Increasing Jamaica's tourism competitiveness

EACH time I am away, I can't help but do a comparison between the country I visit and Jamaica. In particular, I always look at the main industry of the country and contrast it against Jamaica, if it is an industry that Jamaica competes in also.

Over the past few days, a delegation from Jamaica participated in a Caribbean Growth Forum, which was put on by the IDB in conjunction with partners such as the World Bank. The forum's focus was to look at what can be done to enhance the economic growth potential of the Caribbean region. The forum was opened by the Prime Minister of Bahamas, and included significant participation from government ministers from Trinidad, Bahamas, Barbados, and other islands, and included the governor of the Eastern Caribbean Central Bank, president of the IDB, and other senior financial players within the region and even as far as Canada. Of note, Jamaica did not have any government participation, with the exception of Colin Bullock from the Planning Institute of Jamaica.

Tourists sunbathe along a beach in Nassau, Bahamas. (PHOTO: AP)

The discussions which happened offline, resulted in financing opportunities for small and medium-sized companies, in particular, that everyone was keen to be a part of.

I will discuss this, and some other elements of the forum, in later articles, as I want now to make a comparison between tourism in Nassau against Jamaica. Nassau, with a population of only 180,000, and which has to import water, and is much more expensive than Jamaica, has much larger hotels and is humming with tourist activity. The type of activity seen is a distant memory of what I remember used to happen in Jamaica.

The irony of this is that as far as I am concerned the overall hotel experience in Jamaica is ahead of that where I stayed in Nassau. Especially if it is compared with Sandals (which I think is the best hotel experience in Jamaica) but even when compared to the other hotels such as RIU and Sunset Resorts.

The advantages Jamaica have include service levels (our people are more natural when it comes to delivering service) and the operations management at the Jamaican hotels (especially Sandals) is way ahead of the Bahamas experience. The people in Bahamas are very nice, but the service side is not as natural as it is in Jamaica. This is compounded by the poor operations management of the hotel. I don't think the physical infrastructure experience of the Bahamas hotel is superior than the Jamaica experience, but the food in Jamaica is much better.

The number of attractions in Jamaica is also much more, and as far as I am concerned much more attractive. One unique thing about Jamaica also is that we have a very unique culture, and our music and sports, are far more appealing than most other tourist destinations in the world, including Bahamas.

Why then does Nassau seem to have so much tourist activity going on, and certainly more than what you would see at a Jamaican hotel. It certainly is not that our local players are not competitive and creative, because as far as I am concerned, our local tourist players have done wonders, given the lack of environmental support for the tourism product.

The main problem is that tourism service delivery is primarily within the hotel, and is not supported well by the country. It is not that people do not realise the value of tourism to Jamaica, but outside of the players in the industry, the country still has not realised what true tourism delivery is.

So we continuously seek to reduce our competitive edge in tourism, in various ways. And these are the advantages that somewhere like Bahamas has over us, and why the average spend from their tourist is higher than ours.

These include better infrastructure, such as roads, and the fact that everywhere in the Bahamas is clean. In Jamaica when you drive outside of the property you are confronted with a filthy environment, tourist harassment, touts on the beaches, high taxes (in Bahamas there is no income or consumption taxes), and general indiscipline on the roads. In addition to these challenges, we also have allowed our beaches to be degraded because of our poor environmental management, unlike the Bahamas where the beaches are pristine.

This is why an all-inclusive room sells for US$250 double occupancy in Jamaica, while a similar room in Bahamas or Miami sells for US$300 or more just for the bed. If you need internet access, meals, or entertainment you pay additional. In other words we are quickly eroding our comparative advantage in tourism because of poor management.

What we must understand is that a country's comparative advantage is not static and changes based on what other countries are doing, so we need to constantly innovate and properly manage our existing comparative advantage. And it is important that, while we still have a comparative advantage in tourism, we take care of it.

It is necessary for us to ensure that not only the hip strip in Montego Bay looks good, but it must extend to downtown Montego Bay. We must enforce litter laws and ensure that proprietors maintain a certain standard in terms of how their properties look. We must ensure that there is discipline on the roads and must not have so many peddlars in the streets. Tourists, and residents, must also feel safe to walk on the road at any time during the night.

