Monday, November 28, 2016

Relevance of local government — if we can get it to work




Last week I was driving around Montego Bay with the NSWMA regional manager and stopped by the Retirement dumpsite. As I drove around, I thought to myself that much of the challenges we continue to face — at the NSWMA, and nationally — have so much more to do with the lack of order, discipline, and civic pride (or I should just say how people are brought up), than it has to do with resource availability.

As I visited the Retirement dump, it was clear to me that not only does it need a lot of work, but that many of the environmental conditions as it relates to the people and children have been ignored. People are allowed to live around and on the dump, including children, which is a major health hazard waiting to happen. In fact, children there play at the dump as our own children play in our yards or parks.

This, I think, speaks to the ineffective way in which we have sought to enforce environmental standards – by focusing on it after events happen, than being proactive and ensuring that people do not live in these conditions.

But then again, can we blame the people who are to enforce environmental standards when people are allowed all over the country to squat where they please? Maybe this is just another squatting community in the eyes of our local and central government.

As I drove around Montego Bay (in order to view the numerous complaints we get about garbage pile up in the city), it became very clear to me that: (1) the problem of garbage pile-up has less to do with the NSWMA and more to do with our means of disposal; and (2) that based on how garbage is disposed of, we can never afford enough trucks to keep the city clean.

All around the town I spotted people just dumping garbage in piles on the roadside outside of shopping centres, and even where skips were visible, more garbage was thrown outside of the skip than in it.

I was also told, and saw for myself, that NSWMA trucks were picking up the garbage. Then by the time we drove past a few hours later, more garbage was piled up. So, in fact the truck sometimes must make two trips per day.

Based on what I saw, there is no way that NSWMA can provide enough trucks to manage this situation.

The way we dispose of our garbage requires significantly more resources for the NSWMA, which eventually means that Government inevitably has to raise taxes as the cost of providing the service is much more than anticipated.

I hope everyone sees this link.

The main problem, as I see it, is the lack of enforcement of order and discipline in the city, which is not peculiar to Montego Bay. The maintenance of public order is the main responsibility of local government, and this is where I think local government has failed. This responsibility also must rest with local and not central government.

The problem we have with local government is not that it is irrelevant, but that it is dysfunctional. So, in my view, what we need to do is to get local government to work and we would see a significant improvement in our economic and social development. This is because no economy or society can move forward without law and order.

The question, therefore, is why can’t this be done by central government and just get rid of local government? This is the argument that many people make, but this again can lead to greater inefficiency and facilitate corruption. This would be because the other advantage of local government should be a check and control of central government. But this has not worked, as many times it seems as if local government is nothing more than an arm of central government, especially when they are both run by the same party, and it seems impotent when controlled by the Opposition.

The reason for this ineffectiveness is because there is no independence of local government. So when both branches of government are controlled by the same party, the fact that it is the ruling party that appoints candidates for local government makes it an extension of central government.

And when they are both controlled by opposing parties, the central government many times starves local government of resources because the local government funds are controlled by the former.

This is the challenge that local government faces in Jamaica and why it is ineffective.

What we need to do, therefore, is carry out proper reform which would then make local government more effective and accountable to the people, such as direct election of mayors by the people rather than “the chosen one” from the political councillors. In that case, it wouldn’t matter to people who controls the councils, as the mayor would be independently elected by the people.
If this were so, then local government would be much more effective in things such as proper zoning, enforcement of order (such as removal of illegal vending), and clean commercial areas.

This lack of any autonomy for local government is evident in the debates, where much of the debate has centred around things being done at the central government level, rather than anything to be done at the local government level.

The reason for this is simply that parish councils are basically impotent on their own as all the action happens at central government.

Until this is addressed, we will continue to have weak and ineffective local government, lack of public order, and possibly the continuation of improper waste disposal — partly because of lack of effective local government and partly because of the lack of pride by our people.

Monday, November 07, 2016

Analysis of Jamaica’s competitiveness and development challenges (Part 2)



Last week, I ended by speaking on the point that if we are to see true economic and social development in Jamaica, this can only come through increasing our competitiveness as a country. The only way for us to do that is to target the categories of Efficiency Enhancers and Innovation in the Global Competitiveness Report (GCR) ranking, as our improvement has been in the category of Basic Infrastructure primarily.

In other words, what we have been doing over the past four years is creating capacity (such as through institutions and infrastructure development) and macroeconomic and fiscal stability.

This has caused us to see improved confidence and thus increased investments and a return to growth. (It is reported that in the September 2016 quarter, year over year growth was 2.3 per cent annualised. This, however, reflects the bounce back from the drought that affected agriculture and so a more normalised growth may be under two per cent — still a significant development.)

So if we look back at the areas of Basic Infrastructure, we would have seen significant five-year improvement in the pillars of Macroeconomic Environment (17 per cent improvement) and Health & Primary Education (38 per cent).

However, when it comes to our Institutions and Infrastructure, we have only seen five-year improvements of eight per cent and three per cent respectively. A further analysis shows that of these four basic infrastructure pillars, only Health & Primary Education is in the top 50 rankings, with Macroeconomic Environment at 112, Institutions at 73, and Infrastructure at 77.

So even though our overall improvement has come from the basic infrastructure category primarily, the fact is that the improvement does not mean that we are where we should be as our institutions and infrastructure primarily remain serious impediments to development. In fact, the recent occurrences in the “X6 court case” and the unacceptable situation at the Firearm Licensing Authority prove that our institutions remain a problem.

In the area of Efficiency Enhancers, we even have a more serious issue, as in the pillars of Higher Education & Training, Technological Readiness, and Market Size, we have seen five-year declines of 13 per cent, five per cent, and 17 per cent respectively, and rankings of 90, 77, and 119. These are pillars that are essential for improved competitiveness and are therefore a serious concern, and they must be targeted if we are to improve our international competitiveness to create sustainable growth and development.

In fact, the area of Higher Education is of primary concern, as there is no rich country that has a relatively undereducated labour force. I was just this week having a conversation with someone about the future of driverless cars and robots doing most of the menial tasks which Jamaica embraces as job creation. Our labour laws, for example, have helped to impoverish our labour force by creating greater informality in the labour force and lowering productivity. This has all been done with good intentions (and to get votes), but it has had a distortionary effect on the labour market and created less value.

Under Efficiency Enhancers we have seen five-year improvements in the pillars of Goods Market Efficiency, Labour Market Efficiency, and Financial Market Development of 11 per cent, 10 per cent, and 16 per cent respectively. However, the rankings for Goods Market Efficiency (61) and Labour Market Efficiency (60) are still out of the top 50 countries, and show that much work needs to be done, primarily from the regulatory side to improve.

The Innovation and Sophistication category shows five-year improvement in both pillars of Business Sophistication and innovation of 14 per cent and nine per cent respectively. This, in my view, reflects the natural improvement in the private sector, which controls the movement in these pillars. The problem with these is that they are both out of the top 50 countries, at 57 and 70 respectively. Even though they are not where we want them to be in the rankings, my own view is that if we were to create a friendlier and less inhibiting environment, through better regulations and lower entry barriers, we could see a more significant improvement in the Innovation category.

The table shows us the lowest ranked areas from the 2016/17 GCR report (over 100). What it shows us is that the challenges we face for competitiveness, which negatively affects our economic and social development, is primarily because of crime and justice, fiscal management, and government policy.

We all know about the deficiencies in the justice system, and the crime challenges, but as an example, the approach of tax policy in past years has been to raise the taxes every year on people who are compliant, largely ignoring the non-compliant and the fact that higher tax rates drive capital away from the country. The recent successes of the Employment Tax Credit and moves by Tax Administration Jamaica at compliance and ease of paying taxes, show that lower tax rates and easier tax systems do increase compliance and collections.

There is a lot more that could be done in terms of a detailed analysis of Jamaica’s lack of competitiveness, and hence lack of development, but space does not permit. Suffice it to say that what we must do is not just celebrate the headlines but take a strategic and surgical approach, to look at what are the factors that prevent us from achieving the growth and development we need — and then implement policies specifically to improve those areas.

This is the only way for us to get to where we need to be as a country to ensure prosperity for all Jamaicans.

Thursday, November 03, 2016

Analysis of Jamaica’s competitiveness and development challenges



Recently the World Economic Forum released the Global Competitiveness Report 2016/17, which showed Jamaica improving its ranking from 86 of 140 to 75 of 138 countries. This was an improvement from 67 per cent to 54 per cent in the ranking.

A few days later the World Bank released the Doing Business Report (DBR), which shows Jamaica falling two places, in the ranking, from 65th of 189 to 67th of 190 countries. This is a marginal slipping in the rankings.

