What’s Holding Back Jamaica’s Reforms

Go Lean Commentary

IMF_4“The issues and solutions in the book Go Lean … Caribbean are spot on!” This can easily be the conclusion after considering the subsequent news article and contribution from local Jamaica-based blogger Dennis Chung. Go Lean serves as a roadmap for the implementation of the Caribbean Union Trade Federation (CU), a technocratic federal government to administer and optimize the economic/security/ governing engines of the region’s 30 member-states. Mr. Chung’s blog screams: “Now is the time to reboot!”

Jamaica had always been “on the radar scene” for this roadmap, as the country has always sought solutions from super-national schemes. The country was prominent in the now defunct West Indies Federation (1958 – 1962), Caribbean Free Trade Associations (CARIFTA) and its many subsequent iterations (CariCom and CSME – Caribbean Single Market & Economy), Organization of American States (OAS), Association of Caribbean States (ACS) and other multi-lateral agencies and entities. Jamaica has always depended on the “kindness of strangers”, conjuring images of a Depression-era “soup kitchen” scene; in fact, the “soup (agency) du jour” is the International Monetary Fund (IMF) and their reform agenda (of funding and technical consultancy).

Gathering research from a Jamaica Gleaner newspaper article (“IMF says Yes – US$1.27B loan for Jamaica approved – US$950M fund for financial sector” – Jamaica-gleaner.com – 5 February 2010), this is proof that for some time, rebooting the economic engines has been high on the agenda for Jamaica’s government and business leaders. That news article, and the Go Lean roadmap (10 Ways to Re-boot Jamaica – Page 239) reports that the global economic downturn has had a significant impact on the Jamaican economy for the years 2007 to 2009, resulting in negative economic growth. “The government implemented a new Debt Management Initiative, the Jamaica Debt Exchange (JDX) on 14 January 2010. The initiative saw holders of Government of Jamaica (GOJ) bonds returning the high interest earning instruments for bonds with lower yields and longer maturities. The offer was taken up by over 95% of local financial institutions and was deemed a success by the government. Owing to the success of the JDX program, the Government was successful in entering into a borrowing arrangement with the IMF in February 2010 for US$1.27 billion.”

See the actual news article here:

By Dennis Chung, CJ Contributor
Anyone who has been reading or listening to my recent commentaries would realize that I am fully in support of the reform agenda otherwise known as the IMF programme in Jamaica.

Similarly, anyone who has been listening to my commentaries in the past will also realize that I was not in favour of the prior IMF programmes, because I never thought they would have worked.

The reason why I think this current programme stands a better chance than the prior ones, is that I think that the approach this time is a fundamental shift.

The previous programmes focused on providing funding support to prop up the balance of payments and fiscal accounts, without undertaking any structural changes to the economic and social order.

In fact, the main theory under those programmes is that if we just devalued the dollar then everything would be OK after that. What occurred in those cases is that one had significant knee damage and got some steroid injections to keep running.

Under this current programme, before we get the steroid injections, we have done the corrective knee surgery to address the damaged ligaments and put a graft in to ensure that the damage is fixed.

The IMF has said after you surgically fix the knee, then we will provide you with the steroid shots you need (funding), so that you can not only run but outperform the competition.

So I think we stand a very good chance at recovery, but there are some significant risks we face.

So while we are better prepared to face the competition and finish the race, the fact is that our productivity is low because our muscles have been at rest for too long, and the shoes that we have are way past their useful life, so unless we change the shoes (support structures) we will only start the process of damaging our knee again, and maybe not finishing the programme successfully.

I have mentioned before that the significant risks to not realizing our goals are no longer with the fiscal side, but rest outside of the Ministry of Finance (the only other monetary situation that was causing significant challenge is the liquidity problem which the BOJ has sought to address). The main challenges we face today rest in three main areas.

