National Industrial Policy unimpressive
B>THE National Industrial Policy (NIP) that sets out a range of ambitious targets and which Prime Minister P J Patterson is said to still use as his ‘bible’, has failed to impress with hard, in-your-face achievements, after seven years.
Enticing promises of annual growth rate upwards of five per cent in Gross Domestic Product (GDP) and per capita income of US$4,000 a year to working Jamaicans — the NIP’s key indicators — have remained elusive.
In interviews with the Sunday Observer, officials sound typically upbeat about the realisation of the targets of the NIP which, at its launching in 1996, was billed as a comprehensive long-term strategic plan to steer the nation to greater prosperity. But detractors see it as a dismal failure that has not lived up to expectations.
“A great deal is happening. Right now, a number of Fortune 500 companies are investing in Jamaica, including household names such as Phillips, and Apple Computers, and the likes of Citel which recently bought a building in New Kingston,” beamed Pat Francis, the president of Jampro, Jamaica’s one-stop investment and promotions agency.
“There is activity in accounting services and other back office operations for large US banks and other financial institutions who see Jamaica as the ideal location for these activities, and there is massive investment in tourism, largely from Europe,” Francis added.
Francis pointed to international accounting firms like Deloitte and Touche setting up office here, as well as other well known players in financial services, against the background of estimates that 25 per cent of the three million ‘back office’ jobs available in the United States over the next four years would be located offshore.
Unimpressed, the Opposition spokesman for trade and industry, Karl Samuda, described performance in some areas under the NIP as “disastrous”.
“The failure of the NIP can easily be seen in the general decline of almost all aspects of the productive sector,” Samuda lamented. “In the areas of tourism and entertainment there has been some movement, but these are primarily driven by private sector effort.”
The National Industrial Policy has been one of Patterson’s guiding lights to integrated development of Jamaican industries and was designed to provide special support for strategic sectors grouped as clusters.
A Development Council, which came out of the last summit between the Cabinet and the private sector, watches over the policy from the Office of the Prime Minister (OPM). And according to Commerce, Science and Technology Minister Phillip Paulwell, “the prime minister continues to use it as a bible” on Jamaican economic growth prospects.
Historically, the NIP came at a time when much economic activity was happening but without any central co-ordination, said Francis. “The areas identified were, of course, the macro-economic situation and we spent a lot of time on trying to create stability, predictability and credibility coming out of a situation that was rather volatile.”
In summing up the task facing the nation, the NIP proffered in its base document that Jamaica would need to sustain growth at the rate of five per cent per annum in order to double present levels of per capita income by the year 2010. The policy was designed for implementation in three phases:
In the short-term, the focus was on establishing a Social Partnership in 1996 against the background of attempts by organised labour to compensate for years of inflationary pressures which had savaged wages and spending power.
A mid-term term review of the NIP by the OPM acknowledged that no formal agreement was reached on the social partnership, but said the ensuing discussions facilitated an environment which led to a break in the cycle of inflationary expectations, its main objective.
For the medium-term — between 1997 and 2000 — the emphasis should have been on the transition to sustainable economic growth, with GDP in the region of 3.5 to six per cent per annum in a stable macro-economic environment.
The actual out-turn in growth was well below average, recording -2.0, -0.5 and -0.4 respectively for the periods 1997, 1998 and 1999, and for the failure to achieve the stipulated targets, the review blamed “factors such as the crash of the banking sector and a series of natural disasters in agriculture, among other areas”.
The third phase, which should have begun in April 2000, should be the period of high economic growth. It was anticipated that the strategy of an export push, with efficient import substitution, would be consolidated in this phase.
The third phase targets are among the most ambitious — economic growth of seven to 7.5 per cent. But that achievement is doubtful, given that the target was dependent on the success of measures implemented in the previous phases.
Planners insist, however, that an important variable was the fact that in contrast to the public sector-led growth strategy of many developing nations, the NIP was designed to promote growth through the initiatives of the private sector.
The Government was cast in the role of facilitator, enabling the environment necessary for sustainable growth and development of the nation, while the private sector should be the engine of growth.
The strategic aspect of the NIP was based on four components: macro-economic policy; industrial strategy; social policy and environmental policy.
Dennis Morrison, economist, government advisor and chairman of the state-run Jamaica Tourist Board, explained that each of these components had its own set of prescribed goals and specific interventions in terms of particular programmes and activities, as well as procedures for implementation.
“Macro-economic policy, for example, is predicated on the objective of stability, predictability and credibility, through the use of tools such as fiscal and monetary controls, as well as maintaining BOJ (central bank) autonomy and a social partnership,” he noted.
On the other hand, said Morrison, “industrial strategy contains within it, its policy mix investment promotion, including appropriate incentives, financing arrangements and an investment policy, as well as the development of infrastructure and a supportive framework”.
All of that was aimed at promoting growth and diversification through building international competitiveness, said Morrison.
On the critical issue of social policy, Morrison noted that it was grounded in poverty alleviation viewed from a gender perspective and based on equity, while environmental policy had as its main objective the conservation of the environment through legislation, incentives, enforcement and public education.
NIP backers made it plain they were especially proud of the way the inflation targets have gone. They were met and even exceeded in some years such as 1998, when it was projected at between seven and nine per cent and came out at 7.9 per cent, and 1999 when from a seven to nine per cent projection, a close 6.8 per cent was achieved.
