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Facilitating Investment in Antigua and Barbuda . Domestic policies to unlock global opportunities in the tourism sector Corthwright Marshall Ministry of Tourism & Civil Aviation. Introduction.

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Facilitating investment in antigua and barbuda

Facilitating Investment in Antigua and Barbuda

Domestic policies to unlock global opportunities in the tourism sector

Corthwright Marshall

Ministry of Tourism & Civil Aviation


Introduction
Introduction

“Foreign direct investment in Antigua and Barbuda has declined from the 1980s to the early part of the 21st century. According to IMF International Finance Statistics, during the 1980s, the FDI to GDP ratio reached a little more than 10 percent; more than 5 percent in the 1990s; and 5.1 percent in 2000-2002. But, one must take into account that the challenge is not only to attract FDI, but to use the investment efficiently and towards developing other productive sectors. Attracting private investment will require an improved investment climate with better government promotion and facilitation services, less government red tape, generally higher quality service, a more attractive set of investment incentives and a better investment law. Conceptually, the government can provide all of these”.

Antigua and Barbuda: strengths and weaknesses analysis of international trade competitiveness. (USAID January 13, 2006)


Travel and tourism
Travel and tourism

  • travel and tourism industry is the world’s fastest growing industry and the world’s largest employer

  • tourism is the most important economic activity in Antigua and Barbuda

    - employing an estimated 40 percent of the workforce

    - accounts for 85% of foreign exchange earnings and 70% of GDP

    - responsible for 52% of total investments


Tourism global market place

the global market place is extremely competitive and Antigua and Barbuda’s market share is very small

globalization makes it increasingly important to get the “investment

climate” right

Tourism – global market place


Gross investment across caricom 1985 2003
Gross Investment across Caricom- 1985 - 2003 and Barbuda’s market share is very small


Tourism fdi inflows 1998 2002
Tourism FDI inflows, 1998 - 2002 and Barbuda’s market share is very small


Gdp growth and gross investment to gdp ratios 1995 2004
GDP growth and Gross Investment-to-GDP Ratios, 1995-2004 and Barbuda’s market share is very small


Fdi to gdp ratios 1980 2002
FDI to GDP Ratios, 1980-2002 and Barbuda’s market share is very small


Investment and growth 1990 2003
Investment and Growth, 1990-2003 and Barbuda’s market share is very small


Investment trends in the caribbean
Investment trends in the Caribbean and Barbuda’s market share is very small


What is the investment climate
What is the “investment climate”? and Barbuda’s market share is very small

  • “the policy, institutional, and behavioral environment, both present and expected, that influences the returns and risks associated with investment” (Stern 2002)

  • three broad sets of factors that make up the investment climate include:

    • macro fundamentals— macroeconomic stability, economic openness, competitive markets, social and political stability

    • governance and institutions—transparency and efficiency in regulation, taxation, and the legal system; a strong and well-functioning financial sector; labormarket flexibility; a skilled labor force

    • infrastructure—transportation (roads and ports), telecommunications, power and water supply


Investment climate
Investment climate and Barbuda’s market share is very small


Tourism investment climate
Tourism investment climate and Barbuda’s market share is very small


Ratings of the investment climate in the caribbean
Ratings of the Investment Climate in the Caribbean and Barbuda’s market share is very small


Facilitative environment role of the government

the role of Government is to create the enabling environment that establishes an attractive climate for investment

this relates to all aspects of doing business, ranging from regulations governing the establishment of companies to the ease with which profits can be repatriated

Facilitative environment – role of the Government


Tourism related legislation
Tourism related legislation that establishes an attractive climate for investment

  • Hotels Aid Act

  • Income Tax Act

  • Income Tax Amendment Act 2003

  • Cricket World Cup Projects (Incentives) Act 2005

  • Additional Incentives


Hotels aid act
Hotels Aid Act that establishes an attractive climate for investment