It is these things that matter for tourism, and irrespective of how much more you can offer, if you cannot offer a peaceful and restful vacation then you will not be competitive. Having to lock away tourists is not a vacation. It is an adventure, and that is not what people want to do on their vacations. This is why in Bahamas another vibrant activity you see are the number of buses carrying people on tours. And we have much more to show but do not have that sort of activity.

So if we are really serious about tourism, then we must act on the things that matter and ensure that our time is not preoccupied with matters not related to development.

Playing cricket on a volleyball court

ANYONE who knows the game of cricket would know how difficult it would be to fit all 22 players, both umpires, and both sets of stumps on a volleyball court. It would of course be possible to do so, but would be very uncomfortable and would upset the free flow of the game.

It would, for example, be very difficult for the batsman to make any runs, even though the boundary may seem so close, because he would be surrounded with fielders, and the hard surface of the volleyball court would make it difficult to bat on.

Indians play cricket at the University ground in Ahmadabad, India. (Photo: AP)

This reminds me of what Jamaica has been like for businesses and the PAYE worker. It just seems as if from the start we may have designed Jamaica to be a difficult place to do business and find opportunity. In other words, is Jamaica designed for failure rather than success? Is this the main reason why Jamaicans go to other countries and seem to do so well, while the same Jamaicans struggle here? Is it that we are all trying to play cricket on a volleyball court, where we can see the boundary but can't make the runs because of the myriad of obstacles in the way.

We have debated for a very long time that a big part of the challenge to our economic and social progress are the structural obstacles that are in our way. These are very well identified as (1) the cost of energy; (2) the need for tax reform; (3) the cost of the lack of law and order; and (4) the imposing and inefficient bureaucracy.

The fact is that if this economy is to grow it can happen only through private sector effort. And if we are going to see a significant private sector impact, then we must ensure that not only the playing field is level for all but that we have the right playing field for the game that we are playing.

So, for example, if we want to continue the growth in tourism, then we must of necessity protect our natural environment (including our beaches) and deal swiftly with law and order generally, and tourist harassment specifically. If we are going to get into the agro processing in a big way, then we must deal with the issues of energy costs and praedial larceny. If we are to encourage the proliferation of new business ventures, then the bureaucracy surrounding company formation and paying taxes must be improved significantly.

The global competitiveness report, for example, ranks us as 163 out of 185 countries, with respect to ease of paying taxes. Where we spend over 360 hours per year paying 72 different tax types, while Singapore spends 86 hours per year paying four different tax types.

One of the more significant challenges we face is the inefficiency and low levels of productivity in the public sector bureaucracy. If we are to address this then it requires that we rethink the way that we operate the public sector. The current system of rules do not facilitate efficiency, value added thinking, or cost optimisation (more important in the public sector than profitability, as the public sector should not be geared towards profitability but rather service). To solve this problem, we need to change the rules and compensation system to allow the creativity of the people in the public sector to come to the fore and for productivity to be rewarded, rather than tenure.

The problem we face today, is that from the start of independent Jamaica, we lay the foundation for failure. I had to say to someone yesterday that it is more important to rely on systems, for control, rather than people. In other words in our daily operation there should not be an emphasis on personality. We should not design laws around personalities, such as our current laws which refer everything back to a minister. We also need to have a system of governance that ensures checks and balance, rather than the current system we have where it is a first past the post who gets everything. This is the total contrast in the US where the whole governance process has many checks and balances.

The question therefore is, did we design Jamaica to fail from the start, and if we are to really see the growth and development that we so desperately need, then should we not be looking at some of these structural issues that prevent us from realising our potential. The IMF agreement does attempt to address many of these structural issues, through the timeline surrounding the passing of certain legislation, such as the insolvency act and the omnibus tax incentive act. And while we seek to address many of the structural changes we also need to be very careful that when we implement these that a clear value added is identified, so that it moves us to a cricket pitch, rather than just add some painted lines to the volleyball court.

In other words, we must ensure that any structural changes that we make that they actually cause the revolutionary change needed, rather than cause pain for nothing more than a different perspective of the same situation.

So, if we want to be competitive in the global market, and change the fortunes of the last 50 years, of our business community and citizens, we need not upgrade just the volleyball court but change the cricket match to a proper cricket pitch.

