Beyond the IMF

[Sir X]

Beyond the IMF

Published: Sunday | February 17, 2013 1 Comment


Bank of Jamaica Governor Brian Wynter (left) makes a point to Minister of Finance Peter Phillips at a Jamaica House media briefing last Thursday. - Ricardo Makyn/Staff Photographer





Claude Clarke, Contributor

Last Monday night, the Government rolled out its most effective communication asset: a combination of Portia's popular appeal and Peter's business rapport. It was impressive - that is until it ended with an obviously contrived, gratuitous and highly inappropriate embrace that might have diminished the seriousness of the occasion.Notwithstanding, together the two most senior members of the Government delivered a well-crafted appeal for public support of a mission to lead the country to economic viability. The delivery was polished and articulate, but the message was much less than credible, framed entirely, as it was, in the context of paying down the national debt. This, the prime minister and her minister of finance argued, would unlock the door to economic prosperity. How I wish that that were true.
The Government's position is that our economic problems would be solved by reducing our debt-to-GDP ratio, from 140 per cent where it currently stands, to 95 per cent in seven years. To achieve this, it will appropriate resources from the national economy with a combination of expenditure cuts, new taxes (including an unprecedented raid on the NHT) and a second domestic debt-exchange programme.
These measures may very well improve government's fiscal accounts and satisfy the targets set by the IMF. But nothing that has so far been announced will provide the means to stem the country's continuous economic decline.
Encourage economic activities
To reverse the economy's downward slide, Government needs to do much more than balance its books. It will need to change the structure of the economy by encouraging the growth of productive economic activities and creating opportunity for the people to uplift their economic well-being.
However, in its apparent anxiety to improve the appearance of its accounts and impress the IMF, the Government gave no indication that it had a plan to expand the economy. Nor did it exhibit any understanding of how the debt was created or the importance of addressing the economic dysfunction that caused it.
Our gargantuan debt didn't start simply with overspending by Government. In fact, government's Budget deficit is much more a symptom than a cause of our rising debt. Our debt is a product of a macroeconomic policy framework that encourages the growth of incomes beyond the value of the country's productive output. These inflated incomes create 'unfunded demand', which could only be financed by debt.
Most destructive is the fact that escalating incomes increase costs within the economy, leaving our production stubbornly uncompetitive against foreign goods and services. Accordingly, Jamaican consumer demand has been directed away from Jamaican goods and services and towards goods and services from abroad.
Much of the foreign exchange used to support this consumption can be seen in the country's large foreign-exchange debt and the rapid decline of our net international reserves. Our import of goods and services during the last 10 years has exceeded our exports by almost US$25 billion (more than J$2.3 trillion). And it is principally government debt that has financed this deficit.
We will never put our economy on a sustainable path to recovery until Government confronts the truth that the country, through its economic policies that consistently inflate incomes, has been living an economic lie.
However, the measures announced on Monday night ignored this macroeconomic defect and focused on strategies that could end up harming, and not helping, the economy. The presentation was entirely silent on how the economy will grow. Together, the measures, including the previously announced expenditure cuts and the subsequently revealed tax hike, will contract the economy and severely curtail economic activity. Debt reduction is to be achieved through austerity rather than economic growth and is more likely to cause pain than gain.
Contracting the economy without a reformed tax code that provides investment incentives will be harmful. The economy will also be hurt if policies to enhance competitiveness are not provided. The failure to adopt trade policies that will give Jamaican producers fair access to the local, regional and extraregional markets will also have the same negative effect. And the absence of a comprehensive solution to our energy dilemma will continue to be a millstone on the economy.
Economic contraction
It is unfortunate that the one thing common to all the measures announced is economic contraction.
Increasing taxation and extracting resources from the country's principal source of financing for housing development will reduce economic activity.
A domestic debt exchange may reduce the cost of Government but it will also be an added cost to the private economy, because unlike with foreign debt, the interest saved by Government will be taken from the Jamaican economy, causing it to contract.
Reducing the government's wage bill is a fiscal imperative and will benefit the country's economic competitiveness. But it, too, will be economically contractionary in the short run.
It is for these reasons that I am surprised the Government could have presented a package of measures to fix the economy that will only sap its vitality and not give it renewed life through increased production and exports. The treatment the Government has prescribed to heal the economy might very well become the medicine that kills it.
Reducing the debt-to-GDP ratio from 140 per cent to 95 per cent over seven years without economic growth could mean that $78 billion, or 6.4 per cent of our total economic output, will be extracted from the commercial life of the country each year. Does the Government or the IMF believe that that is a workable plan? Or are they prepared to take the economy over the cliff into deep depression in the expectation that, in the end, we will rise from the ashes?
As I have said in previous articles, the basic elements required to put the economy on the path to recovery and growth are clear and indisputable. We need to:

