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| NEVIS, THE UNDECLARED ENTERPRISE ZONE
OF THE EASTERN CARIBBEAN |
| By Paul T. Lawrence |
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Whether we know of it or not, or whether
we know and are indifferent about
it, Nevis is one of the most undeclared enterprise zones
in the Eastern
Caribbean.
There are several undeclared enterprise zones throughout
the world, but
the governments of those countries have not made any
authoritative
statements about the status of their undertakings.
Whenever responsible governments realise that their
economic positions
warrant the imposition of developmental concessions
for their countries or
parts of their countries, they seek the assistance of
their legislative
assemblies to grant the necessary authority for their
implementation.
Under normal circumstances the authority for the operation
of enterprise
zones is given in an enabling act of the legislature
of the country that is
concerned. The enabling act confers the authority on
the relevant minister
to make declarations on the area of land(s) that are
to be declared as
enterprise zones. In the absence of such legislative
authority, the granting of
developmental concessions could be deemed as unlawful
acts and, as a
consequence, are open to legal challenge in the area
of administrative law.
So what is an enterprise zone? It is usually an area
of land where economic
activities are depressed due to the lack of development.
A sizeable
proportion of residents in those areas are variously
unemployed and they
find it difficult to achieve healthy standards of living.
In order to redress the
rigors of such economic depressions, some governments
take drastic
measures to reduce the severity of the effects of those
devastating social
and economic conditions by making provisions for the
creation of
widespread employment opportunities for the labour force.
The operation of enterprise zones very often involves
the reduction of
certain tax burdens and the relaxing of or speeding
up a number of
administrative controls. It is believed that such moderate
concessions would
encourage private sector industrial and commercial activities
in the zones.
Before looking at the rudimentary undeclared enterprise
zone as may or
may not exist in Nevis, it is necessary to look at some
enterprise zones that
are in existence elsewhere in certain parts of the world.
This article is not
intended as a working manual to be followed verbatim
by developing
countries in general, but as an initial guideline for
the budding legislature in
Nevis in particular.
For such brief references, I would like to refer to
the current setup that exists
in the U.K today. The operation of enterprise zones
is of statutory creations.
Under the provisions of s179 and sch. 32 of the Enabling
Act of 1980, the
Secretary of State is given power to designate, by order,
an area of land as
an enterprise zone. In other words, he does this by
delegated legislation.
The same schedule provides that each enterprise zone
should be
administered by an enterprise zone authority and is
usually precise as
regards to which body that should supervise the administration.
An interesting point to bear in mind is that the schedule
specifies a duration
of ten years for the life of the enterprise zone. In
Nevis, there are no
specified enterprise zones, and no declarations; therefore
anything that is
done is done by the whims and fancies of governments
of the day. The only
developments that tend to point to areas of enterprise
zones are those
where the construction of hotels, condominiums, holiday
flats, and villas take
place. These developments have one common feature in
them and that is
that they are located by the seaside or coastal areas.
To look at the stringent methods of controls for the
administration of
enterprise zones in the U.K. I would like to refer to
the (10) ten-year period
of the life of the zones. There are enshrined in the
Act of 1980 several
benefits to both new and commercial business, and such
benefits include
the following:
(a) Under schedule 32 exemptions from liabilities are
given to owners and
occupiers for the payments of property rates. If a property
is used for both
domestic and business purposes, the rateable value of
the property is
divided between the two elements and the business part
is exempt.
(b) Section 74 of the Finance Act of 1980 applies and
extends to enterprise
zones the provisions of the Capital Allowances Act of
1968. This allows
100% of any expenditure incurred in the construction
of industrial and
commercial buildings or structures and hotels to be
set off against
corporation tax or income tax liability.
(c) The power of industrial training boards under section
4 of The
Employment and Training Act 1981 to impose an industrial
levy on
employers does not extend to employers located in an
enterprise zone.
(d) Consideration by customs and excise of applications
made for consent
for the opening of a customs warehouse within an enterprise
zone are given
priority. It also extends to applications for “inward
processing relief” a relief
given from payment of customs and other duties on goods
processed within
the U.K. but imported from and then exported to countries
outside the EC.
On a comparative basis, it is important to look at the
period of time that the
granting of concessions last in the U.K. that is a relatively
rich country. The
maximum period is 10 years. Here in Nevis the tax holiday
appears to run for
25 years initially, and, if economic difficulties arise
as a result of acts of God,
there is a conventional precedent of an additional 25
year period available.
