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Confronting the debt crisis pt. 2
Last week we explored the effects that monetary policy at the turn of the millennium may have had upon the current mortgage and overall debt crisis. As several individuals are calling for a further reduction of the discount and prime rates (DR and PR), it is important to note the impact such a move will have on individuals' credit positions and financial wellbeing.
There is no doubt that the reduction of the DR and PR proved beneficial to the government in that it provided the government with an opportunity to service its debt at a lower interest rate, even though the overall benefits to consumers appears to be minimal. On the other hand, the reduction of the DR and PR would have negatively impacted some organizations, Financial Institutions (FIs) and the National Insurance Board, as they would have lost millions of dollars in investment income.
In the final analysis, FIs usually win and are rarely dealt the bad hand of the stick in any situation within a credit-driven and consumer society like The Bahamas. Financial Institutions in response to the aforementioned reduction imposed charges in other strategic areas, increased some of their fees and maintained their rates for consumer loans. We have witnessed quiet increases in FIs' fees for transactions such as ATM or passbook withdrawals - service charges on accounts and additional fees were applied to loans in the aftermath of the rate reductions. A well-known fact is that the ultimate and main loser is usually the consumer who on the one hand receives a 'supposed' break on his debt servicing due to the DR and PR reduction, but pays hidden fees and charges on the other hand.
The net effect on the consumer is that he/she ends up paying the same amount and in some cases more to the FIs, which may result in non-performing loans or lost property to foreclosure. This reinforces the point that an active Consumer Protection Commission ought to be in place to provide checks and balance on behalf of consumers relating to financial transactions among other things.
In addition to providing debt-servicing relief, it is expected that further reduction in the DR and PR should have also provided access to credit at a cheaper rate for individual and business consumers. The positive effect for business owners is that it creates the opportunity for expansion of the business and/or maintenance of inventory levels. However, it is estimated that approximately one third of commercial banking loans extended to Bahamian companies are in arrears. If businesses are faced with increased energy and gas costs combined with tax increases in National Insurance, business license fees and other diverse areas, it becomes less possible for businesses to be sustained during the current economic climate and more importantly create jobs that will help stem the growing unemployment rate.
The likelihood of FIs extending credit under already constrained circumstances is lower than normal and the underwriting of new loans is being done with extreme caution - a prudent course of action. This further emphasizes and highlights the importance of and the urgent need for a functional and effective credit bureau. It is noted that the Central Bank of The Bahamas had obtained assistance from the Caribbean Regional Technical Assistance Center (CARTAC) with the aim of establishing a credit bureau, albeit the process has been ongoing for a few years. Considering the history of adjustments to the DR and PR, these rates are normally revised (downwards for the most part) not more frequently than in five-year intervals. Whereas this does not suggest that monetary policy should be stalled or be predictable, the historical trends suggest that there is ample time to establish a credit bureau prior to any potential adjustments to the DR and PR.
What are the fiscal policies of the political parties?
In light of the challenges that our economy faces and the general consensus that we must revisit our economic model, it is disturbing to see that little is being said about the proposed fiscal policies of political parties as we enter the heart of the general election campaign. It is a well-known fact that during the election campaign seasons in the past, we have heard politicians produce their grand ideas of what they intend to do for the Bahamian people. The important part of the equation is, however, often omitted and very rarely if ever do we hear about how they propose to 'foot the bill' for their grand but necessary ideas.
It seems inevitable that the next government post the 2012 general election will have to continue this spate of borrowing at least during year one of governance to ensure the government is able to meet its obligations. Fortunately, government debt servicing has been aided by one-off payments in 2011 from the sale of the Bahamas Telecommunications Company and capital inflows from Baha Mar. However, the likelihood of similar capital injections for 2012 is slim. A part from a significant turnaround and increase in tourism numbers and the government's ability to constrain its spending habits, it is difficult to see how we will get ourselves up out of this national disaster.
Our politicians seem to have mastered the art of avoiding reality and failing to inform us that hard decisions will have to be made. In essence, austerity measures are not unforeseeable and it could be argued that these measures are unavoidable. Of course such declarations are unpopular (albeit they would be truthful) and politicians fear the potential backlash of such honesty. The government has continued to borrow in the midst of declining revenues and increased taxes that placed a heavy burden on the Bahamian people. It would not be surprising, therefore, if the current tax levels are maintained or increased to meet budget requirements. Unfortunately, the persons most affected by these tax burdens form part of the working and shrinking middle classes. In the absence of foreign direct investment or new sources of revenue, any reduction in taxes will most certainly require the government to carry out extreme measures to cut its spending, increase the efficiency of state-owned enterprises to stop wastage and implement efficient tax collection policies.
The national debt crisis constitutes an unwanted and unsolicited gift to future generations of Bahamians that threaten their opportunity for economic prosperity. This crisis and prevailing macroeconomic indicators makes it difficult to see any significant economic growth in the near future. Our leaders and all of us must rise above the partisan politics and make a concerted effort to place our economy back on track.
o Arinthia S. Komolafe is an attorney-at-law. Comments can be directed at arinthia.komolafe@komolafelaw.com.
