Monday, March 19, 2018

Sustainable Recovery - Part 2

Anguilla: Sustainable Recovery and Resilient Development Post Irma – Part 2
We looked last week at the first 9 of the 22-paragraphs letter bearing the above title from Mr Ben Merrick.  It was addressed to Anguilla’s Chief Minister (the CM) and was dated 23 December 2017.  Together, these 22 paragraphs set out the conditions of integrity, transparency and accountability that the Government of Anguilla (the GoA) must meet in order to be able to access the £60 million offered to us as a grant to rebuild after Hurricane Irma. 
Let us look briefly at the remaining 13 paragraphs.  We need to understand what this letter says about the task facing our government before they can receive the offered funding.
It appears the CM optimistically told the Foreign and Commonwealth Office (the FCO) that he would take a draft budget to the House of Assembly in early January.  He anticipated a shortfall in revenue for 2018:  GoA would need to borrow money from the Caribbean Development Bank (the CDB) to meet its recurrent expenses.  Mr Merrick explains that if GoA does have a shortfall, the British Government will not be able to provide funding to cover it.  Given, he writes, that the first CDB meeting at which a loan for Anguilla could be agreed would be in May 2018, he wanted to know how the CM would meet our immediate cash requirements for the first part of the year.  Indeed, Mr Merrick explains, the FCO will not even look at our draft budget unless they can be assured how GoA will meet its immediate cash requirements.  I pause to comment that, hopefully, the CM successfully accomplished this challenge, as we have not heard anything to date.
Mr Merrick next wants the CM to explain how Anguilla will meet its debt servicing and amortisation costs in the fiscal projections he made up to the year 2025.  Whatever fiscal projections the CM made, this requirement is going to be particularly challenging.  The grace period associated with the previous CDB loan the CM took out to assist him with the Banking Resolution crisis of 2016 is about to run out.  The full cost of our borrowing is about to hit us, leaving precious little to cover new borrowing.
He wants the CM to send a revised and updated Medium Term Economic and Fiscal Reform Programme (the MTEFRP) for the FCO to consider and approve.  The CM must satisfy the FCO that concerted efforts are being made to implement the FTEFRP.  In other words, we must now move from promises to action.
Mr Merrick refers to “the most recent quarterly progress report”.  Since his letter is written in December 2017, we can assume he is referring to the quarter ending September 2017.  It would have been good if the CM shared this progress report with the people of Anguilla.  We have a real interest in it.  But, we don’t know what is in it.
He also refers to a letter from the CM dated 27 October 2017 in which the CM identified the issues facing Anguilla.  I assume this letter accompanied the quarterly report and gave certain assurances.  But we have not had the privilege of seeing the letter and knowing what promises or predictions our CM made on our behalf.  Mr Merrick responds to this 27 October letter from the CM by stating that the FCO needs his revised programme to be more ambitious.  In other words, he is not satisfied with the predictions made in the CM’s 27 October letter.
In particular, the CM must explain the steps he will take to improve the easing of foreign direct investment into Anguilla, and to privatise key utilities including electricity.  Foreign direct investment is presently discouraged under our xenophobic economic system.  Anguilla was famously described by the late Martin Crowley of Pyrate Rum as “the cemetery for American capital.”  Clearly, this discouragement has to change.
Water and electricity can already be said to be privatised in that they are owned by companies and are no longer government departments.  But, they are not really private since GoA is the sole shareholder in the Water Corporation of Anguilla and a major shareholder in the Anguilla Electricity Company.  We need to sell these assets to the public to raise much needed cash.
Mr Merrick demands that the CM set out sufficient details so that progress in implementing the economic reform package can be monitored.  He wants the CM to go beyond merely identifying policy leads, completion dates and priority ratings.  He wants the CM to provide a clear work plan for each measure he proposes to take.  The CM must set out in detail the actions that need to be taken.  He must set targets for each quarter.  These are some of the ways in which the CM’s unseen letter of 27 October appears to have failed.
Mr Merrick insists that the CM must identify the Senior Accounting Officer responsible for each measure.  This procedure of making Department Heads responsible for the management of his or her Department’s funding is set out in the Act, but in recent years it does not seem to have been followed.  Senior civil servants who waste government resources are no longer held accountable.  To take advantage of this grant, GoA will have to reinstitute this safeguard.  There must be somebody to take responsibility and answer from his or her pocket for any shortcoming.
Mr Merrick acknowledges that there are multiple barriers to growth in the Anguilla economy.  The CM must set out a clear timetable and process for reporting on a quarterly basis to ensure that the momentum on reform efforts is maintained.
Mr Merrick asks the CM to identify the priority reforms that will deliver the greatest impact.  He does not identify the reforms that he claims the FCO have been discussing with GoA.  I think we already know what some of the areas for economic reform in Anguilla are.  They have appeared in previous publications.  As I recall, these include, without claiming any order of priority,
(a) removing the Aliens Landholding Licence restrictions that prevent foreigners from investing in Anguilla unless they submit to going through hoops and jumping over procedural barriers, and months of bureaucratic delay.  We can already adequately control them through our immigration procedures once we carry out adequate due diligence on them;
(b) revising the work permit regulations to allow us to grant multiple-year work permits to major investors and their senior staff so they can manage their investments to their satisfaction without the current level of uncertainty.  The present procedure is based on government policy and can shift from government to government and from minister to minister.  There needs to be the certainty of a law;
