(with Government's 1978/80 Project List fiETlN

Report No. 1996-CRB

Economic Memorandum on Montserrat(with Government's 1978/80 Project List fiETlN TO LA. & Cl

INFORMATION CEiNTEMay 1, 1978

Latin America and the Caribbean Regional Office

FOR OFFICIAL USE ONLY

H

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not DVotherwise be disclosed without World Bank authorization. F L CO Yt

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CURRENCY EQUIVALENTS

Currency Unit: East Caribbean Dollar

Since its creation in 1965, the East Caribbean dollar was tied tosterling at the rate E 1.Q0 = EC$4.8. In July 1976 the link withsterling was broken and the East Caribbean dollar was aligned withthe US dollar at the rate US$1.00 EC$2.70.

Since July 1976:

EC$1.00 = US$0.370 orUS$1.00 = US$2.700

FM OFFXICAL US ONLY

This report is based on the findings of amission to Montserrat in February 1978consisting of Mr. Murray-Ross (Chief ofMission) and Miss Dawn Elvis (Economist).

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS

Page No.

MAP

COUNTRY DATA

SMThARY AND CONCLUSIONS ................................. i-ii

Economic Background ..................................... 1

Economic Developments in 1977 ........................... 1

Development Issues and Prospects ........................ 2

Public Sector Investment Program ........................ 3

Financing the Investment Program ......................... 3

GOVERN'MENTS' PtO.JEC'TC LIST ............................... 9

IBRD 13594

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MONTSERRAT

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of 2 pages

COUNTRY DATA - MONTSERRAT

AREA 2 POPULATION DENSITY102 krf 12,162 (mid-1976) 119 per k

Rate of Growth: 1.1 (from 1971 to 1976) per k12 of arable land

POPULATION CHARACTERISTICS 1976 HEALTH 1976Crude Birth Rate (per 1,000) 16.9 Population per physician 1,737Crude Death Rate (per 1,000) 10,5 Population per hospital bed 214Infant Mortality (per 1,000 live births) 48.5

DISTRIBUTION OF LAND OWNERSHIPX owned by top 107. of owners% owned by smallest 10% of owners

ACCESS TO PIPED WATER7 of population - urban

- rural

EDUCATIONAdult literacy rate %7Primary school enrollment %

GNP PER CAPITA in 1976: USS641

GROSS NATIONAL PRODUCT IN 1976

US $ Mln. %

GNP at Market Prices 7.8 100.0Gross Domestic InvestmentGross National SavingCurrent Account BalanceExports of Goods, NFSImports of Goods, NFS

OUTPUT IN i976

Value AddedUS $ Mln. %

Agriculture 0.7 9.5Industry & Construction 1.7 23.0Government 1.7 23.0Other 3.3 44.5

Total 7.4 100.0

GOVERNMENT FINANCECentral Government

(EC$ Nln.) % of GDP1976 1976

Current Receints 10.6 49.5Current Expenditure 8.5 39.7Current Surplus 2.1 9.8Capital Expenditures 6;I 28.5External Assistance (net) 4.4 20.6

not availablenot applicable

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COUNTRY DATA - MONTSERRAT

MONEY, CREDIT and PRICES 1972 1973 1974 1975 1976(EC$ million cutstanding end period)

Money and Quasi Money 16.4 17.7 19.8 23.2 25.7Bank Credit to Public Sector ., 0.4 0.5 0.3 0.5Bank Credit to Private Sector .. 9.2 10.4 11.8 11.6

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP .

General Price Index (1974 - 100) .. .. lO0.O 125.4 136.2

Bank Credit to Public Sector ) 0 100.0 125.0 75.0 125.0Bank Credit to Private Sector) 1973-1 .. 100.0 113.0 128.3 126.1

BALANCE OF PAYMENTS DOMRSTIC EXPORTS (AVERAGE 1973-6)

1974 1975 1976 US$ 000 7(115$ million) Cotton 30 19.0

Irish Potatoes 31 19.6Exports of Goods, F.O.B. 0.4 0.4 0.4 Cattle 30 19.0imports of Goods, c.i.f. 6.1 6.3 7.9 Rethread Tires 15 9.5

-57 -5.9 -7.5 All other commodities 52 32.9Total 158 100.0

Interest Payments (net)Remittances 0.3 0.3 0.3Other Factor Payments (net)Net Transfers P. .. ,. gXTERNAL DEBT. DECEMBER 31. 1976Balance on Current Account

US $MmnDirect Foreign InvestmentNet MLT Borrowing Public Debt, incl. guaranteed 1.1

Disbursement; Non-Guaranteed Private DebtAmortization Total outstanding & DisbursedSubtotal a

Capital Grants DEBT SERVICE RATIO for 1976 Other Capital (net) %Other items n.e.iIncrease in Reserves (+) Public Debt, incl. guaranteed 38.3

Non-Guaranteed Private DebtGross Reserves (end year) Total outstanding & DisbursedNet Reserves (end year)

AVERAGE RATE OF GROWTH (1976)

US$1.00 = EC$2.63EC$1.00 = US$0.38

B/ Ratio of Debt Service to Exports of Goods.

