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2006 Budget Address by President James A. Michel, Minister for Finance,
before the National Assembly
- 01.12.05
'Our future successes will depend on preserving our gains'
Mr.
Speaker,
Honourable Members of the National Assembly,
People of Seychelles,
On this
day last year I presented to you the 2005 Budget which reflected my
determination to take Seychelles and the Seychellois people further on
the road of progress and prosperity.
The 2005
Budget was part of the new platform for our medium to long-term
development. It introduced further measures to modernize our
economy, accelerate its growth, inspire more confidence in both local
and foreign investors and as a result create more wealth and employment.
Throughout 2005, we strove to achieve these objectives and we have
delivered. This is what I said I would do and in 2005 my
Government has:
- Carried
out changes in Government Departments to improve efficiency and
service delivery
- Created new bodies outside ministries such as the Seychelles Civil
Aviation Authority, the Seychelles Tourism Board, the National
Statistics Bureau and the Non-Banking Financial Services Authority
- Provided further incentives to the tourism industry
- Provided new incentives to the Agricultural and Fisheries sectors
- Concluded agreements for the construction of a 4th and 5th tanker
- Enacted measures to assist musicians
- Promoted cottage industries
- Increased support to small businesses
- Continued our programme of trades tax reduction
- Removed the requirement for import permits for most goods
- Adopted provisions for the declaration of assets by public servants
- Reduced the stock of domestic debt
- Established the Esmeralda Bond to encourage a culture of personal
savings
- Reduced and in certain cases restructured external debts
- Adopted our divesture strategy
- Finalised the Investment Code
- Created the Seychelles Pension Fund
- Maintained a fiscal surplus despite adverse conditions
One
measure that I spoke about in the 2005 budget address has not been fully
implemented as yet. The privatisation programme, which was to start in
the first quarter, has been delayed to the fourth quarter as we have
needed overseas expertise and guidance. Government has been
working with international partners to develop the most appropriate
framework for the sale of assets earmarked for privatisation. We remain
committed to the programme, but we do not want to repeat the mistakes
made by some other countries. We want the privatisation we
undertake to be for the real and long-term benefit of Seychelles and the
Seychellois people. We also want, as far as possible, for every
Seychellois to have the opportunity to buy a share in a privatised
venture.
Today,
our country is entering the modern economic environment. I see
ourselves as a young but maturing and optimistic nation, ready to face
the challenges of the new times.
The core
of my 2005 budget was based on the conviction that together we can
create our prosperity. The events that we have faced this year and the
manner in which we have responded to them, have further reinforced this
conviction. It has been a difficult year: we have faced
unprecedented natural disasters and the highest fuel prices ever.
But we have also together created the conditions to increase the wealth
of the nation. There is more confidence in our country and
investments are on the rise. More jobs are being
created. We are earning more foreign currency and our net reserve
position has improved.
In short,
our efforts, perseverance and resilience as a nation over a difficult
period are starting to bear fruit.
In
addition to the improvements in our economic situation, we have
continued to invest substantially in our social programmes.
In 2006,
I am proposing an economic programme that benefits all Seychellois and
builds on the 2005 measures. My vision for Seychelles is of a
society that is both dynamic and caring � a vision which I believe
epitomises our Seychellois character. It is a vision which should
inspire us to develop our full economic potential while ensuring that
the fruits of our hard work are shared by all of our people.
Mr.
Speaker, before going into the details of the 2006 budget, I will
highlight major elements of our performance in 2005.
Developments in 2005
The international economy remained strong in 2005 despite the rising oil
prices and natural disasters in many parts of the world. The
increasing oil price was caused to a large extent by the high demand of
the newly industrialised countries, which continued to enjoy high
growth. The hurricanes experienced by the USA exerted further
upward pressures in the oil market in the second half of the year.
Inflationary tendencies started to appear especially in countries which
are heavily dependent on importing this commodity. A sector especially
affected was the travel industry, while the basic costs of freight and
importation of goods have also risen.
On the
domestic front, the tsunami and the torrential rains of late December
2004 caused considerable damage to the country�s capital stock,
resulting in an important negative shock for the start of 2005. We
commend the Seychellois people for their solidarity and strength of
character and we thank all local and overseas partners, foreign
governments and international agencies.
The
natural disasters were of concern to the Government as it threatened to
derail the reforms that we are undertaking, particularly our fiscal
policy. But despite these difficulties, and the increase in fuel
prices, we were determined to maintain the strong fiscal stance started
in 2003. For 2005 our budget performance is better than forecast.
Given the strong fiscal position, we have been able to reduce domestic
debt and consequently relied very little on Central Bank funding.
The
improvements in the fiscal accounts translated into a general decline in
liquidity and for the year up to October, the fall was 0.6 per cent.
Since the reforms started in 2003, liquidity movement has been well
contained and has remained in single digits.
The
increase in the price of oil in the latter part of the year, exerted
pressure on the economy. As a net oil importer, our small economy
was not spared the effects of the price hikes. The average value of fuel
increased from US $38 a barrel in 2004 to US $60 a barrel in 2005. In
2002 our domestic imports were US $17 million, in 2003 US $23 million,
in 2004 US $28 million, and in 2005 an all time high of US $38 million.
Government continued to absorb the increases in price and maintained the
prices at the petrol station, electricity tariffs and public transport
charges. Consequently there has been a decline in its tax revenue
Despite
the above constraints, the Government implemented its announced
strategies. I gave my undertaking for a strong fiscal position;
and we will achieve a surplus for a third consecutive year. Mr.
Speaker, this surplus, at 8% of GDP, will be the highest ever. I
consider this to be no small achievement when we take into account the
context in which we have done this.