This makes a total of 50 years of concessions. This
extension was granted
to the Four Seasons Hotel executives following the devastation
of part of its
premises by Hurricane Omar in September 2008.
The sad fate of economic loss to Nevis does not end
with acts of God. There
is the possibility of change of ownership of any concessionary
establishments on Nevis; this would call for further
extensions of tax holiday
periods, or a complete close down which calls for a
complete renewal or a
restart of the whole process of the grant.
The best way for Nevisians to assess the extent of the
crippling concessions
that were granted by previous and present governments
is to ask for copies
of contracts that were made with foreign property developers
up to the end
of May 2009. The sting in the tail is that concessions
are not only granted to
property developers but also to contractors who are
employed to undertake
civil engineering and construction works.
The form of concessions in this area is exemptions from
the payment of
import duties on plants and machineries. One particular
contract went as far
as to say that at the end of their contractual period,
their used plants and
machineries are to be sold and then the responsibility
for the payment of the
import duties rests on those who purchase them. The
contractors then
departed Nevis with their money leaving Nevisians not
only to pay for the
plants and machineries but also the import duties.
The crippling concessions are automatically tied to
the undeclared
enterprise zone of Nevis. There seems to be an unofficial
handbook for
prospective investors in Nevis and it is well read and
understood by them...
The first clauses that they include in their contractual
negotiations deal
heavily on terms that are most favourable to them and
much to the
disadvantage to the Nevisian negotiators. This has to
be the case because
the contracts are always one-sided in favour of the
foreign investors. Look
at the contract for the sale of 600 acres of land to
the Newfound Company
and also to the contract dealing with the geothermal
energy with West Indies
Power. In both of these we have failed to extract enough
economic gains for
the long term benefit of Nevis.
If we had a properly constituted enterprise zone in
Nevis with all of the
statutory powers governing it, we would not have found
ourselves in this
guessing game that plagues us every time contracts have
to be drawn up
between us and a foreign investor.
We can look at ourselves as an island that has an undeclared
enterprise
zone that is artificially set up not by our parliament,
but by the executive
branch of past and present governments. The implication
of this state of
affairs is that governments change, and whenever they
change, the
executives change as well resulting in no uniformity,
consistency, stability
and certainty of the approach towards enterprise ones.
We cannot, should not, allow successive executives continue
to grant
unreasonable and excessive concessions to foreign investors
and
developers whose only motive is to extract maximum and
superfluous profits
from their investments at the loss of their employees
and to the detriment of
our treasury.
We need effective legislation to control enterprise
zones in Nevis that would
encourage the desired development in a future and prosperous
community.
The legislation would also act as checks and balances
on the entire field of
enterprise zone management and would eradicate the personal
element of
members of the executives on the grant of development
in the zones.
Neither the present government nor previous Nevisian
governments are
responsible for this informal approach to the elusive
enterprise zone of
Nevis, but they all follow one another to apply this
conventional and
inefficient procedure. It engenders a party orientated
approach that creates
a weak and vulnerable part of our system that foreign
investors prey upon.
In other words, Nevis is a very vulnerable prey for
foreign investors who are
prepared to squeeze every ounce of concession from the
land that falls
victim to them.
From an insular point of view, we want to maximise our
gains from the
services and facilities that we have on offer and the
only way in which we
could achieve this is to make sure that :-
(a) We build up a highly specialist team of negotiators
to match our foreign
counterpart and
(b) We work out precisely what we want and instruct
our negotiators to
achieve those requirements with minimal derogations.
It must be borne in mind that every foreign team of
negotiators has a
specialist agent whose job it is to provoke and upset
the other team. The
psychology behind this is that if you upset the other
side, you stand a better
chance of getting what you want because the other side
would not be able
to make rational decisions.
This is a mug’s game. Politicians are not trained
negotiators to weather
such tempestuous storms unless they had been specifically
briefed over a
sustained period of time to foil a trap no sooner than
the other side sets it.
It is evident that the enormous economic benefits that
foreign investors
derive from their investment in Nevis far outweigh those
that Nevisians
receive.
Their onslaught on the Caribbean is equivalent to the
economic and
predatory activities of the colonists of the 15th. 16th.,
and 17th. Centuries.
These tremendous economic imbalances are due to the
unequalled ability of
our negotiators to extract better bargains for the people
of Nevis. |
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