Verkavelingsprojecten

Economic Structure

As a resource rich country the economy is dominated by the mining sector. The mining sector is the leading sector in terms of export and fiscal revenues, providing for more than 90% of all exports in 2005, and about 30% of fiscal revenues. The agriculture sector is of increasing importance, after some years of declining significance. In recent years the tourism sector has shown significant growth. There is also a large central government sector and many state-owned enterprises in several sectors. The central government employs over one third of the formal Surinamese workforce.

Table 2.1 Contribution to GDP and employment by economic sectors

Source: General Bureau of Statistics (GBS), Foundation for Planning (SPS)

* The employment figures for the primary sector include the alumina processing and hydro-energy sector.

After several years of very high fiscal deficits, the public finances improved in 2003 and 2004. Although the fiscal budget projected a deficit of SRD. 370.6 million (12,3% of GDP) in 2004, according to preliminary figures the fiscal deficit was at a much lower level of SRD. 72.2 mln., 2,4% of GDP, down from 3,3% in 2003. This was due to higher revenues from the mining sector.

Table 2.2 Public Finance (% of GDP)

Source: Ministry of Finance, GBS; *budget figures

The fiscal deficit in the first quarter of 2005 on a cash account basis was SRD. 60.4 million, down from a surplus of SRD. 4.9 mln. in the first quarter of 2004. This was due to higher expenditures before the May elections and higher subsidies for oil. The government expenditures for goods and services increased from SRD. 63.1 mln. in the last quarter of 2004 to SRD. 131.8 mln. in the first quarter of 2005. It’s expected that the fiscal budget will deteriorate further in the second and third quarter of 2005. The loosening of the fiscal discipline had a negative impact on the value of the Surinamese dollar, the SRD. Although the official quoted rate at banks and cambios is still SRD. 2.75 - 2.80 for USD. 1.- there is practically no supply. The free market rate as of mid June is SRD. 2.95 for USD. 1.-.

The external public debt is on a sound manageable level of USD. 381.6 million at the end of 2004. Approximately 14,3% of the external debts has a multilateral status, 76,9% has a bilateral status and about 8,8% is export credit facilities. The internal public debt was SRD. 554,3 million at the end of 2004. With an dept/GDP ratio of 45,4% of GDP, Suriname has one of the lowest dept/GDP ratios in the Caribbean. In 2003 Suriname has the lowest dept/GDP ratio of the 15 Caricom member countries.

Table 2.3 Public Debt (% of GDP)

Source: Ministry of Finance, SPS and the Bureau voor de Staatsschuld, *Prelimanry figures;

** Regards GDP at market prices including informal sector.

With an import of USD 532 million (41.2% of GDP) and an export of USD 579 million (44.8% of GDP) the trade volume of Suriname amounted up to over USD 1,111 million in 2004. The trade surplus was USD 47 million (3.6% of GDP).

The export increased from USD. 437 million in 2001 to USD. 579 million in 2004, an increase of 32,5%, reflecting higher export volumes and prices for alumina, petroleum and gold. The import increased from USD. 297 million in 2001 to USD. 532 million in 2004. The main factor was the increased spending power and higher investments, including foreign direct investments in the gold sector.

Table 2.4 External sector (USD 1 million)

Source: Central Bank of Suriname

Macro-economic Development

Although Suriname has a bad track record for macro-economic performance in the period 1980-2000, the country improved its policies and is now one of the best performers in the Caribbean. According to a recent IMF study Suriname ranked fourth of 14 Caricom countries on a relative ranking on macro-economic performance.

With an average GDP growth of 5.2% in the period 2001-2005 Suriname has a strong economic performance, reflecting the surge in commodity prices and increased mining output. For 2006 the real GDP growth is projected to be 6.4%. The strong economic performance and prudent fiscal and monetary policies have resulted in a stable macro-economic environment. The average fiscal deficit in the period 2001-2005 was 1.3% of GDP. Inflation has risen in 2005, mainly as a result of a doubling of domestic fuel prices.

In table 2.1.2 and 2.1.3 some macro-economic indicators are provided;

Table 2.1.2 Macroeconomic indicators 2002-2006

Source: GBS, SPS, IMF, CBvS; * preliminary figures, ** estimates

1. CBvS-figures
2. SPS-figures
3. Figures of 2002-2004 are GBS figures, while that of 2005 and 2006 are CBvS-estimates.

Table 2.1.3 Investments and savings (% of GDP)

Source: IMF; ** projections

Public Finances
After several years of high fiscal deficits, the public finances improved since 2003. Although the fiscal budget projected a deficit of SRD. 321.1 million (8.4% of GDP) in 2005, according to preliminary figures the fiscal deficit was about 3% of GDP.

Table 2.1.4 Public Finance (% of GDP)

Source: Ministry of Finance, SPS; * budget figures

In September 2005 the government adjusted the fuel price to the increased world oil prices. The tax on fuel was also raised, resulting in higher revenues for the government. These higher revenues are not taken into account in the fiscal budget of 2006. Therefore the recent projections of the fiscal deficit in 2006 are on a much lower level than the projected 9.3% in the fiscal budget.

Public Debt
With a dept/GDP ratio of 41.5% of GDP, Suriname has one of the lowest dept/GDP ratios in the Caribbean.

