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Budget Presentation 2008 - Prime Minister

Release Date: 
Thursday, April 10, 2008 - 16:00

April 2008

Preliminaries

This debate is taking place at a time when Jamaica finds itself in a harsh global environment to which we are extremely vulnerable and for which we are ill-prepared. We have a development deficit that must be made up, poverty that must be eradicated, a social order that must be transformed, opportunities that must be created and hopes that must be fulfilled.

But we must not be overwhelmed by these challenges for we are a people whose history is defined by struggle against the odds. Nanny of the Maroons, Sam Sharpe, Paul Bogle and George William Gordon have shown us that we can beat those odds, we can triumph over adversity. Therefore, we must never lose faith in ourselves because we have not yet seen the best of ourselves.

I thank the people of Jamaica for the confidence that they have placed in me and the team that I lead. They have placed on us a burden of trust. I promise to hold that trust sacred, never to betray that trust, never to let down the people of Jamaica.

Allow me to pay tribute to the members of the Cabinet, the Ministers of State and Parliamentary Secretaries. We have an enormous job of work to do and we must do it well.

I want to commend, especially, the Minister of Finance and his colleagues in that Ministry, Ministers Don Wehby and Dwight Nelson, for their leadership in the construction of this budget, I know from experience that it was perhaps the most daunting task that the Ministry of Finance has ever had to face. They have done well.

Let me commend Minister Nelson and the leadership of the Jamaica Confederation of Trade Unions led by its Acting President, Mr. Wayne Jones, for having concluded the third Memorandum of Understanding between the government and public sector workers. Theirs was also a daunting task but they demonstrated understanding and consummate negotiating skill in arriving at an agreement what, while not providing all the satisfaction that was sought by both sides, reflected the best interests of Jamaica.

I pay tribute, also, to my parliamentary colleagues (on both sides). I may be the Chief Servant but we are all servants of the people and that duty must supersede any other interest we may have.

I want to commend the Permanent Secretary and staff of the Prime Minister’s Office, its various departments and agencies. It falls to us to lead the way and I thank them for their support in doing that.

I thank also the Cabinet Secretary and staff of the Cabinet Office. The Cabinet Secretary, Dr. the Hon. Carlton Davis, will be retiring at the end of May. He is an outstanding public servant who has given many years of exceptional service under different administrations and this country owes him a great debt of gratitude.

I spoke earlier of the formidable challenges facing the country at this time. I want to address these challenges and, in doing so, I don’t intend to dwell on the past or to be unduly critical of those who were here before. I am prepared to concede that they did their best and did what they thought was best. So, my purpose here today is not to curse the darkness, rather to shine some light.

But we must recognize the darkness for what it is.

Global environment

We are caught in a turbulent global environment and it is hurting us badly. It is hurting the poor, in particular, in a terrible way. Many are bewildered, feeling the pain but not understanding what is causing the pain. The Director-General of the FAO, Mr. Jacques Diouf, speaking at a conference in New Delhi two weeks ago, pointed out that world food prices have risen 45% in the last 9 months. That is about the time that we have been in office.

Last year, Jamaica recorded the highest inflation in 12 years. But so, too, did France, China and Chile. Sweden had the highest inflation in 14 years and Australia and the USA the highest in 17 years! Average inflation in the European Union is the highest it has been since the Union was formed! Venezuela doesn’t have an oil problem. It has oil! Yet, its inflation last year was even worse than ours – 22%.

What is causing prices to go up like this?

Rising prices…..the cause

Some of the large emerging economies like China and India which account for more than a third of the world’s population have been growing rapidly – close to or more than 10% per year. This has swelled the demand for critical commodities such as oil and grain and all the things that oil and grain are used to make. The World Bank estimates that global demand for food will be doubled by 2030. World production of these commodities has not been able to keep pace with this increased demand, hence higher prices and even shortages.

The situation has been made worse by other factors. As the price of oil climbs, crops normally grown for food are being used to make fuel, thus putting more pressure on the dwindling supplies of food. Global warming has resulted in adverse weather conditions – droughts where crops need water and floods where they don’t – and this has led to drastically reduced harvests. In addition, some of the major food producing countries have restricted the export of products such as wheat, corn and rice in order to protect their own food supplies. Because food is becoming so scarce and prices so high, it has become a virtual currency with aggressive bidding in the futures market, pushing up prices even higher.

The world is now facing the worst global food crisis in more than 50 years. In the last few weeks, food riots have broken out in 33 countries. The UN has warned that more countries are likely to erupt.

Relief measures

We have not ignored the hardships that people are going through. In January we increased the minimum wage by 16%. The removal of tuition fees in September and hospital charges earlier this month have eased some of the pressure especially on the poor. We have either eliminated or substantially reduced the duties on certain basic food imports.

In the first 3 months of this year, we spent $500 million to subsidize certain basic food items so as to cushion the impact of rising prices.

We had considered directing the assistance through the PATH programme. There are currently 243,000 persons registered under this programme. But the Survey of Living Conditions estimates that there are some 380,000 persons living below the poverty line. This means that there are over 130,000 persons below the poverty line who are not benefiting from the programme.

PATH expansion and improved benefits

The government, therefore, has made provision in the budget to expand the PATH programme this year to include these additional persons so that all those who fall below the poverty line will receive some assistance to meet the basic needs of life.

In addition, we will be increasing the monthly benefits from $530 to $650 per month.

Education is the ladder that will enable poor people to escape from poverty and, therefore, we want to do something extra for those students who are registered under the programme and who are at risk.

Students in Grades 7-9 will receive $850 per month and those in Grades 10-11 $1000 per month.

Our boys are falling by the wayside with lower levels of school attendance and performance. They will be targeted for extra assistance. Boys in Grades 7-9 who are registered under the programme will receive $935 per month and those in Grades 10-11 $1,100 per month.

Improved NIS benefits

The National Insurance Scheme is part of the social safety net that is vital for survival especially in times like this. For many old persons it is the main source of income.

Effective April 1st:

Basic NIS pension to be increased from $1,500 to $2,000 per week

    Maximum NIS pension to be increased from $2,200 to $2,900 per week
        Those on ¾ pension: from $1,125 to $1,500 per week
        Those on ½ pension: from $750 to $1,000 per week
    Allowance for orphans to be increased from $2,625 to $3,500 per week
    Special allowance for persons born before 1911 to be increased from $750 to $1,000 per week
    Maternity allowance to be increased from $3,200 to $3,700 per week
    Old-Age, Invalidity & Widows/Widowers Grants to be increased from $20,000 to $30,000
    Grants for Orphans and Special Children to be increased from $30,000 to $40,000
    Funeral Grants to be increased from $50,000 to $60,000

There will be increases in other benefits: Dependent Spouse’s Allowance, Employment Injury Benefit and Disablement Pension. These increases will benefit almost 100,000 persons and a Ministry Paper tabled today by the Minister of Labour and Social Security  provides the details of these increases.

Food import dependency

One of the reasons why we have been hit so hard by rising food prices is the fact that we depend too much on imported food. Last year, we imported US$762 million of food. That is about J$20,000 for every man, woman and child! And, therefore, as global prices go up, our prices go up too. In the last 12 months, the price of wheat has more than doubled; rice has more than doubled, soybean is up by more than 80% , corn almost 70% and fertilizer 60%.

What could have cushioned the blow on us is our own domestic food production. But that has been falling progressively over the last 10 years. Agricultural production last year was 30% less than it was in 1996 and is back to where it was in 1988. Here are a few examples:

 

Item

1996

(Tons)

2007

(Tons)

 

Change

  Yams

253,371

113,124

-65%

  Dasheen & Coco

44,611

17,316

-61%

  Cho-Cho

  6,379

  2,534

-60%

  Irish Potato

13,775

  7,477

-46%

  Peas & Beans

11,530

  7,512

-35%

  Cabbage

32,809

22,110

-33%

  Carrot

26,026

19,365

-25%

  Sweet Potato

33,218

26,005

-22%

  Pumpkin

42,150

33,749

-20%

  Tomato

24,114

19,576

-19%

 

We import each year $8 billion of corn and soybean, $8 billion of fruit concentrates and $4 billion of livestock products, because we don’t produce enough of our own. We may not be able to produce all that we need, but we don’t have to be so helpless. We have idle lands, idle hands and hungry mouths. We must be able to do better than that!

