Jamaica’s road to prosperity

THE January fiscal numbers reveal a concern that many of us expressed at the start of the IMF agreement: that achieving the primary surplus target is going to be very challenging. The numbers show that up to January 2014, we were some $2 billion behind the primary surplus target of $69 billion, with the more challenging months (February and March) ahead of us. So a lot will depend on the tax collections, especially in March.

What we also know is that many businesses and individuals have seen significant fall-off in income levels, and local and international consumption tax revenues have been lagging behind. We also know that the Government has been making considerable cutbacks in capital expenditure, and to January 2014 we have spent just under $8 billion less than was projected. But even this was not enough to save the primary surplus target as tax revenues were some $13 billion behind projection, showing that it is all going to come down to the tax collections.

Based on this the question on many minds is whether the Government will be introducing new tax measures. It is important to note here that the thought process of the IMF continues to be that what we need is a widening of the tax base and lower tax rates, which implies doing away with special exemptions, as done with tax waivers, and eventually lowering the tax rates generally. This process is already in train.

Will there be new taxes introduced? Only the finance minister can answer that, but in my own view, this would be a very damaging thing to do at this moment when we are seeing improvement in confidence, and very importantly, from where I sit, a lot more interest in entrepreneurial activities from university graduates.

This last point is critical, as what it means is that young people are seeing a better way for themselves by going the route of starting their own business. The problem is that they are not the ones with the loudest voices; those really are the business people and people in the workforce, through unions, etc. The other problem with this is that some of the businesses and people who are having difficulty have that difficulty because they are not competitive enough. On the other hand, there are also many SMEs in particular that have challenges because of still existing inefficient government bureaucracy and government policy.

The challenge we face, then, is how do we distinguish between those who have a genuine problem and those who even, after we make the necessary bureaucracy and policy improvements, still won't be able to survive. And also, how do we help to transform to greater productivity those businesses and persons who are capable of being transformed to greater productivity and efficiency?

This is a challenge that is faced even when one is trying to turn around the fortunes of a company, or person. The fact is that there are some companies and persons who will not be capable of being transformed, and we need to quickly identify those and understand that they are incapable of being saved and put in place other ways to assist them. This could include retraining, refocus, or welfare. In the past we have tried to maintain the status quo, even when there are clear inefficiencies, and what this has resulted in is new taxes and continuation of outdated incentives that do nothing more than cause further pain for all.

On the other hand, there are many that are capable of greater things, as we see many times when companies and persons extend themselves abroad to other environments and excel. And all they need is that government policy to create an environment for them to excel in.

It is for this reason why last week I recognised the excellent customer focus of the TAJ. And also why my message to the Government now is that the most important thing for us to do to transform Jamaica to prosperity is to stay the course. In other words, we must have confidence that the current fiscal policies and legislative and other changes will work, and we must continue on the path with a certain amount of discipline and not panic. So if we see tax revenues below projection, this does not mean that we raise taxes in a panic as this will only result in what we have done in the past.

Instead, what we must do (as the IMF says) is continue to broaden the tax base and lower the rates, to make us more competitive. We must also continue to focus on reducing energy costs; strategically dealing with crime, indiscipline, and transforming the police force for better customer service; and we must address the bureaucracy impediments, such as the development approval process, which is not being worked on fast enough.

We must also continue our focus on legislative reforms to make the environment more facilitative and competitive. So the fiscal rule legislation (which must also include sanctions), insolvency act, and comprehensive tax reform is necessary for the transformation to prosperity.

I have always felt that the primary surplus target was going to be very difficult to meet, and I wouldn't spend too much time right now on whether we do or not. What I think is important is that we continue to do the things that are necessary to move us to a more competitive environment where businesses (and in particular SMEs) can flourish and plan, where citizens feel safe and can be rewarded with success if they are willing to work, where all children have access to a solid education (up to tertiary level), where government bureaucracy is focused on providing excellent customer service (such as at TAJ), and where discipline is maintained.

My own view is that we are on the right path to making all of this happen, and what we must do is filter out the valid criticisms from all the noise that will inevitably come as we go through this period of adjustment. The sign of a good professional is that he/she does proper due diligence and determines a successful plan and sticks to that plan after having ensured that it is the right one. The biggest mistake he/she can make is wavering at the first criticism that comes.

So if we want to get Jamaica to prosperity, then we must also stay the course.

The politics of Malaysian flight 370

A little over two weeks ago Malaysian Airlines flight 370 went missing and has captivated the attention of the world. This is the first time that I can recall in my life hearing of a plane that just went missing, bringing back memories of the mysterious Bermuda triangle. What is even more suspicious is that even with the advances in flight and other technology, 16 days later we are still unable to say what happened to the plane.

And even though it is not confirmed if it went into the Indian Ocean or not, the reports about the difficulty of the search is a stark reminder that even with our significant technological advances, we have still been unable to conquer the ocean here on earth, while we know so much about space, In fact man may know more about space than what happens on the bottom of the ocean.

