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Tourism on Curaçao: Explaining the Shortageof Sustainability Legislation from GameTheory PerspectiveValentina Dinica aa School of Government, Victoria University of Wellington, Wellington, NewZealand

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Tourism on Curacao: Explaining the Shortage of

Sustainability Legislation from Game Theory Perspective

VALENTINA DINICA

School of Government, Victoria University of Wellington, Wellington, New Zealand

ABSTRACT Tourism has developed unsustainably in Curacao, as in much of the world’smicrostate islands. Numerous foreign investors favouring mass low-cost tourism develop-ment prefer to operate in countries where sustainability legislation is underdeveloped orun-enforced. Political actors often create such environments to maximize foreign invest-ments. Although this is empirically widely acknowledged, no conceptual framework hasyet been advanced to explain theoretically the situation of sustainability legislation short-age in so many developing islands and to suggest ways of overcoming this. This paper con-tributes to scientific literature by indicating such a framework. The paper illuminates howthe Competitive Prisoner Dilemma Game, developed under game theory, can explain thefailure (so far) of political actors on Curacao to adopt laws that would enable a sustainabletourism development. Game theory also suggests interesting lock-out strategies forcountries stuck into this dilemma and reveals that the key for change is a solidarity orien-tation of political actors across developing islands competing for similar tourism products.

KEY WORDS: Sustainable development, legislation, developing islands, gametheory

1. Introduction

Tourism can be a powerful economic engine. When properly planned andmanaged, it can have many positive spin-off effects on local and regional socio-cultural and environmental resources. However, when un-regulated and devel-oped exclusively through demand pressures, tourism can turn into a destructiveforce damaging its resource base and compromising opportunities for localwelfare. The impacts and challenges of tourism development vary according tothe types of tourism products, facilities and infrastructures available. The positiveand negative impacts of ecotourism will differ from those associated with cruisetourism, water-sports tourism, cultural tourism or urban tourism. There canalso be differences between tourism impacts in developing countries, asopposed to developed countries, as the general economic, social and legislative

Correspondence Address: Valentina Dinica, Valentina Dinica School of Government, VictoriaUniversity of Wellington, New Zealand. Email: valentina.dinica@vuw.ac.nz

Journal of Environmental Policy & PlanningiFirst, 2012, 1–28

1523-908X Print/1522-7200 Online/12/000001-28 # 2012 Taylor & Francishttp://dx.doi.org/10.1080/1523908X.2012.681121

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contexts pose fundamentally different challenges. The geographic conditions willhave an influence as well. In this context, the paper will focus on tourism chal-lenges and impacts in microstate developing islands, which share a largenumber of contextual features, as explained in this introductory section.

There are 53 microstate islands in the world, many relying on tourism as a keyeconomic sector. Their tourism receipts vary between 6 and 46% of GDP (Wilkin-son, 1989, p. 154). Thirty-two percent of them are located in the Caribbean Sea,34% are found in the Pacific Ocean and 15% in Africa. In terms of GDP percapita, 81% of these microstate islands can be classified as developing countries(Wilkinson, 1989, pp. 155–156). Numerous islands engage in traditional types oftourism development, characterized by mass sea–sand–sun tourism, enclaveresorts in ‘unspoiled nature areas’, marine sports such as diving and cruisetourism (de Albuquerque & McElroy, 1992; Dixon et al., 2001; Harrison, 2001;Lockhart & Drakakis-Smith, 1997; Tewarie, 2002; WBCCMU, 2004).

Several features have characterized the development of their tourism sectorsso far: political tolerance of uncontrolled and unplanned developments, limitedspecialist expertise on tourism and legislative shortage with regard to localsocial and environmental protection. When legislation does exist, implementationis often missing or inadequate (Briguglio et al., 1996; Dixon et al., 2001; Helmy,2004; Holder, 1988; Sawkar et al., 1998; WBCCMU, 2004). As a result, multinationalcompanies took control of tourism development policies in many islands. Thisenabled them to institutionalize price competition as the sole policy-making prin-ciple, defended by the promise of increased employment and revenues.

The consequence has been similar across islands: they have been plagued bysignificant negative environmental and social impacts of tourism. Often tourismfails to benefit the islands even economically, at the expense of foreign investors.The negative impacts of tourism in microstate islands are by now well documen-ted (de Albuquerque & McElroy, 1992; Camhis & Coccossis, 1983; Conlin & Baum,1995; Davies, 1996; Harrison, 2004; Holder, 1988; Milne, 1992; Sawkar et al., 1998;Wilkinson, 1989). Focusing on the Caribbean region, Barker & McGregor (1995,p. 5) consider that the islands suffer ‘environmental degradation ranging from sig-nificant to extreme’. Timothy & Ioannides (2002) observed that in the Caribbeanislands, the concentration of ‘tourism decision-making authority in the hands ofa few elite (. . .) results in a lack of state planning restrictions’ (p. 192). Planningis an essential ingredient for sustainable development and, in order to beobserved, it needs to be anchored in legislation.

Reflecting on the negative impacts of tourism in small islands, globally,McElroy (2004, p. 236) noted that ‘To reverse past market failure will requirestrong policy intervention, comprehensive integrated planning and improvedimpact monitoring’. Nevertheless, in many microstate islands, sustainability-enabling legislation has remained either absent, or under-developed, or not (ade-quately) implemented. Despite evidence of negative environmental and socialimpacts being generated by the current patterns of tourism development, theshortage of (enforced) sustainability-enabling legislation in microstate islands per-sists.

The tourism literature was enriched over the past decades with exploratorystudies into the factors affecting the unsustainable development of tourism indeveloping countries in general, and in developing islands in particular (Dixonet al., 2001; Lockhart & Drakakis-Smith, 1997; McElroy & de Albuquera, 1998;Mowforth & Munt, 1998; Tosun, 1998; Wahab, 1997). Often, studies point to an

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inadequate governmental involvement or lack of tourism planning/policy/strat-egy as typical consequences of the power exerted by foreign multinationals andtour operators on governments (e.g. Hope, 1980; Jenkins & Henry, 1982;Timothy & Ioannides, 2002). In essence, such factors are connected to the shortageof sustainability-enabling legislation, directly or indirectly. For example, one studyof the World Bank on the Caribbean region mentions that ‘weakness in legislationand accompanying regulations impede the member states’ respective nationalenvironmental unit’s ability to promote behavioural changes’ (WBCCMU, 2004,p. iv).

Many layers of factors may be differentiated to explain the poor performanceof tourism development in microstate islands: administrative factors, such as dis-agreements on the problem owner and problem magnitude; cultural factors; pol-itical factors; or resource factors, such as financial constraints, brain drain,technical expertise and so on. At the core, however, is the insufficient political will-ingness to adopt or implement (adequate) sustainability-enabling legislation(Dixon et al., 2001; McElroy & de Albuquerque, 1998, pp. 160–163; WBCCMU,2004). In spite of this acknowledgement, at this stage, no conceptual frameworkhas been advanced to explain theoretically the situation of sustainability legis-lation shortage in developing islands where tourism is an important economicsector. This paper’s contribution to the literature is to indicate such a frameworkand illustrate its explanatory power, and the policy insights it offers, by means of acase study. More specifically, the main aim of this paper is to illuminate how gametheory can explain the shortage of sustainability legislation needed for sustainabletourism development, taking as a case study the island of Curacao.

Curacao belongs to the Netherlands Antilles, which is a developing micro-state, forming part of the Kingdom of the Netherlands. In 1997, a federal policyfor sustainable tourism was adopted by the Netherlands Antilles Parliament,which had to be implemented by each of the five constituent islands (Curacao,Bonaire, St Maarten, St Eustatius and Saba) through the adoption of severallegal instruments (Netherlands Antilles Government 1997). This would havemade possible the implementation of a large number of practical measures bytourism companies and various stakeholders. So far, none of the envisaged legalinstruments has been adopted.

The interpretation of the research findings from a game theory perspectivereveals that political actors in the Caribbean region are trapped in a decades-long Competitive Prisoner Dilemma Game, the equilibrium outcome of which isthat none of the players will adopt/implement sustainability legislation as longas the players’ characteristics do not change. The paper argues that game theoryalso enables the development of potentially effective ‘lock-out strategies’ for theadoption of legislation that may benefit the sustainable development of tourism.

In spite of its reasonably wide use in other social science disciplines and itsusefulness for policy-makers, game theory has had so far very limited applicationsin tourism studies. Contributions from Chinese academics dominate, focusingespecially on the behaviour of tourism business. For example, Zhang et al.(2009) explore the factors influencing the success of a particular type of outboundtours from the Chinese market (‘zero-commission tours’) by applying gametheory to the strategies used by local (host) and Chinese tour operators. Yanget al. (2008) examine the disadvantages of competition between two tourismsupply chains in a destination. Using game theory, they show that ‘increased com-petition because of increased TSC membership in a sector reduces the profit for

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each service provider, as well as the sector profit’. Schwartz (1997) explores thebusiness behaviour of hospitality companies, such as franchising, mergers,acquisition, pricing strategies and product differentiation, relying on the abilityof game theory to reveal the consequences of interdependent strategies and thepreconditions of cooperation.

