Transcript Growth Agenda Presentation - Competitiveness Unit Suriname

Policy Reforms for Economic
Growth: The Jamaican
Experience
March 2015
Jamaica Fact Sheet
Strategic Geographic Location
Overview
Population
 2.7 mn (2010)
Territory
 10,991 km2
GDP per Capita
 US$5,464.44 (2013)
FX Rate (EOP)
 J$115.32/US$1 (January 2015)
Annual Inflation
 6.4% (CY 2014)
6 month T-Bill Rate
 7.14 (December 2014)
Net Int’l Reserves
 US$2,001.1 million (December 2014)
Sovereign rating
 Caa3 / B- / B- (Moody's/S&P/ Fitch)
Key Highlights
2

Economic programme on track: successfully passed all seven IMF
reviews of the programme to date

Major legislative achievements in tax, fiscal and other reform measures

For the period April–December 2014 central government operations
generated a fiscal deficit of $26 013.5 million and a primary surplus of
$66 825.8 million. The fiscal deficit was $7 856.3 million (23.2 per cent)
lower than budgeted.

Debt to GDP reduced from 145.3% at end FY2012/13 to 135.2% at end
FY2013/14

Reduction in balance of payments deficit from 11.5% of GDP in
FY2012/13 to 9.5% in FY2013/14

