I don’t often reproduce speeches on my blog. But at the National Bakery’s launch of its remarkable “Bold Ones” initiative in support of upcoming Jamaican manufacturers, President of the Jamaica Manufacturers’ Association of Jamaica Brian Pengelley gave a hard-hitting presentation that made me sit up and think. Apart from the strong points that he made on steps that must be taken to ensure a healthier economic environment for manufacturers (and everyone) to flourish, Mr. Pengelley also gave some formidable (at times almost jaw-dropping) facts and figures that put it all in perspective.
Some other issues Mr. Pengelley referred to included the lack of capital incentives for the sector – what are banks doing to support manufacturers? On the issue of the inadequate supply of foreign exchange, he noted that local business people have to send men on motorbikes, carrying cash, running around town from one financial institution to another to obtain the required amount. “We are not speculating,” he added in defense of the private sector, who he said had attended four fruitless meetings at the Bank of Jamaica to resolve the issue of the forex shortage. Each time, he said, they just get a “two-hour lecture.” On the energy issue, he questioned why Jamaica is not seeking global partnerships to initiate alternative energy projects.
So, here it is [the emphases are his own]:
Mr. Gary Butch Hendrickson, Chairman, Continental Baking Company
Members of the Bold Ones
Members of the Media
Ladies and gentlemen
Good morning.
It is a pleasure to share in the announcement of the 2014 Bold Ones program that is again being sponsored by Continental Baking. I know that the companies selected must be elated to have been recognized and accepted into this prestigious program. We are very aware of the challenges that you face as small manufacturers as you seek retail markets, financing and mentorship. I therefore commend Continental Baking Company for exposing small manufacturers doing big things, through this remarkable initiative. As a country, we need to start the New Year with positive news and what better way than with a bold initiative like this.
As individuals, businesses and Government, we need to ask ourselves what bold moves will we be making in 2014?
- As individuals, will we be making the choice to support locally manufactured products to build our economy?
- As businesses, will we be allocating more funds to marketing our products, implementing quality management systems, improving efficiencies or undertaking research to ensure that we remain competitive?
- As Government, will we be implementing a growth strategy that will develop the productive sector and generate jobs and wealth?
Manufacturing, with little or no direct assistance is and continues to be one of the most important engines in sustaining our economy. Our manufacturers contribute over 8% of GDP, employ over 75,000 persons and earn over US$900 million in exports. We also pay taxes – lots of taxes – at latest estimate about 13% of all taxes collected. It is also clear that manufacturing is one of the best sectors to be targeted to grow the economy, and start down the road to economic recovery and prosperity.
If we were to take a look back at Jamaica’s history, the last period of reasonable growth dates back to the 1960s and early 1970s. Since the liberalization in 1980s, financial meltdown in the 1990s, the issuance of government paper in the early 2000s and the global economic meltdown in 2008, the economy has experienced little or no growth. According to the Planning Institute of Jamaica (PIOJ), the country recorded 0.6% growth in the quarter ending September 2013. But the reality is that this is not enough to significantly impact the lives of citizens, who are getting poorer and poorer due to rising electricity costs, rising transportation costs, rising taxation, rising inflation, devaluation of the dollar and ultimately less disposable income.
Let’s look at some more facts – Jamaica’s GDP per capita in 1970 was US$3,355; in 2008 it increased to US$3,792, a mere 13%. Countries such as Costa Rica and Trinidad have experienced over 100% increases.
Jamaica has experienced low productivity since the 1980s. Data from the Jamaica Productivity Centre shows that between 1962 and 2012, our productivity change was 14.6 per cent, compared to United States (81.6%), Canada (64%) and Trinidad and Tobago (97.8%).
Jamaica’s unemployment rate stood at 15.4% per cent as at July 2013 and approximately 40% among youth aged 14 to 24. The male unemployment rate for youth was 29.5% compared to 50.3% for females.
A survey conducted in 2008 indicated that 74.3% of the labor force was untrained, which indicates that the optimal utility of our workforce is not being achieved.
