a day at sch

The challenges and opportunities of an I.M.F. deal on the Jamaican Productive Sector.
“Fragile,” is how the International Monetary Fund (I.M.F.) has described Jamaica’s current economic situation. It is evident that Jamaica’s economy is severely damaged and faces greater risk of further downturn with the already high unemployment rate, low tax revenue, high government spending and a ballooning debt of a high 140% (percentage) of Gross Domestic Product (GDP). As such Jamaica’s economy is in dire need for change; herein, the need for both structural and fiscal reforms in an effort to rescue the economy from bankruptcy. The Simpson-Miller-led Government, in its expert wisdom, believes the IMF is the rescuer of Jamaica’s economic situation and as such is seeking a “Fund supported economic programme” from the latter. Such a move exposes Jamaica to a number of challenges and opportunities. It is good that this will boost production and foreign exchange earnings, stabilize and make the economy more attractive for investors. On the other hand, it will raise challenges which include a reduction of the public sector workforce and a reduction in the availability of Government subsidy for tuition. Hence, with this economy deemed “fragile”, we ought not to settle with the impression that the impending IMF agreement will result in ‘nirvana’ – total peace in our state of affairs; this is more so of a mirage. In light of this, my strategies for business advancement would be to utilize more entrepreneurial skills and establish businesses, also increase exports and find alternative source of energy.
The time is now here for Jamaica to “produce” her way out of the crisis she is in. In an effort to stabilize the economy and set it on a path for sustainable growth there will need to be an increase in production. Yet, for this to manifest, capital funding and resourses ought to be available. Funds from the IMF will afford Jamaica the ability to generate the kind of production that will see us increase our export to match our imports, thus, reducing the balance of payment deficit. Subsequently, this will result in increase of our foreign exchange earnings that significantly, will offset our high import bill. Increasing Jamaica’s production would see major shifts in the Jamaican economy - primarily the moving away from one chief economic driver to multiple economic drivers such as energy, manufacturing, information and communication technology (ICT) and entertainment. This will create a significant increase in employment and, as such, resulting in more disposable income to circulate in the economy that will cohesively strengthen the economy. Increase production will also mean less dependence on debt to maintain the economy and it would also see the debt to GDP ratio reduced to more attractive levels. Increase production will overtime lead to increase employment, expansion sustainability and lessen Jamaica’s dependence on debt financing.
Essential to a country’s economic development is investor confidence and economic stability. Stabilizing the economy is essential in attracting investors, both locally and overseas. The government has a major role to play in the policies they pursue and the structural reforms they make. After the economy is stabilized then it will be considered conducive for investment. At this stage investors will be more willing to undertake the risk of investing, and such a move results in growth, development, expansion, increase earnings, increase revenue for Government through taxes and other fees. It is therefore in the Government’s best interest to ensure the economy is investor-friendly. This, the government can achieve by removing various red tapes to new entrance, offer tax exemptions and/or cuts and other incentives. It is important to note that to create an investor-friendly economy does not rest solely as the Government’s job. According to Mr. Bullock, senior economic lecturer - the broad private sector need to generate blueprints for private sector led growth, including risk taking, equity investment, international standards and external market penetration (Bullock, 2012). This would be in the best interest of the productive sector as it is the engine of the economy.
Jamaica’s productive sector is already reeling from the effects of high unemployment. An IMF deal is always accompanied with tough and stringent austerity measures. Once Jamaica enters into an agreement with The Fund she will have to follow the policies outlined by them and any deviation from these polices is likely to result in more stringent measures. IMF Chief Economist to Jamaica, Oliver Blanchard has made it clear that Government spending must be reduced (Caribbean Media Communication, 2012). With the Government being the biggest employer within the economy, this poses great challenges both economically and politically. Reducing government spending suggests cutting the public sector workers by up to 15 percent. This will only tighten the burden on the economy because the 12 percent unemployment rate would now increase by up to 15 percent. This heightens the pressure on the already weak economy. Furthermore such a move may stand a political ‘suicide’, as this can lead to a severe destabilizing of the economy and give rise to black market activities, crime and violence and may threaten to overturn the Government by force; thus, giving way to more turmoil. When these things happen it can quickly turn into a nightmare in a country which has a very ‘delicate’ political environment. The Government will have to tread carefully so as not ‘to take one step forward and six steps backward.’
Business persons especially the young fresh minds coming out of colleges and universities with bold and bright ideas, becoming an entrepreneur is the best approach. With high levels of unemployment and the pending increase we can no longer depend on the Government to provide us with jobs. In the era of rapid development in technology and increase international trading through globalization, there are windows of opportunities. Business persons now need to use their creative minds to generate great business ideas and formulate strategies to implement them. This will reduce unemployment, grow productivity and competitiveness and help to change the outlook of the economy. After all small and medium size businesses are the life blood of any economy.
Business persons need to focus on increasing and improving export levels. That is the only way to grow. No longer can businesses afford to compete locally. The rise in international trade has made it much easier to compete on a global frontier. Business persons need to get onboard and start to produce and export because that is the only way we will truly advance our businesses. International firms are selling their products here at a much cheaper cost most times thus taking over our market space. We now need to look at ways to increase our competitiveness and export more of our products. Accessing low interest loans is one way we can expand our businesses to be able to export on a competitive basis. Utilizing advance technologies that is at our finger tips is another way. Technologies can help business develop processes and products that will enhance their demand globally.
My final strategy would be for businesses to seek out alternative sources of energy. Mr. Azan, Head of the Jamaica Manufactories Association said recently in an interview on Direct, a current affairs programme on CVM said, one of businesses biggest challenge is the high cost of energy. Now as businesses we cannot continue to suffer and hope that the Government does something. We need to find alternative sources of energy. Whether it is solar, wind or coal Jamaica has the resources to use any of these three to generate energy. I would suggest and support alliances with different businesses to jointly research the possibility of creating an alternative energy source, look at how suitable it is, the cost, the feasibility and the long term benefits. If the studies show that it would save businesses money over time then we could pursue it as it would save on their cost for energy, save them well needed foreign currency and would leave businesses with additional monies that can be invested in the business to expand or boost production.
An IMF agreement presents opportunities for the economy and the productive sector through increase production and foreign exchange earnings. It also helps to stabilize the economy and makes it attractive to investors. But there lies the challenge of increase unemployment. My strategies are to focus on growing businesses through entrepreneurial abilities, seek out alternative sources of energy and increase their presence in export markets. The real challenge is that, whilst the opportunities are not immediate, these ills are almost, always immediate. Mr. Blanchard favourably expressed that “reducing the country’s debt to increase growth and stability is a marathon, not a sprint” (Warmington, 2013). Regardless of what the IMF proposes, the focus should be on growing the economy. A robust productive sector can solve any debt or deficit problem. Whilst the risk may be high the Government must realise that “win without risk, is to triumph without glory.”
Reference
Bullock, C. (2012, February 3). Borrowing from the IMF: Challenges and opportunities. The Gleanerr- Business .
Caribbean Media Communication. (2012, March 22). IMF warns strong challenges to fragile Jamaican economy. Jamaica Observer .
Warmington, D. (2013, February 3). What to expect from the IMF AGREEMENT. Sunday Observer .