BUDGET
STATEMENT 2001
“
Building Self-Sufficiency and Earning The Right to Choose…”
Mr
Speaker, I beg to move the second reading of the Appropriation Bill, 2001.
INTRODUCTION
1.
Mr.
Speaker, on behalf of my Government, I wish to congratulate you on your
appointment as Deputy Speaker of the Legislature.
We also wish you the best in your role as acting speaker at this meeting.
2.
I also wish to thank the people of Montserrat for their overwhelming support in
the recent elections. I will continue to crave their support for our policies
and plans over the next five (5) years.
3.
Mr.
Speaker, we have been elected at a time when Montserrat’s economic development
is in crisis. The main factors
contributing to this situation are:
·
Inadequate revenue generating capacity
resulting in the need for budgetary aid totalling more than 50% of the
recurrent budget.
·
An ever-tightening Aid Framework imposed by
Her Majesty’s Government (HMG) which reduces total aid from £24.4 million
in 2001 to £7.5 million in 5 years.
·
A negative economic growth rate of 6.3% for
the 2000 fiscal year.
·
A struggling private sector that should
normally be the engine of growth; and
·
A slow rate of implementation of public
sector projects.
4.
As you can
see, I have been given a ship that at the moment is not
sea worthy. However, I am a resourceful captain and my government and I are
prepared to repair this ship and sail it to a state of economic prosperity.
5.
Mr. Speaker, building self-sufficiency is this government’s long-term goal.
However, in the short-term we must also focus on economic revival and stability.
I am not saying this because the words sound good, but rather because we
must restore our financial independence and national pride. In saying this,
Montserratians will be called upon to pursue actions or make sacrifices that are
in the national interest. I firmly
believe that for the island to develop, especially the North, the approach must
be a collective one.
6.
In our manifesto my party outlined a variety of plans and programmes which we
feel will address the needs of Montserratians.
We recognise that it will be a challenge to execute this mandate in an
environment where the needs are so many and the resources are so few.
Nevertheless, we shall proceed secure in the knowledge that we have the
support of a group of capable and committed civil servants, a willing and
creative private sector, and an ambitious and hard-working Montserratian people.
7.
This government sees its role as providing the enabling environment through Good
Governance and Effective Leadership. We
are confident that this would encourage our benefactor, the United Kingdom
Government, to provide reasonable responses to our plans for sustainable
development.
8.
Mr Speaker,
this budget recognises that our greatest long-term investment must be the
development of our people. The forced relocation of Montserratians to all parts
of the globe, whatever the benefits, has ripped the heart out of our development
efforts. Nevertheless, our greatest
asset is still, OUR PEOPLE. We
intend therefore, to place
our people first.
9.
Before I
proceed to outline the details of my government’s programmes for 2001, I wish
to highlight some aspects of the economic situation in which we find ourselves
today.
10.
I will first mention a few points about the
international and regional environment so that we may see where Montserrat fits
into the picture. This is important
because many of these issues have a direct or indirect impact on the local
economy.
11.
The global economy is presently undergoing
a critical period of adjustment. Although
it experienced growth of about 4.8% in 2000, there were signs of a slowdown
towards the end of the year.
12.
The engine of global economic growth is the
United States economy, which itself expanded by a healthy 5.3% in 2000.
However, it was in the United States that some fears were expressed at
the end of last year about a possible impending recession.
As a result, the Federal Reserve has reduced interest rates by up to 2%
so far in 2001. It is thought that
this will stimulate consumption and investment, and together with other
measures, could serve to avert the danger of a recession.
This would be a welcome result for Montserrat and the rest of the
Caribbean since our economies are so closely tied to that of the United States.
13.
In the European Union (EU), growth in 2000
was 3.3%, and the forecast is for a 2.5% growth rate in 2001.
It is very worthy of note that the United Kingdom (UK) continues to
experience a long period of sustained economic growth.
The rate of growth in 2000 is estimated to have been around 3%, with
private consumption remaining buoyant. The
UK Government also achieved a significant budgetary surplus at the end of the
last financial year.
14.
Given some concerns over prospects for the
world economy, the Bank of England has adopted measures aimed at forestalling a
weakening of domestic economic activity. As
an overseas territory, it is our hope that Montserrat will benefit from the
present strong financial and economic position of the United Kingdom.
15.
Economic performance among Caribbean
countries varied in 2000, although most economies experienced some level of
growth. High oil prices had a
generally negative impact. Economic
growth was highest in Trinidad and Tobago which benefited from highly improved
prices for its oil products. That country’s economy grew by 7.9%, while growth
in Barbados was 3.7%, and in Jamaica it was minimal.
16.
Some islands, such as Antigua and Barbuda
and St. Lucia saw a decline in tourism activity, while others such as St.
Vincent and the Grenadines experienced a decline in banana exports.
The apparent settlement of the trade dispute between Europe and the
United States would now make the situation with bananas more predictable.
This is a good sign for the stability of our currency - the Eastern
Caribbean Dollar.
17.
One of the main issues affecting the local
economy has been the recent dramatic increase in fuel prices on the
international market. These prices almost tripled between 1998 and 2000.
In 2001, we have continued to feel the effects of high fuel prices and
their impact on charges for diesel-generated electricity. These have in turn
produced undesirable consequences for inflation.
18.
One of the main priorities of this
government will be to implement measures aimed at mitigating the impact of these
increases on our people and the economy as a whole. It is clear that such price
movements on essential items can lead to high rates of inflation. This is one
thing we must avoid.
19.
At the end of last
year the rate of inflation was one point seven percent (1.7%).
The largest price increase was recorded in the category of “gas,
electricity and water”, which rose by nine point one percent (9.1%) on
average.
20.
During recent
months there has been a thirty percent (30%) increase in water rates, a ten per
cent (10%) growth in the basic electricity tariff, and a one hundred and twenty
percent (120%) hike in the electricity fuel surcharge. This has led to a jump in
inflation to 6.8% at the end of March. The avoidance of more immediate price
increases is therefore not merely necessary, but vital to the achievement of
economic stability.