• Reduce the outsize cost burden Government imposes on the economy, without compromising the services necessary to preserve social and economic order.
• Reform the tax code to generate revenue adequate to pay for a smaller government and to service our debt. However, the size of the primary surplus used for debt servicing should not be so big as to jeopardise the country's social and economic health.
• Develop monetary and fiscal policies to bring competitiveness to costs within the economy.
• Provide a programme of fiscal incentives and stimuli, along clear and transparent policy lines, to attract domestic and international investments to productive activities.
• Adopt trade policies to create competitive room in the domestic, regional and extraregional markets for Jamaica's producers, who have been handicapped by harmful government economic policies.
• End the 40-year-long jawboning of the subject of energy and institute a practical energy policy that reduces our extraordinarily wasteful consumption of energy and brings electricity prices below 15 cents per kilowatt-hour.

With which of these vital imperatives can the Government or IMF disagree? None, you might think. But the instinct of political self-preservation in our political decision makers is likely to have been the fly in the ointment preventing agreement on a development-focused plan and robbing the country of its opportunity to begin the process of turning our economy around.
The IMF could not be so foolish as to believe that weakening the country's economy is in the interest of the creditors it represents. It is, therefore, difficult to understand why - if the Government understood what is required for economic recovery and is really serious about achieving it - it has not crafted a recovery plan that the IMF would be unable to refuse.
Live within our means
Economic order, symmetry and growth will never be ours until the practice of living beyond our means is brought to an end, and an income policy designed to align consumption with production is in place.
Today, the new IMF requires its client governments to own their programme. It is able to do this because it is the Government itself, and not the Fund, that determines the programme it will use to meet the benchmarks set to assure the Fund that the Government will be able to meet its debt-servicing obligations. The Government gets to choose the approach it will take, as long as it is credible. Whether it uses monetary, fiscal, trade or administrative tools to deliver the results is its choice.
The decision to rely on austerity instead of economic stimulation or a judicious mix of both was the Government's, not the IMF's. Its choice of pure austerity while trumpeting concern for the poor is not only a betrayal of the trust of the poor but a sad reflection on its lack of preparation for the mandate it received 13 short months ago.
The plan we chose to meet our obligations should not be limited to our relationship with the Fund but must look to the future of the Jamaican people beyond the IMF.
Claude Clarke is a businessman and former ministry of industry. Email feedback to columns@gleanerjm.com and claude_clarke@msn.com.

[Sir X]

Bitter medicine: hard times for us all

Published: Sunday | February 17, 2013 0 Comments


Jan Kees Martijn, IMF mission to Jamaica, talks the economy with Pamela McLaren, senior director of debt management in the finance ministry, at the launch of the NDX on Tuesday. A glum-looking Horace Dalley, minister responsible for the public service, listens in on the conversation.- Ricardo Makyn/Staff Photographer





