‘Complexity
is your enemy.
Any
fool can make something complicated.
It is
hard to make something simple.’
Richard Branson
I.
Introduction
On the whole, Curacao’s GDP has grown at rates that
are significantly below the regional or world average over the past 10-18
years.[1]
Often when speaking about possible avenues for economic growth in Curacao, we
start with macro-economic tenets, broad visions and goals. All too often that’s
also where we stop. Unfortunately that is not where money is made, for a
country or its people. Money is made at the micro-economic level.
As a business strategist it is my job to find
avenues for growth given the organization’s strengths and weaknesses, and to
make those as concrete and simple as possible for those in the organization to
understand and implement. I set out to do the same with the Curacao economy, an
organization smaller than a Fortune 500 company. The following is what I came
up with. Basically, the argument is that if we can find 10 projects to each
produce ANG 5 million a year extra added value (export) , we will achieve a
growth of 1% above the ‘normal’ average.
II.
Assumptions
a.
Curacao’s
GDP is ANG 5.5 billion (in Dutch: miljard), a little over USD 3 billion
b.
To
grow 1% over and above the average 0.6%[2] that the
Curacao economy has grown over the past 10-18 years, we need ANG 55 million in
extra economic activity every year.
c.
The
tourism multiplier is 1.6.[3] For
simplicity, we assume that the overall multiplier for the Curacao economy is
1.8. So, we need about ANG 30 million in new economic activity every year to
grow the GDP with 1%.[4]
d.
Let’s
say that, all else equal, we are totally safe with 10 new initiatives/year with
ANG 5 million (USD 3 million) each in new added value (i.e. export), for a
total of ANG 50 million (USD 30 million) extra added value annually.
e.
Added
value basically means that a company’s operating expense, interest and profit
are left or paid in Curacao (and, in this exercise, paid for by foreigners).
These would include payment for wages, utility, insurance, taxes, rent, bank
interest, dividend, etc.
f.
Imports
enter the equation as a ‘negative’ factor. For every extra dollar in import the
required extra export increases by the same dollar. So it is best to
concentrate on services (which require no import) and on ventures where the
imports have already taken place. For instance, a hotel has already been built
with imported raw material. Maximizing its direct revenue or any other revenue
it may spur, entails little import or capital outflow.
III.
The question is:
1.
Which of the FDI leads generated
over the past 2 years by the Ministry of Economic Affairs, the Ministry of
General Affairs, the Curacao Chamber of Commerce and Industry, the Curacao
Airport Holding, the Curacao Tourism Bureau, etc. are likely to generate ANG 5
million per annum or more from foreign sources?
2.
Which local companies/sectors
can we help generate an extra ANG 5 million/annum or more in export added
value.
3.
What, if any, are the obstacles
to making either of these a reality. What is needed to remove any obstacles?
We
just need 10!
IV.
Conditions
1. All ideas for initiatives must fit within the general
vision of tourism, hub, business and international financial services for
growth. Ideas for hub and international financial services are not included
since the author is unfamiliar with their business models.
2. Note that if we just get more businesses catering to
locals, regardless of how innovative they may be, money just changes hands
locally. There is no influx of more money, so the economy will grow only
minimally.
V.
What produces ANG 5 million
(USD 3 million) in added value?
1.
150
foreign students each spending USD20.000/year on Curacao.
Two semesters at a local medical school cost at least USD 11,000 in tuition
alone. According to The Chronicle of Higher Education, in 2009 St. George’s
Medical School in Grenada graduated 640, while Ross University School of
Medicine in Dominica graduated 754 medical students.[5]
What do we need to do? We need to sign a letter to ‘recognize’ that these
schools exist in Curacao. We do not need to accredit them. We just need to
recognize that they exist, much in the same way a notary attests to the
existence of many other things. This is needed so that students can get student
loans from their respective governments.
2.
200 cosmetic surgeries at USD15.000/patient. A friend spent USD 30.000 in Colombia on surgery.[6] Did you
know that U.S. surgeons take U.S. patients to Costa Rica for surgery in
operating theatres set up in luxury hotels?[7] We must
amend laws to make this possible and train nurses to specifically nurse
clients, who are likely to pay for the treatment themselves, after elective
surgery.
3.
40 extra tickets/day sold by local airlines to
foreign visitors for USD200/ticket.
4.
In
2011, visitors spent close to 3.2
million nights in Curacao. If each left 1 dollar more per night, e.g. as a
tip for the chambermaid, we would have reached the goal of USD 3 million. We
must incentivize visitors to leave that extra tip for the chambermaid and train
the chambermaids to suggest it. I still have a picture of the Martha’s Vineyard
chambermaid, the first ‘suggestion’ I received almost 30 years ago while in
college.
5.
Less than USD10 more spent (preferably in services) by
each of the 400.000 stay-over tourists on Curacao. That is one extra cocktail. We must train waiters to
up-sell. In Barbados, the National Institute for Service Excellence provides these types of training.
6.
