ENHANCING INVESTMENT, REVITALISING AGRICULTURE AND
INTRODUCTION: A Mandate with a Heavy Responsibility
I rise in humility to present the first budget to this
Eighth Parliament. Mr. Speaker, in December of last year, the people of
Saint Lucia renewed their confidence in this Administration to guide our
country through what was widely understood to be arguably its most
difficult period since independence. Indeed, Mr. Speaker, the mandate
which was given to us on December 3rd 2001 was a clear and
unambiguous indication that the people of Saint Lucia understood the
enormity of the challenge which lay before us. It is because of their
grasp of the seriousness of the global challenges confronting us, that
the people of Saint Lucia made the sensible and historic decision to
entrust us once more, with the task of charting the path for the social
and economic advancement of our people and country in these turbulent
Let me assure you Mr. Speaker, that the members on this
side of this Honourable House have not underestimated the enormity of
the responsibility which has been placed on our shoulders. We take this
responsibility seriously. We fully intend, Mr. Speaker, to approach our
duties with the resolute commitment and resolve which the current
I am confident, Mr. Speaker, that the statement which
follows will validate the trust which has, once again, been placed in
our Administration. I am also confident that, with the co-operation,
understanding and commitment of all sectors of society, it will result
in the balanced economic and social development to which we all aspire.
This budget, Mr. Speaker, is intended primarily to
respond to the difficult global economic environment now impacting on
Saint Lucia. Its main goal is to ENHANCE INVESTMENT, REVITALISE
AGRICULTURE AND STIMULATE ECONOMIC RECOVERY.
As with previous budgets, inputs from the public were
invited, submitted, considered and appropriately incorporated. Given the
peculiarities of the current economic environment, the pre-budget
process was longer, more rigorous and all-embracing. The result is a
level of analysis and prescription that addresses the times we face;
times that are conditioned by constantly changing world developments
over which we have limited control.
The year 2001 was extraordinary and it deserves special
mention. By the third quarter of last year, the global recession had
begun to take its toll. Then the world was visited by the events of
September 11, and things have not been the same since, and will never be
Ours was the first government in the region to undertake
an urgent revision of its earlier projections and to present a
contingency plan of adjustments that had to be made in the light of the
post-September 11 reality. The document entitled "Fortifying Our
Economy to Meet the New Challenges" was presented to this
Honourable House and sought to guide us through the rest of the fiscal
Striking the Right Balance
Mr. Speaker, since 1997, we have endeavoured to reshape
and reposition our economy for the challenges facing our nation in the
21st century and beyond.
Through thick and thin we have sought to strike a balance
between short-term requirements and long-term needs. We have endeavoured
to do what is necessary to protect our people from increased prices, to
release more people from the tax net to give direct assistance to the
farming community and to increase concessions to local businesses. At
the same time, we introduced those long-term measures that would better
position us to withstand the shocks ahead.
This year’s budget continues in that tradition.
We will now turn to an examination of the global
environment which has been impacting upon our development efforts here
in St. Lucia.
A DIFFICULT YEAR
International Economic Developments
Real growth in the global economy declined from around
4.7% in 2000, to 2.5% in 2001, the lowest in eight years. Even before
the terrorist attacks in the United States, economic growth had fallen
off significantly in many OECD countries.
The international economy had not fully recovered from
the 1997-1999 crisis in emerging markets, when business confidence in
the USA began to falter in late 2000. This carried over into 2001,
marked by a significant decline in investment, particularly in the
technology sector. The downturn in the US economy spread to other
countries through the financial markets and via a decline in demand for
exports. At the same time, the deepening stagnation of Japan’s economy
and the economic crisis in Argentina exacerbated the downturn.
The attack on the World Trade Centre had an immediate and
pervasive effect on the world economy. Confidence collapsed, stock
markets plummeted, and international trade, travel and tourism were
dealt a severe blow. Subsequently, although tourism recovered somewhat
in many countries, the overall impact was still catastrophic. In St.
Lucia, for example, stay-over visitor arrivals declined by more than
twenty thousand and total tourist expenditure dropped by around $122.3
While inflation was generally lower because of slack
demand and lower energy prices, 2001 was characterised by lower real
growth, growing unemployment in many countries, and shrinking world
trade in real goods and services. The volume of world trade declined by
0.2% in 2001, compared to positive growth of 12.4% in 2000.
Real economic growth in industrial economies fell from an
average of 3.9% in 2000, to 1.2% in 2001. The USA declined from 4.1% to
1.2 per cent, the UK from 3.0 per cent to 2.2%, Germany from 3.0% to
0.6%, Canada from 4.4% to 1.5%, and Japan from 2.2% to negative 0.4%.
Growth in the European Union as a whole fell from 3.4% to 1.7%.
The economic performance of developing countries is
influenced both by domestic factors and by external developments in the
rest of the world. Highly open economies, such as the countries of the
Caribbean, are heavily dependent on international trade. Thus,
performance of a country’s trading partners can have a telling effect on
the domestic economy. Given the prevailing global environment in 2001,
it is not surprising then, that growth in the developing countries as a
whole, declined from 5.7% in 2000 to 4.0% in 2001. Moreover, the
countries of Central and Eastern Europe, as well as Russia and the
Commonwealth of Independent States (the countries of the former Soviet
Union), experienced lower growth of 5.0% in 2001, compared to 6.6% in
In general, most countries experienced a slowdown in the
rate of economic growth, with many of them descending into recession.
With many of the underlying factors still unresolved, the
prospects for recovery in 2002 are uncertain. Some economists and major
international institutions believe that the recession may have already
bottomed out (at least in the USA), and that world growth will be higher
this year. The more pessimistic argue that severe weaknesses in the
economies of the USA, some European countries and other regions will
postpone that recovery.
For example, the buoyant consumer demand which
significantly cushioned the U.S. economy in 2001 may not be sustainable.
Both consumers and investors are heavily indebted and may be severely
constrained in their capacity to provide a spending stimulus to the
economy. Political instability in the Middle East, high and volatile oil
prices, high levels of public and private sector debt in many countries,
and economic crises in Japan and Latin America (particularly Argentina
and possibly Brazil), could delay a return to buoyant growth.
We believe that, barring unforeseen shocks, our own
economy, which derives strength from the fact that it is moderately
diversified, will be stabilised towards the end of this year or early
next year, after which we will begin to see the green shoots of growth.
However, this will not happen automatically, and collectively we must
work hard and be reasonable in our demands in order for that goal to be
REGIONAL ECONOMIC DEVELOPMENTS
The global recession has also had a significant adverse
impact on the regional economy. The performance of most Caribbean
Community economies declined in 2001, with at least five of them
(including St. Lucia), experiencing negative growth. Barbados declined
by around 2.8%, after eight years of growth averaging 2.9%. Dominica’s
decline is estimated to have been in excess of 3%, with Montserrat and
Grenada experiencing negative growth. I shall go into greater detail on
St. Lucia’s performance shortly.
It is interesting that three of the five countries (St.
Lucia, Dominica and Grenada), which suffered negative growth, have
significant agriculture sectors. Agricultural output, exports and
incomes throughout the region, were generally affected by drought and
other adverse weather conditions, such as the hurricane in Belize. The
low commodity prices, coupled with the exodus of producers from some
agricultural sub-sectors such as bananas, further accelerated this
Tourism activity from stayover visitors, already on the
decline towards the end of 2000 and into 2001, was further weakened by a
downturn in the last quarter of 2001. Barbados, Antigua and Barbuda, St
Kitts, St Vincent, Grenada, the Cayman Islands and St. Lucia, were all
adversely affected by the decline in tourism. In most countries, the
growth in cruise ship arrivals could not compensate for the decline in
stayover arrivals, or the heavy discounting of accommodation and other
services forced upon the tourism sector.
The manufacturing sector declined throughout the region.
The sector’s lack of international competitiveness, combined with the
global downturn, lie at the root of its unsatisfactory performance.
The fiscal position of most countries of the region
deteriorated in 2001, as countries suffered revenue losses from the
decline in export earnings and from the decision to delay passing on
petroleum price increases. Governments were generally unwilling to cut
expenditure, accumulating instead considerable debt on commercial terms,
particularly from external sources. This placed additional debt service
burdens on national treasuries at a time of weak revenue performance. A
notable exception was Trinidad and Tobago, which enjoyed higher than
expected revenue, mainly from the energy sector. However, even in that
country, growth was lower at just over 4% in 2001 compared to 6.4% in
Inflation remained relatively low in most countries, in
keeping with weak demand conditions, while liquidity seems to have
increased somewhat as financial institutions found it harder to identify
In general, the OECS economies, Barbados, Belize and the
Bahamas, were hit hard by the economic downturn in the world economy,
exacerbated in some cases by adverse weather conditions. On the other
hand, Trinidad and Tobago, Jamaica and Guyana experienced modest growth,
underscored by a robust energy sector in Trinidad, the recovery of key
mining, agricultural and other sectors in Jamaica, and the recovery of
mining, agriculture and communications in Guyana. With the possible
exception of Trinidad and Tobago, it will be a significant challenge for
all Caribbean countries to sustain or enhance growth in 2002.
PERFORMANCE OF THE DOMESTIC ECONOMY
The past year has been particularly difficult for the St.
Lucia economy. Following encouraging performances in 1998 and 1999 when
the economy grew by 3.1% in each year, representing the highest growth
recorded for the period 1993-2000, the rate of economic growth
decelerated to 0.2% in 2000.
The worsening international economic climate, driven by
the recessionary conditions, along with the most severe drought
experienced in the past forty years, drastically affected St. Lucia’s
economic performance in 2001.
These external factors, which are outside the sphere of
influence of domestic policy makers, stifled domestic economic activity.
The rate of economic growth was estimated at negative 5.4% in 2001.
Despite encouraging performances from the emerging domestic services
sector, the vital foreign exchange and income generating sectors,
agriculture, construction, hotels and restaurant, wholesale and retail,
and manufacturing, which accounted for 56% of GDP, all contracted.
Following modest growth of 2.6% in the preceding year,
value- added in the Agriculture Sector fell by 24.4% in 2001. This
development resulted in a 1.5 percentage point decline in agriculture’s
share of GDP to 6%. Value-added in the banana industry declined by 4.8%,
while its share of GDP fell from 3.5% to 2.2%.
Despite the attempt by Government to stabilize banana
output, through the provision of additional financial assistance for the
purchase of critical inputs, adverse weather conditions and leaf spot
infestation induced a 51.3% decline in banana production and exports to
34,044 tonnes. This reduction in output, combined with a 5% depreciation
of the pound sterling, resulted in a 52.1% reduction in banana revenue
to $41.2 million. On the positive side, fruit quality increased by 5
percentage points, whilst the Free-On-Truck (FOT) price increased by
4.7% to £460.7.