Producing more food

Our most effective response to rising food prices, therefore, must be to produce more of the food we eat. The Ministry of Agriculture has geared itself to lead the way. But, as the Minister pointed out, it has to be more than just producing more. We have to produce it more efficiently so that the consumers can get it more cheaply, while allowing the producers to make a reasonable profit. The old-time way of producing food with the fork and cutlass, praying for rain but praying that it doesn’t come in a flood, scattering the fertilizer and then having to weed out what should not have been fertilized – that kind of farming is not going to be able to produce food cheap enough and in enough quantities to protect us from this global crisis.

That is why this year we will be mounting a strategic initiative to provide support for farmers who are prepared to embrace new technology to improve productivity and product quality. The Minister of Agriculture has already outlined a range of measures that are to be taken to achieve this.

Support for food processing sector

While food security begins with our farmers, they will succeed only if their efforts are synchronized with those of our food processors, large and small. We need to see more packages and tins in our supermarkets that are made in Jamaica, not imported from overseas.

Our food processors face particular difficulties such as high energy and security costs and inadequate and irregular supply of locally grown inputs. Therefore, I have asked the Minister of Industry, Investment and Commerce and the Minister of Agriculture to hold discussions with local food processors to identify ways in which the government can assist them to increase the supply of locally processed food at affordable prices.

The energy crisis

The cost of energy is the most immediate challenge facing the economy. It affects virtually everything – the cost of production, transportation, the cost of living. It is the biggest drain on our foreign exchange. Three years ago the price of oil was under US$50 per barrel. Yesterday it was US$117 per barrel. Our oil bill is equivalent to 70% of the value of our total exports. Three years ago it was less than US$1 billion. This year, it could reach US$2.5 billion. It is a crisis that must be addressed urgently and proactively.

Energy conservation

In the short term, we will have to take meaningful steps to reduce our energy consumption, to use energy more sparingly and more efficiently and this must apply to everybody – the government, the industrial and commercial users and ordinary householders. Households, in fact, have been reducing their energy consumption – from an average of 200 kwh per month to 175 kwh in the last 5 years. But we must do more. We must each make a conscious effort to turn off lights and appliances when they are not needed, carpooling instead of driving separate vehicles in the same direction. There are things we can do to help ourselves and help the country.

And the government must lead by example. We have established an Energy Conservation Unit in the Cabinet Office to coordinate an effort across all ministries and agencies to reduce our energy consumption by 15% this year. I have instructed Permanent Secretaries to ensure that an Energy Coordinator is identified in every ministry, department and agency to be responsible for energy conservation and to ensure that we achieve the target.

Several other initiatives are being undertaken.

    Our decision to apply a lower rate of duty on diesel-engine vehicles is part of our energy-conservation strategy and this differential will be expanded as more energy-efficient diesel-engine vehicles come onto the market.

    The Minister of Finance will be undertaking a review of the tax regime as it applies to energy-consuming devices. We intend to reduce the duties on energy-efficient devices and penalize those that are energy-inefficient. Duties on solar and photovoltaic devices have already been reduced but there are parts and accessories that were omitted. We intend to reduce them as well.

    We intend to offer a range of tax exemptions, tax credits and accelerated depreciation allowances to businesses and households which invest in energy-saving installations and the Minister of Finance will outline the details of these measures as soon as they have been finalized.

    The National Building Code which will be promulgated this year will include mandatory stipulations for energy efficiency. New hotels, for example, will be required to incorporate in their design provision whereby lights and air-conditioning have to be activated by swipe-card room keys so that when you leave the room the lights and air-conditioning are automatically switched off.

    The Minister of Transport and Works is holding discussions with investors and stakeholders in the transport sector toward converting taxis to use LPG which can save up to 30% in fuel costs. It has been done successfully in many countries.

    The Ministry of Energy, Mining and Telecommunications has developed as an addendum to the National Energy Policy a National Energy Conservation and Efficiency Policy which is now before the Cabinet and will be tabled in Parliament shortly and the Minister will deal more extensively with these initiatives in the sectoral debate.

In order to encourage and facilitate these energy-saving initiatives, the DBJ will be making available $1 billion in loans to finance projects based on renewable energy or designed to improve energy efficiency. These loans will be disbursed through approved financial institutions such as commercial banks, merchant banks and small-business-friendly institutions such as credit unions, PC banks and micro-financing institutions. The loans will be for a period of 6 years with a 1-year moratorium on principal, can be used to finance up to 75% of the project cost and will be made available at an interest rate of 10%.

Energy diversification

In the long term, we are determined to reduce our dependence on oil as a source of energy. The debate on alternative energy has gone on for too long. It is time for us to take decisions and take appropriate action.

We are going to promote greater use of renewable sources such as solar, hydro, wind and bio-fuels with the aim of satisfying 15% of our energy requirements and the OUR will be issuing a request for proposals from potential investors. We have received proposals for the conversion of waste to energy and we are developing a policy framework to govern this, taking into account appropriate environmental safeguards.

The upgrade of the Petrojam refinery which is due to commence next year will enable the use of pet coke to generate 100MW of electricity by 2012.

Our primary sources of alternative energy, however, are natural gas and coal. Three critical factors in any diversification decision are:

(a)    the availability of long-term supplies

(b)   comparative costs and the projections for price stability

(c)    critical mass considerations, i.e., calibrating efficient output levels with our current and projected demand

The alumina companies are the largest users of imported oil. Some alumina interests are actively considering the use of coal with the possibility that surplus power would be available for sale to the national grid. We are assured of long-term availability of coal from Columbia. The government would be supportive of such a decision provided the appropriate technology is in place to safeguard the environment.

Last month, a technical team from Venezuela was in the island to discuss a long-term contract for the supply of natural gas to Jamaica. Venezuela has the second largest reserve of natural gas in the Western Hemisphere and is developing the facilities to extract it. These discussions are continuing and the Minister will speak to this in the sectoral debate.

The JPSCo is in advanced negotiations for the conversion of the Bogue generating plant to use compressed natural gas (CNG) and to increase the capacity of the plant from 200 MW to 300 MW.

The process of energy diversification towards greater energy security has begun!

Improving the investment climate

Although we are in the midst of a global cyclone, the answer cannot be to repair to the bunkers. We have to brave the weather if we are to forge ahead.

We are taking steps to improve the country’s business friendliness. We want to roll up the red tape and roll out the red carpet!

·         We are working with the Legs & Regs Committee with assistance from US-AID to reduce bureaucracy, eliminating business procedures that serve no useful purpose and simplify them where they are necessary.

·         We are overhauling the development approval process to create a single, cross-cutting, one-stop agency to evaluate land use and building projects with a 90-day period for determination.

·         We are separating the environmental regulatory functions from what is now known as NEPA to create an independent Environmental Protection Agency with statutory powers to determine and enforce appropriate regulatory standards. For many years we have abused and permitted the abuse of our environment and we are now suffering the consequences. We cannot insulate ourselves from the efforts of global warming but we can do more to protect ourselves and our environment, preserving our natural resources, conserving our forests and water supplies, disposing of our waste properly and guiding development, so that it can be sustained.

·         This year we are going to revive discussions with the trade unions on the question of labour market reform. We are part of a global environment, a seamless, borderless economic space. We are just one in a large menu of options available to both foreign and local investors and we have no choice but to adopt international best practices if we are to be relevant and attractive.

Tax Reform and compliance

Improving our tax system is an important part of the strategy to enhance the business and investment climate. This year, for good reasons, we have not been able to embark on our commitment to a comprehensive tax reform programme:

    Much work has been done in developing the programme but some important work is left to be done
    Because of the extraordinary economic circumstances we face this year, it would not be propitious to undertake a major tax overhaul, because the immediate impact on the revenues is difficult to predict, with any certainty.

