Earl M. Bartley, Contributor
AS THE new year approaches, three public issues appear to be uppermost in the minds of Jamaicans. What is going to happen in the economy, especially in relation to the fiscal budget; will Opposition Leader Edward Seaga finally retire; and whether the country will be able to rid itself of the Patterson administration anytime soon.
THE BUDGET
The most urgent question regarding the budget is what steps will the Government take to further reduce the fiscal deficit and bring its deficit reduction programme back on track with the target of five to six per cent of Gross Domestic Product (GDP) by the end of the fiscal year in April 2004.
It is truly astounding the very loose manner in which successive governments have gone about their public duty to maintain and provide accurate information about the state of the nation's finances. They hold expenditures "off-budget" and pretty much tell us what they want, whenever they feel like it, according to what suits their political advantage. There are strong indications that this was done prior to the last General Elections. More recently, when the September quarter was reported there are indications that arrears were kept off the books. This sort of misleading reporting needs to stop as it reduces planning throughout the economy to a guessing game.
What we do know is that the official figures are acknowledging a fiscal deficit that is off-target by about J$3 billion. Then there are credible reports from public sector managers that the State is in arrears to suppliers to the tune of approximately J$8 billion. The increment to the fiscal deficit from these two sources is therefore about $11 billion. In addition, the Government might have to negotiate and pay out some portion of the $14 billion in damages awarded to Ezroy Millwood's National Transportation Cooperative Society, even though it would probably wish not to make any payment until next fiscal year.
The administration is also under pressure from its local and foreign creditors to cut the public sector workforce.
This means, depending on the size of the cuts, that it will need to find several hundred million dollars, if not one or two billion dollars more, to make redundancy payments.
Conservatively, therefore, the Government may need to find an additional $12 billion to meet its fiscal reduction target of five to six per cent of GDP for the fiscal year ending in April 2004.
To support the budget Finance Minister Davies has in recent weeks obtained a US$100 million from the Bank of Nova Scotia in Canada, and a US$50 million loan from Trinidad. Both loans converted at present exchange rates amounts to approximately $9 billion. Thus, about $3 billion is needed in new revenues and expenditure cuts to meet the fiscal target. Approximately $600 million is expected to be raised by ending the tax exemption of certain public sector companies; and several hundred million more could possibly be raised by divesting government shares in various companies and businesses. The returns from these divestments, however, are unlikely to be realised in a timely way to be of much assistance in the upcoming quarter. There is thus a gap of $2.5 billion to be financed.
NO TO INCREASED GAS TAX
A number of administration spokesmen have been trying to soften up the public for a gas tax increase. They have being arguing that the country's energy bill has doubled over the past four years from US$350 million in 1999 to possibly in excess of US$700 million by the end of this year. Other arguments are that Jamaica's gasolene prices are among the lowest in the world, and even lower than some oil exporting countries, and that our electricity rates are not the highest in the region.
The Government's comparison of our gas price with those of other countries is simplistic. Although Jamaica's gas price of US49 cents per litre is only a little more than the US45 cents paid in oil producing Trinidad and lower than the US74 cents paid in Barbados and much lower than US$1.21 paid in Germany, the per capita income in those countries are four, six, and 20 times that of Jamaica. Our price for gas is therefore far more burdensome on our consumers than in those countries.
Similarly, the 30 to 50 per cent, roughly $9 to $12, the Government at present collects on a litre of gas consisting of $7.50 for special consumption tax (SCT) plus 10 per cent ad valorem duty might appear low compared to other countries.
The concerns of many Jamaicans, however, about the "ripple effect" of any gas tax increase seems justified given our very high tax rates by world standards.
Moreover, the pattern of our fuel consumption suggests that demand may be price inelastic. Thus, merely increasing the gas tax is unlikely to reduce consumption or the import bill. More effective measures would be to encourage conservation by challenging our architects to design more energy efficient buildings to take advantage of cooling trade winds; and encouraging householders to make greater use of solar water heaters. Commuters should also be encouraged to engage in more car-pooling, and alternate driving days for odd and even number licence plates should be introduced which would not only reduce gas consumption, but would ease the congestion on the roads and reduce the loss of production time.
But the Government, as we all suspect, is less interested in conservation than in increasing revenues. In this regard, instead of reflexively burdening consumers, the administration might try to fast track the offer of the business community to forgo a portion of their interest on Government debentures. Instead of waiting until after April 2004, however, they could start granting the rebates on interest in January.
