The
Development Planning Unit
Government of the British Virgin Islands

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LEGISLATIVE COUNCIL OF THE VIRGIN ISLANDS
BUDGET ADDRESS 2005

“Rising to the Challenge”

by the
Honourable Ronnie W. Skelton
Minister of Finance and Economics Development 
Minister of Health and Welfare


Delivered on: 2 December ,2004

Introduction 

1. Madam Speaker, today it is my duty and privilege as Minister for Finance to move that the Appropriation Bill (2005) be read a second time. As you know, Madam Speaker, the Government of the BVI works hard at increasing opportunity and security for all our citizens in all our islands, from Anegada to Jost Van Dyke. This Bill sets out the financial framework for doing so in 2005.

A Global Perspective 

1. Madam Speaker, we continue to live in uncertain times. 2004 saw new and continuing unrest in Iraq, Afghanistan, Haiti, Africa, the Middle East and elsewhere. Combined with the strongly contested Presidential election in the United States and the rise in energy costs, the financial markets were unsettled. However, the world economy avoided a slide and signs are that markets are moving upwards again. 
   
2. Madam Speaker, fear that an overheated market might snuff out continued growth in the Asian economies is subsiding. As the US dollar remains weak, following the huge cost of the Iraq war, the US economy seems set for renewed growth driven by exports. This presents challenges, of course, for import-dependent economies such as ours. But it also presents opportunities. 
   
3. The challenge for us here in the BVI is to position ourselves to seize these opportunities in order to secure our Territory’s success and prosperity for the long-term. Achieving this objective is not just about the policies of this Government. It is not just about Ministers or civil servants. At the end of the day the success of our Territory begins with our people.
   
4. We are a small Territory. We don’t have oil. We don’t have a large labor pool, or vast lands for agricultural production. We don’t have heavy industry. What we have are our beaches, our waters, and our talents. The beaches and waters are the Creator’s blessing upon us. Developing the skills and talents of our people and making the most of our potential, is our duty.
   
5. We all have to use more initiative and be prepared to work that little bit harder. Madam Speaker, we must all strive to be better than “good enough.” That means setting ourselves on a path of constant change and renewal. It does not mean ditching our old traditions. Instead, Madam Speaker, it means that we have to make a greater effort to be in a perpetual state of readiness. 
   
6. Madam Speaker, the immediate way forward for the BVI lies in our making the most of new technologies, and in ensuring that our ways of working are as efficient as possible. The Government has a major role to play in reinventing our institutions and making them more relevant; in fortifying the whole Territory’s social infrastructure and in developing a sustainable, world-class education system. 
   
7. Madam Speaker, we will invest handsomely in the development of our young people. We will do all that is necessary to promote a stronger and more vibrant economy, based on sound market fundamentals. And we will provide a legislative framework for good governance and “Government in the Sunshine.”

Domestic Economic Events and Performance – Looking back on 2004 

1. Let me now turn, Madam Speaker, to domestic events and the BVI’s performance in 2004. Following a small contraction in 2003, we anticipate that the figures for 2004 will show that the BVI enjoyed a healthy growth of between 2 and 2˝ per cent. As Honourable Members would know, on taking office, this Government found it necessary to put a temporary halt on public construction projects while we checked the finances and the way that contracts were awarded. I am pleased to report that the problems have to a large extent been resolved and work is proceeding.
   
2. Madam Speaker, in 2004, we continued the work of improving the capacity of the Civil Service to deliver on their responsibilities to Ministers and the people in an efficient and timely manner. I am pleased by the patriotic spirit of cooperation shown by so many of our public servants. We are making progress Madam Speaker, and we will continue to do so. 
   
3. Madam Speaker, during 2005, this Government will be keeping a closer watch on how business is done in our Territory. We will continue to expect vendors, professionals and tradesmen to provide the best service possible at competitive prices. Fair and vigorous competition will benefit everyone.
   
4. Madam Speaker, in the past, our people were extremely self-reliant, and this reliance placed a relatively small burden on Government’s resources. Because of our success, we now have the resources to better assist our people, through social and other programmes. This Government remains committed, Madam Speaker, to supporting and funding social services programmes that will help the less fortunate in our society. We also remain committed to the creation of economic opportunities for our people that will strengthen their self-reliance and ultimately reduce our social services expenditure. Madam Speaker, I am sure that most of our people would rather have a hand up than a handout.
   
5. Keeping the cost of Government’s programmes under constant review, is extremely important. Madam Speaker, I am fully aware that every penny the Government has at its disposal comes as a result of someone’s hard work. Therefore, Madam Speaker, in 2005, we will continue to look at existing programmes to ascertain whether they all offer sufficient value for money and they are a good use of the people’s resources.

Recurrent Budget Estimates of Revenue and Expenditure (The figures and what are behind them) 

1. Madam Speaker, I now turn my attention to the Budget Document before this Honourable House. As you know, Madam Speaker, this Government pledged to operate in the sunshine. We continue to listen to the aspirations and priorities of our people. This Budget, Madam Speaker, reflects what we have heard. 
   
2.  Madam Speaker, I wish we could do everything at once. Our people’s needs are great and the opportunities to improve these beautiful islands are many. Yet as we traveled around, Madam Speaker, I was relieved to find a general awareness that, because of limited financial resources, it would take more than one budget, or even two or three budgets, to fulfill all our pledges. I can assure you, Madam Speaker, that with the support of the people and Honourable Members, bit by bit, year by year, we as a people will reach our goals. 
   
