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Caribbean Islands-Sectoral Performance





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In the late 1980s, the economic aspirations of St. Kitts and Nevis were only partially realized; a completely diversified economy had not yet been developed, and economic productivity was still highly dependent on the unreliable sugar industry. Although the number of economic sectors in 1984 seemed to indicate a growing economic base, most of the foreign and domestic earnings were still coming from sugar and related products. Key economic sectors of the economy included government services (18.3 percent of GDP), agriculture (16.6 percent), manufacturing (12.8 percent), transportation and communications (12.5 percent), wholesale and retail trade (10.9 percent), and construction (7.9 percent). Other sectors that contributed to the remaining 21 percent of GDP included banking, real estate, utilities, and other service activities.

St. Kitts and Nevis' primary productive sectors were agriculture, manufacturing, and tourism; sugar represented significant portions of both agricultural and manufacturing output. In 1984 sugar took up 90 percent of the land under cultivation, supported 30 percent of the active labor force, constituted 15 percent of GDP, and made up half of total commodity exports. Processed sugar, molasses, and other sugar derivatives also constituted much of the manufacturing output.

The national economy's dependence on sugar has been the primary impediment to further economic development because of the commodity's steady decline in profitability since the 1960s. On St. Kitts, sugar production began falling in 1965 and was abandoned altogether on Nevis because of rising production costs and declining prices. Long-standing quotas with Britain and the United States sustained minimal profitability a while longer, but by the mid-1970s the sugar industry could no longer operate profitably, and its operations were assumed by the government.

The government attempted to revive the sugar industry by reorganizing its functions under the National Agricultural Corporation and the St. Kitts Sugar Manufacturing Corporation, which coordinated production and marketing, respectively. These two organizations were merged in 1986 to streamline operations further; the unpredictable availability and high cost of labor, however, combined with persistently low sugar prices, required that a more efficient harvesting and processing system be developed for the industry to turn a profit. Uncontrollable factors, such as weather, would occasionally aggravate already untenable conditions.

Although the sugar industry required substantial subsidization in the 1980s, the government was unable to drop it altogether because of its pervasive influence on the national economy. Because a long-term transition was considered the only alternative, the government developed a two-pronged strategy for replacing sugar as the leading revenue producer. First, the agricultural sector was to be diversified so that St. Kitts and Nevis could enter promising regional markets, such as that for cut flowers. Import substitution was also emphasized, especially the production of fruits and vegetables that were previously purchased abroad. Second, the economy was to be redirected toward tourism and manufacturing in order to take advantage of foreign exchange earning industries that were succeeding in other Caribbean economies, such as vacation resorts and electronic component assembly.

Lack of available land was a major constraint on the diversification of the agricultural sector. The government's appropriation of the sugar industry included confiscation of growers' land, much of which was to be set aside for production of alternative crops. As of 1987, however, no formal settlement had been reached, and the government had not yet obtained clear title to the property. Until land titling and redistribution problems could be solved, crop diversification was expected to remain an elusive goal.

Manufacturing played an increasingly important role in the Kittitian economy in the 1980s. An aggressive government program focusing on labor-intensive export manufactures attracted foreign firms, allowing the sector's output to reach about 13 percent of GDP in both 1984 and 1985. In the late 1980s, the government continued its energetic effort to attract foreign investment, in the hope that it would help pave the way for economic growth and absorb some of the workers laid off from the retrenching sugar industry.

Besides refined sugar products, industry included numerous kinds of firms specializing in assembly work. Garment, shoe, and electronic component assembly firms were the largest employers; smaller concerns produced processed metal, handicrafts, furniture, pottery, and boats. Although the sector as a whole was stable in the 1980s, individual industries and firms experienced variable success, some being forced to shut down shortly after production began. Nonsugar manufacturing actually experienced no growth in 1986, in spite of new factory start-ups. This was a continuing problem caused by external factors such as regional trade restrictions that often disrupted St. Kitts' export markets, especially for textiles and electronic components.

Faster growth in the industrial sector was also frustrated by internal restrictions in the 1980s. A lack of stable financing and factory space inhibited investors' interest. Government marketing strategies and the creation of the Industrial Development Corporation were expected to address these problems, as was financial assistance from the CDB.

Tourism grew by two-thirds from 1980 to 1984 and positively affected numerous areas of the economy, including construction, hotels, restaurants, and the wholesale and retail trade, among other services. Tourism's success was attributed to government programs that facilitated infrastructure development, hotel construction, and marketing strategies. Continuing efforts in these areas were a government priority, and tourism was expected to be the main component in the country's future economic growth.

Growth of the tourist sector was linked directly to improved accessibility. The opening of Golden Rock International Airport brought direct flights from Canada and the United States, and a large increase in the number of cruise ship calls accompanied the completion of Basseterre's deep-water port. Total ship calls jumped from six in 1979 to fifty in 1984. Although cruise ship calls declined in 1985 and 1986 because of the loss of a major carrier, the long-term expectation was for continued growth in this area of the tourist trade.

Tourist facilities were added quickly in the late 1980s to augment the small-scale accommodations that existed previously. Major resorts, such as the Royal St. Kitts Hotel and the Frigate Bay Resort, offered modern conveniences, and development of the southern peninsula would open previously uninhabited beach areas. Nevis was also planning the expansion of tourism, including the construction of new hotels and an eighteen-hole golf course.

Data as of November 1987



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