final report nustar seis december 2011

CURRENT AND PROJECTED

S O C I A L E C O N O M I C I M PA C T S T U DY O F N U S T A R O I L T E R M I N A L I N S T . E U S T A T I U S

December 2011

AIB ECONOMIC AND FINANCIAL SERVICES

NuStar Terminals N.V. - S T . E U S T A T I U S -

AIB ECONOMIC AND FINANCIAL SERVICES Current and Projected Social Economic Impact Assessment NuStar Terminals N.V. December 2011

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CONTENTS

0. Introduction 1

I. Executive Summary 3

II. Extent of the Assessment 8

1. Constitutional changes St. Eustatius 9

2. GDP St. Eustatius 15

2.1 Current GDP St. Eustatius 15

3. Current and projected impact on public finances 18

3.1 Current Payments to the Government of St. Eustatius 18

3.2 Current Impact on GDP 19

3.3 Projected Payments by the Company to the Government of St. Eustatius 20

4. Current and projected impact on comsumption 22

4.1 Current Personnel Spending 22

4.2 Current Consumption: Spending on goods and services and GDP 23

4.3 Projected Personnel Spending 24

4.4 Projected Consumption: Disposable Income and GDP 26

5. Current and projected impact on investment 27

5.1 Current annual spending of the Company 27

5.2 Current actual Spending of the Company: Goods and Services 28

5.3 The direct impact of the Company’s spending on GDP 30

5.4 Projected Spending of the Company over the construction period including G&S 31

6. Impact on export and import activities 34

6.1 Current trade in Goods & Services 34

6.2 Current Balance of payments 36

6.3 Current Balance of Payments contribution to GDP 36

6.4 Projected Balance of payments 38

7. Summation of GDP components 41

7.1 Current Summation on GDP components 41

7.2 Projected Summation on GDP components 44

8. Current & Projected impact on business activity in general 46


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8.1 Current and Projected impact on the different Economic Sectors 46

8.2 Current and Projected number of Businesses affected 46

8.3 Current and Projected impact on Business Activities 47

9. Current & Projected impact on labour activities 50

9.1 Current and Projected Impact labour Activities 50

9.2 Current and Projected compensation of employees 53

9.3 Current and Projected indirect effects on the GDP 56

10. Current and Projected Social Impact 58

10.1 Current Social Impact 58

10.2 Projected Social Impact 59

11. A qualitative approach to the economic and social impact of

NuStar’s intended investment in the coming years on Statia 62


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0. INTRODUCTION

The AIB Economic and Financial Services (AIB EFS) was requested to conduct a Social

Economic Impact Study (SEIS) of NuStar Terminals N.V. and its affiliates (the Company or

NuStar), established in St. Eustatius. NuStar Terminals N.V. is a refined product terminal, which

contains 67 tanks with a capacity of 13 million barrels and currently has 139 employees. The

affiliates consist of the following companies Bicen Development Corporation N.V., which owns

the property land, housing and furnishings of the expatriates on St. Eustatius, Saba Company

N.V., owns the land connected with the terminal, Seven Seas Steamship Company (Sint

Eustatius) N.V. provides agency services to vessels that call at St. Eustatius, particularly vessels

from NuStar, and NuStar Terminals Marine Services N.V. which sells bunkers (marine fuels).

In 2009, AIB EFS conducted a social economic impact study for the Company, which measured

the direct as well as indirect impacts of NuStar on the economy of St. Eustatius for the end of

2008 through the Gross Domestic Product (expenditure approach) which measured the direct

impact of the Company on the economy. It was agreed that another SEIS would be prepared to

cover the direct as well as indirect impact of the current situation (year end 2010). In addition,

the SEIS would cover the projected direct and indirect impacts of the Company on the island

related to a significant planned investment of approximately USD 477 million on the island, with

the current situation as point of departure. The projected impact after the expansion when the

terminal is operational will be taken into account, with due consideration of the constitutional

changes for St. Eustatius.

The AIB EFS has approached this assignment with the use of a mix of methodologies to

approximate the added value of the Company in St. Eustatius quantitatively as well as

qualitatively. The various methodologies used are portrayed in each related section.

Verifications were made (direct or indirectly) for these methodologies with other organisations

and experts in economic analysis in St. Eustatius and/or the former Netherlands Antilles and


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with the System of National Accounts, including the Central Bureau of Statistics Curacao (CBS),

the Central Bank of Curacao and St. Maarten (CBCS) as well as other individuals. The main

sources of information studied to complete this assignment included extensive information

provided by the Company, various publications of the CBS and CBCS and first hand field work

on the island. The extrapolations, assumptions and interrelationships were all determined by

the AIB EFS after careful analysis of received information.

The AIB EFS conducted this assignment on a best effort basis. Other approaches and

methodologies as well as alternative points of departure are possible for the assignment,

especially considering the limitations within the available current statistics of St. Eustatius. The

selected methodologies are used and chosen based on the information available to AIB EFS,

pragmatism in order to make the results comprehensible, as well as its general acceptance

amongst the various economists with whom brainstorm sessions were held.


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I. EXECUTIVE SUMMARY

Table a: Projected impact Company on GDP

2010 2011 2012 2013 2014

Government 4.8 5.1 5.2 5.2 10.6

Consumption 2.9 2.1 2.1 2.1 2.9

Gross Investment 3.8 3.8 23.8 26.7 2.6

Export - Import 15.8 16.5 17.3 18.2 33.7

Total Estimated Added

Value Company 27.2 27.5 48.4 52.3 49.7

2010 2011 2012 2013 2014

Government 6.7% 6.9% 5.3% 5.1% 10.2%

Consumption 4.0% 2.8% 2.2% 2.0% 2.7%

Gross Investment 5.3% 5.1% 24.6% 25.8% 2.5%

Export - Import 22.1% 22.5% 17.9% 17.5% 32.4%


Value Company38.1% 37.3% 50.0% 50.5% 47.8%

Estimated Impact Company in USD million

Estimated Impact Company in terms of GDP (%)

Table a includes the expansion activities currently planned for the plant

The Government

The added value of the Government component is measured through its expenditure capability

on consumption of goods & services, investments, and compensation of its employees. It is

assumed that all the revenues received by the Government are used completely for Spending in

St. Eustatius. Therefore it can be deduced that the Company contributed an estimated 45.1% to

the total expenditures by the Government in 2010. In terms of GDP, this is 6.7% of the total

estimated GDP in St. Eustatius for the year 2010.


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The projected taxes to be paid are mainly influenced by the possible adjustments in the

Company’s Tax Agreement with the Government which ends in 2014 and by increased

activities by the Company due to the expansion in the first year of operations 2014. The added

value of the Company through the Government component amounts to USD 10.6 million in

2014 or 10.2% of the estimated respective GDP.

Consumption

The Consumption component of the GDP reflects the total spending by the household sector

on all goods and services. The added value of the Company on this component was measured,

by calculating the remaining disposable income of the fixed employees available for consumption

purposes net of tax payments, social securities contributions and other government related

costs, savings component assumed for the employees, and the repayment on loans. The

estimated contribution to the Consumption component of the GDP was USD 2.9 million (Nafl.

5.1 million) or 4.0% of the GDP for the year 2010.

Due to the BES Fiscal Regime it is estimated that the tax burden increased to 35.5% on average

from 27.7% in 2010 influencing the consumption ability of the employees in 2011, 2012 and

2013. In 2014, based on the expected increase in fixed employees due to the expansion taking

into consideration same tax burden of 35.5% and the assumption that repayments on loan and

savings would remain unchanged in relative terms as compared to 2010 the added value of the

Company through the consumption component is estimated at USD 2.9 million or 2.7% of

GDP.

Investment

The Gross Investment component of the GDP is also referred to as Gross Capital Formation

or Fixed Capital Formation and changes in inventory. This consists of all the investments and

spending of the Company to the business sector after subtracting import values with the aim to


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measure only the added value on the island of the enterprises to the GDP. The total impact of

the Company is estimated at USD 3.7 million (Nafl. 6.6 million) or 5.2% of the GDP in 2010.

For the projections of the added value of the Company through the Investment component an

average import related cost was estimated. The total added value in the economy, when

excluding import value, is estimated at USD 3.8 million in 2011, while during the assembling of

the expansion this amounts to USD 23.8 million and USD 26.7 in respectively 2012 and 2013,

which is respectively 24.6% and 25.8% of the total estimated GDP in the respective years.

During the first year of operation after the expansion, in 2014, the added value is projected at

USD 2.6 million or 2.5% of the projected GDP.

Impact on Export and Import Activities

According to the Central Bank of the Netherlands Antilles, the contribution of NuStar to the

overall balance of the foreign exchange of St. Eustatius up to the third quarter of 2010 was USD

11.8 million and extrapolated for the entire year assuming an equal trend for the remainder of

the year, this would mount to USD 15.8 million (Nafl. 28.2 million), which would contribute to

22.1% of the GDP.

In order to be able to assume the Balance of Payments of the following years for the Company,

various assumptions needed to be made where among others the average growth over the last

4 years is used to approximate the Balance of Payment for the years 2011 through 2013. For

2014 the Balance of Payments is increased with the increase in capacity of the terminal due to

the planned expansion, assuming that the increased capacity would generate proportionally the

same inflows and outflows and all other relations within the Balance of Payments remain the

same.

The estimated added value of the Company on the overall balance of Exports (X) – Imports (M)

according to the projected Balance of Payments is USD 33.7 million or 32.4% of the estimated

GDP for that respective year.


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Noteworthy to mention is though that the composition of the total added value is altered after

the expansion. During the execution of the expansion it is estimated that the Investment

component will dominate, while during the operations after expansion is completed the

projected overall balance of the Export (X) – Import (M) is estimated to dominate. The latter

results from the increased receipts from services provided due to the expanded terminal

capacity.

Impact on Business Activities

When observing the mere number of companies the Company does business with, as a

percentage of the total number of companies in St. Eustatius per business sector, it can be

concluded that 66.0% of all establishments in St. Eustatius do business with the Company.

In addition to the number of businesses impacted, the impact on the GDP per business sector is

analyzed. The business sector which is most dependent on the Company in 2010 is the

Construction Sector with a contribution of 19.5% of the total activities in that sector.

The projected impact, on the business activities, is not quantifiable during the execution of the

expansion or for the first full year of operations, as further details are unknown. However, the

expansion during execution phase as well as after would offer an increase in the economic

activities in general. The expected additional 300-500 people on the island as construction

workers during the execution phase would contribute to an increase in demand, which is

assumed to be mostly felt in the rental industry of the island, food & beverage industry as well

as in other auxiliary business. The arrangements made with these workers with their respective

employers highly influence the level of impact, and is currently unknown.


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Qualitative assessment of FDI in Statia

Possible benefits Possible effects

Consumers Purchasing power might increase due to higher

labor benefits enjoyed in NuStar compared to

local companiesSuppliers Technology transfer enhancing productivity Best connections probably with international

companies already in place rather than localOpportunities to become an international

supplierCompetitors Enabling learning from a multi-national company

presence

No space for related competition as economy very

smallPossibilities for upgrading and innovation related

to multinational opportunities offeredWorkers Employment opportunities enhanced Employees' expertise might be little applicable

elsewhere if mobility is desiredTypically higher labor standards than local firms

Training and knowledge transfer to local

populationGovernment Tax revenues Opportunity cost due to tax holiday treaties

Economic activity growth and related benefits

related to increased tax base

Natural environment The multi-national can have higher security and

environmental standards than local firms

The Company might hamper the natural

environment by its large presence in the ocean and

on land, potentially affect marine life etc.

Overall Economy Overall enhanced economic activity due to

Company

An economy that depends highly on the Company

due to its large presence in the small scale of Statia

As a country on the global map for MNE's client

list.

Current Company's general FDI on Statia


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II. EXTENT OF THE ASSESSMENT

The statements made in this Assessment are based on findings arising from the assessment

carried out by AIB EFS, on a best effort basis. The AIB EFS cannot guarantee or give any

assurance as to the completeness of this document as presented. To this end, AIB EFS does not

declare this document to be all-inclusive or contains all information regarding the social

economic impact of NuStar Terminals N.V and its affiliates on St. Eustatius in the current state

or in the projected state.

The Social Economic Impact Study (SEIS) may include certain statements, estimates, and

financial projections provided by the Company and compiled or interpreted by AIB EFS. Such

statements, estimates, and projections, if provided, are based on various assumptions, which

may not prove to be accurate nor comparable with previous assessments. AIB EFS relies on the

information provided by the Company as well as the statistics obtained and will not question

and/ or verify the information provided. In addition, reliance on received information is

augmented due to limited statistics available to extrapolate and benchmark. It is suggested to

the Company and/or other intended readers to conduct its own investigation and analysis of

the impact should further details or benchmarking be required.

The AIB EFS makes no express or implied representations or warranties as to the accuracy of

the information contained herein, and expressly disclaims any and all liabilities which may be

based on such information, errors herein, or omissions there from.

This report contains confidential and/or sensitive information and may only be photocopied,

reproduced, or distributed by the official recipient and owner, NuStar, or by AIB Economic and

Financial Services upon request of NuStar.


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1. CONSTITUTIONAL CHANGES ST. EUSTATIUS

Since October 10, 2010 the Kingdom of the Netherlands has a new constitutional structure.

The country Netherlands Antilles ceased to exist and the islands Bonaire, Sint Eustatius and

Saba (BES Islands) became municipalities of the Netherlands, while the islands Curaçao and Sint

Maarten have obtained the status of a country within the Dutch Kingdom. The Kingdom of the

Netherlands consist accordingly of 4 countries, namely, the Netherlands, Aruba, Curaçao and

St. Maarten.