Orville Taylor, Contributor

There's many a slip 'twixt the cup and the lip, and the Government now knows that there is a big difference between looking from the outside and critiquing, and being on the inside and doing.Under the previous Jamaica Labour Party (JLP) regime, the idea of returning to the International Monetary Fund (IMF) resurfaced. For some of us who observed, studied and researched through the period 1975-1992, it was like a combination of Brooklax and Epsom salts.
For almost two decades, the Jamaican working class took the bitter medicine and, as with the laxative, it was just belly 'cuttings' and 'aparation' but nothing good came out in the end. Then, with the same set of mouths, the then JLP Government warned that the 2008 global financial crisis wouldn't affect us, and we were told that the IMF was a different IMF.
While the current Government might be quick to say, IMF means It's Man a yaad Fault, we in academia did warn that agreements with the Fund typically involved a process that ultimately widened the gap between rich and poor because the working class had to disproportionately bear the burden.
The structural adjustment programmes of the IMF have produced little, if any, benefit for the working classes anywhere in the world. Looking back at the lost decade of the 1980s in which countries reeled and suffered under the programmes, the International Labour Organisation observed that the programmes created 'social debt'. Simply put, this meant that workers were made to bear the burden ostensibly for the short to medium term. Given that the IMF is a bunch of economists and bankers, it was felt that they should do things to allow for the local capitalists to earn and pull the country out of the economic crisis.
Presumably, when the economic targets were met, the social debt would be repaid to workers and the poor, as more welfare-oriented policies would be put in place and some trickling down of the economic spoils would take place. In other words, equity would eventually come the way of the working class who paid high prices for the economic outcomes. However, as with all the bankrupt trickle-down theories from the 1950s to the present, the postponed benefits for the poor never come to fruition.
The measures generally involved reduction of the public sector, decrease in social welfare spending, wage ceilings, more taxes for working classes, but little control on profit. I am not certain what the experts and politicians expected, but in my view it is the same I and the same MF.
NECESSARY MEDICINE
Nevertheless, an IMF agreement is as necessary as a set of immunisation shots are for entry in school, and whosoever's fault it is, it is the People's National Party's (PNP) time to govern. The Government is putting its own stamp on the agreement and is implementing a slew of new policies which, at best, are frightening. First, now swallowing some of its earlier words, the PNP Government has apparently recanted on its prior misgivings.
Faced with a debt-to-gross domestic product ratio of 130 per cent in 2010, the JLP Government came up with the idea of a Jamaica Debt Exchange (JDX). It was not a ludicrous or malevolent programme, because the majority of the national debt was owed to Jamaicans or persons who operate within the Jamaican economy. In 2012, the ratio was 140 per cent
The sad truth is that the Jamaican private sector, and in particular the financial subsector, has been predatory, counterdevelopment and unpatriotic. For all the criticism that it has proffered against successive administrations, only the manufacturing group within the Chamber of Commerce has any moral authority to speak. All others - with the possible exception of the information and communication technology industry, which offers offshore data services - are net users of foreign exchange, make the balance of trade worse, and put pressure on the local currency.
What many financial institutions have been doing, even after the crash of the sector in the 1990s, is essentially lending the State money via government paper and other instruments and thus profiting from the adversity facing the nation. For years, money brokers have grown fat off the high interest rates that the Government pays, instead of investing in businesses and other activities which will bring real growth. True, they have invested pension money in some of these government instruments. However, the majority of the benefits goes to a small number of 'entrepreneurs' who earn their pound of flesh from their services.
Given that in most countries, including the United States, economic growth is mostly attributed to the growth of small and medium enterprises, one would have thought that a patriotic private sector would have been pushing for lower interest rates and even lower ones for small business and agriculture. Only the People's Cooperative Banks and credit unions can say they are people and development-oriented.
Nonetheless, JDX was opposed and criticised by the then Opposition, and Omar Davies declared, "I say very, very calmly and with all good intentions to the minister, let us not even contemplate taking any such step; I am referring to the possibility of a JDX 2."
My suspicion for the recanting by the PNP is that unlike those who can criticise from the periphery, it has displaced the inspectors and loader men and is now in the Driva's seat. Yet, as with the JLP initiative in 2010, I fully support JDX 2.
Never mind that Fitch and Standard & Poor's are going to give us a lower rating because we have unanimously agreed to 'default on our debt'. It is those same institutions which gave poor advice and wrong information and thus led to the global economic crisis. As I said last week, oftentimes the opinions by non-nationals are unfair, biased and reflect an ignorance of things Jamaican.
TRUST DEFICIT
Still, there are elements of the recent announcements by the Government which are, at best, unnerving. The private sector is antsy over the high tax rates which it sees as being a surreptitious betrayal. Trade union members have once again been left out of critical discussions. In fact, my own view is that any team to the IMF should have included the hierarchy of the unions. There is a major trust deficit with the Government, and the unions and private sector feel betrayed.
Furthermore, it doesn't help that the administration has not been very forthright and forthcoming on these matters or other affairs of State. Indeed, the Government has been often accused of being missing in action last year. It also doesn't help that it is Peter Phillips, the same person who is believed to have secretly made an agreement with a foreign state and had gone against popular sentiment in his own party and challenged the Comrade leader, is the main protagonist. He must be careful.
These are trying times and a real social partnership is needed. It cannot be the anti-worker policies of the past. As said in other columns, we need to look at what Barbados did in the early 1990s. Its private sector and trade unions trusted each other to have open dialogue. And the Government was open, too.
Dr Orville Taylor is senior lecturer in sociology at the UWI and a radio talk-show host. Email feedback to columns@gleanerjm.com and tayloronblackline@hotmail.com

[Sir X]

No conscience. Betrayal. Dread.

