Forget the Politics: 3 Critical Insights From Portia’s Warning to Investors

Does anybody need convincing that the recent warning to (local and foreign) investors by the Leader of the Opposition People’s National Party (The Most Honourable Portia Simpson Miller) is most prejudicial to Jamaica’s economic welfare?

Background

The statement came in response to the government’s plans to divest key tourist sites across the island including Dunn’s River Falls and Green Grotto Caves.

Understandably, the Jamaican people, who already, can hardly afford to enter these premises have been jittery. As usual, when the people jit, the politicians jump.

The response by the Leader of the Opposition was :

“I hear a long list that they intend to divest, but I am warning people who intend to buy them that the PNP will be returned to power soon, so be careful, because we will not be standing for it.”

Why Be Concerned about her statements?
This statement by the Opposition Leader, past Prime Minster of Jamaica, and possible future leader of government, if her party becomes successful in the closely contested polls, could be perceived, as injurious to the economy and the private sector. Certain reactions in the media have confirmed this. On Wednesday November 16, 2011, there was a joint statement by Private Sector Leaders “concerned and disappointed by recent controversial statements from both sides that could have dire consequences for the country by creating an environment of uncertainty and instability”. (They claim, that their statement was not related to actions on the campaign trail).

The ruling party also reacted to the actions of the Opposition Leader. The Jamaica Labour Party (JLP) Campaign Director Karl Samuda expressed that her comments were ‘irresponsible and egregious’. These sentiments were further expressed by the Minister of Finance Audley Shaw who has urged Political Ombudsman Bishop Herro Blair to take a closer look at statements. The Gleaner qoutes Shaw as saying:

…Blair should turn his attention to the “mischievous” and other “irresponsible statements” by the Opposition PNP that “seek to destabilise the economy and destroy investor confidence.”

It is cause for concern because everyone knows that the international investing community understands that the opposition could easily become the government and reverse the policies implemented by the current government, or IF these policies are implemented, the divestments could become the center of an imbroglio either which would not be desirable for an investor.

There are three critical things that this statement is saying that Jamaican business interests should take quite seriously in the current global economic climate:

1. The statement strongly suggests that the Jamaican government is bad to do business with.

Please note, the government of Jamaica is always the same legal entity, even when the ruling party changes. It is always the government who owes the teachers their wage increase, for example, never the PNP or the JLP.

Consider additionally, that in our developing context where private investors are few and far apart, the government is often the one who must court support for Jamaican projects locally and overseas.

If the idea is established that the government of Jamaica is unsafe to contract with (because if the Opposition party is returned to power they will revoke certain contracts signed by the ruling party), think of the implications for highway projects, the tourism sector, bauxite and agriculture. In all these areas, it is the government, more often than not, who must lead the negotiation. Whenever the government loses credibility, all Jamaicans lose opportunities.

2. No (if any) alternatives stated, implies the Opposition’s preference in maintaining the status quo

The fact that the concern was merely an echoing of popular sentiments and made no mention of any suitable alternatives, it said loudly “We are commitment to continuing unsustainable, and unprofitable ventures” to the detriment of Jamaica.

What happens in the event that Jamaica needs further aid from a lending agency like the IMF?

It is playing politics to ignore the fact that the divestments have arisen for a reason.

State the reason, and refute the reason.

State the reason, concede the reason if necessary, and then give 4,3, 2 even 1 alternative solutions to the one proposed.

As long as the leaders of Jamaica are willing to invest money we do not have for the sake of “Pride”, Jamaica will epitomise the term “Poor and Boasy.”

3. The statement clearly demonstrates why the country remains in a stalemate

This point flows logically from the previous one. As long as all the critical financial issues are politicized, then no honest analysis can be done. No change can occur.

Take for example the extravagant public sector wage bill. One of the major areas requiring change according to everybody who has analysed Jamaica’s economy is the public sector. The sector, it has been noted, is manifestly overstocked and is consequently one of the highest sources of government expenditure.

The issue was succinctly addressed in an article entitled “Greece and Jamaica — a tale of two countries” by Raulston Nembhard in the Saturday Observer.

We have sought to maintain a bloated public sector and have merely given lip service to public sector rationalisation which in many instances is a mere euphemism for “jobs for the boys”. We have a wage bill that is unsustainable against the background of our horrendous debt levels and the fiscal deficits that we have. Yet, our trade unions are clamouring for higher wages for public sector workers and for the maintenance of pension schemes which, at this time at least, is beyond government’s ability to accommodate. (Jamaica Observer)

As Nembhard clearly concluded, “All of this boils down to one common denominator: a lack of credibility in political leadership and governance.” In the case of recent utterances, a lack of sensible political leadership.

Do you think a new government should dishonor contracts of a previous administration?