Four major factors crippling economy — World Bank

BY PAUL ALLEN Business reporter

Wednesday, July 04, 2012

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MAJOR overhauls are needed if Jamaica's economy is to stop wobbling on four legs, said a World Bank representative. The private sector needs to become globally competitive, but it must first disrupt the Jamaican status quo, said Giorgio Valentini, the World Bank's country representative in Jamaica.

As it stands, there are four factors that continue to cripple the economy, and which must be addressed if the country is to experience a transformation, Valentini told the Private Sector Organisation of Jamaica last week.

The economy continues to be retarded by those who accept and adapt to decades of weak growth instead of fixing major issues; a focus on the local instead of the international market and lack innovation while maintaining a weak policy framework, Valentini said, adding that a mismatch of skills between the private sector and the needs of global economy is also a contributor.

"The vexing issue of low growth in the Caribbean is certainly not new", he said, admitting that the last three to four years have been particularly devastating for regional economies which have seen their gross domestic product fall significantly.

To achieve growth again, Valentini recommends "four corrective measures to strengthen each of the suspect pillars of the Jamaican economy."

The country must embrace competitiveness and the measures necessary to achieve and maintain it, he said, adding that China is the best example of a country that has successfully followed this route.

"China has developed a formula that makes its goods and services more desirable than its competitors with an industry that succeeds in the global marketplace... (while) Chinese people enjoy a high and rising standard of living."

While Chinese companies are in direct competition with Jamaican ones, how many local companies are competing in China, he asked the gathered business leaders.

Companies need to move away from targeting the local market and focus on a more global scale. While it seems difficult, Valentini said, there are many countries that have managed to make the transition and develop a more sustainable society.

Even more importantly, Jamaica has a unique opportunity, with its lateness to using innovation systems, to avoid mistakes made by other nations and "leapfrog to the levels of societies that took decades to implement one".

Innovation is critical to economic growth, Valentini said, and to increase productivity, an economy only has to make better use of the resources it invests in economic activities.

"To truly innovate, Jamaica would need to adopt policies that encourage innovation, entrepreneurship and social cohesion," he said. "Government should support and encourage innovation for its transformative effect on low-value industries and its potential to produce new high value sectors."

Before the country can truly achieve success, it must first determine what skills are required by the global economy and then train the people to fulfill those roles, he said, noting that the information and communication technology sector should be one of its primary focus.

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