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«Productive Development Policies in Jamaica Mónica Panadeiros Warren Benfield Inter-American Development Bank Department of Research and Chief ...»

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It would be interesting to review the coherence of the Master Plan with the traditional tax incentive regime. For example, tourist resorts import some of the foodstuffs that they use, and this is not surprising given the duty concessions set by the legal framework. The “all-inclusive” hotels, the largest ones on the island, seem to have weak linkages to the rest of the economy because they are not integrated with the communities in which they are located. Yet most incentives are aimed at these large facilities.

Other example of initiatives included among the new style of industrial policy is the Private Sector Development Programme (PSDP), a joint project of the Government of Jamaica and the European Union launched in 2005. The PSDP intends to enhance the performance of small and medium enterprises applying modern approaches, such as firm and sector assistance and/or grants that are managed by private sector organizations and support institutions, clustering, 64 and formal dialogue between public and private sectors.

The selected clusters for grant assistance are to four targeted sectors (creative industries, tourism, agribusiness, and services), and were chosen taking into account their comparative advantages.

According to Hausmann and Rodrik (2003), the institutional framework—in particular, public-private dialogues—related to processes and procedures for selecting instruments to be used or sectors to be targeted become one of the most relevant aspects of modern industrial policy.

With respect to clusters, in spite of the potential benefits for enterprises, evidence shows that inter-firm cooperation and the other features of successful clusters do not always emerge spontaneously due to market/government failures (transaction costs, high risk of “free riding”, etc.). The available literature bears out that the intervention of an “external agent” that facilitates the emergence of clusters can greatly reduce the significance of these obstacles. Therefore, while cluster development is ideally a private-sector driven process, there is also an argument for government intervention in cluster promotion.

With regard to export promotion, in the last years the traditional policy approach through the EFZs has been complemented by a more modern and innovative one. It includes JTI supporting the first comers to new developments (facilitating the expansion and development of agribusiness and agro-processing in non-traditional target areas and markets), and being active in trade promotion activities. The economic justification for government involvement in these activities is based on the theory of asymmetric information and other market failures. The resulting evidence suggests that on average export promotion agencies have a positive and statistically significant impact on national exports. 65 EFZs implied a considerable fiscal effort and did not help to boost exports or to diversify the economy. On the contrary, the innovative approach of JTI—although too early to be assessed—seems to be the modern way of thinking about industrial policy: a process of discovery where firms and the government learn about underlying costs and opportunities and engage in strategic coordination.

The two approaches of industrial policy that are present in many areas of the Jamaican economy are also evident in the ICT sector. Jamaica has developed as one of the premiere destinations to Business Process Outsourcing and Contact Centers, largely due to the large English-speaking, trainable labor pool, close proximity to the largest outsourcing market in the world, and competitive cost.

The performance of the Jamaican agency in its efforts to connect businesses to international markets has been considered outstanding by the International Trade Centre and the World Trade Organization: in the last two years, it has won the Global Export Promotion Award for the best trade promotion organization from a small country.

Having identified ICT as one of the sectors for export development, the government implemented a deliberate strategy to develop capabilities in a wide range of ICT services. The most recent one is a five-year NICT Strategy for 2007-2012, the so-called project E-Powering Jamaica 2012, which was the result of extensive consultations and background research, as recommended by major multilateral organizations.

The agreed objectives for the updated project were to significantly increase the number of citizens that are educated and computer literate and to improve their access to ICT networks at affordable prices, in order to generate more active use of the Internet for education, business development, and public administration. The aim is to improve Jamaica’s position as a leader in the delivery of ICT-enhanced services and new investment opportunities in the Caribbean.

The strategies to achieve the goals under the policy in progress include reviewing tax and duty policies for ICT in order to attract major specialized corporations to invest in Jamaica, expanding ICT-focused business parks for major service providers, developing financial and non-financial incentives and resource pools for Jamaican FDI, and creating incentives for rapid adoption and use of new generation networks.

From a theoretical point of view, there is justification for promoting the use of ICT, especially in Jamaica. One argument is the presence of economy-wide externalities associated with this activity: it is the kind of public good that enhances the productivity of the whole economy. Besides, Jamaica seems to have comparative advantages in ICT services. According to Rodriguez-Clare (2005), the best industrial policy entails the direct promotion of clustering in sectors in which the country have comparative advantages, but a policy against comparative advantage may be even welfare improving in the presence of large and inter-industry externalities.

In summary, behind the poor performance and the paradox of high investment and low growth of the Jamaican economy are the “debt trap” and a highly distortive tax incentive structure to attract FDI and promote exports. Although industrial policy is moving towards a more modern conceptual design, the old schemes seem politically difficult to be dismantled. If possible, the common mistakes of the past should be avoided. Subsidies must be contingent on performance and granted on a temporary basis.

