1. Mr Speaker, I wish to express gratitude for the support of the people of Montserrat over the past year. In spite of a number of challenges my Government is determined to enhance the economic and social well-being of our people. This Government has been mindful that it owes its success to Almighty God and the resilience of our people. These two factors, Mr Speaker have motivated us to approach the future with great optimism.

2. It is almost one year since our Party, the New People’s Liberation Movement was elected to office. Since then the world has changed dramatically. The World Trade Centre tragedy of September 11 2001 and the ensuing global reaction have weakened economies across the world, making it more difficult for smaller states to advance economically.

3. The September 11 event not only changed the geopolitical landscape but also the financial and legal environment in which we do business. Mr Speaker you would no doubt realise that the marketplace has become hostile and some organisations have used this event to implement decisions that gives the competitive advantage to developed countries. Consequently, economic prospects and development opportunities for microstates have narrowed considerably.

4. Nevertheless, Government is optimistic and will use every window of opportunity to steer this country on a path of sustained economic growth. This is important for the development of our people and ultimately our own survival. Let us now examine what has been accomplished so far.

5. Mr Speaker, over the past eleven (11) months we have used the resources available to improve the economic situation on Montserrat. The Governor of the Central Bank has reported that during this period preliminary estimates show that the Montserrat economy grew by 5.7% from -5.3% to 0.4%. This growth is due to several factors. Chief among them is our experience at negotiating with the British Government and the fact that the British Government has said that they are satisfied with the way that this Government is conducting its affairs. This has led to removal of restrictions that had prevented the speedy implementation of projects.

6. I am pleased to report Mr Speaker, that between April and October 2001, this Government has seen the implementation of a number of projects with expenditure totalling approximately $25 million. Some of the projects to which I refer are as follows:

This Government will continue to implement projects in an efficient and economical manner so that maximum benefits can accrue within the financial year.

7. Mr Speaker, we were also mindful of the fact that we needed to develop policies and partnerships that would provide an environment for financial institutions to assist us in restoring home ownership to our people. This has been done with remarkable success. I am pleased to report that:-

· The Montserrat Building Society is preparing its business plan and is developing its mortgage programme which will be implemented also by July 2002;

· The British Government has approved £10 million for housing over a period of 5 years.

8. We have also taken our commitment to the Eastern Caribbean Central Bank (ECCB) seriously and have passed all the relevant legislation to ensure that the Eastern Caribbean Securities Exchange (ECSE) becomes a reality. This initiative will provide the opportunity for our people to invest throughout the Organization of Eastern Caribbean States (OECS) without any restrictions.

9. Another important initiative that this Government has successfully embarked on since coming to office is the passing of legislation to bring into being the Financial Services Commission. This organization will now be responsible for regulating the offshore financial sector. We are in the process of fostering partnership with Montserrat Chamber of Commerce in an effort to jointly promote and develop our offshore business. Although there is still much work to be done in meeting the international requirements we are making steady progress.

10. Mr Speaker, this Government has shown maturity in the way we do business and we have successfully completed negotiations with the Department for International Development (DFID) which would give more autonomy in managing local affairs. DFID

has already begun to scale down its supervisory operations on Montserrat. This new arrangement presents challenges and opportunities but we are committed to making the arrangement work for the benefit of our people.

11. In this new relationship the Government is also cognisant of the fact that it is necessary to review financial and budgetary systems to ensure that government spending is focused on what is important.. To this end, a review of the public finance system is being conducted to examine ways in which Government can stimulate the development of the private sector while balancing its own commitment to finance public services.

12. Finally, the fundamental building block of our economy is the private sector. As promised, we have expanded this sector by privatising the fuel operations from 1^st July 2001 at no additional cost to the consumer. We have just completed negotiations with the operator and this would lead to savings in the cost of electricity to consumers.

ECONOMIC CONTEXT

International and Regional Issues

13. Mr Speaker, it is significant to note that the growth in the Montserrat economy in 2001 was experienced in the face of many global economic challenges. This government continues to do what it can to cushion the impact of global developments on the ordinary working men and women in this country.

14. The event of September 11, 2001 occurred at a time when the leading economies of the world, including the United States, were already declining. Since the United States is the major centre of international business, financial and economic activity, and the leader in the global economy, this major shock had a significant negative impact on economies around the world.

15. The destruction of the World Trade Centre affected the United States most directly. As the shock deepened and spread throughout that economy, unemployment further increased and in the third quarter Gross Domestic Product (GDP) fell by 1.1%. The Federal Reserve, in an effort to stimulate the economy, reduced the interest rate 13 times over the last year. Eventually, the United States economy was able to experience growth of a mere 0.4% in comparison to a healthy 5.3% in 2000.

