Antigua: A Caribbean Paradise with Strong Nearshore Potential

Abstract:

Famed as “the land of 365 beaches,” Antigua is more than just a Caribbean paradise with an enviable climate; it is also a well-managed business hub that is ripe for investment. The government provides strong economic incentives for foreign investment and is positioning the country for further growth by targeting emerging markets and diversifying its economy.

It is easier to do business in Antigua than in almost any other country in the region and it is ranked third in the Caribbean in the World Bank’s 2014 Ease of Doing Business index. The process is facilitated not only by Antigua’s long-term political and economic stability, but by the strong cultural affinity that stems from its historical links to the United Kingdom and its geographical proximity to the United States.

The Gateway to the Caribbean

Antigua and Barbuda is a twin-island nation located in the West Indies region on the eastern edge of the Caribbean. A historically important hub on many major sailing routes, Antigua holds a strategic location on the edge of the Atlantic Ocean and is considered the “Gateway to the Caribbean.” It is also blessed with one of the sunniest and most temperate climates in the world.

The largest of the English-speaking Leeward Islands, Antigua is about 14 miles long and 11 miles wide – roughly two-thirds the size of New York City. The nation’s population is approximately 81,800, according to the latest census in 2011, with over a quarter of the population based in the capital of St. John’s, the largest port and city in the islands.

Just two hours, 45 minutes flying time from Miami and three hours, 40 minutes from New York, Antigua receives daily direct flights from the United States and Europe. It has above-average air traffic from North America and the UK compared to other Caribbean destinations (many of which can only be reached by connection) and is served by many major airlines, including Air Canada, American Airlines, British Airways, Caribbean Airlines, Delta, LIAT, United Airlines, US Airways, Virgin Atlantic and WestJet. Private planes can be tended to by FBO 2000, the fixed-base operator at the Antigua International Airport which is considered one of the best in the region. A new terminal is due for completion in late 2014 and there is also a small airport on the isle of Barbuda.

Antigua and Barbuda is on Atlantic Standard Time year-round, meaning the islands are in sync with the east coast of the United States during the summer and just one hour ahead throughout the winter.

Antigua’s Colorful Past

First settled by Ciboney indians in around 3100 BC, Antigua and Barbuda were inhabited by the Arawak and later the Carib cultures. Antigua, meaning “ancient” in Spanish, was named by Christopher Columbus in 1493. The islands were colonized by the British in the mid-1600s. Antigua and Barbuda remained part of the British Empire until 1981, when it became an independent state within the Commonwealth, with Queen Elizabeth II retaining a largely symbolic role as monarch.

The British Empire strongly influenced Antigua and Barbuda’s language (English is the official first language; Antiguan dialect English the second), its culture, its legal system – which is based on the British model – and its strong governmental system, which has ensured political stability since independence.

 “The biggest challenge for any island destination is you need a critical mass of customers. Airlift is the key. Antigua offers direct connections to Europe, mostly to the UK, to Miami and to New York. Having that accessibility makes it a lot more attractive both for professional and personal reasons.”

Andrew Hedley

Enduring Political Stability

Antigua and Barbuda is a constitutional monarchy with a parliamentary system. The Queen is currently represented by Governor General Dame Louise Lake-Tack, the first woman to hold the position, while the government is headed by Prime Minister Winston Baldwin Spencer of the United Progressive Party (UPP). First elected in 2004, Baldwin Spencer campaigned on an anti-corruption platform and won re-election in 2009.

The executive branch of government shares power with the bicameral legislative branch, comprised of the Senate and the House of Representatives (both have 17 members; the former appointed by the Governor General and the latter elected by proportional representation) and the judicial branch, which is headed by the regional Eastern Caribbean Supreme Court based in Saint Lucia. At least one member of the Supreme Court resides in Antigua and presides over the High Court of Justice.

The nation’s firm political system has resulted in a long history of free elections and peaceful transitions of government, while the population’s rights are protected by constitutional safeguards including freedom of speech, press, worship, movement and association.

“One of the advantages of Antigua is the British involvement. The rule of law follows the British system, and that gives people trust and confidence,” says Andrew Hedley, general manager of the luxury Jumby Bay resort and chairman of the Antigua Hotel & Tourist Association.

Hedley, who has spent over 20 years in the Caribbean, including the last nine years in Antigua, praises the islands’ government for encouraging business initiatives and not stifling them as several neighboring islands have.

“Having lived and worked in three other British overseas territories in the Caribbean, I found that those environments were very restrictive. You’re required to get a work permit, and there is a tendency for the political institutions to try to meddle with the private sector,” Hedley says. “One of the things I appreciate about Antigua is that there is a far more hands-off approach from a political perspective. The country is genuine in its attempts to attract investment, and the government appreciates that this needs to be done in an open manner and people need to be allowed to get on with their business.”

 “The investor can rest assured that they will have the government’s support in terms of the rule of law. We enforce contracts so if you invest then your money will be protected”

Dr. McChesney Emanuel

Antigua’s Tourism-Based Economy

Antigua is said to have 365 beaches, one for every day of the year, all with free public access. It is famed for its many luxury resorts and tourism dominates the national economy, accounting for around 60 percent of GDP, 40 percent of investment and more than half of the island’s employment opportunities.