As a result of agreed upon task partitioning after the constitutional change between the BES Islands

and the Netherlands, the scope of the local government budgets became substantially smaller.

Since October 10, 2010, the Netherlands became responsible for a considerable part of the tasks

for which the former islands were previously responsible, such as public security, health care,

allowance attribution and education. The expenditure for these tasks no longer appears on the

budgets of the BES Islands; as a result thereof the budgets have been more than halved. At the

same time, a large number of income sources (federal taxes) flow as of 2011 directly in the

treasury of the State, based on the BES Fiscal Regime (BFR).

Table 1: Local Government Budget Overview

Bonaire St. Eustatius Saba

In USD mln 2010 2011 2010 2011 2010 2011

Approved budget 66.062 32.597 17.273 5.066 19.922 2.005

Allowed shortage 3.17 0.926 0.821

Free Benefit 16.872 7.430 5.251

Total 69.232 49.469 18.199 12.496 20.743 7.256

Source: College financieel toezicht (Cft)


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However, an amount will be supplied annually by the Netherlands in the form of an unengaged

benefit to the BES Islands which can be spent by each concerning island at their own discretion.

Moreover, it is stipulated that the resources for the Social Economic Initiative (SEI) and Institutional

Reinforcement Governing board (IVB) will be ended and that the Solidarity Fund is abolished. All in

all, these measures lead to large changes in the island budget. The BES budgets 2011 are the

first budgets under the supervision of the Netherlands where no more shortages are allowed.

After October 10, 2010 the Netherlands Antilles’ legislation continues to apply for the BES

Islands, unless there is a new law for the BES Islands replacing the Netherlands Antilles’ law, as

the Dutch legislation is made for the Dutch situation and could not be introduced precisely for

the BES Islands; however this will be done gradually with due consideration of the situation per

island/ municipality. With regards, however, to the tax system a new tax regime was created

and introduced following the constitutional changes per January 1, 2011, instead of maintaining

the tax system of the Netherlands Antilles or introducing the tax system of the Netherlands.

The taxation on the BES islands is a mix of federal as well as local taxation, where though the

total proceeds is to remain equal to the former tax revenues on the islands.

BES Fiscal Regime (BFR, federal taxation)

According to the legislator the characteristics of the BES Fiscal Regime is as follows:

1. Simple

2. Broad basis for taxation and low tariffs

3. Shift from direct to indirect taxation

The following is a summary of the main changes in the BES tax system in the BES islands in

comparison with the former tax system which might be relevant for the Company.

The Income Tax and Social Securities

The income tax has been taken over from the Dutch Antillean legislation and has been

converted into Dutch (BES) law: the law income tax BES. On the BES islands the Wage Tax is


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levied as a withholding tax on the Income Tax. An income tariff of 30.4% is applied for a

taxable sum up to and including USD250,000, taking into consideration a tax free amount, child

allowance and elderly allowance. A tariff of 35.4% is levied on the excess amount above the

USD 250,000 threshold. Noteworthy is that these tariffs include the AOV/AWW and ZV

premiums, while the tariffs applied up to 2011, mounted to 12.5%-47.5% progressively, where

the social security contributions are charged separately and not included in mentioned

progression.

The employers’ contribution for social securities is 18.4%. Noteworthy to mention is that the

threshold for the social securities contributions (AOV/ AWW and ZV) has been abolished,

which means that these could increase indefinitely in contrast with the former tax system

where these are capped to a maximum, increasing herewith the tax burden.

General Spending Tax (Algemene Bestedingsbelasting)

The turnover tax has been abolished as well in the BES Tax Regime and replaced with the ABB,

which is the “Algemene Bestedings Belasting”, levied over the ‘purchasing price’ at the moment

of delivery of the goods and services and the import of goods.

ABB is levied on:

1. The delivery of goods, which refer to the delivery of goods produced locally, in each

respective island, where the ABB paid on the imported raw material, aid substance and/

or semi-finished product and ABB paid to other local producers may be deducted to

avoid cumulative taxation.

2. The delivery of services, which refers to any service, not being the delivery of goods,

performed against payment. In the latter there is no right to deduct paid ABB.

3. The import of goods. This includes among others bringing goods in the free movement

on the BES islands and importing from outside the BES islands. Levying at import on the


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goods imported creates the same tax burden as the goods produced on the islands on

which ABB is applied.

The criterion on which the ABB is levied for the categories 1 and 2 is the compensation, the

total amount paid at the delivery of the goods or service. The standard tariff is 8% of respective

compensation, while for insurance a higher tariff of 9% applies. On St. Eustatius and Saba the

tariffs were however reduced with two percentage points to 6% respectively 7%. In category 3

the ABB is levied over the customs value of the imported goods, which is in general 8%,

however St. Eustatius and Saba applies again a lowered tariff, both 6%. Moreover, on all the BES

islands a tariff of 25% for private, non-economical, cars is levied, while a 0% tariff applies for

very economical private cars.

Since January 2011 the turnover tax has been abolished and replaced by this ABB. The tariff for

the turnover tax was 3% on the turnover of the entrepreneur, while the ABB is either 6% of

the compensation for the service rendered and/ or 6% on the customs value of the imported

goods. One could say that the tax burden could have remained practically unchanged as the

turnover tax (3%) is levied on a higher amount (turnover includes margin, overhead expenses

etc.), while the ABB (6%) is levied on the customs value which is a lower amount (does not

include margin nor overhead expenses, includes though transport expenses). An identified issue

with the taxation of the ABB is however, that St. Eustatius is a service oriented economy and as

the service providers may not deduct the ABB paid i.e. on the imported goods it creates a

cumulative taxation which was not desired with the introduction of this tax.

Real Estate Tax

As a substitute for the abolished Profit Tax, the Real Estate Tax is introduced. The Real Estate

Tax is levied on the advantages of the property located on the BES islands, which would be

determined for 4 consecutive years. The Real Estate Tax is not applicable on real estate which

qualify as own house and main residence, these are taken into consideration in the Income Tax.

The advantage from the real estate is determined at a fixed percentage of 4% of the market


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value of the real estate, irrespective of the real advantage. The tariff of the Real Estate Tax

amounts to 25% of the fixed advantage in the respective year, which leads to an annual effective

tax burden of 1% of the market value of the real estate. Noteworthy to mention is that debts

incurred for acquiring the real estate is not taken into consideration.

Revenue Distribution Tax (Opbrengstbelasting)

In addition, to the Real Estate Tax, the withholding tax on revenue distribution, Revenue

Distribution Tax, is a replacement for the Profit Tax on the BES islands. On the main principles

the Revenue Distribution Tax is similar to the Dutch Dividend Tax. The Revenue Distribution

Tax is levied on distributed revenues of companies established in the BES islands. Under

companies is understood, among others, public and private limited liability companies, limited

partnership or any other company whose capital is divided in shares. In contrast, however, to

the Dutch Dividend Tax, the Revenue Distribution is levied as well on proceeds from

cooperations or foundations.

The tariff of the Revenue Distribution Tax is 5% of the distribution. The taxes are withheld

from the proceeds paid. The following revenue payments are exempted from Revenue

Distribution Tax:

The revenue is paid to a body established on the BES islands that has a participating

interest in the body that pays out the revenue.

The revenue originates from a foundation or a special purpose fund and is paid to a

religious, ideological, charitable, cultural or scientific institution or charitable cause

established or organized within the State which is focused on the general good or social

interest.

The revenue originates from a foundation or special purpose fund formed for a pension

scheme.


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Prerequisite of the Revenue Distribution Tax is that the distributing company must be

established in the BES islands. However, for the purpose of the Revenue Distribution Tax all

entities established on the BES islands are considered to be established in the European

Netherlands (fiction), which will make these subject to Dutch Dividend and Corporate Tax

according to the ‘Invoeringswet fiscaal stelsel BES’.

The following are exemptions for which an entity is established nevertheless on the BES islands

for the purpose of the Revenue Distribution Tax and subject to this:

1. The entity has a maximum turnover of USD 80,000 and has assets of generally a

maximum of USD 200,000 and does not provide financial services, royalty payments,

insurance or reinsurance activities and trust services (trust company).

2. An entity which is sufficiently active. Active entities are characterized by the fact that at

the most 50% of by the assets consists of placements, participations, liquidities, available

assets and financing.

3. In case of a non-active entity (passive body) that (1) generally provides work to three

local (resident) FTE’s on the BES islands and (2) for at least a period of two year possess

real estate on the BES islands for the value of minimum USD 50,000 used for the

company’s activities.

The island Government is responsible for the taxation of the local (island) tax and introduced a

new fee regulation in order to broaden the budget for the island and in order to ensure a

balanced budget.


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2. GDP ST. EUSTATIUS

2.1 CURRENT GDP ST. EUSTATIUS

To be able to assess the impact of NuStar on the Economy of St. Eustatius, the Economy of St.

Eustatius needs to be quantified. The quantification is achieved by approximating the Gross

Domestic Product (GDP) of St. Eustatius, which is not readily available since 2004 through the

GDP for the Windward Islands. Generally, the GDP of the Windward Islands could be

distributed in proportion to the population to Saba, St. Eustatius and St. Maarten; however the

results of this exercise were unsatisfactory when compared to available GDP of St. Eustatius

over the years 1998 through 2004. Under the assumption that the distribution would not

change significantly over the years the distribution of 2004, which is the last available year, was

used to approximate the GDP for 2005 through 2010, rather than the average distribution over

the years 1998-2004. The latter approach of using the distribution of previous years was used in

the previous assessment, while the recent approach is now perceived to be more accurate as

the economic situation might resemble the most recent year most, while various approaches

have been assessed to approximate the GDP of St. Eustatius. Due to the constitutional changes

effective as of October 10, 2010 no GDP is available for the Windward Islands for 2010 and has

been approximated based on the GDP of the Netherlands Antilles, Curacao and Bonaire. For

consistency purposes, the same approximation method was also used for the previous years

and compared with the actual GDP figures available for the Windward Islands and these

resulted in a similar trend, therefore this approximation has been selected for the purpose of

this report. From the attained GDP for St. Eustatius the distribution over the industries,

Government and Enterprises, for 2004 is taken to project the continued distribution for the

following years.


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Table 2: Estimated Distribution GDP St. Eustatius by industry 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Statia GDP Government 11.1 13.9 12.9 13.2 14.4 15.49 16.45 17.48 18.57 18.55 19.11 Statia GDP Government as % of GDP Statia 14.7% 17.0% 15.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9%

Statia GDP Enterprises 64.2 67.9 68.5 75.4 82.0 88.18 93.69 99.55 105.77 105.65 108.82

Statia GDP Enterprises as % of GDP Statia 85.3% 83.0% 84.3% 85.0% 85.1% 85.1% 85.1% 85.1% 85.1% 85.1% 85.1%

Statia GDP 75.3 81.8 81.3 88.7 96.4 103.67 110.14 117.04 124.34 124.21 127.93

GDP Windward Islands 1,019.2 1,051.0 1,082.7 1,150.6 1,225.8 1,318.2 1,400.5 1,488.2 1,581.1 1,579.4 1,626.8

Statia GDP as % from GDP Windward Islands 7.4% 7.8% 7.5% 7.7% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9%

Source: CBS NA, projections 2005-2010 estimated by AIB EFS

For the approximation of the GDP of St. Eustatius per sector and industry, the distribution of

the GDP of the Windward Islands per sector and industry is taken as basis. According to

fieldwork conducted the short-term economic development is positive and going in the right

direction therefore a nominal growth of 3% was assumed for the nominal growth of the GDP in

2010, which results are depicted in the following table.


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Table 3: Estimated GDP St. Eustatius by sector and industry

2004 2005 2006 2007 2008 2009 2010 2010 in USDNon-financial corporationsAgriculture and fishing 0.33 0.35 0.38 0.39 0.40 0.41 0.42 0.23Manufacturing 1.84 1.95 1.63 1.74 1.74 1.92 1.98 1.10Electricity, gas and water 4.36 3.79 3.76 4.06 4.41 4.50 4.64 2.59Construction 6.36 7.95 6.31 6.93 7.26 7.31 7.53 4.21Trade 14.50 15.42 17.30 18.60 19.40 19.06 19.63 10.96Hotels and restaurants 6.99 6.94 9.58 9.69 11.24 10.65 10.97 6.13Transport,storage and communications 8.71 10.02 9.77 10.31 11.46 11.60 11.95 6.68Real estate, renting and business activities 6.63 7.29 9.54 10.52 10.48 10.61 10.93 6.11Education private 0.68 1.07 0.83 0.89 0.97 0.93 0.96 0.53Health and social work 1.69 1.97 2.38 2.62 2.94 3.05 3.14 1.76Other community, social and personal service act. 4.49 4.23 3.78 4.06 4.20 4.05 4.17 2.33Gross Value Added, market prices 56.59 60.98 65.26 69.81 74.49 74.08 76.31 42.63

Financial corporationsFinancial intermediation 8.16 8.70 8.90 9.79 10.92 11.54 11.89 6.64Gross Value Added, market prices 8.16 8.70 8.90 9.79 10.92 11.54 11.89 6.64

GovernmentAgriculture and fishing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Transport,storage and communications 0.30 0.32 0.33 0.53 0.28 0.29 0.30 0.17Real estate, renting and business activities 0.00 0.00 0.00 0.00 -0.01 0.00 0.00 0.00Public administration and defence;compulsory social security 10.22 10.86 13.56 14.12 16.03 15.98 16.46 9.20Education 0.74 0.80 0.26 0.21 0.25 0.25 0.25 0.14Health and social work 0.90 1.01 0.79 1.06 0.83 0.84 0.87 0.49Other community, social and personal service act. 2.24 2.49 1.51 1.55 1.20 1.19 1.23 0.69Gross Value Added, market prices 14.40 15.49 16.45 17.48 18.57 18.55 19.11 10.68

Households & Non-profit institutions serving Agriculture and fishing 0.02 0.02 0.02 0.03 0.03 0.03 0.03 0.02Manufacturing 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Construction 0.03 0.03 0.04 0.04 0.05 0.04 0.04 0.02Trade 0.05 0.05 0.07 0.07 0.07 0.07 0.07 0.04Hotels and restaurants 0.05 0.08 0.08 0.07 0.08 0.08 0.09 0.05Transport,storage and communications 0.75 0.75 0.74 0.74 0.77 0.77 0.79 0.44Real estate, renting and business activities 10.10 10.40 10.69 10.71 10.97 11.10 11.44 6.39Health and social work 0.04 0.04 0.04 0.04 0.05 0.05 0.05 0.03Other community, social and personal service act. 0.30 0.33 0.34 0.34 0.35 0.35 0.37 0.20Private households 0.56 0.48 0.48 0.48 0.49 0.50 0.51 0.29Gross Value Added, market prices 11.90 12.17 12.50 12.52 12.84 12.99 13.38 7.47

Total Gross Value Added, market prices 91.05 97.34 103.12 109.60 116.82 117.17 120.68 67.42plus Taxes less subsidies on products 7.37 8.51 9.15 9.86 10.10 9.79 10.08 5.63minus Fisim 2.02 2.19 2.13 2.43 2.57 2.75 2.83 1.58Gross Domestic Product, market prices 96.40 103.67 110.14 117.04 124.34 124.21 127.93 71.47Nominal GDP Growth 8.7 7.5 6.2 6.3 6.2 -0.1 3.0 3.0

Approximation Gross Domestic Product by sector and industry St. Eustatius (mln Nafl.)