  • grants exemption from customs duties on all imports of building materials, machinery, equipment, and furniture for the construction or extension of hotels. An extension usually has to be a minimum of ten rooms to qualify

  • Drawback on the purchase of goods in Antigua and Barbuda or the exportation of building materials and articles of hotel equipment


Income tax act
Income Tax Act that establishes an attractive climate for investment

  • grants a tax holiday of five years to a hotel

  • additional right to write off against subsequent profits 20 percent per annum of the capital cost of the hotel over any five of the eight years following the tax-holiday period


Income tax amendment act
Income Tax Amendment Act that establishes an attractive climate for investment

  • license pursuant to Hotels Aid Act

  • exemption from payment of corporate income tax

    • Construction of new hotel

      minimum of 100 bedrooms – 25 years

    • extension of existing hotel

      30 – 49 bedrooms – 7 years

      50 – 99 bedrooms – 15 years

      100 or more bedrooms - 25 years

    • exemption takes effect from the year of assessment next to the year in which the completion or extension of the hotel is reported, in writing, to the Commissioner


Cricket world cup projects incentives act 2005
Cricket World Cup Projects (Incentives) Act 2005 that establishes an attractive climate for investment

  • a corporate income tax holiday for a time period based on the number of rooms for the event

  • relief on stamp duties, property taxes and non-citizen landholding licensing fees based on the total number of rooms for the event

  • a percentage tax credit for financial institutions based on the amount of investment

  • waiver of customs duty and consumption tax on the imports of building materials, equipment, appliances, and vehicles used for the event

  • the right to repatriate all capital royalties, dividends and profit free of all taxes


Cricket world cup projects incentives act 20051

72 new projects that establishes an attractive climate for investment

approximately EC$203 million

majority locally owned

over 1000 rooms

Cricket World Cup Projects (Incentives) Act 2005


Additional incentives
Additional incentives that establishes an attractive climate for investment

  • a guaranteed number of work permits are provided for foreign nationals

  • acquire real estate property, subject to the acquisition of a license, as set out in the Non-Citizens Land Holding Regulations Act

  • exemption from withholding taxes on interest payments

  • ready repatriation of capital and profits

  • trade bloc memberships include: Caricom, Lome Convention, CBI, and EU-Caribbean Economic Partnership Agreement


Investment climate key factors for investors strengths

government’s positive attitude and willingness to grant incentives

general location of the country, with extended coastlines and safe harbours

natural harbors have the potential to attract high-end tourism in yachting

Investment climate: Key factors for investors - strengths


Investment climate key factors for investors strengths1

positive attitude of local persons and businesses incentives

stable, democratic government

stable and strong regional currency

good international communications

proximity to the U.S.A

Investment climate: Key factors for investors - strengths


Investment climate key factors for investors strengths2

well established local and foreign private sector incentives

competitive with other countries world wide

national language (English)

“Antigua and Barbuda” is a brand name known in tourism around the world

Investment climate: Key factors for investors - strengths


Investment climate key factors for investors strengths3

a good pool of skilled financial and managerial professionals

educated and reliable workforce

government-private sector dialogue

No significant barriers to trade in tourism services

Designation under the CBI, Canada’s Caricom Program, EU EAP, etc.

Investment climate: Key factors for investors - strengths


Investment climate key factors for investors opportunities

cultural and heritage tourism professionals

marine and cruise tourism

Accommodation sector

cuisine tourism

agro-tourism

Investment climate: Key factors for investors - opportunities


Investment climate key factors for investors opportunities1

medical tourism professionals

sports tourism

religious tourism

artifacts and handicraft production

other tourism related services

Investment climate: Key factors for investors - opportunities


Investment climate key factors for investors weaknesses

weak physical infrastructure professionals

high costs of doing business

Absence of land use policy

Government red tape

Customs and trade regulations

Investment climate: Key factors for investors - weaknesses


Investment climate key factors for investors threats

crime and insecurity professionals

increasing competition from destinations offering better value for money

-Cuba and Dominican Republic in the Caribbean

-India in Asia

Investment climate: Key factors for investors - threats


Investment objectives
Investment objectives professionals

  • to institute investment incentives supported by efficient enabling procedures guaranteeing that Antigua and Barbuda’s tourism sector becomes an exciting, risk reduced investment opportunity for international and domestic investors alike