* not available

. not applicable

SUMMARY AN4D CONCLUSIONS

i. Montserrat's economic viability is sharply constrained by her smallsize -- 12,000 population -- and her physical features. A mountainous andboulderized terrain, and extremely difficult external shipping and air connec-tions because of the low volumes involved, have dictated that she retain herstatus as a British colony, and have made her heavily dependent on Britishgrants-in-aid to balance the budget, and on external financing (mainly grants)for capital expenditure.

ii. The relationship with the British Government is becoming modifiedas the latter proposes to gradually reduce budgetary financing to liontserratrequiring her to severely limit current expenditures aiid/or raise revenues onthe alrcady highly taxed population. These requirements place strict limitson the framework for Government policymaking.

iii. The main source of income in the economy is a specialized retireetourism-cum-construction industry which since the 1960's replaced agricultureas the dominant sector. While it provided a boost to the economy in the1960's, it brought stagnation to Montserrat during the recession years of the.1970's, but 1977 was a much better year, as retiree interest in home buildirngpicked up again, and the building industry revived.

iv. The overriding development issue is that of increasing productiveactivity witlh gainful employment for the population, an issue brought intosharper focus in the context of the new budget goals being set by the BritishGovernment. Government is approaching it from three directions: expansionand diversification of the tourist industry to take advantage of the demandfor tourism; agricultural development based oII vegetable and fruit productionwith a view towards processing to absorb surpluses and facilitate marketing;and attraction of offshore and other light industry for employment generation.

v. The public sector investment program reflects the priorities forproductive investment. It gives emiphasis to a number of light manufacturingprojects, and includes a few agricultural projects, including a tree crop andirrigation project. At a total level of EC$19.9 million for the threc-yearperiod, it represents an increase over recent past levels of capital e-npendi-tures.

vi. The management of public finances over the next three-year period,1978-80, is likely to present serious difficulties. In the past, the currentbudgetary deficits and capital expenditures were covered by aid nmaitnl-y fromthe United Kingdom. Recently, however, grants-in-aid to cover bud3,-tarycurrent expenditures have become limited with the determination on the partof the United Kingdom to reduce stclh assistance. Nevertheless, annulal budget-ary deficits of EC$1.0 mllillion on current account have persisted even duringthe past two years when deliberate efforts were made to told down ex:penditures.Prospects for raising revernues are quite limited since they are alr(azdy inexcess of one-third of G()P. Opportunities for reducing current expendituresare equally liinited e:ccpt for further curtailmnctL of the level oL services

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provided. The revenue earning public authorities are expected to generatea small surplus of EC$100,000 during 1978-80. The National Provident Fundis expected to generate savings of about EC$1.2 million during the three-yearperiod. These combined savings, however, will not be adequate to offset thecurrent budgetary deficit, so that an overall public sector deficit on currentaccount will emerge for the thiree-year period.

vii. Assuming that public finances evolve as indicated above, thenmanagement during the period of 1978-80 will present considerable difficulties.Resources will have to be found to cover debt amortization and investmentrequirements, in addition to financing the current public sector deficit ofEC$3.3 million (see Table 2). This deficit can be covered to the extent ofEC$1.1 million from capital receipts and funds that can probably be raisedfrom internal borrowing, leaving EC$2.2 million of the current public sectordeficit that would have to be covered from unidentified sources. Grossexternal capital requirements for the three-year period, 1978-80, for debtamortization and capital expenditures are estimated at EC$20.8 million (approx-imately US$198 per capita annually). It is estimated that official grossexternal disbursements during 1978-80 from previous commitments representsome EC$7.9 million (about US$75 per capita annually). This still leaves anunfinanced gap of EC$12.9 million (approximately US$123 per capita annually).It should be noted that the external capital requirements include someUS$374,000 for recurrent costs of financially non-viable projects in theinvestment program. The unfinanced external gap would have to be covered onappropriately concessional terms if Montserrat is to move in the direction ofrelatively faster economic growth and greater fiscal self-reliance.

viii. The analysis of the country's needs and prospects over the near-to-medium term do not take into account specific benefits which regional coopera-tive efforts, including those directed toward broadening the small markets andbolstering absorptive capacity, could contribute to the longer-term economicdevelopment. These elements are covered in a separate report encompassing allthe ECCM members.

Economic Background

1. Montserrat's economic viability is sharply constrained by its smallsize -- 12,000 population -- and its physical features. It has few naturalresources. The steep slopes and rocky terrain of its 39 square miles placetight limits on arable acreage; and the high costs of handling low volumes andtransshipment at Puerto Rico and Antigua effectively isolate it from majorshipping and air routes. Chiefly for these reasons the island chose to retainits status as a British colony, and the economy has been highly dependent uponremittances from abroad, and upon UK grants-in-aid to balance the budget.

2. The economy has undergone some significant structural changes inthe last two decades. About one quarter of the population emigrated in the1950's and Montserrat's discovery for retiree tourism in the 1960's initiateda strong recreation home industry, a timely replacement for a declining ofagriculture as the dominant sector of the economy. However, following thetourism-cum-construction boom of the 1960's the recent lesser fortunes of thissector that came with the world recession have forced the Government to looktowards a diversified strategy for the economic development of the island.Within this framework the most immediate problem claiming Government's atten-tion is the British Government's decision to phase out budgetary assistance,requiring Montserrat to meet an increasing proportion of its recurrent expen-ditures from its own revenues.

Economic Developments in 1977

3. After years of stagnating from the effects of tourism decline in themid-1970's, the economy experienced a revival of activity in 1977. The build-ing industry picked up for the first time since it peaked in 1972, with arenewal of interest in housebuilding by retirees. Visitor tourismi also whichhad been falling since 1972, picked tip for the first time, and did well.Agricultural exports which had performed strongly in the middle 1970's,suffered as a result of the 1977 drought, but also from lower yields due todisease problems from inadequate fertilizer applications. The very smallindustries which the Govcrnmenit has been successful in attracting mrade a con-tribution, but would have had a somewhat better year were it not for shippingdifficulties -- the United Kingdom dock strike in 1977 slowed supply arrivals,creating a shortage of materials. Whether the gerneral sense of imlprovementwould have represented any posit-ive real growth overall depends on the balanceof the inflation impact. The smaller islanlsi have been experiencing somewhathigher inflation tlhan the rest of the Caribbean, and M4ontserrat in particularhas to bear the highler costs iraplied by the low volumes it purchases fromabroad. Inflation in 1977 was at a rate of 17% -- a ju:np from 9% a yearearlier, and largely triggered by increased raLes of thle public utilities,and high costs of imported items of clothing and footwear.

