(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.

(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

An interview with Prime Minister James Mitchell

'We are now being driven by the market place'

In ancient times, Prime Minister James Mitchell, now in his early sixties, would have been called a 'homo universalis': a man of many talents. Indeed, while being a keen sailor, he is also an agronomist and while running a hotel on Bequia (one of the Grenadines islands), he holds the dual responsibility of presiding over the Government and supervising its finances. Starting his political career in 1966 as a member of the SVG Labour Party, he soon resigned to stand as an independent. 'Premier' of a coalition government from 1972-74, he was in opposition between 1974 and 1979. In 1975, he created his own New Democratic Party,which he led toe victory in the Parliamentary election in 1984. Five years later, he went on to win a landslide, with his party taking all 15 seats in the legislature. On 21 February of this year, he was resumed again with a comfortable 12-3 majority and embarked on his third term of office. A leader of the 'no no-nonsense'. pragmatic kind, sensitive to the balance between the Grenadines and the main island, St Vincent, he is also a keen advocate of regional cooperation, particularly at the level of the OECS and the Windward Islands. His Caricom colleagues also appointed him to be the chief political negotiator for the sensitive restructuring and ultimate privatisation of the regional airline, LIAT. In the following interview, he comments on some of the most recent developments in the LIAT saga, as well as on the broad range of challenges facing SVG as a result of what he describes as 'the bulldozer of free trade'.

· Prime Minister, what do you consider to be the main challenges that St Vincent & the Grenadines faces in the coming years? Is the banana issue the main one to be solved? In particular, does the uncertainty which has dogged the industry for so long still exist or has it at /east been partly reoulved by the entry into force of the new market regulation and the allocation of a quota of 82 000 tons?

- Well, I agree that the banana industry is the number one concern for St Vincent and the Grenadines. It represents the largest sector of our foreign exchange and is the most important industry in empoyment terms, particularly in the rural areas. The uncertainty you mention seemed to have been resolved when the European Union agreed on the structure of the preservation of the banana protocol and that certainly made a difference. But currently - indeed, in the meeting I have been attending today - the issue is back on the agenda. Can the protocol survive the challenge from inside the EU, from Germany for example, or the external pressures being brought to bear by some Latin American countries and by the United States in the GATT and its successor body, the World Trade Organisation? We still need answers to these questions. But what we have got so far has been satisfactory. Obviously, we would have liked to have had more, but the quota allocated to us was reasonable.

Having said this, we have been suffering economically over the last year. We had our first recession for a decade, caused by the fall in the value of the pound sterling against the dollar. This has reduced our income.

· What about the internal challenge you face to make your banana industry more competitive. Are you confident that St Vincent will be able to respond to this?

- We are certainly doing our best to respond to it. We have a full programme in place to make the industry more competitive but we still require some

· A There is, of course, the big issue of banana marketing. Previously, there was an exclusive contract with Geest but I believe the negotiations, which should have been concluded by now, are still going on and relations are apparently quite strained. Also the Windwards have entered the trading side directly, through the creation of WIBDECO. How do you see the whole marketing scene evolving?

- We have relied on an exclusive arrangement in the past but under the new regime, there is now a licensing mechanism which we would like to have more control of. In the negotiations with Geest, we have been discussing in great detail how these licences should operate and who will benefit from the income directly derived from them, as well as the question of shipping. We have had a rollover contract with Geest which has only really been selling our bananas on the British and, more recently, the European market. This has involved a lot of fixed costs and all the problems have been passed on to us. Geest has continued to make a profit on its shipping and other areas of activity from which we have not benefited. So we have been working with Geest to try and restructure the entire marketing arrangement. The World Bank and the European Union have themselves pointed out certain weaknesses in the arrangements which we had with Geest. The farmers have also worked it out for themselves. We in the governments realised that unless we were directly involved in the negotiations we would have no industry in the long run.

· Is WIBDECO really going to become the commercial arm of the Windwards' banana industry?

- Definitely. It is a company that we have organised in the islands and established in the United Kingdom.

· Geest's usual response is that it is all very well for the Windwards to tell them to become more effective, but there is also a need for the land-based banana production activities to become more competitive. Do you agree?

- We agree that there is a need to increase competitiveness on both sides.

· They also argue that their contract arrangements offer long-term marketing security.

- We are not interested in that any more. This idea of long-term reliability has turned out to be a fiction. There are other people who are keen to take our bananas, especially now that there is an annual European licence. We could benefit by having a better regime on marketing.

· Is this a negotiating position?

- We have notified Geest that the contract with them has ended. Now we are negotiating afresh and if they do not come up with a new contract we will sell our bananas to somebody else. We cannot carry on, I am afraid, on the basis of a simple historical relationship. We are now being driven by the market place and we have to respond to the prevailing market conditions, within the framework of what we have worked out and negotiated carefully with the European Union.

· Is this you mentally adjusting to the 'free trade bulldozer' as you called it in this year's budget speech?

- Indeed.

· If you look at the world scene today, you see the formation of large economic blocs and groups of states around you. Do you have a sense, in the Windward Is/ands, of being marginalised and that perhaps your interests are not being properly taken into account?

