Going for growth in the J'can economy, a contractionary environment
Dr Henley Morgan
On Thursday, November 26, 2013, in the same room of the same New Kingston hotel, there were two remarkable speeches. At a breakfast meeting of corporate leaders organised by the Private Sector Organisation of Jamaica (PSOJ), the affable Dr Conrad Douglas presented the findings of an environmental scoping study that will inform cabinet in its decision-making concerning the proposed Chinese investment in developing a logistics hub on the Goat Islands. That afternoon, at a Planning Institute of Jamaica (PIOJ)-organised lecture, the respected Sagicor Life Jamaica President and CEO Richard Byles addressed the topic: Going for growth in the Jamaican economy in a contractionary environment. The first speech was remarkable for what it did not say; the second for what it said.
Dr Douglas prefaced his presentation with a long list of limitations to the study. So exhaustive were the limitations, the expectation of even the most optimistic listener would have been lowered to prepare for information short on facts but long on the speaker's own opinion. The opinionated nature of the presentation was confirmed when, within a few sentences of the start, the speaker committed the cardinal error against which writers of doctoral dissertations are warned. Never telegraph to your audience that you have made up your mind, beforehand, about the outcome of the very thing you are researching.
As remarkable as that presentation was, it would be outdone by the one later in the day. Byles started by repackaging the ills of the Jamaican economy; some of it quite frightening if not revealing. How many of us, for example, know that for 37 of the last 41 years, Jamaica's debt has exceeded 90 per cent of Gross Domestic Product (GDP)? This is the same level of indebtedness that tipped the United States of America into the Great Depression in the 1940s. With the dramatic use of data, the speaker made the case that the current Extended Fund Facility with the International Monetary Fund (IMF) is bitter but necessary medicine.
The contractionary environment, Byles said, is a side effect of having taken the bitter medicine. Growth is the only antidote, and he had come with ten prescriptions that, if applied, could lift the patient out of its comatose state. The promise of hearing solutions is what had caused many in the audience to leave their daily preoccupation with keeping head above water to feast upon words. What followed was a letdown.
The first prescription centred on a much overused word by a griping private sector. That word is "confidence". Upon hearing it, rightly or wrongly, I assumed we were about to be treated to another set of palliatives for the private sector, ie those persons and businesses operating at the top of the economic pyramid or what Michael Manley would call the commanding heights of the economy. Unexcited by what would follow I made my exit at that point.
I later learned, through the press, that much of Byles' recommendations were useful and should be acted upon. The reality, though, is that in the troubled context of Jamaica's perennial economic stagnation, these recommendations along with measures such as the recently announced tax incentives to stimulate production and employment by traditional large enterprises, will not appreciably grow GDP; not in a situation of declining demand. To my non-economist mind, a growth strategy for Jamaica must necessarily involve identifying an underperforming asset or sector; creating the policy framework and making the investments, to bring it to its productive wealth-creating potential. Micro and small enterprises are the obvious choice of a sector that can in the shortest time and with the least investment add to GDP. The nascent, early start-up and more established entrepreneurs who predominate this sector, and who largely comprise the over 40 per cent of the economy operating underground as part of their survival strategy, is a virtually untapped asset.
In practical terms, what would a bottom-up growth strategy look like? Consider the following proposal. Establish parish level or regional public and private business incubators linked to entrepreneurial production centres (EPCs) within communities to facilitate the production of goods and services by small and micro enterprises islandwide to expand demand. The business incubators will provide physical accommodation and a range of support services to nascent entrepreneurs and start-up businesses in order to increase their chance of success and reduce business failure. The EPCs will be private entities located in depressed communities and established in the first instance to produce basic goods and services employing marginal skills.
Minister Phillip Paulwell will notice a familiar ring to the proposal. So too will Valerie Veira of Jamaica Business Development Centre and Maureen Webber of Development Options Limited. It's taken almost verbatim from a document entitled, Framework Document for Incubator and Entrepreneurial Production Centres, 5th March 2007. Minister Paulwell had portfolio responsibility for the initiative, supported by a vote in Parliament of $120 million; a modest albeit inadequate sum in those days. Like with many good ideas, this one went through the window with the change in Government before it had become established.
The inaugural Trench Town Trade and Investment Fair two weeks ago had as its theme: Transforming economically and socially excluded communities through wealth creation. The goals of the event, which culminated with an impressive expo at Emancipation Park displaying goods and services produced by community based entrepreneurs, are consistent with those of an Israeli sponsored United Nations resolution -- Entrepreneurship for Development. Jamaica is a signatory to the resolution which was adopted on December 21, 2012. In general, the resolution "emphasises the need for improved regulatory environments and policy initiatives that promote entrepreneurship and foster small and medium-sized enterprises, as well as microenterprises, and stresses the positive role entrepreneurship plays in driving job creation and expanding opportunities for all". Enough studies, speeches and signing of international conventions. It's time for action.
Henry Ford II, chairman of the board, Ford Motor Company, spoke these words of wisdom: "Bringing these disadvantaged people and their ideas out of the ghettos into the mainstream of the American economy is a goal that can be accomplished only if business grabs the heavy end of the load so that our communities will be worth doing business and living in." Until we can say the same for Jamaica, economic growth and social peace will remain but an illusion.