Government of St.Christopher and Nevis Budget Address 2013

Mr. Speaker, I beg leave to move the second reading of the Bill shortly entitled the

Appropriation Act, 2013.

 

INTRODUCTION

 

Our journey as a Nation over the last five years has been punctuated with heightened

anxiety emanating firstly from the impact of the global economic recession and more recently

from the sluggish and fragile recovery of the global economy.    At home here in St. Kitts and

Nevis the resumption of growth in the real sector has moved to the top priority on the

development agenda of my Government.   Over the last two years, fiscal consolidation and

strengthening the financial sector has been at the cornerstone of our policy agenda.  The decision

to shift priorities was based on an examination of our macroeconomic indicators which suggest

that the economy remained flat in 2012, following contractions in a number of sectors.

Currently, the main drivers of growth are Tourism, Financial Services and Manufacturing.  The

preliminary results show an improvement in tourist stay over arrivals with prospects for the

sector to achieve positive growth.  Similarly, it is estimated that Manufacturing grew by 8% and

Financial Services grew by 3.14%.  The prospects for overall growth are promising and it is

anticipated that the Federation will return to positive growth levels in 2013.

Mr. Speaker, in line with the thoughts of Nicholas Murray Butler the world is divided

into several classes of people which include the few who make things happen and the many who

watch things happen. This Government has chosen to be among the few who make things happen

and we have sought to empower our people so that they not only know what is happening but

they are active participants in what is happening. Over the past several years, we like many

Governments around the world, have tried to manage a balance between fiscal consolidation and

the need to stimulate growth.  In this regard, we have taken steps to enhance the public financial

management system and to strengthen technological and human capacity to ensure efficiency in

 

the collection and distribution of Government resources.  All this has been pursued to facilitate

the provision of quality services to our citizens.

Mr. Speaker, we have performed credibly in terms of improvements to the legislative

framework especially in relation to the governance of public institutions.  We have revised

existing legislation and introduced new legislation such as the Public Service Act 2011 and the

Procurement and Contract Administration Act 2012 to provide the required legal support for

building transparency and good governance in public administration.  In 2012, steps were also

taken to enhance the services provided in the Social Sector.  At all times, we are ever cognizant

of the plight of the vulnerable in our society and we are intent on putting systems in place that

will not only provide relief to these persons but create a path for improved livelihoods.  We have

therefore prepared a National Social Protection Strategy (NSPS) that will facilitate better

coordination of all of the social safety net programmes and improve the services provided to the

most vulnerable citizens within our society.  In addition, given that education is key to our

success in life, a comprehensive National Technical and Vocational Education and Training

(TVET) Implementation Plan has been developed to ensure improvements in the delivery of

skills education and training in the Federation.

We are living in a challenging period when serious headwinds threaten at times to derail

decades of economic, social and political progress. We have been put to the test and I am proud

to say that as a Nation we are poised to stay the course, to remain steadfast on the journey

towards our destiny which beckons with a bright light of a new economy brimming with real

opportunities for our people.  There is no denying that like many countries around the world, we

have suffered some setbacks, but the reality is that St. Kitts and Nevis is now in a stronger

position to build a brighter future where all Kittitians and Nevisians can achieve a better standard

of living.

Mr. Speaker, building the new economy is only possible with thoughtful, proactive and

decisive leadership.   An important requirement, therefore, is strong, creative and courageous

leadership in the public sector and in the private sector.  It also requires cooperation,

coordination and above all the understanding and contribution of all citizens whatever their

 

in these challenging times there are real and exciting opportunities if we would only take into

account the best interest of our Nation.  Let us for a moment consider the point of view that

destiny is shaped in our moments of decision.  The bold and necessary decisions taken by my

Administration are now beginning to yield positive results.  The debt restructuring and fiscal

adjustment programme introduced by my Government has been proceeding quite smoothly and

to date have achieved all of the key fiscal and debt targets established by the Government at the

commencement of the programme.  Indeed, in December 2012 we received notice from that the

Executive Board of the International Monetary Fund (IMF) that it completed the fourth review of

our economic performance under the Stand-By Arrangement.   I am pleased to report that once

again our performance met their standards and approval.    Our success in implementing the

programme has also drawn commendations from the international community and has helped to

build renewed confidence by our international partners and investors.  Our outstanding

achievements have paved the way for accelerating growth in the economy.

During the 2013 fiscal year, my Government will explore all avenues and opportunities

for fostering the growth potential of our country.   Even with the challenges confronting us, this

Budget is designed to sustain Government’s role in stimulating and facilitating growth in

meaningful partnership with the private sector.  We will continue the work already started in

respect of fiscal and debt sustainability, improving education and skills training, and investing in

critical infrastructure.  We will also continue to support innovation and entrepreneurship,

enhance the regulatory and general business environment, strengthen tax administration and

public financial systems, and improve performance in the public sector.

Likewise, if our achievements are to continue to take root and bring benefits to our

people over the long-term, our accomplishments in fiscal adjustment and debt restructuring must

be accompanied and bolstered by appropriate levels of economic growth.  It has therefore

become necessary for us to focus on implementing a strategy that will maintain the core values

of fiscal consolidation and debt sustainability while accommodating more direct growth

enhancing policies, programmes and projects.  A major focus of this Budget is therefore

concentrated on stimulating growth with a view to creating more jobs for our people and opening

up new opportunities for entrepreneurship.  With this in mind, my Government in December

assist them in acquiring skills that would be in demand in the new economy. I will say a little

more about this initiative later.

In the context of the current global environment, stimulating growth at the national level

will require us to work smarter and more cooperatively with each other in order to achieve

success.  At this stage in our development and in the face of the global challenges, it is untenable

for the public sector alone to undertake the task of diversifying the economy.  In this regard,

greater public-private partnerships will be required to ensure the enhancement of our human

capital through continuous training initiatives, enable the efficient and cost effective delivery of

projects, ensure value for money through optimal risk transfer and management, and foster

innovation and diversity in the provision of public services thereby resulting in greater benefits

for all users of public services. This approach to development will require a new way of doing

business in both the public and private sectors in St. Kitts and Nevis.  It will require changes in

our attitudes and a fundamental shift in the way we do business. We would seek to promote

greater cooperation and direct investment in the expansion of emerging growth sectors such as

health and wellness, offshore education, and renewable energy in an effort to broaden the base of

the private sector beyond the traditional wholesale and retail ventures.

Mr. Speaker, it is important to place our current situation in context of the rest of the

world.  Therefore, I will now move to highlight some recent developments in the international

and regional economy.

 

THE EXTERNAL ENVIRONMENT

 

International Economic Developments

Mr. Speaker, five (5) years after the onset of the global recession, the recovery in the

global economy is tepid as downside risks continue to threaten the economic rebound.  The last

minute agreement on a US fiscal policy agenda has contributed to some improvement in the

overall outlook.  However, the continued weakening of the peripheral Euro zone economies is a

major cause for concern. The IMF in the latest edition of the World Economic Outlook (WEO)

reported that policies in the major advanced economies have not rebuilt confidence in the

medium-term forecasts, while tail risks, relating to the viability of the Euro area and the

implementation of the United States fiscal policy agenda, continue to preoccupy investors and

business leaders.

Against this background a major assumption about the global economic outlook relates to

the scope and pace of the policy reform process in the Euro zone countries. Specifically,

policymakers in the Euro area will need to take further steps to gradually ease financial

conditions in the periphery economies. These steps include the implementation of the European

Stability Mechanism, articulating a credible path to achieve a banking union and fiscal

integration and, at the country level, the reforms that are essential for growth, jobs and

competitiveness.  The prevailing anxiety surrounding the political gridlock in the Euro zone

economies continues to cause uncertainty in the financial markets and threatens consumer and

business confidence which remain vital in order to stimulate a sustained and robust economic

recovery.

The emerging economies have been primarily responsible for the growth recorded in the

global economy since the onset of the great recession.  Growth prospects in these economies are

expected to moderate in the wake of policy tightening and a reduction in demand for their

 

India, which have lost some momentum resulting in projected growth rates of 7.8% and 4.9% in

2012 compared to 9.2% and 6.8% in 2011 respectively.  Closer to home, the economy in Brazil

continued to slow with an estimated growth rate of 1.5% in 2012 compared to 2.7% in 2011.

Although the tight policies instituted are beginning to ease, it is anticipated that output from the

emerging economies as a group will be lower than they have been over the past decade when

economic activity was supported by financial deepening and rapid credit growth and relatively

strong demand from the advanced economies.  The reality is that the global economic recovery

remains weak and fraught with uncertainty.  Therefore, care and attention will be required in

identifying the right mix of policy responses within these markets which manifest differences in

cyclical positions.

The decisions taken in these regions will have a profound effect on the strength of future

global economic activity which is projected to expand by 3.6% in 2013. This represents a slight

improvement when compared to the outturn of 3.3% in 2012. In the advanced economies as a

group, output is expected to expand by 1.4% in 2013 after recording a growth rate of 1.3% in

2012, as economic output within the newly industrialized Asian economies which include Korea,

Taiwan, Hong Kong and Singapore, is expected to show signs of recovery expanding by 3.2%in

2013 after recording growth of 1.8% in 2012.   Demand from the major advanced economies is

also showing signs of improvement and the continued rebound in economic output in China

combine to improve economic prospects for that region.  In 2013, the Euro area is projected to

record a growth rate of -0.2% a slight improvement when compared to -0.4% in 2012. This

outturn is a revision downwards from the positive growth rate of 0.2% anticipated in the latter

months of 2012 as concerns remain regarding the momentum of the reform towards a full

banking union and greater fiscal integration.

15.      Although the housing market in the United States has begun to stabilize, the outstanding

challenges underpinned by the impasse at the legislative level, threaten to undermine the

recovery process.  Therefore, with businesses concerned about the pending tax increases and the

resultant impact on the end-market, investment and spending, which is vital to spur increased

economic activity and employment, has been postponed. It has been projected that the United

including high household debt, have constrained private consumption and the negative effects of

the difficulties in the Euro area, its largest trading partner, have impacted economic performance.

Notwithstanding the fragility in the economy the monetary and fiscal policies that are being

implemented show signs of yielding positive outcomes. As a result, it is projected that the

economy will expand by 1.0% in 2013, an improvement from the performance in 2012 which

recorded a contraction in economic output of 0.2%.

In St Kitts and Nevis, our small open economy is significantly affected by the lacklustre

performance of the global economy and of the economies of our major trading partners.  Hence,

in this budget and in all activities, plans and programmes that emanate from this budget.  We aim

to intensify our efforts with a view to confronting the global challenges charting a course of

social and economic progress that would take our people to the next level of development.

Hence, I turn to the Regional Economic Developments.

 

Regional Economic Developments

Mr. Speaker, the Small Island Developing States (SIDS) in the Caribbean region have

continued to take the necessary policy decisions to bolster their resilience during this protracted

period of uncertainty in the global economy.  Some analysts contend that the recent setbacks in

the recovery process were due in part to the hesitant approach to policy decision-making in the

advanced economies, continued high unemployment in the United States and the United

Kingdom and uncertainty regarding the future level of oil and food prices on the international

market as a result of political tensions in the Middle East and adverse weather in other parts of

the world. This complex mix of issues has raised new cause for concerns for the recovery and the

sustaining growth of our small open economies.   This is particularly true for the OECS group

which has achieved remarkable progress in creating a single economic space with opportunities

for expanding economies of scale to support growth in industry and commerce.  In this regard,

my Government will continue to support the regional integration movement while seeking out

emerging opportunities which have potential for advancing growth in the national economy. In

order to capitalize on the opportunities that may arise, it is imperative that we continue to

broaden our production base, enhance service delivery and improve and expand basic

infrastructure.  We must also undertake continuous training of our people to become engaged in

areas where the potential for growth exists locally, regionally and globally.

The economies within the ECCU region have shown evidence of some easing in their

economic situations with a lower contraction rate of 0.5% in 2011 when compared to the decline

of 2.6% in 2010. Albeit slow, this recovery can be attributed in part to improved performances in

the Tourism and Manufacturing Sectors.  The rate of decline in value added also slowed in

Construction, Wholesale and Retail and the Transport, Storage and Communications Sectors

which had been growth sectors in the years prior to the financial crisis. Preliminary data for 2012

indicates that economic output within the OECS region continues to improve, recording a decline

of 0.1% due to sluggish recovery in the Agriculture, Manufacturing, Education, Public

Administration, Real Estate, Transport, Storage and Communications, and Tourism Sectors.

During this period, St. Kitts and Nevis recorded a decline in real economic output of 0.9%.

Positive growth was recorded by the Manufacturing, Tourism and Financial Services Sectors

while the rate of decline slowed in the Construction and Wholesale and Retail Sectors.

Mr. Speaker, in 2011 the larger Caribbean Community continued to struggle to achieve

pre-crisis growth levels, showing some progress when compared to 2010. The rate of growth in

Barbados increased slightly by 0.8% when compared to the positive growth of 0.3% recorded in

2010. This positive trajectory can be attributed to expansions in Tourism, Construction and,

Transport and Communications Sectors. However, economic performance was impacted by a

lack of significant expansion in the International Business and Services Sector and exports, and

reduced investment in public sector projects as a result of the need for fiscal consolidation. The

Distribution Sectors.  However, preliminary data indicates a rebound by 1.5% due primarily to

improved output in the Distribution, Financial Services, Construction, Manufacturing and

Energy Sectors.   The economy in Jamaica recorded an increase in output of 1.5% after recording

three consecutive years of contraction. Mining and Quarrying, Tourism and, Agriculture,

Forestry and Fishing Sectors were the main drivers of growth in the Jamaican economy in 2012.

