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Minister of Finance and the Public Service, Audley Shaw, has said that the formal sector of the economy urgently need to be strengthened as for too long this sector has been going into decline.
“We have seen our financial sector go into implosion, we have seen over 40 financial institutions collapse… because the other side of the formal economy, the productive sector, collapsed,” he stated while addressing the official opening ceremony for the third annual Regional Conference on Investments and Capital Markets, held at the Rose Hall Resort and Country Club, in Montego Bay, recently.
Mr. Shaw expressed the view that the growth of the informal sector has led to a diminishing of discipline in the workplace, while manufacturing as a percentage of Gross Domestic Product has moved from 20 per cent down to some13 per cent. In addition, he said, employment within the manufacturing sector has moved from approximately 150,000 to an estimated half of that number of persons.
He said that the movement of persons from the productive sector has led to more persons getting involved in various alternative means of earning, including buying and selling, “not what we produce as a country but buying and selling what others produce in other countries”.
The Finance Minister said that this has led the government being unable to collect sufficient taxes. He added that many legitimate businesses that should be a part of the formal economy, are also evading paying taxes because of the situation with the informal sector.
Mr. Shaw emphasized that it is within the context of a formal economy that an entity such as the Jamaica Stock Exchange can grow; help to stimulate the notion of public ownership; and build the Jamaican economy on the basis of investment.
He pointed out that it is the responsibility of the government to establish the environment for economic growth by playing a lead role.
“Because it is only when you have an environment that is conducive to growth that the stock market is going to work. We must therefore set the environment for growth, and part of that environment must be that the government itself, instead of continually guaranteeing loans in Parliament for public sector companies, should let them package and structure their instruments and let them go to the equities market and get their money,” he stated.
Mr. Shaw said such an environment should be one of competitiveness. He argued that in creating the necessary environment towards the promotion of a strong and growing formal economy, the nation’s debt problems must be dealt with effectively; and a cogent, predictable, energy policy promoted for the country. This he said is in addition to developing a more productive and responsive bureaucracy, effecting the necessary tax reforms, and establishing an aggressive investment promotion system.