Friday, September 19, 2014

What is Jamaica's growth potential?

Planning Institute of Jamaica Director General Colin Bullock. The PIOJ is targeting three per cent growth for next fiscal year.

THE Planning Institute of Jamaica (PIOJ) is targeting real GDP growth of three per cent in the fiscal year 2015/16. This is against the previously targeted 1.5 to two per cent, under the current IMF agreement. I have long indicated that Jamaica has the capacity to grow at rates of between three to five per cent, in the short to medium term, and also that if we are really to see meaningful growth that will impact the man on the street, then growth must be upwards of three per cent.

I am sure that many will wonder if the PIOJ is being objective in targeting three per cent growth, when for the past 42 years Jamaica has averaged less than one per cent per annum. In fact, the only time that we saw growth over three per cent consecutively was in the 1980s. We have, however, seen one or two years of three per cent growth since then, but the problem we have had is it has not been consistent.

Another question to ask, therefore is: Even if we can achieve growth of three per cent in 2015/16, how sustainable is it, because one year of three per cent growth is not good enough for us to show any significant improvement in the standard of living for the average citizen.

It is also very true that even if we were to achieve a sustained period of growth of three per cent, many persons could still be disillusioned, as they could end up not being impacted positively. This is because macroeconomic growth does not guarantee growth for an individual or organisation, if that individual or organisation is not equipped to take advantage of the growth. Therefore, even in times when there is no growth many persons and businesses will still do well, because they have prepared individually.

In order for us to achieve growth of three per cent and above consistently, we must first understand if we have the capacity to do so, and secondly, what would prevent us from achieving that growth. It should be noted that the PIOJ targeted 2015/16, and did not address the years beyond, based on their expectation of certain projects coming on stream. Therefore, it is very possible that, based on the projects, there could be three per cent growth in 2015/16, but then we return to one per cent in 2016/17. I believe, however, that as a country we have the capacity to grow at three per cent, even beyond the 2015/16 year.

I say this because I don't think that Jamaica has fully exploited our comparative advantages, and there are just a few tweaks that need to be done for us to do so. Many of these changes are being made under the legislative and economic programme by the Government, at which Phillips and Golding are leading the charge. However, there are still some other adjustments to be made, if we are to sustainably achieve three per cent and above GDP growth. In other words, while the economic and legislative programme provides a platform for growth, there are some other things that must be done.

These include addressing the law and order problem, and I don't mean serious crimes like murder alone, but general indiscipline in the society. I am heartened by the position taken by the new police commissioner, and supported by the statement by Minister Bunting, who, I think, has been making the right strategic moves, and in fact, his policy initiatives and work of the former commissioner did have a positive impact on crime in general, and homicides in particular. So this has given the present commissioner an easier wicket to play on. One thing I find, though, that has changed for the worse, is that since Radcliffe Lewis retired from the Traffic department, I have noticed that the indiscipline by the taxis and buses (including JUTC) has got worse. I don't see the same presence by the police on the roads as when he was there. I also continue to notice the blatant disregard that people have for the night noise laws.

If we cannot maintain discipline in a society, then we are going to continue to negatively affect our growth prospects. No one wants to invest, and live, long-term in a society where there is so much indiscipline. A lot of this is personal responsibility by our citizens, who seem to thrive on indiscipline, but still the authorities must enforce the rules. I wouldn't even bother to mention the way we discard our garbage, which is most disgraceful.

This indiscipline extends to the parish councils, who over the years have been some of the biggest let-downs. I think that recently there has been some effort from some parish councils, but we must maintain the discipline of zoning laws and ensure property tax collection. How difficult can these be to enforce?

I have discussed bureaucracy on numerous occasions, and this continues to be the number one challenge that most business persons (large, medium, and small) face. All I will say on this is that I support the call by Minister Phillips for the Public Sector Transformation project to be fast-tracked. When the unit was being set up, I think in 2008/9, I indicated at the time that nothing would come of it, as the way it was set up and the implementation model made it impotent. We must ensure that bureaucracy is addressed, however, as failure to do so will stunt the growth of businesses, particularly at the much needed MSME level.

Energy is another obvious area, which I have discussed a lot also, and nothing more needs to be said as this is an obvious stumbling block to the much-needed value-added exports, which of course means more foreign exchange earnings.

There are two areas which are going to be critical if we are to see sustainable growth of above three per cent. The first is the education system. I believe that Minister Thwaites has been taking the right approach to the challenges the system faces, and I also believe that the stakeholders are coming around to seeing the best way forward. What I will say is that economic growth depends on growing income levels of consumers, and the only way for us to have a growing middle class is for the workforce to become more knowledgeable/educated and hence more productive. This cannot happen in an education system with over 50 per cent of our secondary school leavers graduating without one pass at CXC level.