16. The United Kingdom (UK), like most of the member states of the Organisation for Economic Cooperation and Development (OECD), has seen growth rates decline in 2001. As the United States went into a recession, growth in the UK declined to 1.5% in 2001 from 3.0% in 2000. With the economic slowdown in the UK, external demand has decreased, raising the trade deficit for 2001. Furthermore, the European economies, with which the United Kingdom is closely linked, experienced a slowdown in activity with a growth rate of 2.8% in 2001 in comparison with a 3.3% growth in output in 2000.

17. Mr Speaker, it is clear that United Kingdom government officials would have had first hand experience with these economic developments. It is therefore my hope

that they would recognise the potential impact on a small vulnerable economy like Montserrat, and arrange for the necessary support to be provided to us during the course of this fiscal year.

18. The Organisation of Eastern Caribbean States also experienced economic difficulties during last year. Preliminary estimates indicate that growth in economic activity in the OECS contracted by 0.8 percent following growth of 2.6 percent in 2000. Indications also are that Tourism, which is one of the leading sectors in these economies, suffered a decline following the events of September 11. Activity in the agricultural and manufacturing sectors also declined. However, growth was recorded in the services sectors, particularly government services, transport and communication, and electricity and water. The rate of inflation regionally remained moderate at 2.4 percent in 2001, falling from 2.7 percent in 2000. Imports within the region contracted and there were declines in direct investment income and other payments from abroad, while private direct investment was estimated to have fallen.

19. Governments of OECS are concerned, Mr Speaker with rising budget deficits and fiscal distress caused by deteriorating economic performance and rising debt servicing arrangements. This path cannot continue without serious corrective measures being taken.

20. In all of this, it is worthy of note that the East Caribbean dollar remained sound, backed by external reserves to the extent of 97.5 percent compared with the legal minimum of 60 percent. I am also satisfied that this analysis indicates that, in comparison to our immediate neighbours, the Montserrat economy has fared well generally during the first nine months of my government’s stewardship.

The Domestic Economy

21. Mr Speaker, I believe that a major factor, which positively influenced the local economy in 2001 was this government’s targeted strategy aimed at bringing about the implementation of a number of projects with significant multiplier effects in the economy. These have already been outlined. Despite this, we cannot be complacent because there is much more to be done and there are many Montserratians to whom we must still bring relief.

Construction

22. Up to the end of October 2001 there were 68 new building starts comprising 52 residential, 5 commercial and 11 public buildings. This compares with 81 building starts for the same period in 2000 comprising 73 residential, 7 commercial and 1 public building. Although there was a greater number of building starts in 2000, the value of the contribution to the sector in 2001 was more than double that for 2000. The estimated value of buildings started in 2001 is EC$24.9 million compared with EC$12.2 million for 2000. The new Police Station, Fire Station and Sheltered Housing projects were the three main public sector projects being implemented at a total value EC$18 million. These projects have generated a significant number of jobs in the construction sector as well as increases in wages and income in the economy.

23. Government will be instituting measures to ensure the construction sector will be given further impetus in 2002. Approximately 200 serviced lots will become available early in the second half of this year. The funds that were initially allocated to the Soft Mortgage Housing Scheme will be made available to extend the Material Grants programme. Two sets of direct build housing programmes financed by the European Union (EU) and DFID will also commence in 2002.

Tourism

24. It is government’s intention to make tourism one of the leading sectors of the economy and a major contributor to national income. At present, the tourism sector continues to realise steady growth. During 2001, total visitor arrivals up to November increased by 3.6% over the figure for 2000 to 12,946. This is following a 10.7% growth in visitor arrivals for 2000 over the previous year. There was a remarkable increase of 40% in the number of excursionists visiting Montserrat in 2001.

Agriculture

25. The prolonged dry spell in the first half of 2001 has seriously impacted on the level of agricultural produce. The irrigation project has provided some relief to farmers but was implemented late in the second quarter of 2000. In 2001 local production declined by 45% to approximately 92,000 lbs. The main crops produced were white potato, sweet pepper, cucumber and okro. On a more positive note, the level of egg production which was negligible in 2000 increased substantially to 10,800 dozens in 2001. Fish catch for 2001 also increased by 8% over the catch for 2000 to 77,515 pounds.

Manufacturing

26. Government continues to vigorously develop the necessary infrastructure and incentive programmes in an attempt to stimulate activity within the manufacturing sector. Despite these efforts, the level of manufacturing activity remains insignificant and is limited to mainly furniture manufacturing, block making, and sand and aggregate mining with a contribution to GDP of less than 2%.

Output

27. In 2001, the Montserrat economy experienced positive growth for the first time in seven (7) years. The preliminary rate of growth for 2001 is estimated at 0.4% in comparison with a rate of –5.43% in 2000. The implementation of a number of major public sector projects would have accounted for growth in the construction sector. The other sectors that expanded marginally over the period are the services sector including electricity and water, transport, real estate and housing and government services.