Although the recovery in the Caribbean is projected to continue on a positive trajectory into 2013

the growth rate will remain lower than the levels required to create full employment.

The continued development of the Caribbean, particularly the members of the Eastern

Caribbean Currency Union (ECCU), remains dependent on our ability to transform our

institutions and enhance our human capacity to capitalize on the opportunities that become

available in a global economy that is continually evolving.  Most critical in this process is the

modernization of both our national and regional institutions to ensure greater efficiency in the

execution of policies and the development of the private sector to expand its operations across

the ECCU ultimately transforming itself into a sector that can be competitive and be a major

foreign exchange earner. Our regional institutions remain a valuable asset in this transformation

process.  To this end, the OECS Secretariat has formulated the OECS Development Strategy

which aims to interface the regional strategy with those formulated at the national level.  The aim

of the strategy is to facilitate greater consensus in areas where there is potential for growth and

where greater benefits can be derived from collective action. It is in furtherance of a unified

approach to our development challenges that the OECS Assembly was convened on August 10,

2012. The inauguration of this important Organ of the OECS Economic Union will provide for a

platform for improved dialogue and transparency which will strengthen the decision-making

process to facilitate increased action to enable our continued development.

Mr. Speaker, I now turn to the Domestic Economy.

 

THE DOMESTIC ECONOMY

 

Output, Prices and Balance of Payments

Mr. Speaker, the continued volatility in the global economy had a profound impact on our

economic recovery during 2011 resulting in a contraction in real GDP of 1.9%.  This can be

attributed to a decline in output in the Construction and Manufacturing Sectors of 4.4% and

15.2% respectively, and the slowing of activity in the Tourism Sector resulting in a positive

growth rate of 0.3% when compared to 5.4% in 2010.  In January 2013, preliminary estimates

provided by the Eastern Caribbean Central Bank (ECCB) and the Department of Statistics

indicated that the economy contracted by 0.9% in 2012 and will return to positive growth in

2013 with output levels expanding by 1.9%.  This projected early return to growth is particularly

heartening in view of the ravages of the financial and economic crisis that still litter the global

economy and suppress growth in advanced economies as well as emerging markets.

On a period to period basis, the rate of inflation decreased from 7.1% to 1.4% when 2011

was compared to 2012.  This can be attributed to the stabilisation of prices following the

implementation of the Value Added Tax (VAT).  This was projected in 2011 in this Honourable

House when we sought to elicit a concerted effort by the business community to transfer the

savings of cheaper imports under the VAT regime to its customers.  I use this opportunity to

thank them for their partnership.  We will continue to be vigilant, as in the past months severe

weather conditions have destroyed crops in several regions of the world, including the United

States. This has resulted in low yield in crops such as corn which is an important dietary staple

and source of animal feed thereby increasing the probability of an escalation in food prices.  The

heavy rains in the latter part of 2012 and the drought now being experienced in our Federation

have also negatively impacted some of our farmers and as a result have limited the availability of

fresh local produce at the market place.

The External Account

 

Mr. Speaker, I will now summarize the Balance of Payments Account which records all

receipts and payments between the Federation and the rest of the world. In 2012, the Current

Account deficit declined by 24.2% to $180.6 million or 8.7% of GDP ($2,082.3 million) at

market prices. This improvement is mainly attributed to the decline in net import of goods and

services by 21.3% to $224.4 million or 10.8% of GDP. The downturn in net goods and services

can be attributed to a decline in outflows in respect of the importation of consumer and capital

goods, and the moderate increase in the exportation of electronic components.   The Services

Account increased marginally by 1.5% to $180.1 million or 8.7% of GDP as a result of a

contraction in net travel receipts. The Capital and Financial Account recorded a reduction of

67.1% in the surplus to $161.3 million or 7.8% of GDP.  Net Foreign Direct Investment

contracted by 8.3% to $271.4 million or by 13.0% of GDP when compared to 2011 due mainly

to the significant decline in equity investment. Notwithstanding the decline in investment, the

surplus on the Capital and Financial Account and Other Financing proved sufficient to offset the

deficit on the Current Account, resulting in an overall surplus of $66.5 million or 3.2% of GDP.

 

 

The Tourism Sector

Mr. Speaker, since the closure of the Sugar Industry in 2005, my Government has worked

diligently to ensure that the benefits of travel and tourism result in the improvement of the lives

of our people and sustained growth in the economy. While our overall Sustainable Tourism

Development Strategy remains intact, our recent focus has been to respond to the realities of the

uncertainties of the challenging global economic environment and resulting changes in consumer

behaviour in our main source markets. In a competitive global market where travellers have

numerous options, transportation costs, air accessibility and interline connectivity often define

 

of Trinidad and Tobago continued to contract, recording a real growth rate of -2.6% in

2011. This outturn was due to declines in the Energy, Construction, Manufacturing and

development in our island states.  However, we remain optimistic as the prospects for

deepening collaboration and cooperation within our region also hold potential for stimulating and

 

economy will expand by 2.0% in 2013 having recorded a growth rate of 2.3% in 2012.

The United Kingdom is now in a double-dip recession as the legacies of the pre-crisis era,

which is due, in no small measure, to the weakening of household income in the

advanced economies.   These signs are evident in the outturn of the economies of China and

launched a programme designed to target the unemployed youths of this country, and to

current status in society, whatever their enterprise, and whatever their political persuasion.  Even

 

our own competitiveness. Although we have little or no control over these factors, our decision

to shift our focus to the higher end of the market, to invest in the development of a world-class

airlift infrastructure and direct scheduled airlift arrangements, particularly from key cities in

North America and Europe, are now showing positive returns.

Our partnership with American Airlines has seen the addition of two non-stop flights

between the R. L. Bradshaw and Miami International Airports beginning November 16, 2012,

arriving from Miami on Friday and Sunday nights and returning the following mornings. These

two additional non-stop week-end flights are strategically timed to impact the peak winter travel

season and allow for more connections from North American and International feeder markets as

they provide options for later departures and earlier returns in and out of Miami, one of the

largest airline hubs in the world. The days of the week identified have been found to be most

ideal for our key niche markets, the destination weddings and honeymoon travellers as well as

meeting and incentive groups. In addition, the seasonal Air Canada service introduced in 2011

resumed non-stop flights to St. Kitts from Toronto as of December 21, 2012. This flight makes

the Federation a more viable winter destination choice for travellers from Canada while also

providing easier access for our nationals both at home and in the Diaspora in the Toronto

metropolitan region. Our twice weekly British Airways service from London continues to

significantly improve our international connections to and from the United Kingdom (UK) and

beyond.

Notwithstanding our budgetary constraints, I am pleased to report that our relatively low-

cost online and public relations driven marketing strategy continues to bring good results. Most

recently, our Federation was recognized by U.S.A. Today, the second largest newspaper in the

United States, which named our own Brimstone Hill Fortress National Park as one of the world’s

best kept secrets and one of the ten great places to explore.  In addition, U.S. News and World

has ranked us third amongst the best islands in the world. These are only two of the numerous

accolades that we have received from travellers and publications in recent months.

We are fortunate that notwithstanding the unfavourable global economic environment,

our tourism sector continues to attract significant investment in tourism related facilities and

 

expand our market share in attracting a more upscale clientele. In this regard we are now in the

process of facilitating plans for the modernization and expansion of two of our local hotels. The

construction of our world-class private jet terminal at the R. L. Bradshaw International Airport

which commenced in February 2012 is expected to be opened in June 2013. This unique facility

will include an arrivals and departure building which will accommodate customer service,

immigration and customs, as well as an administration building which will provide top quality

facilities for flight crew and staff. This private jet terminal will be the only one of its type in the

region and will facilitate the increasing numbers of high-end clients who will frequent

developments such as Christophe Harbour, Kittitian Hill, Park Hyatt and other similar

developments in our Federation.

Mr. Speaker, I am pleased to report that work has continued at the Kittitian Hill

Development with the construction of an eighty-five (85) room boutique cottage hotel and an 18-

hole golf course.  Currently, a number of one bedroom cottages and villas are in various stages of

completion as well as the Kittitian Hill’s Terrace Complex which includes a lobby, lounge, bar,

all day dining and fitness centre, and main swimming pool. Therefore, it is expected that Phase

One of the project, under the management of Sedona Resorts, will open for the 2013 – 2014

tourist season.  Similarly, the Christophe Harbour Development also continues to make progress

on the construction of the mega-yacht marina, the ‘Harbour Side’ homes and ‘Windswept’ villas.

To further diversify the type of accommodations provided within this Development, my

Government recently negotiated an agreement for the construction of a Park Hyatt branded Hotel

which will have 200 hotel rooms and 50 residential condominiums. Phase One of this hotel will

include the completion of 125 hotel rooms, 2 food and beverage outlets, a fitness center, a 12-

room treatment spa and more than 7,000 square feet of meeting and banquet space. The second

phase will include the completion of the 75 remaining guest rooms and a third food and beverage

outlet. This hotel is scheduled to be opened in the winter of 2014.  At the Silver Reef Resort

Development, Phases One and Two, which feature seventy-two (72) apartments, have been

completed and Phase Three commenced earlier this year.  In addition, the St. Christopher Club

Group of Companies will be investing almost US$40 million in three condominium and

commercial complex projects in Frigate Bay. The quality of these accommodations will not only

aid in attracting the more discerning traveller but provide additional employment opportunities

Meanwhile, the performance of the Cruise Sub-Sector has remained robust due to our

vigorous sales calls on cruise lines as a means of extending the traditional tourist season to year

round activity.  As a result, cruise passenger arrivals expanded by 17.2% in 2011 and remained

steady in 2012.   Currently, we are projecting to pass the 650,000 passenger arrivals mark for

2013/2014 season and then go beyond 700,000 passengers in 2014/2015.

Mr. Speaker, during the first quarter of 2013, we undertook a formal review of our

Tourism Strategy which has guided developments in the sector since 2006. Much has happened

in the world since 2006 – including dramatic technological changes which have ushered in the

rise of social media. The unprecedented global economic recession, that is only now showing a

sluggish recovery, has also forced the travel and tourism industry to wake up to the global

competitiveness of our industry and the need for added value to the customer. The recent

corporate consolidations and operational shifts in both the airlift and cruise industries have also

impacted potential consumers’ travel decisions since we conducted our last major strategic

planning in 2006.  Therefore, with such rapidly shifting market demands, it was a necessary and

timely decision for us to update our tourism strategy.

33.      An example of our own changing tourism landscape has been the rapid development of

Education tourism and the related influx of international students, faculty and family members

who now live, study, do business, and enjoy the leisure activities available in St. Kitts and Nevis,

thereby adding significantly to the economy of our Federation. The strategic evaluation will also

incorporate the most viable findings of the recently concluded Small Hotel Sector Assessment

undertaken with assistance provided by the European Union in order to formulate a holistic

approach to the development of the small hotel sector going forward.

Mr. Speaker, the centre of our new tourism strategy will continue to be the improvement

of the well-being of our people, and the sustainability of our natural and man-made assets for

future generations. To this end, you can be assured that my Government will continue to pursue

the development of a Tourism Industry that is of the highest quality, one that will bring sustained

growth and development to our Federation, and that will result in better living standards for all of

our citizens.

 

Construction

 

The Construction Sector has been a major growth area in the economy and the decline in

output over the past four (4) years continues to impact the economic and social development of

the Federation.  In this regard, my Government implemented the Building Materials Incentives

Programme in June 2011 which provided for a reduction in taxes applicable to building materials

for first time homeowners’ construction projects valued up to $400,000.  As of December 2012,

over 350 applications were approved and we anticipate that additional applications will be

submitted for approval before the end of the year.  Some of the benefits of this Programme can

be seen in the Eastern Caribbean Central Bank (ECCB) Commercial Banking Statistics Report

which indicates that as of December 2011 personal credit issued in St. Kitts and Nevis increased

by 3.6% to $915.5 million when compared to December 2010. Of this amount, over fifty percent

(50%), or roughly $499.3 million, was attributed to home construction and renovation, and house

and land purchases. As of December 2012, there were preliminary indications that credit issued

to the personal sector had expanded by 0.2% to $917.7 million when compared to December

2011.  Following the trend observed in 2011, over fifty percent (50%) roughly $492.0 million

was attributed to home construction and renovation, and house and land purchases.

Mr. Speaker, empowering our people through land and home ownership remains a

priority for my Government as it is considered a vehicle for upward mobility. Recognizing this

benefit and the need to further strengthen the recovery process, particularly in the Construction

Sector, my Government has provided the facilitating environment and negotiated with the Sugar

Industry Diversification Foundation (SIDF) to provide financing for two initiatives in partnership

with our own indigenous financial institutions; the Fund for the Realization of Economic

Empowerment through Subsidized Housing (FREESH) and the Equity Assistance Fund (EAF).

FREESH provides access to loan resources up to $500,000 at a fixed interest rate of 5% for

residential construction while the EAF provides access to resources to facilitate the removal of

barriers to obtaining a residential mortgage such as legal fees and the required down payment.  I

applaud the SIDF, the Development Bank of St. Kitts and Nevis and the St. Kitts and Nevis

 

recovery and I encourage our citizens to seize the opportunities that have been provided through

these Funds.

