ADDRESS TO JLP ANNUAL CONFERENCE, Sunday November 22, 2009

ADDRESS TO JLP ANNUAL CONFERENCE
Sunday November 22, 2009

I welcome the delegates to our 66th annual general conference.
Many of you have travelled long distances to be here. Some of you had to leave home at the crack of dawn. It is an expression of your commitment to this great party founded by Sir Alexander Bustamante.
I start with a quotation:

"The policy of the Jamaica Labour Party is to work honestly, faithfully and sincerely to bereft ourselves of the bankruptcy we have taken over in the Jamaican government so that we can get this country in a healthy financial position to improve this country and to raise the standard of our people, to make medical, educational and other conditions in this country better."
That quotation is not from any speech that I have made. It is from a speech made at our conference in 1945 by Sir Alexander himself.

More than 60 years have passed. During those 60 years there were times when we made progress but there were also times - too many times - that we suffered setbacks.

Today, we face much of the same challenges that Bustamante faced in 1944. We are called to undertake much the same mission.

Today, in addressing this conference, in delivering the charge to you as delegates, in calling on the Jamaican people to demonstrate the strength of will and purpose that I know this great nation is capable of, I have come not to look back, not to cast blame for Lot's wife was turned into a pillar of salt and only he that is without sin can cast a stone. I am not here to quarrel with those who might be quarrelsome. I am here to talk to you and to the people of Jamaica as your Leader and as a leader should.

We are caught in the middle of the desert and in the middle of a storm in that desert.

The global economic crisis has brought mighty, powerful economies to their knees. We had already been brought to our knees long before the crisis came.

Old people used to tell us to put aside a little something for the rainy day so that when calamity strikes we have something to draw on.

For years we have been spending more than we earn, putting aside nothing for the rainy day so that when the crisis hit us, we had nothing to lean on. When the bauxite industry collapsed, when our exports fell because people abroad could no longer afford to buy our goods, when our tax collections fell because people had less money to spend (some were losing their jobs) and when remittances fell because Jamaicans abroad, too, were losing their jobs the effects on our economy and our people were devastating.

The government is no different from an individual or a family. If you earn $5000 per week but your bills come up to $6,000, then one day you will end up owing so much money that after you pay the instalments on your debt, there is hardly anything left to live off.

It is not that we are living beyond our means. God knows that we need to spend more - not less - on our schools, hospitals, roads. We need to do more - not less - for our pensioners and those in our golden age homes who have no one else to look after them, the children who have been placed in our care.
It is two things:
• We are not doing enough to earn enough
• The little money that we have is not being spent as wisely as it should

In my address to Parliament in the wee hours of September 30th, I pointed out that although the government's budget is $560 billion, after we take out the amount required to service debt, pay salaries and the upkeep of the government machinery, all that we have left is $70 billion to run the country: put medicines and supplies in our hospitals, build more schools, provide lunch for our school children, put gas in the police vehicles, fix our roads and run pipes to bring water to rural households.

Because we are not earning enough, we have to borrow and keep borrowing. And the more we borrow, the more of the little we earn has to be used to pay back what we have borrowed, so less and less is left to look after the needs of the people.

And because we have to borrow so much, interest rates remain high. We have one of the highest interest rates in the world because we have one of the highest debt ratios in the world. The money market is not different than Coronation Market. The more people that are seeking to buy tomatoes, the higher the price of the tomatoes.

And when interest rates are high, it discourages investment because less money is available for people to borrow and invest to start a business or expand a business, to create jobs and earn more foreign exchange. When interest rates are high, the more profitable it is for those who have money to lend it to the government rather than to invest it in business to create jobs and earn foreign exchange.

When government has to borrow so much, the economy does not grow, jobs are not created and the taxes we need to collect to provide the services that people need do not materialize.

So when people complain about the poor condition of their roads, lack of water, inadequate service at the hospitals, they are not being unreasonable; they have good reason to complain. But it is not that the government doesn't care; it is not that your MP and Councillor are not working. It is because there are serious things wrong with the business of the country.

During the campaign, I declared myself to be the driver. But it is not just a new driver that we needed. The old bus needs major repairs. It has run for too long without changing oil. The clutch plate is worn out. The gearbox needs to be pulled down. The frontend mash up and the suspension is gone.

We were not the ones who ran with it but it is we who have to correct it!
This is at the heart of our problems. This is the central issue in our negotiations with the IMF.

The IMF is not a terrorist organization. The IMF is there to help countries in economic difficulties. It is true that is primary purpose is to help countries that are having difficulty in paying their bills with the rest of the world, satisfying those needs that have to be supplied by the rest of the world.

