Friday, February 19, 2010

POLICING THE ECONOMIC RECOVERY

LAST week, the Government secured the much-needed approval from the IMF board for some US$1.3 billion to be loaned to Jamaica for balance of payments support. More importantly though, this paved the way for the Government to secure the necessary financing from the other multilateral organisations.

For me, however, the greatest impetus to economic recovery last week was not the IMF loan, as the loan does not ensure economic recovery but simply provides a halt to the decline of the economy which will continue if the appropriate policies are not implemented. The greatest impetus to economic recovery last week was the arrest of the police seargent and others in the gun and ammunition find.

Why people invest
My reason for saying this is that the salvation of Jamaica does not rest solely in the way the macroeconomic numbers or fiscal accounts are managed. While the management of the numbers is very important (and being an accountant I know that), it is more important for us to remember that economics is a social science and people invest more because of social stability, predictability and confidence, rather than macroeconomic numbers or interest rates.

As an example, in 2008 global investors were accepting a negative return on US treasuries while other markets and instruments were giving positive returns. This was so because of the prevailing uncertainty in global markets at the time, and the first thing that investors want to secure is their original capital. If you can maintain your original capital then you can live to fight another day, but if you can't, then you have no other opportunity to invest if the current one fails. And failure must always be seen as a possibility.

In fact, when investing, the management of risk and minimising loss are always more important considerations than how much profit you can make. The reason for that is if you can minimise your downside risks, then it means that the number of times you have to win in order to get ahead does not have to be very high in order to be profitable.
If, on the other hand, you take a decision to go for broke and you fail, then more than likely you will be wiped out in one go. So when making decisions about investments, investors usually find the best balance between risk and reward.

It is therefore important for us to understand how the potential investor thinks about the risk element of the investment. Investments take place in all types of environment. In Afghanistan and Iraq, for example, people do make investments, but these are investments that have a relatively short payback period. A rational investor would not, for example, seek to establish a business such as an online book store or an agro-processing plant in Afghanistan, even if he is getting money to borrow at zero per cent. Instead, he may seek to do some trading business where there is a quick turnaround on the investment.

Similarly in Jamaica, there are many people who would want to invest more in agriculture but refrain because of the high incidence of praedial larceny.
It is therefore very important for the investor to see (1) a stable social environment; (2) a predictable system of justice and fair play; (3) maintenance of law, order, and discipline; (4) a favourable industrial climate; (5) reduced bureaucratic structure and impediments; and (6) appropriate legislative protection. After all these are in place, then we will start to see serious investments taking place in the country.

Sure we will see some investments taking place, but they will only be in the form where investments are relatively quickly recouped. As examples we will see investments in financial institutions and services, where other people's money is used as capital while enjoying high returns, or we will see investments in trading and services, which have low capitalisation and quick returns. This, in fact, is the way that Jamaica's economy is structured for the most part, and the reason for that is because of all the impediments faced by potential investors. So if we want to see real long-term investments taking place we have to address those issues.

Efficient, corrupt-free police
At the heart of this drive for recovery, therefore, is the need for a corrupt-free and efficient police force. In the largest economy in the world one can't drive 100 yards without seeing a police car, and do not dare try to bribe any of them, or else you will certainly end up on the wrong side of the law. In the US also, while there are predictable and very efficient laws in place to ensure discipline, protection of human rights, and equity, these laws are not overbearing and do not require that everything that happens in the country has to go through a bureaucrat or the minister in charge. What they do is lay the foundation and guidelines for all to follow.

In Jamaica, for example, I can never understand the system of the Tax Compliance Certificate (TCC), which starts off by assuming that everyone is a criminal. Why does the person who has never been a problem have to go through the same process as the person who has had multiple run-ins with the authorities? Wouldn't it be more efficient to have a system where everyone is assumed innocent and if you have problems with the authorities then you are blacklisted and required to go through the process?

In Jamaica also we do not have much respect for human rights. As I keep saying, if people always have to be crying out for justice, then what time do they find to be productive? So once again, because of the way our bureaucrats operate, we waste a lot of productive time and resources dealing with issues such as Armadale and the Horizon Remand Centre, whereas if we had ensured that the rights of these people were being protected in the first instance we wouldn't have to waste time and money on these matters.

The people who are responsible for this should be asked to pay back the monies spent by the state in investigating. I am heartened by the prime minister's response to the announcement by the public defender that his office was denied entry to the Remand Centre. That is disgraceful for a country that calls itself civilised.

And how can any investor have confidence in the police's ability to solve murders and deal with extortion if they can't even control the night noise or the taxi drivers on the road? It would seem to me that these are basic aspects of discipline that any state should be able to maintain. The police seemed to have been making some effort to do so, but as usual when something starts in Jamaica it is kept alive for about... nine days. So once again people are parking (or stopping for a long while) in vehicles on Knutsford Boulevard to go into the food places thus obstructing traffic while all the policemen stationed at the Knutsford Police Post are holed up in the office trying to enjoy the air-conditioning, I assume.

If we are really serious about economic recovery, then while interest rates and other fiscal and monetary policies are important we can never really see real development occurring without first ensuring that we behave like a civilised society. Because as far as I am concerned, our society is far from civilised. In this age of globalisation there are far too many options available to investors other than Jamaica, so we must compete aggressively. For me, therefore, Owen Ellington is going to have the most pivotal role to play in 2010 in policing the economic recovery of Jamaica.

25 comments:

Anonymous said...

Excellent blog here! Also your website loads up fast!

What web host are you using? Can I get your affiliate link
to your host? I wish my website loaded up as quickly as yours lol

Review my page chapter 13 bankruptcy florida

Anonymous said...

