Achieving sustainable and diversified economic growth

Dr. Ewing, Turks and Caicos has a prosperous economy, with a favorable asset position, a well-developed tourism sector, and a steadily expanding GDP [gross domestic product]. This positive outlook is based on the expectation of successful implementation of recent measures to modernize the public sector and governance. This, coupled with a projected growth of 3 percent annually, will contribute to a gradual reduction in your debt over the next few years. As the first elected leader since regaining independent status, you have made it your priority to boost the economy, especially the financial sector, through reforms. How committed has your administration been to ensuring financial stability while increasing transparency and accountability?

This government came into office in 2012, following the suspension of the constitution in 2009, after an interim period where there was direct rule from the United Kingdom. What we regained was our autonomy from a ministerial government status, not independence, so we are still a British overseas territory. We enjoy ministerial government and all arms of government, including the judiciary, legislature, and executive government. When we came into office, the country was a victim of the global recession, and just like most countries around the world we were running deficit budgets. Based on the financial framework that was put in place during the interim administration, we were committed to growing the economy while controlling expenditure. At the same time, we regained confidence from international investors and our major tourism partners, and moved forward to attract investments and grow the economy. We had to make some tough decisions initially, as relates to certain tax measures, so that we could get to the point of a balanced budget, which is one of our fiscal targets. Not only did we balance the budget, but we also achieved a surplus budget after year one in government and have continued to maintain our surplus budget. Based on our fiscal discipline and our growth, in particular in the tourism industry, we were able to surpass all the fiscal targets that were set out in our framework document.

Those fiscal targets included a commitment to reducing our debt burden, so we set up a sinking fund that goes toward repayment of a bond of $170 million USD that will mature in February 2016. Every year of the fiscal budget, we surpass the required targets for the repayment of that bond. So much so that we are well ahead of being able to pay it off, and once we do, our debt-to-GDP ratio or debt burden will be almost nil. We will have a debt of about $35 million USD and it may be even lower.

Like any growing country, we need to invest. We need to invest in infrastructure and in a number of reforms, reform programs that will ensure economic sustainability and viability. We intend to implement those programs over the next few years, following the payment of the bond. In that regard, we will be working with the Caribbean Development Bank and other financial institutions to get back on that path.

Regarding Turks and Caicos being a financial hub, following the publication of Standard & Poor’s detailed rating analysis, Finance Minister the Honorable Washington Misick said that your government is firmly committed to broadening and strengthening the islands’ economy, and that this objective independent analysis will help you make this a reality and attract new investment to the islands. The IMF’s [International Monetary Fund] financial sector assessment program stated that you are making good progress, but that you still need a strong supervisory framework to enhance regulation and supervision. How is Turks and Caicos gaining momentum as a financial hub and what more needs to be done?

We need to continue to reform our investment policies and establish the new Invest Turks and Caicos Agency (Invest TCI). Previously, those responsibilities were under the investment unit, a government department. Now, it has independence and the ability and flexibility to be more efficient and effective in marketing and promoting Turks and Caicos as an investment destination. Invest TCI will work one-on-one with investors and potential investors to deliver on diverse proposals and take care of them after implementation. Our efforts hinge on a very robust, effective, independent, and new investment agency. Most of the policies will be driven through Invest TCI, which will invest in more financing and effort for the marketing and promotion of Turks and Caicos as a destination that is ready and ripe for investment.

There are some areas within the government that we need to address and will do so through the commitment of the European Union. We are a recipient of the EU’s tenth European Development Fund grant (EDF 10), which is directed at improving the business environment in the Turks and Caicos Islands in order for us to be more competitive as a destination. Those targets include things such as improving the efficiency of processing business licenses and work permits, establishing e-government, and making the Turks and Caicos Islands a more efficient business destination.

In addition, we will be reviewing our investment policy to encourage MSMEs (micro, small, and medium-sized enterprises) to establish in the Turks and Caicos Islands. We have a bill that is going to Parliament in October 2015 that will seek to empower and encourage small and medium-sized business development within the islands.

