Friday, May 12, 2017
The Prime Minister recently spoke to the need for sustainable growth that is equally shared by all, and specifically where the average Jamaican can share in that growth. We can, for example, mention many countries where there has been significant growth over sustained periods, and yet still they suffer from social and developmental challenges.As an example of this, Professor Hilary Beckles spoke to the situation in Trinidad, where for years they have seen high levels of growth and economic activity as a result of oil, but when the oil prices plummeted, the lack of social development was evident. Today Trinidad has a very high murder rate, as well as infrastructure which does not reflect the type of economic growth they have had.
This is no different from what happened in Jamaica after the cushion of the bauxite money left us. What it showed in both cases was that the authorities did not focus on economic and social development. Everyone knows that the best time to prepare for a hurricane is before it comes, not after it strikes. That is what the failure of governance in both these cases has demonstrated.
This type of preparation can only happen if a very deliberate and systematic approach is taken. This is also the type of approach that is needed for growth targets to be met. My impression is that we don't really apply a scientific approach to reaching growth targets, but rather we just “do some things” and hope that the target will be achieved.
Because of this we haven't really taken a serious approach to understanding and attempting to remove the structural deficiencies that prevent growth from happening. In fact, growth imperatives take second place to any political expediency, and as a result if we “buck up” on growth we are quite happy, but I can't honestly say that any deliberate and urgent approach is taken toward economic and social development, as it is much more than just growth.
For example, in December 2014 I wrote an article titled “Great need to transform Jamaica's labour force”. The article ended by saying that real sustainable growth “is only possible if we transform our labour force into a highly productive one, which means taking the necessary steps to do so.”
To date, however, not much has been done in terms of implementation. As a result of this, last week an article appeared in the newspaper, lamenting the fact that employers are finding it difficult to find sufficiently qualified workers. We also know that the BPO sector is limited to some extent because of the inability to find suitably qualified labour.
If I could see the need for transforming the labour market for growth from 2014, then I cannot for the life of me understand why our policy makers have not been able to do what is necessary to ensure that we would have met our growth requirements in 2017.
Or is it that although we projected growth, we really didn't believe that it would happen?
If unemployment is such a significant problem, why have we taken so long to take the necessary steps to train people for the jobs the economy will need, and by doing so create higher value employment and improve their earning power?
This shows that we don't really have an unemployment problem. What we have is a problem of the failure of leadership, as regards policy and execution, to create opportunities for people. Unemployment is merely a problem of that leadership failure.
The other challenge with our labour force is that our labour laws create lower levels of productivity. So the biggest problem that private sector companies complain to me about is the Industrial Disputes Tribunal (IDT).
This for me is a significant contributor to preventing increased productivity, because company owners have said that even if they have evidence of theft by employees, the company will still lose the case when they go in front of the IDT. The problem with this is that employers will shy away from long-term contract employment, and use technology to replace labour where possible. In the end the labour force suffers.
In addition to the structural problem of our labour force and its attendant legislation, we also underestimate the limiting factor of the indiscipline and general level of lawlessness.
I cannot for the life of me understand why we have not approached this with greater urgency, as major crimes can only thrive in an environment like this.
I also do not think they read the IDB report a few years ago, which stated that traffic congestion is the number one limiting factor of productivity in Latin America and the Caribbean region.
If we were serious about it, why for example have we taken so long to pass the new Road Traffic Act?
The approach to achieve high levels of sustainable growth seems very straightforward to me. It is a matter of going to the Planning Institute of Jamaica, and asking them what it will take to sustainably achieve economic growth of five per cent and above, in addition to addressing the social development issues. The PIOJ has a model that can provide some answers as to what would need to be done.
Once those strategies are identified, then what we should do is put initiatives in place to focus on the high-impact areas that will give us the greatest growth impetus. This may mean new legislation or some displacement of people and structures, but if we plan properly we can help people to transition to higher-value employment, and put in place much more efficient structures and institutions.
If this had been done in 2014, or before, we would not now be talking about the 12 per cent unemployment and high crime levels, while at the same time having employers report that they are having a difficulty finding suitably skilled and qualified workers.
Friday, May 05, 2017
Last week, members of the private sector met with Dr Alvaro Uribe, former president of Colombia, who was invited to Jamaica by the Economic Growth Council (EGC). At the meeting he said two things which resonated with everyone present, and which indicate the significant headwinds that have challenged our development.
Firstly he said that, if a Government does not create wealth, then the only thing they can distribute is poverty. This we are only too familiar with, as for the past 40-odd years, Jamaica has not created any wealth, even though our politicians have continuously sought to redistribute income from the most productive to the least productive. These failed “welfare” policies have resulted in fiscal deficits, low growth, trade deficits, devaluing currency, high crime, etc. This is the proof that our fiscal policies over the years just have not worked.
Secondly, he said he once had a conversation with Hugo Chavez, who told him that Venezuela does not need the private sector as they have oil. Well, we see where they are today, and to a much lesser extent this attitude against capital has also been a challenge for Jamaica.
Because of the desire to look like Robin Hood, many of our political decisions and policies have centred on “taxing the big man to give the small man a break”. What we have not realised, until recently, is that policies built on that principle will only cause everyone to become a small man. In other words, such policies will lead to impoverishment for all of us. This is what has happened to Venezuela, and the main reason for that is that we have not yet found any more efficient ways of creating value than the market forces.
In addition to those comments, we heard the minister of security say recently that an amazing 40 per cent of Jamaicans are squatting, and a recent editorial dealt with the high percentage of students who cannot cope with secondary or tertiary-level education because of poor grounding at the primary and early childhood levels.
Last week when I wrote about the lack of structure and degradation of the Hip Strip in MoBay, one person sent me an email to say that I am fighting against the small man who is trying to make a living. Obviously this person is caught up in a mentality of impoverishment, as he cannot understand that the way to “prosperity” is not to keep people at almost subsistence levels of living, but to expand the opportunities and teach everyone to take advantage of them.
The Prime Minister hit the nail on the head when he recently spoke to the fact that economic growth without social development is undesirable. And Hilary Beckles agreed by saying that this is what has happened in Trinidad, because while they were seeing high levels of growth, they failed to develop the social infrastructure, and so many were left behind with very low moral standards on top of it. Sounds like how we have developed in Jamaica, doesn't it?
