January 24, 2020
What can we do to move beyond 60% dependency on the UK for our recurrent budget?
BRADES, Montserrat, January 17, 2020 – In his Monday, January 13th opening remarks for the annual DfID Financial Aid Mission (FAM), Montserrat’s new premier, Hon Mr Easton Taylor-Farrell, announced a policy goal that by 2035 (i.e. in fifteen years), Montserrat should be able to pay its own way. That is, he hopes that by that time our economy will have grown sufficiently strong through tourism, trade and investment that we will no longer need the current 60% UK subsidy to carry our recurrent budget; without, over-burdening our economy through over-taxation.
What would that take?
For one, Government and our economy are largely continuous (never mind what politicians tend to say around election time). So, let’s look at a January 2017 article in this series:
“[I]f 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:
[Due to the volcano crisis and UK aid under the UN Charter, Article 73, the public sector has more than doubled as a percent of our economy, moving from 19.3% in 1994 to 45.8% in 2016 . . .
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 . . . public sector to being 20% of our economy in 20 years, our economy would have to more than double, from EC$153 million to EC$ 350 million . . . 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]”
Of course, to do that in fifteen years instead, we would have to grow even faster, 5.7% on average.
What about tourism (and the digital sector)?
That is a bit complicated. As, while we can see that we are surrounded by several islands with 600,000 and more tourists per year, so there is obvious room for growth, in the longer term, the main-spring of global economic growth is shifting to Asia.
As this series noted on July 5th 2018, “China and India . . . combined will contribute over forty percent of global economic growth this year, 3.3%. By contrast, the UK contributes only 1.4% and the US only 12.3% to current global growth. By 2023, the UK may contribute 1.3% and the US, 8.5%.”
Where, “Chinese and Indian tourists will find it far more convenient to go to neighbouring destinations, instead of regularly flying to the Caribbean. So while slow-growth Europe and North America will still be prosperous and will be sources for tourism, the North Atlantic Basin is gradually turning into a low-growth, already-been-there, saw-that, got-the-tee-shirt, mostly cruise-ship visitor driven tourism market. So, it would be a mistake to put all of our economic eggs in the tourism basket. Yes, tourism is indeed Montserrat’s fastest “quick win” driver for growth, but we have to be realistic about setting up our strategic moves beyond tourism.”
That points to the digital sector, and to the significance of the sub-sea, terabit per second class fibre optic cable project, for which the contract was signed by former premier Romeo on October 24th – which is why we just saw a visit by RV Ridley Thomas, which surveyed the proposed route for the cable. We can catch a glimpse into the significance of this by eavesdropping on what St Helena is saying about their own fibre optic cable. As TMR recently reported:
“According to the Government of St Helena, ‘[c]onnecting to Equiano meets SHG’s timing and budgetary requirements for the European Development Fund and supports the Digital ICT Strategy for St Helena.’
According to their Financial Secretary, Mr Dax Richards: ‘[s]ignificant additional economic development on St Helena is conditional on improved connectivity and accessibility, and therefore the delivery of the Fibre Project is crucial to economic growth . . . The delivery of the Fibre Project is a key action in the Sustainable Economic Development Plan – in order to develop the satellite ground stations, financial services, work from home, academia research and conferences, film location and tourism sectors.’”
All of this calls for long-term, consensus based national strategic planning. Such should build on the Mott-McDonald Economic Growth Strategy (EGS) that was recently shepherded through by consultant economist Mr Raja Kadri, on the 2008 – 2020 Sustainable Development Plan, the current 10-year Physical Development Plan, the past two energy policies and other similar initiatives.
Perhaps, it would also be helpful to again look at the SWOT chart for the EGS, as a reminder that a balanced growth framework has been put on the table for over a year now, through a process of national consultation:
Perhaps, then, a very good place to begin building on the foundation that is already in place would be with the successor Sustainable Development Plan, which is technically due this year. (It may be wise to extend the current SDP for a year or so, to give us time to build its successor.)
