COVID-19 ERP PHASE II

On July 1, the Cook Islands Government’s Covid-19 Economic Response Plan (ERP) enters Phase II – a $76 million plan providing comprehensive financial support to carry the country towards a post-COVID-19 future. Included are a range of short-term stimulus measures and initiatives that will continue to deliver lifeline financial support to households and businesses, as well as tools and initiatives for mid-term economic recovery and the transformation of a more diverse and dynamic economy for the future.

It has been well over two months since the country has had a single visitor. In contrast, last year just under 16,000 visitors came to the Cook Islands during the month of June. The effect on the economy has been profound and is felt everywhere. Phase I of the ERP was a rapidly executed $61 million plan designed to meet the immediate needs of the community and the private sector after borders were shut. As a result, businesses were able to keep their workers on payroll and support was given to households to put food on the table. Beginning this month, borders will slowly begin to open.

On June 19, Government will begin to allow the entry of eligible Cook Islanders and work permit holders from New Zealand. Additionally, the creation of a potential safe zone of travel with New Zealand allowing members of the public to visit is being discussed by officials from both governments. While these are positive first steps, the road to economic recovery will be an arduous one.

Government has recognized the need to continue financial support, while providing economic stimulus for the mid and long-term. As a result, a range of measures are included in Phase II that fit into three themes; Lifeline, Recovery, and Transformation.

Intro ERPweb

Lifeline – Supporting Livelihoods

Government will continue vital financial support in the short term to households and businesses through an increased wage subsidy, extension of unemployment benefits, an increase in the tax free threshold, reduction in CINSF contributions, Te Aponga Uira discounts, and the hibernation of interest repayments for individual and commercial debt holders.  

 

  • WAGE SUBSIDY EXTENDED
    Extension of the Wage Subsidy for eligible businesses until September at an increased rate of $320 per week for full-time staff.

  • INTEREST HIBERNATION PROGRAM 
    ‘Hibernation’ of interest repayments for one year for individual and business debt holders, removing the interest burden with the deferred interest to be repaid under more favourable economic circumstances.

  • INCREASE IN TAX-FREE THRESHOLD 
    Increase of the tax-free threshold for individuals from the current $11,000 per year to $12,800 on July 1 and to$14,600 from 1 January 2021.

  • UNEMPLOYMENT BENEFIT EXTENDED
    Extension of the unemployment benefit measure with re-training initiatives

  • EMERGENCY HARDSHIP FUND 
    Establishment of an Emergency Hardship Fund to help families get back on their feet.

  • SUPERANNUATION CONTRIBUTIONS FURTHER REDUCED 
    Extension of the current reduction in superannuation contributions for both employees and employers for another 3 -months with a further reduction to one percent.

  • TE APONGA UIRA DISCOUNTS 
    Coordination with Te Aponga Uira for further electricity discounts to eligible households and businesses.

  • BUSINESS CONTINUITY CREDIT FACILITY 
    Access to low interest short-term loans to businesses.

Recovery – Kick-Starting Growth

Based on the pandemic’s current trajectory, most indicators point to a gradual reopening of the country’s borders. Government recognises the need to ensure the country is prepared for the day visitors return, but that even when that occurs, growth will not be immediate. With that in mind, Phase II includes a number of measures focusing on the need for economic assistance in the mid-term. An ongoing skills shortage is addressed with a training subsidy for eligible businesses, and fees are being waived for a number of programmes and certificates at the Cook Islands Tertiary Training Institute and University of the South Pacific. Businesses will also be given incentives to invest through new tax measures and reduced-interest long-term loans.

 

  • BUSINESS TRAINING SUBSIDY
    A training subsidy and grant funding for interested businesses.

  • ‘FEES FREE’
    An initiative to encourage our workforce to upskill, including a waiver of fees during Semester 2 at the Cook Islands Tertiary Training Institute and a select number of certificates offered by the University of the South Pacific between June and December 2020.

  • ACCELERATED DEPRECIATION
    For businesses, tax measures such as accelerated depreciation to encourage investment in new productive equipment, buildings, and other capital works.

  • BUSINESS GROWTH LOAN PROGRAM
    Reduced interest longer-term loans and government-guaranteed loans to reduce finance costs for investment.

 

Transformation – Moving To A Smarter, Greener Economy

The Cook Islands has been heavily reliant on tourism, which has contributed to a decade of strong economic growth. Yet Government recognises a strong economy is a dynamic one, and there’s no easy path to diversification. Government is introducing several initiatives in Phase II that provide incentives for the private sector to pursue opportunities and participate in the coming economic transformation. Initiatives include SMART Economy and SMART AgriTech, which provide cash grants, low interest loans, tax credits, and other tools to take part in large-scale transformations set for the ICT and agriculture sectors. In addition, the Green Economy Incentive offers enhanced accelerated tax depreciation to encourage investment in environmentally sustainable assets. Combined with recent and ongoing investments in infrastructure, such as the high-speed internet Manatua Cable, these measures – which run through to December 2021 - provide a foundation for businesses to help build the economy of the future.

 

  • SMART ECONOMY INITIATIVE
    The soon-to-be online Manatua Cable and reform of the telecommunications sector are catalysts for a commercial ICT transformation. This initiative will provide a mix of grants, lower interest loans and tax credits to support commercial business ventures providing innovative ICT applications and services to business and consumers.

  • SMART AGRITECH
    This initiative aims to foster innovation and productivity in the commercial agricultural sector by providing grant funding and equipment toencourage investment and improve commercial viability and economic sustainability.

  • GREEN ECONOMY INCENTIVE
    Enhanced accelerated tax depreciation to encourage investment in environmentally sustainable assets with a focus on greening our economy.

“The Government’s approach to this crisis is one of stimulus, the package outlined will provide support to households, businesses and the economy to ensure that we collectively remain afloat and are able to recover when the time comes,” said Finance Minister Mark Brown.

 

“The success of this second and critical phase of Government stimulus will rely on all of us working together, not just for our own benefit, but for the good of the Cook Islands.”