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4. For such a small country, the administrative and social structuretends to be disproportionate to the revenue base and the public finances con-tinued to exhibit that structural weakness. The major influence on the budgetat this time is the British Government's requirements that Montserrat meet anincreasing portion of recurrent expenditures from local revenues. Currenthigh levels of tax revenues leave little room for tax increases, so the imme-diate effect of the requirement is to prevent expansion of improvement of theGovernment services. In lieu of a salary increase in 1976, the Governmentreduced income taxes, and in 1977, in spite of the expenditure controls, thebudgetary deficit was 28% higher than in 1976. However, the stringency ofexpenditure controls evident in the 1978 budget now appears to threaten deter-ioration of the current level of services.

5. Montserrat is dependent on foreign grants for most of its capitalexpenditure, though it has had a small amount of loan financing from CDB.Public sector capital expenditure is estimated at EC$4.8 million in 1977.Amortization amounting to about 5% of budgetary revenues increased totalcapital requirements to EC$5.2 million. The public sector generated negativesavings dominated by the Central Government current account deficit. Thebalance of operations of the revenue earning public authorities may have beenslightly negative given the financial problems of the Development Finance andMarketing Corporation. However, the rate increase allowed the Water Authorityin 1977 should permit it to break even providing a more positive influence onthe public sector finances in the future. Gross external disbursements, mainlygrants, including budgetary grant-in-aid, provided the financing needs.

Development Issues and Prospects

6. Given limited natural resources and the difficulties of externalcommunications, the overriding development problem confronting Montserrat ishow to develop an adequate level of productive activity with gainful employ-ment for its rapidly growing labor force. The issue is highlighted withrespect to the public finances in view of the need to become increasinglyindependent of UK budgetary assistance. This latter requires higher revenuesif expenditure levels are to be maintained, but with existing levels of taxa-tion already high, the alternative must be to increase the tax base throughhigher levels of economic activity. Government's development strategy isbased on three approaches.

7. First is to continue to foster the development of its specializedtourism, with emphasis on diversification by visitor type. While the retireehome tourism is well established in Montserrat, its residential nature,chracterized by a system of establishing homes which are usually occupiedonly a few months of the year, creates less impact on employment than wouldbe desirable. Montserrat is therefore looking towards exploring other similarspecialized tourism services, suclh as matrimonial tourism. If the country cancapture a porLion of the booming market that depends on Haiti and the D)ominicanRepublic for this service, it would vastly increase the nulimbers of slhort-stayvisitors, and with that, the demand for hotel accomtnodation and employment.

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8. Government also has under implementation a development plan foragriculture, through which, and helped by the decline of both tourism andemigration in the mid-1970's, agriculture is resuming an important place inthe economic structure. The Lees Estate development should greatly enhanceagricultural output at full development, and a proposed tree crop developmentis designed to overcome problems of soil erosion. An emphasis thus far onvegetables and new crops such as potatoes has found markets within the regionfor off-season supplies. But the seasonality of these markets, and theperishable nature of the product together with Montserrat's difficulties withexternal transportation, pose grave problems of post-harvest disposal. Thecountry is therefore turning its attention. towards processing as a solution.Such an approach would become even more justified when tree crop developmentof local fruits reaches maturity. Meanwhile, cotton output has been increasingto take advantage of the Japanese market and good prices currently available,though it appears that Government would promote expansion of cotton productiononly if it can be linked to a domestic spinning industry.

9. Finally, Montserrat is alert to the opportunities for employmentoffered by light industry, and has vigorously pursued in the last two yearsthe development of offshore activities. A few of these have been establishedand more are in prospect. Government is also establishing industrial estateswith a loan from CDB, to attract foreign-based and local small industries.

10. Despite this diversified approach to development, the main sourceof income in the economy remains the retiree tourism and associated construc-tion industry. Small farmer production and enclave manufacturing, while goodfor employment, generate little taxable income, and Government might consideremploying an adequate level of land and property tax to ensure that the retireetourism business makes a reasonable contribution to the budget.

Public Sector Investment Program

11. Montserrat has in recent years undertaken capital expenditure ofabout EC$4.5 million per year. The three-year program proposed represents anincrease to about EC$6.6 million per year or a total of EC$19.9 million. Itreflects the emphasis in the development strategy on productive investments.A number of manufacturing projects of the offshore type, and other lightmanufacturing, are being considered. Motserrat has a good start in implement-ing activities of this kind and has plans to undertake additional ones.A principal shortcoming, howiever, is the management and other technical exper-tise required to successfully implement miany of these projects, and requestsfor such technical assistance are included in the program. The main agricul-tural projects proposed include tree crop development and small irrigationworks, as well as a soil conservation project.