Only two studies have been identified that try to incorporate sustainabilityconsiderations into game theory applications to tourism. Bimonte (2008) appliesgame theory to examine under which conditions the relationship between touristsand host communities can facilitate the sustainable use of local tourism-relevantresources. He formulates a number of policy recommendations, arguing that‘selective and precautionary (as opposed to generic and therapeutic) instrumentsare required’ (Bimonte, 2008, p. 462). Sheng (2011) analyses the consequences ofaggressive promotion strategies for the sustainability of tourism destinations,pointing out that the negative social, environmental and economic side effectsof tourism are typically excluded from the cost-benefit evaluations of tourismdevelopment strategies. Applying game theory for the theoretical case of twodestinations competing for the same tourism products, Sheng (2011) concludesthat ‘for the sake of the destination’s sustainable development, rationaldecision-makers should choose moderate strategies instead of very aggressiveones’ (p. 669).

An interesting study, relevant for this paper, is that of Hirsch (1998) whoapplies game theory to understand the options for the sustainable use of waterresources in the Middle East: the issue of marine pollution in the Gulf of Aqabaand that of the pollution of the Mountain Water Aquifer.

He illustrates the usefulness of the Prisoner Dilemma (Section 5.1), the assur-ance game and the coordination game (Scharpf, 1997) for understanding how theinternational environmental law may be designed and implemented, so as toensure the cooperation of countries like Jordan, Israel and Egypt towards sustain-able water use. Hirsch concludes that ‘the concepts and models of game theoryoften assist scholars and policy-makers in identifying why cooperation failed ina given international setting. It may also aid them in predicting settings that aremore susceptible to collective action failure. More importantly, game theoreticaltools can be used to alter the current competitive settings, while serving as a plan-ning tool for the construction of international regimes more suitable to stablecooperation’ (Hirsch, 1998, p. 117).

The reality of tourism sustainability issues in Curacao suggests that gametheory is indeed a powerful theoretical tool to apply in this case too, offeringpolicy-relevant insights into why cooperation among islands on tourism develop-ment failed in the Caribbean and how the competitive setting characterized byaggressive growth strategies may be altered. As Rasmusen (1994, p. 18) puts it:‘[w]henever you observe individuals in a conflict that hurts them all, your firstthought should be of the Prisoner Dilemma’.

The paper is structured as follows. Section 2 offers background informationon the case study, and presents the research methodology. Section 3 presents ashort overview of the negative impacts of tourism development on Curacao.This section also mentions the legal instruments envisaged in the 1997 FederalPolicy on Sustainable Tourism to address the impacts discussed. Section 4 presentsthe arguments offered by interviewees, as underpinning the failure to adopttourism sustainability legislation on Curacao. Section 5 places the empirical find-ings into the explanatory framework offered by game theory. This section

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provides first a short presentation of the basic concepts of game theory. After that,it explains the shortage of sustainability legislation based on the Competitive Pris-oner Dilemma Game. It also proposes several strategies by means of which politi-cal actors in Caribbean islands could exit this game. Section 6 concludes the paperwith some reflections on the insights revealed by game theory regarding theproblem of sustainability legislative shortage in developing islands.

2. Research Background and Methodology

Curacao is a small island situated in the Caribbean Sea; it covers only 444 km2,with a population of approximately 144 000 inhabitants. Currently, tourism onCuracao is the third income generation activity. The main tourism products pro-moted by public authorities since the 1960s have been beach tourism, cruisetourism and marine sports, including coral-reef diving; since the 1990s, golftourism is also supported (CTB, 2005). However, the island has large potentialfor cultural heritage tourism, community-based tourism and nature-friendlytourism; but these tourism resources are currently not given priority in practiceby public authorities, although they are mentioned in the Tourism Master Plansadopted since mid-1990s (Interviewee 1, 2005).

The politically supported tourism products were promoted without a sustain-able development approach, which resulted so far in significant negative environ-mental and social impacts; these are discussed in Section 3. The increasing numberand magnitude of negative impacts in the early 1990s, together with a speeded-upexpansion of tourism facilities (accommodation, attractions), worried the environ-mental organizations, which started to put pressure on politicians, for a policy thatcombines tourism development with environmental protection and social–localequity on welfare generation. Similar developments and movements wererecorded in the other four islands of the federation.

In 1997, the ‘Policy for Sustainable Tourism in the Netherlands Antilles’ wasadopted by the Federal Government of Netherlands Antilles (further referred asthe ST Policy). The political interest in adoption was to satisfy the politicallyand financially significant stakeholders from the Netherlands, putting pressurefor such a programme, as well as the international lending organizations requiringgovernments to have sustainable development policies, as preconditions forlending or subsidies (Interviewees 2 and 3, 2005).

Because of the federal structure of the Netherlands Antilles, policies andpieces of legislation in certain fields of activity adopted at the federal level canonly be implemented if they are transposed into legislation at the island level.This is also the case with the 1997 ST Policy covering many tourism and environ-mental issues under the competence of island authorities. The ST Policy had,therefore, to be passed by the Island Parliament on Curacao, in the form of anIsland Law for Sustainable Tourism.

The 1997 ST Policy required further the adoption and implementation of twocategories of instruments: (1) island political and administrative actors wereresponsible for a number of legal instruments; (2) economic, administrative andsocial actors were responsible for the implementation of the new legal instru-ments, as well as of a set of practical measures stated in the policy, according totheir institutional responsibilities. The adoption of legal instruments was seenas a priority because the environmental and social welfare legal frameworks rel-evant for sustainable tourism development were severely underdeveloped.

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Besides, the implementation of practical measures by economic and social actorsdepends, to large extent, on the existence of legal instruments, such as environ-mental laws, spatial planning laws, fiscal regulations, labour laws etc. However,in Curacao, the 1997 ST Policy was not adopted as law by the Island Parliament,and neither were the legal instruments envisaged in the federal policy. There havebeen no real attempts to fill-in the sustainability legislation vacuum, characteriz-ing the island for decades. Based on this finding, empirical research concentratedon the arguments underpinning the failure of political actors to adopt the legalinstruments envisaged in the 1997 Federal Policy.

The methodology for empirical data collection consisted of in-depth struc-tured interviews with representatives of 20 public and private organizations(see Appendix). Most interviews were carried out in 2005 and were taped withinterviewees consent. In 2008, a number of additional interviews were carriedout by means of phone and email for updates on policy-making. These interviewswere conducted with three policy workers from three governmental departmentsand two environmental NGOs. No changes were signalled. The empirical infor-mation obtained regarding the arguments underpinning the preference for legis-lative shortage was organized and analyzed per legal instrument, and grouped inthemes, as shown in the sub-headings of Section 4.

3. Negative Impacts of Tourism on Curacao and Legislation Needs

This section summarizes the main negative impacts of tourism so far, and the legalmeasures envisaged in the 1997 ST Federal Policy to address them.

3.1. Environmental and Nature Impacts

From an environmental standpoint, the marine environment has been the mostimpacted. There are several key sources of marine life degradation (Thijssen,2000). First, the landscaping practices of hotels and resorts result in nutrientleakage into the ocean. Landscaping is needed because Curacao is a desertisland, and does not have the lush vegetation hotel owners consider theirclients expect. Large areas around accommodation units and beaches wereplanted with palm trees and tropical flowers. However, their maintenancerequires intensive nutrient-rich irrigation. Much of these nutrients find theirway into the ocean, changing the marine ecology (Gast & Laponte, 1998).

Second, marine life is threatened by the leakage of sand from the increasinglynumerous artificial beaches. Curacao has only few natural sand beaches. Most ofits shores are formed by volcanic rocks. Hotel and resort owners/managers builtartificial beaches in order to keep up with the ‘tropical paradise’ image advertisedin their brochures (Abeelen, 1996, pp. 81–82; Debrot, 1993). Due to its vulner-ability to sand, coral reef is the biggest victim of artificial beaches.

Third, some hotels have been discharging for many years their sewage watersdirectly into the sea. Others have only engaged in limited wastewater treatment(Interviewee 4, 2005). Nowadays, such practices are less common, as mosthotels have sespits. But most sespits seem to be poorly insulated, leading to soilpollution and the leakage of toxic substances into the ocean (Gast & Laponte,1998; Interviewees 3 and 4, 2005). These factors contribute to the further deterio-ration of the marine flora and fauna, including the coral reef (Debrot, 1993; Geleu-

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ken, 2005). Curacao has more than 20 km of coral reefs, and there are clear signs ofdegradation in the areas where tourism facilities are located.

