Saturday 20 October, 2018

Jamaica needs to see investment in productive assets - PB Scott

By Al Edwards
If Jamaica is to register significant growth then the country will have to make an effort to invest in its productive assets.

So said the President of the Private Sector Organisation of Jamaica ( PSOJ) Paul B. Scott at light night’s citation of Richard Byles into the PSOJ’s Hall of Fame, held at the Jamaica Pegasus.

Scott who heads the Mussons Group said that productivity does not come from man’s perspiration alone. It also comes from the tools he or she has to work with.

“The truth is our economy is overly reliant on imports which is a huge drag on our growth. If we are really to grow we need to see investment in productive assets. Richard (Byles) has lead this in investing in tourism. But we need to see firms big and small investing. That is why the efficiency of our financial markets are key to economic growth.”

“It is clear if we do not remove the impediments to increasing our domestic investment we will not meet our growth aspirations. We as a country by our own rules are limiting our own ability to increase our productivity by locking away capital in short term assets in our general and life insurance companies,” said the PSOJ boss who will be stepping down in that capacity at the end of the year.

Scott pointed out that The MCT for general insurance companies is still officially 250%. Canada is 150%. The MSSR for life insurance companies he suggested also needs to be remodeled as does the limits pensions can invest in private equity and debt.
“ The insurance ratios effectively restrict the stewards of our capital, the insurance companies from investing in productive assets beyond one year. How do we expect to grow if we simply are doing as a nation the equivalent of a household putting all their cash under their bed only so they can wake up and count it every morning. The cash under the bed will not grow, nor will it contribute to any employment and the general growth of the economy. But it will probably still be there in the morning. Financial regulation is very important in an efficient capital market. We need to address changes in a responsible manner. But we must address them and we must start and most importantly we must complete so we can get on with the business of building the economy.”

“So much of our destiny is in our own hands. It amazes me that we are happy to lend for a car which we consider as a secured loan, yet the BOJ does not recognize a debenture over working capital as security. What successful economy is built on buying imported cars! This too must be addressed if we are to foster growth in successful enterprises. We do not have simple factoring products in Jamaica because of the same issue. We talk about financial inclusion, but we make it so complicated,” said Scott.