Invincible motherhood
The term "Invincible Womanhood" in The Bahamas has become associated with the Women's Suffrage Movement and more specifically is remembered as part of the famous speech by the late Dame Doris Johnson to members of the House of Assembly in 1959. The description of motherhood in this manner is only appropriate insofar as it speaks to the strength, fortitude and courage of mothers across the globe.
A celebration of motherhood, Mother's Day, which was recently celebrated, is a most celebrated and highly anticipated day on the annual calendar in so many countries. It is a time when many reflect on, honor and appreciate the love, sacrifice and benevolence of the mothers and mother figures. In the days leading up to Mother's Day, children are guided to make special little gifts for their mothers, families attend church together and fathers often purchase flowers and special items for the mothers in their lives.
The origin of Mother's Day
The origin of Mother's Day celebration in The Bahamas does not seem to be very well documented; however one can assume that the actual historical genesis of this celebration is closely connected to and derived from the United States of America.
History records that in 1907, Anna Jarvis, a member of a Methodist congregation in West Virginia, gave away white carnations in church to commemorate her mother's life who had passed on. In 1908, she lobbied for the day to be recognized as a day to honor one's mother.
President Woodrow Wilson would later sign Mother's Day into law in 1914.
The objective of early proponents
Political and social history connects the history of Mother's Day to Julia Ward Howe, who wrote a poem titled "A Mother's Day Proclamation". Howe had originally called for a "Mother's Day of Peace" challenging women to resist the political will of war and demand peace. Howe and Anna Jarvis' mother were considered to be enlightened and progressive minded women who agitated for social change in the best interest of women, children and those who were less fortunate.
The American history of this annual event tells a story of women, who understood the vital role that women play in building society, nurturing and catering to the needs of others.
Motherhood in today's Bahamas
Today, our society is filled with so many social ills, the end product resulting in a crime problem that seeks to threaten our peaceful existence, our way of life and our economic prosperity.
Against this backdrop, the mothers and women of today must rise up to the challenges that our Bahamaland faces. The oft referenced urgency of now beckons invincible motherhood.
Equipped with the traits and characteristics that engender living life in peaceful harmony, mothers must confront with a view to curing the decadence which ails us. As we take a look at our society, the social degradation of communities fueled by a loss of and divergence from our social, spiritual and moral values that have guided us in times past are apparent. The breakdown in the family structure continues to plague us as many children are left to raise themselves, being taught and mentored by all forms of media ranging from television and radio to the Internet. Our children - the future of our country - are bombarded with perils that oppose our core value systems.
Unplanned motherhood
The statistics show a disturbing number of young women continue to give birth to children out of wedlock, oftentimes being wooed by older men in certain instances. Sadly, many of these young ladies are left to fend for themselves after being abandoned by the father of the child and rejected by close family members. It is unfortunate that in some of these cases, the grandmothers-to-be may unconsciously express their disappointment through disengagement of any form of relationship with their errant children. The end result is usually the case of children raising children.
The challenges that females thrust into unplanned motherhood face in furthering their education to improve their standard of living and quality of life are enormous. Indeed significant determination and perseverance are key attributes of mothers who have succeeded under such circumstances. Nevertheless, a continuous pattern of this nature is bound to increase the level of social degradation, poverty and an uneducated class who may in one form or the other become a burden to society.
The mothers in the village
The old African adage that "it takes a village to raise a child" must be invoked in the hearts and minds of women everywhere. Women of every class and strata must band together to agitate for social reforms, particularly in our inner cities that will raise awareness and lead to the implementation of parenting classes, counseling centers and community associations that will focus on the continued education and development of women and children.
All and sundry must answer a clarion call to address the social ills that plague our nation to our peril and detriment. Civic and religious organizations must become more active in this social war that we have been weaved into. The women's and youth ministries in churches must do more to reach out to the communities in which they find themselves to bring about physical, emotional and mental healing to many of the hurt mothers in our communities. More importantly, women must seize this opportunity to unite knowing that there is strength in numbers to bring about the desired social and economic change that will empower women to enhance our communities and ultimately our nation.
The lack of mentorship and proper succession planning continue to create a vacuum in our society. The Bible speaks of the older women being present to provide guidance and wisdom to the younger generation. It is evident from the scriptures that the latter is dependent upon the former to navigate successfully. Mentorship is essential from the home perspective to the workplace, public life and places of worship for at some point in history changing of guards must occur.
Motherhood and Integrity
It is imperative that we witness the re-emergence of integrity among women in today's society; our Bahamas calls for women that are worthy of respect to be emulated by the upcoming generation of females. Integrity remains at the core of nation building. Our children must be able to see and identify living examples of honorable people in our homes, churches and workplace. Women and mothers must display honor and behavior contrary to what is being paraded before their eyes through the media or peer pressure.
A true mother's love must be intolerant of any form of wickedness, evil or injustice even if the perpetrator is her child. We must no longer condone dishonesty and immoral behavior by our children. It is fitting that invincible motherhood raises her head and mothers realize that we live not unto ourselves, but we are the custodians and guardians of the path to success of someone else's future. Our children are crying for help. We must therefore rise up to the task, the responsibility is ours and the moment is now. Happy Belated Mother's Day!
o Arinthia S. Komolafe is an attorney-at-law. Comments can be directed at commentary@komolafelaw.com.
Don't cry for Argentina
The national and regional interests of Commonwealth Caribbean countries would hardly be served by backing Argentina in its long-running dispute with Britain over the Falkland Islands.