3. Madam Speaker, at the same time, we have been listening to the views of the International Community and to the views of Her Majesty’s Government. Madam Speaker, as a result of the new European Union rules, we are obligated to make changes to our tax code. Again, following extensive discussions, the measures, that I have laid before this Honourable House earlier today, outlines the changes that we are proposing to our tax code. These changes will fulfill our obligations to the International Community while at the same time maintaining our international competitiveness in the area of financial services.
   
4. Madam Speaker, we are obligated to the elimination of the so-called “ring fencing” that gives International Business Companies a preferential corporate tax rate when compared to local companies or Cap 285 companies. The Chief Minister’s Office, Attorney General’s Chambers, Ministry of Finance, and Financial Services Commission have worked and continue to work diligently to ensure that the necessary measures are in place by the 1st of January, 2005, thereby fulfilling this Country’s international obligation. Rather than abolish the internationally popular International Business Company (IBC) and its revenue stream, we have taken the opportunity to enhance this Country’s attractiveness.
   
5. Madam Speaker, I would like to take this opportunity to pay tribute, on behalf of the Government and people of the BVI, to the private sector partners for their constructive contribution in this effort. In addition Madam Speaker, on 1st January 2005, the Territory will begin the move to a single corporate vehicle for all companies registered in the BVI. This Act will be called the BVI Business Company Act, to which a zero tax will apply. As there will only be one type of company, ‘ring fencing’ will no longer exist.
   
6. Madam Speaker, in light of the changes made to corporate taxes, this Government has also decided to make some changes to personal income tax. In deciding the best way forward, we have listened to the people of this Territory, analysed their comments carefully, and came up with a solution which we believe truly reflects their concerns and at the same time maintains this Country’s revenues.
   
7. Madam Speaker, the new payroll tax we introduced is structured as follows: 

    The maximum overall tax at any one time will be fourteen percent (14%). The first seven thousand five hundred dollars ($7500) will be tax free, both for the employer and the employee. Above this, employees will pay tax at eight percent (8%). Employers will be split into two classes: small business and others. The Class 1 Employer, or small business employer, will be taxed at a rate of two percent (2%) of his payroll. By small business employer, we mean someone who has a payroll of less than one hundred and fifty thousand dollars and one cent ($150,000.01) annually; a turnover of less than three hundred thousand dollars and one cent ($300,000.01) annually; and has seven employees or less. For all other employers, Class 2 Employers, tax will be levied at six percent (6%) of their payroll. 

8. I should point out here, Madam Speaker, that these changes will not in any way affect the existing Social Security contribution. Madam Speaker, this payroll tax regime has the considerable merits of simplicity, fairness, and ease of application. 
   
9. Madam Speaker, I maintain that all corporate and individual citizens must contribute to the upkeep of the society. We must levy taxes Madam Speaker, to raise the revenue to pay for those services that society demands. We must pay for the services of the police, fire, and prison. We must pay for the collection and disposal of solid and liquid waste, and, Madam Speaker, we must pay for the education of our children and our young people. 
   
10. Permit me, Madam Speaker, to turn to the details of the 2005 Estimates. These estimates project revenues of two hundred thirteen million, two hundred thousand dollars ($213,200.000). Of this sum, one hundred eighty-five million, two hundred seventy-four thousand, nine hundred dollars ($185,274,900) have been earmarked to cover recurrent expenditure. This leaves twenty-seven million, nine hundred twenty-five thousand, one hundred dollars ($27,925,100). Madam Speaker, of the twenty-seven million, nine hundred twenty-five thousand, one hundred dollars ($27,925,100), we propose to spend twenty-four million seventy seven thousand, three hundred dollars ($24,077,300) to partially fund our Capital programmes for 2005, and one million dollars ($1,000,000) to the Emergency/Disaster Relief Fund. Madam Speaker, this Government will contribute two million dollars ($2,000,000) to our Reserves. 
    
11. I do not propose, Madam Speaker, to take up Honourable Members’ valuable time by going through the Estimates line by line at this time. This will be done by my Ministerial colleagues during the Committee and Debate stages. However, it may be appropriate for me to focus your attention on certain projects and programmes that will enhance the BVI’s standing and ability to compete in the world.
    
12. Madam Speaker, we are delighted that the Terrence B Lettsome International Airport and Multipurpose Sports Complex have now been completed. While these entities are likely to place considerable demands on our Recurrent Budget, they will add greatly to the attractiveness of the BVI as a destination and assist in the development of sports tourism. 
    
13. Madam Speaker, we are also delighted that we will be able to continue to generously fund our goal of equipping every BVIslander of school age with the necessary education and skills. We have and will continue to put programmes in place to improve our Primary, Secondary and Tertiary education, including curriculum development and training. Madam Speaker, we have recently introduced a Technical Vocational programme which will give all students the opportunity to equip themselves so that they can make their contribution to this Country’s development.
    
14. For all this and other programmes to be successful, Madam Speaker, the training of the educators and facilitators is essential. The budget estimates are, therefore, replete with provisions for scholarships, workshops, seminars, materials and personnel costs.
    
15. Madam Speaker, Honourable Members will also notice the sizeable subvention proposed for the BVI Tourist Board. Tourism will continue to be one of the main generators of economic activity in the BVI in the medium term. This Government intends to take the necessary steps in promoting and positioning our Country as a quality leisure experience.
    
16. This Government is heartened by the role that the private sector is playing by ensuring that we deliver a high quality service and product to our customers. The recent renovation and refurbishment by establishments such as Little Dix Bay Hotel, Peter Island Resort, Maria’s By the Sea, Long Bay Hotel and Lambert Estate are good examples of product improvement.
    
