Jamaica at the bottom of the economic pile

Aubyn Hill, financial gleaner COLUMNIST

The 65th edition of the Economic Survey of Latin America and the Caribbean by ECLAC, which covers 33 countries in the two-year period, 2012 to 2013, lists Jamaica in the economic shrinking pile for 2012.

Our negative 0.3 per cent GDP shrinkage in 2012 puts us in the group of the shrunken, which includes St Lucia (-3 per cent); Dominica (-1.5 per cent); Paraguay (-1.2 per cent); and St Kitts & Nevis (-1.1 per cent).

This is not a pretty place to be, and we now know that the positive 0.5 per cent projected growth for 2013 is unlikely to happen.

Jamaica's imports still far outstrips our exports and our foreign-exchange position has not recovered from the US$255.3 million decline in net private capital flows during the March 2013 quarter, according to ECLAC.

Jamaica's economy still rests largely on consumption and has developed a debt-inducing taste for imported consumer products.

As a country, we appear to be unwilling to curb our desire for foreign cars, clothes, hairpieces, flour and rice, and we continue to produce less and less for export.

The Bank of Jamaica (BOJ) has strained to get the Jamaican dollar back to a measure of stability. Stability in this season has to be considered as a more moderate slide than that which took the dollar to J$101 to US$1 in a few short months.

This 'stability' comes at a price.

The BOJ used special borrowing instruments to suck up Jamaican liquidity, and some of the US dollars that the central bank had from our unsustainable borrowing was sold in the market to assuage US dollar demand - and encourage more imports in some cases.

If we do not manage our imports down until we get our exports up, the Jamaican dollar will continue to slide and the central bank will presumably continue to use our borrowed hard currency in a futile effort to stem the rot.

REAL SOLUTION TO POVERTY

The executive secretary of ECLAC, Alicia Barcena, said the "current situation highlights problems of growth sustainability in most of the region's economies, hence the need to broaden and diversify sources of growth. We also need a social covenant to increase investment and productivity, as well as changing production patterns to grow with equality".

Although Paraguay's economy shrank by 1.2 per cent in 2012, it is expected to lead the ECLAC region with a 12.5 per cent increase in GDP in 2013.

Jamaica is expected to grow by a mere 0.5 per cent by ECLAC, and indications are even that pittance of GDP expansion will not happen.

We seem to expect that the current government arrangements, which have stretched over several administrations and which have been focused on securing more debt, catering to politicians' needs and most everything except growth and efficiency, will somehow, miraculously, lead us to avenues of growth.

Without significant and even radical changes growth will not happen.

The result of our current economic management arrangement by successive administrations shows that even cosmetic changes would be better than nothing. At least cosmetic changes will be noticeable.

My suggestion to reorganise the government structure to form a cabinet post to be clearly responsible for knowledge and economic growth, as well as government efficiency, is radical and fundamental.

KNOWLEDGE ECONOMY MINISTRY

The suggestion is to collapse the ministries of energy and mining, information, industry, investment and commerce, and even parts of finance into one Ministry of Knowledge Economy to focus on a few strategic agenda items.

These would include diversifying our energy sources and reducing the annual US$2.5-billion fossil fuel cost, turn Jamaica into the knowledge factory of the Caribbean with every graduate 'fit for export', with skills that the world will buy, and convert our agricultural activities into viable import-substituting food and agro-processing hard-currency-saving enterprises.

This Knowledge and Economy Ministry will ensure that in the 21st century knowledge, and knowledge workers, will be the drivers of our economic growth - not raw materials or labour.

Creating knowledge workers does not need huge land mass, endless raw materials or hoards of poor people to achieve success. A clear policy, reorganisation of our spending and a seriously empowered and focused minister to lead the charge is what is needed.

Economic growth is not going to happen by chance or by continuing what we have always done.

The comment that cosmetic changes will not work is true. But collapsing three or four ministries into one, in Jamaica, could hardly be called cosmetic.

It will take a different vision than now exists in Government. It will need a clear vision as to the kind of economic growth we want to achieve and the kinds of people we need to travel with, plus a decisive, tough-skinned, bright and experienced woman or man as the knowledge economy minister to have a decent chance of running our moribund economy into a growth and employment machine.

NEEDED: A STRONG PM

A very strong prime minister is needed to give political and managerial backing to such a minister.

It is futile to believe that unless we make dramatic changes to our system of economic management we are ever going to achieve the kind of diversified and sustainable growth that ECLAC has rightly identified that Jamaica, as part of the region, needs.

We cannot continue to pile on debt, beg for aid and hope for remittances to get us out of the decades-old economic mess in which we are mired.

The prime minister and her Cabinet must recognise that it is time to give a thorough overhaul to our economic management and policy apparatus if we are going to move Jamaica from the company of the worst economic performers in the region.

There are risks involved for sure, but the risk of not making radical economic changes - incremental ones will be useless - are even greater.

Luckily for her, Mrs Portia Simpson Miller has a wealth of political capital.

We wish for her to use some of that political wealth to create economic wealth for her beloved, but needy, citizens.

Aubyn Hill is the CEO of Corporate Strategies Limited and was an international banker for more than 25 years.Email: writerhill@gmail.comTwitter: @HillAubynFacebook: facebook.com/Corporate.Strategies