Achieving Vision 2030

"JAMAICA, the place of choice to live, work, raise families and do business" — Vision 2030 National Development Plan. If Jamaica becomes this place then we would have truly transformed from being a third-world country where we kill, cheat, and slander each other, to a truly first-world nation not to be outdone by even the most developed countries.

It is this vision I always dream of Jamaica becoming, and what drives me to criticize society's ills and misguided policy actions that have led to our economic stagnation for 35 years. Jamaica has excelled in every area except for politics. There are, of course, a few politicians that one can hold up as having been "a few good men", but overall politics has led this country on a downward spiral of destruction, as the aim of achieving state power always supersedes the good of the country.

The question therefore is whether, with 18 years before 2030, we can realistically achieve Vision 2030, as stated in the plan. If in 50 years of independence we have been unable to truly mature into a nation, then can we do so in 18 years and what do the indicators tell us? After 50 years we remain two tribes at war with each other, reminiscent of the African tribes, our forefathers who fought and sold each other to the Europeans as slaves. Isn't the divisiveness we have practised over the past 50 years tantamount to keeping Jamaicans in slavery also? The fact that every year Jamaicans have to await the presentation of the budget to see what new taxes we will be forced to pay is similar to the feudal master extracting money from his subjects for his estate.

So here's the real question once again: is there any hope for us and will we see that change occurring by 2030?

From my own perspective I think there is a ray of hope, given developments over the past couple of years. Some of these are listed below. I would start out by saying that in order to achieve Vision 2030 we have to recognise that primacy in that Vision must be the respect for our people and justice and the promotion of unity amongst Jamaicans. This is what Vision 2030 is about, and what will make Jamaica the place of choice to live, grow families, and do business. Because today what we have is a country where people will come for sunshine, beach, fun, and jerk chicken, but would rather go back to cold North America to raise their families and work, so as not to be subject to the vagaries of our society.

In order to achieve Vision 2030 this attitude must change. And if we do achieve this change, then I guarantee that Jamaica will be one of the most prosperous places on the planet. The only drawback is that our feudal... I mean political masters will see power ceded from them to the people. This is why in my book, I started out analyzing economic data and concluded by saying that the real problem with Jamaica is our constitutional political system.

I believe, however, there are some things happening that give hope that Jamaica can achieve Vision 2030, but require consistent application in order for it to be achieved. These are:

1. Tax reform: the Finance Minister has been at pains to indicate that the tax system is going to be reformed to encourage greater productivity and production. At the time of writing the revenue numbers have not yet been presented, but based on things I have been hearing I am hopeful that the necessary tax reform will come that will provide a boost to the productive sector. I am also confident about the Minister's determination to do so, and commend efforts already in place, like the Tax Administration reform.

2. Public Sector Transformation: a lot of work is being done here, and I am hopeful that it will be properly implemented. My own view is that a lot of time has been wasted, however, trying to transform a system that cannot be centrally done (as this was always the problem) and that could easily have been done in a year or two with simpler steps.

3. Charter of Rights: after taking almost 20 years to pass this bill, my understanding is that we are still waiting on the Governor General to sign it into law. This should be immediately done, as the people have waited long enough for fundamental rights to be enshrined in the constitution. Jamaica owes a debt of gratitude to Edward Seaga, who piloted the bill, and we must also commend the politicians for recently passing it in both houses. Personally I do not see the merit in the arguments that the government can be sued for not paying for education for the poor, because it is included as a right, and seems to be politicising the charter already. I mean, I have the right to breathe fresh air, so if I choose to live near a dump, do I have the right to sue the government, or can I sue the government for depriving me of sleep because of night noise?

4. INDECOM, DPP, OCG, and Public Defender: In spite of the public spats that have occurred between these offices, I think the holders and the way they have approached their work is to be commended. Each office can be cited for their efforts to uphold justice or stamp out corruption in one way or the other, and as a country we are fortunate to have had all these offices seemingly working for justice and ethics. I actually believe the public disputes between the offices are good for our democracy. It happens in the great USA, and is healthy as it shows that each office is prepared to defend what it believes is right against other sections of the justice system, which is good control.

5. Police Commissioner: we have a maturing police force under Commissioner Ellington. Over a year ago I indicated that what Ellington does would be what determines the future of this country. I think he has brought a level of discipline and ethical standards to the police force that has been lacking for as far back as I can remember. For the very first time in memory, policemen and women can proudly say they are a part of the JCF. My own view of the police prior to this was a rogue element. In the next survey of trust, we may very well see the police force significantly better than our politicians. Two other officers doing an excellent job are Radcliffe Lewis and Dathan Henry.

6. Civil Society: Lastly, but by no means least, I want to mention the role that civil society has played over the past few years. There is no doubt that there has been a very active and determined civil society keeping our politicians pressured to ensure they get back on the right track when they falter, as they so often do. This is good for our democracy and is the reason why Jamaica will not go the path of the Middle East, as some think. I note that the cries for justice have come from individuals who have formed organisations to fight the corrupt system. These include JFJ, FAST, JUSD, environmental organisations, Columnists, and the list goes on. What is evident is that this change has been carried by individuals while the private sector leaders have apparently caught on, which is not unusual.

Notice I have not mentioned any growth-inducement strategies or macroeconomic numbers as the means to help us achieve Vision 2030, as these are mere symptoms of the underlying problem. If we have social justice and make Jamaica the choice to live and raise families, businesses will certainly follow and economic growth will result. While the signs for social justice are positive, we must ensure we remain consistent, as like a train progress is easy to derail.

Finally I want to add that the biggest failing has been the inability to address our high energy costs. I think there are initiatives that can be taken to ensure a reduction in our energy bill, but until then energy costs are the greatest threat to businesses and disposable incomes today. More on this another time.

Fervet — a model for national development

"FERVET" is the first word of the Jamaica College (JC) motto — Fervet opus in campis. Translated, it means "Work is burning in the fields", and the JC alumni, in talking about the school will just say "Fervet". Indeed, over the past six years, work has certainly been burning in the fields, as the board, foundation, administration old boys and students have all been working to ensure that JC is number one. We have achieved that goal. JC today is number one for total development of the student.

There are some who will argue that JC cannot be number one when we are not the best academically. This is true. But does someone go to school for academics only, or is it necessary to leave secondary school as a well-rounded person -- good academics, sports, and discipline? I would bet most would want the latter for their children.

