SHTA: Poor economic performance has businesses on the brinkPOSTED: 09/9/11 2:08 PM
GREAT BAY, St. Maarten – The Board of Directors of the St. Maarten Hospitality and Trade Association (SHTA) has warned that there are businesses that may not survive “another year of poor economic performance” and called for “immediate and dramatic action to turn the economy around.” Their warning and urging are laid out in a statement they issued on Thursday – a day after both Prime Minister Sarah Wescot-Williams and Minister of Tourism, Economic Affairs, Transportation and Telecommunication Franklin Meyers said that improving the economy is key to keeping the country’s budget balanced.
The SHTA’s statement also follows a recent report that the Central Bank has predicted the island’s economy will not grow in 2012 or that it will contract by half a percent. This is worrying for the organization because its members have depleted their capital reserves and exhausted cost cutting and efficiency measures. Those two factors have stripped them of their “resilience to last another year of poor economic performance.”
The SHTA believes the current situation has been created because of low consumer confidence, low consumer and industry awareness of the destination, a weak investment climate, traffic and a lack of clearly articulated plans.
Low consumer confidence/awareness
The SHTA points out that the low consumer confidence in the country’s source markets for tourism has led people to eliminate discretionary items like international vacations from their budget. The factors driving that low confidence is the turmoil on the global financial markets, fears of double dip recession, high unemployment and fears regarding job security.
A reduced presence in the market place since the Economic Recovery Fund (ERF) Committee was disbanded has led to historic lows in consumer awareness and demand. The lower awareness and demand means that the industry has been sustaining lower occupancy at lower rates, meaning less revenue.
Weak investment Climate
While the SHTA has agreed that the tax system must become simpler, more transparent and more fairly distribute they’ve called the current uncertainty about the new system “a high barrier to stimulating increased investment from current or future investors.” They are especially concerned because they submitted their position paper to the Tax Committee and the Ministry of Finance six months ago and the government still has yet to present the draft proposal they said they’d deliver in June.
“We’ve heard nothing except rumors that the temporary 2% TOT increase will now be extended for another year. This lack of confidence in the economy, will result in investors adopting a wait and see attitude towards making capital improvements and other investments. This lower spending will translate into less economic activity, which will also mean less revenue for government and for the community in general,” the SHTA Board stated in its release.
Thursday’s statement also called for efforts to reduce traffic congestion by temporarily implementing ferries or water taxis, allowing business to schedule staff throughout the full 24 hours of each day or in the evening and increasing the number of traffic control officers. These suggestions are made because while the SHTA “understands and agrees” that the upgrades are necessary, they complain that they excessive delays resulting from the traffic jams are having a major impact on the island’s economy.
Despite its confidence that the government is developing plans for economic growth, tax reform, labor reform, tourism development and infrastructure the SHTA has said they and many others are not aware of the plans. The fact that people are not in the know is also seen as a “deterrent to stimulating investor confidence.
“In times of economic distress, the community needs to feel that the political leadership has a clear vision and action plan to restore economic activity,” the SHTA concluded.