Between the bauxite sector and other export industries, the fall in remittances and the slowdown in foreign investments, we have lost close to 1 ½ billion US dollars in foreign exchange flows. That is the money we need to pay for the oil that we have to import, raw materials and equipment to keep our factories going, the food that we do not produce for ourselves, the medicines that our hospitals must have and the money we need to service the foreign portion of our debt.

Against this background, there is no alternative to borrowing from the IMF; there is nowhere else from which these funds can come.
But in its negotiations with us, the IMF has to be concerned with what we are doing and plan to do to put our house in order, to correct the mistakes of the past, to put ourselves in good shape so that we can meet those obligations and satisfy those needs on our own.

It is like a doctor who examines, diagnoses and prescribes treatment. But it is we who must decide to take that treatment. And the treatment is not just the medicine that we must take but also the changes that we must make, the therapy that we must undergo, the discipline that we must apply, the things we have been doing that we must stop doing, the things that we have been unwilling to do that we must now be prepared to do so that we can get well and enjoy life once again.

The IMF is not forcing anything on us. It is just like how you are free to walk out of the doctor's office and say "No thanks!" You can reject the medicine and go home to try to see if some bush tea will work. We can also say to the IMF "Ta-ta" and then prepare ourselves for a painful and certain death. What is clear is that we cannot continue on this path. If we are to have any hope for the future, we have to change course.

But the funds which will be able to secure from the IMF to meet our external payments is only part of the solution. We have to fix the problem that landed us in so much debt, that has prevented us from earning enough so that we have to borrow so much, that creates such a disincentive to investments and causes debt service to gobble up so much of the little that we earn that we are unable to provide the services that the people need and deserve.

It is not going to be easy; it is not going to be painless. There is no anaesthetic that can put the country to sleep while we fix what has to be fixed.

I worked hard to become your Prime Minister. You worked hard to put me there. We didn't design the road that we have to travel. We didn't abuse the bus in which we must ride. But it is our job to fix the bus and navigate the rough road that is ahead of us. We are certain of our destination. As we sing so often:

"It is a hard road to travel and a mighty long way to go but Jesus the Blessed Saviour will lead us by the way He knows. Many a lonesome valley, many dark waters roll; it is a hard road to travel and a mighty long way to go."

The IMF agreement has taken longer than had been expected. It has taken longer because it is not a quick-fix. We have to make sure that it adequately addresses our fundamental problems. There are essentially four elements of the programme:
(1) Fiscal
How we plan to reduce and eliminate the fiscal deficit especially against the challenges of the global recession that is still not over.

(2) Medium-Term Economic Programme
The strategies that must be employed over the next five years to put the economy on a sound footing and the targets that we must set for ourselves to achieve that.

(3) Policy measures
The changes that must be implemented to support both the fiscal and medium-term programmes.

(4) Debt management
Initiatives that must be taken to manage the huge public debt and the cost of that debt that is strangling us.
We have already embarked on some of these strategies:
(a) The cost of the public sector bureaucracy has to be reduced. The Public Sector Transformation Unit formally commenced operations last Monday and is tasked with the job of reorganizing the machinery of government to be more efficient and cost-effective. It is a major task that will see the merger of some agencies and departments, restructuring, redeployment and, in some cases, reduction of staff.

Importantly, it will address the need for realignment of authority, responsibility and accountability to enable the public sector to be more responsive, customer-friendly and performance-driven.

The PSTU is staffed by persons from both the public and private sector. Its work will be overseen by a Consultative/Monitoring Committee made up of representatives from the public and private sectors, trade unions, academia and we have invited the Opposition to name a representative. On Tuesday, I will announce the members of this committee.

