Editorial | Pivot to National Partnership Council

Prime Minister Andrew Holness is yet to announce the composition of his EPOC2, a committee that is supposed to monitor the slashing of bureaucratic red tape in government.

Mr Holness should abandon that idea and instead give the assignment to an existing body, the National Partnership Council (NPC), that implicitly already has the job.

But the NPC’s mandate should be expanded to explicitly lead the development of a national industrial policy, so as to provide greater substance and, importantly, consensus in support of what the prime minister has characterised his administration’s ‘pivot’ to economic growth.

Over the past dozen years, across administrations, and with adjustment loans from the International Monetary Fund (IMF), Jamaica has made significant strides in macroeconomic stability. By running extremely high – as much as 7.5 per cent of GDP – and reigning spending on social services and soft and hard infrastructure, Jamaica has nearly halved its debt as a proportion of GDP, to the current 72.2 per cent. That ratio is projected to fall further, to the national target of 60 per cent of GDP in 2026/27. Additionally, the island’s current account deficit has declined from double digits to record a small surplus recently.

But while the island’s unemployment rate, currently at 4.2 per cent, has fallen to historic lows, economic growth has remained measly.

In the aftermath of storms and floods, real GDP is expected to decline by about one per cent this year. But even before that, except in the post-COVID-19 recovery phase, Jamaica has struggled to achieve growth of above two per cent.

WIDELY ACCEPTED

So, while it is widely accepted that macroeconomic stability is a crucial component in achieving sustained growth, it is increasingly being accepted that that stability is not by itself a sufficient condition for sustained and robust GDP expansion. Put another way, it requires more than macroeconomic stability if Jamaica is to transition from a low-wage, low-productivity, low value-added, low growth, low middle income economy to one that is capable of climbing higher up the economic food chain.

It was an appreciation of the limitations of macroeconomic stability to be the sole driver of growth that underpinned the late October call by senior corporate leader, Chris Zacca (in front of top private sector bosses and policymakers) “for a pivot to, and focus on, achieving an increasingly strong and sustained economic growth performance”.

Mr Zacca, who was being inducted into the Private Sector Organisation of Jamaica’s (PSOJ) , mentioned bureaucracy among the impediments to growth. But he also strongly implied that much more had to be done in a coordinated fashion, involving the government, the political opposition, the private sector and civil society institutions, to sustainably stimulate growth.

“This coalition must have a respected and influential voice at the decision-making table, ensuring that the hard choices we need to make are implemented for the benefit of all Jamaicans,” Mr Zacca said.

He suggested that the PSOJ should assume leadership of the process.

Fundamentally, what Mr Zacca proposed, without branding it as such, was akin to an old-fashioned industrial policy, where the economy’s critical working parts are synchronised towards particular outcomes. This concept sometimes means identifying, and supporting, potential champion industries and sectors.

DIRTY NOTION

Such ideas have become something of a dirty notion in the context of the Washington consensus of economic development/policy. Yet, few recently poor countries have managed the transition to developed/industrial economies without coordinated/industrial policy-style approaches to economic development.

Since Mr Zacca’s speech, Prime Minister Holness has launched his own “pivot from stability to growth” proposal, including tax reform, infrastructure build out, enhanced security, economic diversification and reduced public sector bureaucracy.

“...We can sometimes lose sight of the fact that stability was never the destination – it was the foundation,” Holness said in a recent policy speech.

He promised to establish an Efficiency Programme Oversight Committee (EPOC), modelled off the Economic Programme Oversight Committee that policed the government’s adherence to commitments made under its IMF programmes.

This newspaper does not believe that there is a need for an EPOC2 – at least not to monitor the removal of unnecessary and/or outdated legislation and regulations that unduly constrain economic activity.

There is already a long-standing body which is supposed to be doing that. Moreover, that job is entirely within the mandate of the NPC, whose membership include government officials, the political opposition, the private sector, trade unions and civil society groups.

Indeed, the current NPC was launched as part of the latest iteration (2022-2026) of social partnership pacts that have steadily advanced – even if meanderingly sometimes – over four decades. Among the NPC’s mandate was to promote the island’s post-pandemic recovery as well as labour market reforms “to ensure that employment growth and productivity targets are met”.

Additionally, the council, as a formal agreement signed by representatives of the participating sectors, pledged to promote reforms in several sectors, among them education, the rule of law, public health and industrial safety, for their alignment with the country’s economic needs.

These are all areas that also have to align with macroeconomic policies and goals to achieve economic transformation. But even the best policies won’t translate to effective action without a workable framework and strategic and tactical plans for implementation.

There is also another important requirement.

The hard work of the first EPOC notwithstanding, a key factor in the success of Jamaica’s macroeconomic project was the national consensus it enjoyed.

That will possibly be more difficult to replicate, especially against the backdrop of looming elections. Its best shot at this time is within the NPC, where all the critical players already coexist and cooperate. In this environment sector and political interests are less likely to pursue narrow interests to contrarian extremes.