Ministry of Economic Growth and Job Creation Strategic Retreat
Address by Prime Minister Andrew Holness
Ministry of Economic Growth and Job Creation Strategic Retreat
August 3, 2016
Now I’m going to be addressing you on several issues – many topics. Feel free to say “me sir” and I will acknowledge you. It will be an interactive conversation. Don’t feel bad if it sounds like a lecture at times, but at the end of it I’m certain that we will have a better understanding of the mission and vision and you will also feel a part of that mission and vision so let’s get straight into it.
There is a company whose market value is US $498.56 billion last year with $74.5 billion in earnings and it has 57,000 employees. Go on and write that down and then you’re going to tell me which company it is. There is another company, its earnings is $497 billion in market value. It earned $234 billion last year. It employs 110,000 employees. There’s another institution that earned $251.6 billion last year. It employed 141,000 persons. There is another company that earned $14.7 billion average last year and employed about a 135,000 persons.
The first company- let me tell you- is Google. For the first time it exceeded Apple’s earnings – well Apple’s market valuation. The second company is Apple. The third company is Singapore Inc. and the fourth company is Jamaica Inc. Singapore’s revenue is $251 billion. They have a public sector of 141,000; they have sixteen ministries and 50 statutory bodies. Let me just repeat that, let it just seep into your consciousness. Singapore produces a GDP of $251 billion. They are expected to grow by about 2 to 2.5 percent and that’s sluggish growth. They employ in their public sector 141,000 people; they have 16 ministries and 50 statutory bodies.
Compare it to Jamaica which is now $14.75 billion. We employ about a 130,000 thereabout in the public sector and we have … help me out now, how many statutory bodies, boards and… two hundred and what fifty? 200? 190? 195 I believe it is. So I’m just trying to set that stage, give you the context so if you were to make an assumption then, I mean… what is it with Singapore? These people are producing multiple times what we are producing. I don’t know about you but I feel very uncomfortable. Indeed I feel embarrassed. Those are true stories.
I had a conversation with one of our industrialist, Carl Hendrickson and I’m certain he wouldn’t mind me calling his name. He came to see me and we had a long discussion and he lamented at where we are and he recalled in his early days which would be many years ago that he was securing the rights to produce a particular biscuit and he wanted to set up a particular factory and he wanted to set it up in Singapore and he went to Singapore and when he arrived at the airport he was met by their investment promotions officer. He was taken to a location and he was told this is your location. This is all your permits to build the factory that you want to build and he said “no, no I want a bigger place” and they said no it is all planned out. This is where you’re going to build, here are your permits for your factory, and here is the form you need to fill out. And he said when he looked at the form it was the exact same form that JNIP in Jamaica had developed that he had filled out in Jamaica four years before.
Singapore came, took our exact template, carried it there, perfected it, and now today look at Singapore. Where did we go wrong? Singapore doesn’t have oil, doesn’t have bauxite, doesn’t have tourism, doesn’t have water; it’s the size of St. James.
There needs to be more PHD thesis on how did we end up here. You can talk about the seventies and politics and all kinds of issues and I’m not going to go into that. I’m passed that. In fact I want to put those things behind us because I have to reach the current generation to get them into a mindset that says profit isn’t bad, no wealth without work, that we can’t maintain the status quo; that we have to create a new higher normal; that there is no success without sacrifice and that work must be rewarded; that we were not born to be poor and there is no excuse for poverty. Laziness must not be rewarded and we cannot use politics as an excuse.
I come from a different generation and I’m going to grab on to these young Jamaicans and make them think differently about the prospects of their future because a mindset change needs to take place in this country. That’s it. We must break from the past that has held us down and I enter upon this subject because it is after all Emancipendence. So if you ask me what Emancipation is about and Independence is about – it is not the celebration so much of the end of slavery – it is the celebration of what we’re going to use our freedom to achieve. It means something to be free. You determine your own faith, no one else.
I take no pride in saying I have to pass the IMF test. We should have been passing these tests without the IMF. We as a people should have said a long time ago without the threat of a default over our heads. We are going to take in hand our fiscal affairs and our growth affairs and put them in order. But it is only when there is a crisis that is looming that we as politicians can hide behind an external force to say these things have to be done because of the IMF.