Both the PSTU and the Consultative/Monitoring Committee will report to a Cabinet Sub-Committee which I, myself, will chair.
(b) Medium-Term Economic Programme has been crafted conservatively, recognizing that the current global recession makes it difficult to predict with any assurance the time and pace of recovery. It will be supported by specific sector programmes and policies aimed at facilitating early recovery and expansion of existing businesses but, importantly, new investments and the establishment of new industries.
(c) Policy initiatives will be pursued in areas of tax reform, recalibration of incentives and concessions, fiscal responsibility, transparency, accountability and corruption prevention.
(d) The debt management strategy will focus on two priorities:
(i) Shifting the burden of debt from the domestic and international capital markets to the multilateral agencies to reduce the cost of borrowing and leave more space for private sector credit to flow to new investments. When we took office, 60% of the funds available in the banking system were commandeered by government leaving only 40% to the private sector. Already, we have reversed that, so that, government's share is only 40%, leaving 60% to the private sector.
(ii) Reducing the cost of debt, i.e., interest rates. Interest payments on government debt today accounts for 16% of GDP, one of the highest in the world. Our domestic debt amounts to more than $700 billion. More than 84% of that is at interest rates of more than 16%. More than a half of it is borrowed at an average rate of more than 22%. The cost of servicing that debt at those rates is not sustainable. Total interest payments alone (excluding capital repayments) now amount to $128 billion or 10% of GDP. Jamaica has had an unblemished record of repaying its debts.
I want to affirm today that we have no intention of allowing that valuable reputation to be compromised and holders of government bonds are assured that our contractual obligations to them remain inviolable. But our interest rates do not have to be as high as they are. We cannot by a stroke of a pen or by legislation mandate interest rates to go down. But they can come down and they must come down. We will need the support of the stakeholders in the market. Discussions on this have already been taking place for there is a clear mutual benefit in seeing the government's fiscal and monetary programme placed on a path that is sustainable, credible and conducive to investment and growth. No one can benefit in the long term if the economy continues to fail. The multilateral institutions have pledged their support. The details are being fine-tuned and that is very much a part of the current discussions taking place with the IMF.
Implicit in our programme is the need to cut our expenditures where we can (especially the cost of government and the interest cost on our debt) and the need to increase revenues where we can.

