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close this bookThe Courier N 148 - Nov - Dec 1994 - Dossier: Education - Country Reports: Saint Lucia - St Vincent and The Grenadines (EC Courier, 1994, 104 p.)
close this folderCountry report
close this folderSt Vincent and the Grenadines: Pulling the kite back up in the air
View the document(introduction...)
View the documentAn interview with Prime Minister James Mitchell
View the documentAn interview with Vincent Beache, Leader of the Opposition
View the documentSt Vincent and the Grenadines and the European Union

(introduction...)

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

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

A unique archipelago

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

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

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

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

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

Slow-down in growth

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

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

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

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

Revamping bananas while diversifying

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

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

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

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

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

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

Comprehensive land reform

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

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

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

Top of the bill tourism

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

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

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

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

Private sector reluctance?

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

Hamstrung by an airport?

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

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

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

Roger De Backer

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.