We see that the growth of the economy is really dependent on how fast you can grow small and medium-sized businesses. Previously, we were focusing on the large foreign-owned investments and major hotel resorts. This will also contribute to diversifying our economy because these SMEs focus not just on the tourism sector, but also on other sectors including agriculture, manufacturing, processing, energy, green energy, and so on. Those policy initiatives will go a long way in ensuring that we have a more sustainable diversified economy in the Turks and Caicos Islands. We have the necessary oversight. One of the challenges we do have is with the procurement process. We have a procurement ordinance that is very strenuous and we need to identify the areas that are causing some of the delays in bureaucracy that are delaying the procurement of services. It is important to address those delays because it slows down the pace of investment. When it comes to public-private partnerships (PPPs) and other projects that the government is participating in, we are committed to the procurement process to ensure transparency and accountability, but it must be efficient.

You have signed on to the OECD’s [Organization for Economic Cooperation and Development] multilateral convention on tax matters, and the IMF congratulated the work done by your financial services commission, saying you have made a lot of progress. However, you need to modernize legislation and improve oversight. Both international and national banks are established here; the entrance market is also growing, while legislation has been introduced to regulate mutual funds. How is the Turks and Caicos Islands competing with other destinations in the region as an offshore financial services provider? Do you believe there is room for growth in the sector?

There are other nations ahead of Turks and Caicos now, although at one point, in the ‘80s, we were the leaders in the sector. We found our niche in tourism and stuck with that, but we found a place for the financial services sector, too. We, like most of the leaders in the sector like the British Virgin Islands, Cayman Islands, and Bermuda, are the leaders in the offshore financial services sector, be it company registration, reinsurance, or other banking initiatives. We have a small piece of that market here and it has the potential to grow. We are committed to identifying new and innovative products, which we can market and sell. We are going through a period now of transparency and accountability as it relates to things such as the tax treaties we are signing and the multilateral convention. We have agreed with the United States to improve international tax compliance and to implement the FATCA (Foreign Account Tax Compliance Act) and are signing a FATCA with the UK.

Now we are discussing the issue of central registries and whether or not they should be public within the British government because that affects our business. The Caribbean Overseas Territories are seen as the leaders in the financial services industry and we truly believe in being transparent. As the same time, the confidentiality of investors is also important to us and if we can’t provide them with the expected level of confidentiality, then they will take that money and go elsewhere. We truly believe that if the world is going to operate in that manner, with that level of transparency, and that it should be implemented everywhere at the same time so that no one has an advantage over anyone else. If we were to do it first that would mean those people who have their money here, and feel that the world should not know, they will take their money and go elsewhere. We are committed to sharing information with any law enforcement agency within the UK or the United States that will help to prevent corruption, the financing of terrorism, and tax avoidance because we are committed to fighting all of that and sharing information that will address those issues that do not serve the greater good for mankind. We believe in fairness, equity, transparency, and accountability. There’s much room for growth in financial services in Turks and Caicos once we have settled and complied with all of the rules and we are set on a path to modernize our banking, insurance, and reinsurance legislations; then we can identify and offer new products.

We also have a great opportunity for people who want to own second homes and come into this country to live and set up all of their businesses here. Those people who want to become residents of Turks and Caicos by buying a home. There are countries like Canada, where you are not required to pay taxes if you are outside the jurisdiction, and we recently discussed with them a double taxation treaty. These are things we are exploring and we continue to look for new products that we can sell that can help establish our niche market within the financial-services market.

The real-estate sector is a very important sector within Turks and Caicos. You have become a very popular destination for Hollywood stars and high-net-worth individuals. You have launched a residency program in part attempting to boost the economy of lesser-developed finance, and you have excellent opportunities for investors given the dollar-based currency and the lack of state income taxes. Where are the best opportunities for investment and how will these investments help with long-term inclusive economic development for the islands?