28. This government was successful in removing the bottlenecks that stifled the pace of implementation of public sector projects. In an attempt to ensure continued economic growth government will be targeting activities in the private sector, and more specifically the manufacturing and agriculture sectors.

29. It is important to note that even with significant public sector construction the economy is fickle and the benefits do not spread across the different income groups. Consequently, persons working outside the construction related sectors never felt the impact of the growth referred to above. This is why broad base development of the private sector is crucial.

Inflation

30. Inflation for the year 2001 stood at 4.9%. One of the main goals of this government’s economic policy will be to control inflation. As I have already indicated, we will work with the private sector to ensure that the prices of goods and services are kept under control.

General

31. Mr Speaker, the economic data has shown that the world has changed and in many cases for the worse. This will affect Montserrat’s ability to develop rapidly. Further, Mr Speaker, Her Majesty Government (HMG) has directed us to reduce our level of dependence on budgetary aid and have tied the approval of certain projects to cost recovery measures and we have had to implement some of these measures. The Government of Montserrat feels that the time is not right for any major decreases in aid as the economic infrastructure is not yet ready to replace this loss of funding. We cannot control the policy of HMG but it is this Government’s intention to seek to balance HMG’s policy with the need to avoid unbearable pressure on an already heavily taxed working population.

32. It is therefore the goal of this budget to outline policies that would be sufficiently creative and flexible to minimize the impact of the negative repercussions from the global economic environment and to promote growth in our local economy.

HUMAN DEVELOPMENT INITIATIVES

33. Mr Speaker, we have had in the past and will continue to maintain a focus on people. This is not easy to accomplish and must necessarily be a process of gradually improving the standard of living for Montserratians and others who choose to live and work on island. Our programmes for achieving this goal are targeted at the development of land, housing, education, health, recreation, sports, culture, community and employment generation.

Land Development

34. The relative scarcity of land and the cost of relevant infrastructure are impediments to the provision of appropriate housing to our people. Government of Montserrat has and will continue only where necessary to acquire land and transfer it at reasonable costs to those who qualify. However, private landowners need to be more enterprising and join Government in making lands available for residential and other purposes. This problem requires joint effort.

35. In this regard, Mr Speaker, the Look Out II project is important in providing land and housing opportunities for displaced residents. This project is intended to provide 200 new residential lots, 1.5 acres of land for commercial plots, and 5.6 acres for community-based activities, including open space and recreational facilities. Government has therefore taken the decision to allocate over $9.5 million to this important project.

36. Government has made significant advances in the design of a Master Plan for Little Bay. This project is funded by the Caribbean Development Bank (CDB). In 2002, Government will commission an overall preliminary design and detailed designs for Phase I of the Little Bay Development. Also as part of Phase I for 2002, Government will provide $2.0 million for the initial infrastructure development in Little Bay. This will provide development for the site of the Cultural Centre and its environs, as well as some commercial and housing sites. The Public Market area will also be included in Phase I.

37. During the year 2001, Government has made progress in streamlining the operations of the Lands & Surveys Department so that applications and transactions involving land subdivision, surveys, transfers and registration can now be processed within a shorter time frame.

38. A project costing approximately $1.6 million will provide much needed computerisation, surveying equipment and training to staff in this area. This investment will allow a reduction in the costs of consultancies related to any significant land development as Government will have the capability of carrying out sophisticated and technologically innovative land surveys and mapping.

39. The year ahead offers great opportunity for development in this area. The relocation of the Lands & Surveys Department to Brades will provide a secure environment and greater accessibility to the Land Registry information. Key work areas will be the implementation of permanent Global Positioning (GPS) Systems network, which should reduce survey costs and allow low cost GPS to be used in the survey of unclaimed lands, cadastral surveys and topographic mapping. The Geographical Information System (GIS) Project, Phase II, will capture new photography of the island, which will allow updates of the topographic mapping which has not been revised since the 1980’s. This data will be added to the GIS database to ensure maximum distribution of land related information within Government and provide opportunities for revenue generation whilst providing quality assurance of existing data sets. The completion this work will also allow for revision of the Tourist Map in 2003.

Housing Development

40. Mr Speaker the Government is mindful of the plight of the 1000 displaced households who are still in need of housing. There are persons without acceptable housing provisions. The housing register shows that there are many Montserratians who wish to return to the island but who do not have access to land and mortgage financing.

41. As a result of our Housing Strategy, DFID has approved a further £10 million for housing over the next five years (2001–2006).

