GOVERNMENT OF ANTIGUA AND BARBUDA
2005 BUDGET STATEMENT
FOUNDATION FOR A FRESH START
DR. THE HON. L. ERROL CORT, MP
MINISTER OF FINANCE AND THE ECONOMY
TUESDAY, NOVEMBER 30, 2004
With your permission, Madam
Speaker, I would like to begin by inviting the nation to
Today, November 30th, 2004, the Sunshine Government of
Antigua and Barbuda again breaks new ground in our nation's
transition to 21st century governance.
It is my special privilege, Madam Speaker, and it is my
honour, to present, in the year 2004, the National Budget
I think it is a historic first in this honourable House,
Madam Speaker, that the Government is presenting the
nation's annual Budget in the year prior to the financial
period in which the Budget's judgments and its measures will
This dramatic departure from accustomed practice, this
preparation and presentation of the Budget in advance of the
period to which it relates is respectful to, and considerate
of, the people whose businesses and lives the Budget will
Advancing the timing of the Budget Presentation is in
consideration of individual as well corporate interests,
providing time for planning and adjustments in households as
well as in businesses.
With typical fiscal waywardness, the previous government
practiced a policy of cruising without a compass, well into
every budget period, plunging the economy and the people of
this country into increasingly troubled waters.
There was, inevitably, a crying need for a rescue mission,
Eight months and seven days ago, on the 23rd of March, 2004,
an educated and conscious electorate, acting in their
considered judgment, and using their inherent and unfailing
common sense, overwhelmingly placed their faith and future
in Government in the Sunshine.
The good people of Antigua and Barbuda turned to the United
Progressive Party to rescue our nation from the road to
ruin, from the continuing corrosion of corruption, and from
the arrogance and incompetence of the ALP regime.
The long embedded regime had become glaringly dysfunctional
and lacked any perceivable capacity to take this nation into
a transition to 21st century governance.
The Antiguan and Barbudan people had long been desperately
yearning for rescue from their years of mounting misery at
the hands of a decaying dynasty.
The people of Antigua and Barbuda understood on March 23rd,
as they understand now, that the bitter harvest that so many
of the less fortunate in our society are reaping today, was
sown by the seeds of greed and corruption and wanton waste
that defined government in this country over the years.
We now face formidable challenges in restructuring and
giving our economy a fresh start and in coping with shocks
and uncertainties in our external environment.
Let me outline a scenario that will be familiar to everyone,
Ribbon-cutting ceremonies marking
the opening of investment projects such as roads, power
plants, ports, airports, schools and hospitals are many a
These occasions present splendid photo opportunities, while
the very act of cutting the ribbon seems to identify the
shear-wielding politician as a contributor to the future
growth of the economy.
In some countries, however, corrupt politicians appear to
choose investment projects, not on the basis of their
intrinsic economic worth, but on the opportunity for bribes
and kickbacks these projects present.
Such corruption increases the number
of capital projects undertaken and tends to enlarge their
size and complexity.
The result is that, paradoxically, some public investment
can end up reducing a country's growth, because even though
the share of public expenditure in gross domestic product
may have risen, the average productivity of that investment
When corrupt politicians influence the approval of an
investment project, the rate of return as calculated by
cost-benefit analysis ceases to be the criterion for project
The process of approving an investment project can be an
irresistible temptation for the unscrupulous.
In some of these cases, a strategically placed, high-level
official can manipulate the process to select a particular
He can also tailor the specifications
of the design to favour a particular enterprise by, for
example, providing inside information to that enterprise at
the time of the issuance of the tender.
Corruption can reduce government revenue if it contributes
to tax evasion, improper tax exemptions or weak tax
administration; and the diversion of funds from the
maintenance of existing infrastructure and from social
programs such as education and health.
This Honourable House, might, understandably, have thought
that I had written the scenario I have just outlined.
That scenario might have seemed a precise fit to such
controversial public investment projects as the former Royal
Antiguan Hotel; Heritage Quay; the Vendors Market; and the
Mount St. John Medical Centre.
Those notorious excesses of the former government are indeed
prime examples of public investment projects serving as
conduits for personal gain for unscrupulous public officials
and their accomplices in private enterprise.
The scenario fits Madam Speaker, but I do not claim
The references to the manipulation of public capital
investment projects that I have just presented are, in fact,
taken directly from the IMF publication titled
"Roads to Nowhere: How Corruption
in Public Investment Hurts Growth".
That thesis was co-authored by Dr. Vito Tanzi, Director of
the Fiscal Affairs department of the International Monetary
Fund and Dr. Hamid Davoodi, an economist in the same
"Roads to Nowhere: How Corruption
in Public Investment Hurts Growth" was drawn from
an IMF Working Paper captioned,
"Corruption, Public Investment and Growth" and
published in 1988 in an IMF series on economic issues.
The International Monetary fund published that scenario
examining corruption in public sector investment projects 16
years ago, Madam Speaker.
The relevance to Antigua and Barbuda over the last couple of
decades is quite striking.
15 days ago, the International Monetary Fund published a
scenario specific to Antigua and Barbuda today, which was
researched by executives of the IMF.
The IMF released that scenario, specific to Antigua and
Barbuda today, on November 15th.
This new scenario is defined in an assessment of Antigua and
Barbuda by two Directors at an IMF Executive Board Meeting
on November 15, 2004.
I quote from this current IMF assessment of Antigua and
Barbuda's economic circumstances and the options that these
circumstances mandate for this country, Madam Speaker:
"It is difficult to avoid the conclusion that the
country's current economic difficulties have been largely
"As a small, open and shock-prone island economy constrained
by a narrow economic base and limited capacity, Antigua and
Barbuda's economic progress has additionally been challenged
by a problem of governance, particularly in the sphere of
"It is clear that the policy missteps of the past have left
the country with a legacy of difficult economic challenges.
"Given the role which governance factors have played in
constraining the performance of the economy, it is difficult
to overestimate the importance of reforms in this critical
"We are encouraged by the current authorities' determination
to break decisively with the past and by the strong
legislative and other actions recently taken to improve
transparency, accountability and integrity across the board;
including a code of conduct for Ministers.
"The new administration in Antigua and Barbuda is making a
strong and committed effort to confront the country's
daunting economic challenges."
End of the quotation.
There could hardly be a more objective, more penetrative,
and more authoritative summary of where Antigua and Barbuda
stands today and the enhanced regard with which the
international community now views Antigua and Barbuda, Madam
One of our most daunting challenges is the mountain of
mounting debt that is the legacy of the previous
On March 31st, 2003, in what has turned out to be, and
certainly was destined to be his final Budget presentation
in this or in any other Parliament, the former Member of
Parliament for St. John's Rural East and then Prime Minister
and Minister of Finance, confirmed that the public sector
wage bill was some 74% of recurrent revenue.
This left 26%, just one point over one quarter of recurrent
revenue, to fund the government's obligation to the Antiguan
and Barbudan people.
After meeting the public sector wage bill, only 26% of
recurrent revenue was available to maintain public
infrastructure; to provide essential services to the
population; to fund social programmes; and to meet the
Government of Antigua and Barbuda's crippling debt
obligations to our legion of creditors throughout the
country, across the region and around the world.
Government revenue cannot support the current public service
wage bill, Madam Speaker.
Nor can we arrest the continuing expansion of interest on
arrears on the mountain of overdue debt generated by our
predecessors that Antigua and Barbuda owes to local and
The former Prime Minister confirmed this in his final Budget
Presentation on March 31st, last year, Madam Speaker.
He ventured no solution to the problem that his irrational
policies had created, save and except for hallucinatory
wishful thinking that the private sector would some day, in
some way, absorb enough public servants to bring the public
service payroll down to a manageable size.
The leadership of the previous administration was beyond
their depth in dealing with the economic problems they had
inflicted upon the country.
The size of the public service payroll and the staggering
volume of debt are not the only monuments to the fiscal
lunacy of the last administration.
In hopeless and increasing financial crisis, that government
perversely gave away some $200 million in duty free waivers
This was a blatant effort to bribe voters in what had been
scheduled as an election year.
That gigantic $200 Million giveaway did not go to any known
investment project of any known significance.
In the weeks leading up to the elections this year, the
Cabinet approved something in the region of 1,000 duty free
waivers for the importation of motor vehicles.
To the enduring credit of the integrity of the Antigua and
Barbuda electorate, that astronomical level of bribery by a
desperate government could not buy enough votes to prevent
the complete rout of the most dismally ineffective group of
economic policy makers to have held office in this part of
In what was certainly the most daring fiction committed by
any Minister of Finance, in any Budget Presentation, in this
or in any other Parliament, former Member of Parliament for
Rural East told the Speaker, told Honourable Members, told
the nation, and told the world, that his Government had
either paid off or rescheduled much of the national debt and
was continuing to service what remained.