(c) providing by law a certain and consistent mechanism for granting permanent residence to investors who invest a minimum amount of foreign currency in our economy, as the Americans and the British themselves do (except they grant citizenship, which we can’t).  The present procedures rely on constantly shifting and uncertain government policies; and
(d) eliminating the impractical security of a “charge” under our Registered Land Act, which makes it almost impossible for a lender to recover the proceeds of a loan from a defaulting borrower.  We need to make it easier for a lender to recover against the security provided by a borrower who then fails to meet his commitment under the loan agreement.  It was this hindrance or obstacle, more than any other, which in my opinion led to the 2008-2013 failure of our two indigenous banks.  Unless the law is changed to bring back mortgage remedies, which involve, eg, title shifting to the lender at the time of the mortgage, a right of foreclosure, and the right to sell by private contract if the loan falls into arrears, only a very foolish bank is likely to continue to lend money secured by a charge on real estate in Anguilla.
GoA will need to agree a Memorandum of Understanding (an MOU) with the FCO on any project that will be supported by the UK grant.  The MOU must set out a “robust business case” consistent with the UK’s Green Book framework.[1]  The Green Book and its supplementary guidance sets out the framework for the appraisal and evaluation of all governmental policies, programmes and projects.  So, where, for example, GoA has to choose between repairing existing buildings and constructing new ones, it must set out in detail the proportionate economic appraisals of these project options.  GoA has to satisfy the FCO that its proposed choices will guarantee maximum value for money.
This £60 million grant, if we can ever qualify to receive any of it, is not going to come in one lump sum, or even in one year.  It will be disbursed in tranches, tied to annual budgets, over several years.  The funding must be based on an agreed dispersal plan, with an agreed list of projects for which this money may be used.  This requires a costed work plan, clearly setting out our priority projects.
This framework is a great advantage to us.  It means that we don’t have to prepare in advance detailed plans for every project we have in mind and for the spending of every penny of the aid.  We must break up the work load by priorities.  It seems to me we need only do the detailed planning and reporting on the most immediate ones.  We can leave those of lower priority to be costed and planned in detail at a later date.
The grant funding will be disbursed under something called the Conflict, Stability & Security Fund.  This means that disbursements will, additionally to the Green Book framework, be subject to the reporting and governance requirements of that fund.  We don’t have to become expert in any of these reporting requirements.  Repeatedly, throughout his letter, Mr Merrick offers to provide GoA with the expertise needed to meet the requirements for the disbursement of this grant.
One final condition is that if any of the grant is to be spent in the UK, both the Financial Adviser and the FCO must approve.  Any expenditure in Anguilla must be approved by the Financial Adviser.  Overall, the Governor’s Office will work with the FCO in applying the most appropriate mechanisms for managing the funding programme.
Some of the reasons for these strict oversight provisions are well known to us.  We need only look at the first 5 pages of the Chief Auditor’s last Audit of Accounts for the year 2013 published in 2016 and available on the GoA website, to understand the reluctance of the British to believe we can handle the funds responsibly if left on our own.[2]
The Chief Auditor has refused (for the past 42 years that Anguilla has been essentially self-governing) to give our public accounts a clean Certificate for four main reasons.  The first one is that when the Minister wants to shift money voted by the House of Assembly from one department to another, the Financial Administration and Audit Act 2010 (the Act) states that the Minister of Finance may do so by a Reallocation or Virement Warrant and with the approval of the House of Assembly.  But, all these Warrants for 2013 were authorised by the Permanent Secretary or the Deputy Permanent Secretary instead of by the Minister of Finance.  And none of them had the approval of the House of Assembly.  This was clearly illegal.
He further qualified his report because GoA has not developed or operated adequate processes to show that all payments due for Property Tax, Interim Stabilisation Levy, customs duties, and other taxes on goods and services, were identified for collection in accordance with the relevant legislation.  Certain persons seem to be permitted to get away with not paying their Property Tax, Interim Stabilisation Levy, or Hotel Accommodation Tax, while the rest of us dutifully comply.  This is patently unjust and an abuse.
He yet further qualified his opinion on the regularity of our accounts because, though the Act states that the Minister of Finance may, by Advance Warrant signed by him, authorise the Accountant General to make advances from the Consolidated Fund, advances made during the year 2013 were not authorised by the Minister.  In other words, the 2013 advances were unlawful.
Finally, he further qualified his opinion because where a law gives Executive Council power to remit any tax, fee or other amount, the Act provides that such remission may not exceed EC$1,000 “or such greater amount as may be prescribed by Regulation” made by Executive Council, and with the approval of the House of Assembly.  While remissions during 2013 were approved by Executive Council, the GoA does not appear to have bothered to seek approval from the House of Assembly.  Clearly, if the House of Assembly has made a law saying that a certain transaction must be taxed at a certain level, it must be illegal for anyone to authorise a reduction in the amount due, without the approval of the House of Assembly.
I think we can all agree that if the monitoring and management provisions set out in Mr Merrick’s letter are adhered to, this will be the best-managed economic reform and infrastructure development programme ever enjoyed in Anguilla.