Tourism is our main business. Our business model is that we get you here, you have a look at the place, you fall in love with it, you buy real estate, we give you residency, you stay, you invest, you get into business. Yes, we want to focus on the lesser-developed islands and so we implemented a program that is just rudimentary because we have not done any marketing of it at all. We are only just now establishing through Invest TCI who will market the program as one of our financial products. Once you get here, there are many opportunities to invest. The most obvious is the high-end tourism sector, from boutique hotels to luxury resorts, low-density-level resorts to high-end hotels.

There are other sectors in which we are looking for investment that will diversify the economy. We’re talking about agriculture: not becoming a major agricultural producing and exporting nation, but agriculture that will assist in processing and manufacturing goods and bio-products that can be sold locally or exported.

We’re also looking into technology and people who are interested in creating technology parks. We would like Turks and Caicos to be listed as one of the IPOs [initial public offering] for products, which come out of those parks. Some of the challenges we have to deal with in that regard, in our discussion with investors and potential investors, is the cost of electricity. That’s why we have to move to green energy, because most kinds of technology that require offshore storage and downloads require high-powered service, a constant stream of energy that is cost effective. So we are looking for green energy parks and people looking to invest in green energy. We just awarded a consultancy to look at reforming our energy sector and legislation that will facilitate more green and alternative-energy sources. Once that consultancy is finished, we will have the legislative framework to take to Parliament to allow us to have more green energy, which will not only reduce our carbon footprint, the cost of living, and the cost of production, but also help boost business in the Turks and Caicos Islands.

You were saying that the main pillar of the economy is tourism and that while you have built a reputation as a virgin, laid-back destination, in comparison with other Caribbean nations, such attractions have driven fast growth, especially as the U.S. economy has recovered. Your target is high-end tourism, but 70 percent of visitors arrive on cruise ships, so how do maintain your reputation as a high-end destination?

We think of ourselves as an archipelago of islands. We’re very diverse in our environment, our flora and fauna, our people. What works in one island will not work in the other. The Grand Turk structure, with its abundant history and culture, is more conducive to cruise tourism than the other islands. We are now focusing on more overnight visitors to Grand Turk, which will allow us more independence from tourists from cruise ships. There has to be a balance between the infrastructure and social demand you need for cruise-ship visitors with those you need for long-stay or overnight visitors. When we look at the numbers, almost 30 percent of the total number of arrivals land on the island of Providenciales where our tourism model is different and where the majority of the resorts are high-end. Beaches, which is an all-inclusive resort, is still a high-end luxury resort not just it terms of the price, but also the service, the offerings, and the amenities that go with it.

We are attracting high-end luxury tourism, but we need to balance the demand. The Turks and Caicos Islands is on everyone’s bucket list and in order to serve that demand we have to look at our room inventory. Over the past five years, we have hardly increased our room inventory, while the numbers of overnight guest arrivals has increased 25 percent. The number of airlines coming in from North America has almost doubled, because in addition to the Eastern seaboard, we have also connected with the Midwest including Houston and Dallas that will then bring more visitors from the West Coast. With increased connections comes the demand for more rooms and airport expansions. We are now planning to develop a new terminal within the next five years because we will need it.

Our previous model was more of a condo/condominium or condo/hotel model but now we have to move to a European Plan (EP) hotel model where the hotel rooms and services are owned by the hotel. The EP style will guarantee us more rooms, whereas a condominium model can’t guarantee us rooms because they’re owned by other people who decide whether to put the rooms into the pool or rent them out themselves. EP style allows you to guarantee a certain number of rooms and block them out to guests in advance, but we still cherish the condominium model, so most developments now being proposed have the EP hotel, but also have condominium rooms on the same property, but with different powers. We still focus on higher-end brands, like Ritz Carlton and so on.

Let’s talk about accessibility. You have stated that due to the expanding growth in demand, you had to expand the airport, which offers another option to the U.S. hub in Puerto Rico. You mentioned that Turks and Caicos is strategically situated to capitalize on the transfer of goods from South and North America, Europe, and the Caribbean. And according to Ralph Hicks, the accessibility to your destination is perhaps the biggest factor to the exceptional growth in the tourism sector in 2014. Given the strategic place of the islands, what other projects would you like to see developed? What do you think is the optimal level of accessibility for the movement of people, business, and trade? Lastly, how do you balance the importance of accessibility and development with protecting the environment?