Fourth, there is the problem of solid wastes, which are dumped into landfill sites.Although local communities also contribute to landfilling, the contribution of tourismis much higher. By 2005, Curacao was almost close to filling-up its second landfill site.There have been so far no requirements on tourism companies to engage in wastereduction practices or recycling. They have never been approached by political andadministrative actors to contribute financially towards the construction of solidwaste treatment facilities on the island. On such a small island like Curacao, landfill-ing cannot be a long-term solution as there is high demand for land. Besides, the twolandfills built so far were also poorly insulated and they have been leaking pollutantsinto the soil and ocean, and will continue to do so for decades.

Further, terrestrial nature areas have also fallen victims to tourism. The mostsevere pressure comes from unplanned accommodation and attraction facilities ingreen nature areas. In the absence of adequate spatial planning legislation andnature protection laws, tourism investors have been increasingly able to securespace in nature areas of high ecological value. Investors argue that there is highdemand from Western tourists for such facilities in ‘untouched nature areas’(Interviewee 5, 2005). Next to the fragmentation of ecosystems, there are seriousconcerns regarding the quality and impacts of the infrastructures needed toaccompany the new dispersed facilities – roads, sewage and clean water, electri-city supply. Emerging products such as ‘adventure nature-based tourism’ also putincreasing pressure on both terrestrial and marine ecosystems. Tour operatorsmay offer these kinds of activities with little or no constraints on location,timing and number of visitors (Interviewees 6 and 7, 2005).

It is important to note that tourism is not the only source of environmentaldegradation. Local communities and other economic sectors and small businesseshave negative impacts too. For example, households and non-tourism businessesare typically storing their wastewaters also in leaking sespits and have been heldresponsible for direct discharges into the ocean. Fast food companies like McDo-nalds and KFC have been seen as key generators of solid wastes, and use econ-omic arguments to justify their refusal to engage in waste reduction andrecycling practices (Interviewees 2, 3 and 4, 2005). The state-owned companyfor drinking water production has been held responsible for environmental(coral reef) damage during the construction of the plant.

However, the largest non-tourism source of pollution on the island is the oilindustry, which is governmentally owned but privately operated under a leasecontract that expires in 2019. The oil refinery company generates significant airpollution, especially sulphur dioxide (SO2). The situation has improved slightlysince 2000, due to the introduction of fuel-efficient technologies and end-of-pipemeasures. However, the leasee argues that the remaining contract time is tooshort to recover significant investments for further reductions of air pollution.The government also does not intend to intervene for environmental improve-ments, as the oil industry is going to be disestablished in 2019 when the contractfor oil supply from Venezuela also expires. Representatives of all political partiesstated that there is no intention to renew the oil supply contract. Both local peopleand tourism facilities are affected by the refinery-generated pollution. However,the Economic Affairs department of the government argues that the breach ofthe oil supply contract would have high financial consequences for the island(Interviewees 2, 3 and 4, 2005).

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The representative of the hotel association considers that in the context of conti-nuing air pollution from the state-owned refinery, hotels are unlikely to engage inradical efforts of environmental improvement (Interviewee 5, 2005). The CuracaoHospitality and Tourism Association (CHATA) wants the refinery closed, as touristsdo not appreciate seeing pipes and industrial landscapes near their resorts andholiday playgrounds. Nevertheless, interviewees from hotels and tourism companiesadmitted they never lobbied political actors with regard to the refinery or othernon-tourism sources of environmental pollution. They prefer this to be done by theenvironmental movement and communities, framing this as a public health issue.

3.2. Local Social and Economic Impacts

There are also problems from the local welfare standpoint. The GDP per capita onCuracao is around US$ 12,400; this is, however, strongly unevenly distributedwith the majority of native people earning between US$ 200 and 400/month(Interviewee 8, 2005). After an initial growth, the development of tourism stag-nated during the 1980s. Public authorities decided to reinvigorate tourismthrough a long-term development policy and a revised package of highly attrac-tive fiscal incentives. However, this was only made available for hotel investmentsabove US$ 550,000, while for property development investments, they should beabove US$ 1,100,000. This shut down the door for entrepreneurship by local,native people as they can hardly make investments above these levels.

Political actors argue that local entrepreneurs do not have expertise todevelop tourism facilities and services able to compete regionally (Abeelen,1996; Interviewees 9 and 10). Preference was given to foreign project developersbecause they were expected to speed up growth and develop facilities profession-ally. There are eight types of fiscal incentives applicable for periods of 10–15 years.Hence, the local economic benefits of tourism in the form of entrepreneurshiphave been limited. Besides, these tax exemptions make public authoritiesunable to raise the needed budgets for improvements in infrastructures andpublic services that could contribute to local social–economic development, asrequired by sustainability principles (UNEP-WTO, 2005). Although fiscal exemp-tions led to a fast increase in the number of rooms and attractions on the island tothe point that the occupancy rates are sometimes as low as 30–40%, political auth-orities do not want to abrogate these laws, and believe that the construction ofaccommodation units should continue (CTB, 2005).

So far, the only meaningful local benefit from tourism is in the form ofemployment. However, tourism did not help solve the structural unemploymentproblem, which is one of the highest in the Caribbean: in Curacao it was 15.6% in2003 (i.e. around 9500 people; DEA, 2004), while the Caribbean average was 8.4%.Political authorities adopted laws in the 1980s allowing foreign people to work intourism, to decrease costs and increase the island’s cost-competitiveness. But withthe increase in legal foreign workers, there has also been an increase in illegalworkers. It is estimated that around 19% of the people employed in tourismwere not born in Curacao (CBS, 2008).

3.3. Legislative Expectations under the 1997 Federal Sustainable Tourism Policy

The 1997 ST Policy assumed the adoption of six legal instruments by the IslandParliament and/or Executive Council. First, an integrated and updated spatial

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development law was deemed necessary that should include planning for sustain-able tourism, preferably based on the principle of concentrated planning. Thisprinciple aims to keep concentrated the infrastructure for water and energysupply and wastes collection, to contain the environmental impacts of facilities.It also aims to limit the encroachment of tourism buildings into nature areasand the possible threats to biodiversity.

Curacao already had a legal instrument applying this principle – the SpatialDevelopment Plan (EROP) adopted by Island parliament in 1935 and amendedseven times since 1980 (Abeelen, 1996). However, the current fragmentation ofthe spatial planning regulatory framework gives opportunities for the inadequateimplementation of its objectives and principles. For a long time, there has beenhigh pressure from tourism investors to build in ‘unspoiled nature areas’. Theyhave also been lobbying to political actors towards the abandonment of the prin-ciple of concentrated planning (Interviewees 6, 7, 11, 12 and 13, 2005).

Second, the 1997 Policy expected the adoption of legislation requiring that allnew tourism facilities be approved only if they passed scrutiny under compulsoryenvironmental impact assessments (EIAs). For any new tourism company, ownerswere expected to comply with environmental performance requirements to bestated in environmental permits. In Curacao, one piece of legislation that iscrucial for sustainable tourism has been awaited for 18 years, namely the specifi-cation of the framework law for environmental permits, called the 1994 HindranceOrdinance, to make it implementable. The 1994 framework law only regulates thegeneral conditions for environmental permits, and requires follow-up legislationspecifying: the activities for which environmental permits are compulsory, whatthe EIA should require and how to carry out EIA in various circumstances (Inter-viewee 4, 2005). The 1997 ST Policy makes reference to this legislative gap anddemands the adoption with priority of implementing regulations that make EIAcompulsory for new artificial beaches, new hotels and mega-piers for cruise ships.

Third, the 1997 ST Policy expected the adoption of a standard package ofenvironmental performance requirements for the already operating accommo-dation facilities; this assumes the adoption of a legal instrument that shouldrequire accommodation facilities to: reduce energy and water consumption;apply/contribute to the adequate treatment of sewage waters; abandon/reducelandscaping practices and the construction of artificial beaches; reduce andrecycle solid wastes.

Fourth, a law was required, offering financial stimuli (soft loans, tax rebates) forcompanies making environment-improving investments, such as using renewableenergy and de-centralized power plants. Fifth, the federal policy also aimed tomeet tourists’ demand for nature through well-managed nature protection areasand marine parks. For this, it demanded the adoption of regulations for the legal pro-tection of the island’s terrestrial and marine nature areas declared as ‘parks’ in islandpolicy papers (which are not enforceable instruments). In addition to these fiveinstruments, a framework law was also supposed to be adopted in Curacao, trans-posing the entire text of the 1997 Federal Policy into island legislation.

4. Arguments Underpinning the Non-Adoption of Legal Instruments forSustainable Tourism

Empirical research indicates two main reasons for the failure to adopt the six legalinstruments mentioned in Section 3.3. First, governmental departments and the

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other actors with competences on drafting legislation have not taken the initiativeto design legislative proposals. The actors with legislation drafting competencesare referred to in this paper as ‘administrative actors’. Second, political actors –such as the Executive Council (government) and the Island Parliament –abstained from putting any pressure on the competent administrative actors tobe submitted with legislative proposals. They also failed to formally initiatepolicy-making themselves, while they had legal competences to do so.

