Encouraging news from Minister Clarke, but...

Friday, July 13, 2018

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The central bank data on foreign direct investment (FDI) which Finance Minister Dr Nigel Clarke referenced in Frankfurt, Germany, during the European leg of Jamaica's investor road show on Wednesday is indeed encouraging.

Minister Clarke reported that Bank of Jamaica data for the fiscal years 2016/17 and 2017/18 show that the average annual FDI was 20 per cent higher than average annual FDI over the fiscal years 2012/13 to 2015/16.

Being a man sensitive to how data needs to be interpreted, Dr Clarke was careful, we believe, to make the point that “FDI fluctuates on a year over year basis and, by definition, can be lumpy with one-off anomalies”.

Against that background, he argued that to get a better picture of the trend or the direction of FDIs, it was better to look at averages over periods of time because averages, he pointed out, “smooth out one-off aberrations”.

The latest trend, he said, shows that FDIs are “moving in the right direction” with this period being 20 per cent higher than the previous.

That, as we said before, is encouraging, because we have dedicated a lot of ink in this space to advocating the implementation of policies that will attract investment, both local and foreign.

The Administration, we note, has committed itself to creating “a politically stable environment that is conducive to private investment; an atmosphere where investments are safe and the expropriation of investment capital is not a considered option; a legal environment based on a long tradition of parliamentary democracy, the rule of constitutional and statute laws; a stable macroeconomic environment bolstered by prudent fiscal management, a stable exchange rate, flexible exchange control rules and free trade; and essential public infrastructure such as roads, [sea] ports, and airports”.

Overall, the Administration and its agencies can feel some level of achievement in relation to those commitments. However, they still face challenges in the areas of security, and the provision of dependable utilities, except, of course, for electricity.

We are aware that the National Investment Policy Steering Committee is steadily working at creating an even more favourable investment climate. We hope that the mandate given to the committee to “introduce new policy approaches and strategies to facilitate a smooth and transparent investment process” will be honoured by the Government and its agencies, because truth be told, the unattractive investment climate that existed in Jamaica for many years before was not for a lack of ideas.

Many of those ideas were euthanised by a lack of political will and an acceptance of the cavalier approach to production in too many areas of the public sector.

Hopefully, what we are now witnessing suggests a change in those cultures, as this country has too much potential to have been plodding economically for so long.

In the meantime, while we fully accept the point that Dr Clarke is making about the need to use multi-year averages of FDI because of its lumpy nature, we urge the Administration to continue close monitoring of the FDI because of its importance in financing the island's perennial current account deficit.

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