Finally, there needs to be greater linkages between areas such as agriculture, manufacturing, and tourism. Minister Wykeham McNeill has a Tourism Linkages council, which has successfully been making a lot of this happen, and I am optimistic that the direction it is heading in will bear fruit. So he has been quietly making some positive impact there. This is an important aspect of our growth journey.

My answer to the question, therefore, would be that Jamaica does have the potential to grow sustainably above three per cent, as we have the areas of comparative advantage that will attract investments. However, real sustainable growth will only come when we see the environment changing to become a place where people want to do business, live, and raise families, not just for the large investor, but more importantly, for the small and medium size business.

Friday, September 05, 2014

What is the role of personal responsibility in development?

The persons responsible for Mario Deane’s death must be held accountable.

THE recent Global Competitiveness Re-port has shown that Jamaica is seeing some international competi-tiveness return from the current set of policies being instituted. It has been a while since our competitiveness has improved, and this is indeed welcome news. We still need to bear in mind, though, that the report shows that both GDP and GDP per capita, in US dollars, has declined from the previous year, but that is to be expected if we are making adjustments in an economy with low productivity. After all, exchange rates are primarily a reflection of a country's relative productivity.

Even though we have seen some improvement in the competitiveness index, the economy still remains very fragile, and there is still a lot of work to do, so we must not become complacent. I know it is very difficult for the average man on the street, and the temptation will be there for persons to take advantage of the hardship and call for greater welfare, which will just put us back where we were. We have had over 50 years of welfare government, since independence, and it has not worked. So if we continue to do the same thing we cannot expect different results.

We also have seen improvement in the homicide rate, reducing by 40 per cent year on year; education seems to be making some improvement; agricultural production is up; the unemployment rate has decreased; and there seems to be a greater awareness in the public sector of the need to improve customer service. Also although I am hurt by incidents such as Mario Deane, as any well-thinking Jamaican should be, and the responsible persons must be held accountable, I am encouraged by the response from INDECOM, the security minister, police high command, and civil society. I also welcome the US pathologist and his remarks, as it brings a very objective view.

There is, however, one consideration that we must all be mindful of as persons who want to see Jamaica move forward, and that is understanding what is our personal responsibility to development. It was John F Kennedy who said to the American people in the 1960s, "Ask not what your country can do for you but what you can do for your country." Although I don't believe that we are still at the same levels of nationalism as in the 1960s, because the world is now like a global village, the message is one of personal responsibility.

In my interaction with persons over the years, on social media and other methods of communication, I have found that many of us don't understand the role of personal responsibility. For example, I have always said, and it is still true today, that many of the political party supporters are much more tribalistic in their views and utterances than the politicians. In fact I find most politicians fairly objective in their reasoning, but not so with many supporters.

I also sadly find that many Jamaicans are very pessimistic about Jamaica to the point where even when something good happens they are cynical about it. So if the homicide rate is reported as going down, then it is because World Cup was going on, or there is underreporting. Similarly when the unemployment numbers are reported as going down. I just can't imagine living with that sort of pessimism, as one must lead a very miserable life doing so.

The fact is that while we should hold our leaders, and those in authority, responsible and accountable for things that go wrong (such as Mario Deane), we must also commend them when they do good, or else they won't be encouraged to do so next time. This is why I have taken the stance to commend the efforts of TAJ, Phillips, Thwaites, Ellington, INDECOM, civil society groups, etc. Because we must encourage what we want to see happen rather than be cynical when there is no evidence to the contrary.

In mature democracies also, the reason why they develop is that citizens understand their responsibility to speak against things that are done incorrectly or unfairly. So look at the outcry about the Mario Deane case, and the results we are seeing. It is not enough to just criticise privately, as the voices of the people in democracies are extremely important for progress.

One other disturbing thing I have always noted is the need of the environmentalists to clean up after Jamaicans. I mean, why do we need an annual beach clean-up day, and each year there seems to be more garbage than the year before? I have seen situations where people are driving and just wind down their windows and throw the garbage on the street. Even as we speak about things like beach erosion and tourist harassment, we must understand that these things are not caused by government policy, but rather individual actions.

When I look at countries like the US, I recognise that these countries were built by citizens understanding their individual responsibilities to act in a way that promotes development. So I read an article in the news only this week that parents were protesting the price of lunch at the school, instead of them maybe preparing a less expensive, more nutritious lunch for their child to carry to school. Or the article that speaks to teachers and book stores working together to unnecessarily place books on the booklist.

We also have the situation where schools are strapped for cash, and unable to provide adequate education, and when they ask for a mere $20,000 per annum ($400 per week) for a child to attend school, they are told by parents with $20,000 hairstyle and hair, or while they are protesting they are on the phone the whole time, using phone credit, that they can't afford it.