The volume of copra produced increased marginally, whilst
fish production maintained its positive trend and grew by 5.7%.
Livestock production expanded, and value added in this sub-sector
increased by 10.3%.
The industry which was most severely affected by adverse
global events was Tourism. In the past decade, this industry has emerged
as the mainstay of the economy and has served as a counterbalance to the
decline in the banana industry. The intricate link which exists between
economic activity in our major source markets and the performance of the
domestic sector, was clearly evident. The global slowdown affected both
the current performance of the industry and its medium-term prospects,
as increased uncertainty delayed planned direct foreign investment flows
into the industry.
Influenced by the global recessionary conditions, real
economic activity in tourism, measured by value-added in the Hotel and
Restaurant sector, contracted by 10.6%. Despite the contraction in
value-added, the tourism industry maintained its position as the single
largest contributor to GDP, accounting for 12.7% of national output.
Mobilizing additional financial support, Government acted
aggressively in an attempt to reverse the adverse developments in the
industry. Funds allocated for tourism marketing were supplemented by
approximately $3.7 million, increasing the total marketing budget to
$18.7 million. The success of this intervention was manifested by the
generally steady recovery in arrivals, especially from the Caribbean.
Overall visitor arrivals increased by 3.2% to 749,339.
The major growth impetus was cruise arrivals, which increased by 11.1%.
The continued strengthening of this sector reflects St. Lucia’s
increasing attractiveness as a cruise destination. Implementing measures
aimed at increasing the indirect benefits derived from this section of
the market will remain a major focus of government policy.
The negative external developments adversely affected the
stay over segment of the industry, where value added is greatest. Stay
over arrivals declined by 6.5%, as arrivals from the USA, Canada and
United Kingdom contracted by 6.5%, 18.1% and 16.9% respectively.
Arrivals from the Caribbean market grew by 10.3%, helping to improve the
overall picture. Growth in arrivals from the Caribbean was influenced by
increased air access and an intensive marketing campaign launched by the
St. Lucia Tourist Board.
Consistent with the contraction in visitor arrivals,
average hotel occupancy declined by more than 7.0 percentage points,
whilst gross tourism expenditure contracted by 15% or $122.3 million.
The manufacturing sector continued to struggle, despite
the continuation of assistance in the form of consumption tax rebates,
technical assistance grants and numerous other fiscal incentives. The
difficulties experienced by the sector are largely associated with its
uncompetitive pricing and structure. The ability of Government to
provide further assistance to the sector is severely constrained by
existing regional and international trading obligations.
Value Added in the sector contracted by 5%. Increases in
the output value of food and beverages (5.1%), copra and copra
derivatives (6.3%), were offset by reductions in the other major
products, including paper products (21.3%), due to the fall in banana
box demand from producers across the Windward Islands. Wearing apparel
and textiles declined by 39.5% and electrical products by 41.6%.
Declines in textiles, electronic and electrical products are directly
related to the contraction of the U.S. economy, our principal market for
The construction sector was indirectly affected by global
recessionary conditions. The reduction in the rate of domestic growth
and the concomitant decline in tax revenue restricted the government’s
ability to execute the planned capital expenditure program. The level of
uncertainty generated by global developments led to the postponement of
direct foreign investment in the hotel sector, thereby restraining
private sector construction activity. The Capital Works program of
Central Government was frustrated by delays in the planned execution of
the Roads Development Program. As far as the Caribbean Development Bank
was concerned, it was business as usual with respect to the
frustratingly long gestation period for projects.
The intensification of works on the National Stadium and
National Cricket Ground and the commencement of Fish Landing Facilities
in Soufriere and Choiseul, provided much needed growth momentum in the
sector, but this was inadequate to compensate for the decline in other
Consequently, the construction sector contracted by 5%,
and public sector activity declined by 7.1%, as actual Government
construction expenditure fell by 27.7% or $52.5 million.
The growing importance of the services sector to national
output was quite evident. Despite the weak performance of the other
foreign exchange earning sectors, activity in the domestic services was
encouraging and highlighted the continued transformation of our economic
structure. Value-added in the Communications sector grew by 11.8%
compared to 5.5% in 2000/2001. Activity in the Banking and Insurance
sector increased by 2.5%. Increased activity was also recorded in the
Electricity and Water sector, which expanded by 3.6%.
However, the retail and wholesale sector, where
performance is more directly linked to that of the banana and
construction sectors, recorded a 15.1% decline in value-added. The
sector’s contribution to GDP declined to 11.3% and was replaced by the
Banking and Insurance sector as the second largest contributor to
International Financial Services Sector
The International Financial Services Sector was fully
established just over two years ago and has made moderate but steady
progress since then. Some 440 International Business Companies have been
registered to date, of which 101 were established in 2000, 242 in 2001
and 97 for the year so far in 2002. Eight companies are international
trusts, eight are insurance companies, one is an administrator of mutual
funds and one is a bank.
The comprehensive legislative framework, the separation
of responsibilities between the supervisory and marketing agencies and
our demonstrated commitment to creating a jurisdiction of high repute,
have not gone unnoticed in the international community.
(1) St. Lucia has never been on the Financial Action
Task Force (FATF) list of non cooperative territories with regard to
money laundering. Several of the older and more established
international financial centres were included on this list and had
to take measures to come off. Our laws and regulatory standards
ensured that from the outset we met the highest standards and were
not, therefore, considered for negative listing.
(2) In addition, St. Lucia was removed from the OECD
list of territories with harmful tax practices in March 2002. This
was achieved with acknowledgement by the OECD in a press statement
that St. Lucia "largely satisfied the OECD key principles of
transparency and exchange of information".
The Caribbean Regional Technical Assistance Centre
(CARTAC), had this to say in its paper on a strategy for strengthening
the supervision of the OECS Financial System: "with the exception of
St. Lucia, the legislation governing the operations of the offshore
sector is generally deficient despite a number of amendments."
These observations have validated our efforts at ensuring
that Saint Lucia remains a "zone of integrity". As our economy continues
to adjust and modernize from agriculture to services, it is hoped that
the Financial Services Sector will, in the future, make an even more
important contribution to our national development efforts.
Money and Prices
In keeping with the slowdown in domestic and global
activity, inflationary pressures subsided. The rate of inflation,
measured by the percentage change in the twelve month moving average,
declined to 2.1% in 2001 from 3.6% in 2000. In the recent past,
Government has used the price of petroleum as one of its instruments to
contain inflation. The current recessionary conditions have exerted
downward pressure on the price of non- petroleum products, thus concerns
about inflation have lessened. This development now requires a shift in
government policy from inflation containment to revenue enhancement.
Money supply expanded by 4.7%. Of this, private sector
demand deposits, savings deposits and time deposits grew by 0.2%, 6.4%
and 8.9% respectively. Domestic credit grew by 15.5%, while outstanding
credit to the private sector grew by 4.1%. Business credit grew by 5.1%,
However, lending to agriculture, tourism, manufacturing and the
distributive trade sector all registered declines.
Liquidity in the banking system improved, as the Loan to
Deposit Ratio declined by 2.0 percentage points to 92.8%. St. Lucia
continued to accumulate foreign reserves, albeit at a slower rate. Our
imputed share of Central Bank reserves now stands at $117.3 million.
There is a direct correlation between growth in nominal
GDP and Central Government Revenue. In periods of declining economic
activity, the volume of imports contracts, triggering a decline in
revenue from consumption tax and import duty. Recessionary conditions
are also associated with declines in corporate profitability and
employment. These also produce concomitant reductions in corporation and
income tax collected by Government.
Consistent with developments in the real economy,
government’s current revenue declined to 24.7% of GDP from 26.1%. The
increased demand for social services and the strategic policy adopted to
maintain the level of employment in the public service, caused current
expenditure to increase from 20.8% to 23.1% of GDP in 2001. The increase
in the ratio of Current Expenditure to GDP reflects the absolute decline
in national output.
Central Government capital investment in the social and
economic sectors declined from 7.3% to 6.5% of GDP. The decline in
investment spending was partially attributable to a reduction in the
level of Government Savings.
Despite the implementation of expenditure controls, the
steep decline in revenue associated with the economic contraction
frustrated attempts at achieving fiscal targets. The Current Account
balance declined from 5.3% of GDP in 2000 to 1.6% in 2001.
The level of Government savings generated was clearly
inadequate and below the enviable standard previously established by
this administration. However, given the prevailing international
economic environment, the realization of positive savings is,
nevertheless, a noteworthy achievement and demonstrates an ability to
manage public finances in difficult circumstances.
I will now highlight some of our performance indices.
1. Central Government Savings to GDP
2. Central Government
Current Revenue to GDP
3. Central Government
Expenditure to GDP
4. Public Sector Savings to
5. Central Government Capital
Expenditure to Total Expenditure
The established targets provide a useful barometer to
measure fiscal performance. However these targets are heavily influenced
by the performance of the domestic economy. The inability of the
Government to attain four of the five established benchmarks is largely
related to the reduction in Current Revenue. The decline in revenue
impacted negatively on the level of savings and consequently, Capital
Expenditure. Central Government Expenditure to GDP, the only benchmark
which was not directly influenced by revenue performance, was easily
attained. The ratio of Central Government expenditure to GDP was 1.9%
below the targeted maximum. Thus, despite the reduction in GDP, tight
expenditure control ensured that this target was achieved.
A primary role of Government is the provision of public
goods and services, which contribute to the long-term development of the
country. It is very important for Government to allocate adequate
resources to the enhancement of the human and physical capital stock.
Such enhancement reduces the capital-labor ratio, increases productivity
and creates an environment conducive to private sector development.
The resources required to pursue this worthy objective
are not all available domestically. Therefore, they have to be acquired
from external sources and financed with loans or grants. Grant funding
of the magnitude required is simply not available and Government has to
borrow to finance such development. Borrowing externally to finance
development is certainly not unique to St Lucia. It is a critical
component of development planning in all developing countries.
In accessing external funds on the private market,
however, Government remains mindful of the need to ensure debt
sustainability. Accordingly the debt position is being constantly
PROSPECTS: A DIFFICULT UPWARD CLIMB
Mr. Speaker, we are all aware that the St Lucia economy
has gone through a very turbulent period. Indications are that the worst
is over but the upward climb will be difficult. To confront the
challenges posed by the current situation, the government has designed
and will implement a comprehensive set of policy measures aimed at
revitalizing the economy. These measures, along with the anticipated
recovery of the United States and world economies, are expected to
stimulate domestic output and income.
In this context of adjustment, we note that the IMF
recently revised its global growth projections upward by 1.3 percentage
points to 2.0%, in consideration of improved growth prospects for the
U.S. economy. The government intends to maximize the possible gains from
this scenario by increasing its investment in tourism marketing. Thus,
assuming that the U.S. growth momentum is sustained, stay-over tourism
arrivals are expected to show significant improvement.
