NOW that the budget debate is finished, our efforts must be focused on how to develop the country to achieve economic and social progress. Everyone had their say on the debates, most of which would have been influenced by political underpinnings, with persons espousing how great the presentation was by their political preference and not any objective assessment of what was presented.
One such person sent me a message to express disappointment in me saying that jobs were needed to move the economy forward. Instead, he said patience needs to be exercised to see the adjustment in the economy. In other words make the adjustments through painful measures that will result in job losses and people will respond by starting businesses because interest rates are falling and other adjustments are being done to create a facilitative environment. When I asked the question though of how he suggest we deal with the economy over the next six months and if he could specifically let me know how the adjustments will impact on the economy in precise terms, that question was ignored.
US government action
It seemed obvious to me, and the US government, that in order for the economy to grow that jobs need to be present. The US, for example, has a very facilitative environment for growth and business start-ups, but supposed they had ignored the declining job market and left it to spiral out of control, where would the world be today? Would Jamaica even be speaking about increased tourism or a return to bauxite if the US had allowed the job market to falter? Would there be any economic growth if disposable incomes from job losses had dwindled? I think not. But this is the myopic view expressed by many who do not understand that the economy is dynamic, and based more on confidence and expectations than macroeconomic data.
My own view is that the general direction of the budget and policies seem to be moving in the right direction. The focus on lower interest rates, a restructured debt cash flow, small businesses, tax reform, and generally an enabling environment is pointing in the right direction. This, of course, includes the commentary by the prime minister on the need for a radically reformed public bureaucracy and crime. This approach of changing the structural make-up of the economy is definitely a positive and must be encouraged, as for the first in a very long time it seems that we have properly set our sights on the direction we want to move in.
What we need to do now is bring that together into a set of specifically laid out plans with timelines attached as to when we will achieve what and where the accountabilities lie. In short what we must be doing is focus on developing a specific set of tasks to achieve a macro-objective. This macro-objective must be economic and social development (not just growth). Because of the long-running fiscal deficits we have had in this country, which has decimated our economic and social structure, we are understandably focused on the fiscal accounts as an objective. The fiscal accounts (and deficit) of course need to be a tool rather than the end of our journey, which seems to always be the main focus.
So we achieve a fiscal deficit of 6.5 per cent in 2010/11 and then what? The question is in achieving that fiscal deficit target, what will be the dislocation caused to the economy? How many persons will have lost or gained employment? What will have been the social impact of achieving the fiscal target? How many new businesses do we expect to start over the next year, as a result of the policy shifts being pursued and the stimulus being provided? How much activity do we expect to occur from the much-needed housing stimulus announced by the prime minister? What are the specific timelines for the well-needed public sector transformation being pursued?
Business interest
These are the questions which businesses need to know the answers to in order to move forward. So while we hear how great the presenters sounded -- who did not sound good, and who was being political and who not -- the question is do we have a clear picture of what our developmental plans are for the next 12 months and how the specific plans are to be achieved?' We have clearly identified the issues that need to be addressed, which was maybe best articulated in the prime minister's presentation. But at the end of the day apart from the "who done it" theme throughout the presentations do we have a clear indication of how the development plans will take shape? If the answer is yes and businesses can plan then we have had an excellent budget presentation irrespective of how the speakers sounded.
After reviewing all the speeches my own view is that the one which best identified our challenges and what needs to be fixed is the prime minister's presentation. This is the one that we can take away the most from in terms of what developmental objectives we should be focused on, as the other presentations were like a Sherlock Holmes mystery unsolved, focusing primarily on who did what, when, and where. Is that relevant in the crisis in which we find ourselves today? If it will put food on peoples' tables and money in their pockets then by all means go for it.
The prime minister's presentation discussed the main issues, but in my view he needed another hour to expand on what the specific action plans are in order to address the issues of focus. In my view, the housing stimulus through the NHT was a good move, as one of the primary sectors of growth is the construction industry and if we can get that sector revitalised along with the growth in agriculture then we will bring back much-needed economic vibrancy.
