IF Jamaica is to move into a growth mode it needs to build a culture that celebrates success. This is an oft repeated recommendation that apparently falls on deaf ears.
Recent exposure of bauxite's impressive performance and the business processes employed to generate expansion provide an interesting reference point to initiate this change.
Specifically, data released by the Jamaica Bauxite Institute (JBI) indicates that alumina production increased by approximately 3.9 million tonnes - the fifth straight year of record production for the plants.
Gramercy plant
Against this background, the JBI projects that this year there will be a 20 per cent increase in bauxite production a projection driven mainly by a return to operation of Kaiser's Gramercy plant. Additionally, local plants are reporting more efficient production from their factories. This level of growth would translate into approximately $70 million in additional revenue for the sector this year as it earned $726 million last year.
These statistics make a compelling case for celebration but the real success is the studied, selective application of business process by the companies, the trade unions, and state bureaucrats that facilitated this change.
Where the state is concerned, the Ministry of Finance allowed the application of production incentive schemes. Additionally, the government gave assurances regarding its commitment to its macro economic targets, mainly inflation containment. In addition, the Government agreed to waive some of its levy requirements, provided the companies kept their part of the bargain.
Requisite investment
For their part, the companies made the requisite investment in machinery and human capital to boost production. Additionally they provided monetary incentives for increased worker productivity and funded these incentives by the savings that resulted from more efficient production.
Where the trade unions are concerned, they virtually eliminated union rivalry and agreed to stipulated wage agreements over defined contract periods. The unions also reinforced the emphasis on increased productivity as central to the industry's survival.
But no doubt the real question engaging the nation's minds is whether the bauxite sector's experience can be replicated in the broader economy.
The answer is a resounding yes but only if we learn the lessons from experience.
The first glaring one is that the tripartite link of government, companies and trade unions is critical for increased production. All three players must understand their roles and deliver the goods. This brings into sharp focus our failure to build a Social Contract. It is this reality no doubt that makes Norman Dacosta, vice-president of the National Workers Union with responsibility for the bauxite sector, argue that it is better to press for selective sector accords as "it is the surest way to tackle big problems".
This may indeed be true but individual sector accords must ultimately be sanctioned by a broader national contract in which the parties trust each other.
A second lesson that jumps up at us is that the State's fiscal policy must be flexible and promote expansion, growth and employment. This message was seen in Dr. Davies' willingness to review his levy requirements and forego revenue as well as his tolerance of special incentives schemes.
Significantly, economist Dennis Morrison, senior director of the JBI argues that this latter provision (productivity incentives) may not be permanent and must be interpreted in the context of Government's need to meet its fiscal targets.
Morrison contends that the ultimate challenge is to make increased productivity the lynchpin of the economy, that it does not depend on the provision of special incentives, with implications for the public coffers.
He is obviously correct but in this thrust towards increased productivity there must be a game plan on how to generate growth and employment in the short term.
Expanded output
A third lesson from bauxite's success that should not be overlooked is that the captains of industry must drive the process of increased expanded output at their business units. The emphasis on the business processes of increased investment in technology, expanded training of human capital, open and transparent management policies that welcome worker inputs are indispensable for turning production around.
Meanwhile, though the application of these lessons are vital to facilitate growth in the economy, it is noteworthy that despite the good news, the industry is not completely out of the woods. The main challenges noted by industry specialists are:
effective management of construction costs
respect for the environment
protection of bauxite reserves (especially from squatting).
efficient energy usage.
Interestingly, these concerns can be addressed at the local level. Both Morrison and DaCosta are agreed on the need to move expeditiously to tackle these problems.
There are other concerns, external to Jamaica, that require attention. These relate for example to the absence of a clear signal from Alcan regarding future investment in Jamaica. Additionally, it must still be remembered that Jamaica's alumina production only accounts for a small proportion of total world production.
These problems apart, the good news from bauxite provides tremendous hope for growth in the economy this year. The psychological significance of this for the economy at the start of the year must never be underestimated.
