Friday, November 10, 2017

Create an environment to encourage growth and development

Last Sunday, Justice Minister Delroy Chuck made a presentation to newly commissioned Justices of the Peace, and it was one of the most passionate and practical speeches I have ever listened to.
He referred in particular to the rampant indiscipline, especially on the roads, and promised to ensure that the full force of the law is brought down on delinquent motorists. He also promised to consult with lawyers to see if there is any way that drivers with 10 or more outstanding tickets can have their licences suspended.

In addition, he indicated that at the end of the traffic ticket amnesty, anyone with unpaid tickets will have arrest warrants issued for them and they will be locked up.

I for one am in total agreement with the sentiments expressed by Minister Chuck, and I would even go further and say that anyone with two or more outstanding tickets should have their licences suspended.

In fact, it might not be a bad idea to systematically revoke all road licences and have holders reapply for them, at which time they would have to thoroughly convince the authorities why they should have them.

This might seem like a radical measure, but it is only by creating a disciplined and orderly society that we will be able to have a shot at real development.

I am sure that most people would have heard the saying, “Show me your company and I will tell you who you are.” Most of us understand that if you plant a seed in infertile soil, then the seed will either not grow or the plant that comes out will be too puny to survive.

The fact is that we will never be able to see any meaningful, sustainable growth and development until we create a fertile environment for people to become more productive. Productivity cannot thrive in an infertile environment. So just as seeds will not grow in infertile soil, people cannot achieve their potential if there is too much negativism and disorder around them.

Crime will not subside in an atmosphere of disorder and indiscipline. Businesses will not do well if citizens (consumers) do not reach their full potential.

This need for a fertile environment does not only apply to people, but also to capital. For years I have listened to people lament the poor productivity of capital and say that “the private sector” must contribute more to the economy, not understanding that the private sector comprises anyone who is not in the public sector, including those spouting criticism.

But local businesses will remain unable to realise maximum value and productivity if we continue to hold them back with inhibiting labour laws, or we continue to restrict the movement of capital.

In Jamaica's case, capital has to work much harder than in other countries. As an example, where our cash reserve ratios are higher than in other countries, then the capital left to work must have a higher rate of return. For that reason we may see fees and other charges not seen in other markets.

Another example of how environment affects outcome is the relationship between the increasing cases of abuse we have seen against children and the low educational performance over the years. This is why I remain disappointed that months after the case of the neglected seven-year-old was brought to the fore, no one from any of the responsible child protection agencies has been held responsible, which just shows the disregard and uncaring attitude we have for our children.

We should not be surprised about the environment that we have created. Our governance has long neglected our justice system, traffic ticketing system, child protection, and the list goes on.

Instead, our governance focus has been on fiscal policy that has the prime intention of grabbing more and more from the citizens while giving less and less. So today we have very bad roads, high crime, bureaucracy, and uncompetitive tax rates.

In plain terms, we have “deliberately” set about creating the environment we live in today, and sometimes I have to wonder about our intent and ability to change that environment.

The production of numerous studies and commentaries of “intent” lead to no positive outcomes. The “toxic” business environment we have created over successive decades simply goes from bad to worse.

This doesn't mean that we have not made some progress — as minimal as it may be. But what we have failed to understand is that we don't live alone in the world, and that improvement is not just assessed by absolute measures, but by relative measures. So while we are standing still, other countries are doing what is necessary to move ahead faster than we are. So we take 10 years to pass Road Traffic Act amendments, or 10 years to pass the new Procurement bill.

We are weighed down under many studies and reports, which tell us in a spectacular way what needs to be done. We listen to countless speeches made by politicians over the years proclaiming their good intentions. And the truth is that if we did even 20 per cent of what is contained in those many reports, we would be way ahead of where we are now, both economically and socially.

As I said at the start, Delroy Chuck is right: the only way to address the matter of indiscipline is to take a zero tolerance approach and bring the full force of the law down on perpetrators.

I also believe that the minister has every intention of doing all within his power to fulfil his promises. However, unless we take action and implement a functioning ticketing system, utilise technology to assist in the crime fight, and fix our ailing justice system, then all those pledges will evaporate. Because if the supporting infrastructure and environment is not in place to support his intentions, then his fate will be the same as that of our economic and social development.

Friday, November 03, 2017

Jamaica, no problem… or land of lawlessness?