As I was saying to my friend in the message, however, we need to have some focus on creating new income (jobs) in order to ensure that the demand exists for the stimulus in order to maximise the economic benefits. As an example, before the housing stimulus could have worked in the US they had to ensure that the job losses were halted. Can you imagine if they had provided the housing stimulus with job losses increasing? The benefit would not have had the maximum impact, which is how we need to approach spending. Hence, we need to ensure that the maximum value is achieved from each expenditure or initiative.
In order to maximise the value added there are a few areas we must concentrate on. The fact is that money is tight for the for the government and the strategy must be to maximise the expenditure by focusing on the greatest value-added strategies, as we do not have, as the prime minister says, reserves available from the days of historic worldwide growth or the ability to borrow given the IMF programme we are on (which I believe the adjustment period needs to be extended whether by the Stand By or Extended Fund Facility. Which one we have is academic as long as we get the adjustment period extended).
Public law and order
So I am heartened by the report in the newspaper about the focus of the police commissioner on dealing with law and order issues such as (1) night noise; (2) traffic violations; (3) safe public transportation; and (4) littering. My only question is why did it take so long to realise these need to be focused on? I only hope that this time we are serious about it, as restoring public law and order is the best method to deal with our crime monster. I only hope that the New Kingston police post becomes active and the people who stop along Knutsford Boulevard, while someone goes to buy food, are dealt with as parking in the roads by the police who seem to ignore them. Commissioner you will find that restoring public law and order will lead to other serious crimes being reduced, which I say based on logic rather than any policing experience.
The other areas, which I believe needs focus if we are to create a development environment, are:
* Public sector bureaucracy -- big impediment to business but the way that the prime minister outlined to deal with it is not adequate. There is a fundamental change that needs to take place, which I will not mention here.
* Energy costs -- critical is we are to become competitive in capital intensive investments and resolve our balance of payments problem. The main focus initially should not be on developing LNG plants, but should be a focus on public transportation investment and development and retail consumption. While the NHT facility for households is good, it suffers from bureaucracy and is not facilitative enough. The benefits of addressing these two areas are great and would not only increase competitiveness but also improve living standards and significantly reduce the trade deficit.
* Tax reform as mentioned by the finance minister is critical to development. The December tax package was not good for economic development. One thing I must commend the Minister for is his willingness to look at what has and has not worked and make the changes. The move to simplify taxes for small businesses is a good move. I would go further to agree with Ethlyn Norton-Coke that we must move towards indirect taxation, which would ensure greater compliance and a greater multiplier effect throughout the economy.
If we focus our resources and energy on these areas then this is where we can achieve the greatest value added. Now that the budget debate is over, and the investigations into "who done it", we should now solve the mystery of economic and social development by outlining a detailed plan of action.
Friday, April 23, 2010
Friday, April 16, 2010
Public bodies and their roles
The Government must be commended for placing before the parliament, and by extension the people of Jamaica, the revenues and expenditure estimates for public bodies. This is significant as the expenditure estimates for these bodies amount to approximately 72 per cent of the central government expenditure and, importantly also, these public bodies expect to commit taxpayers to an additional J$36 billion in loans for fiscal year 2010/11.
This should accelerate the steps towards International Public Sector Accounting Standards (IPSAS), the public sector equivalent to IFRS. If we are to properly assess and address our economic challenges we must be fully aware of all government commitments, both cash and accrued expenses. This will force governments to put all the cards on the table and cease the long-standing practice of meeting fiscal deficit targets by just not paying bills, which in the end harms the economy more than not having known what the true deficit position is.
Myopic views
I am constantly amazed at the myopic view taken of public bodies by elements of our public and private sector leadership, as well as those professing to be knights in shining armour who come flying in on one of the many airlines to prescribe what is "good for us" and fly back home to watch the events unfold on CNN in the luxury of their homes.
