IN delivering the keynote address for the Jamaica Stock Exchange's 8th Regional Conference on Investments and the Capital Markets last week Tuesday, Jamaica's Prime Minister Portia Simpson Miller appeared to deliver one of her most comprehensive economic policy speeches to date, no doubt reflecting the interests of her audience.
In introducing her, Sagicor Investment CEO Donovan Perkins compared Jamaica's prime minister to the now iconic former President Lula of Brazil. Perkins was referring to the fact that on the election of the supposedly left-leaning Lula in Brazil in 2002, there was a collapse of confidence with many international and local investors thinking that Brazil would default, and generally suffer a very sharp increase in economic and social instability. Instead, Brazil achieved a major economic turnaround including a socially inclusive expansion of the middle class and a sharp reduction in poverty and hunger. Interestingly, Prime Minister Portia Simpson Miller appeared happy with this comparison with someone she called her friend.
If we briefly, and unscientifically, compare Jamaica's policies as enunciated by our prime minister and Brazil, it is possible to see certain similarities. Similar to Brazil, the Government has now embarked on the implementation of a framework for public-private partnership as a key strategy for mobilizing investments. Opportunities include infrastructure projects such as roads and bridges, the rail network, ports, factory space, housing and other supporting facilities.
More precisely, the prime minister noted: "The PPP framework will allow private parties to enter into arrangements to provide a public service or implement a project, and assume financial, technical and operational risk in the project. The PPP arrangement may take the form of a private entity carrying out an investment based on the strength of a contract with government to provide agreed services and the cost of providing the service is borne solely by the private entity. The Government's contributions to a PPP may also be in kind (notably the transfer of existing assets) especially for projects that are aimed at enhancing the public infrastructure that is required to buttress the dynamism of the manufacturing sector. "
If we look at just one of numerous examples of similar successful partnerships in the past decade in Brazil (investment in needed infrastructure has been a big part of their economic expansion), the Brazilian government worked on a policy framework to encourage venture capital. The Brazilian government's Agency for Innovation, with support from the IDB's Multilateral Investment Fund, created the "Inovar", or innovation programme to create a venture capital ecosystem. The programme mobilised private sector investment hundreds of times larger than its operating costs, mobilising billions of US dollars primarily through redirecting some of the capital held in local private pension funds from government bonds into innovative high growth companies. Interestingly, whilst the government provided some (but not all) of the financing of the first venture capital funds which were put to competitive tender in a transparent bidding process, the venture funds were entirely private sector run, and the true success of the programme is that new funds have long since stopped needing government involvement as a catalyst.
In her presentation, Prime Minister Simpson Miller also clearly committed herself to a tough reform programme as part of both the impending IMF agreement and what she called "our Reform Agenda for Business". Interestingly, Lula also did this at the beginning of his term. The prime minister has restarted the National Competitiveness Council (NCC), chaired by Minister of Industry, Investment and Commerce Anthony Hylton to improve Jamaica's business environment and the protection of investors by implementing a more investor-friendly climate through reform of the bankruptcy process. In her words, "My Government will take modern Insolvency Legislation to our Parliament. We are committed to a legislative framework that encourages entrepreneurship or risk taking as the basis for new business formation and dynamic business environment." Clearly, Brazil's Inovar programme is a very good fit with this objective.
The same issue of access to capital will be immeasurably helped by the proposed new "Secured Transactions Act". This would allow companies to use other assets other than real estate to access credit. The PM noted that a draft model bill had already been prepared by the IDB.
Other areas of emphasis included making it easier to start a business, for example through fast tracking amendments to the Companies Act and the Registration of Business Names Act, and making it easier to pay taxes electronically. She noted that progress continued with the amalgamation of payroll taxes, and that there would be a new emphasis on reducing the time and costs in resolving commercial disputes in our judicial system.
Simpson Miller call to action, not just vision, was to empower Jamaicans to achieve their fullest potential. "Attaining developed nation status is our destiny. If we do things in good faith and to the best of our collective abilities as one Jamaican family, I have no doubt that we will move Jamaica in quantum steps towards developed country status over the next 50 years."
Most importantly, she noted "there is some consensus on policies and strategic objectives going forward". A key part of Lula's strategy was that he built on the work of his immediate predecessor, for example expanding and making more effective anti-poverty programmes that were already in place. In similar fashion, she noted that "sustainable economic growth and development depend on success in human capital development."
Perhaps most importantly, she revealed her priorities: "We will need to cultivate new workplace habits and a new culture of productivity in all sectors of the economy; old consumption tastes and habits must go. We must rid ourselves of wastefulness and laziness. The poor and marginalised among us must be protected -- but within a framework of social equity that is less compensatory and more developmental and there must be a greater sharing of the burden in our drive towards developed nation status."
As she correctly noted, "the negotiated IMF agreement, taken by itself, will not solve all our problems. It will require a set of medium-term reforms for growth that will help stabilise the macroeconomic situation and reduce anxiety and uncertainty". The last issue, that of confidence, as in Brazil, will be critical to the turnaround in Jamaica's economy.