I got this web page from my buddy who informed me concerning this web site and now this time I
am browsing this site and reading very informative articles here.


Visit my web blog body mass index chart

Anonymous said...

Incredible! This blog looks exactly like my old one! It's on a entirely different topic but it has pretty much the same page layout and design. Superb choice of colors!

Feel free to visit my site; how Much Should i weigh for my age

Anonymous said...

This post is in fact a fastidious one it helps new web viewers, who are wishing in favor of blogging.


Look at my web blog: best registry cleaner

Anonymous said...

I feel that is among the so much significant information
for me. And i am happy studying your article.
But should remark on few normal things, The site taste is great, the articles is actually excellent
: D. Good job, cheers

Feel free to visit my web page ... diets that work fast for women

Anonymous said...

You could definitely see your skills within the article you write.

The world hopes for more passionate writers such as you who are
not afraid to mention how they believe. All the time go after your heart.


Also visit my site ... hip waist ratio

Anonymous said...

Howdy! This post could not be written any better!

Reading through this post reminds me of my previous room mate!
He always kept chatting about this. I will forward this article to him.
Fairly certain he will have a good read.

Thanks for sharing!

my web blog: softsoap elements liquid hand soap coupons

Anonymous said...

Regardless of whether you purchase tag heuer links for your self
or loved ones, get it as being a present or get useful
heirloom pieces, you need to know how to get, promoting and cleansing tag heuer link calibre s practices.
This article gives suggestions on all elements of any time or funds you invest
in tag heuer link calibre.

Anonymous said...

It's a shame you don't have a donate button! I'd certainly donate to this brilliant blog! I guess for now i'll settle
for bookmarking and adding your RSS feed to my Google account.
I look forward to new updates and will share this site
with my Facebook group. Chat soon!

Here is my blog post - rydbikes.Com

Anonymous said...

Hi there, I enjoy reading all of your article. I like to
write a little comment to support you.

my page; http://www.gamesarrow.es/

Anonymous said...

I think the admin of this site is truly working hard for his site, because here every material is quality based stuff.



Here is my webpage: jello gelatin coupons printable

Anonymous said...

I need to to thank you for this wonderful read!
! I absolutely enjoyed every little bit of it. I have you bookmarked to look at new
stuff you post…

My website :: barilla pasta coupons online

Anonymous said...

I hardly drop responses, but i did some searching and wound up
here "POLICING THE ECONOMIC RECOVERY". And I do have a couple of questions for you
if you don't mind. Is it simply me or does it look like some of these responses come across like they are left by brain dead individuals? :-P And, if you are writing at other online sites, I would like to follow everything fresh you have to post. Would you make a list of all of your social sites like your Facebook page, twitter feed, or linkedin profile?

Stop by my blog; how to lose weight

Anonymous said...

Hi there, I enjoy reading all of your article post.
I wanted to write a little comment to support you.


Also visit my homepage: general mills fiber one cereal coupons

Anonymous said...

Hey! I realize this is kind of off-topic however I had to
ask. Does running a well-established website like yours require a large
amount of work? I'm completely new to operating a blog but I do write in my diary daily. I'd like to start a
blog so I can share my personal experience and views online.
Please let me know if you have any suggestions or tips for brand new aspiring
bloggers. Appreciate it!

Feel free to surf to my webpage: Bertolli spaghetti sauce coupons

Anonymous said...

Ouг relatiоnѕhіps ωith othеr indіvіduals require a higher degree of mеmorization abilіty.

Memory loss іs not a fоrgone conclusion for you.
This suggestions will аssіst strengthen youг memory.



My ωеb site: AVH Procera

Anonymous said...

Arе you lоoking to saνе your mοneу on groсeries and househοld ρroduсts?
Thе prime method to find the moѕt effective methoԁ for getting
ωhat you would lіke аt a lоw vаlue is аlways to use coupons fοr frіendlу s
restаurant. Exаctly where arе уou
able to look to find these fantaѕtіс
friendly s coupons?
This аrticle iѕ going to assist reveal the secretѕ of coupons for fгienԁlу s геstaurant.

Anonymous said...

The idea tag carrera watch is almost as stunning as physical pieces
of tag heuer carrera calibre 36 is alone. tag heuer carrera 1887 holds on
to recollections of essential and joyous occasions and
pays tribute to relationships that matter to its owners and givers.
Understanding about all kinds of tag heuer carrera calibre
1887 can aid you preserve your recollections and having a lot more rewarding buying
and promoting experiences.

Anonymous said...

I likе thе valuable info you provіԁe in youг articleѕ.
I'll bookmark your blog and check again here frequently. I am quite sure I'll learn plenty of new stuff right hеrе!
Good luсk for the next!

Also visit my weblog: careerassistance.org

Anonymous said...

Ні there to evеry body, іt's my first visit of this web site; this website carries amazing and actually fine information in favor of visitors.

Feel free to surf to my blog cna to lvn program

Anonymous said...

Ηey very nісе blog!

My web blog: pharmacy technician salary in virginia

Anonymous said...

It's not my first time to pay a visit this website, i am browsing this web site dailly and get good facts from here daily.

my weblog saffron dosage

Anonymous said...

Hi, yes this post is in fact nice and I have learned lot
of things from it about blogging. thanks.

Feel free to visit my site: whole body cleanse **

Anonymous said...

Every weekend i used to visit this web page,
because i wish for enjoyment, since this this website conations truly
nice funny material too.

Feel free to surf to my weblog the pilates Studio

Anonymous said...

Good blog you have here.. It's difficult to find high quality writing like yours these days. I really appreciate people like you! Take care!!

Also visit my page; http://www.purevolume.com/lesterpark0/posts/3756222