No excuse now for lack of growth, suggests Byles
Published:Tuesday | August 16, 2016 | 1:49 PMMcPherse Thompson
With stability in the basic fundamentals of the Jamaican economy, there is no reason the country should not now experience economic growth at a level above the anaemic average one per cent that has occurred over the past few decades, co-chairman of the Economic Programme Oversight Committee (EPOC) Richard Byles has indicated.
At the same time, the International Monetary Fund (IMF) has again diagnosed crime as the primary constraint to private sector growth in Jamaica.
In that regard, it suggested that the Government embark on a new approach to crime-fighting by integrating prevention elements into social programmes in health and education, especially among the youth population.
According to Byles, "when you look at Jamaica, if you are an investor, whether overseas or Jamaican, when you look at the country's economic metrics, they are all very positive."
He noted that "the primary balance is being met and looks like we'll be able to meet it in the future. The NIR (net international reserves) is strong and way above the target. Debt-to-GDP (gross domestic product) is coming down and has reached 120 per cent, which is very good for Jamaica. The current account ... deficit is also down. Inflation is at all-time lows, and business and consumer confidence is very high",
Against that background, Byles, addressing a briefing of EPOC in New Kingston last week, said: I doubt an investor could want a cricket pitch that it better rolled than that. It's watered. It's rolled. It's perfect. It's ready for the game. And the game is, 'let's get going with growth.' No more reasons why we shouldn't have growth. The basic fundamentals of the economy have been stabilised and are looking very good."
However, the IMF, in a diagnostic of constraints to private sector growth in Jamaica and annexed to its June 2016 report, said the top obstacle, when compared with other countries in the world, is crime.
For the cross-country growth diagnostic, an index was compiled looking at the relative performance of Jamaica across an extensive list of common constraints facing emerging market economies, including those that impact the cost of investment, the overall returns on investment, and the appropriability of investment returns.
HIGH CRIME RATE
According to the report, high crime rate severely constrains private sector growth, especially tourism, with nearly 50 per cent of firms identifying breach of law as a major cost of doing business.
Moreover, total costs of crime are over six per cent of businesses' annual sales, once security costs and direct losses are accounted for, it said.
To effectively combat crime, the report said, the World Bank and the CARICOM Regional Taskforce on Crime and Security suggest that a national plan for crime reduction is needed to ensure multi-sectoral collaboration.
In addition, better data-gathering and analysis should help identify geographical and demographic patterns of crime for improved interventions.
"Crime-prevention elements should be integrated into social programmes in health and education, especially among the youth population. The criminal justice system should also be reformed to improve performance measurement and promote institutional accountability," it added.
According to the report, growth momentum of tourism is weak relative to the sector's overall performance around the world.
It also suggests that it is essential to increase the linkage between tourism and the rest of the economy.
SAFETY CONCERNS
A vector autoregressive model associating GDP growth on tourist arrival shows that the impact of tourist arrival on growth is small in Jamaica compared to other tourism-intensive countries.
"This is likely related to Jamaica's enclaved tourism model - tourists mostly stay in all-inclusive resorts that have little linkage with the rest of the economy, partly due to safety concerns. In addition, the sector imports most of its non-labour inputs," the report said.
"To increase the sector's contribution to the economy, better coordination by local producers is needed to reorient the sector's supply chain towards domestic goods and services. To diversify from the all-inclusive operating model, it is essential to reduce crime rate and encourage the development of domestic SMEs (small and medium sized enterprises)," it added.
The effect of crime on economic growth in Jamaica has been the subject of studies for many years.
World Bank experts have long attributed Jamaica's perpetually disappointing economic performance to low productivity caused by three major obstacles.
They suggest the country could achieve GDP growth of up to 5.4 per cent, but said that was predicated on the Government addressing and removing the constraints.
The bank argues that low productivity was ascribed to a high crime rate, deficient human capital primarily reflected in lack of adequate training for most of the labour force, and distortionary tax incentives combined with enclave development, manifested in the mining sector and all-inclusive resorts, that do not spill over to the rest of the economy.