Emsley D Tromp: Tourism in the Netherlands Antilles from a
macroeconomic perspective
Speech by Dr Emsley D Tromp, President of the Bank of the Netherlands Antilles (Bank van
de Nederlandse Antillen), on the occasion of the annual VERA Conference, Willemstad,
8 November 2007.
* * *
Good afternoon ladies and gentlemen,
It is with pleasure that I accept the invitation to address you this afternoon. Let me start by
wishing you a fruitful and productive seminar. Ladies and gentlemen, the theme of this VERA
conference as you know is "Accountancy and Tourism". While instinctively there does not
seem to be a relationship, at least in the conventional sense, between these two sectors as
the topic of this conference indicates, a careful analysis may lead you to conclude otherwise.
Usually when we deal with the topic of accountancy, on the one hand, we discuss the
standards, rules, and regulations in this professional field. The tourism industry, on the other
hand, is usually discussed in terms of its economic impact, marketing efforts, and recent and
future developments. Nevertheless, these two sectors have an important interrelationship.
Firms in the tourism sector rely on accounting and tax services provided by the accounting
firms. The tourist sector is also becoming an important client base for the accounting
profession. By enhancing their mutual understanding, it will allow both sectors to better serve
each other. It will also become possible to better structure one's services to meet both
present and future needs.
A growing tourism industry generates more business opportunities for the accounting firms.
Therefore, I do applaud the initiative of the VERA to organize this conference and to discuss
the developments within the tourism industry, and their implications for the accounting sector.
Today, I would like to add to this discussion by reviewing with you the developments within
the tourism industry in the Netherlands Antilles from a macro-economic perspective.
First, I will deal with the developments on the global and the regional levels, followed by a
discussion of the developments in the tourism sector in the Netherlands Antilles. Secondly, I
will make an attempt to shed some lights on the challenges and opportunities the sector is
facing and the necessary macro-economic environment conducive for the growth of the
tourism sector. Last, I will discuss the outlook for the tourism sector.
Tourism, ladies and gentlemen, is a thriving industry. As the world economy expands,
consumers are willing to spend an increasing share of their income on leisure activities like
travel. On a global level, the tourism sector has indeed benefited from the world economic
growth of recent years. According to the World Tourism Organization 846 billion persons
around the world traveled for leisure or business in 2006. This represents a growth of 5.4%
compared to 2005. (Figure 1 presents the development in tourism arrivals on a global level
over the period 1990-2005.) During the past 15 years, the tourism sector has been
expanding, except for North America. This lack of growth in the North American market, may
be the result of the 9-11 attack and its aftermath, and natural disasters that occurred during
the period 2000-2005. In spite of that, the tourism industry remains one of the largest and
fastest growing sectors of the global economy.
One of the key characteristics of the tourism industry is its contribution to foreign exchange
earnings. The World Tourism Organization estimates that the worldwide receipts from
international tourism reached US$733 billion in 2006. International tourism receipts increased
by US$57 billion in 2006. (In Figure 2, the development in international tourism receipts is
presented for the period 2002 - 2006).
For many countries, foreign exchange receipts from tourism are an important contributor to
economic development. It is widely acknowledged that the sector contributes to the economy
in terms of job creation, investments, and income for the government. In addition, the
industry has indirect spin-off effects across all other sectors of the economy. Therefore, the
tourism sector is an important development tool especially for developing economies.
Because tourism contributes to economic development and growth, national economies
compete against each other to obtain a larger share in international tourist arrivals by
exploiting their competitive advantages. In fact, traditional tourist destinations, such as North
America, Western Europe, Southern Europe, and the Caribbean, are facing increased
competition from emerging tourist destinations including Asia and the Pacific, Central and
Eastern Europe, Africa, and the Middle East. The increase in the number of tourist
destinations is a result of the higher demand for tourist destinations. Fueled by the strength
of the global economy, demand has emanated from new markets, such as China, India, and
Russia. (Figure 3 shows the market shares in international stay-over tourist arrivals by
region.)
The Caribbean has continued to experience growth in international tourist arrivals. In most
Caribbean economies, tourism expansion has played a key role in economic growth and
development. According to the World Travel and Tourism Council, the Caribbean is the most
tourism intensive region in the world. Evidence also suggests that in all Caribbean countries,
tourism is a highly labor intensive sector that provides opportunities for many small and
medium enterprises that produce or supply products and services to the industry.
