The Big Interview with Jean Paul Adam

“I have no leadership ambition”

The new minister of Finance, Trade and the Blue Economy is generally recognised as one of the most competent elements in President Michel’s government. But with the economy suffering from a lack of vitality, this new appointment promises to be the sternest test he’s faced yet. At ease with even the most difficult questions, he tells us about his plans for reviving the fortunes of the economy, fostering innovation and why he’s not the “blue-eyed boy” he’s been billed as. 

By Nicholas Rainer

From the ministry of Foreign Affairs to the ministry of Finance, that’s quite a culture shock. How is Liberty House treating you? 

In many ways, it’s been a relatively smooth process, partly because I’ve had such great support from my predecessor, Pierre Laporte, whom I know extremely well. We managed to do a complete briefing and handing over. In addition, there’s a very strong team at Liberty House. I think we have a strong core of capacity on finance, fiscal matters and macroeconomic policy which has been built up over the reform period. The foundations are very solid. Obviously, there are economic challenges ahead as there are for all countries, but I think that we’ve created a sense of momentum in that we can deal with these obstacles. Sometimes, the way to deal them is not immediately evident but we have the capacity to come up with solutions. 
There have not been any surprises, which is a good thing. The main difference between the two portfolios is that while the ministry of Foreign Affairs has a wide remit it’s still one ministry. The ministry of Finance, Trade and the Blue Economy on the other has much wider responsibilities in terms of the agencies that fall under its aegis, whether they are parastatal companies, banks such, as the Development Bank of Seychelles, etc. Therefore the ministry of Finance commands a much wider array of policies. But because of the strong team, the transition has been very smooth. 

There’s also the issue of the different levels of public scrutiny the two portfolios are subjected to. A minister of Foreign Affairs is judged less harshly than a minister of Finance, for example. Does that intimidate you at all?

No. Of course, there’s the perception that the Foreign Affairs portfolio does not concern itself with bread and butter issues, but if you look at the things we were dealing with in terms of policy priorities, a lot of them have an impact on the economy, such as climate change, Small Island Developing States, trade, etc. It is true that some of these issues are divorced from the man on the street, whereas at Finance it’s easier for people to see the impact.

If prices go up, for instance, you’re the one people will be directing their dissatisfaction at.

That’s normal and I actually welcome it. I like the fact that people do want to put those points forwards and I think an important part of the role of the ministry of Finance is to say plainly what can and can’t be done or to create roadmaps and timeframes as to when we can address things. 

For all his undisputed competencies, communication perhaps wasn’t your predecessor’s strongest suit. 

Personally, I think he was very good. He was very comfortable and open with the media. Institutionally however, I think the ministry of Finance has not built that capacity yet, for various reasons. For example, we don’t have a website. One of my priorities will be to address this issue. To be fair, the plans were already in place and I hope to bring them to conclusion as quickly as possible. 

The economy isn’t exactly on fire at the moment. The World Bank is predicting a growth rate of 2.9% in 2015 and 2.8% in both 2016 and 2017. Are these forecasts fair? If yes, are they satisfactory for a country like Seychelles?

I think that they are generally fair. The President believes we can do better, I believe we can do better and the country believes we can do better. At the same time, we shouldn’t underestimate the challenges or the constraints we face. Most of them link to the very particular nature of our economy – we are in an economy in transition – and to fact that any wealth that we create in the country is relative to global processes. For example, there are many positive things that engender other pressures. In 2014, we had real wage increases, which brought pressures in terms of imports and foreign exchange. This led to increased demand for foreign exchange and a depreciation of the rupee, which contributed to higher costs of imports and other knock on effects. 
Our economy is so interconnected with the world that there are a lot of challenges. What we need to do now is to really build on the opportunities, such as more affordable energy costs. There’s been a slight pickup in tourism arrivals which, while not a great acceleration, is relatively encouraging. I think also that there is a real opportunity for building more human and business capacity to generate more within what I would call a circular economy. In other terms, creating more wealth with what we already have and tapping into a lot of the good things that are happening in the economy. As for growth forecasts, I believe that we can do better but it’s still growth. We’re very much on the right track and, with the right policy mix, I think we can go above 3%. 

One big advantage that Seychelles enjoys is that unemployment isn’t really much of an issue. Do you agree?

Correct. The challenge though is the quality of the jobs rather than quantity, which is why I’m talking about the circular economy and creating opportunities which are accompanied by other opportunities. Examples of this are the Blue Economy and finding more ways to create wealth within the tourism sector. We need to look more at the nuts and bolts of these issues. It’s not all macroeconomic, it’s not all fiscal; it’s also looking at the ease of doing business, which is why we have a new ministry of Investment, Entrepreneurship Development and Business Innovation which will work in tandem with finance. 