We have
also made progress concerning FDI flows into the country with over US
$40 million registered in 2005. The operations of the Seychelles
Investment Bureau have reinforced the investment climate and investor
confidence has never been stronger. This will be further strengthened by
such other measures as our ratification of the UN Convention against
corruption and the adoption of the Investment Code. There have
also been encouraging developments in the offshore sector with SIBA
expecting 50% more revenue in 2005. My Government has also
extended its network of double taxation avoidance treaties, the latest
of which is being negotiated with Belgium. Such agreements are a further
mark of confidence in our economy.
We have
restructured our bilateral debts with the governments of the People�s
Republic of China and the Republic of India and our multilateral debts
with Kuwait Fund and Abu Dhabi Fund. We have engaged in discussions with
the ADB and hope to reach agreement regarding payment of arrears early
next year. We have also resumed payment of our commitments to the
World Bank and OPEC Fund. Positive discussions are ongoing with other
bilateral and multilateral creditors. On the domestic side, we
have restructured our debts. We have also launched the Esmeralda
bonds to promote savings and as part of the domestic debt restructuring.
The sale of the first SR25 million worth of individual bonds is almost
complete.
The
restructuring agreements provide for longer maturity, giving us a
cushion while the economy re-adjusts.
As we all
know, our country is facing certain foreign exchange constraints.
This is an issue which cannot be resolved overnight. We must
maintain measures to facilitate investment, increase productivity and
enhance our foreign exchange earnings. This approach Mr. Speaker,
ensures that we continue to develop while maintaining our socio-economic
gains. The flow of foreign exchange into the country is improving.
Foreign exchange earnings this year up to October totalled SR1.1 billion
compared to SR973 million in the same period of 2004.
New
incentives to the tourism industry have given another boost to this
sector. Several establishments are using the incentives to upgrade
and offer much improved products and service to our guests. A number of
our hotels and resorts are acclaimed as being among the best in the
world. Seychelles enjoys its well-deserved reputation to be not only a
destination of unparalleled beauty but, more and more importantly these
days, one of safety and security.
Up to the
end of October, arrivals totalled 109, 599, an increase of 6 per cent
compared to the same period in 2004. The rise in numbers has been
helped by the marketing exposure of the country through the new airlines
in late 2004 and the repositioning of Air Seychelles which have helped
to broaden the clientele base. The hotels themselves have also
played a part in marketing. Foreign Exchange flows for the tourism
sector between January and October are estimated to be SR947 million,
compared to SR880 million for the same period in 2004. The
improved performance is expected to continue in 2006 as new hotels open.
The
Agriculture and Fisheries (Incentives) Act introduced in April, is
providing the fisheries and agricultural sectors with a series of
incentives designed to improve productivity and competitiveness and
ensure that the two sectors increase their contribution to national
wealth creation.
In the
fisheries sector, industrial fishing has maintained high catch levels
resulting in increased transhipment activities. The total revenue
from industrial fishing including licenses, transhipment fees and
services is estimated to be in the region of SR400 million.
Artisanal fisheries were adversely affected by the December 2004
tsunami, but are staging a remarkable recovery this year as marked by
their catch of 4200 tonnes.
In all
sectors, Government has sought to improve the employment situation and
has put in place a series of special training programmes including the
Apprenticeship Scheme, the Skills Acquisition Programme, and the Small
Project and Business Development scheme.
2005 Budget outcome
This
year, we will achieve a surplus of around SR318 million or 8% of GDP, 1%
more than budgeted.
Government expects to collect SR2.109 billion in revenue. This is higher
than what was budgeted despite lower trades tax receipts and less
dividend collection because of higher Social Security contributions.
Government expects expenditure to be SR1.792 billion which is SR81
million more than budgeted. This is mainly due to higher spending
in certain Government services.
2006 Fiscal Objectives
The
budget that I am presenting today will complement the steps that we have
already taken, not only to improve the fiscal position but also to
streamline procedures and make government more efficient and responsive.
It is
also a budget which will see some of the fruits of the hard work of the
past few years being distributed and shared among our people.
For 2006,
I am aiming for a budget surplus of SR177.946 million or 5% of GDP.
Total
revenue is forecasted to be SR1.929 billion and total outlays SR1.751
billion.
- Revenue
The
SR1.929 billion revenue for 2006 is a decrease over the 2005 budget of
around SR60 million due mainly to further reductions in trades taxes.
The reductions are in line with Government�s endeavour to modernise the
economy, facilitate business, create the enabling environment for the
private sector and reduce the cost of living.
SR40
million more is expected as dividends from parastatals, and
miscellaneous revenue.
- Expenditure
The
proposed expenditure for 2006 is SR1.751 billion which is SR40 million
more than the 2005 Budget. Total appropriation is SR1.320 billion, a 10%
increase over 2005. This is because of planned expenditure for
ministries, which is proposed at SR835 million. Current outlays
will be SR1.514 billion.
In line with our commitments to education and health services, it is
proposed that the ministries concerned again receive the largest
allocations. The Ministry of Health and Social Services will
receive SR184 million, and the Ministry of Education and Youth SR181
million. This represents 5% of GDP for each sector.
The
Police will receive an increase of SR10 million with a total allocation
of SR70 million. Peace and security are central to all our other
efforts to improve the economy and our social welfare. We will
continue to strengthen the Police Force through professional training
and allocation of necessary resources.
The
preservation of the environment and natural resources remains a
priority. An allocation of SR61.299 million is made for 2006.
The
Judiciary will receive SR8.5 million, representing an increase of SR1.5
million. A frequent complaint is that the process of administering
justice takes too long. Too many people on remand are waiting
trial. I have asked the Judiciary to spare no effort in ensuring that
court cases are dealt with in an efficient and timely manner in fairness
to all concerned. The increase in their allocation should
contribute to that process.
Seychelles is increasingly active in international relations and the
Ministry of Foreign Affairs has a key role to play in defending and
promoting Seychelles� interests in an increasingly globalised world. In
this context I am pleased to announce that Seychelles will be rejoining
SADC in 2006. We propose a budgetary allocation of SR10.4 million for
the Ministry of Foreign Affairs.
