Editorial | Car bond and public transport

It's a moot point whether the 80-per-cent slash to 20 per cent of the tariff bond new car dealers have to place with the government should lead to the reduction in the price of vehicles.

A more critical question, this newspaper believes, is what signal, if any, the move sends about the government's transportation policy.

It is a matter that the minister of public transportation, Daryl Vaz, as well as his opposition shadow, should address as a matter of urgency.

One potential interpretation of the measure, announced this week by the finance minister, Fayval Williams, is that the government is incentivising the private ownership of vehicles, rather than promoting a good, efficient and affordable public transportation system. Or, at least, that the administration wants to make it easier for new car dealers to stay in business.

RECOUPED

Until Minister Williams' initiatives, new car dealers had to upfront 100 per cent of the duties of the vehicles they imported, notwithstanding that they remained in bonded facilities – of sort. The dealers recouped their upfront payments on the sale of vehicles.

According to the finance minister, in 2022 Jamaica imported 50, 786 vehicles worth $81 billion. It is not clear what is the breakdown of the imports between new and pre-owned, or if all of these were subject to the duty bond.

However, Minister Williams noted that the duties on vehicles range between 67 and 88 per cent, so if the lower figure was applied “you can see that the capital tied up against the duties is significant”.

Using the lower tariff, motor vehicle dealers would have had to upfront about $54.2 billion, representing the 100 per cent duty on the goods. With the new policy, the bond would be $16.2 billion, a “saving” of about $38 billion, or over 70 per cent.

That's a lot of money which motor vehicle dealers can put to other use, including, as Jacqueline Stewart, the chairman of the Jamaica Automobile Dealers (JDA) said, upgrading facilities, re-tooling, or “lowering overall expenses”. That latter would come in part from the opportunity cost of not having to upfront huge sums, which are likely to wrack up big interest expenses.

GOVERNMENT'S NOD

Dealers will decide how they deploy the saved cash – whether they put it back into the business for future growth, cause it to flow to the bottomline, or, if operating costs are lowered, share some of it with consumers in how they price their products. Either way, it is the government's nod to the motor vehicle industry.

What, however, the policy doesn't address is the government's overarching vision for a transportation system that takes into account where people live, work, recreate, and therefore, how they commute.

At present, public transportation is often dangerous to life, overcrowded and inefficient, pushing more and more people, once they can afford it, to opt for private vehicle ownership. Increasingly, too, people are living longer distances from city and town centres, and therefore farther away from critical services.

The upshot is that Jamaicans have longer commute times on gridlocked roads, annually costing millions and millions of man hours. That impacts on labour and overall economic productivity, as well as people's quality of life.

There are also the costs of importing motor vehicles, spare parts for their maintenance, and petrol to power them.

All of this suggests to this newspaper the need for a medium to long-term policy on where and how Jamaica builds its communities, how they are connected, the type of public transportation that this will require and how private ownership of vehicles fits into this concept of development.

On these questions the government and the political Opposition have been largely quiet.