17. Madam Speaker, this Administration is fully aware of the concerns about the quality of our health services. We will improve these to safeguard the health of our people. To this end, we are forging ahead with the extension to Peebles Hospital to enable an expansion of services. Madam Speaker, it is this Government’s intention to start the construction of the new hospital in 2005. Feasibility studies have already begun on this and developments will continue in 2005. 
    
18. Madam Speaker, I am confident that all members of this Honourable House and the general public will join me in commending our leader, the Honourable Chief Minister, for his leadership over the last year for the substantial improvements made to our Capital, Road Town. This initiative will be excellerated in the New Year with the appointment of the City Manager. Madam Speaker, on behalf of the Government, I wish to express our sincere appreciation to the Ag. Director of Public Works and his team for their hard work in making these improvements a reality.

Public Debt 

1. Turning now to the Public Debt, Madam Speaker, this is one of the many areas in which this and prior Administrations have had an impeccable record of honouring this Country’s obligations.
   
2. Madam Speaker, this administration will only undertake further borrowing after vigorous examination and careful study. Every dollar borrowed must be dedicated towards projects that are judged to be of clear and demonstrable benefit to the people of this Territory, economically viable and as far as possible self-liquidating. Provisional estimates show that, as of 31st December, 2004, our national debt (domestic and foreign) stood at approximately ninety million dollars ($90,000,000), a 1.1 percent increase over the year ending 31st December 2003. Domestic Debt grew by 7.96 percent while Foreign Debt decreased by 4.64 percent. Foreign Debt now stands at fifty million dollars ($50,000,000), while Domestic Debt stands at forty million dollars ($40,000,000).
   
3. Of the National Debt disbursed and outstanding, 27.5 percent is in the form of contingent loan liability for Statutory Boards and Public Corporations. These are all loans which the Boards and Corporations are paying from their own operating revenues.

The Reserve Fund 

1. Madam Speaker, as you will recall, the new Public Finance Management Act (No. 2 of 2004), among other things, makes provision for a Reserve Fund. It is my intention as Minister for Finance to transfer to the Reserve Fund all surpluses on the Recurrent Expenditure at the end of this year. 
   
2. Madam speaker, I am also proposing in this Budget Proposal to continue the process of augmenting our official reserves by contributing $2 million to the Reserve Fund in 2005. Madam Speaker, I cannot over emphasize the commitment of this Administration to ensuring a meaningful level of reserves, sufficient to cover at least three months operating expenditure, approximately forty-eight million dollars ($48,000,000). 

Madam Speaker, this Reserve will not only help to reduce the impact of cyclical shocks to the economy but can also be used to leverage levels of financing at strategic points in this Country’s development. 

Capital Budget Estimates of Receipts and Expenditures 

1. Madam Speaker, even with several major projects completed and others being commissioned, there remains a need for sizeable capital outlays on a number of other worthwhile projects. Of the thirty-nine million, three hundred twenty-eight thousand, three hundred dollars (39,328,300) in the Capital Budget, twenty four million and seventy-seven thousand, three hundred dollars ($24,077,300) in local revenue is needed to ensure the implementation of our Capital programme.
   
2. Madam Speaker, this Budget proposes to raise fifteen million two hundred fifty one thousand dollars ($15,251,000) by loans to complete the funding requirements for this year’s Capital Budget. It goes without saying, that increasingly we are being required to fund from our own resources a greater portion of the Territory’s development.
   
3. Madam Speaker, in order to address this Territory’s overall infrastructural needs, we will need to spend upwards of one hundred and fifty million dollars ($150,000,000) over the next five (5) years on the following priority areas and projects. Madam Speaker, 

1.  We must build a second high school while we continue to upgrade our present school facilities.
   
2. We must build a new hospital while at the same time continuing to upgrade the health facilities on all the islands.
   
3. We must install sewerage treatment systems in all the developed areas of our Territory.
   
4. We must improve and upgrade our police, immigration, and customs facilities.
   
5. We must build a modern Ferry Terminal at West End. 
   
6. And, Madam Speaker, we must continue to upgrade our existing road systems while at the same time opening up new roads.

Programmes for 2005 – New and Continuing

Education, Youth and Sports

1. Education, youth and sports, Madam Speaker, are high on this Government’s agenda. Sport fosters discipline and responsibility, and by encouraging our youngsters to take part in and to excel in sports, promotes these habits. Madam Speaker, the development of our young people is vital for the continued development of our Country. By developing and educating our young people, we can prepare them to lead productive lives in our society. We have some problems, Madam Speaker, and while not on the same scale as our neighbours and metropolitan countries, if left unchecked, these problems will result in increased levels of crime. 
   
2. Madam Speaker, I have also signed on to the belief that it takes a village to raise a child. The establishment of the Department of Youth Affairs and Sports, and the completion of the Multi-purpose Complex, demonstrate this Government’s commitment towards our young people. We will continue to do everything within our power to encourage the proper and well-balanced development of our young people so that they will become productive members and leaders of our society. 
   
3. Our young people face many challenges, and the world in which they must function today is more complex than the one my colleagues and myself faced when we were growing up. We as their parents, mentors and role models must understand our various roles. In order to address the many issues facing our youth, this Administration will continue to implement programmes and policies aimed at developing a world class education, sports and recreation system. 
   
4. The curriculum development project is one of the reform initiatives that is necessary in order to make education relevant to the times in which our young people are living. Already, Madam Speaker, we have identified specific changes to the curriculum that is now followed by our students.
   
