Lakehead University Knowledge Commons,http://knowledgecommons.lakeheadu.ca Electronic Theses and Dissertations Retrospective theses Aid to Jamaica : a study of the role of foreign aid in the development of post-independence Jamaica Nkemdirim, Juliette http://knowledgecommons.lakeheadu.ca/handle/2453/2393 Downloaded from Lakehead University, KnowledgeCommons M. A. THESIS AID TO JAMAICA; A STUDY OF THE ROLE OF FOREIGN AID IN THE DEVELOPMENT OF POST-INDEPENDENCE JAMAICA Submitted by; Juliette Nkemdirim Department of Economics Lakehead University ProQuest Number: 10611240 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Pro ProQuest 10611240 Published by ProQuest LLC (2017). Copyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code Microform Edition © ProQuest LLC. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106 - 1346 ' ? / 4/7/ / Copyright (c) 1980 Juliette Nkemdirim 286888 1 ABSTRACT OF THESIS AID TO JAMAICA: A STUDY OF THE ROLE OF FOREIGN AID IN THE DEVELOPMENT OF POST-INDEPENDENCE JAMAICA. NKEMDIRIM, Juliette Kate, M.A. Lakehead University. Supervisor: Professor Koilpillai J. Charles. The purpose of this thesis is to examine the role of foreign aid in the development of Jamaica over a ten-year period after the country gained independence. A lot of existing empirical data relates to the role of foreign aid to developing countries from the viewpoint of the donor countries or foreign aid advocates who generally conclude that more aid has to be sent to these countries. This thesis attempts to study the subject from the recipient's viewpoint. Before independence the Jamaican economy was highly dependent on foreign factors of production -- it required foreign capital, labour, know-how and foreign markets. Ten years later the situation remained the same. Growth figures represent a statistical success in terms of most developing countries. A fast rate of economic growth tends to lead to a higher level of domestic saving which in turn makes the growth process more self-supporting. Has this been true of the Jamaican situation? We find that the success has riot been for the majority of the people; the participation of the masses in the development process -- economic, social, political and psychological -- is a contradiction in terms. Regional and rural-urban imbalances in incomes and employment are considerable and the gap seems to be forever worsening. ii The industrial sector though statistically highly developed is largely controlled by foreign capital and personnel. Pub- lication of figures of transfer of salaries is severely limited but such transfer is estimated to be very very high and increasing annually. imports are continually growing and slow to adjust to desired levels. The massive inflow of foreign exchange provided the major share of the rising import bill. The thesis starts with a general review of the theoretical literature on aid. It then provides an economic and historical survey of the pattern of development-Jamaica has followed. After a detailed examination of the domestic resource mobilization and effect of aid on national savings, and contributions from various donors the thesis finally reexamines, with specific reference to Jamaica and the structural defects of that country’s economy, the general assumption that foreign aid is a sine qua non to developing countries. This thesis adds to the existing empirical literature concerned with foreign aid to the third world.’ Even with the severe constraint of limited available data some evidence is presented to support the hypothesis that the country mismanaged its resources that there is no critical shortage of savings to necessitate increased influx of aid. iii CONTENTS Page INTRODUCTION 1 i* Economic Aid - Background ii. Theoretical Framework II. ECONOMIC BACKGROUND 1 7 i. History ii. Structure of the Economy Ill. NATIONAL INCOME 31 i. Growth of Output and Income ii. Distribution of Income IV, DOMESTIC RESOURCE MOBILIZATION 51 i. Government As a Saver ii. Corporate Savings iii. Personal Savings iv. Others V. FINANCING FOR THE "INDEPENDENCE" PLAN 88 i. Basic Objectives ii. External Financing Required External Financing Available iii. Balancing the External Account VI. VOLUME AND SCOPE OF AID 114 i. Various Donors ii. Agencies Administering Funds in Jamaica iii. Project Examined iv. Technical Assistance iv. Page VII. CONCLUSIONS 1 60 BIBLIOGRAPHY Si STATISTICAL SOURCES 1 66 APPENDIX A Basic Features of the Jamaican 1 73 Economy Externally Financed Projects 1 74 and Activities Project Loans to Jamaica from 1 93 Principal Donors B - Glossary of Abbreviations 196 C - Map of the Caribbean Area 1 98 D - Map of Jamaica 199 V List of Tables Table Page 2.1 C. D. & W. Grants to Jamaica 1957-62 2.2 % Distribution of Employment by Industry Group 29 2.3 Employment in Selected Industries 1969-72 30 3.1 Percentage Distribution made by Industrial 34 Sectors to Gross Domestic Product 3.2 GDP, GNP, National Income and Per Capita 35 National Income 1962-70 3.3 Expenditure Components Expressed as 36 Percentage of GNP 1962-72 3.4 Labour Force by Age Group and Sex. 48 3.5 Employment and Unemployment by Age Group 49 and Sex 3.6 Percentage Distribution of Farms - By Size, 50 Group No. and Acreage 4.1 Composition of Tax in Jamaica 1961-71 53 4.2 Sources of Government Revenue 1962-72 55 4.3 Sources of Government Revenue - (Percentage 56 Distribution 1962-72) 4.4 Government Expenditure 1962-72 58 4.5 Government Capital Expenditure by Type 59 4.6 Domesitc Savings and GNP 64 4.7 Foreign and Domestic Components of 65 Net Investment and 1/Y ratios 4.8 Financing of Capital Expenditures: 66 Percentage Distribution 4.9 Personal Savings as Percentage of Personal 71 Disposable Income 1962-70 4.10 Distribution of Personal Savings by 72 Occupational Groups 4.11 Value of Assets of Major Financial 79 Institutions, Selected Years 5.1 Projections of G.D.P. at Factor Cost 91 (1960 Prices) by Industrial Origin VI . Table Page 5.2 Actual and Planned Expenditure for 93 1957-62 Plan and 1963-68 Plan 5.3 Sources of Finance for Capital Expenditure - 95 Financial Years 1963/64-66/67 5.4 Government Capital' Expenditure by 95 Function 1963/64 to 1967/68 5.5 Capital Formation and Foreign Exchange 9g Components of the "Independence" Plan 5.6 Balance of Payments - Summary 1963-72 1Q2 5.7 Distribution of Corporate Profits 1963-72 103 5.8 Employment in Selected Industries 105 5.9 Composition of Imports 1963-7 3 -I Q7 5.10 The Structure of Total External Debt I-j 0 5.11 Jamaica: Development External Loans 12 By Agency or Country 5.12 Jamaica: Development External Loans 1-| 3 By Sector 6.1 Development Assistance in Jamaica 1 972-73 ‘118 6.2 Jamaica: Loans at end of 1972 119 6.3 Jamaica's Quota & Exports of Sugar 1962-72 123 6.4 Title II PL480 total commodities shipped 127 by Programme Sponsor, 1972 6.5 Title II PL480 number of recipients, by 128 programme type and sponsor, 1972 6.6 Disbursements for Spanish Town-Kingston 139 Highway Project 6.7 Non Reimbursable External Technical 145 Assistance Granted to Jamaica 1969-72 6.8 Technical Assistance Experts and Teachers 15 assigned to Jamaica 68/67 6.9 U.S. Aid - Technical Co-operation Obligations 155 1964-66 V i i . ACKNOWLEDGEMENTS 4 This thesis was borne out of an idea given me by Dr. Chris Jecchinis^ Professor and Chairman of the Economics Department. Professor jecchinis supervised the thesis' until his work load made it difficult for him to continue to do so. He has nonetheless shown great interest all along and lent me i 1 books on certain occasions. I am deeply grateful to him for his help, interest and the very existence of the thesis. At the commencement of the thesis Dr. K. J. Charles, Professor of Economics, was away on leave of absence. Since his return Dr. Charles has been my chief advisor and supervisor. As an able and internationally**known economist in the field of development economics, I must say I consider myself lucky to have studied under his tutelage. My special thanks go to Dr. Charles for his critical encouragement and advice through- out the thesis and for arousing in me a passion for analytical rigour even though some of the data here do not readily lend themselves to such. I am grateful to a number of people in various departments and agencies in Kingston, all of whom I cannot mention but i Special thanks are due to Messrs. L. Wilson of the Ministry ^ of Trade, D. Thomas of the UNDP, J. H. Dunlap of the USAID, Dr. Owen Jefferson of the Department of Economics, U.W.I, Mona and Miss R. MacLean of the Ministry of Finance. Finally, I must render special thanks to Mrs. June Cleeves who painstakingly typed the manuscript over and over and Miss Sherry Johnston who prepared the final manuscript. ******4r*ik* Chapter I Introduction Massive transfers of capital, from developed to developing countries is frequently advocated as the solution for bridging the "Great Divide" between the living standards of the poor and rich nations of the world. This stems from the view that poor nations cannot finance their economic growth and development from their own savings and as such require significant capital flows from the rich countries.