Published: Sunday | February 17, 2013 2 Comments




Gordon Robinson, Contributor

Somebody once said something about cock mouth. So, let the record speak for itself.Peter Phillips (December 31, 2012): "The discussions with the Fund's technical staff are virtually at an end."
GR ('Peter's pie in the sky'; The Sunday Gleaner, January 13, 2013): But the IMF says: "The IMF remains fully committed to helping Jamaica achieve these fundamental objectives ... and discussions in this direction are continuing."
Discussions are "in this direction" only ... doesn't sound like "at an end".
Portia Simpson Miller (February 11, 2013): "As we approach the final stages of our negotiations with the International Monetary Fund ... ."
Translation for English-only speakers: Nobody's listening to anything we say.
Peter Phillips (December 31, 2012): "The Government is working to bring the negotiations to a conclusion that's mutually satisfactory ... . This agreement must be in [Jamaica's] best interest and provide protection for the most vulnerable."
GR ('Peter's pie in the sky'; Sunday Gleaner, January 13): "... It's OUR debt that's the problem."
Portia Simpson Miller (February 11, 2013): "As a country, we haven't delivered on the expectations of growth and development. Every administration must share this responsibility.
"In keeping with my administration's commitment to the Jamaican people, we're now finalising another [IMF] agreement ... . These negotiations have underscored the point that sustained growth won't materialise with Jamaica's present level of debt."
Translation for English-only speakers: We'll promise, not perform. We've been promising for 35 years. Let's try one more promise ("oops, sorry, commitment") and see if that works.

Well, they tell me of a pie up in
the sky
waiting for me when I die.
But between the day you're born
and when you die
they never seem to hear even
your cry

Peter Phillips (December 31, 2012): The final stage of the discussion centred on the challenges of halting the debt accumulation process [that's "debt accumulation" not "debt"; he's saying that all we need to do is stop further "accumulation"; in other words, if we say "no mas", debt problem cured], raising economic efficiency in both the private and public sectors, and creating the conditions for self-sustaining growth ... .
These include: ... .
f) How best to protect the most vulnerable ... ."
GR ('Peter's pie in the sky'; Sunday Gleaner, January 13): "... It's OUR debt that's the problem."Portia Simpson Miller (February 11, 2013): "As a country, we haven't delivered on the expectations of growth and development. Every administration must share this responsibility.
"In keeping with my administration's commitment to the Jamaican people, we're now finalising another [IMF] agreement ... . These negotiations have underscored the point that sustained growth won't materialise with Jamaica's present level of debt."
Translation for English-only speakers: We'll promise, not perform. We've been promising for 35 years. Let's try one more promise ("oops, sorry, commitment") and see if that works.

Well, they tell me of a pie up in
the sky
waiting for me when I die.
But between the day you're born
and when you die
they never seem to hear even
your cry