In your first press conference as minister of Finance, you said that you one of your objectives is to increase the ease of business in Seychelles. Going by past evidence, this is easier said than done. How do you plan on unlocking the economy?

There are several things we can do. Firstly, there are certain elements that make things complicated for businesses which are linked to the fact that we only undertook our reforms in 2008. Take access to credit and the high interest rate. Both of those are hangovers from the macroeconomic reforms we introduced. Banks still don’t necessarily have many long term options in terms of their investments and, consequently, they are very risk averse. Personally, I think they are too risk averse but there are things we can do to reduce that risk. The banks have said that they’re willing to engage and we’re trying to come up with programmes. The SME Scheme, under which over SCR200 million worth of loans has been disbursed, is a good example. It has enabled a lot of success stories and the banks have played the game. 
The government banks, DBS and Nouvobanq, have led by example but all of the private banks have also participated to different degrees. There a sense of going in the right direction and gradually we will see a reduction in interest rates. The other thing must we do is look at ways to really foster innovation. In Seychelles, private businessmen have liquidity yet they’re putting money in tried and tested areas because they’re also risk averse. We need to have a more conducive policy environment to allow people to put their money in areas that are not necessarily tried and tested. We’re working with the ministry of Investment, Entrepreneurship Development and Business Innovation to make sure that financing is available upfront. The SME Scheme has dealt with this to a degree and it’s fair to say that it facilitated the lives of many small businesses. 

But has it fostered innovation? 

Partly, there are a few innovative projects out there but this is the next challenge and where we’re currently targeting a lot of our effort.

A recurrent gripe of the private sector is the number of taxes businesses are being saddled with. They affirm, not unreasonably, that an economy can’t depend solely on taxes. Do you agree? 

Absolutely, but it’s delicate. If government doesn’t invest in key infrastructure for the private sector, we won’t be empowering businesses. We are at a juncture where businesses are feeling their tax burden more keenly due to the relative slowdown in tourism arrivals. In 2008, when we had just undertaken the reforms, we had a bit of a boost because even though we had a lot of challenges there was a sense that there were a lot of profits to be made. And a lot of profits were made. Currently, I think we all agree, there is a substantial tax burden because of the need for investment. A lot of the investment can be done by the private sector – we’re working on a strong Public-Private Partnership (PPP) framework and some initial PPP projects have already started – but there are also a lot of things that government has to do. There’s no way out of that. 
If I take the example of the Public Utility Corporation (PUC), we have to invest a lot of money in water, sewage, electricity; it’s unavoidable. I don’t expect the tax burden to be so heavy in the long term, but in the short term government has to meet these infrastructure requirements. I look forward to discussing with the private sector, the areas which we can fine-tune. We understand the fact that the tax burden is tough; the message has come through. We have to make sure of two things: that the taxes are fair and that they are not an impediment. Because growth has generally been constant, the taxes have not really been an impediment but we’re prepared to fine-tune them if there’s the necessity to do so.
There’s also the sense that certain taxes, like the CSR tax, aren’t being used in the way that government said they would be used. What do you think of this perception?
I’m actually looking at the CSR dossier at the moment. A lot of good has been done with the funds but it’s not been publicised. There is the issue that big taxpaying companies have to see how their tax rupees are being used. That’s a clear message. At this stage, I’m very willing to commit to increase the transparency so that they can understand how their money is being used in ways that will benefit them directly. A lot of the tourism operators feel that not enough is reinvested in tourism but the reality is that everything in this country is tourism. But we perhaps have to use the funds in a more systematic manner. 

The 2008 economic reforms are spoken about almost reverentially. What reform has been the most impactful in your opinion? Do you think that it’s time to take them to the next level or rather to consolidate what’s been done over the past seven or so years? 

Government has not stopped reforming; the reforms of 2008 are ongoing. There are a lot of areas that we’re addressing. You mentioned that the reforms are referred to reverentially, but the International Monetary Fund (IMF) has said that Seychelles has done what no one else has done. In 2008, we had the highest debt to GDP ratio in the world; we now have a ratio that is lower even than many developed economies. We still don’t believe it’s fully sustainable which is why we’re committed to bring the debt to GDP ratio below 50%. But while we’re reforming, we also have to invest in infrastructure. What I’m most proud about the reforms though is that they have a people centred focus. We haven’t just implemented reforms; it’s also making sure that people benefit in the long run. There was a certain amount of pain that was felt by the whole country and we couldn’t get away from that. We made sure that there was not a large number of people who were unemployed, despite 12% of the public sector workforce having being made redundant. 
That’s a huge chunk for a small country. We didn’t target X, Y or Z. Instead we presented it as a voluntary departure and looked at the areas where there were possibilities for people to move into the private sector. That created a boost for the private sector as well because it became the most productive part of the economy. I think the priority going forward is to create more diversification within the economy. Diversification means new products, yes, but it also means looking at areas where we have competitive advantages, reinforcing them and thinking about the new products we can offer around them. There are a lot of services that we can offer to hotels that are currently underexploited. 