- We have to look at our position in the world and make a realistic assessment of the market opportunities available to us. As the world changes, we have to change with it, and this is what lies behind our economic restructuring. It is not just a question of agricultural diversification. We also need wider economic diversification. We have already made good progress in upmarket tourism. A World Bank study has revealed, for instance, that we in St Vincent and the Grenadines attract the highest expenditure and income per visitor in the Eastern Caribbean. And so while we realise that we may not be able to compete with Latin America on bananas, we certainly have an exclusive tourism product and we clearly want to maximise our income from that. That is why we have gone into the development of shipyards and yachting facilities. This is an area where we have a comparative advantage that we can exploit.

· Looking at the question of diversifying the economic base, you have succeeded in attracting a number of large-scale investments, such as the Union Island one. Do you intend to take this approach further?

- Yes. We are pursuing it at the moment with a proposal for a big coastal development on St Vincent designed to strengthen our 'upmarket' tourism product. This in turn should allow us to achieve greater agricultural diversification because, obviously, home-based tourism generates a lot of additional demand for food and vegetables.

· Is there also an intention here to redress some of the imbalances?After all, tourism is heavily concentrated in the Grenadines rather than on the main island of St Vincent

- Yes, we certainly want to do that and perhaps relieve some of the pressure on the Grenadines.

· Talking of pressure, what about ecological concerns such as the dumping of wastes from cruiseships. Is preservation of the natural environment becoming more and more of an issue?

- There is certainly a big problem regarding the cruiseships that come to the Caribbean. We are one of those territories that have a charge for visitors, levied at 10 US$ per head. We feel that ifsomeone is not prepared to pay this modest amount, they might as well stay at home. Nor do the cruise ship companies spend much money in our countries. Under pressure, they are now beginning to purchase some goods locally, but basically they still get most of their provisions and supplies in Miami. And they don't have much of an impact in terms of labour either. So they have relatively little positive economic impact.

We are currently trying to redress this situation and we are not the only ones. Institutions like the World Bank are very concerned about the dumping of waste at sea and about applying the international rules that govern this. If these west" are to be disposed of in our islands, there must obviously be additional charges for that. We are only prepared to take cruiseship waste if we have a proper regime for dealing with our own solid wastes.

· But what about this issue of the cruiseship tax? The OECS countries agreed to apply the same levy but the cruiseship companies, in what seems to have been a 'divide and rule' strategy, succeeded in breaking the whole thing up. Some countries are now applying the tax while others are not

- That is unfortunate. It is an area where collectively we could be very strong, if we stood our ground, because 75 % of the cruiseship business comes into the Caribbean. When you look around the world, there is no area quite like the Caribbean where cruises can be offered for an extended period. In Norway, they have a season of just six weeks. The same is true for Alaska. The Mediterranean is very polluted and in the Far East, the distances are too great. So the primary area for this business is the Caribbean and, if we stand together, I think the cruiseship companies will come to understand our position. I think we will get to it in time.

· Air access is another important question, particularly for the Windwards. The privatisation of LIAT, which you have been heavily involved in, seems to have been left hanging although there has been some restructuring. In the meantime, some of the OECS countries, together with Barbados, have set up a new company, Sunrise. Are we seeing a breakaway movement here and what sort of feelings have been aroused by the issue?

- Well, the press loves it when governments differ from each other, whether in Europe, Africa, the Caribbean or elsewhere. They thrive on that sort of thing. I have spent a lot of time on the LIAT privatisation. In fact, it was me who advanced the basic idea. I complained more than anyone else because the people of St Vincent and the Grenadines have suffered particularly from the poor service. People have had to sleep in terminals overnight because of lack of connections, and visitors have had difficulties as well. Up to now, unlike other territories, we have not had an international airport. Our concern, therefore, was about better communications and transport services. For some other governments, the prime interests have been employment and prestige, not the basic question of good communications.

So it has long been a serious problem that we take very seriously. I put forward proposals for the privatisation of LIAT. These were accepted, on a step by step basis, by various CARICOM Heads of Government meetings. I went so far as to get the Caribbean Development Bank involved. Money was set aside for studies and we hired the Paribas Bank which analysed LIAT and produced a report. Everybody saw the recommendations that were put forward and was aware that the European Investment Bank had earmarked EC$ 15 million for the LIAT restructuring. Then the privatisation ground to a halt. But the market opportunity remains. I was requested at our meeting in Nassau to carry forward the privatisation exercise. In accordance with the CARICOM mandate, I had meetings with British Airways. The Prime Ministers of Jamaica and Trinidad also met with them. BA was asked to look at the situation and come up with recommendations. Some of us responded to their analysis while others did not, but at no time was there any question of creating a monopoly on air transport in the Caribbean. As a matter of fact there are several different airlines operated by different governments.

We must do what we can to improve our air transport networks. Given the problems we have with bananas and other agricultural exports, and with NAFTA, it is vital that we ensure there are no impediments to tourism.

· If you are aiming for agricultural diversification, so as to export high-value products in what must be relatively small volumes, you will presumably need runway facilities for wider-bodied aircraft. There seems to be no way round it. What is the current state of play?

