Private sector must light the flame of growth

Dennis Morrison, Contributor

This year has been another tough period for Jamaicans as the local economy is still struggling to shake off the effects of the recession. The headline, 'Subdued commercial Christmas' in last Friday's Financial Gleaner, reflecting the assessment of business people, should, therefore, come as no surprise. Those who I have canvassed say that shopping has been low-key.

Some have pointed to the impending election as one contributory factor, while others have blamed the weak economy as the overriding cause.

On the other hand, there is the more optimistic projection from the Bank of Jamaica (BOJ) that money in circulation during the peak Christmas period is likely to show a real increase of six per cent. This would be a significant rise given the state of the economy.

If the BOJ turns out to be right, there would have been a bump in last-minute shopping, partly fuelled by election spending that would have boosted purchasing power in the past few weeks.

The usual spike in remittances during the holiday season would also be an important source of funding for Christmas shopping. The recent payment of outstanding salary increases to public-sector workers would have been felt as well. Otherwise, the uptick in the poverty figures and the unemployment rate means this festive season is going to be another sombre one for many Jamaicans.

Noticeable pick-up

But there is a paradox in our situation. While the roads in our urban centres are congested and short trips take hours rather than minutes, my supermarket operator tells me that the traffic of shoppers has moved up only moderately.

In the past, there would be a noticeable pick-up in spending in the two weeks leading up to Christmas. But in the last three years or so, that window has been compressed to three to four days leading up to Christmas Eve, and this year seems to fit the new pattern.

Spending levels during the year have been squeezed by the burden of sharply increased electricity bills, gasolene prices and tight controls on wages. The downturn in major sectors of the economy remains a big problem, although the tourism sector has remained positive, albeit at a slower pace of growth. Remittances, which have been a big cushion in recent times, have also not rebounded as strongly as was projected. Fortunately, we have not had street protests or widespread strikes that are usual in times of economic distress.

But there is a build-up of discontent related to the rising level of joblessness that demands urgent attention. Whoever takes the reins of government after December 29 will have to take meaningful steps to get the investment and job machinery moving faster. This will be no easy task and cannot be left entirely to the public sector.

Contrary to what is being said by some business leaders, the private sector will have to come with big ideas to help get the economic engine into high gear. After all, isn't the private sector the engine of growth?

In their pitch to the voters, both political parties have made the obvious point that growth is key to getting control of the fiscal deficit and debt problems. But getting the growth equation right depends heavily on the willingness of the private sector to deploy their capital on viable investment projects to increase production, exports and employment. A critical instrument in this process is the investment promotion agency, JAMPRO, which has not been on top of its game recently.

Higher levels of investment

One solution being proposed is to merge that agency with the Development Bank of Jamaica. It is an old idea that is based on the flawed premise that putting the investment promotion agency with development bank will ensure higher levels of investment.

Not only would this run the risk of a conflict of interest where decisions about loans for projects would be driven by the same decision-makers involved in promoting those projects, but what is really needed is for private investment banks to expand lending to private-sector investors. The State should not be the prime mover in this regard, but be a strategic coordinator.

This is a vital issue that must be given serious consideration as the next administration takes office. We cannot expect the Jamaican economy to be pulled from the rut if domestic capital remains on the sidelines, notwithstanding the important catalytic role that can be played by foreign direct investments.

Jamaican governments of both political parties have tried different initiatives to induce our investor class, but with unimpressive results. It is even more pressing now if want to turn the page from poverty and debt to dynamism, growth and development.

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