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St. Lucia’s vulnerability a growing concern (commentary)

Press Release

2016-09-19 09_04_00-St Lucia’s vulnerability a growing concern.docx - Google DocsPRESS RELEASE – There can be little dispute that Saint Lucia’s economic and fiscal policies are generally unstable, along with the latest crisis of governance exacerbated by new Prime Minister Allen Chastanet. 

In fact, the first 100 days of the United Workers Party (UWP) administration have been a combination of useless and pretentious theatrics that have bordered on, if not already become a national disgrace.

This further exposes many the vulnerabilities expressed in my commentary St Lucia walking a tightrope, which stirred-up a government consultant to claim via email: “Please try or rather attempt to be factual and not write from such an uninformed position.” 

Aside from him getting that wrong, as external pressure mounts on the government, for Saint Lucia to move towards security cooperation and economic prosperity, it is critical to shift away from default and denial and meet international obligations. In addition, the evidence of transformational leadership and institutions, as well as good governance to unlock new opportunities is conspicuous by its absence. 

First, let’s agree that no one is sure just how much time Prime Minister Chastanet is going to need to get a grasp of Saint Lucia’s socio-economic conditions and put on track a plausible policy.

When it does happen, hopefully it will reboot the priorities of government and the ideological divide. 

Things are going wrong before our eyes, but government institutions are so intimidated that a number of policymakers have quit thinking. Others remain complacent, and recurring governments instead of the ones we wish we had become delusional and distrusted, woefully abetted by enablers of hypocrisy and ignorance.

Second, the paralysis of government is not unique, but why put off compliance with international law and economic integration consequential to globalization?

Saint Lucia is missing from the list of Caribbean government to comply with Foreign Account Tax Compliance Act (FATCA), which is quite surprising seeing that the Caribbean Association of Banks (CAB) is based on the island. 

Apparently, the CAB’s recent call for action in this respect is not a matter of urgency for Saint Lucia’s government, following the failed attempt on August 16, 2016, by Prime Minister Chastanet to present among other bills to the House of Assembly for a first reading the Inter-Governmental Agreement (Saint Lucia and the United States of America) and the Money Laundering (Prevention) (Amendment), during a sitting that ended prematurely. 

Meanwhile, on January 1, 2017, the US Treasury will begin updating their IGA list to reevaluate the progress of all jurisdictions that have failed to bring their IGAs into force. Failure to do so will expose foreign financial institutions (FFIs) to a 30% withholding tax on certain US payment transactions and could result in further costs for the financial institutions and their customers.

Third, the proposed OECS Harmonised Credit Reporting Bill by the Eastern Caribbean Central Bank (ECCB) with technical assistance from the World Bank’s International Finance Corporation (IFC), is reported to be recommending specific credit bureau legislation for the Eastern Caribbean Currency Union (ECCU), which the St Lucia Chamber of Commerce Industry and Agriculture argues “appears to be extremely stringent in many respects compared to that which obtained in other jurisdictions”.

Members of the St Lucia Chamber of Commerce Industry and Agriculture are concerned about: “The tendency of government, to rush legislation into enactment without proper national consultation with the general public and institutions who will be affected.” 

“‎The sentiments are the proposed legislation would lead to reduced access to credit, expressing fears over the negative impact on small and micro business, and that the legislation’s broad and unreasonable definition of ‘credit information’ has the potential to lead to discrimination against the poorer, small and informal sectors and could lead to reduce access to credit.”

Further, “There is need for extensive discussion and clarification on the draft legislation and substantial redrafting of the planned OECS Harmonised Credit Reporting Bill.”

This might indicate change, but remember democracy works in some funny ways behind closed doors, even so, taken as a whole, the region’s finances, correspondent banking, trade, investment and external policy are governed extra-regionally and present complicated challenges for local jurisdictions. The key here is clear thinking on whatever line that is pushed. 

Forth, it feels like a demolition job filled with pyrotechnics at St Jude hospital, operating from the George Odlum Sports Stadium in Vieux Fort, structurally unsound and perhaps not fit to meet a mass casualty scenario, minutes from the Hewanorra International Airport and understandably of concern to the Federal Aviation Administration (FAA). 

By any measure, the Chastanet-led administration must confer legitimacy and credibility on the suspension of construction at St Jude hospital reconstruction site in Augier, Vieux-Fort, predicated on a “technical audit” costing approximately EC$980,000.

