Ms Valerie Veira, Chief Executive Officer of the Jamaica Business Development Corporation
Ms Lisandra Rickards, Chief Executive Officer of the Branson Centre
Mrs Imega Breese-McNab, Executive Director of the Jamaica Manufacturers Association and I believe soon to be the Jamaica Manufacturers and Exporters Association which I think is an excellent move.
Members of the private sector good morning.
I want to first commend the board and management of the DBJ for continuing to wholeheartedly embrace their commitment to facilitate economic growth and job creation in Jamaica through supporting the development of an ecosystem where innovation can thrive.
The IGNITE Programme; Innovation Grant from New Ideas to Entrepreneurship is one of several initiatives by the DBJ that is creating the necessary inputs for our vision of economic independence. We must stimulate innovation through creating start-ups, increasing the number of start-ups and growing these entities. We must allocate or make investments, which will support our start-ups, and we need to enrich the MSME ecosystem; this is vital for our economic growth and development.
In watching the presentation just a while ago in 2016 which seem like yesterday, I made the point that the DBJ plays the role of a market maker. Earlier, the point was made that the DBJ stands in the place of market failure where our traditional conventional market systems are not providing the access to credit and other resources for businesses, which are good businesses in and of themselves.
What causes that problem? A part of the problem is policy. Sometimes government policies are just too conservative. In other words, government policies is too risk-averse and for good reason there is the poster of being risk-averse but sometimes it is also lack of information.
The point was made earlier, that there is great liquidity in the system searching for somewhere to put that liquidity, to invest that liquidity but they don’t have enough information about the quality, value of for example working capital. They do however have more information and on well-developed policies and regulations around motor-vehicle ownership, which may explain why, banks are more willing to take the risk on the consumer asset than on a commercial asset such as your working capital. The role of the DBJ therefore is to stand in that breach but it is only temporary. The real fix as the Chairman pointed out, is that government has to change policies. Government has to be more instrumental and more proactive in putting in place policies that support the development of businesses and in particular supports the development of an ecosystem that supports the development of small business.
It can only be temporary because all of these funds, yes they are grant funding that we’ve put in place; we won’t always have grant funding so your Managing Director turned to me just a while ago to say ” Prime minister we need more money to do this.” Where is the government going to get the money from?
Sometimes the government end up doing things that in the search for getting money, sometimes becomes counterproductive because we have to find innovative ways of getting the taxes and in trying to get more taxes we end up creating obstacles for businesses to grow and I want to say here today that I’m very sensitive to the issues faced by the small, micro, medium sized enterprises.
Recently, I had the occasion to speak with one of your numbers and they pointed out to me that if they are exporting in commercial quantities that they are required to pay a 5% tax, which run counter-intuitive if you are really seeking to increase exports and I’ve heard the complaint being made by several members of the MSME sector. Now, I just want to tie the two things together, that the government is trying to get more revenue in order that we can support programmes like this but maybe the strategy is how we encourage and support the private sector, the banking system to put more funds because they do have greater liquidity, into businesses rather than putting it into consumer loans.
Now I’m happy to report that we are seeing by virtue of government policy, we’re seeing a greater trend of banks supporting businesses; commercial and industrial lending is increasing and increasing at a noticeable and significant rate and I’m very happy for that but for growth to take place lending has to increase to the medium sized, small and micro enterprises and there are things that the government can do. One of the things that we have to do is to support our businesses in becoming formalized.
Now, what I like about this programme, it is not just providing you with cash for tooling up or for marketing but it also supports you in developing your business plan, in getting yourself regularized with for example the tax authorities; very important, in filing your returns on time; that’s very important. In doing this, you bridge the information gap because for banks to take the risk on your business they need to know about you and so formalizing yourself- it may be costly, the bureaucracy comes with a cost but when you are formalized you’re registered and compliant then banks are able to better assess the risk that they are taking.
One of the reasons why -and I’m not professing that this is the specific reason but one could surmise that the BOJ takes a very conservative view precisely because it may be hard to access the risk of working capital, but you counter that by making sure that your business is properly registered, that you’re compliant with the rules and that you keep information about your business that you can share with the bank so that the banks can understand the value of your working capital.
I want to say to the DBJ that your voucher programme is a very good programme and I want it to be expanded and I can say that because I’m the minister responsible for the DBJ.
