Tobago House of Assembly Chief Secretary, Mr. Orville London seeks to clear up “misinformation”
In the Tobago News of Sunday 10th February 2013 Keino Baird interviewed the Chief Secretary – Tobago House of Assembly, Mr. Orville London, in an article called “Let’s Talk Tobago Tourism”.
Mr. London was reported as saying that he “sought with Minister Cadiz to clear up misinformation regarding the Foreign Investment Act of 1990, and the trigger that established the land licence regime”. He further stated that the central government and the THA must create an environment that nurtures investment, and not speculation. He added that since the Act came into force it has not attracted any foreign investment in Tobago
In the early 2000s, he said, land was being bought and quickly re-sold and that contributed to land speculation, and ultimately triggered the land licence regime in 2007. He said the THA was not interested in deterring investment, but had to respond to the rampant speculation. The misinformation referred to by the Chief Secretary in the statement reported above, seems to be that the Foreign Investment Act was supposed to trigger major tourism investment in Tobago, but failed to do so. Instead it triggered a rush of land speculation that pushed prices out of the reach of nationals, gave nothing in return, and therefore had to be stopped.
The Facts as Analysed by the Association of Real Estate Agents (AREA)
In 2006, AREA did an analysis of the THA’s database of sales to foreign nationals, over a 15-year period from 1990. This analysis showed that approximately 1% of the land bought was not immediately developed by the foreign investor. The remaining 99% of the land purchased either had an existing villa or one was built within a short period of time, thereby signaling a long-term investment in the property.
Details of the purchasers, what they bought and what they built was documented by AREA following interviews with the major real estate agencies in Tobago. Information derived from that analysis indicated that foreign investors were not involved in speculation. In fact the local investor accounted for some 80% of all transactions. The results of the research and analysis were published in 2006 in a joint press release from AREA, the T&T Chamber of Commerce and the T&T Tourism Associations.
Research showed the foreign investor was looking at holiday properties, and investing in goods and services that went along with this development. This enhanced available accommodation in Tobago and created a new level of visitor property, while augmenting the few small hotels on the island.
In 2006 the first indication that THA was seeking a licensing regime for Tobago was noted, and the opportunity to research existing systems in other Caribbean islands was available. There was also the chance of developing the system PRIOR to imposing the licensing regime so that the investors were in no way impeded or deterred by what was taking place. Instead the new licensing system took three and a half years to introduce, during which time no foreign investment took place.
Stimulation of tourism investment by the Foreign Investment Act
The claim that no foreign investment took place after the passing of the FI Act in 1990 may be challenged. Hotel investment post-1990 was made, and testimony to this is the developments done by Karl Pilstl (Blue Haven Hotel), John Jefferis (Coco Reef Hotel), Chris James and James Vaughan (Toucan Inn/Bonkers, Inn on the Bay), Paul Mountjoy (Humming Bird Hotel) and Hilton International joint venture (Hilton Tobago). This latter investment was significant and deserves a closer look.
Tobago Plantations Limited (TPL) a joint Angostura/Guardian Life/Hilton International /TDC project
A spokesperson for Tobago Plantations Limited (TPL) explains that just short of $1 billion of private sector money has been invested. Once the land licence was imposed in 2007, property sales dropped to zero and as a result, TPL was unable to meet its commitments to their financiers, which have since seized property used as collateral and put it on the market for sale. It may be viewed that the major reason for the collapse of the market was the delay in the implementation of the licence regime, resulting in three and a half years of little or no foreign investment, before land developers could once again legally sell land to foreign parties. The initiative caused the Tobago real estate sector to be negatively affected, two to three years before the collapse of the world real estate market.
Golden Grove Resort, another Angostura project
In a second initiative at the Golden Grove Estate Tobago, Angostura developed Samaan Grove, which had generated some $142 million in developed property. Outside of this resort property, Angostura/CLICO had another $182 million invested in Tobago. With the imposition of the Land Licence Order, property development was at a standstill, including Golden Grove Estate with its proposed five-star hotel, valued at the time at $2.2 billion.
Attempts to sell land seized by the banks has not succeeded due to the consequent drop in land values over the last five years and the creation of negative equity in many businesses and development projects.
Prior to the 2007 licensing regime, it was generally felt that the governing body did very little to encourage foreign investment into tourism, and actively discouraged the whole idea of a tourism industry. It was reported that the then Chief Secretary turned away Hyatt Regency at an initial meeting saying he would not negotiate the use of the new Turtle Beach road constructed by Neal & Massy to improve the development potential of the 17 acre hotel site near the beach.
Tourism was systematically denigrated until the local population was unwilling to work in hotels and restaurants, and hoteliers were forced to import foreign staff. This has had a major impact on the island’s workforce and work ethic. Foreign investment needs to be actively persued and welcomed. It is not possible to impose a licence on investors to curb unproven speculation, and at the same time claim to be encouraging investment. The two are mutually exclusive in this context, although control of foreign investment is perfectly achievable in the right circumstances and with the right system in place.
The land licence issue took no account of the inevitable real estate market crash or cost to the island’s tourism industry. This happened at a time when the private sector stakeholders had already seen the writing on the wall and were aggressively lobbying central government to support tourism in Tobago and prove to the world that they did have a policy that welcomed investment in tourism – the engine of the Tobago economy.
AREA and the other joint press release contributors offered in 2006 to do a regional study of alternatives, but their offer was never taken up. It is hoped that with the new outlook for Tobago articulated by the Chief Secretary, a more consultative approach will be used as we seek to stimulate the Tobago economy, and AREA remains ready to assist.