, the private sector - which should be coming in - is not yet up to the task.

- I think that is probably right. The private sector is very conservative and slow to change. Now that we are moving away from protection in the banana industry, they are asking for protection in other fields. In fact, they want protection from the changes that are taking place in the outside world. The mentality is pretty well the same as it was in the 17th and 1 8th centuries. They haven't moved into other areas of production or even into the provision of services but the fact is that they have to play a bigger role. The government can only do so much. It has provided the infrastructure - the education and so on - but somebody has got to provide jobs. That is the task of the private sector.

I should stress that we have a very young population. About 135000 people, of whom some 40% are under 25. One of our big problems is the high population growth rate. We cannot afford it. It is putting too much strain on our social services .

· But has the private sector not been looking at what is happening in the outside world? Protectionism is no longer acceptable.

- You are right, but throughout the Caribbean we have always been used to protection. We used to sell sugar to Britain under the Commonwealth sugar agreement. Then we moved over to the Lomystem but the protection was maintained. Then we moved into bananas and we still had our guaranteed markets. There were even guaranteed prices for other products such as coconuts. But we have to recognise that all that is coming to an end. It's not just a question of changing the mentality of farmers, but of society as a whole. If we don't change fast enough we are going to be left behind.

· tourism has been growing quite fast over the last decade and indeed has overtaken bananas as the main foreign exchange earner. But there is a view that this has happened in a somewhat uncontrolled manner. For example, a lot of people are unhappy with the all-inclusive resort hotels which are now more numerous than the ordinary hotels. Some argue that local businesses - taxi firms, restaurants and so on - lose out as a result Where should tourism go from here?

- As far as we are concerned, the focus should be on expanding the number of hotel rooms and ensuring that the hotels are more integrated with the wider economy. That means we need to be offering the rights things in terms of service. When you speak about competing for the US dollar, it is not just locally, but also with Miami. K we don't produce the goods that the hotels demand, then we obviously lose the business. There is no point just complaining about it. We have to identify and supply the needs - go out there and fight for the business.

For instance, we don't produce enough flowers. Yet horticulture offers some good prospects and not just for export. A local industry geared to providing a fresh bouquet of flowers for every hotel room would be a big operation. There is a market for fruit and fruit juices. These are brought in from outside but we could produce them ourselves. We have a foreign market right here in St Lucia because the foreigners come here to buy these things.

· But I have heard it said that young entrepreneurs with innovative ideas have difficulty getting access to credit Apparently things are very slow and traditional, and lenders are averse to taking risks.

- There is some truth in that but there is also the problem that young entrepreneurs lack management skills. The enterprise culture is something that is new to the island. This takes us back to what I said before about being used to protection and now having to manage on our own. We are short of managers in all fields. A lot of people have good ideas but they have to be able to manage money as well. You will find that that is one of our major drawbacks, which applies both to government and to the private sector.

· And how do you produce managers?

- By accumulating experience. They can't just be produced out of thin air. In any community, you have three sorts of people: the masses, the middle managers and the top echelons. If you are wealthy enough, you can import the top people and buy their services, at least in the short term. But the middle managers, the people living in semi-detached houses, are not likely to uproot themselves to come and work in your country. These are the people that must be 'home-grown' but it takes time for this happen.

· From what you say, there seems to tee a need to translate ideas and decisions into concrete action. On a different subject - but one where a similar problem may exist - what are your views about regional cooperation in the Caribbean? Are you disappointed that in CARICOM decisions taken are not often acted upon? This appears to contrast with the situation in the OECS.

- I agree that there is a problem with CARICOM in translating political will into action. As you say, it is different with the OECS. This is an effective organisation because its secretariat has what are virtually executive powers. it can translate words into deeds. There is no equivalent set-up in CARICOM although I should say that some of our best people work there. The problem is that although they write papers and carry out useful research, once decisions based on their advice have been made, the secretariat is not strong enough to see to their implementation. The system is a cross between the bureau of the nonaligned movement and the set-up you have in the European Community - and it simply doesn't work. There is no Jacques Delors to exercise authority and take the decisions when they are needed.