- We are studying the idea. We have had various proposals but haven't yet reached the stage of being able to determine what can be done. We are still awaiting technical responses to the studies that have been done. We will also have to see what is feasible in terms of financing and I hope we can reach some conclusions before the end of the year.

· You have always been a keen advocate of some form of political integration at /east at the level of the Windward Islands. Is this still on the agenda and do you think it is achievable in the Caribbean?

- I would never be one to write off the subject, even though it looks as if it is in suspense at the present time. We in St Vincent and in the New Democratic Party have pushed this issue but I would like to see initiatives from other political parties as well. I am also waiting to see what kind of initiative might come from other governments to carry the matter forward.

· Both you, in your budget speech, and Prime Minister Compton in St Lucia, have expressed disappointment about the apparent lack of response of the private sector to efforts made by your governments in improving the infrastructure. They still appear to be concentrating on trade rather than moving into production or investment

- That problem certainly does exist. Some entrepreneurs are moving slowly in the right direction but in general I don't think the private sector has sufficient resources to embark on risk-taking ventures. Where there are market opportunities, we have seen changes for the better. For example, when we amended the hotel concessions, a lot of hoteliers improved the quality of their product and they are continuing to do so But there has not been any big move towards industrialisation. Of course, there are always the problems of marketing given the small size of our islands.

· St Vincent and the Grenadines have attracted a number of major industrial investments from the USA in the past but these have all since left.

- There was a time when the kind of factory assembly you refer to was fashionable in the Caribbean because wages were low compared to other countries. But as a result of the devaluation around us, in Central America and elsewhere in the world, the manufacturers can now make products more cheaply elsewhere. Operations of this kind have all moved out as a result.

· Are you optimistic that you can attract companies back again?

- At the moment, we are building a container port beside the industrial estate at Campden Park. We hope to make the facility more competitive and get more people involved in that area in producing goods for export.

· Politicians must always be conscious of the need to strike a balance in catering for different sections of the population. Have you succeeded in maintaining a balance between the interests of the Grenadines and those of the main island of St Vincent? You, yourself, are from one of the smaller islands. Is there competition for investment and infrastructure?

- There was a time when the Grenadines were ignored. They were effectively dependencies and very little attention was paid to their infrastructure - airports, roads, jetties, electricity and so on. When I was in the opposition, we had no electricity in Bequia, for example, for long periods. That now is a thing of the past. Both the quality and coverage of the electricity network have been improved and we have maintained a sense of balance. As Minister of Finance I have made sure that the resources are fairly spread around. If we hadn't done that, we would not have won all the seats that we did, and maintained a good working majority in Parliament.

· On a very different issue, do you find it difficult, as a small country with limited human resources, to service all the different regional and international organisations to which you belong.

- Yes, it is very difficult. That is one reason why I have tried to push the idea of political union. If we could have one person, speaking with one voice on our behalf, we would have more weight in the international community. But you put your finger on the basic issue in your question. We have all these agencies that need to be serviced and only a small number of people capable of doing it. At the same time, we have a lot of people without the right qualifications unemployed in our countries.

· Your unemployment rate is obviously fairly high. Is this a priority for you and what can you do to create new jobs?

- Our unemployment, according to the most recent figures, stands at 19 %. I see in the paper today that it is something like 12 % in France and youth unemployment is much higher. Obviously, it is a worldwide phenomenon. What one has to do is not just seek to restructure our economies, but also to get away from jobless growth. You want economic growth of course, but it must create new employment in the form of jobs that are sustainable. This takes us back to the question of human resource development and training.

· How do you see the future of the Lomonvention from a Caribbean point of view?

- There is a difference between what we would like and what we see as being the actual prospects. We would certainly like to see a continuation of the Lomonvention into the next century. We think that it has been good both for us and for the Europeans. But I recognise that with the expansion of the European Union and the new associations with the former east bloc countries, the Caribbean could well be marginalised. We also see the problems facing Africa, where there is not much progress. I do not know what is going to happen to that continent. But even if the Lomonvention has to be changed or restructured, we would like to see a continuing framework of linkages between Europe and the Caribbean. I think it has been in the interests of all parties concerned.

· What sort of St Vincent and The Grenadines would you like to see in, say, five years time, at the end of your current term of office?

- I would hope that the banana situation will have stabilised and that our economic diversification, especially in tourism, and the creation of more employment, will be advanced more.

· On tourism, you currently offer a product at the top of the market range. Isn't there a danger that if you go for numbers, you might lose out in the high-quality, high-spending sector?

- No, I don't think so. There is a big market out there and we think that with the increasing wealth in the world, there are a lot of people seeking the kinds of things we have to offer. We have to make sure that we build on our natural assets and not destroy them. That means things like good quality architecture. What we do must be compatible with the environment. We have to protect it and keep it attractive.

I am not just talking here about the physical environment. Visitors come to the Caribbean for peace and tranquility and we have to get our people to understand that those who seek privacy and relaxation do not, for example, want to be bombarded by noise. They don't want to be harrassed when they go shopping. We have to ensure that visitors are comfortable and that they continue to feel they are getting good value for their money in our part of the Caribbean. After all, everybody is going for quality these days.