The same cocktail for each of the 400.000 cruise
tourists, please.
7.
In the United States, the guideline for tipping has long
been between 12% and 18%. If we
raise our tipping suggestion from 10%, we will make between 20% and 80% more on
tips.
8.
5,000 visitors leaving USD600 net at festivals and carnivals
every year. In 2011, 4,930 visitors came to the Curacao
North Sea Jazz Festival. They left USD1,717 (gross) per person.
9.
One in eight (12%) visitors, 100.000 total,
stay-over or cruise, buying one or more locally made pieces of art or craft for
USD 30 total, like a Chichi. We must help the sector produce and
merchandize their goods. The same holds true for beach and ‘in-city’[8] massages
with the healing power of laraha and datu.
10.
250 extra conference visitors per month, each leaving
USD 1,000 on Curacao. Dr.
Myles Monroe, CEO of Bahamas Faith Ministries International Fellowship, who
landed on Curacao in his private jet for some motivational workshops some years
ago, has made a business out of getting faith in the Bahamas, with ongoing conferences for every demographic. CTB
has a department to attract MICE. Many of the 20.000 local business owners and
professionals, who are agents or members of global organizations, can also make
a conscious effort to get their meetings and conferences to Curacao.
11.
15
extra ship repair jobs at USD 300.000 (parts are imported). I do not know the
average revenue of a ship repair.
12.
15 extra houses of USD 350.000 sold to foreigners (much of the construction material is imported). We
must adjust the regulations to enable these foreigners to spend more than 6
months on the island without having to leave and ask for a new permit. Wouldn’t
we rather have the ‘penshonado types’ stay 12 months?
13.
100 consultants getting foreign assignments for USD
30.000 per year.
Provide easy e-zone status so they bring the earnings home. Disclosure: I am a
local consultant. I have the required industry knowledge.
14.
Waste
cardboard sells for about USD 100 per ton.[9] If we ship 30.000 tons/year we get USD 3million
in foreign revenues. Elsewhere, cardboard is being stolen! If we don’t have
enough we can also sell mixed waste glass for USD30 per ton or add Bonaire and
Aruba’s waste.
15.
Give ANG 5million in jobs to foreign
consultants, medical clinics (medische uitzendingen), etc., and the required
added value rises by the same amount. We must make a conscious effort to
reduce these numbers, especially when foreign cooperation (SEI) is winding down. The donor money we were getting
ads to our GDP and reduces the donor’s. It is only fair that they donor would
want to get some of it back. But, if the funder is local, a conscious effort
should be made to keep the funds locally, and in the process, increase local
expertise.
16.
If
5,000 immigrant workers each send ANG 250/month home, the required number rises
with ANG 15 million! According to the Central Bank of Curacao and St Maarten,
transfers out of Curacao due to worker remittances reached ANG 80 million in
2011.[10] When attracting
new industries or employees we should focus on those who are most likely to
spend their earnings in Curacao rather than send it off-island.
VI.
How can we organize to achieve this?
1.
We must agree that it is easier
and cheaper to use existing resources to capacity than to attract new ones. The
existing resources have already been sold on Curacao and are invested here. If
these (local or foreign) existing resources do well, they will likely attract
more. If they do badly, that sends a negative message. One can also argue that
existing resources need to be treated as loyal customers.
2.
The Clinton Global Initiative
asks each (invited) member – business, government and NGO leaders, Nobel
laureates, philanthropists, etc. - to make a concrete commitment to solve a
global issue (in one of 12 broad tracks), in a bold innovative way. It’s not a
structured program. Each year the
members gather to measure their progress, network, share knowledge and be inspired.
Why does this model
work? Because, we believe, working with diverse groups with different cultures
(and underlying preferred business models) delays
decision-making. Every ‘captain’ would
want to lead the group. That does not work. In addition, the yearly event
provides a natural moment to measure how effective a ‘captain’ really is.
3.
We could use the same model and
start the Curacao Economic Initiative.
4.
Each member chooses 1 commitment
a year, and finds or provides funding for its execution.
Critique
is welcome. Ideas may be used with appropriate acknowledgement of source.
Tamira La
Cruz, MBA, founder and CEO of MarkStra Caribbean, is a consultant on research,
corporate strategy, competitiveness and innovation. A graduate from The Wharton
School at the University of Pennsylvania, she has a continuing interest in
small state innovations and growth. She can be contacted via www.markstra.com, her blog Caribbean Research
and Strategy or tlacruz@markstra.com.
[1]
Reference to be confirmed
[2]
ibid
[3]
Ministry of Economic Development
[4]
People have argued that the overall multiplier is larger. That would make the
task at hand even easier.
[8]
New Orleans’s French Quarter is full of foot-massage parlors for feet tired of
walking through town
[10] If that
money had been spent locally, that would have added 2.6% to our GDP. Other
middle income countries such as ours only lose 0.2-0.7% of their GDP to
remittances.[10]
In 2010, Barbados received 2.99% of its GDP in remittances.
