Cabinet Secretary

POST CABINET REPORT – September 26, 2018

POST CABINET REPORT – September 26, 2018

Decisions from Cabinet:

1: Cabinet received and approved the following Annual Reports/Financial Statements for tabling in Parliament:

a. Jamaica Deposit Insurance Corporation (JDIC) 31 March, 2017

b. National Water Commission (NWC) 2015/16

c. The Toll Authority 2016/17

d. Maritime Authority of Jamaica 2016/17

e. Trade Board Ltd 2014/15 & 2015/16

f. Office of Utilities Regulation 2017/18

2: National Announcements

I. South Coast Highway Improvement Project

In recalling decisions of December 2015 and August 2016, Cabinet took note of the division of the project to provide local components in Part B: Yallahs to Port Antonio and Morant Bay to Cedar Valley. Cabinet therefore approved the implementation schedule and governance framework for the south coast highway Improvement Project (SCHIP) Part B local components in the

estimated amount of eighty-five million, four hundred and forty-nine thousand, and four hundred and nineteen US dollars (US$ 85, 449,419.00) to be contracted out by China Harbour Engineering Company Ltd (CHEC) through local sub-contractors.

II. Joint Venture Agreement on Morant Bay Urban Centre in St Thomas

In keeping with the decision of July 2014, which designated the development of a shovel-ready project, and advised that the properties earmarked for the project comprised lands that previously housed the Goodyear Jamaica Limited Factory, Cabinet accepted the outline of the joint venture agreement between the Factories Corporation of Jamaica (FCJ), and China Harbour Engineering Company Ltd (CHEC) to construct a new urban centre. This new centre will be constructed on 28 acres and 365 square feet of land during a two-year construction period.

Cabinet has also instructed that this joint venture agreement include a clause which allows the Government to divest its equity through a public offering on the Jamaica Stock Exchange: and directed that the Ministry of Culture, Gender, Entertainment and Sport have consultations with the Factories Corporation of Jamaica (FCJ) to incorporate considerations for heritage, culture and sport including the replacement of the Good Year Sports Oval.

III. Joint Venture Agreement for the Development of Naggo Head Technology Park in Portmore

Cabinet also approved a joint venture agreement between the FCJ and CHEC for development of 34 acres and 810 square feet over a construction period of two years. The Cabinet also instructed that the joint venture agreement should include a provision for the Government to divest its equity through a public offering on the Jamaica Stock Exchange.

Amendment to the Agreement between the Government of Jamaica and the Russian Federation for the waiver of visa requirements

Having reviewed the initial agreements of 2013 and 2014 which set out varying visiting periods of 30 to 90 days, Cabinet has given approval for an amendment to this initial agreement to facilitate the waiver of visa requirements for mutual visits of citizens of Jamaica and the Russian Federation to facilitate tourism and business purposes for periods not exceeding 90 days per annum. Drafting instructions have been issued to effect the necessary changes.


1. Variation in medical gases contract between Western Regional Health Authority and Industrial Gases Ltd

Cabinet approved the variation of a contract originally awarded by the Western Regional Health Authority to IGL Industrial Gases Ltd. (IGL) for the supply of medical gases. This is in keeping with recommendations of the National Contracts Commission for the variation in the amount of forty seven

million, five hundred and fifty-nine thousand, nine hundred and twenty-nine dollars and thirty-six cents ($47,559.929.36)

2. Cabinet also agreed for the award of a contract

Cabinet approved the award of a contract to Gulfstream Petroleum SRL for the supply and delivery of automotive diesel oil and unleaded gasoline to the Errol Flynn Boatyard in Port Antonio, Portland. The contract, in the sum of one hundred and thirty-six million, seven hundred and eighty-six thousand, four hundred and fifty-eight dollars and seventy-seven cents ($136,786,458.77) is for the supply and delivery of nine hundred and eighty-six thousand, four hundred and eighty three litres (986,483 litres) of automotive diesel oil and fifty-four thousand, five hundred and fifty-two litres (54,552 litres) of super unleaded 90-octane gasoline for a two-year period.

3. Rehabilitation and Expansion of Gayle Multi-Purpose Centre

Cabinet gave approval for the award of a contract to Marshal Construction Company Ltd in the sum of eighty-five million, one hundred and seventy-eight thousand, four hundred and fifty-nine dollars and twenty-four cents ($85,178,459.24) to execute the rehabilitation and expansion of the Gayle Multi-purpose Phase 1 works in St Mary.


Minister of State in the Ministry of Finance and the Public Service,

The Honourable Fayval Williams

1. Rating Action

Standard & Poor’s (S&P), one of the three global rating agencies has affirmed Jamaica’s rating at single ‘B’ and raised its outlook to Positive from Stable.

S&P said that after many years of economic, fiscal, and monetary reforms, Jamaica has made material progress in achieving macroeconomic stability and improvement in its external debt burden.

Accordingly, S&P said, “We are revising our outlook on Jamaica to Positive from Stable, and affirming our ‘B’ long- and short-term sovereign credit ratings on the country.

The positive outlook reflects the at least one-in-three likelihood of an upgrade if, in the next 12 months, Jamaica further strengthens its external liquidity position, while maintaining tight fiscal policy, high primary surpluses, and modestly positive real GDP growth.”

2. Supplementary Estimate and Fiscal Policy Paper (FPP)

The first supplementary estimate for FY2018/19 was laid in parliament on Tuesday, September 25th 2018 along with the interim Fiscal Policy Paper. Both documents were referred to the PAAC and the Standing Financing Committee for review.