Of course what we normally do, when these reports are published, is to look at and comment on the overall ranking primarily, and most times do not take the opportunity to look at the details to determine what must be done from a strategic point of view to address these issues.

A part of that deficiency may be that we don’t seem to set any real targets to improve in these ranking — as we always have discussions without any real understanding of the details behind the rankings and what must be done to improve in the rankings.

So we don’t, as a country, set ourselves targets in terms of where we want to be in say five years in the ranking of both the GCR and DBR reports.

As an example, I haven’t heard any real talk about an objective of being in the top 50 countries in the ranking in both reports. So a strategic goal could be to say that in three years our objective will be to be in the top 50 countries, and what that will mean for Jamaica. And then we may go further to say that within 10 years we want to get to the top 25 countries.

This would naturally be what private sector organisations do, as do individuals in their own life plan. But as a country it seems we never create a vision of where we want to be in a defined timeline, and get the population to buy into it. One may say that we have the Vision 2030 objectives — but the truth is that it is a well-kept secret from the general population.

To properly understand where we need to go, we must of necessity understand in greater detail what the current status of our economy is. And this can helped by looking at both the GCR and DBR reports, instead of just looking at the headline ranking. Because if one looks behind the overall ranking I think it gives a very good indication of what areas we must focus on if we are to realise Vision 2030, which is just about 14 years away.

One of the questions I always get is: if Jamaica is touted as doing so well, under the just- ended IMF agreement, then why are we still grappling with economic growth? In fact, even though we have seen a return to growth, the fact is that the average is still not much more than the average growth rate over the past 40 years. The reason for this, I think, can be answered by further analysis of both the GCR and DBR.

If one looks at some of the details behind both reports, you will see that the challenges highlighted are similar in both reports. Both the DBR and GCR reports identify that inefficient government bureaucracy is a major issue, and the GCR report goes on to highlight significant deficiencies in the justice system and crime as issues.

Both crime and inefficient government bureaucracy have been the two most problematic factors to doing business in Jamaica for years, and yet we have been unable to address these challenges.

If one were to really think about it then, the real challenge we face is a lack of proper governance, as both crime and bureaucracy are consequences of poor governance.

This is a conclusion I had come to in my book,Charting Jamaica’s Economic and Social Development, where it became clear that the real challenges of social and economic development stem from our constitutional politic arrangements.

It is not practical, however, to address it by trying to change our constitutional arrangements, as neither political party will want to do that, as they want to preserve power. So the next best thing to do, which has been the trend, is to strengthen the institutions around our current political systems, and in so doing remove some of the stranglehold of our political system (read the book Why Nations Fail).

It is this strengthening of our institutions (as depicted in the table showing the five- year trend in the GCR) that in my view has resulted in greater confidence leading to enhanced macro-environment and market conditions. In other words if we did not move to develop institutions like the OCG, public defender, INDECOM, Charter of Rights, and more recently EPOC and ESET, then we would have had worsening social and economic conditions. This would in turn lead to loss of confidence, lack of investments, and further impoverishment.

So what the table clearly shows is that Jamaica has been improving steadily in the GCR ranking, moving over the five years from the 67th to 54th percentile.

But even with this steady improvement, Jamaica has still struggled to find any significant economic improvement. What should also be noted is that the more significant improvements over the period occurred when we started the IMF agreement in 2013, which saw the strengthening of institutions (mentioned above) and more oversight by the private sector and civil society.

If we are to see economic and social development in Jamaica, then we must fiercely go behind the overall ranking and, secondly, put action in place to bring us into at least the top 50 per cent of countries for doing business.

Even though we have seen continuous improvement in the GCR ranking, it should be noted that the improvement primarily takes place in the Basic Requirements category — where over the five-year period we have improved 24 per cent from 114 of 144 to 75 of 138 countries measured. However, in the categories of Efficiency Enhancers and Innovation, over the period we have seen a decline of one per cent and improvement of 11 per cent respectively. The problem being of course that global competitiveness means that we have to do well with Efficacy Enhancers and Innovation.

It is this lack of development in these areas that, in my view, has caused us not to grow at acceptable rates.
(Continued next week)

Wednesday, October 12, 2016

Jamaica’s growth – same problems, same solutions



The World Economic Forum has just published the 2016/17 Global Competitiveness Report (GCR), and it shows that Jamaica has improved its ranking from 86 of 140 countries to 75 of 138 countries. This is an improvement of some seven per cent on the ranking when the number of countries surveyed are considered.

In the 2012/13 report, Jamaica ranked 97 out of 144 countries surveyed. This means that on a percentile basis, in just four years we have improved by 13 per cent. This, in my view, is in no small measure due to the partnership between all stakeholders that saw us successfully manoeuvring through the International Monetary Fund programme to date, which started in 2013. It shows us what we can achieve as a country if we all work together, and what it also shows me is that progress in Jamaica will only come through advocacy and involvement from private sector and civil society.

As a result of this, we have seen a significant recovery from the 2008/9 recession which hit Jamaica, and a significant increase in business and consumer confidence. We have also started to grow the economy at marginal rates, and growth for this fiscal year is expect to be just under two per cent.

Although we should realise the improvements we have achieved — which includes being the number one place in the Caribbean to do business — the fact is that we are still a very far way from where we should be. In fact, one of the primary challenges we face is that even as we grow the economy, there is the very real danger that if we do not ensure equitable growth, that it will not be sustainable.

Sustainable growth and development only comes about when growth is evenly spread across all sectors and the entire population. This is how countries like the US and Switzerland have experienced growth. We could also say that the rise of Trump in the US can be attributed to the reports that many middle- and lower-class people in the US say that they are not benefiting from growth in the economy. On the other hand, in Switzerland the benefits are widespread and they don’t have a “Trump” as yet. What is happening in the US as well as the recent Brexit vote show that growth without inclusiveness is not sustainable.

This has been recognised in the report from the Economic Growth Council (EGC), which speaks to the need for “Citizen Security and Public Safety” and “Social Inclusion” as fundamental pillars for any sustainable economic growth. As part of the suggested solutions to these challenges, the EGC refers to much-needed improvement in the delivery of justice, proper housing solutions, and improvement in the education facilities.

In August 2009, I wrote an article titled ‘Are Jamaica’s economic problems also social’. This for me was obvious then and it is also obvious now, as is highlighted in the EGC’s report. The fact is that economics is based on the behaviour of people; that is, their social interaction with each other. So when we speak about macroeconomic solutions and ignore the impact on social behaviour, then we only fool ourselves about economic progress – as we have consistently done with failed fiscal policy and tax measures in particular.

When I look at the latest GCR, it is obvious that we have failed to do anything about the challenges we have always had. And so the problems we face today are the same ones we have always faced and failed to do anything about.

So the top four challenges to doing business remain the same year over year, which are in order (1) Crime and theft (was number two previously); (2) Inefficient government bureaucracy (previously one); (3) Tax rates; and (4) Corruption. Just focusing on solving these issues addresses over 50 per cent of the challenges to doing business. So why have we not done anything to remove them as business challenges?

We have made some progress with corruption (from 10.5 per cent to 8 per cent) and government bureaucracy (from 16.4 per cent to 14.4 per cent), but the challenges of crime and tax rates have worsened. Even though we have made some progress in these areas, they still remain significant challenges.

If we drill further in the report, we see that the main areas of challenges centre around bureaucracy, crime, and tax. So areas such as wastefulness of government expenditure, burden of government regulation, cost of crime and violence, government debt, effect of tax on incentives, trade tariff percentage, and government procurement remain significant challenges and hold back the ultimate progress of the country.

The irony is that these challenges that we speak about today are the same ones that have always been with us, and to date we have failed to address them. So as the chairman of the EGC, Michael Lee-Chin, said, we all know what the problem is and what we must ensure this time is that we implement solutions.

The irony also is that we all know, and have known, what the solution is, but we have never been able to get them done. That for me is a straight failure in our governance at the government and bureaucratic levels.

In other words, we all know what the problems are and we know what the solutions are, but we have just not been able to implement them for decades. And that is what management (governance) is responsible for.

So, as we ponder the latest GCR (2016/17) and also the EGC report, let us not make them just another report, as usual, which we read, analyse and not do anything about.

We must concede that we have made strides in Jamaica, from an economic and institutional perspective. The problem for me is that we could have done much better as a country and do have the potential to easily grow at five per cent per annum.

We already know what the problems are and we know what the solutions are. What we must now do is focus on implementation, which is what has gotten us some gains since 2013.

Friday, September 16, 2016

Government policy’s role in development



Two Saturdays ago, as I drove through Spanish Town, I thought to myself that the disorder I was seeing was nothing but the result of how we have governed ourselves over the years.