An Associated Press (AP) report of a meeting of some Latin American and Caribbean leaders, under the umbrella of ALBA, cites Venezuelan President Hugo Chavez as confirming the support of all the ALBA countries for Argentina.
ALBA is a grouping initiated by the Venezuelan president and comprising eight nations - the larger Spanish-speaking states Venezuela, Bolivia, Ecuador, Nicaragua, Cuba, and the three small Caribbean islands St. Vincent and the Grenadines, Antigua and Barbuda, and Dominica.
According to reports by AP and other international news agencies, on February 4, the eight ALBA member governments are reported to have approved an agreement barring any boats flying Falkland Islands flags from docking in their ports.
Up to the time of writing this commentary, only one government has denied being party to such an agreement. In a statement on February 8, the Antigua and Barbuda government said that it "has never supported any call for the banning of flagships from any country in the region and therefore disassociates itself from any statement regarding the banning of ships carrying the flag of the Falklands (Malvinas) from entering our ports".
It has to be assumed that the two other Caribbean governments of St. Vincent and the Grenadines and Dominica will adopt a similar position to the now public Antigua and Barbuda government stance. All three states are members of the Caribbean Community (CARICOM), which are obliged by treaty to co-ordinate their foreign policy positions. It would be both a contravention of their treaty obligations and a rebuff of other CARICOM states should leaders of the three countries make such a commitment without at least discussing the implications with their CARICOM partners.
A further worrying aspect of ALBA is a proposal that its members should join a defense pact by which the military of all of them would be called into action should any of them find itself in a conflict. In this regard, Chavez's reported remark that "if it occurs to the British Empire to attack Argentina, Argentina won't be alone this time", is troubling, particularly as neither Britain nor Argentina has given any indication of such a prospect.
Fortunately, none of the three Commonwealth Caribbean governments has confirmed any interest in joining an ALBA military pact. If they did so without the agreement of their partners in CARICOM and the smaller Organisation of Eastern Caribbean States, these two organizations would be fractured, probably irreparably.
There are many good reasons why Commonwealth Caribbean countries should not support Argentina in this dispute with Britain. First, the inhabitants of the Falklands have determined that they are British and wish to remain so. They have rejected the notion of being Argentinian. The right of self-determination, enshrined in the Charter of the United Nations, is one that Commonwealth Caribbean countries have long upheld, and, indeed, is the basis on which each of them achieved their own political independence.
When foreign ministers of the 15-member countries of CARICOM and the Dominican Republic met ministers of the British government in January this year at the biennial UK-Caribbean Forum in Grenada, they collectively and rightly agreed: "To support the principle and the right to self-determination for all peoples, including the Falkland Islanders, recognizing the historical importance of self-determination in the political development of the Caribbean, and its core status as an internationally agreed principle under the United Nations Charter".
A second good reason not to support Argentina is that the facts of British settlement and sovereignty over the Falklands are well-established. It is important to appreciate that an existing UN resolution on the Falklands does no more than call for negotiations to find a peaceful settlement to the dispute over sovereignty. Where the problem arises is: if both countries claim sovereignty why would either of them want to negotiate over what they consider to be their legitimate right? In any event, Britain has exercised sovereignty over the Falklands since 1765 and, properly, if Argentina disputes such sovereignty, it should take the matter to the International Court of Justice for arbitration. Argentina has declined to do so, while Britain has indicated its willingness on several occasions.
Those are reasons of principle and law why Caribbean countries ought not to support Argentina in its claim for the Falklands. By themselves they are solid and overriding reasons.
But, if economic self-interest were also to play a part in national decision-making on this issue, the following points are worth bearing in mind: Commonwealth Caribbean countries earn far more from exports to Britain than they do to Argentina; Britain is a far bigger aid donor to the Caribbean than is Argentina, and British assistance is not only direct, it is also provided through the European Union, the Commonwealth and the Caribbean Development Bank; Caribbean tourism is far more reliant on British travelers than it is on Argentinians; a large number of Caribbean nationals live and work in Britain, few of them do so in Argentina; Caribbean students study, particularly for postgraduate work, in Britain, few if any study in Argentina; and the Commonwealth Caribbean countries share a history, culture, legal system and language with Britain that is of immense importance and benefit to them.
What is fuelling this latest Argentinian interest in the Falklands is plans announced by four British companies to search for oil around the Falklands. The explorers say they are targeting 8.3 billion barrels in the waters this year. But, Caribbean countries should not be used to advance Argentina's ambitions.
Argentina is a neighboring country, and, as good neighbors, the Caribbean should urge it to take its case to the International Court of Justice if it believes it has a genuine argument for sovereignty over the Falklands, and, therefore the right to any oil that is found in the territorial waters of the islands. It's what the Caribbean would have to do in similar circumstances.
Sir Ronald Sanders is a business executive and former Caribbean diplomat who publishes widely on small states in the global community. Printed with the permission of caribbeannewsnow.com.
International Women's Day Op-Ed: Why women are central to U.S. foreign policy
By U.S. Secretary of State John Kerry
During my first week as the United States' Secretary of State, I had the honor of meeting with a group of courageous women from Burma. Two were former political prisoners, and although they had all endured incredible hardship in their lives, each of them was committed to moving forward - providing education and training to girls, finding jobs for the unemployed and advocating for greater participation in civil society. I have no doubt that they will continue to be powerful agents of change, bringing progress to their communities and their country in the years to come.