One of the reasons why I have to be objective, and applaud effort and good works, is because I want to live in Jamaica and nowhere else. And if that is something we all want to do, then we have to ensure that we are objective in our analysis, to ensure the best action for the country at all times. The generations before us have failed to take this country to prosperity, and it is time for those who are currently in leadership positions to make sure that we don't mess it up further and leave our children in a further mess. If we are to do so then we must be cognisant of the role our individual actions play in economic and social development, and act and talk accordingly.

Friday, August 22, 2014

Jamaica’s growing crisis

Jamaica Cancer Society (JCS) radiographer Donnett Hyman (left) demonstrates the functions of the organisation's newly acquired mammography machine to JCS Executive Director Yulit Gordon (second left), Health Minister Dr Fenton Ferguson (second right) and JCS Chairman Earl Jarrett. Gordon estimates that being stricken by cancer can cost someone over $4.5 million

WHILE we debate the economic challenges facing Jamaica, there is an emerging crisis that many are not speaking of, but which we must address as a country. This is the health of our population, and as a result the cost it currently has and its continued impact as it worsens. If, of course, we do nothing about it.

Anyone who knows me understands how important health management is to me. In fact, my passion for lifestyle management led me to write a book (Achieving Life's Equilibrium) and one aspect of that is health management, which I also have done a few presentations on.

The data on Jamaica shows that non-communicable diseases (NCDs) account for 56 per cent of all deaths, 20 per cent of which are caused by cancer, and cost approximately US$170 million ($19.2 billion) annually. Much of this cost is avoidable just by changing some aspects of our lifestyle, such as healthier food choices and exercise. What this means is that our failure to make the right lifestyle choices is causing us to spend up to $19 billion per annum on health costs, much of which could be going towards welfare, education, or some other growth inducement spending.

The Lancet Medical Journal recently reported that high body-mass index increases the risk of developing the 10 most common cancers, according to a study conducted on over five million people. Researchers estimate that over 12,000 cases of these 10 cancers each year is attributable to being overweight, or obesity, and estimates that if average BMI continues to increase there could be an extra 3,500 cancer cases annually.

Yulit Gordon, the Executive Director of the Jamaica Cancer Society (JCS), estimates that being stricken by cancer can cost someone over $4.5 million (assuming four chemotherapy treatments) in addition to the costs to visit the doctor and hospital stay and tests. So an individual could easily spend over $6 million in the initial fight against cancer. And I say initial because many times it recurs. The JCS is doing a very good job in the fight against cancer but is in need of greater support to be able to be even more effective.

There are, of course, other significant costs for an individual to deal with NCDs, such as high blood pressure and diabetes. These NCDs are the main reasons for many of us starting to show our age, and all because we make incorrect lifestyle choices; if the proper decisions are made many of these NCDs and associated costs are totally avoidable.

In addition to the cost on the health care system, and ultimately the fiscal accounts and taxes, the fact is that many of the drugs and products used in the treatment of NCDs are imported. So if we assume that 70 per cent of the US$170 million annually is imported, then it means that NCDs are adding US$119 million ($13.4 billion) to our trade deficit annually, which is just under 10 per cent of the current account deficit.

This cost to our fiscal and balance of payments accounts does not include the cost to GDP from productive hours lost due to sick leave or death. If we assume that 40 per cent of our workforce takes their entitled seven days' sick leave per year, then on average this could negatively impact GDP by over $10 billion annually.

Even at the lower estimates, the computations show that the cost of NCDs to Jamaica is an ever growing threat, is totally avoidable, and is a cost that I don't think we emphasise enough. Certainly if you are trying to improve the cost structure (profitability) of a company, one of the first things that you do is to look at the "low-hanging fruit". In other words it is easiest to minimise avoidable costs as a means of improving the financial situation. So while we focus on new taxes, earnings, or wages and salaries, the fact is that if we look carefully at the fiscal accounts there are significant costs that can be avoided by just doing things differently. This is something I remember Ronnie Thwaites stressing when he was on Power 106 for a very long time.

But are we ready to take responsibility and make the necessary lifestyle changes? The truth is that even many of us who promote the idea of lifestyle changes are guilty of poor choices ourselves, and the most effective way to influence people is to ensure that you are a good example. I am always amazed at the way adults, for example, tell children about certain ways they should behave but at the same time do the same things they tell them not to do. So they tell them, "Do not drink and drive, do not text while driving, make sure you eat properly," etc. However, I see many adults setting a bad example for children to follow even in front of the same children that they instruct.

I also notice that many children today are living a lifestyle that will ensure they have health issues earlier, rather than later. Certainly in my teenage days when there was one television station that signed on at 5:00 pm, and there were no video games, we had no option but to go outside and engage in some physical activity like football, cricket, and so on. I also have noticed that when one speaks about the quality of a school we refer to academics and not emphasise the importance of physical education, the result being that many of the children leave school today academically brilliant but without the physical foundation that will ensure that they are healthy enough to enjoy the money they earn from the academic achievements. So many of our children are just ticking time bombs for NCDs.

