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FDI in Jamaica

By Jeraurd Richardson

Econ 340-02 10:00-10:50 am MWF

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Background Info: Jamaica’s History The very first people to come to Jamaica were the Arawaks

and they were from Venezuela The discovery of Jamaica was credited to Columbus but the

Arawaks were their on the land first When Columbus returned to the island for his second voyage,

the Arawaks vanished after 70 to 80 years, which was due to the diseases such as smallpox and etc.

Majority of the natives passed away after the Spanish arrived and the ones that didn’t, they were tortured and threatened by Columbus and his men

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Background Cont’d:

After Columbus and in about 1510, the Spanish Europeans took over Jamaica and the Spanish ruler at the time, was Juan de Esquivel and he treated the Jamaicans worse than Columbus did

The Spanish inhabited an area in the vicinity of St. Ann’s Bay and molded it into a settlement named New Seville

The townspeople had to relocate because of the region’s climate and marsh conditions and the townspeople then settled into a present day Spanish Town

Now none of this city remains anymore, it has rotted away after years of neglect and disuse and nowadays Jamaica is an independent country and has been ever since 1962, they gained their full independence within the British Commonwealth

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Background Info Cont’d:

Nowadays Jamaica is an independent country and has been ever since 1962, they gained their full independence within the British Commonwealth

They went through deteriorating economic conditions in the 1970s, which led to recurring violence and a drop off in tourism

The elections of 1980 witnessed the democratic socialists voted out of office. Political violence tarnished elections during the 1990s

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Geography:

Located: Caribbean and the Caribbean Sea, south of Cuba

Jamaica’s total area is 10,991 sq km and the land area is 10,831 sq km and the water area is 160 sq km

Jamaica’s land area is slightly smaller than Connecticut Climate: Tropical, it is also hot and humid

Current Environment Issues: Heavy rates of deforestation; coastal waters polluted by industrial waste, sewage, and oil spills; damage to coral reefs; air pollution in Kingston results from vehicle emissions

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Geography:

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Geography:

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Demographics:

Population: 2,713,130 Percentage Ethnic Groups: Black 90.9%, East Indian 1.3%,

white 0.2%, Chinese 0.2%, mixed 7.3%, other 0.1% Percentage of Religions: Protestant 61.3% (Church of God

21.2%, Baptist 8.8%, Anglican 5.5%, Seventh-Day Adventist 9%, Pentecostal 7.6%, Methodist 2.7%, United Church 2.7%, Brethren 1.1%, Jehovah's Witness 1.6%, Moravian 1.1%), Roman Catholic 4%, includes some spiritual cults 34.7%

Languages: English and patois English

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Government:

Government: Constitutional parliamentary democracy Capital: Kingston Jamaica received their independence on August 6, 1962 from

the UK and they adopted their constitution the same date also Jamaica’s legal system is based on English common law but it

has not accepted compulsory ICJ jurisdiction Chief of State: Queen Elizabeth II and she has been ever since

February 6, 1952 She is represented by Governor General Sir Howard Felix

Cooke and has been ever since August 1, 1991

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Gov’t. Cont’d. :

Head of government : Prime Minister Percival James Patterson and has been ever since March 30, 1992

The cabinet which is appointed by the governor general on the advice of the prime minister and in elections the monarch is hereditary; the governor general is appointed by the monarch on the recommendation of the prime minister; following legislative elections, the leader of the majority party or the leader of the majority coalition in the House of Representatives is appointed prime minister by the governor general; the deputy prime minister is recommended by the prime minister

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Economy:

Jamaica’s economy is heavily dependent on services, which now account for 70% of GDP and the country continues to obtain most of its foreign exchange from tourism, transfer of funds, and bauxite/alumina.

