It’s time we stood up for the little guy

Foreign investment ‘by the back door’ is not the best way forward for Caribbean cruise destinations

By Nathan Dundas, director, Caribbean Shipping Association

‘The Equalizer’ movies starring Denzel Washington are about a strong character who stands up for the weak and defenseless. It is hoped that Caribbean governments can similarly be the equalizers for the Caribbean citizens in this changing cruise environment

Caribbean ports and destinations have long been the envy of European, Asian, Mediterranean, South American and other destinations as we have enjoyed the highest market share of the cruise industry from its inception and continue to do so.

It’s not just the destinations that have watched and envied the growth of the cruise sector and wanted to benefit from this lucrative sector; rather, many companies and other interested parties have been eyeing the Caribbean ports and seeking to benefit from the industry.

‘New phenomenon’

For clarity, I will refer to this new foreign interest in investment in Caribbean cruise ports as the ‘new phenomenon’.

We in the Caribbean cannot stop the global expansion of business interests that seek to capitalize from the growth of the cruise sector in the Caribbean; however, we do depend on our governments to make wise decisions about the business arrangements they enter with these foreign interests. The citizens and stakeholders of the cruise sectors must be considered when governments are being approached by these foreign interests.

The fact is that after three decades of significant growth of cruise tourism in our region we have a new entity that has entered into the Caribbean destinations and is actively involved in acquiring and handling Caribbean cruise ports. Many Caribbean governments have been approached by this new entity and have been battling with the decision whether to have it take over their ports or whether the governments should resist and continue their own operation of their ports.

The industry’s many stakeholders have, for the most part, been taken by surprise by these new entrants into the cruise tourism market as their entrance has not been transparent but has been conducted mostly “behind back doors”, as we say in the Caribbean, between themselves and government and without the knowledge of local stakeholders.

In my discussions with many destinations, it’s surprising to hear that many tourism directors and stakeholders are unaware of the agreements reached by their governments in an industry in which they are directly involved – agreements that will have an effect on them.

Governments and lines

The governments and cruise lines have been traditional partners in the Caribbean when it comes to arrangements with port developments and tariff charges and for the most part it has worked well and continues to do so.

The point has been made that the cruise lines could contribute more to the destinations; and individual destination governments have entered into investment agreements mutually that have seen guaranteed numbers for these destinations as well as improved facilities, etc. It has been a win-win for those destinations and for their cruise lines partners.

I believe strongly that the best negotiating partners in the cruise industry should be the governments and the cruise lines directly. It is therefore troubling that, with this new phenomenon, this arrangement is being put at risk and I believe ultimately it will not be in the best interest of the cruise industry in the Caribbean if it escalates or continues to be eroded.

Role of FCCA

The FCCA has long been the negotiator intermediary between the Caribbean governments and the cruise lines and the arrangement has been for the most part beneficial to the region. The record shows that for the last significant three decades of cruise tourism growth this entity has brought the Caribbean governments closer to the cruise lines and vice versa.

It has been argued by some that the FCCA has resisted the increases in head tax for some destinations; however, anyone taking a more objective and keener insight would see where the FCCA, along with its member lines, has helped to raise the bar requiring the destinations to improve on their standards and their infrastructure to meet the high standards of the cruise lines that call in these destinations.

In other words, as destinations prove that they are getting better in terms of standards and infrastructure, they justify the expected demands in increases of fees.

I believe that, with the threat of this new phenomenon, it behoves the FCCA and its member lines to promote further the partnership that has been based on a solid foundation and that can be expanded upon for the benefit of all mutually.

Price of investment

I believe we should welcome foreign investment in our cruise ports, especially for destinations that require improvements in infrastructure and the attraction sites and tour opportunities. This investment, however, should not come at the cost of alienating the local stakeholders and enriching solely the foreign investors.

