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.

Friday, June 20, 2014

What are the opportunities for the Caribbean?

OVER the past two weeks I did some travelling within the Caribbean, first to Suriname and then to St Kitts. In between I was also asked to go to a South American country, but decided against it because of the amount of travelling time it would take. The itinerary would look something like, leave Jamaica at 2:30 pm and get to Suriname at 1:30 am (11:30 am Jamaica time), or 11 hours travelling time; leave Suriname to Curacao then up to Miami (three hours) and then an eight hour flight to South America; then leave South America to Miami and back to Jamaica; and then leave Jamaica to Miami (1.5 hours) and then to St Kitts (three hours) and then reverse the trip on the way home. Not to mention that it is more expensive to get to a location the same distance away in the Caribbean than it is to get to somewhere in North America.

Usually when you do a trip down to Trinidad or Barbados you curse the time it takes to get there, but don’t usually do much reflection on how much of a challenge it is for development within the region. The fact is that it is easier to get to Europe and North America than it is to travel within the region.

It occurred to me also that this is a significant reason why intraregional trade is not maximised, and the region has not developed to its full potential.

Our tourism officials have worked tirelessly over the years to ensure that we have most if not all the North American airlines coming to Jamaica.

The first issue of the lack of progress with intraregional trade and synergy is obvious. The fact is that unless we are able to improve the ease of travelling throughout the region, then regionalism, at the trade and other levels will suffer. In my view it is therefore necessary for the regional governments to get together and look at regional travel if we are serious about developing Caricom. In addition to this though, if we are truly serious about developing Caricom, then it is very important for there to be free movement of goods and people throughout the region.

It is, in my view, because of the lack of this freedom of movement and ease of travel why countries in the region prefer to look towards North America for trade and labour movement. This is evidenced by the size of the Caribbean diaspora in North America and the trade with North America.

The examples of Suriname and St Kitts show the opportunities that are available to us for development, if only we could address the structural issues of transport and movement of people and goods.

Both countries are excellent tourist destinations, and I think Suriname in particular has a lot of opportunities for development because it not only has good tourism potential, but also has other industries such as gold, bauxite, agriculture etc. St Kitts, on the other hand, because of its size can’t take advantage of industries like agriculture but has vast potential for tourism and international services, which I gather they are trying to develop. The Marriot Hotel in St Kitts in particular is an excellent product, as I was very much impressed with the service and the food. And my comparison is based on the service levels at Sandals, which is at the highest standard globally.

The disadvantage for both countries, however, is the ability to get there. This is certainly one of the advantages that Jamaica has, which we don’t realise enough. Our tourism officials have worked tirelessly over the years to ensure that we have most if not all the North American airlines coming to Jamaica, and have been opening up routes from South America, Europe, and Asia. It helps, of course, that we have an excellent geographic location and brand, but one could argue that the travel connectivity has some responsibility for our brand recognition.

It is this connectivity to the world, through airline travel primarily, why our people are able to visit and open up markets with other countries. The ability to travel easily between Jamaica and those countries has created an identification with the cultures that is essential for business. This is a challenge we have to deal with if we want to get into the South American market in a big way. It is a big market, with many opportunities, but unless we can understand and infiltrate the culture, then it is going to prove difficult to access the markets.

If we look, for example, at trade within the region, Jamaica does relatively more trade with Trinidad than any other Caribbean country, and also has strong ties with Barbados in terms of people movement. We also have Trinidadian and Barbadian companies invested in Jamaica, more so than other Caribbean nationals. The main reason for this I think is because of the connections made through the UWI, as students travel to the various campuses to complete their studies, and at the same time make lifelong connections. In other words, there is an infusion of the cultural aspects.

This trade and business relationship between Jamaica, Trinidad, and Barbados proves that as a region we can do much more together, than we are doing today, particularly with the smaller islands. Again using Suriname and St Kitts as examples, if we had easier travel arrangements with them then they would be much better vacation destinations than just travelling to Florida to spend time in the shopping mall.

My own view is that there are a lot of opportunities to be had by the region being more accessible to other countries, including the Caribbean; and if we also promoted easier movement of people. Because our primary areas of comparative advantage are tourism, added value services, and agriculture, it is even more important for our markets to be accessible. So for example, it would be foolhardy of us to try and promote tourism while at the same time having strict visa requirements. Why then do we create a perception that there is a problem with movement of nationals and goods within the region and expect that Caricom will prosper?

