Antigua and Barbuda: Antigua & Barbuda - Foreign Direct Investment
14 February 2005
Article by Ian Moncrief-Scott for Mondaq.com
According to the old adage, you are judged by the company you keep and your behaviour towards others. Money is no different. Arguably, this explains Antigua & Barbudaís failure to attract sound foreign direct investment.
Though some would contend that the problem is simply due to the countryís relatively high cost of doing business, the reality lies far from this simplistic conjecture. Significantly, apart from a handful of Canadian banks, blue-chip financial institutions do not exist in Antigua & Barbuda. The departure of the Barclays Bank brand in 2003 was notable.
Prior to the 2004 election success of Prime Minister Baldwin Spencerís United Progressive Party, for almost fifty years the Antigua Labour Party and its Bird-led regimes held the country in an adverse investment environment. This has been achieved through perpetual malgovernance, well-documented links to international crime and widespread corruption.
Nor has political violence been absent. Between 1972 and 1976 when the ALP was temporarily out of office, numerous hostile acts were recorded and rampant sabotage was the order of the day.
It has been documented and recognized that the presence of certain highly influential businessmen and government benefactors has proven to act as a barrier to legitimate foreign investment on the island nation.
The consequent advisories placed on Antigua & Barbuda by both the US and British Treasuries following the Bird Governmentís appointment of purported Texas billionaire R Allen Stanford as Head of Antigua & Barbudaís Financial Regulatory Authority evidenced the countryís weak and ineffective regulatory framework.
Finally, it was the former administrationís decision to illegally expropriate the privately owned Half Moon Bay Resort, which signalled that the country was prepared to commit the cardinal sin of democracy, aided and abetted by the failings of both the local and regional legal systems to afford appropriate international investor protection.
So why else has Antigua & Barbuda failed to secure legitimate inward investment?
The answer lies not only in the former governmentís woeful track record in obtaining proper investment and its less-than-transparent policy of rewarding Ministers with "Investment Findersí Fees", but also in its determination to actively prevent proper investment from becoming available for local development.
Highlighting this evidence is the Governmentís failure to activate participation in lending/investment programs with leading specialist organisations like the Multilateral Investment Guarantee Agency and Inter-American Development Bank.
MIGA promotes development by offering credit enhancement, political risk insurance and risk mitigation products to investors and lenders thereby helping emerging economies attract private investment. There is no restriction imposed on the origin or citizenship of the investor, provided the development is undertaken in one of the Member Countries.
Projects can include infrastructure development such as water supply, power generation, telecoms, air/land and seas transportation and road construction, in addition to commercial development in sectors such as tourism and manufacturing.
Though, Antigua & Barbuda is a signatory to the MIGA convention, the former government has never ratified it in Parliament, thereby stifling the influx of proper investment and preventing its own people from accessing development finance for both commercial and infrastructure projects.
Antigua has a crucially urgent need for Foreign Direct Investment to improve basic infrastructure and living conditions, to promote education and to generate employment opportunities in order to create a viable society and become a strong political ally for the free world in an otherwise troubled area.
Who would find Antigua & Barbuda attractive at this time?
Small investors seeking a high risk high return could be tempted. Single shareholder entities or wealthy individuals not bound by boardroom considerations might consider the risks worthwhile. However, it is most likely that dirty money would fill, and/or is filling, the need for FDI.
For Antigua & Barbudaís new "Government in the Sunshine", a huge opportunity now exists to pursue proper policies to attract legitimate investment.
The Government has now set a date for reversing the acquisition of the Half Moon Bay property, which will clear the record of ongoing sequestration of private foreign-owned property and confirm that the new Administration acts on its promises.
Early membership of bodies such as MIGA would yield immediate benefit. MIGA shares the World Bankís vision of a world free of poverty, complementing the work of other World Bank members in striving to promote economic growth, expand markets, encourage more favourable policy environments and improve the lives of people in emerging economies. By virtue of the Investment Guarantees it offers to developments in Member Countries, MIGA not only provides protection to would-be lenders and developers; it also represents an internationally recognised stamp of approval for the Government in power.
Existing Travel Business
Established air & ship routes
Commonwealth membership -- including Privy Council Appeal
Availability & Organisation labour
High end product
Increased flight access
Former governmentís track record
Absence of blue-chip institutions
Poor regulation & compliance
Inconsistent legal system
Ministerial Finderís Fee and longstanding culture of patronage
Lack of access to legitimate financing & investment