· And you think that St Vincent has the most to offer.

- That is right.

Interview by R.D.B.

An interview with Vincent Beache, Leader of the Opposition

'We want genuine accountability'

Among the St Vincent and the Grenadines opposition parties there is a distinct feeling today that 'it is good to be back'. 'sack', that is, in Parliament where, after five years of absence, they have at last resumed following the 22 February 1994 election. Indeed, after Prime Minister James Mitchell's 15 0 landslide victory in 1989, the opposition has now succeeded in gaining three seats. Only shortly prior to the election, the main opposition parties, the SVG Labour Party (SVLP) led by Vincent Beache and the Movement for National Unity (MNU) of Ralph Gonsalves succeeded in overcoming some of their differences of opinion and in forging an alliance. After an unusually violent election campaign the two leaders were elected. together with Louis Straker, who stood as an independent member of the Alliance. The United People's Movement - from which the MNU had split in 1982 - failed to win a seat. Vincent Beache was Minister of Trade and Agriculture in the Government that was ousted in the 1984 election when P.M. Mitchell's New Democratic Party (NDP) took control. In this Courier interview, he highlights the different approach the opposition favours to ensure SVG's future, while stressing the need for increased accountability in government affairs.

· Mr Beache, as reader of the opposition, how does it feel to be back in Parliament 7 I am not suggesting that there was no opposition before, but it was not represented in Parliament

- You are quite right in fact. There was no formal opposition and as such, you can effectively say there was no opposition. We don't really have pressure groups here. We have only two newspapers and there are constraints on what they write because they depend quite heavily on government advertising. There is the Chamber of Commerce, of course, but they are not really a pressure group. There is also the Church Council and, I know this may not go down too well, but I don't think they have been doing as much as they could. So when there is no formal opposition in Parliament you more or less have no opposition at all.

To answer your question, it is good to be back. Being there, we are able to ask questions of the Government and at least try to get answers. I say try because it doesn't always work. As you may know, we walked out of the chamber recently because the Prime Minister refused to answer a series of questions that we had put down. There were 32 of them altogether, which was allowed under the standing orders, but when I was called to ask the first of them, the Prime Minister stood up on a point of order and said that he had never known more than three questions to be asked. He refused to answer them, although he said he might do so at the next sitting, and when they moved on to other business, we left the chamber in protest. It is different in other parts of the Caribbean. In St Lucia, for instance, they can ask as many questions as they like during the hour that is allotted to them. It is the same in Dominica. But here, they refuse to answer questions that might embarrass them. We even had a situation where civil servants were threatened with dismissal if they provided information. That is not allowed, of course, but the fear is there.

· So you feel there is a problem of accountability?

- Exactly. The rules of the House are very strict and they severely limit what you can ask. You cannot impute wrong things, even if you know them to be true. Let me give you an example. One of the questions that we asked was about the size of the national debt, both internal and external. This is a perfectly straightforward request, but we cannot get an answer. The Government will not publish any material about this. The same thing happened when we asked about certain funds that were being paid to overseas personnel. If we are to have genuine accountability we must be entitled to get answers to questions like this.

· You have expressed concern about what you have called 'erosion of the democratic process' What do you mean by this?

- Essentially, the Government is operating more by executive decree, rather than through the legislature. Of course, in small Parliaments like ours, it is not really possible to have a proper separation of powers. In practice, the executive is the legislature in the sense that because they are in the majority, they can put anything through the House. Even so, at least you can debate it there and the public can hear about it. But what the Government is doing is using subsidiary rather than substantive legislation in a lot of areas.

There is also the issue of the Deputy Prime Minister. This position is not provided for in our Constitution but in the last Parliament, the Prime Minister went ahead and appointed one. And there are difficulties over getting legal redress. We have brought a constitutional motion before the court arising from the last election. I can't say much about it because our appeal is pending, but the ruling of the judge at first instance about costs is a cause of concern to us. In a democracy, the judiciary should be independent.

· You obviously have reservations about the independence of courts in the region. You have spoken about the role of the Privy Council and said that you would not trust a higher court of appeal in the Caribbean. Could you elaborate on this?

- This is quite true. I would not support a West Indian Court of Appeal as the final court. We have seen what is happening in the Caribbean. Judges should be impartial but in this region we have had a lot of magistrates and judges who have been corrupt. This is a fact. I am not saying they are all like this, but who is to know who is or is not corrupt?

· This is a very grave accusation.

- Yes, but it is a fact which you can check out if you want. We have had some judges in Trinidad who even went to prison. We have seen it happening in other parts of the Caribbean. But what I think mostly happens is that the judiciary here tends to give the benefit of the doubt to governments rather than to what the law actually says and I think this is bad. As a matter of fact, I have known one judge in St Vincent who said that he can never rule against Government. So you see the difficulty.

· Is that why you support a continuing role for the Privy Council?

- Yes. ,When you go to the Privy Council, they look at the law and apply it strictly.

· Going back to politics, you have here a typical Westminster two party system. The opposition won three seats to the Government's 12, but what was the breakdown in terms of votes?