The process of liberalizing the telecommunications
industry is nearing completion. The issuance of licenses to various
operators in the domestic market is likely to spur investment in that
sector, thereby generating income and employment opportunities.
After being devastated last year by the worst drought in
forty years when production plummeted to a low of 400 tons in week 27,
banana production has surged to pass the 1000 ton mark per week. Due
credit must be extended to our tried and tested farmers.
The implementation of the much delayed Road Development
Program is expected to inject approximately EC$60 million into local
construction. As our economic uncertainty diminishes, a number of
delayed hotel expansion projects are likely to come on stream. These
activities will substantially boost domestic construction, generating
growth and employment activity. Meanwhile, significant investments in
irrigation and drainage infrastructure, increased confidence and greater
access to essential inputs are expected to fuel a significant expansion
in the banana industry.
We are encouraged also by the fact that St. Lucia’s core
macro-economic fundamentals remain intact. St. Lucia’s currency, the EC
dollar, is strong, with the effective foreign reserve backing in excess
of 90%. The continuance of this very successful exchange rate regime
should be a source of confidence to the private sector.
Accordingly, government fiscal operations will focus on
maximizing revenue collection through improved efficiency and the
minimization of expenditure. The key objective of fiscal policy will be
the continued generation of savings by Central Government.
The existing fiscal and monetary policy framework ensures
that the St. Lucia economy, the most diversified in the OECS, is well
poised for a gradual turn around. Obviously, this year will be a period
of stabilization rather than dramatic growth. It will be difficult, but
with the policy mix which this government proposes, the economy is
expected to record positive growth towards the end of this year or early
We must, nevertheless, remain aware that a number of
factors at the domestic and international level could retard our
recovery. Domestic dangers include excessive wage demands, resulting in
a resumption of inflation pressures and a reduction in international
competitiveness. This is clearly not the appropriate time for workers to
lobby for unrealistic wage hikes. Borrowing by the central government to
finance current expenditure is to be avoided. Equally unhelpful is the
unwillingness by overly cautious banks to finance viable investment
projects at reasonable interest rates. To counter this reluctance, the
private sector must seek to utilize the recently established Eastern
Caribbean Stock Exchange to raise equity financing.
The inability of the business and household sectors to
obtain adequate financing at a reasonable cost, will have an adverse
impact on the magnitude and pace of economic recovery in St. Lucia. The
banks and financial intermediaries have a pivotal role to play in oiling
the wheels of growth, and their actions can accelerate or retard
It is true that the banks have taken a step in the right
direction by working with some of their clients to restructure their
debts. However, those efforts have not been extensive enough to have a
significant and lasting effect on the economy as a whole. There is a
need to ease the burden on many more businesses and households, so that
a critical mass is reached and the recovery gets underway.
The banks cannot, of course, do it on their own - no
single entity or sector can. However, we must all work together to
secure a return to growth as quickly as possible. The banks must explore
every avenue in an attempt to improve bank efficiency, lower interest
rates and reduce other costs to their customers and the economy at
These are a few examples of key domestic risk factors,
which fortunately can be managed by domestic agents. On the
international front, downside risk associated with increased oil prices
and weakening economic performance of major export markets, are all real
possibilities which domestic policy cannot influence.
INVESTMENT FOR ECONOMIC STIMULATION
Mr. Speaker, Government accepts that it must lead the way
in stimulating the economy. An economy may be stimulated by increased
investments and with a prudent but appropriate mix of fiscal and
monetary policies. Fortunately or unfortunately, we can only use the
tools of investment and fiscal policy.
The Public Sector will lead the way with the following
(1) Construction of modern fish landing facilities in
Soufriere and Choiseul. Thanks to the generosity of the Government
of Japan, the facilities will be constructed at a cost of $44.67
(2) Commencement of the Road Development Programme by
July 2002. A provision of approximately 60 million dollars has been
made in the Capital Estimates. The contract to undertake
construction of the Vieux Fort/Soufriere highway will be announced
(3) Construction of four new Police Stations,
financed under the BOLT arrangements with NIPRO, at a total
estimated cost of $5.7 million.
(4) Construction of a new fire station in Vieux Fort,
at a cost of $2.03 million, through a BOLT arrangement with NIPRO.
(5) Ongoing construction of the Vieux Fort Police
Station at an estimated cost of $6.2 million.
(6) Ongoing construction of the new jetties at
Laborie and Canaries at the cost of $2.6 million.
(7) Commencement of construction of: (a) a new
primary school at Union, at a cost of $7.5 million; and (b) a new
Technical Institute at Ciceron, at a cost of $6.1 million. The Vieux
Fort Primary (Technical Institute) will be completed at a cost of
(8) Commencement of the CDB - financed housing
programme, costing $13.8 million.
(9) Commencement of the reservoirs and installation
of irrigation and drainage networks in the banana areas of Roseau,
Cul-de-Sac, Canelles and Mabouya Valley at a total cost of $9.677
These investments, Mr. Speaker, will be supported by
major private sector investments, particularly in telecommunications and
tourism. It is anticipated that the new telecommunication operators will
invest over $150.0 million dollars to establish their operations, and
will provide new employment opportunities. The construction industry is
also expected to benefit.
In the tourism sector, Government expects that the long
awaited extension to Sandals Halcyon will commence in November.
Preliminary work will, hopefully, start on the design and eventual
construction of a Beaches Hotel by the Sandals Group in Vieux Fort.
Construction work continues on the expansion of Anse Chastanet hotel in
Soufriere. The Soufriere South bay hotel and marina project is in its
design phase. This investment, valued at approximately U.S. $75.0
million is being facilitated by the Government.
Government has also approved a charter for the
establishment of a new Medical University, to be constructed in Black
Bay, Vieux Fort.
All in all, Mr. Speaker, the economy will receive a
healthy injection of investment flows this financial year.
STRATEGIC OBJECTIVES OF FINANCIAL PROPOSALS
From what I have said so far, it should be clear that the
financial and institutional proposals of this budget virtually select
themselves. This budget has four broad objectives:
· Firstly, restoring
and strengthening fiscal stability;
stimulating economic activity in the short term so that Saint
Lucia can return to a real growth path by the fourth quarter of the
· Thirdly, enhancing
investment prospects by,
(a) reducing and eliminating where possible,
institutional barriers and hindrances to investment; and
(b) engaging in more direct and strategic
investment by Government; and
revitalizing and strengthening the agricultural sector,
particularly the continuing increase in the production of bananas.
These initiatives will be undertaken simultaneously with
policies of fiscal consolidation. Resources will continue to be directed
away from consumption and towards investment in productive sectors.
Government will continue to apply a combination of expenditure reduction
and expenditure switching policies. Precisely how these policy
underpinnings will be implemented will be explained in due course.
ENHANCING INVESTMENT PROSPECTS
Mr. Speaker, every economy needs to be fed and nourished
by investment, whether generated internally or externally. We cannot
continue to build and maintain walls to protect us against foreign
REPEAL OF EXCHANGE CONTROL ORDINANCE AND EXCHANGE CONTROL
(Securities) Order 1994
Mr. Speaker, in an era when it was fashionable to control
foreign exchange transactions, the legislature enacted, in 1951, the
Exchange Control Ordinance, now Chapter 180 (Vol. 111) of the Laws of
Saint Lucia. The legislation contains restrictions on persons, including
Saint Lucians, issuing, transferring and substituting securities
registered in Saint Lucia. "Securities" include shares, stocks, bonds,
debentures, debenture stock units under a unit trust scheme and even
shares in an oil royalty. This Ordinance is anachronistic and
inconsistent with the spirit of the times. It was intended to satisfy
colonial objectives, in colonial times.
The Exchange Control (Securities) Order 1994, sought to
ameliorate the provisions of the Ordinance by allowing the issue and
transfer of securities providing only, that the persons transferring or
issuing are, or have been, resident in Saint Lucia or in the scheduled
territories of the OECS, Barbados, Jamaica and Trinidad and Tobago. In
effect, a person outside those countries may not confidently invest by
purchasing shares in any company in Saint Lucia because he or she is not
free to deal with them without the prior permission of the Government.
This is a major disincentive to direct foreign investment in Saint
Lucia. The Government proposes to review this Ordinace, with a view to
inviting Parliament to consider repealing it.
ESTABLISHMENT OF OFFICE OF INVESTMENT CO-ORDINATION
Mr. Speaker, sourcing investment is one challenge,
facilitating it is another. Unfortunately, Saint Lucia has acquired an
unflattering reputation for red tape, procrastination, and
insensitivity. Investors are required to work with several agencies of
Government without technical support or guidance. The process is
complex, bewildering and often frustrating. Typically an investor in the
tourism sector must endure a sequence of applications and approvals of
which the Ministry of Tourism is only one stop along the way. The
investor has to seek an Aliens Landholding License to purchase land.
This involves the Ministry of Planning, the Cabinet and the Attorney
General’s Chambers. Then planning approval has to be secured, whether in
principle or otherwise. Arrangements have to be made with Customs for
duty free concessions for imported goods. Complete approval may take
anything from five months to two years in extreme cases.
Mr. Speaker, I propose to deal with these problems
directly by the following:
1. Establish in the Ministry of Commerce, Tourism,
Investment and Consumer Affairs an Office of Investment
Co-ordination. This office will be the focal point for the investor,
whether local or foreign. Personnel of this office will work hand in
hand with investors, virtually walking through the system with them
to secure the necessary government approvals.
This office and the NDC will serve different
clientele, but there will be complementarity between the services
offered. This office will be operationalised on or before July 01,
2. Subject to the approval of Cabinet, I propose to
streamline applications for Aliens Landholding Licenses in respect
of investment in manufacturing, tourism and tourism-related products
and services. Applications for investment will be made through the
Office of Investment Co-ordination. All other applications related
to the purchase of land and property will continue to be
channeled through the Ministry of Planning.
REFORM OF WORK PERMIT LEGISLATION
For some time now, Mr. Speaker, the Government has been
contemplating reforms to the Work Permit Legislation. In 1997, the
Government increased work permit fees from $1,000 to $2,000 for
Caricom countries; from $1,500 to $4,000 for citizens of the
Commonwealth countries; and from $2,000 to $5,000 for citizens of other
countries. These increases have yielded revenue in the past year
of $1,857,451.00. It is our intention to present to Parliament a
new Bill which will substantially reform the law governing the issuance
of work permits. Under the new Bill, it is intended to link work permits
to specific designations within applicant companies. That is to say, an
employer would be able to fill a position created by the departure of a
holder of a work permit without having to reapply. This would be valid
for the remaining period of the original work permit granted to the
original applicant, provided that fees are paid for the replacement.
