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TEF pursuing inclusive model for tourism wealth - Project financing initiatives meant to drive income to Jamaicans

Published:Friday | July 26, 2019 | 12:00 AMHuntley Medley - Senior Business Writer
Dr Carey Wallace, executive director of the Tourism Enhancement Fund
An artist’s impression of the Closed Harbour Beach development for Montego Bay. It’s one of the biggest prpjects currently being undertaken by the Tourism Enhancement Fund.

By its own calculation, state-run Tourism Enhancement Fund, TEF, has pumped more than $36 billion into projects meant to both improve Jamaica’s tourist product and to retain more of the earnings from the sector.

It’s been 14 years since the agency was created, and its multibillion-dollar backing of initiatives, ranging from clean-ups to job training and entrepreneurial ventures, happened despite having to give over more than $15 billion in revenue and investments to the Consolidated Fund, the Government’s Central Treasury, since a law was passed two years ago mandating the transfers.

The Tourism Enhancement (Amendment) Act of 2017 has pried $13.2 billion in fees from the TEF accounts, collected from a $20 per passenger charge on airline visitors to Jamaica and $2 per person for cruise passengers.

At the same time the agency, created in 2005 under the administration of then Prime Minister P.J. Patterson to implement the Tourism Master Plan of 2002, had to fork over $1.3 billion in investments and other surpluses to the Government’s coffers.

Similar legislation at the time also forced other public bodies – including the CHASE Fund, set up to receive a tax on lottery winnings; and the Jamaica Civil Aviation Authority – to hand their ­revenues offer to the central ­authorities. The ­entities, in turn, receive monthly subventions against an annual budgetary allocation from the Government.

For the TEF, that amount is $3.7 billion for the current year, down from $4 billion in fiscal year ended March 2019. Other ­government agencies responsible for ­implementing TEF-funded projects now receive monies directly from the central government and no longer from the TEF.

The policy change has also been accompanied by a shift from accrual accounting to a cash basis, where funds not spent in any given financial year are returned to the Consolidated Fund.

“That has put a lot of pressure on the TEF (and) we pass on the pressure to the implementing agencies,” said TEF Executive Director Dr Carey Wallace in an interview with the Financial Gleaner. With implementation delays a recurring feature of many projects, the agency has now resorted to approving financing on a phased basis rather than committing total funding for any project in a given year.

One of the TEF’s largest current projects is the development of the $1.3-billion Closed Harbour Beach, popularly known as Dump Up Beach, in leading resort Montego Bay, being done in collaboration with another state agency, the Urban Development Corporation.

A major sidewalk upgrading programme is also under way in the resort town of Ocho Rios, while in the town of Falmouth, the location of the country’s most recently built cruise pier, the TEF is building an artisan village for makers and sellers of craft items.

Wallace, a businessman and hotelier, who has academic qualifications in computer science, business administration and social psychology, says an overriding concern guiding the TEF’s determination of projects for funding is the extent to which they ensure that locals earn from the tourism industry.

“Tourism is seen as an enclave industry, and the aim is transforming the wealth that is coming into the country every year from tourism into the kind of wealth that spreads itself into the hands of the people,” said the TEF director. That is why the fund has been focusing on a linkages project funded to the tune of $220 million per year and designed to integrate tourism with various other sectors, including agriculture, manufacturing, sport and entertainment.

A Tourism Linkages Council, headed by hotelier Adam Stewart, overseas the work of two working groups – one on agriculture, chaired by Dr Derrick Deslandes, the president of the College of Agriculture, Science and Education; and one on ­manufacturing, headed until recently by the immediate past president of the Jamaica Manufacturers’ and Exporters’ Association, Metry Seaga. There are also sector ­linkages networks for gastronomy, health and wellness, sport and entertainment, knowledge, and shopping.

A training institute, the Jamaica Centre for Tourism Innovation, receives $80 million each year to help get more of the tourism spend into the hands of Jamaicans by training and certifying persons for top jobs in the hotels, Wallace adds. Cardiff Hotel in St Ann and the Montego Bay Conference Centre in Montego Bay are among the entities carrying out the training.

“International chains have hundreds of hotels across the world. They put one or two down in Jamaica and they pretty much have a (hiring) template written in Spain or Mexico,” said Wallace.

“They are not like local hotels, where there is a vested interest in developing local people. As that kind of tourism becomes more localised, you have Wall Street kind of money getting into tourism. Investors are focused on their returns from their investments. Our job is to prevent us from being left behind as a people,” he said.

One of the ways in which the TEF measures its success is through tourism dollar retention in the local economy, which he says has grown from 30 per cent a couple years ago to a current 40.8 per cent, according to Word Travel and Tourism Council data.

At the same time, an initiative such as the Agriculture Linkages digital platform has created an online portal for farmers and hotel purchasing managers to be able to do more than $30 million of business over the past seven months of its operation.

Wallace also points to increasing earnings to Jamaican householders from homestays, largely through Airbnb rentals.

Asked about his take on the current debate surrounding a possible tax on the sub sector, he suggests that a tax on the Airbnb booking platform, rather than on individual properties, would be the way to go.

“It’s an opportunity to tax Airbnb so the Government gets money to fix roads leading to Airbnb properties, and to pay the police to provide security. I don’t see it as derailing the growth of Airbnb, and it would be easy to collect.”

The TEF CEO points out that homestay tourism, though still small, is growing at a faster rate than traditional tourism, but needs the establishment of minimum health and safety standards.

“I like that model because it spreads the wealth a lot faster,” he says of the homestay market.