However, it remains a priority! Our tax system is inequitable, inefficient and leaky:

    Average customs duty collections amount to only 5% of the value of imports
    1% of registered companies account for 75% of corporate taxes while 75% of registered companies account for less than 1% of corporate taxes.
    80% of the company taxes and 50% of the property taxes we should be collecting, are not being collected
    Apart from PAYE taxpayers, only 4,000 individuals are paying income tax. It is estimated that ¼ million persons who should be paying something are paying nothing!
    For every $100 of revenue we collect, $60 goes back out in tax relief, waivers and concessions.

We could significantly reduce taxes and collect significantly more taxes, if everybody paid and this will be the aim of the comprehensive tax reform programme, which we intend to introduce next year.

This year’s Budget is predicated on a significant improvement in tax compliance. We have provided an amnesty period during which we will waive both penalties and interest. I urge delinquent taxpayers to take advantage of it.

Investment and job creation

We promised that a major part of our focus would be on job creation. That requires not just more investment, but significant improvement in our productive capacity.

I have repeatedly made the point that despite substantial foreign investments over the last decade and a half, they have not generated a commensurate level of growth in the economy, which has averaged less than 1% per year over the same period. It illustrates a structural weakness in our economy – our lack of absorptive capacity, the failure of these investments to energize the economy and our inability to sustain their velocity.

We are a nation of small businesses. We will hardly ever be able to become mass producers. We have to leave that to the major industrial countries and emerging economies, like India and Indonesia. Being a nation of small businesses is not necessarily a bad thing. Small businesses create more jobs per dollar of capital investment than large enterprises. Small businesses in the United States account for 50% of total employment. In Jamaica, that proportion is considerably higher.

The Minister of Industry, Investment and Commerce is passionate about building the small business sector. When he speaks in the sectoral debate, he will outline an exciting array of initiatives to expand the sector. Recently, I had the pleasure of opening the first business incubator at the Garmex Free Zone. It is his brainchild to cluster small businesses and provide support services to enable them to grow so that what is micro today, can become small tomorrow and grow into large, profitable enterprises.

In support of his efforts and in support of the small business sector, the DBJ will be providing a loan facility of $1 billion to be disbursed through approved financial institutions including credit unions, PC banks and micro-financing institutions. The loans will be offered for a maximum of 7 years, at an interest rate of 10% with a one-year moratorium on principal repayments.

Major investment projects

Our focus on small businesses is not to ignore the value of major investments. Indeed, as I have pointed out, the two must compliment each other:

    The hotel sector will continue to dominate major investments with approximately 7,000 new rooms to be built over the next two years with total expenditure for this year of US$157 million.
    Commencement of the Falmouth Cruise Ship Terminal, a collaborative effort between Carnival Cruise Lines and the Port Authority of Jamaica, involving a total investment of US$270 million and an agreement from Carnival to deliver a minimum of 500,000 cruise ship arrivals annually.
    Mystic Mountain Rain Forest facility, our latest attraction, financed jointly by Carnival and the DBJ at a cost of US$6.2 million, is to be opened in July
    Construction of the Montego Bay Conference Centre with over 200,000 sq ft of convention facilities at a cost of US$45 million financed by way of a loan from the government of China.

We are working on a number of major new projects:

·         Downtown Kingston/Pt. Royal redevelopment including its potential as an international financial centre

·         Vernamfield cargo transshipment airport

·         Development of the Montego Bay Commercial Centre

·         Expansion of the Ocho Rios Cruise Ship Terminal

·         Major free zone complex for the Caymanas/Ft. Augusta area

·         New airport facilities for Duckenfield and the development of Pt. Antonio as a high-end tourist destination

Tourism

The Minister of Tourism and his team deserve our commendation for the extraordinary performance of the tourism sector despite the economic slowdown in the US, our major source of visitors.

Our vision for tourism requires that we increase its value to Jamaica and the benefits it brings:

    Developing facilities to allow us to attract more of the high-end leisure market which spends more money and is less vulnerable to global economic fluctuations
    Promoting the development of attractions with the same vigour as we use to promote the construction of new hotels
    Ensuring greater vertical and horizontal integration with other sectors of the economy (agriculture, manufacturing and service providers) so that tourist visitors, too, will eat what we grow, use what we make and enjoy what we do.

The Minister, when he speaks, will tell us about plans to establish a hospitality school to train supervisory and management personnel. He will tell us about plans to promote health tourism, rehabilitate the crafts markets and establish multi-purpose artisan villages.

HEART/NTA is seeking to identify lands along the north coast to establish a Craft Training Centre to train our craft makers so that we can offer good quality, made-in-Jamaica craft items.

Casino gaming

The issue of casinos has been a lightning rod of controversy for a long time. We have tiptoed around the issue, not wanting to be embroiled in the controversy. We have sneaked up on the issue while proclaiming our opposition to it. Slot machines are a principal feature of casinos all over the world. Depending on its size and location, slot machines will account for 50-80% of casino revenues.

In the 1990s, the previous government started issuing licences for the operation of slot machines. Today, there are several gaming lounges and hundreds of slot machines in operation throughout the island

What have not been permitted are table games. With improved technology, many slot machines now carry games which, traditionally, were exclusively table games. So, what was intended to be excluded is very much here. Slot machines, however, do not attract major investments. Table games do.

In September 2006, the government entered into an agreement with the Tavistock Group for the development of the Harmony Cove project in Trelawny, a large upscale project on 2,300 acres with total investment of US$4-5 billion and the construction of some 4,500 rooms. The government, through a specially formed company, Harmonization Ltd., would hold 27% equity in the project.

As a means of encouraging “investment in significant large-scale facilities”, one of the conditions set out in the agreement commits the government, through Harmonization Ltd., to “use its best efforts” to secure a Gaming Licence to operate such “gaming machines, gaming tables and/or sportsbook, as may be set forth in the Gaming Notice”. A subsequent letter issued by the Ministry of Finance gave an undertaking that, provided a minimum of 1,000 hotel rooms were built, a licence would be issued for an unlimited number of gaming machines with the right to operate such machines within the Parish of Trelawny or “within a radius of 10 miles as the crow flies from the boundaries of the Parish of Trelawny” and that no other licence of a similar nature will be granted for the defined area for a period of 14 years.

Against this background, the government undertook a review of the issues surrounding the introduction of casino gaming in Jamaica. In particular, we reviewed the recommendations of a study carried out in 2003 by a committee chaired by the Hon. Dennis Lalor. This followed a decision taken at a GOJ/Private Sector summit in March 2003 to “revisit the introduction of casino gaming in Jamaica”.

The report which was prepared in consultation with Price Waterhouse Coopers of Canada expressed the view that casino gaming would be a very viable industry for Jamaica and has significant potential for direct and indirect employment. It recommended that:

(1)   Casino gaming be introduced and appropriate enabling legislation enacted.

(2)   A revised regulatory operational structure for casinos be introduced.

(3)   A maximum of three casino licences be issued with no more than one licence per county.

(4)   No additional licences be issued for a minimum of 10 years.

(5)   Jamaican nationals and residents be allowed to use and work in casinos.

Based on this review, the government has taken the decision to permit the licensing of casinos. Applications for casino licences, however, will only be considered if the following conditions are met:

(1)   Minimum investment of US$1.5 billion and the construction of not less than 1,000 rooms;

(2)   Casino component to be no more than 20% of total project;

(3)   Operators of the casino to be subject to the approval of the government after appropriate due diligence including fit and proper tests and evaluation of track record.

(4)   An appropriate regulatory framework with the necessary legislation and enforcement mechanism is in place.

A team chaired by the Hon. Dennis Lalor has been established to recommend to the government the appropriate regulatory framework and tax regime to govern the operation of casinos. These will inform the legislation which will be brought to Parliament for consideration and approval.