The fiscal balance as a percentage of GDP was also just slightly off target in 1999, achieving 4.5 per cent from a projected 4.6 per cent, something not to be scoffed at, officials insisted. And there was the sustained stability in the Net International Reserves (NIR).
At the micro levels, there are visible signs that things are working, NIP authors insisted. They reel off a list that includes:
* far-reaching work done to prepare the country through legislative reform in areas such as telecoms and to facilitate e-commerce;
* development of world class infrastructure at Jamaica’s ports;
* building of highways which are opening up Jamaica’s coasts and interior for development, especially in tourism and ICT;
* massive reconstruction of the Kingston Port, increasing its capacity several times over, which, with the concurrent public sector modernisation programme of Government, has facilitated on-line transactions with moves toward launching an electronic payment system by Customs;
* enhanced shipping and berthing capacity, moving Jamaica to become a distribution hub for the region, with an eye on becoming a major port like Singapore in the Far East;
* initiatives in copyright legislation to facilitate the development of a genuine music industry and other creative enterprises;
* new developments in value-added agriculture, light manufacturing, fashion and financial services; and
* Jamaica leads the region in terms of direct investment and employment of agents in outbound telemarketing.
Paulwell chipped in with “new directions aimed at the creation of more high-end, knowledge intensive jobs, that can earn larger incomes for what is readily acknowledged as a talented and ambitious Jamaican workforce”.
Rita Hylton, a vice-president of the Jamaica Exporters’ Association and an exporter of agricultural products, gave the thumbs up to prospects in non-traditional agriculture, one of the areas singled out for special treatment by the NIP.
Hyltons saw “great potential” for big earnings in areas such as flavour and herbal extracts and nutraceuticals, taking advantage of the “mystique of the Jamaica name and worldwide trends toward healthy eating”.
In tourism, another of the NIP’s key growth sectors, the outlook is very upbeat in terms of new investment and the overall prospects of the sector, according to Development Minister Dr Paul Robertson.
Robertson pointed to new investment in hotel construction led by what should be Jamaica’s largest ever investment in hotel building, the US$60-million (J$3.6-billion) project signed recently by the Pinero Group from Spain.
The plan is to build three hotels of 600 rooms each year over a three-year period, to reach a total investment of US$144 million at Pear Tree Bay in Runaway Bay, St Ann, in conjunction with Jamaican firm, Tankweld.
These investments and the jewel in the crown, Ritz Carlton in Montego Bay, were all supported and conceived within the purview of the Industrial Policy.
But the Government’s upbeat tune is not being sung by the Opposition Jamaica Labour Party (JLP). Samuda described the out-turn in two of the key areas — agriculture and manufacturing — as tragic.
“Agriculture, forestry and fishing expressed as a contribution to the GDP show a decline, from 1997, of $1.5 billion to $ 1.3 billion — a decline in constant dollars of $220 million — while in manufacturing there was a decline of $121 million over the same period,” he noted recently in Parliament.
Financial analyst, John Jackson found that in terms of critical indicators, such as a projected six to seven per cent growth in GDP, “the policy has failed dismally”.
“We have had consistent negative or low growth and in terms of creating employment and boosting people’s income it (the NIP) has not delivered,” said Jackson, who publishes the business magazine, Investor’s Choice.
“There is nothing phenomenal about the growth of the port. I am sure a lot of this would have happened by natural progression. I would expect more dramatic growth if it were truly guided; tourism is also bad, and for a long time has been unfulfilled in terms of management and promotion,” Jackson argued.
However, Jackson saw favourable developments in the opening up of the telecoms sector “which has resulted in competition which has helped”, and the improvements in the road network through highway construction.
Looking to the NIP’s future, Jampro’s Francis believed that “Jamaica has past the worst” and should now be looking ahead, with the focus now on “what the consumer wants and then going out and producing it”.
The growing overseas success of Jamaican brands like Red Stripe and canned ackee, the result of successful lobbying to change US import restrictions, was the kind of direction in which Jamaica should move.
Francis added to that, recent moves to improve market intelligence with up-to-date information through a linking of the data base established by the Rural Agricultural Development Agency (RADA) with large producers in the agribusiness sector; as well plans to create links between farmers’ organisations like the St Elizabeth Agricultural Co-operative and groups such as supermarket chains and hotels.
Her list also includes creation of a genuine fashion industry, capitalising on the leisure wear segment of the global market to which the Caribbean is readily identified through tourism, “with far more value-added in terms of utilising the talents of local designers, fabrics and even models”.
In the area of music, television production and publishing where “foreigners” had consistently earned far more from local cultural products than Jamaicans, the enactment of copyright legislation some years ago was now allowing far more to be earned from the industry in terms of creative rights, and remittances from royalties.
Francis gleefully pointed to innovations such as the locally produced music show Hype TV, which recently signed an agreement with TVJ, noting additional interest being shown by entities such as the giant MTV.
But indicating that the Government was not entirely happy with the private sector’s contribution, she insisted that players in the private sector now needed to get more involved in the sector rather than relying on agencies like Jampro to do all the groundwork.
Asked what was the greatest deterrent to investment and sustainable economic growth in Jamaica, Francis acknowledged: “It is far easier to make money from paper (financial investments) than investing in productive enterprise.”