EGC smoke and mirrors
ON SEPTEMBER 25, the Economic Growth Council (EGC), chaired by Michael LeeChin, issued a call to action that accurately reflects the reality of Jamaica’s decades-long low economic growth.
Growth in gross domestic product (GDP) for the quarter ended June 2016 was 1.4 per cent. This is very anaemic, but it is an improvement over the recent past. The EGC has aspirational goals of elevating GDP to five per cent annual growth in four years’ time. There have been circumstances in our past when we have had spurts of significant growth in GDP, but the last 40 years have averaged 0.8 per cent.
The various sector interests who have signed on to the aspirations of the EGC are impressive. They have the inherent capacity to drive economic growth. The Small Business Association, Realtors Association, Jamaica Manufacturers’ Association, and Jamaica Employers’ Federation are numbered among them. These organisations are required to work in synch, but one must question whether the platform to facilitate this kind of economic growth over the long haul is, in fact, available and primed for growth.
A number of things come to mind that need to be addressed. The cost of doing business in Jamaica is very high. Businesses spend, on average, 17 per cent of their revenue on security costs. Seventy per cent of the labour force is untrained. The respite from utilities could soon come to an end. The price of a barrel of crude has risen to more than US$50.
Access to capital, at reasonable rates, is often out of the reach of small and medium enterprises. And the banking sector pays lip service to assisting small and medium-size businesses. The banks speak to the high BOJ reserve ratios that limit loanable funds.
Land titling is designed to maintain the former glory that came with land ownership. It takes months to complete a land transaction and the cost could range up to 16 per cent of the value of the transaction. Financial institutions always want to have collateral valued way in excess of the amount sought in a loan transaction. Pension funds must be most conservatively invested and very little of it can be invested in hard currency. And we do not truly have a significant manufacturing base, as we import everything, fabricate it, polish it and sell the end product to the consumer as ‘Made in Jamaica’.
Agro-processing, for the most part, is a stagnant industry. As an aside, there is no central purchasing facility to enable the farmer to produce for ready, identifiable markets. Oh for the full implementation of the concepts behind the Agricultural Marketing Corporation.
How many yellow yam farmers produce by the mini-sett technique, a product geared towards meeting strong demand in export markets? Farmers cannot buy the plastic covering, nor can they handle the carrying costs of large-scale cultivation for the nine months before reaping.
The EGC says it will pursue a reform of the bureaucracy, improve access to finance, build human capital, and catalyse the implementation of strategic projects. It proposes to do this from sitting in the driver’s seat and directing the implementation, but none of them have to answer to a political electorate. None of them will face rejection when the grandiose plans fail to materialise for whatever logical, rational, sane reason.
Nobody has stated the time frame to reform the police force to impact crime. Nobody has said when the pension regime is going to look like Chile’s. On building and development approvals, can we get some positive movement in the turnaround time? Anyone relying on a 90-day turnaround is setting himself up for a nightmare.
The justice system is an immovable mass mired in its own inertia. The Government owns significant property in downtown Kingston, yet cannot do anything about expanding the Court of Appeal until another entity moves out of a structure that has to be rehabilitated.
The EGC may just be our last and best hope. The threat of a natural disaster a week ago leaves one with trepidation as to what we escaped. We must get serious and build a society that is founded on trust, goodwill, inclusiveness and nationalism, and not the unstated belief that given half a chance all Jamaicans would steal.
We won’t progress without gamechanging initiatives. Poor people won’t escape the clutches of deprivation, because banks refuse to trust them with a loan unless they have a title. The procedures involved in setting up and maintaining a business are so tortuous that they disincentivise taxpaying, and an underground economy thrives because the system is more punitive to, than facilitatory of, entrepreneurship.
Welcome to the smoke and mirrors! If we don’t set the foundation for growth, the EGC will be nothing more than a photo op and public relations stunt.