The following is the full text of the Budget Address 2004 delivered to the National Assembly on Tuesday December 2, by Vice-President and Minister for Finance, Mr James Alix Michel

Mr Speaker

Presenting the Budget Address is an important occasion whereby we make propositions of the country's expenditure for the forthcoming fiscal year. We also have to explain where we will get the money that we plan to spend. Our budget covers a whole range of services that form part of our everyday lives such as providing for the education of our children and those who are studying abroad, health care, pay for amenities that bring comfort to our lives, and finance projects that would lay the foundations for a better future.

Mr Speaker, our Budget and our expenditure represent the capacity of our country to create new wealth. If we're searching for new ways to build a stronger economy it's because we want our people to live a better life. We want to be more efficient, and when we create more wealth everyone of us can enjoy better service and a higher standard of living. It is for this reason that we introduced the Macro-Economic Reform Programme (Merp) in July 2003 to put our economy on a better track, and the 2004 Budget is in line with this programme's requirements.

At the same time that we are enjoying the success of our investments resulting from past Budgets, I would like to remind you that when I presented the 2003 Budget to the Assembly I stated that 2003 will be an eventful year for the development of Seychelles.

Indeed, during the fiscal year 2003, we have seen many changes both external and internal that have had major influence on the outcome of our economy.

The outbreak of Sars, the war in Iraq, major increases in oil and commodity prices, global economic slowdown and the introduction of our Macro-Economic Reform Programme (Merp) have been the major events of the year.

A subsequent welcoming development was that the Gulf war lasted shorter than expected and the Sars epidemic was quickly put under control. 

The Government has invested heavily in building up a social fabric where today our income per capita stands at USD 8,000.  The country also enjoys a high standard of living and social status as indicated by the position of Seychelles through the Human Development Index of the UNDP published in 2003, where Seychelles was 1st in Africa and 36th in the world.

Our people know that today Seychelles has an excellent infrastructure system envied by many countries, such as access to electricity, water, and a very good communication system and road network.

Most of these developments have been financed either through external borrowings, which have been on short-term maturities or through Central Bank funding.  This has imposed some constraints on the economy as a whole.  This is why the country is currently experiencing economic difficulties, highlighted by shortage of foreign currency and large excess monetary liquidity.

The sustainability of the social and economic achievement is under threat unless the fiscal imbalances are curtailed.

The Merp is designed to help Seychelles re-structure its economy and to prepare for the challenges ahead.  It is a programme that puts forth an emphasis in restructuring the country’s economic policy, exploring ways to promote growth and raising the living standard.  It recognises that the private sector has a role to play in creating wealth and job opportunities for the younger generation.

It also seeks to redress the negative trends in the economy without undue social burden on its people. This will ensure that the socio-economic gains over the years are not lost and that the country is placed back on its path of sustainable economic growth.

Mr Speaker, I am pleased to state that we have started to see some positive results in the economic indicators as a result of these measures.

International economic developments in 2003 and growth prospects for 2004

In the first half of 2003, world economic conditions were frail as per the expectations of most analysts and economic observers.  Amid persistent uncertainty and prolonged geopolitical anxiety, there was no clear imminent sign of an improvement in growth prospects although forward looking indicators were considerably strong.

For one, the associated effects of the Gulf war – which the US felt was necessary to reduce the risk of terrorist strikes and increase global security – were disruptions in the supply of oil, increases in prices, (and thus inflationary pressures) and a slowdown in air travel.  The tourism and travel industries for instance experienced huge losses from flight cancellations and a rapid decline in occupancy rates at hotels across the globe.  World airlines, which were already adjusting to higher prices of jet fuel and insurance cost had to incur further losses by an initial estimated amount of US$10 billion.

The Sars epidemy brought new concerns over the prospects for the global economy.  Asia which was the global growth leader in 2002 was the worst affected and the World Health Organisation had to issue travel warnings to four Asian destinations (China, Hong Kong, Vietnam and Singapore).  Apart from discouraging economic activity with physical human interactions such as High Street spending, the outbreak also threatened trade agreements involving Asian countries. 

