jitdistributors.com Blog

Local bankers and financial analysts have chided ordinary Jamaicans for investing their hard earned cash in the various ‘alternative Investment Schemes’ (A.I.S.). They chided them because they withdrew funds from the more traditional institutions and ran after the high interest rates offered by the alternative Investment Schemes. The Jamaica Gleaner reported that Michael Lee Chin said “Be careful of your greed. I see a mania developing [and] it is going to end in disaster – I don’t know how much plainer I can get. I am very passionate about this!” It was alleged that he said this at an investment briefing hosted by the wealth management arm of his banking group. To be fair, Lee Chin, Clarke, Bunting etc. all correctly predicted the eventual demise of the various alternative schemes.

No one thought however that these experienced Bankers, Fund Managers; Investment Advisors etc. would find themselves caught up in the same ’scheme’ only with a bigger player, i.e. the Jamaican Government. The Annual Percentage Rate may be well below that offered by OLINT, Worldwise or Cash Plus but the end results are the same. They invested their hard earned cash in high rate government bonds that the government is now saying that they are unable to pay the interest. The so called ‘Jamaica Debt Exchange Program’ put forward by the Bruce Golding led government is only an admission of government’s bankruptcy and its failure to honour legal and binding agreements entered into by the Jamaican government on behalf of the Jamaican people. The end result of this Debt Exchange Program is no different from what happened to investors in the alternative investment schemes, banks and other financial institutions and the investors that they represent will lose significant amount of interest ( J$40 Billion in the next fiscal year) if all goes as planned. You have been duped.

The real danger of this approach is the loss of credibility of the government. The fact that this Debt Exchange Program is aimed at domestic Investors makes no difference. All investors (foreign and local) will have to question whether the government can be trusted to abide by its commitments. Can you bank on the interest invested in government bonds? This `bright idea’ that the PSOJ and the JMA is endorsing leaves the government looking like a Ponsi scheme that is nearing its end.

Debt reorganization is nothing new; it is unusual however for government to beg investors to surrender their income. We will have to wait until mid February to see whether the first part of the plan works. The action taken by the government resembles the Chapter 11 reorganization under the Bankruptcy code used in the United States of America. ‘A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.’ See WWW.UScourts.gov.

The Prime Minister tried to rescue the credibility of his government in a speech to the nation on Thursday night December 23, 2009 when he said ‘we have listened and we have heard’. This was said in response to the negative reactions to the tax package that was announced the previous week.

The government have been saying for some time now that they ‘have no choice’ in going to the IMP for assistance, ‘no choice’ in levying more taxes, ‘no choice’ in laying off hundreds of workers etc. etc. However the apparent U-turn on the recently announced tax package demonstrates that they do have other options available. The Information Minister (Vaz) has said that the Finance Minister (Shaw) has the full support of the Cabinet but from the people’s reaction to the tax package, I am not sure that he is getting any support from the public in general or even from those who voted ‘green’ in the last general election.

In other countries, politicians usually try avoid ‘U-turns’ as it suggests lack of foresight, in other words, plain short-sightedness. The revised package is more palatable to the people in general but the U-turn could have been avoided if the government had given serious thought to the policies that they were planning to implement. The U-turn does not show that they are ‘listening’ rather it shows that they are not smart. It should be noted that this is the second time in less than a year that they have made a U-turn on a major tax package. This is a government that would like us to believe that they have the ‘balls’ to take the tuff decisions that are necessary at this time in the country’s history.

I must remind the government that they cannot run a country by referendums of public opinion on every policy decision that they have to make. If you have to wait on the approval of the public before policies are implemented, we will not get anything done. We need the right ministers heading the right teams and the right teams do not necessarily mean only people who support the Jamaica Labour Party. You may recall that when Saddam Hussain was ousted from power in Iraq, the new Iraqi government had taken the decision with the blessings of the United States to implement a program of debathification. This term refers to the’ process of removing former members of the ruling Bath party of Iraq from the military and civil office’. It did not take them long to realize that the country was going nowhere as they were literally wasting the resources of persons who could have been making a significant contributions to the new Iraq. We are no strangers to ‘debathification’ in Jamaica for as soon as the government changes hands we expect ‘heads to roll’. The replacements are not necessarily more suited for the jobs and sometimes we end up in a more unfavorable position as lack of experience usually shows up in the form of bad decisions.

