by Kevon Browne
St. Kitts and Nevis (WINN): The absence of intra-regional travel continues to plague Caribbean countries as we continue to emerge from the restrictions of the COVID-19 pandemic that hampered travel for two years.
Tourism has made a rebound within the region from the international source markets; however, heads of government in the OECS have been calling for the need for reinvestment in intra-regional travel.
“Intra-regional travel is a regional public good. It’s a bridge. So by its very definition, we have to approach it as a region; we have to work together. I think what the countries are expressing is a certain level of anxiety and impatience with the process to get to a resolution,” said the Governor of the Eastern Caribbean Central Bank (ECCB), Timothy N J Antoine in an interview with reporters at the 2022 IMF and World Bank Group Annual meeting.
The ECCB Governor said several matters must be ironed out before a proper solution to intra-regional travel can be found.
“We have to look at a number of things; leasing of the planes is one, taxes and charges is another. The interlining agreements among airlines is another… There is a range of issues to be looked at when you think about the aircraft that we use based on the routes that are being used or selected… and that is why the work is not going on; the technical work to try to put together some kind of framework to guide these decisions. I think the good news is that most of our governments recognise that some government contribution is required. But it has to be done in a particular way. The private sector has a role, the government has a role, and a framework has to be developed to articulate the individual roles and responsibilities of private sector operators, airlines and governments. That is taking some time, but it has to be done.”
The ECCB Governor said that the bank is interested in and will play a supportive role in the work being done to solve the issue of intraregional travel; they are not the lead. The Caribbean Development Bank (CDB) is the lead in helping to create a framework to guide regional heads of government.
Meanwhile, Grenada’s Prime Minister Dickon Mitchell says his administration is prepared to lease an aircraft as a stop-gap measure if Caribbean governments cannot sort out the regional transportation sector by year-end.
However, one country alone cannot solve intra-regional travel, according to Hon. Camillo Gonsalves, Minister of Finance of St Vincent and the Grenadines.
The Finance Minister referenced the fall of LIAT, stating the regional airline carrier did not have enough buy-in from countries in the region that were serviced by LIAT, especially when things got difficult for the airline.
“Just like COVID killed a lot of people with pre-existing conditions, COVID killed LIAT, which had its own pre-existing conditions. And I think that we collectively, the governments of the region, probably didn’t effectively anticipate the day after COVID, when tourism would return, and LIAT wouldn’t be there to carry people around. The fact of the matter is, is that the previous structure, where the cost of supporting the LIAT was borne almost exclusively by Barbados, Antigua and Barbuda, and St. Vincent and the Grenadines, could not continue. Other countries could not be free riders in the process. Every country has to chip in if we’re going to have an effective regional travel solution.”
The Caribbean Development Bank is getting a general agreement from all the region’s governments that whatever replaces LIAT will have buy-in and support from all the countries this airline serves.
Gonsalves shared, “The CDB is currently finalising a study that tells us the following things; in this post-LIAT environment – what is the optimal aircraft we should use? What is the optimal number of aircraft we need? What is the optimal location of a hub for the aircraft? What are the likely profitable routes, and what are the routes that are unprofitable but nonetheless necessary? To what extent can the profitable routes subsidise the unprofitable routes, and what is the formula by which all governments will have to chip in to the upkeep of this regional airline?”
The CDB still needs to finalise the report. Upon completion of the report, the heads of government will deliberate on it very soon, according to Gonsalves. The SVG Minister of Finance said he hopes that OECS heads of government would be able to identify funding and a structure to have a replacement in mid-2023.
Gonsalves also reminded people of the notion floating around, suggesting that all regional governments pull out of leading the charge on intra-regional travel and let a private company take over. He said no private company was waiting in the wings to save us, so it fell again on regional governments.
“Don’t forget that a lot of people out there said get rid of LIAT. The private sector will come in, and the private sector will solve the problem, and as long as we get this government-funded, inefficient entity out of the way, the private sector will magically replace it. Well, we [saw] what happened. That was always a fallacy. And I think that a lot of people now realise that it was a fallacy and miss LIAT. Not to say LIAT didn’t have problems. But what we’re hoping now is that [at] this moment [when] we all appreciate the imperative for a regional travel solution, we [realise] that it is a public good. We realise that the private sector is not waiting in the wings to save us. That we are at a moment now where we can come together [and] agree that we have to bear this cost for this public good as a region and be guided by the decisions of the experts in terms of aircraft and hubs and routes.”
What about the issues of taxes for countries?
Comparisons have been made concerning the various taxes to enter countries in the region by air.
Gonsalves stated that people have suggested that governments should do away with taxes.
Then he raised an important question – how would the government supplement the revenues lost by waiving all entry taxes?
“Well, when the pandemic began, St. Vincent and the Grenadines was the first country in the region to have and then waive departure taxes and travel [taxes] for inter-regional travel. It’s an issue, but we can’t think that the solution is for the states to waive all revenue but then the same states to chip in revenue to support the aircraft on the back end. So it’s something that we have to measure, we have to evaluate. I know it’s a popular thing to say that taxes are the problem and some of the routes are overtaxed, but it’s not that simple. I think we need to do a route-by-route analysis on a country-by-country analysis about what the cost of the trip costs and what the cost of the taxes costs and come with a more nuanced thing than saying well, [the] government should throw away all the taxes. It was important to incentivise travel when no one was travelling. But as we bring this thing back, we have to think about how we’re going to fund it, and you fund things in our democracies by right tax measures and other revenue measures.”
The issue of intra-regional travel, while essential to the economic growth of countries in the region, will be a complex fix if governments continue to act in the interest of individual country progress.