By Andrew Green, Staff reporterJAMAICA'S ECONOMIC dilemma is directly linked to its mistaken priorities, say experts from a number of different disciplines. The country's $657 billion national debt and massive fiscal deficit are just symptoms of deeper problems, they say.
More than just an International Monetary Fund monitoring arrangement, Jamaica needs to deal with its core issues in order to have a sustainable solution to its present crisis.
"We know what to do," said financial consultant Orville Johnson. "We have just not had the discipline to do it."
The inability to contain government spending within the straitened circumstances of the 1970s forced the government to seek funding from the IMF after the 1976 elections. In the succeeding years the economy distinguished itself with one of the lowest growth rates, recording a 0.5 per cent growth in per capita gross domestic product from 1975 to 2000, according to United Nations Development Programme data.
"We did not manage our resources properly," said chief executive officer and chairman of Barita Investments, Rita Humphries-Lewin. The senior stockbroker said our sister islands of Trinidad and Barbados had also suffered from severe economic crises and managed to emerge stronger.
POLITICS ABOVE ECONOMICS
Economist Omri Evans said the problem was that, "We have consistently put politics above economics. Politics controls the management of country, not economics."
Dr. Evans said the government vastly overshot the fiscal deficit target of 4.4 per cent of Gross Domestic Product in the last financial year to enhance its performance in the last general elections. Said Dennis Chung, a chartered accountant, "Our objective has not been on the creation of wealth. A distinction we have not grasped is that between growth and wealth creation."
Jamaica has focused on growing assets from borrowed money, Mr. Chung said. But the country has invested in assets that are not giving us equivalent returns to cost of assets.
Where the return on investment is lower than the cost of the funds invested, growth takes place but the investor stays poor, the economist said.
The primary example of this misallocation of resources is the sugar industry, which is the country's biggest employer, the chartered accountant said. Investing in sugar will never give Jamaica an appropriate return and the country cannot compete effectively as a sugar producer on world markets.
"The answer is to look at each expenditure against value added and opportunity cost of investing that dollar," Mr. Chung said.
"We have to cut our expenditure and live within our means," said Deloitte & Touche tax principal, Ethlyn Norton-Coke. Given limited means, higher spending in one area requires lower spending in another.
RESTRUCTURE EXISTING DEBT
"We cannot afford any more debt," the tax consultant said. "We need to restructure existing debt to make the payments lower."
The government cannot squeeze taxpayers further, Mrs. Norton-Coke said. The latest Ministry of Finance figures show that General Consumption Tax (GCT) on imports has risen, but that on local production is stagnant.
"You need to go out and tax those who are not now paying," she said.
"We have not put enough effort in collecting taxes," Mrs. Humphries-Lewin said. "Look at Jamaica and see how people are living. Goods are being imported and the government can count it, but cannot collect the GCT on it."
The government can fine-tune financial management, but that will only give the country some more "breathing space," Mr. Johnson said. "Ultimately we need to get production moving."
As recent World Bank report stated, Jamaica needs to be internationally competitive, the financial consultant said. "We will have to earn our way out of this."
The government needs a strategic plan tailored to get the country out of the current crisis, Mr. Chung said. In the long run, a better-trained and educated work force is needed to exploit opportunities for wealth creation.
"In the short term we need to get businesses growing," the accountant said. "To do that we need to get interest rates down."
The challenge now should be to craft a strategy for getting interest rates down in the least objectionable manner, Mr. Chung said.