- I think the figures were something like 51 %for the NDP and 49% for us. It was certainly very close. On the mainland, for instance, leaving out the Grenadines, where the Prime Minister's party is very strong, we got just over 20 000 votes and they got 22 000. Because of the Westminster system, that translated into 10 seats for the NDP and only three for us. We believe that there is a need for electoral reform - some form of proportional representation or at least a combined system. indeed, we think that the whole constitution needs to be looked at.

· But isn't it the case that those who hold power have no interest in changing the system?

- Exactly, and that creates a dilemma. You might say that the party in power is not interested in reform but the opposition is. If the opposition then takes power and decides to do nothing, because the system now favours them, you are never going to get any changes. But if the process is to be upgraded and improved, then somebody has to do it.

· Did you have a genuinely common platform within the opposition at the last election, and are you planning to merge to form a single party with a single programme?

- What happened was that the two parties came together fairly late - not until after the election was called, in fact. It would have been difficult to present ourselves as one party with a single simbol because that would have meant preregistering.

· Why was the Alliance formed so late?

- Well, the two part had had discussions but they could not reach agreement initially. Then a group of prominent people - 'concemed citizens', as they called themselves - who felt there was a need for a change in government, brought the two together and we were able to work out a compromise. We had a common policy platform but the parties' own symbols were used in the constituencies where they actually stood. We made it clear at the outset, however, that we intend to merge the two parties so that we can stand under a single symbol as a united political force at the next election.

· From the point of view of economic development, in what key areas do you diverge from the view of the current Government? As a small island state, you don't appear to have a huge range of economic options. How distinctive can you be as an opposition?

- We diverge on the issue of foreign investiment. Unlike the present administration, we don't think we should just sit back until people who want to invest come to us. We believe that we should go out and try to get people to come and invest in St Vincent. We feel, for example, that there should be industrialisation by invitation.

· The Government would presumably respond that they have succeeded in bringing in two major investments.

- Nonsense. What investiments?? If you are talking about the Ottley Hall project, that do" nothing to improve the economy of St Vincent. The Government has guaranteed EC$ 155 million to an Italian company to do something that will only create 40 jobs. Overall, the project is costing over EC$ 200 million, so we are talking about something like EC$ 5 million per job. In the meantime, because of policies like this, the industries such as Wilson and Pico that we already had here have closed down. We have also spent $7 million of Canadian money, which was supposed to be a grant to establish a new industrial estate, but now there is only cattle grazing there. You can go there and see for yourself. The cattle are living in better accommodation than a lot of people. So these two major projects are not helping the economy of St Vincent and, in fact, I don't think they are going to succeed. I think it is a scam myself. We were against them from the beginning. We were not in Parliament at the time but we know how it works. The projects are guaranteed by the Government and if they fail, it is us who have to pay the bill.

In 1984 when the current Government first took power, manufacturing accounted for something like 1920% of GDP. I doubt if it is even 8% now although it is very difficult to get accurate figures here. Certainly, the last figure from the World Bank was only something like 10%. It is all well and good to have large scale projects but are they really helping the economy? I don't think so. Ten years ago, the World Bank reported that our unemployment rate was about 40%. Now it is thought to be 60% or perhaps even more, although you might see official figures of about 18%. During that time a lot of industries have closed down. The sugar factory has gone. We used to have five arrowroot factories - now we have only one. We had over 1300 acres of arrowroot fields and now it is down to something like 200 acres. These are some of the reasons for all the unemployment.

We feel that we must use agriculture as a basis for our development. We had a flourishing trade with Britain and we used to export quite a lot of produce - mangos, ginger and so on. All that is cut off now and our economy is based completely on bananas.

· Is it fair to blame the Government for all of this? Isn't it the case that farmers were keen on growing bananas because it was lucrative for them - easy money, in a sense?

- Bananas are not an easy crop. Once you get it going, and there is a weekly cash flow, it can be very good but you can lose money as well. Farmers moved out of other crops because the Government did nothing. It was the marketing corporation that used to be their mainstay. It bought the produce from the farmers and then went out and found the markets but that has now come to a standstill and the fault lies fair and square with the Government. There was also the loss of the Trinidad market. After the fall in the Trinidad dollar, they started to go more for their own produce.

So the changes weren't really because of the banana market. In fact there are certain areas which are not really suitable for bananas and where the returns are very poor: for instance, where the sugar cane used to be grown, close to the coast. But the farmers had no other option.

Our sugar sector is another example. Apart from supplying local needs, and saving on foreign exchange, sugar production is geared mainly towards the rum industry. We knew that this was one of the few commodities that we would have no problem selling in Europe. That is why, under our last administration, when I was Minister for Trade and Agriculture, we expanded the distillery. In fact that was in 1984 and we lost power shortly afterwards. The contract was completed by the present Government. But now we are having to import molasses and this is making the rum less competitive - because the Government wasn't interested in sugar. They felt sugar could be bought cheaply elsewhere but, of course, such things change. Today we can't even supply our own rum needs, far less export.

We would have diversified our agriculture. In fact we invited the Japanese and Taiwanese to investigate introducing high value products like shrimps and asparagus that can be airfreighted and still remain competitive - and it was going quite well. We introduced onions instead of having to import them, but that has now almost disappeared. We were going into rice with a view to producing enough to satisfy local demand, because we think that self-suffficiency is important.

