Last week, the government of Jamaica invited me to cover the World Free Zone Conference and Exhibition held in Montego Bay. It was an opportunity for Jamaica to push its conference tourism but, more than that, to show the world its emergence as a confident and resilient island, ready to take off economically with the attending social benefits that come with a thriving economy.
What was clear from the Prime Minister and the various ministers I interviewed, is that Jamaica is firm in its belief that the private sector must drive its economic revival and that it is not in competition with the sector.
Delivering the keynote address at the opening of the conference, Jamaica Prime Minister Andrew Holness said, “We have established a strong record of macroeconomic stability and prudent fiscal management and have managed to maintain this even during the pandemic. Our debt-to-GDP ratio before the pandemic was 94 per cent and is now 96 per cent; only two percentage points higher. By contrast, several of our peers have seen increases of 20, 30, 40 and even 50 percentage points.”
He added, “We are seeing a strong rebound in our economy after the pandemic, with an estimated six per cent growth recorded in the quarter ended March 2022. We are one of few countries in the region with no foreign exchange controls and a freely floating currency. We have a robust and well-established regulatory and fiscal regime for Special Economic Zones.
“We have a track record of large-scale public-private partnerships, as I mentioned earlier, for our air and sea ports and highways. We want to ensure that Jamaica is a nation full of opportunities for international investors as well as for local entrepreneurs. Trade and business are part of our Jamaican culture just as Reggae, jerk chicken and our amazing Blue Mountain coffee.”
His words are not empty. Wherever you drive you can see significant construction taking place in the hotel sector. It has emerged as a major centre for Business Process Outsourcing and a global leader in improving the ease of doing business.
Forced some years ago to enter into a difficult IMF programme, Jamaica has weathered the storm and now its unemployment rate is the lowest in its history, it has set up the institutional framework that forces its governments to maintain fiscal discipline and cut as much as possible wastage out of its system.
This does not mean that Jamaica is perfect. It still has unmanageable crime, its economy is substantially smaller than T&T, which is only half its physical size and has less than half its population and there are concerns about the inequality of the recovery and the quality of some of the BPO jobs. But what is clear is that the country embraces a free open market economy and as a result, has seen tangible improvements in its welfare.
Compare it to T&T, which seems to be limping along, hoping for long-term high energy prices, when we know for a fact that those prices are cyclical and will soon come to an end.
Unlike Jamaica, we have continued to utilise way too much of our annual budgetary expenditure on transfers and subsidies. Not only are these inimical to the interest of the country, but they give a false sense of expectation to the population that they will continue indefinitely and when the country can no longer afford them, leads to an even more difficult adjustment for the most vulnerable in the society.
The Dr Keith Rowley administration must change its approach to governance and see the private sector as a partner in development and not in competition with the numerous state enterprises.
On Tuesday, the National Flour Mills announced what may appear as a sudden increase in flour prices. The truth is that it should have been expected as we watched grain prices skyrocket on account of the Russian invasion of Ukraine. The question is why do we have to have a state company involved in the importation of wheat and production of flour? Is this necessary? Could this not be done by the private sector? Is the NFM cost structure in keeping with an efficiently run company? We have to move away from the monopoly and oligopoly situations that dominate this economy, to one of free and open market competition.
What was also clear from the Jamaica trip was the focus on attracting foreign direct investment and on public-private partnership (PPP). They see it as crucial to mobilising capital that may not be readily available in the country. T&T’s focus for FDI has been almost exclusively in the energy sector, with the regulations for the special economic zones not even drafted.
Jamaica has shown how you can get significant infrastructure projects done without the government building it. Its major highway systems are examples of this. One wonders if this approach would not have been better for the now 12-year-old attempt to build a highway to Point Fortin and the South West Peninsular.
It has also handed over the running of its two major airports to the private sector, which is now investing in their expansion because private capital goes where it gets its best return.
T&T has to move away from the over-reliance on its energy sector and to realise that if its economy is attracting investment in many sectors and growing, then the risk of a meltdown is significantly reduced.
In an IMF study on how beneficial Foreign Direct Investment for Developing Countries is done by Prakash Loungani and Assaf Razin, it was found that FDI allows the transfer of technology—particularly in the form of new varieties of capital inputs—that cannot be achieved through financial investments or trade in goods and services. FDI, the study said, can also promote competition in the domestic input market.
Recipients of FDI, the study found, often gain employee training in the course of operating the new businesses, which contributes to human capital development in the host country and profits generated by FDI contribute to corporate tax revenues in the host country.
The study read, “International flows of capital reduce the risk faced by owners of capital by allowing them to diversify their lending and investment. Second, the global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting rules, and legal traditions. Third, the global mobility of capital limits the ability of governments to pursue bad policies. In addition to these advantages, which in principle apply to all kinds of private capital inflows.”
Jamaica has always played a leadership role in the region. In the present set up with Barbados Prime Minister Mia Mottley being the titular leader of the region, Guyana, by the sheer size of its resources, inclusive of land-space, now emerging as an economic powerhouse and Jamaica showing what good economic policy can achieve, T&T’s Government must awaken from its proverbial slumber and chart a course forward that will combine sound economic policy with a commitment to a free-market economy, fiscal discipline and bold vision.
Only when we do that may we regain our confidence and do like the Jamaicans, who are boldly celebrating their 60th anniversary of independence this year, while we appear to want to pretend that a major event is not upon us.