JLP’s proposals favourable, but cost a vital concern for analysts
ANALYSTS have reacted favourably to the Jamaica Labour Party’s (JLP’s) proposals in its recently released manifesto to improve the economy, health, national security and matters of governance. But some have expressed concerns about the affordability of some of these plans as well as the lack of a coherent strategy to address the country’s high debt stock, which stands at approximately 135 per cent of the country’s gross domestic product.
Errol Daley, president of the Medical Association of Jamaica (MAJ), supports the Opposition party’s proposal to ‘provide access to health insurance for Jamaicans who cannot afford medical and drug costs by implementing a wellness plan’, but he notes that a future JLP administration will face a “resource challenge” in trying to implement its health proposals.
Some of the specific proposals under the JLP’s health plan are:
* a national health insurance plan that provides access to free basic health insurance for all the poor and vulnerable by January 2007;
* removal of user fees for emergency care, immunisations and diseases, especially for the poor and indigent;
* an extensive training and recruitment drive to fill critical medical vacancies; and
* sourcing low-cost drugs internationally, especially those required to treat drug abuse and HIV/AIDS patients.
Noting that the cost of health care in general has been increasing over the last 50 years, Daley underscores the need for the cost of health care to the poor and needy to be borne by the state.
“The way it is supposed to be, the indigent is always to be taken care of,” notes Daley. “The difficulty is to find out how much people can afford to pay through a means test.”
But the MAJ president emphasises that it will be impossible for government to provide free health care to all, hence the importance of promoting wellness or disease prevention.
According to Daley, there is really “not much difference” between the two health plans proposed by the current administration and the JLP, except the promise of free care by the JLP.
He is supportive of the JLP’s plan to establish a voluntary individual retirement savings plan, titled HOPE, to address health, pension, housing and educational needs. Daley, however, suggests that the scheme be set up as a dedicated fund and become part of government’s general revenue.
He is in agreement with the JLP’s proposal to fill critical medical vacancies, pointing to the need to expand the current established posts in the health-care sector, which have been rendered inadequate due to the increased demand for health care over time.
However, the MAJ head notes that with salaries already accounting for 70 per cent of the state’s expenditure, a future JLP administration will be hard pressed to find the resources to accommodate expanding the complement of medical personnel.
“There is a resource challenge,” he argues “and it is going to be difficult to increase the staff complement because the JLP say they are not going to collect additional tax”.
Mark Walters, investment banker, also has similar concerns about the ability of an incoming administration after the upcoming general elections to finance the national budget. Specifically, he wants to know how the government will find funds to pay interests to holders of investment instruments which form a part of the country’s total debt stock of almost $500 billion. Will this be done through significant increase in taxation or a radical reduction in government expenditure? he asks.
Walters, a vice-president at Dehring Bunting and Golding investment house, doesn’t see a credible plan put forward generally to address these particular concerns of investors.
“To a large extent, nobody seems to be facing the reality that, come tomorrow, whoever wins the election, there are investors who own billions of dollars of government debt instrument and who will need their interest payments the next day,” he observes. “I have not seen anything that reflects the reality of the market that after the election the country will have to deal with this debt problem.”
The main elements of the JLP’s economic growth plan as outlined in the manifesto include:
* an independent central bank that doesn’t lend to government;
* a fully-backed (by US dollars) local currency required by law;
* a reduction and simplification of the tax burden and system;
* tax incentives to promote venture capital financing and export manufacturing; and
* the reduction of ‘red tape’, especially in the operations of the Customs Department.
The party also proposes the establishment of a private sector-owned securities brokers regulatory exchange and a credit agency to “jump-start” a formal local corporate bond market.
Walters reacts coolly to this proposal: “All the market probably needs (to grow), in my opinion, is a good regulatory framework in which to operate… and let the market develop.”
He adds that the securities market was already regulated by the state-run Financial Services Commission and investment houses have formed a dealers’ association in order to police themselves.
Regarding the JLP’s proposal to grant tax concessions to shareholders in venture capital firms, Walters says it’s a positive move, but he argues that the success of venture capital business depends on a vibrant investment/business climate. And that, by his reading, is still a long way off.
In contrast, Omri Evans, an economist, is more bullish about the proposed tax concessions to venture capitalists. “Jamaica needs vibrant venture capital financing institutions to help kick-start the investment and growth process,” he says, “after such a long period of economic stagnation and fall-out in the financial sector.”
The JLP promises that if it forms the next government, it will allow venture capital companies to treat 100 per cent of amounts invested as an “allowable expense” for tax purposes. In addition, Jamaican resident shareholders in approved venture capital companies will benefit from tax-free dividends.
Support for incentives to venture capital firms also comes from Anthony Chang, businessman and former president of the Jamaica Chamber of Commerce.