The just-concluded fiscal year has also seen a public sector company I chair, Jamaica Ultimate Tyre Company (JUTC2), triple our 2009/10 profits (unaudited financials). This in an economic decline from increased productivity.

Both these organisations, and in particular the Fervet story, can be used as models for national development. What makes both these cases even more rewarding is that they both emerged from the ashes.

In the case of JC, we emerged from being a school with a bad reputation to one where parents want to send their children. In the past year the achievements have been Champs, schoolboy football, under-14 and under-19 hockey, placed in the Robotics competition, won the English and Literary competition, significant academic improvement, and others too numerous to mention. At JUTC2 we recorded profits for the first time in 2009/10.

There is a lot Jamaica can learn from both cases, about what is essential for moving forward. Some of these include the following:

* Entire team rallied around common objectives. JC — at the start of the six-year period, the principal and the board agreed we were number one and the school of champions. A sign was erected, even in the early days, to this effect. At JUTC2 the common objectives from day one were profits and productivity. Is there a common objective for national development that all stakeholders have accepted?

* Each person's role was defined and they were charged with meeting certain deliverables and given the authority to do so. At JUTC2 the general manager was clearly told he was to deliver a profitable and productive organisation through a motivated workforce and he was given the authority to do so, with the only interference from the board being policy input and operational support where required. At JC the principal was clear about his role, and defined it himself. The board offered support, but he always had authority over operations. In the public sector there is still not a clear distinction between policy and operations.

* JC and the JUTC2 clearly defined strengths, weaknesses, opportunities and threats. Maybe not as textbook SWOT analysis, but these were clearly recognised and we built on our strengths and eliminated weaknesses, while taking advantage of opportunities and eliminating threats. In JC's case, we built on the school's tradition and history and utilised the support of the old boys. Indiscipline was curbed, and today, when you go to the school, the students address you in a very courteous manner. At JUTC we recognised that in our business the recessionary environment was an advantage, and that we could offer better support to JUTC. Has Jamaica maximised our areas of comparative advantage — tourism, coffee, sports, and agriculture -- or eliminated our areas of weaknesses or threats -- energy, crime, and indiscipline?

* Set goals with specific timelines. In both cases specific targets were set that all related to achieving the ultimate objectives, so that we created a road map to achieve the objective with specific milestones along the way, which were all measurable, which a specific individual had responsibility for. Is there any clear timetable with milestones to achieve Vision 2030, for example?

* The right persons were in the appropriate functions. At JC we have the appropriate skills in the principal, chairman, board, foundation, administration, sports administrators, old boys, and PTA. At JUTC2, a part of our change was to ensure that we had the right skills at the board, in management, and on the factory floor; and we also have a very supportive minister. In both cases, if someone was not capable of delivering, they were replaced.

* Technology played a vital role in improving efficiencies. Technology does not only mean computers are a new and more efficient way of doing things, because one could have a computer but be ineffective without the appropriate skills. At JC, we ensured the school management system, computer technology, and task management tools were all up to scratch and persons were appropriately trained. At JUTC2, we invested our capital in new and more efficient machinery, and ensured our workforce was properly trained in using it. In the public sector we see Tax Administration has improved by doing this, but there is still a general lack throughout. The RGD, for example, has good technology.

* Staff is appropriately rewarded for improved performance. In both cases there is a link between performance and reward, and the staff clearly recognises this link. This recognition of the link between reward and performance is important. I have seen organisations in which the incentive programme is very good but the problem is that there is no clear link between reward and performance, so that the incentive is perceived as a part of salary, whether they perform or not. Similarly, if someone is being punished, then we must be certain about the evidence before accusing them of being in violation, otherwise morale suffers.

* Every milestone is celebrated and the staff is applauded.

These are some of the major factors that have contributed to the success of both organisations, and which can serve as a model for our country's development. The first inhibitor to Jamaica's development is our divisiveness, and unless we unite on common objectives, then everything else is a non-starter. I can never understand why a country of 2.7 million persons, with so much potential, is so divided along political lines. Is this any different from apartheid, when people were discriminated against by skin colour? In Jamaica discrimination is based on ideology.

Strength of customer service

All this fuss about the Digicel-Claro deal, I think, is misguided energy, as it will not hurt LIME directly, and therefore I wonder why anyone would want to focus on resisting the merger. The fact is that Claro's closure is a benefit for LIME if the energy is placed on the right objective rather than on the merger. If we want true competition in the mobile market, then we must address number portability and cross-network charges.

This also reminds me of the importance of customer service. For example, even though others offer better rates, I remain with BNS, FGB, Digicel, and FLOW because of good customer service. At the first three, for example, I know persons in customer service and call or BBM them at any time of night if I have a problem. And that is the primary reason why I have remained with them despite more attractive rates being advertised. In the case of FLOW their service has been superior, although, of late, the way they implement increases is cause for concern, as if they are feeling like a monopoly.

Long-term growth-inducement strategies

THE Planning Institute of Jamaica (PIOJ), in its growth strategy document, readily admits it was not called upon for long-term development. While some of the projects will impact long-term development, it does not appear to be enough, and as it rightly says, will only serve as a "short-term growth strategy" if a nexus is not created to long-term development.

While I say this, I believe that there are other things happening that will have positive impact on longer-term development, rather than just growth. And what we need is development and not just growth, which we have always focused on since Independence.

I will comment on some of these, and critical areas we need to focus on if we want development and not just short-term growth. Because this focus is lacking in the PIOJ document, this is why I believe that the money could have been better spent.

I start with the statement I often repeat that "economics is a social science and therefore has more to do with human behaviour more than macroeconomic numbers or investments". In other words, it is human behaviour and consumers that drive markets and economies forward rather than economic indicators or incentives. If we were to focus on driving human behaviour in the right direction, then businesses, fiscal accounts, and investments would all benefit. This is the most important thing in achieving the current illusion of the 2030 vision, the place of choice to live and work. People do not first choose to live somewhere because it is a thriving economic mecca, but rather because of the social quality of life. This is why, despite the economic prosperity of the Middle East, many would not choose to live and retire there but rather may go on a one- or two-year contract to make some money and retire to a place where the social quality of life is much better.

It is therefore imperative that any economic planning begins with this end of social justice and happiness in mind. For all those who feel differently, you are certainly welcome to go live in Saudi Arabia, Syria, or Iraq, where you can find financially rewarding contracts. It is this lack of focus on the social objective that has caused Jamaica to see dismal growth performances over the years.

