In what direction are we going?
The latest public opinion poll conducted by Bill Johnson for The Gleaner Company raises the question as to whether Jamaica is going in the right direction. The strident answer from the public is that the direction is wrong. This is based on the widespread suffering from the economic adjustments being borne by the majority of the population because of the agreement between the Government and the International Monetary Fund (IMF).
On the other hand, the business class is applauding Finance Minister Dr Peter Phillips for maintaining the economic pressure. This strategy will keep expenditures low, allowing revenue to accumulate to pay down some of the mountains of debt of Jamaica, which has the third-largest debt-service ratio in the world. Lately, this ratio has begun to fall from a high of 138 per cent of GDP to the present 126 per cent. This is a notable achievement worth applauding.
But the difference between the rich and poor leaves Prime Minister Portia Simpson Miller having to ride the horse both ways: for the haves and the have-nots, which can be done for a while until time catches up eventually with the damaging contradiction.
How can this be avoided? Some say the economy should be growing and this would provide surplus revenue to stimulate investment, growth and jobs. But, if surplus revenue is available, it is to be used for the payment of debt as the first priority, leaving little or nothing to stimulate growth. Growth will only be possible from major new investments that are already funded from non-budget sources.
As the economy tightens its grip on expenditure over the remaining 18 months of the agreement with the IMF to ensure that the principal target of debt reduction will materialise, a greater threat will be looming. Currently, it is the IMF funds that are closing the gap for foreign exchange in the economy. This gap arises from inadequate supply of Jamaican export earnings. But the IMF flow will cease in April 2017 when the agreement with the multilateral ends. Hence, it is to be expected that, at that time, improvements in the economy will be able to take over the task of increasing foreign-exchange earnings without which the economy cannot survive.
What are the possibilities for such projects? Apart from the Old Harbour logistics hub, the smaller version in the Kingston Harbour, and the recently announced US$900-million Mexican tourism investment over 10 years, nothing else spectacular has so far appeared by way of major projects to earn the vital foreign exchange in the short time span.
If there are such new developments to come, they should be identified and their development tracks marked to give the public assurance that the end of the IMF programme and the beginning of the next phase of new development of the Jamaican economy (which will be most likely be without IMF financial support) will not result in a huge gap of foreign-exchange earnings, for which a huge amount of foreign exchange to close the gap will have to be borrowed, throwing the economy back into the hole from which it would have just emerged.
At the present time, that gap appears to be looming. As a consequence, much work has to be done to forestall possible potential failure of confidence.
In the 1980s, when confronted with the same prospects, I set the Jamaica National Investment Company (later JAMPRO) on a track of finding investments concurrently with the carrying out of the adjustment programme, so that when the latter was completed, the former would immediately commence. That strategy was successful and the path to development was swift and smooth with a revenue surplus in less than three years, and new foreign-exchange earnings leading the way. This surplus lasted until the mid-1990s.
Providing that we do not, in the future, go back to spending excessively, that surplus will hold, and the fiscal Budget would be fixed, so that it would operate prudently, borrowing only within our means, thanks to the insistence of the IMF and the willing response by the government.
For some time now, it has been felt that the new logistics hub to be created by the widening of the Panama Canal, to take much larger vessels, will create a bright future for the use of Jamaican ports, notably Kingston and Old Harbour. Thousands of jobs will follow. That would show us the road to follow for the future, using the Panamax development. But so far, insufficient concrete development has been spelled out for the Jamaican scenario.
To set the future in its proper perspective, we must differentiate between the ports of Kingston and Old Harbour. To be more accurate, Kingston has a group of businessmen operating with the Kingston Port and the Port Authority endeavouring to create their own logistic development in Kingston Harbour to increase capacity for additional ships. I believe that an agreement was also reached with a French company to participate.
The harbour is to be dredged to provide this additional accommodation in addition to using nearly 100 acres of land available at Fort Augusta. This is the Fort Augusta investment I suggested over 20 years ago and regularly repeated. It is an investment in the right direction. Whilst it may be too early to spell out specifics to keep hope alive, a broad picture should be painted for the public to hang its confidence.
This is not true of Old Harbour, which is where the massive development is supposed to take place, at Goat Islands, by China Harbour Engineering Company (CHEC). But, after a splurge of publicity with mixed responses on the use of the Goat Islands in the development, everything has gone quiet while CHEC is making plans to move its headquarters from Jamaica to Panama.
This move is quite well known. What is not known is if there is any other aspect of this project to remain in Jamaica. It is being quietly said that CHEC will spend its first five years in Jamaica making cranes for use by the Nicaraguan canal development in which it has a substantial investment. We do not know if the use of the proposed Nicaraguan canal to join the Pacific to the Caribbean/Atlantic will affect the Jamaican plan with Panama adversely or beneficially. The difference between success and failure will be the basis for Jamaicans to believe that we are going in the right or wrong direction. Assurances are needed.
Some light at the end of the tunnel must shine now.
There is a second possibility to make Jamaica self-sufficient in foreign exchange earnings. It is the IMF mantra of making Jamaican production competitive by devaluing the currency. I will deal with how much of a success or failure that has been as soon as the editing of a study of this area of operation has been completed, which will be very soon.
- Edward Seaga is a former prime minister of Jamaica. Email feedback to firstname.lastname@example.org.