So this is how we differ from the present Government. They feel that the private sector should do everything. I am not anti-private sector but, in a small country like ours, the Government must act as a catalyst. There isn't really a proper private sector here when you think about it - let's face it, they are all shopkeepers and for a very good reason. You buy things, and if you don't sell them today, you can sell them tomorrow. If, as a merchant, you import something that goes bad, the insurance will pay at the end of the day. You don't have union problems in the mercantile sector. But it is very different if you build a factory. The unions immediately move in. That is another reason why I think most of the entrepreneurs here are not prepared to go into manufacturing.

· There have been some complaints, even from successful enterprises like the ECGC, about the way things are being run at the moment

- I think the problem is that the Government isn't really giving the kind of leadership that is necessary to get an industry going. As for ECGC, that was another one of our initiatives of course. When I was Minister of Trade, I was the one who brought them here. I do know that they are regarded as one of the Caribbean success stories as far as manufacturing is concerned. I believe they have a good management team but I cannot say why they are complaining, I don't know the inside story.

· It seems to be a question of taxation. - Well, this is something that we have been pointing out. We have been losing companies who come in, get ten years' tax holiday, and then all of a sudden are forced to pay 45% corporate tax. This is crazy. What we would have done is to have a sliding scale. Say, after four tax-free years, you have to pay 10%, going up to 15% the following year, and so on. It is like jumping twenty feet off a roof instead of going down the stairs at a steady pace. The impact is bound to be less painful. I don't think we would lose anything by doing this. I don't think we have anything to lose, in fact. At the moment you have companies who stay for ten years paying no tax and then go off somewhere else and perhaps get another ten or fifteen years' tax holiday in their new location. It is wrong for industries to pay nothing but I accept we have to be pragmatic in finding the right balance. They obviously have their shareholders who want their dividends.

· If you look at the other major project currently under way, the tourism one on Union /eland, there seems to be a lot of popular concern over the potential threat to the environment

- Yes, I agree. It is strange that this Government should have proclaimed the 1990s to be the decade of the environment. When you look at what is happening, you see that we are still destroying it rather than doing anything to save it. I know that the people in Union Island are concerned because they are worried about the impact of the development on their swampland and their marine life. Prime Minister Mitchell, overriding the expert opinion of people like Jacques Cousteau, with whom he disagreed whether a reef - where an airport extension was going to be built - was dead or alive, just swept the ecological concerns under the carpet.

· What other developments do you see as vital for the future of the country?

- Well I know it is going to cost a lot of money but I think that we must try to get some type of international airport here. As Minister of Trade I fought for that but it fumed out to be a chicken and egg situation. When you went to the institutions to say that you wanted an airport to develop tourism, they replied that there wasn't sufficient hotel capacity. When you went to the hoteliers to see about increasing the number of beds, they replied that there wasn't sufficient infrastructure, particularly at the airport.

I feel that we have to start somewhere. When you look at what we spend on tourism in comparison to Antigua, Barbados or St Lucia, it is a drop in the ocean. If we are really serious about diversification of the economy as a whole, and not just of agriculture, then we have to look at all the possibilities including tourism. At the moment we are losing tourists because we do not have the infrastructure.

I think we also need to do more to develop small-scale industries. We would push within CARICOM, as indeed we did when were in power, for the rationalisation of the industrial base within our countries. We did it once in agriculture and although that worked quite well, it has now been scrapped. The vital thing is to create jobs. If we can't get more people employed, I fear that we could have violence here.

We already have a problem involving drugs: more and more people are fuming to marijuana growing and they might not do so if they had the opportunity of real jobs. Everyone is also well aware of the fact that the Grenadines are a major transshipment area for cocaine from Colombia and other parts of South America. Again, we need to offer proper jobs if we want to stamp this out.

You know that foreign companies get all the major contracts. I have no problem with this in principle - we need the expertise after all - but I don't see why, for example, when a company comes here from Trinidad, they should even bring their own drivers with them. That is crazy. By all means employ outside engineering firms, or whatever, but the contract should require them to employ local labour.

Another area where we disagree with the Government is over the question of the public works department. We believe that we should have one that is well-equipped. This saves money in the long run. We used to have a good public works system with all the heavy-duty equipment. When there was a contract, we leased the equipment to the contractors and of course, we still had it when they had left. Now, when you get a company in, you have to pay them to transport everything that is needed for the work to be done. This is an example of an area where we should be able to save money.

· Do you think the Government will learn how to live with an opposition again?

- Well, Mr Mitchell and, indeed, most of his MPs, ought to know how to live with an opposition. Just because they had five years without one doesn't mean that they should have become addicted to unopposed rule without any real accountability.

Interview by R.D.B.

St Vincent and the Grenadines and the European Union

by Philippe Darmuzey

St Vincent and the Grenadines, which attained independence on 27 October, 1979, enjoys, like its sister Windward Islands, a close cultural, political and economic relationship with the European Union. The country is both a member of the Caribbean Community (CARICOM) and of the Organisation of Eastern Caribbean X 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 Vincent and the Grenadines benefited from 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). St Vincent and the Grenadines acceded to the Third Lomonvention as a full member of the ACP Group in 1984. It is now one of the 70 ACP States signatory to the Fourth Lomonvention, which links the ACP States to the European Union for the 19902000 period.

