BUDGET DEBATE 2006/2007

PRESENTATION BY

AUDLEY SHAW, M.P.

OPPOSITION SPOKESMAN ON FINANCE & THE PUBLIC SERVICE

TUESDAY, MAY 2, 2006

 

 

“A TIME TO CHOOSE”

 

Order Of Speech

In My Presentation This Afternoon I Will:

 

• First, Examine The Past. It Is Important That We Understand The 13 Years Of Dr. Davies’ And The 17 Years Of The Pnp Government’s Mismanagement Of The Economy.

 

• Second, Realistically Assess The Choices Of The Present. And Highlight The Fundamental Differences Between The People’s National Party And The Jamaica Labour Party.

 

• Third, Outlay Some Aspects Of A Jlp Economic Strategy For The Future.

 

 

• State Of The Nation

 

Mr. Speaker, What Is The Background Against Which We Are Today Engaged In This Budget Debate, Quite Apart From The Proud Declaration Of The Finance Minister, Reminding Us Of His Thirteen Years In That Role?

 

The Minister’s Pride In His Years Of Service Makes It Necessary For Us To Look Carefully At The Results Of His Stewardship – Indeed, His Legacy Must Be Subject To Rigorous Scrutiny.

 

But Before I Do So, Where Are We As A Nation Today, 44 Years Since Independence And After 17 Years Of The Reign Of The People’s National Party Government?

 

• This Year, An Estimated 70% Or 7 Out Of 10 Children Will Leave High School Without Passing At Least One Subject In C.X.C. Examinations.

 

• While The Prices Of Basic Foods Continue To Rise, Traders Are Reporting A 10-15 Percent Fall Off In Business Over Last Year Due To Reduced Purchasing Power Among The People, Whose Disposable Income Is Ravaged By Wage Freeze. Higher Fuel Prices, Escalating Electricity Costs, And Unavailability Of Cement.

 

 

Inflation On Basic Food Items

 

Item	Price I Year Ago 2005	Currentprice 2006	% Increase
Rice	$14.63 Per Lb.	$17.32	18.37%
Flour	14.00 Per Lb.	15.77	12.66%
Sugar	20.20 Per Lb.	26.50	31.19%
Cornmeal	21.94 Per Lb.	29.32	33.63%
Milk Powder (Lasco)	42.40 Per Pk.	42.40	0.00%
Condensed Milk (Betty)	62.50 Per Tin	70.70	13.12%
Margarine	57.72 Per Lb.	75.00	29.94%
Chiffon Margarine	69.90 Per Pk	78.70	12.59%
Grace Mackerel (Dutty Gal)	25.00 Per Tin	29.70	18.80%
Cooking Oil	110.00 Per Litre	137.00	24.55%
Bread (2 Lbs.)	42.50 Per Lb	48.50	14.12%
Saltfish	149.00 Per Lb.	187.00	25.50%
Water Crackers (Sml)	28.10 Per Pk.	35.00	24.56%
Special Cream Crackers	21.40 Per Pk.	22.00	2.80%
Red Peas	86.50 Per Lb.	86.50	0.00%
Sardines	36.00 Per Tin	45.00	25.00%
Macaroni	60.30 Per Pk.	61.00	1.16%
Baked Beans	51.10 Per Tin	53.70	5.09%
Eggs	114.00 Per Doz.	107.00	-6.14%
Salt	10.50 Per Lb.	10.50	0.00%
Chicken	75.00 Per Lb.	84.00	12.00%
Total	$1,359.79		14.23%

 

 

• The Productive Sectors Of The Economy Continue To Record Declines, With A 1.0% Decline In Manufacturing And A 7.0% Decline In Agriculture.

 

• As We Speak, And By My Most Conservative Estimate, Taking Into Account The Official Unemployment Figures And Those Who Have Given Up Hope Looking For A Job, Some 450,000 Jamaicans – Hale And Hearty – Of Working Age, Are Now Without Work.

 

• And While This Is Happening, We Are Rapidly Losing Our Work Ethic Looking Instead To Remittances And Barrels From The Effort Of Others, Or A Lotto Ticket With A Dream To “Step Up In A Life”, The Refrain Among Our Idle Youth Is “Wha Yu Caan Do Fi Mi Boss?”, “ Let Off Somethin’ Nuh?”, “Nutten Naw Gwaan.”

 

• Not Surprisingly, Crime Becomes The Substitute To The Productive Deployment Of Our Workforce Making Jamaica Now The Murder Capital Of The World, Where Human Beings Are Butchered Daily, The Extortionists Reign Supreme, And The So-Called Community Protectors Send For Our Little Girls To Rape And Rob Them Of Their Innocence – And Except For A Few Voices Of Outrage, Where Is The State And Its Resources In Ensuring That Every Jamaican From Every Walk Of Life Should Be Entitled To The Right To Pursue Life, Liberty And Happiness?

 

• And While Our Citizens Of Modest Income Cannot Afford Surgery And Medication, Under The Rule Of This Government And This Finance Minister, The Shameless And Wasteful Extravagance Continues Apace, Where Expensive Official Vehicles Are Rejected Because It’s The Wrong Colour And Others Have Extra Accessories Costing $4.0 Million, Pushing The Price Of An Official Duty Free Vehicle To $12.0 Million.

 

 

The Legacy Of The Finance Minister

 

The State Of The Nation Just Described By Me Mr. Speaker, Is Most Certainly A Part Of The Legacy Of This Finance Minister And His Government, But Let Us Look At Some Of The Numbers, Especially The Ones The Minister Shows No Appetite To Dicuss During His Presentations.

 

 

 

 

 

 

 

• G.D.P. – 13 Years Of No Growth

 

Year	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005
Real Annual Gdp Growth %	1.4	1.0	0.7	-1.3	-1.7	-0.3	0.9	0.7	1.5	1.1	2.3	0.9	1.4
Average Gdp	-	-	-	-	-	-	-	-	-	-	-	-	-	0.6
Cumula- Tive Gdp	-	-	-	-	-	-	-	-	-	-	-	-	-	8.6

 

 

The Cummulative Growth For The Entire 13 Years Of The Tenure Of The Finance Minister Is 8.6% Which Is Roughly The Same Amount That The Jamaican Economy Grew By In 1987 – In One Single Year Under The Jamaica Labour Party Government .

 

 

Per Capita Income

 

One May Consider Various Indices In Examining A Country’s Human Development, But One Commonly Used Index Is Per Capita Income As Illustrated In The Chart Below.

 

 

Per Capita Income (Usd)

Source: Caribbean Development Bank

 

 

 

• Barbados ’ Per Capita Income Is Well Ahead And At Us$10,325 In 2004 Was Over Three Times Larger Than Jamaica ’s Us$3,331

 

• At Us$9,502 Trinidad And Tobago Lags Behind Barbados But It Is Clear That The Growth Trends Are About The Same. In Fact, Trinidad Added Us$5,277 To Its Income Per Person Between 1995 And 2004

 

• While Some Other Countries In The Region Also Show Up Jamaica . Bahamas Us$17,550, Guadeloupe Us$13,968, And Even Volcano-Ravaged Montserrat Us$8,754

 

• And Per Capita Income For Jamaica Has Remained Almost Static Since 1997, Reinforcing The Urgency Of Credible Policy Measures To Enhance National Productivity Levels, And To Give Jamaicans A Chance To Get Into Productive Endeavours.

 

 

Treasury Bill Rates

 

Treasury Bill Rates 1995-2005 (May) %

Source: Caribbean Development Bank

 

 

This Is Another Illustration Of How The Management Of The Jamaican Economy Has Impacted Negatively On The Capacity Of The Productive Sector To Perform And Grow.

 

In Its Desire To Mop Up Liquidity The Government Has Used Treasury Bill Rates To Set The Pace For Market Rates To Move To Astronomical Levels, Thus Effectively Retarding Industry, As Manufacturers Cannot Meet The High Cost. The Available Statistics Show That In The Five Years To 2005 Treasury Bill Rates In Barbados And Trinidad And Tobago Averaged Between 2.2% And 4.9% Respectively (See Chart) In Jamaica, The Comparable Rate Was 16.5%. At Such Staggering Rates It Is Difficult To See How Our Manufacturers And Producers Could Compete.

 

The Even Higher Treasury Bills Rates Between 1992 And 1996 Which Led To Commercial Banking Rates Averaging 53.0% In The 1990s, And Which Led To The Financial Sector Collapse Leading To A Bill Of $130 Billion And The Fire Sale Of Many Homegrown Jamaican Businesses. (Island Life, Mutual Life, Cement Company, Banks, And Even The Very Life Of Jamaica (Loj).

 

Average Exchange Rate

 

Average Exchange Rate

Source: Caribbean Development Bank

 

 

In Looking At Changes In Exchange Rates Against The Us$ In The Ten Years To 2005 Across Three Caribbean Common Market Sister Economies – Jamaica, Barbados And Trinidad And Tobago.

 

What Is Of Note Here Is That While The Currency Of Barbados Has Remained “Fixed” At B$2.0 To Us$, And The Trinidad And Tobago Dollar Has Been Relatively Stable At Between T/T$6.0 To $6.3 To The Us$. Jamaica By Contrast, Has Seen Its Currency Fall Against The Us Dollar From J$35.5 In 1995 To $64.5 At The End Of 2005, A Decline Of 81.6 Percent. The Situation Is Even More Startling When We Compare The Change From 1989 When The Exchange Rate Was J$5.75 To The Us Dollar To The Out-Turn Last Year. In Jamaica ’s Case There Has Been A Most Precipitous Fall Of Some 1021 Percent Compared With 46.5 Percent Fall In The Value Of The Trinidad And Tobago Currency.

 

This Marked Difference Between The Three Countries Can Be Attributed To Jamaica’s Extra-Ordinarily Poor Economic Management Which Has Effectively Undermined The Country’s Productive Capacity And By Extension The Strengthening Of The Local Currency. This Is Reflected In A Worsening Trade Deficit As Jamaica’s Competitive Position Has Grown Progressively Worse.

 

 

Inflation (Change In Cpi) %

 

Inflation (Change In Cpi) %

Source: Caribbean Development Bank

 

 

In Tracking Inflation In The Three Sister Caricom Countries, The Inflation Burden Has Been Most Severe For Jamaicans, Rising To Peak At 81 Percent In 1991, And Later, Falling To 26.4 Percent In 1996. In Contrast, Barbados Which Recorded Little Or No Inflation In 1998, And Trinidad And Tobago , Have Been Successful In Containing Increases In The General Level Of Prices To Low-Single Digit.

 

At The End Of Last Year Jamaica’s Inflation Rate Was Galloping At A Rate 10 Times That Of Barbados And 4 Times That Of Trinidad And Tobago.

 

 

 

 

 

Summary

 

• We Have Reviewed Some Economic Indicators, Reflecting A Distinct Stagnation In Jamaica’s Economy Over The Last 10 Years Compared With Our Caricom Partners, Barbados And Trinidad And Tobago.

 

• With The Contraction In Manufacturing, The Sector Is Effectively Using A Mere Fraction Of Its Industrial Capacity, Reflected Also In The Adverse Balance In The Country’s External Trade Account. Data Published By The Planning Institute Of Jamaica Show That By The End Of 2005 Jamaica’s Worrying Trade Deficit Had Deepened By Us$685 Million, Or 27.2 Percent, To Us$3,208 Million. This, As Imports Have Grown Almost 2.5 Times Faster Than Exports, Adding To Uncertainties Surrounding Economic Performance And Stability.

 

Mr. Speaker, This Is A Part Of The 13-Year Legacy Of The Minister Of Finance And Planning. I Wonder If This Was The “Reality Check” To Which He Referred On Thursday?

 

But The Greatest Legacy Of All For Which He Will Be Long Remembered Is The Legacy Of Debt.

 

 

The Debt Problem

 

Mr. Speaker, Over The Period Since I Have Been The Opposition Spokesman On Finance, I Have Been Quite Consistent In Bringing To The Attention Of This Honourable House, And To The Country, The Increasing Problems And The Risks Which The Fast Growing Cost Of The Rapidly Expanding Public Debt, Impose Upon The Already Over-Burdened Taxpayers, The Economy And Indeed Every Man, Woman And Child.

 

The Rapidly Expanding Public Debt, Which Is Fast Approaching The Trillion Dollar Mark, Is Now A Tightening Noose Around Our Necks. This Debt Is Also A Tightening Noose Around The Operations Of Every Business, Whether Large, Medium, Small Or Micro, And Those Yet To Get Off The Ground.

 

Mr. Speaker, When The Jamaica Labour Party Demitted Office In 1989, The Size Of The Public Debt (Including Govt. Guaranteed Debts) Was J$31.3 Billion. Of That Amount, The External Debt Was Us$4.0 Billion Or J$22 Billion, And The Domestic Debt Was J$9.3 Billion. The Country’s External Debt Was Structured Around Medium And Long-Term Relatively Inexpensive Loans, And With Institutional Arrangements For Some Flexibility In The Management Of The Economy In Times Of Severe External Shocks, Such As From Adverse Changes In The Major Export Earning Sectors, Escalating Oil Prices And Natural Disasters.

 

The Jamaican Economy Was Placed On A Sound Path Of Economic And Export Growth, In Order To Earn And Service Its Debt Obligations And Build Back Foreign Reserves, Which Were Fully Depleted In The Decade Of The 1970s.

 

Mr. Speaker, After Being In Government For Seventeen Years, And Pursuing An Economic Model, Which Some Persons Now Claim To Be Inseparable From Its Conceptualizer, After 1990, The Jamaican Economy Has Not Managed To Grow By Even The 2.9 Percent Recorded In The Hurricane “Gilbert” Year Of 1988.

 

The Davies’ Economic Model Has Failed To Deliver Neither Real Growth In Wealth Creation Nor The Economic Development Of The Country And Improved Well-Being Of The People. However, The Economic Model Has Produced Some Undesireable Results; And We Can Note Some Of Them:

 

 

3.1 Bank Of Jamaica Losses From Mopping Up Liquidity

 

There Was 230% Expansion In The Money Supply Between 1991 And 1995 Which Resulted In A High Interest Rate Policy To Aggressively “Mop-Up” The Excess Liquidity. So, The Pre-Occupation Of Monetary Policy Became The Mopping Up Of Liquidity, At Any Cost. In This Year’s Budget Alone, $8.0 Billion Or 2.2% Of The Expenditure Budget Is To Cover The Bank Of Jamaica Losses Up To Financial Year 2004/05 For Its Liquidity, And For Mopping Up Activities.

 

Mr. Speaker, These Massive Losses At The Bank Of Jamaica , And Which Are Being Borne By The Already Over-Burdened Taxpayers, Represent A Small Fraction Of The Massive Transfer Of Wealth From The Poor To The Rich. A Condition That Has Persisted Over The 17 Years Of The P.N.P. Government.

 

 

3.2 The Fast Growing Debt Servicing Burden

 

The Public Debt Is Now At $847 Billion, And With Estimated New Borrowings Of $136 Billion For This Budget, The Total Debt Will Be Close To The Trillion Dollar Mark, By The End Of This Fiscal Year. By The End Of This Fiscal Year, The Debt Will Be 32 Times The Size It Was In 1989. And What Do We Have To Show For This Massive Debt?

 

Jamaica ’s Present Real G.D.P. Per Capita Is Just About The Same Level It Was In 1971, Mainly Because Of The Mismanagement Of The Economy By The P.N.P. Government.

 

The $92.4 Billion That Is In The Budget For Interest Payment This Year, Is Almost Three Times The Size Of The Total Public Debt In 1989.

 

 

3.3 An Emerging Debt Amortization Crisis

 

In This Expenditure Budget, Debt Amortization Is Put At

 

• $117.58 Billion, Down From The Revised $139.78 Billion Last Year;

 

• A Reduction Of 15.9% For The External Debt, Amortization Payments Have Been Reduced From $31.18 Billion Last Year To $16.58 Billion This Year;

• A Reduction Of 46.8%. In The Case Of The Domestic Debt, The Reduction Is Marginally, Down From $108.6 Billion Last Year To $101.0 Billion This Year.

 

Total Debt Obligations As A Percentage Of The Total Budget This Year Is 59.0% Down From 65.0% Last Year. On The Face Of It, This Might Suggest That The Strategy Of Lengthening The Tenor Of The Debt Is Reaping Success, And So More Budget Resources Will Now Be Available To Finance Critical Non-Debt Areas Of Expenditure, Such As Education, Security And Health. But, A Deeper Analysis Reveals A Different Picture.

 

 

Loans On The International Capital Markets By G.O.J.

 

Debt Instrument	Interest Rate	Annual Interest Charge	Total Interest Charges	Maturity Date
1. Us$225m	12.5%	J$1.9b	J$1.9b	2007 In 1 Year
2. Us$50m	9.5%	J$315m	J$.630m	2008 In 2 Years
3. Us$50m	9.0%	J$298m	J$.596m	2008 In 2 Years
4. 4. Euro 200/Us$250m	10.5%	J$1.64b	J$4.8b	2009 In 3 Years
5. Us$400m	11.75%	J$3.1b	J$15.5b	2011 In 5 Years
6. Euro 200/Us$250m	11.0%	J$1.7b	J$10.2b	2012 In 6 Years
7. Euro 150/Us$190m	10.5%	J$1.2b	J$9.6b	2014 In 8 Years
8. Us$300m	9.0%	J$1.8b	J$16.2b	2015 In 9 Years
9. Us$425m	10.625%	J$2.992b	J$32.5	2017 In 11 Years
10. Us250m	11625%	J$1.9b	J$30.4b	2022 In 16 Years
11. Us$250m	9.25%	J$1.53b	J$28.5b	2025 In 19 Years
12. Us$250m	8.5%	J$1.4b	J$42.0b	2036 In 30 Years
Us$2.890 (J$187.8b)	11.0%	J$19.775b	J$192.826b

An Analysis Of The Amortization Schedule Of The Public Debt Indicates That 51% Or $435.54 Billion Falls Due For Payment Within Five Years. Another 24% Or $205.0 Billion Will Fall Due For Payment Within 5 To 10 Years, And The Other 25% Will Fall Due For Payment In Over 10 Years. Approximately 57% Of These Amortization Tranches Relate To The External Debt And To Which Several Billion Dollars Of Devaluation Charges Would Be Added, Under The Prevailing Floating Foreign Exchange Rate Mechanism.

 

 

3.4 Why So High?

 

Earlier This Year , The Minister Of Finance Raised Us$250 Million With A 30-Year Bond At A Coupon Rate Of 8.5% On The International Capital Market To Pre-Fund The Government’s 2006/07 External Borrowing Programme.

 

But Is Not This Very Expensive Long-Term Money? I Think So. And Does This Really Reflect Any Meaningful Shift In The Government’s High Interest Rate Strategy? I Think Not!

 

In June 1998 The Minister Of Finance Raised Us$250 Million In A Bond Issue At An Interest Rate Of 10.875% With A 7-Year Maturity, Dated For June 10, 2005 . On The Surface, It Would Appear That The 30-Year Bond At An Interest Rate Of 8.5% Is A Much Better Deal Than The 7-Year Bond At 10.875%.

 

But Looking Beyond The Surface, It Is Recognised That It Is More Costly To The Economy And Has Locked The Economy Into A High Interest Rate Mode For The Long Term.

 

The Accumulated Interest Costs On The 30-Year Bond Will Be Just Over 3 1/3 More Than The Accumulated Interest Costs On The 7-Year Bond.