Peter Phillips (December 31, 2012): The final stage of the discussion centred on the challenges of halting the debt accumulation process [that's "debt accumulation" not "debt"; he's saying that all we need to do is stop further "accumulation"; in other words, if we say "no mas", debt problem cured], raising economic efficiency in both the private and public sectors, and creating the conditions for self-sustaining growth ... .
These include: ... .
f) How best to protect the most vulnerable ... ."
GR ('Peter's pie in the sky'; The Sunday Gleaner, January 13): ... It's OUR debt that's the problem.
Portia Simpson Miller (February 11, 2013): The centrepiece of the IMF agreement that we'll sign is a commitment to significantly reduce the debt from the current level ... . This is critical to our Economic Reform Programme.
Bringing down the debt is a fundamental requirement to secure Jamaica's future.
Bringing down the debt is fundamental to us moving forward to create jobs.
Bringing down the debt is also fundamental to enable us to provide the quality services and facilities that will meet the needs of our people."
Translation for English-only speakers: It's taken a while but I think we finally get it. Done wid the most vulnerable. We haffi pay di damn debt.
Prior actions
Peter Phillips (December 31, 2012): "Following conclusion of the negotiations, there'll be prior actions to be undertaken SUBJECT TO THE APPROVAL THE CABINET AND THE NECESSARY CONSULTATIONS WITH LOCAL STAKEHOLDERS. (my emphasis) ... .
"The time that's being taken to reach agreement isn't unusual, and there are complex and weighty issues at stake ... .
"Even as we issue this update, negotiations are continuing with the IMF to arrive at an agreement that is beneficial to the people of Jamaica."
GR ('Peter's pie in the sky'; The Sunday Gleaner, January 13): Why isn't there agreement on simple fiscal issues after 12 months? What exactly are the "complex and weighty issues" Peter insists are "at stake"? ... While the IMF speaks easily understandable language, Peter appears not to grasp the essentials of fiscal responsibility, and still clings to "sovereignty".
While he's insisting on a "policy" on tax waivers, the IMF has reduced the tax waiver issue to a "technical" level ... .
The IMF insists on a higher primary surplus (read: public-sector cuts and tax-collection enhancements); while Peter waffles about investing "great effort in advancing pension reform, wage negotiations, reducing the effective size of the public-sector Establishment, tax administration ..." What effort? ... Debt can only be reduced from primary surpluses.
Portia Simpson Miller (February 11, 2013): "To achieve this necessary level of debt reduction, greater levels of accountability and discipline are required. My administration is setting the example ... .
"Success can only come from a truly national effort ... .
"There are some very steep mountains to climb ... :
We'll redouble our efforts to collect taxes due to the Government.
We'll do all we can to provide more efficient, effective and considerate public service (sounds like increasing the primary surplus; ROFL).
We'll lead the national fight against corruption ... ."
Peter Phillips (February 11, 2013): "We must intensify the process ... by further raising our primary surplus to 7.5% ... .
First, we'll have to take concrete steps to reduce and virtually eliminate discretionary tax waivers ... .
We'll also need to ... enable the achievement of a wage-to-GDP ratio of 9% by 2015-2016 ... ."
Peter Phillips (in Parliament; February 12, after 5 p.m.): The Gleaner reports: "Phillips dawdled until late in the sitting, during a lengthy presentation in a debate on the First Supplementary Estimates, before unveiling a tax package that brings almost $40 billion in new annualised taxation ... during the 2012-2013 financial year." The report continues: "Phillips also introduced a range of new measures related to general consumption tax (GCT) that will come into effect on March.
"The telephone call tax (TCT) has been included in the taxable base for the purpose of calculating GCT ... .
He announced that all fees and taxes paid at the ports as part of the GCT base are expected to rake in another $1.5 billion. Another $200 million is expected to be earned through an amendment to the legislation to account for GCT on the face value of prepaid vouchers/airtime."
Translation for English-only speakers: Well, that was excellent timing. The SUVs are already here, tax-free. It's almost as if we knew this tribulation was just around the corner. Now we can start by getting everybody else to sacrifice and pay their taxes. After all, if we're not comfortable, how can we work for the "most vulnerable"?

So as sure as the sun will shine
I'm gonna get my share now,
what's mine.
And then the harder they come
the harder they fall, one and all.