Since 1976, financial resources allocated by the European Union to projects, programmes and operations in St Vincent and the Grenadines have totalled about ECU 53.9 million.

The main areas of cooperation under the National Indicative Programme resources have been agriculture and rural development (34%), social infrastructure, mainly in the health sector (37%), human resource development (3.5%), economic infrastructure (21%), tourism and trade (4%), energy and the development of small and medium-sized enterprises in the area of industry, agro-industry and tourism.

Regional coo,oeration is also a key element in St Vincent-EU relations. In common with the other ACP partners of the OECS, CARICOM and the Caribbean Forum (CARIFORUM) the country benefits from EDF regional resources. The construction of Bequia Airport, completed in 1992, is the major single operation supported from the resources of the EDF regional programme in the Eastern Caribbean, with benefits primarily accruing to St Vincent and the Grenadines.

In addition, the country benefits substantially from its preferential trade arrangements with the European Union. These include duty and quota-free access for manufactured goods and preferential access to the Single European Market for bananas, up to the year 2002, under the banana protocol. Taken together with the benefits under the STABEX compensation scheme for losses incurred in banana (or other commodities) export earnings, this constitutes a considerable component of cooperation between the EU and St Vincent and the Grenadines.

'SIDS' vulnerability

To an even greater extent than several other Caribbean and Pacific State partners of the EU, St Vincent and the Grenadines faces the major development constraints inherent to 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 SIDS syndrome is compounded in this particular island state by the geographic dispersal of micro-development poles throughout the archipelago. Against this background, it is rather difficult for the country to reconcile its development requirements and the stereotyped image of the Grenadines tourism paradise.

St Vincent's mainstay is agriculture, in particular bananas. The country's resource balance is largely determined by the level of tourism receipts, banana exports (50% of total exports) and capital inflows. Through infrastructural improvements, the country is trying to develop its tourism potential. Non-banana agricultural production has increased. St Vincent is the main supplier of arrowroot. Fish landings and manufacturing production have also increased.

Since the mid-1980s, St Vincent and the Grenadines has pursued sound economic policies. This, along with increased banana exports, resulted in strong private sector-led growth. In 1990, real GDP increased by over 6% due to expansion in banana production. The country has continued to manage its public finances well in recent years.

The country's relatively rapid economic growth since the mid-1980s only slowed down with the drastic deterioration of the situation of the banana industry in 1992-93.

The depreciation of the UK pound by the end of 1992, followed by the banana price fall on the European market (the total banana exports from St Vincent are absorbed by the United Kingdom) in 1993 have been combined with a reduced production volume, together with reduced returns to the farmers and future negative expectations, to induce a decline of 40% in local currency of banana export earnings.

Construction activity increased during 1991, due in large measure to work on the Bequia airport, mainly financed by a grant from the European Union.

GDP-growth rates for 1992 and 1993 were +6.5% and +1.4% respectively.

The recent deterioration of the performance of the banana industry and the serious economic impact of the 1979 Soufriere eruption, Hurricane Allen in 1980 and the tropical storms of 1981, 1986/87 and 1993 show the degree of vulnerability of St Vincent's economy to external shocks and natural disasters.

Both as a consequence of the necessary reform in the banana industry and its vulnerability, St Vincent is facing continued sustainable development challenges. During this transitional period, EU-St Vincent cooperation will be focused on the restructuring efforts in the banana industry and the diversification policy which must accompany the banana reform. STABEX transfers for 1992 and 1993 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, both at the national level and at the regional level, the Windward Island Banana Industry restructuring plan.

EU financial and technical cooperation

St Vincent's efforts towards sustainable development have been supported consistently by the European Union at the financial and technical level.

Under the First Lomonvention (1975-80), the island's road system and health sector, both in the rural and urban areas, received priority support.

The health sector projects consisted of the construction of a clinic at Georgetown and the construction and supply of equipment for a 50-bed paediatric ward at Kingstown Hospital in the capital.

LomI (1980-85) and LomII (1985-90) saw assistance again concentrated on the health sector, in the form of continued development of the Kingstown Hospital, where a 90-bed ward was constructed. A clinic on Union Island was also financed.

Under a revamped Master Plan for the Kingstown Hospital, the main operating theatre has been completed, the emergency department is already manned 24 hours a day, and some nurses have been sent to Jamaica for training in special recovery room techniques. On completion of the project, the hospital will have 307 beds, an increase of over 100. New delivery suites and a special baby care unit are also being built as part of the project.

The focus of the LomII programme was on rural development, notably the settlement of the Orange Hill Estate in the north-east of the island. Funds were also made available for further improvements to the Kingstown Hospital and a small tourism project.

The Orange Hill Development Project involved the settlement of 1225 hectares. It included the provision of a farm access road network (32 km), housing sites, public utilities, a central administration providing advice on crop production, the supply of farm inputs and the provision of agro-processing facilities. Shops and schools were also constructed on the estate lands.