Obvious illegal vending was intertwined with cars trying to make it through the intersection before the other car ahead of them; pedestrians were competing for road space with the cars and walked across the road as they pleased. In addition, garbage from some of the vendors littered the streets, and the narrow space between the front of some buildings and the street was just not wide enough to absorb the flow of pedestrians going through the town.

In other words, it was pure chaos.

I then thought to myself, if this is the type of environment that we leave persons to exist in, then what sort of behaviour do we expect from them? I went even further into thought, and reflected on the fact that many of these people grew up in these very same conditions, and in some communities violence was either at the door- step or had entered the house.

Just around that time the entire Jamaica was saddened by the drive-by killing of a two-year-old, only to be followed days later by the killing of a six-month-old. My mind reflected on my own children and I wondered what, possibly, could those two children have done to meet such a horrific death at that age. More telling was what could have happened to those adults who killed those children, to have changed them from innocent youngsters into barbarians.

My mind then went further to think about what causes non-communicable diseases (NCDs), such as diabetes, etc, and the fact that these NCDs are caused by the environment we create for ourselves. So if, for example, we consume a diet high in processed foods, with no exercise, then there is an increased probability of getting diabetes, cancer, and heart disease.
So isn’t human behaviour and, by extension, economic and social development, not also a result of the environment we create? In other words, the innocent child that grows up in an environment of chaos, loud music, lack of proper garbage disposal, violence, and surrounded by music that speaks to the disrespect of women and the promotion of gun violence; isn’t he going to grow up to practise what he knows?

If he grows up understanding violence as the best tool of negotiation, because he might have seen his father or brother being killed by a gunman or the police; or if he grows up with his parents (who at that age he thinks know best) placing a greater emphasis on the latest dancehall fashion over his school fee, or even allows him at his young age to go to the dance or drink alcohol; or if he grows up thinking that the open lot across the road is for dumping garbage, do we expect that he will grow up to be a very productive citizen that will contribute in any significant way to GDP growth?

And if we create an environment where this young man represents a significant number of people in the country, then what do we expect will be the effect on GDP growth, indiscipline and crime?

Would the result be declining labour productivity since 1972, GDP growth averaging 0.8 per cent for the last 40 years, and/or lack of order and high crime rates?

The problem with that young man, of course, is lack of proper parental guidance, as parents have the primary responsibility to provide a proper learning environment for their children. But those parents may also have grown up under the same circumstances, and so are really just victims like their son.

So shouldn’t it ultimately be the responsibility of Government to keep the rules and order in place to ensure that parents and private citizens practise certain behaviours to foster long-term development?

What then happens when the Government, from in the 1970s, starts to tell people that “don’t you worry about a thing” because Government will ensure that your child’s school fee is paid and you never have to pay another cent for hospital fees, even though the country is broke and can’t afford it?

Or what happens when politicians, because they see votes, encourage squatter settlements and do not come down on persons who steal electricity? Instead the people vent their anger on companies like JPS who can’t even collect the money for street lights from Government.

What happens when politicians support music blaring at all hours of night into the morning, depriving working people of sleep, and express surprise when labour productivity is low? Or when we expect that crime will be solved by the police but don’t give them the resources to fight crime, or they are faced with a justice system that places a stop on the speedy resolution of trials?
What do we expect when our fiscal policy over decades is to borrow money, or tax productivity to transfer the wealth to lower productivity areas, and when it doesn’t work we borrow and tax more, expecting a different result, or we create a culture where success is seen as the big man oppressing the poor man, because we love the poor?

As a result, we see GDP growth averaging 0.8 per cent over 40 years, labour productivity declining from 1972, and general indiscipline and crime.

The problem we have is that Government policy over the years has been the catalyst that has created impoverishment of the people and the country. It is not one set of people who have caused hardship on the other. We got political Independence in 1962 and can no longer blame our colonial masters. In other words, where we are today is a direct result of policy creating an inhibiting environment. We reap what we sow, or what policies we put in place.

Monday, August 15, 2016

The problem with Jamaica’s hustler mentality

The last Global Entrepreneurship Monitoring report, showed that Jamaicans are one of the most entrepreneurial in the region. It, however, goes on to state that even though this is the case, most business startups happen out of necessity. In other words, most Jamaican businesses start because people are trying to fill a gap, for example because of loss of employment.

So, as a friend of mine said, most Jamaicans are “doing a business” and are not “in business”. What this basically means is that many of us are really just trying to earn money through “hustling”.

This is not only restricted to business startups, but it seems as if Jamaica has a culture of “hustling”. So the youngsters who start off selling or wiping the car glass, is doing it for a hustle. Or the politician, or public sector worker, who engages in corrupt practices thinks it is ok because they are just doing a “hustle”. Or the university student who applies for a job and when you ask them what their career goal is they say they don’t know yet but just want the job as something to do and make a money.

What is even more frightening, is the Jamaican culture, and our governance, supports the “hustler mentality”. When for example, I posted on social media that we need to get the men and boys removed from the stoplights, who are harassing drivers, the response from some persons is that they are just trying to make a living and what else will the government do for them. Those in authority also refuse to do anything about the situation, and we even have formal government programmes that promise job creation through mass employment. These are nothing more than programmes that give people a fish rather than teach them to fish. That is nothing more than an election promise of a “hustle”.

So it seems that in every sphere of Jamaican life, everything is a just a hustle. The persons who sets up a business, which he/she has no previous experience in, to benefit from his political party being in power; the student with no career path but just want “any” job that they can make some money; the boy who grows up on the street hustling every day to make a dollar; and the authorities who support the hustling by refusing to address the children on the street, or turns a blind eye to informal settlements.

Because of this hustler mentality we have created today a huge problem of a large informal economy, numerous informal settlements, and a set of persons who are unable to create any value for themselves, because they have for example grown up learning how to sell on the streets or wipe car glasses.

Effectively, the lack of action by the authorities, and the support of this “hustler” mentality has ended up creating greater poverty. This is because governance has been about giving someone a fish rather than teaching them how to fish. So we have a significant part of our people today who rely on hand outs from either government or others to survive, because we have failed to teach them how to create their own value. And the persons/businesses who are serious about creating value for all are scared away by bureaucracy or taxes that always seem to extract more out of the productive and give it to those who are less productive.

In other words, we have created more and more poverty amongst the Jamaican people.

The spin-off of that, of course, is crime, lack of law and order, and declining productivity and compensation. And as productivity and compensation decreases, political expediency means that we need to promise more handouts, which lead to greater poverty, as the only way the government can get more to give is through loans (which the IMF agreement has restricted) and/or taxing the productive more, which results in the productive becoming unproductive, thereby leading to even more stringent tax measures in the current IMF environment.

The problem we face now is that because of the IMF measurements, government must ensure fiscal discipline. But doing so means also that less money is available for handouts to those who have been taught to “beg” for a fish rather than learn how to fish. The dilemma is that increasing taxes will reduce investments, so the only practical option now is for the compensation levels to match productivity levels. The result being that “real incomes” will decline, as generally we have been seeing declining labour productivity since the 1970s.

And not much can be done to address that situation also, as any attempts for government or the private sector to address the productivity issues are met with stern resistance from our labour laws, which don’t care much for productivity. We can’t do much to improve productivity by improved processes and execution also, because the inefficient government bureaucracy, which includes the procurement rules, ensure that any implementation of private sector investments or greater public sector efficiency is held to ransom.

Examples include the building approval process or I know of investments (hundreds of US$ millions) waiting to happen but because of public sector bureaucracy we delay thousands of jobs, and GDP growth. Even when we talk about people losing their lives on the roads there is no urgency as the new Road Traffic Act may more than likely not be passed until 2017. And when you speak about trying to prevent road carnage by bringing discipline and accountability to the private taxis and buses, you hear that you are trying to stop their “hustling”.

One of the major challenges we face today is that Jamaicans are so dependent on “hustling” to make a money, that any attempt to bring order to the society is going to be faced with strong opposition and can result in hardship for many Jamaicans. This has not been by accident, however, as the government policies over the years have ensured that we find ourselves in this position today.

This is going to be one of the most difficult things to change in Jamaica, but unless we start to reverse it then we will sink further. The economy will grow of course, but the problem is that participation in that growth will be minimal, and the majority of persons can end up being left out.

Jamaica lacking a strategic long term vision

Recently someone said to me that the reason why our politics has not been able to solve our challenges and have sunk us further into economic and social problems is because either politicians don’t understand what to do or just don’t care. After reflection, I thought to myself, that I do know many politicians who care about Jamaica and are also quite competent. And so the problem could not be explained away as simply as that.