As I reflected on these things, I compared it to conversations I have had with many successful business leaders, such as Hon Dennis Lalor, Hon Butch Stewart, Don Wehby, and Butch Hendrickson. These are people I enjoy speaking to and working with, as when you speak with them you get a different perspective on development, than for example the email I received about fighting against the small man on the Hip Strip.
And I would extend that even to some politicians, who suffer from the same “poverty of the mind” as the person who sent me the email.
This “poverty of the mind” is in fact what is holding back Jamaica. I have always maintained that poverty is more defined by how we think than the physical assets we own. When you listen to the stories of many of the very successful business people in Jamaica today, who were by societal standards economically poor, what you pick up is that even though initially they did not have material wealth, their minds were very fertile and prosperous, and that is what allowed them to become successful.
The irony also is that many people who say the rich should be taxed to help the poor man don't realise the difficulties they had to overcome to reach where they are. One trait I find among all the moguls mentioned above is that they never thought they were entitled to anything they didn't work for.
A serious problem that we face in Jamaica is a culture of entitlement that is ingrained in some of us. I saw a woman with nine children on the TV news one night, saying that she is suffering and the Government has done nothing to help her with her nine children.
Or we can even look at middle-class people who are in jobs and think that the employer owes them a favour, and so if they do what they are employed to do they must be compensated, or feel an entitlement to extend a long holiday weekend. And if the employer should dare to dismiss them, then they simply take the company to the IDT, where most times they will win.
Of course, this culture of entitlement receives strong support from political platforms, and is supported through legislation such as our labour laws which encourage unproductive behaviour and informal employment.
Over the years many have been mystified by the fact that despite Jamaica's obvious competitive advantages, such as in music, sports, bauxite, tourism, etc, we are still unable to develop as a country. Blessed with all these natural advantages, why are we still a poor country? Little Antigua boasts GDP per capita of US$18,000, while a much larger, resource-rich country like Jamaica is struggling at a mere US$5,000.
Or we wonder why indiscipline runs rampant in Jamaica, along with crumbling infrastructure and high crime. Why are we able to produce some of the best musical artistes in the world and the best athletes globally, yet with all of that we are still poor and struggling with economic and social challenges?
The problem is that we suffer from a poverty of the mind, which has been fed by the direction of some of our leaders over the years. The comment by the PM is to me a signal of this recognition, and must now be backed up by action.
If we are to move forward - one example being the development of the Hip Strip - it can only happen if we change our mindset, and stop thinking about poverty as our priority (such as what we can do for the poor) and start thinking about wealth creation (such as how we can make everyone better).
Friday, April 28, 2017
Last Easter Sunday seven of us decided that we would do the 111-mile cycle ride to Montego Bay.Of course I had to eat at Peppa's as soon as I got there, which I think is one of the best kept secrets in Montego Bay, and then stayed at my friend, Terrence Jarret's Altamont West, located right on the Hip Strip, which I haven't visited in a while.
After showering and resting for a while, I ventured out to meet a friend of mine who was visiting from overseas, to have a quick chat and then head back to the room for a good sleep.
I deliberately stayed on the Hip Strip because I could just walk from the hotel to meet up with my friend. Everything had gone well so far: We had a great ride to MoBay, ate good food, the room was good, and after the meeting I thought I'd just walk back to my hotel.
Everything was good until I started walking along the Hip Strip. This immediately struck me as urban decay in action.
The pan chicken and other vendors had all taken up residence along the side of the street and even under the bus stops, allowing little room for any pedestrian traffic.
The sidewalks had obviously not been repaired in many years, and one could see the concrete breaking up. The roads had been cleaned but were badly stained from the vending activities that take place there night after night. And the traffic was horrendous, with taxis stopping wherever they pleased.
I thought to myself: “This is a prime example of why we find it so difficult to develop the country.” Tourism, as we know, is the number one foreign exchange earner (apart from remittances which are not based on productive activity, and Trump may soon reverse that).
Additionally, Montego Bay is the tourist capital of Jamaica, and the main area of attraction has always been touted as the Hip Strip. So in effect this strip could be referred to as the proverbial “goose that lays the golden egg”. But it seems as if we are trying to strangle that goose.
I cannot understand why we do not have a grand vision for the Hip Strip. If we do, why has it not been implemented? I can picture the Hip Strip as a well-kept road, where only pedestrian traffic is allowed, or specially designated shuttles, operated by the Tourist Board, paid for by advertisements displayed by tourism interests. The sidewalks and streets are well maintained.
No vending is allowed, and the type of business activity is well regulated. Against this backdrop thousands of tourists are traversing the Hip Strip 24 hours a day, and because of this experience the cost of a room is double what it is now, which means soaring real estate values.
In essence, the Hip Strip would become a global tourist attraction. However, once I wake up from that dream I come to the realisation that the Hip Strip is being allowed to go the route of downtown Montego Bay, which is dirty and absolutely chaotic.
Urban decay has been allowed to creep into residential communities because zoning laws have not been implemented; inadequate planning and the support of the “disturb my neighbour mentality” prevail as loud music is the norm across the country, with no regard for the citizens who want to enjoy the peace and quiet of their homes.
This is another assault on the market value of real estate across the country, as if we are not satisfied with the decay we have brought to the garrison communities in defiance of the euphoria and vision that Jamaicans had in 1962.
But let's not stop there, because we have allowed this same type of decay to beset downtown Kingston, which we are now trying to redevelop, while at the same time allowing the decay and indiscipline to creep into New Kingston.
New Kingston is now a place where many people say they dread going to because the sidewalk infrastructure is decaying; homeless people loiter on the streets all day - some establishing car wash businesses on the streets, in addition to the begging; the parking restrictions are ignored and whenever you go there, a line of illegally parked vehicles can be seen (even though there is a police post); and then there is the traffic which is blended in with the reckless driving.
For too long (for fiscal and other reasons) we have ignored the infrastructure and have been underspending, and it is important to reverse that trend. Think of it like a balloon.
