Memorandum of Understanding (MOU)

Between
The Government of Montserrat (GoM)
And
The UK Department for International Development (DFID)

1. Issue

1.1 This MOU sets out the Government of Montserrat’s commitment to implementing
reforms that will (i) improve the business environment (ii) develop Montserrat as a tourist
destination and iii) strengthen GoM’s capacity to facilitate growth. Significant progress across
all reform areas is a fundamental precondition for any future UK commitment to investment
funds in Little Bay town, Carr’s Bay port and sea/air access to Montserrat.

2. Introduction

2.1 The GoM have identified an ambitious strategy to move Montserrat towards self-
sufficiency and away from financial dependence on the UK. This strategy is focussed on the
development of a new capital in Little Bay with a new port at Carr’s Bay to replace Plymouth as
the centre for economic activity following the destruction of the former capital in the volcanic
eruptions in the late 1990s. Since those eruptions, Montserrat has faced considerable
challenges in rebuilding the economy as many people left Montserrat to live and work in the
US, other Caribbean islands and the UK. Continued volcanic activity and ashing have resulted
in nearly two thirds of Montserrat becoming uninhabitable.

2.2 Sustained economic growth focussed on the north of Montserrat around Little Bay is only
likely to be achieved through significant public investment, if it can be fully justified (including
financial and economic justification), which would act as a catalyst for private investment in
town and tourism facilities. GoM do not have sufficient resources to fund public investments of
the scale that might be made without financial support from the UK Government. In February
of 2011, the Secretary of State for International Development, Andrew Mitchell visited
Montserrat, outlining the basis for a potential deal between the UK and the Government of
Montserrat to reduce Montserrat’s financial dependence on the UK. This deal would involve
increased capital investment and technical assistance funded by the UK, if it can be fully
justified, while GoM undertakes policy reforms to create an enabling environment for private
sector investment.

2.3 This MoU sets out the nature of this deal.

3. The Reform Programme

3.1 GoM’s strategy for financial self-sufficiency depends not only on increased public
investment but also on a radical transformation of the business environment so Montserrat
becomes more attractive for private investment. GoM have set an ambitious target of having
the private sector contribute more than 50% of the economy by 2020, a significant increase on
the 34% in 2011. This transformation will require significant changes in three key areas:
 i. improving the business environment;
ii. developing Montserrat as a tourism destination; and
iii. strengthening GoM’s capacity to deliver reforms and key strategic investments.

3.2 Improving the business environment will be achieved through reviewing GoM’s
investment, immigration and tax policies so that Montserrat has a clear, simple, transparent and
development-friendly system for non-Monsterratians to be allowed to enter, live, work and
invest in Montserrat. This will be achieved through exploring options for creating a Special
Economic Zone at Little Bay, reviewing immigrant land-holding policy and speeding up
customs clearance times at the port.

3.3 Developing Montserrat as a tourist destination will be achieved through developing a

clear tourism plan that drives economic growth and provides platform for sustained
development. The 3rd Tourism Development Plan will be finalised by September and
implementation started by February 2013. GoM will also take actions to improve sea and air
access so it delivers secure access to the island and value for money to tax-payers. Activities
include exploring private sector interest in running improved ferry and air services by
September.

3.4 Strengthening GoM’s capacity will be delivered through delivery of a comprehensive

package of technical assistance. GoM have also committed to establishing a geothermal unit
and restructuring the Montserrat Development Corporation (MDC) by September 2012 as well
as reviewing GoM’s regulatory bodies. By February 2013, GoM have implemented a number of
cabinet decisions on institutional reforms as well as implemented recommendations from the
policing review.

3.5 The goals and activities in each reform area are presented in the policy reform matrix in
Annex 1. Progress in delivering against this reform plan will be monitored regularly over the
next 12 months with a major review in September 2012 and again in February 2013. In
delivering on this reform plan, GoM have identified 3 underlying principles which cut across all
areas: Sound environmental management, sound financial management and inclusive growth.

4. Investments for Growth

4.1 GoM’s Strategic growth plan identifies three areas requiring significant public investment:
Electricity generation from geothermal; Little Bay town and Carr’s Bay Port; sea and air access.