The fact is that markets are driven by consumer spending (not investments and businesses, which are a result of consumer spending). And consumer spending is driven by consumer sentiment and behaviour. Therefore, it makes perfect sense to develop policies that will cause consumers to feel good about spending. In the US, for example, the growth out of the recession did not start to take hold when initially the government pumped TARP funds into businesses, but rather when money was placed in the hands of the consumer through micro business and home-purchase support.

The problem in Jamaica is that we have always placed emphasis on incentives for investments and the fiscal accounts while allowing abuse of the consumer by the police, the public bureaucracy, and others through road indiscipline and night noise. So if we abuse the root (consumer) of the tree (economy), then how do we expect growth? The only time that there was an attempt at social justice was in the 1970s, but the problem with that was its focus on political rather than social objectives.

There are, however, initiatives that have been taking place that will help to create a better society but this is being countered by a stronger focus on things that will depreciate the focus on a better social outcome. These include:

1. The Charter of Rights: this is probably one of the most significant initiatives that can lead to positive economic and social development. And to show how interested we are in ensuring social and economic development, it took us 20 years to pass it in the Lower House.

2. INDECOM, Police Reform, Public Defender, and the DPP: the introduction of INDECOM has been an excellent move as it now establishes an independent body that can bring rogue cops to justice. Similarly the zeal of the current Public Defender. The work being done by Commissioner Ellington and his team of top cops such as Henry (Clarendon) and Lewis (Traffic), and the careful way with which the DPP approaches her job. We need to put even more resources behind these offices and charge them with more precise objectives.

3. Tax Administration reform and Public Sector transformation: these two initiatives are critical because bureaucracy is a significant inhibitor to an enabling environment. My only criticism is that these need to move ahead faster, and in the case of public sector transformation, that it could have been done quicker and at a lower cost.

4. Infrastructure development: these include road improvements, Falmouth Pier, and the MoBay Convention Centre. These are things that drive productivity and a focus on the areas where we have a comparative advantage.

The other areas where we need to focus on are:

1. Energy: Accounts for 35 per cent of imports and probably the largest cost item for companies and individuals. While the longer-term LNG/Coal/Nuclear initiatives are critical, the fact is that we could save 40 per cent of our energy bill by taking short-term measures, with significantly lower relative costs. These include:

a. Public transportation: Developing an efficient public transportation system, such as what Minister Henry is pursuing. We need to provide initially at least $3 billion per annum towards this and incorporate the private operators in the system.

b. Retail consumption: Encouraging renewable energy (such as solar) use at homes. This could be assisted by using the GCT on JPS bills to provide a credit to consumers on the purchase and implementation of solar equipment at home, similar to the hand-out of the energy-saving bulbs.

2. Food: Accounts for 10 per cent of imports. We need to ensure that the Scientific Research Council is involved in local food alternative development; agro-processing ventures are supported by places such as DBJ; and places such as the JAS help with farmer organisation.

3. Tax reform: There needs to be a shift from our always-present focus on the fiscal to the real economy. Tax policy has always been driven by a need to sustain the fiscal programme, and so has always ended up stifling the real economy. Today, our effective tax rate is approximately 50 per cent, which is a big turn-off for sustainable formal investments. In the upcoming budget, tax reform must focus on providing a platform for businesses to flourish. Any attempt to do otherwise will have the same contractionary effect as recent tax packages.

After almost 50 years of Independence it is time we stop acting like a socialist welfare state and focus on social justice and the real economy. No other path will take us to the long-term development and vision 2030 objectives we desire.

Energy again

FROM early last year I pointed out that Jamaican businesses were feeling inflationary pressures and that as soon as the economic recovery started we would begin to see price increases. Additionally I indicated that oil and food prices would see increases come 2011. Because of what I expected, when oil was around US$50 per barrel I invested in solar equipment and have never regretted it. I believe the time to do such investments is before the crisis, and at the time I encouraged everyone to do the same.

Oil is now trading above US$105 per barrel and JPS will be hiking rates by 10 per cent. The NWC has hinted at a rate increase. My only regret is that I did not fully replace JPS. However, I didn't expect the Middle East uprising which has caused oil prices to increase so quickly.

So here we are once again, having been in this position in 2008, but forgetting about that period as a result of oil prices plummeting in 2009. The "9 day wonder" psyche of Jamaicans. Similarly, when we had drought conditions last year everyone was complaining about the need to improve the water supply infrastructure. The government announces the two-month closure of the Bog Walk Gorge to improve the water supply and receives many complaints. So we may once again complain about the water supply infrastructure at the next drought.

While the immediate crisis we face is energy, we must look beyond that, as graver implications are yet to come. The increase at the pumps and light bills is just the tip of the iceberg if oil prices continue to remain over US$100 per barrel. The real problem lies in the threat to global economies, which could lead to further social unrest around the globe, as higher energy costs translate into higher commodity and food prices also. This is at a time when unemployment levels are still relatively high and disposable incomes have declined considerably.

The Jamaican economy will no doubt have to be propped up by government spending, for example the JDIP and PIOJ Growth Inducement Strategy. While I advocated this for a while, as it was clear as day it would be needed, my only caution is that monies be spent wisely to ensure maximum sustainability or else we find ourselves chasing our tails again.

2011 is shaping up to be a difficult year for consumers, businesses, and the government. Already we are seeing that government will have to support the economy, as private capital will be very cautious in this environment. The fact is that businesses follow consumer expenditure and all indicators are that disposable income levels will be hit even further this year. The signs include increases in flour and baked products; increases by JPS, NWC, and the knock-on effect on other products; increases at the gas pumps; and a struggling global economy.

If you look at the recent major spending in the economy, and expenditure to come, they include (i) Falmouth Pier; (ii) JDIP work; and (iii) PIOJ Inducement Strategy. These are all government expenditure and are what the economy will have to continue to rely on in the short term. The main challenge with this is going to be the bureaucracy and the time it will take for the funds to be rolled out, and therefore it may not provide the greatest value added because of that.

It is clear therefore clear that the country and government are going to face challenges. The government in particular will be faced with the dilemma of soft revenue (because of a decline in disposable income), unemployment, and reduced company profits, and the fact that it has to be the primary driver of expenditure in the economy. So while the prudent thing seems to be to reduce the tax burden to drive economic expenditure, they are going to be faced with increased spending demands and weak revenue. So the million-dollar question is how to successfully juggle these demands versus what is needed, as it is going to be very difficult.

