The expected JLP economic model:Wealth creation through growth, not poverty alleviation

from The Jamaica Gleaner

Keith Collister, Business Writer

The Jamaica Labour Party (JLP) believes that a long term increase in the standard of living of the Jamaican people can only be achieved through a focus on growth, rather than mere poverty alleviation.

Jamaica's growth will be "private sector led, government facilitated", in the words of Prime Minister-designate Bruce Golding.


DEBT REDUCTION

The central plank of the JLP's pro-growth policy is job creation.

Golding will make it a Government priority to seek out job creating investments, looking specifically for investments that are labour intensive.

He also says he will bring to fruition the long delayed Social Partnership agreement between government, opposition, private sector and trade unions as part of a shared vision of the way forward for Jamaica.

As part of a sound macro-economic policy framework, the JLP proposes to make the Bank of Jamaica independent with a clear mandate to achieve price stability.

The JLP does not believe high primary surpluses are the only way to reduce the debt burden, arguing instead that a proactive debt reduction strategy, rather than the current debt management strategy, is required to stimulate economic development.

The party has placed a creative debt management strategy at the heart of its economic model, which consists principally of capping the debt and deficit so that in Mr. Golding's words: " No government, no matter how powerful, should be able to mortgage the future of the country."

This means using the proceeds of PetroCaribe and securitisation as debt fighting tools, using multilateral financing for specific projects and attempting to forge an agreement with the private sector to lower interest rates.

The JLP would also establish a firm policy that channels all proceeds from the sale of government assets into debt reduction.

TOUGH LOVE NEEDED

Macroeconomic stability is necessary but not sufficient. While tough fiscal policies are necessary, in Mr. Golding's view they are not sufficient, and in isolation, "they constitute an impediment to economic development and growth".

The view that macro stability is a necessary but not sufficient for economic growth is not an endorsement of a 'statist' economic model or an attempt to revive the ISI (Import Substitution Industrialisation), or even the "picking winners" policies of the past.

Rather it is based on the notion that the government must play an active role in setting industrial policy, and take a less bureaucratic and more pro-active approach to investment promotion.

BUSINESS FRIENDLINESS

Golding believes very strongly in the need to create a business friendly environment.

"Jamaica must not only be open for business but ready and anxious for investment," he said during the campaigning.

An example of this is his intention to create one agency, comprised of all the relevant authorities that evaluate building applications, with the goal of achieving a ninety day approval process.

The JLP Manifesto also calls for the consolidation of Jamaica Trade and Invest (formerly Jampro), the Development Bank of Jamaica and Exim Bank into a mega agency with the responsibility of the financing, marketing and promotion of Jamaica.

TAXATION and GOVERNANCE

Tax rates and administration must become competitive as Jamaica is now competing with everybody else in the world.

Good governance is also an economic issue.

The JLP has said that good governance is not solely a legal issue but is an integral part of economic policy in three clear ways.

Firstly, it frees up resources by reducing waste and corruption in the public sector.

Secondly, it insulates monetary policy from politics through the creation of an independent central bank. Third, it reduces Jamaica 's political risk premium in the international capital markets and therefore lowers interest rates on its external debt.

The party sees education and health care as investments in human capital, not just social expenses.

It believes that the cost of waiting to make these investments at some point in the future is significantly more expensive than the budgetary costs of making these investments in the short term.

keithcollister@cwjamaica.com