Dutch expertise offered for price regulation

The Executive Councils of Bonaire, St. Eustatius and Saba can make use of expertise of the Dutch Ministry of Economic Affairs in the area of market forces and price regulation. Minister of Economic Affairs Henk Kamp stated this in a recent letter to the Second Chamber of the Dutch Parliament following talks with the Executive Council representatives in The Hague earlier this month. During the so-called Caribbean Netherlands Week is was agreed that the Executive Councils can make use of expertise of the Ministry of Economic Affairs in the process of setting up price regulations of basic consumer goods.

During the meeting, the issue of price policy and other topics relating to economic development were also discussed. According to Kamp, the Executive Councils in the Caribbean Netherlands barely made use of their authority to regulate prices. The public entity Bonaire in 2013 set maximum prices for a number of specific basic consumer goods such as rice, bread, coffee, vegetables, fruits and sugar. This led to protests by several supermarket owners on the island.

By law, the Executive Councils have the authority to regulate prices of goods and services and to request information from wholesalers and stores on the build-up of prices. Price regulation can, under circumstances, contribute to a better protection of the affordability of specific goods and services on the islands, Kamp explained. “There is little leeway for multiple bidders and the perspective for effective competition is very limited due to the small scale of the islands. This can have a price increasing effect. At the same time, price regulation doesn’t prevent that, due to the very limited economic scale, the production cost for many goods and services are relatively high and that products and services have to be imported from surrounding islands,” Kamp stated. The potential added value of price regulation remains limited to situations where the high prices can’t be justified by underlying costs because the private sector can’t be forced to sell their products below cost price, the minister clarified. According to Kamp, price regulation can also have undesirable side-effects, for example that as a result of maximum prices the quality and availability of goods and services can decrease.