21.
During the 2000
fiscal year the economy of Montserrat suffered a negative growth rate in
comparison to 1999. The rate of
decline is estimated to have been 6.3%. This
performance resulted in part from the slow pace of implementation of several
public sector projects which should have brought important economic benefits to
the island last year.
22.
Mr Speaker, the first
order of business for
this government is to fully investigate this situation and remove the
bottlenecks that have robbed the economy of the full benefits of these projects.
It is clear that economic performance during recent years has been driven
by construction and government services. Therefore,
we must not tolerate any further delays in the implementation of these
projects.
23.
A second factor
that contributed to the negative growth rate in 2000 was a slight decline in
construction activity. As we are
all aware, many potential homeowners had been waiting for the approval of the
Soft Mortgage Housing Scheme to finance the building of new homes. It was
expected that at least 55 houses would have been built under this scheme at a
value of $7.5 million. However, by
the end of the year very few loans had been approved.
24.
This
government will vigorously pursue a review of the scheme to make it more
accessible to potential homeowners. Once the Department for International
Development (DFID) and the Bank of Montserrat are willing to accept certain
changes, I am sure that this would generate significant economic activity on the
island.
25.
Overall, there was
little change in the number of
building starts in 2000 when compared to 1999.
The completion value of
building starts last year decreased by eight percent (8%) to $13.4 million.
The fall in the overall estimated completion value of building starts is
a reflection of the decrease in construction activity in the commercial and
public sectors. There was an
increase in the number of new residential buildings from seventy-six (76) to
eighty-two (82), but the value remained at around $11.0 million.
26.
Although the
present contribution of tourism to domestic economic activity is relatively
small, the signs witnessed last year in the industry indicate that there are
still good possibilities for expansion. During
2000, total visitor arrivals increased by 10.7% over the 1999 figure to 14,356.
This was influenced by growth in the number of excursionists and
stay-over visitors to the island. The
number of excursionists increased by 26.1% to 4,019, while stay-over arrivals
expanded by 5.6% to 10,337.
27.
Together with these
signs of visitor interest in Montserrat, it is important to note that the United
States economy, our major tourist market, continued to grow throughout most of
2000. Despite some fears of a slow-down in that economy during recent months,
North Americans are still travelling, as indeed are residents of Montserrat’s
other tourism markets, for example the United Kingdom.
28.
It is therefore my
government’s intention to seriously pursue the redevelopment of tourism, and
to make this sector once again a major contributor to domestic economic
performance.
29.
It is estimated
that Agriculture contributed only 1.5% to economic output in 2000.
This is a significant decline from 5.5% in 1995.
The length of the current dry season is causing some concern with respect
to the levels of production for 2001. Beginning
this year Government intends to adopt measures to reverse this trend, some of
which are outlined later.
30.
Montserrat
continues to experience very low levels of manufacturing activity. In 2000 the
sector contributed less than 1% of GDP compared to almost 6% in 1996.
Despite present difficulties, government will put the necessary
infrastructure in place, provide appropriate incentives, and vigorously promote
the island as a location for small-scale manufacturing activity.
31.
Generally Mr.
Speaker, due to the short time remaining in this financial year, we may not see
the results of some of these policies in 2001.
Our immediate goal must be to begin to put in place the strategies that
would improve the prospects for our economy, and to start the process of
building self-sufficiency for this island.
32.
Mr. Speaker, the term “human development
initiatives” is used to discuss our approach to improving the living standards
of our people. This is what this
government considers development to mean and, as I have said before, we intend
to place our people first. Let us
now look at the components of these initiatives:
33.
In our manifesto, we stated that our top
priority as a government would be housing because we thought that it was
‘vital to our continued existence and development.’
In trying to achieve our ‘collective vision’ as indicated during our
campaign we need to foster partnerships with Montserratians at home and abroad,
aid donors and the business sector, including financial institutions and other
investors.
34.
Mr. Speaker, in this regard we will:
·
Put in place mechanisms for the transfer of
ownership of government–built homes to residents;
·
Review the current soft-mortgage scheme to
make it more accessible;
·
Support the private sector in its efforts to
deliver more affordable mortgages.
35.
This appears to be a realistic start given
that four months have already gone in the current financial year.
36.
Mr. Speaker, we have inherited allocations
in the development budget of $3.6 million for Materials Grant Phase II, $5.0
million for Materials Grant Phase III, and $1.3 million for Housing Development.
We have also allocated the amount of $1.0 million dollars to develop
serviced lots in Look Out and to continue to develop an appropriate land and
housing policy.
37.
This government is committed to the
development of education on Montserrat. We
believe that education is a mechanism that provides access to opportunities
otherwise denied our people. In
addition, our drive for self-sufficiency and our limited resources demand that
as far as possible our education system must develop the capacity to produce
individuals with appropriate skills to meet our development needs.
In an environment of declining aid, we must be able to produce students
not only for the world of Academia
but also for the local job market.
38.
Government views a community college as
essential to its education policy and our overall development objectives.
The contribution of $1.5 million dollars allocated towards the building
of a Community College by the European Union is therefore welcomed.
This will be supported by a further allocation from DFID for the land and
site development.
39.
The strides made in delivering secondary
education are noted by this government. We
will continue to support the efforts of all those involved to ensure that the
standards established are maintained and improved where necessary.
40.
We take note of the growth in the student
population at the primary school level. Since
this stage in the education process represents the formative and perhaps the
most important years of a person’s life, we shall ensure that adequate support
is provided for both primary schools on the island. Government will also improve
the nursery school facilities at Look Out at a cost of $912,000.
41.
Mr. Speaker, in total we allocate $4.5
million in the Development Budget for educational facilities which also includes
the construction of a nursery school at Look Out.
42.
Government recognises that good health is a
prerequisite for a productive community. The primary aim of our health policy
therefore, is to ensure that everyone has access to a reasonable standard of
health care regardless of his or her ability to pay.
To this end, we have allocated over $600,000 for overseas medical care
and to cover visits by specialists to the island.