Finally, both the Prime Minister and the Finance Minister have been using the recommendations of the Matalon review committee (2005) as the ‘taxation policy Bible for Jamaica’. I will hasten to point that contrary to their assertions, they are doing the very opposite of what the committee recommended. I am surprised that the press has not caught onto this or that members of the committee have not objected to the way their recommendations are being used. My quotation is taken from page one of the report and is as follows:

‘The reform package presented should not be considered simply as a “menu” of reform options from which preferred positions may be selected. Rather, the committee wishes to emphasise that in making its recommendations, the impacts in terms of economic effects, burden distribution, equity etc. have been measured based upon the outcome of the recommended package as a whole and given the interaction of all proposed measures. Any changes which government in its wisdom may deem appropriate should therefore be measured in the same light if the hoped-for internal consistency of the tax system is to be preserved. ‘

My opinion of this is that they were asking the government not to ‘cherry pick’ pieces of the report for implementation as it will not have the same impact as their recommendations were intended to be taken as a ‘whole’. In view of the above, the government should not blame the Matalon Committee for any hard tax pills that must swallowed now as the Matalon Committee made the recommendations but the government does not have to accept them. We should not forget also that the Matalon Committee completed its review in November 2004, then there were no plans to go back to the IMF and the current world crisis if it existed was only in its infancy. It may well be that we need to refresh the Matalon report in view of the current circumstances as the old report may have outlived its usefulness.

http://jis.gov.jm/pdf/pm-broadcast-dec232009.pdf

The government is under pressure from newspaper editors, financial analysts, tax paying members of the general public to cut the size of the government’s wage bill, citing it as unsustainable at its current levels. Prime Minister Golding is credited with the statement “This wage-bill burden cannot be sustained, or else we will do nothing else but pay salaries and service debt.” The suggested solution to the problem is at best short-sighted and simplistic in approach and while it may fix a problem for the ‘government’ in the short term, it will create a problem for the country as a whole.  I am not suggesting that the government cannot find any ‘fat to trim’ but the real question is, what will you do with the 10-15,000 people whose jobs will be made redundant? The emphasis here is on ‘jobs that will be made redundant’ not necessarily that the jobs have become redundant.

There are a number of stakeholders that have been watching these developments keenly. The over- burdened PAYE taxpayers have been clamouring for a more equitable tax system for decades. Incidentally, a significant number of these taxpayers are from the government sector. They feel that they have been let down by successive governments as they have always been asked to shoulder a disproportionate part of the governments tax bill. Any attempts to reduce the government’s budget and their tax bill would be welcomed.

You also have the trade unions that in times like these are forced to go ‘beyond the party line’ and fight for the jobs of their members or face their own demise. They must be feeling the pinch as it is reported that nearly 30,000 people have lost their jobs since the start of the current crisis. As it is also being suggested that further job losses are inevitable, they must be looking at ways to protect their income. It is not surprising therefore that at every forum, catch phrases such as flexi- work, job rotation along with other popular phrases are being touted as alternatives to business owners laying off workers or closing ‘shop’ completely.

Is condemning 10 -15,000 more people to the category of the ‘unemployed’ the solution to our problem? Are more jobs being created by the private sector that can hopefully absorb the losses from the government? Is this just a ‘numbers’ game? Will balancing the budget solve all our problems?

http://www.jamaica-gleaner.com/gleaner/20090625/business/business1.html

Below is a quotation from an article from the Jamaica Gleaner online about the issue of ‘imported frozen patties’ allegedly raised at the Annual General Meeting of the JMA on Wednesday.

