The purpose of this research is to collect information on various aspects of St. Lucia, including the natural and social features, the political and economic situation, the commercial and investment conditions and the investment-related laws of the nation. Based on these data, we conduct an in-depth analysis to search for local investment niches, which are appropriate for Taiwanese businesses.
St. Lucia is situated in the southern part of the Caribbean Sea. The area of St. Lucia is 616 square kilometers and the population of St. Lucia is around 170,000. The local people are mainly Black Africans by race. Because of the colonial tradition, sugar production once played a vital role in the local economy, although in recent years it has been replaced by tourism. The tourists of St. Lucia mainly come from western countries. Tourism industry has become a leading industry of St. Lucia.
The economy of St. Lucia’s contracted in 2001, but since then has been expanding at an increasing rate. The main driving force was tourism industry. In 2006, the economic growth rate reached 5.0%. Following strong growth in 2006, the St. Lucia economy has begun to moderate in response to the slow down in the tourism industry. The economic growth rate has decelerated to 3.2% in 2007. Despite the solid economic performance in recent years, St. Lucia has encountered a number of economic problems which are high unemployment rate, deteriorating fiscal and trade unbalances, and elevated inflation rates.
In a way that is similar to other Caribbean nations, St. Lucia has tried hard to reform its economy from labor-intensive agriculture to a capital-intensive tourism industry. In addition to improving local physical conditions, the government has worked hard on the policy side to build up a friendly environment to attract foreign direct investment. The Ministry of Trade, Industry and commerce is responsible for foreign investment policy. The St. Lucia National Development Corporation (NDC) is in charge of foreign direct investment.
There are three major foreign investment related acts in St. Lucia: Fiscal Incentive Act NO.15, Special Development Area Act and Tourism Incentive Act. Under these regulations incentives to potential foreign investors are offered through tax holidays and other tax concessions. The maximum tax exemption period is 15 years.
In general, St. Lucia is well-developed in terms of infrastructure, with good air and marine transportation, and shows no signs of suffering an electricity or water supply shortage. This should be attractive for foreign investment, especially for the tourism-related industries.
According to our analysis, the most significant advantage of St. Lucia in regard to attracting FDI is its stable political condition and the proactive attitude of the government in facilitating investment, including ongoing improvements in the local infrastructure. Because of the remote distance between Taiwan and St. Lucia, Taiwanese businesses are unfamiliar with the country and therefore tend to overlook the potential investment opportunities in St. Lucia.
Our research results confirm that there are certainly some commercial opportunities there. In particular, tourism industry-related investments are actually full of potential. The growth of the tourism industry in the Caribbean area in recent years would further support our suggestion.
We have found that the local tourism industry in St. Lucia has started to exhibit a cluster effect that would enable several large, world class hotels/resorts to be established in its relatively small territory. The pioneering investments in this industry have given rise to apparent barriers to further investments in hotels/resorts.
By contrast, the supply chain of the local tourism industry is far from complete, and several important items, including vegetables, fruit, flowers, etc., are largely dependent on high cost imports.
Accordingly, we suggest that Taiwanese investments can seek to fill the gap in the local supply chain and provide related items and services. This kind of investment is not only profitable for Taiwanese investors, but is also beneficial to local economic development and can make the local tourism industry more complete. Particularly, we propose that Taiwanese businesses could invest in the tourism industry-related farms to supply tropical vegetables, flowers and fruits.
In addition to tourism related industry, we also recommend poultry and livestock production is another niche industry for the Taiwanese investors. This is because the high tariff rates, insufficient local supply and rising demand of these products. Furthermore, the Taiwan Technical Mission in St. Lucia will set up a shambles in 2008 and it will be very helpful in facilitating such investments.