Infrastructure and Development in Jamaica and Japan

Jamaica is a low level middle income country with tourism, bauxite and agriculture being the major sources of foreign exchange. It forms part of the Caribbean islands and has a population of about three million people with per capita income estimated to be $2,330. 19% of the population lives below the poverty line. It has a democratic form of government with a two party system.[1]

Jamaica experienced stagnant and negative economic growth during the 90s. During this period economic growth averaged 0.1%. The Jamaican economy still struggles to achieve a significant turnaround. In 2006 Jamaica achieved an economic growth rate of 1.9%. This is a very minimal growth as compared to other developing countries whose economic growth rate averages 5-6%.The fiscal deficit is 8.4% of GDP and the public debt stands at 141% of GDP, up from 134% recorded in March 2002. It is also important to note that 64% of the budget now goes servicing national debt leaving 36% for recurrent and development expenditure. Inflation is also at double digits level.[2]

From a macroeconomic point of view, Jamaica’s dependence on primary exports coupled with the liberalization of the economy has contributed to the poor economic growth.   Traditional primary exports account for more than 60 percent of Jamaica’s merchandise export. Of these, bauxite is the most important, accounting for just over half Jamaica’s exports. Exports of sugar (7.1 percent) and bananas (2.4 percent) are also important.

The flood of cheap exports in the market as a result of liberalization has stifled the growth of indigenous industries. This has limited the contribution of the manufacturing sector to the GDP. The manufacturing sector is known to be a key source of employment and economic development. In fact all the developed nations of the world have a vibrant manufacturing sector. The tourism industry, which falls under the services sector, is the single largest source of foreign exchange in Jamaica. However too much dependence on tourism is not healthy for the economy as political turmoil and travel bans from developed nations usually impact heavily on tourism.

High interest rates as a result of high inflation rates has hampered the growth of local business as this has made the cost of borrowing prohibitive and access cheap loans next to impossible. Despite the attempts by the government to institute tight fiscal policies, it has not been able to contain inflation to single digit levels. [3]This has been due to a number of reasons including the imbalance of trade, high national debt and global events. High levels of crime and violence have also hindered investment and job creation. A thousand murders were reported in 2002 making Jamaica’s murder rate the third highest in the world.

The balance of trade has over the years not been in favour of Jamaica. According to statistics Jamaican exports (expressed as a percentage of GDP) stood at 52 percent in 1999. The level of imports at the time was 62 percent in 1999.[4] The difference may seem minimal but what is alarming is that a growing proportion of these imports are for immediate consumption, rather than for industrial machinery. 33 percent of the imports in 1999 were consumable goods. If this trend continues the country’s foreign exchange reserves may end up being depleted with little investment on capital machinery.

The Jamaican government has been borrowing heavily from the public to finance its budget. This has increased the public debt and thereby making the government fiscal policies meaningless in containing inflation. This has also made the private sector to be devoid of the much needed capital lent to it by banks. The government’s heavy domestic borrowing has been as a result of its inability to collect enough revenue domestically due to corruption and the inability to create new sources of revenue.[5] Global events like rising oil and food prices have also contributed to the high inflation rate. Jamaica needs to urgently address these issues if there are any hopes of revamping the economy.

In terms of infrastructure, the country still lags behind. Very little money is dedicated to development programs as stated earlier as most of the budgetary allocations goes to servicing national debt and recurrent expenditure. This has led to slow infrastructural growth over the years. Infrastructural development is centred in urban areas with rural areas having little or no access to electricity, water and good roads. [6]This has hindered the development of these areas as farmers cannot even transport their produce to markets on time. The lack of access to water and electricity has also curtailed the development of home based rural industries which besides providing a source of livelihood are a source of employment.

Nevertheless the government has come up with ambitious programs aimed at rebuilding current infrastructure and building new infrastructure. One such program is the Parish Infrastructure Development Program. This project aims to continue and expand efforts to rehabilitate local infrastructure, modify the legal and institutional framework for local government as well as strengthen the parish council’s abilities to provide services.

Another program aimed at improving Jamaica’s infrastructure is the South Coast Sustainable Development Program. Jamaica’s South Coast is one of the least developed areas of the country and some of the most outstanding ecosystems. The potential of this region is high and unexploited. The economy of the region has been under performing. The agricultural sector is affected by the decline in the sugar industry and the manufacturing sector is on the downfall, with the closure of major businesses particularly in the garment industry along the South Coast.

Japan has the second largest economy in the world after the United States. The nominal gross domestic production stands at around US$4.5 trillion. The economy is highly efficient and well organized. It also extremely competitive in terms of international trade. Japan has well-educated work force, high savings and investment rates. Japan’s economy is largely under private enterprise. In terms of GDP, agriculture contributes 1.6%, industry 25.3% and services 73.1%. Inflation in 2006 was estimated to be 0.3%.[7]

Industry contributes significantly to the Japanese economy. The Japanese industry is diverse branching into areas such as: optoelectronics, optical media, facsimile and copy machines, and fermentation processes in food and biochemistry.[8] In terms of infrastructure, Japan has an extensive road network covering 1.2 million kilometers of paved. A single network of high-speed, divided, limited-access toll roads connect major cities and are operated by toll-collecting enterprises.

The railway line is also a key part of Japan’s infrastructure. Dozens of railway companies compete in regional and local passenger transportation markets. There are 176 airports and flying is a popular way to travel between cities.[9] In terms of energy, a half of energy in Japan is derived from petroleum, a fifth from coal, and 14% from natural gas.  Nuclear power in Japan makes a quarter of electricity production. However, Japan intends to double its nuclear power production in future.

Japan has been able to achieve such milestones through a lean and corruption free government. The Japanese economy is largely controlled by private enterprise with minimal government intervention. It has a vibrant services sector consisting of banks, insurers, stock brokers and financial services which is only second to the US. Japan is the 12^th easiest country to conduct business among 188 countries. The government does not tax its citizens heavily and vat is pegged at 5%. Much of its revenue is derived from corporate tax. This has given Japan phenomenal economic growth over the years making it an economic power house in Asia.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography:

 

Henry-Lee, Aldrie and Dillon Alleyne. “Globalisation, Liberalization and Sustainable Human Development in Jamaica.” Draft. Kingston: University of the West Indies. ( 2001)

Harris, Donald. “The Jamaican Economy in the Twenty-First Century: Challenges to Development and Requirements of a Response”.  Planning Institute of Jamaica, Kingston, Jamaica. (1994)

Davies, Omar. “The Jamaican Economy Since Independence: Agenda for the Future”. Jamaica: Preparing for the 21^st Century.  Planning Institute of Jamaica, Kingston, Jamaica. (1994)

Imai, Masaaki Kaizen: The Key to Japan’s Competitive Success. New York, NY, USA: Random House. (1986).

 

Flath, David. The Japanese economy. Oxford University Press ( 2005)