Building Capacity for Improving the Business Environment in Montserrat

BERF Montserrat Business Environment Capacity Building January 2017

BERF has helped the Government of Montserrat develop a strategic and institutional framework for improving the business-enabling environment in Montserrat. The report sets out international best practice, key functions that are required for the government to engage effectively with businesses and investors, improve business and sector regulation and drive improvements in the business environment and provides options for the design of an intervention within Government in areas related to the business environment that would build capacity in engaging with and supporting businesses and investors.

International Best Practice

In theory, best practice in business environment reform consists of

  1. legal and regulatory framework for business generally and small enterprise in particular and includes the rule of law and access of businesses to commercial justice;
  2. a policy framework for business and private sector development; and
  3. the institutional framework for design and implementation of, and compliance with, policies and programmes linked to the regulation, promotion and representation of business.

Operationally, best practice has been condensed into a standard institutional framework that facilitates Business Environment Reform via

  1.  linkage of the Business Environment Reform programme to national development priorities,
  2. establishment of a public-private dialogue mechanism to ensure that challenges are identified and addressed in an open and transparent process;
  3. access to and usage of technical resources to support the introduction of technological and legal reforms and
  4. support from international donors in the diagnostic and implementation phases of the reform process.

Also, in most cases, the institutional mechanism functions as an operational unit within one of Government’s leading economic development agencies.

Current Status of Business Environment Reform in Montserrat

At the time of this study, Montserrat, like other Caribbean countries, had already initiated a limited number of Business Environment Reform. The Government itself has attempted to address Business Environment Reform such as through developing an investment promotion strategy. The strategy was designed in 2012 to “promote private sector investment in Montserrat”. Also, it defined specific objectives in a small number of sectors including high quality tourism, geothermal energy, agro-processing and mining and manufacturing.

The investment promotion agency was to be established as an operating arm of the Montserrat Development Corporation. However, the MDC was terminated following poor performance and concerns over management of money, as evidenced by the findings and recommendations of a Task Force review of the Montserrat Development Corporation in March 2015.  Consequently, this primary investment promotion capacity was never fully realised and was itself terminated with the closure of the Montserrat Development Corporation.

Prospective foreign investors have continued to express frustration with the poor Business Environment. Moreover, the Government has failed to streamline four Acts governing investment concessions into one Investment Incentives Act to bring clarity and improve the processing of foreign direct investment proposals.  The absence of a transparent, supportive and efficient investment facilitation system is therefore a major constraint to creating a more supportive enabling environment for both foreign and locally sourced private sector initiatives on the island.

More recently, Montserrat’s Department for Information Technology and e-Government Services have created Information and Communications Technology-based reforms that were encouraged by DFID. The result was the adoption of an Automated System for Customs Data World, which covers most foreign trade procedures, handles manifests, customs declarations, accounting procedures, transit and suspense procedures.  This new system now allows customs brokers to file their declarations online and receive customs approvals of those declarations within 24 hours. The Department for Information Technology and e-Government Services has also created online access to land information via www.landinfo.gov.ms, and an online system whereby visitors needing to obtain tourist visas to visit Montserrat can now do so via www.immigration.ms.  This is especially convenient for new visitors to the island since they can receive their visas online in a short timeframe from application to the actual issuance of visas.

Montserrat’s Current Capacity to Implement Business Environment Reforms

Montserrat’s readiness to implement Business Environment Reforms depends on the government’s organisational capacity to

  1. introduce Information and Communication Technology solutions for transactions that the private sector undertakes on the basis of that country’s Doing Business Rankings;
  2. modify, upgrade or introduce new legislation and regulations to allow the reforms to take legal effect and
  3. oversee and participate in the formulation and implementation of reform initiatives.

Challenges to effective Business Environment Reform identification and implementation include

  • assimilation of private sector priorities and concerns,
  • increasing the Information and Communication Technology capacity in government
  • potential throughput limitations of the office of the Attorney General,
  • Government’s reluctance to forego online revenue due to credit card payment mechanisms associated with the availability of online services e.g. tax payment etc.; and
  • general capacity constraints of Government.

Most developing countries face such challenges. Those that have succeeded at achieving marked improvements in their BE have done so by developing temporary solutions such as a reliance on outsourced technical expertise and leapfrogging priority lists of a nation’s legal agenda to ensure efficient enactment of new legislation or actual amendments to existing Acts or regulations.

Such strategies are not a panacea for longer-term capacity building within government.  However, such “workarounds” have proved successful in other Caribbean countries (e.g. Jamaica and Grenada) and could facilitate the Government to act on institutional constraints.

The Business Environment Reform Model: Options for Montserrat

Three potential institutional approaches were considered for Montserrat:

  • A stand-alone institution would exist as a relatively independent agency tasked with multi-disciplinary functions normally provided by a national investment promotion entity or its equivalent.
  • The attachment of Business Environment Reform functions to an already-established and functioning private national agency such as the local arm of the Organisation of Eastern Caribbean States Business Council, the Chamber of Commerce, or the Small Business Association.
  • Attaching the institution to operate as an arm of a leading government Ministry or entity that already has responsibility for advancing economic planning and implementation of key development strategies.

On the basis of an assessment of the strengths and weaknesses of each option, BERF’s consultant recommended option 3 for adoption by the Government. The recommended model which is called “the Business Facilitation Services Centre” aims to strengthen three core components of BER:

  1. the ease of doing business,
  2. business facilitation/support services including investment promotion and
  3. competitiveness – in terms of the development of highly conducive sector eco-systems.

The Government needs to manage the risk that 3 major components could overwhelm available capacity: initially, the Business Facilitation Services Centre should concentrate on just one or two main activities and gradually build its capacity.

A proposed Action Plan and budget is included in BERF Montserrat Business Environment Capacity Building