A global economic slowdown happened, particularly after the terrorist attacks in the United States of America September 11, 2001

Since then they’ve had an underdeveloped economic growth but the economy bounced back moderately in 2003, with one of the best tourist seasons on record today

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Economy Cont’d. :

But the economy still faced serious long-term problems such as high interest rates; increased foreign competition; a pressured, sometimes sliding, exchange rate; a sizable merchandise trade deficit; large-scale unemployment; and a growing internal debt, the result of government bailouts to ailing sectors of the economy

The ratio of debt to GDP is close to 150% and inflation is formerly a bright spot and is expected to remain in the double digits

Depressed economic conditions have resulted into increased civil unrest, including gang violence that was heightened by the drug trade

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Economy Cont’d. :

In 2004, the government of Jamaica faced the difficult prospect of having to achieve fiscal discipline in order to preserve the debt payments while simultaneously attacking a serious and growing crime problem that is hindering economic growth in Jamaica

Jamaica’s purchasing power parity is $10.61 billion which is the most current since 2003

Jamaica’s GDP real growth rate is 1.9% and their GDP per capita and purchasing power parity is at $3,900 which is most current since 2003

Jamaica’s unemployment rates stands at 15.9% which is the most current as of 2003

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Economy Cont’d. :

The Budget: Revenues $2.596 billion, and Expenditures $3.111 billion, which include Capital Expenditures of $236 million

Public debt: 145.6% of GDP Agriculture products: Sugarcane, bananas, coffee, citrus,

yams, vegetables, poultry, goats, milk, crustaceans, and mollusks

Money Making Industries: Tourism, bauxite/alumina, textiles, agro processing, wearing apparel, light manufactures, rum, cement, metal, paper, chemical products, and telecommunications

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Economy Cont’d. :

Current Account Balance: $842 million which is the most current as of 2003

Export: $1.355 billion f.o.b is most current as well Export Commodities: Alumina, bauxite, sugar, bananas, rum,

coffee, yams, beverages, chemicals, wearing apparel, and mineral fuels

Exporting Partners Percentage: US 29.6%, UK 11%, Canada 10.8%, France 7.9%, Norway 6.8%, Germany 6.2%, China 6%, and Netherlands 4.4% which is the most current since 2003

Imports: $3.265 billion f.o.b as of 2003

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Economy Cont’d. :

Import Commodities: Food and other consumer goods, industrial supplies, fuel, parts and accessories of capital goods, machinery and transport equipment, construction materials

Import Partner By Percentage: US 39.8%, Trinidad and Tobago 9.7%, Germany 5.6%, Venezuela 4.5%, France 4.5%, and Japan 4.2%

Currency: Jamaican dollar (JMD) Exchange Rates: Jamaican dollars per US dollar 57.7409 in

2003, 48.4159 in 2002, 45.9962 in 2001, 42.7011 in 2000, and 39.0435 in 1999

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Transnational Issues:

International Disputes: None Illegal drugs which are a major transshipment point for

cocaine from South America to North America and Europe; illicit cultivation of cannabis; the government has an active manual cannabis eradication program; corruption is a major concern though; substantial money-laundering activity; Colombian narcotics traffickers favor Jamaica for it’s illicit financial transactions

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(FDI) Foreign Direct Investment Is among a small number of countries in the region, which

have experienced growth in Foreign Direct Investment (FDI) in 2003

Top 3 Investors: National Assets Recovery Services, Iberostar, and Verizon Global Solutions

Top 3 Destination Sectors: Hotels, tourism and leisure, real estate, and financial services

Top 3 Business Functions: Construction, customer support centre, and manufacturing

Top 2 Source Countries: US and Spain World Investment Report 2002 ranked Jamaica 2nd in

CARICOM, and 5th in the Latin American and Caribbean region in Foreign Direct Investment (FDI) inflow performance in 2001

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(FDI) Foreign Direct Investment Cont’d: The report cites that of the 140 United Nations (UN) member

countries, ranging from developed nations such as the United States to developing economies like Rwanda, Jamaica was ranked 26th overall in attracting foreign investment inflows, according to JAMPRO

