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tag:blogger.com,1999:blog-383010142016-07-25T05:06:07.231-05:00DC JottingsAn archive of my writings on the Jamaican economy dating back to 2003 and link to my books "Charting Jamaica's Economic and Social development - A much needed paradigm shift" AND "Achieving Life's Equilibrium - balancing health, wealth, and happiness for optimal living"Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-30703153430479340002016-07-08T08:18:00.000-05:002016-07-08T08:18:36.111-05:00The chickens have started to roost

The phrase "The chickens have come home to roost", can refer to a situation where something bad happens after an action, or inaction, occurs. So if a person goes around defrauding people, and is finally caught and goes to prison, then one could use that phrase.

This phrase can be used in relation to the present economic and social conditions Jamaica finds itself in today. When we think about the untenable crime situation in St James (the tourist capital of Jamaica) and the general levels of indiscipline and lack of law and order in Jamaica today, we can safely say that the chickens are starting to roost. That is to say that what we are seeing in Jamaica today is a direct consequence (even if long term) of the way we have practised our governance, and politics in particular.

When Commissioner Williams said that the problems we are seeing with crime in Montego Bay are deep-seated social issues, he is correct. This is the same reason why I have repeatedly said that Jamaica's economic problems are social.

The fact is that the crime situation we see in Montego Bay today, is not unique to Montego Bay. We have had similar crime spikes in places like Kingston and Spanish Town. In all cases, they have left the nearby residents in a state of fear. So the Montego Bay situation may be what is current but it is certainly not isolated.

And each time we have these upsurges, we normally find a short-term solution, but fail to address the underlying problem. This of course does not mean that short-term solutions are not necessary, but they must always be accompanied long-term solutions also.

It is this lack of long-term solutions, that causes the predictable upsurge in crime to occur every few years or so. And although we do need far more resources, especially in the short term, the fact is that the main problem is not a lack of resources. It is one of political will and enforcement of our laws.

One of the problems with how we manage our resources is that we wait until there is an emergency and then find the resources to throw at it. Never mind that when the emergency occurs it costs you five times more than the preventative cost.

As I always say, fiscal policy in Jamaica is a simple math exercise of addition and subtraction. There is no real strategy about how fiscal policy can be used as a tool for development, and not just focus on how much money is being spent on a project, but rather what is the value added. But then again maybe most of our people in authority don't understand the concept of value added.

It does not take a rocket scientist to figure out that is we create an environment where women have nine children without any way of feeding them properly; if taxis, buses, motor cyclists, and pedestrians are allowed to use the road as they wish; if people are allowed to squat and build communities as they like; if the justice system turns at a snail's pace; and other such forms of lack of order are allowed; then what we are doing is laying a fertile ground for criminality.

But what we do is fail to enforce traffic laws or demand order on the road; we fail to enforce the Noise Abatement Act; we turn a blind eye at the squatter communities, until they develop into major communities; and we fail to enforce zoning laws. And when we fail to demand that laws be obeyed and that indiscipline must be rooted out, then we wonder why after many decades of neglect of enforcing the laws that we now find ourselves facing the social and economic challenges we have today.

In other words, how do we expect children to grow up and be successful professionals, if when they are young they are not taught what is right and what is wrong.

If we fail to do this, then the major role of the police will be to react to crime, and if there is a prevalence of crime, as we have today, that effectiveness is significantly reduced. Then what we do is apply a "shock and awe" action to the problem. Crime then dies down for a year, or two if we are lucky, and then rears its ugly head again often with more aggression.

This of course is because we have failed to address the deep-rooted social issues faced daily by our citizens, including children.

And then when these very same children, who have grown up in deplorable conditions (because of lack of urban planning), or grown up listening to deviant musical lyrics (because of lack of not enforcing the Noise Abatement Act), or see their father being abused by the police, or are abused themselves with little consequence in many instances — these children grow up and become criminals. We send the police to address the situation, by which time many of those children are lost, and further exacerbate our social issues.

Minister Montague has, in my view, spoken to some short-term approaches that are needed. However, what we must start to address immediately, and at the same time, are the longer-term solutions like enforcement of road discipline, and other laws like the Noise Abatement Act and the protection of our children from abuse.

Unless we can do these things, we will not be solving the crime and indiscipline issue, but rather just placing a band aid on a sore that will become worse. As we saw when we celebrated the reduction in crime in 2010, but which was just a temporary reprieve.

There have been many very insightful studies that we have just placed on a shelf, and not sought to implement. Either because of our inefficient bureaucracy (the number one problem to doing business) or lack of political will to do so. The fact is that no one who has had responsibility for policy to date can claim success, as where we are today is testament to what the efforts have been before.

One of the things I would love to see put back in place is the Rule of Law Committee, a private and public committee that was focused on addressing the crime problem — just as EPOC and ESET were set up. This is needed urgently, as because of our actions, (or inactions), in the past — the chickens have started to roost.

Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-17666938463195067182016-06-17T11:13:00.000-05:002016-06-17T11:14:07.699-05:00Jamaica needs fewer hedgehogs
A book I am reading called "Superforecasting" looks at the way in which people go about making forecasts, and draws some conclusions why some people – a select few – are consistently more accurate than others. These people are referred to as superforecasters.

One of the reasons mentioned is that most people think like hedgehogs, while the superforecasters think like foxes. Hedgehog-type thinkers make forecasts or predictions that are influenced significantly by their own biases and experiences. In other words, they lack the ability to think "beyond the tip of their nose". Foxes, on the other hand, are those who are able to objectively take all surrounding information into consideration, and look beyond their own biases and experiences.

No doubt, foxes in most cases will be much more accurate than hedgehogs. So if we consider someone who can make good investment predictions or economic projections, it is usually someone who thinks like a fox. That is, a person who considers all the information objectively and does not pay attention to the short-term market reactions.

One person who thinks like a fox, and he always speaks to it, is Michael Lee-Chin. He always expounds the same principles of investing, always looks beyond short-term market moves, and believes in the information he has analysed, for long-term gain.

This principle is also very important in organisations. When we think about people who are seen as transformational leaders, more often than not they are "foxes". In other words, one of the significant characteristics a transformational leader has is his/her ability to look into the future, and consider all the information available, and implement strategies based on that objective analysis.

Some transformational leaders we know include Lee Kuan Yew, Steve Jobs, Henry Ford, and more recently, in my view, Barack Obama. Closer to home we can think of people like Michael Lee-Chin, Butch Stewart, and Chris Blackwell. And if I were to think of politicians who implemented transformational ideas, I would say Michael Manley, Edward Seaga, and PJ Patterson.

These leaders were able to think about and implement ideas that were not the "talk of the town" at the time. In other words, they looked at the information and the environment around them, and made decisions even when others couldn't see the reason for it.

One of the challenges Jamaica has, in my view, is that we have too much hedgehog-type thinking. This has frequently caused us to take two steps forward and three steps backward, and has robbed us of innovation and progress.

The fact is that too many of us are not able to see beyond our own personal biases. Because of that (and thanks to social media), you can see where some people have two different views on the same issue, depending on which political party is in power.

When a statement or forecast is made by someone who is not in alignment with other people's political or personal preferences, some people attack the person and say that the idea is backward, stupid, or political. But if someone who holds their political conviction makes that same statement, they will support it. This is because of their hedgehog style of thinking. In other words, they are unable to think beyond "the tip of their nose".

After reading this reasoning in the book Superforecasting, I began to realise what makes normally rational people think irrationally, or with unsupported bias, when they enter groups (such as political parties). This also explains why a normally rational person, when he or she takes up political office, would shelve a tried and proven plan in favour of another, sometimes doing the same thing, but with another name. Examples can be found in both parties.

I think this is why we are unable to get consensus many times on governance priorities, because irrespective of how well a plan has performed, because it was implemented by the other party, it must go. Or because someone has always been aligned to the opposing party, then they are not useful. The result is that potentially every five years we can throw out good ideas and start the same process all over again, and then we wonder why after 54 years of independence, it seems like we are still in the starting blocks.

There is no doubt that the only way we will move forward is if more of us as citizens, and at the leadership levels, start to think like foxes. We do see some ministers who are more inclined to be foxes, but there are still too many of us who think like hedgehogs. And we know only too well in Jamaica, from our crime situation, that all it requires is a critical minority that can wreak havoc on any well intentioned plan or idea.

If we are to move this country forward though, there must be an unwritten code that we are going to ensure that we shed our hedgehog-type thinking and start focusing more on objective thinking about national development.

We must learn (especially many of the younger political activists) that it is important to look beyond the messenger and properly analyse the message. Or we must learn to be able to properly assess information, and look beyond our personal biases. If we fail to do so, then we will always be in the starting blocks as a country.

For this to happen, only transformational leadership will set that tone.
Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-85306485958464085722016-06-12T17:13:00.000-05:002016-06-12T17:13:00.813-05:00Maximising Jamaica's full potential
AS I listened to the PIOJ's recent review of the Jamaican economy, I thought to myself that we have become a nation that is too used to mediocrity. The PIOJ estimated that the Jamaican economy grew by 0.9 per cent for the fiscal year just ended, and in the current fiscal year it is expected to grow between one and two per cent.

In the context of how the economy has performed, one could easily say that this is welcome news, as since around 2009 we have seen what the economists love to refer to as "negative growth". In layman's term, the economy has shrunk.

On the other hand, while we are happy for the growth, our willingness to accept that meagre growth rate is symptomatic of the way in which we have grown to accept mediocrity as a standard. In other words, we should be very concerned that as a country with a lot more potential to expand at much faster rates, we have failed miserably to achieve that full potential.

This is the same way we accept poor customer service, indiscipline, poor governance by our politicians, bureaucracy, and the list goes on. It seems as if we have been shell-shocked by our mediocre performances, and so we set our standard very low and any politician that comes and tells us how nice we look, we are ready to go with them. This, I think, is one of the major impediments to our economic and social development.

If you grow up in a community where it is expected that garbage will be disposed of anywhere (gullies, sidewalk etc) or loud music is as natural as birds chirping, then it becomes a natural part of the environment. And you can't imagine your life without it. In other words, what is the big deal about these things? Until finally one day, as we are seeing now, it is no longer just confined to a single community, but rather is very much the accepted culture for the whole island of Jamaica.

So we are numb to murders when they happen, or the number of road fatalities. We also see indiscipline as a way of life in the form of road use or squatting, among others. Because this culture and degradation is now ingrained in us, we then begin to celebrate it through our music.

So songs speak about the abuse of women or violence and we cheer when we hear them. Or, one of the new trends is violence in dancing, where men jump from roof tops on women, many times causing physical harm. But it is so accepted as a part of our culture that the patrons at the dances cheer when they see it.

The irony, also, is that we try to sell Jamaica on this "No Problem" culture, as Jamaicans seem proud to display their indiscipline when overseas. Many times when travelling and Jamaicans are on the aircraft, they have to put on some display, including speaking loudly. Recently I saw a sports team representing Jamaica (funded by the Jamaican Government and in Jamaica-branded shirts) playing music and speaking loudly on the aircraft. I had to speak to one of them to get the other to shut up.

But when I think about it, you can't really blame Jamaicans too much for how they behave because this is how they have been socialised. Because of the failings of government policy and action, over the decades, we have developed an environment of indiscipline and acceptance of mediocrity, hence the reason for falling labour productivity since the 1970s.

Governments have further solidified this mediocrity by creating labour laws that go way beyond protecting workers rights to harming them, as the stringency of the laws have now led to a situation where a great majority of the workforce do not have any health or pension benefits, because it is best to hire people on short-term contracts.

These same Jamaicans, though, when they go to live in other countries, do conform to the social behaviour in the majority of cases. And then we ask the question why do Jamaicans conform when they migrate, but are indisciplined here. The answer, of course, is that the environment we have in Jamaica encourages indiscipline and mediocrity.

It seems logical to me then that if we truly want to realise our full potential as a country, we must as a priority look at the environment we promote.

For example, the best-selling book Rich Dad, Poor Dad speaks to the belief that the environment for learning created by two different fathers can determine the outcome of the child. So, as long as we teach our citizens to be indisciplined, unproductive and give them handouts, then we will continue to create a country where underperformance and indiscipline is rampant.

It is for this fundamental reason why we will always find it difficult to achieve any sustainable growth about three per cent. It is also for this fundamental reason why we have so many Jamaicans earning very low wages. It is also a fundamental reason why child abuse is so high, why squatting continues to grow, and why crime is a challenge.

For me it seems logical, and I can't understand why we have not seen it expedient, to fix these underlying issues rather than encouraging celebration of our mediocrity as "No Problem". It is perplexing that we celebrate the very high standards of people like Usain Bolt, Shelly-Ann Fraser-Pryce and Bob Marley, but we seem too ready to accept a mediocre society.

Until we can do so, then we will continue to speak about one to two per cent growth and be willing to accept mediocrity as our highest standard.
Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-57654274466039712792016-05-20T08:04:00.003-05:002016-05-20T08:04:49.452-05:00Safeguarding our growth agenda
The Government has placed growth at the front of its priorities. Since political independence, in 1962, we have only seen growth of any significance in the period 1962 to 1972, and then about three years in the 1980s. So the focus on growth is definitely what is needed if we are to truly see Jamaica develop relative to the rest of the world.

In order for growth to occur in any sustainable manner, however, there are some fundamental things that must first happen. The most important thing to consider is that "sustainable growth" can only occur in an environment that enables its occurrence. This is no different from the need to create an environment that encourages productivity in a single organisation, or even in a business sector.

So, as an example, if someone is learning how to swim they must have a body of water (such as a pool), proper swimwear and, very importantly, a teacher who is capable of teaching someone how to swim — and more importantly can themselves swim.