The view put forward is that public bodies are costing the Government a lot of money so we need to just cut them out totally, and given the chance, they would do so immediately without any regard for the immediate negative effect on the economic and social conditions of the country. I will agree that some public bodies should be divested and the Government is making the right moves to deal with these bodies.
For example, the Government has either taken steps or stated its intention to divest itself of Air Jamaica, the Sugar Company, Wallenford Coffee and Caymanas Track Limited, among others. And the Government is spot on about the need to get its tentacles out of these businesses, as by their very definition, bureaucracies should not be involved in trying to compete in the market economy. They will always lose.
On the other hand, there are certain bodies which are critical to the economy and the public infrastructure. One such is the JUTC. These bodies should not be targeted to reduce losses without considering the opportunity cost of such an action. So when people say to me that the JUTC costs too much money and we should just do away with it, I have to ask myself what banned substance were they just partaking in, or is it that they are so blinkered in their views that border on being ignorant.
It is very important not to approach the operation of public bodies, or the fiscal deficit, with a narrow- minded approach. This dangerous way of thinking could lead us to not have any proper public infrastructure a few years down the line if we approach it in this way. The purpose of public bodies, and fiscal policy for that matter, should be to target economic and social growth and development. One of the reasons why we have failed to develop as a country is that we have had this long-standing obsession with monetary policy and applying fiscal policy with a view to increasing government revenues rather than addressing it to macroeconomic objectives we lay out year after year without being successful in meeting them. The bottom line is that if we intend to go down road X but we take the path that leads us down road Y, then how can we expect to reach to the end of road X, unless it runs into road Y? Similarly, the approach that we take to fiscal policy will only lead us to our macroeconomic objectives by what Jamaicans call "buck up". Targeting the fiscal deficit as a policy decision, for example, ignores the need for development in the economic and social environment.
Questions to ask
So while the Government is totally on the right path of not wanting to compete with private sector interests in coffee, air transport, and horse racing (can you believe government is involved in this?), there are some public bodies that are critical to an efficient economy. Another argument for government not competing in the industries mentioned is, how fair is it for Government to own interest in a sector that it also regulates? This seems like a serious conflict of interest and one that the private sector should be concerned about.
On the other hand, places like the JUTC should not be assessed according to profit or loss, but rather the following questions need to be asked:
1. What need is the public body fulfilling?
2. What would be the effect on the economy and public order if the body fails to deliver service, or not provide service at a certain minimum standard?
3. How can implementing the service bring efficiency to the economy or save the country much-needed foreign exchange?
4. How can I improve the movement of persons throughout the country, and what is the expected benefit to productivity?
5. What is the most efficient cost structure for carrying out the needed operation?
These are just some general questions that must be asked when assessing the need for a public body, and the question about cost should always be after determining the expected benefit to the economy. So, for example, if we were to have an efficient and safe public transportation system, then we could save billions of dollars from (1) oil imports; (2) productivity increases; (3) freeing up of traffic; and (4) implementing access charges to business districts, just as in Manhattan or London. Before this can be properly implemented, however, we need to have a well-run, and very importantly, safe public transportation system. In the end all of our misfortunes come back to the crime monster.
There are also some public bodies that should be merged, as they provide basically the same function. Some of these include (1) the Betting, Gaming, and Lotteries and Racing commissions; (2) JIS and PBCJ; (3) MIDA and the Self-Start Fund; (4) DBJ and EXIM Bank, and there are many others. This move may not only save the Government hundreds of millions in expenditure but would also create a more efficient service delivery to the market.
While we are going through these necessary consolidations and eliminating what needs to be removed, we must recognise the importance of some public bodies to growth and development. For example, if the JUTC even cost $2 billion to run per annum, if it was saving us 50 per cent of the oil bill related to transportation and getting people to work in a more productive state of mind, or easing the traffic congestion leading to less need for road development and repair, then it would have been $2 billion well spent, as opposed to spending $500 million and not maximising on the benefits of such a public body.