· So people agree to a decision but end up going their own way. Take the example of the tax on cruise ships. Apparently, only St Lucia stuck to this agreement

- Yes, because there is no sanction. It is all voluntary.

· Of all the organisations that have been set up to bring the countries of the Caribbean closer together, which do you see as offering the most promising basis for integration?

- The OECS. We already have very narrow parameters for independent manœuvre in the economic field, having set up a Central Bank and surrendered sovereignty in the key area of money. When we take a decision in the OECS, we have to stick by it.

· Do you believe political union can come about within the OECS or is that just a distant dream?

- I don't know. If you had asked me that question five years ago I would have said political union was possible. Today I would have to say perhaps.

I also think that there are too many organisations - too many balls in the air that have to be juggled with. We have the OECS, Caricom and now the ACS as well. We are members of the OAS and the United Nations. We are also in the Commonwealth and the ACP Group. As a small country, we cannot effectively service all of these organisations so we need to target. Are we going, for example, to concentrate on strengthening CARICOM or the OECS? I think we should be deepening our relationships first.

· You seem to be confronted with the same issue that Europe is facing - deepening versus broadening.

- Yes, but Europe has already deepened quite a lot. We have to do the same thing now to protect ourselves. How are we to face up to NAFTA, for instance? As little islands, would it not be better for us to strengthen CARICOM so as to have, if not a huge market, at least a larger one which might be able to exercise some influence. But at the moment, this market is fragmented and so long as each of us keeps doing his own thing, we will not get very far.

· Do you find it easier to make concrete agreements on specific issues among the smaller islands than in an arrangement that involves more and larger players?

- Yes. We can get things done among the smaller countries. You can get up in the morning, telephone your counterparts to say that there is a problem, say that you want something done, make an agreement immediately and act upon it. When you are dealing with the bigger countries, there are more formalities and things tend to get lost in the wash.

· Is LIAT one of those issues that got lost in the wash?

- You could say that LIAT got lost in the management wash. The problem of the airline was one of management, not political will. The decision to privatise it was a purely economic one. It could have been viable but the management was poor and we therefore decided to try and transfer it to the private sector. This generated a lot of emotion with people complaining about job losses and so on.

· But do you see the LIAT issue being resolved?

- I wish I could say I do, but I am afraid I do not. There are people who have ideas about trying to turn it around but I am not optimistic.

· To come back to tourism, how much further can this sector be developed? Is growth that involves local inputs - local people providing services and in management positions - still possible?

- You have to limit the physical growth. How many rooms can a small island support and still maintain itself without being overrun by tourists? As far as we are concerned there is a limit. We should reach 5000 rooms by the end of the century and, after that, we will try to see how we can maximise the benefits at this level. But the important thing in tourism is the marketing, not just in the sense of advertising externally, but also the internal organisation you need to meet the demands of a very sophisticated industry. The people who come on holiday expect certain things. You have to provide them with food of an appropriate quality. You have to package and market the product. We aren't there yet because we haven't been organising ourselves to meet the demands of the tourist industry.

· You agree then that, in addition to a lack of entrepreneurship, there is also a shortage of skills and of trained people? If you compare literacy levels, for example, with other islands, do you think that more efforts are needed in that area?

- We are already putting a lot of effort into this. We are expanding education. There is a school place for every child and a teacher to teach that child. We are also looking to reorganise the curriculum so as to train people for jobs when they leave school. We recognise that some of the education currently available will not be of much use in the future because it relates to jobs which will have become obsolete. So we have to look down the road and try to predict where the economy is going.

· Will the St Lucia economy be able to provide jobs for all those young people that are going to be coming on to the labour market?

- We can do it but we have to plan in advance. It is not so much a question of money but of managing the resources that you have. In other words, where do you put the money to achieve the best results? I think, for instance, that we should be looking at the new information technologies. We have to train our children to be computer literate. We have to ensure that they can cope with the type of world that they are going to be living in.