References Artana, D., and Navajas, F. 2004. “Fiscal Policy Challenge.” In: Revitalizing the Jamaican Economy: Policies for Sustained Growth. Washington, D.C. Inter-American Development Bank.

Caribbean Policy Development Centre. 2008. “Foreign Direct Investment and Corporate Governance in the Caribbean.” Ceglie, G. and Dini, M. 1999. “SME Cluster and Network Development in Developing Countries: The Experience of UNIDO”, International Trade Center, ITC Executive Forum.

Central Information Technology Office. 2007. “E-Powering Jamaica 2012. National ICT Strategy 2007-2012.” Government of Jamaica. Draft.

Downes, A. 2004. “Enhancing Productivity and Competitiveness.” In Revitalizing the Jamaican Economy. Policies for Sustained Growth. Washington, D.C. Inter-American Development Bank.

Economic Commission for Latin America and the Caribbean. 2007. “Challenges to Caribbean

Tourism.” Accessible at:

http://www.eclac.org /portofspain/noticias/paginas/2/9792/issue14.pdf

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Economic Development Institute. 2005. “Jamaica 2030: A Strategy for Developed Country Status.” Jamaica. Mimeo.

FIAS. 2008. “Special Economic Zones. Performance, Lessons Learned, and Implications for Zone Development.” Washington, D.C. The World Bank.

Grasso, J. 2007. “Attacking the Priority Areas for Growth and Development of the Caribbean for the Next 15 Years: Ideas for U.S.-Caribbean and University-Government Cooperation.” International Software Research Institute, Carnegie Mellon University. Pennsylvania.

Gumansingh, J. 2003. “Assessing the Progress towards E-Government: The Bahamas, Barbados, Guyana, Jamaica, Suriname and Trinidad & Tobago”, prepared for Inter-American Development Bank. Draft.

Harriott, A. 2006. “Crime and Violence in the Tourist Sector: Perception and Reality.” In Tourism: The Driver of change in the Jamaican economy. Ed. K. Hall and R. Holding.

Kingston: Ian Rhandle Publishers.

Hausmann, R., Rodrik, D. and Sabel, C. 2008. “Reconfiguring Industrial Policy: A Framework with an Application to South Africa.” CID Working Paper Nº 168, Center of International Development, Harvard University.

Hausmann, R., J. Hwang, J. and Rodrik, D. 2006. “What You Export Matters,” National Bureau of Economic Research WP.

Hausmann, R. and Klinger, B. 2006. “Structural Transformation and Patterns of Comparative Advantage in the Product Space”: CID Working Paper No. 128, Center of International Development, Harvard University.

Hausmann, R., Pritchett, L. and D. Rodrik. 2005. “Growth Accelerations,” National Bureau of Economic Research WP.

Hausmann, R., Rodrik, D. and Velasco, A. 2005. “Growth Diagnostics,” John F. Kennedy School of Government, Harvard University.

Hausmann, R. and D. Rodrik. 2003. “Economic Development as Self-discovery.” Journal of Development Economics 72(2).

Heritage Foundation. 2008. “The 2008 Index of Economic Freedom.” Accessible at www.heritage.org Holden, P. and S. Holden. 2005. “Jamaica: A Private Sector Assessment.” Inter-American Development Bank. Mimeo.

Hwang, J. (2006), “Introduction of New Goods, Convergence and Growth.” Harvard University.


Hynes, K. and Morgan, B. 2006. “The Jamaica Cluster Competitiveness Project (JCCP).” Kingston, Jamaica. Press information.

Inter-American Development Bank. 2008. “Industrial Policies in Latin America and the Caribbean”, Call for Research Proposal.

----------. 2007. “Tax Reform in Jamaica: Scenario Options for Consideration”, draft #4.

----------. 2006. “IDB Country Strategy with Jamaica, 2006-2009.”

Information and Communications Technology Task Force. 2007. “Vision 2030 Jamaica:

National Development Plan. ICT Sector Plan (1st draft).” Jamaica.

International Monetary Fund. 2008. “Jamaica: 2008 Article IV Consultation”, Country report Nº 08/199. Washington, D.C.

Jamaica Tourist Board. 2007. “Visitor Opinion Survey.” Government of Jamaica.

Jayawardena, C. and Crick, A. 1999. “Human Resource Management in Jamaica: Responding to Challenging Times.” Mona, West Indies.

Jensen, A. and C. Vignoles. 2005. “Jamaica: Trade, Integration and the Quest for Growth”, Institute for the Integration of Latin America and the Caribbean (INTAL) and Integration, Trade and Hemispheric Issues Division (ITD) Occasional Paper 30. Buenos Aires, Argentina.