To institutionalize fiscal discipline, the government passed the 2002 Public Debt Act. This act established a debt ceiling (i.e., 15% of GDP for the domestic debt and 45% of GDP for the external debt) and established legal and financial penalties for the Minister of Finance and the Governor of the Central Bank for breaching these limits. The Public Debt Act also sets up the Surinamese Debt Management Organization (SDMO) whose main focus is to develop and implement debt management strategy, maintain central records of government debt, provide payment instructions and control debt payments.

The Public Debt Act of 2002 regards non-disbursed amounts of committed loans and non-recalled guarantees also as debt. Internationally these components are not regarded as debt.

The external public debt according the definition of the Public Debt Act of 2002 was USD. 504.4 mln. at the end of  2005, or 37.5% of GDP. According the international definitions the external public debt is on a sound manageable level of USD. 400.3 million at the end of  2005, or 29.8% of GDP. Approximately 14% of the external debts have a multilateral status, 83% have a bilateral status and about 3% are commercial debt.

The internal public debt according the definition of the Public Debt Act of 2002 was SRD. 847.0 mln. at the end of 2005. According international definitions the internal public debt was SRD. 724.4 million at the end of  2005.

Table 2.1.5 Public Debt

Source: SDMO

External debt in USD millions; Domestic debt in SRD millions.

1. According the debt definition of the Public Debt Act 2002.
2. According the international debt definition.

Suriname has some arrears with payments to bilateral loans. Regarding commercial loans there are no arrears and Suriname has a good track record in the servicing of commercial loans.

External Sector

The export of goods on a cash account basis increased from USD. 437 million in 2001 to USD. 726.9 million in 2005, an increase of 74.5%, reflecting higher export volumes and prices for alumina, petroleum and gold. The import of goods on a cash basis increased from USD. 297 million in 2001 to USD. 768.9 million in 2005. The main factor was the increased spending power and higher investments, including foreign direct investments in the gold and bauxite sectors.

Table 2.1.6 External sector (millions USD) 2001 - 2005

Source: Central Bank of Suriname, *preliminary figures

Social Partnership

Private sector organizations and labor unions are well established. The three most important organizations representing the private sector are the Surinam Trade and Industrial Association (STIA/VSB), the Association of Surinamese Manufacturers (ASFA) and the Chamber of Commerce and Industry (KKF).
The VSB’s membership (about 200 companies) spans all economic sectors, with large companies in the mining, banking and commercial sector playing a leading role. ASFA’s members (about 150) are mostly domestically owned manufacturing companies. The KKF has the largest membership of the private sector organizations (about 21,000 officially registered, of which about 15,000 active) due to its role in managing the register of companies. It places a special emphasis on promoting policies that support micro, small and medium-sized companies.

The three dominant private sector organizations play a leading role in the call for a shift in the development paradigm: a greater role for markets and the private sector and a lesser role for the state.

Trade unions are well established and have a long history. Their power is reflected in the large influence they have on wage policies and labor legislation. Several trade-union leaders are also prominent politicians, which gives them influence on political developments.
The multitudes of individual unions are members of an umbrella group for all trade unions in Suriname, the Council of Trade Unions in Suriname (RAVAKSUR). The most important groupings are four federations or clusters of unions namely, the Progressive Trade Union Federation (C-47), the General Alliance of Trade Union Associations in Suriname (de Moederbond), the Federation of Civil Servants Organization (CLO) and the Federation of Farmers and Agrarians (FAL).

The role of employers’ organizations and unions is institutionalized in representation in the State Advisory Council, the Social-Economic Council (SER) and several tripartite bodies.
The State Advisory Council consists of representatives of political parties represented in Parliament and the workers and employers associations. The State Advisory Council that is chaired by the President is the highest advisory institution for the government.

Economic Structure

As a resource rich country the economy is dominated by the mining sector. The mining sector is the leading sector in terms of export and fiscal revenues, providing for more than 90% of all exports in 2005, and about 30% of fiscal revenues. The agriculture sector is of increasing importance, after some years of declining significance. In recent years the tourism sector has shown significant growth. There is also a large central government sector and many state-owned enterprises in several sectors. The central government employs over one third of the formal Surinamese workforce.

Table 2.1 Contribution to GDP and employment by economic sectors

Source: General Bureau of Statistics (GBS), Foundation for Planning (SPS)

* The employment figures for the primary sector include the alumina processing and hydro-energy sector.

After several years of very high fiscal deficits, the public finances improved in 2003 and 2004. Although the fiscal budget projected a deficit of SRD. 370.6 million (12,3% of GDP) in 2004, according to preliminary figures the fiscal deficit was at a much lower level of SRD. 72.2 mln., 2,4% of GDP, down from 3,3% in 2003. This was due to higher revenues from the mining sector.

Table 2.2 Public Finance (% of GDP)

Source: Ministry of Finance, GBS; *budget figures

The fiscal deficit in the first quarter of 2005 on a cash account basis was SRD. 60.4 million, down from a surplus of SRD. 4.9 mln. in the first quarter of 2004. This was due to higher expenditures before the May elections and higher subsidies for oil. The government expenditures for goods and services increased from SRD. 63.1 mln. in the last quarter of 2004 to SRD. 131.8 mln. in the first quarter of 2005. It’s expected that the fiscal budget will deteriorate further in the second and third quarter of 2005. The loosening of the fiscal discipline had a negative impact on the value of the Surinamese dollar, the SRD. Although the official quoted rate at banks and cambios is still SRD. 2.75 - 2.80 for USD. 1.- there is practically no supply. The free market rate as of mid June is SRD. 2.95 for USD. 1.-.