Therefore before we start talking about growing CARICOM as a unit, shouldn’t we address the challenges of market accessibility? That is, of course, if we are serious about it.

Understanding the path to development — part 2

The social entrepreneur uses business/economic strategies to solve social problems. The end product is wealth produced by persons at the base of the economic pyramid and living in harmonious, sustainable but economically integrated communities

LAST week I ended by speaking about the risk taken by many private sector investors, which is the story of many successful entrepreneurs I have spoken with, who at some point in time questioned if what they were doing was the right thing, or should they just be satisfied with the safety of a job. The truth, however, is that a real entrepreneur is not one who is driven by money as much as he/she is driven by the need to accomplish something different. If you speak to many of the successful entrepreneurs you will find this trait amongst them.

If you examine the current economic programme, what you will see is that there is a real effort to remove the structural impediments to the entrepreneurial drive. This is very important for sustainability, as what this will do is cause the private individual (entrepreneur) to develop the confidence to invest his savings in starting a business, and by so doing create jobs, and income, which will then result in even further economic activity and growth. And so the cycle continues with further confidence and growth.

So we can all agree that the only sustainable way for economic growth to occur is through private (entrepreneurs and individuals) spending and investing.

The questions that we should be asking, therefore, are what are the inhibitors to the private sector having enough confidence to invest, and also, have we created enough areas of opportunities, again by removing the barriers, for investments to happen. It is important to understand that government policy can have the effect of both creating and also reducing areas of comparative advantage, and so the one of the primary features of government policy should be to create a business-friendly environment in as many areas of opportunity as possible.

It is for this reason that the fiscal and legislative adjustments under the current IMF agreement are beneficial for economic growth. Contrast this to the previous IMF agreements where the primary adjustment was devaluation with no adjustment to the "doing business" environment, which was really just making it more difficult for persons to make purchases, but not give them the opportunity to earn more income. This is because the classical argument for devaluation is that it is supposed to make your goods cheaper, and thus more competitive globally. However, what was not considered is that if you are hampered with the inability to produce (inhibitors), then no matter how much your income is reduced, and how hungry you get, without the ability to earn income then you will not be able to earn your way out of the problem.

What this programme is aiming to do, with the adjustments being made, is to make for an easier path to production for those who are innovative and productive.

However, legislative and fiscal changes are not enough to ensure sustained economic growth. Or put another way, competitive production, or increased productivity does not result from only tightening on government expenditure and putting the legislation in place to aid the business environment.

As examples, government cannot continue to make adjustments just on the expenditure side, or increase taxes, and expect that the fiscal situation will improve. This is because, at best, government services and effectiveness will remain stagnant, or non-existent. Also, we have had many sound pieces of legislation in place that are not enforced.

Therefore, the fiscal situation, and effective government service, can only improve if the fiscal revenues improve and that can only happen sustainably if economic activity and net incomes improve. Definitely not through new tax measures, which have been in the past the only solution we have taken to improving the fiscal budget, which has always failed. And the only way that legislative changes can be effective is if they are enforced without preference or delay.

This speaks to two requirements for development. First, we must improve the "doing business" environment for investment and income growth (economic growth). Second, we must improve the discipline of enforcing legislation and justice for social development. When these two things come together, then what we will see is development, as opposed to just improving social justice or growth separately.

So then we come back to the question of what are the impediments to increased investment and employment, AND similarly, the impediments to social equity and justice? Note that social equity and justice does not mean welfare only, or distributing capital to persons who are unproductive, but rather, it means providing equal and available opportunity to all irrespective of social or income standing.

So for me the solution to development is simple.

Firstly, we need to focus our efforts on creating a "doing business" environment that encourages investments and employment, particularly in export industries. Secondly, it means creating a social environment where everyone has the same opportunity and will succeed based on talent and productivity.

These inhibitors include (i) an efficient and accountable public sector bureaucracy; (ii) ease of paying taxes and greater tax compliance to reduce tax burden across the board; (iii) increased societal discipline and reduced incidence of crime; (iv) lower energy costs; and (v) improved citizen-police relations.

If we remove these obstacles, in addition to the reforms under the IMF programme, then the result will be (i) increased business and consumer confidence leading to (ii) increased consumer spending, investments, and employment leading to (iii) increased production and exports / import substitution leading to (iv) increased income levels leading to (v) increased fiscal revenues. And so the cycle will continue, each time leading to expanded growth and developmental opportunities for all.

