Communication by The Rt. Hon. Perry G. Christie on IFMS and Citizen Security Resolution

Mr. Speaker,

I rise to convey my support and gratitude with the outcome of the debate on two important IDB projects that require Parliamentary approval in advance of execution by Government Ministries and Stakeholders. I note that both projects during the design stages, considered the view of many stakeholders who were adept in the area of public financial management and citizen security. Further, the implementation of the two initiatives bodes well for a country that is desirous of introducing new approaches, inclusive of advance technology, to modernize its pubic financial management system and reduce social sector challenges.  In essence then, Mr. Speaker, both project are in line with the purpose of the National Development Plan.

In addressing the Thirty Three Million ($33,000,000) Public Financial Management and Performance Monitoring Project, I reflect on recent reform programmes introduced or soon to be realized by the government to improve processes and ultimately provide better service to the public. It is worth mentioning, the VAT initiative, Reforms to the Road Traffic Department, and the impending National Health Insurance initiative. These programmes are not stand alone, but to some degree are inextricably linked and consequent to the linkage there must be a comprehensive platform for the collection, assessment and dissemination of information. The idea of executing new programmes on old platforms, would most certainly engender results that are costly and ineffective.

This modernization of our financial management system is something that is critical and indeed, imperative to our development.

At the last convening of the House, the Minister of State for Finance in his communication thoroughly explained the rationale for the project, its objectives, the allocation of resources among the four main components, the cost of the loan and the corresponding maturity.  While the Government is incurring a debt with both  projects it must be conveyed that in both instances, senior public officers and private sector stakeholders were keenly involved in developing a strategy, that was supported by the government, to effectively advance each project toward their goals.

I am of the firm belief that these programmes and the debt incurred to finance them will yield extremely positive results for the country.  Mechanisms exist within these facilities to ensure that they are executed properly and there are evaluation points along the way to ensure that we are achieving the results that we seek.

In the case of the Public Financial Management and Performance Monitoring Reform, the strategy for execution hinges on the creation of a Steering Committee comprising both public and private sector personnel. Further, this body, will assume oversight and are expected to meet periodically to discuss the project’s progress and attainment of milestones. I am confident that staff in the Ministry of Finance, Department of Public Service, the Treasury Department, Department of Statistics, and the National Development Planning Unit, will undoubtedly undertake appropriate actions deemed necessary for the successful completion of the Public Financial Management Project.

While all components of the Public Financial Management Program are regarded as vital and relevant to transform and modernize the procedures for effective managing and monitoring of public resources, I wish to highlight a component intricately related to the National Development Plan that will ensure that major projects introduced by the government will be properly monitored, that roadblocks will be identified and resolved in a timely manner so that projects can proceed and then the effectiveness of those project evaluated.

I was briefed last evening on some of the findings to-date for the National Development Plan.  This initiative is being executed by staff from the Office of the Prime Minister with assistance from a Steering Committee, headed by Mr. Felix Stubbs that comprises experts from focal sectors of the Bahamian economy, civil society, academia, the private sector and the political parties.   I am also aware that most, if not all my Parliamentary colleagues have been apprised on this important initiative that transcends political parties and for the first time introduce a national roadmap for the future of The Bahamas.

There were certain startling statistics contained in that briefing that indicates a need for urgent action.  Now, it is important to say that the challenges that we face did not arise overnight.  No, these were long in the making.  However, we have the opportunity today to begin the process of fixing them.  Based on an IDB study on Managing for Development Results, for example, The Bahamas received a score of 0.8 out of 5.  This loan programme will directly address this to ensure that the programmes and priorities of a Prime Minister and a Government are executed.

We know that we will have some work to be done to improve competitiveness.  To this end, we must examine our Doing Business Indicators rankings and implement the necessary changes.  This loan will allow us to monitor the multi-sectoral changes which will be necessary and ensure that we receive results.

Citizen Security and Justice Programme

In addressing the Citizen Security and Justice Programme, I must commend the Ministry of National Security, other government agencies, private stakeholders and the IDB, our development partner, for designing a Twenty Million ($20,000,000) project to reduce criminal activities, more specifically, on the island of New Providence.

