MINISTER of Finance and Planning, Dr Peter Phillips, has warned Jamaican investors against depending on high-yielding government paper to protect them from competition, under the new Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF).

Dr Phillips’ caution was aimed primarily at financial institutions and other businesses depending on government paper over the years to remain profitable, as well as commercial traders thriving on the importation of foreign goods.

“In many respects, having existed in an environment which over many, many years of high interest rates and a lot of protected sectors, protected from the winds of competition, are able to secure profits simply by holding government paper, many elements in the investor community have lost the knowledge, skill, talent, to really face the competition,” Dr Phillips said Thursday.

“Bankers will have to return to the business of banking, rather than just simply purchasing (government) paper. Companies who had huge portfolios will have to learn, again, what it takes to take an idea from concept to production. That, in itself, will take time, but it is also, I suspect, going to cause some degree of apprehension,” he stated.

“People who lived simply on the basis of buying things from outside and selling them in the domestic market, if they want to sustain their profit levels, are going to have to look at how they are going to have to stop being traders and become producers, in some way; because those are the things that the programme is intended to achieve, to incentivise production and, in a sense, disincentivise the support of production elsewhere,” he added.

He said that while the objectives may not be achieved overnight, the country has to sustain its commitment to that path, “and not lose heart or be overwhelmed in the immediate, painful difficulties which we face”.

Dr Phillips was speaking at a press briefing at his ministry, Heroes’ Circle, on Jamaica’s performance in the first quarterly test under the new Extended Fund Facility agreement with the IMF.

He said that he believes investor confidence in the EFF agreement is rebuilding, and that this was evident from recently concluded discussions with the holders of Government of Jamaica bonds in both North America and Europe.

“I can say we are seeing the slow but steady and significant rebuilding of this confidence, certainly in the international community,” he said.

“There are many who did not believe that we would have concluded a programme and indeed they were pleasantly surprised,” the minister said.

“I am satisfied with Jamaica’s fulfilment of the prior conditions, and I think we need to emphasise that they were not easily achieved. They were achieved with the sacrifice and contributions of stockholders from all sectors of the country,” he added.

Phillips also said he believed that the successful conclusion of the first review under the new programme will add to the level of confidence, but that it would require “sustained implementation” over future quarters, in order to sustain the build-up in confidence.

He said that it would also require a more comprehensive communications effort, internationally and domestically, to promote the rationale behind the programme and, at the same time, take advantage of what has already been completed.

He pointed out that while the programme is being administered by the Government, it will require the full realisation of its objectives and the participation of the other stakeholders, mainly the investor community.