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Holness's legacy wish

Mr Construction? Mr Congestion? Mr Anti-Corruption?

Canute Thompson

Sunday, September 16, 2018

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The Government of Jamaica is engaged in major road infrastructure projects involving billions of dollars of expenditure. The roads involved cover Mandela Highway, Washington Boulevard, Constant Spring, Barbican, and Three Miles. While these projects are welcome, there are undeniable problems related to poor implementation in terms of scheduling, sequencing, and volume.

Doing all of these at once will cost the country dearly in terms of productivity and, given the length of time the most busy urban intersection, Three Miles, will be closed, one has to question whether adequate attention was given to the effects of having these multiple projects running at once.

There are so many concurrent projects that head of the National Works Agency (NWA), E G Hunter has admitted that some contractors are overwhelmed by oversight responsibilities. But the question of why the Jamaica Labour Party Andrew Holness Administration, including its Ministry of Economic Growth and Job Creation, would permit the pursuit of all these projects at once is worth pondering.

On the face of it, one may concede that the purpose of these projects is to improve the infrastructure, but some cynics suggest that some of the spending is not about infrastructure improvement per se, but economic stimuli and trickle-down economics.

'Flurry' of activity

Some people also suggest that one element of the flurry of activity is the apparent desire of Prime Minister Holness to create a buzz of economic activity and give the appearance of economic growth. There is also the suggestion that it is part of Holness's desire to be seen as “Mr Construction”. Well, the country has been placed in such a traffic mess by a slew of bad decisions that the most apt name at this point is “Mr Congestion”. But with the apparent attempt to blame this mess on poor traffic planning by the police, poor signage by the NWA, unruly motorists, bad-minded People's National Party (PNP) members, and everyone else but the person whose (presumably) conscious decision caused this mess we are also having a “Mr Confusion”. The buck for this misery stops with Holness.

The Government's narrative on the buzzing economy appears to have got into trouble. A few weeks ago Minister Audley Shaw cited cement sales as evidence that the construction sector is growing faster than is being reported and insisted that growth must be at least twice what was being reported. Subsequent to Shaw's assertions, Minister Daryl Vaz added his voice, saying that given the activity in the construction sector, the economy must be growing faster than the Planning Institute of Jamaica (PIOJ) has been reporting. He intimated that since the numbers put out by the PIOJ did not show significant growth, then the methodology used to measure growth was wrong.

But the Government was forced to back down from that narrative, and Minister Fayval Williams was called to the wicket to defend the aged-old methodology for calculating gross domestic product (GDP) and to acknowledge the accuracy of the numbers put out by PIOJ.

Construction: Its economic impact

The latest development represents a teaching moment concerning the impact of the construction sector on the economy and helps us to place in context the reported desire of the prime minister to be known as Mr Construction.

The latest data from the PIOJ show that, despite robust activity in the construction sector, with billions in expenditure, its impact on the economy has been weak. According to the PIOJ, the expenditure in the sector include a 65.4 per cent increase in spending by the NWA to $4.9 billion (due largely to the road construction and rehabilitation mentioned earlier); Jamaica Public Service, up nearly 600 per cent to $10.4 billion; and National Water Commission, which increased spending by over 70 per cent to just under $882.4 million.

Additionally there was an 8.2 per cent growth in sales of construction inputs such as plumbing and heating equipment, glass, and other hardware supplies. There are also increases in residential construction which saw new housing starts of over 1,100 during the preceding quarter (January to March 2018). There is also strong activity in the non-residential sector with ongoing hotel construction and renovation.

Despite the virtual road clogging and traffic jamming volume of work and other developments in the sector, the growth experienced was a mere 1.2 per cent during the April to June 2018 quarter. Part of the explanation for this negligible growth is the fact that some construction projects import over 90 per cent of their inputs, according to the head of the PIOJ.

It is to be noted that in the financial year ending March 2018 the economy grew by less than one per cent (0.9 per cent). This despite similar busyness in the sector, which included 8,200 housing starts and about 3,000 additional hotel rooms being added between April 2016 and March 2018.

The conclusion we may thus draw, unlike ministers Shaw and Vaz, is that an active construction sector does not result, per se, in strong economic growth; nor is there a one-to-one relationship between sale of construction inputs and growth in the construction sector, as the head of the PIOJ has said. This clarification should, hopefully, put to rest the claims by Shaw, Vaz, and other Government operatives who are seeking to claim that the plethora of construction projects means that the economy is growing exponentially.

I share three examples from data in earlier reporting from the PIOJ to show the impact of activity in the construction sector on the overall growth of the national economy:

(a) Although there was extensive construction activity, including Highway 2000 and Cricket World Cup, in the period 1997 - 2017, GDP growth averaged 0.15 per cent, with notable years of negative growth — FY 08/09 to FY 10/11, which averaged minus 1.7 per cent;

(b) The construction sector grew by 0.8 per cent and 1.5 per cent respectively during the periods January to March and April to June 2017, yet the economy contracted by 1.3 per cent and 0.9 per cent, respectively;

(c) In a record year, 2005, the construction sector grew by seven per cent, but its contribution to overall economic growth was one-tenth of that at 0.7 per cent.

Legacy 2.0

Given the reported wish by Prime Minister Holness that he be remembered as “Mr Construction” and, given what has been shown to be the historical impact of construction on GDP growth, Holness may well be advised to ponder whether that label is what he wishes his defining legacy to be.

In keeping with his reported 'legacy wish', Holness has promised to provide 20,000 housing solutions by 2021. He may wish to note that with 20,000 housing solutions between 2016 and 2021 he would average 4,000 per year. That performance would be 80 per cent of the record set by the late Anthony Spalding, who produced 40,000 housing solutions in eight years (1972 and 1980), or 5,000 per year. So, quite separate and apart from its likely negligible impact on economic growth, Holness should consider whether his time is best spent chasing such a prize.

The question, then, is: If the “Mr Construction” ambition is not the most worthy use of the prime minister's longings, what should be?

There is a risk that, rather than earning the “Mr Construction” investiture, given all that has been going on at Petrojam and elsewhere, and how ripe the business of infrastructure development is for corrupt activity, there may well be a legacy ascribed to the Andrew Holness-led Administration that is less than desirable.

It is, however, my humble opinion that, given Jamaica's long history of corruption, a more necessary and noble pursuit of the prime minister would be to be dubbed “Mr Anti-Corruption”.

Corruption is assessed to deprive the economy of five per cent of GDP. Think for a moment what a great legacy it would be if Holness were to raise the bar on probity, transparency, fairness, and good governance, and were able to reduce corruption to one per cent of GDP over the next two years. (That would add about four per cent GDP growth.) If corruption were significantly reduced it would spur a level of economic activity that would be unprecedented and Holness may then be known for true greatness.

Holness, like his predecessors, had promised to stamp out corruption. Like others, he has not been successful, so far.

There is a view that the allegations of corruption having taken place in the last two years are equal to, or greater than, those ascribed to the PNP in its 18 years. I am not sure about that. What is undeniable is that the reports of corruption being investigated over the last two years are frightening.

I believe that tackling corruption should be the ideal focus of the prime minister on his journey to creating a great legacy for Jamaica. The data show that by being Mr Construction the prime minister is not likely to transform the economy — notwithstanding the importance of construction to the economy. A more sure way to transform the economy is to seriously tackle corruption and be known and immortalised as Mr Anti-Corruption.

The areas in which the prime minister may begin this mission are:

• providing the various State agencies with all the support needed to execute investigations in the agencies that have been recently rocked by allegations of corruption and cronyism and providing updates to the country thereon;

• fulfilling his promise to disclose his integrity filings and proceed to pass legislation requiring all public officials to do the same;

• strengthening legislation which prevent/sanction public officials from securing personal favours through public office; and

• empowering Tax Administration Jamaica to shine the spotlight on, and send the Revenue Protection Division after public officials who evade paying taxes, in the same way the ordinary citizen and entrepreneur is pressured.

Prime Minister, Jamaica needs a Mr Construction, but we need a Mr Anti-Corruption more. I urge you to transform your office into a “bully pulpit” against corruption.

Dr Canute Thompson is head of the Caribbean Centre for Educational Planning, lecturer in the School of Education, and co-founder and chief consultant for the Caribbean Leadership Re-Imagination Initiative, at The University of the West Indies, Mona. He is also author of three books and several articles on leadership. Send comments to the Observer or canutethompson1@gmail.com.

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