Friday, August 7, 2009

Dominica Freedom Party responds to the 2009-10 budget

The chosen theme for the 2009-2010 Budget Address is “Securing a Brighter Future in the Face of Global Crisis”. But what the budget has failed to address is how Dominicans can actually secure a future in Dominica in the face of little or no job opportunities, rising violence and crime particularly amongst the youth, drop in health services, falling standards in education despite the introduction of universal secondary education, which if not addressed urgently will lead to a national crisis! On the contrary, the Budget has not presented government’s overall strategy for securing a brighter future but reveals a lack of any strategy at all.

GOVERNMENTS OVERALL STRATEGY OR LACK THEREOF
Prime Minister Skerrit spoke of our grave dependence on conditions beyond our shores. What is the administration doing to reduce our dependence and vulnerability on conditions beyond our shores?

Rather than providing a strategy to build a diversified and resilient economy and so reduce our vulnerability, this Government has made us more vulnerable by making us more dependent on foreign aid.

While we welcome foreign aid, it cannot and should not be the basis for making our people self-reliant and independent, in control of their affairs and in charge of their destinies. Aid is unpredictable and volatile.

We should not make the security and welfare of our people dependent on the interests of foreign governments for when these interests change we are left in a lurch. And this government fails or refuses to understand this whilst it goes about equating a development strategy with how much aid it receives.

This is the fundamental difference between the DFP and the DLP. The DFP believes that building a thriving economy depends on our own initiatives, using our creativity and natural and human resources. The DLP believes that mendicancy is the answer to unemployment and lack of income.

The DFP sees foreign aid as a cog on the rims of the wheel of the Dominican economy; the DLP sees aid as the whole wheel. The government’s efforts at economic development have been lopsided and minimal at best.

While the DLP is likening itself to the DFP when it was criticised as a government of infrastructure, what the DLP is forgetting is that the infrastructure built by the DFP created employment and income which was sustainable. We only have to look at the Dame Eugenia Charles Boulevard and the cruise ship berth to see what we mean!

EFFECTS OF THE CRISIS ON THE ECONOMY OF DOMINICA
In reporting on the effects of the global economic meltdown, the Prime Minister tells the nation that Dominica has been adversely affected by the global downturn. He cites Remittances as having declined sharply. Foreign Direct Investment has reduced by about 50 percent. Growth will continue to decline. Et cetera, et cetera.

Yet, the Prime Minister says in the same breath that the economy has fared, to use his own words, ‘‘more than satisfactorily.’’ Which is it Prime Minister—are we in the land of plenty, much better off than the British and the Americans or are we to face a bleak economic outlook as you stated at the meeting of the Monetary Council of the ECCB held here three weeks ago?

Most Dominicans know where we truly are. Some disturbing statistics: a steep decline in tourism receipts during the first four months of 2009. Tourism receipts are projected to decline by as much as 3.6 per cent of GDP.


GROWTH
The PM boasts of an economic growth rate of 3 per cent as an achievement of his government. I suppose that after the DLP Government allowed the economy to decline by an unprecedented 10 per cent in two years, a 3 per cent growth rate is indeed an achievement for them.

But let us compare the results of the Government’s economic management with the rest of the ECCU region. Economic growth is generally referred to as an increase in per capita income. In 2008, the ECCB reported that the per capita income of the ECCU as a whole was $20,590.

What was Dominica’s per capita income? $13,475, more than $7000 below the average of the ECCU. While the real growth rate of the ECCU averaged 3 per cent during the reign of the DLP (2000-2009), Dominica’s economy again lagged considerably at an average of less than one per cent.

A 3 per cent growth rate cannot provide jobs for the hundreds of persons who leave school every year and the hundreds who are forced to migrate because of a lack of employment opportunities.

A Dominica Freedom Party Government will double the growth rate by making strategic investments in export industries with high growth impact, increasing productivity through upgrading of production technologies and training and re-tooling of the labour force, and aggressively pursuing Foreign Direct Investment. This is no idle boast or mere politicking.

In the 1980s, following the worst hurricane that has ever hit Dominica and the gross mismanagement of the Labour Party, the Freedom Party Government grew the economy by 6 and 7 per cent in real terms per year, and the distributive impact of that growth was far more widely spread than what obtains today.

While the PM says that ‘there is no fiscal or economic crisis in our country...” (Page 52) “our people deserve to take some comfort in the fact that we are not among the countries most adversely affected by the global crisis…..”; adding (page 26) “…while the official figures are not yet available on the country’s poverty and unemployment situation, we are very confident on the basis of reasonableness and logic, that there would have been a significant downward movement in both poverty and unemployment.