5. Madam Speaker, the Chief Minister’s Office has begun the process of constructing a new track-and-field facility on the A.O. Shirley Recreation Grounds. While we realise that the primary users of the grounds will be inconvenienced, it is this Government’s aim to provide the people of the BVI with a track that meets international standards thereby positioning this Territory as a strong contender for regional and international sporting meets. The improved facility will include a new rubberised running surface, spectator stands, and other amenities. The Ministry of Education and the Department of Youth Affairs and Sports will interact with organisers of those sports to work out, where possible, solutions to any potential inconvenience.

Health Care

1. Madam Speaker, as the Minister responsible for health care in this Territory, I am glad to say that great strides are being taken to deliver on our promises of realising world-class health care in the British Virgin Islands. We are in the final stages of completion of the Hospital Expansion and plans are already afoot to begin building a new hospital once a revised and more cost-efficient design has been agreed. 
   
2. The new Health Services Authority should be up and running in the first quarter of next year and will ensure that the sector is responsive and relevant to the needs of our people. Just as importantly, Madam Speaker, is the continued fight to educate, guard and protect our people against the dreadful HIV/AIDS epidemic. As you are aware, the fight presses on as the disease rages globally decimating human resources and institutions.
   
3. According to estimates from the Joint United Nations Programme on HIV/AIDS (UNAIDS) and the World Health Organization (WHO), close to 40 million adults and 3.2 million children were living with HIV at the end of 2002. This is more than 50% higher than the figures projected by WHO in 1991. During 2002, some five million people became infected with the human immunodeficiency virus (HIV), which causes AIDS. The year also saw 3.1 million deaths from HIV/AIDS. What is more disturbing is that the Caribbean is the hardest hit region in the world outside of sub Saharan Africa and the disease continues to spread with devastating social and economic consequences. At present there are an estimated 500,000 persons living with HIV/AIDS in the Caribbean, and the disease is the leading cause of death in the 15 to 44 years age group. In the BVI, the statistics show that a total of 43 cases of AIDS have been diagnosed. However, these are the number of cases that have been reported locally. We know that many persons can and do utilize services in our neighbouring islands. 
   
4. Madam Speaker, we also will continue our efforts to inform and educate our people on the need healthy lifestyles in order to reduce such ailments as diabetes, hypertension and cancer. 
   
5. Looking ahead, Madam Speaker, this Government has funded and will continue to fund a number of scholarships to train some of our young people in the various fields of healthcare, from doctors to lab technicians. We, therefore, expect that a large portion of the healthcare professionals needed to staff and run our healthcare system will come from within the Territory. 
   
6. Madam Speaker, this Government will press on in expanding the services provided to the most vulnerable groups within our community. We will continue to reach out to our elderly through direct assistance and by means of activities organised at the various community centres. Efforts will persist, Madam Speaker, in identifying young people who are at risk in order that they can receive the needed interventions to ensure that they become productive citizens in this community.

Our Natural Resources

1. Madam Speaker , we are blessed with an environment that contributes significantly to our economy. Our tourism industry depends heavily on our having pristine beaches, clear waters and clean air.
    
2. We must treasure all the assets with which these beautiful islands have been graced and ensure that they continue to attract visitors to our shores year in and year out. This Administration will continue to manage our natural resources prudently and will require developers to pursue environmentally friendly development.

Agriculture

1. Madam speaker financial support for our farmers and those engage in raising small stock will continue to be a priority of this government, We are encouraged by the investment our farmers are making as they strive to supply a portion of the local demand for agricultural produce. 
   
2. Over the last several months the Ministry of Natural Resources and the Department of Agriculture launched a program that will provide grants to assist our farmers engaged in producing small stock for the local markets. 
   
3. Madam speaker it is the intention of this government to extend this program to include all farmers including those engaged in the production of fruits and vegetables. 
   
4.  Madam speaker I am confident that our farmers are capable and able to meet a respectable portion of the local demand for fresh fruits, vegetables and small stock such as poultry, mutton, pork and beef.

Immigration

1. Madam Speaker, the Chief Minister will shortly announce this Government’s new policy on Immigration, which will outline the administrative guidelines for the Board of Immigration in the processing of applications for Residence and Belonger Status. Among other things, the new policy is meant to provide predictability and clarity for everyone. 

Tourism

1. Madam Speaker, tourism is one the engines that drive this economy. In one way or another, it touches the daily lives of all the people in this Territory. 
   
2. Madam Speaker, I ask you, the Members of this Honourable House and the entire Territory to join me in giving thanks to the Almighty for sparing the British Virgin Islands from the ravages and destruction of hurricanes and other natural and man-made disasters this year. As we begin what is projected to be a very good winter season, our hearts go out to our Caribbean brothers and sisters who are still recovering from the hurricane related destruction experienced this year. 
   
3. Madam Speaker, all indicators suggest that 2004 will be a good season for our tourism. Following a difficult two years, the BVI was able to reap the benefits of favourable travel trends in the Caribbean, as the travel industry completed its adjustments to the post-911 environment as consumer confidence returned. 
   
4. Under the leadership of the BVI Tourist Board, we now have a plan to strengthen our tourism economy and position it for future growth and development. Among the several projects undertaken in 2004, the Board launched the Tourism Industry Service Standards, a three-year initiative to raise the levels of customer service in the industry. The Board also invested in a Tourism Statistics Management System, a new world-class website at BVITourism.com, and a state of the art global information network. From 2005, the BVI will have an advance technological management and marketing tool that will allow the BVI Tourist Board to make more effective marketing and product management decisions, thus ensuring greater value for money.
   