My own view is that there is no alternative but to programme further value-added loans in order to accomplish some form of vibrancy in the economy while keeping the wheels of government moving. Because I had expected this would happen I was calling from last year for greater stimulus spending from the government, as today there would be a reduced need for government spending.

I don't think, however, that anyone expected such a rapid rise in oil prices, which has also hastened the need for government expenditure. The immediate challenges we face continue to be energy and food, and should be the target of much of the expenditure to reduce costs to the country.

Ineffective Strata Commission

Since my article last week I have received much feedback to say that although my general thoughts about the strata commission are correct, it is actually much worse. An example was used that if someone owed maintenance fees of $250,000 for two years (assuming monthly maintenance of $12,500 ) and refuses to pay, then to access the recovery provision under the strata act through sale, you not only have to pay the $5,000 before the commission will talk to you but have to get two valuations on the property (approximately $100,000), advertise (approximately $50,000) and then wait at least three months before any action can be taken. So at the end of the period the corporation would have paid $155,000 to collect a $250,000 debt and would have to wait at least six months before they could recover (between the three-month waiting period and period to close the sale).

So my question then is, what value do Strata plans get from registering with the commission, as by the time one collects the debt the corporation is bankrupt and the property is run-down anyway. The Act is therefore a bigger burden to the corporation than it is to the delinquent owner. But as the often quoted saying goes: "The man who plays by the rules gets shafted". Welcome to Jamaica.

And understand this: the Strata corporation has no choice but to register with the commission, as it will be in breach and fined if it does not. Further, if it does not abide by the Act then it can be fined significant sums, which it will be unable to pay as it cannot collect maintenance.

My recommendation is that the government should suspend any requirement for Strata plans to register with the Commission and change the Act to conform more with the objective of protecting Strata properties. The fees paid already would be carried forward until the first year after the appropriate amendments. Otherwise this is nothing more than an unjust tax.

So the motto for the Strata Commission should be, "Contributing to the demise of strata properties....for a fee, of course".

Inducing growth

THIS week the PIOJ launched its plan for growth, titled "A GROWTH-INDUCEMENT STRATEGY FOR JAMAICA IN THE SHORT AND MEDIUM TERM". This is welcome, as a stimulus package from the government has been long overdue as a result of the strictures imposed on us by the IMF programme. We also see that the PIOJ in September 2010 stated that the IMF programme was contractionary, which is consistent with a belief held by others for a while.

While I welcome the strategy outlined by the PIOJ, I have a few concerns, the first of which is my hope that the bureaucracy does not prevent us from maximising the benefits from the programmes. We have in the past seen many such strategies developed, but we never derive the full benefits as our problem has always been in implementation, yet we are great conceptualisers.

The second concern comes from what is stated in the PIOJ document itself, where on page eight it says in bold type: "We were not called upon to construct a plan for long-term development of the economy". This is a big turn-off for me, as before even telling us about the programmes that are to be put in place to move the economy forward, the authors are putting forth a disclaimer about any link to long-term development. My own view is that the "Planning" Institute of Jamaica is supposed to be involved in long-term development planning, and so to produce a document where their primary role is denied seems contradictory.This is significant especially as they have a responsibility for Vision 2030.

On page 17 it then seeks to increase employment by growing the "labour-intensive industries", which to me is not necessarily the way to go as we should be trying to mechanise these industries for productivity improvement. What we should do is create employment by increasing the capacity in the areas where we have a comparative advantage, and that is one of the shortcomings of the document as it does not focus on international competitiveness to take advantage of exports or import substitution.

Overall, though, I agree that many of the projects included are necessary, particularly the infrastructure projects, and I want to support the government on establishing this initiative. I believe, however, that the limited resources could have been better utilised (greater ROI) by the PIOJ, and should undoubtedly be a part of the long-term development plans. The responsibility for this not happening I will have to place at the feet of the PIOJ, as they are the technical experts, and are the ones who propose this to the government, and not the other way around. While the government may say that they want to achieve growth in the economy, I expect that the technical implementation must rest with the body charged to drive the policy directive.

For example, I do not think that the document places enough emphasis on long-term productivity improvement (or even short-term), sustainable crime reduction, and what I like to call (as an accountant) "balance sheet improvement". The latter, of course, refers to the Balance of Payments.

I will not go into any further details on my analysis of the document, except to say that I hope that this is still a work in progress and can be adjusted to ensure that it is brought in line with the long-term development we need and not just focus on short-term growth. Having no doubt that the strategy will lead to short-term growth I applaud the efforts to provide this stimulus, but is this all we want from the PIOJ?

Public health strengths and weaknesses

Two weeks ago I had knee surgery done. It was a complicated procedure, as it involved meniscus repair, ACL reconstruction, drilling, and insertion of an implant.

When it was determined last year that the operation was necessary, I was advised to have it done overseas, at which point I started the investigations. After a few months of looking into it, I discussed the situation with Dr. Derrick McDowell, who was the head of the MAJ mission to Haiti and former head of the Orthopaedic Association, and apart from all of that his greatest attribute is that he is a Jamaica College Old Boy. He immediately explained to me that he does many of these surgeries and could easily do it.

He also advised me of the team he would be using (Jackie Minott - anaesthetist, Michelle Depass - physiotherapist), whom I also checked out, in keeping with my accounting training. I also checked with persons overseas to see what their experience with similar surgeries was, and they indicated that they experienced pain for a few days after the operation. I also did extensive reading on the procedure and anaesthesia methods.

After much reading and analysis of the information given to me by both Derrick and Jackie, in addition to my checks with persons overseas, I decided that there was no benefit to doing the surgery abroad. In fact I felt that one of the advantages of doing it in Jamaica was the ability to be in touch with the local team as needed.

I opted for spinal anaesthesia, and was enjoying watching the surgery being done while listening to my iPod. The next thing I remember is the bandage being put on and being wheeled back to the hospital room. On seeing Derrick later I asked why they had put me to sleep knowing that I wanted to see the operation, to which he responded that I was fully conscious but that the sedative I got causes amnesia, so I wouldn't remember what happened. That I found amazing. In addition, by the next day I had no pain at all, in contradiction to the experience of the persons overseas.