Fortunately, the reduced uncertainty following the quick end of the Gulf war, and the containment of the Sars outbreak and reports that the epidemic would not damage Asia’s growth potential, suggested that the world economy would pick up as early as in the second half of 2003.  The global growth was projected at 3.2 per cent in 2003, picking up to 4.1 per cent in 2004. 

Among the advanced economies, indicators suggest the US is picking up momentum.  Equity markets are strengthening, business and consumer confidence are on the rise although labour market condition remained a major cause for concerns amid considerable excess capacity.  GDP growth is projected at 2.6 per cent in 2003, going up to 3.9 per cent in 2004. 

In the euro area, the forecast has been significantly reduced on account of weak private domestic demand and the strengthening euro.  Euro area growth is projected at 0.5 per cent in 2003, picking up to 1.9 per cent in 2004. 

In Japan, following a prolonged period of deflationary trend and weak economic prospects, the economy is projected to expand by 2.0 per cent in 2003 but by only 1.4 per cent in 2004.

In Africa, growth prospects remained dependent on world economic conditions.  However, in the continent which includes some of the world’s poorest countries, political instability, the spread of HIV/Aids, arm conflicts and severe flooding and drought conditions continued to hinder growth prospects.  GDP growth for Africa is estimated at 3.7 per cent in 2003, picking up to 4.8 per cent in 2004. 

Domestic economic performance in 2003

The economy saw two distinct outcomes in 2003: one in the first six months of the year and the other following the introduction of the Merp in July.

Developments in the first six months of the year were not favourable.  This period was characterised by a shortfall on government fiscal operations, which amounted to R131 million compared to a similar outcome in the same period of last year.  

This has resulted in an increase in liquidity of 5.7 per cent caused principally by the rise in domestic credit. The growth in domestic credit was attributed to the financing of the Government budgetary shortfalls. 

In addition, the economy was also affected by the external shocks, namely the Sars and the Gulf war  which affected the tourism trade, our main source of foreign exchange.  Nevertheless, manufacturing, particularly the tuna canning factory and prawn exports did extremely well.  The other productive sectors were being hampered by the foreign exchange shortage, which were holding back their investment plans. 

2003 Fiscal Outcome

Mr Speaker, I am pleased to inform this Assembly that on the basis of the current trends, I am predicting a budget surplus of approximately R247 million or 7% of GDP for the year 2003.

Government expects a total revenue of R1.8 billion compared to R1.4 billion in 2002.  This positive outcome stems out of a rise in current receipts, namely from GST and other revised fees and fines.  Total expenditure including current outlays, capital outlays and net lending is expected to be R1.6 billion, which is R45 million less than estimated.

Current outlays are expected to reach R1.5 billion, which is in line with the budget, an encouraging outcome given the extra-budgetary spending that the government undertook for the 5th Indian Ocean Island Games held in Mauritius in August and the African and Afro-Asian Games.  This was a justifiable increase judging from our athletes' greater success and the pride and joy they brought to our country. Their success reminds me of the patriotic feeling and unity that pervaded our counrty during the month of September. We in Government will always put money aside to allow our sportsmen to prove their worth on the international scene. Their success is our glory and our joy.

Capital outlays will be R83 million of which the principal element is capital project expenditure contained at R60 million, reflecting a significant reduction from R289 million in 2002.

As regards net lending, the Government remains committed to achieving a nil balance at the end of the year. 

The results in expenditure reflect the strong fiscal discipline maintained throughout the year with full co-operation from the Ministries and they are being encouraged to continue this firm stance.  

As a result of the surplus in the budget, the Government will be reducing its dependence on domestic credit and this will provide for a decline in liquidity growth.  This has already been evident in the four months since the introduction of the Merp.  We have seen a decline in liquidity and a slight increase in total domestic credit.  The main reason for the rise in credit was attributable to the issue of new government paper.  By contrast, Central Bank claims on Government fell in line with the Merp, which advocates a decrease in Government’s reliance on Central Bank financing.

However, the main concern remained the foreign exchange shortage, whereby economic agents could not fulfil all their transactions with the rest of the world, particularly for investment purposes.  On a cash basis, the overall position of the Balance of Payments ended in a shortfall of R13 million for the three months of July to September, principally explained by the trade deficit and debt payments.  Nevertheless, despite these movements in the external accounts, it is worth noting that the economic transactions with the rest of the world were being affected negatively by the strength of the Euro and the South African rand in local currency terms.  In the forthcoming year, more efforts will be made to increase the inflow of foreign exchange. 