 

Agriculture

Mr. Speaker, food security and the nutritional intake of our people remain a priority as

we confront the threat of an escalation in global food prices and increases in chronic non-

communicable diseases such as diabetes and hypertension. Commercial farms have been

identified as critical to increasing food production and security in the Agriculture Sector.  In

support of these efforts, work intensified at the Capisterre Farm in 2012 in an attempt to increase

production of fresh vegetables.  The objective is to increase the supply of selective crops to a

point where consumers can benefit from reduced prices of vegetables on the local market.

Capisterre Farm is on the right path to achieving this objective as a number of milestones have

been achieved to date, including the establishment of an orchard and Shade House, the

cultivation of twenty-two (22) acres for both tree and vegetable crops and the sale of

approximately 7,000 kg of vegetables and root crops.

In addition to the obvious capacity to create employment, this farm has potential to

provide an avenue to improve our approach to training in agriculture science, farming techniques

and farm management.  It has already provided exposure to fourteen (14) former sugar workers

to the business of non-sugar agriculture and it is anticipated that more employment and training

opportunities will become available as output expands.    The technical staff at the Department of

Agriculture has been working with farmers to find solutions to protect certain crops from severe

weather and pests.  In this regard, funding through the Agriculture Resource Management

Project was used to procure seven (7) screen houses which provide environmental modification

and protection from severe weather and pests during the cultivation process. Once these methods

are successfully applied such action can help to increase crop production among our small

farmers, reduce losses and increase profit margins for farmers.  Individual farmers and farmer

groups in Mansion, Con Phipps and Tabernacle have benefited from this initiative.  We will

 

feasibility of introducing other methods that are suitable to our conditions and that can enhance

food security here in the Federation.

To further diversify the food products available to our people my Government has

facilitated the establishment of a new agro-processors group – the St. Kitts Agro Processor

Cooperative.  This Cooperative is expected to assist with the introduction of new products into

the market while at the same time secure new markets for existing products.  I am pleased to

report that, with the establishment of this group, we now have a total of ten (10) registered

farmer groups. Agro-processing remains a viable niche market which can assist in poverty

reduction through employment generation.  To further develop this promising industry the Agro

Processing Facility and the Demonstration Farm in Needsmust will be handed over to the

Ministry of Agriculture later this month. Entrepreneurs operating in this industry will therefore

be able to further capitalise on the resources provided via this facility.  In addition,  to further

enhance the marketability of the locally produced goods available to the public, the Basic Needs

Trust Fund (BNTF) has provided equipment which will allow processers to generate and affix

labels and barcodes to their products. The equipment is compatible with the systems used by

shops and supermarkets in the Federation and will improve the stock management process. It

will also allow agro-processers to meet the expectations of consumers in regard to packaging and

presentation of products. It is our hope that this will lead to a greater penetration of agro-

processed products in the local market and increase the potential for export to markets regionally

and internationally.

Mr. Speaker, in 2011 and 2012 we continued to enhance the development of the

Agriculture Sector in collaboration with various organizations. In partnership with the Food and

Agriculture Organization (FAO) we have improved gardens at six (6) primary schools around St.

Kitts.  The objective of this undertaking is to enhance the exposure of our young people to

agriculture and to enable them to develop the connection between the sector, food security and

nutrition. We have also commenced work on a four (4) year regional initiative in collaboration

with McGill University and the West Indies Crops Programme to promote sustainable

agricultural technologies to increase food availability and diversity in food choices. During 2012,

a number of crop related activities were undertaken including the establishment of a carrot

varietal trial at the La Guerite Station, procurement of three (3) pumpkin seed cultivators and the

continue to explore how best to expand the programme to other communities as well as the

Company Limited (FINCO) for their partnership during this period of economic

our people.

signing of a Memorandum of Understanding (MOU) between McGill University and farmers

located in Stapleton and Mansion. The MOU commits the University to providing technical

assistance to the farmers in order to improve the quality of produce which will be used to enrich

the school meals provided to our students. The project is now in its second year and I am pleased

to report that the partnership has proven successful with the School Meals Programme having

benefited from the output of the farmers.

In 2012 output from the Livestock Sub-Sector contracted by 26.0% as disease, poor

husbandry practices and the high cost of feed remained a challenge for livestock farmers.

Despite these difficulties, we have stayed committed to the expansion of output evidenced by the

use of genetic engineering as a means of reducing the mortality rate of animals, particularly

cattle which have been hard hit by the resurgence of the Tropical Bont Tick and the associated

Dermatophilosis disease.  To provide assistance to farmers in the control of Dermtophilosis,

Bayticol was made available to farmers at a subsidized price in 2012. Further, to facilitate the

artificial insemination programme, three (3) cattle chutes were installed on farms in Newton

Ground, Con Phipps and Lamberts.  To date, this procedure has been performed on a number of

animals and one (1) calf was born during 2012 as a result of this process. We will continue to

monitor the programme to ascertain its success as four (4) additional calves are expected in 2013.

Mr. Speaker, the Fishing Sub-Sector recorded a slight decline in performance during

2012.  Fish landings declined by 3% totalling 692,780 pounds when compared to 2011 with a

total value of $6.8 million.  We will continue to explore opportunities to expand the use of

Fishing Aggregate Devices (FADs) and to provide continuous training to our fishers in various

fishing techniques and use of equipment donated by the Japanese International Cooperation

Agency (JICA) and the French Research Institute for Exploration of the Sea (IFEMER).  As a

result of these efforts, new large pelagic species such as sword and bill fish, and blue marlin have

now been introduced into the market and the increase in landings has allowed the fishers to share

their success through donations to Government institutions such as the Joseph N. France General

Hospital. I would like to thank the fishers for their generosity to the community.

As a Small Island Developing State (SIDS), the effects of climate change can have a

 

concerned about potential changes in the distribution and structure of species, their habitats and

the impact of extreme weather associated with abnormally high sea surface temperatures which

can damage coastal ecosystems and related infrastructure.  In order to address this challenge it

has become necessary for us to explore adaptive measures that will build resilience within the

sub-sector, as well as protect the biodiversity of our marine species in our surrounding waters

from over-fishing. Therefore, through the Department of Marine Resources, we have taken steps

to explore the viability of  aquaculture on a wider scale as success has been shown through the

development of the St. Kitts and Nevis Aquaculture Pilot Project (SNAPPER).  Recognizing that

consistent long term development would be required, assistance was sought through the African,

Caribbean and Pacific (ACP) FISH II Project, financed by the European Union, to provide

technical assistance to conduct an inventory and analysis of the current strengths and weaknesses

that could facilitate or hinder the development of aquaculture and formulate an Aquaculture

Development Strategy.  I am pleased to report that the study has been completed and the Strategy

is being reviewed bringing us another step closer to achieving another milestone in the

development of the Fishing Sub-Sector.

My Government has acknowledged that the protection of our marine biodiversity requires

a holistic approach particularly as we consider the existing and emerging threats caused by

nature and by man.  In order to conserve, manage and facilitate the sustained development of our

marine life we signed a Memorandum of Understanding endorsing the partnership between the

Caribbean Regional Fisheries Mechanism (CRFM) and the Organization for Fisheries and

Aquaculture of the Central American Isthmus (OSPESCA). This collaboration will enhance our

access to additional information and expertise shared between both organizations from research

findings, resource management and policy coordination which will redound to improved

management of our marine resources. Equally important is the need to curtail Illegal Unreported

and Unregulated (IUU) Fishing which has become a major challenge for our Federation. In this

regard, my Government has sought assistance from the Commonwealth Secretariat to provide

legal and technical advice to enable us to commence negotiations with neighbouring islands to

establish an agreement on our maritime boundaries. Through the Department of Marine

Resources, in collaboration with other stakeholders, we expect to commence negotiations later

this year with our Dutch neighbours to delimit our marine boundaries.  This will provide the

activities such as drug trafficking. My Government remains committed to the utilization of all

means available to ensure the continued development of the Fishing Sub-Sector and to provide a

facilitating environment for the advancement of the work being undertaken in related sectors.

 

Manufacturing, Industrial and Enterprise Development

Mr. Speaker, the Manufacturing Sector continues to be impacted by the slow economic

recovery in its major trading markets but shows resilience in its Enclave Sector which involves

the assembly of electronic components. As a result, earnings from the export of electronic

components to the United States increased by 9.4% recording a total value of $91.7 million in

2011 when compared to 2010.  Further, two major manufacturers in this sector expanded their

operations thereby improving their capacity to meet the increasing demand. This was evidenced

by the increase in value of exports which was recorded at $108.2 million in 2012.

As a major employer in the Federation, the Manufacturing Sector continues to make

every effort to maintain its cadre of highly skilled employees and forego as much as possible the

reduction of the work force even as the global recession continues to impact its markets and

create some level of uncertainty.  A long standing strategy deployed within the sector is simply

to consistently produce high quality products, at reasonable prices, on time. This Administration

applauds these efforts and will continue to provide the support necessary to ensure that the sector

continues to be an important contributor to the health of the economy.

In order to ensure the continued expansion of the sector it is vital that we capitalize on the

opportunities that present themselves in other burgeoning economies, as well as to improve the

manner in which business is conducted on a daily basis.  In this regard, I am pleased to advise

that in May 2012, my Government successfully completed negotiations for the Federation to

accede to a Partial Scope Agreement (PSA) with Brazil.  Notwithstanding reports of a slowdown

in the economic growth rate in that economy, there remains potential for further expansion

thereby providing a viable market for consumption of our manufactured products.   Efforts to

bring this Agreement into fruition have continued and we expect that it will not be much longe

 

expected increase in exports as a result of this Agreement will translate into growth in

employment in the sector and industries that provide complementary services.

Mr. Speaker, we have also acknowledged that the cost of energy has a profound impact

on the capacity of our manufacturers to operate efficiently and expand their operations.  As a

result, my Government, through the Ministry of International Trade, Industry, Commerce and

Consumer Affairs and the St. Kitts Investment Promotion Agency (SKIPA), with the assistance

of the Caribbean Development Fund (CDF), has taken the initiative to conduct a comprehensive

energy audit of the sector under the Manufacturers Competitiveness for Energy Efficiency

(MACEE) Project. This exercise will aid in identifying areas where the sector can improve

energy efficiency through the reduction of leakages and wastage, and most importantly the

incorporation of conservation, and renewable and energy efficient technologies.

As the economy becomes increasingly service-based it is imperative that we explore

opportunities to ensure the viability of the Services Sector in a regional and international context.

It is therefore necessary for us to develop a structured approach to exploring market

opportunities and therefore my Government has secured technical assistance, through the

Commonwealth Secretariat, to develop a Services Sector Strategy.  The Strategy will identify

options for enhancing competitiveness within the area of professional services.  This undertaking

is critical in capitalizing on the opportunities that can be derived through the CARIFORUM-EU

EPA Agreement, the CSME and CARICOM-Canada Trade and Development Agreement when

brought into force as we venture to not only export goods to other markets but the skills and

knowledge of our people as well.

Mr. Speaker, I am pleased to report that in July 2012 my Government established the

Economic Partnership Agreement (EPA) Unit within the Ministry of International Trade,

Industry, Commerce and Consumer Affairs. The purpose of the Unit is to actualize the objectives

and provisions of the EPA through public sector coordination and private sector development

initiatives. The EPA Unit has already commenced a public awareness campaign and has accessed

technical assistance through the Centre for Development Enterprise (CDE) to assess the

challenges that may hinder the ability of manufacturers to benefit fully from the EPA and

 

During 2013, the Unit will formulate a number of projects to assist the private sector such as the

establishment of a microfinance facility for small businesses, and will seek technical assistance

to aid in the development of local agro-processing capabilities and trade missions.  The fostering

of greater collaboration between the public and private sector by the EPA Unit is expected to

redound to greater economic gains for the Manufacturing, Services and other key sectors of the

economy.

 

 

 

Information Technology and Telecommunications

 

Mr. Speaker, I am pleased to report that my Government, through the Department of

Information Technology, has successfully completed the One-2-One Laptop Project which

provided 7,000 students, and by extension their families, with the means to learn, communicate

and contribute utilizing virtual classrooms, literature and markets. This Project was developed as

a vehicle to aid the increased integration of our people in the global market through access to

additional academic and/or vocational certification programmes through accredited institutions.

The project is also intended to promote the export of knowledge-based services, the development

of innovative solutions, increased information literacy-awareness and the production of local

content for the benefit of the ever expanding Information Society. My Government is committed

to undertaking initiatives that will form synergies with this Project. These synergies will

facilitate the upgrade of information management and processing capabilities to enable improved

sharing and learning within the education system. In this regard, we have embarked on the

development of an Education Network (EduNET) with the assistance of the Eastern Caribbean

Telecommunications Authority (ECTEL). The system will enhance peer learning and

collaboration, master teacher tutoring and streamline communications among our schools at a

reduced cost. During 2012, the required equipment to effect the operationalization of the network

was installed in our eight (8) public high schools. Additional configurations will be undertaken

 

launch of the network by the National Telecommunications Regulatory Commission (NTRC)

later this year.

