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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 folderSt Vincent and the Grenadines: Pulling the kite back up in the air
View the document(introduction...)
View the documentAn interview with Prime Minister James Mitchell
View the documentAn interview with Vincent Beache, Leader of the Opposition
View the documentSt Vincent and the Grenadines and the European Union

(introduction...)

'The protective subsidy of some 30% we enjoyed for the last 30 years from the British housewife for our bananas is over.' This somewhat cryptic excerpt from Prime Minister James Mitchell's 1994 budget speech reflects rather well the fin de sie mood that is currently felt in Saint Vincent and the Grenadines. The end of an era indeed, because gone are the days or rather years when ever more bananas were produced and exported, to be sold, for the greater part, at high 'protected' prices on the UK market. If one were to think of the country as a kite - an image inspired by a simple look at the map which shows the main island St Vincent as the body and the 30 or so Grenadines as its tail then the kite had, for years, been climbing higher and higher, on an updraught of constantly rising banana export receipts. But in the early 1990s it seems to have lost altitude and perhaps has even gone into a nose dive. Whereas, during the previous 15 years, real growth averaged 6% per annum, the rate was virtually halved last year. Indeed, the income from bananas dropped by more than 39% during 1993 and the 'kites was only able to keep flying thanks to tourism and its related construction activities. What caused the drop was the combined effect of a sharp decline in the exchange rate of the pound sterling, the currency used to pay for most of the exported bananas, and what the PM calls 'the free trade bulldozer'. What he meant was the set of new rules governing the opened-up yet tightly regulated EU banana market, which only came into force after years of fighting and haggling over the new arrangements. These events created a lot of uncertainty and downward price pressures, placing a sword of Damocles over several thousand small banana growers in the Windward Islands, to which SVG belongs. The country finally succeeded in securing an annual quota of 82 000 tons (operative until 2002). Yet while bananas will continue to play a pivotal role in SVG's economy for some time to come, the survival of the sector will ultimately depend on it becoming truly competitive, both in terms of better quality and increased productivity.

Next to that, the other major challenge will be to broaden and differentiate the country's basis of economic activity. This will involve focusing on agro-based diversification while trying to boost both foreign and local investment, although, as regards the latter, the response so far has been disappointing. At the back of the mind, there is the reassurance that tourists are always likely to know where to find the 'kite'. Yet getting to it, in particular by air, suffers from a major constraint, namely the lack of an airport accessible to wider aircraft. This handicap is likely to hamper not just tourism but also any other high-value, small-volume diversification attempts. The ability to live up to these challenges and constraints, both in the medium and in the long term, will depend on the resourcefulness and stamina of the SVG people. The view that it is time to get the kite back into the air is definitely there. Who, after all, would wish to see such a beautiful object lying immobile on the ground?

A unique archipelago

The mere mention of SVG as a destination for a Country Report 'mission' is sufficient to provoke such reactions as 'lucky you!' or even 'you're sure it is a mission?'. What better proof can there be of SVG's renown as a major holiday destination! Indeed, most glossy magazines, at some stage or another, carry idyllic scenes from the country - an exclusive resort, perhaps, or a luxury yacht afloat on the crystal-blue water.

The 'kite' formed by the main island of Saint Vincent (about 344 km²) competes in beauty with its 'tail' which consists of some 30 islets and cays with very varying features. The latter range in size from 18 km² (Bequia), to mere dots of land punctuating the Caribbean seascape. The total population of about 108 000 is also unevenly spread with some 99 000 living on Saint Vincent and just 4900 on Bequia. The other islands' inhabitants are numbered in the hundreds, or less. These include such places as Mustique, Canouan, Mayreau, Union Island, Petit St Vincent and Palm Island and most of them belong to that category of 'select' locations where a happy few 'rich and famous' tend to spend part of their exclusive and expensive holidays. Although the islands are all part of the SVG nation, some of them are privately-owned, making access to them even more selective!

