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The fall of home-grown entrepreneurs
The fall of home-grown entrepreneurs
By Ralston Hyman
In some respects, Friday’s announcement that Jamaican/Canadian billionaire Michael Lee-Chin had acquired majority shareholdings in the Neville Blythe-controlled UGI Group of Companies and the CVM Communications Group betrayed the late prime minister, Michael Manley’s assertion that the liberalisation of the economy would unleash the entrepreneurial energy of the masses.
Blythe was seen as among the few surviving black entrepreneurs in corporate Jamaica since the process commenced in 1991. His removal as a major player leaves only Ryland Campbell at Capital and Credit as the only home-grown boy standing in the corporate halls.
Banking
The financial sector’s meltdown of the mid-1990s accounted for the demise of Don Crawford’s Century National Financial Group; Delroy Lindsay’s Workers Bank Group and Paul Chen Young’s Eagle Financial Network, which were all wiped out at a cost of almost $30 billion to the treasury.
This, after finance and planning minister, Dr. Omar Davies, jacked-up interest rates to astronomical levels in order to contain inflation, which zipped to the dizzying heights of 91 per cent in 1991 and 40 per cent in 1992.
The high interest rate regime had a negative impact on these institutions which experienced liquidity problems after they pumped short-term deposits into long-term assets such as, the construction of massive corporate edifices, apartments and hotels. They were forced to accept overdraft facilities at rates above 90 per cent from the central bank in order to be able to provide funds to customers who wanted to withdraw their deposits for one reason or another.
The tight liquidity situation eventually led to a run on these banks and when the central bank finally intervened in 1996, 1997 and 1998 respectively taxpayers were left holding the bag to the tune of almost $30 billion. The bill for the Century National Group was over $6 billion, Workers Bank approximately $7 billion and Eagle $14 billion.
Saved
A similar situation occurred at the National Commercial Bank (NCB), under the management of Dunbar McFarlane, Jeff Cobham and Theo Golding. The bank invested heavily in non-banking businesses such as agriculture and tourism and racked-up some $13 billion in bad or non-performing loans.
This amounted to approximately 50 per cent of its total loan portfolio which stood at $26 billion at the time. The government finally intervened and cleaned up the bank’s books with the help of McKinsey & Company Limited and the Financial Sector Adjustment Company (FINSAC) before selling to Michael Lee Chin’s AIC Group for just over $6 billion.
Insurance
Dennis Lalor also lost his Life of Jamaica Group (LoJ) which included Citizens Bank, for similar reasons and these groups were rehabilitated by FINSAC and sold cheaply to the Barbados Mutual and RBTT Group of Trinidad, respectively.
Mutual Life Assurance Company which was the oldest financial entity in the country before it collapsed under the weight of the high interest rate regime and liquidity problems was also sold for a song to the Guardian Financial Holdings Group after it was rehabilitated by Finsac.
Oliver Jones also lost his Island Life Insurance Group for the same reasons — high interest rates and cash-flow problems.
Economic fall-out
The problems in the financial sector were, however, only a mirror of what was happening in the real sectors of the economy. For example, many local manufacturers were wiped out because of the liberalisation of the economy and the consequential galloping inflation and high interest rate regime.
The contribution of the manufacturing sector fell from 21 per cent of Gross Domestic Product (GDP) in 1989 to only about 15 per cent last year, while employment fell from a high of 150,000 to below 100,000.
The country also lost control of the Caribbean Cement Limited (CCC) to the TCL Group to which it was forced to provide a number of concessions, including the contrivance of a monopoly over the importation and distribution of the precious commodity.
This move, which resulted in the exclusion of local companies such as Arc Systems Limited and Mainland International from the market, backfired because of the CCC’s inability to supply adequate levels of quality products to the market.
The agricultural sector also took a beating because of the liberalisation of imports and many farmers have been wiped out. As a result the sector’s contribution to GDP has remained constant at seven per cent, although it still employs 20 per cent of the country’s labour force. The Garment sector, which pulled in approximately US$500 million in 1996, while employing over 30,000 workers, particularly females, was also wiped out because of the high levels of inflation and protracted interest rate regime.
Goodyear Jamaica Limited was also forced to stop manufacturing tyres at its Morant Bay plant, while Gillette Caribbean and Colgate Palmolive were also forced to flee the country because of the high cost of doing business there. These include galloping inflation, high interest rates, security, utility, transportation and managerial costs.