5. Additionally, Madam Speaker, in 2004 the Government implemented the following measures to strengthen the tourism sector:

• We assisted our locally-owned small tourism properties through the formation of the Tourism Accommodation Properties Association and invested in their success with the Intimate Hideaways marketing programme;
  
• We expanded our sales presence in the US market to six regions up from three, and added new marketing materials to strengthen the foundation of our sales strategy;
  
• Madam Speaker, we also invested in the European market by installing a new management team and a new Advertising agency in the United Kingdom to aggressively grow our arrivals from this important market, thus making us less vulnerable to regional downturns; and
  
• Madam Speaker, we opened an office in Puerto Rico to focus our efforts on this lucrative market.
  
• Later this month we will also open the Gun Creek Visitor Centre in our efforts to enhance the already considerable attractiveness of Virgin Gorda.

6. Madam Speaker, as we look to fiscal year 2005, permit me to outline four of the major challenges our tourism sector will face and how this Government propose to tackle them.

• Our greatest challenge will be to improve our tourism product infrastructure. It is no secret that our tourism infrastructure development has not kept pace with our levels of tourism visitors. This became quite apparent when this Government began to review the Cruise Tourism Policy recommendations submitted by the BVI Tourist Board. Madam Speaker, some aspects of our tourism infrastructure are so misaligned that this Government has deferred implementation of the Cruise Tourism Policy recommendations until we have re-aligned our current and future visitor arrivals with a commensurate level of infrastructural development. In this regard, Madam Speaker, I am pleased to announce that this Government will commit approximately one-million dollars to tourism infrastructural development in 2005. These funds will be used for areas such as restrooms, the development of historical sites, and the development of specific tourism areas and beaches. It is expected that the BVI Ports Authority will finance these projects as part of its partnership with the BVI Tourist Board.
  
• Our second greatest challenge, Madam Speaker, is to broaden our visitor experience. We have aggressively sought investment in key areas of the tourism product. This includes a five star resort, a golf course, sports fishing, mega yacht facilities and conferencing facilities. I am pleased to say, Madam Speaker, that we are poised to begin work in several of these areas in 2005, thus creating significant opportunities for BVI Islanders.
  
• Our third greatest challenge is to increase the active and meaningful participation of BVIslanders in the tourism sector. Madam Speaker, in 2005 this Government will make significant investments in creating opportunities for BVIslanders in the aforementioned areas of opportunity. This will take the form of training, economic incentives and access to capital, to ensure that BVIslanders become stronger stakeholders in the tourism sector.
  
• Our fourth greatest challenge is to manage and regulate the tourism sector. Madam Speaker, the BVI’s natural environment is the foundation of our tourism product and unless we take serious measures to preserve and protect it, we jeopardize our future and that of our children. Our primary objective in this area is to develop a beach management initiative aimed at reducing solicitation and hassling of visitors on our beaches.

7. Madam Speaker, tourism is a vital part of our economy and will become more so in the future. Let us work together so that we may solidify tourism, the BVI’s sustainable economic pillar upon which we can confidently build the future of the BVI and continue to enhance our quality of life.

BVI International Finance Centre

1. Madam Speaker, in order to enhance and promote the reputation of the British Virgin Islands as a premier International Finance Centre, the British Virgin Islands International Finance Centre adopted an ambitious marketing strategy in 2004 by hosting Road Shows in key financial centres such as Hong Kong, Singapore, London, New York, and Miami. The message, “The BVI Advantage – Opportunities for Growth in Financial Services” was well received and the feedback from delegates and local practitioners has been very positive. For 2005, additional Road Shows will be planned in other key geographical areas such as Switzerland and China.
   
2. Here at home, Madam Speaker, the British Virgin Islands International Finance Centre launched a Strategic Development Plan for the BVI Financial Services Sector. The Plan provides action points and recommendations on the way forward to ensure the sustainability and continued growth and development of the financial services sector, including specific implementation measures.

Financial Services

1. Madam Speaker, I now turn to the performance of the Financial Services Sector in 2004 and its prospects for 2005 and beyond. Madam Speaker it is an open secret that much of this Territory’s recent growth and development have been underpinned and financed by the revenue obtained from the Financial Services Sector. Accordingly, Madam Speaker, this Administration has devoted considerable time and effort to maintain and enhance the right environment for financial services.
   
2. Today, Madam Speaker, it gives me great pleasure to announce that preliminary figures for 2004 are more robust than last year. New IBC registrations have rebounded to pre- 2003 levels. 54,000 new IBCs were registered as at November 30, 2004, cementing our position as the world’s premiere offshore corporate domicile.
   
3. Madam Speaker, the regulated sector comprises seven holders of General Banking Licences, four holders of Restricted Banking Licences, 19 holders of Company Management Licences, 101 holders of General Trust Licences and 112 holders of Restricted Trust Licences. There are currently 103 Registered Agents - an increase of 12 over the 93 of 2003. At the end of the third quarter, Banking Deposits stood at $2.5 billion, with loans and advances of $700 million.
   
4.  In the area of Captive Insurance, BVI is now the fourth largest captive domicile centre. Already 43 new Captive Insurance Licences have been approved for the year, bringing the number of Captives on the BVI Register to approximately 340. The Territory is now the second largest offshore center for the registration of mutual funds, with approximately 2,250 active funds and over 400 Fund Managers and Administrators on the Register. Already, 10 applications for insolvency practitioner status have been processed under the Insolvency Act which came into effect on 16th August this year.
   