The nexus of the price tag and influence surrounding this decision within just over one month of assuming office raises legitimate questions about ideological background, links and agendas, in the continuance of systemic manipulation in awarding direct contracts. 

This ring-mastering brings to mind the irony of campaign finance reform and access to information.  

However, in the marketplace of ideas the challenge will be steeper amid Prime Minister Chastanet’s confirmed participation in Finance, Fintech, and the Future of Banking in the Caribbean Basin conference from October 4-6, 2016, in Washington, DC.

A reasonable question is how much influence can Prime Minister Chastanet’s temperament and intelligence have on any proposition for legitimate economic and fiscal policy action when, increasingly, led by short-sightedness, self-interest programs and non-specific economic policy, Saint Lucia’s economy is not merely stagnant, but is struggling to adapt to global change and how to close ballooning fiscal deficits.

Consider the fiscal playbook thus far, on which the Chastanet administration’s tax and revenue policy, debts and deficits are based, promising sweet relief – “Five to Stay Alive”. Clearly, that represents a phony breed of manipulation that will not accomplish sustainable gross domestic product (GDP) growth rate, but actually exacerbate the lack of available fiscal options and thus serve to recycle poverty. 

It’s no wonder that the need for change without real caution is galvanizing secret deals to monopolize food distribution networks, the launch of a new airline, mergers and acquisitions.

Can you imagine the future of Saint Lucia with Prime Minister Allen Chastanet? 

Which brings me back to Keynesian predisposition that has been misplaced before, and what it has gotten us to date. 

To put this in context, policymakers must step-up on significant financial prudence and restore aggregate domestic demand, restore sovereign credit rating, build on credit, and re-establish regional and international credibility.

In view of that, if the country intends to be the preferred regional location where businesses start, expand and develop into a stabilizing presence in the region, good conscience, substance and real engagement are needed, away from the political culture of mere spectacle. 

New investment is required to sustain broad-based economic growth and boost the region’s monetary union but, again, this will not materialize without compliance and enforcement of international law and ethics, and the right fiscal policy response to reset Saint Lucia’s value focus to empowerment. 

By a very significant margin, what passes for economic fundamentals and new opportunities by the Chastanet-led administration is a fraud at best and, as well, a psychological and strategic obstacle to Saint Lucia’s economic and fiscal policy progress, which so far remains an illusion.

Melanius Alphonse is a management and development consultant, a long-standing senior correspondent and a contributing columnist to Caribbean News Now. His areas of focus include political, economic and global security developments, and on the latest news and opinion. His philanthropic interests include advocating for community development, social justice, economic freedom and equality. He contributes to special programming on Radio Free Iyanola, RFI 102.1FM and NewsNow Global affairs and economic analysis. He can be reached at: melanius@newsnowglobal.com

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One comment

  1. The press release reads as a excessively voluminous dissertation that does not clearly knit together the author's points in a clear, concise and compelling manner.

    While fortified with academic theories that no doubt took many years and many textbooks, and probably a doctoral thesis to learn, there the press release falls disappointing short in establishing a firm linkage to St. Lucia's fundamentals. In short, while long in number of words, it is disappointingly short on actual substance at all levels --- the strategic level, the tactical level and the operational level.

    The author made the assertion regarding investment that "this will not materialize without compliance and enforcement of international law and ethics, and the right fiscal policy response to reset Saint Lucia’s value focus to empowerment". Clearly that didn't stop the recent announcement by China of the billion dollar Pearl of the Caribbean project or the other recent announcement of the Bulgarian built resort project in Choiseul.

    Speaking as someone that lives in the real world of finance, not the academic or theoretical side, investors and firms want simply one thing --- grow shareholder value. Simple, No essay required.

    One of the factors strongly considered in making the decision to invest off-shore is stability. Economic stability and social stability. Each affects the other. They are inextricably attached. They cannot be decorticated.

    In the case of St. Lucia, from a risk management standpoint when considering FDI (foreign direct investment), depending on the metrics used, St. Lucia's stablility could be considered somewhat tenuous. Government borrowing policies aside, St. Lucia's social instability , factually speaking, is a concern for some potential investors.

    Long story short, substantial investment will not materialize until the government shows concrete actions, and shows tangible results in stooping the island's slide into a status approaching that of Haiti from both a safey point of view, and sometimes, from the simple standpoint of image and brand. (think of the goodwill value on the balance sheet of CocaCola versus that of Pepsi).

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