This is because the effect of removing the inhibitors will be the exploitation of our best talent and most productive resources. It is for this reason that I am somewhat optimistic about the current economic programme. But while necessary it is far from sufficient for sustainable development.

Tuesday, June 03, 2014

Understanding the path to development (Part 1)

Dennis Chung says, much more than economic growth, development means the general improvement in opportunities and standard of living of the average citizen, which can be summed up in the Jamaica 2030 vision as “the place to live, work, and raise families”.

ALMOST daily I get questions on what will happen to the Jamaican economy and whether or not we are moving in the right direction. Or sometimes, get a comment that my expressed cautious optimism is misguided, as things are difficult in the economy. I can understand the frustration of many persons as we have been promised prosperity if we tightened our belts for the past 40 years, and we have not seen the results of the belt tightening. So, many Jamaicans are understandably cynical about the expressed optimism.

Some persons even ask why I am cautiously optimistic when in the past I have been very critical of the policies, to the point where persons have seen some of us (including Ralston Hyman) as pessimists, and today even he seems to be cautiously optimistic.

Could it be that we are just getting old and can't bother anymore, is there something wrong with us mentally, or are we able to see something that many others don't see? I remember that on many occasions we were chastised similarly for saying things like there was a need to go to the IMF or that debt restructuring seemed like the only way. But that is history, so let's look at a reasoned approach as to what may lie ahead for the economy, and what is an appropriate path for development.

Being in darkness, or a painful position, can mean that either you are about to see daybreak (or a better result, as darkness and pain can come before light and progress) or it can mean that you are falling deeper into a hole.

How then do you determine if you are actually in the darkest hour before the dawn or if you are plunging further into an abyss? The answer lies in understanding the context of the darkness. So the sophisticated investor knows that the best time to buy is when everyone is selling (or panic) and the best time to sell is when everyone is buying (or too much optimism).

The fact is that it is the analysis of the context, and understanding when there is further value, or losses ahead, that determine if one buys or sells. Analysis is something many seem to be short on, especially with the advent of instant media, as much of the debate is sometimes driven by emotions rather than reason. And this emotion is on both sides of the argument for optimism and pessimism, as arguments go overboard on either side sometimes.

I will attempt to then put forward a reasoned approach to understanding what is needed for Jamaica's economy to develop, in summary, as one or two articles can never do enough justice.

The first thing we need to do is understand what the objective of development is. In my view, development is much more than economic growth, or even increase in per capita GDP, but means the general improvement in opportunities and standard of living of the average citizen, which can be summed up in the Jamaica 2030 vision as "the place to live, work, and raise families". If we can achieve this vision for the average person, then we can truly say that we have developed as a country.

Once we have defined that vision though, then we need to assess whether we are there, and if not then what is preventing us from getting there. In other words, if we understand where the finish line is (objective), where we are in the race (200 metres in a 400 metre race), and what is preventing us from finishing the race, and we can remove the obstacle then maybe we can complete the race. But of course this assumes that we possess the capacity to do a 400 metre run instead of a 200 metre run, which we have had a better advantage in.

Therefore in removing the obstacles to the objectives, we needed to understand what our potential was. So it makes no sense saying that we want to be as well off as Canadian citizens in 20 years, if our realistic potential is that in 20 years we can only achieve what they have in Barbados. This translates to understanding our comparative advantage and what value can be realistically had.

So when I look at Jamaica, I think that we have a potential to be much better off than we are today in terms of Tourism, Agriculture, ICT, Energy, and Manufacturing. I think that we have the potential to grow in excess of the elusive three per cent, that since 1972 we only saw between 1987 and 1990. And the fact is that if we could have done it between 1987 and 1990, what is stopping us from doing so now that we have a much better brand, athletes, more accepted music, and we are more interlinked with the global marketplace.

This leads us to the question then, if we are capable of growing in excess of three per cent, or the world average, then what prevents us from doing so.

The first thing to do is understand what are the drivers that will cause us to grow beyond three per cent, because even if we remove the obstacles and we do not empower the drivers of growth then we will still not have the growth. So if I provide a clear path for a car but not have a working battery in the car then even with the path cleared the car still won't be able to go, simply because it may have been sitting in a still position so long that the battery is dead.

