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Growth strategy: Not by Gov't alone

Published:Monday | June 11, 2012 | 12:00 AM
Colin Bullock, Contributor

Colin Bullock, Contributor

Jamaica's growth prospects are modest; only one to two per cent per annum is being projected over the next few years. We all want to see stronger growth, but how is this to be realised?

Some commentators lament what they see as the absence of a "growth strategy". What do they mean?

Faced with spending more than 50 per cent of the Budget on debt servicing, can Jamaica, which is struggling to reduce its debt burden, spend more? Or do we simply abandon the debt sustainability objective?

Within a tight Budget constraint, expenditure has to be prioritised and managed efficiently to build physical and social infrastructure (including crime reduction) to enhance labour capability and to significantly reduce the cost of energy.

The importance of reducing the costs of crime and energy to increasing competitiveness can scarcely be exaggerated. Public expenditure prioritisation and management increase the importance of moving rapidly to design and implement the long delayed reforms to the structure and remuneration of the public sector and to the efficiency of public-sector financial management.

Strict adherence to the tight budget constraint is necessary to moderate inflation and keep interest rates low to facilitate private sector-led growth. The structural reforms will reduce waste and inefficiency and make more resources available for infrastructural and human capital development.

The enhancement of growth flowing from fiscal stabilisation and structural reform is not likely to be immediate. It is in this context that major private direct foreign investment projects are expected to contribute to increased activity in the near term.

Care has to be taken, however, to ensure that as far as possible, the economic benefits of these projects are felt in the rest of the economy. To the extent feasible, domestic expertise and inputs need to be utilised and as we build more hotel rooms, how do we link this to our agricultural sector?

For three decades, we have been speaking of "private sector-led growth". Indeed, various misadventures of government ownership, sometimes abetted by private-sector partners, have contributed significantly to our public debt.

As the Government divests itself of ownership, the private sector is expected to lead the process of expanding economic activity. In many instances, foreign investors have been more comfortable with the domestic "investment climate", at great profit to themselves.

As a severely debt-constrained country tries to enhance its "investment climate", we each have to ask ourselves: "What is my own growth strategy?" How will I enhance my individual capability or the productivity of my business? What is my next great idea?

Colin Bullock is a former financial secretary and now a senior lecturer in the Department of Economics at the University of the West Indies.