  • To maintain quality products as well as expanding the economic impact of the sector

  • To create a high profile image of the country

  • to encourage existing properties to expand and move up the value chain, and so raise the image of the destination


Tax concessions justification
TAX CONCESSIONS - justification! professionals

  • a central component of the development strategy

  • commonplace in developed as well as developing countries

  • justified against the backdrop of increased competition in the tourism market and the reported threat by firms that they would leave otherwise

  • granted to promote investment or to achieve defined social objectives

  • granted not only to newly-established enterprises but also to well-established firms


Efficacy and cost effectiveness of concessions
Efficacy and cost effectiveness of professionals concessions

  • tax concessions are not among the key determinants of investment

  • tax concessions were not even in the top 15 of the 40 areas that firms considered critical for their investments (see FIAS, 2004; and World Bank, 2005)

  • key determinants of investment

    -telecommunications

    - power supply

    - political stability

    - a favorable attitude towards FDI

    -labor productivity


Revenue costs of concessions
Revenue Costs of Concessions professionals

  • Revenue forgone from Import Related Taxes may have exceeded 8 percent of GDP in 2003



Revenue costs of concessions corporate income tax cit holidays
Revenue Costs of Concessions - Corporate income tax (CIT) holidays

  • Revenue forgone from CIT holidays exceeded 5 percent of GDP in 2003


Friendly facilitative environment for investment
Friendly facilitative environment for investment

  • Policy framework

    -Tourism Master Plan

    -Antigua and Barbuda Tourism Strategic Policy and Plan (2005-2009)

    -Preparation and promotion of product profile

    -Tourism Manpower needs assessment and plan

  • Fiscal and investment legislation

    -Tourism Development Act (proposed)

    -Cricket World Cup Projects (Incentives) Act 2005


Friendly facilitative environment for investment1
Friendly facilitative environment for investment for investment

  • Regulatory initiatives

    -open market

    -privatization of state enterprises

    -removal of exchange controls

    -free repatriation of profits and dividends

  • Institutional framework

    -Antigua and Barbuda Investment Authority as an effective one-stop shop

    -Antigua and Barbuda Tourism Authority

    -micro and small business development authority

    -Antigua and Barbuda Sport Tourism alliance (ABSTA)

    -Investment Promotions Workshops

    -Re-structuring of the Ministry of Tourism


Friendly facilitative environment for investment tourism development act

Develop a new Tourism Development Act to replace the Hotel Aid Act

Tourism Development Act

-initiative to create a more facilitate tourism investment climate

-extend the scope and reach of the activities

Friendly facilitative environment for investment – Tourism Development Act


Tourism development act scope

Approved activities Aid Act

-hotels including conference areas

-other tourism facilities

-water-based activities

-tourism projects highlighting heritage and natural environment

-arts and cultural investments

-agricultural-based tourism related activities

Tourism Development Act - scope


Tourism development act incentives

income tax concessions in respect of write-off of interest Aid Act

accelerated deduction of expenditure

interest rate subsidy

equity financing

training

marketing

Tourism Development Act -incentives


Antigua and barbuda investment authority one stop shop
Antigua and Barbuda Investment Authority – Aid Act “one-stop shop”

  • at present the government unit (Industrial Development Board) responsible for investment has only few staff members, is isolated from upper levels of government, and has limited resources

  • the new authority should develop its own website to provide information on the investment environment in Antigua and Barbuda so as to promote the country as a destination for investment, in general, and in tourist-related investment in particular