After giving it some thought, and a recent experience, I thought to myself that the real reason why our governments have not been able to bring us to the “prosperity” being talked about now, is that the objective of politics is many times different from the objective of long term economic and social development.

In other words, because of our political system, and the needs of the supporters, the expediency of politics (and ultimately governments) have been at variance with the much needed economic and social development. So if you think of economic and social development as going to Montego Bay, the problem is that the objective of politics has been either going to St. Thomas, or at best going to Ocho Rios and stopping there. In the latter case going in the correct direction, but stopping short of the long term objective.

So in my view, politicians are very competent at achieving the objectives they set. The problem is that the objectives are different from what we as Jamaicans want for economic and social development. Maybe I shouldn’t include all Jamaicans, because many, as a result of ignorance, party colour blindness, or personal goals, also don’t mind the political objectives being different from the needed economic and social ones.

Because of this, the policy directions are geared towards the political objectives in many respects. And because we have had too many bureaucrats who are willing to accommodate political, over economic and social objectives, we end up with the political objectives being implemented in preference to long term developmental objectives. This also results in the systems and processes of government bureaucracy being set up to really do nothing but push a lot of paper.

It is for this reason why persons from the private sector will find it difficult to work in the public sector because in the private sector we are used to things happening, and the achievement of organizational growth. The problem with government bureaucracy is that it doesn’t need prosperity or effectiveness of itself to survive, as all government has to do to make up for the revenue loss from being unproductive is raise taxes on the productive persons (private citizens). The problem is that sooner or later you end up with significantly fewer productive persons to tax, and then you end up in a situation as we are in Jamaica, where debt to GDP ratio goes to 150% before we realize we have a problem.

Even our well talked about Vision 2030 is nothing but a pipe dream, because our political objectives are at variant with its objectives. The result is that the Vision 2030 objectives (which were well thought out) flies under the radar, and may be soon forgotten when 2030 finally arrives.

So while we talk about a long term developmental objective, the truth is that the preference of political objectives will always ensure that these are not met. The only way for that to happen is for the political objectives to align with our “Vision 2030” developmental objectives.

The irony is that this is easily possible, and can result in very real economic and social development in Jamaica. However, the probability of Jamaica achieving its full potential in the near future though is maybe less than 50%, primarily because the existing institutional infrastructures do not allow it. It is still early days for this administration, however, and if the desire is real prosperity then we may very well see the structural issues being addressed. Up to this point though the probability of that happening anytime soon seems to be less than 50%.

The reason I say so is because for that to happen, then political objectives would need to be sacrificed for long term development plans. The political objectives I speak of does not include remaining in office, as any government that achieves real economic and social development in Jamaica will, in my view guarantee office for years to come. The objectives I speak of include (1) short term benefits for the party and constituents; (2) power benefits; and (3) the need to make out the opposition as doing the worst things in the past 5 years when the problem is the accumulation of the past 54 years.

So we continue to put the right framework in place to address these serious structural issues like the OCG, INDECOM, Public Defender, Auditor General, and the new Corporate Governance Framework. But we also underfund or ignore their recommendations, and expect that they will work. For example, we say we are serious about solving crime, but we continue to underfund the security forces and refuse to address a very inefficient and underfunded justice system. Never mind that crime robs us of 4 to 6 percent of GDP, as the longer term benefit of solving crime never seems to get preference over the shorter term political objectives mentioned above.

One of the major problems also are the supporters, who as I said in a recent social media post, even if a political party put Hitler to represent them against Obama, they would still be voted in because many Jamaicans vote based on colour and not objective reasoning. Obviously this is the theory of the effect of crowds, as individually they will be very rational but put them in a group and the reasoning changes.

So after my many years commenting on Jamaica’s economy, and seeing events like the current rise of Donald Trump, I am convinced that the reason why the world (and Jamaica) is in economic and social decline for most persons is because of our failure to ensure that political objectives align with development objectives. We only have to look to Singapore to see the positive effect the alignment of those objectives can have on a country.

Friday, July 29, 2016

We need a serious approach to development


The current government has economic growth as its main thrust. The phrase coined by the Growth Council — “Five in four” — refers to the objective to have five per cent growth in four years. If this is achieved this would be a significant boost to our economic fortunes, and already we are seeing increased economic activity and higher levels of business and consumer confidence.

As a part of the boost to economic activity, the government has started to implement it’s $1.5 million tax threshold promise, made in the run-up to the general elections.

So far we have seen the threshold move from $592,000 to approximately $1 million, with the final move to $1.5 million slated for April 1, 2017.

In addition, the government has indicated that the aim is to move completely from direct to indirect taxes — a very good move, and Finance Minister Audley Shaw indicated on the On Point discussion programme on Business Access TV, that the aim is for this to be done before the end of the current five-year term.

Shaw also indicated that there was the possibility of a small tax package next fiscal year to accommodate the threshold increase, but that this would be on the consumption side.

The fact, however, is that while this tax threshold increase will result in short-term stimulus to the economy, and the move to indirect taxes will assist with greater tax compliance, this by itself will not give us the much-needed development. And without certain other actions or policies being implemented, it will be improbable that we will see the consistent 4.0 to 5.0 per cent growth rates needed.

Further, even if we are to see improved growth rates, this does not equate to the economic and social development needed. Economic growth is one part of the equation — but by itself is insufficient.

Economic and social development means an improvement generally in earning capacity and living conditions for most Jamaicans. This means that the increased capacity of persons to earn, infrastructure development, and personal safety must be at the core of government policy.

The challenge that we have is that our politics, and government policies, have been too much focused on handing out a fish rather than teaching Jamaicans how to fish.

And the reality is that Jamaica will not see true economic and social development unless we build the capacity of everyone to improve their income, and create opportunities for them to earn — instead of policies that seek to increase income without increasing productivity.

We may think that we are doing good for “poor” Jamaicans by “giving” them more — but what we have effectively done by applying those policies is actually caused greater poverty.

The welfare type policies that we have applied over the last 40 to 45 years in Jamaica have done nothing more than cause more long-term impoverishment, as is shown by the devaluation of the Jamaican dollar.

Whenever our governments have talked about improving the lives of Jamaicans, we have spoken in terms of specially created job programmes, housing for the poor, land distribution, tax breaks etc. Instead we should be talking about greater educational opportunities, facilitating more private sector investments (particularly SMEs), and tax incentives for investments (such as the Junior Stock Exchange).

The effect of what we have created can be considered in the example of raising a child.

If every time a child says they want money or a car etc you give it to them — without insisting that they develop the ability to earn it for themselves — then what happens is that you create a child that becomes totally dependent on you to live and maintain the lifestyle he has become accustomed to.

If on the other hand you insist that the child goes and gets an education or starts a business, and puts what he has learned to work, and earns his own money, then the child would eventually be able to earn much more than you can give to him.

And in the end there will be two incomes in the household rather than one income supporting two persons.

So what our policies have done over time is create a dependency syndrome: which we have not only shared what we have earned, but in order to maintain a “high” lifestyle for everyone we have gone out and borrowed to supplement the income.

And because our government policies support more and more dependents, we have continuously increased taxes on those who are more productive — the result being that overall productivity declines, as capital stops working to escape the increased taxes and bureaucracy by becoming dormant or going overseas.

One person recently said to me that every time something starts to do well in Jamaica the policy is to tax it in order to earn more income for the voracious fiscal appetite. In other words, we always kill the goose that lays the golden egg and then when we end up with no goose we wonder why there is no egg.

Because of this approach to policy, and the need to “please” every five years, then we not only create a dependency syndrome, but we also fail to focus on the important issues that hold back development. These include law and order (as this is seen as fighting against the small man who wants to set up his house or business anywhere — squatting, illegal vending, tourist harassment), infrastructure development, and the creation of rules such as the procurement process because we don’t want to face the real monster of accountability and corruption.

So while we strive for much-needed economic growth, we must also support the Growth Council by ensuring that we have policies that support the development of the average citizen of Jamaica, through increasing his capacity, opportunities, and safety.

Adopting a serious approach to economic and social development is the only way to sustainable “prosperity”. This should be the primary focus of the Government and its Economic Growth Ministry.

Friday, July 08, 2016

The chickens have started to roost



The phrase “The chickens have come home to roost”, can refer to a situation where something bad happens after an action, or inaction, occurs. So if a person goes around defrauding people, and is finally caught and goes to prison, then one could use that phrase.

This phrase can be used in relation to the present economic and social conditions Jamaica finds itself in today. When we think about the untenable crime situation in St James (the tourist capital of Jamaica) and the general levels of indiscipline and lack of law and order in Jamaica today, we can safely say that the chickens are starting to roost. That is to say that what we are seeing in Jamaica today is a direct consequence (even if long term) of the way we have practised our governance, and politics in particular.

