St Kitts Grows In Spite Of Sugar Shutdown

by Jason Gorringe, Tax-News.com, London

23 May 2005

In spite of a decision to end sugar production in 2005 after 300 years, St Kitts and Nevis Prime Minister Dr Denzil Douglas was able to tell a Caribbean Development Bank Board of Governors Meeting last week that the tiny country grew at 4% in 2004, and is expecting to grow again in 2005.

“This improved economic performance represents a substantial recovery from the relatively sluggish growth in economic activity experienced over the period 1999-2003 when our economy was tossed around by frequent exogenous shocks including natural disasters, international war and terrorism and a very volatile global economic climate,” said Prime Minister Douglas, adding that growth is resulting from substantial increases in tourism and a construction boom.

“The people who reside in St. Kitts and Nevis in these challenging and poignant times are witnesses to the collapse of our sugar industry under the weight of trade liberalisation and the premature withdrawal of trade preferences, and to the continuing struggle to transform our sugar-based economy into a more diversified economy in which the main impetus for growth is expected to come from the services sector,” said Dr Douglas.

The St Kitts government decided to shut down its sugar industry earlier this year; this year's harvest of an estimated 12,360 tons will be the last, and the 2,000 workers in the sugar sector have been promised other jobs by the Prime Minister. Rising production costs and falling revenues have left the state-owned St. Kitts Sugar Manufacturing Corp. owing local banks some Eastern Caribbean $313 million (US$117 million) and the government has appealed to regional and global bodies and the EU for economic assistance to ride out the closure.

"The sugar industry has become like a cancer. If the cancer remains, it spreads; and then it is too late to cure, and the person dies ... I will perform surgery," Prime Minister Denzil Douglas said in April. In recent times, the sugar was exported mainly to the EU, which has pledged to conform to World Trade Organization regulations and cut the price support it gives to Caribbean sugar production. Next year, the price St. Kitts receives for its sugar would have dropped by 37% and further cuts were planned in 2007.

The Caribbean Development Bank and the EU are providing wide-ranging financial and technical assistance packages to help the islands. An EU grant of EC$10.5 million for economic reform was signed by Prime Minister Douglas and EU Commissioner Tincani in Basseterre last month. "The grant is a supplement to an original allocation of EC$11 million from the EU and will be earmarked for information technology education in the context of economic reform away from sugar dependency”, announced the government. “It can create a whole series of dynamism for the private sector and can help not only a small country but also an island which has difficulty in exporting goods, but would export services through the internet,” said Commissioner Tincani.

The Commissioner confirmed that longer term support would be forthcoming. “It is written into our financial perspective. So we are talking about a multi-annual programme to support St. Kitts and Nevis and clearly we need to define concretely how we get into the first steps as we need to start somewhere,” said Ambassador Tincani. “We will clearly help you over the medium term and we are willing to start discussing.”

Recommended