The impact of tourism is especially strong in the retail trade, hotels and restaurants, and the
construction sectors. In most Caribbean economies it is a major generator employment and
foreign exchange. According to the World Travel and Tourism Council, tourism now
contributes to approximately 15 percent of the Caribbean's Gross Domestic Product and 16
percent of total employment.
However, growth in the Caribbean tourism industry has been lagging behind the global
expansion largely because of the small scale and vulnerability of Caribbean economies to
external shocks. In fact, growth in 2006 was partially offset by damages to the infrastructure
that were caused by hurricanes in 2005. Moreover, problems in attracting additional airlift to
the region also negatively influenced the regional expansion of tourist arrivals in 2006.
Tourism sector growth in the Caribbean region has also been hampered by some
weaknesses in the investment climate in the region. Because the tourism industry is a major
source of income for most Caribbean countries, any threats to the sustainability of the
industry must be addressed in a timely way. That is to say, we have to maintain a good
investment climate.
Ladies and gentlemen, a good investment climate will lead to investment, jobs creation, and
expansion of economic activities. More investments in the tourism industry will not only raise
activities in the sector, but will also stimulate additional investments in related sectors, and
hence contribute to economic expansion. Therefore, it is crucial that the investment climate
give the correct signals and encourage high quality and more productive private investment.
With regard to the investment climate, Caribbean economies face more or less similar
weaknesses. These weaknesses include:
- A qualitative mismatch in the labor market
- Inefficient public sector
- Infrastructure deficiencies
- Complex taxation systems
- Crime
- Macro-economic instability, and
- Natural disasters
Needless to say, the economies in the region should address these issues if they want to
enhance their investment climate and thereby stimulate growth of the tourism sector and the
economy.
Ladies and gentlemen, the Netherlands Antilles is no exception in the Caribbean. Similar to
most countries in the region, tourism is one of the most important sectors in the Netherlands
Antilles' economy.
In 2006, the Netherlands Antilles received about 2.6 million tourist visitors - stay-over and
cruise - which is a growth of 36 percent compared to the year 2000. Visitors to St. Maarten
represented 73 percent of total visitors in the Netherlands Antilles, followed by Curaçao with
22 percent and Bonaire with 5 percent. (Figure 4 shows the development in stay-over tourist
in Curacao, St. Maarten and Bonaire.) As illustrated, the number of stay-over visitors in the
Netherlands Antilles has increased on average by 1.3 percent during the past six years.
Meanwhile, Curacao's stay-over tourism has risen on average by about 3 percent per year
during this period.
The number of cruise tourists has also been growing in the Netherlands Antilles. (Figure 5
presents the development in cruise tourism for each island for the period 2000-2006.) The
cruise tourism market is the largest in St. Maarten, which accounts for 79 percent of total
cruise tourism, followed by Curaçao with 18 percent and Bonaire with 3 percent.
The tourism industry contributes directly and indirectly to the economy. Tourism expenditures
stimulate economic activity and create additional business sales, employment, and
household income, and government revenues. (In Figure 6, the share of tourism receipts in
total foreign exchange revenues is depicted.) Tourism receipts account for 39 percent of the
total foreign exchange revenues from the exports of goods and services. (Figure 7 presents
the share in foreign exchange revenues from tourism in Curacao, St. Maarten and Bonaire.)
St. Maarten has the largest share of foreign exchange receipts from tourism, followed by
Curaçao and Bonaire. Tourism is the main foreign exchange earner, whereas bunkering, and
re-exports by the free-zone generate about 15 percent of the foreign exchange earnings.
(Figure 8 illustrates the development in foreign exchange revenues from tourism in Curacao,
St. Maarten and Bonaire over the period 2000-2006.) Foreign exchange revenues from
tourism over the period 2000-2006 have increased on all islands of the Netherlands Antilles
in the past six years.
Tourism has an influence on several sectors in the economy, but is felt mostly in the hotels &
restaurants and wholesale & retail sectors.
Based on the weights of tourism-related activities in these sectors we estimated that the
tourism industry contributes approximately 7 percent to Gross Domestic Product of the
Netherlands Antilles. Meanwhile, tourism accounts for about 6 percent of GDP in Curaçao.