That was a calculated misrepresentation of indictable
dimensions and an arrogant demonstration of contempt for the
intelligence of the Antiguan and Barbudan people.
Paid-off, rescheduled and timely debt service could not
possibly have attracted arrears on external and domestic
debt at the level of $366 Million, which was where the
arrears on debt repayment stood when the United Progressive
Party came into government.
The total debt burden was within striking distance of ten
times that amount, Madam Speaker.
To underline the magnitude of the past mismanagement of this
country's fiscal and economic affairs, comparison with a
number of other economies is instructive.
Net debt is now 45% of national income in France.
In America it is 50%.
In Germany, net government debt is 55% of national income.
In Japan it is 86%.
It is 94% in Italy.
This year, the net government debt in the United Kingdom is
34 % of national income.
In Antigua and Barbuda, the Central Government debt is over
500% of the government's highest recorded annual revenue.
Total Debt in 2002 amounted to $2,649,131,826 or 136.5% of
GDP, while total Debt in 2003 grew to $2,818,314,637 or
137.1% of GDP.
Of these totals, Central Government domestic debt
represented $659,581,000 in 2002, while external debt
In 2003, Central Government domestic debt recorded
$651,232,000, while external debt increased to
It is obvious that for some time to come, the people of this
country will have to live with the cumulative consequences
of the aberrant and irresponsible approach of our
predecessors in government to fiscal affairs over the years.
It can only be assumed that my predecessor had deluded
himself that what the people did not know would not hurt
In contrast to such calculated deception of the people, the
Sunshine Government has broken new ground with unprecedented
public consultation in the formulation of the fiscal and
economic policies that are embodied in the 2005 Budget.
Budget 2005 is therefore, quite literally, the people's
It embodies the stated aspirations and concerns of a wide
cross section of the population of Antigua and Barbuda.
I am indebted to innumerable persons across the length and
breadth of Antigua and Barbuda for their contribution to the
judgments that I articulate in Budget 2005.
I wish to place on record my gratitude to all the persons
who were participants in the extensive public consultations
that the Ministry of Finance and the Economy conducted
across the country.
I am grateful to the many units of civil society, including
business and labour and the NGO's, whose observations and
advice I greatly appreciate and have factored into the
judgments I have made in the 2005 Budget.
I am indebted to the Governor of the Eastern Caribbean
Central Bank and his staff, and to the Caribbean Development
Bank, CARTAC, and other regional and international
organisations for their insight and for their valuable
counsel on fiscal policies common to the member states of
The media have been critical catalysts in making economic
realities and fiscal issues subjects of topical public
I thank you for raising public consciousness in these
matters, ladies and gentlemen of the media.
I thank the public service officers in every Ministry, whose
labours were vital in the preparation of the voluminous data
and the plethora of policies that are coordinated in the
I particularly wish to thank officers of the Ministry of
Finance and the Economy for their unwavering dedication to
the Government's policy agenda for turning around the
economy and propelling it on a path to sustainable growth.
Their sensitivity to the needs of the competing groups in
the society and their all round professional competence has
helped, immensely, to relieve the burden of the Budget
exercise that would otherwise have fallen to their Minister.
Of this group, I wish to recognise the work of:
The Budget Director, David Matthias;
The Financial Secretary, Whitfield Harris, Jr.;
The Director of the Economic Policy and Planning Unit of the
Ministry of Finance, Yolanda Goodwin;
The Coordinator of the Economic Policy and Planning Unit of
the Ministry, Rasona Davis; and
The Tax Consultant to the Minister of Finance, Carey
I pay special tribute to Senator, the Honourable Lenworth
Johnson, Parliamentary Secretary in the Ministry of Finance
and the Economy, an able and committed partner in the
overall Budget endeavor.
I ask the forgiveness of those whose names I have not
My gratitude to them is just as great.
I especially thank the technical and support staff of the
Ministry, and the Budget and Planning Staff who assisted
with the national consultations.
They went beyond the call of duty. They were evangelists in
this mission of empowering the Antiguan and Barbudan people.
I must thank my colleague Cabinet Ministers for their
recommendations for the Budget.
I am grateful, too, for their goodwill and cooperation in
holding the line on expenditure in the current Budget
It is not the practice of the Prime Minister to ask members
of his Cabinet to put people first.
In his actions, and in his injunctions, Prime Minister
Spencer has always demonstrated and asserted his core
political and economic philosophy that people do, in fact,
Putting people first is therefore not a matter of choice for
the UPP administration.
Putting People First is the essential reason why we are all
I am grateful to you, Honourable Prime Minister, for keeping
us focused on our fundamental philosophy in politics and in
governance, People First.
It is self evident that Budget 2005 is informed by the
insight of the Antiguan and Barbudan people of all groups in
the society; all callings; all walks of life; every station;
and from every constituency.
The reconstruction of the economy and the renewal of the
nation will call for the combined effort of the government
and the people, in common purpose and in joint endeavour.
To maneuver this nation on the challenging path ahead will
require the unwavering commitment of all in this nation.
There is a place for everyone; and there is a role for
This Budget sets out to lay a foundation for a fresh start
for Antigua and Barbuda; and a fresh start for everyone in
It is an honest examination of our nation's economic
realities and a solid foundation for a fresh start.
If we are to look forward to happy days for all in this
country, all in our nation will have to go through a period
of austerity, a period of adjustment.
Every one will have to demand less and give more.
Now, more than ever, the obligation falls to every Antiguan
and Barbudan, every citizen, every resident, to ask not what
our country can do for us, but rather to ask what we can do
for Antigua and Barbuda.
Budget 2005 speaks to both propositions.
Our current circumstances and the global environment present
The path and priorities we outline in Budget 2005 confront
the challenges that surround us, and they will prepare
Antigua and Barbuda for the challenges that are coming at
That path and those priorities also present exciting
INTERNATIONAL ECONOMIC ENVIRONMENT
It is fitting at this point to look at the global economic
terrain, which Antigua and Barbuda has to negotiate.
In 2003, real GDP in the world economy grew by 2.6% compared
to 1.8% in 2002.
For the first half of 2003, adverse economic and
socio-political shocks - particularly the war in Iraq -
affected world economic performance.
However, economic performance in the second half of 2003
improved, bringing year end performance above that of 2002.
For 2004 and 2005, economic growth is projected to rise
further by 4.2% and 4.1% respectively, reflecting a marked
upswing in private investment.
World trade is also projected to expand significantly by
8.9% in 2004 and 10.1% in 2005, with China, the US, Japan
and the European Union being the main contributors in world
The pegging of the Eastern Caribbean dollar to the US dollar
means that developments in the US economy can have direct
economic implications for the Antigua and Barbuda economy.
Real GDP growth in the US is expected to increase over 2003
performance, which was 1.8%.
For 2004, GDP is projected at 4.3% and for 2005 growth is
forecasted to slow to about 3.3%.
This upturn in the US economy in 2004 over performance in
2003 reflects an increase in private investment as well as
acceleration in private consumption and exports.
However, the continued weakening of the US dollar, which is
expected to depreciate a further 2.7% against the Euro in
2004, remains a concern for the US economy.
This weakening of the US dollar, in conjunction with rising
oil prices, is expected to increase the rate of inflation
from the 1.8% registered in 2003 to 2.4% in 2004.
Despite the growing world economy, the widening US deficit,
the large deficits of a number of European Union countries,
along with the slow turn around in a number of these key
economies, may dampen economic growth in the next few years.
However, the recovery of the Japanese economy and the
booming Chinese and South-East Asian economies are expected
to contribute possibly to world economic output.
Another key factor that remains paramount is the continued
instability of oil prices.
As indicated in a report by the Energy Information
Administration earlier this month, the short-term energy
outlook shows that oil prices for the fourth quarter of 2004
are projected at just over US$51 per barrel.
This is US$20 above prices in the fourth quarter of 2003.
The continued rise in oil prices and the instability has had
economic consequences for oil-importing economies and more
so for oil-importing developing countries.
For Antigua and Barbuda, rising oil prices, if fully passed
on, may place upward pressure on the cost of doing business,
drive up domestic prices and further deteriorate our Balance
That steady climb in oil prices will have implications for
electricity generation and the cost of utilities to
consumers and businesses.
