Published On: Tue, Dec 18th, 2012

Growing Curaçao’s Economy By 1%: 10 Simple Project Ideas For 50 Million ANG’s

WILLEMSTAD – Looking for fresh new business ideas for the new year 2013 and at the same time grow our economy? Tamira La Cruz suggests 10 Simple Project Ideas.

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 Curaçao, 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.

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 get 10 projects to each produce an additional USD 3million in exports per year, we can achieve a growth of 1% over and above the 'normal' average.

II. Assumptions

  1. Curacao’s GDP is ANG 5.5billion (in Dutch: miljard), a little over USD 3billion
  2. 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 55million in extra economic activity every year.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 30million in new economic activity every year to grow the GDP with 1%.[4]
  3. Let’s say that, all else equal, we are totally safe with 10 new companies/year with ANG 5 million (USD 3million) each in new added value (i.e. export), for a total of ANG 50million (USD 30million) extra added value annually.
  4. 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.
  5. 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?

IV. Conditions

  1. All ideas 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 5million (USD 3million) 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. 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.[5] Did you know that U.S. surgeons take U.S. patients to Costa Rica for surgery in operating theatres set up in luxury hotels?[6] 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.
  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, mostly from foreigners.
  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’[7] 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, 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.[8] 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.[9] 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 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 what a leader can actually achieve.
  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.

Feedback 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,Facebook, her blog Caribbean Research and Strategy or tlacruz@markstra.com.

Notes

[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.

[5] www.chron.com/news/nation-world/article/Colombia-s-budget-plastic-surgery-w-slideshow-1810223.php.

[6] www.healthcostarica.com/tummy_tuck_costa_rica.html.

[7] New Orleans’s French Quarter is full of foot-massage parlors for feet tired of walking through town.

[8] www.theatlanticcities.com/jobs-and-economy/2012/07/inside-surprisingly-lucrative-world-cardboard-theft/2761/

[9] 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. In 2010, Barbados received 2.99% of its GDP in remittances.

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