A GROWTH-INDUCEMENT STRATEGY FOR JAMAICA IN THE SHORT AND MEDIUM TERM

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1.0 Prologue Chapter 1 ________________ Introduction 1.1 The Growth-Inducement Strategy was prepared through careful socio-economic analysis and a structured approach to public scholarship. The consultation process involved in its preparation is summarized in the Acknowledgements to this document. A draft of the strategy document was submitted to and discussed by Jamaica’s Cabinet on three occasions between January and February 2011, and subsequently was publicly released on March 4, 2011 and posted on the PIOJ’s web-site. After its public release, the PIOJ organized and hosted a Public Symposium, featuring analysis and critique from expert panelists drawn from the private sector and civil society, as well as commentary from members of the public in attendance. The full presentations are also available on the PIOJ’s web-site. 1.2 Subsequent to the Public Symposium, public commentary on the Growth- Inducement Strategy has, by and large, been favourable, with prominent editorials in the large-circulation newspapers endorsing the philosophy and strategy of the Growth- Inducement Strategy, albeit with special emphasis on different aspects (for example, the proposed “Lifestyle Centre for Downtown Kingston”). In addition, various contributors to the printed press and commentators on radio and television have provided broad-based support for the Growth-Inducement Strategy. 1.3 On September 29, 2011 the University of the West Indies (through the Sir Arthur Lewis Institute for Social and Economic Research – SALISES – and the Department of Economics) hosted a public seminar for further critical analysis and discussion of the Growth-Inducement Strategy. 1.4 We hope that continuing public attention and public scholarship are brought to bear on the further development and execution of the strategy, transforming it into a living, organically adaptive instrument for economic and social transformation. 2.0 Epilogue 2.1 Buy-in from the Cabinet for the Growth Strategy was high. In late February 2011, Cabinet granted preliminary approval to the adoption of the Growth-Inducement Strategy as the organizing framework for determining Government’s policy priorities over the medium-term beginning with the FY 2011/12 budget. The consensus was that, as far as possible, the GOJ would re-prioritize its expenditures and programmes to incorporate the policy initiatives outlined in the Growth-Inducement Strategy, in order to minimize the 1
need for “additional fiscal space” and reduce the risks to the credibility of the overall economic programme. 2.2 Our preliminary assessment of FY 2011/2 budget tabled in late April 2011 and early May 2011, is that the GOJ’s budget was prepared based on a FY 2011/12 primary surplus target of 5.2% of GDP. This compares with an initial FY 2011/12 target in the IMF Stand-by Arrangement (SBA) of 6.8% of GDP, and hence, the current year primary balance target represents a relaxation of the initial fiscal target of the central government by 1.6% of GDP. However, we caution against interpreting this as “additional fiscal space” for the purposes of growth inducement as we understand that the adjustment to the primary balance was made in order to accommodate higher expenditures mainly due to: (a) The West Kingston disturbance in May 2011 (b) Emergency and rehabilitation expenditures due to Tropical Storm Nicole, and (c) Legacy costs from divestment operations. Hence, the new primary balance target is largely a “carry-over” from adjustments made to the FY 2010/11 targets. 2.3 Further, it should be noted that major components of the Growth-Inducement Strategy would, in principle, be captured in the FY 2011/12 budget through the operations of public bodies (such as the NWA, FCJ, etc) rather than in the Capital A or B budgets of the central government. In this regard, we understand that the deficit of the “Selected Public Enterprises” (SPEs) for FY 2011/12 is now targeted at approximately ½ % of GDP, which is essentially unchanged from the initial SBA target of 0.6% of GDP. Hence, taking the central government and public bodies together, it is apparent to us that the FY 2011/12 budget does not incorporate much in the way of a net quantitative fiscal stimulus. 2.4 Nevertheless, we are of the view that the FY 2011/12 budget incorporates important growth inducement elements. In particular, we believe that the allocation of expenditure to certain priority areas (such as road construction, among others) will engender significant benefits to a sluggish economy in terms of their direct impacts and also to the extent that they serve to alleviate critical production constraints (such as improving the resilience of the targeted infrastructure and providing other production infrastructure such as factory space). 2.5 Further, we note that substantial work has been done to carefully craft a tax reform package that simplifies the tax system, broadens the tax base and increases compliance. There is still additional work to be done to map out the social and welfare impacts of various tax-reform proposals in order to properly prepare the government to sensitize stakeholders, gain broad-based consensus and implement mitigating measures. It is imperative that this work be expedited so that the tax reform package can be finalized and its implementation begun in the shortest feasible time frame. However, in the interim, firm decisions have been taken with regard to the treatment of certain “nuisance taxes” (such as stamp duty and property transfer tax on estates and financial instruments such as corporate paper and bonds). These are important elements of the “asset mobilization” initiatives outlined in the Growth-Inducement Strategy and these 2
Page 1 and 2: A GROWTH-INDUCEMENT STRATEGY FOR JA
Page 3 and 4: To the many ordinary Jamaicans who
Page 5 and 6: Preface The Jamaican economy has ex
Page 7 and 8: for making a determined start on th
Page 9 and 10: the private sector groups, listed b
Page 11: Citibank N.A. Jamaica Branch Grace
Page 15 and 16: Chapter 2 ________________ Summary
Page 17 and 18: 1.0 The Economic Situation Today 1.