The external public debt is on a sound manageable level of USD. 381.6 million at the end of 2004. Approximately 14,3% of the external debts has a multilateral status, 76,9% has a bilateral status and about 8,8% is export credit facilities. The internal public debt was SRD. 554,3 million at the end of 2004. With an dept/GDP ratio of 45,4% of GDP, Suriname has one of the lowest dept/GDP ratios in the Caribbean. In 2003 Suriname has the lowest dept/GDP ratio of the 15 Caricom member countries.

Table 2.3 Public Debt (% of GDP)

Source: Ministry of Finance, SPS and the Bureau voor de Staatsschuld, *Prelimanry figures;

** Regards GDP at market prices including informal sector.

With an import of USD 532 million (41.2% of GDP) and an export of USD 579 million (44.8% of GDP) the trade volume of Suriname amounted up to over USD 1,111 million in 2004. The trade surplus was USD 47 million (3.6% of GDP).

The export increased from USD. 437 million in 2001 to USD. 579 million in 2004, an increase of 32,5%, reflecting higher export volumes and prices for alumina, petroleum and gold. The import increased from USD. 297 million in 2001 to USD. 532 million in 2004. The main factor was the increased spending power and higher investments, including foreign direct investments in the gold sector.

Table 2.4 External sector (USD 1 million)

Source: Central Bank of Suriname

Macro-economic Development

Although Suriname has a bad track record for macro-economic performance in the period 1980-2000, the country improved its policies and is now one of the best performers in the Caribbean. According to a recent IMF study Suriname ranked fourth of 14 Caricom countries on a relative ranking on macro-economic performance.

With an average GDP growth of 5.2% in the period 2001-2005 Suriname has a strong economic performance, reflecting the surge in commodity prices and increased mining output. For 2006 the real GDP growth is projected to be 6.4%. The strong economic performance and prudent fiscal and monetary policies have resulted in a stable macro-economic environment. The average fiscal deficit in the period 2001-2005 was 1.3% of GDP. Inflation has risen in 2005, mainly as a result of a doubling of domestic fuel prices.

In table 2.1.2 and 2.1.3 some macro-economic indicators are provided;

Table 2.1.2 Macroeconomic indicators 2002-2006

Source: GBS, SPS, IMF, CBvS; * preliminary figures, ** estimates

1. CBvS-figures
2. SPS-figures
3. Figures of 2002-2004 are GBS figures, while that of 2005 and 2006 are CBvS-estimates.

Table 2.1.3 Investments and savings (% of GDP)

Source: IMF; ** projections

Public Finances
After several years of high fiscal deficits, the public finances improved since 2003. Although the fiscal budget projected a deficit of SRD. 321.1 million (8.4% of GDP) in 2005, according to preliminary figures the fiscal deficit was about 3% of GDP.

Table 2.1.4 Public Finance (% of GDP)

Source: Ministry of Finance, SPS; * budget figures

In September 2005 the government adjusted the fuel price to the increased world oil prices. The tax on fuel was also raised, resulting in higher revenues for the government. These higher revenues are not taken into account in the fiscal budget of 2006. Therefore the recent projections of the fiscal deficit in 2006 are on a much lower level than the projected 9.3% in the fiscal budget.

Public Debt
With a dept/GDP ratio of 41.5% of GDP, Suriname has one of the lowest dept/GDP ratios in the Caribbean.

To institutionalize fiscal discipline, the government passed the 2002 Public Debt Act. This act established a debt ceiling (i.e., 15% of GDP for the domestic debt and 45% of GDP for the external debt) and established legal and financial penalties for the Minister of Finance and the Governor of the Central Bank for breaching these limits. The Public Debt Act also sets up the Surinamese Debt Management Organization (SDMO) whose main focus is to develop and implement debt management strategy, maintain central records of government debt, provide payment instructions and control debt payments.

The Public Debt Act of 2002 regards non-disbursed amounts of committed loans and non-recalled guarantees also as debt. Internationally these components are not regarded as debt.

The external public debt according the definition of the Public Debt Act of 2002 was USD. 504.4 mln. at the end of  2005, or 37.5% of GDP. According the international definitions the external public debt is on a sound manageable level of USD. 400.3 million at the end of  2005, or 29.8% of GDP. Approximately 14% of the external debts have a multilateral status, 83% have a bilateral status and about 3% are commercial debt.

The internal public debt according the definition of the Public Debt Act of 2002 was SRD. 847.0 mln. at the end of 2005. According international definitions the internal public debt was SRD. 724.4 million at the end of  2005.

Table 2.1.5 Public Debt

Source: SDMO

External debt in USD millions; Domestic debt in SRD millions.

1. According the debt definition of the Public Debt Act 2002.
2. According the international debt definition.

Suriname has some arrears with payments to bilateral loans. Regarding commercial loans there are no arrears and Suriname has a good track record in the servicing of commercial loans.

External Sector

The export of goods on a cash account basis increased from USD. 437 million in 2001 to USD. 726.9 million in 2005, an increase of 74.5%, reflecting higher export volumes and prices for alumina, petroleum and gold. The import of goods on a cash basis increased from USD. 297 million in 2001 to USD. 768.9 million in 2005. The main factor was the increased spending power and higher investments, including foreign direct investments in the gold and bauxite sectors.

