A word on Jamaica's development

Dennis Chung

Friday, November 02, 2018

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These are exciting times for Jamaica and a time which, quite frankly, I never thought I would see. I have always thought about the high growth rate and development of the 1960s, when Jamaica saw most of its infrastructure development, and growth rates averaging six to seven per cent, and always wondered if I would ever live long enough to see that excitement return of our economic prospect.

My most consistent recollection of my early childhood was the 1970s, which was a time of food rationing, frequent power cuts, and state of emergency, which led to the tumultuous 1980 election, where people were targeted just because of the colour of the clothing they wore.

The 1980s were no less politically tense, and during that time there were still many social struggles. I remember being a part of mass marches by the students at UWI protesting the significant tuition increases at the time by the then Government. That must have been the first time I wrote publicly, as I penned a letter to the then Prime Minister Edward Seaga suggesting an alternative way of funding — to which he did respond and signed personally.

Although the 1980s seemed to drive us away from what was touted as a path towards socialism, it was still a time of foreign exchange and other restrictions. Many will remember the difficulty in securing a motor vehicle, and almost certainly you could guarantee that a used vehicle was going to go up in value over time.

The 1990s saw a further move towards a more competitive economy, but it was a time of excess without legislation, resulting in the FINSAC era, where we further compounded our debt problem — which started in the 1970s with the over 20 per cent decline in real gross domestive product (GDP) and continued to reach a debt-to-GDP ratio of more than 200 per cent in the mid-1980s.

For me, the most devastating consequence of the FINSAC period was the negative impact on the entrepreneurial spirit, which resulted in many local business people withdrawing from local, or even long-term investments in favour of trading. The other problem with this period was that much of our assets were sold off through the debt owed to many overseas interests.

After that latest FINSAC experience, and the fact that between the 70s and 90s we still did not know if we wanted to have a true market economy or reach back for our “bush jackets”, private investors were understandably gun shy and Governments thought that the best way to resist the excesses of the past was to control everything against the “evil” capitalists.

Government then dominated the economy and put legislative restrictions in place to ensure that capital couldn't do anything without public sector permission or oversight.

So today, for example, the restrictions on capital tie up billions of dollars of local capital, which allowed overseas interest to acquire much of our assets in a much easier fashion than our local investors could have. Most local investments were thus restricted to trading — and manufacturing — which flourished up to the 90s and took not just a back seat, but was placed in the trunk.

There were, of course, some business people who bucked the trend, for example Butch Stewart (Sandals), Karl Hendrickson (National), Carlton Alexander (Grace), William Mahfood (Wisynco) and others, who stood tall in ensuring the survival of free enterprise in Jamaica.

In the main, however, real value-creation industries became a thing of the past during that time.

I began writing in the early 2000s, and one thing I always wrote about was the fact that our fiscal policy choked the life out of the economy, as well as the need to focus on labour and capital productivity which, I thought, were the main inhibitors to development.

One of my other issues, which still remains today, is the problem of indiscipline and lack of enforcement of laws, which I think is the foundation of crime and the low income levels of our people.

After living through these periods, the Great Depression comes along in 2007/8 and begins to wreak havoc on Jamaica in around 2009. It then became clear that we had no fiscal sustainability and we were on the brink of collapse.

I remember on a radio interview, with Ralston Hyman, saying that the only alternative, after analysing the fiscal accounts, was debt restructuring.

We were drawn over the coals publicly for the suggestion from both sides of Parliament. But then, a few months later, we had our first restructuring. We also stated repeatedly that unless Jamaica developed its capital infrastructure, we would not be able to see the growth we need for the country to develop.

Another point we spoke about repeatedly was the need to reduce the Government's role in the economy with the high tax rates ($1.5m coming into effect after).

Unable to continue Government's invasive role in the economy, as our debt levels became unsustainable, Peter Phillips took the bold decision to not just go back to the International Monetary Fund, after a damaged deal, but agreed to put forward certain reforms that laid the foundation for the turnaround we are seeing today. And then after winning the election, the Holness Administration accelerated that path that we were set on by the Simpson Miller Administration.

I had the good fortune of being at the Private Sector Organisation of Jamaica during that period where the reform started and continued, and was a part of many of the interactions and discussions around that time. What I have seen since the 70s has been nothing less than transformational, not only in our development as a country, but the thought process and philosophy that has driven our leaders and business people.

This process has resulted in us today experiencing the lowest levels of unemployment in 50 years (since 1968) and growth that seems more sustainable than most of the periods since the 1960s. In fact, since then the longest period of sustainable growth was the latter half of the 80s, but one could argue that it was driven by a high debt-to-GDP. Today we are seeing growth driven primarily by fiscal reform and local private sector growth, particularly at the SME level.

Much of that SME development I think can be attributed to Joe Matalon while he was chairman at the Development Bank of Jamaica — something I have always said and seen while at the PSOJ.

We also have seen not just a sustained period of growth, but increasing growth levels and, very importantly, a focus on developing our capital infrastructure which, for me, was always going to be necessary as a foundation for and stimulating growth.

However, with all of this growth and greater income levels that we have been seeing, we must understand that this is not development. We cannot have development with an underperforming and under-resourced police force; with high levels of indiscipline, and in particular a set of drivers (taxis) being able to do what they want on the roads; with high incidences of child and female abuse; with people being able to dispose of their garbage anywhere they choose and pay maybe $3,000 for an offence; with zoning laws being ignored and people able to set up business and stalls anywhere they choose; or with all children not being able to access quality education.

So as we gloat in the deserved economic and fiscal successes we have fought for, let us move to the next level of addressing the issues raised above and truly develop Jamaica.

Dennis Chung is the author of Charting Jamaica's Economic and Social Development AND Achieving Life's Equilibrium . His blog is dcjottings.blogspot.com.

Email: drachung@gmail.com

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