POLITICS: Jamaicans Ponder Economic Cost of Gun Battles

By Zadie Neufville Reprint | | Print |

Zadie Neufville

KINGSTON, Jul 13 2001 (IPS) - Jamaica’s nascent economic recovery is in peril, officials and business executives say. Their warning comes as this city collects its dead and clears debris from the recent outbreak of gang and political warfare.

The Private Sector Organisation of Jamaica (PSOJ) says this week’s pitched gun battles between security forces and criminal gangs with rival political loyalties cost the country dearly.

Official figures remain to be compiled but the local business press estimates that the fighting, which forced a two-day lock- down of the capital city, caused 330 million dollars in damage and lost business and taxes.

The tourism industry will be hard pressed to restore the country’s image as a resort but must do so if the economy is to recover, according to the PSOJ.

Jamaica must average 3.5 percent annual economic growth if it is to provide jobs for the 320,000 people expected to join the workforce in the next 20 years, says former government economic consultant Gladstone Bonnick.

Economist and media commentator Ralston Hyman predicts a long, bitter struggle ahead to restore Jamaica’s economy to what is was just a week ago.

The economy grew by only 0.8 per cent last year but appeared to be recovering this year, posting four percent growth in the first quarter. But because of the violence that began weeks ago and peaked this week, there is widespread talk that many local firms now face bankruptcy or closure. The business sector has “suffered a massive setback”, says Clarence Clarke, head of the Jamaica Manufacturers Association (JMA).

According to the Jamaica Chamber of Commerce, sales have fallen by as much as 60 percent in the nine weeks of fighting that culminated in a three-day firefight between security forces and gunmen that began Jul 8.

This week’s violence claimed at least 22 lives, adding to a death toll that already stood at 40.

Church and private sector leaders intervened to restore calm – the PSOJ, for example, sponsored a tour of the devastated areas earlier this week – but Hyman says their efforts were too late.

Visitor arrivals, he says, will be the first casualty of negative publicity from media reports of the incident overseas. Tourism is the country’s largest foreign exchange earner, accounting for 45 percent of hard currency receipts and providing one in four jobs.

“Government will have to spend millions to revamp our image, not to mention production and revenue losses over those two days”, Hyman says.

Jamaica missed out on the 1990s boom that allowed the regional tourism trade to grow an average of seven percent per year but the country began to catch up in 1999, when it grew six percent before posting 10 percent growth last year with more than two million visitors.

Gordon Stewart, head of the Sandals Group of hotels, predicts the violence will halve visitor arrivals and cost the tourism industry more than 300 million dollars this season.

Hotels have begun to report cancelled bookings and industry sources say controlling damage to Jamaica’s reputation among tourists will cost between five million and 25 million dollars.

Even the smaller figure is more than the Jamaica Tourist Board’s current advertising budget, says Director Fay Pickersgill.

Clarke and Hyman both say manufacturing, exports and government revenue also have been badly affected, compounding the country’s economic woes.

Business confidence can be restored, Clarke says, but only if Prime Minister PJ Patterson, and opposition leader Edward Seaga find a solution to a crisis that reeks with political undertones.

Officials say they are heartened that Bear Sterns, a US investment firm selling Jamaican bonds overseas, has played down the possible consequences of the violence for the country’s credit rating but the real impact of its statement to investors remains to be seen.

Seamus Lynch, head of the Irish-owned mobile phone company Digicel Jamaica, warns that investors will be unwilling to invest in a country to which tourists would not travel. “What I’d urge politicians to do is to sit and resolve the issue. There has to be a common policy and approach to crime by all political parties,” he says.

Patterson and Seaga are expected to meet over the weekend.

Meanwhile, this week’s PSOJ-sponsored tour of Kingston has opened business leaders’ eyes to the twin problems of crime and poverty.

“We must look at the restoration of proper housing and the improvement of living conditions in the inner-city communities,” says Clarke, who describes potholed streets awash with sewage running through neighbourhoods of dilapidated, overcrowded houses. “We should not allow any community to drop to the level of what we saw.”

Peter Moses, the PSOJ president, says it is unfortunate that it took such violence to draw business leaders’ attention to the horrendous living conditions. Clarke urges education and training programmes to help residents find jobs but it remains to be seen what the executives’ newfound appreciation of their compatriots’ plight will yield.

Jamaica’s economy has long grappled with mounting foreign debt and creditors’ demands that it stabilise its exchange rate and rein in inflation regardless of the cost to local jobs and the political system.

Tight fiscal and monetary policies succeeded in bringing inflation down to the single digits but local firms, faced with a credit crunch, were forced to downsize or shut down. Unemployment rose steadily.

The agricultural sector was badly hit by trade liberalisation and the removal of duties. Making matters worse, the government imposed a fuel tax in 1999 to generate revenue – and unleashed riots.

Just last month, however, Bonnick noted a stock market recovery and the official Planning Institute of Jamaica reported four percent economic growth in the first quarter of this year.

Bolstered by the news and recent highway, mobile communications and information technology deals, government officials said they finally felt they were doing something right.