This should accelerate the steps towards International Public Sector Accounting Standards (IPSAS), the public sector equivalent to IFRS. If we are to properly assess and address our economic challenges we must be fully aware of all government commitments, both cash and accrued expenses. This will force governments to put all the cards on the table and cease the long-standing practice of meeting fiscal deficit targets by just not paying bills, which in the end harms the economy more than not having known what the true deficit position is.
Myopic views
I am constantly amazed at the myopic view taken of public bodies by elements of our public and private sector leadership, as well as those professing to be knights in shining armour who come flying in on one of the many airlines to prescribe what is "good for us" and fly back home to watch the events unfold on CNN in the luxury of their homes.
The view put forward is that public bodies are costing the Government a lot of money so we need to just cut them out totally, and given the chance, they would do so immediately without any regard for the immediate negative effect on the economic and social conditions of the country. I will agree that some public bodies should be divested and the Government is making the right moves to deal with these bodies.
For example, the Government has either taken steps or stated its intention to divest itself of Air Jamaica, the Sugar Company, Wallenford Coffee and Caymanas Track Limited, among others. And the Government is spot on about the need to get its tentacles out of these businesses, as by their very definition, bureaucracies should not be involved in trying to compete in the market economy. They will always lose.
On the other hand, there are certain bodies which are critical to the economy and the public infrastructure. One such is the JUTC. These bodies should not be targeted to reduce losses without considering the opportunity cost of such an action. So when people say to me that the JUTC costs too much money and we should just do away with it, I have to ask myself what banned substance were they just partaking in, or is it that they are so blinkered in their views that border on being ignorant.
It is very important not to approach the operation of public bodies, or the fiscal deficit, with a narrow- minded approach. This dangerous way of thinking could lead us to not have any proper public infrastructure a few years down the line if we approach it in this way. The purpose of public bodies, and fiscal policy for that matter, should be to target economic and social growth and development. One of the reasons why we have failed to develop as a country is that we have had this long-standing obsession with monetary policy and applying fiscal policy with a view to increasing government revenues rather than addressing it to macroeconomic objectives we lay out year after year without being successful in meeting them. The bottom line is that if we intend to go down road X but we take the path that leads us down road Y, then how can we expect to reach to the end of road X, unless it runs into road Y? Similarly, the approach that we take to fiscal policy will only lead us to our macroeconomic objectives by what Jamaicans call "buck up". Targeting the fiscal deficit as a policy decision, for example, ignores the need for development in the economic and social environment.
Questions to ask
So while the Government is totally on the right path of not wanting to compete with private sector interests in coffee, air transport, and horse racing (can you believe government is involved in this?), there are some public bodies that are critical to an efficient economy. Another argument for government not competing in the industries mentioned is, how fair is it for Government to own interest in a sector that it also regulates? This seems like a serious conflict of interest and one that the private sector should be concerned about.
On the other hand, places like the JUTC should not be assessed according to profit or loss, but rather the following questions need to be asked:
1. What need is the public body fulfilling?
2. What would be the effect on the economy and public order if the body fails to deliver service, or not provide service at a certain minimum standard?
3. How can implementing the service bring efficiency to the economy or save the country much-needed foreign exchange?
4. How can I improve the movement of persons throughout the country, and what is the expected benefit to productivity?
5. What is the most efficient cost structure for carrying out the needed operation?
These are just some general questions that must be asked when assessing the need for a public body, and the question about cost should always be after determining the expected benefit to the economy. So, for example, if we were to have an efficient and safe public transportation system, then we could save billions of dollars from (1) oil imports; (2) productivity increases; (3) freeing up of traffic; and (4) implementing access charges to business districts, just as in Manhattan or London. Before this can be properly implemented, however, we need to have a well-run, and very importantly, safe public transportation system. In the end all of our misfortunes come back to the crime monster.