So while moving the obstacles I also have to ensure that the engine of growth is ready to go. And we have to find out what is required for that growth engine to go. So many have said that now that the obstacles to growth have been removed that the private sector must now come forward and start to grow the economy. I remember someone saying that to me at a seminar, and when I asked if he didn't consider himself the private sector, and if he would invest his pension in a business and start the growth, he said no that he wouldn't risk his life savings. This is exactly what the private sector does, particularly at the SME level.

So the question is, what do we have to do to make people feel safe to risk their hard earned savings, which is what will result in growth. In other words, what would motivate them to have the confidence to invest money that otherwise could have gone to provide for their family, and in particular future income, or pension? The fact is that this is the decision that many entrepreneurs face, and it is therefore not a matter of just saying that some of the obstacles are being removed so now the private sector must invest, as much of the "abstract" private sector many persons love to speak of are ordinary individuals who take extraordinary risks, which amounts to a gamble of their family's well-being.

Friday, May 16, 2014

The economic impact of fear

FEAR can be a very important learning tool if one understands and embraces it. A child for example learns through fear, and understanding how to minimise the risk associated with the fear. If, however, the child does not take risks because of fear then the child will not develop properly, and could end up being mediocre in life because of the fear of taking risks. This I think is one of the reasons children (or young animals) are curious because nature understand this need to take risk in order to learn, but it also gives us pain as a way to ensure that while we remain curious we are also fearful of the consequences of being careless. In fact it is usually the fear of parents that lead children to not want to take risks as parents tend to thwart their natural curiosity to experiment.

While riding earlier this week, I thought about this concept, as we were all sprinting at upwards of 30 mph. While recognising the fear of falling, or crashing into someone, at 30 mph on a bicycle, we also understand that not taking the risk means that you get left behind. So if you want to ensure that you are at the front of the pack, then you have to understand that you have taken all steps to minimise the risk of falling but not let the fear of falling stop you.

This to me seems to be one of the major philosophical challenges we have faced as a country that has set us back significantly. This is manifested in a fear of failure that has led many Jamaicans, and the Government, into inaction. Or at best case to do the same things a different way, while expecting the same result.

This is one of the reasons the Insolvency Act, which is soon to become law, is such an important piece of legislation, as it seeks to change our perspective on people who have tried and failed. Steve Jobs, for example, did not succeed the first time he was at Apple, was actually dismissed as a failure. If he lived in a country like Jamaica, however, more than likely he would not have been given a second chance because either the ridicule from society, or the regulations, would have prevented him from trying again.

It is this stigma that society places on failure that leads many persons to prefer the comfort of a job rather than the initially difficult, but long-term rewarding, life of an entrepreneur. That situation is changing now I think, as I see a lot more university students wanting to become entrepreneurs, than when I was going to school when the thing to do was to become a lawyer, doctor, etc. In other words your parents wanted you to just go to school and then apply for a job you would keep for the rest of your life. The result of course is that you never enjoy the rewards of being a successful entrepreneur, which usually was left to the persons who never did so well academically, who ended up employing the persons who excelled academically.

This same situation is also present in the government bureaucracy, where the fear of failure is so entrenched that we ended up creating systems that ensured that no one is seen as a failure by ensuring that everyone failed. In other words, because we are fearful that persons will be corrupt, the first thing we do is assume that everyone is corrupt and then put in a system to ensure gridlock (procurement and approval systems) and the result is nothing gets done. The positive side we see is that if nothing gets done then nobody can be blamed, and so everyone is satisfied that they have done nothing wrong because they do nothing.

I have seen for example numerous situations where following the procurement rules caused the cost incurred to be greater than the risk from having less onerous procurement rules. In one instance I saw a situation where the cost of the system to monitor an expenditure cost more than the expenditure. I also remember a case that was in Parliament where the Accountant General department has not paid a bill for two years because the procurement rule was not followed properly to secure the equipment, and the finance charges they had to pay two years later came to more than the initial bill. So they ended up having to pay more than twice the cost, in US$. Why? Simply because of the fear of failing, even when we have failed already.

And this fear is exacerbated, and many times distorted, by the media who just wants to hear that someone got something wrong and then they are all over them, and the readers and listeners lap it up as the latest scandal to be discussed. Never mind that for the first time in a very long time Jamaica has achieved a fiscal surplus. That is not newsworthy enough to carry.