One of the best ways to be educated is to travel to other countries and see different environments in operation, as it teaches you not only new things, but also shows possibilities. For example, there have been reports of ancient tribes that have been locked away in the Amazon for decades and still live the same way they did 100 years ago.

Whenever I come back from overseas and land at Norman Manley International Airport, it is always a great feeling to touch down in the land of my birth, as I am sure many Jamaicans living overseas feel. However, after leaving the picturesque view of the Palisadoes strip, you find yourself quickly descending into the decay of our capital city.

The first thing that hits you is the run-down infrastructure; then moving along Windward Road and Mountain View Avenue, you notice not only further decay, but also the indiscipline on the roads, where the police and government have ceded control to the taxis and buses.

As you drive further into the city, going either through downtown or New Kingston, you will meet the garbage pile-ups, numerous peddlers at the traffic lights, and taxis and buses weaving in and out of traffic, using their vehicles like “weapons of mass destruction”.


As a resident Jamaican, I am all too familiar with the contrast between the orderly environment overseas and the morass of disorder that always greets me on my return to Jamaica. I suspect that a new visitor to the island must be wondering if there is any government in Jamaica. They may have heard the slogan 'Jamaica - No Problem', but I don't think they would have imagined that it meant 'Jamaica - No Accountability'.

So every morning, as I make the arduous journey to work through the traffic, I can't help but wonder, like the new visitor, if there is any governance in Jamaica. Or should I say, if there is any care about proper governance.

Taxis, which are easily identifiable now, drive illegally on the right-hand side of the road, and flash off any oncoming traffic with disgust because they dare to drive (legally) on the left-hand side of the road coming towards them. And don't even try to suggest that taxis should stay in the turning lane, for example when they are turning onto Hope Road from East King's House Road. After all, they have the right to do anything they want, and no government or police can stop them.

' Jamaica - No Problem' means that anyone can establish a small business on the sidewalk by just deciding that they will set up a stall, and to hell with pedestrians who try to make rightful use of the sidewalk. And woe betide any female driver who dares to reject the “services” of boys who flock to wipe their windscreens. And you'd better not offer them less than $100 for the “service” they have imposed on you.

If you are misled into believing that as a Jamaican you have any right to peace and quiet, you will be sorely disappointed, because the party promoters have a lot of clout and will play their music as loud as they want at any time of day or night. You are crazy to think that because you go to the United States and see where noise levels are controlled, you can come to Jamaica and think you deserve the same privilege.

In fact, if you have children who are too young to watch PG programmes or listen to X-rated lyrics, tough luck. They will just have to stay in their beds and listen to the lewd lyrics from the music being played two blocks away. Why do you think that you have the right to determine whether your child listens to expletives or abusive lyrics being played through loudspeakers at parties? That is the right of the promoter, and no government or policeman can stop that.


And if people want to squat on government land and put up concrete structures, that is their right also, as long as they are delivering votes. It is no business of the government to tell anyone where they can build or if they want to operate a garage in a residential community.

If someone chooses to take unauthorised leave from work, the employer has no right to tell them they cannot, and if the employer dares to dismiss them for it, then they will just go to the IDT and put the employer in his place because he failed to follow a year-long process. No employer has any right to demand high levels of productivity from any worker, or they will be forced to pay monies which they were unable to earn because of low productivity.

And if you are ill-advised enough to sue someone for committing a crime, or because of abuse by any arm of the State, then you must suffer the high legal costs of having the matter adjourned repeatedly, and become familiar with the comatose justice system, because you will be in court for at least five years.

After five years, if the judge thinks you have suffered long enough and awards you any costs, especially against the State, you had better bequeath the amount to your grandchildren, because you will not see any payment in the rest of your time on Earth.

Does anyone think I am exaggerating? I am no crime expert, but how do we expect to solve crime and get economic and social development in the kind of system I have outlined above? Sadly, this is Jamaica's reality - not a fictional place.

Year after year, the Global Competitiveness Report tells us that crime and bureaucracy are the two main impediments to economic growth, which is essential for social development, but instead of addressing the root cause of disorder and indiscipline, we tinker around the edges while undermining our true potential as a nation.