 

Mr. Speaker, The Latest 30-Year Bond At 8.5% Is Clearly Not In The Best Interest Of The Country. The Minister Of Finance Must Seek Cheaper Sources Of Long-Term Financing From Multi-Lateral And Bilateral Sources, And Use It To Replace This High Cost Long-Term Bond, Which Is Further Tightening The Debt Noose Around The Economy.

• Opportunities For Emerging Markets

 

Recently Mexico ’s Government Had Raised The Foreign Money It Needed For 2006 And 2007 As Cheaply As The U.S. Would At A Spread Of Little More Than A Percentage Point. Spreads On J.P. Morgan’s Index Of Emerging Market Bonds Fell Well Below 2.3 Percentage Points, The Lowest On Record. According To Goldman Sachs, Countries Such As Brazil Were Borrowing At Margins Not Seen Since Britain Was The World’s Banker And Gold Its Standard Of Value.

 

Why Were Spreads So Low? The Common Answer Is Global Liquidity, The World Has Got Richer, Except Jamaica . The Government Has Issued Bonds At Mind-Boggling Returns To Foreign Investors Largely Because Public Confidence In Its Management Of The Economy Remains On The Downside. In Other Words, The Government Borrows At Rates In The High Double Digit (13%) Compared, For Example, With Our Caricom Partner, Barbados , That Now Borrows At 4 Percent.

 

Mr. Speaker, Its Massive Debt Burden Accompanied By A High Interest Rate Policy That Has Militated Against Meaningful Investment In The Productive Sector Will Be The Lasting Legacy Of This Finance Minister.

 

 

Public Bodies – A Tale Of Neglect Of Duty

 

Mr. Speaker, The Management Of Public Bodies Under This Government And This Finance Minister, Leaves Much To Be Desired.

 

Mr. Speaker, Of The 12 Public Bodies Reported On, At Least 75% Of Them Are Making Losses And Some We Are Not Able To Comment On, Such As The Jamaica Urban Transit Company, For Which No Accounts Have Been Presented.

 

• The Sugar Company Of Jamaica And Its Affiliates Have Accumulated Losses Of J$12 Billion.

 

In Ministry Paper 21/05 The Minister States That The Sugar Company Was Projected To Make A Loss Of $112 Million For 2004/2005. Mr. Speaker, Would You Believe That Actual Loss For 2004/2005 Is $1 Billion As Reported In This Year’s Ministry Paper.

A Glaring Example Of This Neglect Of Duty Is The Interest Charges Incurred By The Sc.J. According To This Year’s Ministry Paper Interest Charges For 2004/2005 Interest Cost Was $381.32 Million, 40% Of Total Losses. For 2005/2006 The Interest Cost Was Projected At $485 Million With A Net Loss Of $400 Million. But Hear This Mr. Speaker, The Actual Interest Charge For 2005/2006 Was $800 Million And, More Alarming, I Understand That At Least 65%, That Is, $520 Million Of The Interest Charge Is Due To Overdraft And Excess Overdraft Charges, Which Run Into Interest Rates Far In Excess Of 25 Percent.

 

Mr. Speaker, This Is Unbelievable Mismanagement, This Minister Needs To Inform This Parliament As To Why A Company That Is “Insolvent” Is Paying $520 Million In Overdraft And Excess Overdraft Interest Charges, Which All Have Now Been Converted Into A Long-Term Loan. Why Wasn’t The Loan Established Before And Did The Overdraft Facility Receive The Approval Of The S.C.J., The Governor Of The B.O.J., And The Minister Of Finance? This Is Gross Dereliction Of Duty And Is A Fiscally Reckless Approach To Public Affairs.

 

In Addition, There Are Liabilities Of $3.8 Billion, Liabilities Due For Payment Within The Next 12 Months, And Real Current Assets Of $327 Million, How Will These Short-Term Debts Be Financed, Are We Going To Continue To Operate An Overdraft Account And At What Price To The Profit Of The Banks And Certainly Not The Small Cane Farmers Or The Sugar Workers.

 

4.2 The Accumulated Loss Of Air Jamaica Is Us$1 Billion Or J$65 Billion. Liabilities Stand At Us$642 Million Or J$43 Billion. Mr. Speaker, The Company’s Current Liabilities, That Is Liabilities Which Have To Be Paid Within A Year Is Us$220 Million Or J$14 Billion, Which Represents 4% Of This Year’s Total Budget Or 8% Of The Recurrent Budget. The Three Largest Components Of The Current Liability Are:

 

Unsecured Bank Overdraft – J$1.5

Trade Creditors – J8.5 Billion

Air Traffic Fees – J$4 Billion

 

To Compound Matters The Current Liabilities Do Not Include Loan Repayments Of Us$340 Million And Lease Obligations Of Us$64 Million, And The Only Assets Available To Pay The Current Liability Is Us$43m Or J$2.8b.

 

The Minister Needs To Advise Us How Will Air Jamaica Fund The J$11 Billion Of Net Current Liabilities.

 

4.3National Water Commission For The Last Two Years The Commission Has Accumulated Losses Of J$2 Billion And Is Projected To Make A Loss Of J$1.3 Billion For 2005/2006. In Addition The Commission Is Projected To Spend J$1billion On Capital Projects. Minister, Are There Any Budgetary Implications Here?

 

 

 

 

 

4.4 The National Housing Trust .

 

• In Looking At The Accounts Of The Nht The Independent Auditors, Deloitte, Expressed A Serious Concern About The Underlying Securities For Investments Made By The N.H.T. Of Approximately J$3.5b. That Is, The Auditors Are Of The Opinion That The N.H.T. Has Made Loans/Investments For Which The Securities Are Questionable?

 

4.4.2 I Also Notice The Nht Has Entered Into Joint Ventures With Selected Developers And That Advances To These Developers Are Currently J$986 Million Of Which $345m Is Considered Uncollectible. Is The Minister Prepared To Say Which Development(S) And Who Are The Developer(S) Which This J$345m Relates To? And Why Are These Sums Uncollectible?

 

4.4.3 In Respect Of The Harmonisation Limited At Harmony Cove, Is The J$685 Million Spent By Nht On This Project Only Relating To Land Or Does It Include Fees, And If Yes, What Are These Fees For? Minister, I Have Been Receiving Many Compliants As To How This Project Is Proceeding And This Side Of The House Will Be Very Vigilant On This Important Matter In The Near Future. These Concerns Include The Lack Of Transparency On The Terms Of The Agreement And The Qualifications Of The Joint Venture Partner.

 

 

4.5Student Loan Bureau. Firstly, I Acknowledge The Reduction Of Interest Rates On Student Loans By The S.L.B. However, 12% Interest Rate To Students Is Still Too High. Mr. Speaker, A Well-Run Business Struggles To Survive At An Interest Rate Of 12% How Do We Expect Our Students To Survive? In Fact, Each Year We Have Thousands Of Students Leaving The Universities Who Are Unable To Find Suitable Jobs And Meet Their Obligations. No Wonder Our Tertiary Graduates Are Migrating In Such Numbers.

 

I Must Also State My Total Dis-Satisfaction With The Level Of Service Provided To The Students, In Particular, The Inconvenience That The Students Face When Applying For A Loan Such As Over-Nighting In Parking Lots Just To Secure A Number For An Interview. This Is Totally Unacceptable.

 

In Reviewing The Ministry Paper I Notice An Allocation For J$360m To Build A New Office. I Want To Register My Objection To This Plan. We Have Too Much Empty Buildings Downtown, Kingston , To Be Spending J$360m On A New Office. We Have Too Many Poor Kids Not Able To Get Higher Education Because Of A Lack Of Funding, Too Many Indebted Students Leaving The Universities, Debts Which These Students Will Not Be Able To Pay Given The Lack Of Economic Opportunity , And Yet We Are Prepared To Spend J$360m On Building An Office. Where Are Our Priorities? I Recommend That We Scrap This Latest Monument To Extravagance And Reduce The Interest Rate To Students To Single Digit. (-9% Or Less).

 

 

4.6 Pension Funds

 

4.6.1 The Government Talks About Pension Reforms To Protect The Interest Of Pensioners.

 

I Challenge Their Own Management Of Pension Funds And Find Them Wanting.

 

My Understanding Is That Government Currently Owes Pensioners Almost $2 Billion In Withholding Tax For Almost A Year.

 

The Actual Loss To Pensioners At Interest Rates Could Be As High As $260 Million Per Year, Based On Lost Interest Income.

 

This, Mr. Speaker, Is In Breach Of The New Pension Regulations Where Pensioners’ Funds Are Not To Be Left Idle. So, Mr. Speaker, Not Only Is The Government Depriving Poor Pensioners Of Their Monies For Their Retirement Years, They Are In Breach Of The Regulations.

 

4.6.2 Mr. Speaker In Respect Of The Pension Reform Where The Fsc Will Become The Regulator Of The Industry, We On This Side Cannot Disagree With Regulation To Protect The Pensioners But We Certainly Do Not Agree With Over Regulation Which Defeats The Purpose And The Intent Of The Regulation In The First Place.

 

I Notice That The Regulators Expect To Earn Income Of J$125 Million From Fees To Be Charged To The Pension Industry.

 

In This Proposed Scale Of Fees It Is Clear That The F.S.C. Will Be Building Up Considerable Annual Surpluses Of $90 Million At The Expense Of The Pension Industry And The Poor Pensioners.

 

 

 

5. Expenditure Understated/Revenue Overstated

The Expenditure Budget

The Minister Of Finance Supported By The Cabinet Of Jamaica , Continues To Tell The Country Only A Part Of The True Story Concerning The Expenditure Budget.

 

The Expenditure Budget Is Understated, The Full Extent Of Which Is Dependent On The Final Outcomes Of Such Big Ticket Expenditure Items As The M.O.U., Air Jamaica And The Sugar Company Of Jamaica, And Other Public Bodies.

 

The M.O.U. Has A 2-Year $11 Billion Gap Between The Unions’ Request And The Government’s Offer. In This Fiscal Year The Gap Is $4.0 Billion.

 

In Relation To Both Air Jamaica And The Sugar Company Of Jamaica , Several Billions Of Dollars In Financing Are Needed. The Question Is Whether The Minister Intends To Bring Portions Of These Obligations Into The Budget Or He Intends To Recklessly Allow The Entities To Incur Rapacious Overdraft Charges Without The Guarantee Of Parliament?

 

Equally, The Obvious Intention Of The Government To Spend Some $18 Billion In Petrocaribe Funds Beneath The Close Scrutiny Of Parliament Is Itself Indicative Of The Length To Which The Government Will Go To Corrupt The Budgetary Process.

 

The Minister’s Promise Of No New Taxes Is Also To Be Taken With A Grain Of Salt. He Said The Same Thing On April 18, 2002 . (“Read My Lips, No New Taxes”). After The General Elections That Year It Was Revealed That A $8.2 Billion Payment Was Made To Public Sector Workers Without The Knowledge Or Approval Of Parliament. The Minister Also Admitted Then That He Had To Take On Board To The Budget Obligations For The S.C.J. And The N.W.C., Of Several Billion Dollars, As Well As $4.0 Billion In Additional Interest Charges.

 

What Followed Was A Record Tax Package Of $14.5 Billion In Order For The Minister To “Correct It”.

 

The Minister Has A Duty And An Obligation To Bring The Real Picture Of Expenditure And Revenue To Parliament So They Can Be Properly Debated.

 

Mr. Speaker, Today Jamaica Stands At An Economic Cross-Roads.

 

 

6 . The Time Has Come For Us To Choose

 

There Is A Real Difference Between The Opposition And The Government On The Question Of How Jamaica’s Economy Should Be Managed, And This Difference Is Growing. As This Government Has Shown, Years Of Mistakes Take Decades To Solve. The Choice The Jamaican People Make Now About Which Economic Path To Pursue Will Determine Jamaica’s Economic Fortunes For The Next Decade And Beyond .

 

First, We Can Choose, To Continue To “Muddle Through.” Jamaica Can Simply Continue Its Current Policies And Hope Against Hope That Somehow Things Will Change. The Definition Of Insanity Is To Repeat The Same Thing Over And Over And Dream Of A Different Outcome. This Is A Policy Of All Pain And No Gain. This Is Dr. Davies’ And The Pnp’s Strategy.

 

Second, Jamaica Can Choose To Make A Wild And Incorrect Shift In Policy. It Could Abandon What Little Prudent Macro-Economic Policy It Has, Squander The Tough Sacrifices The Jamaican People Have Been Asked To Make And Embark On A Populist Campaign. This Approach Is Not New, It Has Been Tried And It Has Failed. It Is Reckless, It Is Simplistic, It Is Deceptive And Irresponsible. This Is A Policy Of Less Pain Now, More Pain Later And No Gain At All. This Is The Policy Of Others In The Government – A Policy Appropriately Named – The Crash Programme.

 

While The Government Cannot Even Decide Among Themselves What Policy It Plans To Adopt, Let It Be Clear That The People Of Jamaica Must Choose To Reject Both Plans. Jamaica Needs A New, Creative, Aggressive And Comprehensive Strategy That Delivers Real Economic Development. This Mr. Speaker Is The Strategy I Will Deliver Today.

 

 

Macro-Economic Stablization And Going For Growth

 

For The Purposes Of My Presentation, I Will Focus On The Policies That Are Needed To Spur Broad-Based Investment, Growth And Economic Development. This Alternative Economic Strategy Which Has Three Components: (1) Prudent And Credible Macro-Economic Policies, (2) New And Creative Debt Reduction Strategies And (3) An Aggressive And Export-Oriented Industrial Policy.

 

6.1 A Commitment To Prudent And Credible Macro-Economic Policies

 

The First Component Of Our Strategy Is To Successfully Pursue Prudent Macro-Economic Management . With Levels Of Debt That Stand At 131% Of G.D.P. And 60 Percent Of Our Budget Dedicated To Interest And Amortization Payments, Any Plan To Revive Our Economy Must Begin By Attacking This Massive Barrier To Success. Let It Be Very Clear: We Did Not Create This Problem, But We Cannot Afford To Ignore It.

 

Plans By The Government To Embark On A Massive Social Spending Campaign Are Not Sustainable And Only Kick This Problem Further Down The Road. The Jamaican People Deserve The Dignity Of More Than Just A Hand Out; They Deserve A Strategy That Provides A Real Way Out. A Strategy That Is Rooted In The Opportunity To Learn How To Fish For Oneself, Not To Get A Fish.

 

In Our Strategy, Prudent Fiscal Management Is Critical. Dr. Davies Claims To Have A Similar View, But The People Of Jamaica Should Not Confuse Intentions With Results. We Have Had 13 Years Of Good Intentions And No Significant Economic Development – No Results. We Need Look No Further Than Dr. Davies Own Promise To Balance The Budget By This Fiscal Year. Even With The Immense Sacrifices The Jamaican People Have Been Asked To Make – Higher Taxes, Lower Wages, Fewer Social Services – The Budget Deficit Still Stands At 3% Of G.D.P.

 

Mr. Speaker, These Macro-Economic Policy Failures Have Not Been The Result Of Natural Disasters, They Have Been The Result Of Human Disasters. The Human Disasters That Construct And Continue To Implement Failed Economic Policy, Human Disasters That Shamelessly Run With It When An Election Is On The Horizon, Human Disasters That Consistently Over-Run The Cost Of Capital Projects.

 

Jamaica Has Consistently Failed To Meet Its Fiscal Targets – But The Problem Is Not The Targets, The Problem Is A Team That Has Failed To Implement Them. We Do Not Therefore Believe That A Policy Of Fiscal Discipline Should Be Abandoned, We Believe That Jamaica Must Abandon A Government That Is Too Uncommitted To Good Governance And Too Incompetent To Implement All The Critical Macro-Economic Variables.

 

 

• Fixed Exchange Rate

Proposals To Fix The Exchange Rate Will Not Fix The Problem. While We Agree That This Issue Requires Greater Study As We Fully Recognize Its Merits, We Believe That Such A Policy Could Be Inappropriate For Jamaica At This Time .

 

Fixing The Nominal Exchange Rate Could Lead To Significant Losses Of International Reserves And Decreased International Competitiveness. Even Worse, It Could Risk International Confidence In Our Economy And Make Jamaica Vulnerable To Speculative Attacks.

 

 

 

Despite Some Investment Taking Place , The Jamaican Economy Is Still In A Fragile And Growthless Mode, With Too Heavy A Reliance On Debt To Take Any Unnecessary Risks At This Time.

 

Despite These Negatives Mr. Speaker, There Are Many Success Stories With Respect To The Fixed Exchange Rate System Including China , The Eastern Caribbean , And Many Latin American Countries, Many Of Whom Recently Fixed Their Exchange Rates. So We Need To Discuss The Matter Further Before Coming To Early Conclusive Positions. ( Argentina Is Likely To Grow By 7% In 2006, Third Only To China And India , So Our Analysis Cannot Only Be Limited To Argentina .)

 

 

6.3 New Debt Reduction Solutions

 

Last Week, Dr. Davies Tabled His Annual “Debt Management Strategy” Paper. This Document, Written More For The Benefit Of Creditors Than For The Jamaican People, Contains Not One Single New Idea On How To Confront The Single Greatest Threat To Our Economy.

 

While We Believe Very Strongly In The Principle Of Prudent Fiscal Policy, We Also Believe New And Creative Solutions Exist. Let Me Share Just Three Examples With You:

 

• The Recently Signed Petrocaribe Agreement Provides Jamaica With The Ability To Finance A Portion Of Its Petroleum Needs At Preferential Interest Rates. The Proceeds Of This Arrangement Which Will Yield Some $18 Billion By The End Of This Financial Year, Should Be Invested Or Used To Attack The Most Serious Problem – To Retire Expensive Debt, The Result Would Be A Significant Decrease In The Debt Stock And A Further Decrease In The Amount Of Revenue Dedicated To Debt Service.

 

We Estimate That In Just Three Years This Policy Alone Could Lower Debt To G.D.P. Ratio By 8% And Interest Expense By 3% Of Revenue. Whatever The Nature Of The Structure That Is Used,

 

It Is Clear That Any Government Serious About Debt Reduction Should Use Petrocaribe As A Debt Reduction Tool And Not As A Social Spending Slush Fund – Or Another Crash Programme By Any Other Name .

 

6.3.2 But Petrocaribe Is Just One Option. Within The Revenue The Government Collects Each Year Are Flows Denominated Or Linked To Foreign Currency. Like The Petrocaribe Agreement, These Flows Are An Unused Debt Fighting Tool. If Separated And Securitized, Bonds Backed By These Flows Would Receive Interest Rates Significantly Below Jamaica ’s Eurobonds. The Proceeds Of These Bonds Could Then Be Used To Repay More Expensive Debt And Lower The Annual Interest Burden. A Similar Structure Has Been Successfully Implemented In Mexico , Venezuela And Russia And Could Be Implemented In Jamaica .

 

6.3.3 The Third Example Is To Borrow A Block Of Funds From A Consortium Of Multilateral Institutions (Idb, World Bank And Cdb) I.E. Us$1.0 Billion And Use This Low Interest Cost Funds To Replace Expensive Instruments As They Mature, Thus Reducing The Demand For High Cost Instruments With The International Capital Markets.

 

These Combined Initiatives Will Cause A Reduction In Interest Cost On The Budget, Reduce Commercial Interest Rates And Redirect Private Sector Investments Into The Goods And Services Producing Sectors Of The Economy. This In Turn Will Cause Our Factories To Reopen, Our Fields To Be Planted, Our Exports To Grow And Our People To Be Gainfully Employed.