So growth can only happen in an environment that encourages capital investment, greater productivity, and where people feel incentivised to work. This is the challenge that we have and continue to have. I don't think that most of our politicians see the long-term link between the need to improve productivity and work ethic, for example, and sustainable growth. For this reason our State has, over many years, encouraged welfare politics and income redistribution rather than productivity improvement and rewards based on productivity.

The result of this welfare politics is squatter settlements and falling labour productivity, because in order to "get ahead in life", all you have to do is align yourself closely with a political party and ensure they get in power. This type of thinking has led us to develop labour laws that ensure that unproductive labour is rewarded, which results in the long term with many people being contracted without any permanent employment benefits. This in turn creates lower fiscal revenues for the Government and erodes workers benefits into the future.

When I started writing in newspapers in 2003, I thought to myself that surely Jamaica has the potential to be a high growth rate country and see significant development. This, I thought, was where we were destined to be because of our geographic location, language advantage, tourism competitiveness, music and sports competitiveness, etc.

One of my objectives was to see if I could assist to improve the conversation around development and by doing so help Jamaica to achieve economic success, within a 10- to 15-year time span.

One of my main motivations in 2003 was to see Jamaica become a place where my son would grow up and want to live in. At the time he was nine, and I thought that if as a country we did what was necessary, we could have seen Jamaica truly become the place of choice to live, raise families, and do business, as pronounced in Vision 2030. As a result, I also sat on one of the Vision 2030 sector committees.

This obviously didn't work out as 16 years later we are still grappling with low growth, low productivity, and social issues. Although in the last two to three years we have made some progress in putting a framework in place to address our economic issues, our social and legislative challenges still remain an issue.

This came home to me even more when last weekend I attended my son's graduation, where he did a bachelor's degree in actuarial science, and he said to me that even though he would love to come back to Jamaica to live, he would not because it was too disorderly and had too much crime.

He also went on to say that, in his view, Jamaica would be the best place to live if we could control the crime and bring order to the society. I couldn't argue with him when he said that, and I thought to myself that Jamaica has once again lost another mind that could help us to develop. And this scenario has played out many times over.

This conversation took place in Des Moines, Iowa, which is the same place the two US missionaries that were murdered in St Mary are from. Sitting down to dinner with two residents there, they brought up the matter and said that they were both very popular in Des Moines, and because of it Jamaica had developed a very bad reputation there and many missionaries who were thinking of coming decided not to.

Jamaica has always had the potential to develop into a First-World country, where our people would prosper and we would not be seen as persons of interest for security personnel in other countries. In other words, we could have easily avoided the label of being "extraordinarily violent".

The problem we have is that we continue to cause our own demise by our failure to do what is necessary from a governance framework to provide an enabling environment for proper economic and social development, and safeguard the growth agenda we speak about so often but fail to realise.

What we must recognise, though, is that creating this environment is not going to come from the continuation of our welfare politics, or biasing our conversations depending on which political party forms Government. For example, I see on social media all the time where some people argue two different ways before and after the election, on the same point.

Safeguarding our growth agenda means that as a people we must change the conversation and we need to start looking at capital as positive for development, rather than with the suspicion we have always treated it and tax it before it starts working.

We have to create an environment of trust, which means that the security forces and government bureaucracy must respect the citizen and not make it hard for them to live and do business.

We have to bring order to the society, which means harsh penalties for those who dispose of waste illegally or who violate the Noise Abatement Act or who break the Road Code.

Until we bring this sort of order to our country, then someone else will lament the fact that their son or daughter chooses not to return to work and live.
Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-55782392352069883902016-05-06T08:24:00.000-05:002016-05-06T08:24:28.073-05:00A long-term solution to crime needed
According to the World Economic Forum's 2015-16 Global Competitiveness Report, crime and theft are the second most problematic factors to doing business in Jamaica, accounting for 16 per cent of the challenges. This is only outdone by inefficient government bureaucracy at 16.4 per cent.

Recently we have seen an upsurge in horrific crimes, including multiple killings. These include the following murders: a three-year-old killed by her father, a policewoman shot at a bus stop, and two US missionaries killed by persons unknown. These incidents have renewed calls for severe punishment for the perpetrators. The case of the US missionaries has understandably caused international press coverage, which can result in a negative economic impact if not managed properly.

There have also been renewed calls for hanging by the Security Minister and others. All this comes at a time when we are fighting for the freer movement of Jamaicans within Caricom. The government has also placed responsibility for reducing the crime rate on the shoulders of Police Commissioner Carl Williams.

In my view, the fundamental issues that have created the crime monster will not be addressed by either the resumption of hanging or by saddling the Commissioner with the superhuman task of reducing the crime rate. Hanging can only be a deterrent if we are able to catch the criminals. Even then it is not a solution if a trial takes years to complete, and then through the lengthy appeal process hanging might be in breach of the Pratt and Morgan rules.

It is also impractical to place the responsibility for reducing crime at the feet of the police, as in most cases all they can do is react to the crime after it is committed. I say this because an assessment of the crime statistics reveals that many killings are domestic, with gang murders in second place. We have discussed many times that the real challenges with crime in general and murder in particular have less to do with policing and more to do with the environment.

In 2015, for example, I am told that the police solved 600 murders committed by more than 700 people, which is a significant number of murders to solve. This has been achieved despite being hampered by inadequate resources and operating in a challenging working environment, both in the office and on the streets.

How can the police prevent domestic crimes, if they are defined as mainly crimes of passion, and not premeditated – which means they occur in the heat of the moment? All the police can do is react.

How do the police eliminate gang murders when the society and communities are actually creating more and more people who are likely to fall into crime every day? As an example, one of the challenges with crime in St James is the number of squatter settlements that have mushroomed. So because the communities are not properly organised, they are very difficult to police, and the conditions the people live in do not encourage civil behaviour.

Although short-term fixes must be found to relieve the increasing crime situation, the fact is that a sustained reduction in crime needs a much more detailed assessment. In my view, the first thing we must do is understand what are the causes of crime, and many of these causal factors occur years before the crime actually occurs. For example, people who commit murder today may have been victims of child abuse who saw one or both parents murdered years earlier, or who grew up without any parental control over what movies or music they were exposed to.

The fact is that our crime situation today has resulted from policy missteps over the years. In short, we have continued to create an environment which encourages criminal activity. This is no different from children growing up in a household where there are no rules, and they can do and get away with anything they want. So if children have grown up in an unstructured environment, don't expect that when they get to 18 they will adhere to the rules of society or their workplace.

Similarly, Jamaica continues to facilitate an environment of indiscipline on the roads (taxis and buses drive how they want); night noise from dances throughout the night (in contravention of the Noise Abatement Act); blaring music that promotes violence and abuse of women; illegal squatting and violation of the zoning laws; illegal vending; violation of environmental standards; and abuse of children and the elderly.

This undisciplined environment is supported by a very slow justice system and a grossly under-resourced police force that is fighting corruption within its own ranks. Add to that a less-than-adequate education system and a high incidence of children not attending school.

So in fact, crime is supported by the ways we have chosen to organise ourselves. We have had many spontaneous reactions to crime over the years – special police task forces such as ACID and Kingfish; curfews; Suppression of Crime Act; Gun Court; and in 2010 – the Tivoli incursion. All this has not resulted in reduced levels of crime, but rather an increasing distrust between the authorities and the Jamaican people, as evidenced by the LAPOP report over the years.

If we are serious about making Jamaica a safe place, then we must realise that crime can only be solved by creating a society of order and respect for the average citizen. We must stop fertilising the crime tree.

Until we choose to do so, we will continue to react to an ever-increasing problem (at best we might have a short-term reprieve). The security forces will find it more and more difficult to cope, and we as Jamaicans will continue to suffer.

We must create opportunities for all Jamaicans and ensure that our children are protected and not subject to conditions that breed criminal behaviour. We must use technology such as CCTV and properly resource the police force. We must ensure that legislation such as the new Road Traffic Act is enacted in short order, just as we do with tax legislation.

Only then can we say that Jamaica will be the choice of place to live, raise families, work, and do business.

Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-25286301366614563782016-05-04T05:36:00.000-05:002016-05-04T05:36:04.654-05:00That Caricom issue: Jamaica -Trinidad relationship
The recent impasse between Jamaica and Trinidad, arising out of the latest round of Jamaicans being not only denied entry to Trinidad but being detained in less than acceptable circumstances, has once again raised the question of the purpose of Caricom, and more specifically the CSME.

This is only the last of many incidents that have grabbed the attention of the region on this matter. The tension began in 1961, when Jamaica held a referendum which saw us withdrawing from the West Indies Federation. At that time the then Trinidad Prime Minster Dr Eric Williams appropriately said that "one from 10 leaves zero", referring to the fact that without Jamaica the Federation would be virtually non-existent.

Since then we have been unable to see the free movement of goods and people within the region, and examples of these include:

(1) the challenges involved with exporting Jamaican products to Trinidad and Belize, especially patties;

(2) previous instances of Jamaicans being refused entry into Trinidad (I remember last year the Institute of Chartered Accountants of Jamaica sought reassurance from Trinidad that our delegates attending the Caribbean Conference would not have any difficulty with immigration because of a prior incident); and

(3) the landmark ruling coming out of the Shanique Myrie case.

In the case of the movement of goods in particular, my own view is that Caricom and the Council of Trade and Economic Development have proven to be very ineffective in addressing this issue. Countries have made commitments at the highest level that the non-tariff restrictions would be addressed, but years later the problems remain – in particular, the case of the restriction by Belize.

This recent impasse between Jamaica and Trinidad is the latest in a long line of events demonstrating the ineffectiveness of Caricom, and more specifically the failure of our governments to rectify this situation. It reflects a serious lack of leadership in the region. I am left to wonder why we are unable to resolve a matter as important as this, yet we find time to proffer solutions to problems affecting West Indies cricket; but such is the irony of our regional politics.

Once again, though, we need to question the relevance of Caricom. The recurrence of these situations creates divisiveness and drains our energy, because the failure of governments to find a sustainable solution always carries us back to the same unfortunate position.

Nonetheless, I am heartened by the stance taken by Prime Minister Andrew Holness and Foreign Minister Kamina Johnson Smith, and former Minister Anthony Hylton, as they have all stated a commitment to take firm action on this. Hylton at the time had in fact overseen rulings against Trinidadian petroleum products for rules of origin breaches under the Treaty of Chaguaramas.

Outside of these three, however, I think the other responsible people have proven to be ineffective and seem to always be seeking quiet diplomacy, while Jamaica and other countries of the region suffer. In fact, one could say that it is the failure of strong leadership on this matter that has seen the persistent failures of Caricom and our inability to move towards a true CSME.

On this recent impasse, however, I appeal to Jamaicans not to get emotional and respond like the former Trinidad National Security Minister, and also the "Donald Trump" surrogate Trinidadian talk show host. As a people we must remain above those types of responses, and understand that there are many Trinidadians who are decent people.

So we should continue to conduct business with Trinidad wherever possible, because it makes us better off financially. That is the only reason for market trade, so let us avoid emotional reactions.

I, for example, will not stop buying Trinidadian goods just because of this issue, but I have always looked for Jamaican goods over any other import, as long as they are equal in value (quality to price). This is because as a Jamaican my preference should always be for Jamaican goods, but certainly not at all costs to me personally. I therefore encourage Jamaicans to always purchase Jamaican goods over imports where they are available and of similar value.

UNFAIR COMPETITON

However, while we consider the comparison of products and services, we must also be mindful of the policy restrictions that create unfair competition.

Trinidad (through its finance minister) has admitted to providing a subsidy on fuel. Based on our own research (at the PSOJ) this subsidy is more than just on petrol, and extends to manufacturers.

I won't go into detail here, but suffice it to say that this is in contravention of several parts of the treaty. So while we have enforced a policy (CET under the Treaty) to promote the CSME, we must also recognise where policies are failing us because of contraventions, and must act decisively to address that.

This is where the Jamaican government has failed us, because much of this has been suspected for a while, and brought to their attention, and they have failed to protect the Jamaican people. In fact the PSOJ estimates that over the 10 years to 2014, we have paid out approximately US$700 million we wouldn't have had to pay if there was no CET on fuel because of the premium charged by Trinidad on account of the CET.

This would be enough to fund the sugar industry every year, and hence create jobs in Jamaica as opposed to supporting the subsidy in Trinidad.

So my appeal to Jamaicans is this: Don't let one or two wayward voices in Trinidad cause us to view everyone in Trinidad with disfavour. And don't let the ineffectiveness of the current Trinidad Government to address this issue, or the past ineffectiveness of the Jamaican government, play a role in how we feel. What we must do is demand action by the governments to either solve this Caricom façade, and make it a true CSME, or stop fooling ourselves about it. What we must do is act and stop "posing".

Caricom has a role to play in our regional development. But it is our failure to treat Caricom properly that has resulted in the many breaches – and not only the failure of Caricom, but the poor economic performance of the region.

Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-53287123784525888252016-04-15T05:44:00.001-05:002016-04-15T05:44:39.303-05:00What should be the real purpose of growth and development?
Last year I had set a goal to ride 7,500 miles on the bicycle, which I achieved. Discussing it with another cyclist, I was asked if that was my ultimate objective and if I would be increasing it this year (2016), to which my response was no because the real purpose of the goal was not to just ride 7500 miles for the year, but rather that was an initiative to achieve the greater goal, which was good health and to perform better on the bicycle.

Also, just recently, I posted that the philosophy that was adopted by the previous NSWMA board was good customer service and good corporate governance. This in itself is not the ultimate objective of the NSWMA, but what it does is guide the development of the initiatives needed to achieve the ultimate goal.

These two examples show that in order to achieve any ultimate objective, we must have carefully designed initiatives and a guiding philosophy.