In the meanwhile, the government has approved proposals from the developers of the Palmyra Resort and Spa, operating under a company known as Celebration Jamaica Ltd., for a major new investment predicated on the granting of a casino licence. This investment involves the development of a 65 acre property adjoining the existing Palmyra Resort at Rose Hall and consisting of 2,080 new hotel rooms. The project will involve a total investment of US$1.8 billion.

However, in order for this proposal to be committed to agreement, we had to renegotiate the terms of the agreement with the Tavistock Group in respect of Harmony Cove. This was so because under the agreement entered into with the previous administration, Harmony Cove would have enjoyed an exclusive licence to operate gaming machines within a 10 mile radius of any border of Trelawny. This exclusive zone encompasses Rose Hall.

I am in a position to advise that based on our undertaking that it will also be allowed to operate a casino, Tavistock has agreed to restrict its exclusivity to allow for an agreement to be signed with Celebration Jamaica and by an exchange of letters the Heads of Agreement have been amended accordingly.

This amended agreement involves much more. Tavistock has agreed to increase the size of the project from 4,500 rooms to 8,500 rooms with an additional investment of US$1-2  billion. These will be configured in a cluster of 9 hotels with a stupendous array of facilities and amenities.

Accordingly, the government has signed a Heads of Agreement with Celebration Jamaica Ltd. for the new development at Rose Hall.

There are those who I know disagree with casino gaming. I respect their views. The fact is that horse bolted through the gate a long time ago with the granting of licences for hundreds of gaming machines. With this decision, we have already secured agreements with these two investors for major developments involving over 6,000 new hotel rooms and US$2.8 billion of investment.

We will ensure that best practices are observed and that only reputable companies with proven integrity are allowed to operate in Jamaica.

It is our intention to dedicate the revenues from casino operations to a special fund to finance capital development in health, education and security.

Tidying-up issues

The Minister of Finance spoke about having to do what he called “tidying-up” involving matters carried over from the previous administration, e.g. expenditures that were made but not yet reflected in the budget and interest on the FINSAC debt which was capitalized by the Bank of Jamaica  but for which no securities were issued. The Minister of Finance will have to address these matters over time.

Some of these “tidying-up” issues involve unfinished business like the privatization of the state-owned sugar enterprises and the dispute surrounding the cost overruns on Sandals Whitehouse.

Sugar privatization

We have continued the work of the previous administration towards the privatization of the sugar cane assets. Negotiations with the sole bidder have progressed to the point where an agreement is in sight.

It would be premature for me to disclose the details of the agreement which is taking shape except to say the following:

    The taxpayers of Jamaica cannot continue to absorb the annual losses incurred by the sugar industry which have now accumulated to $18 billion.
    We have sought to ensure the continued existence of a SUGARCANE industry that can be viable and efficient so that cane farmers and cane workers are not left without economic opportunity.
    With the assistance of the European Union we have made provision to meet our statutory obligations to those workers whose status will be altered by the transition from government to private sector control.
    We have ensured that the vast acreage of lands connected with the sugar industry will not be transferred from government ownership.
    While being unequivocal in our view that the industry requires private investment and management, the government is not abandoning the industry.

I have been in communication with the distinguished Leader of the Opposition and will be meeting with her and her team to brief them on the shape of the agreement, which we hope to conclude within the next few weeks. Parliament will be duly informed, as soon as the negotiations are concluded.

Air Jamaica

Air Jamaica has accumulated losses of over US$1 billion. Last year its losses amounted to US$170 million, exacerbated by rising fuel costs.

We are mindful of Air Jamaica’s importance to Jamaica. It is a key airlift provider for the tourist industry. It is our flag carrier and Jamaicans, especially those in the Diaspora, are emotionally attached to it. However, we cannot continue to pile up these losses on the backs of the Jamaican taxpayer with no end in sight.

We have engaged the services of the IFC, the private sector arm of the World Bank, as consultants/advisors on the process of divesting Air Jamaica. An international competitive bidding process will be used to identify prospective investors who have the requisite technical and financial strengths.

Air Jamaica has value. We have no intention of giving it away. In spite of its difficulties, it carried 1.7 million passengers last year and commands 44% of the Jamaican aviation market. It has a strong and loyal customer base and it has the Jamaica brand appeal.

The final shape of the divestment arrangement will, of course, be determined after consideration of bids submitted. Our broad objectives, however, are:

    the transfer of complete or substantial majority ownership and full management control to the private sector
    the recapitalization of the airline
    the retention and long-term sustainability of Air Jamaica as the national carrier
    structural or contractual linkage to a major global carrier

We hope to complete the process of divestment by the end of this financial year.

If we are able to relieve the taxpayers of the annual losses incurred by Air Jamaica and the Sugar Company of Jamaica, it will save the taxpayers more than $10 billion per year. 

NROCC

I had advised the House in January of the looming crisis regarding the financing obligations of NROCC. This year, we are paying out $2 billion to meet NROCC’s debt obligations for the construction of Highway 2000. That is the last of the portion of the loan that was reserved for debt servicing. As of next year, NROCC will accumulate losses of $2-3 billion per year.

The undeniable fact is that Highway 2000 was badly financed with a substantial part of its funding, derived from subscription bonds issued at par but adjusted for inflation.

The DBJ has been mandated to develop a strategy for the financial restructuring of NROCC.

JUTC

The JUTC is another loss maker. Some progress has been made in reducing the losses but more will have to be done.

We have always believed that the railway should be an important element of our mass transport system. Efforts to restore the rail service have faltered for many years. The Minister has been pursuing the matter vigorously and the possibility of a major breakthrough now exists.

The Minister of Transport and Works will speak to these issues in the sectoral debate.

Ackendown/Sandals Whitehouse dispute

The dispute surrounding the cost overruns of over US41 million at Sandals Whitehouse remains unresolved and is the subject of litigation. The matter has to be brought to a resolution.

It has been agreed among the partners, NIBJ, UDC and Gorstew, that the matter be referred to arbitration and a decision has been taken to appoint Mr. Justice Hugh Small as sole arbitrator. It is hoped that this will enable the matter to be resolved finally and conclusively.

Forward sale of alumina

The Minister of Finance made reference to the agreement which the previous government entered into with Alumina Enterprises Ltd. and Glencore for the forward sale of alumina produced at the Clarendon Alumina Production plant at Halse Hall. It was a bad agreement.

Faced with a huge hole in the budget in 2000, the government secured a loan of US$125 million and, in return, agreed to sell all the alumina produced at the plant on the following basis:

    Half of the alumina produced would be sold at a fixed price of US$128 per ton.
    The other half would be sold at a price linked to the price of alumina on the London Metal Exchange but capped at 12 ¼% of that price.

It has turned out to be a bad deal because with the steep rise in the cost of oil and caustic soda our costs of production now far exceed the price we are getting for the alumina. It is now costing US$340 per ton to produce but, based on the forward sale agreement, we are getting only $225 per ton. We are losing over US$115 on every ton of alumina we ship. And this arrangement will remain in effect until 2011 and some elements until 2013.

It was a bad arrangement because what we did was to cap the top but leave the bottom open.

It was a bad arrangement because we knew at the time that as joint venture partners with Alcoa we would be obliged to finance our share of the capital investment to build the new mud lake and put in the infrastructure to open up new mining areas on which the continued operation of the plant depended.

As it is, we now owe the Jamalco joint venture partnership US$70 million for capital expenditure and US$70 as our share of the production costs. The proceeds we are receiving under the alumina sale agreement are not sufficient to meet these payments. Up to the end of last year, our losses on the sale of alumina were just under US$100 million. It is estimated that by the end of this year, these losses will have climbed to US$170 million and we are in danger of our shares in the enterprise being diluted.

The government has initiated discussions with the other contracting parties in an attempt to resolve this dilemma. We attach no blame to them. The agreement was entered into by us and them. We signed and they signed. As it has turned out, it was a bad deal!

