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Compete Caribbean Private Sector Assessment Report for St. Vincent and the Grenadines 2013

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FINAL REPORT

Compete Caribbean OECS Project

Private Sector Assessment and Donor Matrix Report

for St. Vincent and the Grenadines

Prepared by:

The Special Studies Unit (SSU), Sir Arthur Lewis Institute of Social and Economic Studies

(SALISES), University of the West Indies, Cave Hill Campus, Barbados

August 2013


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BENCHMARK/COMPARATOR COUNTRIES:

Benchmark countries used in this report include all 15 beneficiary countries of the Compete

Caribbean Program, as listed below, in addition to Malta, Mauritius, the Seychelles, and Palau.

1. Antigua and Barbuda

2. The Bahamas

3. Barbados

4. Belize

5. Dominican Republic

6. Dominica

7. Grenada

8. Guyana

9. Haiti

10. Jamaica

11. St. Lucia

12. St. Kitts and Nevis

13. St. Vincent and the Grenadines

14. Surinam

15. Trinidad and Tobago

PROJECT TEAM

Dr. Judy Whitehead, Dr. Winston Moore, Dr. Jonathan Lashley, Mr. Ryan Straughn, , Mr. Mitch

Hartman, Ms. Carol-Anne Blenman and Ms. Beverley Hinds.


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ACRONYMS AND ABBREVIATIONS

CARICOM Caribbean Community

CDB Caribbean Development Bank

CIDA Canadian International Development Agency

CIDA Canadian International Development Agency

CROSQ CARICOM Regional Organisation for Standards and Quality

CSME Caribbean Community Single Market and Economy

DfID United Kingdom Department for International Development

ECCU Eastern Caribbean Currency Union

EU European Union

FDI Foreign Direct Investment

GDP Gross Domestic Product

HDI Human Development Index

IADB Inter-American Development Bank

ICT Information and Communication Technology

IFC International Financial Corporation

IMF International Monetary Fund

MFI Microfinance Institution

NBFI Non-Bank Financial Institution

OECS Organisation of Eastern Caribbean States

PRGF Poverty Reduction and Growth Facil ity

PSA Private Sector Assessment

PSD Private Sector Development

RCA Revealed Comparative Advantage

RCF Rapid Credit Facil ity of the IMF

UN United Nations

UNDP United Nations Development Program

USAID United States Agency for International Development

VAT Value Added Tax


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Contents

Executive Summary.................................................................................................................................................. ix

1. Introduction ...................................................................................................................................................... 2

1.1. Background.............................................................................................................................................. 2

1.2. Methodology ........................................................................................................................................... 3

1.3. Report Structure ..................................................................................................................................... 4

2. Country Overview ............................................................................................................................................ 5

2.1. Governance ............................................................................................................................................. 5

2.2. Environment............................................................................................................................................ 7

3. St. Vincent and the Grenadines, the OECS and the ECCU ............................................................................. 9

4. Macro Context of Grenada and the OECS .................................................................................................... 12

4.1. The International Economy .................................................................................................................. 12

4.1.1 Trade ................................................................................................................................................. 14

4.1.2 Foreign Direct Investments ............................................................................................................. 17

4.1.3 Analysis for the International Economy ......................................................................................... 17

4.2. The Domestic Economy ........................................................................................................................ 18

4.2.1 Analysis for Domestic Economy ...................................................................................................... 25

4.3. The Productive Sector .......................................................................................................................... 25

4.3.1 Industry and Agriculture .................................................................................................................. 25

4.3.2 Services ............................................................................................................................................. 27

4.3.3 Analysis for the Productive Sector .................................................................................................. 28

5. Characteristics, Issues, Challenges of Private Sector Development in St. Vincent and the Grenadines . 30

5.1. Goal for Private Sector Development in St. Vincent and the Grenadines ........................................ 30

5.2. State of the Private Sector ................................................................................................................... 31

5.2.1 Large and Fast Growing Sectors ...................................................................................................... 34

5.2.2 Business Supportive Institutions Structure .................................................................................... 38

5.2.3 Donors and Other International Entities ........................................................................................ 38

5.2.4 Access to Finance ............................................................................................................................. 52

5.2.5 Corporate Taxation .......................................................................................................................... 58

5.2.6 Business Environment...................................................................................................................... 61

5.2.7 Technology and Innovation ............................................................................................................. 64

5.2.8 Trade and FDI Policies ...................................................................................................................... 65

5.2.9 Labour Regulation ............................................................................................................................ 69

5.2.10 Infrastructure, Communications and Energy............................................................................. 71

5.2.11 Gender .......................................................................................................................................... 73


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5.2.12 Ease of Doing Business ................................................................................................................ 74

5.3. Summary................................................................................................................................................ 80

5.4. Field Research Findings ........................................................................................................................ 81

5.4.1 Priority Action Areas ........................................................................................................................ 82

5.4.2 Summary .........................................................................................................................................100

6. Conclusions and Recommendations ...........................................................................................................101

6.1. A Long Term Action Plan for Private Sector Development ..............................................................101

6.2. Summary..............................................................................................................................................103

References .................................................................................................................................................................106

Appendices.................................................................................................................................................................108

Appendix 1: Structure of the OECS..........................................................................................................................109

Appendix 2: List of Key Stakeholders from Interviews and Consultations .........................................................111

Appendix 3: St. Vincent and the Grenadines Governance Framework ...............................................................112

Appendix 4: Minimum Wage Levels in St. Vincent and the Grenadines .............................................................113

Appendix 5: Donor Matrix Report for St. Vincent and the Grenadines ..............................................................115

Description of the Donor Community .................................................................................................................117

Description of Local Stakeholders........................................................................................................................117

Public Sector Stakeholders ..............................................................................................................................117

Private Sector Stakeholders.............................................................................................................................117

Description of Information Available for the Analysis of Private Sector Characteristics, Dev elopment

Initiatives and Results ...........................................................................................................................................120

Identification of Opportunities to Increase Efficient Design and Execution of Programs ...............................120

Identification of Opportunities to Address Omitted Priority Problems ............................................................120

Recommendations ................................................................................................................................................120

DMX Annex 1: Analysis of Donor Projects and Programs in St. Vincent and the Grenadines .........................121

TABLES

Table 1: Unemployment Data for Comparator Countries (Various Years)......................................24

Table 2: Top 20 Exports for St. Vincent and the Grenadines for 1995 and 2010 .............................27

Table 3: Contribution to GDP by Sector in St. Vincent and the Grenadines (2012) ..........................31

Table 4: Condensed table showing Type of Enterprises and Labour structure in St. Vincent ............32

Table 5: Proposed Official Typology of Enterprises by Size – St. Vincent and the Grenadines (EC$) ...33

Table 6: Four Sectors Concentration and Share of St. Vincent’s Employment and Output ...............33

Table 7: Main Objectives and Sector Profiles of Donor Projects in St. Vincent and the Grenadines and the OECS ............................................................................................................................39

Table 8: Business Support Institutions in St. Vincent and the Grenadines .....................................40


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Table 9: Institutional Analysis: Donors and International Organisations .......................................43

Table 10: Credit Unions in the Caribbean (Number and Penetration Ratio) ...................................52

Table 11: Revenue per Trader Permits Issued in St. Vincent and the Grenadines (2007-2008) .........58

Table 12: Technology Use by Manufacturing Firms in Selected Countries (% of firms) ....................65

Table 13: Employed Population by Main Industrial Groups (2008) ...............................................70

Table 14: Infrastructure and Electricity in St. Vincent and the Grenadines (2010) ..........................72

Table 15: Biggest Obstacles to Business in the OECS (Enterprise Survey, 2010) ..............................81

Table 16: Private Sector Growth and Development: SWOT Matrix for St. Vincent and the Grenadines .........................................................................................................................................84

Table 17: Recommendations and Actions Matrix for St. Vincent and the Grenadines ................... 105

Table 18: Business Support Institutions and Other Relevant Bodies ........................................... 111

Table 19: The Government of St. Vincent and the Grenadines: Cabinet Members and Portfolios ... 112

Table 20: Overview of Key Stakeholders in St. Vincent and the Grenadines ................................ 118

Table 21: Main Objectives and Sector Profiles of Donor Projects in St. Vincent and the Grenadines and the OECS .................................................................................................................... 122

Table 22: Overview of Main Donor Projects by Objective, Sector and Value................................ 122

Table 23: Main Objectives and Sector Profiles of Donor Projects in the OECS and Member States.. 124

FIGURES

Figure 1: Snapshot of St. Vincent and the Grenadines and Comparator Countries ........................... 6

Figure 2: Governance Effectiveness for St. Vincent and the Grenadines versus Comparators (2010) .. 7

Figure 3: Environmental Performance: CO2 Emissions for St. Vincent and the Grenadines versus Comparators (2008) .............................................................................................................. 8

Figure 4: Current Account Balance for St. Vincent and the Grenadines (1980-2010) .......................12

Figure 5: External Accounts Analysis for St. Vincent and the Grenadines (1980-2010) ....................13

Figure 6: External Debt and Debt Service for St. Vincent and the Grenadines and the OECS 6 (2000-2010) .................................................................................................................................13

Figure 7: Real Effective Exchange Rate Index (2005=100) and Current Account Balance (%GDP) for St. Vincent and the Grenadines (1980-2010) ................................................................................14

Figure 8: Trade Snapshot for St. Vincent and the Grenadines (2010)............................................15

Figure 9: Treemap of Imports, St. Vincent and the Grenadines 2010............................................16

Figure 10: Treemap of Exports, St. Vincent and the Grenadines 2010 ..........................................16

Figure 11: Inward FDI for St. Vincent and the Grenadines and Comparators (2011)........................17

Figure 12: GDP Dynamics for St. Vincent and the Grenadines .....................................................19

Figure 13: GDP Growth in St. Vincent and the Grenadines (1980-2010)........................................19

Figure 14: GDP Decomposition by Expenditure for St. Vincent and the Grenadines (1980-2010) ......20

Figure 15: GDP Decomposition by Industry for St. Vincent and the Grenadines (1980-2010) ...........21

Figure 16: Inflation Data for St. Vincent and the Grenadines (1980-2010).....................................22


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Figure 17: Fiscal Deficit for St. Vincent and the Grenadines (2000-2010) ......................................23

Figure 18: Gross Government Debt for St. Vincent and the Grenadines versus Comparators (2000-2010) .................................................................................................................................24

Figure 19: Product Space Map (Exports) for St. Vincent and the Grenadines 1995 and 2010............26

Figure 20: Decomposition of Service Exports for St. Vincent and the Grenadines (1980-2010) .........28

Figure 21: Interest Rate Spreads for St. Vincent and the Grenadines (1980-2010) and Comparators (2010) ................................................................................................................................53

Figure 22: Domestic Financial Variables for St. Vincent and the Grenadines versus Comparators (2010) ................................................................................................................................53

Figure 23: Doing Business Rankings for St. Vincent and the Grenadines versus Comparators (2012) for Selected Indicators..........................................................................................................54

Figure 24: Value of Collateral Required for Credit for St. Vincent and the Grenadines and Comparators (2010) .............................................................................................................55

Figure 25: Firms with Access to Financial Services for St. Vincent and the Grenadines and Comparators (2010) .............................................................................................................56

Figure 26: Sources of Finance for Investment for St. Vincent and the Grenadines and Comparators (2010) ................................................................................................................................57

Figure 27: Sources of Finance for Working Capital for St. Vincent and the Grenadines and Comparators (2010) .............................................................................................................58

Figure 28: Corporate Taxes for St. Vincent and the Grenadines and Comparators (2012) ................59

Figure 29: Tax Rates as a Constraint to Doing Business for Exporters and Non -Exporters (2010) ......60

Figure 30: Major Constraints to Doing Business- Licenses and Permits and Tax Administration (2010) .........................................................................................................................................60

Figure 31: Business Licensing as a Major Constraint to Doing Business (2010) ...............................61

Figure 32: Corruption as a Major Constraint to Doing Business (2010) .........................................62

Figure 33: Crime, Theft and Disorder as a Major Constraint to Doing Business (2010) ....................63

Figure 34: Practices of Competitors in the Informal Sector as a Major Constraint to Doing Business (2010) ................................................................................................................................63

Figure 35: Transportation as a Constraint to Doing Business (2010) .............................................64

Figure 36: Market Map Average Tariffs (2009)..........................................................................66

Figure 37: Senior Management Time Spent on Dealing with the Requirements of Government Regulations- Comparison across Selected Countries (2010) ........................................................67

Figure 38: Major Constraints to Doing Business: Customs and Trade Regulations (2010) ................68

Figure 39: Major Constraints to Doing Business: Time to Clear Imports (days) ...............................68

Figure 40: Labour Market Issues in St. Vincent and the Grenadines and Comparators (2010) ..........70

Figure 41: Availability of Services to Firms for St. Vincent and the Grenadines versus Comparators (2010) ................................................................................................................................71

Figure 42: Major Constraints to Doing Business: Electricity and Transportation (2010) ...................73

Figure 43: Female Participation in Establishments for St. Vincent and the Grenadines versus Comparator (2010) ..............................................................................................................74


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Figure 44: Percentage of Firms with Female Top Managers for St. Vincent and the Grenadines versus Comparators (2010) .............................................................................................................74

Figure 45: Cost and Time to Start a Business: St. Vincent and the Grenadines versus Comparators (2011) ................................................................................................................................76

Figure 46: Economic Freedom, Comparison for Selected Countries (2012) ....................................80

Figure 47: Electricity Rates in St. Vincent and Selected Caribbean Countries (2010) .......................96

Figure 48: Organisational Chart of the OECS Secretariat .......................................................... 110


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Executive Summary

The private sector assessment (PSA) for St. Vincent and the Grenadines draws on primary data

analysis from interviews with key stakeholders from the domestic private and public sectors as well

as interviews with regional and international agencies. In addition, secondary data was utilised to

describe the state of the country at both the micro and macro levels.

Threats to Private Sector Development in St. Vincent and the Grenadines

The main strengths of the private sector development framework in St. Vincent and the Grenadines

relate mainly to institutions where there is a clear presence of support (CED, Invest SVG, NDF) and

the provision of support to the productive sectors through fiscal policies. It is also commendable

that a public sector strengthening exercise is being undertaken. However, there are several

constraints to private sector development in the country.

Table B: Biggest Obstacles to Business in the OECS (Enterprise Survey, 2010)

Biggest Obstacle ANT DOM GREN SKN SLU SVG

Access to finance 15.3 44.0 12.8 20.9 35.0 20.6 Inadequately educated workforce

1.3 2.1 15.4 10.0 7.4 12.8

Crime, theft and disorder 7.9 3.6 10.2 13.4 5.1 11.3

Tax rates 18.2 8.6 17.6 20.0 6.0 11.0

Electricity 13.0 29.7 2.7 15.2 22.4 10.6

Political instability 6.1 0.0 12.3 0.5 0.2 10.2

Customs and trade regulations 16.1 0.9 2.1 5.2 4.0 9.9

Practices of the informal sector

4.8 3.1 8.4 5.8 2.7 7.8

Tax administration 2.4 0.0 5.7 1.4 0.0 2.6

Corruption 7.7 0.0 1.4 3.5 0.9 1.5 Transportation 3.9 3.5 4.1 3.4 10.7 1.0

Courts 0.0 0.0 0.8 0.0 0.0 0.3

Business licensing and permits 2.7 0.0 0.0 0.0 0.0 0.3

Access to land 0.7 0.0 3.9 0.7 0.0 0.0

Labour regulations 0.0 4.4 2.9 0.0 5.6 0.0

From the interviews conducted and additional secondary data gathered during in-country visits, the

main issues identified were mostly in keeping with the results of the background research. The main

critical issues identified were:

Costs and Stringency of conditions for finance

Customs and Trade Procedures

Market Access

Inadequately skilled labour force

Political and Governance Issues which related to ad hoc planning;

A ‘silo’ mindset in the public sector in relation to agencies and departments operating in

their own interest rather than to a specific strategic plan;

Lack of fiscal space and hence a lack of Government investment in public good investments

such as tourism marketing, business support mechanisms and addressing inefficiencies in

the public service;

Cost of energy and electricity;


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Lack of product differentiation and limited export market focus makes the country

vulnerable to shifts in the global business cycle.

A Long Term Plan for Private Sector Growth

The analysis identified a number of pertinent issues affecting the development and growth of the

private sector in St. Vincent and the Grenadines. One of the most critical recommendations to

emerge is the need for the implementation of a forum for collaboration between key stakeholders

and representatives of labour, the private sector and Government.

Action 1: Establishment of a Tripartite Committee (government-employer-labour) to

identify the needs of all bodies and guide and oversee private sector development

strategies.

At present, attempts are being made to facilitate these discussions, however, there is no formal

forum available to discuss the issue of private sector development at the national level. Once

established, the Tripartite Committee should seek to also address the following:

Action 2: Rationalisation and streamlining of public sector’s business support

framework through the work of the Tripartite Committee to ensure a revised system

that addresses both the needs of the private sector (access to finance, technical

assistance and data) as well as wider obligations of Government.

Action 3: Development of a National Strategic Plan that mainstreams private sector

development in the country. Through the lobbying efforts of Government, the plans for

the development of the private sector should also be included in and regional strategic

plans at the level of the OECS/ECCU and CARICOM.

Action 4: Reduce the cost of finance through the reduction of transactional and

operational costs in financial institutions through the use of technology and monitoring

of efficiency levels; the reduction of risk and risk-averseness through the establishment

of a credit bureau and a collateral registry; and the introduction of alternative financial

products and greater networking in the financial sector.

Action 5: Increase the capacity of businesses to access finance through the provision of

support (technical assistance and training) for the adoption of accepted business

practices (recordkeeping) and the skills to develop business plans for funding and

strategic planning. These services exist in St. Vincent and the Grenadines and are

provided by Invest SVG and the Centre for Enterprise Development, however, the

utilisation of these services need to be expanded given the results to emerge from the

PSA.

Action 6: Provide incentives for energy conservation and frameworks for the

exploitation of renewable/alternative energy and reduce the cost of fossil fuels.

Incentives and support in this area will act as both a cost-reduction tool as well as an

opportunity for investment and enterprise development in the renewable/alternative

energy sector. Efforts to reduce the cost of fossil fuels would relate to periodic reviews

of the fuel clause tariff structure, a review of the distribution chain and exploration of

the possibility of privatisation of electricity supply.

Action 7: Education and training curriculum reform that addresses the long term

strategic direction of Government as well as the more immediate needs of the private


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sector. The reforms undertaken should be informed from manpower surveys and

subsequently developed human resource development plans which should seek to

catalyse the utilisation of apprenticeships and on-the-job training. The long term

strategic direction of Government should be constructed on the basis of dialogue with

the private sector.

It should however be noted that in order for these actions to be effectively implemented, that the

private sector will need to show greater willingness to share information and that both the private

and public sectors will need to more effectively exploit technology in relation to data mining and

collation in the public sector, and to improve productivity in the private sector. An overview of the

recommendations and related action plans are shown in Table B.

While all of the Action Points relate to the establishment of a conducive environment for the

development of the private sector and are external to enterprises, that the private sector itself will

need to take a portion of responsibility and seek to adopt a more proactive approach to exploiting

opportunities available in the market. Given the perception that the private sector is not as

proactive as it can be, and as a caution in relation to interventions to spur private sector

development, it is imperative that all key stakeholders, from the international to the domestic level,

are fully aware of the current level of development of the private sector. In St. Vincent and the

Grenadines, and across the region, the private sector is relatively under-developed and limited in its

ability to cope with current neo-liberal developments given a long period of protection through such

mechanisms as preferential trade agreements which have recently been removed. Any

interventions should therefore seek to assist the private sector, with the assistance of the public

sector, to build domestic market opportunities as well as special and differential treatment for

export goods in the short- to medium-term, rather than fully expose it to the rigours of international

competition. Lessons should also be learnt in relation to drawing on the strengths of the region

rather than seeking, as in the past, to attract investment based on low-cost labour which

subsequently led to the attraction of footloose enterprises that relocate to competitors as cost levels

change or economic circumstances deteriorate in relative terms. In this vein, the Caribbean needs to

exploit those resources for which it has an advantage and a brand, suggesting a concentration on

alternative energy (geothermal, solar), specialist agricultural products (such as nutmeg in Grenada)

and agro-processing, eco-tourism, edu-tourism (drawing on human resources in the region), heritage

tourism, health and wellness (both product-specific and related to tourism), and financial services,

among others.

In addition to drawing on the locational advantages that exist in the region, attention should be paid

to the specific recommendations that have consistently emerged from research in the region which

speak to: niche market development; moving up the value chain; development of strategic alliances

and joint ventures for knowledge and technology transfer; and the development of clusters, both

vertical and horizontal. The current VINCYKLUS initiative in promoting clusters provides a basis for

growth in the area of clustering. While activities in these areas are not specifically mentioned in the

Action Plan due to their specificity, they should remain as options during the development of the

strategic plan for private sector development and growth in St. Vincent and the Grenadines.


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Table B: Recommendations and Actions Matrix for St. Vincent and the Grenadines

Themes Critical Issues Actions Details Responsibility of…

General Political

and

Governance

Issues

Limited dialogue between stakeholders representing

Government, labour and the

private sector

‘Silo-mindset’ in business support organizations in the

public sector

Ad hoc development planning

Lack of information sharing by the private sector

Lack of utilization of

technology.

1. Establishment of a Tripartite Committee

2. Rationalisation and

streamlining of public

sector’s business support framework

3. Development of a

National Strategic Plan

that mainstreams private sector

development

As noted by Fashoyin (2004) there is a need for: Members to be independent and representative

Willing to consult and negotiate

Demonstrate mutual trust and respect

Need for communication at the Tripartite Committee level to determine the speci fic external needs of enterprises in relation to the business environment (finance, technical assistance) while

meeting the wider obligations of Government.

Government to initiate Tripartite

Committee and

address other issues

in conjunction with Tripartite Committee

Access to

Finance

High Transaction and Operating

Costs

Informational Asymmetries Alternative Financing Options

4. Reduce the cost of

finance

5. Increase capacity of business to access

finance

To address the issues of access to finance, several specific steps can be taken:

Introduction of technological advances ;

Monitoring of efficiency rate of financial institutions to identify areas for improvement ; Establishment of credit bureaus and collateral registries ;

Introduction of alternative financing options such as equity financing,

Greater competition in the financial sector, particularly the strengthening of domestic institutions;

Provision of technical assistance and training to the private sector in relation to increasing formality, the adoption of accepted business practices, and the skills to secure funding.

Eastern Caribbean

Central Bank; Business

support organisations

Cost of Doing

Business

Cost of electricity 6. Provide incentives for energy conservation

and frameworks for the

exploitation of

alternative energy options and reduce the

cost of fossil fuels.

Provision of incentives and support to help reduce energy costs through conservation as well a s for investing in the sector.

Periodic review of the fuel clause adjustment.

Assess the efficiency of the current distribution chain.

Explore the possibility of privatization of electricity supply.

Government

Labour

Market

Issues

Limited availability and lack of

specialist skills in the labour

market:

7. Education and training

curriculum reform.

The specific content of any reform should be determined at the Tripartite level and informed from

the strategic plan for private sector development. Agreement will need to be reached on the

immediate needs of the private and the longer terms development vision of Government.

Government

Trade

Issues

Limited product and market

range with a domestic focus.

The trade issues highlighted for St. Vincent and the Grenadines cannot be addressed directly by the Action Plan as the expans ion of product range and

markets will require the action of private sector entrepreneurs. The Action Plan seeks to provide a conducive environment in the provision of appropriate

labour and capital for the exploitation of market opportunities. Issues that will need to be addressed during the execution of the Action Plans in relation to Trade include:

Increasing efficiency in customs

Strengthening of Bureau of Quality and Standards


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Compete Caribbean

Private Sector

Assessment Report for

St. Vincent and the

Grenadines

August 2013


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1. Introduction

1.1. Background

Compete Caribbean is a private sector development program funded by the IDB, DfID and CIDA

which works with Governments and the private sector to promote economic growth and enhance

competitiveness across the Caribbean region. The Private Sector Assessment (PSA) and construction

of Donor Matrices for countries in the region is one element of the overall program.

The overall objectives of the Compete Caribbean program in the OECS include:

a) Building a more robust and sustainable private sector through the elimination of remaining

restrictions to the free flow of goods, services, capital and people within the countries of the

Caribbean Single Market and Economy;

b) Providing opportunities for forging closer private sector linkages across OECS member

countries;

c) Shifting from protection to adjustment support to help disadvantaged countries, regions and

sectors manage the process of intra-regional liberalisation; and

d) Facilitate private sector development within a more open trading environment.

The program is expected to be delivered within three components as follows:

1. Component 1 provides a review and diagnostic of the status of private sector development

in the OECS region. This component focuses on:

a. A review of existing studies and reports on private sector development and

competitiveness for the participating OECS member countries in the last 5 years, as

well as an evaluation of the recent performance of the private sector in each of the

six independent OECS member countries; and

b. The identification and evaluation of obstacles to effective private sector

development;

2. Component 2 focuses on the development of private sector development strategies and

action plans to include the development of a draft private sector development action plan

for each of the six independent OECS member countries, and for the OECS sub-region as a

whole, and the identification of possible opportunities for collaboration by CDB and IDB in

supporting the development of the private sector in the region.

3. Component 3 focuses on consensus building among key stakeholders on future actions

under the recommended private sector development strategy and facilitation of national

and regional workshops to present findings and action plans.

There are two main elements of the PSA project which are a Private Sector Assessment Report

(PSAR) and the construction of a Donor Matrix (DMX). The DMX is to provide an inventory of donor

projects related to private sector development and identify duplication and omissions. The main

aim of the PSAR element of the project is to identify market failures that are affecting the

development of the private sector at a national and at a regional/sub-regional level, and to identify

priority areas for intervention. There are two main elements of the PSA:

First, it compiles and analyzes information from different sources in order to provide a

snapshot of the state of the private sector in the country, and second, it brings the


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information to relevant stakeholders- such as firms in the economy- to establish priorities on

all the identified issues affecting the future growth in the private sector.

The Caribbean Development Bank is the executing agency for the PSAs and DMXs for six of the OECS

countries which include: Antigua and Barbuda, Dominica, Grenada, St. Kitts, St. Lucia and St. Vincent

and the Grenadines.

In 2012, the research team conducted interviews across the OECS with key stakeholders including

government ministries and agencies concerned with private sector development, private sector

associations, civil society and individual business enterprises. These interviews were conducted with

a view to ascertaining the primary constraints to private sector development and potential solutions

to the issues identified.

The following report highlights the main results to emerge from the analysis of primary and

secondary data collected as well as the views expressed in national consultations organised by

SALISES in Grenada and Antigua and Barbuda, and by the Caribbean Growth Forum in Dominica, St.

Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines. The details of the methodology

adopted for the research is shown below.

1.2. Methodology

The private sector assessment (PSA) draws on primary data analysis from interviews with key

stakeholders from the domestic private and public sector as well as interviews with regional and

international agencies. In addition, secondary data was utilised to describe the state of the country

at both the micro and macro levels. The specific methodology for the PSARs had three (3) core

components:

1. Analysis of secondary data and documentation from the following sources:

a. Enterprise Surveys/Doing Business Surveys

b. Central Government Fiscal Accounts

c. World Development Indicators

d. CARICOM Secretariat/OECS Secretariat

e. Miscellaneous Country Surveys

2. Interviews/Consultations with key stakeholders:

a. International Donor Agencies

b. Regional/Sub-Regional Agencies

c. Country-Specific Agents including business associations, representatives of labour

and relevant public sector bodies. Specific businesses and finance providers were

also included.

3. Identification of Main Thematic Issues affecting PSD and Identifying Priorities from the

results of interviews and national consultations.

The interviews conducted in St. Vincent and the Grenadines included the main business support

organisations and sector associations in both the public and private sector (Ministry of Tourism;

Statistical Department; Invest SVG; St. Vincent Hotel and Tourism Association; the St. Vincent

Chamber of Commerce and Industry; the St. Vincent National Development Bank; and the National

Development Foundation), finance providers and representatives, and private enterprises. A listing

of key stakeholders from interviews and consultations is included in the Appendices.


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In addition to these specific elements of the research, the development of the PSA Reports was

assisted by the information to emanate from consultations organised under the Caribbean Growth

Forum banner.

The Caribbean Growth Forum (CGF) is a joint initiative by the Compete Caribbean Program,

the Inter-American Development Bank, the World Bank, and the Caribbean Development

Bank. It is supported by the Canadian International Development Agency, the United

Kingdom’s Department for International Development, CARICOM Secretariat, and the

University of the West Indies.

The CGF is a facilitative methodology for public-private dialogue around issues central to

private sector development and growth. It brings a non-traditional approach to the greatest

challenge currently faced by the region – creating sustainable and inclusive growth. The

Forum also aims to facilitate an action oriented dialogue around key policy reforms needed

across three thematic areas: Investment Climate, Skills and Productivity and Logistics and

Connectivity.

