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Entrepreneurs want new Gov't to reverse effects of 90s financial meltdown
BY PATRICK FOSTER Sunday Observer writer fosterp@jamaicaobserver.com
Sunday, March 30, 2008
EMOTIONAL entrepreneurs, owing millions of dollars after the financial meltdown in the 1990s, have vowed to take their plight to Prime Minister Bruce Golding, calling for a halt on the sale of seized assets pending investigations into the operation of the Jamaica Redevelopment Foundation (JRF) and others handling FINSAC debts.
The entrepreneurs charged that it was the prolonged high interest rate policy by Government in the 1990s that precipitated the demise of indigenous financial institutions, and government should therefore take steps to address their current demise.
The Interest rates now being charged by the JRF are onerous and, in many instances, an accounting of the rapidly-mounting debts are not disclosed, the entrepreneurs said. They outlined cases, including one instance where a $2.8-million loan for the operation of a fish farm ballooned into a $55-million debt propelled by interest rates of up to 140 per cent.
"We are now calling on the present administration to do the right thing," said Neville Box, chairman of the newly-formed group Association of Finsac'd Entrepreneurs at a meeting held at the Stella Maris auditorium in Kingston last Thursday. "They must do everything in their power to re-engage local entrepreneurs," he added.
Relating tales of broken homes, bankruptcy, migration and suicide, the investors gave testimonials about the effect of high interest rates being affixed to a debt, originally sold at a highly discounted rate by the former People's National Party Government.
"They sold us out like cattle to the Texans," said one angry businessman, referring to Dennis Joslin, the US investor from Texas who bought the FINSAC debt at knock-down rates of a few cents in the dollar.
"Was it fair to sell the loan portfolio for a fraction of the principal amount, and then for the borrower to be required to pay the principal plus outstanding interest, particularly if it was calculated at ridiculous rates of up to triple digits?" questioned economist Keith Collister, guest speaker at the meeting.
The group said that individuals affected by FINSAC were unable to take positive action before now, alleging that all previous attempts were blocked by agents of the past administration. "They (the former administration) were not about to take any action that would amount to an admission of irresponsibility," said Box.
"I have a case in court, but I can't get anywhere," agreed another investor, who added that bailiffs had turned up at her house even while her case was unresolved.
"I have my tin of gas. I will burn it before they get it," she declared.
The Finsac'd entrepreneurs have also sought the support of the public in their efforts, urging people seeking real estate not to purchase from the JRF.
"Do not participate in any auction sale, or sale by private treaty of properties by the JRF and any other FINSAC company," said Box. "Do not contribute to this destruction of our country."
A seven-point proposal, which they said would be circulated throughout the island and would form the basis of a petition to Prime Minister Bruce Golding, was signed by the over 50 attendees at the meeting.
"We will start with this and continue around the country gathering more signatures," said David Wong Ken, attorney for the group.
Stated the proposal:
. Stop the sale of seized assets with a view to having them returned to their owners.
. Secure an acknowledgment from Government that it was irresponsible Government polices that caused the collapse of the economy.
. Correlate the collapse of the economy in the 1990s with today's high rate of employment, low national production, high crime rate and other social ills.
. Establish a commission of enquiry into the cause of the collapse, the so-called rescue of the financial sector by FINSAC at the expense of the entrepreneurial class and the bail-out of certain investors at the exclusion of others.
. Instigate an investigation and forensic audit of all FINSAC accounts, particularly those held by the Jamaica Redevelopment Foundation (JRF).
. Suspend the further disposing of seized assets pending the completion of the investigation and audit.
. Educate Jamaicans to the cause of the economic collapse with a view to prevent it from recurring.
Collister, meanwhile, outlined a sequence of events which he said led to the financial collapse, adding that chances of it recurring would be substantially reduced if Jamaicans understood why such an event occurred.
"Just as important as the personal needs of the many individuals involved in the crisis is Jamaica's wider need to understand why it happened," argued Collister.
He said that whilst a period of higher interest rates was necessary to combat Jamaica's very high inflation in the early 1990s, companies would be unable to survive any prolonged period of such rates, the approach taken by then minister of finance Omar Davies.
Collister also questioned whether selling the entire loan portfolio at a steeply discounted price to a group of foreign investors was the best alternative, both from the perspective of allowing Jamaican borrowers some chance to bid on their own loans, and in the eventual cost to the taxpayer.
"There are probably any number of examples where a borrower might have paid more to regain his property than the Government got from the auction," said Collister.