We are a very small community. We don't have a big population but we do have a lot of children - a lot of dependants who have to be supported by too small a workforce. Having said that, if the economy is properly organised, we should be able to cope with 3000 or so school leavers annually, whether in the service industries, tourism, agriculture or the public service. It is not too big a number but we have to start planning from the time that they enter school.

In this respect, we need to ask what the private sector is doing. Is it simply importing things to sell here rather than producing wealth? Can that be regarded as growth? I am afraid that this is where we face difficulties. At present, the private sector is not the engine of growth that one would expect.

· To conclude, would you accept the view that St Lucia is at a kind of crossroads - that with bananas no longer dominant in the economic equation, new strategic choices now have to be made?

- Yes. We will always have people in agriculture because we have the resources and the land is fertile. But there is a limit. That means we have to look towards tourism. But in doing that, let's not just build hotel rooms. It is really a question of servicing the industry and training our people - not only to make beds and lay tables but to manage all aspects of the industry. That means we need to be able to repair a refrigerator when it goes wrong and do all the other things that need to be done in a service industry. So we have to start educating our people for that.

And we have to look at meshing it all together. If you are a farmer, you should be asking what the hotels need. If bananas are out, what can they be replaced with? And you can't go back to the old slash and bum techniques either. We need to introduce appropriate technologies so that people can make a living on small areas of land. These are the kinds of challenges that we need to tackle.

· And are you optimistic that this will happen?

- It has to. We have no choice - we cannot take to the boats.

Interview by R.D.B.

EU-St Lucia cooperation by Philippe Darmuzey*

St Lucia is both a member of the Caribbean Community (CARICOM) and of the Organisation of Eastern Caribbean States (OECS). It is also one of the 25 full members of the Association of Caribbean States (ACS) which was created on 25 July 1994.

A formal cooperation partnership with the European Union was initiated in 1976 within the framework of the Association with the Overseas Countries and Territories (OCTs). Under the OCT 'Decision', St Lucia benefited through preferential trading arrangements with the EU, financial and technical assistance and other instruments of cooperation available through the fourth and fifth European Development Funds (EDFs). Subsequently, St Lucia acceded to the Third Lomonvention as a full member of the ACP Group in 1984. It is now one of the 70 ACP States, signatories to the Fourth Lomonvention which links the ACP States to the European Union for the 1990-2000 period.

Since 1976, financial resources allocated by the European Union to projects, programmes and operations in St Lucia have totalled about ECU 39 million.'

The main areas of cooperation have been agriculture and rural development (57%), social infrastructure - mainly in the health sector - (17%), human resource development (11.5%), infrastructure (10%), energy and the development of small and medium-sized enterprises in industry, agro-industry and tourism.

Regional cooperation is also a focal area in St Lucia-EU cooperation. The country shares with the other ACP partners of the OECS, CARICOM and the Caribbean Forum (CARIFORUM) the benefits of the regional resources of the EDF.

In addition, the country derives substantial benefits from its preferential trade arrangements with the European Union, including duty- and quota-free access for manufactured goods and, under the banana protocol, St Lucia enjoys preferential access to the Single European Market up to the year 2002. This, combined with the support provided by STABEX, the compensation scheme for losses incurred in banana (or other commodities) export earnings, represents the single most important aspect of cooperation between the EU and St Lucia.

St Lucia's sustainable development challenge

St Lucia, like many other Caribbean and Pacific State partners of the EU, faces the major development constraints inherent in Small Island Developing States (SIDS): the small domestic market, which seriously limits industrial opportunities, a narrow resource base, a high per capita cost of economic and social infrastructure, a fragile environment and heavy external dependence and vulnerability to external shocks, including natural disasters (particularly hurricanes and tropical storms).

The country's economy has long been dominated by the production of sugar, which was first introduced to the islands in the 17th century. Sugar was gradually abandoned and replaced by bananas in the 1950s.