Many Caribbean territories have a very good starting point with draft or completed national

growth strategies. Therefore, the aim is to identify the priorities within the three pillars of the

CGF that can contribute to these national strategies. In this respect, the CGF’s methodology

has been designed to result in a consensual, concrete action plan with specific responsibilities

and timelines, and it has built in transparency and accountability mechanisms to make sure

that, over time, results are delivered.

The CGF is part of the donor agencies’ commitment to support the Caribbean and develop

and implement inclusive growth policies that generate jobs and opportunities for all. 1

The CGF’s consultations and subsequent working groups provided useful information to add to, and

corroborate, the findings of the current PSA.

1.3. Report Structure

The rest of the Private Sector Assessment is structured as follows. Initially, Section 2 provides a

general overview of the country. This is followed by a description of its relationship with the OECS

and the ECCU in Section 3. Section 4 then presents the macroeconomic context of the country in

relation to domestic economic variables and the productive sectors, and the country’s position in the

international economy with respect to trade and foreign direct investment.

Section 5, the main section of the report, outlines the main characteristics, issues and challenges of

the private sector including the support for private sector development, the state of the private

sector, a review of primary and secondary data on the private sector and a summary of the main

issues affecting its development. This is followed by the development of an action plan for private

sector development in the country. Section 6 presents the main conclusions of the PSA and provides

some general recommendations.

The Appendices to the report include relevant details to complement the main report as well as the

Donor Matrix Report for the country. The Donor Matrix Report describes the relevant members of

the donor community, local stakeholders, information sources, opportunities for enhancing the

design and execution of programs and opportunities to address priority gaps.

1 http://caribgrowth.competecaribbean.org/about-the-cgf

http://caribgrowth.competecaribbean.org/about-the-cgf


5

2. Country Overview

St. Vincent and the Grenadines is an upper-middle income small microstate within the Eastern

Caribbean archipelago. The island is just 389 km2, or about one tenth (1/10) the size of Rhode

Island. The population is estimated at 110,000 persons, with a median age of 31 years and

population growth rate of about -0.313% per annum. St. Vincent and the Grenadines Human

Development Index (HDI) score in 2012 was 0.733; 83rd out of 187 countries. The country’s score

was below that for the Latin America and Caribbean region, largely reflective of a relatively lower life

expectancy (72 years). St. Vincent and the Grenadines is a member of the Eastern Caribbean

Currency Union (ECCU), which is fixed to the US dollar at $1 (Eastern Caribbean Dollar) to $0.37 (US

Dollars).

Growth in St. Vincent and the Grenadines was quite volatile over this period. The downturn in the

global economy as well as several natural disasters, have derailed the economy on many occasions.

Between 1994 and 2010, the island has been affected by 5 tropical storms and 1 category 2

hurricane (Tomas, 2010) as well as a drought in 2010. As a result, following average growth of 5%

between 2002 and 2007, the economy contracted by 2.4% in 2009 and a further 1.8% in 2010. The

contraction in the economy largely reflected falling tourist arrivals as well as FDI-related

construction, which has had negative spillover effects on the rest of the economy. An overview of

the main indicators for the economy is shown in Figure 1.

2.1. Governance

Freedom House (www.freedomhouse.org) ranks the country as ‘Free’ with a Freedom Rating of 1,

where a rating of 1 indicates the highest degree of freedom and 7 the lowest level of freedom. The

think tank notes that the last parliamentary elections were considered free and fair, despite threats

of legal challenges to the result of the 2010 General Elections. In addition, the right to free

expression and the free exercise of religious beliefs are generally respected. Workers have the right

to strike and organise and collectively bargain, the independence of the Judiciary is respected and

women are represented in Government. The Worldwide Governance Indicators Project of the World

Bank and the Brookings Institution suggests that the country performs moderately in the area of

‘Government Effectiveness’. The indicator captures the perceptions of the quality and

independence of public services and civil service, the quality of policy formulation and

implementation and the credibility of the government’s commitment to these polities. In 2010, the

score for ‘Government Effectiveness’ in St. Vincent and the Grenadines was above the70 th percentile

for all countries evaluated and above the median for the group of comparator countries.

http://www.freedomhouse.org/


6

Figure 1: Snapshot of St. Vincent and the Grenadines and Comparator Countries

Small Caribbean States, St. Vincent and the Grenadines and Extra-Regional Comparators

Small Caribbean States include: Antigua and Barbuda; The Bahamas; Barbados; Belize; Dominica; Grenada; Guyana; Jamaica;

St. Lucia; St. Kitts and Nevis; St. Vincent and the Grenadines; Surinam; Trinidad and To bago. Extra-regional comparators include: Malta, Mauritius, the Seychelles, and Palau.

0

5000

10000

15000

20000

GD

P p

er

cap

ita,

PP

P (

con

stan

t 20

05

inte

rnat

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)

GDP per capita in St. Vincent and the Grenadines has been consistently below the regional and

extra-regional average

0123456

Ma

urit

us

Bel

ize

Do

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…

St. V

ince

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St. L

ucia

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ica

Trin

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…

Bah

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Jam

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Suri

nam

Guy

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Ave

rage

GD

P G

row

th 1

980

-201

0 (%

)

However GDP growth over the last 30 years has been marginally better than that for other

comparator countries

-10

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10

20

30

Fore

ign

Dir

ect

Inve

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, ne

t in

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s (%

o

f G

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)

Net FDI in the country has been relatively erratic, but on a growth trend up to 2008 before a fall to

its present level of about 15% of GDP. Despite the limited growth since 2009, as a share of GDP,

FDI is somewhat higher that comparator countries.

0

20

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100

Ge

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ove

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(%

o

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Government Debt as a percentage of GDP is below the regional average and has not exceeded

70%, unlike other countries in the region

60

65

70

75

80

200020012002200320042005200620072008200920102011

Serv

ice

s V

alu

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dd

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(%

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Services are an extremely important part of the St. Vincent and the Grenadines economy at

approximately 74% of GDP in 2011, some 6% above the regional average

30

40

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70

80

2005 2006 2007 2008 2009 2010 2011

Trav

el S

erv

ice

s (%

of

serv

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exp

orts

, B

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)

Travel services are the main component of service exports . However, their share of service exports has fallen marginally below the regional

average since 2010

21%

16%

10% 9%

6%

38%

St. Vincent and the Grenadines' main export partners are located within CARICOM, while the

main export commodities (2010) were... Mill ing Industry Products,Malt etc.Edible Fruit and Nuts etc.

Edible Vegetables andcertain roots and tubersCereals

Beverages, Spirits andVinegarOther 0

2

4

6

8

10

2000 2001 2002 2003 2004 20052006 2007 2008 2009 2010 2011Inte

rest

Rat

e S

pre

ad (

%)

One of the main issues for businesses in St. Vincent and the Grenadines and the region was access to finance, and like the rest of the region,

interest rate spreads are relatively high


7

Figure 2: Governance Effectiveness for St. Vincent and the Grenadines versus Comparators (2010)

Source: Woldwide Governance Indicators

In relation to the issue of gender, females are represented in the House of Assembly and the Senate

(3 from 21), but not to any significant degree. However, the issue of gender is given Ministerial

prominence and addressed with the establishment of a Gender Affairs section within the Ministry of

National Mobilisation, Social Development, Family, Gender Affairs, Persons with Disabilities and

Youth. The goal of the Gender Affairs section is to ‘Support the integration and advancement of a

gender perspective into national development so as to attain equality and equity’.

2.2. Environment

St. Vincent and the Grenadines has a number of hazards that pose a threat to both the environment

and economic viability. The island is inherently vulnerable to hurricanes, volcanoes and other

climate change hazards and 70-90 % of the sloped terrain also poses risks of land slippage. The

Government, in 2006, passed a national emergency act, which identifies tasks and functions of

crucial stakeholders in an Emergency Committee. Examples of these tasks are:

Designation of Vulnerable Areas

Power to declare Disaster Alert

Power to close roads

The Government also passed an act to monitor and control precursor chemicals (defined as any

substance which can be used in any of the chemical processes involved in the production,

manufacture or preparation of narcotic drugs, psychotropic substances or substances having a

similar effect; or incorporates its molecular structure into the final product making it essential for

those processes).

Figure 3 shows CO2 emissions were second lowest versus other comparator countries.

0

10

20

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40

50

60

70

80

90

100

Per

cen

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Ra

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-10

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8

Figure 3: Environmental Performance: CO2 Emissions for St. Vincent and the Grenadines versus Comparators (2008)

Source: World Development Indicators

0

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9

3. St. Vincent and the Grenadines, the OECS and the ECCU

St. Vincent and the Grenadines is a member of the Organisation of Eastern Caribbean States (OECS)

and the Eastern Caribbean Currency Union (ECCU), the common currency framework for the OECS

countries; this is with the exception of the British Virgin Islands which does not use the Eastern

Caribbean Dollar. The Eastern Caribbean Dollar is issued by the Eastern Caribbean Central Bank

(ECCB), the monetary authority for the OECS. St. Vincent and the Grenadines represented 12% of

nominal GDP for the OECS, and ranked 7th in GDP per capita, in 2010.

The OECS was established in 1981 with the signing of the Treaty of Basseterre, named after the

venue of the signing of the treaty, the capital of St. Kitts and Nevis. The motivation for the formation

of the body was to provide a formal structure for cooperation to deal with development challenges

posed in the post-independence period. The OECS currently has nine members: Antigua and

Barbuda; Commonwealth of Dominica; Grenada; Montserrat; St. Kitts and Nevis; St. Lucia; St.

Vincent and the Grenadines; and Anguilla and the British Virgin Islands as associate members.

In June 2010, a Revised Treaty was signed, establishing the OECS Economic Union, a single economic

space for the free movement of goods, people and capital and a framework for the harmonization of

monetary and fiscal policies. The Revised Treaty allows for the adoption of ‘…a common approach to

trade, health, education and environment, as well as to the development of such critical sectors as

agriculture, tourism and energy’2. The organs of the OECS are shown in Appendix 1. Of particular

relevance to the development of the private sector in the region are the units under the Economic

Affairs Division, specifically the Export Development Unit (EDU) and the Trade Policy Unit (TPU). The

EDU is responsible for export development in manufacturing and non-traditional agriculture and the

TPU provides assistance in formulation and implementation of trade policies and in the negotiation

of trade arrangements. The EDU is currently working directly with officers in business development

organisations across the region to facilitate interaction between them and actual enterprises in the

region. Such proactive outreach programs are integral to enabling these development agencies in

serving the needs of the private sector and act to allay the concerns expressed by international

agencies during the PSA that the organs of the OECS were not as proactive as they could be.

Although the Revised Treaty of 2010 spoke to fiscal coordination and free movement of persons,

these have not come to full fruition, while movement of capital has not obtained any significant

scale economies at the regional level.

In relation to fiscal coordination, Schipke, Cebotari and Thacker (2013:5)3 note:

‘…faced with very high public debt, the region needs to put in place a mechanism to enforce

fiscal discipline because the success of the common currency depends on simultaneously

satisfying eight national budget constraints. As the experiences from the European Union

demonstrate, cross-border spillover- especially via the financial sector- from the weakest

member could undermine confidence and trigger a regionwide crisis.’

2 http://www.oecs.org/about-the-oecs/who-we-are/about-oecs

3 Schipke, A., Cebotari, A. and Thacker, N. (eds.) (2013). The Eastern Caribbean Economic and Currency Union: Macroeconomics and Financial Systems. IMF: Washington D.C..

http://www.oecs.org/about-the-oecs/who-we-are/about-oecs


10

The undermining of confidence in these economies would indeed create a crisis, especially in

relation to these economies’ reliance on foreign investment and tourism.

In addition, the free movement of goods, labour and capital are the foundation of unions of this type

to enable, in the long term, the realization of the benefits of integration, namely benefits of scale

economies, rationalization of public services, and greater bargaining ability at international forums.

However, given that private sector enterprises in the region indicate inadequately trained labour as

a major constraint, it is questionable whether free movement of labour within the sub-region will

pay any dividends to the receiving country, or the union as a whole, given that the economies are

not structured in any significantly different ways, and therefore their labour force is likely to be

comprised of the same types of skills and abilities.

A similar situation to what exists for labour could be said to exist in relation to finance. While

Schipke, Cebotari and Thacker (2013) note that indicators at a macro level indicate that the financial

sector in the OECS is well developed, and on par with Latin America and the rest of the Caribbean,

Enterprise Surveys ‘tell a different story’(p.15). Enterprise Surveys and Doing Business indicators

across the region show that a significant amount of firms in the OECS view lack of access to finance

as a major obstacle to their business, while interviews conducted during the PSA for the region

indicate that this is due to the cost of finance, collateral requirements and application procedures,

issues ground in the lack of credit information as well as the capacity of enterprise owners in

supplying information to creditors. Given that this issue is pervasive across the OECS, while

theoretically regional integration should provide scale economies in financial provision, in reality the

movement of capital within the union would simply replicate the problems experienced at the

domestic level.

While these issues demonstrate that perhaps regional integration in the OECS/ECCU does not

facilitate private sector development to the degree it should, their actual existence provides for a

perception of stability at both the political and financial level, as well as pose the opportunity for

growth in the future; that is if issues related to skills in the labour force, fiscal coordination and scale

economies in financial provision can be addressed, if the private sector itself seeks to proactively

exploit available opportunities in the wider region.

However, these issues cannot be taken without due consideration to the external effect of the global

financial crisis. In seeking to address the downturn, the OECS/ECCU has implemented an eight point

program which includes the following elements and main components:

1. Suitably adapted Financial programmes for each country:

a. Aim: To identify the financing gaps of government and recommendations to close

gaps and address structural issues in relation to the Balance of Payments (external

sector), National Accounts (real sector), Fiscal Accounts (public sector) and

Monetary Accounts (financial sector).

2. Fiscal reform programmes:

a. Aim: To develop efficient revenue and expenditure systems, as well address the

management of governments’ cash flows, debt servicing and wages.

3. Debt management programmes:

a. Aim: To facilitate the adoption of a structured approach to debt management to

achieve optimal debt profiles and enhance sustainability. The debt target is 60% of

GDP by 2020.


11

4. Public sector investment programmes (PSIP):

a. Aim: To provide short- to medium-term fiscal stimuli for the ECCU in relation to

‘Quick disbursing projects which will put people to work and stimulate economic

activity to restore growth; and …provision of critical infrastructure for medium and

long term development’4.

5. Social safety net programmes:

a. Aim: To review the social safety nets in the ECCU countries and the development of

measures to achieve sustainable poverty reduction.

6. Financial safety net programmes:

a. Aim: Restructuring and recapitalisation of the banking and insurance sectors and

regulatory and supervisory strengthening.

7. Amalgamation of the indigenous commercial banks:

a. Aim: To create economies of scale and scope, operational efficiency in financial

services in the ECCU.

8. Rationalisation, development and regulation of the insurance sector:

a. Aim: To reduce the number of insurance companies in the region and strengthen the

regulatory framework.

A brief review of the eight point plan reveals limited direct relevance to the development of the

private sector with the exception of plans for public sector investment programs (PSIP) and the

amalgamation of banks which, it would be hoped, would provide easier access to finance. While the

points in the plan seek to provide an overall conducive environment for business in the long term,

there appears to be limited attention to the immediate needs of the private sector at the regional

and domestic level. This is not to say that the needs of the private sector are not being addressed,

simply that the focus of policy at the regional level is focussed more on the macroeconomic

environment rather than increasing productivity and private sector development.

4 http://www.eccb-centralbank.org/about/ann26_eight.asp

http://www.eccb-centralbank.org/about/ann26_eight.asp


12

4. Macro Context of Grenada and the OECS

4.1. The International Economy

Since 2001, St. Vincent and the Grenadines’ external current account deficit has further

deteriorated. In 2001 the external current account balance was estimated at -6% of GDP falling to -

16% of GDP in 2003 and to -33% of GDP in 2008. There was some improvement in the current

account balance in 2009 and 2010, but was still at unsustainable levels (see Figure 4). The

deterioration in the island’s external current account balance largely reflected falling exports of

traditional export commodities, rising food and petroleum prices as well as a contraction in earnings

from tourism. The net services balance in 2010 was EC$197 million compared to EC$263 million in

2006. The merchandise trade balance also contracted by over EC$100 million due to declining

exports of traditional export commodities (primarily bananas).

Figure 4: Current Account Balance for St. Vincent and the Grenadines (1980-2010)


The deficit on the external current account has in recent years been financed by rising FDI inflows.

Prior to 1994, FDI inflows were less than US$15 per year. Since then, however, FDI inflows have

grown quite rapidly reaching US$89 million in 1998 and US$160 in 2008. FDI inflows in 2009 and

2010 declined somewhat to US$100 million. Most of the remainder of the deficit tends to be

financed via aid flows as well as a small amount of remittance flows. The external indebtedness of

the island was fairly steady for much of the period at around 50 per cent of GDP and about 10% of

exports of goods and services (see Figure 6).

-35

-30

-25

-20

-15

-10

-5

0

5

10

-250

-200

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1980 1985 1990 1995 2000 2005 2010

% o

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US$

Balance (US$M) % of GDP


13

Figure 5: External Accounts Analysis for St. Vincent and the Grenadines (1980-2010)


Figure 6: External Debt and Debt Service for St. Vincent and the Grenadines and the OECS 6 (2000-2010)

Source: IMF Article IV Consultations (Various Years)

Note: Debt Service measured as % of Goods and Services Exports

In small open economies, the real effective exchange rate is not a good proxy for external

competitiveness. These economies tend to be very open to the rest of the world, given the lack of

natural resources and limited self-sufficiency in food production. As a result, domestic prices tend to

be largely driven by external factors beyond the control of the domestic authorities. In addition, as

these economies tend to largely focus on the supply of services to other economies (e.g. tourism and

international financial services), which are not very dependent on price, but on quality, the real

effective exchange rate is not a good proxy for competitiveness of the island to provide these

services. The limited utility of the real effective exchange rate to explain competitiveness changes is

shown by the lack of correlation between the index and the external current account balance (see

Figure 7). Essentially, as the exchange rate is fixed, domestic prices are largely driven by external

-23 -18 -22 -20 -18 -13 -21 -17 -14 -33 -28 -38 -33 -42 -58 -37 -37

-84 -100 -67

-35 -43 -30 -68

-113 -88

-126

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-237

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-200

-100

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200

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1980 1985 1990 1995 2000 2005 2010

Mil

lions

US$

Remittances FDI

Net Financing ODA

Balance of G&S Deficit + Reserves Accum.

0

20

40

60

80

2000 2005 2010

%

St. Vincent and the Grenadines Debt ServiceOECS 6 Average Debt ServiceSt. Vincent and the Grenadines External Debt (% GDP)


14

prices, not domestic market conditions. One would therefore not expect any relationship between

the RER and the current account balance in fixed exchange regimes such as in the OECS.

Figure 7: Real Effective Exchange Rate Index (2005=100) and Current Account Balance (%GDP) for St. Vincent and the Grenadines (1980-2010)


4.1.1 Trade

Figure 8 provides a snapshot of the trade patterns for St. Vincent and the Grenadines. More than

half of all imports are for energy related imports. Fluctuations in international oil prices therefore

have a significant impact on the overall external current account for the island. Given the lack of a

large manufacturing base, most of the machinery and equipment required for the production of

goods and services are imported from abroad (Figure 9). The US is the largest trading partner,

accounting for 33% of all imported goods. Most of these items are non-durable and durable

consumer items. Trinidad and Tobago and the United Kingdom also show up as a major sources of

imports.

On the goods exports side, the island’s main commodity export remains agricultural commodities,

with alcoholic beverages also appearing in the top 5 export categories (Figure 10). More than one

third of these exports are for the St. Lucian market, with most of the remainder going to Trinidad

and Tobago, Barbados and the UK.

-35

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-5

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40

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120

140

1980 1985 1990 1995 2000 2005 2010

%G

DP

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ex

(20

05

=10

0)

Year

Exchange Rate Index Current Account Balance (%GDP)


15

Figure 8: Trade Snapshot for St. Vincent and the Grenadines (2010)


16

Figure 9: Treemap of Imports5, St. Vincent and the Grenadines 2010

Source: The Observatory of Economic Complexity

Figure 10: Treemap of Exports, St. Vincent and the Grenadines 2010


5 A treemap of imports/exports show various products’ share of total imports/total expor ts. The product classification is based on the Harmonised Commodity Description and Coding System (HS) at the 4 -digit level.


17

4.1.2 Foreign Direct Investments

FDI in St. Vincent and the Grenadines is largely associated with tourism and commodity exports. In

2011, FDI was 19% of GDP, the third largest ratio among the group of comparator countries. St.

Vincent and the Grenadines face a number of challenges in regards to attracting FDI, many of which

are outside of the control of policymakers. Its small market size limits the amount of funds flowing

into the island for market-seeking opportunities. The size of the of the economy and lack of natural

resources, also results in higher input costs and limited opportunities for natural resource seeking

FDI. Given the profile of the island, it is likely that most FDI would be of the efficiency-seeking

variety (e.g. international financial services). This would utilise the surplus labour but would also

require some investment in the human resource capabilities of the island.

Figure 11: Inward FDI for St. Vincent and the Grenadines and Comparators (2011)

Source: UNCTAD

The macroeconomic environment is quite stable, but there are some social and political

uncertainties that might impact on potential FDI flows. In relation to the macroeconomic

environment, inflation is relatively low, there are no restrictions on capital flows and limited

exchange rate uncertainty. There are also relatively few regulatory hurdles for potential investors;

only electricity, telecommunications and water require government licences, while financial

institutions must obtain permission from the International Financial Services Authority.

Invest St. Vincent and the Grenadines has been playing an important role in relation to investment

promotion on the island. The institution offers investment and trade information, investment

incentives, investment facilitation, industrial facilities and policy advice. Key sectors targeted include

manufacturing, tourism, international financial services, information and communication

technologies, the creative industries as well as agriculture and agro-processing.

4.1.3 Analysis for the International Economy

Given the openness of the St. Vincent and the Grenadines economy, international economic

developments have a significant impact on the domestic economy. There are three key potential

-20.0

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-5.0

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DP


18

external threats to future developments: (1) growth in more developed economies; (2) commodity

prices; and (3) FDI flows. Given the small size of the domestic market, most growth opportunities in

small states are related to the international economy. Future prospects for tourism, for example,

are largely driven by economic developments in key source markets. If lack of growth in these

economies is protracted, the already weak tourism industry could be further affected. Remittance

flows, which are also an important component of the financing mix for the island, are also intimately

associated with economic developments in the above-mentioned larger economies.

Commodity prices have a significant impact on not only domestic prices but also external current

account sustainability. More than one third of the total value of imports in St. Vincent and the

Grenadines, for example, are for imports of petroleum-related products. Fluctuations in

international oil prices can therefore affect the success of any economic adjustment programme.

Commodity prices also impact on the demand for travel to the island and can also increase the price

of all imports as shipping costs rise.

The relatively large current account deficit that St. Vincent and the Grenadines has reported in

recent years has largely been financed by FDI inflows. Should these flows continue to decline, the

island will need to accumulate an even larger amounts of external debt, which is already just below

40% of GDP. FDI inflows also support growth in the construction industry. Any rebound in growth of

this industry is therefore dependent on a rebound in FDI inflows.

4.2. The Domestic Economy

The size of the St. Vincent and the Grenadines economy has grown quite rapidly between 1980 and

2010. In 2010, real GDP was estimated at US$1.1 billion, over three times the size of the economy in

1980. On a per capita basis, GDP for the island was still, however, below that for most comparator

countries (US$11,077): just 8 countries (Dominican Republic, St. Lucia, Jamaica, Suriname, Belize,

Grenada, Guyana and Haiti) out of the 18 comparator countries considered had a lower level of per

capita GDP.

Growth in St. Vincent and the Grenadines was quite volatile over this period. The downturn in the

global economy, as well as several natural disasters, has derailed the economy on many occasions.

Between 1994 and 2010, the island has been affected by five tropical storms and one category 2

hurricane (Tomas, 2010), as well as a drought in 2010. As a result, following average growth of 5%

between 2002 and 2007, the economy contracted by 2.4% in 2009 and a further 1.8% in 2010. The

contraction in the economy largely reflected falling tourist arrivals as well as FDI -related

construction, which has had negative spillover effects on the rest of the economy, especially in

relation to employment.


19

Figure 12: GDP Dynamics for St. Vincent and the Grenadines

GDP Dynamics 1980-2010 GDP Per Capita 2010, PPP (current international $)


In order to offset the negative effects of these shocks, the island made a request to the IMF for

access to the Rapid Credit Facility (RCF) to the tune of US$3.26 million. While the facility does not

have programme-based conditionality, countries are expected to put policies in place address the

balance of payments problem, as well as support macroeconomic stability and poverty reduction.

Figure 13: GDP Growth in St. Vincent and the Grenadines (1980-2010)

GDP Growth (Annual %) 1980-2010 Average GDP Growth 1980-2010


Note: GDP Growth (Annual %) based on PPP (constant prices, international $)

0

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1980 1985 1990 1995 2000 2005 2010

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GDP, PPP (constant international $)

GDP per capita, PPP (constant international $)

0 10000 20000 30000

Haiti

Guyana

Belize

Suriname

Jamaica

Dominican Republic

Grenada

St. Lucia

St. Vincent and the Grenadines

Dominica

Mauritius

Palau

St. Kitts and Nevis

Barbados

Antigua and Barbuda

Seychelles

Trinidad and Tobago

Malta

Bahamas, The

current international $

-4

-2

0

2

4

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8

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12

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16

1980 1985 1990 1995 2000 2005 2010

%


Average for Comparators

0.0

1.0

2.0

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6.0

An

tigu

a a

nd…

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amas

, Th

e

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Do

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Do

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…

Gre

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a

Guy

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aica

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lta

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us

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ucia

St. V

ince

nt a

nd

…

Suri

nam

Trin

idad

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%


20

The success of these stabilisation plans will hinge on the ability of the authorities to moderate the

growth in consumption. Expenditure on GDP is largely driven by trends in household consumption.

For most of the period the share of consumption in GDP has fluctuated around 90 per cent of GDP.

In recent years, however, the share of this category has fallen: in 2010 household consumption was

estimated at 79% due to falling household incomes. The islands net exports (or trade balance) has

also deteriorated significantly. In 2007, 2008 and 2009, the net exports were estimated at almost -

30% of GDP. There was some improvement in the current account balance in 2010, but the deficit

still remained above 13% of GDP. Government expenditure and gross capital formation have both

increased in recent years as part of government efforts to stimulate the economy. Since 2007,

government expenditure has been about 2 percentage points higher when compared to the 2001-

2006 period, while gross capital formation in 2010 was more than 11 percentage points higher than

in 2009.

Figure 14: GDP Decomposition by Expenditure for St. Vincent and the Grenadines (1980-2010)

Source: UN National Accounts Database

Traditional, the St. Vincent and the Grenadines economy has been dependent on the export of

commodities (primarily bananas), as well as tourism. With the loss of preferential markets in

Europe, however, the banana industry on the island has declined significantly while Hurricane Tomas

(2010) and the Black Sigatoka disease have devastated most of the remaining banana crops. As a

result, the share of agriculture in GDP has gone from almost 21% of GDP in 1990 to just 6% by 2010,

while GDP has fallen and other sectors have failed to fill the gap. As a result of the decline of

agriculture, the services sector has become more important: tourism, wholesale and retail trade,

transport storage and communications, construction and real estate, renting & business activities;

these four industries together account for more than 50% of GDP. St. Vincent and the Grenadines

receives over 200,000 tourists every year, half of these were due to cruise ship passengers (110,954)

and most of the remainder was made up of long stay passenger arrivals (72,645) as well as yacht

passengers (43,115). More than 33% of long stay tourist arrivals came from the Caribbean, followed

by the USA (30%) and the UK (16%). Tourism activity has stimulated economic activity in most of the

-100

-50

0

50

100

150

200

1980 1985 1990 1995 2000 2005 2010

% o

f GD

P

Household Consumption Government Expenditure

Gross Capital Formation Net Exports


21

other service industries such as construction, wholesale and retail trade and transportation.

Services share in GDP has gone from 60% in 1993 to 75% by 2010.

Figure 15: GDP Decomposition by Industry for St. Vincent and the Grenadines (1980-2010)

Source: UN National Accounts Database

Inflation in St. Vincent and the Grenadines tends to be relatively low. Since 1980, the average

annual rate of inflation was 2.9% compared to 8.5% in a group of its peers (see Figure 16). Between

2005 and 2008, prices in St. Vincent and the Grenadines were significantly above the historical

average, primarily due to higher prices for food, beverages and housing, as well as fuel and light.

While some of the increase can be attributed to higher international commodity prices, the increase

in prices can also be attributed to the implementation of the VAT in 2007. Since 2009, however, the

rate of price increases has been subdued: in 2009 inflation was 0.4% while in 2010 it was just 0.8%.