My own view is that there was no terrorist action involved and that what we might be dealing with is a “zombie” flight, where some event happened that incapacitated the pilots and caused the auto pilot to fly the aircraft in the direction of the Indian Ocean until it ran out of fuel and went into the Ocean. One reason why I believe the aircraft is in the ocean, and not on land, is that the satellite technology we have would have picked up anything on land a long time ago, particularly the military technology.

Even with this situation monopolizing the news, flying still remains possibly the safest form of travel.

Another point of view on this event, however, is the apparent politics behind it.

The fact is that the search for the missing aircraft has turned into a scenario where countries seem to be competing with each other to find out what happened, from the governments to the media houses. The two main countries in the search are China and the US, and some experts believe that China may actually be releasing the information in bits and pieces because they don’t want the world to know of their capabilities, and the US is also tying to prove that they can solve the mystery.

Just think, I the Chinese were to locate the aircraft before the US, then what would it say about the capabilities of China, which has also been gaining steady ground s an economic powerhouse, and is busy acquiring many assets worldwide. In fact the common belief is that China will one day be the new super power.

It therefore may be critical for the US to be the ones to find the missing plane, and cement itself as the world leader. One could say that the reason why China is taking such an active role is because 75% of the passengers were Chinese, but another reason might simply be the need to show their technological capabilities, which are long established in the US.

At the level of the media house everyone media house wants to be the one to report first on what actually happened. So they have many different perspectives, from experts. So here again there is a race to the finish, or should say the start.

Transforming the public sector

ANYONE who has been reading my articles will be aware that I have always been caught up with the need to transform the public sector into a more efficient and facilitative support for private sector development. When I talk about public sector, I don't just mean the persons employed in the sector, but very importantly the rules and legislation, which affect the private sector intimately.

In fact, we need to understand that public sector bureaucracy, and more directly the inefficiency, is a major cause for reduced levels of productivity when compared to our international partners. In the 2014 Doing Business Report, our ranking slipped from 91 to 94 out of 189 economies, in terms of the ease of doing business. Many of the challenges relate directly to the bureaucracy such as registering a business, registering property, dealing with construction permits, enforcing contracts, resolving insolvency, etc. In fact there were no areas that we improved in over 2013, but in the area of registering property we declined by 12 places.

The current reforms that are taking place under the economic programme, such as tax reform, insolvency act, security in personal property, super form for business registration, and many others, will certainly lay the foundation for ensuring the improvement in the doing business index in Jamaica. And so I am confident that from a policy perspective the government is doing much to address the challenges to doing business in Jamaica.

One thing I have learnt in my years of work, is that irrespective of how good the systems in an organisation are -- or put another way even if you have the latest software programmes, the output is only as good as the people who are delivering the service. So in my world of cycling, although having a good bicycle can help with performance, in the end it all depends on the physical and mental toughness of the cyclist. As I have always joked with a friend of mine who used to change his bicycles regularly, because he felt that they would perform better, that after about the fifth bicycle change he should recognise that the problem is not the bicycle.

So, too, in the public sector I realise that the problem with the bureaucracy has in many instances to do with the attitude of the persons to service, and how they see the public. If you see the public as nothing more than some people who must wait until I who have the power am ready to serve them, then this is exactly what contributes to the inefficiency, as service delivery is compromised by that attitude. As an example, I have been in situations where the rules do not facilitate efficiency and the public servant's attitude is that service is utmost and finds a way to deliver good service.

On the other hand I have also been in situations where the rules provide for efficient service but the attitude of the public servant ensures bad service.

So the Development Approval Process does have a computer based system that if used, will significantly improve the time to approve construction permits, but it is the attitude to service of the players that cause the delays. In fact this attitude is a major cause for inadequate growth in the country, as improving the process can add billions to economic activity, resulting in more economic growth and jobs.

It is for these reasons I think that the only way to truly transform the public sector bureaucracy to greater efficiency, is to attack it from the human resource aspect, by (1) ensuring promotions based on performance rather than seniority; and (2) implementing some measure of performance-based pay.

There are two organisations in particular that I want to highlight the good work being done, and the changing attitude to service. The first is the Tax Authority of Jamaica, under the leadership of Ainsley Powell, who has been making significant strives in transforming that organisation to a model for the rest of the public sector to follow. This is my third year of filing my taxes online, and again I can attest to the excellent service attitude and the ease of being able to file my taxes in the evening or on a Saturday morning. In fact, you can start filing one day and complete it another.

There is of course more work to be done in the service delivery at the physical tax offices, and in discussions with Ainsley I know that he is working to improve these facilities and I have seen some marginal improvement.

The second is the police force, under the leadership of Commissioner Ellington. I know that crime is still a problem but I believe that much of the crime is caused by the indiscipline that is supported by many, who lament the high levels of crime, but still support the indiscipline. And the two "in your face" areas I speak to are road indiscipline which is now not the taxi drivers but the persons who hold up traffic while texting or having the phone at their ears) and the night noise (I would like to commend ministers Davies and Guy for their efforts in bringing some amount of discipline to public transport.

