If You Were Minister of Finance How Would You Spur Growth in Jamaica?
It is generally acknowledged that the Jamaican economy is in the doldrums and already the rating agencies have downgraded the country. Jamaica’s public debt is now at J$1.2 trillion and its fiscal and trade deficit are at nightmare proportions.
The country’s three largest foreign currency earners — tourism, bauxite/alumina and remittances — are down and 13,000 jobs have been lost since October of last year. What is a cause for concern is the likely social unrest and the unacceptable crime levels besieging the country. This week saw 12 people murdered in the space of 17 hours and as the economy continued to contract social unrest seems a distinct possibility.
The country’s leading talk show host Wilmot Perkins has said that the media are culpable in the country’s predicament as they choose to concentrate on frivolity instead of bringing to the country pertinent news and the severity of the situations.
The Government is severely constrained and has limited options, if any, and has not unequivocally come to the nation with a comprehensive plan to address its plight. It may not have done so for fear of igniting civil disorder and therefore committing political Hari Kari.
Pointing blame at this juncture is futile. What has to be immediately addressed is how will Jamaica get out of this inertia and grow its economy so that its citizens can prosper. It has been said that a country is nothing more than a multiple of businesses, and if businesses prosper, so does the country.
In 1953, at the peak of its powers, the auto car giant, General Motors’ president, Charles Wilson declared before the US Congress that what was good for the country was good for General Motors (GM) and vice versa. In other words, as GM goes, so goes the nation. General Motors was founded in 1908 and grew to be the largest corporation in the world. Its market capitalization reached US$50 billion in 2000. Last month, its market capitalization dropped below US$1 billion.
By that token it will be left to the business community and its leaders to play a pivotal role in shaping the growth of Jamaica.
This week Caribbean Business Report posed this question to several business personalities. If you were the minister of finance, what would you do to spur economic growth and help solve the pressure on the local currency?
Here are their answers,
Bruce Bicknell-managing director of Tank-Weld Group
“We need a holistic approach to economic growth and we cannot just rely on Government. I think we should take the Obama approach and undergo infrastructure programmes that would create jobs in construction. The construction industry is one of the country’s largest employers, employing over 120,000 people in this country. We need to maintain those vital jobs and ensure that people in the inner city communities can look after themselves and their families.
“Tourism, remittances and bauxite have been our biggest earners but they are all registering a decline in fortunes now, and it appears that we can’t always rely on tem to see us through. The construction of the Spanish hotels is coming to an end and the Government must now keep up the building momentum. There has to be work for unskilled labour so that it can play a role in the growth of the economy.
“There has to be a partnership between the Government, the private sector and the various communities that will lead to positive changes that in turn changes the society and restores confidence. Companies must be encouraged to invest in the inner cities because they can help to raise the quality of life there. Furthermore, they can benefit financially while helping those communities. We have to address the crime situation because it is Jamaica’s biggest problem. If we do not make the right social changes, then we can never have economic growth that can lead to a better quality of life for all Jamaicans. You cannot talk about economic and financial prosperity without paying attention to social welfare of the country they are inextricably linked.
“We have to recruit the irredeemable and make them worthwhile, contributing citizens of Jamaica. By irredeemable I mean those boys between the ages of 14 and 22 who have no hope of a decent future and end up plaguing the society with their criminal activities. We have to build facilities for them and put them to work, teach them a trade and get them to understand the value of creating something worthwhile. I think if we do so they will come out better citizens. They just need a helping hand. Jamaica does not have a money problem, but it does have a leadership problem.
“We can’t just borrow ourselves out of our problems because there will come a day of reckoning. Also, we cannot line on 40 cents on the dollar.”
Joseph Issa- executive chairman, Cool Group of Companies:
“If China, or another nation that we deemed acceptable, found out our ports, railway and airline attractive. I would attempt to leverage a deal involving those entities to include access to a US$2 billion loan facility, at competitive rates of course, to be used only to refinance the equivalent amount of J$ national debt.
“This, being greater than our current NIR and representing just under 20 per cent of our total national debt, would first result in exchange rate stabilization. Thereafter, local interest rates would reduce from the current 20-plus percent levels down to the low teens or possibly even single digits thereby lowering our annual national interest costs. Assuming a 15 per cent interest rate reduction, the interest savings would leave well over $30 million cash in the hands of consumers, businesses and the Government annually, creating added growth and prosperity for our beloved Jamaica.”
Keith Collister- economist and columnist:
“If I was the minister of finance there would be two main priorities for the upcoming budget — the immediate priority of avoiding a fiscal crisis (tax revenues have been weakening since October) and the medium term priority of incentivizing Jamaica to truly adopt a strategy of export or die to compensate for the likely loss of foreign exchange earnings, particularly in the bauxite industry.
“Avoiding a fiscal crisis will require even tougher measures than were taken in 2003, as the international economic environment is continuing to deteriorate in what may turn out to be a modern day depression in direct contrast, the international economy was improving in 2003, and consequently, Jamaica was in the process of benefiting from a new wave of foreign direct investment.
“In 2003, a wage freeze was negotiated with the unions, and combined with a united private sector response dubbed the partnership for progress and a neutral opposition allowed confidence to return to the financial markets. Interest rates fell, allowing the Government to refuse a proffered debt swap.
“This time around every measure will need to be taken, namely a zero increase in the overall wage bill restraint on capital and recurrent expenditure, and increased taxation (including energy) to achieve a sustainable budget deficit. Interest rates will also need to fall from current levels, requiring a unified response by the country to maintain investor confidence.
“In the medium term, the Government needs to adopt a strategy of export-led growth. The simplest, most effective way to achieve this is in an environment where the Government cannot afford to give up tax revenue issuing Government to adopt a per cent rate on manufacturing international services. What Ireland did to help its economy during its Celtic Tigers from 1987 to 2003, and so achieved a unified corporate rate when the fiscal is available.”