DR. ARUN KASHYAP // Brown Bag Session at RBLACApr 16, 2013
What is the current economic, political and social situation in Jamaica?
Jamaica is a mixed economy with both state enterprises and private sector businesses. Major sectors of the Jamaican economy include agriculture, mining, manufacturing, tourism, and financial and insurance services. Tourism and mining are the leading earners of foreign exchange. Half the Jamaican economy relies on services, with half of its income coming from services such as tourism. An estimated 1.9 million foreign tourists visit Jamaica every year.
Jamaica faces several long-term problems, such as a very high public debt burden (one of the highest in the world) large-scale unemployment, underemployment and a sizeable trade deficit, persistently high crime rates (with noticeable incidences of violence against women and children, especially girls) and one of the highest homicide rates in the world. Domestic demand continues to be low and the fiscal position fragile. Global economic uncertainties, especially weaknesses in the Euro zone and the UK, in addition to weak recovery of the US, have adversely impacted the tourist industry, thus constraining revenue. Remittances from Jamaicans living abroad reached US$1.2 billion by July 2012, an increase by 3.3% compared to 2011 in the same period. However they declined by 2.6% year on year by August.
The global economic downturn had a significant impact on the Jamaican economy for the years 2007 to 2009, resulting in negative economic growth. The government implemented a Debt Management Initiative, the Jamaica Debt Exchange (JDX) on 14 January 2010. The initiative would see holders of Government of Jamaica (GOJ) bonds returning the high interest earning instruments for bonds with lower yields and longer maturities.The offer was taken up by over 95% of local financial institutions and was deemed a success by the government. Owing to the success of the JDX program, the Bruce Golding-led Jamaica Labour Party (JLP) government was successful in entering into a borrowing arrangement with the IMF on 4 February 2010 for the amount of US$1.27b. That loan agreement was for a period of three years, but the country’s failure to meet its commitments under that IMF Agreement resulted in the Portia Simpson-Miller-led government having to have a new set of negotiations for a new IMF arrangement.
The People’s National Party (PNP) government led by Mrs Portia Simpson Miller has governed Jamaica since January 2012 (and with a large parliamentary majority having 42 of the 63 seats). Negotiations with the IMF on a new loan programme has been a major priority and the lack of an approved agreement up to this time has been an important challenge that has impacted the delivery of development resources of the UN agencies under very trying economic, social and security related national circumstances.
The IMF and the Government of Jamaica have reached a staff-level agreement on the key elements of an economic program that can be supported by a 48-month arrangement under the Extended Fund Facility (EFF), in the amount equivalent of approximately US$750 million. The IMF’s Executive Board is to now consider the proposed arrangement under the EFF, subject to the timely completion of prior actions to be taken by the Jamaican government and obtaining necessary financing assurances.
The Government of Jamaica has implemented a National Debt Exchange that, along with the fiscal adjustment and structural reform measures in the economic program, is expected to help reduce Jamaica’s medium-term financing needs and contribute to debt sustainability.
Over the last three decades, the Jamaican economy has experienced very low economic growth, declining productivity, and reduced international competitiveness. An important factor behind these problems has been Jamaica’s unsustainable debt burden, which has undermined confidence and elevated risks to economic stability. Additionally, Jamaica’s high debt service has limited the government’s potential to provide the services needed to achieve sustained rates of growth and increased welfare for its citizens.
The main objective of Jamaica’s economic reform program is to contain the country’s rising economic and external vulnerabilities and address economic imbalances, while putting Jamaica on a path of sustainable growth. The program also aims to promote macroeconomic and financial stability through achieving and sustaining higher primary fiscal surpluses that can help underpin debt sustainability, pave the way for private-sector led growth through the implementation of a comprehensive set of structural reforms, and promote social stability through enhanced social protection for the most vulnerable.
This involves implementing a coordinated set of reforms to: (i) strengthen public finances, including through comprehensive tax reform, expenditure rationalization, and improved public debt management and public financial management; (ii) enhance the resilience of the financial sector through strengthened supervisory, regulatory, and crisis management frameworks; (iii) improve growth-generating efficiency through enhancements to the business environment, increased competitiveness, and strengthened institutional capacity and governance (including through a broad legislative agenda); and (iv) protect the most vulnerable and promote economic self-reliance, including through the establishment of a floor on social spending, maintaining the real value of PATH (Program of Advancement through Health and Education) benefits, and expanding re-certification and the Steps-to-Work program.