When I first saw Portia and Peter together last Monday night performing what looked like a dancehall duet; Peter promising no haircuts; Portia promising growth; I thought I was at a Rasta convention.
Then the two kissed and walked off into the sunset to live happily ever after painting a picture of utter bliss. Only the wicked, rich banks had taken a mild laxative called National Debt Exchange. No biggie. Who could criticise that smooth insertion of clarity for the nation's bowels? Maybe Les Green could be the last addition to the list of 'Enemas' of the State. We should've known he was trouble as soon as he said he was green, but who'd have thunk he'd purge so much?
Shut up and put up
But, has anybody noticed there's still no IMF agreement? And there obviously won't be one until we shut up and put up. The dancehall duet having failed to convince any but the most sycophantic, somehow, an IMF staff release was hurriedly secured. Its statement that there's an agreement on "key elements" would be hilarious were it not so pathetic. It's expressly "subject to" board approval, but the board won't "consider" it for another six weeks AND THEN ONLY IF there's "timely completion of prior actions to be taken by the Jamaican Government and ... necessary financing assurances".
After 14 months, we've finally got the IMF staff sorted. Conditionally. Goody, goody two-shoes!
But, it's put up time. Having accepted the colonoscope, we must find a way to insert it with minimal resistance? So a cunning scheme, hatched in secrecy, was unveiled with expert timing and ruthless execution. Deliberately waiting until after working hours on a public holiday's eve, a swift and scathing strike, of which Nicodemus would be proud, lashed "most vulnerable" with another $16 billion of taxes.
Annually, $11 billion otherwise available for "most vulnerable's" housing solutions will instead go to the Consolidated Fund where it'll no doubt disappear. When families send barrels, "most vulnerable" will pay GCT on the contents' value AND on other government taxes already charged. When "most vulnerable" calls the doctor, they pay taxes on the telephone tax.
No warning; no discussion; no representation from "most vulnerable's" elected MPs who banged tables and celebrated. Just licks. If the licks weren't enough, insult was added to injury as those of us inclined to ask questions were called denigrating names or added to the 'Enemas' of the State list and flushed from the bathroom of government concern.
Betrayal
Why can't we just get along? Elementary. When Government slithered, hat in hand, to the banks begging $17 billion, there was no hint of an intention to flog Jamaicans with a dollar of additional taxes. One private-sector group has already called it a betrayal. That's kind. A Government deliberately asking for handouts while engaging in material non-disclosure is a national disgrace with zero credibility. Whatever happened to "there'll be prior actions to be undertaken SUBJECT TO ... THE NECESSARY CONSULTATIONS WITH LOCAL STAKEHOLDERS ... ?"
That same Government plots to keep the tax lash a secret until the eve of a public holiday probably expecting an apathetic citizenry to 'cool off' on Ash Wednesday and so take no aggressive action the next day. These are actions of a government which knows it's about to do wrong. Why else hide so much from so many? I'll bet dollars to donuts some government MPs were taken by surprise. Still, they thumped, banged and applauded on cue. Guess who wins this year's Nobel Prize for Desperation?
When will we understand that any system permitting a finance minister to impose taxes willy-nilly with zero prior consultation with his boss, the electorate, is inherently corrupt, and intolerable? What are we going to do about it? Grumble, suck salt through a wooden spoon and grumble again?
Or will we stand up like 21st-century citizens and refuse to be abused in this despicable way? Make no mistake about it: Peter Phillips was right when he promised no haircuts. This is a full scalping.
Peace and love.
Gordon Robinson is an attorney-at-law. Email feedback to columns@gleanerjm.com.

[Sir X]

Designing a political path for a different economic result

Claude Robinson

Sunday, February 17, 2013

THE Portia Simpson Miller Administration last week inched closer to an agreement with the International Monetary Fund (IMF) by taking some prior actions demanded by the fund as preconditions to a deal which the Government regards as essential to reducing the massive public debt and laying the foundation for economic growth.

The process began Monday night with an unprecedented joint broadcast by Prime Minister Simpson Miller and Finance Minister Dr Peter Phillips announcing a restructuring of Jamaica's domestic debt that will cost savers and pensioners $17 billion per year over the next seven years. Bond holders have until February 21 to accept the offer; indications are that they will.

Then on Tuesday, Dr Phillips presented a $15.9-billion tax package to Parliament that will, among other things, see increases in property taxes, transfer tax, tax on dividends, customs fees, gambling and telephone services. The Government will also draw down $11 billion a year over the next four years from the National Housing Trust (NHT).
These are tough measures that have ignited major debates that are likely to intensify as the details, the impact on consumers and taxpayers at all levels and the implications for the overall economy, sink in.
There are many hard questions as we move forward: How will giving up $44 billion affect the ability of the NHT to provide desperately needed housing and housing solutions, especially among low-income contributors?
Will the Government be able to collect the new taxes, given the actual experiences of shortfalls in revenue collections over the past decade?
And most important, will this pending IMF agreement be implemented and will it achieve the results? And will the country achieve the admittedly modest one to two per cent economic growth projected over the four-year life of the agreement?
In December 2009, we may recall, the country got word of a previous agreement that would, among other things, address our economic imbalances and put "Jamaica on a path of sustainable growth"; resolve the problem of an "unsustainable" debt position at over 130 per cent of GDP, and other weaknesses in the economy.
Among other things, the Golding Administration committed itself to implementing a credible medium-term fiscal framework and a proactive debt management strategy to put the debt-to-GDP ratio on a clear downward path.
We know how that turned out. And now we are being asked to believe once more. Only this time, the debt is 140 per cent of GDP.
Different result requires different actions