According to estimates of the World Travel & Tourism Council, the tourism industry accounts
for approximately 4,500 jobs, representing 8.3 percent of total employment in Curaçao.
Tourism's share of total employment is greater than its share in gross value added. This is
because on average, tourism tends to be more labor-intensive than other forms of economic
activity.
When tourism-related businesses purchase goods and services from other domestic
companies, we speak of the indirect impact of tourism on the economy. Moreover, individuals
employed at the hotels, restaurants, and other tourism-related businesses will spend their
income locally, which will create more jobs and spending in the economy. The combination of
the direct and indirect impacts of tourism creates a spin-off effect in the economy contributing
to a higher level of growth.
Like most economies in the region, the Netherlands Antilles is characterized by some
weaknesses that negatively influence the development and growth of the tourism sector.
One of the drawbacks on the tourism industry is the qualitative mismatch in our labor market.
This mismatch is common on all the islands of the Netherlands Antilles.
The main reason for the structural unemployment is not so much the absence of jobs, but a
qualitative mismatch between labor supply and demand. However, according to the recent
vacancy survey by the Central Bureau of Statistics, there is a high demand for workers with a
low level of education, such as the MAVO, LBO, and VSBO. Fifty-two percent of the job
openings require individuals with a low level of education. On the other hand, the majority of
the unemployed jobseekers have a low level of education. Thus, a paradoxical situation
seems to exist in the labor market, as the high unemployment often coexists with vacancies
in the low skilled labor-intensive occupations. Lack of motivation and or loss of skills due to a
protracted period of unemployment may be the underlying causes.
As we all are very aware, tourism depends heavily on the skills level and professionalism of
the labor force to make the sector more productive and competitive. Therefore, human
resources requirements in the tourism sector are a critical factor for the industry. Moreover,
the tourism sector requires more flexible labor laws to account for seasonality, daily flows
and the specific characteristics of an industry that operates on 24-hour 7-days a week basis.
Ladies and gentlemen, private and public partnerships are crucial to shape and ensure a
sustainable future growth for one of the world's largest industries - tourism. Due to the
economic importance of the sector, the government has a key role as a facilitator and
mediator rather than a financier. In the past, our government has also taken the role of
financier by offering grants or even taking over the management of hotels in order to
safeguard employment in the tourism industry.
It is clear that the public and private sectors have different interests and roles in the tourism
industry. Yet there is a strong need for them to complement each other through partnerships
at all levels to exploit the tourism sector's full potential. The private sector can and must play
the driving role in tourism development, ensuring quality products and competitive services
geared towards rapidly changing demand, while the government needs to show leadership
by stimulating and facilitating investment, streamlining and clarifying regulations, and
developing the much-needed infrastructure and human capital.
Public - private partnerships have proven to be an effective tool in the development of many
industries. The Netherlands Antilles has the potential to realize the economic and social
benefits from tourism if the government and the industry join in efforts to address the
obstacles and constraints that hamper the further development of the tourism sector.
Ladies and gentlemen, to improve our investment climate, the government should tackle its
weaknesses, thus creating an environment conducive to investment, including investment in
the tourism sector. Sound public finances are indispensable for sustained economic growth,
the creation of jobs, and social progress. Fiscal discipline is not only needed for
macroeconomic stability, but also to preserve funds essential for public investment, especially in
education, infrastructure, and social safety nets.
Another weakness of our investment climate is the current administrative barriers or high
degree of bureaucracy.
In this respect, it is important that the government streamline its administrative procedures by
removing all unnecessary bureaucracy and simplifying the procedures for obtaining business
and work permits and business visas.
The other policy area that needs our attention is the tax system, which also plays an
important role in shaping the investment climate. In my view, the new tax system of the future
country of Curacao should be simple and transparent. These reforms are needed to
encourage consumer spending and investment by raising disposable income that is by
lowering the marginal tax rate. This increase in disposable income will lead to more
economic activities, which will broaden the tax base and hence raise sufficient revenues to
cover government expenditures. In addition, a more effective and efficient assessment and
collection system should also be an important component of the new tax system, since it can
ensure budget neutrality in the face of the reduction in direct tax rates.
