Take your head out of the sand, JMA!

Robert Wynter, Contributor

In an article published in The Sunday Gleaner of March 4, 2012, the Jamaica Manufacturers' Association (JMA) responded to my article published the previous week on problems afflicting the manufacturing sector.

While I agree with the association that manufacturing in Jamaica is not dead, the sector suffers from unrealised potential because of insufficient leadership, governance, strategy and accountability.

Based on its feeble attempt to counter the assertion that the sector is riddled with inefficiencies as confirmed in official statistics, it appears that the JMA has its head buried so deep in the sand that it finds comfort in blaming everyone else for the sector's continued decline.

Incentives vs Subsidies

The JMA stated: "Mr Wynter pointed out in his article that the association lobbies for subsidies for the sector, which is incorrect. Instead, we have lobbied for incentives to enhance the competitiveness of the manufacturing sector, which is nothing new or unique to Jamaica."

The JMA fails to understand that an incentive is, in effect, a subsidy. An incentive/subsidy is justified only if it redounds to the greater good. Had the incentives provided under the 'Modernisation of Industry' programme resulted in an overall modernisation of the sector, it would have been justified as the country would have benefited.

Instead, the reduction of duties under the programme, for the most part, went directly to the pockets of business owners while the majority of these businesses remained uncompetitive. While providing examples such as Spur Tree Spices, AMG Packaging, Trade Winds Citrus and LASCO Manufacturing as having modernised, the JMA failed to admit that these are exceptions to the rule and not typical of the sector.

Protection, Handouts and Support

The article continued: "Mr Wynter also declared that a strong manufacturing sector needs no protection, which is a faulty statement ... ." However, while suggesting that manufacturing needs protection, the JMA contradicts itself in the very same paragraph by saying the following "... We are not asking for protection or handouts, but for greater support to the sector."

Rather than asking for support, manufacturing should be generating enough surpluses to provide needed support to health, education, social welfare and community development, thereby negating the Government's voracious appetite for borrowing.

Manufacturing and Vision 2030

In my article, I quoted GDP, employment and productivity figures for the sector. In its response, the JMA commented on the first two, but conveniently avoided the third. In 2009-10, manufacturing's low productivity, which I contend is largely within the remit of the sector, was J$532,000 (2003) or approximately US$6,600 value added per worker. Jamaica's National Development Plan projects our GDP per capita to be around US$25,000 by 2030. Therefore, with an estimated 50 per cent of the population gainfully employed at the time, a strong manufacturing sector should be generating US$50,000 per worker.

With only 18 years to go, the sector needs to improve its productivity by 700 per cent to make any meaningful contribution to achieving Vision 2030. The JMA's article leaves me with little confidence that this will happen.

Buy Jamaica vs Sell Jamaica

During the days of trade barriers, the manufacturing sector flourished while consumers suffered because they had little or no choice. In the nearly 30 years since the dismantling of these barriers, most players in the sector have yet to come to terms with the new world order. Hence the JMA call for protection (oops, support). Consumers today faced with choices based on quality, availability and price are very often choosing imported goods over local ones.

Rather than encouraging its members to seriously retool and otherwise strategise to regain the local market and to exploit the huge export market, JMA's Buy Jamaican campaign has been an attempt to use patriotism to influence consumers' purchasing decisions.

David Rabkin, in an article published in the local press several years ago, suggested that manufacturers shift their mindset from Buy Jamaican to Sell Jamaican, thereby shifting the burden from Jamaican consumers to buy locally produced goods to producers to sell these goods into the export market. The JMA clearly demonstrates that Mr Rabkin's comments have fallen on deaf ears.

Net consumer of Foreign Exchange

The article continues: "Mr Wynter, we ask, how inefficient could we be if we are servicing the local and international market, and earning foreign exchange to the tune of US$646.7 million?" First, efficiency (productivity) statistics do not lie. Second, if the sector was indeed optimally "servicing" the local and international market, why would the JMA ask for support? Third, while the sector does, in fact, earn approximately US$650 million annually, the JMA somehow did not indicate that the sector imported raw and intermediate goods to the tune of US$1.139 billion in 2009-10 as per the 2010 'Economic and Social Survey of Jamaica'. Manufacturing is, therefore, a net consumer of foreign exchange, contributing significantly to the country's trade deficit.

Brand Jamaica

The JMA continues: "How inefficient can we be when people all over the world are trying to take advantage of the strength of Brand Jamaica?" While we agree that products like rum, beer and coffee contributes to Brand Jamaica, it has been our sports, music, arts and culture that have had the greatest contribution. In fact, it is precisely because of its inefficiency why the sector has failed to adequately exploit the strength of Brand Jamaica.

JMA's role

The article continues: "What we need are better policies to support industry and to rid the system of bureaucracy ... . We need to create an enabling and facilitative business environment for manufacturers to prosper and a demand for our products by buying Jamaica."

It is well accepted that all companies in Jamaica are constrained by bureaucracy. However, I believe that internal inefficiency is a greater scourge on the fortunes of the sector than government bureaucracy can ever be. The fundamental purpose of the JMA, like any private-sector association, is to lobby the Government to create an enabling and facilitative environment for businesses to prosper.

The fact that we do not have this enabling environment suggests that the JMA, and others, have failed to adequately influence Government. Instead, the association has been parochial in seeking incentives to serve its own narrow interests rather than seeking to lobby for the removal of disincentives which would benefit everyone.

Way forward for JMA and Manufacturing

JMA needs to make the paradigm shift from asking for incentives to lobbying for the removal of disincentives. It also needs to make the paradigm shift from blaming others to taking accountability for the sector's performance. In so doing, a JMA five-year strategic plan should be formulated to move the sector from a productivity level of $532,000 per worker to $1,000,000; and from a net consumer of foreign exchange to a net earner.

The JMA's activities, policies, programmes and lobbying efforts would then be focused on transforming the sector to achieve those targets. The first order of business, however, is for the association to extricate its head from the sand.

Robert Wynter is the managing director of Strategic Alignment Limited, which facilitates organisational realignment and leadership development. Email feedback to columns@gleanerjm.com and rob.wyn@hotmail.com.