Published On: Sun, Jun 7th, 2020

Lack of Independence is not St. Maarten’s real problem

By Leandra Cyntje

St. Maarten was not happy with the conditions given by the Dutch. For this reason, many have suggested independence from the Netherlands.

However, independence is not an indispensable solution to our current problem. This is because our problem is not the conditions presented to us by the Dutch. In actuality, our problem is the inability to take care of ourselves from a fiscal standpoint. As this present crisis continues to unfold in this reality, it becomes more evident that this has been a long-standing issue. Therefore, it is no fault of any particular faction or any current person in government. In fact, given the political instability, no government has sat in office long enough, from 10-10-10 to affect real change.

As well as the OECD in 2009, many scholars have heeded that Small Island Developing States (SIDS) face several challenges regarding their economic development. St. Maarten, much like many of its SIDS counterparts, also encounter similar financial issues.

Firstly, St. Maarten is considered small, both in the territory and in population. As a result, there is low economies of scale and higher production cost for goods and services for the government. Additionally, there is a low (or an unknown) level of tax compliance.

Another notable point is the fact that St. Maarten is vulnerable to external shock; we are highly impacted by what is going on in the global market, particularly the United States.  Therefore, our economic success is highly dependent on the policymakers and their ability to anticipate, mitigate, and manage these potential shocks.

St. Maarten also faces environmental vulnerability, that is heightened by climate change. The most recent being Hurricane Irma in 2017. This is a reminder of our vulnerability and its impact on the single pillar economy, thus presenting one of the predominant issues: the lack of economic diversification on St. Maarten, as the island has a  tourist-based single pillar economy.

It is clear that we face many challenges, but the most significant challenge yet is the lack of relevant data. Decisions are difficult to make without pertinent data to give a better understanding of the problem. Taking it a step further, there is a lack of proper Census Data. Census data helps us to understand who owns what, who lives where, and what are the needs in various communities.  Furthermore, this information ensures that everyone is contributing appropriately, and the country’s needs are being met.

The factors mentioned above render the economy of St. Maarten weak and vulnerable to forces beyond its control. Unfortunately, the GDP or GNP per capita may conceal this underlying reality.

Independence would mean that St. Maarten would have more options. However, these options often also come with conditionality. For example, the IMF and World Bank usually go for cuts in benefits, with minimal successful outcomes, might I add. Furthermore, with such vast external and environmental vulnerabilities, there would be many possible occasions for the island to be subjected to those conditions.

Furthermore, the more you borrow, the more debt you will accumulate; this also impacts the extent to which you can borrow or the interest rate you may be given while lending. This will ultimately provide our decision-makers with two viable options, raising taxes or reducing benefits.

St. Maarten has inherited a challenging financial situation; this is because St. Maarten assumed the debt of the Netherland Antilles. The Netherlands helped reduce that debt to the recommended 30% of GDP. However, this was not enough. The following are a few general short- and long-term suggestion pending proper research and data collection:

 Short-term

  • Eliminate Wastage: Evaluate and reduce resources.
  • Strengthen our public financial management system by increasing transparency, accountability, and checks and balances while increasing fiscal discipline.
  • A strengthened procurement process for more clarity and to avoid abuse or wastage.
  • An environmental fee for our Cruise-ship visitors to the island
  • Enforcement of the policies to enable collection fees on government debt.
  • Increase the overall culture of tax compliance, strengthen our tax administration.
  • Complete a Base-line study to evaluate the current development issues, for more elaborate actions and decision making.
  • Scope out and commit land to agriculture using local resources and knowledge base to create a sustainable livelihood and food security.

Long-term

  • Identify and negotiate the implementation of additional sources of revenue for the government.
  • Develop the agricultural sector.
  • Research of a tax system that works for all and can support the country’s needs.
  • Improve data management systems to ensure tax compliance by issuing social security numbers.

Independence for St. Maarten is not an unattainable goal. However, there is much work to be done before we get there to get there. The Government of St. Maarten had to make tough decisions to get past this situation, which may impact several persons, including the Members of Parliament and the Council of Ministers themselves. However, the focus after that should be on ensuring that we are not in this fiscal position again.