John Rapley

Last week in Beijing, some of the world's leading economists gathered in a conference devoted to considering the impact of Asia on the world economy. As former U.S. Treasury Secretary Lawrence Summers said in his keynote address, the Chinese boom will likely appear in the history books as the most important development of the last half-century, surpassing such other dramatic events as the end of the Cold War. And now, with India also taking off, the weight of the world economy will increasingly shift ever more decisively towards the east.

As I listened in on the discussions, I reflected on the lessons that could be adduced to inform Jamaica's own future. Most of the presenters agreed that the impact of China on other developing countries has generally been positive. However, there have been losers. For example, those countries whose exports closely resemble China's have tended to suffer from the fierce competition.

What we need to do

So, looking at the experiences of various countries, what might Jamaica do if it is to successfully navigate the Asian age? Seven points stood out at me.

First, and most obviously, we cannot compete with China. We should abandon any hope of preserving industries in which China specialises. Instead, we should promote those which will complement China's, providing inputs in which she enjoys little comparative advantage.

Second, we need to spend more heavily on education, and we need to make it reach the poor. Jamaica's hope lies in raising its productivity through human capital improvements. And if we are to avoid the worsening inequalities which accompany structural change, we have to make schools in poor communities into beacons of transformation.

Third, we need to raise investment. Our saving rate still pales next to China's, and we need to find ways to encourage Jamaicans to put more of their earnings into banks, the stock market, their own businesses, or their education.

Fourth, and related to the previous point, we need to improve access to capital. This involves bringing down interest rates and reducing the hesitance of lending institutions to lend to small enterprises. But government meddling - like differential interest rates - seems to hold little promise. Rather, by bringing down government debt, reducing spreads on interest rates, and adopting regulations that encourage banks to lend more aggressively to small but dynamic businesses, policies can be implemented which can do this effectively.

Fifth, we need to look closely at our social programmes to see if they are serving their intended purposes. In some countries, social programmes have inhibited development. In others, they have aided it. But one lesson seems clear to me: education spending, by raising skill levels and thus earning power, may be the most important social programme any government can provide. It also seems to me to be one that our own government does well.

Tourism and health care

Sixth, tourism and health care - and, when they combine, health tourism - are sectors in which Jamaica enjoys strong comparative advantage, and that are also likely to grow strongly in the future. But producing products which respond to future demand - Chinese language-training for hotel workers? - could enable these sectors to grow more quickly.

Finally, there is offshoring. There is some scope for offering back-office services for companies in industrial countries. On the face of it, Jamaica should be good at this. But there are some sub-sectors in which we are likely to be out-muscled by India. So we need to be selective about what we choose to promote.

The challenges are great. However, with good policy, it should be possible to find a way to ride the Asian wave. But nothing is assured, and tough choices will require strong leadership.