There are also some public bodies that should be merged, as they provide basically the same function. Some of these include (1) the Betting, Gaming, and Lotteries and Racing commissions; (2) JIS and PBCJ; (3) MIDA and the Self-Start Fund; (4) DBJ and EXIM Bank, and there are many others. This move may not only save the Government hundreds of millions in expenditure but would also create a more efficient service delivery to the market.
While we are going through these necessary consolidations and eliminating what needs to be removed, we must recognise the importance of some public bodies to growth and development. For example, if the JUTC even cost $2 billion to run per annum, if it was saving us 50 per cent of the oil bill related to transportation and getting people to work in a more productive state of mind, or easing the traffic congestion leading to less need for road development and repair, then it would have been $2 billion well spent, as opposed to spending $500 million and not maximising on the benefits of such a public body.
Sunday, April 04, 2010
The budget’s role in development
As far as I can remember, every year the government goes to parliament and outlines the expenditure and revenue estimates for the upcoming year. And you can be sure that as night follows day that some new taxes or fees are to be added to the overall economy. Even if something is given to the citizens, be assured that it is going to be taken back elsewhere.
The questions we must ask is why do governments come to the Jamaican people year after year for more but we still see no real development in the country. There are some that will argue that Jamaicans drive better cars, live in better houses, and carry two or three cell phones so the citizen must be better off. While we enjoy natural developments, as a result of the technological advances, the fact is that (as I pointed out in my book) in1975 we were ranked in the top 39 percent of countries surveyed in the Human Development Index (HDI), while in 2005 we moved to the 57 percentile. So relatively speaking Jamaica has declined in HDI ranking.
Governments are parasitic
For years Government has been parasitic, just like the mosquito which sucks blood from the body without replacing it, waiting instead for it to be nourished by other sources before it starts its blood sucking again. The problem is that at some point in time that constant sucking of blood without any adequate replacement will make the person ill and eventually lead to their death.
Add to that the fact that the person is very sick already and what you do is hasten the process of death. So compare that to an economy that is in recession and you will understand why new taxes will only serve to shrink the economy further. Can you imagine if the US in 2008 chose to increase taxes in order to reduce the fiscal deficit? The global economy would have crashed and cause devastation.
So we can understand the effect on the fiscal accounts from the tax package introduced in December 2009.The February fiscal numbers show this. Cursory looks at the fiscal numbers do not reveal the true picture, as the fiscal deficit and tax revenue is distorted by the JADEX. And so one would be misled to utilize those numbers for any assumptions without making the adjustments to smooth out that extraordinary item as accountants would do.
If one were to adjust out the extraordinary items caused by the JADEX, the normalized fiscal deficit would in fact be approximately $121.3 Billion and not $135.6Billion, or 12% of GDP rather than 13%. No doubt the IMF took this into consideration. On the other hand as it relates to the tax revenues, they actually underperformed in January by 19.47% ($4.3 Billion) if normalized. This is because one would have to remove the tax effect of the JADEX in order to arrive at what the normalized tax would be, which I estimate at $17.8 Billion compared to a budget of $22.2 Billion.
The tax revenues is what I am more concerned with than the fiscal deficit target, as it measures how healthy an economy is. And remember that this is in the context of the December tax package. Moreover this does not include the GCT on electricity bills and increased property taxes, which I think will have a further contractionary effect on disposable incomes, which is the blood supply of economies.
The problem with our budgets therefore is that there has been no real alignment between our budget process and the desired economic developmental objectives. So even while we set targets for economic growth, inflation etc., the fact is that our budgets have not been configured around our macroeconomic objectives. So we will inevitably end up missing our targets on that basis.
