MEGJC General Staff Meeting 2024

Main Address
By
The Most Honourable Andrew Holness ON, PC, MP
Prime Minister & Minister of Economic Growth and Job Creation
At
MEGJC General Staff Meeting
On
June 26, 2024
__________________________________________________________________
I promise you I will serve you a feast of information that you will leave here filled with nutritious facts and tidbits sumptuous information that you will chew into and the good thing about what I will serve up, is that you won’t put on any weight. It’s exercise for the brain and hopefully you will leave here motivated to do even greater things.
So first of all, let me acknowledge our…I didn’t realize she was such a motivational speaker, she grabbed the mic on went down onto the floor showing me up so I may very well have to do that and then, of course, our two ministers Minister Mathew Samuda and Minister Morgan, who are like my left and right hand in the ministry to get things done. And then to you, the loyal, committed, hardworking, faithful staff of the Ministry of Economic Growth and Job Creation. If you didn’t fit into any of those categories, then see me later.
It is my pleasure to address the staff of this super ministry at your yearly staff meeting. It’s very important that this be done, this exercise be done because in a large ministry, which I’m going to substitute the term bureaucracy, in a large bureaucracy like this sometimes you can feel like a cog in a wheel. The wheel is turning, but you’re not quite sure if the wheel can turn without you and where that wheel is going, if you have any control over it. So you might very well feel, well, whether or not I’m here, yes or no, that wheel will turn and whether or not I’m in the process, yes or no, that wheel is only going to turn at the same pace.
Now, that is the recipe for the wheel not to turn. So, it’s very important that regardless if you are a cog or a spoke or the axle or the wheel itself, or the air in the wheel, it is very important that you have a sense of purpose. The purpose of my presentation is to give you a sense of purpose. You are an important part of the success of the ministry. The success of the ministry, the success of the government, the success of the country is you. That’s just the reality, it’s you.
Unfortunately, we as a people have either chosen to believe, or we have been fed this view that the progress, the prosperity, the responsibility is not ours, it is external, somebody else is responsible for it, it’s somebody else’s fault, it’s somebody else’s responsibility, the success is going to come from outside, somebody is going to come and make it happen, we can’t do it ourselves and I want to destroy that notion in your minds, if it exists, that our success as a people depends on you individually.
Very important point that I start with, because when people ask us why are we focusing on becoming a republic, what’s the value of that, it’s similar to the questions that would have been asked around the time of Jamaica becoming an independent country. Of course, there was a greater understanding at that period of time. The opportunities and the challenges were more starkly juxtaposed in the minds of the people and there was a universal embrace of Jamaica becoming independent, going on its own way but what does it mean now to become a republic? I’m not going go into that because that’s not the focus of the presentation but an important part of becoming a republic is a further taking on of the responsibility of your country. You own your country, and you are responsible for it in every way.
I want to go into my presentation, and I have some graphs projected. And I want you to, for a minute, get your knives and forks because the graph is a meal on the plate and I want you to use your eyes, which will be your mouth and teeth to devour it and look at it. This is a graph that goes back to 1970. It is showing the external debt stock of Jamaica and you can see how we have increased our national debt going from the 70s to now. And if you look at the top of it, the last part of the graph under where you see 2020, you will see that little broken part of it. What is that telling you? The debt is going down. And as you look at the graph you will see that there was a point in time when the debt just escalated.
Let’s look at inflation. What does that tell you about inflation in Jamaica? It’s volatile, it’s the first thing you can look at the graph and see, volatility, meaning it spikes, it goes up, comes down, it shoots up again, it goes down, shoots up again, and there was a period of time in the 90s when inflation was as high as close to 80%. What that meant is that if you earned $100, eighty percent of that purchasing power is just wiped off. Not to be regained unless, of course, wages increased so the history of Jamaica is we have suffered from high inflation, but volatility as well, ups and downs, ups and downs. And you will notice that in just around 2020… Well, you will see that from 2015/ 2016, thereabouts, inflation started to level off within our target zone but then you had the COVID years, so that would be 2020, 2021, 2022, and you see a little spike in inflation but generally, in the last decade, we have managed to keep inflation low and less volatile.
Now that’s a big achievement for any economy. If for the last five decades we have experienced this heavy volatile high inflation, and then in the last decade, we have managed to bring some stability to inflation, then relative to periods past, you can say we have made some progress on that very critical variable. So we have made progress on managing the debt and we have made progress in managing inflation.