It's opportunities like this that remind us why it is so vital that the United States continues to work with governments, organizations and individuals around the world to protect and advance the rights of women and girls. After all, just like in our own country, the world's most pressing economic, social and political problems simply cannot be solved without the full participation of women.
According to the World Economic Forum, countries where men and women are closer to enjoying equal rights are far more economically competitive than those where the gender gap has left women and girls with limited or no access to medical care, education, elected office, and the marketplace. Similarly, the U.N. Food and Agriculture Organization estimates that if women farmers had the same access to seeds, fertilizer, and technology as men do, they could reduce the number of undernourished people in the world by 100 million to 150 million.
The Commonwealth Charter, human rights and Sri Lanka
The most important reason for the selection of a country as the host-venue for a Commonwealth Heads of Government Meeting (CHOGM) is that it serves the interests of the Commonwealth as a whole.
If this reason were a consideration, President Mahinda Rajapaksa would already have withdrawn Sri Lanka from hosting the CHOGM in November. The president has not done so. Instead, he has insisted that the Commonwealth Summit must be held in Sri Lanka even as his government is mired in intense controversy over violations of human rights and disregard for the rule of law.
By this insistence, the Sri Lanka president demonstrates only an ambition to claim honor and respectability through hosting the meeting and representing the Commonwealth for the next two years as its chair. This self-serving position of the Sri Lanka government is injuring the Commonwealth.
Every member state of the Commonwealth - particularly its small and weak ones - needs the organization to be strong and credible. A discredited Commonwealth, that cannot stand-up for its own declared values, would have no moral authority or convincing status to advocate effectively for the welfare of its member countries in the international community.
Rajapaksa's dismissal of the country's chief justice, Shirani Bandaranayake, after an unfair impeachment process that was ruled illegal by the Supreme Court, and the appointment of his former attorney-general to the post, is "serious" and it comes amid evidence of "persistent" human rights abuses of journalists, and other groups within Sri Lanka.
These developments follow the government's refusal to allow an independent inquiry, as requested by the United Nations, into the deaths of tens of thousands of Tamil civilians in 2009 towards the end of a conflict between government forces and the Tamil Tigers.
The unsuitability of Sri Lanka at this time to host the CHOGM is drawn into stark clarity by the Charter of the Commonwealth that was signed on March 11 by Her Majesty Queen Elizabeth II as head of the Commonwealth after the complete concurrence of 53 of the Commonwealth's 54 heads of government. The fifty-fourth member state, Fiji whose military government seized power in 2006, is currently suspended from the Councils of the Commonwealth.
The charter was one of the important recommendations for reform of the Commonwealth made by an Eminent Persons Group (EPG) of which I was privileged to be a member. The recommendation was accepted by all Commonwealth heads of government at their meeting in Australia in October 2011.
An important clause in the charter reads: "We are committed to equality and respect for the protection and promotion of civil, political, economic, social and cultural rights including the right to development, for all without discrimination on any grounds as the foundations of peaceful, just and stable societies." Unless the Sri Lanka government demonstrates that it upholds that commitment through actions that have been urged upon it by the UN, many Commonwealth governments, and a myriad number of international legal and judicial organizations, it is not qualified to host the CHOGM. Attendance by other heads of government would sully the Commonwealth by validating the Rajapaksa government.
This is not the first time that the Commonwealth has had to deal with violations of its values and principles by a member state. It did so in 1977 in relation to Idi Amin, whose brutal regime in Uganda engaged in massive violation of human rights and sustained disregard for the sanctity of life.
At that time, the Commonwealth secretary-general, Shridath Ramphal, said to Commonwealth leaders: "There has been in the Commonwealth, of course, as in the international community, a long and necessary tradition of non-interference in the internal affairs of other states. No Commonwealth country (indeed, who anywhere in the world?) is above reproach in some respect or other. If these traditions were not to be respected there would be no end to recrimination and censoriousness. How to strike a balance of political judgement between the two extremes of declamation and silence is sometimes difficult - but it would be entirely illusory to believe that such a judgment could, or indeed should, be avoided altogether. There will be times in the affairs of the Commonwealth when one member's conduct will provoke the wrath of others beyond the limits of silence... although the line may be indefinable, all the world will know when it has been crossed."
It had been crossed in Uganda and, at their meeting in 1977, Commonwealth leaders stated that it was their "overwhelming view" that the excesses of Amin's regime "were so gross as to warrant the world's concern and to evoke condemnation by heads of government in strong and unequivocal terms".
In those days, there was no Commonwealth Ministerial Action Group (CMAG) as there is now, tasked with dealing with states where the Commonwealth's declared values have been violated. Nonetheless, heads of government themselves made it clear that the excesses of Idi Amin were unacceptable, as they did later with the white minority government of Ian Smith in Southern Rhodesia (later Zimbabwe) and the apartheid regime in South Africa.
As CMAG has since suspended other member states - Fiji, Nigeria, Zimbabwe and Pakistan - after addressing their violations of Commonwealth values, it should do so now with Sri Lanka, or the freshly minted Commonwealth Charter will simply become another set of words, not worth the paper on which they are inscribed in the name of the people of the Commonwealth.