Some of the islets, including the famous Tobago Cays, are little more than uninhabited rocks surrounded by white coral sand beaches and crystalline waters offering the whole spectrum of green-toblue shades. Little wonder that they have become the exquisite playground of divers, snorkellers and yachtsmen! The main island of St Vincent is of volcanic origin, with steep mountains rising out of lush valleys, carved through by waterfalls and rivers. It is dominated in the north by the La Soufri volcano, which peaks at 1219m and which erupted as recently as in 1979 - the year when independence was finally achieved - damaging houses, roads and harvests but fortunately killing no one. Today many a hiker is tempted to visit the top of the volcano, however hard the latter tries to hide in the clouds.

In the distant past, successive waves of different Indian tribes emigrated to SVG from South America. The last wave brought the belligerent Caribs, whose rule lasted for several centuries. When European settlers - bringing African slaves in their wake - started to show an interest in the islands, the result was that many battles were fought, not just against the Caribs, but also among the competing European powers, most notably France and Great Britain, for control of the territory. Today SVG has a typical West Indian flavour, displaying many of the characteristics of its British heritage, although, for historical reasons, some of the smaller islands reveal somewhat more cd the French influence.

Constitutionally, St Vincent & the Grenadines is a parliamentary democracy of the Westminster type with a bicameral Parliament sitting, in principle, for five-year terms. The last general election was held on 21 February of this year. Prime Minister James Mitchell, in power since 1984, led his New Democratic Party (NDP) to a third consecutive win with a comfortable majority of 12-3 in Parliament. The February elections were marked not only by the arrival of about 10000 new young voters on the political scene, but also by an unusual amount of violence, which showed how high tempers can rise in such a small and relatively 'intimate' poll. Italso signalled the return of an opposition to Parliament. In the previous election, the Prime Minister had scored a 15-0 landslide at the ballot box. On this occasion, after a series of difficult talks, a last minute alliance was forged between the two main opposition parties, the SVG Labour Party (SVLP) led by Vincent Beache and the Movement for National Unity (MNU) led by Ralph Gonsalves. Both were elected under an alliance ticket, together with a third independent member of the alliance. The remaining opposition party, the United People's Movement (UPM), failed to win a seat. Returning to power, the NDP is determined to build on the country's continuing political stability, to boost the overall tourism and investment climate and to try and live up to the challenges that the new international scene has forced upon this small and vulnerable island economy.

Slow-down in growth

Despine the handicaps and constraints to SVG resulting from the small size of its domestic market - a factor which means that economic growth is therefore largely determined by the fate of its external trade - the country had an average real GDP growth rate of 7% per year over the 1985-90 period. Most of that growth was fired by the dual engine of banana exports and tourism (together with the related construction activity). Bananas proved to be a real winner, with production almost doubling from 42 000 tons in 1985 to about 80 000 tons in 1990. Tourism also did well, growing by 7% a year, increasingly showing potential for further growth and gaining in importance in the overall economic framework.

The early 1990s, however, saw a slow-down in the growth trend: in other words, the 'kite' began to nose-dive. Manufacturing was badly affected by the closure of three 'enclave' firms, producing electronic components, gloves and tennis rackets respectively. Their withdrawal resulted in the loss of 800 jobs and reduced the manufacturing sector's contribution to GDP to between 8% and 9%, well below the level of 13% achieved in 1984.

As if the troubles in manufacturing were not enough, the main impetus keeping the kite in the air - the banana sector - began to weaken. In the economic performance charts, 1993 recorded the worst set of figures for bananas for six years. In the previous five-year period, annual receipts from this sector averaged about EC $86 million (compared with some EC $68 million per annum generated by tourism). But a combination of lower prices (-22.9%) and smaller export volumes (-20.4%), meant that export earnings plummeted to just EC $60 million, 39.3% less than the 1992 performance of EC $99 million. As in the other Windwards, two major factors influenced this negative turnaround. These were the entry into force of the new EU banana market regulation which, combined with the preceding and ongoing battles with the dollar banana countries and companies, put prices under pressure, and the sharp depreciation of the pound sterling against the EC$. In fact, the drop was more than 25%. Low producer prices, coupled with extended uncertainty over the future, heavily affected the entire production chain and only 58 600 tons were exported last year, a considerable shortfall vis-is SVG's quota of 82 000 tons which it has been able to secure under the EU's 'famous' Regulation 404/93.