Source: CBS NA, projections 2005-2010 estimated by AIB EFS, distribution per sector for 1998-2010 based on distribution GDP Windward Islands

The projected GDP for the following years will be addressed accordingly in chapter 7.2 as the

components of the GDP will be addressed previously as reference.


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3. CURRENT AND PROJECTED IMPACT ON PUBLIC FINANCES

According to previous research conducted, St. Eustatius is not self sustainable, meaning that the

revenues collected by the Government are not sufficient to cover its total expenditures. The

deficit is financed through the “Solidariteitsbelasting” and grants from the Dutch Government.

However, following the constitutional changes, where St. Eustatius became a municipality of the

Netherlands, it is the aim that the tax revenues in St. Eustatius under the new tax regime as a

municipality of the Netherlands should remain on the same level as prior to the constitutional

changes.

3.1 CURRENT PAYMENTS TO THE GOVERNMENT OF ST. EUSTATIUS

As is depicted in the following table NuStar contributed via taxes USD 4.8 million to the

Government in 2010, which is an increase of 8.4% as compared to the previous year. In 2009,

the contribution had decreased with 3.3% as compared to 2008.

Table 4: Company payments to the Government of St. Eustatius

Taxes and other government payments in USD

2008 2009 2010

Profit Tax 561,897.12 561,897.12 561,897.12

Wage Tax 2,015,436.81 1,940,307.46 2,034,375.87

AOV/ AWW 818,926.55 887,023.78 873,602.98

AVBZ 128,353.31 141,912.50 146,632.99

Concession fee 112,359.60 112,359.60 112,359.60

Vessel fee 458,931.86 408,490.15 363,370.79

Anchorage fee 304,599.85 268,827.25 198,517.65

Turn-Over Tax 19,569.09 15,838.21 24,942.16

Hindrance Fee 28,089.89 28,089.89 28,089.89

Miscellaneous 145,154.94 78,003.84 471,456.56

Total 4,593,319.02 4,442,749.80 4,815,245.61

Source: NuStar Terminals N.V.

According to the Vendor’s List the total taxes and fees paid by the Company to the various

Government receivers is depicted in the table below.


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Table 5: Company payments to the Government of St. Eustatius according to Vendors’ List

NuStar Total spending on Government in USD

2008 2009 2010

Federal Receiver 147,796.00 159,188.33 126,775.22

Island Receiver 3,626,596.47 3,396,537.60 2,976,632.52

SVB 818,926.55 887,023.87 873,602.98

Tax Authority Caribisch Nederland 838,234.89

Total 4,593,319.02 4,442,749.80 4,815,245.61Source: NuStar Terminals N.V., Statia Vendors 2008 - June2011

3.2 CURRENT IMPACT ON GDP

The Expenditure Approach1 to the calculation of the Gross Domestic Product (GDP) of a

country is calculated by the sum of Consumption (C), Gross Investment (I)2, Government

spending (G), plus the balance of Export (X) – Import (M). The Government’s added value to

the GDP, component G, is measured through its outlays on the consumption of goods &

services, investments, and compensation of employees. The Company does not have a direct

impact on the G component of the GDP.

It is assumed, however, that all revenues of the Government are used as expenditure of the

Government where these are completely spent in St. Eustatius and not partly in the remaining

islands of the former Netherlands Antilles. The total Government Expenditure for 2010 was

USD 10.68 million (Nafl. 19.11 million) according to the contribution of the Government to the

GDP in 2010. With this assumption, it can be deduced that the Company, which paid USD 4.8

million (Nafl. 8.6 million) to the Government in taxes and other payments in 2010 (see Table

1 The Expenditure Approach is one of three main approaches to calculate GDP, the two others are the Production Approach and the Income Approach. The reason the Expenditure Approach was chosen for this report is that the available information facilitated this Approach as opposed to the other two. It is noteworthy though to mention that all three approaches reach the same level of GDP, and thus in this case the approximation of the total impact of GDP should result similar. The basis of the methodology used is the System of National Accounts 93 (SNA 93), while the approximations, assumptions and subsequent calculations and methodology used to reach these were prepared by AIB EFS, in close consultation with other macro economists familiar with the SNA 93. 2 Gross Investment as component of GDP is also referred to as Gross Capital Formation or Fixed Capital Formation plus change in Inventory.


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5), contributed 45.1% to the total Government expenditures for that year, which represents

6.7% of the GDP3.

The above impact is also referred to as the first order effect of the Company on the

Government Revenues. Consequent second order and subsequent compounded effects,

referred to as the multiplier effect, creates an additional indirect impact on the GDP, where if it

is assumed that a number of companies depend on the Company for a significant percentage of

their sales, these also contribute to the revenues of the Government through wage tax, profit

tax, turn-over tax and others, thereby enhancing the expenditure possibility of the

Government.

3.3 PROJECTED PAYMENTS BY THE COMPANY TO THE GOVERNMENT OF ST. EUSTATIUS

Based on the new consitutional changes St. Eustatius introduced the BES Fiscal Regime (BFR),

which does not have an influence on all tax components for the Company as the Company has

a Tax Agreement with the Government which is effective until 2014. It is expected that the

profit tax will be abolished in the future arrangements between the Government and the

Company and replaced with a property tax which would be in accordance as well with the BFR,

which is effective since January 2011 for the remainder of the companies in St. Eustatius,

however new arrangements are still under negotiations. The effective rate for the property tax

is 1% of the market value of the property. The turnover tax has been abolished as well and

replaced with the ABB in the BFR, which is the “Algemene Bestedings Belasting”, levied over

the ‘purchasing price’.

In addition, a flat tax rate of 30.4% was introduced in the BFR for wage tax and social securities

contribution for the employees, while the employers’ contribution for social securities is 18.4%.

The tax burden related herewith is estimated to have increased on average to 35.5%, whereas

this was on average 27.7% previously. The following table depicts the projected taxes to be

paid by the Company to the Government of St. Eustatius.

3 The GDP of 2010 is estimated at USD 71.47 million or Nafl. 127.93 million as is depicted in Table 3.


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Table 6: Projected company payments to the Government of St. Eustatius

Projected taxes on other government payments

2011 2012 2013 2014

Profit Tax 561,897 561,897 561,897 -

Wage Tax 2,500,000 2,550,000 2,601,000 3,470,706

General Health Insurance 1,087,715 1,109,469 1,131,659 1,510,056

ZV/ OV & CS 155,387 158,495 161,665 215,721

Concession fee 112,360 112,360 112,360 168,360

Vessel fee 400,000 400,000 400,000 750,000

Achorage fee 250,000 250,000 250,000 450,000

Turn-Over Tax - - - -

Hinderance Fee 28,090 28,090 28,090 42,090

Propertry Tax - - - 4,000,000

Total 5,095,449 5,170,311 5,246,670 10,606,932

Source: Based on information provided by NuStar Terminals N.V.

In 2011, the total estimated taxes and fees paid to the Government increased with 6% as

compared to 2010, which is mainly due to an increase of USD 0.7 million in wage tax and social

securities contributions (incl. general health insurance). The increase in 2014 of USD 5.4 million

as compared to the previous year is mainly due to the introduction of the property tax offset

by the profit tax abolishment estimated to sum to USD 3.4 million and due to the expansion

which is estimated to contribute with an additional USD 1.9 million as resulting from increases

in wage tax, social contributions, concession, anchorage, vessel and hindrance fees.


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4. CURRENT AND PROJECTED IMPACT ON COMSUMPTION

4.1 CURRENT PERSONNEL SPENDING

A company’s current personnel’s spending contributes to the Consumption component of the

GDP. For this reason, the total fixed spending of the NuStar employees is examined. Through

the multiplier effect, the employee compensation of the Company also has an indirect influence

on the Public Sector as discussed in the previous chapter, through wage tax and other

payments.

Table 7: NuStar Employment Compensation in USD

NuStar Employment Compensation in USD

2008 2009 2010

Spending on local payroll employees 8,278,759.11 8,671,953.83 9,599,653.41

Spending on temporary employees 775,590.00 604,087.00 688,206.00

Total spending on local employees 9,054,349.11 9,276,040.83 10,287,859.41

Source: NuStar Terminals N.V.

The purpose of this chapter is to approximate the amount of the current personnel spending

that enters the economy via Consumption. From the previous table, the total spending on

employee compensation was USD 10.3 million (Nafl. 18.4 million) in 2010. This is a 10.9%

increase as compared to the previous year following an increase of 2.4% in 2009 as compared

to the year before. The year 2010 will be taken as the point of departure to determine the

contribution of the Company to the Consumption component of the GDP as for the current

situation.


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4.2 CURRENT CONSUMPTION: SPENDING ON GOODS AND SERVICES AND GDP

Consumption (C) (the expenditure of the household sector) generally is the largest component

of the GDP and is calculated by adding durable and non-durable goods & services expenditures.

It is unaffected by the estimated value of imported goods. In order to approximate the

Company’s direct contribution to the C component of the GDP, an estimate needs to be made

of the disposable income4 of the Company’s employees. The disposable income will then be

deducted with the assumed amount set aside for repayment of loans and savings, in order to

approximate the amount entering back into Consumption through purchases, payments, etc….

Net salaries are calculated by deducting the wage tax payment and the social securities

contributions from the salaries by the Company. For the year 2010 a total of USD 10.3 million

(Nafl. 18.4 million) was paid out in salaries. On the other hand, USD 2.8 million (Nafl. 5.0

million) was paid in wage tax, AOV/ AWW and ZV/AVBZ employee contributions in 2010,

leaving USD 7.5 million (Nafl. 13.4 million) in net salaries for the employees. Additionally,

conservatively 40% of the gross salaries are reserved for loan repayments, according with the

policy of the former Central Bank with regards to the maximum exposure of an individual,

which would add to around USD 4.1 million (Nafl. 7.4 million). Traditionally, the former

Netherlands Antilles including St. Eustatius is not a country which saves a lot, thus a mere 5%,

or USD 0.5 million (Nafl. 0.9 million), is deducted from the net income as assumed amounts

placed in savings by personnel.

4Disposable income is the amount of an individual’s income after deduction of direct taxes, which is available for spending, saving and loans.


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Table 8: Disposable Income for consumption purposes in USD

Disposable Income for Consumption purposes in USD

2008 2009 2010

Total spending local employees 9,054,349.11 9,276,040.83 10,287,859.41 - Total contribution wage tax, AOV/AWW, ZV/AVBZ 2,419,998.59 2,719,060.91 2,795,869.44

Disposable Income (Net Salary) 6,634,350.52 6,556,979.92 7,491,989.97

- 40% of gross salaries on loan repayments 3,621,739.64 3,710,416.33 4,115,143.76 - 5% of gross salaries on savings 452,717.46 463,802.04 514,392.97

Remaining disposable income for consumption purposes 2,559,893.42 2,382,761.55 2,862,453.24

The disposable income minus assumed savings and loan repayments impacting the Consumption

component of the GDP is estimated to be USD 2.9 million (Nafl. 5.1 million), which is

approximately 4.0% of the GDP.

4.3 PROJECTED PERSONNEL SPENDING

To be able to project the portion of personnel spending that reenters the economy via

Consumption, the personnel spending over the period 2011 through 2014 needs to be

estimated for the local employees directly employed by the Company.

It is estimated that the execution of the expansion plans would take two years, which is planned

to take place in the years 2012 and 2013. It is expected that in the beginning of 2014 the

terminal would be fully operational including the foreseen expansion. It is assumed that in 2011

and during the execution of the expansion the number of local payroll employees would remain

unchanged as compared to 2010 counting 125 employees. However, it is expected that in the

first full year of operations the Company needs to acquire an additional 41 local payroll

employees. The temporary employees are expected to increase in 2011 to 19 from 16 in 2010

and would than remain unchanged until the first full year of operation at 15 temporary

employees as depicted in the table below.