This time around, the finance minister seems resolute. "I would not want to put any other generation of Jamaican officials through the process I have just gone through..." he said last Thursday. "But that is the price you have to pay when you allow things to get to the stage" where the Jamaican economy is now.
Dr Phillips says there was no alternative to the tax package and though he's "open to suggestions and concerns" for tinkering around the edges, the basic package will remain intact. In Jamaica's dire circumstances and uncertainties in the global economy, the IMF was the only lifeline and the offer that the Administration took was the only one available. It was a choice between "difficult and more difficult, between bad and worse," he said at a media briefing at Jamaica House Thursday.
Of course, the $1.7-trillion debt reflects the deeper underlying problem of an economy distorted by overconsumption, using other people's money and under-production due to our uncompetitiveness, low productivity, a largely untrained labour force, and high crime rates. According to UWI professor of economics, Anthony Clayton, crime costs approximately 7.1 per cent of GDP.
Many of the solutions to our problems are within our grasp; not buried in any IMF agreement, essential though that is under the present circumstances. Grasping them requires us to think and act differently.
Dr Phillips wants the country to "collectively focus on how we can achieve the targets" rather than pointing to why they may not work. That would be different.
Government must lead by example. It is within their remit to set and implement a rational economic growth agenda including lowering electricity prices; implementing tax reforms that will reduce rates and bring more people into the tax net; making it easier to start and do business; and encourage major investment and expansion in agriculture to produce about half of the US$1-billion food import bill. Government can do a great deal more to generate economic activity in the small and medium-size enterprises.
Investors who are now faced with the reality of lower returns on government paper have a choice: Seek 'safe havens' abroad or look for alternative opportunities in the local economy. Choosing the latter course will involve our political leadership at the highest level, forging confidence-building measures and facilitating an open process with business and labour.
Government can also lead the wage restraint agenda. Specifically, Prime Minister Simpson Miller should send a clear signal of commitment to fiscal prudence and public sector efficiency by cutting the size of the political executive and demanding greater performance. The rest of the public sector would get the message.
Eschew political gamesmanship

The prime minister and the finance minister have, quite fairly in my view, been criticised for not clearly stating in their broadcast Monday night that a substantial tax package would be presented for passage in the Parliament the following day.
They didn't have to provide specific details; but it was not enough to rely on previous statements signalling that there would be additional taxes as part of what is required to achieve a primary surplus of 7.5 per cent of gross domestic product (GDP) over the next three fiscal years.
Indeed, the finance minister acknowledged the criticism when he told reporters at his media briefing, "I accept the observation that it might have served a useful purpose to restate all the conditionalities in the broadcast of February 11th."
That "useful purpose" is that frankness and transparency in the communication of bad news are essential, especially when the messenger desperately needs broad understanding and buy-in if the message is to have any chance of being accepted. It would avoid suggestions of deceptive tactics and begin to establish a basis for getting "all hands on deck" which, according to the minister, was a basic requirement for success.
In addition, the Opposition should have been given more time to critique the tax measures before they were asked to vote on it. It would have avoided criticism that this was a 'Nicodemus' approach to tax measures. It now appears that the IMF insisted on swift passage of the tax measures to avoid the very political wrangling that has broken out.
While the Opposition had a point about not being consulted, it hardly rose to the level of a walk-out of Parliament. Opposition Leader Andrew Holness and his finance spokesman Audley Shaw should have been in the House to critique the measures.
Instead we now have an increase in the partisan decibel level in which Mr Shaw has not only taken on the Administration but the IMF for what he has described as a "scandalous" deal that will hurt the productive sector and the broader economy.
We have the makings of political bickering and the excessively tribal nature of our politics. A party takes a position in Opposition and does the very opposite when it forms government and vice-versa. We have had so much of that over the years, I think it is embedded in a dysfunctional politics that seems inherently incapable of collaborating on important matters.
Will we, as Jamaicans, demand a different kind of politics that will ensure that Jamaica does not walk this path again?
kcr@cwjamaica.com