4.2 Preparations for the first investment in electricity generation from geothermal are the
most advanced. Signing of this MoU will be made at the same time as UK Government
commitment to fund the exploration phase of geothermal and support for the GoM to establish
the necessary institutional arrangements to manage this investment. Following the drilling
phase, it is expected that electricity generation from the geothermal resource will be delivered
through a public-private partnership.
4.3 Little Bay town and Carr’s Bay port are under design and the level of public funding
required will be determined in mid-2012. A conditional and in principle decision on UK funding
for public infrastructure (port, town and sea/air access) will require: detailed design and
costings of the port and any other publicly funded infrastructure; outline justification (including
financial and economic justification) of the investment; and the demonstrated interest of private
sector entities to make key investments in hotel, yachting marina, residential and other
facilities. The actual commitment of UK funds will be dependent upon: the UK Government
having a full justification (including financial and economic justification) of the investment; the
simultaneous contractual commitment of private sector entities to make key investments in
hotel, yachting marina, residential and other facilities; the submission and approval of a detailed
business case; and demonstrable, significant progress by GoM in delivering reforms outlined in
this MoU. The decision is expected no earlier than February 2013 following the review of
progress against the reform matrix.

5. Dissemination strategy

5.1 GoM will design and implement a clear communication strategy covering both the public
investments and the reforms. This will target people living in Montserrat and its Diaspora. DFID
will publish this MoU on its external website once signed.

6. Coordination, Monitoring and Reporting

6.1 GoM will establish necessary monitoring arrangements and provide DFID with monthly
reports of progress. Prior to the formal reviews in September 2012 and February 2013, GoM
will provide DFID with a self-assessment of progress.

For GoM For DFID

The Premier Secretary of State

Date: Date:
 

 
DRAFT  

GoM Reform Matrix

Reform Policy Goal Milestones Milestones by Resources Impleme

Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
Busines Investme Private Complet Key For all MoFEM
s nt Policy sector e study recommend sections MCRS
Environ contribute of ations as below: MDC
ment s 50% Special agreed by To be Post
share of Economi Cabinet agreed Office
GDP by c Zones implemente following CabSec
2020 and d. productio
priority n of the HMG
incentive Action inputs
s by end Plan.
May DFID
2012. FCO
GoM
Investme introduces
nt tax a postal
regime code
approve system that
d by enhances
Cabinet and
and facilitates
publishe trade and
d. investment1
.
Investme
nt
promotio
n
strategy
(to
include
special
economi
c zone)

                                                                                                                       
1
 Will  be  dependent  on  conclusion  of  international  agreements  with  the  UN  postal  agency  
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
develope .
d and
adopted
by
Cabinet

Outsourc
ing
strategy
impleme
nted as
set out in
Cabinet
Decision
s

Time
taken for
goods to
clear
customs
reduced
from one
week to
3 days

Impleme
nt
recomm
endation
s for
access
to
business
finance
proposal
s to
stimulate
SME
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
develop
ment
(TIPA
and BFF
study)

GoM
clarifies
arrange
ments
with
existing
land
users
(legal
and
illegal) in
LB area
to
facilitate
future
land
disposal.

Immigrati A simple, Review Key CabSec

on Policy transpare immigrati recommend MAHLE
nt and on policy ations on DITES
developm with a immigration MCWL
ent- view to , labour and
friendly simplifyi work permit HMG
system for ng the systems, as inputs
non- process agreed by
Monsterra for right Cabinet, FCO
tians to be of implemente DFID
allowed to residenc d. UKBA
enter, live, e for
work and investors
invest in by end
Montserra of June
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
t. 2012.

Review
immigra
nt land
holding
policy by
Septemb
er 2012.

Review
labour
policies
and
legislatio
n by
Septemb
er 2012.

Impleme
nt pilot
online
visa
system
by
Septemb
er 2012.

Complet
e
revision
of the
Immigrat
ion and
Work
Permit
system
by
Septemb
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
er 2012.
Tax Tax Review Key MoFE
Policy policies tax recommend M
encourag policies ations as MCRS
e to agreed by CabSe
investmen develop Cabinet c
t and tax implemente
drive regime d
private that
sector stimulate
growth. s growth.