To get the civil service to move you have to say we have to do these things because there is some threat. That is not a sign of our freedom as a people. And so I say these things, not having the concern of what the editorials and the opinion leaders are going to say. I couldn’t care less. What I care about is that Jamaica Inc. grows and delivers for the thousands of “yute man” on the corner who have a binary option crime or dead which end up basically at the same place. I am not comfortable with that because I was one of those who happen to get the opportunity and so I’m going to make sure that every single Jamaican get the opportunity to fulfill themselves.
I’m going to just set that against the context for why we are here. So I see myself being on a mission and every day I ask myself “Why am I here?” because by all accounts I should not be here; by every measure Andrew Holness from 56 Cumberland Road, born to a farmer and a civil servant. When I first left University my pay cheque was double that of my mother who worked in the ministry of security. When she retired she served almost forty years. So the old conventional thinking doesn’t apply to me.
I am prepared to take on any challenge, any critic, and any naysayer to bring Jamaica to the point because what I have observed the biggest challenge for change is internal. It boils down really to leadership and I’m speaking here to the leaders. Why am I here? And I ask myself that every single morning so that I don’t forget why I am here. And I want you to ask yourself that question every single day you turn up to work because the moment you forget why you’re here is when the organizations that you lead are just existing. They’re not thriving, they’re not achieving, they’re not growing, and they’re not doing anything. They’re just existing. You have to be here for a purpose and if your organization isn’t growing, isn’t doing something different then why are you here?
So the Ministry of Economic Growth and Job Creation is established with the Prime Minister as the Minister and I want you to absorb that point that I don’t see myself in an imperial role. I’m used to being on the shop floor, so I’m on the shop floor at ground zero with you. I’m not ensconced somewhere in some rarified atmosphere giving dictates. The Ministry of Economic Growth and Job Creation is established to be the engine, the driver of economic growth strategy policy development and implementation in Jamaica. By a show of hands how many persons were at last week’s event? Where we… Staff meeting… A good number… So you would have heard but I will repeat for those who didn’t hear it, some of the thinking behind why we created the ministry.
Basically there are three pillars of economic management. The first pillar is monetary policy. You need an institution to effectively, execute and monitor monetary policy and that is the Bank of Jamaica. The conventional economic thought is that you really want your monetary policy to be independently executed. I believe we are ninety percent there. There is still collaboration but there is a firewall and the governor does act independently so I think we can put a tick in that box that we have monetary policy and good institution to execute that.
Then there is your fiscal policy – what government chooses to do, how much tax it will impose and how much spending it will do. What is the level of deficit it will decide to carry which effectively determines the level of debt that it will decide to carry? What is it going to use it for? Is it going to use ninety percent of its revenue to pay salaries and ten percent on capital works? What capital projects will it select and if it decides to borrow, what will it use the borrowing to do? And how will it borrow? Will it borrow in foreign exchange or will it borrow locally? Will it borrow from international financial institutions or will it go on the open market? Will it use fiscal policy to stimulate growth or will you just use it for political popular reasons?
We never truly started to develop an institution to manage fiscal policy. We’ve always had the Ministry of Finance but it was never really rules based. It was always very much hinged on political considerations. It was not until the political consideration – I call it the politics of poverty – that led us to the point where we faced calamity with the level of debt that we had, that we were forced to start to consider something called a fiscal responsibility framework. We were the government then and we started to have to put in rules to the point now where we have fiscal rules and we’re trying to maintain the seven percent primary surplus target and contain spending and the rest of it and we’ve done fairly well. It’s not an easy thing to do and the Ministry of Finance is developing the capacity to manage that. And I believe in another ten years we will have developed, the policy refined, and the culture to support it and the institution to monitor and make sure it is sustainable. That will be the Ministry of Finance.
The third pillar of economic management is growth strategy. We’ve not as an economy or as a country, really taken an instrumental deliberate planned approach to it. We’ve had development plans from the 1950’s. We’ve had the industrialization plan, import substitution plan, but we’ve never really focused on economic growth. Economic growth is not so much a macroeconomic phenomenon as it is a microeconomic phenomenon. Economic growth really comes down to a granular understanding of the interaction between government policy and markets. When we’re talking about economic growth, you need to have a stable macroeconomic environment but that in itself does not mean you will have economic growth.
Yes economic growth can happen organically if all the right conditions exist organically; if you have markets that prefer to lend for industry and commerce rather than for consumption. If that is the natural state of your finance market, growth will take place without much government intervention but if it is the case of your financial markets prefer to lend for Benz and BMW rather than for industrial machinery then you’re not going to get growth.