Friday, October 13, 2017

Establishing a foundation for development

Over the past couple of weeks traffic congestion has been unbearable on the roads, and has revealed a lack of proper governance.
The recent traffic pile-ups have been caused, in my view, by:

(1) poor road work in the past, which has led to “craters” on the roads as soon as it rains;

(2) indiscipline on the roads, primarily from taxi and bus operators who think they can do whatever they like, and the authorities do nothing to address it; and

(3) the National Water Commission working on the roads all over the Corporate Area, causing traffic congestion, with no apparent thought to coordinating the activities so that they don't significantly affect traffic flow. And then when they are finished, not repaving the roads quickly.

In 2015, the Inter-American Development Bank started a dialogue on the cost of traffic congestion in Latin America, and concluded in the report that it was the number one factor inhibiting productivity in Latin America and the Caribbean.

This is not difficult to understand, as, if we assume that people on average spend even an additional one hour on the road every day because of traffic and multiply that by a working labour force of one million, we lose one million productive hours each work day. Assume 200 work days for the year conservatively, and we get 200 million productive hours lost per year to traffic congestion.

A simple computation (assuming GDP of $1.7 trillion, one million labour force, 200 days per year and one-hour workday) shows that traffic congestion, causing a one-hour loss per day, is costing us around $200 billion in lost GDP opportunity per year.

Wouldn't it be better to spend $10 billion to $20 billion per year on an efficient public transportation system, including a safe and efficient school bus system to prevent daily pick-ups, which adds to the $200-billion annual loss?

But traffic congestion is just one element of a weak foundation we have developed.

The recently released Global Competitiveness Report (GCR) 2017/18 shows that Jamaica still grapples with the issues of crime and theft, inefficient government bureaucracy, tax rates and corruption, as major inhibitors to doing business in Jamaica. I have omitted access to financing, which features in the top four this year, because the historical data show that these four issues have been consistently the main inhibitors.

Between 2014/15 and 2017/18, the GCR shows that these four factors above accounted for an average of 51.85 per cent of the challenges to doing business in Jamaica. In 2014/15 they were at 55.40 per cent; 2015/16, 54.20 per cent; 2016/17, 50.80 per cent, and 2017/18, 47.00 per cent.

The numbers show that they have been decreasing, but still remain around 50 per cent of the challenges to doing business in the country. No doubt there have been some improvements in the bureaucracy, which has caused the change, as evidenced by the fact that inefficient bureaucracy now ranks fifth, and in the years 2014/15 to 2016/17, was always in the top two challenges. Inefficient government bureaucracy still remains, however, at a significant 9.20 per cent perception as posing a challenge to doing business.

Among the inefficient bureaucracy is the matter of our regulatory environment, which includes the restrictions we place on the use of capital. Over the years of high government borrowing, legislation was put in place that effectively forced pension funds, and other financial institutions, to place most of their funds in government paper and a large amount also sitting down idly doing nothing.

This has caused us to lock away billions of dollars in capital, which could be working for local entrepreneurs, and which would cause lower interest rates, lower transaction costs, and greater wealth for LOCAL entrepreneurs.

Instead, fiscal policy has sought to lock away the capital (earning very minimal amounts), and has been pushing FOREIGN Direct Investments in preference to LOCAL investments. The fact also is that more local investments mean that more of the profits will stay in Jamaica. The fact also is that if capital was allowed to work, instead of being locked away, then more local people would have access to cheaper capital and our GDP per capita would increase.

So if we were to look at the conservative cost of traffic congestion ($200 billion), the approximate four to six per cent GDP loss from crime and bureaucracy ($85 billion), the capital losses because of uncompetitive tax rates and corruption (no estimate computed but assume conservatively two per cent of GDP - $30 billion), and the opportunity cost of capital locked away because of the regulatory environment, it would seem to me that we could easily get close to another $500 billion in GDP output, or another 29 per cent of GDP. This may not be in one year, but even over five years we are talking about six per cent growth per year additional.

This does not include the productivity losses as a result of our labour regulations, or losses from our procurement issues.

This shows that Jamaica's challenge for growth and development comes down to a poor foundation for development and growth. It also shows that the reason we are struggling with low growth, and our people are not productive and have low income levels, is primarily because we keep shooting our-selves in the foot. The fact is that Jamaica's challenges are more internally than externally generated.

So, given our limited resources, wouldn't it be better to just focus on these four or five areas to stimulate development and growth in Jamaica?

