Let me start by observing the convention of thanking those who facilitate my continuing Parliamentary and political service. My wife and family, my constituency team, my personal support team, and my Party and Parliamentary colleagues.
I also want to acknowledge the progress we have made over the past seven years, across two administrations, in implementing fiscal and economic reforms which continue to yield dividends to the economy. Low inflation and interest rates, a declining debt to GDP ratio, more fiscal space, falling unemployment levels, and encouraging levels of investment.
Nuff credit is due to then Minister of Finance, now Opposition Leader, who led the negotiations and supervised the implementation of the 2013 IMF programme. Credit is also due to his successor Ministers of Finance who continued a programme of fiscal and economic reform.
Let us not forget the contribution of the many others who helped us through the toughest times of that programme:
The Most Hon. Portia Simpson-Miller, who persuaded the congressional black caucus to lobby on Jamaica’s behalf. Her lifetime of advocacy for workers and the poor undoubtedly helped to legitimize the austerity programme that was implemented.
The current MP for South St. Andrew, who as Minister of Justice, and Chair of the Legislative Committee of Cabinet enabled all the benchmark target legislation to be achieved. The quantity and quality of the legislation brought to Parliament during his stewardship was outstanding.
The contribution of Portfolio Ministers such as the members from C. Kingston and E. St. Thomas, who had some of the toughest roles to play as Education and Health Ministers respectively, are often overlooked. It would have required enormous effort to motivate the teams, maintain the facilities, and deliver results in the face of woefully inadequate resources.
Finally, the most important contribution was made by public sector workers, and workers and consumers generally, who collectively made the greatest sacrifice to ensure fiscal sustainability.
Review and Context
Last year my presentation was entitled “Inclusive Growth: Level the Playing Field.” It presented recommendations that were grounded in empirical analysis. One year later, most of the key elements from that presentation are still relevant and accurate today, and so much is left to be done.
I will highlight that my friend – the Minister of Finance – not only consulted me on one of my recommendations in that presentation last year, but went on to implement it in his Budget earlier this year. That recommendation was to raise the turnover threshold for GCT registration to remove the burden of filing and paying for many small businesses. A gentle reminder that there was a small defect in the implementing legislation that was identified by the Opposition Spokesman on Finance, but has still not been corrected.
The central point of my presentation last year was that the MSME sector has to become the catalyst for the development and inclusive growth of the private sector. The MSME sector can support innovation, competitiveness, wealth creation, and social stability.
I am more hopeful this year, not so much because of any new government policy, but a growing recognition by private sector leadership of the importance of the MSME sector to economic growth and economic inclusion.
Recently, the PSOJ President gave a speech where he recognized that SME’s employ 70-80% of the workforce but only get 11% of private sector credit and 26% of bank loans. And there has been more than just talk, as an access to finance facilitation panel has been set up under the auspices of the PSOJ by the Jamaica Bankers Association. I spent many hours at their workshop on SME financing at Terra Nova recently, listening to small business people give the senior bankers a ‘piece of dem mind’ about how they are treated by the banks.
I acknowledge the leadership that Howard Mitchell and Keith Duncan are bringing to the effort. However, a more powerful motivation is now operating as blue chip companies bypass banks entirely and directly access the capital markets for funding. Spreads are being squeezed on corporate loans and asset-backed consumer loans, and spreads have disappeared almost entirely on government paper. Bank profits are being propped up by fees and FX trading as the exchange rate bounces around erratically, but that is not sustainable in the long run. Banks will have to re-learn how to do cash flow and business cycle lending to SMEs if they are to continue growing business.
Download the full speech here