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Jamaica Poised for Business Growth

he local business climate is certainly heating up. The budget debate has dominated the headlines as the government and opposition square off on taxes, expenditure, debt reduction, economic growth and job creation, among other issues. Your Money eZine spoke to Darron Thomas, a lecturer in Economics at the University of Technology for a breakdown of the 2011/2012 budget proposed by Finance Minister Audley Shaw. Coincidentally, Thomas and a team of financial analysts have undertaken a series of panel discussions surrounding the recently unveiled Growth Inducement Strategy (GIS), developed by the Planning Institute of Jamaica (PIOJ) and the next in the series, scheduled for tomorrow, March 12, at 5:30 p.m., will look at the estimates of expenditure, tax policy and administration; the national debt and implications for growth; the budget in the economic reality and context of the development plan; and prospects for sustainable growth and development.

Additionally, Prime Minister Bruce Golding yesterday announced that Jamaica is now out of the recession, having recorded modest growth over the first quarter of this year. PanCaribbean Financial Services also mirrors this achievement, recording strong growth over the January to March 2011 period. This is certainly encouraging news as the economy continues to rebound from the crippling effects of the global crisis. It is indeed an exciting time to go into business in Jamaica and we look forward to the many developments that are on stream.

Tyrone Wilson CEO of eZines Limited

CEO’s Think Tank is a weekly discussion between Your Money reporters and our CEO, Tyrone Wilson. It will focus on pertinent business issues that are discussed on a regular basis among corporate executives, entrepreneurs, small business owners, political leaders and other key leaders in our society.

More good news for local businesses is the pending establishment of Jamaica’s first credit bureau, which could be in operation before year end. The nation’s financial institutions and business people have been calling for this for a number of years and this development stands to significantly change the way business is done for the better.

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Lennox Mcleod

aims to build jamaica’s credit rating system relationships with the right people to ensure that we have enough to get going from day one,” McLeod stated. The company will initially offer three products – detailed credit reports, credit rating based on credit scores, and credit monitoring, which will alert subscribers of any fraudulent activity on their credit file. There will be a companion customer website where members of the public can register and subscribe to the company’s services. Subscribers will be able to pay monthly, bi-annually or annually. Additionally, plans are in place to develop a range of other services within the next two to three years, including fraud prevention and anti-money laundering tools, authentication checks and collection and recovery solutions.

Lennox McLeod Founder anf CEO of Premier Credit Bureau Limited

he local business community probably breathed a collective sigh of relief last August when the Credit Reporting Act was passed after some 13 years of deliberation. The Act provides for the sharing of credit information between specified bodies, such as financial institutions, and also opens the door for licensing of credit bureaus, which would collect such data. Business interests have been calling for the establishment of a credit bureau for a number of years because of the benefits to both lenders and borrowers alike, and they could very well see the first agency in operation before year end as so far, three agencies have applied to the Bank of Jamaica since it began accepting applications last November. Among the three is Premier Credit Bureau Limited,

“We’ve told everyone that within four weeks we’ll be up and running, loading data, because we’ve also formed good relationships with the right people to ensure that we have enough to get going from day one” which has been waiting in the wings since 2006 and CEO Lennox McLeod and his team are ready and rearing to go. “We’ve told everyone that within four weeks we’ll be up and running, loading data, because we’ve also formed good

McLeod, a son of Trinityville, St. Thomas, is a University of Glamorgan graduate and a chartered accountant and certified international accountant. Seeking a different challenge from Macs and Co, his thriving accountancy in London, he identified the lack of a credit bureau in Jamaica and has set about to fill the gap. He has pumped some J$4 million into Premier Credit and assembled a highly skilled team of international-level industry professionals, many with Jamaican roots, who are just waiting for the word ‘Go’. “Once the opportunities have been provided, I see Premier Credit stabilizing within a year-and-a-half. That is because of the pool of resources in terms of specific credit bureau expertise that we have access to,” McLeod stated, adding that the Premier Credit programme manager has successfully established eight other such agencies worldwide.