Other major developments in 2003

- Negotiations with our foreign partners

During the course of 2003, we have had numerous discussions with both the IMF and the World Bank.  We have sought to obtain their support and blessing for our home grown Reform package.  As a result, we are very close to conclude a Staff Monitored Programme with the IMF.

- Housing programme

This year we saw the creation of the Housing Finance Company (HFC), one of the two companies mandated to take over from the Seychelles Housing Development Company (SHDC) as part of the reform programme undertaken by the Ministry of Land Use and Habitat (MLUH).

Apart from granting new housing loans, this new Company will also eventually take over the total loan portfolio of SHDC.

HFC has also taken over the Home Ownership Scheme (HOS) formed last year to assist families in acquiring their own homes. Up to October 2003, over 2,000 cases have been processed with 858 cases finalized from which cash receipts of R39 million have been collected.  We expect to recover about R20 million during the course of 2004.

With the procedural issues with the banks sorted out, cases under HOS are now being dealt with faster and more efficiently and we should be expecting faster inflows in the coming months.

The setting up of the Property Management Corporation (PMC) is now being finalized and this corporation will take over and manage all SHDC properties under tenancies as well as all Government buildings.

As stated last year, families will also be allowed and encouraged to purchase their rented apartments under the HOS. Government, through the SHDC, currently has about 1,200 such rental units that will be sold off.

Our R1.2 billion, 5-year housing programme, to be made by mobilising private sector resources, will be spent for the different housing projects covering all the districts of Mahé, Praslin and La Digue continues with advanced progress during 2003. The investment of R70 million as announced in the budget last year for implementing housing projects in all the 25 districts is on target with the current stock of ongoing projects contracted amounting to R327 million for 1090 units. This is the highest number of housing units ever to be constructed at any one time by Government.

The role of Government to assist families whose financial means do not permit will continue under its “Social Housing Programme” even with the eventual liquidation of SHDC and the taking over of its business by the HFC and PMC with their self financing roles. However, instead of relying on Government financing as was previously the case, HFC has now taken over this role and now it is this company which is organizing and managing all financing through loans obtained from commercial banks. Once built, families will obtain a loan through HFC from commercial banks to pay for their homes and in the process allow HFC to repay the costs for the construction programme.

-  Sepec

The oil industry is a sector which is doing significantly well year on year.  Foreign exchange revenues from re-export of oil have been increasing over the past few years.  In 2002 there was a growth of 4.7 per cent in revenue compared to the previous year.  A total of US$54 million was recorded in 2002, whilst exports for 2003 will surpass US$65 million and the result of 2004 is also expected to be buoyant.  This is not surprising since there has been an average yearly increase in earnings of 16 per cent during the past five years.  In 2002, the country gained property of its first oil tanker, the Seychelles Pride, which is doing well commercially on the international market.  The tanker was built with one of its main aim to increase foreign exchange earnings for the country and also to reduce the freight costs of transporting fuel to the country.  For the moment, the tanker is performing better than expected and is currently paying back its loan on schedule.   In addition, from its revenue, it has made the first down payment on the second oil tanker, being one of two oil tankers on order for delivery in June and November 2005 respectively.  These two new tankers will boost foreign exchange inflows further into the economy whilst from its earnings it will pay back its borrowings.

- Industrial Training Centre and Maritime Training Centre

Industrial Training Centre

This Government is extremely concerned with the need to create job opportunities for our young people. With the growing demands for skilled labour in construction industry, there is an urgency to provide adequate vocational and technical training. To this end, the Industrial Training Centre (ITC) aims to revitalise the provision of technical vocational education and training for the people, with a view to re-orient its curriculum in order to keep abreast with modern technological development and also to provide readily marketable skills to the labour market.

When completed, the new ITC will be able to absorb an annual intake of 400 trainees in various industrial training courses such as electronics, motor vehicle engineering, plumbing, masonry etc. This should provide a local workforce in areas where there is a large number of expatriates.