Table 2.1.6 External sector (millions USD) 2001 - 2005

Source: Central Bank of Suriname, *preliminary figures

Social Partnership

Private sector organizations and labor unions are well established. The three most important organizations representing the private sector are the Surinam Trade and Industrial Association (STIA/VSB), the Association of Surinamese Manufacturers (ASFA) and the Chamber of Commerce and Industry (KKF).
The VSB’s membership (about 200 companies) spans all economic sectors, with large companies in the mining, banking and commercial sector playing a leading role. ASFA’s members (about 150) are mostly domestically owned manufacturing companies. The KKF has the largest membership of the private sector organizations (about 21,000 officially registered, of which about 15,000 active) due to its role in managing the register of companies. It places a special emphasis on promoting policies that support micro, small and medium-sized companies.

The three dominant private sector organizations play a leading role in the call for a shift in the development paradigm: a greater role for markets and the private sector and a lesser role for the state.

Trade unions are well established and have a long history. Their power is reflected in the large influence they have on wage policies and labor legislation. Several trade-union leaders are also prominent politicians, which gives them influence on political developments.
The multitudes of individual unions are members of an umbrella group for all trade unions in Suriname, the Council of Trade Unions in Suriname (RAVAKSUR). The most important groupings are four federations or clusters of unions namely, the Progressive Trade Union Federation (C-47), the General Alliance of Trade Union Associations in Suriname (de Moederbond), the Federation of Civil Servants Organization (CLO) and the Federation of Farmers and Agrarians (FAL).

The role of employers’ organizations and unions is institutionalized in representation in the State Advisory Council, the Social-Economic Council (SER) and several tripartite bodies.
The State Advisory Council consists of representatives of political parties represented in Parliament and the workers and employers associations. The State Advisory Council that is chaired by the President is the highest advisory institution for the government.

The  government’s strategic goals are stated in the Multi-annual Development Plan 2006-2010 (MOP 2006-2010). The MOP 2006-2010 has three pillars:

1. Economic Development
2. Social Development
3. Righteous distribution of wealth.

The main goal for economic development is doubling of the per capita GDP in 2020. This will be realized by a greater emphasis on the domestic private sector, especially knowledge intensive sectors. Also the creation of (international) business clusters will be stimulated to create scale advantages and access to knowledge and technology. The following sectors have been identified as high potential: tourism, water industry, handicraft, livestock and traditional dance and music.

Public Sector Reform has also a high priority. The aim of public sector reform is to create a modern and efficient decentralized public sector. The government also plans to privatize non-strategic state-owned enterprises. Some state-owned enterprises have been identified to be privatized.

Corruption

Due to the characteristics of its economic and institutional systems Suriname is vulnerable to corruption. The state has a large role in the economy, not only as government but also due to the many state-owned enterprises.
Especially the procurement for public works and large contracts for goods and services are vulnerable to corruption.

In 2003 former Minister of Finance and Natural Resources in the Wijdenbosch government (1996-2000) Errol Alibux was sentenced for a period of one year on corruption charges. The New Front government (2000-2005) was also plagued with several corruption scandals at the Ministries of Public Works and Agriculture. In the corruption case of the Ministry of Public Works payments were made for unfulfilled jobs. Charges have been brought against several high-ranking civil servants and  former Minister Balesar by  the public prosecutor.
With a score of 3.2 Suriname ranks fourth in the Caribbean on the Corruption Perception Index 2005 (CPI) of Transparency International. In 2004 Suriname ranked second in the Caribbean with a score of 4.3. The deterioration is due to the recent corruption scandals, where high government officials were involved.

General

Suriname has a fairly free trade system, with large trade-flows relative to its GDP. The unweighted average rate tariff is 9.7% and there are no non-tariff barriers.

Suriname is a member of CARICOM and is a signatory to several regional and international trade agreements such as the Cotonou convention, the Free Trade Area of the America’s (FTAA) and the WTO.

international Trade

Trade figures/Main Trade Partners

Trade figures

With an import of USD 740 million (48.62% of GDP) and an export of USD 833 million (54.8% of GDP) the trade volume of Suriname amounted up to USD 1,573 million in 2004. The trade surplus was USD 93 million (6.1% of GDP).

The main export products of Suriname are mining (alumina, gold and petroleum) and agricultural (fish, shrimp, rice) products.
The government supports the diversification of the export sector. Imports are dominated by manufactured products, particularly machinery and transport equipment (mainly motor vehicles) and chemicals. These products account for almost half of Suriname’s total imports. A wide variety of food products account for  about 20% and fuels for some 8%.

Main trade partners

With regard to import trade the main trade blocks are NAFTA, EU and Caricom. These 3 trade blocks are accountable for about 76 % of the total import. Within the EU, the Netherlands is by far the largest source of imports, accounting for some 20% of Suriname’s total imports. With regard to the export the main trade-partners of Suriname are also NAFTA, the EU and Caricom. About 63 % of the Surinamese export goes to these trading blocks.

Trade Regulations

License/Customs/Duties

License

The trade regime of Suriname is a liberalized one. With regard to imports and exports there are no licenses required except for a few items that do require an import or export license or a certificate in order to enter or leave Suriname.

There are four categories of goods:
1.      Goods of which import or export is forbidden;
2.      Goods that may be imported or exported only by license;
3.      Goods that require a certificate to import;
4.      Goods that are forbidden to import or export.

