Editorial | A strategy for growth

The narrative is regularly recited and celebrated.

Since the 2010s, Jamaica has undergone a remarkable fiscal transformation. Debt has fallen from unsustainable heights, inflation has been tamed, and macroeconomic discipline has become the rule rather than the exception.

But beneath this fiscal success lies a quieter, more troubling trend: the slow erosion of investment, or what economists call gross fixed capital formation (GFCF) as a share of GDP.

This metric matters greatly. GFCF represents the proportion of a country’s national income that is being reinvested into the machinery for future growth: infrastructure, factories, power plants, ports, water systems, broadband, dwellings, schools, and more. It is the foundation of productive capacity.

The numbers don’t lie, and in Jamaica’s case they don’t flatter.

In the early 2000s, Jamaica’s GFCF/GDP ratio hovered around 27 per cent, placing it firmly in the range of fast-developing economies. Since then, that ratio has steadily declined. By 2022, it had fallen to just 16.24 per cent of GDP – closer to where stagnant or post-crisis economies tend to settle.

This isn’t just a statistical drift; it’s a strategic signal of potential trouble ahead.

Low investment today means weaker productivity tomorrow. That translates to fewer jobs, slower growth, fragile infrastructure, and fewer opportunities for the next generation. It signals falling behind in innovation and competitiveness.

NOT ALONE

Jamaica, on this front, is not alone. Across Latin America and the Caribbean, investment has stagnated. According to the UN’s Economic Commission for Latin America and the Caribbean (ECLAC) foreign direct investment (FDI) in the region averaged just 2.8 per cent of GDP in 2024 and accounted for only 13.7 per cent of gross fixed capital formation – a big decline from previous decades.

This indicates a shrinking pipeline of transformative projects, weaker industrial linkages, and a failure to match investment flows with developmental priorities.

Why has this happened?

First, public investment was crowded out. In Jamaica, commitment to fiscal reform, though commendable, came at a cost: capital spending became the budget’s shock-absorber, subject to compressions when revenues dipped or debt targets took priority. At the same time, execution bottlenecks – ranging from procurement delays, weak governance to utility relocations – hampered implementation, even when funds were available.

Second, private investment remained tepid. Despite improvements in the macroeconomic environment, Jamaica has not sufficiently lowered the high real cost of capital to unlock domestic or diaspora-led investments. High interest rates, collateral constraints, limited risk-sharing instruments, and underdeveloped venture finance have kept entrepreneurial energy bottled up.

Third, FDI became concentrated in a few sectors: tourism and real estate chiefly, with limited spillovers.

Unlike countries that used FDI to build industrial ecosystems, upgrade skills, and transfer technology (the Asian Tigers for example), Jamaica’s investment regime has been more extractive than catalytic.

Fourth, the investment climate remains complex and uncertain. Land titling, permitting, and environmental approvals are still slow and unpredictable. Projects often take years to move from concept to execution, causing investor fatigue and policy cynicism.

Investors have faced numerous shocks: financial crisis, pandemic, supply chain disruptions, trade wars, tariff uncertainty, inflationary pressures – all of which further delayed or derailed investment cycles.

The result is that Jamaica now finds itself in an uncomfortable middle ground: fiscally stable, but structurally underinvested. The national balance sheet has been repaired, but the production engine remains in need of a major overhaul.

ALL IS NOT LOST

All is not lost if Jamaica acts now to take advantage of a shifting global context. Climate finance is expanding despite US push back. Supply chains are realigning. Energy systems are being overhauled. Investors are looking for credible, stable, nearshore platforms to anchor their bets.

Jamaica, with its geographic advantage, democratic stability, and growing macroeconomic credibility, can position itself as a green, digital, logistics-enabled hub, if it restores its investment engine.

To achieve this three strategic shifts are necessary:

• Raising the investment/GDP ratio back toward 25 per cent;

• Improving the productivity of investment (i.e., more output per dollar invested); and

• Ensuring investment aligns with national development priorities, not just short-term returns.

To achieve these targets policymakers must focus on six key areas.

They must restore and protect public capital spending. This should start with a multi-year capital budget expenditure floor – perhaps five per cent of GDP – that is insulated from cyclical shocks and fiscal overcorrections.

This spending must be professionalised through better project preparation, feasibility studies, cost-benefit analyses, and independent monitoring. A dedicated and more efficient Project Development Facility could help institutionalise these capabilities. The current mechanism is sputtering.

Next should be the development of a pipeline of high-impact, investor-ready projects. Jamaica needs at least five big bets – projects that can drive economic transformation and attract blended finance. The Gleaner’s list:

• A renewable energy plus grid modernisation programme to significantly lower energy costs;

• A focused buildout of the Kingston logistics and industrial zone to leverage the port, and the island’s geographic location;

• A national smart agro-processing corridor to reduce food imports and add value to exports;

• A ‘Tourism 2.0’ strategy that focuses on heritage, wellness, and sustainability;

• A national digital services platform built on reliable broadband and secure infrastructure.

Third, the systemic cost of capital must be lowered. This means blending concessional climate and development finance with private capital. It also means reforming collateral regimes, expanding partial guarantees, improving insolvency processes, and ensuring long-tenor financing is available to productive enterprises – not just bondholders.

Fourth, simplify and streamline the investment climate. A true single window for permits, standardised land titling, and predictable environmental review timelines will do more to unlock capital than any tax incentive.

Fifth, redefine the FDI strategy. Instead of measuring success by inflows, it should be assessed by domestic linkages, employment quality, technology transfer, and value-added production. Incentives should be performance-based, tied to what the country gets, not just what the investor promises.

Finally, mobilising domestic savings is important, including diaspora capital. Jamaica’s pensions industry holds billions, much of it sitting in low-risk assets. With the right vehicles, oversight, and governance, this capital can be channelled into productive infrastructure. Diaspora bonds, linked to transparent national projects, could also open new doors.

Jamaica doesn’t suffer from a lack of ideas or ambition. It suffers from execution gaps, coordination failures, and risk aversion. If GFCF can be lifted back into the mid-20s and raise to the optimum the return on every dollar spent through better governance, the country’s growth trajectory can be shifted.