‘The Government has dismissed concerns raised yesterday by the Jamaica Manufacturers’ Association (JMA) about the importation of frozen patties, arguing there was nothing illegal about persons engaging in such trade…..’

Other excerpts from the Jamaica Gleaner article are as follows-

“What we can do is lament the fact that patties are brought in here on a competitive basis but we can’t prevent people from importing anything into Jamaica,” said Karl Samuda, minister of industry, investment and commerce. “We can’t stop it because we are an open market.”

“There is Juici Beef, there is Tastee Patties producing and Jamaicans are purchasing imported patties and I find this totally ridiculous,” said Omar Azan,

“We are having problems with foreign exchange to buy raw materials to produce and employ Jamaicans but yet still we are finding US dollars to purchase imported patties?”

If the allegations are true, the JMA has apparently forgotten the old Jamaican proverb which goes something like ‘The same knife weh stick goat stick sheep’

It was only recently that the government consulted them on the issue of whether the 15 per cent CET on imported Cement should be suspended for another year. Their response angered the Caribbean Cement Company as they suggested a ‘quota system’ rather than recommending the suspension of the waiver that allowed ‘cement importers’ to gain a significant share of the market. The same ‘problems with foreign exchange’ argument undoubtedly would have been one of the points used by the Caribbean Cement Company when they were trying to get the JMA to back their position as a monopoly producer of cement in Jamaica.

Additionally, it seems a little hypocritical for us to be trying to block the importation of ‘frozen patties’ while at the same time fighting to export our patties to Trinidad.

My personal belief is that our local patty producers are in no real danger from the ‘imported frozen patties’ as Jamaicans are also interested in quality. The overseas supplier may be able to beat local manufacturers on effectiveness and probably cost, but will most certainly loose on the ‘taste test’. The imported patties also face cultural barriers as Jamaican’s like their patties ‘fresh and hot’.

‘UK reports first swine flu death

AP

Monday, June 15, 2009

LONDON, England (AP) – Officials say a person has died of swine flu at a hospital in Scotland in the first death from the illness reported in Britain.

It also is the first death from the H5N1 strain of influenza reported outside the Americas’ ……….

The information above was taken from a story reported in the Jamaica Observer today, Monday June 15, 2009. Someone got the name wrong as reference is made of the ‘H5N1′ which I believe is the ‘Bird Flu’ and not ‘Swine Flu’ as reported in the story. Making this type of mistake was inevitable as despite the fact that the ‘Swine Flu’ was officially renamed to H1N1, news organizations kept referring back to the ‘Swine Flu’ thus placing less emphasis on the new name.

See link: http://www.jamaicaobserver.com/news/html/20090614T190000-0500_153495_OBS_UK_REPORTS_FIRST_SWINE_FLU_DEATH_.asp

Senator Nelson may have stumbled upon another area of the police force where it is alleged that there is rampant corruption. I am referring to the issue of ‘void’ traffic tickets. No data was given as to the level of ‘void tickets’ as a percentage of total tickets issued but word on the street is that more attention should be placed on the cops issuing the void tickets. It is being suggested that there may be a link between void tickets and the cops who take bribes from motorists to make the offence ‘disappear’. 

I have heard numerous stories about cops who issue ‘void tickets’ under the watchful eyes of their superiors but not before making secret arrangements with guilty motorist to pay a bribe later. It is said that the tickets had to be issued as a means of ‘keeping up appearances’ especially when several policemen are in attendance at the ‘spot check’. 

Senator Nelson may have been focusing on the amount of revenue lost by the government but if they allow the investigation to run its natural course, they may find that a number of these ‘void tickets’ were issued deliberately rather than resulting from human error whether technical or otherwise. 

There is currently an attempt to rebrand the police force and to ‘weed out’ the bad cops. This will not happen overnight. Members of the police force are doing a difficult job with less than adequate compensation. Those that are not fit for the job will take bribes. 