Divestment of assets

The government is committed to the divestment of state-owned assets and enterprises which –

(a)    do not form part of our critical service obligations to the people

(b)   can be more effectively developed and operated with private capital and under private management

(c)    constitute an unnecessary burden on taxpayers

We have identified several such assets representing a total estimated value of $36 billion. The list is not yet finalized. The divestment process is being carefully worked out and the Cabinet has approved the appointment of a committee to be chaired by the Hon. Dennis Lalor to manage the process and make final recommendations to the Cabinet. The timing of the placement of these assets is also critical and must take into account the state of the market at any particular time, as well as, government’s own financing requirements.

Cabinet is to consider how the proceeds of divestment are to be applied and, while not wanting to pre-empt the deliberations of the Cabinet, I am of the view that these considerations should be confined to two areas: paying down the national debt and/or capital investment.

Ministerial waivers

We have been alarmed at the extraordinary level of waivers that are granted in the course of a financial year. They are broken down into discretionary and non-discretionary waivers.

The fact that so many waivers are even sought suggests, that there is something fundamentally wrong with our tax structure. It is one of the issues we will be addressing in the tax reform exercise.

Discretionary waivers are a matter of great concern. They are granted primarily by the Minister of Finance and, to a lesser extent, the Minister of Agriculture. They come under a lot of pressure from waiver seekers. I don’t like it one bit! They don’t like it either!

In 2006/07 discretionary waivers by the Minister of Finance alone amounted to $12.5 billion! That represents taxes that were waived. Some of it is justified e.g. imports by Food for the Poor and other charitable organizations. But $12.5 billion is much too much and represents a hole that has to be plugged.

The Minister of Finance has announced limits on the use of motor vehicle duty concessions, because that has been the subject of too much corruption. Concessions are granted to persons because of their limited means and the need of a car to do their jobs. Many of these concessions are used to purchase luxury cars and high-end SUVs. The registered owner and the actual owner sometimes don’t even know each other. Under the new regime, these concessions will only apply to vehicles not more than 2500cc and with a value not exceeding US$25,000. Vehicles above either of those limits will attract full duty from the very first dollar. This stipulation will apply to all who are entitled to the concession including parliamentarians and parish councilors.

The outrageous value of ministerial waivers has to be reined in. The Minister of Finance will be bringing to Cabinet a submission to define a policy to govern ministerial waivers. We are going to impose restrictions on the types of waivers that Ministers can grant and a limit on the amount that can be waived.

FINSAC

Last week, I received a petition signed by hundreds of “finsacked” Jamaicans calling for a Commission of Enquiry, a forensic investigation and suspension of any further sale of assets by the FINSAC debt collectors.

In examining the petition I saw the signatures of many notable Jamaicans, persons who have served their country well and are befuddled as to how their country could have done this to them. Some have lost their businesses that they spent their entire life to build. Some have lost their homes.

What is being done to these people is cruel, heartless and immoral!

The government sold the FINSAC debts for an initial payment of US$23 million. Thereafter, it is entitled to a percentage of whatever is recovered. Up to the end of January 2008, the debt collectors had recovered a total of US$122 million net of operating costs, out of which they paid the government an additional US$30 million. So, for an initial investment of US$23 million the debt collectors have so far made US$92 million.

What can the government do?

    The government cannot repurchase the loans. The taxpayers cannot bear that burden.
    The debt has been sold and the owners are legally entitled to enforce recovery even if it means selling the home of that 14 year old girl and her two brothers.
    The Money Lending Act which says that the maximum interest rate that can be charged on a loan is 20% does not apply to banks and licensed institutions with which the loans were originally contracted.

I have asked the Attorney-General to assemble a team to advise me on the matter. I can offer no assurance because there are legal and international business principles involved. What I can say which is all I can say to the FINSAC debtors at this time, is that this government is deeply moved by your plight and we are seeking the best advice available to determine what, if any, response can be made.

NHT

Part of the tidying up that we have been left with has to do with the NHT.

A major part of the problem with the NHT is that the former government did not pay over monies due to the Trust. Over the last 15 years, $10 billion should have been paid over as employer’s contributions. What the government actually paid was about $80 million – less than 1%. So, today it owes almost $10 billion in contributions and another $10 billion in interest.

What makes this so atrocious is that private employers are taken to court and fined for failure to pay over monies owed to the Trust when the government is the biggest culprit.

We have to tidy that up!

We have provided $2.3 billion in the budget this year. Half of that represents contributions that will become due this year and the other half will go toward reducing the arrears.

We will have to seek a waiver from the NHT for the interest. We will endeavour to pay the current portion each year and clear the arrears within 5 years.

That alone, however, will not solve the NHT’s financial problems. It recorded a small surplus of $528 million last year. More worrying are the prospects for the immediate future.

Extracts from staff retreat paper prepared by NHT management team January 2008 

 

“The Trust is anticipated to be operating at a deficit for each of the next five years (with a) cumulative deficit of approximately $14.7 billion at the end of 2012/2013”

“Based on projected trends, the cash reserves of the Trust will be totally depleted by the end of 2009/10 and the organization will require funding of $29.5 billion to offset cash flow shortfalls by March 2013 with cash having decreased from $8.96 billion projected in 2008/09. This represents a decline of $38.4 billion or 329%. Based on the balances at the end of each year, the Trust will be unable to stay within its margin of safety. The organization will face the risk of becoming insolvent”.

What has put the NHT in this precarious position?

(1)   Successive reductions in mortgage rates to levels which leaves no margin for sustainability

(2)   Significant expenditure on projects for non-NHT contributors which do not allow for recovery of the funds expended

Changes in NHT Mortgage Rates

September 2000

April 2002

August 2005

July 2007

Weekly Income

Rate

Weekly Income

Rate

Weekly Income

Rate

Weekly Income

Rate

Up to $1500

2%

Up to $2000

2%

Up to $5500

2%

Up to $7500

2%

$1501-$4500

4%

$2001-$4500

4%

$5501-$7500

3%

$7501-$10000

4%

$4501-$9000

8%

$4501-$9000

7%

$7501-$10000

5%

$10000-$20000

5%

Above $9000

12%

Above $9000

9%

$10000-$20000

7%

Above $20000

6%

 

 

Above $20,000

8%

 

Average Yield:  8.2%

Average Yield:   7.8%

Average Yield:   6.5%

Average Yield:   4.2%

Between 2000 and 2008, the average return on mortgages has been cut in half from 8.2% in 2000 to 4.2% in 2007. But the cost of funds to the NHT is 4.2%! There is no properly run lending institution that can lend money at the same rate that it costs to get the money to lend. It will not be able to meet its operational expenses. Its reserves will eventually be wiped out!

Non-recoverable expenditure

In recent years , the NHT has been directed to undertake projects which are incapable of paying back the costs incurred. Principal among these are the Inner-City Housing Programme (ICHP) and Operation PRIDE.

To date, the NHT has spent $2 billion on the ICHP. The original commitment was for total expenditure of $5 billion. The programme calls for a total of 3,000 units. 580 units have so far been delivered and 1,184 are in varying stages of construction. Without any increase in the number of units, the projected cost has now climbed to $15.5 billion.

The NHT has spent $3 billion dollars on NHDC & Operation Pride projects. Arrears outstanding now total $337 million.

There are two aspects of the ICHP that demand attention:

(1)    There is a significant built-in subsidy. Units are being sold at a price of $1.5-$2.0 billion below cost. Regular NHT mortgagers get no such subsidy.

(2)    The mortgage repayment performance is abysmal. Mortgage arrears are currently 69% compared to 13% for the regular NHT mortgage accounts.

Well-intentioned though these projects are, they threaten to ruin the NHT, an institution which was sturdily built and has been efficiently managed.

Question of trust

There is a deeper issue involved – one of trust! The NHT was conceived as a compulsory contributory scheme. 2% is deducted from the worker’s wages and 3% is contributed by the employer in the interest of that worker. The intention was that these workers would be able to access mortgage benefits from the Trust. It was never the intention that although only some contributed, all and sundry would benefit. If that were the case, there would be no value in contributing.

