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Contributed by DENNIS CHUNG
Friday, September 17, 2010
var addthis_pub="jamaicaobserver";
ONCE again the Manatt, Phelps& Phillips affair is dominating the news and distracting Prime Minister Bruce Golding from the task at hand -- that is, placing the Jamaican economy on a sound footing and stimulating growth. While the rest of the region flourishes , with many Latin American economies (Chile, Peru, Brazil) thriving, Jamaica languishes in no-growth mode, very little investment and a high debt burden.
More recently, measures have been taken to address the situation and with the help of the multilateral agencies there are some encouraging signs. Still, the government must press ahead further rather than engage in political skirmishes and internecine infighting.
Earlier this week, Minister of Finance Audley Shaw addressed the Americas Conference, organised by the World Bank and the Miami Herald held at Miami's Biltmore Hotel. His theme was " A new Era of Innovation" and he took the opportunity to highlight some positive occurrences resulting from new strategic macroeconomic policies.
Although the global financial crisis did play some part in exacerbating an already deleterious situation, Shaw was quick to point out that Jamaica's economic challenges predated the global crisis. He said that for the greater part of the last two decades Jamaica has been caught in a pernicious cycle of low growth and unsustainable fiscal and debt dynamics.
According to Shaw, a primary reason for the country's lack of growth has been a high public sector debt bringing with it high debt servicing costs, leaving the country vulnerable to adverse shocks, increasing macroeconomic uncertainty and lowering Jamaica's ability to engender long-term growth. This also saw public investment capacity crowded out by debt service obligations.
Turning his attention to the social side, he acknowledged that the economic shortcomings have led to inadequate infrastructure, declining quality and quantity of public services and rising rates of crime and violence.
"The problem of the country's debt has been coupled by a history of low growth. Our growth rate over the last decade has been anaemic at best. That 10-year period represented a time of insurmountable growth for emerging markets. Our neighbours Trinidad& Tobago, the Bahamas and Barbados all grew at rates higher than ours. During the last fiscal year, the share of revenue earmarked for interest payments peaked at 66 per cent while the export sector underwent severe contraction.
"It is estimated that the fallout from bauxite & alumina, remittances and tourism approximated some US$1.3 billion ( some 10 per cent of GDP and 20 per cent of the national budget)," said Shaw.
Faced with this daunting situation, the government endeavoured to undertake a number of initiatives to steer the country on a new course and avert defaulting and going over the precipice. Shaw outlined these as follows:
1. An aggressive re-engagement of multilateral lending institutions, which saw the country securing over US$1.2 billion at interest rates of between 0.63 and 5 per cent.
2. The Jamaica Debt Exchange (JDX), which opened in January of this year, closed with a participation rate of over 99 per cent, and saw rates on domestic debt instruments fall from an average of 19 per cent to just over 12 per cent, with an increase in average maturity by 4.5 years.
3. The passage of a large tax package in December 2009
4. The divestment of our perennially loss-making national airline, and state-run sugar factories
5. Tax policy reforms to improve collection and administration
6. Public sector reforms to reduce cost and improve efficiency
7. Fiscal responsibility legislation to improve budget planning and public financial management, and make the government more accountable.
Commenting on this raft of measures Jamaica's minister of finance said: "These initiatives have served to stabilise the Jamaican economy and return the country to a path of sustainable growth and development.
The macroeconomic fundamentals are all pointed in the right direction. The exchange rate is stable, interest rates on government paper and on Central Bank deposit instruments are at a 33- year low. The inflation rate is projected in the 6 to 7 per cent range (down from several years of double-digit inflation).
"The level of the Net International Reserves is at a healthy US$1.9 billion, of which gross reserves stand at US$2.7 billion. The economy, for the first time since 2008, is set to grow in the December and March quarters of this fiscal year. We have secured an agreement with the IMF which opens the door to US$2.4 billion (20 per cent of GDP) in inflows from the IMF and other multilaterals. We have passed both the first and second IMF tests with flying colours."
So far, so good, but greater aggregate demand must be created and job creation initiatives must be put in place. Also Jamaica has to now look to other trading partners and not place an over-reliance on the United States, Britain and Canada. The emerging economies should be sought out and trading relations should begin in earnest. Jamaica must also be turned into an investment-friendly country. To this end other countries can serve as examples to emulate. Here Singapore, Ireland and Chile spring to mind.
Shaw readily conceded this, saying in his address: "Even as the economy is being nurtured back to good health, its ability to grow and drive the process of development must be supported by the efforts of all sectors and stockholders. It will take all of us: the government to foster and facilitate, providing a motivating framework, the private sector to unlock its innovation and creativity, generating enthusiasm and realising efficiency.
