ADDRESS BY CHARLES WILKIN QC TO NATIONAL CONSULTATION ON THE ECONOMY 22ND OCTOBER 2015.
I begin by recognizing some very positive attributes of our economy which can be built on if we are to make a fresh start. Firstly, Kittitians and Nevisians have a proud record of investing in their economy. The 5 listed public companies whose shares are traded on the Eastern Caribbean Securities Exchange have in excess of 8,000 shareholders the vast majority of whom are nationals. Even allowing for some overlapping in those numbers our country has by far the biggest ratio of local investors per capita in the region. We must build on that culture and develop an entrepreneurial spirit which permeates every level of the economy. Secondly, some of the investors are nationals living abroad. The diaspora is a huge market which has not been effectively tapped. We should create effective ways of exploiting that market. The electronic age makes it all the more feasible to do so. Thirdly, the country has relatively good infrastructure. We should aim to improve that further in a cost effective manner. Fourthly, we have already made a start in the development of alternative energy. The new plan should seek to wean the country off fossil fuels and to go truly green. That should be a major focus of the new start. Fifthly, the country has a relatively good stock of foreign investment both in terms of the value of the investments and the quality of the investors themselves. We should build on that platform to keep the current investors and to attract others.
We must however accept that investment and other financial capital and infrastructure will not alone ensure sustained growth. The country’s social and human capital are just as important. The goals for which we should aim in terms of our social and human capital are, to my mind, social cohesion, strong rule of law, a sound democracy, high levels of productivity, top quality service, a business friendly environment, meritocracy, focused training and education, an efficient and transparent public service, integrity and as I have already mentioned an entrepreneurial spirit.
We have not done particularly well in developing our social and human capital. This is where a fresh start is most needed. How can this be done?
1. We have to stop equating the economic cycle with the 5 year political cycle. In order to make a fresh start the country needs to set goals and devise a long term plan to attain those goals. It must decide on the components of that plan to match our resources, our realities and our aspirations.
2. We need a conversion from tribal to issue based politics. Economic development should be the goal of the entire community. Differences of opinion are healthy if they are issue based. It is unhealthy and counterproductive if half the community wants the economy to fail. That culture is all the more cancerous in a small society like ours. Our development has been hampered by the unhealthy partisanship of our politics.
3. We must end the entitlements mentality which has evolved out of the tribal politics. The government is not a bread basket. It is regarded as such by too many people. That is made worse by the attitude that supporters of the governing parties should feed in priority. We must wean ourselves out of that culture and establish government’s role as helping those really in need and providing the infrastructure, stability, incentives, legislation, policy, public services and other conditions to facilitate and promote economic development. We must become a meritocracy in which ability, merit, hard work and enterprise rather than political connections are the criteria for success. More and more people are coming into the country and happily taking advantage of opportunities in business and employment while our people complain and continue to expect handouts. As a result they are being left behind. Our country cannot sustain an endless PEP programme. There should be a financial safety net and creative training programmes but it is not sustainable for Government to be the employer of last resort.
4. That leads to the issue of productivity. The level of productivity of a country determines its standard of living. Insufficient attention is being paid to the importance of productivity. We must develop a system of measuring and analysing productivity and a public awareness programme to highlight its importance. A simple example is the debilitating cost of inefficiencies in construction which is a key area of our development. Construction experts tell me that the loss could be 25 per cent. The multiplier effect is enormous. We must ask ourselves honestly whether we can afford a 4½ day work week and continued inefficiencies in construction.
5. Akin to productivity is the quality of service. I challenge anyone to say that standards of service in government and the private sector are generally good. The standards of service can best be described as variable. Some government departments are brilliant. Some are not. Same in the private sector. Standards of service are key to success across the board and particularly in tourism. You cannot have a five star destination with one star service. Too many people still confuse service with servitude. If tourism is to be the key focus of our development then we must work urgently on improving the levels of service in every aspect. We must address the need for training. A single hospitality training course at CFBC is grossly inadequate. I welcome the proposed establishment of a hospitality school with a wide ranging remit. Do not however leave the hotel and hospitality sector out of planning and implementation.
6. Government must urgently address the levels of staffing, service and efficiency in the public sector. We will not achieve sustainable development without massive improvements in that service. We say we want to promote foreign and local investment. We say that the private sector is the engine of growth. We say we endorse the free market system. We say that Government should be the facilitator. Those pronouncements are not put sufficiently into practice. The clearest evidence of this is shown by our rankings in the World Bank Doing Business survey. The annual survey ranks the business environment in 189 countries across the world. The higher the ranking the more friendly is the assessment of the business climate. Here are the rankings for St. Kitts and Nevis from 2006 to 2015:
The numbers speak for themselves – a drop of 51 places in the last 6 years.
7. We must get a handle on crime. Here again serious changes of culture are required in parenting, in the development of our young people, in the education system and in interactions between the public and the police and in the politics to mention a few. This is an issue for the entire community not only for the police.
8. Social Discipline- weak social discipline promotes criminal activity. It impacts negatively on stability, productivity and social cohesion and therefore has an impact on economic development. There is too much ill-discipline here. Our cruise ship tourism is being threatened by harassment of visitors. Our traffic is threatened by irresponsible bus drivers. There is a free for all in vending on the streets. Last weekend there were barbeque pits in the peninsula road at Timothy Hill. Those are just a few examples of the problem.
9. Corruption- I quote what the head of the World Bank said in 2013 on the impact of corruption “Let us not mince words. In the developing world, corruption is Public Enemy #1”. Serious work is required to create an environment that deters corruption. Legislation to provide Freedom of Information, Campaign Finance regulation, Integrity in Public Life, greater oversight of Government procurement, Civil Service reform and a host of other measures are needed in this regard to create a truly transparent governance system.
The issues I have raised reflect the need for changes in attitudes. Those are the most difficult changes because they take time to achieve and for the most part they cannot be legislated. Many of the current attitudes have become embedded over the half century that Kittitians and Nevisians have run their own governments. However without the changes the country will not achieve sustained growth. Perhaps it is timely to recall the famous words of President John F. Kennedy “Ask not what your country can do for you. Ask what you can do for your country.”
A couple of other points quickly. The country needs to study carefully what the effect will be on the property market of the implementation in 2017 of the rule that a person who bought a property to acquire citizenship can from that year sell that property again on the citizenship market. This will in my opinion deter new construction. Around that time too the five year period for holding their property will expire for many economic citizens. With the declining numbers of new citizens, many of the previous ones will not be able to recoup their original investment and may be happy to dump the property on the local market to get some return. That may be good for people with access to finance who can snap up the properties cheaply but it will result in a fall in property values which will affect the whole country not just high priced properties.
As part of its commitment to greater transparency Government should publish the breakdown of Government revenue by segment – corporate tax, consumption tax, payroll taxes, stamp duty, property tax, customs duties, port fees, licence and other fees, cruise ship fees, CBI fees, travel tax, withholding tax. That will allow an assessment to be made of the effectiveness of Government spending on the departments which contribute to the generation of revenue. An example, the Bar Association is lobbying for the separation of the Titles Registry from the Registry of the Supreme Court. That is badly needed for improving the efficiency of the service. The World Bank Doing Business Report ranked St. Kitts and Nevis 170 out of 189 countries in the category of ease of getting a title to property. That is unacceptable. We should be able to assess the cost of running the Registry against the revenue generated by it. That revenue should include some of the stamp duty revenue. That will enable a realistic cost benefit analysis. The analysis will I am sure justify the establishment of a modern, computerized Registry.
I recommend a change to the Constitution to mandate a balanced budget except in emergency circumstances.