 

 

6.4 An Aggressive Export-Oriented Industrial Policy

 

Mr. Speaker, Any Economic Strategy Need To Move Beyond Merely Managing Debt And Lay Out A Specific Plan On How To Generate Growth. As Usual, There Was No Such Plan In Dr. Davies’ Presentation.

 

Over The Last 17 Years, Jamaica ’s Main Exports Have Remained The Same As Total Exports Have Declined As A Share Of G.D.P. The Technological Intensity Of Our Exports Has Been Allowed To Decline, While Our Neighbours In The Caribbean And Central America Have Successfully Transitioned To Higher Value Added Products.

 

Jamaica Must Be Seen As A Business, So It Should Not Be Holding On To A Declining Market Share In An Increasingly Competitive Market. It Would Have Failed To Diversify Its Products, Even As Its Competitors Moved Into More Specialized Goods And Services. It Would Be Unprofitable And Overleveraged. It Would Be Paying Its Employees Less In Wages And Giving Them Less In Benefits And It Would Be Losing Its Employees To The Competition.

 

Jamaica Needs A New Business Plan. This Business Plan Must Be Export-Oriented, Aimed At Diversifying The Economy And Focused On Developing Service Sectors In Which Jamaica Is Globally Competitive. Such A Policy Must Be Aggressive, Firm Centric And Managed Directly At The Very Highest Levels Of Government By A Ceo Prime Minster And A Cfo Finance Minister.

 

This Is A Strategy That Has Been Successfully Implemented Not Only In Singapore And Ireland , But In Our Own Region By Costa Rica . By Making Investments In New, Fast-Growing Sectors A National Priority. These Countries Have Overcome Obstacles No Greater Than Those Of Jamaica . The Result Has Been Higher Economic Growth, Lower Unemployment And Higher Wages.

 

Many Such Opportunities Exist In Jamaica Today. Agri-Business, Light Manufacturing, Health Tourism, Retirement Villages , And Business Process Outsourcing, Are Just Some Examples. Any Industrial Policy Must Take Advantage Of These Favourable Global Trends. All These Sectors Are Examples Of Activities In Which Jamaica Possesses A Competitive Advantage.

 

 

 

 

6.5 Business Processing Outsourcing

Let Us Look At Business Processing Outsourcing. The West Indies Are The Only English-Speaking, Low Wage, Literate Labour Market In The Western Hemisphere . We Are Perfectly Situated To Be The Off-Shore And Outsourcing Mecca For North America . Call Centers Are Just An Example Of The Potential That Exists; Jamaica Could Be Processing United States Income Tax Returns, Drafting British Legal Documents And Be Engaged In Other Higher Value Businesses.

 

We Estimate That If Jamaica Captured Just 1% Of The Global Market Share In These Businesses By 2010, It Would Generate 50,000 Jobs Directly, Another 120,000 Of Jobs Indirectly And Create A Domestic Industry With Us$1.5 Billion In Annual Sales.

 

 

6.6 A Revival Plan For Agriculture – Think Globally But Act Locally

 

The Jlp Believes That An Important Part Of Our Economic Salvation, Must Be The Revival Of Agriculture And Agro-Industry Within The Globalised Economy. Not Only Will We Pursue The Revival And Diversification Of The Sugar Cane Industry – With Or Without International Partnership – We Intend To Aggressively Promote Diversification Into A Range Of Other Crops, Including Long-Term Tree Crops On Large Acreages Of Arable Land That Now Lay Idle.

 

Equally, We Will Put In Place A Support Programme For Small Farmers That Allows Them Access To Affordable Credit At Single Digit Interest Rates. The Provision Of Subsidized Inputs Such As Fertilizers And Insecticides Must Also Be A Part Of The Plan. The Present Crop Incentive Programme Of The Ministry Of Agriculture Is Grossly Inadequate And Highly Discriminatory. Our Hard Working Small Farmers Deserve A Break.

 

6.6.1. A Clear Strategy Is Needed For Rural Development

Special Initiatives Are Urgently Needed To Assist Small Farmers In Rural Communities Islandwide To Be More Productive.

 

In Addition To Available Credit At Low Interest Rate And Subsidized Inputs, Special Financing Must Be Made Available Through The Development Bank Of Jamaica To Provide The Seed Capital For New Initiatives Such As Greenhouse And Tissue Culture Technology That Can Yield Greater Productivity And Wealth For Our Rural Folk.

 

The Project Being Undertaken By The Christiana Potato Growers Co-Operative In North East Manchester Show The Dramatic Results Of Greenhouse Technology In Which Tomatoes And Sweet Peppers Have Been Bearing In

Abundance For The Past 8 Months, On The Same Plants. This Compares With A Plant Life Of Only 2 Or 3 Months Using Conventional Methods.

 

The Government’s Constant Refusal To Assist Our Farmers On The Premise That The W.T.O. Will Not Allow Subsidies Is Totally Untrue And Shows The Government’s Lack Of Concern For The Back Bone Of Our Country, The Farmers And Rural Communities. I Quote From The International Chartered Accountant Magazine:

 

“….Figures Produced By The O.E.C.D. Suggests That The Developed World Spends Around Us$1 Billion Each Day On Support Of Its Agricultural Communities… The E.U.’S Commissioner For Trade Responded By Saying That There Are Legitimate Reasons For Any Country To Support Its Agriculture In Order To Achieve Security, Safety, And The Quality Of Food Which Is Produced…This Figure Of Us$1b Embraces Higher Prices Paid By Consumers And The Cost Of Tariff Protection”–

 

 

Industry And Commerce

 

With More Than 50% Of The Work Force Being Non-Productive – We Need Incentives For The Private Sector. Here Are Some Suggestions:

 

• Remove G.C.T. Customs Duties And User Fees On Capital Goods And Raw Materials

 

• Establish Enterprise Development Zones. Mr Speaker, Our Inner Cities Are A Problem We Must Find Ways Of Rescuing Our Fellow Jamaicans From A Life Of Misery In These Communities. And So, I Recommend That We Establish Enterprise Development Zones In These Areas Where These Zones Will Have Specific Tax Incentives On Profits, Imports, Training, And Community Activities. Target Areas For Permanent Job Creation Should Include Kingston, Spanish Town , May Pen, Montego Bay And St. Ann’s Bay.

 

• The Previous Leader Of The Jamaica Labour Party, The Most Honourable Edward Seaga Has Proposed A Free Port On The Palisadoes Peninsula That Would Combine Light Manufacturing With Cruise Shipping And Shopping. I Think It Is Full Time We Give Proper Consideration To This Proposal.

 

• Small Business/Cottage Industries – The $1.0 Billion Fund For Small Businesses Should Be Directed To The Production Of Goods And Services And Aimed At Releasing The Entrepreneurial Energies Of Jamaicans.

 

For Jamaica To Seize These Tremendous Opportunities, It Needs A Prime Minister And A Minister Of Finance That Believe Investment Promotion Is A Top National Priority And Are Willing To Be Personally And Actively Engaged In Aggressively Selling Brand Jamaica.

 

 

• Taxation

 

Mr. Speaker, Given The Global Environment We Now Live In And Our High Dependency On Fossil Fuel We Do Not Have Many Levers Available For Us To Make Jamaica Competitive. Those That Are Under Our Control We Must Utilize Them Effectively To Ensure That We Create A Competitive Jamaica . One Such Tool Available Is Taxation, That Is, Our Tax System.

 

For Too Long We Have Continued With A Myopic View Of A Tax System Focusing Only On Short-Term Gains And Ignoring The Long Term Possibilities. We Had Wonderful Opportunities In The Past To Adjust Our Tax System, Such As, The Mou And The Buoyancy On The Capital Markets.

 

We Do Not Support The Piecemeal Approach That The Minister Is Taking In Respect Of The Recommendations Of The Matalon Report. So Far, He Has Increased G.C.T. And The Tax Threshold As Recommended By The Report But The Other Aspects Of The Report Have Been Totally Ignored. We Are Interested In The Following Matters:-

 

• Removal Of Stamp Duty – No Doubt The Minister Is Aware Of The Impact This Will Have On Trading Of Financial Instruments And The Creation Of Secondary Mortgage Markets.

 

• Reduction Of Transfer Tax

 

• The Elimination Of Double Taxation On Non-Listed Companies

 

• Reduction Of Payroll Taxes. The Report Stated That Jamaican Workers Are Taxed 10% More Than Other Countries.

 

• Carry Forward Losses.

 

• The Creation Of Incentives For Energy, Higher Education For P.A.Y.E. Workers, And Tax Allowances For First Time P.A.Y.E. Home Owners.

 

Minister, We Are Fully Prepared To Discuss These Tax Matters Amongst Others During This Financial Year, So I Implore You To Start To The Debate With Urgency.

 

 

New Energy Policy Needed

 

Apart From The High Cost Of Debt Servicing And The Consequent High Cost Of Commercial Bank Credit, The Second Major Problem That Militates Against The Pocketbooks Of The Jamaican People As Well As Impacting On The Competitiveness Of The Jamaican Economy, Is The Government’s Failure After 17 Years, To Implement A Cost Saving, Energy Efficiency And Conservation Policy.

 

Mr. Speaker, The Government Has Failed To Deal With The Cost Of Electricity Production Although They Remain Shareholders In J.P.S.Co. But Have Allowed The Use Of Fuel Guzzling Turbines Without Making Any Effort To Protect The Pockets Of Consumers.

 

They Have Also Failed To Move Aggressively With Ethanol For Transportation And Biogas For Electricity Generation.

 

Mr. Speaker, They Have Failed To Even Look To The Heavens Because Solar Energy Is Being Ignored – Energy Has A Major Impact On The Economy – In Terms Of The Factors Of Production, Household Usage, And Its Overall Impact On The Inflation Rate.

 

 

6.9.1 J.P.S.Co.

 

The Divestment Of The Jamaica Public Service Company Limited Was Supposed To Yield Greater Efficiency And Cost Savings To Consumers, But The Terms Of The J.P.S.Co. Licence, Combined With The Inappropriate-Expensive-To-Operate Technology Being Used By The Jpsco, Weigh Heavily Against Our Light Bills Which Now Resemble Or Exceed Our Mortgage Payment Obligations.

 

The Government After Itself Pursuing Inappropriate Electricity Generation Policies Since 1989, Also Failed To Require Radical Change To Be Implemented By Mirant.

 

And Now, The Government, In Its Latest Attack Of Youthful Exhuberance, Instead Of Using Its 20 Percent Ownership In J.P.S.Co. As A Leverage For Demanding The Right Investment Mix In New Technology, Proposes To Sell Its Remaining Shares In Such A Vital Company, Leaving The Jpsco, To Plunder The Pockets Of Jamaicans Even As The O.U.R. Looks On In A State Of Absolute Impotence.

 

 

 

Given The Importance Of Energy To Jamaica’s Survival, And Taking Into Account Rising Oil Prices, The Jlp Will Be Obliged To Carry Out A Review Of The Divestment Of The J.P.S.Co. To Mirant, With A View To Seeing How Greater Efficiencies Can Be Achieved.

 

The Jlp Will Be Presenting A Comprehensive Energy Policy That Takes Into Account Our Unique Potential Within The Context Of Available Technology.

 

 

• Transparency And Accountability

 

Mr. Speaker, Every Year I Speak About The Massive Corruption That Takes Place In Government And Every Year The Response Has Been The Same, Silence. Silence From The Media, Silence From The Church, Silence From The Government Members Of Parliament, Silence From Business Communities. It Is As If We Are Immune To The Corruption, At Times It Baffles Me.

 

This Silence Has Led To A New Level Of Arrogance Among Senior Government Servants Who Feel That They Can Do Anything And Get Away With It Because “It’s The Runnings”. It Is An Act Of Gross Disrespect To The People Of Jamaica .

 

It Is In This Context That I Wish To Repeat The Call Of The Opposition To Immediately Appoint An Appropriation Committee Of The House Under The Chairmanship Of An Opposition Member.

 

The Leader Of The Opposition Has Also Tabled Critical Legislation In Parliament Aimed At Stemming The Corruption In The Award Of Contracts. We Urge Quick Passage Of This Legislation.

 

 

Conclusion

Mr. Speaker, Today Jamaica Faces Real Economic Choices. As I Have Shown, There Is A Difference Between The Government And The Opposition On How The Jamaican Economy Should Be Managed And This Difference Appears To Be Growing:

 

 

 

The Government Is Divided Internally On The Question Of Economic Policy And Has No Clear Plan To Generate Growth; The Opposition Has A Clear And Comprehensive Economic Strategy Which We Have Put Forward Here Today.

 

The Government Is Divided Between Partially Implementing Half-Hearted Fiscal Measures And Moving Towards A Populist Approach, The Opposition Is Solidly Committed To The Successful Implementation Of Macro-Economic Prudence.

 

The Government Has A Long Track Record Of Missed Targets And Is Losing Credibility As A Result; The Opposition Has No Such Legacy And Has Strong Credibility With The Domestic Private Sector And International Community.

 

The Government Is Bankrupt Of New Ideas, The Opposition Has Put Forward Today Three New And Creative Solutions To Lower Our Debt Burden, As The Necessary Precondition To Spurring Investment And Growth.

 

The Government Believes That If You Get The Macro-Economic Situation Right You Can Sit Back And Wait For Growth, The Opposition Believes That An Aggressive, Export-Oriented Industrial Policy Should Be A National Priority And Should Be The Natural Partner To Macro-Economic Stabilization In Order To Move From Borrowing Our Way Towards Poverty Alleviation To Earning Our Way To Wealth-Creation.

 

Mr. Speaker, These Are Just Some Of The Fundamental Policy Differences That Exist. But Let It Be Clear, By Far The Largest Difference Between The Government And The Opposition Is The Difference In Our Ability To Successfully Implement Whatever Policy We Choose.

 

 

 

 

 

 

 

 

 

 

7. How To Create Wealth Through A Production Culture

 

Mr. Speaker, I Wish To Leave An Issue Before This Parliament And The Country For Consideration And Debate As We ConAudleyShawJamaica.com - Hon. Audley Shaw - Minister of Finance and the Public Service Our Future. This Is, The Urgent Need For A Production Culture In Jamaica .

 

At Present Our Capital Is Not Being Deployed In A Productive Way That Can Lead To Generating Investment And Growth In Job Creating Technology-Driven And Foreign Exchange Earning Endeavours.

 

The N.I.R. Is Built Up On Borrowed Money, Running Up Losses At The Bank Of Jamaica At Taxpayers Expense.

 

Funds Borrowed On The Local And International Capital Markets Are Being Used Principally To Service Other Debt Instruments And Recurrent Expenditure.

 

None Of These Initiatives Either Individually Or Combined Represent A Sufficient Condition For The Creation Of Wealth On A Significant Scale And This Is So Because Funds Borrowed At High Interest Rates That Crowd Out Productive Investments, Merely Continue The Transfer Of Wealth From The Poor To The Rich.

 

And Funds Garnered From Remittances Have A Downside, As It Provides Some Relief To The Population, But It Discourages Individual Efforts At Improving Productivity Here At Home. Too Many Jamaicans Are Living Marginally From The Surpluses Of The Productive Output Of Jamaicans Overseas.

 

Annually, The Inter-American Development Bank (I.D.B.) In Its Report, Has Commented On The Important Role Of Remittances To Countries, Noting The Growing Dependence On This Source Of Inflows. The Bank Has Warned That This Is “Non-Sustainable” As A Prolonged Downturn In The U.S. Economy, For Example, Could Hit Hardest Latin American And Caribbean Workers In Terms Of Unemployment, Because Many Are In The Service Sector, Pending U.S. Immigration Legislation Further Complicates This Issue.

 

On Two Counts, The Deployment Of Our Labour Force And In Our Use Of Capital, The Government Is Not Employing Wealth-Creating Policies.

 

Adam Smith, Writing 230 Years Ago, Put It Best When He Wrote “An Inquiry Into The Nature And Causes Of The Wealth Of Nations.”

 

On The Productive Use Of Labour, Adam Smith Said:

 

“The Annual Labour Of Every Nation Is The Fund Which Originally Supplies It With All The Necessaries And Conveniences Of Life Which It Annually Consumes”.

 

He Further Said That The Proportion Between What Is Produced And What Is Consumed, Must Be Regulated By Two Different Circumstances.

 

“First, By The Skill, Dexterity And Judgment With Which Its Labour Is Generally Applied; And Secondly, By The Proportion Between The Number Of Those Who Are Employed In Useful Labour, And That Of Those Who Are Not So Employed.”

 

“Whatever The Soil, Climate, Or Extent Of Territory Of Any Nation, The Abundance Or Scantiness Of Its Annual Supply, Must Depend Upon These Two Circumstances”.

 

 

And On The Productive Use Of Capital, Adam Smith Wrote:

 

“It Is Not By Augmenting The Capital Of The Country, But By Rendering A Greater Part Of That Capital Active And Productive Than Would Otherwise Be So, That The Most Judicious Operations Of Banking Can Increase The Industry Of The Country.”

 

On Both The Counts Of The Productive Use Of Labour And The Productive Use Of Capital Advanced By Adam Smith, Jamaica Has Been Found Wanting, And, Our People In Consequence Suffer On The Vine Of Mediocrity While Our Capacity For The Pursuit Of Excellence Is Compromised.

 

For Jamaica To Embark On A Path Of Wealth Creation We Must Commit Our Labour And Capital To A Production Culture.

 

I Invite The Minister Of Finance, The Government And All Jamaicans To Enter Into This Debate On How To Achieve A Production Culture.

 

8. It Is Time For A Better Life

 

Mr. Speaker, With The Progressive Corruption Of Our Institutions, With Its Tentacles Spreading Far And Wide, There Is Now A Clear And Present Threat To Jamaica’s Democracy.

 

Time Is Not On Our Side. Our People Are Struggling, Hungry, Bewildered, And Impatient, And This Can Lead To An Outburst Among The Population. It Is Time To Choose A Clear Path To A Better Life, A Life Of Peace, Gentility And Prosperity.

Unsecurred

• It IsA Time To Choose To Ensure That Every Child In Jamaica Is Nurtured And Protected And Gets The Opportunity For A Good Education As A Matter Of Right And Not A Matter Of Privilege, So They Can Live A Better Life.

 

• It Is A Time To Choose So That One-Third Of Our Adult Population Can Have The Opportunity To Get A Decent Job So They Can Provide For Their Families And Live A Better Life.

 

• It Is A Time To Choose So That Our Citizens Will Have The Opportunity To Live In Peace And Safety By Putting In Place The Resources For The Security Forces To Be Able To Do Their Work, So Our Citizens Can Live A Better Life.

 

• It Is A Time To Choose So That Our People Have The Opportunity To Be More Productive By Lifting Up Standards Of Governance And Public Sector Service Delivery So That We The People Can Live A Better Life.

 

• It Is A Time To Choose So That We The People Can Get The Opportunity To Benefit From The Wealth Of The Nation By Cutting Out Corruption In The Award Of Contracts, Cutting Out Waste And Extravagance, And Using The Savings To Fund Basic Services So We Can All Live A Better Life.

 

• Mr. Speaker, It Is A Time To Choose Between Two Clear Alternatives. The Present Path That Has Resulted In Unemployment, A Decline In Family Life And An Alarming Decline In Standards, And Persistent Poverty; Or A Jlp-Led Path That Will Transform Jamaica By Putting The Opportunity Into The Hands Of Every Jamaican To Be Able To Live A Better Life.