This Government has remained at the forefront in the utilization of information

technology as a means of achieving cost savings and greater efficacy in the delivery of public

services. In order to ensure good governance it is vital that there is a means of effective

communication between Government Ministries and Departments, and the citizenry that allows

for universal access.  With assistance from the International Telecommunications Union (ITU)

we have advanced our efforts to facilitate the establishment of the Government Wide Area

Network (GWAN) through the development of a business case which outlines the benefits and

rewards to be derived from the system.  With the GWAN providing the infrastructural

foundation for a converged communications platform, the type of information and

communications services deployed over this medium will determine the level of efficiency and

savings to be realized from implementing this initiative.

Mr. Speaker, the technological advances being pursued by this Government are in line

with the regional approach to improve governance, modernize the public sector and enhance

integration through the use of information technology to facilitate greater returns to stimulate

economic growth. To this end, we have deemed it beneficial to participate in two regional

initiatives namely the Enhancing Competitiveness in the Caribbean through the Harmonization

of ICT Policies, Legislation and Regulatory Procedures (HIPCAR) Project and the OECS E-

Government for Regional Integration Programme (EGRIP). The increased utilization of the

internet to enhance the competitiveness of and collaboration between the public and private

sectors nationally and regionally requires that government information and transactions be

facilitated electronically thus making it critical that our legislative frameworks be more robust to

address issues such as the legitimacy of electronic documents and signatures, and to provide

protection of electronic forms of payment.

In January 2012, we signed a Grant Agreement with the Caribbean Development Bank

(CDB) making it possible for St. Kitts and Nevis to benefit from valuable technical assistance

which facilitated the assessment of departmental activities and the development of a framework

 

gain access to an OECS E-procurement system for pharmaceuticals which will improve the

services provided by the OECS Pharmaceutical Procurement Service (PPS). My Government

will continue to provide the facilitating environment, while enhancing its own services, to ensure

that in this new technological environment business can be conducted within a safe virtual

environment.

 

 

Energy Sector

As we undertake efforts to return the economy to positive growth we recognize the

importance of an affordable, reliable energy supply.  The increasing cost of energy is a real

concern and has occupied the thoughts of many in our society.  High energy costs have

implications for the operation of both public and private ventures.  Equally important is the fact

that, as a Small Island Developing State (SIDS), which has no control over oil prices and has a

traditional reliance on imports of petroleum-based energy products, we are left vulnerable to the

effects of geopolitical forces and internal strife in the Middle-East.

The goal of our National Energy Policy therefore is to transform St. Kitts and Nevis into

a country where sustainable, clean, reliable and more affordable energy sources are developed

and used.  In an effort to advance this goal, we have continued to explore opportunities where

alternative energy and energy saving technologies can be integrated into the daily operations of

businesses, households and community life.  To further this transformation, my Government

instituted a waiver on import duties and customs service charges on a number of alternative

energy generating and efficiency equipment which include solar photovoltaic panels, hydrogen

fuel cells, wind turbines, energy-saving bulbs, solar water heaters, tanks and high efficiency air-

condition units.

Always one to lead by example, my Government, with the assistance of the Republic of

China (Taiwan), installed a grid-powered lighting system which utilizes Induction Lighting along

lighting solution has advantages over other energy-saving bulbs such as Light-emitting Diode

(LED) and Florescent lighting as it gives a brighter light output while using less energy,

particularly at a high wattage. The second phase of this initiative was successfully completed

with the installation of 120 solar-powered street lights along the main road starting in the

proximity of the Sir Gilles Agro-Tourism Demonstration Farm to St. Pauls.  These initiatives

will not only aid in the reduction of our carbon emissions but will help to provide a tangible

foundation for the integration of renewable energy as a viable option for reducing our

dependence on fossil fuels and the advancement of our development agenda.

Mr. Speaker, our development has brought with it an increase in the amount of solid

waste produced by households and commercial entities while there is limited scope for waste

disposal using traditional means. Therefore, I am pleased to inform you that my Government has

included Waste-to-Energy as a viable option to fossil fuel energy generation. We are currently

encouraged by the formation of a new joint venture initiative between Nanovo Energy

Incorporated and a local company, NICOL International Services. It is anticipated that the plant

will be built over a two (2) year period in the vicinity of the Conaree landfill and would utilize

180 tons of waste per day to generate up to 14 megawatts of power which will be sold to the St.

Kitts Electricity Company Limited (SKELEC) for distribution to consumers. We have also held

discussions with a potential investor to establish a factory that will produce solar panels right

here in our Federation. Both of these initiatives will provide employment options for our citizens

as the economy continues to expand and evolve.

I turn now to the Financial Sector.

 

 

The Financial Sector

 

Commercial Banks

 

Mr. Speaker, although the global financial markets remain uncertain, our commercial

banks remain well capitalized and poised to make a significant contribution to our future

development. As of December 2012, the assets held by the commercial banks totalled $5.5

billion, representing a 3.2% increase over the $5.3 billion recorded at the end of 2011. During the

year under review, deposits grew by 9.0% to $3.7 billion while loans and advances contracted by

1.6% to $2.5 billion. The approval of loans and advances remained subdued as a result of the

very cautious stance of banks and the slow rate of recovery in the Construction Sector during

2012.

Mr. Speaker, since the start of the fiscal adjustment programme, the IMF has consistently

reported that the domestic Banking Sector has remained healthy, adequately capitalized, resilient

to a range of shocks and capable of withstanding the impact of the public sector debt

restructuring.  Liquidity levels have been growing and coverage of total deposits remains well

above 40% and the regulatory requirement. This is partly explained by the slow pace of recovery

of private investment in particular and the reduction of credit to the public sector.  Indeed, one of

the important challenges of the economic programme in the coming months will be to facilitate

the movement of some of this excess liquidity into productive investment activity.   The level of

exposure to the public sector has been trending downward over the last year and is expected to

contract sharply with the completion of the debt-land swap.

 

Development Bank

 

Mr. Speaker, the Development Bank continues to partner with the Government of St.

Kitts and Nevis showing its commitment to advancing the development of this Federation

through the provision of financing for the benefit of our people.  In 2012, the Bank approved 952

 

 

the Kim Collins Highway and the Frigate Bay Road up to the Sugars business complex. This

an E-government desk. When the project concludes in June 2013, St. Kitts and Nevis will

to enhance the security and functionality of the system to facilitate the handover and official

provide guidance on utilizing the provisions of the Agreement to maximize their benefits.

local manufacturers will benefit from improved access to the Brazilian market. The

legal parameters not only for the management of marine resources but for law enforcement

devastating effect on the continued development of the Fishing Sub-Sector.  At this time, we are

. These infrastructure developments are a critical component in our efforts to

loans with a total value of $70.2 million. Of this amount, $13.6 million was allocated to higher

learning, $23.1 million to business lending and $3.3 million to mortgage financing.  This

institution continues to execute its mission to promote economic growth and development by

providing financial and advisory services to viable ventures and programmes.

In furtherance of this goal, the Development Bank deepened its partnerships with the St.

Kitts and Nevis Social Security Board (SSB) and the Sugar Industry Diversification Foundation

(SIDF) to provide support during this period of economic recovery.  The key areas targeted for

stimulating economic activity are Construction, Agriculture, Manufacturing, and the expansion

of private sector ventures.  As a result, collaboration with the SIDF has assisted in the delivery of

additional financing for mortgage, student, and business loans, while the partnership with the

Social Security Board has contributed to financing for business development and expansion. A

vital component in the delivery of the services of the Bank has been the provision of training to

micro and small business operators, particularly in the Tourism and Agriculture Sectors.  In this

regard, a number of workshops were undertaken in 2012 to address issues such as E-business

integration and sound financial management targeting taxi and tour operators, farmers and

fishers. With the assistance of the Centre for the Development of Enterprise (CDE), the

Development Bank reached an important milestone through the delivery of technical support

valued in the region of $100,000 to assist four (4) persons to develop viable business plans and

marketing strategies for their respective investment ideas.  I use this opportunity to thank the

Development Bank for its continued efforts to support the people of St. Kitts and Nevis.

 

Developments in ECCU Money and Capital Markets

 

Mr. Speaker, during the period January to December 2012, there was a further decline in

the region’s debt and equities markets as the recovery from the global crisis remained weak and

continued to impact investor confidence.  At the end of 2012, a total of eighty-five (85) securities

were listed on the Eastern Caribbean Securities Exchange (ECSE) which comprised of fourteen

 

currently thirteen (13) listed companies on the Exchange, of which eleven (11) are domestic to

the ECCU and five (5) reside in our Federation.  Domestic equity market capitalization was

valued at EC$11.8 billion for the year 2012, a slight increase from the EC$10.9 billion which

was recorded one year earlier.  The ECSE Share Index which stood at 139.16 in December 2011

stood at 156.07 at December 2012 reflecting an increase in return for investors.  The importance

of the equity market should not be underestimated as it provides our citizens, both in the

Federation and across the globe, with the opportunity to own a fraction of domestic companies

thereby encouraging participation in the investments and expansion of those institutions in which

they hold shares.  In addition, the market has and continues to provide an avenue for companies

to raise capital for further expansion, which would translate into employment for our people,

either directly or indirectly, thus stimulating further economic growth and development.

 

St Kitts Investment Promotion Agency (SKIPA)

 

Mr. Speaker, notwithstanding the challenges within the global economy, the St. Kitts

Investment Promotion Agency (SKIPA) recorded increased interest from both foreign and local

investors in undertaking business ventures in St. Kitts. It is expected that this interest will remain

strong into 2013 as a number of very large investment projects are being negotiated or have

received approval which will redound to improved growth prospects over the short to medium

term. During 2012, SKIPA facilitated the approval for the construction of a $25 million

condominium hotel and a $300 million luxury resort and residence project, which will both be

located in the Frigate Bay area. Local investors have also capitalized on the opportunity to

establish businesses that will meet the needs of our people and visitors while also diversifying

the services and products provided by our private sector.  This is evidenced by the approval of

our first Bowling Alley and Adventure Park in St. Kitts. These two developments will not only

provide entertainment value to the Federation as a tourism destination but another opportunity

for direct employment and increased earnings to those who will provide support services.

In line with our agenda to make St. Kitts and Nevis the smallest and greenest country in

renewable energy and energy efficient technologies which has resulted in an upsurge in

proposals for the establishment of related businesses. In this regard, the Agency has and will

continue to work closely with the Energy Unit, the St. Kitts Electricity Company (SKELEC) and

other stakeholders in the public and private sectors to review and facilitate the approval of

renewable energy solutions that best meet our requirements in the Federation. In order to

maintain the level of interest that has been received from foreign and local investors my

Government, through SKIPA, is refining a draft Investment Code that will clearly articulate the

privileges and benefits to investors and the parameters that guide foreign investment in restricted

areas, that is areas reserved for domestic investors, such as within the Tourism Sector,

Agriculture and Fisheries, and Industry.  During 2013, we will endeavour to lay this important

piece of legislation before this Honourable House to strengthen how we do business here in the

Federation.

I turn now to the Cross-cutting issues.

 

Cross-cutting Issues

Social Development

Mr. Speaker, although my Government has had to contend with fiscal constraints, we

have remained committed to our mandate to ensure the delivery and improvement of our social

safety net programmes, particularly during this period of economic downturn. In pursuit of our

efforts to achieve further poverty reduction and sustained human development in St. Kitts and

Nevis, my Government, through the Ministry of Social and Community Development, Culture

and Gender Affairs, in partnership with the United Nations Children’s Fund (UNICEF) and the

United Nations Development Fund for Women (UNIFEM), undertook and completed the

development of the National Social Protection Strategy and Action Plan 2012-2017. This

Strategy is vital to ensuring the efficacy of the system as there are several programmes that

extend across various Ministries and Departments. As a result, it was determined that there is

need for streamlining of these initiatives to reduce duplication of effort by both Government

personnel and clients seeking assistance thereby reducing wastage in the system. This document

establishes the main priorities for social protection reform and the creation of a sustained,

comprehensive and integrated social protection system. I am proud to report that this document

is the first of its kind in the English speaking Caribbean and St. Kitts and Nevis is being

considered a model from which others can take pattern.

The first phase of implementation will focus on the costing of the Plan of Action,

consolidation of existing programmes, the development of an effective proxy means test and, the

development of a Management Information System (MIS).  It will also include capacity building

in the areas of monitoring and evaluation in order to maximize improvements in the living

standards of clients in an efficient and sustainable manner.  It is our vision that these newly

established mechanisms will contribute extensively towards improving the social and economic

mobility of the most vulnerable in our communities and serve as a best practice model. I

therefore take this opportunity to express thanks to the Ministry of Social and Community

Development, Culture and Gender Affairs and other stakeholders in Government, civil society,

the private sector and the international community for their invaluable contribution thus far and

solicit their continued partnership as we move now to make the necessary changes.

Mr. Speaker, critical to the success of our social protection reform is the integration  of

co-responsibility mechanisms within the social safety net programmes to engender the need for

personal responsibility in the achievement of sustained human development.  It is within this

context that my Government has developed our own national tailored initiative; the Mould,

Empower, Nurture and Direct Families (MEND) Programme utilizing the best practice model,

the Chile Puente Programme.  This strategic intervention will be targeted at vulnerable families

to provide support that will systematically address the complex issues that are attributed to

generational poverty.