The Government of Antigua and Barbuda cushioned motorists
from rising prices at the pump by direct subsidy over
Regrettably, the Government is in no position to sustain
On the bright side, the continued depreciation of the US
dollar vis-à-vis the Euro offers significant economic
opportunity for Antigua and Barbuda.
Euro-rich vacationers are visiting Antigua and Barbuda in
increasing numbers, and the prospects for continuing growth
in our European business are positive.
The issues of trade liberalization and globalization remain
at the forefront of world economic developments.
For Antigua and Barbuda, our more immediate concerns relate
to the World Trade Organization and the proposed Free Trade
Area of the Americas.
The Government of Antigua and Barbuda is pressing its WTO
backed claim, for the removal of the US bar to our access to
the US market for Internet Gaming.
The removal of that bar would immediately restore a number
of well paying jobs for young Antiguans and Barbudans.
The implementation of a Free Trade Area of the Americas
arrangement will significantly impact all economies of the
Antigua and Barbuda will continue to be an active
participant in the CARICOM bloc in FTAA trade negotiations.
We must ensure that our best interests as a small island
developing state are well served in the eventual FTAA
REGIONAL ECONOMIC OVERVIEW
Post 9/11 difficulties in the world economy in 2003 led,
inevitably, to a downturn in economic performance in the
However, most Member States have since enjoyed some growth
in real output.
In particular, Barbados and Trinidad and Tobago realized
2.2% and 3.4% growth in real GDP respectively.
As the developments that negatively impacted world economic
performance in 2003 come under control and a turn around in
the US economy takes effect, it is projected that the
regional economic environment will show further recovery in
The turnaround in the world economy is expected to
positively impact economic performance in the region.
While inflation remained relatively low - between 1% and 3%
- the region experienced unemployment rates in excess of
Despite the reduction of interest rates in a number of
CARICOM member states, high liquidity of commercial banks
continues in 2004.
While all CARICOM member states continue to work towards the
establishment of the Caribbean Single Market and Economy,
Barbados, Jamaica and Trinidad and Tobago are CSME-ready and
are expected to implement the treaty from January 2005.
The CSME can help to prepare the region's producers and its
professionals for competing in the wider hemispheric and
This can enhance our economic performance in an increasingly
liberalized, an increasingly competitive, and an
increasingly borderless global economy.
As we enhance our productivity and competitiveness, the
region should see increased export performance driving
Recognising the importance of the CSME for Antigua and
Barbuda, government is accelerating its efforts to prepare
our nation for regional integration.
It is critical that our producers and professionals, and our
citizens in general, are equipped to seize the opportunities
that the CSME will offer.
THE NATIONAL ECONOMY
From the mid 1980s to the mid 1990s Antigua and Barbuda
enjoyed average annual growth rates of 6%. However, between
1994 and 2003, the average annual rate of real economic
growth declined steadily from a high of 6% to 2%.
For 2004, it is expected that real GDP growth will expand as
projections indicate a 3.97% growth in real output.
Further increase in economic growth is anticipated in 2005.
With the Government focusing on improving its fiscal
position, reducing the national debt; making significant
investments in social and physical capital accumulation;
enhancing development of the tourism sector and promoting
expansion in agriculture, light manufacturing and
agro-processing activities, conservative projections
indicate a 4% growth in real output for 2005.
Between 1999 and 2003, the fiscal situation in Antigua and
Barbuda grew progressively worse.
In 1999, the current account and overall deficits were
$74.47 Million and $70.61 Million, respectively.
By 2003, the current account deficit and the overall fiscal
deficit had ballooned to $83.85 Million and $158.78 Million
Through intensive efforts by this Government, the current
account deficit and overall fiscal deficit are expected to
decline by the end of 2004 to $68.80 Million and $80.91
Despite this anticipated improvement in fiscal performance,
there are still significant cash flow constraints, which
make it difficult for the Government to meet its current and
Consequently, our initial efforts to prevent further
declines in the fiscal accounts must be buttressed by a
comprehensive programme of fiscal reform.
With such a strategy, government will be able to move to a
sustainable level of fiscal operations.
Our current fiscal objectives include:
i. A Current Account Surplus equal to 4% of GDP within 5
ii. An overall Fiscal Balance not exceeding -3% of GDP
within 5 years.
iii. Disbursed Outstanding Debt not exceeding 60% of GDP
within 10 years.
iv. Debt Service to Current Revenue Ratio of no more than
15% within 5 years.
The achievement of these fiscal benchmarks should in turn
facilitate the realization of our macro-economic goals,
• Full employment in the Antigua and Barbuda economy.
• Containing inflation rates to no more than 3% annually.
• Sustaining real growth in annual output of no less than
The Government anticipates that new standards of fiscal
management will facilitate the attainment of these
macro-economic goals within the next 5 years.
Clearly, a significant turn around in the Antigua and
Barbuda economy will require more than improved fiscal
The National Strategic Development Plan, which will be fine
tuned for implementation from 2005, will detail the
Government's economic programmes through the next five
In formulating the National Strategic Development Plan,
Central Government will work closely with the Barbuda
Council to prepare a comprehensive and integrated
development plan for Barbuda.
However, the court's determination of the Barbuda issue,
which it is currently adjudicating, is a prerequisite to
full consultation with the Barbuda Council.
The tourism sector remains the most significant foreign
exchange earner for Antigua and Barbuda.
A conservative estimate for 2004, projects a 5% expansion in
the tourism industry, with a contribution of 12.46% to GDP.
The Government has formulated strategies for accelerated
development of the tourism sector as we approach a peak in
the wave of visitors for World Cup Cricket in 2007.
OVERVIEW OF BUDGET 2005
The Sunshine Government is committed to dramatically
improving Antigua and Barbuda's perilous fiscal situation.
Large and unsustainable deficits will no longer be the order
of the day.
Nor will mounting debt and accumulation of arrears of public
debt be acceptable.
This Government fully intends to improve revenue generation,
as we introduce new standards in expenditure management.
We have to ensure that the chronic fiscal deficits that
plagued Antigua and Barbuda over the years are effectively
To this end, the Government will initiate a comprehensive
fiscal reform programme.
This programme will focus on improving revenue collection
from existing revenue streams; on the introduction of new
revenue measures; on streamlining the public service; on
enhancing efficiency and productivity in the public sector;
on rationalisation of government expenditure; and on the
operation of efficient expenditure management systems.
As the Government works to improve the country's fiscal
position, our motto, 'People First', will remain paramount.
We will introduce specific measures to ensure that citizens
and residents are not unduly burdened by the revenue and
expenditure management imperatives that we have to
The Government will remain true to our commitment to keep
current on payments to Social Security, Medical Benefits and
the Board of Education, in respect of public servants'
Recurrent Expenditure for the 2005 financial year is
estimated at six hundred and nine million, six hundred and
seventy two thousand seven hundred and two dollars
This represents a decline of $17,815,858 from the 2003
recurrent expenditure estimate, which was $627,398,640.
Though government has been able to reduce this estimate
through effective rationalisation of expenditure, we
recognise that essential services must be adequately funded.
These services will therefore be supported by provision of
the resources to ensure efficient and timely delivery of
services to the public.
The Police Service
The Royal Antigua and Barbuda Police Force has operated
under unsatisfactory and deteriorating conditions over the
Our Police officers have been required to function in
deplorable conditions, with inadequate equipment, limited
technology, and limited training.
Urgent corrective measures will be implemented in the 2005
The Defence Force
The Defence Force is understaffed and urgently needs
equipment essential to the proper discharge of its
Allocations have therefore been made for the purchase of
equipment and vehicles, and for the employment of 56
It is intended that candidates for these positions will be
recruited from within the ranks of the public service, in
the first instance.
The nursing service is seriously understaffed and only a
very limited number of persons are currently undergoing
training for the profession.
Allocations have been made in the budget to fill 90 vacant
These positions will be offered to public servants for first
Further, funds have been allocated for the purchase of
essential medical equipment for the hospital, in particular
- a dialysis machine.
As the student population increases, so does the need for
The Budget provides for the recruitment of 20 teachers.
These positions will be offered to public servants as the
Newly qualified graduates will also be considered.
Allocations have also been made for the upgrade of existing
In addition Madam Speaker the Board of Education will be
required to oversee the establishment of Early Childcare and
Education Centers in the Old Road, Nut Grove and Newfield
The Government has approached the CDB for funding for a new
secondary school with industrial arts facilities in Antigua.
Efforts will be made to ensure that all classrooms in
primary schools across the island are optimally equipped and
School Meals for our Public Primary
A pilot project for the school meals programme will coincide
with the start of the next school year, with nutritious
lunches for students in public primary schools.
