What's at stake in the election (Part 1)

It is well known that Jamaica must earn its way in the global economy by capturing and maintaining an appropriate share of the relevant global markets. That same enhanced productivity is essential to stimulating the domestic economy to provide the goods and services that people need, want and can afford in the face of competition from imports.

The impasse with the International Monetary Fund (IMF) that has dragged on for a year now, through five quarterly tests that have been suspended, epitomises the drift of the economy. One can imagine that the IMF's patience will extend no further than the first day of the new Government's mandate. The hardships being endured by the masses of the population are tolerable only in the context of hope for promised action by the Government.

In this election, the only promises that are sure to be kept are promises of hard times. But there are promises of ways out of the economic stagnation and the social malaise that people need to give them hope. It is these promises that the new Government must make every effort to keep.

The investment that drives the economy has fallen to very low levels, and the foreign and local investors probably require a major confidence boost to get the funds flowing again. Jamaica needs the appropriate framework of policies to manage the national debt and ensure stability, a coherent economic programme for economic growth and employment, a posture of governance that is transparent and inclusive, and social policies that are sensitive to the needs of the most vulnerable citizens while being affordable.

The new Government must articulate a feasible and credible economic policy, a sensitive social policy and an effective governance policy.

Economic policy

The immediate economic task is to renegotiate the IMF agreement over a longer period, say, three years, with more realistic targets for reducing the fiscal deficit and for economic growth. The renegotiated agreement should not increase the level of borrowing, but rather ease the terms of repayment. Indeed, Jamaica needs to go beyond the current debt-management strategies and commit to a cap on borrowing that limits new foreign debt to financing projects with clear, low-risk, short-to-medium-term returns in hard currency, and limits domestic debt to support the feasible deficit targets of a renegotiated stabilisation agreement.

A programme of orderly transformation of the public-sector labour force for greater efficiency of service delivery will be less risky than the economic and social dislocations of layoffs driven by arbitrary ratios of public-sector wages to GDP. The public-sector transformation strategy that has been worked on for more than a year now needs to augment its concerns with how to deal with laid-off workers, and focus on how to make public policy more efficient and effective.

The transformation needs to go beyond reallocating current activities among the existing set of ministries to defining new objectives with new administrative processes, and new processes to achieve those old objectives that are retained. The new Government should undertake a thorough rethinking, with extensive and genuine public consultation, of the services that the Government will provide, and redesign the establishment of staffing to support the new ways of service delivery.

It seems inevitable that Jamaica must transform the public-sector labour force into a leaner, more efficiently organised, technologically enhanced team of persons with higher skills than currently obtains.

Foreign trade policy should be the lynchpin for an economy that is so dependent on global markets. The priority must be to engage with the overdue commitments under the Economic Partnership Agreement (EPA), from the collective strength of a CARICOM Single Market and Economy (CSME) of recommitted partners. Critics of the EPA have warned of the inherent dangers of the EPA undermining the CSME, and thereby hastening the fragmentation of the regional integration movement.

At the same time, the drift of the Jamaican economy also expresses itself in the lack of attention to building the CSME as a platform for engaging the global economy. The most immediate challenge is to find ways to take advantage of the opportunities of the EPA without surrendering too much in the competition with imports from the European Union (EU). The new Government must enlist the Jamaican business classes with urgency to face the challenges of the EPA, with as much support from the CSME and other regional arrangements as it can muster.

Tourism-Agriculture-Manufacturing

Perhaps, the new Government needs to approach domestic economic policy by way of clusters of complementary industries rather than focusing on the traditional sectors in isolation from each other. One of the weaknesses of the proposed transformation of the public sector is that it persists with ministries with sectoral mandates, even as cross-cutting issues demand the priority attention of policymakers.

The first cluster that comes to mind is tourism-agriculture-manufacturing. Efforts to pursue sustainable tourism must be redoubled in the context of the building pressures of climate change on the very fragile environment's resources of sand and sea on which the industry is based.

Competition for the tourist dollar will only become more intense as other regional destinations, especially Cuba, seek greater shares of a market that is projected to grow more slowly than in the recent past. Jamaican food is increasingly seen as a major attraction - recall the recent classification of ackee and salt fish as the second of the top-10 dishes internationally. Jamaica has a well-established international reputation for fine foods such as Blue Mountain coffee, jerk-flavoured foods and patties, tasty fruits and vegetables, and exotic spices like pimento and ginger.

As such, agricultural output should be targeted at the tourist market, both here in Jamaica and the wider Caribbean region where estimates of the demand for food by visitors to the major regional destinations are of the order of US$4 billion annually. Strategically located farms and greenhouses should be oriented to supply this market, and serve as central marketing agents for small satellite contract producers.

Of course, processing agricultural output into consumable products that create value added is imperative. Some of this agro-processing is amenable to small-scale activities, while others require investment in modern large-scale processing facilities. This kind of manufacturing based on local raw materials is far more sustainable than previous attempts at screwdriver-type industries that are totally dependent on imported inputs.

One of the top priorities for the reorganised Jamaica Development Infrastructure Programme (JDIP) should be the repair and maintenance of farm roads to support the supply of produce for both the tourist and the domestic markets.

Energy-Bauxite/Alumina-Households

The urgency of implementing the evolving energy policy is agreed by all. It is well known that the viability of industrial activity depends critically on sharply reducing the cost of energy to producers. The bauxite-alumina industry is a heavy consumer of energy, and its principals have made it clear that even restarting, and certainly expansion, will depend on securing cheaper reliable energy supplies. Voiceless small producers feel the same way, and are even more desperate for cheaper energy for their survival.

Recently, households have been protesting the high electricity bills of the Jamaica Public Service Company (JPS). Renegotiating the JPS contract to reduce the profit rate is inescapable. But the significant reductions in costs will only come when there are cheaper sources of fuel, and the public needs to understand and embrace this.

All of which points to the need to hasten the implementation of the mix of energy sources posited in the National Energy Policy, with the main new element being the development of LNG supplies. At the same time, the promotion of solar-powered heating and wind-generated electricity to achieve the target of 20 per cent of the national energy supply coming from sources of renewable energy is critical. Disciplined conservation practices will be essential to bring household energy bills under control, and the Government must lead by example.

Conservation should not only be practised diligently in government offices, but policies to promote efficient use of fossil fuels for transportation must get priority attention. The Government should encourage the importation of hybrid motor vehicles, extend the train service, and pursue efforts to develop a mass-transit system regardless of how long it takes. The increasing reliance of the travelling public on individual gas-powered motor vehicles is not sustainable. Nor can the roads manage the giant trucks built for USA highways that are too often driven recklessly.

The new Government must move with haste in this direction. Implementing the energy-conservation policy will require cooperation with the schools and the media for public education, and businesses and households for conservation practices.

Michael Witter is senior research fellow at Sir Arthur Lewis Institute of Social and Economic Studies, UWI. Email feedback to columns@gleanerjm.com and michael.witter@uwimona.edu.jm.

SEE PART TWO NEXT WEEK.