Friday, April 29, 2011

Achieving Vision 2030

"JAMAICA, the place of choice to live, work, raise families and do business" — Vision 2030 National Development Plan. If Jamaica becomes this place then we would have truly transformed from being a third-world country where we kill, cheat, and slander each other, to a truly first-world nation not to be outdone by even the most developed countries.

It is this vision I always dream of Jamaica becoming, and what drives me to criticize society's ills and misguided policy actions that have led to our economic stagnation for 35 years. Jamaica has excelled in every area except for politics. There are, of course, a few politicians that one can hold up as having been "a few good men", but overall politics has led this country on a downward spiral of destruction, as the aim of achieving state power always supersedes the good of the country.

The question therefore is whether, with 18 years before 2030, we can realistically achieve Vision 2030, as stated in the plan. If in 50 years of independence we have been unable to truly mature into a nation, then can we do so in 18 years and what do the indicators tell us? After 50 years we remain two tribes at war with each other, reminiscent of the African tribes, our forefathers who fought and sold each other to the Europeans as slaves. Isn't the divisiveness we have practised over the past 50 years tantamount to keeping Jamaicans in slavery also? The fact that every year Jamaicans have to await the presentation of the budget to see what new taxes we will be forced to pay is similar to the feudal master extracting money from his subjects for his estate.

So here's the real question once again: is there any hope for us and will we see that change occurring by 2030?

From my own perspective I think there is a ray of hope, given developments over the past couple of years. Some of these are listed below. I would start out by saying that in order to achieve Vision 2030 we have to recognise that primacy in that Vision must be the respect for our people and justice and the promotion of unity amongst Jamaicans. This is what Vision 2030 is about, and what will make Jamaica the place of choice to live, grow families, and do business. Because today what we have is a country where people will come for sunshine, beach, fun, and jerk chicken, but would rather go back to cold North America to raise their families and work, so as not to be subject to the vagaries of our society.

In order to achieve Vision 2030 this attitude must change. And if we do achieve this change, then I guarantee that Jamaica will be one of the most prosperous places on the planet. The only drawback is that our feudal... I mean political masters will see power ceded from them to the people. This is why in my book, I started out analyzing economic data and concluded by saying that the real problem with Jamaica is our constitutional political system.

I believe, however, there are some things happening that give hope that Jamaica can achieve Vision 2030, but require consistent application in order for it to be achieved. These are:

1. Tax reform: the Finance Minister has been at pains to indicate that the tax system is going to be reformed to encourage greater productivity and production. At the time of writing the revenue numbers have not yet been presented, but based on things I have been hearing I am hopeful that the necessary tax reform will come that will provide a boost to the productive sector. I am also confident about the Minister's determination to do so, and commend efforts already in place, like the Tax Administration reform.

2. Public Sector Transformation: a lot of work is being done here, and I am hopeful that it will be properly implemented. My own view is that a lot of time has been wasted, however, trying to transform a system that cannot be centrally done (as this was always the problem) and that could easily have been done in a year or two with simpler steps.

3. Charter of Rights: after taking almost 20 years to pass this bill, my understanding is that we are still waiting on the Governor General to sign it into law. This should be immediately done, as the people have waited long enough for fundamental rights to be enshrined in the constitution. Jamaica owes a debt of gratitude to Edward Seaga, who piloted the bill, and we must also commend the politicians for recently passing it in both houses. Personally I do not see the merit in the arguments that the government can be sued for not paying for education for the poor, because it is included as a right, and seems to be politicising the charter already. I mean, I have the right to breathe fresh air, so if I choose to live near a dump, do I have the right to sue the government, or can I sue the government for depriving me of sleep because of night noise?

4. INDECOM, DPP, OCG, and Public Defender: In spite of the public spats that have occurred between these offices, I think the holders and the way they have approached their work is to be commended. Each office can be cited for their efforts to uphold justice or stamp out corruption in one way or the other, and as a country we are fortunate to have had all these offices seemingly working for justice and ethics. I actually believe the public disputes between the offices are good for our democracy. It happens in the great USA, and is healthy as it shows that each office is prepared to defend what it believes is right against other sections of the justice system, which is good control.

