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Governance and development

Claude Robinson

Sunday, January 13, 2013    

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At the time of writing (Thursday), the Cabinet was in day one of a three-day retreat, the fourth since the Portia Simpson Miller Administration assumed the reins of Government on January 6, 2012.

"Among the matters before this special meeting are issues pertaining to the economy, preparations for the 2013/14 Budget and the negotiations currently underway with the IMF for an Extended Fund Facility for Jamaica," read the official agenda from the Office of the Prime Minister.

Assuming that the meeting was successful, the 20-member Cabinet would have agreed a plan and an implementation timetable to:

* Reduce the public sector wage bill as a percentage of GDP;

* Reduce the stock of debt and slow the growth of new borrowing;

* Remove the discretionary authority of the finance minister to issue tax waivers as part of a package of measures to improve the efficiency of the tax system and to bring more people into the tax net;

* Restructure public sector pensions to raise the retirement age of government workers and to have them contribute more to their pensions;

* Restructure the public sector to make it more efficient and better able to support enterprise, job creation, and economic growth.

The Cabinet has to do these things because they are fundamental to the new IMF agreement to replace the one that crumbled under the previous Jamaica Labour Party Administration.

And the IMF 'seal of approval' is necessary because the country is broke. We have borrowed beyond our capacity to repay. The debt, in excess of $1.7 trillion, cannot be repaid within the lifetime of any Jamaican alive today; debt servicing and debt and public sector wages together account for 80 per cent of Government expenditure. That leaves precious little for anything else.

So the choice is clear: Either default on the debt and deal with matters arising down the road, or reduce our expenses to match our means.

From its public pronouncements, the Government has rejected the default option — if indeed it was ever considered. So Mrs Simpson Miller must administer what former Prime Minister Andrew Holness called "bitter medicine" that he would have prescribed had he not lost his job.

The option will impose pain on all of us — workers, consumers, savers and investors alike. And they will test the political courage of the Administration and cost political capital.

Coming out of the retreat, which was scheduled to end yesterday (Saturday), Mrs Simpson Miller and her team must present a clear plan and implementation timetable not just to qualify for an IMF deal but to put the country on the road to human and economic development.

A credible plan would, in my view, include reducing the size of the Cabinet. This is more than symbolism; it would send a clear signal that the political directorate was being realigned as part of the broader public sector reform to allocate the limited resources to priority areas and achieve efficiencies.

The plan should also entail new priorities for Government. There must be provisions to protect the most vulnerable among us; but it must specify changes about the role of Government from being the creator and distributor of "scarce benefits" to facilitating enterprise, particularly among micro, small and medium-sized enterprises — the source of most new jobs.

It must have plans to transform the natural entrepreneurship of the Jamaican people from the ability to juggle and survive in the most difficult of circumstances to creating wealth in a globally competitive environment.

Considering where we are today, neither the decisions nor the implementation will be easy. It will not be business as usual for either government or citizenry.

Decades of underdevelopment

Much time was devoted last week to critiquing an editorial in the US newspaper, The Chicago Tribune, which offended patriotic sensibilities by stating that Jamaica was worse off than Greece. The debate is absurd. Both countries are broke for roughly the same reasons; and both desperately need outside help which comes with a price.

The editorial did not tell us anything new about our parlous condition which has been with us for decades and which is kept in front of us every day by our free, independent national media.

A World Bank report, titled Jamaica Country Economic Memorandum: Unlocking Growth released May 2011, documented in 300 pages of detail that the Jamaican economy has woefully underachieved since Independence.

"Jamaica was one of the world's slowest-growing economies in the last four decades. In the 2000s, Jamaica's average real GDP growth ranked 180th out of 196 countries. Jamaica's ranking in terms of average real GDP growth continuously deteriorated during 1960-2008. Jamaica also lost ground against countries in Latin America and the Caribbean. Its ranking in the 2000s was 29th out of 34 countries," said the report.

The report compared Jamaica with its closest 19 peers in per capita GDP between 1970 and 2008 and concluded: "Jamaica's real per capita GDP growth was 13 per cent, and its rank within this group of 20 countries fell from seventh to 18th. This growth was the lowest in the entire group."

We also know that over this period, the country attracted large inflows of foreign direct investment, especially in bauxite mining and alumina production, tourism, port expansion and infrastructure development and, more recently, the information and communication technology sector. But all of this has not translated into higher productivity or economic expansion. Nor has the extensive borrowing.

But the real issue is not that the country borrowed too much. It is, as the Tribune editorial accurately put it: "The lesson of Jamaica is not that access to credit is bad. It's that irresponsible stewardship is bad."

The expression, "irresponsible stewardship" may be a bitter pill to take. But what else is the major explanation for decades of economic underperformance in the face of massive foreign direct investment and borrowings?

Among other things, irresponsible stewardship is exemplified by the dysfunctional aspects of tribal and garrison politics; political favouritism in the allocation of incentives; lack of policy continuity from one administration to another; weak governance structures and institutions to ensure accountability; lack of clear rules-based regime for making or implementing many important economic and business decisions; inordinate influence of the well-connected and the socially prominent.

Going forward, Government cannot merely ask us for sacrifice and make vague promises that there will be long-term benefits. Structures and processes must be put in place to ensure that we have responsible stewardship. Essentially this is about good governance.

Good governance is generally acknowledged to be an expression of democratic values and liberal constitutionalism which contribute to development. It embodies principles like participation in decision making; fairness and equity in how people are treated; the rule of law; accountability and transparency; free, independent and responsible media. It's about strong institutions and not personality.

The contrary school of thought is that greater transparency, accountability, and participation are often a result, rather than a direct cause of faster development; hence the greater focus should be on investment and development.

The question has currency in light of the constitutional battle between the Administration and the Office of the Contractor General (OCG) over differing interpretations of the powers of the OCG regarding the awarding and monitoring of government contracts.

The issue is too important to remain unresolved for long. The signal from the Government is that the solution may lie in new legislation. That may work. What will not work is any retreat from the stated policy of a strong, independent anti-corruption agency.

In these times of stress, we need responsible stewardship more than ever. Key to that is a strong anti-corruption institution that may very well do the same for economic development as the Electoral Commission did for the political process that was on the verge of imploding from violence and electoral fraud.

kcr@cwjamaica.com

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