This is clear from the continuing increase in economic activity and growth, despite the global crisis and in the number of projects being executed all over the island.” he notes (page 36) that “there is no disgrace in seeking access to this facility that has been established precisely for the countries like Dominica reeling under the effect of the global financial apocalypse.

The contradictions continue (page 28) when he identifies “our country’s binding constraint, all things considered, is the insufficiency of the direct investment, domestic and foreign, that is needed to be addressed in the creation of economic growth and job opportunities.” These statements are inconsistent and a deliberate attempt to cloud the economic difficulties/realities to the public.


I now wish to highlight some of the productive sectors referred to in the budget starting with

AGRICULTURE
Agriculture has always been a vital part of Dominica's economy. The DFP objectives in agriculture are to ensure food security, but also to move to higher levels of diversification, production and productivity and to enhance our competitive position in regional and international markets.

This has been lost over the past decade and has not been restored by the policies and practices of the present administration. Land use practices must reflect the suitability of land to particular crops while a delicate balance between agricultural and industrial development and protection of the terrestrial as well as the marine environment must be maintained.

While the Prime Minister concludes that “our efforts in agriculture have paid off”, that conclusion is not supported by the facts; we continue to see, declines in banana production and export output, capacity to reduce the food import bill, reduction of employment in the agriculture sector, the farm labour shortage issue and out migration of people from agriculture. Are these the signs of Agriculture having ‘paid off’?

TOURISM

The Budget identifies the 2010 Tourism Master Plan as ‘a template for developing a range of products and services to advancing the sector over the next 10 to 15 years”. While we acknowledge ongoing activities such as the Waitukubili National Trail Project, EU financial support for destination marketing and rural tourism, the 3 year Eco Tourism Development Programme, development of new accommodation facilities, re-branding of our tourism product “Defy the Everyday – the Nature Island –Dominica’, we cannot agree that “ The efforts by Government over these past five years have gone a long way to lay a solid foundation for building a more vibrant and sustainable tourism industry in Dominica”. Why?

1. More hotels have closed down over the last five years viz Continental Inn, Vena’s Guest House, Sisserou Hotel, Reigate Hotel, Wesleyan Apartel, Castaways Beach Hotel

2. Existing hotels/guest houses are operating with skeletal staff and occupancy on average is less than 60 per cent per annum.

3. Persons with the requisite skills for the hospitality industry continue to be in short supply.

4. While the increase in visitor arrivals may have risen from 380, 769 in 2005 to 460,475 in 2008 these numbers do not tell the true story. The true story is:
• Cruise visitors number approximately 380,000
• Same day visitors approx 800
• Stay over’s approximately 79,000.

It is obvious that the segment of the market that contributes most to growth in income and permanent employment has remained stagnant at just above 70,000 (stabilizing at 70,000 plus but less than 80,000).

5. The environment has been severely sabotaged through continuing unplanned use of land for tourism development and an unclear land use policy

Tourism development cannot be sustainable in the absence of what seems to be a lack of integrated planning. This would entail policies which provide for development of the human resource for tourism, an agricultural policy which complements tourism development, safe and secure air access, and innovative use of our existing sites and attractions to enhance our tourism product.

Environmental protection and the importance of the relevant EIAs cannot be overlooked. I would strongly advise that this be identified as a major component of the planned Roseau River Promenade Project so that any potential natural disaster is averted.

By its own admission and quite contrary to laying a solid foundation for building a more vibrant and sustainable tourism industry over the last five years, Government states (see page 34) that “it will be more proactive in stimulating the economy through direct financial support to existing and start-up business ventures.

For years, stakeholders in the industry have been asking for such assistance and while we note that the AIDB has been “facilitated… in accessing inexpensive financing to be on-lent at equally concessional rates …” we have not been told how concessionary these rates will be. Given the challenges faced by small business in the current global economic climate, we would expect that this will be a package of measures which will not only be relegated to low interest rates.

It is important that the government and banks understand that where the income flow has become decidedly lower as a result of the current economic downturn, it will be important for stakeholders to keep businesses open and persons employed. Concessions being considered will therefore have to include not only the reduction of the repayment cost but restructuring of loans so that it is not just only the interest rate effect that should give some relief but also the maturity structure which if lengthened will also ease up repayment. What cannot be implied is taking on of new debt as income levels not only for the hotel sector but for all business in general have declined substantially.