5. Madam Speaker, the success of the BVI Financial Services Industry is largely attributable to the well-established tradition of partnership and collaboration that exists between the private and public sectors. Working together in close cooperation has facilitated the building up of a consensus about doing what is right for the long-term sustainability of the BVI Financial Services Sector, as distinct from doing what is expedient. This genuine partnership, Madam Speaker, continues to shape our financial sector laws, policies and programmes, as well as the strategic national response to the international initiatives that have placed the activities of financial services everywhere under intense scrutiny. 
   
6. Madam Speaker, this Territory continues to garner international accolades for its handling of the international initiatives targeting offshore financial centres. Our financial sector is acknowledged to be well regulated. Our legislative, regulatory and supervisory practices have all been acknowledged to be compliant with relevant international best practice standards. New, innovative laws are constantly being enacted by this Honourable House, adding depth and breath to our sector offerings and providing legitimate market-driven solutions to established international needs. 
   
7. Madam Speaker, to capitalize on the cross-border opportunities that bring economic benefits to our Territory and people, we will need to continue to focus on three fundamental tenets:

• Maintaining the trust and confidence of investors;
  
• Offering real value-added services to the international business community; 
  and
  
• Ensuring that BVIslanders are given every opportunity and chance to excel at every level of the industry.

8. This year, the Territory celebrated the 20th Anniversary of the enactment and implementation of the IBC Act under the theme “International Business: At The Cross Roads.” Madam Speaker, I am sure that Honourable Members will wish to join me in thanking the many persons in both the public and private sectors who, over the years, have contributed in any way to the success of what has been the crown jewel of our Financial Services Industry.
   
9. Madam Speaker, I know only too well that a number of our people invariably ask whether, apart from public revenues, all these developments are being translated into tangible benefits and opportunities for our people. On this point, I am pleased to say that the performance of our youths in the radio quizzes, speech competition, and the parliamentary debates that marked the IBC celebrations, demonstrate an abiding interest in becoming significant players in the industry. This augurs well for the future. In this regard we will continue to actively encourage institutions, industry associations and other relevant industry participants to develop appropriate educational and training programmes that will support skills upgrading and career advancement within the industry. Madam Speaker, it is this Government’s intention to reward Good corporate citizenship within the Industry.
   
10. Looking further afield, Madam Speaker, those who thought the international spotlight was moving away from offshore centres were wrong. The international scrutiny will continue unabated. Emphasis will now be on risk management, customer due diligence, transparency, corporate governance, new anti-money laundering and combating the financing of terrorism measures and effective exchange of information for law enforcement and regulatory purposes. As the international community steps up its scrutiny of offshore financial centres, it would be a grave mistake to rest on our laurels. To remain competitive and to maintain market share, we must be proactive and build on the solid foundations laid by our IBC Act. Our past experiences should serve us in good stead.
    
11. Time and time again through the combined efforts of the public and private sectors, the BVI financial services industry has demonstrated its ability to adapt to global challenges in a reasoned, responsible, pragmatic and proportionate manner. This encourages international and domestic confidence and enables the market to grow and innovate. Madam Speaker, our new laws have been well received by the international community. In this way, we intend to continue to provide legitimate value-added market driven solutions to the discriminating international clientele we seek to serve, while at the same time increasing the business and employment opportunities for BVIslanders.

London Office

1. Madam Speaker, this Government appointed a Director for the London Office in 2004. I am pleased to inform this Honourable House that, as a result, the profile of the British Virgin Islands in the United Kingdom and Europe has risen significantly. At least 25 members of the House of Commons have indicated their interest in joining an all Party Parliamentary Group for the British Virgin Islands and that Group is expected to hold its first meeting next week. This is as a result of the strong lobbying efforts of the BVI Representative who has managed to generate sufficient interest in the Territory such that parliamentary questions are asked regularly about various issues impacting the Territory.
   
2. The representative continues to carry out regular consular type duties to provide information about the BVI on a worldwide basis, to encourage investment through staying in close touch with businesses and individuals with a commercial interest in the Territory and to negotiate for support and assistance for the Territory. Through the London Office we continue to maintain our relationship with the Foreign and Commonwealth Office as well as other Departments and Agencies of Her Majesty’s Government.
   
3. Representation in Brussels has improved significantly and additionally the indications are that decisions by the Commission will take into consideration the views of Overseas Territories as a result of our specific recommendation.

Communication and Other Infrastructural Development

Telecommunications

1. Madam Speaker, as we look to the future, the need for the BVI to have a state-of-the-art, efficiently run and price-competitive telecommunications service is too pressing for the status quo to be allowed to continue. In line with our Manifesto commitment, during 2005 this Administration will introduce a Telecommunications Bill to liberalise telecommunication services. Among other things, this seeks to end the current monopoly system, to bring about competition in the supply of a range of telecommunications services and to give consumers a wider choice of service providers.
   
2. In taking liberalisation forward, we look forward to continuing our dialogue with major players in the domestic market as well as with prospective suppliers regionally and internationally. I congratulate my Ministerial colleague and his officials on all their hard and effective work on this vitally important matter and I pledge my support to help him to achieve the liberalisation of telecommunication in this Territory.

Water and Sewerage

1. Work is also continuing on another vital aspect of our infrastructure, Madam Speaker. The wide distribution and availability of high quality drinking water continue to be a high priority for this Administration. The Minister responsible has taken bold steps to ensure that this Department achieves all that it is capable of, and I congratulate both him and those committed civil servants who have risen to the challenge.
   
