Tue | Oct 17, 2017

Editorial: Mr Kellier’s folly

Published:Tuesday | April 28, 2015 | 12:00 AM

Having been blocked in his effort to recreate a government monopoly for the importation of refined sugar, Derrick Kellier, the agriculture minister, has hatched a new scheme to undermine competition, ruin manufacturers, and send even more Jamaicans into unemployment.

Having not seriously exercised his mind on the implications of his plan, Mr Kellier won't see it that way. Yet, that is precisely the likely outcome of his proposal to impose a cess on refined sugar imported into Jamaica, which is another way of saying that a special tax will be placed on the commodity. And should Mr Kellier and his colleagues in the Government question our analysis of the potential impact, we suggest that they have a read of last weekend's letter to the press by Lascelles Chin, the chairman and principal of the LASCO manufacturing companies.

Mr Kellier's assault on Jamaica's production started six months ago when he announced his intention to reverse a near decade-and-a-half-old policy that allowed manufacturers and consumers to source and import their own refined sugar, of which the country consumes around 80,000 tonnes annually. Instead, the Sugar Industry Authority (SIA), a kind of regulatory agency, would be handed that monopoly. Mr Kellier's plan was to cure the supposed mischief of manufacturers, having had tariff breaks, leaking some of their refined sugar into the retail market to compete with that which was subject to a 128 per cent duty.

If indeed there was some cheating, Mr Kellier's proposal would be a bureaucratic fix that weakened Jamaica's move to a competitive market economy by limiting the ability of firms to find the cheapest and most efficient suppliers. Believing that the hand of some bureaucrat was better than the hand of the market, Mr Kellier would have, by fiat, imposed a cost on production.

Although stalled, Mr Kellier clearly hasn't recognised his folly for what it is. So he now proposes to impose this tax of US$35 per tonne of refined sugar, or an additional tax of around J$325 million on manufacturers. His defence of this planned assault on industry is that the money would contribute to the restructuring of the domestic sugar industry, without offering specifics.

 

competitive advantage

 

But Mr Kellier appeared to have given short shrift to people like Mr Chin, whose company recently invested US$40 million to expand its beverage line, is running at full hilt, and has employed scores of people. That is not easy given the competitive advantage of many external manufacturers, in the Caribbean and elsewhere, against which LASCO has to compete.

Mr Chin plans another US$20-million expansion, but says that would become unviable with Mr Kellier's proposed tax. In other words, that would be lost investment, lost jobs, lost product, lost consumption, and a lost opportunity for growth. This domino effect applies not only to Mr Chin's company. The cascading impact would be felt elsewhere in the economy - at a time where business confidence is on the rise because of the fiscal discipline displayed by the Simpson Miller administration of the past three years.

Now is the time for a display of good sense. The Kellier folly should not be allowed to overrun that confidence and derail Jamaica's prospects for economic recovery.