My Government considers the protection of our children to be paramount in order to

ensure that we have future generations of well adjusted productive citizens. In this regard, we

have continued to improve our strategy in addressing the issue of child abuse and neglect which

is increasingly being brought to the forefront in our society.  As the basis for establishing a more

coordinated approach towards addressing the challenges regarding prevention, reporting and

investigation of these matters, the Ministry of Social and Community Development, Culture and

Gender Affairs completed the formulation of the National Child Protocol and Action Plan during

2012.  This document is intended to provide assistance to a network of child protection service

providers in identifying child abuse, acknowledging their responsibilities and ensuring children

are protected and supported in order to safeguard their wellbeing.   Cognizant of the need to have

a mechanism in place that will monitor and evaluate services provided by Government agencies,

residential institutions and other entities that serve children and help in their development, my

Government supported the re-establishment of the Probation and Child Welfare Board in March

of this year.  This Board has drawn its membership from among educators, social workers, early

childhood specialists, medical professionals, the security forces, the legal fraternity and the

clergy. I would like to thank our generous and dedicated citizens for sharing their skills with the

community and assisting to advance our objective of ensuring the rights and welfare of our

young people are safeguarded.

 

Mr. Speaker, we are aware that our efforts towards achieving sustainable human

development would be in vain without attention being given to our young people who are at risk.

Therefore, my Government has overseen the construction of the New Horizons Rehabilitation

Centre which was completed in September 2012 as part of a comprehensive exercise to provide

rehabilitative care to youths who have committed offences.  The Centre which was officially

opened last month will provide quality treatment and child development services to male and

female residents.  These services include counselling, legal services, academic, technical and

vocational training and career development.  Training courses in anger management and

decision-making will also become vital components of the programmes offered to aid residents

in developing good social skills and becoming productive citizens.  The strength and influence of

the family remains critical in ensuring lifestyle changes. Therefore, provisions are made for

outreach to family members and other persons in the community who exercise influence in the

lives of these young people. Family counselling will also be provided to enhance parenting and

communication skills.  As the young residents at this facility find their way and chart new paths

for themselves, they will need the love, care and support of the extended family, their

communities and their country.  Let us commit today to be more caring, more understanding,

more loving and more supportive to all the young people of our beloved country, St. Kitts and

Nevis.

Although the Government plays a vital role in ensuring that our young people who are at

risk and marginalized are provided with opportunities to reduce the probability of them being

found on the wrong side of the law through engagement in productive activities, we cannot

undertake this huge task alone and welcome partnership from community organizations.  The

Skills Training and Entrepreneurial Programme (STEP) is one such partnership which was

designed to deliver agriculture and entrepreneurial skills to our young people who feel as though

they have been overlooked by society. This Programme is jointly coordinated by the Ministry of

Social and Community Development, the Ministry of Education and Information, and the STEP

Foundation which is comprised of a number of leaders in the public and private sectors. Through

this initiative, approximately thirty-six (36) young men have benefitted from training in

hydroponic agriculture and have shown great skill in the use of this technology.  As a result of

this initiative, the McKnight Community Farms have been able to supply produce such as

 

restaurants such as Carambola, Marshalls and Excelsior. This cultivation technique helps

residents living in high density areas to become actively involved in the expansion of the

Agriculture Sector and provides a means of employment for themselves.  I would like to thank

the STEP Foundation and the public sector entities for their involvement in this programme.  I

am also compelled to recognise the young persons who have taken an interest in and capitalized

on this programme to chart a new course for their lives.   I congratulate them on their

accomplishments to date.  I encourage them to remain positive and to seize the opportunities that

are being created through this and other initiatives.

 

 

Law and Order

Mr. Speaker, my Government is fully committed to and takes the responsibility for

maintaining law and order very seriously. Our goal is to ensure that our Federation is a safe place

where there is confidence in the security forces and residents can live with a sense of security.  I

again emphasize that security is an essential element of promoting an environment where

development activity can flourish.  The results of the past twelve (12) months have been

encouraging as our security agencies have worked assiduously to implement a myriad of

programmes as part of our crime fighting plan. These programmes have positively impacted our

efforts to maintain investor confidence and improve the quality of life for our people.  The High

Command of the Royal St. Christopher and Nevis Police Force has reported a 60% reduction in

crime during 2012 as the Police Force and the St. Kitts and Nevis Defence Force have jointly

undertaken more strategic operations in response to the crime situation.  I use this opportunity to

extend to the rank and file of these two organizations the gratitude of our people for their

diligence in the execution of their duties.  With their commitment and coordinated action we will

continue to make bold projections for safety and security as we are convinced that our vision for

socio-economic growth must not be darkened by the anti-social behaviour of a minority.  My

Government will continue to pursue every avenue for crime reduction in support of our law

enforcement agencies, and to ensure that the necessary resources are provided for the effective

We are mindful that threats to our security exist on several fronts and require deeper

collaborative efforts with our national, regional and international partners in order to boost our

capabilities and resources. In this regard, we continue to work with the Coalition of Support for

St. Kitts and Nevis Security Initiatives (CSSKNSI) and other key partners such as the TDC

Group of Companies Limited which provided essential equipment such as vehicles and bullet

proof vests, as well as additions to our K-9 Unit to enhance the capabilities of our officers.  The

reduction in reported criminal activity is a positive outcome of this deeper partnership between

the security forces, corporate citizens and the wider community.  Therefore, I extend the

appreciation of my Government and the people of the Federation to the Coalition, TDC, Ross

University and our other private sector partners as this exemplifies what can be accomplished

when we consolidate resources, both human and financial.

Mr. Speaker, it would be remiss of me not to highlight the strong support that has been

received from our international partners. The United States (U.S.) Government has allocated

over US$200 million under the Caribbean Basin Security Initiative (CBSI) with the goal of

substantially reducing the illicit trafficking of drugs, guns and people, and to enhance public

safety and promote social justice for all. The security forces of the north and south corridors in

the Western Hemisphere have been actively undertaking joint operations to reduce the illicit

trade in drugs and firearms.  An area of focus is the strengthening of the capabilities of our Coast

Guard to effectively deter illegal activities in our waters.  The United States Government has

provided two (2) interceptor vessels which have been named the ‘Hermitage Bay’ and the

‘Oualie Bay’. This security cooperation initiative with the United States goes beyond security

and law enforcement by embracing a proactive approach to crime, strengthening and reforming

institutions of the judiciary, prosecution and prisons, as well as addressing the social factors

associated with the root causes of crime.  With the assistance of the European Union (EU), we

continue to implement activities under the Safety and Security Improvement Programme (SSIP).

During 2012, this initiative facilitated the training of two (2) staff members from the Ministry of

Justice and Legal Affairs to undertake training in legislative drafting which is a highly coveted

skill among persons within the legal profession.  It also facilitates the participation of a public

officer at the Second Annual Conference of the Cooperation Programme on Drug Policies

between the European Union and Latin America and the hosting of the Third Meeting of the

Caribbean Basin Security Initiative (CBSI) Commission in October of last year.

Mr. Speaker, during 2013 my Government will buttress our crime reduction plan with

several new initiatives including the creation of an Anti-Robbery Team with officers from the

Police Force, Defence Force, and the Customs and Excise Department.   Other initiatives will

include a Firearms Tracking Investigations Unit, the first of its kind in the Eastern Caribbean,

which will work with the United States Bureau of Alcohol, Tobacco and Firearms (ATF), and an

Arson Investigation Unit which will be comprised of officers from the Police Force and Fire

Services Department.  The Arson Investigation Unit will also receive assistance from the ATF to

enhance capacity in this specialised area to investigate fire offences and deter crimes which

target our expanding residential, public and business infrastructure.

78.      My Government will continue to shape legislation to effectively respond to the changing

nature of criminal activity and to support the judiciary in the execution of its duties. During

2012, this Honourable House passed the Jury Act to modernize and enhance the performance of

the jury system, the Bail Act to govern the granting and restriction of bail and the Justice

Protection Act which made provision for the protection of witnesses and judges when it is

determined that their safety is threatened. We have also passed amendments to several pieces of

legislation including the Proceeds of Crime Act (2000) to improve our ability to work with other

governments in the investigation of money laundering, the Anti-Terrorism Act (2002) to increase

the penalties for acts of terrorism, the Immigration Act (2002) to address the illegal smuggling of

persons across the borders of our Federation and the Offences Against the Person Act (1873) to

ensure that all categories of indecent assault against the person perpetuated within our

jurisdiction are addressed in a comprehensive manner.

79.      Mr. Speaker, this Government will continue to invest in the enhancement of skills,

equipment and infrastructure to improve the output of the security forces and utilize new

approaches and legislation in order to ensure a holistic approach in maintaining law and order.  I

encourage our citizens to continue to support our men and women in uniform and in the halls of

justice as they endeavour to maintain a society buttressed by laws.

Mr. Speaker, I turn now to Public Finance.

 

PUBLIC FINANCE

 

Fiscal Review

 

Mr. Speaker, the world has been battling an economic crisis for the past five years – five

long years – and to this day in many aspects the global outlook is still bleak.  Recognizing the

prolonged effects of the crisis, the level of uncertainty that it was creating and our vulnerability

during recessionary times, we took the bold step in 2010 to devise our own home-grown

economic recovery programme in order to stem the effects of the global economic crisis on our

economy.  The programme entailed measures such as the introduction of the Value-Added Tax,

the restructuring of the Housing and Social Development Levy, the elimination of exemptions

from Customs Service Charge and the adjustment of the electricity tariff.  On the expenditure

side, we introduced a wage and hiring freeze, corporatized the Electricity Department, executed a

comprehensive debt restructuring programme and prioritized capital expenditure to focus on

those projects that would stimulate growth in the economy.

Together, these measures had a positive impact on our 2011 fiscal position as we realized

a Recurrent Account Surplus of $46.6 million as well as Overall and Primary Surpluses of $70.6

million and $171.7 million respectively.  Mr. Speaker, we do indeed expect this trend to continue

and are in fact expecting to confirm a Recurrent Account Surplus in the region of $100.2 million

at the end of December 2012 as well as an Overall Surplus of $102.7 million and a Primary

Surplus of $199.1 million.  The 2011 and 2012 results are a significant improvement over the

outturn for 2010 when deficits were recorded for the Recurrent Account, the Overall Balance and

the Primary Balance.  The attainment of surpluses in all categories of our fiscal accounts in 2011

and 2012 is a most noteworthy achievement that I expect will draw commendation from all

members of this Honourable House, since the issue of fiscal deficits has occupied much of the

attention of Honourable Members of this House in previous debates.  Indeed, it symbolizes the

tremendous resolve and sacrifice of our people as we strive to break free from the limitations of

fiscal imbalances and debt accumulation.

The improvement in the Government’s finances in 2011 was seen in Recurrent Revenue

which amounted to $530.5 million, 26.4% over what was collected in 2010 and 22.5% in excess

of the 2011 budget.  This outturn was mainly due to the strong performance of Non-Tax Revenue

which surpassed the amount collected in 2010 by 48.0%.  VAT yielded $115.0 million during its

first full year of implementation representing an increase of approximately 58% over the various

taxes that it replaced.  The success of the VAT contributed to an expansion of 95.5% in Taxes on

Domestic Goods and Consumption and a 4.0% increase in Taxes on International Trade and

Transactions over the previous year.  Taxes on Income, however, declined by 9.5% when

compared to the amount collected in 2010.  In this category, the gains realized from an

improvement in Withholding Tax and the restructuring of the Housing and Social Development

Levy were insufficient to cover the continued decline in Corporate Income Tax.

In addition to the positive impact of the implementation of the various measures, the

fiscal position for 2011 was also aided by the receipt of budgetary grants totalling $61.3 million

primarily from the European Union (EU) and the Sugar Industry Diversification Foundation

(SIDF).  I take this opportunity to sincerely thank all of our donor institutions for the generous

support that they have given us during these turbulent economic times.  I am quite aware that

there are many other governments and organizations that compete for the same resources yet we

have been successful in securing the financial support of our donors over the years and for that

we are very appreciative.

Mr. Speaker, our focus during 2011 was not only on improving our revenue collection,

but also on containing expenditure.  To this end, we were able to curtail Recurrent Expenditure

to $483.9 million, 4.6% below what was incurred in 2010.  In addition to being attentive to the

use of our scarce resources, the reduction in Recurrent Expenditure was also associated with the

removal of the cost of running the Electricity Department from Government’s books.  You may

recall, Mr. Speaker, that the Electricity Department was corporatized in August 2011.  This

materialized a few months after we had envisioned and for that reason Recurrent Expenditure for

2011 exceeded the budget by 20.6%.

Mr. Speaker, funds expended for Capital Expenditure amounted to $45.9 million or 2.3%

which accounted for 43.4% of public investment and General Administration which represented

37.8% of the capital projects.  The Social Services Sector consumed 15.6% of Capital

Expenditure while 3.2% of the capital resources was spent on Economic Services.  Some of the

major undertakings in 2011 for Economic Infrastructure related to the West Basseterre By-Pass

Road and the Hurricane Lenny Rehabilitation Project.  The latter entailed the construction of a

rock armoured sea defence wall at Half Way Tree and Bourkes in Sandy Point, a guard rail at

Half Way Tree as well as other works to address the issue of soil slippage.

87.      Significant projects that were executed under the General Administration Sector were the

Information and Communication Technology for Improving Education, Diversification and

Competitiveness (ICT4EDC) Project, the E-Passport Project and the Border Management

System.  The ICT4EDC is a project that seeks to enhance the ICT Sector; a sector that is critical

to the modernization of our business practices.  The successful conclusion of this project along

with the E-Passport and Border Management System projects will strengthen our investment

infrastructure and provide further opportunities that would spur economic activity in the

Federation.