 

 

The Choices We Make Are Not Just About Our Political Arrangements, They Are More Importantly About The Kind Of Nation That We Want To Build And Preserve For Future Generations.

 

Mr. Speaker, I Close By Quoting One Verse Of A Song From A Hymn Book Presented To Me By My Mother Before She Died:

 

“Lord Jesus Teach Me How To Choose – A Thousand Choices Bar My Way. I See In Each A Destiny, So Help Me Wisely Choose I Pray.”

 

Thank You, May God Bless You All And May God Bless Jamaica !

 

 

 

 

 

 

Audley Shaw, M.P.

Opposition Spokesman On Finance

And The Public Service

 

 

Tuesday, May 2, 2006

 

 

 

 

 

 

 

 

BUDGET DEBATE 2005/2006

PRESENTATION BY

AUDLEY SHAW, M.P.

OPPOSITION SPOKESMAN ON FINANCE AND THE PUBLIC SERVICE

TUESDAY, APRIL 19, 2005

 

“CORRUPTING THE BUDGETARY PROCESS”

 

INTRODUCTION

 

FOR THE FIRST TIME SINCE INDEPENDENT JAMAICA , THIS BUDGET DEBATE IS TAKING PLACE WITHOUT THE PARTICIPATION OF A FORMER FINANCE MINISTER WHOSE CONTRIBUTION TO THESE DEBATES OVER 40 YEARS BOTH IN GOVERNMENT AND OPPOSITION HAS BEEN SEMINAL.

 

I HAVE NOT ONLY BENEFITED FROM THESE CONTRIBUTIONS BUT I AM THANKFUL FOR THE GUIDANCE I RECEIVED FROM HIM OVER THE YEARS. I REFER, OF COURSE, TO THE FORMER MEMBER OF PARLIAMENT FOR WEST KINGSTON, THE MOST HONOURABLE EDWARD PHILLIP GEORGE SEAGA, WHO TO DATE, HOLDS THE RECORD AS MINISTER OF FINANCE PRESIDING OVER THE GREATEST PERIOD OF ECONOMIC GROWTH IN JAMAICA.

 

I ALSO TAKE THIS OPPORTUNITY TO WELCOME MR. BRUCE GOLDING WHO REPLACES MR. SEAGA.

 

THE STATE OF THE NATION

THIS BUDGET DEBATE IS BEING HELD AGAINST THE BACKGROUND OF SERIOUS CHALLENGES THAT FACE US AT THIS TIME.

 

ANY POSITIVE INITIATIVES OF NEW INVESTMENT IN TOURISM AND ANTICIPATED ADDITIONAL INVESTMENT IN THE BAUXITE/ALUMINA SECTOR, DOES LITTLE TO DETRACT FROM THE ISSUE THAT THE ECONOMY CONTINUES TO BE IN A NO-GROWTH TO LOW-GROWTH MODE.

 

LACK OF MEANINGFUL GROWTH

THE PERSISTENT LACK OF MEANINGFUL GROWTH IN THE ECONOMY OVER THE PAST 14 YEARS AVERAGING LESS THAN ONE PERCENT PER YEAR FOR THE PAST 12 YEARS, CAN BE TRACED TO THE FACT THAT THE MANUFACTURING SECTOR – A MAJOR PILLAR OF ECONOMIC DEVELOPMENT – HAS BEEN SO BADLY DEVASTATED OVER THE YEARS, THAT TODAY, MANUFACTURING ONLY CONTRIBUTE 13.8 PERCENT TO G.D.P., COMPARED WITH 20 PERCENT OF G.D.P. IN 1989, AT THAT TIME 145,000 PERSONS WERE EMPLOYED IN THIS SECTOR COMPARED WITH ONLY 80,000 PERSONS BEING EMPLOYED IN MANUFACTURING TODAY.

 

THE LACK OF MEANINGFUL GROWTH IN THE ECONOMY IS CAUSED BY A LACK OF DIVERSIFICATION IN THE ECONOMY, AND THIS IS DUE TO THE GOVERNMENT’S LACK OF FOCUS ON THE FUNDAMENTALS OF WHAT IT TAKES TO ACHIEVE BROAD-BASED ECONOMIC DEVELOPMENT THAT PROVIDES OPPORTUNITY FOR OUR CITIZENS. (I WILL RETURN TO THIS SUBJECT).

 

INFLATION

INFLATION WHICH WAS PROJECTED TO BE 9.0% IN 2004/2005, WAS 13.7 PERCENT AND WILL NO DOUBT BE FURTHER AFFECTED WITH THE ILL-ADVISED DECISION OF THE FINANCE MINISTER TO INCREASE G.C.T. AND REMOVE ALL ITEMS FROM ZERO RATING.

 

AND TAKE NOTE THAT THE BASIC FOODS ON WHICH THE POOR RELY, IS HIGHER THAN THE RATE OF INFLATION.

 

INFLATION ON BASIC FOOD ITEMS

 

ITEM	PRICE I YEAR AGO 2004	CURRENTPRICE 2005	% INCREASE
RICE	$13.18 PER LB.	$14.63	11.00
FLOUR	14.00 PER LB.	14.00	0.00
SUGAR	19.82 PER LB.	20.20	1.92
CORNMEAL	11.00 PER LB.	21.94	99.45
MILK POWDER (LASCO)	31.50 PER PK.	42.40	34.60
CONDENSED MILK (BETTY)	56.10 PER TIN	62.50	11.41
MARGARINE	37.65 PER LB.	57.72	53.31
CHIFFON MARGARINE	66.40 PER PK	69.90	5.27
GRACE MACKEREL (DUTTY GAL)	25.00 PER TIN	25.00	0.00
COOKING OIL	94.00 PER LITRE	110.00	17.02
BREAD (2 LBS.)	75.50 PER 2 LB	85.00	12.58
SALTFISH	128.00 PER LB.	149.00	16.41
WATER CRACKERS (SML)	28.10 PER PK.	28.10	0.00
SPECIAL CREAM CRACKERS	18.50 PER PK.	21.40	15.68
RED PEAS	56.00 PER LB.	86.50	54.46
SARDINES	34.30 PER TIN	36.00	4.96
MACARONI	28.10 PER PK.	60.30	114.59
BAKED BEANS	53.10 PER TIN	51.10	-3.77
EGGS	90.00 PER DOZ.	114.00	26.67
SALT	9.00 PER LB.	10.50	16.67
CHICKEN	72.45 PER LB.	75.00	3.52
TOTAL	$1,155.50	$1,359.79	17.68

 

 

INTEREST RATES

INTEREST RATES, WHILE TRENDING DOWN MARGINALLY, CONTINUE TO BE INTOLERABLY HIGH, WITH THE GOVERNMENT’S BENCHMARK TREASURY BILL RATE STILL HOVERING IN THE 14 PERCENT REGION.

 

IT IS TRUE TO SAY THAT COMMERCIAL BANKS NEED TO AGGRESSIVELY CUT COSTS AND INCREASE EFFICIENCIES IN ORDER TO SIGNIFICANTLY REDUCE THEIR SPREAD BETWEEN THE GOVERNMENT’S BENCHMARK RATE AND THEIR LENDING RATES.

 

BUT THE CALL ON COMMERICAL BANKS MUST BE PRECEDED BY A CALL ON THE GOVERNMENT TO LEAD THE WAY TO BENCHMARK INTEREST RATES OF LOW SINGLE DIGIT LEVELS WHICH IS THE ONLY WAY TO ACHIEVE RATES THAT ARE COMPETITIVE WITH OUR PARTNERS IN THE CARIBBEAN . IT IS THEN AND ONLY THEN THAT COMMERCIAL BANKS WILL GET THE CONFIDENCE TO CUT INTEREST RATES. AT PRESENT, COMMERCIAL BANK RATES IS A FUNCTION OF GOVERNMENT’S HIGH INTEREST RATE POLICY.

 

THE CONTINUING DEBT PROBLEM

JAMAICA ’S STOCK OF DEBT MOVED FROM J$34 BILLION IN 1989 TO $760 BILLION TODAY, BREAKING THE ¾ TRILLION DOLLAR MARK, AN INCREASE OF 2,135 PERCENT, OR A YEARLY INCREASE OF 142 PERCENT. THIS MASSIVE BORROWING HAS RESTRICTED THE GOVERNMENT’S ABILITY TO EFFECTIVELY CARRY OUT THOSE FUNCTIONS THAT FORM A PART OF THE INESCAPABLE MANDATE AND PURPOSE OF GOVERNMENT.

 

APART FROM THIS MOUNTAIN OF DEBT , WHAT DO WE HAVE TO SHOW FOR IT BUT INCREASED JOBLESSNESS, MORE CRIME AND DEEPER POVERTY?

 

AND DESPITE THE IMPOSITION OF YET ANOTHER DRACONIAN TAX PACKAGE, THE SECOND LARGEST TO THE “RUN WITH IT” TAX PACKAGE OF 2003/2004, THERE ARE NO DISCERNABLE ADDITIONAL BENEFITS TO BE DERIVED BY THE PEOPLE.

 

THE MINISTER’S SO-CALLED BALANCED BUDGET WOULD HAVE PLEASED THE COUNTRY’S CREDITORS AT HOME AND ABROAD. HOWEVER, THIS HAS BEEN ACHIEVED ON THE BACKS OF POOR PEOPLE, BY DEPRIVING THEM OF BASIC SOCIAL SERVICES WHICH ARE NECESSARY FOR A BETTER QUALITY OF LIFE.

 

HERE ARE THE CONSEQUENCES OF A RECKLESS AND INSENSITIVE ADMINISTRATION THAT PUTS VIRTUALLY EVERYTHING AHEAD OF SECURING THE RIGHTS OF THE PEOPLE AND DELIVERING BASIC SERVICES TO THEM DESPITE COLLECTING RECORD TAXES FROM THEM.

 

CONSEQUENCES OF HIGH DEBT SERVICE & RECKLESS GOVERNANCE

 

• THE HEALTH SECTOR IS SHORTCHANGED, WHERE CITIZENS NOW HAVE TO PAY SIGNIFICANTLY HIGHER USER FEES AT OUR HOSPITALS, AND OVER 600 PERSONS DIE EACH YEAR FROM KIDNEY AILMENTS FOR WANT OF DIALYSIS AND TREATMENT WHICH THEY CANNOT AFFORD, DUE TO POVERTY. THIS REQUIRES $369 MILLION TO PROVIDE KIDNEY DIALYSIS FREE OF COST TO SAVE THEIR LIVES.

 

• OUR EDUCATIONAL SYSTEM CONTINUES TO BE SHORTCHANGED, WHEREBY THE GOVERNMENT REFUSES TO HONOUR ITS 2002 PRE-ELECTION PROMISE TO ABOLISH COST-SHARING BY 2005/2006, EVEN AS THE 2004 ISSUE OF THE JAMAICA SURVEY OF LIVING CONDITIONS (JSLC), TELLS US THAT 62 PERCENT OF SCHOOL CHILDREN WHO ARE ABSENT FROM SCHOOL GIVE THE REASON FOR ABSENCE AS “MONEY PROBLEMS”.

 

• OUR FIRE SERVICES, SHORTCHANGED, WHERE DESPITE THE PROMISE OF THE PRIME MINISTER AND HIS CABINET COLLEAGUES, THE FIRE SERVICES ARE IN A WORSE POSITION THIS YEAR THAN LAST YEAR AND WILL NOT IMPROVE FOR AT LEAST ONE MORE YEAR, DUE TO LACK OF FUNDS, MINISTERIAL NEGLIGENCE AND GROSS DERELICTION OF DUTY.

 

• OUR GOVERNMENT PENSIONERS ARE SHORTCHANGED, WITH THE GOVERNMENT HOLDING ON TO THEIR MONEY FOR MONTHS, EVEN YEARS, ALTHOUGH IT IS AN ILLEGAL ACT, AS PENSIONERS HAVE THE SAME STATUS IN LAW AS THE PAYMENT OF DEBT OBLIGATIONS.

 

• OUR TEACHERS, NURSES AND SECURITY FORCES ARE SHORTCHANGED, WITH MEAGRE SALARIES AND ARE BEING CALLED UPON TO HOLD STRAIN WITH AN M.O.U. DESPITE CUMULATIVE INFLATION OF 30 PERCENT OVER THE PAST TWO YEARS.

 

• OUR HURRICANE RELIEF EFFORTS ARE SHORTCHANGED, WHERE DESPITE FINANCIAL ASSISTANCE TO THE GOVERNMENT ON AN UNPRECEDENTED SCALE, THE SEVERELY DAMAGED HAVE NOT YET ALL RECEIVED ASSISTANCE AND MOST WITH MINOR DAMAGE WILL GET A LITTLE “BUMP” OF SOMETHING A YEAR LATER OR NOTHING AT ALL.

 

• THE BUDGETARY PROCESS ITSELF IS BEING SHORTCHANGED, WHERE A SECOND BUDGET IS BEING EXPENDED ILLEGALLY AND UNCONSTITUTIONALLY, WITHOUT PARLIAMENTARY APPROVAL OR OVERSIGHT AND WHICH IS AN OPEN INVITATION TO CORRUPTION ON A MASSIVE SCALE.

 

• IF WE DARE TO ASK QUESTIONS ABOUT THE SHORTCHANGING OF TAXPAYERS WITH WASTEFUL EXPENDITURE, A NEW LEVEL OF ARROGANCE HAS EMERGED WHERE WE ARE TOLD TO SHUT OUR ”DAMN MOUTHS”, AND THE PUBLIC SERVANT IS NOT REBUKED BY EITHER THE PRIME MINISTER OR ANY ONE ELSE, EVEN AS WE ARE LECTURED TO ABOUT OUR VALUES AND ATTITUDES.

 

• BUT, MOST OF ALL, OUR VERY FUTURE BECOMES SHORTCHANGED, WHEN A STUDENT TELLS HER CLASSMATES “I AM CONVINCED THAT OUR PRESENT LEADERS DO NOT HAVE THE ABILITY OR THE WILLINGNESS TO DEAL WITH THE CRIMINALS ON THE STREETS”, AND SOON AFTER IS BRUTALLY SLAIN FOR A CELLULAR PHONE, THEREBY BECOMING ANOTHER STATISTIC IN THE OVER 1,400 PERSONS BEING MURDERED EACH YEAR.

 

TRANSPARENCY AND ACCOUNTABILITY

OVER THE YEARS THE CONDUCT OF THE GOVERNMENT HAS CAUSED ME TO FOCUS ON THE ISSUE OF CORRUPTION CARRIED ON OR FACILITATED BY THE GOVERNMENT OF JAMAICA . I DO SO BECAUSE I STRONGLY BELIEVE THAT CORRUPTION IS BECOMING DEEPLY ENTRENCHED IN OUR CULTURE AND WILL LEAD TO FURTHER INDISCIPLINE AND EVEN MORE VIOLENCE.

EVERY YEAR I COME TO THIS HONORABLE HOUSE THINKING AND HOPING, YES HOPING, THE GOVERNMENT OF THE DAY WOULD HAVE THE COURAGE AND TAKE THE NECESSARY CORRECTIVE ACTION TO FIRST ELIMINATE EXISTING CORRUPT PRACTICES AND PUT PROCEDURES IN PLACE TO PREVENT RECURRENCES.

BUT IT APPEARS THAT OUR LEADERS CAN NO LONGER DIFFERENTIATE BETWEEN “RIGHT AND WRONG” – IS IT THAT WE HAVE LOST THE MORAL CAPACITY TO DO SO? OR IS IT THAT OUR CONSCIENCE IS SO DEADENED THAT WE NO LONGER CAN SEE THE POVERTY THAT PRESENTS ITSELF TO US IN SO MANY WAYS?

THE MINISTER ONLY HAS TO LOOK THROUGH HIS OFFICE FROM ANY CORNER HE CHOOSES TO SEE THE POVERTY THAT PERVADES IN THIS SOCIETY, A POVERTY WHICH IS PARTLY CAUSED BY CORRUPTION.

IN FACT, IT APPEARS THAT THE MORE WE SPEAK ON MATTERS OF CORRUPTION THE MORE THE GOVERNMENT APPEARS TO BECOME MORE OBLIVIOUS AND “DON’T-CARE” TOWARD THESE MATTERS. WHERE IS OUR CONSCIENCE AND SENSE OF DECENCY?

THE DEFINITION OF CORRUPTION SHOULD NOT BE LIMITED TO THE CONSTANT BREACHING OF THE COUNTRY’S CONTRACT TENDERING PROCESS FOR THE BENEFIT OF THE PARTY IN POWER, OR THE MASSIVE OVER-RUNS ON PROJECTS, BUT IN THE CONTEXT OF GOOD GOVERNANCE, SHOULD ALSO INCLUDE THE WILFUL INTENT TO DELIBERATELY BREACH LAWS OF JAMAICA, AND MOST IMPORTANTLY TO CONTINUE MISLEADING AND DISRESPECTING THE PARLIAMENT AND BY EXTENSION THE PEOPLE OF JAMAICA.

 

OFF-BUDGET FINANCING

ONE AREA OF CORRUPTION IS THE PRACTICE, OF “OFF BUDGET” FINANCING. THERE APPEARS TO BE TWO BUDGET SYSTEMS; ONE FOR PARLIAMENT, AND THE “OFF-BUDGET” FINANCING PRACTICED BY THE MINISTER OF FINANCE, KNOWN AS THE “RUN-WID-IT” BUDGET.

 

THE MINISTER OF FINANCE COMES TO THIS HONOURABLE HOUSE EACH YEAR TO PRESENT A BUDGET BUT SIMULTANEOUSLY HE OPERATES THE “RUN WID IT” BUDGET. THE METHODS USED TO FINANCE THIS “RUN-WID-IT” BUDGET INCLUDES AMONG OTHER THINGS:

 

• DEFERRED FINANCING
• COMFORT LETTERS
• LETTERS OF UNDERTAKING
• TRADE CREDITORS FINANCING.

 

THESE FINANCING TECHNIQUES ARE BEING USED OUTSIDE OF THE BUDGETARY PROCESS, NOT IN THE CASE OF EMERGENCY AS THE MINISTER STATED IN HIS BUDGET PRESENTATION, BUT AS A METHOD OF COMMITTING THE TAXPAYERS OF THE COUNTRY TO ADDITIONAL DEBT WITHOUT THE PEOPLES’ REPRESENTATIVES KNOWLEDGE OR APPROVAL AS REQUIRED BY LAW.

 

A PRACTICE THAT LEAVES ME AS CHAIRMAN OF THE PUBLIC ACCOUNTS COMMITTEE TO WONDER AS TO THE ACCURACY OF THE BUDGET AND QUITE FRANKLY, AS TO WHAT CONFIDENCE WE SHOULD HAVE IN THE BUDGET.

 

DEFERRED FINANCING

IN THE LATE 1990s, I FIRST BROUGHT THE ISSUE OF DEFERRED FINANCING TO PARLIAMENT NOTING THAT THESE EXPENDITURE ITEMS (RUNNING INTO BILLIONS OF DOLLARS) WERE BEING DONE “OFF BUDGET.”