Gross foreign direct investment (FDI) in CY2013 was US$567 mn up
from US$380 mn in CY2012
Growth Transformation Strategy in Brief
Unlocking latent wealth tied up in idle assets
Resiliency of the built and natural environment
Modernize business climate
Fiscal Consolidation & Public Sector Transformation
Human Capital Development & Social Protection
Social inclusion through community renewal
Building partnerships between public & private sector
3
Growth Agenda- Key Factors
Component
Role
Core Economic Components
4
1. Fiscal Consolidation
Provides Macroeconomic Stability
2. Structural Reforms
Addresses Constraints in the
Business Environment; Improve
competitiveness/efficiency
3. Strategic Investments
Provide Catalytic Capital
Investments and Employment;
Improve Business Environment;
Disaster mitigation projects
4. Social Protection
Builds Labour Productivity; Provides
Social Protection; Human and
Community Security;
Growth Strategy – Core Components
1. Fiscal
Consolidation
i.
Deficit
Reduction
ii. Debt
Management
iii. Tax Reform
iv. Fiscal
Accountability
v. Public Sector
Rationalization
vi. Pension
Reform
vii. Inflation
2. Business
Environment
i.
ii.
iii.
iv.
v.
Improved Access
to Credit including
for MSMEs
Streamlining
Approvals and
Business
Registration
Legal Processes
Customs
Processes
Energy Sector
Reforms
3. Strategic
Investments
i.
ii.
iii.
iv.
Logistics Hub
Agro Parks
ICT Parks
Road
Infrastructure
Projects
v. Hotel
Development
Projects
vi. Energy
Diversification
vii. Urban Renewal
Growth Agenda – Supporting Components
4. Human Capital Development and Social
Protection
i.
ii.
iii.
iv.
v.
Enhanced Social Protection
Education & Skills Training
Primary Health Care
Youth Employment
Citizens Security & Community Renewal
initiatives
Economic Programme
Key elements of the Economic programme which is far advanced in its execution
Public Financial
Management
Tax Reform
Financial System
Stability
Key
Elements
Debt Reduction
Strategy
Growth and
Competitiveness
Ease of Doing
Business
7
Social Protection
Debt Reduction Strategy
 Public Debt targeted to decline to 96% of GDP by 2020; to decline to
sustainable level (60% of GDP) by 2026
 Management of Contingent Liabilities as a percentage of GDP as guided
by the PDMA; 12.6% of GDP in FY2012/13. Target: 3.0 % by FY 2026/27
 Continued implementation of structural reforms to support sustained
fiscal performance
 Fiscal Rule Legislation enacted in 2014 by way of amendments to
several laws geared towards minimizing fiscal overspending while
locking-in fiscal gains garnered thus far and expected
 Public Debt Management Act (PDMA) passed in 2012 : - increases
oversight of debt management and governance.
 Funding from multilaterals
 low cost funding from the IDB/World Bank/CDB.
 Active market friendly liability management
 US$150 mn budgeted for FY 2014/15 to buy back high yield securities
8
Monetary Policy and Financial System
 Maintain Single-digit Inflation
 Consumer price inflation to gradually converge towards trading partners
 BOJ short term rate key market signal to guide inflation towards target
 Maintain Flexible Exchange Rate System
 Important to maintaining price competitiveness of exports
 Enhance market information
 Increase Reserves
 Current account deficit set to halve by FY 2016/17
 Import coverage of gross reserves to rise from 3 months to 4 months
 Strengthen Financial System
 Increase BOJ regulatory and supervisory powers and responsibility for
financial system stability
 Support growth by providing liquidity to the Financial System
9
Significant Achievements under Programme
Public Financial
Management &
Debt Reduction
Strategy
Tax Reform
Financial System
Stability
10
• 7.5% primary budget surplus from 3.2% in FY2011/12
• Consistent fiscal surplus from deficit of 6.4% in FY2011/12
• Budget cycle altered to be congruent with the start of the Fiscal Year
• Implemented the CTMS (Central Treasury Management System)
• Fiscal rules established and fiscal policy paper tabled
• Implementation of a debt reduction strategy
• Charities Act
• Fiscal Incentives Legislation
• Amendments to the Customs Act to reduce Tariff Dispersion
• Property Tax Reform
• Amalgamation of Payroll Taxes and Tax Administration
• GCT and Corporate Income Tax Reform
• Enactment of the Banking Services Bill to enhance supervisory and regulatory
framework for Banks
• Amendments to the Financial Services Commission Act
• Amendments to the Securities Act, December 2013
• Framework (remove legal restrictions) for collective investment schemes (CIS)
• Legal and institutional reforms regarding unlawful financial operations
Significant Achievements under Programme
11
Enhancing Ease
of Doing Business
• Establishment of a One Stop Shop for import/export inspection service
• Probate reform
• Established a National Collateral Registry to improve access to credit
• Enacted Insolvency Act
• Mobile Banking
• Public sector transformation
• Procurement Management Reform
Focus on Specific
Sectors
• Logistics
• Agriculture
• Tourism
• ICT / BPO Operations
• MSME
Human Capital
Development &
Social Protection
• Labour Market Reform
• Poverty Alleviation Coordinating Body established
• PATH Programme
• Community Renewal
• National Training & Certification Programme – HEART
Other Selected Milestones and Developments
December
2013
Secured
Transactions
Framework
enacted
Dec 2013
March 2014
Fiscal Rules
Framework
adopted
December 2013
Fiscal Incentive
Legislation
enacted
March 2014
April 2014
September
2014
GCT
Amendment
Act passed
June 2104
Sept. 2014
December 2014
The Securities
(Amendment) Act
was enacted
Oct 2014
Dec 2014
March 2015
June 2014
December 2014
Lower House of
Reforms to
Parliament passes
Development
September
new Banking
Applications
Process
2014
Services Bill
approved
by
Cabinet
The Customs
(Amendment)
April 2014
Act enacted
Cabinet approves the
New
October 2014
establishment of a
Procurement
Insolvency Act
Growth Committee
Manual
approved by
Completed
Parliament
March 2014
Social Protection
Strategy
Approved by
Cabinet
January 2014
A combined quarterly
Statutory Payment
form (S03) launched
(Amalgam. of payroll
taxes)
12
April 2014
Amendment to
Proceeds of
Crime Act
effected (limits
of $1m in cash)
– saves millions
at ports
January
2014
Collateral
registry goes
live
Jan 2014
October 2014
FIRM Expo (financial
matchmaking ) held.
$1.94B in funding for
MSME’s determined
Risk Profile and Sustainability Strategies
Risk
Uncertainty in the
global economy
Impact of fiscal
consolidation
Likelihood
Likely
Likely
Impact
High

High




Delays in aid flows
Unlikely
Delays in
implementation of
reforms and
projects
Likely
Impact of natural
hazards
Likely
Reform fatigue
Likely
Loss of social
cohesion/ political
will
Business and
consumer
confidence
13
Moderate 
High