This programme, which will cost an estimated $4.5 million,
will provide primary school children with a balanced
lunch-time meal and will provide employment opportunities
for individuals in communities across the country as
suppliers of the meal packages.
The school meals programme will provide a significant new
market for our farmers, including our poultry farmers.
The Best Brand in Caribbean Tourism
Tourism, the mainstay of the Antigua and Barbuda economy,
will receive a significantly increased allocation in the
This will drive stepped-up programmes for marketing and
promotion to position Antigua and Barbuda as the best brand
in Caribbean tourism.
$11.2 million is allocated to the Ministry of Tourism in the
2005 Budget for this purpose. In addition, to the estimated
$6 Million to be generated by the 2%, Guest Levy will bring
the total allocations for tourism marketing and promotion to
The Budget provides allocations intended to boost activity
Particular focus will be on the increase of cotton and
pineapple production and on the development of
Targeted strategies will be geared to production of other
crops, to optimize the fishing industry, and to expand
linkages between local farmers and fishermen and the tourism
Caribbean Festival Park:
Provisions have been made for a feasibility study for the
Caribbean Festival Park.
This project promises to provide significant employment in
Antigua and Barbuda during the construction phase and when
This project will be initiated in 2005.
The Caribbean Festival Park will be a permanent showcase and
celebration of the cultural diversity that makes Antigua and
Barbuda the Caribbean melting pot.
The Caribbean Festival park is intended to be a year-round
theme park that will, in time, become a major tourism
attraction in the region.
Public Sector Reform/Expenditure
To ensure expenditure does not exceed budgeted amounts, new
expenditure management programmes will be introduced.
These expenditure management programmes are a critical
component of government's overall fiscal reform strategy
These expenditure management programmes will focus on
reducing the government's wage bill and rationalizing
expenditure on other line items.
Government's Wage Bill
As part of a comprehensive public sector reform programme,
the Government wage bill will be reduced by 20% in 2005.
The intention is to rationalize public sector spending on
wages and salaries; increase efficiency in the service; and
to raise productivity within each Government department.
Particular focus will be placed eliminating the need for
overtime, through the introduction of best practices.
Further, except where absolutely necessary, there will be no
new recruits to the service for 2005.
To streamline the public service, the Government will offer
packages of voluntary severance and early retirement to
In addition, government will provide assistance to ex-public
servants who wish to establish their own businesses.
Such assistance will come through special arrangements that
will operate through the Antigua and Barbuda Development
Public Servants will also have the options of transferring
to the Defense Force, to teaching and to nursing.
The government will ensure that all public servants
voluntarily leaving the public service will be paid all
monies due to them.
The government has, in collaboration with the Antigua and
Barbuda International Institute of Technology, developed
special training programmes for persons leaving the public
These programmes will focus on training in the area of small
business development and will prepare individuals to
transition from employment to ownership.
The programmes will run for a period of three months, during
which participants will continue to receive payment from the
Reducing the cost of Government:
In addition to reducing expenditure on salaries and wages,
government will also reduce spending on overseas travel,
utilities and overseas telephone calls.
Government's transfer of its international calls service
onto the Cable and Wireless Corporate plan which was
activated in July 2004 is expected to save about $200,000 by
the end of 2004.
For 2005, a modest estimate of savings on overseas calls
indicates total possible savings of about $435,000.
Government will also strengthen its procurement policies and
enhance efficiency and transparency in the manner in which
goods and services are acquired.
The use of government vehicles will also be rationalized to
ensure efficiency and a reduction in maintenance and repair
costs. The abuse and appropriation of government vehicles is
At present, Government pays a total of $20.82 million in
To reduce the cost of government we will renegotiate rents
with private landlords with a target of securing a 20%
Such a reduction would result in $4.16 Million in savings
In addition, government will seek to reduce the amount it
pays in rent to private parties through a process of
consolidating government departments and units.
Cabinet over-reach was a defining deficiency in past
Persons and organizations entitled to concessions were
misdirected into thinking that such concessions could only
be accessed through favours from Cabinet Ministers.
This not only generated presumed political indebtedness to
such Ministers, it might also have been calculated to create
opportunity for kickbacks to ten per centers in previous
An element of expenditure management relates to the level of
concessions granted, in particular discretionary
By granting discretionary concessions, government foregoes
much needed revenue.
This represents a form of expenditure which needs to be
properly and controlled.
To this end, there will be a cap on the value of concessions
to be granted.
In 2005, total concessions will be capped at $100 Million.
This is $100 million less than was allowed in 2003.
There will be significant reduction in waivers on vehicles.
Only those categories of persons identified in the
Government's Schedule of Parties Eligible for Concessions on
Motor Vehicles will be allowed such concessions.
The Government will also strictly enforce it's "not waiver"
policy of the customs service tax.
This is to ensure that revenues due to the government are
collected and applied to the pressing needs of the
Institutional reform is an essential element of fiscal
Investment in the development of the governance
infrastructure necessary to support the restoration of
fiscal balance is vital.
We must ensure accountability for the processing and
reporting of government's operational budget; and we must
re-establish policy credibility, as essential conditions for
private sector led growth.
The acquisition of FreeBalance eFinancials, an integrated
financial and inventory management system, represents a key
investment in the development of a modern and transparent
financial management system; and ultimately in the
restoration of the fiscal balance.
eFinancials is now the core of the accounting system for the
Ministry of Finance and the Economy.
It facilitates the integration of financial management
services and delivers the capability for electronically
recording expenditures, producing cheques and receipts and
generating disbursement reports.
The project has already recorded its first milestone; the
Treasury Department has installed a cash management system,
which now allows for the generation of electronic cash
receipts and deposit statements.
This was made possible with assistance of the CIDA funded
initiative, Eastern Caribbean Economic Managing Programme.
Yesterday, Monday 29th November, the Treasury Department
generated its first electronic cash receipt.
This is a quantum leap by this Government towards the
modernization of government operations in this country.
Effective January 31st, 2005 the Office of the Prime
Minister and the Ministries in his portfolio, together with
the Ministry of Finance and the Treasury and Audit
Departments, will be fully automated with the eFinancials
This system will efficiently manage funds through electronic
receipting, revenue reporting and the generation of
electronic cheques by March, 2005.
Another key area of institutional reform relates to the
efficiency and productivity of revenue generating
departments of the Government.
We will focus on rationalisation and reorganisation of
revenue generating departments to ensure greater efficiency
and productivity in revenue collection, as well as the
service provided to the general public.
This strengthening of revenue generating departments should
facilitate the Government's efforts to stamp out the time
worn abuse of the duty free system, which now takes place at
the Heritage Quay Shopping Centre.
Madame Speaker, the establishment of this duty free centre
was intended to be an additional means of attracting
visitors to our shores where they could purchase items free
However, certain tenants at the Heritage Quay Shopping
Center have been abusing the system over the years thus
depriving the Treasury of significant revenues.
I intend to put an end to this dishonest practice.
An elite cadre of Customs Inspectors will be assigned
responsibility for ensuring that duties and relevant taxes
are collected at the Heritage Quay.
This special squad will monitor those businesses that
acquire inventory duty free and sell such merchandise
wholesale to businesses outside the duty free area.
Stiffer penalties for such activity will be introduced, with
the possibility of confiscation; fines lease forfeiture
fines and imprisonment.
Government is focusing on enhancing institutional and
management capacity and a cutoff mechanism in public sector
In particular, government has accessed technical assistance
through CARTAC to improve the management of our public
sector investment programme.
The government will seek further technical assistance in
2005 to ensure specific reforms in procurement and
management of public sector investment projects.
As a result of these interventions we should see more
transparent and efficient mechanisms for the monitoring,
evaluation and overall management of projects under the
improved Public Sector Investment Programme.
Statutory Bodies will be called upon to function along the
same business principles as private sector enterprises.
In this regard, Statutory Bodies and Government Owned
Corporations should not expect that their accustomed and, in
some cases, legislated tax free status should continue
beyond fiscal year 2005.
The government also acknowledges that it must remit its
obligations to such entities in a timely manner.
Given the unprecedented fiscal challenges now facing our
Public Finances, and considering the apparent pervasiveness
of certain practices that are inconsistent with the tenets
of Accountability, Transparency and Good Governance in
general, I now put on notice all Public Officers, that is,
all persons remunerated from the Consolidated Fund, that
where it can be proved that the Government has suffered loss
by reason of neglect or fault on the part of said Officers,
the Financial Secretary, shall be asked to consider the
invocation of Part 10 of the Finance and Audit Act,
I turn, now, to Recurrent Revenue.