There is also precedent for moving a Commonwealth meeting if the host government has breached Commonwealth agreed principles and values. In 1981, the New Zealand prime minister, Robert Muldoon, ignored the 1977 Gleneagles Agreement that banned sporting contact with apartheid South Africa. Muldoon strongly supported the South African Springbok rugby team's tour to New Zealand. Commonwealth governments, feeling that Muldoon had violated agreed Commonwealth principles and values, moved a finance ministers meeting from New Zealand to The Bahamas as a mark of their displeasure.
The Sri Lanka government should withdraw from hosting the CHOGM in November, or the other Commonwealth countries should withdraw themselves from attending. Either action would strengthen the Commonwealth and enhance its authority. But on no account should the CHOGM be held in Sri Lanka.
o Sir Ronald Sanders is a consultant and visiting fellow, London University. Send responses to: www.sirronaldsanders.com.
Advice for the prime Minister
In our reading we came across a letter to then President-elect Ronald Reagan from his Coordinating Committee on Economic Policy which we thought sheds some light on where we are as a country today some 30-plus years later.
We have up-dated the letter to reflect the issues and challenges facing The Bahamas and made some specific recommendations to our prime minister. The quotations herein include our modifications to that letter in our context.
Today The Bahamas faces many challenges. To some, the task seems daunting. But if we review history around the world, we would be surprised as to how similar the problems are, and as such the solutions can also be similar.
The late 1970s were also a time of great economic anxiety fed by a runaway government, spending out of control, taxes that were too high, regulations that were too burdensome, high unemployment, increasing healthcare costs and increasing energy costs.
As we have time and time again reiterated in these pages, what we need to do is develop a consistent long-term focus that does not change with the temperature of the electorate or the latest fad. The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success.
As they wrote to Reagan: "The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success."
We believe this is appropriate advice to our prime minister today.
We would recommend that the prime minister assembles his advisors and focuses on implementing his reforms in his first year, and then they ride out the various storms confident that the policies would work in the long run. Similar policies in other developed nations have resulted in a boom for their economies.
We believe a 180-degree change in the present economic policy is an absolute necessity. The problems of increasing government spending and debt, low national savings, declining government revenue, increasing inflation and slow growth, falling standards of living, declining productivity, declining education and increasing healthcare costs, are severe but they are not intractable. Having been produced by
government policy, they can be addressed by a change in policy.
Prime minister, you articulated an impressive array of promises during the election. They will take time. But more importantly, to be achieved you must think long-term. We invite you to have your Council of Economic Advisors (as you suggested you would) study, develop and recommend guiding principles, on priorities and linkages among policy areas, and on the problems of getting action.
You have identified in the campaign a list of key issues and policies during your first 100 days (which we would not list here) necessary to restore hope and confidence in a better economic future. This requires fundamental policy changes that may take more than five years, but should result in a sound and growing economy.
The advisors to Reagan suggested some "guiding principles" which we have amended for our prime minister:
"The essence of good policy is good strategy. Some strategic principles can guide your new administration as it charts its course."
"Timing and preparation are critical aspects of strategy. The fertile moment may come suddenly and evaporate as quickly. The administration that is well prepared is ready to act when the time is ripe. The transition period and the early months of the new administration are a particularly fertile period. The opportunity to set the tone for your administration must be seized by putting the fundamental policies into place immediately and decisively."
"The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success. This long-term view is as important for day-to-day problem solving as for the making of large policy decisions. Most decisions in government are made in the process of responding to problems of the moment. The danger is that this daily firefighting can lead the policymaker farther and farther from his goals. A clear sense of guiding strategy makes it possible to move in the desired direction in the unending process of contending with issues of the day. Many failures of government can be traced to an attempt to solve problems piecemeal. The resulting patchwork of ad hoc solutions often makes such fundamental goals as price stability, economic growth, affordable healthcare and housing more difficult to achieve."
"Challenges that your government must face are linked by their substance and their root causes."
As we have written on many occasions, measures adopted to deal with one problem will inevitably have effects on others. It is as important to recognize these interrelationships, as it is to recognize the individual problems themselves.
"Consistency in policy is critical to effectiveness. Individuals and business enterprises plan on a long-range basis. They need to have an environment in which they can conduct their affairs with confidence."
You have announced your goals and policies during the election. Your administration should commit itself to their achievement, and should seek Parliament's commitment to them as well. Then the public as well as the government would know what to expect.
"The administration should be candid with the public. It should not over-promise, especially with respect to the speed with which the policies adopted can achieve the desired results."
Seizing the initiative
"The fundamental areas of economic strategy concern the budget, taxation, regulation, and monetary policy. Prompt action in each of these areas is essential to establish both your resolve and your capacity to achieve your goals."
Budget
For the most part, you have inherited a budget which perhaps was near completion, hence allowing you little room to make substantive policy changes save for some tweaking given the late stage of the process.
"You must convince the financial markets and the public at large that your economic policy is more than rhetoric. The public and especially the financial community are skeptical and need a startling demonstration of resolve".
You have made key Cabinet appointments but this won't be enough. The business community will be watching to see whether you are serious about decreasing the budget deficit and how you propose to grow the revenue base without any increase in taxes given the current fiscal structure.