 

THIS FORCED AN AMENDMENT TO THE LAW – THE F.A.A. ACT – MANDATING, AMONG OTHER THINGS, THE MINISTER OF FINANCE TO BRING THE DEFERRED FINANCING ARRANGEMENTS TO PARLIAMENT, SETTING OUT THE SCHEDULE OF PAYMENTS ON EACH PROJECT OVER FUTURE BUDGETS. THE LAW REQUIRED THAT THE DEFERRED FINANCING PROJECTS BE APPROVED BY CABINET AND THE FINANCE MINISTER.

 

THE AMENDMENT ALSO REQUIRES THAT A COPY OF EVERY AGREEMENT SHALL BE TABLED IN PARLIAMENT. THIS HAS NOT BEEN DONE ON ANY OCCASION SINCE THE AMENDMENT WAS PASSED.

 

IN ANSWER TO QUESTIONS TABLED AT THE PUBLIC ACCOUNTS COMMITTEE OF PARLIAMENT ON MARCH 22, 2005 , ON THE SUBJECT OF DEFERRED FINANCING, THE FOLLOWING WAS STATED BY A DEPUTY FINANCIAL SECRETARY OF THE MINISTRY OF FINANCE AND PLANNING:

 

“THE MINISTER OF FINANCE AND PLANNING, BY WAY OF MINISTRY PAPERS 52/03 AND 20/04 DATED JULY 11, 2003 AND APRIL 15, 2004 RESPECTIVELY LAID BEFORE THE HOUSE OF REPRESENTATIVES, ALL DEFERRED FINANCING AGREEMENTS ENTERED INTO BY THE MINISTRY.

 

SINCE THEN THE MOFP HAS NOT ENTERED INTO ANY AGREEMENTS REQUIRING THE USE OF THIS METHOD OF FINANCING.

 

AT THIS TIME THERE ARE NO OUTSTANDING DEFERRED FINANCING AGREEMENTS WHICH WOULD REQUIRE THE APPROVAL OF PARLIAMENT.”

 

ACCORDING TO THE MINISTRY PAPERS PROVIDED, BOTH PROJECTED THAT THE TOTAL AMOUNT OF FUNDS TO BE PAID IN THE ESTIMATES OF EXPENDITURE FOR FY 2005/2006 TO COVER DEFERRED FINANCING ARRANGEMENTS WAS $567.092 MILLION.

 

HOWEVER, LAST WEEK THE MINISTER OF FINANCE TABLED ANOTHER MINISTRY PAPER 24/05 ON APRIL 14 TH, 2005 WHICH SHOWS THAT THE AMOUNT TO BE PAID OUT IN FY 2005/2006 FOR DEFERRED FINANCING IS SOME $3.180 BILLION, ALMOST SIX-FOLD THE ORIGINAL AMOUNT PROJECTED.

 

BUT EVEN THIS DOES NOT PRESENT A TRUE PICTURE OF THE “OFF-BUDGET” ITEMS THAT ARE BEING INCLUDED IN THIS YEAR’S BUDGET. WE ALSO HAVE TO LOOK AT THE IMPACT OF LETTERS OF UNDERTAKING AND COMFORT LETTERS.

 

THE AUDITOR GENERAL IN HIS REPORT FOR FY2002/03, AND STATEMENTS TO THE PUBIC ACCOUNTS COMMITTEE HAS DRAWN ATTENTION TO THE FACT THAT OVER TIME THE STRICT DEMARCATION LINE BETWEEN DEFERRED FINANCING, LOUs AND COMFORT LETTERS HAVE BEEN CROSSED, AND THE LANGUAGE OF LETTERS OF UNDERTAKING AND COMFORT LETTERS HAVE NOW REACHED THE POINT WHERE THEY ARE TECHNICALLY CONTINGENT LIABILITIES.

 

IN OTHER WORDS, RATHER THAN SIMPLY BEING A GENTLEMAN’S AGREEMENT, THAT DOES NOT RISE TO THE LEVEL OF A GUARANTEE THAT IS LEGALLY ENFORCEABLE, THE WORDING IN MANY OF THESE AGREEMENTS IS SUCH THAT THEY ARE BASICALLY GUARANTEES THAT IN THE EVENT THAT THE DEBTOR CAN NOT REPAY THE OUTSTANDING DEBT, THE GOVERNMENT WILL ASSUME ITS REPAYMENT.

 

THAT IS WHY THE PUBLIC ACCOUNTS COMMITTEE HAS SOUGHT A COMPREHENSIVE LISTING OF ALL LETTERS OF UNDERTAKING, COMFORT LETTERS, PROMISSORY NOTES, ETC., WHICH ARE NOW IN PLACE , AND WHETHER OR NOT PRIOR APPROVAL OF PARLIAMENT WAS SOUGHT IN EACH CASE.

 

THE MINISTER OF FINANCE HAS STATED CATEGORICALLY THAT COMFORT LETTERS ARE ISSUED BY THE M.O.F.P. TO PROVIDE ASSURANCE TO FINANCIAL INSTITUTIONS THAT THE PUBLIC BODIES ASSUMING THE DEBT WILL BE IN A POSITION TO MAKE PAYMENTS WHEN THEY FALL DUE FROM THEIR BUDGETS.

 

THE REALITY IS THAT WHILE SOME OF THE STRONGER PUBLIC SECTOR ENTITIES SUCH AS PETROJAM, AND THE PORT AUTHORITY HAVE BEEN ABLE TO SUCCESSFULLY REPAY THEIR DEBT OBLIGATIONS, IN RECENT YEARS THE GOVERNMENT HAS HAD TO BRING OUTSTANDING DEBT AND LOSSES ACCUMULATED BY ENTITIES SUCH AS N.W.C., J.U.T.C., SUGAR CORPORATION OF JAMAICA , AND AIR JAMAICA INTO SUCCESSIVE BUDGETS.

 

A DETAILED ANALYSIS OF THIS YEAR’S ESTIMATES OF EXPENDITURE REVEALS THAT INCLUDED IN THE CAPITAL A BUDGETS OF THREE MINISTRIES IS A TOTAL OF SOME $15.32 BILLION THAT IS BEING BROUGHT ON BOARD IN FY 2005/2005 FOR DEFERRED FINANCING AND LOUs/COMFORT LETTERS WHICH REPRESENT MONEY THAT HAS LONG BEEN EXPENDED WITHOUT THE KNOWLEDGE OR APPROVAL OF PARLIAMENT. ADDED TO THIS IS $3.81 BILLION IN INTEREST, TOTALLING $19.13 BILLION:

 

 

 

 

 

 

 

 

 

 

MINISTRY OF FINANCE (CAPITAL A) $11.5 BILLION

• Contingent Payments on Guaranteed Loans:
• Air Jamaica - $3.0 billion
• Sugar Co. of Ja. - $2.2 “
• DBJ (Road Works) - $1.2 “
• Deferred Financing

UDC/WHICON with LOU

not in public debt - $1.6 “

• NWC - $0.1 “

$8.32 BILLION

• Repayment of loans/deferred financing projects from Local Commercial Banks including:
• Comfort letter re UWI for $1.7 billion
• Water & Sewage projects
• Working Capital Support for JUTC
• DFF for road works, rehabilitation, &

School construction

-- $2.89 BILLION

• Repayment of loans/debt/deferred financing commitments from other financial/non-financial institutions:
• DFF for road & school construction
• DFF for acquisition of motor vehicles For the security forces

-- $300 MILLION

 

MINISTRY OF EDUCATION (CAPITAL A) $2.0 BILLION

• North Western Jamaica School Project (Westmoreland, Trelawny, St. James & Hanover – Deferred Financing commitments now falling due:
• Basic Schools -- $ 246 Million
• Primary Schools -- $ 314 Million
• High Schools -- $ 806 Million

$1.366 BILLION

(B) UDC/WICHON St Catherine Schools Project – Promissory Note commitments now falling due:

• Basic Schools -- $ 115 Million
• Primary Schools -- $ 147 Million
• High Schools -- $ 377 Million

$ 639 MILLION

 

MINISTRY OF TRANSPORT & WORKS(CAP. A) $1.814 BILLION

• Deferred Financing Commitments for Arterial Roads:
• Washington Blvd/Mandela Highway - $61.3 Million
• Trafalgar Rd/Old Harbour/Mt. Rosser - $54.0 Million
• Traffic Mgt/North Coast Highway - $451.8 Million
• UDC/Dredging Sandy Gully/Howard

Cooke Dualization/Eldermire Dr - $1.247 Billion

$1.814 BILLION

 

 

SOME MIGHT ARGUE THAT THIS IS NO BIG DEAL, BUT IT IS CLEAR THAT IN RESPECT OF DEFERRED FINANCING THE AMENDMENTS TO THE F.A.A. ACT OF 2002, DO NOT GO FAR ENOUGH TO ACT AS AN EFFECTIVE CONSTRAINT AGAINST THE FISCAL PROFLIGACY OF THE FINANCE MINISTER.

 

WHAT OBTAINS NOW IN RESPECT OF DEFERRED FINANCING IS THAT EXPENDITURE IS BEING APPROVED “OFF BUDGET” AND COMES ON THE BUDGET YEARS LATER FOR RETROACTIVE APPROVAL BY THE PEOPLES’ REPRESENTATIVES, WITHOUT HAVING BEEN AWARE OF THE EXPENDITURE WHEN IT WAS ORIGINALLY COMMITTED OR WITHOUT PARTICIPATING IN THE EFFECTIVE OVERSIGHT OF THE EXPENDITURE OF FUNDS.

 

COME CLEAN WITH COMFORT LETTERS

THE MINISTER OF FINANCE AND PLANNING MUST COME CLEAN ON THE ISSUE OF COMFORT LETTERS. AT THE LAST SITTING OF THE P.A.C., WE REQUESTED THOSE LETTERS, IN ORDER FOR THE COMMITTEE AND THE COUNTRY TO SEE THE MAGNITUDE OF “OFF BUDGET” FINANCING TAKING PLACE, AND THERE IS NOW A FAIR DEGREE OF INDICATIVE EVIDENCE THAT THE MINISTER IS SEEKING TO CONCEAL AND COVER UP THE INFORMATION FROM PARLIAMENT AND THE PEOPLE.

 

HERE IS THE SEQUENCE OF EVENTS THAT LEAD ME TO THIS CONCLUSION:

 

1. THE FULL LIST OF LOUs AND COMFORT LETTERS WAS REQUESTED OF THE MINISTRY OF FINANCE AND PLANNING.

 

2. ONLY THE LIST OF LOUs TOTALLING $19.6 BILLION WAS PRESENTED TO THE P.A.C. ON MARCH 22 ND.

 

3. THE P.A.C. REPEATED ITS REQUEST FOR THE COMFORT LETTERS TO BE TABLED.

 

4. THE SECRETARY TO THE P.A.C. INFORMED ME THAT THE LIST OF COMFORT LETTERS WERE GIVEN TO THE MINISTER OF FINANCE AND PLANNING LAST WEEK.

 

5. THE MINISTER OF FINANCE TOLD ME AT THE STANDING FINANCE COMMITTEE THAT HE WOULD TABLE ALL INFORMATION ON LOUs AND COMFORT LETTERS WHEN HE SPOKE IN THE OPENING OF THE BUDGET DEBATE.

 

6. I CONFIRMED ALL THIS IN WRITING TO THE M.O.F.P. AND COPIED THE LETTER TO THE SPEAKER OF THE HOUSE.

 

7. THE MINISTER ONLY TABLED PAPERS ON DEFERRED FINANCING AND LOUs LAST THURSDAY, BUT NO COMFORT LETTERS. INSTEAD HE KINDLY SENT ME A WRITTEN DEFINITION OF COMFORT LETTERS.

 

WHILE THE DEFINITION IS APPRECIATED, I TAKE NO COMFORT IN IT. MINISTER WE WANT THE COMFORT LETTERS.

 

THE MINISTER OF FINANCE MUST EXPLAIN TO THIS HONOURABLE HOUSE WHY HE REFUSED TO PROVIDE THE INFORMATION REQUESTED DESPITE HIS RECENT STATEMENT IN THE PRESS, I QUOTE:

 

“THE MINISTRY OF FINANCE AND THE GOVERNMENT HAVE NOTHING TO HIDE AND WILL PROCEED IN FUTURE TO REGULARLY TAKE TO PARLIAMENT FULL INFORMATION ON SUCH LETTERS OF UNDERSTANDING AND COMFORT LETTERS.”

 

WE WILL NOT REST UNTIL WE ARE TOLD THE TRUTH, THE WHOLE TRUTH, AND NOTHING BUT THE TRUTH.

 

I HEREBY SERVE NOTICE THAT I WILL TABLE FURTHER QUESTIONS IN PARLIAMENT AND SIMULTANEOUSLY FILE FOR INFORMATION UNDER THE FREEDOM OF INFORMATION ACT.

 

AND THE OPPOSITION IS PREPARED TO GO TO COURT IF NECESSARY TO GET THE INFORMATION ON COMFORT LETTERS.

 

 

LEGAL OPINION OF ATTORNEY-GENERAL MUST BE MADE PUBLIC

 

THE MINISTER OF FINANCE AND PLANNING HAS A DUTY TO RELEASE THE FULL TEXT OF THE LEGAL OPINION OF THE ATTORNEY GENERAL IN RESPECT OF LOUs/COMFORT LETTERS, HAVING REGARD TO THE CONTEXT IN WHICH THE ISSUE IS RAISED AND THE MINISTER’S USE OF THE OPINION AS HIS DEFENCE.

 

AT ANY RATE, THE QUOTATION FROM THE OPINION USED BY THE FINANCE MINISTER, OFFERS HIM NO PROTECTION.

 

THE OPINION STATED, INTER ALIA:

 

“THE TERMS OF SECTION 43 OF THE FINANCIAL ADMINISTRATION AND AUDIT ACT ARE NOT APPLICABLE TO GUARANTEES, UNDERTAKINGS AND OTHER SUCH ARRANGEMENTS THAT ARE NOT INTENDED TO BE PAID DIRECTLY FROM THE CONSOLIDATED FUND. IN THESE CASES, THE GOVERNMENT IS FREE TO CONCLUDE AND WILL BE LEGALLY BOUND BY SUCH ARRANGEMENTS WITHOUT THE NEED FOR PARLIAMENTARY APPROVAL.”

 

SECTION 43 READ IN ITS ENTIRETY MAKES ITS CLEAR THAT GUARANTEES IN ANY FORM BEING LETTERS OF COMFORT OR LOUs, REQUIRE PARLIAMENTARY APPROVAL AS THE COMMITMENT GIVEN BY GOVERNMENT MAY NECESSITATE PAYMENT FROM THE CONSOLIDATED FUND. I QUOTE:

 

“NO PAYMENT SHALL BE MADE FROM THE CONSOLIDATED FUND TO ANY PUBLIC BODY BY WAY OF GRANT, CAPITAL CONTRIBUTIONS, LOANS OR ASSIGNMENT OF REVENUE, AND NO GUARANTEE MAY BE GIVEN TO ANY SUCH BODY BEING A GUARANTEE WHICH MAY NECESSITATE PAYMENTS FROM THE CONSOLIDATED FUND, UNLESS –

 

• THE PRIOR APPROVAL OF THE HOUSE OF REPRESENTATIVES HAS BEEN OBTAINED FOR SUCH PAYMENT OR GUARANTEES;….”END OF QUOTE.

 

LET US GO NO FURTHER THAN THE LIST OF CONTINGENT PAYMENTS TO WHICH I PREVIOUSLY MENTIONED. THESE WERE BASED ON LETTERS OF UNDERSTANDING. WHETHER IT IS AIR JAMAICA , S.C.J., CONTRACTOR’S PAYMENT, FINANCING FOR SCHOOLS CONSTRUCTION OR THE N.W.C. THAT HAS A POOR TRACK RECORD OF PAYMENT, IT WOULD BE STRETCHING IT TO SAY THAT THESE GUARANTEES “WERE NOT INTENDED TO BE PAID DIRECTLY FROM THE CONSOLIDATED FUND.”

 

WITHOUT EXCEPTION, THESE ARE ALL BODIES THAT HAVE EITHER BEEN IN A CONTINUAL LOSS POSITION OR NOT INCOME-EARNING COMPANIES THAT CAN SERVICE THEIR OWN DEBT.

 

IN ADDITION, THE MINISTER HAS PROVIDED DEFERRED FINANCING THROUGH D.B.J FOR APPROXIMATELY $4 BILLION, FOR SMALL ROAD CONTRACTORS. THE MINISTER OUGHT TO HAVE KNOWN THAT THIS ITEM SHOULD HAVE BEEN INCLUDED IN THE BUDGET IN THE YEAR THE PROGRAMME COMMENCED.

 

SO FROM THE VERY OUTSET OF ISSUING THEM WITH LETTERS OF UNDERSTANDING, IT WAS KNOWN THAT THESE WOULD BECOME BUDGET ITEMS IN DUE COURSE.

 

THIS LATEST “OFF BUDGET” EXERCISE MUST BE ADDRESSED.

 

PUBLIC BODIES

MR. SPEAKER, GIVEN THE FACT THAT SUCH LARGE SUMS OF UNAPPROVED FUNDS ARE BEING EXPENDED TO KEEP SELECTED PUBLIC SECTOR BODIES AFLOAT, IT IS NECESSARY THAT WE EXAMINE IN BRIEF THE STATE OF AFFAIRS OF SOME OF THESE ENTITIES.

 

A BRIEF REVIEW OF THE MINISTRY PAPER 21/05 CONCERNING THE JAMAICA PUBLIC BODIES AND INFORMATION PROVIDED BY THE MINISTER OF FINANCE REVEAL THE FOLLOWING LOSSES WHICH MUST BE FUNDED IN SOME MANNER:

 

• BANK OF JAMAICA HAS CASH LOSSES AS AT MARCH 31, 2005 OF APPROXIMATELY J$15.08 B. THE GENERAL RESERVE FUND OF THE BANK OF JAMAICA WILL NOT BE SUFFICIENT TO ABSORB THESE LOSSES SO IN ACCORDANCE WITH THE BANK OF JAMAICA ACT THESE LOSSES WILL HAVE TO BE FUNDED FROM THE CONSOLIDATED FUND OR THROUGH THE ISSUING OF SECURITIES. THE MINISTER SHOULD INFORM PARLIAMENT OF HIS PLAN TO DEAL WITH THOSE LOSSES.

 

• THE SUGAR COMPANY OF JAMAICA ACCUMULATED LOSSES IS APPROXIMATELY J$7B BEFORE CONSIDERING THIS YEAR’S LOSS WHICH I UNDERSTAND FROM THE VARIOUS INTEREST GROUPS WILL BE SIGNIFICANT AND COULD BE OVER $600 MILLION.

 

• THE NATIONAL WATER COMMISSION – LOSSES WAS ESTIMATED AT J$606.36B FOR FINANCIAL YEAR 2004/2005. MINISTER I NEED TO KNOW THE ACCUMULATED LOSSES AS AT MARCH 31, 2005 .

 

• NATIONAL HOUSING DEVELOPMENT CORPORATION – LOSSES FOR 2004/2005 ARE ESTIMATED AT J$260M. AGAIN, WE NEED TO KNOW THE ACCUMULATED LOSSES. IN FACT, THE REPORT STATES THAT THE OPERATION PRIDE FUND WILL NOT BE ABLE TO FUND INTEREST EXPENSE OF J$290 M AS THE FUND IS DEPLETED. HOW WILL THE OPERATION PRIDE PROJECT BE FUNDED?

 

• JAMAICA URBAN TRANSIT COMPANY – ESTIMATED LOSSES FOR 2004/2005 WAS $589 M AND PROJECTED LOSSES FOR 2005/2006 IS $978 M TOTALLING $1.567 B.