The slowdown was largely due to falling housing prices and subdued growth in prices of good as well

as transportation and communications.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 1985 1990 1995 2000 2005 2010

% o

f GD

P

Agriculture Industry Services


22

Figure 16: Inflation Data for St. Vincent and the Grenadines (1980-2010)

Inflation Dynamics 1980-2010 Comparative Inflation (2010)


Since 2002, Government’s fiscal deficit has been widening. Deterioration largely reflected significant

growth in both current as well as capital expenditure. Between 2006 and 2010, wages and salaries

rose by almost 30%, while transfers and subsidies more than doubled over the same period. As a

result, government’s current account balance – current revenue less current expenditure – went

from a surplus of EC$58 million in 2008 to a deficit of almost EC$9 million in 2010. As a result,

government’s fiscal balance (excluding grants) was almost 6% of GDP in 2010.

With the introduction of the VAT in 2007, government revenue yields rose from 24% of GDP in 2006

to as much as 30% of GDP in 2009, and 27% in 2010. Since 2009, however, revenues have been

relatively flat. With incomes falling, taxes on income and profits were virtually unchanged between

2009 and 2010, while VAT on international trade and domestic transactions both fell by around

EC$10 million.

0

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1980 1985 1990 1995 2000 2005 2010

%

St. Vincent and the…

-4

-2

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23

Figure 17: Fiscal Deficit for St. Vincent and the Grenadines (2000-2010)

Source: Central Government Fiscal Accounts

As a result of the deterioration in Government’s fiscal position, gross government debt has been

rising since 2007 and is now 67% of GDP. Most of this debt is denominated in foreign currency:

external debt in 2010 was 42% of GDP (US$222 million6) compared to 30% of GDP in 2008 (US$167

million). External public sector debt service has also been rising quite rapidly and is now estimated

at 17% of GDP. Public sector debt is expected to rise even further in the future due to planned

International Airport project, however, debt ratios should be contained after the project is

completed.

6 Measured in constant 2000 US$

-200.00

-100.00

-

100.00

200.00

300.00

400.00

500.00

600.00

2000 2005 2010

EC$

Mil

lio

ns

Current Revenue Current Expenditure Capital Expenditure Deficit Fiscal Current Account Balance


24

Figure 18: Gross Government Debt for St. Vincent and the Grenadines versus Comparators (2000-2010)

Source: IMF WEO Database

Like most of the OECS, obtaining information on labour market developments in St. Vincent and the

Grenadines is quite difficult and often dated. Nevertheless, it is estimated that the unemployment

rate in 2008 was 19%, with about 17% of the labour force being unemployed for 12 or more months.

As a means of comparison, the table below demonstrates that the unemployment rate in St. Vincent

and the Grenadines is higher than for comparator countries, with the exception of Guyana, with a

higher burden on women and the youth.

Table 1: Unemployment Data for Comparator Countries (Various Years)

Country Name Data Year

Total Unemployment (%)

Female Unemployment

(%)

Male Unemployment

(%)

Youth Unemployment

(%)

Bahamas, The 2011 13.7 13.7 13.6 na

Barbados 2011 11.2 12.5 9.8 na

Belize 2007 8.5 13.0 5.9 na

Dominican Republic 2010 12.4 16.4 9.34 na

Guyana 2011 21.0 25.74 17.24 46.0

Jamaica 2011 12.7 17.2 9.6 30.1

St. Lucia 2007 14.0 18.5 10.0 na

Trinidad and Tobago

2008 4.6 6.2 3.5 10.5

Malta 2011 6.4 7.0 6.1 13.9

Mauritius 2011 7.9 12.3 5.2 21.7


The majority of persons are employed in services/sales or elementary occupations. This largely

reflects the lack of skilled persons in the labour force. In 2008 more than 50% of labour force

participants had no formal qualification and only 24% had secondary school certification.

0

10

20

30

40

50

60

70

80

90

2000 2005 2010

% G

DP

Year

Gross Debt (%of GDP) Average for Comparators


25

4.2.1 Analysis for Domestic Economy

The slowdown in world economic growth has had a negative effect on macroeconomic

fundamentals in St. Vincent and the Grenadines. Key industries, such as construction and wholesale

and retail trade as well as tourism, have reported double-digit rates of decline, resulting in a

significant deterioration in the employment profile for the island. Based on relatively poor

employment statistics, it is estimated that 1 in every 5 Vincentians was unemployed, with the

statistics for the youth and females expected to be somewhat higher.

As a result of the deterioration in economic conditions, gross government debt has begun to expand

again after falling during the early 2000s. The main policy challenge in the short- to medium-run will

therefore be the implementation of a credible fiscal strategy that does not impede recovery

prospects. The process of fiscal consolidation has already begun, with the implementation of the

expenditure reducing measures and various other initiatives aimed at enhancing the ease of doing

business on the island. Should growth not recover in the short- to medium-term, however,

Government debt could rise to unsustainable levels.

4.3. The Productive Sector

St. Vincent and the Grenadines has traditionally depended on agriculture and tourism to spur growth

and development on the island. The island has been trying to expand its offering of international

financial services. At present the sector comprises International Business Companies, International

Trusts, International Banks, International Insurance Companies and Mutual Funds. Given the

traditional agricultural base on the island, there is also potential for agro-businesses in the area of

coconut processing, fruit processing, poultry production, cassava processing, dasheen and other root

crops as well as arrowroot processing.

4.3.1 Industry and Agriculture

St. Vincent and the Grenadines’ production structure has not changed much in recent years, and in

general, the island tends to export goods that are not unique/complex (Figure 197). The product

space maps show that there have been limited developments in the core with some expansion in the

periphery. In addition, most of the new industries are on the periphery, which could have

implications for coordination in the accumulation of capabilities.

7 ‘The product space map is a view of the network of relatedness of products that countries trade. The layout remains fixed for which the country’s export basket is overlayed with a thick black border on the products that they were exporting in the given year’ http://atlas.media.mit.edu/about/. An interactive version of the Product Space Maps for Exports is available from http://atlas.media.mit.edu/

http://atlas.media.mit.edu/about/

http://atlas.media.mit.edu/


26

Figure 19: Product Space Map (Exports) for St. Vincent and the Grenadines 1995 and 2010

1995

2010



27

In reviewing the export data utilised to construct the maps, Frozen Fish (excluding fillets), Fish Fillet

or Meat, Women’s Suits, and Fishing Vessels have fallen from being in the top 10, to out of the top

20. Cruise ships and similar vessels fell from third (11% of exports) in 1995 to 19th (0.4% of exports)

in 2010. These products have been replaced in the top 10 by Yachts, Waters (flavoured or

sweetened), Carton, Boxes and other packing containers made of paper, Flat rolled iron, and

Preparations of a kind used in animal feed. It should be noted that Bananas and Plantains fell from

23% of exports in 1995, to 4% in 2010. While the analysis reveals that there has been some

movement up the production chain with a reduction of exports of primary products and an

expansion of more processed products the percentage change has been limited over the period.

Table 2: Top 20 Exports for St. Vincent and the Grenadines for 1995 and 2010

1995 Top 20 Exports Share 2010 Top 20 Exports Share

Bananas and plantains 23.30% Yachts 55.32%

Tugs and pusher craft 11.57% Wheat or meslin flour 6.13%

Cruise ships and similar vessels for the transport of persons

11.04% Tugs and pusher craft 6.11%

Frozen fish, excluding fillets 10.88% Bananas and plantains 4.20%

Wheat or meslin flour 7.73% Manioc (cassava) 2.82%

Rice 5.84% Rice 2.70%

Fish fillet or meat 3.41% Waters flavored or sweetened 1.58% Women's suits, not knit 2.68% Cartons, boxes, cases, bags and other packing

containers of paper 1.33%

Manioc (cassava) 2.15% Flat rolled iron or non-alloy steel, coated with tin, w >600mm, t >0.5m

1.27%

Fishing vessels 1.89% Preparations of a kind used in animal feeding 1.24%

Men's shirts 1.40% Floating or submersible drilling platforms 1.12%

Preparations of a kind used in animal feeding

1.28% Antiques older than one hundred years 0.87%

Fish, excluding fillets 1.24% Fork-lift trucks 0.76% Flat rolled iron or non-alloy steel, coated with tin, w >600mm, t >0.5m

1.17% Aluminum structures (bridges, towers etc) 0.61%

Yachts 1.02% Packing of goods 0.42%

Jewelry of precious metal 0.86% Scrap of precious metal 0.41%

Cartons, boxes, cases, bags and other packing containers of paper

0.65% Automatic data processing machines 0.41%

Crustaceans 0.51% Ferrous waste and scrap 0.38% Packing of goods 0.49% Cruise ships and similar vessels for the transport

of persons 0.36%

Waters flavored or sweetened 0.49% Crustaceans 0.30% Source: The Observatory of Economic Complexity

4.3.2 Services

Tourism is the main driver of activity in the services sector of the economy. Figure 20 plots the

decomposition of the various components of the services industry for the period 1980 to 2010. On

average, tourism services accounted for just over four-fifths of service exports, with communications

services accounting for most of the remainder. Travel services are the only category of services

trade where the island has a trade surplus. For all the other segments of services trade payments

for these services far exceed earnings.


28

In specifically addressing tourism, the World Travel and Tourism Council (2013)8, estimates the direct

contribution9 of travel and tourism to the economy of St. Vincent and the Grenadines as 6.0% of GDP

in 2012, and 5.5% of employment, or approximately 2,500 jobs.

Figure 20: Decomposition of Service Exports for St. Vincent and the Grenadines (1980-2010)


4.3.3 Analysis for the Productive Sector

The agricultural sector in St. Vincent and the Grenadines, traditionally a key foreign-exchange

earning industry, has contracted significantly in recent years. In 1980, agriculture accounted for

almost one quarter of all production on the island. Since then, the size of the sector has shrunk

significantly and now only accounts for less than 7% of total domestic activity. The tourism industry

has also weakened in recent years as well due to the weak global environment.

In the 2012 budgetary address the authorities also unveiled a number of policies aimed at

stimulating private sector development. One of these initiatives was the production of 20,000

tonnes of bananas for regional and extra-regional export. Funds will be used to obtain GAP

certification for 900 banana farmers. The larger capital works project currently being undertaken is

a new international airport at Argyle. At present, to get to St. Vincent and the Grenadines one needs

to make connecting flights at other regional airports. The new international airport would reduce

the cost of travelling to St. Vincent and the Grenadines due to the elimination of intermediate flights

from other regional airports.

8 http://www.wttc.org/site_media/uploads/downloads/st_vincent_and_the_grenadines2013_2.pdf

9 The WTTC defines ‘direct contribution’ as spending in relation to travel and tourism by residents, businesses and government, and visitor exports on tourism related commodities (accommodation, transportation, entertainment and attractions) in relation to GDP, and for employment, jobs provided in these industries (accommodation services, food and beverage services, retail trade, transportation services, and cultural, sports and recreational services.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980

1981

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1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

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1994

1995

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1998

1999

2000

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2004

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2008

2009

2010

% o

f Ser

vic

e E

xp

ort

s

Communications, computer, etc. Transport services

Insurance and financial services Travel services

http://www.wttc.org/site_media/uploads/downloads/st_vincent_and_the_grenadines2013_2.pdf


29

Numerous measures were also announced to support traditional industries. From 2012, all

manufacturers (including agro-processors) will receive duty free concessions on all raw materials,

plant and equipment imported for use in their operations. To further assist businesses, electricity

tariffs for industrial uses were also reduced.


30

5. Characteristics, Issues, Challenges of Private Sector Development in St. Vincent and the

Grenadines

5.1. Goal for Private Sector Development in St. Vincent and the Grenadines

The Government of St. Vincent and the Grenadines’ main priority in the aftermath of the financial,

CLICO and BAICO crises, along with its ECCU counterparts, is to structure budgeting plans in

accordance to the eight-point stabilization program conceived by all ECCU members. The

Government, in its 2013 budget speech address10 stated:

‘The 2013 Budget is crafted, too, within the frame of the Draft National Economic and

Social Development Plan, the Eight Point Growth and Stabilisation Programme of the

ECCU, and the various developmental instruments and programmes of the OECS and

CARICOM to which our government has contributed’ . (p. 6)

The eight-point program speaks to: Suitably Adapted Financial Programmes for each country; Fiscal

Reform Programmes; Debt Management Programmes; Public Sector Investment Programmes; Social

Safety Net Programmes; Financial Safety Net Programmes; Amalgamation of the Indigenous

Commercial Banks; and lastly, Rationalisation, Development and Regulation of the Insurance Sector.

Aside from this, job creation and poverty reduction were still overarching themes for St. Vincent and

the Grenadines. The Government is currently undertaking a population census to update

demographic and employment statistics and outlined that:

‘…a more robust public sector investment programme, an increase in domestic and foreign

direct investment, an enhanced flow of remittances, an uplift in tourism arrivals particularly

after the international airport opens in 2014, a revitalization of agriculture and fisheries, and

an improvement in the export of services (including entertainment), are likely to spur job

creation.’11(p. 17)

The sentiment of increasing investment (foreign and domestic), agriculture and its by-products, and

the export of services are all echoed in the mandate of many business support institutions such as

Invest SVG, the National Development Foundation, the Centre for Enterprise Development, COMFI

(an alliance of three large credit unions) and indigenous banks, among others. In addition to this,

human resources are expected to be more competitive in tourism, as the Government seeks to

establish a hospitality and training institute, which is a pre-requisite for a more competitive tourism

services sector in St. Vincent and the Grenadines12.

10 http://www.gov.vc/

11 http://www.gov.vc/

12 INVEST SVG priority sectors for investing were identified: Information and Communications Technology (ICT), International Financial Services (IFS), Tourism, Agri -business, Light manufacturing and the Cultural Industries. The government is seeking to attract investors in these sectors . Credit Union League stated from interviews that their penetration rate was consistently at 8 percent. The NDF stated from interviews that a sizeable proportion of their funds were going towards agriculture and fisheries and maintains that this sector has potential. The Center for Enterprise Development’s specific objective is to increase the number of viable enterprises in St. Vincent and the Grenadines. COMFI was established in 2013 by the three largest credit unions in St. Vincent, it is a cooperative that makes small business loans. The Bank of St. Vincent and the Grenadines mentioned in an interview that its output for the last year rivals most of the international banks.

http://www.gov.vc/

http://www.gov.vc/


31

Government also places energy independence as another instrument to revolutionizing the structure

of its economy with hopes that production could become more competitive with cheaper input

costs. Though many ECCU governments are working on creating a more sustainable and renewable

energy, most electricity companies in the Eastern Caribbean are owned by governments and

contribute significantly to government revenues. Moreover, as highlighted the 2013 Budget Speech,

the funds from the PetroCaribe deal (traditional fossil fuel resources) are borrowed for major

Government projects i.e. the new international airport.

‘Government also approved funding to IADC (International Airport Development Company)

in the amount of 50 percent of the monies accumulated under the loan component of the

PetroCaribe (SVG) Ltd. fuel supply arrangements that the Government of Venezuela has

established with the Government of St. Vincent and the Grenadines. As at 31st October 2012,

IADC has been able to borrow EC$ 41.4 million from the PetroCaribe funds to be used for

airport construction’. (p. 35)

In general, it appears that the Government of St. Vincent and the Grenadines is seeking to ensure

sustainable growth in the private sector through a number of avenues in relation to enhancing

investment opportunities in a number of sectors through enhancing access to finance, reducing

energy cost and developing the human resources of the country. While it appears from the majority

of the rhetoric that private sector development is being pursued for its own sake, the Government

appears to recognise that the generation of employment is key for the sustainable reduction of

poverty, while also seeking to ensure fiscal security and foreign exchange earning capabilities to

allow the Government to undertake its other obligations to the citizenry of the country.

5.2. State of the Private Sector

The industrial structure of St. Vincent and the Grenadines is dominated by services; real estate,

renting and business activities, wholesale and retail trade, and transport, storage and

communications account for 48.1% of GDP.

Table 3: Contribution to GDP by Sector in St. Vincent and the Grenadines (2012)

Sector Share (%)

Real Estate, Renting and Business Activities 16.55

Wholesale & Retail Trade 16.25 Transport, Storage and Communications 15.28

Public Administration, Defence & Compulsory Social Security 10.54

Construction 8.34 Financial Intermediation 6.37

Agriculture, Livestock and Forestry 5.86 Manufacturing 4.88

Education 4.57 Electricity & Water 4.13

Health and Social Work 3.07

Other Community, Social & Personal Services 2.45 Hotels & Restaurants 2.23

Fishing 0.33 Mining & Quarrying 0.22

Source: ECCB (2013)


32

The structure of the private sector in St. Vincent and the Grenadines, in relation to the size of

enterprises and the distribution of the labour force, is illustrated in the table below. Statistics

indicate that out of approximately 110,000 persons in St. Vincent and the Grenadines, approximately

half the population is in the labour force and 49,000 persons account for the total employed labour

force. Approximately 69% of the employed, accounted for in NIS data, are employed in the private

sector; while 32% are employed in the public sector. Unemployment was estimated between 23-

25%. The gap between the NIS accounted workforce and the adjusted workforce is noticeably large,

and Vincentians still participate in informal type activities in Agriculture, Construction and Retail.

This evidence is validated by the classification of type of enterprise listed below; the table shows

80% of Vincentian businesses were informal, micro or small scale enterprises and 60% of total

employed persons were in Micro or Small enterprises (MSEs).

As seen across the sub-region, Government is the dominant employer in the country and also has a

number of stakes in primary production in the island (i.e. Government has a 20% stake in the largest

company on the island, Eastern Caribbean Group of Companies (ECGC), and the agro-processing

company WINFRESH is owned by OECS participating governments). Locally owned enterprises

remain in small to medium scale agro-processing, light manufacturing, consumer goods and small-

scale tourism related business.

Table 4: Condensed table showing Type of Enterprises and Labour structure in St. Vincent

No. of Employees

Type of Enterprise

Share of Business by

Enterprise Type

Share of Employment

by Enterprise

Type

Sector Workforce (in the NIS)

Adjusted Workforce (not in NIS)

(1-5) Micro 80% 55-60% Manufacturing 2,183 2,183 (6-20) Small Agriculture and

related 531 5,000

(20-50) Medium 18% 5% Construction 5,770 6,600 >50 Large 2% 2-3% Services Tourism 2,776 3,000 Financial 1,239 1,239 Retail and

Wholesale 4,277 6,500

Government 13,200 13,228 Other Services 7,703 11,250 Total 37,679 49,000

Source: 2010 Labour Market Report, MSME (2009) and Enterprise survey


33

In relation to the definition of businesses by size in St. Vincent and the Grenadines, the table below

outlines the officially proposed typology (MSME Report, 2009).

Table 5: Proposed Official Typology of Enterprises by Size – St. Vincent and the Grenadines (EC$)

INDICATORS LARGE MEDIUM SMALL MICRO

No. of employees Over 50 20 to 50 6 to 20 1 to 5 Net asset value Over 1 mill ion Up to $1 mill ion Less than

$500,000 Less than $100,000

Annual sales/turnover Over 2 mill ion Less than $2 mill ion

Less than $500,000

Less than $100,000

Needing to borrow Over $500,000 Up to $500,000 Less than 250,000

Less than $50,000

Legal Structure From 100% foreign to 00% local

Minimum 75% local

Minimum 75% local

100% locally owne

Source: Secretariat (2009) MSME report

Non-Domestic ownership is most prevalent in large-scale telecommunications firms, hotels,

manufacturing, and commercial banking. These enterprises capitalize on knowledge of export

markets, marketing techniques, distribution networks, among others, and reap a substantial

percentage of the country’s output. Though most of the income generated may be repatriated

overseas, the value creation through large scale employment and inclusive employment of

professional staff is equally important. For example, ECGC is 40 percent owned by Canadians, CEO is

Vincentian; telecommunications companies KARIB cable, DIGICEL and LIME are non-resident owned

enterprises and much of their management are nationals. In addition, Government may offer

citizenship to large investors (i.e. owner of the recent Buccament Resorts was recently awarded

citizenship).

Table 6: Four Sectors Concentration and Share of St. Vincent’s Employment and Output

Sector Company No of Companies

Share of Sector Employment

Revenue (% of GDP)

Telecommunication LIME, DIGICEL, KARIB 3 ≥75% 8-9% Manufacturing East Caribbean Metals, ECGC,

Packaging, Hairoun Beer, Kendra’s Windows , Mountain Top Water , Container Corp

7 ≥45% 7%

Tourism Buccament Bay resort, Palm Island Resort

2 ≥24% ..

Electricity/Utilities VINLEC 1 ≥35% 8% Source: Survey Results and Annual Reports

The table above illustrates the concentration and share of the country’s employment and revenue

by the main enterprises hold in each sector. The non-domestic owned companies represented for

the telecommunications sector employs an estimated 75% in the sector and contributes an

estimated 9% to the economy’s total output. The seven companies representing the manufacturing

sector, half being foreign-owned, contributes 6-7% to the total economy, and employs an estimated

50% of the manufacturing sector.

The recently opened Buccament Bay and the Palm Island Resorts are some of the major players in

the tourism industry and currently employ more than 24% of total persons employed in the tourism


34

sector. These non-resident owned enterprises continues to add value to the tourism product of St.

Vincent and the Grenadines.

The private sector in St. Vincent and the Grenadines is characterised by a large number of informal,

micro or small enterprises, with larger enterprises mostly being foreign- or Government-owned, and

with a heavy concentration in the services sector.

Notable shock events such as the elimination of trade preferences to the EU market in the early

2000s, the recession of 2008, liquidation and receivership of BAICO and CLICO insurance in

2009/2010, and damage from Hurricane Tomas in 2010 has jolted the already vulnerable private

sector, especially in relation to enterprises in tourism and subsistence agriculture. Private capital

flows and overall demand have also suffered as a consequence.

To cushion the adverse effects of the various shocks to the country’s economy, Government has put

in place short-term measures to address duties and electricity costs in sectors such as tourism. In

addition, STABEX/SFA funds was created to provide assistance in the transitory period to the

displaced subsistence agricultural labour force and to assist the country in their efforts to diversify

and enhance private sector competitiveness. Notwithstanding, it is imperative that issues related to

enterprise development which lead to significant structural changes be investigated, so that the

country could benefit from sustain growth in factors of production to transform its large informal

and indigent labour force.

5.2.1 Large and Fast Growing Sectors

The largest sectors in St. Vincent and the Grenadines as a percentage of gross value added, outside

of public administration, are: Real Estate, Renting and Business Activities (17%), Wholesale and

Retail Trade (16%), Transport (15%), Construction (8%) and Financial Intermediation (6%) (ECCB,

2013). For employment, the largest sectors are Other Services, which supplies 23.0% of

employment, Construction (13.5%), and Wholesale and Retail Trade (13.3%) (CARICOM Statistics,

2012). In relation to the largest companies in the country, these are as indicated in the previous

section and comprise several foreign-owned enterprises in the communications and tourism sectors.

As indicated in ECCB (2012)13, there was an expectation of marginal improvement in the economy in

2012 due to developments in construction (Argyle International Airport, upgrades to Buccament Bay

Resort, Government’s capital works program), tourism (heightened marketing), manufacturing

(strong demand for flour, feeds and beer) and agriculture (recovery from Black Sigatoka disease).

With regards to gender segmentation in the labour market of the largest sectors in St. Vincent and

the Grenadines, estimates suggest that of the approximately 11,000 persons in the informal

economy, 5000 are in agriculture comprised mostly of women. In tourism services, most of the

administrative and elementary services are dominated by women. As indicated in the Survey of

Living Conditions (2008): "There is evidence of gender segmentation of the labour market, men in

construction, women in hotels and tourism”. These characteristics of the labour market suggests

that women are somewhat marginalised from the largest sectors, and when they are included, they

are in mostly elementary positions.

13 http://www.eccb-centralbank.org/PDF/efr_june2012(1).pdf

http://www.eccb-centralbank.org/PDF/efr_june2012(1).pdf


35

While the foregoing speaks to the largest sectors in the economy, any discussion in the context of

growth is difficult given the current economic crisis. However, in relation to the results from

interviews conducted during the Private Sector Assessment, potential for growth was identified in

the following sub-sectors:

1. Eco-Tourism

2. Construction

3. Knowledge-based industries (ICT)

4. Creative Industries

5. Light Manufacturing

6. Agro-processing in cocoa (chocolate) and meat

7. Pharmaceutical and Medical manufacturing

8. Finance

Eco-Tourism

The Government of St. Vincent and the Grenadines sees tourism as its comparative advantage in

overall production and currently directly employs an estimated 3,000 persons in the private sector.

To this extent, there have been many incentives and initiatives directed towards tourism related

businesses and its support organisations. For example, the Hotel and Tourism Association of St.

Vincent stated that they have been able to negotiate the tax rates of hotels and villas along with

concessions on electricity and import duties. Moreover, this association mentioned that hoteliers,

and the sector as a whole, are looking at developing the sub-sector of eco-tourism. Recently, St.

Vincent and the Grenadines has been lauded for being among the top 50 countries with the best

dives and the Government has received help on restoring sites such as Fort Duvernette which is

expected to “add to the ecotourism heritage product of St. Vincent and the Grenadines”.14

Construction

The construction sector in St. Vincent and the Grenadines employs close to 5000 persons and, with

the value-added in this supply chain, along with physical investments in infrastructure, this sector

should not be overlooked as a potential driver of private sector development. This non-productive

sector is one of the most direct ways a government or any organization can impact private sector job

creation, and the multiplier effect from infrastructural work spans through every sector. It is

recommended that elements such as training on high-tech equipment use, public-private

stakeholder participation on planning for infrastructure and the facilitative environment, among

other factors, be noted as high priority areas for private sector assistance in this sector. This should

help firms involved in construction understand what is required of them, and how they fit into the

country’s development plan. In addition, the development of a cadre of skills in this area could also

assist in developing service exports to the region, as undertaken by large construction firms in

Barbados.

14 Statement by the tourism authority on the World wide Web http://www.discoversvg.com/index.php/de/component/acajoom/mailing/view/listid-1/mailingid-16/Itemid-271

http://www.discoversvg.com/index.php/de/component/acajoom/mailing/view/listid-1/mailingid-16/Itemid-271

http://www.discoversvg.com/index.php/de/component/acajoom/mailing/view/listid-1/mailingid-16/Itemid-271


36

Information and Communication Technology

Part of most growth strategies by governments around CARICOM is to capitalize on the advantages

of information, communication and technology. St. Vincent and the Grenadines is no different. It is

believed that ICT, particularly telecommunications, employs over 1000 people and could play an

even greater role in adding value to the service product of the country. A telecommunication

executive maintained that they were proud to be a partner in the country’s ICT growth strategy as it

would be win-win effort for everyone involved. In its strategic ICT plan for 2010-2015, the

Government lists e-government, training human resources, business development and effective

regulatory environment as the four main initiatives for St. Vincent and the Grenadines’ ICT

development. Investments in telecommunications have dramatically increased in the last 5 years

through the ICT Investment Act (2007) and the e-government plan is currently being undertaken

with the help of the Taiwanese government.

Creative Industries: Film, Music and Culture

The creative industries present great opportunities for private sector development, especially with

the enhanced EPA (Economic Partnership Agreement) benefits allowed to Caribbean industry

stakeholders. Employment in this sector is not quantifiable due to the considerable amount of

informality in the industry, however, it is part of the growing interest among a sizeable young and

inexperienced demographic in St. Vincent and the Grenadines. To quote, “… creative industries offer

many opportunities for livelihood/employment, but face several labour market related challenges

which are all manageable”.15 INVEST SVG stated that they have been working extensively by lending

technical assistance and international promotion to designers and creative-based industries and

have seen a high success rate. It is therefore important that, not only financing be available for much

of those individuals without collateral, but assistance for overall business development be put in

place, i.e. encouraging foreign capital investments, formalizing the business, informational tools to

understand the benefits of EPA, and training as part of the training curricula.

Light Manufacturing

The manufacturing sector has often been overlooked in many small island’s strategic growth plans,

and because of this, countries like St. Vincent and the Grenadines struggle to diversify their

production, become highly vulnerable to external shocks, and experience serious macro-economic

implications. St. Vincent and the Grenadines, in the late 1980s, had a robust manufacturing plan

that gave incentives, zoning, and promotions, and as a result brought a substantial amount of

foreign capital and employment and changed the paradigm on how to develop a mechanism for that

sector in the early 1990s. One manufacturer disclosed that the sector used to be thriving with the

production of tennis rackets and other related business, but presently he thinks the sector is too low

on Government’s agenda. The sector today employs over 2000 persons and minimally impacts

foreign exchange. It must be highlighted that the country’s inherited physical landscape, high input

costs of electricity and other factors contribute to a disadvantage in scale economies and price

competitiveness. However, there are some strong points that should be mentioned about the

opportunity that this sector holds. Firstly, free zones has been already been facilitated and more

zones are likely to be implemented by government. Secondly, the government is working on an

energy efficiency plan to reduce energy costs. Thirdly, because of the country’s location in the

15 InvestSVG (2010)


37

Western Hemisphere, businesses could further capitalize on trade agreements. Finally, there is now

greater emphasis on the development of technical skills and retaining human capital, especially after

CGF and in-country consultations. Building on this groundswell of action, the Government will be

well served by implementing appropriate incentives to assist this sector to grow.