Everyone will be watching to see where cuts are made and revenue measures are address. Our interest payment as a percent of government revenue continues to grow at an alarming rate. Prompt and strong action is necessary if these budgets are to be brought under control, as they must be. The nation can no longer afford governmental business as usual.
"The formal budget alone is far from the whole story, though it is visible and important. Off-budget financing and government guarantees mount and expand programs through the use of the government's borrowing capacity, draining the nation's resources without being adequately recorded in the formal spending totals. In addition, the mandating of private expenditures for government purposes should be limited. Efforts to control spending should be comprehensive; otherwise, good work in one area will be negated in another. And these efforts should be part of the administration's development of a long-term strategy."
Hopefully once the Council of Economic Advisors is appointed, one of its first mandates will be to identify an extensive list of areas for potential savings, but it will be up to your administration to implement the recommendations.
To borrow from the United States, we should consider the appointment of a budget director along with an Office of Management and Budget, whose responsibility will be to assist you in developing and executing your policies and programs.
The OMB will evaluate the effectiveness of agency programs, policies and procedures, assesses competing funding demands among agencies and set funding priorities. The OMB will ensure that agencies or departments operate in conformity to your budget and administrative policies.
Tax policy
Tax policy is properly the province of the Ministry of Finance. You have assumed responsibility along with your junior minister. Given the overall economic health and our continued reliance on an antiquated system, which has serve us well, we believe one of your first orders should be a task force which takes a comprehensive review of our system of taxation with specific mandates and a time frame to report to you in with actionable recommendations. We cannot as a country continue to rely on the old system which is repressive.
Other key proposals are tax incentives for the establishment of economic zones that are consistent with your charter of governance.
Regulation
The Bahamas lives in a global village with ever increasing regulatory changes that have and will continue to drive the way we conduct business. While we must adhere to international regulatory reforms, we must be mindful of their impact on The Bahamas. We must ensure that regulators' mandates are consistent with preserving our financial sector while working with industry to grow the sector.
The current regulatory overburden must be removed from the economy. We believe the appointment of a ministry for the financial sector is a step in the right direction and should better coordinate the various agencies towards a common purpose.
We have recommended in these pages before that we should move towards a consolidated regulator.
We are aware that steps have been taken in this direction. We urge your administration to complete the process. A consolidated regulator will enable your ministry to have consistent and clear understanding of the issues and challenges involved as we move our financial sector forward. The person heading up this effort will require your continued, wholehearted support.
Unprofitable corporations
Many of our economic problems today stem from the large and increasing proportion of economic decisions being made through the political process rather than the market process.
A comprehensive program needs to be developed with specific mandates and time lines to address the continued drain on the public treasury by the likes of ZNS, Bahamasair, the Bahamas Electricity Corporation, Water and Sewerage, the Bahamas Development Bank, etc.
We have numerous examples of successful public-private partnerships, such as Bank of Bahamas, with no government support. The new boards should be given specific mandates to achieve specific economic targets with minimal social fall-out. The country cannot continue to support nearly $75 million per annum indefinitely.
We recommend, also, that the price control departments become more active to ensure the consuming public is not disadvantaged.
Monetary policy
A steady and moderate rate of monetary growth is an essential to provide a healthy environment for economic growth. We must be careful, however, not to interfere and to ensure that all work toward a common goal.
The Central Bank is an independent agency. However, independence should not mean lack of accountability for what it does. The challenge is how to assume accountability while preserving independence. As we indicated before, monetary policy must be mindful of the full impact on the economy and not just one sector. Monetary policies have implications for budgetary and other economic policies.
The activities of a wide variety of departments, agencies, and other units of government affect economic policy.
As President-elect Ronald Reagan's Coordinating Committee on Economic Policy said many years ago: "The flow of economic events does not recognize organizational lines. The economy itself operates as a system in which constituent parts are linked, sometimes tightly. The combination of interwoven problems and disparate organizations means that, in the process of policy formulation and implementation, some people high in your administration must identify the central ideas and problems and devise a strategy and tactics for dealing with them. Your leadership is essential to this effort".
We support this position.
They went on to say: "Our final point is our most important one. The success of your economic policy will be a direct reflection of your ability to maintain a steady course over your full first term. Rough times will come and crises of one kind or another, some small, some of great moment, will arise. Sustained effort through these testing times means that public understanding and support are essential. Of equal and related importance is the understanding and support of the Congress."
Today, we can echo these same words and say that gaining public and parliamentary support are critical as you make some tough choices for the betterment of the country.
Sir today, much like the advice given back then to Reagan: "You have emphasized in your successful campaign precisely the strategy set forth in this document. In moving to implement it, you will be doing what the people voted for. Every effort must be made to maintain and broaden your base of support by improving public understanding, and close cooperation with the Parliament, Cabinet and others in your administration can help in these tasks. Their ability to do so should be one important criterion in their selection."
"At the end of the day, however, the burden of leadership falls on you: Leadership to chart the course ahead; leadership to persuade that your course is the one to take; leadership to stay on course, whatever way political winds may blow. Through effective advocacy of the sharp changes so sorely needed, your leadership has brought us to this long-hoped-for opportunity at a critical moment for the nation. Your leadership can maintain this advocacy in the convincing manner necessary for a successful outcome."
