In last Wednesday's article, CaPRI began to estimate the cost of the stimulus package which Prime Minister Bruce Golding announced in December of last year. As with almost every economy in the world, we have been feeling the effects of a global financial crisis - and many governments have been introducing various kinds of stimulus plans. The Jamaican Government was helpful in outlining the hopeful outcomes of its plan. We believe this to be fourfold: to prevent the closure of business, to prevent unnecessary job losses, to retrain persons who have been made redundant and finally to provide support for households affected by the crisis in meeting basic expenditures. Our stimulus package is then aimed to benefit both individual and corporate citizens.

Jamaica's stimulus package included several initiatives. Among other things, it would see a halving of the GCT charged to the tourism sector for the six months, concessions to the bauxite/aluminium sector, the promise of NHT support for persons who found they were no longer able to make their usual mortgage payments and various loan packages for businesses.

CaPRI wanted to know what a range of our corporate citizens - from large to micro businesses - felt about this stimulus package and specifically if they thought they would benefit from it. While this might be discounted as mere impressions, we felt that as business managers, they had the closest pulse on what is happening in the real economy. In the aggregate of their impressions, there would be some underlying truths which we would do well to investigate further.

Expected benefits of the stimulus package

In the tourism sector, 83 per cent of our respondents felt they would benefit from the Government's plan to increase its spending on advertising and marketing, while 70 per cent felt they would benefit from the reduction in GCT. Regarding the loan fund of $500 million being made available to the sector, 65 per cent of respondents expected to benefit from it.

Another element of the stimulus package is the removal of customs user fees payable on capital goods and raw materials for manufacturers. Ninety per cent of manufacturers expect to benefit from this. A smaller, yet considerable, percentage (71 per cent) expect to benefit from the reduction of time allowed for depreciating the cost of capital equipment (from two years to one year). The Government also announced a policy of preference to Jamaican-owned businesses in procurement of contracts, and that this preference would be given to local companies if their bids were not more than 10 per cent over their foreign counterparts. Sixty-one per cent of the manufacturing sector expected to benefit from this policy.

Regarding the loan facility of $350 million for micro and small businesses (provided by DBJ through Jamaica National Small Business Loans Ltd), 58 per cent of micro businesses expect to benefit, while 51 per cent of small businesses expect to benefit. Regarding the $300 million provided through Jamaica Business Development Centre and designated credit unions, 46 per cent of micro businesses expect to benefit, while 48 per cent of small businesses expect to benefit. Government agencies are to reserve at least 15 per cent of their total procurement for micro and small businesses. Forty per cent of micro businesses thought this was good for them, but only 32 per cent of small businesses thought they would benefit.

Small-business response

The response of small business was even less enthusiastic with regard to the Government's plan to not charge GCT for companies earning less than $3 million per annum. Only 24 per cent of small businesses thought this would benefit them, though 51 per cent of micro businesses felt this was in their best interest.

Seventy-four per cent of businesses were happy with the loan facility of $300 million for productive sector (provided by IDB through commercial banks and Ex-Im Bank but only 43 per cent saw the abolishing of tax on dividends paid by all locally owned companies as being in their best interest).

With regard to the reduction of transfer tax on property transactions, 61 per cent from construction and installation expected to benefit, but only 28 per cent of the businesses surveyed from real estate saw any gain coming their way.

Sixty-one per cent of all businesses thought the Government's decision to raise the income-tax threshold to $220,272 was a good move that would benefit them.

So, in general, the initiatives of the Jamaican stimulus package have impressed roughly 60 per cent of those businesses that were directly targeted. Respondents from the micro and small business sector seemed less optimistic about those initiatives that were specifically designed for them.

We wondered, however, for those businesses that were generally optimistic about the stimulus package, if they saw it as achieving the aims as outlined by the Government. Our research instrument, therefore, went a step further and offered these businesses three possible types of intended macroeconomic impact to choose from. We wanted to know if they saw the stimulus plan as more likely to lead to fewer job losses, to fewer business closures, or to improving businesses' bottom lines. This was done to allow the business community to give us an idea of the type of macroeconomic impact we should anticipate as a country.

Without going into much details about the responses given for each initiative, we can say, on average, 78 per cent of all the businesses that are expecting the stimulus package to impact business performance said that its plan will improve bottom line, while only 15 per cent said they would be able to retain more workers.

We might infer from all of this then that the stimulus initiatives are more likely to aid businesses to thicken or maintain their profit margins and less likely to lead to fewer layoffs. While this may indeed be good news for businesses, it is interesting that 'improving the bottom line' was not one of the obvious hopeful outcomes of the Government's stimulus package.

The Caribbean Policy Research Institute (CaPRI) is an independent think tank affiliated to the University of the West Indies, Mona. Email: info@capricaribbean.org.