The new normal Coexisting with COVID-19 requires growthTuesday, September 15, 2020
By now it should be evident to most that COVID-19 will be with us for the foreseeable future. That considered, those so minded would do well to adjust to the reality of coexisting with this virus. A vaccine, the timing of which is uncertain as of right now, suffered setbacks as recently as September 9, 2020 with the challenges related to AstraZeneca's late-stage trial. It is therefore reasonable to say that coexisting with COVID is the new normal.
What does coexisting
On September 9, 2020 it was reported that Jamaica's economy declined by an estimated 18 per cent for the April – June 2020 quarter. This is not inconsistent with declines in Singapore (-41.2 per cent), Mexico (-18.7 per cent), Canada (-38.7 per cent), the United States (-31.7 per cent) and the United Kingdom (-20.4 per cent) over the corresponding period. Whilst this was not unexpected, we would do well to avoid a repeat of this economic carnage. To that end, we must ensure that we grow as many industries as possible to survive this pandemic that is expected to last another two to three years.
A local business that recently found itself classified as high risk by its long-standing financial institution has been forced to prematurely close its doors. One is led to wonder about which entities will follow suit and have financing challenges.
I believe there are three potential means to drive economic activity within this new environment. Whilst not exhaustive, due consideration could be given as is necessary.
Firstly, we would do well to accelerate the digitisation thrust to ensure that one can conduct business as easily remotely as in a fixed office location. The bedrock of this thrust will be a fortified telecommunications infrastructure.
Obvious biases aside, I was encouraged to hear the prime minister's intention to pursue this outcome in short order. I particularly look forward to improved telephone call connectivity.
Secondly, fiscal policy (taxation, government spending) has a meaningful role to play in economic stimulation. The Government's stated intention to pursue infrastructure projects (and encouragement of the private sector to continue existing capital projects) with alacrity is laudable, as upgrading infrastructure will: (a) allow easier transit of goods and services and (b) facilitate greenfield investments.
With the progression of the south coast highway in sharp focus, the Government could consider making the parish of St Thomas a special economic zone with the attendant incentives. The incentives could be staggered in favour of those employing above 100, 500, 1,000 people and so on. It is possible that this would:
(i) encourage asset acquisition in the parish,
(ii) facilitate relocation, and
(iii) stimulate new businesses.
The economic displacement resulting from the closure of the sugar factories in the parish comes to mind readily as warranting timely reversal.
With regard to other projects, we are aware of the US$60-million Rio Cobre water supply public-private-partnership (PPP) with a leading financial institution. This PPP model could be replicated in future projects to facilitate deployment of capital by private sector entities/retail investors in the pursuit of a ROI (return of investment). Formerly latent public sector assets would also become revenue generators, all being equal.
Finally, an analysis of gross domestic product (GDP) by county (Cornwall, Middlesex & Surrey) would pellucidly reveal exploitable opportunities in our economy. Anecdotes strongly suggest that the bulk of Jamaica's economic activity is skewed towards the Corporate Area and the tourism/farming belts. Some of the challenged parishes in central Jamaica have unquestionably suffered from the closure of several aluminium plants and US$3-billion JISCO investment foregone as a result of the 2019 ALPART closure.
Be that as it may, it is somewhat ironic that some of the parishes with the most acres of available land are the lowest contributors to our nation's GDP. A suggestion to reverse this is a renewed focus on rural development, which has the potential to bear fruit, no pun intended. Where infrastructure upgrades go, commerce tends to follow. Low-hanging fruit (which have commenced) include continued farm road and water supply improvements that the previous (2016) Holness-led Administration pursued.
That aside, there are lessons within the turnaround of Adelanto, California, due in large part to fiscal policy adjustments. Adelanto, in the San Bernadino County, shed significant debt and facilitated robust asset appreciation through a new marijuana tax regime, that included reduced taxes and allowed for a 25 per cent reduction in their debt outstanding in 12 months.
Additionally, commercial real estate appreciated ten-fold (1,000 per cent) on the back of robust demand for land to construct warehouses. Residential real estate appreciation followed shortly thereafter. Whilst marijuana is not necessarily the panacea for Jamaica, it would behove us to give further thought to incentivising industries with similar potential. I say industries because COVID-19's disproportionate decimation of particular industries should reinforce the need for diversification of income sources.
These initiatives all bear medium-term sustainability whether COVID-19 remains or takes it leave.
Ryan Strachan is a stockbroker and president of Generation 2000 (G2K), the young professional affiliate of the Jamaica Labour Party. Send comments to the Jamaica Observer or firstname.lastname@example.org.
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