Phillips backs private-sector growth

Paul Allen Business reporter allenp@jamaicaobserver.com

Wednesday, January 25, 2012

Jamaica is at a crossroads as a nation, said Dr. Peter Phillips, minister of Finance, Planning and the Public Service.

The goal of the new administration is to "accelerate private-sector-led growth through increased investment and efficiency gains," said the minister, addressing dozens at the Private Sector Organisation of Jamaica's Club Forum yesterday.

Several challenges that have to be addressed to achieve growth that creates jobs, and reduces poverty, he said. Among the things that constrain growth are the national debt, inadequate controls of public expenditure, low workforce productivity, the high cost of the public sector and the lack of a business-friendly environment.

Any steps that are taken in the medium term "must involve comprehensive tax reforms, the reform of the public sector pension system, public sector transformation and a moderation of the growth in public sector costs which is allied to economic growth," he said.

The handling of these issues will be critical to "improving public finances over the medium term if the economy is to have a chance for faster growth".

Additionally, greater fiscal responsibility, through sustained efforts to reduce the fiscal deficit and national debt, will play a significant role in the nation's growth.

Phillips noted that the business community has been critical of the current waiver system, arguing that it needs to operate on a " more level playing field".

"There is a certain urgency that we must recognise, but at the same time we must proceed with the confidence that with crisis comes opportunity, and that if we can build a working partnership we can make the difference to Jamaica's future," he said.

When asked about the state of the nation's tax-reform policy, Phillips said it's acknowledged that the tax base is too narrow and that processes associated with taxation are too cumbersome, problems that must be corrected.

"I am committed to tax reform and I believe that all of us have a stake in achieving the stability that will come with a more equitable tax system, one which expands the base more so than increasing the tax burden on any one group."

The minister said tough decisions would have to be made but added that it should not be a deterrent from making them.

"Macro-economic stability has to be maintained and must include low interest rates and there will be no policy of high interest rates," he said.

Despite the high levels of competition between banks, "borrowers are not yet receiving the full benefits".

He charged the banks to "assist further by taking active steps to contain their costs, increase their efficiencies and so reduce their spreads."

With regards to the nation's deal with the International Monetary Fund (IMF), the newly sworn in minister said the government wants to enter a "new agreement in the shortest possible timeframe."

Preliminary talks with the IMF wrapped up yesterday, just hours after Phillips addressed the forum.

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Phillips backs private-sector growth