Vantage Point - With KEITH COLLISTER
Ireland has made a truly impressive turnaround, earning itself the nickname 'Celtic tiger'.
If Ireland were a person, its advice would be very simple: speak English, actively seek out global companies, example, Intel, make high-school education free, make corporate taxes low, simple and transparent, keep your fiscal house in order, and build a consensus around the whole package with labour and management.
Let us look at the latter four issues.
A critical change took place in 1967, with Ireland making secondary education free.
As soon as the opportunity presented itself financially, Ireland vastly increased the resources allocated to this area.
Up to now, there has not been a similar 'shared vision' in Jamaica that the only investment with an infinite return is an investment in our children.
In 2003, Ireland moved to a standard rate of corporation tax of 12.5 per cent to ensure that they held on to their very high level of foreign multinational investment.
This covered everything that previously qualified for Ireland's rate of 10 per cent on manufacturing and internationally traded services.
According to Dermot O' Brien, Ireland's low corporate tax rate works because it gets PAYE and VAT (the equivalent of Jamaican GCT), which increases if peopleare kept in employment.
As he put it: "The corporate tax revenue forgone argument is rubbish, as most of the companies would not have been there anyway without it - in that sense it is found money."
The impetus for action in Ireland was actually a crisis. It was, for example, going to be downgraded by international rating agency Standard & Poors.
According to former Irish Finance Minister Ray MacSharry, in his book The Making of the Celtic Tiger: "In March 1987, the economy was trapped in a vicious circle of high spending, high taxes, high interest rates, and rising debt."
In a dramatic move, he cut spending radically in 1987, and by 2001, government debt had fallen to 33 per cent from over 130 per cent of GDP due to Ireland's fast growth over the past two decades.
The sense of national crisis prompted a concerted search for ways to escape the vicious circle of stagnation, rising taxes and spiralling debt.
In October 1987, the first social partnership agreement, the programme for national recovery, was agreed, and has been renewed ever since. At its core, it embodied trade-union support for a radical correction of public finances.
JAMAICA'S HORIZON
The major problem Jamaica has had in following the Irish model is its lack of a 'shared vision', which was what the private sector has unsuccessfully been trying to achieve with the Partnership for Progress Initiative for nearly four years.
The time horizons of politicians in Jamaica have been much too short-term, and politicians have given the population the impression that there are easy solutions and rapid fixes - 'vote for me and everything will be okay'.
Jamaica requires a time horizon of a minimum of between 10 and 20 years to fix its many problems, far longer than a typical politician's time horizon of several years, or even the life of the parliament.
Ireland achieved this through successive partnership agreements that continue to this day.
The end of the election presents a magnificent opportunity for the creation of a shared vision, including all Jamaica's social partners: private sector, public sector, union movement, civil society and Opposition.
social partnership
What should be the key goals of a Jamaican social partnership?
In Ireland, the overriding goal in everything they did was job creation.
In 1990, Ireland's total work force was 1.1 million, while today it is more than two million, with no unemployment and 200,000 foreign workers. Jamaica's new economic policy should have a similar focus to create long-term, real, sustainable, private-sector jobs.
What should be the economic priorities for the first 100 days in office for a new government?
1) Finalise the long-awaited social partnership, including agreeing to raise the personal income-tax threshold in return for wage restraint.
2) Restart the tax-reform process, including announcing a tax amnesty no later than January 1 to reverse the trend toward informality.
3) Outline a revised, credible, significantly lower target for the fiscal deficit for both the current year and next.
4) Announce plans to revitalise downtown Kingston, including the massive use of CCTV, a comprehensive strategy for degarrisonisation and the explicit return of the majority of government offices downtown, which will require prime ministerial leadership to start the process.
5) A Jamaica international financial services centre.
keith.collister@cwjamaica.com