Agro-Processing

Agro business is one of the main sub-sectors identified as an opportunity by key industry players

such as the Centre for Enterprise Development and the National Development Foundation. Part of

the over 4000 persons employed in the agricultural sector, agro-producers are increasing

exponentially as small and backyard farmers learn about the techniques to make by-products from

the raw material. There are some questions about the efficiency of this type of production, as it is

labour intensive and production is on a small physical scale, yet there are some key points to show

the opportunity which could be reaped from this sector. Firstly, because St. Vincent and the

Grenadines has relied predominantly on agricultural production and its processes, skills for the

processes of its by-products can be easily transferred. Secondly, by being a part of an alliance,

cooperative or cluster development organization, i.e. VINCYKLUS, small agro producers can benefit

from reduction in overall costs. Additionally, they are a number of successful small agro businesses

who have sustained their businesses via linkages to the tourism sector. Some of the value added

products that stakeholders are interesting in exploiting in the area include chocolate from cocoa and

meat production. On a related note, opportunities in the pharmaceutical and medical

manufacturing sector may also be available. Most of our interviews conducted in the agro-

processing industry showed the need for micro-biologist and more bio-technological research,

especially in regards to verifying products through standards and testing. In the same vein, micro-

biologists and those in bio-technology could exploit the by-products offered from raw

agriculture/crops. For example, aspirin is a by-product from the willow bark plant Digoxin, used to

treat heart conditions, are derived from foxglove; and Quinine, used to treat malaria and is

synthesized from cinchona bark. There is great potential in St. Vincent to research and develop the

possible drugs and pharmaceutics that could be derived from its large agricultural lands. Institutions

such as CARDI, medical research labs, Multinational Companies, Multilateral organizations and

government should be the prime stakeholders to participate in the development of this sub-sector.

Alternative Financing and Offshore Financing

Alternative finance and offshore finance are also noted as sub-sectors that present opportunities

and could change the financial landscape in St. Vincent. The financial sector currently employs over

1,000 persons and the industry is growing, especially in the sector of credit unions, which has seen a

strong consistent 6.8 percent growth rate for the last 5 years. Much of the alternative financing

success can be attributed to the stringent conditions foreign banks place on Vincentians and vice-

versa, treatment faced in alternative financial institutions or cooperatives. An alternative financial

option facilitates more financial inclusion in a country, and if managed right, is proven to be much

more profitable than formal banks. For example, the top three credit unions amalgamated to form a

micro-finance program, COMFI, dedicated to facilitate the small business community. Invest SVG

also list offshore banking as a sector area with investment opportunities, though, because of

restrictive secrecy laws, have come under international review.

In terms of the largest sectors in the economy and their potential for future growth, the most viable

areas appear to be in tourism and manufacturing. Through heightened tourism marketing and the


38

development of a niche in eco-tourism, the country may be able to provide a sustainable growth

path for the sector. In manufacturing, a focus on the sectors with greatest potential, agro-

processing and pharmaceutical and medical manufacturing, would allow for the development of

indigenous sub-sectors that can provide employment opportunities and obtain valuable foreign

exchange. In relation to one of the largest sectors, construction, the dominant projects in the

country should be commended for their revenue generation ability (Argyle International Airport and

upgrades to Buccament Bay Resort). These projects not only provide for employment in the short

term, they also provide for further development of the tourism product and enhance airlift to the

country.

5.2.2 Business Supportive Institutions Structure

St. Vincent and the Grenadines private sector has a number of supportive institutions. Table 8

below illustrates the role each Business Support Institution plays as well as information on their

mission and the political influence of the organisation. Support in St. Vincent and the Grenadines

includes both public and private sector entities with a similar structure to other OECS member

states. Institutions include Invest SVG, an investment promotion agency, the Centre for Enterprise

Development, Chamber of Commerce, Tourism Association, and the National Development

Foundation. As seen in other OECS member states, there is limited formal coordination between

representatives, although there are informal networks in place.

5.2.3 Donors and Other International Entities

Main donors to St. Vincent and the Grenadines include: The Caribbean Development Bank (CDB),

The European Union’s European Development Funding (EDF) program, The Department for

International Development (DFID), The International Bank for Reconstruction and Development

(IBRD), the European Investment Bank (EIB), and the International Finance Corporation (IFC). Major

bilateral assistance came from the Canadian International Development Agency (CIDA), USAID, and

the Government of Taiwan. In addition, multi-donor support is provided through Compete

Caribbean. An overview of some of the key entities at the regional level is shown below, while a full

exposition is located in the Donor Matrix (DMX) file covering both national and regionally relevant

programs and projects.

The activities of donors are driven from both internal and external sources. While some agencies

base the identification of priority areas from an internal analysis of country or region-specific data,

others base the allocation of funds on the strategic/political objectives of the source country or

region. Other donors indicated that priority areas are based on country demands, and not on any

covert strategic or political objective. While donors indicate for the most part that the needs of the

receiving country are paramount, they do note that there are several main areas that greater

support is needed, including support for regional integration, trade facilitation and logistics, access

to finance and greater public sector dialogue. It should also be noted that the issue of gender is

taken into consideration in all projects, sometimes implicitly, but for the most part the issue of

gender is explicitly included.

One of the main issues of concern in recent times was lack of donor coordination, however,

duplication of donor efforts is being addressed, as seen with the Compete Caribbean program and

the Caribbean Growth Forum (CGF). However, there was some concern in relation to duplication

with the CGF and the Private Sector Assessments (PSAs) of Compete Caribbean. In addition, most


39

agencies interviewed indicated that there is formal coordination with other donor agencies, while

informal coordination is seen with country-specific agencies and NGOs in receiving countries. Some

donors however noted that there was the need for greater collaboration with the CARICOM

Secretariat and the OECS Secretariat.

In relation to the nature of projects funded, the majority of active projects are focussed on the

Business Support, Finance (access to finance), the Business Environment in general or a combination

of these objectives. For projects focussed on these objectives, there are 42 active or recently

completed donor funded projects in St. Vincent and the Grenadines specifically, and 12 operating at

the OECS level. Of these projects, at the country level, the majority of projects are focussed on the

Business Environment (38%) and Business Support/Access to Finance (38%). The largest area in

terms of funding is Business Support/Access to Finance with US$41 million. It should however be

noted that although Access to Finance by itself only accounts for 5% of projects, it accounts for 31%

of funding (US$38 million). In terms of the sector focus, 52% of these main objectives are targeted

at the service sector.

Table 7: Main Objectives and Sector Profiles of Donor Projects in St. Vincent and the Grenadines and the OECS

Loca

tio

n Objective Share

(%) Agriculture

(%) Industry

(%) Services

(%) Value of Active

Projects (US $’000)

St. V

ince

nt

and

th

e G

ren

adin

es Business

Support/Institutional Structure

19.0 4.8 7.1 9.5 $ 13,803

Access to finance 4.8 2.4 2.4 2.4 $ 37,503

Business Environment 38.1 19.0 11.9 28.6 $ 29,647

Business Support/Finance 38.1 11.9 11.9 11.9 $ 41,608 TOTAL 100.0 38.1 33.3 52.4 $ 122,561

OEC

S

Business Support/Institutional Structure

41.7 8.3 8.3 8.3 $ 31,140


Business Environment 25.0 8.3 8.3 8.3 $ 14,190

Business Support/Finance 16.7 8.3 8.3 8.3 $ 2,060 TOTAL OECS 100.0 33.3 33.3 41.7 $ 49,330

At the OECS level, for projects in these areas which are operating at the sub regional level, the

service sector is also the focus, accounting for 42% of projects. In terms of the number of projects

and value, the Business Support/Institutional Structure objectives dominate with 42% of projects

and funding in excess of US$31 million.

In terms of gaps in support, although access to finance has been noted as a major obstacle to

business development in the region, projects specifically targeting this area at the sub regional level

only account for 17% of projects, and less than US$2 million in funding. However, at the domestic

level in St. Vincent and the Grenadines, while only accounting for 5% of projects, support for access

to finance accounts for 31% of total funding in these areas.


40

Table 8: Business Support Institutions in St. Vincent and the Grenadines

Nam

e

Typ

e

Bri

ef

His

tory

Re

po

rt t

o…

Vis

ion

,

Mis

sio

n a

nd

Go

als

(ass

ess

me

nt)

Sect

or

of

Aff

ilia

tio

n

Pe

rso

n i

n

Ch

arge

an

d

Titl

e

Po

liti

cal

Infl

ue

nce

Par

tne

r

Org

anis

atio

ns

The Centre for

Enterprise Development

Technical

Assistance

The CED is a State-owned corporation

reporting to the Minister responsible for Industry, and is mandated to

promote development of the private

sector in St. Vincent and the

Grenadines. Its work includes marketing and promotional support,

research and data, education,

incubator services, and other activities

The Minister

responsible for Industry

Vision- To be the focal point for the

delivery of technical support, advisory and information services to the private sector

for the facilitation of an enabling

environment which will encourage the

growth and development of an entrepreneurial spirit in St. Vincent and the

Grenadines. Mission- A people-centered

organisation with the professional

competence and commitment to business resulting in increased competitiveness,

higher levels of business success and

sustainability in the local private sector.

General Objectives of CED: Increased economic growth and

employment;

Increased diversification of the economic activity;

Poverty reduction.

The specific objectives of the CED are:

To increase the number of viable enterprises in St. Vincent and the

Grenadines.

To strengthen the institutional support

base for private sector development in St. Vincent and the Grenadines.

Private

Sector

Mr Felix

Lewis

Mediu

m

None

The St. Vincent and the

Grenadines

Chamber of

Commerce

Technical Assistance

The St Vincent and the Grenadines Chamber of Industry and Commerce is

a non-profit, non-governmental,

membership based organisation.

Established in 1926, the SVGCIC is the oldest and largest private sector

Members To build organizational commitment and capacity to deliver sustainable

developmental and innovative solutions to

all business partners and stakeholders.

Private Sector

Mr Michael Nanton

Medium

None


41

Nam

e

Typ

e

Bri

ef

His

tory

Re

po

rt t

o…

Vis

ion

,

Mis

sio

n a

nd

Go

als

(ass

ess

me

nt)

Sect

or

of

Aff

ilia

tio

n

Pe

rso

n i

n

Ch

arge

an

d

Titl

e

Po

liti

cal

Infl

ue

nce

Par

tne

r

Org

anis

atio

ns

organization, representing the interest of approximately 120 businesses across

SVG.

Invest SVG Technical assistance/

Investment

Promotion

The report concluded that in order for the Government to achieve its ideals of

self-sustainable and balanced

economic growth it was necessary to

create a separate entity which would be responsible for the island’s

Investment Promotions and Foreign

Direct Investment functions. Consequently the National Investment

Promotions Incorporated was founded

by decree in October 2003. NIPI

was rebranded Invest SVG in a move to bolster the company’s image and

identity regionally and

internationally. The Invest SVG brand

was launched on August 24th 2009.

Government of St. Vincent

Mission-To attract FDI, act as policy advocate to create a more facilitative

environment. Invest SVG provides

aftercare services, trade shows, technical

support

Private Sector

Mr Curtis Denny

High None

The National

Development Foundation

Technical

Assistance/Micro-

Financing

NDFSVG was incorporated on 26th

October, 1983 as a private non-profit development organization. Its main

purpose is to promote self-help

development among the less privileged

sectors. The main purpose of the Foundation is to promote self-help

development among the less privileged

sectors primarily through the provision

of credit, technical assistance and training in the initiation and/or

development of owner managed

enterprises.

Government

of St. Vincent

To promote and support entrepreneurial

development in the small and micro business sector by providing credit,

technical and training to improve the social

well being and economic prosperity of its

clients and to make a positive contribution to national development

Private

Sector

Ms Hermia

Neehall

Mediu

m

None

The National

Commercial

Micro-

Financing

The Bank of Saint Vincent & the

Grenadines, formerly the National

ECFH and the

Government

To be the preferred provider of superior

financial products and services through

Private

Sector

Derry

Williams

Mediu

m

None


42

Nam

e

Typ

e

Bri

ef

His

tory

Re

po

rt t

o…

Vis

ion

,

Mis

sio

n a

nd

Go

als

(ass

ess

me

nt)

Sect

or

of

Aff

ilia

tio

n

Pe

rso

n i

n

Ch

arge

an

d

Titl

e

Po

liti

cal

Infl

ue

nce

Par

tne

r

Org

anis

atio

ns

Bank Commercial Bank (SVG) Ltd. was founded in June 1977 by The

Honorable Robert Milton Cato the then

Premier of Saint Vincent with 11 staff

members at a single Branch. The current staff complement is 159 and

the Bank operates from 2 locations in

Kingstown which includes its Head

Office, and five branches. The branches are located in Georgetown on the

Windward side of St. Vincent,

Barrouallie on the Leeward side, and

on the Grenadine Islands of Bequia, Canouan and Union Island.

of St. Vincent caring, professional staff and appropriate technology. To be customer-focused,

innovative, and efficient. To exceed

shareholder expectations and be a catalyst

for development.

Credit Unions (Credit Union

League)

Micro-Financing

Formed in 1962, registered in 1964 Shareholders The league came out to unify the system, train and develop services in Credit union,

Compliance, monitor their performance,

discuss cooperative issues

Micro to Small

Enterprise

Ms Angela Patrick

Low None


43

Table 9: Institutional Analysis: Donors and International Organisations N

ame

Budget Identifying Priorities Potential

Collaborators

Gaps in

Support

Gender and PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of Donor

Duplication

Monitoring and Evaluation

Efforts

(DFI

D) D

epar

tmen

t Fo

r In

tern

atio

nal

Dev

elo

pm

ent

DFID’s projects

run under cycles. They are

currently in the

2nd year of

(2011-2015) cycle, where

75m pounds

are allotted to

the Caribbean. The program

runs under

thematic areas

i.e. Economic Growth (27.5m

pounds),

Climate Change,

Governance

and Security.

DFID’s team identifies

problems i.e. development issues,

debt burden,

competitiveness,

regional integration then bid for funds

from government for

4 year cycle.

Some

coordination with OECS

Secretariat.

Need for

more work on trade

facilitation

and freight

and trade logistics in

OECS.

Regional

Integration, Non-Tariff

Barriers,

Clearer

Political Targeting.

Gender is

involved in each project

implicitly

There is an

aid coordination

structure

(Private

Sector Donor Working

group) which

CIDA heads.

Everything is

undertaken through

cooperation

with others

i.e. IDB, CARTAC and

CART fund

(CDB)

A lot of

projects and work done

with local

stakeholders

done via CART fund

(CDB)

DFID has 5.6m

pounds unallocated

currently.

Would like to

focus on strengthening

financial sector,

regulation and

competitiveness in poorer

countries in

Caribbean

including Guyana and

Belize.

The level of

duplication is moderate

and varies

somewhat by

sector, what helps mainly

is that not

many donors

are in the Caribbean;

they also

have Donor

coordination structures in

placed.

DFID uses a

program called LOGFRAMES to

gauge projects

and determine

outputs i.e. jobs created,

outcome of

project,

workshops, activities

carried out,

average

Caribbean business

indexes etc.


44

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Cari

bb

ean

Dev

elo

pm

ent

Ban

k

CDB allocated US$22.5 million

to 11 financial

intermediaries

(development banks) in 2012.

Current priorities include:

Enhancing

Disaster Risk Management and

Safeguards/Streng

thening Environmental

Sustainability

Economic Growth, Inclusive Social

Development

Support for Education and

Training

Improving the environment for

private sector development

Improving Productivity and

Competitiveness

in Agriculture

- - Gender Equality

Policy

adopted in

2009 and related

Operational

Strategy.

Seeking to ensure that

policies,

programmes

(including PSD) and

practices are

responsive to gender

equality

issues.

CDB works closely with

all the

bilateral and

multilateral partners in

the region;

IADB, DFID,

European Union, World

Bank, IMF,

CARTAC and

other bi-lateral and

multilateral

partners.

- The CDB works to

serve the

needs of its

BMCs. The OECS

member

states are

also BMCs.

- - Results matrix.


45

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Com

pet

e Ca

rib

bea

n P

rogr

am

US$40 for the Caribbean in

areas such as

Knowledge

Management, Business

Climate.

Compete

operates in a competitive

process where

businesses can

submit proposals.

Background reports and analysis

(information from

World Reports,

Country Budgets from governments &

investment agencies.

Compete is demand

driven

Competitiveness Council,

Public Sector

Dialogue and

Reform of the Business

Climate is

currently on

the agenda but can only

take place if

the country

has an appetite for

such reforms

Every single project must

have gender

consideratio

n involved. However,

certain

gender

specific indices are

hard to

obtain from

OECS.

Formal coordination

and special

initiatives

with most donors i.e.

CDB, DFID,

CIDA

Informal coordination

with World

Bank,

CARICOM, other NGOs

like Branson

Center

Foundation, U.S State

Dept

Antigua Customs

Reform &

Investment

Attraction. One of the projects

in Dominica

was to do a

growth strategy in partnership

with EU.

Updated

Strategies presented with

local

stakeholders.

Donor coordination

group and

the outcome

of donor matrix helps

with

Compete

Caribbean's objective to

minimize

duplication

Results Matrix and Mid-term

evaluation to

determine

outcomes and impact


46

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

CAR

ICO

M R

egio

nal

Org

anis

atio

n fo

r

Stan

dar

ds

and

Qu

alit

y (C

RO

SQ)

Funds come from 2 sources:

1.Gov'mts of 15

members 2.

Donors who support most

of CROSQ

programs.

Budget based on a formula

CARICOM uses

(i.e. per capita

GDP). No specif. budget

allotted on a

country basis, more regional.

Political (key trade issue that affect

member states &

these guide standards

for production (i.e. flour, honey, furn.) in

the region).

Important research

needed include Demand Surveys in

the private sector to

understand what

equipment needed and calibration

services needed from

CROSQ to facilitate trade.

There is potential to

work with

UNIDO

The 10th EDF is going to be

the core for

what they

want to do. The main

thing is to

evolve from

not just standards

institution,

but to put

together committees

to help with

Accreditation and

Metrology.

Most projects

under the

CARTfund

(CDB) maintains

that gender

be included,

however most efforts

are in

building up

standard bureaus and

gender still

needs to be properly

defined for

CROSQ

projects.

CDB CARTfund

and own

funds,

Germany and IDB funds

helped with

RQI1 (quality,

infrastructure and

awareness).

Now working

with PAHO and CDC

working with

accreditation. UNDP as

well.

CARIB Export, CIDA, CTO.

Regional program,

works with

governments

where local stakeholders

benefit.

Rather than focus just on

standards,

trying to

establish accreditation

and metrology.

With the

accreditation project

currently in

house (funded

by CARTfund CDB) it is the

first time using

resources in the private sector

(starting with

labs)

There are areas for

better

synergy and

this is improving.

Need to

cooperate

more within the CARICOM

Secretariat.

CROSQ has been

functioning

under a

strategic plan from 3 years

ago, where it

was

determined that they had

met those

objectives.

Different CROSQ

projects use

different evaluations,

mostly done

through

LOGFRAME.


47

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Cari

bb

ean

Exp

ort

Funding mostly from the EU

with

counterpart

member states, DFID, German

Development

Agency, CIDA,

also contributing.

Sectors with opportunities for

growth are focus in

relation to

professional services, investment in

distributive services,

creative industries,

agro-processing, energy, specialist

tourism, among

others.

Currently work with a range of

international,

regional and

domestic agencies.

- - Governments, Business

Support

Organisations

, CARICOM, OECS, EU,

DFID

- Governments and local

stakeholders

All projects which meet

remit:

enhancing

competition via investment

promotion

agencies, direct

assistance to firms, small

grants to key

sectors; trade

and export development;

trade and

investment relations etc..

- Utilise both internal and

external

evaluators.


48

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Can

adia

n In

tern

atio

nal

Dev

elo

pm

ent

Age

ncy

(CID

A)

CIDA handles approximately

80% of financial

assistance

provided by the Government of

Canada. Funds

are provided

via grants and contributions

rather than

loans.

CIDA’s priorities are determined by the

Canadian

Government and

currently focus on: Sustainable Economic

Growth; and

Entrepreneurship and

Connecting Markets.

Already collaborating

with main

stakeholders.

Due to differences in

laws and

requirements

in each country,

regional

integration is

a challenge.

Gender is core to all of

CIDA’s

efforts

(cross-cutting

issue).

Formal coordination

is seen with

the Compete

Caribbean Program

which

involves IDB,

and DFID.

- - CIDA as an entity is

currently being

subsumed

within the Ministry of

Foreign Affairs.

Current

projects however

include:

Eastern

Caribbean Leadership

Program;

Entrepreneurship for

Innovation;

Canada-

Caribbean Leadership;

Regional

Integration and

Trade; and Caribbean Local

Economic

Development.

Can be reduced

through

better

planning and coordination

and through

better

reporting on project

results to

inform the

development of future

projects.

A log frame methodology is

utilized in the

planning and

execution phase of

projects in

order to

specify indicators to

track project

progress.


49

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Euro

pea

n U

nio

n D

eleg

atio

n t

o B

arb

ado

s an

d t

he

East

ern

Car

ibb

ean

EU Delegation operates under

EDF cycles

every 5 years.

Under the current cycle

(2008-2013),

funds are

alotted both Regionally and

Nationally. EU

delegation

determines the national

allocation via

the country strategy paper

(CSP), located

on EU's

website.

Joint process between country

development

priorities & E.U. It has

to be linked globally & with national

initiatives. C.P.M.

(Country Protfolio

Meetings) held annually where

project officers look

at social and

economic status from governments

EU works with DOMex in

Dominica, St.

Lucia, St. Kitts,

OECS Secratariat

[OECS Export

Development]

Caribbean Export also.

All projects fit for EPA, EU

not in a

position to

provide loan financing but

is looking to

assist banking

sector. There is need for

more loans

and funding

to private sector in

Caribbean.

Banks are too risk averse;

need for

Guarantee

fund and Credit

Bureaus

The Country Strategy

Paper

identifies

allocation, and each

project has a

Financial

Agreement. This

implicitly

targets

women through

developmen

t of Micro and Small

Businesses

Donor groups meet each

other at

Donor

presentation level. There

are

framework

agreements with UNDP,

World Bank,

FAO.

Fluid, transparent

among

agencies

Deal with Investment

Agencies,

Chambers of

Commerce, mostly quasi-

government

Institutions

EU has financing

agreement for;

Integration

&Trade in OECS (8.6m Euros),

Harmonisation,

Tourism sector,

agriculture & health food

safety systems,

exprort

capacity development,

28.3m Euros to

Carib Export for Regional

Private Sector

Development

Program 3.1m of CARIFORUM

47.1m EPA

funds for

services.

Some challenges;

take for e.g.

Compete

Caribbean is conducting

national

initiatives &

ITC conducting

export

interventions

; results are almost the

same & some

projects need to be run

sequentially.

Private

Sector Donor Group

coordination

helps.

Each project in financial

agreement has

provision for

mid-term evaluation &

EU contracts

evaluators. EU

also uses ROM [Results

Oriented

Monitoring] to

evaluate project design,

effectiveness,

relevance and sustain. Court

of Auditors

come for large

EU projects


50

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

IFC

No budget for OECS, but have

strategic

priorities and

needs to address, and

modify

approach and

find money to meet those

needs. Most

services in

OECS are Advisory

Services and

Trade Facilitation,

Logistics, Credit

Bureaus

Because the majority of projects in the

OECS are Advisory

services, work with

clients (government institutions, financial

institutions) to

provide services that

are needed i.e. Trade Logistics, Credit

Portfolio

Management

IFC is flexible, and works

with clients to

meet their

needs.

No specific outline for

explicit

gender

efforts in projects,

however

gender is

implied in projects and

gender

impact and

outcomes i.e females jobs

provided

Most Donor organisations

.

CIDA Ministries of Finance,

Grenada

Investment

Office of Investment

Climate

Reform, St.

Lucia Min. of Commerce,

Antigua ABIA,

St. Kitts Min

of Finance

Trade logistics and Tax

implementation

Proportionally to what IFC

have seen

there is an

importance in looking to

fill the gaps

where no

one is providing

assistance.

IFC looks at

gaps and tries to fill

them.

For Investment Services IFC

uses the

Development

Outcome Tracking

System (DOTS)

to assess

financial performance,

Economic &

Environmental

performance, Private Sector

Impact. For

Advisory Services they

use Strategic

Relevance,

Efficiency & Effectiveness


51

Nam

e


Collaborators

Gaps in

Support

Gender and

PSD

Integration

Formal

Coordination

Informal

Coordination

Country

Partnerships

Projects Under

Consideration

Views of

Donor

Duplication

Monitoring

and Evaluation

Efforts

Wo

rld

Ban

k

For the OECS, the bank

operates under

a Regional

Partnership Strategy for the

region. 120 m

US approved

May 2010 for 4 years.

Depending on

country's

income level they may get

IBRD funds

(middle income loans) or IDA

assistance

(lower income

concessional loans & grants)

The Bank act only on the basis of

government

requests. The Bank

aligns program and projects with

government,

however may suggest

some areas government could

look at.

To strengthen coordination

with Donors in

Barbados is a

good area where World

Bank could

work. The Bank

is one of the only Donors

that does not

have a regional

office in Barbados.

The Bank is open to

whatever

provided 1) it

comes from government

2) the Bank

has resources

and makes sure that

project is

sustainable

(bank may not have

enough for

certain initiatives)

Gender is explicitly

defined in

World Bank's

Regional Strategic

Objectives

and the Bank

thinks that this is also

crucial to

developmen

t in the region

CIDA, E.U., DFID, UNDP,

CDB (one

main

partner). WB view CDB as a

crucial a

partner for

projects, as they are very

prevalent in

the region

and together can be more

effective in

helping countries

The informal platform is

sometimes

considered

better. Sometimes

setting up

meetings with

all Donors is difficult

because of

Donors

availability. WB trys to

keep constant

dialogue with Donors.

There are some clear

policies on

where the

Bank have to operate with

governments

and other

stakeholders. Depending

on nature of

project, WB

always takes into account

the

implication to private

sector.

One of the main priorities

is improving

business

competitiveness. The bank

tries to assist

countries with

broadband access(Telecom

m.) and energy,

and tries to

adopt regional initiatives.

There are a number of

interactions

with Donors

(DFID, CIDA, UNDP E.U

Delegation,

CDB to avoid

duplication. UNDP sets up

periodic

meeting with

donors (every 3-

4months)

Monitoring and evaluation

is done every 6

months for

each project. Task team

leader has

dialogue with

the country and conducts

an

Implementatio

n Status Report


52

5.2.4 Access to Finance

Access to finance is one of the foremost pre-requisites for facilitating entrepreneurs and helps bring

conception into real gains. Sharma et al. (2012) noted, that access to finance strongly influences

private sector and economic growth, and it is pivotal to the finance-growth link. The World Bank

maintained that when financial institutions and markets work well:

…they provide opportunities for all market participants to take advantage of the best investment by

channelling funds to their most productive uses, hence improving income distribution and reducing

poverty (World Bank 2008).

The issue of easy or cheap access to financing and working capital is specifically important to Small

Island Developing States (SIDS) like St. Vincent and the Grenadines due to the fact that the financial

sector (i.e. commercial banking) is not as competitive and efficient as major economies.

The financial sector in St. Vincent and the Grenadines is dominated by three large foreign

commercial banks (Canadian and Trinidadian owned), the Bank of St. Vincent and the Grenadines, a

Co-operative Bank and nine credit unions representing nearly 57,000 members (81% penetration

rate in 2011). While this penetration rate is the second highest in the OECS and the wider region, it

should be noted that lending to enterprises is limited across the region. The National Development

Foundation also provides credit facilities for microenterprises.

Table 10: Credit Unions in the Caribbean (Number and Penetration Ratio)

Country Number of Credit Unions Members Penetration Ratio Antigua & Barbuda 6 25892 0.44

Bahamas 10 39070 0.18

Barbados 35 157198 0.77 Belize 13 121889 0.64

Dominica 10 62683 0.88* Dominican Republic 15 417862 0.07

Grenada 11 43849 0.62 Guyana 25 33499 0.07

Haiti 69 400379 0.07 Jamaica 42 920408 0.52

St. Kitts & Nevis 4 18523 0.53

St. Lucia 15 81022 0.74 St. Vincent & the Grenadines 9 56741 0.81

Suriname 25 24628 0.07 Trinidad & Tobago 130 499528 0.56 Source: World Council of Credit Unions (2013) *Penetration ratio not available from WCCU. Ratio estimated from population estimates for 2011.

Compared to the other Caribbean countries, St. Vincent and the Grenadines’ credit market is

relatively more efficient when measured by the spread between lending and deposit rates. At

roughly 6 percentage points, the country has one of the lower interest rate spreads among

comparator countries; the only Caribbean countries with lower spreads were The Bahamas, St. Kitts

and Nevis, Suriname, Barbados, Belize and Dominica. Since the early 1990s, the interest rate

spreads on the island fluctuated between 6 and 8%. These spreads have remained quite constant in

the 6 to 7% range since 2005.