2. What are the main development challenges (MDGs and post 2015 agenda)?
The main development challenges facing Jamaica are:
a. High public debt burden;
b. Large scale unemployment – (In 2012, the projected poverty rate for Jamaica was 12.1%. The actual poverty rate for Jamaica is 14.3 %. However, it should be noted that 23.2% of the population in rural areas lives in poverty);
c. Sizeable trade deficit;
d. Persistently high crime rates;
e. Issues relating to human rights and gender equality;
f. Slow growth in economy – note that global economic uncertainties have adversely impacted the tourist industry, which is one of the country’s main sources of income;
g. Climate change and weather-related hazards continue to remain a pervasive risk. Hurricane Sandy made landfall as a Category One Hurricane in October 2012, causing severe damage, especially in the agricultural sector.
h. Jamaica is far behind in MDG target of reducing maternity mortality by 3/4 for 2015. The MDG targets for poverty reduction, infant and child nutrition, primary education and access to safe drinking water are expected to be met. The Government’s 2009 analysis shows that the poorest decile of the population account for 2.7% of national consumption compared to 29% by the wealthiest 10%. While the Jamaican population living in poverty significantly decreased in 2007, it increased to 17.6% in 2010; it was 14.3% in April 2012. Rural areas continue to have the largest proportion of poor people at nearly 23.2%. Even with an overall increase in the labour force in Jamaica, the youth unemployment rate, at nearly 24%, is nearly three times higher than adult unemployment.
Gender disparity is obvious by grade 6 in primary schools, with boys being the majority of dropouts at the secondary level. Males continue to be under-represented by 2:1 at the tertiary level. There is a low representation of women in Parliament and in other areas of decision-making with a significantly higher rate of unemployment for women, despite their educational gains. The Government has identified high unemployment particularly among youth and women as one of the country’s biggest problems.
3. How the UN system in general and the UNDP in particular can support national efforts to overcome these challenges.
The continued challenges faced by Jamaica since 2012 is a potential opportunity for the UNCT to reassert UN’s comparative advantage and creatively engage both national and international development partners.
The UNDAF (2012-2016) was launched in early 2012. While the UNDAF plans to deliver over $37m during the period, the amount available with the agencies is $13m. The plan under the UNDAF is to prioritize interventions in safety, security and justice; the environment and social empowerment, and equity. Foremost efforts will have to be directed for UN to work together in a synergistic manner, enhance operational efficiencies, strongly focus on aid effectiveness, and explore creative and coherent options to mobilize resources including knowledge resources by learning from the good practices of other UNCT’s.
The UNDAF Outcome 1 Group identified opportunities to provide leadership to the UNCT’s joint programming in the following areas:
• Expansion/replication of renewable energy and demand side management activities at the community level in line with the Secretary General’s initiative on Sustainable Energy for All, and in line with the national climate change strategy;
• Emphasis on Food Security and adequate nutrition for all while expanding and up scaling of projects on Rainwater Harvesting for Drip Irrigation;
• Assisting the Government in setting up a climate change department, strengthening community based disaster management, replication of community level Agricultural Disaster Risk Management planning and implementation, for building resilience in agriculture and other rural livelihoods;
• Advancing Blue and John Crow Mountains National Park Implementation of management plan and business plan towards facilitating World Heritage Site Designation.
The UNDAF Outcome 2 Group identified opportunities to provide leadership to the UNCT’s joint programming in the following areas:
• Access to Reproductive Health Information, Education and Services including legal and policy reform (ii) access to contraceptive services, STI, HIV, counselling, testing and prevention services (iii) HFLE curriculum;
• Improvement in Maternal Health through the development of a strategic plan, improving the data management systems, and capacity development of health care workers;
• Choice Programme as a framework for community intervention and includes components such as parenting, youth empowerment, governance, education, community sports, etc.
The UNDAF Outcome 3 Group identified opportunities to provide leadership to the UNCT’s joint programming in the following areas:
• Building the capacity of the State to fulfil human rights obligations that relate to all UNDAF outcomes, through:
• The establishment of a UNCT wide Human Rights Theme Group;
• An invitation extended to the Office of the High Commission for Human Rights (OHCHR) to be a member and participate virtually in its meetings;
• Hosting an OHCHR mission in 2012 comprising the UPR unit and the Americas unit;
• Preparing a formal application to the OHCHR for the appointment of a Human Rights Advisor for the UNCT/RCO.