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[Sir X]

Taxation Twilight Zone

ID: INTERACTIVE DIALOGUE
David Mullings

Sunday, February 17, 2013

MY column last week was titled 'The Twilight Zone', based on a discussion I had with a friend recently. After the surprise revelation of yet another tax package this past week, in a manner that I cannot support, I cannot help but feel that we really are in the Twilight Zone.

Over the last two years I have written a number of columns on comprehensive tax reform versus the piecemeal approach that has consistently been taken by successive PNP and JLP administrations. In my January 2011 column titled 'Many plans, little progress (part 2) - Tax reform', I quoted the following from the Medium Term Socio-Economic Policy Framework 2009-2012 that was supposed to guide the first three years of Vision 2030:



(L-R) PHILLIPS… is now undertaking a debt restructuring exercise similar to the JDX. SHAW… said he had started to implement some of the tax reforms and hoped to accomplish more by the end of 2011.

1/1

"Jamaica has one of the worst tax systems in the world, ranking 173rd out of 181 countries in the overall ease of paying taxes, 175th in the number of required annual tax payments, 148th in the time required to pay taxes and 133rd in total tax rate."
At the time of the column I was able to ask the then minister of finance, Hon Audley Shaw, about the many tax reform reports and his plans during a Mayberry Investors Forum. Back then he indicated that the time for studies and reports was gone, it was action time. He also pointed out that he had started to implement some of the reforms and hoped to accomplish more by the end of the year. No comprehensive reform ever took place and the JLP eventually lost the next election.
We most certainly have improved in the tax rankings due to some reforms that were implemented, but we have stalled and now risk slipping backwards.
For those with short memories, the JLP attempted to implement three successive tax packages in 2009 that amounted to $42 billion in new taxes. The reason for three packages was that each one underachieved the revenue goals.
The current PNP Administration is now undertaking a similar debt restructuring exercise of local debt (our international bondholders are not slated to lose any interest or be asked to participate, as far as I can tell so far) and another tax package. The PNP announced $19.3 billion in new taxes last May and now another $16.4 billion. This is separate from seeking to secure $11.4 billion per year for the next four years from the NHT, amounting to some $45 billion.
Based on history repeating itself so many times with tax packages, I most certainly feel that I am watching an episode of The Twilight Zone.
Once again, instead of comprehensive tax reform, which keeps getting lip service from both sides of the House, we are getting piecemeal tax policy, some of which cannot be called reform. To lower corporate taxes on non-regulated financial entities to 25 per cent in the recent past, and now wanting to add a five per cent surtax to bring the rate back up cannot be called reform.
It is well known that if Jamaica collected all the taxes owed we would be quite safe. Which administration is going to finally provide the Tax Administration and the Customs department with the budgets they need to improve collections?
It raises the question: are we really interested in improving collections?
David Mullings was the first Future Leaders representative for the USA on the Jamaica Diaspora Advisory Board. He can be found on Twitter at twitter.com/davidmullings and Facebook at facebook.com/InteractiveDialogue










Read more: http://www.jamaicaobserver.com/colum...#ixzz2LAFxGCx9

[World Fan]

[World Fan]

Petah!? Petah!? Why you do this to us, Petah!?

http://www.listal.com/viewimage/4144869

[Willi]

Bun up di ting.

[Willi]

Why dem wont listen to this man?

Him talk more economic sense than all the PNP MoF in the last 20 years. Him better dan MoY too...

[Assasin]

Claude should be in business, or economics policy. Claude is saying what a whole heap of the business and former business people are saying, only that them can't label him except saying he was Finsaced.

He writes some very good article.

[Muadib]

Is not talking duh dis ting...

[Willi]

True and I know that MoY was not able to do all he wanted, but CC ah speak some hurtful truths...

[World Fan]

More funds for JEEP

http://jamaica-gleaner.com/latest/article.php?id=42946

[Willi]

$171,000 a head fi crash program.