The Government also needs to take a serious look at the money market brokers as a source of revenues. Over the past four years, one company has reported cumulative profits of J$613 million on which it has paid only J$12.9 million in taxes, or two per cent of its income. Another one has reported cumulative profits of J$1.5 billion over the past two years and paid only J$43.7 million in taxes, or 2.9 per cent of income.
I am not saying that these companies are doing anything illegal, but considering the company tax rate is 33.3 per cent, it does not seem that these companies are bearing their fair share of the tax burden.
PUBLIC SECTOR LAYOFFS
As one who has strongly advocated that the Government cut the size of the public sector, I have mixed feelings about the impending layoffs. To meet the 'credibility standards' of foreign and local lenders, the layoffs could affect about 4,000 to 10,000 workers over the next several months. My feelings are mixed, because in this depressed economy, no decent person wants to see others thrown into the ranks of the jobless.
But having worked in the public sector, I saw where the extensive waste and corruption engaged in by the politicians could not have occurred without being facilitated and covered-up by the bureaucrats. Now it seems that having been used by the worse malefactors, these workers are being discarded while the politicians preen themselves on taking the "tough" decisions.
It is a reflection and possibly explanation for the stagnancy of the economy that 70 per cent of the academically qualified people in the workforce are working in the low-productivity public sector, instead of the private sector. In the latter, their skills and presumably greater dynamism could yield more optimal benefits for society. And it is a reflection of the dullen imagination of the Government, that years ago it did not develop a programme of transferring several hundreds of these persons with accounting, marketing, management and scientific training to head-up and start off state sponsored community-based enterprises patterned off Walkerswood.
These managers would have been paid half of their public sector salaries for a year or two, and challenged to make the enterprises work for themselves and the people in our disintegrating communities. Instead, these public sector workers are to be laid off in a desultory way and we will probably lose many of them to migration and the millions we invested in their education.
TIME FOR GOVERNMENT TO GO
What I find to be almost unbearably hypocritical is the spectre of this administration pleading with others to 'hold strain'. This, after they have given themselves 100 per cent salary increases, reduced or duty-free automobiles, extensive travel allowances and overseas health benefits.
The Government and its cronies have also been busy suing people who have tried to expose their questionable dealings. At the same time they have used the defence of the "fragile recovery" and the "image sensitive" tourism industry to shield and protect themselves from strenuous opposition.
Unfortunately, many in the business sector have fallen for these "rope-a-dope" tactics. But does it make sense for taxpayers to be continuously pouring money into a black hole of waste and corruption of which Operation PRIDE was not atypical?I think not.
And in addition to whatever legislation for fiscal responsibility that Private Sector leaders might force the Government to enact, I believe we have to steel ourselves to remove Mr. Patterson and his compromised cronies, who have already wasted too much of the nation's time and patrimony and seems committed to their profligate ways.
In 2004, I am also hoping Mr. Seaga will bow out gracefully instead of waiting to be pushed. In the annals of Jamaica's public administration history, only Sir John Peter Grant who became Governor in the aftermath of the Morant Bay Rebellion, and who had a reputation and a record of being a capable administrator seems comparable to Seaga and his achievements do not come close.
Mr Seaga has an anthropologist breath of vision and insight into the nature and operations of social institutions, an engineer's methodical application, and the pragmatic rationalism of a good economist thrown into the mix.
Still, like Moses, I believe he is under providential judgement. I have always felt it was kind of harsh that Yahweh had barred Moses from entering the "Promised Land" for his seemingly slight act of disobedience in striking the rock with his rod instead of touching it as he was commanded.
But who am I to second-guess Yahweh? Considering the pervasive 'complexionism' in Jamaican society, I now believe Seaga might have being provoked into retaliation by those who wanted to shoot this "Brown Boy" (and an Arab at that) out of Western Kingston.
But like the others associated with the extreme violence which was initiated in that constituency and which has sullied our politics and society for decades, I think he is under providential judgement for the expedient way in which human life was treated in the pursuit of power.
INTELLECTUAL LEGACY
History will record that Mr. Seaga loved power more than money.
Hopefully, the University of the West Indies and the business community will appreciate the value of the intellectual legacy and memoirs of an Edward Seaga and arrange a suitable endowment for him.
But for the past two elections he has been shielding the present Government from the electoral wrath of the Jamaican people and it is time for him to get out of the way.
Earl M. Bartley is an economist and businessman. You can send your comments to adapapa@cwjamaica.com.