We are
also proposing for SR170 million under centralised payments to cater for
a number of activities and in support of national organisations.
We are increasingly conscious of the importance of disaster
preparedness. An allocation of SR1 million has been made to the National
Disaster Secretariat. A new allocation of SR2 million is proposed
for the Football Federation and SR3.5 million for the Concessionary
Credit Unit. SR2 million is provided as a contribution to
religious organisations. This is to assist in the construction and
renovation of certain churches.
I should
like to express the Government�s appreciation for the most important
role that religious organisations play in the promotion of spiritual and
moral values in our society. Our society faces major challenges in
the form of drug and alcohol abuse and the spread of HIV/Aids.
These are challenges that require the common and concerted efforts of
Government, the Churches and the whole of society.
An
additional SR7 million has been proposed under subventions to regulatory
bodies and SR24 million more to parastatals and other bodies, mainly
SPTC and SBC.
- Capital Outlays
Capital
outlays will be maintained at R200 million in 2006. The main area of
expenditure will be the new housing projects and the completion of
ongoing projects of 2005.
The 2006 Budget Strategy
Budget
2006 builds on the foundations laid in the budget of 2005 for our medium
to long term development. It aims to promote economic growth and
the creation of wealth while furthering the well-being of the population
and addressing their concerns. It is a budget for every
Seychellois.
The 2006
budget proposes measures which will:
- Address
the cost of living and improve the family budget
- Create employment opportunities for our population, in particular the
youth;
- Improve the conditions of service of the working population and promote
personal responsibility and productivity;
- Further improve the management and performance of the economy.
- Increase the confidence of investors, in particular Seychellois, in the
potential
of our country
- Promote the entrepreneurial spirit and business development;
- Improve public service delivery and promote better coordination and
implementation of policies;
- Reduce the costs of employment through a reduction in employers�
contribution to social security;
- Control Government borrowing, and manage public debt in support of the
economic growth process.
During
the year, I visited a number of work places in ministries. With
the Vice- President, I also held public consultations throughout the
country. We learnt a lot through those meetings and we are
determined to address the issues that came up. I have asked the
ministries and services concerned to follow-up on specific points and I
expect them to do so diligently and to ensure that where justified, the
necessary improvements are made.
Apart
from services, the public across the country raised a number of other
issues, notably the cost of goods in the shops and the cost of living,
the employment situation and housing. We have been considering how
best we can address these issues and the 2006 Budget gives them due
attention.
For very
many Seychellois families, the cost of goods, transport and housing
account for a substantial part of their spending. The budget
introduces a number of measures that should reduce the cost of living
over time.
Measures to reduce the cost of living
The
government will start with the following:
1) Public Transport
Taking into account that several commuters have to change buses to reach
their destination and that each change requires a new ticket, SPTC will
in January 2006 introduce a one day ticket of SR6. The one day
ticket will enable, for example, a Bel Ombre parent who has to drop a
small child at a Day Care centre at Beau Vallon before taking another
bus to go to work and do the reverse journey in the afternoon, to do so
for SR6 instead of SR12. The single fare of SR3 will remain.
Free bus
services currently available for pensioners will also be extended to
persons registered as disabled and to all post-secondary students.
2) Tax Reductions
Since 2003, Government has been reducing trades taxes on imports
gradually. As part of the efforts to reduce the cost of doing
business and the cost of living, further reductions in trades tax will
be made on raw materials and equipment for manufacturing and on certain
food items.
The
budget makes provision for a trades tax regime where most trade tax
would be collected on four main items, namely fuel, motor vehicles,
cigarettes and alcohol. There will be further reductions in the
rates already published for 2006 for a number of items, especially food.
In many cases the trades taxes will be reduced to 0%. All other
trade taxes will be reduced so that the average rate of tax will be
around 10%.
Trades
taxes on all raw materials, selected capital equipment and machinery for
the manufacturing sector will be reduced to 0%. This will benefit
the manufacturing sector and cottage industries and bring us in line
with regional requirements such as with COMESA.
Trades
taxes on domestic household appliances such as fridges, washing machines
and combined gas/electricity cookers will be removed completely. Trades
taxes on beauty products and cosmetics, hair products, etc which
currently are at an average of 50% will also be removed completely.
To
protect our local production we have established a seasonal and a
sensitive agricultural list. For the seasonal items, in times of
plenty, the importation of these items for retail will be regulated
through import permits. For sensitive items, such as bananas,
sweet potatoes, cassava and roses, Government will protect the farming
community through a high protective tax.
For local
industries, a similar tax will apply on certain imports, such as tea,
UHT Milk, canned tuna, prawns, savoury crisps. This will help to protect
and encourage local production and employment.
In the
case of imported non-alcoholic beverages such as fruit juice and bottled
water we will move away from an ad-valorem tax to a specific tax of SR15
per litre.
For
imported beer, a SR35 per litre tax will be maintained. The present levy
on beer and all other items will be removed except for cigarettes and
dish antennae.
Government has decided not to implement the published trades tax
reduction on imported beer which was scheduled for 2006, as a further
measure to protect local industry and the employment it generates.
The
Government is currently assessing the tax structure on locally produced
goods. The tax on all locally produced soft drinks will be reduced
so that a 33cl bottle will retail at SR2 excluding the bottle
deposit. Similarly tax on local beer is being reduced, from R24.85
to R19.45 per litre. This means that a 28cl bottle of Seybrew
beer, currently costing SR10.50 will retail at SR9 excluding the bottle
deposit.
All the new rates will take effect on 1st December 2005 except for the
reductions on locally produced drinks which will be effective from 9th
December.
