Speaking Notes by
The Most Honourable Andrew Holness, Prime Minister of Jamaica
International Conference on Sustainable Development,
Conference Theme: Moving Forward: The SDGs in Practice
21st September 2016
Dr. Jeffrey Sachs,
Ladies and gentlemen
In my first campaign I used the title of his book, the “End of Poverty” and in fact, a signature photograph featured a copy of me holding his book.
It is therefore a privilege to address this symposium being organised by Prof Sachs.
Reaffirmation of commitment to the SDG’s
Jamaica is naturally and irrevocably aligned to the sustainable development goals and at every opportunity we reaffirm our commitment to achieving them. Furthermore Jamaica will play its part in regional and international fora to promote attainment.
The goals are self-reinforcing. Strategies to achieve one have the achievement of others as byproducts. Our focus is on economic growth and job creation the gains of which will be used to advance health, education and ending poverty.
After approximately 54 years of independence Jamaica has recorded impressive improvements in the human development index, particularly in reference to health and education.
However, while we can take pride in this progress, Jamaica finds itself in challenging and uncertain times as our development has not always been financed through productivity and economic growth.
Much of our development has been achieved through the accumulation of debt and in recent times unsustainably high levels of Debt. These high levels of debt pose an existential risk to our economy and have the potential to retard, and even reverse, social and economic development.
It is important to note that our accumulation of debt cannot all be attributed to profligacy, mismanagement and poor governance. On the contrary, some of the debt that we carry has been as a result of our vulnerabilities to natural disasters and due to the exposure of our undiversified economies to the vagaries of commodity price volatility.
In Jamaica all of the sustainable development goals matter. As President Obama observed recently, in an age of social and digital media, in a country of huge mobile penetration, people around the world easily see how “the other half lives”. Development is therefore a bottom-up desire.
Special development challenge of a highly indebted Jamaica
Today I would like to present to you however the special and challenging case of pursuing sustainable development goals in the context of high debt.
As you are probably aware Jamaica, like much of the Caribbean, has a high Debt to GDP ratio which today at 120% is lower by 27% compared to where it was a few years ago.
High debt matters especially when you plan to service it as doing so consumes the majority of our budget. The challenge that Jamaica faces is how to develop sustainably when close to 60% of revenues are used to service debt.
The resources available to fund infrastructure, health, education, security spending to alleviate poverty are squeezed by the burdens and requirement of debt service.
However debt reduction must be a priority, as it remains, in our case, the single biggest obstacle to development. High debt increases the perceived risk of the economy, increases the cost of capital, leads to government crowding out of the private sector and ultimately retards economic growth, on which development depends.
This is especially acute in a country characterized as lower middle income. This characterization makes it difficult for Jamaica to qualify for certain levels of assistance from multilateral institutions like the World Bank as we confront these challenges.
Jamaica’s designation as a lower middle income country makes it ineligible to receive certain types of aid and concessionary financing which can act as an impediment to the attainment of our national development goals. The problem of a high debt burden can undoubtedly undermine our ability to meet commitments to implement the Sustainable Development Goals (SDGs) and a change in logic is being posited so that social and environmental criteria —not only economic criteria— are recognized.
Jamaica is not only calling on the International Financial Institutions (IFIs) to review their policy on graduating middle income countries from development financing, using GDP as the sole criterion, we are also proposing a carve out, within the Middle Income category, for Small, Highly Indebted Middle Income Countries, (“HIMIC”) where the inclusion of other indicators are used in determining economic well-being. While advocating for this change, we however want to reiterate that we are actively promoting a culture of self-sufficiency whereby we must be creative, innovative and strategic in repaying debt while also relying on our own strategies to achieve sustainable development and prosperity.
Bifurcated solution required
Our twin commitments to sustainable development and debt repayment seem incompatible and therefore present us with a challenge. How do we achieve both?
Jamaica has indeed shown that a societal resolve to economic reform structured around debt reduction is an attainable goal. While we remain vulnerable, important strides have been made.
Jamaica is an outlier in the global economy in the consistent attainment of a primary surplus balance, the excess of revenues over non-interest expenditure of 7% of GDP. There is no other country in our hemisphere that comes even close to achieving that.
On one hand this is something to be proud of as it demonstrates resolve, commitment and fidelity to principles even in the face of hardship. On the other hand, however, in the context of sustainable development this requirement poses a challenge.
So in the Jamaican context, development goals have to be viewed within the context of high resource commitment to debt repayment and the strategy to achieve that is through fiscal consolidation.
With the help of the International Monetary Fund, Jamaica has pursued deep institutional reform to restore fiscal probity and to build confidence.
Reforms aimed at boosting investment
There have been reforms aimed at boosting investment inclusive of the Lowering of corporate income tax and the introduction of fiscal incentives legislation. These reforms provide an overarching non-sector specific, rules-based, investment incentive regime eliminating sector specific incentives and discretionary waivers along with the Introduction of an employment tax credit to incentivise employment.
There has been companion legislation that allows persons, who are registering new companies and businesses, to do so through the Companies Office by the completion of a single business registration form along with their incorporation documents.