Moderate 
- Severe 
Moderate 

Likely

Moderate 
Likely
Moderate 
Mitigating Strategies
Implement programme of fiscal consolidation and debt reduction with growth-inducing measures
designed to reduce the vulnerability of the Jamaican economy to external shocks from the global
economy
In order to protect the vulnerable, the government has strengthened the social protection system
Undertake diversification of products and markets, including marketing to emerging economies
Prioritize growth-enhancing capital expenditure through the Public Sector Investment Programme
(PSIP)
Implement structural reforms to improve the competitiveness of the business environment to
increase the mobility of factors of production (land, labour and capital), stimulate investment and
improve total factor productivity
Improve coordination of aid flows from international development partners
Strengthen the operation of the Public Investment Management System (PIMS)
Seek to ensure that the absorptive capacity of the private sector is congruent with the pace of
reform
Undertake improvement in project management of capital projects, including through capacity
development and training of project managers and improved systems of project monitoring and
evaluation
Establishment of a rigorous M&E framework
Implement projects to strengthen resilience of the built and natural environment
Mainstream hazard risk reduction and climate change adaptation in national development planning
across sectors
Ensure proper planning and sequencing of structural reforms
Undertake capacity development of implementing agencies and provide technical assistance for
reforms as required
Implement public campaign on achievements and their implications
Engage key stakeholders in the implementation and monitoring of the growth agenda through a
range of mechanisms including the Economic Programme Oversight Committee (EPOC)
Implement communication strategy to inform the private sector and consumers of the progress and
benefits of improvements in the economy and business environment
Thank You
Appendices
Appendix 1: A Diversified Economy
GDP by Sector 2013
(Current Prices)
Electricity and
Water Supply Mining and
3%
Quarrying
Hotels &
2%
Restaurants
6%
Agriculture,
Forestry and
Fishing:
7%
Wholesale &
Retail Trade;
Repairs;
Installation of
Machinery and
Equipment
18%
Other Services
7%
Producers of
Government
Services
13%
Exports by Region FY 2013
Inedible
Materials
2%
Other
Countries
13%
USA
49%
Canada
14%
Agriculture
1%
Manufacturing
7%
Mining &
Quarring
42%
Food &
Beverage
12%
Finance &
Insurance
Services
7% Manufacture
8%
Real Estate,
Renting &
Business
Activities
11%
Source: Ministry of Finance and Planning
Transport,
Storage &
Communication
11%
European
Union
19%
Apparel
0.09%
Other Exports
2%
Re-Exports
5%
Ethanol
6%
Japan
1%
CARICOM
4%
Construction
7%
16
Exports by Sector FY 2013
Minerals, Fuels
and Related
Products
23%
Appendix 2: Debt Analysis
Ratios (%)
Public Debt/GDP1
Interest/Expenditure
Debt Service /Tax Revenue
Ext. Debt Service/XGST
1
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
118.6
131.6
133.9
131.9
135.6
131.9
35.6
44.8
33.0
29.9
31.8
27.4
111.3
134.7
82.4
85.9
67.3
63.0
14.8
12.6
12.2
18.5
15.4
16.3
Public Debt includes Bank of Jamaica, Central Government and External Guaranteed Debt
Debt as of March 2014
Type of Debt as of March 2014
Other
External
Debt
7%
Domestic Debt Holders
Other Government
Funds & Statutory Individuals
2%
6%
Building Societies
5%
Multilateral
20%
Domestic
Debt
53%
Other Institutions
11%
Fixed-rate
65%
Global
Bonds
20%
Source: Ministry of Finance and Planning
17
Variablerate
35%
Bank of Jamaica
12%
National Insurance
Fund
4%
Superann &
Pension Funds
9%
BOJ
Superannuation
Fund
1%
Commercial Banks
8%
Merchant Banks,
Trust Cos. &
Brokers
24%
Insurance
Companies
18%
Appendix 3: Monetary Policy and Financial System
Remittances
Current Account Deficit as a percentage of GDP
2,100
0.0%
2005
US$ Million
2,000
2006
2007
2008
2009
2010
2011
2012
2013
-5.0%
1,900
-10.0%
1,800
-15.0%
1,700
-20.0%
1,600
2006
2007
2008
2009
2010
2011
2012
2013
Gross Reserves Coverage of Imports and Services
-25.0%
Net International Reserves and F/X Rate
25.0
2,500
110.0
105.0
20.0
2,000
100.0
Weeks
95.0
15.0
1,500
90.0
85.0
10.0
1,000
80.0
75.0
5.0
500
70.0
65.0
0.0
Jan-11
Jul-11
Jan-12
Source: Bank of Jamaica
18
Jul-12
Jan-13
Jul-13
Jan-14
0
60.0
2006
2007
NIR (US$MN)
2008
2009
2010
2011
2012
2013
End-Point Exchange Rate J$/US$ (right-axis)
Appendix 4: Logistics Hub Initiative (LHI)
Overview
 Position Jamaica as a global logistics hub - capitalise on the expansion of the
Panama Canal
 Strategic location and perfectly positioned to receive Post-Panamax ships
 The Kingston Harbour is the seventh largest natural harbour in the world
 Planned investments in dredging of the harbour
Achievements
 Divestment of Kingston Container Terminal (one of the region’s leading
container transshipment ports) – well advanced in bid process, 3 bidding
companies: Singapore (PSA), Dubai World, and Consortium CMA/CGM,
completion anticipated presently
 Portland Bight – a non-binding framework agreement with China Harbour
and Engineering Company (CHEC) signed for the development of a
transshipment port and industrial and commercial zone; Project valued at
US$1.5bn
 Special Economic Zones (SEZ) – Green paper now developed to facilitate
public engagement. New SEZ legislation by yearend
 Divestment of Norman Manley International Airport and Aerodromes –
Cabinet has approved the transaction structure and an enterprise team is
overseeing the divestment
19
Appendix 5: Agriculture
Overview
 Agriculture sector is significant to the economy in terms of employment, foreign
exchange earnings, food security and rural development
 Fastest growing sector over the past two quarters
 Aim is to stimulate food exports and accelerate the pace of import substitution
through change in processes and scale of operations
Ongoing Agricultural Development Projects and Achievements
 Promote expansion of Agro-Parks (7 Agro-Parks currently in operation; 2 more
to be commissioned in 2015)
 COMPLANT has commenced investment of US$100 mn to expand sugar cane
planting and refurbish sugar factories in two locations
20
Appendix 6: Tourism
 Jamaica offers a mix of attractions and activities
across the island for both visitors and cruise
ship passengers
 Tourism is a key economic sector for Jamaica:
 Visitor expenditure totaled approximately
US$2.1 B in 2013
 Tourism is a primary source of employment
Recent developments
 Integrated Resorts Development (casino gaming
/ hotels) – minimum of 2,000 rooms
 Significant boost in the tourism product from the
completion of a phase of the North/South Coast
Highway
 10 hotels (approximately 2,300 hotel rooms)
amounting to US$700 mn will be refurbished or
constructed by end 2015
21
Appendix 7: Information Communication Technologies
Overview - Competitive Advantages in ICT / BPO
 Ideal time-zone and proximity to the US, the world’s biggest originator of outsourcing
 Large, educated English speaking workforce with low attrition rates
 Sophisticated telecommunications infrastructure
 Competitive business costs
 Jamaica:
 Has established track record in ICT / BPO
 Ranks 3rd in the Caribbean and Central America destination for outsourcing
 In 2012, was ranked 4th in terms of investment in ICT/BPO by a recent global
survey
Recent Developments
 Currently 30 ICT/BPO firms operating in Jamaica, employing ~14,000 workers fulltime
 JAMPRO facilitated five new entrants to the Jamaican market in 2013 – two
software development firms and three outsourcing companies
 Barnett Tech Park –when fully developed will provide approximately 30,000 jobs.
 Development of bi-lingual ICT / BPO facilities (one already operational)
 The Development Bank of Jamaica has already approved 6 projects and is
considering 2 additional applications with an estimated investment of US$33 mn to
create ~ 8,000 new jobs
 Pro-Free Zone investment initiatives by the GOJ include:
 Operations in Economic Free Zones pay 0% tax on profits
 Qualify for exemption from General Consumption Tax and Common External
Tariff
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