Recurrent revenue for the 2005 financial year is budgeted at
five hundred and twenty three million, five hundred and
forty four thousand two hundred dollars ($523,544,200).
Indirect taxes account for 62% of anticipated revenue, while
direct taxes and non-tax revenue account for 23% and 15%
To realize these revenues, government will adopt a
two-pronged strategy for revenue generation.
The first will be programmes for more efficient collection
of existing taxes, while the second will be the introduction
of new revenue measures.
The new revenue measures form part of an overall strategy of
fiscal reform to help reduce the existing fiscal gap and to
place government on a sound and sustainable financial
These measures are elements of a domestic programme for
fiscal adjustment and, once the turn-around in the fiscal
situation is achieved, government will review these new
measures with a view to adjusting them.
Improved Efficiency in Collecting
Government's efforts to improve revenue collection through
existing taxes will focus on the implementation of measures
to enhance collection, as well as measures to ensure
compliance in respect of certain taxes.
With respect to the latter, the property tax structure is to
be upgraded to ensure wider coverage, more equity in its
application and the enhancement of revenue for the
The tax will now be assessed on the market value of the
property instead of on the construction replacement cost
which now applies.
The tax burden on residential properties is not expected to
Government expects that this revenue stream should yield
about $15 million for 2005.
This represents a 50% increase over the $10 million budgeted
The increase in projected revenue is due to an increase in
the number of land parcels registered with the Property
Valuation Division from just under 38,000 to just fewer than
Special provision will be made for residential homes valued
under $100,000 which will be exempt from the property while
Senior Citizens (persons 60 years and over) will enjoy an
additional 50% rebate on their property tax liability on the
There will also be a low rate applied to lands being used
for agricultural purposes and agriculture buildings will not
be subject to the property tax.
Also, mechanisms will be put in place to ensure the more
effective collection of the 10% tax on airline tickets
Specifically, government will determine the feasibility of
placing the responsibility of collecting this tax with IATA.
Finally, specific measures will be put in place to ensure
compliance with the restaurant tax.
Over the years collection from this revenue stream has been
woefully inadequate as restaurants either did not collect
the tax or they collected and did not remit the proceeds to
the Inland Revenue Department.
New Tax Measures:
Prevailing economic circumstances necessitate the
establishment of a Stabilization Fund drawn from personal
incomes over $3000 per month.
Incomes below this $3,000 threshold are personal allowances
intended to cover statutory contributions to Social Security
and Medical Benefits, and the Education Levy.
The personal allowance is also intended to allow income
earners to meet personal expenses.
The structure of income earners' contributions to the
Stabilization Fund is designed to exempt the vast majority
of the population.
The source of revenue for the Stabilization Fund will be a
direct draw on personal income at the following rates:
• 10% on income from $3001-$4000
• 15% on income from $4001-$6000
• and 25% on income that is $6001 and above
This proposed structure is less punitive than the pre-1977
structure, which had rates as high as 55% with no provision
This meant that, at that time, the income of all persons was
The allowance of $3,000 per month means that only 25% of the
employed labour force will be required to contribute to the
Stabilization Fund, while the remaining 75% will be exempt.
The exempt individuals include police constables and
recruits, defense force recruits, junior prison officers and
some senior prison officers.
Also administrative and other staff in the public sector
such as senior executive officers, secretaries/typists,
receptionists, security guards, watchmen, assistant
teachers, clerical assistants and a host of other government
employees will be exempted.
Further, certain waged and salaried employees in the private
sector will be exempt from contributing to the Stabilization
For those persons who will be contributing to the
Stabilization Fund, the tax burden will be kept to a
The following table presents the amount of tax that would be
payable for a number of different income levels.
Anticipated revenue from this measure, which will take
effect from April 1 2005, would be approximately $35
To ensure professionals are adequately captured within the
system, all professionals practicing in Antigua and Barbuda
will be required to undergo a business registration process,
at no cost, upon which a certificate of registration will be
Professionals would also be allowed to self-assess and
declare their taxable income to the IRD.
To ensure maximum compliance, the auditing capacity of the
IRD will be strengthened to allow for increased and more
effective random audits.
In addition, to facilitate the identification of businesses
for the purposes of taxation, all businesses, regardless of
size or nature of operation, will be required to register
with the IRD.
This business registration will be done annually, with the
authorization for the continuation of such business
contingent upon it being current with respect to all taxes
There will be no cost associated with this registration
This registration process will allow for better
identification of businesses that are subject to the
Corporation Tax, the Restaurant and Catering Services Tax
and other business taxes.
The Sole Proprietor's salary will be assessed at the same
rates as those applied to individual income while the
profits of his/her Unincorporated business will be subject
to a 25% tax.
Another new revenue measure will be a Retail Sales Tax,
which will be introduced by July 1 2005.
This tax is to be applied at a rate of 5% with certain basic
commodities being exempted from this tax.
Government will also introduce as of January 1 2005 an
excise tax at a rate of 7%.
This will be applied to alcohol and tobacco products and on
various luxury items.
In particular, the excise tax will be applied to vehicles
with engine capacities above 2.5 litres or 2500cc.
Also, the excise tax will be applied to certain high-end
Recognising, the importance of the rum industry in Antigua
and Barbuda, special provisions will be made to ensure this
excise tax does not in anyway affect the competitiveness of
Consolidation of Existing Revenue
By the beginning of the tourist season in November 2005, the
existing three taxes on the hotel industry (the Hotel Guest
Levy, the Hotels Tax and the Guest Tax) will be consolidated
into a single Hotel and Holiday Accommodation tax.
This will make for better administration and will ensure
greater compliance by hotels in meeting their tax
This single tax will represent a fixed sum, charged per
guest per night, in each hotel and other categories of
It will range from US$4 to US$53 during the high season,
according to the size and category of the property and from
US$4 to US$36 during the off-season, according to the size
and category of the property.
The hotels will be classified according to size and standard
so that the rate payable will be determined by such
The revenue expected from hotel taxes in 2005 is estimated
at $29 million.
Also, the carious Liquor Licenses (Retail License, Beer
License and Bottle License) along with the Hotel Liquor
License and the Tavern Club License will all be consolidated
into a single, less complicated simple tax.
Removal of Taxes:
To eliminate any unnecessary administrative burden on the
revenue departments and on tax payers, a number of existing
nuisance taxes will be abolished:
These include the Radio License; the TV License; and fee
associated with the Dog License.
Government will remove the 15% Entertainment Tax so that
local promoters will not be faced with added costs.
However, in cases where the social events include foreign
entertainers, the promoter will be liable to pay the
Entertainment Tax in respect of these foreign entertainers.
Further, the 2% tax on gross turnover of unincorporated
businesses will be removed.
The government will also eliminate the 3% tax on loans to
This is intended to boost investor interest and economic
This removal of the 3% tax of loans to non-nationals should
in effect reduce the cost of funds to non-nationals wishing
to invest in business enterprise or in residential
Another tax to be removed is the 1% foreign exchange levy.
This will further encourage investment in Antigua and
Barbuda as costs on the transfer of profits from investment
Also, the government will remove the administrative
bottleneck which requires persons wishing to convert any sum
at or above $250,000 into a foreign currency to apply for
There will therefore no longer be any restrictions in
Antigua and Barbuda on foreign currency transactions.
We recognise that while we attempt to improve the fiscal
situation in Antigua and Barbuda, there must still be some
effort to alleviate the effect of the new programmes and
measures for the more vulnerable sections of society.
Government will implement a number of support measures and
incentive schemes to ensure that the people as well as
business are able to function at sustainable levels.
To ensure that the more vulnerable in the country will not
face increases in staple items such as basic food items and
medication, the Customs Service Tax will be reduced by 50%
on items specified in the 'basket of essential goods'.
In these instances the Customs Service Tax will be slashed
from 10% to 5%.
This is what we mean by putting people first, Madam Speaker.
In addition, these items will be exempted from the sales
tax. This means that the cost of most basic food items will
be immediately reduced.
I give a few illustrations:
Due to Government's cutting the Customs Service Tax (CST) in
half and the exemptions of these basic food items from the
sales tax, households will realize direct and immediate
For example, a package of Prince Macaroni, which now retails
for $3.31, will be 25 cents less at $3.06.
A 5 lb Box of Bravo Chicken Legs, which now sells for $13.99
will be $1.27 cheaper at $12.72.
Tastee Cheddar Cheese, which now retails at $7.67, will be
54 cents cheaper at $7.13.
A 400g tin of Ovaltine, which now retails for $7.27, will be
52 cents cheaper at $6.75.
