Tweet
Gene Leon - Keeping Jamaica Honest
Caribbean Business Report’s personality for 2011
By Al Edwards
NOW that the general election is over and the electioneering bunting and confetti have been consigned to dustbins, Jamaica must now reside in the realms of reality. What is that reality? The country has a debt to GDP ratio of 130 per cent. A fiscal deficit of 6 per cent. Official unemployment of 12.3 per cent. A significant decline of Foreign Direct Investment (FDI) over the last four years. An unacceptable crime problem that sees the country labelled as one of the most notorious murder provinces in the world. An onerous and archaic tax system charcterised by low compliance. It has now become imperative that the number of public sector employees be rationalised, meaning many will be thrown on the scrap heap. Anaemic growth which has seen the country unable to register anywhere near 3 per cent per year consistently for decades. It is indeed a grim prognosis on a country that was once considered the pearl of the Caribbean.
Taking the bitter medicine
Over the course of this year, IMF country representative Gene Leon has been a resolute quartermaster on the good ship Jamaica. He has consistently kept the country and the government honest about its obligations to the Stand-by Arrangement signed at the end of 2009 for US$1.27 billion over a 27-month period.
With that arrangement concluding during a likely general election year, it was always going to be the case that political expediency would be a factor to contend with.
Over the last four years the government has made commendable efforts to dispose of some nonperforming public assets and there remains the Carendon Alumina Production (CAP) where it is understood that an agreement is close to conclusion. However, the country remains bedevilled by its inability to subject itself to prescribed tests since December 2010, meaning in effect that the country is unable to meet its obligations to the IMF.
For too long the country’s position with the IMF had remained ambiguous and opaque. Leading Cabinet members have obfuscated and failed to clarify on the matter. Despite this, Leon has always maintained that the IMF will continue to support Jamaica’s efforts toward macroeconomic reform and sustainable economic growth.
As the months went by, Leon has become more declarative and his observations more pertinent. The way he sees it, the country’s present predicament cannot be attributable to one or two factors. He points to the country’s fiscal distortions, low productivity, the propensity of waivers and incentives, the challenging business environment, and a crime rate that has cost the country between 5 and 7 per cent of GDP.
High crime hinders the economy
Addressing the vexing issue of the country’s high crime rate, Leon, speaking at a Jamaica Exporters’ Association (JEA) awards function at the end of June this year said: “A laser focus on crime reduction would also translate to increase in productivity from redirected resources and benefits from enhanced social integration.” He has consistently proclaimed that crime is a major impediment to growing the economy and a Jamaican administration must seriously pay attention to rectifying this.
Jamaica’s income per capita is around US$4,500 per year, meaning that most people have no disposable income when housing, utilities and food is paid for. This puts added pressure on the country’s human capital and makes nonsense of the Vision 2030 National Development Plan aphorism, “Jamaica, the place of choice to live, work, raise families and do business.” Leon has stressed that while Jamaica languishes in the bottom 25 in pay and productivity, it should aim to elevate itself to the top 25.
Growth cannot just be left to the government
The task of generating commendable economic growth figures cannot be left to the government but rather should be a shared responsibility for all Jamaicans. This notion is espoused by Leon as he encourages to government to invest in a well-educated workforce that is adaptable to the global economy.
The key he sees is diversification which utilises Jamaica’s many national endowments. He notes that there are few linkages of the sectors with many of them closed off acting as separate silos. He has called for Jamaica to maximise downstream value-added and horizontal linkages across sectors. To support his point he notes that there are few linkages with local manufacturing and the tourism sector, and mining does not cut across other sectors.
Barbados is now considered a First-World state which, in the main, is predicated solely on tourism. Jamaica is somewhat more diverse but still remains fixed at the bottom of most listings of economies of the world. Indeed, this year Forbes listed Jamaica as the fifth worst economy in the world.
For sometime now, politicians of both major parties have considered renegotiating the present IMF agreement as it has proven to be too bitter a medicine for the country to swallow. But if the patient is to effect a full recovery then it will have to adhere to the prescription.
Sticking to the arrangement
Having failed ignominiously to comply with a number of tests, talk of renegotiating and changing the terms before its conclusion are juvenile and nonsensical.