Maritime Training Centre

Given the paramount importance of fisheries to the economic development of our country, having a skilled manpower to exploit the abundant maritime resources has always been a must.

It is within this objective that work will start shortly on the construction of a modern Maritime Training Centre (MTC). As part of the project, the Government will expand the current curriculum with the aim to deliver training at diploma level including IMO certificates. The MTC will also have a modern training vessel. 

Outlook for 2004

Mr Speaker, I am expecting a very positive outlook for 2004.  This is mainly due to the fact that the uncertainties surrounding the US-Iraqi conflict have been reduced.  Economic indicators from both the US and the Eurozone suggest an improvement in these economies.  As our main tourism market is Europe, this should lead to better results in the tourism sector. 

 2004 Budget Strategy

- Fiscal policy

The Government will maintain its tight approach to spending and maximise revenue flows as announced in June.  This will enable the realisation of the anticipated surpluses over the coming years, which will help Government reduce its debt considerably, particularly with the Central Bank.  Emphasis will be further made on the expenditure side in 2004 with cuts of up to 10% to 15% in the ministries/departments allocated budgets and a strict adherence to the capital budget of R50 million.  The reduction in expenditure will be done in two ways:  firstly by prioritising expenditure and secondly by instilling greater efficiency in the provision of public services.

The overall surplus for the year is projected at R593.373 million or 15% of GDP.

- Revenue

Gross revenue for 2004 is expected to be R2.1 billion, which is about R257.7 million more than the estimated actuals of the current year, mostly as a result of the full effect of the measures taken in 2003 vis-à-vis GST and review of various tariff rates.

The main areas of increase are as follows:

(a)        Indirect taxes mostly GST and Licence fees – R153.125 million increase due to revision in         2003 of telecommunication licence fees, and GST being extended to all sectors including on        direct imports, locally manufactured goods, petroleum products and the whole tourism sector.

(b)        Increase of R27 million in Administration fees is a result of increase in 2003 of various fees         such as for landing/cargo handling fees, transhipment charges, immigration fees and airline    passenger fees.

(c)        Income from sale of assets/land and housing stock – sale of assets is expected to collect R35     million more with the privatisation process whilst sale of housing stock is expected to bring     in another R20 million next year as most of the legal delays would have been settled.

(d)        Trades Tax to collect R9.198 million more in 2004 based on present trend.

(e)        Review and introduction of other fees will also be made for various Government services           namely in the health sector, the details of which will be announced after the study of the        whole civil service is completed.

- Expenditure

Total Outlays for 2004 is expected to be R1.45 billion, a decrease of 4% against the 2003 forecast.

The reduction is a result of the following:

(a)        A decrease of R71 million subvention to Parastatals.  This reduction is due to no funds being      allocated to Public Utilities Corporation (PUC) as a result of the completion of major PUC             projects and no allocations made for SHDC.

(b)        The reduction for Subventions to Regulatory Bodies of 7% following the removal of Solid          Waste & Cleaning Agency (SWAC) to Ministry of Environment (the reason for their          increased budget), whilst STMA has been reclassified under Regulatory Bodies.

(c)        A decrease of 4% in appropriation of Ministries and Departments totalling to R33.7 million.       The other major changes in the Ministries and Departments are as follows:

 1.         President’s Office:

 The allocation for this office has been reduced by R6.87 million as a result of a new Contingency Fund being set up to cater for expenses of national disaster and the expenditure vote of Minor Disaster currently provided under President’s Office being removed and re-allocated to this Fund.  It is to be noted that the reduced budget also provides for Ministers' personal expenses, which will hereafter be centralised under the President’s Office and not from the respective Ministries’ budgets.

2.         Ministry of Health:

Ministry of Health’s budget has been cut by 4% compared to 2003.  This relates to the administrative restructuring exercise being carried out with the aim of reducing wastage.  However, there is an increase of 5% in the funds provided for medical supplies and Primary Health Care has also been increased by 6% to further consolidate the health services in the community, whilst the hospital services have been curtailed by 2.5%. 

The total budget of the Ministry of Health is R158.5 million which represents the largest allocation in the 2004 budget for Ministries and Departments and is 13% of the amount appropriated.