As in the other Windwards, the economic barometer in SVG rises and falls in line with the fortunes of the banana industry. The 'banana dollar' spreads throughout the economy, influencing local commerce, housing, education, small business investment and so on, in a very tangible way. 'Although tourism is increasingly showing its real potential and has been able to attract a number of important projects in recent years, our economy at the moment is clearly somewhat sluggish because of the banana situation,' feels Director of Planning, Randolph Cato.

Revamping bananas while diversifying

Some say the economy is sluggish. Others, like Allan Cruickshank, the Minister for Agriculture, Industry and Labour, talk of the 'banana squeeze' while stressing that the year-long uncertainty cast a shadow over the sector that was acutely felt by the farmers. 'as long as bananas went well, people generally thought that they had an open-ended licence to grow them on virtually every available plot. The new requirements of the considerably toughened-up European banana market, however, send a new message to producers,' feels Mr Cato. 'The current market and price situation,' he says, 'has clearly signalled to farmers that they may have to reconsider what they grow where, and certainly to abandon growing bananas in less favourable plots while going into more suitable other crops. There is no way around it for banana growers: both quality and productivity will be challenged by the increased need for competitiveness.'

The present crisis has certainly concentrated minds on producing bananas in a more business-like way. 'That has become unavoidable,' feels Minister Cruickshank. 'After all, our long-standing marketing agent, Geest, is also no longer behaving as a genteel family enterprise but rather as a tough business partner.' This, he says, has been revealed in the negotiations over a new marketing contract. Director Cato confirms the need for a more realistic approach. 'Through price incentives, combined with the identification of their costs, farmers must be able in the future to make their own assessment whether it is worthwhile staying in bananas.' Banana-growing, he continues, must, in any event 'become a real business.'

The Banana Growers Association (BOA) is acutely conscious of the new, 'tough' environment. Simeon Greene, the Association's acting General Manager, underlines the fact that 'the BGA can no longer act as a sort of welfare organisation. On both the production side and, through WIBDECO, on the marketing side, farmers are now aware that a proper commercial sense must prevail.' As in the other Windwards, the local BGA faces both huge debts and massive overdrafts. Mr Greene admits that 'the banana crisis is still making itself very much felt,' but insists, 'we are fighting back, our industry is far from dead, and anyway there is no real alternative!' The Government, meanwhile, has embarked upon a major banana improvement and rehabilitation scheme which is going so well that it is actually running ahead of schedule and initial targets have had to be brought forward.

Needless to say, there is the perception in SVG, too, that growers do not get a fair share of the cake. 'Geest Plc is no longer the Van Geest we knew before,' says GM Greene, 'and just as we cannot take it for granted that our standard of living will rise, if we do not work hard for it, Geest should also not take the profits it makes out of our fruit for granted.' The fact that a mere 30% of the banana retail price is resumed to SVG - about 16.3 % for the growers and 13% for the BGA - is obviously considered far from satisfactory. While Geest may perhaps be seen as 'the devil we know', the aims are nevertheless to achieve a fairer share-out of the banana profits and an end to exclusivity both in terms of the partnership itself and as regards the division between production and marketing operations. Whatever the extent of the current banana turmoil, there is widespread underlying confidence that SVG will succeed in becoming a competitive banana producer by the turn of the century. It may be a tough task, for, as PM Mitchell stressed in his budget speech, 'survival of the industry will be dependent on the willingness of farmers and the BGA to accept inevitable changes.' And, as he went on to observe, 'old habits die hard!'

The new banana scene has obviously prompted a concern really to come to grips with agricultural diversification. Special attention will be given to rehabilitating the production of arrowroot. Bananas had indeed been doing so well in the second half of the 1980s that many other crops were abandoned or neglected. The figures speak for themselves: exports of root crops and vegetables earned more than EC$ 67m in 1986 but by 1992 earnings had slumped to a mere EC$ 14 million. But now there seems to be a clear determination to try and reverse the trend: fruits, root crops, vegetables, flowers and foliage all offer potentially rewarding niche markets.