2. On the revenue side, the Department, from November 1, 2004 going forward, has resumed billing via the metered system. By or before the second week of this month, customers should be receiving their first bill after some eleven (11) months of no bills.
   
3.  I am aware that the Territory’s water distribution system is in need of immediate repair and further expansion. This Administration is committed to provide the necessary infrastructure to deliver water to the people and businesses of the community, but we expect the Department to do so on a more efficient basis.
   
4. Madam Speaker, sewerage in the Territory continues to be major challenge to our social and economic development. This Administration promised the people of this country that we will more effectively address the sewerage system. Provisions have been made in this Budget to continue the implementation of the East End/Long Look and Road Town phases of this project.

Electricity

1. Madam Speaker, we are all aware of the frequent power outages experienced by this Territory within the past months. These outages are due largely to the rapid growth of the Territory as well as the age of some of the present generators. This Government is well aware that the continued success of our Financial Services and Tourism sectors, along with future economic prosperity of this Territory, is heavily dependent on a reliable supply of electricity. Therefore, the Corporation has been tasked with presenting this Government with a proposal for the provision of clean, reliable, affordable electricity, now and in the foreseeable future. We look forward to seeing this proposal within the New Year.

New Projects

1. Madam Speaker, work on the much discussed and anticipated waterfront development in the East End/Long Look community will commence within the next two weeks. This will include the bulkheading and dredging of the area.
   
2. Madam Speaker, the residents of Cane Garden Bay would be pleased to know that a contract will be let for work on the Community Centre before year’s end with a view to completing this project in 2005. Planning for the construction of a public dock in the area is quite advanced and work will commence on this project in the new year. In addition, Cane Garden Bay will also benefit from improvements to the area being made by the BVI Tourist Board to improve the visitor experience of our cruise passengers.

The Sister Islands

1. Madam Speaker, meeting the needs of the Sister Islands is a high priority of this Government. Since coming to office this Government has completed the the much needed resurfacing of the Auguste George International Airport on Anegada, and work has commenced on building a new public jetty on the island. 
   
2. Madam Speaker, we are also working feverishly to bring banking facility to the island and I am pleased to say that we are making good progress. Turning to Virgin Gorda, work has commenced on the resurfacing of the main road from the Valley to North Sound. We still anticipate having this completed by the end of the year. This Government is also working to expand the banking facilities on Virgin Gorda. We anticipate that substantial progress will be made on this matter in fiscal 2005.
   
3. On the Island of Jost Van Dyke, the Government has tasked the BVI Ports Authority with completing the requisite planning required to build a public dock in the Dog Hole area.

Law Enforcement 

1. Madam Speaker, as we look to the great opportunities of growing the economy and modernizing our Territory, we are also called to address some of the fundamental challenges that these developments bring. Specifically, I would like to discuss two issues that have become particularly pressing over this past year: law enforcement and disaster preparedness.
   
2. Madam Speaker, our Territory does not have a tradition of criminality. But as we grow and open up to the outside world we must honestly recognize the fact that sometimes we have to deal with the bad as well as the good. Drug trafficking, destructive cultural influences, and a media that glorifies violence have all contributed to a year that has seen far too many instances of lawlessness. No priority is more urgent that to safeguard the peace, security and tranquility of our islands. Following the increase in crimes during 2004, the Royal Virgin Islands Police Force (RVIPF) will engage in aggressive covert policing and strengthening its Special Investigations Unit in the coming year. The RVIPF will also purchase a Marine Patrol Vessel and will enhance its operational capabilities of the Airwing (aeroplane). It is envisaged that these provisions will greatly enhance the surveillance and patrol capabilities of the Force. 
   
3. We also call on the RVIPF to spare no effort in reaching out to the community to strengthen the bonds of trust and mutual respect that are no less crucial to effective policing than squad cars and handcuffs. This Government is prepared to do all in our power to support the police in their work and we call on the entire community to rally behind this cause. Crime is not something we can tolerate. We must join together and say that we are a society of laws and we will join forces to defeat criminality wherever we see it.

Disaster Preparedness 

1. Madam Speaker, while we seek to deal with the man-made destruction caused by crime, this past year also reminded us with grim force the importance of preparing to deal with the destructive force of nature, as well. The World Bank, in its annual report, notes that extensive hurricane damage has derailed development in several Caribbean countries, and that it may take several months before these countries start growing again.
   
2. The BVI has been blessed with the opportunity to learn from the disasters of others in order to take measures to safeguard not only lives and property, but also the economy as a whole. Disaster management and disaster responsiveness continue to be a high priority for the Territory. The Government is committed to providing the necessary support to disaster management efforts, to educate the public about the potential hazards that can affect our economy, and to strengthen our response mechanisms. The Government has addressed the policy gaps but there is a need to enforce regulations to protect our hotels, health service, financial services, telecommunications and utilities.

Social Security 

1. Madam Speaker, we should be proud of the success of our Social Security Administration, which has been emulated by many much larger administrations. Like anything else, of course, we must be prepared to change and modify the Administration in order to ensure its relevance to its beneficiaries.
   
2. On July 2nd, 2005, Social Security in the BVI will celebrate its 25th Anniversary. It is considered fitting by this Administration that we celebrate this milestone by:

• granting an increase to all pensions payable under the Social Security scheme;
  
• increasing the minimum pension payable to approximately 30% of minimum wage - which would double the maximum pension;
  
• explore the benefits and costs of indexing pensions to movements in the Consumer Price Index (CPI); and
  
• guarantee that benefits paid under the scheme remain relevant and meaningful by: (a) increasing the insurable earnings and (b) wage indexing that amount of insurable earnings.