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Table 9: Projected number of local employees

Nustar Local Employees

2011 2012 2013 2014

Payroll employees 125 125 125 166

Temporary employees 19 15 15 15

Total local employees 144 140 140 181

Source: Based on information provided by NuStar and assumptions by AIB EFS

Based on the assumption that the amount of local payroll employees would remain unchanged

in 2011 and following years of construction as compared to 2010, the spending on local payroll

employees would only be adjusted with an average inflation level of 2.0%, based on the 10 year

average inflation in St. Maarten, although the inflation levels in the third quarter of 2011 as

compared to same quarter of the previous year is 11.0% in Statia due to the increased cost of

living caused by the changes in the tax system. In the first full year of operation, in 2014, the

spending of local payroll employees is increased in addition with USD 3,491,390.41 which is the

expected spending for the additional 41 employees.

Table 10: Projected Compensation local employees


2011 2012 2013 2014

Spending on local payroll employees 9,791,646.48 9,987,479.41 10,187,229.00 13,882,363.99

Spending on temporary employees 788,848.00 750,000.00 750,000.00 750,000.00

Total spending on local employees 10,580,494.48 10,737,479.41 10,937,229.00 14,632,363.99

Average Compensation per Employee

2011 2012 2013 2014

Payroll employees 78,333.17 79,899.84 81,497.83 83,628.70

Temporary employees 41,518.32 50,000.00 50,000.00 50,000.00 Source: Based on information provided by NuStar Terminals N.V. and assumptions AIB EFS

Please note that spending on contractors is accounted for in the spending on goods and

services by the Company which is the Investment component of the GDP (chapter 5) and not

in personnel.


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4.4 PROJECTED CONSUMPTION: DISPOSABLE INCOME AND GDP

In order to approximate the Company’s direct contribution to the Consumption (C)

component of the GDP, an estimate is made of the disposable income (net salary) of the

Company’s fixed employees through wage tax and social securities deductions. In the BES Fiscal

Regime which initiated in January 2011, due to the constitutional changes, a flat tax rate of

30.4% was introduced which includes wage tax and social security contributions for the

employees, while the employers contribution for social securities is 18.4%. However, because

the threshold for social securities contributions (AOV/AWW and ZV) has been abolished these

could increase indefinitely, increasing herewith the tax burden significantly. Over the years

2008 to 2010 27.7% was paid on average on wage tax and social securities contributions, which

is estimated to have increased on average to 35.5% based on the changes in tax system, which

has been taken into consideration to estimate the projected disposable income. Although there

are discussions to make adjustments in the BFR related to the tax burden it is assumed that this

tax burden would remain unchanged over the years 2011 to 2014. It is further assumed that

repayments on loan and savings would remain unchanged in the projected period at

respectively 40% and 5% of the gross salaries as these are considered to be traditional habits

which are not easily adjusted, in addition the loans are probably existing commitments, which

could not be easily adjusted were there new regulations. Based on these assumptions it can be

deduced that the remaining disposable income for consumption purposes in 2014 is USD 2.9

million, a slight decrease (-0.4%) as compared to 2010 before the effects of the tax reform and

increased with 34.4% by the effects of the expansion and after the effects of the tax reform.

Table 11: Projected Disposable Income

Disposable Income for Consumption purposes in USD

2011 2012 2013 2014

Total spending local employees 10,580,494.48 10,737,479.41 10,937,229.00 14,632,363.99 - Total contribution wage tax, AOV/AWW, ZV/AVBZ 3,743,102.00 3,817,964.04 3,894,323.32 5,196,482.38

Disposable Income (Net Salary) 6,837,392.48 6,919,515.37 7,042,905.68 9,435,881.60

- 40% of gross salaries on loan repayments 4,232,197.79 4,294,991.76 4,374,891.60 5,852,945.60 - 5% of gross salaries on savings 529,024.72 536,873.97 546,861.45 731,618.20

Remaining disposable income for consumption purposes 2,076,169.96 2,087,649.63 2,121,152.63 2,851,317.81


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5. CURRENT AND PROJECTED IMPACT ON INVESTMENT

5.1 CURRENT ANNUAL SPENDING OF THE COMPANY

The annual spending, as received directly from the Company, totaled USD 114.0 million (Nafl.

204.0 million) in 2010. A percentage of that is spent internationally, and a percentage is spent

locally. The local spending on Goods & Services by the Company in 2010 was 9.4% of the total

annual spending, amounting to USD 10.7 million. Although the local share in the total spending

has diminished considerably over the years, the value increased in 2010 with 9.3% as compared

to the previous year. The direct added value to the economy can be estimated from this share,

while the remaining 90.6% is spent in the Antillean economy (3.4%) and internationally (87.1%).

The table below reflects a synopsis of the total annual spending as provided by the Company.

(Please note that the provided table has been adjusted as from the Vendors’ list obtained it was noted that a few spending

was ordered into the category Netherlands Antilles, whereas it seems that these should have been ordered in St. Eustatius

(Oranjestad, Goldenrock))

Table 12: NuStar Annual Spending

Distribution spending in Local/ Foreign in USD

2008 2009 2010 2011 YTD

St. Eustatius 10,779,962.44 9,828,936.17 10,741,546.40 5,061,666.33

Rest of former Netherlands Antilles 2,639,777.62 3,013,138.13 3,921,515.85 1,703,183.78

Rest of Caribbean 2,731,850.03 4,412,228.25 3,946,469.25 6,739,142.70

Europe 2,309,926.05 4,692,190.03 5,696,861.62 10,597,759.20 US & Canada 35,961,592.13 39,479,620.21 89,654,956.82 24,130,369.69

Total Spending 54,423,108.27 61,426,112.79 113,961,349.94 48,232,121.70

Distribution spending in Local/ Foreign in %

2008 2009 2010 2011 YTD

St. Eustatius 19.81% 16.00% 9.43% 10.49%

Rest of former Netherlands Antilles 4.85% 4.91% 3.44% 3.53%

Foreign 75.34% 79.09% 87.13% 85.97%

Total 100.00% 100.00% 100.00% 100.00%


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5.2 CURRENT ACTUAL SPENDING OF THE COMPANY: GOODS AND SERVICES

In order to calculate the added value of the Company’s spending to enterprises in the economy

of St. Eustatius, fixed investment spending and other spending are added together as the Gross

Investment (I)5 component of the GDP. The vendor’s list as received from the Company has

been classified by sector according to the CBS business register of 2009. The vendors which

were not listed on this register were classified based on the goods or services provided to the

Company according to the International Standard Industrial Classification (ISIC), regardless of

the fact that these might include unregistered (grey) businesses as well.

The total spending on goods and services in St. Eustatius by the Company was USD 10.7 million

(Nafl. 19.2 million) including public administration and certain payments to employees, however

the latter two have been already taken into consideration in the Government component and

the Consumption component respectively. The spending on Goods and Services, excluding the

public administration and the employee payments, amounts to USD 5.7 million (Nafl.10.1).

These amounts include the spending on fixed investment portion spent locally. For the purpose

of calculating the added value to Gross Investment of St. Eustatius, direct costs (import related

costs) for the different vendors paid by NuStar is assumed. The cost structure of businesses of

Aruba has been used to approach the direct costs of businesses in St. Eustatius, where the

direct costs are calculated through the findings of the CBS Aruba per sector6. The direct cost in

this case is measured by the composition of expenditure of the Company and the respective

import percentage cost per sector, however corrected for import duties, which is neither

levied in St. Eustatius nor St. Maarten. Additionally, it is assumed that all products imported to

St. Eustatius are imported directly or via St. Maarten. Furthermore, it is assumed that the

money paid to the listed local companies is spent completely on St. Eustatius. The following

table 13 illustrates the import related cost (adjusted for import duties) next to the spending.

5 Gross Investment component (I) of GDP is also referred to as Gross Capital Formation or Fixed Capital Formation plus change in Inventory. 6 The CBS Aruba publication: “Cost structure of Businesses 1996 – 2004” was used as a basis for calculation of the direct cost per sector, corrected for import duties which is not levied in St. Eustatius. This information is not separately available for St. Eustatius, which is why the Aruban data was used as basis for assumption.


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The total added value in the economy, when excluding import value and payments to the public

administration and employees, is estimated at USD 3.7 million (Nafl. 6.6 million) in 2010.

Table 13: NuStar Spending

Vendors List per sector

2008 2009 2010

Agriculture 182,679.57 172,047.98 239,846.37

Manufacturing, Electricity, Gas and Water Supply 452,821.24 315,451.41 304,272.86

Construction 1,628,088.82 1,364,152.66 2,028,520.19

Wholesale & Retail Trade 255,024.56 282,705.47 564,161.30

Hotels & Restaurants 208,122.52 192,142.49 206,601.18

Transport, Storage & Communication 935,931.56 748,941.26 619,024.34

Financial Intermediation 364,835.92 425,679.94 377,906.27

Real Estate, Renting & Business Activities 774,726.75 589,751.47 605,349.06

Public Administration & Defense; Social Securities* 4,593,319.02 4,442,749.80 4,815,245.61

Education 5,104.51 4,424.16 2,432.58

Health and Social Work 87,789.41 110,339.47 219,891.85

Other community, social and personal services activities* 44,706.47 10,496.19 107,376.86

N.e.c. 1,645.25 6,170.96 7,317.42

Cash 1,022,542.38 943,957.38 378,638.93

Employee 222,624.46 219,925.53 264,961.58

Total 10,779,962.44 9,828,936.17 10,741,546.40

Total Goods & Services excl. Government and Employees 5,964,018.96 5,166,260.84 5,661,339.21

Source: NuStar Terminals N.V., Statia Vendors 2008 - June2011. Basis of information provided by CBS NA and Chamber of Commerce

Distribution by AIB EFS based on CBS NA Business Register 2009 for EUX and ISIC. Direct Costs based on CBS Aruba Cost Structure of Businesses

Please take into account that Investments are usually considered in their totality as component

of the GDP, while corrected in the Export (X) – Import (M) saldo of the Balance of Payments

directly which forms the added value for a country. However, for the purpose of this report

where the isolated added value of a company is measured the import related costs need to be

taken into consideration in this manner, as the Balance of Payments available for the Company

includes only transactions directly attributed to the Company and does not include transactions

of third parties.


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Table 14: NuStar Spending excluding direct import related costs

Vendors List per sector

in %

2008 2009 2010 2008 2009 2010

Agriculture - - - 182,679.57 172,047.98 239,846.37

Manufacturing, Electricity, Gas and Water Supply 36.5% 165,279.75 115,139.76 111,059.59 287,541.49 200,311.65 193,213.27

Construction 59.3% 965,456.67 808,942.53 1,202,912.47 662,632.15 555,210.13 825,607.72

Wholesale & Retail Trade 67.2% 171,376.50 189,978.08 379,116.39 83,648.06 92,727.39 185,044.91

Hotels & Restaurants 34.4% 71,594.15 66,097.02 71,070.81 136,528.37 126,045.47 135,530.37

Transport, Storage & Communication 11.3% 105,760.27 84,630.36 69,949.75 830,171.29 664,310.90 549,074.59

Financial Intermediation 13.0% 47,428.67 55,338.39 49,127.82 317,407.25 370,341.55 328,778.45

Real Estate, Renting & Business Activities 13.0% 100,714.48 76,667.69 78,695.38 674,012.27 513,083.78 526,653.68

Public Administration & Defense; Social Securities - - -

Education - - - 5,104.51 4,424.16 2,432.58

Health and Social Work - - - 87,789.41 110,339.47 219,891.85

Other community, social and personal services activities 14.2% 6,348.32 1,490.46 15,247.51 38,358.15 9,005.73 92,129.35

N.e.c. 1,645.25 6,170.96 7,317.42

Cash 1,022,542.38 943,957.38 378,638.93

Employee

Total

Total Goods & Services excl. Government and Employees 4,330,060.15 3,767,976.55 3,684,159.49

Source: NuStar Terminals N.V., Statia Vendors 2008 - June2011.

Distribution by AIB EFS based on CBS NA Business Register 2009 for EUX and SIC. Direct Costs based on CBS Aruba Cost Structure of Businesses 1996-2004

Direct costs related to import per sector

in USD

Added Value NuStar

5.3 THE DIRECT IMPACT OF THE COMPANY’S SPENDING ON GDP

The total contribution to the Gross Investment component of the GDP when subtracting direct

cost from all related spending in St. Eustatius is estimated at USD 3.7 million (Nafl. 6.6 million)

or 5.2% of the total GDP7. When adding this with the Government contribution (6.7%) as well

as the Consumption component (4.0%), the total contribution, excluding the GDP Export

minus Import component, is 15.9% to the GDP. The GDP Export minus Import component,

which still needs to be addressed in chapter 5, will be added to this percentage to attain the

complete estimated direct contribution of the Company on the economy (GDP). The

Expenditure Approach8, as explained in chapter 2.2, of calculating the GDP is used to

approximate the added value to the economy of St. Eustatius.

7 The GDP of 2010 is estimated at USD 71.47 million or Nafl. 127.93 million as displayed in chapter 2 8 Expenditure Approach: Consumption (C) + Gross Investment (I) + Government (G) + (Export (X)- Imports (M))


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5.4 PROJECTED SPENDING OF THE COMPANY OVER THE CONSTRUCTION PERIOD

INCLUDING G&S

Please note that it has been assumed that the total projected spending as provided by the

Company is excluding estimated tax payments to the Government of St. Eustatius. This has

been concluded as otherwise the remaining local spending for goods & services would not be in

line with previous years or would be negative, which is not realistic.

Depicted in the table below is the total spending as provided by the Company including the

average distribution, over the years 2008 through 2010, used to project the distribution over

the years 2011 through 2014.

