RMI Economic Review

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RMI Economic ReviewMajuro, October 2013

Graduate School USA, Pacific & Virgin Islands Training Initiatives

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slideGraduate School USAPacific Islands Training Initiativewww.econmap.org

RMI Presentation

Economic Performance

State-Owned Enterprise Performance

Economic Policy Issues

Compact Trust Fund

1


REAL GDP and Per Capita GDP

2

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$120

$125

$130

$135

$140

$145

$150

$155

$160

$2,400

$2,500

$2,600

$2,700

$2,800

$2,900

$3,000

$3,100

$3,200

$131

$151

$2,626

$2,821

GDP at constant prices GDP per Capita

GD

P U

S$

Mill

ion

s

GD

P (

Pe

r C

ap

ita

)

1.5% GDP Growth from FY03 to FY12

0.8% GDP Per Capita Growth


Average Wage Rates

3

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

Private Sector Public Sector

1.8% Average Private Wage Growth During Amended Compact Period

1.3% Average Public Wage Growth During Amended Compact Period


Outmigration

4

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

Migration

Num

ber

of

Mig

rants

-7,148 over the Amended Compact Period

-1.5% ANNUALLY


Employment by Sector

5

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Private Sector RMI Government

1.1% Average Private Job Growth During Amended Compact Period

1.8% Average Government Growth During Amended Compact Period


Govt Revenues vs Expenditures

6

FY04FY05

FY06FY07

FY08FY09

FY10FY11

FY12$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

Total Revenues Exp adjusted for CTF Total Expenditures

US$ M

illions


Current Revenues vs Expense

7

FY04FY05

FY06FY07

FY08FY09

FY10FY11

FY12$60

$65

$70

$75

$80

$85

$90

$95

Current revenues Current expense

$1.5 m


Govt Employment & Payroll

8

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

0

500

1,000

1,500

2,000

2,500

3,000

3,500

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

Payroll cost Public servants

No. of

Em

plo

yees

on P

ayro

ll

Tota

l G

overn

ment

Payro

ll $

'000


External Debt

9

FY04FY05

FY06FY07

FY08FY09

FY10FY11

FY12

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Outstanding Servicing


FY12 SOE Cap Transfers & Subsidies

10

-$3,000

-$2,500

-$2,000

-$1,500

-$1,000

-$500

$0

$500

$1,000

US$ ‘

000

AMI KAJUR MWSC MEC MIPA MISC NTA MIR TOBOLAR

$11 million in Subsidies in FY12


RMI Presentation




Compact Trust Fund

11


SOE Operating Rev vs Exp

12

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

Total Net Operating Revenue Total Net Operating Expenses


SOE Operating Rev, Exp, Income

13

-$20,000,000

-$10,000,000

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

Total Net Operating Revenue Total Net Operating Expenses Operating Income (loss)


SOE Operating Rev, Exp, Income

14

FY03FY04

FY05FY06

FY07FY08

FY09FY10

FY11FY12

$0

$20

$40

$60

$80

$100

$120

$140

$160

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%$148

Total Assets ($m) Return on Assets (median)

US

$ M

illio

ns


SOE FY12 Current Ratio

15

TobolarKAJUR

MIPAMAWC

MWSCMEC

MIPSAMISC

MRIAMI

NTA0

2

4

6

8

10

12

14

11.66

1.84

1.02 0.75 0.72 0.68 0.54 0.440.14 0.09 0.09

Current Ratio

US

$ M

illio

ns


SOE Subsidies FY03-FY12

16

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$8,794,402.00

$15,206,687.00

Transfers (operating subsidies) Total transfers (operating and capital)

US$ M

illio

ns


MEC Electricity Operating Rev & Exp

17

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$20,760,524.00

$21,207,615.00

Generation/distribution net operating revenues

US$

Mill

ions

FY13 assuming provision for doubtful

accts of $1.5 m


MEC Tank Farm Rev & Exp

18

$0.0

$500,000.0

$1,000,000.0

$1,500,000.0

$2,000,000.0

$2,500,000.0

$3,000,000.0

$2,295,763.00

$1,082,098.00

Total net operating revenue Total operating expenses

US$ M

illio

ns


MEC Outstanding Debt

19

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$8,494,897 $9,227,663

RUS Loan (balance before current installments) ExxonMobil Debt (balance before current installments)BOG Loan (balance before current installments) ADB Loan (balance before current installments)BoMI Short-term loan (balance before current installments)

BoG balance New ADB loan

ExxonMobil debt


MEC Debt Servicing

20

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012$0.0

$500,000.0

$1,000,000.0

$1,500,000.0

$2,000,000.0

$2,500,000.0

$3,000,000.0

$3,500,000.0

$511,970.00

$2,934,062.00

$1,743,841.00

$1,953,031.00$2,022,622.00

$963,722.00

$1,191,779.00

$655,968.00

Balance due within one year (as of FY year-end)

US

$ M

illio

ns

Impact of ADB loan

Impact of RUS deferment


MEC Accounts Receivable

21

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

Accounts Receivable, total Net accounts receivable

US$ M

illio

ns


RMI Presentation




Compact Trust Fund

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CAP (minimally implemented)TRAM (under consideration)SOE Framework Legislation (with Nitijela)ADB Public Sector Program (closed-out)External Debt Management (with Nitijela)World Bank ICT Reform (underway)Fiscal Responsibility Act (with Nitijela)Public Service Commission Reform & Personnel AuditDecrement Management & Long-Term Planning

(requires urgent & sustained effort)

Other RMI Policy Initiatives

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RMI Policy Issues

FISCAL MANAGEMENT ISSUES/OPPORTUNITIESInfusion of additional resources supports previously unplanned expenditures in FY13:

$3 million from World Bank (ICT reforms);$5 million from ADB as 2nd tranche of PSPLarge surplus from Vessel Day Scheme (VDS), US treaty and $5,000 VDS rate; (MIMRA revenues in FY12 over $10 million)

Similar infusions likely in FY14:$5 million possible from World Bank (ICT reforms);~$2 million from continued large surplus from VDS with anticipated increase to $6,000 daily rate.$1 million from Papua New Guinea

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RMI Policy Issues DECREMENT MANAGEMENT & LONG-TERM PLANNING

RMI implementation of the MTBIF could have addressed 1st step of the requirement for a decrement management plan

Line agency ownership and leadership adoption were absentBudgets did not reflect commitmentsTable submitted to USG in late July based on the Fiscal Management

Model provided only a medium-term revenue forecastMost recent update came late and fell short of extensive requirements

RMI needs to develop, for its own benefit, a technically proficient long-term fiscal and planning framework with demonstrated broad ownership.

Unallocated Compact resources (~$1.8 million) should not be committed at least until RMI has confidence in its own plan.

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RMI Presentation




Compact Trust Fund

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RMI Compact Trust Fund

OBSERVATIONSManagement of the CTF further streamlined and improved; investment costs now better match investment strategy but need to be monitored closelyAnnual report for FY2012 continues improvements, building on the FY2011 reportLooming need to focus on “distribution policy” per TF Agreement Article 15(1)New issue 25 percent of annual grants continue after FY2023 per Military Use and Operating Rights Agreement

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$557m

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Questions or Comments?JEMCO-JEMFAC, August 2012

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Graduate School USA, Pacific & Virgin Islands Training Initiatives

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RMI Economic Review