On Thursday, February 16, it will be exactly five years since, at the request of the THA in 2006, the Ministry of Finance invoked an existing clause in the Foreign Investment Act of 1990 to impose on Tobago a land licensing regime for all investments by foreign nationals.
This action by the THA was nothing but hollow, empty chest-beating, xenophobic triumphalism, myopic and obtuse stupidity.
It was a dangerous tendency towards breeding a type of hostility and suspicion towards visitors and foreigners under the misinformation that—“they coming to t’ief we land.” This is the same type of clownish buffoonery which guided the acquisition of Pigeon Point because—“dat is we beach.”
The timeline and following information provided by tourism and real estate professionals on the island in respect of this ill-fated and idiotic policy of the land licence regime is as follows:
February 16, 2007
Legal Notice 65 – Minister of Finance declares that all FDI must obtain a licence before purchasing property in Tobago.
Highly critical joint AREA/Chamber/Tourism Sector press release issued.
Private sector committee submits a report to government highlighting the many detrimental effects of the licence and proposing alternative solutions.
THA speech at the CHIC Investment Conference was a further, very public deterrent to FDI into Tobago.
Cabinet still debating the licence, its rationale, parameters, process, penalties.
Licensing regulations launched in September budget and published on Web site in October. Government promises that issue of licences will take only 20 days.
First two licence applications submitted by AREA member Seajade Investments, but Ministry of Finance still making changes and improvements to the regulations and guidelines.
First land licence issued August 12. The process took 42 months or 3.5 years to implement.
The application itself took six months instead of the mandated 20 working days. The application was for land within a Designated Development Area (DDA). There is still no agreed procedure for applications outside of a DDA. Despite that fact that the licensing system is finally in place, 2010 saw only four applications, and 2011 only two, of which one was withdrawn. Clearly, it is not just the application that is deterring buyers, but also a total lack of confidence in the intentions towards both to urism and FDI. The negative effects of the licence are:
• Licence applications take too long to complete and neither buyer, seller nor agent is keen to enter into an agreement on these terms
• Small investors have no incentive to invest because tourism has also lost some 65 per cent of its past revenue levels and prospects for a return on investment are abysmal
• Large investors do not trust the Government support for tourism or for FDI
• Investors both local and foreign would be taking an enormous risk if they were to invest now, with international tourist arrivals down to under 30,000 per annum, and no special fiscal incentives offered to mitigate the risk
• The Government has promised special investment incentives for tourism investment in new and existing property but to date has failed to implement
• FDI is easier in almost any other island in the Caribbean
• Tourism arrivals are up in almost every other island in the Caribbean
The imposition of the land licence appears to be something which could be challenged in law because it breached agreements signed by the Government of the Republic of Trinidad & Tobago with a number of foreign countries, particularly the United Kingdom. Our firm is currently in discussions with UK counterparts in this regard because someone must stand up for the people of Tobago. Its terms prejudiced all owners of property, and helped crash tourism which was the mainstay of the small man and average Tobagonian. Many of them would have been involved in either owning or operating a guest house and so many other spin off small businesses and enterprises from the tourism industry. It also caused the suspension of at least 14 new developments that had started or were about to kick off in 2007. The financial loss to these developers was enormous and this, coupled with the fact that property values have collapsed over the past five years in Tobago, gave a dramatic reduction in the overall level of real estate business in addition to the loss of foreign exchange.
This land licence requirement was a retrograde Mugabe-type, Chavez-styled step, which caused a total loss of confidence by existing investors who felt betrayed by this change in policy. A number of foreign investors were caught in the middle of this three-and-a-half-year hiatus. Most sought refunds and invested elsewhere in the region. At the time of the change in policy, individuals and companies had invested just over $1b in Tobago Plantations, while at Golden Grove, investment had topped $300m. Phase two of the Golden Grove project had an estimated value or $2b over a five to seven-year period. Just calculate if you can the loss of planned employment that these projects represented.
Five years after the licence, the future still looks grim with very little investment taking place on the island. What is needed to reverse this situation is a clear policy from the THA and from Central Government on foreign investment in the tourism and resort industry. Central Government has to step in and save Tobago from itself and its leaders. We keep getting mixed messages, particularly from the Tobago House of Assembly. Until the signals are clear and foreign investors are welcome again, we will continue to fail to attract any significant new investment to the sector and the economy will continue to be dismantled.