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Lennox Mcleod

aims to build jamaica’s credit rating system Another trump card is the company’s specially-designed software fully developed and tested for Jamaica and the Caribbean. “We didn’t go and take software off the shelf or take software that is used somewhere else and say, ‘OK, customize this for Jamaica.’ From day one, it was designed with the customs of Jamaica in mind. It was developed with a lot of dialogue with the people who are going to be using it, like the Jamaica Bankers Association, National Housing Trust, Student Loan Bureau, Courts, Singer, microfinance companies, and the general public,” McLeod said. He also spoke to the benefits of a credit reporting system for local business growth and the potential it holds for Jamaica’s overall economic development. In the current system, financial institutions require substantial collateral before approving loans, which is usually a huge impediment to entrepreneurs and small business operators. “Most of the people with brilliant ideas are not middle aged or old people; they’re young people and they’re the ones who are not going to have collateral. If you look at most of the brilliant business ideas that have emerged over the past two to three decades, they’ve been developed by young people. A lot of these people couldn’t get the funding in Jamaica or any other country that doesn’t have a credit bureau,” McLeod stated. Lending institutions will also benefit as they will be better able to assess the credit risk of potential borrowers before deciding to issue loans, which will increase their recovery rates. “If you look at the statistics behind the non-

“If you look at the statistics behind the non-performing loan portfolio of any financial institution, not everybody who’s in arrears or in default is unwilling to pay. Some of them genuinely can’t afford to pay.”

McLeod also plans to establish Premier Credit in other English-speaking Caribbean countries within the next five years. The feeders for the credit bureau’s database such as taxpayer registration information, electoral offices, court systems and banks are already in place, he said, so it would just be a matter of replicating the Jamaican model.

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performing loan portfolio of any financial institution, not everybody who’s in arrears or in default is unwilling to pay. Some of them genuinely can’t afford to pay. Now of course, if the interest rates were lower, in many cases, more people could afford to pay, and so you’d find the non-performing loan portfolio shrinking,” McLeod said. Additionally, more businesses will be able to keep their doors open as they should be better able to repay their loans due to the decreased rates. “If you really want a good inflow of tax revenue, then you’ve got to get business development going. For many years, the high interest rate has stifled business growth and development because the cost of credit is too high,” McLeod noted. “In any country you go where the cost of credit is high, look at what happens with employment. Look at what happens with tax revenue. So you find a small bunch of people who have to bear the brunt of the tax burden.” yourmoney ezine

business lounge by Tracey-Ann Wisdom

PanCaribbean

posts Excellent First Quarter Results

or its first quarter ended March 2011, Pan Caribbean Financial Services Limited (PCFS) reported consolidated net income of $503 million, up 27% over last year’s $397 million. Earnings per share were $0.92 for the current quarter versus $0.72 for the corresponding period last year. These results were influenced primarily by balance sheet growth and represent the best quarterly operating results for the institution. Ordinary dividends of $0.62 per share declared during the first quarter were paid in April 2011. The consolidated balance sheet grew by five percent over December 2010 to $76.3 billion, positively influencing net interest income. Interest bearing liabilities grew $1.9 billion or three percent to $62.3 billion compared to $60.4 billion as at December 2010. Donovan H. Perkins, President and CEO of PanCaribbean noted, “We owe our strong performance to loyal customers, who have continued to give us more of their business and recommend us to friends and family. We remain focused on delivering high standards of service, offering competitive pricing, especially in the commercial banking sector. We continue to deliver on our promise of helping each and every customer become more financially successful.” Net interest income increased nine percent from $692 million in the first quarter of 2010 to $756 million. According to Perkins, “A key ratio tracked by PanCaribbean is our income assets to expense liabilities. This ratio has improved from 112% to 114% with more