There is no doubt that if we continue to ignore the necessary lifestyle choices that will improve our health, then we can safely say that Jamaica will face a health crisis in NCDs, similar to developed countries like the US, and this will impact even more on our fiscal accounts and balance of payments.

So while we try to solve our economic circumstances, we should recognise the role that behavioural choices play in our economic challenges, and the significant cost it has, both nationally and individually. In fact, I have heard many people say they cannot afford to eat properly, as proper nutrition costs more. While this may be true in relation to the direct cost of nutrition, they haven't considered the current and future medical expenses from poor nutrition choices, which ends up being significantly more and the negative impact on quality of life.

Apart from the cost, though, we should be encouraging our children to make healthier choices for their own benefit, and my own view is that this has more to do with lack of exercise and consumption of many of the imported processed foods, as our own local brands and produce are a lot healthier. Yet another reason to support Jamaican products.

Friday, August 15, 2014

Social justice and economic development

EVERYONE should know by now that I believe the economic programme is being managed properly, as the fiscal and legislative adjustments being made are definitely the right option for creating a positive environment for economic development. And certainly, more importantly, is that the leadership of the programme, headed by Peter Phillips, has shown the willingness to see it through to a successful end.

Even with this, though, the economy is still in a very fragile state, with unemployment still too high, and despite improvements in the fiscal and other macroeconomic indicators, we still have a very far way to go. Importantly, any letup on the implementation of the programme, or even a natural disaster, could cause us to be back in dire economic circumstances. So it is important for us to stick to it.

On the other hand, we also need to realise that sustainable economic and social development cannot be achieved merely by implementing this programme, or getting in significant foreign investments, as has happened in the past. The only way for us to truly see sustained development is for any such development to be inclusive of the masses of people. In other words, any path that we are on must of necessity provide opportunities for the ordinary Jamaican to excel, and very importantly Government's primary role must be to ensure that the vulnerable are not only protected, through social programmes, but also have equal access to the opportunities for elevation available.

So everyone should have access to the best education, justice, and social welfare protection where needed.

It is with this in mind that it really hurt me when I heard about the Mario Deane situation. Not because it hasn't happened before, and similarly I was outraged, but because he died on the day we were celebrating our 52nd anniversary of independence as a nation. And my perspective is that independence not only means the right to govern your own affairs, but of necessity independence comes with the responsibility to ensure that we treat others right, as well as manage our own affairs properly.

So a child who attains adulthood is not just independent because he/she earns money. Those allowed independence must practise good citizenship and must manage their affairs properly. Any mismanagement of that independence results in it being taken away. So if you are reckless with your finances and have to rely on others to support you, then you are once again dependent, and similarly, if you break the law your independence can be taken away from you.

Similarly, a country that cannot manage the responsibility of Independence will also become dependent. This is our case with the dependence on the international lending agencies, and other countries that we rely on for aid. Even though we attained Independence in 1962, the way we have managed our affairs has resulted in us losing much of that independence. So, to be independent implies being responsible.

One of the responsibilities of Independence is being fair to all; even those you think may offend you. Because it is when we can truly forgive the indiscretions of others that we have really matured as independent people, and a country. Remaining independent also means accepting responsibility.

The Mario Deane case showed both sides of this argument, as first it showed that the response from the police involved demonstrated that they never accepted responsibility of the power to detain persons against their will. I would have expected a statement to the effect: "We regret to inform the people of Jamaica that Mr. Mario Deane was severely beaten by other detained persons. We accept the responsibility for persons in our care, and will be vigorously investigating this matter to see who is directly responsible and will make our findings known in the shortest possible time." Instead the response was to first deny culpability and then charge two persons, with no apology. It took the ministers of Justice and National Security, the acting commissioner, some politicians, INDECOM, and civil society to express outrage and apologise. Still no one from Barnett Street, from what I know, has issued any statement of apology. If so then I stand corrected.

What as a country we have also failed to understand is that in order to have sustained economic development, it is necessary to also have social justice. Whenever there is no social justice, it results in lost opportunities and wasted talent. It also results in wasted productive hours, as instead of cleaning up the mess caused by some functionaries of the state, we could be planning how to increase agricultural and other production. If we were to do an analysis on the amount of time and resources wasted trying to correct social ills I am sure that it could significantly add to GDP.

This means of course ensuring that law and order exists in the country. And this does not only apply to the citizens who should be abiding by the laws of the land, but it also applies to those with the responsibility for creating and enforcing laws.

As Peter Tosh said, everyone is crying out for peace but there can be no peace without justice. I want to go a step further and say that there can be no sustained economic development without social justice and stability. Just look at the Middle East.

As a country we have made strides. I find that the policymakers are more willing today to engage stakeholders. We see that with the response to criticisms of the recent legislative changes, which has been to engage stakeholders. I personally also see improved customer service within the public sector, and improved service delivery. This even extends to the security forces, as the police are a lot more courteous than days gone by.

