Thursday, December 27, 2007

2008 economic expectations

As usual in welcoming 2008 it is a time to look at the year past and project expectations for 2008. For the past two years I have been saying that crime and education are the main concerns, and indeed they continue to be. Crime because there is so much economic loss and education because productivity remains a big concern for Jamaica.

In my view 2007 has not been a very good year for Jamaica, as the year has seen the effects of a continually high debt; high crime rate; inadequate education results; and a slow down in the global economy manifest themselves. Growth has also been much less than originally projected, firstly because the projection was unrealistic, as I had indicated at the start of the year, and secondly the long election campaign resulted in a slow down of economic activity, with more time spent managing the election campaign than the economy.

A new government was elected, of which much was expected on the first day, although we didn’t seem to expect much in the past 45 years. When the government came in they had to begin to grapple with understanding the state of government and was immediately faced with global events affecting Jamaica, not least of which the high oil and commodity prices, resulting in inflation were being revised upward. This was not a phenomenon of Jamaica only, as some developed markets became concerned about stagflation (slowing economy and rising inflation), caused primarily rising oil prices and the sub prime crisis.

Higher oil prices
For the first time oil prices threatened to push past US$100 per barrel, and the threat is still very real. In light of this the government has had to grapple with high food and commodity prices while at the same time having to deal with a higher than originally projected fiscal deficit. These events, coupled with a weakening US$, saw the exchange rate climb to near 71.50 but we managed to survive through November and today the exchange rate is back below 71.

So the last three months has been very challenging for Jamaica, with a new government in power after 18 years, and having to deal with global events and a rising crime rate, I believe that they have handled the crisis creditably and as things settle down we can see gains come next year. This will of course depend on how the country’s affairs are managed, particularly on the fiscal side but even beyond that within the public bodies.

The close electoral margin gained by the ruling JLP can be good or bad for the country, but this depends on how we manage it. Very disappointing for me over the past three months has been the continued tribalistic nature of our politics, which can gridlock the country. The only shining light for me has been the way the Prime Minister has continued the path of giving the opposition greater power even in light of the political events as he had committed to, which shows a certain degree of maturity. How can we expect the people of the country to live peacefully with each other if in Parliament we continue to display the partisan approach to management that after 45 years has left us nothing but poverty and debt?

In 2008 the Prime Minister will have to continue to remain above the politics and provide the direction needed for this country. For too long we have been without proper leadership. He has said that he is public servant number one and I believe he is sincere about it. I believe that there is someone on the opposition side of a similar vein, but I will reserve my opinion on which person that is.

We should also expect the global situation to remain bad over the next three months or so, as oil prices remain relatively high over the winter, eventually tapering off to the 70’s on average for the year, and the sub prime crisis is resolved. We may also see a slow down in European markets, and global growth continue to be propped up by the emerging economies such as China, Russia, India, and some South American economies. These markets would be the ideal ones to market tourism and exports, as discretionary spending should remain strong.

2008 developments
I expect that the fiscal situation will settle down, and with the strong tourist winter season expected we should see the exchange rate also stabilize. Inflation for next year should be lower than 2007 and all these factors added to reducing interest rates in the US should see better interest rates for Jamaica. I also like the approach of the Education Minister, and expect that we will start to see better things happening in that sector.

The bug bear for me remains crime, and it is heartening to see Hardley Lewin as the new Commissioner, whom I have every confidence in, as someone I have known for a while and know his capabilities. If we can manage to tame the crime beast then we will see an upswing in economic activity, as crime ridden parts of the country can be returned to economic areas. I hope that after so many years of sowing the seeds of crime we can begin to reverse it by focusing on giving the youth an alternative. The current approach of searching everyone at dances is ridiculous though, as (1) it tramples on the rights of persons and economics; and (2) if the person with a gun or drugs sees that the search is taking place what are they going to do keep the contraband on them. While we continue to perform these sting operations persons are still doing what they want on the roads and music still continues to blare at 7AM in the mornings.

Going into 2008 also the developments within the unregulated investments community should start to unfold, as we have seen two recent events which should form this catalyst, (1) the unaudited statements published by Cash Plus; and (2) the ruling against OLINT and LEWFAM in the courts. Persons invested in these institutions have also reported that they have been receiving tax assessments from the authorities. The start of 2008 should therefore be a very interesting year in this area.

When one speaks of the first 100 days of a government though I always wonder what the significance of this is, as this is not the time that you would necessarily expect results but rather expect that the foundation be laid for governance. Much of this preparation is behind the scenes and may not manifest itself in results over the first 100 days. So the real question to ask government is what have you done to prepare for governance in that time. The first 100 days should therefore be a time for laying the groundwork.

Of relevance though is for us to understand that the most important thing to be done over the 100 days is the appointment of boards. This is not something that has been carefully analyzed. We must understand though that it is not politicians that run countries, and to a lesser extent civil servants. Countries are run by the boards that are put in place by politicians, as poorly performing public bodies can make a responsible Minister look bad. If we want an efficiently run country it is to these boards that we must look.

2008 I expect to be a better year than 2007, as we are over the malaise of elections, and the government will be better positioned. The economic climate will change from what has traditionally driven it and I believe that we will start to see more small businesses come to the fore as crime is dealt with. It is of course going to depend though on strong leadership from the Prime Minister on who much rests.

