Tuesday, March 28, 2017

Develop our intellectual capacity for growth

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

Create a culture of development

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.