A presentation to the Rotary Club of Kingston on January 6, 2011.

I had no hesitation in accepting your invitation to present this brief paper on Economic Growth and Job Creation for it is a subject that is of vital importance to Jamaica’s future.

The major challenge facing Jamaica at this time is the incapacity of the economy to provide jobs for the 50,000 Jamaicans who come on to the labour market every year. The fact is that over the last 30 years annual GDP growth has been less than one per cent and it is only when we achieve sustained economic growth that we will be able to tackle seriously the problem of joblessness.

It is also my view that we retard our own progress by packaging our economic failures into convenient political time frames.

The truth is that under governments formed by both of our main political parties we have had flat or negative growth. Even in the years 2006/2007 when 124 of the world’s countries grew faster than four per cent annually, the Jamaican economy grew less than one per cent.

Under both political parties, despite their stated intentions, entrepreneurs have had to contend with a State bureaucracy which is not business-friendly.

Under both political parties, we have seen money supply expanded to finance projects of dubious economic benefit prior to elections in an effort to hold on to power.

Both political parties have found borrowing easier than facilitating economic growth, and they are equally responsible for the national debt which in July, 2010 stood at $1.45 trillion!

Finally, both political parties have contributed to the massive devaluation of our currency. In 1969 when we established our own currency, the Jamaican dollar was valued at US$1.30. Today, the value of the Jamaican dollar is just above one cent US.

I now turn to the Labour Force Survey of 2009 which is the official source of information on employment and productivity levels. It informs us that:

In October 2008, the labour force stood at 1,302,400. Of this number, 942,400 had no training and five out of every eight of these persons were male.

Of the remainder, 131,900 were professionals with degrees or diplomas and 60 per cent of these persons were females.

Only 124,100 had certified vocational training and another 58,100 had on-the-job training. In terms of examinations passed, 789,000 had no certification whatsoever.

However, the most alarming piece of information in the survey was that the number of persons “not looking for work” had grown from 317,500 in October 2003 to 423,700 in October 2008. We know that those who don’t work live off the sweat of another man’s brow.

These facts paint a chilling picture of our present reality, and explain the levels of parasitism that we encounter on our streets daily.

The root of our present crisis

At the root of the present crisis of joblessness is the weak performance of our education and training system in independent Jamaica. The statistical database of UNESCO places Jamaica just ahead of Belize and Dominica as the third lowest in literacy in the region, with a literacy rate of 79.9 per cent.

The performance of our students in English, the primary language of international finance, and Information Technology is far too weak.

In 2009, only 60 per cent of the 23,800 entrants passed CXC English, while just over 17,000 did not take the exam at all.

Jamaica is the third largest English-speaking country in the Western Hemisphere after the United States and Canada, and every child with certification in English has a training or employment opportunity.

In Mathematics, another critical developmental subject, our performance is just as weak. In 2009, only 39 per cent of the 20,500 entries passed CXC Mathematics. The other 20,000 in the cohort did not take the exam at all.

These performances explain the low productivity of the Jamaican worker. A survey done in 2004 showed Jamaica ranking 11th out of 13 Caribbean countries.

Another contributing factor to our weak performance at the secondary level is inadequate management capacity.

At the present time, we have schools with an enrolment of over 2,000 students and over 150 members of staff being managed by teachers who have not had even one day’s training in management. No business structured along these lines could survive for any period of time.

At the tertiary level, we need to examine more closely the courses being offered by our two major universities, UWI and UTech, both of which receive major support from the Jamaican taxpayer.

Can we afford the level of duplication in the courses being offered by these two universities? Should we not be offering courses which take more into account the country’s developmental needs, which would also ensure that our graduates would be more readily and productively employed?

Can we correct our deficiencies in the teaching of English and Mathematics without providing teachers with specially developed tertiary courses?

For some time now those of us at the top of the retail trade have been experiencing difficulty in recruiting suitable staff. This is certainly one area of tertiary training in which the private sector would invest.

Employment in the private and public sectors

There is a fundamental difference between the private and public sectors in the criteria we use for employing and rewarding labour. In public sector recruitment, there seems to be no way around the influence of politicians to include political correctness as a criterion for employment. Also, the overwhelming majority of employees in the public sector provide a regulatory function.

There is no measurement of productivity and they are all guaranteed wages and pensions regardless of efficiency, reliability and productivity.

In the private sector, we employ labour to produce goods and services which must successfully compete on the international market. If we don’t, there are consequences which the market or our shareholders determine without fear or favour. Jamaica cannot solve the problem of joblessness by a public sector/welfare approach to employment. Welfare is at best temporary and entirely dependent on public revenues for sustainability.

I would like to see a study done on the performance of all the productive enterprises that became a part of the state sector over the last 40 years. I’m sure such a study would reveal that the overwhelming majority of these enterprises either went bankrupt or were closed or privatised when subsidies could no longer be afforded from the public purse.

Taxation

For too long one section of the population has been subjected to the most punitive tax measures, while the other part remains outside the tax net. Such an approach only contributes to joblessness.

The creation of new employment opportunities is directly related to the availability of disposable income to buy the goods and services produced by the economy.

Over the years, the sustained tax burdens, particularly on earners of fixed incomes, have left many households with just enough to pay utilities and buy food.

Increasingly, education is being funded by loans and only when there are massive discounts are families able to buy other goods and services. This level of expenditure cannot keep businesses open, much more create new jobs.

In the same breath, those businesses that are already in the tax net are being called upon daily to bear more than their fair share of taxation. As a consequence, capital that should be invested in expansion and, by extension, job creation, is being taken into government revenues to be expended in a manner which has more to do with retaining political power than with developing the economy.