Mr. Speaker, this government has the needs of the people at heart.
43.
Our health policy will support health
institutions and programmes that encourage those who can pay to do so.
It will also support those that set aside funds to pay for the future
cost of their health care. Mr.
Speaker, we will pay close attention to the role of the social security and
insurance companies in financing the cost of health care on island.
44.
We recognise that there is a gap in the
level of health care services. We
intend to commit ourselves to the systematic development of the necessary
facilities and improvements to the delivery of health care on island.
The construction of a proper operating theatre and mental healthcare
facilities are foremost in our health programme.
We have allocated approximately $4 million in the development budget to
support these programmes.
45.
Mr Speaker, entertainment, relaxation and
physical fitness all comprise an important aspect of good health and well being.
They also contribute immensely to
worker productivity. Furthermore,
opportunities for this type of activity often serve as an added attraction to
visitors and can play a role in the development of the tourism industry.
46.
I wish to place on record my government’s
fullest appreciation and support for all the work that has been done by a
variety of groups and personalities to establish a Montserrat Cultural Centre.
While this is not directly a government undertaking, we recognize its
importance to the community and would do all we can to facilitate its successful
completion and subsequent operation.
47.
The design has been completed and plans are
being made for construction to begin later this year on the land provided by
Government. It is envisaged that the building will be multi-functional and
suitable for the performing arts, drama, music and dance.
It will have a concert hall that will seat up to 400 people.
48.
The Cultural Centre is now estimated to
cost about $4.3 million of which more than one-third has already been raised. Mr
Speaker, no praise can be too high for Sir George and Lady Martin, Mrs Margaret
Abbott, the trustees of the Music for Montserrat Charity, the Montserrat
Cultural Committee, and all those other committed and enthusiastic individuals
who have been working on this project.
49.
The Cultural Centre will serve as a
stimulus for cultural activity, and it is now incumbent on Government to design
a sound and integrated policy for facilitating the role of culture in the
overall development of Montserrat. The Department of Culture will be fully
supported in its efforts to implement an annual calendar of cultural events.
This will comprise the St Patrick’s Week of Activities, the Year-End Festival,
and a series of other activities including radio and television presentations.
The Department will also be encouraged to develop relationships with regional
organizations that possess resources that can be made available to Montserrat.
50.
The recent hosting of a cricket match
involving the South African team is an example of the manner in which sports and
tourism can be successfully linked. The exposure that Montserrat has received is
immeasurable. The Montserrat Cricket Association and the Government Sports
Department are to be commended for their tremendous efforts in upgrading Salem
Park and successfully hosting the match.
51.
Government will remain involved in the
maintenance of Salem Park as well as a number of other sporting facilities
around the island. In 2001 much
emphasis will be placed on training. This
will involve training in a variety of sports for athletes and the coaching staff
at the Sports Department. More attention will also be paid to the overseas
promotion of events such as the annual Run Montserrat Road Relay. The intention
is to attract participants and other visitors from overseas and to further
develop the link between sports and tourism.
52.
Mr. Speaker, the people of Montserrat have
a proud tradition of being independent minded, resilient and resourceful.
We cannot lose sight of this fact because of the pressures brought on by
this crisis. In fact, it should
strengthen our resolve to be better people and a closer community. I believe
that it is in these conditions that the greatest sacrifices are demanded, heroes
made, and the temperament for nationhood forged.
53.
Mr Speaker, we believe that government must
lead. This we intend to do.
54.
We believe that government cannot provide
everything. It does not have the
resources to do so, and even it did, government would still need to avoid
undermining the role, power and creativity of private enterprise.
55.
We believe that, in the context of
sustainable development, good government leadership should not encourage
increased public sector involvement, but rather provide the stimulus for
increased private sector activity.
56.
We see government as a catalyst, an enabler
and a supporter of individual development and enterprise.
57.
Our approach to employment is therefore to
systematically create opportunities within the various economic sectors:
construction, tourism, manufacturing, agriculture, financial services,
information technology and so on. We
ask all of our people to embrace the sectoral plans in our Country Policy Plan
(CPP) and make them work for us individually, and ultimately for Montserrat as a
whole. Let us think positively.
58.
Mr Speaker, what we are saying is that we
recognise that our people must be able to work. If they work, they become
independent. If they become
independent, they have freedom of choice. If
they have freedom of choice, they are free.
59.
Mr. Speaker, as a British Overseas
Territory we are guided by the contents of the White
Paper, Eliminating World Poverty: A challenge for the 21st Century.
In keeping with the aims of this document, this government intends to
build on the findings of the Participatory Poverty and Hardship Assessment
conducted in June 2000. This
assessment provided a better understanding of the multi-dimensional causes and
characteristics of hardship and poverty in Montserrat.
60.
We intend to meet the challenge of tackling
poverty and hardship through the development of consistent social policy
principles, promoting partnerships with civil society organisations and
providing support in a sustainable and targeted manner.
61.
With this in mind, we will continue to
embrace and improve the relationships developed between government and
organisations such as the Montserrat Branch of the British Red Cross, the
Rotary, Lions, senior citizens associations and other community groups.
62.
Government will endeavour to provide
reasonable housing for the poor. Rental assistance in the amount of $300,000 has
been included as an interim measure to help persons on social welfare including
those who may still be seeking jobs. A further $200,000 will also be made
available to maintain current shelters.
63.
We have allocated over $1.0 million in the
recurrent budget and $5.8 million in the development budget to support the care
of the elderly. We have further
allocated $1.7 million dollars under the Social Welfare Scheme to cater to the
essential needs of those who qualify.
64.
This is a government with a social
conscience and we are prepared to support real needs.
However, I must appeal to any citizen who benefits from these programmes,
but who is working or has other sources of income, to act responsibly and give
priority to someone less fortunate.
65.
Mr Speaker, our economy is small and
therefore some businesses and schemes are more efficient and effective when
merged. We believe that the Social
Security and Civil Service Pensions are two such schemes.
66.