REVIEW OF ALIENS LANDHOLDING LEGISLATION
Mr. Speaker, as we march towards a regional Single Market
and Economy, Saint Lucia will be required to join other Caricom States
and repeal legislation requiring Caricom nationals and companies to
obtain aliens landholding licences before they can register companies or
purchase shares in companies, or purchase land for purposes of
investment. Other Caricom states will be required to grant Saint Lucians
similar rights and privileges. I wish to assure Honourable Members that
this Government will jealously guard our patrimony and will ensure that
the legislation is enacted on the basis of reciprocity. Caricom
nationals shall receive no more and no less latitude than their
Governments extend to Saint Lucians.
The advent of the Single Market and Economy will compel a
revisit of the recently enacted Aliens Landholding License Act, No 9 of
1999. Government will also take the opportunity to perfect the
In order to spur investment it is necessary to remove
restrictions on the purchase and disposal of shares. Shares in companies
should be freely acquired and sold in St. Lucia.
The revised legislation will thereby re-focus on its
original target, that is, monitoring the sale and /or lease of land to
ESTABLISHMENT OF EQUITY FUND
Experience in Saint Lucia has shown that many of our
businesses are too heavily dependent on debt, mainly commercial bank
financing. In other parts of the world, corporate entities structure
their financing with reasonable proportions of debt and equity.
In periods of economic uncertainty, businesses with sound
debt/equity structures may remain more stable than those which do not
have such structures. This contrasts starkly with some investments in
our hotel sector, which were already experiencing financial difficulties
before the bad times hit us.
In an attempt to address the issue of excessive debt
overhang, the Government of Saint Lucia has joined the Bank of Saint
Lucia in establishing a $15 million Productive Sector Equity Fund. This
will be an independent fund, managed by the Bank of St. Lucia. The Fund
entails investments of $5 million from the Government of Saint Lucia, $4
million from the National Insurance Corporation, $5 million from the
European Investment Bank and $1 million from the resources of the Bank
of St. Lucia.
The Fund will be used to take equity positions in small
to medium sized enterprises that intend to produce goods and services
for domestic production and export. Such enterprises must have good
management, secure markets and must be potentially profitable. The Fund
will also invest in existing productive sector enterprises that require
financial restructuring to realize otherwise promising performance
The maximum investment in any enterprise will be the
higher of $750,000 or 40% of the equity capital in the enterprise, and
the owners/managers must hold at least 51% of the enterprise’s equity
position. The investment will be for a period not exceeding 7 years,
after which the owners can buy out the Fund’s interest in the enterprise
at negotiated market rates.
The Fund expects to make a reasonable return so as to
recycle its resources into other enterprises and to induce others,
including Saint Lucian institutions, companies and individuals, to
invest in the Fund to make it grow to meet the tremendous needs for
equity funding in the country.
NEW PUBLIC OFFICERS TO RECEIVE NIC PENSIONS
Mr. Speaker, from the inception of the National Insurance
Scheme in 1978, it was envisaged that public officers, like other
workers, would receive their pensions through the National Insurance
Scheme. This was never implemented and Government continued to be
responsible for the payment of pensions of all persons who joined the
Public Service and qualified for pensions under the Pensions Act, No. 9
of 1967, as amended. In the recently enacted National Insurance
Corporation Act, No. 18 of 2000, provision has been made for pensions of
public officers to be paid by the National Insurance Corporation.
In 2000-2001, The Government of Saint Lucia paid a
staggering sum of $32.6 million for pensions. This figure will increase
if the Public Service expands or as Public Officers proceed on
retirement. Unless action is taken now, future Governments will find the
payment of pensions unsustainable.
The amounts allocated to the payment of pensions over the
last ten years tell the story:
Commencing January 01, 2003, all new entrants to the
Public Service will pay contributions to the National Insurance
Corporation on the same basis as other employees in the Private Sector.
The Government, as employer, will pay the contribution mandated by law.
This date has been selected to permit the Minister, pursuant to section
66 of the National Insurance Corporation Act, to make Regulations to
provide for treating persons employed by the Government "in like manner
as if such persons were insured persons in the employment of a private
I wish to emphasize, Mr. Speaker, that this policy shift
does not affect the rights of existing Public Officers or if you prefer,
all persons employed in the Public Service prior to January 01, 2003.
Their pensions will be paid in the usual manner in accordance with the
REVITALISING THE AGRICULTURAL SECTOR
On that note, I now turn my attention to the Agricultural
From time to time, the impression is conveyed that our
banana farmers are oblivious to the millions of dollars poured into the
banana industry over the past five years. Indeed, some are unconcerned
about the sacrifices made by the tax payers of this country. Perhaps,
some reminders will help. Perhaps too, the taxpayers who bear this
burden need to be informed of the extent of their commitment to the
survival of the banana industry.
Financial Support to the Banana Industry
The financial help provided to the banana industry over
the past four years includes:
(a) $44 million debt write off and $700,00
forgiveness of outstanding trade payables owed by the SLBGA;
(b) $3.65 million from the European Union for the
retrenchment of SLBGA staff;
(c) $16.3 million provided by the European Union to
fund the banana production recovery plan (PRP);
(d) In 1998, $6.1 million in loans was provided by
Geest Bananas to the SLBGA to assist with input financing, working
capital and the cost of dead freight;
(e) The construction of three modern Inland Reception
and Distribution Centres (IRDC), costing $12.5 million, to stimulate
(f) Between October 2000 and March 2001, $2.5 million
was provided to fund Leaf Spot control. Additionally at the end of
2000 $1.4 million was provided to facilitate reducing the price of
banana cartons by $1.00 and in April 2001, $3.5 million was made
available by the Government for the establishment of a revolving
input credit scheme;
(g) Special leave was sought and obtained from the
European Union, to utilize funds under the 1995 STABEX Transfer,
totaling approximately $2.5 million, to finance Leaf Spot control
activities between April 2001 and December 2001 (this depleted the
funds that had been allocated under the PRP to fund on-farm
(h) Over $20 million has been mobilized under the
European Union’s Special Framework of Assistance 1999 and 2000 for
the banana industry.
These interventions do not take into consideration the
duties foregone from the provision of 100% import duty and consumption
tax exemption on farm vehicles, or the 100% duty concessions on
Therefore, in total, between 1998 and now, $109 million
in direct financial support has been provided to the banana industry.
This should lay to rest any claims that the Government has ignored the
ESTABLISHMENT OF BANANA EMERGENCY RECOVERY UNIT
In 2001, a Banana Industry Task Force, headed by Mr.
George Theophilus, submitted a comprehensive report on the way forward
for St. Lucia’s banana industry. The Government commissioned this study
because we were unhappy with the generic prescriptions that had been
proposed for the Windward Islands industry.
One of the first actions that the Government will
undertake during this financial year is the commissioning of a Banana
Emergency Recovery Unit (BERU), which will oversee the implementation of
a Banana Emergency Action Programme. The BERU will comprise a Technical
Coordinator, an agronomist (the only two positions that are being
sourced from outside of the existing public service structure), a plant
protection officer, a senior field officer and five extension officers.
The $11 million banana recovery programme, will seek to
do the following:
(1) Restore farmer confidence in the banana industry;
(2) Reverse the decline in production and quickly
restore production to the level that would satisfy market
(3) Begin the process of targeting potentially viable
high-yielding farms which could meet the product certification
standards set by the market; and
(4) Assist with the improvement of fruit quality, and
in particular, liaise with the industry and provide technical
guidance on the subject of pest and disease control.
These objectives will be pursued through a series of
interventions that will include:
(1) The targeting of farms located in the
agro-ecological zones (AEZ) that have been classified as optimally
suited for banana cultivation – i.e. only those farms that meet set
criteria and are capable of producing a minimum of 12 tonnes per
acre will be considered eligible for financial and technical
(2) The broadening of the input credit scheme to make
available a total of $5 million in a revolving fund facility,
administered through the Banana Industry Trust and the Bank of St.
Lucia, for the purchase of inputs by qualifying farmers;
(3) The coordination of the monitoring of pest and
disease development, particularly Leaf Spot Control, advising on the
timing and nature of spray treatments, and providing assistance to
the industry on the use of pest and disease control technologies
that are appropriate, safe and environmentally sound;
(4) The allocation of $2.0 million to establish a
revolving credit mechanism for on-farm irrigation and drainage
works, which will allow farmers to take advantage of the off-farm
infrastructure established under the SFA programme;
(5) The rehabilitation of 1500 acres of banana farm
land, which will consist of the addition of lime to reverse the
acidity of soils, land preparation for replanting, and the use of
high yielding, disease-resistant tissue culture varieties in a
replanting programme. This element of the Emergency Recovery Plan
will cost EC$6.0 million; and
(6) The initiation of a major information campaign
that has as its major objectives farmer education, information
sharing and confidence building.
Simultaneously, a major irrigation and drainage programme
will be implemented using the funds of the European Union’s SFA 1999 and
2000 transfers. I am heartened by the knowledge that St. Lucia is the
only island in the sub-region to have already received funds from the
European Union Special Framework of Assistance (SFA) programme. I wish
to place on record the thanks and appreciation of the Government and
people of Saint Lucia to the European Union, and in particular, the
European Delegation in Barbados for their generous support.
Under SFA 1999, the drainage network in the Mabouya
Valley, will be improved. An off-farm irrigation network will be
constructed for the Cul-de-Sac Valley, and this will facilitate the
irrigation of 440 acres of farm lands. Additionally, a 56,000 cubic
metre reservoir will be constructed in Cul-de-Sac, together with the
installation of a 2.2 kilometre gravity fed distribution line and
abstraction structure. In the Roseau Valley, an off-farm irrigation
system will be constructed to provide for the irrigation of 180 acres,
while Canelles and Marquis will benefit from the construction of
off-farm systems for the irrigation of 69 acres.
SFA 2000 will allow for the construction of a 74,000
cubic metre reservoir in Roseau, together with the installation of a 2.5
kilometre gravity fed distribution line, and an abstraction structure.
The Roseau Valley will also benefit from the construction of off-farm
irrigation systems to irrigate 140 acres, and the amelioration of the
drainage network. SFA 2000 will facilitate a much-needed improvement in
the drainage system in Cul de Sac.
These two projects will complement the two irrigation
projects that were completed during this Government’s first term of
office, which resulted in the irrigation of 94 acres in the Mabouya
Valley and 32 acres in the Troumassee Valley.
A critical difference between this plan and all of the
other plans in the past will be its strict targeting of farmers, and its
provision of direct technical support and extension to farmers. These
considerations were conspicuously absent in previous initiatives. Only
those farmers who are financially viable and capable of achieving the
required minimum productivity levels will receive financial and
Productivity Grant to Banana Farmers
Under the European Union’s Special Framework of
Assistance Programme, approximately 840 acres of banana farm lands will
be provided with off-farm irrigation infrastructure. Additionally, under
the Banana Emergency Action Plan, a total of $6 million is allocated for
field rehabilitation and the introduction of tissue culture plants in
the banana valley areas.
