Need for greater investment promotion
THE acceleration of economic growth in developing economies like Jamaica requires increasing investment. The dilemma for developing economies is that the level of investment is constrained by the level of domestic savings resulting from low income levels.
This vicious cycle can be broken by inflows of foreign capital in the form of loans, development assistance, and/or private foreign investment — portfolio or direct.
Governments of Jamaica, since the 1960s, have understood the need for higher levels of investment and sought to garner foreign capital in all three forms. There are limits to foreign borrowing, and Jamaica has already passed the feasible level of debt servicing as is evident by two debt exchanges — a euphemism for debt rescheduling.
As a middle-income developing country, there is a limited and steadily declining amount of development aid available to Jamaica. The country's debt situation and its middle-income status leave foreign investment as the source which has no limit.
While successive governments have actively encouraged foreign direct investment, this task has become increasingly difficult because of Jamaica's mix of advantages and disadvantages.
The advantages are democracy, location, preferential trade agreements, and a political consensus on a private sector-led, market-driven economic strategy.
The disadvantages are a small national market, low labour productivity, crime, violence, high cost of electricity, and uncertainty due to the economic travails of the last 30 years.
Despite the drawbacks, Jamaica has managed to attract some foreign direct investment in bauxite and tourism. However, we have had to compete for those investments with numerous other developing countries that have our advantages without the disadvantages, eg the Dominican Republic, which has a larger national market, low cost of labour, and a high rate of growth.
If Jamaica is to attract foreign direct investment it must overcome its disadvantages. In the meantime, it has to spend far more on investment promotion because, as the old dictum says, "You cannot make money unless you spend money", which is why private businesses spend money on marketing and advertisement.
We therefore endorse the appointment of Ms Diane Edwards as president of the national investment and trade promotion agency, effective September 1, 2013. She is a former trade commissioner for JAMPRO in New York, Brussels and London. As such, she brings to the post a wealth of knowledge and experience in international marketing and business development.
JAMPRO's current budget amounts to asking her to run with a "ball and chain", as it is woefully inadequate and urgently needs to be increased. Such an increase, if used properly, could be money well spent.