Is there a case for economic development in the British Virgin Islands?
Benito Wheatley - Monday, September 17th, 2012 at 7:37 AM
Benito Wheatley
Economic development has emerged as one of the British Virgin Islands’ (BVI’s) most polarising issues at a time when a consensus is desperately needed in order to stabilise the economy and begin laying a new foundation for future growth.
At issue is the potential impact on society of large scale capital projects and whether their benefits will outweigh their costs.
This concern raises the legitimate question of the appropriate role of economic development in the economy. Such a determination requires the input of a cross-section of stakeholders in society who must weigh the balance between economic development and other economic drivers in stimulating economic growth.
One key consideration is the state of the economy. Recent Ministry of Finance Economic Reviews indicate that the territory’s economic outlook has improved since the global financial crisis, but the economy remains in a fragile state of recovery.
The crisis did considerable damage to the financial services and tourism industries that account for nearly 50% of Gross Domestic Product (GDP).
Between 2008 and 2009, GDP growth contracted by an unprecedented 11.6%. Tourist arrivals fell 13% and company incorporations dropped 20%. The construction industry was particularly hard hit as both private and public sector demand for building and public works related activity plummeted. Unemployment within the industry rose 14% over the period.
The effects of the crisis are still being felt four years on as employment, revenue and commerce remain below pre-crisis levels; and economic growth, a key indicator of the economy’s health, remains subdued on weak demand in traditional markets such as the United States (US) and Europe whose economies continue to grapple with severe debt and unemployment problems.
Uncertainty in financial markets and stronger financial regulation at global level are also a drag on the economy.
International Monetary Fund (IMF) forecasts suggest that these trends will continue until global conditions improve, posing a serious challenge for the financial services and tourism industries in the short- and medium-terms.
In this context economic development is needed to help boost economic growth and strengthen the economy’s fragile recovery until international conditions stabilise.
Economic development can help drive employment and commerce and give a much needed boost to the construction industry. It can also support long-term economic growth through the laying down of critical infrastructure needed to improve the efficiency of the economy.
An international consensus is emerging that economic development is a necessary economic stimulus when demand in the economy is weak.
International trends also indicate that the key to successful economic development is inclusivity and sustainability.
The public and other stakeholders must have an opportunity at the conceptual phase of a particular capital project to express their views, which should be weighed in its design. Efforts must also be made for local participation in the investment side of the project and its development.
From a sustainability perspective, capital projects should be carried out on a scale commensurate with the society’s capacity to satisfactorily manage the social, economic and environmental costs involved.
Economic development can play a positive role in the economy, but it must be executed in a manner that benefits the society as a whole. This can only be done if the right balance is found between sustainability, inclusivity and development.
During this extraordinary period it is imperative that the society quickly reaches a consensus on economic development if the territory is to consolidate its economic recovery and lay the foundation for future growth.
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I read all the elaborate articles from educated young BVI professionals but somehow there seems to be no one who is willing to admit that things are not working in the BVI as they should be working in a “real” country. First, your economy depends on foreign investment and foreign labour. The only thing that the BVIslanders can claim for their economic development is real estate rentals. By building huge apartment blocks, they hope to get rich from renting to people who flock here to take the jobs that some of the locals are in dire need of, whether they are prepared for these jobs is another matter, but no one should be denied employment in their own country when jobs are available.
Then you have the situation where the income generated locally is being spent abroad. Locals take the money out to shop in US territories (St, Thomas, Puerto Rico, Miami and on the Internet). Others send their money back home via MoneyGram and Western Union. All the talk about economic development is like pouring water in a basket, the more you put in, the more it falls out and you cannot achieve any growth, no matter how much investment you get. It’s really a vicious cycle. Until BVIslanders begin to think in terms of sustainable economic development where you learn to manage your own resouces, build your financial reserves through prudent spending and saving, this whole thing about development is like a joke. Not even the talk is real, it’s like living in a fantasy world, dreaming about the nice and easy way of living a high standard on someone elses expense. The only way the BVI can get out of this rut is if people get real about the real situation. Stop fooling yourselves about this economic development theory and start practicing some good old fashion habits such as living within your means.
It is no secret that there is tremendous leakage in the BVI economy. Almost everything is imported inclufing food, clothing, appliances, furnishing, construction/building material, electronics….etc. This leakage stiffles the multiplier effect of local spending and national productivity.