It is
important that the benefits of the reductions in the various taxes are
passed on to the consumers. Price control staff have been visiting
shops to verify stocks and prices of goods to deter the practice of
selling newly imported items which benefit from the reductions, at the
older prices. I call on all traders to participate in our common
effort to provide goods to the Seychellois people at fair prices.
3) Reduction in the price of LPG
As of 1st December, the price of LPG will also be reduced from SR9.33/kg
to SR7/kg. This means, for example, that a 4.5kg cylinder which
currently costs SR39.50 will cost SR31.50, one of 9kg costing SR84 will
cost SR63, and a 12kg costing SR112 will now cost SR84.
4) Domestic air travel
From 1st January 2005 the rate of Goods and Services Tax (GST) on
Domestic Air Travel will be adjusted to 7% to be in line with other
tourism related services. Thus a Mah-Praslin return ticket
currently costing SR280 for a resident will now cost SR260.
5) Telecommunication charges
In recent years there have been welcome reductions in rates for both local
and international calls. Following initial negotiations with Cable
and Wireless and Airtel, it is expected that there will be further
reductions in the coming year.
6) Strengthening consumer protection
From 1st December 2005, a Consumer Affairs Unit in the Department of
Finance will act as a clearing house for consumer complaints. It
will reinforce the provisions of the 1997 Consumer Protection Act and
other complementary laws and regulations. This unit will promote good
trading practices in the interests of consumers and traders. It
will have the power to investigate cases of alleged infringements and
prosecute where necessary.
Mr.
Speaker, our efforts to reduce the cost of living for all Seychellois
are reflected not only in the points I have just announced but also in
other measures in this budget.
Housing
The
Government is committed to its policy of facilitating each Seychellois
family to have their own home. A total number of 46 projects with
contract values totalling R750 million and representing 3,257 housing
units are in various stages of construction.
In
addition to major advances in our housing programme, the Housing Finance
Company (HFC) has been disbursing loans for house construction and for
land purchase. 736 loans totalling R86.4 million have been granted
to families in the period January 2004 to date. 906 home
improvement loans worth SR18.3 million have also been disbursed over
this period. A total of 2,092 families have benefited from our housing
and loans programmes since January 2004. In 2006, it is planned
that 1,075 houses will be completed under the ongoing programmes.
The Home
Ownership Scheme launched by Government in 2002 has achieved remarkable
results. Some 1,900 persons have benefited directly. The
revenue of SR83 million it has brought in is helping Government to
sustain its housing programme.
In the
2005 Budget address, I said that further measures would be taken to
encourage families to buy and own their own homes.
The Government is introducing a new Home Ownership Scheme to benefit
families who have legally occupied PMC (Property Management Company)
houses as well as those who have taken loans from SHDC, prior to 31st
December 2003.
The scheme which will start on 1st December 2005, will make it possible
for families who have been living legally in a PMC house for 15 years or
more and who are up to date with their rent to acquire their house and
corresponding land without any further payment. Families who have
been repaying a loan with SHDC for 15 years or more and who are up to
date with their repayment will not pay any further amount. Their
loan will be considered as having been paid in full.
Families
who have occupied their house or repaid their loan for a period less
than 15 years will be able to buy their house or pay off the total
balance of their loan at substantially discounted prices based on the
period of occupancy and repayments made.
People
joining the scheme will also benefit from a minimum 20% reduction in
their existing rent or loan repayment.
Some
3,800 families stand to benefit from this scheme. The offer made
in the scheme will be for a limited period and it is in the interest of
the families concerned to seek information on the scheme. I
encourage all families concerned to do their best to become the proud
owners of their own house which they can later pass on to their children
or grandchildren. How many persons in other countries, have such
an opportunity. What is only a dream for many people elsewhere can
become a reality for the ordinary Seychellois family.
Families
occupying PMC flats and bed-sitters as well as houses ear-marked for
redevelopment prior to 31st December 2003 will benefit from a 10%
reduction in their rental payments with effect from 1st December 2005.
All these
measures are also part of my Government�s drive to bring about a
reduction in the cost of living.
Employment
During
this year Government has looked closely at the employment situation.
In the district consultations, the issue of unemployment, especially
among the youth came up. It was also pointed out that in many cases
unemployed persons are reluctant to take jobs immediately available.
In the last few months the Employment Department has been actively
engaged in providing advice to job seekers and guiding them to
appropriate vacancies.
In
September 2005, there were 1,596 registered job-seekers in Seychelles,
and the unemployment rate was 3.8%. The number of persons in
formal employment has increased from 38,763 in September 2004 to 40,128
in September 2005.
In the
coming year there will be increased employment opportunities but, we
must also as a society, address the question of willingness to take up
available employment.
To
further facilitate employment and business development, the government
is reviewing social security payment by employers. A 20% cap
on contributions by employers in the tourism industry has already been
implemented and similar concessions extended to the agriculture and
fisheries sector.
I should
like to announce that with effect from January 2006 the rate of
employers� contribution for the salary range of SR2,001 to SR10,000 will
be reduced from 35% to 30%, for all other sectors of the economy.
The aim
of this reduction is to facilitate employment and to improve employees�
remuneration in the private sector.
Government will also continue to localise posts occupied by expatriates
as far as is possible.
Senior citizens
The
progress that our country has made would not have been possible without
the contribution of the senior citizens of our society. Our
parents and grandparents are an important source of knowledge,
experience and guidance for us and the younger generations.
I should
like to emphasise once more the responsibility we have towards our
elderly and the love, affection and care that we should give them.
The
Government will continue to play its part through its social policies.
I am pleased to announce that provision is made in the budget for an
increment of SR100 to their Social Security benefits, which is to take
effect in January 2006.
Public Service
The
Government will persevere in its endeavour to improve the efficiency and
effectiveness of the public service. My visits to workplaces and
exchanges with the staff have been enlightening.
I recognise that many public servants are performing commendably, but we
must aim for improvements on the part of all.