Sunday, March 11, 2018

Sustainable Recovery

Anguilla: Sustainable Recovery and Resilient Development Post Irma
This is the title of a letter Mr Ben Merrick, the supervisor of all British Overseas Territories’ Governors, wrote to Anguilla’s Chief Minister on 23 December 2017.  In it, he offers us a £60 million (approximately EC$250 million) reconstruction grant.
This British taxpayers’ money is to help us build back stronger after the devastation of Hurricane Irma.  It is a grant, a gift:  we don’t have to pay back a cent of it.
There has been no discussion of this letter in the public domain that I know about, other than a cursory mention by the Chief Minister in his January press conference.[1]  The letter came to my attention only last week.  It deserves to be publicly discussed.
Reading it, I gather that they have no intention of just dropping the money on us.  They have set out a number of conditions we have to meet before they let us have the first payment.  And, we have to satisfy them at quarterly intervals that we are keeping our promises and commitments, if we are to continue receiving disbursements.
First, we must agree a revised Medium Term Economic and Fiscal Reform Programme (MTEFRP); [2]
Second, we must appoint a Financial Adviser to sit in ExCo and in the Ministry of Finance;[3] and
Third, we must submit a clear list of the projects we will spend the money on, with agreed implementation arrangements.
The letter claims that if we can meet the first condition, we will not just be building back infrastructure, but also maintaining strong public finances and creating an environment that encourages business and attracts significant investment.
We already have an MTEFRP.  But Hurricane Irma committed euthanasia on it.  It has been put to sleep.  That is why we have to agree another one.  Meanwhile, our national debt is well over EC$400 million and growing (EC$206.53 million in 2015 and EC$419.24 million in 2016.)[4]
The full aid package will not be handed over in one lump sum.  It will be disbursed in stages, and only if we can show that we are making progress in implementing the MTEFRP.  No more will we be permitted to submit wonderful sounding promises, take the money, and then just go back to the old ways of spending it.
The MTEFRP was due by 31 January 2018.  In it we had to show (1) how we would manage our public finances; and (2) how we would progress sustained economic development.
Anyone who has read the 5-page certificate to the Chief Auditor’s ‘Audit of Accounts 2013’, published in 2016 on the Government website, will be aware that we have failed to manage our public finances.[5]  Many departments of government keep no proper record of where they got their money.  They can’t account for where they spend it, or who they spend it on.
Taxes, duties and levies are forgiven without authority, and with no record made.  The result is that for the past 40 years we have never had a clean audit.
To get this promised money, we have to set out in detail the steps we intend to take to achieve a current account budgetary surplus from 2019 onwards.  In my opinion, it is simply impossible for us to achieve a current account budgetary surplus from 2019 onwards. Our public debt continues to increase.  I would guess that we won’t achieve a surplus for decades to come.  Alternatively, we could set out the steps we intend to take from 2019 onwards.  But, we would not be able, on past evidence, to stick to our undertaking.
We can supply, as they request, an updated public finance projection from 2018-2025.  That is not difficult.  We are experts at drawing up projections and writing reports.
They ask us to clearly identify what actions we will take to manage public spending, and increase the efficiency of the public service.  I don’t think we can meet this condition.  We permit public servants to arbitrarily reduce assessments, duties and taxes without any record being kept, or any report being made, as the ‘Financial Administration and Audit Act’ requires.  See the Chief Auditor’s Certificate.
Next, they want us to take clear steps to raise revenue through increasing tax compliance rates, reducing arrears, and extending taxation.
We have to provide a clear Work Plan for each measure, including actions that need to be taken and target outputs per quarter.
We must prepare a Risk Register including mitigating steps to manage future pressures from such things as more hurricanes in the years to come.
We must provide a Timetable and a process for reporting on a quarterly basis to ensure the momentum on reform efforts is maintained.
These are high bars for us to cross.  We long ago decided that we will never enforce our tax laws if it means, to repeat the memorable words of a former Chief Minister, “criminalising innocent Anguillians”.
In my opinion, it is unlikely we can meet these conditions for receiving this money.  Unless we change our past ways, we will never receive one penny of the offered grant.  If we get any of the money, it will most probably be for having successfully pulled the tam down over their eyes.
Edited 12 March to include (a) in the 3rd paragraph mention of the Chief Minister’s January press conference; (b) in a footnote to the 5th paragraph, the preparation and approval of a draft MTEFRP; (c) in a footnote to the 6th paragraph, the appointment of a Financial Adviser; (d) in a footnote to the 12th paragraph, a link to the Chief Auditor’s Report; and (e) a revision of the 13th paragraph for clarity.