Further, remittances add to the leakage in the economy and reduces the money turnover rate in the economy. A dollar turnover at most two times in the economy; the more a dollar tutnover the larger the multiplier effect. Additionally, Virgin Islanders were ill-prepared to take advantage of economic growth. This lack of preparation is similar to African-Americans not being prepared for the transition from a manufacturing/blue collar economy to the new technology driven.
The BVI economy like the economy of other regional countries is ham strung the plantation economy hold; the economy is foreign owned and export oriented. See Essays on the Theory Plantation Economy by Lloyd Best and Keri Levitate.
economy
Too right. Those who fail to learn from the mistakes of history are doomed to repeat them. The fundamental obstacles I see in terms of growth and development are
1. Cronyism within government allowing too many sweetheart projects to those with the right connections,
2. Failure to complete any major projects on time and within budget, and no accountability for those projects that don’t get done on time and within budget.
3. Inadequate investment in the infrastructure (eg unreliable electricity and public water supply).
4. Insufficient investment in education so that we train people to do the jobs we have to import labour for, and so that we have a pool of talented educated and skilled workers that are attractive to investors.
5. A less than ideal work ethic. Everybody wants the money but few people are willing to expend blood sweat and tears to succeed.
6. Too much greed. Goods particularly are priced so that it pays to take one’s money and spend it in St. Thomas or PR. Just take a look at the price of tools for example.
7. Lack of interest in preserving the beautiful environment we have been blessed with. Look at how we deal with trash, look at the litter strewn about, think about how we deal with sewage, think about the 100s of charter boats out there, all dumping their business into our seas. We somehow don’t seem to have any pride about this.
Much has been said about all of these issues, but all the leadership does is talk. No serious action other than wanting to spend more on the airport expansion, the cruise ship dock etc., oblivious to the mounting debts, which will only lead to resentment as others bail us out and effectively end up owning us. Would you be willing to elnd your hard earned cash to someone you know is already carrying heavy debts? Every March we celebrate H Lavitty Stout but how easily we have forgotten his words (from Proverbs 29:18) “Where there is no vision the people will perish”. Who do we want to be as a Territory, and what are we doing to get there?
Great article! Nonetheless, we need to quit fooling ourselves and making believe that we are a large, developed resourced rich territory (by definition the BVI is not viewed as a country). We are not are a resource-poor territory, getting by on two fragile industries—tourism and financial services.
The BVI face an uncertain future. And if it does not anticipate and embrace the changes that lie ahead, the way forward will be challenging. Someone coin the phrase: if you fail to plan, you plan to fail.
Benito, as always an insightful and informative article. The BVI transformed its economy from an agricultural to a service sector economy: tourism and financial services. This transformation resulted in impressive economic growth and GDP increases.
It’s recognized as having on the highest standard of living and quality of life in the region with an~ per capita income of $41K and an ~$1B GDP.
Nonetheless, it did not effectively leverage its economic growth to effect structural, quality, and quantitative changes to the its economy. Economic development lags economic growth. The economic, social and other structures did not at least keep pace with economic growth.
Clearly, the BVI needs investment to grow and sustain
both economic growth and economic development. But as Benito noted the right balance among sustainability, inclusivity, and development is important and necessary.
Further, to maintain its current high standard of living and quality of life, the BVI needs to aggressively pursue economic diversity. Its needs to position itself for transforming its economy into a knowledge-based economy. Deeping education and training is a first step in the knowledge-based transformation. Perhaps it can become the Hong Kong of the west.
Should read deepening, not feeling.
Benito,
Government is behind the 8 ball on being proactive where economic development is concerned.
They need to get out of this LEGACY of incomplete projects –
Projects like the Hospital and Prospect Reef are good if they are not only providing a service to the community – but also creating jobs.
Without jobs people don’t have money to spend.
Government can’t just sit down and watch companies down size or worse pick up and leave BVI.
They should be doing things to help companies avoid these situations.
Evaluate the cost of doing business in the BVI. Give companies incentives to want to stay in the BVI. Provide more training to locals to help them qualify for the top management jobs.
Good Article. Now how about we finish the Capital Projects that have already started – the Hospital and Prospect Reef before embarking on other money-pit projects……
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