A balloon can hold a certain amount of air in it, depending on the size. If you put more air than it can hold, then it will burst, and this is an undesirable outcome as you will lose both the air and the balloon. Similarly, economic growth is like the air in the balloon, and the capital infrastructure is the balloon.
In order to expand your economic and social development, infrastructure is important. So if we think about the tourism product, it is not going to be possible to increase the tourism value added if we do not improve the tourism product. And the tourism product cannot be improved unless we put the necessary infrastructure in place to support the improvement.
So the all-inclusives, such as Sandals, and similar hotels which have done a fantastic job with a fragile environment, cannot grow geometrically if we do not provide the environmental infrastructure to grow. Even on a micro level, can you imagine the growth in tourism we would see if we could improve the infrastructure and environment around the Hip Strip - even without developing beyond that, though that too is necessary.
Or can you imagine the growth in business and real estate values if we were to halt the decay in New Kingston and solve the traffic problems?
As far as I am concerned, this is a sound argument for the use of funds like the TEF and NHT. We shouldn't only be talking about using these funds for fiscal support.
We must think outside the box and start envisioning what is possible if we properly utilise these funds to provide this environmental support, and find the will to instill the discipline and order that we need.
What I am certain of is that investing in our infrastructure will increase our capacity for growth, and allow us to see the geometric expansion we need, rather than the incremental growth we have become accustomed to.
Monday, April 10, 2017
A few years ago someone asked me what I was passionate about. I mentioned that one of the things I really am passionate about is Jamaica and Jamaicans. It is that passion for Jamaica and to see Jamaicans in a better place that often drives me to write and make comments, as I think this is the best way I can contribute.
I really believe in the potential of Jamaica, and when I speak at any event overseas I always try to portray that. Recently I was at a regional conference and spoke to what Jamaica has done since 2012 in transforming our economic fortunes, and what I discovered was that many people are aware of our progress and have a lot of respect for what we have done. We need to understand that this was no easy task, and people overseas understand this much more than we seem to.
Where we are today is undoubtedly one of the best opportunities we have to shine, and I can’t remember in my lifetime such an opportunity. Speaking to people who are older than I am, I get the feeling that we are feeling somewhat like we did in 1962 — the year we achieved independence.
At that time, I am told, there was a feeling of invincibility - a feeling that we could achieve anything we wanted. History has shown us that those responsible for charting that course have messed up badly, and they have to live with that. Today, however, I think we have a chance to once again realise that dream, and if we do not do so now, then I am not sure we will be able to do so any time soon. So we must ensure that we grab the opportunity and “run with it”.
In order to do so, it will take extraordinary leadership. Note carefully I said leadership, not management. Because it won’t be about just checking some boxes and saying that we have completed a set of tasks or initiatives. What it will require is leadership that will mobilise and motivate the people to be the best that they can be. This is the resolve that the Government will have to find to lead this country on a path to real prosperity and development, which means allowing people to reach their full potential and success by their own efforts - and not through handouts as we have come to think development means.
At the present time I think that both political parties have two leaders who are capable of delivering on such a vision. Andrew Holness and Peter Phillips — both of whom I have a lot of respect for — have the ability to lead that change via different paths. Based on my interactions, I believe they are both committed to seeing a better Jamaica. But commitment alone never got anyone anywhere, because in the end it is how one leads and manages to mobilise his/her team that will make the difference.
Team in this case means all Jamaicans, not just the ones who vote for either side. This distinction is very important, as too often we act as if there are two Jamaicas, and one can survive without the other.
One of my greatest fears is that I will become mentally disabled and unable to think properly — an affliction that overcomes many coherent people from time to time. As far as I am concerned, anyone who defends a party position irrespective of the illogic behind it suffers from some form of mental disability and lack of independent thought.
In the past I have voted for both parties based on the agenda that they placed in front of me during the election campaign, because I think that success is not based on the colour of the party flag, but rather on ideas and the ability to lead. As a matter of fact, if one is blinded politically by “party colour”, how can one criticise a racist who is blinded by “race colour”? I am not saying that one should not have political ideals, but just remember that John McCain — a Republican — criticises any perceived wrong move by Donald Trump.
This is the real challenge that the “chosen leader” will have to face. In order for us to move forward as a country, we must unite around common goals and not ostracise someone else just because they hold a different opinion. Sadly, I see this happening all too frequently on social media.
The leadership we need must not only be able to see beyond “party colours” and unite the nation around a common goal, but must also ensure that there is consultation with the people. This does not mean that one must talk to everyone about everything, but a good leader can always feel the pulse of his people. Think about Bustamante and Michael Manley.
This is what I take away from the “Call to Action” report done by the Economic Growth Council when it says that citizen security should be at the heart of our development. This could not be better stated. What we must remember is that nations are not successful because they have fiscal surpluses, stable exchange rates, and highways. Countries are successful because they have successful citizens who live in an environment they feel comfortable in. This is what created the nostalgic feeling in 1962, and it is what we need to focus on if we are to be a truly successful country.
Of course, this means creating an orderly and disciplined society where people feel it is “the place of choice to live, raise families, work, and do business”. Show me someone who goes home and sleeps with his bank account every night and feels satisfied. Show me someone who feels good knowing that he has amassed a lot of wealth but needs to have constant security around him 24/7, or else face possible criminal attacks.
To be a successful country also means not just creating an orderly and disciplined society. We must also create EQUAL opportunities for everyone to be the best that they can be. The circumstances of our birth shouldn’t matter; we should all have the ability to excel based on our own efforts. This means removing the obstacles that prevent people from moving forward - like excessive bureaucracy, taxes, corruption, and crime.
In addition, we must protect our children so that they don’t grow up abused and angry, and we must create an efficient system of justice, where if someone is accused of a crime they don’t spend years waiting to get a verdict.
Like others looking on from overseas, I believe that Jamaica and Jamaicans have accomplished a lot over the past four years, and we have an opportunity to shine. This will require the type of leadership to unite and put every citizen at the centre of all policy decisions.
Tuesday, March 28, 2017
Last week I made the point that the most important asset that Jamaica has is its three million residents, and that it is the underutilisation of this asset that has caused us to attain average growth of a mere 0.8 per cent per annum for the past 40 years. The fact is that our three million residents are also our most neglected, abused, and underutilised asset.