 

• AIR JAMAICA – DEBTS OF US$650 M OR J$40.3 B.

 

• MANY OTHER BODIES SUCH AS THE COFFEE BOARD, COCOA BOARD, ETC., WITH LOSSES OF APPROXIMATELY J$250M

 

HOW WILL THESE LOSSES, APPROXIMATING $64.3B, BE FUNDED IN 2005/2006 AND WHAT ARE THE IMPLICATIONS FOR FUTURE BUDGETS?

 

SUGAR COMPANY OF JAMAICA

IN 1994 THE G.O.J. PRIVATIZED THE SUGAR INDUSTRY. IN 1998 THE GOVERNMENT WAS FORCED TO RE-ACQUIRE THESE ENTITIES GIVEN THEIR FINANCIAL STATUS AND THEIR IMPORTANCE TO THE COUNTRY, IN PARTICULAR RURAL COMMUNITIES.

 

SINCE 1998 THE G.O.J. HAS WRITTEN-OFF OR ABSORBED J$5B IN DEBTS; CURRENTLY, THE ACCUMULATED LOSSES ARE APPROXIMATELY J$7B.

 

IN MINISTRY PAPER 21/05 THE COMPANY PROJECTED A LOSS OF J$112M FOR 2004/2005. MINISTER, IN LIGHT OF THE HURRICANE AND THE DROUGHT WHAT ARE THE PROJECTED LOSSES FOR THIS CROP? MANY PERSONS IN THE INDUSTRY HAVE SUGGESTED THAT THE LOSS FOR THIS YEAR COULD BE AS HIGH AS $600 M. IS THIS CORRECT?

 

EVERY DAY I HEAR THE FARMERS AND STAKEHOLDERS COMPLAINING ABOUT THE SUGAR COMPANY.

 

IN FACT, I HEARD YOUR OWN MINISTER OF AGRICULTURE COMPLAINING ABOUT THE MANAGEMENT OF THE COMPANY. SO DID YOUR PARTY COLLEAGUE, THE CHAIRMAN FOR THE ALL-ISLAND CANE FARMERS ASSOCIATION, COMPLAINING ABOUT THE LACK OF MANAGEMENT AT THE S.C.J., YET TO DATE I HAVE NOT HEARD ONE SINGLE WORD FROM YOUR MINISTRY OR THE GOVERNOR OF THE B.O.J. WHO IS THE CHAIRMAN OF THE S.C.J. ON THIS ISSUE.

 

I WOULD LIKE TO REMIND YOU THAT SCJ EMPLOYS APPROXIMATELY 8,000 WORKERS, SEVERAL THOUSANDS OF FARMERS, AND CONTRACTORS, ALL OF WHOM ARE LOOKING TO YOUR GUIDANCE AND LEADERSHIP ON THIS IMPORTANT COMPANY TO RURAL FOLKS. I WOULD LIKE FOR THIS HOUSE TO BE PRESENTED WITH A COMPLETE REPORT ON THE INDUSTRY INCLUDING A TURNAROUND PLAN FOR THE NEXT TWO YEARS.

 

AIR JAMAICA

MR. SPEAKER, NEXT TO F.I.N.S.A.C., WHICH COST THE TAXPAYERS OF JAMAICA OVER $130 BILLION AND COUNTING AND POSSIBLY THE MOST MASSIVE “OFF BUDGET” EXPENDITURE NOW TAKING PLACE, AIR JAMAICA LOOMS LARGE AS A MAJOR FINANCIAL PROBLEM WITH CONSEQUENCES FOR THE ECONOMY FAR EXCEEDING THE DEBT OBLIGATIONS BEING ASSUMED BY GOVERNMENT.

 

YET, IN AN ALMOST TWO-HOUR LONG SPEECH, THE MINISTER OF FINANCE DID NOT MENTION THE NATIONAL AIRLINE EVEN ONCE.

 

ON SEVERAL OCCASIONS THE MINISTER HAS PROMISED A FULL REPORT ON THE STATE OF AFFAIRS AT AIR JAMAICA . NO SUCH REPORT IS FORTHCOMING.

 

BUT SINCE THE GOJ TOOK OVER CONTROL OF THE AIRLINE THE LOSSES SEEM TO BE GETTING WORSE. FOR THE MONTH OF FEBRUARY ALONE, THE AIRLINE LOST US$15.0 MILLION.

 

IN LIGHT OF A RECENT STATEMENT ISSUED BY THE HON. GORDON ‘BUTCH’ STEWART, WHICH DIRECTLY CONTRADICTS INFORMATION PROVIDED TO PARLIAMENT BY THE FINANCE MINISTER, AND IN THE INTEREST OF TRANSPARENCY, IT BECOMES EVEN MORE CRITICAL THAT A PROPER ENQUIRY IS CARRIED OUT OF AIR JAMAICA, SETTING OUT THE CIRCUMSTANCES THAT LED TO LOSSES AND DEBT ACCUMULATION RUNNING REPORTEDLY AS HIGH AS $54 BILLION.

 

THIS STUDY IS PARTICULARLY NECESSARY FOR THE FOLLOWING REASONS:

 

• WHAT WAS THE TRUE FINANCIAL IMPACT OF SOME ELEVEN EVENTS LISTED BY MR. STEWART ON THE BOTTOMLINE OF AIR JAMAICA ? INCLUDING THE F.A.A. CATEGORY II, 9/11 TERRORIST ATTACK, DEFECTIVE RADAR EQUIPMENT, INTERNATIONAL WARS AND CIVIL DISTURBANCES IN JAMAICA , FUEL PRICES AND RECENT HURRICANES?

 

• WHAT SPECIFIC ACTION WAS TAKEN BY THE MINISTER OF FINANCE AND THE GOVERNMENT TO DEAL WITH THE PROBLEM LISTED IN QUESTION ONE(1)?

 

• HAVING REGARD TO THE CLAIM BY MR. STEWART AND THE A.J.A.G. GROUP THAT THE MINISTRY OF FINANCE RECEIVED DETAILED MONTHLY REPORTS ON THE AIRLINE’S FINANCIAL STATUS AND THAT THE FINANCE COMMITTEE WAS CHAIRED BY A GOVERNMENT REPRESENTATIVE, AND OTHER REPRESENTATIVES ON THE COMMITTEE INCLUDED THE GOVERNOR OF THE BANK OF JAMAICA AND THE PRESENT EXECUTIVE CHAIRMAN OF AIR JAMAICA, MR. VIN LAWRENCE, DOESN’T THE MINISTER HAVE A DUTY TO EXPLAIN HIS OBVIOUS NEGLIGENCE IN DEALING WITH THIS PROBLEM ON A TIMELY BASIS?

 

DOES THE MINISTER OF FINANCE NOT HAVE A DUTY AND AN OBLIGATION TO REPORT TO THIS HONOURABLE HOUSE, THE REASONS FOR THE PRESENT STATE OF AIR JAMAICA AND WHAT SPECIFIC PLANS ARE IN PLACE TO RESCUE THIS IMPORTANT NATIONAL ASSET FROM ANY FURTHER DETERIORATION OF ITS IMAGE IN THE INTERNATIONAL MARKETPLACE?

 

MINISTER, YOUR SILENCE ON AIR JAMAICA IS DEAFENING. THE OPPOSITION IS DEMANDING A FULL AND COMPLETE REPORT ON AIR JAMAICA , ESPECIALLY IN LIGHT OF NEW REPORTS THAT THE AIRLINE IS NOW BEING SERIOUSLY MISMANAGED, WHICH THREATENS TO COMPLETELY WRECK ITS FUTURE.

 

 

THE EFFECT OF OFF-BUDGET FINANCING

THIS PARALLEL OR “RUN-WID-IT” BUDGET REPRESENTS A CORRUPTION OF THE BUDGETARY PROCESS TO AN EXTENT NEVER SEEN BEFORE. THIS PRACTICE MUST STOP. THE IMPLICATIONS FOR THIS COUNTRY ARE TOO GRAVE TO ALLOW THIS PROCESS TO CONTINUE. SOME OF THE IMPLICATIONS ARE:

 

• A MASSIVE SUPPLEMENTAL BUDGET IN THE SHORT-TERM WHICH I BELIEVE WILL HAVE TO BE FUNDED BY ADDITIONAL TAX MEASURES.

 

THE CONTINUING INCREASE OF OUR DEBT STOCK. IN 1996 AT THE COMMENCEMENT OF THE “OFF BUDGET” FINANCING, THE LOAN STOCK TO COMMERCIAL BANKS

• WAS J$4B BY 2005 THIS HAD INCREASED TO J$12.2B AN INCREASE OF 300%. IF WE USE BASIC GEOMETRIC PROGRESSION ANALYSIS IT APPEARS THAT THIS STOCK OF DEBT WILL INCREASE TO J$16B BY THE NEXT BUDGET, AN INCREASE OF 30%.

 

• THE CLEAR AND PRESENT DANGER OF UNDERSTATING OUR EXPENDITURE AND THE IMPACT ON THE BUDGET.

 

THE OPPOSITION WILL NOT CONTINUE TO ALLOW THE GOVERNMENT TO DEFER EXPENDITURE OF THIS COUNTRY TO THE FUTURE FOR THE SOLE PURPOSE OF MEETING ITS POLITICAL AGENDA.

 

DYOLL DEMISE

I WISH TO LOOK AT TWO OTHER AREAS THAT IMPACT ON ISSUES OF TRANSPARENCY AND ACCOUNTABILITY – DYOLL INSURANCE AND THE AUDITOR GENERAL’S REPORT TO THE END OF 2004. IN RESPECT OF DYOLL, I WISH TO ASK THE FOLLOWING QUESTIONS OF THE MINISTER OF FINANCE:

 

• WHEN WERE YOU AWARE OF THE DYOLL FAILURE, AND DID YOU TAKE A PROPOSAL TO CABINET FOR US$20 MILLION TO ASSIST THE COMPANY?

 

• WHEN DID THE F.S.C. KNOW OF THE FAILURE AND WHY WAS CORRECTIVE ACTION TO PROTECT THE CREDITORS AND MINORITY SHAREHOLDERS NOT TAKEN EARLIER?

 

• IS THE F.S.C. CONDUCTING ITS OWN INVESTIGATION ON REPORTS OF ILLEGAL INSIDER TRADING?

 

 

THE AUDITOR GENERAL’S REPORT FOR FINANCIAL YEAR ENDED MARCH 31, 2004

 

IN THE AUDITOR GENERAL’S REPORT FOR THE YEAR ENDED MARCH 31, 2004, THERE ARE CERTAIN ISSUES RAISED THAT HAVE QUITE CORRECTLY CAUSED CONCERN WITH THE OPPOSITION AND IN THE PUBLIC, AS TO THE IMPLICATIONS FOR THE MANNER IN WHICH THE FINANCIAL AFFAIRS OF THE COUNTRY ARE BEING MANAGED BY THE MINISTER AND MINISTRY OF FINANCE AND PLANNING.

 

I WILL SINGLE OUT FOUR SUCH ISSUES.

 

• THE MINISTRY OF FINANCE ILLEGALLY HELD ON TO $1.1 BILLION WHICH SHOULD HAVE BEEN PAID DIRECTLY TO THE NATIONAL HEALTH FUND FOR USE IN SUBSIDIZING THE COST OF DRUGS FOR RECIPIENTS.

 

• THE A.G. COMPLAINED ABOUT 6 LOANS TOTALLING US$6.0 MILLION AND J$3.68 BILLION THAT WERE GUARANTEED BY LETTERS OF COMMITMENT, THAT WERE THEN BEING SERVICED WITHOUT ANY FORMAL APPROVAL OF PARLIAMENT THEREBY VIOLATING THE LAWS OF THE LAND.

 

• THERE WERE DELAYS OF UP TO 11 MONTHS IN THE PAYMENT OF APPROVED GRATUITY AND PENSION TO RETIRED PUBLIC OFFICERS TO AUGUST 2004, 482 GOVERNMENT PENSIONERS OR THEIR BENEFICIARIES WERE OWED $254 MILLION.

 

PENSION PAYMENTS – LIKE DEBT SEVICING – IS A STATUTORY EXPENDITURE AND AS SUCH SHOULD BE A PRIORITY CHARGE ON THE CONSOLIDATED FUND.

 

AND

 

• AMAZINGLY, THE AUDITOR GENERAL WAS UNABLE TO VERIFY RECEIPT INTO THE CONSOLIDATED FUND OF $15.82 BILLION AND US$176.9 MILLION REPRESENTING FINANCIAL INSTRUMENTS ISSUED BY THE GOVERNMENT AND WHICH FORMED PART OF THE PUBLIC DEBT.

 

THE INABILITY OF THE AUDITOR GENERAL TO CARRY OUT THIS VERIFICATION IS A SERIOUS MATTER, BECAUSE AS I UNDERSTAND IT THIS MATTER HAS STILL NOT BEEN CLEARED UP. WHERE DID THIS MONEY GO? THIS COUNTRY MUST BE TOLD.

 

IF THESE ISSUES ARE NOT PROPERLY RECORDED IT UNDERSTATE REVENUE, EXPENDITURE AND THE STOCK OF DEBT AND ARE NOT NECESSARILY UTILIZED FOR THE PURPOSE FOR WHICH IT WAS INTENDED.

 

THE MINISTER OF FINANCE AND PLANNING, WHO IS CHARGED WITH THE FIDUCIARY DUTY TO PROTECT THE REVENUE OF THE COUNTRY, HAS A DUTY TO CLEAR UP THIS ANOMALY AND TO EXPLAIN THE OTHER ISSUES RAISED BY THE AUDITOR GENERAL.

 

EXPENDITURE BUDGET

 

HURRICANE IVAN RELIEF INADEQUATE

THE HURRICANE ‘IVAN’ RELIEF EFFORT HAS BEEN CHARACTERIZED BY MORE ADMINISTRATIVE BUREAUCRACY AND PUBLIC RELATIONS FANFARE THAN BY RAPID AND FAIR ASSESSMENT OF DAMAGE AND THE IMPLEMENTATION OF EXPENDITURE RELIEF EFFORTS.

 

THOUSANDS OF JAMAICANS WHO MADE REPORTS OF DAMAGE TO HOUSES AND FARMS HAVE NOT BEEN ASSESSED BY GOVERNMENT AGENCIES.

 

• IN SOUTH EAST CLARENDON, ONE OF THE AREAS WORST HIT BY HURRICANE ‘IVAN’ WAS THE ROCKY POINT DIVISION WHERE HUNDREDS OF PEOPLE WERE LEFT HOMELESS AND AN ESTIMATED 90 PERCENT OF ALL HOMES WERE DAMAGED.

 

IN THIS VERY PARLIAMENT, PROMISES WERE MADE THAT BY THE END OF DECEMBER OVER 200 HOUSES WOULD BE CONSTRUCTED ON A NEW SITE TO HOUSE VICTIMS. TO DATE NOT ONE HOUSE HAD BEEN BUILT.

 

• IN WEST RURAL ST. ANDREW OF 1,540 PERSONS WHO REPORTED THEIR DAMAGE TO THEIR M.P., ONLY 300 HAVE APPEARED ON THE LIST TO RECEIVE ASSISTANCE SOME TIME IN THE FUTURE.

 

AND

• IN NORTH EAST MANCHESTER , OF 2,200 PERSONS REPORTING DAMAGE TO AGRICULTURAL CROPS, ONLY 1,100 WERE VISITED AND ONLY 550 APPEAR ON A LIST TO RECEIVE ASSISTANCE. AND ONLY A SMALL NUMBER OF PERSONS HAVE SO FAR RECEIVED ASSISTANCE WITH HOUSE REPAIRS DESPITE OVER 2,000 PERSONS REPORTING FROM MAJOR TO MINOR DAMAGE.

 

THESE ARE JUST SAMPLES OF THE LACK OF RESPONSIVENESS OF THE GOVERNMENT IN THE RELIEF EFFORTS.

 

BY THEIR OWN ADMISSION, THE O.N.R. WILL TRY TO COMPLETE ASSISTING THOSE ON THEIR LIST OF SEVERELY DAMAGED HOUSES BY THE END OF APRIL, A FULL SEVEN MONTHS AFTER THE PASSAGE OF ‘IVAN’.

 

AND MOST PEOPLE WITH MINOR DAMAGE, MIGHT GET SOME ASSISTANCE UP TO ONE YEAR AFTER ‘IVAN’ WHILE THOUSANDS WHO GENUINELY SUFFERED WILL RECEIVE NO ASSISTANCE AT ALL.

 

THE RELIEF EFFORTS HAVE BEEN HIGHLY OVER-RATED AND HAVE BEEN MARKED BY A HIGH DEGREE OF INSENSITIVITY AND LACK OF URGENCY.

 

 

 

 

 

 

THE VEXING CASE OF THE FIRE SERVICES

A GROSS DERELICTION OF MINISTERIAL DUTY

 

DURING THE YEAR 2004/2005, DESPITE THE PROMISE OF THE PRIME MINISTER WHO GAVE THE UNDERTAKING THAT ADEQUATE RESOURCES WOULD HAVE BEEN PROVIDED TO THE FIRE SERVICE, THE CAPITAL BUDGET OF $115 MILLION WAS ONCE AGAIN SAVAGELY CUT TO $53 MILLION, WITH $45 MILLION BEING PUT ON HOLD TO BEGIN THE CONSTRUCTION OF A NEW FIRE STATION AND LEAVING ONLY $8.0 MILLION WHICH WAS MADE AVAILABLE LAST DECEMBER TO REPAIR TRUCKS. (SEE APPENDIX A - STATUS OF FIRE SERVICES)

 

THIS IS TAKING PLACE WHILE THE FIRE SERVICES HAVE FURTHER DETERIORATED TO THE POINT WHERE IT HAS BECOME A NATIONAL DISGRACE. PEOPLE’S LIVES AND PROPERTY ARE AT RISK, HUNDREDS OF MILLIONS OF DOLLARS OF PROPERTY HAVE BEEN LOST AND EVEN THE SAFETY OF OUR FIREMEN AND WOMEN ARE NOW AT RISK DUE TO THE GROSS NEGLIGENCE OF THIS GOVERNMENT.

 

THE MINISTER OF FINANCE MUST EXPLAIN

IN THE PAST WHERE THERE ARE EMERGENCIES, THIS GOVERNMENT, AS PREVIOUS GOVERNMENTS HAVE DONE, HAS WELL ESTABLISHED PRECEDENT FOR APPROACHING FOREIGN GOVERNMENTS FOR ASSISTANCE TO EXPEDITE SPECIAL ARRANGEMENTS TO DEAL WITH GENUINE EMERGENCIES.

 

IT WAS NO DOUBT FOR THIS REASON THAT IN 2003 THE GOVERNMENT OF JAMAICA ESTABLISHED CONTACT WITH THE GOVERNMENT OF FRANCE , SEEKING THE ASSISTANCE OF THE FRENCH GOVERNMENT IN THE ACQUISITION OF FIRE TRUCKS.

 

THIS WAS ON THE BASIS THAT THE FRENCH RENAULT TRUCKS ARE AMONG THE MOST RELIABLE TRUCKS IN BOTH THE FIRE AND SOLID WASTE FLEET IN JAMAICA .