But while crime remains a challenge, I believe that the attitude of the policeman to citizens is changing, and also the approach to crime fighting is much more intelligent than we had in the past. There is much more that needs to be done, as there are still instances of police abuse, but I sincerely believe that the attitude to service is changing, and today I feel more comfortable with the police than two years ago.

Therefore as we seek to improve the public sector, we need not go overseas to get some consultant or model to look at, but speak to leaders such as these two gentlemen, and find out from them what their approach has been. Let us use our own Jamaicans who are trying to make a difference as examples.

So if we are to truly transform the public sector, to one that is facilitative of the increased productivity of the private sector and citizens, we must understand that the most important part of good service is an attitude, more than the rules.

Jamaica’s emerging crisis

IN examining whether an organisation can turn around or is a good investment, one would first have to look at its businessmodel to see if it makes sense or not. Secondly, one would have to consider the people managing or working there and what inherent risks exists. This approach will tell you whether to shut down the organisation or attempt to revive it.

So too, with a country, we need to examine its economic model and determine the human resource input, and the risks associated with its development. This approach will tell you of the structural risks that could make or break the country’s progress.

On Ash Wednesday, I went out to Hellshire to get some fish and festival, which I do sometimes, but usually go early to avoid the crowd. Because I did a five hour ride that morning, I was unable to get there until the crowd had already descended and what I saw was quite revealing as it unearthed certain inherent challenges the country has.

Firstly, I should say that my view is that under the current programme, our economic model is moving in the right direction, and Jamaica does have many comparative advantages it can easily exploit for international competitiveness.

There are, however, certain inherent challenges that could lead to an economic and social crisis, which is not unrelated to the crime issues we are seeing.

My first observation is that I believe Jamaica will face a significant health problem and poor nutritional choices evident amongst the young and older people which will definitely lead to a crisis. This is coupled with the fact that many of the persons observed can easily become unemployable, based on the number of young men content with just sitting down to pull on a “spliff” continually or their attitude and dress sense.

Secondly, and most important though, is the apparent absence of values and social skills required for a productive work force.

It is obvious that many of the required values for social interaction are missing, and I saw situations where young children were being exposed to foul language and behaviour, by their parents and older persons, which will negatively impact their values.

In one situation a man was driving with loud music blaring, with the DJ saying how one should treat a woman, in a very degrading manner, with two young boys no older than eight sitting in the back. In another situation a man, dressed with his shorts half-way at his underwear, and a big “spliff” in his mouth was there with a little girl around 11.

The many young children there also lacked the social skills for acceptable values and attitudes required for productive interaction, as they gyrated to the sometimes offensive music, spurred on by the similar actions from the adults.

It occurred to me that the people there represented the masses in Jamaica, and the future of the country. At that moment it was evident why there was so much violence, not only generally, but in schools, and why there were so many instances of child and female abuse. The fact is that this type of aggressive, carefree, and undisciplined behaviour was totally acceptable as the norm.

I also thought that I wouldn’t want my family associating with these people, and learning that sort of behaviour and why there is a class division in the country. I cannot imagine wanting to expose any child to that sort of accepted behaviour. Not to mention also the utter chaos, as there was no organisation around the traffic.

It occurred to me that if we do not do something to address this behaviour then we will not only face a social crisis, but that we will have a workforce that is unable to compete for jobs in a more competitive world. In other words, as was said on radio a few years ago, “one chiney can do five somebody work”.

What this simply means is that even though we are excited about major projects such as the logistics hub and the road improvement, the truth is that if we do not do something about improving the attitude and productivity of our labour force, many of these jobs could be farmed out to foreigners. This is not because of any sinister plot by the government, but because our work force will not have the requisite skills to compete effectively for those jobs.

What we must understand is that as we shift the economy to a more productive one, where government no longer determines who gets what jobs or if one company has an advantage over another, because of political leanings, then it also means that workers need to become more productive.

It is only through productivity and innovation that companies will survive. As a result of this need by companies to survive in a more competitive environment, they will also demand workers that can operate at the highest levels of productivity. Anyone who chooses to hire someone merely because they are a friend, or family, even though they are clearly unproductive is eventually going to have to shut down their business where they are faced with more efficient competition.

A very big part of productivity is attitude, and

not just academic qualifications. I have seen many people with academic qualifications whom I would not even consider to feed my dogs, because their attitude is wrong and also they lack the ability to reason or solve problems. They may end up either kicking my dog or over feeding them.

This problem of attitude also crosses over to social media sites where I see many young adults destroying themselves before they even start working by their posts, not realising that any serious human resources department will always check social media sites before they hire someone, as an employee’s social media ranting can affect the company’s image.

So, when we see this type of behaviour emerging among the masses, coupled with the lack of discipline we see generally (partially driven by the inability of the police to control things like road indiscipline and night noise for various reasons), you can see a crisis of human resources emerging in Jamaica.