Knowledge Note

OECS countries face two critical barriers for developing their infrastructure and connectivity: their conditions of island states and their geographic location in the Caribbean. Exchanges of goods and services with the rest of the world are limited to air and maritime transport modes, logistics costs are generally more expensive, and they face a disproportionate risk to natural disasters. This all translates in a cost premium for developing infrastructure, and higher transport services. Moreover, the OECS islands are small states characterized by small markets sizes and this imposes an important limitation for developing large infrastructure assets. The long life cycles that characterize these types of assets and the important upfront capital investments required– ever greater if climate resilient-- make them suited for larger markets in which it is possible to reap the benefits of the economies of scale proper of such investments. In the case of OECS countries, this can only be developed through regional cooperation. Moreover, with the collapse of agricultural exports in the Caribbean in recent decades, the tourism sector has emerged as a key economic pillar, contributing in 2011, up to 12 percent of all jobs and about 14 percent of the region’s GDP (WTTC, 2012). In the case of the OECS countries, in their condition of island states, tourism and air transport are invariably intertwined. This note will take a look to the air transport sector and the implications for the tourism sector.

About the Presenters

Heinrich C. Bofinger

Florencia Millan Placci