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Make the business environment friendlier
PSOJ president bats for micro-, small- and medium-sized businesses
By Julian Richardson
Sunday, February 25, 2007
Private Sector Organisation of Jamaica (PSOJ) President Christopher Zacca has identified the need for a more business-friendly environment and the alleviation of the high level of crime and corruption as two of the major challenges currently facing Jamaica.
Zacca, addressing members of the Rotary Club of Kingston at the Jamaica Pegasus on Thursday, said that reduced bureaucracy, cost containment, a more efficient public service and a simpler taxation system that will encourage greater compliance are some of the initiatives needed to facilitate a more business-friendly environment and enhance Jamaica's economic growth rate.
Zacca. if the business environment does not become more facilitative, then businesses will continue to operate in the shadows and perform at less than optimal scales in efforts to avoid having any interaction with the government. (Photo: Joseph Wellington)
"We all know that for many years, our country has been unable to sustain growth rates of any consequence. We have a fiscal deficit of billions of dollars and extremely high levels of both domestic and external debt," said Zacca. "In my opinion, the lack of business-friendly environment has led to a chronic lack of growth. In fact, I believe that it is this lack of growth which is the primary contributor to the problems we face as a nation."
Indeed, Jamaica has one of the lowest growth rates in the region and has averaged a dismal annual GDP growth of 0.4 per cent since its independence in 1962. Zacca, in analysing the country's economic retardation caused by this lack of growth, pointed out that if Jamaica, for example, had grown at the same rate as neighbours Costa Rica or Barbados since then, Jamaica's GDP in 2005, rather than being J$600 billion, would have been J$2 trillion or J$900 billion respectively. This would result in the government earning much more revenues through taxation, he said.
"The Matalon tax report, indicates that government collects approximately 25 per cent of GDP in taxes and fees. Continuing this scenario (using Costa Rica's growth rate), the government of Jamaica would have had an extra 350 billion dollars to spend in 2005," noted Zacca. "Similarly, if we compare ourselves to Barbados. our government would have had an additional $80 billion to spend.
"These numbers are startling and point to the need for an explosion of growth and development in our nation," said the PSOJ president.
Zacca added that the lack of economic growth is even more of a concern as all data indicate that lack of foreign investment is not the reason for the country's economic stagnation. One such statistic which supports Zacca's assessment is the fact that with US$601 million worth of foreign direct investment (FDI) in 2005, Jamaica was ranked 21 out of 120 world economies in world FDI inflows, according to the 2006 United Nations World Investment Report.
"Gross Fixed Investment as a percentage of GDP is projected to be approximately 31 per cent for 2006," notes Zacca. "Such investments rank us among the East Asian Tigers - South Korea, Taiwan, Hong Kong and Singapore. In contrast, for 2006, these countries have generated average economic growth in excess of four per cent."
Zacca, noting that Jamaica's Debt to GDP ratio of 132 per cent as of March 2006 is one of the highest in the world, said that this is a great hindrance to the nation's production capacity as the government spends a huge chunk of its tax revenue on debt financing. He highlighted that for the fiscal year 2006/2007 to December, Capital Expenditure programmes have been cut by 21 per cent of the budgeted level.
"Despite significant strides by the government to reduce the debt and balance the budget, the debt remains at an alarmingly high level," said Zacca. "Consequently, a large proportion of tax revenue has been allocated to debt financing rather than to basic infrastructure developments and projects geared at nation building and the increasing of real productive capacity."
The PSOJ president said that in order for Jamaica to achieve a desirable level of growth, it is critical for all parties to come up with a cohesive plan to facilitate the said business-friendly environment, particularly for micro-, small- and medium-sized businesses. Zacca's analysis is rooted in the fact that it is very difficult for small and medium-sized businesses to operate in Jamaica.
"To grow, a country needs to tap into its excess capacity. But where is this excess capacity? I suggest that the greater part lays in the micro-, small- and medium-sized businesses and willing but restricted entrepreneurs, living both in Jamaica and abroad," said Zacca. "The large companies that are already approaching their maximum efficiency scale can grow, but by only so much more."
"If the business environment does not become more facilitative, then businesses will continue to operate in the shadows and perform at less than optimal scales in efforts to avoid having any interaction with the government" added Zacca. "The approach should not be to go searching for them to force them to pay their taxes, but to lure them out with appropriate incentives that business-minded people will react to. It is for this reason why the PSOJ has made one of its major goals for this year, the improvement of the Jamaican business environment."
In emphasising the challenge of crime and violence in Jamaica, Zacca said that though there have been many achievements in fighting the crisis, crime continues to be a major problem for Jamaicans.
"Jamaica has been suffering the effects of crime and violence for far too many years now and our citizens continue to be severely affected by this scourge in our society," said Zacca. "The PSOJ intends to continue the fight to take back Jamaica from the criminal elements, but each of us must continue to support the work of those members of the security forces who conduct themselves professionally."
Added Zacca: "Most of all, the PSOJ feels that ensuring the rules of law must be the top priority for our nation at this time and we intend to lobby extensively for this at this time."
However, in addition to identifying many PSOJ initiatives to fight crime, such as the work of past president Peter Moses on the National Report of Crime, the Police Courtesy Week activities, the Phone-in-Programme and Crime Stop, Zacca also lauded the police force and the government for their efforts.
"It is evident that there have been some achievements in the police force in recent times.greater attention is now being paid to major hotspots with concurrent reduction in crime and violence in those areas," said Zacca. "In addition, a number of legislative acts designed to support the police were amended and/or passed in the House of Representatives last year. These included amendments to the Evidence Act, the Firearms Act and Anti-Extortion provisions. The Plea Bargaining Act and the Proceeds of Crime Act were also passed."