Let’s look at another critical variable and that’s economic growth. What can we say about economic growth? If we were to draw best fit line through that graph it would be tending generally downwards, flat but trending down. But what do we notice about the points around that best fit line if we had that? It’s wide, it’s volatile, it goes up, it goes down, and it is volatile around zero because we have had as many negative growth points as we have had positive growth points. That is your performance.
Let’s look at 2019 and 2020. You’ve started to see some progression in growth in the last decade, but what happened; external shock, a pandemic, and the growth fell off. You see that dramatic fall off, and now look at the recovery. Within a year, we’re back up, better than we were before, and we’re trending up again in economic growth so you could say that if you look at the years gone by, the many decades gone by on our performance in economic growth, we’re doing much better now. We’re not where we want to be in four or five, six percent growth but we’re seeing growth with more resilience, meaning our growth rate is less affected by shocks, and it is less volatile. And again, we can say we have made some progress in that regard.
The last variable I want you to chew on is the employment rate. Look closely at unemployment in Jamaica, and you will see that we have had high unemployment rates but, look at where we are now. We’ve been hit by the pandemic again, 2020, and that caused the unemployment rate to shoot up but look at the quick recovery, right back down again. This is not the latest statistic, because we are at 4.2% so we are well, well below what is presented here.
Again, if you look at our performance in the last decade, relative to all the decades past, you will see that Jamaica is improving so I use those statistics to make a point. The point is that Jamaica today is not the same as Jamaica of the last four or five decades. Significant changes have been made in the structure of our Jamaican economy. Very important point, and that should destroy any notion about ‘nothing nah gwaan’ and all the problems. A whole lot of problems in Jamaica, nobody questions that but have fundamental changes been made to put us in a position to address the problems and the answer to that is a definitive yes. These are facts taken from the World Bank, taken from STATIN. You can have your opinion on them. It might hurt you to believe it. It might shatter your perspective, but it’s the fact.
So, how did this happen? How did these fundamental changes in our economy happen? They started to happen when we decided to take responsibility for our economy. It started in 2009. I was right there as a young minister in the Cabinet. I saw what happened. Jamaica was on the verge of collapsing. The debt was overwhelming, and the decision was made that we will have to engage with the IMF on this programme of fiscal responsibility and that decade long journey of engaging fiscal responsibility has placed our economy on a totally different pathway. For us to have gotten on this pathway, we had to have a social consensus.
Some of you may not remember that we had to have the unions, we had to have business, we had several debt exchanges, and the unions agreed to a wage freeze; those were difficult times. Almost every year, the budget was presented, new taxes. During that period of time massive disinvestments took place. The capital budget was very small, and we have now managed after that decade, to place the economy on a better footing. The economy is not perfect, but we are on a better footing from a fiscal perspective. The point that you should take away from this graph is that when your government, your country, your civil society, your social groupings decide that we are going to come together on a consensus for policy towards the benefit of the country, great things can happen. We achieved these fiscal goals because there was a formal consensus which was monitored by EPOC ( Economic Programme Oversight Committee.
Now, we are at a different point where we need another consensus. I’ve been speaking about this and I see one editorial says I’m harping on it. Yes, I’m going to keep speaking about it as we build up towards a national consensus and this is now the consensus on productivity; that is what is urgently needed now, a consensus on productivity. And if there is any ministry that is a productivity ministry, it’s the Ministry of Economic Growth and Job Creation.
So, if you’re looking at the Ministry of Economic Growth and Job Creation, you’re assessing it, the ministry has done well. When you look at the employment statistics, obviously, that’s the Ministry of Economic Growth and Job Creation. When you look at the economic growth figures, that’s the Ministry of Economic Growth, of course, peered with the Ministry of Finance. Now, how are we going to build this social consensus around productivity? I’m going to address that in another presentation but for this presentation, I wanted to position you, all of you individually, in this conversation about productivity and how we can change the current trajectory that the country is on relative to our economic growth.
Let’s go to the last slide and I want to start at inflation. I’ll give you a little historical overview on inflation. I won’t go through everything, but the critical point here is that our inflation presently is at about 5.7% there about, and the United States inflation is about 3.4% so we’re still above the U.S inflation, but within our own target and the question that continues to be raised at almost every meeting that I have is why are the prices moving as they are moving? Why is the cost of living so high? And what can the government do to control cost of living?