When Commissioner Williams said that the problems we are seeing with crime in Montego Bay are deep-seated social issues, he is correct. This is the same reason why I have repeatedly said that Jamaica’s economic problems are social.

The fact is that the crime situation we see in Montego Bay today, is not unique to Montego Bay. We have had similar crime spikes in places like Kingston and Spanish Town. In all cases, they have left the nearby residents in a state of fear. So the Montego Bay situation may be what is current but it is certainly not isolated.

And each time we have these upsurges, we normally find a short-term solution, but fail to address the underlying problem. This of course does not mean that short-term solutions are not necessary, but they must always be accompanied long-term solutions also.

It is this lack of long-term solutions, that causes the predictable upsurge in crime to occur every few years or so. And although we do need far more resources, especially in the short term, the fact is that the main problem is not a lack of resources. It is one of political will and enforcement of our laws.

One of the problems with how we manage our resources is that we wait until there is an emergency and then find the resources to throw at it. Never mind that when the emergency occurs it costs you five times more than the preventative cost.

As I always say, fiscal policy in Jamaica is a simple math exercise of addition and subtraction. There is no real strategy about how fiscal policy can be used as a tool for development, and not just focus on how much money is being spent on a project, but rather what is the value added. But then again maybe most of our people in authority don’t understand the concept of value added.

It does not take a rocket scientist to figure out that is we create an environment where women have nine children without any way of feeding them properly; if taxis, buses, motor cyclists, and pedestrians are allowed to use the road as they wish; if people are allowed to squat and build communities as they like; if the justice system turns at a snail’s pace; and other such forms of lack of order are allowed; then what we are doing is laying a fertile ground for criminality.

But what we do is fail to enforce traffic laws or demand order on the road; we fail to enforce the Noise Abatement Act; we turn a blind eye at the squatter communities, until they develop into major communities; and we fail to enforce zoning laws. And when we fail to demand that laws be obeyed and that indiscipline must be rooted out, then we wonder why after many decades of neglect of enforcing the laws that we now find ourselves facing the social and economic challenges we have today.

In other words, how do we expect children to grow up and be successful professionals, if when they are young they are not taught what is right and what is wrong.

If we fail to do this, then the major role of the police will be to react to crime, and if there is a prevalence of crime, as we have today, that effectiveness is significantly reduced. Then what we do is apply a “shock and awe” action to the problem. Crime then dies down for a year, or two if we are lucky, and then rears its ugly head again often with more aggression.

This of course is because we have failed to address the deep-rooted social issues faced daily by our citizens, including children.

And then when these very same children, who have grown up in deplorable conditions (because of lack of urban planning), or grown up listening to deviant musical lyrics (because of lack of not enforcing the Noise Abatement Act), or see their father being abused by the police, or are abused themselves with little consequence in many instances — these children grow up and become criminals. We send the police to address the situation, by which time many of those children are lost, and further exacerbate our social issues.

Minister Montague has, in my view, spoken to some short-term approaches that are needed. However, what we must start to address immediately, and at the same time, are the longer-term solutions like enforcement of road discipline, and other laws like the Noise Abatement Act and the protection of our children from abuse.

Unless we can do these things, we will not be solving the crime and indiscipline issue, but rather just placing a band aid on a sore that will become worse. As we saw when we celebrated the reduction in crime in 2010, but which was just a temporary reprieve.

There have been many very insightful studies that we have just placed on a shelf, and not sought to implement. Either because of our inefficient bureaucracy (the number one problem to doing business) or lack of political will to do so. The fact is that no one who has had responsibility for policy to date can claim success, as where we are today is testament to what the efforts have been before.

One of the things I would love to see put back in place is the Rule of Law Committee, a private and public committee that was focused on addressing the crime problem — just as EPOC and ESET were set up. This is needed urgently, as because of our actions, (or inactions), in the past — the chickens have started to roost.

Friday, June 17, 2016

Jamaica needs fewer hedgehogs


A book I am reading called “Superforecasting” looks at the way in which people go about making forecasts, and draws some conclusions why some people – a select few – are consistently more accurate than others. These people are referred to as superforecasters.

One of the reasons mentioned is that most people think like hedgehogs, while the superforecasters think like foxes. Hedgehog-type thinkers make forecasts or predictions that are influenced significantly by their own biases and experiences. In other words, they lack the ability to think “beyond the tip of their nose”. Foxes, on the other hand, are those who are able to objectively take all surrounding information into consideration, and look beyond their own biases and experiences.

No doubt, foxes in most cases will be much more accurate than hedgehogs. So if we consider someone who can make good investment predictions or economic projections, it is usually someone who thinks like a fox. That is, a person who considers all the information objectively and does not pay attention to the short-term market reactions.

One person who thinks like a fox, and he always speaks to it, is Michael Lee-Chin. He always expounds the same principles of investing, always looks beyond short-term market moves, and believes in the information he has analysed, for long-term gain.

This principle is also very important in organisations. When we think about people who are seen as transformational leaders, more often than not they are “foxes”. In other words, one of the significant characteristics a transformational leader has is his/her ability to look into the future, and consider all the information available, and implement strategies based on that objective analysis.

Some transformational leaders we know include Lee Kuan Yew, Steve Jobs, Henry Ford, and more recently, in my view, Barack Obama. Closer to home we can think of people like Michael Lee-Chin, Butch Stewart, and Chris Blackwell. And if I were to think of politicians who implemented transformational ideas, I would say Michael Manley, Edward Seaga, and PJ Patterson.

These leaders were able to think about and implement ideas that were not the “talk of the town” at the time. In other words, they looked at the information and the environment around them, and made decisions even when others couldn’t see the reason for it.

One of the challenges Jamaica has, in my view, is that we have too much hedgehog-type thinking. This has frequently caused us to take two steps forward and three steps backward, and has robbed us of innovation and progress.

The fact is that too many of us are not able to see beyond our own personal biases. Because of that (and thanks to social media), you can see where some people have two different views on the same issue, depending on which political party is in power.

When a statement or forecast is made by someone who is not in alignment with other people’s political or personal preferences, some people attack the person and say that the idea is backward, stupid, or political. But if someone who holds their political conviction makes that same statement, they will support it. This is because of their hedgehog style of thinking. In other words, they are unable to think beyond “the tip of their nose”.

After reading this reasoning in the book Superforecasting, I began to realise what makes normally rational people think irrationally, or with unsupported bias, when they enter groups (such as political parties). This also explains why a normally rational person, when he or she takes up political office, would shelve a tried and proven plan in favour of another, sometimes doing the same thing, but with another name. Examples can be found in both parties.

I think this is why we are unable to get consensus many times on governance priorities, because irrespective of how well a plan has performed, because it was implemented by the other party, it must go. Or because someone has always been aligned to the opposing party, then they are not useful. The result is that potentially every five years we can throw out good ideas and start the same process all over again, and then we wonder why after 54 years of independence, it seems like we are still in the starting blocks.

There is no doubt that the only way we will move forward is if more of us as citizens, and at the leadership levels, start to think like foxes. We do see some ministers who are more inclined to be foxes, but there are still too many of us who think like hedgehogs. And we know only too well in Jamaica, from our crime situation, that all it requires is a critical minority that can wreak havoc on any well intentioned plan or idea.

If we are to move this country forward though, there must be an unwritten code that we are going to ensure that we shed our hedgehog-type thinking and start focusing more on objective thinking about national development.

We must learn (especially many of the younger political activists) that it is important to look beyond the messenger and properly analyse the message. Or we must learn to be able to properly assess information, and look beyond our personal biases. If we fail to do so, then we will always be in the starting blocks as a country.

For this to happen, only transformational leadership will set that tone.

Sunday, June 12, 2016

Maximising Jamaica’s full potential


AS I listened to the PIOJ’s recent review of the Jamaican economy, I thought to myself that we have become a nation that is too used to mediocrity. The PIOJ estimated that the Jamaican economy grew by 0.9 per cent for the fiscal year just ended, and in the current fiscal year it is expected to grow between one and two per cent.

In the context of how the economy has performed, one could easily say that this is welcome news, as since around 2009 we have seen what the economists love to refer to as “negative growth”. In layman’s term, the economy has shrunk.

On the other hand, while we are happy for the growth, our willingness to accept that meagre growth rate is symptomatic of the way in which we have grown to accept mediocrity as a standard. In other words, we should be very concerned that as a country with a lot more potential to expand at much faster rates, we have failed miserably to achieve that full potential.

This is the same way we accept poor customer service, indiscipline, poor governance by our politicians, bureaucracy, and the list goes on. It seems as if we have been shell-shocked by our mediocre performances, and so we set our standard very low and any politician that comes and tells us how nice we look, we are ready to go with them. This, I think, is one of the major impediments to our economic and social development.