88.      The capital projects that were executed in 2011 were primarily financed from revenue

and, to a lesser extent loans and development aid.  For the most part, loan disbursements for

capital projects did not involve the contraction of new loans but rather were previously arranged

for projects that were already in the pipeline.   We were aware of our level of indebtedness and

the difficulties that it was posing especially at a time when fiscal space was needed for us to be

able to better respond at a national level to the economic crisis.  We realized that we needed to

have a sound fiscal base and a manageable debt level which would then create avenues for

sustainable growth.

89.      A comprehensive debt restructuring exercise was therefore undertaken with the

invaluable assistance of a dedicated team of international debt and legal advisors.  The debt

restructuring was quite successful and I would wish at this point to publicly thank our debt

advisors, our legal advisors and the staff of the Ministry of Finance, for their commitment and

hard work during the entire process.  I must also express our gratitude to the Caribbean

 

Development Bank which aided the process by providing a partial guarantee of the new discount

bond.

Mr. Speaker, allow me to summarize the outcome of the debt restructuring exercise to

date.  The debt exchange offer was launched on 27 February 2012 and provided two options.

The first option was Discount Bonds with a 50% discount on the face value of original claims,

20-year maturity with monthly mortgage-style repayments and no grace period, step-down

coupon rate of 6% for the first four years and 3% thereafter and a partial guarantee of up to

US$12 million from the CDB.  The second option was Par Bonds with a 45-year maturity, a 15-

year grace period on principal payments and a fixed coupon rate of 1.5%.  Unsecured bonds and

syndicated loans amounting to US$137 million (EC$370 million) were Eligible Claims.  Tenders

were received from 97% of the holders of Eligible Claims with two-thirds of the tenders electing

for the discount option.  The activation of Collective Action Clauses increased the percentage of

Eligible Claims to be restructured to 100.  The exchange offer was closed on 18 April 2012 and

the new bond instruments were issued on that date.  A month later we began servicing the new

instruments and expressed our appreciation to our creditors for their support by way of a

goodwill payment.

Also on 18 April 2012, we signed a Shareholders’ Agreement with our domestic creditors

that allow our domestic creditors to monetize encumbered lands through participation in a

Special Purpose Vehicle (SPV).  The SPV will be professionally managed and will be the

appointed agent for land sales.  Proceeds from the land sales will be channelled by the SPV to

creditors in the form of dividends.  Land sale proceeds in excess of the face value of the debt will

be passed on to the Government.  Under this arrangement, the interest rate will be reduced from

an average of 8.6% per annum to 3.5% per annum.  Mr. Speaker, it is very important that I

reiterate that Government will remain instrumental in determining our policy in respect of the

SPV.  Priority will be given to nationals before one square foot of land is offered to any

foreigner.  Our national enterprises and individual citizens will be given the opportunity to

purchase any of the designated lands they choose.

As it relates to our debt to Paris Club creditor countries, we met with the Paris Club on 24

May 2012 and were able to come to an agreement where the debt to these creditors would be

rescheduled over 20 years with a 7-year grace period.  This essentially reduced our debt service

due to our Paris Club creditors by 90% during the current IMF Stand-By Arrangement (SBA).

Since that meeting, the UK Department for International Development (DFID), one of our Paris

Club creditors, advised us that it had cancelled our debt in full.  At the time of the cancellation,

the debt outstanding was approximately EC$9.7 million.

Mr. Speaker, when we approached our creditors at the beginning of June 2011 and asked

for their support in the restructuring of our debt stock, the Total Public Sector Debt was $2.8

billion or 140.8% of the rebased GDP.  At the end of December 2011 the stock increased

marginally by 0.4% to stand at $2.9 billion (141.4% of GDP).  The growth in the debt stock was

mainly on account of a loan disbursement from the IMF Stand-By Arrangement.  Primarily as a

result of the debt restructuring exercise, the Total Public Sector Debt has been reduced from $2.9

billion at the end of 2011 to $2.7 billion (129.3% of GDP) at the end of December 2012.

The debt of the Central Government at the end of December 2012 stood at $1.8 billion

(87.2% of GDP).  This represented a contraction of $122.9 million (6.3%) when compared to the

stock at the end of 2011. Our ability to move the debt of the Central Government down to 87.2%

of GDP in such a short time is nothing short of miraculous.  We have successfully removed a

huge burden from the shoulders of our young people and of the future generation.  We have

positioned the economy to grasp the opportunity for enhanced growth and economic

development.  This outstanding achievement has impressed the international community and is

worth celebrating throughout the length and breadth of this country.   Mr. Speaker, the debt

restructuring programme is a comprehensive exercise and is not only for the benefit of the

Central Government but also for the Nevis Island Administration (NIA) and the Public

Corporations in the Federation.  Consequently, the NIA’s debt at the end of 2012 declined by

$22.4 million (6.0%) in comparison to its position at the end of 2011 while the debt of the Public

Corporations decreased by $31.4 million (5.7%).  The total public sector debt will decline even

further when the debt-for-land swap is completed later this year.

In terms of the way forward with respect to the debt, we have developed a Medium-Term

Debt Management Strategy that will be used as a guide in the management of the debt stock.

minimize cost and risks as well as ensure that public borrowing is within the parameters of our

debt servicing capacity.  The strategy is an integral part of the budget process and has been laid

before this Honourable House along with the 2013 Estimates.

 

 

Fiscal Prospects

Mr. Speaker, from all indications we will continue to see the positive impact of our

consolidation programme and debt restructuring exercise in both our revenue and expenditure.

Consequently, we expect that there will be an ease in the pressure on the fiscal account from

2013 onwards.  However, this is not a signal for us to go on a spending spree.  Conversely, this

positive development is being approached with due care and diligence to ensure that we make

the best choices and obtain the best value for public funds.  As a consequence, there are no major

increases in Recurrent Expenditure but there is a moderate increase in Capital Expenditure over

the 2012 level.  We have ensured that the Recurrent Expenditure provisions to support critical

services such as Education, Healthcare, Safety and Security and Social Assistance have been

adequately resourced so that the quality and scope of these services could be maintained. The

moderate expansion in Capital Expenditure is in line with our strategy to use the Public Sector

Investment Programme to make a direct contribution towards stimulating the economy.  The

Government’s 2013 Capital Programme will twin with projects planned by other public entities

and private sector investments to boost growth in the National economy. As the fiscal situation

improves, we will dedicate more and more resources to the Capital programme which will target

the development of critical infrastructure.

Mr. Speaker, our ability to execute our plans as envisioned is of course constrained by

our revenue collections.  Therefore, before I outline our proposed expenditure allocations for

2013, I will highlight our revenue expectations for the upcoming fiscal year.  Recurrent Revenue

for 2013 has been projected at $464,370,444 which is $63,057,778 or 15.7% above the 2012

Estimates.  The increase is attributed to projected increases in the Housing and Social

Development Levy, Income Tax, Value Added Tax (VAT) and proceeds from the Citizenship by

Investment Programme.  Revenue from taxes is expected to account for 73% of Recurrent

Revenue, almost half of which will be derived from Taxes on International Trade and

Transactions.  Non-Tax Revenue, on the other hand, will contribute 27% to Recurrent Revenue

with the major contributor being fees from the Citizenship by Investment Programme.

Within this context, Recurrent Expenditure for 2013 (excluding loan principal

repayments) has been estimated at $409,283,516 representing an increase of $8,363,207 or 2.1%

when compared to the 2012 Estimates.   The Recurrent Account surplus for 2013 has therefore

been estimated at $55,086,928.

Mr. Speaker, details of the programmes and activities of all Ministries are outlined in the

Draft Estimates for 2013.  Therefore, allow me now the opportunity to highlight only the major

initiatives that will be undertaken during 2013.

100.     The Ministry of Justice and Legal Affairs has been allocated $6,316,336 for its Recurrent

Expenditure for 2013. This represents an increase of $1,022,362 or 19.3% over the 2012

Estimate.

101.     Mr. Speaker, the rule of law is fundamental to the economic and social development of

our Federation.  During 2013, this Ministry will therefore continue to steadfastly build on its

achievements in upholding the rule of law in our beloved Federation. Work will continue on the

Law Revision Project resulting in the publication in 2013 of the revised laws from 2003 to 2009

along with the revised ordinances for Nevis from independence up to the present. Following this,

the Ministry of Justice and Legal Affairs will be in a position to update the laws on an annual

basis.  This will be facilitated by the establishment of a Law Revision Commission in 2013.  The

Commission will be responsible for law reform and ongoing law revision.

102.     The Ministry will also continue its efforts to reform the Criminal Justice System with the

formulation of a comprehensive Penal Code.  This will enable crime and violence to be

addressed more effectively and decisively.  Further, the recent appointment of an Assistant

Registrar based in Nevis will go a long way in ensuring that court matters on Nevis are handled

expeditiously.

103.     The Office of the Prime Minister has been allocated $51,989,115 for 2013 Recurrent

Expenditure. This amount represents an increase of $10,626,398 or 25.7% over the 2012

allocation.  Mr. Speaker, Public Service Reform remains a top priority as my Government

continues its drive to modernize the public service and make it more responsive, efficient and

accountable.  In this regard, the Human Resource Management Department of this Ministry will

continue to spearhead the Public Sector Reform Program of the Government, building on its

achievements in fiscal year 2012.  The new Public Service Act 2011 has already been passed

before this Honourable House and the accompanying regulations are in the process of being

finalized.  In this fiscal year the Human Resource Management Department will complete the

Government Auxiliary Employees (GAE) plan, and circulate and  implement the following

Public Services Regulations: (a) Codes of Discipline; (b) Codes of Conduct and Ethics; (c)

Recruitment and Employment Codes and (d) the Public Service Standing Orders.  The

Department will also continue to provide assistance to public service employees on health,

financial and work performance matters and, of course, continue the delivery of a comprehensive

training programme.

Mr. Speaker, our Citizenship by Investment Programme continues to perform beyond

expectations and has now gained international recognition as one of the best Citizenship by

Investment Programmes in the world. This Programme has already attracted over US$100

million to the economy for the 2012 fiscal year and continues to play a vital role in bolstering our

economy especially during this period of global economic slowdown.  In going forward, the

thrust of the programme will be on attracting the type of investors who could invest in businesses

that support our development pillars and will advance our objectives in respect of alternative

energy and job creation.  The resources of the Citizenship by Investment Unit have therefore

been increased to allow it to discharge its expanding role. This includes resources for due

diligence investigations which must be conducted on every applicant to the program.

The St. Kitts Investment Promotion Agency (SKIPA) will continue to discharge its role

as a one stop window for investors by streamlining the investment process.  During 2013, SKIPA

will finalize a National Investment Code and Charter and establish an export development

programme.  SKIPA will also develop a Business Linkages Programme with a view of matching

domestic companies with foreign investors. In addition, the Agency will continue building its

capacity in investment promotion, facilitation and aftercare in order to increase domestic

investment and job creation.

Mr. Speaker, in fiscal year 2013, the Anti-Crime Unit, which falls under the Office of the

Prime Minister, will continue to build on its achievements during 2012 which have resulted in

the containment in the escalation of crime.  It will continue to pursue the core components of its

strategic plan namely:

 Maintaining stability to facilitate economic, social and political development

 Containing the escalation of crime

  Cooperation with international and regional entities

 Capacity building through training and technological advancement

 

The Anti-Crime Unit will focus on the implementation of this strategy to address

incidents of crime perpetrated in selected communities paying particular attention to recovering

firearms from our streets.  The visibility of the Security Forces will be stepped up by the

employment of additional manpower and by augmenting the fleet of vehicles to assist them in

discharging their duties. Other initiatives to be carried out include:

 Increased surveillance at Ports of entry and joint operations by the K-9 units of

the Police and Defence Forces, Customs and Port Security which have already

proven to be beneficial.

 Increased consultation between the Security Forces and the Private Sector as well

as Civil Society on areas of collaboration on crime prevention.

 Town hall meetings to sensitize the public on the function of law enforcement

agencies and to build partnerships with communities in addressing issues of

crime.

 Restructuring the Intelligence Unit and establishing a repository for information

and intelligence.  This Unit will be renamed the “Strategic Intelligence Unit” and

will be responsible for providing intelligence to support crime fighting operations

such as the Delta Unit, Special Branch Division and the INTERPOL Bureau.

108.     Mr. Speaker, 2013 will also see the implementation of a number of initiatives aimed at

upgrading the security infrastructure in order to keep pace with community expansion and the

decentralization of commercial activities away from the urban areas.  The National Indicative

Programme under the 10th European Development Fund (EDF) has identified safety and security

as the focal sector for action in St. Kitts and Nevis.  The Safety and Security Improvement

Programme will involve three main outputs:

 The enhancement of institutional capacity to prevent, detect and solve crimes,

 The enhancement of effectiveness of the operations with modern

infrastructure and equipment, and

 The development of the National Security as the driving force for safety and

security collaboration.

In the past, substantial resources have been invested in the human resource development

of our security agencies.  Fiscal year 2013 will be no different.  Training and capacity building

will be increased during this year so as to improve the productivity, efficiency and effectiveness

of our security agencies.

Mr. Speaker, the Ministry of Homeland Security and Labour has been allocated

$11,097,220 to carry out its recurrent programmes and activities for fiscal year 2013. This

Ministry will continue its role in improving homeland security and transforming labour relations

in the context of a diversified economy.  During 2013 the Ministry will seek to achieve greater

efficiency in its Departments by instituting a number of reforms including reorganizing the

Labour Department and improving border security. The Ministry will continue to advance the

plans to erect a new prison facility in the near future.  This facility will have the capacity to

house 400 inmates and will go a long way to ease the present overcrowding situation at the main

prison.