The Social Security Scheme can be
strengthened by the inclusion of civil servants.
One advantage to civil servants is that they will qualify for pension
earlier in the Social Security scheme than in the present scheme.
Another is that the transfer also means that civil servants can move in
and out of the public and private sector without any loss of benefits.
67.
We are confident that this is the right
move. In our bid to revive the
private sector, it is necessary for civil servants to be able to move freely
between jobs in the local labour market without losing the benefits normally
attached to the years of service. This
can be useful because most of our trained people are employed in the civil
service.
68.
The second point I wish to make is that
this decision will take us to the point where we can realistically consider a
national pension scheme so that those Montserratians who have reached a certain
age can qualify for some benefit. In
the longer term then, it would be possible for all Montserratians to be entitled
to a national pension in their old age, which is the time when they need it
most.
69.
Mr Speaker, we are hoping that civil
servants, trade unions and other relevant parties would work together with this
government to make these changes possible.
70.
Mr. Speaker, this government acknowledges
the need for increased agricultural production, and intends to put in place the
measures that would lead to improvements in this sector.
We believe that Montserrat should be self-sufficient in food production.
Our policy would be to concentrate our efforts in the short-term on
producing enough food to feed the local population.
However, in the longer-term the focus will need to shift to producing
items for the overseas market.
71.
As mentioned earlier, the percentage
contribution of the Agricultural Sector to the Gross Domestic Product (GDP) in
constant prices was 5.5% in 1995. That contribution has now fallen to 1.5% in
2000. It is clear that agriculture
is an important but struggling sector and unless efforts are put in place to
assist its recovery, then all the small subsistence farmers are likely to lose
their means of livelihood. They all have children and must be able to support
them through the dignity of their own efforts and enterprise.
72.
Mr. Speaker, this government’s approach
is first to provide a public market where farmers and fishermen can sell their
produce. The second step is to
construct an abattoir for meat production.
These activities will encourage the farmers and fishermen to trade in an
acceptable environment.
73.
The next step would be to increase the
shelf life of agricultural products and facilitate all year crop production.
A review of the economic data reveals that manufacturing activity fell
from as much as 5.93% of GDP in 1996 to 0.82% last year.
Mr. Speaker, we will start to address the issue by reviewing our capacity
to manufacture through the development of agro-based industries, and
commissioning pilot studies in the selected areas.
It is anticipated that over the next five years we would be able to
benefit from the fruits of our labour.
74.
Another area that
needs attention is the low level of crop production. A major constraint is the
lack of accessible agricultural land. It
is the aim of government to bring more land under production, as well as to
encourage the use of hydroponics and irrigation techniques to produce suitable
crops for domestic consumption and possible export.
75.
Again, this government recognises the cries
of our fishermen for better facilities. We
will begin to look at current facilities with the intention of upgrading them
over the next three years to an acceptable level.
The upgrade will include safe harbour for fishing boats, as well as
mooring facilities for fishermen.
76.
Mr. Speaker, we have allocated in the
development budget the amount of $305,000 for watershed and forestry management,
$957,000 for the construction of an abattoir, $500,000 towards the establishment
of a Marketing/Fisheries facility, and $485,000 towards improvement of
agricultural extension services. Later,
Mr Speaker, we will need to consider the scope for a food-processing laboratory.
77.
Tourism has traditionally been one of the
leading sectors of the Montserrat economy.
After the 1997 crisis, the industry was as severely affected as all other
aspects of social and economic life on the island.
Despite this, many agencies, groups and individuals at home and abroad
have maintained a keen interest in re-organising and re-establishing tourism as
a major form of economic activity.
78.
This government is prepared to lead the way
in the achievement of this goal. With
assistance from the Economic Commission for Latin America and the Caribbean
(ECLAC), a Tourism Master Plan is being designed.
This would help to re-define the Montserrat tourism product, identify the
sites and services that need to be developed, recommend ways of improving access
to the island, and outline new and creative ways of marketing Montserrat as a
desirable destination.
79.
All initiatives in the industry must be
developed in conjunction with the Montserrat Tourist Board and other parties
with vested interests. The Board has itself been pursuing a number of programmes
aimed at bringing Montserrat squarely back into the marketplace.
Projects valued at $2.5 million have been submitted to DFID for funding.
These include a tourist facility at Garibaldi Hill; improvements to the
access road; development of a network of hiking trails; and development of the
Tourist Board’s website.
80.
Another Board initiative is being
undertaken through the Caribbean Program for Economic Competitiveness funded by
the Government of Canada. This
involves the assessment of training needs within the sector.
Regional attachments will also be provided for local industry workers as
a means of upgrading the domestic skills base.
The Organisation of American States is also making available a consultant
who will assist local operators in obtaining websites and making business
information available on the internet.
81.
Government is pleased to note that private
operators are also using their own creativity and resources to improve some of
the sites of attraction on the island. One
such example is Jack Boy Hill which has become an increasingly popular site for
day excursionists and stay-over visitors alike.
Government highly commends this type of co-operation among business
operators and will continue to support such efforts.
82.
In addition, the role that the Montserrat
Golf Course played in attracting visitors to the island is recognised by this
Government. It formed a vital and
integral part of the tourism product. We
feel that there is much to be gained from the construction of a new golf course
on Montserrat. We are prepared to
consider any reasonable proposal from an investor or group of investors.
It is however hoped that this can be achieved in partnership with the
local private sector.
83.
As I have previously stated, the economic
strategy of this government regards the private sector as the primary engine of
future economic growth. It is
therefore necessary that we design appropriate strategies and programmes aimed
at revitalising business activity on the island.
84.
In keeping with this objective, we will
engage a private consultancy to examine the opportunities available for private
sector development. Work is expected to start in the next three months. This
consultancy is designed to ensure that all Montserratians can participate and
make their views heard. I therefore
urge all those members of the public who have ideas to participate fully in this
exercise.
85.
Government fully supports the Business
Survey that is currently being undertaken by the National Development Foundation
(NDF). The survey will allow us an
insight into the needs of the business community and will also be important in
designing strategies specifically to support small and micro enterprise
development.
