2014 must be Jamaica's year of growth

Densil A. Williams, Contributor

The economic news coming into 2014 for Jamaica was mostly positive. On December 29, 2013, The Gleaner had a big headline: 'Recovery under way'. This catchy headline, I am sure, was aimed at bringing much-needed confidence back into the economic planning cycle for 2014.

The International Monetary Fund (IMF) seems to be very pleased with the Government of Jamaica's (GOJ) performance under its extended fund facility arrangements. The GOJ has passed with high marks two of 17 tests so far.

While it is still early days, the purposefulness and adroit leadership with which the GOJ is going about administering the programme seem to be the major reasons for the optimism in Washington. The GOJ's primary surplus and the fiscal out-turns were better than projected, according to the reports from the first two tests.

Similarly, on the monetary side, the Bank of Jamaica was able to sustain its major policy rate such as its interest rate on 30-day certificate of deposits, maintained inflation within expectations for the fiscal year, and maintained healthy local cash currency reserves, among other benchmark criteria.

MOVING IN RIGHT DIRECTION

Overall, the picture painted thus far suggests that the march towards fiscal discipline and the generation of macroeconomic stability is headed in the right direction. Indeed, at the heart of the IMF programme is the need to generate fiscal discipline that can lead to greater stability in the macroeconomy; which in the neo-liberal philosophy is the foundation for economic growth and prosperity. We will get a better picture at the end of the final quarter of this fiscal year whether the train will still remain on the track.

However, while getting the macro on the right track is desirable, a more important objective is to grow the economy. This will be the only way that Jamaica will be able to deal in any decisive way with the many economic and social issues from debt reduction to reduction in crime and violence which have bedevilled it for almost 30 years. It is, therefore, imperative that 2014 becomes the year of growth for Jamaica. The usual dismal discourse about the IMF and all its expectations will have to change to reflect the importance of growth. Most important, the major growth ministries will have to step up seriously in 2014 in order to sustain the slight growth recovery that was seen in the September quarter of 2013. Agriculture, energy, investment and commerce, labour, foreign affairs and foreign trade will need to double their efforts in 2014 in order to get the growth agenda going.

To stimulate growth in any meaningful way, there needs to be a fillip in aggregate demand. Put differently, consumers will have to spend more, businesses will have to invest more and firms will have to seek new markets internationally in order to offload excess capacity and continue to gain needed market share outside of Jamaica. This is vital as a source of diversification of the risks inherent in operating in a high debt/low growth economy like Jamaica. The various institutional ministries and agencies that are directly on the growth path will definitely need to play an active role in positioning the growth agenda for Jamaica in 2014.

Agriculture will always be important in helping the country with its balance of payments issues. A critical agenda item in 2014 is for the country to substitute with local production high-value imports, especially in the food bill. Using more judiciously international trade policy, the country can substitute in the very short term almost US$300 million worth of imported food with locally produced food. This will help the net international reserves tremendously, and also provide needed employment for many local persons as well. The multiplier effect of this saving will be important in the Jamaican context.

REDUCE ENERGY COSTS

A most critical agenda item which has to be resolved in 2014 in order to propel significant growth in the Jamaican economy is the cost of energy. A number of plans are in the pipeline, including the build-out of the 360MW plant, which is touted to reduce energy price by about 20 to 40 per cent. Clearly, this is going to be a game-changer if it comes off the ground. The cost of energy is exorbitant, especially for small and medium-size enterprises, which are critical stakeholders to the growth of the Jamaican economy.

Reducing the price which these enterprises pay for energy will undoubtedly give them enough room to increase capacity in their plants and, as such, add value-added outputs to the gross domestic product of the country. Lowering the price for energy will also give house-holders more spending power, which can increase the consumption element of the aggregate demand function.

In addition to energy and agriculture, there will be a greater need to attract more local and foreign investments into the economy. The Government, through its Ministry of Industry and Commerce, will have to make the business environment become more benign for local and overseas firms to invest. Removing obstacles such as those that hinder the paying of taxes, transferring of properties, transacting businesses across border, etc, will need to be addressed urgently.

Similarly, the need to have the issues around the much-touted logistics hub be finalised and real commercial activities started is paramount. The significant potential the logistics hub has for the growth of the economy is not something that we can afford to play with at the moment. The touted investment of US$1.5 billion is not money that we can afford to lose at this time in our quest for robust economic growth. It is urgently needed and we must ensure that we do not obfuscate the issues and lose out on this investment.

The country cannot continue to struggle along the periphery. The key enablers for growth must be put into place in order to allow enterprises which create value added to go about the business of producing and stimulating aggregate demand to grow the country's GDP. We cannot continue to look to the old sectors that are in their sunset years for growth.

Greater focus and attention need to be paid to the emerging creative industries sector to ensure that Jamaica taps into the potential that this sector can deliver in stimulating aggregate demand and lead to economic growth. The word that must be most used in policy circles for this year must be 'growth'.

Densil A. Williams is professor of international business and executive director of the Mona School of Business and Management at UWI, Mona. Send feedback to columns@gleanerjm.com.