The murder rate stands at over 1000 persons per year or 40 to every 100,000 persons. According to the World Bank 1.3 per cent of Jamaica’s GDP is spent on security. This could instead be spent on driving the PRODUCTIVE sector. Crime has constricted business operations and by extension growth.
The question is what do we need to do as a nation to bring about significant growth and development? Please allow me to make some suggestions:
1. Tax Reform – The Government has indicated that revenue has fallen short of projections and while we note the pressure from the International Monetary Fund to increase revenue, the contracting economy is of grave concern. We must first focus on collecting from those not contributing and widening the tax net. The manufacturing sector alone contributes J$30 billion annually or J$120 million each working day. Revenue generation through taxation alone is not the answer. We must cut our costs as a Government. The private sector knows only too well that to survive when things are tough, you must not only seek ways in which to raise revenues but you also must aggressively manage your costs!
As it pertains to the Omnibus Incentive Legislation, we need to ensure that the relevant institutions are established for its smooth implementation. In addition, we maintain that no taxes should be applied on manufacturing inputs, only on the finished products. We need to provide relief for local manufacturers, as we cannot afford to give our competitors in the region the advantage. We don’t even provide capital incentives to drive investment, import machinery, so that our manufacturers can retool and expand. Which other country in the world operates like ours, punishing businesses for its poor economic management? We need to grow our country through manufacturing to create employment for our people, so that they don’t have to depend on jobs in other countries. We must produce to earn our way out of our debt!
2. Removal of bureaucracy and facilitating a business and investment climate – We need to undertake public sector reform and make it easier to do business, with fewer processes to start a business, import and export. We note that the implementation of a ONE STOP SHOP and a SUPER FORM for registering a business is now in place at the Companies Office, and we compliment the Government for finally getting this done, but have to ask – why did it take so long?
It is time for our Government to treat our businesses better. We need to facilitate our small producers that are showing potential with factory space and affordable financing and move growth ahead. There are things that can be done now; we don’t have to wait for the Logistics Hub to materialize in two to three years. To unlock growth, we have to keep the wheels of the economy turning whilst we chase the big projects. Greater monitoring of the ports and enforcement of standards is needed to prevent inferior products from entering the market. The sector must also be strengthened to overcome non-tariff barriers for increased market access. We need to return to and exceed the glory days when our economic growth was 3-5% per annum, and manufacturing can play a significant role in this growth.
We need a government that stands up for Jamaican businesses, or our economy will continue to be eroded by international forces. The government must demand a level playing field for Jamaicans to trade goods and services within CARICOM and that our people are treated fairly in keeping with the Treaty of Chaguaramas. Let me be clear – manufacturers are not whining [as some in the press like to put it] – we are simply making the point that our Government must stand for not just our sector BUT ALL Jamaicans where there are instances of unfair treatment. Put another way, it is clear that Jamaican manufacturers have a clear and vested interest in the thriving of Jamaica. We then have to ask the question: What vested interests exist when persons oppose supporting Jamaican production, Jamaican employment, Jamaican growth?
3. A stable dollar and an adequate supply of foreign exchange are needed as most manufacturing inputs are imported and businesses need to operate in an environment of certainty – We hear that the dollar will continue to devalue until reaches its “right” level. Would someone please be bold enough to give us an idea of what the right level is and when we should get there, so that business and investors can plan with some level of confidence?
We are mindful of the need to grow local production and exports considerably; however, if we do not allow our exporters to produce competitively, then we will not achieve the growth in exports that we require. To address inadequate foreign exchange supply, I again call for the Governor of the Bank of Jamaica to establish a special facility to ensure that manufacturers can pay its overseas suppliers.
4. Lowering of energy costs and promoting the use of alternative energy – The cost of energy is a hindrance to the development of the manufacturing sector and we continue to have a high dependency on imported oil. The government needs to provide even more incentives to business that will encourage investment in renewable energy. Why are we not actively seeking during our travels around the world to attract investment in manufacturing alternative energy equipment here in Jamaica for not only our own domestic use but also for export? I guess that’s the next thing that we will hear Haiti beat us to.