4.1. Key Actors in the Legislative Process

Table 1 shows the six legal instruments expected to be adopted and the politicalactors responsible for them. The Executive Council is formed by seven deputies,three of whom have portfolios that are directly relevant for the sustainable devel-opment of tourism: the Deputy for Tourism; the Deputy for Spatial Planning; andthe Deputy for the Environment. The island’s Deputy for Tourism is the presidentof the Curacao Tourism Board established in 1955. The Board is assigned with thetask of developing the island’s tourism policy. The Board is further made up oftwo representatives of CHATA, two representatives of the financial sector, onemember representing tourism trade unions and one representative of projectdevelopers active on the island.

The tourism agency Curacao Tourism Bureau (CTB) was established in 1989,as an executive body of the Board. Among the main tasks of CTB is to take care ofthe regulation of tourism activities, the physical planning of tourism, productdevelopment, promotion of the island among tourism investors, market researchand marketing. The Board and CTB constitute important institutional arenas,where tourism companies and project developers lobby political actors regardingtheir vision of tourism development on the island.

The main administrative actors that should have been involved in draftingthe legislative proposals were: Curacao Tourism Board, CTB, Department of

Table 1. Actors with competences on the adoption of legal instruments forsustainable tourism.

Legal instruments needed for ST Decision-maker Formal initiator of the proposal

1. Framework law for Sustainable Tourismon Curacao

Island Parliament Executive Council withcoordination by TourismDeputy

2. Adoption of updated spatialdevelopment plans with specificplanning for sustainable tourism

Island Parliament Executive Council withcoordination by Deputy forSpatial Planning

3. Legislation for the protection of natureand marine areas by island governments

Island Parliament Executive Council withcoordination by TourismDeputy

4. Legislation to implement the 1994Hindrance Ordinance for environmentalpermits and EIA

Executive Council Deputy for Spatial Planningand Deputy for theEnvironment

5. Adoption of a standard package ofenvironmental requirements for hotels

Executive Council Deputy for Environment andTourism Deputy

6. Adoption of fiscal incentives for touristfacilities for environmentally improvinginvestments

Executive Council;NL-Antillesgovernment

Tourism Deputy and Deputyfor Environment

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Spatial Planning and Housing, Department of Agriculture, Nature and Fisheries(LNV), the Environmental Directorate, part of Department of Public Health andEnvironment (MD), Department for Public Works and Public Domain Manage-ment. Next to these, advice and input was also expected in some cases from: thepublic company responsible for water and energy supply, and sewage (Aqua-electra); the public company responsible for wastes management (Selicor);and the nature protection NGO Carmabi contracted by the LNV to implementpart of its nature protection policy, in the absence of funds for a governmentalagency.

Interviews revealed that the failure of the administrative actors – other thanthe Board and CTB – to engage in the drafting of legislative proposals, or provideadvice for them, is due to very low self-efficacy perceptions (Interviewees 6, 7 and14, 2005). These originate in their numerous previous experiences when draftedlegal instruments were never discussed or adopted. An example is the legislativeproposal for the protection of the marine environment. This was formulated by theNGO Carmabi and the LNValready in early 1990s; by 2008, it was still not adoptedby the Island Parliament. The same happened with the Nature Policy Plan, await-ing approval for more than 15 years (Interviewee 11, 2005). The 1994 NuisanceOrdinance designed, among others, to offer some minimum level of protectionfor environmental and natural resources from economic activities was adopted11 years after its submission as legislative proposal to the Island Parliament (Inter-viewee 4, 2005).

4.2. Visions on Tourism Products and Markets

In 1995, the Executive Council adopted a Tourism Development Master Plan witha 20-year horizon, to be updated every 5 years. The 1999 update, which followed 2years after the adoption of the 1997 ST Federal Policy, did not include objectivesregarding any of the legal and practical measures envisaged in the 1997 STPolicy; neither did the 2005 update. Given the institutional framework onCuracao, the Executive Council, the Deputy for Tourism, the Curacao TourismBoard and CTB were supposed to be key actors in the preparation of sustainabletourism legislation. Empirical research indicated that they have been, however,negatively motivated towards the adoption of the legal instruments mentionedin Section 3.3.

Several argumentation lines can be distinguished that contributed to thestrong motivation at the level of Curacao Tourism Board and CTB against sustain-ability legislation. The adoption of the legal instruments 2, 3, 4 and 5 mentioned inTable 1 was considered as an obstacle for tourism growth on the island. Incumbenttourism companies and prospective investors were arguing that a successfultourism development policy must be focused with priority on the North Americanmarket because of the island’s proximity. The Board and CTB embraced thisvision. The 2005 Master Plan mentions that: ‘No other destination in the Caribbeanis less dependent upon the US market and more reliant upon “other” sourcemarkets. The US represents just 18% of arrivals into Curacao compared with53% for the whole of the Caribbean’ (CTB, 2005, p. 16).

Further, CTB subscribed to investors’ visions that:

(1) North American tourists have a strong preference for certain standardizedproducts, especially enclave resorts in unspoiled nature areas; golf resorts

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either in the proximity of beaches or in attractive nature areas; beach resortswith plentiful lush vegetation and large sandy beaches; and cruise tourism;

(2) Curacao should take as developing models and main competitors the Carib-bean islands: Aruba, Bahamas, the Dominican Republic, Jamaica, Bonaireand Cuba (CTB, 2005: 27).

Nevertheless, in order for Curacao to be competitive on the Caribbean market, ithad to offer these products at the lowest cost possible. This is clearly stated in the2005 Master Plan: ‘The current product does not compete on price with the low-cost destinations in the Caribbean’ (CTB, 2005, p. 10).

4.3 Arguments Regarding Spatial Planning and Nature Protection Laws

Laws 2 and 3, in Table 1, have been viewed by CTB and investors as key threats forthe development of most of the above-mentioned products. Several intervieweesargued that investors and CTB plan to change the current legal framework forspatial planning, but in a different way (Interviewees 6, 7, 11, 12 and 13, 2005).In their vision, the new law should clearly allow for a widespread diffusion oftourism facilities across the island. Besides, it should also lift the constructionrestrictions currently protecting certain beautiful areas of the island where compa-nies want to invest. A legislative change in this direction was viewed as crucial forpromoting golf tourism and all-inclusive resorts in ‘pure nature areas’. Suchchange is also viewed as essential for the construction of all-inclusive beachresorts in coastal areas where currently it is not always easy to obtain a spatialplanning permit. The plan to change the Spatial Development Plan (EROP)towards a more ‘investor-friendly’ version was confirmed and defended by therepresentative of the CHATA (Interviewee 5, 2005), the largest association oftourism businesses on the island.

Tourism investors and CTB also oppose the adoption of a law that wouldoffer the current terrestrial nature parks and marine parks of Curacao an enforce-able legal protection regime. These parks are currently ‘paper parks’ (Interviewee11, 2005). They were given this status in policy papers that have no legal conse-quences in terms of offering protection from commercial development.However, political authorities still wanted to give those areas some kind ofstatus so that the manager of NGO Carmabi can be eligible for internationaland Dutch funds for nature conservation (Interviewee 12, 2005). The preferenceof CTB to have less rather than more legislation applying to tourism businessescan be seen also in the 2005 Master Plan: ‘red tape (bureaucracy) within govern-ment departments and authorities with regard to petitions for permits and indealing with tourist projects have to be reduced’ (CTB, 2005, p. 10).

4.4. Arguments Regarding Environmental Performance and Impact AssessmentLaws

CTB and investors have been also strongly against the adoption of the laws 4and 5, in Table 1. The competitive development of beach tourism and cruisetourism is portrayed as highly unlikely under such legislation, especially due tothe requirements for EIAs for artificial beaches, landscaping projects and megapiers for cruise ships. The tourism businesses and CTB also argue that theadditional costs incurred by compliance with laws 4 and 5 would make much

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of the tourism sector on the island collapse, in the context of the tough price com-petition for these products in the Caribbean region (Interviewees 5, 15, 16, 17, 18,19 and 20, 2005).

Owners of accommodation facilities managed to convince CTB alreadydecades ago that tourists coming to Curacao expect to see lush vegetation andsandy beaches, because this is the mental image they hold about a typical Carib-bean island. The Master Plan mentions that: ‘The resultant overwhelming visualmessage (website and collaterals) displayed by Curacao’s international hotels isone of sandy beaches, swaying palm trees and blue seas. The potential customeris left in absolutely no doubt that Curacao is a typical Caribbean island (. . .). Inview of this competitive set, the opportunity, and challenge, presented to the Cur-acaoan hotelier and at a broader level to CTB, is to indeed show the “expected”beach product’. (CTB, 2005, p. 27). In promoting beach tourism, CTB has takenislands such as Aruba, Jamaica, Bahamas and Cuba as models. However, theseislands are naturally endowed with natural sand-rich natural beaches. In contrast,Curacao is a volcanic, desert island. Most of its natural beaches are rough, coveredin volcanic rocks. Intensive landscaping and artificial beaches are needed to satisfythe expectation created by accommodation companies that Curacao is a ‘lushparadise’. Hence, the negative environmental impacts mentioned in Section 3.1emerged as a result of the political and CTB back-up of hotels’ preference toengage in such developments.