One does not have to be a rocket scientist to understand that if you minimise the use of what can give you the greatest value, then obviously your value creation will be minimal.
This can be extended in economic terms to say that an economy that does not focus on its areas of comparative advantage cannot be competitive and cannot optimise its development.
Jamaica, for example, has a comparative advantage in tourism, sports, music, niche agricultural products, and more recently the BPO sector - which is primarily our human resources and geographic location. We have, however, done everything to restrict the development of these by not addressing crime, inadequate resources and planning, by tolerating praedial larceny, and year after year by seeking to “kill” any industry that does well through the imposition of draconian taxes. We therefore create policies to discourage industries from doing well, and then we wonder why we can't have sustainably high growth levels.
This is the same thing we do with our human resources, as we encourage urban decay by creating disorderly communities; we ignore the productivity of people by allowing uncontrolled noise when people need to sleep; by not respecting the rights of people; by restricting the potential of people through the creation of labour laws that stymie their capacity; and by not insisting on the protection and schooling of children.
The result of this is that Jamaica scores very poorly with respect to innovation, as shown in the
Global Competitiveness Report, when it is well known that economies develop fastest when innovation is encouraged.
A secret that many of our policy makers have never understood over the years - but which our private sector understands very well - is that the best way to build your business is to improve the intellectual capacity of the people who work there.
The most progressive CEOs I know understand this; for example Don Wehby tells me that he is always on the lookout for good talent, even if there is no vacancy, as they will always add more value than their cost. And if he cannot place them within the company, then he puts them on boards. It is therefore no surprise that under his leadership, GraceKennedy has become a much larger global brand and is always improving its profitability.
This importance of intellectual capacity is something our policy makers have never understood. So even while they always seem amazed at the development of a country like Singapore, they don't understand that one of the things that has led to Singapore's success is the focus on building human capacity through education and creating an environment for the population to be productive.
The creation of this environment is necessary for improved productivity and human capacity. If we continue to support an environment of disorder, such as road indiscipline and night noise, discourage productivity and improved compensation, through archaic labour laws and mechanisms such as collective bargaining, and discourage investment and value creation with taxes, then we cannot be surprised to see our labour and total productivity factor falling since the 1970s.
Can we further be surprised, as I mentioned last week, that little Antigua has GDP per capita at US$18,300 per annum, while we are just over US$4,000 per annum? Can we be surprised when we have approximately 20 per cent of our people living below the poverty line, unemployment at 13 per cent, and more than 300,000 peopler on welfare (PATH), with another 200,000 in need of welfare?
The only way for us to achieve Vision 2030, and experience real development, is to improve the intellectual capacity of our people.
This means creating an environment that encourages learning and disciplined living. It means educating our people and preparing them for higher value jobs, as it is not just about the quantity of jobs (such as low-paying factory or BPO jobs) but the quality of jobs. The fact also is that industry, such as BPO, is restricted by the intellectual capacity of the human resources available; therefore the BPO sector cannot move readily to high value jobs, such as programming, because we don't have the skills necessary.
The first step, of course, is that our policy makers need to fully appreciate the need to develop our human resources if we want to see true development.
The EGC's Call to Action has understood this by focusing firstly on “Citizen Security” as the foundation for growth. The next step, however, is for it to be intertwined with the fabric of our fiscal and other government policies.
This to me is still not evident, as our discussions are still focused around the mathematics of the budget, and who did what when they were in office since independence.
So essentially, our conversations are focused on immediate needs and the distant past. There is very little discussion about the future. If we are to get to Vision 2030 we must change this way of thinking, and we must start to lay out and discuss plans for the future.
We also need to understand that the future of any country depends mainly on the children and those yet unborn. Therefore we need to ensure that focus is placed on improving our education system in terms of access and quality. This does not mean building a school at every corner, but using innovative ways such as distance learning.
The future of our country depends on creating exceptional human resources. This means that our focus must be on creating an environment for our people to realise their full potential. This must not be confused with the politics we have practised over the years, which consists of giving people handouts. That approach simply brings everyone down to a lower standard instead of helping them to be the best they can be.
This is going to require visionary leadership, which chooses to take action for developing the potential of our people. In other words, leadership must take steps similar to those taken by Jesus when he fed 5,000 people from a basket of fish and loaves, instead of trying to share up the single basket among the 5,000 people.
Friday, March 17, 2017
Every time we come around to this time of the year — when we debate the budget, I swear that the arguments for and against are the same. The same arguments may not come from the same people every year, as it depends on which party is in power at the time. But no matter which party it is, the arguments made by their supporters are always similar to the ones made by the party that was in power the last time.
The problem I have with the discussions that take place is that they never really centre on moving the country forward. They tend to develop into shouting matches where both sides put forward arguments that are usually incorrect and myopic. The advent of social media has only served to escalate the divisive and myopic views in many respects.
At the end of the day, of course, we have all wasted a lot of energy arguing points that really do not elevate the discussion about how we can develop Jamaica.
Last week I visited Antigua for the first time, and I was struck by the fact that the 100,000 or so residents of this small island enjoyed a far better quality of life and seemed more organised than Jamaicans. They have a GDP per capita income of more than US$18,300 and their main industry is tourism, which I was told supports around 70 per cent of the population.
Contrast that to Jamaica, which earns significantly more from tourism, bauxite, and agriculture. Yet with a population of three million, we have a GDP per capita of around US$4,000 — a far cry from Antigua.
Jamaica is also much closer to the largest global market and has far more air and sea connections. So the question is: Why have we not been able to come close to a small island like Antigua, although we have so many more natural advantages?
And even more important, we have 30 times the number of people, which means that we should have the capacity to be 30 times more innovative than Antigua, and when coupled with our significant resource advantages we really should be looking at GDP per capita of more than US$30,000, at a minimum.
Instead, we are scraping the bottom of the barrel at just over US$4,000 GDP per capita.
As I pondered these things, and as I listened to the Antiguans describe their culture, I began to understand. And anyone who runs an organisation knows that leadership and culture are the two most defining elements of organisational success. Everything else is secondary.