Friday, September 08, 2017

Artificial labour in Jamaica

Putin is recently on record as saying that whoever has a competitive advantage in Artificial Intelligence (AI) will control the future of the world. Elon Musk agrees with him.
Whether or not this will be so (and it does sound logical), what is clear is that the environment for labour is changing. In fact, a recent article suggested that because robots are being used more and more to replace labour, especially blue collar workers, governments should consider making a minimum payment to all their citizens. In other words, a minimum “welfare payment”, which would substitute for the displaced employment caused by robots and AI in the future.

What this onward march of technology means is that, in the very near future, most blue-collar and some white-collar jobs will be replaced by robots and AI. For me it doesn't necessarily mean that there will be no jobs, but that for people to gain employment they would have to be employed in areas that require higher-level thinking.

So recently I purchased, and have been using, a vacuuming robot at home, which can be scheduled to clean the house when no one is there. So even while on vacation the house can be cleaned.

There are also Wi-Fi camera systems that not only allow you to monitor your home from another country, but also allow you to speak through the camera to someone who is in your yard, or in your house, which I also have installed.

But this doesn't mean that you don't need household help or security companies to monitor your house. What it means is that their role changes to more critical and higher-level thinking. So the household worker now needs to understand how to utilise and monitor these house robots, and the security guard must now be familiar with the technology.

Another article pointed to the dominant economies projected for 2050. The similar track for the top 10 was that they all depended on infrastructure development, and very important growing and productive labour. So even in 2050, labour is still being seen as a competitive edge for development.

What must be noted, though, is that labour can only be competitive, and can only raise its value when it is constantly increasing in productivity. But labour can only increase in value, and be competitive, when it is allowed to compete with labour productivity in other countries.

This for me is the biggest impediment that Jamaica faces to our development and competitiveness, which I have been saying for some time.

The fact is that Jamaica's lack of international competitiveness and development is being stymied by our low labour productivity, and has been declining since the 1970s. The only way to increase real labour compensation is by increasing productivity.

However, up to the 2013 IMF Agreement, public sector wages were increasing (in real terms) at a pace faster than productivity. Indirectly also, overall labour compensation has been doled out through government welfare programmes, labour laws, and tax breaks. The result is that products and services do not increase in competitiveness, and as a result labour compensation loses value, resulting in declining standards of living.

If the Jamaican economy is to develop and become internationally competitive, it also means that our labour has to become competitive. Just like in a private sector company, the competitive edge is always labour productivity, such as customer service levels.

But for this to happen, Jamaica must face some facts and address them. The first one is that our policy must recognise that robots will eventually take over and be much more productive in jobs that we cling to for political reasons. These include street sweeping and sugar cane cutting.

This does not mean that we will displace these workers, but rather that we will employ strategies to ensure their training for higher-value thinking jobs, and hence more compensation because of increased productivity.

It also means that we must face the reality that our current labour laws actually end up creating a worse future for labour than the present we are trying to protect.

So I consider the IDT and labour laws major stumbling blocks to productivity, because they allow labour and capital to remain unproductive. This has resulted in more informal labour and less hope of pensions and health benefits accruing to workers.

So eventually the fiscal accounts will be caught with these gaps, which will mean greater taxes in the future.

This is not to say that unions are not relevant in protecting against any advantage being taken of workers, but they must be provided with an environment that promotes productivity and prosperity for their charges.

It is only by taking bold actions to address our present labour and industrial environment that we will begin to see an increase in labour productivity. And if labour productivity increases, then capital and labour compensation will increase. This will in turn increase standards of living.

But this cannot happen with just tinkering at the edge of the problem. Government must take the bold and decisive decision to do so, just as the decision was taken with the ZOSO.

Jamaica's growth and development can only happen when we accept the future of what will develop with labour markets and start to think about how we will make the Jamaican worker more productive, and not rely on “artificially created labour” and short-term impact measures.

Friday, September 01, 2017

Jamaica's lack of disruptive thought

The Jamaica Observer's editorial on Tuesday appropriately addressed the issue of the lack of “big” thinking, which has plagued Jamaica and resulted in a lack of development.
The Observer yesterday reported on the PIOJ press conference, which announced an estimated growth of 0.3 per cent for Q2 2017 (April to June), which followed a 1.4 per cent decline in Q1, as reported by STATIN.

The editorial, in my view, is fully supported by the PIOJ press conference. Dr Henry reported that in the short term, the reliance on growth would be on the expected construction on the Alpart plant, and that the risks to growth remain weather conditions and any oil price shocks, primarily.

This is the same thing we have been saying from as far back as I can remember, even while the world has, and is, changing around us.

