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Robust economic growth and the Jamaican Diaspora

Wednesday, September 06, 2017

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Minister of Finance Audley Shaw has reported that the country is experiencing a budget surplus for the last fiscal year. The primary budget surplus has increased to $135.9 billion, a $7.7 billion increase over the targeted surplus. Also, director general of the Planning Institute of Jamaica Wayne Henry has forecast growth in the economy of up to three per cent for the fiscal year March 31, 2018. This is encouraging news which augurs well for the growth trajectory of the economy. Barring any unforeseen circumstances that could hinder growth, such as natural disasters or geopolitical disturbances, there should hardly be any pessimism that such growth levels can be achieved. Taken together, the macroeconomic indices continue to point in a positive direction.

An essential feature of the Economic Growth Council (EGC) projection for “5 in 4” growth is the participation of the Jamaican Diaspora. Their participation was again reaffirmed, trumpeted and lauded at the last Diaspora conference held this year in Kingston. I am not one to rain on anyone's parade, but I am always suspicious of grand conferences where undoubtedly well-meaning people assemble to dissect issues and offer panacea for all that ails the world. This last conference was hailed as one of the best so far, where all kinds of ideas flowed. My interest has never been in grand lovefests, but the practical outcome of such conferences. After all the good time had by everyone, how willing, for example, are people to invest their time, effort and capital in putting legs to their grand ideas?

From where I sit, the Government would be well advised to temper its expectations concerning any robust participation of the Diaspora in the growth of the economy. There should be no overconfidence in any perceived miracles that the Diaspora can perform. I offer this caution within the context of certain imperatives of which I believe the Government should be mindful.

First, members of the Jamaican Diaspora who have capital to invest are very wary of investing that capital. Part of the problem is the persistence of a lack of confidence arising from the financial meltdown in the 1990s. In fact, for some, this pre-dates the financial crisis and harks back to the days when many fled on one of Michael Manley's “five flights” to Miami. Those who lost their assets in their flight from communism never really recovered, and they have told their sad stories to who would listen — many of whom the Government is now asking to return with investment dollars.

Shaw has promised that the long-awaited FINSAC report on the collapse of the financial sector is soon to be published. This cannot come soon enough, if even to let people know what really happened and perhaps assuage the fears of would-be investors. The truth is that the duppy of FINSAC still haunts potential investors. There is still a deficit of trust arising from this sad episode in Jamaica's financial history.

Second, in America, the United Kingdom and Canada, where most of the Jamaican Diaspora reside, investment capital is not easy to come by. There are some who may have that kind of capital, but by and large it is not easy to find people who will be willing to put up the kind of capital that could make significant contributions to the growth of the economy. Despite all the talk, not many with the know-how and expertise are willing to give their services for free to the Government.

And this is not about patriotism, which Samuel Johnson reminded us is the last refuge of scoundrels. Let us be frank about it, investment capital in any of these metropolitan areas is hard to come by. If it is available it will be hard to let go of unless there are strong incentives to do so. People work hard for what they have, often under inhospitable conditions. They will make it to a conference such as that which was recently held, but back home in the metropole it is a hard slug to make ends meet. Those who are able to excel to take advantage of investment opportunities in Jamaica are few and far between. It is not a robust pool from which to draw.

I wish I did not have to say it, but this is why I do not hold out great hope for the Diaspora bond being touted by the EGC. I wish my pessimism could be blown to pieces, but when I look at economic trends in the countries from which we expect investments to flow, I am not given much room for optimism.

Thirdly, economical trends globally indicate sluggish economies that have made people more hesitant to deploy capital as they would when confidence is high. The great US investor, Warren Buffett, in a recent interview on CNBC, lamented what he described as a “two per cent economy” in America. This will not change any time soon, despite the bluster and big talk coming from the challenged and over-optimistic President Donald Trump.

US national debt has doubled over the last eight years. During that time there has not been a doubling of incomes or economic output. Government debt is increasing three times faster than the economy that should sustain it. Yes, the stock market is soaring into the stratosphere, but it is only doing that off the 'gas' that has been pumped into the economy by the Federal Reserve's Quantitative Easing (printing money, because it can) and negative interest policy which has distorted asset prices. It is essentially a bubble economy impatient of correction. And, as the night follows day, expect this correction to happen. It may be sooner than later.

Talk of robust tax reform remains just that — talk. Although the Republicans control the White House and the Congress, there is no indication that they will get a reasonable legislative agenda in place any time soon. And the debt ceiling, compounded by the devastating Hurricane Harvey, is about to blow the house down.

Finally, people who can invest will not do so unless they are given strong incentives to. With all the talk about the ease of doing business in Jamaica, people in the Diaspora know that they still have to battle government bureaucracy to get anything done, and this after having to brave rampant criminality. How welcome are they made to feel when the “red eye” of envy is often turned in their direction when they try to return home or set up a little business? Dealing with Customs is not all that hassle-free as it is often made out to be.

A suite of incentives ought to be worked out for those who are willing to put their hard-earned capital into the economy. For example, the person interested in providing housing solutions would expect to get property at reasonable prices along with relevant tax exemptions for a period of time. This is given to companies on the Junior Market on the stock exchange, what about those in the Diaspora?

Also, the matter of voting in national elections has not yet been settled. Neither has that of serving as a representative in the people's parliament. Diasporans get the impression that Jamaica is content on getting what it can from them, but when it comes to considering their concerns they are ignored. If the Government really cares about diasporan investment, if it is not just about exploiting the Diaspora for its own sake, then it must correct these deficiencies and roll out incentives to the willing investor. Diasporans want to help their country grow, but it is not a one-way street.

Dr Raulston Nembhard is a priest and social commentator. Send comments to the Observer or stead6655@aol.com.

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