I learnt that in Antigua everyone understands the importance of tourism, therefore everyone is in the business of ensuring that the tourists have a great experience.
As an example, the group I was with went to visit an old English fort. Another tour guide leading a separate group there came over and offered us some water and drinks from his van, saying that he needed to ensure that he took care of all visitors.
In Jamaica, tourist harassment is so pervasive that Sandals had to push forward with a very successful product called all-inclusive hotels. Thank heavens for Butch Stewart.
I also noticed that, even though Antigua doesn’t have the infrastructural development that Jamaica does, the streets were spotless. I actually saw a plastic bag on the side of the road and it stood out like a sore thumb because everywhere else was so clean.
In our case, when the NSWMA requests $5.5 billion to keep the streets clean and we get $3.6 billion, we are criticised by the same people who cut the budget for not keeping the country clean.
Driving on the roads in Antigua is a pleasant experience, as people actually stop at stop signs and stop lights; no one is speeding, and I didn’t see any reckless driving by the taxi drivers there. Contrast that with what goes on here, and we see the vast difference.
I also noticed that the environment was quiet, and there was no noise from dances or churches. By contrast, Jamaicans are forced to listen to the dissonant sounds emanating from sound systems and raucous pastors, despite the Noise Abatement Act.
Our visit was topped off by the discussions we had at a well-organised symposium put on by the Caribbean Centre for Development Administration (now headed by Devon Rowe, a former financial secretary of Jamaica) on developing a charter for public sector improvement in the Caribbean. We had ministers of government present from nearly every other Caribbean island except Jamaica, of course.
Based on the progressive nature of the discussions, I was only too happy not to be in Jamaica and surrounded by the type of discussions we normally have around budget time.
So what has caused this marked difference between a small island that depends on tourism, and Jamaica — a country blessed with relatively abundant natural and human resources?
It struck me that what Antigua has done, which we have failed to do, is to create a culture of progress and development. Their people and their environment are geared towards moving the country forward for the betterment of everyone.
I am not saying that they do not have their challenges, but certainly the cultural atmosphere that has been drilled into the minds of their people (as evidenced by my interaction) is that they recognise the need to protect their tourism business and create an environment where everyone feels comfortable and can prosper. Hence, their US$18,500 GDP per capita compared to our approximately US$4,000.
At the end of the day, therefore, if we are going to reach “5 in 4”, then we must understand that this responsibility — or the ability to do so — does not lie in the hands of a few committees. It can only happen if through our leadership we get the whole country behind the plan.
As an example, Vision 2030 must move beyond a concept in a book and in meetings, and be owned by all three million Jamaicans.
To do this we must also recognise that the most valuable resource we have as a country is our population of three million residents, and not the natural beauty, music, or sports. Unless we are able to make that transition in our thinking, and our leadership begins to understand the importance of creating that culture, then next year this time we will be having the same discussions we have had for the last 40 years.
Friday, February 17, 2017
It’s that time of year again when businesses and people get edgy, and in some cases hold off on plans until the minister of finance speaks and reveals the tax package.
The fact is that tax policy has a direct bearing on economic growth and development, which is something our governments have failed to understand, as tax policy over the years is devised through political statements on platforms rather than through consultation with the technocrats.
So the politician gets on the stage and gives an impossible directive such as ‘ye shall fly’, and then says to the technocrat that they need to make them fly, even while it is not possible.
The consequence of this type of approach is that we have a tax framework that doesn’t encourage production and development, but rather takes pride of place in the 2016-17 Global Competitiveness Report as the third most problematic factor to doing business in Jamaica. And in fact it has consistently been in the top five most problematic factors over the years.
Obviously this means that politicians do not read this report, because if they did we would have done something about it years ago.
This is why when the Matalon report came out in 2007, and the Private Sector Working Group on Tax came out with their 2012 report, the Government just cherry-picked what they wanted from it and ignored the statement that the measures would only be effective if implemented as a whole. The fact is that the expediency of funding the budget was more important than long-term development.
Today, because of this naÃ¯ve view of our policymakers, we still grapple with the same fiscal challenges we had 10 or even 20 years ago. So today we are faced with a budget deficit of close to $20 billion, and an expected tax package in the billions of dollars. And as usual, tax policy is merely a mathematical and allocation exercise, rather than one geared at driving growth.
One of the major challenges facing the Government over the years is that of low tax compliance. This is evident in the fact that even though the employed working force is estimated at 1.15 million people, just over 320,000 (around 27 per cent) are registered for payroll taxes.
But last year, instead of going after compliance, it was easier to impose a higher tax rate on people above the $6-million level. The promise, though, was that the move would be temporary — as the minister committed last year that in the upcoming year these people would enjoy the full $1.5-million threshold and the rate would not be increased. This is expected to be so as the minister is someone who sticks to his commitments, as evidenced by the $1.5-million threshold implementation.
What this would mean is that the additional $19-billion income tax increases on individuals should come from compliance measures, given the low percentage of people working who are registered for PAYE.
When I do some analysis on the revenue estimates for 2017/18, however, it again betrays the intended policy to move towards indirect tax, as the 2016/17 direct tax as a percentage of total revenues is 27.8 per cent, while the 2017/18 estimate is 29.8 per cent — suggesting a move in the opposite direction. This of course needs explanation.
This math exercise every year, in my view, speaks to the lack of innovative ideas and vision of our leaders over the years. Any society that is concerned about development and growth does not look only
short term at revenue collection and expenditure management, but addresses its mind to what needs to be done to encourage growth.
This is where I think our governors continue to fail us.
It is not all bad news, however, as since the economic reform programme started in 2013, we have admittedly seen legislative and fiscal changes to encourage growth and stability. But in my view it is not fast enough to cause the paradigm shift we need. And unless we start doing what’s necessary to cause this paradigm shift, we will remain behind our competitors in terms of development, which we must understand is relative.
Every year we continue to play a wait-and-see game to find out which sector is going to be called upon to finance the budget, but the truth is that our time is not being efficiently spent doing so.
The debates and analysis will continue in the media about what taxes will be raised and which ones will decline (mainly because of political announcements). But there is not enough talk in the media about the need to use tax policy to drive growth.
