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JEMFAC Progress Monitoring
Presented by the RMI Government
RMI-U.S. JEMFAC Meeting
Honolulu, HI
August 29, 2007
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Outline of Presentation
• Economic Update & Policy Reform• Priority Funding• Fiscal Year 2008 Budget• Fiscal Update & Decrement
Management• Compliance Management• Education Reform Initiatives
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Policy Framework
• Maintaining Macroeconomic Stability
• Improving the Business Policy Environment
• Prioritizing Education & Health Sectors
• Implementing Infrastructure Development Projects
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Recent Economic Performance
• Positive GDP growth continues but at a modest pace;
• Real GDP in FY 2006 is estimated 1.3% increased with anticipated real
GDP growth for FY 2007 at 2.0%;
• Growth experienced in FY 2004 was 5.6%;
• Slow growth in FY 2005 & 2006 partly due to high global energy prices;
• While Government continues to be the main component of the economy,
its growth has been steady but the private sector growth is gradually
increasing.
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Real Gross Domestic Product Growth 1997-2007 Trend
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Real GDP Growth -5.4% -3.6% -2.9% 5.1% 2.7% 3.8% 3.4% 5.6% 1.7% 1.3% 2.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 20062007 (forecast)
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Sectoral Shares of GDP, FY 2006
Private Enterprise
32.1%
Public Enterprise
8.1%Finance (Banks)
6.0%
Government38.8%
NGOs1.6%
Households13.4%
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What is influencing growth?
• Construction and fisheries industries have generated significant employment growth which has been major factor in private sector contribution to the real GDP.
• Government compensation of employees is still a major contributor to the GDP growth.
• The difficulties with Marshall Energy Company, as a result of high fuel prices, constrained growth in FY 2005 & 2006.
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Employment Trend Factors • Government payroll has re-absorbed the Kindergarten
program with approximately 200 employees from the former Head Start program.
• Employment growth is derived from the private sector while the Government is presently steady.
• The opening of the new Tuna Loining Plant is expected to further increase the private sector employment growth in FY 2008.
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Employees by Major Sectors, FY1997 - FY2007
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07proj
Public sector Non-Government sectorKwajalein US BasePrivate sector
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Industry Developments
Positive prospects for the RMI economy;
• The newly formed Marshall Islands Shipping Corporation has operated with improved delivery services to the outer islands;
• Japan Airlines has conducted direct chartered flights between Tokyo and Majuro, boosting the tourism industry;
• A modern Dry-Dock Facility nearing final approval of securing operational site.
• The Tuna Loining Plant is to re-open soon under new management. Construction is near completion with prospect of employing up to 600 workers by early 2008;
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Improving Business Environment
• Passage of Immigration and Labor Laws
• Passage of Secured Transactions Law
• Strengthening of the Land Registration Authority
• Establishment of Public-Private RMI Economic
Development Council to advise President on economic
reform initiatives.
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Public-Private Dialogue
Role of the RMI Economic Development Advisory Council;
The Council will:
• Consult with the business community to foster public-private cooperation;
• Provide advice to the President on appropriate policies to encourage private sector development including, but not limited to, regulatory reform, tax reform, public sector reform, land tenure, trade and industry policy;
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RMI Priorities:Education & Health Sectors
• Education and Health sectors continue as the RMI Government’s two top priorities;
• Focus implementation of the base grant;
• Direct positive impact on all other sectors and the economy, as a whole, over the medium and long-term.
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Education & Health Spendings
• Education recurrent spending has increased by
125%;
• Health recurrent spending has increased by 71%;
• Spending on other areas has declined by 9%.
Recurrent spending on Education & Health have grown rapidly since FY 2003:
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Education and Health Spending
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
FY03 FY04 FY05 FY06 FY 07Budget
FY 08Proposed
MoH
MoE
Other
Recurrent Expenditure FY 2003 - FY 2008(General Fund, Compact Funds, Federal Grants and Special Revenues)
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Fiscal Policy Framework
• Adoption of Balanced Budget
• Implementation of Cash Management Plan
• More Aggressive Tax Collections and Tight Expenditure Controls
• Restructuring Selected Public Services into Corporate Enterprises
• Continuation of Performance Based Budgeting Concept
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Factors Affecting FY 2008 Budget Formulation
• Wage & Hiring Freeze Policy;
• Modest assumptions of inflation and growth used for
revenue estimates based on recent trends and expectations;
• Utility costs to increase modestly;
• ADB debt payment to increase substantially;
• Slight reduction in Compact infrastructure grant to support
Ministry of Health & Ministry of Education.