We recognize, however, that many of our banana farmers
will not benefit from either of these productivity enhancement schemes.
While it is vitally important that we maximize productivity in the major
banana producing valleys, we cannot ignore the important contribution
that banana farmers in other areas have made and will continue to make
to the industry. We must, therefore, provide some level of support to
those farmers who cultivate bananas on the approximately 5,000 acres of
farm lands that fall outside of the productivity enhancement programme.
Therefore, in the coming financial year, we will provide
a grant to banana farmers who fall outside of the areas earmarked for
irrigation and drainage and land rehabilitation work under the EU-funded
programme, but who farm within approved agro-ecological zones. This
grant will help offset the costs of inputs and replanting on the
targeted farms. In total, $2.5 million will be earmarked for this
purpose. The grants will be administered by the Banana Emergency
Recovery Unit, through the Banana Industry Trust, and will be applied as
a credit for the farmer against the purchase of inputs or tissue culture
SUPPORT FOR AGRICULTURAL DIVERSIFICATION
Mr. Speaker, while all of my discussion on the
agricultural sector so far has revolved around bananas, our plans for
the sector are not confined to the banana industry. A central plank of
Our Vision for Saint Lucia was our commitment to stimulate further
growth in the agricultural sector, and we intend to accomplish this by
focusing attention on the entire sector.
Therefore, in the coming financial year, we will pursue a
number of initiatives aimed at creating the right environment for the
development of the sector.
New Incentives Regime
In our 2001 Manifesto, we stated that incentives should
be given to those with a capacity to produce and a willingness to
innovate. Consequently, very early in the financial year, we will
implement a comprehensive Agricultural Incentives Regime that will seek
to stimulate entrepreneurship and encourage greater investment in the
Access to agricultural credit remains a critical
bottleneck for the sector. While we do not intend to revisit the failed
experiments of the past, we have to ensure that the conditions for
agriculture lending encourage rather than discourage, and stimulate
rather than frustrate.
Under the Special Framework of Assistance 1999 programme,
an initial allocation of $1 million will be made available to fund
investments in agricultural diversification. We are currently in
discussions with the European Union and the banking sector to explore
the feasibility of providing a technical assistance grant to persons
accessing these funds, which would allow the agri-entrepreneurs to
invest in new technologies, market promotion and product development.
This fund will be augmented by subsequent SFA programmes and the credit
facility will be administered by approved credit institutions.
With the financial assistance of the European Union, a
national Agricultural Information Management System (AIMS) will be
established. This AIMS will allow for the easy accessing and sharing of
information on levels of production, market statistics, technological
packages, and other information pertinent to the agricultural sector. No
longer will persons requiring information on the agricultural sector
have to wait for an eternity for a response to requests for data or
Our Government is always keen to work with the private
sector in the delivery of services. Indeed, this has been one of the
defining characteristics of this administration. Unfortunately, the
national agricultural landscape has traditionally been dominated by
public sector agencies.
Mr. Speaker, there is the need to change the culture of
100 percent dependence on Government. So, with financial support from
the European Union, we will work at establishing a National Consortium
of Agricultural Associations, which will be a private-sector driven body
that will attend to many of the needs of the sector. Already, we have
organizations like the Coconut Growers’ Association and the
Agriculturists’ Association that attend to the needs of segments of the
sector. There is a need to bring these organizations together into one
all-embracing body that can provide the level of assistance that our
producers need. Not only do we find that the general membership of these
various small bodies comprise the same persons, but the executives of
many of these organizations are mirror images of each other. The single
new agency will be able to coordinate production, seek markets, and
provide ancillary services, such as input supply and credit support for
MARKETING OF TOURISM SECTOR
The tourism industry has emerged as the dominant economic
sector of the St Lucia economy. The performance of this sector is a key
determinant of the economic fortunes of the country.
The level of resources available for marketing is one of
the primary determinants of the performance of the stay-over market and
consequently the sector’s overall contribution to national output. The
government is cognizant of the need to invest adequate resources in that
sector, which is regarded as the primary engine of domestic growth. In
order for St. Lucia to sustain its rate of return in this globally
competitive industry, a high level presence is required in the regional
and international market. Maintaining the requisite presence is a very
costly exercise. However, government will continue to make every effort
to ensure that adequate funds are allocated for tourism marketing.
Our promotional efforts last year proved very successful
in increasing arrivals from the Caribbean and attracting
increased airlift from major markets. This resulted in the introduction
of US Airways direct service from Philadelphia and increased flights by
Virgin Atlantic and British Airways.
The intended focus of the 2002/2003 marketing campaign
was originally geared towards the broadening of activity in the Italian
market and the development of the Swedish market. However, in the light
of the negative international developments, the marketing plan for
2002/2003 has been reformed.
The planned increase in the marketing budget will help
sustain initiatives already in motion. Thus, there will be an
intensification of activity in traditional markets as the Tourist Board
attempts to maintain and increase market share.
The attention of the Tourist Board will also be focused
on revitalizing the German market, possibly in conjunction with other
OECS countries. Special attention will also be paid to the Canadian
market. Visitor arrivals from Canada have declined and efforts will be
made to revamp this market. Promotional activity in the UK and USA,
geared towards increasing St. Lucia’s visibility and consolidating its
position on the market, will be intensified.
St. Lucia has a significant hold on the wedding,
honeymoon and soft adventure markets. This year the Tourist Board will
seek to utilize our new sports infrastructure to promote sports tourism.
The integration of sports and tourism will reinforce the viability of
St. Lucia’s new sports facilities.
Mr. Speaker, increasing the number of stay-over arrivals
is vital, particularly at this time. The decision of the Minister of
Tourism to undertake, in conjunction with Air Jamaica, a marketing blitz
in North America and Europe is, in the circumstances, deserving of
support. So important is this initiative that I have indicated that
other ministers will be made available to support these efforts. I, too,
will assist once it is possible to do so.
TOURISM HOSPITALITY AND DEVELOPMENT BILL
Mr. Speaker, in the 2001/02 Budget Statement, I announced
that Government intended to "permit the maximum of fifteen years on the
duration of the concessions period to be extended by an additional year,
for each $10 million invested up to a maximum of twenty years".
On reflection and after consultation with stake-holders,
it became apparent that Government needed to address "the entire
Currently, the Tourism Incentives Act, No. 7 of 1996,
contains Income Tax benefits (Part III) and specifies applicable Customs
Duty Exemptions (Part IV) to any approved tourism project. The Act is
not only complicated, but fails to set out with clarity the range of
incentives which are available to investors. Moreover, it is necessary
to contain the incidence of repeated requests for concessions.
The new Tourism Hospitality and Development Bill will
retain the concept of "an approved tourism project", but will widen its
definition to include not only hotels, but also restaurants, villas,
time-share properties, recreational facilities, and leisure craft. The
legislation will specify the goods, including building materials, which
an approved tourism project can import or purchase locally free of
duties and taxes. The Bill will also introduce a ceiling on the
frequency with which concessions may be granted.
These changes are necessary, Mr. Speaker, not only to
ensure the balanced development of our tourism product, but crucially,
to enable us to maintain our competitive advantage. The environment in
which we compete is aggressive and unrelenting and we cannot ignore it.
FISCAL POLICIES AND INITIATIVES
Mr. Speaker, the challenging times will not force a
retreat from introducing fiscal and other policy measures to assist the
private sector and to redefine our financial landscape.
I shall now proceed to introduce this year’s fiscal
policies and initiatives.
BROADENING PARTICIPATION IN THE BANK OF ST LUCIA
The National Commercial Bank of St Lucia was partially
privatised in 1999 and successfully merged with the St Lucia Development
Bank in 2001.
The foresight of our Administration in establishing a
National Bank more than two decades ago, privatising it when the time
was right, and merging our two primary financial institutions under one
roof, has proven to be sound.
Government assumed the role of catalyst, then broadened
participation when it became appropriate and the institutions were
sufficiently mature. Ultimately, Government sold sixty per cent of the
Bank to citizens and to the private sector, and retained forty per cent.
Public sector participation of forty per cent proved to be a source of
comfort for private investors, including those from overseas. The Bank
has grown from strength to strength.
However, one consequence of Government’s strategic
approach to the development of its financial institutions was that other
public sector entities were prevented from purchasing shares despite the
strong interest from institutions like the National Insurance
Corporation (NIC). It was Government’s view that Central Government
itself should retain ownership of forty per cent of the Bank, given the
need to generate a high degree of confidence in the new entity. Investor
and shareholder confidence in the Bank has been achieved and continues
to be high, although, as in every institution, there is much room for
improvement in some areas of the Bank’s operations.
The time has now come to give other public sector bodies
the opportunity to participate in the ownership of the Bank of St Lucia.
The Government has, therefore, offered one quarter of its
ordinary shares to the NIC and one quarter to the Saint Lucia Air and
Seaports Authority. This will reduce Government’s shareholding to twenty
per cent and give each of those institutions a large enough stake to
appoint one director each to the Board, with Government reducing its own
directors by two. In addition, the NIC will purchase 2.73 million
preference shares which Government owns in the Bank. Those shares have a
fixed rate of return of 7% per annum. The NIC will be able to convert
these to ordinary shares over a 10 year period, according to a formula
which will ensure that three ordinary shares are offered for sale to the
public for every two preference share converted to an ordinary share by
NIC. The use of the formula will make additional shares available to the
public over the 10 year period and maintain the public-private ownership
This phase of the Bank’s growth reflects Government’s
role as a catalyst in stimulating financial sector development and
diversifying the ownership of our institutions. Meanwhile, the
Government will monitor the progress of the Bank and will, in time,
determine a course of action for the next phase of its development.
Tax Payment Settlement Plan
Mr. Speaker, over the years, the Inland Revenue
Department has been making inroads in persuading taxpayers who have
arrears to settle their obligations to the State. Notwithstanding, I
have often been approached by taxpayers who, although recognizing their
obligations, request that some relief be granted on interest and
penalties to ease the tax burden.
As a result of the above, I am happy to announce that the
Department will be offering a Tax Payment Settlement Plan. It is the
intention of the Department to offer interest and penalty waivers as
part of the Plan. The Plan is not an amnesty offered for a specific
period of time, but will be a permanent arrangement where taxpayers can
be offered the opportunity to settle their arrears in accordance with a
prearranged payment plan tailored to their specific cash flow
projections and their ability to pay. The Plan is, however, designed to
offer incentives for early settlement. If, for example, a taxpayer
agrees to take advantage of the Settlement Plan and indicates his desire
to settle over a short term, the waivers offered will be more generous
than if, say, the settlement period was over a longer period.