During the 1980s, St Lucia's economy took advantage of the years of plenty associated with high banana prices. The rapid development of the banana industry permitted the expansion of the external market and a reasonably diversified and performing manufacturing sector.

The country's development strategy emphasised economic diversification and export-led growth, with a central role for the private sector and a supportive role for the public sector. The Government has also undertaken an ambitious long-temm programme in support of improved social and economic infrastructure. These efforts aim in particular to favour a continued development of the tourism sector, one of the engines of growth in the recent past. A significant acceleration of the diversification efforts is now required as a result of the structural challenges faced by the banana industry.

Economic performance has remained strong since 1982. During 19871990, St Lucia's economy recorded buoyant growth of 5% per year on average and achieved sustained improvements in its fiscal accounts. Steady expansion in banana output, combined with the dynamic performance of the tourism sector, were the underlying factors for strong economic growth which increased from 1.8% in 1991 to 7% and 3% in 1992 and 1993 respectively.

The recent deterioration of the performance of the banana industry and the serious economic impact of tropical storm Debby (September 1994) show, however, the degree of vulnerability of St Lucia's economy to external shocks and natural disasters.

Time and again, the country's long-term development efforts are jeopardised by exogenous factors: Hurricane Allen in 1980, the 1983 tropical storm and Debby in 1994. The financial damages caused by the flooding of most major rivers of St Lucia during tropical storm Debby was evaluated at US$74m and the reconstruction programme envisaged subsequently will cost approximately US$56m.

Both as a consequence of the necessary reform in the banana industry and the post-Debby reconstruction programme, St Lucia is facing a new economic challenge. During this transitional period, EU-St Lucia cooperation will be focused on the restructuring efforts in the banana industry and the agricultural diversification policy which must accompany the banana reform. STABEX transfers for 1992 and 1993 application years will be used, to this end.

Additional EU assistance is being envisaged to supplement the ongoing efforts with the resources of the proposed special programme of assistance to traditional ACP banana suppliers. It is intended to apply the proposed additional resources to support the Windward Island Banana Industry restructuring plan, at both the national and regional levels.

The Government and the EU are also considering allocating the uncommitted resources of the LomV National Indicative Programme to some of the operations envisaged under the reconstruction plan.

EU financial and technical cooperation

St Lucia's efforts to meet the vulnerability and sustainable development challenges and to adjust to external shocks have been accompanied by consistent support from the European Union at the financial and technical level.

Under the First Lomonvention (Lom: 1975-80), the main projects implemented were in the area of livestock development, agricultural resettlement and diversification and the construction of 27.4 km of feeder roads. Assistance was also provided to the water sector in the form of a study for the development of water resources, support to the Land and Water Use Unit and water supply micro-projects.

The LomI National Indicative Programme (1980-1985) continued the technical assistance to the Land and Water Use Unit while major financial support was provided for a drainage and land conservation programme and for the construction of secondary roads. A first multi-annual training programme in the form of scholarships was implemented.

Under LomII (1985-1990) the National Indicative Programme resources were allocated to Phase II of the Roseau Valley Agricultural Resettlement Project, a similar project in the Mabouya Valley, the extension and rehabilitation of Castries Market, tertiary level education and tourism promotion.

The Mabouya Valley Development Programme aimed to reduce dependence on the banana monoculture, to improve land titling legislation, to reverse urban migration and to conserve land and water resources. It involved the redistribution of 200 hectares of farm land, the construction of 13.5 km of farm access roads and 5 km of community roads to 80 rural settlements comprising over 900 households on Dennery Estate lands. The project also included the provision of a forest nursery and village amenities.

The Roseau Valley Resettlement Project aimed at completing the settlement of farms on 230 hectares. Difficulties faced by. St Lucia Model Farms Limited, the executing body, resulted in it being placed in receivership. The implementation arrangements for the continuation of the project have delayed the utilisation of funds which are now being reallocated in the light of the damaging consequences of tropical storm Debby.

