What’s Next for Jamaica’s Economy

By: Caribbean Journal Staff - February 7, 2016

Looking ahead

By Dennis Chung
CJ Contributor

In 1961, when Jamaica voted by referendum to withdraw from the West Indies Federation, Dr Eric Williams, then Premier of Trinidad and Tobago, said “one from ten leaves nought”.

This statement can be interpreted to mean that there are always key ingredients in an object or event that make it unworkable, or achieve suboptimal performance. So for example, if a car does not have fuel it will not drive, while on the other hand a car with a flat tyre may still be able to move but at a significantly slower pace.

So too if we look at our economy, there are some who from the start have lamented the hardships that have come as a result of the fiscal programme, and at the same time talk about development. The fact, however, is that development could not have happened until we were able to fix our fiscal and debt situation. As a result the necessary adjustments, which created the downturn, were an essential part of any development that was to take place.

I think that many have accepted that reality, with the exception of a few diehards who still believe that it is always going to be possible to have economic and social prosperity without sacrifice. And it is not surprising, as even at the individual level there are many who believe that sacrifice is not necessary for success, and so they will borrow to buy the most expensive cars when they are young, only to face the reality at retirement.

Now that we are at a point where the fiscal and legislative reforms have borne fruit (as we see from the confidence sentiments, low inflation and interest rates, improved capital market, relative exchange rate stability, etc), it is now necessary for us to realise what the next ingredient is to move to the next level of economic and social development.

To illustrate, growing an economy or a company is similar to riding a century (100 miles). The first 50 miles may be the easiest, but even if you can’t easily get to the first 50 miles, you can still be in condition to go the full century. As you progress, however, every additional mile is going to require more fluids, food, and physical and mental toughness.

So it is with our economic and social development. Getting to a point of fiscal and macroeconomic stability is an essential base, but to move from this base to the next 50 miles of real economic and social development is going to require more, and different strategies, than what we used to complete the first half of the journey.

This, of course, is one of the challenges we have had with implementing Vision 2030. The fact is that we have sought to make it happen without any real attempt to change the bureaucratic and social environment needed for us to realise that vision. The result is that we are pressing the gas pedal with the emergency brake still engaged. The car may move slightly with the emergency brake engaged, but the performance will be way below what is required to get anywhere soon.

New thinking needed

It is important for us to understand this as we move from fiscal and macroeconomic reform to sustained economic and social development. In short, for this to happen it will require a different and bold way of thinking, as the strategies that got us to this point cannot be the same ones to get us through the next 50 miles of the race.

For this reason I have always maintained that any strategy that focuses primarily on fiscal revenues will do so to the detriment of economic and social progress. This is because the nature of a focus on fiscal revenues is in contrast to incentivising productivity and investment. Therefore, it is important for us to find the optimal balance, where fiscal revenues are maximised and productivity and investments are optimal.

This is the mistake that we have always made with our fiscal accounts, and as a result have always put more and more taxes in place only to watch economic performance stagnate over the years.

Today, my view is that the economic reform programme of the past three years has created a very attractive base for us to now move to the next level of real economic and social development, like no other time that I can remember. Whereas in the ‘90s we were attractive for debt, today we are seen as the best place in the Caribbean to do business (Forbes andDoing Business Report) — a significant contrast.

The only way to move to the next level is to now get the ingredients necessary for it all to come together. It is going to require a new and bold way of thinking. Not the old linear way of saying that if we increase fees and taxes, then more will come to the government coffers. Or that every business person is trying to run a scam.

It is going to require even more public-private partnerships (which has been one of the reasons over the past three years for the progress we have made). It is going to require bold moves such as charting a way for more competitive tax rates by reducing rates, and even setting out a programme to gradually move from direct to indirect taxes. It is going to require an assault on indiscipline, such as road indiscipline, and clamping down on night noises. It is going to require investing significant sums in the security forces, not just for equipment but for training, and demanding even more accountability. It is going to require that we take decisions — such as was taken with the oil hedge — and realise that we won’t win every time, but that we take decisions based on risks to the stability of the country. It is going to require political maturity to rally around a common cause, and for us as individuals to be tolerant of each other’s views and to vote based on issues and to move away from welfare politics.

Unless we can make this paradigm shift in our thinking, then we will always be reminded that “one from ten leaves nought”.

Dennis Chung is a chartered accountant and is currently Vice President of the Institute of Chartered Accountants of Jamaica. He has written two books: Charting Jamaica’s Economic and Social Development – 2009; and Achieving Life’s Equilibrium – balancing health, wealth, and happiness for optimal living – 2012. Both books are available at Amazon in both digital and paperback format. His blog isdcjottings.blogspot.com. He can be reached at drachung@gmail.com.

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