The Plan also gives the Comptroller the opportunity to
waive a portion of the tax charged as well as interest and penalties, on
long outstanding assessments where there is evidence that the taxpayer
does not have the ability to pay or where assessments were derived
Mr. Speaker I will now explain some of the features of
With respect to income tax assessments for Income Years
1996 and prior, there will be interest and penalty waivers of up to 70%
and 100% respectively. Thus, for example, if settlement is before March
31, 2003, the Plan will offer waivers on interest up to 70% and waivers
up to 100%. However, if the settlement extends to March 31, 2004, the
waiver offered may be as low as 40% on interest and 100% on penalty.
For income tax assessments for Income Years 1997 to 2000,
there will be interest waivers of up to 40%. If the taxpayer agrees to
settle tax obligations before March 31, 2003 the waiver will be up to
40% on interest and up to 100% on penalties. However, if settlement
extends to March 31, 2004, the waiver offered will be 30% on interest.
Further Mr. Speaker, the Comptroller will be in a
position to waive up to 50% of interest if the settlement period is
beyond March 31, 2004. This will be dependent on the Income Year for
which the tax is due.
Moreover, should payments be made within a six month
period, no interest will be charged on the outstanding balance during
the period. In other words Mr. Speaker, the shorter the payment plan,
the more generous the interest waiver.
It is my hope, Mr. Speaker, that taxpayers will take
advantage of this Payment Plan being offered by the Inland Revenue
Department, as we clearly want everyone to own up to their
responsibilities to ensure that their tax affairs are in order.
Increase in Personal Allowances
Mr. Speaker you will recall in my presentation to this
Honourable House last year that I indicated that there would be phased
increases in the Personal Allowances that individuals can claim for
Income Tax purposes.
Most Honourable Member are familiar with the position of
the Income Tax (Amendment) Act, No.9 of 2001 (Section 21 page 135),
which amended the Sixth Schedule of the Income Tax Act to allow for
claims for Personal Allowances of $12,000.00 in Income Year 2001,
$14,000.00 in Income Year 2002, and $16,000.00 in Income Year 2003. I
wish to reaffirm Mr. Speaker the intention of this Government to
progressively ease our people from the burden of Income Tax. This year,
it is expected that an additional 1,000 taxpayers will benefit, bringing
the total so far to 4,200 taxpayers.
Mr. Speaker, the adjustments for Income Year 2002 came
into effect on January 1st, this year, while the increase to
$16,000 for Income Year 2003 will come into effect from January 1st,
2003. I urge taxpayers, therefore, to ensure that they programme the
change into their tax codes so that they may realise immediate benefit.
CORPORATE TAX ADJUSTMENTS
Mr. Speaker, we continue quietly to make adjustments to
the Income Tax regime, as promised. This year we will focus on
Corporations. I wish now to announce two adjustments that will be
implemented to the Corporate Tax regime. The first is with respect to
Capital Cost Allowances and the other relates to the utilization of
losses by companies within a group.
Capital Cost Allowances
I intend to amend the Income Tax Act to allow for certain
qualifying businesses in the commercial sector to qualify to claim
capital allowances on commercial buildings.
Currently, the Income Tax Act allows for capital
allowances to be claimed on buildings used for the manufacture of goods
or materials, the extraction of natural resources by mining or drilling,
and for agricultural purposes. I intend to expand the scope of the
allowances to include commercial buildings used in the retail and
services industries. Capital Allowances will not be claimed by companies
that are granted fiscal incentives in the Tourism industry. These
companies already enjoy 100% income tax waivers.
The capital allowance will be set at an annual rate of
2.5% of the initial cost of the building, in the case of a new
acquisition or on the written down value of buildings brought into the
calculation for the first time. The allowance will be applicable for
companies from income year 2002.
Accumulated Tax Losses
Beginning income year 2002, accumulated Income Tax losses
will be made available to the subsidiary or parent companies of a group
on the reorganization of that group of companies. The utilization of the
tax losses will be based on the substance of the group reorganization,
which must be approved by the Comptroller of Inland Revenue. The losses
will be made available under the current rules (i.e. available for carry
forward for five years and at a maximum of 50% of the taxable profits
for any income tax year).
Usually, corporate restructuring and reorganization of
groups of companies involve the rationalization of assets and
liabilities. In most cases, these transactions may include changes in
ownership of assets and liabilities. Under our current stamp duty
ordinance the imposition of stamp duties would apply. This makes the
cost of the transactions prohibitive. Once the Comptroller has approved
the reorganization, I propose Mr. Speaker, to waive all stamp duties
applicable to such transfers.
It is expected that companies within a group can now take
advantage of this opportunity to reorganize their structure so that they
can become more competitive in the present environment. Further
companies within a group can now be encouraged to diversify certain
aspects of their operations to take advantage of listing on the OECS
Mr. Speaker, Honourable Members, I come now to the most
critical juncture. How do we finance this budget?
FINANCING THE BUDGET
Mr. Speaker, I can assure you that the formulation of the
budget for the fiscal year 2002/03 was no easy task. Some very tough
decisions have to be made this year, if we are to steer the economy back
on course for a more balanced and sustained recovery from the deep
contraction we experienced in 2001. We are faced with the arduous task
of reversing the deterioration in fiscal performance in fiscal year
2001/02, caused by a substantial shortfall in revenue collections.
Principles Underpinning Budgetary Policy
This budget must provide the platform for macroeconomic
stability, which will provide the basis for higher levels of economic
growth and employment in the future. This Budget is, accordingly,
characterised by two core elements:
(1) a strong commitment to sound fiscal management;
(2) an equally strong commitment to the
transformation of the economy, which is reflected in a range of
policy measures and spending proposals that I shall elaborate later
in my presentation.
The fiscal stabilization measures which I outlined in the
Statement to the House of Assembly on September 25, 2001 will continue
until further notice.
We will not sacrifice our long-term goals in the face of
extreme short-term pressures. It is tempting to succumb to the
short-term pressures and borrow ourselves out of the current recession.
In fact, history has shown that many countries have done just that and
we know where they have ended – at the doorsteps of the IMF. Mr.
Speaker, I wish to reconfirm: I will not be lured into excessive
borrowing to the extent that our debt position becomes unsustainable.
Whatever borrowing that is needed, will be within acceptable limits and
utilized for the purpose of stimulating growth.
Reduction In Expenditure
To indicate Government’s commitment to the implementation
of the policies aimed at increasing the rate of domestic savings for
investment, I propose to contain recurrent expenditure. Over the last
three fiscal years, recurrent expenditure has grown by 4.6%, 7.2% and
11.2% respectively. In the face of a contraction in revenue, this rate
of growth must be reduced in order to safeguard macroeconomic stability.
The wage bill, including salaries, accounts for the
largest component of current expenditure; this year it is projected to
account for 50.3% of this expenditure. It is important, therefore, that
we restrict its growth. In this regard, one of the programmes that
regrettably we have to defer is the civilianization of the Immigration
Department, due to the high wage cost.
Review of Planned Expenditure
Total planned expenditure for 2002/03 amounts to $780.8
million, 8.9% lower than the previous year. This is made up as follows:
(1) Recurrent Expenditure, exclusive of debt
amortisation, amounts to $460.5 million, representing 59.0%
of total budgetted expenditure or 25.8% of GDP.
Amortisation of $32.3 million or 4.1% of total budgetted
(3) Capital Expenditure of $288.0 million,
representing 36.9% of total budgetted expenditure.
Total Planned Government Expenditure of $780.8 million
will be financed from the following sources:
Recurrent Revenue of $473.1 million in
2002/03 or 26.5% of GDP;
Capital Revenue of $26.2 million,
representing the divestment of shares in Bank of Saint
Grant funding of $66.9 million;
Loan funding of $214.6 million, of which
$130.1 million will be provided from loans already
contracted. The World Bank is providing approximately
$6.4 million in the form of direct budgetary support.
Allocation of Expenditure
Mr. Speaker, I will now provide a brief summary of the
allocation of projected Government Expenditure among agencies for the
fiscal year 2002/03, paying particular attention to investment
expenditure of special significance. Given that a number of agencies
were reconfigured after the General Elections in December, one must be
careful in making comparisons with previous fiscal years.
The Economic Services Agencies will receive
$459.6 million or approximately 58.9 percent of total
expenditure. Amounts of $83.9 million and $27.0 million are
earmarked for debt servicing and pensions respectively.
Mr. Speaker, I indicated that this Government
would be an Agriculture Government. In keeping with this
commitment, I propose to allocate to the Ministry of
Agriculture, Forestry and Fisheries a sum of $50.6 million, for
much needed investment in this sector.
The tourism sector will receive $23.4 million for
investment purposes, of which $20 million is for tourism
marketing and promotion.
The Ministry of Communications, Works, Transport
and Public Utilities will receive $71.0 million or 24.7% of the
Capital Budget. Mr. Speaker, this agency receives the largest
share of the Capital Budget this year and reflects the overall
importance we place on improving and upgrading the road
The Ministry of Planning, Development, Housing
and Environment will receive $64.7 million, the second largest
share of the capital budget.
An allocation of $1.9 million is provided for the
Ministry of Commerce, Investment and Consumer Affairs, which is
to be utilised for the Repositioning of the Micro and Small
Scale Enterprise Sector, the Small Furniture Manufacturers
Project, the Establishment of E-Commerce and other Trade,
Industry and Consumer initiatives.
The Social Service Agencies will receive an
allocation of $228.3 million, of which $175.3 million is for
recurrent purposes and $53.0 million is for capital expenditure.
The Ministry of Education, Human Resource Development, Youth and
Sports will receive 108.9 million, or 22% of the total recurrent
budget. The Ministry of Health, Human Services and Family
Affairs will receive $52.5 million, approximately 10.7 percent
of the recurrent budget. A sum of $13.8 million is allocated to
the Ministry of Social Transformation, Culture and Local
Government, of which $1.1 million is for the newly established
Cultural Development Foundation.
The capital allocation of $53.0 million is distributed as
(a) The Ministry of Education, Human Resource
Development, Youth and Sports is to receive $29.3 million;
(b) The Ministry of Health, Human Services and Family
Affairs is to receive $8.3 million; and
(c) The Ministry of Social Transformation, Culture
and Local Government is to receive $15.4 million.
In the area of Health, $3.5 million is allocated for
the New National Hospital, $1.1 million is available to Victoria
Hospital for repairs and for the purchase and repair of medical
equipment, and $1 million is allocated for rehabilitation of primary
health care facilities.
Mr. Speaker, the lion’s share of the capital
allocation of the Ministry of Social Transformation, Culture and
Local Government is to be injected into the Poverty Reduction Fund,
which shall receive a total amount of $11.0 million, or 61.7% higher
than the previous year. One of the programmes being funded by the
Poverty Reduction Fund is a Rural Employment Programme, for which a
sum of $1.9 million is available.