It is very important that we expand that but listening to the success stories here it’s always good to be at the start and then seeing something come to fruition. You begin to see an even bigger picture of what is possible so I’m looking forward to round 2 and I’m happy to note that you have increased the grant sealing from 1 to 2.5 being the minimum and you’ve increased the maximum now to 5. I’m not giving that as a policy direction but maybe we should talk about it because the truth is that the more we begin to understand what the businesses needs, I’m sure we will discover that you need greater support.
It is important that the government take an instrumental approach to the development of business. For over forty years we’ve had mixed but disappointing results on growth but as I said when I launched this in 2016, growth is not a mystery, economic growth is not a mystery; it is a well-studied area and there is a suit of policies that are very well understood that have been implemented and tried across the world. The key to growth is that you must support your private sector. The engine of growth is the private sector but when we say private sector we tend to believe that the private sector is only big business. The truth is that the private sector is really the micro small medium sized enterprises that drive growth.
I was pleased to hear that the enterprises here generated over two hundred and nineteen full-time or part-time jobs. That is significant; very important. Can you imagine if we were to double, triple, quadruple the number that we have in this programme how we would be having a significant impact on employment?
Therefore, the role of the government isn’t necessarily to go and provide jobs. In other words, the old strategy of government was to expand public sector employment. The new strategy of government must be how do we deliberately go out there and support entrepreneurs to expand their businesses and support innovators and start-ups to create employment and that is what the DBJ has been tasked with and I’m hoping that your new cohort of IGNITE business people will understand that we’re giving them the support for them to develop their business yes, but more importantly for them to increase employment; that’s absolutely important.
The other strategy of government as it relates to growth is not just to find the innovative and creative people and pair them with the resources so that they can start up business but we have to increase the complexity of our economy and by that I mean the linkages so we tend to operate in silos. I think the best example of this is that we would say, “Wow, tourism is growing at such a great pace but why is it that the economy around the tourism areas are not booming as much?” “oh, there’s massive investment in telecommunications and it’s growing rapidly, why is it that the economy as a whole isn’t growing and that’s the puzzle that over the last two decades Jamaica has gotten significant investments but these investments have not necessarily translated into economic growth and the reason behind that is that you have to ensure that there are linkages between the industries in which the investment is flowing and the rest of the economy and it has not always been the case.
Now, these linkages can emerge organically but sometimes they don’t precisely because of things like market failures for example we probably don’t grow enough food to supply the needs of the hotel industry primarily because there is not a clearing house of information between farmers and the hotels so that farmers can grow and plan to supply the hotels exactly what they need. Fortunately, this is changing. We do have a Linkages Council and they are working but greater effort needs to be made to ensure that the businesses we are developing are not just growing in silos but they are linking together with each other so an important component that the DBJ should be looking at is to ensure that the cohort that you have that they start working together to see how not just the DBJ supports them but how they support each other.
In looking at the cohort that is about to graduate, somebody might be doing 3D printing, how can that be linked to someone who is doing design and manufacture? Someone is in marketing, how can that be linked with someone who is doing design and manufacture? Someone is doing software database creation or whatever it is, how can that be linked? It’s very important that you start that process of ensuring the linkages. The linkages are absolutely important to growth so that the raw material which is the product of one becomes the raw material for the other and that is how we start to secure the growth in the economy so I’m saying that you must focus on how the next cohort will link to each other so in the selection process you want to put together a pool of selectees who can form an ecosystem in and of themselves but aside from that you also want to ensure that they are linked in with existing businesses.
We should find ways to support you into markets overseas to ensure that you get into the gift shops in the hotels to make sure that you get exposed. I know that there is that component but we need to emphasize it to make sure that your products find the market; that’s the linkage.
It gives me great pleasure to associate with this initiative. I think I’m sufficiently moved that I will have to try and find some more funds to expand the project. The growth figures certainly they are not what we want. We’re growing yes, but very slowly. I’m confident however, that we’re on the right track. We’re doing the things that are necessary and we’re hoping for growth to happen organically. We are right there in the field with you doing the granular things such as actually identifying the creativity, the innovativeness and we’re taking that creativity and innovativeness and we’re giving it support to develop that into entrepreneur-ism and we’re supplying that entrepreneurism with the resources to create an enterprise and an enterprise that will grow, employ people and create the prosperity that we need; that is the job of government. It will not happen overnight however, it is a process but we’re now satisfied that the government has changed its policy towards growth and is actually implementing well tried, well studied, proven policies that will create the growth that we all need, the jobs that we all need and the prosperity that we all desire.
We will make Jamaica the place of choice to work, live, raise your families, do business and eventually retire in paradise.
God bless you.