In this First Supplementary budget, against the backdrop of:

* The over performance on tax revenues to end of July 2018

* The positive revision of the tax revenue forecast to end of March 2019

* The very robust performance of capital expenditure and savings on the recurrent side of the original budget (lower interest cost and

programmes), the proposed additional expenditures will be on both the recurrent and capital budgets.

* On the recurrent expenditure, the additional spending will be $12.4 billion while the capital budget is proposed to be increased by $5.3 billion.

* These expenditures are to be covered by better than budgeted tax revenues and additional distributions from public bodies.

* The primary surplus is now programmed to be at $142.98 billion, which satisfies the 7% of GDP requirement.

Additionally, project execution under the Major Infrastructure Development Programme (MIDP) has been progressing ahead of schedule. Accordingly, further capital expenditure has been provided to continue the pace of implementation of the three major works that are simultaneously underway in the Kingston Metropolitan area.

3. IMF 4th Review

The economic reform programme remains on track with the successful completion of the 4th review on Sept 21, 2018.

At the end of the review visit, Ms. Uma Ramakrishnan, the IMF mission chief, concluded that:

Programme implementation remains robust.

All quantitative performance criteria for end-June 2018 were met and structural reforms are on track.

The primary surplus of central government operations exceeded the program target by 0.7 per cent of GDP, driven mainly by continued buoyant taxes.

Capital expenditure, which has typically lagged, exceeded budget by 13 per cent; and non-borrowed reserves over-performed by about US$400 million.

The IMF said in its report that “It is important for the Bank of Jamaica to continue improving monetary policy signaling and limiting FX interventions to episodes of disorderly FX market conditions. Meanwhile, the Mission

Chief highlighted that government is moving to table legislation that amends the BOJ Act to anchor monetary policy on price stability. Ongoing improvements in the monetary policy toolkit and clear communication are essential for the success of this flagship reform.

Strong economic fundamentals and sustained policy implementation of the authorities’ reform program provide the private sector with an unprecedented opportunity to expand domestic investment, generate economic opportunities, and become the growth engine for Jamaica.”

The IMF concluded that, “Jamaica will benefit from fostering financial inclusion policies, while taking into consideration financial stability risks. Addressing domestic constraints to financial intermediation will support market deepening and further catalyze domestic investment.”

Debt/GDP is expected to reach 98.9% of GDP at the end of FY2018/19.

4. Bauxite Levy

For this segment, I will address some questions raised about the agreement signed between GOJ (Jamaica Bauxite Mining Ltd) and New Day Aluminium (Jamaica) Ltd, the company that purchased certain of the assets of the former mining company Noranda and was granted permission for mining activities.

By way of background, successive governments have maintained two regimes for taxation in the bauxite industry:

* The levy regime in which companies are charged a fee on every tonne of bauxite produced and the income tax regime in which companies pay taxes based on profits.

* This has always been the case across governments that there are two regimes.

On taking over as Government, we found a bauxite industry that was in crisis:

There had been no bauxite mining at Kirkvine since 2009

Alpart Refinery had been closed for approximately 7 years.

* The Government’s ownership in the Jamalco/CAP partnership was a major fiscal risk. CAP has had to seek financial assistance from the government. CAP currently owes a debt of approximately US$140 million to creditors.

* Noranda was in bankruptcy courts in the US with a most uncertain future having filed for bankruptcy protection on Feb 8, 2016.

* A US$12.5 million line of credit that Noranda had issued to the GOJ that could have been drawn on to pay outstanding bauxite levies to the GOJ was left undrawn and allowed to expire under the prior government.

What were the headlines then?

Bauxite job cuts: Noranda to slash 190 positions – Jamaica Gleaner…/bauxite-job-cuts-noranda-slash-190-positions

Jan 14, 2016 – Noranda Aluminum Holding Corporation has announced it will be moving ahead with job cuts …the release did not specific how many of these jobs would be cut..

Bauxite job cuts – Massive redundancy to hit … – Jamaica Gleaner…/bauxite-job-cuts-massive-redundancy-hit-noranda-workers-ja…

Dec 21, 2015 – MORE THAN 30 per cent of employees at the NorandaBauxite Company in St Ann could be out of a job come early next year.

That was the state of the companies in the bauxite/alumina industry. This is what we found when we came to Government. We had to set about to rescue the industry at a time when alumina prices were at their lowest in about five (5) years. So let’s not conveniently forget history.

Fast forward to 2018:

As a result of the efforts of the current government, over 300 jobs were saved and all monies owed to workers are being paid. The partnership agreement with New Day prevented any disruption of Noranda Bauxite operations.

We believe that this new arrangement will earn the country more in US dollars compared to the traditional levy system. Under the agreement, the GOJ will earn 17.33% of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), or US$1.50 per tonne of dried bauxite shipped; whichever is greater.

Consolidated EBITDA covers profits on the Jamaican operations as well as profits on the downstream alumina operations in Gramercy in Louisiana, USA.

The Royalty payments of US$0.50 (50 cents) per dry metric tonne of ore shipped will also remain in effect.

At signing, New Day paid to the GOJ US$5.033 million for profit share. There was also US$2 million that was paid towards the outstanding legacy levies, with US$10.6 million remaining to be paid over a thirty–six (36) month period commencing April 2019.

The taxation regime in place has a three-year review clause. No other agreement signed in the bauxite industry has this clause.


Senator Ruel Reid

[email protected]


Colin Steer – [email protected]