Jamaica on the cusp of success, but everyone needs to contribute
6th Quarterly EGC report to the nationMonday, August 27, 2018
I graduated from Excelsior in 1969 and was fortunate to have gotten a job because Jamaica had growth of 5.41 per cent.
I was fortunate to have kept my job because Jamaica had growth — growth in 1970 was 11.94 per cent. I was therefore able to save enough money to go to university in Canada. Jamaica had growth when I graduated, which enabled me to get a university education and live a fulfilled life.
Over the past 20 years to April 2016, GDP growth rate in Jamaica has averaged 0.50 per cent.
Over the past 10 years, to April 2016, GDP growth rate has averaged 0.20 per cent.
We have had an entire generation of stagnation, which means young graduates have no opportunities to get a job and live an independent life.
No growth means that there is no incentive to go to school. No growth means our youths will resort to criminality to survive. No growth means we will develop an expectation of hopelessness.
The conditions that created low growth also caused the following realities:
• Devaluation of all assets
• High level of crime
• A poverty spiral
• Low confidence
• Poorly educated graduates
• Decimation of the middle class
• Devaluation of societal values
• Devaluation of our currency
The opposite is also true.
High growth means the opposite of the above.
On April 27, 2016 the prime minister announced the creation of the EGC. At that inauguration I declared that, notwithstanding 0.2 per cent and 0.5 per cent growth, we will have five per cent growth over the next four years — 5 in 4.
The vision of the EGC:
To create a meritocracy.
For every Jamaican, there must be a clear path to fulfilment and prosperity.
For every Jamaican, there should be jobs and opportunities here at home.
For every Jamaican, there should be access to world-class health care.
For every Jamaican, there should be a national pension plan providing retirement in dignity.
The EGC's vision also is to build a model for every democracy to emulate.
On my appointment on April 27, 2016, I pledged five per cent GDP growth in four years — 25 times the average growth rate over the past 10 years.
• Listen to the stakeholders of Jamaica
• Design and advise of a plan
• Monitor and report
• Sell and motivate.
What has the EGC been doing over the past 2.33 years?
We have had over 340 meetings with stakeholders. I am coming to Jamaica every other week to work at the EGC after the first 100 meetings.
We collated the stakeholders' feedback and prescriptions into eight growth initiatives and 111 sub-initiatives.
We printed and distributed these in our 'Call to action' report which has become the basis for the legislative agenda of the Government.
To increase speed, one has to minimise friction and increase horsepower.
The eight policy initiatives that are summarised in our report are designed to address, on a legislative and policy basis, the aforementioned frictions:
• Maintain macro-economic stability and pursue debt reduction
• Improve citizen security and public safety
• Remove profit from crime.
• Reorganise the police force.
• Accelerate reform of the justice system
• Thoroughly address social exclusion
• Strengthen border control and maintain territorial integrity
• Improve access to finance
• Pursue bureaucratic reform to improve the business environment
• Development and Building Application Approvals
• Interface with the courts
• Business start-ups
• Paying taxes
• Port Community System
• Licensing, permitting and approval agencies
• Stimulate greater asset utilisation
• Build human capital
• Pursue labour market reform
• Implement a growth-oriented, open-door, immigration policy
• Harness the power of the diaspora
• Catalyse the implementation of strategic projects
• Implementation of growth initiatives
Some of the growth initiatives embedded in the successor agreement with the International Monetary Fund (IMF) are hardwired.
Success is one per cent strategy, 99 per cent implementation.
We have all heard the adage “What gets measured and monitored, gets done.” In this quarter we have seen:
a. Tax collection has exceeded the target for the first quarter of the 2018-19 fiscal year — $79.9B or 9.2 per cent above the $73.2B target. The Tax Administration Jamaica is on track to exceed the annual target of $320B.
b. Bank of Jamaica has lowered the policy interest rate to two per cent, the eighth consecutive decrease of 50 basis points (or 0.5 per cent) since 2016.
c. Inflation fell below the targeted four per cent to six per cent for the month of June 2018 at 2.8 per cent.
d. Net International Reserves reached its highest level at US$3.7B in August 2017 and is currently at US$3.14B.
e. Debt to GDP ratio has fallen to 105 per cent and is projected to dip below 100 per cent by the end of the fiscal year 2018-19.
f. Both Fitch and Moody's credit rating for Jamaica stand at B and the outlook in both cases was improved from stable to positive in 2018.
g. Unemployment was recently reported at 9.7 per cent for the first quarter of the 2018-19 fiscal year (the end of June 2018), the lowest in over 10 years.
h. The second quarter 2018 data of the Survey of Business and Consumer Confidence continues to highlight a sustained period of confidence amongst both groups, with an average of 150 points. This represents the highest recorded since the start of the survey in the second quarter of 2001.
i. Poverty rate has decreased from 21 per cent to 17 per cent in 2016. This represents a 19 per cent drop in the incidence of poverty, the largest annual reduction in 10 years, and last but certainly not least
j. GDP growth of 1.8 per cent.
These metrics are pillars that we can stand on. Slowly we are beginning to build investor confidence that potentially Jamaica is a place where they can come and do business.
This confidence must be exploited. We must not get complacent because we have a whole 3.2 per cent to go and we still have the live, work and raise families aspect of Vision 2030 to accomplish as well.
This is why the EGC, as lead growth enabler, has been taking the approach to aggressively collaborate with ministries, departments and agencies and bring them together with private sector implementers to identify issues and hindrances to growth and devise practical solutions that can lead to rapid, sustained and inclusive economic growth.
Sixteen hundred years ago, St Augustine said: “Hope has two beautiful daughters — Anger and Courage. Anger at the way things are, and Courage to make them the way they ought to be.”