So while we welcome the promised funds for private sector development, we caution that these funds must be appropriately designed to positively and significantly impact the unemployment rate and national income. Important issues such as diseconomies of scale and institutional support for the formation of backward and forward linkages must be systematically addressed if these funds are to have the desirable macroeconomic impact.

In light of the challenges faced by hotels and guest houses, it is not clear why the Prime Minister’ has decided “…to contribute all of the US$5.1million ...received under the IMF’s Exogenous Shocks Facility towards investment in a hotel facility… While we do not doubt the need for more export ready rooms, we believe that such investment is better left to the private sector.

Government’s role is to facilitate such investment and not to get in bed with the private sector to build a hotel which it hopes “… will succeed in leveraging additional financing from the private sector for a Government/private sector joint venture in this vital sector of our economy”. Experience elsewhere has shown that few if any such investments where Government is directly involved have succeeded…. Just thinking of the political interference which will ensue is in itself a recipe for disaster.

It would therefore seem to us that in this context, that money should be put towards increasing output for exports and greater marketing promotion of the island as an ecotourism destination.

What is however more worrying is when the PM (on page 52) states that “we are receiving financial support for our efforts from the IMF, not through a stand-by arrangement or even a PRFG, but through its Exogenous Shocks Facility , a facility from which Dominicans have nothing to fear”. Is he telling Dominicans that this financial support is free? According to the IMF, the ESF is designed to provide a buffer to low-income countries like Dominica to face exogenous shocks through loans which are more concessionary that is loans which carry an annual interest rate of 0.5 per cent with repayments made semi-annually, beginning 5½ years and ending 10 years after the disbursement.

A key objective of this financial assistance is to provide a bridge until the country has adequate stability and administrative capacity to implement a comprehensive economic program supported by an IMF engagement. So there is no free lunch!

The Government has identified tourism as the sector to spur economic growth following the decline of the banana industry. Yet, successive budgets have not reflected a decisive shift in resource allocation in favour of the sector. In this fiscal year, for instance, the Government has allocated only 5 per cent of the capital budget to tourism-specific initiatives (and I refer here to marketing and promotion and the EU-funded SFA 2006 programme).

By comparison, individuals and organisations are allocated 20 per cent of the recurrent budget and 13 per cent of the total budget by way of transfers to fund their current expenditures as opposed to growth-inducing expenditures. The budget for marketing and promotion of the island is $3.5 million. There are smaller islands in Caribbean with larger tourism marketing budgets. So much for the Government’s boasts of having a growth agenda! That the Government has failed to rev the tourism growth engine is borne out by its own admission in the Budget Address of its failure to attract Foreign Direct Investment in the sector.

CRIME
The Budget makes no provision for addressing the increase in juvenile crime which is becoming a major problem in Dominica. The DFP would develop community parenting programs which would help parents and communities to develop conflict resolution and anger management skills at an early stage.

It is important that Dominica is not left with a criminal sub-culture that will engulf the children of law abiding citizens and at the same time make life in the island intolerable with all its consequences for migration and economic stagnation. Curbing violence, whether this is a result of drug use or other factors, has important implications for the security and safety of locals and visitors. Investors (both local and foreign) will not invest in an environment where they do not feel safe or are not sure they will survive to enjoy the fruits of their labour.

The DFP will ensure the maintenance of an effective law and order apparatus which accelerates law enforcement through a transformed criminal justice system. Trials must be swift and punishment certain but just. Prisoners should earn their keep as far as possible and the opportunity must not be missed to re-educate and train prisoners for gainful employment and to be socially functional when they leave jail while juvenile crime will need to be given special attention.

The DFP will mount a nation-wide programme to inform society, particularly our youth, about the risks posed by the drug economy, money laundering and white collar crime.

ENERGY

The relief received from the provision of fuel under the Petro Caribe agreement is less than a dollar per month for the average consumer. This is negligible.
The delay in formulating an effective Energy Policy, especially one which takes advantage of Dominica’s hydro, wind, solar and geothermal potential, has cost consumers dearly.

This 9 year delay in placing geothermal exploration at the helm of Dominica’s Energy program will not only delay the relief to consumers of electricity by another 6 to 12 years, it may delay, in the best case scenario, much needed investments of industries which consume high volumes of electricity to generate employment.

If the exploration agreement with government which has not been disclosed does not leverage the resources for the people of Dominica to make this country a low cost energy producer from geothermal, then in the worst case scenario, we will be no better off than we are today because transmission and distribution of electricity in Dominica due to our terrain is prohibitive compared to our sister islands.