So even though the initiatives and philosophy have been identified and are both critical to attaining the objective, the fact is that if you were just told the initiatives and philosophy guiding the initiatives, they would both be meaningless unless we are aware of what the ultimate objective is.

However, if we were to know what the ultimate objective is, then we could easily identify a philosophical framework and the supporting initiatives without being told.

So if I told you the ultimate objective of the NSWMA (as defined by section 4 of the NSWMA Act) is responsibility for the proper management and disposal of waste, then you could say to me that in order to achieve that I would need to have a guiding philosophy of customer service and governance. At that point I could then say, well, if I want to achieve that then I must look at the major risks to achieving that and then create my initiatives by order of priority.

This is the approach that the previous NSWMA board took, as the first thing the board did was to go to the NSWMA Act and ask what is our ultimate responsibility. That was able to guide our philosophy and coming out of that analysis we were able to identify Riverton and garbage collection as main risk areas and tackle those early.

For the past 43 years, Jamaica has been trying to achieve growth and development. We have heard many people talk about the need to grow the economy, and identify specific sectors — need for macroeconomic stability; need to reduce the debt to GDP ratio and reduce the fiscal deficit; and how critical it is to pass the IMF tests inter alia.

Vision 2030

It wasn't, however, until Vision 2030 was developed and launched in December 2013, that we sort of created a guiding philosophy for our development. It was then that we finally decided that what we wanted for our development was to become "the place of choice to live, work, raise families, and do business".

Until then Jamaica had no guiding philosophy for our development. Sure we knew that we wanted economic growth. We knew that we wanted to develop the country's infrastructure. We knew that we wanted to reduce crime and indiscipline. We knew that we wanted to eradicate poverty. But to what end? And the fact is that if you don't know where you are going, then you can take any road and you will get there.

But even though this philosophy (which I think is an excellent one) was developed, the truth is that it really has not been taken seriously by successive administrations, and seems to have remained an academic task with no desire for implementation. So there are a few persons monitoring Vision 2030, but the needed initiatives have not been tied in to the action by the country's "board of directors", which is the Cabinet.

So imagine if the NSWMA management identified a philosophy for the organisation, but it was not accepted by the board. Could it be achieved?

Last Tuesday, I accepted an invitation to interview some young people from a low-income community, in an attempt to identify what their skill sets and needs are. I thought it was important, even though I had a really hectic day, because I believe our young people need serious nurturing and guidance. I was happy to see that several professionals were there, and it was more encouraging because it took place at 7:00 pm.

Disheartening

But while speaking to some of these young people, just out of school, I was very disheartened. These youngsters were very ambitious and creative, but had a poor family background, had been abused, had produced children early, or had to drop out of school because they had no financial support.

One young lady of 18 was trying to make life better for herself, and wanted to go back to school, but had to drop out at 13 when her mother died and her grandmother could not afford to send her and two younger siblings to school. So she had to start hustling to help them. Immediately I thought to myself, what type of future does she have? Fortunately, she had no children and I pleaded with her not to do so until she was financially independent.

There were many stories similar to this, and it was obvious that they were very willing to improve themselves and at a time when they should have been enjoying their childhood but could not do so. I will definitely participate again.

This led me to think that even though we are talking about passing IMF tests, and nice terms like macroeconomic stability, the fact is that there is a significant part of our population that is just concerned about what they will eat tomorrow. Hence the disengagement we saw in the election turnout.

The fact is that our governance and philosophy is totally disconnected from what the ultimate objective of development should be – to improve the general standard of living for Jamaicans and ensure that all Jamaicans have an equal opportunity at success.

That is what governance should be about. Instead we focus on initiatives, and because we have not been able to define anything but initiatives we have not been able to see any meaningful development.

In other words, our leaders need to go back to basics and understand that the real purpose of growth and development should be about enhancing the lives and opportunities for the people. This is why the US has been so successful as a country, because their ultimate objective is improving the lives of US citizens, guided by the philosophy of government by the people and for the people.

Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-18934939465881090732016-04-01T06:07:00.000-05:002016-04-01T06:07:13.980-05:00Why should we buy Jamaican?

As we pursue our eternal search for economic development, one focus has been on the need for us to purchase local goods and services in preference to imports. The reasoning behind this seems logical, as it should mean that the balance of payments should improve, and this should mean a stable exchange rate and employment for more Jamaicans.

As a result, there have been many calls for us to 'Buy Jamaican'. Former senator Norman Grant has been at the helm of this initiative, which, in my view, has reaped much success. Even with this successful campaign, however, we have continued to see currency depreciation, high inflation and interest rates, and increased unemployment over the period. So the question is, why wouldn't things improve if we had such a successful 'Buy Jamaican' campaign?

There are a few reasons for this, and it underlines the fact that simply saying we should 'Buy Jamaican' will not improve our economic fortunes.

So while the campaign was very good and necessary, the truth is that we never really supported it with policies that would sustain a move towards consuming more Jamaican-made products and services. In addition to lack of policy stimulus, many local producers have not improved the service and product quality to properly compete with imported products.

The first thing to note is that it is a futile exercise to be pushing a 'Buy Jamaican' campaign when we are unable to significantly increase the production of Jamaican goods and services. So what we have failed to do as a country is ensure that appropriate policies address this failing. To do so all we had to do was ask the question – what is it that prevents capital from making long-term investments in locally produced goods and services? In other words, does capital feel comfortable investing for the very long term in sustainable production, and – importantly – locating their facilities in Jamaica?

The answer to this is that government policy has never effectively addressed the issue of being more attractive to capital than our competitors. Sure we have done it by creating special incentives for industries such as tourism, bauxite, free zones, etc. But the fact is that government's attitude to capital generally has been very wanting.

As an example, tax policy in Jamaica has always pinpointed increasing fiscal revenue as its primary purpose. Never mind that it ends up killing incentives for capital and businesses generally. In contrast, countries like Panama have a direct policy of focusing on attracting capital, and as a result they have consistently grown at 6.0 per cent to 8.0 per cent per annum.

Government policy in Jamaica has always created a hostile environment to capital, and then created special carve-outs for foreign direct investments. Small wonder then that local investors are reluctant to risk their savings and pensions in business ideas.

The fact is that if government policy was focused on addressing the four most problematic factors in the 2016 Doing Business Report: inefficient government bureaucracy, crime and theft, tax rates, and corruption — then not only would we solve 54 per cent of our business challenges, but we would also see increased capital inflows and employment. Instead we have struggled for years to implement a computerised tracking system for development approvals, and then we wonder why growth remains anaemic.

Secondly, many of the Jamaican products and services produced are not able to compete in terms of quality and price.

Price in many instances is again affected by government policy, which seeks to extract as much revenue as possible without much concern for the survival of businesses and their ability to compete. But there are also quality issues with some of the goods and services produced. As an example, last year I took my daughter to the Easter Funfest at Hope Gardens, and it was a great event for children. I got there very early and she was almost alone on the rides so it was good.

This year I went early with her, only to be greeted by blaring music, with speaker boxes lining the route to the rides. The music was so loud that my daughter started crying and wanted to leave, and it was equally unbearable for me and some of the staff. Later I got a video of them having a stage show there with children dancing on the stage to a large audience of cheering adults.

A significant deterioration over last year.

This is a similar story for many Jamaican products and services. They start out well and end up being uncompetitive. This is okay in a competitive market, but the problem is that this mediocrity is supported somewhat by government policy, which in many respects creates significant barriers to entry. The result is that the invisible hand of a competitive market does not get to work properly. For example, something as simple as not enforcing zoning laws allows some businesses protection by allowing them an unfair advantage from a cost point of view. The result is mediocrity.

Other inhibitors are lack of information and inability to move goods effectively. Just look at the deplorable state of most farm roads.

The point is that we should not 'Buy Jamaican' just because it is a Jamaican product or service. But rather we should 'Buy Jamaican' because it is just as good or better than the imported products.

It is only when we can produce competitively that we will see improved growth and employment. This is because buying an inferior product actually does have economic costs: (i) higher cost of living, (ii) lower productivity and hence lower wages, and (iii) decreased potential for foreign exchange earnings.

At best then, producing inferior products and services will produce a more closed economy which becomes more uncompetitive and produces lower income levels, as happens in Cuba.

If we are to grow the economy at acceptable levels, then we must increase the number of Jamaican products and services. This, however, must be done competitively if we are to benefit.
Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-62378255359809432492016-03-18T06:20:00.000-05:002016-03-18T06:20:13.675-05:00Jamaica's road to prosperity — Part 2

In order to secure power (spillover from the colonial system), both political parties when they formed government set about creating institutional loyalties, using the state bodies and security forces to cement their hold on power and share spoils amongst supporters. This resulted in an inefficient bureaucracy (based on political loyalty, rather than ability, for board appointments, as an example) and dysfunctional state mechanisms that excluded those supporting the opposition, instead of including all citizens.

I could go on and develop this, but suffice it to say that Jamaica's political arrangements have resulted in a state of affairs where most of the citizens have either been excluded from participating in any "prosperity" because (1) people were given special economic privileges based on party affiliation and not market opportunity; (2) the masses suffered from declining values and poor educational and health access because of inefficiency and poor governance; and (3) our political system created garrisons that focused on furthering political division.

Therefore if we are to move towards "prosperity" for all, we must find a way of firstly continuing the current fiscal and legislative reform programme, in order to create the foundation for development.

In other words, no development can happen with a debt-burdened society and poor legislative infrastructure. Secondly, we must create an environment that encourages capital to invest and by doing so provide employment and entrepreneurial activities. Thirdly, we must then create a policy and political environment which includes everyone (irrespective of political preferences) and which builds on the natural talent of all and not just some.

If we can achieve these three goals, then we can create prosperity for all, as we will then be able to create value at the individual level.

The problem with where we currently are in the ERP is that it has never seriously considered the third objective up to this time, and hence people were not feeling the improvements on the ground.

Of course, there are the usual policy actions that need to be taken, and these include a modern legislative framework, and other policies to enable a competitive and business-friendly environment. I have been emphasising that all we need to do is create policies that speak to the top four problematic factors in the World Bank's Doing Business Report, which are Inefficient Government Bureaucracy, Tax Rates (uncompetitive tax environment), Crime and Theft (lack of law and order), and Corruption. These four account for 54 per cent of the challenges perceived to doing business in Jamaica. So if we were to just focus on these four areas alone, then we would have gone a far way in enhancing the business climate.

Fixing these alone, however, will only solve the layer of creating an enabling business environment and generating country-level growth. But to get to the desired levels of "prosperity" for all, what is needed is to create an environment of inclusion for all. Of course, this means breaking down the institutional barriers to inclusion. Very importantly, the existing political and economic structures will have to give up some power over their respective territories.

This, of course, will require strong, sincere, and forward-looking leadership.

To the credit of the politicians, and also business people, they have been giving up some of that power and this is why Jamaica is making some progress under the ERP.

This is very important to understand, because no reform programme can work sustainably if institutional arrangements continue to strangle any progress made, which is why we have had to go through so many IMF agreements and reform programmes without any success. The fact is that as soon as we start to see some progress and the squeeze starts to threaten the political process, then the institutions usually reverse any improvements and maintain the stranglehold, through debt, as an example.

Since I wrote the book in 2009, however, I think much of that institutional stranglehold has been released and there has been more citizenry inclusion in the political process. So things like the Charter of Rights, INDECOM, Fiscal Rule legislation, Political Ombudsman, Public Defender, etc. have all been incremental steps towards greater citizenry inclusion.

I am also reminded that the current Electoral Commission started out as the Electoral Advisory Board and is a shining example today of citizenry inclusion.

This progress has come as a result of our much regarded press freedom, which has encouraged more radio and television stations and with it a voice given to Jamaicans. It has also resulted in a very active civil society and private sector, all of which have forced the Parliament to bring about incremental changes that have resulted in greater participation.

The problem we have, though, is that while we have progressed significantly in terms of social inclusion, we have made little progress in terms of economic inclusion. This is evidenced by the fact that a significant number of Jamaicans still remain below the poverty line and more importantly, we have not seen any relative improvements in our middle-class structure when compared to other countries. Everyone knows that in order for countries to do well, and for shared prosperity, there must be a growing middle class. Because what it means is that there are greater opportunities for all.

The challenge for the new government in moving towards prosperity, therefore, will be how we achieve economic inclusion. One thing is certain: it can only be done by breaking down institutional barriers. So, for example, we must create educational and health opportunities but in a fiscally responsible way, as we cannot achieve individual prosperity without country growth, and that can only be done with a stable fiscal, legislative, and macroeconomic environment).

We must also find a way of breaking down the invisible, but divisive barriers of garrisons. We must find a way to create a safe environment for all, where the security forces are seen as protectors of the people.

We must find a way to make government service delivery efficient and focused on providing quality service.

We must find a way of creating a low tax environment where people see maximum returns from their efforts.

If these can be done, then we will truly be on the path to "prosperity" for all.
Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-67090687518169019272016-03-11T05:16:00.000-05:002016-03-11T05:16:13.785-05:00Jamaica's road to prosperity - part 1

The JLP's slogan, "Poverty to Prosperity", was very catchy and seemed to have been embraced by enough people for them to win the elections. Now that the election is over, we certainly as a country must turn our attention to moving towards prosperity.

The first thing we must clearly understand is what true prosperity is, as many people, even in their personal lives, do not truly understand the concept of prosperity and how to achieve it. And even at a national level you could say that we have never understood what prosperity is, as we have never been able to achieve it since independence in 1962.

Many people get confused and think that prosperity is borrowing money to buy the latest luxury car, when you don't own a house or can't afford to do things you want to do because you are hamstrung by a loan. Or even worse, cannot afford to miss one month's salary or else all financial hell breaks loose.

