UAE energy minister: No change in OPEC policy amid oil slide

ABU DHABI, United Arab Emirates (AP) — The energy minister for the United Arab Emirates said yesterday his country is concerned about the balance in the oil market but added that OPEC does not plan to shift its strategy to shore up falling crude prices.

Oil prices have lost well over half their value since late June, with benchmark US prices now trading below US$45 a barrel.

OPEC, a 12-member bloc that includes the Emirates, decided at its last meeting in November to keep its production levels unchanged. A decision to cut production could have helped boost prices, a move that would also benefit rivals including higher-cost producers benefiting from the US oil-shale boom.

Emirati Energy Minister Suhail Bin Mohammed al-Mazroui suggested his country believes OPEC’s move is still the right one despite the steep sell-off, and said the organisation will likely wait until its next meeting in June before considering any change in strategy.

“We cannot continue just protecting a certain price,” al-Mazroui said at an energy conference in the Emirati capital, Abu Dhabi.

He said the Emirates is “concerned about the balance of the market but we cannot under any circumstances be the only party that is responsible to balance the market.”

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UAE energy minister: No change in OPEC policy amid oil slide

Business sector forecasts slow slide to J$115 = US$1

Businesses expect the local currency to slide towards $115 to US$1 by August 2015, a slower pace than previously expected, according to a Bank of Jamaica (BOJ) report.

It signals growing stability in the financial sector which, up to mid-year, suffered from faster depreciation.

The expected depreciation would result in 3.8 per cent decline over the review period against its US counterpart. In June, respondents expected the dollar to lose 5.8 per cent of its value over 12 months.

“Relative to the survey in June 2014, respondents expected a slower pace of depreciation in the domestic currency for the three-month, six-month and 12-month period beyond the survey date,” stated the BOJ Inflation Expectation Survey prepared by the bank’s Research Services Department and which contained data from 292 respondents.

The currency lost 14.4 per cent of its value in 2013 and an additional five per cent since January. Since June 2014, the slide tapered off based on an influx of foreign currency linked to the International Monetary Fund (IMF) loan agreement. At the time, the BOJ and the IMF separately indicated that the currency gained competitiveness against the greenback.

In the survey, businesses stated that they expect inflation to dip slightly towards 10.4 per cent for the 2014 calendar year, down from 10.7 per cent expected in the previous survey.

“The results of the August 2014 survey reflected an improvement in businesses’ perception of inflation control by the authorities when compared to the previous survey. Specifically, the index of inflation control increased to 156.6 from 149.9 in the June 2014 survey. This improvement mainly reflected an increase in the number of respondents who were ‘satisfied’ with the authorities’ control of inflation,” stated the BOJ.

The survey captured the perceptions of chief executive officers, managing directors and financial controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages/salaries. The BOJ said that these responses assist it in charting future policy decisions.

– Steven Jackson

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Business sector forecasts slow slide to J$115 = US$1

Financial experts praise Bank of Jamaica’s intervention to halt slide of dollar

KINGSTON, Jamaica, Friday July 11, 2014, CMC – The decision by the Bank of Jamaica (BoJ) to intervene in the foreign currency market in a bid to stabilize the local currency has been praised by financial experts.

The BoJ stepped in to stabilise the local currency, which on Thursday traded at J$112.71 to one US dollar. But there are concerns as to whether or not the BoJ has enough reserves to maintain the intervention.

Assistant Trading and Treasury Manager at Jamaica Market Money Brokers (JMMB), Kwame Brooks, said the intervention is possible for the immediate future.

“I think they will maintain a presence in the market to ensure orderly movement going forward. Usually the Central Bank doesn’t indicate how many days of intervention… it’s on a need to be basis.

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“What they will do is be vigilant and to keep a close eye to ensure that the movement is orderly,” he said, adding that the move by the BoJ to stabilize the dollar, will benefit from the assistance of major foreign exchange dealers.

President of the Private Sector Organisation of Jamaica (PSOJ) Chris Zacca is urging Jamaicans to focus on working efficiently to improve growth in the country instead of continuously talking about the devaluation of the Jamaican dollar.