“As the big cry for start-up and existing business people is the lack of access and cost of funding, promotion of a venture capital industry will widen the source of business financing,” says Chang.
He also believes the growth in venture capital companies can further deepen the local stock exchange, it being a source of capitalisation for venture capital companies. But Chang notes there is need for clarity on the definition of approved venture capital transactions.
Another proposal by the JLP is to allow companies to treat 20 per cent of profits as tax-free for investments in approved value-added activity. The party also proposes to grant export and other manufacturers a raft of tax incentives related to the depreciated value of assets or physical capital.
Evans, who operates a financial advisory business, regards these incentives as a lifeline for Jamaican businesses, especially in manufacturing and agriculture, whose level of capitalisation is low as a result of the high cost of loans over the last decade.
Explains Evans: “There has to be some means by which business can have some retained earnings to reduce their dependence on bank financing for working capital. And the accelerated depreciation strategy and others (proposed by the JLP) are credible ways to deal with this problem.”
The economist also endorses a JLP plan to provide low-cost financing to small farmers through the People’s Co-operative Bank network and funded by surpluses from the operation of the Development Bank of Jamaica.
Meantime Chang, who is involved in the baking business, endorses the JLP’s proposal to reduce ‘red tape’ at the Customs Department and the state-owned investment promotions agencies of Jamaica Promotions (Jampro) and the National Investment Bank of Jamaica (NIBJ). He suggests that the JLP extends its plan to reduce ‘red tape’ to all types of business transactions and implement a study of this phenomenon similar to that proposed regarding the tax burden.
Says Chang: “In this competitive world where the benchmarks are getting higher, there is continual need to remove costs to make it easier for firms to transact business and comply with public sector requirements.”
In regards to the JLP’s plans to introduce a raft of constitutional reforms, Stephen Vasciannie, professor of government, supports plans to upgrade the physical and administrative infrastructure in the judicial system in order to accelerate the process.
He says there is “considerable scope” for further improvement in the court system despite significant reductions in the backlog of cases.
“Even now the (United Kingdom) Privy Council’s mandate in Pratt and Morgan (capital punishment cases) that cases be heard from start to finish within five years still remains difficult to satisfy,” notes Vasciannie, who is also an attorney-at-law.
According to Vasciannie, some Resident Magistrate’s Courts lack copies of the laws of Jamaica, which he considers to be a “minimum condition for operation”. This poor state of the local courts system, the professor says, is the basis for his opposition to the establishment of a regional appellate court until domestic courts are improved.
Vasciannie, who is a lecturer in government at the University of the West Indies, Mona Campus, supports JLP proposals to establish a fund to compensate victims of state abuse and mistreatment. But he opposes plans to grant the public defender prosecutorial powers to initiate cases against violators or abusers of human rights.
“I am not sure that the public defender should enter the business of prosecuting, as he would already have his hands full of things that fall properly under his mandate,” says Vasciannie. The business of prosecution, he stresses, is constitutionally confined to the director of public prosecution.
The university lecturer thinks it is a “good idea” that the JLP intends to require two-thirds approvals of both houses of Parliament for appointment of service commissions that are responsible for the career movements of different classes of public officials. But he is cautious about the Opposition’s plan to establish impeachment procedures for elected and non-elected officials found guilty of corruption, abuse and dereliction of duties.
Says he: “In practice, it could be subject to abuse… I would like to see more details to see how the impeachment mechanism would be triggered.”
However, he questions the relevance of impeaching non-elected officials, who, he points out, are already subjected to the various service commissions and/or the terms of their contracts of employment.
Regarding the JLP’s proposals to combat crime, criminologist Bernard Headley cautions against the “unmodified” importation of strategies from other countries such as the computer-based intelligence system (COMPSAT) adopted by the New York Police.
Headley, who is a professor of criminology at the University of the West Indies, Mona Campus, says the JLP’s plan to set up an ‘independent police services commission’ “does not go far enough”. The aim of the proposal is to remove the possibility of political contamination from the operations of the security forces, particularly the Jamaica Constabulary Force, which JLP officials consistently charge is politically biased against the party.
In fact, the JLP claims that a bloody police operation which resulted in the deaths of nearly 30 persons, including two security officers, in West Kingston last year July, was instigated by the ruling People’s National Party.
A commission of inquiry led by Julius Isaac, a Canadian jurist, subsequently concluded that the purpose of the ill-fated police operation under the leadership of Senior Superintendent Reneto Adams was to search for guns and drugs.
“If we are to take entirely the politics out of policing,” argues Professor Headley, “why not have as the ultimate oversight body a truly independent civilian review board?”
While Headley notes that there is wide consensus on the other elements of the JLP’s crime plan, he feels it is basically deficient as it does not address the reform of correctional institutions.
However, he says its success is dependent on the electorate deciding on which party has the political will and capability to implement measures to combat crime.