Tourism, remittances can't feed us forever
THE fact that Jamaica has for too long been living beyond its means is dramatised by external borrowing reaching 140 per cent of Gross Domestic Product (GDP) and the large and persistent gap between foreign exchange earnings and the expenditure.
The perennial foreign exchange gap is also evident in the depreciation of the Jamaican dollar of 14.4 per cent in 2013.
The foreign exchange gap has to be closed by reducing foreign exchange spending and increasing foreign exchange earnings. Cutting back on spending in reality means reducing imports; easier said than done because of our vast appetite for imports over local alternatives.
In any case, reducing imports in the absence of the production of local import substitutes causes inflation and an increase in the cost of living. In addition, the high import content of local production results in an increase in the cost of production for both local consumption and exports. Given these consequences, greater attention should be directed to earning more foreign exchange.
Jamaica's foreign exchange earnings are garnered from three main sources -- exports, tourism and remittances -- with tourism and remittances each contributing around US$2 billion or the equivalent of 13 per cent of GDP in 2013.
The tourism sector has grown every year in the last decade and accounts for almost 8.4 per cent of GDP. Jamaica achieved a record in 2013 with more than two million stopover visitors. Jamaica was also able to significantly increase cruise ship passengers over the past two years, reaching 1.3 million. Tourism has done well and has prospects, but it cannot increase exponentially.
According to the 2013 World Travel and Tourism Council's Economic Impact Report, tourism's contribution to global GDP grew for the third successive year in 2012, and created more than four million new jobs globally. The report points out that in the long term, demand from and within emerging markets will continue to rise in importance.
The report forecasts that China will overtake the United States by 2023 as the world's largest travel and tourism economy, measured in total GDP (2012 prices) and the size of the outbound market.
To tap this emerging demand Jamaica will have to be innovative and competitive in the tourism sector which, thankfully, has performed well in a difficult economic environment but continues to face a challenging future because of economic malaise in source markets and increased international competition.
We must take on this challenge through product diversification, namely, quality control, the creation of new market niches, improved airlift, and the reorientation of supply toward emerging or neglected markets such as Brazil and China.
Remittances, for their part, have been a remarkably consistent shock absorber for the Jamaican economy, growing even in the midst of slow economic conditions in source countries, particularly the United States and Great Britain. The level of remittances has been maintained
by overseas Jamaicans by supplementing deductions from current income with drawdowns from savings. We cannot expect the charity of overseas Jamaicans to continue to grow indefinitely.
The bottom line is, Jamaica cannot depend only on tourism and charity. We must earn more foreign exchange by exporting more. We export or die.