BY PATRICK FOSTER Sunday Observer writer fosterp@jamaicaobserver.com
Sunday, March 30, 2008
EMOTIONAL entrepreneurs, owing millions of dollars after the financial meltdown in the 1990s, have vowed to take their plight to Prime Minister Bruce Golding, calling for a halt on the sale of seized assets pending investigations into the operation of the Jamaica Redevelopment Foundation (JRF) and others handling FINSAC debts.
The entrepreneurs charged that it was the prolonged high interest rate policy by Government in the 1990s that precipitated the demise of indigenous financial institutions, and government should therefore take steps to address their current demise.
The Interest rates now being charged by the JRF are onerous and, in many instances, an accounting of the rapidly-mounting debts are not disclosed, the entrepreneurs said. They outlined cases, including one instance where a $2.8-million loan for the operation of a fish farm ballooned into a $55-million debt propelled by interest rates of up to 140 per cent.
"We are now calling on the present administration to do the right thing," said Neville Box, chairman of the newly-formed group Association of Finsac'd Entrepreneurs at a meeting held at the Stella Maris auditorium in Kingston last Thursday. "They must do everything in their power to re-engage local entrepreneurs," he added.
Relating tales of broken homes, bankruptcy, migration and suicide, the investors gave testimonials about the effect of high interest rates being affixed to a debt, originally sold at a highly discounted rate by the former People's National Party Government.
"They sold us out like cattle to the Texans," said one angry businessman, referring to Dennis Joslin, the US investor from Texas who bought the FINSAC debt at knock-down rates of a few cents in the dollar.
"Was it fair to sell the loan portfolio for a fraction of the principal amount, and then for the borrower to be required to pay the principal plus outstanding interest, particularly if it was calculated at ridiculous rates of up to triple digits?" questioned economist Keith Collister, guest speaker at the meeting.
The group said that individuals affected by FINSAC were unable to take positive action before now, alleging that all previous attempts were blocked by agents of the past administration. "They (the former administration) were not about to take any action that would amount to an admission of irresponsibility," said Box.
"I have a case in court, but I can't get anywhere," agreed another investor, who added that bailiffs had turned up at her house even while her case was unresolved.
"I have my tin of gas. I will burn it before they get it," she declared.
The Finsac'd entrepreneurs have also sought the support of the public in their efforts, urging people seeking real estate not to purchase from the JRF.
"Do not participate in any auction sale, or sale by private treaty of properties by the JRF and any other FINSAC company," said Box. "Do not contribute to this destruction of our country."
A seven-point proposal, which they said would be circulated throughout the island and would form the basis of a petition to Prime Minister Bruce Golding, was signed by the over 50 attendees at the meeting.
"We will start with this and continue around the country gathering more signatures," said David Wong Ken, attorney for the group.
Stated the proposal:
. Stop the sale of seized assets with a view to having them returned to their owners.
. Secure an acknowledgment from Government that it was irresponsible Government polices that caused the collapse of the economy.
. Correlate the collapse of the economy in the 1990s with today's high rate of employment, low national production, high crime rate and other social ills.
. Establish a commission of enquiry into the cause of the collapse, the so-called rescue of the financial sector by FINSAC at the expense of the entrepreneurial class and the bail-out of certain investors at the exclusion of others.
. Instigate an investigation and forensic audit of all FINSAC accounts, particularly those held by the Jamaica Redevelopment Foundation (JRF).
. Suspend the further disposing of seized assets pending the completion of the investigation and audit.
. Educate Jamaicans to the cause of the economic collapse with a view to prevent it from recurring.
Collister, meanwhile, outlined a sequence of events which he said led to the financial collapse, adding that chances of it recurring would be substantially reduced if Jamaicans understood why such an event occurred.
"Just as important as the personal needs of the many individuals involved in the crisis is Jamaica's wider need to understand why it happened," argued Collister.
He said that whilst a period of higher interest rates was necessary to combat Jamaica's very high inflation in the early 1990s, companies would be unable to survive any prolonged period of such rates, the approach taken by then minister of finance Omar Davies.
Collister also questioned whether selling the entire loan portfolio at a steeply discounted price to a group of foreign investors was the best alternative, both from the perspective of allowing Jamaican borrowers some chance to bid on their own loans, and in the eventual cost to the taxpayer.
"There are probably any number of examples where a borrower might have paid more to regain his property than the Government got from the auction," said Collister.