Martin Henry | Going for growth
Jamaica is 'poised' for growth. And, like Usain Bolt, Shelly-Ann Fraser-Pryce or Elaine Thompson frozen in the starting blocks, the country has been so 'poised' for the last 40-odd years.
Mark you, this is 'growth' only in what STATIN, the BOJ and the PIOJ actually count, which is a fraction of the real Jamaican economy and very likely the 'smaller half'. The growth numbers could be instantly improved just by formalising more of the informal economy, i.e., the underground economy, so stuff happening there could be officially counted. And a lot of buzz happens in this survival, eat-a-food sector of the real economy.
The present Government has created elaborate mechanisms to drive growth, including an entire and unprecedented Ministry of Economic Growth and Job Creation headed by the prime minister himself and an Economic Growth Council (EGC). The EGC, so far, has only two visible members, the growth magician Michael Lee-Chin, Jamaican-Canadian financier; and Doctor of Mathematics Nigel Clarke, weighed down with wide-ranging responsibilities and the weighty title of Ambassador Plenipotentiary for Economic Affairs.
Last Wednesday, the Growth Council hosted a press conference timed by design or accident, for the anniversary of Marcus Garvey's birth 129 years ago. Back in the 1920s, Garvey had a clear and powerful agenda for national growth and development expressed in the manifesto of his People's Political Party.
The prime minister is hoping, dreaming, commanding that the stellar performance of our athletes in Rio will benefit tourism. Would love to see the data for outcomes from Beijing and London for this nebulous correlation.
This newspaper has reported [Thompson, IMF Tracker, August 17, 2016] that an IMF study using a "vector autoregressive model" which links GDP growth with tourist arrivals is showing that the impact of tourist arrivals on GDP growth is small for Jamaica, compared to other tourism-intensive countries. "This," the IMF report said, "is likely related to Jamaica's enclaved tourism model - tourists mostly stay in all-inclusive resorts that have little linkage with the rest of the economy, partly due to safety concerns. In addition, the sector imports much of its non-labour inputs."
And we might add that in the tourism sector, in this country with the highest income inequality in the Western Hemisphere, labour at the lower end is poorly paid, ending up subsidising the 'profitability' of the industry. As Government inputs from taxes also do.
In any case, the EGC press conference didn't yield very much by way of concrete information on a growth strategy or any data on early results. The big news from Prime Minister Holness was that the council is to prepare and submit from its consultations with everybody a report with proposals of various growth initiatives for the Government to initiate with growth to come from public-private partnerships.
And warmly commending the IMF for its oversight role, which blocks backsliding, Mr Lee-Chin pumped up his optimism and tried hard to pump up ours that five in four can be delivered: Five per cent growth per annum can be achieved in four years. We hit a growth high of 12 per cent in 1970 and haven't seen anything like that since.
No excuse now for lack of growth, gushes Richard Byles, the private sector co-chairman of the Economic Programme Oversight Committee (EPOC), which was created by the last Government to monitor performance under the IMF programme it had entered into.
As The Gleaner reports from the EPOC's own press conference, Byles thinks that "with stability in the basic fundamentals of the Jamaican economy, there is no reason the country should not now experience economic growth at a level above the anaemic average one percent that has occurred over the past few decades".
You will recall that when it was the Opposition, the present Government kept hammering away that achieving 'stability' and passing IMF tests without growth and job creation would not cut it in improving the lot of ordinary Jamaicans. They're in charge now!
TOP FIVE OBSTACLES
Tacked on to the last IMF report in June which covers the combined 11th and 12th quarterly reviews is an Annex called 'Growth Drivers and Constraints'. The Annex begins by noting, "Jamaica's growth impediments, just like many other countries which have suffered from protracted low growth, are numerous and severe.
The Annex says: "Jamaica's potential growth has historically been one of the lowest in the region," and "total investment in Jamaica is among the lowest of the region with FDI concentrated in tourism", a sector whose contribution to real growth is, at best, doubtful.
And what did the IMF find to be the biggest areas of constraints hampering growth? Coming from the world's leading multilateral lender, you'd expect a lot of directly economic constraints. And there are plenty of those. But leading the way far and away is crime. "The top five obstacles to growth in Jamaica, when compared to other countries in the world are: (i) crime, (ii) the cost and availability of credit, (iii) tax-compliance costs, (iv) electricity supply and (v) competition from informal sector.
Other factors, in descending order, include: corporate tax rates, educated workforce, customs and trade regulations, corruption, business licensing and permits, and labour regulations.
Number 5, 'competition from informal sector', I don't understand. But let's go back to No. 1: crime. The 'severity score' for crime as an obstacle to growth is twice the next nearest score and three times the world average.
Speaking to the crime obstacle to growth, the IMF says: "High crime rate severely constrains private-sector growth, especially tourism. Jamaica has one of the highest homicide rates in the world. Other crimes such as theft, robbery and gang activities are also prevalent. Nearly 50 per cent of firms identify crime as a major cost of doing business. The IDB estimates that Jamaica's growth could have been 1.6 per cent higher if it had the same homicide rate as the global average between 1995 and 2011."
While the prime minister is awaiting the report from the Economic Growth Council, he should lead his ministers and all permanent secretaries in a study of the 21-point Annex II to the IMF June report, 'Growth Drivers and Constraints'.
We're very fond of reinventing the wheel. This relieves us from actually driving. As a parting shot before leaving the PIOJ and retreating back to the United States and academia from whence he had returned to head the PIOJ, Dr Gladstone Hutchinson, working with Stanford Professor of Economics Donald Harris, led the preparation, with extensive consultations, of 'A Growth-Inducement Strategy for Jamaica in the Short and Medium Term' (2012).
The strategy was derived from and aligned to the bipartisan Vision 2030 National Development Plan. Mr Lee-Chin, the Economic Growth Council and the Cabinet should read it and save themselves and us a great deal of bother. We're weary of consultations - and of no growth.