86.
In the meantime, Government is concerned to
see full and proper use made of the funds available under the Small Enterprise
Development Project (SEDP). We
would wish to ensure that maximum benefits are obtained under the scheme.
An extra amount of $1.8 million will be made available by DFID for
on-lending to small businesses. These
funds should be so distributed as to facilitate the start of new micro
enterprises on Montserrat. Government
will, through its representative on the Board of the NDF, seek to ensure that
these objectives are achieved.
87.
It is also important that the retail units
be constructed and made available as soon as possible. Government will do its
part by speedily allocating the land for this activity.
This project is vital to the economic future of the island.
88.
This year Government will begin working
towards the erection of at least one more factory shell at Brades. This will be
subject to funding availability. Consideration
will also be given to a further sub-division of the existing factory shell.
We intend to engage in investment promotion to attract new industries to
Montserrat, and to work closely with local entrepreneurs who are interested in
light manufacturing and similar activity. If we are to be successful at this, we
must have space available.
89.
Government will also be seeking to get a
number of specific businesses fully established and operational in the near
future. For example, we are aware
that Selsi Ltd. has been experiencing certain difficulties in exporting
aggregate from the Belham Valley area. It
is important that Government provides all reasonable assistance in order to
ensure the viability of this undertaking.
90.
For some time now there has been much
discussion and negotiation regarding the re-establishment of Radio Antilles.
The enterprise has the potential to provide employment and generate
government revenue. It would also provide business for other entities such as
Montserrat Electricity Services (MONLEC). It
is therefore government’s intention to expedite the negotiations with a view
to getting Radio Antilles operational as soon as possible.
91.
All Montserratians are familiar with the
American University of the Caribbean (AUC) and all the economic benefits it
brought to Montserrat before it was forced to leave a few years ago.
The principals are now interested in returning to the island. Government
will immediately begin investigating the conditions which would make it feasible
for the AUC to be re-established here.
92.
In addition to these, Government will explore the opportunities for attracting
certain service industries to the island. We believe one such opportunity is in
the area of ship registration. This can provide much-needed government revenue
and at the same time create the possibility for improving transportation
arrangements to and from Montserrat.
93.
Another opportunity is in
the area of information technology. We firmly believe that we can make
significant strides in our economic development if we are able to successfully
target this as an area of economic activity.
This is the direction in which the world is going and we must make sure
that we make the necessary arrangements to become fully involved in the sector.
94.
We
are aware that the first condition for entering the information services
industry is regular and adequate computer training both at home and abroad.
My government is committed to investment in education generally, but
especially to this type of training for our young people.
This provides further justification for the Community College referred to
earlier. Information Services is
the type of industry that would allow the youth to develop a skill, and then to
use that skill to earn a decent salary and to maintain a good standard of
living.
95.
Finally Mr. Speaker, the Caribbean
Development Bank funded project for conducting an Infrastructure Audit and Area
Action Plan for the Little Bay Area is now underway.
Consultants have already started their work and we are awaiting the
report. This would provide the
opportunity for us to seriously consider transforming Little Bay into a vibrant
business centre.
96.
Mr Speaker, the development of
infrastructure ranks among the most important needs of Montserrat for a number
of reasons. First of all, we lost
the greater portion of our infrastructure facilities in 1997, and we need to
ensure that they are speedily and adequately replaced.
This is vital for economic and social development.
Secondly, the implementation of infrastructure projects provides income
and employment for both public and private sector workers.
This in turn has a positive impact on economic growth.
97.
One of the first tasks facing this new
government therefore, is to resolve the issues surrounding those projects that
have been delayed for a variety of reasons.
The Honourable Minister of Communication and Works has already accorded
this the highest priority and we expect to see a significant improvement in the
near future.
98.
Mr Speaker, it is the view of this
government that the time has come for decisive steps to be taken to resolve the
issue of air transport. The
construction of a new airport facility on Montserrat is an essential condition
for economic development. Over the past few weeks, ministers have been absorbing
all the information that is available. We
are aware that the EU have employed consultants to review the situation and we
are awaiting that report.
99.
It is clearly uneconomic to continue
spending more than $8 million a year on the ferry and helicopter service when
this money could be used to build an adequate airport on the island.
Our approach will be to consider both a short-term solution and a
longer-term solution. The short-term solution would allow us to fulfil present
needs while we make adequate preparations for a more permanent facility that
would support the development of Montserrat for many years to come.
100.
In the meantime, government will continue
to make the heliport facility as convenient and effective as possible to
facilitate the helicopter service. Most
of the heliport operations have now been relocated to new and upgraded
facilities, and in 2001 the general public can expect to see further
improvements.
101.
With respect to the seaport, government’s
approach will be as follows:
(a)
Prepare a comprehensive plan for port development.
(b)
Sub-divide the plan into discrete project components.
(c)
Systematically implement and finance each component as a project that
fits into the overall plan.
102.
Mr Speaker, the Little Bay Port is another
one of those projects that has been delayed for too long now.
Approval was obtained as long ago as 1998 for an amount of $3.0 million
to be spent on development of the port. Government
is fully aware that there is a lot that needs to be done at Little Bay and that
this level of funding is inadequate to achieve all that is required. However, we
must make use of these funds within the context of an agreed comprehensive,
prioritised plan. One of the most
pressing needs is for warehouse storage to ensure that the goods imported by
businessmen and ordinary people are properly secured and remain safe.
This is a priority and must be pursued without delay.
103.
During 2000 the Public Works Department
embarked on a project of road works which was approved by DFID around the middle
of the year. The project is
continuing this year and will see the completion of about thirty-eight different
schemes with a construction value of $3.4 million. The schemes include new
drains, culverts and retaining structures, as well as a complete rebuild of some
sections of road. One example of
the work being undertaken can be seen alongside Salem Park where a new drain is
being installed.
104.