Poor procurement practices in the selection of the Soufriere catchments area may also jeopardise any benefits that may be realized from exploiting geothermal energy to generate electricity.

PETRO CARIBE

The PM said in his Budget Address that the financing offered by Venezuela for the fuel under the Petro Caribe Agreement is not a debt, not even arrears. The Agreement definitely says that the 40 % of the fuel price is financing offered by Venezuela at an interest rate of 1 per cent to be repaid over a period of 23 years. That IS a debt obligation.

By referring to the debt as ''technical arrears'', (a term used by the IMF to describe arrears that are to be rescheduled in the future but terms and conditions of which are not yet formalized with a (new) contract), is the PM implying that we are not able or won't be able to repay Venezuela and so we need to reschedule the payments?

The PM's statement rather than clearing the air on the Petro Caribe debts, as he boasted in his Address, has made the situation surrounding the Petro Caribe arrangements more confusing for the public. The bottom line is we still do not know what the long term debt is to Petro Caribe.


HEALTH

We see no major initiative to improve the quality of care at the health facilities despite the increasing level of public complaints. Additionally no metric is provided to guide us in determining what if any improvements we have made in the delivery of healthcare. Even with the announcement that user fees will not be paid by persons in the 60 to 65 age range, we did not hear what the quality of care available to them is when they go to our hospital and how that has improved year to year.

Our once envied healthcare facilities are now woefully inadequate to the needs of the country and even with the promise of the PRC, MOU; we are yet to see any moves towards improving conditions at our only hospital. The DFP will develop a much more efficient Medical Health System which will retain our trained people and other technocrats to get the development job done.

SUPPLEMENTARY ESTIMATES
An unsettling feature of this Government’s approach to the management of the public finances is the frequency and growing size of supplementary estimates which threaten to undermine the integrity of the budget planning process.

Supplementary estimates are meant to cover unforeseen expenses such as rehabilitation following the passage of a storm. But even such expenses can, to some extent, be provided for by forward looking budgeting given the fact that we know we are susceptible to storms between June and November and we have relevant information from the meteorologists before the commencement of the hurricane season.

Recent Supplementary Estimates have been very large even when there are no hurricanes. The size of unbudgeted spending jumped from $28.6 million in FY 2005/2006 to $60.5 million in FY 2006/2007, and Hurricane Deane had not yet struck. Remember the hurricane was in August 2007 after the end of the 2006/2007 fiscal year.

For the Fiscal Year 2008/2009, the original capital expenditure estimate was $143.1 million. As a consequence of the Finance Minister’s supplementary budget, total capital spending reached $200.7 million. The supplementary estimates or what is more appropriate, additional spending was 40 per cent of the original capital budget and 13 % of the original total budget.

Supplementary estimates now include such items as road maintenance, payment of utilities, purchase of bins, retroactive payments and a host of other expenditures that can be properly forecast and hence included in the normal budgetary process.

Furthermore, the use of supplementary estimates has been abused by this government, especially the Prime Minister as he seeks to advance his politically partisan ends. These suggest a weakening of the budget planning process, which does not do well for proper and effective management of taxpayers’ monies despite the claims of efficiency by the Minister of Finance.

RECURRENT ESTIMATES
The Recurrent Revenue estimates for 2009/2010 is 10.5% above that for 2008/2009. One would have thought that with the rising cost of living and with reduction in overseas remittances, the Government would after three years of introducing VAT would now be in a position to EITHER reduce the rate of the VAT OR exempt a few more basic items from the tax.

The Government seems to forget that a number of tariff items were exempt from Consumption Tax before the introduction of VAT. These items which were exempt from Consumption Tax now attract VAT at 15% . Additionally, most services which now attract VAT were exempt from taxes before.

Imagine revenue from VAT has increased from $89.8 million in 2006/2007 to an estimated collection of $122.7 million in fiscal year 2009/2010, an increase of 32.9 million in just three (3) years! From VAT alone! If this is not taxation, then what is?

Dominicans must never forget that before VAT we paid consumption tax at 20% and sales tax at 7% and over 600 items were exempt from consumption tax. Today you pay VAT at 15% but every time the commodity value changes, at the end of the day, the consumer no longer pays 15% but over 45%.

While other countries have drastically reduced the VAT in face of the global crisis (,France has just reduced VAT from 19.6% to 5.5% to boost tourism) even if this is for a limited period, Dominicans continue to reel from this tax burden, yet the P M boasts of a tax free budget! Government’s claim of no increase tax budget is further illustrated when one looks at the tax to GDP ratio.