Antigua and barbuda investment authority one stop shop1
Antigua and Barbuda Investment Authority – Aid Act “one-stop shop”

  • Simplify the process of investing in Antigua and Barbuda

  • Level the playing field for all investors –domestic and foreign

  • Remove the discretionary and discriminatory character from the process

  • Provide a focused and inclusive “one-stop” mechanism for the promotion and coordination of all investment proposals

  • Advise on government’s investment policy

  • Ensure greater transparency in the granting of concessions


Antigua and barbuda investment authority one stop shop2
Antigua and Barbuda Investment Authority – Aid Act “one-stop shop”

  • Identifying investment opportunities

  • Providing information/data on the social, political and economic environment in the country

  • Explaining incentive legislation and the benefits available to investors in the tourism and hospitality sector

  • Liaising with government departments and agencies

  • Reviewing investment proposals and advising as to their general acceptability within the context of the Sustainable Tourism Development Plan of the Ministry of Tourism


Antigua and barbuda investment authority one stop shop3
Antigua and Barbuda Investment Authority – Aid Act “one-stop shop”

  • Facilitation of the approval process

  • Provide full protection and security to investors in accordance with international standards

  • Tasked with investment monitoring, and more importantly investment facilitation to ease the passage of investors through the regulatory system

  • Tasked with data collection, policy analysis, and policy advocacy from the investors’ point of view


Customs renewal programme
Customs Renewal Programme Aid Act

  • improvement of the administration and operation of the Customs Department

  • improve the services offered to customers by the Department

  • reduce private sector costs


Antigua and barbuda tourism authority
Antigua and Barbuda Tourism Authority Aid Act

  • private sector oriented and led by a board comprising senior level hotel managers, general managers and CEO’s from the industry

  • a sustainable, identifiable source of revenue (from both sectors) with an established formula that apportions government revenue e.g. room tax, VAT or incentives contributions


Antigua and barbuda tourism authority1
Antigua and Barbuda Tourism Authority Aid Act

  • the role, responsibilities, functions, powers of authority and financing should be clearly defined

  • executing agency for the marketing and allied research functions for the marketing and promotion of Antigua and Barbuda as a tourist destination

  • Establish a high level public/private sector partnership to drive tourism development

  • autonomous statutary body with a private sector orientation


Summary of actions required
Summary of actions required Aid Act

  • rationalise tax regime in relation to tourism enterprises

  • assess financing needs of small and medium tourism enterprises

  • review investment incentives

  • preparation and promotion of product profiles for tourism sector

  • convene Investment Promotion Workshop to identify fiscal regime and package of incentives to attract investment, identify investment opportunities


Summary of actions required1
Summary of actions required Aid Act

  • formulate investment promotion plan

  • develop investment plan and strategy

  • streamline investor access to information and the subsequent processing of that information is done through a single agency

  • undertake promotions and Monitor and evaluate

  • benchmarking the country against other countries in the region in how it is perceived by foreign investors as an investment location

  • establishment of investment promotion agency-ABIA


Summary of actions required2
Summary of actions required Aid Act

  • establish coordinating mechanism with various stakeholders

  • review investment opportunities, potential targets, promotions strategy, incentives regime, financing options, and monitoring and evaluation options

  • establish incentives regime

  • identify targeted investors

  • develop a high profile investment image of the country

  • put in place fast tract system to eliminate bottlenecks for approvals


Conclusion

Aid ActInvestment is critical for further development of the tourism sector, so it is important to understand what drives investment. In this respect, we need to have an in-depth understanding and knowledge about the market - what investors are looking for; about competitors – what alternatives investors have; as well as our strengths, weaknesses, opportunities and threats.

It is the responsibility of the Ministry to ensure that the benefits of investments, both foreign and domestic are maximized in a way, that address the needs of the sector, the national economy and the local population”.

Conclusion


Thank you
Thank you Aid Act


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