Government is currently undertaking a review of public sector salaries
with technical assistance from the Commonwealth Secretariat to ensure
that remuneration is done in a fair and sustainable manner. The
system of periodic gratuity is also under review.
New schemes of service for teachers and members of the Defense Forces will
be implemented in 2006. Schemes for the health sector are also
being finalised and for implementation in January 2006.
I am
pleased to announce that this budget makes provision for enhancements to
the basic salaries of public sector employees in posts below the senior
executive level. These will take effect from 1st January 2006 and
will be as follows:
- An
increase of SR300 per month for public sector employees holding posts at
Grade V and Grade IV, i.e. posts in salary bands SP20-25 and SP25-29.
- An
increase of SR200 per month for public sector employees holding posts at
Grade III and Grade II level, i.e. post in salary bands SP29-34 and
SP34-39.
- An
increase of SR100 per month for public sector employees holding posts at
Grade I and Senior Officer level, i.e. posts in salary bands SP39-44
and SP44- 49.
The
remuneration of officers employed on contract terms will be reviewed
upon renewal of contract, as is the current practice.
I call
again on employers in the private sector to make use of the reductions
allocated in social security contributions to provide an increase to
benefit their employees.
Graduates
In my
National Day address I made special mention of the significant
investment our country makes in our graduates and the important
contribution they can and should make to national development.
A new
remuneration package will apply to graduate employees in the public
sector as from January 2006. The housing allowance of SR2,000 will
be extended to three years. In the fourth and fifth year of
employment a graduate in the public sector can expect to receive a
minimum basic salary of SR4,725 per month and a new graduate salary
supplementation of SR2,000 per month. From their sixth year of
service graduates will be offered public sector commission contracts.
The Seychelles Pension Fund
The
establishment of the Seychelles Pension Fund is a significant
achievement of my government. In 1979 our government instituted a
social security fund which over the years has guaranteed a basic old age
pension to our people. In 1991 the Pension Scheme was introduced to
provide an additional income upon retirement. In its 25 years of
existence, the Social Security Fund has laid a solid foundation which
today permits us to establish the new Seychelles Pension Fund.
All
workers, not only civil servants and employees of a few companies as in
the past, can now look forward to an additional pension based on their
contributions.
Hard work
pays.
The more
wealth we produce, the more we can benefit when we retire.
The
Seychelles Pension Fund belongs to all who contribute to it. It is the
fruit of our labour and savings. I appeal to all Seychellois,
especially the young, to understand how the fund works and to take up
available employment opportunities in order to be able to contribute to
the fund and start saving for a comfortable life later.
Business opportunities and privatisation
It has
long been a principle of the SPPF and this Government, that Seychellois
of all backgrounds should have the possibility of becoming investors or
business owners. That is why today in our country, all taxi
operators are the owners of their own cars. Likewise instead of
there being only a few, some fifty operators have a share in the car
hire business. The same is true of hire craft operators.
The DBS,
YES and SEnPA have put in place the facilities to enable many young
people and housewives to start small business activities and cottage
industries. As at mid-November, there were 543 registered cottage
industries and SEnPA receives a dozen new applications a week.
There are 317 registered small businesses, with on average 4 new
applications a week.
The
construction of the micro-enterprise centre at Providence will start in
early 2006 through funding from the Seychelles Pension Fund.
Arrangements are also being made for the funding of a similar centre at
Cap Samy, Praslin, and for the kiosks for artisans to be built at Port
Glaud.
Opportunities for investment and ownership should be open to all
Seychellois and the new phase of privatisation will provide such
opportunities.
In the
privatisation of its assets Government bears in mind three major points:
the protection of employment, the ownership of shares by the staff and
sale of shares to the general public.
The
process for the privatisation of Sacos is underway. As already
announced Government will retain a 20% stake and 30% of the shares are
being tendered to strategic investors.
We want
to encourage the development of a share ownership culture in the
country. Therefore 20% of the shares will be offered to the staff of
Sacos. Furthermore, another 30% of the shares will be available for
purchase by any Seychellois. The cost of each share will be
ascertained early next year.
The Government is looking at ways to ensure that within this 30%, every
Seychellois over the age of 18 will have the opportunity to purchase a
share in Sacos. This is indicative of our commitment to share the
wealth of the country among the whole population.
Importation of essential goods
In our
endeavour to modernize the economy, we have gradually moved to open up
the trading regime and facilitate the importation of goods. The
system in place since the 1st January 2005 has enabled most goods to be
imported without an import permit except for goods classified as
�restricted�, such as pharmaceutical drugs, plants and animals.
As a
small country that has to import a large proportion of the basic
commodities it needs, we have to ensure the efficient importation of
essential goods. Government has introduced the tender system for the
provision of commodities, namely, rice, sugar, flour, margarine, milk,
oil, vegetables, fruit and meat.
Through
the tender system, we want to ensure the availability of essential
commodities at fair prices while guaranteeing quality, sanitary and
phytosanitary requirements. Government will be responsible to
stock and distribute these essential items.
Tenders
have already been awarded for the supply of flour. Tenders have
also been invited for the supply of sugar, ginger, garlic, onions and
potatoes. Tenders for other items will be invited when existing
supply contracts expire. Government will ensure foreign exchange
for the payment of goods tendered.
Review of Trades Tax Act
The
Office of Tax has just completed an exercise to revise the Trades Tax
Act. New HS codes have been introduced for certain items and
others re-classified. As part of this exercise the trades tax on
vehicles of 1300cc and less will be reduced from 125% to 75%.
Trades tax on delivery vans and pick-ups not exceeding 1.5 tonnes will
also be reduced, from 50% to 25%. This will be of benefit to small
business.