Zacca addressing the Jamaica Observer Monday Exchange forum, acknowledged that the sliding dollar is causing real pain. But he believes that the emphasis being placed on the currency’s value is distracting businesses from focusing on production.

“The dollar is a market-determined rate, anyway. Let’s stop talking that it is going to be that much at the end of the year and let us put our heads down and do what we have to do to run the country and our businesses… Let’s stop talking down the dollar,” he told the forum.

Former finance minister Audley Shaw said the intervention of the BoJ, is in line with the policy of stability “promoted and successfully applied by the opposition Jamaica Labour Party (JLP).

“We have been warning the government for months that devaluation is hurting business, hurting people and hurting Jamaica. We were criticized for our positions, but as the higher prices and speculation have become chronic along with undeniable reductions in exports, it seems the BoJ has finally woken up,” Shaw said in statement.

But even as he welcomed the initiative, Shaw, the JLP’s spokesman on Finance, declared that it did not go far enough.

“Investors do not know the direction of the government so businesses cannot plan. The Government could decide next week to start devaluation again and this possibility does not bring confidence to the market and to the business sector,” he said.

He has called on the government to “state its policy direction clearly, and its policy must create a stable and predictable environment.”

Shaw said that if Jamaica is to benefit from the current IMF (International Monetary Fund) agreement, “the government must also come up with a proper growth and development policy that is bankable and saleable,” one that includes a robust growth strategy”.

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Financial experts praise Bank of Jamaica’s intervention to halt slide of dollar

FX study predicts 1.7% growth due to dollar slide

JAMAICA needs to boost exports to gain from a dollar projected to lose more than one-quarter of its value in 2013, says economist Dr Vanus James.

James made the observation while launching his report on the exchange rate on Wednesday. The study noted that depreciation of the projected amount, 28 per cent, would result in growth of some 1.79 per cent. That equates to the highest growth in years, but James indicated that it needs to be supported by real sector production.“The data is saying that you have to set an exchange rate that facilitates what you have to do on the real side,” he indicated in his address at the Edward Seaga Research Institute at the University of the West Indies.James, a University of Technology professor, is known for his landmark 2007 study on the size of the local copyright industry.“When you have a real exchange rate that is appreciating, that is going to bite you on the exports side. You have to be careful to allow some depreciation to discipline the market.”The 85-page technical report, entitled “Exchange Rate, Economic Structure and Economic Performance in Jamaica”, answered three main questions on the exchange rate, but always returned to the issue of production.“The story is right here,” he stated, pointing to a letter strewn within several stacks of equations on the effect of the dollar slide on the economy over decades. It was a symbol indicating the importance of production.“The problem you have here is on the real side. You have to solve that problem of how to industrialise,” he said.Currency depreciation cheapens exports and thereby increases the global competitiveness of products.But the report found that the real exchange rate actually “appreciated” at a rate of 1.5 per cent per annum since 2000 (presumably factoring in US inflation).Fast-forward to this current round of depreciation, the study found that the dollar nominally dipped seven per cent in 2012, with projections that it could dip by multiples by year-end.“The current path of depreciation will lead to about 28 per cent depreciation over 2013,” indicated the study, on page 76. However, importantly, the research found that the “net gain from a one per cent depreciation is growth of 0.064 per cent”, which would translate to 1.9 per cent growth.“Thus, while significant, both effects are highly inelastic and so very small compared to the effects of sound monetary policy and the industrialisation of the economy based on rising exports of output, especially from the domestic capital sector,” he continued on page 76.The currency surpassed the symbolic $100 to US$1 earlier this year, following a rapid double-digit depreciation over 12 months.The study was commissioned by the Edward Seaga Research Institute and sponsored by a grant from PanJamaica Investment Trust and Jamaica National Building Society, and the ICWI Group Foundation.The report, according to its author, examines the relationship between the exchange rate regime and economic performance such as inflation, restructuring and growth in Jamaica. It considers whether there is a performance cost of varying rather than fixing the exchange rate and seeks estimates of the cost. The report also seeks to determine an optimal exchange rate regime for Jamaica — whether a floating rate or a fixed rate. It also finds that instead of a crawling peg, the economic dynamics favour a fairly strict-managed float, complemented by solution of the real-sector problems of high energy and other import costs and structural change.