Regional competition considerations played a role also in the explanationsprovided by some administrative actors regarding the preference of CTB and pol-itical actors for legislative vacuum. The Environmental Department representative(Interviewee 4, 2005) explained that, in the past, regional attempts were made toimpose legal EIA obligations on tourism investors across the Caribbean islands. In1990, governmental representatives from numerous Caribbean states agreed,during a regional conference, on common guidelines for EIA studies, includingregarding artificial beaches. However, due to the tough price competition ontourism among islands, especially beach tourism, no Caribbean governmentkept its commitment to transpose the EIA obligation and agreed guidelines intonational legislations. Each government feared, at least few other governmentswould not keep their commitments, and that would be enough for investors tomove to the islands breaking the agreement.

The same interviewee (Interviewee 4, 2005) explained that this was also thereason for the Curacao political actors not to adopt implementing regulationsfor the 1994 Hindrance Ordinance. Such regulations would have made possibleto request tourism companies to apply for and secure environmental permitsbefore any construction and landscaping activities could begin. Therefore, othernegative environmental impacts mentioned in Section 3.1 – such as soil andmarine pollution due to poorly/un-treated sewage waters and solid wastesstorage in rapidly growing landfill sites – can also be seen as a consequence ofCTB’ and political authorities’ fear to upset tourism companies and make themconsider investing in competing islands.

The legislative requirement for EIAs for mega-piers is also considered unde-sirable by CTB. As regards cruise tourism, Aruba and St.-Maarten are takenas models, because they receive numerous cruise ship visits every week. CTBsupports the interest of tourism businesses and the Port Authority to stimulatemass cruise tourism. These actors consider actually that cruise-line companieshave been ignoring Curacao because of its location in the south of the Caribbean

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Sea and they would do anything to attract cruise ships there. The power of thecruising industry was illustrated by Port Authority interviewee: ‘The cruise indus-try will ultimately decide if new mega-piers are coming or not. If they need anextra pier or two to continue growing here on Curacao, we will build them’ (Inter-viewee 19, 2005).

Cruise tourism is an iconic product for the Caribbean Sea and most islandscompete to be included in the itineraries of major cruise liners. The tough compe-tition can be seen in the failure so far to adopt measures cruise liners might dislike.To illustrate this, the interviewee from the Port Authority explained that, in 1996,the Caribbean Tourism Organization proposed to state governments, in the frame-work of a regional conference, to adopt and implement a ‘head tax’ on all types oftourists. The governments of Caribbean islands agreed with a 10 US$ per touristtax. However, when this agreement was implemented at the island level, politicaldecision-makers of most islands gave a waiver to the cruise industry. ‘Islandswork together when the issue is in the interest of cruise-line industry (. . .),which is particularly successful with its “divide-and-conquer” strategy. They donot like Caribbean islands to get together and get too strong. Caribbeancooperation has been an issue for 20 years but it is just not working’. (Interviewee19, 2005).

4.5. Disinterest in Fiscal Incentives for Environmentally Friendly Investments

The lack of interest in the adoption of fiscal incentives for tourism companiesapplying environmentally improving technologies and measures is based onarguments and perceptions related to the same regional competition consider-ations. Section 3.2 mentioned a number of negative local economic impacts ofthe current tourism development patterns. Some of them are strongly related tothe political decision in the 1980s to give a large number of tax exemptions toforeign investors, if they build large-scale projects.

Similar incentives were put in place in those years by most competing islandsin the Caribbean, to avoid being left behind on tourism development. This placedCaribbean islands in ‘connected path dependency’ situations: if they attempt toreduce these fiscal incentives, investors threaten they will invest in the islandsstill maintaining the incentives. The importance for the already regionally activeinvestors of these incentives is illustrated by an interviewee who explained that‘no hotel stays more than nine years in the hands of the same group of investorsbecause the “tax holiday” expires; when this happens they go bankrupt and startagain’ (Interviewee 11, 2005). Besides, there is so much confidence from investorsthat administrative and political actors would not do anything to upset them that‘Many hotels do not even pay their bills to the public companies; some havereceipts at Aqua-Elektra of 1 or 2 million NGL and they are still not being cutoff from water/electricity while this would be the case if local people haddebts’ (Interviewee 11, 2005).

Such practices led to the situation that governmental budgets suffer fromgreat deficits. Political authorities are unwilling to consider legal instrumentsthat would give even further fiscal incentives to incumbent tourism companiesand new investors. Interviewees from administrative and political institutionswere asked if they are willing to implement a fiscal reform that would limit theexistent fiscal incentives to foreign investors who comply with some minimumenvironmental performances. However, it was argued that this would be not pol-

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itically feasible as long as it is not implemented by all islands in the Caribbeanregion, competing with Curacao for the same tourism products (Interviewees 9and 20, 2005).

Having in view such perceptions and practices, the adoption of a framework lawfor sustainable tourism – (1) in Table 1 – transposing the 1997 ST Policy into islandlegislation was also considered undesirable by CTB and Curacao Tourism Board.

4.6. The Perceptions and Attitude of Political Actors

The attitude of the members of Island Parliament and Executive Council regard-ing sustainable tourism legislation is strongly influenced by CTB, the Board andthe powerful direct lobby of tourism companies and potential investors. The argu-ments of tourism businesses have focused on the missed opportunities for theisland if the standardized tourism products mentioned in Section 4.2 are notoffered in Curacao. If other Caribbean islands are doing better in terms oftourism receipts, the arguments goes, it is because political authorities therehave been wise enough to develop such products (Interviewees 15, 16, 17, 18and 20, 2005). Tourism businesses have been successful in creating the perceptionamong political actors that there is high market demand for their preferred pro-ducts. Moreover, if Curacao implements sustainability legislation, it cannotcompete with the low-cost destinations in the Caribbean, which are pictured asthe only really successful destinations in the region.

According to numerous interviewed administrative actors, political actorsview the policy analysts of governmental departments and environmentalNGOs as lacking professional expertise, and distrust their advice (Interviewees3, 4, 6 and 7, 2005). For political actors, of great importance is the advice of theBoard, CTB and tourism investors. Investors are typically successful in convincingpoliticians their plans are sound, ‘based on cost-benefit analyses which politicianshardly understand’ (Interviewee 11, 2005). The approval of many poorly con-ceived investment projects is illustrated by the fact that only around 10% of theproposed tourism projects are ultimately successful (Interviewee 13, 2005). Therest leaves financial gaps in the island’s budget (paying for infrastructures suchas roads, water and electricity transport) and visual scars on the island due tounfinished constructions.

Based on the perception that CTB is the actor that holds the best expertise ontourism, political actors have allocated CTB a de facto very large autonomy inmaking choices for tourism development. The policy choices of CTB, such asthe products to be promoted, their scale and location, do not need to be formallyapproved by the Executive Council to be put into practice. The main competencethe Executive Council has chosen to still exert regarding CTB’s activities is theapproval of its budget (Abeelen, 1996, p. 109).

When issues of tourism products’ choice and location are discussed betweenthe two actors, and disagreements emerge, CTB may still choose not to followindications from the Executive Council. Only the Tourism Deputy may exert, inpractice, an influence on CTB, as president of Curacao Tourism Board.However, the lobbying power of prospective investors and CHATA led alltourism deputies so far to accept in full the CTB proposals for the most ‘desirable’development style and projects. Typically, the Executive Council and Island Par-liament have always stood behind the preferences of CTB (Abeelen, 1996,p. 109; Interviewees 3 and 7, 2005).

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In conclusion, political actors believe that the more sustainability legislationthe island has, the more obstacles emerge for tourism growth, and the missedopportunities will be reaped by the competing islands. They argue that, unlesssimilar policies are adopted and implemented at the regional level by all Carib-bean islands with which they compete on the chosen tourism products, itmakes for them little sense to focus on sustainable tourism on their own.

5. Explaining the Shortage of Sustainability Legislation from Game TheoryPerspective

The arguments that emerged from interviews and the analysed written documen-tation are striking in several respects. First, they refer extensively to the power andresources of regionally active foreign investors and the powerlessness of islandgovernments. Second, they reveal patterns of behavioural choices and strategiesreminiscent of actors playing a game, in which game players are meshed intohighly interdependent relationships. Third, the arguments regarding the behav-ioural options of political actors in Curacao are clearly affected by particularinterpretations of what sustainable tourism development could mean for theisland and how it can be operationalized. Fourth, the arguments appear to fuelstrategy choices leading to lose–lose situations for all Caribbean islands, reward-ing only the powerful regionally active investors. Interestingly, interviewees weresilent when attempts were made to explore options and strategies that wouldchange the decision-making behaviour of political actors. A strong sense of help-lessness and hopelessness dominated interviewees’ accounts, typically conclud-ing that political actors are locked in a situation of sustainability legislativevacuum for decades, and cannot imagine how this can change.