The Portfolios of the Attorney General’s Chambers,
the Ministry of Justice, and the Ministry of Home Affairs and Gender
Relations, which together comprise the Justice Agencies, will
receive $62.7 million. Under capital expenditure, approximately $2.1
million is provided for fire fighting vehicles and equipment, $7.5
million is allocated for the completion of the Bordelais
Correctional Facility and $200,000 is provided for a Local Frame
Relay Network that will allow for improved communications in the
The allocation for the General Service Agencies,
which include the Office of the Prime Minister, the Ministry of
Labour Relations, Public Service and Cooperatives and the Parastatal
Monitoring Department, is $25.2 million. An amount of $1.9 million
will be made available for the Private Sector Development Programme.
The Office of the Governor General and the agencies
of Parliament, namely, the Legislature, the Service Commissions, the
Electoral and Audit Departments will receive a total of $5.0 million
in 2002/03, representing an increase of 3.6% over the previous
MEASURES TO GENERATE REVENUE
Mr. Speaker, Central Governments’ fiscal position
deteriorated sharply during the last financial year. Government savings,
so necessary, particularly for the financing of, our social investment,
were unavailable. Therefore Mr. Speaker, in support of this budget, I
propose the following revenue measures.
TAX ON CELLULAR PHONES
The liberalisation of the telecommunications industry has
revolutionised the telephone landscape. A new market sophistication has
emerged, and prices are set to decline significantly. The general thrust
of the government tax policy has been to gradually shift from a direct
to an indirect tax system.
In keeping with this strategy, I propose a 10% cellular
tax to be applied on gross sales or gross receipts. Therefore Mr.
Speaker, every provider of a cellular service shall, from the effective
date, add to the price or charge for such service and collect from every
purchaser, 10% of the gross charge thereof. As an example Mr. Speaker,
if a post-paid customer has a monthly charge of $50 for his cellular
phone in a billing period, a $5.00 tax will be collected by the provider
on behalf of government. Similarly, if a pre-paid customer purchases a
$40 cellular card that customer will pay an additional $4.00.
A similar tax will be introduced in respect of cellular
telephones used by visitors to Saint Lucia. Our air-space is a resource
to be used wisely. Implementation of this tax will entail some
adjustments to the present billing system of current and future service
providers. The tax will be added to the call charges before the final
Let me make it clear Mr. Speaker that this tax will apply
Only to the cellular service and NOT to
Regular Telephones. This measure will take effect on May 4th
2002, and all providers and sellers will be required to remit all sums
due to Central Government no later than the 15th of the
EXCISE TAX ON MOTOR VEHICLES
Mr. Speaker, over the past decade there has been a
significant and rapid expansion in the used car market and an
accelerated decline in market share of the new vehicle dealers. In the
process, we have experienced:
1) extreme congestion on our motorways; and
2) substantial accumulation of derelict vehicles,
which is hazardous to the environment.
Importantly too, Mr. Speaker, when the Government
deregulated the sector in 1999, allowing for greater competition in the
market, it was never intended to encourage under-invoicing or for that
matter the consequential loss of revenue.
Consider Mr. Speaker, the following statistics, when the
periods April to December 2000, and April to December 2001 are compared.
Imports of used cars more than doubled, from 1,366 units to 3, 427 yet
the total value of the vehicles as assessed by Customs declined from
$23.4 million to $19.3 million: a drop of 21%. The assessed duty
liability declined from $15.9 million to $9.8 million, a drop of 38%.
This situation is alarming. So, while there was an increase in imports,
the customs value dropped by 21% and the assessed duty by 38%.
The present situation is untenable for many reasons, Mr.
Speaker. The secondary market for used cars is virtually dead. Persons
who purchase new cars are unable to resell their vehicles, as second
purchasers prefer to buy imported used cars. Banks who repossess used
cars are discovering that they are unable to attract buyers. Much as I
believe, Mr. Speaker, that individuals have a right to own vehicles, the
current situation is untenable.
Against this background, Mr. Speaker, I propose the
following changes in respect of the importation and applicable duties
and charges for motor vehicles of heading 8703 of the Customs Tariff:
1) Firstly, I propose to remove the five year age
limit on the importation of used vehicles.
2) Effective May 4th 2002, the Excise duty
for vehicles classified under Tariff Head 8703 will be reduced by 10
percentage points. By way of example Mr. Speaker, a motor car of a
cylinder capacity exceeding 1500 cc but not exceeding 1800 cc, which
currently attracts excise duty of 40.5% of the customs value will
now attract a 30.5% rate.
3) The following changes to the Environmental Levy
Act are also proposed:
a) New Vehicles $1,000
b) Used Vehicles –
i) up to 2 years $6,000
ii) exceeding 2 years
but not exceeding 4 $9,000
iii) exceeding 4 years $12,000
This measure is expected to increase revenue intake by
approximately $3 million.
I wish to emphasize that the foregoing will not affect
the duty-free importation of vehicles by returning residents.
Mr. Speaker, in the 1998/99 Budget Presentation, I
introduced two significant reforms in respect of petroleum pricing. The
consumption tax on gasoline and diesel was fixed at a desired rate of
$2.85 per gallon, which includes a $0.45 per gallon consumption tax to
compensate for the removal of the annual vehicle licence fee and allowed
to fluctuate within a range of plus or minus 10 cents. Therefore if the
world price of these fuels changed, pump prices would change in line. In
so doing, both the consumer and the state would have benefited or shared
in any possible gains or losses.
The benefits of this arrangement for the average consumer
were realised when, in October of 1998, gasoline prices were reduced in
line with a fall in world market prices. However, conditions on the
world market have changed dramatically and world oil prices have since
sky-rocketed. As a consequence, except for a brief period between
October 1st 2001 and March 4th 2002, the desired
consumption tax rates for both gasoline and gas oil (diesel) have not
The strategy of absorbing increases in the world price of
oil through reductions in consumption tax intake represented a
deliberate attempt by the government to control inflation. This policy
was very costly, but was necessary to maintain macroeconomic stability.
Allow me, Mr. Speaker, to draw to the attention of this
Honourable House the cost to Government of not adjusting gasoline
prices. Between 1999 and 2001 Government lost a total, of EC$
48,826,958.66 in revenue in order to control price inflation. Honourable
members should also note that, had a partial adjustment not been made on
October 16, 2000, the loss in 2001 would have been substantially higher.
Based on the current world price of petroleum, the
government currently subsidises domestic petroleum purchases by $1.14
per gallon. Indeed Mr. Speaker, every time an individual purchases one
gallon of petroleum the government effectively pays $1.14 of the cost.
In the light of the fact that oil prices depend heavily on economic and
political factors, which at the moment are very volatile, indications
are that world market prices will increase further.
Failure to adjust domestic prices to reflect world prices
will result in the further loss of significant revenue for this
Mr. Speaker, with inflation decreasing from 3.6% to 2.1%,
the government has decided to abolish the policy of absorbing the full
effect of increases in the price of oil. Therefore, we have no choice
but to utilise the pricing mechanism announced in the 1998/99 budget
effective May 5, 2002. If followed, petroleum prices would be as
Gas Oil (diesel)
However, the government is conscious of the effects of
such a substantial charge on the average consumer and will continue to
subsidize petroleum prices by 36 cents per gallon. Therefore, petroleum
prices will be as follows:
Gas Oil (diesel)
Mr. Speaker, part of the increase will be used to address
the concerns of the dealers and suppliers.
Mr. Speaker, I want to emphasise that the price of
Kerosene and LPG (cooking gas) will not be altered.
The fiscal performance of the economies of the OECS has
been severely affected by the upward movement in world oil prices. Mr.
Speaker, the countries which have attempted to absorb the price effects
without any adjustment have come under tremendous fiscal pressure. St.
Lucia has taken a more balanced approach by protecting consumers through
potential subsidization and ensuring that the fiscal position is not
Mr. Speaker, the options are clear. Either we borrow to
subsidise the cost of fuel or we make the adjustment needed. It is not
an easy decision, but let us do what has to be done.
Government will continue to monitor and analyse the
developments in international oil prices and in keeping with the spirit
of the 1998/99 budget will make further adjustments where necessary.
In order to provide some level of relief to our fishers,
the cost of local fishing licenses will be reduced from $25 to $5 per
annum. This is the minimum amount required to cover the statutory costs
of licensing vessels for sea worthiness and safety. The new fee for
fishing licenses will be in effect from 1 April 2002.
TICKET TAX FOR MARKETING
Mr. Speaker, the point has been made that there can be no
tourism without marketing. As Honourable Members have noted, marketing
for tourism takes money, significant sums of money. This year’s
marketing budget is 20 million dollars.
All regional economies that depend on Tourism as their
lead sector are under extraordinary fiscal stress at this time. Money
for marketing must, however, be found somewhere.
At the Nassau Summit on Tourism it was proposed by
hoteliers that a regional marketing fund be established by levying a tax
on all tickets purchased by travelers to the Caribbean. This proposal is
attractive, but care would need to be exercised in selecting the rate of
the tax, lest it becomes a disincentive to travellers.
The principle of levying a small charge on persons
enplaning to the Caribbean was introduced in Bermuda in January 2002,
albeit to meet increased security costs. Likewise, all visitors to
Grenada pay EC$ 20.00 as a "Facilitation Fee", regardless of origin.
Saint Lucia proposes to follow the lead of Bermuda.
Effective July 1st, 2002, all persons enplaning to Saint
Lucia, will be required on purchasing their tickets to pay a fee of U.S.
$5.00. This revenue will go towards marketing of our tourism product. It
is expected that this measure will yield EC$ 2.7 million dollars.
The introduction of such a fee is nothing new. Saint
Lucians who travel to the United States pay the U.S. Government
approximately EC$ 110.90 in airport taxes, while those who travel to the
United Kingdom pay approximately EC$ 110.40. The traveler is not aware
that he or she is paying those charges since they are included in the
INCREASE IN CONSUMPTION TAX ON TOBACCO
Mr. Speaker, in the 1998/99 Budgetary Statement, I
announced an increase in the Consumption Tax on cigarettes, cigars,
cheroots and cigarillos. Apparently, this increase did not deter or
discourage smoking, even among my parliamentary colleagues who should
set the example.
In the circumstances and given the clear medical advice
to limit and discourage smoking, I propose to increase the consumption
duty on tobacco and tobacco products by 15%. A certain percentage of the
revenue raised by this initiative will be given to the St. Lucia Cancer
Society to intensify its work in cancer screening throughout the
Mr. Speaker, In the 2001/2002 Budget presentation, I
alerted Honourble Members to the plans of the Government to provide a
secondary school place for every child. The road is now clear. I am
pleased to present the financial details of the programme to ensure that
our children can become productive and globally competitive citizens of
the new Century.