 3.         Ministry of Local Government & Sports:

A major cut of R10.7 million has been effected in this Ministry.  This is mainly due to removal of allocation of funds made for the Games this year as well as review of other services and activities of the Ministry.

4.         Ministry of Education and Youth:

Ministry of Education and Youth takes the second largest allocation for next year.  However, a 4% cut has also been made in this Ministry.  This again reflects the administrative review being made.  The allocation for Education is R151.6 million and for Youth R5.48 million. For the Overseas Training Fund, the budget will be maintained at R35 million which is the actual costs per year.  However, this shows a decrease of R10 million compared to 2003 during which arrears of previous years were cleared.  As of November, we have 316 students studying abroad with 117 new students having left for new courses this year.  An exercise is being carried out to assess the skill requirements of the country and Government continues to be committed to provide higher education for the young people.

5.         Ministry of Social Affairs & Employment:

Even though this Ministry’s budget has been curtailed by 5% for 2004, it must be noted that the Prison’s Division has been allocated 23% more funds over the 2003 budget to cater for the procurement of required equipment and the setting up of the necessary facilities to better the present services including the setting up of a new prison at Grand Police Bay.

6.         Ministry of Enviroment:

This Ministry has received an increase of R24 million due to the relocation of Solid Waste & Cleaning Agency (SWAC) as a unit of the Ministry.

7.         Department of Internal Affairs:

The Department has received a 2% increase above its 2003 budget due to the re-organisation of the Police Force.  There is also an increase in the Immigration Division’s allocation for a new passport system that offers new security features in line with present international requirements.

Under Centralised Payments the allocation has been decreased by R32.5 million on account of reduction made in the allocation for Provision of arrears. This is despite an additional amount of R28.634 million being allocated under Centralised Payments for compensation for 15 and 10 years of service for Government employees.

Capital expenditure has been limited to R50.0 million in order to complete our ongoing capital projects.  However, the Government will continue to invest in projects which will have direct benefits in the districts within the budget.

CBS advances are expected to be further limited and reduced in 2004, with Government actually increasing its net repayment of both foreign loans and domestic debts thereby reducing public debts.  Thus with the surplus of R593.373 million or 15% of GDP to be generated in 2004, there will be no requirement for public sector borrowing for the 2004 fiscal year

Debt re-scheduling

The Government is actively negotiating with its foreign partners for prolongation and restructuring of a number of foreign loans.  In doing so, it will not only restructure the debt profile but also release significant inflows into the domestic economy. This will by far help the economy through an increase in the foreign exchange inflows going into the banking system for other important payments.  It is expected that the re-scheduling of public sector external loans will release about US$20 million into the economy in the coming year.

Mr Speaker, I am pleased to inform this assembly that we are about to restructure two foreign loans at longer repayment periods.

Monetary policy

As stated above, the Government is committed to its strong fiscal policy.  In view of the fact that it will depend less and less on the Central Bank for financing, the Bank will now have a greater role to play in making sure that the economy is functioning in a manner that would enhance economic growth and ensure domestic price stability.  In this context, the Central Bank will devise its monetary policy that reflects this new economic environment.  One of the first moves in that direction is a gradual liberalisation of interest rates through the re-introduction of the tender system on government securities, namely in treasury bills. 

I would like to reassure this Assembly that the issuance of debt will be done in a manner that will be sustainable and the debt service can be absorbed in the budget in such a way that the fiscal outcome is not affected in a negative way. 

As a measure to further reduce domestic liquidity, with effect from February 1, 2004, importers will be required to deposit the equivalent of Seychelles Rupees against their lodging of foreign exchange requests with the banks.  This will also provide for a more orderly clearing of payments.  However, not to put undue burden on our small businesses in the productive sectors, they will be exempted from this requirement.

Furthermore, the Central Bank will become more vigilant on its reserve management.  It will monitor closely the reserve position and any slip will be met by further tightening of monetary policy through the various instruments which it has at its disposal.

In order to improve the soundness of the banking system the Central Bank will be introducing additional prudential regulations regarding foreign exchange risk, large exposure limits, loan classification and provisioning.

