By McPherse Thompson, Staff ReporterMICHAEL LEE-CHIN, chairman of the National Commercial Bank (NCB) and Canadian mutual fund company AIC, came under fire yesterday for suggesting that foreign-owned businesses in Jamaica start reinvesting their profits here.
"It doesn't reflect the investment history of foreign-owned companies that have been operating here," said Peter Moses, Country Corporate Officer of Citibank NA in Jamaica. "Citibank has been operating here for more than 40 years and I do know from experience that profits have remained here to stimulate additional expansion of foreign-owned businesses," he added.
At the same time, Mr. Moses, like Raymond Campbell, Country Manager for FirstCaribbean International Bank, formerly CIBC, as well as Amritt Sinanan, managing director of Royal Bank of Trinidad & Tobago (RBTT), said that as investors, shareholders had the right to repatriate profits if they so desired.
Mr. Lee-Chin, speaking at an awards function in Kingston on Tuesday, called on all foreign-owned businesses in Jamaica to resist the temptation of sending their profits abroad and instead reinvest in the local economy.
"I think it's a very unfortunate statement by Mr. Lee-Chin," said Mr. Moses, in a telephone interview yesterday. "His involvement here in NCB is quite recent," he added, pointing out that "a lot of foreign-owned banks have had a long history of retaining part of their profits here" for investment in expansion of the businesses.
Mr. Moses, a former president of the Jamaica Bankers Association as well as the Private Sector Organisation of Jamaica (PSOJ), said expansion required capital and therefore banks usually retain a portion of their earnings to expand the businesses. What Mr. Lee-Chin's "statement implies is that foreign-owned companies should start doing what he has suggested, as if it was not being done before," said the Citibank Country Officer.
He said profit retention or remittance were independent decisions taken by individual entities and "nothing is wrong" if investors wanted to repatriate those profits, but Mr. Lee-Chin's suggestion "doesn't reflect on the history of the companies that operate here as foreign-owned entities."
Mr. Campbell also said of Mr. Lee-Chin's suggestion: "It's a very unfortunate statement in my view." He said that once companies, including banks, complied with their statutory obligations they had the right to do whatever they wished with the rest of the profit.
However, he pointed out that foreign-owned businesses, including banks, have been contributing positively to the Jamaican economy.
"The foreign-owned banks have a presence in Jamaica for more that 200 years and therefore the distinction between foreign-owned and local banks is irrelevant," Mr. Campbell said, adding that "foreign-owned banks are significant players in the economy in terms of creating employment and contributing to the national treasury by way of income taxes and re-investment of capital into the economy."
At the same time, Mr. Campbell said, "the banks, like other businesses, have an obligation to shareholders, who are expected to receive returns in the form of dividends and capital appreciation, and their right to repatriate or do whatever they wish with the money is a right that is not to be taken lightly."
He emphasised that while some companies may choose to repatriate profits, others may choose not to, but "it is their right to use their income as they see fit."
Mr. Campbell said that by virtue of being profitable, foreign-owned entities were contributing positively to the Jamaican economy by paying taxes, providing employment and investing in a range of activities. He said that while they also reinvest part of the profits in the business, "we have an obligation to shareholders" and those shareholders have a right to repatriate their gains if they so desire.
"This notion of profits being repatriated overseas ... is one apparently made without the benefit of research. Most banks, I believe, pay out less than 50 per cent of their profit in dividends and so about half of it is reinvested back into the business and therefore provide investment in the economy," he said.
Maxine MacLure, Chief Executive Officer of Life of Jamaica (LoJ), said Barbados Mutual Life, which owns the insurance firm, has invested a lot of money in Jamaica over the past few years "so they obviously have a long-term interest in the financial stability of the country," and therefore their mission was not at variance with the idea propounded by Mr. Lee-Chin.
Mr. Sinanan said the "the situation, as presented by Mr. Lee-Chin, is noble and commendable, but it has to be put into the context that Jamaica needs lots of foreign direct investment to grow and we are likely to attract investors who will want a return on their investment; shareholders will want and demand a return on their investment."
In the case of RBTT, he said, the investors bought the company with accumulated losses of $2.8 billion, which the bank would be required to erase before it considers paying out dividends. But "as we do further business, our intention is to grow and develop profit, and shareholders will want returns on their investment." At the same time, Mr. Sinanan said, "we are committed to Jamaica, hence the reason we are doing business here."