5. Police Commissioner: we have a maturing police force under Commissioner Ellington. Over a year ago I indicated that what Ellington does would be what determines the future of this country. I think he has brought a level of discipline and ethical standards to the police force that has been lacking for as far back as I can remember. For the very first time in memory, policemen and women can proudly say they are a part of the JCF. My own view of the police prior to this was a rogue element. In the next survey of trust, we may very well see the police force significantly better than our politicians. Two other officers doing an excellent job are Radcliffe Lewis and Dathan Henry.

6. Civil Society: Lastly, but by no means least, I want to mention the role that civil society has played over the past few years. There is no doubt that there has been a very active and determined civil society keeping our politicians pressured to ensure they get back on the right track when they falter, as they so often do. This is good for our democracy and is the reason why Jamaica will not go the path of the Middle East, as some think. I note that the cries for justice have come from individuals who have formed organisations to fight the corrupt system. These include JFJ, FAST, JUSD, environmental organisations, Columnists, and the list goes on. What is evident is that this change has been carried by individuals while the private sector leaders have apparently caught on, which is not unusual.

Notice I have not mentioned any growth-inducement strategies or macroeconomic numbers as the means to help us achieve Vision 2030, as these are mere symptoms of the underlying problem. If we have social justice and make Jamaica the choice to live and raise families, businesses will certainly follow and economic growth will result. While the signs for social justice are positive, we must ensure we remain consistent, as like a train progress is easy to derail.

Finally I want to add that the biggest failing has been the inability to address our high energy costs. I think there are initiatives that can be taken to ensure a reduction in our energy bill, but until then energy costs are the greatest threat to businesses and disposable incomes today. More on this another time.

Friday, April 08, 2011

Fervet — a model for national development

"FERVET" is the first word of the Jamaica College (JC) motto — Fervet opus in campis. Translated, it means "Work is burning in the fields", and the JC alumni, in talking about the school will just say "Fervet". Indeed, over the past six years, work has certainly been burning in the fields, as the board, foundation, administration old boys and students have all been working to ensure that JC is number one. We have achieved that goal. JC today is number one for total development of the student.

There are some who will argue that JC cannot be number one when we are not the best academically. This is true. But does someone go to school for academics only, or is it necessary to leave secondary school as a well-rounded person -- good academics, sports, and discipline? I would bet most would want the latter for their children.

The just-concluded fiscal year has also seen a public sector company I chair, Jamaica Ultimate Tyre Company (JUTC2), triple our 2009/10 profits (unaudited financials). This in an economic decline from increased productivity.

Both these organisations, and in particular the Fervet story, can be used as models for national development. What makes both these cases even more rewarding is that they both emerged from the ashes.

In the case of JC, we emerged from being a school with a bad reputation to one where parents want to send their children. In the past year the achievements have been Champs, schoolboy football, under-14 and under-19 hockey, placed in the Robotics competition, won the English and Literary competition, significant academic improvement, and others too numerous to mention. At JUTC2 we recorded profits for the first time in 2009/10.

There is a lot Jamaica can learn from both cases, about what is essential for moving forward. Some of these include the following:

* Entire team rallied around common objectives. JC — at the start of the six-year period, the principal and the board agreed we were number one and the school of champions. A sign was erected, even in the early days, to this effect. At JUTC2 the common objectives from day one were profits and productivity. Is there a common objective for national development that all stakeholders have accepted?

* Each person's role was defined and they were charged with meeting certain deliverables and given the authority to do so. At JUTC2 the general manager was clearly told he was to deliver a profitable and productive organisation through a motivated workforce and he was given the authority to do so, with the only interference from the board being policy input and operational support where required. At JC the principal was clear about his role, and defined it himself. The board offered support, but he always had authority over operations. In the public sector there is still not a clear distinction between policy and operations.