Budget philosophy
While this budget has made some improvements in that philosophy, I do not think that it has gone far enough to compensate for the negative consequences of the budget. The Minister of Finance has correctly recognized:
(1) the need for restructuring the debt cash flows – this is something I have touted for a while to much ridicule from most persons, even some who know embrace it as the best thing since sliced bread. As a matter of fact the much anticipated downgrades I was told would happen if we discussed it too much, all happened before it was discussed and after it was done and discussed we got upgraded. The Finance Minister has taken a very bold step in doing this and I think is consistent with his overall philosophy on the necessary adjustments that need to be done. While I welcome the restructure, my own view is that the pace of the restructure carries significant risks and means that other revolutionary changes must happen to minimize the JADEX risk, with some amount of social fallout. I also believe that the government is going to have to seek other loans like the China road loan to mitigate this risk;
(2) the need to rationalize and bring efficiency to the bureaucracy of government - among these efficiencies is one that I think is one of the most significant developments in recent times because of its positive effect on business costs and private sector efficiency. That is the efiling rolled out by the Tax Administration. I would certainly recommend this project for special recognition at an event like Business Leader or Jamaica Chamber of Commerce awards because of the efficiency it brings to businesses; and
(3) the need to reduce discretionary expenditure to only what is necessary and adds value.
So the overall philosophy of the Finance Minister is I think moving in the right direction. The problem is that the actions of the Finance Minister need to be supported by the other policy arms and actions of the bureaucracy. So that while the Finance Minister is pressing ahead there are other aspects that are weighting down his initiatives. Not least among them is crime, which I have been at pains to point out will only frustrate any financial effort made to turn the fiscal around, as even if the Shaw and his team get interest rates down to zero percent, no one will make any real productive long term investments in a socially decadent environment. The other factor is that we must settle the dispute between the government and teachers/nurses so as to avoid all the resulting unproductive time.
This problem of support can also be implied from the budget numbers, where there are significant real cuts in the budget for the public defender, OCG, auditor general, and courts. My opinion is not based on any detailed knowledge of the programmes but what we need is to get a clear indication of what will the resources allocated to these agencies do to improve the objectives and further serve as a stop to the excesses they seek to prevent. So the budget exercise must not just be a focus on how much is spent this year versus last or how much we can reduce the fiscal deficit by but must focus primarily on what are the deliverables expected in relation to the overall economic targets and whose accountability will it be for certain specific targets to be met.
Unless we understand this inextricable link between the budget and the behavioural aspects of the society we will continue to focus on how much we spend in relation to last year, in a very narrow financial way as I have heard some commentators do, which will only result in us going through the same ritual next year without any real benefit.
As I indicated though, I think the overall philosophy of the budget is changing for the better but we must improve its alignment with the overall economic objectives by taking a much more detailed view of the deliverables in relation to expenditure. That requires a certain shift, which I will not comment on here.
The questions we must ask is why do governments come to the Jamaican people year after year for more but we still see no real development in the country. There are some that will argue that Jamaicans drive better cars, live in better houses, and carry two or three cell phones so the citizen must be better off. While we enjoy natural developments, as a result of the technological advances, the fact is that (as I pointed out in my book) in1975 we were ranked in the top 39 percent of countries surveyed in the Human Development Index (HDI), while in 2005 we moved to the 57 percentile. So relatively speaking Jamaica has declined in HDI ranking.
Governments are parasitic
For years Government has been parasitic, just like the mosquito which sucks blood from the body without replacing it, waiting instead for it to be nourished by other sources before it starts its blood sucking again. The problem is that at some point in time that constant sucking of blood without any adequate replacement will make the person ill and eventually lead to their death.
Add to that the fact that the person is very sick already and what you do is hasten the process of death. So compare that to an economy that is in recession and you will understand why new taxes will only serve to shrink the economy further. Can you imagine if the US in 2008 chose to increase taxes in order to reduce the fiscal deficit? The global economy would have crashed and cause devastation.
So we can understand the effect on the fiscal accounts from the tax package introduced in December 2009.The February fiscal numbers show this. Cursory looks at the fiscal numbers do not reveal the true picture, as the fiscal deficit and tax revenue is distorted by the JADEX. And so one would be misled to utilize those numbers for any assumptions without making the adjustments to smooth out that extraordinary item as accountants would do.
