Editorial | Provide coronavirus stimulus to R&D
Apart from lessening the health risks from COVID-19, the attention of Jamaican policymakers, like those elsewhere in the world, is primarily on limiting the economic fallout from the pandemic and how to get a V-shaped recovery when the turnaround happens.
Jamaica, for instance, so far, has earmarked J$34 billion, or 1.3 per cent of GDP, for a stimulus spending while hoping for a relatively early revival of the US economy, which accounts for more than 70 per cent of the visitors for its key tourism industry. The Americans are proposing to kick-start their economy, which is heading into recession, with a stimulus package worth around nine per cent of GDP, US$2 trillion.
Up to now, the assumption, it appears, is that once the danger of this coronavirus has passed, global economic arrangements will return to ‘normal’, or the normal of the era of economic globalisation. That is unlikely to be the case.
This newspaper does not expect that the current rule books will all be torn up. And neither would that be in the interest of Jamaica and other small, developing states of the Caribbean Community (CARICOM). For such countries, the rules-based, multilateral system offers the best protection against arbitrary actions of the powerful nations.
However, once the disease has receded, the critics of economic globalisation are likely to find recruits for at least some elements of their cause. The disruption of global supply chains as cities, regions, and countries shut down to slow the spread of the virus and how these developments affect production in other countries, causing a shortage of some goods, is evident. So, too, is the problem of quickly ramping up production in domestic markets to offset shortfalls.
In this regard, the post-COVID-19 world will open niches for those who are nimble enough to spot, and take advantage of, the opportunities. Further, crises like these are often fillips to innovation, the encouragement of which ought to be among the next areas for attention by the Andrew Holness Government, especially the finance minister, Nigel Clarke. As he has done for other sectors of the economy, Dr Clarke might consider ways to incentivise research and development (R&D) as a driver of innovation.
The finance minister is already attuned to the potential for R&D to Jamaica’s growth, as he made clear in February last year, when he announced that spending on R&D would be treated as investment in calculating gross domestic product (GDP).
There are no reliable, current data on what Jamaica spends on R&D, but the best guesstimate is that that it is less than one-half of one per cent of GDP. Neither is it known what proportion of the efforts from R&D flow into new products or other forms of innovation by firms.
What is known, though, is that the world’s most innovative economies spend substantially on research and development. In the United States, for example, that spend is nearly three per cent of GDP. It is two per cent in the European Union and over three per cent in China.
In Jamaica, R&D investment is a taxable expense, but firms might be enticed to do more if such spending had a clawback value, especially if investors worked with universities and other research institutions in the quest to drive innovation. The point is, the aftermath of COVID-19 will require new thinking and greater innovation, which should start now, for it will be who grasps the opportunities first.