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Fiscal Year 2008 Budget
• FY 2008 Budget projected at $123.6 million
• Slight decline from FY 2007 largely due to ROC grants
from $13.0 million to $9.5 million
• Revenues forecast increase slightly with aggressive
collections and new agreement with Ship Registry
• Federal grants forecast to be steady
• Special Revenues increase due to more accurate
assessment of revenues
• FY 2008 Budget projected at $123.6 million
• Slight decline from FY 2007 largely due to ROC grants
from $13.0 million to $9.5 million
• Revenues forecast increase slightly with aggressive
collections and new agreement with Ship Registry
• Federal grants forecast to be steady
• Special Revenues increase due to more accurate
assessment of revenues
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FY 2008 Tentative Budget Figures
Funding Source FY 2007 FY 2008Domestic Revenue 30,511,827$ 30,999,890$ Compact Sector & Other Grants 39,982,002$ 40,272,580$ Special Revenues 5,977,336$ 7,528,008$ Federal Grants 8,414,586$ 7,310,129$ Overseas Revenue (ROC recurrent and projects)
13,000,000$ 9,500,000$
Compact Trust Fund 8,949,592$ 9,713,700$ Kwajalein Impact Funds 2,000,497$ 2,050,670$ Kwajaleing Landowner payments 15,793,397$ 16,189,500$ Total 124,629,237$ 123,564,476$
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FY 2008 Compact sector grant allocations
FY 2008 Compact Sector Grants Breakdown FY 2008 proposed Sector Allocations
Education 11,336,978$ Health 6,512,349$ Private Sector -$ Capacity Building 300,000$ Environment -$ Infrastructure Development 11,855,213$ Total Compact Sector Grants 30,004,540$
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FY 2008 Education Spending
MOE Outcomes & Tuition/Fees Auxiliary
Related Agencies Pell Grants Enterprise
Non-Appro Non-Appro
$2,434,377 $521,989 0 $136,333 $1,951,139 $3,138,490 0 0 0 $8,182,328
$86,959 $234,615 0 $158,256 $279,000 $876,286 0 0 0 $1,635,116
$7,099,217 $1,233,940 0 $1,380,835 $0 $720,710 0 0 0 $10,434,702
0 0 0 0 0 0 0 0 0 0
$716,426 $173,221 0 $100,000 0 $669,000 0 0 0 $1,658,647
0 $60,180 $174,631 0 0 $486,004 0 0 0 $720,815
0 0 0 0 $54,173 0 0 0 0 $54,173
College of Marshall Islands
$1,000,000 $2,000,000 0 0 $1,100,820 $100,000 $5,000,000 $2,309,595 $296,100 $11,806,515
Total $11,336,979 $4,223,945 $174,631 $1,775,424 $3,385,132 $5,990,490 $5,000,000 $2,309,595 $296,100 $34,492,296
National Scholarship Board
National Training Council
4-Atoll Feeding Program
MOE Outcome 1: Curriculum
MOE Outcome 2: Teacher training
MOE Outcome 3: Improving student performance
MOE Outcome 4: Infrastructure development and maintenance plan
Table 1: MOE Funding (total $) by Outcome, Agency and SourceCompact Base
GrantGeneral Fund Special
RevenueEbeye Special
NeedsFederal and other Grants
SEG Capital Total
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FY 2008 Recurrent Education Spending by Outcomes
Curriculum30.4%
Teacher training6.1%
Improving student performance
38.8%
NTC2.7%
4-Atoll feeding program0.2%
Scholarship Board6.2%
College of the Marshall Islands15.6%
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FY 2008 Health Spending
Other
Grants
$777,455 $492,349 $648,000 $500,296 0 0 0 2,418,100
$0 $378,697 $30,000 $775,634 $73,720 0 0 1,258,051
$3,014,918 $1,110,817 $1,609,000 1,318,796 0 0 7,053,531
$1,043,707 $373,637 $651,000 $76,204 0 0 $1,410,434 3,554,982
$59,429 0 0 $28,740 0 0 $91,884 180,053
$32,298 $126,363 $15,000 $518,046 0 0 $68,088 759,795
$1,584,542 $502,630 $252,000 584,891 0 0 0 2,924,063
0 $145,549 0 0 0 0 0 145,549
0 0 $2,772,000 0 0 0 0 $2,772,000
Total $6,512,349 $3,130,042 $5,977,000 $3,802,607 $73,720 0 $1,570,406 $21,066,124
* Not inclusive of Section 177 Federal grant
Outcome 8: Health Information Service
Outcome 9: Overseas referrals
Outcome 4: Ebeye Hospital
Outcome 5: Effectiveness of Ebeye HospitalOutcome 6: Ebeye Primary and Preventative
Outcome 7: MoH Administration
Outcome 1: Outer Islands Primary and Preventive
Outcome 2: Majuro Primary and Preventive
Outcome 3: Majuro Hospital
Diagram 1: MOH Funding (total $) by Outcome, Agency and SourceMOH Outcomes Compact
Base GrantGeneral
FundHealth Fund & Health Care
US Federal Grants*