This increasingly, the previous government treated the NHT as part of the Consolidated Fund. The ICHP is a clear example. Persons are decanted in order to make way for the construction of new housing units. When these are completed, they are installed in the units. It doesn’t matter whether they had contributed to the Trust before. It doesn’t matter what their income level is or whether they have any source of income. It is not surprising that the arrears now stand at 69%. Some don’t bother to pay because it is “government house”. Others don’t pay, because they simply cannot afford to pay.

I believe it is wrong to use NHT funds to provide houses for persons who have never contributed to the Trust, while many who have contributed are still waiting for a benefit. It is like throwing a “partner” and allowing persons who never threw to get a draw before you.

Must we abandon the building of houses in our inner cities? Certainly not! But it cannot be at the expense of the NHT contributors.

We are going to complete the ICHP projects that are already under construction. These amount to 1,184 units and are located at:

                                    231 Spanish Town Road

                                    White Wing

                                    Majestic Gardens

                                    Denham Town (Block J)

                                    Swallowfield

While those are being completed, we intend to conduct a review of the programme to devise a way to address the undeniable need for inner-city housing without impairing the viability of the Trust or doing injustice to its contributors.

It doesn’t mean a retreat by the NHT from inner cities. There are NHT contributors there who are entitled to NHT benefits, but other means will have to be found to provide for those who are not NHT contributors.

Three new approaches will be pursued:

(1)   Greater effort will be made to encourage individuals in inner-city areas, especially self-employed and informal sector workers, to become voluntary contributors to the Trust, so that they can become entitled to benefits.

(2)   The Ministry of Water and Housing will purchase, on mortgage-linked repayment terms, units built by NHT, which are to be sold to non-contributors so that the NHT expenditure becomes part of its investment portfolio.

(3)   Ways must be found to provide appropriate and affordable housing solutions for inner-city residents to eliminate or minimize the need for subsidies.

(4)   Any subsidies to non-contributors must not be for the account of the NHT

The “social housing” component normally funded from the NHT will now be funded from the Constituency Development Fund.

Discussions are taking place between the NHT and the Ministry of Water and Housing to rationalize the situation regarding non-performing NHDC and Operation Pride loans. Some workout arrangements will have to be made, so that these do not continue to be a burden on the Trust.

The Board of the NHT has approved proposals designed to ensure the viability of the Trust and ensure that it continues to provide affordable housing solutions to its contributors. These are contained in a Ministry Paper tabled today which covers a document entitled “Financial Viability Model”. It outlines a number of cost saving measures to improve the finances of the Trust. I have also tabled a document entitled “Modified Benefits Policy 2008” which outlines a number of new measures to provide greater access to benefits for NHT contributors.  

It is on the basis of these changes which have been carefully worked out by the management of the Trust and endorsed by the Board that the NHT will be able to provide new housing solutions for its contributors. The details of these have also been tabled.

I was impressed with the stridency of the Leader of the Opposition. I invite her to examine the financial data on the NHT that have been tabled today. I will instruct the management of the NHT to make available to her any additional information she may require. I invite her to do as I did – seek the advice of reputable chartered accountants and financial analysts – and then determine for herself, the necessity for these measures to safeguard the future of the NHT.

I have no intention of presiding over the ruination of the NHT. If we don’t change course, we will be forced to reduce drastically the number of new housing solutions that are provided. I intend to do no such thing. It is our duty to ensure that the trust of the NHT contributors is redeemed and that the Trust remains viable. Political rhetoric will not cause us to shirk that responsibility.

Shelter strategy

While I am responsible for the NHT, it is the Minister of Water & Housing who has broad responsibility for the housing sector and he is directly responsible for the provision of housing solutions for non-NHT- contributors. He will outline the new approaches which will be taken to address the acute shortage of housing.

One of the issues that must be tackled urgently is the need to restrict the spread of squatter communities. We have identified some 700 squatter settlements across the island. It is going to be a mammoth task to upgrade those that can be regularized and relocate those that pose a danger either to themselves or the environment.

The Minister will outline the steps that are being put in place to halt the growth of squatter settlements. It will require firm action and rapid response from the Police. It will also require the accelerated provision of serviced lots so that would-be squatters can have somewhere to erect their structures rather than capturing land to which they are not entitled.

One important aspect of the approach that has to be taken is to re-examine the issue of land titling. The LAMP programme carried out by the previous administration in the parish of St. Catherine recorded some success but fell far below expectations, as less than 1,000 titles were produced.

We are seeking funding to expand the cadastral mapping of the island. The actual work will take a minimum of 10 years, but we want to move more purposely on this important endeavour.

A land title can be a powerful instrument not only in stabilizing and enhancing orderly development within informal settlements but for facilitating economic activity among thousands of persons who have assets (land) that cannot be used for creating wealth.

I have challenged the NLA, NEPA and the Attorney-General to revisit the issue of land titling.

What is a title?

We have instituted a convention in which a title is proof of development. So, in order to get a title, roads have to be built to specified standards, water supply must be installed and the requirements go on and on. This has, by and large, restricted title registration to those who can pay for these developments.

What should a title be? Should it be a certificate of ownership rather than an authentication of expensive development? Should the effecting of that development not be separated from the issue of ownership so that the development can be viewed as a process which, if necessary, is carried out incrementally over time and is allowed to determine the value of the land, rather than the certified ownership?

Am I opening a pandora’s box? No. Simply thinking outside the box!

We are pursuing the proposal we had put forward in our election manifesto for the establishment of Community Land Tribunals to help to affirm ownership of lands by taking oral evidence at the community level where boundaries are clearly established and ownership is not in dispute but documentation does not exist.

If we can find a way to make it easier for people who have undisputed ownership of land to be able to have the ownership legally certified, we would unleash enormous wealth-creating power. I am determined to drive that process.

Placing the people at the centre

The Leader of the Opposition has charged that the Budget doesn’t have the people at the centre.

When we abolish tuition fees in high schools so that poor people’s children are not kept out of school because they can’t pay the fees, it is because the people are not only at the centre of the budget; they are at the centre of our minds!

When we abolish hospital charges so that poor people don’t have to stay home and die because they don’t have the money to pay the hospital fees, it is because the people are not only at the centre of the budget; they are in the centre of our hearts!

I found the comments by the member for Central Manchester most revealing. He disagrees philosophically with these initiatives. He calls it “freeness”, “clientelism”. He says people must take personal responsibility for themselves; they must be prepared to pay something. The Survey of Living Conditions reported in 2004 that Jamaican families spent $19 billion of their own money on education: uniforms, bus fares, lunch money, books and, at that time, tuition fees. They are taking as much responsibility for themselves, as they can!

We take the view that educating our children is more than just a parental responsibility. Yes, they must do everything they can. The Minister of Education is establishing a Parenting Commission to help them to do that, but educating our children is a national imperative! For we as a nation will be much better off, if our children are educated.

The member for Central Manchester was equally harshly critical of the abolition of hospital charges. In the short time since the decision was taken, there has been a significant increase in patient flow. We have managed that increased load well and I want to commend the Minister of Health and the Environment and his team for a challenging task, well executed.

Where we have encountered problems is in the shortage of hospital drugs because the number of patients turning up with prescriptions was greater than we had anticipated. Our next regular shipment of drugs is due at the end of the month but, in the meanwhile, the Minister has made arrangements to source drugs locally to meet the shortfall and we should now be in a better position to fill those prescriptions.

We expect that the flow will taper off and even decline once the initial rush is over. What we have been seeing are weeks, months and, perhaps, years of illness that could not venture into the hospitals because they didn’t have the money to pay. And if we needed any vindication of the correctness of our decision, the increase in the number of patients provides it.

We must ask the question: Where were all these sick people before the fees were abolished? Going to private doctors? No! Private doctors are reporting that there has been no fall-off in their patient flow. So, where were all these sick people? They were at home bearing the sickness, trying a little bush medicine. They were taking personal responsibility! SLC 2006 reports that 35% of the poorest quintile said they were not able to seek medical help, because they had no money.

