On Jamaican growth
By Dennis Chung
The World Economic Forum has just published the 2016/17 Global Competitiveness Report (GCR), and it shows that Jamaica has improved its ranking from 86 of 140 countries to 75 of 138 countries. This is an improvement of some seven per cent on the ranking when the number of countries surveyed are considered.
In the 2012/13 report, Jamaica ranked 97 out of 144 countries surveyed. This means that on a percentile basis, in just four years we have improved by 13 per cent. This, in my view, is in no small measure due to the partnership between all stakeholders that saw us successfully manoeuvring through the International Monetary Fund programme to date, which started in 2013. It shows us what we can achieve as a country if we all work together, and what it also shows me is that progress in Jamaica will only come through advocacy and involvement from private sector and civil society.
As a result of this, we have seen a significant recovery from the 2008/9 recession which hit Jamaica, and a significant increase in business and consumer confidence. We have also started to grow the economy at marginal rates, and growth for this fiscal year is expect to be just under two per cent.
Although we should realise the improvements we have achieved — which includes being the number one place in the Caribbean to do business — the fact is that we are still a very far way from where we should be. In fact, one of the primary challenges we face is that even as we grow the economy, there is the very real danger that if we do not ensure equitable growth, that it will not be sustainable.
Sustainable growth and development only comes about when growth is evenly spread across all sectors and the entire population. This is how countries like the US and Switzerland have experienced growth. We could also say that the rise of Trump in the US can be attributed to the reports that many middle- and lower-class people in the US say that they are not benefiting from growth in the economy. On the other hand, in Switzerland the benefits are widespread and they don’t have a “Trump” as yet. What is happening in the US as well as the recent Brexit vote show that growth without inclusiveness is not sustainable.
This has been recognised in the report from the Economic Growth Council (EGC), which speaks to the need for “Citizen Security and Public Safety” and “Social Inclusion” as fundamental pillars for any sustainable economic growth. As part of the suggested solutions to these challenges, the EGC refers to much-needed improvement in the delivery of justice, proper housing solutions, and improvement in the education facilities.
In August 2009, I wrote an article titled ‘Are Jamaica’s economic problems also social’. This for me was obvious then and it is also obvious now, as is highlighted in the EGC’s report. The fact is that economics is based on the behaviour of people; that is, their social interaction with each other. So when we speak about macroeconomic solutions and ignore the impact on social behaviour, then we only fool ourselves about economic progress – as we have consistently done with failed fiscal policy and tax measures in particular.
When I look at the latest GCR, it is obvious that we have failed to do anything about the challenges we have always had. And so the problems we face today are the same ones we have always faced and failed to do anything about.
So the top four challenges to doing business remain the same year over year, which are in order (1) Crime and theft (was number two previously); (2) Inefficient government bureaucracy (previously one); (3) Tax rates; and (4) Corruption. Just focusing on solving these issues addresses over 50 per cent of the challenges to doing business. So why have we not done anything to remove them as business challenges?
We have made some progress with corruption (from 10.5 per cent to 8 per cent) and government bureaucracy (from 16.4 per cent to 14.4 per cent), but the challenges of crime and tax rates have worsened. Even though we have made some progress in these areas, they still remain significant challenges.
If we drill further in the report, we see that the main areas of challenges centre around bureaucracy, crime, and tax. So areas such as wastefulness of government expenditure, burden of government regulation, cost of crime and violence, government debt, effect of tax on incentives, trade tariff percentage, and government procurement remain significant challenges and hold back the ultimate progress of the country.
The irony is that these challenges that we speak about today are the same ones that have always been with us, and to date we have failed to address them. So as the chairman of the EGC, Michael Lee-Chin, said, we all know what the problem is and what we must ensure this time is that we implement solutions.
The irony also is that we all know, and have known, what the solution is, but we have never been able to get them done. That for me is a straight failure in our governance at the government and bureaucratic levels.
In other words, we all know what the problems are and we know what the solutions are, but we have just not been able to implement them for decades. And that is what management (governance) is responsible for.
So, as we ponder the latest GCR (2016/17) and also the EGC report, let us not make them just another report, as usual, which we read, analyse and not do anything about.
We must concede that we have made strides in Jamaica, from an economic and institutional perspective. The problem for me is that we could have done much better as a country and do have the potential to easily grow at five per cent per annum.
We already know what the problems are and we know what the solutions are. What we must now do is focus on implementation, which is what has gotten us some gains since 2013.
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 firstname.lastname@example.org.