The Government is planning to review the existing Central Bank Act to enhance the transparency, accountability and functional independence of the Central Bank.

In consultation with the commercial banks, we are planning to review the Financial Institutions Act to achieve greater compliance with the Basle Core Principles.

Privatisation and trade liberalisation

In order to promote private sector development and stimulate investment in the economy, the Government will implement structural reforms in 2004.  This will help build up confidence both domestically and internationally. Towards this end, the Government will start to liberalise the economy, which includes the setting up of a mechanism for privatisation and a gradual move on trade liberalisation.

- Privatisation

The Government has historically owned businesses which have played critical roles in our economic and social development e.g. Air Seychelles.  The parastatals attract considerable attention and a fair share of controversy.  Perhaps one of the reasons is because we have not always explained the role of these entities and how they have helped and continue to help in the development of Seychelles.  The Government is reviewing the role of these companies and will make recommendations on their future roles.  A list of the entities that would be privatised and the privatisation process will be published during the course of the year.  The Government is finalising the sale of two of its hotels - Barbarons Hotel and Fisherman’s Cove hotels to Telecom Seychelles Ltd and Le Meridien.  The Government has also started the process of privatisation of the Providence Industrial Land areas which should be completed in 2004.  Land development for sale to individuals will also be considered for privatisation.

- Trade Liberalisation

Government will in 2004 begin to reduce the controls on trade.  In this context, it undertakes to proceed with trade liberalisation as the economy improves during the year through a gradual reduction of monopoly, price control, import permit and the foreign exchange allocation system.

As a first step to this end, in January 2004, the Government will move on a reduction of the monopoly items of the Seychelles Marketing Board.

Foreign Exchange

Mr Speaker, I will now turn on the subject which is preoccupying everyone - foreign exchange.  May I first reassure you that it is a great concern for this Government when we hear that there are no cigarettes in the shops or fishermen do not have lines or there are no agricultural products available for farmers.  It is disturbing when we hear that students have to photocopy textbooks or there are no materials for students studying arts or stipends are paid late. We are concerned when small businesses have difficulty in obtaining raw materials.

I am today giving my commitment that in 2004, this Government will endeavour to ensure that these shortages of vital requirements for our progress do not happen again.

How do we hope to do this?

I am confident that the reduction in Public Sector consumption will have a marked effect on domestic liquidity and demand for foreign exchange and hence make more available to the Private Sector.

Secondly, we believe that the spin-off from the current good fish catch will bring in higher foreign exchange yields.

Thirdly, early estimates are projecting an increase in tourism numbers next year.

Fourthly, during the last 12 months, a large portion of our foreign exchange inflows of $42 million was used to repay one single loan. With the possibility of restructuring over a longer period and at a smaller debt service amount will further release funds which could be used in other areas (approx. $20 million annually).

Education

In view of our ongoing pursuit of excellence, the provision of quality education to our children and youths remains a priority for our Government.  The 2004 budget allocation will provide for the consolidation of the 1998 Education Reform, with ongoing emphasis on programmes and physical infrastructure.

Thus, Government will continue with its programme for school maintenance.  After construction of the new Port Glaud School, we will continue with the construction of the next two schools, namely Anse Aux Pins and Bel Ombre, which should be completed during the course of the year 2004.  Whereas for Baie Ste Anne Praslin, construction of the new school on the reclaimed area will start early next year.

Also considered to be the top priority in education is the provision of quality training for teachers and school leaders.  In acknowledgement of the importance of school leadership in the overall endeavour to provide quality education and following the success of the School Improvement Programme, I am happy to announce that as from next year, a group of school managers will be embarking on a new MBA programme that will be delivered full time by the National Institute of Education.

Youth

You will recall that this year, together with high officials from the Ministry of Education and Youth, I made it my obligation to spend time listening to the youth of our country.  I am proud that the youths of Seychelles have created what is now called Aspiration 2013.

The 2004 budget for the Youth Department will provide for the formulation of short, medium and long term planning in order that, together with other Ministries, agencies and the youths commitment, we can work together to ensure the realization of our youths’ aspirations.  The budget for 2004 for Youth is R5.48 million which will be used for various youth development performances.

