Lee Chin says failure to save and invest holding back GDP growth
Economic Growth Council (EGC) Chairman Michael Lee-Chin, says that a major hitch in the council's efforts to achieve its target of five per cent Gross Domestic Product (GDP) growth in four years was the lack of a culture of saving.
“We in Jamaica, we need to develop a culture of saving. We don't save. We consume,” the Jamaican-born billionaire investor told Wednesday's 8th “Report to the Nation” from the council, which was created in 2016 to boost GDP growth, at Jamaica House.
Lee Chin noted that Asian economies have continued to boom over the decades because their citizens are savers.
“The saving rate in Asia was as high as 40 per cent of disposable income. So, it sets the stage for long-term growth. So, we in Jamaica, we have to realise that a part of all I earn is mine to keep'. I shouldn't be spending all I earn. I should be saving, and the minimum you should be saving is 10 per cent of what you earn,” he stated.
But Lee Chin noted that saving was only the start of the economic process.
“We should be taking our savings and investing in owning assets, like stocks: starting a business, whatever, but just own assets. Own a home, pay down on something, even a piece of land. But you should be owning assets, and you should be saving. Remember, if we can achieve one thing here, it is to encourage our citizens to be better savers, and that a part of what is earn is mine to keep,” he said.
Lee Chin also identified the need to defer gratification.
“Because, if you defer the gratification today, you will have a lot more gratification tomorrow,” he advised.
“We, in Jamaica, we need to defer gratification; consume less, save more, invest more right now, so that the confidence that we are experiencing today in Jamaica is felt by all of us. We see it, we hear it, we smell it, we can even touch it, with confidence. We are, therefore, in the best position to take advantage of it. We in Jamaica are in the best investing position, the next best group to see it, feel it and hear it would be our relatives living abroad, because they have a connection to us,” he noted.
He added that the third best group would be the international community of investors.
“So the logic would be, given the confidence, we should be the ones who are jumping in first and investing, but the reality is that that's not the case. The reality is that foreigners are the ones who are leading the way,” he stated, naming several overseas investors including China's JISCO (Jiuquan Iron and Steel Company Limited) and the Spanish hotel chains.
“They see what we don't see, although it is right in front of us. So, they have been investing heavily in Jamaica so well it is backward. We need to correct that backwardness. We need to make sure, as Jamaicans, that we take advantage of the opportunity that is now,” Lee Chin said.
He noted the huge reduction of the debt-to-GDP, from 147 since 2016 to approximately 96 per cent of GDP at the close of calendar 2018; increase in the net international reserves (NIR) beyond US$ 3.1 billion; levelling off of inflation at between two and three per cent; Bank of Jamaica's 1.25 per cent, a consumer confidence high of 177.5 per cent and an increase in business confidence.
Lee Chin also praised the performance of the Jamaica Stock Exchange (JSE) over the last few years. He credited the input of the EGC in these improvements as he recalled the early development of the council and the efforts put into its successes.
He noted the BOJ reduced cash reserve requirement to boost lending by deposit-taking institutions, and other measures to increase liquidity in the financial system, as well as the reduction in policy interest rate to 1.25 per cent.
“We are having a good time now. We have gone through difficult times over the last six years. It is now time to harvest the sacrifices that we have made and deliver the five-in-four to the next generation,” he insisted.
The Government of Jamaica officially launched the EGC in 2016, chaired by Michael Lee-Chin, who is also chairman of the country's largest commercial bank, the National Commercial Bank (NCB), for advice on a framework of proposed initiatives along with sub-initiatives.
Both Lee Chin and Senator Aubyn Hill, who was appointed executive director of the EGC in December 2017, remain confident that Jamaica can achieve a five per cent growth target, as was set by the EGC in 2016. However, it is very unlikely that it will be achieved in the current four-year span, which started after the change of government in 2016.
Lee Chin, a Jamaican-Canadian investor who travels to the island every other week to assess the growth trend was quite charitable; however, in addressing the issue, noting that Jamaica has performed very well in some key areas of the economy over the last three years.
He praised the performance of the Jamaica Stock Exchange (JSE) over the last few years, including being the world's top performing stock exchange since 2018.
He credited the input of the EGC in these improvements since 2016, as he recalled the early development of the council and the efforts which has helped to prod the local economy forward.
“We cannot solve our problems with the same thinking we used when we created them. So whose responsibility it is? The growth and stagnation problem will require all hands on deck,” he said.
“We need the involvement of the SMEs (Small and Medium Enterprises), we need the involvement of the youths, we need the involvement of families, we need the involvement of labour unions, we need the involvement of the Opposition, we need the involvement of the students, the teachers, the professors, local investors, corporate heads, religious leaders and the diaspora community: we all need to haul together to get through,” he commented.
He suggested that the vision for every Jamaican should be: “Tomorrow must be better than today.”
“For every Jamaican there must be a clear path to fulfilment and prosperity. There must be jobs and opportunities here at home; there must be access to world-class health care for every retired Jamaican. There should be a national pension plan providing retirement in dignity. That was the vision of the EGC and that is still the vision of the EGC,” he stated.