After the IMF, no place for routine, ordinary governance

Published: Sunday | February 24, 2013 Comments 0
Prime Minister Portia Simpson Miller and Finance Minister Dr Peter Phillips during the recording of their joint national address which aired recently.  - JIS
Prime Minister Portia Simpson Miller and Finance Minister Dr Peter Phillips during the recording of their joint national address which aired recently. - JIS

Chris Tufton, Contributor

The tax package announced two Tuesdays ago by Finance Minister Peter Phillips should have been expected by critical stakeholders who had demonstrated an interest in the International Monetary Fund (IMF) negotiations and the much-talked-about belt-tightening.

It was an open secret that this Government, in both its action and inaction, quickly accepted that its promise of a deal with the IMF within two weeks was not going to happen. Additionally, there were sufficient discussions around lifting of waivers and general tax reform to have expected a tax hike. So we all should have expected it, even if we were frightened at the prospects of paying more in a shrinking economy.

But Peter Phillips erred when he announced the tax package without any hint of an imminent announcement to stakeholders, including the Opposition, with which he was meeting just days before to discuss a National Debt Exchange (NDX).

In effect, it is not the tax package that should have been most offensive to those who criticise the announcement, but rather the way it was announced. The process was typical and routine is an argument advanced by Minister Phillips to suggest that the loud protests were unjustifiable, if not surprising.

But shouldn't Government's strategy in this uncertain and cynical environment avoid, as much as possible, what is typical and routine about national governance? And are we not worse off today, as governments lose credibility in the eyes of the Jamaican people because we have established predictable approaches to economic management, which deprived us of growth, jobs, safety and security?

Peter Phillips and the Government must be careful that they do not send mixed signals in their approach to political and economic management. The routine and the ordinary are unlikely to bring any solutions to Jamaica's current challenges.

There is no place in consensus-building for a do-as-I-say-but-not-as-I-do philosophy. The Government needs a consistent strategy in consensus building, and the approach by the Government to the recent tax announcement was too routine and too ordinary.

TRUST DEFICIT

Since the last general election, the Government - Finance Minister Phillips, in particular - has been relatively consistent in its call for a national effort to confront these challenges. Peter himself is on record of speaking of a trust deficit and the need for partisan politics to be given less prominence in forging an economic path going forward.

The finance minister, in anticipation of the austerity programme necessary to get the stamp of approval from the IMF, used every podium he was invited to speak at and encourage cooperation. Despite the ominous warnings of tough times ahead, many Jamaicans were increasingly accepting the need for consensus around belt-tightening and collective sacrifice. The recently concluded debt exchange, and the willingness of other stakeholder groups to accept the need for sacrifice, are manifestations of the fact that the message is slowly sinking in.

For whatever reason, the PNP has traditionally had better luck in getting key stakeholders to side with its national causes, particularly civil society and professional groups like the Jamaica Teachers' Association, the Church, and trade unions. In this case, the Government's focus, as articulated by the finance minister and later the prime minister, has been clearly aimed at soliciting support from these and other groups.

 This all culminated in the joint national broadcast with Peter and Portia to announce the NDX, which essentially called on a cross section of Jamaicans, including pensioners, to make sacrifices for this national effort. The broadcast was not routine and ordinary, and that may have been a good thing. It was a first and, therefore, unusual and (some argue) effective way to telecast unity of purpose by a Government that has been perceived as pulling in different directions.

The united front from Peter and Portia was as much for the country as it was for our external partners, in particular the IMF, perhaps at the time still searching for signs that the Government was sufficiently committed to a different path of economic management.

Importantly, the joint broadcast was an attempt at confidence and consensus building. It was not routine or ordinary, and was good theatre, particularly the two-sided kiss planted on Portia's jaws by Peter at the end of his presentation. Even for those who may not be convinced that that action was a manifestation of unity, they would have had to be given credit for it.

Then came the surprise announcement a $16-billion tax package, just as the private sector and pensioners were trying to digest the implications of the NDX.

Minister Phillips may be correct that tax packages are not usually prereleased for fear of market-distorting activities by speculators. However, these are not ordinary times and require extraordinary effort to find a balance between an austerity programme and a growth imperative. His key and consistent message should have been that this time around, things were going to be done differently.

Bitter medicine backlash

The People's National Party (PNP), in the 2011 election campaign, did what it felt was necessary to generate sufficient hope in the minds of the majority of those Jamaicans who voted on December 29, and got the mandate necessary to secure a victory just four years after being in Opposition. It was harshly critical of the then Government for being uncaring and promised Jamaicans jobs and transparent governance.

The JLP was more measured in its campaign, perhaps to its own detriment, asking the Jamaican people to understand the challenges the country faced and even suggesting more challenging times ahead. Some may argue that the JLP's campaign was not routine or ordinary when the party leader deviated from the traditional campaign script to speak of "bitter medicine".

With all the achievements of the JLP over the four-year period, the PNP's communication machinery was more effective in highlighting the perceived negative of the JLP than the JLP was in highlighting its positives. The Labourites paid the price.

The lesson from the 2011 campaign has clearly been that perceptions of hope are critical to driving political support. As the results of the 2011 election demonstrate, however, perception does not necessarily equate to reality. In fact, the JLP, despite the extended period of uncertainty in getting an extension of the IMF agreement leading up to the end of December 2011, was presiding over an economy with higher levels of confidence supported by a range of positive economic variables.

The exchange rate was stable for more than two years at around US$1:J$86, foreign exchange reserves above US$2 billion, Bank of Jamaica rates as low as 6.5 per cent, and mortgage rates at 9.5 per cent, just to list a few key economic indicators.

The truth is that almost 14 months into office, the PNP Government cannot claim improvements in these variables. The exchange rate is unstable and sliding close to US$1:J$97; the net international reserves slumping to US$1.1 billion, and the Planning Institute of Jamaica announcing this past week that the economy is shrinking. Projections for the immediate future are not good.

Despite the rhetoric on the political platforms, the facts are that the JLP had been able to achieve higher levels of confidence and economic stability, even with the drawn-out discussions with the IMF, which lasted up to the last general election.

The current Government has to work much harder to re-establish this confidence as a precursor to getting investment going. This is no routine or ordinary task and requires all hands on deck.

Now that an IMF agreement seems imminent, the Government must be as deliberate in driving a growth strategy, through taxation and public-sector reform, while setting timelines for achievable critical investment projects.

Dr Christopher Tufton is opposition senator and spokesman on foreign affairs, foreign trade and investment and co-executive director of think tank CaPRI. Email feedback to columns@gleanerjm.com and cctufton@yahoo.com.

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