Ramesh Sujanani, Contributor
Since 1962, the Jamaican manufacturing sector has struggled through a myriad of problems. Various slogans have been used: 'Export or Die', 'Export and Live', 'Export or Else', and 'Export and Survive' being my latest contribution.
The 1960s-'80s were quite active in export. Adversity came in many forms: the depletion of US dollars to finance raw materials, and new regulations in foreign lands. We had exchange control up to 1988, and so the payment of bills was a problem. The Central Bank offered working capital support through the Export Development Fund (EDF), and lines of credit from other central banks.
But EDF support ended with the Government of the '80s. Somehow a recommendation from the World Bank and a study done by Paul Chen-Young and associates indicated that we stop manufacturing locally those products that could be imported on a competitive basis. It did not say how the reduction of export dollars would be compensated. As Edward Seaga said, we then became a supermarket, and in a few years the economy was in shambles.
I recall there was a competent trade commissioner at the Jamaica National Export Corporation who gave me some advice. At that time, we were manufacturing jewellery, and our volume was good; but the margins were low because of worldwide competition in our trade.
The commissioner advised me, as a last resort, to export as much goods to obtain foreign dollars as is necessary to cover my import needs. That way, one could argue that one was no burden on the US-dollar requirements of one's country, and one ultimately became a net foreign-exchange earner, being able then to access all lines of credit.
That piece of advice paved the way in 1976 when I met the new minister of industry, and I was able to show that I was a net earner; and he was justified in approving licences which lasted through business life.
Do not forget that duty-free stores, hotels and tourism businesses can remit funds in US dollars, and through this one may qualify as an exporter, and apply for a waiver of the taxation.
Now, we have the Caribbean Basin Initiative (CBI). In my opinion, this is of no help. When introduced, it allowed 35 per cent of one's merchandise exported to the USA to be of an imported origin, and 65 per cent of local cost or value added. This was the same deal being offered to us under GSP (the generalised system of preferences) prior to the CBI being offered, so there was no improvement in benefit.
If we took imported content to be up 65 per cent, allowing for supplies from Mexico and Canada, under the North American Free Trade Agreement, this would make our products easier to produce and, therefore, easier to sell. So this is the second piece of advice: Have the CBI revised with more adjustments to increase benefits and survive.
There is always a possibility that one can obtain payment up front, depending on your customer. Failing which, the customer should establish a letter of credit (though your bank might give you a hard time), or accept a draft against documents.
There is one last benefit I can think of at this time. Export profit margins are constrained, so a taxation benefit would be welcome. In the 1960s, '70s and '80s, there was an Export Encouragement Act which waived income tax for producers of export goods to third countries. Government needs to revisit and revise this law to suit current needs, as soon as possible, so that an exporter may continue to operate.
Our trade committees should impress the Government with this taxation package, and recalibrate the CBI terms. Then, and only then, can we profitably export.
Ramesh Sujanani is a businessman. Email feedback to email@example.com and firstname.lastname@example.org.