'The Government is working vigorously to identify and respond to new opportunities with proper marketing arrangements,' stresses Planning Director Cato. He refers, in this context, to the growth in US imports of tropical flowers and foliage, a market which is now worth more than US$ 400 million a year.

Comprehensive land reform

The whole agricultural diversification exercise is also, to a large extent, tied to the comprehensive land reform programme that SVG launched into about a decade ago, although there had been attempts on a smaller scale before. In the view of Karl John, the current Director of the Agricultural Rehabilitation and Diversification Project (ARDP), who was formerly Director of Planning, land reform has a two-fold aim. 'The first is to change social realities by making a more equitable distribution of land resources, while the second is the improvement of agricultural productivity coupled with crop diversification.' The exercise consists of a three-stage redistribution of available plots which before were part of some 10 major estates. Phase I involved the break-up of Orange Hill (now called the Rabacca farms), which used to be one of the largest coconut estates in the Caribbean and, indeed, in the world. It covered some 3300 acres, of which almost 2000 acres are arable land. With assistance from the European Union, the Caribbean Development Bank and the United Kingdom, plots ranging in size from 2 to 7 acres were redistributed to about 435 farming families. Karl John is keen to stress the interesting social aspects of the scheme. 'The Orange Hill project has been a major exercise in socio-economic transformation, as about 70% of the newly-established farmers were previously agricultural wage earners, who were less accustomed to working things out for themselves. A lot of extension efforts went into that aspect and most of those involved have quickly become used to their new status.' Prior to the banana crisis, farming was generally a profitable occupation, so giving people access to land was seen as demonstrating a genuine commitment to transforming their standard of living.

The Orange Hill project set the tone for the phases which followed. It was more than simply a land distribution exercise, offering, in addition, a whole range of support services including agricultural extension, credit facilities and marketing assistance. It also included infra-strucutural aspects such as feeder and farm access roads and social housing with fully serviced building plots.

Phase II of the land reform programme is the above-mentioned ARDP, which is sponsored by the World Bank and the IDA with additional bilateral support from Japan and Denmark. It entails the carving up of seven estates covering some 4200 acres, of which about 1800 are arable land, into 745 plots. The plots will generally be smaller than those made available under Phase 1, as a lot of the land was already occupied by squatters when the project started - clear evidence of the strong demand for land. Phase II is now well under way, with completion scheduled for 1996. The third phase, also EU sponsored, will deal with the so-called Mount Wynne/Peter's Hope area, which covers a total of about 700 acres on the west coast. Its commencement is delayed for a combination of reasons - the CDB is also interested in becoming involved, the results of an evaluation exercise of the Orange Hill project, which could be used to help fine-tune the third phase, are awaited, and there is the question of the area's significant tourist potential to be considered. Indeed, serious negotiations are going on with potential foreign investors for the establishment of a multi-million dollar tourism facility, comprising a 100-150 room hotel, a leisure complex, a marina and an 18-hole golf course. All in all, after Phase Ill is completed, there will be 'little left to redistribute', feels Karl John, who insists that 'the whole programme must be seen as the successful transformation of a plantation system into a thriving small farmers' community.' The proposed Mount Wynne/Peter's Hope tourism development will, in his view, 'be complementary to our agricultural diversification effort, with the tourism sector offering new opportunities for local suppliers.'

Top of the bill tourism

The development of tourism on the main island should also increase its share of this lucrative cake while relieving some of the pressure on the smaller Grenadines where most tourism is currently concentrated. That it is lucrative is beyond doubt. SVG attracts higher spending visitors than any other part of the Eastern Caribbean. The going rate in some luxury resorts varies from US$ 450 to US$ 700 a night, while villas may be rented on a weekly basis for anything between US$ 7000 and US$ 20 000 per week. The 'exclusive' tag that attaches to this destination is well-known. And with such famous regular clients as Princess Margaret, Raquel Welch and Mick Jagger, there must be something special about SVG. The list of assets - ranging from the idyllic beach resorts, the oldest botanical gardens in the western hemisphere and the stunning nature 'hikes' - is too long to enumerate. And this is not to mention the spectacular 'Vincy Mas', the highly popular carnival which provides many expatriate Saint Vincentians with a good excuse to pay a visit home and 'let their hair down'.