However, in order to make that next step to sustainable development, and achieving Vision 2030, social justice must be at the top of the agenda.

Friday, August 08, 2014

Role of values and attitudes in development

DAVIES… when he tries to introduce discipline to the transport system, the response is protest and demonstration

Earlier this week I ran into Bunny Goodison, and we got to talking about the demise of values and attitudes in Jamaica. We spoke about the fact that even though we may see growth in the economy, there is still a critical mass of the population that doesn't know what it means to be productive, and sadly, may not easily find a place in a more competitive economy.

So even as we see the employment numbers declining, and GDP growth chugging along, the fact is that there is still a great concern about many of the youths who grew up in a time when the values of working were never a priority. In fact, Bunny said we may have about two generations that fall into that category.

As I thought about this some more over the ensuing days, I reflected on the importance that was placed on this by former PM PJ Patterson, in his Values and Attitudes campaign. He realised how much of a problem the lack of proper attitudes and values was going to be for the proper development of Jamaica.

The reality is that no country can develop in any sustainable way without a foundation of proper values and attitudes. One may argue that this is the reason we have laws, that is, to bring people in line when they deviate. However, this is only effective when the general behaviour of society is aligned with ethical values and attitudes, and the unethical behaviour is in the minority.

Jamaica has, however, developed in such a way that it seems as if the unethical behaviour is challenging ethical behaviour as the acceptable way of life. When this happens, the laws are not as meaningful, because the people who have grown up accepting unethical behaviour are the ones who enforce the laws.

So many of us grew up accepting indiscipline on our roads -- drinking while driving, boorish behaviour by taxis and buses -- children in bars and at betting shops, underage drinking and smoking, evasion of taxes, domestic violence, and the list goes on.

The danger of constant exposure to that sort of behaviour is that we accept it as the norm, therefore when the child that grew up in this culture becomes a police officer, he/she turns a blind eye to indiscipline.

The reasons for this acceptable norm of behaviour are complex, and sociologists may need to explain it, but one reason for it is the attitude we had in the 1970s and 1980s, where even the slogan of our tourism campaign was 'Jamaica, no problem'. So Jamaica was a laid-back place for both locals and tourists. We could consume alcohol and drive, play music at anytime of the night, tourist harassment was seen as hustling, and if the authorities came down on someone for breaking the law, the attitude was "Bwoy, look how dem fighting down the poor man."

The result of all of this was that anyone who wanted to enforce the law was seen as unreasonable, and this was in no small way promoted by the attitude of politics and the politicians.

So when the political parties had rallies, it was okay for the supporters to hang outside of the buses and destroy property as they travelled to meetings. Some will remember when the supporters, under the influence of political fever, would smash the windows of stores and engage in violent confrontations. In fact, there was a time when political meetings were being held that the law-abiding citizen would stay off the road and allow the law breakers to gain acceptance.

Combine all of this breakdown in proper behaviour with the fact that around the end of the 1980s to today, the role model of many young people became the deejay and the area don. As Bunny said, when he was growing up everyone wanted to be a lawyer, doctor, accountant, nurse, teacher, or other professional.

Today, I see some change as people look to become sports personalities or entrepreneurs, but the values and attitudes have still not improved.

By the late 2000s, the politicians, many of whom helped to create the societal indiscipline, decided that out of necessity we needed to change it for the better. By that time there was a serious breakdown in values, and the two generations that Bunny referred to did not know how to be productive contributors, and this is reflected in the type of music we produce.

So the lyrics of music today tell the children -- who are encouraged by their parents to gyrate to it -- that they must take advantage of the other sex or glorify the gun culture. This, of course, didn't start today, as in the late 1960s to 1970s the "rude boy" culture started to find its way into songs, in response to the perceived social oppression of the time. But at that time there was still respect for authority.

So today, the Government is trying to change that lack of disrespect for authority and indiscipline. The problem is that after decades of acceptable social decay, any attempt to change it will meet resistance. So when Dr Omar Davies tries to introduce discipline to the transport system, the response is protest and demonstration.

When the police try to maintain road discipline or deal with night noise, the patrons come down on them as "fighting against" people who want to make a living. When the tax authorities try to deal with tax evasion they face an uphill battle.

If, however, we want to create a country that is the preferred place to live, raise families, work, and invest, then we must create a society where the rule of law and order is paramount. The only way for us to create this is to ensure that engrained in all of us, as law-abiding citizens, is the desire to always do the right thing. This is not something that can be enforced by application of the law only. It must be learned as a way of life.

As I said to Bunny, I grew up learning from my parents that I should always do the right thing, no matter what the immediate consequences, as this is the only way to hold your head high over time. But how many of us have been able to learn that, given that many of the parents -- themselves teenagers -- were not prepared with that knowledge, much more to teach it.

