DIRECTOR of the Sir Arthur Lewis Institute of Social and Economic Studies at the University of the West Indies (UWI), Mona, Professor Neville Duncan, is advising that Jamaica's national savings rate be increased from 20 per cent of Gross Domestic Product (GDP) to 35 or 40 per cent of GDP, in order for the country to achieve social transformation and development.
He stressed that any government in this region, including the Jamaican government, which could facilitate a reasonable increase in the domestic savings rate, would bring about social transformation and development in that country.
Professor Duncan was speaking at the Friday Policy Forum, held recently at the Management Institute for National Development (MIND). The Professor addressed the topic, 'Jamaica and Caribbean Development: Shaping the Future'.
In addition, he advocated for a holistic strategy, as the recommended public policy framework, to create considerable domestic strength.
"We need to consider raising domestic finances and doubling the national savings rate, in order to reduce the cost of international borrowing," the Professor said.
Professor Duncan told the Forum that the Caribbean's total share of world direct investment had gone down substantially since the late 1980s. He noted that Caribbean governments desired foreign direct investment in sectors that further the introduction of technical change, and especially those contributing to the generation of competitive exports.
Such investments, he pointed out, should be primarily new investments in new productive activities, and not merely injections to resuscitate existing assets or enterprises. In relation to old investments, the UWI Professor advised that the resuscitation should be accomplished based on a strenuous national effort. This would entail doubling the retained savings rate and offering world market interest rates and dividends to savers and investors in the domestic environment.
Professor Duncan stressed that it was the responsibility of the state to develop a variety of new capital markets and investment/savings instruments "which induce, if not compel, this response of a doubling of the national savings rate."
He also insisted that the state should ensure the strengthening and securing of these mechanisms in the statutes or laws of the country. In his paper presented to the Forum, he said, "The state should provide the same support and monitoring to and over, a range of non-state financial markets and instruments, such as mutual savings societies for housing, credit unions, co-operatives (in general), local government... and private sector activity in insurance and equity trust funds."
The basis for this support should be that for every increment of savings achieved towards the national savings target, tax breaks and other relief should be given, Professor Duncan explained.
Pointing to evidence that his recommendation works, Professor Duncan said, "by and large, those countries which have become newly industrialised, have taken that savings rate over decades, up to and beyond 40 per cent. Singapore went as high as 55 per cent of their GDP saved."
He further noted that it was not difficult to achieve this target. "Lest you think it is something difficult for us to do, it is not at all difficult," he stressed. "One of the things we do in Caribbean countries is to allow considerable amounts of money to be spent on hire purchase agreements," he observed, adding that, "when you pay back, it's two or three times the value of what you took out on a no-down payment (plan)."
Making reference to the holistic strategy, the University Professor explained that it stood in favourable contrast to the growth, welfare, and responsive strategies. In his paper he noted, "The holistic strategy emerges as a genuine alternate strategy to the ones normally adopted by our (Caribbean) states in establishing better intra-societal relationships.
"It has as its dominant goals," he continued, "growth, equity, well-being and participation, which are consonant with International Financial Institutions' (IFI) new policy statements, those of NGOs (non-governmental organisations), and those of national governments."
CONSULTATIONS
He noted that this approach required extensive national consultations to determine the direction to be taken. This was important, he said, as the only way the government was going to give meaning and substance to certain objectives was by getting the deepest possible national consultation and agreement.
Prof. Duncan also advised that the most recent efforts at creating social partnerships should reflect the fact that such partnerships were not only a relationship between trade unions, businesses and the government, but also the entire non-state sector.
