«Productive Development Policies in Jamaica Mónica Panadeiros Warren Benfield Inter-American Development Bank Department of Research and Chief ...»
• Corporate Finance Broker (CFB) Unit: acts as a mediator between businesses and financial institutions that agree to participate in this program, so that the former can gain increased access to financing. The main services provided by this unit are business plan analysis; cash flow and budget review; review of marketing strategy, sales and distribution plans; review of technical strategy, production plan, and process flow; and identification of sources of finance and workshops on financial issues.
As part of the PSDP, consultancy firms and individual business service providers can
become registered partners with the PSDP under what is expected to be an exhaustive database:
the Business Service Provider registration facility. Besides being a mechanism to offer services to the public, qualified business service providers that are entered into this database will also have the opportunity to provide relevant services to PSDP beneficiaries under various components of the program, including training for specific tasks such as enterprise competitiveness assessor for the ERU.
Through its components, this program aims to tackle several problems associated with small and medium-sized enterprises (SMESs). The lack of formal channels to identify and discuss with the authorities the challenges and opportunities faced by SMESs represents a very important problem. The process of developing an effective policy for MSMEs was initiated by the Ministry of Industry, Commerce and Technology, which has responsibility for the MSME sector. This ministry began researching the issues facing the sector and investigating international experiences in MSME development. The Target Growth Competitiveness Committee supported by the PSDP propelled the process by initiating discussions on a wider scale, including with a range of stakeholders. Those discussions precipitated decisions on the design of the policy process.
According to Hausmann and Rodrik (2003), the public-private dialogue is among the main characteristics of the new style of industrial policymaking. The idea is that imperfect knowledge of specific market distortions creates the need for an identification policy process, and because of this, policymakers should systematically be able to obtain information from the business sector about the constraints and opportunities that it faces. The institutional framework related to processes and procedures for selecting instruments to be used or sectors to be targeted has thus become one of the most relevant issues in the modern understanding of industrial policy.
Other traditional problems affecting MSMEs that this program intends to tackle are high transaction costs, which are barriers to entry to some markets, such as foreign countries;
asymmetric information, which prevents firms from obtaining loans under normal conditions in the financial system, and the need for business capacity building. The cluster approach to development seems to represent a response to the coordination failures that reduce the supply of specialized providers of raw materials and components, the growth of a pool of sector-specific skills, and the rise of specialized technical, administrative, and financial services. Moreover, the essence of high-performance clusters is that they provide a stimulating learning environment for companies through a mix of competition and collaboration. Following this idea, the worldwide growth of industry and regional clusters and business networks has been impressive, and the Jamaican cluster development program is another example of this.45 In spite of the potential benefits to firms, evidence shows that inter-firm cooperation and other features of successful clusters do not always emerge spontaneously. Three main factors significantly hinder this process: a) the significance of the transaction costs that need to be borne to identify suitable network partners and to forge relationships, b) the imperfect market functioning for the provision of crucial inputs for network development such as information and innovation; and c) the high risk of “free riding,” especially in contexts where the legal framework to back up joint endeavors is relatively underdeveloped.
The available literature bears out that the intervention of an "external agent” that facilitates the emergence of clusters can greatly reduce the significance of the above factors.
Therefore, while cluster development was ideally a private-sector driven process, there is also an argument for government intervention in cluster promotion, especially in developing countries, such as those in the Caribbean, where private organizations are weak. An important principle in the design and provision of cluster development is demand orientation. The PSDP satisfies this principle through the process of selecting the clusters to be promoted.
Another operating principle that should be included in the policy of clustering is that the final stage of the cluster-building exercise should be a self-management phase. This means that the respective group of enterprises earning greater autonomy from the network brokers is capable of independently carrying out further joint activities. Self-management is not always an easy step. Clusters often tend to lean on broker's assistance for a longer time than initially envisaged.
To avoid dependency, a recommended rule is that the fees which are normally charged to the network for the assistance given by the broker, which are initially quite low, should be progressively increased to encourage autonomy. The temporary condition of the PSDP seems to satisfy this rule.
Although the framework in which the PSDP helps to develop MSMEs is fairly adequate, it could fail to achieve its goals. A necessary condition for its success is that entrepreneurs must be enthusiastic in order to participate in this program. This is an important issue because in the past decade, there have been several government-funded business support services geared However, little, if any, attempt has been made so far to gather systematic information about the policies and practices of these clusters (ECLAC, 2006).
towards developing and expanding MSMEs in Jamaica, but most Jamaican entrepreneurs have not taken advantage of these services. According to a survey carried out by the PSDP in 2008, when firms were asked “Have you ever used government-funded business support services?”, only 8 percent of respondents said “yes.” When those who claimed never to have used government-funded enterprise services were asked the reason for not using such services, roughly 50 percent failed to provide a response. Of those who did answer, an overwhelming 67.3 percent cited lack of awareness as the main reason. Issues of awareness or the lack of awareness have been longstanding where government support for enterprise development and expansion is concerned.
Undoubtedly, the government’s efforts through the PSDP have been important for the creation of an environment where entrepreneurship is encouraged. However several other strategies must be developed in order to effectively benefit Jamaican entrepreneurs.
4.4 ICT Strategy: E-Powering Jamaica 2012
The development of Jamaica’s ICT sector began in the early 1990s, with the collaborative efforts of the public and private sectors. Since then, the Jamaica Computer Society Education Foundation (JCSEF), with support from the Business Partners for Education, the Ministry of Education and Culture, the Human Employment and Resource Training Trust/National Training Agency (HEART/NTA), and other partners in the private sector, have been implementing programs to improve the quality of education in Jamaican schools through the introduction of computer technology.