53

Figure 21: Interest Rate Spreads for St. Vincent and the Grenadines (1980-2010) and Comparators (2010)

Interest Rates 1980-2010 Interest Rate Spread 2010


Domestic savings play a key role in relation to the availability of credit. At the end 2010, deposits

were over 64% of GDP, one of the lowest ratios among the group of comparator countries and the

lowest in the OECS. In relation to bank credit as a ratio of bank deposits, this was 78%, about the

average for the region. This suggests that a large proportion of savings in St. Vincent and the

Grenadines is utilised to finance credit.

Figure 22: Domestic Financial Variables for St. Vincent and the Grenadines versus Comparators (2010)

Deposits (% of GDP) Bank Credit/Bank Deposits (%)


0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

1980 1985 1990 1995 2000 2005 2010

%

Interest Rate Spread Deposit Rate

Lending Rate

0

2

4

6

8

10

12

14

16

18

Ma

urit

ius

Bah

amas

, Th

e

Can

ada

St. K

itts

an

d N

evis

Suri

nam

e

Bar

bad

os

Bel

ize

Do

min

ica

St. V

ince

nt a

nd

the

…

St. L

ucia

Do

min

ican

Rep

ublic

Gre

nad

a

An

tigu

a a

nd…

Trin

idad

an

d T

oba

go

Seyc

hel

les

Guy

ana

Jam

aica

Ha

iti

%

0 20 40 60 80 100 120 140 160

Dominican Republic

Haiti

Jamaica

Seychelles

Guyana


Belize

The Bahamas

Dominica

St. Lucia

Grenada

Antigua and Barbuda

Mauritus

St. Kitts and Nevis

Malta

%

0 20 40 60 80 100 120 140

Haiti

Seychelles

Jamaica

St. Kitts and Nevis

Guyana

Dominica

Dominican Republic

Antigua and Barbuda


Belize

Malta

Mauritus

Grenada

The Bahamas

St. Lucia

%


54

Despite the proportion of savings used to finance loans, the country was still ranked one of the

lowest in the region for getting credit. This suggests that business finance (or the lack thereof) is

both a supply and demand problem. On the supply-side there is the perceived risk associated with

supplying loans to the small business sector, while on the demand-side entrepreneurs and small

businesses may lack the ability (e.g. record keeping) to access available lending facilities. It should

however be noted that with the savings deposit rate (SDR) and the reserve requirement rate (RRR)

set by the ECCB, that the funds available for lending are restricted and may therefore account in part

for the high cost of finance in St. Vincent and the Grenadines and the wider region.

This low ranking is demonstrated by Doing Business (2012) which currently ranks St. Vincent the

Grenadines as the fourth lowest-ranking country in the region to obtain credit, next to countries

such as Guyana, Suriname and Jamaica.

Figure 23: Doing Business Rankings for St. Vincent and the Grenadines versus Comparators (2012) for Selected Indicators

Source: Doing Business 2012

Some enterprises and business support institutions interviewed stated that if finance was available,

the cost of finance was burdensome to their already costly operations. Invest SVG representatives

stated that their clients, mostly small agro-processing and cultural businesses, are unable to meet

the stringent collateral demands of private sector financing. Collateral complaints are validated in

Figure 24, which showed St. Vincent and the Grenadines with the third highest collateral

requirements in CARICOM, in excess of 210% of the value of commercial bank loans. These

relatively high collateral requirements exist despite the relatively high level of penetration of

banking services on the island: virtually every business in St. Vincent and the Grenadines has a

checking account and over half utilise either loan or line of credit services (Figure 25).

0

1

2

3

4

5

6

7

8

9

10

0

20

40

60

80

100

120

140

160

180

200

Stre

ngt

h o

f Le

gal R

igh

ts In

de

x (0

-10

)

RA

NK

Getting Credit- Rank Getting Credit- Strength of Legal Rights Index


55

In exploring these issues during interviews, a CEO in a manufacturing company stated that his

operations are mostly funded by German and American overseas banks, which offer working capital

for manufacturing in Asia (overseas banking offer less than 8 % on financing, whilst domestically the

rates are in excess of 10%). The CEO stated that savings from the cost of financing facilitates

expansion of the company’s marketing budget, plant and staff, providing an indicator of the knock-

on effects of the efficient provision of finance.

VINCYFRESH, a government owned agro-processor, suffers from the inability to access private sector

credit due to the inherent structure of their ownership (public sector owned). The VINCYFRESH

representative stated that while a strategic plan of action and location for plant expansion was

identified, access to finance is almost close to nil due to the fact that private sector financial

institutions cater to privately-owned enterprises, and international funding agencies are structured

for policy-based type loans. This subsequently leaves the government-owned agro-processor unable

to access funding from either agency.

Figure 24: Value of Collateral Required for Credit for St. Vincent and the Grenadines and Comparators (2010)

Source: Enterprise Survey

0.0

50.0

100.0

150.0

200.0

250.0

Pe

rce

nta

ge o

f Lo

an


56

Figure 25: Firms with Access to Financial Services for St. Vincent and the Grenadines and Comparators (2010)


One of the most influential theories of corporate leverage is the pecking order theory of capital

structure (Myers, 1984). This theoretical framework suggests that firms prefer internal to external

finance due to adverse selection. The data for St. Vincent and the Grenadines, on the surface, fits

this hypothesis with 56% of investment being financed by internally generated cash, with most of

the remainder coming from debt and insignificant amounts from supplier credit and equity (Figure

26). The over reliance on internal sources of finance has traditionally been seen as a constraint to

firm growth as it limits the ability to exploit profitability investment opportunities (Moore, Craigwell

and Maxwell, 2005), this is particularly the case for younger and smaller enterprises.

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Pe

rce

nta

ge

Checking Account Bank Loan/Line of Credit


57

Figure 26: Sources of Finance for Investment for St. Vincent and the Grenadines and Comparators (2010)


Besides investment opportunities, firms also require funds for working capital purposes to meet day-

to-day expenses. In St. Vincent and the Grenadines, nearly a quarter of working capital finance

comes from banks, the second highest in the region after Suriname. Consequently, approximately

8% of working capital comes from supplier credit, the lowest in the region. This overall ratio of

approximately 33% is moderate in comparison with the rest of the region, which may suggest that

the cost of working capital financing may be somewhat less burdensome for firms in St. Vincent and

the Grenadines than elsewhere in the region.

0.010.020.030.040.050.060.070.080.090.0

% o

f To

tal

Internal Bank Supplier Credit Equity or Stock Sales


58

Figure 27: Sources of Finance for Working Capital for St. Vincent and the Grenadines and Comparators (2010)


5.2.5 Corporate Taxation

If taxation is set comparably high in a country, it could lead to significant downward pressure on

savings, investment and economic outlook. The nominal corporate tax rate in St. Vincent and the

Grenadines is 30%. The general business income tax rate is 30% of profits. International entities

registered in St. Vincent and the Grenadines are not subject to taxation. There is no capital gains tax,

no inheritance tax, no tax on dividends and corporate tax ranges from 10-30%. Withholding tax rates

are:

Royalties- 20%

Property Rights- 10%

Other Payments- 10%

A feature of the local tax system is the Trader Permit system. Tax here is collected annually and

levied on businesses of all sizes that carry stock or inventory and is graduated based on assessed

stock value. The table below shows the number of trader permits issued in 2007 and 2008 at various

levels of stock value, and revenue received from each size category.

Table 11: Revenue per Trader Permits Issued in St. Vincent and the Grenadines (2007-2008)

Stock Value Traders

July 2006-7

Traders

July 2007-8

% Total

2008

Fees

Levied

Fee as % of

Stock Value

Revenue

July 2006-7

Revenue

July 2007-8

% Total

2008

<$1,000 479 439 25.5 $20 2.0 ++ $9,580 $8,780 5.6

$1,000-$10,000 873 884 47.1 $50 0.5- 5.0 $43,650 $44,200 28.1

10,000-$100,000 344 351 18.7 $100 0.1- 1.0 $34,400 $35,100 22.3

$100,000-$1Mil. 156 136 7.2 $250 0.025- 0.25 $39,000 $34,000 21.7

>$1Mil. 27 35 1.5 $1000 0- 0.1 $27,000 $35,000 22.3

TOTALS 1,879 1,879 100 $153,630 $157,080 100

Source: MSME (2010)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

% o

f To

tal

Bank Supplier Credit


59

As indicated from the Doing Business Survey of 2012 (Doing Business, 2012), labour taxes are one of

the lowest among comparator countries and total tax as a percentage of profits is 39%, one of the

lowest in the OECS with the exception of Dominica (38%) and St. Lucia (34%).

Figure 28: Corporate Taxes for St. Vincent and the Grenadines and Comparators (2012)


Overall, enterprises interviewed during country visits did not see corporation tax as a significant

hurdle, however, the imposition of the new indirect value added tax (VAT) and customs duties were

seen as bigger hindrances. The views expressed in the interviews are somewhat supported from the

results of the Enterprise Survey (2012), as shown in the figures below. In relation to tax rates as a

constraint to doing business, 45% of exporters and 34% of non-exporters noted this as a constraint.

In relation to major constraints in this area: 9% of enterprises noted licenses and permits as a major

constraint, the second highest in the OECS after Antigua and Barbuda (17%); tax administration

(19%), the second lowest in the OECS after Dominica (less than 1%); and business licensing (3% for

exporters and 10% for non-exporters).

0

10

20

30

40

50

60

70

80

Pe

rce

nta

ge

Labour Tax Total Tax (% Profit)


60

Figure 29: Tax Rates as a Constraint to Doing Business for Exporters and Non-Exporters (2010)

Source: Enterprise Surveys (2010)

Figure 30: Major Constraints to Doing Business- Licenses and Permits and Tax Administration (2010)


0102030405060708090

100

%

Non-Exporter Exporter

0.05.0

10.015.020.025.030.035.040.045.050.0

Licenses and Permits Tax Administration


61

Figure 31: Business Licensing as a Major Constraint to Doing Business (2010)


5.2.6 Business Environment

According to Doing Business (2012), regulations relating to protecting investors can determine

whether investors are confident or reluctant to invest in the country. Indicators measured if

regulations were clearly defined, promoted disclosure requirements, required shareholder

participation and standards of accountability for company insiders. The report ranked St. Vincent

and the Grenadines at 29, the same as the rest of the OECS and only bettered by Trinidad and

Tobago at 24. On the Strength of Investor Protection Index, St. Vincent and the Grenadines was also

high, again only bettered by Trinidad and Tobago in the region.

0

10

20

30

40

50

60

70

%



62

Figure 24: Strength of Investor Protection for St. Vincent and the Grenadines versus Comparators (2012)


Although corruption was only noted by 21% of non-exporters and 6% of exporters as a major

constraint to doing business from the Enterprise Surveys (2010), the lowest in the OECS apart from

St. Lucia, the results from private sector field surveys showed a general concern about the function

of Government in this area.

Figure 32: Corruption as a Major Constraint to Doing Business (2010)


0

1

2

3

4

5

6

7

8

9

0

20

40

60

80

100

120

140

160

180

200

Stre

ngt

h o

f In

vest

or P

rote

ctio

n In

de

x (0

-10)

RA

NK

Protecting Investors - Rank Strength of Investor Protection Index

0

10

20

30

40

50

60

70

80

%



63

In relation to other crimes, theft and disorder, only 12% of non-exporters and 15% exporters viewed

this as a major constraint to doing business, one of the lowest in the region.

In relation to other major constraints, currently 65% of firms consider that they are competing

against the informal businesses, but overall most firms do not see practices of the informal sector as

a constraint, again one of the lowest in the region.

Figure 33: Crime, Theft and Disorder as a Major Constraint to Doing Business (2010)


Figure 34: Practices of Competitors in the Informal Sector as a Major Constraint to Doing Business (2010)


0102030405060708090

%


0102030405060708090

%



64

In relation to transportation, only 12% of non-exporters and 5% of exporters identify this as a major

constraint. However, because of St. Vincent’s topography, domestic transport takes considerably

more time, which speaks to efficiency and productivity.

Figure 35: Transportation as a Constraint to Doing Business (2010)


5.2.7 Technology and Innovation

The Neo-Classical paradigm describes changes in technology and technical advancement (human

capital) as fundamental for business and overall macroeconomic growth. As shown in the table

below, of the manufacturing firms surveyed for the Enterprise Survey (2010), 21% had an

internationally recognized quality certificate, one of the highest in the region, and 25% of

manufacturing firms used technology licensed from foreign companies, the highest amongst

comparator countries. However, only approximately one-third of firms had an internet presence,

one of the lowest in the region.

These results suggest that St. Vincent and the Grenadines should be well placed for future business

growth, however, from the interviews conducted in the country, private sector stakeholders

identified several other issues that would constrain growth as it relates to technology and process

innovation: lack of proper business techniques and accounting, such as cash flow systems; lack of a

marketing database; and record keeping.

0102030405060708090

%



65

Table 12: Technology Use by Manufacturing Firms in Selected Countries (% of firms)

Variable Using technology licensed from foreign companies

International quality certification

Own website

Using e-mail to interact with

clients/suppliers St. Vincent and the Grenadines

24.6 20.9 32.3 82.2

Dominican Republic 24.1 11.8 48.9 85.3 The Bahamas 20.1 31.1 50.1 89.5 Guyana 17.4 29.5 46.0 92.5 Belize 16.7 0.7 27.8 85.0 Grenada 15.2 32.6 42.5 80.6 Jamaica 14.6 16.5 36.4 72.6 Mauritius 14.4 11.1 35.9 69.3 Dominica 10.3 1.3 1.8 70.8 St. Kitts and Nevis 9.6 19.4 40.4 91.5 Barbados 6.8 18.3 68.2 100.0 Suriname 5.4 11.1 11.0 58.5 Trinidad and Tobago 2.2 16.9 30.8 81.2 Antigua and Barbuda 0.0 3.7 28.3 87.9 St. Lucia 0.0 0.6 15.4 53.9 Source: Enterprise Survey (2010)

5.2.8 Trade and FDI Policies

Tariffs in St. Vincent and the Grenadines are relatively low on most categories of goods imported

into the country, suggesting that the country’s local producers could be subjected to high levels of

competition from imports. The average applied tariff on all products in 2009 was 10%, in line with

the average among the group of comparator countries. The level of protection offered to the

agricultural sector is also relatively low, with the average tariff on these goods at 16%. This level of

protection is significantly lower than that offered to agriculture in other countries in the region

where the tariff a quarter of what it was in Barbados, and less than 40% of tariffs in Belize and

Trinidad and Tobago. It should be noted, however, that some industries, particularly tourism,

usually import most goods duty-free.


66

Figure 36: Market Map Average Tariffs (2009)

Source: Market Access Map (2009)

As noted in the previous Corporate Tax subsection, many small business importers interviewed felt

excluded from policies related to tariffs. Even with the recently passed Small Business Development

Act (2007), which exempts plant and equipment duties for qualified businesses, small businesses still

said they faced tariff challenges. These enterprises complained that government, particularly in the

recessionary period, were biased mostly towards hoteliers (as they received duty exemptions),

whilst other businesses took the brunt of high duties. For example, hotel and tourism related

businesses benefitted from: exemptions of Duties/V.A.T through the Hotel Act (1988); concessions

on electricity; and technical assistance promotion via the Tourism Authority Act 39 (2007).

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Figure 37: Senior Management Time Spent on Dealing with the Requirements of Government Regulations- Comparison across Selected Countries (2010)


In relation to dealing with Government regulations in general, customs and trade regulations and

time to clear imports, it appears that St. Vincent and the Grenadines performs moderately well. As

Figure 37 indicates, 5% of senior management time is spent dealing with Government regulations.

This amount is about the same as for Belize, Barbados and Antigua and Barbuda, less than half of

that for St. Kitts and Nevis, Guyana and the Dominican Republic, and only a couple of percentage

points above Jamaica, Dominica and St. Lucia.

For customs and trade regulations as a major constraint to doing business and time to clear imports,

St. Vincent and the Grenadines also performs relatively well and was about the average for the

region; approximately 22% noted customs and trade regulations as a major constraint and it took

approximately 8 days to clear imports.

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Figure 38: Major Constraints to Doing Business: Customs and Trade Regulations (2010)


Figure 39: Major Constraints to Doing Business: Time to Clear Imports (days)


While the figures below illustrate that St. Vincent posted relatively good scores on trade regulations

and time to clear imports, entities such as the Chamber of Industry and Commerce and East

Caribbean Metals differed. The Chamber stated that most of their members were frustrated by the

costs imposed by the Bureau of Standards for imported products; for example, costs for a

confirmation certificate are levied on importers for Bureau testing. The Chambers further indicates

that lab testing and clearance time is poor even with the certificate. East Caribbean Metals stated

that some periods of production run continuously for months and hence require staff to rotate. One

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of the biggest threats to production in this period is time spent to clear raw materials at the port,

which increases labour input costs for the company.

“…if you bring in the powder to make the PVC, and it isn’t cleared in time, then you have to pay

overtime for staff.” Michael Persaud, Managing Director of East Caribbean Metals.

5.2.9 Labour Regulation

Labour market distortions and regulations often make investors reluctant to invest in a country. The

main acts and legislation relevant to labour relations are the recently amended Protection of

Employment (2003) and the Wages Regulation (2008).

Protection of Employment (2003) covers employment rights, severance pay and disputes. Under

employment rights, the probationary period for employment is 6 months, terms of employment and

vacation must be written. Termination for good cause states that employees can be terminated and

ineligible for severance pay if, for example, they do not have the capability to perform the work they

were employed to perform. All other terminations, excluding illness and redundancy termination,

must have permission from the Labour Commission.

In relation to remuneration, the Wages Regulation (2008) states minimum levels by employment

category. These minimal levels are shown the Appendices.

In reviewing the results of the Enterprise Survey data, it appears that there is relatively little

dissatisfaction with the labour regulations in St. Vincent and the Grenadines, with only 5% of firms

indicating that these were a constraint to doing business, the third lowest amongst comparator

countries after Dominica (4.4%) and The Bahamas (4.9%) (see Figure 40). However, what does

appear to be a major issue in relation to the labour market is an inadequately trained labour force, a

result supported both by interviews with private sector representatives and the Enterprise Survey

(2010).

Although the percentage of the labour force with post-secondary/university education has increased

from 3.2% in 1995 to 8.6% in 2008 (Kairi Consultants, 2009)16, approximately 35% of firms indicated

that an inadequately trained labour force was a constraint to doing business; this was marginally

below the comparator average of 36% and above the OECS average of 30%. This result suggests that

although there is general satisfaction with labour market regulations, relative to the rest of the

OECS, the skills available in the labour force in St. Vincent and the Grenadines are below average for

the region.

16 Kairi Consultants (2009). Final Report: St. Vincent and the Grenadines Country Poverty Assessment 2007/2008: Volume 1.


70

Figure 40: Labour Market Issues in St. Vincent and the Grenadines and Comparators (2010)

Source: Enterprise Survey (2010)

As regards the issue of gender, the table below indicates that there is a clear gender segmentation in

the labour market where women comprise 43% of the employed labour force and are mostly

employed in Community, Social and Personal Activities, Financial and Business Services and

Wholesale and Retail. In relation to the sectors that are dominated by females, this is seen in

Education and Social Work, Wholesale and Retail, Hotels and Restaurants and Financial and Business

Services where females account for 84%, 70%, 63% and 62% of employment in these sectors

respectively.

Table 13: Employed Population by Main Industrial Groups (2008)

Industrial Group Female (% of Sex) Male (% of Sex) Female (% of Group) Male (% of Group)

Total 100.0 100.0 42.8 57.2

Agriculture & Fishing 8.4 17.3 26.7 73.3

Mining and Quarrying - - - -

Manufacturing 2.5 3.9 32.2 67.8

Electricity, Gas and Water - - - -

Construction 1.0 25.5 2.8 97.2

Wholesale & Retail 12.4 4.0 70.1 29.9

Hotel and Restaurant 6.7 2.9 63.0 37.0

Transportation 0.3 6.0 4.1 95.9

Financial & business services 18.9 8.7 61.9 38.1

Public Administration/Social

Security and Defence

6.6 5.1 49.0 51.0

Education/Social Work 11.2 1.6 84.0 16.0

Other Community, Social and Personal Activities

24.9 20.5 47.7 52.3

Not Stated 7.1 4.4 55.0 45.0

Source: Kairi Consultants (2009)

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Labour Market Regulation as Constraint Inadequately Trained Labour Force as Constraint


71

For males, the dominant sectors of employment are Construction, Community, Social and Personal

Activities, and Agriculture and Fishing. In terms of sectoral dominance for males, this is seen in

Construction, Transportation, Agriculture and Fishing, and Manufacturing where males comprise

97%, 96%, 73% and 68% of employment in these sectors respectively.

It should however be noted that although these statistics are intuitively accurate, the data is drawn

from a poverty survey and not a labour market survey and that there are sectoral gaps in relation to

Mining and Quarrying and Electricity, Gas and Water.

5.2.10 Infrastructure, Communications and Energy

Nordås et al. (2004) illustrated that the quality of infrastructure and telecommunication is an

important determinant of trade performance and export competitiveness. The government of St.

Vincent recently passed the ICT Investment Act (2007), which gives exemptions on duties and tax

concessions for ‘Approved’ ICT companies willing to invest, employ and overall contribute to the

development of St. Vincent’s private sector. Penetration of mobile phones and internet users per

100 persons increased twofold and sevenfold respectively in the last 6-8 years.

Figure 41: Availability of Services to Firms for St. Vincent and the Grenadines versus Comparators (2010)


As indicated in the figure above, access to fixed broadband internet is low across comparator

countries, and in the OECS ranges from 8 per 100 in Antigua and Barbuda to 27 per hundred in St.

Kitts and Nevis with access in St. Vincent and the Grenadines at 11 per 100. For internet users, this

stands at 70 per 100 in St. Vincent and the Grenadines, the third highest in the OECS after Antigua

and Barbuda (80 per 100) and St. Kitts and Nevis (76 per 100). Also indicated in the figure above is

the high level of mobile phone penetration, in excess of 100 for all OECS countries.

Drawing on the results of the Enterprise Survey (2010) results showed that the major constraints in

relation to Infrastructure, Communications and Energy were electricity (25% of firms), and transport

(12%). Of interest here is that these results are below LAC and World averages, as shown in the

020406080

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Fixed broadband Internet Internet users Mobile cellular subscriptions


72

table below. In addition to these results, it appears that the electricity system in the island is

performing well given the low number of electricity outages per month, duration of outages, and

losses due to outages, all below LAC and World averages. In relation to the source of displeasure by

25% of firms that identified electricity as a major constraint, the source of this displeasure may lie

more in the cost of energy rather than the infrastructure itself, as seen across the region.

Table 14: Infrastructure and Electricity in St. Vincent and the Grenadines (2010)

St. Vincent and the

Grenadines

Latin America

& Caribbean

World

Percent of firms identifying electricity as a major constraint 25.4 37.6 38.9

Percent of firms owning or sharing a generator 22.9 28.1 32.5

Percent of firms identifying transportation as a major

constraint

12.0 23.5 21.8

Days to obtain an electrical connection (upon application) 9.3 21.3 34.3

If a generator is used, average proportion of electricity from a generator (%)

2.9 18.4 21.1

Number of electrical outages in a typical month 1.7 2.5 7.0

If there were outages, average duration of a typical

electrical outage (hours)

1.6 2.5 4.9

Duration of a typical electrical outage (hours) 1.2 1.3 3.1

If there were outages, average losses due to electrical outages (% of annual sales)

0.8 2.8 5.0

Losses due to electrical outages (% of annual sales) 0.6 1.1 3.0

Proportion of electricity from a generator (%) 0.2 2.1 7.0

Number of water insufficiencies in a typical month* 0.2 0.7 1.4

Source: Enterprise Survey (2010)

In looking at specific differences across the rest of the OECS, the figure below indicates that

Electricity is viewed as a major constraint by only 17% of firms in Grenada, all of the other OECS

countries are above St. Vincent and the Grenadines (25%), ranging from 45% in Antigua and Barbuda

to 66% in Dominica. For Transport, the 12% that noted it as a major constraint in St. Vincent and the

Grenadines was matched by Dominica and just below Grenada at 15%; all other OECS countries were

in the range of 21% to 31%.


73

Figure 42: Major Constraints to Doing Business: Electricity and Transportation (2010)


5.2.11 Gender

Figure 43 and Figure 44 indicate that St. Vincent and the Grenadines outperforms all other

comparator countries in relation to both female participation in ownership (76%), permanent female

full-time workers (49%) and females in top management positions (39%). However, the figures do

not illustrate that females comprise most of the estimated 30% below the poverty line, and 55% of

those engaged of informal-type sectors.

As indicated in the discussion of the labour market, the figures also do not reveal the clear

segmentation in the labour market with female employment mainly in Community, Social and

Personal Services, Finance and Business Services and Wholesale and Retail Trade, mostly in

elementary positions.

In seeking to address gender issues in St. Vincent and the Grenadines, the Government has not only

established a Gender Affairs Agency, it has also implemented a number of initiatives to generate

employment in the rural communities that would directly benefit women.

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Figure 43: Female Participation in Establishments for St. Vincent and the Grenadines versus Comparator (2010)


Figure 44: Percentage of Firms with Female Top Managers for St. Vincent and the Grenadines versus Comparators (2010)


5.2.12 Ease of Doing Business

The influence of institutions in St. Vincent and the Grenadines on the ease of doing business is

represented in the figure below in relation to the results of the Doing Business Survey of 2012. As

the figure indicates, the country ranks 75th out of 185 countries in relation to the ease of doing

business. Within the region, only four other countries rank higher: Antigua and Barbuda (63 rd),

Dominica (68th), St. Lucia (53rd) and Trinidad and Tobago (69th).

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Figure 21: Overall Ease of Doing Business Rankings for Selected Countries (2012)


In relation to the factors that contribute to this relatively high ranking for St. Vincent and the

Grenadines, the country ranks highly in relation to Trading Across Borders (3rd), Protecting Investors

(5th) and Paying Taxes (6th). The country ranks 11th in relation to ‘Starting a Business’.

In relation to the time and cost of registering a business, 2004 data indicates that in relation to time

(in days), only St. Kitts and Nevis, Jamaica and Dominica in the region perform better than the 10

days in St. Vincent and the Grenadines. In relation to cost (as a percentage of GNI), only Trinidad

and Tobago, in relation to comparator countries, outperforms St. Vincent and the Grenadines where

cost was 2.3% of GNI.

In 2011, Doing Business indicators suggest that while days to register a business had not changed,

the cost of registering a business has increased to 21.2% of GNI (Doing Business, 2011).

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Dominican Republic

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Palau

Seychelles

St. Kitts and Nevis

St. Lucia

St. Vincent and theGrenadines

Suriname

Bahamas, The

Trinidad andTobago

Ease of Doing Business Rank Starting a Business Protecting Investors

Paying Taxes Trading Across Borders


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Figure 22: Time and Cost to Start a Business: St. Vincent and the Grenadines versus Comparators (2004)

Time (days) Cost (% of GNI)

Source: WB, and Archibald, Lewis -Bynoe and Moore (2004)

Figure 45: Cost and Time to Start a Business: St. Vincent and the Grenadines versus Comparators (2011)

Time (days) Cost (% of GNI)


In relation to changes over time, the only comparable data for 2012 is 2011. However, the data does

show some significant changes over the period with St. Vincent and the Grenadines improving by 9

ranking positions for the Ease of Doing Business and 10 positions in relation to Starting a Business.

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Figure 24: Change in Doing Business Rankings for St. Vincent and the Grenadines versus Comparators (2011 to 2012)


Other indicators of the ease of doing business include dealing with construction permits, getting

electricity, registering a property, getting credit, protecting investors, paying taxes, trading across

borders, enforcing contracts and resolving insolvency (see figures below). Areas where St. Vincent

and the Grenadines under-performed, i.e. had a ranking higher than most comparator countries was

in relation to registering property, getting credit, and resolving insolvency. The areas where the

country performed relatively well were: dealing with construction permits; getting electricity;

protecting investors; and trading across borders.

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78





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79



Drawing on data from the World Heritage Foundation (see figure below), St. Vincent and the

Grenadines performs well in relation to economic freedom in comparison with selected countries.

With an overall score of 66, the country is only surpassed by St. Lucia (71) and Barbados (69) in the

region. Underlying this overall score are good scores in Business Freedom and Property Rights.

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Trading Across Borders Rank Enforcing Contracts Rank Resolving Insolvency Rank


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Figure 46: Economic Freedom, Comparison for Selected Countries (2012)

Source: World Heritage Foundation (www.heritage.org)

St. Vincent and the Grenadines demonstrates relatively good rankings in relation to governance and

overall economic freedom. However, there are some institutional shortcomings in relation to

‘getting credit’ and ‘resolving insolvency’, two issues that inextricably linked in relation to difficulties

in resolving insolvency having knock-on effects in relation to increasing risk-averseness and hence

increased difficulties in ‘getting credit’. Giving the important role played by finance in the

development process, the country’s poor ranking in relation to accessing credit is a significant risk to

private sector development and growth. Key policy interventions needed in this regard include the

establishment of a public credit registry and support for the establishment of a private credit

bureau. This would reduce information asymmetries that may exists for lenders and therefore

enhance the speed and potentially the amount of credit made available to the private sector. Key

legislative changes are also required to provide greater protection to creditors as well as speed-up

the process of enforcing security rights.

