Wednesday, 10 November 2010

Thinking about a small open economy

Sitting out here in St Kitts, as the Caribbean sun is setting, it's rather easy to see why people are attracted to come out here as tourists. So it's no surprise, when we study the economic structure, to find that tourism is one of the biggest sectors, in terms of the employment and income it generates for the local economy. However, the past couple of years, in the wake of the financial crisis and world recession, have been pretty grim, with visitor numbers and spend per visitor both well down and hotel occupancy rates very low. Naturally, everyone out here hopes this situation won't last too long, but the signs are quite mixed. On the one hand, the US and other major economies are slowly recovering from recession and that might soon bring more tourists back to the Caribbean, including St Kitts and Nevis; and visits by cruise liners did very well last month. On the other hand, some of the local facilities look a bit 'tired' and need more investment - though the best are wonderful - while some countries have raised taxes on long-haul flights (e.g. the UK, just last week). So as things stand right now, it's quite hard to predict how the tourism sector will develop.

Last weekend we managed a really interesting trip around the island of St Kitts, a total drive of just 30 miles, with nice views of the coast for most of the way and impressive views of the (dormant) volcano in the middle of the island as well. For lunch we stopped at a Plantation Inn, shown in the picture. Well kept grounds, ruins from the former sugar industry (finally shut down in 2005 when the EU changed its 'sugar regime'), and a great hotel; and a nice lunch, too.

Thinking more generally about the economy here, we're on a very small island with a highly open economy. Yet when we read various reports on the economy, as part of our project here, it's hard to find much that pays serious attention to foreign trade, either in goods or in services. It's hardly mentioned except in passing in routine reports on the economic situation. Yet there has to be some potential here for expanding exports both of goods (the island already has a successful niche in electronic components) and of services. On the latter, one surprise was to find several US universities established here, including a veterinary school and part of a medical school. These offshore education establishments appear to be doing well and must be contributing significantly to the island's GDP - except that this contribution is not yet being measured! It's not totally clear what has attracted these institutions here, which makes it hard to assess whether there is potential for further expansion; but we suspect there probably is. In any case, we'll soon visit one or two of these institutions to learn more about them.

Meanwhile, my colleague and I are extremely busy right now preparing material for our first training workshop, due next week. We've already written a lot but we're still debating exactly what we should present this time, and what to leave until December. Personally, I think it's vital that we emphasise the regional and international setting in which this small economy has to operate, and that includes highlighting some of the trade issues - and opportunities - which I've been thinking about this week.

No comments:

Post a Comment