Friday, May 11, 2007

Can Jamaica afford to grow?

At the start of the 2006/7 fiscal year I had indicated that we would not meet the fiscal revenue projections, and that we would fall short by 5 to 10 per cent, with the expectation of a natural disaster.

We ended up short about 5 per cent with no natural disaster. I also indicated during the fiscal year that at best we would be on target with expenditures, which we once again exceeded. I also thought that the fiscal deficit would come out at around 4 per cent, and not the 2.5 per cent projected. We ended up at 5.4 per cent, with J$14 billion of expenditure being put in 2007/8.

These estimations were based primarily on the fact that I did not believe that Jamaica had the capacity to grow at 3 to 4 per cent, and we ended up at around 2.8 per cent. Again, while 3 per cent for 2007/8 is probable, it is not likely, especially if we have a major natural disaster. I say this because I still do not think that we have the capacity to grow at that rate, and also the following factors will be a negative:
. The slowdown in the US economy will negatively affect us, and more importantly the problem in the housing market, although possibly subsiding, will affect discretionary income, which tourism depends on and 75 per cent of our tourists come from North America
Growth in the Latin American region is expected to be lower in the coming year;
. Our tourism sector has seen a slowdown over last year, and I expect that this may continue for a while;
. The cement company indicated that they expected softer cement sales in the last quarter, and this is an indication of a slowdown in construction; and
. Agriculture will not see as phenomenal growth as last year, as we are not recovering from any natural disasters.
With all these factors, it does not seem likely that we will achieve a 3 per cent growth rate.

I see this also in the context of the promises by both political parties that they will find money to finance free health care, education and more money for the police to fight crime. The accusations are that the money cannot be found and that these are mere promises which cannot be sustained. When I hear these comments the first thing I think to myself is, are we thinking logically and this is exactly the reason why we are constantly in this predicament.

It would have made sense to apply that reasoning to the money spent on Cricket World Cup. We do not question expenditure for two months of entertainment but seek to question the proposals by the prime minister and Opposition leader to spend money on health, education, and crime. It seems logical to me that the latter would have a far greater value than cricket.

The logic I apply to this is as follows:
1. If we are to grow at acceptable international rates then we need to have a productive workforce and an adequate social and physical infrastructure;
2. If we are to have a productive workforce and proper infrastructure then we need to have (a) an educated population; (b) a healthy population; and (c) a low crime rate;
3. If we are to achieve these things then we will need to put money into them given the fact that the majority of our people cannot afford it individually;
4. If we do not put money into these sectors then we will not lay the foundation to ensure we are internationally competitive and grow at acceptable rates;
5. If we do not grow at acceptable rates and become competitive then we will sink further into debt and poverty. We may even qualify for debt relief under the IMF's debt relief programme for countries in dire straits, if that is our objective;
6. Therefore, logic dictates that the only option for us is to invest adequate resources in health, education, and fighting crime to move the country forward; and
7. It follows logically then that we must find the resources to do these necessary things, and it may mean reallocating funds or radically reforming the public sector for efficiency. We have tried the route of taxation over the years and it has now reached a point where any further taxation becomes unproductive.

So, based on my reasoning, it is now a matter of how and when the money to finance these areas can be made available, and the longer we wait, while discussing it to death, the worse it becomes. A recent report by the World Bank states that crime costs us 3.7 per cent of GDP. This of course is only the logic of a simple accountant, who could be wrong, but if there is another way, someone please show me.

Customer service deficiencies
Another thing I would like to look at is the level of customer service in this country. Is it that the Jamaican consumers have "exploit me" written all over their foreheads?

Or is it that there is something seriously wrong with our education process and corporate culture? It seems as if everywhere I go there is a problem with customer service, and in many instances the regulators do a poor job in protecting consumer rights. Maybe because they are more concerned with the licensing and other fees they receive than the role they are set up for. I think the fees should go to government and then the government finances the regulators to avoid any conflict, but then again if it goes to government the regulators may not be financed effectively.

Apart from the issues I always write about, I had another problem with a large bank in Jamaica. I have a credit card with them that expired a few months ago. They sent me a new card but I did not activate it, and therefore do not have the use of it.

As far as I am concerned, the contract with the previous card ended and the only way for another contract to come into play is if I sign accepting the card or activate the new one. I did neither. But they sent me a statement with the annual fee for the new card, even though I have not activated it, signed for it, or called them to ask them to send it.

Well, my position is that I will not be paying the fee, will not be activating the card, and I would love to see if they are going to charge me penalty and interest on the annual fee, which another bank has done with me already, even though they were the ones that sent me a card I had not asked for. Each time I receive the statement I throw it in the garbage, so I guess the balance is very significant now, as it has been going on for almost two years. But I did not ask for a card to be sent to me.

I am sure that this practice is happening to anyone who is part of a mailing list the banks have access to, and the regulators may be aware of this. But is anything being done about it? I wonder about the poor consumer who is intimidated by this tactic and ends up paying the money because of a fear of not being on their receivables listing. Personally, I will not succumb to any financial institution that tries to hold me up and take away my money because they have failed to properly manage their balance sheets and are now prey to falling interest rates.

25 comments:

David Mullings said...

I have been saying the same thing for years - about where we need to invest money, even if it means a drastic rethinking of other areas.

I am a keynote speaker and panelist at a Caribbean-American Youth Leadership conference in June 29th and will use some of your points because they are the same as mine and follow the exact same logic.

As for the credit card and the bank - I am sure that they will say that the original contract you signed says that you are a customer until you request to close the account, so the expiration of the card is not the end of the contract - of course they just want money

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