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FX study predicts 1.7% growth due to dollar slide

Holness speaks to JCC on dollar slide and tax reform

ON Tuesday, opposition leader Andrew Holness addressed the Jamaica Chamber of Commerce (JCC) board meeting on the issue of the Jamaican dollar and tax reform. He argued that while he was familiar with the economic arguments for devaluation, such as the need for the internal “rebalancing” of the economy, and admitted that “in the future it may be necessary”, he didn’t think such a policy should be pursued now.

He described “the policy of devaluation as poisonous to the Jamaican economy at this time”, and part of a “tacit agreement” with the IMF.Holness suggested that so far the Opposition had behaved in a responsible way, rather than “oppose, oppose, oppose”, so as to “avoid disruption”. Stating that in the context of the IMF deal, Jamaica’s “political climate was ripe for reform”, Holness assured that he “will support good policy”, but oppose bad policy.Addressing the issue of tax reform, Holness stated that “had we won the elections, we would have implemented comprehensive tax reform”, emphasising that in Opposition, “we took the risk of supporting comprehensive tax reform”, including supporting the position of the Private Sector Working Group on a uniform rate of GCT at between 10 to 12.5 per cent. He argued that the “unabated slide in the Jamaican dollar” since the election had been much more detrimental to the poor, and destructive to people’s standard of living, than a universal GCT, particularly as any such proposed reform should include increased social protection measures. In addition, in his view, there had been no compensating social protection measures to offset the slide in the dollar.Describing tax reform, Holness argued “in the hands of a butcher, it will kill you”, but “in the hands of a surgeon, it will save you”. Holness suggested that taxation was a very important signalling mechanism, and that he had reviewed the past two budgets, and couldn’t find one signal for investment. When in office, he said, the JLP had reduced transfer taxes, stamp duties, and removed the tax on dividends, as well as reducing some customs duties, and had planned to continue on a programme to reduce and unify some duties. In contrast, he said, the current government had just increased taxes.He was unapologetic in suggesting that the JLP stood for a Jamaica First position on Caricom, stating that he didn’t believe that one can have a strong Caricom with a weak Jamaica. He revealed that the JLP was still assessing this issue, and “that at a later stage will make statements on its position on Caricom”. His starting point was that Jamaica should seek true implementation of the treaty, meaning seeking remedies to deal with goods coming from outside the region but masquerading as Caricom imports and therefore coming in duty-free.Stating that “Economic growth must be private sector driven”, Holness argued that because Government accounts for about 70 per cent of procurement, a very important measure that would help private sector growth would be to pay suppliers for goods and services on time, preferably between seven and 14 days. “That simple action alone by Government committing to clear its bills on a timely basis would speed up the velocity of transactions in Jamaica. It would do miracles in improving access to credit”.Holness finished by arguing that he wanted to “unleash Jamaica as the next Singapore”. While arguing that it was positive that the society was strong enough to work together in a collaborative way to ensure that we have a successful economy and recover from serious recession, he observed that “in speaking to the different sector groups, that there is also a sense of uncertainty as to whether the sacrifices made both by workers and business will actually bear fruit”.In the question and answer session, he argued that we “don’t have the luxury of time anymore”, referring to the correct sequencing between tax reform and devaluation. He also observed that in the long term, it was his view that education was the most binding constraint on growth, even above, say, energy and access to credit. Jamaica doesn’t have oil, or a plethora of natural resources, so “Jamaica’s people is its oil”. For this reason, he had resisted the move to take away teachers emoluments, and teachers had got one of their largest increases under the former JLP government. He cited the example of when he was Minister of Education, a major business process outsourcing firm had wanted to hire 20,000 people. However, due to our low education standards, they told him that they had to interview 100 people to get 10. Finally, he observed that the JLP was forming an export strategy committee, to focus on how to increase exports.Opposition Leader Andrew Holness (right) addresses the Jamaica Chamber of Commerce (JCC) board meeting on the issue of the Jamaican dollar and tax reform. Looking on are JCC vice-presidents Catherine Kennedy and Warren McDonald. (PHOTO: ASTON SPAULDING)

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Holness speaks to JCC on dollar slide and tax reform