In fact, the school curriculum never taught you, and still doesn't teach you, to be a good parent or a good citizen. I would go as far as to say that some teachers themselves are not good role models for the children they lead, as they themselves lacked the grounding in proper values and attitudes.

So thanks for the conversation, Bunny. Indeed, if we are to develop a society aligned with Vision 2030, then I don't think it is possible without us changing our values and attitudes, as we could end up with a lot of money but an undisciplined society.

Saturday, August 02, 2014

Why private sector-led growth is good for earnings

THE recent Observer report that 7,000 professionals have left Jamaica over the past few years has received much attention. We all know that teachers, nurses, engineers, accountants, and other professionals have been making the trek up north in the hope of either finding employment or seeking better salaries.

This "brain migration" is definitely the best way to exploit the value of these trained minds, primarily through remittances. The greater value is to have them stay in Jamaica and contribute their minds, through ideas and innovation in services and products. You only have to think about the impact of someone like Steve Jobs on the American economy versus any remittances that might have been sent back to another country.

In other words, the value of one idea can be worth much more than the remittances from one million or more people on the economy where the idea is developed.

The question we should ask ourselves is, how can

Canada, or the US, compensate Jamaican-trained professionals more than we can afford to do? Why can't we pay our own professionals more than they can demand in another country? For example, why are Jamaican-trained teachers and nurses able to command higher salaries in North America, and other countries, than they do here? After all, the act of a plane trip doesn't automatically transform them into higher-earning individuals.

It is important to understand this if we are to seriously attack the problem of relatively low wages in Jamaica, and my view is that the reason for this imbalance has to do with the size of the private sector in the economy in relation to the size of government.

In other words, private sector-led economies are always, on the whole, more productive and innovative, and it is productivity and innovation that drive value, which in turn drive financial reward, whether at the organisational or personal level.

This drive for productivity and innovation is, of course, driven by the profit motive, as economics teaches us. In other words, people will always find ways to be more productive and innovate in circumstances where they are rewarded with something they desire. So the motivation doesn't necessarily have to be money.

However, our motivations are driven by

what Organisational Behaviour studies refer to as Maslow's Hierarchy of Needs. In other words, at the basic level man is motivated by food and shelter, but after he acquires enough food and shelter his motivation is more influenced by other things such as clothing style, car, house, education, etc.

At the highest level the motivation is self-actualisation, which is why many billionaires become philanthropists. That is because they are more motivated by being recognised for doing good than for making much more money.

It is this same reasoning that drives the profit motive for companies, that causes economies to grow, value to be added, and similar employees in prosperous countries to be rewarded more than poorer countries.

And it is the absence of this structure that has caused relatively lower wages in Jamaica. In other words, the declining levels of productivity in Jamaica have been the primary problem, which simply means that if your output per hour is declining, then obviously your income per hour must also be declining.

So the key to greater wages, and ultimately sustainable economic growth, is to improve productivity. It is therefore important to understand what causes our declining productivity and the consequence of relatively lower GDP per capita and lower wages.

Arguments are made that the high level of public sector employment is a major problem. However, when you compare Jamaica's percentage of workers in the public sector to other countries like the US and UK, the rates are pretty similar. In fact, some countries that have had significant economic challenges have had a lower rate employed in the public sector.

This is because it is not how many people are employed in the public sector but rather what are the productivity levels in the public sector, in terms of delivering public services and goods. In other words, the efficiency of the bureaucracy is key to determining productivity and explain why bureaucracy is such a big inhibitor to Jamaica's growth.

What is also important for the private sector is that greater facilitation is made for the more innovative ideas to succeed and for workers to be rewarded based on their productivity. And this is the reason that the minimum wage by itself cannot improve living standards, even though a minimum level is important to prevent exploitation. Moving wages by legislation does not guarantee improved living standards; instead, it has the opposite effect of increasing inflation.

So in both the public and private sectors the only real living standard improvements must come from greater productivity and innovation through delivering goods and services that consumers want. Simply increasing productivity and being innovative do not, by themselves, guarantee greater financial returns, but must be coupled with a consumer demand for what is being produced.

How does the private sector address this? If a company produces goods and services which are not in demand, that company will go out of business. On the public sector side, however, this must be carefully looked at by the policy makers to ensure that whatever services are being provided are in demand.

So duplication of effort by public sector bodies or legislating that the public pay for unnecessary services is merely increasing costs and reducing productivity. Also, providing much-needed services inefficiently has the same effect.

This is why the legislative and competitive environment changes being undertaken under the current economic and monetary programme are so important, and welcome. However, it must go further to ensure that the delivery of services by the bureaucracy is as efficient as it can be.

If we can achieve this, and ensure that we facilitate the profit motive of the private sector (ensuring, of course, it is legal, fair, and accessible to all), then we will eventually start seeing greater productivity and wages moving to the levels of other countries.