3. Madam Speaker, I assure Honourable Members that these proposals, along with other options will be given vigorous examination to ensure relevant benefits to beneficiaries and the long-term success and viability of the Social Security Board.

Prospect for the Immediate Future

1. Madam Speaker, I look to 2005 with great optimism. Everything remaining equal, we should see growth in our economy of between 2% and 2.5% as our Gross Domestic Product (GDP) figures climb. We are expecting to witness increasing demand for office and residential accommodation and the resulting increase in construction activity. As we close out 2004, consumer confidence is high, with great expectation by householders and workers in general of having more money, after taxes, in their pockets. 
   
2. Madam Speaker, not withstanding the work already explained about the payroll tax and our continuing efforts to provide the environment befitting for growth and development in our islands, I am seriously considering granting further tax relief. My thoughts are being centered around the need to encourage more private savings for health and educational purposes, thus providing a pool of investment funds. Madam Speaker, my initial thinking is to provide incentives whereby individuals and businesses can set aside as savings as much as 15% of their annual earnings while their tax liability to the Government on this saving is deferred. The initial details of this tax credit programme are being worked out. I will consult with the public at large before introducing any amendment to the Income Tax Act and/or the Payroll Tax Act.
   
3. Work is also in preparation for one or both of the two leading agencies in this field (Moody’s and Standard and Poor) to assign a sovereign rating to the Virgin Islands Government. I am looking at the culmination of this initial exercise as a tangible means of securing funds for development at the most efficient cost. We will not borrow at any cost and for any purpose but only for tangible investments which give us real returns. 
   
4. Madam Speaker, Members of this House, the current and past Finance Ministers have complained about the undesirable nature and the problems posed by the sheer size and number of “Revotes” in the Capital Budget. All are agreed that the process must be rationalized and we must find a pragmatic way of putting to best use those funds that this and prior Legislatures have appropriated to the Capital Fund.
   
5. Madam Speaker, I have in the Budget Proposal made an effort to combine a number of closely-related Subheads appearing in the 2004 Budget in order to give the Ministers some flexibility in responding to Members’ plea to get on with works that were approved as much as five years ago.
   
6. Madam Speaker, we have already made significant strides towards having a Category 1 Shipping Registry established here in the BVI. We remain confident that this area if properly exploited not only holds the potential to become a much needed additional revenue earner, but that it complements and diversifies our current product offerings as a sailing mecca and full service finance centre. Our overtures towards mega- yachts and the economic activities surrounding having such facilities in the Territory are all part of our plans for developing the BVI’s tourism offering. We look forward with great hope and enthusiasm to a number of our efforts over the last 17 months coming to fruition in 2005.

Acknowledgements

1. Madam Speaker, the thriving economy of these our treasured islands could not have been accomplished with out the contribution and partnership of all the stakeholders. On behalf of the people of the BVI, I would like to thank donor agencies such as the United Kingdom Government, the Caribbean Development Bank, the European Investment Bank, the European Union, the United Nations Development Programme, the Commonwealth Fund for Technical Co-operation, the Canadian International Development Agency, the United States Agency for International Development, the Organisation of Eastern Caribbean States and the Caribbean Community (CARICOM). I would also like to express gratitude to the commercial Banks operating locally, the BVI Social Security Board and all other local, regional and international donor agencies, including our local Development Bank, that have contributed to our development efforts thus far. We hope we can rely on these organsiations for continued support.
   
2. Madam Speaker, as I present the 2005 Budget Estimates, I would especially like to thank my Honourable Colleagues, His Excellency The Governor, The Deputy Governor, public officers in the ranks of the civil service, the Public Works Department and employees of our Statutory Boards and Companies, members of the private and public sectors who are called upon to serve on numerous Boards, Committees and Commissions, and the Financial Secretary and staff at the Ministry of Finance, without whose cooperation it would not have been possible to present these estimates today. 
   
3. Madam Speaker, it is with great pleasure that I present this Government’s Budget for 2005. I commend its provisions and policies for the consideration and approval of Honourable Members.
   
   
   

Financial Secretary
Glenroy A. Forbes

Deputy Financial Secretary
Neil M. Smith

Director of Financial Management
Lucia C. Lettsome

Budget Unit
Jeremiah Frett - Budget Analyst
Diane Parsons – Budget Officer II
Trecia Thomas-Maduro – Budget Officer I
Daphne Frett – Budget Officer I
Michelynne Bassue – Finance Cadet
Delroy Jennings – Finance Cadet
Laurel Smith – Finance Cadet
Vinette Forbes - Finance Cadet
Lilian George – Senior Executive Officer
Gregory Mendez - Executive Officer
Jahmal Rabsatt – Clerical Trainee

Administration Unit
Cecile Jardine
Althea Richardson-Crandall
Lenia Smith-Hodge
Gwynne Chapman
Maria Smith-Thomas
C. Jovita Mercer-Scatliffe
Micheko Francis
Rhonda Glasgow
Helen Ajisebutu
Shervon Tyson
Dean McDowell
Kareem Thomas
Nardia Thomas
Tristan Mills

Procurement Unit
Avonette Morton
Diana Purcell-Gumbs
Myra Maynard

Project Cycle Management Unit
Lucille Malone
Shaina Smith
Carlene Prentice

Human Resource Management Unit
Marisa Frett
Simera Durante

Finance and Economic Affairs Secretaruat
Mathilda Uhrle
Natalie Fahie-Smith
Dwayne Thomas
Teshonda Thomas

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