Strategies for Stimulating Growth and
Sustainability
John W. Robinson
Deputy Governor
Bank of Jamaica
4th BIENNIAL INTERNATIONAL CONFERENCE ON BUSINESS, BANKING AND
FINANCE
‘Restoring Business Confidence & Investments in the Caribbean’
22 – 24 June 2011
Trinidad & Tobago
Outline
• Sustained Economic Growth
• Role of Government
• Strategies for Stimulating Growth in Jamaica
• Economic Transformation Programme
• Progress to date
• Concluding Remarks
Sustained Economic Growth
• A steady increase in the productive capacity of the economy.
• In the medium to long run, production possibilities are
enhanced by improvements in technology, the quantum and
quality of the labour force as well as the capital stock.
• Fundamental considerations
•
•
•
•
Issues of the quality of education and the cost of capital
Adequacy of supporting infrastructure
Environmental sustainability
Social and economic stability
Role of the Government
• Provide an enabling environment for private sector led growth
-macroeconomic, social and political stability,
- sound physical infrastructure
- secure property rights
- stable financial system
- well-trained labour force
- competitive markets
- efficient public sector
- environmental sustainability
Strategies for Stimulating Growth in Jamaica
• Jamaican economy grew by 0.8 per cent over the last decade.
 Despite relatively high rates of investment.
• Weak growth performance attributed to low productivity.
 Reflecting the influence of macro / microeconomic and social factors.
• Relatively unstable macro environment
 Embedded in elevated public debt levels
 Adverse debt dynamics
 Relatively high rates of inflation
• Resulted in distortion of private investments
 Difficult to project production costs, cash flows and rates of returns.
 High interest rates environment
As such, long-term investment decisions were either postponed
or shelved, while some new ventures folded.
Main Elements of Current Economic Strategy
• The main areas of focus of the transformation programme are:
I.
Restoring fiscal discipline and debt sustainability
II.
Enhancing financial system stability
III.
Improving the business environment
Fiscal Discipline & Debt sustainability
• Primary objective


Elimination of the fiscal deficit over the next four years
Institutionalization of prudent fiscal practices
• Strategies

Voluntary par-for-par exchange of domestic bonds for longer
dated, lower coupon instruments (JDX)
 Establishment of a fiscal responsibility framework
 Implementation of a centralized treasury management system
 Public sector reform
 Divestment of non-core assets
Financial System Stability
• Primary objective - reduce systemic risk
• Strategies

Amendment of BOJ Act to give the Bank responsibility for
overall financial system stability
 Development of an Omnibus Banking Law
 Strengthening prudential framework of securities dealers,
 Combating unregulated financial schemes
 Improving the regulatory framework for collective investment
schemes
Enhancing the Business Environment
• Primary objective – Enabling business environment

Comprehensive transformation of the tax system
i.
To reduce distortions & inefficiencies & stimulate growth
• Strategies
 Simplify the tax system, widen the base and improve equity mainly
through the streamlining of waivers and exemptions.
 Elimination of stamp duties on financial transactions & transfer
tax and stamp duties on registered corporate securities.
Supporting Infrastructure
• Achieving sustainable economic growth also require adequate
supporting infrastructure, physical and social.
 Physical
i.
Investments through the Jamaica Development Infrastructure
Programme (JDIP)
 Social
i.
ii.
iii.
iv.
Special emphasis placed on early childhood development
Training for the out of school population
Improving teacher quality
Restoration of law and order
Progress to Date
• Fiscal Discipline & Debt Sustainability
 Successful implementation of JDX in February 2010.
 All quantitative targets under the IMF-SBA programme have been
met.
 Divestment of Air Jamaica and Sugar Company of Jamaica Holdings.
 Fiscal responsibility framework passed in Parliament.
 Pilot CTMS .
 Public sector transformation plan tabled in Parliament.
• Financial System Stability
 Amendments to the Bank of Jamaica Act have been drafted.
 Phased introduction of risk weights for foreign currency denominated
GOJ securities (started June 2010).
 Draft Omnibus Banking Law is being prepared.
Progress to Date (Cont)
• Enhancing the Business Environment
 Stable Macroeconomic Environment
i. Trend decline in inflation & interest rates
ii. Improving business confidence
 Single tax authority established
 Streamlining of customs procedures
 First phase of the reforms implemented in the FY2011/12 budget
i. Elimination of stamp duties on financial transactions.
ii. Abolition of transfer tax and stamp duties on registered corporate
securities.
Conclusion
• The major challenge for policy makers is the restoration of
sustained economic growth.
• The recent global crisis exposed a number of underlying
weaknesses in the Jamaican economy, to which the
Government responded with a raft of far-reaching economic
reforms.
• The macroeconomic programme is being complemented by
initiatives to enhance social capital.
Conclusion
• Jamaica has made notable progress in its economic
programme
very stable macroeconomic environment
improving business confidence.
indicators suggest that Jamaica should emerge from the
recession in the first quarter of 2011
• However, transitioning from recovery to sustained high growth
rates will require a long-term commitment by the society to
the process of economic reforms and social transformation
that have begun.