Friday, July 14, 2017

Does Jamaica have a resource constraint or management problem?

Many times, when things are not done properly in Jamaica, the common cry is because there is a lack of resources. The impression being given is that because resources are constrained, that is the reason for many of the challenges we face as a country.

So a few weeks ago, in a conversation, I expressed dissatisfaction that there are drivers with more than 1,000 outstanding tickets. The excuse was that we did not have enough resources to follow up on all the outstanding tickets. Then just two days ago I was told that the high crime rate in a certain parish is because the police lack the resources to properly address the crime problem.

If these arguments are to be accepted, it means that we will never be able to solve the challenges we face. The fact is that every Government and business I know has a resource constraint problem. When one is running a private business, for example, you will always have a resource constraint and will have to make choices about which initiative gives the greatest value added, and also how to best manage your resources to produce maximum benefit (returns). Failure to do so will result in the business being uncompetitive and ultimately failing.

In my view, it is this failure to manage the resources of the country properly that has led to so many of the challenges we face today - such as high crime levels, countless informal settlements, deteriorating infrastructure, and the list goes on. In other words, it is not the lack of resources that has led to these problems, but rather the failure to efficiently manage the country's resources.

Whenever there is a shortage of resources at the fiscal level, our solution is not to consolidate our public sector operations, or see how much more efficiently we can deploy existing resources. The fiscal solution is always to look at who is doing well (because they have managed to efficiently manage their resources) and raise taxes on them, demonstrating the intellectual vortex that too many of our policy makers have found themselves in over the past 45 years at least.

The result of this approach is no different than if a private business were to mismanage its resources and then when it needs more, seek to raise prices on its customers. The result is that the customers go elsewhere to spend their money and the business and employees suffer.

Similarly, when we raise taxes every year and fail to provide a suitable environment for businesses to flourish, and for people to live, then capital moves either outside the country, or to other unproductive investments, the fiscal accounts suffer, and people lose jobs.

So in the case of the person who told me that the problem the justice system faces is lack of resources to go after so many people with more than 1,000 tickets — wouldn't it be prudent to identify even two such people and ensure they are brought to book and made an example of? Then the probability that others would comply would increase.

Then there are those who believe that there are not enough police to monitor the traffic indiscipline. What about implementing cameras at the hot spots for indiscipline and identifying a few offenders and making examples of them?

Also, if we are going for growth, then doesn't it make sense to focus on the things we are already doing well and maximise the value from them? I think of tourism, for example, where the emphasis is always on increasing the number of tourists to the island without improving the value of the product offering, unless of course done by an all-inclusive, which is also hampered by the country environment.

Because of this lack of focus on improving the value, I understand that the average repeat visit to Jamaica is 1.2 times, compared to a world average of maybe three times. If this information is correct, then it means that visitors on average do not return to the island. This was a sentiment expressed to me by some senior visitors to the island, who said two things.

First, they said that Jamaica is a powerful brand and the envy of many, but that because the brand is so powerful the expectations are high, and when people visit the island and are met with harassment, a dirty environment (such as what is happening at the Hip Strip), poor public transportation, aggressive behaviour from our people (such as the peddlers at the traffic lights, etc), they become disappointed because the high expectations are not met.

Just think of going to your favourite restaurant and the food is not up to the usual standard. What would be your reaction?

Secondly, they spoke specifically about Jamaica's high departure tax, which is causing uncompetitiveness. In particular, they referred to the fact that many of the tourists come on charter, and when the travel companies sell these charter flights they do not quote the departure tax as they want to be competitive. So the person telling the story said she came on a charter flight, and when she was leaving Jamaica she discovered that she needed to fork out departure tax of more than US$80 and was totally unprepared for it. Her question was, “Is that the final farewell that we want to give to our visitors?”

Wouldn't a better approach to increasing tourism value be to improve the environment (think about the Hip Strip as an example) and then rooms could go for US$500 instead of US$250 per night, more people would venture outside the all-inclusive to spend in the local economy, and make Jamaica a higher-value, more attractive place to visit? In other words, think about maximising the resources we currently have rather than going for increased quantity, which costs more to do.

This is going to take a different mindset, such as changing how we think about taxes, so that we try to get more taxes from increased activity and lower rates, rather than seek to increase rates every year and limit the potential of increasing activities.

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