A new Insolvency Act that accommodates corporate and individual insolvency, facilitates the rehabilitation of an insolvent debtor, expedites the insolvency process, addresses the stigma of personal and corporate insolvency, and regulates insolvency practioners.
We are engaged in a process of tax reform shifting the emphasis from direct to indirect taxes while moving poverty alleviation measures from the revenue to the expenditure side of the budget. This is aimed at promoting economic efficiency, revenue certainty and greater incentives for work and production.
Jamaica has broadened the tax base for consumption taxes while strengthening the ability of the authorities to collect tax and harmonising and reforming penalties.
We have amended the Custom Act to simplify tariff structures and reduce opportunities for misclassification.
Reforms aimed at securing fiscal sustainability
Jamaica has enacted laws to ensure that future governments act responsibly and are constrained from profligate spending. Fiscal rule legislation has been passed to enhance fiscal transparency and accountability and to ensure that gains of fiscal consolidation are secured and maintained.
Importantly this legislation limits annual budgeted fiscal balance with the expressed aim of achieving a target debt/GDP ratio of 60% by 2026.
However, Jamaica’s economy has also shown that such strategies in isolation are insufficient.
Jamaica has had a particularly challenging time with the attainment of economic growth. No growth austerity is unsustainable and not an option. Economic growth is paramount.
History of Economic Growth
Over the last 54 years Jamaica experienced an average annual economic growth of 1.6% per annum well under the global economy’s average annual economic growth 3.1% over the same period. This relative performance gap is however masked by the relatively high GDP growth in Jamaica between the period 1962 – 1972.
In more recent times Jamaica has been on a trajectory of decreasing real GDP growth decade after decade. Over the last 20 years real GDP averaged 0.5% per annum and over the last 10 years GDP growth was 0.2% per annum. Jamaica consistently ranks among the slowest growing developing countries in the world.
The imperative of sustainable development means that we must arrest and reverse this anaemic growth performance.
We do not, have the luxury of choosing between fiscal consolidation and economic growth and development. All are imperatives.
Social consensus is pre-requisite
However we acknowledge that pursuit of that trinity is difficult. Its achievement would be threatened by the inability to retain the social consensus necessary to make the reforms and changes required.
Unbridled and narrowly self-interested competitive politics thrives in such an environment but does not necessarily work to advance the interests of the people. The Jamaican political leadership has shown some maturity in recognition of this.
The strategies to build and maintain consensus have been to pursue unprecedented levels of civic engagement and involvement in the decision-making process while increasing levels of transparency and accountability.
Oversight bodies that help in the formulation of government policy and in the transparent monitoring of the implementation thereof have been created to oversee energy diversification, as well as economic and growth policy implementation. These bodies involve leaders from the business community, the trade union movement, academia and civil society.
Economic Growth Policies
In the context of these high levels of civic involvement, Jamaica is pursuing reforms to improve the efficiency of the public sector, improve its customer service delivery, pursue economies of scale, reduce duplication and align the public sector towards enabling and facilitating economic growth and development
In order to bolster Jamaica’s Growth Agenda, the Ministry of Economic Growth and Job Creation, which is charged with drafting the blueprint to drive economic growth and sustainable development in Jamaica was established. This Ministry has the responsibility for seven critical portfolio areas which are now under one Ministry for greater synergy, effectiveness and efficiency: Land, Environment, Climate Change, Investment, Water, Housing and Works
Debt for Climate Change
While we pursue reforms aimed at boosting fiscal sustainability and growth we are also looking at innovative ways of matching our financing needs with sustainable development objectives
Jamaica intends to pursue debt for climate change swaps that holds the potential of providing bilateral relief-for- climate change adaptation and mitigation initiatives. This mechanism has the potential to provide relief while helping to unlock pledged climate finance to fund climate change adaptation and mitigation projects.
The rationale underpinning the initiative is that on the one hand there is a considerable pledge of climate finance resources available against a similarly huge implementation gap, while at the same time there is a persistent and unsustainable debt overhang in Jamaica which is a climate vulnerable country. This provides a ground-breaking opportunity to use climate funds to assist in alleviating both of these important challenges.
Peace and Security
Peace and security is a sustainable development goal. This is usually spoken about in the context of peace between states. However peace within states is just as important.
Jamaica has a high rate of crime which is concentrated in certain communities across the island. This has deterred investment, destroyed capital formation and discouraged business development. The cost of crime to Jamaica includes lost life expectancy, injuries and health care and the higher cost of doing business in a low-trust society, the emigration of skilled workers and the loss of foreign investment. The absence of security in sections of Jamaica therefore threatens the attainment of sustainable development goals and is a priority of the government
Jamaica’s mix of challenges and opportunities require a unique path. We continue to innovate towards solutions leveraging our cohesion, our bilateral and multilateral relationships while drawing on insights from the experiences of others.
Jamaica has absorbed the development goals and expressed them in the 2030 vision of Jamaica as the place of choice to love, work and raise families.
We see ourselves as the centre of the Caribbean culturally, financially and politically with a special calling among the community of nations.
Development in a sustainable way is not only our goal, it is our destiny.