The Ministry of International Trade, Industry, Commerce and Consumer Affairs has been

allocated $2,776,518 for 2013 representing a 6.7% decrease below the 2012 allocation as a result

of the closure of the Supply Office. This Ministry will continue to play a critical role in the

implementation of bilateral and multilateral trade agreements including the CSME, the OECS

Economic Union, the CARIFORUM-EU Economic Partnership Agreement (EPA) and the

Brazil/Guyana Partial Scope Agreement.

112.     The Ministry will also continue to play an ever increasing role in supporting Small and

Medium-size Enterprises (SMEs) by improving the technical capacity of the National

Entrepreneurship Development Division (NEDD). During this year, NEDD will provide SMEs

with an increased level of technical assistance and training in business management and skills

development.

The Department of Consumer Affairs will continue to play an active role in protecting

consumers through the monitoring of prices of essential products in the basket of goods sold to

the public.  In 2013 this Department will be provided with additional staff to increase its capacity

to discharge its monitoring functions with island wide coverage.

Mr. Speaker, the Ministry of Finance’s allocation for 2013 is $161,538,531 for Recurrent

Expenditure, a decrease of $3,279,592 or 2% when compared to the estimate for 2012. This

notable decrease is due primarily to lower debt servicing costs which is the direct result of my

Government’s success in restructuring our public debt, one of the benchmarks in our home

grown Economic Recovery Programme which is being supported by the IMF.

Going forward, the Ministry of Finance will continue to implement pro-growth policies

and policies that promote fiscal and debt sustainability through strong fiscal discipline, more

efficient tax administration and prudent management of scarce financial resources.

During 2013, the Ministry will also undertake a number of initiatives to achieve the

following:

 Implementation of new Finance Administration Regulations;

 Completion of a draft new Corporate Income Tax Act;

 Implementation of the Medium Term Debt Management Strategy;

 Strengthening of Government Public Financial Management Procedures;

 Increased on site support to Line Ministries and Departments;

 Preparation for the migration to the ASYCUDA World System; and

 Improvement in procurement management systems and operations within the

framework of the recently passed legislation.

 

I am pleased to report that the Inland Revenue Department is already in the process of

upgrading its IT infrastructure to allow businesses to file their VAT Returns online.  This service

was launched in December 2012 with a small segment of taxpayers and plans are progressing for

the service to be extended to all relevant businesses.

118.     Mr. Speaker, the Ministry of Social and Community Development, Culture and Gender

Affairs has been allocated $7,463,096 for Recurrent Expenditure and $3,906,325 for Capital

Expenditure for 2013. This Ministry continues to play a critical role in protecting the most

vulnerable persons in our community.   During 2013 the Ministry will further advance the

implementation of the National Social Protection Strategy.  The objective will be to better target

social safety net services to the most vulnerable groups. This will include the piloting of the

MEND programme. Initiatives will be implemented to facilitate greater community participation

by groups such as the elderly and persons living with disabilities and strengthen the capacity of

Community Based Organizations (CBOs) and Non-Governmental Organizations (NGO’s).  Later

this year, we will also see the adoption of the National Aging Policy and the Development of a

National Parents’ Training program.

Major capital projects that will be undertaken by the Ministry in 2013 include:

 The renovation of the Charles E. Mills Secondary High School

 The replacement of the roof at Cayon Primary School

 The renovation of the Basseterre High School Biology Lab and restroom facilities

 The construction of  road in Parson’s Village

 The construction of a health centre in Tabernacle Village.

 

Mr. Speaker, the Ministry of Agriculture, Marine Resources, and Cooperatives has been

provided with $6,531,415 for Recurrent Expenditure for 2013. This represents an increase of

$1,379,437 over its allocation for 2012. This Ministry has an important role to play in

implementing initiatives that increase food, livestock, and fish production as well as the creation

of stronger linkages between the Agricultural and Tourism Sectors.  In 2013, special focus will

be given to water harvesting, protected agriculture, establishing a storage and packing house

facility, addressing the lethal Yellowing and Bud Rot diseases in coconut trees and palms and the

marketing of agricultural products. Work will also continue to control the Dermatophilosis

disease in the livestock population, improve the services delivered by the abattoir and animal

healthcare delivery.

The Ministry of Tourism and International Transport has been allocated $17,764,969 to

carry out its programs and activities for fiscal year 2013.  Tourism continues to be the dominant

sector of the economy of St. Kitts and Nevis even though this sector has been experiencing some

challenges on account of the global economic downturn.  During this fiscal year, this Ministry

will continue its drive to grow visitor arrivals and expenditure, to actively promote St. Kitts and

Nevis in international markets and facilitate new capital investment initiatives from local and

foreign investors.

Mr. Speaker, I now turn to the Ministry of Housing, Public Works, Energy and Public

Utilities. This Ministry’s recurrent allocation for 2013 is $15,087,437 which represents a

decrease of $10,865,399.  The reduction was due to the transfer of resources that were previously

allocated to this Ministry for the payment of Government’s electricity bills to the Accountant

General’s Department.

In 2013 the Ministry will undertake a major project to resurface the Southeast Peninsula

Road. The resurfacing of this road will facilitate the further development of the Southeast

Peninsula which is the gateway to tourism related developments.  The Ministry will also

continue its thrust to diversify the Energy Sector and will continue its home ownership

programmes executed by the National Housing Corporation.

Mr. Speaker, the Ministry of Education and Information has been allocated $56,662,112

for Recurrent Expenditure for 2013. This represents an increase of $2,334,773 or 4.3% over the

2012 allocation.  This increase is notable in these challenging economic times and demonstrates

my Government’s commitment to the education of our citizens at every level.

 

 

During 2013 the Ministry of Education will continue with the implementation of its

White Paper on Education Development and Policy 2009-2019.   In particular, at the secondary

level, the Ministry will continue to ensure the  achievements of  the White Paper’s vision that

85% or higher of every cohort of students will have the opportunity to write CXC/CSEC

examinations while maintaining a pass rate of at least 80% in each subject area.  The teaching of

Reading will be given special attention both at the primary and secondary levels.  To facilitate

this, secondary teachers will be given special training to assist students who are struggling with

reading.

The Ministry will carry out a number of research projects to further evaluate the impact

of the single sex classroom initiative and subject groups for instruction at grade 3 and beyond.

Surveys will also be carried out on school climate, students’ risk behaviour assessments and

school needs assessments to guide in the development of programmes to promote peace in

schools.

The Ministry will also continue to focus on early childhood education to ensure that the

maximum number of children benefit from such education. Initiatives will be undertaken to

upgrade and expand early childhood facilities, recruit workers for the new facilities, train new

workers, and upgrade some categories of early childhood workers.

Increased focus will continue to be placed on technical and vocational education. A Road

Map for Technical Vocational Education and Training (TVET) with targets and performance

indicators has already been developed and is now ready for implementation. The following

activities will be undertaken to facilitate the implementation of the TVET Road Map which

includes the delivery of the Caribbean Vocational Education (CVQ) in secondary schools and

AVEC:

 The upgrading of facilities;

 The training of more assessors, and internal and external verifiers;

 The strengthening of links with industry; and

 The provision of improved physical facilities for the National Skills Training

Programme.

 

During 2013, the Ministry of Education will enhance the school maintenance program

with increased emphasis on preventative maintenance and will undertake work to upgrade a

number of school facilities across the island.  In this regard, additional resources in the amount of

$500,000 have been provided in the 2013 Capital Budget exclusively for the upgrading of school

facilities.  These resources are supplementary to the funds already committed for school

maintenance on an ongoing basis under the Ministry’s recurrent budget.

130.     A new administrative structure has been established for the Clarence Fitzroy Bryant

College.   The Board of Governors for the College has already been appointed and functioning in

accordance with the mandate of the institution.  The Ministry of Education will continue to work

with the Board to transition the CFBC into an autonomous institution. Meanwhile, a number of

activities are being undertaken to improve the quality of instruction and to upgrade infrastructure

and equipment to position the CFBC to deliver relevant, high quality programmes.

During 2013, efforts to modernize the Government Information System will continue by

the acquisition of additional equipment and software required to deliver more efficient and high

quality services.  This will be complemented by the training of staff for increased productivity

and effectiveness.

Efforts will also continue with regard to the upgrade and modernization of the

Government Printery.  These will include improving its digital archiving capacity for long-term

storage, retrieval and management of documents.

Mr. Speaker, I now turn to the Ministry of Health. This Ministry has been provided with

$34,680,562 for Recurrent Expenditure for 2013, a small increase over the allocation for 2012.

My Government has ensured that all of the programmes and activities of this Ministry have been

allocated the necessary resources to ensure that health services remain accessible, affordable and

of high quality.  My Government believes that access to healthcare services is a sacred right of

every citizen.  We also believe that access to good healthcare should not be dependent on the

socioeconomic status of an individual.  Therefore this Ministry’s actions will continue to be

geared towards enhancing family centred care, equity, effectiveness, efficiency, timeliness as

well as the well being, safety and security of healthcare recipients and healthcare providers.

Further, several pieces of legislation will be enacted to strengthen the legal framework.  These

 

will include a new Public Health Bill which will take into consideration national and

international health regulations that address health risks such as tobacco and obesity caused by

the consumption of unhealthy foods and provisions to strengthen public health reporting.  A new

Pharmacy Bill and a new Medical Bill will also be tabled.

In 2013, the Ministry of Health will aggressively pursue plans for the introduction of

Universal Health Coverage as it seeks to protect our people from the devastating and

impoverishing effects of catastrophic medical bills and to put the provisions of healthcare

services on a more sustainable path.  To this end, resources have been allocated in the Ministry

of Health’s budget for capitalisation of the Universal Health Insurance Scheme.  “Health for All”

will continue to be the focus of this Ministry.

135.     During this year, the Ministry intends to continue investing in the physical plant of the

main JNF General Hospital to ensure patient safety and to improve satisfaction with the services

provided.  The Ministry also intends to repair and upgrade the kitchen facilities at the JNF

General Hospital.

Mr. Speaker, the Ministry of Youth Empowerment, Sports, Information Technology,

Telecommunications and Posts has been provided with $8,049,532 for Recurrent Expenditure

and $3,220,105 for Capital Expenditure.  Youth empowerment remains at the centre of the work

of this Ministry.  Therefore, in 2013 it will continue to pursue policies and programmes to

develop our young people to become productive citizens who can provide for themselves and

their families as well as contribute positively to the economic and social development of our

beloved Federation. In 2013, this Ministry will establish a Youth Business Trust in order to

develop entrepreneurship among our youth. The Ministry will also collaborate with local,

regional and international agencies to deliver character and peace building and conflict resolution

workshops in various communities to address issues related to youth on youth violence.

137.     With regard to Sports, a National Sports Development Policy focusing on governance,

sport development, facility management amongst other things, will be ratified and implemented.

A number of sporting facilities and playfields will also be upgraded, namely, Trinity/Boyds

Playfield, St. Pauls Sporting Complex, the grounds at Half Way Tree, Silver Jubilee Athletic

Track and lighting of the Warner Park Cricket Stadium.

In this fiscal year, the Information Technology arm of this Ministry will implement a

number of initiatives to transform the operation of the Public Sector by the application of ICT –

enhanced, cost optimizing processes for the provision of customer focused information services

and products.  This will be facilitated by the installation and commissioning of a Government

Wide Area Network (GWAN) which will provide integrated and interactive e-government

services.  When the GWAN is completely installed the Government will be in a better position to

provide services that are not only more efficient but also more accessible by all stakeholders.

With regard to Posts, the Dieppe Bay Post Office will be constructed and postal services

upgraded to provide cost efficient, high quality physical and electronic postal and related

services. These services will be administered by an integrated, interactive business information

system.

The Ministry of Sustainable Development has been provided with $4,660,785 for

Recurrent Expenditure and $9,316,715 for Capital Expenditure to carry out its programmes and

activities for 2013. The Ministry will continue to focus on economic growth and development

initiatives with a view to achieving the objectives outlined in the National Adaptation Strategy

and the National Poverty Reduction Strategy.  The Ministry will also continue its efforts to build

capacity in the area of Monitoring and Evaluation which is critical to the assessment of the

effectiveness of public sector programmes and projects.

The 2013 allocation for the Ministry of Foreign Affairs is $14,347,255 for Recurrent

Expenditure. These resources will enable the Ministry to continue to pursue a wide range of

objectives including the formulation and promotion of foreign policy, safeguard the welfare of

our citizens abroad, negotiation of cooperation agreements, participation in multilateral fora,

facilitation of visits and meetings and collaboration with the Diaspora in attracting investments

to the Federation.  Greater effort will also be exercised through our membership in international

institutions to leverage benefits for the Federation.

 

Fiscal and Other Strategic Measures

Mr. Speaker, I am pleased to indicate that in 2012 my Government was successful in

several areas of our multipronged reform agenda.   As I mentioned earlier, we have exerted

considerable effort over the last several months to tackle the National debt head on.  We are now

at a stage where we have reduced the burden of our debt overhang and in so doing have

effectively relieved the Government from much of the inherent fiscal vulnerabilities associated

with unsustainably high debt.  As announced in my last Budget Address to this Honourable

House, effective January 2012 we allowed Sol to operate and manage the fuel station that

supplies Government vehicles with fuel.  Undoubtedly, this change in the way we conduct

Government’s business has proven successful and we intend to maintain these arrangements to

the benefit of all concerned.    Further, the Supply Office has been closed as planned and I am

advised that the transition arrangements for the privatization of this function have been working

quite smoothly.