A dozen eggs, which now sell for $7.50, will be 53 cents
cheaper at $6.97. 1lb of salt-fish, which now retails for
$8.75, will be 62 cents cheaper at $8.13.
Hereford Corn Beef
Trinidad Orange Juice
Case of 24
The Government will ensure that these savings are passed on
to consumers by strengthening the monitoring and policing
capabilities of the Prices and Consumer Affairs Division.
Items in the basket of essential goods that are not
currently on the price control list will be added.
For a family of 3 or 4 persons who would typically spend
about $147 per week on these items, the Government's
reduction in the Customs Service Tax would result in savings
of about 10% per week.
That represents an increase in spending power of about $60 a
An additional $60 a month would be of some significance to a
lot of people, Madam Speaker.
In essence, this support measure will help reduce the cost
of living in Antigua and Barbuda for those in our society to
whom it matters most.
Further, the compounding of the consumption tax will be
removed from all imported items, in order to reduce costs at
With the removal of the compounding effect, importers should
realize an immediate reduction in the amounts payable at the
For example, at present, items being imported with a value
of $10,000 duty of 20%, a consumption tax of 15% and a
customs service tax of 10% would attract $4800 in duties and
With the removal of the compounding effect, the importer
will pay $4500.
This reduction in the compounding effect on imports will not
only assist in reducing the cost of living, but should also
facilitate expansion of economic activity in the private
sector, as the lower port charges should help to reduce
In the National Consultations preceding this Budget
Statement, the people of Antigua and Barbuda expressed
concern about the effect the new tax measures could have on
I am pleased to say that the Government has listened to the
people and has discussed options for reducing residential
mortgage rates with a number of financial institutions.
I can now confirm that the Government has secured a
commitment from ACB Mortgage and Trust Company to reduce its
mortgage rates by ½% in December 2004 and to further reduce
these rates by another ½% in April 2005.
Such a reduction in the rates homeowners face in respect on
mortgages will reduce their monthly payments.
For a mortgage of $150,000 over a period of 20 years, the
homeowner will realize a 6% reduction in monthly mortgage
payments as a direct result of the 1% decline in mortgage
This in real terms would amount to a saving of $1,224.84 per
year or just under $25,000 over the life of such a mortgage.
We must grasp the meaning of this, Madam Speaker:
A State Registered Nurse,
with a $150,000 mortgage on a home in Liberta and earning
just over $3,000 a month, will in fact have the equivalent
of her income tax liability offset in full by this 1%
reduction in her mortgage rate. The same would apply in the
case of a Sergeant with a similar mortgage on a home in
The government is confident that the other banking
institutions will follow this lead by the ACB Mortgage and
Trust Company and reduce their residential mortgage rates.
Also, the government hopes that this reduction in rates
would increase the demand for mortgages and this should
produce an increase in construction activity.
In addition to providing relief on mortgage rates,
government will eliminate the stamp duty payable on the
Discharge of Charge in on residential mortgages.
Further, the stamp duties on residential mortgages will be
reduced from $6 per thousand to $4 per thousand. All these
measures will reduce the total expenses faced by the
This reduction in rates will increase demand for mortgages,
which would be linked to increased construction activity.
This government recognizes the need to provide pensioners
with a stipend that allows them to maintain some basic
In this regard, the minimum Government pension will be
increased to $750 monthly as of January 1 2005 in order to
provide greater support to pensioners.
In addition, the government will in December of this year,
make a one-off payment of $500 to all Government pensioners
who are currently earning pensions of $500 or below.
This will amount to EC$553,000 in total payments.
The UPP Administration will right a long outstanding wrong,
inflicted on certain sections of the Public Service who were
denied salary increments negotiated by their Union and
agreed by the previous administration.
This dates back to 2000.
This Government cannot, in good conscience, ignore the
plight of these Public Service workers.
We have therefore made special arrangements to meet, in
part, this long outstanding obligation.
Affected public officers will receive this relief before
Certain other groups in the Public Service, particularly CMC
workers, employees of the Fiennes Institute, the Mental
Hospital and Holberton Hospital, will also receive some
CAPITAL EXPENDITURE ESTIMATES
Capital expenditure for 2005 is estimated at $116 million.
This will reflect government's commitment to spending a
meaningful proportion of revenue on improving
infrastructure; enhancing investment in social development
projects; and ensuring there is sufficient capital
investment, which should encourage private investment.
The focus of the 2005 Budget will be on preparations for
World Cup 2007; expansion of the airport; and various major
road enhancement and construction projects - particularly in
respect of roads in Barbuda; and a number of road networks
in several communities in Antigua.
In total, about $26 million will be spent on road
construction, of which $10 million is allocated for road
construction in Barbuda.
In light of the foregoing, the question naturally arises as
to how the recurrent deficit of $86,128,502.00 will be
We intend to do so by reducing outstanding arrears through
negotiations with creditors and by the sale of Treasury
Bills and Bonds valued at $151 Million, which would give us
$48 million in "new money".
This will be made possible through the efforts of the
Antigua and Barbuda Investment Bank to assist government in
restructuring and negotiating its high interest debt.
We wish to commend the ABI Group for its initiative and
support in partnering with the government as we seek to
address the fiscal imbalance and improve the nation's
The government will also pursue a policy of public ownership
and limited divestiture of state owned assets to finance the
deficit. The sale of Crown Lands is also a viable policy
option for the generation of revenues necessary to close the
The Public Debt provisions for 2005 are set at $100,692,659.
This is a 10% reduction in comparison to the provisions made
in the 2003 budget.
The provision for Public Debt servicing represents 17% of
the budgeted recurrent expenditure and 20% of the budgeted
The 2005 public debt provision is allocated as follows:
Domestic Amortization: $30,812,641
Domestic Interest Payment: $21,338,645
Sinking Fund Contribution: $ 3,976,144
External Amortization: $33,248,717
External Interest Payments: $11,316,512
During 2004, the Government of Antigua and Barbuda, in its
attempt to reduce the level of public debt servicing,
renegotiated the terms and conditions of its debt to
domestic commercial banks and as such has effected
In this regard, Madam Speaker, I wish to record the
Government's gratitude to all of our domestic commercial
Further, in an effort to address the floating debt
(suppliers' credit) the government will negotiate with
domestic creditors for 70% payout on outstanding debt.
The high level of arrears on the Central Government debt has
restricted the level of new borrowing over the last few
years. Government is currently formulating a plan to reduce
the level of arrears and to normalize relations with its
The rate growth of external debt is definitely signaling the
need for better debt management and structured control
mechanisms to ensure that our debt burden does not continue
To this end, the Government has re-instituted the National
Debt Co-ordinating Committee, which will, among other
things, focus on issues for effective management and seek to
maintain prudent and sustainable levels of debt for Antigua
To enhance its debt management, renegotiating and
restructuring programmes, government has approached CIDA to
provide technical assistance in these areas.
This technical assistance should increase debt management
capacity in Antigua and Barbuda and should also, through
support in respect of debt restructuring, help reduce the
total debt stock and bring our debt servicing requirements
to more manageable levels.
I can now confirm that following intensive negotiations
since April, the Government has already secured provisional
agreement for the net reduction of the Central Government
Debt in the region of $650 million.
The infamous Deep Bay debt of approximately $600 million on
the Royal Antiguan Hotel will be substantially reduced.
So too will the DEVCON debt for the dredging of the St.
On another creditor account which I shall shortly identify,
we have succeeded in negotiating a debt write off of $50
million on an estimated $230 million debt.
The question arises, Madam Speaker, did the previous
administration ever really care about such matters?
GOVERNMENT/PRIVATE SECTOR PARTNERSHIP
This government recognizes that for high and sustainable
levels of economic growth to be realized in Antigua and
Barbuda, economic activity must be driven by private
In this regard, it is necessary for government to facilitate
private sector development by creating an enabling
macro-economic environment and also by offering appropriate
incentives for private enterprise.
The Antigua and Barbuda Investment
As part of government's overall programme to promote
domestic and foreign investment, Antigua and Barbuda
Investment Authority is to be established in January 2005.
This entity will serve as a one-stop-shop for investors and
will function as an investment promotion and facilitation
The Investment Authority will be the repository of all
necessary information on doing business in Antigua and
Further, it will be that critical link between the various
government agencies with which the investor must interact.
The facilitation function of the Antiguan and Barbudan
Investment providing support and practical advice to micro
small and medium domestic enterprises in order to enhance
their capacities in areas such as efficient business
operations, effective cash flow forecasting and marketing.