Stamp Duty
At
present the stamp duty on the sale or transfer of land is applied at a
rate of 4% on the first SR50, 000 and 10% on the remainder. This
will be changed to a flat rate of 5%. Stamp duty will be exempted
on transfers between parents and children, inheritance, and transactions
arising from court settlements of matrimonial cases where the value of
the land does not exceed SR1 million.
Economic Sectors
The Tourism Sector
I am
confident that our tourism industry is set on its recovery course and
this is evident from the high interest being shown by foreign and local
investors. The Barbarons Meridien and the Northolme have undertaken
important upgrades and have reopened their doors this year. Their
investments total over US $30 million, providing 300 jobs. The
development of Eden island as an integrated tourism project which will
be implemented in phases over a number of years also started this year.
New
projects that are already under way and that are expected to be
completed in 2006 include a new hotel to be operated by the Southern Sun
group at Anse Louis as well as a project at La Passe on Silhouette.
These projects combined should provide investment to the value of US $54
million and over 400 jobs. A further 10 new projects are also
scheduled for launch in 2006 including an extension of Banyan Tree, a
second development on Silhouette, a new hotel on the current site of
Allamanda hotel at Anse Forbans, an extensive project for Port Launay as
well as projects from world renowned companies such as Beach Comber on
Praslin and Four Seasons at Petite Anse. Total investment from
these new projects over the next 2 years is expected to be in the region
of US $475 million and is expected to create over 1,700 new jobs.
The new
developments highlighted are expected to bring an increase of around
28,000 visitors which would result in an increase of around US $60
million per annum in earnings. These projects will also have a
multiplying effect on the economy as a whole.
Alongside
these new developments, the Government believes that product enhancement
should be our priority in keeping with our vision of Seychelles as a
quality destination.
A number
of small establishments are already benefiting from the small hotel
enhancement programme in partnership with the trade. The programme
will in the year 2006 be pursued with renewed vigor.
The
development of human resources in the sector will continue to be a
priority and Government will encourage increased involvement of
operators in this endeavour.
Renovation of our international airport is well under way and if all
goes well the newly refurbished facilities will be operational in 2006.
Air Seychelles
The
worldwide airline industry has been experiencing a crisis for the last 5
years. With the further opening of air access and the arrival of
two major competitors in 2004, there were fears that our national
airline, Air Seychelles, would not survive.
It was
the view of my Government that Seychelles as a destination needed more
exposure and the arrival of more foreign carriers would bring about
interest not only in terms of direct marketing but also foreign direct
investment. I am happy to say that this is proving to be the case.
For its
part Air Seychelles has succeeded in implementing the measures necessary
to ensure not only its survival, but improved performance. It is
already in negotiation with aircraft manufacturers to replace its B767s
and in the process of purchasing another Shorts 360 to augment its
domestic fleet. Air Seychelles continues to work in close
collaboration with Air France, currently the world�s biggest airline in
terms of revenue. As from next year, the two airlines will operate
six flights a week to and from Paris, with a daily flight as from 2007.
Likewise Air Seychelles values its collaboration with Air Mauritius,
which allows us to maintain 2 flights a week to and from London.
Our Air
Seychelles is the pride of Government and every Seychellois who has the
interest of the country at heart. I have seen it face the crises
of two wars in the Gulf, September 11th, and SARS, not to mention the
current fuel price problems. In my travels I have to fly many
airlines and I can confidently say that Air Seychelles is second to
none. It is a world class airline with a world class staff. Only
last week I had the pleasure to confirm this for myself once again when
I travelled to Europe for the Commonwealth Heads of Government Meeting.
The Fishing Sector
The
various measures announced for the fishing sector last year have all
successfully been introduced. The capital and operational
incentives offered under the Agriculture and Fisheries (Incentives) Act
will, I am sure, be the catalyst for the further development of
Seychellois-owned artisanal and semi-industrial fishery operations.
The incentives and concessions offered will improve the efficiency and
competitiveness of the artisanal and semi- industrial fishery and enable
them to increase export of fish and fish products.
The
intervention of Government by way of financial and logistical support
has enabled all fishermen affected by the December 2004 tsunami to
resume their activities and normalise supply of fish to the domestic and
international market.
Unfortunately, planned renovation of some fisheries facilities affected
by the tsunami remains outstanding because of delays by donors to honour
pledges for financial assistance to tsunami affected countries. We
have however undertaken some renovation from our own resources. We
will continue to pursue these pledges through the United Nations system.
The
efficient operation of the fisheries sector is dependent upon the
availability of fishing inputs. I would like to assure the
industry that I have put in place the required mechanism through the
Seychelles Fishing Authority which will ensure that fishing inputs are
available at competitive prices. I urge the private sector to
equally play their part in this respect.
Earlier
this year the new fisheries policies of Seychelles was finalised and
published. An inter-ministerial working group has been
commissioned to prepare a 5 years strategic plan for the fisheries
sector which will guide the further development of our fishing industry.
In 2005,
Port Victoria reaffirmed its status as the most important tuna
transhipment port in the South West Indian Ocean with transhipment
activities expected to total 350,000 MT (Metric Tonnes) out of an
estimated total catch of 400,000 MT in the region. In 2006 the
Government will continue to explore avenues to further develop the
potentials of Port Victoria as a hub in the region.
During
the district consultations, stevedoring workers requested assistance
from Government during periods where they do not have work.
Government is considering the matter with a view to facilitate
assistance to those in need.
In an
effort to improve the safety of dockworkers, Government will during the
course of 2006 be introducing new regulations concerning safety of
the environment in the dock and safety of workers. The
introduction of these regulations aims to arrest the rising trend of
accidents in the ports.
Recently
Government intervened on the question of compensation for IOT workers in
the event of the sale of the tuna cannery. Provisions have been made for
the payment of compensation to all Seychellois workers in the event that
Heinz sells its share in IOT.