Financing the Tnvestmont_ KPrL_-;m

12. The managem-r,t of public finances over the next three-year period,1978-80, is likely to presiunt serious difFicultics. In the past, the currentbudgetary deficits ailx capital exopepdiLurcn; were covered by aid mainly fromthe United Kingdom. Pecently, houevvr, granrts-in-aid to cover budgetary

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current expenditures have become limited with the determination on the partof the United Kingdom to reduce such assistance. Nevertheless, annual budget-ary deficits of EC$1.0 million on current account have-persisted even duringthe past two years when deliberate efforts were made to hold down expenditures.Prospects for raising revenues are quite limited since they are already inexcess of one-third of GDP. Opportunities for reducing current expendituresare equally limited except for further curtailment of the level of servicesprovided. The revenue-earning public authorities are expected to generatea small surplus of EC$100,000 during 1978-80. The National Provident Fundis expected to generate savings of about EC$1.2 million during the three-yearperiod. These combined savings, however, will not be adequate to offset thecurrent budgetary deficit, so that an overall public sector deficit on currentaccount will emerge for the three-year period.

13. Assuming that public finances evolve as indicated above, thenmanagement during the period of 1978-80 will present considerable difficulties.Resources will have to be found to cover debt amortization and investmentrequirements, in addition to financing the current public sector deficit ofEC$3.3 million. This deficit can be cotvered to the extent of EC$1.1-millionfrom capital receipts and funds that can probably be raised from internalborrowing, leaving EC$2.2 million of the current public sector deficit thatwould have to be covered from unidentified sources. Gross external capitalrequirements for the three-year period, 1978-80, for debt amortization andcapital expenditures are estimated at EC$20.8 million (approximately US$198per capita annually). It is estimated that official gross external disburse-ments during 1978-80 from previous commitments represent some EC$7.9 million(about US$75 per capita annually). This still leaves an unfinanced gap ofEC$12.9 million (approximately US$123 per capita annually). It should benoted that the external capital requirements include some US$374,000 forrecurrent costs of financially non-viable projects in the investment program.The unfinanced external gap would have to be covered on appropriately conces-sional terms if Montserrat is to move in the direction of relatively fastereconomic growth and greater fiscal self-reliance. The financing plan for1978-80 is presented below in tabular form:

(EC$ million)

1978 1979 1980 1978-80

USES 7.6 8.8 7.7 24.1

Current Deficit 1.2 1.1 1.0 3.3Amortization 0.3 0.3 0.3 0.9Public Sector Investment 6.1 7.4 6.4, 19.9

SOURCES 7.6 8.8 7.7 24.1

Capital Receipts 0.2 - - 0.2Gross Domestic Borrowing 0.3 0.3 0.3 0.9Unidentified Budgetary Financing 0.7 0.8 0.7 2.2Committed Official External 5.0 1.9 1.0 7.9External Gap 1.4 5.8 5.7 12.9

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14. The analysis of the country's needs and prospects over the near-to-medium term do not take into account specific benefits which regional coopera-tive efforts, including those directed toward broadening the small markets andbolstering absorptive capacity, could contribute to the longer-term, economicdevelopment. These elements are covered in a separate report encompassing allthe ECCM members.

6

Table 1: MONTSERRAT - SECTORAL ALLOCATION OF PUBLICSECTOR INVESTMENT, 1978-80

(EC$ thousands)

- Total1978 1979 1980 1978-80

Agriculture 704 987 965 2656

Manufacturing 1082 4672 4653 10397

Tourism 300 - - 300

Power - -

Transport and Commrmunications 2062 1000 200 3262

Subtotal 4148 6659 5818 16625

Housing 727 612 553 1892

Education 675 122 - 797

Health 312 - - 312

Water Supply

Other Services - 238 - - 238

Subtotal 1952 734 553 3239

Total 6100 7393 6371 19864= = . _ _

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Table 2: MONTSERRAT - FINANCING OF PUBLIC SECTOR INVESTMENT, 1976-80

(EC$ million)

Actual Est. Projected1976 1977 1978 1979 1980

~21lion of Funds 6.922 6.111 7.637 8.750 7.667

Amortization .327 .373 .313 .263 .263Public Sector Investment 5.968 4.841 6.100 7.393 6.371

Central Government 5.968 4.841 6.100 7.372 6.371Rest of Public Sector - - - - -

(Memo item: Current Deficit) .627 .897 1.224 1.094 1.033

Sources of Funds 6.922 6.111 7.637 8.750 7.667

Public Sector Savings* (-.627) (-.897) (-1.224)(-1.094)(-1.033)Central Government -. 970 -1.247 -1.604 -1.524 -1.463National Provident Fund .373 .380 .380 .380 .380Rest of Public Sector -. 030 -. 030 - .050 .050

Capital Receipts .014 .019 .244 - -

Gross Domestic Borrowing -.495 .451 .300 .300 .300

UnidentIfied Bu tiaty FiriAneing - - .680 .794 .733

Gross Official F,-ternalDisburseuimernts on CoI-mItments 7.403 5.641 5.014 1.911 1.018

3.033 1.860 1.672 - -Other 4.370 3.781 3.342 1.911 1.018

Financing, Gap - - 1.399 5.754 5.656

* Items in parenthesca are for balancing purposes only.