There is more data to support our position. SLC 2006 reports that there was a 50% increase in real terms in expenditure at public health facilities compared to 2004. At the same time, there was a 47% decrease in expenditure at private facilities and a 7% decrease in expenditure on education. What this means is that not only were they leaving the private doctor and turning to the public hospitals but they now had to make a choice between taking granny to the hospital and sending Junior to school. Nobody should have to make that kind of choice. This government is taking responsibility!

The position of the member for Central Manchester reveals not just a philosophical fixity. It reveals a myopic disposition. He says that government assistance should not be extended across the board because it is inherently inefficient. Rather, it should be targeted to those who are most vulnerable. Those who can pay should pay!

How do we determine that? When a woman is wheeled in to a hospital writhing in pain, how do you determine whether she can afford to pay? Ask her? And when she says she can’t pay, what do you do? Put her treatment on hold while you check it out?

It is a myopic view because it is unbalanced. The government grants billions of dollars of incentives, waivers and concessions to the hotel sector, farmers, manufacturers, exporters etc. Has the member ever argued that we shouldn’t do that, that those who can pay should pay?

We provide motor vehicle duty concessions to MPs. That is a subsidy. Has the member ever suggested that we shouldn’t do that; that those MPs who can afford to pay should pay?

I once heard the member for Eastern Hanover make the profound observation that when government provides assistance to people near the top it is called “incentives”. When it is given to people at the bottom it is denigrated as “subsidies”.

Removing tuition fees and hospital charges does not solve all the problems of our education system and health services…..far from it. But it helps poor people and the people are not only at the centre of this budget, they are at the centre of the concern of this government.

Transforming education

The Minister of Education will outline in the sectoral debate our plans to transform the education system. During our recent Cabinet retreat, he startled many of us when he revealed that of the 53,000 students “graduating” from high schools each year, 38,000 of them are “unattached”, meaning that they have not achieved the minimum qualifications required to go on to higher learning or enter the job market. 25,000 of them have not passed a single subject! They go home, many of them to live wasted lives.

His, is one of the toughest jobs in the Cabinet. He is the youngest member of the Cabinet – still in his mid 30s and I placed him there for a reason.

He is moving education transformation beyond just building more schools. We have to build more achievements, better lesson delivery, better school management, better academic performance, more school discipline. When he speaks he will tell you about:

    the restructuring of the Ministry to decentralize, not just regionalize;
    the intensification of the assessment process and remediation efforts so that Grade 7 capability doesn’t find itself bewildered in Grade 9 and so that we don’t hand out certificates to “graduates” who can’t read or write – certificates that certify nothing!
    the plans to bring HEART/NTA and its competency-based NVQ certification programmes into the high schools and to extend the school age by two years, so that students don’t leave school until they have acquired a skill that can navigate them through life
    the homework programme that we want to launch in September, to ensure that learning doesn’t shut down when the bell rings
    the roll-out of audio-visual technology to improve the quality of lesson delivery and the learning process

Modernizing our health services

The improvement of our health service is one of the priorities of this government. It creaks under stress and suffers from many deficiencies. Yet, we must commend our health workers – doctors, nurses, pharmacists, technicians, porters, ambulance drivers, administrative staff – for the tremendous work they do under difficult circumstances.

We continue to be short of critical staff especially nurses, pharmacists and medical technicians. We lack much of the state-of-the-art diagnostic and surgical equipment that can help to save lives and make people get well.

The dedication of the casinos revenues to develop the health services is a reflection of that commitment.

Let me share with you our vision and plans for the health services:

    We want to strengthen primary care facilities to divert from the hospitals those cases that do not require hospital treatment so that hospitals can concentrate on the things that hospitals are needed to do.
    We are negotiating to acquire the St. Joseph’s Hospital to allow us to establish a trauma centre either at KPH or St. Josephs, as part of a move toward the establishment of specialist hospitals to deal with chronic, prevalent ailments such as cancer, heart disease, and eye impairment.
    We are working toward the establishment of regional diagnostic centres providing a full range of diagnostic services that would be within reasonable distance for the entire population.
    We are pursuing the introduction of telemedicine technologies that would link remote medical facilities with major treatment centres for real-time diagnosis and consultation.
    We are committing our support to enhance our bio-technological capabilities to undertake research and development of pharmaceutical products from indigenous herbs and plants.

The Minister of Health will address these and other issues in the forthcoming sectoral debate.    

Sustaining the fight against crime

The high level of crime remains one of our most pressing problems. Violent crime has become systemic and endemic in particular communities in various parts of the island and is unresponsive to traditional policing methods.

More resources are needed to improve the capability of the Police Force. These are being addressed based on a structure of priorities. The available resources must be more effectively deployed. Special emphasis is being placed on greater use of technological and forensic tools.

Intelligence gathering, analysis and utilization are critical for success. Strategic measures are being put in place, the details of which it would be inappropriate to disclose.

The source of intelligence is the ordinary people who live in the communities where the criminals are known and crimes are being committed. But even as we continue to plead for them to come forward and help us to get the criminals, we must ensure that they are not discouraged and alienated by the conduct of those police personnel who are unmindful of their sworn duty to serve, protect and reassure.

The effectiveness of the Police Force is undermined by those members who are engaged in corruption, some of which involves consorting with criminal elements. The new leadership of the Force is taking a very pro-active approach to rid the Force of undesirable elements. Since the start of the year, 27 policemen have been charged with criminal offences including corruption. We intend, with the cooperation of the Opposition, to effect certain changes to strengthen the powers of the Commissioner to lead and manage the members of his Force.

Social intervention measures will be intensified to enlist more communities and community members in the fight against crime. There will be much closer strategic collaboration between the relevant government agencies, NGOs and community-based organizations in this effort.

This year, we intend to enact specific legislation to improve police investigative capabilities and strengthen prosecutorial effectiveness.

The strategic review of the Jamaica Constabulary Force which was commissioned last year has been completed and its report is expected to be submitted before the end of this month. It is expected that this will provide a blueprint for modernizing the Force and improving its crime-fighting capabilities and performance.

The Minister of National Security who is recuperating from surgery will be back at work shortly and will deal more comprehensively with these matters in the sectoral debate.

Justice reform

An efficient and effective justice system is not only a critical component in the fight against crime but it is an absolute necessity for a stable and orderly society. Like so many critical areas of national life, it has suffered from an inadequacy of resources and is creaking under pressure.

We are committed to the implementation of the changes recommended by the Justice Reform Task Force and this will commence this year on a phased basis.

We will be strengthening the independence of the judiciary by establishing a Court Services Agency to give the Chief Justice administrative control over the Courts system and the necessary legislation will be brought to Parliament this year.

We will be fulfilling our pre-election commitment to provide security of tenure for Resident Magistrates so that their independence as dispensers of justice can be assured.

We will be taking steps to transfer the prosecutorial functions of the Clerks of Courts to the Office of the Director of Public Prosecutions. Clerks of Courts will be re-designated Assistant Public Prosecutors. The administrative duties of Clerks of Courts will be assigned to the Court Services Agency.

In order to clear the backlog of cases in the RM Courts, retired Resident Magistrates, private attorneys and Court administrators will be engaged on a contract basis to increase the number of Court sittings.

Legislation will also be brought to Parliament to increase the number of High Court Judges to overtake the workload there, We intend to expand the jurisdiction of the Lay Magistrates Court to reduce the case load at the RM Courts.

We will finalize arrangements for the establishment of Community Justice Tribunals manned by Justices of the Peace to resolve disputes between citizens that do not involve criminal offences and are heard with the consent of the disputing parties. Settlements would be enforceable by the Courts.    

Questions regarding eligibility of members of the House

The question of the eligibility of members to sit in this House has been raised and the Chief Justice has ruled in the matter. Had I prior knowledge of any such infraction on this side, then as Leader I would have provided the appropriate guidance.

