PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

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moment which demands re-orienting our economic policy towards a sharpened focus on enhancing growth as the necessary basis for realizing sustained improvements in the social well-being of citizens, consistent with the goals of Vision 2030. 2.2 The strategy recognizes the binding constraints that the economy now faces, not the least of which come from tight and restrictive conditionalities of the IMF programme. However, it simultaneously appreciates and exploits unique opportunities arising from the current situation which have combined to create important avenues for economic recovery. 2.3 Specifically, ongoing fiscal consolidation and improvements in budgetary management have resulted in significant reduction in the interest yield on financial instruments offered by government and BOJ, hence in the cost of government financing activities. This, in turn, has forced private capital into a search for new opportunities to earn competitive returns. The ongoing recession has also created significant liquidity in the portfolio of development banks as they experience a drop-off in demand for funds to support traditional venture economic activities, thus similarly forcing them into identifying new ways and economic activities for creating value. 2.4 Hence, an economic stimulus and recovery strategy that is aimed at facilitating increased private-sector investment in real sector activities, and development bank financing partnership, could provide a rich vein for economic recovery without excessive new demands for central government support either in finances or through fiscal space. 2.5 At its core, the strategy recognizes a basic fact, i.e. that there exists a sizeable pool of latently available and potentially productive assets - financial assets, physical capital, buildings, labour, and land - that currently lie fallow, dormant, and/or underutilized and/or wasted. There also exists throughout the economy, in big, medium, and small businesses, entrepreneurial talent ready to act to bring these assets to fruition in productive activities. Foreign investors and diaspora partners have also shown an active interest. In some widely reported cases, creative moves in this direction are already being made in various sectors of the economy, as is evident, for instance, in a recent run of nine successful IPOs (with ten more expected in 2011) and in the revival of the real estate market in downtown Kingston. The strategy seeks to strengthen and accelerate these positive developments by setting in place the necessary support framework to mobilize potentially productive assets and unleash entrepreneurial dynamism. 2.6 This dynamic combination of factors constitutes a solid base on which to begin to build a platform for growth. However, there are significant constraints, real and perceived, which stand in the way of realizing this potential. Of these, the single most important is the cost of crime. It is estimated to cost the economy between 5 and 7 per cent in gross output. A systematic approach to crime reduction is being taken by Government, with noticeable gains now being realized. Ongoing actions and plans now in place should yield further gains, hence advance further towards normalization of criminality and, thereby, enhance the climate for conduct of business as well as the daily life of citizens. In this context, the proposed Community Renewal Programme is 7
expected to provide an essential antidote to the cancer of crime by offering positive alternatives to illegal activity in one hundred targeted communities throughout the island. Combined with other proposed measures for urban-regional development and strengthening the capacity of MSMEs, these efforts serve also to meet the need for levelling the playing field, broadening participation in the growth process, and combating the social marginalization that affects many of our citizens. 3.0 Understanding the Fundamental Constraints 3.1 In developing a growth-inducement strategy for Jamaica the central problem to be confronted, conceptually and strategically, is the supposed paradox of a high investment rate (as a % of GDP) and low growth rate, which has characterized Jamaica’s economic performance since the 1970s. The analytical and strategic foundation of the growthinducement strategy rests fundamentally on the notion that this apparent “low growthhigh investment puzzle” is the consequence of specific conditions operating in the economy through the investment process and in combination with a number of dysfunctional pathologies and systemic constraints. 3.2 In particular, our analysis indicates that Jamaica’s low-growth high-investment puzzle is explained by the following set of conditions: (a) chronic state of fiscal imbalance (b) underutilization of productive capacity (c) economic waste of capital (d) unbalanced sectoral structure of the economy, with high investment rates in capital intensive and enclave sectors. The formal analysis of these determinant conditions underlying Jamaica’s growth puzzle is set out in Chapter 7 of this report. 3.3 Analysis of the conditions underlying Jamaica’s poor growth performance was complemented by a careful review of recent diagnostic studies of Jamaica’s competitiveness and business environment (see Chapter 8), which systematically identified and ranked the key supply-side constraints to growth in the Jamaican economy as follows: • Crime and violence • Corruption • Taxation • Electricity • Finance • Macroeconomic instability This listing of key constraints displays factors that are “external” to the individual firm and have a significant impact on all firms, in terms of the cost, risk, and uncertainty of 8
Page 1 and 2: i A GROWTH-INDUCEMENT STRATEGY FOR
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 and 12: Citibank N.A. Jamaica Branch Grace
Page 13 and 14: need for “additional fiscal space
Page 15 and 16: Chapter 2 ________________ Summary
Page 17: 1.0 The Economic Situation Today 1.
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: April July October January April Ju
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: 50 Part II _________ Situational An
Page 63 and 64: inadequate provision of public infr
Page 65 and 66: 2.0 Macroeconomic Assessment 2.1 In
Page 67 and 68: 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 Figure 5.1. Private Sect
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2011/12). These extreme weather eve
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Chapter 6 ________________ Assessme
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creates allocative inefficiencies,
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Million $ Per cent Jun-10 Mar-10 De
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Table 6.1. Employed Labour Force by
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J$ million Mar-10 Dec-09 Sep-09 Jun
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FIGURE 7: GROSS NATIONAL SAVINGS RA
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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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Chapter 8 ____________________ Asse
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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) Rank Indicato
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Rank* Constraint Table 8.7 Business
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Chapter 9 ___________________ Inter
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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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B ____________________ Eliminating
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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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D ____________________ Business Pro
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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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Table E.2. Unemployed Labour Force
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indirect losses experienced when th
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Table F.1 (continued) Area Type of
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G ____________________ Community Re
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Figure G.1 Community Renewal Progra
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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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Figure I.1. Functions of National P
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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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Figure C.1. National resilience is
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PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

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