Table 15: Projected distribution as provided by the Company

Projected distribution spending in Local/ Foreign in USD

in % 2011 2012 2013 2014

St. Eustatius 15.08% 5,720,465.87 36,203,804.18 40,734,492.23 3,916,183.56

Rest of former Netherlands Antilles 4.40% 1,668,907.34 10,562,215.69 11,884,013.38 1,142,520.14

Foreign 80.52% 30,549,335.80 193,341,276.13 217,536,772.40 20,913,822.30

Total Investment 100.00% 37,938,709.00 240,107,296.00 270,155,278.00 25,972,526.00 Source: NuStar Terminals N.V. In order to obtain the total spending, the estimated tax payments to be paid to the

Government were added to the local spending, while the spending in the rest of the former

Netherlands Antilles and foreign investment remained the same. The percentage distribution

has been recalculated based on this addition and is depicted in the table below.

Table 16: Projected distribution spending

Projected distribution spending in Local/ Foreign in USD

2011 2012 2013 2014

St. Eustatius 10,815,914.48 41,374,114.83 45,981,162.16 14,523,115.94

Rest of former Netherlands Antilles 1,668,907.34 10,562,215.69 11,884,013.38 1,142,520.14

Foreign 30,549,335.80 193,341,276.13 217,536,772.40 20,913,822.30

Total Investment 43,034,157.61 245,277,606.65 275,401,947.93 36,579,458.38

Projected distribution spending in Local/ Foreign in % 2011 2012 2013 2014

St. Eustatius 25.1% 16.9% 16.7% 39.7%

Rest of former Netherlands Antilles 3.9% 4.3% 4.3% 3.1%

Foreign 71.0% 78.8% 79.0% 57.2%

Total Investment 100.0% 100.0% 100.0% 100.0%

Source: Based on information provided by NuStar Terminals N.V.


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The exercise is performed to illustrate the total local spending and the effects on the

percentage distribution due to the above mentioned assumption, while the impact on the

Investment component of the GDP is approximated by the total local spending in Goods &

Services exclusive of the tax payments to the Government as the latter has already been

accounted for in the Government (G) component of the GDP, which results back into the local

spending (assumed exclusive of Government taxes) as provided by the Company and depicted

in the following table 17.

Table 17: Projected local spending

Projected local spending on Goods & Services

2011 2012 2013 2014

Total local spending 10,815,914.48 41,374,114.83 45,981,162.16 14,523,115.94 - Taxes and fees paid to Government 5,095,448.61 5,170,310.65 5,246,669.93 10,606,932.38

Total spending in Goods & Services (excl. Govt) 5,720,420.49 36,203,758.78 40,734,446.80 3,916,138.12 - Direct import related costs 1,965,772.21 12,441,103.40 13,998,034.51 1,345,746.43

Added Value of the Company 3,754,648.28 23,762,655.37 26,736,412.29 2,570,391.68 Source: Based on information provided by NuStar Terminals N.V. In addition, the direct costs (import related costs) need to be assumed to calculate the added

value to the Gross Investment. The cost structure of businesses of Aruba has been used to

approach the direct costs of businesses in St. Eustatius through the same method used in

chapter 4.2, where the direct costs are calculated for the years 2008 to 2010. Contrary

however to chapter 4.2 the correction for import duties is minimal as the ABB was introduced

increasing the import costs. After performing said exercise an average was calculated over the

years 2008 to 2010 (34.4%) and used for the projections of 2011 through 2014. Additionally, it

is assumed that all products imported to St. Eustatius are imported directly or via St. Maarten.

Sint Maarten still does not levy any kind of import duties, what might influence the imports

costs when importing via St. Maarten is though the turnover tax levied in St. Maarten, which is

not taken into consideration for the purpose of this report as various assumptions need to be

considered, making the results less tangible. Furthermore, it is assumed that all local spending,

after deduction of the import related costs, is spent completely on St. Eustatius. The below

table illustrates the import related cost next to the spending. The total added value in the


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economy, when excluding import value, is estimated at USD 3.8 million in 2011, while during

the assembling of the expansion this amounts to USD 23.8 million and USD 26.7 in respectively

2012 and 2013. During the first year of operation after the expansion, in 2014, the added value

is projected at USD 2.6 million.


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6. IMPACT ON EXPORT AND IMPORT ACTIVITIES

6.1 CURRENT TRADE IN GOODS & SERVICES

The influence of NuStar on Merchandise Trade is displayed in the following table, also in

proportion to the Merchandise Trade of the Windward Islands. Noteworthy to mention is that

the Windward Islands are import oriented islands, which is also reflected in the merchandise

trade deficit as displayed in the Balance of Payments’ breakdown of the merchandise exports

and imports of the Windward Islands from 2003-2008, while no newer detailed statistics is

made available on the Balance of Payments of the Windward Islands. In addition, due to the

constitutional changes which came to effect in October 2010, the Balance of Payment of the Oil

Terminal is obtainable up to the third quarter of 2010, where NuStar imported Nafl. 1.1 million

in value on goods, while exporting a value of Nafl. 0.1 million, resulting in a merchandise trade

deficit of Nafl. 1.0 million up to the third quarter of 2010.

Table 18: Balance of Payments merchandise exports and imports NuStar

In millions Nafl. 2003 2004 2005 2006 2007 2008 2009 2010

TRADE BALANCE -596.3 -746.2 -863.5 -992.2 -1,225.0 -1,256.8

Merchandise Exports 96.2 159.5 180.1 164.2 197.8 240.3 -General merchandise 86.0 128.5 138.2 140.6 184.8 217.4 -Statia terminal 2.3 0.8 0.0 0.1 -Oil products 10.1 29.5 36.8 21.2 6.5 5.4 -Goods for processing - - - - - - -Repairs on goods - - - - - - -Goods procured in ports 0.1 1.5 5.1 2.4 4.2 16.7

Merchandise Imports 692.5 905.7 1,043.6 1,156.4 1,422.8 1,497.1 -General merchandise 647.0 806.6 867.2 981.5 1,215.5 1,241.1 -Statia terminal 0.7 3.4 8.8 12.3 12.0 4.1 1.0 1.1 -Oil products 45.4 99.1 176.2 174.7 206.4 255.3 -Goods for processing - - 0.1 - - - -Repairs on goods - - - - - - -Goods procured in ports 0.1 - 0.1 0.2 0.9 0.7

Statia Terminal Trade Balance -0.7 -3.4 -8.8 -12.3 -9.7 -3.3 -1.0 -1.0

Source: Central Bank of the Netherlands Antilles

Balance of Payments: Breakdwon merchandise exports and imports for the Windward Islands


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The Company’s added value in the Balance of Payments, however, is recorded in the

Company’s export of its services. The payments received for rendered services up to the third

quarter of 2010 amounted to Nafl. 49.9 million from transportation services and refining fee,

while the payments received in 2009 amount to Nafl. 105.6 for a full year of operation.

According to the Central Bank of the former Netherlands Antilles, the refining fee in the

services balance of the balance of payments reflects the net foreign exchange receipts for

refining activities by the refineries in the Netherlands Antilles. The refining fee is paid by the

parent companies abroad and is used by the refineries to cover their operational costs and

investments in the Netherlands Antilles.

The payments made by NuStar for services imported to the island of St. Eustatius amounted to

Nafl. 2.6 million up to the third quarter of 2010, which decreased considerably as compared to

2007. Noteworthy to mention, however, is that the payments made by the Company in 2007

for services imported were substantially higher than the previous years.

The overall balance for services in the Balance of Payments results in a surplus of Nafl. 47.3

million (USD 26.4 million) up to the third quarter of 2010.

Table 19: Balance of Payments Services NuStar Oil Terminal

Revenues from oil storage and refining feeIn millions Nafl. 2003 2004 2005 2006 2007 2008 2009 2010*

Services Exports (Receipts) 48.6 68.4 117.8 124.6 107.6 88.1 105.6 49.9

-Transportation (statia terminal) 34.3 46.7 74.1 75.6 69.1 37.9

-Refining fee (statia terminal) 14.3 21.7 43.6 49.0 38.5 50.3

Services Imports (Payments) 42.0 30.6 21.8 23.2 52.5 31.2 22.2 2.6

Balance Services 6.6 37.8 96.0 101.4 55.1 56.9 83.4 47.3* Up to the 3rd quarter

Source: Central Bank of Curacao and St. Maarten

Balance of Payments: Statia Oil Terminal


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6.2 CURRENT BALANCE OF PAYMENTS9

According to the Balance of Payments, as provided by the Central Bank of the Netherlands

Antilles, the added value (overall balance) to the economy by the Company was Nafl. 21.2

million (USD 11.8 million) up to the third quarter of 2010. However, the year 2010 has been

used as point of departure to assess the current contribution to the GDP, therefore the

Balance of Payment of NuStar for the entire year has been approximated by assuming that the

last quarter of the year had an average development. For this approximation the average over

the last 5 years has been used, which projection is displayed in table 13.

The Overall balance is the amount of money that stays on St. Eustatius after deduction of all the

payments and outflows outside of St. Eustatius and influences the economy.

6.3 CURRENT BALANCE OF PAYMENTS CONTRIBUTION TO GDP

As discussed in chapters 2 through 4, the Gross Domestic Product (GDP) is calculated via the

Expenditure Approach. The omitted component up to now in the equation was the total

overall balance of Exports (X)-Imports (M) with the exception of the correction in Investment

for third parties. This is USD 15.8 (Nafl. 28.2 million) or 22.1% of the total GDP bringing the

current added value of the Company on the economy of St. Eustatius to an estimated total of

38.0% of the total GDP.

9 All items of the Balance of Payments are received directly from the Central Bank of the Netherlands Antilles upon special request, the data is not published in any publications.


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Table 20: Balance of Payments NuStar

2003 2004 2005 2006 2007 2008 2009 2010p

1.Current account (net) 5.9 34.4 92.6 94.7 48.8 60.6 88.8 64.6

A.Goods and services 5.9 34.4 87.2 89.1 45.4 53.6 82.4 61.7

1. Goods -0.7 -3.4 -8.8 -12.3 -9.7 -3.3 -1.0 -1.3

1.1 Exports f.o.b 0.0 0.0 0.0 0.0 2.3 0.8 0.0 0.1

1.2 Imports f.o.b 0.7 3.4 8.8 12.3 12.0 4.1 1.0 1.5

2. Services 6.6 37.8 96.0 101.4 55.1 56.9 83.4 63.1

2.1 Receipts 48.6 68.4 117.8 124.6 107.6 88.1 105.6 66.5

2.2 Payments 42.0 30.6 21.8 23.2 52.5 31.2 22.2 3.5

B. Income 0.0 0.0 4.3 4.5 5.0 10.3 6.2 0.8

1.Receipts 0.0 0.0 4.3 4.5 6.6 10.3 6.2 0.8

2.Payments 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0

C. Current transfers 0.0 0.0 1.1 1.1 -1.6 -3.3 0.2 2.1

1. Receipts 0.0 0.0 1.1 1.1 0.4 0.6 0.3 2.1

2.Payments 0.0 0.0 0.0 0.0 1.9 3.9 0.1 0.0

2. Capital and financial account (net) (5.9) (34.4) (71.6) (75.3) (30.2) (36.2) (59.2) (37.7)

A.Capital account 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1. Capital transfers

2. Acquisition/disposal of n.p.n.f. assets

B. Financial account (5.9) (34.4) (71.6) (75.3) (30.2) (36.2) (59.2) (37.7)

1.Direct investment -5.9 -34.4 -71.6 -75.3 -30.2 -36.2 -59.2 -37.7

2.Portfolio investment

3. Financial derivatives

4.Other investment

3.Items not yet classified 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3

4. Overall balance 0.0 0.0 21.0 19.4 18.6 24.4 29.6 28.2

5. Banking transactions

6. Increase (-) in official reserves 0.0 0.0 -21.0 -19.4 -18.6 -24.4 -29.6 -28.2

A.Monetary gold 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

B. Foreign exchange holding 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0p projection

Source: Central Bank of Curacao and St. Maarten

Statia Oil Terminal


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6.4 PROJECTED BALANCE OF PAYMENTS10

In order to be able to project the Balance of Payments over the years 2011 to 2014 the

following assumptions are made:

- The expansion plans will be finalized by the end of 2013 and will be fully operational for

the entire 2014

- The expansion will become fully operational in one shot per 2014 and not gradually in

the years of mantling

- All investments (spending) incurred during 2012 and 2013 related to the expansion will

be executed through third parties and not directly via the Company

- The latter is not applicable for investments falling under the usual operations of the

Company

- It is assumed that the expansion is financed with capital which is already abroad (mother

company or by a financial institution abroad, which will have no influence during

execution period on the balance of payments as the foreign services are paid directly

with foreign money)

- It is assumed that the local portion of the investments is paid with capital available in

Statia and the use of this capital has no influence on potential dividend payment or loan

repayments to either the mother company or any other financial institution abroad,

meaning that these could remain on the same level, in proportion, as previous years.

Taking the above assumptions into consideration the Balance of Payments for the Company is

approximated by taking the average growth over from 2005-2010, 4.8%, for the years 2011 to

2013 which might be conservative seen that in 2010 and 2011 already investments were made

to increase capacity of the Terminal.

For 2014 the Balance of Payments is increased with the increase in capacity of the terminal due

to the planned expansion, which is an increase of 85.5%, assuming that the increased capacity

10 All items of the Balance of Payments are received directly from the Central Bank of the Netherlands Antilles upon special request; the data is not published in any publications.


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would generate proportionally the same inflows and outflows and all relations within the

Balance of Payments remain the same.

