The Keith Mitchell government has publicly admitted that it is concerned over its failure to attract new private sector business to Grenada.

This point was underscored in an official bulletin put out by the Washington-based International Monetary Fund (IMF). "The paucity of new private investment, particularly in the tourism sector, is a major concern for the authorities (NNP regime)", the IMF said in the report that was obtained by this newspaper.

According to the fund, the few tourism projects that have been initiated in recent years in Grenada have entailed considerable government financial involvement. It noted that a number of these projects "had stalled".

The IMF was clearly referring to projects such as the much-talked about Ritz Carlton hotel for Mt. Hartman, the rebuilding of Butler House and Lagoon Marina by czech-born investor Viktor Kozeny (The Pirate of Prague) and the Levera hotel and golf course on the northern side of the country.

The Mitchell government has been forced to look at ways of trying to back out of some of the arrangements with these foreign investors who have failed to deliver on their promises. In the case of the Ritz Carlton, the developer, R.J Miller of the United States is threatening to take government to an international arbitration tribunal over ownership of Mt. Hartman.

The IMF document also alluded to the questionable policy of the Mitchell government to offer certain inducements to these foreign businessmen. The fund said: ".... The government has tended to provide generous income tax holidays to most new investment initiatives. But, again, this practice too has failed to elicit much new investment; creating instead a cycle of dependency with well-established firms being repeatedly granted extensions of concessions.

According to the fund, the argument being put forward by the Mitchell government is that without such interventions by the State, "there would have been even less investor interest". "While not discounting the importance of incentives, (IMF) staff argued that there are more efficient tax incentives that should be considered in lieu of tax holidays", it remarked.

"Ultimately, it was the limited success of the current approach that prompted action. Against this backdrop, structural policies will focus on eliminating policy-induced distortions that have inhibited higher private investment", the IMF said. The document pointed out that the absence of much new investment in Grenada is confirmed by survey data, including a recent diagnostic review of the investment climate in Grenada by the World Bank's Foreign Investment Advisory Service (FIAS).

The survey concluded that "new business activity has been in decline in recent years, with most existing firms having been in operation for more than ten years". On the area of Investment promotion, the fund indicated that the government agency responsible for investment promotion, Grenada Industrial Development Corporation (GIDC), will be strengthened and made to focus on investment promotion, rather than its current focus of screening requests for tax incentives.

As regards the Investment code, the plan of the Mitchell government is to have a new investment code legislated by September 2006, clearly laying out investor rights and obligations. On tax incentives, the current system of tax holidays should have been replaced by end-June 2006 with a system of accelerated depreciation and time-limited loss carry forward
provisions.