PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

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A _____________________ State of the Economy Nicholas Scott Vice President, Private Sector Organisation of Jamaica Dr. Gladstone Hutchinson, Director General of the Planning Institute of Jamaica, Professor Donald Harris, other distinguished guests, panellists and fellow partners in the development of Jamaica – good morning. My name is Nicholas Scott, Vice President of the PSOJ and Chairman of its Economic Policy Committee. My goal this morning is four fold: to summarize the PSOJ’s own economic policy framework, to give you the state of the economy from the perspective of the private sector, to outline the PSOJ’s reaction to the growth-inducement strategy, and, finally, to leave you with some parting thoughts on the way forward. 1.0 Review of PSOJ’s Framework I’ve been that told I have 20 minutes, but in doing my part to increase productivity I will try my best to beat that target. A year-and-half ago, as the global economy was falling into the “great recession,” Jamaica’s debt was being downgraded, interest rates were still above 20 per cent and any change in Jamaica’s debt instruments was something one only whispered – the PSOJ began developing an economic policy framework. The goal was to provide a realistic and concise set of policies which we believed would produce sustainable and high rates of growth and job creation. Our framework has four components: A foundation and three pillars. The foundation is macroeconomic stability. Like the foundation of a house, without it there can be no structure, but in of itself, it’s not exactly somewhere you want to live. So on this foundation, we proposed three pillars critical for growth. We called them “growth enhancing,” but, perhaps, in retrospect, we should have called them “growth inducing.” These were: reforming the tax system, creating an enabling business, legal and regulatory environment and reforming industrial (including Energy), Trade and Investment Promotion Policy. Within each of these pillars, we listed specific action items in detail. The framework is available on our website – www.psoj.org - in its entirety and I would encourage everyone to review it. 2.0 Private Sector’s view of state of the economy Looking back on the framework, more than a year after its release, is a useful lens through which to examine the state of the economy from the Private Sector’s perspective. In some ways, it’s now a dated document. Through the JDX, the implementation of an IMF programme, an adherence to fiscal discipline, a commitment to lowering benchmark rates and key divestments – we have repaired the foundation of macroeconomic stability that had long been the binding constraint to growth. 205
With the benefit of hindsight, some now say that these developments were inevitable. For our part, we know that they involved difficult choices and decisive action and wish to congratulate policymakers once again for these important successes. At the same time, we are yet to begin work on the pillars that will ultimately lead to growth and an improvement in the standard of living of all Jamaicans. Our tax system remains inefficient and inequitable. The regulatory and legal systems in which businesses operate still tie one hand behind the back of our entrepreneurs as we compete with the world. And finally, there has been no noticeable improvement in our investment, industrial and energy policies to speak of. A review of the framework makes it clear that while we have undertaken the critical and difficult work of restoring stability in the macroeconomy – we are yet to begin building our growth pillars. The house is unfinished. Perhaps we’re finding it hard to get the permits. A review of our growth rates also makes it clear that stability was indeed “necessary but insufficient.” The official GDP figures and my day-to-day responsibilities in the manufacturing, distribution and services businesses in which I operate - confirm that while growth rates are picking up, the recovery remains very fragile. Today, the PSOJ believes that we are essentially in a race against time. We believe that the major economic question facing Jamaica now is which of two outcomes will happen first. Will we succeed in erecting the growth pillars, or for that matter, implementing the Growth- Inducement Strategy and reap the rewards that macroeconomic stability provides? Or, will the public become so disenchanted with the sacrifices that have been made and so sceptical that the economists know what they are talking about, that a new consensus will emerge and unwind the difficult progress that’s been made? Such a tear in our social fabric would not be the result of the ignorance or naiveté of the public – but would represent a completely legitimate sentiment that we the business people and policymakers have failed. It is, therefore, incumbent upon all of us to collectively ensure that we complete the work before it’s too late and before this opportunity, like so many others before it, vanishes into the dustbin of history. 3.0 Reaction to Growth- Inducement Strategy In this context, the PSOJ welcomes the PIOJ’s Growth-Inducement Strategy. The document shares most of the elements in our own framework, and not surprisingly, the PSOJ has no major disagreement with the strategy as proposed. Nonetheless, this morning, we would like to share the following observations and reactions. Firstly, the fiscal situation continues to have serious risks and still deserves our laser-like focus. While the Growth-Inducement Strategy is centred on areas of growth, we believe that policymakers still need to implement key fiscal reforms such as: fiscal responsibility legislation and central treasury management. Of great concern to the PSOJ is the size of unfunded pension obligations in the public sector, which by some estimates is as large as 25% of the public debt. The annual costs of just the pension expenses of current retirees 206
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i A GROWTH-INDUCEMENT STRATEGY FOR
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To the many ordinary Jamaicans who
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Preface The Jamaican economy has ex
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for making a determined start on th
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the private sector groups, listed b
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Citibank N.A. Jamaica Branch Grace
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need for “additional fiscal space
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Chapter 2 ________________ Summary
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1.0 The Economic Situation Today 1.
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expected to provide an essential an
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Table 2.1. The Policy Framework: A
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programme of social inclusion that
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Strategic Focus Table 2.2. Growth S
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6.0 Short-Term Growth Stimulus 6.1
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decline of 2.0 - 2.2 percentage poi
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Table 2A.2. NWA Projects To be Fast
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Table 2A.5. Community Renewal Proje
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Table 2B.3. Impact of Repairing Far
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Appendix 2C Methodology of the Grow
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Part I _________ Overview 28
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2.0 Vision 2030 Jamaica Before delv
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3.0 May 2010 Security Event and Aft
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the longer than anticipated global
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April July October January April Ju
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Three industries recorded increases
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9.0 Proposals for Growth-Stimulus I
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targeted economic and social infras
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partnering with government to disco
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3.0 Growth Inducement Strategy The
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Growth-Inducement Strategy Alignmen
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50 Part II _________ Situational An
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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 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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PIOJ Growth-Inducement Strategy - Planning Institute of Jamaica

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