GDP stood at $1.02 billion EC Dollars in 2008/2009. While Government estimated it would collect $310.2 million in taxes in 2008/2009, it did collect $323.7 million in 2007/2008. Tax as a percentage of GDP is 30.96%.


FOREIGN POLICY
The PM (at page 52) notes that “our proactive foreign policy has served to elicit funding support for our programmes of economic growth, social protection and poverty reduction. This foreign policy has enabled us to borrow not only from financial institutions such as the IMF but from our long and trusted partners and friends”.

While we have not been told what our foreign policy strategy is I would assume that we subscribe to a non-aligned foreign policy which was more aptly described by the late Errol Barrow of Barbados as “friends of all satellites of none”. Our foreign policy should not make us more vulnerable and dependent on foreign aid. That policy should ensure respect for democracy and the rule of law.

It should also uphold our economic and political principles so that we establish the kind of society which recognizes the ability, integrity and merit of every Dominican, irrespective of party affiliation, religious belief or creed to benefit equitably from the economic system. While we are grateful for the financial support received our foreign policy must not undermine investor confidence neither must it have the negative impact which could lead to the loss of skills and capital flight.

If (page 27) Government’s development strategy is “continuing to pursue a foreign policy that is proactive and exploited efficiently and productively” it is even more imperative that in the face of an ongoing global economic crisis, our foreign policy like our development imperative must be balanced.

While we welcome the establishment of a Cabinet Sub-Committee on Infrastructure and Governance, we note the omission of “Good Governance” as a fundamental flaw in the establishment of such a Sub-Committee.

While Governance describes the process of decision-making and the process by which decisions are implemented – or not implemented, “Good governance” accomplishes the process of governance – that is the steering of the people – in a manner essentially free of abuse and corruption and with due regard for the rule of law. It is therefore disappointing that at the end of this budget address, the PM omitted such a critical facet for the ensuring of transparency, accountability and integrity in public office.

In their campaign for good governance and transparency; the World Bank and the IMF have identified corruption as the abuse of public office for private gain which negatively affects equitable development and sustainable growth. Corruption is also the major barrier to sustainable economic growth and development.

When government is not transparent and accountable to the people, it loses the moral authority to govern. Until there is full disclosure and accountability in respect of the recent scandals in public office involving the purchase of garbage bins and fertiliser (without tender and at exorbitant prices from the brother of a minister), the DBS Board Chairman fiasco, among others, the achievements referred to in the Budget will remain hollow.

A DFP Government will restore honesty, transparency, accountability and integrity to public office. This is why I have the pleasure to provide you with a copy of a DFP perspective on Good Governance. This will be augmented shortly by the launch of our 5 year EC 200 million dollar economic revitalization plan – mention of which was made at our last Press Conference.

A plan which puts people before power, a plan which will give hope and a future to our youth through a youth empowerment scheme (YES); a plan which will revitalize sports, agriculture, a plan which will combine education with job creation so that adults as well as young people can be guaranteed jobs in their country and secure a brighter future which will enable them to overcome any local challenges in the face of a wider global crisis. This economic revitalization plan will seek to empower all Dominicans as we strive to build a sustainable economy for all.


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Comments:
First off, I have to say that I LOVE cruise ships.
I spent over 12 years working on them as a Scuba Instructor,
Shore Excursion Manager and an IT Officer.

For 2 years I also worked shoreside in Miami as a database IT guy.

During my years on ships, I have to stay that many things happened
and that life is definately stranger than fiction on cruise ships.

Many people have asked me to share the stories I have collected over
the years, so I am complying with their request.

My site is: www.cruiseshipstories.com

If you had any stories of your own to add, please
send them to me and I will be happy to add them.

Sean B. Halliday
www.cruiseshipstories.com
 
"But what the budget has failed to address is how Dominicans can actually secure a future in Dominica in the face of little or no job opportunities, rising violence and crime particularly amongst the youth, drop in health services, falling standards in education"

To answer that question - it is my belief that the internet and the opportunities it provides through web 2.0, blogs and social network creation that those in Dominica with a computer can promote the work that they do so that people around the world can buy it from them.

Education in making that happen is the key. There are a large number of success stories - but we have to teach tithing and giving - not just earning an income and running after possessions.

Just my thoughts on it

Diane Corriette
http://www.sustainablecommunityblogs.org
 

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