* JC and the JUTC2 clearly defined strengths, weaknesses, opportunities and threats. Maybe not as textbook SWOT analysis, but these were clearly recognised and we built on our strengths and eliminated weaknesses, while taking advantage of opportunities and eliminating threats. In JC's case, we built on the school's tradition and history and utilised the support of the old boys. Indiscipline was curbed, and today, when you go to the school, the students address you in a very courteous manner. At JUTC we recognised that in our business the recessionary environment was an advantage, and that we could offer better support to JUTC. Has Jamaica maximised our areas of comparative advantage — tourism, coffee, sports, and agriculture -- or eliminated our areas of weaknesses or threats -- energy, crime, and indiscipline?

* Set goals with specific timelines. In both cases specific targets were set that all related to achieving the ultimate objectives, so that we created a road map to achieve the objective with specific milestones along the way, which were all measurable, which a specific individual had responsibility for. Is there any clear timetable with milestones to achieve Vision 2030, for example?

* The right persons were in the appropriate functions. At JC we have the appropriate skills in the principal, chairman, board, foundation, administration, sports administrators, old boys, and PTA. At JUTC2, a part of our change was to ensure that we had the right skills at the board, in management, and on the factory floor; and we also have a very supportive minister. In both cases, if someone was not capable of delivering, they were replaced.

* Technology played a vital role in improving efficiencies. Technology does not only mean computers are a new and more efficient way of doing things, because one could have a computer but be ineffective without the appropriate skills. At JC, we ensured the school management system, computer technology, and task management tools were all up to scratch and persons were appropriately trained. At JUTC2, we invested our capital in new and more efficient machinery, and ensured our workforce was properly trained in using it. In the public sector we see Tax Administration has improved by doing this, but there is still a general lack throughout. The RGD, for example, has good technology.

* Staff is appropriately rewarded for improved performance. In both cases there is a link between performance and reward, and the staff clearly recognises this link. This recognition of the link between reward and performance is important. I have seen organisations in which the incentive programme is very good but the problem is that there is no clear link between reward and performance, so that the incentive is perceived as a part of salary, whether they perform or not. Similarly, if someone is being punished, then we must be certain about the evidence before accusing them of being in violation, otherwise morale suffers.

* Every milestone is celebrated and the staff is applauded.

These are some of the major factors that have contributed to the success of both organisations, and which can serve as a model for our country's development. The first inhibitor to Jamaica's development is our divisiveness, and unless we unite on common objectives, then everything else is a non-starter. I can never understand why a country of 2.7 million persons, with so much potential, is so divided along political lines. Is this any different from apartheid, when people were discriminated against by skin colour? In Jamaica discrimination is based on ideology.

Strength of customer service

All this fuss about the Digicel-Claro deal, I think, is misguided energy, as it will not hurt LIME directly, and therefore I wonder why anyone would want to focus on resisting the merger. The fact is that Claro's closure is a benefit for LIME if the energy is placed on the right objective rather than on the merger. If we want true competition in the mobile market, then we must address number portability and cross-network charges.

This also reminds me of the importance of customer service. For example, even though others offer better rates, I remain with BNS, FGB, Digicel, and FLOW because of good customer service. At the first three, for example, I know persons in customer service and call or BBM them at any time of night if I have a problem. And that is the primary reason why I have remained with them despite more attractive rates being advertised. In the case of FLOW their service has been superior, although, of late, the way they implement increases is cause for concern, as if they are feeling like a monopoly.

Friday, April 01, 2011

Long-term growth-inducement strategies

THE Planning Institute of Jamaica (PIOJ), in its growth strategy document, readily admits it was not called upon for long-term development. While some of the projects will impact long-term development, it does not appear to be enough, and as it rightly says, will only serve as a "short-term growth strategy" if a nexus is not created to long-term development.

While I say this, I believe that there are other things happening that will have positive impact on longer-term development, rather than just growth. And what we need is development and not just growth, which we have always focused on since Independence.

I will comment on some of these, and critical areas we need to focus on if we want development and not just short-term growth. Because this focus is lacking in the PIOJ document, this is why I believe that the money could have been better spent.

I start with the statement I often repeat that "economics is a social science and therefore has more to do with human behaviour more than macroeconomic numbers or investments". In other words, it is human behaviour and consumers that drive markets and economies forward rather than economic indicators or incentives. If we were to focus on driving human behaviour in the right direction, then businesses, fiscal accounts, and investments would all benefit. This is the most important thing in achieving the current illusion of the 2030 vision, the place of choice to live and work. People do not first choose to live somewhere because it is a thriving economic mecca, but rather because of the social quality of life. This is why, despite the economic prosperity of the Middle East, many would not choose to live and retire there but rather may go on a one- or two-year contract to make some money and retire to a place where the social quality of life is much better.