• Trafficking in Persons
• Design a joint programme involving IOM and UNDP and mobilize resources to implement a programme to support the execution of the National Plan of Action to Combat Trafficking in Persons from 2012-15.
• Legal reform relating to HIV-AIDS
• In partnership and guidance from the Joint Team on AIDS, UNAIDS and UNDP, implement parallel projects on Gender Policy and HIV-AIDS (UNAIDS) and HIV-AIDS Legal Reform (UNDP and UBRAF funding).
• Care and conditions of children in conflict with the law
• Collaboration between UNDP and UNICEF to develop and implement a project to improve the conditions of the sole remand centre for boys;
• UNICEF (with core and EU funds) to initiate a project to establish a dedicated facility for girls on remand;
Pilot a National Child Diversion Programme and establish a Mobile Mental Health Unit to treat wards of the State.
What is the role of Jamaica as a key player in the Caribbean?
Jamaica is the largest island in the English-speaking Caribbean. Jamaica is undoubtedly a political leader of the Caribbean Community (CARICOM).It is noteworthy that Jamaica led the world in the designation of 1968 as the International Year for Human Rights to mark the Twentieth Anniversary of the Universal Declaration of Human Rights and emphasized the promise of the UN Charter. Jamaica persistently opposed apartheid and racism, and it was the first country to declare a trade embargo against South Africa. Jamaica got the General Assembly to adopt the Convention against Apartheid in Sports, and also negotiated the path to Zimbabwe's independence.
Jamaica has significant name recognition and global goodwill, allowing it to be a major tourist pull not just to its own shores but for the wider Caribbean. Jamaica is the renowned leader in the Caribbean in the areas of sports (producing celebrities such as Usain Bolt and Merlene Ottey); in music (producing celebrities such as Bob Marley, Jimmy Cliff and Shaggy) and in culture (with the Jamaican culture being highlighted in VW’s 2013 Global Ad campaign, which was launched during this year’s SuperBowl in the US).
Jamaica has made the Caribbean proud on several occasions by consistently recording success on the world stage in global events such as The Olympics, World Championships, The World Cup, The Grammy Music Awards, Global Beauty Pageants, International Spelling and Science Competitions and International Literary and Film Festivals.
In 2006, Jamaica became part of the CARICOM Single Market and Economy (CSME) as one of the pioneering members. The CARICOM Single Market and Economy is intended to benefit the people of the Region by providing more and better opportunities to produce and sell their goods and services and to attract investment. It provides one large market among the participating member states. The main objectives of the CSME are the full use of labour (full employment) and full exploitation of the other factors of production (natural resources and capital); competitive production leading to greater variety and quantity of products and services to trade with other countries. The goal is that the achievement of these objectives will in turn provide improved standards of living and work and sustained economic development.
Jamaica operates a Common External Tariff (CET) along with other trading partners of the Caribbean Common Market (CARICOM). Goods imported from countries outside of CARICOM are subject to the duties listed in the CET, but goods imported from CARICOM countries and are certified to be of CARICOM origin, do not generally attract these import duties. These CARICOM origin goods enjoy duty-free status, that is, they are not subject to Customs import duty but local taxes, General Consumption Tax and Special Consumption Tax are payable.
5. What significant development events will take place in Jamaica in 2013?
a) In order to achieve growth, the Government of Jamaica plans to change the business environment to make investing in the country more attractive to investors. This will include:
i. Cutting out the ‘bureaucratic red tape’ that currently exists, and reducing the time to do registrations (of businesses) etc.
ii. Changes to probate legislation and other similar legislative changes.
iii. Infrastructural development
iv. Look at sectors offering greatest benefit in order to maintain economic stability.
• The ICT & Business Continuity Sector is one such critical area – 10,000 jobs have already been earmarked in this area, with the possibility of an additional 5,000 jobs being added to this through another component involving the University of the West Indies.
• The Hotel Sector – Currently, there are interests for over 2,000 additional hotel rooms to be added to the Jamaican Hotel Sector, with the potential for four (4) new persons to be hired for each additional room added to the sector.
• A Port Logistics Centre is being proposed
A feasibility study is being done
It involves plans to privatize the ports
• Agro-Processing Sector – increase food security by enhancing agro-processing
• Small & Micro-Enterprise Development – includes enhancing and maximising the potential of the entertainment industry.