JEMFAC Progress Monitoring

Presented by the RMI Government 6th RMI-U.S. JEMFAC MeetingWashington D.CAugust 27th, 2008

Outline of Presentation

• Economic Update & Policy Reform

• Fiscal Year 2009 Budget

• Priority Funding

• Fiscal Update & Decrement Management

Photo: Rairok Elementary School II

Policy Framework

• Maintaining Macroeconomic Stability

• Improving the Business Policy Environment

• Prioritizing Education & Health Sectors

• Implementing Infrastructure Development

Projects

Photo: Jaliut High School (JHS) Phase II – Admin. Building

Sectoral Shares of GDP ( FY 2008)

Photo: NIHS Phase II - Classrooms

Recent Economic Performance

• Positive GDP growth continues but at a modest pace;

• Slow growth in FY 2007 & 2008 partly due to high global energy prices;

• Real GDP growth in FY 2007 was1.3%;

• Projected Real GDP growth for FY 2008 is 1.8%;

Photo: JHS Phase II – Staff House

What is influencing GDP?

• Modest value added activities in the private sector

• Job losses and reduction of working hours at USAKA

• Public sector

• High energy cost.

Photo: Northern Islands High School (NIHS) Phase II - Classrooms

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;

• The Tuna Loining Plant is open and operational with new management and prospect of employing up to 600 workers by the end 2008;

• Majuro Atoll Waste Company (MAWC) has tremendously improve waste collections.

Photo: Majuro Atoll Waste Company (MAWC)

USAKAImpact Summary

 FY07 

(Baseline) FY08 FY09 FY10 FY11 FY12

RMI Workforce 1030 912 15% 3% 3% 3%

Yearly RMI Employee Tax Contribution

$1.5 Million

$1.3 Million

$1.1 Million

$1.1 Million

$1.0 Million

$1.0 Million

US Workforce On-Island 1034 958 17% 4% 5% 4%

Yearly US Contractor Tax Contribution

$2.5 Million

$2.3 Million

$1.9 Million

$1.8 Million

$1.7 Million

$1.5 Million

*estimated FY08 – FY12 and reflect Prime Contractor (KRS) and AAFES only;*figures not adjusted for inflation

Photo: Pan Pacific Foods (RMI) Inc.

Employment Trend Factors

• Modest growth in Private Sector in FY08, expected growth in FY09• Decreased employment in USAKA• Slight decrease in Non-Governmental Sector• Stagnant growth in RMI Government and Other Public Sectors

Photo: Pan Pacific Foods (RMI) Inc.

RMI Priorities:

• Education and Health sectors continue as the RMI Government’s two top priorities;

• Direct positive impact on all other sectors and the economy, as a whole, over the medium and long-term.

Photo: Rairok Elementary School II

Education & Health Spending

• Recurrent spending on Education & Health have grown rapidly since FY 2003:

• Education recurrent spending has increased by

125%;

• Health recurrent spending has increased by 71%;

• Spending on other areas has declined by 9%.

Photo: JHS Phase II – Admin. Building

Education and Health SpendingRecurrent Expenditure FY 2003 - FY 2008

(General Fund, Compact Funds, Federal Grants and Special Revenues)

$-

$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

Photo: JHS Phase II – Iakwe Sign

Fiscal Year 2009 Budget

• FY 2009 Budget projected at $124.5 million

• Slight increase from FY 2009 partly due to inflation adjustments

• Revenues forecast decrease largely to reduction in labor force in

USAKA

• Federal grants forecast to be steady

• Special Revenues slightly decreased

Photo: CMI Classroom

Factors Affecting FY 2009 Budget Formulation

• Energy costs which led to a declaration of economic emergency;

• Wage & Hiring Freeze Policy;

• Modest assumptions of inflation and growth used for revenue estimates

based on recent trends and expectations;

• Utility costs increased sharply;

• ADB debt payment to increase substantially;

• Slight reduction in Compact infrastructure grant to support Ministry of

Health & Ministry of Education;

• High inflation rate.

Photo: Rairok Elementary School II

Government Fiscal Status

• Overall fiscal position is stagnant;

• Imposed freeze on General Fund;

• Recent freeze on vacant government posts;

• Reduction of subsidies to State Owned Enterprises (SOE);

• Aggressive tax collections;