The funding for a comprehensive road audit
was released in October last year and the successful consultant mobilized to
Montserrat in November to start work. His
first objective was to provide a financial appraisal of the road network
condition and this was completed in early December.
It has greatly assisted PWD to substantiate its request for funding for
road maintenance works in the 2001 budget.
The amount to be spent is $1.7 million.
105.
Mr Speaker, during 2000 the number of water
supply connections increased by one hundred and forty (140). This is clear
evidence that there is an increasing demand for water supply and specifically, a
demand for water in areas where development is taking place but which have not
yet been included in the distribution network.
These areas include Mongo Hill, Peaceful Cottage and Mars Hill.
It is therefore imperative that the Montserrat Water Authority (MWA) be
placed in a position to satisfy this demand as soon as possible.
106.
For some time now, MWA has been awaiting
approval to proceed with the Water III project which would provide distribution
branch water mains into those areas still lacking a proper supply of water.
It also provides for the replacement of steel tanks which are more than
30 years old, and two reservoirs in new locations.
107.
It is our understanding that the project
was initially delayed by DFID until the previous government agreed to increase
the water tariff. As we are all
aware, that increase took effect earlier this year.
108.
My government fully understands DFID’s
concern that the subsidies to MWA should be reduced and eventually eliminated.
This is one of the main reasons why the Water III project is necessary.
It would provide water in developing areas for potential customers.
It would generate additional revenue for MWA, and eventually lead to a
decrease in the level of subsidy required.
109.
We shall be engaging DFID on this issue in
the hope that they would see the need to release the funds and allow the project
to proceed. We shall also be requesting MWA to take a closer look at their
expenditure patterns and introduce cost-cutting measures.
110.
The team responsible for sewage operations
continues to provide an effective service to the areas of Davy Hill and Lookout.
This is a new and expanding service and government will continue to seek
ways of developing and improving it, including the feasibility of making the
operation as self-supporting as possible.
111.
I wish also to state that while government
wishes to see all statutory bodies pursue a strategy of cost-recovery, this can
only reasonably be achieved over a period of time, and must take into
consideration any likely impact on the paying public.
112.
Montserrat Electricity Services faced many
challenges during the year 2000. Shortages
in generating capacity at the Brades Power Station led to a degradation of the
high quality of service to which customers have grown accustomed.
The procurement of a fourth generating set at the Brades Power Station,
which would have prevented a lot of the problems experienced by customers, had
been planned for 2000. This did not
materialize due to delays in the approval of Power III Project.
113.
There were, however, some positive
developments during the year. There
was an improvement in the revenue base with the connection of one hundred and
seventy eight (178) new customers to the system.
MONLEC was able to complete the restoration of electricity supply to
Isles Bay and Water Works, and construction work on a new Office and Control
Centre at the Brades Power Station commenced during the latter part of the year.
These developments were made possible through the support of the
Government of Montserrat and DFID.
114.
Improvements in the reliability of the
service are expected during 2001 with the installation and commissioning of a
fourth 1000KW generating set, upgrading of switchgear and protection systems,
and the completion of a centralised control system for the operation of the
generating set at the Brades Power Station.
The recruitment of consultants for a new power station project is also
expected during 2001.
115.
Extensions and improvements to the
Transmission & Distribution (T&D) system are also planned for 2001.
These are to include provision of new distribution lines to new
residential housing developments. It
is hoped that distribution automation will be introduced for the first time on
the T & D system. This would
enable some switching operations to be done remotely from the control room at
the power station, enabling shorter response times during emergencies on the
system.
116.
The efforts of the management and staff of
MONLEC to provide a dependable service on Montserrat have not gone unnoticed.
For this, I wish to express appreciation on behalf of the Government and
people of Montserrat.
117.
Every effort will be made by this
government to merge the public utilities into one organisation.
We expect MONLEC to lead in this process.
We will be expecting significant progress to be made in this area by 31
December 2001. This will enable us
to look strategically at the future of public utilities during the course of
2002.
118.
Mr. Speaker, this government is acutely
aware of the large reduction in services in the local financial market.
This has stifled our development as the economy is forced to rely on
public expenditure for economic buoyancy.
119.
As we see it, there are two fundamental
problems involved. The first is the
reduction in the level of financial services available to the public, for
instance long-term mortgages and investment capital.
The second is the acceptable level of risk which financial institutions
are willing to take within this restricted economy.
120.
The approach favoured by this government is
to adopt policies that would create an environment that encourages banks and
non-banking institutions to become fully involved in the development process.
121.
Mr. Speaker, my immediate thoughts are on
the revival of the Montserrat Building Society and the need for greater
participation of the Royal Bank of Canada in our development.
In the latter case, government expects that the institution would decide
to become more fully involved in the reconstruction efforts as expected of all
our corporate citizens. Government
is however encouraged by the fact that the institution has started to open new
accounts but we hope that other services would also be made available in the
near future.
122.
This government applauds the efforts of the
Eastern Caribbean Central Bank (ECCB) to deepen our financial market.
They have done so in many ways but the introduction of the Eastern
Caribbean Stock Exchange (ECSE) is most valuable to us at this time especially
when HMG’s Aid Framework provides for a rapid reduction in aid over the next
five (5) years.
123.
The securities market will be limited to
the islands of the Organization of the Eastern Caribbean States (OECS) and
allows for the buying and selling of various financial products such as stocks
and bonds throughout the region. This
will help individuals and businesses to spread their risks by investing and
owning businesses throughout the region. Montserratians
would therefore have the opportunity to earn interest and dividend income from
the region. On the other hand, they would also obtain inexpensive capital to
finance businesses by offering shares to regional counterparts as an alternative
to loan financing.
124.
We are looking forward to the approval and
support from HMG to join our neighbours in implementing the ECSE Agreement
especially in the face of their declining aid policy.
125.
Mr. Speaker, this government recognises
that offshore financial services are a significant source of finance in the
medium to long-term and is therefore committed to the development of offshore
financial services. It is clear to
us that much ground has been lost, as other countries have moved to the
forefront in providing these services. I
am also aware that several international agencies such as the Organization for
Economic Corporation and Development have established rigid deadlines for us to
conform to international standards.