If one were to adjust out the extraordinary items caused by the JADEX, the normalized fiscal deficit would in fact be approximately $121.3 Billion and not $135.6Billion, or 12% of GDP rather than 13%. No doubt the IMF took this into consideration. On the other hand as it relates to the tax revenues, they actually underperformed in January by 19.47% ($4.3 Billion) if normalized. This is because one would have to remove the tax effect of the JADEX in order to arrive at what the normalized tax would be, which I estimate at $17.8 Billion compared to a budget of $22.2 Billion.
The tax revenues is what I am more concerned with than the fiscal deficit target, as it measures how healthy an economy is. And remember that this is in the context of the December tax package. Moreover this does not include the GCT on electricity bills and increased property taxes, which I think will have a further contractionary effect on disposable incomes, which is the blood supply of economies.
The problem with our budgets therefore is that there has been no real alignment between our budget process and the desired economic developmental objectives. So even while we set targets for economic growth, inflation etc., the fact is that our budgets have not been configured around our macroeconomic objectives. So we will inevitably end up missing our targets on that basis.
Budget philosophy
While this budget has made some improvements in that philosophy, I do not think that it has gone far enough to compensate for the negative consequences of the budget. The Minister of Finance has correctly recognized:
(1) the need for restructuring the debt cash flows – this is something I have touted for a while to much ridicule from most persons, even some who know embrace it as the best thing since sliced bread. As a matter of fact the much anticipated downgrades I was told would happen if we discussed it too much, all happened before it was discussed and after it was done and discussed we got upgraded. The Finance Minister has taken a very bold step in doing this and I think is consistent with his overall philosophy on the necessary adjustments that need to be done. While I welcome the restructure, my own view is that the pace of the restructure carries significant risks and means that other revolutionary changes must happen to minimize the JADEX risk, with some amount of social fallout. I also believe that the government is going to have to seek other loans like the China road loan to mitigate this risk;
(2) the need to rationalize and bring efficiency to the bureaucracy of government - among these efficiencies is one that I think is one of the most significant developments in recent times because of its positive effect on business costs and private sector efficiency. That is the efiling rolled out by the Tax Administration. I would certainly recommend this project for special recognition at an event like Business Leader or Jamaica Chamber of Commerce awards because of the efficiency it brings to businesses; and
(3) the need to reduce discretionary expenditure to only what is necessary and adds value.
So the overall philosophy of the Finance Minister is I think moving in the right direction. The problem is that the actions of the Finance Minister need to be supported by the other policy arms and actions of the bureaucracy. So that while the Finance Minister is pressing ahead there are other aspects that are weighting down his initiatives. Not least among them is crime, which I have been at pains to point out will only frustrate any financial effort made to turn the fiscal around, as even if the Shaw and his team get interest rates down to zero percent, no one will make any real productive long term investments in a socially decadent environment. The other factor is that we must settle the dispute between the government and teachers/nurses so as to avoid all the resulting unproductive time.
This problem of support can also be implied from the budget numbers, where there are significant real cuts in the budget for the public defender, OCG, auditor general, and courts. My opinion is not based on any detailed knowledge of the programmes but what we need is to get a clear indication of what will the resources allocated to these agencies do to improve the objectives and further serve as a stop to the excesses they seek to prevent. So the budget exercise must not just be a focus on how much is spent this year versus last or how much we can reduce the fiscal deficit by but must focus primarily on what are the deliverables expected in relation to the overall economic targets and whose accountability will it be for certain specific targets to be met.
Unless we understand this inextricable link between the budget and the behavioural aspects of the society we will continue to focus on how much we spend in relation to last year, in a very narrow financial way as I have heard some commentators do, which will only result in us going through the same ritual next year without any real benefit.
As I indicated though, I think the overall philosophy of the budget is changing for the better but we must improve its alignment with the overall economic objectives by taking a much more detailed view of the deliverables in relation to expenditure. That requires a certain shift, which I will not comment on here.
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