In terms of geographical placement, we are ideally situated in the Eastern Seaboard of North America to serve the rest of the Caribbean. We can see that just about every aircraft going south from the Eastern Seaboard passes through our airspace, due partly to our relationship with the United States and partly to the navigational systems available from the Islands. From the trans-shipments standpoint, we also think that we offer the marine midway and transshipment point, and that is an opportunity that we can capitalize on. We are still very cautious as to the extent of export—because we don’t think that we have to be the next Panama Canal port, or Freeport. What we would like to do is to expand our port facility for the sole purpose of bringing larger ships that will enable us to reduce the cost of living. As it stands now, most of the ships that bring goods to Turks and Caicos are one way, as many ships are too large to dock here. Ships going to the Dominican Republic often can’t stop here, but if they could, we could reduce the cost of shipping and lower the cost of living here. It is the same for oil, which ships from Texas to the Bahamas, and then placed on smaller ships to come to Turks and Caicos. These multiple transshipment points raise the cost of fuel so if we are able to have larger ships come in, either for trans-shipment or dropping off oil, the price would be significantly lower. We do want to make money off the trans-shipment, but the objective is to enable a lower the cost of living.

One of the other objectives is to connect the islands, because connecting those islands by a roadway network would reduce the duplication of various essential services, be it schools, hospitals, clinics, government offices, or airports. In order to fund such a roadway network and make it viable, we need traffic going through. So we floated the idea for the upper islands to accommodate cruise ships, because those islands have lots of ecotourism and heritage tourism, like kayaking and exploring the wetlands. That would allow traffic to go through the bridge to the port on the other island and drive the traffic of cargo and people. This is the policy we are exploring and are engaged with the Caribbean Development Bank, which is conducting a study for us. They are exploring the socioeconomic effects and feasibility of such a roadway network, and what it will take. Every time you have to build a bridge, you will damage the environment, so what you have to look at is the long-term damage and mitigation measures necessary to protect the environment and ensure sustainability over the long term. In everything we do, there is some sacrifice to the environment that you will have to put in place in order to have development that serves the greater good of the people. The developments we are working on are life changing. We don’t just build hotels—we serve the people who have to build homes and live, who need schools and hospitals and access to services. I presented some of those infrastructure projects at the KPM conference two years ago, but they have been concepts since the 1990s. I want to make them a reality in such a way that they are for the greater good and to do whatever is necessary to mitigate the damage to the environment.

Where are you proposing to build a deep-sea port?

We are looking at several options; one is between North and Middle Caicos, and the other is the upper end of East Caicos, but neither has been decide on yet. We are still looking at the feasibility—a study was done on a deep-water port on the East Caicos location back in the 1990s. No one lives there and significant infrastructure would be needed to bring people there whereas a port between North and Middle Caicos would be serving the population and less infrastructure would be required. It’s not a rush.

Readers of Foreign Policy, our media partner, are constantly looking for opportunities to invest, and Turks and Caicos has the right combination of English-speaking population, proximity to the United States, dollar-based currency, and no income or real estate taxes. In 2012, you created the Turks and Caicos investment policy, to facilitate the establishment of businesses, and you recently created TCI; how successful has this been?

The investment policy has been successful at providing very generous concessions to potential investors to facilitate their initial startup. We assist them on their startup, knowing that there is a return to government on the back end. When it comes to concessions on importation duties, on import of supplies, on purchase of land, be it Crown or private land, those concessions are given to encourage development. What we find is that the biggest support that the country can give to those investors is to facilitate in a timely manner the implementation of their projects. For those who may have challenges in finding capital, those concessions may appeal more because finding capital for investment was a problem coming out of the recession. Those people who did have capital held on to it tightly, especially those investing in tourism in the Caribbean. Following the global recession, the banks were reluctant to fund tourism projects in the Caribbean. Now we find that for the people who are freeing up capital and lending, the best we we can do is to help support those investors to get their projects off the ground and up and running in a timely manner because we know that time is money. The main role of the investment unit is to hold the hand of the investors and act as the coordinating agency for all of their doings.