We wish you much success over the next five years as we address some serious pressing economic and social issues.
o CFAL is a sister company of The Nassau Guardian under the AF Holdings Ltd. umbrella. CFAL provides investment management, research, brokerage and pension services. For comments, please contact CFAL at: column@cfal.com.
The Bahamian fiscal cliff
Dear Editor,It is my sincere hope thatmost Bahamians, if not all,will enjoy the upcomingChristmas season and willfind time for recreation,prayerful sessions and qualitytime with family and friends.We have much to be thankfulfor despite the personal andcollective challenges.After the festivities are concludedand all of the hamsand turkeys eaten, the nationwill have to confront some seriousfinancial and fiscal issuesin January 2013. Playingpossum and seeking to buryone's head in the sand like thefabled Ostrich will not cut it.Successive governments,headed by prime ministerswho are lawyers by professionand who would have served asministers of finance, aidedand abetted by ministers ofstate for finance, who know orknew nothing about big business,have led us to our ownlooming fiscal cliff.Sir Lynden, God bless hissoul, was the most successful,visionary and pragmatic ministerof finance this countryhas seen to date. Say what youmay about Sir Lynden but healmost single-handedly createdall of our national organizationssuch as: the NationalInsurance Board; the Royal BahamasDefence Force, the firstgovernment subdivision, etc.At least if he spent the moneyone is able to actually seewhat he spent it on. Contrastthe other two prime ministers,also lawyers. Hubert Ingraham,a good Bahamian,may have meant well I amsure during his various termsin office. The question whichbegs an answer however is:Did we get value for the massiveamounts of money hewould have spent on our behalf?The purchase of the socalledBlake Road buildingwas a boondoggle and onewhich I submit was done as a"favor" for the boys. It shouldnever have been purchasedwith NIB funds, as it was nevera viable building. Millionshave been poured into thepurchase and never-endingrenovations to the extent, allegedly,in excess of $25 million.Successive governments"stopped, canceled and reawarded"the renovation contractsto their alleged politicalassociates and that buildingstill appears to be in its originalstate.Governmental operationsand ministries are housed inleased and rented propertiesat great expense, allegedly, tothe public purse. For instance,the Immigration Departmenthas been in rentedpremises at Hawkins Hill forgenerations.No one that I know of in thepublic domain knows exactlyhow much is being paid inrent and certainly not theterms and conditions or eventhe lifespan of the rental contract.The old City Meat MarketBuilding on Market Streetwas purchased to be used, allegedly,as the site for The RegistrarGeneral's Department.A renovation contract wasgranted and the building wasduly gutted. Nothing hasbeen done from then to nowand the forlorn building remainsa stark reminder of thewaste of public funds. Yet anothergovernment-ownedbuilding is located on John F.Kennedy Drive to the immediatewest of the Ministry ofWorks compound.Constructed to the tune oftens of millions of dollars andlit up to the highest everynight, it is under-occupiedand under-utilized. Yet, majorministries, inclusive of ourcourts, remain in leased,cramped and totally inadequatequarters.The Ministry of Tourism ison George Street downtownwhere staffers are obliged towork in an outdated environment.Potential foreign andlocal investors who are desirousof meeting with theminister of tourism and hissenior officials would not beimpressed with the ambience.The ongoing roadwork herein New Providence is the singlelargest cause for the massivefiscal deficits we are saddledwith. That this work hadto be carried out cannot be deniedbut the cost overruns tothe tune of $100 million areunbelievable. In too manycases, remedial work will haveto be done costing tens of millionsof dollars in the near future.The civil service is top heavyand there are too many individualsdeployed in ministriesand departments doing absolutelynothing of value. Arationalization must be doneand done soon. It has been estimatedthat 50 percent of theannual national budget goesto salaries, pensions and gratuities.Another 40 percent isrequired to actually run thegovernment leaving less than20 percent for infrastructureand other much needed societaland cultural works.Yes, dear friends, countrymen/women and enemies weare between a rock and a veryhard place due to the fiscalmismanagement of all of ourgovernments to date. It is nouse now, of course, engagingin a blame game as the Androsianbuzzards have alreadycome home to roost. It iswhat it is.The gold rush administrationmust reach out to allstakeholders regardless of politicalpersuasion and certainly,regardless of age. Early inthe new year the prime ministerand his economic teamshould convene a secludedconclave with business professionals,accountants, lawyersand the media to hash out viablesolutions to our own fiscalcliff. There can be no otherway.Failure is not an option andwe are in this slow boat overthe cliff together. If it succeedsin averting this loomingdisaster, the gold rush administrationand Perry GladstoneChristie (PLP-Centreville)could go down in our historyas the government that madea difference. In conclusion,then, I wish all a Merry Christmasand a prosperous NewYear. Despite it all, I submitthat our best days are yetahead of us.To God also, in all things, bethe glory.- Ortland H. Bodie Jr.
No Caribbean society
At their retreat in Guyana on May 21 and 22, Caribbean Community and Common Market (CARICOM) heads of government are reported to have noted that the preamble to the revised CARICOM Treaty focuses exclusively on 'economy' and does not speak to 'society'.
The heads are recorded as agreeing: "If there is no sense of community; no sense of shared values; no sense that the people of the region have something to contribute to the treasury of human civilization, our endeavours would be meaningless". They then concluded: "There is therefore need for discussion and articulation of a Caribbean society".