Table 3: MONTSERRAT - CENTRAL GOVERNMENT FINANCES, 1975-80

(EC$ million)

Actual Projected1975 1976 1977 1978 1979 1980

Current Revenuie 5.507 7.520 7.369 7.284 7.794 8.235

Tax Revenue 4.136 5.554 4.979 5.245 5.612 5.930Income Tax 1.618 2.559a/ 1.742 1.745 1.800 1.840Import Duties 1.007 1.116 1.189 1.312 1.432 1.582Consumption Tax .926 1.046 1.165 1.288 1.400 1.520Other Tax Revenue .585 .833 .883 .900 .980 .988

Non-Tax Revenue andOther Non-Tax RecCiots 1.371 1.967 2.390 2.039 2.182 2.305

Current Expenditures 7.650 8.490 8.616 8.888 9.318 9.698

Personal Fmoluments 3.559 3.685 3.742 4.124 4.324 4.500

Goods and Services 4.091 4.805 4.874 4.764 4.984 5.198Interest .070 .076 .065 .056 .056 .056Pension & Gratuities .373 .385 .447 .478 .489 .499Grants .126 .051 .150 .238 - -Other 3.522 4.293 4.212 3.992 4.439 4.643

Current Budgetory Surplus -2.143 -.970 -1.247 -1.604 -1.524 -1.463

External Budgetary Assistance 1.791 3.033 1.860 1.672 1.524 1.463

Current Surplus (incl.external assistance) -.352 2.063 .613 .068 - -

Capital Re 2ipts .102 .014 .019 .244 - -

Capital Expen&iture 3.953 5.968 4.841 6.100 7.393 6.371

Overall Surplus -4.203 -3.891 -4.209 -5.788 r7.393 -6.371

a! Exrceptionel receipt of EC$.800 million.

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MONTSERRAT PROJECT LIST

INDEX

Abbreviations Used

Introduction

Annex A. Ongoing Major Projects and Source of Financing

Annex B. Projects 1978/1980

Annex C. Individual Project Descriptions 1978/1980

Annex D. Individual Technical Assistance Profiles 1978/1980

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ABBREVIATIONS USED

BDD - British Development Division

CDB - Caribbean Development Bank

CIDA - Canadian International Development Agency

EDF - European Development Fund

IBRD - International Bank for Reconstruction and Development

IDB - Inter-American Development Bank

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Introduction

1. This report contains a list of major ongoing projects (Annex A), alist of projects for which external finance will be sought during the period1978/80 (Annex B), individual project descriptions (Annex C) and individualtechnical assistance profiles (Annex D). Each list (Annexes A and B) containsthe name of the project, the executing agency, the expected lender(s), if any,the total cost, the external financing required, the status of readiness ofthe project and the estimated recurrent costs during the 1978/80 period. Theindividual descriptions contain additional information which would be ofinterest to potential donors or lenders.

2. Data for these project lists, which will be presented at the meetingof the Caribbean Group for Cooperation in Economic Development scheduled forJune 19-23, 1978, were provided by the Government of Montserrat. The projectlists for 1978/80 reflect the developmental strategy of the Government ofMontserrat, as outlined in the Economic Memorandum dated May 1, 1978.

3. For many projects a 10% financial contribution is shown as requiredto be provided by the Government with the potential donors or lenders provid-ing the remaining 90%. Although the objective of the local contributionshould be given due priority, during the 1978-80 period the likelihood ofthe availability of such contributions is extremely small in most instances.Therefore, the financing of the proposed projects would have to be coveredon appropriately concessionary terms from external sources.

4. The following tables summarize by sector and year the amount ofexternal financing which would be required to be committed by donors orlenders to finance the projects presented in the Project List, the counterpartfinancing required, and the recurrent costs that would be generated from theseand the ongoing projects during the 1978/80 period.

Investment Plan and External Financing Commitments Required for the Period of 1978/80(US$ '000)

1978 1979 1980 TotalTotal External Total External Total External Total ExternalCost Financing Cost Financing Cost Financing Cost Financing

Agriculture 1,625 1,566 - - - - 1,625 1,566Housing 1,110 1,006 - - - - 1,110 1,006Industry 2,100 1,790 1,277 1,157 - - 3,377 2,947Education 238 238 - - - - 238 238

Total 5,073 4.600 1,277 1.157 6 - 650 5,757

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Counterpart Disbursements Required(US$ '000)

Contribution RequiredSectors 1978 1979 1980 Total

Agriculture 5 10 11 26Housing 42 21 14 77Industry 21 184 100 305Education - - -

Transportation 164 _ - 164

Total 232 215 125 572

Estimated Recurrent Costs(US$ '000)

Estimated Recurrent CostsSectors 1978 1979 1980 Total

Agriculture 3 12 13 28Housing - - 5 5Industry - 3 3 7Education - 11 28 39Health 95 98 98 291Other Services - 2 2 4

Total 98 126 149 374

MONTSERRAT - MAJOR ONGOING PROJECTS ANI) SOURCES OF FINANCING

(US$ thousands)

Ext. Amortiza- Recurrent CostsTotal Financ- Interest tiDon Grace Counterpart FinancingCosts ing Source (7.) Years Years Amount (7) 1978 1979 19qO Total

AgricultureFarm Improvement Credit 111 111 CDB 4 15 5 - - - - -

Small Agricultural Projects 5 5 BDD G R A N T - - - - -

Tree Crop Project 32 32 BDD G R A N T - - - - - -

Subtotal 148 148

IndustrySmall Industry Credit 117 117 CDB 4 15 5 - - - - - -

Industrial Estate 18 18 CDB 4 15 5 - - - - - -Large Factory Buildings

Community Workshop Project 14 14 BDD G R A N T - - - .3 .3 .6

Handicraft Development Project 192 192 BDD G R A N T - - - - - -

Small Project Scheme 4 4 BDD G R A N T - - -

Technical Center Project 4 4 BDD G R A N T - - - 3 3 6

Subtotal 349 349.6

TourismTourism Development Project ill 111 BDD G R A N T - - -

Transportation & CommunicationsCIDA 2. 40 10

Plymouth Harbor Development 393 229 CDB 4 15 5 164 42 - - - -

BDD G R A N T

New Road 370 370 BDD G R A N T - - -

EDF

Subtotal 763 599 164 22 -

Health CDBNew Glendale Hospital 63 63 BDD G R A N T - - 95 95 95 285

Equipment for Glendale Hospitel 52 52 BDD G R A N T - - - 3 3 6

Subtotal 115 15 - 95 98 98 21

Other ServicesNew Government Offices 88 88 BDD G R ANT - - - 2 2 4

Total 1574 1410 164 10 95 103.3 03.3 0.

