Sri Lanka, Malaysia, Pakistan and counting; a classic case of underdevelopment at play with China’s involvement in Jamaica now being played out in Sri Lanka as “Sri Lanka has fallen knee deep in China’s debt trap after it invested billions of dollars in huge infrastructure projects – on China’s guidance and promises.”
“To fund a 70-nation infrastructure-building program called the ‘Belt and Road Initiative’, China has been extending loans in opaque deals often contingent on using Chinese contractors. Three years into its program in Pakistan, that nation is heading for a debt crisis.”
Politics must not be the driver in economic development decisions as we are amassing huge amount of phantom debt using Chinese model of development. The billions of US dollars in “phantom debt” that is supposedly off-books will cripple any chance of economic growth for years to come under current and proposed infrastructure contracts with the Chinese. In fact, according to International Financial Reporting Standards (IFRS), we are “Enrondizing” our national accounts as these are hidden liabilities that must be accounted for and are indeed a taxation on the backs of the Jamaican people.
Like Sri Lanka, we are caught in China’s debt trap, as the arrival to revenue ratio of tourists to Jamaica is not sustainable. It is this basic economic misalignment that has seriously placed the Jamaican economy in another round of crisis as Chinese-funded infrastructure linked to tourism development won’t have the future revenue streams to support its development.
Even if tourism grows 3.6 percent on average for the next ten years, the marginal cost to subsidize tourism growth in Jamaica would be far greater than the marginal returns, as increasing price pressures result in lower yields, which mean more devaluations. The fact still remains that, if the government does not incur any additional cost and the dollar remains stable, excluding the cost of the South-East Highway, it would take us some 30 years (2046) or three decades to recover the current level of public investments already made to attract and develop the tourism industry in Jamaica.
By 2046, the total combined arrival population is estimated to be around 14.7 million visitors that would be needed to recover the US$34 billion in net economic cost incurred to date. Obviously, to accommodate 14.7 million visitors the government will have to incur additional cost, which makes tourism development a tool of underdevelopment, especially when you consider the impact on the environment and the number of working poor it employs.
Tourism development must be sustainable not only in economic terms but also environmentally and socially. A balance should be maintained between the degree of environmental degradation as well as the capacity of local infrastructure to support increased arrivals and the resulting population growth.
Since 1990, Jamaican governments spent some US$4.5 billion on tourism-related infrastructure projects, which equal the same amount travel and tourism contributed in total GDP in 2012. The constant devaluation to attract tourism investments cost the Jamaican economy some US$32 billion overall plus the US$4.5 billion in tourist related infrastructure investments. So in total, it cost the economy US$36.5 billion since 1990 to attract an industry that only recently added US$2.2 billion in direct contribution to the GDP or US$7 billion in total.
We are dealing with a very clever development partner that has effectively conned the government of Jamaica into accepting a very long-term view of the economic benefits of their investments while they reap the current or present value of the benefits in current dollars. It is essentially a debt trap we have found ourselves in again, creating a classic case of underdevelopment across Africa and the Caribbean.
Continued dealings with China Harbour Engineering Company (CHEC) are inconsistent with our laws. It is theft to charge the Jamaican people US$18.5 million for every mile travelled on the North-South highway.
According to the Office of the Contractor General (OCG), “in keeping with its mandates under the law, has always been of the view that Jamaica’s economic development must be pursued in a sustainable and responsible manner, and within an appropriate system of institutionalized independent checks and balances which will ensure probity, transparency, accountability and value for money in all Government commercial transactions,” ~ Greg Christie