Minister of Finance and the Public Service Audley Shaw tabled a $548-billion budget in Parliament on April 23. - Norman Grindley/Chief Photographer

THE TWO previous essays in this series detail the factual record of dismal economic performance of the Jamaican economy since 1990 and explain fundamental flaws in the government's economic strategy that help to account for poor performance. This analysis reveals the record as a fatal combination of strategy failure and implementation failure.

The critical question is how to overcome the chronic tendency of strategy failure and implementation failure as a characteristic feature of economic policy and governance in Jamaica.

This problem is deeply rooted in our post-independence history and political culture. Nevertheless, it is still possible to come up with working principles for designing practical solutions relevant to the situation we face today. As a guide to such solutions, I suggest that the issue is, first, one of institutions: (a) existing regulatory institutions that do not perform well their assigned job of providing oversight, accountability and transparency and need to be shaken up to do so (b) missing institutions that could serve to enhance and strengthen those functions, as well as focus action in accordance with priorities and plans agreed upon.

Second, it is a problem of failure to distinguish and coordinate the proper space for performing the functions of legislating policy as against the functions of executing policy. In Jamaica, the two functions have tended to be fused in practice, resulting often in ministers without executive skills required by their assigned portfolios, or in a mismatch of meddlesome ministers and recalcitrant permanent secretaries, or in executive institutions lacking proper direction and control.

proposals for action

Accordingly, I offer the following proposals for action now.

The legitimate interests of the Ministry of Finance (MoF) - divested of its current functions of "economic planning," and of the Bank of Jamaica (BOJ) - duly constituted as an independent central bank - must be counterbalanced by a separate institutional leadership of the development effort. To address the complex and challenging issues of economic development in today's world with a sharp and concentrated focus requires a competent and forceful driver within the Cabinet (a warrior for the cause!), who can direct, motivate, and coordinate appropriate action. To this end, I propose the formation of a separate and distinct ministry of development and planning.

This new ministry could then be made to absorb many of the functions of development and planning, currently scattered over many different ministries and agencies, within a single apparatus of government. That would satisfy the current and urgent objective of reducing the cost of government and meet the desired goal of a reduced number of cabinet positions suggested long ago by the Nettleford Committee.

operation guidelines

By restoring the MoF to its proper and unique constitutional role of managing the money bills, this proposal also seeks to place the MoF on a stronger footing to implement the imperative of fiscal discipline, without which the country is destined to continue to undergo future bouts of debt explosion.

The MoF must then be made to operate under strict requirements that the budget must 'add up', and the adding up verified by an independent office of the auditor general. The audited fiscal accounts must be placed on full display for all to see, both in Parliament and before the general public. This requirement forces maturity on the part of Government and the general public, because it demands transparency and accountability in government-financing operations and allows the public to engage in informed debate about those operations.

Because many of the statutory bodies were set up in the past to bypass parliamentary oversight and public scrutiny, serious information asymmetry problems have come into play, leaving parliament and the public in the dark.

Moreover, this allowed for the creation of off-budget and contingent liabilities, along with the maintenance by government of active deferred-financing accounts with the large banks. Consequently, fiscal accounts were always at odds with actual fiscal expenditures, government could not programme accurately its demand for funds, hence, could not predict accurately the impact of its demand for funds on interest rates, hence constantly missing interest-rate targets, with the budget deficit then becoming the residual in this causal chain.

To break into this causal chain at its source, the operations of all statutory agencies must be placed 'on the books', and the MoF must be made to give up the practice of off-budget operations. The system of government-guaranteed loans and advances to statutory agencies without a corresponding obligation for those agencies to transfer their surpluses to the consolidated fund must be revised. Furthermore, instituting and enforcing a proper treasury management function and rigorous control of the contract-procurement process are necessary requirements to bring the overall budget into balance.

standing guard

If the BOJ is to be legitimately considered an autonomous and independent central bank, then it must be made to justify and validate that status by standing guard against the fiscal imprudence of the MoF, instead of aiding and abetting it by allowing the MoF easy and uncontrolled access to the many monetary instruments (T-bills, repos, etc) that enable and facilitate such imprudence. Furthermore, the BOJ must itself exhibit fiscal prudence, technical competence and professionalism in the internal management of its own affairs, inasmuch as it must also seek to strengthen regulatory control over private financial institutions under its purview.