[2]       The Minutes of Executive Council for 8 February 2018 reveal ExCo’s approval of a draft MTEFRP with instructions to the Ministry of Finance to send it to the FCO for discussion.  This draft has never been publicly mentioned or discussed:
[3]       In the Anguillian Newspaper of 26 February, we learned that Mr Stephen Turnbull was recently appointed the new Financial Adviser:

Monday, January 15, 2018

Is Anguilla Civilised?

An update to the brothel blog of a few days ago.
In addition to her photographs and the comments to them, Ms Soncini has published an article on brothels in Anguilla.  I invite you to read it by clicking on the link.  Then, click on the tab in the left-hand margin, “English Version of Published Article.”  It is very instructional.
Since I published my article on brothels in Anguilla, I have been getting feedback.  One Jamaican lady in the bank line with me this morning mentioned that Pam Webster brought up the matter of my article in some recent meeting of the House of Assembly.  According to the lady, Victor protested that (a) most of the article was not true;  and (b) he saw nothing wrong with prostitution, as it existed everywhere and at all times.  I don’t know, I did not hear the broadcast.
Of course, my article was not about prostitution.  It was about illegal brothels.  It is about the failure of the authorities to prosecute those involved in managing them and profiting from the business.  It is about the exploitation in brothels of these foreign victims by Anguillian men.
A couple of nights ago, Minister Cora Hodge, phoned me to express her concerns.  I learned that the Immigration Department has, in fact, carried out three raids on illegal brothels, not one, as a result of which several more women have been deported.  (It was very kind of her to take the time to respond to my concerns, something she definitely was not obliged to do.  I am very grateful to her.)
My response to the Minister was that her Ministry had very poor PR if there have been three raids in all.  I have never heard of any raids on houses of prostitution except for the one raid (which I got in writing from a senior police officer).  The other two raids must be very recent, maybe even subsequent to the publication of my article.  I urged her to have someone write and publish a press release explaining to the Anguillian public what the Ministry of Home Affairs has accomplished in dealing with the illegal brothel problem.  It is not acceptable to keep sweeping this matter under the carpet.
The Minister did not seem to realise that what is really sad about merely deporting the foreign girls is that the only persons who are made to suffer from the criminal activity of the men who run the brothels and live off the proceeds are the female victims themselves.  They are not treated as victims but as criminals and deported.  They are doubly punished for their poverty and helplessness.  The men, by contrast, only have to wait until the replacement girls arrive to continue their connivance at their exploitation.
Minister Hodge further advised that the Ministry has found a solution to the large numbers of these women and girls working in Anguilla.  They have introduced a visa requirement for Venezuelans.  They have reduced the visa time to just one week.  What use is that, I ask?  My information is that the Anguillians involved in this trafficking frequently bring the girls in at night, illegally, at Sandy Hill and Little Harbour bays, landing them on the beaches.  When they enter Anguilla that way, no one asks them about their visa.  
The brothel activity is not reducing as a result of these three raids.  The Jamaican lady mentioned earlier told us that she lives in Blowing Point, and two new houses have opened up since the hurricane, right near to her home.  She told us that the demand for new girls is growing such that plane trips to Santo Domingo are now being arranged to bring back new stock.
My second problem with this so-called “solution” or “remedial action” is that this visa requirement only accomplishes two things I can see.  One, it ensures there is a steady supply of fresh girls imported into Anguilla.  The result of this “remedial action” is that the men who frequent these places have new victims once a week instead of once a month.
