Camilo Thame, Business Reporter

In Guyana, flags of various member Caricom countries flying at the Caricom headquarters in Georgetown.

Jamaica is basically on par with its CARICOM partners on public spending as a proportion of gross domestic product (GDP), a Financial Gleaner assessment indicates.

But while the major chunk of Jamaica's government spend goes to service the national debt, its regional partners steer cash towards subsidising production and public services, such as education, health and social welfare.

In the case of oil/gas-rich Trinidad and Tobago, much of its budget flows to subsidies.

Damien King, lecturer in economics at the University of the West Indies, argues that Jamaica's concentration on debt servicing 'weakens the economy', saying it is "government spending on infrastructure that provides the overlay for commerce to develop."

Low investment in infrastructure, he says, "prohibits the kind of commerce to begin with and passes on the cost to private entities, both of which weakens the economy," said King.

André Gordon, past president of the Jamaica Exporters Association and managing director of scientific and technical support service company Technological Solutions Limited, said a lot more investment was needed in rural and secondary road networks.

Jamaica's expenditure accounts for 33 per cent of GDP, one percentage point lower than Barbados and a point higher than Trinidad, where output at US$19 billion is nearly twice that of Jamaica.

In the case of the seven member Organisation of Eastern Caribbean States (OECS), 37 per cent of GDP flows from the government's coffers to run the country.

However, in Guyana, where the state - despite efforts of reform by the administration of President Bharrat Jagdeo - props up the economy through its public spending, 61 cents of every dollar earned in the South American country flowed back out the government's coffers.

The high expenditure largely reflects capital flows, which represented 40 per cent of Guyana's government spending for the year to June 30, in line with the administration's "commitment to the continued rehabilitation and expansion of infrastructure," according to Guyana's central bank report for the first half of 2006, chief among them being a major overhaul and expansion of the country's sugar producer, Guysuco.

At US$500 million (61 per cent of GDP), the South American country's public spend is more than US$100 million higher than the government intake from revenue and grant, creating a healthy appetite for borrowing which pushed the country's debt to GDP ratio well pass 160 per cent at the end of June.

Interestingly, Guyana's interest payments only represent a small part of the government's spending due to a series of arrangements with creditors involving deferred payment and debt relief.

Under the Multilateral Debt Relief Initiative, US$254.1 million, or a quarter of Guyana's external debt, will be written off by creditors during 2006.

But in Jamaica, where J$895 billion as at September 30 represents just over 130 per cent of GDP, the government forks out 43 cents out of every dollar spent (not including loan repayment) on interest payments, unlike other countries, such as Trinidad, Barbados and the OECS, whose debt servicing ranged between 6.0 and 14 per cent of their expenditure.

Importantly, those countries do not run a deficit like Guyana (14 per cent of GDP) or Jamaica (3.0 per cent of GDP), so their debt stock remain at relatively manageable levels Ñ between 33 per cent for Trinidad and 79 per cent for Barbados.

Some OECS member states restructured their debt and received debt relief, such as Antigua & Barbuda, which lowered its debt stock by US$200 million as a result of debt relief during the last quarter of 2005.

After interest payments, Jamaica's next highest spend is on salaries Ñ 30 per cent of expenditure, which is comparable with its CARICOM partners, but the proportion of cash (7.0 per cent) left to spend on infrastructure projects in Jamaica is dwarfed by that of its regional trading partners.

Guyana spent 40 cents and Barbados used 12 cents out of every dollar spent on public services and goods for capital programmes.

But in twin-island republic Trinidad and among the OECS states, the capital expenditure not only represents a higher proportion of total expenditure Ñ 14 per cent and 22 per cent, respectively - but is higher in absolute terms.

At US$833 million and US$271 million, Trinidad and Tobago and the OECS respectively had higher capital expenditure during the 2005-2006 fiscal year than Jamaica's US$238 million.

The OECS states, with the exception of Dominica and Anguilla, are undergoing infrastructure projects surrounding Cricket World Cup to be held in March 2007, which include five stadia for hosting matches.

But in Trinidad, which is also preparing for the cricket competition, a major part of the spend goes into its Infrastructure Development Fund (IDF) and towards the Public Sector Investment Programme (PSIP).

For Trinidad, like Barbados, the highest proportion of expenditure goes towards transfers and subsidies - US$3.3 billion or 55 per cent of total expenditure for the twin island republic and US$387 million, or 37 per cent for Barbados.

Jamaica, along with Guyana and OECS member states, spend less than 20 per cent on this category.

Said Gordon: "Subsidies to business make them more competitive while creating a more attractive environment to investors wanting to do business in the region, but it would put Jamaican firms at a disadvantage."

Trinidad whose energy sector represents almost half of the country's output, US$200 million was spent by the government during the fiscal year ending September 30, to maintain the subsidy on fuel, but aside from transfers to the IDF and PSIP, the biggest subsidy went towards households in a range of support mechanisms from mortgage subsidies to cash to spend on food, amounting to US$680 million.

But for both Trinidad and Barbados, spend on social amenities tops the list of government expenditure.

Barbados spends 20 cents out of every dollar on the education system which provides free access to all students up to and including tertiary level education, compared to Jamaica's 17 per cent absorbed largely by salaries.

King suggests that the country is misdirected, noting that an educated workforce is likely to add more value to the economy than one-off job programmes.

"Government spending on education and health is a more efficient means of effective welfare than direct income transfers or crash programmes," he said.

"And the extent to which a labour force is educated, will determine their ability to become more prosperous."

Trinidad whose 1.3 million population is less than half Jamaica's 2.7 million, spent a smaller proportion (13 per cent) during the 2005-2006 fiscal year, using US$778 million compared to Jamaica's US$553 million.

Similarly, Barbados used a larger proportion of its funds on health (12 per cent) and social welfare (10 per cent) than Jamaica, which spent 8.0 per cent and 1.0 per cent on the two areas.

Trinidad also outspent Jamaica dollar for dollar on both areas - allocating US$349 million to health and US$651 million for social welfare, while Jamaica spent US$242 million and about US$30 million respectively.

camilo.thame@gleanerjm.com