Regarding the country’s relationship with the UK and the United States, we understand a new London office has been established to facilitate investment, but the United States remains your most important partner, and there is talk about you joining Canada. How are you planning on promoting investment from the United States and Canada, and how has TCI has helped in this area?

We had a London tourism office before, focusing on tourism marketing. In addition to that, we have the Turks and Caicos Office whose main focus will be on promoting Turks and Caicos as a country, and with focus on investment promotion in collaboration with the investment agency. We will do the same expansion in Canada and the United States, at the tourism offices in Toronto and New York. We will expand those into Turks and Caicos offices for representing tourism, the investment agency, and the government. The office in London is an extension of my office as premier, and hopefully we can do the same in Canada and New York and one or two other cities in the United States. Those offices will facilitate meeting with investors who may not be available to fly down. We can meet with groups to expose them to various opportunities in the Turks and Caicos Islands and suggest why we are the best place to invest in right now. Our relationship with Canada is great and, as I said, just about every major investment in Turks and Caicos is Canadian-owned, including our power company, our hospital, all of our banks, and some of our hotels. We want first and foremost to explore and expand our socioeconomic relationships, and we have already engaged with the Canadian government agencies in the development of the deep-water port. It was their idea in the ‘90s when they wanted more presence in the Caribbean, not just for sun, sea, and sand, but also for an economic presence to ship Canadian goods from Turks and Caicos. They’re very keen on engaging such an initiative, and any support from other Canadian government agencies, be it CIDA [the Canadian International Development Agency] or others, would be very good.

Standard & Poor’s said that your relationship with the UK serves as an anchor for economic policies and judicial stability. How do you see that relationship evolving, and what are your expectations for greater autonomy?

We are a UK Overseas Territory, and the UK has put in place a financial and management framework within which we are expected to work. We will be renegotiating that document very soon. There are some fiscal targets that we think could be relaxed because we have been able to surpass performance targets—things such as our ideal GDP-to-debt ratio, what level of reserves we want to build up and hold, what level of year-to-year retention of liquidity, etc. Those parameters need to be set. This new term, we have a chief financial officer [CFO] who was put in place under a British ordinance as a safeguard, because of the UK guarantee of the loan, which falls away in February. We don’t see the need for an ordinance or the CFO, but we do see the need for fiscal oversight. I think every country needs someone from the outside looking in, to review policy, targets, and performance, and let you know whether you are on track. Those are the things we are committed to, and we are looking at the person or body that needs to be put in place after the removal of the CFO when the loan is paid off in February 2016. That will give confidence to investors and banks, and will help us to continue on the path of sustainability and economic growth.

You were a general surgeon for fifteen years and entered politics in 2012, when you became premier. What have been your most gratifying accomplishments and biggest challenges so far?

What has been most gratifying for me has been my ability to restore economic growth and put us on a path to sustain that growth, establish political stability and instill investor confidence.

In the next phase, my focus will be to empower the local population, support the implementation of small and medium-sized enterprises, build new educational institutions such as high schools, provide scholarships, attract more foreign direct investment, and provide more jobs and job opportunities.

We have been working to improve the health system, even though we have state-of-the-art hospitals built in 2010 that came on the heels of the global recession and were relatively expensive due to the downturn. We need to work so that it’s cost-effective and affordable to the local population, and ensure access. My focus on the next term will be on primary care, rather than secondary care, which we will try to keep affordable. Working on the development of community-based health initiatives, which increase healthy living and reduce the health burden, things like the community-based health care facilities and healthy lifestyles initiatives, such as the tobacco bill to reduce second-hand smoking. Those are some of the initiatives we are looking at.

What do you want your legacy to be? How do you want to be remembered?

I want to facilitate economic rebound during a turbulent period, and to stabilize an economy and ensure economic growth, despite known and unknown challenges, to make lives better than they were before. That is my legacy: I hope to connect the islands and improve peoples’ lives.

Premier Ewing, thank you so much for this interview.