Table 21: Projected Balance of Payments NuStar

2011 2012 2013 2014

1.Current account (net) 67.8 71.0 74.4 138.0

A.Goods and services 64.7 67.8 71.1 131.8

1. Goods -1.4 -1.5 -1.5 -2.8

1.1 Exports f.o.b 0.1 0.1 0.2 0.3

1.2 Imports f.o.b 1.5 1.6 1.7 3.1

2. Services 66.1 69.3 72.6 134.7

2.1 Receipts 69.7 73.1 76.6 142.1

2.2 Payments 3.6 3.8 4.0 7.4

B. Income 0.8 0.9 0.9 1.7

1.Receipts 0.8 0.9 0.9 1.7

2.Payments 0.0 0.0 0.0 0.0

C. Current transfers 2.2 2.3 2.4 4.5

1. Receipts 2.2 2.3 2.4 4.5

2.Payments 0.0 0.0 0.0 0.0

2. Capital and financial account (net) (39.5) (41.4) (43.4) (80.6)

A.Capital account 0.0 0.0 0.0 0.0

1. Capital transfers

2. Acquisition/disposal of n.p.n.f. assets

B. Financial account (39.5) (41.4) (43.4) (80.6)

1.Direct investment -39.5 -41.4 -43.4 -80.6

2.Portfolio investment

3. Financial derivatives

4.Other investment

3.Items not yet classified 1.4 1.5 1.5 2.8

4. Overall balance 29.6 31.0 32.5 60.3

5. Banking transactions 0.0

6. Increase (-) in official reserves -29.6 -31.0 -32.5 -60.3

A.Monetary gold 0.0 0.0 0.0 0.0

B. Foreign exchange holding 0.0 0.0 0.0 0.0Source: Central Bank of Curacao and St. Maarten

Statia Oil Terminal


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The added value of the Company on the overall balance of Exports (X) – Imports (M) according

to the projected Balance of Payments is USD 33.7 million, bringing the total added value of the

Company to an estimated total of USD 49.7 million in 2014.


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7. SUMMATION OF GDP COMPONENTS

7.1 CURRENT SUMMATION ON GDP COMPONENTS

In summation of the impact of the Company on the GDP components, Table 14 portrays each

GDP component next to the methodology used to approximate the Company’s impact on

these.


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Table 22: Summation of Company’s direct impact on GDP components 2010

GDP Component Estimated Estimated Explanation Methodology approach

based on Impact Company Impact Company Approximation of impact

expenditure approach in USD million in terms of GDP

Government 4.8 6.7% The added value of the

Government component is

measured through its outlays on

consumption of goods &

services, investments, and

compensation of its employees.

It is assumed all the revenues received

by the Government directly from

Company are used in turn for

Spending, where the Company's

direct contribution to revenue is then

indirect contribution to spending.

Consumption 2.9 4.0% The Consumption component

of the GDP reflects the total

spending by the household

sector on durable and non-

durable goods as well as

services.

All the wages received by employees

of the Company, less the tax

payments, social securities

contributions and other government

related costs, the savings component

assumed for the employees, and the

repayment on loans.

Gross Investment 3.8 5.3% The Gross Investment

component of the GDP is also

referred to as Gross Capital

Formation or fixed capital

formation and changes in

inventory.

All the investments and spending of

the Company to local vendors after

subtracting import payments with the

aim to measure the added value in the

GDP to enterprises.

Export - Import 15.8 22.1% Export minus import is the

added value of trade to the

economy

The contribution to the balance of

payment as recorded by the Central

Bank Netherlands Antilles up to the

third quarter and extrapolated for the

remainder of 2010

Approximation to total

impact on GDP of St.

Eustatius

27.2 38.1% This item excludes further

order of events resulting from

multiplier

The Government

The added value of the Government component is measured through its outlays on

consumption of goods & services, investments, and compensation of its employees. For the

sake of this report it is assumed that all the revenues received by the Government are used for

Spending completely in St. Eustatius. With this point of departure it is estimated that the


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Company contributed 45.1% to the total expenditures by the Government in 2010. In terms of

GDP, this is 6.7% of the total estimated GDP in St. Eustatius for the year 2010.

Consumption

The Consumption component of the GDP reflects the total spending by the household sector

on durable and non-durable goods as well as services. The approximation of the impact of the

Company on this component was conducted by taking the wages received by employees, less

the tax payments, social securities contributions and other government related costs, the

savings component assumed for the employees, and the repayment on loans. The estimated

contribution to the Consumption component of the GDP was USD 2.9 million (Nafl. 5.1

million) or 4.0% of the GDP for the year 2010.

Investment

The Gross Investment component of the GDP is also referred to as Gross Capital Formation

or Fixed Capital Formation and changes in inventory. This consists of all the investments and

spending of the business sector after subtracting import values with the aim to measure only

the added value on the island of the enterprises to the GDP. The total impact of the Company

is estimated at USD 3.7 million (Nafl. 6.6 million) or 5.2% of the GDP in 2010.

Impact on Export and Import Activities

According to the Central Bank of the Netherlands Antilles, the contribution of NuStar to the

overall balance of the foreign exchange of St. Eustatius up to the third quarter of 2010 was USD

11.8 million and extrapolated for the entire year assuming an equal trend for the remainder of

the year, this would mount to USD 15.8 million (Nafl. 28.2 million), which would contribute to

22.1% of the GDP.


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7.2 PROJECTED SUMMATION ON GDP COMPONENTS

In the following table the added value of the Company on each GDP components are initially

summarized per year. During the execution of the expansion, in the years 2012 and 2013, it can

be noted that the total absolute added value of the Company increased significantly, mainly due

to the Investment component, to USD 48.4 and USD 52.3 million respectively, directly related

to the Project. In the first full year of operation after the expansion is completed the total

absolute added value decreased somewhat to USD 49.7 million. Noteworthy to mention is

though that the composition of the total added value changed. During the execution of the

expansion it is estimated that the Investment component will dominate, while during the

operations after expansion is completed the projected overall balance of the Export (X) –

Import (M) is estimated to dominate. The latter results from the increased receipts from

services provided due to the expanded terminal capacity. In addition, the total absolute added

value is influenced by the Government component due to the estimated adjustments in the tax

agreement with the Government, where it is expected to be subject to the Real Estate Tax.

Table 23a: Summary Projected Absolute GDP components

GDP Component

based on

expenditure approach

2010 2011 2012 2013 2014

Government 4.8 5.1 5.2 5.2 10.6

Consumption 2.9 2.1 2.1 2.1 2.9

Gross Investment 3.7 3.8 23.8 26.7 2.6

Export - Import 15.8 16.5 17.3 18.2 33.7


Value Company 27.1 27.5 48.4 52.3 49.7

Estimated Impact Company

in USD million

The GDP for the years 2011 to 2014 need to be projected in order to be able to assess the

added value of the Company on the GDP. The GDP for 2011 is estimated to have increased

with a nominal standard growth of 3%. For the years 2012 through 2014 the same standard

nominal growth is taken into consideration, in addition, the excess added value of the Company


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is added as compared to the previous years, resulting in the projected GDP as displayed in the

table below.

Table 23b: Projected GDP and estimated impact on GDP

2010 2011 2012 2013 2014

Nominal GDP projection

in million USD71.5 73.6 96.7 103.5 104.1


Value Company27.1 27.5 48.4 52.3 49.7

Estimated Impact Company

based on GDP38.0% 37.3% 50.0% 50.5% 47.8%

It can be depicted from the table above that the estimated impact on the GDP for the years of

execution of the expansion is 50.0% and 50.5% for respectively 2012 and 2013, while for the

year 2014 the impact on the GDP is estimated at 47.8%.

Noteworthy to mention is that the GDP itself is influenced directly due to the expansion of the

terminal, while the indirect effects thereof (spin off) caused by increased business activities is

expected to be felt later, where the GDP is expected to further increase, which will though

lead to a diminishing of the added value of the Company in terms of GDP. However, due to the

increased productivity of the Company and herewith of the island the social well being of its

population is enhanced which can be measured i.e. by the estimated GDP per capita.


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8. CURRENT & PROJECTED IMPACT ON BUSINESS ACTIVITY IN GENERAL

8.1 CURRENT AND PROJECTED IMPACT ON THE DIFFERENT ECONOMIC SECTORS

In the previous sections the contribution of the Company to the GDP of St. Eustatius was

approximated. In addition to impacting the local economy through its macro economic

measure, namely the GDP, the Company’s impact on a micro level in the different business

sectors was analyzed. This way the business sectors which are most and least dependent on the

Company could be identified.

8.2 CURRENT AND PROJECTED NUMBER OF BUSINESSES AFFECTED

The total number of businesses as received from the CBS in 2009 mount to 131 distributed

over the sectors. However, according to the Chamber of Commerce an estimated 250

businesses are registered in their data base which needs to be cleared up though with non-

active businesses. For lack of a better indication we have assumed that 30% of the businesses

are non-active, which result in 175 active businesses, these have been redistributed according

to the distribution of the CBS register, which is displayed next to the Company’s spending per

business activity, as classified according to the CBS business register and the ISIC, for the year

2010, including the number of businesses the Company does business with, “frequency” of

different vendors. When observing the mere number of companies the Company does business

with, as a percentage of the total number of companies in St. Eustatius per business sector, it

can be concluded that a significant number of companies do business with the Company, or

rather 66.0% of all establishments in St. Eustatius.


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Table 24: NuStar Vendor’s List per economic activity

Vendors List per sector Frequency*

2010

Agriculture 239,846.37 4 4 100%

Manufacturing, Electricity, Gas and Water Supply 304,272.86 4 8 50%

Construction 2,028,520.19 6 11 56%

Wholesale & Retail Trade 564,161.30 31 45 68%

Hotels & Restaurants 206,601.18 17 37 45%

Transport, Storage & Communication 619,024.34 12 9 128%

Financial Intermediation 377,906.27 3 5 56%

Real Estate, Renting & Business Activities 605,349.06 26 45 57%

Public Administration & Defense; Social Securities* 4,815,245.61 1

Education 2,432.58 2 5 37%

Health and Social Work 219,891.85 10 4 250%

Other community, social and personal services activities* 107,376.86 12

N.e.c. 7,317.42

Cash 378,638.93

Employee 264,961.58

Total 10,741,546.40

Total Goods & Services excl. Government and Employees 5,661,339.21 115 175 66%Source: NuStar Terminals N.V., Statia Vendors 2008 - June2011. Basis of information provided by CBS NA and Chamber of Commerce

* Does not include other community, social and personal services activities and public administration in the total

in % of establish-

ment per econo-

mic sector

Establishment

per economic

center

8.3 CURRENT AND PROJECTED IMPACT ON BUSINESS ACTIVITIES

Current Impact Business Activities

In addition to the number of businesses impacted, the impact on the GDP per business sector is

analyzed. In Table 25, the actual amounts paid per business activity by the Company are

displayed next to the total GDP amounts approximated for the respective sectors.

The Methodology used to determine the impact of these payments of the Company to the

business activity of St. Eustatius is as follows:

The vendor data has been aggregated and sorted based on International Standard

Industry Codes (ISIC)

Data on GDP per business activity of St. Eustatius has been approximated and is

depicted in Table 3 of the second chapter.


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NuStar contribution to the GDP per sector could subsequently be estimated

Table 25: NuStar Contribution to GDP per sector

Contribution to GDP by sector & industry (mln Nafl.)

2004 2005 2006 2007 2008 2009 2010

Agriculture and fishing 0.34 0.37 0.40 0.42 0.43 0.44 0.45 0.43 95.2%

Manufacturing 1.84 1.95 1.63 1.74 1.74 1.92 1.98 0.14 7.0%

Electricity, gas and water 4.36 3.79 3.76 4.06 4.41 4.50 4.64 0.21 4.5%

Construction 6.40 7.98 6.34 6.97 7.30 7.35 7.57 1.48 19.5%

Trade 14.55 15.46 17.37 18.67 19.47 19.12 19.70 0.33 1.7%

Hotels and restaurants 7.05 7.02 9.66 9.76 11.32 10.73 11.05 0.24 2.2%

Transport, storage and communications 9.77 11.09 10.84 11.58 12.51 12.66 13.04 0.98 7.5%

Real estate, renting and business activities 16.73 17.69 20.24 21.23 21.44 21.71 22.37 0.94 4.2%

Education private 1.43 1.87 1.09 1.10 1.22 1.18 1.21 0.00 0.4%

Health and social work 2.63 3.01 3.21 3.72 3.81 3.94 4.06 0.39 9.7%

Other community, social and personal service act. 7.02 7.06 5.63 5.95 5.75 5.60 5.76 0.16 2.9%

Financial Intermediation 8.16 8.70 8.90 9.79 10.92 11.54 11.89 0.59 5.0%

Public administration and defence;compulsory social security 10.22 10.86 13.56 14.12 16.03 15.98 16.46

Private Households 0.56 0.48 0.48 0.48 0.49 0.50 0.51

Total Gross Value Added, market prices 91.05 97.34 103.12 109.60 116.82 117.17 120.68 5.90 4.9%

plus Taxes less subsidies on products 7.37 8.51 9.15 9.86 10.10 9.79 10.08

minus Fisim 2.02 2.19 2.13 2.43 2.57 2.75 2.83

Gross Domestic Product, market prices 96.40 103.67 110.14 117.04 124.34 124.21 127.93 5.90 4.7%

Source: Calculated based on GDP Netherlands Antilles, Windward Islands and St. Maarten (CBSNA)

NuStar contribution to

GDP by sector & industry

The business sectors which are most dependent on the Company in 2010 are displayed in

terms of the estimated percentage contribution of the Company to each sector’s GDP:

• NuStar contributed 19.5% to the total activities in the Construction

sector

• NuStar contributed 9.7% to the total GDP in the Health and Social

Work, of which the majority is through donations to foundations which

contribute to social welfare

• NuStar contributed 7.5% to the total Transport, Storage and

Communications, 7% to Manufacturing and to 5% Financial Intermediation

NuStar contributed 95.2% to the total activities in the Agriculture &

Fishing Sector. Noteworthy to mention is that the Agriculture & Fishing

sector is the smallest sector.