Agriculture
Development of our agricultural sector to produce as much as our
available resources will permit and to sustain such production will
remain the key policy objectives of my Government. The capital and
operational incentives and concessions ranging from reduced trade taxes
and GST on capital equipment and other inputs, exemption from business
taxes on profits of less than SR240,000, reduced employers contribution
to social security offered this year will, I expect, result in increased
production of quality agricultural produce which will be available to
consumers at fair prices.
As
regards chicken production, the government will support the
establishment of a parent stock farm to obtain hatching eggs so that day
old chicks can be produced locally. The parent stock farm will
also result in substantial foreign exchange savings.
Cultural industries
The
economic potential of cultural industries needs to be further developed
and to that end the Government will continue to provide an enabling
environment for this to be realised.
I am
pleased to note that our young musical artists are making an impression
in the international market, and I would like to congratulate Dezil on
their success. I know that other Seychellois successes will follow.
From 1st
December, there will be no trades tax on musical instruments and
recording equipment required by musicians. The Government will
also continue to facilitate their participation in international events.
Strengthening the environment for growth
The
medium term economic framework put in place last year laid the
foundation for renewed economic growth. The increase in new
investments is evidence of this.
During
2005, we have started on a review of existing business practices,
systems and procedures; with a view to amending legislation where
necessary to reflect the realities of our changing economy.
One
important piece of legislation which I mentioned last year was the
Investment Code. I am glad to report that the Investment Code,
providing the legal conditions for the facilitation and protection of
investments and legal remedies for dispute resolution has just been
adopted by the National Assembly. The Investment Code has been
developed in collaboration with the Seychelles Chamber of Commerce and
Industry and with technical assistance from the World Bank and I thank
all concerned for their collaboration.
The
Government has also been revisiting other legislation which will provide
more flexibility for business development. These include the
Companies Act, Licensing Act, and the Employment Act. The first
two will be amended to make them in line with international standards as
well as to accommodate new business activities being created.
There will also be a reduction in the import license fee from SR5,000 to
SR1,000 to be effective from January 2006. For the Employment Act, the
Government, with economic and social partners, has considered provision
for more flexibility for employers and employees alike. The Employment
Act Amendment Bill will be presented to the Assembly early next year.
The changes proposed include the facilitation of casual and part-time
employment and a revision of the redundancy process.
Provision will also be made for annual leave to be based on 21 working
days instead of 21 calendar days as at present.
To
further facilitate the access of financial resources for small business,
the Department of Finance is consolidating all the different financial
schemes under one body � the Concessionary Credit Agency. As announced
on November 15, this Division will take responsibility of all the
existing schemes.
To
facilitate in the streamlining of procedures for imports, the government
has decided to centralise the import permit system through the
Department of Finance. As of December, all traders will come to
the Department of Finance as the one-stop shop for the import
procedures.
The
government has also taken into account the needs of the business
communities of Praslin and La Digue. In this context the Department of
Finance has decentralised some of its services through the setting up of
a new office on Praslin, namely the �Business Advisory Centre� at Baie
Ste Anne. This will reduce the necessity for residents to have to
travel to Mah for administrative purposes.
The
office on Praslin will perform multiple functions as follows:
- Advise on tariff and other Customs matters;
- Advise on import procedures;
- Advise on investment matters;
- Facilitate the processing of Young Enterprise Scheme (YES) loans
applications.
My Government will continue to look at ways to enhance business and
investment services on Praslin and La Digue, and if necessary outside
Seychelles.
As
announced in the Budget 2005, we have finalised the legislation for the
setting up of the National Statistics Bureau. The Bill laying the
legal framework under which it will operate has been published.
The Bureau will have an important role in ensuring the quality of
national statistics, so vital for effective monitoring of economic
developments and policy formulation by government.
Social sectors
Education
Mr.
Speaker,
My Government is determined to provide the highest standard of education
possible within the resources available. This is why our programme
of training for education personnel has remained consistent,
irrespective of cut backs in other areas.
In
addition to the training of teachers at degree and postgraduate levels,
from 2006 the Ministry of Education and Youth will embark on a project
to upgrade the qualifications of over 200 in-service teachers from
Diploma Part I to Diploma Part II. 25 Supply Teachers with more
than five years teaching experience will also follow training at Diploma
level for a period of three years.
Post-secondary students from families with a monthly income below
SR5,000 currently receive an allowance to help them meet costs
associated with their studies. This allowance will now be extended
to families with a parental income below SR6,000. An adjustment
will also be made to the amount granted.
In 2006
construction of 3 new schools will start. This concerns the Baie
Lazare Primary and Creche, the Mont Fleuri Primary and La Rosire.
The
programme for the maintenance of educational institutions will also be
strengthened. I note with satisfaction the increasing involvement
of parent teacher associations in this effort.
Information and Communication Technology education will be strengthened
through the provision of a second ICT room in secondary schools next
year.
In the
post-secondary sector, the Seychelles Institute of Technology (SIT) will
begin to receive students in early 2006. This institute, with a
capacity to accommodate 600 students, is mandated to provide life-long
training opportunities for the human resource requirements of the
construction and engineering industries and support the economy of the
country.
The
construction of the new National Institute for Health and Social Studies
and the new Maritime Training Centre will begin in 2006. The
expansion and improvement of the SHTTC is also planned.
Government is also currently in negotiations with the Government of
India for the setting up of an Information Technology Centre that will
provide training and build capacity in software development.
During
the past 3 years significant funds have been allocated for the
procurement of furniture, equipment, and other resources for secondary
schools. As from early next year, each educational institution
will be provided with a heavy-duty photocopier. Tenders have also
been made for text books and library books for next year.
It is
important that all this investment made for the good of the students are
safeguarded and well used. It is the duty of students and teachers
to ensure this and of the parents and community at large to support
them.
Mr.
Speaker, Government also aims to improve security in schools.
Following a review of the security arrangements, in 2006 the Ministry of
Education and Youth will contract out security services to professional
security companies. They will be responsible on a 24-hour basis
for the security of secondary and post-secondary establishments.