Environm Montserra Review The MAHL

ental t has an of Conservatio E
managem appropriat propose n and AG
ent e legal d CEMA Environmen
and complete tal
institution d, draft Manageme
al final nt Act
framewor version CEMA is
k for available enacted.
enviornm for
ental consultat
managem ion.
ent in
place. Appropri
ate
institutio
nal
arrange
ments
for
environ
mental
manage
ment are
in place
Tourism Demand Montserra Tourism Appointmen OP
and t has a Develop t of CabSe
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
Supply clear ment professional c
constraint tourism Plan 3 marketing MTB
s plan that that and
drives address promotion
inclusive es agency. HMG
economic demand inputs
growth and
and supply DFID
provides constrain
platform ts
for develope
sustained d and
developm approve
ent. d by
Cabinet
by
Septemb
er 2012.

Funding
for
Tourism
Develop
ment
Strategy
agreed
with
DFID by
Dec
2012.

Access Montserra Negotiati Brysons MCWL

t’s access ons with Pier fully Access
arrangem Govt of operational. Coordinat
ents drive Antigua or
social have OP
economic secured MCRS
growth agreeme Recommen MTB
and nt for dations of
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
deepen use of customs Port/Airpo
regional Brysons and rt
integratio Pier, immigration Authoritie
n. Antigua. review s?
implemente
Prospect d.
uses for
private
sector Public
acquisiti subsidy, if
on and needed, for
operatio access
n of arrangemen
ferry/Twi ts
n Otter confirmed
air in time for
service budget aid
finalized mission in
by end January
June. 2013.

EoIs for
acquisiti
on and
operatio
n of
ferry/Twi
n Otter
air
service
complete
d by end
October
2012.

Review
of
arrange
ments
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
for air
and sea
transport
operator
s,
including
affordabi
lity,
endorse
d by
Cabinet.

Review
of
customs
and
immigrati
on
procedur
es to
expedite
processi
ng of
passeng
ers in
Montserr
at and
Antigua
endorse
d by
Cabinet.

Tourism
facilitatio
n service
at
Antigua
airport
establish
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
ed.

Capacity Public / Montserra Commen Labour MCWL

Private t has skills ce market MEHC
to achieve labour strategy for MDC
strong, market key sectors Gover
inclusive, survey to completed nor
economic identify and and
growth. skills endorsed ODG
and by Cabinet.
training
needs in
key
sectors

Public GoM has Technica Training Impleme HRD

relevant l programme ntation of CabSec
technical assistan s agreed training MAHLE
capacity ce matrix and funding program
to outtlines secured. mes. HMG
implement key inputs
reforms short- DFID
and term and
support long-
long-term term
sustainabl skills
e gaps
economic identified
growth. in priority
reform
areas
approve
d by
Cabinet

Institution Appropriat MDC Implement ODG

s e restructu Cabinet CabSec
institution red to decision in MoFEM
al deliver relation to MCWL
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
framewor port and the merger OP
ks in town of port and MTB
place to develop airport MDC
deliver ments. authority. AG
strategic
inclusive Access Revised HMG
growth co- access co- inputs
package. ordinatio ordination DFID
n functions
functions agreed,
reviewed with long-
. term
funding
GoM secured.
sets up a
Geother
mal Unit,
with Key
clear recommend
roles, ations of
responsi GoM
bilities regulatory
and functions
funding implemente
for d.
geother Regulatory
mal Commissio
manage n
ment. established
by
Institutio December
nal 2013
framewo
rk for Recommen
Montserr dations
at analysed,
Tourism agreed and
Board timetabled.
reviewed Agreed
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
and recommend
recomm ations
endation coming
s from the
endorse Police
d by review are
Cabinet. either
implemente
Review d, or an
of GoM action plan
regulator is in place
y to deliver
functions implementa
to tion.
facilitate
investme
nt in key
areas
that will
drive
investme
nt:
telecoms
, utilities,
quality/st
andards,
sea and
air
access.

Review
of land
legislatio
n to
streamlin
e and
eliminate
inconsist
encies,
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
conflicts
and
obsolesc
ence,
and to
free up
market
opportun
ities for
non-
Montserr
atians.

Establish
an
overarch
ing
Environ
mental
Safeguar
ding and
Social
Impact
framewo
rk for the
impleme
ntation
of the
SGP
GoM has
carried
out a full
scale
indepen
dent and
external
performa
nce
review
of the
Royal
Montserr
at Police
Reform Policy Goal Milestones Milestones by Resources Impleme
Area Area by 09/12 02/13 Required nting
(Mid-Year Agency
Review)
Service