The Antigua and Barbuda Investment Authority will be
responsible for global investment.
Incentives for Tourism Investment:
To encourage development of the hotel industry, concessions
will be extended to all hotels in 2005 for the expansion and
refurbishing of existing properties.
Further, concessions will be granted for the construction of
new hotels with at minimum of 10 rooms.
Particular emphasis will be placed on encouraging the
development of locally owned small hotels.
These incentives, as well as investment promotion measures
in general should assist local businesses and entrepreneurs
to position themselves to take advantage of benefits and
opportunities anticipated with World Cup 2007.
With respect to agriculture, allocations have been made to
enhance this sector.
As noted previously, particular focus will be on the
increase of cotton and pineapple production as well as in
the further development of agro-processing in Antigua and
Further, efforts will be made to enhance production of other
crops and to enhance the fishing industry so that local
farmers and fishermen will benefit from expanded linkages
with the tourism sector.
Special measures will be put in place to assist small and
micro agro-processing businesses - particularly those
involved in producing, bottling and selling pepper sauce,
jams and various condiments.
Promoting Manufacturing and Small
A proportion of the $100 million in concessions provided for
in 2005 will be targeted to the manufacturing sector and the
development of small businesses.
Provided that certain value added and other requirements are
met, manufacturers and small business owners will be allowed
the importation of raw materials free of duties and
consumption tax for a period of three years.
To stimulate small and micro business in Antigua and
Barbuda, Government will seek technical assistance for small
and micro businesses in order to enhance efficiency of
operations, improve productivity and promote export
The Government will seek to access resources for on-lending
to existing small and micro businesses and to persons
starting small business ventures.
Free Trade Zone:
To enhance its operations and to encourage light
manufacturing for export, specific measures will be
undertaken to further develop the Free Trade Zone.
This will involve a joint venture between an international
business developer, the government and local development
International Financial Services:
For an economy to be viable and for economic growth to be
sustainable, it cannot rely on a single sector for growth in
The government will develop a comprehensive diversification
The financial services sector shows great promise for
revenue delivery to the Antigua and Barbuda economy.
Appropriate support will therefore be provided to the
Financial Services Regulatory Commission to enhance its
capacity to monitor and assess operations in the
international financial services sector.
This will include Internet gaming.
Further, with the introduction of new Trust Legislation, it
is expected that this agency will generate more revenue.
Mutual Funds Legislation will be introduced.
This will enhance and encourage growth in the international
financial services sector.
The government has confirmed an alliance for joint marketing
and promotion of the international financial services and
The Government will lend its support to the Antigua and
Barbuda International Marketing Corporation (AIM Corp),
which will focus on promoting Antigua and Barbuda's
international competitive advantage in international
financial services and tourism.
The effective operation of this corporation will depend on
strong private and public sector partnership.
The Government gives the undertaking to provide an adequate
and enabling policy environment.
The success of AIM Corp will not only have beneficial
effects for the targeted sectors, but also for the economy
as a whole.
Incentives through Reduction of the
Corporate Income Tax:
An additional measure to promote investment in Antigua and
Barbuda and to encourage expansion of existing companies
will be the reduction of the corporate income tax from 35%
Further, government will reduce the corporate income tax
rate to 27.5% for banking institutions that maintain
commercial lending rates at or below 10% and their
residential mortgage rates at or below 8%.
This provision will be applicable for one year in the first
instance after which it will be reviewed in order to
determine its success.
This provision wills not only offer additional support to
homeowners, but it should also facilitate an increase in the
demand for residential mortgages and this should produce an
increase in construction activity.
I expect that with all that I have outlined, together with
what I shall yet present, this foundation for a fresh start
will turn out to be a launching pad for substantial and
sustainable economic growth and ever increasing personal
prosperity for the Antiguan and Barbudan people.
ALLIANCE FOR DEVELOPMENT THROUGH
EDUCATION AND EMPOWERMENT
I turn now to a preoccupation more dominant than any other,
in private contemplation and in public discourse, virtually
every day since the United Progressive Party's election to
That preoccupation is the role of Mr. R. Allen Stanford in
economic and social development in Antigua and Barbuda under
the UPP Administration.
No single individual so dominates the investment landscape
in any nation in our region as Mr. Stanford does in Antigua
Many persons have serious problems with this; among them,
many colleagues in the United Progressive Party.
We took serious issue with the conduct of ALP Ministers, who
surreptitiously compromised themselves and their government
by accepting very generous favours from Mr. Stanford while
representing the government's and the people's interests in
their negotiations with him.
Mr. Stanford, in the view of many, was ill-advised in his
response to UPP protests over the matter.
Members of the Government are convinced that it did not take
long for Mr. Stanford to become a wiser person after he
publicly compounded the problem that had resulted from the
former Ministers' deviant conduct.
It is a matter of conjecture as to whether those former ALP
Ministers are now any wiser.
The UPP also had serious problems with the questionable
Asian Village transaction between the former administration
and Dato Tan Kay Hock.
The previous government's acquisition of what had always
been private property, and its immediate transfer to new
private ownership, at less than what the previous government
paid remains a mystery and a scandal that is this
Government's obligation to probe.
That is why the Sunshine Government has challenged that
transfer in the court, and why we insist on investigating
the circumstances that surrounded it.
Mr. Stanford did little to advance his cause when he made a
bid earlier this year, to take over the Asian Village
project, which gave Dato Tan a number of entitlements that
were odious to the Antiguan and Barbudan people.
Mr. Stanford has since stepped way from the Asian Village
However, Mr. Stanford's interest in acquiring the real
estate that was fleetingly owned by the previous government
while the property was en route to Dato Tan, no longer
extends to the multiple concessions and exclusives that were
part of the ALP Administration's arrangement with Dr. Dao
We, of the UPP Administration always recognised that our
positions had to be subservient to the common good.
I can now confirm that since the Stanford Group's
presentation to a representative group drawn from civil
society shortly after the election of the Government, there
have been continuing discussions between Mr. Allen Stanford
and the Government on the bases for a demonstrably win-win
partnership between the Stanford Group and the people of
Antigua and Barbuda.
Those discussions gained impetus over the last few weeks.
The proposals that had taken shape during those discussions
received the unanimous endorsement of last Tuesday's Cabinet
After internal discussions in the early hours of Saturday
morning, following his return from Hong Kong, the evening
before, the Prime Minister met with Mr. Allen Stanford in
marathon discussions that started at 11 o'clock Saturday
morning and carried through for hours.
During their lengthy discussions on Saturday, Prime Minister
Spencer, acting on behalf of the people of Antigua and
Barbuda, worked out the fundamentals for a far-reaching and
historic alliance between the Stanford Group and the
The Prime Minister has directed that the fundamentals for an
alliance between the Stanford Group and the Government of
Antigua and Barbuda be embodied in the 2005 Budget
The prime fundamental of the partnership between the
Stanford Group and the Government of Antigua and Barbuda is
Development through Education and Empowerment.
To this end, four projects have been agreed between the
Government and Mr. Allen Stanford for immediate
ONE, Mr. Allen Stanford will
make an immediate contribution of $1 Million, together with
technical assistance where appropriate, to the completion of
the construction of the National Library.
Mr. Stanford has confirmed that he will present that cheque
to the Government tomorrow.
TWO, the Stanford Group will
make a dedicated $10 Million Fund for the empowerment of new
Antiguan and Barbudan entrepreneurs.
Those funds will be in place from January 1st, 2005.
The Fund will provide financing of up to $50,000 to support
micro and small business ventures owned by Antiguans and
The Stanford Group will provide technical support and
counseling for this project, which will operate through the
Antigua and Barbuda Development Bank.
Public servants opting for voluntary separation from
government employment will be given fast-track access to
grants from the special $10 Million Fund.
This is one of the mechanisms the Government will utilize in
moving public servants from employment to ownership of their
THREE, the Stanford Group will
fund and construct at no cost to the Government a state of
the art higher education complex in Antigua on a projected
budget of $25 Million.
This will be Allen Stanford's contribution to the
fundamental of development through education and
Related to this, Mr. Stanford will fund an ongoing endowment
to provide full scholarships to young Antiguans and
Once the site for the new institute is identified, work on
this complex will commence in the first half of 2005.
FOUR, Mr. Stanford will
transform Stanford Development Company into a professional
management services company, which will outsource an
estimated 70% of its construction projects to local
contractors and other local suppliers.
This is in harmony with the Government's stated policy on
reserving 25% of procurement on private sector as well as
government projects for qualified small business; as will be
mandated by the Buildup Business Act.
