The CPA Foundation unveiled the results of a study providing suggestions for Puerto Rico’s reconstruction and long-term sustainable development that focuses on six specific pillars moving forward.
The “Puerto Rico: A development roadmap” study, commissioned to Estudios Técnicos Inc., calls for: strengthening the island’s industrial system; rethinking promotional strategies; establishing a tax system that stimulates investment; defining the role of municipalities; establishing policies and strategies to stabilize population; and, optimizing the management of federal programs and funds.
Strengthening Puerto Rico’s capacity to insert itself into the global economy will require a major overhaul of the government’s economic policy making entities. The process must include considerations beyond export promotion and investment attraction, the report noted.
“We must promote Puerto Rico as a service exporter in key advanced services sectors and make the necessary institutional changes to improve effectiveness, recognizing that service exports require a very different approach and support mechanisms, as well as very different skill levels in the promotional entities. Law 20 of 2011 provides a major stimulus for service exports from Puerto Rico,” the document noted.
The study also suggested adopting a policy to introduce innovation in every sector, including the government and municipalities, which would a key competitive strategy.
The island must also adopt an economic promotion strategy that is not tax-driven and relies on tax advantages to induce external investment.
With respect to manufacturing, adopting a “retain, attract and grow” strategy is key, the CPA Foundation’s report stated.
“Incentives will vary with the needs of particular firms and the stage at which they find themselves. The Puerto Rico Industrial Development Company, or the responsible entity, must have sector specialists in its staff, which has not been the case,” the study stated.
“Incentives cannot be one-size-fits-all, since emerging and mature firms have different needs and retention, attraction, and growing of industries also requires different approaches,” the report noted.
Another strategy calls for Puerto Rico to develop and adopt a coherent and consistent policy for dealing with the diaspora, not only for dealings with Congress, but also as support for the island’s development strategies, mobilizing the resources of the Puerto Rican community in the mainland.
Furthermore, stabilizing population and stemming outward migration is achievable through a combined effort aimed not only at job creation but improving social infrastructure, in particular education, health and labor reforms.
As for the tax system —a core component of any development strategy — Puerto Rico’s must be simple, consumption-based and with low compliance and monitoring costs.
Municipalities must play a more important role in development than they have so far, but to do so, changes in the way in which they are currently organized must be made, the study concluded.
“The creation of counties or autonomous regions in which cost sharing is possible and that can generate scale economies, is seen as essential,” it noted.
Finally, the management of federal programs and funds requires that a central agency be created to handle what is perhaps the most critical element in future development prospects.
“As of today such programs are handled in a fragmented manner that has cost the island billions of dollars in such funds,” the study concluded.