UK Budgetary Aid increase
by Bennette Roach :
l-r: Allan Clarkin, Tom Kelly, Dr. Kato Kimbugwe
The question that had been languishing over the Memorandum of Understanding (MOU), signed by Montserrat and the UK on May 1, last year, has come to haunt Montserrat, but HMG is understanding and while easing the conditions merely exasperate the problems.
The question had to do with concerns over this section of the MOU” where it said: “The actual commitment of UK funds will be dependent upon: the UK Government having a full justification (including financial and economic justification) of the investment; the simultaneous contractual commitment of private sector entities to make key investments in hotel, yachting marina, residential and other facilities;”
At that point there was no mention or requirement regarding the port, but as of the review of the Strategic Growth (Development) Plan and the review of the MOU with its attending Reform Matrices, HMG softened the pain by extending to Premier Meade’s government more time to meet its obligations emanating out of the MOU.
Tom Kelly, head of the Review team explained following a press release on the visit, said it was significant, because it clarified the way forward on the SGP in a number of areas:. One of those areas was as follows in that following the discussion GoM was, “provided more time to consider new ideas for financing the construction and operation of a port through a PPP drawing in private sector investment, alongside on-going efforts to attract private investment for hotel, marina and other tourist infrastructure.”
In the joint press conference of DFID and GoM, he admitted that there had been some adjustments, additions to the SGP with specific reference to the foregoing. He said: “…the work that is still to be done – we’ve agreed an action plan that will make sure that that will be implemented or at least the work on that would be completed by August of this year and then we can reach some sort of decision…” advising that the government has until August to make good the Letters of Intent and the interest shown by private sector investors, to build the port and related, the town, and develop Little Bay.
The press received clarification for the people’s benefit, that “Private sector investment” referenced local and foreign (and the Diaspora).
UKG Pressure
Although Kelly informed of the letter from the UK ministers of DFID and FCO, “UK Ministers have written to the Premier reiterating HMG’s commitment to Montserrat and clarifying the next stages of our joint work,” in spite of that seeming forwarding gesture, It was suggested to the DFID team that the UK was putting pressure on Montserrat with the conditions, even with the time extension.
The extended response by Kelly was: “What the government (UK) is saying is, the initial idea, the initial time table hasn’t been met. Is there another way of doing this, can we look at other ways of funding the port for example? That’s where the PPP (Public Private Partnership comes in. Why the government want to give more time for the PPP is that, that then is a definite way of financing the port where the cost and the risk of port development are shared between the private and the public sector. So, what the government is saying is, the original timelines weren’t met rather than closing the book right now and trying something else, let’s see if we can extend the timeline for this PPP interest. It’s giving Montserrat more time to look at more options to fund he port.”
GoM accepts
The Premier as leader of Governments business, acknowledging GoM’s culpability in the arrangements, in addition explained, why extra time was desirable: “If we’re forced to go in a particular direction, the first person that comes to the table we’d jump, because that would leave the British funds.”
He explained further, acknowledging the pressures of the MOU, “the understanding here is, (to the UK) do not hold us to that time line, because you can cause us to make an injudicious decision. Therefore, despite what the MOU says, give us an opportunity to go out there and see if we can get the best possible investment for Montserrat, and they have agreed to that,” he noted.
He also pointed out the reasoning and accepted the UK’s lack of interest in fully funding, what he referred to as, “elaborate port which we designed…”.
“We made a mistake with the airport by building something, and in relation to the port we are designing a port which will meet future needs of Montserrat,” he pointed out. “We don’t expect the British government to finance the elaborate port which we designed, in terms of all the things which we want in there. We have basically indicated, let us look at the private sector…” he concluded.
Tax Reforms
The press noted to both DFID and GoM the continued continuation of the question of tax reforms. In fact it was reported as one of the areas that government had been failing in meeting its commitments under the MOU. While good progress was reported in the review on Investment policy; Tourism; and Access; “Performance has been below expectations in the following areas”: Tax reforms; Review of regulatory functions; and Institutions.
On the question of Tax reforms, Kelly pointed out while avoiding directly addressing questions on their continued reference to ‘tax compliance’ he assumed the question, “relates to recurring budget and how much government of Montserrat raising in terms of recurring budget.” He said, “That’s an issue that we discuss at our mid-year and annual reviews, as to whether or not these taxes, the old tax régime that government of Montserrat has implemented is raising the adequate level of revenue.”
He said that they reference, “looking at a tax régime – that is attractive to private investment; that is on or off island, I think the question that you’re talking about
Budget
The press conference revealed that the Government of Montserrat had received settlement from DFID the budgetary aid for 2013/14. It was local DFid through Dr. Kato Kimbugwe whose pleasure it was to bear the good news. “Local DFID Montserrat is pleased to announce that the budget aid settlement amounting to EC$70.3million has been agreed.”
It showed EC$57.3m for the recurrent budget – increased from EC$52m in 2012/13, pointing out that the settlement enables continued provision of essential services, including assistance across health, education services and improving sea access and safety at the airport.
The accompanying release said that “during discussions, GoM highlighted significant budget pressures arising from capital replacement costs, rising pension costs and on-going financial liabilities.”
It noted that “DFID has increased funding across these areas to address these pressures.”