I say all that to point out our tendency not to recognise the competence of our local experts, and this is why we seem to always prefer to go for external consultants, who in many cases mess up a project and leave the Jamaicans to clean it up. One of the reasons for this choice is because we fail to do proper analysis up front. The result is that much of our talent (e.g. Bob Marley) is recognised abroad long before it is recognised in Jamaica.

It seems to me that the real problem with public health in Jamaica is a lack of good administration rather than the capacity of the workers, and I hope that the work being done by the Ministry of Health will soon resolve this long outstanding problem. The recent Observer story that shows specimens being stored in unsatisfactory conditions at the KPH illustrates the poor administration and controls.

Strata board

Recently I was having a conversation with the manager of a strata plan who was telling me that some of the owners still owed significant amounts for maintenance. When I enquired as to why she didn't go to the Strata Board and seek to enforce payment she indicated that she had, but before any action could be taken she would have to pay a fee of $5,000 per unit. I would have preferred to hear that action was taken and then the offending parties (owners in arrears) were asked to pay the $5,000, but not that the victim (strata), who has had to suffer because of the non-payment of what is due, is being asked to pay to access something to which they are entitled. This gives the impression that the main concern of the Strata Board is to raise funds rather than to improve compliance, as many strata properties still continue to suffer from what the Strata Board was set up to fix.

Oil and food price threats

Last week I spoke to economic challenges in 2011 and businesses in particular. There are two primary reasons for this, one of which is the threat of oil and food prices increasing in 2011 beyond the reach of income levels of consumers and businesses. As a matter of fact, oil prices at US$100 to US$110/bbl today is more of a threat to the global and local economy than when oil prices reached US$147/bbl in 2008. The reason is because relative prices today would be greater than 2008.

The fact is that since 2008, economies and income levels in real terms have seen significant declines, and unemployment has increased. Despite growth seen in the global environment there has not been commensurate growth in employment. Spending has therefore not returned to 2007 levels. In Jamaica, for example, we have seen significant job losses and in the last quarter of 2010 job losses amounted to 21,000.

Added to the slow global economic recovery, the following factors will also negatively affect global growth:

1. Oil and food price hikes will have a negative impact on consumer spending and business costs. Although I anticipated increases in these two areas, I never expected it to occur so quickly. It was always expected that there would have been social unrest caused by declining costs of living, but the turmoil seen in the Middle East has come earlier and with a greater force than expected.

2. The expected pull-back in economic stimulus in the US will result in a slowdown in consumer spending.

3. The inflationary pressures globally will no doubt lead to increased interest rates, which will pull liquidity from the system and put the brakes on consumer spending and growth. In fact we have seen interest rate increases in China, which has been leading global growth.

4. There is still a lot of debt in the system that will have to be pared back with expenditure cuts.

So although growth is expected I believe food and oil prices will cause a slow-down.

The charts show oil and food price movements over the past year. In both cases we see significant increases, and if coupled with the fact that there has been a real decline in consumer disposable incomes then one can see the dilemma economies face. The oil chart shows that volumes are greater when prices are going up than when coming down, implying there are more buyers than sellers.

In Jamaica, we see the challenges of (i) job losses since 2007; (ii) business profits declining; (iii) high cost of energy and crime; (iv) relative inefficient agricultural production costs; (v) fiscal deficit; and (vi) very high dependency on imported oil.

These challenges are compounded by the fact that food and oil account for 46 percent of imports, and this is before the impact of the rising costs. This simple analysis shows the significant impact to be felt in Jamaica from oil and food price increases.

It is therefore evident that the greatest possible return is from a focus on dealing with the impact of food and oil on the economy. The impact of high energy costs on businesses in Jamaica, for example, makes our produce uncompetitive, whether it is from manufacturing or the tourism product. And tourism gets a double hit here, as food is also a significant cost component. This is important when we remember that tourism is our number one productive foreign exchange earner. So even though the number of tourist arrivals has increased (thanks in part to the efforts of the Tourism Ministry), the fact is that this has been achieved with (i) significantly discounted room prices; and (ii) increased costs, resulting in a lower retention of earnings in the country. One could therefore say the tourism industry has been facing its own stagflation.

So how do we deal with these global price increases? Clearly they will affect local demand as it means real disposable incomes will decline even further, if left unchecked. One can already see that reported business profits have declined, and anyone monitoring the real estate market can also see that prices have been getting lower.

The fact is that the most effective way of dealing with this situation is to focus on the domestic economy. This is not to say that there will not be opportunities for exports, but that the greater return on investment will come from focusing on the domestic economy infrastructure. As a start we if we focus on reducing our imports of oil and food, this will not only help our foreign exchange situation but will also create jobs and income income in the process. The problem is that it is important to find short-term solutions, which is possible, but necessitates the support of the bureaucracy.

One of the things I would like to add is how important it is for businesses at this time to engage the assistance of professionals; and among them importantly is a chartered accountant. And I use the term chartered accountant very carefully, because one of the things we recognised at the ICAJ is the need to ensure that our members are current with their knowledge and that the highest ethical standards are maintained amongst our membership, as in these difficult times employers need this assurance.

One of the initiatives we have therefore taken is to provide for employers a list of all ICAJ members on the website (www.icaj.org), which tells whether they are compliant with continuing professional development or not. This is not to be glossed over, as it is going to be very important for businesses to have good analysis in charting the economic climate.

2011 will be a challenging year

Last year I indicated that in 2011 we could look forward to some recovery in the global and local economy. This will be more evident in the global economy, as I believe that the Jamaican economy will still continue to struggle because of the structural issues it continues to face. It is my view also that the contractionary effect of the IMF policies will cause the recovery to be more of an uphill task than if the contraction was not as deep.

There are some positives that have happened during the recession. These include (1) Tax administration; (2) Divestment programme; (3) Attention to the Public Sector Transformation Programme; (4) Reduction in interest rates; (5) Emphasis on local agricultural production; (5) Completion of the Falmouth Pier and Montego Bay Conference Centre; and (7) Focus on reducing corruption in the police force and crime generally.