Imports

Companies wishing to import goods that require a license, have to apply for a license (H-99 form) at the Import, Export and Currency-control Department of the Ministry of Trade and Industry. Certificates are provided by the Ministry of Agriculture (MoA) and the Ministry of Health (MoH). In table 2.8 the items that require a license or certificate are listed.

Table 2.8 Articles that require a license or a certificate

Source: Ministry of Trade and Industry

Source: Ministry of Trade and Industry

The Minister of Trade and Industry is entitled to grant exemptions for the import of goods that are forbidden.

Exports

In table 2.9 and 2.8 respectively, the goods that are forbidden to export and the goods that require a license are provided. All other goods are exempted from export licenses.

Table 2.10 Goods of which export is forbidden and goods that require a license to export

Source: Ministry of Trade and Industry

The minister of Trade and Industry is entitled to grant exemptions for the exports of goods that are forbidden. Companies wishing to export goods that require a license, have to apply for a license (H-99 form) at the Department for Import, Export and Currency-control of the Ministry of Trade and Industry.

Customs

Imports
The importer has to complete an International Trade Form (IT-form). There are custom brokers who assist with completing the form. Once the goods have arrived in Suriname, the IT-form, supported by other documents such as the Single Document, original invoice from the supplier, bill of loading and if required, an import-license (H-99 form) and health certificate, has to be presented to the customs at the department Asycuda. The documents are scanned into the asycuda system for statistical information and the duties are determined accordingly. Once the documents have been stamped by the customs and the duties have been paid at the tax collector for excise duties, an inspection is carried out at the port of Paramaribo, before the goods can be cleared.

Exports
The exporter also has to complete the IT-form. This IT-form supported by the Single document and if required an export license (H-99 form) and health certificate, has to be presented to the customs at the department Asycuda. The documents are scanned into the asycuda system for statistical information and the duties (statistical fee and consent right fee) are determined accordingly.

Duties
As a member of Caricom, Suriname implemented the Caricom agreement on trade, which includes duty-free trade with other Caricom-countries and a Common External Tariff (CET) with other countries. The items are classified according to the Harmonized Commodity Description and Coding System. The CET-rate is according to the tariff-list of the Tariff Duty Act 1996 and varies between 5 to 40 percent. Raw materials are subject to a rate of 5 %, semi-manufactured articles are subject to a rate of 10 %, end products are subject to a rate of 20 % and luxury goods are subject to a rate of 40 %. The basis for the duties is the Cost Insurance Freight (C.I.F.) value of the goods.

Besides the CET-rate, statistical fees and consent right fees are required for imports and exports. For exports the statistical fee is 0.5 % of the free on board (F.O.B.) value and the consent right fee is 0.1 % of the F.O.B. value. For imports the statistical fee is 0.5 % of the C.I.F. value and the consent right fee is1.5 % of the C.I.F. value.

Trade Agreements

Caricom/ACP-EU/FTAA

Caricom Single Market and Economy (CSME)

The Caricom Single Market and Economy was launched on January 1st 2006 by Suriname, Jamaica, Barbados, Belize, Guyana and Trinidad and Tobago. With the CSME the Caribbean countries further integrated their economies, creating a single market of about 6 million people.

The Caribbean Community, Caricom was established in 1973 on the basis of the Treaty of Chaguaramas. The Treaty is essentially two agreements-the Treaty establishing the Caribbean Community and the Annex to the Treaty, setting out the details of the Caribbean Common Market. These two agreements were signed separately and permitted a country to be legally a member of one without being a member of the other.
The Treaty establishing CARICOM and its Annex were signed at Chaguaramas, Trinidad on July 4, 1973, and came into effect on august 1, 1973.

Suriname joined the Community in July 1995 and the Common Market in January 1996. Suriname was the first non-English speaking member of the Caricom. The Caricom has fifteen member states.

The objectives of the Community are set out in Article 4 of the Treaty and are based on the following three pillars:

• economic integration through a common market and common trade policies;
• functional cooperation (pooling of resources and sharing of services in the area of human and social development);and
• coordination of foreign policies (presenting a united front in its relations with countries outside the grouping).

There is a free movement of goods within the Common market. No duties are required for imports from other Caricom member countries and quantitative restrictions are forbidden. Only products originating from the member-countries qualify for this treatment. A Caricom-certificate is required to apply for this treatment. In Suriname the Chamber of Commerce and Industry has the authority to grant Caricom-certificates to products.

The heads of State of the Caricom decided in 1989 to deepen the integration movement and to better respond to the challenges and opportunities presented by globalization by establishing the CARICOM Single Market and Economy (CSME).
While a primary focus of the Common Market was on liberalizing trade in goods among the members, the Single Market and Economy not only expands this process to include services, but also provides for the free movement of capital (money), skilled labor and the freedom to establish business enterprises anywhere in the community. It also deepens economic cooperation among the member states participating in the Single Market and Economy. Of particular importance is the right that the CSME grants to any CARICOM national to establish a business in any member state and be treated as a national of that state. This complements the opportunities that the CSME will provide for greater cooperation among businesses to improve and increase the quality and quantity of goods and services they produce and to do so at better prices.
A single market for goods already exists among Caricom member states, as more than 95 per cent of goods produced in the Region move freely across the Region. With the establishment of  the Single Market,  the restrictions on the right of establishment, the movement of services, capital and skilled labor will be removed.