The fall of home-grown entrepreneurs
By Ralston Hyman
In some respects, Friday’s announcement that Jamaican/Canadian billionaire Michael Lee-Chin had acquired majority shareholdings in the Neville Blythe-controlled UGI Group of Companies and the CVM Communications Group betrayed the late prime minister, Michael Manley’s assertion that the liberalisation of the economy would unleash the entrepreneurial energy of the masses.
Blythe was seen as among the few surviving black entrepreneurs in corporate Jamaica since the process commenced in 1991. His removal as a major player leaves only Ryland Campbell at Capital and Credit as the only home-grown boy standing in the corporate halls.
Banking
The financial sector’s meltdown of the mid-1990s accounted for the demise of Don Crawford’s Century National Financial Group; Delroy Lindsay’s Workers Bank Group and Paul Chen Young’s Eagle Financial Network, which were all wiped out at a cost of almost $30 billion to the treasury.
This, after finance and planning minister, Dr. Omar Davies, jacked-up interest rates to astronomical levels in order to contain inflation, which zipped to the dizzying heights of 91 per cent in 1991 and 40 per cent in 1992.
The high interest rate regime had a negative impact on these institutions which experienced liquidity problems after they pumped short-term deposits into long-term assets such as, the construction of massive corporate edifices, apartments and hotels. They were forced to accept overdraft facilities at rates above 90 per cent from the central bank in order to be able to provide funds to customers who wanted to withdraw their deposits for one reason or another.
The tight liquidity situation eventually led to a run on these banks and when the central bank finally intervened in 1996, 1997 and 1998 respectively taxpayers were left holding the bag to the tune of almost $30 billion. The bill for the Century National Group was over $6 billion, Workers Bank approximately $7 billion and Eagle $14 billion.
Saved
A similar situation occurred at the National Commercial Bank (NCB), under the management of Dunbar McFarlane, Jeff Cobham and Theo Golding. The bank invested heavily in non-banking businesses such as agriculture and tourism and racked-up some $13 billion in bad or non-performing loans.
This amounted to approximately 50 per cent of its total loan portfolio which stood at $26 billion at the time. The government finally intervened and cleaned up the bank’s books with the help of McKinsey & Company Limited and the Financial Sector Adjustment Company (FINSAC) before selling to Michael Lee Chin’s AIC Group for just over $6 billion.
Insurance
Dennis Lalor also lost his Life of Jamaica Group (LoJ) which included Citizens Bank, for similar reasons and these groups were rehabilitated by FINSAC and sold cheaply to the Barbados Mutual and RBTT Group of Trinidad, respectively.
Mutual Life Assurance Company which was the oldest financial entity in the country before it collapsed under the weight of the high interest rate regime and liquidity problems was also sold for a song to the Guardian Financial Holdings Group after it was rehabilitated by Finsac.
Oliver Jones also lost his Island Life Insurance Group for the same reasons — high interest rates and cash-flow problems.
Economic fall-out
The problems in the financial sector were, however, only a mirror of what was happening in the real sectors of the economy. For example, many local manufacturers were wiped out because of the liberalisation of the economy and the consequential galloping inflation and high interest rate regime.
The contribution of the manufacturing sector fell from 21 per cent of Gross Domestic Product (GDP) in 1989 to only about 15 per cent last year, while employment fell from a high of 150,000 to below 100,000.
The country also lost control of the Caribbean Cement Limited (CCC) to the TCL Group to which it was forced to provide a number of concessions, including the contrivance of a monopoly over the importation and distribution of the precious commodity.
This move, which resulted in the exclusion of local companies such as Arc Systems Limited and Mainland International from the market, backfired because of the CCC’s inability to supply adequate levels of quality products to the market.
The agricultural sector also took a beating because of the liberalisation of imports and many farmers have been wiped out. As a result the sector’s contribution to GDP has remained constant at seven per cent, although it still employs 20 per cent of the country’s labour force. The Garment sector, which pulled in approximately US$500 million in 1996, while employing over 30,000 workers, particularly females, was also wiped out because of the high levels of inflation and protracted interest rate regime.
Goodyear Jamaica Limited was also forced to stop manufacturing tyres at its Morant Bay plant, while Gillette Caribbean and Colgate Palmolive were also forced to flee the country because of the high cost of doing business there. These include galloping inflation, high interest rates, security, utility, transportation and managerial costs.