Donovan Perkins CEO of PanCaribbean Financial Services

“We owe our strong performance to loyal customers, who have continued to give us more of their business and recommend us to friends and family.” cash deployed in investment securities.” Non-interest income increased 62% to $304 million as fixed income trading, asset management fees and FX activities reflected improved results over the previous year. Team member costs rose 10% to $242 million as a result of 2011 salary adjustments, while occupancy expenses increased by eight percent to $23 million. PanCaribbean’s operating efficiency ratio (operating expense /operating income) improved significantly to 36.3% versus 40.5% in 2010 as operating income grew by 21% while operating expenses increased by eight percent. The Group’s credit portfolio reflected some deterioration with the non-performing loan ratio increasing to 4.7% of the portfolio versus 3.9% of the portfolio at December 2010 (industry aver-

age 6.5%). Perkins indicated, “We are keeping a watchful eye on the portfolio and taking the necessary measures to contain and improve the situation. We want to restore our asset quality ratio to its target level of at or below three percent or less in this operating environment.” At the end of the first quarter of 2011, the Group’s capital to assets ratio stood at 14.7% with its risk-weighted capital ratio at 29.1%, both excellent indicators of the company’s financial strength and stability. Stockholders’ equity closed the quarter at $11.2 billion, up from $10.6 billion at December 2010, with $407 million of this improvement directly related to the rally in GOJ US dollar and JA dollar denominated bond prices, which is reflected in Fair Value Reserves. During the quarter, the regional rating agency - Caribbean Information and Credit Rating Service Limited (CariCRIS), the regional rating agency, reaffirmed PanCaribbean’s credit rating of jmA+ on its Jamaica national scale citing the company’s “strong capitalization levels underpinned by a large tangible net worth base.” During the quarter, PanCaribbean’s Sigma Corporate Run raised over $15.2 million for Victoria Jubilee Hospital. Perkins noted “Once again we partnered with the National Health Fund and Corporate Jamaica to host another successful event. Over 20013 companies and organizations participated to contribute to a record registration of approximately 15,000 highly motivated athletes.” He added, “Our combined efforts will make the hospital a more effective institution in caring for newborn babies and their mothers. We are happy to be involved with improving this important aspect of health care.”

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Behind the budget with Darron Thomas

he 2011/2012 budget has already been tabled and is currently being debated in Parliament. As the government and opposition go back and forth over the various measures, Your Money sought the opinions of Darron Thomas, Economics lecturer at the University of Technology, on the components of the budget and the prospects for growth for the Jamaican economy. “[The budget] certainly outlines some improvements in the Jamaican economy as far as the implications for economic outcomes are concerned. Of course, there have been some discussions which essentially try to argue that the budget is a pork barrel budget and there is lots of pork for certain segments of society. Some of this may be true, because the implications of the changes announced are such that some sectors of the economy benefit disproportionately,” Thomas stated. The budget underscores three broad areas - stabilization, growth and tax reform. The stabilization efforts are necessary, due to the continued effects of the global economic crisis. However, Thomas argued that the government’s delay in responding to the initial signs of the downturn in the American economy put us on the back foot. He added that Jamaica needed the stabilization measures imposed by the International Monetary Fund, which forced us to “essentially ‘band our bellies’ and rein in our spending and try to bring our revenues up.” Unlike the austerity measures such as job cuts, wage freezes and deep slashes

Darron Thomas

“[The budget] certainly outlines some improvements in the Jamaican economy as far as the implications for economic outcomes are concerned. Of course, there have been some discussions which essentially try to argue that the budget is a pork barrel budget and there is lots of pork for certain segments of society. Some of this may be true, because the implications of the changes announced are such that some sectors of the economy benefit disproportionately,”

to various portfolios and organizations’ budgets, Minister Shaw’s announcement of a series of tax reform measures has been welcomed across the board. The government has pursued a high tax rate regime over the past 18 months which has generally failed to increase its revenue. People simply cut spending and of course, many individuals and organizations simply avoided paying any taxes whatsoever. “This latest simplification of the tax system seeks to ease the tax burden to get greater participation in economic activity and therefore to generate greater amounts of revenue by collecting smaller amounts from each segment of the economy,” Thomas said.