Total - - a - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

MONTSERRAT - 1978/80 PROJECT LIST

(US$ thousands)

ExternalTotal Financing Counterpart Contribution Estimated Recurrent Costs

Projects Costs Required Possible Source Amount (%7) Status of Project 1978 1979 1980 Total

Agriculture

Fruit Crop Establishment 592 533 Unknown 59 10 Concept of project identified. Sites - - - -

available, nursery in operation.

Irrigation - 422 422 Sites identified, feasibility - 1 2 3study underway.

Soil Conservation 611 611 - - Concept of project identified. 3 11 11 25

Subtotal 5 1566 59 X Main components costed. _ 1 1 Z

Low-Cost Housing 1110 1006 Unknown 104 9 Land and building sites identified. - - 5 5

Subtotal 1110 1006 104 i 5 5

Industry

Dairy Plant 400 300 Unknown 100 25 Feasibility study prepared.

Emerald Isle Leather Works 677 677 - - Expansion phase under study.

Match Manufacturing Project 600 540 60 10 Feasibility study underway. - - - -

Montserrat Apparel M5anufacturing 200 180 " 20 10 Main concept identified.

Montserrat Industrial Enterprises 500 450 " 50 10 Implementing agency has been formed

(MIEL) as of 2/1/78.

Montserrat Plastics 1000 800 200 20 Project study required.

Subtotal 3377 2947 430 13

Education

Junior Secondary School 238 238 Unknown - - Building plans drawn up and land - 11 28 39acquired.

Subtotal 2_8 238 --11 28 3

Total 6350 5757 593 9 3 23 46 72

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MONTSERRAT

ANNEX C

INDIVIDUAL PROJECT DESCRIPTIONS

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MONTSERRAT

1978/80 Project List - Individual Project Description

Agriculture(US$ '000)

I. NAME OF PROJECT: Fruit Crop Establishment

II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture

III. TOTAL ESTIMIATED COST: $592.0

IV. EXTERNAL FINANCING ACQUIRED: $533.0

V. LENDING AGENCY: Unknown

VI. PURPOSE AND DESCRIPTION: Large areas of terrain are unsuitable forintensive agriculture but are ideal for growing fruit crops. Goodmarkets exist for a variety of tropical fruits which can be success-fully grown in Montserrat. The Government proposes to manageapproximately 1,200 acres of fruit crops.

VII. COST COMPONENTS AND FINANCING:

Financed by TotalLocal ExternalSources Sources Amount %

Local Costs 59 414 473 80Foreign Costs - 119 119 20

Total Costs - Amount 59 533 592- 10 90 100

VIII. DISBURSEMENT PERIOD:

Prior to Post1978 1978 1979 1980 Total 1980

Local Sources - 5 10 11 26 33External Sources 50 86 184 240 293

Total - 55 96 115 266 326

IX. STATUS OF PREPARATION: Main concept hlas been identi.fied. Clearedland available and a nursery in operation.

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X. TERMS OF FINANCING:

Interest Rate )Amortization Period: ) UnknownGrace Period : )

XI. PROJECT IIPILICATIONS:

1978 1979 1980 Total

Operating and Maintenance Costs - 1 2 3Debt ObligationsEstimated New Permanent Jobs

XII. TECHNICAL ASSISTANCE REQUIRED:

A. Feasibility Studies: )B. Project Preparation: ) Technical assistance during projectC. Project Implementation: ) preparation and implementation willD. Other: ) be required.

XIII. COMMENTS:

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MONTSERRAT


Agriculture(US$ '000)

I. NkME OF PROJECT: Irrigation

II. EXECUTING GOVERNMENT AGENCY: Ministry of Works

III. TOTAL ESTIMATED COST: $422.0



VI. PURPOSE AND DESCRIPTION: To alleviate water shortages during annualdry seasons thereby increasing agricultural production. Irrigationprojects will be centered on untapped springs and small ponds sincethere are few suitable sites on the island for water storage dams.Each project will be small and affect only 10 to 12 acres.

VII. COST COAPONENTS AND FINANCING:


Local Costs - 21 21 5Foreign Costs - 401 401 95

Total Costs - Amount - 422 422

- % - 100 100

VIII. DISBURSE1MENT PERIOD:


Local Sources - -

External Sources - 128 92 83 303 119

Total - 128 92 83 303 119

IX. STATUS OF1 PR'EPARATION: Sites identified, cost feasibility studyundorxway.

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Interest Rate : )Amortization Period: ) UnknownGrace Period : )

XI. PROJECT IMPLICATIONS:

-1978 1979 1980 Total

Operating and Maintenance Costs - 15 46 61Debt Obligations - - -Estimated New Permanent Jobs - - -



XIII. COMMENTS:

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MONTSERRAT


Agriculture(US$' 000)

I. NAME OF PROJECT: Soil Conservation





VI. PURPOSE AiD DESCRIPTION: Most of the usable land on Montserrat isexposed to rapid erosion as a result of the steep slopes which arethe main topographical feature of the island. As a result, positiveefforts must be made to maintain soil cover and fertility. Theisland is also exposed to constant wind, and crops grown in mostareas tend to be adversely affected, thus resulting in substantiallyreduced yields.