We have seen examples of the Employer Tax Credit resulting in Corporate Income Taxes increasing, and the tax incentive on the Junior Stock Exchange resulting in significantly more employment, payroll taxes, and consumption taxes. But yet still we have not embraced the fact that if we were to make the tax environment more competitive, primarily with lower rates, then we may actually see more economic activity. Again, just look at the Global Competitiveness Report.
The conversation we therefore need to have each year is not one about wondering if the minister is going to ‘hit me’ this year, but rather what tax policy should be introduced to spur development.
In Panama, for example, the law protects investors on the same terms as the investment was made. In the US tax rates are set out three to five years in advance. Therefore, investors and people can plan their business and have confidence that the decision they make today will not be altered by any political decision for the next five years.
This is the “alternative fact” of what budgets and debates should be about. For this to happen though we need to change how we think. In other words, we need to have a vision for development.
We need to not continuously seek to place one group against the other. And we need to understand that encouraging capital to make as much money as possible is to the benefit of the whole society.
The question therefore is: is it possible for us to make this paradigm shift in our thinking and reveal the “alternative facts”?
Friday, February 10, 2017
On February 23, 2007, in my piece called “No public law and order”, I wrote:
“Any effort to permanently deal with…criminality in this country,must not only be addressed at hardened criminals, but must of necessity include an assault on the breakdown of law and order generally. We need to put a stop to the manufacture of criminals by discontinuing the corruption in the public sector and enforcing discipline in the society…Unless we can address these issues we will not be able to maintain discipline in the society. And if we cannot have basic discipline, then these same undisciplined people will grow up to be hardened criminals. What happens is that people will continue to buck the system as much as possible to see what more they can get away with.”
So far we have not managed to address the problem of indiscipline, which has in fact worsened, and like night follows day, we also continue to reap violent crimes with greater intensity. It is therefore no surprise to me that crime is at higher levels today. And, additionally, we see more violent crimes.
A recently released study by the IDB also shows that crime costs Jamaica four per cent of GDP every year, which approximates to $60 billion annually.
At the same time that we are losing $60 billion annually from crime, we are trying to find $16 billion in the fiscal accounts to deliver on the promise for an increase of the income tax threshold to $1.5 million per annum.
The solution to finding this additional $16 billion is that we may have to raid the funds from public sector bodies like the NHT and increase other consumption taxes.
It is therefore obvious to me that the reason for having to squeeze the hapless taxpayers, instead of being able to reduce taxes is the result of very poor governance/public policy over the decades.
This responsibility does not lie with any one administration, as the crime that we are reaping today is the result of poor public policy for more than 40 years. I would go further to say that the responsibility for this is not just with the politicians in Parliament, but also the public sector bureaucracy that has been charged with executing public policy.
In an interview with Minister Bobby Montague, on my TV programme
On Point, he made the very telling statement that we must ensure that we take the time to craft a correct strategy to tame this crime monster once and for all. Because, in my view, crime-fighting policies and initiatives over the years have been woefully ineffective.
For decades we have had several anti-crime police squads with various acronyms. We have imposed numerous states of emergency and pieces of legislation, which in most cases have only served to cause increased strain between the Jamaica Constabulary Force and the citizens.
Over the years, Jamaican citizens have also contributed to the crime problem by seeking to support the politicisation of crime. So when one party is in power they seek to criticise the ruling party — not because any careful analysis is done, but because they are not supporters. As citizens we also support indiscipline. As one person on social media said to me, why do we want to further oppress the transport operator by imposing increased fines for littering or traffic offences? The answer is that if you don’t want to pay the fine, then don’t break the law.
Recently, for example, the Minister announced the acquisition of two boats and an aircraft to monitor the borders. There was immediate outcry from some people, who if they really thought about it would understand that unless we secure our borders, with 145 illegal points of entry, then taking guns off the street will be meaningless, as they can be easily replaced.
But while we continue to announce initiatives to solve crime by deploying more security forces, having a zero tolerance approach (which we should always have had anyway), and putting more resources into crime, I still think that we have failed to address the root causes of crime. And so our efforts will be like treating the symptoms of an illness without finding out what is causing the illness.
As I pointed out in February 2007, the nourishment for crime is the lack of law and order in our environment. This is what, as a country, throughout all our crime strategies, we have failed to address. So while we roll out multiple crime plans, we have never in any serious way addressed the matter of road indiscipline, squatting, night noise, or child abuse for that matter.
The evidence is clear. We have failed to address the deficiencies in the Road Traffic Act and Child Care and Protection Act with any urgency, or in the same manner we pass legislation for retroactive taxes. We have failed to ensure that there is peace and quiet in communities, thus ensuring greater productivity.
And even though we are now talking about child abuse, because it is the current topic, we have not discussed the need for parents to be held accountable for the abuse of children, such as putting them on the roads to sell various items when they should be in school or at home studying. We have not discussed holding parents accountable for children not attending school regularly.
Like any other problem, one can only solve it in a sustainable way by identifying the root cause and taking steps to fix that root problem, while at the same time dealing with the symptoms.
So here are questions to ponder: Is it possible to solve crime without addressing the matter of accountability of parents for their children? Is it possible to solve crime without ensuring that we have a very orderly society, such as the way people drive on the road and ensuring proper zoning and noise levels? Is it possible to solve crime without a properly functioning and efficient justice system? Is it possible to solve crime without ensuring that the people asked to uphold the law (the police) enjoy acceptable working conditions?
The February 2007 article was written 10 years ago, and is as relevant today as it was then. The crime problem has not been solved, and during those 10 years we have spent a lot of resources and had many crime plans.
Still, crime worsens.
In my view, we have failed to address the social issues and law and order challenges, which are the root causes of crime. And, I should add, the main reason for our perpetual fiscal budget challenges.
Friday, January 27, 2017
Page 3 of the Wednesday, January 25th, Jamaica Observer, had two very disturbing reports.
The first referred to a 15-year-old who is unable to read and write, because his mother had no money to send him to school, and his father had basically abandoned him. In addition, the mother, who is not working, has several children and his older siblings are in a similar position.
