Digging Jamaica out of fiscal hole

Dennis Morrison, Contributor

No one should be surprised that the targets of the economic programme agreed with the International Monetary Fund (IMF) have proven to be too steep and unachievable in the period specified.

From the outset, it was obvious that correction of the nation's Budget deficit could not be achieved only by cutting expenditure, but would require significant revenue growth as well. And revenue growth itself cannot be sustained simply by imposing new taxes or by aggressive tax collection.

Jamaica's problem of high indebtedness and fiscal deficits can only be tackled on a sustainable basis by an ongoing investment drive and growth initiatives in sectors where we can attain higher productivity levels and international competitiveness.

We have to grow our way out of these problems. Put another way, fiscal prudence, while being necessary, is not sufficient.

Much has been written about the fiscal measures required, and the IMF programme has laid out some of the steps: fiscal responsibility framework, central Treasury management, divestment of loss-making public entities, public-sector restructuring. It is the necessary growth aspect of the two-pronged approach to our economic problems that require closer attention.

Reducing bureaucracy and boosting investments

On one side, the obvious impediments to growth are reflected in our low ratings under the 'Doing Business' and global-competitiveness assessments. Bureaucracy is an obstacle to the smooth functioning of businesses and households and puts Jamaica at serious disadvantage to competing nations.

This is in spite of the fact that we have been at the public-sector reform process for nearly two decades and that significant improvements have been registered in some areas. The next government of Jamaica must deploy the political and bureaucratic management talent needed to overhaul the business processes of the agencies responsible for service deli-very in the areas mentioned above. A top priority towards accomplishing this objective is expeditious review and rewriting of the outdated and cumbersome legislation to remove overlapping and wasteful procedures that run the gamut of the public sector.

On the other side, the machinery for mobilising investment must be put into high gear. I have no doubt that Jamaica can pull together the expertise and public-/private-sector apparatus to mobilise high levels of both local and foreign direct investment. In the decade up to 2008, Jamaica was one of the world's leading small island states in investment promotion, as shown in the unprecedented foreign direct investment, especially in tourism and infrastructure.

Tourism investments are one of the easiest targets for any growth initiative in Jamaica, and the fact is that there are several major resort projects with the appropriate development approvals already in the pipeline. Getting these projects to the implementation stage is now critical if the tourist industry is to continue to grow.

On cusp of shipping boom

But the full benefits, in terms of economic growth, can only be derived if the public and private sectors take the actions necessary to broaden and deepen the linkages between the tourist industry and agriculture, entertainment, manufacturing and Jamaica's cultural heritage.

A big winning area of investment which has not got much recent attention, however, is the Port of Kingston. Through the foresight of the Port Authority of Jamaica (PAJ), the Kingston Container Terminal (KCT) has been transformed into a world-class facility with its latest US$250-million expansion phase moving its capacity by nearly 50 per cent. The port is strategically located to sea lanes that serve the growing cargo traffic from Asia to the US East Coast, Europe, and South America.

The shipping industry in this part of the world is about to see "the greatest positive impact to come to world trade and world shipping in the essentially threefold expansion of capacity of the Panama Canal". (Noel Hylton, chairman, PAJ). The KCT is well positioned, with its infrastructural and logistical facilities, to capitalise on the massive increase of cargo movements that will follow the Panama Canal expansion. It already has in place a US$680-million investment plan to meet the new demand for port services flowing from the Canal expansion.

This will involve construction of two berths and 200 acres of storage area at Fort Augusta at an estimated cost of US$400 million. It will also include expansion of the western terminal, with the addition of 50 acres at a cost of US$30 million, dredging of the channel and berths, US$160 million, and new cranes and related handling equipment - US$90 million. This phase of the port's development would open up new opportunities in logistics, information technology, business process outsourcing, manufacturing and assembling.

Jamaica can only tap into this quantum leap in shipping and the opportunities that it can bring for integration with the local economy, economic growth and employment if it can forge a public-/private-partnership to mobilise the capital investment and local and foreign investors. The role of the PAJ will be critical in this as the coordinator, strategic driver, and investor as well, and therefore the renegotiation of the agreements with the IMF and other multilateral agencies must take account of this factor.

Dennis Morrison is an economist. Email feedback to columns@gleanerjm.com.