Despite these positives, however, the economy will continue to see significant challenges in 2011, in my view. Indications of this can be seen in the following areas:

o Global inflationary pressures from oil and food price increases, which I had indicated would take hold in 2011. Even before these global pressures, Jamaican businesses were already seeing inflationary pressures but could not increase prices because of falling demand;

o Interest rates globally will increase to deal with inflation and excess liquidity resulting from fiscal interventions in countries such as the US;

o The PSOJ has, through its National Security Advisory committee, pointed out that security is a major cost because of crime. They estimate that a whopping 20% of small business revenues go into security-related costs. The implication is that we may not see the upswing, in small business ventures, needed to drive job creation and growth;

o Commercial bank loans are trending down, and more importantly the loans to the productive sector, such as agriculture, have decreased;

o The majority of funds under the IMF programme have already been received. The positive side is that government has been able to successfully raise funds on the capital market, and should attempt to replace the expensive debt; and

o The trade deficit is worsening year over year.

The fact that the global recovery is slowly continuing this year represents an even greater disadvantage for Jamaica than the recessionary effect experienced last year. This may seem perplexing to some, but the reason for this is very simple. Between 2009 and 2010 when the Jamaican economy was in decline, I believe that while it proved difficult for individuals, it was good for the Jamaican economy. The reason for that is because of the way the Jamaican economy is structured. Prior to the recession, the Jamaican economy was growing, although at small rates. The contradiction, however, is that while the economy was growing, so was the debt and fiscal deficit. Simply put, what we were doing was growing by consumption, based on borrowed money. Therefore for every $1 we produced we consumed 72 cents of it, and exported 28 cents. At the same time we were importing between 70 and 80 cents to produce that $1. Mathematically, therefore, we were importing 80 cents and only exporting the equivalent of 36 cents (assuming we mark up the production by 50%).

Therefore when the economy was contracting, we were actually reducing the need for borrowed funds, and therefore cutting our suit to fit us.

Now that the global economy is recovering, we still have the same basic infrastructural problems that have been with us since the 1990s. If you factor in the negative effect of market demand, you will find that there is going to be a tug of war between fiscal and private sector demands. It will therefore be imperative for the public and private sector to find a happy medium, and this I think will be driven by government policy. There are some good initiatives undertaken (as mentioned above), but we will have to be a lot more decisive in our policies if we want to ensure that we stop the train before the track runs out.

Initiatives I support the government on - and wonder about what the IMF is thinking - are the JDIP, purchase of buses, and similar projects. If we are going to ensure that the economy does not go through any further contraction, government must take the lead in infrastructural projects that will not only provide much needed infrastructure and employment, but will also contribute to future savings in foreign exchange. The two most important sectors to focus on are agriculture and transport.

I can recall the opposition expressed when I supported the need for more money to be spent by the government on infrastructural projects. Suppose government had not continued to spend on road improvement and projects such as Falmouth Pier. Apart from the greater loss of jobs and crime we would have experienced, what sort of infrastructure would we have in this country? It is important that we not ignore our infrastructural support, or else we will be even less competitive.

A critical look at the balance of payments tells us about the challenges that lie ahead. A cursory look seems to indicate that things are going well, as we see the current account deficit improving by US$137.7M for the January to September period in 2010. The areas of improvement were (i) Services - US$56.2 million; (ii) Income - US$93.7 million; and (iii) Current Transfers - US$82.5 million. This overall performance is good, as any line we get the money from to turn around our fortunes is good. We have to be careful about how we develop these areas, however, so that we do not revert to the structural challenges coming out of the 1990s, as this will lead to a need for high interest rates in order to have macroeconomic stability.

The challenges from the BOP can be seen in:

(1) Declining trade deficit. Specifically we see a reduction in exports and an increase in imports;

(2) Services, although improved, show one of the reasons as a decline in expenditure of Jamaicans travelling abroad. This is good as it means lower consumption of overseas items but not because of increased expenditure locally, which means that it is a weakness of consumer demand;

(3) Income has improved because of reductions in official interest payments and reduction in profits remittances. The former is what we want to achieve, and is a move in the right direction, but the latter means there is less incentive for foreign investments; and

(4) Current transfers, which have come primarily from remittances, and an indication that the country is heading back to reliance on non-productive income.

The BOP and economic stagnation tells me that the market is trying to make the necessary adjustment to become more efficient. This is the way markets work. We continue to be dogged, however by societal, political, and bureaucratic challenges that inhibit this necessary market adjustment. If these challenges are not addressed effectively, then we will find ourselves with the same structural problems we have had since the 1990s.

Overall this means that although we see the global recovery, because of Jamaica's inherent structural problems we will continue to face challenges in 2011. Hopefully some of the policies being pursued by the government will bear fruit and alleviate some of these challenges.

A SWOT analysis of Jamaica's economy Part 3

OVER the past two articles I tried to develop a simplistic SWOT analysis and demonstrate the method that should be used to target the development objective of the country in the most efficient manner. There is no one solution that is right and the others wrong, but there is always going to be one that is the most efficient use of resources and greatest value-added return, which is what this analysis is trying to do.

Coming out of the last article, I identified three possible areas that would provide maximum return, in relation to the resources that need to be invested. The three specific areas I identified were (1) dealing with indiscipline to create order and fairness in the society; (2) breaking up the JPS monopoly hold on the energy distribution lines and creating an efficient transportation system; and (3) reforming the tax system (already we have seen where just improving tax administration has resulted in significant compliance improvement. Can you imagine if this was coupled with real productivity-oriented tax reform?).

This week I want to take a simplistic look at the possible effect of focusing on these three areas by imputing financial numbers from the initiatives, and hence completing another step in looking at the SWOT approach.

	GDP Effect ($M)
	Yr 1	Yr 2	Yr 3	Yr 4	Total
Productivity plus from improved justice	34,048	34,048	34,048	34,048	136,190
Import substitution / agro-processing	7,695	15,390	23,085	26,933	73,103
Energy savings - retail	25,650	12,825	7,695	7,695	53,865
Energy savings - transport
Tax reform effect	16,314	16,314	16,314	16,314	65,256
	83,707	78,577	81,142	84,989	328,414
US$ equivalent	979	919	949	994	3,841
	BOP Effect ($M)
	Yr 1	Yr 2	Yr 3	Yr 4	Total
Productivity plus from improved justice
Import substitution / agro-processing	7,695	15,390	23,085	26,933	73,103
Energy savings - retail	25,650	25,650	25,650	25,650	102,600
Energy savings - transport	25,650	25,650	25,650	25,650	102,600
Tax reform effect
	58,995	66,690	74,385	78,233	278,303
US$ equivalent	690	780	870	915	3,255

The table (Figure 1) shows imputed values from the initiatives outlined. It shows a total four-year positive effect of J$328.4 billion on GDP and J$278.3 billion (US$3.2 billion) on the Balance of Payments (BOP). The actual outcome could be more or less, so what I am trying to do here is show an approach to selecting the best value-added initiatives and how to do an analysis on the financial projection. It is important to focus on the effect on GDP and BOP, as these should be the real objective of economic policy.