Friday, July 18, 2014

What "Buy Jamaican" should mean

There are Jamaican hotels like Pegasus that are always buzzing with activity, and Spanish Court Hotel, which has done very well as a small boutique hotel, not because they are 100 per cent Jamaican but because they are of a very high standard.

Earlier this week I attended a forum and was asked to answer some questions from the audience. The forum was about entrepreneurship and one person, an entrepreneur himself, addressed the audience and encouraged everyone that they should buy Jamaican products in preference to imported ones and criticized the Jamaican branded companies that actually manufacture their products abroad, while everyone believed that they were 100 percent Jamaican made products.

You will recall that a recent news report identified products from two well known Jamaican companies as made primarily in other countries and branded as products of the Jamaican companies, and it to this that the reference was made.

The meeting was addressing young entrepreneurs and therefore I felt compelled to respond to the statement about the need for us to buy Jamaican always in preference to imported products.

I made the point to the young entrepreneurs that I do not want them to walk away with the view that we should buy a product just because it is 100 percent made in Jamaica, as what we could end up doing is supporting inefficiency and this could result in us continuing to underachieve as a country. I went on to say that in fact, up until the early 1990s, when the economy was liberalised, Jamaica actually did have a buy Jamaica campaign. This was well voiced in the 1970s, and continued in the 1980s, not as a campaign, but rather in the form of tarrifs that protected Jamaican goods. In other words, we forced persons to buy Jamaican goods by establishing trade barriers and foreign exchange controls to ensure that we kept as much money as possible in Jamaica and spent on Jamaican produce.

Another country that has done that, whether by their own design or the US embargo, is Cuba. The question we must therefore ask ourselves is, has Jamaica benefitted from the Buy Jamaica campaign in the 1970s and protectionist policies up to the 1990s. I clearly remember that we were only allowed to take out US$50 up to the early 1990s, when we were travelling, and all it did in my view was to create cheats of persons who were caught trying to take more than US$50 out of the country. I have not seen any lasting positive economic results from that era.

The point to be made is that if we are to promote the idea that we should buy a product just because it has 100 percent Jamaican input, in preference to one with 30 per cent Jamaican input then we could actually be doing ourselves a disservice by promoting low poductivity and inefficiency. And this is a very important point for us to understand as a country.

Instead I advised the young entrepreneurs there that they should not expect that their produce will be bought just because its Jamaican, but rather because it is of the highest world standard. To otherwise expect that your product will be bought by a Jamaican just because it is made 100 per cent in Jamaica is to expect patronage.

I, for example, do believe that we should buy Jamaican produce and services and do prefer to buy some Jamaican products to imported ones. But my choice is not based on the fact that they are 100 per cent Jamaican produce but because the Jamaican products I buy I think are superior to the foreign ones.

I think of Jamaican brands like Sandals, which as far as I am concerned is a far superior to most other hotels whether in Jamaica or overseas. This is so much recognised by the market that Sandals is able to charge a significant premium, and is one of the reasons why I can't always go there myself but that is good for Jamaica and Sandals. Also Grace, Lasco, National, and Island Grill are strong Jamaican brands that consumers purchase, not because they are 100 per cent Jamaican but because they represent a higher value than many foreign brands.

There are Jamaican hotels like Pegasus and Knutsford Court that are always buzzing with activity, and Spanish Court Hotel, which has done very well as a small boutique hotel, not because they are 100 per cent Jamaican but because they are of a very high standard.

And this does not mean that their prices are the lowest in the market also (as Sandals) but because they provide the best value for the dollar. I only have to think of my preference for local agricultural products, and the reason why I prefer going to Coronation market to get produce than in the supermarkets. This is not because the prices are necessarily cheaper than the imports, or that it is more convenient to go to Coronation market. Rather I prefer to buy the Jamaican produce from Coronation market because they are fresher and closer to organic than the imports.

The above highlights the importance of value and standards in purchase decisions. My word to young entrepreneurs therefore is not to think along the lines that you will succeed just becaue your products are all Jamaican but rather because you produce the highest standard product. This is the only way that you can sustain your business model and grow your business. Else what you are asking for is patronage.

I also would encourage Jamaicans to always purchase Jamaican products also, not because you should patronize Jamaican products, but because I truly believe that many of our Jamaican products are superior to the foreign ones.

This leads me to another point though that their is no Jamaican product that is 100 per cent Jamaican. A significant part of production cost is energy, of which oil is our main import. There is also the cost of packaging, which even if the printing is done here, the paper is not made here. The furniture that many of us use is either imported or the raw material in the furniture is imported. So there is no truly 100 per cent Jamaican product.

We also need to understand that if we are to develop then we must create global brands, such as Sandals, Grace, Jamaica Producers, etc. What this means also is that these global brands, in order to compete and grow must produce where it is in their best interest to do so, from a financial and supply chain management perspective.