However, they did not continue to say how and when the "discussion and articulation of a Caribbean society" would begin.
In any event, the statement that the revised CARICOM Treaty focuses exclusively on 'economy' and does not speak to 'society' has not been surprising for the past decade since the revised treaty was signed.
Nor should it have been. The CARICOM Treaty, after all, is an agreement governing areas of trade, economic integration, foreign policy co-ordination, functional cooperation and related matters. More particularly, the Treaty grew out of an understanding, developed over almost a century, that Caribbean countries are indeed a society. There was hardly a need in the treaty to refer to a 'society'. It was taken for granted.
The understanding that the Caribbean people are a society has been articulated since the beginning of the 20th Century by trade union leaders, educators, writers, calypsonians and politicians such as C.L.R James, Marcus Garvey, T.L. Marryshow, Gerald Francisco Slinger (the Mighty Sparrow), Eric Williams, Norman Manley, Grantley Adams, Shridath Ramphal, and Errol Barrow.
That list is by no means exhaustive. In the current group of leaders, no one has done more to advance the notion of the existence of a Caribbean 'society' than the Prime Minister of St Vincent and the Grenadines who rightly and constantly reminds us of our 'Caribbean civilization'.
Even long before that, in 1772, Pere Labat said of the Caribbean people: "You are all together in the same boat, sailing on the same uncertain sea... citizenship and race unimportant, feeble little labels compared to the message that my spirit brings to me: that of the predicament which history has imposed upon you".
And what is 'society'? Sociologists define it as "people who interact in such a way as to share a common culture. The cultural bond may be ethnic or racial, based on gender, or due to shared beliefs, values, and activities".
Who would doubt that the people of the Caribbean share "beliefs, values and activities"? Are those shared beliefs, values and activities not obvious in our common legal system; in our shared education system; in our joint admiration of Usain Bolt as an outstanding Caribbean achiever; in our cheering for Caribbean athletes in Commonwealth and international events regardless of the jurisdiction in which they were born; and in our love of cricket and our passion for the West Indies cricket team to succeed?
Of course, there are some cultural differences between each of the countries, but none of them are sufficient to negate the existence of a 'society', just as differences between people in Clarendon and Kingston are not enough to deny a Jamaican society or are differences between people from St. Peter and Bridgetown sufficient to cancel out the reality of a Barbadian society.
It should also be recalled that, in 1997, the heads of government of CARICOM adopted a resolution adopting a Charter of Civil Society in which, in the name of the Caribbean people, they established values for the region as (in their words) "an important element of the community's structures of unity". Maybe it is true that few Caribbean people remember and even fewer know of the Charter. But who should take responsibility for that?
In any event, it is welcome news that a "need" has been recognized "for discussion and articulation of a Caribbean society" because, in recent years, few political representatives have done much to articulate the benefits of Caribbean economic integration or the gains of functional cooperation or of joint trade negotiations. Indeed, Caribbean integration is more often than not spoken of in derogatory and inaccurate terms, succeeding in raising tensions between the citizens of member countries.
One way of discussing and articulating a Caribbean society in a meaningful way would be to re-invigorate a Regional Assembly of Caribbean Community Representatives. But, it should not consist of political representatives alone.
Equally represented should be private sector and trade union organizations from every member country of CARICOM. And, the assembly should have select committees which should be able to take evidence from Caribbean academics and practitioners in their fields of expertise. Further, the assembly should rotate its meetings among all CARICOM states and the meetings should be broadcast throughout the region on national television.
The assembly should be able to discuss matters which its members initiate, according to their own rules, and which they should be empowered to send to CARICOM decision-making organs such as heads of governments meetings for consideration. In turn, the assembly should also be able to debate and pronounce upon local and international developments which affect the region as a whole.
This is not a new idea. Six years ago, Dr. Vaughan Lewis distinguished Caribbean academic and public servant proposed a variation of the notion set out here for an Assembly of Caribbean Community Representatives. He saw its role more as "an education forum" than "a debating forum". The point is that the Assembly, even though it would have no legislative capacity as in the European Union, would be able to lift the notions of Caribbean 'society', Caribbean 'community' and Caribbean 'integration' to a higher plane of informed discussion.
And, in an assembly made up of private sector and trade union persons as well as politicians, the participation would be broader and more representative of Caribbean society.
Printed with the permission of caribbeannewsnow.com
The Ideal Education System
"If a man neglects education, he walks lame to the end of his life." - Plato
Last week, we discussed national priorities, including the educational system in The Bahamas which is generally accepted as dysfunctional and urgently in need of reform. Therefore this week we would like to Consider This; is there an ideal educational system for the 21st Century Bahamas?
Education is the process that a society creates to prepare its citizens for productive participation in its social, political and commercial life. The ideal educational system requires a clearly defined system of values and a set of socializing skills, and encourages individuals to develop a positive self-image and the ability to approach issues from more than a single point of view.
Haiti And The Issue of Color
There has recently been continuous chatting in the Haitian cyberspace regarding the issue of color. The chatting might have been caused by the pictures sent of the inaugural ball, by those opposing the government, where most were of light skin color in a sea of black-skinned Haitians in the country.
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