There seems to be a trend of parastatals competing with the private sector: Green Island Construction Company is getting many contracts, NISA received a government guaranteed loan from Nouvobank and, of course, the STC is moving into new product ranges. You’ve said that they are not in competition with the private sector but isn’t the reality a bit more nuanced than that?

One of the principles of the reforms is that we need competition. In small countries like Seychelles we’ve seen it time and again that competition doesn’t happen automatically. If you just open the market without regulation you won’t necessarily get competition because the market is small enough that it’s very easy for one big operator to dominate. If we go from the principle that we want competition, government can do several things. For instance, it can try to enforce anti-monopoly rules but in a small economy like Seychelles it’s not necessarily the best way. The other thing it can do is create anchors that are reference points. That is the strategy with regards the different entities you have mentioned. 
If we take the banks, everybody, even bankers, will say they are not satisfied with the current interest rates. We believe that interest rates should be lower; that’s what will allow people to invest in their homes and businessmen to reinvest in their businesses. If you check the rates of Nouvobanq, government has tried to do this as much as possible, without altering market conditions. The same rules that apply to the private sector also apply to government companies. Of course, the fact that they are government companies and that they are big companies means that they do enjoy certain advantages in the marketplace but these advantages are also available to the companies they’re competing with. 

Are you saying that there is a level playing field? 

Yes, I would say so. As the Minister of Finance, I’m very open to criticism on these questions and if there are areas where the private sector fears there is an unfair advantage I will investigate them. But there are many examples, animal feed, for instance, where the private sector isn’t pulling its weight. The STC is meeting a real need in the market. The reason why the STC went into construction materials is because everyone has recognised that one of the biggest factors in the cost of living is the cost of construction. Anybody can import as many construction materials as they want, but the STC is bringing them in with a minimum mark-up to make sure there is a base price. 

But is the STC being subsidised? 

In terms of the 14 core products that we recognise as being basic requirements, government does subsidise. That has been announced, published and is freely available to consult. But it doesn’t subsidise other products. The STC is looking to expand on the 14 core products because the question of the number of products that are considered essential is wider than it once was. 
Government was supposed to withdraw from Nouvobank sometime back. What is happening to this? Is privatization still on the cards?
It’s still on the agenda. But we are not going to privatise for the sake it. That’s we’ve done throughout the reforms. Countries that have privatised just to say that they’ve done it have not really benefitted. I think there are good examples of privatisation in Seychelles, SACOS being one of them and the Seychelles Commercial Bank (SCB) another. These were done gradually. [Ed’s note, SACOS is now a fully private company while government is still the majority shareholder in the SCB but is gradually selling off its shares]. All companies that are profitable are available for privatisation at a certain point but the moment has to be right and we have to make sure not to create imbalances in the economy. 

The SCCI elections are around the corner. What do you expect from the next chairman? 

I want an engaged private sector so the identity of the next chairman doesn’t really matter. We need somebody who is going to be a reliable interlocutor, somebody who can put across the positions of the private sector effectively and transparently and make sure they represent the interests of the entire business community of Seychelles. I have no issue with either candidate and I wish them all the best. I hope the elections go smoothly and successfully and I look forward to working with whoever is elected.

Certain segments of the media interpreted your appointment as evidence that you’re destined for even greater things. How do you see your appointment?

I’ve always addressed my work as a Minister as contributing to the greater good of Seychelles and this portfolio is no different. I was very lucky to be appointed to Foreign Affairs for my first portfolio and it’s the ministry where I grew up so to speak. I relish the challenge of being in Finance in the sense that there are more policy tools that I can use to contribute to that goal. I don’t see it as a promotion.

Really?

No, I honestly don’t. I see it as part of the work of government. I always smile when I hear people speak about...

The blue-eyed boy for example? 

I don’t have blue eyes (laughs). I always thought they were talking about Minister St Ange! In the context of Seychelles, Ministers are not elected, we are appointed by the President; therefore, we are here to support the agenda of government. That’s how I see it. I’m also a member of a party and I will continue to support the work of the party. I have frankly no leadership ambition.

That was going to be my next question: how ambitious are you? 

I’m ambitious for Seychelles but I have no personal ambitions. My ambition is to support the goals of the President and the country. 

Do you think the elections will be held this year or next? 

The ruling party is ready for the elections. As per the calendar, the date of the elections is, I believe, May 2016. There is the possibility of having elections before that. We’re ready for them. I believe that elections are a key part of the democratic process for Seychelles and they are part of the economic landscape as well as they’re a way for people to express their expectations.

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