LAST week, I told someone making a presentation that one of the challenges facing Caribbean businesses is that regulators act like parents rather than partners.
So regulation in Jamaica is not about working with the business community and civil society in order to assist them to develop, but rather it is more like a parent who keeps a watchful eye on a child, ready to pounce and punish at a moment's notice.
Because of this approach we have developed regulations and laws to provide welfare and punishment, rather than encouragement and teaching the populace to fish. This attitude is highlighted in two recent events. The first is the call to roll back GCT on electricity, which should never have been introduced in the first place.
In the first instance, the introduction of GCT on electricity bills was only a short-term measure to a fiscal problem and ignored the longer-term challenge of high energy costs to consumers and businesses.
Instead of trying to reduce our consumption of imported fossil fuels, the response was to add a tax to the use of it, not really to discourage persons from using it but to raise money for the government accounts.
This approach is similar to the way GCT was introduced on telephone calls, which again sought to raise taxes on something that is widely used.
The second instance I have discussed in previous articles was to state in the tax reform green paper that the most important function of tax reform is to raise money for the fiscal accounts.
It is this attitude that has contributed to much of our restrictive regulations and focus on the fiscal accounts at the expense of the economy and social infrastructure. Admittedly there seems to be an attempt to change this attitude with the public consultations on the tax reform paper, and pension and public sector reform, but this still moves too slowly.
My own view is that government must get out of the way and allow the economy to grow. If a mother is constantly protecting her children, even when they are adults, then what chance do they have to develop their own survival and developmental instincts?
It is this approach that causes businesses that do very well in Jamaica to tend to develop into monopolies or oligopolies. Sectors that readily come to mind are (i) financial; (ii) telecommunications; and (iii) energy. In all these cases it is because of government's desire to act like parents why these industries don't develop further for the benefit of economic growth and development, and, in the end, the benefit of the consumer. In other words, even though we say that we want the economy to develop, the barriers to entry and the burdensome legislation cause a lack of competitiveness.
So even within the financial sector, the long, drawn-out process to allow mutual funds and credit bureaus, for example, has no doubt robbed the country of much-needed capital.
The FSC has been trying to improve the timing of application approvals, but the problem with the “barriers to entry” is not so much the regulators but the regulation they have to work with. Some may argue that it is the strength of our financial regulations that prevented us from experiencing a significant fallout from the recession, but my view is that we could still have been prevented from having that experience even with more players, and businesses would have benefited much more.
In the telecommunications sector, I don't think much more needs to be said than the OUR has twiddled its thumbs while LIME is experiencing a slow and painful death. I have been a Digicel customer for years, and will be for the foreseeable future, but why does it take so long to introduce number portability and establish crossnetwork charges?
Maybe after LIME is dead and gone, and Digicel is the only one left standing, we will have these things introduced. By that time they will be redundant. That is when they are redundant.
The other sector is energy. Our political masters have seen it fit to create a licence that enslaves the Jamaican consumer and business at the hands of one of our new colonial masters — the JPS. Some attempt has been made to change that somewhat, by introducing net billing and power wheeling.
While these are commendable steps, they are far from sufficient to have any positive impact on energy costs to the consumers and businesses. The cost of setting up energy production far outweighs the benefits of net billing, and it is a better payback to produce and store. Also, power wheeling will not bring the economies of scale needed to change the cost landscape.
I understand the restrictions of that horrendous licence, but there are some things we can do outside of the licence that will bring much greater competition to the JPS, and force them to review their operations.
Firstly, we should not reverse the GCT on electricity bills but use it to set up a fund that will provide, say, a 50 per cent credit to “tax-compliant” persons who want to set up renewable energy solutions, with NCC-registered suppliers. Secondly, businesses should look at creating a co-operative-type company, which they all own a piece of, and set up a power generation company that they would power wheel to themselves. Unless the amendment said that you had to own 100 per cent of the power generation in order to power wheel.
These steps are necessary, as by the time LNG comes we will be “powerless”.
Finally, I believe that elections matter so much in this country because government has established itself as such a big player in the economy. When the Government has a financial problem it pressures the poor Jamaicans through taxes, and when elections are in the air we wonder who will be in charge, as it may certainly affect the business or our lives.
This should not be. Government needs to move out of the way and allow people and businesses to thrive.
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