THE ROAD TO UNIVERSAL SECONDARY EDUCATION
Government has increased access to secondary school
substantially over the last five years and we are now on the threshold
of realizing Universal Secondary Education. The new O.E.C.S. Education
Development Project, financed with the assistance of the World Bank,
will help to make this a reality and significantly improve the quality
of education. The importance of this project to the future of education
and our overall development cannot be over-stated.
The total cost of the new project, including investment
and recurrent costs, is US$19 million or E.C. $51.3 million dollars.
This will be financed by a combined World Bank/International Development
Agency loan and credit of US $12m, together with counterpart funding of
US$2.8 million. An additional US$3.4 million in recurrent cost will be
financed from the education budget, and grant funding of US$0.8 million
will come from the British Department for International Development.
The targets to be attained by this project include:
Creation of an additional 1,785 secondary school
places through the construction of two additional secondary
schools. The new schools will be constructed in Gros Islet and
Anse La Raye.
Upgrading of 420 existing spaces from Senior
Primary to Secondary, by expanding, upgrading and rehabilitating
existing schools in Micoud and Dennery (including the conversion
of the Grande Riviere Senior Primary to secondary status).
Increase in our net enrollment rates at secondary
level from 64% to 77% by 2006;
This project will be complemented by the following
institutional strengthening measures:
(a) improving the quality of teaching and learning;
(b) improving governance and management; and
(c) redesigning the common entrance exam.
On completion of this project, the dreaded Common
Entrance Exam will be completely redesigned. Instead of a do or die, one
shot exam, students will be continually assessed throughout their
primary education career in both academics and other areas to determine
their readiness for secondary education.
NEW PSYCHIATRIC HOSPITAL
Mr. Speaker, if one of the tests of modern civilization
was a society’s treatment of its psychiatric patients, then Saint Lucia
would surely fail. What we have inherited as a psychiatric institution
is an affront to humanity. We must build on the efforts of the former
Minister of Health, Hon. Sarah Flood-Beaubrun, and put an end to the
indignity endured by patients at Golden Hope. We will shortly do so with
the support of the People’s Republic of China.
On completion of the National Stadium, technicians of the
Government of the People’s Republic of China will commence design work
for the construction of the new Psychiatric Hospital. It is anticipated
that construction will commence in early 2003. The hospital will be
located at a site near La Perle, Marigot.
APPROVED FUNDING FOR NEW HOSPITAL
Mr. Speaker, Honourable Members will recall that I
advised that the Government of Saint Lucia intended to construct a new
hospital to replace Victoria Hospital. I am pleased to report that
arrangements for the funding of the construction of the hospital have
been finalized with the European Union. The new hospital will be
constructed at a cost of Euro 29.9 million or E.C. $67.16 million
dollars. Of that amount, E.C. $55 million is allocated to construction
works and E.C$12 million is earmarked for the provision of equipment and
supplies. Of the $67 million, funding has been secured from the European
Union for E.C. $65.756 million leaving a balance of E.C. $1.344 million
to be funded by the Government of St. Lucia.
The pre-feasibility study is now complete and Government
has authorized the next stage, that is the design of the hospital,
engagement of consultants, preparation of the construction tender
dossiers, the launch of the construction tender process and the
evaluation of tenders.
Consistent with the practice of this Government, the
principal stake-holders, our doctors, administrators and nurses will be
engaged in the design process.
ROAD REHABILITATION AND CONSTRUCTION
The road network is of vital importance to the economy of
St. Lucia. Accordingly, the Government of St. Lucia recognizes the
importance of maintaining the road network and has initiated a
comprehensive rehabilitation programme.
Mr. Speaker, I have, in a previous budget, already dealt
extensively with the major components of the Road Development Programme,
and will not bother the House, once again, with its full details.
Agricultural and Economic Feeder Roads
A sub-component of the Roads Development Programme is the
formulation of a Tertiary Roads Programme or, as it is commonly referred
to, the Agricultural and Economic Feeder Roads Programme.
The main goal of this programme is to develop a
prioritized programme of road maintenance, rehabilitation and
reconstruction works for St. Lucia’s 460 kilometers of Agricultural and
Economic Feeder Roads.
The feeder road network represents a significant and
expensive part of St. Lucia’s infrastructure in general, and road
infrastructure in particular. The network plays a major role in our
economic and social life and constitutes an important national asset.
During the past two decades the condition of the Agricultural and
Economic Feeder Road network has deteriorated quite significantly.
Greater attention will now be paid to feeder road maintenance in order
to halt the deterioration.
In pursuit of a systematic approach to this initiative,
the Government of St. Lucia has approached the French Development Bank,
Agence Francaise de Developement (AFD) to undertake a feasibility study
to identify a sub-programme of priority Agricultural and Economic Feeder
Roads for immediate rehabilitation. AFD has provided grant funding for
the implementation of the study.
The study will target about 100km of roads, in
particular, roads of economic and agricultural value.
The duration of the study will be four to five months. If
the project is feasible then actual implementation should begin in April
In this financial year, I propose to allocate the sum of
EC$500,000 to the Ministry of Communications and Works to facilitate
emergency works on critical aspects of the Agricultural and Economic
Feeder Roads Programme, thereby bringing some measure of relief to road
users, while we patiently await the conclusion of the AFD funded study.
Reconstruction and Rehabilitation of Roads
Mr. Speaker, the Government plans to undertake the
reconstruction and rehabilitation of roads not earmarked for improvement
in the Road Development Programme or the Agricultural and Economic
Feeder Roads Programme.
Below are some of the roads identified for inclusion
under this project:
Paix Bouche – Bougis
Victoria – Martin – Mongouge – Le Riche
Millet – Venus
Cas en Bas
Coolie Town main road
(Ti Rocher- Fond D’or- Couville)
Augier – Cartier
La Pointe (Patience)
Provision has been made in the Capital Estimates for the
expenditure of EC$4 million towards the implementation of this project.
Bridges and Culverts
In 2001, the Ministry of Communications, Works, Transport
and Public Utilities undertook an inventory of over 50 bridges island
wide. As a result, two bridges have been identified for rehabilitation
in this fiscal year: the Belmont Main Bridge and the Vigier Bridge. An
amount of EC$600,000 has been allocated in the Capital Estimates for the
repair of bridges.
CASTRIES FIRE STATION
Mr. Speaker, the Saint Lucia Fire Service has long
complained about the inadequacies of the location of the Castries Fire
Station. Among its many disadvantages, the current location is hampered
(1) An immediate environment that is susceptible to
(2) A structurally unsound building
(3) An access that is impeded by a main roadway that
runs along the response route;
(4) A traffic control light that is located to the
front, the only response route; and
(5) Limited yard space that impedes the
maneuverability of personnel equipment.
Moreover, Mr. Speaker, in the study entitled "An Urban
Design Strategy - Castries 2020," the consultants recommended that the
Government relocates the Castries Fire Station to release the present
site for port related commercial activity.
The St. Lucia Fire Service has recommended to Government
an appropriate site and this is presently being actively considered.
POLICE STATION FOR BEXON
Mr. Speaker, we all agree that strengthening our security
services to deal with increasing crime is a pressing need at this time.
For this fiscal year, Government will embark on the
construction of two new police stations in the villages of Dennery and
Micoud to replace the existing buildings which are dilapidated. These
projects will be financed under BOLT arrangements with NIPRO, costing
the government approximately $1.9 million each.
In addition, the Government proposes to construct a new
police station in the Bexon community as part of its efforts to curb and
reduce the incidence of crime. Official statistics indicate that
incidents of crime are particularly high in the Castries South East
Community. Moreover, praedial larceny is rampant and uncontrollable. The
farmers need help; so too do the citizens who must confront criminal
behaviour on a daily basis.
CONCLUSION: OUR COUNTRY AT THE CROSSROADS
In the eyes of its many citizens, the Caribbean is at a
Across the region, very few countries have the luxury of
certainty. The old familiar roads to economic growth are now complex
highways, and the traffic is intense. We are at the crossroads, and our
self-reliance is, being severely tested.
But a crossroad need not be a place of imminent crisis,
for it is also a nexus of need and opportunity. It is a junction where
we recognize the need to make definitive decisions about our
future, at a point where we actually have the opportunity to choose
new directions from a map of options. If we are already on course, we
should proceed. If not, we adjust and move on.
Many of us did not even notice, even when our own
societies, our own businesses, were experiencing phenomenal growth. We
saw ourselves as sleepy little islands, grateful for the handful of
curious allies and adventurers paying us scant attention. We still do
not appreciate that the Caribbean is not just at a crossroad; we are the
crossroad: a virtual junction for global traffic in tourism, investment,
trade, transport, politics, information, language and culture.
In many of these areas we are highly competitive. We have
distinct strengths and strategic advantages. For instance, we compete in
the world tourism market with very few subsidies or market distortions,
despite some of the highest structural costs found anywhere. Many of our
cost factors are related to size and scale and carrying capacity. Some
are related to the maturity of the society and its institutions.
Both as a region and as a nation, what we do collectively
from here on, is likely to have a far more significant effect than those
things we choose to do individually. For these reasons alone, this
crossroads at which we find ourselves must be used for a meeting of the
The challenge for us all lies in fostering and sustaining
an economic, social and legislative environment that encourages
viability and vitality in both the public and private arenas. Such an
approach requires adequate investment in human as much as physical
infrastructure. It requires a productive workforce: in the private
sector which undertakes investment, as well as the public sector which
facilitates such investment. For all of us then, it is about an
environment which encourages, supports and rewards increasing levels of
productivity and efficiency, and it is to this cause that we must commit
Ultimately, this debate should be about growth. It should
be about the systematic and sustainable expansion of business and
industry. It should be about those things we agree to do collectively
which will have the most lasting effects on the shaping of our future.
In this vein, the overriding hope is that a true spirit
of public/private partnership will develop, deepen and evolve in support
of economic activity which turns size, population and finite resources
to distinct advantage. We cannot afford to miss any opportunity to grow
through healthy interdependence. We must adopt best practices and
establish performance benchmarks by comparison with our peers as well as
After all, while we may have varying perspectives, we
share the same hope - however differently expressed - of maximizing the
economic and social benefits of each opportunity. Ultimately, our
shareholders come in variations on the same theme: they are our
families, our citizens, our customers and employees, our voters, and the
communities that sustain us all. We live in a very small world. We can
expand that world by combining our resources as well as our imaginations
and creative energies to create, sustain and enhance our considerable
advantages. With that in mind, let us proceed.
I am, therefore, honoured, Mr. Speaker, to move the
second reading of the Appropriation Bill 2002/2003.