One of the main benefits I saw in the region where the cruise lines invested in the destination ports directly was that the governments were able to maintain control of their ports and also that local entrepreneurs thrived. Most of the profits and benefits earned locally stayed in the destination, in the country. Revenues earned from the industry locally by tour operators, suppliers and other entities benefitted the local businesses and employees. Taxi drivers, vendors and suppliers became owners of their own businesses and new entrepreneurs.

Caribbean governments have an obligation to their citizens to want to maintain this business structure to the benefit of its people as opposed to seeing a ‘quick fix’ from foreign investors who wisely – from their standpoint – would seek to take these profits to their foreign-based accounts. Income that would have once been earned and consumed locally would disappear to foreign accounts.

This is a grave danger and a reality under this new phenomenon. We collectively have achieved a lot of benefits over three decades. We have built a lot. At this stage, why should we want to go back?

In one of my interviews to do this article, a CEO of one of the ports who have refused the enticements of this new phenomenon stated: “Why should we want to give a foreign entity control of our cruise port when we have built this from bottom up to where we are now getting over a million passengers? It doesn’t make sense.”

Management of our cruise sector

There clearly is a very concerted effort by foreign investors in our cruise sector and almost every Caribbean destination government is being approached.

Some governments, as put by one CEO, have “resisted the push and lure of selling their countries and citizens out and I commend them for their prudent decision”. Some governments have adopted a wait-and-see approach before jumping at this quick fix and ready fast cash temptation.

The governments that have entered into this arrangement for the most part point to the fact that they have not been able to see the benefits of the cruise industry in paying off long-standing debts – in some cases debts that goes back almost 20 years. The need for the absolution of those debts and the promise of other emoluments have swayed some of these governments to look the way of handing their industry to the new phenomenon. The question must be asked, however: have these government-owned ports been managed properly and effectively to find themselves in this position? Why is there a disparity of some ports and destinations finding themselves unable to pay off their debts and improve proper infrastructure and some others are able to accomplish this?

Is it a question of the proper management of resources earned why these ports have found themselves in this situation?

This can well be illustrated in the case of one port that has dredged and swept its one single cruise port area at least five times in five years and, most significantly, has spent approximately US$ 300 million between dredging and infrastructure. Absolute madness. No wonder this port couldn’t pay off its debt and welcomed the new phenomenon to clear its debt and give whatever exclusive rights the foreign entity wanted to recoup its investments.

Another glaring example is one of the well-known ports with millions of passengers disembarking annually that wasn’t able to maintain and improve its port facility and has also gone the way of this new phenomenon.

It is really hard to understand.

Granted any destination would want to collect its fair share of taxes and income for its investments; and there may be legitimate arguments for such increases; however, if there were increases, would our expenditures also increase in an equitable manner?

There clearly is a need for Caribbean governments to manage their resources gained from the industry. As an added incentive, the FCCA does offer management advice to governments on investments and infrastructure developments that can help ports to manage their development effectively.

Caribbean governments can and should make use of this opportunity.

Caribbean citizens and cruise tourism

After 30 years in this industry – and looking at it from all aspects, especially as a port agent, tourism director, etc where my responsibilities have been on the ground interacting with the cruise passengers directly and the cruise lines and with governments – I have concerns with the way forward of the cruise industry in the Caribbean.

My main concern is that of the local tourism stakeholders in the cruise industry. Many of the top tour operators and duty-free store owners, for instance, will not feel threatened by this new phenomenon. My concern, however, is for the small stakeholders and others who are seeking to benefit. Will they be subjected to becoming hewers of wood and carriers of stones?

After building an industry up to where it is today, why can’t Caribbean governments empower their citizens to continue to own and operate and manage this industry locally?

Surely, when we see the next big cruise ship with thousands of passengers pulling up at our shores, we should feel and know that our local stakeholders and our economy stand to benefit and we own it locally.

Denzel Washington’s recent movies, ‘The Equalizer’ and ‘The Equalizer 2’, are about a strong character who stands up for the weak and defenseless. It is hoped that Caribbean governments can similarly be the equalizers for the Caribbean citizens in this changing cruise environment.