By Al Edwards, Business Co-ordinatorFOLLOWING THE Ministry of Finance and Planning's release of the International Monetary Fund's (IMF) Article IV Consultation on the country's economy, comes a new World Bank study released earlier this week calling for Jamaica to increase its international competitiveness and productivity in order to achieve sustained economic growth and to further reduce poverty.
Titled 'Jamaica: The Road to Sustained Growth', the report calls for the Government to meet its most pressing challenges, with its debt being the most pressing. Jamaica's debt has reached 150 per cent of GDP and means that 65 cents of every dollar of the budget goes into debt payments with interest payments amounting to 16 per cent of GDP.
The report recommends that a sustainable fiscal situation be a top priority of the Government.
Commenting on Jamaica's present economic situation, the World Bank's Country Director for the Caribbean region, Caroline Anstey, said: "Although Jamaica faces some significant challenges in its effort to spur growth and create employment opportunities, the country's assets, including its labour force and strong social and governance indicators, help to position the country well for a future economic rebound."
Crime has for some time become an impediment to the country's economic growth with the latest American Inter- Development Bank report estimating that crime costs the country some $19 billion a year. According to the World Bank report crime is costing Jamaica four per cent of its GDP.
The report suggests that even when the country was experiencing modest growth in the 1990s, it was unable to create enough jobs because of a decline in the country's competitiveness. Jamaica's lack of competitiveness hurt its tradable goods production and, as a result employment rose less than 0.3 per cent per year from 1991-2001. The short-term recommendations made by the World Bank are as follows:
Reduce significantly the growth of the public sector wage bill
Continue to search for quality-enhancing and other cost-cutting measures in the public sector, such as improving expenditure management, privatising remaining inefficient public entities, and reducing the contingent liabilities taken on by Government, which have often contributed to an increase in national debt.
Equalise the effective tax rates across different sectors and extend the tax base through presumptive taxation
increases cost sharing in tertiary education.
MEDIUM/LONG-TERM IMPACT RECOMMENDATIONS
Combat crime with systematic efforts, such as improving information on crime and its incidence, improving clear-up rates for violent crimes and applying targeted interventions.
Distribute education resources more efficiently by concentrating on low income students, reducing wage compression in teacher salaries and increasing reliance on the better performing private schools.
Reduce the cost and improve the coverage of basic services (water/sewage, roads, power supply), while improving cost recovery; and
Improve lending to the private sector, especially small borrowers, such as by accelerating the starting-up of credit registries.
PREVENTING FUTURE
CRISES AND PROTECTING SOCIAL CAPITAL
Generate large primary surpluses by implementing revenue generation measures and expenditure reduction measures quickly;
Continue to strengthen social society nets; and
Maintain and improve transparency and speed of communication of economic news to the public.
Commenting on this World Bank report, Chairman of Today's Money Orville Johnson speaking with Wednesday Business last night said: "The World Bank has taken a strategic approach to the analysis. It is not simply concerned with cost containment measures but takes a long-term view of the Jamaican economy. It stresses growth and the energising of the productive sector. It speaks of revenue generation but balances this with attention to the social aspects of life in Jamaica. It is very important that we create a society where people are more employable and so this report points out the need for more money to be spent on early childhood education. It places a lot of store in transparency and this makes it easier for the Government to get the public to buy into changes it must make if the country is going to make the turn for the better. We need to get interest rates down and protect the more vulnerable here in Jamaica."
