THE inauguration of new Prime Minister Andrew Holness has come and gone and now the financial and economic affairs of the country must be placed front and centre of the national agenda. First, the ambiguity surrounding the IMF agreement must be unequivocally resolved. There are those who argue that a new arrangement must be arrived at if the country is going to move forward with any degree of certainty.

The debt to GDP ratio currently stands at around 130 per cent of GDP and the interest payments alone exceed the sum total of all the taxes collected in this country. The debt mountain has bedeviled the Jamaican economy for decades. Holness remarked at his swearing-in ceremony, “ We now borrow in order to repay previous borrowing”. The answer to this perpetual debt cycle must be found expeditiously.

Poverty on the rise

Poverty in Jamaica is on the rise and as the economy continues to contract more people will be thrown unto the scrap heap. According to the IMF’s recent Regional Economic Outlook, Western Hemisphere: “Shifting Winds, New Policy Challenges,” the level of poverty, unemployment and inequality in Jamaica is among the worst in the Americas. The IMF is of the view that as many as 1.1 million people in Jamaica can be defined as living in poverty and that Jamaica now has the second-highest unemployment rate at 11.8 per cent and the fourth-highest poverty rate at 43.1 per cent compared with 23 countries in the region. This is the sobering reality the new young prime minster has to contend with, despite the Government officially placing the country’s poverty rate at 16.5 per cent.

For far too long there has been a widening chasm in the distribution of income and this did not escape the IMF’s attention. The report ranked it as the second-worst among the 23 listed regional countries. “ I love the poor, but I do not love poverty,” declared Holness at the swearing-in ceremony. He then went on to say that the most pressing need in the country is for education and that it was the answer out of a life of poverty. At first that seemed opaque because education in of itself cannot feed or house the citizens. The most pressing need is for a job that allows one to build and structure an existence. There are too many well educated Jamaicans who cannot secure meaningful jobs and so their best years lie like rotting fruit in fallow grounds instead of being fecund in fields of gold. Many have to resort to seeking a career in the diaspora. The Industrial Revolution was not built on education rather it facilitated an educated class. Education needs a vessel to enter into if it is to be utilitarian in nature. An educated citizenry with no jobs will not lead to growth.

Economics that makes sense to the man on the street

Audley Shaw must be given much credit for presiding over the stability of the four pillars of any economy; interest rates, inflation, high reserves and a stable local currency. The Jamaica Debt Exchange (JDX) has seen the country reduce its debt burden by about 14 per cent of GDP one year later and some say that many of the debtridden countries of Europe should follow Jamaica’s lead with this debt swap. But what does all this mean to the man on the street? How does it all translate to better living standards and more money in his pocket? It all sounds well coming from the educated chattering classes and those au fait with economic theory, but with unemployment and poverty on the rise what does it really mean for Jamaicans? It is said that the economy is heading in the right direction but the reality belies that. It is now left to Holness to ensure that this is not so and that the people of his country can live well today and look forward to a better tomorrow.

Cutting the public sector

The IMF is insisting that the public sector wage bill be cut to 9 per cent of GDP by 2016 and that more civil servants be cut. The Government has decided to honour a pay increase thus putting additional pressure on the budget. It is said that this move, together with an unwillingness to cut the public sector, will incur the displeasure of the IMF who now calls the tune.

What is clear is that it may not be politically prudent to ask for the electorate’s support this year only to make many people unemployed next year — that’s a sucker’s bet, a bad bargain. This could lead to civil unrest as seen in Greece were many people are balking at the austerity measures insisted upon by the IMF and other agencies.

Rising unemployment and falling FDI.

The spectre of rising unemployment must be closely watched and dealt with by the new prime minister. Earlier this week Peter-John Gordon of the Department of Economics at the University of the West Indies pointed out that based on data from the Statistical Institute of Jamaica (STATIN) between 1972 and 1975 unemployment fell each year starting at 23.2 per cent and ending at 20.4 per cent. Unemployment then rose each year until it reached 27.8 per cent in 1981. Thereafter unemployment has fallen each year with the exception of 1992, 1995 and 1997 until it reached its lowest level ever that of 9.8 per cent in 2007. It has been rising ever since and is hovering at around 12 per cent (about 152,000 people).

Another worrisome portend is the drying up of Foreign Direct Investment (FDI). A clear correlation between economic growth and rising FDI numbers has never been clearly made in Jamaica. However, there is a distinct one when unemployment is factored in. The task is left to Holness now to translate FDI into growth and employment.

According to research done by the CEO of GraceKennedy Don Wehby, between 2003 and 2006 total FDI inflows averaged more than US$720 million and in 2007 inflows were more than US$866 million. In 2008, Jamaica received FDI inflows of US$850 million, with only the Caribbean islands of British Virgin Islands, Cayman Islands and the Dominican Republic doing better than Jamaica. According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2010, Jamaica’s FDI fell 26 per cent in 2009. Last year, 2010, it declined by 62 per cent in one year to US$201 million according to the same report.

Jamaica is not business-friendly

It has been said that foreign investors do not regard Jamaica as a good bet. High crime rates, high electricity costs, a faltering economy are all contributing factors. In fact, earlier this month the Doing Business Report 2012, published by the World Bank and its affiliate the International Finance Corporation (IFC) declared that Jamaica is a country that doesn’t protect investors.

Jamaica fell 7 places to rank 88 out of 183 countries in the report, its seventh straight year of decline. The World Bank report put this down to Jamaica’s onerous tax structure and its expensive and inefficient electricity system.

Successive prime ministers have long bemoaned the stifling bureaucracy that hampers business development in Jamaica, yet a successful panacea has never been implemented. Each year conducting business in Jamaica becomes more arduous. Is it any wonder that investors shy away from Jamaica? Holness will have to pull his sleeves up and get to work on this. His predecessor Bruce Golding sounded earnest in wanting to reduce the bureaucracy associated with doing business in Jamaica. He recognised it as an impediment to growth and in his 2007 election campaign declared that development proposals would be dealt with within 90 days or the project could be considered approved. During his tenure this failed to get implemented, and no attempt to curtail burdensome bureaucracy has seriously been made. Holness mentioned how difficult businesses found this and must now endeavour to address the situation. He must not be as lackadaisical as Golding was here.

Last year at a Jamaica Observer Chairman’s Luncheon, renowned real estate developer Maurice Facey said “ the Government does not appear to make any decision promptly.” According to Facey, there was an absence of a master development plan, which he argued would greatly assist the Government in making its decisions. He added that in Canada, development proposals are presented before all agencies involved at one sitting, and decisions are routinely made within two weeks.

The importance of socialisation

Underscoring all this is the realisation that inadequate socialisation and poverty retards the family’s ability to produce wholesome functional individuals. It is trite to continue to go on about Holness’s youth suggesting that this will make him a good chief executive of Jamaica. He is seemingly decent, honourable and is committed to making Jamaica a better country. He knows all too well that when citizens are not adequately socialised together with wallowing in poverty, it creates a toxic mix which renders the country a banana republic immersed in debt with no hope for its citizens. If Jamaica aspires to be a developed country by 2030, then Prime Minister Holness must find and implement the answers sooner rather than later.