It is therefore imperative that any economic planning begins with this end of social justice and happiness in mind. For all those who feel differently, you are certainly welcome to go live in Saudi Arabia, Syria, or Iraq, where you can find financially rewarding contracts. It is this lack of focus on the social objective that has caused Jamaica to see dismal growth performances over the years.

The fact is that markets are driven by consumer spending (not investments and businesses, which are a result of consumer spending). And consumer spending is driven by consumer sentiment and behaviour. Therefore, it makes perfect sense to develop policies that will cause consumers to feel good about spending. In the US, for example, the growth out of the recession did not start to take hold when initially the government pumped TARP funds into businesses, but rather when money was placed in the hands of the consumer through micro business and home-purchase support.

The problem in Jamaica is that we have always placed emphasis on incentives for investments and the fiscal accounts while allowing abuse of the consumer by the police, the public bureaucracy, and others through road indiscipline and night noise. So if we abuse the root (consumer) of the tree (economy), then how do we expect growth? The only time that there was an attempt at social justice was in the 1970s, but the problem with that was its focus on political rather than social objectives.

There are, however, initiatives that have been taking place that will help to create a better society but this is being countered by a stronger focus on things that will depreciate the focus on a better social outcome. These include:

1. The Charter of Rights: this is probably one of the most significant initiatives that can lead to positive economic and social development. And to show how interested we are in ensuring social and economic development, it took us 20 years to pass it in the Lower House.

2. INDECOM, Police Reform, Public Defender, and the DPP: the introduction of INDECOM has been an excellent move as it now establishes an independent body that can bring rogue cops to justice. Similarly the zeal of the current Public Defender. The work being done by Commissioner Ellington and his team of top cops such as Henry (Clarendon) and Lewis (Traffic), and the careful way with which the DPP approaches her job. We need to put even more resources behind these offices and charge them with more precise objectives.

3. Tax Administration reform and Public Sector transformation: these two initiatives are critical because bureaucracy is a significant inhibitor to an enabling environment. My only criticism is that these need to move ahead faster, and in the case of public sector transformation, that it could have been done quicker and at a lower cost.

4. Infrastructure development: these include road improvements, Falmouth Pier, and the MoBay Convention Centre. These are things that drive productivity and a focus on the areas where we have a comparative advantage.

The other areas where we need to focus on are:

1. Energy: Accounts for 35 per cent of imports and probably the largest cost item for companies and individuals. While the longer-term LNG/Coal/Nuclear initiatives are critical, the fact is that we could save 40 per cent of our energy bill by taking short-term measures, with significantly lower relative costs. These include:

a. Public transportation: Developing an efficient public transportation system, such as what Minister Henry is pursuing. We need to provide initially at least $3 billion per annum towards this and incorporate the private operators in the system.

b. Retail consumption: Encouraging renewable energy (such as solar) use at homes. This could be assisted by using the GCT on JPS bills to provide a credit to consumers on the purchase and implementation of solar equipment at home, similar to the hand-out of the energy-saving bulbs.

2. Food: Accounts for 10 per cent of imports. We need to ensure that the Scientific Research Council is involved in local food alternative development; agro-processing ventures are supported by places such as DBJ; and places such as the JAS help with farmer organisation.

3. Tax reform: There needs to be a shift from our always-present focus on the fiscal to the real economy. Tax policy has always been driven by a need to sustain the fiscal programme, and so has always ended up stifling the real economy. Today, our effective tax rate is approximately 50 per cent, which is a big turn-off for sustainable formal investments. In the upcoming budget, tax reform must focus on providing a platform for businesses to flourish. Any attempt to do otherwise will have the same contractionary effect as recent tax packages.

After almost 50 years of Independence it is time we stop acting like a socialist welfare state and focus on social justice and the real economy. No other path will take us to the long-term development and vision 2030 objectives we desire.