126.
Montserrat has given an undertaking to
implement the recommendations but has indicated its need for additional
resources as it seeks to make the required adjustments to current legislation
and structures. Let me state that as I speak the relevant legislation and
business plans are being drafted.
127.
Our approach to the provision of financial
services is based on six primary objectives:
i.
create a strong regulatory environment;
ii.
establish an appropriately staffed autonomous agency to regulate the
offshore business;
iii.
introduce systems that facilitate and modernise current approaches to
managing and developing financial services including use of the internet;
iv.
effectively manage the current offshore banking sector and IBCs
registered on island;
v.
Identify new financial products for development;
vi.
facilitate the exchange of information as a means of maintaining the
integrity and probity of the offshore business.
128.
We are a responsible government.
We understand our roles in providing
public goods and services and stabilising the economy when the private
sector is in crisis. However, we
know that if government continues to dominate the market the private sector will
never develop.
129.
Our public expenditure management policy is
therefore based on the following themes:
i.
Government should engage only in those economic activities that it must
provide for administrative, economic and social reasons and only for as long as
absolutely necessary;
ii.
improve efficiency through simplification and modernisation of systems;
iii.
enhance financial management capacity at all levels;
iv.
try to balance recurrent budget over time through prudent expenditure
control and enhanced revenue generation capacity.
130.
Mr Speaker, the first theme will be
elaborated below under the heading “Public Sector Restructuring”.
The second is very important and embodies a review of our financial
regulations and procedures at all levels. These
will be introduced in this Honourable House before the end of the year. The
third and fourth themes are dealt with in other sections of this budget
statement.
131.
A project
has been recently introduced to improve government accounting.
This is known as the Caribbean Overseas Territories Government Accounting
Reform project or COTGAR. It will
cost $3.0 million. When this is
completed the entire government accounting and human resource systems will be
computerised. The project also
includes significant training modules. The
new system will cause some disruptions in the short-term but as the ministries
and departments master the programme it will prove to be an invaluable resource.
I wish to publicly thank all the organisations and public servants
associated with implementing the programme.
132.
Mr Speaker, much has been said about the
need to graduate from a position of budgetary aid funding. Furthermore, DFID has
stated that its total aid framework
for Montserrat during the next five years contemplates financing of no more than
£71.0 million pounds. Annual
amounts are expected to decline from £24.4 million pounds this year to a mere
£7.5 million pounds or less than $30.0 million in 2005.
133.
This means that, among other things,
Government needs to examine options for increasing efficiency of certain public
sector organisations. One option is to restructure and privatise these
operations in order to make them self-supporting.
In other words, they must not only be able to cover their operating
costs, they must also be prepared to arrange their business in such a way as to
contribute to capital requirements as well.
134.
It is the intention of this government to
adopt this approach as soon as possible. However,
we shall also have to study all the implications so that we may all be able to
prepare ourselves in advance and make any necessary adjustments.
135.
One of those areas that must be returned to
the private sector in the near future is the purchase and distribution of fuel.
Government was forced to take over the operations when the privately
owned plant and equipment in Plymouth were either destroyed or made inaccessible
in 1997. It has put a severe strain
on both the government budget and its human resources.
136.
We shall therefore be requesting the
relevant departments to start the tender process for privatisation of the
operations in Carr’s Bay. It is
anticipated that one of the major regional companies would take over both the
supply and distribution of fuel. It
is also expected that the successful bidder would involve local Montserratian
business interests in the overall arrangement.
137.
It is important to note that divestment of
the operations will not necessarily lead to price increases.
A company which operates on a regional basis may be able to find ways of
cutting expenditure thus reducing the need to raise fuel prices.
138.
Another operation that calls for close
examination is the housing activities presently carried out by the Land
Development Authority (LDA). One of
the major difficulties faced by that organisation is that housing maintenance
costs are extremely high. The rents
that are collected are presently insufficient to cover these costs as well as
other overheads. Government will
make it a priority to sell as large a portion of the housing stock as soon as
possible. This would not only
create a higher level of home ownership, but would reduce the maintenance burden
and the need for significant levels of subsidy to the LDA.
139.
Beyond this, however, we shall be
considering the possibility of re-organising the LDA itself into a
self-supporting corporation. Such
an entity would be able raise its own financing. A combination of private and
public sector persons will be appointed to look at the mechanisms for making
this transition. This arrangement
can be used to take forward the Little Bay Development and similar
infrastructure development projects.
140.
Mr Speaker, I now turn to the state of
public finances, and I wish to start by briefly reviewing fiscal performance for
last year. Preliminary
indications are that total recurrent expenditure during fiscal 2000 amounted to
$50.6 million. This represents a
reduction of 15% in comparison to 1999 when recurrent expenditure totalled $59.3
million. It is also $3.8 million or 7% lower than budgeted for 2000.
It is my understanding that this decline has resulted largely from
efforts by the previous administration and DFID to exercise tight control on
expenditure. Some of the major
areas which experienced cut-backs were Subventions, as well as allocations for
Remedial Works, Purchase of Equipment, and Emergency Expenditure.
141.
With respect to recurrent revenue, the
total amount raised during 2000 was approximately $27.4 million. This represents
an increase of 4% over the 1999 total and is quite close to the budget estimate
of $27.2 million. The increase in revenue was due partly to certain measures
introduced in the 2000 budget by the previous administration.
These include increases in departure taxes and work permit fees. There
was also a one-off windfall payment of company tax during the year.
In addition, the Inland Revenue Department has been implementing a
combination of standard and creative measures to improve the collection of tax
arrears. These have so far produced fairly satisfactory results.
142.
The outturn for fiscal 2000 therefore shows
a deficit of $23.2 million. As in
the recent past, this has been financed by aid funds received from DFID. This
deficit is $10.1 million or 30% lower than the 1999 deficit of $33.3 million.
It is important that we continue to seek feasible options for reducing
the annual deficit.
