Jamaica Gleaner
Published: Friday | January 2, 2009
Home : Business
YEAR IN REVIEW - Manufacturing bounces back mid-yearBanking on stimulus to weather 2009
Dionne Rose, Business Reporter

( L - R ) Azan, Samuda

It was a challenging year for the manufacturing sector which was rocked by rising inflation and high interest rates, says its chief spokesman, as the financial crisis that began in the rich nations spilled over into vulnerable markets.

The sector was dogged by poor performances in the first quarter of the year recording a 0.8 per cent downturn.

This was due primarily to decreases in the production of food, beverages and tobacco (down 1.0 per cent), according to reports from the Planning Institute of Jamaica (PIOJ).

The sector, however, bounced back in the third quarter of the year. According to the PIOJ, real value added in the manufacturing industry grew by 0.4 per cent for the July to September period.

Food, beverages and tobacco value added grew by 0.2 per cent, while other goods increased by 0.6 per cent.

Omar Azan, president of the Jamaica Manufacturers' Associa-tion (JMA) in reflecting on the positives during the year lauded the incentive packages offered by the government during the latter part of the year to stimulate and cushion the sector as the country rode the financial crisis.

Way paved

"In terms of government policies, they have paved the way now for us to start moving ahead in terms of the removal of the two per cent and the financing that is going to be available," he told The Financial Gleaner.

Azan was referring to an announcement made by Prime Minister Bruce Golding in December that the customs user fees payable on capital goods and raw materials would be removed on January 1.

As of that date, the time allowed for depreciating the cost of capital equipment would also be reduced from two years to one.

Golding also announced that Government procurement policy would be adjusted to provide a 10 per cent margin of preference to Jamaican-owned companies.

This means that preference in the award of public contracts would be given to a Jamaican-owned company over one that is foreign-owned if the bid submitted is not more than 10 per cent above that of a foreign competitor.

"It may cost us a little more but we have to support our local manufacturers and suppliers," said Golding.

The incentives that the Government had conceded to came after years of lobbying.

However, Azan noted that despite the latter day positives, 2009 would be no cake-walk for manufacturers.

"It is going to be a challenging year in terms of the economy and the downturn in sales,," he said.

"Manufacturers will have to just make use of their marketing strategies and come up with new products ... in both the domestic and export markets."

Meanwhile, Milton Samuda, president of the Jamaica Chambers of Commerce (JCC) said 2008 ended on a low note.

Best hope

Christmas sales - which was supposed to be company's best hope of strong earnings and profit - were flat according to Samuda, referencing feedback from JCC members.

"Which to me has turned out to be a reasonably good thing because if it was flat, it was similar to last year," Samuda said.

"We are happy that it was not a reversal."

However, Samuda cited that high interest rates is one of the negatives.

The central bank raised signal interest rates five times during the year in defense of the Jamaican dollar - the last hike placing rates between 17.5 per cent and 24 per cent

"I think that we need to be assured that the high interest rate regime although it may be necessary in the short run to defend the value of the dollar does not last indefinitely because the little credit that is available to the productive sector - and now more than ever - we need to stimulate," he said.

He noted that 2009 would be more challenging and indicated the possibility of job cuts.

Hard fight to come

"Several of our members will have to fight hard to retain staff. There are others who are likely to have to lay off staff or make other arrangements," he said.

Outgoing president of the Jamaica Exporters Association (JEA), Marjorie Kennedy who demitted office in November and handed over the mantle to her successor, Michael Lumsden, gave a similar assessment of the year.

"The performance of the sector indicates that the base of the non-traditional export sector is a fragile one, and there is a need to broaden the base and strengthen the existing firms," she declared in her message at the JEA annual general meeting.

"We as an industry have to understand that productivity and competitiveness also depend on adopting scientific methods and accessing technical support. We have to transform our business and cultural practices from crisis management and a lack of planning to providing the sustained and integrated approaches that will bring success."


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