FORMER president of the Private Sector Organisation of Jamaica (PSOJ) P B Scott has suggested that Government should focus on creating the right framework in which the private sector can excel and prosper.

The private sector now, he said, cannot grow without Government ensuring that the landscape is such that capital will flow into productive assets, other than the core areas of Government’s focus, which are education, security, justice and health.

Regional business tycoon Scott made the bold statements as he shared viewpoints on governments and their ultimate role in society recently.

The need for privatisation

This line of thought, however, is not new for the respected businessman, best known for his role as chairman and CEO of the Musson Group of Companies. With annual revenues exceeding US$1.5 billion and over 5,000 employees, the Jamaica-based conglomerate has established a strong presence locally and internationally, spanning over 30 countries. Its offshoots include the Facey Group, Seprod Limited, Productive Business Solutions (PBS), T Geddes Grant Distributors, General Accident Insurance Company, among others.

Seprod, just recently, officially opened the country’s the largest industrial investment in recent times, the $3- billion Jamaica Grain & Cereals Limited’s (JGCL) refurbished state-of-the-art Multi-Grain Milling operation. The operation is deemed the most modern in the Caribbean and Latin America.

During his recent presidency of the PSOJ, Scott was a strong advocate of a number of growth-inducing policies such as public-private partnerships (PPP) and privatisation. “Privatisation is absolutely key. One of the reasons for Jamaica’s economic problems is because of the Government’s debt, which is very high, and this is partially because they are involved in areas they simply should not be. If the Government gets out of the way of the private sector, and reduces its involvement, reduces its footprint, it will actually reduced its capacity to make mistakes and incur further debt in the future. Additionally, many of these assets will be better utilised by the private sector.”

The divestment of State-owned entities was also cited by Scott, in his discussion on privatisation, as necessary to boost efficiency and economic growth. He explained that even though not all such assets are a “drain on the public purse”, their ownership by the Government was, however, still not justified. Instead, he advocated that the Government should focus its resources on matters falling within its core functions and leave the rest to the private sector. “You cannot afford to have the little resources available allocated to areas that can be managed by the private sector. For example, hypothetically speaking, governments cannot be spending on bakeries and marinas, but at the same time not be able to purchase petrol for police cars. The resources available must go towards national priorities first, and these are the core functions of education security, justice and health.”

The need for timely policy change and implementation

Scott is known for having championed the unlocking of billions of dollars in the economy constrained by financial regulations, namely minimum capital requirements. In response to his call for an adjustment of the minimum capital test for insurance companies in Jamaica, the Financial Services Commission (FSC) said in late 2016 that the matter is being closely examined.

Then, Scott noted that the MCT for general insurance companies is 70 per cent higher than the next highest globally.

“If we were to simply dial this back to 150 per cent from the 250 per cent, that alone would potentially release approximately $40 billion of capital to risk weight assets that would employ people, and we would still be equal to Canada,” he argued at a PSOJ Hall of Fame induction event at the Jamaica Pegasus Hotel in St Andrew.

“Investment is a function of healthy financial systems, where individuals are confident in their ability to access capital and taking a risk in deploying it. The reality is that we have very conservative regulations, and as a result we are capturing capital and ensuring that it does nothing but stay in the bank and does not get invested in longer-term assets, or to employ people and lead to development and growth. We need to take the savings and investments of the country and align it to the policy directives, which is to grow,” stated Scott.

Further expounding on the possible roadblocks to changing the current regulations governing minimum capital requirements, Scott cited the high level of consideration which has to be given to changing monetary policy and the current regulations on financial services. “Shifts in monetary policy are a lot more complicated than making changes in fiscal policy. Therefore, any changes must be made in a responsible manner with a lot of consideration regarding the possible consequences. However, the biggest impediment is not actually starting the process after the consideration; it’s very possible to have paralysis by analysis where you end up doing nothing, and if you do nothing, then you won’t develop and grow. It’s important to start the work now.”

Maximisation of regional organisations

In his personal capacity as a businessman, Scott has long called for stronger collaboration of the private sectors of Caribbean countries, evidenced by his push for the full implementation of a Caribbean Business Council which would have a seat on Caricom’s Council for Trade and Economic Development (COTED). His position, however, goes against the tide of calls by many for Jamaica to instead focus on building stronger business relations with North America instead. Scott, on the other hand, did not view the two as mutually exclusive and instead expressed the need to take advantage of all relationships to the benefit of the country.

“One set of relationships does not substitute for the other, and neither is more important. However, we made a commitment to enter Caricom and we need to ensure that it works for Jamaica, which right now it is not”.

He further stated, “We opened up our market to products from Caricom countries. Other markets such as the Organisation of Eastern Caribbean States (OECS) did not — they have protections against Jamaica; that is not a free market. We all signed agreements for freedom of movement, but if a factory in Bog Walk closes down and production moves to Trinidad, for example, the people in Bog Walk cannot simply apply for that job in Trinidad. If production is moving without the movement of labour, then we have a big problem which can be alleviated by closer ties in the respective regional private sectors in order to lobby for the rational reforms.”

BPO sector as a key driver of Jamaican growth

The business process outsourcing (BPO) sector was cited as Jamaica’s most important sector for job creation, and subsequent growth. Our greatest asset is the people of Jamaica and if you look at the demographics of the country, you will see that we have a lot of young Jamaicans. If we want to be a productive society then we need to get the society into productivity, and that means people need to have jobs.

Scott explained that given the compatibility of the BPO sector with the skills present in Jamaica, it is important that the country makes the most of the opportunity to scale up employment and reduce unemployment. “I think the requirement of the BPO industry fits the skill set that exists in the employment market. That is, we speak English, we are closest to the largest market in the world, and we have an educated workforce that is trainable and employable.”

The Musson Group, through its subsidiary, Stanley Motta Ltd, is in the process of constructing what will become the largest BPO facility in the English-speaking Caribbean at 58 Half-Way-Tree Road. The facility will create more than 5,000 permanent jobs and is set to be completed in coming months.

Addressing the possible risks facing the further development of the industry, Scott cited the belief of some that strengthening of the Jamaican dollar several weeks ago is inherently good for the country. “Many see it as a sign of economic prosperity and I would strongly argue against that. If you are looking to have a tourism and BPO-led economy, the strengthening of the dollar causes the participants in these industries to have to swim against a tide.” Instead, he asserted, industries, and many others, would prefer the predictability of a stable economic environment. “Stable does not mean stagnant. If you can expect an inflation rate of a certain percentage, you can plan your business around it. What you dont want is to plan your business with rational beliefs and then something happens that makes the inputs of that rational logic not work anymore.”

Scott further opined that what is important for the currency is to have a fair valuation and for focus to be placed on inflation rather than valuation. “At the end of the day, what really affects the people of Jamaica is what happens on the shelf. If the dollar appreciates a little bit, apart from a few PR stunts here and there, the people of Jamaica really don’t see that change in their pockets. Businessmen do not pass the savings on, they keep it in profits — that’s the reality and it is not going to change. Therefore, we need things to function the way the market desires it to,” Scott said.