What I am arguing though must not be confused with carelessness and lack of accountability. Of course if one breaches rules or is negligent then there must be accountability, which the lack of it is another problem. Holding someone accountable for something, or accepting accountability, is a big problem we face, but maybe that is again driven by the fear of failure. What we must do is find the right balance between risk and accountability if we are to maximise success.

This I think is one of the positive differences with the economic programme we are currently undertaking. The fact is that it is a departure from the normal way we have done things, as it seeks to change the behaviour of the economic players, by changing the way we do things. This I think is fundamentally driven by the legislative reforms being undertaken. While the programme realises the risks associated with tax and legislative reform to the fiscal revenues, it also balances that risk with the benefits to be achieved from the increased competitiveness that will result.

The point is that while we must all be fearful of failure, that fear must be measured by the need for success, and the realisation that giving in to that fear means gridlock, and ensures that nothing happens. Just ask all the successful entrepreneurs we would all like to become.

Friday, May 09, 2014

What will man leave for God?

Christianity teaches us that God made the earth, and all that is within it, in seven days, while the proponents of evolution promotes the idea that the world, and the animals (including man) evolved over billions of years. In either case it would seem that the world came about with man as a by product. The result in either case was a world where nature was seemingly in perfect harmony with itself, abundant food and water sources, and a natural habitat that corrected itself through the elements of nature.

Christianity also goes on to teach us that one day there will be the second coming of Christ, when God will come back to judge everyone and take back his creation.

On May 7th the New York Times reported on a recent climate study publication (National Climate Assessment), which showed that climate change is no longer something that will happen in the future but that it is here with us today. There has been a 2 degree Fahrenheit increase in average temperature over the past century, the glaciers have decreased by roughly 40 percent, and sea levels could rise by six feet in 2100 (consider this against the fact that sea levels have risen by 8 inches over the past century). The report states that the changing weather patterns we have been seeing in the US is attributable to the increasing global warming effect.

So for all of us who believe in the second coming of Christ, the question that we should be asking is what will man leave for God? In other words when God returns to earth to judge what we have done since creation, will God be satisfied that the condition he gave the earth to us in is the same, or similar to, the condition we will be handing it back in.

The fact is, as the report says, that since the industrialization period the concentration of carbon dioxide has increased by approximately 40 percent, and over the past 50 years the primary cause of global warming has been driven by human activities. Further, temperatures are expected to rise another 2 to 4 degrees F in most areas of the US over the next few decades, and around 6 degrees F by the end of the century.

One can only imagine what climatic conditions we will face if we continue on the same path, as the past decade has also been reported as one of the most active in earthquake activities. What is more is that this tells us how short sighted we are as humans, because the main motive behind the destruction of our climate (profit and improved living standard) is the same things that we are ensuring will be threatened for ourselves and our children, who we claim to love so much. So we are ensuring that when we are no longer here to protect our children that they will be at the mercy of vicious climatic conditions.

But this is just one of the ways in which the so called most intelligent animal (humans) have sought to bring about our own destruction. We kill each other through wars and murders in society, abuse our children, keep others in poverty for our own riches, create more destructive weapons every day, produce foods and other inventions that lead to our ill health and own devise, and the list goes on. And then we say that we are civilized. In fact, I think people acted in a more civilized manner to each other before many of the technological and luxury advances we have seen.

I was commenting to someone recently that it is no longer fun living in Jamaica, because we are so fearful of the crime and for what can happen to our children and loved ones. We have created an environment where people thrive on news from the media about the downfall of others, and celebrate the fact that our children are baring themselves naked and drinking alcohol at various events.

And still we say that we have advanced and call ourselves intelligent and civilized. We know for example that certain lifestyle habits are not good for us, but we still do it and say we are intelligent. Is it any wonder then that even though there have been many warnings about climate change effects from the use of fossil fuels and other carbon emissions that we ignore the warnings and continue to live as if actions have no consequences, negatively or positively. Or maybe because we are in an era where everything is fixed for cosmetic reasons we believe that when the climatic conditions get really bad we can solve it like we do with liposuction or a diet pill, when we want to lose weight for an event, not thinking about the long term health effects.

Climate change is a serious thing. This is not something that affects one part of the world and not the other, or one section of society only. It is the great equalizer and if we do not take care of how we treat the climate, or how we allow others to treat it, then we all suffer.

