Better must come (Pt 2)

This is the second instalment of a lightly edited presentation by Claude Clarke to the Jamaica Manufacturers' Association Annual Awards Banquet 2013.

Had the Government been aware of the critical importance of manufacturing to our economic success, it might have realised that, just as it was important to establish an oversight committee to monitor the implementation of the IMF agreement, there was also an urgent need to create a body with strong industrial-sector participation to assist it in shaping policies to increase the economy's productive output.

A body such as this would have advised that, although tight fiscal management is necessary to reduce our debt, growing the economy is another way to do it. And that it is possible for the arrangements, for both could work in harmony. That body would have made the additional point that there is no better way for a country like ours to grow and create sustainable jobs than through the high-value creating activity of manufacturing.

For example, the economic rise of Singapore, the most outstanding of the much-admired Asian tigers, was spurred by manufacturing. While Jamaica's manufacturing as a percentage of GDP was being halved, in Singapore, it leapt from 10 per cent of GDP in 1960 to more than 30 per cent just 20 years later.

Manufacturing alone was responsible for half of the country's dramatic growth. That was the key to sending it on its way to the ranks of the First World.

A production-focused advisory group might have been able to convince the Government that a significant reason for Singapore's success in manufacturing was keeping the production process free of government taxes.

Our Government would have been convinced of what the Singapore government knew: every dollar of taxes and fees that is added to the cost of production is a job that is endangered, an export dollar that is lost, or an import dollar that is wasted.

Government would have recognised that taxing the inputs to production and losing the greater revenue that would be earned on the output is being penny wise and pound foolish.

No manufactured product should have to absorb any government tax or fee before the goods are sold and taxes can be applied on an equal basis with imports that enter the market.

And surely the Government could not be aware of how irrational it is to handicap Jamaican producers with taxes and fees while it surrenders as much as $15 billion of revenue to our CARICOM competitors as subsid, to make them more competitive than our own producers in our own market.

DIRE STRAITS

Jamaica is in a dire fiscal situation. We are literally up the economic creek without a paddle. But a paddle is at hand and available: billions of dollars the Jamaican people have been foregoing for the benefit of CARICOM countries that are economically far better off than we are. Billions of dollars directly invested in moving jobs out of Jamaica and out of the reach of the Jamaican worker.

This is no time for the legalistic niceties of litigation to solve a problem that threatens the economic lifeblood of our country. Trinidad did not go to the courts when it imposed a virtual trade embargo on Jamaican imports to rescue its manufacturers in the 1980s.

It is time for the Jamaican Government to fulfil its mandate to protect the economic interest of the Jamaican people. It is time for the Jamaican Government to put the Jamaican people first. And it is time for the Jamaican Government to assert its sovereign authority and suspend the Common External Tariff of CARICOM, at least for the duration of the IMF programme.

In the meantime, Jamaican producers continue to live with an uncompetitive currency that is in permanent free fall. I believe a production-focused advisory group would have by now convinced the Government that the perpetual cycle of devaluations can never end, and the competitive and stable currency manufacturers need to plan will never be achieved until the rising cost of domestic services, particularly financial services, is contained and the inflation it breeds is held at the level of our trading partners.

Jamaica needs manufacturing, and manufacturing needs capital to grow. More than half of the country's manufacturing capacity and 75,000 manufacturing jobs were lost to the economic disaster known as FINSAC. And we will need more than $400 billion of new investments to rebuild it.

One small but very important step was taken towards attracting local capital to this purpose, and that was the setting up of the Junior Market of the Jamaica Stock Exchange (JSE). To my mind, the JSE stands as the most positive economic initiative taken by the previous administration.

But there have been worrying sounds coming out of the discussions surrounding the Omnibus Incentives legislation that this important initiative will be brought to an end.

INCENTIVE WARNING

I do not believe incentives should be duplicated. However, it would be seriously damaging to the effort to attract capital to production if the incentives under the Junior Stock Exchange were to be diminished in any way. My sincere advice to the Government is this: don't even think about it, unless you can show Jamaica how else you are going to attract equity capital to grow small and medium-size productive enterprises. Show us how you will give small investors the opportunity to experience the benefits and joy of ownership in businesses that are building Jamaica.

The new Omnibus Tax Incentive legislation should increase, not reduce, the incentives for investment in production. And every effort should be made to ensure that the legislation will encourage more, not fewer, Jamaicans to invest in our productive capacity.

I firmly believe that all these pro-production measures could already have been part of government's economic plan today, if there had been the right kind of collaboration between itself and manufacturers, the creators of real value in our economy.

I also believe there would be a far greater likelihood that economic policies would be more favourable to production if within the ranks of government there was an effective voice promoting industrial production. Where is the knowledge, or the interest, or the passion for manufacturing within the Government today?

The periods during which manufacturing did best were characterised by industry ministers who had knowledge of, or belief in, or passion for, manufacturing. Where is that person today? Where is today's Robert Lightbourne?

Perhaps the prime minister could begin delivering on her pledge to support manufacturing by ensuring that someone with a proper appreciation of the value of manufacturing to the economy is appropriately placed in her administration.

Governing in a democracy is the responsibility of government. But the rest of us have the right and the duty to advise. And given the enormous value that manufacturing has given to the economy in the past and its undoubted capacity to lead economic development in the future, no group is better equipped to provide that advice than the manufacturers of Jamaica.

Manufacturers are Jamaica's true economic heroes. It is because of their accomplishments in manufacturing that the dream of Jamaica's economic success lives on. And I live for the day when my friend, the faithful manufacturer who ends every conversation with "Claude, I believe Jamaica's best days are ahead of us", as well as my former prime minister who predicted "better must come", will be proven right. Jamaica's better days lie ahead and, yes, better must come.

Claude Clarke is a businessman and former minister of industry. Email feedback to columns@gleanerjm.com.