Sat | Jul 22, 2017

Denzil A. Williams | Radical overhaul of 'doing business' environment needed

Published:Sunday | January 1, 2017 | 1:00 AM
Andrew Holness
Densil Williams
Portia Simpson Miller
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It is no secret that Jamaica had another successful year in 2016 on the economic front. Big growth numbers came in the July-September quarter, positive outlook came from the rating agencies, a new precautionary standby agreement (PSBA) was signed with the International Monetary Fund (IMF), and overall, business and consumer confidence were heading in an upward direction. Credit must be given to the Andrew Holness-led Government for not changing course from the strong foundation laid by the Portia Simpson-Miller-led Government prior to February 2016, which laid the foundation for the strong path towards real economic growth in the foreseeable future.

Our economic management is heading in a new phase of maturity, of which I think we should all be proud. The Jamaica Labour Party (JLP) administration of 2007-2011 started the work of bringing stability to the macro-economy, but somewhere along the line, abandoned the ship.

A signal piece of legislation under the 2007-2011 JLP Government, which set the stage for stability in the macro-economy, is the fiscal responsibility law that was passed in our Parliament. The People's National Party (PNP) Government of 2012-2016 showed great maturity and implemented this law (some would argue to the detriment of electoral victory in 2016) in addition to further building on it to deliver one of the most sustained periods of stability in the macro-economy that Jamaica has seen in its 54 years history.

The austerity programme delivered under the PNP Government of 2012-2016, no doubt, made a big, positive impact on the macro-economic landscape in Jamaica and has set the table for real growth to start taking place. The JLP Government of 2016 read the economic temperate well and has not gone about making cavalier decisions to disturb the foundation laid for growth.

The country is now reaping some good rewards, and the JLP Government is getting positive reviews for maintaining the discipline towards the management of our economic affairs.

Despite the positive developments in the macro-economic environment, there are some serious challenges ahead that if not managed properly, will erode the gains we have made over the last decade.

In the World Bank's authoritative work on the ease of doing business, the report of 2017 shows Jamaica slipping from 65 to 67 position, a fall of two places. This is not the direction we would want to see the country going in, especially at a time when the macro-economy is looking poised to deliver an enabling environment for growth.

Critically, having a strong macro-economic environment is a necessary, but not a sufficient, condition to drive sustained economic growth. Simply put, for growth to happen, production must take place. For production to take place and for the goods and services to be sold competitively in the global marketplace, the doing-business environment must become more hospitable.

 

Trouble-free

 

In very simple language, businesses must be able to pay their taxes, register their properties, enforce contracts, protect investors' monies, get construction permits - among other things - with very little hassle, or to be utopian, hassle-free. Unfortunately, in Jamaica, these things tend to take years to be accomplished, and by the time approval is given, for example, to construct a new factory space, our global competitors have constructed three new factories and have snatched up the market that we could have got if we had only acted with more speed and greater urgency to grant construction permits.

Why, for example, should a bank not be able to correct an error on a creditcard in three days instead of 45 days when all the relevant information is passed to them? Why should business persons wait for 150 days to get a permit to waive duties on the importation of a motor vehicle? Why should it take 268 hours per year to prepare, file, and pay corporate taxes when OECD high-income countries are taking only 163 hours? Why should we have 17 procedures per year to deal with building a warehouse while the OECD high-income countries have only 12?

These are real issues that business persons face on a daily basis and why production and productivity cannot improve in any significant way. If we do not address them urgently, we will be in for a rough time moving the growth needle beyond the traditional 0.8 per cent, which has characterised us for the past 30 years.

Twothousand and seventeen must be the year to tackle the doing-business environment - full stop. The business environment has to become more hospitable for business persons to do what they do best, that is, produce goods and services, sell to markets both locally, regionally, and globally to improve our GDP in a significant way.

It will require disciplined and decisive leadership to deal with the issues in the doing-business environment in 2017. I do not support the school of thought that says that it is a lack of resources why we are not able to fix some of the very simple problems in the doing-business environment in Jamaica. A lot of the issues that make our business environment so inhospitable are simple and basic and merely require the right leadership to provide direction and vision and allow the workers to get on with their job of fixing the problems.

We will require leadership that embraces performance and results and not merely platitudes and rhetoric. We need leadership to say, this is the broad vision, these are the things that we need to be accomplished, these are the resources we have and these are the responsible persons to lead the charge. We should then hold persons accountable for deliverables and when they do well, we reward them. Similarly, when they sit idly and waste time and have no deliverables to show, they should face the necessary sanctions as well.

If we do not start managing our affairs at the national level in this way, we will continue to face an inhospitable doing-business environment and, sadly, we will not be able to achieve any significant growth to move our economy to the level where wealth creation is the order of the day and not the exception.

- Densil A. Williams is professor of international business and pro vice chancellor, planning, at the University of the West Indies.