Therefore when we see that a company is not using mostly Jamaican inputs we must not criticise themfor doing so but rather must ask what can we do as a country to ensure that they increase Jamaican inputs. So is it that they can't get consistent supplies; labour productivity is low in Jamaica; bureaucracy stifles productivity; or our tax rates are not competitive.

In other words if we want to create brands with more Jamaican inputs (including foreign brands that want Jamaican inputs) then we must encourage our entrepreneurs to meet global standards and must also ensure that our policy makers create a very friendly doing business environment.

Practising the Law of Priorities

I have just completed reading a book by John C. Maxwell, titled the 21 Irrefutable Laws of Leadership, which was kindly given to me by Everton Bryan from IAS, who was recently recognized as the CEO of the year for Action Coach International. The book is about the characteristics that good leaders possess, and is something that we all know but what it does is lay it out in a very structured way. And I would certainly recommend it to anyone who wants to work on developing their leadership ability.

One of the laws (principles) that I thought is very important for us to understand as a country, and could be extended to the region, as we seek to develop our economy with limited resources (financial and HR) is the law of priorities.

What this law says is that leaders must understand that activity is not necessarily accomplishment. In other words, as I wrote in my last book, working efficiently is much more important than working hard. It is not as important how much you do as it is what you do in a day at work.

Many of us will know people who are always busy and always working late. But at the end of the day it seems like they always have a lot of work piled on their desks with little accomplishment. When I say accomplishment I don’t mean just doing various tasks but doing something that adds value to the organization or people around them. So just working hard and not seeing any “value added” at the end of it means that the organization will stand still as you are doing the same thing everyday and hence you will get the same result, which most times means not creating a competitive edge.

What it means therefore is that when we are faced with a lot of work and limited resources then in order to accomplish any value added what we must do is observe the law of priorities, or put another way focus on what will add value, given the resource constraint.

So using the example of people exercising to get fit, or just have a healthy lifestyle, many persons do not organize their exercise so that it is as efficient as possible. So they spend two hours each day walking or running leisurely and can’t understand why they can’t get results. While if they spent 20 minutes on much more intense exercise, which would not allow them to talk, then they would get far better results. Or in an organization some people always cry out for more resources to get things done, while the more organized person first recognizes the limitation of the resources and prioritizes within that limitation. Guess who ends up getting the results.

I think this lack of prioritizing is also one of the root causes of the challenges we face in Jamaica, and one could maybe extend it to the region. Too many times, especially at the political level over the years, we want to be all things to all people and end up being nothing to all people. In other words in our quest to please everyone we end up making everyone worse off. This of course is because we do not apply the law of priorities to our actions.

So everyone recognizes that the country has a fiscal challenge, a high debt-GDP ratio, and spend more than we earn, among many other challenges. And we recognize that we cannot try to do everything we would like to do because of limited resources. In fact one of the things that is clear is that the maybe the most fundamental reason why the country has not developed is that we have promoted labour and capital unproductivity, through government policies and fiscal welfare, which we have funded with debt in the past.

We also recognize that in order to change this paradigm that we have to change this culture of low productivity, and place capital, which includes the limited fiscal resources, in the places that returns the highest value. In other words we must make a list of what the actions that will bring greatest value and help us to achieve the goal of economic and social development. Put another way if we continue to try to stretch our meagre resources and support spending that discourages productivity then we will be “Back at One” as Brian McKnight sings.

So what we must do is adopt the law of priorities, as well as the law of sacrifice, in our quest for real economic and social development. So we can’t continue to use our meagre resources to promote practices that discourage productivity, which simply means we can’t use fiscal expenditure to support persons who do not intend to become productive or competitive. Otherwise called handouts. It also means that we need to prioritize what our reform areas should be. That is those that will have the greatest impact on the agenda going forward. This is what the documented economic programme schedule is supposed to do and it means that we must ensure that we do not “waiver” from it.

This need to prioritize the right actions also means that when we are setting policy, that we must also ensure that the policies are done with the longer term objective of sustainable development, rather than short term gains to meet a target only.

This is the same thing that businesses must do everyday. They would like to have unlimited resources to do everything they want to do but must consider the capital, projected business, the limitation of the human resources, market conditions etc. and then prioritize the strategies and match them with the available resources. You then do what will bring the greatest long term value to the business.

It seems to me that this is something that we need to understand as a country. As we get nearer to the “political silly season”, a.k.a. elections, let us apply this law of priorities and not get sidetracked with unrealistically trying to be all things to all people, and end up pleasing no one.

This is the challenge that we face as we continue to manage our meagre resources, and while it is possible to achieve the elusive development we have always wanted, even with our much more limited resources. It can only happen with the application of the laws of priorities and sacrifice. The reward for this will be prosperity for all.