Following the successful piloting of the Young Citizens movement in five schools on Mahé, Praslin and La Digue, Government will support the establishment of the Young Citizens Movement in all our schools.  This is part of our goal of promoting civic responsibility and patriotism, as well as to provide support to education in promoting positive behaviour in our overall endeavour to enhance responsible and respectful citizenship.

Re-structuring of the social welfare

Mr Speaker, today we are proud when visitors tell us that there are no beggars in Seychelles.  This is due to a sound and comprehensive welfare programme.  However, we need to remain conscious of the need to ensure that the welfare system continues to provide a social safety net and not act as a deterrent to employment.  To this end, the government will re-look at the welfare schemes in a bid to make them more efficient.  The release of individuals from those schemes will provide the labour to the productive sectors of the economy.

YES Scheme

The Young Enterprise Scheme (YES) was set up in 1996 with the aim of providing interest free loans to individuals with viable projects to enable them to start small businesses.  The Secretariat provides administrative assistance to the loan committee and maintains financial records.  Loan applications are submitted to and vetted by the SIDEC prior to submission to the Loans Committee for consideration through the Secretariat.  Once approved by the Committee, disbursement of loans is effected by the Secretariat through its bank account.

To date, over R61 million has been provided. 

Mr Speaker, the Scheme has been extremely successful in that it has created employment for over 2,000 young people to-date.

In spite of the favourable terms which the scheme has provided, I am perturbed to note that a number of borrowers are not servicing their debts nor making any effort to contact the Secretariat to discuss a repayment plan when they have general problems. We cannot continue to condone these actions since it places the continuity of the scheme into jeopardy and depriving others assistance. During 2004 we will be pursuing the defaulters to ensure that they meet their obligation.

To consolidate the efficiency and sustainability of the YES, Government has decided to restructure the administration of the loans and follow-up procedures.  Effective February 1, the administration of the loans will be made by the Seychelles Savings Bank.   The Secretariat will continue to process the loan application and the terms of the loans will remain unchanged.

Re-structuring of the civil service

As a second phase of the Merp program, the Government will be reviewing the public service to adapt to the needs of a more modern economy. These reforms will include, apart from the size of the public service, the restructuring of the administrative and organisational structure to improve management and accountability, devolution and flexibility, and improved management of human resources.

Restructuring of SIDEC

Government took a decision in November 2003 to liquidate SIDEC and replace it with a smaller and more efficient body that will be more focused on the promotion of small enterprises.  The process of restructuring started with the divestiture of properties from SIDEC in July 2003 whereby tenants at Providence Industrial Zone were offered a fresh 99-year leasehold for the plot(s) that they are occupying.  The new entity will have as its core activities to promote small enterprises in the craft manufacturing, agro-processing and industry-related sectors and provide them with basic business-related services such as business planning, book-keeping and counselling services.

Concluding Remarks

2003 has been an eventful year and the forthcoming year looks promising.  We have now entered a new era of economic change for the betterment of our people. With the positive results achieved so far, the Government is confident that its new economic strategies underlined by the Merp will go a long way in helping to attain its overall objectives, which will provide for economic prosperity without eroding the socio-economic gains of the past years.  It is with this in mind that all stakeholders should help in order for us to achieve these goals for the benefit of us all.

After presenting this Budget and following all the explanations given before, our people understand that our current economic difficulties are due to the rapid development that our country has known over the years. Every country, especially those that have just attained independence like us, passes through this phase in their development. Nonetheless our rapid development has brought us many things. We've spent a lot and now we have to take necessary steps to redress the imbalances in our economy, a process which is already yielding good results. And this gives me great hope for the future that we are aiming for. It is necessary at this stage for me to reiterate my call for all of us to work together, in unity and solidarity for us to achieve this success. We are on the right track. We are a people with a lot of talents. We've already done a lot to bring our country where it is today. We all want to achieve much more. We have the ability to do it and we can do it. And this is what drives us to do better, but it is nevertheless important that all economic and social partners in the country work together so that we can all benefit afterwards.

Finally Mr Speaker I wish to thank all those who have assisted in the preparation of this Budget and I commend this Budget to the Assembly.

Thank you.

LINKS