So what then is the role of government policy in trying to guide the market for credit and finance in the right way? You will get growth organically if your permit system is such that the people naturally want to hurry up and give you your approval, that they run you down and when you arrive they meet you at the airport and give you a form and take you exactly to where you’re going to set up and permitting is done. Yes you’ll get economic growth. There’s no need for government but if it is the case that if you make a wrong spelling of the word they send back the form to you, you’re not going get growth. If it is that, “boy (chuckles) you know, I never know bout this project enuh. How you a do it and you never tell me?” If that is the natural stance of your institutions you’re not going get growth.
So yes having a stable macro environment is good but to get growth you have to now get to the granular things. If entrepreneur says I consider myself an investor because I bought a bond you have a problem, but if you have people who say I’ve invested because I’ve taken a risk and I’ve borrowed money and I’ve set up a factory and I’ve employed people then you’ll get growth organically. But are these natural dispositions of the Jamaican institutions and systems. I’m not convinced it is and there are many persons who are wedded to the system as it is and don’t want to see any changes at all and will fight you tooth and nail on the political battlefield to maintain the status quo but I’m prepared to fight for what is right because I have been through the fire already and there’s nothing more anybody can do to me. So all dem can talk but we are going to get change in Jamaica. Mark my word on that.
The Ministry of Economic Growth and Job Creation is set up to house our economic growth policy; to execute and monitor its effective execution. That’s what it is there for. It is also there to cut the bureaucracy. Now when Max Weber described bureaucracy, he wasn’t describing a bad thing. In fact it was a necessary thing. It was important that institutions develop prosthesis of managing large scale enterprise. But when bureaucracies become self-serving that’s when you have a problem. When it is the process and not the outcome that matters, that is when you have a problem and so you have to ask yourself am I here because of a process that I represent the process or am I here to get an outcome. If you are here for the process leave, if you are here to get the outcome, let’s work together.
A part of this exercise today is to reorient our thoughts towards the outcome. The outcome is economic growth. This is not to say that process is not important but the advance of management thought has basically said that the process can serve the outcome. There is no trade off of good governance, efficiency, transparency for efficiency and results. There is no need for it. In fact it is when the process becomes inefficient, nontransparent and bureaucratic that the outcome is corruption. Let me go back through that again. There is no trade off between process and outcome and good management practice incorporate. It has evolved to this because good management builds in technology, innovation, risk taking, and reward.
Let me spend time on the risk taking, the traditional civil service does not encourage risk taking. It doesn’t. I have very good reasons why it doesn’t and I’m not saying that you must go out there and run ruption like banks who bare great risks. I’m not asking anybody to take any chance. Incorporating your decision making process, put in place contingencies, assign responsibilities, that’s good management. The question is does our civil service do this? Do we genuinely? I don’t know… but we have almost two hundred statutory bodies, producing $14.7 billion in GDP compared to Singapore that has fifty statutory bodies producing $251.6 billion in GDP.
Jamaica is ranked way down or way up on the corruption perception index compared to where Singapore is right now. You can’t be satisfied, you continue like business as usual and we always have to ask ourselves what have I done, why am I here? There are some imperatives which we will face. There’s no getting around them. These are… as my good friend Nigel would say existential threats. I mean they are both immanent and imminent.
The level of our debt is a major problem and we agonize as to how we’re going to bring this down. The level of debt by itself is not an issue. Singapore has a very high debt but they owe it to themselves, in other words they have set up a – almost like the NHT- Singapore fund. What’s it called? It’s not the Sovereign Fund. Yea they have development fund and basically they owe themselves. It’s not an issue. So it’s not the level of the debt.
The problem is the level of your debt to your GDP. Let me say how perilous it is. If you had a major storm that knocked out agriculture and shut down tourism for a month your GDP will fall significantly and your debt to GDP would rise and let’s say it happened at a point where you had interest payments that were due or amortizations that were due, you see the challenges that you would be in? So I’m trying to communicate to you the urgency of the situation. A lot of people sit and think “oh I’ll always have my job. This will always be the case. I retire tomorrow, or I’ll spend five years.” But a lot could change within the time horizon that we have that could make the way how you see a comfortable future just totally dissipate.
So I’m trying to communicate to the leaders of the public service especially those in the Ministry of Economic Growth and Job Creation, the urgency of our situation. Every piece of paper that comes to your desk for permitting get it out there quickly, move fast.
