Wehby
The following is an excerpt from a speech delivered October 8 at the 41st Annual Awards Banquet of the Jamaica Manufacturers' Association.
Let's look at our performance over the last five or six years in term of gross domestic product (GDP) growth and compare with our colleagues in the Caribbean. Trinidad and Tobago's average growth was under 10 per cent, Barbados just under four per cent and Jamaica grew at just about one per cent.
We have had very little real growth in the Jamaican economy for a number of years. More frightening, however, is our debt over a period of time. In 1990, the total public debt for Jamaica was $43.2 billion, in 1997 that figure grew to $221.3 billion, and in 2007 it grew to $990 billion. Therefore, in a period of 10 years we had increased borrowings of over $770 billion and now our debt is over $1 trillion. What does this mean? It means that every Jamaican owes about $400,000. It also means that 54 cents out of every dollar goes towards paying our public debt. The public debt is basically crowding out the social sector.
This is what I would call a crisis in our country. If we have a crisis, we need to analyse the crisis, diagnose the crisis and come up with the appropriate solution.
REASONS FOR THE HIGH DEBT PROBLEM Consistently missing fiscal targets - when you miss your fiscal target, you have to borrow. In other words, the Government of Jamaica over the last 20 years or more has been spending more than we are earning.
The low rate of growth, which I referred to previously, is another reason why we are having this debt problem.
Strain of contingent liabilities - the loss-making public bodies such as Air Jamaica and the Sugar Company. When we constructed the first budget, approximately $16 billion was taken over from the Sugar Company and put on the central treasury. This means that the taxpayers of this country will have to service the debt of the Sugar Company.
Finsac - By June 30, 2000, the FINSAC debt was estimated to be approximately 40 per cent of GDP.
The current world economic crisis
As a country, we must balance our budget; we cannot continue to spend more than we are earning. During my tenure in government, I had many discussions with top economists in Washington and the United Kingdom (International Development Bank, World Bank, International Monetary Fund, etc.) and we came up with a number of major reform programmes. I believe that if these reform programmes are implemented we can stop the haemorrhaging, reduce the debt and have growth in our country.
Comprehensive tax reform system.
One per cent of corporations pay 71 per cent of CIT collected.
One per cent of registered entities accounts for 60 per cent of PAYE collected.
One per cent of companies pay 58 per cent of the GCT collected.
We need to make the tax system simpler, equitable, efficient and competitive.
Increase growth and competitiveness: The only solution for Jamaica's problem is to grow our way out of the debt. We need to create jobs, increase productivity and increase investments. In terms of growth and competitiveness, we need to roll out the red carpet and roll in the red tape. It is very frustrating to get business done in Jamaica.
Rationalisation of public bodies: I believe that Air Jamaica is one of the best airlines in the world but it requires cash. In looking at Air Jamaica's balance sheet, the negative equity was US$1 billion and the average accumulated losses over a number of years was US$100 million. We have to be dispassionate about it, the airline needs to be capitalised and we do not have the cash to do it. I am happy to say that the work has gone nicely with Dennis Lalor at the helm, and there is a partner who has submitted a proposal which I personally believe is a good proposal, and I am hoping that the Cabinet, Government and the Opposition will make the right decision.
Modernisation of the public sector: Fewer people are needed in the public sector and those remaining should be paid more, based on a productivity incentive. We need to start the process by stating the objectives and the core business of Government. It is not about making persons redundant; it is about reallocating resources in an efficient manner.
Controlling public-sector balances and debt: There are a lot of large companies that the Government controls (JUTC, Port Authority, National Water Commission, etc.) which I will refer to as selected bodies. The budget for these selected bodies should be debated in Parliament in terms of their strategy and the cost to taxpayers. Their reporting function should be treated similarly to that of companies listed on the Jamaica Stock Exchange. Therefore, they should start reporting their financial position and cash flow on a quarterly basis.
Improving public sector financial management: We need to implement a central treasury management system. The system that is currently in place is very inefficient. The central treasury management system will provide 'helicopter view' of the Government's cash and treasury. A submission was made to Cabinet which was approved. We need to ensure that it is implemented as soon as possible.
There are many talented people working in the Ministry of Finance and the Public Service but they do not have the necessary tools to work with. I am suggesting that a review be done of the IT system because the current system is very weak and a weak system will possibly produce errors. I would recommend that the necessary capital and technological resources be put in place to upgrade the computer system.
reform programmes
After being in government for two years, I am convinced that the implementation of the necessary reform programmes is often delayed because of the lack of institutional capacity in the various government agencies. I believe that, if the reform programmes previously highlighted are put in place in a timely basis, it will make a huge difference for our country. Therefore, let us put all the resources behind these reform programmes to get them implemented as quickly as possible.
High interest rates are a symptom of fiscal indiscipline over the years. Therefore, I would like to encourage the Jamaica Manufacturers' Association, Jamaica Exporters' Association, Private Sector Organisation of Jamaica, etc., to broaden their lobby efforts and request that we have a balanced budget in the shortest possible time. We must implement some significant reform programmes and I have highlighted some which I believe will make a huge difference.
We are a great country with a lot of challenges but we are too great to be struggling as we are now. We must unite as a country and put the politics behind us. Let us make the sacrifice for a better Jamaica.
May God bless our country.
Don Wehby is Group Chief Operating Officer at GraceKennedy Limited. Feedback may be sent to columns@gleanerjm.com.