Thursday, December 06, 2007

True blue for life

Last Saturday was one of the happiest days of my life, when Jamaica College (JC), the greatest institution in the world, won the Manning Cup for the first time in 33 years. Anyone who knows me well understands that the reason JC was my only choice at common entrance was because of its football tradition. I waited for 30 years after entering JC to see the Manning Cup come home to its rightful place, and even after so long I will still take it. For me the Manning Cup is more meaningful than any other trophy JC has lifted, which since I entered included everything else. Much respect to the team and coaching staff that brought it home for all the JC alumni.

As I always say to my friends there are two types of people in this world, those who went to JC and those who wish they went to JC. This great institution has produced many Jamaicans who have and continue to make significant contribution to Jamaica. We have produced three of Jamaica’s eight Prime Ministers to date (Norman Manley, Michael Manley, and Bruce Golding), a West Indian Captain (Jimmy Adams), Olympians (such as John Mair who is a part of the current coaching staff), scholars (such as Professor Hall and Trevor Munroe), and business greats (such as Karl Hendrickson, Jimmy Moss-Solomon and Maurice Facey). And the list goes on and on of great Jamaicans we have produced.

And we will continue to produce contributors to Jamaican development, which I would feel proud to be named amongst one day. All JC alumni, present and past should be aware of the great tradition of greatness they have to uphold once they enter JC.

Seriously though, what an institution like JC shows us is the effect a single institution can have on national development. And such an approach may not be a bad one to take. Of course we want to see the entire country develop to the highest standard, but in every development there are always winners that lead the way. In other words while we develop the entire country we need to look at centres of excellence that will lead the way.

We have seen this in tourism where Sandals and Superclubs have set the standard for all other hotels to follow. We see it in business also where one or two have been leaders in their industry, for example in the fast food business many have developed their model based on KFC. This is the way that markets operate, and we will see where new leaders will emerge once a new entrant improves on the previous standard or the current leader falters. As an example, the prominence that Microsoft once held in the technology industry is being shared today by companies such as Google and Apple. Similarly countries lose prominence over time and new super powers emerge.

What is takes though is for high standards to be set by one or two institutions and for the market to encourage others to follow. This is one of the significant problems that Jamaica has faced, particularly with crime, over the past ten to fifteen years. Standards have been set, as will always happen when a vacuum is left, but left unguided those standards will be the wrong ones. When we look at the crime situation, we see that what has happened is that over the years the general break down of law and order has led to standards of viciousness, corruption, and easy money being set. Because we have failed to institute effective organs of discipline such as in schools or an effective police force we have left Jamaicans to develop standards for their own survival. There are no rules that they must obey and so the natural laws kick in and people do whatever is necessary to survive.

Because of the bureaucracies we have created, and the lax manner in which we have sought to enforce laws, if they are enforced at all, we have succeeded in creating a society where indiscipline is the order of the day. I have been writing for a while that if we want to deal with the crime problem in Jamaica we must attack it from the basic levels of discipline. In other words we have to ensure that the laws of the roads and public nuisances are obeyed. I mean how can we expect to solve crime if we cannot even enforce discipline on the roads and that the Noise Abatement Act.

General indiscipline
Two weekends ago I was exiting through a one way and a taxi sought to enter, indicating to me (the person with the right) that I should move over and allow him to break the one way. Well I refused to do so, standing my ground, and eventually he had to reverse onto the road and allow the traffic that had piled up to leave. What was noteworthy also was that the people in the taxi were on his side, demonstrating the level of indiscipline in the society. I was watching the news a few nights ago and saw where the police went to shut down a dance that had gone on until the next morning, and the patrons were on camera saying that the police was fighting against them.

A few mornings ago Emily Crooks was speaking to a policeman, Radcliffe Lewis, who said that a mother of a wanted gunman, whom they found dead with a gun in his hand was saying that she would report the police to Wilmot Perkins and Cliff Hughes because they were looking for her son. The irony is that the police found him on the bed beside his mother murdered by other gunmen.

These examples show that the problem we face today is not just a few gunmen running around and terrorizing the country, but a general breakdown in law and order that has led to a society that does not appreciate the difference between wrong and right, including many in the police force. So how does arranging a few police operations to tackle this solve the problem? It doesn’t. What is needed is a general approach to dealing with discipline in the society and making people know that even the most trivial of laws must be upheld or the law will hold you accountable. Unless we start with the visible areas such as the roads and noise disturbances it will only be one successful operation after another without any general effect.

This again brings me back to JC, where the current Chairman (another great Danny Williams) and the principal (Ruel Reid) has made significant strides with the school. The discipline has improved tremendously and with it the academic performances. They, however, never started by trying to clean up the discipline with “sting operations” among the student body. They ensured that the teachers first and foremost were brought in line and then that the students were made to follow the rules and the standards of excellence that were set. When one goes to JC today we will see signs such as “The school of champions” littering the school yard, as we try to impress upon the students that they are in fact champions, having to deal with them as products of an undisciplined society.

The programme of JC’s transformation is working, although we have had incidents such as the unfortunate stabbing some days ago. It will be a process but we will continue to have our eyes on the prize and will get there, both for JC and Jamaica. but as all JC alumni, past and present knows, FERVET OPUS IN CAMPIS.