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Behind the budget with Darron Thomas However, he also expressed concern about the lack of a timeline for the implementation of some of the tax measures plus the fact that a number of items have not been accounted for in expenditure, such as outstanding public sector salaries and pensions. “I think then it would be fair to agree with the Opposition Spokesman on Finance that this essentially understates expenditures and therefore, we will find that somehow deficits will creep up on us that we have not seen on the books,” he argued, also criticizing Mr. Davies for not outlining a complete picture of what the alternatives are. “My own feeling is that the best way to get out of the quagmire that we find ourselves in is to grow the economy. If persons have more income, then even at a smaller rate of tax, the government would be able to generate a greater total amount in tax revenues.” Another component of the budget is an extension of the standby agreement with the IMF as well as the possibility of a second Jamaica Debt Exchange programme. Thomas was unclear whether the IMF will extend the current agreement or the government will pursue an extended fund facility, which carries more stringent conditionalities. The JDX II would seek to reduce the interest rates paid by the government on US dollar and other foreign currency denominated government securities. He explained that a JDX II might not be as successful as the first because the

“My own feeling is that the best way to get out of the quagmire that we find ourselves in is to grow the economy. If persons have more income, then even at a smaller rate of tax, the government would be able to generate a greater total amount in tax revenues.”

opment, which has not yet been fully embraced by Jamaica. “We are some ways off in terms of competing in terms of our growth rates with the best of the best in the world,” he said. “I don’t think we have the policies in place just yet to get us there, but it’s a process, so there is yet some work to do.”

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financial market might resist. However, “It seems that with the debt standing at 140% of GDP this may be inevitable, so there might be some really dire consequences going forward if this is the only possibility for us.” Thomas was cautious in his assessment of the budget where growth is concerned, but stated that the removal of some of the rigidity from the tax system will help in this regard. He also pointed to the short-term Growth Inducement Strategy, which runs concurrently with the budget as well as the current stability in the macro economy as useful for promoting economic growth. Pointing to the economies that are currently thriving post-recession, such as Brazil and India, Thomas noted that they have invested heavily in research and develyourmoney ezine

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fabian G. Brown

any might question the validity of the axiom “do what you love and you’ll never work a day in your life”, but for Fabian Brown, it is absolute truth as he has built a stellar career around the principle of profiting from your passion. His interests include youth, social and community development; planning, logistics and general management; protocol, customer relations and people business and resource mobilization, and he has managed to encompass them all under the umbrella of Value Added Services (VAS), his fouryear-old company dedicated to adding value to the services individuals, businesses and other organizations provide. The company, started in June 2006, provides a range of services including capacity building, marketing, workshop facilitation, motivational sessions, training, events planning and management, music and entertainment (edutainment) social outreach services and resource mobilization, which involves grant writing and building partnerships and alliances for business or community development. “Value Added Services pulls together a resource base of professionals in the various areas that we cover,” Brown states. “We also provide training against the background of entrepreneurship development for youth and adults alike. If it’s an event and we need protocol and liaison services personnel, we would have had a bank of persons that we would have trained and is ready to execute, to be able to provide that support for a particular event.” VAS works with a diverse clientele, from corporate entities to government bodies

adding value to service

Fabian G. Brown, CEO of Value Added Services

“If it’s an event and we need protocol and liaison services personnel, we would have had a bank of persons that we would have trained and is ready to execute, to be able to provide that support for a particular event.” to non-profit agencies such as American Airlines, National Housing Trust (NHT), Sandals Resorts International, Diageo, Jamaica Social Investment Fund, Bars to Go Training Institute and St. Patrick’s Foundation, where Brown worked as Executive Director from 1993 to 1999 and later as Director of Development. Among the key objectives of VAS is “to establish the concepts of fundraising and development as a business”. These are traditionally seen as the domains of nongovernmental and non-profit agencies, not as viable business pursuits. However, Brown believes it is a thriving yet under-developed niche locally. “I would engage an individual, an organization, a community to appreciate that it is your

ability to attract the kind of resources – be it the people skills, the technical skills, the physical, material things or the cash to your project or activity that is going to help you to develop,” Brown explains, adding that VAS assesses the organization’s capacity to do the work itself or executes the resource mobilization process on its behalf. It is especially hard to attract cash in today’s economy, so Brown shies away from the words ‘sponsorship’ and ‘donation’, replacing them with ‘partnership’ and ‘investments’, which changes the nature of the engagement of supporting organizations, generating more interest as they feel they have a stake in the project. “You’re not going to get involved with a partner, be it a love affair or otherwise unless you figure that there is something in it for you and something you provide for the person. Therein lies Value Added Services – it must be about adding value to the services that are provided at both ends.”

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