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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.)
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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*

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