"For countries of the Caribbean, the occasion of the global economic crisis should serve to sharpen our focus and strengthen our resolve.
http://www.jamaicaobserver.com/busin...ooting_7970772
Friday, September 17, 2010
var addthis_pub="jamaicaobserver";
ONCE again the Manatt, Phelps& Phillips affair is dominating the news and distracting Prime Minister Bruce Golding from the task at hand -- that is, placing the Jamaican economy on a sound footing and stimulating growth. While the rest of the region flourishes , with many Latin American economies (Chile, Peru, Brazil) thriving, Jamaica languishes in no-growth mode, very little investment and a high debt burden.
More recently, measures have been taken to address the situation and with the help of the multilateral agencies there are some encouraging signs. Still, the government must press ahead further rather than engage in political skirmishes and internecine infighting.
Earlier this week, Minister of Finance Audley Shaw addressed the Americas Conference, organised by the World Bank and the Miami Herald held at Miami's Biltmore Hotel. His theme was " A new Era of Innovation" and he took the opportunity to highlight some positive occurrences resulting from new strategic macroeconomic policies.
Although the global financial crisis did play some part in exacerbating an already deleterious situation, Shaw was quick to point out that Jamaica's economic challenges predated the global crisis. He said that for the greater part of the last two decades Jamaica has been caught in a pernicious cycle of low growth and unsustainable fiscal and debt dynamics.
According to Shaw, a primary reason for the country's lack of growth has been a high public sector debt bringing with it high debt servicing costs, leaving the country vulnerable to adverse shocks, increasing macroeconomic uncertainty and lowering Jamaica's ability to engender long-term growth. This also saw public investment capacity crowded out by debt service obligations.
Turning his attention to the social side, he acknowledged that the economic shortcomings have led to inadequate infrastructure, declining quality and quantity of public services and rising rates of crime and violence.
"The problem of the country's debt has been coupled by a history of low growth. Our growth rate over the last decade has been anaemic at best. That 10-year period represented a time of insurmountable growth for emerging markets. Our neighbours Trinidad& Tobago, the Bahamas and Barbados all grew at rates higher than ours. During the last fiscal year, the share of revenue earmarked for interest payments peaked at 66 per cent while the export sector underwent severe contraction.
"It is estimated that the fallout from bauxite & alumina, remittances and tourism approximated some US$1.3 billion ( some 10 per cent of GDP and 20 per cent of the national budget)," said Shaw.
Faced with this daunting situation, the government endeavoured to undertake a number of initiatives to steer the country on a new course and avert defaulting and going over the precipice. Shaw outlined these as follows:
1. An aggressive re-engagement of multilateral lending institutions, which saw the country securing over US$1.2 billion at interest rates of between 0.63 and 5 per cent.
2. The Jamaica Debt Exchange (JDX), which opened in January of this year, closed with a participation rate of over 99 per cent, and saw rates on domestic debt instruments fall from an average of 19 per cent to just over 12 per cent, with an increase in average maturity by 4.5 years.
3. The passage of a large tax package in December 2009
4. The divestment of our perennially loss-making national airline, and state-run sugar factories
5. Tax policy reforms to improve collection and administration
6. Public sector reforms to reduce cost and improve efficiency
7. Fiscal responsibility legislation to improve budget planning and public financial management, and make the government more accountable.
Commenting on this raft of measures Jamaica's minister of finance said: "These initiatives have served to stabilise the Jamaican economy and return the country to a path of sustainable growth and development.
The macroeconomic fundamentals are all pointed in the right direction. The exchange rate is stable, interest rates on government paper and on Central Bank deposit instruments are at a 33- year low. The inflation rate is projected in the 6 to 7 per cent range (down from several years of double-digit inflation).
"The level of the Net International Reserves is at a healthy US$1.9 billion, of which gross reserves stand at US$2.7 billion. The economy, for the first time since 2008, is set to grow in the December and March quarters of this fiscal year. We have secured an agreement with the IMF which opens the door to US$2.4 billion (20 per cent of GDP) in inflows from the IMF and other multilaterals. We have passed both the first and second IMF tests with flying colours."
So far, so good, but greater aggregate demand must be created and job creation initiatives must be put in place. Also Jamaica has to now look to other trading partners and not place an over-reliance on the United States, Britain and Canada. The emerging economies should be sought out and trading relations should begin in earnest. Jamaica must also be turned into an investment-friendly country. To this end other countries can serve as examples to emulate. Here Singapore, Ireland and Chile spring to mind.
Shaw readily conceded this, saying in his address: "Even as the economy is being nurtured back to good health, its ability to grow and drive the process of development must be supported by the efforts of all sectors and stockholders. It will take all of us: the government to foster and facilitate, providing a motivating framework, the private sector to unlock its innovation and creativity, generating enthusiasm and realising efficiency.
"For countries of the Caribbean, the occasion of the global economic crisis should serve to sharpen our focus and strengthen our resolve.
http://www.jamaicaobserver.com/busin...ooting_7970772