So the question is, what will man leave for God when he returns? Based on our behaviour the likely answer is that when God returns there will be nothing left as we will have destroyed everything. However, as human beings we do in fact have the intelligence (even though difficult to believe) to understand and act to ensure that when God returns we can give back the earth in the same or better condition. Which one will we choose?

A cyclist's perspective of Jamaica

ONE of the things I have learned from my teachers is that before you attempt to write (or say) something, in other words pass judgment, it is very important to observe and think about what you will say.

This not only requires that you carefully observe but that you be slow in giving an opinion, and even more careful when you say or write something, which in many respects means that you understand two very important subjects -- mathematics (which teaches one to be logical) and English (which teaches one to relate accurately and understand). The problem with much of what we hear and say today of course betrays our understanding of both, and many times leads to national and personal challenges that could have been avoided if we had a proper understanding of these subjects.

It is therefore no surprise that many of us who see the importance of this understanding can point to teachers who have influenced us in many positive ways. At this point I would like to wish all my past teachers happy belated Teachers' Day. I can clearly remember those teachers who influenced the way I think and my preoccupation with the advancement of Jamaica, starting from high school and cemented at university by lecturers such as Trevor Munroe. Michael Witter, and Don Robotham, who, although they never taught the core subjects of my degree (accounting), very importantly influenced my thought process with their provocative look at the subjects of politics, economics, and sociology.

While returning home from my usual Sunday morning bicycle ride last week, it occurred to me that one of the challenges many of us face is one of perspective. In other words, many times we are moving too fast to really observe, understand, and appreciate what is happening in life around us. This, I think, is one of the challenges we face at a national and personal level, in many instances. That is, we many times don't appreciate what is happening around us because we are moving so fast and this results in us not being able to fully understand and comment appropriately. On a personal level what this many times results in is us coming to the end of our lives and then discovering that we really never focused on the things that really matter.

This is similar to my own perspective when driving as opposed to riding. When driving you are moving at around 30 mph and when cycling from the ride I am moving at around 10 mph. I therefore usually notice a lot more about the environment when riding home, which I don't notice when driving at a faster speed and sitting behind four doors with the windows up and radio on.

So while riding back home there are a few things you notice that would not normally be seen while driving. First thing you notice is that the roads are not in the most desirable state, but you do notice that some work is being done to address some of the road infrastructure issues. Related to this, however, is that our roads need directional signs in order to control the driving, especially for the buses and taximen who are the worst offenders. You also notice that the general infrastructure (sidewalks, drainage, and even some of the buildings) need some work to be done. If we are going to move forward as a society, and move towards vision 2030, then infrastructure development and some systems to guide use of the roads are essential.

One of the challenges we face is lack of fiscal space to do so, but it is also important to understand that future fiscal revenues also depend on a proper infrastructure being in place for investments, and for living generally.

What you also notice is that there are many young men on the road, obviously needing something to occupy their time. It is easy to identify those persons who are busy making their way to some employment, but you can also clearly identify those persons who are just hanging out on the corner, of which most are young men who should be employed in some productive activity instead of just sitting on a wall. If as a country we do not address this problem, then the future will have challenges.

You also notice (and this is normally when going to the ride) that we have no respect for the noise abatement act, as up until 5:30am you can hear the music all over.

Another thing that jumps out at you is that the gullies and sidewalks are dirty. People obviously dispose of their waste anywhere they feel like. This is a health and environmental hazard, which does not make the headlines but is a very serious problem. This may be because we have gotten used to this situation, and I notice that one way of certainly being able to identify when you are getting into Kingston is when you start to feel the quality of the air changing for the worse, indisciplined driving, and the garbage on the roads.

These challenges in our environment are problems for how we socialise our children, and you can see the various stages of development as you ride past the children. The very young you see with their mothers mostly (very rarely do you see a young child with a father) has the face of innocence and curiosity, and then the older ones (between maybe six and 10 years) you see without any adults riding or just starting the practice of hanging out on the corner like the older ones. And then there are the teenagers who are obviously making the transition to the practice of the young men mentioned before.

What is clear is that our society needs to be properly organised and that there must be a deliberate effort to do so. Cycling at 10 mph brings home a reality of what our society and infrastructure is like, which you don't see driving at 30 mph. It means to me, also, that much of what we talk about daily is really not addressing the heart of the problem, as even while we discuss many of the other pressing issues at a high level there are some critical on-the-ground things that need to be addressed.