In other words, for 40 years or more, Jamaica has been doing the same things, in a rapidly changing world, but expecting different results. Governments come and go, and they make grand announcements, but the same growth and market inefficiency issues remain.

So one could look at the last 10 years of the Global Competitiveness Report, and crime, bureaucracy, tax rates and corruption would feature among the top five impediments to doing business.

What is more, these four consistently account for upwards of 40 per cent of challenges to doing business.

It is this same attitude to governance that has caused the problem, not only with the Hip Strip, but with tourism decay in general. One may say that we have been increasing the number of tourists that visit the island every year, and that may be so. But within the context of a growing tourist market, cheaper and more accessible air travel, greater income levels and spend by tourists worldwide, and importantly, very good tourism offerings, particularly by our all-inclusives — have we really kept pace and achieved what and where we should be?

It is the attitude that ignores indiscipline (including illegal vending and harassment); the attitude that ignores infrastructure maintenance and development (because of our short- term fiscal thinking); and the attitude that ignores the foundations of crime (squatting and lack of order), that have kept us back and have us talking about negative 1.4 per cent growth, followed by 0.3 per cent growth.


Let us be clear: 0.3 per cent growth, based on the sacrifices we have made, the potential we have, and the growth we are seeing in the global economy, is shameful.

In fact, one could say it is within the margin of error, and when STATIN reports the final numbers, it could very well be negative.

With all of this, we still keep doing the same things and expecting different results. And maybe it is because successive governments think that even if the fiscal accounts do not perform well, all they have to do is raise taxes. Well, they have basically been doing so every year, and still we are reporting — 1.4 and 0.3 per cent growth rates.

Another example is the recent announcement by TPDCo to instal anti-harassment officers, which is being done for maybe the third time. But after a while you see the officers blending in with those doing the harassing, and as usual, “Jamaica - no problem”.

I am not saying that we have not had development in Jamaica, but I am saying that we are underperforming significantly compared to where we need to be. This is primarily because of the mindset that we have, and have had, towards governance.

In other words, what we need in our governance is “disruptive thinking”. And we had that when we put EPOC and ESET in place. Both teams have seen tremendous success, and made Jamaica the “poster child for IMF reform”.

This means that we are more than capable of moving the economy forward, and one has to therefore wonder why we can't achieve more.

Sadly, this is because of what the Observer editorial referred to as “lack of big thinking” or I would say “lack of disruptive thinking”.

If we are going to go for significant development and growth, and by extension improved living standards for all, then we must change the way we do things.

We cannot continue to be impeded by a set of procurement rules that cause more opportunities to be lost than costs saved; we cannot continue to ignore the indiscipline on the roads, such as the traffic lights that have become mini shopping malls and centres of harassment; we cannot continue to ignore the zoning laws and night noises; we cannot continue with labour laws that encourage an unproductive environment and the resultant loss of incomes; and we cannot continue to blame and restrict capital from working to develop the lives of Jamaicans, and as soon as someone starts to do well we tax them back down to a level of mediocrity.

And if we are going to achieve consistently high levels of growth, we have to recognise that the world is changing around us. So our growth strategy cannot continue to be to rely on “big” one-time projects, and not realise that we have to change our approach to agriculture because of climate change; we have to change our approach to growth inducement strategies; and we have to stop incentivising where we do not have a comparative advantage and build infrastructure to support those areas where we do.

Our fiscal policy must begin to recognise that the more productive capital is, the greater the returns for the economy. If we keep increasing the tax burden on capital and people, if we keep putting more and more stringent regulations in place, it follows that our fiscal accounts will fall, leading to further negative growth.

One ridiculous suggestion I heard recently was the recommendation by the National Road Safety Council that a tax be imposed on motor cycle imports to reduce the number of motor cycle accidents.

So, if we are to move beyond the growth we have seen in the first six months of 2017, we must understand that we need to have a mindset change from small thinking to big thinking, or from safe thinking to disruptive thinking.

Otherwise, in 40 years we will still be having the same press conference as the PIOJ did on Wednesday.

Friday, August 18, 2017

Jamaica's gold medal potential

As I watched the World Championships and saw us not medalling in events we were expecting to, I really did not feel as disappointed as the many individuals whose comments I have read and heard about. Some of the comments were nothing less than ridiculous, blaming the athletes, as if someone “put the medals down for us” prior to the event.
What I witnessed was a set of young athletes who went and did their best; and, fully understanding what goes into the preparation for such competitions, I was extremely proud of all of them.

