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The figures are looking nice
Let's not throw it all awayDennis Morrison
Wednesday, August 01, 2007
As I pointed out in last Wednesday's column, "Watch out for those wild, vote-catching election promises", it is critical that we hear in this election campaign realistic proposals regarding Jamaica's social and economic development.
Such proposals must not be contradictory or involve loose spending because we would quickly be pushed into a cycle of economic instability trying to meet wild promises.
Where things now stand, Jamaica's macroeconomic situation has improved significantly, and a framework has been laid for rapid expansion of the economy. Inflation is at the lowest level since the late 1960s, which means that wage-earners and business people can plan in a stable environment. This in turn means that, other things being equal, the Jamaican dollar will not undergo sharp devaluation that imposes hardships on the society.
Were there to be sudden big increases in spending by the government, the stability would be undermined, returning the country to the all-too-familiar hardships associated with high inflation and devaluation of our currency. At great cost, we have broken the cycle of inflation and devaluation which plagued the country for three decades leading up to the mid-1990s. What we have today is a foreign exchange market which operates more efficiently than any other in the English- and Spanish-speaking Caribbean, and where adjustments to the Jamaican dollar really reflect normal economic factors.
We have arrived at this point, having undertaken the liberalisation of exchange controls and built up credibility at a cost. Today, the foreign reserves of the country stand at over US$2.3 billion and private individuals have another US$2 billion. Jamaica can pay its bills on time and even cope with economic dislocation as was the case during Hurricane Ivan.
But what has been built up by way of foreign reserves and a functioning market could be easily lost by reckless spending and inappropriate policies. There are enough examples around us, the most recent being Argentina where the society was plunged into social chaos, as those managing the economy went off in directions that upset the fundamentals. Maybe too many of us have forgotten that not long ago Jamaica had negative foreign reserves of over US$650 million, which meant that, if we treat it like an individual, the country was running a massive overdraft. Now, it has money in its foreign bank account that ensures the smooth running of our affairs.
On the investment side, there can be no doubt that the picture is positive and getting better. Much effort and significant resources have been put by the state into transforming Jamaica's social and physical infrastructure to make it attractive for business. By carrying out major policy reforms success has been achieved in attracting investments in water supply, highways and airports.
Perhaps the most significant area though is the investment which has gone into transforming our telecommunications system. By de-monopolising the system through bold legislation, Jamaica was able to get private investors to put huge sums into creating a state-of-the-art system which surpasses all others in the entire region and which puts us ahead of many developed countries. We now have a rapidly expanding ICT sector in which thousands of new jobs have been created for young people.
Investment in the tourism sector has been unprecedented and it is quite clear that there is a boom under way which is going to get even stronger. Already 15,000 new hotel rooms have been built or are under construction from Westmoreland to St Ann. Every young person trained in hospitality services and in construction is being snapped up by investors who are hard-pressed to meet the rapidly growing demand for manpower in this region. It is no secret that in the current wave of new hotels, 60 - 70 per cent of the workers being employed are under 30 years old and the younger ones are, in many cases, picking up their first jobs.
This is a big part of the explanation of why over 40,000 jobs were created last year and 73,000 net new jobs in the two-year period prior to that. As the momentum gets even stronger, the rate of job creation will easily get up to 60,000 per annum, driven by the tourism and construction sectors and the other sectors which have close linkages to tourism, such as agriculture, transportation, business services, and attractions.
Based on the groundwork that has been laid, even larger investments are about to take off. It is apparent that there is a snowballing effect under way as the initial round of tourism investment has spawned many more projects, a large portion of which is to be established in other parts of Jamaica. Investors are already looking to the time when Segment III of the North Coast Highway will transform access to St Mary, Portland and St Thomas.
The IMF and other international experts that have been following the progress of the Jamaican economy have noted these prospects. But they have stressed that more needs to be done to consolidate the positive economic environment so that we can reap the benefits. They have emphasised the importance of continuing to strengthen fiscal policy and the credibility of monetary policy. Rather than promising big spending, their advice is that public expenditure must remain tight with respect to the public-sector wage bill, employment levels and the losses of public entities. That advice should be heeded by those who are aspiring to lead Jamaica after the next elections.