The second story is about a Pentecostal pastor who was convicted of having sex with a minor.
These stories follow the revelation of the sexual misconduct allegations against three Moravian Church pastors, in all cases involving minors. In this case, it also features a mother who has 11 children, who is also not able to take proper care of them, and no mention of the father, or fathers.
Around the same time, a news report revealed that both the OCR and CDA, were playing “bureaucracy tag team”, while a seven-year-old girl was allegedly suffering abuse at the hands of a predator. After seven months, they had not located the child despite having the contact details for the person who had made the report - and within one night of the news item the child was found.
The authorities have launched an investigation into the case of the seven-year-old, and the Government has also promised to assist the mother of the girl involved in what is now known as the Moravian Church Scandal.
Both responses I think have fallen short of what they should be, as in the former case there was no urgency in the form of a timeline given to completing the investigations, or even any suspension from “front line duties”, as done with police, even though the abuse of a child is one of the worst crimes.
In the second case, I would have wanted to know what was the investigation into the neglect by the mother. But this is a day in Jamaica.
And after all of this, the question being asked is, has the church failed us? With much debate about the inadequacies of the church, as if it is the church that is the responsible gatekeeper for law and order in the country.
The fact is that all these cases have more to do with a lawlessness society, and lack of order, than any teachings of the church.
What we must not continue to do is divert the responsibility of governance from where it should reside, which is the Government and Parliament, as these are the institutions with the power and authority to effect law and order, and hence create values in a society.
The church like any other institution is nothing more than a microcosm of the society. This also applies to a school. So, that when up to a few years ago, 70 per cent of our children were leaving high school, without one subject, the ultimate blame is not the school, but rather the system that has caused the school to produce that output.
Until we understand this fundamental point, we will be forever chasing our tails, and eventually end up repeating the cycle of the past 40 years.
The fact is that the cases above have more to do with the policies pursued by Government over the past 40 years than the failing of any church or school, as the same leadership in the church and school was created by the policies (or lack thereof). So a teacher or pastor, who has underperformed, was not isolated from the environment before.
In fact, one could also argue that if the church and school were absent then the situation may be much worse than it is today. Just as a senior policeman said to me - even though people may say that the JCF is dysfunctional, what would happen if we did not have the “dysfunctional) JCF in place?
Therefore, in order to solve the problems of murders, child abuse, road indiscipline, and disorder generally we must, in my view, go back to the problem of Government policy.
So even though we create a police force, OCG, Public Defender, OCA, and other such institutions, if the Parliament each year refuses to provide adequate resources then how do these institutions function effectively?
And even if we go further and provide the resources to all these institutions and they do their job effectively and carry persons to the court, but because of inadequate resources and action, the justice system is unable to deliver judgements for at least two years -then once again the result is disorder.
And even if we assume that the resources are made available, and the justice system works efficiently, another challenge we have is that we do not proactively put legislation in place. Effectively taking years to debate and have legislation passed.
Also, when we look at the economy, even when we make all the sacrifices under the Economic Reform Programme, if we fail to put the legislation in place to deregulate capital or achieve public sector efficiency, then there will be no sustainable growth and development.
In the end everything that happens in a society comes down to policy developed by Government, and functionaries, and importantly also how Parliament governs and debates when they meet every week.
We only need to look as far as the United States and see what effect the policies espoused by a President, or the House of Representatives, have on markets and whether capital stays in the country or not. Or what effect laws passed - such as on abortion, or the mere appointment of a Supreme Court judge - have on the behavior and values in the society.
In the end it all comes down to policy, as this is what affects long term behavior and what a society turns out to be.
Unless we realise and address this issue then a focus on church or the JCF will only be a superficial solution.
Friday, January 20, 2017
I have often wondered why we Jamaicans have always been able to recognise our problems but we have never been able to solve them.
We constantly pile up study after study, we form multiple commissions to examine the same problem year after year, with maybe a different title and a new set — or a new generation — of people. And so we go along our merry way, having the same problems in 2016 that we had in 1962.
Because we are a “bright” and creative people, we always seem to articulate the same problem very well in different ways. The result is that we never recognise what the fundamental cause of our problem is, because we somehow always focus on the symptoms, which we articulate so well.
So after numerous Commissions of Inquiry and piles of commentary and reports on what our problems are, we still face the same challenges year after year, disguised in different suits.
One such criticism that is now in vogue is the ineffectiveness of the Jamaica Constabulary Force (JCF) at solving crime. And I would be the very first to admit that the JCF has significant challenges, and has arguably had a leadership deficit over the decades, as no one person can be held accountable for the current state of affairs. It is also true that no one political party can be held accountable for our economic and social challenges, as they have both made unwise decisions over the years, not only as Government or Opposition, but also as Parliamentarians and representatives of the people.
The JCF, therefore, can be seen as the driver of a car that is in a race and going at 50 mph, while everyone else is going at 80 mph (globally). The car is not performing at optimum capacity because it has not been serviced, it has very old tyres, and it is sputtering because it has been filled with “bad gas”.
People look on and say the driver is not the best, and he/she needs to be replaced because the race is being lost. All this time there is no realisation that if you change the driver, even though he/she may have some clear deficiencies, it will not make the car go any faster. And in fact one cannot do a proper assessment of the driver’s ability if the car is in such a poor condition.
Similarly, it is always very easy for us to blame the JCF for the high levels of crime in the society, because they are the most visible part of the justice system. But we fail to recognise that the justice system, and I should say the law and order environment, is much more than the JCF. In fact, the JCF often intervenes when everything else in the chain of that system has failed.
So the policeman is not there to prevent crime, but rather to arrest it. Therefore, shouldn’t the emphasis and discussion be around crime prevention, and hence what sort of system needs to be in place to achieve this?
In my view, it makes more sense to do what is necessary to prevent crime than to put all our resources into solving it, because by then you would have already had a victim. This approach would also place less stress on the JCF and would allow them more opportunities to solve crime, and would also allow us a fairer chance to assess their performance.
One example is the derelict traffic ticketing system and Road Traffic legislation we have in place.