Another important issue is to balance the expansion in tourism with the protection of our
natural resources. In recent years, researchers around the globe devoted quite some time to
raise our awareness about achieving a sustainable tourism expansion. Preserving nature
and launching eco-projects are the latest trend. This trend has also reached Curaçao, as
eco-projects and environmental friendly projects are being developed. Furthermore, it is
essential that we develop and promote our national heritage designations, which will further
improve our tourism environment.
Ladies and gentlemen, as can be appreciated, the tourism industry represents an important
pillar of the Netherlands Antilles economy.
It has registered important growth during the last few years. In order to sustain that, we have
to continue to invest in our investment climate. Moving forward, we can also conclude that
the long-term prospects of the tourism industry look promising. According to the World Travel
and Tourism Council, global tourism is projected to expand by approximately 5 percent
annually over the next seven years, while the tourism sector in the Caribbean area is
expected to grow at 4 percent annually. As part of the Caribbean area, the Netherlands
Antilles tourism sector will undoubtedly share in this growth.
Therefore, it is safe to say that the firms in the tourist sectors will continue to increase and
will increasingly become important players in our economy. To the accounting profession it
means more and hopefully financially healthier clients. The need to have more people in the
accounting profession with increased knowledge of this sector is becoming self-evident.
Seminars like this one, is a very important step in meeting this objective. It is with this in mind
that I once more would like to congratulate the organizer of this seminar who took the
initiative to address this important topic for our economy.
As we all know, on the constitutional scene, the Netherlands Antilles is due to be disbanded
on December 15, 2008. This change in status will also bring its pressure to bear on the
prospects for the tourism sector. One of the main changes accompanying the new
constitutional status of Curaçao is the elimination of the double layer of government. This will
reduce the administrative barriers in the government apparatus considerably, facilitating the
decision-making process of policies and projects.
The outlook for Curacao's tourism industry as a consequence of this may be substantially
enhanced. A continuous and increasing flow of investment is already noticeable in this
sector, with the numerous promising projects in the pipeline. The World Travel and Tourism
Council estimates average annual gains of 6 percent in the total employed in Curacao's
tourism sector over the next seven years. I hope sincerely that the benefits of this expansion
will sustainable and will higher living standards for all especially those that were marginalized
in our society.
Ladies and gentlemen, I thank you for your attention.
International tourist arrivals
(% change over 5 year period)
Figure 1
35
World
20 Caribbean
Europe
North America
5
-10
1990/95 1995/00 2000/05
International tourism receipts
(% change)
Figure 2
14
12
10
8
6
4
2
0
-2
-4
-6
2003/02 2004-03 2005/06 2006/05
World Europe North America Caribbean
BIS Review 134/2007
Market share of
international tourist arrivals (%)
Figure 3
2.6 2.6 2.5 2.3
10.7
13.4
15.1
16.4
16.2 19.8
12.9 15.4
60.2
58.0 57.4
54.4
1990 1995 2000 2006
Europe Asia & the Pacific North America Caribbean
Stay-over tourism: 2000 - 2006
(% change)
Figure 4
25
20
15
10
5
0
-5
-10
-15
-20
2000 2001 2002 2003 2004 2005 2006
Curacao Bonaire St. Maarten
Cruise Tourism: 2000 - 2006
(% change)
Figure 5
50 250
40
200
30
150
St Maarten (L)
20
10 100
0
Curaçao (L)
50
Bonaire (R)
-10
0
-20
-30 -50
2000 2001 2002 2003 2004 2005 2006
Share in foreign exchange
in the
Netherlands Antilles
Figure 6
Re-exports
Refining Other services
freezone
9% 20%
12%
Transportation
Bunker
6%
3%
In'l financial
bussiness sector
Tourism
11%
39%
Share in tourism receipts (%)
Figure 7
63.3
64.5 64.1 63.9
66.9 66.6
67.8
28.1 26.1 27.2
27.0
23.9 24.7
24.3
9.8
7.9 8.6 8.5 9.2 8.8 8.9
2000 2001 2002 2003 2004 2005 2006
Bonaire Curacao Windward Islands
Tourism receipts: 2001 - 2006
)
(% change
Figure 8
30
25
20
15
10
5
0
2001 2002 2003 2004 2005 2006
-5
-10
Bonaire Curacao Windward islands