Similarly Jamaica gives the impression of prosperity to many who visit and see the cars etc, and can't believe that this is a country that is burdened by debt that has reached as high as 150 per cent of GDP in recent years and 212 per cent in 1984.

So maybe the first thing that we need to do is understand what prosperity means. Because prosperity is not driving the latest model car, while not being able to feed yourself properly. And it is not borrowing money to pay people more, or provide welfare, as Jamaica has done in the past.

Also the socialist experiments, which came to an end with Russia and China effectively accepting market economies, showed us that redistribution of income from one set of people to the next does not mean long-term prosperity if there is no increase in productivity. Our own social experiment in the 1970s demonstrated to us that a country cannot be prosperous without capital, when for example there was migration of capital from Jamaica.

The fact is that prosperity for a country only comes about when there is sustained economic and social development. And this can only happen when real GDP grows consistently at above average levels, and when there is social inclusion. And at the individual level, prosperity can only come when you are yourself more productive and can increase your earnings based on that productivity.

So a country's prosperity comes when greater value is created either through increasing the capital investments in a country, or by improving the return on the current investments. In other words, producing more value through goods or services.

At the same time a country can be prosperous, but a large majority of the citizens are not. In other words, prosperity for a country does not automatically translate into prosperity for the population. If we look at countries such as those in the Middle East, for example, where the countries earn a lot of money from oil, there is still only a small set of persons who really experience prosperity. So the challenge that Jamaica's government will have, to realise prosperity, is not only to grow the economy, but also to find a way to push that prosperity down to all Jamaicans.

And as indicated above, the only way for this to happen sustainably is to find a way for these people to improve their productivity and value creation. It certainly cannot be done by moving money from one place to another, by borrowing, by increasing taxes, or by ignoring capital spending in favour of recurrent expenditure. All these things we have consistently tried in the past, but they have not worked.

The recent economic reform programme (ERP) has also generated much debate, with some saying that it has not improved the lives of most citizens, and in fact has caused more pain. Although this is a very true statement, the ERP should not be blamed for this, as it has been constantly said, and is true, that the ERP is necessary but far from sufficient to bring about prosperity. What it does, however, is lay the foundation for prosperity. So, for example, you cannot eat dirt, but dirt is necessary for a tree to grow and bear fruit. If you get rid of the dirt then there will be no fruit, and similarly if you do not do the necessary fiscal and legislative adjustments there can be no sustained growth and prosperity.

The challenge is this: How do you first of all create sustained economic and social development, and then translate that country-level development into as much widespread individual development as possible? Because irrespective of what you do, there are going to be some people who will not benefit. The role of governance, however, should not be to see that everyone benefits, even if they don't deserve to, but rather to create an environment where everyone has the opportunity to be the best they can be. This is true whether you run an organisation or a country.

This comes down of course to the problem of politics. In 2009, I wrote the book Charting Jamaica's Economic and Social Development: a much needed paradigm shift. The book looked at our economic development since 1962, as I sought to answer why Jamaica has not done better economically and socially, and what needed to be done to get us to the elusive "prosperity" goal.

I concluded (which was not the intention) that the problem with our economics and society is our politics. Our political system, and the way we practise it, pulls the life out of our economy and society and does nothing more than create a welfare economy where the ruling party controls the resources to the exclusion of half of the country at any one time (remember the statement "[Jamaica's] politics is about who gets what…). So at best we have half of our resources pulling in one direction and half in the other direction.

I recently began reading another book, which supports the conclusion I arrived at in my own book. The book is called Why Nations Fail and is a book I recommend to all politicians, and those interested in understanding the difference between rich and poor nations. In fact I was in Guyana recently and mentioned the book to their Minister of Energy (who was on a panel discussion) and he indicated that he was currently reading the same book.

What the book says is basically that our political systems, and how we practise our politics, is ultimately what determines why one country is rich and another is poor, which supports my own conclusion about Jamaica's development since 1962.

The fact is that politics determines inclusion or exclusion (as said in Why Nations Fail), and pursuing a path of inclusion or exclusion determines whether or not we achieve long-term prosperity. Since 1962 (and before, but my concern is with our own governance) we have pursued a politics of exclusion by virtue of our political arrangements.

This politics of exclusion got even more aggressive in the 1970s, having its roots in the 1960s, when Jamaica and Jamaicans started to be divided along political lines, culminating in the democratic socialist ideals of the PNP in the 1970s, versus the market doctrine of the JLP.
Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-33354633248053197912016-02-28T15:06:00.001-05:002016-02-28T15:06:44.682-05:00We are Jamaica's problem
I am sitting down to write this article on election day (February 25), after watching the lead-up to the election and the commentary from not only politicians but also us the citizens of Jamaica.

In considering this, I am even firmer in the belief that Jamaica's challenges have more to do with the way we have ordered our society and the way we interact with each other. After all, economics teaches us that the way economies are organised and developed has more to do with social interactions than anything else. Which is why economics is a social and not natural science.

While we spend much time speaking about the macroeconomy, the fact is that it is an outcome of the microeconomy, which is nothing more than the behaviour of individual households. And that behaviour is determined by the social interaction and behaviour of individuals within the household.

So my preferred taste for imported foods over local foods, if I am joined by enough Jamaicans, will determine what the demand for foreign currency is and ultimately the balance of payments. Similarly, if enough individuals believe that school is a waste of time and it is better to pursue an athletic or music career, or just "beg" money, then we would end up with low labour productivity.

In the context of elections, many people have made some very strong opinions about policies being proposed by both major political parties. but when when you ask them if they will vote they tell you they are not enumerated. At that point I always tune them out because I realise that they are irrelevant and can contribute nothing meaningful beyond words.

This is no different from the parent who tells their child that it is important to eat properly, but then they themselves eat the same things they tell their child not to eat. Or the person who wants to own the most expensive car, without first trying to own a home, and does so with bank loans they can't afford.

So we can see that the accumulated behaviour of everyone determines the economic outcome for the country.

So when people tell me they feel hopeless about making changes in the country as they don't have influence, I tell them that everyone has the platform to make their voices heard. And many times these are the same people who will say that they can't bother to go out and vote, or worse they can't even bother to get enumerated. I feel very strongly about this, as it is a fundamental right that we all have and even if we are the only vote against everyone else in the constituency we live, it is important for us to exercise the right that many of our forefathers gave their lives for. Ensuring that we do this also sends a very good signal to our children, not making it into a hopeless cause like the bad examples some show on health and social interaction.

As of today though, our failure to have exercised that right (because many say of frustration) on Election Day will have determined our own future whether you voted or not. Because any policy implemented by any government will affect you whether you voted or not. The fact that you did not vote means you don't have the moral authority to criticise. Just like they say, "God helps those who helps themselves."

If we accept that the success of economies are determined by the sum of individual behaviours, then it seems to me that countries can only successfully develop if societies are properly ordered and policies are geared towards influencing behavioural outcomes. And if that is the case, shouldn't we as a people demand that political parties (and governments) implement policies that would lead to behavioural attitudes that will result in economic success. In other words impacting social development is critical for impacting economic development.

So as I always say, despite the economic failures of the Manley administration in the 1970s, his social policies were critical in ensuring greater opportunity for the average Jamaican and transforming the advantage from the ruling colonial class to average Jamaicans. The problem is that the policies were primarily focused on upstaging the power balance rather than integrating everyone into it.

This change in approach to policies that influence behaviour can only come, however, when we demand it as a people. And I don't think that enough of us have paid any interest to long-term acceptable social behaviour to make the politicians pay enough attention to it. The truth is that without this the country will continue to perform way below our potential.

Societies and economies cannot, for example, develop without order. What most of us show interest in, however, is just getting rid of the high murder rate, without making the link between road indiscipline, night noise, and the way we treat our environment.

This election was no different, in that we really did not address the important issues. What we were talking about mostly is what one party would do for us as opposed to the other and vice versa. And the conflict in many respects was a retrograde step, as we have made too much progress to go down that road again.

One major problem is that many young people do not understand the social and violent turmoil coming out of the 70s leading up to the 1980 election and so are prone to repeat the mistakes again. This is why it is important for us to teach the history of Jamaica (no matter how short is is) in our schools instead of focusing on the history of other countries.

So the next time we think of criticising someone else (politicians, civil society groups, or private sector) for Jamaica's problems, take a look in the mirror first and understand that the outcome of policies and how our governors behave have more to do with how we behave at an individual level. In other words, we can either be Jamaica's problem or success.

 Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-13917401176371468332016-02-05T08:38:00.000-05:002016-02-05T08:39:02.230-05:00One from ten leaves nought

In 1961, when Jamaica voted by referendum to withdraw from the West Indies Federation, Dr Eric Williams, then Premier of Trinidad and Tobago, said "one from ten leaves nought".

This statement can be interpreted to mean that there are always key ingredients in an object or event that make it unworkable, or achieve suboptimal performance. So for example, if a car does not have fuel it will not drive, while on the other hand a car with a flat tyre may still be able to move but at a significantly slower pace.

So too if we look at our economy, there are some who from the start have lamented the hardships that have come as a result of the fiscal programme, and at the same time talk about development. The fact, however, is that development could not have happened until we were able to fix our fiscal and debt situation. As a result the necessary adjustments, which created the downturn, were an essential part of any development that was to take place.

I think that many have accepted that reality, with the exception of a few diehards who still believe that it is always going to be possible to have economic and social prosperity without sacrifice. And it is not surprising, as even at the individual level there are many who believe that sacrifice is not necessary for success, and so they will borrow to buy the most expensive cars when they are young, only to face the reality at retirement.

Now that we are at a point where the fiscal and legislative reforms have borne fruit (as we see from the confidence sentiments, low inflation and interest rates, improved capital market, relative exchange rate stability, etc), it is now necessary for us to realise what the next ingredient is to move to the next level of economic and social development.
To illustrate, growing an economy or a company is similar to riding a century (100 miles). The first 50 miles may be the easiest, but even if you can't easily get to the first 50 miles, you can still be in condition to go the full century. As you progress, however, every additional mile is going to require more fluids, food, and physical and mental toughness.

So it is with our economic and social development. Getting to a point of fiscal and macroeconomic stability is an essential base, but to move from this base to the next 50 miles of real economic and social development is going to require more, and different strategies, than what we used to complete the first half of the journey.

This, of course, is one of the challenges we have had with implementing Vision 2030. The fact is that we have sought to make it happen without any real attempt to change the bureaucratic and social environment needed for us to realise that vision. The result is that we are pressing the gas pedal with the emergency brake still engaged. The car may move slightly with the emergency brake engaged, but the performance will be way below what is required to get anywhere soon.

New thinking needed

It is important for us to understand this as we move from fiscal and macroeconomic reform to sustained economic and social development. In short, for this to happen it will require a different and bold way of thinking, as the strategies that got us to this point cannot be the same ones to get us through the next 50 miles of the race.

For this reason I have always maintained that any strategy that focuses primarily on fiscal revenues will do so to the detriment of economic and social progress. This is because the nature of a focus on fiscal revenues is in contrast to incentivising productivity and investment. Therefore, it is important for us to find the optimal balance, where fiscal revenues are maximised and productivity and investments are optimal.

This is the mistake that we have always made with our fiscal accounts, and as a result have always put more and more taxes in place only to watch economic performance stagnate over the years.

Today, my view is that the economic reform programme of the past three years has created a very attractive base for us to now move to the next level of real economic and social development, like no other time that I can remember. Whereas in the '90s we were attractive for debt, today we are seen as the best place in the Caribbean to do business (Forbes andDoing Business Report) — a significant contrast.

The only way to move to the next level is to now get the ingredients necessary for it all to come together. It is going to require a new and bold way of thinking. Not the old linear way of saying that if we increase fees and taxes, then more will come to the government coffers. Or that every business person is trying to run a scam.

It is going to require even more public-private partnerships (which has been one of the reasons over the past three years for the progress we have made). It is going to require bold moves such as charting a way for more competitive tax rates by reducing rates, and even setting out a programme to gradually move from direct to indirect taxes. It is going to require an assault on indiscipline, such as road indiscipline, and clamping down on night noises. It is going to require investing significant sums in the security forces, not just for equipment but for training, and demanding even more accountability. It is going to require that we take decisions — such as was taken with the oil hedge — and realise that we won't win every time, but that we take decisions based on risks to the stability of the country. It is going to require political maturity to rally around a common cause, and for us as individuals to be tolerant of each other's views and to vote based on issues and to move away from welfare politics.

Unless we can make this paradigm shift in our thinking, then we will always be reminded that "one from ten leaves nought".Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-46209927736531231072016-01-02T04:32:00.000-05:002016-01-02T04:32:04.728-05:002016 must be a year for growth

As was expected, 2015 was a turning point for the economy and the fiscal accounts.

In 2015 the Jamaican economy started to see the benefits of the economic reform programme (ERP) and ended the year in a very strong position, with third-quarter growth of 1.5 per cent, the fastest-growing stock market in the world, multi-year lows in both interest and inflation rates, and improved business and consumer confidence.

All of this resulted from the perseverance of policies to maintain fiscal discipline and create the legislative framework that would bring greater competitiveness to the market. As a result Jamaica saw our debt to GDP ratio fall to 126 per cent (from 150 per cent in 2012), improving fiscal balances, and the first balance of payments surplus in 10 years, which by itself is a game changer and a significant achievement.

This performance was strengthened by the fortune of lower oil prices, the PetroCaribe debt buyback, and — up until recently — near zero US interest rates.

Without these occurrences, we would still have seen improvement in the economy — but at a much slower pace.

Also, from a regional perspective, Jamaica is poised to regain its place as the "Powerhouse of the Caribbean", with the Trinidad and Barbados economies now in free fall, as low oil prices and policies against offshore financial havens take a toll on both economies.

