As the global financial crisis begins to have an increasingly potent effect on the Caribbean, governments across the region are beginning to take steps to mitigate some of its most immediate effects.

How successful they will be, will depend greatly on how rapidly they can implement what they are proposing and the extent to which they understand that the region is yet to experience the full force of unfolding economic events in developed and emerging markets.

In the absence of a viable regional economic integration process much of what has happened has been piecemeal and related to the precise economic circumstances of particular nations.

Thus Jamaica, Trinidad, the OECS, the Bahamas and others have acted independently to address the crisis through country specific measures.
These have ranged from budget cuts through borrowings that underwrite public indebtedness to specific interventions to ensure credits and tax relief are available to small and micro businesses.

What is particularly of note in almost all of these packages is that the global crisis has caused governments and opposition to fully recognise the ways in which the region’s economy has changed over the last two decades. That is to say almost all governments now understand the need to defend and sustain the tourism and services sectors and to place them close to the top of their economic priorities because of their huge contribution to national GDP.

In recognition of the central role that tourism plays in the Jamaican economy and the industry’s ability to rapidly generate and revive growth, if well stimulated, the government of Bruce Golding has for instance developed a plan that includes tax cuts for hotels and provided around US$6.4M in loans to support the sector’s cash flow and to enable the creation of new promotional budgets. In part this involves the Development Bank of Jamaica making available a special loan facility of J$500M to provide working capital for those parts of the tourism sector experiencing cash flow problems. Government has also cut the consumption tax paid by hotels by 50% to 4.125% for at least six months and introduced other measures aimed at stimulating growth in the sector. Other states have also developed a new tourism focus.

At a meeting in St Kitts held on January 15/16, OECS heads of government and the East Caribbean Central Bank (ECCB) acknowledged that the overall economic situation was grave, that its effects could be prolonged and that policy changes were required.

Tourism came at the top of a wide range of announced measures.  The meeting recognised that the industry was the most important economic activity in the OECS and that the downward trend in visitor arrivals may worsen in 2009.

As a consequence it was agreed that OECS member states would provide a tailored short term tax relief package to the hotel industry on condition that the industry takes measures to preserve employment levels, increase operating efficiency and reduce operating costs. OECS leaders also agreed to strengthen partnership with the industry in supporting marketing and to position the industry to respond when the source markets recover. They proposed in the medium to long term to establish an Executive Committee of Ministers of Tourism to give direction to the OECS tourism development and suggested the possible creation of an OECS Tourism Authority working with Ministries of Tourism, the ECCB and the OECS Secretariat.

More broadly they confirmed, subject to agreement by the wider Caribbean, the Eastern Caribbean would implement a US$3 levy on airline tickets for persons travelling to the OECS originating in overseas markets to fund a regional marketing campaign.

In an attempt to further the linkages between tourism and the rest of the economy they will embark on a programme of video-conferences between the Ministries of Finance, Agriculture, Tourism, the OECS Secretariat and the ECCB, an approach that Caricom and governments across the region might more generally consider in place of the present requirement for frequent travel to sometimes poorly attended meetings.

Also proposed were a number of steps on transport of fundamental importance of longer term value to tourism. In St Kitts participants agreed to explore with Martinique and Guadeloupe opportunities for expanding the  fast ferry service to Dominica and Saint Lucia and to explore further initiatives for a similar link to Trinidad.

The problems facing the region as a consequence of the downturn in tourism arrivals – forecast by some ministers to fall by as much as 30 per cent – was confirmed in a recent report from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).  In its report, ECLAC noted that about 75 per cent of tourists to the English-speaking Caribbean came from economies in recession and forecast that tourism in 2009 will only grow by a maximum of  between zero and two per cent. The reported noted that the strong deceleration in arrivals had begun between June and August of 2008.

In confirmation of the industry’s central role in economic development it noted that tourism expenditure in the English-speaking Caribbean (with the exception of Guyana, Suriname and Trinidad) were equivalent to 15 to 41 per cent of GDP and that tourism had become the main source of income for all but the three Caribbean economies.

It is far from clear how long or how deep the recession will be.  Governments are now taking steps that show they are reorienting their future thinking and by implication that of the region about tourism’s central economic role. This is overdue but welcome. It suggests, without in any way minimising the negative social implications that global economic crisis will have on the region, through no fault of its own, that there is a little light in the global gloom.

Previous columns can be found at www.caribbean-council.org

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