If we do not address these issues, then we could end up with a society that is disconnected regardless of any macroeconomic progress we make.

Monday, April 28, 2014

Social behaviour - the missing link for Jamaica's development

Jamaica Urban Transit Company (JUTC) buses. Chung lauds the JUTC and the Ministry of Transport for their efforts to streamline the bus system.

AS we start the 2014/15 fiscal year with the reports that we have successfully passed all four IMF tests so far, and with a feeling of greater confidence and hope for economic and fiscal improvements, it is also important for us to consider that economic growth alone is not enough for development. After all, our ultimate objective as a country must be social and economic development and not just growth. In other words, we should strive to achieve the mission of vision 2030, which is to make Jamaica the place to live, work, and raise families.

In order to achieve this vision, however, we must understand that while economic growth is necessary, it is not sufficient for development. It is also important that while we pursue the necessary economic, and legislative changes to secure a competitive economic environment, we also focus our efforts on what I think is the foundation for a country's development, which is social behaviour. We will of course remember the "values and attitudes" campaign under PJ Patterson as prime minister.

The reasons proper social behaviour is so important to development should be obvious to all, but suffice to say that whether you are in an organisation or in a country setting, no meaningful development can happen without an adherence to rules / structure and the respect of the rights of every citizen in the country, whether they are guilty of a crime or not. It is on these principles of rules, acceptable social behaviour, and respect for the rights of all, that modern societies are based. And without these at the base of our development we cannot consider ourselves a modern society, but rather one with barbaric norms.

Because how can we hope to be a modern society if our public transport system is a chaotic state of illegal and legal operators who drive how they want and stop anywhere in the road they want? How can we hope to be a modern society if people cannot enjoy their homes, or commute on the street, because there are those who believe that they should contaminate your space with loud music or preaching? How can we be a modern society if we ask a private company (JPS), and the law abiding customers, to subsidise the illegitimate behaviour of stealing electricity? How can we be a modern society where adults sexually and physically abuse children at will?

These are just a few of the socially deviant behaviour types that have become the accepted social behaviour in Jamaica. So we are happy being a country where social behaviour is dysfunctional and not understand that this more than anything else is what contributes to the widening gap between the income levels.

One case that I want to highlight specifically is that of the public transport system, and again add my commendations for the stance being taken by the JUTC and the Ministry of Transport on the need to streamline the system. What we today call a transport system is one where anyone who has the means to purchase or drive a motor car, can enter the market as a public passenger vehicle, endangering the lives of the public (including children); one where taximen and bus operators (including some JUTC drivers) drive as if they are involved in either a formula one or motor rally event; one where there is no proper scheduling of buses; one where there is no colour coding or no proper training of operators to provide uniformity.

The system as it is now not only endangers the lives of the users, other motorists, and pedestrians, but it also causes an economic strain on the country, as people prefer to drive rather than take a disorganised and unsafe public transport system. This then causes traffic congestion, which an IDB study showed that traffic congestion is the greatest inhibitor to productivity in Latin America and the Caribbean. Not to mention the need for imported oil and foreign exchange for car imports.

This is why the JUTC has my full support for the structure that they are bringing to the sector, and should not waiver from what they are doing as we need to stop selling ourselves short just because some may feel that the behaviour is oppressive. I am sure that the JUTC will equitably consider the other side also.

Another area of great concern to me is that of the number of cases of child abuse. This not only contributes to deviant behaviour when they get to being adults, but in most cases results in perpetuating the cycle of poverty and destroying our most important factor of production - our human resources. The long-term effect is continued poverty. Add to this another problem, which is the abuse of citizens by some policemen and then you see that what we are creating is a workforce that is ill-equipped for global competition and productive lives.

Add to these two problems again the slow pace with which our justice system moves, and then we can understand why for the past fifty years we have stagnated as a country, happy with the small crumbs of economic growth we have been able to achieve sometimes. In other words, the lack of discipline and structure, and deviant social behaviour has created a society where ethics are at an all time low (resulting in white collar crime, including corruption); where immediate gratification is more important than long-term planning; and other such issues.

So while we remain optimistic about the economic and legislative reforms being undertaken, which show much hope for a more competitive economy, we must remember that it is not possible to achieve the needed social and economic development (Vision 2030) without addressing the serious social deficit that we have as a country.

