This is the first part of a presentation given in Barbados at the Institute Of Chartered Accountants

on Saturday, June 10, 2006.

Disclaimer

I want to indicate at the outset of my presentation that the opinions that I express are personal opinions and do not reflect the position of the Jamaica Stock Exchange.

Building a Caribbean Investment Culture

It is said that nothing focuses the mind as forcefully as the knowledge that at dawn the next morning you will die.

If not a sentence of death, something closely akin to that might have recently been pronounced in the case of Pear Tree Bottom. This ought to bring into clearer focus the need for us in the Caribbean to build an investment culture that is consistent with our needs, yet responsive to international investment flows and in that order of precedence.

Standing here , you must forgive me if I feel strongly that the last thing we need in the Caribbean is more talk. You certainly do not need another so-called expert to tell you what to do. Least of all, somebody from Jamaica.

We, like the West Indies Cricket Team, have developed a scientific approach to the art of snatching defeat from the jaws of victory. Pear Tree Bottom testifies to this.

For those who have not read about this significant watershed in the history of Jamaican investment activities, I will resist the urge to sing about “pipers piping, maids a milking and a partridge in a pear tree”, because this is a serious issue.

Justice Sykes, in the Supreme Court of Jamaica in a judicial review, has quashed the decision by the relevant authorities to grant a permit for the building of a 1,918-room hotel at Pear Tree Bottom.

This large hotel is being built on approximately 80 acres of land along the northern coastline of Jamaica, nestled by the sea, just outside of Runaway Bay. It is rich in bio-diversity.

Local residents and environmentalists have for years lauded and enjoyed its picturesque grandeur. It teems with wildlife ranging from potoos and patoos to yellow snakes and yellow-billed parrots.

It is agreed that it is a very sensitive area from an ecological standpoint, yet in the process of consulting with the public and the production of the necessary Environmental Impact Assessment, the judge found such significant short comings that he ordered the NRCA to reconsider its decision to grant a permit. The investors had spent US$62M and the hotel is 80% complete.

The implications and the consequences of this decision on investments in the Caribbean? Severe and far-reaching. The judge said, “In these circumstances, I must give greater primacy to obedience to the law than to hardship to third parties and detriment to good administration.” The reactions of the head of JAMPRO, the Government investment promotion agency was one of acute disappointment. She said,

“It is clear that we are not ready to welcome foreign investment.” She suggested that there was a love/hate relationship. I would suggest that this extends beyond Jamaica to the entire region when it comes to non-domestic investment. So we have to make up our minds.

Governments in the Caribbean are known to give more favourable terms to investors from outside the region and from other territories than their own nationals. Is this necessary, desirable or sustainable? Nationals have a “necessary evil” view of non-domestic investment.

Is this healthy for a country? To the same extent that Jamaica is viewed as “taking over” the service sector in some Caribbean islands, Barbados and Trinidad are viewed as taking over the financial and manufacturing sectors in Jamaica, while foreign investment is viewed as biting the ripest cherries in our economies.

The need to define and build our investment culture is critical. Pear Tree Bottom raises a significant question. When an investment will have a major impact on the economic future of the people, at what stage in the negotiations will government invite the participation of the people?

It is quite clear that the bureaucracy which ought to protect the public interest was so committed to advancing the project that the people had to go to court to protect their interest. They claimed that they had been agitating for their issues to be addressed for 10 years without being paid the necessary attention. While the investors no doubt have done what is required of them, they will now be as distrustful of the process as the people have long been.

Professor C.Y. Thomas in a lecture recently stated: “Given the critical juncture at which the region finds itself, it is not altogether surprising that harsh comments and severe doubts have been expressed in many quarters about the readiness, fitness, seriousness and even purposefulness of the contemporary leadership elites in moving the Caribbean forward.”

He went on to say, “We also face enormous pressures as the forces of globalization and liberalization transform the global economy and change the institutional architecture under which we undertake international transactions. These direct economic effects have been multi-dimensional in character impacting on production, technology, cross-border flows of people and financial resources, management and enterprise.”

In the process, the Caribbean faces both increased opportunities for engagement in the international economy, as well as increased exposure to economic insecurity. For example, he points to the dramatic expansion of the number and range of inter- governmental conventions and agreements to which the region is bound.

These pressures have created international “best practice”, norms and standards in the form of “state-of-the-art benchmarks” which are expected to guide the region. To what extent have we adjusted and geared ourselves to properly implement these standards I would like to ask.

Further, the speeding up of communications, the intensifying of relations between countries and the bringing together of cultures into closer contact with each other have impacted immeasurably on the region’s capacity to build national identity and therefore “investment” culture.

The truth is, every year we attend the Caribbean and Latin America Conference in Miami and are reminded that our investment and economic culture is defined for us in terms of size, skill, bureaucracy and corruption.

Let us not forget Pear Tree Bottom. It was the attempt to break the mold, accelerate the project and demonstrate that red tape can be dispensed with that ran afoul of the Rule of Law.