Cornerstone of Belize’s Development

Last year definitely witnessed a palpable increase in the number of government-sponsored infrastructure projects, ranging from Belize City Council’s cementing of streets to the Poverty Alleviation Project.
In the short-run, we must admit that these projects have had a positive effect, which was clearly evident in the phenomenon of works like the Chetumal Street initiative that saw youths from rival gangs working together on building the street. This effort definitely deserves its praises.
But in the controversial universe of economics, disputes between rivalling views are all but seldom.
While fiscal policy, built around government spending to stimulate the economy, has its merits, especially in the short-run, this does not negate the concern that in terms of long-term growth, governments cannot expect to carry the load indefinitely.
The cornerstone of any healthy economy is the private sector, and it should behove any government to ensure that it spends sufficient energy building the adequate enabling environment for the private sector to flourish, and this is exactly one of the key points underscored in Compete Caribbean’s 2013 Private Sector Assessment Report (PSAR).
The report states: “Country experience and research have shown that no government, no matter how well intentioned and altruistic, can increase employment and reduce poverty and increase overall wellbeing without a joint public-private partnership and “buy-in” by the private sector.”
The study goes on to give its diagnosis and prescriptions, saying:
“In light of the uncertain global economic outlook, a commitment to prudent macroeconomic policies as well as structural reforms, to stimulate economic growth, reduce debt overhangs and large fiscal imbalances and to increase wellbeing, is important.”
It further states: “In this vein, competitive national economies that provide an enabling environment for private sector development will be best positioned to weather the more fragile global economy and lower growth outlook.”
The reality on the ground
While most would agree with the position that private sector development (PSD) is indeed a pivotal factor, there still remain significant constraints against true PSD.
The PSAR, which was produced after consultations with members of the Belize private sector, pointed out that most stakeholders in the private sector hold the view that there is not a well-thought-out role for the private sector or PSD.
“Governments have focused more on ‘pro-poor’ strategies and policies rather than on ‘pro-business’ policies.”
We could all understand why the government would deem such ‘pro-poor’ policies as priority, especially after the 2009 Country Poverty Assessment report showed that more than 40 percent of Belizeans live in poverty.
To make matters worse, the report revealed that 55 percent of all households were either poor or susceptible to falling into poverty.
Coupled with the alarming poverty rate, the PSAR points out that Belize–“a small highly open, natural-resource-based, lower middle-income country”–has a largely unskilled work force.
“Belize’s shortage of skilled labour and technical personnel across sectors is a significant constraint to growth.”
In the first instalment of this column, we had looked briefly at the importance of Human Capital Development, and this data adds empirical evidence to that need.
“Belize’s labour force is relatively uneducated with almost three quarters having a primary school or less education (no education 45.9% and primary education 28.8%).”
The study adds that approximately 30.9% of those employed work “in clerical, service and sales jobs, and about one-quarter of the employed work in elementary occupations such as cleaners and helpers, food preparation assistants, agricultural and fishery labourers and construction workers.”
If we all agree that the true wealth of a nation is its people, these alarming figures help to show where the real proverbial bodies are buried: in the need for an improved, and higher skilled work force.
It is interesting to note that the study also highligthed the increasing role as employer that our government has taken on since the early 1990s.
According to data, the average compensation for government employees in low-income countries, as a share of GDP, was little above 5 percent. In Belize, however, the government’s wage bill averaged just below 11 percent of Gross Domestic Product between 2000-2010.
The PSAR cautions against this trend, saying, “In the absence of expanding revenue, the growth in the wage bill poses a threat to PSD. Growing expenditure on compensation is crowding out expenditure for social services and infrastructure.”
Priority Area One: Innovation
The list of issues and concerns that are deemed as impediments to appropriate PSD is relatively lengthy, and we will look at these individually in subsequent Our Economy articles.
However, for now, it is suffice to say that the PSAR identified nine priority areas: Technology and Innovation, Access to Finance, Corporate taxation, Trade and Foreign Direct Investment Policies, Labour Regulation, Infrastructure, environment, education and training, and ensuring gender equality.
At a glance, it’s obvious that each of those priorities areas are as independently significant as much as they are, in many ways, interdependent; however, I’ve opted to first highlight innovation in this article, because it goes hand in hand with the need for human capital development.
The fact of the matter is that Technology and innovation are among the chief factors that contribute to true economic growth.
As the PSAR confirms: “ICT access and usage are key enablers of countries’ overall technological readiness.”
Belize, when ranked on the World Economic Forum’s index of technological readiness, came in 118th out of 142 countries.
In this regard, the PSAR states: “Sufficient investment in research and development (R&D), especially by the private sector, is critical for long term growth and viability.
“This involves the presence of high-quality scientific research institutions; extensive collaboration in research between universities and industry; and the protection of intellectual property rights.
“R&D tends to be constrained in countries like Belize facing fiscal pressures notwithstanding its importance for sustainable growth going into the future.”
In this regard, the report showed that Belize ranked 135 of 142 countries on the Global Competitiveness Index.
Moving forward
The pillar identified is only but one key area that we, as a nation, need to turn our focus as we enter the New Year. It is mandatory that we look at economic growth and development from a long-term perspective, and not fool ourselves by using short-term methods to cure a long term problem.
It is my hope that 2014 will see an increased role for the Economic Development Council and an palpable augmentation in the level of public-private dialogue that could genuinely address these concerns and more.

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