Friday, July 01, 2011

Lessons for Jamaica from the ICAC conference

LAST week the Institute of Chartered Accountants of Jamaica (ICAJ) hosted the annual conference of Caribbean accountants. This was the most successful one to date, with over 900 delegates registered, and more importantly for me, the theme, "Third to First [World] — going the distance", was superbly handled.

The conference did not focus on traditional accounting topics, but rather illustrated the fact that accountants are now a lot more than just the perceived book-keepers, representing in fact the most rounded professionals in a country. The theme we used as the basis of a presentation made by Professor Ghesquiere, from the Lee Quan Yew School, which focused on the Singapore success story. In addition to this presentation, Andrew Deutscher made a very informative presentation on "The Energy Project", which focuses on the role of energy rather than just attempts to get things done; while Michael Fairbanks and yours truly did a presentation on competitiveness in the region.

There were also many other enlightening presentations, but I think that these themes of (i) The Singapore experience; (ii) Energy as a tool for success; and (iii) the role of competition in market development captured the essence of the theme.

There were numerous lessons for Jamaica coming out of the conference, and those not in attendance really missed out on a very educational experience. It's not that what was presented was anything novel, as many other commentators have been proposing these solutions over time, but the interconnectivity of all that was said placed a special perspective on the recommendations.

Professor Ghesquiere did a fantastic job explaining the main factors that led to Singapore's success. The first thing he mentioned was that Singapore had exceptional leadership that focused primarily on economic development and growth, rather than the constant political power plays that we are used to in this region.

In fact, he was at pains to point out that Singapore and Jamaica had the same GDP per capita and level of development in the 1960s. The major difference was in the choices made by both countries. While Jamaica chose to focus more on social and political issues, Singapore, under the exceptional guidance of Lee Quan Yew, made economic growth and development their primary objective. So while we fought among ourselves for political and social supremacy, all of Singapore's policies and actions were geared towards economic development for the entire country.

He also pointed out, as many of us have been saying, that a very important part of Singapore's success was the fact that there was respect for law, order, and authority. He did point out that Singapore benefited from being a one-party state. In my view, in Jamaica sometimes we confuse indiscipline for liberty. For example, the argument that persons need freedom of expression so they must be allowed to play music at any volume, at any time, ignores the fact that the liberty of those being disturbed and offended by the noise is being disrespected. So we tolerate indiscipline and call it liberty. What we don't recognise is that for companies, countries, or even people to grow successfully, there must be rules and structure, otherwise it becomes a "free for all".

In Singapore labour and capital worked together for the development of the country. So during the recent recession, labour understood the need to take a pay cut in order to minimise job losses and to ensure that the country weathered the recessionary storms well. So while Singapore saw a harmonious working relationship between labour and capital during the short-lived recession there, in Jamaica we continue to see the stand-off between the government and public sector workers. And as a result of the inability of politicians, labour, and capital to work together, we have experienced thirteen consecutive quarters of GDP decline. So who wins in our case? Nobody.

What was also evident from the presentation was that an essential ingredient of Singapore's success continues to be trust between leaders and the people. What we find from the recent study about trust in Jamaica, however, is that amongst the least trusted are the police and the politicians. What is ironic about this is that these are the persons who are supposed to provide everyday leadership. The fact is that if there is no trust, then irrespective of how good your intentions are, no one will follow willingly. On the other hand, if the trust level is high then even when you have bad intentions people will follow until they wise up. It would therefore seem to me that repairing the breach of trust between our leaders and citizens should be a top priority.

Singapore also focused on economic growth rather than pursuing political objectives. This is critical to understand, and while many of us talk about economic growth and development, it is somewhat different to actually make it your primary objective. The fact is that much of the talk about economic growth and development in Jamaica is shrouded in the greater priority of politics and individual reward. Economic development for Jamaica will always be good for politicians as long as it helps them to remain in power. So even though we may realise that certain types of expenditure can derail an economy's development, we do it anyway because it is necessary to keep the party in power. Even though we know that duty waivers are not in the best interest of the country, we will support the policy only as long as it doesn't affect "me". This is where it is necessary for exceptional leadership to do what is good for the country and not any special interest group.

The last thing I will mention from the professor's address is that of the need to live within our means. For too long Jamaicans have consumed 90 per cent of the money we have borrowed. We have actually been borrowing to support a lifestyle that we cannot afford. There is no way that we can continue on that path, as countries like Greece have seen. Those who argue that while we were borrowing in order to consume, the economy was actually getting better, fail to realise that we were actually getting better, fail to realise that we were actually digging our own graves. What we must do is cut our suit to match the cloth we have. On the other hand, though, I don't think this means that we must stop borrowing or spending, and I somewhat disagree with the notion that debt is bad. As long as the marginal return of debt exceeds the marginal cost, then debt is good. What we must change is the way we spend money: we must ensure that we spend it in such a way that we receive a value added in excess of the cost. This would include, for example, infrastructure spending to support industries such as tourism and agriculture. A country where the tourist capital is separated from the national capital by a single-lane bridge over a river that is impassable when rains fall, while having a debt to GDP ratio of 129 per cent, cannot be serious about development.

Next week I am going to look at the other two themes I found very interesting at the conference, those of energy and competition. Until then I urge us all to think about these things that the professor has brought from his experience and reflect on why Jamaica is in its current position, after having been the model Singapore looked at favourably in the 1960s.


Leahcim Semaj said...

I was impressed by the scope and level of organization of the conference. New level of respect for the profession.

Top shelf stuff.

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