THE EDITOR, Sir:THE RECENT opening of the extension to Highway 2000 has resulted in much public discourse with contributions from various commentators. The major focus has been on the steep increase in the toll despite the obvious fact of the greater distance now covered. There are other practical issues which need to be addressed, including improved signage, particularly at the new Spanish Town roundabout.
However, I would wish to make a contribution as it relates to the appropriate level of toll. In that regard, various newspaper columnists, including Revd Garnet Roper, Dr. Garth Rattray and Mr. Peter Espeut, have all questioned the justification for the level of increase. Mr. Espeut has been harshest in his assessment and has argued that "this toll rate operates like a monopoly with price fixing ... This is not business; it is a money tree!"
BASIC FACTORS
I believe it is important that there is a clear understanding of the basic factors which influence the most appropriate level of the toll. The cost of the new construction is known and this has been financed by equity injection from the investors and by borrowed funds. As such the owners/operators need to generate adequate revenues to meet the following obligations:
Interest on the funds borrowed;
repayment of the principal amount borrowed;
maintenance of the system, and
the agreed rate of return on their investment by the developers.
Each of these four areas of expenditure can be accurately estimated, particularly in view of the fact that the rate of return on the investment (the level of profits) is part of the contract. For the present stretch of highway, it is capped at eight per cent.
MONEY TREE
To garner the revenues to cover the four areas of costs listed above, an estimate has to be made in setting a toll, of the number of motorists (say Y) who will travel on the road for any given charge say ($X). The revenues will be equal to $XY. Clearly in making this assessment, if X is set too high, then the number of motorists who can afford the toll may be too few to allow $XY to cover the various costs. At the other extreme, if X is set too low, then you could have the worse of two worlds - an overcrowded tollway which does not generate enough revenues to meet obligations.
Mr. Espeut's assertion that the tollway is a 'money tree' is clearly a gross simplification as it would not be in the interest of the operators to set the rates so high that there are 'super profits'. In any event, this is not allowed, given the agreement on the rate of returns. Furthermore, the reduced usage would preclude such a result. On the other hand, those who advocate a lower toll must appreciate that there are dangers in setting it so low that investors are unable to meet the basic costs which I have outlined above.
The operators may be faulted for inadequate investment in public education, whereby the facts are presented in simple language. What is needed is for a clear statement to be given by the operators as to (i) the precise numbers as they apply to the four categories of costs/payments which I have outlined above and (ii) the revenues to date. This would provide for the public a better understanding of what is involved in financing and paying for what is universally accepted as a significant improvement to our national road infrastructure.
I am, etc.,
OMAR DAVIES, MP
Minister of Finance Planning
Leniency and patience needed with delinquent taxpayers
THE EDITOR, Sir:
I WOULD like to make a special appeal to the tax administrators to exercise leniency and patience with the delinquent taxpayers. They should not operate with malice or prejudice.
I know that there are taxpayers who willingly refuse to pay their fair share of taxes, but the vast majority are tax-compliant. Businesses are experiencing a very difficult time and their very existence is threatened daily.
Banks are not very helpful or understanding, and I speak from personal experience. I tried to access a loan to purchase rolling stock and equipment for my business. The bank is recommending the purchase of a new vehicle for in excess of US$60,000 CIF. It is very difficult to qualify for a loan. If you move down to a two-year-old vehicle you are looking at approximately US$40,000 CIF. I tried to purchase a generator through my bank and hoped that the generator would be used as collateral and the bank advised that they would not use the generator as collateral.
The informal banking system thrives because of the insensitive attitude of the formal systems. As a result, the informal system is here to stay. Call up a friend or an associate and say "Lend me US$20,000" and with the proper repayment agreement it's 'bingo'.
I observed in The Gleaner where banks, including National Commercial Bank, are asking for up to $2,000 to open a savings account. How many people in Jamaica are able to find $2,000 to open an account? I think the banks should rethink their position.
I remember as a child, the Government Savings Bank through the post offices islandwide operated a 'Penny' bank where you could get a savings pan and save pennies until it accumulated and lodge it to your account. You could open an account with what you could afford. Potential savers are now forced to use the mattress or the partner system.
Foreign exchange loans should be made available to all who require loans in foreign currency. The present arrangement states that only exporters and people in tourism can access such loans.
All overseas purchases have to be made in foreign currency. There are at least four advantages.
The borrower does not have to go from bank to bank, cambio to cambio or the informal system to access foreign currency.
The interest rates on a percentage basis are lower than borrowing in Jamaican currency.
It reduces business expenses (interest on loan repayment).
The cost of goods and services will see a reduction or stability.
I trust that the Ministry of Finance and Planning through the Bank of Jamaica and the Institute of Bankers will look into this matter with a view to making changes.
I am, etc.,
JOSEPH M. CORNWALL (SNR) J.P
Email: Tranquillityfh@yahoo.com