5.3. Summary

Already starting at a disadvantage, the country of St. Vincent and the Grenadines gained

independence at an average lag of 14 years compared to its More Developed Countries (MDC)

counterparts (i.e. Barbados, Jamaica and Trinidad). It is clear that the country is faced with

numerous constraints that could impede private sector development. Notwithstanding, the country

has been relatively successful in several of private sector issues previously mentioned, and it is

therefore important that the country continue its advancement in these areas, whilst ensuring

correction of the most critical private sector facets. The main strengths of the private sector

development framework in St. Vincent and the Grenadines relate mainly to institutions where there

is a clear presence of support institutions (CED, Invest SVG, NDF) and the provision of support to the

0

20

40

60

80

100Barbados

Belize

Dominica

Dominican Republic

Guyana

Haiti

Jamaica

Malta

Mauritius

St Lucia

St Vincent and theGrenadines

Seychelles

Suriname

Trinidad and Tobago

overall score business freedom investment freedom

financial freedom property rights

http://www.heritage.org/


81

productive sectors through fiscal policies. It is also commendable that a public sector strengthening

exercise is being undertaken. It is also worthy of comment that there is a high level of participation

by women in ownership and management in St. Vincent and the Grenadines. However, there are

several constraints to private sector development in the country relating to time and monetary costs

of doing business (electricity, energy, importing/exporting and finance), lack of access to finance due

to stringent conditions for credit and an underdeveloped capital market, weakness in interregional

transport, and labour force issues related to a lack specialist skills and an inadequately trained

labour force. All of this is in an environment where external threats from climate change and natural

hazards, crime, and competition from new tourism destinations, present severe challenges to the

private sector in St. Vincent and the Grenadines.

Table 15: Biggest Obstacles to Business in the OECS (Enterprise Survey, 2010)

Biggest Obstacle ANT DOM GREN SKN SLU SVG

Access to finance 15.3 44.0 12.8 20.9 35.0 20.6 Inadequately educated workforce

1.3 2.1 15.4 10.0 7.4 12.8

Crime, theft and disorder 7.9 3.6 10.2 13.4 5.1 11.3 Tax rates 18.2 8.6 17.6 20.0 6.0 11.0

Electricity 13.0 29.7 2.7 15.2 22.4 10.6

Political instability 6.1 0.0 12.3 0.5 0.2 10.2

Customs and trade regulations 16.1 0.9 2.1 5.2 4.0 9.9

Practices of the informal sector

4.8 3.1 8.4 5.8 2.7 7.8

Tax administration 2.4 0.0 5.7 1.4 0.0 2.6

Corruption 7.7 0.0 1.4 3.5 0.9 1.5 Transportation 3.9 3.5 4.1 3.4 10.7 1.0

Courts 0.0 0.0 0.8 0.0 0.0 0.3

Business licensing and permits 2.7 0.0 0.0 0.0 0.0 0.3

Access to land 0.7 0.0 3.9 0.7 0.0 0.0

Labour regulations 0.0 4.4 2.9 0.0 5.6 0.0

The key threats identified from the Enterprise Survey (2010) for St. Vincent and the Grenadines

identified access to finance, an inadequately educated workforce, crime theft and disorder, tax

rates, and electricity as the five biggest obstacles to doing business in the country. These results

were mostly borne out in the examination of specific data presented in the above analysis. These

results are mostly in keeping with the rest of the region. Some of the recommendations to address

these and other issues raised during interviews with stakeholders are discussed in the following

section.

5.4. Field Research Findings

In addition to the desk review of key private sector development challenges (presented in previous

sections), interviews were conducted with various departments, enterprises and representative

associations in the public service, private sector and civil society. These entities were chosen to

capture a wide variety of views regarding the main challenges concerning private sector

development in the country. Interviews were conducted between July and August 2012 using a

focused semi-structured interview. Both open-ended and closed-ended questions were posed to

interviews in order to obtain details on the key private sector development challenges. Following on

from these interviews, issues to emerge from the working groups developed for the Caribbean


82

Growth Forum (CGF), as described in the introduction, were also reviewed. The following

subsections identify the main critical issues to emerge from the interviews and the CGF and present

a series of required actions to address these issues.

5.4.1 Priority Action Areas

The key obstacles to business growth gleaned from the background research in St. Vincent and the

Grenadines where:

Finance Issues: High interest rate spreads and high collateral requirements;

Lack of an inadequately educated workforce

Crime, theft and disorder

Tax rates

Cost of electricity

During the interviews conducted with key stakeholders, these issues were presented and

interviewees were asked to comment in relation to:

Did the list adequately capture the main issues constraining private sector development in

the country?

What other issues would they add to this list?

Identification the top three issues holding back private sector development?

Recommendations to solve the identified challenges?

From the interviews conducted and additional secondary data gathered during in-country visits, six

main issues were identified which are mostly in keeping with the results of the background research.

The following subsections investigate these critical issues affecting private sector development in St.

Vincent and the Grenadines. The main critical issues identified were:

Costs and Stringency of conditions for finance

Customs and Trade Procedures

Market Access

Inadequately skilled labour force

Political and Governance Issues which related to ad hoc planning;

A ‘silo’ mindset in the public sector in relation to agencies and departments operating in

their own interest rather than to a specific strategic plan;

Lack of fiscal space and hence a lack of Government investment in public good investments

such as tourism marketing, business support mechanisms and addressing inefficiencies in

the public service;

Cost of energy and electricity;

Lack of product differentiation and limited export market focus makes the country

vulnerable to shifts in the global business cycle.

These findings from the applied element of the PSA are not dissimilar to those emerging from the

Caribbean Growth Forum (CGF) consultations undertaken across the region in the first quarter of

2013. The three working groups (Logistics and Connectivity, Investment Climate, Skills and

Productivity) organized for the CGF for St. Vincent and the Grenadines identified a number of issues

that once addressed can catalyze private sector development. These issues were: finance, trade,


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information and ICT, business support services, skills in the labour force and productivity. The main

needs identified from the CGF Working Groups to address these issues for the development of the

private sector in St. Vincent and the Grenadines were:

Availability and Access to Finance

Trade Facilitation:

o Movement of People and Goods

o Operation of customs in relation to ease of clearing goods

o Market access and competitiveness

Use of Information and Communication Technologies (ICT) and increased access to

information

Review and rationalization of current incentives and private sector development initiatives

Education and training development to match needs of industry

Increase productivity

Drawing on the results of all aspects of the research, the following SWOT (Strengths, Weaknesses,

Opportunities, Threats) matrix was developed in relation to the private sector growth and

development in St. Vincent and the Grenadines. The matrix is subsequently used to develop

recommendations and action plans based on the main critical issues identified.


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Table 16: Private Sector Growth and Development: SWOT Matrix for St. Vincent and the Grenadines

Strengths Weaknesses Opportunities Threats International Relations and Governance: Membership of international bodies, regional integration schemes (OECS/ECCU and CARICOM) and other regional bodies (CDB, UWI, ECCB). Signatory to trade agreements and international conventions; Stable democracy; Strength of investor protection; Good rating on Governance effectiveness; Relative overall ease of doing business; Fiscal incentives for businesses; Currently strengthening the public service; Existence of capacity development and business support organisations. Economy: Stable regional currency; Relatively low inflation ; Remittances from ex-patriots; Existence of alternative financing options (COMFI). Labour and Skills: Good labour relations; Access to education in the domestic and regional market. Sectors: Established reputation in tourism; Established manufacturing zones; Environment and Society: Natural beauty and heritage; Transport and Communications: International sea port; Proximity to regional and international markets; Relatively good domestic network infrastructure (transport and communications); Access to technology platforms.

Governance: Lack of human resource capacity in business support organizations; Lack of formal dialogue between social partners; Lack of formal coordination amongst business support organizations; Lack of a strategic plan to guide public and private sector investment and lack of an economic board; Lack of freely available data. Economy: Relatively high Government debt; High current account deficit; Difficulty in accessing finance due to cost and collateral requirements; Limited utilisation of non-debt financing (i.e. equity); Small domestic market; Low tariff levels exposes domestic producers to increased competition; Costs of energy; Cost of regional and international transportation; Labour and Skills: Lack of skills demanded in the labour market Sectors: Lack of diversification of products and export markets; Small-scale production with no ability to obtain economies of scale. Environment and Society: Exposure to natural disasters; High levels of poverty and unemployment; Lack of flat land. Transport and Communications: Transport constraints within the region; Airport facilities (although new airport under construction); Cost of import certificates. Technology: Existing technology not utilised to its full potential (private and public sectors)

Economy: Freedom of movement of capital in the region; Freedom of movement of goods in the region; Exploitation of larger regional market; Labour and Skills: Freedom of movement of skilled labour in the region. Sectors: Specialty tourism; Geothermal energy; Agro-processing; Trade agreements. Technology: Exploitation of existing technology for cost-savings in the private sector and greater dissemination of information from the public sector.

Economy: Lack of growth in main trading and inward investing countries; Fall in FDI inflows; Increases in commodity prices on the international market Labour and Skills: Brain drain Sectors: Competition from new tourism destinations with new tourism products and loss of seat capacity from non-national carriers; Increased competition from imports for domestic producers with greater trade liberalisation; Environment and Society: Climate change.


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These interrelated issues are discussed below and used to develop recommendations and action

plans in relation to the identified priority areas of: general governance issues; access to finance

issues; energy costs issues; and labour market issues.

5.4.1.1. General Political and Governance Issues

The PSA for St. Vincent and the Grenadines identified general political and governance issues as a

critical issue impacting on private sector development. Stakeholders were of the view that

development planning tended to be ad-hoc with little or no use of strategic long-term visioning. In

addition, private enterprises were of the view that there was a ‘silo mentality’ in public sector

business support organisations with these agents operating as autonomous entities without an

explicit relationship with other public sector entities and a single strategic vision. This negative view

is somewhat contrary to St. Vincent and the Grenadines’ relatively good ranking among comparator

countries for ‘Government Effectiveness’, which looks at the perceptions of stakeholders in relation

to the quality and independence of public services and the civil service, the quality of policy

formulation and implementation, and the credibility of governments’ commitment to these policies;

St. Vincent and the Grenadines ranked 7th out of 19 comparator countries and was 3rd highest in the

OECS. Other hindrances in St. Vincent and the Grenadines to emerge from the interviews in relation

to the public sector were the Bureau of Standards’ lack of proper laboratory testing and the cost of

importing certificates.

One of the main issues that appears constant across the OECS is what has been termed a ‘silo-

mindset’ in the business support infrastructure. Most businesses in St. Vincent and the Grenadines,

both directly and indirectly, were of the opinion that domestic support organizations were either

influenced politically or lacked quality leadership. An MSME policy and strategy report from 2009

substantiates these claims in relation to the public sector, as highlighted below:

“There is a strong public perception that government departments do not work together

well, but instead have their own agendas aimed at job preservation as much as at customer

service. This situation merely reinforces a “silo mentality” in the public sector. In any

economy, particularly one with a public service in excess of 8,000 employees, there is no

justification for this kind of divisiveness.” (Commonwealth Secretariat, 2009:68)

The research undertaken for the private sector assessment somewhat corroborates these findings

and suggests similar recommendations made which call for more liberalized policies regarding

information disclosure, streamlining of support services to business, revision of fee schedules and

expanding opportunities for SMEs through Government procurement. In addition, the

Commonwealth Secretariat (2009) report recommends:

‘Streamlining of government processes as they relate to servicing small businesses. This will

involve aggressively rationalising the multiplicity of forms, records and processes currently

required for various registrations by business (especially by MSMEs).

Revision of the CIPO [Corporate and Intellectual Property Office] fee schedule. The current

fee schedule for CIPO registrations is high and will be reviewed where such charges are

within CIPOs control to bring them more inline with international practice. Similarly efforts

will be made to downscale the attendant legal fees charged to struggling entrepreneurs.


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Repackaging of public sector procurement programmes to deliberately create possibilities for

MSMEs to participate in public tenders will also be pursued and legislation will make it

mandatory for the government itself and for government-owned companies to reserve at

least 25 % of their tenders for small businesses.’

The negative views expressed above should however not suggest that there are no positive actions

being taken. In St. Vincent and the Grenadines, Invest SVG serves as the major promotional agency

for businesses and the organization has a number of accomplishments regarding trade, cultural and

fashion shows. However, some of the businesses interviewed thought that not enough time and

money was directed towards gaining market access for the small-scale productive sectors and action

of this concern has been taken. As a consequence of this constraint noted by the private sector, the

Centre for Enterprise Development (CED), conceived a program called ‘VINCYKLUS’ meant to serve

as a cluster for small businesses, with an overall objective:

“To increase and strengthen the capability of individual producers operating within the

cluster, through export development, training, marketing and promotion, and information

support, in order to enhance and develop the export capacity of firms to take full advantage

of market access opportunities”

The conception of VINCYKLUS by the CED should be commended. However, the VINCYKLUS program

currently faces human resource constraints, such as finding suitable management for the cluster

program. Hence it is recommended that policies be geared at strengthening institutional capacity at

VINCYKLUS and other business support agencies. It is also advised that for all initiatives/policies

pertaining to market access, that strong alliances/partnerships be forged among VINCYKLUS, Invest

SVG, NDF, the Chamber of Industry and Commerce and the wider business community. As with

other recommendations, there is a greater need for the development of linkages and alliances.

Such issues and recommendations should inform the development of a national strategic plan for

private sector development, an explicit delineation of the remits of various Government agencies,

and the development of greater communication channels between business support organisations

(both public and private) and greater dissemination of information. The relevant Action Plans

developed from the PSA to address these issues include:



strategies.

Once established, the Tripartite Committee should seek to also address the following:










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A national strategic plan can ensure that national policy planning is continuous and not subject to

the electoral business cycle. It was considered that such an approach to development planning

would also enhance the transparency of government policy formation as well as reduce business

uncertainty.

An overall national strategic plan would also help to get around the common criticism of the ‘silo-

mindset’ common in the public sector. Rather than focussing on departmental or ministry-specific

objectives, technocrats would be working towards national objectives. While this approach does not

necessarily mean that intra-governmental lines of communication would improve, it does however,

provide a basis for overall strategic planning and developing policy priorities. ICTs and knowledge

platforms could then be used to facilitate communication between various departments and

ministries.

The development of a national strategic plan however offers up some logistical challenges in relation

to who develops the plan and how to ensure that it would be followed with changes in Government.

These challenges should however not be viewed as insurmountable and the existence of these

challenges should not deter action. Indeed, if the private sector was sufficiently strong, and insisted

that successive government keep to a development plan, the concern about political business cycles

would not be present. This therefore suggests that if the private sector is afforded the space to

grow, these problems with implementation would wane.

One of the other issues that warrant discussion is the lack of fiscal space afforded to the

Government. While the development of a strategic plan for the development of the private sector

will not in itself solve the fiscal problems of government, the demonstration of commitment to

private sector development can act as a boost to investor confidence and open avenues for public-

private partnerships in public goods where opportunities exist. In addition, the establishment of a

more interactive and proactive business support framework can assist in expenditure savings

through rationalisation, as well as revenue enhancement through the general growth and

development of the private sector.

However, in order to effectively execute these action plans a number of issues will need to be

addressed including:

Lack of information sharing and research by the private sector;

Lack of economic and labour market information; caused in part by the limited use of

existing technology by the public sector.

Private enterprises are reluctant to share information on their enterprises and by greater inclusion in

the decision-making process there may be greater willingness to share relevant information. The

private sector will need to inculcate this culture of information sharing to assist governments in

understanding the situation of the private sector, and its contribution to the economy. One such

avenue that this can be addressed through is the establishment of a private sector funded research

unit, perhaps overseen by the private sector representative on the Tripartite Committee. Such a

unit could identify opportunities (domestic and foreign) for private sector growth as well as potential

threats to the various sectors. Pooling of resources would allow the decision-making process of

individual firms and other economic agents to benefit from evidence-based research and data which

should enhance profitability and sustainability.


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There is also a strong demand by private sector enterprises for data, to assist in strategic planning

and the formulation of business plans for accessing finance. However, the situation is not that data

does not exist in the region, it is basically that the data is not collated or mined as public sector

agents are not fully exploiting the available technology . Individual governments, through such

agencies as Inland Revenue Departments and National Insurance Schemes, collect information over

specific periods that could provide more detailed information as regards revenue and expenditure

by sector, employment levels and categories, and investment data. The problem in this regard is a

lack of infrastructure and human resources to consistently collate and present data. This is an area

where, at the country and regional level through national statistical offices and the OECS Secretariat

and the Eastern Caribbean Central Bank, that donors could direct resources; especially as it relates

to technical assistance in the development of such a system. These are the sorts of issues that will

need specific attention to enable all of the action plans to be effectively implemented.

It should however also be noted that the private sector is also not utilising the available technology

to its fullest potential even though they would benefit from its use in the general operations of their

firms. As an example, firms utilize a significant amount of their human resources physically

collecting payments whilst the technology exists that can provide a far more efficient solution,

thereby reducing fraud and associated security issues. Once implemented, the current resources can

then be deployed to enhance the levels of service delivery or to more productive areas within the

business operation.

5.4.1.2. Access to finance

A problem that has been consistent in the region is the cost of financing and under-developed

capital markets. Private sector stakeholders interviewed in St. Vincent and the Grenadines stated

that finance was either difficult to attain due to collateral pre-requisites or that it was too costly to

borrow (high interest rates). Loans from credit unions and other financial intermediaries were

typical mortgage and consumer type financing, and these institutions tended to shy away from

private sector funding. Although the interest rate spread in St. Vincent and the Grenadines is the 3rd

lowest in the OECS, the spread in this regard is important to monitor as it provides a relative

indicator as to the efficiency of financial institutions and/or the level of competition in the sector;

high interest rate spreads can either indicate that financial institutions are inefficient or that they are

exploiting a dominant market position. High transaction and operating costs are passed onto the

consumer via higher interest rates.

In St. Vincent and the Grenadines, working capital and other financial services are predominantly

sourced from commercial banks, as demonstrated from the Enterprise Survey (2010). The problem

with the commercial banking system is, first, a large percentage of banks are foreign-owned with

conservative portfolios and employ a strategy of ‘cherry-picking’ the least risky private sector

borrowers. Second, transaction and operation costs are relatively high and hence transferred to the

interest rate paid on loans. Ultimately, the high level of informal unaccounted businesses and

information asymmetries increase the risk of lending, which also contributes to higher up front

collateral requirements.

It should however be noted that these limitations to accessing finance are not purely institutional,

that entrepreneurs also either propose impractical projects, or present poorly constructed business

plans due to a lack of skills, as well as a lack of data.


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The main hindrances therefore, for productive enterprises in relation to finance in St. Vincent and

the Grenadines, relate to the cost of finance (high interest rates) and collateral requirements. For

creditors, they insist that due to high operating costs, informality, and a lack of accounting records,

that their risks are increased due to an increased likelihood of default and hence this needs to be

offset by higher interest rates and collateral requirements.

To address these access to finance issues (collateral requirements and high interest rates), there is a

need to investigate the cause of these issues which relate primarily to efficiency in financial

institutions, high transaction and operational costs, and information asymmetries in relation to

borrower information available to lenders. In addition, there is also the need to balance the savings

deposit rate and the reserve requirements set by the ECCB. The ECCB’s Savings Deposit Rate (SRD),

the statutory minimum rate on savings deposits, has been shown to be positively correlated with

interest rate spreads from commercial banks operating in the OECS (Grenade (2007). This, taken in

relation to the Reserve Requirement Ratio (RRR), proxied as the percentage of reserves to total

deposits mandated to be held by commercial banks, which has an effect on the amount of funds

available to make loans, together influence higher interest rates on loans in the region as this

burden is normally passed on to customers. It is recommended that these two variables, RRR and

SDR, are assessed intermittently to find a suitable balance as they both affect the cost of borrowing

in St. Vincent and the Grenadines and the OECS in general. The other causes of high interest rates,

high interest rate spreads and high collateral requirements are discussed below.

Transactional and Operating Costs

Transaction costs are defined by Coase (1937) as the costs associated with a transaction on the open

market, and by Wang (2003) as the economic value of resources used in locating trading partners

and executing transactions. Communications charges, legal fees, informational cost for finding the

‘right price’ are all examples that apply to banking transaction costs. The World Bank (2008) stated

that modern trends in transactional lending suggest that any improvements in information available

and technological advances are likely to improve access to finance for MSME’s (for example through

credit registries and automated credit appraisal) and hence reduce transactional costs. To quote:

“Encouraging the development of specific infrastructures (particularly in information and

debt recovery) and of financial market activities that can use technology to bring down

transaction costs will produce results sooner than long-term institution building.’ World Bank

(2008:15)

The IMF (1998) noted that operating costs for commercial banks in the Eastern Caribbean was a key

determinant of interest rate spreads. Grenade (2007) showed that operating cost ratios, defined as

operating costs to assets, for foreign banks in the Eastern Caribbean were higher than indigenous

banks and the overall average ratio was higher than the acceptable international standard of 3.617.

It can be assumed that the operating cost ratio for commercial banks operating in St. Vincent and

the Grenadines, is presently higher than Grenade’s 2003 estimates, due to substantial changes in

energy prices and other expenses.

The concept of introducing technological advances to reduce transaction and interest costs from

banks operating in St. Vincent and the Grenadines should be high on the priority list. However,

17 Moore and Craigwell (2000)


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because of the informality of most businesses in the country, which leads to more personal catering

between the borrower and lender, transaction costs may still prevail. In addition to this, a reduction

in overhead costs to assist with lowering interest rates could potentially displace many employees in

the banking sector. For example, a Vincentian banking representative interviewed for the private

sector assessment, stated that they always wanted to introduce cost reducing mechanisms such as

internet banking and other technological reforms, however, because of the mindset of the

population and the informality of business customers, there was a preference for face-to-face,

relationship-based, banking. To reduce transaction and operating costs it is therefore recommended

that policies be structured around ensuring the formality of businesses (i.e. the registering of

companies, technical assistance for product/service development), technological advancement (i.e.

credit information systems), and efficiency of operating costs (i.e. incentives/policies that reduce

variable costs of electricity such as retrofitting). All of these policies should contribute to reductions

in interest rates charged for credit services.

Given that inefficient operation of financial institutions will result in increased costs to consumers, it

is also recommended that a quarterly assessment be taken of the overall efficiency rate to ensure

commercial banks operating in St. Vincent and the Grenadines are running efficiently and, as a

result, benefitting the consumer, individual or enterprise, from competitive prices. The overall

efficiency rate in this regard relates to profitability rates, margin rates, weighted results rates and

employment efficiency rates18.

Information Asymmetries

Informational asymmetries, as well as informality, directly affect the level of collateral required by

commercial banks in the region as they increase the uncertainty of lending, id est. higher risk. This

uncertainty is therefore passed onto customers through collateral requirements. While average

collateral in St. Vincent and the Grenadines was 211%, the world average was 168%, and the average

for Latin America and the Caribbean was 197% (Enterprise Survey, 2010). Any measures to reduce

information asymmetries, and increase formality, should therefore assist in reducing the cost of, and

access to, commercial finance.

A problem that has been encountered, not only by financial institutions, but also NGOs, public and

technical institutions, is that lack of information and record keeping from private enterprises in St.

Vincent and the Grenadines. For example, one indigenous bank interviewed stated that their

institution was considered ‘the poor man’s bank’ and that many customers are facilitated even

without the correct paper work. Another statutory institution stated that businesses wanted both

technical assistance and finance, but were unwilling to divulge information and records on their

business. This lack of information disseminated by businesses can be attributed to:

18 Profitability Rates, defined as: Return on Assets (ROA)- presented as a ratio of financial results and a bank’s assets; Return on Equity (ROE)- a ratio of financial results to a bank’s own fund; Return on Sale (ROS)- a ratio of financial results to a bank’s income; Costs Ratio (C/I)- a ratio of costs to income. Margin Rates, defined as: Net Interest Margin- a ratio of interest results to assets; Interest Spread, which can be interpreted as a difference between the average interest-bearing assets and the average expense of interest-bearing l iabilities. Weighted Results Rates, defined as: The result rate charged with reserves (reserves balance) which is shown as a dif-ference between the building up and dissolution of reserves, and the achieved result; The result rate charged with operating costs, i . e. the ratio of operating costs to the result. Employment Efficiency Rates: The rate presented as a ratio of assets to a number of employees (job positions); The rate presented as a ratio of a result to a number of employees. See Wozniewska (2008)


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Lack of knowledge of proper record-keeping and accounting

Unwillingness to gather income statements or other crucial information due to fear of being

imposed with taxes or other expenses

Lack of awareness of technical criteria and documentation standards required by banking

institutions.

Overall, it appears that a proportion of the informational asymmetry that leads to higher collateral

requirements is due to the level of informality of business in the country which can somewhat be

attributed to the lack of enterprise management skills. The proportion of informational asymmetry

that leads to higher collateral requirements for formal businesses could be said to be due to the

absence of credit bureaus and related registries. It is recommended that these issues be address by

the following actions:

Technical Assistance Services: To access loans from formal financial institutions, businesses must

have some formality structure. Technical assistance services make enterprises aware of customary

procedures before approaching for working capital i.e. income statements, bookkeeping, strategic

plans, and the process of registering business. For example, St. Vincent and the Grenadines’

investment promotional agency, Invest SVG, demonstrates this with the manner in which their

technical services have actually assisted many businesses in accessing capital from financial

institutions.

Establishment of Credit Bureaus: Credit Bureaus are defined as an agency which collects the credit

history on individuals and other prospective borrowers that assist financial institutions with its

lending decisions:

‘Rather than… various ill-fated schemes aimed at broadening access to credit, the countries

would be better served with a vibrant system of credit bureaus. The bureaus would provide

reliable information on all current and potential borrowers at low cost to banks and other

lenders. This would allow lenders to move beyond their fairly small circle of well-known, and

typically higher-income, business clients to lend to the broad strata of small and even micro

businesses that represent the vast majority of productive enterprises in the Caribbean.

To be truly useful, credit bureaus should be able to obtain not only bank loan repayment

histories but also all hire-purchase, tax, and bill payment histories without the prior consent

of the individuals involved. By the same token, each individual should be able to review and

challenge the accuracy of his or her record, and the credit bureau should be responsible for

correcting any verified inaccuracy on a low-cost and timely basis.’ IADB (2009:22).

In 2012, the ECCB collaborated with the IFC in a conference called “Wider Access to Credit and

Consumers’ Empowerment through Credit Information Sharing”. Representatives from regional

central banks, ministries of finance, other government agencies, and financial institutions from the

Eastern Caribbean Currency Union (ECCU) and the wider Caribbean region met to discuss credit

information sharing systems (credit bureaus) in the Caribbean. The Credit Reporting Conference falls

under the umbrella of a Canadian International Development Agency (CIDA) funded project aimed at

establishing a private credit bureau in the ECCU and the development of the credit bureau

legislation for the region. This is the first step of many needed to rectify information asymmetry in

St. Vincent and the Grenadines and the OECS.


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The only country in the Caribbean that actively participates in comprehensive credit history

collection is Trinidad and Tobago. According to USAID:

‘The Credit Bureau of Trinidad and Tobago was founded eighteen years ago by a law firm

and collection agency. The bureau currently holds over 350,000 records and reviews an

average of approximately 10,000 credit applications a month (individual and corporate

applications). The banks in Trinidad and Tobago have recently decided to create their own

platform for exchanging credit information, in which The Credit Bureau of Trinidad and

Tobago will also be included’. USAID (2004)

Establishment of Collateral Registries: Collateral registries are systems that identify and document

property (movable property or real estate). In the Caribbean, the collateral registry system is

underdeveloped and does not fit the ‘needs of a modern financial system’19. For the most part,

financial entities in the Caribbean do not accept movable collateral (such as inventory, accounts

receivables, crops and equipment) which is seen by the IFC as a significant impediment to a free

flowing credit market and economic development.

‘Reforming the framework for movable collateral lending allows businesses—particularly

SMEs—to leverage their assets into capital for investment and growth. Modern Secured

Transactions Registries increase the availability of credit and reduce the cost of credit’ 20.

Alternative Financing Options

Another factor identified during the private sector assessment which would assist in increasing

access to finance in the OECS is understanding the ideology of foreign banks, and exploring the

prospects of utilising indigenous non-bank financial institutions (NBFIs). The financial landscape in

the region is characterised by commercial banks (international, regional and domestic) and NBFIs

(insurance companies, domestic credit unions and microfinancial institutions (MFIs)). However, non-

national banks dominate and ‘cherry-pick’ in their lending while maintaining a conservative,

traditional approach to lending (collateral-based lending). There is therefore a need to encourage

the development of financial services which suit domestic needs through the enhancement of credit

unions and other NBFIs.

The traditional financial sector in the Caribbean is currently being complemented through a number

of NBFIs, such as credit unions, micro-finance and a regional export agency. The capitalization of

credit unions, particularly in Barbados, are comparable to some small banks, as firms realize the

need for a financial partner that understands the parallel between the size or stage of their business

and the type of capital assistance required to take the business to the next step.