Both Mabouya and Roseau Valley were severely affected by Debby.

However, the land conservation and water development activities undertaken through the MVDP proved relatively effective.

The Castries Central Market Improvement Project is intended to stimulate agricultural trade diversification and consumption of local produce. To this end, the market, the largest outlet for agricultural produce, is being extended and rehabilitated. The extension part, co-financed by the Government of St Lucia and the EDF, is nearly complete (October 94).

In the area of education, at the tertiary level, a major project was financed through the combined resources of national and regional indicative programmes for the construction of a new library at the Sir Arthur Lewis Community College. This project is part of the OECS Education Reform Strategy.

Higher education and, more generally, human resource development is indeed a central concern in St Lucia, which has the distinction of having produced two Nobel Prize Winners - Sir Arthur Lewis in 1979 (for Economics) and Derek Walcott in 1992 (for Literature).

The LomV National Indicative Programme (1990-1995) focuses primarily on social infrastructure with special emphasis on the health sector for the phased development of Victoria Hospital which will start in the second half of 1995 after completion of the feasibility study at the end of 1994.

In the rural development sector, the Government sought EU assistance to pursue the objective of generating new sources of income and employment and to improve living conditions in the rural areas of the island. In this regard, a second phase of the Mabouya Valley Development Programme has been designed based on the results of the just completed first phase and taking into account the recent impact of tropical storm Debby. Project activities were expected to start by the end of 1994.

A third area for assistance is human resource development through the ongoing implementation of a programme of scholarships to support the priority requirements of the economy.

Finally, in October 1994, it was envisaged to review the situation of the LomV NIP with a view to rescheduling the use of uncommitted financial resources within the framework of the 'post-Debby' reconstruction programme under discussion between St Lucia and the donor community.

Through the Euro,oean Investment Bank (EIB), St Lucia has benefited from additional EU assistance in sectors which are normally not eligible for EDF assistance.

Under the four Lomonventions, the EIB has financed a geothermal energy study, two loans to the St Lucia Development Bank for the development of small and medium-size enterprises and two loans to St Lucia Electricity Services. Total EIB assistance for the 1980-1994 period represents ECU 12.5m.

Another important instrument of EU-St Luda cooperation is the STABEX system. The scheme aims at remedying the harmful effects of instability of export earnings by guaranteeing the stabilisation of export earnings derived from St Lucia's exports to the EU or other destinations, of products, especially bananas, on which the economy is highly dependent.

In the 1980-1994 period, St Lucia has been entitled to STABEX transfers for a total of ECU 5.8m. This is particularly in relation to the 1992-1994 period associated with both price changes due to the overall evolution of the Common Organisation of the banana market in the EU and increased competition from non-ACP bananas, combined with local difficulties due to climatic factors (drought and tropical storms). STABEX transfers are being used by St Lucia to support a major reform of the banana industry in parallel with the global efforts undertaken to diversify both agriculture and the economy as a whole.

Emergency assistance, NGOs and micro-project financing schemes are among the other instruments which operate in favour of St Lucia. In the area of AIDS prevention, laboratory equipment and materials are being supplied.

Supporting the integration of St Lucia in its regional environment

The European Union also pursues a policy dialogue with the Caribbean on regional cooperation. St Lucia is a member of both CARICOM and the OECS, the latter having established a single monetary area and a common currency (the Eastern Caribbean dollar) as well as a common central bank - the Eastern Caribbean Central Bank.

Whether as an OECS or as a CARICOM member, St Lucia takes full advantage of the regional cooperation instruments of the Lomonvention. The country also belongs, under the Fourth Lomonvention to the group of 15 ACP partners who make up the Caribbean Forum. Island status, disparity of levels of development, cultural diversity and vulnerability to external shocks and competition are the main challenges which require enhanced solidarity and regional cooperation among the Caribbean partners. Lomegional funds are committed to these objectives.