Whenever that conversation comes up about the cost of living, the immediate solution that is placed on the table is that we have to increase wages. It’s the reality. Whenever we talk about cost of living- by the way, cost of living and inflation are not necessarily the same thing. Inflation is a part of cost of living, but cost of living is made up of many other elements which, by the way, the Ministry of Economic Growth and Job Creation has a lot to do with the other elements of cost of living. The issue really in dealing with cost of living is not only inflation. I hope I’m making sense.
Inflation is a part of cost of living, but it is not the only element that we have to be concerned with and whenever we speak about it, cost of living, the main response is we need to increase wages. Now, let’s all accept that the economy that we have is generally a low-wage economy. And why is it a low wage economy? It is a low-wage economy largely because we have had uncontrolled bouts of inflation which have eaten up purchasing power. We have had wage freezes, several, over the decades, which have placed a cap on wages keeping abreast with inflation but we have noticed that whenever governments have tried to increase wages, or given significant increases to public sector workers, it is usually followed by a period of high inflation which creates the need for another wage freeze.
In other words, it has created some economic instability so when we looked at it, and we decided we’re going to do the compensation review, we had to be thinking very carefully, how do we make the increases in public sector wages and the increases in the minimum wage, how do we ensure that those increases are sustainable increases, meaning that they don’t create any economic instability, and how do we ensure that those increases remain real? Meaning, that they are not increases that are going to be eaten up by inflation in subsequent period so the increases in effect were not real increases. That is the challenge of the government; how do we make the increases real? And the way that we have to do this, we’re going to try through our monetary policy, interest rates, and as much as we can through subsidies of critical items of goods in the basket that we use to measure inflation, we maintain subsidies on them like transportation and so forth but the only other way to ensure that the 200 billion dollars additional that we have placed on the wage bill, 200 billion, is for us to increase productivity.
So, you might be wondering what’s the connection between productivity and inflation. Well, it’s not so much productivity and inflation, it’s productivity and the cost of living. So, the Ministry of Economic Growth and Job Creation is, therefore, absolutely critical, indispensable in the government’s attempts at managing cost of living and inflation in order to ensure that the wages that we are paying, the increases that we’re giving, are meaningful.
So, let’s look at cost of living. Would you say that the cost of living in Kingston is higher than the cost of living in Browns Town? I think so. Generally, urban cost of living is higher. Why? We face the same prices, isn’t that so? So, let’s look at the things, therefore, that make up cost of living. So if you own a car and you have to drive on a road at a place, let’s say in St. Catherine where the bridge is deemed as compromised and you can’t drive across that bridge. You have to drive your car, stop, park it, come out, and walk the rest of the distance to work; how does that affect your cost of living?
Or, let’s say you had to take a taxi, but let’s look at the business that is right close to it, that their trucks cannot go over that bridge. Their trucks have to take a longer route to get to that factory, that increases its cost, right? And the cost for you is also increased. I mean, you might have to change shoes more often. You might have to make special arrangements for transportation but let’s look at the other costs that you don’t calculate such as arriving to work upset, or late, or tired; all of these add costs, either costs that you can calculate or hidden costs. So what’s the role of government then?
The role of government is to make the investments that will reduce these costs to you. So when the government fixes that bridge, and I’m giving you a real-ife example, the trucking cost for that company, and by the way, that company processes chicken meat so if that company has to take a longer route to carry all the chicken from all over to get there because that bridge isn’t working, can you imagine the one cent addition to the unit cost of chicken meat? You see the point I’m making everybody? That’s not inflation in itself. That’s not a demand and supply issue. That’s a structure of the economy that makes the cost of doing business higher than it should be. And if the cost of doing business is higher than it should be, then that is going to be passed on in the price of the product to you.
You begin to see that even if I were to pay you more and more bridges went down and vehicles had to take a longer route, that don’t really matter that you’re paid more, the cost of producing the goods that you are going to purchase is going to be more, even if it is one cent more. But if you were to put all the issues that inhibit production in the country together, that one cent becomes ten cent more on the price of chicken meat. And if you have to buy 10lbs pounds per week, it adds up.
Now, I just want you to take that practical example. Minister Morgan mentioned that we’re going to fix the bridge. Finally, we’re going to fix that bridge. It’s Spring Village, I went and toured it, saw it; we’re going to build a fantastic bridge. We signed the Cabinet submission. It’s at procurement already. It’s contract is signed so the bridge will get done but you get the point about cost of living versus inflation.