USAID (2004) and Malaki (2006) show that microfinance institutions compliment and can coexist

with formal financial institutions, as they focus on a niche demographic; the start-up or initial stages

of firm development and the economically active poor. Though statistics on the effectiveness of

micro-finance has been scrutinized and the results subject to debate, the outreach of NBFIs has with

many small businesses, especially in the agro-processing field in St. Vincent has been encouraging:

19 USAID(2004)

20Source: http://www1.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Financial+Markets/Financial+Infrastructure/Collateral+Registries/

http://www1.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Financial+Markets/Financial+Infrastructure/Collateral+Registries/

http://www1.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Financial+Markets/Financial+Infrastructure/Collateral+Registries/


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‘Shifts in the private sector structure to service industries (from agriculture) indicate that

there are opportunities for expansion of MSE financing that would have a direct and

meaningful impact on the business environment21.’ USAID (2004)

It is interesting to note that COMFI, a new MFI in the country, is an amalgamation of the three

biggest credit unions in St. Vincent and the Grenadines. The experience this co-operative brings is

vital, as they understand financial developments, small business issues and depositary system in the

country. This local knowledge and a synchronisation with national development goals is vital to the

development of a vibrant indigenous financial sector as well as the development of the private

sector in the country.

Another important source of alternative financing, particularly in the seed or start-up stage of

business, is venture capital. Venture capital is money provided by an external investor to finance

various stages and development of a business. The capital is invested for an exchange in equity

stake, rather than loan financing, and it offers high-risk and high-reward for both client and

financier. However, venture capital financing is limited in the Caribbean and institutions such as the

MIF, part of the IADB group, has also been working on creating a better venture capital industry in

the Caribbean. Their focus is on fund managers, helping them contribute to the venture capital

industry that invests in SMEs that cannot access funding from traditional financial institutions.

MIF results have been semi-encouraging so far on facilitating venture capital in the Caribbean. Some

problems faced by the fund is, lack of quality fund managers, no local laws for venture capital

investing, and governments not providing organized support for industry. However, the MIF is

unable to operate directly in St. Vincent and the Grenadines, as their remit is limited to the 25 IADB

member countries. This suggests that there is a need for another international or regional body to

intervene in this area to directly facilitate the development of a venture capital industry in the

region. In seeking to address this gap in financing options, the ECCB established the Eastern

Caribbean Enterprise Fund (ECEF) in 2009:

‘The ECEF is being positioned to be a mechanism for attracting investment capital and

channelling those resources to promote the development of private sector enterprises in the

region. In this regard, the ECEF will complement existing financial intermediation services of

providers in the ECCU by offering a wide range of services to assist in filling the current gap

with respect to the availability of requisite financing and technical support. Additionally, the

ECEF will foster the creation and growth of productive sectors in the economies of the region

through the injection of equity and debt financing….In addition, as the first regional fund of

its type in the ECCU, the ECEF will also play a key role in the promotion of a private

equity/venture capital industry in the region’22.

Overall, it is recommended that emphasis be placed on capacity development and financial

assistance of alternative financing options such as COMFI and the NDF, as they serve a critical

purpose for micro and small businesses in St. Vincent and the Grenadines, the foundation of an

immature private sector. It is important that technical assistance, which is also recommended in

bank financing, play an important role in developing customers’ ability to be educated on private

21 Highlights from USAID (2004) Caribbean Financial Assessment document

22 http://www.eccb-centralbank.org/money/ecef.asp

http://www.eccb-centralbank.org/money/ecef.asp


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sector financing. Technical assistance to firms helps both debtor and creditor with due diligence by

preparing emerging entrepreneurs with an outlook of where the business could be, and by assisting

micro-creditors on monitoring and evaluation.

With regards to venture capital facilitation, it is advised that more emphasis be placed on capacity

development of institutions via the development of fund managers specializing in the productive

sectors, development of the legal framework for facilitating venture capital in the OECS and

awareness on the potential of a venture capital eco-system. The ECEF, conceptualized by the ECCB,

is a good start for creating a venture funding industry in the region, and it is proposed that all

international assistance be prioritized around the development of this fund.

Developing an alternative financing industry is an important element needed for financial

inclusiveness in the OECS and St. Vincent and the Grenadines in particular. NBFIs and venture

capital have helped developed many start-up and seed-staged enterprises in developed countries.

The intention of these alternative recommendations is to compliment the services of formal banks

(which have the ideology of formal conservative lending portfolios) with financing options that help

the often excluded segments (start-up or initial stages of business) of the private sector.

However, while the development of alternative financing options is important for facilitating access

to capital without the normal stringent conditions enforced by banks, these alternative financing

options are not expected to be a mainstay throughout the life of the business. As previously stated,

NBFIs and venture capital options are usually backed by grants/subsides or cash injections from

investors/co-operatives, and are designed to help businesses at earlier stages of their life cycle.

Therefore the aim of these financing options are for businesses to reach a productive capacity which

would result in savings/investment, and, ultimately, savings/investment services from commercial

banks needed for sustaining the development of the business.

The broader issue of a need for greater collaboration between various private sector

representatives, between government agencies, and between the private and public sector also

applies to the financial sector. As businesses in the private sector range in size from micro to small

to medium to large, their market focus also ranges from local to national to regional to international,

covering a spectrum of value-added activities from low to high. This lack of homogeneity in the

private sector relates to heterogeneity of financing needs. Rather than competing for clients,

financial institutions should seek to develop linkages to best serve the clientele for which they are

best suited to serve, as well as provide opportunities for graduating from non-commercial finance,

such as that offered by development-focussed NGOs and CBOs, to more commercial types of finance

as they become more ‘bankable’.

Since microfinancing institutions and commercial banks work to provide greater access to

financial services, both could gain by forming synergies among themselves. Commercial

banks have the network capability to facilitate this process, and thus each party could benefit

from the expertise of the other. Consequently, target groups and intended beneficiaries could

have greater access to both credit and non-credit services. In addition to insurance and

guarantee schemes, they could benefit from facilities that the banks could offer for

remittances and money transfers. Moreover, they could use services to facilitate payments,

such as by means of cash machines, cheques, trust receipts and so on.(International Poverty

Centre UNDP,2008)


95

Such alliances are not unknown. In Africa, a number of banks are creating linkages with micro-

lending agencies and are creating innovative fund products. The linkage with banks helps micro

financiers benefit through the reach that banking services offer, such as branch networks and

electronic transfer systems, bringing transaction costs down. In addition to this, the cooperation

between both of the financing agents offer:

a) Micro finance customers deposit systems

b) More records on transactions and repayments

c) Less information asymmetries on borrowers

d) Joint Training and Marketing

This culminates in creating greater credibility of micro-finance customers and the potential to access

more commercial banking services as they create a formal credit history.

An example of the detrimental effect a lack of cooperation and development of linkages can have on

accessing finance was demonstrated by an agro-processor in St. Vincent and the Grenadines.

Although the agro-processor was able to gain a sizeable percentage of her financing needs from a

regional export agency, because of lack of knowledge of this export financing entity by a domestic

commercial bank, the application for residual funding for the project was declined. This is an

example of the problems that arise when financing entities do not form linkages or cooperate with

each other and hence the potential of financially including many clients is lost. The International

Fund for Agricultural Development (IFAD)23 is currently working to establish ongoing links with

alternative lending agents and commercial banks to ensure that the excluded demographic gains

access to financial services beyond the life cycle of IFAD projects. Furthermore, governments are

engaging in guarantee schemes to assist with commercial bank inclusion of micro-finance customers.

It is therefore recommended that St. Vincent and the Grenadines’ commercial banking sector

collaborates and seek innovative linkages with NBFIs such as COMFI, NDF, and MFIs. Implementing

linkages and cooperation between financial entities must be facilitated by legal and institutional

policies from government.

In drawing all of these issues related to the lack of access to finance, there is a need to reduce the

cost of finance and increase the ability of firms to access finance through increasing the formality of

enterprises and provision of networking among financial institutions to enable them to better serve

private sector businesses at different stages of development. While the availability of data is

important for the development of business plans, both strategic and to access finance, this is already

addressed in relation to Action 2. However, businesses also lack the ability to access finance in

relation to a lack of record keeping, and a lack of skills to prepare viable proposals to finance

providers. By increasing formality, not only in terms of issues related to registration but also the

adoption of accepted business practices, access to credit is increased. The relevant Action Plans to

emerge from this element of the PSA include:

Action 4: Reduce the cost of finance through the reduction of transactional and operational

costs in financial institutions through the use of technology and monitoring of efficiency

levels; the reduction of risk and risk-averseness through the establishment of a credit bureau

23 From the World Wide Web: http://www.ifad.org/events/op/2008/microfinance.htm

http://www.ifad.org/events/op/2008/microfinance.htm


96

and a collateral registry; and the introduction of alternative financial products and greater

networking in the financial sector.


support (technical assistance and training) for the adoption of accepted business practices

(recordkeeping) and the skills to develop business plans for funding and strategic planning.

These services exist in St. Vincent and the Grenadines and are provided by the Invest SVG

and the Centre for Enterprise Development, however, the utilisation of these services need

to be expanded given the results to emerge from the PSA.

It should also be noted that the negative impact of the current constraints in the financial market are

often magnified due to other costs of doing business, especially the cost of electricity.

5.4.1.3. Electricity Costs

Based on interviews and the results of the Enterprise Surveys (2010), electricity costs were ranked as

one of the biggest obstacles to doing business across the OECS. As shown in the figure below, cost

per kilowatt hour (kwh) exceeded US$0.30 for all of the OECS countries included, while this cost was,

unsurprisingly, less than US$0.05 for Trinidad and Tobago.

Figure 47: Electricity Rates in St. Vincent and Selected Caribbean Countries (2010)

Source: The Caribbean Electric Util ity Service Corporation (CARILEC) (2010)

In St. Vincent and the Grenadines, businesses such as LIME, ECGC East Caribbean Metal, along with

the Chamber of Commerce, all indicated that electricity and energy costs were major constraints. In

2012, the Government of St. Vincent and the Grenadines signed an agreement with the Clinton

Foundation to provide technical and financial support for geo-thermal energy. This exploration of

alternative energy sources could have a catalytic effect on the economy of St. Vincent and the

Grenadines as demonstrated by the experience of telecommunications company LIME with the

introduction of retrofitted air conditioners; the country manager for LIME noted that the company

experienced significant declines in electricity costs, estimated at 40%, over the last 2 to 4 years due

to this retrofitting.

0

5

10

15

20

25

30

35

40

US

Ce

nts

pe

r K

W h

ou

r


97

There is however no quick fix for problems relating to electricity or energy costs in a country lacking

traditional mineral energy resources like St. Vincent and the Grenadines. To address the issue of the

high cost of electricity, and energy in general, the two main options involve conservation of energy

and exploitation of alternative energy options . In terms of conservation, the adaptation of

behaviour to reduce usage and the adoption of energy efficient technologies, along with retrofitting,

provide avenues to reduce costs in the short and medium term. For St. Vincent and the Grenadines,

the possibility for the exploitation of alternative energy sources is high given the country’s ranking of

sixth in the wider region in relation to the existence of an enabling environment and renewable

energy projects already operating24. The country however ranks low on the scale of planned

renewable energy projects. Castalia Strategic Advisors (2012) suggest that the main opportunities in

this area relate to solar and wind energy.

Some of the other recommendations emerging from consultations and previous research were:

A bi-annual review of the fuel clause tariff structure (the fuel cost element of electricity) to

reduce the incidence of price-gouging, or if price gouging is found to not be prevalent,

reassure the private sector of such;

Support for energy service companies which are providing retrofitting services;

Address the current downstream distribution value chain with hydro-carbon suppliers to

ensure the lowest possible energy prices

Exploration of the possibility of privatisation of the electricity company as a means to

increase efficiency and productivity.

In accordance with the Energy Action Plan 2010:

o Increased capacity of Energy Statistics to help bolster education/training, monitoring

and evaluation;

o Financial and fiscal incentives to any persons training or involved in the production

of RE technologies and financial institutions providing capital for RE technologies

Drawing on the results of the PSA in relation to energy costs, the need for energy conservation and

exploitation of alternative energy options relate to the following Action Plan:

Action 6: Provide incentives for energy conservation and frameworks for the exploitation

of renewable/alternative energy and reduce the cost of fossil fuels. Incentives and support

in this area will act as both a cost-reduction tool as well as an opportunity for investment

and enterprise development in the renewable/alternative energy sector. Efforts to reduce

the cost of fossil fuels would relate to periodic reviews of the fuel clause tariff structure, a

review of the distribution chain and exploration of possibility of privatisation of the

electricity supply.

Incentives in this area could include concessions related to duties on imports of materials, technical

assistance and the development of special funds for investments in alternative energy projects and

enterprises supplying complementary services such as retrofitting.

24 http://www.castalia-advisors.com/files/Castalia-CREF_RE_Islands_Index_121010-1.pdf

http://www.castalia-advisors.com/files/Castalia-CREF_RE_Islands_Index_121010-1.pdf


98

5.4.1.4. Labour Market Issues

The final issue constraining private sector development in St. Vincent and the Grenadines, but by no

means the least important, relates to the labour force. These labour force issues relate to a lack of

specialist skills in the OECS, a mismatch between what is demanded by industry and what is supplied

by training labour market, as well as a general lack of adequately trained labour. As noted by the

Enterprise Survey (2010), this was the biggest obstacle to 13% of businesses sampled in St. Vincent

and the Grenadines. In seeking to address these issues, the private sector assessment identified two

main areas that would require attention:

Implementation of education, human resource and comprehensive human capital planning

Vocational and On-the-Job Training

Human Resource Planning

There are several approaches that can be adopted to address the skill deficiencies in the labour

market for St. Vincent and the Grenadines. However, before the details of any plan can be

conceptualised, there needs to be a human resource development strategy based on a balanced

account of the needs of industry and the strategic direction of Government. Manpower planning in

this respect, along with other elements of a national strategic plan, would greatly assist in the

current work environment as well as assist in future growth of the private sector by clearly signally

the sectors which Government intends to support. Such clear signalling would encourage

investment by the private sector in these strategic sectors, both foreign and domestic. However,

there is a lack of useful data on the composition of the workforce and labour market dynamics to

usefully inform the development of human resource plans for St. Vincent and the Grenadines. Invest

SVG is currently working on increasing business registration and collecting enterprise data, which is

the first step on attaining proper labour market information on the country’s large informal

economy. To build on this effort, the government should implement a National Accreditation and

Productivity Council under the remit of the Ministry of Education, which would work closely with the

labour department and coordinate with other planning conduits25, to oversee comprehensive human

capital planning for the country.

Following the development of a balanced strategic plan (including a human resource development

plan), attention should be paid to the facilitation of research and development initiatives in key

sectors, with special attention to: technology transfer as a component of foreign direct investment;

and the development of vocational and on-the-job training opportunities that allow for the

development of specialist skills. Such an approach is not overly alien to St. Vincent and the

Grenadines as seen with the development of its tourism industry, where the Government took a

strategic decision to develop a relatively small tourism sector in consultation with key stakeholders

(Tourism Authority and Hotel and Tourism Association). One of the key initiatives in this sense was

the founding of a hospitality institute. Such efforts could be mirrored in the agricultural and light

manufacturing sectors. This concentration on the development of specialist skills and technology

transfer in the labour will be integral in the long-run for St. Vincent and the Grenadines to avoid the

attraction of footloose investors that investments solely on costs, especially labour. A strategy of

embedding investors through the development of specialist skills can avoid such unwanted

investments.

25 Such as universities, private sector, training institutes, bi-lateral partners etc.


99

A combination of the right investments in labour and physical capital can change the productive

capacity of an economy. What is spurred from strategic human capital planning, is identifying the

research and development skills needed for sectors, which also helps in understanding the right type

of investments in physical capital.

Research and development, particularly in Science, Technology and Engineering, has been a

predominant feature of emerging countries human capital plan to ensure the highest return per

worker. Non-natural resourced governments such as Taiwan, Korea, and Malaysia strategized the

role of R&D for industrial competitiveness and identified competencies in areas such as information

technology, robotics, micro-electronics, laser technology, food and agro-technology, and bio-

technology. St. Vincent and the Grenadines can learn lessons from these experiences and seek to

exploit advantages in relation to renewable energy technologies (geo-thermal, solar, wind and wave)

and other locational advantages such as technologies related to the marine environment, agro-

processing and niche manufacturing. The government’s human capital plan for R&D should involve

Invest SVG, CED, University and Training institutes, CARDI, Chamber of Commerce and industry

stakeholders.

Vocational and On-the-Job Training

With respect to on-the-job training and apprenticeships, interview results suggest that specific

technical skills required by enterprises were absent in the labour market. The

promotion/incentivising for enterprises to invest in this element of skill development needs to be

implemented to ensure that enterprises attain the required skills for growth, as well as provide an

opportunity for uncertified labour to enhance their earning capacity through on-the-job certification

initiatives such as national vocational qualifications (NVQs). This is an area where the private sector

can contribute to the wider development of society.

Most respondents from the stakeholder interviews conducted stated that secondary, and even

tertiary level graduates, lacked the technical expertise and other skills needed for workplace

productivity. When asked if they participated in any apprenticeships or training programs for

inexperienced professionals, most businesses stated it was minimal to non-existent. Given the

specificity of required skills in some organisations, it is unlikely that training will be available in the

education sector and therefore these skills need to be built internally. However, this does not

appear to be promoted or practiced in St. Vincent and the Grenadines. As with incentivising

investments in plant and equipment, incentives need to be put in place to invest in training at the

enterprise-level rather than the educational institution level through apprenticeships and on-the-job

training with requisite recognition through certification and opportunities for labour to improve

their employment prospects within and outside of the specific enterprise. Caribbean and National

Vocational Qualifications (CVQs/NVQs) provide an ideal mechanism in this respect and participation

by enterprises should be strongly encouraged. Such enhancement of skills not only benefits the

productivity of the individual enterprise, but demonstrates to potential investors that there is a

skills-base in the country and that there is a commitment to on-going training.

Chambers of Commerce, Government, enterprises, training institutes, and productivity councils are

all considered as catalysts for implementing vocational training, apprenticeships and on the job

training. However, it is ultimately Government’s responsibility to promote the adoption of

apprenticeships and on-the-job training given the public good nature of such training. Collaborations


100

between Government, Chambers of Commerce and other private sector stakeholders should be

given high priority.

It should however be noted that the skill needs in St. Vincent and the Grenadines do not exist

independently of any strategic plan for socio-economic development or private sector development

specifically. Given this and the identified skill needs, the relevant Action Plan is:

Action 7: Education and training curriculum reform that addresses the long term strategic

direction of Government as well as the more immediate needs of the private sector. The

reforms undertaken should be informed from manpower surveys and subsequently

developed human resource development plans which should seek to catalyse the utilisation

of apprenticeships and on-the-job training. The long term strategic direction of Government

should be constructed on the basis of dialogue with the private sector.

5.4.2 Summary

In addition to these core issues, issues related to trade were also highlighted such as inefficiency in

customs and the need for the strengthening of the Bureau of Quality and Standards. However,

these cannot be addressed directly by the Action Plan as the plan seeks to provide a conducive

environment in the provision of appropriate labour and capital for the exploitation of market

opportunities. However, these specific issues should be kept in mind during the implementation of

the individual elements of the plan. Additionally, it needs to be noted that private sector

development cannot be separated from the overall sustainable development of the country. This

implies that social issues such as poverty, unemployment as well as environmental vulnerabilities

should be considered in any plan to enhance private sector development. Indeed, these issues can

often show up in the bottom line for businesses via higher security and insurance costs. It is

imperative that these issues be kept in mind during the development of strategic plans to support

the private sector.

It is noteworthy that the Government of St. Vincent and the Grenadines appears to appreciate this

and the general direction of the Government is in keeping with the Action Plans to emerge from the

PSA. The 2013 Budget seeks to ensure sustainable growth in the private sector through a number of

avenues in relation to enhancing investment opportunities in a number of sectors (agro-processing

and export services, including entertainment) through enhancing access to finance, reducing energy

cost and developing the human resources of the country. The Government clearly recognises that

the generation of employment is key for the sustainable reduction of poverty, while also seeking to

ensure fiscal security and foreign exchange earning capabilities to allow the Government to

undertake its other obligations to the citizenry of the country.


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6. Conclusions and Recommendations

6.1. A Long Term Action Plan for Private Sector Development

The preceding analysis identified a number of pertinent issues affecting the development and

growth of the private sector in St. Vincent and the Grenadines. As noted previously, the findings

from the CGF are not significantly different to that from the PSA for St. Vincent and the Grenadines.

One of the most critical recommendations to emerge from both studies is the need for the

implementation of a forum for collaboration between key stakeholders and representatives of

labour, the private sector and Government.



strategies.

At present, attempts are being made to facilitate these discussions, as noted above, however, there

is no formal forum available to discuss the issue of private sector development at the national level.

In Barbados, the umbrella institutional mechanism is known as the Social Partnership, which is

chaired by the Prime Minister with members drawn from labour and private sector representative

bodies. There are sub-committee meetings of the social partnership that then feed into the sessions

chaired by the Prime Minister. Added to this consultative process, members of the social

partnership also sit on the boards of various government agencies and key policymaking

committees. Fashoyin26 (2004:59), drawing on the Barbadian Social Partnership, provides some

conditions for effective dialogue:

Free, independent and representative organisations of workers and employers;

The willingness and readiness to consult, negotiate and share information;

Strong and capable trade unions and employers’ organisations;

Acknowledgement of the interdependence of the tripartite partners;

Shared vision and a commitment to search for wider consensus;

Mutual trust and respect for each party;

Institutional machinery for social dialogue at the various levels of the economy;

A certain degree of coordination between the levels of consultation and negotiation.

Fashoyin (2004) does however note that the framework for social dialogue cannot be neatly

exported from one country to another, and the development of a Tripartite body in St. Vincent and

the Grenadines will need to be cognisant of this, while appreciative of the challenges for meeting the

conditions for effective dialogue.

Once established, the Tripartite Committee should seek to also address the following:





26 Fashoyin, T. (2004). Social Dialogue in Selected Countries in the Caribbean: An Overview, Journal of Eastern Caribbean Studies, 29 (4), 42-63.


102





Action 4: Reduce the cost of finance through the reduction of transactional and

operational costs in financial institutions through the use of technology and monitoring

of efficiency levels; the reduction of risk and risk-averseness through the establishment

of a credit bureau and a collateral registry; and the introduction of alternative financial

products and greater networking in the financial sector.


support (technical assistance and training) for the adoption of accepted business

practices (recordkeeping) and the skills to develop business plans for funding and

strategic planning. These services exist in St. Vincent and the Grenadines and are

provided by the Invest SVG and the Centre for Enterprise Development, however, the

utilisation of these services need to be expanded given the results to emerge from the

PSA.

Action 6: Provide incentives for energy conservation and frameworks for the

exploitation of renewable/alternative energy and reduce the cost of fossil fuels.

Incentives and support in this area will act as both a cost-reduction tool as well as an

opportunity for investment and enterprise development in the renewable/alternative

energy sector. Efforts to reduce the cost of fossil fuels would relate to periodic reviews

of the fuel clause tariff structure, a review of the distribution chain and exploration of

the possibility of privatisation of electricity supply.

Action 7: Education and training curriculum reform that addresses the long term

strategic direction of Government as well as the more immediate needs of the private

sector. The reforms undertaken should be informed from manpower surveys and

subsequently developed human resource development plans which should seek to

catalyse the utilisation of apprenticeships and on-the-job training. The long term

strategic direction of Government should be constructed on the basis of dialogue with

the private sector.

It should be noted that the various elements of the Action Plan seek to provide a conducive

environment for private sector development in St. Vincent and the Grenadines, however, this does

not suggest that the implementation of the Action Plan in and of itself will automatically lead to

growth of the private sector; there must also be entrepreneurial action in exploiting opportunities in

the local, regional and global market. This is especially in light of anecdotal evidence that emerged

during interviews throughout the region that the private sector demonstrated a lack of interest in

looking ‘beyond their borders’ and instead seek to grow domestic market share.

As another caveat, the implementation of the Action Plan cannot be undertaken in isolation from

regional integration efforts at the OECS and CARICOM levels. If Action 3, the development of a

national strategic plan, is taken as synonymous to some degree as the development of an industrial

policy, the following should be noted:

‘Given that trade negotiations often take place at the regional level, industrial policies should

be framed by the existing and likely trade commitments and coordination should be


103

facilitated as much as feasible as it is unlikely that the Region will gain the first-world status

that it seeks without greater regional coordination’(p.145)27

In relation to the development of a national strategic plan with a regional focus, attention should be

paid to the specific recommendations that have consistently emerged from research in the region

which speak to niche market development, moving up the value chain, development of strategic

alliances and joint ventures for knowledge and technology transfer, and the development of

clusters, both vertical and horizontal28. The current VINCYKLUS initiative in promoting clusters

provides a basis for growth in the area of clustering. While activities in these areas are not

specifically mentioned in the Action Plan due to their specificity, they should remain as options

during the development of the strategic plan for private sector development and growth in St.

Vincent and the Grenadines.

6.2. Summary

The economies of the OECS have all been severely affected by the global economic recession, both

in relation to government’s ability to meet its obligations to its citizenry as well as the private

sector’s ability to grow. Growth in St. Vincent and the Grenadines has been quite volatile over the

last few years. In addition to the downturn in the global economy, several natural disasters have

derailed the economy. Between 1994 and 2010, the island has been affected by five tropical storms

and one category 2 hurricane (Tomas, 2010) as well as a drought in 2010. As a result, following

average growth of 5% between 2002 and 2007, the economy contracted by 2.4% in 2009 and a

further 1.8% in 2010. The contraction in the economy largely reflected falling tourist arrivals as well

as FDI-related construction, which has had negative spillover effects on the rest of the economy.

While the private sector in St. Vincent and the Grenadines face many specific issues related to taxes,

dealing with Government departments, etc., it is considered that addressing the wider issues and

the facilitation of a forum for discussion, that many of these specific issues could be addressed. It is

also important to be aware that many of the recommended actions will not bear results in the short-

term; building a framework for the development of alternative energy and curricula reform are not

overnight processes, and require an element of structural change. In summary, the table below

outlines the relationship between the main critical themes identified from the PSA, the main critical

issues and related elements of the Action Plan.

It should be noted that while all of the Action Points relate to the establishment of a conducive

environment for the development of the private sector and are external to enterprises, that the

private sector itself will need to take a portion of responsibility and seek to adopt a more proactive

approach to exploiting opportunities available in the market. Given the perception that the private

sector is not as proactive as it can be, and as a caution in relation to interventions to spur private

sector development, it is imperative that all key stakeholders, from the international to the domestic

level, are fully aware of the current level of development of the private sector. In St. Vincent and

the Grenadines, and across the region, the private sector is relatively under-developed and limited in

27 Moore, W. (2010). Trade and Industrial Policy in the Caribbean. In: Alleyne, F., Lewis-Bynoe, D. and Archibald, X. (2010). Growth and Development Strategies for the Caribbean. CDB: Barbados.

28 An overview of policy recommendations made in this respect can be found in: Lashley, J. (2010). Productive Sector Development in the Caribbean: Manufacturing and Mining. In: Alleyne, F., Lewis-Bynoe, D. and Archibald, X. (2010). Growth and Development Strategies for the Caribbean. CDB: Barbados.


104

its ability to cope with current neo-liberal developments given a long period of protection through

such mechanisms as preferential trade agreements which have recently been removed. Any

interventions should therefore seek to assist the private sector, with the assistance of the public

sector, to build domestic market opportunities as well as special and differential treatment for

export goods in the short- to medium-term, rather than fully expose it to the rigours of international

competition. Lessons should also be learnt in relation to drawing on the strengths of the region

rather than seeking, as in the past, to attract investment based on low-cost labour which

subsequently led to the attraction of footloose enterprises that relocate to competitors as cost levels

change or economic circumstances deteriorate in relative terms. In this vein, the Caribbean needs to

exploit those resources for which it has an advantage and a brand, suggesting a concentration on

alternative energy (geothermal, solar), specialist agricultural products (such as nutmeg in Grenada)

and agro-processing, eco-tourism, edu-tourism (drawing on human resources in the region), heritage

tourism, health and wellness (both product-specific and related to tourism), and financial services,

among others.

In addition to drawing on the locational advantages that exist in the region, attention should be paid

to the specific recommendations that have consistently emerged from research in the region which

speak to: niche market development; moving up the value chain; development of strategic alliances

and joint ventures for knowledge and technology transfer; and the development of clusters, both

vertical and horizontal. The current VINCYKLUS initiative in promoting clusters provides a basis for

growth in the area of clustering. While activities in these areas are not specifically mentioned in the

Action Plan due to their specificity, they should remain as options during the development of the

strategic plan for private sector development and growth in St. Vincent and the Grenadines.


105

Table 17: Recommendations and Actions Matrix for St. Vincent and the Grenadines

Themes Main Critical Issues Actions Details Responsibility of…

General Political and

Governance

Issues

Limited dialogue between stakeholders representing

Government, labour and the

private sector

‘Silo-mindset’ in business support organizations in the public sector

Ad hoc development planning

Lack of information sharing by the

private sector Lack of utilization of technology.