I have been able to get information from the JCF that between the period November 2010 and April 2016, 45 people in the Corporate Area and St Catherine had more than 500 outstanding tickets each. The total number of outstanding tickets for these 45 persons was an unbelievable 30,757, or an average of 683 tickets per person. And this doesn’t include drivers with less than 500 tickets outstanding.
To drive the point home even further, an example was given of one person who the ticketing system showed was issued 117 tickets of which 103 remained outstanding. After being arrested he was taken to court, where 78 warrants for disobedience of the summonses were issued and he was fined $90,000 for 78 tickets. He had another 22 matters outstanding, and the next day was fined $25,000 for 9 matters. On that same day I am told that he was committing the same offences for which he was brought to the court.
The result, the police say, is that his behaviour is now mimicked by most of the other illegal operators, as all the passengers want to take his car because of how quickly he gets them to their destination.
This example shows that there is a problem with legislation, as the long delay in passing the Road Traffic Act causes uncertainty in fines, and ties the judge’s hands as to whether to suspend the licence or seize the car. The passengers also contribute to the lawlessness because they know the man is an illegal operator and that he breaks the speed limit, but they gravitate towards him. It has also resulted in everyone now behaving in that manner because that is what the customer demands.
The result is that we have an accepted chaotic transportation system overrun by illegal operators and a sympathetic public.
We then say to the police,”Why are you not solving this problem?” We might as well just ask them, “Why aren’t you able to carry water in a basket?” The Parliament fails to provide the proper legislative framework and resources (as the ticketing system does not link the various arms of the justice system and tax system), the police are asked to work in very unfavourable conditions, and the public is supporting lawlessness.
At the end of the day, however, some politician will go on a platform and say the Government is not solving crime, the Government and people will say the police are inefficient, and we will call for a commission of inquiry, create another report, and still have the same challenges we have had for the past 40 or more years. And in the end we will be no better able to properly assess the effectiveness of the JCF, although we may end up implementing some changes when we really don’t know how effective they will be.
Another year has passed, and as usual at the start of a new year we wish each other much prosperity and make new (or, more likely, repeat) resolutions about how we intend to improve ourselves. At the start of the year many plans are made around how we intend to improve our money management, health, and social lives.
Our leaders also deliver messages that speak to the need for us to work together to achieve prosperity and ensure that every Jamaican has an opportunity to be the best they can be. The political leaders also take jabs at each other and give all the reasons why either party will be better for Jamaica, and ensure a better path for all, even though over 54 years we have not had the evidence of the prosperity promised by either, year after year.
In fact, with a few adjustments we may be able to replay today the New Year’s messages done 25 years ago and they would still be very relevant — the reason being that we have not really done anything to address the fundamental cause of the challenges we have faced for the past 40 years.
Today, however, most will agree that we see a light at the end of the tunnel, which seems to be daylight and not the usual train that has always been at the end of our previous policies.
This is because approximately four years ago we decided to make a fundamental shift in our governance and focused our attention on inclusion of all stakeholders in our development, maybe because we had no other choice.
However, the inclusion of all stakeholders through institutions such as EPOC, ESET, and the Partnership for Jamaica were instrumental in placing us on the path we are on today.
And so today we are optimistic that we will exit the tunnel and see daylight and not be mowed down by a train, as we have become used to. This is because we have seen where the previous government made the decision to forge ahead with the necessary reforms, and inclusion of the entire country. And the current government showed the political maturity to continue the major fiscal and economic programme and other things such as continued board appointments.
Both must be commended for this, as this is what made the difference, and changed the course of our destiny in 2016.
What this change has done though is turn the car away from driving off the cliff and point it away from disaster — and in fact, we have started to point the car in the right direction. However, we are still very close to the edge of the cliff and must now start to move the car away from the cliff and drive away from it.
It is also essential that this happens in 2017, as anything that remains stable is really “progressing backwards”, somewhat like the term “negative growth” that economists love to use.
So to even remain stable we must move forward somewhat; and to make progress, it means moving forward at a minimum pace, and to win the global competitive race we must move forward at a minimum-plus pace (the plus of course being a pace above the global average).
When we go back to basic economic theory (which has always applied to us), this can only happen if we recognise that a country’s competitiveness is determined by how it capitalises on its comparative advantages.
This means that our development requires us to maximise the value from our areas of comparative advantage, which we have not done in the past, and what some of the legislative changes (Harmonisation Act) seeks to do.
Before I mention these areas though, it also means not making some of our sectors that provide the “veins with blood” to be at a disadvantage compared to other countries. I speak specifically about the financial industry, which is significantly constrained by taxes and bureaucracy, way beyond our competitors, even while we expect capital to flow.
This expectation is as logical as the NSWMA trying to collect garbage without any garbage trucks, and must be fixed.
So if we are to move forward at a competitive pace we must focus on our areas of comparative advantage, which are primarily tourism, agriculture (in niche areas) and the BPO sectors. All of these need the “blood” provided by the restricted financial industry, but, very importantly, also need productive human resources at the base.
But over the last 54 years it is this human element that we have “oppressed” — by not providing opportunities, allowing police brutality and inhibiting growth in other ways such as bureaucratic inefficiency and increased taxes and cost of living.
As a result of this we today have a population that has a relatively low literacy rate, falling labour productivity, increased labour force informality (which means no retirement income plans), one-third living in informal settlements, and a limitation being imposed on their full potential.
Is it any surprise then that UHWI cannot perform major surgeries because of a shortage of specialist nurses, when just a few years ago some of our politicians were encouraging training professionals for export to get the crumbs of remittances instead of the bounty of their contribution to development? And then when they leave, based on us supporting that policy, we are surprised that we have none here to keep the health sector going.
For me, therefore, our greatest asset is the people of Jamaica and policy must do everything to ensure their security, as espoused in the EGC’s call to action. It is the citizens, and their development, that societies are built on and we must do everything to ensure that their long-term prosperity is not sacrificed for short-term objectives.
This is the challenge I see for 2017, because the way we approach citizen security and opportunity will not only affect the outcome of the EGC’s 5 in 4 objective, but will also determine the country’s long-term viability.
This calls for a fundamental policy shift as was done in 2013 when oversight of the economic programme was given to private citizens through EPOC.