The main objectives of the CSME are: full use of labor (full employment); full exploitation of the other factors of production (natural resources and capital); competitive production leading to greater variety, quality and quantity of goods and services, thereby providing greater capacity to trade with other countries. It is expected that these objectives will in turn provide improved standards of living and work as well as sustained economic development.

The legal platform of the CSME are the nine protocols which amends the Treaty of Chaguaramas

The Caribbean Court of Justice (CCJ) has the compulsory and exclusive jurisdiction to hear and determine disputes relating to the interpretation of the Treaty.

Key elements of the Caricom Single Market and Economy include:

Free movement of goods and services-through measures such as the elimination of all barriers to intra-regional movement and harmonization of standards to ensure acceptability of goods and services traded. There already exists a single market for goods among the Caricom member states as over 95 per cent of goods move freely across the Region.

Right of establishment-to permit the establishment of CARICOM-owned businesses in any member state without restrictions and on the same terms as national enterprises, in effect according them ‘national treatment’.

A Common External Tariff-a rate of duty applied by all members of the Single Market on entry of a product from a country, which is not a member of the Single Market.

Free circulation-free movement among member states of goods imported from extra-regional sources. This requires collection of duties only at first point of entry into the Single Market and the establishment of arrangements for sharing the customs revenue collected from these goods among the countries to which they are consigned. This aspect is envisaged in the Revised Treaty but is still to be developed;

Free movement of capital-through measures such as eliminating foreign exchange controls, convertibility of currencies (or a common currency) and integrated capital markets, such as a regional stock exchange;

A Common trade policy-agreement among the members on matters related to internal and international trade and a coordinated external trade policy negotiated on a joint basis;

Free movement of labor- through measures such as removal of work permits, hassle-free travel, providing for the transfer of social security benefits, harmonizing social services, such as education and health and establishing common standards and measures for accreditation and equivalency of qualifications and skills;

Other measures: Harmonization of Laws: such as the harmonization of company, intellectual property and other laws.

There are also a number of economic, fiscal and monetary measures and policies that are also important for the full achievement and proper functioning of the CSME. These include:

Economic policy measures: coordinating and converging macro-economic policies and performance; harmonizing foreign investment policy and adopting measures to acquire, develop and transfer appropriate technology;

Monetary policy measures: coordinating exchange rate and interest rate policies as well as the commercial banking market; and

Fiscal policy measures: including coordinating indirect taxes and national budget deficits.

ACP-EU

The relation between Suriname and the EU is regulated by the Cotonou Agreement of June 2000. The Cotonou Agreement provides the framework for the EU’s co-operation with 78 ACP countries until 2020. As a successor to the Lomé Conventions, the Cotonou Agreement covers most aspects of the EU’s co-operation with the ACP countries, including trade, aid and political dialogue.
As an ACP country rice and bananas from Surinamese enjoy preferential access to the EU-market. ACP bananas are guaranteed a duty free access until 2008.

According to the Cotonou Agreement, the parties agreed to conclude new WTO-compatible trade agreements, which aim to progressively remove barriers to trade and enhance cooperation in all areas relevant to trade. These trade arrangements are supposed to replace the preferential non-reciprocal trade system foreseen by the Lomé Conventions. The objective is to enable ACP states to play a full part in international trade and advance poverty eradication and sustainable development in the ACP countries. To this end the ACP and the EU began negotiations on Economic Partnership Agreements (EPAs) in September 2002, and are supposed to end these negotiations by December 2007 at the latest. EPA’s, which are an integral part of the Cotonou Agreement and are supposed to embody the new ACP-EU trade arrangements, are based on four main principles: partnership, regional integration, development and compatibility with the WTO.

As part of the ACP countries Suriname is also actively participating in negotiations to establish trade and economic partnership agreements (EPAs) with the EU to be effective from 1 January 2008.

FTAA (Free Trade Area of the America’s)

At the summit of the America’s in Miami in December 1994 Head of States of 34 nations agreed on working towards a free trade area at the Western Hemisphere and agreed to eliminate barriers regarding trade and investments among the countries in the Americas. The participating countries have a total population of 757 million people, a GDP of about USD 8 trillion and a trade volume of about USD 2.4 trillion. The FTAA will by far be the largest free trade area in the world creating enormous business opportunities in the participating countries.

Nine negotiating groups and three committees have been established under the FTAA. The negotiating groups cover market access, agriculture, services, intellectual property rights, competition policy, investment subsidies, dispute settlement, and anti-dumping and countervailing duties. The consultation committees are on small economies, electronic commerce and civil society. Although the deadline for the establishment of the FTAA was december 2005, the negotiations are suspended due to disagreement on several issues like the subsidies for US-farmers.

Direct Taxes

The tax system in Suriname is regulated by the Income Tax Law 1922, the Dividend Tax Law 1965 and the Wage Tax Act 1981.

Taxation of Companies

Companies resident in Suriname are subject to corporate income tax, which is levied on their worldwide income after deduction of business expenses. Non-resident companies are taxable only on income derived from a permanent establishment. Taxable is income from immovable property located in Suriname and certain other less significant types of Surinamese source income. The basis of assessment of a resident company’s corporate tax liability is the amount of profit remaining after certain deductions and possible relief for tax losses. Suriname’s tax law 0defines "profit" as "all the benefits derived from the business of an enterprise, regardless of the name or the form of the benefits". Capital gains are considered to be ordinary profits and are taxed accordingly. This principle is applied each year. Payments are made in the current year on the basis of a pay-as-you-earn system (self assessment system).

