Fri | Aug 18, 2017

Editorial | Beyond Phillips’ new economy commission

Published:Wednesday | June 14, 2017 | 6:00 AM

Peter Phillips, the Opposition leader, broke no new ground in recognising the failure of the Jamaican economy to reinvent itself for 21st-century competitiveness. What is important, though, is that he has set his party to the task of thinking of ways to drive innovation and find ideas for job creation in the new global environment.

But this is a matter on which Dr Phillips holds no monopoly. Neither can Jamaicans afford to await a return to government of his People's National Party (PNP), which would require a presumption that that will happen sometime soon. It is an issue of which Jamaican governments have talked quite a lot for a long time, although with very limited achievements.

So, even as Dr Phillips' New Economy Commission sets about its work, we expect acceleration by the Holness administration of its own effort in this regard.

The problem is that the Jamaican economy still looks fundamentally the same as it did for most of the 20th century - and some might even claim the 19th century. As it has done for centuries, Jamaica produces raw material, like sugar and coffee and a few other agricultural crops, for export. In the second half of the 20th century, we added bauxite and alumina and a handful of other manufactured products. More recently, it has taken on a bit of digital outsourcing work.

Or, as Dr Phillips observed: "We have not replaced the traditional sectors with any new modern sectors and we continue to rely on the declining export of raw materials. The new economy is yet to emerge."

Of course, there has been much discussion in recent years about establishing the island as a centre for financial services and as a logistics hub. Talk, however, has vastly outperformed actual outcomes. But even in cases where positive things have happened, they have been difficult to sustain because of the uncompetitiveness of the economy.

The country, however, is on its way to overcoming a significant part of that challenge: the fiscal recklessness of gourmandising governments. The Budget is now essentially balanced; and the public debt, as a proportion of national output, has fallen sharply. The Government is no longer muscling the private sector out of the domestic debt market, allowing firms to borrow more affordably for investment.

 

Major issue

 

But there remains a major issue with labour productivity, which, in recent decades, has declined at one per cent a year. Indeed, nearly 70 per cent of the employed labour force has no specific training for their jobs. This problem of low productivity can be addressed, in part, by firms investing in new technologies to make themselves more efficient. The relative success, so far, in restructuring the economy makes this more feasible.

But the more fundamental fix lies in education and training to produce a workforce capable of performing in an economy envisioned by Dr Phillips and others. At present, no more than 20 per cent of Jamaican students leave high school having passed five Caribbean Secondary Education Certificate (CSEC) subjects in a single sitting, the minimum requirement for immediate matriculation to higher education. Performance in math and the sciences, critical for performance in the "new economy", is poorer. Less than half of the annual cohort passes math at CSEC. It's little wonder that retail and services and agriculture, most of which is rudimentary, employ almost 40 per cent of Jamaica's workforce and that around a third of the country's youth is unemployed.

Creating a new, competitive economy rests significantly on a thrust in education and coordination between government and the private sector. The labour and education ministries, for instance, can't see themselves separately from those involved in industry, or investment promotion. Neither can they perceive themselves as being detached from labour market reform. All have to be part of a transformative whole.