Let's not throw it all awayDennis Morrison
Wednesday, August 01, 2007
As I pointed out in last Wednesday's column, "Watch out for those wild, vote-catching election promises", it is critical that we hear in this election campaign realistic proposals regarding Jamaica's social and economic development.
Such proposals must not be contradictory or involve loose spending because we would quickly be pushed into a cycle of economic instability trying to meet wild promises.
Where things now stand, Jamaica's macroeconomic situation has improved significantly, and a framework has been laid for rapid expansion of the economy. Inflation is at the lowest level since the late 1960s, which means that wage-earners and business people can plan in a stable environment. This in turn means that, other things being equal, the Jamaican dollar will not undergo sharp devaluation that imposes hardships on the society.
Were there to be sudden big increases in spending by the government, the stability would be undermined, returning the country to the all-too-familiar hardships associated with high inflation and devaluation of our currency. At great cost, we have broken the cycle of inflation and devaluation which plagued the country for three decades leading up to the mid-1990s. What we have today is a foreign exchange market which operates more efficiently than any other in the English- and Spanish-speaking Caribbean, and where adjustments to the Jamaican dollar really reflect normal economic factors.
We have arrived at this point, having undertaken the liberalisation of exchange controls and built up credibility at a cost. Today, the foreign reserves of the country stand at over US$2.3 billion and private individuals have another US$2 billion. Jamaica can pay its bills on time and even cope with economic dislocation as was the case during Hurricane Ivan.
But what has been built up by way of foreign reserves and a functioning market could be easily lost by reckless spending and inappropriate policies. There are enough examples around us, the most recent being Argentina where the society was plunged into social chaos, as those managing the economy went off in directions that upset the fundamentals. Maybe too many of us have forgotten that not long ago Jamaica had negative foreign reserves of over US$650 million, which meant that, if we treat it like an individual, the country was running a massive overdraft. Now, it has money in its foreign bank account that ensures the smooth running of our affairs.
On the investment side, there can be no doubt that the picture is positive and getting better. Much effort and significant resources have been put by the state into transforming Jamaica's social and physical infrastructure to make it attractive for business. By carrying out major policy reforms success has been achieved in attracting investments in water supply, highways and airports.
Perhaps the most significant area though is the investment which has gone into transforming our telecommunications system. By de-monopolising the system through bold legislation, Jamaica was able to get private investors to put huge sums into creating a state-of-the-art system which surpasses all others in the entire region and which puts us ahead of many developed countries. We now have a rapidly expanding ICT sector in which thousands of new jobs have been created for young people.
Investment in the tourism sector has been unprecedented and it is quite clear that there is a boom under way which is going to get even stronger. Already 15,000 new hotel rooms have been built or are under construction from Westmoreland to St Ann. Every young person trained in hospitality services and in construction is being snapped up by investors who are hard-pressed to meet the rapidly growing demand for manpower in this region. It is no secret that in the current wave of new hotels, 60 - 70 per cent of the workers being employed are under 30 years old and the younger ones are, in many cases, picking up their first jobs.
This is a big part of the explanation of why over 40,000 jobs were created last year and 73,000 net new jobs in the two-year period prior to that. As the momentum gets even stronger, the rate of job creation will easily get up to 60,000 per annum, driven by the tourism and construction sectors and the other sectors which have close linkages to tourism, such as agriculture, transportation, business services, and attractions.
Based on the groundwork that has been laid, even larger investments are about to take off. It is apparent that there is a snowballing effect under way as the initial round of tourism investment has spawned many more projects, a large portion of which is to be established in other parts of Jamaica. Investors are already looking to the time when Segment III of the North Coast Highway will transform access to St Mary, Portland and St Thomas.
The IMF and other international experts that have been following the progress of the Jamaican economy have noted these prospects. But they have stressed that more needs to be done to consolidate the positive economic environment so that we can reap the benefits. They have emphasised the importance of continuing to strengthen fiscal policy and the credibility of monetary policy. Rather than promising big spending, their advice is that public expenditure must remain tight with respect to the public-sector wage bill, employment levels and the losses of public entities. That advice should be heeded by those who are aspiring to lead Jamaica after the next elections.
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