143.     I also indicated in my last Budget Address the Government’s commitment to the

rationalization of the subsidy on liquefied petroleum gas (LPG), a subsidy which costs

Government in excess of $4 million annually.  Pursuant to this commitment, in March 2012,

Cabinet approved a strategy for bringing the fiscal impact of the subsidy system within

sustainable levels while ensuring that the needs of the most vulnerable sections of the population

are protected.  The first step in this strategy involved a comprehensive review of the functioning

of the market for petroleum supplies in the Federation.  The findings of this study will inform the

design and implementation of policies to improve the functioning of the petroleum market with

attendant benefits in the areas of consumer savings, a more transparent pricing regime and the

efficiency of public expenditure.

The study was undertaken by an Energy Sector consulting firm which was contracted in

October 2012.  The consultants have completed their field work and recently submitted their

final report to the Ministry of Finance. This report will be considered by the Cabinet in the

coming weeks and a comprehensive statement on the way forward will be made at a later date.

 

 

Mr. Speaker, as part of the Government’s efforts to strengthen tax administration and

compliance, the Inland Revenue Department launched a major taxpayer public education and

awareness campaign in May 2012 with a focus on property taxes.   Prior to the launch of this

initiative, revenue derived from Property Taxes had traditionally underperformed relative to its

target, exhibiting anemic growth and large fluctuations, particularly over the period 2003 to

2011.   As a result of the persistent underperformance of the Property Tax portfolio, the

Department sought to remedy this trend through improved tax administrative reform.

In 2010, property tax receipts rose to $7.6 million, before declining to $6.6m in 2011.

However, following the implementation of relevant components of our Tax Administrative

Reform Strategy, we witnessed a notable turn around in the level of tax collected.  In fact, data

from the Inland Revenue Department shows that Property Tax collection for 2012 is in the

region of $10.8 million.   It is important for all to note that these results were underpinned by a

comprehensive public education campaign that was implemented in 2012 and geared towards

increasing the general public’s awareness and understanding of their civic responsibility as

citizens to make their fair contribution in taxes and contribution to Nation building.  The

Department will continue in 2013 to strengthen its public relations strategy to drive the process

of enhancing taxpayer education and awareness in St. Kitts and Nevis.  During the forthcoming

months, the Department will also work with the Water Services Department to enhance the

administrative efficiency of both the Property Tax and water billing system.

Mr. Speaker, again as noted in my last Budget Address, we outlined our intent to replace

the current Income Tax Act enacted in 1966 with a modernized version in 2012.  This is to

ensure that we are creating the strongest and most efficient environment in which businesses can

thrive, thereby generating jobs and allowing our people to improve their standard of well-being.

However, due to capacity constraints we were unable to present the updated draft Income Tax

Bill to this Honourable House for debate during the fiscal year 2012.  I wish to assure you that

we have not been idle neither are we treating this matter lightly.  We will continue to fine tune

the existing draft and ensure that it is delivered to this National Assembly in the quickest time

possible.  In the interim Mr. Speaker, we undertook a targeted strategy of tax reform to the

 

 

recommendations from stakeholders during the National Consultation on the Economy; and (2)

to correct obvious tax loopholes in the existing legislation.

I should state here Mr. Speaker, that from this year onwards, the Government will require

all businesses, including those that are the beneficiaries of tax holiday, to file annual tax returns.

This will help us to determine the effectiveness of our tax policy regime and inform our decision-

making process as we endeavour to ensure that the right sectors are the beneficiaries of our

stimulus and growth programmes.

Mr. Speaker, my Government has always welcomed sound recommendations that carry

the potential to induce investment and stimulate economic output.  In this regard, in March 2012,

we brought legislation to this Honourable House that increased the amount deductible for

management compensation from $60,000 to $75,000.  This amendment provides a much larger

deduction in the form of executive compensation for businesses from their taxable incomes.

The second prong of our strategy focused on closing clear tax loopholes and modernizing

selected sections of the current Income Tax Act.  Mr. Speaker, I am now pleased to note that the

closure of these tax loopholes has created some degree of fiscal space.  Mr. Speaker, the question

is, what should we do with this fiscal space that this strategy has created?  Should we focus on

providing more tax deductions or should we re-examine our tax rate for corporations which is

said to be the highest in the OECS?   As a caring Government that listens well, that seeks out

opportunities to build partnerships with the private sector where and when possible, I am very

pleased to announce to this Honourable House and to the people of St. Kitts and Nevis that it is

the intention of my Government to adjust the rate of Corporate Income tax from 35% to 33%.

The new rate will be applied to taxes filed in respect of business activities occurring in 2013.

Full information on this new measure will be given in further communication.

Mr. Speaker, we have deliberated long and hard about the actions Government can take

in order to help to stimulate growth in the economy.  This is a serious issue confronting most, if

not all, countries around the world and the truth is there are no easy answers.  We have

determined, however, that some of the key elements of our strategy going forward will include

support for the Construction Sector, entrepreneurship, and education and skills training.    In this

regard, I am pleased to announce an extension of the Building Materials Incentive (BMI)

56

programme which was introduced in June 2011 and was scheduled to come to an end in

December 2012.  The extension is being pursued at this time because there is evidence which

indicates that there is still a great need in the country for this programme.  Such action will not

only support the Construction Sector but help to alleviate the pent-up demand for housing.   It is

also our intention to discuss and explore with the SIDF possible ways to modify the Fund for the

Realization of Economic Empowerment through Subsidized Housing (FREESH) in order to

improve access to the resources provided under this scheme.

152.     My Government has provided hundreds of acres of land to help first time land owners to

change their status from being landless to proud and empowered land owners.  It was not our

goal to facilitate land ownership for ownership sake but a step towards empowerment and for

these individuals to take up the opportunity to move to the next step and build homes.  We

recognise, however that the lack of adequate infrastructure at the various housing sites can be a

deterrent for some individuals who are in a position to build now.  In light of this, we will make a

concerted effort to accelerate the infrastructure development component in the Special Land

Distribution Initiative.

153.     Mr. Speaker, we cannot discuss or make plans for improving growth prospects in the

Federation without including some measure that involves education and training.  Following on

my announcement at our National Consultation on the Economy, I am pleased to update you, this

Honourable House and the citizens of this country that we have not only developed the specifics

of the programme which is called “Preparing People for Employment Project” (PPEP) but have

successfully enrolled 2,795 young persons and placed1,412. The majority of these persons have

been placed in the private sector.  Under this Project, focus will be placed on building vocational

skills, social and life skills and entrepreneurship.  PPEP is designed to target unemployed youths

by providing training and internship opportunities to build skills necessary for the new economy.

The core areas of training includes: building trades, beauty services, hotel and tourism,

environment, renewable energy, agriculture and ICTs.    The Project is being implemented by the

National Skills Training Programme (NSTP) in collaboration with partners in training and

business.    I therefore take the opportunity to appeal to private sector entities to continue to

participate in this vital project that will provide real opportunities for our young people to learn,

to grow and to acquire the necessary skills that will enable them to make their individual and

collective contribution to the growth and development of our Nation

 

SUMMARY AND CONCLUSION

 

Mr. Speaker, it is clear that we are not out of the woods in terms of the dangers that still

loom in the global and National economies.  It is still quite possible that our economy can suffer

repercussions if economic and financial turbulence resurfaces, particularly, events that may

affect our major international trade and donor partners.   Even as we contemplate such

possibilities we must press forward with the job of building our Nation for the benefit of all

citizens and residents.  Today, I have given you an account of the state of affairs in the economy,

summarized the fiscal and debt dynamics as well as provided a preview of the major policy

issues, programmes and projects to be pursued by my Government for the rest of the year. There

are some early signs that our fiscal discipline has created a little headroom for us to continue to

support the main functions of the Government service and to promote important policies planned

for implementation in 2013.

Our strategic actions are being crafted in line with our budgetary limitations and

commitments to our reform agenda.  As our systems evolve, we must take time for assessing our

actions so that we can have continuous improvements.  In this regard, we are working on several

fronts with bilateral and international partners to accomplish a number of reforms in tax

administration, public financial management and the civil service. We have recently worked with

the Fiscal Affairs Department at the IMF to evaluate the performance of the VAT since its

launch in 2010.  With assistance from the European Union, we have developed a robust Public

Financial Management Action Plan to guide reforms over the medium term.  In addition, in

2012, we signed a Grant Agreement with the World Bank to implement a project for the

enhancement of public sector governance and efficiency.  We will continue to implement this

important project in 2013.

156.     Mr. Speaker, our tax regime is growing from strength to strength in terms of its overall

admin capability, customer service orientation and technical expertise.  It is our expectation that

continuous improvements will serve to boost business confidence and enhance competitiveness

of businesses operating in the Federation.  With elevated business confidence and the real

opportunity to create financial space for increased investment, our policies and actions can

ultimately lead to job creation, lifting of real income, economic growth and increased revenues.

The negative effect of the contraction in the Construction Sector must now be treated

with renewed energy as we formulate policies and put in motion direct actions that will get it

moving again.  This will be critical to the achievement of the positive growth levels which we

seek.  The Government cannot do the transformative work that is required all by itself neither is

there any intention to try to go it alone.    In fact, we expect that much of the growth in the

economy will be generated by the private sector.  We also expect that the private sector will take

hold of the opportunities that have been created as a result of the resounding success of the

Government in crafting a more sustainable outlook for the country.

Mr. Speaker, in an effort to foster sustained growth we have approved six (6) investment

projects that will be executed in the Federation over the next five (5) to seven (7) years.  Taking

a combination of these projects, we expect that in excess of $300 million will be injected into the

economy.   They have the potential to stimulate growth within and between various sectors such

as Construction, Tourism, Wholesale and Retail, and Information and Communication

Technology.  These projects will also provide well-needed long-term job opportunities for

persons in various fields of expertise such as landscape architects, web developers, graphic

designers and mechanics.  I again emphasise to our people that this Government will continue to

do its part but each of you should prepare yourselves to capitalize on the opportunities when they

become available.

Mr. Speaker, we expect acceleration in the ongoing recovery in the Tourism Sector as

indicated by recent data on advanced bookings and tourist arrivals.  We expect more positive

outcome in construction activity and imports combining to produce stronger growth in 2013.  In

addition to generating economic activity, the Government’s Capital Programme, particularly the

infrastructure component of the Special Land Distribution Initiative, will increase the value of

the lands.  This will translate to greater equity enabling the beneficiary households to negotiate

mortgage financing, education facilities and arrange financing for business purposes.  As far as

possible, all capital projects will be designed to create jobs.

In closing, it is important to put the policies and programmes that I have presented in the

context of the challenge of maintaining high investment levels.  Mr. Speaker, investment levels

are a significant driver of economic activity and growth in the small economies of the OECS.

Indeed, in the case of our Federation, the evidence over the last decade is that investment levels

have played an even more important role in GDP than in the rest of the OECS region.  As a

percentage of GDP, our investment levels have consistently exceeded those recorded in the rest

of the region.   Moreover, although there is still great uncertainty about the acceleration of the

global recovery, one thing that we can be sure about is that the recovery will usher in a much

more competitive environment as countries and firms struggle to recover lost ground.  It is

therefore important that we focus on positioning our economy to compete in this environment.

In order to meet this challenge, infrastructure investments by the public sector and product

development investments by the private sector will need to complement each other.

The initiatives planned for this fiscal year will target the three (3) main actors in our

investment environment – the public sector, the domestic private sector and the foreign investors.

In the public sector, as I have outlined, the emphasis will be on using available fiscal space to re-

energize infrastructure investment.  Alongside these investments, we will intensify efforts to

strengthen our public investment management systems within the framework of the ongoing

public finance management action plan and the recently enacted public procurement legislation.

Business climate enhancement issues will be the focus of interventions in the private sector and

these will include the planned migration to the ASYCUDA system at the Customs Department

and Exercise Department, the introduction of online filing systems at the Inland Revenue

Department and, of course, the adjustment in corporate tax levels.  In addition, we plan to use the

information gleaned from the annual World Bank Doing Business Indicators publication as part

of the framework for identifying and prioritizing actions designed to improve the

competitiveness of our business climate.  In 2013, work should be completed on the design of a

new investment code and this will be followed by a comprehensive review of our tax incentive

policies.  This review will inform the re-engineering of policies in this area as we seek to align

them with the requirements of the restructured tax system, the country’s accession to the World

Trade Organization (WTO) and the European Partnership Agreement (EPA) and the continuing

growth in the relative importance of tourism and other service industries.

At this time we can find value in the words of William Jennings Bryan who said “Destiny

is not a matter of chance; it is a matter of choice.  It is not a thing to be waited for, it is a thing to

be achieved”.   It is important for our people to understand that this Government is proactive and

we cannot wait for anyone else to determine our destiny.  We must study the facts, identify our

resources and opportunities, choose our path and follow the Leader with full confidence.

In the end, our journey as a Nation must be rooted in our bond of love for our fellowmen

and our bond of love for our country.

Mr. Speaker, I so move.

Tax regime. The aim of this strategy was twofold; (1) to incorporate some