In addition to these four immediate fundamentals for
development through education and empowerment, Prime
Minister Spencer and Mr. Allen Stanford hammered out a
number of other fundamentals during their watershed
discussions on Saturday.
The country's leader and the business leader agreed on a
review of the funding arrangements for the Mount St. John
Hospital with a view to relieving the Medical Benefits
Scheme of the monthly $735,000 payment to the Stanford
Group, which financed that controversial project.
Mr. Stanford has agreed to assist, where appropriate, in the
functioning of the institution, which will provide
specialised health care to Antiguans and Barbudans, as well
as to patients from overseas.
Together with all of this, Mr. Stanford confirmed his
willingness to write off $50 Million of the estimated $230
Million debt the Government of Antigua and Barbuda owes his
Culminating the fundamentals negotiated in Saturday's
meeting between the Prime Minister and Mr. Allen Stanford,
is the Government green light for Mr. Stanford's acquisition
of Guiana Island and other lands to which Dato Tan Kay Hoc
presumably holds title.
The Stanford plan for development of the land package which
he is negotiating to acquire from the current title holder
is envisaged as a $3 Billion upscale resort that will inject
an estimated $2 Billion into the Antigua and Barbuda economy
in its construction phase.
The project is expected to generate continuing employment
for 1,200 persons in direct and indirect jobs over its
thirty-six months construction period.
The planned Six-Star resort will offer jobs for 1,000
persons when it is in operation.
Well before its completion, the project will recruit some
500 to 700 employees for extensive training, starting in
A similar number of persons will be employed next year, with
the start up of construction.
Mr. Stanford has proposed a front-end corporation tax
arrangement, under which tax concessions will be deferred
for 30 years, while he will pay to the Government Treasury a
monthly flat tax, amounting to $34.4 Million a year,
starting in January, 2008; aggregating to more than $1
Billion over 30 years.
Full project funds are on hand for the entire project, which
will cater to the wealthiest people in the world, and it
will open its doors with $400 Million cash in hand.
Government is impressed by Mr. Allen Stanford's voluntary
submission of all documents pertaining to all agreements he
entered with the previous administration.
We are also impressed with Mr. Stanford's voluntary proposal
for all his projects requiring government approvals to be
subject to performance clauses.
In his meetings with the Government, Mr. Stanford has
stressed his sensitivity to, and his respect for the
character and conservation of Antigua and Barbuda's
environment, which he sees as valuable equity that enhances
the value of any business venture.
Mr. Sanford also emphasises his recognition of the
birthright of every Antiguan and Barbudan to have access to
every beach on our two islands.
The Government is confident that the Stanford Group's
business agenda can be in total harmony with the aspirations
of the Antiguan and Barbudan people, and with the
Government's development agenda.
The Government of Antigua and Barbuda looks forward to an
enduring and productive partnership with the Stanford Group.
I trust the significance of the developments I have just
outlined permits me the liberty to say to Mr. Stanford:
"Welcome to Government in the Sunshine!"
I sense that the nation is no longer waiting to exhale.
This alliance between the Government of Antigua and Barbuda
and Mr. Stanford has the potential to dramatically transform
this country's economy.
Notwithstanding this, I will not encourage a national
mindset of spend and splurge.
That would be a formula for an economic bubble that is
ultimately bound to burst.
It is just as critical that we avoid overheating the economy
as any other obligation we now carry.
A new discipline is fundamental to the new opportunities
that come with a fresh start.
We must, above all, recognise that Antigua and Barbuda dare
not, I repeat, dare not, risk repeating the mistakes of the
past, when bust followed boom, because of fiscal
maladministration at the level of the government; and
personal extravagance at the individual level among large
numbers of the population.
Antigua and Barbuda might well have been singular among our
sister nations of the region in not possessing the wisdom
that we should have put aside something for the rainy days
that were bound to come.
Should this country fail to learn from the mistakes of the
past, it is not likely that either we, or our children, or
our children's children, will be allowed a second chance for
a fresh start.
The electorate gave this nation a chance for a fresh start
on the 23rd of March this year.
This nation now has a chance for a fresh start.
We must seize that opportunity, now.
The economic theology of eat drink and be merry today and
let tomorrow take care of itself, is a virtual suicide
prescription for individuals as well as for nations.
That is not the path that any of us will consciously follow.
The judgments I have made in constructing the Budget for
2005 are designed to lay a solid foundation for a fresh
We are on the threshold of a fresh start.
We cannot afford to blow it.
The 2005 Budget is an instrument for equitable distribution
of the entitlements and the responsibilities of the better
off in the society, as well as the less privileged.
Every judgment I have made in laying the foundation for a
fresh start has been driven by realism.
At the same time, every judgment I have made has been
tempered by restraint and by conscious compassion.
Three quarters of the nation's income earners will be
exempted from paying income tax or filing income tax
The staples of life will be less expensive and more
affordable to all.
This will bring particular and meaningful benefits to those
in our society who face the greatest challenge in making
Through personal income tax, the better off among us will
help to ease the squeeze on those in greatest need.
The vast majority of income earners will have no income tax
The judgments we must make in reducing the public payroll
will be characterized by compassion.
This nation has no option but learn to live within its
Budget 2005 calls for all in Antigua and Barbuda to
contribute in rebuilding our economy and in giving our
nation a fresh start.
Budget 2005 affords those who are privileged to earn more,
or who are fortunate to possess wealth, the privilege of
contributing to the well being of the many who are less
"The test of our progress is not
that we add more to those who have much; it is whether we
provide enough for those who have too little."
Franklyn Delano Roosevelt spoke for all societies, in all
places, in all times.
He also spoke for this society, at this time, when he
expressed that wisdom, Madam Speaker.
A thinking and educated society elected the United
Progressive Party to government eight months and seven days
We continue to trust the commonsense and the considered
judgment of the same people.
I am confident that the Antiguan and Barbudan people will
maintain that faith in us and that they will respond to the
call to work in partnership with their Government in giving
our country a fresh start.
I am also confident that they will seize the opportunities
for a fresh start that Budget 2005 presents to all.
As I move to the conclusion of my presentation, I must
confide that I am not confident of the level of goodwill I
will continue to enjoy among my Cabinet colleagues.
In spite of the good news I have shared with the nation, I
have not come to this House today with a Santa Claus bag of
The state of the economy permits nothing of that sort.
As we call upon the Antiguan and Barbudan people to share
the sacrifice demanded by the times and by our
circumstances, the United Progressive Party will demonstrate
that as charity begins at home, austerity, in this case,
begins with members of the Government.
Effective New Year's Day, 2005, the Salaries of Ministers of
Government, Ministers of State and Parliamentary
Secretaries, will be cut by 10%.
This means that when personal income tax becomes operative
on the 1st of April, 2005, our Honourable Prime Minister, my
colleague Ministers, Ministers of State and Parliamentary
Secretaries, and the Minister of Finance and the Economy,
will be taking home a lower portion of our salaries than
will other income earners in our tax brackets in Antigua and
I take their thunderous response to this contribution to the
Stabilization Fund as my colleagues' enthusiastic approval
of this measure.
I venture to suggest, Madam Speaker, that other officials,
including Senators and Board Members appointed by this
administration, will, more than likely, voluntarily take a
similar cut in salaries and fees.
I am confident that Honourable Members opposite need no
urging to join the United Progressive Party in this symbolic
sharing of the burden of adjustment at this time.
On this note of caring and sharing, I take this opportunity
to wish the Honourable Speaker and Honourable Members, and
the nation, a peaceful, safe, and Holy Christmas Season.
Together, all who love Antigua and Barbuda can transform
Antigua and Barbuda into a land of opportunity where every
individual has the chance to be the best he or she can be;
into a safe and healthy home where people want to raise
their families; into an economy which attracts talent and
investments; and into a society which offers young people
the chance to be shareholders and nation builders; and a
global centre of excellence with a quality of life that will
be widely envied.
We have a genuine opportunity to start now, to build that
land, here in Antigua and Barbuda.
We might not be allowed a second chance.
Let us work together to build that land in our land.
Budget 2005 is accompanied by its primary source, the views
that the Antiguan and Barbudan people freely expressed
during the public consultations which laid the foundation
that makes Budget 2005 genuinely the people's budget.
With gratitude for the gracious attention of Honourable
Members, at the pleasure of the Prime Minister, I look
forward to 2005 with the firm intention to resolutely direct
this nation's fiscal and economic affairs within the
parameters and the disciplines I have defined in my
With this resolution, I commend this Foundation for a Fresh
Start, Budget 2005, to the House, Madam Speaker.
I respectfully beg to move, Madam Speaker.