Page 19 and 20: expected to provide an essential an
Page 21 and 22: Table 2.1. The Policy Framework: A
Page 23 and 24: programme of social inclusion that
Page 25 and 26: Strategic Focus Table 2.2. Growth S
Page 27 and 28: 6.0 Short-Term Growth Stimulus 6.1
Page 29 and 30: decline of 2.0 - 2.2 percentage poi
Page 31 and 32: Table 2A.2. NWA Projects To be Fast
Page 33 and 34: Table 2A.5. Community Renewal Proje
Page 35 and 36: Table 2B.3. Impact of Repairing Far
Page 37 and 38: Appendix 2C Methodology of the Grow
Page 39 and 40: Part I _________ Overview 28
Page 41 and 42: 2.0 Vision 2030 Jamaica Before delv
Page 43 and 44: 3.0 May 2010 Security Event and Aft
Page 45 and 46: the longer than anticipated global
Page 47 and 48: Million $ 1,200,000 1,180,000 1,160
Page 49 and 50: Three industries recorded increases
Page 51 and 52: 9.0 Proposals for Growth-Stimulus I
Page 53 and 54: targeted economic and social infras
Page 55 and 56: partnering with government to disco
Page 57 and 58: 3.0 Growth Inducement Strategy The
Page 59 and 60: Growth-Inducement Strategy Alignmen
Page 61 and 62: Part II _________ Situational Analy
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inadequate provision of public infr
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2.0 Macroeconomic Assessment 2.1 In
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Increased global oil consumption wa
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$4,742.0 million and $688.4 million
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Non -Traditional Domestic Exports E
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negative impact of the Jamaica Debt
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ethanol and paint, whereas lower de
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Analysis of preliminary GCT data re
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The number of ship calls to the isl
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industry was, however, estimated to
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4.0 Projected Performance 4.1 Calen
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increased marketing and extension s
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Electricity & Water For FY 2010/11,
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J$ Million 510,000 500,000 490,000
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2011/12). These extreme weather eve
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Summary Chapter 6 ________________
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creates allocative inefficiencies,
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heightened risk aversion of financi
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Table 6.1. Employed Labour Force by
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7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%
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20.0% 18.0% 16.0% 14.0% 12.0% 10.0%
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4.10.2. However, the extent of the
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Part III ____________ Analytical Fr
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functional relationship between the
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It follows that: (5) s = I/Y = [S -
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However, the existence of measureme
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(d) v* = Y*/K* This is a measure of
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in Chapter 8. The mutual interactio
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Transforming the complex set of str
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Appendix 7A A Methodological Note T
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1.0 Focus of this Assessment Chapte
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The DBI focuses more narrowly on qu
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to ask, is it possible to predict g
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can be made to serve a very useful
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For further elaboration of the cons
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progressive Jamaica-based firms and
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Table 8.2. Jamaica: Doing Business,
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Table 8.4. Global Competitiveness I
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Table 8.5 (continued) Indicator Ran
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Rank* Constraint Table 8.7 Business
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1.0 Summary Chapter 9 _____________
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3.0 The Burdens of LAC’s Logistic
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conditions. These combined with a p
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Figure 9.4. Proportion of Primary A
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6.0 Logistics are Essential for Tou
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7.0 Fundamental Steps Forward for J
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Part IV ________________ Policies a
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Current Status: Cabinet by decision
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e more than compensated for by the
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1.0 Background B __________________
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Commercial Bank loan rates have als
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5.0 Expected Outcomes These measure
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capital, mainly in the form of equi
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oth local and overseas (including t
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Table C.1. Proposed Implementation
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Locally, the Scientific Research Co
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Develop formal and informal links t
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1.0 Background D __________________
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5.0 Recommendations Based on the ma
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2.5 Coexistent with the levels of u
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industry as well as provide funding
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Age Group Table E.2. Unemployed Lab
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indirect losses experienced when th
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Table F.1 (continued) Area Type of
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1.0 Introduction G ________________
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Ineffective Social Intervention Pro
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Table G.1 Priority Initiatives Obje
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Table G.2 Phased Implementation Pla
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H ____________________ Proposed Wes
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3.0 Transparency Guarantees By desi
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and Coordinating Unit (PCMU) was es
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therefore need to have sanctioned o
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Slate of existing programme initiat
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The rationalisation was guided by t
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deliver services in an efficient an
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efurbishing to allow for accommodat
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Part V _______________ Panelists’
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With the benefit of hindsight, some
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ight. Where we as a society fail is
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and exclusion of the majority of th
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the elders, youth, children. What f
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C __________________ Enhancing Nati
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Economic Figure C.1. National resil
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A GROWTH-INDUCEMENT STRATEGY FOR JAMAICA IN THE SHORT AND MEDIUM TERM

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