 

AS A RESULT OF THE GOVERNMENT’S REQUEST, THE FRENCH RESPONDED WHEREBY THE FRENCH EX-IM BANK, COFACE, BACKED A FINANCING ARRANGEMENT WITH RENAULT TO PROVIDE 41 FIRE TRUCKS TO THE GOVERNMENT WITH A 2-YEAR MORATORIUM, ONE (1) YEAR MORATORIUM MORE THAN WHAT WAS STATED BY THE MINISTER OF FINANCE IN HIS SPEECH ON THURSDAY AS HIS REQUIREMENT IN THE BIDDING PROCESS.

 

THIS ARRANGEMENT RECEIVED THE BLESSINGS OF THE MINISTRY OF FINANCE PERSONNEL AND THE NATIONAL CONTRACTS COMMISSION, ON THE BASIS THAT THIS WAS AN EMERGENCY, THE TERMS WERE FAVOURABLE, IT WAS A BI-LATERAL AGREEMENT WITH FRANCE , AND ON THIS BASIS THEY WERE PREPARED TO RECOMMEND THE CONTRACTS.

 

ARANGEMENTS SUCH AS THIS HAVE WELL ESTABLISHED PRECEDENT, WHERE HIGHLY SPECIALIZED VEHICLES ARE NEEDED ON CONCESSIONARY TERMS, ON AN EMERGENCY BASIS, FROM A RELIABLE SOURCE WITH PROVEN TRACK RECORD.

 

INDEED, FIRE TRUCKS AND COMPACTORS WERE ACQUIRED FROM THE FRENCH AND AUSTRIAN GOVERNMENTS IN THIS MANNER SINCE THE 1970s, AND BUSES HAVE SIMILARLY BEEN ACQUIRED AND A $4.0 BILLION TRANSPORTATION TERMINAL IS ALSO ABOUT TO BE DONE ON A SIMILAR BASIS.

 

AND IN THE MOST RECENT PRECEDENT, 20 GARBAGE COMPACTORS WERE REQUIRED FROM FRANCE IN A BILATERAL AGREEMENT 2 YEARS AGO. (SEE MINISTRY PAPER 81/03)

 

HAD THE MINISTER OF FINANCE PROCEEDED WITH THIS ARRANGEMENT, WE WOULD ALREADY HAVE 41 FIRE TRUCKS IN THE SYSTEM TODAY.

 

WHILE WE ARE MINDFUL OF TRANSPARENCY, THIS MUST BE BALANCED WITH THE GENUINE EMERGENCY NEEDS OF THE PEOPLE.

 

WITH PRECEDENT AND THE ABSOLUTE URGENCY OF THIS SITUATION, THE AWARD OF THIS CONTRACT WITHOUT TENDER WAS JUSTIFIED AND APPROVED BY THE NATIONAL CONTRACTS COMMISSION.

 

BUT, MR. SPEAKER, THE MATTER DOES NOT END THERE. THE MINISTER OF LOCAL GOVERNMENT ADVISED THIS HONOURABLE HOUSE THAT THE TRUCKS WERE NOT ORDERED BECAUSE THE TALKS WITH THE FRENCH GOVERNMENT HAD “BROKEN-DOWN”.

 

I WISH TO ASK THE MINISTERS OF FINANCE AND PLANNING AND LOCAL GOVERNMENT TO EXPLAIN TO THIS PARLIAMENT THE BASIS ON WHICH THE TALKS HAD BROKEN DOWN AND EXACTLY WHEN?

 

AND IN YOUR ANSWERS CAN YOU EXPLAIN THE BASIS ON WHICH YOUR MINISTER OF INFORMATION ANNOUNCED IN A POST-CABINET MEETING THAT THE FRENCH WERE AWARDED THE CONTRACT AND TRUCKS WOULD BE DELIVERED IN MONTHS, ONLY TO BE FOLLOWED BY A WITHDRAWAL OF THE STATEMENT?

 

IN THESE CIRCUMSTANCES, THE DELAY OF 12 MONTHS TO EVENTUALLY DECIDE ON A BIDDING SYSTEM AND TO WAIT FOR ANOTHER 10-12 MONTHS FOR DELIVERY OF THE TRUCKS IS INEXCUSABLE AND IS A GROSS DERELICTION OF MINISTERIAL DUTY WHICH SHOULD BE CONDEMNED BY THIS PARLIAMENT.

 

IT APPEARS MANIFESTLY CLEAR THAT A DIFFERENT TYPE OF POLITICS HAS ENTERED THE BUSINESS OF ACQUIRING FIRE FIGHTING EQUIPMENT. IT APPEARS THAT FIGHTING FIRES HAS BEEN PUT ON HOLD WHILE – A NEW FIRE RAGES – THE FIRE OF INTERNAL LEADERSHIP POLITICS AT OLD HOPE ROAD – PLACING LIFE AND PROPERTY AT RISK IN THE PROCESS.

 

COST-SHARING SCHEME

IN THE RUN UP TO THE 2002 GENERAL ELECTIONS, MEMBERS WILL RECALL THAT THE JAMAICA LABOUR PARTY ANNOUNCED THAT IT WOULD BE ABOLISHING SCHOOL FEES IMMEDIATELY AFTER IT WON OFFICE. THE COUNTRY GREETED THIS ANNOUNCEMENT WITH APPLAUSE, BECAUSE THERE ARE FEW AREAS OF GREATER TRAUMA AND IRRITATION THAN FINDING SCHOOL FEES EVERY YEAR. MR. SPEAKER, THE GOVERNMENT OPPOSED THE POSITION AND A HEATED DEBATE FOLLOWED.

 

A FEW MONTHS BEFORE THE GENERAL ELECTION, THE PRIME MINISTER ANNOUNCED THAT THE GOVERNMENT WAS ACCEPTING THE JLP PROPOSAL AND SCHOOL FEES WOULD BE ABOLISHED. HE WENT FURTHER, MR. SPEAKER. HE SAID IT COULD NOT BE DONE IN ONE YEAR, BUT WOULD BE PHASED IN OVER THREE YEARS, AND THE COUNTRY COULD BE ASSURED THAT BY THE 2005/2006 BUDGET, SCHOOL FEES WOULD BE ABOLISHED.

 

BUT THE GOVERNMENT HAS RETREATED FROM THE COMMITMENT GIVEN, TO THE PARENTS AND CARE-GIVERS OF THE QUARTER MILLION CHILDREN IN THE SECONDARY SCHOOLS OF JAMAICA . THE GOVERNMENT HAS DECIDED TO CONTINUE WITH SCHOOL FEES, REFUSING TO GIVE UP THE $900 M THAT IT WOULD COST.

 

IT IS GENERALLY ACCEPTED THAT POOR ATTENDANCE IS ONE OF THE PRINCIPAL CAUSES OF THE POOR ACADEMIC RESULTS AT EVERY LEVEL OF OUR SCHOOL SYSTEM. IT IS KNOWN THAT WHILE JAMAICAN SCHOOL CHILDREN FROM SOME INSTITUTIONS ARE ABLE TO BEAT THE WORLD, SIGNIFICANT NUMBERS REMAIN ILLITERATE AND INNUMERATE.

 

MR. SPEAKER, THE GOVERNMENT’S OWN SURVEY OF LIVING CONDITIONS STATES THAT MONEY PROBLEMS ARE RESPONSIBLE FOR 62% OF OUR CHILDREN BEING ABSENT FROM SCHOOL. WE DID NOT NEED ANY SURVEY TO KNOW THIS.

 

MR. SPEAKER, WE ARE THE ONLY COUNTRY IN CARICOM WHOSE CHILDREN FACE THIS INDIGNITY AND PROBLEM. SCHOOL FEES WERE ABOLISHED IN THE OTHER TERRITORIES LONG BEFORE THEY GAINED INDEPENDENCE . JAMAICA WAS THE FIRST IN INDEPENDENCE , BUT CONTINUES TO BE THE LAST TO PROVIDE THIS CRITICAL TOOL TO EMPOWER OUR CHILDREN.

 

UNFORTUNATELY, THIS INCIDENT ALSO PROVIDES AN EXAMPLE OF THE OFFICIAL SOURCES OF AUTHORITY RENEGING ON A FIRM COMMITMENT – BREAKING TRUST WITH THE PEOPLE, USING THE POWER OF OFFICE TO TAKE PARTISAN ADVANTAGE OF THE PEOPLE BY MAKING A SOLEMN PLEDGE IN THE COURSE OF AN ELECTION CAMPAIGN, AND THEN, DESPITE SPENDING BILLIONS OF DOLLARS ON PROJECTS OF LITTLE INTEREST TO THE CITIZENS, TELLING THEM AND THEIR CHILDREN, “SORRY, NEXT TIME. IT HOT, BUT HUSH.”

 

LET ME WARN THEM, MR. SPEAKER, THAT WHEN PEOPLE LOSE TRUST IN PUBLIC OFFICIALS, THAT IS UNDERMINING THE VERY BASIS OF DEMOCRACY, AND THOSE WHO SOW THE WIND, MUST UNDERSTAND THAT THEY WILL REAP THE WHIRLWIND.

 

STUDENTS’ LOANS

WHILE WE ARE ON THE SUBJECT OF EDUCATION THE G2K GROUP HAS CARRIED OUT A STUDY THAT REVEALS SERIOUS INADEQUACIES THAT WILL NOT BE ADDRESSED BY THE MINISTER’S ANNOUNCEMENT OF A NOMINAL REDUCTION IN INTEREST RATES TO 12% AND A INCREASE IN THE POOL OF FUNDS.

 

THE G2K STUDY REVEALS THAT STUDENTS FROM THE POOREST GROUP RECEIVE THE LOWEST AMOUNT OF STUDENT LOANS, AND THIS IS IN PART DUE TO THEIR BEING ASSESSED AS UNABLE TO REPAY THE LOANS.

 

IN ADDITION, NOT ONLY DO MORE OF THESE STUDENTS NEED TO BE GRANTED LOANS, BUT THEY NEED MORE FUNDS TO COVER LIVING EXPENSES AS WELL AS TUITION. THE MINISTER NEEDS ALSO TO INTERVENE AND SIGNIFICANTLY REDUCE INTEREST RATES AT THE S.L.B. TO BRING IT IN LINE WITH INTERNATIONAL STANDARDS OF 5-6% FOR SUCH PROGRAMMES.

 

JAMALCO

I WISH FOR THE FINANCE MINISTER TO PROVIDE A MORE DETAILED UPDATE ON THE INVESTMENT EXPANSION PLANS FOR THE JAMALCO PLANT AT HALSE HALL, INCLUDING A FIRM TIMETABLE FOR IMPLEMENTATION.

 

THIS REQUEST COMES AGAINST THE BACKGROUND OF PERSISTENT REPORTS THAT THE PROJECTED COST OF THE PROJECT WAS SOME US$700 MILLION, BUT IS NOW HIGHER. AND THAT TO DATE, THE BOARD OF THE PARENT COMPANY, ALCOA HAS NOT APPROVED THE PROJECT.

 

HOW CAN IT BE THAT A PROJECT THAT HAS NOT YET EVEN BEEN APPROVED BY THE BOARD OF DIRECTORS, HAS BEEN ANNOUNCED WITH SUCH CERTITUDE AND FANFARE BY THE PRIME MINISTER AND THE FINANCE MINISTER?

 

AND CAN THE MINISTER ADVISE WHEN THE NEW PLANNED START-UP DATE IS FOR THIS PROJECT SINCE FEBRUARY 2005, PREVIOUSLY ANNOUNCED START-UP DATE HAS OBVIOUSLY FALLEN THROUGH?

 

WHITEHOUSE HOTEL

MR. SPEAKER, LAST YEAR, THIS HONOURABLE HOUSE APPROVED LOAN GUARANTEES FOR THE CONSTRUCTION OF A HOTEL IN WHITEHOUSE, WESTMORELAND. THE COST WAS INITIALLY ESTIMATED AT US$60 MILLION AND LATER REVISED TO US$70 MILLION.

 

AFTER MANY MONTHS OF DELAY IN COMPLETING THE CONSTRUCTION, LEADING TO DELAYS IN DELIVERY OF THE FULLY COMPLETED HOTEL TO THE LESSEE, THE SANDALS CHAIN, THE FOLLOWING IS NOW THE SITUATION AT THE PROJECT WHICH SPELLS NOTHING BUT GRIEF ONCE AGAIN FOR THE TAXPAYERS OF THIS COUNTRY.

 

• THE OVERRUN ON THE PROJECT, FOR WHICH THE SCOPE OF WORK HAS NOT CHANGED, IS NO LONGER US$10 MILLION FROM THE ORIGINAL FIGURE OF US$60 MILLION. THE OVERRUN IS NOW REPORTEDLY US$45 MILLION, MOVING THE TOTAL COST OF THIS PROJECT TO US$105 MILLION. AN OVERRUN, MR. SPEAKER, OF J$2.8 BILLION THAT WILL NOW HAVE TO BE PAID BY JAMAICAN TAXPAYERS.

 

• AS WE SPEAK, THERE ARE MATERIALS ON THE WHARF THAT ARE NOT BEING RELEASED BY THE SUPPLIERS BECAUSE THEY ARE AWAITING PAYMENT BEFORE RELEASE.

 

• THE SUBCONTRACTS THAT WERE AWARDED WITHOUT TENDER ON THE PROJECT READS AS A ‘WHOS WHO’ OF THE PEOPLES’ NATIONAL PARTY – SUBCONTRACTS THAT HAVE ALL EXCEEDED THE BUDGET FOR THE SERVICES REQUIRED.

 

• AND THE PROJECT DIRECTOR REPORTEDLY RECEIVES BETWEEN 2 AND 3 PERCENT AS HIS FEES, OR ROUGHLY BETWEEN $130 AND $195 MILLION. (MAYBE WE SHOULD SHUT OUR “DAMN MOUTHS” AGAIN)

 

THE OPPOSITION IS DEMANDING A COMMISSION OF ENQUIRY INTO THIS SCANDALOUS STATE OF AFFAIRS AT WHITEHOUSE HOTEL BECAUSE THE STENCH OF CORRUPTION RUNS DEEP AND WIDE. THIS MUST BE ONE OF THE MOST EXPENSIVE HOTELS IN THE WORLD.

 

 

 

FURTHER INVESTIGATION NEEDED INTO AWARD OF CONTRACTS

 

THE OPPOSITION IS CALLING ON THE CONTRACTOR GENERAL AND THE AUDITOR GENERAL OF JAMAICA , TO CARRY OUT SPECIAL INVESTIGATIONS INTO THE AWARD OF CONTRACTS TO A SELECT NUMBER OF COMPANIES AND INDIVIDUALS.

 

THESE COMPANIES AND INDIVIDUALS (THE DETAILS OF WHICH WILL BE SUBMITTED TO THE CONTRACTOR GENERAL AND AUDITOR GENERAL) CONTINUALLY RECEIVE MAJOR CONTRACTS WITHOUT COMPETITIVE TENDER AND THEN PROCEED TO AWARD SUBCONTRACTS WITHOUT COMPETITIVE TENDER IN AN INCESTUOUS AND CORRUPTLY INTERCONNECTED WAY, AND THE TAXPAYERS END UP PAYING HUNDREDS OF MILLIONS OF DOLLARS IN OVERRUNS.

 

MR. SPEAKER, THERE IS CORRUPTION INSPEAKABLE IN OUR LAND. AND IF THE COUNTRY DOES NOT UNITE TO FIGHT IT, PEOPLE WILL CONTINUE TO DIE FOR WANT OF BASIC HEALTHCARE, CHILDREN WILL BE DEPRIVED OF BASIC EDUCATION AND OUR LIFE AND PROPERTY WILL BE AT RISK DUE TO LACK OF RESOURCES, WHILE WE WITNESS A SMALL GROUP OF HIGHLY CONNECTED INDIVIDUALS GORGING THEMSELVES IN A BANQUET OF BENEFITS WHILE QUALIFIED PROFESSIONALS HAVE NO OPPORTUNITY TO BID ON CONTRACTS, AND IN CIRCUMSTANCES WHERE THE VALUE FOR MONEY RECEIVED IS QUESTIONABLE.

 

 

THE REVENUE PROGRAMME

 

TAXATION

 

IN MAY 2003 THE MINISTER OF FINANCE AND PLANNING ESTABLISHED A TAX REFORM COMMITTEE WITH THE MAJOR PURPOSE OF OVERHAULING THE EXISTING TAX STRUCTURE. THE TERMS OF REFERENCE ARE LONG AND EXHAUSTING BUT TWO STRUCK ME:

• FIRST AND MOST IMPORTANT, THE RECOMMENDATIONS SHOULD BE REVENUE NEUTRAL. WHAT DO WE MEAN BY REVENUE NEUTRAL? THE TAXES BEING PROPOSED MUST NOT CHANGE THE TOTAL TAX REVENUE THAT IS, THE NET EFFECT OF THE RECOMMENDATIONS MUST NOT INCREASE OR DECREASE THE MINISTER’S REVENUE EXPECTATIONS.

 

• THAT THE COMMITTEE MUST NOT FOCUS ON TAX ADMINISTRATION.

 

LET ME FOCUS ON THIS LATTER TERM OF REFERENCE BY, FIRSTLY, EXAMINE THE MAIN PROBLEM OF THE TAX SYSTEM, THE EFFICIENCY OF THE MINISTRY OF FINANCE IN COLLECTING THE HIGH TAXES ALREADY IMPOSED ON THE JAMAICAN PEOPLE.

 

THE COMMITTEE REPORTED THAT THE CURRENT TAX ADMINISTRATION IS WEAK: GOVERNMENT DEPENDS ON P.A.Y.E., WITHHOLDING TAX AND G.C.T. FROM A SMALL GROUP OF FIRMS. THE POTENTIAL TAXPAYERS APPEAR TO OPERATE ON A BASIS OF “CATCH ME IF YOU CAN”, WHERE AS THE TAX ADMINISTRATION OPERATES ON THE BASIS OF “OVER KILLING THE REGULAR TAXPAYERS”. IN ADDITION, THE SYSTEM IS AD HOC AND OVER COMPLICATED.

 

COLLECTION EFFORT

THE COMMITTEE’S REPORT HIGHLIGHTED THE TAX EFFICIENCY COLLECTION OF THE MINISTRY OF FINANCE AND PLANNING AS FOLLOWS:

 

• P.A.Y.E. – 50%. THAT IS, THE G.O.J. COLLECT 50% OF THE TAX DUE AND PAYABLE. AND VERY FEW RETURNS ARE MADE BY SELF-EMPLOYED PERSONS.

 

• G.C.T. 55% - THAT IS, G.O.J. COLLECTS 55% OF THE TOTAL TAX DUE AND PAYABLE.

 

• CORPORATE INCOME TAX – THIS YOU WILL NOT BELIEVE, 17%. THAT IS G.O.J. COLLECTS 17% OF THE TOTAL TAX PAYABLE BY CORPORATIONS.

 

• PROPERTY TAX – 40% – THAT IS THE GOVERNMENT COLLECTS LESS THAN 40% OF THE TAX DUE AND PAYABLE.

 

• CUSTOMS– 50%. THAT IS, THE GOVERNMENT OF JAMAICA COLLECTS LESS THAN 50% OF THE TAX DUE AND PAYABLE.

 

THE COMMITTEE REVIEWED SEVERAL TAX NEUTRAL PACKAGES AS PRESENTED BY THE CONSULTANTS FROM ANDREW YOUNG BUSINESS SCHOOL AND ONE PACKAGE, THE STRUCTURAL AND REBALANCING PACKAGE, WAS PRESENTED TO THE MINISTER OF FINANCE AND PLANNING ON NOVEMBER 30, 2004.