The Director of Tourism, Andreas Wickham, stresses the dual nature of SVG's tourism product. 'We combine a nature and heritage type of tourism on the main island with up-market classic beach tourism on the Grenadines, which in turn are situated in the middle of some unique marine resources.' Last year was a successful one, with visitor numbers increasing by 5.2% to more than 163 000. The rise in the financially important 'stayover' category was even more impressive at 6.3% (56 700). The territory of SVG, spread out over a vast and diverse array of islands, each with its competing attractions, also makes it a favoured spot for sailors and yacht enthusiasts. It is not surprising, therefore, to discover that linked marina and yacht developments have been a pole of attraction for major foreign investments. Over the past few years, three very large projects have been undertaken: a yacht yard at Ottley Hall on the main island costing US$75 million, a US$102m marina and resort development on Union Island and a tourism project on Canouan on which US$4Om has already been spent, with plans to raise the total investment to US$200m. Alpian Allen, who is the Minister of Foreign Affairs and Tourism, stresses that 'these investments must be seen as part and parcel of our overall diversification drive and an attempt at lessening dependence on bananas.' Hugh Philips, the Permanent Secretary of the same Ministry, explains that 'while the Grenadines clearly have a top reputation of their own, combining quality with serenity, it is now time to adjust the main island to that upmarket image in terms of developing its potential for eco-tourism. SVG, as a whole, obviously offers a multi-destination package, but because of the predominance of agriculture, and bananas in particular, tourism on St Vincent itself has been a sort of missing link. We have succeeded in promoting the development of some smaller hotels there, but the Mount Wynne/Peter's Hope development will obviously be a top-of-the range attraction on the main island, into which agricultural and other suppliers could be directly tied.'

There is a feeling among the tourism authorities that more emphasis should be placed on proper product development, both locally and at the level of OECS and CTO regional programmes. This is seen as particularly important for eco-tourism as an adjunct to resort tourism. Preservation of the natural environment is a major concern among those involved in the sector. The land and marine ecosystems of the islands and cays are a vital part of the country's attraction, but they are also fragile and need to be protected from overuse or carelessness by visitors. There is, for instance, the issue of solid waste disposal by yachts and cruiseships (for which a new berthing facility is planned), which is a major area of concern. Also, due to its particular geographical situation, SVG has unfortunately become a transshipment area for chug traffickers and this is proving difficult to control.

Hitherto, the view that there is an imbalance in the spread of tourist facilities between St Vincent itself and the Grenadines has not really been strongly held. 'Tourism has developed into a tradition in the Grenadines to the extent that we have obtained a very high level of loyal repeat tourists. St Vincent has always been more oriented towards agriculture and more punch will be needed here if we are to live up to a more challenging future,' explains Tourism Minister Allen.

Private sector reluctance?