I myself, being someone who engages in endurance sporting events and competes occasionally, understand what the body goes through and the pain one feels, and the necessity to be precise with your preparation. So when I heard Blake mention that the organisers had them waiting for 45 minutes in cold conditions, I thought to myself that this is what happens when you put people in charge who have no idea about sports, apart from what they read.

It always amazes me that professional sports is one of the only professions where one doesn't need experience to be an administrator. Many times people in administration are people who have never competed or played in any sporting event.

Over the past 12 years, we have had a cadre of athletes, led by Usain Bolt, who have all made Jamaica proud. In fact, as Leighton Levy pointed out, as far as historical records can show, no other country (especially given our size) has dominated athletics globally the way we have done.

So nuff-nuff respect to Bolt, Asafa, Yohan, Shelly-Ann, VCB, Carter, Melaine, and all those other athletes who competed at the highest level for us over the past 12 years. They have made Jamaica extremely proud, and have helped to place us as a global brand, just like the late great Bob Marley did.

In fact, it was the individual and team performances of these athletes that have given Jamaicans hope (eg 1998 World Cup qualification), and not the people who have been elected to do so. Our greatest hope and inspiration have come from our athletes, musicians, and business people, while our greatest letdowns have come from our politics and those elected to lead us.

But even so, the politicians are the first to pounce on the opportunity for popularity from these individual Jamaicans, often posing with them for pictures or having welcome-home celebrations or parties. And these Jamaicans deserve all of that and more for making us all proud to be Jamaicans, despite the mayhem and bad reputation created by our crime and inefficient bureaucracy.

My greatest disappointment with the Championships was not the individual performance of our athletes on the track, but what has been reported about the quarrelling in the camp. I am personally fine with seeing our athletes do their best and not medalling, as even if they make a final, remember they are amongst the top eight in the world, and many of those who criticise them can't even go through a training routine with them, and have no idea about what sacrifices they have made to get there.

My other disappointment is that the younger athletes do not seem to have the mental toughness that I see in the now older athletes, such as what we saw in the spectacular feat by Bert Cameron at the 1984 Olympics. That mental toughness is what most times makes the greatest difference, as one thing we forget as a country many times is that while we are celebrating our victories, other countries are planning and preparing to take our crown away.

This was the case with West Indies cricket, which we once dominated. I was going to Sabina Park from I was eight to watch the great Rolls Royce of West Indian bowling Mikey Holding with the other three hit men in the pace-bowling attack, and the finesse of people like Viv Richards, as he thrilled us, making test cricket have all the excitement of one-day cricket.

While we were on top, however, countries like Australia were planning a takeover with their cricket programmes at home. And as usual, our cricket was hit by administrators who didn't understand what was needed to sustain our dominance.

And so, just like athletics, or even after we qualified for the World Cup, there was little if any infrastructure investment made. If you look at the areas where we have or have had a competitive advantage, we find that most of the investments made in infrastructure have been done by private individuals, such as MVP or Racers. There have been few if any strategic infrastructure investments made by the government, even though we are a world leader in many of these areas.

The fact is that we have been celebrating Bob Marley, and his value-added for Jamaica, but wouldn't it have made sense to make some serious infrastructural investment around his community (Trench Town) as a major tourist attraction? We see where the Bob Marley museum was the first place Obama visited, which shows the attractiveness of Marley, but still we have failed to capitalise on this icon.

When we qualified for the World Cup in 1998, that was certainly an opportunity for some proper infrastructure investment in football fields across the island. The Reggae Boyz were globally recognised, just like the bobsled team.

Over the past 12 years, we have dominated athletics, and had the fortune of the greatest sprinter ever, and the man with the most sub-10-second times. Yet, has there been any strategic investments in track facilities, or even serious investments in GC Foster College, where we agree that much of the expertise that lay the foundation has come from?

And outside of sports, I go back to tourism, which earns us more than US$2 billion per annum, but we allow the degradation of the infrastructure in the tourism capital, and the rampant indiscipline to exist, allowing for example the traffic lights at the end of the Hip Strip to become an unofficial shopping mall.

Jamaica has true gold medal potential as a country, which can go way beyond individual accomplishments, which is what has built our brand. We have the potential to be fully recognised as the greatest country on earth, but we must overcome our governance challenges and take deliberate actions to capitalise on our areas of advantage and success, not just through celebratory activities, but investment in our people and infrastructure.