1. Establishment of a Tripartite Committee

2. Rationalisation and

streamlining of public

sector’s business support framework

3. Development of a

National Strategic Plan

that mainstreams private sector

development

As noted by Fashoyin (2004) there is a need for: Members to be independent and representative

Willing to consult and negotiate

Demonstrate mutual trust and respect

Need for communication at the Tripartite Committee level to determine the specific external needs of enterprises in relation to the business environment (finance, technical

assistance) while meeting the wider obligations of Government.

Government to initiate Tripartite Committee and

address other issues in

conjunction with

Tripartite Committee

Access to

Finance

High Transaction and Operating

Costs

Informational Asymmetries

Alternative Financing Options

4. Reduce the cost of

finance

5. Increase capacity of

business to access finance

To address the issues of access to finance, several specific steps can be taken:

Introduction of technological advances ;

Monitoring of efficiency rate of financial institutions to identify areas for improvement;

Establishment of credit bureaus and collateral registries ; Introduction of alternative financing options such as equity financing,

Greater competition in the financial sector, particularly the strengthening of domestic

institutions;

Provision of technical assistance and training to the private sector in relation to increasing formality, the adoption of accepted business practices, and the skills to secure

funding.

Eastern Caribbean Central

Bank; Business support

organisations

Cost of Doing

Business

Cost of electricity 6. Provide incentives for

energy conservation

and frameworks for the

exploitation of alternative energy

options and reduce the

cost of fossil fuels.

Provision of incentives and support to help reduce energy costs through conservation as

well as for investing in the sector.

Periodic review of the fuel clause adjustment.

Assess the efficiency of the current distribution chain. Explore the possibility of privatization of electricity supply.

Government

Labour Market

Issues

Limited availability and lack of

specialist skills in the labour

market:

7. Education and training

curriculum reform.

The specific content of any reform should be determined at the Tripart ite level and

informed from the strategic plan for private sector development. Agreement will need to

be reached on the immediate needs of the private and the longer terms development vision of Government. Specific issues that will need to be addressed i nclude:

Lack of labor market data

Lack of utilization of formalized apprenticeships and on-the-job training

Government

Trade Issues Limited product and market range

with a domestic focus.

The trade issues highlighted for St. Vincent and the Grenadines cannot be addressed directly by the Action Plan as the expansion of product range

and markets will require the action of private sector entrepreneurs. The Action Plan seeks to provide a conducive environmen t in the provision of

appropriate labour and capital for the exploitation of market opportunities.


106

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108

Appendices


109

Appendix 1: Structure of the OECS

The administration of the OECS is run by the OECS Secretariat, which is based in St. Lucia. The

organs of the OECS include:

The OECS Authority: The highest policy-making body of the OECS consisting of the various

Heads of Government. The Authority’s chairmanship changes annually and rotates between

the various member countries’ Head of Government.

The Council of Ministers: The Council is comprised of appointed Ministers of Government

from each member state and is responsible to the Authority. The Council act on matters

referred by the Authority and also makes recommendations to the Authority.

The OECS Assembly: The Assembly is comprised of appointed members of Government and

Opposition from each member state. The Assembly serves as the legislative arm of the

OECS. The power of the Assembly is confined to common market aspects of the Economic

Union- Monetary Policy; Trade Policy; Maritime Jurisdiction and Maritime Boundaries; and

Civil Aviation. The Assembly is permanently based in Antigua and is comprised of five

legislators from every independent state and three from every non-independent state.

The Economic Affairs Council: The Council is comprised of representatives of member states,

usually Ministers of Trade. The Council is guided by the Economic Union Protocol and the

Council is the principal organ of the Economic Union.

The OECS Commission: The Commission is the main administrative organ of the Economic

Union. It is comprised of a Director-General whose responsibility is the daily administration

of the Organisation and convenes and presides over meetings of the Commission. The

Commission also included one Commissioner of Ambassadorial rank named by each member

state. The Commission also provides the Secretariat services for the organs of the OECS and

makes recommendations to the Authority and Council of Ministers ‘…regarding the

formation of Acts and Regulations of the Organisation; and undertake other work and

studies, and perform other services relating to the functions of the Organisation as required

under this Treaty or the OECS Authority or by any other organ’29.

The OECS Secretariat: The Secretariat is responsible for the coordination of the function of

the OECS under the direction of the Director-General. The organizational chart of the

Secretariat is shown below.

In addition to these organs, other relevant institutions include:

The Eastern Caribbean Central Bank (ECCB): The ECCB is the monetary authority of the OECS

and issues the Eastern Caribbean Dollar. The ECCB maintains currency stability and oversees

the banking system in the member states. The ECCB is governed by a Monetary Council and

a Board of Directors and is managed by a Governor, currently Sir Dwight Venner. The ECCB

was formed in 1983 and is based in St. Kitts and Nevis.

The Eastern Caribbean Civil Aviation Authority (ECCAA): The ECCAA is an autonomous body

with the OECS with responsibility to regulate civil aviation activities.

Eastern Caribbean Supreme Court (ECSC): The ECSC has unlimited jurisdiction in all member

states in accordance with individual Supreme Court Acts. The Court, established in 1967, is

the superior court of record for the OECS member states.

29 Op cit.


110

Figure 48: Organisational Chart of the OECS Secretariat

Source: http://www.oecs.org/images/oecs_org_chart.jpg

http://www.oecs.org/images/oecs_org_chart.jpg


111

Appendix 2: List of Key Stakeholders from Interviews and Consultations

Table 18: Business Support Institutions and Other Relevant Bodies

Name of Institution Contact Person Address Chamber Of Industry & Commerce (St Vincent & The Grenadies) Inc

Ruthmilda Patrick Corea's Bldg Hillsboro St Box 134 Kingstown

Invest SVG Mr. Edmond Jackson 2nd Floor Administrative Bldg. Bay Street P.O. Box 2442 Kingstown

Ministry of Finance and Economic Planning Mr. Maurice Edwards P.O.Box 608, Kingstown. Ministry of Tourism, Sports and Culture Mrs. Lavern Grant 2nd Floor NIS Building, Upper Bay

St., Kingstown, St. Vincent National Development Foundation Mrs. Hermia Neehall McKies Hill, Kingstown, St.

Vincent and the Grenadines St. Vincent and the European Development Fund

Ms Laura Anthony – Browne

1st Floor, Administrative Centre Bay Street, Kingstown

St. Vincent and the Grenadines Hotel & Tourism Association Executive Director

P O Box 2125, Kingstown, St Vincent & the Grenadines

Statistical Office Ms. Gatlin Roberts Ministry of Finance, Planning and Economic Development, PO Box 608, Kingstown

Commercial Technical & Allied Workers Union

Alice Mandeville P.O. Box 245, Middle Street, Kingstown, St. Vincent and the Grenadines

St. Vincent & the Grenadines Co-op Credit Union

Ms. Angela Patrick P O Box 1265, Lower Kingstown Park, Kingstown, St. Vincent and the Grenadines

St. Vincent and the Grenadines Small Business Association

The Secretary P.O. Box 2343, Kingstown


112

Appendix 3: St. Vincent and the Grenadines Governance Framework

St. Vincent and the Grenadines gained independence from Britain on 27th October 1979. The

Government is a parliamentary democracy based on the Westminster model. The country is a

member of the British Commonwealth with Queen Elizabeth II as the head of state. Queen Elizabeth

II is represented in St. Vincent and the Grenadines by the Governor General, Sir Frederick Ballantyne.

The Prime Minister is the Honourable Dr. Ralph Gonsalves who was elected in March 2001. The

House of Assembly has 15 elected members and 6 senators who are appointed by the Governor

General on the recommendation of the Prime Minister.

Table 19: The Government of St. Vincent and the Grenadines: Cabinet Members and Portfolios

Member Portfolio Dr. Hon. Ralph Gonsalves Prime Minister and Minister of Finance, National Security, Grenadines

Affairs and Legal Affairs Hon. Girlyn Miguel Minister of Education Hon. Senator Dr. Douglas Slater Minister of Foreign Affairs, Foreign Trade and Consumer Affairs Hon. Clayton Burgin Minister of Health, Wellness and the Environment Hon. Montgomery Daniel Minister of Housing, Informal Human Settlements, Lands and Surveys and

Physical Planning Hon. Saboto Caesar Minister of Agriculture, Industry, Forestry, Fisheries and Rural

Transformation Hon. Maxwell Charles Minister of National Reconciliation, the Public Service, Labour,

Information and Ecclesiastical Affairs Hon. Cecil McKie Minister of Tourism, Sport and Culture Hon. Senator Julian Francis Minister of Transport, Works, Urban Development and Local Government Hon. Frederick Stephenson Minister of National Mobilisation, Social Development, the Family,

Gender Affairs, Persons with Disabilities and Youth Source: http://www.gov.vc/index.php?option=com_content&view=article&id=11&Itemid=104. Last Accessed 8th April, 2013.

http://www.gov.vc/index.php?option=com_content&view=article&id=11&Itemid=104


113

Appendix 4: Minimum Wage Levels in St. Vincent and the Grenadines

Domestic Workers

Persons with living-in accommodation - $400.000 per month with meals

Persons without living-in accommodation - $450.00 per month with meals

Persons employed on a day-to –day basis - $25.00

Hotel Workers

Front Desk/Receptionist/Secretary………….$675.00 per month

Accounts Clerk/Office Clerk……………….. $900.00 per month

Guest Services……………………………… $ 900.00 per month

Room Attendants………………………….. $565.00 per month

House man/Bellboy……………………..… $450.00 per month

Supervisor – Housekeeping……………..….. $675.00 per month

Food and Beverage Supervisors………..……$775.00 per month

Cooks…………………………………….… $675.00 per month

Dish washer/Kitchen Helpers……….….….. $450.00 per month

Chef………………………………….………$1,100.00 per month

Laundry ………..$30.00 per day………….. $500.00 per month

Gardener………..$30.00 per day……………….$500.00 per month

Maintenance…………………………….….….. $900.00 per month

Waiter/Waitress…………………………..……. $565.00 per month

Bartender…………………………………...….. $675.00 per month

General Helper…………………………………. $565.00 per month

Industrial Workers

Workers Employed in industrial sector

Apprentice for period of six months to one year - $20.00 per day

Watchmen ………….. …………………………. $40.00 for a twelve-hour shift.

Workers in Offices of Professionals

Clerks………………….………. $ 700.00 per month

Receptionist……………….…… $ 600.00 per month

Office Attendant………..……… $ 400.00 per month

Secretary/Typist……………..….$ 800.00 per month

Shop Assistants

1. Persons with previous working experience

Cashiers $175.00 per week $700.00 per month


114

Sales Clerk $150.00 per week $6 00.00 per month

2. Check-out attendants, office

Attendants, packers and cleaners (full time) $125.00 per week

Part time cleaners (3 hours or less) $200.00 per month

3. Porters $150.00 per week

4. Watchmen $200.00 per week

5. Office clerks

a. With previous working experience $600.00 per month

b. Persons sixteen and over:

On first employment, first six months $500.00 per month

Thereafter: $600.00 per month


115

Appendix 5: Donor Matrix Report for St. Vincent and the Grenadines


116

Compete Caribbean

Private Sector Donor

Matrix Report for St.

Vincent and the

Grenadines

August 2013


117

Description of the Donor Community

Please see Section 5.2.3 of the main PSA Report for information on:

Active multilateral and bilateral donors

Formal and Informal Coordinating Mechanisms among donors

Methodologies for indentifying priorities for donor funding

Monitoring and evaluation by donors

Opportunities to improve coordination amongst donors

For information on programs and projects undertaken by donors in the country and in the OECS in

general, please see DMX Appendix 1: Donor Projects and Programs.

Description of Local Stakeholders

Public Sector Stakeholders

The main public sector body in St. Vincent and the Grenadines supporting private sector

development is the Ministry of Agriculture, Industry, Forestry, Fisheries and Rural Transformation.

The Department of Industry is:

‘The principal institution responsible for shaping the government’s policy in respect of the

country’s institutional development and to stimulate the development of the industrial sector

by promoting greater economic diversification, export competitiveness and improved

productivity. This unit processes applications for industry incentives under the Fiscal

Incentives Act, Chapter 366 of the Laws of St. Vincent and the Grenadines (Revised Edition)

1990.’30

In addition to the Ministry, St. Vincent and the Grenadines also operate the Centre for Enterprise

Development, an investment promotion agency, Invest SVG, and a National Development

Foundation. An overview of these agencies is provided in Section 5.2.2. while additional information

is included in the table below.

Private Sector Stakeholders

A listing of main private sector stakeholders is shown in Section 5.2.2. Please see below for specific

information the background of these organisations are well as the main constraints faced and

sectors considered as having potential for future growth.

30 http://www.agriculture.gov.vc/index.php?option=com_content&view=article&id=218&Itemid=181

http://www.agriculture.gov.vc/index.php?option=com_content&view=article&id=218&Itemid=181


118

Table 20: Overview of Key Stakeholders in St. Vincent and the Grenadines

Name Type of

Organisation

Background Main constraints faced Areas/Sectors with potential

for future growth

Invest SVG Business

Support

To attract FDI, act as policy advocate to create a more facilitating

environment. Provision of aftercare services, trade shows, technical support

1)Energy Costs

2) Book keeping and Efficiency of Business

3) Access to finance

1) ICT

2) Construction, Infrastructure

3) Agro-Business linkages

St. Vincent Hotel and Tourism

Association

Business Support

Marketing Hotels and Advocacy for Hotels and tourism related businesses 1)Access to Finance 2) Energy Costs

3) Airlift

1) Airport Opportunities 2) Eco- Tourism

3)Sport Tourism (Kite Surfing)

The Chamber of

Commerce

Business

Support

To build organisational commitment and capacity to deliver sustainable,

developmental and innovative solutions to all business partners and

stakeholders.

1)Bureau of Standards Certificate

costs

2) Energy costs

3)Market Access

1) Linkage between

Hospitality and Agro-Business

2) ICT

3)Green Projects

Bureau of

Standards

Business

Support

Established in 1992, The Standards Act No. 70 of 1992 (amended by Act No.

28 of 2001) gives the SVGBS authority, inter alia, “…. to prepare and promote standards relating to goods, services, processes and practices produced

and/or used in St. Vincent and the Grenadines, to ensure industrial efficiency

and to assist in industrial development as well as to promote public and

industrial welfare, health, safety and to safeguard against negative effects to the environment”.

1) Human Resource Capacity/ Skilled

Staff (In Bureau) 2) Capacity to implement

3)No National Labs

1) Agro-Business/Processing

2) Linkages among sectors i.e. Tourism

3) Service Industry

Bequia Tourism Association

Business Support

The Bequia Tourism Association (BTA) was formed in December 1999 by a group of individuals from the Bequia business community, with the dual aims

of protecting and enhancing the island's resources for both visitors and the

community, and of attracting more visitors to the island through its own

promotional and marketing initiatives. Its membership has now become more broadly based, encompassing not only business people but also

representatives of community groups, Bequia schools, private residents, and

Bequia lovers from around the world.

1)Energy Costs 2)Maintenance Costs-Sea Salt

3)Access to the island (Transport

Costs)

4)Public Awareness on Tourism 5) Security

1) Diving Facilitation 2) Hospitality Training School

3)Bequia as central to tourism

in SVG

VINCYKLUS Business

Support

The overall objective of VINCYKLUS is to increase and strengthen the

capability of individual producers operating within the cluster.

1)Access to Finance

2) Certification Standards

3) Customs 4) Capacity Issue in VINCYKLUS

1) Agro-Production

2) Micro-Enterprise

3)Creation of Synergies

Center for Enterprise

Development

Business Support

(Government

Owned

Statutory)

THE CED is a people-centred organisation with the professional competence and commitment to deliver timely, relevant and reliable services,

information and advice to potential and existing entrepreneurs on all aspects

of business resulting in increased competitiveness, higher levels of business

success and sustainability in the local private sector.

1)Access to Finance specifically (equity) 2) Energy Costs 3) Customs

Efficiency

1) Agro-business 2) Cultural Industry

3) Designing a sustainable

financial services model for

entrepreneurs


119

Port Authority Business Support

(Government

Owned

Statutory)

The St. Vincent and the Grenadines Port Authority (SVGPA) is responsible for the operation and administration of the Port of Kingstown, the nearby

Campden Park Container Port (CPCP) and the Cruise and Ferry Terminal. The

Port Authority's mission is to provide a coordinated effective and efficient

system of port facilities to the public

1)Operating inefficient running 2 ports

2)Access to finance

3)Infrastructure

4)Brain Drain (Technical Fields)

1)Centralized Port 2) Tourism

Credit Union

League

Business

Support/Finance

The league came out to unify the system, train and develop services in Credit

union, Compliance, monitor their performance, discuss cooperative issues

1)Infrastructure, Airport Services 2)

Access to finance 3)Credit Unions inadequate focus on

production

1) Financial Services (Credit

Unions, Micro-Financing) 2) finding Synergies

3) Youth in Agro-business

The National

Development Foundation

Business

Support/Finance

Established to assist the poor with training, technology and funding. 1)Funding decreased to NDF

2)Record Keeping 3) Market Access

4) Energy Costs

5) Customs

1) Agro-Business

2)Clustering 3)Poultry, Meat

The National Bank

of St. Vincent

Finance

(Private

Enterprise)

The Bank of Saint Vincent & the Grenadines, formerly the National

Commercial Bank (SVG) Ltd. was founded in June 1977 by The Honorable

Robert Milton Cato the then Premier of Saint Vincent with 11 staff members at a single Branch. Bank of Saint Vincent & the Grenadines currently offers

services in retail banking which includes savings and deposits in addition to

credit and investment banking.

1)Unskilled labour force

2)People resistant to

innovation/change

1)ICT

2)Tourism

Cooperative Bank Finance

(Private

Enterprise)

The St Vincent Co-operative Bank Limited opened its doors to business on 1st

February 1945 and is one of the oldest indigenous financial institutions in St.

Vincent and the Grenadines. We are committed to providing Banking services that consistently conform to customer requirements; to deliver

them efficiently, whilst maintaining the highest degree of service quality in

order to achieve total customer satisfaction.

1)Politics(Policies superficial )

2)Unskilled labour force

3)Energy Costs

1) Agri-Business

2)ICT/ Services

Ministry of Tourism Public Sector The objective of Ministry of Tourism is to ensure that there is a high quality

visitor experience for all consumers of St. Vincent and the Grenadines’

Tourism Product.

1)Access to Finance 2)Youth

Entrepreneurship 3) Hotels data

sharing

1)Agro-Business

2) ICTs

3) Tourism Linkages

The Statistical

Department

Public Sector Mission is to facilitate informed decision-making through the provision of

high quality, relevant, user-oriented and dynamic statistical services by coordinating Statistical activities and promoting the adherence to Statistical

standards.

1)Data Collection, 2)Human Resource

Capacity in Stats

1) Fashion Cultural, 2)Benefits

from Diaspora


120

Description of Information Available for the Analysis of Private Sector Characteristics,

Development Initiatives and Results

The most up-to-date information on the private sector in St. Vincent and the Grenadines is provided

by the Enterprise Surveys and Doing Business Reports as used extensively throughout the PSA

Report. In addition, the Eastern Caribbean Central Bank conducts twice yearly Business Outlook

Surveys (http://www.eccb-centralbank.org/Statistics/outlooksummary.asp). A recent survey of the

MSME sector was also undertaken by the Commonwealth Secretariat in 2009.

Identification of Opportunities to Increase Efficient Design and Execution of Programs

The main issue in relation to opportunities to increase the efficient design and execution of

programs relates not only to these overlaps and duplication, but also to gaps. The gaps mainly relate

to the main issues raised in the PSA Report in relation to lack of easily accessible finance, lack of

matching of skills supplied with the needs of the private sector, and process issues related to the

operation of customs and trade-related organisations and a ‘silo-mindset’ in business support

organisations. One of the reasons for these gaps is a lack of inclusion of the private sector in

decision-making and strategic planning. It is hoped that this issue would be addressed by the

establishment of a high-level steering committee comprising of labour, private sector and public

sector representatives.

Identification of Opportunities to Address Omitted Priority Problems

The areas omitted from current support for private sector development can be addressed as

recommended in the PSA Report. In addition, many of the agencies mentioned in the previous

section are in one way or the other are associated with the goal of private sector development in St.

Vincent and the Grenadines. While a single entity would result in some cost savings, it is likely that

such an institution might not have the necessary capacity to effective enable private sector

development in such a wide cross-section of industries. Instead, members of all the above agencies,

along with representatives from key supporting industries (e.g. finance, labour, customs, among

others) could form a special taskforce with the expressed objective of private sector development.

Such should be tasked with coordinating any overlaps or duplication that might occur in relation to

the goal of private sector development.

Recommendations

The areas where recommendations are required from the terms of reference for the DMX section of

the project relate to recommendations that improve coordination amongst donors, improve donor

coordination with local stakeholders and improve PSD-related information systems and monitoring

and evaluation.

The current activities by Compete Caribbean as an approach to improve donor coordination and the

Caribbean Growth Forum (CGF) initiative are two examples that other donor agencies not currently

participating would do well to emulate. In areas of congruence, such initiatives should be utilised to

achieve overall development goals, while unilateral targets could still be met via the donor’s

independent activities.

http://www.eccb-centralbank.org/Statistics/outlooksummary.asp


121

In relation to donor coordination with local private sector and public sector representatives, the

results of interviews across the region speak to the issue of a lack of dissemination of information on

areas of support available as well as the results of research studies which local stakeholders have

provided information for. The inclusive modus operandi of the CGF is a good example of how to

improve the relationships with local stakeholders through inclusion in working groups and

transparency in research results. However, it should be noted that there was limited participation

by the private sector and this will need to be more actively encouraged.

This point is closely related to the issues of the development of information systems and monitoring

and evaluation. Private enterprises are reluctant to share information on their enterprises and by

greater inclusion in the decision-making process there may be greater willingness to share relevant

information. There is a strong demand by private sector enterprises for data to assist in strategic

planning. However, the situation is not that data does not exist in the region, it is basically that the

data is not collated or mined. Individual governments, through such agencies as Inland Revenue

Departments and National Insurance Schemes, collect information over specific periods that could

provide more detailed information as regards revenue and expenditure by sector, employment

levels and categories, and investment data. The problem in this regard is a lack of infrastructure and

human resources to consistently collate and present data. This is an area where, at the country and

regional level through national statistical offices and the OECS Secretariat and the Eastern Caribbean

Central Bank, that donors could direct resources, especially as it relates to technical assistance in the

development of such a system.

DMX Annex 1: Analysis of Donor Projects and Programs in St. Vincent and the Grenadines

Main donors to St. Vincent and the Grenadines include: The Caribbean Development Bank (CDB),

The European Union’s European Development Funding (EDF) program, The Department for

International Development (DFID), The International Bank for Reconstruction and Development

(IBRD), the European Investment Bank (EIB), and the International Finance Corporation (IFC). Major

bilateral assistance came from the Canadian International Development Agency (CIDA), USAID, and

the Government of Taiwan. In addition, multi-donor support is provided through Compete

Caribbean.

In relation to the nature of projects funded, the majority of active projects are focussed on the

Business Support, Finance (access to finance), the Business Environment in general or a combination

of these objectives. For projects focussed on these objectives, there are 42 active or recently

completed donor funded projects in St. Vincent and the Grenadines specifically, and 12 operating at

the OECS level. Of these projects, at the country level, the majority of projects are focussed on the

Business Environment (38%) and Business Support/Access to Finance (38%). The largest area in

terms of funding is Business Support/Access to Finance with US$41 million. It should however be

noted that although Access to Finance by itself only accounts for 5% of projects, it accounts for 31%

of funding (US$38 million). In terms of the sector focus, 52% of these main objectives are targeted

at the service sector.


122

Table 21: Main Objectives and Sector Profiles of Donor Projects in St. Vincent and the Grenadines and the OECS

Loca

tio

n Objective Share

(%) Agriculture

(%) Industry

(%) Services

(%) Value of Active

Projects (US $’000)

St. V

ince

nt

and

th

e G

ren

adin

es Business

Support/Institutional Structure

19.0 4.8 7.1 9.5 $ 13,803


Business Environment 38.1 19.0 11.9 28.6 $ 29,647 Business Support/Finance 38.1 11.9 11.9 11.9 $ 41,608

TOTAL 100.0 38.1 33.3 52.4 $ 122,561

OEC

S

Business Support/Institutional Structure

41.7 8.3 8.3 8.3 $ 31,140


Business Environment 25.0 8.3 8.3 8.3 $ 14,190 Business Support/Finance 16.7 8.3 8.3 8.3 $ 2,060

TOTAL OECS 100.0 33.3 33.3 41.7 $ 49,330

At the OECS level, for projects in these areas which are operating at the sub regional level, the

service sector is also the focus, accounting for 42% of projects. In terms of the number of projects

and value, the Business Support/Institutional Structure objectives dominate with 42% of projects

and funding in excess of US$31 million.

In terms of gaps in support, although access to finance has been noted as a major obstacle to

business development in the region, projects specifically targeting this area at the sub regional level

only account for 17% of projects, and less than US$2 million in funding. However, at the domestic

level in St. Vincent and the Grenadines, while only accounting for 5% of projects, support for access

to finance accounts for 31% of total funding in these areas.

In taking the region as a whole, access to finance is only the main focus of 14% of projects, and a

joint focus with Business Support for 13% of projects. However, within these categorisations, 22% of

funding is directed to Access to Finance, while 21% of funding is targeted at both Access to Finance

and Business Support.

Table 22: Overview of Main Donor Projects by Objective, Sector and Value 31

Objective Active/Recent

Completed

Projects

Average

Share (%)

Agriculture

Projects (%

of total)

Industry

Projects (%

of total)

Services

Projects (%

of total)

Total Value of

Main Projects

(US$'000)

Business Support/

Institutional Structure

67 27.0 6.3 7.9 10.8 $ 107,738

Access to finance 36 14.1 5.9 6.7 10.6 $ 104,390

Business Environment 91 33.5 9.0 10.1 19.0 $ 155,733

Business Support/

Access to finance

35 12.9 4.8 5.2 7.0 $ 96,996

Total 229 - 26.0 30.0 47.4 $ 464,857

31 Note that some percentages do not sum to 100% due to rounding during aggregation.


123

As indicated in the table above, the greatest number of projects relate to the Business Environment,

accounting for on average 34% of projects at a total value of US$156 million. In terms of sector

concentration, on 47% of projects are focussed on services. The table below outlines the main

information by the main objectives, sector of focus and value at the country level in the OECS.


124

Table 23: Main Objectives and Sector Profiles of Donor Projects in the OECS and Member States

Country Objective Active/Recently Completed Projects

Share of Total (%)

Agriculture Projects (%)

Industry Projects (%)

Services Projects (%)

Total Value of Main Projects (US$'000)

An

tigu

a an

d

Bar

bu

da

Business Support Insitutional Structure

12 37.5 6.3 3.1 9.4 $ 15,350

Access to finance 5 15.6 6.3 6.3 6.3 $ 1,250 Business Environment 11 34.4 3.1 9.4 3.1 $ 19,049

Business Support and Access to finance

4 12.5 3.1 3.1 9.4 $ 3,457

TOTAL 32 100.0 18.8 21.9 28.1 $ 39,105

Do

min

ica


11 31.4 11.4 11.4 22.9 $ 14,553



3 8.6 2.9 2.9 8.6 $ 4,150

TOTAL 35 100.0 28.6 37.1 91.4 $ 59,819

Gre

nad

a


10 28.6 5.7 14.3 20.0 $ 9,950

Access to finance 7 20.0 5.7 5.7 20.0 $ 11,081 Business Environment 16 45.7 $ 19,688

Business Support and Finance 2 5.7 5.7 $ 34,658

TOTAL 35 100.0 11.4 20.0 45.7 $ 75,377

St. K

itts

an

d N

evis


10 28.6 8.6 8.6 8.6 $ 7,493




2 5.7 $ 3,820

TOTAL 35 100.0 20.0 31.4 57.1 $ 35,648

St.

Luci

a Business Support Insitutional Structure

11 28.9 5.3 10.5 7.9 $ 15,450



125

Country Objective Active/Recently Completed Projects

Share of Total (%)

Agriculture Projects (%)

Industry Projects (%)

Services Projects (%)

Total Value of Main Projects (US$'000)



6 15.8 2.6 5.3 5.3 $ 7,243

TOTAL 38 100.0 39.5 42.1 36.8 $ 83,017

St. V

ince

nt

and

th

e G

ren

adin

es


8 19.0 4.8 7.1 9.5 $ 13,803



16 38.1 11.9 11.9 11.9 $ 41,608

TOTAL 42 100.0 38.1 33.3 52.4 $ 122,561

OEC

S Le

vel


5 41.7 8.3 8.3 8.3 $ 31,140



2 16.7 8.3 8.3 8.3 $ 2,060

TOTAL 12 100.0 33.3 33.3 41.7 $ 49,330


126

DOCUMENT END.

FINAL REPORT Compete Caribbean OECS Project Private Sector ... · FINAL REPORT Compete Caribbean...

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