As Leon succinctly put it: “In essence, by next month, the scheduled period for review of the programme would literally have come to a close, so when you talk about renegotiating, I can’t talk about renegotiating something that is supposed to finish next month.” Jamaica’s arrangement with the IMF comes to an end in May 2012.
“What we can say is that the IMF went into the programme with a view to assisting the Government and the people of Jamaica to address what the country was confronting as of January/Feburary 2010, and so consequently, at the end of this period, we will still be willing and able to engage and assist when asked.”
Where Jamaica’s political leaders have been obtuse, Leon has been resolute in outlining what has to be done. He has not bowed to what is expedient or short-term palliatives. It is true that all agreements can be renegotiated, but in this instance, Jamaica must demonstrate a willingness and steel its mind to addressing its woeful fiscal and economic position. To date it has kicked the can down the road and it will have to be disciplined and determined if it is to get out of this box of bricks. It borrowed money from the IMF under certain conditions and it cannot now say that it is unwilling to fulfil its part of the deal. Jamaica is now at a crossroads and it has to make the right decisions in order that the country can prosper and move forward. Leon’s pronouncements have merit and if adhered to Jamaica will then see positive results.
At the crossroads
Dr Peter Phillips of the People’s National Party (PNP) declared in a speech last month: “ The simple fact is that for more than one year, there has been no successful completion of any of the set performance tests, no meeting of the performance targets, (and) no announcement of a successful conclusion of the IMF tests.
“That means that the current agreement is in abeyance. Call it what you will, but monies that would have been paid under the programme to Jamaica are not forthcoming.”
He is absolutely right and something now has to be done. There can no longer be any ambiguity and if a new deal has to be formed next year then it has to have at its very centre how to jump-start the economy.
Spelling out Jamaica’s choices, Leon said: “ Jamaica is at a crossroads and the country can either choose to do something or it can choose to do nothing. Every challenge presents an opportunity, but how you manage that opportunity is an exercise in choice, and that choice is either one of action or one of inaction, but it is a choice nonetheless.”
Part II next week
Read more: http://www.jamaicaobserver.com/busin...#ixzz1iA0fBiU1
Caribbean Business Report’s personality for 2011
By Al Edwards
NOW that the general election is over and the electioneering bunting and confetti have been consigned to dustbins, Jamaica must now reside in the realms of reality. What is that reality? The country has a debt to GDP ratio of 130 per cent. A fiscal deficit of 6 per cent. Official unemployment of 12.3 per cent. A significant decline of Foreign Direct Investment (FDI) over the last four years. An unacceptable crime problem that sees the country labelled as one of the most notorious murder provinces in the world. An onerous and archaic tax system charcterised by low compliance. It has now become imperative that the number of public sector employees be rationalised, meaning many will be thrown on the scrap heap. Anaemic growth which has seen the country unable to register anywhere near 3 per cent per year consistently for decades. It is indeed a grim prognosis on a country that was once considered the pearl of the Caribbean.
Taking the bitter medicine
Over the course of this year, IMF country representative Gene Leon has been a resolute quartermaster on the good ship Jamaica. He has consistently kept the country and the government honest about its obligations to the Stand-by Arrangement signed at the end of 2009 for US$1.27 billion over a 27-month period.
With that arrangement concluding during a likely general election year, it was always going to be the case that political expediency would be a factor to contend with.
Over the last four years the government has made commendable efforts to dispose of some nonperforming public assets and there remains the Carendon Alumina Production (CAP) where it is understood that an agreement is close to conclusion. However, the country remains bedevilled by its inability to subject itself to prescribed tests since December 2010, meaning in effect that the country is unable to meet its obligations to the IMF.
For too long the country’s position with the IMF had remained ambiguous and opaque. Leading Cabinet members have obfuscated and failed to clarify on the matter. Despite this, Leon has always maintained that the IMF will continue to support Jamaica’s efforts toward macroeconomic reform and sustainable economic growth.
As the months went by, Leon has become more declarative and his observations more pertinent. The way he sees it, the country’s present predicament cannot be attributable to one or two factors. He points to the country’s fiscal distortions, low productivity, the propensity of waivers and incentives, the challenging business environment, and a crime rate that has cost the country between 5 and 7 per cent of GDP.
