How can we build on the research published in the December 15, 2017 Mott-MacDonald Draft Economic Growth Strategy document?
BRADES, Montserrat – As we all know, Montserrat’s economy took a very hard blow from the volcano disaster. That was multiplied by gaps and delays in emergency management response and the resulting loss of 2/3 of our population. We also lost access to 2/3 of our land, much of our key infrastructure and therefore a big slice of our productive capacity. So, if we are to soundly rebuild Montserrat’s economy we need to soundly understand what happened to us. This makes the December 15, 2017, Mott-MacDonald Draft Economic Growth Strategy document[1] doubly important. Here, let us look at an adjusted version of one of their tables, with some additional calculations:
This table tells our economic story by making a comparison between our economy in 1994 and in 2016, with a telling side-light from the Antigua Economy:
- Our economy (in “real” terms) as indicated by Gross Domestic Product (GDP)[2] is just over half as big as it was on the eve of the volcano disaster.
- Apart from Finance and Transport, the private sector collapsed well beyond the 50% or so that would imply just a scaling down; in some sectors it is less than 20% of what it was.
- The structure of our economy has clearly changed drastically, due to a dramatic collapse of key productive sectors.[3]
- It has stayed there for many years because of a want of investor confidence and lack of key growth-enabling infrastructure that we are still fighting to put in place over twenty years later.
- The public sector has more than doubled as a percent of our economy, moving from 19.3% in 1994 to 45.8% in 2016. (This reflects the impact of the annual UK grants under the legally binding UN Charter Article 73 obligation to “ensure . . . advancement” and to “promote . . . development.” As the 2012 FCO OT’s White Paper shows, this is the main reason for the longstanding UK policy that “reasonable assistance needs” of OT’s have “a first call” on the UK’s International Development Budget. [Cf. pp. 13 and 17.])
- As a result, our GDP is not a “natural” one driven by a buoyant private sector, it reflects this annual support to our economy. Such is not sustainable.
- In simple terms, if we are to return the same level of public sector to being 20% of our economy in 20 years, our economy would have to more than double, from EC$153 millions to EC$ 350 millions.
- A compound interest calculation (yes, CXC Maths is good enough) will show this requires an average growth rate of 4.2%.
- So, it is reasonable for Mott-MacDonald to target a 3 – 5% annual GDP growth rate. ECCB would prefer to see 5 – 7%.
- However, if Montserrat is to move ahead, we must put in place key infrastructure, build our productive capacity,[4] provide incentives and reassurance that will rebuild investor confidence, and support a wave of enterprises that take advantage of our major opportunities: tourism, geothermal energy, the rising global digital services economy, and the like.[5]
- A comparison with Antigua and Barbuda will show that on a per person (“per capita”) basis, our average income has increased by 13%. However, while in 1994 we were at 105% of the Antigua figure, by 2016 we fell to 98% of the increased Antigua figure. (As, Antigua’s GDP/Capita rose by 21% in the same twenty-two years whilst ours rose by only 13%.)
- this strongly suggests that DfID has had a basic yardstick for annual support under “reasonable assistance needs,” keeping us on a comparable level to Antigua.
- DfID Ministers and Officers have also repeatedly made it clear that unless they see sound proposals, credible capacity and sound governance reforms (including of financial management) they will not have good reason to invest in major infrastructure projects.
- This brings us back to the need for a charter of good governance working with a development partnership memorandum of Understanding that will lay out how we are going to move ahead together.
With that in hand, let us briefly look at a modified SWOT table from the Mott-MacDonald study:
Glorified common sense, almost a no-brainer once we see the sort of data we now have in hand. Any economic development framework going forward must reckon with these issues and opportunities. That means we have a basis for national consensus, so let us now move forward together.
[1] See GoM: http://www.gov.ms/wp-content/uploads/2012/06/Growth-Strategy-Delivery-Plan-2017-DRAFT-.pdf
[2] See Investopedia: https://www.investopedia.com/terms/g/gdp.asp
[3] See TMR reference resource: https://ia902707.us.archive.org/11/items/EconomicsForDummies_/EconomicsForDummies.pdf
[4] See TMR, DoD: https://www.themontserratreporter.com/22132-2/
[5] See TMR, DoD: https://www.themontserratreporter.com/de-ole-dawg-part10-contribution/