Jamaica Gleaner News – Void traffic tickets costing government – News – Saturday | June 6, 2009 

I am surprised that the JMA did not list the impact on our foreign exchange rates as a major factor that was considered before weighing in on whether the 15 per cent CET on imported Cement should be suspended for another year. 

As we have no other way of knowing whether Tank-Weld Limited or others involved in the import of Cement are net earners of foreign exchange the JMA should have clarified this point. The inflationary effects of the reduction in value of the Jamaican dollar against the major currencies impacts every Jamaican and consequently we should be careful not to take any action or actions that will introduce additional pressure on the dollar. 

In the long run, we expect that there will be repatriation of profits to Trinidad as the majority shareholders of the CCCL are Trinidad based. The CCCL however, could become net foreign exchange earners as they have started to export Cement to other countries in the Caribbean. 

This brings us back to the ‘national interest’ reference in the caption above. The only way that Jamaican Manufacturers can help to reduce the pressure on the Jamaican dollar, is to manufacture high quality goods at the right price. I have bought locally manufactured goods at prices just a little lower than the imported alternative, but whereas the prices were competitive, they failed on quality. This is a little different in the Cement market as under normal circumstances the locally manufactured Cement is of the required standard the real issue being whether we would be exposed to unfair prices if the 15 per cent CET exemption on imported Cement should come to an end. 

Jamaica Gleaner News – Cement debate – We’re acting in the national interest – JMA – Business – Friday | May 29, 2009 

Is there more to this story than we are being told? Why not prevent the program from being aired rather than yanking it offline during the broadcast?  Despite  the gracious comments made by Cliff Hughes about RJR being a ‘professional partner’ etc. this does not look good.

Jamaica Gleaner News – RJR shuts down AM, Nationwide goes off air – Lead Stories – Tuesday | March 31, 2009

  Jamaica Gleaner News – Police present seven reasons for 60 days – Wednesday | October 1, 2008 

  Various stakeholders have been debating the proposed ‘crime bills’ before a joint select committee at Gordon House. Substantiating the case for a 60-day detention without bail of persons charged for serious offences is one of the most contentious issues. I do not regard the current bail provisions as ’sacred’ and so I would be prepared to discuss their amendment. However, my discussion would be focused on the question ;why is more time needed before bail is considered? This is not an easy question to answer but a significant number of the answers seems to point to the ‘logistics’ of the situation facing the crime fighting machinery i.e. the Police, Lawyers, Courts/Judges, Prison Officers and the citizens. 

The Police have their hands full with current investigations and are faced with an increasing inventory of new cases. The courts are also overwhelmed with backlog cases and the prison system is bursting at it’s seams with inmates to monitor. These issues must be dealt with so that we can increase our capability to solve current crimes or preferably to prevent them. Were the action of the persons in the sample of cases (71) presented to the committee by the Police representative of all persons charged with serious crimes by the Police? What period did this sample cover and how many ‘bail’ cases were involved in total? Was the sample selected ’scientifically’? There are some of the questions that should be answered before the merits of the Police case can be considered. 

There are also other issues that must be taken into consideration. At the top of the list is the issue of the corruption and credibility of the Police force. Attempts are being made to weed out the ‘bad cops’ but until credibility is restored a significant number of citizens with information will not come forwards as witnesses to help in the crime fighting process. The Police need to prove that their rate of solving crimes are acceptable when compared to other crime fighting forces in similar situations and that they are not calling for an extension because citizens do not trust them or because they are inefficient or ineffective in carrying out their duties. I advise caution in giving more power to a Police force that is shrouded with allegations of corruption. There are no overnight solutions. Continue to weed out the bad cops, show citizens that the police force can be trusted. Provide jobs especially to people in these so called ‘depressed communities’ so that no one will find it necessary to depend on criminals for sustenance. Go after corporate criminals also so that citizens are confident that the Police are not afraid to do their jobs. Finally, we must find some way to address the belief that it is bad to give information to the Police even when it relates to criminals and their activities. The idea that it is OK to beat of despise a ‘police informa’ must stop.