AGrowth-InducementStrategy forJamaicaintheShortand MediumTerm Editors Gladstone Hutchinson Donald J. Harris Planning Institute of Jamaica Copyright©2012by PlanningInstituteofJamaica Allrightsreserved Apublicationof: ThePlanningInstituteofJamaica(PIOJ) 16OxfordRoad Kingston5 Jamaica,WestIndies Telephone:(876)960-9339/(876)906-4463-4 Fax:(876)906-5011 E-mail:[email protected] Website:www.pioj.gov.jm NATIONALLIBRARYOFJAMAICACATALOGUINGIN PUBLICATIONDATA A Growth-Inducement Strategy for Jamaica in the Short and Medium Term ISBN978-976-8103-39-0 Tothemany ordinary Jamaicanswho communicatedtous theirviewofthe significant waysthisprojectcouldfurtherthe Vision2030 goalof“Jamaica [becoming]theplaceofchoicetolive,work, raisefamiliesanddobusiness.” Table of Contents ListofTables·······················································································iii ListofFigures ·····················································································vi ListofAbbreviationsandAcronyms················································viii Preface ··································································································1 Acknowledgements ··············································································5 1. Introduction···················································································11 2. Summary ························································································15 GuidingPrinciples ·····································································15 1.0TheEconomicSituationToday··············································17 2.0ConstraintsandOpportunities ···············································18 3.0UnderstandingtheFundamentalConstraints··························19 4.0ComponentsoftheGrowth-InducementStrategy ··················23 5.0Fromstrategytoimplementation ···········································25 6.0Short-TermGrowthStimulus ················································28 7.0ImpactAnalysisofShort-TermGrowthStimulus···················30 Appendix2A–DetailsofTargetedProjects ·································33 Appendix2B–ImpactAssessmentofShort-TermMeasures ········37 Appendix2C–MethodologyoftheGrowth-ImpactAnalysis ·····41 PartI:Overview 3.FromtheIMF Programme toPrivateSector-Led Growthwithin Vision2030Jamaica ··············································45 4.AlignmentoftheGrowth-InducementStrategywith Vision2030Jamaica –NationalDevelopmentPlan···························63 AGrowth-InducementStrategyforJamaicaintheShortandMediumTerm i PartII:SituationalAnalysis 5.TheJamaicanEconomy–EconomicPerformance andProspects ···············································································73 6.AssessmentofandRecommendationsfortheCurrent Fiscal/Financial Programme ·······················································115 PartIII:AnalyticalFramework 7.ResolvingtheSupposed“Puzzle”ofLowGrowthRateandHigh InvestmentRateintheJamaicanEconomy ····························133 8.AssessmentoftheConstraintstoEconomicGrowth inJamaica ··············································································151 9.InternalLogisticsandJamaica’sCompetitiveness ···························177 PartIV:Policiesand Programmes A.AssetMobilization·································································193 B.EliminatingTransferTaxandStampDutyon SelectedFinancialInstruments ···············································199 C.JamaicaVentureCapital Programme ·····································207 D.BusinessProcessOutsourcing(BPO)Industry······················221 E.HumanResources:TrainingandCertification·······················225 F.StrengtheningResilienceoftheBuiltand NaturalEnvironment ·····························································233 G.CommunityRenewal Programme ·········································239 H.ProposedWestKingstonCommercialLifestyles Centre ········251 I.AViableFrameworkforCoordinationof PovertyReduction ·································································255 J.PublicSectorTransformation ·················································263 PartV: Panellists’ ContributiontoSymposiumonthe Growth-InducementStrategy A.StateoftheEconomy ····························································275 B.CommunityRenewal Programme··········································281 C.EnhancingNationalResilience:FocusontheBuilt andNaturalEnvironments ····················································289 ii AGrowth-InducementStrategyforJamaicaintheShortandMediumTerm ListofTables 2.1 ThePolicyFramework:AMappingofGapIndicators, ContributingFactorsandCorrectiveStrategies ····························22 2.2 GrowthStrategyMatrix ·······························································26 2.3 HighlightedGrowthProjects ·······················································28 2.4 One-yearGrowthImpactofShort-TermGrowth-Strategy Components ················································································30 2.5 IncreasedValueAdded&TaxRevenueGeneratedby Short-TermGrowthProjects(J$Million) ·····································32 2A.1 NWA ProjectsTentativelyBudgetedfor2011/12 (NWA PriorityLevel1) ·······························································33 2A.2 NWA ProjectstobeFast-TrackedtoFY2011/12 (NWA PriorityLevel2) ·······························································34 2A.3RADAFarm-RoadRehabilitationProjects:CostandDistance ofFarmRoadsinNeedofRepair,byParish ································34 2A.4Micro-FinanceInstitutions(MFI):EstimatedDemandforFunds, FY2011/2012(J$Million)···························································35 2A.5CommunityRenewalProjects(CRP),2011/2012·······················35 2B.1ValueAdded&EmploymentImpactof NWA–PL1Projects·······37 2B.2.ValueAdded&EmploymentImpactof NWA–PL2Projects······37 2B.3ImpactofRepairingFarmRoads(J$Million)······························38 2B.4ImpactofRepairingFarmRoads,byParish ································38 2B.5Impactofthe CRP byProjects ····················································38 2B.6Impactof DBJ Loansin MSMEs,byIndustry ·····························39 PARTI:Overview 3.1 Vision2030Jamaica–NationalDevelopmentPlan: DashboardofNationalIndicators ················································48 3.2 Employed Labour ForcebyIndustryGroup, April2004–October2008····························································54 3.3 Employed Labour ForcebyIndustryGroup, October2008–April2010····························································55 AGrowth-InducementStrategyforJamaicaintheShortandMediumTerm iii 4.1 NationalOutcomesLinkedtoNationalGoals ······························64 4.2 AlignmentofGrowth-InducementStrategyComponents with Vision2030Jamaica ······························································66 PARTII:SituationalAnalysis 5.1 WorldEconomicGrowthPerformanceandOutlook:2008–2010 (percentperannum) ···································································77 5.2 PercentageChangeinWorldBank’sCommodityPriceIndices, 2008–2010 ··················································································78 5.3 SelectedCommodityPrices,DailyMovements, HalfYearandCalendarYearChanges ··········································78 5.4 Jamaica:MediumTermMacro-EconomicTargets························82 5.5 Inflation,2009-2010····································································84 5.6 MerchandiseExports:January–August2009, 2010(US$Million) ······································································86 5.7 MerchandiseImportsandExports:January–August2009, 2010(US$Million) ······································································87 5.8 ChangeofValueAddedbyIndustryatConstant (2003)Prices ···············································································89 5.9 SelectedConstructionIndustryIndicators, January–September2008–2010 ···················································92 5.10VisitorArrivals,2009–2010·························································97 5.11ProjectedChangeinValueAddedbyIndustry atConstant(2003)Prices···························································104 5.12FY2011/12IndustryAssumptions ············································110 5.13SelectedNaturalDisasters&TheirEstimated EconomicImpact·······································································112 6.1 Employed Labour ForcebyIndustryGroup, April2004–October2008··························································122 6.2 Employed Labour ForcebyIndustryGroup, October2008–April2010··························································123 6.3 PovertyRates(PerCent) ···························································126 iv AGrowth-InducementStrategyforJamaicaintheShortandMediumTerm PARTIII:AnalyticalFramework 8.1 CorrelationofIndicatorswith PerCapitaIncome,2009: SelectedEconomies····································································156 8.2 CorrelationofIndicatorswithGrowthRateofPerCapitaIncome: SelectedEconomies····································································156 8.3 Jamaica:AverageRankingofMainConstraints inBusinessActivity ····································································158 8.4 Strength/WeaknessinPillarsofCompetitiveness, 2010–2011 ················································································160 8.5 Strength/WeaknessinInternalPracticesofBusiness, 2010–2011 ················································································161 8.6 CompositionofAggregateDemand,2009(CurrentPrices)·······162