High crime hinders the economy
Addressing the vexing issue of the country’s high crime rate, Leon, speaking at a Jamaica Exporters’ Association (JEA) awards function at the end of June this year said: “A laser focus on crime reduction would also translate to increase in productivity from redirected resources and benefits from enhanced social integration.” He has consistently proclaimed that crime is a major impediment to growing the economy and a Jamaican administration must seriously pay attention to rectifying this.
Jamaica’s income per capita is around US$4,500 per year, meaning that most people have no disposable income when housing, utilities and food is paid for. This puts added pressure on the country’s human capital and makes nonsense of the Vision 2030 National Development Plan aphorism, “Jamaica, the place of choice to live, work, raise families and do business.” Leon has stressed that while Jamaica languishes in the bottom 25 in pay and productivity, it should aim to elevate itself to the top 25.
Growth cannot just be left to the government
The task of generating commendable economic growth figures cannot be left to the government but rather should be a shared responsibility for all Jamaicans. This notion is espoused by Leon as he encourages to government to invest in a well-educated workforce that is adaptable to the global economy.
The key he sees is diversification which utilises Jamaica’s many national endowments. He notes that there are few linkages of the sectors with many of them closed off acting as separate silos. He has called for Jamaica to maximise downstream value-added and horizontal linkages across sectors. To support his point he notes that there are few linkages with local manufacturing and the tourism sector, and mining does not cut across other sectors.
Barbados is now considered a First-World state which, in the main, is predicated solely on tourism. Jamaica is somewhat more diverse but still remains fixed at the bottom of most listings of economies of the world. Indeed, this year Forbes listed Jamaica as the fifth worst economy in the world.
For sometime now, politicians of both major parties have considered renegotiating the present IMF agreement as it has proven to be too bitter a medicine for the country to swallow. But if the patient is to effect a full recovery then it will have to adhere to the prescription.
Sticking to the arrangement
Having failed ignominiously to comply with a number of tests, talk of renegotiating and changing the terms before its conclusion are juvenile and nonsensical.
As Leon succinctly put it: “In essence, by next month, the scheduled period for review of the programme would literally have come to a close, so when you talk about renegotiating, I can’t talk about renegotiating something that is supposed to finish next month.” Jamaica’s arrangement with the IMF comes to an end in May 2012.
“What we can say is that the IMF went into the programme with a view to assisting the Government and the people of Jamaica to address what the country was confronting as of January/Feburary 2010, and so consequently, at the end of this period, we will still be willing and able to engage and assist when asked.”
Where Jamaica’s political leaders have been obtuse, Leon has been resolute in outlining what has to be done. He has not bowed to what is expedient or short-term palliatives. It is true that all agreements can be renegotiated, but in this instance, Jamaica must demonstrate a willingness and steel its mind to addressing its woeful fiscal and economic position. To date it has kicked the can down the road and it will have to be disciplined and determined if it is to get out of this box of bricks. It borrowed money from the IMF under certain conditions and it cannot now say that it is unwilling to fulfil its part of the deal. Jamaica is now at a crossroads and it has to make the right decisions in order that the country can prosper and move forward. Leon’s pronouncements have merit and if adhered to Jamaica will then see positive results.
At the crossroads
Dr Peter Phillips of the People’s National Party (PNP) declared in a speech last month: “ The simple fact is that for more than one year, there has been no successful completion of any of the set performance tests, no meeting of the performance targets, (and) no announcement of a successful conclusion of the IMF tests.
“That means that the current agreement is in abeyance. Call it what you will, but monies that would have been paid under the programme to Jamaica are not forthcoming.”
He is absolutely right and something now has to be done. There can no longer be any ambiguity and if a new deal has to be formed next year then it has to have at its very centre how to jump-start the economy.
Spelling out Jamaica’s choices, Leon said: “ Jamaica is at a crossroads and the country can either choose to do something or it can choose to do nothing. Every challenge presents an opportunity, but how you manage that opportunity is an exercise in choice, and that choice is either one of action or one of inaction, but it is a choice nonetheless.”
Part II next week
Read more: http://www.jamaicaobserver.com/busin...#ixzz1iA0fBiU1