I read a book entitled The 10 commandments for business failure. It could easily have been entitled 'The 10 commandments for country failure'.
You will fail if you:
1. quit taking risk
2. are inflexible
4. assume infallibility
5. play the game close to the foul line
6. don't take time to think
7. put all your faith in outside consultants
8. love your bureaucracy
9. send mixed messages
10. fear the future.
As I pointed out before, over the last two years we have held more than 340 consultations and stakeholder engagements, and the results are showing.
But there is much work left for us to do to attract and retain the type of investments that will allow us to achieve our economic growth target of five per cent GDP growth by 2020.
For example, the largest pool of investable funds in this country currently valued at over $600 billion lies in the pensions and insurance industries. This is approximately one-third of Jamaica's current GDP. Currently these funds are mainly invested in low yield government securities and financial instruments.
This pool of capital needs to be un-incarcerated, and we have been imploring the Financial Services Commission (FSC) from 2016 to act. They did in early 2017, but subsequently a “study” was requested, which was due at the end of June 2018. We are now told that the scope has been increased, which will put the conclusion now to March of 2019, two years later.
I implore the minister of finance and the FSC to do what's necessary to expedite the completion. We cannot afford to have long-term capital to be legislatively locked, which is unlike other countries such as the US, Canada, and Norway.
Secondly, one of the areas emphasised strongly in the EGC's call to action was the need to accelerate reform of the justice system. As cases meander through our court system over the years, what happens is witnesses lose interest, their memories fade and they become vulnerable to cross-examination. Ultimately strong cases become weakened, justice is not served and our collective security continues to be compromised.
One of the projects established as part of the justice reformation thrust is the implementation of measures to allow witnesses to record their statements and give evidence via video link in at least 50 locations. This was supposed to have been completed by February 2018 and it was later delayed to April 2018. This target has also been missed. The delays are attributed to the halting of the project due to unmet software and hardware requirements by the consultant as well as resulting legal issues between the Ministry of Justice and the contractor, an Italian company.
The EGC has been engaging the Ministry of Justice and the European Union (EU) to identify strategies to bring this project back on track. In the interim, the ministry has established 19 mobile units to ensure that requests for recording of witness statements can be facilitated. Ministry of Justice, let's fix this quickly. I am imploring the minister of justice, the head of the EU, and the contractor to immediately solve this issue. We need to clear our courts.
Thirdly, if we are going to attract the kinds of growth-inducing investments we seek we will have to continue to work hard at removing the high levels of bureaucracy from our processes, particularly in the development and building application approval process.
This is a major hindrance which is now compounded by the fact that the development orders for all parishes which should have been completed by June 28, 2018 have not been completed in their entirety. This can be attributed to a number of factors including delayed receipt of feedback from municipalities and printing of the provisional development orders.
The EGC conducted an investigation of the process and together with the enabling entities — National Environment and Planning Agency and Jamaica Printing Service — we came up with strategies that have enabled the printing of all draft development orders by June 24, 2018. The EGC has also been following up with the various municipalities, mayors, ministers and the office of the chief parliamentary council to ensure that the completion of this initiative is expedited.
I am imploring the municipalities, ministries, mayors, and the office of the chief parliamentary council to once and for all get the development order finished so we can clear up the backlog of projects that are lingering in the bureaucracy and retarding growth.
The commencement of the pilot of Public Portal Module 2 of the Amanda System in three local authorities by June 2018 and the commencement of the upgrade of the IT infrastructure in eight of the authorities to support the effective functioning of the Amanda System have also been delayed due to software and procurement-related issues.
The EGC has been working extensively with key enablers from JAMPRO, the Cabinet Office and the Ministry of Local Government and Community Development to look at the development approval process in its entirety, highlight the gaps, and come up with strategies to improve the predictability, consistency and quality of the process and expedite the implementation of critical components including the standardisation of development approval fees.
The EGC will continue this work. We will be relentless in following up on agreed strategies and lend technical expertise where necessary to drive the timely reform of the development approval process.
In conclusion: Fellow Jamaicans, we are seeing green shoots in the economy. We have all sacrificed to have got to this point of achieving the benefits of fiscal reforms. We are now being encouraged by increasing GDP results. We now should be encouraged by the results and redouble our efforts to drive and push and be relentless in our focus. Economic growth will be the panacea to most of our problems. The responsibility for achieving our fullest potential doesn't rest with the EGC, Government or the private sector only, these entities are necessary, but not sufficient.
Success is going to require the effort of every citizen. We all now have to put our best foot forward and continue to build on the achievements we have worked so hard for since 2013.
Success will require the ministries, departments and agencies to be even more assiduous, diligent, efficient, not focused on covering your derrière, and everyday ask the question: Is this the best contribution that I can make to the turnaround of my country?
Success will require our private sector to be even more entrepreneurial, risk-taking, aspirational, efficient, forward-thinking and opportunistic, and everyvday ask the question: Is this the best contribution that I can make to the turnaround of my country?
Success will require our citizens to be more vigilant in not supporting corruption, criminality, abide by the law, be good role models and every day ask the question: Is this the best contribution that I can make to the turnaround of my country?
We are at the cusp. Over the past five years, since the IMF agreement, we have all made many sacrifices to get to this point where we can now see the light at the end of the tunnel.
Confidence is at the highest level since Independence, investors are once again looking at Jamaica, cranes are now visible in Kingston. Debt to GDP is down from 149 to 105 and trending lower, thereby improving our fiscal space to eventually be able to improve our ability to afford better infrastructure, schools, etc. Our reserves are strong, currency is stable, investors are opening up their wallets and investing in Jamaica again.
We encourage the Government and the Opposition to continue working together in areas of national interest to ensure that we never go back to the dark days pre-2013, and to ensure the realisation of 5 in 4.