Government will have to choose between maintaining its present tax strategies and widening the tax net, since it is patently clear that jobs can hardly be created or sustained at the present levels of taxation on those inside the net.

We need to change our approach

It is clear that we will have to change the way we do business. It is the decisions taken and policies pursued by successive administrations that have brought us to the situation in which we now find ourselves; it is not likely that we can continue down that same road and achieve different results.

Any sustainable expansion in the productive sector will require action aimed at creating a more facilitating environment for business and providing the entrepreneur with a better trained and more productive labour force.

Few opportunities for job creation can be successfully exploited with the present largely untrained and poorly educated labour force and current levels of bureaucratic red tape.

Some ideas to consider for economic growth and job creation:

Number one: It’s time to cut the red tape

Successive administrations have promised to reduce the bureaucracy facing businesses. This promise has been a major plank of election campaigning. We are still waiting. If I told you all the regulatory hurdles we had to jump through to get our most recent investment, Sweet Tings, off the ground, we’d be here for a couple days.

The plethora of agencies, approval processes and downright obstacles that face anyone trying to start a business, to create jobs is just too much. In this situation, how do we expect entrepreneurs with very limited resources to get started? The Government must simplify the process and do so quickly. In such a small country there is no reason why an entrepreneur who is seeking to provide a product or service that has little or no health, safety, or environmental issues should have to spend more than two weeks to get all the paper work in place.

This brings me to my next point: Increase access to capital

This same culture of red tape has been adopted by many of our banks and financial institutions, making it extremely difficult for entrepreneurs to access capital. Even when the Government makes funding available, most people are completely turned off by all the running around that has to be done.

Jamaica’s economy cannot move forward without people taking risks, but entrepreneurs need partners to share this risk.

Banks and other financial institutions must become more dynamic and more willing to fund new ideas.

Government should begin meaningful dialogue with local entrepreneurs who are willing to create jobs, fast-track and facilitate their effort and hold them accountable to targets for job creation within a specified time-frame.

Number Three: Adopt a more ‘entrepreneurship friendly’ tax policy

We cannot have a system that punishes people for taking risk. If I set up a company today, and I make a little profit by the end of the year, the Government is expecting me to pay taxes, even though I haven’t begun to recover my initial investment. And don’t forget, this is after I’ve payed PAYE, NHT, NIS and GCT.

Even with declining interest rates, why would anyone take that risk?

Through its tax policy, the Government must assure entrepreneurs that they’re on our side…that they want us to succeed.

My fourth point is personal responsibility

Jamaica belongs to Jamaicans, therefore we are responsible for the economy, not the Government. Now obviously the Government plays an important role, but at the end of the day, we the citizens of Jamaica must take charge.

Because even if bank lending rates go down to low single digits, and the red tape is removed, and the tax policy is improved, and the education system is revitalised, we still have to do the work.

We have to come up with ideas… create products and services that can compete in a global economy.

It’s easy to blame the Government, but the fact is, we must rekindle the spirit of entrepreneurship and demonstrate our belief in Jamaica and its future.

I would also like to outline some opportunities for project development in downtown Kingston. As I have said before, we believe in downtown Kingston and have always been committed to its development. It is here that we locate the heart of all our operations for both MegaMart and Bashco.

Just recently we made another major investment in the downtown area. We own a single-storey brick structure that had housed one of the traditional Wray & Nephew corner bars which dotted the Kingston landscape in former times. We renovated it and operated it as one of our Bashco stores for a while.

Then it became the germ of a new idea to establish a state-of-the-art retail bakery facility.

We succeeded in modernising the interior but kept the traditional look of old Kingston on the exterior, which has given the entire square a face-lift and in the process created 30 jobs.

Fortunately, other members of the private sector have kept faith with downtown. Some of us still maintain our corporate headquarters here and the recent announcement by Digicel indicates that more will come. Some of our most prestigious legal firms are still located on Duke Street and our oldest newspaper is still on North Street.

The National Gallery on Orange Street and the Institute of Jamaica on East Street represent a vital part of the cultural heritage of the country.

We are confident that downtown Kingston can be restored to the status and prosperity it previously enjoyed, for the future of Jamaica is inextricably linked with the renewal of its capital city. It is for this reason that the ideas I am putting forward today are for projects downtown. I do not claim originality for these ideas, but I want to add my support for their urgent consideration in any programme aimed at stimulating economic growth and creating employment opportunities.

Firstly, establishment of a university campus downtown, and I cannot think of a better location than where the General Penitentiary is now located. By removing the prison, we would eliminate a good part of the criminal-related traffic and with the establishment of a university campus, thousands of workers and students who live downtown or in the dormitory communities of Portmore could access tertiary education much easier. The evening traffic that would result would help to keep businesses open and start bringing life to the capital city after six in the evening.

Another undertaking that could bring economic renewal downtown is a sustained project to clean and maintain Kingston Harbour in a manner befitting one of the finest harbours in the world, and one around which economic enterprises can be created.

All these projects would require investment, and every administration finds money for what it considers to be its priorities.

In this regard, I believe Government must lead by example. Despite the expressed desire to move Government offices back downtown, the Government continues to pay billions of dollars in rent for offices uptown, while buildings owned by the Government, downtown, remain empty.

We need all hands on board if we are to successfully tackle the problem of joblessness in our society. Only the most sincere collaboration between the private and public sectors can establish the kind of projects that would provide opportunities for sustainable and productive employment as well as a methodology for incentivising job creation. Our progress in this vital area will require fundamental changes in our way of thinking to give the national interest the priority it deserves.