Trinidad in particular is in for a rough ride, as oil prices are projected to remain low until maybe 2020, and by that time it could be further impacted by new sources of energy.

Micro level challenges

With all these macro achievements, however, Jamaica's economy is still in a very vulnerable state, as there are still challenges at the micro level to address.

These risks include (i) an inadequately trained labour force (which resulted from periods where approximately 70 per cent of secondary school leavers left without passing one subject); (ii) crime and indiscipline, which is a major inhibitor to maximising our productivity; (iii) a still struggling SME sector, which, although conditions have improved, still struggles with capacity issues and bureaucracy in doing business; and (iv) an uncompetitive tax structure.

The fact is that unless we address these four major issues — which account for the majority of the most problematic factors in the Global Competitiveness Report — we will not successfully maximise our growth potential. This means that the benefits of growth for the economy, fiscal accounts and general standard of living will take longer to be realised.

This is important because even though we have been seeing the benefits at the macro level and specifically the fiscal and trade accounts, the fact is that the widespread micro effect has not been felt as yet. This is expected in any economic recovery. However, a failure to have widespread benefits in a timely manner will mean that economic activity and spending could be inhibited and lead to a loss of confidence.

In effect, therefore, we have done a very good job as it relates to the ERP, and the effect on the fiscal accounts and other macroeconomic indicators. Much commendation is due to those who have been charged with implementing and overseeing the ERP. However, similar to when a company is being restructured, expenditure management can only have short-term benefits. For the recovery to be sustained, you have to work on the revenue side.

As it relates to the country this means that we must now turn our focus to higher levels of GDP growth in 2016, as 1.5 or 2.0 per cent is insufficient to see the much needed impact on the middle and lower income classes.

In order for this to happen, it is going to be very important to focus on deliberate policy actions to address the issues of inefficient public sector bureaucracy, crime and indiscipline, more efficient justice system, more competitive tax rates and tax compliance, and — very important for me — labour market reform and workforce productivity.

Labour market reform and workforce productivity will be a critical success factor in 2016 if economic growth is to be above the low levels we are used to. It also is going to be a very important factor to increase the value added and compensation to labour. In other words, unless we are able to improve the productivity of the labour force, the standard of living generally will not significantly improve.

Therefore deliberate policy action geared towards education and productivity is going to be essential.

This for me will be the most critical factor for fundamental benefits of growth. That is to ensure that the average man on the street benefits from growth, as to do so they must be able to participate at the highest value added.

Some of the actions that can be taken include (i) vocational training programmes at HEART; (ii) focusing loans from the Students' Loans Bureau on professions that will be in demand; and (iii) labour market reform.

If we are able to successfully address this and the other issues mentioned, then I have no doubt that we can achieve growth in excess of 3.0 to 4.0 per cent and Jamaica will once again be the envy of the Caribbean.

Honesty is very much alive

An incident occurred which gave me hope in our young people. Recently a friend of mine lost his phone at an event and gave up hope that it would be recovered only to receive a text from a young lady to say that she had found the phone and wanted to return it. She arranged to meet him and return it and refused to take any compensation and said she only wanted to return the phone because it was the right thing to do.

This single action certainly has bolstered my faith in the youth, and I want to say,'Well done, Lindesia'. She is a Political Science student at UWI.

Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-66209469740872211782015-12-13T12:48:00.000-05:002015-12-13T12:48:46.955-05:00Foundations for prosperity

The World Bank recently released a paper called "Jamaica Economic Update Fall 2015", in which it gave an update on the Jamaican economy and spoke to the necessity to achieve higher levels of growth. As stated in the report, "While the government has made important progress on the structural reform agenda, Jamaica will need to accelerate its growth in order to achieve lasting debt sustainability".

This is a very important point to note by the World Bank, as it is saying what some of us have been saying for a long time that while the fiscal adjustment is necessary, it is far from sufficient.

This is because the fiscal reform programme has been more on the expenditure management side and there is a limitation to what can be done in expenditure management, as there is a point that you can get to where everything stops.

If we are not at that point yet, we are certainly nearing that point. We should also note when the World Bank says that accelerated growth is necessary for debt sustainability. In other words, if we do not get the growth we need then we could start to compromise our debt to GDP ratio progress.

This has always been very clear, but the fact that it is mentioned in a World Bank report shows that after two years of expenditure management, it is very important to shift our focus to accelerated growth rates.

The World Bank goes further to suggest that capital investment may be a good way of doing so, which is what the US, for example, uses to emerge from economic recessions. This stimulus will usually come through the public purse in the form of roads, bridges, etc. One could think of Highway 2000 as having provided much of the stimulus for the economy because without it the economic conditions would have been much worse.

The recent decrease in the primary surplus balance will certainly allow some room for increased government spending, but even that amount will not be sufficient to create the stimulus for accelerated growth by itself, although it will help. In addition, the fact is that the government does not have the money required for the capital investments needed and so we should examine other sources to achieve that growth.

The best way to do that, without causing a strain on the fiscal accounts, require focusing on a few options.

The first is utilising Public-Private Partnerships (PPP). We have seen PPPs in the form of JPS and Sangster International Airport for example. In addition to PPPs in the pure sense, we also need to be looking at privatising some government assets, not just to take the burden off the government but also to make the assets more efficient and increase employment. Examples include Jamaica Telephone Company sold to Cable and Wireless; NCB privatisation; Air Jamaica taken over by Caribbean Airlines; and Sugar companies divested to the Chinese, among others.

These had the advantages of (i) reducing the burden on the fiscal accounts as well as (ii) increasing competition and employment as many have got larger.

In this vein I would also propose the privatisation of bodies like the National Water Commission, and looking at PPPs to manage entities like the Registrar General's Department (RGD).

This approach will have the effect of (i) increasing capital investments; (ii) increasing employment and earnings; and (iii) reducing the fiscal burden, while increasing revenues from assets.

Poverty rate troubling

One troubling statement in the World Bank report is about the poverty level. It states: "Between 1997 and 2007 Jamaica's poverty rate fell from 19.7 to 9.9 per cent, but by 2012 the poverty rate had rebounded to 19.9 per cent".

This is a very worrying figure, as higher poverty rates means that purchasing power is reduced, resulting in lower economic activity. If economic activity is reduced, then it primarily affects SMEs, which are the ones that create the most new jobs. It also means that innovation which comes from the influence of SMEs will be limited. This will result in lower employment and uncompetitiveness eventually.

One of the main foundations for prosperity, therefore, must be to reduce the poverty rate to the lowest possible levels. For this to happen we need perhaps to increase employment. In order to increase employment in the past, the governments increased the number of people employed in the public sector. The only problem is that that is not a sustainable model as we are seeing now.

Therefore, increased employment can only come through increased private sector activity. Increased private sector activity can only come through people making investments with private capital. And capital will only invest where the risk-return is the best it can get, or else it goes to a safer haven.

What this means is creating an environment to facilitate capital moving into investments in Jamaica. In this global village it is easy to move capital from one market to another. This means that policies must be created to attract capital to the country, as is done in Panama where investors' terms under which they invest are protected by law, which allows for predictability and lower risk.

The real foundation for prosperity lies in policies geared at full employment (defined at five per cent or less unemployment). But for full employment to occur it requires capital investments, as the World Bank says.

Since the government does not have the necessary fiscal space, it therefore requires private capital investments through PPPs or private investments. This in turn requires policy action deliberately aimed at inviting capital to invest.

When this occurs (increased capital investment) then we will see increased employment, which will be the road to prosperity.

Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-9260268380796036122015-11-27T06:28:00.001-05:002015-11-27T06:28:53.711-05:00Requirements for sustainable growth

The Planning Institute of Jamaica has reported good news that the economy is estimated to have grown by 1.5 per cent for the July to September 2015 quarter. Of note is that the goods sector has grown 4.4 per cent, with manufacturing up 9.7 per cent and agriculture up 3.3 per cent. At the same time the services sector grew 0.6 per cent, with all services growing with the exception of producers of government services, which declined by 0.2 per cent.
This performance is not unexpected, as the fiscal and legislative adjustments have had a positive impact on the macroeconomic environment, as well as the business environment. Certainly over the past year we have been seeing improved investor and consumer confidence, along with increased investments by large companies.
While we celebrate this return to growth, it is important that we set about ensuring that growth is not only higher, but also sustainable. It will therefore require an understanding of what the challenges are to sustainable growth and what must be done to fix them.
It is important to understand this, as in the past we have seen bouts of growth of around three per cent, only to slip back under one per cent, because of structural issues in the economy. The fact is that the fiscal and legislative reforms being undertaken have gone a far way to break down many of the structural issues. If we are going to have real and sustainable development it will be through deliberate policy actions.
Risk of uneven growth

The risk we run of course is that we will have growth, but that it will not be distributed evenly. In other words, the economy can grow but a significant part of the population cannot see any benefit. This is the situation we see in Haiti, for example, as growth in an economy does not necessarily translate into better income levels generally.
So, even as the economy grows, the gains can be restricted to a certain part of the population. This is a situation that we do not want to see, but we are at risk of seeing. This is because the main risk we face to sustainable economic and social development is the current state of our labour market. This is reflected in the low labour productivity numbers.
This means that even though we may see a decline in unemployment, it will primarily be with low paying jobs and it will be difficult (though not impossible) for the 100,000 jobs projected by the minister of finance to be realised.
If, however, we embark on a programme of training (eg through HEART) and labour market reform, then we can certainly see more than 100,000 jobs being created even before five years. The reason why this intervention is important is that a significant part of the labour market is not adequately trained for the more productive and higher paying jobs, and in many respects our labour market is still dependent on menial jobs.
Labour market reform will of course be necessary to attract even more long-term investors and also to promote labour productivity.
Shifting to SME growth

Secondly, sustainable growth will require a vibrant SME sector, and this means improving the ease of doing business on the ground and not just the legislative framework.
This is why although the Doing Business Report 2016 shows us moving up seven places, the Global Competitiveness report 2015-16 shows a slight decline effectively. What this means is that for us to develop a vibrant SME sector, deliberate policies must be aimed at reducing red tape and also providing a friendly legislative framework and customer service approach to facilitate the business environment.
Much improvement has already been done (and this is why confidence has been improving) but, to be globally competitive, much more needs to be done.
One of the very important things I mention all the time is a predictable environment for doing business. So even though many legislative improvements have been made, business people still have to consider that next year the finance minister could go to Parliament and impose a new tax, which is an additional cost to doing business. Or a bureaucrat could destroy their business by targeting them for audits or causing unnecessary costs from bureaucratic processes without any accountability.
I finally want to mention that sustainable growth is also very much about creating a safe and disciplined environment in which people will want to raise their families. In other words, the most stable environment for a person's family (in particular, children) will be where that business person's money finally comes to rest.
It is important to understand this point, as over the years we have seen where many people have made money through their business in Jamaica and shipped it out to other countries (namely North America), where they send their families to reside for fear of the crime rate or the general lack of discipline in the country.
So my message would be that, while we should celebrate the 1.5 per cent growth rate, we should be mindful that:
(1) if the proper infrastructure was in place we would be talking about growth of maybe three per cent, as the drought alone cost us one per cent of GDP;
(2) it is important to create an environment where we will have sustainable growth and not just acceptable growth for one or two quarters. My own view is that we are on the path to doing this, but we are still at a very delicate stage and any incorrect policy action can reverse these benefits;
(3) we must create a workforce that is equipped with the skills necessary to be more productive, and hence earn more income.
In other words, for sustainable growth to happen, we must reduce our reliance on large-scale projects and FDIs mainly, to instead concentrate on a vibrant SME market and internal investors. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-46722670044041428122015-11-20T04:22:00.001-05:002015-11-20T04:22:04.463-05:00"The law is an ass"