All these patterns in arguments are clearly reminiscent of the CompetitivePrisoner Dilemma Game, developed under game theory. A series of theorieswere initially considered for this research, including discourse theory, contextualinteraction theory (Bressers, 2004) and even one of the author’s own theoreticalframework for the investigation of policy processes, referred to as structure–conduct–performance (Dinica, 2005; Dinica et al. 2007). Nevertheless, the empiri-cal findings regarding the importance of power, strategies and actors’ interdepen-dencies have taken the author into the realm of game theory, as a more appropriateframework for the analysis of this case study, in the Caribbean context. Like anyother theory, game theory has its limitations, which can be more easily understoodif presented in the concluding section.

However, game theory emerged as useful in the phase of data interpretationbecause of several reasons. First, it can capture parsimoniously the deadlock cur-rently affecting Curacao tourism, offering a powerful descriptive and explanatorytool. Second, it permits a systematic analysis of actors’ behavioural choices, reveal-ing also how these interact with other actors’ strategies. This improves the under-standing of the analysis, and can be inspirational as to the unexplored behaviouraloptions and the preconditions for these, which may move actors away from lose–lose games. Third, it reveals how actors think when choosing to engage in onestrategy or another, by revealing their perceptions of costs and benefits, oradvantages and disadvantages. Fourth, game theory deals well not only withfactors such as actors’ cognitions and perceptions, but also with the aspects ofpower and resources. And finally, perhaps most importantly, game theory offersa wide range of game possibilities; it is flexible and allows its users to be creative.

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New games may be suggested, if one respects the core assumptions and rules ofthe theory. The new games may be translated into policy recommendations, withthe potential of improving the impact of policy science on governance for sustain-ability. In this paper, this has been attempted in Section 5.3.

The next section offers a short presentation of the basic concepts of gametheory, before elaborating on this statement.

5.1. Game Theory in a Nutshell

Game theory originates in applied mathematics and builds upon rational choiceassumptions, though models were developed that allow for incomplete and asym-metrical information as well. Game theory operates with three key concepts:players, strategies and payoffs. In policy sciences, Fritz Scharpf carried out inno-vative work, transforming complex analytical models used by game theorists intoparsimonious tools for empirical policy analysis (Scharpf, 1990, 1994). Gametheory can be used for both explanatory and predictive purposes.

Any actor may be a player: individual or composite, public or private actors.Players have available at least two courses of action, referred to as ‘strategies’.Each strategy has a payoff for each of the actors involved in the game, which ‘rep-resents the valuation of a given set of possible outcomes by the preferences of theplayers involved’ (Scharpf, 1997, p. 7). Therefore, the payoff is not the outcome itselfbut how the actor values the outcome. Scharpf argues that game-theoretic conceptu-alizations of actor interaction processes in the policy cycle are especially usefulwhen: (a) interactions involve a limited number of players, or can be acceptablysimplified as interactions among two or three actor types; and (b) ‘the outcomesare a joint product of their separate choices’ (Scharpf, 1997, p. 5). In tourism,games may be played, for example, between policy-makers from differentcountries, between tourism investors or between policy-makers and investors.As they play the game, ‘these actors are generally aware of their interdependence;they respond to and often try to anticipate one another’s move’ (Scharpf, 1997,p. 5).

The most frequently used representation of games, when they are played onlyby two (categories of) actors, is the ‘normal form’. Empirical policy situationswhen more than two actors (categories) are involved can be conceptualized asconnected games. The ‘normal form’ of the game is represented as a table withtwo rows and two columns. For the unaccustomed reader, Figures 1–3 of thispaper offer concrete examples, in Section 5.2, of the ‘normal form’, based onthis paper’s case study. The two rows represent the two strategies of Player 1;the two columns represent the two strategies Player 2. The payoffs ‘arenumbers entered in the cells at which strategies intersect’ (Scharpf, 1997, p. 87).The higher the numbers, the higher is the valuation of the payoff by the playerfor the respective strategy. Therefore, payoffs depend on actors’ knowledge andperceptions. For example, when actors lack insight into the benefits of environ-mental quality and social equity, payoffs may be defined by them as ‘economicbenefits’ only. Insights into how negative environmental and social side effectsmay affect the economic success of tourism development would lead actors toattach higher payoffs for sustainability-oriented strategies (Sheng, 2011).

Games can be non-cooperative and cooperative. In non-cooperative games,players have a strong mistrust of each other, and lack the opportunity to maketheir agreement binding, as it is for example the case with many international trea-

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ties and agreements. In contrast, in cooperative games, players do have availablemechanisms to make sure that the other does implement the strategies it has avail-able. In their interaction, players may have various ‘actor orientations’. Scharpf(1997, pp. 84–89) differentiates among: altruism, hostility, individualism, solidar-ity and competition. Only the last two orientations are sketched here, as they willcome up in the next section. Scharpf (1997) argues that: ‘In real-world policy pro-cesses, in the domestic politics of democratic states as well as in internationalrelations (. . .) individualism, solidarity and competition (. . .) are the most likelyinteraction orientations to expect’ ( p. 86).

Actor orientations are important because they can make a difference for thestrategy a player chooses. Besides, they account for a significant difference inthe payoffs perceived under the available strategies: players may value thesame strategy outcome differently, when their orientation changes, as discussedtheoretically in Sections 5.2 and 5.3 below. Under a competitive orientation ‘Again to ego or a loss to alter will be equally valued’ (Scharpf, 1997, pp. 84–89).In valuing payoffs, players have a win–lose mentality in the sense thatone cannot gain unless the other loses to the extent of his/her gain. Under acompetitive orientation, any game is a zero-sum game. For players holding ‘soli-darity orientations’, it would be possible for ego to accept a strategy where his/herpayoff is lower than the possible maximum, as long as the other player also bookssome gain. However, most often players will aim for win–win situations. Changesfrom competitive to solidarity orientations transform non-cooperative games into

Figure 2. Informed Competitive Prisoner Dilemma Game (adapted from Scharpf, 1997, p. 88).

Figure 1. Competitive Prisoner Dilemma Game according to Scharpf (1997, p. 88).

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cooperative games. When players have solidarity orientations, games are notanymore zero-sum games, where any gain must be the others’ equal loss.

5.2. The Competitive Prisoner Dilemma Game

The ideas and perceptions highlighted in Section 4 influenced political actors onCuracao towards a ‘competitive orientation’ regarding tourism development.Empirical information suggests that political actors on numerous other Caribbeanislands can be also characterized as holding ‘competitive orientations’. There is astrong mistrust among politicians across the Caribbean islands, with the conse-quence that agreements and treaties at the regional/Caribbean level cannot beenforced at the island level. Likewise for sustainability legislation that would bedesirable at the country/island level. Consequently, according to game theory,political actors across the Caribbean islands are engaged in a non-cooperativegame. Of all the non-cooperative games where players hold ‘competitive orien-tations’ (Scharpf, 1997), the Competitive Prisoner Dilemma Game is best suitedto explain the current deadlock on Curacao, and also more widely across Carib-bean islands, regarding the shortage of tourism sustainability legislation. Thisgame is represented in Figure 1.

In Figure 1, the ‘players’ are two developing islands in the Caribbean region,represented by their political actors. For each island, all political actors areassumed to hold the same ‘actor orientation’ and payoff perceptions. Therefore,the game can be reduced to a two-player game, with both players being ‘compo-site actors’. Each player has two strategies: to ‘adopt’ or ‘not adopt’ sustainabilitylegislation. (In case sustainability legislation has already been adopted, the samegame can be played with regard to the strategies of ‘implement’ or ‘notimplement’ available to political actors on islands). For each player, the payoffunder each of the two strategies depends on what the other player chooses to do.

When Island 1 (say Curacao) ponders whether to adopt sustainability legis-lation, it fears that Island 2 would not do the same and would ‘steal’ its growthopportunity. As a result, Island 1 fears that its payoff will be low and negative,say 23, as shown in the lower left cell of Figure 1, based on the game suggestedby Scharpf (1997, p. 88). In case both islands adopt the respective laws, they wouldbe on a ‘level playing field’: tourism investors on both islands would be equally‘hit’. Because players do not understand how sustainability legislation can help

Figure 3. Informed and Solidaristic Prisoner Dilemma Game (adapted from Scharpf, 1997, p. 88).

