Jun 2010 Financial News

Electricity said biggest negative to production

Jun 22, 2010

BUSINESS leaders, in spite of problems faced by crime and Government bureaucracy, yesterday knocked the delivery and cost of energy as having the greatest negative impact on production in Jamaica.

"Electricity is the single most severe hindrance to manufacturing in this country," said William Mahfood, principal of Wisynco — manufacturers of a range of drinks, including Wata, and distributors of the Coca Cola brand.

He added that the problem was not only in the high cost of energy, but also in the delivery of service.

Mahfood said that his company lost 80 hours of production last year due to power outages, forcing him to invest U$1 million in the purchase of a standby unit.

"This is ridiculous, for a manufacturer to take money that could be used to increase its capacity to put in a standby unit for lost time," Mahfood said.

Mahfood and other members of the business and financial community were guests at the Observer's weekly Monday Exchange yesterday at the newspaper's Beechwood Avenue headquarters in Kingston.

Crime, energy cost, high interest rates and bureaucracy continue to hamper production as local businesses struggle to stay afloat, in spite of signals of a recovery in the economy, the business leaders said.

At the same time, high interest rates charged by commercial banks continue to worry the entrepreneurs, despite the successful Jamaica Debt Exchange (JDX) initiative some months ago.

While welcoming the JDX and its effects in reducing rates, the business leaders argued that some commercial banks were slow in responding and single-digit rates were needed to make the country globally competitive.

Financial analyst Karen Fitz-Ritson cited Guyana, where she said the lending rate to businesses was 6.7 per cent, while Barbados and Trinidad had rates of seven per cent.

Chris Williams, principal of Proven, a new investment house, argued that Government had to "get its books in order" and allow the private sector to operate.

"The primary area of contention was the interest cost and that was addressed to a large extent through the JDX," Williams said. "Secondly, the need to perfect the ability of the country to operate was addressed through the IMF, providing us with balance of payment support," he added.

Williams contended that these two areas had laid a framework for improved performance of the business sector.

In the meantime, president of the Jamaica Manufacturers' Association (JMA) Omar Azan said that bureaucracy was still stifling businesses, especially where it pertained to the issuing of waivers for the importation of raw material and equipment.

Azan said that equipment recently imported by at least two manufacturers have sat on the wharf for almost six weeks awaiting clearance from the Ministry of Finance.

"Bureaucratic red tape is a major issue," said Azan.

The JMA president said Jamaican manufactures had learned to operate in a recession environment and argued that entrepreneurs reaping success in other jurisdictions would not be able to operate in Jamaica.

"If you were to take some of those companies regionally or globally and put them in a Jamaican landscape they would be bankrupt in days," said Azan.

"We have been trained to operate in a recessionary environment," he contended. "We are a resilient people."


Source:
BY PATRICK FOSTER Observer writer fosterp@jamaicaobserver.com
Jamaica Observer
Tuesday June 22, 2010

http://www.jamaicaobserver.com/news/Electricity-said-biggest-negative-to-production_7732772