This phrase originated in the Charles Dickens novel, Oliver Twist, when Mr Bumble, the unhappy spouse of a domineering wife, is told in court that "...the law supposes that your wife acts under your direction".
"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is an ass -- an idiot."
On Saturday morning at around 1:00 am I arrived in the Customs Hall at the airport. On reaching the Nothing to Declare line, a customs officer looked at my form and saw that I had declared souvenirs in the amount of US$80. He asked if I had any clothes and I said that I only had the clothes I went away with, at which point he said I should declare them. I didn't think it made sense to declare the clothes I left Jamaica with as they were not acquired abroad.
He insisted that I do so. At that point I refused as it was not practical. He insisted that I was ignorant of the rules.
I still refused to write it down and another officer who was there told me that if I refused to do so then he would send me to the room to check my luggage, even before my luggage went through the x-ray machine. I told him to come and do so, but he ignored me. He did not have the decency to acknowledge. Apparently he wanted me to just stand there and wait.
On Monday I called the Customs Office, and it was verified that the officer was the one who was not aware of the rules. In fairness to the Customs Office they addressed the matter swiftly. I should also point out that every other time I have interacted with customs officers they have always been very pleasant and have never taken that attitude, so it is a matter of two bad eggs giving the department a bad rap.
Even one incident, however, is too much, and what was of greater concern was that the customs officer was trying to intimidate me even though I was telling him the right thing. It is unacceptable for anyone in authority to deal with a citizen of Jamaica, who helps to pay their salary through taxes, in that manner.
This was not a matter of the law being "an ass". Rather it was a case of someone in a position of authority "making up" rules and trying to intimidate a citizen. I shudder to think of how they deal with people who don't have a voice. Accountability demands that those people be removed from front-line duty, and I hope the Customs Office will deal with it in this way.
What this reminds us though, is that the law must be practical and must not be an inhibition to (i) democracy, (ii) market efficiency, or (iii) personal privacy. The law also must not be discriminatory to any group. And the persons charged with enforcing the law should do so fairly and with sensitivity for the rights of the citizen.
This seems to be one of the challenges we have had with the application of laws in Jamaica, where those given authority have sought to use it to abuse the rights of our citizens. Apart from this customs incident, members of the police force have also been known to use their authority to abuse the rights of Jamaicans. We also have the situation where procurement rules may be resulting in more costs to Jamaicans, rather than reducing them -- as in my view the bureaucracy caused by these rules in fact may end up facilitating the same corruption they are trying to prevent.
Law vs its application
So the law, and its application, must also play the important role of facilitating market development and competitiveness,. But also very importantly, it must make everyone feel safe and that they have the same opportunities.
So it is not only about what laws are on the books. Their application is even more important.
A similar situation has to do with what is recognised by the Global Competitiveness Report (GCR) 2015-16, as the most problematic factor for doing business in Jamaica. Inefficient government bureaucracy is seen as causing 16.4 per cent of all the problematic factors in doing business. As a result of the challenges, the GCR actually showed an effective decline for Jamaica in 2014-15 over 2013-14. Jamaica ranked 86 for both reports, but the number of countries included this year was 140 versus 144 the year before.
Contrast this with the Doing Business Report (DBR) 2016, which shows that Jamaica moved up 7 places from 71 to 64 of 189.
The reason for the difference in the reports is that while the DBR focuses on the legislative and policy framework, the GCR looks at the implementation of the laws and policies, or how it is felt on the ground. The challenge we have, therefore, is not that the policy makers (politicians) have not been putting the framework in place -- but that the operatives, at the institutional level, are not implementing the framework in a way that impacts doing business properly.
So while it is clear that we have been driving the legislative and policy framework in a positive direction, the main challenge we have is how to ensure that the implementation is also done in a way that positively impacts the social and economic components.
This is why public sector transformation is critical to moving the needle on our development. The fact is that unless we have a structure that will allow us to efficiently implement laws and policy, then "the law will be nothing but an ass".
So for me, public sector transformation is not primarily about saving money, but rather delivering efficiency. In this regard we must ensure that those in authority do not have the ability to abuse any citizen or make up rules as they go along, and there should be accountability when things go wrong. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-17207356336150418222015-11-13T05:59:00.001-05:002015-11-13T05:59:13.014-05:00Accountability's importance to development

The recent health sector saga has brought to the fore the real need for accountability in Jamaica. The fact is that this is not the first incident to highlight this deficiency, but another one that has been highlighted because of the sensitivity of the health sector and the election atmosphere.
What this incident has shown is that Jamaicans are demanding more and more accountability from our leaders, not only at the political level, but also those entrusted with the management of public assets. This is a good thing, as accountability is a very important ingredient for development, as without it there is usually an erosion of confidence and credibility in institutions and system.
It is no surprise, therefore, that there is little trust in our public institutions in Jamaica. It is because of the lack of accountability over the decades (as far as I can remember) that there is very little trust in politicians and public institutions like the police. As a result, there is constant suspicion of corruption and a heightened appetite for "scandal" news.
In other words, if there was a perception that people were held to account when things go wrong, then trust would be higher and not everything would be seen as corruption. My own experience, based on my public sector involvement, is that much of what people call corruption results from bureaucratic systems.
It is also because of the lack of systems for accountability that we have created very bureaucratic processes, such as procurement guidelines which take discretion and innovation out of the public sector, and which undermine the potential of many public sector workers. This is because our failure over the years to hold people to account has led us to introduce rules to make up for that accountability, but end up costing us more in the long run.
It is also because of this lack of accountability systems why we end up salivating each time a new so-called "scandal" breaks and calls for blood; because we finally get someone to account for the lack of accountability in all the past mishaps that we were not able to hold someone to account for. So we crucify the individuals in a very personal manner most times, with the objective of destroying them in the name of accountability.
The fact, however, is that when one exists in a culture of accountability, the focus is not on the person, but rather on the issue at hand. Accountability does not mean "crucifying" the person responsible, but rather holding the person (and the person holding themselves) to account for the execution of the function. So in a working accountable environment, it is seen as learning and a way to improve the person who might have made a mistake.
I remember reading an article when I was around 18, where a young manager in a very successful company in the US made a mistake that cost the company a substantial amount of money. When he went to the CEO and handed him his resignation, the CEO gave it back to him and said "Why would I fire you when I have paid so much for you learning a lesson, and then hire someone else who may make the same mistake?" In this example, the CEO realised that the young manager had taken accountability and was willing to learn from the mistake.
The problem we have in Jamaica is that no one wants to admit that they made a mistake so the natural reaction is to cover it up and not hold yourself or others accountable. So something as simple as saying to your stakeholders that I am sorry and made a mistake, is one of the problems we have. So, in the end, the problem stays like a sore that deteriorates without medical attention, and eventually threatens the whole.
Health sector saga

This is the problem with the health sector saga. The fact is that when Dr Dawes raised concerns, Minister Ferguson did the right thing and called for an audit. What went wrong, however, is that when the audit came back no one wanted to take accountability for it. So not being transparent and holding the operational people to account (which does not mean firing them as indicated above) resulted in the situation worsening and lives being lost. Lack of accountability creates a situation where credibility is not only lost in the system -- but also the people who manage it.
It is when that credibility is lost (because people have failed to hold themselves to account) that whether or not they can remain in the job comes into question. This would of course be the position the Prime Minister would have faced when she made the decision to remove the minister, and asked someone else to restore the credibility of the system. That was the right thing to do. The question that Minister Dalley must now ask is if the credibility of the system can be maintained if those who failed to hold themselves to account remain involved.
This does not only apply to health. We have also seen it in the police force, where the previous commissioner and INDECOM made accountability more prominent and we then started to see greater trust from the public.
What is certain is that a lack of accountability systems will stymie development, as companies or countries cannot move forward without trust in institutions and governance. And trust is not possible without accountability.
What is also obvious to me is that if people had held themselves to account earlier in this health situation, and said what went wrong and what was to be done to fix the system and restore credibility the loud calls for firings and resignations may not have happened. What is clear is that it is the lack of holding ourselves responsible that cause problems to escalate, and not the event itself.
So my plea to those charged with governance of our public sector is to be as transparent as possible. Share challenges with Jamaicans, as we were able to go through some significant economic transformation and we understand. And please take responsibility for when things go wrong and act. This is what Dr Phillips has done with the economic reform programme, through avenues like EPOC and his own utterances. Is it any coincidence then that the reform programme has been seen as successful? Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-85114466015378743312015-11-06T09:06:00.001-05:002015-11-06T09:06:38.352-05:00Realising the objectives of governance?

Recently I did a presentation to the Institute of Chartered Accountants of Jamaica (ICAJ) about whether the success of the economic programme would make Jamaica the place of choice to live. I posed this question: "If you were guaranteed 100% return per annum on your capital invested in Syria, would you move your family there?"
The answer to that question was obviously no, which is what you would expect from any rational person who cares about their children in particular.
This shows us that choosing a place to live does not depend solely on financial returns, but rather on safety concerns and the general surroundings in which you live. As an example, even in a country where you have very little crime, things like racial, religious, or gender biases are very important. And in Jamaica's case, one thing we have that many other countries envy is our record of press freedom.
Around the same time, I was having another conversation in which I was told of someone who did business in Jamaica for many years, but decided to uproot himself and his family to go and live in North America because he felt safe when his children jumped on their bicycles and rode down to the park to play with their friends.
These two instances bring home the important point that the primary objective of governance should be about creating an environment in which people feel safe to live, work, and raise their families. In other words, in alignment with Vision 2030.
So even as we discuss the various achievements under the economic programme, I am reminded that we still have not, as a country, started to discuss the real issues relating to the purpose of governance, in any serious way.
Sure, we speak about the crime rate, health and access to education (or I should say free access), infrastructure, and employment opportunities. The problem isn't that we do not discuss the issues, but the context within which we do so. When we discuss these issues we do so from the point of view of how relevant it is to securing a vote. And this has been consistent from as far back as I can remember, not only from the politicians.
Context is of course important because it guides the way the conversation and action are developed.
I have given this a lot of thought recently, and the truth is that if we are to achieve Vision 2030, it seems to me that the whole purpose of governance must focus on creating an environment to make the average citizen see Jamaica as the place of choice to live, work, do business, and raise families.
If we were to do this, then I think everything else would fall into place -- because the focus would be on creating opportunities and an environment for individuals and families to see Jamaica as their first choice of home.
So we would not just be focused on the high murder rate, but rather we would be focused on the outcome of creating positive values within the schools, discipline on our roads, eliminating noise and waste pollution, and rehabilitation at our prisons. But our focus on crime though, is more a reaction to the outcry about murders. The result is that the solutions we propose are: tougher punishment for criminals, neglect of our prisons because we see inmates as criminals rather than citizens in need of rehabilitation, neglect of the Noise Abatement Act, and solutions to detect weapons in schools rather than change behaviour.
In other words, because our objectives of governance relate more to satisfying and minimising the cries from society, we become reactive to issues.
Similarly, another issue is the matter of the abuse of our children. The abuse we see now has been around for a long time, and every now and again it becomes a topical issue and there are a lot of reactive comments and action. But if we really had the issue on our radar to improve the lives of our children, then we would be focused on ensuring that the laws relating to underage drinking and gambling are enforced, we would ensure that there is a good school bus system in place so that children are not at risk on the roads, and we would ensure that the justice system catches sexual predators swiftly.
What these examples show us is that firstly, governance should be primarily about improving the lives of people rather than just economics, if we intend Jamaica to be the place of choice to live and raise families.
Secondly, it also tells me that maybe one of the reasons that we have been chasing our tails about development in Jamaica since independence at least -- is we have never really defined what governance should be about. To some it is holding state power and to others it may be 'what can I get from it?' But there is not enough of a critical mass that wants governance to focus on improving the lives and opportunities for the majority of Jamaicans. Is it any wonder then, that the US has been at the top of global development for a very long time, when its Constitution seeks first and foremost to protect and advance the rights of its citizens? Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-34233226438687058762015-10-25T10:09:00.001-05:002015-10-25T10:09:45.229-05:00If Jamaicans are to excel...

One of the things we often forget is that development of a company or a country is primarily for the purpose of advancing the lives of people, and not just measuring numerical indicators. Although companies are developed primarily to improve their returns, they should ultimately have a positive effect on the lives of shareholders. Similarly, countries should be developed to improve the lives of their citizens.
This, I believe, explains the failure of many managers and governments, in that they tend to forget that their customers are people and not financial statements or fiscal accounts, which are merely ways of measuring development, but not the purpose of development.
So while the primary objective of a manager is to meet corporate objectives, this can only be done successfully if employees are productive, and employees can only be productive if they are happy with their environment. Further, if one is successfully providing financial returns but there is no return to shareholders through dividends or capital appreciation, then the share price will suffer.
Similarly, if a government institutes policies that are geared towards meeting numerical targets, but not towards improving the lives of its people, that government will fall out of favour.
I think that this is one of the primary failures that I have seen with many people, at a corporate level, and also fiscal policies over the years in Jamaica. They have failed to keep their eyes on the goal of human development as the ultimate objective of everything they do. This also translates to a societal problem, as over the decades we have developed so many products for profit only and have forgotten about the people in the middle. This is why today many of the foods and practices we have become accustomed to create health and other societal issues.
Excelling overseas

This lack of focus on the ultimate beneficiary of policy causes us to develop policies and systems that focus on financial returns, which ultimately hurt the progress of the people. This is why many Jamaicans, for example, go overseas and excel, when they find it difficult to do so in Jamaica. It is not because they suddenly develop new skills when they migrate, but rather the environment they are placed in allows them to exploit their full potential.
So when we talk about the need for private sector (and particularly SME) growth, we must understand that businesses will only grow if the operating environment facilitates that growth. This is the main reason why we have not seen greater SME growth in Jamaica, even though we have comparative advantages that we can develop.
One of the things that comes to mind readily is the way we have designed the procurement rules, which happens not only in Jamaica, as I have spoken to many people in the region with the same problem. Unfortunately, the way our rules are designed actually reduces the productivity of public sector workers significantly and creates costs greater than those we are trying to avoid, both directly and also in terms of social costs. The objective of the rules is supposedly to eliminate corruption and improve value, but because the rules were designed without the ultimate objective of efficiency and productivity in mind, they have actually had the opposite effect of costing more. Of course, the ultimate effect is negative on taxpayers and citizens generally in terms of the cost of living.
Another failing that comes to mind is the way we design policies, with a focus more on fiscal revenues, rather than focusing on creating an environment to make the bureaucracy and tax environment better for businesses and citizens. It is because of this focus why -- over the many years that I have been following the budget -- we have always been increasing taxes, even though over that same period the cost of living has been increasing while GDP growth and productivity have been lagging.
I believe that when we implement public sector transformation, the focus should be not simply on cutting expenditure, but on creating a more efficient public sector. In other words, the success of transformation should not be just meeting the wage target as a percentage of GDP, but rather on improving the service delivered to the public.
Why, you may ask, is it so important to focus on the human element? Simply because in today's world competitiveness is a direct result of innovation conceived in the human mind. Sadly, businesses and people spend much of their time trying to resolve bureaucracy issues or interacting with the government bureaucracy and so have less time than their competitors to spend on innovation. This explains why under the Global Competitiveness Report we are unable to transition to an Innovation Driven economy, which is when real value is added.
Of course, this means ensuring that institutions such as the police force and the court system respect human rights and are efficient.
So if we want to transform our economy it means we must focus on improving the lives of our people, and finally get the news that the world no longer exists in the industrial era where capital and land created competitive advantages. We now live in the information era where people create the competitive edge, and so if we do not create an environment where our people can develop better than in other societies, then we will forever be laggards.
Caricom dilemma

