Will Portia's courtship of the private sector lead to a new relationship?


Sunday, January 26, 2014    

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In a recent interview with Archibald Gordon on TVJ News, Prime Minister Portia Simpson Miller repeatedly asserted that at every Cabinet meeting she consistently defends poor people and their interest.

Anyone even remotely familiar with the prime minister's utterances over the several decades she has been in public life would have no difficulty accepting the statement as credible. And her public approval rating affirms that the poor see her as their staunchest protector and deserving of the designation 'Mama P'. (Sister P was an earlier incarnation.)

Mrs Simpson Miller did not provide details of how that hard work manifested itself (Cabinet deliberations are secret, after all), nor did she define the interest of the poor.

But in the context of the reporter asking if the prime minister could give an assurance that there would be no new taxes in the April Budget, one can infer that the prime minister will be working very hard to keep as much distance as possible between the taxman and poor people.

In the same interview, the prime minister conceded that she and her finance minister, Dr Peter Phillips, are operating in a "very tight financial space"; translation, they neither have the money nor the political freedom to spend as they might wish on public infrastructure, poverty alleviation, social services and other much-needed areas of human development.

The tight rein on Government spending is the centrepiece of the four-year Extended Fund Facility with the International Monetary Fund (IMF) which, among other things, provides the Government with some cash and a seal of approval that sends the right message to private lenders.

In return, the deal requires the Government to live within its financial means and undertake major structural reforms. One of the highest hurdles is that the Government must work down the debt, which stood at $1.92 trillion at the end of November (upwards of 140 per cent of GDP) to less than 100 per cent by 2016.

Given her commitment to keep faith with her primary constituency, some may wonder whether the prime minister has the political stomach for offering what her rival, Opposition Leader Andrew Holness, prescribed as "bitter medicine" that would have to be administered after the 2011 general election.

For those harbouring any doubt, the prime minister put an end to such thoughts in an important speech to the Jamaica Stock Exchange Investments and Capital Markets Conference at the Jamaica Pegasus Hotel on Tuesday, January 21. Her Administration, she said, will stay the course.

"The telling reality is that it was impossible for any Government to continue running the level of deficits which had been accumulated in recent years," Mrs Simpson Miller said as she explained why the IMF agreement correctly "focuses on improvement in our fiscal situation".

Days of big spending by government are over

Maintaining high levels of public spending by borrowing and running up huge deficits could not go on forever.

"Let me put it as bluntly as I can. Continuation of that approach would invariably lead to total collapse of the economy, with no creditor, either local or foreign, willing to lend to us. There was no fundamental disagreement between the Government and the external financial entities, led by the IMF, in terms of the eventual objectives to be attained.

"My Administration does not, in any way, seek to resile from taking responsibility for the tough decisions which had to be made. We have not presented these decisions as being impositions by the IMF. That would be a cop-out. Whilst we may disagree with the fund in terms of the pace of some of the adjustments, we accept that the adjustments are necessary," she said.

Mrs Simpson Miller couldn't be clearer. She not only embraced the tough measures as policies of her Government and not external impositions, but also accepted a much-reduced role for the State in the economy.

"Compared to the approaches of the past," this time around "the investment capital needed for expansion and modernisation will not be provided by the Government of Jamaica. Rather, in all the sectors, our emphasis is on attracting investment capital to areas which were once considered the exclusive province of the State," she said.

Growing the economy, expanding employment, modernising the electricity sector, and continued development and modernisation of physical and communication infrastructure must be driven by the private sector.

Will a reluctant private sector step up and begin to seek out opportunities to invest, or continue to hedge and insist on further wooing by the Government?

Richard Byles, president of Sagicor, and co-chairman of the Economic Programme Oversight Committee (EPOC) monitoring implementation of the IMF agreement, has, in recent speeches, been urging other players in the sector to acknowledge improvements in the policy environment and take a more aggressive approach to investing where opportunities exist.

Part of the reluctance of the private sector to take Portia's hand is based on their reading of decades of poor governance by a succession of administrations which have caused the country to underperform in the economy and in other areas of national life.

Governments have had a history of passing laws and not implementing them; sound policies have been derailed in the interest of short-term political advantage. So some are sceptical that the measures taken, and the recent raft of legislation to modernise the economy, will actually be followed through.

The prime minister and her finance minister say it will be different this time. Passing the first two tests under the IMF agreement and the achievement of some growth in the last quarter, however modest, are good signs, though worries persist about the continuing devaluation of the currency.

One speech, however important and thoughtful, does not change a mindset. Nor does it alter the normal cautiousness of money and the historic risk aversion of the Jamaican private sector. So this is going to be a long courtship, and maybe even some tiffs when one side will question the seriousness of the other and may even take a furtive glance at other suitors.

However, the sacrifices made by workers (wage freezes), investors (reduced interest on government bonds), consumers (price rises), and businesses (rising prices and shrinking markets) must not be in vain. We all say we want different outcomes than the ones we have seen over the past 40 years; we have to do things differently -- starting with measures that gradually build trust in the sincerity of each other.





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