The need for durable economic growth and how to get there.

In terms of growth percentages of the GDP, Curaçao's economic performance over the last ten years has not been exuberant. On an average, the economic growth was barely 0.9 %. For 2013 and 2014 shrinkage of 2.3 % is expected, partly as a result of a large number of cost increasing measures (the so called "cold turkey" approach) that have been taken in the first quarter of 2013 in order to try to reduce the budget shortfalls and to establish a balance.

The IMF’s report Economic Outlook 2013 indicates that Curaçao’s economy is not keeping up with the countries in the Central or South American region. For 2013 – 2014 a growth of 2% - 3% is expected for the Caribbean region, 4% for Central America and 3% - 4% for South America. TAC’s most recent study "Strategies for Sustainable Long Term Economic Development in Curaçao" also concludes that for the past years, Curaçao has scored almost six times worse in terms of economic performance than comparable countries did.

Economic potential and comparative advantages

The development as described above is remarkable because Curaçao has the potential to excel in the economic area. This is apparent from the many comparative advantages of Curaçao, such as:

• Curaçao is part of the Kingdom of the Netherlands, therefore the Dutch legal system, including access to the Supreme Court and guarantee of Good Corporate Governance is applicable. There is also access to schooling, education and expertise.
  
• Relatively low National Debt (32% of GDP).
  
• Low inflation and stable currency.
  
• Reasonably good basic infrastructure (roads, sea- airport, telecom)
  
• Reasonably trustworthy production of electricity and water.
  
• Hardly any analphabetism and a well-developed feeling for languages.
  
• Advantageous geographical position in relation to natural calamities such as hurricanes and earthquakes.
  
• Relatively close to countries with large economic growth potential and increasing prosperity.
  
• Relatively good wages and salaries and social security.
  
• Preferential access to the European market.
  
• Presence of attractive facilities, including fiscal ones.
  
• Availability of attractive marine sources and climate, donor funds, the World
• Heritage Status for the city centre.
  
• A population that is increasingly critical and demanding with regard to the development of their country.

These advantages are already being applied partially and have led to the current level of prosperity. However, too many people are under the impression that these advantages have not yet been applied and used to their full potential. In other words, there is still a lot of room for further increase of the level of prosperity. This can be illustrated by some clear examples.

Tourism is an activity that fully complies with the theory of comparative advantages (sun, sea, beaches, friendly inhabitants, et cetera.). Further expansion of tourism in Curaçao is therefore a logical step.

Many activities have been identified to further expand and improve our tourist operations, among other things the development and construction of new hotels, villa’s, apartments, yacht marina’s, a second mega pier, water related (sports) activities, entertainment, et cetera.

Elements such as the legal system, reasonably good physical infrastructure, presence of a university, a scientific institution as CARMABI, trustworthy production of utility products and in particular the very good telecom connectivity are a strong basis for the development of a transnational or knowledge-based economy. In addition, we have an advantageous geographical location and good ties and relations with excellently developed countries. It is by all means worthwhile to convert the comparative advantages that Curaçao offers in this area into a booming economic sector.

Development, research and the application of alternative energy sources (wind, sun, cold water, et cetera) is another economic field with a lot of potential that fits the ambition to optimize the comparative advantages that Curaçao has to offer. Of course, these activities would also fit within the concept of transnational education.

The cultivation and the further expansion of existing sectors, such as the international financial services sector, international trade and logistics and ship repairs seem obvious, but require the necessary attention in order to timely introduce changes in order to remain competitive.

Oil refining activities have been an important part of Curaçao’s economy for decades and have been the flywheel for the current level of prosperity. The fact that the contract with PDVSA expires in 2019, evidently requires the necessary attention and decision making. The central question is: do we continue this activity, and if so in what form? And if not, what would be the alternative to compensate this loss of economic activity? The possibilities for oil and gas exploration complicate this process, but at the same time it creates opportunities.

This brief summary of potential (new) economic activities based on the comparative advantages that Curaçao has to offer, shows that these are more than the current (relatively small) population of Curaçao would be able to process. That is why we can conclude that there is enough potential for durable economic development.

The big question is why the comparative advantages are not used to their full extent in order to create durable labor, income, a good social security system, safety, and education – in short – durable economic growth and higher prosperity. The answer to this question has already been provided by various studies from experts, professionals and other individuals: a lack of (long term) vision, action and consistency. The VBC (Trade and Industry Association of Curaçao) acknowledges this analysis and strongly believes that durable economic growth can best be realized if politicians and the government create the necessary conditions in which the private sector can carry out its tasks in the most productive and structural way. These conditions are:

• Healthy government finance
  
• Small, efficient and quick-witted government apparatus
  
• Cost of doing business
  
• Innovation and consistent policy
  
• Living climate
  
• Combating of poverty
  
• Relations within the Kingdom
  
• Balanced Budget
  
• Integrity / Good Corporate Governance
  
• Tripartite Plan of Action.

Summary

Curaçao has sufficient potential to realize durable economic growth, to such an extent that financial and socio-economic problems that manifest themselves anno 2013 can be solved structurally. Budgetary shortfalls and increasing national debt, lack of financial means, large unemployment, insufficient income and pensions, deficient quality of education, health care, insecurity et cetera belong to the past. Economic growth creates means to be able to finance the necessary investments. Political will, commitment and consistency combined with the creation of the necessary conditions so that the private sector can carry out its activities is the ideal prescription to accomplish durable economic growth.

Action

The VBC has taken the initiative, together with the leaders of the political parties that form the coalition, to analyze the current financial and socio-economic situation in which Curaçao finds itself at the moment. Parties have unanimously reached the conclusion that Curaçao is in dire need of durable economic growth. This necessary and desired growth can be realized by promoting investments, both public and private. Parties have reached an agreement that they will do their utmost best to create the framework of conditions and circumstances to truly realize these necessary investments.

The agreements will be bundled in a covenant, after which they will be executed. Among other things, there is the intention of organizing an Economic Summit where the most important economic stakeholders will gather to determine which are the priority projects to invest in.

This plan of action will hopefully contribute to the restoration of confidence and to durable economic growth so that employment, a steady income for the people of Curaçao and general prosperity will increase.

H. Behr
President Curaçao Trade and Industry Association