Thursday, October 14, 2010

A cement plant, a cruise ship port, an airport, or something else?

There's an interesting development vs. conservation issue on the horizon in St. Lucy, Barbados. Read about it here at the Barbados Advocate. The Arawak cement plant is currently located in the relatively undeveloped northwest region of the island, near Maycock's Bay. The plant is located right on the coast, and if you swim in the area you see a film of particulate matter on the surface of the sea. In addition to this air pollution, the plant is also quite noisy. The combination of air, noise and water pollution no doubt creates a host of negative external effects for nearby residents. The site apparently looks appealing for a new cruise ship port, or perhaps a new airport. Of course, the land could also be set aside for conservation, or developed for residential uses.

What can we say about how land rents for the area will depend on alternative uses? What kind of research questions might we consider before going forward? Does anyone have an indication as to how this might play out?

9 comments:

David Gill said...

A suggested study would be a cost-benefit analysis to look at the opportunity costs for various land uses of the area (tourism, residential, etc). If local societal costs were added to the mix (i.e. within the area), the cement plant probably won't do well with all those negative externalities. However, the CBA needs to factor in how the island's cement market will be affected by the closure of the plant

Todd Ebner said...

The rent of the area depends on the perspective of the individual. The article favors getting rid of the plant to use for another entry port for either an airport or cruise ship port because Janelle Reailly-Thornhill suggests the island should focus much more on tourism for the economy since it's one of the biggest contributers to the economy. If the plant is harming the environment and making areas not appealing to tourists, incoming money from them will go down. Adding another entry port will contribute the economy in a much bigger way than the cement plant. If it was looked at as a commercial area, the cement plant would provide constant jobs regardless of how many tourists are visiting the country. Then residential areas would pop up and more businesses if rent gradient applied.

Custodian said...

This is a very interesting item to deliberate. The fundamental question to be asked is what is the best way to pursue economic development with little or no external impacts and economic loss or pain to Barbadians.

The cement plant demise maybe overdue, but is a port of entry of any sort the way to go? If the current state of global travel is any indication of where we are heading - more air or seaport will increase costs to travellers and deepen the fall off in travelling. Already the Caribbean has taxed themselves out of the regional tourism market by 40%, and is fast heading to do the same on the international scene. Building larger and more exotic airports is not the way to go. I believe we should pursue eco-centered policies, policies with overwhelming natural and lasting benefits. Eco-villages (with enviro-friendly material of course)can be a way to pursue the need for residential or even tourist accommodation needs.

Wile I believe catering to customers/ tourist needs to be a consideration, I am definitely not in favour of allowing tourism to dictate national development priorities. National priorities ought to be determined by the local people for the local people. Very often the customers leaves the local "holding the bag".

Be careful what you wish for, you might just get it.

Custodian said...

As we know, the supply of land in this area is perfectly inelastic because the quantity available is fixed and determined by nature (there is only one such location in Barbados. So, supply has no influence in determining economic rent.

Having said that, demand is the only determinant of economic rent. Who or what has the strongest demand? I Barbados right now, there is a high demand for residential lands. This is driven both from external forces (foreign demand) and internal demand. As this demand increases, economic rent will increase given the perfectly inelastic supply of land.

Economic rent offers no incentive given the fixed supply of land. Increasing economic rent will not bring forth more quantity as is the case with other natural resources. However it will fetch the owner a good price.. or shall I say a hefty surplus?

As population grows, the demand for land increases for businesses, farming, housing etc. Supply of land remaining same, that surplus paid to the landowners keeps increasing. (socialists argues that land rent is unearned income and that either land should be nationalized or land rents should be taxed away).

I believe, the best use should be to utilise for eco-residential purposes/villages or living spaces. The income generated for taxes and utility services will be more that generated from tourism facilities with associated maintenance. Beside there is likely to be less externalities with eco-villages.

How is that for discussion?

Julia holder said...

As said before the demise of the cement plant maybe long be overdue but what are the overall benefits of replacing it with a port. if the negative externalities of noise and air pollution are already the problems what will the area gain from having an airport or cruise ship port, an airplane keeps way more noise when it takes off or lands. It is one thing to try to develop an area but Barbados already has all the ports that it needs. I believe Mr Kellman should look for something else to attract tourism and jobs in that area and maybe look into bettering the facilities at the already existing cement plant. In addition the cost of developing an area like St Lucy are superior to what the nation will be benefiting from. It is not just building at airport but building stores, malls, hotels, implementing security (fire and police stations)and what about the relocation of some of the people living there just to implement these ports. And above this the maintenance cost.
Julia Holder

Loren Albertson said...

The rent of the land where the cement plant is currently located would indefinitely increase if it was changed to a port instead of a plant, because tourism is the largest contributor to the island's economy. The society as a whole would also benefit more from the port than the cement plant, because the negative externalities and pollution released into the environment would be greatly decreased. In contrast, I do not think relying on one huge industry for the islands entire revenue is a practical economic approach because of the possibility of uncertainty/fluctuations, etc.

Marium said...

Land rent is partly due to differences of productivity but chiefly to advantage of location. The land rent for the are would definitely increase if value if added to the area through the construction of an airport or a port. The construction of a port or an airport would increase the aggregate market value of all properties within the area. Since Barbados depends largely on the tourism sector, a cost and benefit analysis could be utilized to determine the opportunity costs for various land uses.

Marium said...

Land rent is partly due to differences of productivity but chiefly to advantage of location. The land rent for the are would definitely increase if value if added to the area through the construction of an airport or a port. The construction of a port or an airport would increase the aggregate market value of all properties within the area. Since Barbados depends largely on the tourism sector, a cost and benefit analysis could be utilized to determine the opportunity costs for various land uses.

Ryan McKnight said...

End Game -- I foresee the land going commercial (maybe a port or airport) or residential if the cement plant closes its doors...even if the greatest economic rent from the land could be realized by conserving/protecting it.

Although I could be wrong, the Government of Barbados seems to place far less importance on positive/negative environmental externalities than on costs/benefits already incorporated into the present (or future) MKT.

See Graeme Hall wetland debate...
http://www.graemehall.com/press/releases/mangrove-wetland-disappearing/index.htm