A major source of concern must be to rein in and bring under proper scrutiny and accountability the role of government executive agencies, such as the National Development Bank, the National Insurance Bank of Jamaica, the Urban Development Corporation and the National Housing Trust. Proper coordination of this particular set of agencies should become central to executing

the economic development effort under the guidance of policy priorities and directives coming from the new ministry of development and planning.

All operations of government must be subjected to oversight and accountability through open and transparent procedures. This requires beefing up and giving teeth to the agencies responsible for performing this role (for example, auditor general, contractor general, and director of public prosecutions), as well as firming up the role of relevant parliamentary committees.

Reform and proper regulation of the monopolistic financial sector to enforce rules of competition and good behavior are essential to moving forward. This is made even more necessary now that the sector has grown to be bloated and fat from feeding at the trough of public debt. It will be difficult to wean those elements of the private sector that have fed off this largesse to move into more productive investments where the economic risks and management requirements are very different and more challenging.

dynamic leadership

More constructively, it is necessary to promote the emergence of new dynamic leadership within and without the financial sector, a new cadre of financial innovators, who will themselves seek out profitable opportunities to channel funds into long-term productive investments, acting under appropriate regulatory oversight to avoid reckless schemes, such as those that came to light in the Financial Sector Adjustment Committe (FINSAC) era.

As concerns productive investment, until and unless systematic efforts are made to reduce the elements of risk, uncertainty and cost associated with the environment for conducting business operations in the factory and on the farm (urban crime, praedial larceny, bureaucratic delays, etc), as well as to restructure the complex and unwieldy system of tax incentives, it is unlikely that there will be a significant resurgence of domestic private investment in export-producing activities.

viable agricultural land

Moreover, the current state of the government's budget puts on hold many public-investment projects and programmes for providing a "support framework" for private investment. However, there is viable agricultural land that can be brought into production for domestic food and for inputs into processing as well as for export. Supply of skilled labour, schooled in the requirements for work in modern industry and agriculture, will be a significant constraint that challenges the capacity of the educational and training institutions to respond.

It is useful to adopt a model of private-cum-public-sector strategic partnership to pursue economic targets of opportunity for investment and export where the targets are identified and pursued through an open and transparent, structured and deliberative process. The idea here is to take advantage of the executive abilities and entrepreneurial skills of some of the dynamic leaders in the private sector (who have proved in practice their strengths as business leaders as well as their commitment to the national interest) to form operational teams to get things done. The bauxite levy negotiations in 1974 represent an instructive example of such a model.

Strengthening the technical and administrative capacity of human resources in the public sector is a major requirement for successful policy implementation. Down-sizing of Government presents an opportunity for rationalising ('right-sizing') the allocation and effective use of the best talent currently employed in Government. Useful approaches to increasing the supply of such talent at all levels (adding to the entry-level supply coming out of local schools and colleges) include breaking down the barriers to labour mobility within CARICOM, and tapping into the vast talent pool of the diaspora.

rejuvenate positions

At the top levels of Government, it is necessary to find a way to rejuvenate the executive positions in executive institutions in the public sector. There is no objective reason why the official director or governor of a government agency or statutory body should be allowed to hold on to that position for up to 15 or 20 years, and more in some cases, before yielding it to younger, highly qualified, aspiring candidates. This practice may serve perversely to discourage aspiring and talented candidates and cause them to vote with their feet by moving to more welcoming environments. How else (apart from obvious salary and working conditions and the small size of the domestic market) can one account for all the highly talented, migratory young Jamaicans that one finds in top-level positions overseas?

crucial role

In all this effort, there is a crucial role for wise, visionary, and pragmatic leadership at the top of Government, in defining the vision, giving directions, insisting on the proper balance in the mix of policies being pursued, ensuring that there is a well-functioning network of teams in place to carry out the vision, and disciplining the slackers and miscreants. There is no formula for a solution to this problem. We either have it or we don't. We can usually tell when we have it and when we don't, but unfortunately, only after the fact. In a parliamentary democracy like ours, we have to take our chance and choose between the options we have. That could turn out to be like a crap shoot.

The problem here is that we have for too long cultivated and held up for celebration the image of the charismatic leader. Looking around us today, at the countries that are doing well, we find that the kind of leadership that is working is far from the charismatic model. They are good managers of Cabinets and of other functionaries inside the state apparatus as well as leaders of the public conscience. They don't have to have PhDs; that qualification, however acquired, can sometimes be used to promote empty rhetoric, grandstanding, and braggadocio ('doctor politics').

Donald J. Harris, professor emeritus of economics, Stanford University.