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tourism development, for various time horizons, they both attach a ‘zero payoff’under the scenario that they both adopt/implement (upper left cell). Under thescenario that none of them does adopt such laws, they also consider theirpayoff to be 0, that is ‘level playing field’ (lower right cell). The ‘competitive orien-tation’ in this game influences political actors from Island 1 not to adopt lawsbecause, under this strategy, the payoffs for Island 1 will be either:

(1) gain of +3, because maybe Island 2 would still keep its promise and adopt, inwhich case Island 1 would attract additional growth (upper right cell); or

(2) no gain 0, no stolen growth opportunity, because Island 2 may also decide notto adopt, as represented in the lower right cell of Figure 1.

The same reasoning is made by Island 2 when pondering whether to adopt/implement or not tourism sustainability legislation. The ‘domination rule’ charac-terizing prisoner dilemma games is the rule based on which players choose amongavailable strategies. The domination rule says that: ‘in choosing between two strat-egies an actor should always select the one that provides for payoffs thatare superior or equal to the payoffs provided by the second strategy for alloptions the other parties may exercise’ (Scharpf, 1997, p. 103). For Island 1, thesum of the payoff under the ‘adopt’ strategy is 0 – 3 ¼ 23, while the sumof the payoff under the ‘not adopt’ strategy is +3 + 0 ¼ +3. Therefore, basedon the ‘domination rule’, Island 1 will choose to ‘not adopt’; likewise forIsland 2. As a result of the mistrust between players and the absence of opportu-nities to make agreements to adopt/implement enforceable legislation, the equili-brium outcome will be that shown with (∗) in the lower right cell of Figure 1 willpersist.

5.3. Lock-out Strategies Based on Game Theory

Based on game theory, several changes in actor characteristics may help escape theCompetitive Prisoner Dilemma Game. First, an important step would be to changethe payoff attached by players for the strategy of adopting/implementing sustain-ability legislation. This requires changing the information structure shaping pol-itical actors’ perceptions and their valuation of the ‘adoption strategy’outcomes. If political actors are made to believe that the island stands to gainfrom sustainability legislation, they will attach a higher payoff, say +3, to the‘adopt’/‘implementation’ strategy. In this case, both players will find the strategycombination shown in the left upper cell of Figure 2 most attractive. Nevertheless,this will not be the equilibrium outcome as long as the mistrust problem persistsand/or there are no institutional mechanisms for enforcing an agreement toadopt.

Scharpf warns that ‘Competitive interaction orientation will transform allvarieties of constellations into zero-sum games (marked: ∗). Under these con-ditions cooperation, which would presuppose a modicum of common interest,is ruled out, and any communication received from the other is at best “cheaptalk” but more likely an attempt at deception’ (Scharpf, 1997, p. 87). Under thegame proposed in Figure 2, where players are better informed on sustainabilitybut preserve their competitive orientation, the equilibrium outcome will still beat the intersection of the ‘not adopt’ strategies, in the lower right cell.

The payoff perceptions (+3,23) and (23,+3) for the two game possibilities inthe lower left cell and upper right cell (Figure 2) are sustained by the continuous

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win–lose perspective inculcated by the competitive orientation. The change inoutcome valuation needs, therefore, to be more radical than illustrated in Figure2. In order for this to happen, game theory suggests that the second actor charac-teristic needs to change as well, namely the actor orientation. A change from com-petitive to solidarity orientation can finally shift the equilibrium outcome, becausethe solidarity orientation will transform the game into a cooperative one. Theequilibrium outcome of this new ‘Solidarity and Informed’ Prisoner DilemmaGame would be at the intersection of the ‘adopt’ strategies, in the upper leftlower cell of Figure 3.

The game suggested in Figure 3 satisfies the three main conditions undergame theory for solidaristic orientations. First, Scharpf argues that ‘A gameexists if (. . .) courses of action are in fact interdependent, so that the outcomeachieved will be affected by the choices of both (or all) players’ (Scharpf, 1997,p. 7). In Figure 3, an improved information structure, affecting the outcome valua-tion by political actors, will make them attach a +3 payoff for themselves to theadoption strategy, in case both islands keep their promises. They are now awarethat each island has a lot to benefit from implementing sustainability legislation.

If Island 2 deludes, Island 1 may experience a somewhat lower gain, say +2,as shown in the lower left cell of Figure 3. However, Island 1 will still be better offthan when it chooses the strategy to ‘not adopt’; in this later case, Island 1 mayperceive a small gain for itself, say +1, as a result of some positive spin-offs incase Island 2 does ‘adopt’ sustainability laws. When Island 2 deludes too, thepayoff for Island 1 will be the smallest of all, say 0, in lower right cell. The sameconsiderations and payoff valuations are made by Island 2. Therefore, the firstcondition of payoff interdependency is satisfied.

Second, under a solidaristic orientation, ego is willing to accept a strategywhere their own payoff is lower than the possible maximum, as long as alteralso books some gain. In Figure 3, the two combinations of strategies wherebyone island does ‘adopt’, while the other does ‘not adopt’, result in a payoff of+1 for the non-adopting island (upper right cell and lower left cell). Thisoutcome valuation is the result of the learning experienced even by the playerwho eventually does ‘not adopt’. Learning leads the player to assess that sustain-ability legislation adopted elsewhere in the region may create widespread positiveimpacts in the region that may be enjoyed even in the case of non-adoption by theplayer. This is a free-rider situation, but under a solidarity orientation, the adopt-ing player considers this acceptable, because he still gains through adoptionenjoying a +2 payoff. Besides, Scharpf (1997) argues that under a solidarity orien-tation, players try to prevent a loss for the other (p. 85). The payoff in this case of+2 is below the maximum possible because the adopting player realizes that he/she will miss the ‘benefits of economies of scale’ possible when adopting/imple-menting together with the second player; hence the payoff may be expected to besomewhat under the maximum obtainable.

Third, the proposed game in Figure 3 also satisfies the ‘domination rule’ char-acterizing Prisoner Dilemma Games, mentioned above (Scharpf, 1997, p. 103). Thesum of the payoffs for Island 1 for the ‘adopt’ strategy is +3 + 2 ¼ +5; whenIsland 1 chooses the ‘not adopt’ strategy, the sum of its payoffs is +1 + 0 ¼ +1;likewise for Island 2. Therefore, both islands have higher total payoffs for the strat-egy to ‘adopt’. In conclusion, according to game theory, only simultaneouschanges in the information structure shaping players’ valuation of sustainabilitylegislation and in the players’ orientation towards solidarity may lead to an equi-

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librium outcome whereby both adopt sustainability legislation. The next sectionconcludes this paper with some considerations on the strengths of game theoryand reflections on how actor characteristics may change in the case of politicalactors on Curacao.

6. Conclusion

Tourism has been developing unsustainably across numerous microstate islands,and developing countries more generally. A large number of factors are reviewedin the academic and professional literature as contributing to this. Prominentamong them is the strong power exerted by foreign investors, such as multina-tional tourism businesses and project developers, on political authorities. Manyof these investors focusing on low-cost mass tourism have a strong preferencefor a shortage of sustainability legislation applicable to the tourism sector. Theempirical findings presented in this paper confirm that this problem also existson Curacao.

The paper proposed to use an existing conceptual framework in order toexplain theoretically the shortage of sustainability-enabling legislation. Gametheory offers a parsimonious theoretical explanation for the choice of politicalactors across numerous developing islands not to adopt/implement suchlegislation. Foreign investors are able to exert strong power on political actorsby fuelling distrust that such legislation would be implemented regionally orinternationally. Moreover, power is increased by negatively portraying the conse-quences of such legislation, on the background of very poor awareness of sustain-ability issues among political actors. The power exerted by tourism businessespushed political authorities across islands and countries into Competitive Pris-oner Dilemma Games, where many have been stuck for decades.

This analytical perspective does not deny that the adoption of sufficient sus-tainability legislation and its adequate implementation is influenced by otherfactors as well, many of which will be contextual. However, the presence ofpolitical will to produce change is crucial and offers the very first steppingstone for numerous actions that need to be taken, such as the identification andallocation of competences, mobilization of resources of all sorts and the mobiliz-ation of a wide range of stakeholders.

The paper also showed that, based on the rules of game theory, interestingsuggestions can be formulated as to how political actors can exit the currentsub-optimal game, and switch to a game where the equilibrium outcome allowsthem to benefit of higher payoffs, while applying sustainable development prin-ciples. While much of the academic and professional literature emphasizes theneed for learning by political actors on the benefits of sustainable developmentapproaches, game theory shows this would not be enough to induce change.For this to happen, political actors need to change also their orientation in analyz-ing strategies, from competitive to solidarity.