Two, all one week visa policy achieves is an increase in government’s revenue from granting the inevitably requested visa extensions.  This new visa policy makes it look like the government of Anguilla is knowingly participating in brothel keeping and living on the proceeds of prostitution.
One correspondent commented on the original Blog:  Remember when Anguillian men went off to Macoris and other places, well you know what happened, men being men and being away from their wives, well, boys will be boys and that sort of behavior resulted in lots of babies, which came to Anguilla to claim their birthrights, and with them they brought their culture which includes Bodegas and brothels.”
To which I responded that we need to be careful not to seem to adopt the usual, false, weasely, Anguillian, fall-back excuse that all these wrongs are caused by the foreigners in our midst, especially the “Spanish”, and not by real Anguillians.  The truth is that brothel keeping in Anguilla is principally an affair of native Anguillians.  So, the particular family who own the houses in question may not personally run them.  But, they knowingly rent out their premises to these brothel keepers.  They are as much living off the proceeds of prostitution as Liliana, shown in the Ms Soncini's photo blog.  It is the same with many of the other “Sports Bars” throughout the island.  They are owned by native Anguillians who are happy to live off the proceeds of prostitution while hiring others to do the dirty work.
My worry is that a lot of us in Anguilla (mainly the men) are in denial about the consequences of this growing illegal and unhealthy business on our society.  The church is silent in the face of their most prominent members being participants in this business.  The National Council of Women appear to have had their balls cut off.  Members of the Mothers’ Union can be said to have deteriorated to a state of decrepitude.  Seventh Day Adventists appear happy to argue only about the correct Sabbath Day, while ignoring the pain and suffering their members bring to these exploited girls and women.
Mind you, like Victor’s alleged assertion, I have no problem with prostitution.  Everyone has a right to sell his or her body for sex, ONCE they are an informed and consenting adult.  But, we know the hazards to health and welfare that exist where this behaviour is conducted in houses that are not regulated and licensed.  (I will let others more qualified than me in matters of morality worry about that aspect.)  Some of these women are not consenting adults.  Some are under-age.  Others have been trafficked, meaning to me, tricked, beaten, and exploited.
Unlike with licensed brothels in St Maarten (if they still exist), the workers in Anguillian whore-houses are not medically examined on a weekly basis.  Diseases such as Syphilis, super clap Gonorrhea, Chlamydia, HPV and Genital Herpes, among others, are being injected into our families when the men come back home from these houses.  Limiting the visa time for these women to one week is not going to have any impact on the rate at which STIs are introduced into our society.
Obviously, because they are illegal, these illegal whore-houses are not examined by the public health department to ensure the conditions are sanitary.  The derelict buildings that are used for this trade, (as demonstrated in Belinda Soncini’s photo-blog) and the second-hand mattresses that the customers lie on seemingly in the abandoned villas at Mariners Hotel at Sandy Ground and elsewhere remain vermin infected.  This is an appalling way to treat these women, as if they are dogs without rights, barely human beings at all.
Because these houses are illegal, the sex workers are not protected in the event they are raped, beaten and even killed as happened recently.  The result of this free for all is that children are trafficked to Anguilla as sex workers.  Without protection of law, we can expect that most of their money is taken away from them (not least in paying officials for protection).  Their passports are confiscated by their pimps and managers, so they cannot escape the island, even if they are so desperate as to ask directions to the nearest police station.
The conduct of these Anguillian men who condone this “Sports Bar” business is disgusting, and would be unacceptable in any civilised country.
This begs the question: Is Anguilla a civilized country?