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Time for JamExit from Caricom

Tuesday, May 16, 2017

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The whole world was shocked when the United Kingdom chose to leave the European Union. It is yet to be seen how positively or negatively this will affect the British people. The exit forced a resignation from former Prime Minister David Cameron, only to leave the nation's uncertain future to Theresa May — a woman that many compare to Angela Merkel, chancellor of Germany.In November 2016, the world would be shocked once again when Donald Trump, the celebrity real estate mogul, would achieve the greatest political upset in United States history and be elected the 45th president of the United States. As of now, Trump is embroiled in scandal and there is a great deal of uncertainty in the world as it relates to the United States. In the spirit of changing times, it is time for Jamaica to shock the world (or perhaps just the region) and exit Caricom.

The Caribbean Community (Caricom) is an absolute and irrefutable disaster for the Jamaican people and for Jamaica's growth agenda. There is no tangible benefit. There is only pontification by intellectuals and elites who have a vested interest in maintaining the status quo.

I must make myself clear. The goal and focus of Caricom is a noble one. To theoretically allow companies to gain economies of scale through a single market, allow skilled labour to move freely, and facilitate free trade within the region is wonderful. But this is not the case.

Jamaica is getting a raw deal. This is to say Jamaica is being abused, neglected, and discriminated against by a member state with little or no consequences. At this point the reader will know I'm taking issue with Trinidad & Tobago. It is well known that Jamaica is being decimated in terms of trade due to what I believe is unfair treaty-compromising behaviour. Trinidad subsidises their manufacturers. Trinidadian companies have been accused of illegally misrepresenting the nation of origin on products they export to avoid tariffs. And Trinidad actively discriminates against Jamaicans entering their country.

Though Jamaican and Trinidadian trade is on the decline, the figures remain preposterous. In 2015, Jamaica imported $462 million worth of goods from our great friend Trinidad, while they received a measly $7.7 million worth of Jamaican goods. Jamaica has never exceeded $20 million in exports to Trinidad and Jamaica has consistently received over $400 million worth of goods. The reader should note that in 2008 the Jamaican people maintained and created thousands of jobs in Trinidad by importing $1.52 billion worth of goods. The numbers are unbelievable. It logically follows that our leaders are corrupt, stupid, or both.

For Caricom to work, it must work for the Jamaican people. There must be an arrangement made to close the gap. As far as I'm concerned, Jamaica could import billions from Trinidad, but there must be reciprocation.

As well, Jamaica must begin to support and address the needs of its manufacturers, because an export-oriented model has been the only one to successfully lift a nation out of poverty. Of course, there are overwhelmingly resource-rich, low population exceptions, but a pattern exists. Examples include Ireland, Singapore, and South Korea.

Jamaica's only path to development involves exports, and exports require a helpful Government, not a bureaucratic one. The problem with red tape is obvious, and most people would largely agree with that.

My next suggestion may drive our more socialist-oriented brothers and sisters a little insane. Jamaica must become the most aggressive country in terms of tax incentives. There is nothing to lose. Consider this.

In 1967, the Economic Expansion Incentives Act was signed into law in Singapore. The law would provide a 90 per cent tax remission on companies that profited from exports and provide a slew of other incentives to multinationals and local firms. The small nation would see a growth of an average of 12.6 per cent every year between 1966 and 1973. This created an amazing number of jobs for a population ill-prepared for white-collar work. Jobs in electronics jumped from 1,611 in 1966 to 44,483 in 1973. In the textile industry, the island nation saw increases from 2,459 to 35,012 jobs. I share these figures just to give the reader an idea just how impactful incentives can be.

Consider the business process outsourcing (BPO) industry. Though nothing is being physically created, it is effectively an industry centred on the export of services. Why not become more aggressive? Create a tiered corporate tax structure incentivisng expansion in Jamaica and incentivising locals to invest in the industry. Any loss of tax revenue can be more than accounted for through the sheer volume of investment (economic activity) and consumption taxes paid by the newly employed. This is my plan. All BPO operations on the island will be taxed at a 10 per cent clip, with concessions on all equipment coming into the country. This is even for firms operating outside special economic zones. Firms employing 10,000 Jamaicans will pay five per cent and firms employing 20,000 Jamaicans will pay no corporate tax. As for local investors, there will be a tax remission lasting up to 10 years, after which Jamaican business people will pay five per cent in corporate taxes unless they have passed the threshold of 10,000 workers.

These are just thoughts, but the principle should be applied. Jamaica must do all it can to unleash investment into the country. Jamaica is now at a tipping point in its history. Can Prime Minister Andrew Holness provide the growth the nation so desperately needs? We must wait and see.

Davin-Kyle Thompson is a finance student at Rutgers University with interests in economics and policy. Send comments to the Observer or davinkylethompson@gmail.com.

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