The corporate income tax rate for resident companies and Surinamese branches of foreign companies consists of one flat rate of 36 % of the gross profit.

The rough calculation of the taxable incomes of a company progresses as follows:

Company income ……...………

Deductible charges……....……. -/-

------------------------------------------

Financial profit ………….….…

Tax offset-table losses ….….... -/-

Reservations ……….……......... -/-

------------------------------------------

Taxable income **************

The determination of the annual profit should be based on the so-called "sound business practice principle". This means that the annual profit should be calculated according to the generally accepted accounting principles, unless there are specific contrary provisions to tax law. The annual profit concept is dominated by the so-called principle of "prudence concept".

Depreciation rates All the operating costs of the company are tax-deductible, within the limits set by the law (good business practice). Expenses made with regard to the incorporation of a company are tax deductible. Donations to churches, charitable-, cultural- and scientific institutions are also tax deductible. Interest is deductible provided that it is calculated on an arm’s length basis. No formal debt to equity ratio requirement exists. However, a Surinamese company must be capable of handling its debts through interest payments and/or loan principal repayments to prevent a possible reclassification of the debt to equity. Depreciation must be in accordance with sound business practice. Depreciation rates are based on the economic life of the assets.

Common straight-line depreciation rates are:

* Buildings 2 - 5 %

* Machinery and manufacturing equipment 10 - 20 %

* Transportation vehicles 25 - 33.33%

* Tools and assets of small value 100 %

* Office equipment 20 - 50 %

* Office furniture and fixtures 10 - 20 %

Intangible assets, including goodwill, can be amortized over their operative lives. For goodwill this is usually 2 to 5 years. A detailed business administration is required.

Recuperation of previous year losses Net operating tax losses can be carried forward for a period of 7 years. However, tax losses incurred during the first 3 years of the company’s existence can be carried forward for an indefinite period of time. Where a start-up tax loss and a normal net operating tax loss can be carried forward simultaneously, the latter tax loss will be offset first. Tax losses incurred by a permanent Surinamese establishment of a foreign company are subject to the same rules as mentioned above.

Dividend tax Dividend distributed by a Surinamese company to its (foreign) parent company is subject to 25 % withholding tax. The distributing company has a withholding, complementary and payment liability. Interest, royalties, management fees, fees for technical assistance etc. paid by a Surinamese company to a company abroad are not subject to withholding taxes. However, the bottom line is that first the company has to pay income tax (36 %) and at the distribution of a dividend the shareholder has to pay 25 % dividend tax. The investment act of 2001 has regulations on participation exemption for entities.

The Income Tax Act supplies regulations for avoiding double taxation. In accordance with the income tax law it is possible that the Surinamese authorities decide by State Resolution to give a company total or partial tax exemption. Suriname has a tax-treaty with the Netherlands for avoidance of double taxation. With regard to the application of special tax incentives, it is common for sizeable foreign investments to conclude a special agreement with the Government of Suriname.

Taxation of individuals

Individuals domiciled in Suriname are taxed on net worldwide income, wherever received. Net income is the difference between total income and deductible losses, deductible business expenses and the basic personal allowance. Non resident individuals are taxed on "Surinamese net income", which is the total income earned in Suriname, less deductible losses made in Suriname and interest on debts secured by a mortgage on real estate in Suriname. For income tax there is a payments exemption of SRD. 1,890, = per year. The income rates are provided in table 2.11.

Table 2.11 income rates

Indirect Taxes

General

The Financial Services sector accounted for about 11% of GDP in 2003. The sector is composed of the Central Bank of Suriname (CBvS), 8 commercial banks, 1 development bank, 10 life and general insurance companies, 31 pension funds, foreign exchange bureaus (cambio’s), a stock market and 2 credit co-operatives. The non-bank financial institutions represent less than a third of financial sector assets. Banks and insurance companies provided for 2.8% of formal employment in 2003.

Banking Sector

General / Services / Credit system / Investment Fund

General

The banking system consists of the Central Bank, eight commercial banks and one development bank. Of the commercial banks, one is foreign owned; three are local private owned, while four are state-owned. The banking system is highly concentrated, with the largest three banks accounting for about 87% of total claims, assets and deposits. The three small state-owned banks mostly provide credit to low-income households for agriculture and housing under mostly social criteria.

The following banks operate in Suriname:

• DSB Bank
• RBTT (Suriname) NV
• Hakrinbank NV (private runned, but the state has a 51%-share)

• Surinaamse Postspaarbank (SPSB) (state-owned)
• Foundation Volkscredietbank (state-owned)
• Landbouwbank NV (state-owned)
• Finabank
• SuriChange Bank
• Nationale Ontwikkelingsbank (state-owned)

In tables 2.20 and 2.21 some figures of the banking sector are provided.

Table 2.20 Accounts of the Banking System (millions of SRD)

Source: Central Bank of Suriname, *preliminary; **projected; 1) As of June 2005

Table 2.21 Key Performance Indicators of the Banking System

Source: Central Bank of Suriname  * as of September 2004

The principal laws governing the banking sector are the Bank Act of 1956, amended in 2005 and the Banking and Credit Institutions Supervision Act of 1968. The Banking and Credit Institutions Supervision Act of 1968 applies to credit institutions, including banks, insurance companies and credit unions. The entity responsible for regulating and supervising the Surinamese financial system is the Central Bank.