Local Costs 611 611 100Foreign Costs - - -

Total Costs - Amount _ 611 611-% - 100 100



Local Sources - - -- -

External Sources - 20 122 122 264 347

Total - 20 122 122 264 347

IX. STATITS OF PREP" iRATTXlN: Concept and main components of project havebcen identificsd.

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Interest Rate : )Amortization Period: ) UnknownGrace Period )


1978 1979 1980 Total

Operating and Maintenance Costs 3 11 11 25Debt ObligationsEstimated New Permanent Jobs



XIII. COMMENTS:

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MONTSERRAT


Housing(US$ '000)

I. NAME OF PROJECT: Low-Cost Housing


III. TOTAL ESTIMATED COST: $1,110.0

IV. EXTERNAL FINANCING ACQUIRED: $1,006.0


VI. PURPOSE AND D)ESCRIPTION: Project designed to provide 400 low-costhouse units through aided self-help and using a reservoir of laborskills developed during the construction activities. of the 1960's.Designed to promote cooperation and mutual assistance among low-income groups.

VII. COST COMAPONENTS AND FINANCING:


Local Costs 104 7 111 10Foreign Costs - 999 999 . 90

Total Costs - Amount 104 1._06 1,110- % 10 90 100.

VIII. DISBIURSEIMENT PERIOD:


Local Souirces - 42 21 14 77 27External Sources - 227 205 191 623 383

Total - 269 226 205 700 410

IX. STAT;OFi PRTh,'::TiON: Project prepared'; Iarid aiid building siteslicve becii idc Vl-i i .

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X. TERMS OF FINANCING: To be negotiated

Interest RateAmortization Period:Grace Period


Operating and Maintenance Costs ) None during the 1978/80 period.Debt Obligations ) Project under preparation andEstimated New Permanent Jobs ) implementation.


A. Feasibility Studies:B. Project Preparation:C. Project Implementation:D. Other:

XIII. COMM5ENTS:

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MONTSERRAT


Industry(US$ '000)

I. NAME OF PROJECT: Dairy Plant

II. EXECUTING GOVERNMENT AGENCY: Ministry of Agriculture




VI. PURPOSE AND DESCRIPTION: To meet the country's requirement of milkand milk by-products. The plant will produce 2 million liters ofmilk and also 1 million liters of pasteurized milk, 300,000 lbof cheese, yogurt and butter yearly.



Local Costs 100 - 100 25Foreign Costs - 300 300 75

Total Costs - Amount 100 300 400- 25 75 100

VIII. DISBURSEMIENT PERIOD:

Prior to Post1978 1978 1979. 1980 Total. 1980

Local Sources - - 100 - 100 -External Sources - - 180 120 300 -

Total _ - 280 120 400 -

IX. STATUS OF P,3PARATION: Feasibility study prepared.

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Interest Rate )Amortization Period: ) UnknownGrace Period )


1978 1979 1980 Total

Operating and Maintenance Costs - 250 350 600Debt Obligations - 160 100 260Estimated New Permanent Jobs - - -


A. Feasibility Studies:

B. Project Preparation:

C. Project Implementation: Services of a technical expert requiredfor 1-1/2 years.

D. Other: An expatriate dairy manager is alsoneeded for 2 years until a local personcan be trained.

XIII. COMMENTS:

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MONTSERRAT


Industry(US$ '000)

'I. -NAME OF PROJECT: Emerald Isle Leather Works Ltd. - Expansion Phase

II. EXECUTING GOVERNMENT AGENCY: Government of Montserrat/Chief Minister's Office

-III. -TOTAL ESTIM4ATED COST: $677.0



'VI. PURPOSE AND DESCRIPTION: Tannery is being set up with the purposecof utilizing local and imported hides and skins to be tanned for the-craft leather unit. It is proposed to expand the initial concept to.a medium scale venture. The capacity aimed at is 12,000 hides and120,000 skins per annum.

'VII. 'COST COMPONENTS AND FINANCING:

Financed by US$ millionLocal ExternalSources Sources Amount

-Local Costs - 271 271 40'Foreign Costs - 406 406 60

Total Costs - Amount _ 677 677- % - 100 100



Local Sources - - - - -External Sources _ - 339 338 677

-Total - 339 338 677

IX. STATUS OF Pl'EPARATION: First phase under implementation; expansionphase being studied.

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Operating and Maintenance Costs)Debt Obligations ) NoneEstimated New Permanent Jobs )


A. Feasibility Studies: )B. Project Preparation: ) Feasibility study is required.C. Project Implementation: )D. Other: ?

XIII. COVDFENTS:

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MONTSERRAT


Industry(US$ '000)

I. NAME OF PROJECT: Match Manufacturing Project





VI. PURPOSE AND DESCRIPTION: Substitution of import and for export inthe East Caribbean region. Designed capacity is 14 million matchboxes per year.


Financed by US$ millionLocal ExternalSources Sources Amount %


Total Costs - Amount 60 540 600- % 10 90 100



Local Sources - 4 10 46 60 -

External Sources - 34 90 416 540

Total - 38 100 462 .600

IX. STATUS OF PREPAIRATION: Feasibility study underway.

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Interest Rate )Amortization Period: ) UnknownGrace Period )





B. Project Preparation: Feasibility work is required.Services of project engineer from matchindustry requested.

C. Project Implementation: Technical assistance will.be required.

D. Other:

XIII. COMMENTS:

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MONTSERRAT-


Industry(US$ '000)

