Key Sectors Targeted To Drive Economic Growth

The key sectors to be targeted for the generation of significant growth of the Jamaican economy are: energy; tourism; information and communications technology (ICT); micro, small and medium enterprises (MSME); divestment of public assets through the Jamaica Stock Exchange (JSE); the revitalization of foreign direct investment inflows, improved business facilitation and the revamping the incentives regime.

This was stated by new Minister of Finance, Planning and the Public Service, Dr. the Hon. Peter Phillips, as he updated investors on  his administration’s  plans to facilitate greater economic growth, during a presentation to the recently held Mayberry Investment Forum in Kingston.

Speaking to the theme, “Jamaica’s next 50 years – opportunities and challenges we face as a nation”, the minister observed that Jamaica had achieved significant gains during the past 50 years, including a reputable democratic tradition and political maturity. He also cited “national institutions such as the Bank of Jamaica, the Planning Institute of Jamaica, a strong judiciary,”… and a “strong regulatory framework for the financial sector.”

The Finance Minister emphasized that the challenge for the next 50 years is creating and sustaining a cohesive, safe, peaceful and prosperous society that “will successfully compete on a global scale while maintaining our unique identity.” CEO of Mayberry Investments, Gary Peart with the Minister of Finance Dr Peter Phillips at the Mayberry Investment Forum held at the Knutsford Court Hotel on Wednesday night. (Photo: Jermaine Barnaby)

Alluding to the modest growth that has characterized the economic performance of much of the past five decades, Dr Phillips reflected that there is one aspect of the nation building project that has not been successfully realized.

“That is the ability to provide sustained economic growth, to deliver on the expectations of the Jamaican people for meaningful jobs and a good quality of life,” he said.

He argued that to compensate for the “weak growth performance” there has been a build-up of unsustainable public debt.

“This debt has now become a drag on our ability to grow faster. The debt to GDP ratio of more than 212 per cent in 1984 was reduced to about 111 per cent in 2007. The ratio climbed to about 131 per cent of GDP by the end of March 2011. The stranglehold of the national debt is impeding the provision of funding for vital social services and necessary capital investments to support growth,” he opined.

Dr. Phillips also pointed to recent “breaches that contributed to the breakdown of trust between Jamaica and our international partners over the last year”.

The Minister of Finance is currently engaged in “preliminary” discussions with visiting International Monetary Fund (IMF) officials, to arrive at an appropriate arrangement.          

“The IMF Programme, which expires May 2012, has not been completed because various critical structural benchmarks and targets were delayed or missed. An entirely new programme now has to be negotiated and new targets set focusing on growing the economy. The failure to successfully complete the Stand-by Arrangement resulted in the non-disbursement of multilateral funding, including US$220 million from the IDB. We expect that progress on the IMF negotiations will help unlock these funds,” he stated.

He emphasized that the Government was determined to fix the problem in a “framework of national and international partnership.”

Dr Phillips further advised that, in the medium term, any programme going forward must involve comprehensive tax reforms, the reform of the public sector pension system, public sector transformation and a reduction in public sector costs.

The aim, he explained, is to arrive at macro-economic stability including low inflation and low interest rates.

 “Let us recognise, however, that macro-economic stability is not an end in itself. There is stability now, partly because there is low demand for credit and foreign exchange due to the weakness in the economy. Banks are competing vigorously to lend and, in doing so, are lowering interest rates required to identify opportunities to generate increased revenues, which must be in the context of the promotion and inducement of growth in the Jamaican economy,” he stated.

The Minister advised that, if the Jamaican economy is to exhibit signs of meaningful growth then, it must bolster its international competitiveness in order to “drive export growth, investment and job creation.”

“Jamaica cannot be the “place of choice to live, work, raise families and do business’ if bureaucratic and other obstacles exist at every step of the way. Jamaica’s overall competitiveness has nosedived from 67th position in 2006 to 107th position in 2011, its worst performance ever and, in the World Bank’s ‘Doing Business’ rating from 43rd in 2006 to 88th in 2010-2011. We are ranked 133rd out of 187 countries in terms of savings rate, 172nd in paying taxes and 103rd in registering property. There will be a coordinated campaign to remove bureaucratic red tape,” he disclosed.

The Minister underscored the point that the “active recruitment and coordination of investments by the State is an absolute priority.”

He observed that: “Faster growth can be triggered, fast-tracked and ensured by Foreign Direct Investment (FDI) flows. We would also like to invite the private sector with capital to invest and propose ideas for investment to have discussions with us about how to move such investments forward. FDI must be targeted and deliberately coordinated. That was how we achieved the so-called ‘Spanish invasion’ in the tourism sector in 2007.”

Dr. Phillips pointed to his administration’s “solid track record” in the area of tourism investments, which helped to put Jamaica at the top of small island states in investment promotion in the period prior to 2007.

With indications that additional new hotel investments, both local and foreign are “ready to come on stream”, he advised that linkages among various sectors of the economy would be strengthened.

“There now has to be an effective divestment programme for large blocks of state-owned land to ensure production of food for the growing hotel sector and for export. We will revitalize investment promotion to boost foreign direct inflows, growth and jobs,” the Minister declared.