Fixing Jamaica’s broken economy.

A leader in Jamaica has to commit political suicide if the broken economy that we have, is to get fixed. I say political suicide but this may not entirely be the case but it sure will cause him/her party to lose the elections.

For years each political party has been more focused on retaining power vs. doing what is right in order to fix our broken economy, and I believe its full time now that someone steps forward and get the job done, they owe it to the Jamaican people.

Jamaicans as a whole do not like to hear bad news, and the politicians try’s always to hide this and delay the inevitable as they try to retain power doing whatever it take.

The JLP being the party in power today will be a one term government as there is no way they can do what I am suggesting the do without getting voted out of office at the next election, but it needs to be done if we are to survive when the global economy returns.

• We are almost at the bottom of every scale that is used to measure economic wealth when compared to our Caribbean partners even though we are the largest in the region with the exception of Cuba.

• Even Cuba which has sought for years to provide for its people had to take a decision to day to suspend its “free lunch” program which is expected to save the country US$350M dollars.

• We have “free education” which produces a bunch of dunces far exceeding the “good” graduates that are produced.
• We have “free” health service, which you cannot access, as hospital, clinics and pharmacies don’t have drugs, bed, operating theater beds, and other supplies need to for a proper health service.
• We have a broken tax system which sees over 200,000 professional and self employed people paying no taxes, while PAYE contribute well over 50% of taxes collected in this country.
• We have a corrupt bunch of contractors who does less than an ideal job and in some cases nothing, yet collects a big pay package.
• We have very few checks and balances which allows politicians to cost the government over $200m for something which was supposed to be free
• We have a bunch of gun boys/gundogs walking around and killing people with impunity and getting away with it.
• We have a country where hard work and profits from business seems to be a bad thing.
• We have a country where it’s easier to make a profit by shuffling papers vs. being engaged in productive work.
• We have successive government who are propagated that philosophy and so we end up with a bunch of lazy people who believe that making 10% per month is actually possible, and if you say stop and check then you are “trying” to prevent people from “eating a food”.
• We have a bunch of people who believes its right to rob, kill and main, so they can “eat a food”. Not only that , when they are cornered by the cops and “dealt with” we hear they are bible studying students who keep the peace, make people “eat food” in the community and make sure children go to school by paying their schools fees and buying books. It does not matter to the community folks that these guys are not employed, what the heck it does not matter as long as ” we a eat a food” and they aren’t troubling us.
• We have a bunch of people living in areas controlled by goons and operate as a law unto themselves.
• We have a bunch of cops who are nothing short of criminals in uniform who are hell bent on destroying the credibility of the police force.

Ok everyone can state the problem, the real issue is do we have the “gonads” to do what is necessary to fix the problem. You cannot do it and remain in power in Jamaica for a long time, so someone has to take that risk, the sad truth is no one is willing to do that, at least not until they have “taken” care of themselves first.

What needs to be done now?

• Setup a special tax unit in the Inland Revenue department staffed with qualified and fearless people whose job is to assess all self employed professionals and ensure that the taxes they pay are in accordance with their earning power. They must seek to look out for disparity between people’s lifestyle and their returns.
• Effect a law, which allows for seizure and sale of property for not paying tax, while putting the offenders in jail.
• Move to financing of elections using the public purse, while setting a cap as to the amount of funds that can be used to finance elections. Why, well because, corporate support of the elections campaign leads to special interest groups determining government policies in exchange for their financial support.
• Remove contractors from qualified contractors list who have been found to engage in over pricing or down right fraudulent activities. They should be hauled before the courts and jailed applied for the fraudulent activities. Not only should they be bared from working on government projects but they should have their “license” suspended for first offence. Next offence should result in permanent termination of license along with the appropriate jail time for the offence.
• Cut the public sector by 25% minimum.
• Merge government agencies.
• Reduce the number of ministries.
• Implement a system that rewards people for performance and get rid of non-performers who spend all the time chatting and providing poor service.
• Remove political appointees who are really just living “high off the hog”.

Security

• Stop talking and put in place security cameras fully manned in all major towns.
• Introduce a mandatory ID system, persons without should be hauled before the courts and charged and forcibly photographed and issued an ID
• Have a systematic way to deals with people address. 100 persons cannot have the same address ie 20 john toms lane. Each person must have a distinct address or apt number.

Now for the big ones.

1. The GOJ should start taxing returns on domestic GOJ bonds denominated in $J at 45% and those in US$ at 50%.
2. GOJ at the same time should drop corporate taxes on profits to 15% and move individual taxes to (income tax) to 20%.
3. Fix the exchange rate or get rid of the $J and use the US$ as the official currency.

What the above effectively does:

1. Is to reduce interest payments on GOJ papers by a whopping 25%.
2. Encourage business to grow and be profitable thus employ more people who will effectively be taking home more pay. The increased number of persons working will lead to greater government revenue from taxes.
3. Reduce debt to GDP  ratio
4. Increase government revenue

A country cannot have sustained grow without a vibrant manufacturing sector. It may  have seemed that the financial services was the  way to go, however we can clearly now see how the USA has effectively shutdown these offshore secret tax havens, causing major problems for the those Swiss account and bankruptcy in the Cayman Islands.

This is the time when the “bright” people in our government are rushing to setup offshore banking sector. I am truly amazed and the utter bankruptcy that’s is present in the thought process of government members.

The financials.

The GOJ debt as of March 2009 stood at J$1.2 Trillion of which external debt stood at   J$548.7b, while domestic debt stood at J$651.7B.

Lets focus on the domestic debt as this is what the high interest rates are being paid on, and lets assume a average interest rate of 15% per annum.

This means interest is being accrued on GOJ papers at a rate of J$ 267.8m per day or slightly over $8b per month.

If the GOJ via the BOJ does what I am saying above they would end up accruing an additional $67M per day in taxes or over $2b per month.

So on a annual basis the GOJ would have paid out $24B less or put another way, they would have earned an additional J$24B.

As a people we spend too much time talking and doing very little to fix the real problems.

More to follow.