It has implications not for this side alone. A well cited case in Trinidad pronounced that renunciation of foreign allegiance after nomination day still renders a member ineligible. The recent ruling of the Chief Justice asserts that even if one acquired foreign citizenship by right of birth, the act of traveling on a foreign passport obtained during adulthood constitutes an allegiance to a foreign power which renders one ineligible and, therefore, any of us who has done so is also ineligible.

Our Constitution is the supreme law and it must be observed. But we must take note that breaches in the past have gone unnoticed, and some of those breaches demand that we revisit some of the provisions of the Constitution.

There are others who have served in this house whose membership would also have been struck down if appropriate action had been brought – some of blessed memory, some of current memory, some, even of recent memory. In 1972, for example, a member was elected having returned to Jamaica just weeks before nomination day. He was a citizen of Jamaica and bore allegiance to no other country. Nevertheless, he was ineligible to sit in the Parliament of his land because under section 39 of the Constitution, a person who on the day of nomination is a Commonwealth citizen not less than 21 years old and “has been ordinarily resident in Jamaica for the immediately preceding twelve months” shall be qualified to be elected as a member of this House “and no other person shall be so qualified”. The person, of whom I speak, nonetheless, took his place and was appointed to the Cabinet. But this same section would have allowed, for example, a Canadian citizen who has lived in Jamaica for 12 months and may not have obtained a Canadian passport or done anything to assert his Canadian citizenship to be elected to this House. There is an absurdity in that which needs to be addressed.

The legitimacy of this Parliament or the membership thereof must not continue to be called into question. The matter can be resolved either by the courts or by political action. The matter will be resolved.

Corruption

The Leader of the Opposition has made her declaration about corruption and accountability. I take her at her word and I welcome her affirmation. As party leaders, we depend on the loyalty of those whom we lead. Our solemn oath to the people of Jamaica, is the trust we must hold most sacred and inviolable.

Before the elections we pledged to the people of Jamaica that we would be resolute in our efforts to stamp out corruption. We are taking steps to honour that commitment.

    We are ready to table a new Corruption Prevention Act with stronger powers and with provision for the appointment of a Special Prosecutor to relentlessly pursue and prosecute those engaged in corrupt practices.
    We will seek to finalize the recommendations of the Constitutional Reform Committee for provisions to impeach public officials who engage in corruption or betray public trust.
    We have prepared a Green Paper on whistleblower legislation which will be brought to this House for consideration by an appropriate Select Committee.
    We will be tabling the report of the Special Committee which reviewed defamation laws and has recommended changes that will ensure that the law is not allowed to be used as a firewall for the protection of scoundrels.
    We will be bringing to Parliament this year, legislation to amend the Contractor General Act to criminalize serious breaches of government contract award procedures.

PSC

The Leader of the Opposition has made some trenchant statements about the replacement of the PSC. That matter is the subject of a challenge in the Supreme Court and, therefore, I will refrain from commenting on the specific charges she has made.

But it may be of interest for me to quote from two letters written to a former Governor-General by members of previous Public Service Commissions.

Charge of vindictiveness

The Leader of the Opposition has accused this government of vindictiveness. It is a most unfair statement. I don’t think there has been any government before that has been more magnanimous and accommodating in the treatment of persons associated with the previous administration. I have not hesitated, when the situation warranted it, to publicly rebuke my own members when they cross the line. I reject the charge

Good governance

The issue of governance has been raised, quite appropriately, by the distinguished Leader of the Opposition. It is a firm commitment by this government which we made when we were seeking office.

I signalled the firmness of that commitment when I spoke to the nation on the night of the election and again when I took the Oath of Office.

This year, we intend to continue to deliver on that commitment.

Constitutional reform

We will seek to have discussions with the Opposition with a view to implementing those Constitutional reform proposals on which we have already agreed.

Human Rights

    The Charter of Rights Bill to strengthen and safeguard the rights of every citizen has again been tabled and we will seek the required support of the Opposition to enact it this year.
    We are now ready to table the Bill to establish an Independent Authority to investigate abuses by members of the security forces.
    We are also ready to table the Bill to establish a Special Coroner to conduct speedy inquests when citizens are killed by agents of the State in questionable circumstances.

Parliamentary reform

    We have held true to our promise to appoint Opposition members to chair critical oversight committees.
    We have asked the Standing Orders Committee to consider a range of proposals to strengthen the role of Parliament and, in particular, the role of the Opposition in Parliament and we anxiously await the deliberations and recommendations of that Committee.
    We have provided $23 million in this year’s budget to establish an Office of the Leader of the Opposition because we respect the constitutional role of the Leader of the Opposition and we believe that it should be adequately supported by the State.
    We are committed to subjecting to parliamentary scrutiny the appointment of persons to sensitive posts including ambassadorial and statutory board appointments as soon as the Standing Orders Committee has worked out the procedures for the conduct of such oversight.
    We stand ready to enact legislation to regulate the financing of political parties as soon as we have received the appropriate recommendations from the Electoral Commission.
    We remain committed to having reports of oversight authorities such as the Auditor-General, Contractor-General, Political Ombudsman, Corruption Prevention and Integrity Commissions fully debated in Parliament and we are anxious that the Committee to which these matters were referred proceed with a greater sense of purpose.

Effective political representation

We have been faithful to our commitment to establish the Constituency Development Fund to enable MPs to respond more effectively to the needs of their constituents. While fiscal constraints limited the provisions that could be made this year, we have made a good start and will expand it in future years. Systems for proper accountability have been put in place and while these may be burdensome we must recognize that this programme will be under intense public scrutiny and will be a test of our integrity and capacity for efficient management.

Local government reform

The local government reform programme is being fast-tracked. There are some critical policy decisions to be made and the strategic options will be brought to Parliament for discussions this year so that the review can be completed within the two-year timeframe that we had set and implementation can begin next year.

Conclusion

We are now embarked on our first full fiscal year as the government of Jamaica.

We are mindful of the expectations the people have of us, some of them inescapable, some of them unrealistic. We accept them because they represent the heights that great men must strive to reach and keep.

We are ever so mindful of the difficult global environment through which we are called to navigate this country. We do not offer that as an excuse. Rather, it is a challenge that must command us to find that extra strength, that extraordinary resolve, that unprecedented ingenuity to demonstrate that our mission is not mere survival – our mission is VICTORY!

Speaking in the House of Commons on August 20th 1940 as Britain braced itself for invasion by Hitler’s forces, Sir Winston Churchill declared:

“Rather more than a quarter of a year has passed since the new Government came into power in this country. What a cataract of disaster has poured out upon us since then! But we have not only fortified our hearts but our Island.

The dangers we face are still enormous, but so are our advantages and resources.

We are still toiling up the hill; we have not yet reached the crest-line of it; we cannot survey the landscape or even imagine what its condition will be when that longed-for morning comes. But for the rest, we have to gain the victory. That is our task.”

I close on a very personal note.

I first entered this Parliament 36 years ago – 10 years after independence. I was still enthralled by the spirit of that enormous event. I took my place in this House fired up, not with youthful exuberance, but with a sense of what we had set out to achieve and what we had the capacity to achieve. I saw then a vast horizon of opportunity for us as a people. I had a passionate belief that our reach was much greater than our grasp, that the journey may seem long but with every step we took we would be one step closer to a greater day.

Those 36 years have had their ups and downs. Few things of any value progress in a straight line. In those 36 years I have been on this side and that side, I have been on the inside and the outside. My faith in Jamaica and its people has never waned. I have never lost hope. I have never lost my belief that we can make it if we try, that we can be as good as the best and better than the rest.

I have one overriding hope and ambition for which I seek God’s help and guidance every day – not to amass wealth or even to enjoy fame. Those things mean little to me.

I simply want

·         to right the wrongs that should not exist

·         to help the poor to escape from their poverty

·         to enable that young man on the streets of the ghetto to walk around with a smile on his face instead of a gun in his waist

I do not dream an impossible dream!

I simply want to make this a better place for all Jamaican people to live a better life

I believe with all my heart and soul that, together, we can make it if we try!

 

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