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From these findings, the dependence of the business sectors can provide an indication as to

even the employees per business sector that might indirectly depend on the Company, which is

further examined in chapter 8.

Projected Impact Business Activities

The projected impact, on the business activities, is not quantifiable during the execution of the

expansion or for the first full year of operations as the frequency of the vendor’s used is not

known neither the distribution of the total investment per sector. However, the expansion

would offer an increase in the economic activities in general. Due to the expansion, demand

would increase on the rental industry of the island as well as on other auxiliary business.

Noteworthy to mention is that it is perceived that besides the Terminal, there are limited

economic activities possible with a short to medium term impact on the overall economy.

During the construction period of 2012-2013, it can also be assumed that business activities in

general would increase greatly due to the presence of contractors engaged for the purpose of

the expansion. These are indirectly influenced by the Company but are certainly noteworthy to

mention. The contractors are expected to bring temporarily between 300 and 500 more

people on the island merely to work on the expansion activities, which would mean a

temporarily increase in the population of between 10.4% and 17.3% as compared to 2010.

While the terms and conditions of the agreements with the contractors are unknown as of yet

it is now quantifiable how much these will influence the business activities in general, however it

is expected to impact the food & beverage sector as well as the real estate industry especially.


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9. CURRENT & PROJECTED IMPACT ON LABOUR ACTIVITIES

The impact on labour activities by the Company is considered from a social-economic angle.

The direct impact of the Company’s employees is seen as a contribution to the Consumption of

St. Eustatius, as already discussed in chapter 4, consequently creating purchasing capacity in the

usual business activity of St. Eustatius. However, employees of the businesses with which the

Company does business on a regular basis are also partly dependent on the Company for their

compensation, which is accounted for in the indirect impact but not easily quantifiable in value

9.1 CURRENT AND PROJECTED IMPACT LABOUR ACTIVITIES

Current impact Labour Activities

For the basis of this study the current employment figures for the year 2010 is required to

assess the impact as the current year under review, however no definitive statistics regarding

labour force participation and detailed employment levels since 2001 are available, which was

based on the latest census which was conducted on the island of St. Eustatius.

In the meanwhile, for the purpose of the SEIS, AIB EFS extrapolated the figures to estimate

distribution of employed population for the years 2008 through 2010 based on a variety of

sources and growth figures as provided from CBS Netherlands Antilles and the assumption that

the relation between the figures are maintained as no newer statistics are available. The result

is depicted in the following table.


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Table 26: Population by economically active population

Population by economically active population

2001 2008* 2009* 2010*

Employed Population 1,038 1,240 1,288 1,306

Unemployed Population 96 115 119 121

Labor Force 1,134 1,355 1,407 1,427

Unemployment Rate 8.3

Total Population 2,293 2,739 2,845 2,886

Participationrate 75.3 75.3 75.3 75.3

Source: Censo 2001, Island Registry and CBS Estimates, *extrapolation by AIB EFS

In 2010, the Company had 133 employees on the payroll, which directly accounts for 10.2% of

the total extrapolated employment in the respective year. The employment by the Company

decreased with 4.3% (6 employees) as compared to the 139 employees reported in 2008.

Noteworthy to mention is that the foreign employee decreased with 4 employees (33.3%) to a

total of 8 foreign employees and the local employees decreased with 2 employees (1.6%) to 125

employees in 2010 as compared to the previous year. In addition, the Company hired

temporary workers which accounts for 1.2% of the total extrapolated employment in the year

2010.

Table 27: Employment NuStar

Employment NuStar

2008 2009 2010

Locals 127 126 125

Expats 12 11 8

Total Employees NuStar 139 137 133

Local Employees as % of Employed Population 10.2% 9.8% 9.6%

Total Employees as % of Employed Population 11.2% 10.6% 10.2%

Source: NuStar Terminals St. Eustatius N.V.

Based on previous distribution over the different sectors as received from the Central Bureau

of Statistics of the former Netherlands Antilles, the employed population as extrapolated for

2010 has been spread. An important portion of the employees of the business sectors which


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are economically the most dependent on the Company, such as the construction sector, are

employed due to the impact of the Company on their businesses. As indicated in chapter 7, the

Company contributes to the activities of various business sectors. If we assume we can

translate the percentage impact11 to employees, we are speaking of 239 employees of St.

Eustatius which depend indirectly on the Company for their earnings. Table 19 illustrates the

assumptions for number of employees per sector. This total translates to 18.3% of total

employed population of St. Eustatius. When the NuStar employees are added to this total, the

Company is responsible, either directly or indirectly, for 29.1% of total employment of St.

Eustatius for the year 2010.

Table 28: Assumed number of employees indirectly dependent on Company

Employment distribution per industry

2008 2009 2010

Agriculture & Fishing 0.9% 12 12 12 95.2% 12

Manufacturing, Electricity, gas & water 2.6% 32 34 34 5.2% 2

Construction 3.6% 44 46 46 19.5% 9

Trade 22.2% 275 285 290 1.7% 5

Hotels & Restaurants 7.3% 91 94 96 2.2% 2

Transport, storage & communication 3.6% 44 46 46 7.5% 4

Real estate, renting & business activities 15.1% 187 194 197 4.2% 8

Financial Intermediation 1.0% 13 13 14 5.0% 1

Private education 6.5% 80 83 85 0.4% 0

Health 5.0% 62 65 66 9.7% 6

Government* 32.3% 400 415 421 45.1% 190

Total 100.0% 1,240 1,288 1,306 239

* As estimated in chapter 1, NuStar's contribution to the Government Expenditures

NuStar

contribution

to economy

per sector

Assumed

employment

dependent on

NuStar

Source: Based on data from 2009 obtained from the CBS Netherlands Antilles

It can thus be mentioned that the Company not only offers employment but adds to the

diversification of employment availability in St. Eustatius. It is probably a more productive

industry as well then others considering its added value.

11 This impact is based on an assumption that an equal average production rate per employee in each sector is maintained, independent from total number of employees working in a business or other production factors.


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Projection impact labour activities

It is assumed that during the execution of the expansion the fixed local employees would

remain unchanged while the temporary employees in 2011 is estimated at 19 and projected to

lower to 15 during the execution and in the first full year of operations. After the execution

period of the Project, around 41 permanent employees will be created, among others 8

control room operators, 8 field operators, of each operations supervisor and operations

superintendent 4, 1 operations manager and 1 director of operations. It is expected that these

will be primarily locals, perhaps Statians returning home.

Table 29: Projected Employment NuStar

Nustar Local Employees

2011 2012 2013 2014

Payroll employees 125 125 125 166

Temporary employees 19 15 15 15

Total local employees 144 140 140 181

Source: Based on information provided by NuStar and assumptions by AIB EFS

In addition, it is estimated that during the execution phase of the Project between 300 and 500

workers would be required through the engaged contractors. Although the workers are not

directly employed by the Company and have no direct impact other than the amount invested

(spent) on these contractors and already accounted for in the projected investments. These

workers would though have disposable income for consumption purposes influencing indirectly

the economic activities as will the additional employees which are indirectly affected due to

increased business activities (spin-off).

9.2 CURRENT AND PROJECTED COMPENSATION OF EMPLOYEES

Current compensation employees

In addition to the impact on the sheer number of employees directly and indirectly, the

Company offers attractive compensation for its employees in comparison to the local labour


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market. The average yearly salary among all NuStar employees excluding expatriates is USD

76,797.23 (Nafl. 137,467.04) as is depicted in Table 19.

Table 30: Average yearly salary NuStar Employees in USD


2008 2009 2010

Spending on local payroll employees 8,278,759.11 8,671,953.83 9,599,653.41

Spending on temporary employees 775,590.00 604,087.00 688,206.00

Total spending on local employees 9,054,349.11 9,276,040.83 10,287,859.41


2008 2009 2010

Payroll employees 65,187.08 68,825.03 76,797.23

Temporary employees 35,254.09 40,272.47 43,012.88 Source: NuStar Terminals N.V.

In 2010, St. Eustatius has the lowest minimum wage per hour within the Dutch Kingdom

followed by Saba and Bonaire.

Table 31: Minimum wages in the Netherlands Antilles

Bonaire 7.21

Curacao 7.30

Saba 6.26

St. Eustatius 5.95

St. Maarten 7.96

Source: Directorate of Labour & Social Affairs NA

* Valid for workers of 21 years and older. For the age group of 16-

20 yrs a youth minimum wage is applicable for each specific age.

Minimum wages per hour in Nafl.* per September 1,

2008 in all categories

Noteworthy to mention is though that, the minimum wages have been aligned for the three

new municipalities to Nafl. 7.52 (USD 4.20) since January 1, 2011.


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The average wage of the employed population in St. Eustatius is approximated through data

obtainable for the Island of Bonaire, where an average wage is approximated through the

amount of employees in each bracket, resulting in an average wage of Nafl. 2,674.16 per month,

amounting to Nafl. 32,089.89 per year. In view that the minimum wage of St. Eustatius is

approximately 17.5% lower than the one of Bonaire in 2010 we corrected the yearly amount by

17.5% to Nafl. 26,474.16, while the GDP per capita based on the GDP estimates for 2010 is

Nafl. 44,329.

The NuStar average salary is five times higher than the average wage as approximated above

and three times higher than the GDP per capita for St. Eustatius. Noteworthy, however, to

mention is the fact that the wages of NuStar are not taken into consideration in the

approximation of the average wage, which makes the average presumably lower.

Table 32: Employed population by Gross Monthly Income, Bonaire

Male Female Total

average income

per group

weighted average

income for total

500 or less 27 119 146 250.00 36,500.00

501 - 1,000 162 466 628 750.50 471,314.00

1,001 - 1,500 521 477 998 1,250.50 1,247,999.00

1,501 - 2,000 789 619 1,408 1,750.50 2,464,704.00

2,001 - 2,500 710 442 1,152 2,250.50 2,592,576.00

2,501 - 3,000 566 250 816 2,750.50 2,244,408.00

3,001 - 5,000 725 540 1,265 4,000.50 5,060,632.50

5,000 plus* 344 153 497 10,000.00 4,970,000.00

Unknown 67 161 228

Total 3,911 3,227 7,138 2,875.38 2,674.16

* assumed maximum wage of Nafl. 15,000 as provided by the Department of Finance St. Eustatius

Employed Population by Gross Monthly Income, Bonaire 2010

Source: CBS Nederland, averages approximation AIB EFS

Besides the high average salaries provided by the Company, the Company offers to the

employees on site safety training as well as managerial training and anger management, which


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contributes to the employees’ opportunities in the labour force. Additionally, the Company

provides counselling for employees with regards to family related problems etc..

Projected compensation employees

With the assumption in mind that during the execution period of the expansion the amount of

fixed local employees would remain unchanged for the years 2011 through 2013 the wages

have been only adjusted for inflation (2%), taking 2010 as point of departure, while for 2014

these has been adjusted for inflation and the estimated wages for the additional 41 employees

added. Estimated spending on temporary employees has been provided by NuStar and remains

at the level of USD 750,000 for 2012 to 2014. The total projected salary is displayed in the

table below.

Table 33: Projected average yearly salary NuStar Employees in USD


2011 2012 2013 2014

Spending on local payroll employees 9,791,646.48 9,987,479.41 10,187,229.00 13,882,363.99

Spending on temporary employees 788,848.00 750,000.00 750,000.00 750,000.00

Total spending on local employees 10,580,494.48 10,737,479.41 10,937,229.00 14,632,363.99


2011 2012 2013 2014

Payroll employees 78,333.17 79,899.84 81,497.83 83,628.70

Temporary employees 41,518.32 50,000.00 50,000.00 50,000.00

Source: Based on information provided by NuStar Terminals N.V. and assumptions AIB EFS

9.3 CURRENT AND PROJECTED INDIRECT EFFECTS ON THE GDP

Current indirect effects on the GDP

Based on the two previous paragraphs the indirect impact on the GDP due to the indirect

employment can be estimated. As calculated previously 239 employees depend indirectly on the

Company for their consumption, which at an average yearly wage of Nafl. 26,474.16 mounts to

Nafl. 6.3 million (USD 3.5 million). The total contribution to wage tax and the social

contributions is assumed at 27.7%, which was the average over the last 3 years at NuStar. Equal

to the approximation of the disposable income in chapter 3, 40% and 5% of gross salaries is

subtracted for respectively loan repayments and savings, resulting in a disposable income of


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USD 0.96 million for consumption purposes of the indirect employment or an additional 1.3%

of the total GDP.

Table 34: Indirect Disposable Income

Indirect Disposable Income for Consumption purposes 2010

in USD in Nafl.

Total Spending local employees 3,530,905.85 6,320,321.48

- Total contribution wage tax, AOV/AWW, ZV/AVBZ 979,433.26 1,753,185.53

Disposable Income (Net Salary) 2,551,472.60 4,567,135.95

- 40% of gross salaries on loan repayments 1,412,362.34 2,528,128.59

- 5% of gross salaries on savings 176,545.29 316,016.07

Remaining disposable income for consumption purposes 962,564.96 1,722,991.28

Projected indirect effects on the GDP

It is expected that the dependency of the various sectors of the economy on the Company

would become even greater especially in the period of execution of the expansion, while in the

following years these would level up to a certain level. Although it is expected that the demand

on local employment would increase it is foreseeable though that the 300 to 500 workers

needed can not be supplied solely by the St. Eustatius labour force, where a significant portion

would need to be imported from abroad. Nonetheless these would have indirect effects on the

GDP through their consumption. For the purpose of this exercise it is assumed that during the

period of execution of the expansion there will be on average 400 foreign workers.