With respect to productivity improvement from improved justice and discipline, this assumes an improvement of one productive hour per week per person in the labour force multiplied by the average labour output dollar amount. The assumption is that if we were to improve justice and order in the society then we could see people being at work longer and producing more productively as a result of (1) persons not spending time focusing on issues of justice; (2) fewer resources being spent in the courts dealing with justice and indiscipline problems; (3) greater availability to the human and real estate resources in the inner-city communities; (4) less traffic congestion and more productive time as a result of improved road conditions; and (5) productivity increase from lower crime levels, including extortion and praedial larceny. What is obvious is that the initiative of creating a more ordered society and improved justice will always have the largest positive impact on GDP because it creates greater efficiencies in the market economy.

Another initiative mentioned in the table is the focus on food import substitution from increased agricultural productivity and agro-processing. The table assumes that food import substitution is done to 10 per cent in year one, 20 per cent in year 2, 30 per cent in year three, and 35 per cent in year four. This initiative will have a positive effect on both GDP and the BOP to the same extent, and is assumed to have a positive four-year effect of J$73.1 billion.

The energy initiative that focuses on retail consumption (through renewables) and transportation (through an efficient public transport system) is assumed to have the effect of reducing the energy consumption of these two sectors by 50%. This is not hard to believe given the significant positives that can flow from these initiatives, and is assumed to have a positive impact on GDP and BOP of J$53.9 billion and J$205.2 billion respectively. The effect on GDP comes from the creation of energy jobs. The attractiveness aspect of it is that they are short-term initiatives, yet they have the largest positive impact on the BOP.

The final initiative of productivity-oriented tax reform, I assume will cause a positive GDP impact of 5% of tax revenues budgeted for the current year. This I think is very conservative, but you know us accountants. Never count our chickens even after they hatch, as they could still die. In addition to the good work being done by the Tax Administration to reduce bureaucracy, we should be looking at tax reform aimed at improving productivity and keeping monies longer in the economy to have a greater multiplier effect. These include moving more towards indirect from direct taxation. This will allow for greater spending and hence a higher multiplier effect. Incentives also need to be geared more towards production and productivity in foreign exchange-earning industries.

This is by no means an exhaustive list of value-added initiatives and requires much deeper and dedicated analysis, especially to arrive at the financial possibilities. What I have tried to do over these three articles, however, is show one method for arriving at the greatest value-added initiative given the limited resources we have.

The debate will no doubt continue, but what is obvious is that we need to define our SWOT and systematically choose the best initiatives based on return on investment and difficulty to achieve.

A SWOT analysis of Jamaica's economy Part 2

THE article last week generated quite a bit of interest from persons in and outside of Jamaica, with many wanting a deeper breakdown of the SWOT analysis. While I am not able to provide a complete analysis because of space constraints, although needed, it was always my intention to go into more specifics.

A SWOT analysis is nothing more than a snapshot that tells at a point in time what the various areas of the analysis are. This would be the same approach one takes to a business plan, and is a very logical and objective way of properly assessing the current situation of a company or country. My own view is that fixing the economy and society is not a difficult task. What we have always lacked is the will to place the interest of the country above that of the party. I will try to outline below some of the initiatives that can have the greatest positive impact on the country's development.


In looking at what was produced by the SWOT analysis, what you want to do is strengthen (or maintain) the strengths, fix the weaknesses, develop the opportunities, and minimise (or eliminate) the threats. If you can successfully do this, within the context of your agreed objectives, then it will lead to greater development.

But you will never have enough resources to do all the things that need to be done. So a government, for example, has a limited amount of funds available to it but has a multitude of challenges to address and calls for help to answer. How do you then decide which one to address, and when? The when is important because timing is of course critical. The way to do this is to determine what the most efficient use of your resources are.

As an example, if you have $1,000 and can either pay off debt that costs 20 per cent per annum, or put away the money at 10 per cent per annum, then it seems more prudent to pay off the debt, and save 10 per cent of $1,000. On the other hand, you may be running a business and therefore may need cash resources of $200 to ensure that the business will not be threatened. You may therefore choose to pay off $800 in debt and maintain $200 in debt and $200 in cash. The direct cost of that decision is $200 times 10 per cent but there may be an opportunity benefit, as if you were cashless the cost to the business might have been much more.

Similarly, as a country we should do the things that add the greatest value in the shortest possible time. That is if a decision adds value of $1,000 in five years, it may not be as valuable as one that adds $300 in one year. This is the sort of analysis that needs to take place if we are to maximise our resources.

What then are some of the major initiatives that I think will add the greatest benefit to Jamaica? If our objective is economic and social development, and in particular, the best improvement in per capita income and social interaction, then we must focus on those things that cause these to happen. This for me means improving the quality and standard of living. The way to improve the quality and standard of living is to ensure (i) a basic respect for the human rights of every Jamaican citizen; (ii) universal access to a minimum standard of education and health care; (iii) increased opportunity for greater income levels; (iv) structure and discipline in the society, so that everyone can enjoy quiet and civility when interacting with others, for example when driving; and (v) a prosperous private sector, which in turn can create jobs. I do not, and never will, believe in the government trying to pick winners or providing massive amount of welfare for communities. This merely discourages an efficient market, undermines productivity, and in the end causes corruption and disorder in society. Another spin-off, which we know all too well, is that this results in significant debt.

Therefore we need to focus on the things that will increase private sector productivity and competitiveness; and also improve the quality of life of people. The latter is necessary, as even if you are wealthy and live in a society with high levels of indiscipline, your quality of life is still substandard.

So for me therefore, it is a no-brainer. I want to improve my strengths but realise that that does not necessarily mean focusing on the strengths. If I were to focus on the weaknesses then that would serve the purpose of removing the weaknesses and improving the strengths. So the first order of business for me would be to deal with the culture of indiscipline. In doing this I would strengthen tourism, improve productivity and production, and improve tax compliance. The other positive of focusing on this is that it does not require any resources really, what it needs is greater accountability. So if the police and public sector were held more accountable, then they would implement the regulations already on the books. So just imagine the police did the simple job of strictly enforcing discipline on the road and the Noise Abatement Act. Just imagine if the KSAC enforced the zoning laws. Just imagine, if instead of a bureaucratic public transformation process we put accountable people in charge of public bodies, and schools, and give them the authority and held them accountable when they failed to meet agreed objectives. These things don't take any additional resources but have far-reaching effects in strengthening the quality of life, improving productivity, and reducing crime.

