DaviesFINANCE and Planning Minister Dr. Omar Davies said that although the Government has laid the macro-economic basis to surmount the obstacles posed by Jamaica's indebtedness, it would also depend on the willingness and ability of the private sector to invest and expand production.
At the same time, the Minister said that despite the indebtedness, there were concrete results from investments in the island's physical and social infrastructure to demonstrate how the money has been used.
Dr. Davies was speaking at the annual economic seminar of the Private Sector Organisation of Jamaica (PSOJ) at the Jamaica Conference Centre in downtown Kingston earlier this week. The seminar was held under the theme "Life & Debt: The Jamaican Experience", in view of the island's domestic and foreign obligation now standing at $495 billion.
Explaining how the money owed has been used, the Minister said a third of the domestic debt - $100 billion - was directly related to the Financial Sector Adjustment Company (FINSAC), the agency established by the Government to rehabilitate troubled financial sector companies.
The debt has also been used to improve the island's road infrastructure, and before the Atlanta-based Mirant Corporation took over the Jamaica Public Service Company (JPSCo) last year, a portion of the money was used to invest in expanding electricity capacity and coverage of access to electricity.
Dr. Davies said that despite any recent adverse publicity, a large number of persons now have access to portable water and housing, and there had also been investments in port facilities.
In terms of the social infrastructure, Dr. Davies said that while "we may not be fully satisfied with the quality of education, there has been significant investment in broadening access to both secondary and tertiary education." There has also been significant expenditure in improving the health services, he said, singling out the Kingston Public Hospital (KPH), as well as the May Pen, St. Ann's Bay and Mandeville hospitals as institutions in which there have been improvements in the physical infrastructure and equipment provided.
"There has been real tangible improvements in the health services in that regard," the Minister said. "Despite the deficiencies, the international assessment of the coverage of the health services places Jamaica as being one of the most efficient users of budgetary expenditure for the provision of health services," he said. "This is reflected in terms of basic measures such as life expectancy (and) coverage in terms of public health."
Within the social safety net, Dr. Davies said, "we have made significant improvements, and the launch of the improved safety net in early January is an attempt to rationalise the scheme, putting together diverse schemes and programmes under one umbrella."
The Minister, referring to a 1.7 per cent growth in the economy last year, said it improved despite four significant shocks during the period - the July disturbance in West Kingston, the September 11 airborne attacks on New York and Washington, floods in northeast Jamaica in November, and the closure of the Jamalco plant for three months in the latter part of calendar year 2001.
"I just simply suggest to you that in any previous era, four shocks of that magnitude would have totally disrupted the economy in terms of the foreign exchange situation because you had September 11 (which caused) a reduction in tourism arrivals. There was the Jamalco plant where close to US$50 million in terms of export earnings just did not materialise. In any other period, with four shocks like that you would have had negative growth as well as significant disruptions in terms of economic activity," he said. According to Dr. Davies, there were other countries, such as Barbados, that faced less shocks and went into negative growth.
"The disruption in the Jamaican economy from those four shocks did not take place because the economy is now more diversified, now more resilient and it speaks to the fact that the private sector is now operating in a situation where there is greater confidence in terms of predictability of policy," said the Minister. "And this is not just something we would assert," he said. "This can be seen from the fact that both traditional and new firms are acting with a greater degree of confidence."
He cited traditional firms like Jamaica Broilers, SuperClubs, Sandals, Red Stripe, and Grace, Kennedy which he said had all adjusted to a more competitive environment and had remained viable. Referring to the emergence of new players in the field, he singled out financial sector firms such as Manufacturers Sigma; Dehring, Bunting & Golding (DB&G); Jamaica Money Market Brokers (JMMB), and Capital & Credit Merchant Bank, as well as the entry of new firms such as Royal Bank of Trinidad & Tobago (RBTT).
Noting there were also new entrants in other areas, Dr. Davies said: "I think that what you are seeing is the entry into the business environment of new firms which are taking on challenges within the context of a stable macro-economic environment."
In addition, he said, old firms were retooling and putting themselves in a position to compete not just domestically but globally.
He said recent surveys by the Jamaica Conference Board, which found there was increased business and consumer confidence in the economy, were important because they provided reassurance that policies pursued by the Government had borne fruit. "They indicate that for the first time, certainly in recent memory, ... the imminence of an election hasn't led to companies taking a wait-and-see attitude," said Dr. Davies. "Persons are saying 'we feel positive about the future'. I think the upsurge and the buoyancy in the stock market is another indicator," he added. "I think this augurs well for the future of the country."
Dr. Davies has earlier graphically illustrated where the island's economy stood 10-12 years ago, a period characterised by chronically high inflation, an unstable foreign exchange market partly related to the absence of reserves, too rapid a growth in money supply and as a result an unstable labour market. He also told the businesspeople what the Government has done to address the problems that resulted in "greater stability and greater predictability in terms of Government policy."
According to the Minister, "there's no question that we have a difficult fiscal period in terms of bringing down the debt ratios to more acceptable levels. However, the basis has been laid in terms of macro-economic policy, in terms of investment in physical and social infrastructure. The year 2001 was an extremely important test in terms of whether the economy and the players in the economy are ready for the challenges."
