Editorial | Growth: Agriculture, tourism

According to the tourism minister, Edmund Bartlett, Jamaican small farmers will sell about J$500 million worth of their produce to the island’s hotels, via a trading platform called ALEX – Agri Linkages Exchange.

It will be less than last year, when, according to the minister, ALEX facilitated nearly J$1 billion in trade. The decline, in part, is because of storms and floods in the summer that hampered farm production. The industry is still recovering.

Tourist arrival also softened because of travel advisories by the United States, warning its citizens against travel to the island because of crime. Americans account for nearly 70 per cent of Jamaica’s tourists.

Nonetheless, on its face, a $1 billion dollar market for small farmers is not a trivial sum. Additionally, there will be larger producers who do not require, or use, the intermediation of ALEX, a web portal developed by the Rural Agricultural Development Authority with support from the Tourism Enhancement Fund. They are likely to market directly to hotels and other tourism-related businesses.

“The linkages that we’ve tried to develop between tourism, manufacturing, agriculture and the myriad industries that operate within our space is something that we are getting more and more proud of, as a larger number of Jamaicans are becoming inserted in the tourism value chain,” Mr Bartlett said last week as he talked about the success of the ALEX system.

This newspaper, too, welcomes the apparent success of ALEX, as well as the attempts at what, in an earlier time, was referred to as back-and-forward linkages between tourism and the rest of the economy.

Those efforts, often, were in the context of something called an industrial policy, with the State cooperating with the private sector in designing initiatives to foster production, innovation, productivity and economic growth. That sometimes meant identifying potential winners and placing resources behind them.

BENEFITED

In several respects, Jamaica’s tourism industry, the island’s largest foreign exchange earner, has benefited from various forms of State-supported initiatives. However, in recent decades, the government has been largely out of the business of coordinated initiatives to extract the best value from all sectors of the economy. That, by and large, has been left entirely to the market.

This newspaper believes in, and supports, the primacy of the private sector in the economy. However, we are also clear that minimalist government and/or the achievement of macroeconomic stability, such as Jamaica has accomplished over the past dozen years, are not by themselves sufficient to drive sustained and robust growth. Indeed, despite running high primary balances and halving its debt as a proportion of GDP, to just over 72 per cent, Jamaica remains a low-middle-income economy with anaemic growth, low wages and low productivity.

So while it maintains the fiscal prudence that helped to win the current macroeconomic stability, it has clear that Jamaica has to do something more to extricate itself from its trap of low growth, while pushing itself up the economic and productivity ladder. It is against this backdrop that we endorse Prime Minister Andrew Holness’ declaration of a “pivot … to focus on achieving an increasingly strong and sustained economic growth performance”.

Agriculture and tourism are two sectors that are emblematic of the possibilities for cooperation and coordination in the drive for the strong and sustainable growth which Mr Holness hopes to achieve.

FOOD IMPORT BILL

Jamaica has an annual food import bill of around US$1.4 billion, or over 18 per cent of all imports. An estimated 65 per cent of food imports is consumed in the hotel and restaurant sectors, which are primarily associated with tourism. That is, over US$900 million (J$143 billion) of the food bill is largely to feed tourists.

Against the backdrop of the total food consumption in the tourist sector, J$1 billion (US$6.3 million) sourced from local farmers is a small proportion. Yet, experts say that between 20 per cent and a quarter of the island’s food imports could be substituted for domestic products, suggesting that up to US$350 million (J$55 billion, or a significant portion of it) could be retained in Jamaica and available for domestic investment.

However, Jamaica’s agriculture is mostly small-scale, with low technology and low productivity. Transformation, therefore, requires the coordinated efforts of training/education, research and innovation. That needs broad stakeholder participation.

Tourism, though, does not only consume agricultural products. A wide range of goods and services are used in the sector, including bed and sheets on which tourists sleep, and the toiletries they use in their bathrooms.

It is not clear how much of these and other items are sourced domestically, to contribute to the 40 per cent of the industry’s gross earnings (US$4.38 billion in 2023), which Mr Bartlett said is retained in Jamaica.

Current data on this matter are sparse. Anecdotal evidence, however, suggests that only a relatively limited number of these goods are produced domestically, although an analysis for industry interests, a dozen years ago by private consultants, concluded that in 2010 tourism accounted for 21 per cent, and 20 per cent respectively, of the output of agriculture and manufacturing.

The current initiatives through linkages notwithstanding, there is need for a far more strategic programme, founded in a broader and deeper national policy, to ensure these sectors extract greater value from each other. It need not be called an industrial policy, but the idea is the same.