Friday, March 28, 2014

Jamaica’s road to prosperity

THE January fiscal numbers reveal a concern that many of us expressed at the start of the IMF agreement: that achieving the primary surplus target is going to be very challenging. The numbers show that up to January 2014, we were some $2 billion behind the primary surplus target of $69 billion, with the more challenging months (February and March) ahead of us. So a lot will depend on the tax collections, especially in March.

What we also know is that many businesses and individuals have seen significant fall-off in income levels, and local and international consumption tax revenues have been lagging behind. We also know that the Government has been making considerable cutbacks in capital expenditure, and to January 2014 we have spent just under $8 billion less than was projected. But even this was not enough to save the primary surplus target as tax revenues were some $13 billion behind projection, showing that it is all going to come down to the tax collections.

Based on this the question on many minds is whether the Government will be introducing new tax measures. It is important to note here that the thought process of the IMF continues to be that what we need is a widening of the tax base and lower tax rates, which implies doing away with special exemptions, as done with tax waivers, and eventually lowering the tax rates generally. This process is already in train.

Will there be new taxes introduced? Only the finance minister can answer that, but in my own view, this would be a very damaging thing to do at this moment when we are seeing improvement in confidence, and very importantly, from where I sit, a lot more interest in entrepreneurial activities from university graduates.

This last point is critical, as what it means is that young people are seeing a better way for themselves by going the route of starting their own business. The problem is that they are not the ones with the loudest voices; those really are the business people and people in the workforce, through unions, etc. The other problem with this is that some of the businesses and people who are having difficulty have that difficulty because they are not competitive enough. On the other hand, there are also many SMEs in particular that have challenges because of still existing inefficient government bureaucracy and government policy.

The challenge we face, then, is how do we distinguish between those who have a genuine problem and those who even, after we make the necessary bureaucracy and policy improvements, still won't be able to survive. And also, how do we help to transform to greater productivity those businesses and persons who are capable of being transformed to greater productivity and efficiency?

This is a challenge that is faced even when one is trying to turn around the fortunes of a company, or person. The fact is that there are some companies and persons who will not be capable of being transformed, and we need to quickly identify those and understand that they are incapable of being saved and put in place other ways to assist them. This could include retraining, refocus, or welfare. In the past we have tried to maintain the status quo, even when there are clear inefficiencies, and what this has resulted in is new taxes and continuation of outdated incentives that do nothing more than cause further pain for all.

On the other hand, there are many that are capable of greater things, as we see many times when companies and persons extend themselves abroad to other environments and excel. And all they need is that government policy to create an environment for them to excel in.

It is for this reason why last week I recognised the excellent customer focus of the TAJ. And also why my message to the Government now is that the most important thing for us to do to transform Jamaica to prosperity is to stay the course. In other words, we must have confidence that the current fiscal policies and legislative and other changes will work, and we must continue on the path with a certain amount of discipline and not panic. So if we see tax revenues below projection, this does not mean that we raise taxes in a panic as this will only result in what we have done in the past.

Instead, what we must do (as the IMF says) is continue to broaden the tax base and lower the rates, to make us more competitive. We must also continue to focus on reducing energy costs; strategically dealing with crime, indiscipline, and transforming the police force for better customer service; and we must address the bureaucracy impediments, such as the development approval process, which is not being worked on fast enough.

We must also continue our focus on legislative reforms to make the environment more facilitative and competitive. So the fiscal rule legislation (which must also include sanctions), insolvency act, and comprehensive tax reform is necessary for the transformation to prosperity.

I have always felt that the primary surplus target was going to be very difficult to meet, and I wouldn't spend too much time right now on whether we do or not. What I think is important is that we continue to do the things that are necessary to move us to a more competitive environment where businesses (and in particular SMEs) can flourish and plan, where citizens feel safe and can be rewarded with success if they are willing to work, where all children have access to a solid education (up to tertiary level), where government bureaucracy is focused on providing excellent customer service (such as at TAJ), and where discipline is maintained.

My own view is that we are on the right path to making all of this happen, and what we must do is filter out the valid criticisms from all the noise that will inevitably come as we go through this period of adjustment. The sign of a good professional is that he/she does proper due diligence and determines a successful plan and sticks to that plan after having ensured that it is the right one. The biggest mistake he/she can make is wavering at the first criticism that comes.

So if we want to get Jamaica to prosperity, then we must also stay the course.