If you grow up in a community where it is expected that garbage will be disposed of anywhere (gullies, sidewalk etc) or loud music is as natural as birds chirping, then it becomes a natural part of the environment. And you can’t imagine your life without it. In other words, what is the big deal about these things? Until finally one day, as we are seeing now, it is no longer just confined to a single community, but rather is very much the accepted culture for the whole island of Jamaica.

So we are numb to murders when they happen, or the number of road fatalities. We also see indiscipline as a way of life in the form of road use or squatting, among others. Because this culture and degradation is now ingrained in us, we then begin to celebrate it through our music.

So songs speak about the abuse of women or violence and we cheer when we hear them. Or, one of the new trends is violence in dancing, where men jump from roof tops on women, many times causing physical harm. But it is so accepted as a part of our culture that the patrons at the dances cheer when they see it.

The irony, also, is that we try to sell Jamaica on this “No Problem” culture, as Jamaicans seem proud to display their indiscipline when overseas. Many times when travelling and Jamaicans are on the aircraft, they have to put on some display, including speaking loudly. Recently I saw a sports team representing Jamaica (funded by the Jamaican Government and in Jamaica-branded shirts) playing music and speaking loudly on the aircraft. I had to speak to one of them to get the other to shut up.

But when I think about it, you can’t really blame Jamaicans too much for how they behave because this is how they have been socialised. Because of the failings of government policy and action, over the decades, we have developed an environment of indiscipline and acceptance of mediocrity, hence the reason for falling labour productivity since the 1970s.

Governments have further solidified this mediocrity by creating labour laws that go way beyond protecting workers rights to harming them, as the stringency of the laws have now led to a situation where a great majority of the workforce do not have any health or pension benefits, because it is best to hire people on short-term contracts.

These same Jamaicans, though, when they go to live in other countries, do conform to the social behaviour in the majority of cases. And then we ask the question why do Jamaicans conform when they migrate, but are indisciplined here. The answer, of course, is that the environment we have in Jamaica encourages indiscipline and mediocrity.

It seems logical to me then that if we truly want to realise our full potential as a country, we must as a priority look at the environment we promote.

For example, the best-selling book Rich Dad, Poor Dad speaks to the belief that the environment for learning created by two different fathers can determine the outcome of the child. So, as long as we teach our citizens to be indisciplined, unproductive and give them handouts, then we will continue to create a country where underperformance and indiscipline is rampant.

It is for this fundamental reason why we will always find it difficult to achieve any sustainable growth about three per cent. It is also for this fundamental reason why we have so many Jamaicans earning very low wages. It is also a fundamental reason why child abuse is so high, why squatting continues to grow, and why crime is a challenge.

For me it seems logical, and I can’t understand why we have not seen it expedient, to fix these underlying issues rather than encouraging celebration of our mediocrity as “No Problem”. It is perplexing that we celebrate the very high standards of people like Usain Bolt, Shelly-Ann Fraser-Pryce and Bob Marley, but we seem too ready to accept a mediocre society.

Until we can do so, then we will continue to speak about one to two per cent growth and be willing to accept mediocrity as our highest standard.

Friday, May 20, 2016

Safeguarding our growth agenda


The Government has placed growth at the front of its priorities. Since political independence, in 1962, we have only seen growth of any significance in the period 1962 to 1972, and then about three years in the 1980s. So the focus on growth is definitely what is needed if we are to truly see Jamaica develop relative to the rest of the world.

In order for growth to occur in any sustainable manner, however, there are some fundamental things that must first happen. The most important thing to consider is that “sustainable growth” can only occur in an environment that enables its occurrence. This is no different from the need to create an environment that encourages productivity in a single organisation, or even in a business sector.

So, as an example, if someone is learning how to swim they must have a body of water (such as a pool), proper swimwear and, very importantly, a teacher who is capable of teaching someone how to swim — and more importantly can themselves swim.

So growth can only happen in an environment that encourages capital investment, greater productivity, and where people feel incentivised to work. This is the challenge that we have and continue to have. I don’t think that most of our politicians see the long-term link between the need to improve productivity and work ethic, for example, and sustainable growth. For this reason our State has, over many years, encouraged welfare politics and income redistribution rather than productivity improvement and rewards based on productivity.

The result of this welfare politics is squatter settlements and falling labour productivity, because in order to “get ahead in life”, all you have to do is align yourself closely with a political party and ensure they get in power. This type of thinking has led us to develop labour laws that ensure that unproductive labour is rewarded, which results in the long term with many people being contracted without any permanent employment benefits. This in turn creates lower fiscal revenues for the Government and erodes workers benefits into the future.

When I started writing in newspapers in 2003, I thought to myself that surely Jamaica has the potential to be a high growth rate country and see significant development. This, I thought, was where we were destined to be because of our geographic location, language advantage, tourism competitiveness, music and sports competitiveness, etc.

One of my objectives was to see if I could assist to improve the conversation around development and by doing so help Jamaica to achieve economic success, within a 10- to 15-year time span.

One of my main motivations in 2003 was to see Jamaica become a place where my son would grow up and want to live in. At the time he was nine, and I thought that if as a country we did what was necessary, we could have seen Jamaica truly become the place of choice to live, raise families, and do business, as pronounced in Vision 2030. As a result, I also sat on one of the Vision 2030 sector committees.

This obviously didn’t work out as 16 years later we are still grappling with low growth, low productivity, and social issues. Although in the last two to three years we have made some progress in putting a framework in place to address our economic issues, our social and legislative challenges still remain an issue.

This came home to me even more when last weekend I attended my son’s graduation, where he did a bachelor’s degree in actuarial science, and he said to me that even though he would love to come back to Jamaica to live, he would not because it was too disorderly and had too much crime.

He also went on to say that, in his view, Jamaica would be the best place to live if we could control the crime and bring order to the society. I couldn’t argue with him when he said that, and I thought to myself that Jamaica has once again lost another mind that could help us to develop. And this scenario has played out many times over.

This conversation took place in Des Moines, Iowa, which is the same place the two US missionaries that were murdered in St Mary are from. Sitting down to dinner with two residents there, they brought up the matter and said that they were both very popular in Des Moines, and because of it Jamaica had developed a very bad reputation there and many missionaries who were thinking of coming decided not to.

Jamaica has always had the potential to develop into a First-World country, where our people would prosper and we would not be seen as persons of interest for security personnel in other countries. In other words, we could have easily avoided the label of being “extraordinarily violent”.

The problem we have is that we continue to cause our own demise by our failure to do what is necessary from a governance framework to provide an enabling environment for proper economic and social development, and safeguard the growth agenda we speak about so often but fail to realise.

What we must recognise, though, is that creating this environment is not going to come from the continuation of our welfare politics, or biasing our conversations depending on which political party forms Government. For example, I see on social media all the time where some people argue two different ways before and after the election, on the same point.

Safeguarding our growth agenda means that as a people we must change the conversation and we need to start looking at capital as positive for development, rather than with the suspicion we have always treated it and tax it before it starts working.

We have to create an environment of trust, which means that the security forces and government bureaucracy must respect the citizen and not make it hard for them to live and do business.

We have to bring order to the society, which means harsh penalties for those who dispose of waste illegally or who violate the Noise Abatement Act or who break the Road Code.

Until we bring this sort of order to our country, then someone else will lament the fact that their son or daughter chooses not to return to work and live.

Friday, May 06, 2016

A long-term solution to crime needed


According to the World Economic Forum’s 2015-16 Global Competitiveness Report, crime and theft are the second most problematic factors to doing business in Jamaica, accounting for 16 per cent of the challenges. This is only outdone by inefficient government bureaucracy at 16.4 per cent.

Recently we have seen an upsurge in horrific crimes, including multiple killings. These include the following murders: a three-year-old killed by her father, a policewoman shot at a bus stop, and two US missionaries killed by persons unknown. These incidents have renewed calls for severe punishment for the perpetrators. The case of the US missionaries has understandably caused international press coverage, which can result in a negative economic impact if not managed properly.

There have also been renewed calls for hanging by the Security Minister and others. All this comes at a time when we are fighting for the freer movement of Jamaicans within Caricom. The government has also placed responsibility for reducing the crime rate on the shoulders of Police Commissioner Carl Williams.

In my view, the fundamental issues that have created the crime monster will not be addressed by either the resumption of hanging or by saddling the Commissioner with the superhuman task of reducing the crime rate. Hanging can only be a deterrent if we are able to catch the criminals. Even then it is not a solution if a trial takes years to complete, and then through the lengthy appeal process hanging might be in breach of the Pratt and Morgan rules.