Friday, July 14, 2017

Does Jamaica have a resource constraint or management problem?

Many times, when things are not done properly in Jamaica, the common cry is because there is a lack of resources. The impression being given is that because resources are constrained, that is the reason for many of the challenges we face as a country.

So a few weeks ago, in a conversation, I expressed dissatisfaction that there are drivers with more than 1,000 outstanding tickets. The excuse was that we did not have enough resources to follow up on all the outstanding tickets. Then just two days ago I was told that the high crime rate in a certain parish is because the police lack the resources to properly address the crime problem.

If these arguments are to be accepted, it means that we will never be able to solve the challenges we face. The fact is that every Government and business I know has a resource constraint problem. When one is running a private business, for example, you will always have a resource constraint and will have to make choices about which initiative gives the greatest value added, and also how to best manage your resources to produce maximum benefit (returns). Failure to do so will result in the business being uncompetitive and ultimately failing.

In my view, it is this failure to manage the resources of the country properly that has led to so many of the challenges we face today - such as high crime levels, countless informal settlements, deteriorating infrastructure, and the list goes on. In other words, it is not the lack of resources that has led to these problems, but rather the failure to efficiently manage the country's resources.

Whenever there is a shortage of resources at the fiscal level, our solution is not to consolidate our public sector operations, or see how much more efficiently we can deploy existing resources. The fiscal solution is always to look at who is doing well (because they have managed to efficiently manage their resources) and raise taxes on them, demonstrating the intellectual vortex that too many of our policy makers have found themselves in over the past 45 years at least.

The result of this approach is no different than if a private business were to mismanage its resources and then when it needs more, seek to raise prices on its customers. The result is that the customers go elsewhere to spend their money and the business and employees suffer.

Similarly, when we raise taxes every year and fail to provide a suitable environment for businesses to flourish, and for people to live, then capital moves either outside the country, or to other unproductive investments, the fiscal accounts suffer, and people lose jobs.

So in the case of the person who told me that the problem the justice system faces is lack of resources to go after so many people with more than 1,000 tickets — wouldn't it be prudent to identify even two such people and ensure they are brought to book and made an example of? Then the probability that others would comply would increase.

Then there are those who believe that there are not enough police to monitor the traffic indiscipline. What about implementing cameras at the hot spots for indiscipline and identifying a few offenders and making examples of them?

Also, if we are going for growth, then doesn't it make sense to focus on the things we are already doing well and maximise the value from them? I think of tourism, for example, where the emphasis is always on increasing the number of tourists to the island without improving the value of the product offering, unless of course done by an all-inclusive, which is also hampered by the country environment.

Because of this lack of focus on improving the value, I understand that the average repeat visit to Jamaica is 1.2 times, compared to a world average of maybe three times. If this information is correct, then it means that visitors on average do not return to the island. This was a sentiment expressed to me by some senior visitors to the island, who said two things.

First, they said that Jamaica is a powerful brand and the envy of many, but that because the brand is so powerful the expectations are high, and when people visit the island and are met with harassment, a dirty environment (such as what is happening at the Hip Strip), poor public transportation, aggressive behaviour from our people (such as the peddlers at the traffic lights, etc), they become disappointed because the high expectations are not met.

Just think of going to your favourite restaurant and the food is not up to the usual standard. What would be your reaction?

Secondly, they spoke specifically about Jamaica's high departure tax, which is causing uncompetitiveness. In particular, they referred to the fact that many of the tourists come on charter, and when the travel companies sell these charter flights they do not quote the departure tax as they want to be competitive. So the person telling the story said she came on a charter flight, and when she was leaving Jamaica she discovered that she needed to fork out departure tax of more than US$80 and was totally unprepared for it. Her question was, “Is that the final farewell that we want to give to our visitors?”

Wouldn't a better approach to increasing tourism value be to improve the environment (think about the Hip Strip as an example) and then rooms could go for US$500 instead of US$250 per night, more people would venture outside the all-inclusive to spend in the local economy, and make Jamaica a higher-value, more attractive place to visit? In other words, think about maximising the resources we currently have rather than going for increased quantity, which costs more to do.

This is going to take a different mindset, such as changing how we think about taxes, so that we try to get more taxes from increased activity and lower rates, rather than seek to increase rates every year and limit the potential of increasing activities.