Noteworthy to mention is that the GDP per capita based on the GDP projections and a

projected population growth based on the average over the last 4 years it can be deduced that

the GDP per capita for 2014 increased with 28.9% to Nafl. 57,128. The latter is greatly

influenced by the productivity of the company in terms of GDP.


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10. CURRENT AND PROJECTED SOCIAL IMPACT

10.1 CURRENT SOCIAL IMPACT

Besides the economic impact on the Island of St. Eustatius, the Company contributes to the

social welfare of the island. In this paragraph the identified social impacts are highlighted.

The Company is pretty much self sufficient with its own electricity plant, reverse osmosis plant

and landfill and as such does not strain the infrastructure of St. Eustatius. Contrariwise, the

local electricity company G.E.B.E. has a hook-up with the electricity plant of the Company in

case of power losses on the island, which occurs approximately 3 times a year ranging from a

few days to even several months at a time. Additionally, supplementary required drinking water

is supplied partly from the reverse osmosis plant from the oil terminal and delivered by truck,

however this is forbidden since the Government established its own reverse osmosis plant, but

it still occurs approximately once a year. NuStar’s operation also provides the ability to provide

gasoline and diesel to local gas stations (2) via a Company owned delivery truck. Moreover,

G.E.B.E has utilized the Company frequently to provide diesel for its own power generating

generators due to supply issues.

Based on a new tax agreement signed with the Government in 2005, the Company contributes

to a Restoration Fund, which is an annual fund in which the Government and the Company

contribute to, in the event of closure of the terminal and in 2010 the Company contributed

USD 64,045 in this fund. Additionally, the Company donates to restore old buildings in St.

Eustatius as the Company’s commitment to give back to the community. In 2010, USD 189,524

was donated by the Company to amongst others Statia Way Foundation, established by the

Company to render financial assistance to charitable organizations, an Auxiliary home and to

the Chapel Piece Health and Recreational Center. Over the last three years the Company


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donated more than USD 450,000. Additionally, the hours volunteered by the employees of

NuStar amounted to 385 hours in 2010 and 1,389.5 hours over the last three years.

Furthermore, the Company gives scholarships, the NuStar Scholarship and the Greehey

Scholarschip both in the amount of USD 2,500 per four years, contributing to improve the

educational level.

The Company offers various services to its employees, including education for the children of

expatriates as well as healthcare and training. Currently, a negative social impact could not be

detected, while the employment possibilities offered enhance the overall labor market’s range.

Of course, in comparison to the other economic sectors, the Company pays quite well which

could create a social inequality between company workers and workers of other companies.

However, this same higher level of benefits is again spent on the island to benefit the other

activities.

Since the Company employs mostly locals, there is no social impact as a consequence of

cultural differences of immigrants on the island as such.

It is noteworthy also to mention that the territory used by NuStar for its business activities is

approximately 1 square mile, which is 8.4% of St. Eustatius. The current territorial impact can

be considered as an impact on property of the island not available for other activities. However,

when comparing this to the economic benefit, the property is also contributing to the general

social well-being of the island through its employment benefits and added value to other

business sectors.

10.2 PROJECTED SOCIAL IMPACT

The commitment of the Company towards the community remains and will even improve as

the Company is planning to increase its donations from approximately USD 200,000 in 2011 to

USD 500,000 in the following years to charitable organizations. The number of hours


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volunteered by the employees of NuStar is expected to increase over the years to 650

estimated volunteered man hours in 2014, 68.8% higher as compared to the committed hours

in 2010. The amount applied for the scholarships would remain unchanged.

The major concern is the social impact the 300 to 500 temporary workers would have on St.

Eustatius during the period of execution of the expansion, considering also that these would

increase the population significantly by 10.4% to 17.3% temporarily. While housing facilities will

be arranged probably in the form of a man-camp, there might be no additional demand on real

estate and F&B as the latter might be arranged for in the man-camp. It is usual as well that;

foreign workers would send the majority of their income to their native country, for the living

expenses of their family which stayed behind. Additional business activities would be stimulated

including, utilities, F&B, transportation, entertainment etc. A more detailed projection of that

impact can be portrayed if the organization related to personnel housing is revealed.

There might be a social impact as a consequence of cultural differences of immigrants during

the period of execution of the expansion on the island as such, however due to the potential

man-camp this might be limited as the foreign workers would hang out among themselves. On

the other hand as the foreign workers are only temporary on the island there might be no

respect for the island and its environment. This however would not be the case for the fixed

employees to be hired after the expansion is completed as:

1. It is the aim to hire as many locals as possible

2. The employees will consist of mostly higher paid jobs

3. These would not be housed in a man-camp, but in existing facilities

4. These would not be temporary, even if foreigners are hired, it is expected that these

would integrate and create a bond with the island

Currently, the territory used by NuStar for its business activities is approximately 1 square

mile, which is 8.4% of St. Eustatius. The current territorial impact can be considered as an

impact on property of the island not available for other activities which would increase


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accordingly with the expansion. Some people seem to have a problem with the general

expansion intentions of the Company, as the preferred location for said expansion might be the

concerning issue for the population and stakeholders, as the preferred location by the

Company is quite obvious to the eye and can be sighted from the main areas of town. This

potentially disrupts the more suttle presence the Company enjoyed before on the island.


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11. A QUALITATIVE APPROACH TO THE ECONOMIC AND SOCIAL IMPACT OF

NUSTAR’S INTENDED INVESTMENT IN THE COMING YEARS ON STATIA

A qualitative approach is required to enhance the study on the social economic impact of the

Company on Statia, due to a range of uncertainties lying ahead of the island and its related

economic development. To put the intended investment into proper perspective, a USD 500

million expansion of the Company is a factor of near 7 times of the expected GDP of Statia in

2010. The related impact depends greatly on the forecasted development of various industries

of the island which are in their turn dependent on their respective expected investments and

received attention. As the economy evolves and develops a forecasted impact has a wide range

of margin of error related to assumptions drawn for the development of all these interrelated

factors. For this reason, for the qualitative approach, we isolate the intended investment as a

foreign direct investment (FDI) in itself and review its impact on various aspects of the

community, including macro-economy, social development and business environment in general.

NuStar’s investments as a Foreign Direct Investment in Statia

The impact of foreign direct investment (FDI) on a host country is important to measure in

order to see if the FDI matches the host country and has an actual positive impact on the

country or if it disrupts the general economic model in anyway or the direction of its economic

policies.

The impact should be seen as the macroeconomic impact of the FDI in the country/island as

well as spillovers to various aspects of the country/ island. FDI might increase growth, provided

sufficient “absorptive capacity” is stimulated. FDI in general impacts various aspects positively,

including balance of payments, employment, investment and exports, which have already been

addressed quantitatively in previous chapters. These however also need to be seen in the

overall scope of the host country to assess its overall qualitative impact.


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In the following chart an overview is provided how FDI in general affects performance and

integration in a country.

How might FDI affect performance and integration

Parent multinational FDI Project Local firms

-Country of origin -subsidiary role knowledge -intra-industry spillovers

-Industry -mode of entry Linkage effects -inter-industry spillovers

-organizational centralization -centralization Competition -absorptive capacity

-size & experience -knowledge management -entrepreneurship

-clusters

Natural Environment Social issues Institutions Macro-economy

-Polution havens -ethical business practices -policy framework -balance of payment

-global standards -labour standards -FDI laws -captial stock

-wages -competition laws -employment

-community participation -edicational systems -economic growth

-health systems

Spillovers

There are horizontal as well as vertical spillovers with Multi-National Enterprises (MNEs) in a

country such as the Company. The company is a multinational company with relations on a

global level and operating in the US, Canada, Mexico, the Netherlands, the United Kingdom and

Turkey:

Potential positive spillovers:

Horizontal spillovers include:

Knowledge diffusion by demonstration effects

o Local firms observe technology and managerial practices and might adopt it

Knowledge diffusion by movement of employees

o Employees are trained in the Company, for example, and take up jobs in local

firms, or set up their own business based on experience gained

Vertical

Vertical linkages (as supplier or customer)

o Direct knowledge transfer


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o Economies of scale when applicable

Potential negative spillovers

Horizontal

Attraction of the most productive resources

o Highly qualified workers might leave other local companies to go to NuStar

Vertical

Reliance on imported components and displacement of local suppliers

Dependency relationships across the board


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Benefits and costs FDI related to NuStar on Statia:

Possible benefits Possible effects

Consumers Purchasing power might increase due to higher

labor benefits enjoyed in NuStar compared to

local companiesSuppliers Technology transfer enhancing productivity Best connections probably with international

companies already in place rather than localOpportunities to become an international

supplierCompetitors Enabling learning from a multi-national company

presence

No space for related competition as economy very

smallPossibilities for upgrading and innovation related

to multinational opportunities offeredWorkers Employment opportunities enhanced Employees' expertise might be little applicable

elsewhere if mobility is desiredTypically higher labor standards than local firms

Training and knowledge transfer to local

populationGovernment Tax revenues Opportunity cost due to tax holiday treaties

Economic activity growth and related benefits

related to increased tax base

Natural environment The multi-national can have higher security and

environmental standards than local firms

The Company might hamper the natural

environment by its large presence in the ocean and

on land, potentially affect marine life etc.

Overall Economy Overall enhanced economic activity due to

Company

An economy that depends highly on the Company

due to its large presence in the small scale of Statia

As a country on the global map for MNE's client

list.

Current Company's general FDI on Statia

Knowledge spillovers are difficult to track or quantify:

An indirect measurement would be to relate performance changes of potential recipient firms

or country empirically to the presence of the FDI in the same country. Knowledge spillovers

are measured by changes in local firms’ productivity and the influence of FDI to the share of

foreign-owned firms in the industry in general. However, due to the small size of Statia, and the

long presence of a Storage Terminal (since 1982) on the island, the general productivity created

cannot be measured for recent years in an isolated form. However, since the economic


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quantitative impact is currently calculated well around 38% of the total economy (excluding

expansion), other economic opportunities can be assessed next to the intended investments, to

see if economically there are other alternatives that might be viable within the country that

could match up to the expected impact of the new investments envisioned by the Company.

Economic opportunities:

The country’s economic policies focuses on improving the tourist industry as well as the

development of innovative businesses and related sectors. The tourism industry is not currently

prominent in Statia and measures directly to around 8.6% of the economy in 2010. The tourism

industry is labor intensive in nature and generally therefore has a low productivity per

employee. While for the development of innovative businesses the infrastructure need to be in

place which is the intention to enhance as well, however this might take its necessary time.

Additionally, in order to attain an effect that is anywhere near the expected impacts of a new

USD 500 million investment in the country during approximately 24 months as proposed by

NuStar in another industry, various surrounding prerequisites would need to be in place.

Case study for such an investment in another sector, i.e. Tourism sector

A large investment of around USD 500 mln would translate into 3 large five-star hotels totaling

around 888 rooms when compared to other such investments in the region.

If complying to the basic square meters required for this development (888 rooms), this would

require at least 135,000-140,000. square meters for development.

This would require a need for searching for financing in a tough financial market prior to being

able to start such huge venture.

Such an investment would entail a construction of approximately 30 months of labor intensity,

(which excludes all the preparatory work), but would require many laborers from abroad to

fulfill the construction needs


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After such a development, if the meager equation of 1 employee per room is assumed, this

would require an additional 888 employees, which would also need to be imported.

If there were 888 rooms added, for example, this would be an addition of 324,120 nights to

the current supply, which is 13 times current supply. This would require 42,137 visitors per

year or 3,500 per month to ensure occupancy of 65%. The exponential implications of this

require far more other investments, like increased number of restaurants to accommodate

them, increased tourist activities etc… which all take years to develop.

To make these hotels successful, airlift would need to be increased significantly to a degree

above currently capable measures of the airport, thereby having massive infrastructural

implications

Marketing spending of the island would need to be increased to attract tourist to fill these

rooms.

This example illustrates, that it would take many more years to plan and position while land

would need to be arranged as well as financing, airlift and many other ancillaries that are

currently not in place to accommodate such. Thus a larger barrier is visible for another industry

to have such an impact as compared to NuStar’s envisioned investment.

NuStar is a multinational enterprise which is in itself a large economic entity of USD 4.4bln in

revenues. The other industries are important industries but are not as a single economic

activity rated in these kinds of categories.

Statia’s comparative advantage pertaining to natural resources might lie greatly in its location

and deep waters that caters to NuStar Terminal. Compared to the other islands in the

Caribbean there are not many other comparative advantages, from an economic diversity

perspective.

For FDI to choose location or in this case for NuStar to choose Statia:

The eclectic paradigm (OLI Model)


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O- Ownership advantages are identified

L- Location advantages of host countries are identified

I- Internalization – firms able to exploit the above through internalization rather than

through market

These create net ownership advantages for the Company (NuStar), but how does this affect the

island and could you have such a MNE located there which would have more of a stake of the

island in it? Not likely.

Vulnerability risk rating:

Such an industry with an impact so large is not easy to duplicate or replace.

by increasing GDP, on average GDP per capita is also increased, which normally can

translate to an improved quality of life if distribution is well established.

The triple A’s approach:

Adaptation – adjusting to differences around the world and undertaking activities locally in each

of them

Aggregation – centralizing parts of operations regionally (via regional hubs) or globally to reap

economies of scale and to integrate innovation

Arbitration – moving goods/services from high to low cost areas, i.e. global sourcing, offshoring

etc…

NuStar Terminal located in Statia is the biggest capacity storage location of the company. This

also gives the Statia’s government leverage as the interests (“belangen”) are very important

internationally as it is estimated that the Statia location assures for 27% of the total

international storage capacity of NuStar Terminal.

final report nustar seis december 2011

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