Agro-Processing

Agro-Processing

The cultivation and export of agricultural crops, especially bananas, continues to be of critical importance to the economy of St. Vincent and the Grenadines despite its steady decline on the world market. Although changes in the banana marketing regime resulted in a loss of international market share and a significant reduction in price to the farmer, it is still the leading crop in St. Vincent with over 62 million lbs yield in 2008.

In lieu of the on-going challenges affecting the growth of banana export, the government has responded by focusing on diversifying the productive base of the economy with particular emphasis on agro-processing. At present, the Lauders Agro-Processers is leading the way in this sector preparing vacuum packed fruits and vegetables for local, regional and international markets.

There is also the Orange Hill Agro-Processing Laboratory which is jointly operated by Taiwan Technical Mission and the Ministry of Agriculture, Forestry and Fisheries. The major focal point of the laboratory is to diversify the agriculture items into different form of processed products. For the past few years, it has been in the production of dehydrated fruit (jujube, carambola, sweet potato), concentrated juice (passion fruit, lemonade, ginger), chips (green banana, sweet potato and bread fruit), ground spices (hot pepper and ginger) and ice cream (passion fruit and mango). These products with an annual production capacity of about two thousand pounds (2,000) satisfy the local market and the revenues reinvested into the fund for sustainability.

Some of the investment opportunities currently available are the manufacture of fruit juices, fruit based beverages, jams, jellies and marmalades using locally available fruits, and the production of desiccated coconut, coconut cream and coconut milk. Foreign Direct Investment into the manufacturing and agro-processing sectors has strong potential for any serious investor, and would reap mutual benefit for both any investor and the national economy.

Significant interest has been generated in the benefits of food processing in St. Vincent and the Grenadines not only as a means of exploiting the rich food resource but also as a means of improving nutritional status. A number of entrepreneurs have continued to progress toward commercialisation and there is now greater use of a number of local crops.  Agro-processing utilizing root crops and fruit tree crops is being recognized as having good potentials for development to facilitate import substitution and for exports, and will also support food security.

The established policy objectives of the Government of St. Vincent and the Grenadines are to maximize the economic potential of the country in an effort to deliver higher and sustainable growth, eradicate poverty and reduce unemployment, and improve the general welfare of the population. The farmers, by reducing waste of fruit and vegetables, will not only realize revenue but also learn how to meet global market demand while at the same time generate added benefits to the food and the packaging industry.

Food processing in the form of canned goods on a large scale will bring employment and value-added benefits to the host country.

  • Coconut Processing
  • Fruit Processing
  • Poultry Production
  • Cassava Production
  • Dasheen and other root crops
  • Arrowroot Processing

Regulations & Incentives

The following incentives are granted in accordance with the Fiscal Incentives Act No. 5 of 1982 (as amended by Act No. 16 of 1991) by the government for the establishment and development of the manufacturing and processing industries.

Industrial Investment Incentives
Fiscal Incentives may be granted to an ‘Approved Enterprise. Such an enterprise must be engaged in the manufacturing of or must be about to embark on the establishment of an industry in the State to manufacture an ‘Approved Product’.
Upon receipt of an application for the establishment of an industry or where the application is received from an enterprise that is manufacturing the product, Cabinet may declare such an enterprise an ‘Approved Enterprise’. Also, Cabinet may, by notified order, declare any product an ‘Approved Product’.

An application for Fiscal Incentives must contain the following information:

The locality or proposed locality of the factory
The construction day (must not be later than 12 months after the date of granting of the application).
The production day (must not be later than 18 months from the construction day)
The approved product
All information relevant to the determination of the “local value added”. (See below)

In accordance with the Fiscal Incentives Act, 5 types of manufacturing and processing enterprises can qualify for a tax holiday. The length of the tax holiday for the first 3 types depends on, among other things, the amount of local value added to the finished product(s). The fourth type is called an Enclave Industry, meaning that it produces exclusively for export to extra-regional markets. Categories of enterprises and tax holiday allowable are as follows:

Category Tax Holiday Period
Group I Enterprise 15 years
Group II Enterprise 12 years
Group III Enterprise 10 years
Enclave Enterprise 15 years

Notwithstanding the above, the local value added content (expressed as a percentage of sales of an approved product) is first estimated, as shown below, for enterprises in Group I, II and III.

Category Local Value Added Content
Group I Enterprise 50% or more
Group II Enterprise 25% or more but less than 50%
Group III Enterprise 10% or more but less than 25%

‘Local value added’ means the amount by which total sales of an approved product over a period of twelve months exceeds the aggregate of the following:
1. The value of imported raw materials, contents of components and parts, fuel and services;
2. Wages, salaries paid to non-nationals of CARICOM;
3. Profits distributed or remitted directly to persons who are not resident in a member state;
4. Interest, management charges and other income payments accruing directly to persons who are not resident in a member state and
5. Depreciation on imported plant and machinery and equipment.

Additionally, exports of approved products to Guyana, Jamaica and Trinidad and Tobago ONLY are eligible for an ‘Export Allowance’ under the Act. Such an allowance, however, is confined to a period not exceeding 5 years after the expiration of the tax holiday period. The Export Allowance is calculated as follows:

Export sales (as a % of total sales) Rebate of Income Tax (as a % of income tax on export sales)
10 but under 21 25%
21 but under 41 35%
41 but under 61 25%
61 and over 50%

Tax holiday is also granted to capital-intensive industry, where initial capital invested is not less than ECD$25 million.

Other benefits under the Act include:

Duty-free importation of plant, equipment, machinery, spare parts, raw materials or components for a period equivalent to the tax holiday granted (Category I, II, III).
Exemption of income tax on dividends paid to shareholders.
Net losses set-off in computing the profits taxable for the 5 years following the tax holiday period.