To strengthen the banking system the Central Bank introduced new prudential regulations in line with Basel Core Principles. These regulations cover capital adequacy, loan classification and provisioning, large exposure, insider lending and fixed assets revaluation. Also an anti-money laundering law was passed in August 2002.

The banking sector indicators for the main three banks are sound while three of the small state-owned banks have problems. The non-performing loan ratio for the three largest banks is 10%, while that of the small state-owned banks is 32%. The capital adequacy ratios for the three large banks are above Basel minimum guidelines, while those of the small state banks are negative. The authorities have obtained support from the IDB to review the financial situation of the small state-owned banks and to recommend possible solutions. The Minister of Finance announced in January 2006 that he was looking for political support to privatize the small state-owned banks.

Services

Surinamese banks provide a broad range of traditional and innovative services, among others:

• Access to foreign currency mainly in the form of transfers or exchange one currency for another
• Corporate loan for long, medium and short term, nominated in SRD, USD and Euro’s (investment loan and current-acount)
• Consumer loan for long, medium and short term (real estate mortgages, Motor vehicle loan, personal loans)
• Foreign transfers
• Domestic payments
• Various categories of deposits including fixed deposits
• Investment services
• Debit and Credit card
• ATM
• Point of Sale
• Internet-banking
• Phone-banking
• Mobile Recharge

Credit system

The credit system is the most important business for Surinamese banks. The credit portfolio in Surinamese dollars amounted to SRD. 590.6 million as of June 2005, while the foreign currency credit portfolio amounted to USD. 163.4 million.

Table 2.22 Creditportfolio (2002 – 2005)

Source: Central Bank of Suriname, * As of June 2005

Table 2.23 Deposit and lending rates (%)

Source: Central Bank of Suriname,  * As of June 2005

The base interest rates on credit facilities  for enterprises are provided in table 2.24.

Table 2.24 Interest rates (current)

Source: Commercial Banks

The actual interest rates that apply are set in negotiations between the bank and the borrower. The average lending rate as of end 2005 was 17.4% for Surinamese dollars and 9.8% for foreign currency loans. The average lending rate as of the end of June 2005 for Surinamese dollars loans was 18,6, down from 19,1% at the end of March. In December 2005 several banks lowered their base SRD-lending rate with 200 base points. It is therefore expected that the average lending rates will further decrease in 2006.

Foreign currency operations were liberalized in 1992. Companies and individuals can have foreign accounts and foreign currency deposits. Financial institutions are allowed to give foreign currency loans. In 2004 the foreign currency deposits amounted to USD 320.2 million or about 56.5% of total banking system deposits, while FX loans account for 54.6% of total bank lending. At the end of June 2005, the foreign currency deposits amounted to USD. 375.8 million

Investment Fund

As a result of the development cooperation between Suriname and the Netherlands an Investment Fund Development Aid Netherlands – Suriname (IFONS) was established. The IFONS finances projects for the export and the import-replacing sector. The interest rate is the six-months libor-rate + 3%. The first part of the IFONS (Euro 11,4 million) was managed by the National Development Bank. The management of a second part will be tendered among the Surinamese banks in the second half of 2005.

Insurance Sector

There are ten active insurance companies in Suriname. The sector is governed by the Bank Act of 1956, amended in 2005 and the Banking and Credit Institution Supervision Act of 1968.  Insurance companies are considered as ‘credit institutions’ and are subject to Central Bank supervision.

The following services are provided:

• Life insurance
• Accident and health insurance
• Motor vehicle insurance
• Fire insurance
• Ocean hull, marine and aviation insurance

The following insurance companies operate in Suriname:

• Indemnity Insurance Companies:
• Self Reliance NV
• Fatum Schadeverzekering NV
• Assuria Schadeverzekering NV
• Assuria Medische verzekeringen NV
• Parsasco NV
• Clico General Insurance Company NV

Life Insurance Companies:

• Assuria Levensverzekering NV
• Fatum Levensverzekering NV
• Clico Life Insurance Company NV

Funeral Insurance Companies

• Foundation Hamdard
• Hennep Verzorgende Verzekering NV

In tables 2.25 and 2.26 some figures of the Insurance sector are provided

Table 2.25 Asset composition 2001- 2002 (x SRD. 1,000.-)

Source: Central Bank of Suriname

Table 2.26 Profit and Loss Figures 2002 – 2003 (x SRD. 1,000.-)

Source: Central Bank of Suriname

Life insurance companies enjoy preferential fiscal facilities.

Securities markets

There are ten companies listed on the stock exchange. The market capitalization of the Surinamese Stock Exchange (SSE) was SRD 192.5 million at the end of 2004, up from SRD. 144.3 million at the end of 2003, resulting in an increase of the market capitalization ratio from 5.4% to 6.4%. The trading value in 2004 was SRD 163,899.-, down from SRD. 382,200.- in 2003, resulting in a decrease of the turnover ratio from 0.27% in 2003 to 0.09% in 2004. The most traded companies were the Hakrinbank NV, Self Reliance NV and the DSB Bank NV. These three companies accounted for 98% of total turnover.

In the first quarter of 2005 the turnover increased substantially to SRD. 447,732.-, more than 273% of the turnover of 2003.

The SSE is open for trade every second and fourth Thursday of the month. There are five brokers in the SSE.