Four-acre plots of land have been leased to farmers, with an option to purchase. A total of 400 plots were allocated. Cultivation includes coconuts, bananas, nutmegs, citrus, peppers, pigeon peas, cassava, eddoes and other fruits and vegetables. The agro-processing complex produced bottled water.

A similar land resettlement operation with potential diversification linkages in the area of tourism development has been prepared, under the LomV Indicative Programme (1990-95) on the Mount Wynne/Peter's Hope Development Scheme. LomV funds have also been earmarked for further expansion of the Kingstown Hospital, the provision of additional secondary education facilities and tourism development with special emphasis on the tourism-environment linkage.

The European Investment Bank (EIB) assistance to St Vincent has provided additional EU support in sectors not usually eligible for EDF assistance.

Under the four Lomonventions, the EIB has financed operations in support of the improvement of electricity generation through loans to the National Electricity Company (VINLEC) (ECU 6.9 million under LomI and III) and the promotion of small and medium-scale enterprises in the industrial, agro-industrial and tourism sectors. EIB partner-institutions in the latter areas were DEVCO, the Development Bank and the Caribbean Financial Services Corporation. In addition, a feasibility study on an OECS-Guyana sand supply scheme was financed in 1993 and further support in the area of port infrastructure was under consideration by the end of 1994.

Total EIB assistance for the 198094 period represents ECU 11.5 million.

Another important instrument in EU-St Vincent cooperation is STABEX, the system which seeks to offset losses in agricultural earnings caused by price fluctuations. St Vincent's exports to the EU, or other destinations, of products on which the economy is highly dependent (most notably bananas in this case), qualify for STABEX coverage.

In the period 1980-94, St Vincent has been entitled to STABEX transfers totalling ECU 6.3 million. This is particularly in relation to the period 1992-94 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 during 1993-94). STABEX transfers are being used by St Vincent for support to a major reform of the banana industry in parallel with the global efforts undertaken to diversify both agriculture and the economy as a whole.

Other instruments which benefit St Vincent include emergency assistance and NGO micro-project financing schemes. In the field of AIDS prevention, laboratory equipment and material are being supplied.

The integration of SVG in its regional environment

The EU also has an ongoing policy dialogue with the Caribbean on regional cooperation. St Vincent is a member of both CARICOM and the OECS. The latter has established a single monetary area, a common currency (the Eastern Caribbean dollar) and a common central bank (the Eastern Caribbean Central Bank).

As a member of the two organisation mentioned, St Vincent takes full advantage of the Lomegional cooperation instruments. Under LomV, it also belongs 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 Vincent 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:

Transport: The Bequia Airport is the largest single EDF-financed project in the Eastern Caribbean. The airport provided a new air link in the sub-region between the Grenadines (Bequia is the largest island of the Grenadines), and Barbados, Martinique and Guadeloupe. The airport was officially opened in May 1992 by Prime Minister James Mitchell in the presence of several Caribbean Heads of Government and Philippe Soubestre, Deputy Director-General for Development of the European Commission. The EDF contribution to the project is ECU 18.5 million, of which ECU 2 million is from the National Indicative Programme and ECU 16.5 million from the Regional programme (LomII).

Other 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 III.

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 provides for new facilities at St Vincent 'A' Level College.

A new student accommodation project under implementation for the UWI 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 Kingstown.

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 the Caribbean destinations, including St Vincent and the Grenadines.

The LomV Caribbean Regional Programme (CRIP) under the umbrella of the CARIFORUM has indentified programmes in six priority areas - agriculture, trade, transport and communications, environment and human resource development. The financial resources allocated to the CRIP for the period 1990-95 amount to ECU 90 million.

Financing decisions for the Trade Development Programme (ECU 14m), the agricultural sector programme (ECU 25m), 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 benefit St Vincent and the Grenadines directly.

Beyond the horizon of sub-regional cooperation, St Vincent, 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 Vincent 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 address 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, other Central Banks and European Universities;

- addressing regional cooperation and integration issues. These will remain of crucial importance in the face of globalisation and regionalisation trends. The countries of the wider Caribbean Basin had this in mind when they created the Association of Caribbean States (ACS) in July 1994. St Vincent and the Grenadines is one of this organisation's 25 members.

EU-St Vincent trade relationship

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

The EU accounts for approximately one-half of St Vincent's exports and one-fifth of St Vincent's imports. Bananas have accounted for more than 90% of exports to the EU in recent years.

Exports of bananas were around 70,000 tonnes. The Banana Protocol will extend preferential access to the Single European Market up to the year 2002. The subsidy implicit in the EC guaranteed banana market has been estimated to amount to about one-fifth of the total value of St Vincent and the Grenadines' banana exports. The financial support deriving from the Banana Protocol is thus far more significant than regular EU development aid to St Vincent and the Grenadines.

The combined support of the LomV Banana Protocol and STABEX provides for the most important aspect of cooperation between EU and St Vincent in the present economic transition period. It also illustrates the comprehensive and integrated use which can be made of the LomV Convention's trade and aid instruments.

EU-St Vincent and the Grenadines - cooperation (1976-1995)

P.D.