The following are excerpts from the presentation by Michael Bernard at the Jamaican Institute of Manage-ment/Gleaner 2012 Manager of the Year Award
"Several weeks ago, Jamaican investors, financial institutions; pension funds and pensioners, were forced to make a sacrifice called the National Debt Exchange (NDX). This is a necessary, involuntary sacrifice for self, country and our future.
Last week, our public-sector workers were forced to make an involuntary sacrifice to accept wage restraint for the next three years.
Of course, with continued price inflation and devaluation of our currency, our standard of living will continue to decline.
Several weeks ago, I was waiting to receive a return of my principal from some JDX bonds which I felt that I voluntarily participated in only to be confronted with the NDX. This time around I felt that my participation was involuntary as I perceived that there would be dire consequences if I did not accept the offer.
With both the JDX, and the NDX, I had the opportunity to meet the respective Ministers of Finance responsible for their implementation.
With the JDX, I met with then Minister Shaw, before it was implemented, while on Carreras' business, at that time he said that "even though we would see a dramatic reduction in interest rates, we would not be able to find better rates anywhere. I took that advice and voluntarily re-invested my money at the lower rates.
With the NDX, I ran into Minister Phillips at an event to launch a Welfare Fund. This was very timely, as, in these times of austerity, more and more welfare support is needed. Anyhow, I said to Minister Phillips, "the NDX has impacted me significantly, but I understand.
But as someone waiting to receive my money and being told that it has to remain with the borrower for another three years, what is it that I really understand.
I understand that prudent action on my part has forced me to involuntarily make a sacrifice to save and protect myself, my country and our future. I am sure that this is the conclusion that has driven the large financial institutions to accept this NDX.
Now, with interest rates on Government of Jamaica (GOJ) instruments and other financial instruments entrenched in the mid-single digit region, I had planned prior to the NDX announcement, to invest my principal in three productive employment-generating and employment-sustaining projects. This is consistent with what a low interest rate environment should encourage. However, the need for this money by Government and its 'Crowding Out Effect' has once again taken precedence, even though the NDX is intended to reduce government debt.
As we grapple with the effect of the NDX, the question is how do we respond to the potential effects of not receiving our principal when it is due and the lower interest rate to come.
Do we condemn our country and abandon the long held view that government debt is relatively risk free? Do we avoid further investment in GOJ instruments and live for the day when our principal is returned, never to invest with them again? But instead try to acquire and hoard US$ or send it overseas?
No, I don't think that that we should. We would still need to diversify our portfolios, to minimise the potential loss of our principal, and ensure that the Government does not have to resort to punitive fiscal measures.
Our current predicament now forces us, involuntarily, to direct more of our investment and concentrate much more of our efforts on local productive initiatives.
Our sacrifice has to go beyond just accepting the NDX and the lower rates of return on GOJ financial instruments. It will have to extend to us producing and consuming more things Jamaican; from textbooks to agricultural produce and agri-processed products, locally manufactured goods such as paints, water, horses, fast-moving consumer goods, sources of energy, services, vacation."