PERSPECTIVE: TOWARDS A GLOBAL TRADING POSTURE: JAMAICA MUST LEVERAGE ITS COMPARATIVE ADVANTAGE IN EMERGING ECONOMIES
Did you know Africa’s Gross Domestic Product (GDP) per capita is larger than China and India combined? and by 2050 Africa will be home to a quarter (25%) of the world’s population.
The pursuit of knowledge is the pursuit of power to transform nations. Jamaica’s transformation can only be achieved by those who seek to think big and has the vision to see the big picture. Towards a global vision to leverage Jamaica’s comparative advantages in emerging economies to create economies of scale in production instead of violence. India and Africa Economic Growth Will Soon Surpass China. In fact, Africa’s GDP per capita (US$14,000) is greater than China (US$8,123) and India (US$1,709) combined.
We should be looking more to India and Africa as a trading partner than China since Jamaica also enjoys a significant comparative advantage in currency exchange with India and Africa as an export market. Jamaica’s GDP per capita is 60% of China, yet China has a US$12.2 trillion market (GDP), hence China poses some significant strategic risks for Jamaica as they enter into a development partnership with the government.
Jamaica must be mindful of the prosperity pitfall. Growth doesn’t always translate into prosperity if it occurs at the expense of building strong institutions to protect the people and local businesses. “The Philippines has grown much faster than Thailand or Malaysia since 2010, though it still lags behind them in prosperity. And while Thailand struggles under an inept military dictatorship, and Malaysia suffers under its scandal-ridden leader’s increasingly unhelpful hold on power, under Mr. Aquino the Philippines has seen improvements in economic management, transparency, and governance.”
China may have optimized its productive capacity and now trying to extend its rapid growth rate or economic life beyond China borders through the practice of economic imperialism in Africa and the Caribbean as its population is aging at a faster rate than neighboring countries like India. In the new economy, significant growth will be driven by countries having a younger population cohort. As it stands China has 42% of its population between ages 45 and over and 36% ages 15 to 44.
For a country trying to take advantage of its demographic bonus, this is a sound strategy. Unlike Japan and China, India enjoys a young population and offers the best opportunity for Jamaican companies looking for a comparative advantage in trading to optimize and add value to commodities trade and local manufacturing. The exchange rate differential between the two countries gives Jamaica this comparative advantage more so than any other trading partners.
With a younger population and its consumption-driven economy, India and Africa should allow Jamaican manufacturers and distributors to take advantage of competitively priced commodity trade to fill an ever-rising demanding for consumer goods. Strategically, China poses far more political, cultural and market risk for Jamaican investors and exporters. Wealth is far too concentrated in China which opened the opportunity for social upheaval as China rate of growth continues to slow down impacting the growth in prosperity and democratic expectations for a significant number of its 1.4 billion people.
It was only three decades ago Japan was on the verge of taking over the world, the last ten (10) years or so, growth has been stagnant in Japan as they have optimized their productive capacity. What China is doing differently is to extend is productive capacity has an emerging colonial power in Africa and the Third World. Japan resisted this posture perhaps restrained by the American imposed constitutional framework where Japan imperialist ambitions were traded-off under the Marshall Plan for its post-war economic development.
China, on the other hand, is not restrained as its rise to being a world economic power is largely aided my American Capitalism when it could no longer extract super-profits from Japanese investments as the Japanese economy became more and more efficient in retaining much it’s productive capital in its emerging global corporation through the use of advanced research and technology.
Japan’s growth was also curtailed by the opening up of China through the World Trade Organization (WTO) and corporate America. The restriction of the Japanese capital expansion is instructive for other economies who are participating in the current dominant economic model. While growth is celebrated, we must also find innovative ways to sustain growth. The best way is to somehow create an economy that is dependent on local participation. In a sense, we need to experiment with national economic innovations that could take advantage of global markets while being independent of those markets. Japan’s economic implosion could also be China’s and later on India’s. We need a new economic model that takes away the power of a nation’s economy from external forces.
As long as we attach economic progress to external conditions we will forever remain at the mercy of those outside forces.
It was this restriction on Japanese capital expansion globally to restrain its imperialistic ambition that allows China to emerge as a dominant economic force. What I should also highlight is the fact that there exist a lack of population diversity as well as cultural and political barriers to open trade with the world in both China and Japan. This too will impact the rate at which China’s economy and its productive capacity are optimized. India, and Africa, on the other hand, enjoys the best of both worlds. Virtually no social, cultural or political constraints as both region would home to more than 1/3 of the world’s population and are largely democratic nations.
Jamaica could indeed benefit from more bilateral trade with India and become fully integrated into the African Union especially with the current currency position of both nations. In terms of economic innovations that are local, we should firstly look at our human capital as the greatest asset for our nation. The mismanagement of our human capital is the greatest tragedy of consecutive government of Jamaica. We really need a referendum on the course that we should be taking as a nation. The current direction is choppy and lacking in focus. We must innovate with better management of the human capital that we have in abundance all over the globe.
India, along with Africa is home to some of the fasting growing economies in the world. According to World Bank-CIA World Fact, seven (7) of the thirteen (13) fasting growing economies in the world are in Africa with Ethiopia ranking number one (1) with a growth rate of 9.7%, India ranks eighth (8) with 7.5% and China (13) with 7.1%.
What is needed is for Jamaican policymakers to become aggressive in promoting Jamaica’s presence globally to leverage our comparative advantage among the fastest growing economies in Africa and the Indian Sub-Continent to move the Jamaican economy beyond selling Red Dirt and Sun towards and Energy Based Economy to expand its manufacturing capacity to meeting the new challenges of changing demographics and technologies around the world which is fuelling the rise of emerging economies.
“If bauxite cost remains the most significant driver of the current location of alumina production, shifts in the geographic location of aluminum production are determined to a large extent by variations in energy prices. Even if capital, alumina and energy costs account for about equal shares of total aluminium production costs, energy costs vary much more between countries than the two other cost elements; consequently, energy costs remain the most important determinant of international differences in aluminium production costs (about 70% of the variability in aluminium’s total cost is linked to energy cost).”- Dr Carmine Nappi, Consultant and Industry Analyst.
The lack of a strategic vision for our economic development has cost us significantly. In 1992 the World Bank had approved a US$240 million loan to build a 360 MW LNG power generating capacity to lower the cost of energy to the Jamaican manufacturing and mining industries.
Instead, our government decided to pursue tourism development and some 25 years later this decision cost our economy some US$32 billion plus another US$630 million to build the said 360 MW LNG power plant in 2015.
Had the government lowered the cost of energy in 1992 Jamaica would have been the world leader in Alumina Production and would strategically position our economy to be the regional hub for aluminum production. The shift towards an energy-based economy in Jamaica would strengthen our strategic position as an Alumina producing nation and give rise to the expansion of our manufacturing capacity beyond bauxite refining to the manufacturing of pharmaceutical, chemicals, fertilizers, and Agri-Processing.