Other Revenues non-appr’t
Ebeye Special Needs
Total
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FY 2008 Recurrent HealthSpending By Outcomes
OI Primary and Preventative
11.5%
Majuro Primary and Preventative
6.0%
Majuro Hospital33.5%
Ebeye Hospital17.7%
Ebeye Primary and Preventative
3.6%
MoH Administration13.9%
Overseas referrals13.2%
MoH Information Services
0.7%
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Infrastructure Development
• Infrastructure Development Plan is consistent with the RMI’s sectoral priorities, the Education and Health Sectors:
• Elementary Schools
• Majuro Hospital Redevelopment
• The College of the Marshall Islands
• Matching for FAA airport grants;
• Infrastructure grant declines in FY 2008 to increase sector grant to Education and Health but still well above 30% requirement
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FY 2008 Capital Infrastructure
FY 2008 Infrastructure AllocationsFY 2008
Ministry of Education Elementary Schools 4,695,676$ Majuro Hospital 779,900$ College of the Marshall Islands 5,000,000$ Marshall Islands Airports Authority (FAA Matching) 786,876$ Infrastructure Maintenance Fund 592,761$ Total 11,855,213$
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FY 2008 Infrastructure Plan
Majuro Hospital6.6%
Ministry of Education Elementary Schools
39.6%
Infrastructure Maintenance Fund
5.0%
College of the Marshall Islands42.2%
Marshall Islands Airports Authority (FAA Matching)
6.6%
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• Overall fiscal position is improving; • Tighter expenditure control measures in place to meet modest
revenues collected (fuel tax);• ADB debt arrears in FY 2007 have been paid;• Marshalls Energy Company has resumed selling diesel fuel
after its recent re-financing initiative and establishment of template rates in coincide with fuel costs;
• Collected total tax arrears of $1.3 in FY 2006 & 2007 combined, resulting from improved enforcement and greater compliance;
• New Ship Registry agreement of contribution from $1.0 million to $2.0 million per annum.
Recent Fiscal Developments
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Decrement Management
• Full inflation is critical to cope with rising costs and allow time to
make fiscal adjustments;
• Cost controls through hiring and wage freeze policy;
• Improved tax administration - auditing division, DOI TA on tax &
customs modernization systems & staff training
• Broadened tax and revenue base - e.g. elimination of import tax
exemptions;
• Comprehensive tax review
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Compliance Management: Audit
• No. of Audit Findings: FY 2003 (33) - FY2006 (10);
• No. of unauditable Component Units: 8 to 2;
• Initiating DOI TA aims to assist Component Units;
• Fixed Assets Finding removed after 17 years;
• Total Questioned Cost is lowest ever;
• RMI’s aim to achieve a clean audit by FY 2008.
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Compliance ManagementOffice of Compact Implementation
The Cabinet has approved the establishment of an Office of Compact Implementation (OCI) in the Ministry of Foreign Affairs.
OCI will be responsible for coordinating, with other Offices, all Compact matters including:
• Performance budgeting and monitoring• MTBIF• Infrastructure programming• Section 215 report• JEMFAC preparations• Compact Trust Fund reporting
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Compliance Management Performance Budgeting
• FY 2008 Budget includes $300,000 public sector capacity building grant for consolidating and expanding performance budgeting throughout Government;
• The grant will be managed out of the newly formed Office of Compact Implementation in the Ministry of Foreign Affairs;
• The intention is to phase out over time as performance budgeting becomes firmly established within the Ministries and Agencies.
Education - Reform Initiatives
• Personnel Auditing Initiative
• Improving Data Collection & Analysis
• Reviewing the Current Strategic Plan
• Legislative Proposed Act requiring;• Teacher Certification Process• Minimum Standard for Teacher Qualifications
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Thank you
“Kommoltata”