• Consolidation of funds

Photo: NIHS Phase II - Classrooms

Consumer Price Index – FY2008

Photo: MAWC – Red Bin Repaired

Global Budget Figures

Photo: JHS Phase II – Admin. Building

Funding Source FY 2008 FY 2009

Domestic Revenue $ 34,999,891 $ 33,249,896

Compact Sector & Other Grants $ 40,272,580 $ 41,833,589

Special Revenues $ 7,528,008 $ 6,784,089

Federal Grants $ 7,310,129 $ 7,326,078

Overseas Revenue (ROC recurrent and projects) $ 5,500,000 $ 5,250,000

Compact Trust Fund $ 9,713,700 $ 10,784,291

Kwajalein Development Fund $ 2,050,670 $ 2,167,308

Kwajalein Landowner payments $ 16,189,500 $ 17,110,328

Total $ 123,564,477 $ 124,505,579

FY 2009 Compact sector grant allocations

Photo: CMI Classroom

Compact Sector Grants Breakdown Proposed Sector Allocations

Education $ 11,957,410

Health $ 7,404,620

Private Sector $ -

Capacity Building $ 425,000

Environment $ -

Infrastructure Development $ 12,047,382

Total  $                                  31,834,412 

FY 2009 Education Spending

Photo: Rairok Elementary School II

FY 2009 Recurrent Education Spending by Outcomes

Admin11%

Policy1%

Property2%

Primary20%

Secondary9%

TVET0%

CIA1%

Kwaj7%

Special Ed5%

NSB4%

NTC4%

CMI36%

Admin

Policy

Property

Primary

Secondary

TVET

CIA

Kwaj

Special Ed

NSB

NTC

CMI

Photo: JHS Phase II - Staff House

FY 2009 Health Spending

Photo: JHS Phase II – Staff House

Table 1: MOH Funding (total $) by Outcome, Agency and SourceMOH Outcomes General

FundHealth Fund

Health Care

Revenue

CompactBaseGrant

Ebeye SpecialNeeds

US FederalGrants

OtherGrants

Total

Outcome 1: Provide Primary and PreventiveHealth Care and Improve the Health Status in then Outer Islands

492,349 681,000 777,455 0 430,565 0 2,381,369

Outcome 2: Provide Primary and PreventiveHealth Care on Majuro

411,589 30,000 0 0 1,070,366 96,300 1,608,255

Outcome 3: To provide Effective Hospital Service Majuro 1,077,925 1,874,000 3,085,298 0 1,480,503 0 7,517,726Outcome 4: To Provide Kwajalein Atoll withefficient Hospital Services (Ebeye)

462,593 801,000 1,151,337 1,585,393 25,000 0 4,025,323

Outcome 5: To Improve the Effectiveness of Hospital Service for Kwajalein Atoll

10,169 0 23,000 85,750 15,243 0 134,162

Outcome 6: To Provide Kwajalein Atoll withEfficient Primary and Preventative Health Care Services and Management

27,238 15,000 239,988 72,146 694,940 0 1,049,312

Outcome 7: To Provide Effective Management of OH Personnel and Finance

282,295 308,000 1,802,542 0 784,754 210,400 3,387,991

Outcome 8: To Provide Timely and Current HIS Service 145,549 0 0 0 0 29,300 174,849Outcome 9: To Provide Referral Service toPatients who Require Medical Attention

75,144 2,268,000 0 0 0 0 2,343,144

Outcome 10: MAWC0 0 325,000 0 0 0 325,000

Total2,984,851 5,977,000 7,404,620 1,743,289 4,501,371 336,000 22,947,131

FY 2009 Recurrent HealthSpending By Outcomes

Photo: NIHS Phase II - Classrooms

MAWC1%

Admin15%

HIS1%

KHS18%

Referral10%

KHS-Improvement1%

KPP5%

MHS32%

MPP7%

OIHS10% OIHS

MPP

MHS

KHS

KHS-Improvement

KPP

Admin

HIS

Referral

MAWC

Infrastructure Development• Infrastructure Development Plan is consistent with the RMI’s

sectoral priorities, the Education and Health Sectors:

• The College of the Marshall Islands

• Elementary and High Schools

• Majuro Hospital Redevelopment

• National Energy Capital Projects

• Matching for grants;

• Infrastructure and Maintenance Fund (IMF)

• Majuro Atoll Waste Company (MAWC)

• Infrastructure grant increased in FY 2009 due to inflation adjustments and well above 30% requirement

Photo: CMI Classroom

FY 2009 Capital Infrastructure

Photo: CMI Classroom

Compact Capital Fund $ 12,047,381

College of the Marshall Islands $ 5,000,000

Elementary and High School Projects $ 3,625,012

Majuro Hospital $ 1,000,000

National Energy Capital Projects $ 1,000,000 Marshall Islands Ports Authority (FAA Matching) $ 700,000

Infrastructure Maintenance Fund $ 602,369

Majuro Atoll Waste Company $ 120,000

FY 2009 Infrastructure Plan

Photo: Rairok Elementary School II

Decrement Management

• Full inflation is critical in coping with rising

costs and will allow time to make fiscal

adjustments;

• Cost controls through hiring and wage freeze

policy;

• Consolidation of Special Revenue Funds

• Tax Reform Commision

Photo: CMI Classrooms

Compliance Management: Audit Progress since FY2003

• No. of Audit Findings reduced by 50%;

• No. of unauditable Component Units: 8 - 0;

• Amount of Questioned Costs reduced by 33%;

• Fixed Assets qualification resolved two years in a row;

• Request for extension of DOI TA to assist Component Units

• Achieved Unqualified Opinion – Clean Audit for the first time

Photo: Namdrik Elementary School (Phase 1 – Outer Islands School)

Thank you

“Kommol Tata”

Photo: MAWC – Majuro Dumpsite (Rebuilding Red Bins)

IDMP 0018 Marshall Islands High School Phase II

IDMP 0017 Rita Elementary School Phase II

IDMP 0028 Laura High School Phase II (Stage II)

IDMP 0020 Namdrik Elementary School (Phase I)