Growth strategy absent from Budget
Nothing new about the covenant
Extract more value from public sector
Robert Wynter, Guest columnist
"Parliament may make laws for the peace, order and good government of Jamaica". Parliamentarians take their oath of office by saying, inter alia, "I solemnly swear to uphold the Constitution of Jamaica, so help me God ... ." - Section 49 (1), The Jamaican Constitution
The Constitution has declared a covenant between parliamentarians and the people of Jamaica. Our parliamentarians have consistently abrogated this covenant by promising very high and by delivering very low. The people of Jamaica have endured a quality of life at levels far below Jamaica's potential, while continually voting in one or the other party. In other words, we have kept our end of the covenant, even as the progressively low voter turnout signals a waning commitment.
Finance Minister Dr Peter Phillips would have been better served to remind his parliamentary colleagues that a covenant already exists, and what is needed is for the Parliament to collectively live up to its end of the bargain. I suggest, therefore, that the Budget title be changed to: 'Time for Parliament to live up to the Covenant for Stability, Equity, Growth and Prosperity'.
Heavy on Diagnosis, Light on Prognosis
Opposition spokesman Audley Shaw, in his Budget presentation, was spot on when he congratulated Dr Phillips for his excellent articulation of the problems facing Jamaica, and castigated him for falling short of prescribing solutions to address the key problems. According to Dr Phillips, "If steps are not taken to cut the debt, we will be mortgaging the future of the country and future generations ... . This is the heart of the challenge that we face as a country."
Dr Phillips continued with his diagnosis: "One major deficit is our failure to achieve sustained economic growth." Dr Phillips then made the link between the debt and the anaemic growth as follows: "to compensate for the weak growth performance over the years, we have witnessed a build-up of an unsustainable public debt stock."
Debt and anaemic growth are symptoms of a greater problem, which Dr Phillips failed to adequately articulate. The central plank of his Budget presentation is to "set the debt on a downward trajectory". In doing so, Dr Phillips seems to be treating the symptom without the commensurate attention paid to the problem.
Budget not in sync with Vision 2030
The Government plans to be very aggressive in addressing the debt, as Dr Phillips is targeting a fiscal balance and a 100% debt-to-GDP ratio by 2015-2016. Growth targets, however, are weak, with projections being 1%, 1.3% and 1.9% for the next three years, despite his assertions that he is going for growth. This is in stark contrast to the 3% to 5% targets set out in Vision 2030 National Development Plan (NDP). In fact, the NDP suggests that Jamaica will become a developed country by 2030, as measured by GDP per capita, among other things.
If we were to achieve Dr Phillips medium-term growth targets, the country would have to grow each year between 2015 and 2030 by a whopping 10.5 per cent! If, on the other hand, the country's GDP growth continues to average what Dr Phillips has projected, with little or no population increase, we would achieve the developed-country status in the year 2123, over a century from today! This perennial discrepancy between the Ministry of Finance's Budget and the Planning Institute of Jamaica's NDP needs to be corrected.
Lack of Strategic Thinking
Dr Phillips' failure to articulate the root cause of our anaemic growth and debt challenges has resulted in the lack of a clear strategy underpinning the Budget.
In his Budget contribution on Thursday, Opposition Leader Andrew Holness suggested that the finance minister ought to have "used the tax package to indicate strategy direction; instead he has tried to scrape up taxes wherever he can find it".
I am in full support of this aspect of Mr Holness' presentation. I also agree with Emily Crooks, who on Nationwide that very morning suggested that the Cabinet go again into retreat, as there was no clear strategy for growth.
The Budget is simply a quantification of strategy. As such, Dr Phillips and his Cabinet ought to have set more robust growth targets for the medium term, then designed strategies to achieve those targets. This would have forced the strategic thinking which Mr Holness and Ms Crooks suggest has been sadly lack-
ing in the Cabinet and has not been evidenced in the Budget.
Extract more value out of public sector
Achieving robust growth targets will require thinking and acting outside the box as we determine how to make our two largest expenditure items, debt repayment and the public-sector wage bill, much more productive. It is my strong belief that the public sector's failure to effectively convert loans to tangible outcomes (poor project execution or implementation) has contributed significantly to the debt problem. In fact, there have been suggestions that typical technical assistance loans achieve only 40% of their stated objectives.
In a previous article, I suggested that the Government take the tough decision to separate those persons in the public sector who are not adding value, while adequately compensating those who do. I estimated there may be some 10,000 persons that could go in this fiscal year and, therefore, assume the finance minister was addressing me when he stated: "We have rejected the views of those who called for massive lay offs. We would prefer to grow the economy and attain a smaller public sector through rationalisation and efficiency gains, and natural attrition."
I have three questions for Dr Phillips: (a) By saying he prefers to grow the economy, is he suggesting that growth and public-sector cuts are mutually exclusive? (b) Is his projected average 1.4% growth over the next three years adequate to reduce the public-sector wage bill as a percentage of GDP to the desired levels? (c) If by rationalisation he means merging organisations with missions and functions that overlap, will job losses not be a natural outcome?
Let us assume, however, that there are no significant job cuts and the wage bill is kept at $145 billion-$150 billion. How can we extract greater value from the public sector? How can we get better value from the $75 billion spent on education? How can the private sector get better value from JAMPRO to drive investments and exports and from the Productivity Centre to improve overall productivity? How can we get better value from the billions spent in the health sector?
The very low level of productivity in the public sector has been a significant contributor to the anaemic growth and the unsustainably high debt. It must be addressed frontally by the Government.
Prime Minister Portia Simpson Miller will make her contribution to the debate on Tuesday, followed by Dr Phillips who will close the debate on Thursday. Hope springs eternal, and I expect one, or both, to provide some strategic solutions to really grow this country. Mrs Simpson Miller, Dr Phillips and their parliamentary colleagues have all agreed to the covenant. We need strong leadership now more than ever to ensure the covenant will be executed.
Robert Wynter is the managing director of Strategic Alignment Limited, which facilitates organisational transformation and leadership development. Comments are welcome at email@example.com and firstname.lastname@example.org.