Our economy can recover stronger from COVID-19

Our economy can recover stronger from COVID-19

Malik
Smith

Tuesday, February 23, 2021

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JAMAICA is a small island developing state that has unfortunately dealt with anaemic growth and development in the last 58 years of Independence, despite multiple administrations trying to improve on their predecessor's performance.

The country began seeing signs of slight improvement, and there was positive outlook from multiple international agencies, such as Standard & Poor's and Fitch. The International Monetary Fund (IMF) completing its 36-month Stand-By Arrangement in 2019 was also a good sign. The confidence of consumers and investors was up as well. Then COVID-19 struck the world.

According to Trading Economics, in 2018 Jamaica's gross domestic product (GDP) was over US$15 billion, with a GDP per capita at roughly US$5,200. For several economic quarters over the last few years our country has grown at a seemingly stagnant rate of around 0.5 per cent to two per cent, but since the first quarter of 2020 Jamaica has seen an expectantly sharp decline in its GDP, a rise in unemployment, and an increase of several businesses going under. Trading Economics has forecast that Jamaica's GDP will decline by around six per cent for 2020. They've also forecast that the economy will see an estimated increase of two per cent to four per cent for 2021, but that would technically mean Jamaica would still not fully recover from the virus' effects, as other countries are forecasted to do for 2021.

In my view, the only way we can heal the wounds of the coronavirus at a faster rate is to diversify the economy in a multifaceted manner. We are too reliant on tourism, which holds a portion larger than 10 per cent of the overall economy. As seen on the news, the hospitality industry across the world has taken a serious hit, and it won't be back at 2019 levels until the various vaccinations have been taken by an adequate number of people. Professionals have already said that could take us into 2022-23.

By doing some research one can see that constant innovation, improvement in technology, and efficient institutions can be integrated to maintain and increase the output of a nation. We can lower the unemployment rate from 12.6 per cent as of July 2020 (according to the Statistical Institute of Jamaica) by expanding into different industries such as the marijuana industry (recreational and medicinal) and trading and logistics, while still managing to expand our manufacturing industry.

Jamaica is popularly known for marijuana — even though most people here do not use it for any specific purpose. If we are able to make the right moves the Jamaican marijuana brand could arguably be larger than the Blue Mountain Coffee brand, not to mention the potential business-to-business (B2B) transactions in the international space.

In tandem with this, Jamaica's location is perfectly situated for shipping cargo between the continents above and below us, not to mention our close proximity to the Panama Canal. Jamaica could become the main shipping hub in the western hemisphere. Logistics and supply chain management have been proven to be more lucrative in the long run than tourism — one can look at Singapore, Sri Lanka, and Dubai, for example. More focus on these new industries could create even more businesses and jobs with the potential to expand beyond the nation's borders and the region, improving our gross national product (GNP) in the long run, as well as our resistance to external shocks due to lack of diversification.

If the Government were to give subsidies and incentives for people to build and expand these industries, such as an extended COVID-19 Allocation of Resources to Employees (CARE) Programme, we could see a far greater and more diversified economy in the medium to long term that would be ready for any shocks due to its developed and multifaceted nature.

All this added focus has to be in addition to strengthening our traditional industries, such as agriculture. There is a good amount of arable land in Jamaica that is not being utilised. These parcels should not be left alone while they could be contributing to the overall economy. Once we are truly ensured that the lands are correctly used we could also take a step in the direction of integrating technology in order to improve yields and utilise inputs in the most efficient way.

We also need to improve tax collection, as there are many tax evaders in the nation who are directly benefiting from common and public goods provided by the Government, such as roads and parks, without contributing to the tax revenue. Once the vast amount of money lost is recouped, and the evaders are brought into the fold, specific protocols would have to be put in place to make it more difficult to evade taxes.

Yet another important step we could take in improving the nation is better preparing Jamaica for the Fourth Industrial Revolution, featuring artificial intelligence and automation. If not properly managed, this could put many people out of work, especially individuals with menial jobs and jobs involving repetitive tasks. It is imperative to promote high-skilled jobs, such as those developed through science, technology, engineering, and mathematics (STEM) programmes, looking ahead to the jobs that will still exist in around 25 years, as well as new jobs and industries that will come on stream.

Vocational/skills-based training should be promoted further, as not everyone will or should be expected to attain a university degree. Many trades can be quite lucrative, and many individuals could also branch off to start companies based on their respective skill sets. A new set of trades that could be introduced for the upcoming landscape is vocational training for different kinds of renewable energy solutions, which could help further the initiative of Jamaica employing more than 30 per cent renewable energy by 2030, as well as giving young, ambitious technicians a stake in the green future.

Last, but not least, should be improvements in the efficiency of different public sector agencies. Should doing business with the Government be more streamlined, we would require less effort and each task would be dealt with at a faster pace. This would directly affect the productivity of the nation, which would decrease the deterrence to compliance in the first place. Thereafter innovation can play a vital role, such as introducing secure and reliable digitisation. Once the workers in these government organisations are incentivised to do better work we will see a positive shift in their work ethic and output.

When we, as a nation, delve into more industries, strengthen current strongholds, cleanse the tax loopholes, and truly prepare the workforce for the future, I believe Jamaica will become a beacon of hope and economic excellence in the Caribbean region.

Malik Smith is currently pursuing a double major in economics and banking and finance.


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