Example of excellence in the public sector

TWO weeks ago I wrote about the effect of culture on economic growth and development, and want this week to follow up with an example of a public sector company that has excelled during the recession. The company is Jamaica Ultimate Tyre Company Limited (JUTC2), a subsidiary of JUTC, which I have written about before, but want to do so now as I am about to demit office as chairman after six fulfilling years.

JUTC2 is an example of what a culture shift, performance reward, good management, and supportive governance can do. It is an example for not only other public sector bodies to follow, but also what can happen in Jamaica if we develop an enabling environment for businesses.

Jamaica Ultimate Tyre Company has not suffered from any political influence, says Dennis Chung, who has served the company through two transport ministers — Mike Henry (left) and Dr Omar Davies.

It was incorporated in 2001, and I became chairman in 2007, under then Transport Minister Mike Henry. At the time the company was losing approximately $1 million per month; and as a small subsidiary of JUTC and not very important on the national agenda, we were uncertain about getting financial support. In fact, the company was really not afforded much attention.

The first thing the new board did was to look at the business model, and determined that it could not work as it was, as the JUTC (which was cash strapped at the time) was the major customer accounting for 65 per cent of production, and was the main challenge of the company's cash flow and profitability.

The first decision therefore was that we needed to change that ratio, and focus on expanding the commercial base thereby reducing JUTC's impact on the business. Second, we determined that there were five key principles on which we were going to manage the business, which included a value-added approach to every decision made in the company. Third, we had to manage our balance sheet carefully to ensure that we could finance the strategy without any external debt or capital injection. And finally, we ensured that the proper personnel were in place based on what we wanted to achieve.

We also had to deal with the audited statements being six years in arrears, and therefore did not have properly audited numbers we could rely on. One of the first orders of business therefore was to get the audited statements up to date, as information is critical to analysis and management. This is a lesson the Jamaican economy must learn. One of the advantages the US economy has is that they have every type of data you can imagine, and it is very timely, even if not 100 per cent accurate. The important lesson is that relevance and timeliness of information is just as important as accuracy — a very important principle of accounting. For the past three years we have filed the audited statements with the ministry within the statutory period of 120 days, and all our statutory payments done on time.

By 2009 we were able to show a profit, and more important JUTC was no longer the majority of our production sales, and today represents just 30 per cent of production. Profitability continued to grow, where it peaked in 2011/12 to over $30 million, but fell last year as the economy declined. Since 2009, however, we have consistently made profits.

What is it that contributed to this performance, which the country can learn from?

First, the company did not suffer from any political influence. Under Mike Henry, the Transport Ministry was very supportive of our direction and gave us strong analytical support. When Omar Davies took over as minister I explained to him what we were trying to achieve, and indicated to him that I would be willing to stay on for two years to complete a project we were working on to make the company stronger. He asked me to stay on and never one day interfered, and the strong support continued from the ministry. This is illustrative of what needs to happen generally in the country, and is a tribute to both ministers.

Second, the board members I worked with (under both administrations) were business-focused, and gave significant support to the direction. Again this is a tribute to the ministers who appointed people who were well qualified, with their only agenda being good governance.

Third, while the board focused just on policy direction, the management executed the operational strategy efficiently. This relationship between the board and management was critical, where board members never interfered in operations. Management was made aware that their employment depended on profitability, as that was the only way to ensure the company remained open.

Every decision we made was based on a careful value- added approach. If it was not financially prudent, even if the activity was a part of the operations from the start, it was discarded. Everything we did had to have a value proposition attached to it.

Finally, the workers were a big part of the transformation. In around 2010, the management wrote to the finance ministry and got them to approve 10 per cent of the audited profits to be distributed to the employees. This caused the workers to defend jealously the profitability of the company, and in fact when a new worker was found attempting to help himself, the workers gave him up, and effectively terminated him.

I want to pay tribute to the ministers, board members, management, and workers for the tremendous job they have done and hold them out as an example to be followed. The company has been featured in international, as well as local media. It is not any one of the high profile loss making entities, but just a set of workers trying to increase their compensation through their own efforts.

Can Jamaica learn from this? You decide. What I will say is that if we do not improve the environment for doing business in Jamaica, then how can we expect companies, and workers, to excel internationally?