In 1992, the JCSEF, in partnership with the HEART Trust/NTA, the private sector through the Business Partners, and secondary school communities, launched the Jamaica 2000 Project. The aim of this project was to establish a fully equipped 15-station computer laboratory in each secondary school, community college, and teachers college and provide in-service training for teachers. The initial aim of the project was to provide opportunities for students of the upper secondary level to pursue computer studies in the Caribbean Examination Council (CXC) examinations so that the pool of potential computer professionals could be enlarged. The use of computers later evolved to include remedial education in numeracy and literacy for students enrolled at the lower secondary level.
With the support of the IDB, the Ed tech 20/20 Technology in Education Project, which placed computer facilities in primary schools, was initiated by the Round Table Think Tank, a body comprising representatives from the public and private sectors, educators, the media and JCSEF.
The importance of promoting ICT was formally recognized in the National Implementation Plan (1996), which stated “there exists a notable global tendency for a shift away from natural-resource-based primary products, towards knowledge-based and humanresource-intensive goods and services” (p. 27). The government of Jamaica made projections in the NIP which indicated that opportunities existed for information technology to be the driving force in the development of interactive training programs and distance education which would enhance training efforts of the information technology industry itself as well as through the entire educational system.
In accordance with this vision of using ICTs as tools to achieve national goals, in 1999 the government took steps to expand this industry. It liberalized the telecommunications sector lifted the monopoly on telephone services previously enjoyed by Cable and Wireless Jamaica Limited (C&W) and by Telecommunications of Jamaica. Since then, the telecommunications industry has experienced among the highest levels of expansion and investment of any sector in the Jamaican economy. One indicator of the sector’s performance is the explosion in the number of telecommunications licenses granted, increasing from a total of two in 2000 to 426 by 2006.
Similarly, the number of internet service provider (ISP) licenses in Jamaica increased from 45 in 2001 to 80 by 2006. The formalization of the cable industry in 1998 opened up opportunities for 55 cable companies operating by 2007 to provide subscriber television services island-wide.
Another indicator of the performance of this industry comes from the data for sectoral investment and earnings. FDI inflows to the ICT sector averaged US$69 million per annum over the period 2001-2005, representing 11 percent of total FDI inflows over the period. Annual inflows of earnings from communication services and computer and information services have averaged US$199 million over the period 2001-2005, while annual outflows from these services averaged US$76 million, indicating that the ICT sector generated average net foreign exchange earnings of US$123 million annually between 2001 and 2005.
Jamaica has developed as one of the premiere destinations for Business Process Outsourcing and Contact Centers for service providers looking to the Caribbean for a near-shore outsourcing location, largely due to the large English-speaking, trainable labor pool, proximity to the largest outsourcing market in the world (the United States), and competitive cost. Jamaica Trade and Invest (JTI) estimates that the ICT projects facilitated by JTI in the telecommunications and call centre industries employ over 14,000 persons, many of whom are engaged in the export of services. There are currently 18 contact centers in the sector, two of which are local companies and 16 are multinationals.
A.T. Keaney, an expert assessment and global management consulting firm that analyzes and ranks the top 50 locations worldwide and provides the most common remote functions.
ranked Jamaica in 2007 as one of the top offshore destinations in the world. Jamaica is the only English-speaking Caribbean location on the list.
A range of international indices show that Jamaica has generally achieved a position midway among the nations of the world in the development of its ICT sector. For example, under the e-Readiness ranking produced by the Economist Intelligence Unit (EIU), which provides an assessment of a country’s status in terms of connectivity and its ICT environment, Jamaica’s 2007 ranking is 43 out of 69 countries. The World Economic Forum Network Readiness Index for 2006-2007 ranked Jamaica 45th of 122 countries in terms of the ICT environment, network readiness, and usage of ICT.
In fact, Jamaica compared favorably to Latin American and other Caribbean countries on a number of indicators relating to access, including the number of mobile subscribers and internet subscribers per 1,000 persons. However, it was behind the region in telephone main lines and personal computers per 1,000 persons and percentage of households with television sets. Jamaica also compared favorably on indicators relating to affordability, institutional efficiency and sustainability, and ICT applications, but trailed in the number of broadband subscribers, at 3.4 per 1,000 persons compared to 16.5 per 1,000 persons for the region.
The Jamaican government has put in place a number of tax incentives aimed at facilitating the growth of the ICT sector. Some of these are included in the Export Free Zone Act, the Export Industry Encouragement Act and Accelerated Depreciation/Special Capital Allowance. In addition to these general incentives, companies in the ICT sector with single entity free zone status can apply for licenses to provide their own telecommunications. 46 This provision may allow them to achieve significant cost savings using technology such as Very Small Aperture Terminals.
Complementing these policies, the government has implemented a deliberate strategy to develop capabilities in a wide range of services. The Ministry of Energy, Mining and Telecommunications, which is responsible for setting the overall policy framework to guide the development of the ICT sector in Jamaica, 47 also formulated the first five-year National ICT (NICT) Strategy in 2001. A year later, in May 2002, the government established the Central Information Technology Office (CITO), which is linked to the Ministry but is nonetheless an independent agency whose main mandate is strategic planning. CITO has recently launched a new five-year NICT Strategy for 2007-2012, the so-called E-Powering Jamaica 2012.