42. The approved Housing Programme comprises several components, namely, infrastructure development to provide 200 serviced lots at Look Out, the Materials Grant Phase III, Establishment of a Housing Corporation, and Refurbishment of Houses at Davy Hill and Shinn Lands. DFID support for housing will be carefully coordinated with parallel support from the European Community of about £3.25 million. The European Development Fund (EDF) allocation will finance the servicing of 50 lots and the construction of approximately 50 starter homes at Look Out II.

43. Our senior citizens are important to us. In late 2001 construction began on 50 units for the elderly under the Sheltered Housing Programme. This project includes the purchase of land at a cost of $9.04 million. Mr Speaker, when this project is completed Government will have provided accommodation and support to over 150 of our most vulnerable. This is significant in a population of approximately 5000 people.

44. Mr Speaker work has also just begun on a 20 single-bedroom hostel at Lookout costing $1.3 million to house single persons. You see, Mr Speaker, Government is ensuring that the needs of all categories and classes of our people are addressed.

45. We continue to help people to help themselves. The Self-Build Materials Grant Scheme is on-going with an additional 44 new awards to Montserratians already allocated this financial year. Further, funds are now available under the approved Housing Programme for applicants who are awaiting assistance under the Scheme.

46. Again, Mr Speaker, we are repairing and renovating 55 houses at Davy Hill and Shinn lands at a cost of approximately $1.0 million. It is unfortunate that previous authorities allowed these houses to be built. This Government is now forced to put it

right and this will be done. The project started in early January 2002 and should be completed by the end of March 2002.

47. Having said this, Mr Speaker, one of the main aims of Government’s Housing policy is to restore the levels of home ownership to that which existed prior to the volcanic crisis. To this end, Government has decided that its housing stock at Lookout Phase I, Davy Hill and Shinn will be offered for sale to the current tenants. Tenants will then be able to apply directly for planning permission in the usual way to extend their homes if they wish to do so.

48. My Government welcomes the news that the Montserrat Building Society and the Bank of Montserrat will be launching their mortgage programmes by July this year. It is hoped that the terms would be reasonable to ensure that many more persons would qualify. It is estimated that this partnership will bring about $12.0 million into circulation over the next two to three years. This would leave government to concentrate on delivering public housing to the most vulnerable.

49. Mr Speaker, Government’s Housing Policy is being implemented through two organisations working in the same sector: The Housing Unit and the Montserrat Land Development Authority. Government has already made clear its strategic intention of establishing a self-supporting corporation that would assume the function of managing Government’s housing stock and efficiently implement its housing programmes. These programmes include the divestment of current housing stock, financial assistance for the procurement of housing materials, and assistance to poor and vulnerable groups. During this financial year, Government intends to complete all necessary procedural steps to merge the existing GoM Housing Unit and the Land Development Authority into a National Housing and Development Corporation. This new institution will assume central responsibility for delivery of government’s land management and development policy. To this end $440,000 has been allocated to implement the housing strategy.

Education

50. Government is fully appreciative of the fact that it is education that will provide the platform for future development of Montserrat. During 2001, we have made significant strides in improving the quality of education provided. Steps were taken to improve physical accessibility to education and to boost students’ performance at all levels. The skills of teachers were enhanced through professional development workshops and training programs and further access to educational opportunities for the adult population was created through the establishment of a part time evening institute.

51. More importantly, a Unit for children with special needs was established. Form VI advanced level programme was re-introduced at the Montserrat Secondary School and a Five-Year Education Development Plan was formulated. The Government of Montserrat is committed to the successful implementation of the Plan.

52. .During 2002 emphasis will be placed on the construction of the Montserrat Community College, expanding access to early childhood education, improving the school bus fleet and increasing the sums allocated for the purchase of equipment and resources for each level of the education system.

53. Government remains steadfast in its commitment to increase provision of education at the tertiary level. In fulfilment of this objective a Community College will be constructed adjacent to the Salem Campus. This project is jointly funded by the European Union and DFID and is estimated to cost in excess of EC$6.0 million. The building when completed will provide a state of the art library, computer room, science laboratory and workshop area accompanied by classrooms and staff areas. The College will provide A’ level classes as well as vocational training in many disciplines. Following approval from the European Union the Ministry of Communications and Works will co-ordinate all design work for completion and tender in the middle of the year. Construction should be completed in time for the start of the academic year in September 2003.

54. Government realises that a prerequisite to success at the highest level is the need for the development of a solid foundation. To this end, the Nursery school at Lookout was started on site in July of 2001. The building provides the Ministry with a large children play/education hall, a smaller quiet area and ancillary office and support areas. The building will be handed over shortly.

55. Mr Speaker, we attach importance to the consolidation of good quality educational opportunities in Montserrat, to retain those workers in the productive sectors who have young families and might otherwise relocate elsewhere for educational purposes.

56. When the education facilities are completed, approximately $9.1 million dollars would have been spent. The education plan will then focus on the quality of outputs, taking into account: