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Dr Phillips outlines the way ahead for the Jamaican economy
BY AL EDWARDS
Friday, January 20, 2012
THE new Minister of Finance Dr Peter Phillips gave a comprehensive assessment of the Jamaican economy and how his administration intends to facilitate greater growth at a Mayberry Investment Forum held at the Knutsford Court Hotel on Wednesday night.
Looking back over the last 50 years, the minister of finance said Jamaica had achieved significant gains; among them being the formation of a competent and reputable Bank of Jamaica, a non-partisan Planning Institute of Jamaica and a strong regulatory framework for the financial sector. The challenge for the next 50 years, Dr Phillips declared, was how does the country create and sustain a cohesive, safe, peaceful and prosperous society that will successfully compete on a global scale while maintaining its unique identity.
CEO of Mayberry Investments, Gary Peart with the Minister of Finance Dr Peter Phillips at the Mayberry Investment Forum held at the Knutsford Court Hotel on Wednesday night. (Photo: Jermaine Barnaby)
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Addressing the vexing issue of anaemic growth, Dr Phillips said: “There is one aspect of the nation building project that has not been successfully realised. That is the ability to provide sustained economic growth to deliver on the expectations of the Jamaican people for meaningful jobs and a good quality of life.
“To compensate for the weak growth performance there has been a build-up of an unsustainable public debt stock. This debt has now become a drag on our ability to grow faster. The debt to GDP ratio of more than 212 per cent in 1984 was reduced to about 111 per cent in 2007. The ratio climbed to about 131 per cent of GDP by the end of March 2011. The stranglehold of the national debt is impeding the provision of funding for vital social services and necessary capital investments to support growth.
Assessing the previous administration’s financial performance he pointed to a lack of fiscal prudence which led to the mismanagement of contract negotiations with public sector workers, massive off-budget expenditure, and the failure to effect the timely implementation of public sector, tax, and pension reforms.
“We are now at risk of squandering the relief provided by the JDX, which so many people made significant sacrifices to secure. The JDX provided some breathing space to allow us to do the other needed adjustments to allow faster growth. A sad fact is the amount budgeted to be spent in the 2011/12 budget for the JDIP was deliberately ignored in the run-up to the last election and was overshot by US$80 million or close to J$7 billion. This was sprinting with it!
“More debts were racked up by the Government through the ordering of some 96 million Euros worth of buses that were not budgeted for and which will have to be paid for. The financial profligacy took place despite the existence of a Fiscal Responsibility Framework entrenched in law that prohibits such actions. This fact speaks to the need for sanctions for such deliberate breaches flowing from ministerial action. It was these breaches that contributed to the breakdown of trust between Jamaica and our international partners over the last year. There has been a failure to adequately manage the fiscal situation and to contain expenditure in the face of declining revenues. The end result is we have a very difficult national challenge on the fiscal front which we must tackle with urgency.
The IMF situation
Since December 2010, Jamaica has failed to submit itself for the prescribed tests and the whole US$1.27-billion Stand-by Arrangement seems to have run aground. This has serious implications for the balance of payments and the country’s reputation on the international financial markets. It may even lead to a downgrade by the rating agencies. The minister of finance is currently having talks with visiting IMF officials in the hope at arriving.
Speaking to this matter, Dr Phillips declared: “The IMF Programme which expires May 2012 has not been completed because various critical structural benchmarks and targets were delayed or missed. An entirely new programme now has to be negotiated and new targets set focusing on growing the economy. The failure to successfully complete the Stand-by Arrangement resulted in the non-disbursement of multilateral funding including US$220 million from the IDB. We expect that progress on the IMF negotiations will help unlock these funds.
“A sustainable resolution of the problem must start with an acceptance that there is a problem and a determination to fix it. The Government is determined to fix the problem and we will fix it in a framework of national and international partnership.”
Dr Phillips further added that in the medium term, any programme going forward must involve comprehensive tax reforms, the reform of the public sector pension system, public sector transformation and a reduction in public sector costs.
“Wages constitute only one of the costs of the public sector. We will have to reduce the other cost components of running the public sector — utilities, rent, waste, corruption and general inefficiencies.”
Stability and low interest rates
As it currently stands, interest rates are at the lowest level for decades. Added to that, the currency remains stable, the reserves are more than adequate and inflation is hovering comfortably at around 6 per cent. These underpinnings of the economy bode well. Many have concerns that with the new administration, the country will once again return to high interest rates and a wildly fluctuating currency that makes doing business untenable. The Jamaica Manufacturers’ Association (JMA) has already expressed grave returns on the mooted return of the former Governor of the Bank of Jamaica Derrick Latibeaudiere playing a role in the economic management of the country. Dr Phillips once again made it clear that that there will be no policy of high interest rates and in fact that was never the case. The Finsac situation which cost the country 20 per cent of GDP was as a result of the prevailing economic and financial landscape of the 90s.
“The aim is to arrive at macro-economic stability. This has to be maintained, and must and will include low inflation and low interest rates. There is no policy of high interest rates and there will be no policy of high interest rates. We are committed to providing the macro-economic framework that will support low and competitive interest rates. We would like to get the rates even lower if conditions allow.
“Let us recognise, however, that macro-economic stability is not an end in itself. There is stability now partly because there is low demand for credit and foreign exchange due to the weakness in the economy. Banks are competing vigorously to lend and in doing so are lowering interest rates required to identify opportunities to generate increased revenues which must be in the context of the promotion and inducement of growth in the Jamaican economy.
Creating a climate for doing business
If the Jamaican economy is to exhibit signs of meaningful growth then it must bolster its international competitiveness. Dr Phillips maintains that the country has to improve significantly in this area if it is to drive export growth, investment and job creation.
“Jamaica cannot be “the place of choice to live, work, raise families and do business” if bureaucratic and other obstacles exist at every step of the way in the attempt Jamaica’s overall competitiveness has nosedived from 67th position in 2006 to 107th position in 2011, its worst performance ever, and in the World Bank’s ‘Doing Business’ rating from 43rd in 2006 to 88th in 2010-2011. We are ranked 133rd out of 187 countries in terms of savings rate, 172nd in paying taxes and 103rd in registering property. There will be a coordinated campaign to remove bureaucratic red tape.
“If as minister of finance I have to err, I will err on the side of providing for businesses — small, medium and large — the environment that they need to expand production, hire people and grow the economy. This effort will require a team approach working with the ministries of justice, commerce and investment through the Development Council.
More investments
The Minister made it clear that the active recruitment and coordination of investments by the State is an absolute priority. Here, he said: “Faster growth can be triggered, fast-tracked and ensured by Foreign Direct Investment (FDI) flows. We would also like to invite the private sector with capital to invest and propose ideas for investment to have discussions with us about how to move such investments forward. FDI must be targeted and deliberately coordinated.
“That was how we achieved the so-called ‘Spanish invasion’ in the tourism sector in 2007.
“There now has to be an effective divestment programme for large blocks of state-owned land to ensure production of food for the growing hotel sector and for export. We will revitailse investment promotion to boost foreign direct inflows, growth and jobs. Our government has a solid track record in this area, which helped to put Jamaica at the top of small island states in investment promotion in the period prior to 2007. Already there are additional new hotel investments, both local and foreign ready to come on stream.”
During his presentation Dr Phillips outlined key sectors that will be targeted in order to generate greater growth. They are:
1.Energy
2.Tourism
3.ICT
4.SMEs
5.Packaging and divestment of public assets through the Jamaica Stock Exchange
6.Revitalisation of foreign direct investment flows
7. Improved business facilitation
8. Revamping of the incentives regime
Related Stories:
Finance minister upbeat about IMF talks
Gov't to slash budget
Read more: http://www.jamaicaobserver.com/busin...#ixzz1k6GH9dEM
BY AL EDWARDS
Friday, January 20, 2012
THE new Minister of Finance Dr Peter Phillips gave a comprehensive assessment of the Jamaican economy and how his administration intends to facilitate greater growth at a Mayberry Investment Forum held at the Knutsford Court Hotel on Wednesday night.
Looking back over the last 50 years, the minister of finance said Jamaica had achieved significant gains; among them being the formation of a competent and reputable Bank of Jamaica, a non-partisan Planning Institute of Jamaica and a strong regulatory framework for the financial sector. The challenge for the next 50 years, Dr Phillips declared, was how does the country create and sustain a cohesive, safe, peaceful and prosperous society that will successfully compete on a global scale while maintaining its unique identity.
CEO of Mayberry Investments, Gary Peart with the Minister of Finance Dr Peter Phillips at the Mayberry Investment Forum held at the Knutsford Court Hotel on Wednesday night. (Photo: Jermaine Barnaby)
1/1
Addressing the vexing issue of anaemic growth, Dr Phillips said: “There is one aspect of the nation building project that has not been successfully realised. That is the ability to provide sustained economic growth to deliver on the expectations of the Jamaican people for meaningful jobs and a good quality of life.
“To compensate for the weak growth performance there has been a build-up of an unsustainable public debt stock. This debt has now become a drag on our ability to grow faster. The debt to GDP ratio of more than 212 per cent in 1984 was reduced to about 111 per cent in 2007. The ratio climbed to about 131 per cent of GDP by the end of March 2011. The stranglehold of the national debt is impeding the provision of funding for vital social services and necessary capital investments to support growth.
Assessing the previous administration’s financial performance he pointed to a lack of fiscal prudence which led to the mismanagement of contract negotiations with public sector workers, massive off-budget expenditure, and the failure to effect the timely implementation of public sector, tax, and pension reforms.
“We are now at risk of squandering the relief provided by the JDX, which so many people made significant sacrifices to secure. The JDX provided some breathing space to allow us to do the other needed adjustments to allow faster growth. A sad fact is the amount budgeted to be spent in the 2011/12 budget for the JDIP was deliberately ignored in the run-up to the last election and was overshot by US$80 million or close to J$7 billion. This was sprinting with it!
“More debts were racked up by the Government through the ordering of some 96 million Euros worth of buses that were not budgeted for and which will have to be paid for. The financial profligacy took place despite the existence of a Fiscal Responsibility Framework entrenched in law that prohibits such actions. This fact speaks to the need for sanctions for such deliberate breaches flowing from ministerial action. It was these breaches that contributed to the breakdown of trust between Jamaica and our international partners over the last year. There has been a failure to adequately manage the fiscal situation and to contain expenditure in the face of declining revenues. The end result is we have a very difficult national challenge on the fiscal front which we must tackle with urgency.
The IMF situation
Since December 2010, Jamaica has failed to submit itself for the prescribed tests and the whole US$1.27-billion Stand-by Arrangement seems to have run aground. This has serious implications for the balance of payments and the country’s reputation on the international financial markets. It may even lead to a downgrade by the rating agencies. The minister of finance is currently having talks with visiting IMF officials in the hope at arriving.
Speaking to this matter, Dr Phillips declared: “The IMF Programme which expires May 2012 has not been completed because various critical structural benchmarks and targets were delayed or missed. An entirely new programme now has to be negotiated and new targets set focusing on growing the economy. The failure to successfully complete the Stand-by Arrangement resulted in the non-disbursement of multilateral funding including US$220 million from the IDB. We expect that progress on the IMF negotiations will help unlock these funds.
“A sustainable resolution of the problem must start with an acceptance that there is a problem and a determination to fix it. The Government is determined to fix the problem and we will fix it in a framework of national and international partnership.”
Dr Phillips further added that in the medium term, any programme going forward must involve comprehensive tax reforms, the reform of the public sector pension system, public sector transformation and a reduction in public sector costs.
“Wages constitute only one of the costs of the public sector. We will have to reduce the other cost components of running the public sector — utilities, rent, waste, corruption and general inefficiencies.”