Each time I travel within this region, I realise why Caricom will never achieve the purpose intended. This is travel. It is much easier to travel to North America, or in some cases to Europe, than it is to travel within the region. Not to mention the fact that it is more expensive to travel within Caricom than to North America in some instances. As if that is not enough, it takes much longer for Caricom citizens to be processed through immigration than visitors from outside CARICOM, because we allocate fewer immigration counters to Caricom citizens, resulting in longer lines.
The fact is that unless we can better accommodate the movement of people and goods within Caricom, then it will continue to be primarily of academic rather than practical application. Dennis Chunghttps://firstname.lastname@example.com:blogger.com,1999:blog-38301014.post-50392737546764924912015-10-17T03:34:00.001-05:002015-10-17T03:34:22.523-05:00Capacity restrictions to growth

In my last article, I asked the question why is growth so elusive to Jamaica and identified some of the challenges that restrict our ability to grow. These are not new and have been with us over many years without any real attempt to address the underlying issues.
There has been much rhetoric around the symptoms of the underlying challenges. So we speak about interest rates, exchange rates, inflation rates, unemployment levels, NIR, etc, and many do not understand that these are outcomes of poor policy rather than the cause of poor economic performance.
This is why I believe that a focus on the legislative changes and fiscal discipline is important, because they both encourage behaviour that addresses the underlying problem. Only, however, if they are done correctly. In other words, many times we start with the right objective but implement it in the wrong way.
This is one of the reasons why we have failed to see any consistent growth levels above one per cent. The fact is that irrespective of how many policies we implement, if they are not geared at improving capacity to grow, then despite our best efforts we will hit a growth ceiling.
As an example, this Saturday will be the annual Kingston to Negril charity ride, and many cyclists have been training for it. The training, of course, includes many long rides leading up to the big ride, which are geared towards building your capacity for enduring long rides. So then, irrespective of whether you have the best bicycle and equipment in the world, if you the rider do not have the capacity to do a 158-mile ride, then the best equipment in the world will never help you to complete it.
What the quality of the equipment does is add that competitive edge over someone else who has similar capacity as you do, and makes it easier for you to compete. So I always say to fellow cyclists that I have found the most important upgrade on a bicycle is for the rider to get fit.
Similarly, Jamaica has seen massive amounts of FDI and billions spent on projects such as SME development. Irrespective of this, however, we continue to see growth averaging less than one per cent. So from a return on investment point of view, we have done very poorly. This problem will persist as long as we fail to address the capacity issues, irrespective of who is managing a country or organisation.
I have always found that the most sustainable way to build an organisation is to first address the issues that restricts its capacity; whether this be a human resource issue, infrastructure issue (such as IT), or the business model needs tweaking. Unless this is addressed, then the organisation, just like the country, will find its growth will hit a ceiling and not be able to move to the next level.
This, I think, is what has happened to Jamaica. For too long we have been trying to grow the economy without addressing the capacity issues,which has restricted our growth to an average of less than one per cent.
So, as an example, we currently have a capacity restriction caused by our poor water infrastructure. This may not have been a capacity issue a few years ago because the rainfall patterns were more predictable. But with the effects of climate change and the increase in residential communities, our water infrastructure has now become a capacity constraint.
Similarly, inefficient bureaucracy, crime and indiscipline, uncompetitive tax rates and corruption have been identified by the Global Competitiveness Report as the four top constraining factors to competitiveness and growth. In other words, unless we address these recurring issues, we will never be able to see the growth levels that we need to drive the economy forward.
One item that was a greater constraint on capacity a few years ago, compared to today, is energy cost. It has somewhat lessened, but still remains a problem, primarily because the pump prices are constraining spending in the economy, which are windfalls for other economies. So then, even though oil prices have fallen dramatically, the price from Petrojam have not adjusted accordingly and continues to be a constraint on our capacity to grow the economy and increase disposable income.
The problem, therefore, is that despite our best efforts over the years to achieve high levels of growth, the fact is that our failure to address the factors that constrain the economy has resulted in us hitting a growth ceiling and finding it hard to break through.
What is needed, therefore, is an identification of what the capacity-constraining factors are and deliberate policies to remove these constraints to growth.
Kingston to Negril 2015

As I mentioned above, this Saturday is the annual Kingston to Negril charity bicycle ride, where the proceeds this year will go to the Epilepsy foundation — an organisation I have a special place for.
Last year 150 riders started, and most finished, with many coming from overseas to participate. Included in the ride are people who participate for special reasons, and this year a local cyclist --Mike Johnson -- will be doing the ride in honour of his brother, who recently passed from cancer.
It is a growing sport, and recently Jamaican Marloe Rodman won the Tobago Calssic, following the tradition of greats like Peter Aldridge and David Weller. This is why I can't understand the statement made a few months ago that the only cycle track at the stadium was being destroyed to create more seats in the stadium, without an alternative.
Much respect to all those who line up on Saturday, and the organisers, who both do so for health and charity. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-73234499786717472732015-09-14T08:42:00.001-05:002015-09-14T08:42:49.412-05:00Why has growth been so elusive for Jamaica?

SINCE the early 1970s, Jamaica has suffered from an anaemic growth rate of less than one per cent per annum. This despite many prescriptions and attempts by various governments, and promises by politicians, as to what needs to be done for growth to happen.
Once again we are in the season where many prescriptions will be made, and many discussions will take place on this elusive growth and how to achieve it. Once again there will be many recommendations, from both sides, that government should increase spending in order to boost growth in the economy. Much of this has been done in the past but really to no avail because we have not managed to achieve the elusive growth despite billions of taxpayers' money being spent
One reality that we must start to confront is that sustainable growth cannot be done by the public sector. In the past we have become used to a situation where we expect that government can drive sustainable growth. But that shows a lack of understanding of how to achieve sustainable growth.
Sure, government can put projects in place that can create a stimulus for growth, as most governments will do when a country is in recession -- as espoused by economist Maynard Keynes. But real sustainable growth comes from private sector development, especially when there is vibrant SME activity.
This is a significant philosophical problem we have had and in many respects continue to have. And this has guided policy in the wrong direction. So instead of encouraging competition and SME development, the policies implemented by various governments have caused greater public sector involvement, which effectively kills a competitive environment.
Gridlock
So we have created a bureaucratic structure to involve government in every aspect of business and personal life. And if that is not enough, we have created gridlock in the government processes by implementing a procurement process and culture that assumes that everyone is guilty until proven innocent -- which is in many respects perpetuated by a "gossip" culture.
The result is that businesses, and particularly SMEs, become inefficient. Bureaucracy is one of the major inhibitors to doing business in Jamaica, as reported by the Doing Business report for many years.
Also, because of the welfare politics that we have practised for as long as I can remember, we have also created an unproductive labour force. The result is that labour productivity has consistently declined in Jamaica since the 1970s.
It is this practice by our political system that has in my view resulted in the persistent poverty of our labour force as, instead of teaching people to fish, we continued to give them a fish. The irony is that our ability to give the fish has got less and less -- to the point where the state is not capable of doing so anymore. The result is a significant part of our labour force finds it difficult to fend for themselves in any meaningful way.
So the biggest risk we face to economic growth and development today is the state of our labour force. Even if the economy grows 100 per cent per annum, because many in the labour force are not equipped to be high-value producers and earners, they will not benefit.
Organisations like HEART must have a national mandate to retrain our labour force with much needed vocational skills for a successful logistics environment, for example. If we fail to retain the labour force, then we will only have growth without any real social development.
Fiscal policy has never really been engaged in facilitating a more friendly business environment, but rather has been primarily focused on raising revenues to feed the voracious appetite of government welfare programmes. The problem with this is that what we have been doing is transferring, through fiscal policy, productive funds to unproductive uses.
In fact since 2004, of all the tax measures put in place, only one has achieved the revenue targets. This has served to cause inflation because the fiscal policy effectively reduces productivity.
IMF programme
So far this year it seems as if the tax measures will be met. I am hopeful that they will be, and I remain optimistic about the positive changes from the economic and fiscal programme. I say this because the IMF programme we are under represents the first time I am aware that we have sought to tackle the legislative issues that have hampered a competitive business environment. And it is the first time I can remember where we are seeing all the macroeconomic indicators trending in the right direction.
One question though is, why have we not seen the exchange rate stop moving, even though the balance of payments is improving? The reason for that is because even though the legislative and fiscal changes made are positive, the fact is that some fundamental structural issues exist which we have not dealt with as yet. Because of this there is still a strain on productivity issues, as evidenced by falling exports.
The next step therefore must be to make the necessary structural shifts that will complement the legislative and fiscal reform process. That process must continue, but is not sufficient for growth.
In this regard we must address the issue of public sector transformation, not just from the point of view of the wage bill, but more importantly on how we can make bureaucracy more productive and supportive of businesses.
In other words, how do we change the culture?
We must also ensure that fiscal policy is not just geared towards getting more revenue for government, but rather look at the bigger picture -- of facilitating a better business environment to encourage more economic activity and to lead to a lower tax rate with increased revenues.
Until we fix these structural issues, growth will remain elusive to us, and we will forever be surviving with an average of one per cent growth.
This takes collaboration between the private and public sector, which I must say has improved significantly and is moving in the right direction -- but much more needs to be done. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-68515952662953664082015-08-10T11:11:00.001-05:002015-08-10T11:11:30.501-05:00Time for economic independence

ON August 6, 1962, Jamaica gained political independence, and many people watched the Jamaican flag raised while the Union Jack was lowered for the last time. This symbolised Jamaica's new-found political independence and was indeed cause for celebration.
Over the 53 years since then, Jamaica has achieved a great deal and, personally, I have seen much development in infrastructure and other areas (although I wasn't around in 1962).
However, one thing that has eluded us is economic independence.
So although we were given the right to govern ourselves, we have never truly experienced what it is really like to be a prosperous country. And so we have changed from being told how to manage our economic affairs by our colonial masters, to now being told how to do so by the holders of our debt stock.
This is similar to a young man attaining adulthood, but still having to live under his parents' roof and abide by their rules, simply because he wasted his opportunities at school.
In my view, however, today we have a great opportunity to change that path of dependence and move towards economic independence. It has taken us 53 years to get here, but I think the opportunity exists now more than any other that I have been conscious of.
And I say this because the economic and fiscal programme we are pursuing allows us to change our fortunes.
The macroeconomic indicators are all trending in the right direction, and confidence -- both local and international -- is high. In addition, all of this is happening within the context of a recovering global economy and greater opportunities for Jamaica. Importantly, for the first time since 2004 we have recorded a surplus on our current account balance.
On the other hand, we also have the grand opportunity to once again snatch defeat from the jaws of victory, as we have done so many times in our past -- which is why we are involved in our 13th IMF agreement.
Economic stagnation
We are at a point where we can either do the right things to make the economy grow, or we can watch the economy stagnate. Stagnation of course means continuing economic dependence, and I don't think there is anyone who wants that to happen.
In order for us to realise the growth needed to lead us to economic independence, we must do certain things -- especially leading up to a constitutionally due election. That will require focused and strong leadership.
Both the prime minister and the minister of finance have stated their commitment to the economic programme.
The irony is that by making the right choices we can also improve the living conditions of most Jamaicans. I say most, as there are some people who will no longer benefit from being connected -- because the market will distribute rewards instead of connections. This process has already started with the legislative and fiscal reforms we have already undertaken, and so I expect it will continue.
The prime objective of any government must be to improve the lives of all its citizens. In order to do so, however, we must establish the framework for proper governance, finances, and behaviour -- just as is done in an organisation.
Here are a few things that must happen:
First, the government must have policies that facilitate greater opportunity and growth for both individuals and businesses. Fiscal policy, especially, must be geared towards that. In many respects fiscal policy in Jamaica still has the objective of revenue collection rather than economic facilitation. There is too much emphasis on penalising businesses and people for the slightest of errors, with no attempt being made to expedite their progress.
Secondly, if we are to move this country forward (even with the best fiscal policies) we must ensure that there is law, order, and discipline. We cannot continue with the mantra of "Jamaica No Problem", which everyone interprets as "Do whatever you want". So road discipline and respect for the peace and quiet of others must be at the top of the list.
The third thing in support of a disciplined society is that any progressive society must have a properly functioning justice system, from enforcement by the security forces all the way to the court system. Without enforcement, discipline does not work as justice delayed is justice denied.
Drought of action
But before we can see any serious improvement on the fiscal and competitive sides, the culture of the public sector must be transformed to one of efficiency. This is by far the biggest complaint in doing business. This has been on the table for far too long without action, and the irony is that unless we address this, then no meaningful economic development will come any time soon. This must include accountability for inaction, such as that which has led to the effects of another drought.
Leadership is of course going to be critical. Leadership will have to do the right thing for the country irrespective of the opposition or the political expediency. The country is crying out for leadership at all levels, and without it we all will continue to suffer.
All these factors are related and must be done together if we are to achieve real economic independence. Importantly, we must change the way we think and stop looking at short-term objectives while sacrificing the long-term benefits. Only then will we be truly on a path to sustainable development and prosperity.
The question is, are we committed to doing what is necessary and right to improve the long-term prospects of the Jamaican people? This is not just a responsibility of government, but for all of us to think about after 53 years of trying. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-52729496978846570322015-07-24T07:57:00.001-05:002015-07-24T07:57:24.693-05:00What is the correct primary surplus target?