For academics and practitioners, this means that recommendations towardsovercoming the current lock-in should expand beyond awareness-raising cam-paigns and the education of political actors on ‘pure facts’ about sustainabilitybenefits. There is already abundant literature with advice on what can be doneat national levels in terms of policy and legislation – guidelines, manuals, toolkits,benchmarks etc. While awareness of these is a necessary condition for change, thisis not sufficient. More efforts should be focused on how to make the political

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actors across microstates and developing countries cooperate and build trust ineach other’s commitments. Scharpf (1997) warns that ‘solidarity is a precariousinteraction orientation whose maintenance may depend on highly demandingindividual and institutional preconditions and typically on high visibility andthe availability of effective sanctions’ (p. 89).

For the Caribbean region, a focus on a ‘joint implementation’ of sustainabilitylaws implies the need to map cooperation and trust-building on the agenda ofinternational actors of influence across islands, such as donor NGOs, internationallending institutions and influential international political organizations such asUnited Nations Environment Programme. Such organizations can be efficientby raising the issue with various regional associations where political, administra-tive and economic actors meet. Examples of such organizations are: the Associ-ation of Caribbean States, Caribbean Tourism Organization, Caribbean HotelAssociation, Caribbean Association of Indigenous Banks, United Nations Econ-omic Commission for Latin America and the Caribbean and Caribbean Associ-ation of Industry and Commerce. Globally, the Small Island Developing StatesNetwork may also be a platform where the efforts of solidarity-building can beconcentrated.

Although numerous organizations already have programmes concerned withsustainable tourism, the emphasis is either on ‘knowledge transfer’, or on placingfunding preconditions on the adoption of environmental or social policies. Thesefoci need to be enriched with trust-building mechanisms, aiming to develop soli-darity orientations among countries. This would enable them to cope better withthe power of international investors focused on maximizing short-term profits.Besides, donors and lenders should precondition loans and grants on hardmeasures such as the implementation of legal instruments rather than policiesand political wish lists that can be ignored, institutionally. The neglect of the1997 ST Federal policy discussed in this paper illustrates the uselessness of softinternational requirements.

In the particular case of Curacao, a change in the way political actors perceivethe payoffs of sustainability legislation could be facilitated by a series of messagesand mechanisms. First, political actors need to get a realistic picture of the tourismpotential of the island and the products on which the island can compete bestregionally and internationally. The current institutional framework that allowsCuracao Tourism Board and its executive arm CTB – strongly influenced by inves-tors – to decide on all aspects of tourism developments needs to be changed.Regional and international pressure needs to be exerted on Island Parliamentand Executive Council to involve administrative actors and local communitiesin the decision-making process.

This may lead to a change in the tourism products promoted with priority onthe island: from products that are abundantly and cheaply offered across theCaribbean and microstate islands, such as beach tourism, cruise tourism andgolf tourism, to more unique products. As mentioned in Section 2, Curacao hasa large potential for cultural heritage tourism, community-based tourism andnature-friendly tourism, yet unused. At the same time, Curacao does not havethe natural resources needed to offer the ‘typical Caribbean’ beach tourismproduct and does not enjoy an ideal location for mass cruise tourism. The mis-match between product choice and endowment with natural resources is at thecore of most negative environmental impacts accountable to tourism, in thecontext of the environmental legislative vacuum. A double benefit of changing

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the range of products offered lies in the enlargement of the pool of potential inves-tors in tourism facilities and services. This has the potential to challenge the powercurrently exerted on politicians by foreign investors interested only in mass low-cost tourism.

Awareness-raising for a more realistic image of market demand and theexpectations of potential tourism investors will also play a role in the perceptionof the sustainability strategy payoff. The image painted by incumbent tourismcompanies that the North American market is only interested in cruise, beachand golf tourism needs to be challenged with independent studies pointing atthe diverse range of holiday-making preferences. A diversification of themarkets targeted is also needed. Besides, studies need to be carried out andreach political actors, demonstrating the economic benefits of a large range ofenvironmental and fiscal measures that can be implemented by tourism compa-nies.

When political actors become aware of these, they are more likely to dare toraise the issue of investment design so that the environmental and social sustain-ability aspects are optimized, given a certain desired profitability. There is agrowing number of internationally active companies with corporate responsibilitypolicies in the tourism development arena. But political authorities and tourismdevelopment bureaus in the Caribbean have often a too restricted search for inves-tors, falling back on names well-known regionally and already active in the com-peting destinations. This way, they bring themselves continuously back into theCompetitive Prisoner Dilemma Game, competing with the same islands, for thesame developers, and for mostly the same tourism products that, in the case ofCuracao, mismatch the islands’ natural resources. With a larger pool of potentialinvestors, the chance of finding corporations sensitive to sustainability-enablingmeasures is higher. Solidarity orientations across the region will help politicalactors to dare raise the issue of sustainability performances when negotiatingwith foreign investors.

Game theory has nevertheless, just like any other theory, some shortcomingsand limitations. For example it assumes that players are monolithic: they think,perceive and value payoffs similarly, if they come from a single place, like anisland. It also assumes that the choice among a player’s strategies is influencedonly by the other player: in this particular case, non-island players are not con-sidered. Hirsch (1998) mentions three other limitations:

(1) The processes underpinning the formation and consolidation of preferencesare outside the scope of the theory; indeed game theory takes actors’ motiv-ations and payoff valuations as given and does not aim to explain how theyform.

(2) Game theory also ignores the influence of socio-psychological factors on aplayer’s behaviour: culture, social values, personal traits; to explore these,one needs to connect game theory to another complementary theory, whosedependent variables are the same as the independent variables of game theory.

(3) ‘It does not represent a comprehensive theory exhausting all factors involvedin international cooperation’ (Hirsch, 1998, p. 118).

Schwartz (1997) also warns that the mathematical representation of a player’spayoff, like in Figures 1–3, is not hard science and may be affected by subjectiveconsiderations of both the interviewees and the analyst. Extra care needs to beexercised when quantifying payoff valuations to enable a robust analysis, as in

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any quantitative social study inquiry. Scharpf (1997) also warns that the strong be-havioural assumptions embedded in game theory ‘often make it difficult to justifythe applicability of the models’ conclusions to the real world’ (p. 66). Mathemat-ical modellers using game theory tried to address this concern by relaxing the be-havioural assumptions, incorporating more influencing factors and contextualvariables. However, as this happens, the complexity of models increases dramati-cally, requiring the users to possess very strong mathematical skills. As such skillsare not widely available among social scientists and policy-makers, the de factoutility of game theory applications for policy-makers decreases as its ‘realism’increases. For an illustration, see the Appendix of Yang et al. (2008).

In spite of these limitations, game theory has had numerous successful appli-cations in economics, management studies, political science, international law,trade and international relations (arms control), even biology. Of all games, thePrisoner Dilemma game has captivated academics and policy-makers for itsability to examine the problem of collective action, making it an excellent tool ofthe study of sustainability issues. Hirsch argues that analysts should not be dis-heartened by the limitations of game theory, as its strengths out-weight them by‘simplifying and abstracting complex social phenomena into formal models.Focusing on one set of variables facilitates rigorous analysis and the explorationof the interplay between the variables involved in collective action’ (Hirsch,1998, p. 118).

Arguably, the incorporation of sustainability principles in both the legislationand practice of tourism development in Curacao may have positive spin-offeffects for the sustainability of island development as a whole. Making foreigndevelopers pay their fair share in taxes and investments on infrastructures forwastes, wastewater and (public) transport will help political and administrativeactors deal with the other environmental and social problems highlighted inSection 3. The problem of air pollution and visual intrusion by the state-ownedoil refinery is there to stay until 2019, due to the unwise political decision toengage in a long-term fix contract and the lack of incentives for the lease toinvest in effective, but expensive, environmentally superior technologies for theshort remaining time span. Nevertheless, green innovations in the island’s thirdeconomic engine, which is tourism, may teach island politicians valuablelessons on the socio-economic benefits of environmentally well-managed econ-omic sectors.

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Appendix

1 List of Interviewees on Curacao

Interviewee 1 Curacao Apartments and Small Hotels Association.Interviewee 2 Natuur en Milieu Centrum NGO.Interviewee 3 Stichting Unik Curacao NGO.Interviewee 4 Department of Environment and Natural Resource.Interviewee 5 Curacao Hospitality and Tourism Association.Interviewee 6 Department of Spatial Planning.Interviewee 7 Department of Spatial Planning.Interviewee 8 Stichting Unik Curacao NGO.Interviewee 9 Curacao Tourism Board.Interviewee 10 Curacao Tourism Board.Interviewee 11 Caribbean Marine Biological Institute (NGO Carmabi).Interviewee 12 Caribbean Marine Biological Institute (NGO Carmabi).Interviewee 13 Caribbean Marine Biological Institute (NGO Carmabi)Interviewee 14 Department of Environment and Nature.Interviewee 15 Breezers Hotel.Interviewee 16 Howard Johnson Plaza Hotel.

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Interviewee 17 Otrabanda Hotel.Interviewee 18 Holiday Beach Hotel and Casino.Interviewee 19 Cruise Port Authority.Interviewee 20 Curacao Tourism Board.

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