It is also impractical to place the responsibility for reducing crime at the feet of the police, as in most cases all they can do is react to the crime after it is committed. I say this because an assessment of the crime statistics reveals that many killings are domestic, with gang murders in second place. We have discussed many times that the real challenges with crime in general and murder in particular have less to do with policing and more to do with the environment.

In 2015, for example, I am told that the police solved 600 murders committed by more than 700 people, which is a significant number of murders to solve. This has been achieved despite being hampered by inadequate resources and operating in a challenging working environment, both in the office and on the streets.

How can the police prevent domestic crimes, if they are defined as mainly crimes of passion, and not premeditated – which means they occur in the heat of the moment? All the police can do is react.

How do the police eliminate gang murders when the society and communities are actually creating more and more people who are likely to fall into crime every day? As an example, one of the challenges with crime in St James is the number of squatter settlements that have mushroomed. So because the communities are not properly organised, they are very difficult to police, and the conditions the people live in do not encourage civil behaviour.

Although short-term fixes must be found to relieve the increasing crime situation, the fact is that a sustained reduction in crime needs a much more detailed assessment. In my view, the first thing we must do is understand what are the causes of crime, and many of these causal factors occur years before the crime actually occurs. For example, people who commit murder today may have been victims of child abuse who saw one or both parents murdered years earlier, or who grew up without any parental control over what movies or music they were exposed to.

The fact is that our crime situation today has resulted from policy missteps over the years. In short, we have continued to create an environment which encourages criminal activity. This is no different from children growing up in a household where there are no rules, and they can do and get away with anything they want. So if children have grown up in an unstructured environment, don’t expect that when they get to 18 they will adhere to the rules of society or their workplace.

Similarly, Jamaica continues to facilitate an environment of indiscipline on the roads (taxis and buses drive how they want); night noise from dances throughout the night (in contravention of the Noise Abatement Act); blaring music that promotes violence and abuse of women; illegal squatting and violation of the zoning laws; illegal vending; violation of environmental standards; and abuse of children and the elderly.

This undisciplined environment is supported by a very slow justice system and a grossly under-resourced police force that is fighting corruption within its own ranks. Add to that a less-than-adequate education system and a high incidence of children not attending school.

So in fact, crime is supported by the ways we have chosen to organise ourselves. We have had many spontaneous reactions to crime over the years – special police task forces such as ACID and Kingfish; curfews; Suppression of Crime Act; Gun Court; and in 2010 – the Tivoli incursion. All this has not resulted in reduced levels of crime, but rather an increasing distrust between the authorities and the Jamaican people, as evidenced by the LAPOP report over the years.

If we are serious about making Jamaica a safe place, then we must realise that crime can only be solved by creating a society of order and respect for the average citizen. We must stop fertilising the crime tree.

Until we choose to do so, we will continue to react to an ever-increasing problem (at best we might have a short-term reprieve). The security forces will find it more and more difficult to cope, and we as Jamaicans will continue to suffer.

We must create opportunities for all Jamaicans and ensure that our children are protected and not subject to conditions that breed criminal behaviour. We must use technology such as CCTV and properly resource the police force. We must ensure that legislation such as the new Road Traffic Act is enacted in short order, just as we do with tax legislation.

Only then can we say that Jamaica will be the choice of place to live, raise families, work, and do business.

Wednesday, May 04, 2016

That Caricom issue: Jamaica -Trinidad relationship


The recent impasse between Jamaica and Trinidad, arising out of the latest round of Jamaicans being not only denied entry to Trinidad but being detained in less than acceptable circumstances, has once again raised the question of the purpose of Caricom, and more specifically the CSME.

This is only the last of many incidents that have grabbed the attention of the region on this matter. The tension began in 1961, when Jamaica held a referendum which saw us withdrawing from the West Indies Federation. At that time the then Trinidad Prime Minster Dr Eric Williams appropriately said that “one from 10 leaves zero”, referring to the fact that without Jamaica the Federation would be virtually non-existent.

Since then we have been unable to see the free movement of goods and people within the region, and examples of these include:

(1) the challenges involved with exporting Jamaican products to Trinidad and Belize, especially patties;

(2) previous instances of Jamaicans being refused entry into Trinidad (I remember last year the Institute of Chartered Accountants of Jamaica sought reassurance from Trinidad that our delegates attending the Caribbean Conference would not have any difficulty with immigration because of a prior incident); and

(3) the landmark ruling coming out of the Shanique Myrie case.

In the case of the movement of goods in particular, my own view is that Caricom and the Council of Trade and Economic Development have proven to be very ineffective in addressing this issue. Countries have made commitments at the highest level that the non-tariff restrictions would be addressed, but years later the problems remain – in particular, the case of the restriction by Belize.

This recent impasse between Jamaica and Trinidad is the latest in a long line of events demonstrating the ineffectiveness of Caricom, and more specifically the failure of our governments to rectify this situation. It reflects a serious lack of leadership in the region. I am left to wonder why we are unable to resolve a matter as important as this, yet we find time to proffer solutions to problems affecting West Indies cricket; but such is the irony of our regional politics.

Once again, though, we need to question the relevance of Caricom. The recurrence of these situations creates divisiveness and drains our energy, because the failure of governments to find a sustainable solution always carries us back to the same unfortunate position.

Nonetheless, I am heartened by the stance taken by Prime Minister Andrew Holness and Foreign Minister Kamina Johnson Smith, and former Minister Anthony Hylton, as they have all stated a commitment to take firm action on this. Hylton at the time had in fact overseen rulings against Trinidadian petroleum products for rules of origin breaches under the Treaty of Chaguaramas.

Outside of these three, however, I think the other responsible people have proven to be ineffective and seem to always be seeking quiet diplomacy, while Jamaica and other countries of the region suffer. In fact, one could say that it is the failure of strong leadership on this matter that has seen the persistent failures of Caricom and our inability to move towards a true CSME.

On this recent impasse, however, I appeal to Jamaicans not to get emotional and respond like the former Trinidad National Security Minister, and also the “Donald Trump” surrogate Trinidadian talk show host. As a people we must remain above those types of responses, and understand that there are many Trinidadians who are decent people.

So we should continue to conduct business with Trinidad wherever possible, because it makes us better off financially. That is the only reason for market trade, so let us avoid emotional reactions.

I, for example, will not stop buying Trinidadian goods just because of this issue, but I have always looked for Jamaican goods over any other import, as long as they are equal in value (quality to price). This is because as a Jamaican my preference should always be for Jamaican goods, but certainly not at all costs to me personally. I therefore encourage Jamaicans to always purchase Jamaican goods over imports where they are available and of similar value.

UNFAIR COMPETITON

However, while we consider the comparison of products and services, we must also be mindful of the policy restrictions that create unfair competition.

Trinidad (through its finance minister) has admitted to providing a subsidy on fuel. Based on our own research (at the PSOJ) this subsidy is more than just on petrol, and extends to manufacturers.

I won’t go into detail here, but suffice it to say that this is in contravention of several parts of the treaty. So while we have enforced a policy (CET under the Treaty) to promote the CSME, we must also recognise where policies are failing us because of contraventions, and must act decisively to address that.

This is where the Jamaican government has failed us, because much of this has been suspected for a while, and brought to their attention, and they have failed to protect the Jamaican people. In fact the PSOJ estimates that over the 10 years to 2014, we have paid out approximately US$700 million we wouldn’t have had to pay if there was no CET on fuel because of the premium charged by Trinidad on account of the CET.

This would be enough to fund the sugar industry every year, and hence create jobs in Jamaica as opposed to supporting the subsidy in Trinidad.

So my appeal to Jamaicans is this: Don’t let one or two wayward voices in Trinidad cause us to view everyone in Trinidad with disfavour. And don’t let the ineffectiveness of the current Trinidad Government to address this issue, or the past ineffectiveness of the Jamaican government, play a role in how we feel. What we must do is demand action by the governments to either solve this Caricom fa├žade, and make it a true CSME, or stop fooling ourselves about it. What we must do is act and stop “posing”.

Caricom has a role to play in our regional development. But it is our failure to treat Caricom properly that has resulted in the many breaches – and not only the failure of Caricom, but the poor economic performance of the region.

Friday, April 15, 2016

What should be the real purpose of growth and development?


Last year I had set a goal to ride 7,500 miles on the bicycle, which I achieved. Discussing it with another cyclist, I was asked if that was my ultimate objective and if I would be increasing it this year (2016), to which my response was no because the real purpose of the goal was not to just ride 7500 miles for the year, but rather that was an initiative to achieve the greater goal, which was good health and to perform better on the bicycle.