PSOJ president bats for micro-, small- and medium-sized businesses
By Julian Richardson
Sunday, February 25, 2007
Private Sector Organisation of Jamaica (PSOJ) President Christopher Zacca has identified the need for a more business-friendly environment and the alleviation of the high level of crime and corruption as two of the major challenges currently facing Jamaica.
Zacca, addressing members of the Rotary Club of Kingston at the Jamaica Pegasus on Thursday, said that reduced bureaucracy, cost containment, a more efficient public service and a simpler taxation system that will encourage greater compliance are some of the initiatives needed to facilitate a more business-friendly environment and enhance Jamaica's economic growth rate.
Zacca. if the business environment does not become more facilitative, then businesses will continue to operate in the shadows and perform at less than optimal scales in efforts to avoid having any interaction with the government. (Photo: Joseph Wellington)
"We all know that for many years, our country has been unable to sustain growth rates of any consequence. We have a fiscal deficit of billions of dollars and extremely high levels of both domestic and external debt," said Zacca. "In my opinion, the lack of business-friendly environment has led to a chronic lack of growth. In fact, I believe that it is this lack of growth which is the primary contributor to the problems we face as a nation."
Indeed, Jamaica has one of the lowest growth rates in the region and has averaged a dismal annual GDP growth of 0.4 per cent since its independence in 1962. Zacca, in analysing the country's economic retardation caused by this lack of growth, pointed out that if Jamaica, for example, had grown at the same rate as neighbours Costa Rica or Barbados since then, Jamaica's GDP in 2005, rather than being J$600 billion, would have been J$2 trillion or J$900 billion respectively. This would result in the government earning much more revenues through taxation, he said.
"The Matalon tax report, indicates that government collects approximately 25 per cent of GDP in taxes and fees. Continuing this scenario (using Costa Rica's growth rate), the government of Jamaica would have had an extra 350 billion dollars to spend in 2005," noted Zacca. "Similarly, if we compare ourselves to Barbados. our government would have had an additional $80 billion to spend.
"These numbers are startling and point to the need for an explosion of growth and development in our nation," said the PSOJ president.
Zacca added that the lack of economic growth is even more of a concern as all data indicate that lack of foreign investment is not the reason for the country's economic stagnation. One such statistic which supports Zacca's assessment is the fact that with US$601 million worth of foreign direct investment (FDI) in 2005, Jamaica was ranked 21 out of 120 world economies in world FDI inflows, according to the 2006 United Nations World Investment Report.
"Gross Fixed Investment as a percentage of GDP is projected to be approximately 31 per cent for 2006," notes Zacca. "Such investments rank us among the East Asian Tigers - South Korea, Taiwan, Hong Kong and Singapore. In contrast, for 2006, these countries have generated average economic growth in excess of four per cent."
Zacca, noting that Jamaica's Debt to GDP ratio of 132 per cent as of March 2006 is one of the highest in the world, said that this is a great hindrance to the nation's production capacity as the government spends a huge chunk of its tax revenue on debt financing. He highlighted that for the fiscal year 2006/2007 to December, Capital Expenditure programmes have been cut by 21 per cent of the budgeted level.
"Despite significant strides by the government to reduce the debt and balance the budget, the debt remains at an alarmingly high level," said Zacca. "Consequently, a large proportion of tax revenue has been allocated to debt financing rather than to basic infrastructure developments and projects geared at nation building and the increasing of real productive capacity."
The PSOJ president said that in order for Jamaica to achieve a desirable level of growth, it is critical for all parties to come up with a cohesive plan to facilitate the said business-friendly environment, particularly for micro-, small- and medium-sized businesses. Zacca's analysis is rooted in the fact that it is very difficult for small and medium-sized businesses to operate in Jamaica.
"To grow, a country needs to tap into its excess capacity. But where is this excess capacity? I suggest that the greater part lays in the micro-, small- and medium-sized businesses and willing but restricted entrepreneurs, living both in Jamaica and abroad," said Zacca. "The large companies that are already approaching their maximum efficiency scale can grow, but by only so much more."
"If the business environment does not become more facilitative, then businesses will continue to operate in the shadows and perform at less than optimal scales in efforts to avoid having any interaction with the government" added Zacca. "The approach should not be to go searching for them to force them to pay their taxes, but to lure them out with appropriate incentives that business-minded people will react to. It is for this reason why the PSOJ has made one of its major goals for this year, the improvement of the Jamaican business environment."
In emphasising the challenge of crime and violence in Jamaica, Zacca said that though there have been many achievements in fighting the crisis, crime continues to be a major problem for Jamaicans.
"Jamaica has been suffering the effects of crime and violence for far too many years now and our citizens continue to be severely affected by this scourge in our society," said Zacca. "The PSOJ intends to continue the fight to take back Jamaica from the criminal elements, but each of us must continue to support the work of those members of the security forces who conduct themselves professionally."
Added Zacca: "Most of all, the PSOJ feels that ensuring the rules of law must be the top priority for our nation at this time and we intend to lobby extensively for this at this time."
However, in addition to identifying many PSOJ initiatives to fight crime, such as the work of past president Peter Moses on the National Report of Crime, the Police Courtesy Week activities, the Phone-in-Programme and Crime Stop, Zacca also lauded the police force and the government for their efforts.
"It is evident that there have been some achievements in the police force in recent times.greater attention is now being paid to major hotspots with concurrent reduction in crime and violence in those areas," said Zacca. "In addition, a number of legislative acts designed to support the police were amended and/or passed in the House of Representatives last year. These included amendments to the Evidence Act, the Firearms Act and Anti-Extortion provisions. The Plea Bargaining Act and the Proceeds of Crime Act were also passed."