EPOC, IMF optimism and export frustration

Last Wednesday, Richard Byles, the co-chairman of the Economic Programme Oversight Committee (EPOC), was featured on the front page of The Gleaner with the announcement that Jamaica was performing better against many of the IMF targets than was expected.

Byles carried that same level of enthusiasm to a briefing of Jamaican stakeholders — business people, academics, journalists and others — at the University of the West Indies at Mona.

Representatives of the IMF, World Bank, the IDB which comprise Jamaica's current troika of lenders, along with others from the EU were present and participated in the briefing. Minister Mark Golding represented the Government and Governor Brian Wynter of the Bank of Jamaica (BOJ), who is co-chair of EPOC, participated in the briefing and discussions.

The IMF's briefing was largely matter-of-fact and the World Bank's representative sought to encourage all leaders in our society, especially business ones, to include bright young people in our growth plans and weed out the red tape that hampers growth and export.

Byles was fairly ebullient about the results of the second of 15 quarterly reports - 13 more for Jamaica to pass - in our agreement with the IMF.

He enumerated the basis of his joy.

The Net International Reserve (NIR), which had slipped progressively from about US$2 billion at the end of 2011, stood at US$912.3 million at the end of September and was US$151.1 million above the US$761.2 million target.

Reserves and grants in April to September 2013 were J$27.2 billion higher, recurrent expenditure was J$4.8 billion lower, capital expenditure was J$8 billion higher and loan receipts (borrowings) were J$58.5 billion lower compared to the same period in 2012.

These and other statistics served to reduce our planned Budget expenditure by J$10.9 billion and recorded a J$6.6-billion fiscal deficit, which was significantly better than the J$10.4-billion deficit figure that was in the Budget for the quarter under review.

The BOJ governor was positive without Being effusive when he, among other statements, mentioned the fact that after a very long time the fiscal policymakers and implementors in the country - read minister of finance and his team of technocrats - are doing the right things and, thereby, have reduced the need for a more robust and aggressive monetary policy.

The relatively low interest rate in spite of the sliding dollar is one very clear indication.

Byles stated his optimism and the question was put as to what more the private sector can and should expect the Government to do.

Well, while the results are good for the IMF targets, many of the economic actions taken to achieve them are contractionary and will likely impede robust growth.

BUSINESS CONFIDENCE

What more can the Government do to revive business confidence? Even Byles agreed that meeting two of 15 quarterly targets means that we still have a long road to travel to achieve IMF success.

Regrettably, IMF success is only one set of consideration and actions needed for economic success.

Business confidence was not eroded over a six-month or even six-year period. We have reached this nadir in business confidence after decades of missteps, mistakes and mismanagement.

Governments of both parties have led the way - high interest rates, too much government borrowing and dithering on major decisions on energy, education, agriculture and efficiency in government - in progressively wiping out business confidence.

That kind of relentless erosion of confidence will take some time to rebuild.

Government red-tape and short-sightedness on the part of some GOJ agencies and departments are solid deterrence to growth and they act as confidence depressants.

Do bear in mind that sustained above-average growth is the only real short cut to renewed confidence and reduction of economic pain of our people.

In response to my column last week on the slide in our rating by the World Bank on the ease of doing business in Jamaica, I had the following response from a reader:

"I recently got my first export order going to [an Eastern Caribbean country] - what a headache for a US$3,500.00 order. It has been very arduous and time-consuming between JAMPRO, Trade Board, MIIC, trying to get the shipment to [EC country], it has been enough to make me consider throwing in the towel! So much potential not being addressed! Will we ever see change? How can we see growth without this!"

This reader's comment says it all - red tape, red tape everywhere!

Minister Golding referred to that efficiency-in-government committee for which JAMPRO acts as the secretariat, when I read the reader's mail at the IMF-EPOC briefing.

Some of the agencies represented in that committee are named by the reader as the source of her problem. Committees really cannot effect change. We need a tough red-tape cutter.

This red-tape cutter and his or her team members must go to businesses, big and especially small ones, to find out the red tape that hinders progress and chop them out.

Many businesses, especially small ones and their promoters, will not go to some fancy board room before government officials, who are perceived to be powerful, to state their cases.

Many are extremely sceptical that those committees ever get anything done, anyway.

CHANGE CAN BE SWIFT

Through all these discussions, the stark reality of our economic situation tells us that change will take time and, therefore, economic pain will not be short-lived.

Still, once we become decisive - Lord, how our leaders dither, help them to 'un-dither' - and put capable persons in positions who will act and be held accountable for their actions, economic and social changes for the better can happen quite quickly, in economic time.

A good example is Mauritius. In 2005, the per capita income in this Indian Ocean island state was US$5,200. We are near to this figure in 2013.

However, by this year the per capita income in Mauritius had climbed to US$9,300, an increase of 79 per cent in eight years. This year, the country's budget deficit is about 3.7 per cent of GDP, and 97 per cent of that figure was used in investment - not consumption - expenditure.

The world economy is estimated to grow by 3.6 per cent in 2014, while the Mauritian economy is projected to grow by 3.8 per cent to four per cent. Most importantly, public-sector debt-to-GDP ratio in Mauritius is down to 54.8 per cent and is on track to meet the country's target of 50 per cent debt-to-GDP ratio by 2018.

Given our debt-to-GDP ratio, and the need to grow our economy to cut the pain of our agreed programme with the IMF, the GOJ will have to move fast to make our agencies efficient by focusing on delivering faster service to our citizens.

They simply must stop trying only to collect more fees from improvised businesses and citizens, as seems to be their sole mandate.

We also want our policymakers to stop dithering and make sensible and commonsense decisions quickly.

A few right ones on energy and government red tapes would herald a good start. Then many more of us will possess and display sustained optimism and confidence in our economy and country.

Aubyn Hill is the CEO of Corporate Strategies Limited and was an international banker for more than 25 years.Email: writerhill@gmail.comTwitter: @HillAubynFacebook: facebook.com/Corporate.Strategies