Stability and low interest rates
As it currently stands, interest rates are at the lowest level for decades. Added to that, the currency remains stable, the reserves are more than adequate and inflation is hovering comfortably at around 6 per cent. These underpinnings of the economy bode well. Many have concerns that with the new administration, the country will once again return to high interest rates and a wildly fluctuating currency that makes doing business untenable. The Jamaica Manufacturers’ Association (JMA) has already expressed grave returns on the mooted return of the former Governor of the Bank of Jamaica Derrick Latibeaudiere playing a role in the economic management of the country. Dr Phillips once again made it clear that that there will be no policy of high interest rates and in fact that was never the case. The Finsac situation which cost the country 20 per cent of GDP was as a result of the prevailing economic and financial landscape of the 90s.
“The aim is to arrive at macro-economic stability. This has to be maintained, and must and will include low inflation and low interest rates. There is no policy of high interest rates and there will be no policy of high interest rates. We are committed to providing the macro-economic framework that will support low and competitive interest rates. We would like to get the rates even lower if conditions allow.
“Let us recognise, however, that macro-economic stability is not an end in itself. There is stability now partly because there is low demand for credit and foreign exchange due to the weakness in the economy. Banks are competing vigorously to lend and in doing so are lowering interest rates required to identify opportunities to generate increased revenues which must be in the context of the promotion and inducement of growth in the Jamaican economy.
Creating a climate for doing business
If the Jamaican economy is to exhibit signs of meaningful growth then it must bolster its international competitiveness. Dr Phillips maintains that the country has to improve significantly in this area if it is to drive export growth, investment and job creation.
“Jamaica cannot be “the place of choice to live, work, raise families and do business” if bureaucratic and other obstacles exist at every step of the way in the attempt Jamaica’s overall competitiveness has nosedived from 67th position in 2006 to 107th position in 2011, its worst performance ever, and in the World Bank’s ‘Doing Business’ rating from 43rd in 2006 to 88th in 2010-2011. We are ranked 133rd out of 187 countries in terms of savings rate, 172nd in paying taxes and 103rd in registering property. There will be a coordinated campaign to remove bureaucratic red tape.
“If as minister of finance I have to err, I will err on the side of providing for businesses — small, medium and large — the environment that they need to expand production, hire people and grow the economy. This effort will require a team approach working with the ministries of justice, commerce and investment through the Development Council.
More investments
The Minister made it clear that the active recruitment and coordination of investments by the State is an absolute priority. Here, he said: “Faster growth can be triggered, fast-tracked and ensured by Foreign Direct Investment (FDI) flows. We would also like to invite the private sector with capital to invest and propose ideas for investment to have discussions with us about how to move such investments forward. FDI must be targeted and deliberately coordinated.
“That was how we achieved the so-called ‘Spanish invasion’ in the tourism sector in 2007.
“There now has to be an effective divestment programme for large blocks of state-owned land to ensure production of food for the growing hotel sector and for export. We will revitailse investment promotion to boost foreign direct inflows, growth and jobs. Our government has a solid track record in this area, which helped to put Jamaica at the top of small island states in investment promotion in the period prior to 2007. Already there are additional new hotel investments, both local and foreign ready to come on stream.”
During his presentation Dr Phillips outlined key sectors that will be targeted in order to generate greater growth. They are:
1.Energy
2.Tourism
3.ICT
4.SMEs
5.Packaging and divestment of public assets through the Jamaica Stock Exchange
6.Revitalisation of foreign direct investment flows
7. Improved business facilitation
8. Revamping of the incentives regime
Related Stories:
Finance minister upbeat about IMF talks
Gov't to slash budget
Read more: http://www.jamaicaobserver.com/busin...#ixzz1k6GH9dEM
Paul Marin -19 is one thing, 20 is a whole other matter. It gets even worse if they win the UCL. *groan*. 
05/18/2011.MU fans naah cough, but all a unuh a vomit?-Lazie 1/11/2015
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