Karagiannis, N. and Salvaris, C. 2005. “Tourism in the Caribbean: A Consensus-building Tourism Growth Strategy for Jamaica.” In Tourism: The Driver of change in the Jamaican economy. Ed. K. Hall and R. Holding. Kingston: Ian Rhandle Publishers.

Keller, W. 2004. “International Technology Diffusion,” Journal of Economic Literature.

Klenow, P. and Rodríguez, A. 2005. “Externalities and Growth.” In Handbook of Economic Growth. Volume 1A. P. Aghion and S. Durlauf, eds.

Lederman, D., Olarreaga M. and Payton, L. 2006. “Export Promotion Agencies: What Works and What Doesn’t.” Washington, D.C. World Bank Policy Research Working Paper 4044.

Lord, M. and Pegus, C. 2004. “Evaluation of DFID Support to Trade Related Capacity Building.” The North-South Institute.

Maloney, W. And Rodríguez-Clare, A. 2007. “Innovations Shortfalls.” Mimeo.

Melo, A., and A. Rodríguez-Clare (2006), “Productive Development Policies and Supporting Institutions in Latin America and the Caribbean.” IDB WP C-I 06. Inter-American Development Bank.

Ministry of Energy, Mining and Telecommunications. 2008. National Industrial Policy.

Government of Jamaica. Accessible at: http://www.mct.gov.jm/industrial_policy.htm Ministry of Industry, Commerce and Technology. 2002. “Preparing the Jamaican Youth for Employment and Entrepreneurship.” Government of Jamaica. Project Document.

Ministry of Industry, Technology, Energy and Commerce. 2007. “The Jamaica Telecommunications Policy 2007.” Government of Jamaica. Draft.

Ministry of Trade and Industry, Republic of Trinidad & Tobago. 2004. “Jamaica’s Approach to the Development of Non-Tourism Services Exports.” Trinidad & Tobago.

Ministry of Industry and Tourism. Government of Jamaica. 2008. Executive summary:

Objectives of the Master Plan. Accessible at:

http://tourism.gov.jm/master_plan/executive_summary.html Planning Institute Of Jamaica. 2009. “Vision 2030 Jamaica. National Development Plan.” Kingston. Jamaica. Draft.

Private Sector Development Programme. 2008. “A Landscape Assessment of Jamaican Micro Small and Medium-Size Enterprises (MSMEs).” Prepared for the Target Growth Competitiveness Committee. Jamaica.

Rodríguez-Clare, A. 2005a. “Clusters and Comparative Advantage: Implications for Industrial Policy.” Pennsylvania State University. Mimeo.

----------. 2005b. “Coordination Failures, Clusters and Microeconomic Interventions”, Washington, D.C. Inter-American Development Bank. Mimeo.

----------. 2004. “Microeconomic Interventions After the Washington Consensus.” Washington, D.C. Inter-American Development Bank. Mimeo.

Rodrik, D. 2008. “Normalizing Industrial Policy.” Commision on Growth and Development, WP Nº 3. Washington, D.C. International Bank for Reconstruction and Development /World Bank.

----------. 2004. “Industrial Policy for the 21st Century.” Harvard University. Mimeo.

Schiffbauer, M. 2006. “Theoretical and Methodological Study on the Role of Public Policies in Fostering Innovation and Growth.” Dynamic Regions in a Knowledge Driven Global Economy, DYNREG Workpage Nº1.

Seaga, E. 2006. “Keynote address: Tourism as the driver of change in the Jamaican economy”.

In Tourism: The Driver of change in the Jamaican economy. Ed. K. Hall and R. Holding.

Kingston: Ian Rhandle Publishers.

Singh, D. and Jayawardena, C. 2005. “The performance of tourism analysis of four Caribbean countries”. In Caribbean tourism: Visions, missions and challenges. Ed. C. Jayawardena.

Kingston: Ian Rhandle Publishers.

Trajtenberg, M. 2005. “Innovation Policy for Development: An Overview,” mimeo, LAEBA Meeting.

Tenant, D. 2008. “Policy Report for the Jamaican MSME Sector”, report submitted to the Target Growth Competitiveness Committee of the PSDP. Jamaica. Mimeo.

UNCTAD. 2003. “Export Promotion Policies CARICOM Caribbean Economies”.


----------. 2005. “Strategies of ‘Industrialization by Invitation’ in the Caribbean”. LC/CAR/L.68.

World Bank. 2004. “The Road to Sustained Growth in Jamaica”. Washington, D.C.

----------. 2008. Doing Business Survey. Washington, D.C.

World Economic Forum. 2008. “The Global Competitiveness Report 2008-2009.” Washington, D.C. World Bank.

World Trade Organization. 2005. “Trade Policy Review. Jamaica.” Report by theSecretariat.


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