I. NAME OF PROJECT: Montserrat Apparel Manufacturing Limited -

First Phase

II. EXECUTING GOVFERNMENT AGENCY: Government of Monteserrat/Chief Minister's Office

III. TOTAL ESTIT'LTED COST: $200.0

IV. EXTERNAL FINA/24CING ACQUIRED: $180.0


VI. PURPOSE AND DESCRIPTION: To take on stitching contract from Americaof various items on clothing.


Financed by TotalLocal ExternalSources Sources Amount Z

Local Costs 20 40 60 30Foreign Costs _ 140 140 70


VIII. DISBURSEMENJT PERIOD:


Local Sources - - 20 - 20 -

External Sources - - 180 _ 180 -

Total - - 200 _ 200 -

IX. cS',!:' 0;' i'.XT(M, tin coneeiel bas been identified.

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XII. TECHNICAL ASSISTAI'CE REQUIRED:


B. Project Preparation: Full technical assistance required frompreparatory to operational stage of theproject.

C. Project Implementation:

D. Other:

XIII. COMMENTS:

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MONTSERRAT


Industry(US$ '000)

I. NAN;E OF PROJECT: Montserrat Industrial Enterprises Limited (MIEL)



IV. EXTERNAL FINAN'CING ACQUIRED: $450.0


VI. PURPOSE AND DESCRIPTION: The Government lhas formed MIEL with theobject of managing small industrial ventures which would not interestprivate sector and to function as a holding company for such jointventures which need Government support.

VII. COST COiMPONENTS AND FINANCING:




VIII. DISB3URSEMENT PERIOD:


Local Sources - 7 9 9 25 25External Sources - 68 78 79 225 225

Total _ 75 87 88 250 250

IX. STAT1US 0F PRrElP.fPAT Io: MITEL formed on February 1, 1978; generalmanager appointed.

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Interest Rate )Amortization Period: ) UnknownGrace Period : )





B. Project Preparation:

C. Project Implementation: Management assistance needed for thecompany.

D. Other:

XIII. COMMENTS:

.

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MONTSERRAT


Industry(US$ '000)

I. NAMIE OF PROJECT: Montserrat Plastics Ltd.


III. TOTAL ESTIMATED COST: $1,000.0



VI. PURPOSE AND DESCRIPTION: To meet local consumers' demand forplastic goods, it is proposed to expand the present facility alreadyproducing plastic bags.

VII. COST COMPONENTS AND FINANCI1!G:



Total Costs - Amount 100 900 1,000-% 10 90 100



Local Sources - 10 45 45 100 -

External Sources - 90 405 405 900 -

Total - 100 450 450 1,000-

IX. STATUS OF PREPARATION: Mtain concept and components have beenidentified.

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B. Project Preparation: Full technical assistance needed fromthe market survey stage to production.

C. Project Implementation:

D. Other:

XIII. COMMENTS:

///

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MONTSERRAT


Education(US$ '000)

I. NAME OF PROJECT: Junior Secondary School (Eastern District)

II. EXECUTING GOVERNMENT AGENCY: Ministry of Education, Health andWelfare

III. TOTAL ESTItATED COST: $238.0



VI. PURPOSE AND DESCRIPTION: The project provides for the constructionand equipment of a Junior Secondary School building in the EasternDistrict to complete the reorganization of the school system. Theschool will cater to 200 children in the 12+ to 15+- age group,giving emphasis on practical subjects (Industrial Arts, lightHandicrafts, Agriculture and Home Economics) in addition to basicsubjects -- Language Arts, Maths, and General Science. Basicrequirements are for 6 general classrooms, 6 special rooms, Libraryand Administrative block. Total building area, 11,200 sq ft.



Local Costs 95 95 40Foreign Costs - 143 143 60

Total Costs - Amount - 238 238

-% - 100 100


Prior to Post1978 1.978 1979 1980 Total 1980

Local Sources - - - - - -

External Souirces - 193 45 - 238 -

Total 193 45 - 238

IX. STAhU S IW' PK iP,A I: dai ld-i it plans hrxve heen O•1xra upl) at-d s i .esacquired.

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1978 1979 1980 Total

Operating and Maintenance Costs - 11 28 39Debt Obligations - - -Estimated New Permanent Jobs - -


A. Feasibility Studies: )B. Project Preparation: ) Technical assistance in projectC. Project Implementation: ) preparation and implementation willD. Other: ) be required.

XIII. COMMENTS:

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MONTSERRAT

ANNEX D

INDIVIDUAL TECHINICAL ASSISTANCE PROFILES

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MONTSERRAT

1978/80 Prolect List - Individual Project Description

Technical Assistance

SECTOR: Agriculture

PROJECT TITLE: Feasibility Study on Belham River Irrigation Scheme

INTERNATIONAL ORGANIZATION: Unknown

COUNTERPART INSTITUTION: Ministry of Works

DESCRIPTION AND OBJECTIVES: The Belham River represents one of the onlysites for large-scale water storage. A qualified civil engineer is requiredfor a period of two months to thoroughly investigate the potential sites.

TECHNICAL ASSISTANCE REQUIREMENTS: Experienced civil engineer for feasibilitystudy.

ESTIMATED COST: Unknown.

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MONTSERRAT


Technical Assistance

SECTOR: Agriculture

PROJECT TITLE: Technical Assistance for Project Preparation

INTERNATIONAL ORGANIZATION: Unknown

COUNTERPART INSTITUTION: Ministry of Akriculture

DESCRIPTION AND OBJECTIVES: To facilitate the submission of projects to donoragencies, it would be very helpful if these agencies could supply personnelto assist with project documentation and preparation. Under technical assis-tance, this saves time and permits projects to be prepared in the mannerrequested by aid donors.

TECHNICAL ASSISTANCE REQUIREMENTS: Experts to assist the Ministry ofAgriculture in project identification and preparation.

ESTIMATED COST: Unknown.

(with Government's 1978/80 Project List fiETlN

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