Also, just recently, I posted that the philosophy that was adopted by the previous NSWMA board was good customer service and good corporate governance. This in itself is not the ultimate objective of the NSWMA, but what it does is guide the development of the initiatives needed to achieve the ultimate goal.

These two examples show that in order to achieve any ultimate objective, we must have carefully designed initiatives and a guiding philosophy.

So even though the initiatives and philosophy have been identified and are both critical to attaining the objective, the fact is that if you were just told the initiatives and philosophy guiding the initiatives, they would both be meaningless unless we are aware of what the ultimate objective is.

However, if we were to know what the ultimate objective is, then we could easily identify a philosophical framework and the supporting initiatives without being told.

So if I told you the ultimate objective of the NSWMA (as defined by section 4 of the NSWMA Act) is responsibility for the proper management and disposal of waste, then you could say to me that in order to achieve that I would need to have a guiding philosophy of customer service and governance. At that point I could then say, well, if I want to achieve that then I must look at the major risks to achieving that and then create my initiatives by order of priority.

This is the approach that the previous NSWMA board took, as the first thing the board did was to go to the NSWMA Act and ask what is our ultimate responsibility. That was able to guide our philosophy and coming out of that analysis we were able to identify Riverton and garbage collection as main risk areas and tackle those early.

For the past 43 years, Jamaica has been trying to achieve growth and development. We have heard many people talk about the need to grow the economy, and identify specific sectors — need for macroeconomic stability; need to reduce the debt to GDP ratio and reduce the fiscal deficit; and how critical it is to pass the IMF tests inter alia.

Vision 2030

It wasn’t, however, until Vision 2030 was developed and launched in December 2013, that we sort of created a guiding philosophy for our development. It was then that we finally decided that what we wanted for our development was to become “the place of choice to live, work, raise families, and do business”.

Until then Jamaica had no guiding philosophy for our development. Sure we knew that we wanted economic growth. We knew that we wanted to develop the country’s infrastructure. We knew that we wanted to reduce crime and indiscipline. We knew that we wanted to eradicate poverty. But to what end? And the fact is that if you don’t know where you are going, then you can take any road and you will get there.

But even though this philosophy (which I think is an excellent one) was developed, the truth is that it really has not been taken seriously by successive administrations, and seems to have remained an academic task with no desire for implementation. So there are a few persons monitoring Vision 2030, but the needed initiatives have not been tied in to the action by the country’s “board of directors”, which is the Cabinet.

So imagine if the NSWMA management identified a philosophy for the organisation, but it was not accepted by the board. Could it be achieved?

Last Tuesday, I accepted an invitation to interview some young people from a low-income community, in an attempt to identify what their skill sets and needs are. I thought it was important, even though I had a really hectic day, because I believe our young people need serious nurturing and guidance. I was happy to see that several professionals were there, and it was more encouraging because it took place at 7:00 pm.

Disheartening

But while speaking to some of these young people, just out of school, I was very disheartened. These youngsters were very ambitious and creative, but had a poor family background, had been abused, had produced children early, or had to drop out of school because they had no financial support.

One young lady of 18 was trying to make life better for herself, and wanted to go back to school, but had to drop out at 13 when her mother died and her grandmother could not afford to send her and two younger siblings to school. So she had to start hustling to help them. Immediately I thought to myself, what type of future does she have? Fortunately, she had no children and I pleaded with her not to do so until she was financially independent.

There were many stories similar to this, and it was obvious that they were very willing to improve themselves and at a time when they should have been enjoying their childhood but could not do so. I will definitely participate again.

This led me to think that even though we are talking about passing IMF tests, and nice terms like macroeconomic stability, the fact is that there is a significant part of our population that is just concerned about what they will eat tomorrow. Hence the disengagement we saw in the election turnout.

The fact is that our governance and philosophy is totally disconnected from what the ultimate objective of development should be – to improve the general standard of living for Jamaicans and ensure that all Jamaicans have an equal opportunity at success.

That is what governance should be about. Instead we focus on initiatives, and because we have not been able to define anything but initiatives we have not been able to see any meaningful development.

In other words, our leaders need to go back to basics and understand that the real purpose of growth and development should be about enhancing the lives and opportunities for the people. This is why the US has been so successful as a country, because their ultimate objective is improving the lives of US citizens, guided by the philosophy of government by the people and for the people.

Friday, April 01, 2016

Why should we buy Jamaican?



As we pursue our eternal search for economic development, one focus has been on the need for us to purchase local goods and services in preference to imports. The reasoning behind this seems logical, as it should mean that the balance of payments should improve, and this should mean a stable exchange rate and employment for more Jamaicans.

As a result, there have been many calls for us to ‘Buy Jamaican’. Former senator Norman Grant has been at the helm of this initiative, which, in my view, has reaped much success. Even with this successful campaign, however, we have continued to see currency depreciation, high inflation and interest rates, and increased unemployment over the period. So the question is, why wouldn’t things improve if we had such a successful ‘Buy Jamaican’ campaign?

There are a few reasons for this, and it underlines the fact that simply saying we should ‘Buy Jamaican’ will not improve our economic fortunes.

So while the campaign was very good and necessary, the truth is that we never really supported it with policies that would sustain a move towards consuming more Jamaican-made products and services. In addition to lack of policy stimulus, many local producers have not improved the service and product quality to properly compete with imported products.

The first thing to note is that it is a futile exercise to be pushing a ‘Buy Jamaican’ campaign when we are unable to significantly increase the production of Jamaican goods and services. So what we have failed to do as a country is ensure that appropriate policies address this failing. To do so all we had to do was ask the question – what is it that prevents capital from making long-term investments in locally produced goods and services? In other words, does capital feel comfortable investing for the very long term in sustainable production, and – importantly – locating their facilities in Jamaica?

The answer to this is that government policy has never effectively addressed the issue of being more attractive to capital than our competitors. Sure we have done it by creating special incentives for industries such as tourism, bauxite, free zones, etc. But the fact is that government’s attitude to capital generally has been very wanting.

As an example, tax policy in Jamaica has always pinpointed increasing fiscal revenue as its primary purpose. Never mind that it ends up killing incentives for capital and businesses generally. In contrast, countries like Panama have a direct policy of focusing on attracting capital, and as a result they have consistently grown at 6.0 per cent to 8.0 per cent per annum.

Government policy in Jamaica has always created a hostile environment to capital, and then created special carve-outs for foreign direct investments. Small wonder then that local investors are reluctant to risk their savings and pensions in business ideas.

The fact is that if government policy was focused on addressing the four most problematic factors in the 2016 Doing Business Report: inefficient government bureaucracy, crime and theft, tax rates, and corruption — then not only would we solve 54 per cent of our business challenges, but we would also see increased capital inflows and employment. Instead we have struggled for years to implement a computerised tracking system for development approvals, and then we wonder why growth remains anaemic.

Secondly, many of the Jamaican products and services produced are not able to compete in terms of quality and price.

Price in many instances is again affected by government policy, which seeks to extract as much revenue as possible without much concern for the survival of businesses and their ability to compete. But there are also quality issues with some of the goods and services produced. As an example, last year I took my daughter to the Easter Funfest at Hope Gardens, and it was a great event for children. I got there very early and she was almost alone on the rides so it was good.

This year I went early with her, only to be greeted by blaring music, with speaker boxes lining the route to the rides. The music was so loud that my daughter started crying and wanted to leave, and it was equally unbearable for me and some of the staff. Later I got a video of them having a stage show there with children dancing on the stage to a large audience of cheering adults.

A significant deterioration over last year.

This is a similar story for many Jamaican products and services. They start out well and end up being uncompetitive. This is okay in a competitive market, but the problem is that this mediocrity is supported somewhat by government policy, which in many respects creates significant barriers to entry. The result is that the invisible hand of a competitive market does not get to work properly. For example, something as simple as not enforcing zoning laws allows some businesses protection by allowing them an unfair advantage from a cost point of view. The result is mediocrity.

Other inhibitors are lack of information and inability to move goods effectively. Just look at the deplorable state of most farm roads.

The point is that we should not ‘Buy Jamaican’ just because it is a Jamaican product or service. But rather we should ‘Buy Jamaican’ because it is just as good or better than the imported products.

It is only when we can produce competitively that we will see improved growth and employment. This is because buying an inferior product actually does have economic costs: (i) higher cost of living, (ii) lower productivity and hence lower wages, and (iii) decreased potential for foreign exchange earnings.

At best then, producing inferior products and services will produce a more closed economy which becomes more uncompetitive and produces lower income levels, as happens in Cuba.

If we are to grow the economy at acceptable levels, then we must increase the number of Jamaican products and services. This, however, must be done competitively if we are to benefit.