 

THE REPORT CATEGORICALLY STATED THAT THE “PACKAGE SHOULD NOT BE CONSIDERED SIMPLY AS A “MENU” OF REFORM OPTIONS FROM WHICH PEFERRED POSITIONS MAY BE SELECTED”. IT APPEARS TO ME, THAT THE MINISTER OF FINANCE AND PLANNING, IN HIS USUAL STYLE, HAS DECIDED TO DO OTHERWISE DESPITE THAT THE FACT THAT THE RECOMMENDATION WAS BASED ON AN ECONOMIC MODEL IN WHICH ALL THE VARIABLES WERE “ HANGED”TOGETHER.

 

GCT

IN HIS PRESENTATION ON THURSDAY, THE MINISTER OF FINANCE IN REGARDS TO TRANSFER OF ITEMS FROM ZERO RATED TO EXEMPT STATED:

 

“IT WILL HAVE NO IMPACT ON PRICE LEVELS AS NO G.C.T. WILL BE CHARGED ON FINAL SALES“.

 

IT IS ECONOMIC REASONING LIKE THIS THAT HAVE KEPT US IN THE ECONOMIC “MUDDLE” FOR THE LAST 15 YEARS. THE TAX EXPERTS WILL CONFIRM THAT THE MOVEMENT OF THESE ITEMS FROM ZERO RATED TO TAX EXEMPT WILL RESULT IN AN INCREASE IN THE PRICE OF THESE ITEMS IN ORDER TO PROTECT THEIR PROFIT MARGINS. MY CALCULATED ESTIMATE IS THAT THE INCREASE WILL RANGE FROM 10 TO 30% DEPENDING ON THE ITEM.

 

MR. SPEAKER, THIS NEW TAX IS EXPECTED TO GENERATE J$3.6B. THIS IS A TAX ON POOR PEOPLE IN PARTICULAR THE POOR SMALL FARMERS WHO ARE STRUGGLING TO SURVIVE IN THIS HIGHLY COMPETITIVE WORLD. LET ME HIGHLIGHT SOME OF THE ITEMS WHICH WILL BE AFFECTED BY THIS CHANGE.

 

AGRICULTURE – ANIMAL FEEDS, MACHETE, FARM FORKS, HOES, PLANTING MATERIAL CHEMICALS, FERTILIZERS, INSECTICIDES, HERBICIDES, ETC.

 

HEALTH – PRESCRIPTION DRUGS, CONTRACEPTIVES, TAMPONS, GOODS ACQUIRED FOR HOSPITALS , LABORATORY APPLIANCES, CRUTCHES, INVALID CARRIAGES, ARTIFICIAL LIMBS.

 

EDUCATION – SCHOOL BOOKS, SCHOOL BAGS, EXERCISE BOOKS, GOODS AND SERVICES ACQUIRED BY THE UNIVERSITY OF THE WEST INDIES, MAGAZINES.

 

PLACE OF WORSHIP – ALTAR BREAD AND WINE, DECORATIONS.

 

 

GCT ON CONSTRUCTION

MR. SPEAKER, THIS TAX INCREASE OF 4% WILL SEE THE COST OF PURCHASING A HOME INCREASE AND ALSO, RENT. I RECOMMEND THAT THE MINISTER CONSIDER THE PROPOSAL BY THE COMMITTEE TO REDUCE TRANSFER TAX FROM 7.5% TO 5%, AND ALSO THE ELIMINATION OF STAMP DUTY. THIS REDUCTION/ELIMINATION OF TAXES WILL REDUCE THE COST OF TRANSFERRING PROPERTIES BUT MORE IMPORTANTLY INCREASE THE INCIDENCE OF TRANSACTIONS AND, AS SUCH, INCREASE THE GOVERNMENT’S REVENUE TAKE.

 

I ALSO WOULD LIKE TO RECOMMEND TO THE MINISTER THAT A HOUSING ALLOWANCE BE INSTITUTED FOR THE YOUNG WORKING POPULATION WHO WILL BE AFFECTED BY THIS INCREASE IN TAX ON CONSTRUCTION. FINDING SUITABLE HOUSING IS ONE OF THE GREATEST PROBLEMS BEING FACED BY YOUNG JAMAICANS. THIS HOUSING ALLOWANCE SHOULD TAKE THE FORM OF A MORTGAGE BREAK IN INTEREST PAYMENTS FROM P.A.Y.E. INCOME.

 

HOTEL STAFF GRATUITIES

MR. SPEAKER, AS MOST MEMBERS OF PARLIAMENT IN THE TOURIST AREAS KNOW THE AVERAGE WORKER IN THE TOURISM INDUSTRY DOES NOT EARN A LOT OF MONEY. AS AN EXAMPLE, A TRAINEE MANAGER FRESH OUT OF THE UNIVERSITY EARNS APPROXIMATELY J$40,000 PER MONTH AND IS EXPECTED TO PAY STUDENT’S LOAN OF J$22,000 PER MONTH.

 

MANY OF THESE WORKERS DEPEND ON THEIR GRATUITY PAY TO FUND THEIR WEEKLY EXPENSES OF TRAVELING, AND MEETING DAILY WORK RELATED EXPENSES. AS WE ALL KNOW, THE ROADS IN JAMAICA ARE IN TERRIBLE CONDITION EXPECT FOR THE HIGH PRICED TOLL ROADS, AND AS SUCH, TRANSPORTATION COSTS ARE HIGH.

 

A WORKER IN A HOTEL WITH 50 ROOMS AND A GRATUITIES POOL OF $6.9M WILL BE AFFECTED BY THE MINISTER’S PROPOSAL TO “CAP” GRATUITIES TO 5%, INSTEAD OF THE EXISTING 10%. AS SUCH, AN EMPLOYEE’S INCOME WILL BE REDUCED BY J$24,326 PER YEAR. SO A LITTLE IS GIVEN BY WAY OF THE TAX THRESHOLD AND MUCH IS TAKEN AWAY BY WAY OF G.C.T. AND GRATUITY.

 

 

 

 

 

 

 

TYPICAL HOTEL WORKER

Before Tax New Tax Measures

ANNUAL SALARY 208,000 208,000 - gratuity

GRATUITY 72,613 48,287 - reduced by

$24,326

TOTAL $280,613 $256,287 or 33.5%,

resulting

in an overall

reduction in

pay of 8.5%.

 

 

IMPACT ON HOTELS

• INCREASE IN G.C.T. RATE ON HOTELS IS DISPROPORTIONATE TO OTHER INCREASES IN G.C.T. AND WAS NOT A RECOMMENDATION OF THE MATALON TAX REFORM COMMITTEE;

 

• TOURISM REMAINS THE ONLY EXPORT INDUSTRY THAT PAYS G.C.T. ON ITS SALES;

 

• EFFECT ON A TYPICAL ALL-INCLUSIVE HOTEL WILL BE TO INCREASE THE BURDEN OF OUTPUT G.C.T. BY APPROXIMATELY 40%;

 

• THE HUGE EFFECT WILL NOT BE LIMITED TO LARGE HOTELS. ALL HOTELS WILL BE AFFECTED, FURTHER HAMPERING THE DEVELOPMENT OF THE SMALL HOTEL SECTOR.

 

 

TAX INCENTIVES FOR PRODUCTION

MR. SPEAKER, I WILL BE ADDRESSING THE ISSUE OF TAXATION IN MUCH GREATER DETAIL IN THE FUTURE, IN PARTICULAR, THE TAX COMMITTEE’S RECOMMENDATIONS AND REPORTS. ONE AREA THAT I WILL BE FOCUSING ON, INTENSELY, IS HOW WE CAN USE TAXATION TO ENHANCE PRODUCTION AND EFFICIENCY.

 

TAXATION STRATEGY CANNOT BE LIMITED TO THE CONSTANT NEED FOR FINANCING CORRUPTION AND WASTE AND THE EVER-WIDENING STOCK OF DEBT. WE NEED TO BE A LOT MORE EXPANSIVE IN OUR THINKING.

 

IN CONCLUDING, I MUST POINT OUT THAT GIVEN THE COMMITTEE’S RECOMMENDATIONS FOR TAX NEUTRALITY, AS REQUESTED BY THE MINISTER OF FINANCE, I AM CONCERNED AS TO THE MINISTER’S APPROACH OF ONLY IMPLEMENTING THOSE ASPECTS OF THE PROPOSAL WHICH GENERATE NEW TAXES.

 

THOSE MEASURES THAT REDUCE TAXES ARE TO BE IMPLEMENTED ON, IT WOULD APPEAR, DURING A PERIOD OF 18 MONTHS TO 4 YEARS. FURTHER, IT SHOULD BE NOTED THAT ONE OF THE MAIN RECOMMENDATIONS OF THE COMMITTEE TO REDUCE THE SHORT-TERM IMPACT ON THE POOR PEOPLE OF THIS COUNTRY, AS A RESULT OF THE TAX PACKAGE IS THE IMPLEMENTATION OF A SOCIAL FUND.

 

I NOTICE THE MINISTER’S DEAFENING SILENCE ON THIS RECOMMENDATION, DESPITE A NET INCREASE OF $9.35 BILLION OF NEW TAXES THAT WILL IMPACT MOST SEVERELY ON POOR PEOPLE, NOT ONLY IN TERMS OF FOOD AND DRUGS, BUT IN TERMS OF THEIR ECONOMIC LIVELIHOOD.

 

 

 

WANTED: A MODEL THAT PROMOTES BROAD-BASED ECONOMIC DEVELOPMENT

 

MR. SPEAKER, THE MINISTER OF FINANCE AND PLANNING IN HIS OPENING PRESENTATION HAD THIS TO SAY ABOUT THE FAILED ECONOMIC MODEL OF THE PAST 12 YEARS. (QUOTE)

 

“NO ONE NEEDS TO TELL ME THAT THE ECONOMIC MODEL IS IMPERFECT AND THAT THERE ARE REMAINING DIFFICULTIES. BUT IT MUST BE QUITE CLEAR BY NOW, TO EVERYONE, EXCEPT THOSE WHO REFUSE TO SEE, THAT AFTER A LONG SEARCH WE HAVE THE MAKINGS OF A WORKABLE ECONOMIC MODEL.” (END QUOTE).

 

THE FINANCE MINISTER IS NOW OPENLY ADMITTING, DESPITE HIS STOUT DEFENCE OF HIS “ECONOMIC MODEL” OVER THE YEARS, THAT –

 

• HE HAD BEEN INVOLVED IN A LONG SEARCH FOR AN ECONOMIC MODEL

 

• AFTER 12 YEARS AS MINISTER OF FINANCE AND PLANNING, ALL HE CAN NOW TELL US IS THAT HE HAS “THE MAKINGS OF A WORKABLE ECONOMIC MODEL”.

 

THE RESULTS OF THIS SEARCHING OR GROPING IN THE DARK HAS BEEN:

 

• THE COLLAPSE OF THE FINANCIAL AND PRODUCTIVE SECTORS OF THE ECONOMY.

 

• THE DESTRUCTION OF THE LIVES AND PROFESSION OF MANY ENTREPRENEURS WHO DARED TO BELIEVE IN JAMAICA AND TAKE RISKS, AND MANY OF WHOM HAVE LONG LEFT OUR SHORES FOR A LESS HOSTILE ECONOMIC CLIMATE.

 

• THE IMPOSITION OF PUNITIVE ECONOMIC POLICIES THAT NOW KEEP JAMAICA IN A STATE OF PERSISTENT UNDER-DEVELOPMENT BARELY AVERAGING 1 PERCENT PER YEAR GROWTH OVER THE PAST 12 YEARS.

 

 

ECONOMIC DIVERSIFICATION NEEDED

A NEW ECONOMIC MODEL THAT IS BASED ON SENSIBLE MACRO-ECONOMIC POLICIES IS NEEDED TO DRIVE THIS ECONOMY TOWARDS REAL ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT.

 

THE REASON FOR THIS IS THAT THE ECONOMY NOW RESTS ON A FRAGILE BASE IN WHICH ONLY TOURISM AND THE BAUXITE/ALUMINA SECTORS OFFER REAL GROWTH POTENTIAL IN THE SHORT-TERM.

 

THESE AREAS ARE EXPANDING BECAUSE THEY ARE DRIVEN BY FOREIGN DIRECT INVESTMENT (F.D.I.), AND NEW GLOBAL DYNAMICS.

 

WHAT IS NOW NEEDED ARE POLICIES THAT WILL ENCOURAGE BROAD-BASED INVESTMENT BY JAMAICAN ENTREPRENEURS FROM NEGRIL POINT TO MORANT POINT, WHERE GOVERNMENT REDUCES INTEREST RATES SO THAT INVESTORS CAN BORROW MONEY IN LOW DOUBLE DIGITS OR SINGLE DIGIT RATES.

 

THE ECONOMY MUST ONCE AGAIN BE DIVERSIFIED TO THE POINT WHERE SECTORS SUCH AS INFORMATION TECHNOLOGY, MANUFACTURING, AGRICULTURE, AGRO INDUSTRY, FURNITURE AND CRAFT, CAN BE REVIVED SO THAT THE EXPORT CAPACITY OF THE COUNTRY CAN BE REBUILT ALLOWING FOR SIGNIFICANT JOB-CREATION AND FOREIGN EXCHANGE EARNINGS.

 

IN ORDER TO DO THIS, THE GOVERNMENT MUST PUT IN PLACE STRATEGIES THAT CAN INCREASE THE COMPETITIVENESS OF JAMAICAN PRODUCERS.

 

AMONG THE ISSUES THAT MUST BE ADDRESSED TO ACHIEVE THIS COMPETITIVENESS IN THE GLOBAL MARKETS ARE, LOW INTEREST RATES, LOWER UTILITY COSTS, BETTER EDUCATION AND TRAINING OF THE WORK FORCE, PRODUCTIVITY INCENTIVES, EXPORT AND MERCHANDIZING SCHEMES, TO NAME A FEW.

 

THE JAMAICA LABOUR PARTY HAS CONSISTENTLY PUT FORWARD SPECIFIC PROPOSALS FOR A REVIVAL OF THE ECONOMY. THE GOVERNMENT AND THE FINANCE MINISTER HAVE STEADFASTLY FAILED TO TAKE ON BOARD THESE TRIED AND PROVEN TECHNIQUES OF EFFECTIVE GOVERNANCE.

 

THE HANSARD REPORTS OF PARLIAMENT SHOW THE DETAILED ALTERNATIVES PUT FORWARD BY THE OPPOSITION, INCLUDING OUR PROPOSALS FOR:

 

• A FORENSIC EFFICIENCY AUDIT OF GOVERNMENT AND ALL ITS AGENCIES;

 

• BORROW LOW COST MONEY FROM MULTILATERAL INSTITUTIONS AND REPLACE A BLOCK OF MATURING DEBT INSTRUMENTS WITH THIS IN ORDER TO PROPEL A MORE AGGRESSIVE DOWNWARD MOVEMENT OF INTEREST RATES. GOVERNMENT MUST, OVERTIME, REDUCE ITS RELIANCE ON EURO AND GLOBAL BOND RATES AT 10-12 PERCENT. THESE RATES WILL GUARANTEE THAT OUR HIGH INTEREST RATES WILL CONTINUE INDEFINITELY.

 

• THE DEVELOPMENT BANK OF JAMAICA SHOULD EMBRACE ITS CORE BUSINESS OF PROVIDING LOAN FUNDS TO THE PRODUCTIVE SECTOR, INCLUDING SMALL BUSINESSES AND SMALL FARMERS. THE P.C. BANKS IN RURAL JAMAICA NEED TO BE REVIVED.

 

WE NEED TO BUILD SUPERHIGHWAYS OF PRODUCTION TO GIVE JAMAICANS AN OPPORTUNITY TO CREATE WEALTH FOR THEMSELVES.

 

BUT THE TIME IS FAST COMING WHERE WE OF THE JLP WILL HAVE TO IMPLEMENT THESE SENSIBLE POLICIES THAT CAN LIFT THE JAMAICAN SHIP OF STATE ENSURING THAT JAMAICANS AT EVERY LEVEL GET AN OPPORTUNITY :

 

• FOR A DECENT EDUCATION

 

• FOR AFFORDABLE HEALTH CARE

 

• FOR INVESTMENT AND ENTREPRENEURIAL OPPORTUNITIES

 

• FOR REASONABLE JOB OPPORTUNITIES

 

• FOR A PEACEFUL AND CRIME-FREE SOCIETY

 

• FOR A WEALTHY SOCIETY IN WHICH VALUES AND ATTITUDES ARE RESTORED TO PRIDE OF PLACE .

 

 

 

CONCLUSION

 

MR. SPEAKER, I HAVE SOUGHT IN THIS PRESENTATION TO DEMONSTRATE THE DESTRUC-TIVE EFFECTS OF POOR GOVERNANCE.

 

I HAVE DEMONSTRATED THAT FOR TOO LONG THE GOVERNMENT HAS ACTIVELY AND SYSTEMATICALLY BEEN INVOLVED IN THE CORRUPTION OF THE BUDGETARY PROCESS, WHEREBY IT HAS ENGAGED IN THE CONDUCT OF TWO BUDGETS, ONE SEEN AND THE OTHER UNSEEN, OPENLY VIOLATING THE CONSTITUTIONAL REQUIREMENT THAT PARLIAMENT MUST APPROVE ALL EXPENDITURE, INCLUDING LOANS, BEFORE THE MONEY IS SPENT.

 

IN THE PROCESS, THERE HAS BEEN LACK OF TRANSPARENCY AND A STEADY INCREASE IN CORRUPTION IN THE PUBLIC SECTOR DUE TO LACK OF OVERSIGHT AND THE IMPLEMENTATION OF ADEQUATE SAFEGUARDS.

 

IN THIS PROGRAMME OF BUDGETARY DECEPTION, THERE HAS BEEN LITTLE EMPHASIS PLACED ON PUTTING IN PLACE ECONOMIC DEVELOPMENT POLICIES THAT GENERATE WEALTH FOR THE PEOPLE. THE RESULT IS – SPIRALLING DEBT AND DEEPENING POVERTY.

 

WE MUST MAKE A COMMITMENT TO CHANGE THE COURSE ON WHICH WE ARE EMBARKED, IRRESPECTIVE OF WHO FORMS THE GOVERNMENT AND WHO SITS AS FINANCE MINISTER.

 

WE MUST RESOLVE TO OBEY THE LAWS OF THE LAND THAT WERE LAID DOWN BY OUR FOREFATHERS, SO THAT WE CAN BUILD NEW RESPECT FOR CITIZENSHIP, LAW AND ORDER.

 

WITH HOPEFUL AND CONTRITE HEARTS LET US DEDICATE OURSELVES TO RESCUING OUR FUTURE.

 

I END WITH A FAVOURITE PRAYER THAT I CONSIDER APPROPRIATE:

 

“MAY GOD GRANT US THE SERENITY TO ACCEPT THE THINGS WE CANNOT CHANGE, MAY HE GIVE US THE COURAGE TO CHANGE THE THINGS WE CAN, AND GIVE US THE WISDOM TO KNOW THE DIFFERENCE BETWEEN WHAT WE CAN AND CANNOT CHANGE.”

 

AUDLEY SHAW, M.P.

OPPOSITION SPOKESMAN ON FINANCE AND

THE PUBLIC SERVICE

 

TUESDAY, APRIL 19, 2005