Regional and sub-regional projects and programmes, which are additional to the national indicative programmes, have benefited St Lucia within the framework of the EDF regional programme for the Caribbean. Under Lom, II and III, the country derived particular benefit from the following regional programmes:

Agriculture: Research carried out by the Caribbean Agricultural Research and Development Institute (CARDI). A study of crop diversification was implemented by the Agricultural Diversification Unit of the OECS (ADCU) which is based in Dominica.

Human Resource Development: Programmes in favour of the University of the West Indies; the OECS Tertiary Education Project, which contributes to the elaboration of an OECS education reform strategy and plan and provided new facilities at Sir Arthur Lewis Community College in Castries. New programmes under implementation include the University of the West Indies student accommodation project, which will provide halls of residence at each UWI campus.

Regional Trade Promotion Development: Major support is being received by the Eastern Caribbean States Export Development Agency (ECSEDA) set up in Dominica to provide assistance to OECS exporters. In the area of trade information and statistics collection, the EU has also participated in the funding of the Automated System for the Collection of Customs Data (ASYCUDA), under which computer equipment has been installed and is being operated at the customs office in Castries. Tourism: The OECS tourism development project, launched in 1992, provides a three-year programme of support in marketing investment, policy formulation, planning and training. It coordinates its operations with the more extensive tourism development programme run by the Caribbean Tourism Organisation (CTO), which includes professional technical assistance for the development of a major marketing campaign in Europe for Caribbean destinations, including St Lucia.

Transport: Programmes in sea and air transport (relating respectively to WISCO, the West Indies Shipping Corporation and LIAT, Leeward Islands Air Transport), were implemented under Lom and II.

The LomV Caribbean Regional Programme (CRIP) under the umbrella of the CARIFORUM, has identified programmes in six priority areas - agriculture, trade, transport and communications, environment and human resource development. The financial resources allocated to the CRIP for the 1990-1995 period amount to ECU 90m.

Financing decisions for the Trade Development Programme (ECU 14m), the Inter-University Programme including UWI, the Caribbean Examinations Council's Project (ECU 2.5m) and the Tourism Development Programme (ECU 13m) were expected to be taken in early 1995. In addition, a new programme in the area of tertiary education for the benefit of the OECS countries is in preparation. All these projects, plus a few others in the above mentioned sectors will be of direct benefit to St Lucia.

Beyond the horizon of sub-regional cooperation, St Lucia, like its partners in the wider Caribbean, has to face the increased competition brought about by the creation of regional trade blocs in North America (NAFTA), Europe (the Single European Market) and Latin America. It is the Community's vocation, inspired by its own integration experience, to help St Lucia participate in the process of deepening and widening the Caribbean region. This can take such forms as:

- at the sub-regional level, encouraging the initiative of an OECS economic reform strategy;

- at the regional level, helping Caribbean decision-makers to assess the regional dimension of national adjustment programmes and to measure the costs and benefits of regional integration. This latter topic is the subject matter of a study which has been undertaken in close cooperation with CARICOM, the Caribbean Development Bank, the University of the West Indies, the Eastern Caribbean Central Bank and other Central Banks;

- regional cooperation and integration issues, addressed with the support of the EU, will remain of crucial importance in the face of the globalisation and regionalisation trends which the wider Caribbean Basin countries had in mind when they created, in July 1994, the Association of Caribbean States (ACS), among the 25 members of which St Lucia is a member.

EU-St Lucia trade relationship

Under the Lomonvention, St Lucia benefits from duty-free access for manufactured goods to the EU market, as well as preferential arrangements for bananas.

The EU accounts for approximately three-fifths of St Lucia's exports and a quarter of St Lucia's imports. Bananas accounted for 1/5 of total exports in 1992.

The combined support of the LomV banana protocol, which guarantees preferential access for St Lucia bananas to the Single European Market and STABEX provides the most important aspect of cooperation between EU and St Lucia in the present economic transition period. It also illustrates the comprehensive and integrated use which is being made by St Lucia of the Lomonventions trade and aid instruments.


Eu-St Lucia cooperation 1976-1995

P.D.