St Lucia government severely handicapped

St Lucia government severely handicapped

It is long proven that governments can’t function effectively when citizens are not working or paying their fair share of taxes, resulting in decreased national revenue, especially when coupled with a lack of capital investment and devoid of any serious policies to tackle real economic issues.

In these circumstances, the scheme of “Five to Stay Alive” is hell bent on mamaguying the vulnerable and households struggling to make ends meet, by dancing around fantasy solutions that “new taxes to be less burdensome”, but at the same time saying they “will obviously include the new VAT [rates] and a lot of new forms of taxation”. 

Yet, interestingly, the truth is hidden as to what new taxes will be enforced on the people of Saint Lucia to offset the EC$7.0 million loss for every one percent reduction in VAT revenue and/or the expected multiplier effect on low levels of liquidity. 

The situation is not helped by pie in the sky new “creative” tax measures. There is the prospect that the economic path Allen Chastanet-led administration is trying to set a frightening agenda by way of the return of the plague that takes from Peter to pay Paul, at a time when new external regulations and delayed compliance set hurdles to private-sector confidence, which in turn encourages fear, sluggish growth and systemic risk. 

Besides enormous public debt burdens and uncontrolled budget deficits, it is evident that there are anxieties over the misguided policy approach intended to bring about the following:

• Increase revenue annually to pay for economic and social priorities [Recurring low growth 2013 (2.7%): 2014 (-0.9%): and 2015 (1.2%); persistent indebtedness (EC$3 billion); and average interest rate of six percent on ballooning debt];

• Reduce the burden of trade and negotiate trade deals to increase export capacity and advance economic prosperity;

• The introduction of a simplified tax policy and amendments to the tax code towards a progressive structure that values work, supports business and encourages investment;

  • The pursuit of renewable energy to become competitive and gain an upper hand on market share, products and service delivery vs. the heavy reliance on fossil fuels that are a competitive disadvantage;

    • The implementation of a debt ceilingwhile working towards budget discipline.

    Granted there is need to do things differently, by taking the right kind of business approach on the part of government and policymakers, and there are clear reasons to believe the status quo is not effective to affect fiscal reform.

    But, in the current modus operandi, are parliamentarians thinking deep, generating ideas and making the case for policy, or have episodes of embarrassing decorum and weak cabinet ministers (in silo shape) become a drag on good governance? 

    Of course, the larger issue seems submerged in complacency. Nonetheless, the consequence is a self-inflicted wound, compromising the ability to solve problems and/or plan for the trauma that has accompanied worsening economic conditions. 

    Not surprisingly, confidence building requires exceptional intelligence and a commonsense approach to leadership and mutual respect to settle the national temperament without contradiction and ambiguities.

    “We’re using this time [first100 days] to develop our overall plan and so it is the intention of our government that when we announce the budget in April that we will announce a one year financial budget, but we’re going to roll out a four year development plan for this country” ~ Allen Chastanet

    There is no doubt that this attempts to compensate for the vagaries on the economic front that make the environment, already devoid of a long-term-national development plan, foreign policy and inward branding strategy, show more weakness. 

And with reliance on government largess, ineptitude and unrealistic rate of return on investments accompanied by depressed demand, how long will it take for:

• The Allen Chastanet-led administration to present its economic and policy proposal? 

• Are expenditures by the government fully authorized from the Consolidated Fund? 

  • Is depression economics acceptable amid a government regulatory burden that is hampering capital investment and discouraging planned business investment acceptable?

In a tepid environment of sustained low economic growth well below two percent, the growing syndrome of dependency and a subsidized lifestyle on declining state resources, utterly paralyzed by illiteracy and partisan deadlock, and political leadership that is obliviously not leading on principle, we have a frail vision, besieged with trust challenges. 

This is compounded by a wannabe dictatorship that has given rise to political and economic cleansing, which has commenced the massive replacement of public employees and contract cancellations to make way for the “petty bourgeoisie” and “zombie” companies, who depend on government contracts and a way of life that values institutional corruption.

This convenient norm is all about control and self preservation, which alludes to influence on whom and where money and credit is directed, based on which political party is in office. 

It would seem appropriate that dispassionate measures replace unchecked discrimination and, more appropriately, a proficiency audit is undertaken to correct national and economic measures that besiege the country’s economic path.

Meanwhile, the prospects of a sound economic basis to attract foreign direct investments are wavering: 

• What are the Allen Chastanet-led administration’s plans for jobs in the construction sector, manufacturing, information technology, agricultural production, developing alternative sources of energy?

• What are the prospects for the health sector, strategic partnerships between business and academia, research and development as well as an expansion proposition to create a thriving life sciences business hub?  

• What capital investment(s) will be employed in terms of trade, to boost real output, capital outflow/inflow, and rising commodity prices at current inflation in a depressed economy?

In compelling contrast, the combined factors of agribusiness, the green and blue economic prospective in abundant supply on island carry a greater economic multiplier to growth patterns and economic prosperity, much greater than the vagaries of tourism that is independently practiced. 

Therefore, government should establish policy to promote (the blue economy) ocean and coastal sustainability, to offer a whole new level of jobs, small and medium-sized enterprises (SMEs) and career opportunities. 

With regard to strengthening efficiency, exports and real output, there is need to facilitate and modernize existing plant and equipment to double industrial production and actually manufacture products that exceed export market standards and consume more of what is produced, reducing the food import bill

In the component of aesthetic value, the options are not palatable. Nonetheless, a strong economic performance that translates into improved government finances to exceed VAT revenue of EC$346 million in 2015/2016: and to outperform preliminary growth forecast of 1.1 percent by more than 4 percent of GDP is imperative.

The good news is that competition and fiscal discipline have a positive impact on jobs and industry bottom line, but Saint Lucia’s competitiveness requires collaborative efforts with regard to sustainable development, in particular:

• Renewable energy on the scale of Costa Rica’s clean energy success and fossil fuel-dependency, where the electric grid ran exclusively on renewable energy for 150 days so far this year;

• Trade negotiation and export capacity;

• Investments that produce sustainable jobs, raise wages, increase prosperity and protect our sovereignty. 

Although more recently, the dynamic nature of change seems more in keeping with hyperbolic fanfare and subpar notion of “die dead, die alive”. 

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