The staff and students will also benefit from the presence of security
personnel who will ensure a safe working environment and assist the
school management in the prevention of anti-social behaviour.
Children and Youth
Our
national theme for this year, �Our children, our treasure, our future�
has caught the imagination of the Seychellois people and I was heartened
to see the many initiatives that various organisations undertook to
promote it. Our children are truly our treasure and they are our
future and we need to do the best we can to ensure they have good care
and education.
In order
to facilitate the care of small children while mothers and fathers are
at work, we will extend the provision of day care. The Ministry of
Education and Youth will lease Day Care Centres in 10 districts to
interested and suitable persons.
On our
National Day this year I announced that as from January next year every
new born Seychellois will receive SR1, 000 as a gift from Seychellois
society. Arrangements are already in place at the Savings Bank for
the opening of the children�s accounts. The scheme is also
intended to promote a culture of savings and I encourage parents and
others to contribute when they can so that the child can truly benefit
in the future.
Young
people have throughout this year participated in feedback sessions on
the Aspiration 2013 initiative that they worked on two years ago.
It is fitting that young people participate in the affairs of society
and contribute their views and ideas while at the same time learning
more about their country�s affairs. I was also pleased that young
people participated with interest in the district consultations
conducted earlier this year. This budget aims to address a number
of the issues that they raised.
Community Development
In 2006
my Government will continue to support community projects, especially
those of direct benefit to residents. We will continue to place
emphasis on sports in the districts so that as many persons, especially
the youth, can participate and develop their talents. This is
consistent with our goal for a healthy and active population.
We must
place more emphasis on community development and encourage residents to
participate actively in the life of their districts and increase their
sense of ownership.
Wherever
possible, services will be decentralised to the districts. In this
context, Government will aim to have a social worker serving each
district in order to bring social services closer to people.
Health and Social Services
Throughout this year the Government has given a lot of attention to our
Health system. I have personally visited the Victoria Hospital and
health centres on a number of occasions, and discussed improvements with
the management and staff. A number of facilities have been and are
being renovated and enhanced to provide better service. A new
spiral CT scan has been installed at Victoria Hospital. Laundry services
have been contracted out. Where services can be improved by
outsourcing in this way, Government will do so. The system for the
purchase, storage and distribution of drugs has been reviewed and
strengthened, and we have tendered one year�s supply of drugs for the
Ministry of Health and Social Services. A new clinical laboratory
for Victoria Hospital which offers many more diagnostic tests than
before has also been built.
The
construction of the Beau Vallon Health Centre will be placed on tender
in the coming weeks and will start early next year.
A number
of significant contributions in equipment and materials has been made by
the private sector and organisations, both local and international.
We need
to pursue our efforts to improve and modernise our health services.
In general the health staff work diligently and with devotion and are
appreciated by the public. I congratulate them and assure them of
my support in their efforts to achieve the highest standards of health
care possible in Seychelles.
While we
continue to improve working conditions for our healthcare professionals
and build our capacity to offer new services, our programme of overseas
treatment where necessary will also continue.
Concluding remarks
Mr.
Speaker,
Honourable Members of the National Assembly,
People of Seychelles,
Seychelles is a young country but in our 29 years of nationhood, we have
achieved a lot. Our achievements are not just in the past, but are
continuing today.
On the
economic front we may have difficulties that still need addressing. But
which country does not have difficulties at one time or other? In our
case, there are clear signs of improvement that should bear fruit in the
near future.
We have
achieved a lot. However, the world is in constant and, now, even
accelerated change and we need to change with it whilst safeguarding our
values and the social and economic gains we have made.
We need
to take the measures necessary to strengthen our economy and gear it to
the requirements of global developments and new threats and
opportunities.
We must
maintain fiscal discipline and ensure the proper management of our debts
while pursuing the measures for modernizing our economy and
strengthening our major industries as well as small enterprises.
We need
to work harder and be more productive. We need to work
intelligently and strengthen cooperation and partnerships.
We must
maintain the stability and harmony that our country has enjoyed over the
years and that have permitted the progress we have made so far.
We, the Seychellois people and our Government, have worked hard over the
years to reach where we are today, to become what we are today. We have
persevered against all odds. We must preserve our achievements. We must
preserve the conditions that have enabled us to succeed so far. Our
future successes will depend on this.
Budget
2006 builds on the Budget of 2005. It aims for both a dynamic
economy that will produce more wealth and the consolidation and
improvement of the social services that benefit us all. The
economy and the social service are interdependent and mutually
reinforcing.
It is
also my conviction that the measures in the budget to address the cost
of living and bring more comfort to our families will in turn lead to
increased productivity.
The
budget I have presented today is a budget for each and every
Seychellois. I believe that each Seychellois sees himself or herself in
it. Each Seychellois will benefit from it. Each and every
Seychellois should also know that he or she has a part to play to make
it succeed.
We
produce the wealth of our country. The contribution, the hard
work, of each worker counts.
Let us,
all of us Seychellois, come together to take our country forward.
In 2006 we will celebrate 30 years of nationhood. We will
celebrate the many achievements we have made, in spite of our size and
the many constraints. Let us also celebrate the spirit which
underpins our work and our achievements. That spirit of unity,
solidarity and perseverance that reminds us that we have a common future
and that we must, each one of us, truly play our part in the common task
of building it.
I believe
that we have a bright future. I believe in our people.
Let us
believe in Seychelles. Let us work together. Together, we shall
succeed.
Mr.
Speaker,
Before I end, allow me to thank all who worked on preparing this budget. I
also wish to thank the Seychellois people for their support and their
hard work.
Mr.
Speaker,
It is my pleasure to recommend the 2006 Budget to the Honourable Members
of our National Assembly.
Thank you.
God bless Seychelles and the Seychellois people.