The increase is very significant because a decade ago they were ranked 33rd

The World Investment report showed that of all the countries in the Latin American region, Jamaica was ranked 9th in outward FDI flows in 2001, outperforming countries such as Argentina, Brazil, Bermuda, Costa Rica and the Dominican Republic

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(FDI) Foreign Direct Investment Cont’d: Outward FDI flows increased from an average of US

$51million in 1990 through1995, from US $89million in 2001, and it peaked in 1999 at US $95million

During 2003, Jamaica recorded a record level of FDI inflows, a trend that shows no sign of slowing, particularly in the tourism sector

Jamaica is a key member of the Caribbean Common Market, which is strategically located just 1000 miles from the US and it provides investors with access to both of these markets

A range of goods produced by Jamaica also enjoys preferential access to the EU

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(FDI) Foreign Direct Investment Cont’d: Free Trade Area of the Americas agreement in 2005 will open

up markets across these regions United Nations World Investment Report in 2004 reported that

Latin America and the Caribbean last year, experienced a decline in FDI flows for the fourth consecutive year, with inflows falling by three percent to $50 billion, the lowest since 1996

Jamaica remained one of the few regional economies, which showed an overall growth in FDI flows over the last four years, in addition to an increase of inflows for the 2003 period over 2002

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(FDI) Foreign Direct Investment Cont’d: To help investors to capitalize on opportunities, Jamaica offers

a range of investor-friendly incentives, good infrastructure and a highly skilled workforce

Improvements to infrastructure include the liberalization of the telecommunications sector and substantial investment in the Kingston Containerised Trans-shipment Port, a state-of-the-art hub between North and South America

The road network has also been upgraded, stimulating development in areas close to new routes

Jamaica has a long history of stable democracy and has one of the most liberalized and modern regulatory environments in the western hemisphere

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(FDI) Foreign Direct Investment Cont’d: There aren’t any constraints to capital flows in and out of the

country; exchange controls have been removed; and the government has implemented legislation to protect the integrity of the financial system

Investment Sectors: IT, tourism, agribusiness, manufacturing, minerals and chemicals, and textiles

The Development Minister, Dr. Paul Robertson, spoke at the UN report at JAMPRO’s headquarters on Trafalgar Road this past September 23, 2004 and he pointed to statistics from the Bank of Jamaica (BoJ), which showed that Jamaica attracted a record FDI inflow of US$720.4 million in 2003 representing an even greater amount than the preliminary estimate of US$520 million

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(FDI) Foreign Direct Investment Cont’d: Dr. Robertson said that Jamaica, with its advantage of

location, had benefited from the global shift in FDI flows toward services, benefiting from investment in tourism, information and communication technology

He credited the country’s ability to attract growth in these areas, to government’s initiatives to liberalize the telecommunications sector, the privatization of state-owned companies, growth in the tourism industry and putting incentives in place to attract private capital.

“Our reality is that the service economy is our real economy,” he stated.

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Conclusion Cont’d:

Dr. Robertson maintained that the strength of the economy lay in its geography, its location and closeness to certain markets and its advances in the ICT and tourism sectors

He said that by 2010, tourism would be more evenly spread across the island and also stood to be totally transformed based on local and foreign investment

JAMPRO’s President Patricia Francis, announced that next fiscal year, the country should begin to benefit from the European Union-funded private sector development programme, which would see a total of 28 million Euros being spent over a three-year period to develop the services sector

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Conclusion Cont’d:

Furthermore, she said, a service sector survey has been commissioned to provide critical information on strategies to be adopted to ensure maximum impact

According to the “capacity theory” in economics that projects future investment based on the current share of capital stock to output, this experience presents Jamaica’s future in attracting FDI inflows into a positive light

The investment will provide for the implementation of various sector development programmes and the employment of a corporate finance broker, who will be charged with restructuring domestic investment

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The End: