1 month ago
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More emphasis on innovation and a refreshed industrial policy are needed for the country to avoid what has been called “the middle-income trap”, according to views on what Jamaica needs to move up the income scale espoused at a forum in Kingston.
Economist Dr Wesley Hughes and financial analyst and fund executive Keith Collister both pointed to a need for more infusion and innovation in the industrial sector, and for less dependence on tourism and the business process outsourcing sector for Jamaica’s development, during the forum.
According to the World Bank, since 1990 only 34 middle-income countries have transitioned to high income, while 108 countries are still trapped in the middle-income status and are finding it difficult to move up the ladder.
The bank categorises countries with per capita income of US$1,100 to US$4,500 as lower middle-income countries, while those at US$4,500 to US$14,000 per capita are upper middle-income countries. Jamaica’s per capita income has moved between US$5,300 and US$6,000 over the past five years.
The World Development Report produced by the World Bank states that growth is slower in middle-income countries than high-income countries, and calls for a “three I” strategy of investment, infusion and innovation to escape the middle-income trap.
Simek Lal, senior adviser to the chief economist at the World Bank Group, noted that the GDP per capita for middle-income economies vis-a-vis advanced economies is actually decreasing, and the situation is even worse in the Caribbean.
In Caribbean countries, the share of GDP per capita is only 26 per cent of that of advanced economies now, while 35 years ago it was 36 per cent.
Lal pointed to Poland, South Korea and Chile as examples of countries that have escaped the middle-income trap.
Commenting on Poland, Lal said similar to the Caribbean, that country experienced a brain drain of its most educated persons taking up more lucrative opportunities in other parts of the European Union, but were returning home as the economy got better in Poland.
“So the idea is investment, infusion, innovation; but don’t fear this brain drain as long as your diaspora is connected to the best knowledge, and it can transmit that knowledge back home,” he said.
Dr Hughes, who is a former financial secretary, central banker and director general of the Planning Institute of Jamaica, identified weaknesses to Jamaica’s development as a lack of emphasis on innovation and research and development, artificial intelligence, green energy, advanced manufacturing and STEM education.
“I am putting it back on the table that we need to revisit the notion of an industrial policy for Jamaica. Much of the efforts of the past have outlived their usefulness and therefore, we need to take account of all the deficiencies of the old industrial policy model, the state capture, the elite capture, the corruption, the misallocation of resources, and so on,” Hughes said.
He said the work of the IFC, the World Bank Group’s private-sector arm, was critical in strengthening project management and financing.
Meanwhile, Collister, who is a director of the Jamaica Chamber of Commerce’s economic and tax committee and a director of Sandals Resorts International, called for greater technology infusion in small and medium-sized firms to help grow the economy.
“The problem is that the small firms are weak. So, the strategy is, how can we get the large firms to help their weaker brethren? We need to bring the small ones on board and act as leaders for them,” said Collister. “My view is, we haven’t yet got a final solution on that, but clearly some kind of partnership approach, perhaps involving tax credits and the whole issue of R&D (research and development),” he said.
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