Secondly, I would break up the JPS monopoly and encourage persons to invest in renewable energy and put a few billion dollars into the JUTC to create an efficient and secure public transportation system. These two initiatives could result in approximately US$600 million per year in import savings, and eliminate the trade deficit in four years.

My third focus would be to reform the tax system to encourage private sector development, and export in particular, rather than the narrow focus on the fiscal that we have practiced for decades. This would include moving away from direct towards indirect taxation, and removing the incentives from industries to rewarding foreign currency earnings. The government has recognised the need for reform, and the $6-billion investment is welcome. What we must ensure is that the reform is not just about collecting more for government but more importantly will focus on tax reform to encourage private sector development and exports.

If these three areas are focused on then it will take care of most of the items identified on the SWOT. So, contrary to the content of some of the responses I received, it does not matter if the list of weaknesses is longer than the strengths, as the value added from focusing on just a few of the weaknesses will significantly reduce the list of weaknesses and threats.

The result of focusing on these three areas will definitely mean development, and real growth for Jamaica. So I don’t consider it difficult, but it must be a deliberate strategy with specific and measurable objectives. The real solution would be to introduce the separation of powers, but that may be a lot more difficult to achieve in the current environment.

Much more analysis is needed on this, but again space does not permit.

A SWOT analysis of Jamaica's economy

SINCE the start of the year I have received many questions (both locally and internationally) about the prospects for Jamaica's economy in 2011 and beyond. Perhaps more so today than in previous years, persons are understandably more curious about Jamaica's prospects for growth. This is understandable because with the world coming out of a very significant global recession, there are many realignments of investment portfolios taking place, and investors are more cautious, after being ravaged by the global events since 2007.

Investors also are becoming a lot more conscious of global investments, and understand that true diversification is not just among asset classes but more importantly between economies. This is an underlying philosophy that Jamaican policymakers need to understand as we craft policies around the economy. As a result of improvements in technology and investor awareness, there are greater choices across economies when choosing where to put money to work. So that even an individual investor can open an online brokerage account and invest overseas in what they consider a more attractive and predictable environment. This, I believe, will be the scene for investors from 2011 going forward, and will be to the disadvantage of countries that do not get their investment environment right.

One particular question being asked is, what are the prospects for the Jamaican economy and investments in particular? I don't believe that this question can be answered in a "one size fits all" sort of way, as it depends a lot on the type of investment one is involved in. For example, while I believe that there are significant growth prospects for small businesses, it depends on the type of business one is in and the approach to that business development.

What I would therefore like to do in this article is look at a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis of the Jamaican economy. This requires much further discourse for anyone looking at an investment or business opportunity.

The table outlines generally the SWOT of the Jamaican economy as I see it, and provides an indication (based on interpretation) of where businesses and investors should be looking for 2011 and beyond.

This table represents a synopsis of some of the strengths, weaknesses, opportunities, and threats. Of course, it requires a whole lot more analysis and with a little more thought we could arrive at a much more comprehensive list. This I believe is the first thing we need to understand if we are to seriously assess and tackle the challenges facing Jamaica. In short, what is needed is a wholesome approach to dealing with Jamaica's economy.

I say, this because over the years governments have taken very good policy decisions on specific issues, without fully understanding the impact it has on other issues. Therefore the net result is that we end up with a net worse situation, as one sector improves by "x" but another worsens by "x + y". This is also the flaw I find in much of the analysis that I have heard over the years. So while persons speak of special interests that sound excellent, there is always the knock-on effect that is not considered.

Strengths

* Tourism product

* Agricultural opportunities (particularly import substitution opportunities)

* Culture, music, sports

* Geographic location

* Bauxite and alumina

* Renewable energy sources supply

* Focus on prudent fiscal management

* Tax administration development

Weaknesses

* Crime and culture of indiscipline and lawlessness

* Poor human rights system

* Poor representation of electors

* Low literacy and poor school governance

* Poverty -- economic dependence

* Inefficient court system

* High cost of energy

* Poor organisation of small businesses

* Unfriendly tax policies

* Political system

* Inefficient bureaucracy

* Poorly structured economic foundation

* Poor infrastructure

* Inaccessible garrison communities

Opportunities

* Global recovery -- increased markets

* Import substitution opportunities

* Renewable energy opportunities

* Poor structure and import dependency means greater opportunities to grow

* Public sector rationalisation

* Tax reform and simplification

Threats

* Global recovery -- inflation, higher interest rates, etc

* Rising oil and commodity prices

* Focus on more investor-friendly emerging economies

* Upcoming election

* Fiscal appetite for revenue

* Inadequate health care

This is the sort of approach I would expect policymakers to take. So if this approach is taken, then why don't we see the results? I am sure that many of the initiatives taken by our politicians and bureaucrats over the years have been good. The problem, I believe, is that many of these initiatives have been taken within the context of the same inefficient structure that created the problem in the first place. So in effect what we end up doing is fixing the symptoms rather than the underlying problem.

This is similar to an organisation trying to improve productivity by giving incentives to workers and preaching teamwork etc. All of this, however, is being done in an environment without effective leadership, management, or rules. The result is that the workers get more of the profits, but productivity and profits, eventually decline.

Although I digressed into the policy holders at the state level, this sort of approach in assessing an economy for investment and business decisions is also very important. So that, to all those who ask the question, if you were considering the economic environment then you would perform first a SWOT analysis of the economy generally. Secondly, you would look at the areas of that analysis that impact you the greatest, and then quantify the effect on your decisions.

When one looks generally at this SWOT for Jamaica over the coming year, it tells me that 2011 is going to be a challenging year for Jamaica, but will also provide significant opportunities for us to move forward as a country. That, however, will depend on the policy decisions that are taken to enhance the strengths, reduce the weaknesses, take advantage of the opportunities, and hedge against the threats.

I have not written a column over the last three weeks, but have taken the time out to listen to much of the commentary and analysis since the start of the year. And after listening, I see a lot of this analysis wanting and see us falling back into the same habits that existed before the great recession.