THE primary surplus on the fiscal accounts can be defined as what is left to service debt after the government considers its revenues and expenditure on running the country. So wages, social programmes spending, and general spending on maintaining the country is taken out of revenues, and what is left is called the primary surplus.
This has been the topic of debate over the last week after five US lawmakers wrote to President Obama and asked him to lobby the IMF to ease up on the primary surplus requirement of 7.5 per cent of GDP. The purpose of lowering the target from 7.5 per cent to around 6.5 per cent would have the impact of allowing for more expenditure in the economy, which implies that there would be more money available for programmes, capital expenditure, and wages. The argument, of course, is that it would help to cushion some of the hardships being experienced by many Jamaicans.
Some people have suggested that lowering the primary surplus requirement from 7.5 per cent to around 6.5 per cent of GDP would also result in greater growth. They have pointed out that Jamaica has the largest primary surplus requirement globally, and that even Greece is not required to run such a large primary surplus, which effectively reduces the amount of government spending in the economy.
But what is the truth about the primary surplus and its effect on growth, and consequently reducing the hardship being experienced by many? Will it also allow the Government to provide greater wage increases, as some have argued? And more importantly, what is the best solution to the primary surplus that will ensure sustainable growth and development? The most important consideration is that of sustainable growth and development, and not just to think about short-term impact solely.
Letter to Obama

Last week, I was on a radio programme discussing the primary surplus level and if there was any merit in the letter sent to Obama by the legislators. The point I made is that even if the primary surplus is reduced from 7.5 per cent to zero per cent of GDP, this by itself does not guarantee growth, and, in fact, in the past we have run primary surpluses which are much lower than 7.5 per cent, and with much higher fiscal deficits. After doing that for many years we still have not seen sustainable growth rates, and since the 1960s the only respectable levels of growth we have seen occured from 1986 to 1990.
So between 1972 and 2014 (42 years), we have seen only four years of any sustained growth above say four per cent. And over those four years this was influenced primarily by a debt to GDP that climbed to 212 per cent in 1984. There is therefore no evidence that allowing greater funds for government expenditure will guarantee any sustainable levels of growth, and in fact it has worked against us as we have funded the increased government spending through debt, which has put us where we are today.
Even if we were to reduce the primary surplus requirement today, it would mean that we would have to do so either by:
1) increasing tax revenues (through compliance measures or increased economic activity). In other words, not really decrease the absolute primary surplus amount but increase the fiscal revenues; or
2) increasing debt.
Option 2 is certainly not desirable, as it would mean a reversal of what we have achieved so far and would result in a longer period of adjustment and potential hardships.
Option 1 is therefore the desirable one, and is where we need to focus.
Increasing tax revenue through compliance measures is the preferred option, especially as we see that the Greek problem is significantly caused by a low level of tax compliance; which is why what they are doing now will not work until they address the tax compliance problem. This is something that the TAJ has been working on. But the problem is that the tax policy has been more focused on targeting already compliant taxpayers and asking them to pay more -- not going after those who are not in the tax net. That policy has only served to discourage capital and new investments, which in effect has resulted in low growth levels.
The focus on squeezing more and more out of investors that are already tax-compliant ends up discouraging capital investments and causing growth stagnation.
This makes revenue from increased economic activity difficult. We have seen that every tax package introduced since 2004, with the exception of one, has not achieved the targeted revenues. The reason is simply because policy is geared at increasing revenues from those who already pay taxes, rather than expanding the net and encouraging capital investments. The result is a largely service economy with capital outflows greater than inflows over the last 42 years.
Lack of water hitting GDP

Another example of the lack of accountability that has caused loss of GDP growth is the management of the water situation by the NWC. Everyone knew from last year that the drought would be worse this year, and even with that knowledge the NWC failed to plan to address the situation. The result is that this year the drought may cost us about one per cent of GDP, as it did last year.
Therefore increasing fiscal expenditure by reducing the primary surplus requirement can actually cause us to reverse our gains if we do not change the way we look at policy, how we spend, and accountability.
There is an argument for increasing government expenditure to provide short-term stimulus, and therefore one could argue for a relaxation of the primary surplus target. But this must be done in a controlled environment and with the understanding that sustained growth will only come through increasing productivity and changing the way we look at policy. In fact, changing the attitude to capital (with policy), public sector accountability, and value for money fiscal spending will all have a greater impact on growth, even without changing the primary surplus percentage.
At this time of the programme, however, there is an argument for relaxing the primary surplus percentage as this would provide the short-term stimulus needed to drive economic activity. The impact of this, however, will have less effect than if it had been built in at the start of the programme, as it means pulling activity up from a lower level than it was before. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-35767984388588325112015-06-26T05:04:00.001-05:002015-06-26T05:04:14.272-05:00Productivity at the centre of economic and social success

AFTER twelve previous IMF agreements, Jamaica is once again at a crossroads. We are once again at a place where we are having a debate about how much pain is being inflicted by the agreement, with some saying that we must stay on the path of fiscal reform and others saying we must renegotiate the agreement and allow for more fiscal space for greater expenditure. Allowing for more fiscal space is of course code for a higher fiscal deficit and an increased debt to GDP ratio.
My own view is that we have been here before. In fact, since the 1970s all we have done is to postpone prudent fiscal and economic management, so that we can play the populist game and feed the welfare addiction of our political process. By doing so, we have changed the attitude of the people from one of independence to one of being hooked on welfare through government spending -- thereby creating a political culture where the supporters of the party in power get all the benefits through their party's control of the fiscal resources.
Neo-colonial dependency

In fact, our political and social arrangements have moved us from the hopefulness of independence in 1962, to a culture of dependence on government, and the government's own dependence on foreign governments and agencies. Our irresponsible actions have moved us into a neo-colonial dependency, where our constitution is merely an illusion of independence.
All of this is because we have failed to address the root of our economic and social issues -- the continuing decline in labour productivity since around 1972 (there was a brief period of marginal improvement in the 1980s). As a result we have sought to improve our standard of living by either "begging" (through grants) or borrowing. We have never really paid back our debt but have just transferred our debt from one creditor to the next. By doing so we have created one big Ponzi scheme, where what we have done is rely on geometrically expanding those who will lend us money to pay back those we borrowed from before.
This trend is unsustainable, as we are now finding out, and we have come full circle -- borrowing in the 1970s from multilaterals, then from the capital markets, and now back to the multilaterals. Throughout this whole process we have never controlled our own economic destiny, but have always been marching to the orders of foreign creditors.
Change needed

The question we must now ask ourselves is, do we want to continue this trend -- thereby mortgaging the lives of our children the way we have done with our own lives? If the answer is yes, then we can continue to ignore the issues of productivity and needed behavioural change. If the answer is no, then we must do what is necessary to change our behaviour.
Whether it is your own personal life, a company, or a country, we can only make changes to our financial outturn by changing our behaviour patterns. This is something that as a country we have failed to do, just like many companies and individuals. We cannot change a company's fortune by working diligently at expanding the operations if the business model is no longer viable. And Jamaica's business model needs change.
This is the reasoning behind the fiscal and legislative reforms under the current economic programme, and why I personally an hopeful that it will work this time. Because in the past there has been fiscal and economic reform without legislative reform. This is the first time we are seeking to change economic and social behaviour through legislation such as the Insolvency Act, Tax Harmonisation Act, Fiscal Rule, and other criminal legislation such as DNA and Plea Bargain legislation.
This will ensure that as we apply fiscal reforms to bring about more responsible financial management, we will be ensuring behavioural change for greater competitiveness. If done properly, this will have the effect of increasing productivity for labour and capital, and will result in improving our external accounts, which is at the heart of our problems.
This adjustment is not going to be easy, primarily because we have delayed it for so long and built up a lot of "adjustment pressures". But if not done, then it is gong to cause much greater dislocation in the very near future. But the adjustment is not restricted to labour and capital, as government bureaucracy also needs to make the adjustment in how they think.
I refer specifically to government's addiction to taxes, and its current struggle to change its addiction habit. This is seen in the way taxes are introduced, which focuses on earning fiscal revenue rather than encouraging private sector and economic expansion. So, we have seen, and continue to see, new tax policy that is devoid of the link between economic activity and fiscal expansion, rather than focusing on fiscal expansion at the expense of economic activity. This type of behaviour will result in continuing the downward spiral and cause the sacrifices already made to be in vain.
We must remember that we live in a global village and capital has no obligation to one territory.
So while we ask labour and capital to change their behaviour, the change must also take place in policy. To the credit of the policy makers though, I have found that this attitude is changing and they have opened the door of dialogue to a greater degree than I have ever seen before, and this dialogue is taking place not just at the level of the policy makers but the executors also.
This needed change, however, is not only at the policy level but in the way we socially interact. So things like indiscipline on the roads and persistent night noise have deleterious effects on productivity. As an example, if we had proper order and control of crime, people would find it more palatable to use public transportation, or ride bicycles, which would cut into the more than US$2 billion spent on oil each year, and increase the spending power of labour to improve their standard of living. Or if we were to dispose of our garbage properly it would improve our health environment and reduce the money we spend on health care.
This is a conversation that we need to continue, as anything we do that does not include increasing labour and capital productivity (Total Productivity Factor) will only cause pain without benefit. Dennis Chunghttps://email@example.com:blogger.com,1999:blog-38301014.post-71427510587025052992015-06-05T08:30:00.001-05:002015-06-05T08:30:23.082-05:00Public sector wages — what are the real options?

ONCE again the public sector wage negotiation is the main topic of the day. This was also the case in 2004, when the first round of wage freezes was agreed. Then, just like today, I didn't see a public sector wage freeze as a long-term solution. In fact, the 2004 agreement never saw it as that either, as it proposed actions that included retraining public sector workers and preparing them to transition, voluntarily, to start their own businesses or seek employment in the private sector.
So what we are seeing today is not a new problem. It is just worse because we have delayed solving the underlying problems. And even if we were to get another wage freeze, or lay off workers, it still would not solve the underlying problem by itself and we would be back in this same situation within another two to three years.
What is really needed is proper public sector reform that results in performance related-pay measurements and labour market reform. It is our failure to do this, and just talk, that has led to where we are today. And if we do not carry out this reform effectively, we will still find ourselves back where we are today, because at the heart of the problem is the matter of productivity.
The approach to public sector reform in 2010 (through the centralised PSTU at the OPM) was never going to work. When I indicated that in 2010 I was told that I didn't know what I was talking about. The approach today is somewhat better, based on what I have seen, but the centralised approach is still too bureaucratic and will not have any short-term impact. The best solution is to decentralise the reform process. But that is for another article, as I want to look at the immediate options to resolve the current impasse.
Emotional responses

The response from many on the public sector wage dispute is emotional. I have heard many people say that the government should pay the public sector workers significant increases, or more than 25 per cent. When I ask them to put forward their immediate solution, bearing in mind that new taxes won't work and debt is not possible, they speak to medium-term solutions such as tax reform, public sector reform, and reducing wasteful expenditure.
One person, when pressed, even went as far as to say that people over 55 should be forced to retire and the other workers should be given an increase of at least 25 per cent. In other words, lay off other workers as long as it does not affect me. But there's no mention of keeping the most productive, or of paying based on performance.
What these responses show is that they are not supported by any thought-out solutions. One man I heard on the radio, when asked for a solution, said that the government can raise taxes -- which betrays a lack of understanding of how the economy works. That solution would cause even further hardship, not only on businesses, and SMEs in particular, but for the same public sector workers.
Let us be clear that I empathise with public sector workers, and in particular the police, nurses, and teachers. Even though these groups have demonstrated their willingness to go the extra mile, in general, the fact is that both productive and non-productive people have been grouped together, in relation to the negotiations. The result is that you apply the same compensation amounts to people with varying degrees of productivity, and the productivity level as a whole will fall.
So, because of our failure to properly address public sector reform, we are in the same place, or worse, than we were 11 years ago when the first wage freeze agreement was inked. Resolving this, however, is a longer-term solution and the chickens have now come home to roost.
The fact is that the options available to the government today are very limited. There are only two options (i) accept the government's offer, within its ability to pay, or (ii) as Minister Dalley said, if the demands are met then it means 10,000 to 15,000 jobs will be lost. Or else there will be an inability to pay.
The private sector seems to be profitable today, and the truth is that they are improving, but they are still far from where they were pre-recession. This success, however, came after much pain in the private sector, as they suffered from two debt swaps and also lost a significant amount of jobs, when the unemployment rate went close to 20 per cent. Many businesses also closed, and even today many are struggling. Every week, I get many requests from people seeking employment -- even for a job way below their training.
So what has happened in the private sector is that the market has adjusted, and as a result organisations are becoming more profitable. This is just as it happened in the US market, where job losses and business closures were rampant, and after a few years of pain the market is recovering.
This adjustment never happened in the public sector, however, resulting in the difficult situation we are in today. The fact, however, is that sooner or later the market will demand that the adjustment either be made, through public sector reform, or the suffering will continue for a much longer time. And it would have happened earlier had we not gone out and borrowed money to cover up for our inefficiencies.
Just as in 2009 myself and Ralston Hyman said (i) the debt needed to be restructured and (ii) the government would have to turn to the IMF, and we were told that we didn't know what we were saying. Approximately three months later, however, we signed an agreement with the IMF and the debt was restructured. The point being that the way to deal with the fiscal problem must be looked at practically, and not from an emotive position.
So while public sector and policy reform, is necessary for a long-term sustainable solution, the fact is that an immediate solution is necessary. In my view, the best solution for the country now, is for the government's offer to be accepted. I don't subscribe to the selfish view that we should retire the older people so that the younger ones can benefit. I know that people are having a difficult time, but trust me when I say that any significant increase, without the accompanying productivity increase, will only lead to increases in inflation and the depreciation of the exchange rate, and make it even much worse for everyone.
However, while accepting the offer, it is important for both parties to sit down and arrive at a win-win long-term solution for all. This will of course require an improvement of the trust factor between both parties, as the lack of trust for me is the most divisive factor in these negotiations. Dennis Chunghttps://firstname.lastname@example.com