PRESIDENT of the Jamaica Manufacturers and Exporters Association John Mahfood says getting manufacturers to have a “risk-taking attitude” will take more than just government policies which have created a stable macroeconomy.
Mahfood was responding to Jamaica Observer queries on Friday about the finance minister's call for the sector to invest more.
Dr Nigel Clarke, in an appearance on the Mayberry Investor Forum last Wednesday, called on manufacturers to follow the example of developers who have used the stable macroeconomic conditions to engage in a construction boom that has defied the general economic fallout caused by the novel coronavirus pandemic.
“The policymaker only is a part of the equation,” Clarke told the audience. “In the same way if I obliterated stamp duty and reduce transfer tax and the governor [of the Bank of Jamaica] reduced interest rates down to 0.5 per cent, and [if] no entrepreneur stood up and said, 'Wait, I'm going to build an 11-storey building. I'm going to build a five-storey building,' then nothing would have happened. I'm saying to you, we need a similar risk-taking attitude when it comes to building new factories,” he continued.
Expanding on his call, Clarke added, “We can build a factory in the same way we build a building. Our future is going to depend not only on the nature of the policymaking, but on the quality and on the risk-taking attitude of our entrepreneurs.”
Mahfood, in response to the call for a risk-taking attitude, was terse.
“I'm not sure what that means, to tell you the truth,” he told Sunday Finance.
Pressed more, he added: “When you are a manufacturer and you decide to expand...you make an evaluation of everything and then make a decision, yes or no. Every decision you make, you take a risk.”
Mahfood, a manufacturer himself who operates Jamaican Teas, said at the start of 2020 he was about to invest US$5 million in expanding his factory but decided against doing so because of the uncertainties surrounding the novel coronavirus at the time.
But while he cited the programmes with the International Monetary Fund from 2013 to 2019 brought stability and helped the country “weather the storm brought by COVID”, that was not enough to cause manufacturers to start investing en masse in the same way developers are investing.
Doubling down on his point, Mahfood asked: “Why is it that [the Government] cannot encourage large foreign companies to come to Jamaica and manufacture? I think the answer is clear. Why would a company leave the US or the Far East to come to Jamaica [to manufacture] if your security costs, if your labour cost, if your electricity costs and if your fuel costs are higher in Jamaica?”
He also questioned what achievements the Economic Growth Council can show for its efforts to get the economy growing, saying: “To my mind, I have not seen a report from the body showing what are the issues affecting manufacturing and how to address them.”
However, Clarke, in making his argument at the Mayberry forum, pointed out, “The conditions that exist here today, these conditions are conducive to the production of goods, and we are seeing some of the companies involved in the production of goods in Jamaica, how well they have been doing.”
Mahfood, in agreement, said: “The good environment has helped and companies have invested... You would have seen companies like Fosrich expand their manufacturing base significantly with a view to exporting to the region and for the local market, and the product they are manufacturing is heavily used in Jamaica... This hold's true for other entities like Boss Furniture with bedding and furniture.”
But he concluded that most of the reticence among manufacturers to take greater risks stems from a long memory of being burnt by the financial meltdown of the late 1990s.
“We had the financial meltdown which destroyed a bunch of manufacturing companies, but the Government didn't save those, they saved the banks.”
“It's easy for him to say manufacturers have to have 'a more risk-taking attitude', but we have to put it in context why manufacturers are how they are today.”
He pointed out that in the 1970s and 1980s manufacturing accounted for close to 20 per cent of economic activity in Jamaica, but now barely accounts for 8 per cent overall, because “of bad government policies” in the 1990s.
Mahfood also reiterated his call for the Government to appoint a minister whose sole focus is growing exports which would ultimately happen from growth in the manufacturing and agriculture sector.
“Look how many people [the prime minister has put in OPM [Office of the Prime Minister)... make one of them, like Floyd Green, since they thought well enough of him to bring him back as a minister, at least give him something better than NIDS [national identification system] and...that could [have] been minister of export,” he stated.