143.
Mr Speaker, before I proceed to discuss the
estimates of revenue and expenditure for the 2001 financial year, I wish to
place the recurrent budget in its proper perspective.
In the first place, we are bound by law to prepare and present a budget
before the end of April. As a
result of the timing of the recent general elections, this meant that we had a
timeframe of a mere three weeks in which to do so.
144.
Secondly, we have discovered that since the
budget of the United Kingdom government has already been passed in the UK
parliament, a fixed amount has already been allocated to Montserrat as budgetary
aid for 2001.
145.
Thirdly, just prior to the announcement of
elections in February the previous government had negotiated certain other
budgetary arrangements with DFID that now allows us little flexibility.
146.
There are many things we would wish to
change, but because of these quite serious constraints, we have been able to
introduce only a few of the proposals we would have wanted to include in this
budget. Nevertheless, we accept our
responsibility to conduct the business of government as effectively as we can,
and to make the best use of the resources available for 2001.
147.
Mr Speaker, I propose to spend this year
the amount of $55.3 million under the recurrent budget.
This figure shows an increase of $0.9 million over last year’s budget,
and an increase of $4.7 million over the actual expenditure for 2000.
148.
Three of the main factors which have led to
the increased expenditure are:
i.
The amount of $1.0 million will be spent on additional road maintenance
and upgrading during the course of this year.
As we are all aware, people not only need to build new homes, but they
must have proper access to their properties. Sections of the main road and many
of the secondary roads will therefore be upgraded.
ii.
Like all the other Caribbean islands, Montserrat will be conducting a
population census in the month of May. This
will require expenditure of about $0.5 million, but it is important to note that
this expenditure will not be repeated in next year’s budget.
iii.
The amount of $0.6 million has been allocated for the maintenance of
Montserratian prisoners, who had to be sent to other Caribbean islands which
have better security than we do. Previously, this item was covered under project
expenditure.
149.
I propose the allocation of $16.0 million
to the Ministry of Health, Education and Community Services.
This represents 29% of the overall budget, but it includes wages and
salaries in departments containing large numbers of workers such as nurses and
teachers. The amount to be spent on primary and secondary health care is $6.6
million. Some of the important items include financial assistance to the Golden
Years Home, continued improvements in sanitation, and allocations to finance the
visit to Montserrat of health specialists.
The allocation to this ministry in the 2001 budget is 4% lower than that
for 2000. The main reason for this
is that certain changes have been made to the social welfare scheme that have
led to a reduction in cost.
150.
The allocation to the Ministry of
Communication and Works for this year is $5.7 million. As previously pointed
out, this includes an additional $1.0
million to be spent on road maintenance this year.
151.
The Ministry of Agriculture, Housing and
Lands accounts for 8% of the budget, that is, $4.7 million.
This represents an increase of $0.5 million over last year’s amount.
The main reason for this is an increase in the subvention paid to the LDA
to assist with the maintenance of houses under their control. This government is
prepared to implement a programme of divestment that would allow occupants of
the houses in Lookout, Davy Hill and other areas to take over ownership. This
would also have the effect of reducing the subvention that is currently
necessary.
152.
The amount to be spent on personal
emoluments and wages this year is $23.6 million.
While this figure already represents 43% of the total recurrent budget,
my government is of the view that public service workers must be adequately and
properly compensated for the work they have been doing during this difficult
period. The job evaluation review
is still ongoing and we do not wish to pre-empt the results. However, in light
of recent price increases, we believe that every effort must be made to ensure
that public servants and workers in general are able to maintain a reasonable
standard of living.
153.
I wish to turn now to the revenue
estimates. Mr Speaker, it is
estimated that revenue collection will amount to $26.6 million in 2001.
This figure $0.8 million less than the revised revenue estimate for 2000.
The main explanation for the apparent decrease is that the 2000 revised
figure of $27.4 million included a one-off “windfall” payment of $1.5
million in company tax.
154.
The largest source of income continues to
be taxes on imports. These comprise Import Duties, Consumption Tax and Customs
Service Tax. Together, they
are expected to raise $10.6 million or 39% of total revenue.
Personal Income Tax, Company Tax and Property tax are estimated to
contribute $7.2 million, $1.6 million and $0.8 million respectively.
155.
Despite the fact that a good number of
taxpayers have recently made some attempts to deal with outstanding taxes, I
want to encourage all who are still in arrears to make some arrangement with the
Inland Revenue Department to minimize their current tax liability.
I understand that many of us are still experiencing difficult times, but
if we seriously wish to return Montserrat to a healthy financial and economic
state, we have to meet our tax commitments.
156.
DFID have recently agreed to provide
technical assistance to Inland Revenue and a tax adviser is expected on island
soon. One of the things I hope he will be able to do is to assist the government
in finding ways to improve revenue collection without necessarily increasing the
overall tax burden.
157.
Based on the
estimates of revenue and expenditure that I have presented, the expected outturn
for 2001 is a deficit of $28.6 million. This
will be financed by budgetary aid from Her Majesty’s Government.
The amount is $4.8 million higher than the expected outturn for 2000.
158.
DFID has sought to make it clear that its
approach to aid for Montserrat will no longer consider the island to be in a
state of crisis. Less emphasis
would therefore be placed on “emergency expenditure”.
For our part, Government of Montserrat feels that it is the crisis
situation which has dictated the nature of our long-term needs, and the process
of change from emergency aid to greater self-sufficiency must necessarily be a
gradual one. In fact, while it may not appear that we are still facing a
physical emergency, it cannot be claimed that Montserrat has already emerged
from the economic crisis which resulted from it.
159.
Mr Speaker, I have already expressed my
government’s concerns about the pace of implementation of projects during the
year 2000 and the first quarter of 2001. In
the 2000 budget the previous government proposed to spend the sum of $95.0
million on Development Expenditure. This
year we are proposing to spend $77.8 million on development projects.
A total of $71.8 million or 92% of the funds are to be provided by DFID.
The major projects have already been outlined.
160.
I have to say that I feel it