We commend the Jamaica Public Service, who we understand will partner with Energy World International Limited to construct the 360 megawatt plant, and look forward to the provision of energy to businesses and the Jamaican people at the costs and timeline promised by Minister Paulwell. We also urge the Oversight Committee to be vigilant and to call out any potential barriers to a successful completion of this project when they see them; and to this end we would appreciate the nation being briefed [similar to the EPOC committee] on a regular basis.
5. Buying Jamaican and establishing inter–sectorial linkages. We produce some of the highest quality, innovative products that are comparable in price to imports. The Bold Ones selected are a testament to this. We must reduce our trade deficit, which stood at US$4.8 billion in 2012, by doing two things – increasing our consumption of local products AND growing our exports. Part of the current malaise is due to policies and practices that have favored imports over local products. We can’t afford for imports to further erode our local manufacturing sector.
As Jamaicans, we must make the link between the purchases we make and the impact on the economy. Buying Jamaican helps to save and create jobs; indirectly will impact a reduction in crime; retains foreign exchange; creates demand for local brands; and generates revenue for the government to improve justice, education, health and infrastructure all of which are vital in improving the lives of our citizens. The poverty rate stood at 17.6% in 2010 and this remains vexingly high today. We must, and we CAN fix this.
In addition, our policy makers need to lead the way in the implementation of the Government’s procurement guidelines, to ensure that local products are in a preferred position and to demonstrate that they are serious about buying Jamaican and building Jamaica. We should all commend the Ministry of Education for taking the first major step with the procurement of school books locally.
Manufacturing has the highest multiplier effect of any other sector on our economy, with strong linkages to tourism, agriculture, finance, transport, mining and construction sectors. Leakages [external purchases] numbers from the Tourism Ministry is estimated at up to 50% and this has led the Ministry of Tourism and Entertainment, the Ministry of Industry Investment & Commerce, the Ministry of Agriculture, the Jamaica Manufacturers’ Association and the Jamaica Hotel and Tourist Association to establish a Tourism Linkages Hub to increase the procurement of locally manufactured and grown agricultural products. We are already seeing positive impacts from this.
6. We must develop Jamaica as a brand – Tessanne was victorious on The Voice; we recently turned the spotlight on Lisa Hanna who won the Miss Jamaica World title twenty years ago, Usain Bolt, Blue Mountain coffee and Bob Marley continue to be big names all around the world. Let us leverage the strength of brand Jamaica, which includes our innovative, world class products, to attract investments, promote exports and build our nation.
In this breath, I invite you all to attend Expo Jamaica, Jamaica’s premier trade show, which highlights over 2000 authentic Jamaican products and services. The event will be held from April 3 to 6, 2014, at the National Arena under the theme “The Business Hub of the Caribbean.”
7. As manufacturers we have to be willing to work together and share information to improve our businesses in this challenging economic climate. We have to look at contract manufacturing for optimum use of technology, clustering for bulk purchases to reduce cost per unit and marrying manufacturing products to increase sales. We have seen where recently Wisynco acquired 50% of Trade Winds Citrus to create a beverage powerhouse; Pepsi and Red Stripe have partnered to establish ‘Celebration Brands’; and J. Wray and Nephew have merged with Lascelles Limited to become a stronger and more focused company.
In addition to these companies, there are many other manufacturers such as Spur Tree Spices, PA Benjamin Manufacturing, Jamaica Beverages and Jamaican Teas investing in efficiency, technology, expansion and export. In fact, we export to 103 countries under 882 tariff headings. In addition, manufacturers like Continental Baking Company, Jamaica Broilers, LASCO, Grace Kennedy and associate members of the JMA such as the National Commercial Bank and Digicel continue to give back through school programs, community initiatives and training. This speaks volumes of our commitment and contribution to Jamaica.
As I close, I ask: Are the country’s best days behind us or ahead of us?
We believe that the latter is the right answer – that our best days are indeed ahead of us, as Jamaica can and will get better with the right mindset and the right policy framework. Pro-growth policies will make Jamaica a great place to raise our families, work, to do business and more importantly, ensure that a great future lies ahead just as it does for these companies who are now being recognized as the BOLD ones.
Thank you.
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