Letters & Opinion

Our Economy – Part 3: The Private Sector Conundrum

Image of David Prescod
By David Prescod

WE shouldn’t conclude our discussion of the economy without some discussion of the performance of the private sector. Often referred to as the “engine of economic growth”, this is the sector in which new jobs are supposed to be created, particularly by small businesses.

But for the longest while now, we have had little or no growth in our economy and, rather than jobs being created, we have seen them being lost. Some in the private sector simply blame their woes on the inefficiencies of government — and they have a point.

In a report entitled “Situational Analysis of the Services Sector in St. Lucia”, authored by Ramesh Chaitoo and published May 30, 2016, the author questions “why a tiny economy like Saint Lucia has so many ministries, agencies and statutory bodies. The GOSL website shows 15 Ministries, 15 government corporations and 24 statutory bodies”. He adds that, “The multiplicity of different jurisdictions makes it almost a Herculean task to coordinate policy and administrative measures across them all”. (This report was funded through the CDB).

We obviously have an inefficient government structure and though Mr. Chaitoo puts it starkly, this observation is not new. In delivering the 8th Patrick Emmanuel Memorial Lecture on November 21, 2013, Sir Dwight Venner advised us that, “In the government sector, a cadre of technically and administratively competent professionals should spearhead the restructuring of the State machinery to create a highly competent and developmental state.…In short, the modernization of the State has to be one of the highest priorities of the political authorities.”

As usual, we nod in agreement, then continue with business as usual and the avoidance mechanism of choice is to blame public servants. Some of this is understandable, as the public service is perhaps the only “business” which continues to grow in size and costs even as its “client”, the private sector, is shrinking and much of it is in financial distress. Understandable, but not accurate, because as both Sir Dwight and Mr. Chaitoo point out above, the structure of government itself is inefficient and so public servants are not entirely to be blamed for the poor service provided by government.

While there may be concerns with the upper end of the pay scale of the public sector, simply rectifying those issues will not solve the problem of the high cost of the public service as we know that the bulk of public sector expenditure is on our teachers, nurses and policemen — the middle portion of that scale.

As we saw last week, however, not even the IMF has recommended a pay cut or a slashing of the size of the public sector in order to reduce costs. Instead, in their February 2016 Article IV Consultation Staff Report, the IMF recommends that the size of the public sector should be reduced through attrition (persons retiring) while encouraging restraint on wage and salary increases by anchoring those increases to inflation.

In its report on the review of our economy last year, the CDB advised that with respect to the need to improve the efficiency of government spending, “the issue of public sector productivity needs to be addressed frontally, in particular, the linking of wages to productivity.”

Meanwhile, with the inefficient nature of government widely recognized, instead of its structure being addressed, we see the birth of a growing number of agencies aimed at “improving the ease of doing business” for the private sector, adding layer upon layer on an already inefficient structure. Not that these agencies aren’t useful, but their performance will necessarily be hampered by overall government inefficiency. So that even with those interventions, our “ease of doing business” ranking fell last year, according to the World Bank.

But there are issues with the private sector, too, as while this sector accounts for about 90% of our GDP, 80% of that comes from services such as retail, wholesale, tourism, real estate and construction. While tourism accounts for about 15% of GDP, Prime Minister Chastanet has recently indicated that this sector accounts for 83% of our foreign exchange earnings. Outside of tourism, our private sector produces little for export and, in fact, relies on the earnings of the tourism industry for its survival.

Sir Dwight also addresses this in his Economic Review of 2013, advising us that, “There must be a systematic programme for the development of a viable and innovative private sector in our countries. Without this, most of our important business enterprises in the traditional sectors will be sold off to regional or foreign interests, others will cease operations as the founders pass from the scene; and the current age of internet buying will finish off the rest.” Much of this has already come to pass for St. Lucia.

Both our public and private sectors, then, are due for major overhaul. But don’t expect any change in the public sector, as this proliferation of government ministries and agencies suits our politicians well, with a ministry going to every elected parliamentarian after every election — one more reason for reform of our Constitution.

P.S.: The last six articles have attempted to focus on issues which are critical to the economic survival of our country, but issues which have not been addressed by either administration. Instead of focusing on these, with St. Jude, our country has been dragged into the gravest scandal in its independent history, a scandal which has brought us to a point in our governance beyond which there is no possibility of return to ethical government. We, therefore, return to St. Jude in November, after a brief look at ethics in governance.

Leave a Reply

Your email address will not be published. Required fields are marked *