Devaluation is no strategy for growth

The Editor, sir

I have been following the ongoing debate about devaluing the Jamaican dollar.  Kudos to the Caribbean Policy Research Institute (CaPRI) on hosting the forum “Jamaica $100 to US $1: A Cause for Panic or an Opportunity for Growth?”.  But, I cannot believe that devaluation is still being advocated as a strategy for growth.

                In the article titled “Devaluation Solution Persists Despite Contrary Evidence” in the Financial Gleaner of 1 March 2013, Wilberne Persaud rightly stated that: “… devaluation of the Jamaican dollar does not really deliver increased exports and decreased imports.  It did little over the years to correct incipient and chronic deficits in our balance of payments”.

For those still not convinced, Dr. Michael Witter had assessed our exchange rate policy since 1962, and presented his findings in a paper titled “Exchange Rate Policy in Jamaica: A Critical Assessment”.  His conclusion was that devaluation is insensitive to the effects of speculation by those lacking confidence in Jamaica’s productive sectors; and it does not recognize the inelastic demand for imports both for production and consumption.

                I am not advocating the fixing of the exchange rate.  Rather, I simply support the views of those quoted that devaluation is not a strategy for growth, or policy to correct balance of payment deficits.  It has been proven to be otherwise.  We need to address our lack of competitiveness by some other means.

I am, etc.

Paul Hay

Paul Hay is a Jamaican national, founder of PAUL HAY Capital Projects: a consultancy, based in Kingston Jamaica, with a vision of providing strategic planning and implementation services to organizations for non-residential facilities in the Caribbean.

Doing Business 2018 - Jamaica Preparations

By October 2016, the World Bank and International Financial Corporation will publish their 14th report on the Ease of Doing Business Index. The present Government will have little opportunity to influence the outcome of that report because the period that will be under review ends next month.

Nevertheless, it is important that the thrust to improve Jamaica's performance does not wane. Referring to Doing Business 2016: Measuring Regulatory Quality and Efficiency, in 'Jamaica Takes the Leap in Doing Business Indicators: 5 Lessons for the Wider Caribbean', Navita Anganu-Ramroop lamented that:

"Not all countries are bothered by rankings, and therefore not all countries make a concerted effort to change and attempt to improve same, failing to realise that the competitiveness of nations are equally important and necessary for the competitiveness of firms operating within the country."

Doing Business 2016 also states that Latin America and the Caribbean (LAC) is one of the regions "with the smallest share of economies implementing regulatory reforms. ..." In fact, Jamaica and The Bahamas were the only Caribbean nations that actually improved their global ranking in that report.

The Bahamas moved from 108th to 106th, while Jamaica moved from 71st to 64th out of 189 global economies. With the widening of the Panama Canal and construction of a second canal in Nicaragua, a significant increase in trade and investment can be expected in the Caribbean Basin. So, improving competitiveness of local firms is imperative and this through greater effort than before.

It is also important to realise that 11 out of the 12 highest-ranked nations within LAC are located in the Caribbean Basin. Jamaica cannot afford to slack up on its previous effort. It should be of no comfort that greater trade is expected in the greater Caribbean if we are ill-prepared to benefit from it.

Doing Business 2020 - Jamaica Preparations (2 of 2)

In May 2019, the World Bank and International Financial Corporation will commence collection of data that will be evaluated for publication in their 17th report on the Ease of Doing Business Index: Doing Business 2020. In the current one, Jamaica ranks 75^th, out of the 190 countries, which is below its rank four years ago.

One would expect the Government to be bothered by this and make a concerted effort to improve the outcome. Instead, Jamaica seems destined to its fourth consecutive fall in rank, because sufficient changes have not been made to laws and regulations that govern the operation of Small, and Medium-size Enterprises (SMEs).

Quoting from “Doing Business 2019”, “It is important to have effective rules in place that are easy to follow and understand. To realize economic gains, reduce corruption, and encourage SMEs to flourish, unnecessary red tape should be eliminated”.

In a letter titled “What’s being Done About ‘Doing Business’?” published in the Jamaica Observer on 4th December 2019, I recommended that our Government aim to be the first Latin American and Caribbean nation in the top 50 economies by consistently implementing no less than four reforms annually. Some may argue that time would not permit, but I disagree.

Doing Business overall-ranks are aggregated on assessment of 10 areas in the life of a business. In Jamaica’s case, the five worse-ranked areas are: (i) Trading Across Borders, (ii) Registering property, (iii) Enforcing Contracts, (iv) Paying Taxes, and (v) Getting Electricity. All have ranks worse than 110 and have been so for at least five years.

In fact, all are getting worse resulting in our lower ranks. These are the areas most in need of reform, especially by a country with aspirations of being amongst the top ten economies of the world. Based on the Budget Debate so far, changes are proposed for especially “Paying Taxes”, but these are too late for inclusion in the next evaluation cycle.

Hopefully Doing Business 2021 will show a greater effort made. I leave you with another quote from the current report: “Any rational government that cares about the economic well-being and advancement of its constituency pays special attention to laws and regulations affecting small and medium-size enterprises.”

Doing Business 2020 - Jamaica Preparations (1 of 2)

By October 2019, the World Bank and International Financial Corporation will publish their 17th report on the Ease of Doing Business Index. Our Government has until May 2019 to attempt to influence the outcome of that report because only data available at that time will be considered for the report.

Referring to the report Doing Business 2016: Measuring Regulatory Quality and Efficiency, Navita Anganu-Ramroop lamented, in 'Jamaica Takes the Leap in Doing Business Indicators: 5 Lessons for the Wider Caribbean', that:

"Not all countries are bothered by rankings, and therefore not all countries make a concerted effort to change and attempt to improve same, failing to realize that the competitiveness of nations are equally important and necessary for the competitiveness of firms operating within the country."

Doing Business 2016 also stated that Latin America and the Caribbean (LAC) is one of the regions "with the smallest share of economies implementing regulatory reforms. ...". In fact, Jamaica and The Bahamas were the only Caribbean nations that actually improved their global ranking in that report.

Fast forward to Doing Business 2019: Training for Reform, “South Asia and LAC are the (only) two regions absent from the top 50 ranking”. Again, LAC has the “lowest share of reformers with 56% of economies”. Consequently, LAC had the “lowest average increase” in score, +0.22 points”.

For Doing Business 2016, Jamaica had made 4 reforms and moved from 71st to 64th out of 189 global economies. Since then, Jamaica has consistently fallen in rank to its current 75, having implemented only one reform over the year ending May 2018: a reduction from the 2 reforms that were implemented in the previous year.

In Doing Business 2019, Brazil is the only LAC economy to improve its ranking. Like Jamaica, it implemented 4 reforms, by which it was able to improve its rank from 125 to 109. In the previous year, El Salvador, Dominican Republic and The Bahamas improved their rankings after implementing at least 3 reforms.

Again, El Salvador had implemented 4 reforms and was the top performer: improving its rank from 95 to 73. But, El Salvador, Dominican Republic and The Bahamas have subsequently fallen in rank after implemented less than 3 reforms, just like Jamaica.

Jamaica’s National Competitiveness Council is optimistic the island can be ranked in the top 10 economies in the Doing Business 2021. This seems overly optimistic considering no LAC economy is currently within the top 50, Jamaica has consistently fallen in rank over the past 3 years, and only two years remain to the deadline.

More realistically, it is proposed that Jamaica aim to become a top 50 ranked economy by 2020, and our Government strive to implement at least 4 reforms annually. It is also important to realize that 11 of the 15 highest-ranked LAC nations are within the Caribbean Basin. So, Jamaica cannot afford to be slack in its effort to become competitive.