Any investment in the
economy is only worthwhile when significant economic spin-off occurs in the
economy occurs. Where huge debt were incurred in order to build our
infrastructures we must ensure that the benefits of the immediate economic impact
occurs now and not blindly rely on the long term net benefit that this
government is forecasting since it may result in a negative rate of return on
investment due the time value of money. Meaning it is better to have the
benefits occurring now than later. This only occurs when your own workers are
employed on the job, otherwise we are speculating about future benefits.
Another significant
inference is the nature and types direct foreign investments we are attracting.
We have witnessed over the last ten years, huge investments in our roads
infrastructure and tourism, however, relative to the size of these investments
the growth in GDP was at best marginal. For instance, some US$20 billion was
invested in the Tourism Industry in 2013, according to Government Sources, yet
the GDP was only US$14.79 Billion in 2013 and fell some 3% by 2014 to US$14.36
billion?
The economic leakages and
why Foreign Direct Investment (FDI) have not resulted in significant growth in
GDP are twofold; (1) The consumption of imported resources (Energy, Goods and
Labours) to facilitate or build the project here in Jamaica and (2) the
ineffective and or abuse of our taxation policies like the tax waiver. We have
very good consulting engineering and business people here in Jamaica, all the
government needs to do is to practice good management of the nation resources
and enforce good business ethics.
If you were to do a
correlation between GDP and FDI and you will see my point. Mark you, this
occurred under both administrations. We need to get rid of the systemic and
structural impediment to growth. One of which is the need for strong leadership
and more transparency in Government.
The United Nations
Environment Programme (UNEP) cites that in most all-inclusive mass tourism
package tours, about 80% of travelers’ expenditures go to the airlines, hotels,
and other international companies (who often have their headquarters in the
travelers’ home countries), and not to local businesses or workers. Of each USD
100 spent on a vacation tour by a tourist from a developed country, only around
USD 5 actually stays in a developing destination’s economy. UNEP cites several studies that approximately
tourism leakage to be up to 40% in India, 70% in Thailand, and 80% in Caribbean
countries due to factors such as foreign-owned operators, airlines, hotels, and
imported food and products.
According to the World Bank for every expenditure of $1.00 in the Jamaican Economy the resulting impact or growth in Gross Domestic Product (GDP) should be equivalent to $4.20. Despite the significant rise in personal consumption expenditure due to the inflows of remittance between 1990 and 2013 growth in the GDP and subsequently the Jamaican Economy remains marginal at best. This enormous disparity between expenditure and growth in GDP is troubling and reflects significant economic leakages stemming from corruption and bad economic decisions like maintaining a floating dollar, constant devaluation, failure to reduce the cost of energy and a regressive tax system. In real terms the value of our GDP should approximately US$58 billion (estimated) instead of the US$14 billion.
According to the World Bank for every expenditure of $1.00 in the Jamaican Economy the resulting impact or growth in Gross Domestic Product (GDP) should be equivalent to $4.20. Despite the significant rise in personal consumption expenditure due to the inflows of remittance between 1990 and 2013 growth in the GDP and subsequently the Jamaican Economy remains marginal at best. This enormous disparity between expenditure and growth in GDP is troubling and reflects significant economic leakages stemming from corruption and bad economic decisions like maintaining a floating dollar, constant devaluation, failure to reduce the cost of energy and a regressive tax system. In real terms the value of our GDP should approximately US$58 billion (estimated) instead of the US$14 billion.