Some expenses we cannot cut: schools, police, hospitals. But where we can cut, we must cut and where we can increase revenues, we must increase revenues.
Revenues this year are likely to be $16 billion below what was targeted. This is partly due to the economic downturn. When over 40,000 persons lose their jobs, we collect less income tax, education tax and GCT. When imports are down because people are buying less, we collect less customs duties. When people have less money to spend, we collect less GCT.
But implicit, also, is the need to reform the tax system that places a heavy burden on some and allows others to escape. We have to do more to pay for the things we must have and must do. We cant go on borrowing to pay for these things.
We will very shortly be outlining in Parliament the terms of the IMF agreement, the details of the economic programme to be pursued and targets to be met, the policy measures to be implemented and the debt management strategy to be executed. We will also be outlining changes in our revenue programme to ensure that we begin the process of closing the gap between expenditure and revenue.
Some will see some relief. As previously announced, the income tax threshold will be increased to $440,000 as of January 1. This means that since coming to office, we would have more than doubled the income tax threshold, removing income tax deductions from the payslips of more than 132,000 persons.
But it will be necessary to spread the burden of tax more broadly and to shift more of that burden from "pay as you earn" to "pay as you consume".
That concept is already being rolled out. We will have to be very clear in terms of the things that government must provide without charge and the things that government provides but must recover the cost.
I outlined in Parliament the role of government: providing a safe, secure and healthy environment, an effective justice system, quality education, basic health care, support for the disadvantaged and vulnerable, public infrastructure, an efficient bureaucracy, appropriate policy and regulatory mechanisms and effective diplomatic representation. We have taken on to ourselves to do a range of other things leaving these essential things undone. It's time for a reality check.
The Cabinet has already given instructions that government agencies and departments that provide or regulate commercial services must finance their operations from fees collected and must no longer depend on budgetary support.
There have been complaints recently about the increase in passport fees. The increase is necessary to cover the cost of producing the passports. People need passports to travel but those who wish to travel must be prepared to bear the cost of the passport that they need. It cannot be right for the taxpayer who is not travelling to have to pay part of the cost of the person who needs a passport to travel, not when we are running huge deficits, not when our children need better schools and the sick need better health services. Other government agencies that provide services that are not part of the core functions of government have been ordered to earn their keep and finance their operations.
It must be understood, however, that the government's economic programme is not just about balancing books. We make a mistake to think that we can balance people's lives without balancing the books. But fiscal discipline is not about contraction. Fiscal discipline is necessary to enable expansion to take place, enable investments to take place and jobs to be created. You cannot look to government itself to create the jobs. We currently employ 117,000. That is too much; we cant employ any more.
Fiscal discipline is necessary to enable more of the scarce funds to be available to do the things that government has to do: fix roads, provide water supplies, transform education, make healthcare available, reduce crime.
And we are not just tidying up our fiscal mess in the hope that something good will happen to us. We have to make good things happen.
• We are about to invite investors to bid for providing the investment and infrastructure necessary to enable us to shift much of our energy requirements from oil to natural gas so that electricity costs can come down.
• We are pursuing exciting prospects for new investment in our bauxite and alumina industry to modernize our mining and processing operations so that we can be back in business when the global conditions improve and so that our bauxite workers can get back to work.
• Our agricultural sector has done well despite the difficult times - four consecutive quarters averaging double-digit growth. The transformation of agriculture to using higher technology, improved farming methods and the integration of the sector with manufacturing and tourism is proceeding and bringing new hope to rural Jamaica.
• The National Housing Trust has been restored to good financial health and between now and next year, along with the Ministry of Water and Housing and private developers we will be commencing construction of more than 10,000 new housing solutions involving houses, serviced lots and settlement upgrading.
• We have just completed arrangements for a major water supply programme costing $1.9 billion to expand water supplies in several parishes across Jamaica.
• We expect to announce very shortly new financing arrangements for a major road improvement programme adding to that which is being done through the Road Maintenance Fund o9f the Ministry of Transport and Works.
• We have provided substantial funding to support small, medium and micro enterprises because they are the backbone of the economy. We have introduced new measures to enhance credit eligibility and reduce the amount of collateral required.
• We have established the CDF to enable MPs to respond more effectively to the needs of their constituents. The amount available this year has had to be reduced because of the fiscal challenges we are experiencing but the concept is sound and despite the criticisms from some quarters, it will be preserved.
• We are well advanced in the planning for the development of the Caymans Enterprize Zone which will provide thousands of new jobs. Investor interest has been strong and commitments have been made which will enable construction to commence next year.
• Our tourism sector has done exceptionally well to weather the storm. When other destinations are experiencing significant downturn, we have been able to maintain our visitor arrival numbers and a substantial part of our earnings. New hotel projects which have been delayed because of the economic crisis are alive and well and will come on stream as soon as market conditions improve.
• We have remained faithful to our commitments to remove hospital user fees and to cover the full cost of high school tuition. Some continue to criticize these measures. The hospitals have, indeed, come under pressure and we are working to address those issues. But the answer cannot be, as some suggest, that poor people who cant find the money must stay home to die in pain and misery. Providing basic healthcare is part of the inescapable, uncommercializable role of government. Similarly, no child must be kept out of school because its parents cannot afford to pay for its tuition. Prior to the removal of tuition charges, schools struggled to collect 50% of what was to be paid. Today, they receive 100% of their tuition fees from the Ministry of Education. Some would want us to roll that back, to change course. That is a new course. That is not the course we said we had to change.
Taking the country through these difficult times into a brighter tomorrow is not just a matter of fiscal management and economic development. We are not just a bunch of statistics. We are a people and our fortunes are as much dependent on our economic strategies as they are about how we govern ourselves, how we behave, the values we share and our faithfulness to those values.
The problem of crime is not just a result of our economic difficulties. It is a product of our social disorientation.
The security forces are intensifying their operational strategies to combat crime and violence. We are providing all the support we can for the security forces within the limits of the available resources. The work to transform the Police Force, to root out corruption from within its ranks, to strengthen those dedicated policemen and policewomen who work hard and risk their lives for us will continue. Efforts to build trust among the citizens and the communities so that they can be the vital partners that they must be in the fight against crime will continue.
We as a society must unite around some basic principles, some agreement as to what is right and wrong, good and bad, what will uplift and what will destroy.
The gully-gaza conflict is just one example of the negative influences that destabilize us as a people and destroy our confidence in ourselves,
The ambivalence toward corruption is one example of a people whose compass is broken.
The government is delivering on its commitments to tackle the scourge of corruption wherever it is found. The Bill to establish a Special Prosecutor to deal with corruption is before a committee of Parliament and we expect enactment shortly. The establishment of an Independent Commission of Investigations to deal with abuse by agents of the State is well advanced. Whistleblower legislation is on its way.
We who proclaimed these to be our standards and our platform must be ever mindful that we must be like Caesar's wife. And let me address the members of my own party: It matters not if you are a Labourite, it matters not how hard you worked to help us to win the election. If any of you is caught in any corrupt activity, expect the full force of the law and do not look to me or the government for any sympathy or protection.
I have spoken to you today as I thought that, as your Leader, I must. We are facing tough times but we have faced tough times before and once we remain focused, once we do not allow ourselves to be distracted by the dine and the noise, once we remain faithful to the principles that earned us the trust and confidence of the people, we will overcome.
And as we embark on this challenging, difficult programme of adjustment and restructuring, our ultimate aim must be not just recovery but growth - robust growth - creating jobs, increasing production, developing our human resources, making ourselves more competitive both locally and in the overseas market, building trust among our people and finding the bond that will united us as a people with an illustrious past and an even brighter future.
We must go forward purposefully and with confidence in ourselves. The world is not going to wait for us. We must catch up with the world and therefore, like Usain Bolt, we must strike a bold stance and say "To the world!"