The Government, however, feels that it cannot face all of these challenges alone and that the local private sector ought to step in to do its bit. So far, the authorities have been rather disappointed at the response of local entrepreneurs. 'We recognise that the private sector in St Vincent is generally weak, with a few notable exceptions. It has not responded readily to the incentives and opportunities made available but we will continue to provide what support we can to strengthen it. The problem is that reluctance to take up new investment opportunities is quite marked in the private sector.' This was how Prime Minister Mitchell summarised the situation. Among the 'notable exceptions' to which the Prime Minister referred is the SVG-based Eastern Caribbean Group of Companies Ltd (ECGC), which is one of the sub-region's most successful enterprises. ECGC's Managing Director, Ken Boyea, who is also Executive Director of the Caribbean Chamber of Commerce and Industry, does not entirely share the view common among politicians both here and in neighbouring countries. 'Most Caribbean governments,' he argues, 'are very reluctant to relinquish the stranglehold they have on their economies, as most of their power derives from providing largesse and jobs.' He claims that, up to now, few have really been interested in promoting private sector employment and indeed, that they have been 'hampering their private sectors with heavy tax burdens.' He continues; 'our local private sector does not really find the proper climate, whether in terms of support services or in the supply of properly trained staff. Most school leavers here adopt a traditional 'friendly-topoliticians' attitude in order to find a job, instead of the 'friendly-to clients' one that the private sector requires. It is no wonder that we have to spend so much time and money on in-house training. So it is not really fair to say that the private sector does not take up the challenge. Both government and ourselves should be pushing the wagon in the same direction. We now face the challenge of having to change from virtually a one-crop society to an all-sectors competitive one, and that cannot really happen without raising our debt. Look at Jamaica or Mauritius. Debt has paid for their learning process in going from rags to riches. Throughout the Caribbean, we lack a fundamental dialogue between governments and private sector on real industrial development, which needs a long-term vision which extends beyond the length of most political mandates. Foreign investment alone is not enough, because, as our own record in SVG shows, once they have used to the full their tax advantages in a sort of splendid isolation they move on to other horizons. Local entrepreneurship is vital to create subsidiary industries and to create a sort of industrial network. Also, foreign enterprises are often invited to come in to make locals more competitive. But as the example of K-Mart in St Lucia shows, they use muscle instead of efficiency to compete. Thanks to their volume on their home market, they can undercut us all the time. Our governments offer them the kinds of advantages that we can only dream of. Caribbean entrepreneurs also suffer daily because there is no real freedom of movement of persons and capital in the region.'

Hamstrung by an airport?

For an example, both of the problems involving free movement, and of a failure to find common ground between Caribbean governments and at least part of the local private sector, LIAT, the ailing regional airline, certainly offers a case in point. SVG's Prime Minister was chosen as the lead negotiator for the proposed privatisation of the publicly-owned company. However, the interests of some Caribbean governments, notably as regards employment creation, appear to have conflicted with those of others such as SVG who were more in search of reliable and efficient air services. Also, while some of the parties concerned were looking for an external deus ex machine, parts of the Caribbean private sector wanted a chance to prove they could straighten things out and put LIAT back on track themselves. As it was felt in certain quarters that the debate was going round in circles and that a real breakthrough was not in sight, the so-called 'Sunrise' project was announced in September with a view to 'lancing the boil'. A US$15 million package was put together for the setting up of a new airline, with the four Windward islands and Barbados contributing 80% of the total (70% from their private sectors and 10% from their governments) and British Airways putting up 19.9%. LIAT meanwhile is now in a kind of emergency phase. The new chairman, William Rapier, who also chairs Geest West Indies, has the task of presenting a true financial picture of the company by the end of the year, with the subsequent privatisation scheduled to take place by March 1995. Needless to say, the whole LIAT saga has been a source of discord in the region.

SVG's participation in Sunrise is understandable. It may have one of the highest ratios of airports per capita in the region - there are no fewer than five in the country - but they are all small. During the Second World War, the Americans built air bases in Antigua and St Lucia for military purposes, and these were subsequently converted to civilian use, but SVG did not have the benefit of any such 'blessing in disguise'. Today the absence of such a facility, allowing efficient connections within the region and beyond, is increasingly proving a development bottleneck. As with Dominica, tourist access is hampered and the potential for low-volume exports of high-value agricultural and other products is limited considerably. The feeling is that there is a vicious circle here that needs to be broken as a prerequisite to successful diversification and the further expansion of tourism. Given the country's physical geography, the price tag for solving the problem is likely to run into hundreds of millions of dollars. Various alternatives have been studied, but having come to terms with the nature and scale of what is needed, and subject to what they can afford (presumably including at least some outside help), there seems no realistic option other than to press ahead.

It may not be the only challenge SVG is confronted with, but it is certainly one of the biggest ones. Confidence in the future however is solid because, as the PM says, 'we have what others will pay for end we have the ability to produce what is wanted.'

Roger De Backer