These are:

(1) Energy costs. Here, a lot rests on the 360 MW project, and therefore, the management of it by the OUR [(Office of Utility Regulations)]. Energy is a significant challenge for manufacturers, and is certainly one of the reasons why we have seen growth in agriculture, construction, mining, and tourism and a decline in manufacturing in the last quarter. High energy costs inhibit Jamaica from moving from a producer of primary to secondary products.

(2) Crime. Indiscipline is the major contributor to our fundamental problem and hinders productivity. Crime and indiscipline lead to low productivity of labour and capital, otherwise called total factor productivity (TFP). Jamaica’s TFP has declined at a rate of approximately 1.5 percent annually on average since 1972. An example of indiscipline can be seen in an article I wrote about a few weeks ago concerning Jamaican timekeeping and meetings, road indiscipline and night noise. Unless we get serious about this, then productivity will not be positively affected. Our current attitude sees us unable to successfully compete and everyone grows at a faster rate than Jamaica. I want to also mention in particular the demise of societal values and the failure to protect our children from abuse. This all leads to an even more unproductive work force.

(3) Bureaucracy. This is probably the biggest challenge facing businesses and results in low productivity. I recently had an example, which illustrates that while the Government is trying to pull in one direction (to move the economy forward) its functionaries of government are pulling in the other direction. In the past week I have had two instances that remind me of this. The first is being stopped by a policeman to say he was carrying out a spot check (no reason other than that) and then proceeding to seek to extract something from me, which I refused to do because I told him it was not right.

The second instance, however, is a situation where I had to go to the rent board to resolve a matter, even though the tedious process already set me back two months as that is the time period they gave to me to deal with the matter. So if you are unable to afford to be without the income for two months, then you will lose your property before the rent board deals with it.

After waiting for the two months, though (trying to follow the rules) I get a call the day before the matter is to be dealt with, saying it has to be delayed because the person handling the matter was unavailable, and I would be advised to select another date. After a few days I called to complain about the situation and eventually had to report it to the parent ministry (Transport). I then received a call the day after for a hearing to be set, which date was inconvenient, but then again I had to seek a remedy outside of the rent board, as I might have grown too old waiting on them.

The question, therefore, is what is the purpose of the rent board, as they were supposed to have made the process easier, but only succeeded in supporting the violation of the rights of a property owner, ensured that the Government loses tax revenue because no income is collected during the period, and maybe their delay has caused others to lose their property, and has caused rental costs to be more expensive for future renters as one will now have to demand enough security deposit to compensate for the delay of the rent board.

So, while the government is pressing ahead with the reform agenda in many respects, there are other forces pulling in the other direction.

Caribbean Journal Online News Site (Retrieved 02/28/2014) –

The Go Lean roadmap posits that the Great Recession crisis lingers to this day and trumpets that “a crisis is a terrible thing to waste”. Now is the time for Jamaica and all of the Caribbean to forge permanent change by implementing the Five Year roadmap advocated in Go Lean … Caribbean. The book directly addresses the economic engines, security concerns and the governing optimizations needed to assuage these inadequacies identified so vividly in the foregoing blog:

Energy – Implementation of a Regional Power Grid to lower cost

Crime – CU jurisdiction for economic and cross-border racketeering

Bureaucracy – Deployment of lean processes/systems for efficiency

Plus, the book advocates to lean-in on the community ethos that would address the deficiency in societal progress/growth. Now finally, with the Go Lean implementations, the Caribbean region in general, and Jamaica in particular, can emerge and finally become a better place for all citizens to live, work and play.

Dennis Chung is a chartered accountant and is currently Vice President of the Institute of Chartered Accountants of Jamaica. He has written two books: Charting Jamaica’s Economic and Social Development – 2009; and Achieving Life’s Equilibrium – balancing health, wealth, and happiness for optimal living – 2012. Both books are available at Amazon in both digital and paperback format. His blog is dcjottings.blogspot.com. He can be reached at drachung@gmail.com.

Download the Book – Go Lean … Caribbean now!!!

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