Firstly, let me wish everyone a great day of Horseracing on this Carnival Wednesday racing programme.
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Lok Jack: Import labour to increase production
One of the country’s most prominent businessmen has called on the Government to promote the orderly importation of labour in order to address the manpower shortages that are being experienced locally. Arthur Lok Jack—chairman of two large, publicly listed companies—said the low unemployment rate in T&T was one of the causes of the low rate of investment by the private sector.
Lok Jack made the point in an extended intervention during the question and answer period following a presentation on Thursday night at the Hyatt Regency hotel by Prof Peter Blair Henry, a Jamaica-born economist who is Dean of New York University’s Leonard N Stern School of Business. Henry, in his presentation, made the point that stock market reactions to economic reforms provide a powerful forecast of policy efficiency and that share prices respond to revelations about a country’s economy.
Henry cited Latin American countries, where the price earnings ratios went from an average of 3.5 per cent to 14 per cent between 1993 and 2012. This, in turn, caused a reduction in the cost of capital in those countries. Lok Jack explained he was the chairman of a number of pan-Caribbean companies that headquartered in Trinidad. He was referring to Guardian Holdings Ltd, Neal & Massy Holdings—both of which are public companies—and his family firm, Associated Brands.
He said that in Jamaica, the companies face cost of capital of 18 or 19 per cent, while in T&T “our cost of capital runs at around nine per cent.” He said in T&T stocks sell at an average multiple of about ten to 11 times earnings, while in Jamaica the price earnings ratio is about five times. He said that the disparity in the price earnings ratios between T&T and Jamaica reflected what Henry had said in his presentation.
Lok Jack said: “So basically that shows that the uncertainty about the future in Jamaica, to a large extent, at that high cost of capital, reflects a very low multiple. “People buy stocks for the future, what the future earnings are, not for what it is currently. In Trinidad, people buy a stock at ten times earnings. Similarly, in Jamaica, they think it is only worth five times earnings.”
Lok Jack made the point that in T&T there is full employment and there is a “hue and cry from every manufacturer, every retailer, everybody for labour” as there are not enough workers “to go around.” He said: “Despite low interest rates and low inflation, low unemployment brings about low investment. It is very difficult for us to put a new plant or a new factory with absolutely no labour.”
He said he thought that Trinidadians were quite entrepreneurial, but the country needs to remove some of structural impediments. “We should go definitely for, in my view, organised, official immigration policies, rather than the type of immigration policies that we have where we close our eyes to people coming off a boat or whatever have you.
“We should have it where they can come in, get employed, pay their union dues, be a part of the society and help to grow the economy because the GDP of this economy is not going to grow one single percentage more because I cannot increase my production. And neither can anyone else.” Lok Jack added: “Despite the fact that we have gone to robotics and all sorts of things in our factories, we still cannot get the growth that we need, although we may have the demand internationally for it.”
The businessman also said: “I know democracy is good, but I have a problem when we have governments changing and throwing policies out the window and new policies coming in.
“The only time that I ever saw policies continue in T&T was after Mr (George) Chambers made some very tough decisions in an election year. He lost the election, and the new party coming—the NAR (National Alliance for Reconstruction)—continued with the same policies. And it was that five-year term—even though we had all sorts of problems with it; we had a coup and all sorts of things—we had consistency, in respect of the policy, which brought us back out from the ten years of GDP decline.
“I don’t know how you get political parties today to continue that disciplined sustainability that you talk about.” On the issue of democracy, Lok Jack said he and former Finance Minister Wendell Mottley were in China when that country was adopting its reforms. But China, he said, was not a democracy.
Lok Jack continued: “As someone said, India is democracy of steroids. It’s par for the course in that China and India are moving forward, but China seems to be doing a lot better than India because of their democratic issues. “How do you do that in developing countries? How do we turn that around?”