Opinion: Will new hotel rooms jump-start the economy?

POSTED: 12/2/13 2:38 PM

“Sint Maarten’s budgetary challenges are smaller than the budgetary challenges that the Netherlands, Curacao and Aruba are saddled with”, according to the chairman of the Cft, Prof. Age Bakker. Sint Maarten’s economy compared to the Netherlands, Curacao and Aruba, has performed comparably well over the past 10 years. However, stronger economic growth on Sint Maarten has not translated into more budgetary space. In spite of the growth tax receipts remain stagnant. A “can-do” mentality reigns on Sint Maarten that many other countries can learn from.

These statements were made yesterday by Prof. Bakker, during the commemoration of 200 years existence of the Kingdom of the Netherlands.

Sint Maarten’s debt to GDP ratio is less than 30% making it one of the lowest in the world. The EU maintains a debt to GDP ratio norm of 60%. The Netherlands has a debt to GDP ratio of 77%. Aruba’s debt to GDP ratio runs approximately 80%. Curacao enjoys a debt to GDP ratio of approximately 35%.

Member of Parliament, Leroy De Weever, expressed as his opinion on Wednesday that GEBE, PJIAE and the Harbor corporations should acquire Mullet Bay, and facilitate the building of 3 to 4 top-name hotel brands on the property. With this these government-owned companies will be forced into the real estate business. This according to the parliamentarian is the only way for Sint Maarten to emerge from “economic turmoil”. He further said that this is the only way to move forward and to jump-start the economy with a significant move.

The opinion expressed by the parliamentarian is in shrill contrast to the facts quoted by the Cft-chairman.  There is no “economic turmoil” and no need to “jump-start” Sint Maarten’s economy. Sint Maarten’s economy has performed comparably well over the past 10 years, in spite of the worldwide financial economic crisis. Moreover, adding 3 or 4 hotels is no guarantee that this will translate into more economic growth, nor add to more budgetary space. The Cft chairman stated this in so many words by comparing the economic growth of Sint Maarten over the past 10 years to the budgetary problems that Sint Maarten faces today. Tax compliance appears to be the main culprit here. In spite of the economic growth over the past 10 years, government tax revenues remained stagnant (approximately 25% of GDP).

The French government several years ago embarked on an ambitious program called “defiscalization” and created some 3000 new hotel rooms on the French side. This did not result in more tourists visiting the island. It resulted in cannibalization of the existing hotel occupancy on the Dutch side; the emergence of social problems in housing, schooling and healthcare services for imported workers, traffic congestion that affected the quality of life of tourists and locals alike and after several years most of these new hotels proved to be not viable, disappeared and continue to disappear.

This debacle was created because government interfered with market forces and did not allow free enterprise to work the way it should. Government should stick to creating the infrastructure and the environment to allow free enterprise to flourish and not embrace unnecessary business risks. Business risk-taking should be best left up to entrepreneurs and risk-takers. If not, the average citizen at the end of the day will have to pay the price. Buying and selling real estate is not a business government should be in.

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