I am convinced that the criminal acts, which are, in most instances, the results of violence among youths, will soon be reduced to levels that give rise to positive commentary from the public.

The loan from IDB will certainly not be the panacea to immediately reduce violence in New Providence as the issue among us requires a comprehensive strategy that considers input from civil society, the clergy, and community leaders as governments cannot arrest this vexing challenge on its own. Our challenge is a grave one, and no doubt the resolution will not be realized over-night, as it requires time and effort in progressing toward a goal to reduce crime at levels regarded as reasonable.  However, we must take the right and necessary steps.

I wish once again to express gratitude to all whose input contributed to the design of the Public Financial Management and Performance Monitoring Programme and the Citizen Security and Justice Initiative. Both programmes, at this juncture are vital to transforming The Bahamian economy and it is my belief that the implementation of these projects will achieve desired results considering the support of the government and people of The Bahamas for a change.

Before I close I want to address certain comments by members opposite.  Namely, that import revenue is underperforming; that the calculation of VAT on import amounts to double charge; that VAT on condominium fees is a double charge; and that the Government is doing nothing with CLICO.

Last January with the introduction of VAT the Government made a conscious decision to reduce or eliminate import and excise duties on a wide variety of goods.  The Government also made the decision to change the basis of customs duty calculation from cost insurance and freight (cif) to free on board (fob).  These two changes has resulted in a predictable and planned reduction in revenue from Customs duty, not underperformance as some would suggest.

The Vat is calculated on the landed cost of the good.  So VAT is applied on the fob cost which includes data plus the shipping cost plus VAT.  To do it otherwise would amount to treating imported goods more favourably than domestically produced goods as the VAT is calculated on the full cost plus margin of the domestically produced good.

The comment on double charge on VAT on condominium fee is also without basis.  Any fees paid for mortgage or rental of a condominium is VAT exempt.  Fees paid to a Condo association or Homeowners association is vatable.  The VAT liability associated with these fees are calculated on a cash basis.  This outcome is as a result of industry consultation.  In fact any other treatment would have resulted in these entities being charged VAT for services without any mechanism to recover the VAT.

CLICO

Now, the matter with CLICO.

The previous administration at the onset of the liquidation of CLICO proposed to provide a conditional guarantee of $30 million to any entity which would have purchase the insurance operations of CLICO.  This guarantee was conditional on the sale of the book and while affording comfort to a potential purchaser did not actually guarantee that the policyholders would be made whole.

For two main reasons: namely concerns with respect to the information system; and the conditional nature of the guarantee (i.e. it was unclear what event would have triggered the calling in of the guarantee) was unsuccessful in the sale of the portfolio.

The liquidator has proposed and the Government has agreed a plan to make all existing policyholders whole.  This plan involves the creation of a special purpose vehicle to assume the insurance operations of CLICO and to pay out the policyholders who have been unable to receive the full pay out off their benefits subject to the policy not lapsing during the period of liquidation.

In short order the Insurance Commission and the liquidator will announce the details of the plan including pay out dates.  I know that there are many persons impacted by CLICO and these persons have grown impatient waiting for a solution but rest assured a solution is at hand.

The transaction being proposed is complex and required time to ensure that all stakeholders, which would be the Insurance Commission, the policyholders, the liquidator and the Government arrived at a consensus position.  This has now been achieved.

In the short term the Government would present its mid-term fiscal statement.  This statement would provide Parliament, the public and investors a mid-year fiscal and economic report.  I do not want to pre-empt that statement but I think it is important to comment that the Government is well position to achieve its fiscal targets.  This has been driven in a large part by the continued strong performance of the tourism industry led by Grand Bahama and Bimini and continued strong flows of foreign direct investment.

Bahamians have every reason to be confident about the economic and fiscal future of the country.  These two loans by the country would contribute very well to the sustainable development of this country both socially and economically.

Thank you.

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