There are over 60 hotels with around 4,500 rooms on Antigua, while numerous cruise ships dock regularly at the island’s two main ports. Antigua and Barbuda attracted 650,000 cruise ship passengers in 2012, a 13-percent increase from the previous year. With each passenger spending on average $75 USD, this represents an annual injection of around $45 million USD into the local economy.

Prospects for economic growth in the medium term depend on income growth in the industrialized world – especially in the United States, which accounts for one-third to one-half of all tourists. (Another 30 percent of tourists come from the UK, with the remainder mostly coming from Europe, Canada and the Caribbean.) The government is working to diversify the economy, however, focusing on medical tourism, agriculture, outsourcing and environmental projects.

“We are in a very good position to add medical tourism to the tourist options that we offer,” says Dr. McChesney Emanuel, of the board of management of the Antigua and Barbuda Investment Authority (ABIA). “We can do this at a competitive rate, it could be a cost-saving venture which would be very attractive to potential investors … You could come and do a procedure at a discounted cost and at the same time convalesce at one of our resorts and enjoy the climate and the tranquil atmosphere.”

Other key industries include financial services, retail, fishing, forestry and mining. Exports – estimated by the CIA World Factbook at $37.9 million USD in 2012 – include rum, refined petroleum, paints, garments, furniture and electrical components.

Antigua’s economy was understandably affected by the global economic crisis in 2009, but prior to this the island’s financial services sector was thriving and had become the second largest economic sector after tourism. The investment banking industry has a strong presence in St. John’s, where many major financial institutions have offices, including the Royal Bank of Canada and Scotiabank, plus advisory firms such as KPMG and Grant Thornton.

Attracting Foreign Investment

FDI peaked at around $359 million USD in 2006 but fell to $59 million USD by 2011 as a result of the global financial crisis. In order to stimulate recovery and prevent any such drops in the future, the government is working to ease the reliance on traditional markets like North America and Europe by targeting FDI from other regions with strong potential.

“We have revised and reformed our approach and how we target markets,” Emanuel says. “So far we have developed good leads, and we are engaging investors from the BRIC countries and emerging markets in South Africa and Eastern Europe.”

In September 2013 Antigua and Barbuda launched a citizenship via investment program, which Emanuel said “will bolster the country’s competitiveness in terms of attracting FDI.”

Based on a successful program that has been running for almost 30 years in St. Kitts and Nevis, the program grants investors a passport (which entitles them to visa-free travel to over 115 countries, including the UK, France and Canada) in return for investing $250,000 USD in a national development fund, $400,000 in real estate or $1.5 million USD in a government-approved business.

The Antigua and Barbuda government also offers a range of concessions in order to attract investors. Depending on the size of the capital investment and the number of Antigua citizens or residents to be employed, businesses are entitled to reductions of 10 percent to 75 percent on property tax, stamp duty on land transfers and non-citizen licenses. They are also entitled to exemption or reductions of corporate income tax and withholding tax for three to 20 years, and one to seven years of loss carried forward in income tax.

The stability that Antigua and Barbuda provides is reflected in its steady currency, the Eastern Caribbean dollar, which does not fluctuate and is at no risk of devaluation as the exchange rate is fixed at $1 USD equal to $2.68 EC. US dollars are also widely accepted in Antigua, as are traveler’s checks and major credit cards, and there are many ATMs and banks capable of handling financial transactions.

The CIA World Factbook estimates that GDP per capita was $18,300 USD in 2012. Taxes are low, with corporate tax fixed at 25 percent for all companies except financial institutions registered under the Banking Act. Income tax is just 10 percent for earnings above $36,001 EC ($13,333 USD) and 25 percent for all earnings above $180,000 EC ($66,666 USD).

Doing Business in Antigua

Antigua and Barbuda is ranked 71rd out of 189 economies in the World Bank’s 2014 Doing Business index, ahead of Uruguay, China, Argentina, Brazil and India. It also ranks above every state in the Caribbean region except St. Lucia and Trinidad and Tobago. In terms of protecting investors, Antigua and Barbuda is ranked second in the Caribbean and 34th in the world.

There are eight procedures that must be completed to set up a business in Antigua, just below the Latin American and Caribbean average (nine). The process typically takes 21 days, less than half the regional average (51 days), and the cost is just 10.9 percent of income per capita, less than a third of the regional average (33.7 percent).

When setting up a business, Emanuel says, “The ABIA should be your first point of contact. It exists to help investors navigate all of the processes, departments and entities involved in establishing a business in Antigua.”

Antigua and Barbuda has all the necessary infrastructure to support new businesses, he explains, including a reliable telephone system, broadband technology and by far the best Internet penetration rate in the Caribbean.

“The ABIA will make sure that you get all of the support, incentives and concessions that will help you to get started,” Emanuel adds. “Even after that, we have personnel that will follow the business to make sure that things are going smoothly and help you overcome any challenges so that your business can add value to our economy.”

Table 1: Ease of Doing Business rankings

Table 2: Caribbean Internet penetration as of Dec. 31, 2011