One of the things we will have to do in our ministry is to very quickly look at shared services, which is one of the reasons why we’ve brought everything under one roof so I’m going to give the Permanent Secretary directives to look at every single business process and reengineer it for efficiency. The directive is going to flow down to you leaders that you are going to have to look at every single business process that you undertake in other words every bit of delegation, every bit of process that you do for decision making, for applications, for approvals, how we can bring in technology, how can we flatten hierarchies to make them more efficient.
One of things you’re going to do in this exercise here today is to figure out how do we increase the efficiency of our ministry. Synergies, redundancies, and by the way I mean redundancies not in the (laughs) – not in the traditional way of thinking. Duplication is a better word. So that’s one exercise that we’ll have to undertake. The other exercise that we’re going to undertake is what am I doing that I don’t need to do? What am I doing that the private sector could do? Because one of the fastest route to growth is to support your private sector.
I’m going to give you an example. China is a communist economy but China is probably the best example of competition. China allows its companies to compete against each other and it’s not the state doing everything. The states control a lot but the states allows private initiative and competition even amongst state enterprises. They actively promote and support their private enterprise to go overseas, to own, and to do all kinds of things.
We need to shed ourselves of this view that we’re here to serve the public service. No we’re here to serve the private sector and the private sector isn’t some big brown man making whole heap a money. The private sector is more so the little black man struggling with his small business, who push handcart, who want to move from handcart to own him own store. We must support them in that drive. That is the private sector.
Profit is not a bad word. I want to see more Jamaicans make more profit in their business. I want to see more Michael Lee-Chins and more Butch Stewarts. Jamaica can create more bill gates and we must support that. My job is to make more Jamaicans rich and I’m not ashamed of that. My job is to support business and to make every youth in the schools understand that he too can be a business man; that his hard work will be respected and rewarded and we have to develop that culture to support business.
Let me put it to you in this way… You know Nigel went into some of the historical theories of why countries grow and one of the theories which looked at the institutional linkages really could also explain the difference between Singapore and Jamaica because Jamaica was really an extractive colony. It was never a place that people you know were put there to live. The planters owned plantation and then built massive structures in London and other parts of the United Kingdom and just basically took the wealth and so we have a different view of wealth in our culture.
We still see wealth as an extractive thing. You get wealth to manifest it but true wealth after a while; you can only have so much, after a while you want to do other things and the new emergence of wealth really revolves not so much around extraction. It is more so around creation. In other words the new frontier for other generations comes from what you can create.
So yes we do have to focus on the extractive industries which are usually primary, agriculture and bauxite but what can we create with those things? What can we add value to them with? And that’s now the basis of new wealth. Government has to support that.
The government has to be in our schools encouraging our young people to be creative and that’s going to be part of the role of the ministry to go and find these entrepreneur who are creating things and support them to turn their creations, their innovations into products because the secret to growth… let me rephrase it. There is no secret to growth.
To grow the economy you do three things. The first one is you grow firms. You grow business. You support them in every way shape or form. Make sure they have finance. Make sure they have security. Make sure they have water. Make sure they have a good labor force. Support businesses. Then the next thing you support – you support products, the development of products, the value added to products so that means the educations system, the introduction of technology, the use of technology and then you grow markets. That means now you use your foreign policy, your trade policy, your competition policy to grow- not just your local market but to grow your foreign markets so we can grow Jamaica very easily.
To grow our markets that should be the easiest one, you know why? Because we have a brand. So Jampro growing markets utilizing the brand. DBJ supporting the development of entrepreneurs which I’ve seen that it is being done but you need to be doing that on a geometric scale and then supporting entrepreneurs, ensuring that they get their permits on time, removing obstacles out of their way, make sure that water reach them that energy prices are low. It’s a partnership between the government and the private sector so we’re going to have to look at what we’re doing as government that we don’t really need to do, that we can operate under the private sector rules because that is how we preserve and create more jobs. That’s it. That is how we’re going to preserve and create more jobs.
So I hope I’ve shocked you enough.
I hope I’ve stimulated your thoughts. And I hope that I’ve motivated you and brought you to a better understanding as to what it is the Ministry of Economic Growth and Job Creation is designed to do. Further on in presentations to come we’ll get more granular. We will get into more details and we will uncover other things by virtue of the questions that you will ask. It was my distinct pleasure to have spent the time with you. I’ll be in and out because as I said you know… I’m a shop floor man. Thank you so much.