Now, let’s put you into the picture now. Who prepared the Cabinet submission? Who went and scoped the bridge? That’s NWA. Who put it through procurement? The people are all here so the big question is, how long did it take? Could it have been done faster? Could you have done it faster? How many of you are going to take responsibility for it? It’s a legitimate question. You are not a cog in the wheel. You are an important part of the functioning of that wheel. This is why I’m saying that becoming independent, becoming a republic, this is what it means that we take responsibility. Everything that we do either slows down our progress and prosperity or speeds it up. And if we approach our work with that mindset, that sense of purpose, every one of you here is important to it.
Don’t believe that if the letter comes to your desk for an approval, and you say, you know what, me have to go do something right now, make that stay. And you go do what you have to do, and you come back, and you spend 20 minutes talking with your colleagues, and then you read it over and say, you know them never dot the I, and send it back. Just think about how that slows down. It’s the reality of the situation that we face every day. That has an impact on the cost of doing business, which has an impact on the cost of the goods that are going to be produced from the business, which has the ultimate impact on the cost of living for you.
So I’m not speaking in abstract terms now. Yes, inflation is a reality. Yes, we can control an element of inflation by virtue of controlling monetary policy, money supply, and the interest rates, but a large part of the cost of living equation is also the structural elements of the economy, the rate at which approvals are given which affects the rate at which we convert the capital budget into actual investments, which affects the rate at which we absorb labour through the creation of new jobs, the rate at which we produce more products at lower prices. So the impact of this ministry is to reduce the unit cost of production, increase production itself and increase the pace and efficiency of production. And this is not policy on paper. It’s not me talking. It’s not some highfalutin economics in a textbook. It is what you do when you sit at your desk to sign off on something. The value of your pay is in your hands. That’s the reality and I will continue to harp on this until it becomes music. I hope I’ve been able to make a connection in your minds.
I don’t think I need to deprive you of your lunch anymore. I think the point is made. The next frontier of the government, having after a decade now, I think we have reached a good place in the dealing with the fiscal issues. The next focus now is on the productivity issues and the Ministry of Economic Growth and Job Creation you have done a wonderful job so far in increasing employment, stabilizing growth. The next frontier now is to increase that growth and you are only going to see the increase in the growth when there is an increase in productivity. And you’re only going to see that increase in productivity for you, that means an increase in, because you are a large permitting and regulatory ministry, when you increase the pace of permitting and approvals, you are a large implementation ministry. It is this ministry that builds the roads, puts in the pipes for the water, does the procurement when we increase the pace of implementation. And I guarantee you, that as the economy grows, and our growth rate moves out of the one to two percent zone to the three to four and five percent zone, you will see a moderation in your cost of living that will preserve the increases that have been given.
That is how we’re going to move from- remember now, we were a low employment, low-wage economy. Now, we are a high employment, increasing but still low-wage economy and the only way to get to the high employment, high-wage economy is by productivity. Look, people are going to want to come and invest in your country if they feel that there is a differential in productivity in your country versus the country where they are domiciled. There has been a model of investment where people go to foreign countries to invest because there is a differential in wages. So they will say, well, the wage in country X is lower than in country Y so I’m going to move my factory there. I’m going to move my operations there but that is not the best model for development.
So even countries that have lower wages to attract investments, that’s just to attract investment. Afterwards, they seek to upskill. They seek to increase the skills and capability of their labour force and then that attracts higher wages. However, even if you upskill, and that upskilling, meaning you go to school and you train, that must translate into greater productivity. You must be able to produce more with the same resources that justifies the increased wages that keeps the investment. Where Jamaica is now, if you want to get more wages, we must, there is no way around it, increase productivity.
A lot of hotels are coming here to build. BPO still see Jamaica as a place. We have some challenges, we have to deal with that but those industries alone can’t carry us. We have to start looking at other industries. We have to look at the creative industries, film and music. We have to start looking at not just the output, but the creation behind it, the production behind it; those are areas that Jamaica can do very well in but we should never underestimate Jamaica’s potential in tech and technology. Those are things that we are gonna have to focus on.
Again, I’m depriving you of your lunch but I’m in a preaching mood. I hope that I have been able to make a connection with you and productivity; you play a critical role in it. We are developing the plan. Over the coming weeks and months, you will hear more of the presentation. Today, the presentation made to you will advance the conversation a little bit more. I’m certain now that you have an understanding about cost of living, inflation, and how productivity moderates those two critical elements to preserve your wages and the Ministry of Economic Growth and Job Creation is central to that.
Thank you very much, ladies and gentlemen.